G.R. No.

182864

January 12, 2015

EASTERN SHIPPING LINES, INC., Petitioner,

vs.
BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO., LTD., Respondents.
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari of the Decision of the Second Division of the Court of Appeals in CA-G.R.
CV No. 88744 dated 31 January 2008, modifying the Decision of the Regional Trial Court (RTC) by upholding the liability of
Eastern Shipping Lines, Inc. (ESLI) but absolving Asian Terminals, Inc. (ATI) from liability and deleting the award of attorney's
fees.
1

The facts gathered from the records follow:

On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company Limited (Mitsui) filed
a Complaint before the RTC of Makati City against ESLI and ATI to recover actual damages amounting to US$17,560.48 with
legal interest, attorneys fees and costs of suit.
3

In their complaint, BPI/MS and Mitsui alleged that on 2 February 2004 at Yokohama, Japan, Sumitomo Corporation shipped on
board ESLIs vessel M/V "Eastern Venus 22" 22 coils of various Steel Sheet weighing 159,534 kilograms in good order and
condition for transportation to and delivery at the port of Manila, Philippines in favor of consignee Calamba Steel Center, Inc.
(Calamba Steel) located in Saimsim, Calamba, Laguna as evidenced by a Bill of Lading with Nos. ESLIYMA001. The declared
value of the shipment was US$83,857.59 as shown by an Invoice with Nos. KJGE-03-1228-NT/KE3. The shipment was insured
with the respondents BPI/MS and Mitsui against all risks under Marine Policy No. 103-GG03448834.
On 11 February 2004, the complaint alleged that the shipment arrived at the port of Manila in an unknown condition and was
turned over to ATI for safekeeping. Upon withdrawal of the shipment by the Calamba Steels representative, it was found out that
part of the shipment was damaged and was in bad order condition such that there was a Request for Bad Order Survey. It was
found out that the damage amounted to US$4,598.85 prompting Calamba Steel to reject the damaged shipment for being unfit
for the intended purpose.
On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again shipped on board ESLIs vessel M/V "Eastern Venus 25" 50
coils in various Steel Sheet weighing 383,532 kilograms in good order and condition for transportation to and delivery at the port
of Manila, Philippines in favor of the same consignee Calamba Steel asevidenced by a Bill of Lading with Nos. ESLIKSMA002.
The declared value of the shipment was US$221,455.58 as evidenced by Invoice Nos. KJGE-04-1327-NT/KE2. The shipment
was insured with the respondents BPI/MS and Mitsui against all risks under Marine Policy No. 104-GG04457785.
On 21 May 2004, ESLIs vessel withthe second shipment arrived at the port of Manila partly damaged and in bad order. The coils
sustained further damage during the discharge from vessel to shore until its turnover to ATIs custody for safekeeping.
Upon withdrawal from ATI and delivery to Calamba Steel, it was found out that the damage amounted to US$12,961.63. As it did
before, Calamba Steel rejected the damaged shipment for being unfit for the intended purpose.
Calamba Steel attributed the damages on both shipments to ESLI as the carrier and ATI as the arrastre operator in charge of the
handling and discharge of the coils and filed a claim against them. When ESLI and ATI refused to pay, Calamba Steel filed an
insurance claim for the total amount of the cargo against BPI/MS and Mitsuias cargo insurers. As a result, BPI/MS and Mitsui
became subrogated in place of and with all the rights and defenses accorded by law in favor of Calamba Steel.
Opposing the complaint, ATI, in itsAnswer, denied the allegations and insisted that the coils in two shipments were already
damaged upon receipt from ESLIs vessels. It likewise insisted that it exercised due diligence in the handling of the shipments
and invoked that in case of adverse decision, its liability should not exceed P5,000.00 pursuant to Section 7.01, Article VII of the
4

Contract for Cargo Handling Services between Philippine Ports Authority (PPA) and ATI. A cross-claim was also filed against
ESLI.
5

On its part, ESLI denied the allegations of the complainants and averred that the damage to both shipments was incurred while
the same were in the possession and custody of ATI and/or of the consignee or its representatives. It also filed a cross-claim
against ATI for indemnification in case of liability.
6

To expedite settlement, the case was referred to mediation but it was returned to the trial court for further proceedings due tothe
parties failure to resolve the legal issues as noted inthe Mediators Report dated 28 June 2005.
7

On 10 January 2006, the court issued a Pre-Trial Order wherein the following stipulations wereagreed upon by the parties:
1. Parties admitted the capacity of the parties to sue and be sued;
2. Parties likewise admitted the existence and due execution of the Bill of Lading covering various steel sheets in coil
attached to the Complaint as Annex A;
3. Parties admitted the existence of the Invoiceissued by Sumitomo Corporation, a true and faithful copy of which was
attached to the Complaint as Annex B;
4. Parties likewise admitted the existence of the Marine Cargo Policy issued by the Mitsui Sumitomo Insurance
Company, Limited, copy of which was attached to the Complaint as Annex C;
5. [ATI] admitted the existence and due execution of the Request for Bad Order Survey dated February 13, 2004,
attached to the Complaint as Annex D;
6. Insofar as the second cause of action, [ESLI] admitted the existence and due execution of the document [Bill of Lading
Nos. ESLIKSMA002, Invoice with Nos. KJGE-04-1327-NT/KE2 and Marine Cargo Policy against all risks on the second
shipment] attachedto the Complaint as Annexes E, F and G;
7. [ATI] admitted the existence of the Bill of Lading together with the Invoices and Marine Cargo Policy. [It] likewise
admitted by [ATI] are the Turn Over Survey of Bad Order Cargoes attached to the Complaint as Annexes H, H-1 and J.

The parties agreed that the procedural issue was whether there was a valid subrogation in favor of BPI/MS and Mitsui; and that
the substantive issues were, whether the shipments suffered damages, the cause of damage, and the entity liable for reparation
of the damages caused. Due to the limited factual mattersof the case, the parties were required to present their evidence
through affidavits and documents. Upon submission of these evidence, the case was submitted for resolution.
9

10

BPI/MS and Mitsui, to substantiate their claims, submitted the Affidavits of (1) Mario A. Manuel (Manuel), the Cargo Surveyor of
Philippine Japan Marine Surveyors and Sworn Measurers Corporation who personally examined and conducted the surveys on
the two shipments; (2) Richatto P. Almeda, the General Manager of Calamba Steel who oversaw and examined the condition,
quantity, and quality of the shipped steel coils, and who thereafter filed formal notices and claims against ESLI and ATI; and (3)
Virgilio G. Tiangco, Jr., the Marine Claims Supervisor of BPI/MS who processed the insurance claims of Calamba Steel. Along
with the Affidavits were the Bills of Lading covering the two shipments, Invoices, Notices of Loss of Calamba
Steel, Subrogation Form, Insurance Claims, Survey Reports, Turn Over Survey of Bad Order Cargoes and Request for Bad
Order Survey.
11

12

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21

ESLI, in turn, submitted the Affidavits of Captain Hermelo M. Eduarte, Manager of the Operations Department of ESLI, who
monitored in coordination with ATI the discharge of the two shipments, and Rodrigo Victoria (Rodrigo), the Cargo Surveyor of R
& R Industrial and Marine Services, Inc., who personally surveyed the subject cargoes on board the vessel as well as the
manner the ATI employees discharged the coils. The documents presented were the Bills of Lading, Secretarys Certificate of
PPA, granting ATI the duty and privilege to provide arrastre and stevedoring services at South Harbor, Port of Manila, Contract
for Cargo Handling Services, Damage Report and Turn Over Report made by Rodrigo. ESLI also adopted the Survey Reports
submitted by BPI/MS and Mitsui.
22

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24

25

26

28

27

Lastly, ATI submitted the Affidavits of its Bad Order Inspector Ramon Garcia (Garcia) and Claims Officer Ramiro De Vera. The
documents attached to the submissions were the Turn Over Surveys of Bad Cargo Order, Requests for Bad Order
Survey, Cargo Gatepasses issued by ATI, Notices of Loss/Claims of Calamba Steel and Contract for Cargo Handling
Services.
29

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31

32

33

34

35

On 17 September 2006, RTC Makati City rendered a decision finding both the ESLI and ATI liable for the damages sustained by
the two shipments. The dispositive portion reads: WHEREFORE, judgment is hereby rendered in favor of [BPI/MS and Mitsui]
and against [ESLI Inc.] and [ATI], jointly and severally ordering the latter to pay [BPI/MS and Mitsui] the following: 1. Actual
damages amounting to US$17,560.48 plus 6% legal interest per annum commencing from the filing of this complaint, until the
same is fully paid;
2. Attorneys fees in a sum equivalent to 20% of the amount claimed;
3. Costs of suit.

36

Aggrieved, ESLI and ATI filed their respective appeals before the Court of Appeals on both questions of fact and law.

37

Before the appellate court, ESLI argued that the trial court erred when it found BPI/MS has the capacity to sue and when it
assumed jurisdiction over the case. It also questioned the ruling on its liability since the Survey Reports indicated that the cause
ofloss and damage was due to the "rough handling of ATIs stevedores during discharge from vessel to shore and during loading
operation onto the trucks."It invoked the limitation of liability of US$500.00 per package asprovided in Commonwealth Act No. 65
or the Carriage of Goods by Sea Act (COGSA). On the other hand, ATI questioned the capacity to sue of BPI/MS and Mitsui
and the award of attorneys fees despite its lack of justification in the body of the decision. ATI also imputed error on the part of
the trial court when it ruled that ATIs employees were negligent in the ruling of the shipments. It also insisted on the applicability
of the provision of COGSA on limitation of liability.
38

39

In its Decision, the Court of Appeals absolved ATI from liability thereby modifying the decision of the trial court. The dispositive
portions reads:
40

WHEREFORE, the appeal of ESLI is DENIED, while that of ATI is GRANTED. The assailed Judgment dated September 17,
2006 of Branch 138, RTC of Makati City inCivil Case No. 05-108 is hereby MODIFIED absolving ATI from liability and deleting
the award of attorneys fees. The rest of the decision is affirmed.
41

Before this Court, ESLI seeks the reversal of the ruling on its liability.
At the outset, and notably, ESLI included among its arguments the attribution of liability to ATI but it failed to implead the latter as
a party to the present petition. This non-inclusion was raised by BPI/MS and Mitsui as an issue in its Comment/Opposition and
Memorandum: For reasons known only to [ESLI],it did not implead ATI as a party respondent in this case when it could have
easily done so. Considering the nature of the arguments raised by petitioner pointing to ATI as solely responsible for the
damages sustained by the subject shipments, it is respectfully submitted that ATI is an indispensable party in this case. Without
ATI being impleaded, the issue of whether ATI is solely responsible for the damages could not be determined with finality by this
Honorable Court. ATI certainly deserves to be heard on the issue but it could not defend itself because it was not impleaded
before this Court. Perhaps, this is the reason why [ESLI] left out ATI in this case so that it could not rebut while petitioner puts it
at fault.
42

43

44

45

ESLI in its Reply put the blame for the non-exclusion of ATI to BPI/MS and Mitsui:
46

[BPI/MS and Mitsui] claim that herein [ESLI] did not implead [ATI] as a party respondent in the Petition for Review on Certiorari it
had filed. Herein Petitioner submits that it is not the obligation of [ESLI] to implead ATI as the same isalready the look out of
[BPI/MS and Mitsui]. If [BPI/MS and Mitsui] believe that ATI should be made liable, they should have filed a Motion for
Reconsideration with the Honorable Court of Appeals. The fact that [BPI/MS and Mitsui] did not even lift a finger to question the
decision of the Honorable Court of Appeals goes to show that [BPI/MS and Mitsui] are not interested as to whether or not ATI is
indeed liable.
47

It is clear from the exchange that both [ESLI] and [BPI/MS and Mitsui] are aware of the non-inclusion of ATI, the arrastre
operator, as a party to this review of the Decision of the Court of Appeals. By blaming each other for the exclusion of ATI, [ESLI]
and [BPI/MS and Mitsui] impliedly agree that the absolution of ATI from liability isfinal and beyond review. Clearly, [ESLI] is the
consequential loser. It alone must bear the proven liability for the loss of the shipment. It cannot shift the blame to ATI, the
arrastreoperator, which has been cleared by the Court of Appeals. Neither can it argue that the consignee should bear the loss.
Thus confined, we go to the merits of the arguments of ESLI.
First Issue: Liability of ESLI
ESLI bases of its non-liability onthe survey reports prepared by BPI/MS and Mitsuis witness Manuel which found that the cause
of damage was the rough handling on the shipment by the stevedores of ATI during the discharging operations. However,
Manuel does not absolve ESLI of liability. The witness in fact includes ESLI in the findings of negligence. Paragraphs 3 and 11 of
the affidavit of witness Manuel attribute fault to both ESLI and ATI.
48

3. The vessel M.V. "EASTERN VENUS" V 22-S carrying the said shipment of 22 coils of various steel sheets arrived at the port
of Manila and discharged the said shipment on or about 11 February 2004 to the arrastre operator [ATI]. I personally noticed that
the 22 coils were roughly handled during their discharging from the vessel to the pier of [ATI] and even during the loading
operations of these coils from the pier to the trucks that will transport the coils to the consigneess warehouse. During the
aforesaid operations, the employees and forklift operators of [ESLI] and [ATI] were very negligent in the handling of the subject
cargoes.
xxxx
11. The vessel M.V. "EASTERN VENUS" V 25-S carrying the said shipment of 50 coils of various steel sheets arrived at the port
of Manila and discharged the said shipment on or about 21 May 2004 to the arrastre operator [ATI]. I personally noticed that the
50 coils were roughly handled during their discharging from the vessel to the pier of [ATI] and even during the loading operations
of these coils from the pier to the trucks that will transport the coils to the consigneess warehouse. During the aforesaid
operations, the employees and forklift operators of [ESLI] and [ATI] were very negligent in the handling of the subject
cargoes. (Emphasis supplied).
49

ESLI cannot rely only on parts it chooses. The entire body of evidence should determine the liability of the parties. From the
statements of Manuel, [ESLI] was negligent, whether solely or together with ATI.
To further press its cause, ESLI cites the affidavit of its witness Rodrigo who stated that the cause of the damage was the rough
mishandling by ATIs stevedores.
The affidavit of Rodrigo states that his functions as a cargo surveyor are, (1) getting hold of a copy of the bill of lading and cargo
manifest; (2) inspection and monitoring of the cargo on-board, during discharging and after unloading from the vessel; and (3)
making a necessary report of his findings. Thus, upon arrival at the South Harbor of Manila of the two vessels of ESLI on 11
February 2004 and on 21 May 2004, Rodrigo immediately boarded the vessels to inspect and monitor the unloading of the
cargoes. In both instances, it was his finding that there was mishandling on the part of ATIs stevedores which he reported as the
cause of the damage. Easily seen, however, is the absence of a crucial point in determining liability of either or both ESLI and
ATI lack of determination whether the cargo was in a good order condition as described in the bills of lading at the time of his
boarding. As Rodrigo admits, it was also his duty to inspect and monitor the cargo on-board upon arrival of the vessel. ESLI
cannot invoke its non-liability solely on the manner the cargo was discharged and unloaded. The actual condition of the cargoes
upon arrival prior to discharge is equally important and cannot be disregarded. Proof is needed that the cargo arrived at the port
of Manila in good order condition and remained as such prior to its handling by ATI.
50

Common carriers, from the nature of their business and on public policy considerations, are bound to observe extra ordinary
diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received
by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them.
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52

In maritime transportation, a bill of lading is issued by a common carrier as a contract, receipt and symbol of the goods covered
by it. If it has no notation of any defect ordamage in the goods, it is considered as a "clean bill of lading." A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods as therein described.
1wphi1

53

Based on the bills of lading issued, it is undisputed that ESLI received the two shipments of coils from shipper Sumitomo
Corporation in good condition at the ports of Yokohama and Kashima, Japan. However, upon arrival at the port of Manila, some
coils from the two shipments were partly dented and crumpled as evidenced by the Turn Over Survey of Bad Order Cargoes No.
67982 dated 13 February 2004 and Turn Over Survey of Bad Order Cargoes Nos. 68363 and 68365 both dated 24 May 2004
signed by ESLIs representatives, a certain Tabanao and Rodrigo together with ATIs representative Garcia. According toTurn
Over Survey of Bad Order Cargoes No. 67982, four coils and one skid were partly dented and crumpled prior to turnover by
ESLI to ATIs possession while a total of eleven coils were partly dented and crumpled prior to turnover based on Turn Over
Survey Bad Order Cargoes Nos. 68363 and 68365.
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Calamba Steel requested for a re-examination of the damages sustained by the two shipments. Based on the Requests for Bad
Order Survey Nos. 58267 and 58254 covering the first shipment dated 13 and 17 February 2004, four coils were damaged
prior to turnover. The second Request for Bad Order Survey No. 58658 dated 25 May 2004 also affirmed the earlier findings
that elevencoils on the second shipment were damaged prior to turnover.
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In Asian Terminals, Inc., v. Philam Insurance Co., Inc., the Court based its ruling on liability on the Bad Order Cargo and Turn
Over of Bad Order. The Receipt bore a notation "B.O. not yet over to ATI," while the Survey stated that the said steel case was
not opened at the time of survey and was accepted by the arrastre in good order. Based on these documents, packages in the
Asian Terminals, Inc. case were found damaged while in the custody of the carrier Westwind Shipping Corporation.
60

Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes a prima faciecase of fault or negligence against the carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the transporter shall be held responsible. From the foregoing, the
fault is attributable to ESLI. While no longer an issue, it may be nonetheless state that ATI was correctly absolved of liability for
the damage.
61

Second Issue: Limitation of Liability

ESLI assigns as error the appellate courts finding and reasoning that the package limitation under the COGSA is inapplicable
even if the bills of lading covering the shipments only made reference to the corresponding invoices. Noticeably, the invoices
specified among others the weight, quantity, description and value of the cargoes, and bore the notation "Freight Prepaid" and
"As Arranged." ESLI argues that the value of the cargoes was not incorporated in the bills of lading and that there was no
evidence that the shipper had presented to the carrier in writing prior to the loading of the actual value of the cargo, and, that
there was a no payment of corresponding freight. Finally, despite the fact that ESLI admits the existence of the invoices, it
denies any knowledge either of the value declared or of any information contained therein.
62

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According to the New Civil Code, the law of the country to which the goods are to be transported shall govern the liability of the
common carrier for their loss, destruction or deterioration. The Code takes precedence as the primary law over the rights and
obligations of common carriers with the Code of Commerce and COGSA applying suppletorily.
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68

The New Civil Code provides that a stipulation limiting a common carriers liability to the value of the goods appearing in the bill
of lading is binding, unless the shipper or owner declares a greater value. In addition, a contract fixing the sum that may be
recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under
the circumstances, and has been fairly and freely agreed upon.
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70

COGSA, on the other hand, provides under Section 4, Subsection 5 that an amount recoverable in case ofloss or damage shall
not exceed US$500.00 per package or per customary freight unless the nature and value of such goods have been declared by
the shipper before shipment and inserted in the bill of lading.
In line with these maritime law provisions, paragraph 13 of bills of lading issued by ESLI to the shipper specifically provides a
similar restriction:

The value of the goods, in calculating and adjusting any claims for which the Carrier may be liable shall, to avoid uncertainties
and difficulties in fixing value, be deemed to the invoice value of the goods plus ocean freight and insurance, if paid, Irrespective
of whether any other value is greater or less, and any partial loss or damage shall be adjusted pro rataon the basis of such
value; provided, however, that neither the Carrier nor the ship shall in any event be or become liable for any loss, non-delivery or
misdelivery of or damage or delay to, or in connection with the custody or transportation of the goods in an amount exceeding
$500.00 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit,
unless the nature of the goods and a valuation higher than $500.00 is declared in writing by the shipper on delivery to the Carrier
and inserted in the bill of lading and extra freight is paid therein as required by applicable tariffs to obtain the benefit of such
higher valuation. In which case even if the actual value of the goods per package orunit exceeds such declared value, the value
shall nevertheless be deemed to be the declared value and any Carriers liability shall not exceed such declared value and any
partial loss or damage shall be adjusted pro-rata on the basis thereof. The Carrier shall not be liable for any loss or profit or any
consequential or special damage and shall have the option of replacing any lost goods and replacing o reconditioning any
damage goods. No oral declaration or agreement shall be evidence of a value different from that provided therein.
71

xxxx
Accordingly, the issue whether or not ESLI has limited liability as a carrier is determined by either absence or presence of proof
that the nature and value of the goods have been declared by Sumitomo Corporation and inserted in the bills of lading.
ESLI contends that the invoices specifying the weight, quantity, description and value of the cargo in reference to the bills of
lading do not prove the fact that the shipper complied with the requirements mandated by the COGSA. It contends that there
must be an insertion of this declaration in the bill of lading itself to fall outside the statutory limitation of liability.
ESLI asserts that the appellate court erred when it ruled that there was compliance with the declaration requirement even if the
value of the shipment and fact of payment were indicated on the invoice and not on the bill of lading itself.
There is no question about the declaration of the nature, weight and description of the goods on the first bill of lading.
The bills of lading represent the formal expression of the parties rights, duties and obligations. It is the best evidence of the
intention of the parties which is to be deciphered from the language used in the contract, not from the unilateral post facto
assertions of one of the parties, or of third parties who are strangers to the contract. Thus, when the terms of an agreement
have been reduced to writing, it is deemed to contain all the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of the written agreement.
72

73

As to the non-declaration of the value of the goods on the second bill of lading, we see no error on the part of the appellate court
when it ruled that there was a compliance of the requirement provided by COGSA. The declaration requirement does not require
that all the details must be written down on the very bill of lading itself. It must be emphasized that all the needed details are in
the invoice, which "contains the itemized list of goods shipped to a buyer, stating quantities, prices, shipping charges," and other
details which may contain numerous sheets. Compliance can be attained by incorporating the invoice, by way of reference, to
the bill of lading provided that the former containing the description of the nature, value and/or payment of freight charges isas in
this case duly admitted as evidence.
74

In Unsworth Transport International(Phils.), Inc. v. Court of Appeals, the Court held that the insertion of an invoice number does
not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo. However, the same
interpretation does not squarely apply if the carrier had been advised of the value of the goods as evidenced by the invoice and
payment of corresponding freight charges. It would be unfair for ESLI to invoke the limitation under COGSA when the shipper in
fact paid the freight charges based on the value of the goods. In Adams Express Company v. Croninger, it was said: "Neither is
it conformable to plain principles of justice that a shipper may understate the value of his property for the purpose of reducing the
rate, and then recover a larger value in case of loss. Nor does a limitation based upon an agreed value for the purpose of
adjusting the rate conflict with any sound principle of public policy." Conversely, but for the same reason, it is unjust for ESLI to
invoke the limitation when it is informed that the shipper paid the freight charges corresponding to the value of the goods.
75

76

Also, ESLI admitted the existence and due execution of the Bills of Lading and the Invoice containing the nature and value of the
goods on the second shipment. As written in the Pre-Trial Order, the parties, including ESLI, admitted the existence and due
execution of the two Bills of Lading together with the Invoice on the second shipment with Nos. KJGE-04-1327-NT/KE2 dated
77

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12 May 2004. On the first shipment, ESLI admitted the existence of the Invoice with Nos. KJGE-031228-NT/KE3 dated 2
February 2004.
80

The effect of admission of the genuineness and due execution of a document means that the party whose signature it bears
admits that he voluntarily signed the document or itwas signed by another for him and with his authority.
81

A review of the bill of ladings and invoice on the second shipment indicates that the shipper declared the nature and value of the
goods with the corresponding payment of the freight on the bills of lading. Further, under the caption "description of packages
and goods," it states that the description of the goods to be transported as "various steel sheet in coil" with a gross weight of
383,532 kilograms (89.510 M3).On the other hand, the amount of the goods is referred in the invoice, the due execution and
genuineness of which has already been admitted by ESLI, is US$186,906.35 as freight on board with payment of ocean freight
of US$32,736.06 and insurance premium of US$1,813.17. From the foregoing, we rule that the non-limitation of liability applies
in the present case.
We likewise accord the same binding effect on the contents of the invoice on the first shipment. ESLI contends that what was
admitted and written on the pre-trial order was only the existence of the first shipment invoice but not its contents and due
execution. It invokes admission of existence but renounces any knowledge of the contents written on it.
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82

Judicial admissions are legally binding on the party making the admissions. Pre-trial admission in civil cases is one of the
instances of judicial admissions explicitly provided for under Section 7,Rule 18 of the Rules of Court, which mandates that the
contents of the pre-trial order shall control the subsequent course of the action, thereby, defining and limiting the issues to be
tried. In Bayas v. Sandiganbayan, this Court emphasized that:
83

Once the stipulations are reduced into writing and signed by the parties and their counsels, they become binding on the parties
who made them. They become judicial admissions of the fact or facts stipulated. Even if placed at a disadvantageous position, a
party may not be allowed to rescind them unilaterally, it must assume the consequences of the disadvantage.
84

Moreover, in Alfelor v. Halasan, this Court declared that:

85

A party who judicially admits a fact cannot later challenge that fact as judicial admissions are a waiver of proof; production of
evidence is dispensed with. A judicial admission also removes an admitted fact from the field of controversy. Consequently, an
admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to such
party, and all proofs to the contrary or inconsistent there with should be ignored, whether objection is interposed by the party or
not. The allegations, statements or admissions contained in a pleading are conclusive as against the pleader. A party cannot
subsequently take a position contrary of or inconsistent with what was pleaded. (Citations omitted)
86

The admission having been made in a stipulation of facts at pre-trial by the parties, it must be treated as a judicial admission.
Under Section 4, of Rule 129 of the Rules of Court, a judicial admission requires no proof.
87

It is inconceivable that a shipping company with maritime experience and resource like the ESLI will admit the existence of a
maritime document like an invoice even if it has no knowledge of its contents or without having any copy thereof.
ESLI also asserts that the notation "Freight Prepaid" and "As Arranged," does not prove that there was an actual declaration
made in writing of the payment of freight as required by COGSA. ESLI did not as it could not deny payment of freight in the
amount indicated in the documents. Indeed, the earlier discussions on ESLI's admission of the existence and due execution of
the invoices, cover and disprove the argument regarding actual declaration of payment. The bills of lading bore a notation on the
manner of payment which was "Freight Prepaid" and "As Arranged" while the invoices indicated the amount exactly paid by the
shipper to ESLI.
WHEREFORE, we DENY the Petition for Review on Certiorari. The Decision dated 31 January 2008 and Resolution dated 5
May 2008 of the Second Division of the Court of Appeals in CA-G.R. CV. No. 88744 are hereby AFFIRMED.
SO ORDERED.

G.R. No. 212025

EXCELLENT QUALITYAPPAREL , INC., Petitioners,
vs.
VISAYAN SURETY & INSURANCE CORPORATION, and FAR EASTERN SURETY & INSURANCE CO., INC.,Respondent.
DECISION
MENDOZA, J.:

The present case involves the wrongful attachment and release of the petitioner's funds to the adverse party and its plight to
recover the same. It seems that when misfortune poured down from the skies, the petitioner received a handful. The scales of
justice, however, do not tilt based on chance; rather on the proper application of law, jurisprudence and justice.
This is a petition for review on certiorari seeking to reverse and set aside the October 21, 2013 Decision and the April 1, 2014
Resolution of the Court of Appeals (CA), in CA-G.R. CV No. 95421, which affirmed the January 15, 2010 and May 19,
2010 Orders of the Regional Trial Court of Manila, Branch 32 (RTC), in Civil Case No. 04-108940.
1

The Facts
On March 26, 1996, petitioner Excellent Quality Apparel, Inc. (petitioner), then represented by Max L.F. Ying(Ying), VicePresident for Productions, and Alfiero R. Orden, Treasurer, entered into a contract with Multi-Rich Builders (Multi-Rich), a single
proprietorship, represented by Wilson G. Chua, its President and General Manager, for the construction of a garment factory
within the Cavite Philippine Economic Zone Authority (CPEZA). The duration of the project was for a maximum period of five (5)
months or 150 consecutive calendar days. Included in the contract was an Arbitration Clause in case of dispute.
On November 27, 1996, the construction of the factory building was completed.
On February 20, 1997, Win Multi-Rich Builders, Inc. (Win Multi-Rich) was incorporated with the Securities and Exchange
Commission (SEC).
On January 26, 2004, Win Multi-Rich filed a complaint for sum of money and damages against petitioner and Ying before the
RTC. It also prayed for the issuance of a writ of attachment, claiming that Ying was about to abscond and that petitioner had an
impending closure.
5

Win Multi-Rich then secured the necessary bond in the amount of P8,634,448.20 from respondent Visayan Surety and
Insurance Corporation (Visayan Surety). In the Order, dated February 2, 2004, the RTC issued a writ of preliminary attachment
in favor of Win Multi-Rich.
6

To prevent the enforcement of the writ of preliminary attachment on its equipment and machinery, petitioner issued Equitable
PCI Bank Check No. 160149, dated February 16, 2004, in the amount of P8,634,448.20 payable to the Clerk of Court of the
RTC.
8

On February 19, 2004, petitioner filed its Omnibus Motion, seeking to discharge the attachment. Petitioner also questioned the
jurisdiction of the RTC due to the presence of the Arbitration Clause in the contract. It asserted that the case should have been
referred first to the Construction Industry Arbitration Commission (CIAC) pursuant to Executive Order (E.O.) No. 1008.
9

The motion, however, was denied by the RTC in its Order,10 dated April 12, 2004, because the issues of the case could be
resolved after a full-blown trial.
On April 26, 2004, petitioner filed its Answer with Compulsory Counterclaim before the RTC. It denied the material allegation of
the complaint and sought the immediate lifting of the writ of attachment. It also prayed that the bond filed by Win Multi-Rich to
support its application for attachment be held to satisfy petitioners claim for damages due to the improper issuance of such writ.
11

On April 29, 2004, the RTC issued another order directing the deposit of the garnished funds of petitioner to the cashier of the
Clerk of Court of the RTC.
12

Win Multi-Rich then filed a motion, dated April 29, 2004, to release petitioners cash deposit to it. Notably, the motion was
granted by the RTC in the Order, dated May 3, 2004. Subsequently, on May 7, 2004, Win Multi-Rich posted Surety Bond No.
10198 issued by respondent Far Eastern Surety and Insurance Co., Inc. (FESICO) for the amount of P9,000,000.00, to secure
the withdrawal of the cash deposited by petitioner. Thus, Win Multi-Rich was able to receive the funds of petitioner even before
the trial began.
13

14

15

On June 18, 2004, petitioner filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure before the CA. The
petition sought to annul and set aside the April 12, 2004 and April 29, 2004 Orders of the RTC. Petitioner then filed its
Supplemental Manifestation and Motion, asserting that its cash deposit with the RTC was turned over to Win Multi-Rich.
16

17

On March 14, 2006, the CA rendered a decision, annulling the April 12 2004 and April 29, 2004 Orders of the RTC. It ruled,
however, that the RTC had jurisdiction over the case inspite of the arbitration clause because it was a suit for collection of sum of
money. The dispositive portion of which reads:
18

IN LIGHT OF ALL THE FOREGOING, the instant petition is hereby GRANTED. The Orders dated April 12, 2004 and April 29,
2004 of respondent judge are hereby ANNULLED and SET ASIDE. Accordingly, the writ of preliminary injunction is hereby
MADE PERMANENT.
SO ORDERED.

19

Petitioner filed a motion for reconsideration arguing, among others, that the CA decision failed to state an order to return the
garnished amount of P8,634,448.20, which was taken from its bank account and given to Win Multi-Rich. In its
Resolution, dated October 11, 2006, the CA denied the motion.
20

Aggrieved, petitioner elevated the matter to the Court by way of a petition for review on certiorari under Rule 45, docketed
as G.R. No. 175048.
On February 10, 2009, in G.R. No. 175048, the Court promulgated a Decision in favor of petitioner and held:first, that Win MultiRich was not a real party in interest; second, that the RTC should not have taken cognizance of the collection suit because the
presence of the arbitration clause vested jurisdiction on the CIAC over all construction disputes between petitioner and MultiRich; and lastly, that Win Multi-Rich could not retain the garnished amount, as the RTC did not have jurisdiction to issue the
questioned writ of attachment and to order the release of the funds. The dispositive portion reads:
21

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is hereby MODIFIED. Civil Case No. 04-108940
is DISMISSED. Win Multi-Rich Builders, Inc. is ORDERED to return the garnished amount of EIGHT MILLION SIX HUNDRED
THIRTY FOUR THOUSAND FOUR HUNDRED FORTY-EIGHT PESOS AND TWENTY CENTAVOS (P8,634,448.20), which was
turned over by the Regional Trial Court, to petitioner with legal interest of 12 percent (12%) per annum upon finality of this
Decision until payment.
SO ORDERED.

22

Win Multi-Rich filed a motion for reconsideration but it was denied by the Court in its April 20, 2009 Resolution. Pursuant to an
entry of judgment, the Courts decision became final and executory on June 2, 2009.
23

24

On June 26, 2009, petitioner moved for execution thereof, praying for the return of its cash deposit and, in the event of refusal of
Win Multi-Rich to comply, to hold Visayan Surety and FESICO liable under their respective bonds.
25

Win Multi-Rich, Visayan Surety and FESICO were served with copies of the motion for execution. During the August 7, 2009
hearing on the motion for execution, counsels for petitioner, Win Multi-Rich and FESICO were present. The hearing, however,
was reset to September 16, 2009. On the said date, Win Multi-Rich, Visayan Surety and FESICO were given fifteen (15) days to
submit their respective comments or oppositions to the motion for execution.
26

27

28

On October 15, 2009, Win Multi-Rich opposed the motion for Execution because the cash deposit awarded to it by the RTC had
been paid to suppliers and the said amount was long overdue and demandable.
29

The RTC granted the motion for execution in an Order, dated October 19, 2009, and issued a writ of execution. Visayan Surety
and FESICO separately moved for reconsideration of the RTC order.
30

31

The RTC Ruling

On January 15, 2010, the RTC issued the order, granting the surety respondents motion for reconsideration and lifting its
October 19, 2009 Order insofar as it granted the motion for execution against Visayan Surety and FESICO. The RTC absolved
the surety respondents because petitioner did not file a motion for judgment on the attachment bond before the finality of
judgment, thus, violating the surety respondents right to due process. It further held that the execution against the surety
respondents would go beyond the terms of the judgment sought to be executed considering that the Court decision pertained to
Win Multi-Rich only.
32

Petitioner moved for reconsideration, but its motion was denied by the RTC in its May 19, 2010 Order.

33

Undaunted, petitioner appealed before the CA, arguing that there was no violation of the right to due process because the
liability of the surety respondents were based on the bonds issued by them.
The CA Ruling
In the assailed decision, dated October 21, 2013, the CA found petitioners appeal without merit. Citing Section 20, Rule 57 of
the 1997 Rules of Civil Procedure (Section 20, Rule 57), the CA held that petitioner failed to timely claim damages against the
surety before the decision of the Court became final and executory. It further stated that a court judgment could not bind persons
who were not parties to the action as the records showed that Visayan Surety and FESICO were neither impleaded nor informed
of the proceedings before the Court in G.R. No. 175048. It was the view of the CA that "[h]aving failed to observe very
elementary rules of procedure which are mandatory, [petitioner] caused its own predicament."
Petitioner filed a motion for reconsideration, but it was denied by the CA in the assailed April 1, 2014 Resolution.
Hence, this present petition, anchored on the following
STATEMENT OF ISSUES
I
THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT OF APPEALS SHOULD BE REVERSED
AND SET ASIDE FOR BEING CONTRARY TO LAW AND JURISPRUDENCE CONSIDERING THAT THE RIGHT TO DUE
PROCESS OF THE TWO SURETY COMPANIES WILL NOT BE VIOLATED IF EXECUTION OF THE JUDGMENT AGAINST
THEM IS ALLOWED.
II
THE ASSAILED DECISION AND THE ASSAILED RESOLUTION OF THE COURT OF APPEALS SHOULD BE REVERSED
AND SET ASIDE FOR BEING CONTRARY TO LAW AND JURISPRUDENCE CONSIDERING THAT TO ALLOW THE
EXECUTION AGAINST THE TWO SURETY COMPANIES WOULD GIVE FULL EFFECT TO THE TERMS OF THE
JUDGMENT.
34

Petitioner contends that Visayan Surety and FESICO could be held liable because the Court, in G.R. No. 175048, ruled that it
cannot allow Win Multi-Rich to retain the garnished amount turned over by the RTC, which had no jurisdiction to issue the
questioned writ of attachment. Petitioner argues that if Win Multi-Rich fails or refuses to refund or return the cash deposit, then
Visayan Surety and FESICO must be held liable under their respective bonds. Also, petitioner claims that the surety bond of
FESICO is not covered by Section 20, Rule 57 because it did not pertain to the writ of attachment itself, but on the withdrawal of
the cash deposit.
On October 3, 2014, Visayan Surety filed its Comment. It asserted that no application for damages was filed before the Court in
G.R. No. 175048. Thus, there was no occasion to direct the RTC to hear and decide the claim for damages, which constituted a
violation of its right to due process. Also, Visayan Surety contended that Section 20, Rule 57 provided a mandatory rule that an
application for damages must be filed before the judgment becomes final and executory.
35

On October 8, 2014, FESICO filed its Comment. It averred that petitioner failed to comply with Section 20, Rule 57 of the Rules
of Court because the hearing on the motion for execution was conducted after the decision in G.R. No. 175048 had already
become final and executory. It also stated that petitioner failed to implead the surety respondents as parties in G.R. No. 175048.
36

On January 26, 2015, petitioner filed its Consolidated Reply. It stressed that because the highest court of the land had directed
the return of the wrongfully garnished amount to petitioner, proceedings on the application under Section 20, Rule 57, became
no longer necessary.
37

The Courts Ruling

The petition is partly meritorious.
There was an application
for damages; but there
was no notice given to
Visayan Surety
By its nature, preliminary attachment, under Rule 57 of the Rules of Court, "is an ancillary remedy applied for not for its own
sake but to enable the attaching party to realize upon relief sought and expected to be granted in the main or principal action; it
is a measure auxiliary or incidental to the main action. As such, it is available during the pendency of the action which may be
resorted to by a litigant to preserve and protect certain rights and interests therein pending rendition and for purposes of the
ultimate effects, of a final judgment in the case. In addition, attachment is also availed of in order to acquire jurisdiction over the
action by actual or constructive seizure of the property in those instances where personal or substituted service of summons on
the defendant cannot be effected."
38

39

The party applying for the order of attachment must thereafter give a bond executed to the adverse party in the amount fixed by
the court in its order granting the issuance of the writ. The purpose of an attachment bond is to answer for all costs and
damages which the adverse party may sustain by reason of the attachment if the court finally rules that the applicant is not
entitled to the writ.
40

41

In this case, the attachment bond was issued by Visayan Surety in order for Win Multi-Rich to secure the issuance of the writ of
attachment. Hence, any application for damages arising from the improper, irregular or excessive attachment shall be governed
by Section 20, Rule 57, which provides:
Sec. 20. Claim for damages on account of improper, irregular or excessive attachment.
An application for damages on account of improper, irregular or excessive attachment must be filed before the trial or before
appeal is perfected or before the judgment becomes executory, with due notice to the attaching party and his surety or sureties,
setting forth the facts showing his right to damages and the amount thereof. Such damages may be awarded only after proper
hearing and shall be included in the judgment on the main case.
If the judgment of the appellate court be favorable to the party against whom the attachment was issued, he must claim
damages sustained during the pendency of the appeal by filing an application in the appellate court, with notice to the party in
whose favor the attachment was issued or his surety or sureties, before the judgment of the appellate court becomes executory.
The appellate court may allow the application to be heard and decided by the trial court.
Nothing herein contained shall prevent the party against whom the attachment was issued from recovering in the same action
the damages awarded to him from any property of the attaching party not exempt from execution should the bond or deposit
given by the latter be insufficient or fail to fully satisfy the award.
The history of Section 20, Rule 57 was discussed in Malayan Insurance, Inc. v. Salas. In that case, the Court explained that
Section 20, Rule 57 was a revised version of Section 20, Rule 59 of the 1940 Rules of Court, which, in turn, was a consolidation
of Sections 170, 177, 223, 272, and 439 of the Code of Civil Procedure regarding the damages recoverable in case of wrongful
issuance of the writs of preliminary injunction, attachment, mandamus and replevin and the appointment of a receiver.
42

Thus, the current provision of Section 20, Rule 57 of the 1997 Rules of Civil Procedure covers application for damages against
improper attachment, preliminary injunction, receivership, and replevin. Consequently, jurisprudence concerning application for
damages against preliminary injunction, receivership and replevin bonds can be equally applied in the present case.
43

In a catena of cases, the Court has cited the requisites under Section 20, Rule 57 in order to claim damages against the bond,
as follows:
44

1. The application for damages must be filed in the same case where the bond was issued;
2. Such application for damages must be filed before the entry of judgment; and
3. After hearing with notice to the surety.
The first and second requisites, as stated above, relate to the application for damages against the bond. An application for
damages must be filed in the same case where the bond was issued, either (a) before the trial or (b) before the appeal is
perfected or (c) before the judgment becomes executory. The usual procedure is to file an application for damages with due
notice to the other party and his sureties. The other method would be to incorporate the application in the answer with
compulsory counterclaim.
45

46

The purpose of requiring the application for damages to be filed in the same proceeding is to avoid the multiplicity of suit and
forum shopping. It is also required to file the application against the bond before the finality of the decision to prevent the
alteration of the immutable judgment.
47

In Paramount Insurance Corp. v. CA, the Court allowed an application for damages incorporated in the answer with compulsory
counterclaim of the defendant therein. The sureties were properly notified of the hearing and were given their day in court.
48

Conversely, in the recent case of Advent Capital and Finance Corp. v. Young, the application for damages against the bond was
not allowed. The respondent therein filed his omnibus motion claiming damages against surety after the dismissal order issued
by the trial court had attained finality.
49

In the present petition, the Court holds that petitioner sufficiently incorporated an application for damages against the wrongful
attachment in its answer with compulsory counterclaim filed before the RTC. Petitioner alleged that the issuance of the improper
writ of attachment caused it actual damages in the amount of at least P3,000,000.00. It added that the Equitable PCI Bank
Check No. 160149 it issued to the RTC Clerk of Court, to lift the improper writ of attachment, should be returned to it. Evidently,
these allegations constitute petitioners application for damages arising from the wrongful attachment, and the said application
was timely filed as it was filed before the finality of judgment.
50

The next requisite that must be satisfied by petitioner to hold Visayan Surety liable would be that the judgment against the
wrongful attachment was promulgated after the hearing with notice to the surety. Certainly, the surety must be given prior notice
and an opportunity to be heard with respect to the application for damages before the finality of the judgment. The Court rules
that petitioner did not satisfy this crucial element.
Section 20, Rule 57 specifically requires that the application for damages against the wrongful attachment, whether filed before
the trial court or appellate court, must be with due notice to the attaching party and his surety or sureties. Such damages may be
awarded only after proper hearing and shall be included in the judgment on the main case.
Due notice to the adverse party and its surety setting forth the facts supporting the applicant's right to damages and the amount
thereof under the bond is indispensable. The surety should be given an opportunity to be heard as to the reality or
reasonableness of the damages resulting from the wrongful issuance of the writ. In the absence of due notice to the surety,
therefore, no judgment for damages may be entered and executed against it.
51

In the old case of Visayan Surety and Insurance Corp. v. Pascual, the application for damages was made before the finality of
judgment, but the surety was not given due notice. The Court allowed such application under Section 20, Rule 59 of the 1940
Rules of Court because there was no rule which stated that the failure to give to the surety due notice of the application for
damages would release the surety from the obligation of the bond.
52

53

The case of Visayan Surety and Insurance Corp. v. Pascual, however, was abandoned in the subsequent rulings of the Court
because this was contrary to the explicit provision of Section 20, Rule 57.
54

In People Surety and Insurance Co. v. CA, the defendant therein filed an application for damages during the trial but the surety
was not notified. The Court denied the application and stated that "it is now well settled that a court has no jurisdiction to
entertain any proceeding seeking to hold a surety liable upon its bond, where the surety has not been given notice of the
proceedings for damages against the principal and the judgment holding the latter liable has already become final."
55

56

In Plaridel Surety & Insurance Co. v. De Los Angeles, a motion for execution against the bond of the surety was filed after the
finality of judgment. The petitioner therein asserted that the motion for execution was a sufficient notification to the surety of its
application for damages. The Court ruled, that "[t]his notification, however, which was made after almost a year after the
promulgation of the judgment by the Court of Appeals, did not cure the tardiness of the claim upon the liability of the surety,
which, by mandate of the Rules, should have been included in the judgment."
57

58

In the present case, petitioners answer with compulsory counterclaim, which contained the application for damages, was not
served on Visayan Surety. Also, a perusal of the records revealed that Visayan Surety was not furnished any copies of the
pleadings, motions, processes, and judgments concerned with the application for damages against the surety bond. Visayan
Surety was only notified of the application when the motion for execution was filed by petitioner on June 29, 2009, after the
judgment in G.R. No. 175048 had become final and executory on June 2, 2009.
59

60

Clearly, petitioner failed to comply with the requisites under Section 20, Rule 57 because Visayan Surety was not given due
notice on the application for damages before the finality of judgment. The subsequent motion for execution, which sought to
implicate Visayan Surety, cannot alter the immutable judgment anymore.
FESICOs bond is not
covered by Section 20,
Rule 57
While Visayan Surety could not be held liable under Section 20, Rule 57, the same cannot be said of FESICO. In the case at
bench, to forestall the enforcement of the writ of preliminary attachment, petitioner issued Equitable PCI Bank Check No.
160149, dated February 16, 2004, in the amount of P8,634,448.20 payable to the Clerk of Court of the RTC. Pursuant to the
RTC Order, dated April 29, 2004, the garnished funds of petitioner were deposited to the cashier of the Clerk of Court of the
RTC. The procedure to discharge the writ of preliminary attachment is stated in Section 12, Rule 57, to wit:
Sec. 12. Discharge of attachment upon giving counterbond.
After a writ of attachment has been enforced, the party whose property has been attached, or the person appearing on his
behalf, may move for the discharge of the attachment wholly or in part on the security given.The court shall, after due notice
and hearing, order the discharge of the attachment if the movant makes a cash deposit, or files a counter-bond
executed to the attaching party with the clerk of the court where the application is made, in an amount equal to that
fixed by the court in the order of attachment, exclusive of costs. But if the attachment is sought to be discharged with
respect to a particular property, the counter-bond shall be equal to the value of that property as determined by the court. In either
case, the cash deposit or the counter-bond shall secure the payment of any judgment that the attaching party may recover in the
action. A notice of the deposit shall forthwith be served on the attaching party. Upon the discharge of an attachment in
accordance with the provisions of this section, the property attached, or the proceeds of any sale thereof, shall be delivered to
the party making the deposit or giving the counter-bond, or to the person appearing on his behalf, the deposit or counter-bond
aforesaid standing in place of the property so released. Should such counter-bond for any reason to be found to be or become
insufficient, and the party furnishing the same fail to file an additional counter-bond, the attaching party may apply for a new
order of attachment.
[Emphasis Supplied]
Win Multi-Rich, however, took a step further and filed a motion to release petitioners cash deposit to it. Immediately, the RTC
granted the motion and directed Win Multi-Rich to post a bond in favor of petitioner in the amount of P9,000,000.00 to answer for
the damages which the latter may sustain should the court decide that Win Multi-Rich was not entitled to the relief sought.

Subsequently, Win Multi-Rich filed a surety bond of FESICO before the RTC and was able to obtain the P8,634,448.20 cash
deposit of petitioner, even before the trial commenced.
Strictly speaking, the surety bond of FESICO is not covered by any of the provisions in Rule 57 of the Rules of Court because, in
the first place, Win Multi-Rich should not have filed its motion to release the cash deposit of petitioner and the RTC should not
have granted the same. The release of the cash deposit to the attaching party is anathema to the basic tenets of a preliminary
attachment.
The chief purpose of the remedy of attachment is to secure a contingent lien on defendants property until plaintiff can, by
appropriate proceedings, obtain a judgment and have such property applied to its satisfaction, or to make some provision for
unsecured debts in cases where the means of satisfaction thereof are liable to be removed beyond the jurisdiction, or improperly
disposed of or concealed, or otherwise placed beyond the reach of creditors. The garnished funds or attached properties could
only be released to the attaching party after a judgment in his favor is obtained. Under no circumstance, whatsoever, can the
garnished funds or attached properties, under the custody of the sheriff or the clerk of court, be released to the
attaching party before the promulgation of judgment.
61

Cash deposits and counterbonds posted by the defendant to lift the writ of attachment is a security for the payment of any
judgment that the attaching party may obtain; they are, thus, mere replacements of the property previously
attached. Accordingly, the P8,634,448.20 cash deposit of petitioner, as replacement of the properties to be attached, should
never have been released to Win Multi-Rich.
62

Nevertheless, the Court must determine the nature of the surety bond of FESICO. The cash deposit or the counter-bond was
supposed to secure the payment of any judgment that the attaching party may recover in the action. In this case, however, Win
Multi-Rich was able to withdraw the cash deposit and, in exchange, it posted a surety bond of FESICO in favor of petitioner to
answer for the damages that the latter may sustain. Corollarily, the surety bond of FESICO substituted the cash deposit of
petitioner as a security for the judgment. Thus, to claim damages from the surety bond of FESICO, Section 17, Rule 57 could be
applied. It reads:
63

Sec. 17. Recovery upon the counter-bond.

When the judgment has become executory, the surety or sureties on any counter-bond given pursuant to the provisions of this
Rule to secure the payment of the judgment shall become charged on such counter-bond and bound to pay the judgment
obligee upon demand the amount due under the judgment, which amount may be recovered from such surety or sureties after
notice and summary hearing in the same action.
From a reading of the above-quoted provision, it is evident that a surety on a counter-bond given to secure the payment of a
judgment becomes liable for the payment of the amount due upon: (1) demand made upon the surety; and (2) notice and
summary hearing on the same action. Noticeably, unlike Section 20, Rule 57, which requires notice and hearing before the
finality of the judgment in an application for damages, Section 17, Rule 57 allows a party to claim damages on the surety bond
after the judgment has become executory.
64

65

The question remains, in contrast to Section 20, why does Section 17 sanction the notice and hearing to the surety after the
finality of judgment? The answer lies in the kind of damages sought to be enforced against the bond.
Under Section 20, Rule 57, in relation to Section 4 therein, the surety bond shall answer for all the costs which may be
adjudged to the adverse party and all damages which he may sustain by reason of the attachment. In other words, the damages
sought to be enforced against the surety bond are unliquidated. Necessarily, a notice and hearing before the finality of
judgment must be undertaken to properly determine the amount of damages that was suffered by the defendant due to the
improper attachment. These damages to be imposed against the attaching party and his sureties are different from the principal
case, and must be included in the judgment.
66

On the other hand, under Section 17, Rule 57, in relation to Section 12 therein, the cash deposit or the counter-bond shall
secure the payment of any judgment that the attaching party may recover in the action. Stated differently, the damages sought to
be charged against the surety bond are liquidated. The final judgment had already determined the amount to be awarded to the
winning litigant on the main action. Thus, there is nothing left to do but to execute the judgment against the losing party, or in
case of insufficiency, against its sureties.

Here, the Court is convinced that a demand against FESICO had been made, and that it was given due notice and an
opportunity to be heard on its defense. First, petitioner filed a motion for execution on June 29, 2009, a copy of which was
furnished to FESICO; second, petitioner filed a manifestation, dated July 13, 2009, that FESICO was duly served with the said
motion and notified of the hearing on August 7, 2009; third, during the August 7, 2009 hearing on the motion for execution, the
counsels for petitioner, Win Multi-Rich and FESICO were all present; fourth, in an Order, dated September 16, 2009, FESICO
was given fifteen (15) days to submit its comment or opposition to the motion for execution; and lastly, FESICO filed its
comment on the motion on October 1, 2009. Based on the foregoing, the requirements under Section 17, Rule 57 have been
more than satisfied.
1wphi1

67

68

69

70

71

Indeed, FESICO cannot escape liability on its surety bond issued in favor of petitioner. The purpose of FESICO's bond was to
secure the withdrawal of the cash deposit and to answer any damages that would be inflicted against petitioner in the course of
the proceedings. Also, the undertaking signed by FESICO stated that the duration of the effectivity of the bond shall be from its
approval by the court until the action is fully decided, resolved or terminated.
72

73

FESICO cannot simply escape liability by invoking that it was not a party in G.R. No. 175048. From the moment that FESICO
issued Surety Bond No. 10198 to Win Multi-Rich and the same was posted before the RTC, the court has acquired jurisdiction
over the surety, and the provisions of Sections 12 and 17 of Rule 57 became operational. Thus, the Court holds that FESICO is
solidarily liable under its surety bond with its principal Win Multi-Rich.
On a final note, the Court reminds the bench and the bar that lawsuits, unlike duels, are not to be won by a rapier's thrust.
Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves
scant consideration from courts. There should be no vested rights in technicalities.
74

WHEREFORE, the petition is PARTIALLY GRANTED. The October 21, 2013 Decision and the April 1, 2014 Resolution of the
Court of Appeals in CA-G.R. CV No. 95421 are AFFIRMED WITH MODIFICATION. The Regional Trial Court of Manila, Branch
32 in Civil Case No. 04-108940 is hereby ordered to proceed with the execution against Far Eastern Surety & Insurance Co.,
Inc., to the extent of the amount of the surety bond.
SO ORDERED.

G.R. No. 198436

PIONEER INSURANCE SURETY CORPORATION, Petitioner,
vs.
MORNING STAR TRAVEL & TOURS, INC., ESTELITA CO WONG, BENNY H. WONG, ARSENIO CHUA, SONNY CHUA, AND
WONG YAN TAK, Respondents.
DECISION
LEONEN, J.:
As a general rule, a corporation has a separate and distinct personality from those who represent it. Its officers are solidarily
liable only when exceptional circumstances exist, such as cases enumerated in Section 31 of the Corporation Code. The liability
of the officers must be proven by evidence sufficient to overcome the burden of proof borne by the plaintiff.
1

This case originated from a Complaint for Collection of Sum of Money and Damages filed by Pioneer Insurance & Surety
Corporation (Pioneer) against Morning Star Travel & Tours, Inc. (Morning Star) for the amounts Pioneer paid the International Air
Transport Association under its credit insurance policy. The amounts of P100,479,171.59 and US$457,834.14 represent Morning
Stars overdue remittances to the International Air Transport Association.
3

Pioneer filed this Petition for Review assailing the Court of Appeals February 28, 2011 Decision "only insofar as it absolved the
individual respondents of their joint and solidary liability to petitioner[,]" and August 31, 2011 Resolution denying
reconsideration.
5

Morning Star is a travel and tours agency with Benny Wong, Estelita Wong, Arsenio Chua, Sonny Chua, and Wong Yan Tak as
shareholders and members of the board of directors.
9

International Air Transport Association is a Canadian corporation licensed to do business in the Philippines "to promote safe,
regular and economical air transport for all people, among others."
10

International Air Transport Association appointed Morning Star as an accredited travel agent. Morning Star "avail[ed] of the
privilege of getting on credit . . . air transport tickets from various airline companies [to be sold] to passengers at prices fixed by
the airline companies[.]"
11

12

Morning Star and International Air Transport Association entered a Passenger Sales Agency Agreement such that Morning Star
must report all air transport ticket sales to International Air Transport Association and account all payments received through the
centralized system called Billing and Settlement Plan. Morning Star only holds in trust all monies collected as these belong to
the airline companies.
13

14

International Air Transport Association obtained a Credit Insurance Policy from Pioneer to assure itself of payments by
accredited travel agents for ticket sales and monies due to the airline companies under the Billing and Settlement Plan. The
policy was for the period from November 1, 2001 to December 31, 2002, renewed for the period from January 1, 2003 to
December 31, 2003.
15

16

The policy was made known to the accredited travel agents. Morning Star, through its President, Benny Wong, was among those
that declared itself liable to indemnify Pioneer for any and all claims under the policy. He executed a registration form under the
Credit Insurance Program for BSP-Philippines Agents.
17

Morning Star had an accrued billing of P49,051,641.80 and US$325,865.35 for the period from December 16, 2002 to December
31, 2002. It failed to remit these amounts through the Billing and Settlement Plan, prompting the International Air Transport
Association to send a letter dated January 17, 2003 advising on the overdue remittance.
18

International Air Transport Association again declared Morning Star in default by a letter dated January 20, 2003 for its overdue
account covering the period from January 1, 2003 to January 20, 2003.
19

Pursuant to the credit insurance policies, International Air Transport Association demanded from Pioneer the sums of
P109,728,051.00 and US$457,834.14 representing Morning Stars overdue account as of April 30, 2003. Pioneer investigated,
ascertained, and validated the claims, then paid International Air Transport Association the amounts of P100,479,171.59 and
US$457,834.14.
20

Consequently, Pioneer demanded these amounts from Morning Star through a letter dated September 23, 2003. International
Air Transport Association executed in Pioneers favor a Release of Claim and Subrogation Receipt on December 23, 2003.
21

22

On November 10, 2005, Pioneer filed a Complaint for Collection of Sum of Money and Damages against Morning Star and its
shareholders and directors.
23

Morning Star, Benny Wong, and Estelita Wong were served with summons and a copy of the Complaint on November 22, 2005,
while Arsenio Chua, Sonny Chua, and Wong Yan Tak were unserved.
24

The trial court granted Pioneers Motion to Declare Respondents in Default for failure to file an Answer within the
period. Pioneer presented its evidence ex-parte.
25

26

Meanwhile, Pioneer filed an Ex-Parte Motion for Issuance of Alias Summons since Morning Star was previously served through
substituted service. The trial court granted the Motion, and alias summons was served on February 5, 2007. Upon motion,
Morning Star was declared in default for failure to file an Answer within the period.
27

On June 28, 2007, Morning Star filed a Motion for Leave of Court to File Attached Answer explaining that it only received a copy
of the Complaint on February 5, 2007. Its counsel also alleged that he was retained only on June 22, 2007. The trial court
denied the Motion on July 23, 2007, and also denied reconsideration.
28

29

30

The Regional Trial Court in its Decision dated November 9, 2007 ruled in favor of Pioneer and ordered respondents to jointly
and severally pay Pioneer:
31

WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiff as against the defendants
ordering the latter to jointly and severally pay the following amount:
1. One Hundred Million Four Hundred Seventy Nine Thousand One Hundred Seventy One Pesos and Fifty Nine
(Php100,479,171.59) and Four Hundred Fifty Seven Thousand Eight Hundred Thirty Four Dollars and 14/100
(US$457,834.14), with interest at 12% per annum from September 23, 2003 until the sum is fully paid;
2. Php100,000.00 as attorneys fees;
3. Php100,000.00 as exemplary damages;
4. Php200,000.00 as litigation expenses[;]
5. costs of suit.
SO ORDERED.

32

The Court of Appeals, in its Decision dated February 28, 2011, affirmed the trial court with modification in that only Morning Star
was liable to pay petitioner:
WHEREFORE, premises considered, the instant Appeal is DENIED. Accordingly, the assailed 9 November 2007 Decision of the
Regional Trial Court of Makati City, Branch 143 in Civil Case No. 05-993 is AFFIRMED with MODIFICATION. Insofar as the trial
court ordered Defendants-Appellants Estelita Co Wong, Benny H. Wong, Arsenio Chua, Sonny Chua and Wong Yan Tak to
jointly and severally pay the amounts awarded to Plaintiff-Appellee, the same is deleted. Only Morning Star is held personally
liable for the payment thereof. Further, exemplary damages and attorneys fees are likewise deleted for lack of basis.
SO ORDERED.

33

The Court of Appeals denied Pioneers Motion for Partial Reconsideration. Thus, Pioneer filed this Petition.
34

Pioneer submits that its Petition falls under the exceptions to the general rule that petitions for review may raise only questions
of law. Pioneer raises conflicting findings and conclusions by the lower courts regarding solidary liability, and misapprehension
of facts by the Court of Appeals.
35

36

Pioneer argues that "the individual respondents were, at the very least, grossly negligent in running the affairs of respondent
Morning Star by knowingly allowing it to amass huge debts to [International Air Transport Association] despite its financial
distress, thus, giving sufficient ground for the court to pierce the corporate veil and hold said individual respondents personally
liable." It cites Section 31 of the Corporation Code on the liability of directors "guilty of gross negligence or bad faith in directing
the affairs of the corporation[.]"
37

38

Pioneer also cites jurisprudence on the requisites for the doctrine of piercing the corporate veil to apply. It submits that all
requisites are present, thus, the individual respondents should be held solidarily liable with Morning Star. It cites at length the
testimony of its witness Atty. Vincenzo Nonato M. Taggueg (Atty. Taggueg) that based on Morning Stars General Information
Sheet and financial statements, Morning Star "has been accumulating losses as early as 1998 continuing to 1999 and 2000
resulting to a deficit of Php26,168,1768.00 [sic] as of December 31, 2000[.]"
39

40

41

42

43

Pioneer contends that the abnormally large indebtedness to International Air Transport Association was incurred in fraud and
bad faith, with Morning Star having no intention to pay its debt. It cites Oria v. McMicking on the badges of fraud. Pioneer then
44

45

46

enumerates "the unmistakable badges of fraud and deceit committed by individual respondents" such as the fact that Morning
Star had no assets, but the two corporations also "controlled and managed by the individual respondents were doing relatively
well [at] the time . . . Morning Star was incurring huge losses[.]" Moreover, a new travel agency called Morning Star Tour
Planners, Inc. now operates at the Morning Stars former principal place of business in Pedro Gil, Manila, with the children of
individual respondents as its stockholders, directors, and officers.
47

48

49

50

Respondents counter with the general rule clothing corporations with personality separate and distinct from their officers and
stockholders. They submit that "[m]ere sweeping allegations that officers acted in bad faith because it incurred obligations it
cannot pay will not hold any water." Respondents argue that Pioneer failed to prove bad faith, relying only on Atty. Tagguegs
testimony, but "Mr. Taggueg admitted that his knowledge about the defendant Morning Star was merely based on his
assumptions and his examination of the [Securities and Exchange Commission] documents."
51

52

53

The issues for resolution are:

First, whether this case involves an exception to the general rule that petitions for review are limited to questions of law; and
Second, whether the doctrine of piercing the corporate veil applies to hold the individual respondents solidarily liable with
respondent Morning Star Travel and Tours, Inc. to pay the award in favor of petitioner Pioneer Insurance & Surety Corporation.
I
Only questions of law may be raised in a petition for review. Factual findings of the Court of Appeals are generally "final and
conclusive, and cannot be reviewed on appeal by [this court], provided they are borne out by the record or based on substantial
evidence."
54

55

Issues such as whether the separate and distinct personality of a corporation was used for fraudulent ends, or whether the
evidence warrants a piercing of the corporate veil, involve questions of fact.
56

Jurisprudence established exceptions from the general rule against a factual review by this court. These exceptions include
cases when the judgment appears to be based on a "patent misappreciation of facts."
57

Petitioner invokes this exception in alleging that "the conflicting findings and conclusions between the Court of Appeals and the
trial court insofar as the solidary liability of respondents to pay petitioner and the misapprehensions of facts by the Court of
Appeals constrains petitioner to raise both questions of fact and law in the Petition."
58

In ruling against the solidary liability of the individual respondents with respondent Morning Star, the Court of Appeals discussed
that "the trial court merely stated in the dispositive portion thereof that Defendants- Appellants are ordered to pay PlaintiffAppellee jointly and severally the judgment award without discussing in the body of the decision the reason for such
conclusion."
59

The Court of Appeals then enumerated the exceptional circumstances warranting solidary liabilities by corporate agents based
on jurisprudence, and found none to be present in this case.
60

We affirm the Court of Appeals.

II
The law vests corporations with a separate and distinct personality from those that represent these corporations.

61

The corporate legal structure draws its "economic superiority" from key features such as a separate corporate personality.
Unlike other business associations such as partnerships, the corporate framework encourages investment by allowing even
small capital contributors to be part of a big business endeavor made possible by the aggregation of their capital funds. The
consequent limited liability feature, since corporate assets will answer for corporate debts, also proves attractive for investors.
However, this legal structure should not be abused.
62

63

A separate corporate personality shields corporate officers acting in good faith and within their scope of authority from personal
liability except for situations enumerated by law and jurisprudence, thus:
64

Personal liability of a corporate director, trustee or officer along (although not necessarily) with the corporation may so validly
attach, as a rule, only when
1. He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing its
affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;
2. He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with the
corporate secretary his written objection thereto;
3. He agrees to hold himself personally and solidarily liable with the corporation; or
4. He is made, by a specific provision of law, to personally answer for his corporate action.

65

The first exception comes from Section 31 of the Corporation Code:

SECTION 31. Liability of Directors, Trustees or Officers.
Directors or trustees who wilfully and knowingly vote for or assent to patently unlawful acts of the corporation orwho are guilty
of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in
conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom
suffered by the corporation, its stockholders or members and other persons. (Emphasis supplied)
Petitioner imputes gross negligence and bad faith on the part of the individual respondents for incurring the huge indebtedness
to International Air Transport Association.
66

Bad faith "imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, not simply bad judgment or
negligence." "[I]t means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud."
67

68

The trial court gave weight to its finding that respondent Morning Star still availed itself of loans and/or obligations with
International Air Transport Association despite its financial standing of operating at a loss:
Based on the plaintiffs examination of the financial statements submitted by the defendant Morning Star with the Securities and
Exchange Commission (SEC) for the years 2000 and 2001 with comparative figures for the years ending 1998, 1999 and 2000,
herein defendant corporation has been accumulating losses as early as 1998 continuing to 1999 and 2000 resulting to a deficit
of Php26, 168,176.80 as of December 31, 2000. It was also shown that for the prior years of 1998 and 1999, defendant Morning
Star incurred a deficit of Php3,910,763.00 as of December 31, 1998 and Php2,841,626.00 as of December 31, 1999 and in the
Balance Sheet, it indicated therein the defendants total assets of Php150,579,421.00 while the total liabilities amounted to
Php160,222,966.00, thereby making the defendant Morning Star insolvent. Despite the fact that defendant Morning Star was
already incurring losses as early as 1998 up to the year 2000, the latter still contractedloans and/or obligations with
IATA sometime in 2002 and which indebtedness ballooned to the huge amount of Php109,728,051.00
and US$496,403.21 as of April 30, 2003, which obviously it could not pay considering its financial standing.
Further investigation by the plaintiff shows that it could not find any assets or properties in the name of defendant Morning Star
because even the land and the building where it held office was registered in the name of "Morning Star Management Ventures
Corporation", as evidenced by the certified true copies of the transfer certificates of title (TCT) nos. 192243 and 192244 in the
name of Morning Star Management Ventures Corporation and unlike the defendant Morning Star, which has practically the same
officers and members of the Board, has only an asset of Php125,392,960.00 and liabilities of Php4,306,702[.]00 and an income
deficit of Php26,922,598.00 as of December 31, 2001. Similarly, the Pic []N Pac Mart, Inc., which has the same set of officers,
said corporation has shown a total assets of Php5,423,201.30 and liabilities/stockholders equity of Php5,423,201.30 but with a
retained earnings of Php194,412[.]74 as of December 31, 1999. Plaintiff contends that in such a case, defendant Morning
Star has used the separate and distinct corporate personality accorded to it under the Corporation Code to commit

said fraudulent transaction of incurring corporate debts and allow the herein individual defendants to escape personal
liability and placing the assets beyond the reach of the creditors. (Emphasis supplied, citations omitted)
69

On the other hand, the Court of Appeals ruled that the general rule on separate corporate personality and against personal
liability by corporate officers applies since petitioner failed to prove bad faith amounting to fraud by the corporate officers:
The mere fact that Morning Star has been incurring huge losses and that it has no assets at the time it contracted large financial
obligations to IATA, cannot be considered that its officers, Defendants-Appellants Estelita Co Wong, Benny H. Wong, Arsenio
Chua, Sonny Chua and Wong Yan Tak, acted in bad faith or such circumstance would amount to fraud, warranting personal and
solidary liability of its corporate officers. The same is also true with the fact that Morning Star Management Ventures Corporation
and Pic N Pac Mart, Inc., corporations having the same set of officers as Morning Star, were doing relatively well during the time
that the former incurred huge losses. Thus, only Morning Star should be held personally liable to Plaintiff- Appellee, and not its
corporate officers.
70

Piercing the corporate veil in order to hold corporate officers personally liable for the corporations debts requires that "the bad
faith or wrongdoing of the director must be established clearly and convincingly [as] [b]ad faith is never presumed."
71

III
Oria v. McMicking enumerates several badges of fraud. Petitioner argues the existence of the fourth to sixth badges:
72

73

1. The fact that the consideration of the conveyance is fictitious or is inadequate.

2. A transfer made by a debtor after suit has been begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly
embarrassed financially.
6. The fact that the transfer is made between father and son, when there are present other of the above
circumstances.
7. The failure of the vendee to take exclusive possession of all the property. (Emphasis supplied)
74

Petitioner listed the following circumstances as constituting badges of fraud by the individual respondents:
Attention is drawn to the following badges of fraud by individual respondents to use the corporate fiction of respondent Morning
Star as a veil or cloak to insulate themselves from any liability to pay its indebtedness to [sic], to wit:
a. As members of the Board of Directors and at the same time, officers of respondent Morning Star, individual
respondents Estelita Co Wong (President and Member of the Board), Benny H. Wong (Chairman of the Board), Arsenio
Chua (Member of the Board), Sonny Chua (Secretary and Member of the Board) and Wong Yan Tak (Treasurer and
Member of the Board) undoubtedly exercised complete control and direction of the financial management and business
operations of respondent Morning Star;
b. Similarly, the individual respondents are likewise in direct control of the management of two other corporations,
Morning Star Management Ventures Corp. and Pic N Pac Mart[,] Inc., being the shareholders, members of the Board
and officers of the said corporations, as evidenced by the General Information Sheets (GIS) of the said corporations filed
with the Securities and Exchange Commission (Exhibits "O" to "O-4" and "P" to "P-3" of petitioners Formal Offer of
Evidence dated August 15, 2007);

c. Respondent Morning Star has no assets or property in its name that may be levied upon for attachment and execution
to secure and to satisfy any judgment debt, as in fact the land and building where its offices can be found and situated at
J. Bocobo Street cor. Pedro Gil Street, Ermita Manila is not even registered in its name but in the name of another
corporation "Morning Star Management Ventures Corporation" which is similarly owned and controlled by the individual
respondents (Exhibits "S" to "S-2" and "T" to "T-2" of petitioners Formal Offer of Evidence dated August 15, 2007);
d. As early as 1998, respondent Morning Star had already been incurring huge losses which clearly show the inability to
pay its obligations to IATA but the individual respondents contracted its huge financial obligations from IATA knowing fully
well that respondent Morning Star will be unable to pay such obligations;
e. Strangely, on the other hand, Pic N Pac Mart, Inc. and Morning Star Management Ventures Corp., the other two (2)
corporations similarly controlled and managed by the individual respondents, were doing relatively well during the time
that respondent Morning Star was incurring huge losses (Exhibits "U" to "U-7" and "V" to "V-9" of petitioners Formal
Offer of Evidence dated August 15, 2007);
f. Individual respondents allowed the indebtedness of respondent Morning Star to balloon to a staggering amount of
Php100,479,171.59 and US$457,834.14[.] (Citations omitted)
75

This court finds that petitioner was not able to clearly and convincingly establish bad faith by the individual respondents, nor
substantiate the alleged badges of fraud.
1avvphi1

IV
First, petitioner failed to substantiate the fourth badge of fraud on "[e]vidence of large indebtedness or complete insolvency."

76

In 1993, International Air Transport Association appointed respondent Morning Star as an accredited travel agent with the
privilege of getting air tickets on credit, and they entered a Passenger Sales Agency Agreement. None of the parties made
allegations on the financial status or business standing of respondent Morning Star during the first five years from its
accreditation in 1993.
77

Petitioner relies on Atty. Tagguegs testimony regarding respondent Morning Stars financial statements with the Securities and
Exchange Commission.
Atty. Taggueg testified on the comparative figures for the years ended 1998, 1999, and 2000 and how the company was
"accumulating losses as early as 1998 continuing to 1999 and 2000 resulting to a deficit of Php26,168,1768.00 [sic] as of
December 31, 2000 . . . deficit of Php3,910,763.00 as of December 31, 1998 and another deficit of Php2,841,626.00 as of
December 31, 1999[.]" He testified that as of December 31, 2000, respondent Morning Star had total assets of
Php150,579,421.00 and total liabilities of Php160,222,966.00.
78

79

Atty. Taggueg then testified that despite this insolvency, "Morning Star Travel still contracted loans and/or obligations from the
IATA sometime in December 2002 which indebtedness with IATA ballooned to the huge amount of Php109,728,051.00 and
US$496,403.21 as of April 30, 2003[.]"
80

Petitioner did not present Securities and Exchange Commission documents on respondent Morning Stars total assets as of
December 2002. It did not present respondent Morning Stars financial statements for December 2002, the year it incurred
obligations from International Air Transport Association.
1a\^/phi1

81

The financial statements for years 1998 to 1999 and 1999 to 2000 testified on by Atty. Taggueg are not representative of the
financial status of respondent Morning Stars business. Year 2000 reflected total assets of P150,579,421.00 and total liabilities of
P160,222,966.00. On the other hand, year 1999 showed total assets of P134,361,353.00 and total liabilities of
P120,678,345.00. Businesses may earn profits in some years and operate at a loss in others as a result of changing economic
conditions. These two financial statements do not show that respondent Morning Star was operating at a loss in 2002. Deficits in
the years 1998 to 2000 do not necessarily mean deficits in 2002. It is unclear if these figures included previous obligations to
International Air Transport Association, or whether some or all of such obligations were paid in subsequent years as an indication
of respondent Morning Stars credit history.
82
83

In any event, it is in the nature of businesses to take risks when making business judgments, and this includes taking loans and
incurring liabilities.
Atty. Tagguegs association with respondent Morning Star, or this case, is also unclear. Respondents submit in their
memorandum that "[i]n his testimony[,] Mr. Taggueg admitted that his knowledge about . . . Morning Star was merely based on
his assumptions and his examination of the [Securities and Exchange Commission] documents."
84

Petitioners reliance on Atty. Tagguegs testimony on respondentMorning Stars financial statements for previous years fails to
clearly and convincingly establish bad faith by the individual respondents.
V
Second, petitioner failed to substantiate the fifth badge of fraud on the "transfer of all or nearly all of his property by a debtor,
especially when he is insolvent or greatly embarrassed financially."
85

Mere allegations that Morning Star Management Ventures Corporation and Pic N Pac Mart, Inc. "were doing relatively well
during the time that respondent Morning Star was incurring huge losses" do not establish bad faith or fraud by the individual
respondents. Such allegations alone do not prove that the individual respondents were transferring respondent Morning Stars
properties in fraud of its creditors.
86

Neither does the allegation that Morning Star Management Ventures Corporation has title over the land and building where the
offices can be found establish bad faith or fraud. Petitioner did not show that this title was originally in respondent Morning Stars
name and was later transferred to respondent Morning Star.
This court has held that the "existence of interlocking directors, corporate officers and shareholders is not enough justification to
pierce the veil of corporate fiction in the absence of fraud or other public policy considerations."
87

VI
Third, petitioner also failed to substantiate the sixth badge of fraud that "the transfer is made between father and son, when there
are present other of the above circumstances."
88

Petitioner submits that:

It would be the height of injustice to allow individual respondents to get away with their gross negligence to the prejudice of
petitioner, especially since there is now another travel agency in the name of Morning Star Tour Planners, Inc. operating at the
respondent Morning Stars former principal place of business at 1600 J. Bocobo St. corner Pedro Gil Malate, Manila. . . .
....
Curiously, among the stockholders, directors and officers of Morning Star Tour Planners, Inc., are the following: Belinda Wong,
Billy Wong, Barbara C. Wong and Benny C. Wong, Jr., who all have the same address as individual respondents Estelita Co
Wong and Benny H. Wong.
Given, these vital pieces of information, it is at once indubitable that respondents have established another travel agency in the
name of their children in order to escape their solidary liability to petitioner! (Citation omitted)
89

This court has held that "compliance with the recognized modes of acquisition of jurisdiction cannot be dispensed with even in
piercing the veil of corporate fiction[.]" Morning Star Tour Planners, Inc. is not a party in this case. It would offend due process
rights if what petitioner ultimately seeks in its allegation is to hold Morning Star Tour Planners, Inc. responsible for respondent
Morning Stars liability.
90

In any event, petitioner failed to plead and prove the circumstances that would pass the following control test for the operation of
the alter ego doctrine:

(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time
no separate mind, will or existence of its own;
(2) Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a
statutory or other positive legal duty, or dishonest and unjust act in contravention of plaintiffs legal right; and
(3) The aforesaid control and breach of duty must [have] proximately caused the injury or unjust loss complained of.

91

The records do not show that the individual respondents controlled Morning Star Tour Planners, Inc. and that such control was
used to commit fraud against petitioner. Neither does this suspicion support petitioners position that the individual respondents
were in bad faith or gross negligence in directing the affairs of respondent Morning Star.
Finally, pursuant to this court's pronouncement in Nacar v. Gallery Frames, the interest rate should be 6% per annum on the
amount owing to petitioner representing respondent Morning Star's unpaid air transport tickets availed on credit.
92

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision is AFFIRMED with MODIFICATION in that legal interest
is 6% per annum from September 23, 2003 until fully paid.
SO ORDERED.
G.R. No. 204689

January 21, 2015

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,

vs.
SPOUSES RUNE and LEA STROEM, Respondents.
DECISION
LEONEN, J.:
For resolution is a Petition for Review under Rule 45 of the Rules of Court assailing the Decision dated November 20, 2012 of
the Court of Appeals in CA-G.R. CV No. 96017. The Court of Appeals ;iffirmed the Decision of the Regional Trial Court of
Makati, Branch 133 in Civil Case No. 02-1108 for collection of a sum of money.
1

This case involves the proper invocation of the Construction Industry Arbitration Committee's (CIAC) jurisdiction through an
arbitration clause in a construction contract. The main issue here is whether the dispute liability of a surety under a
performance bond is connected to a construction contract and, therefore, falls under the exclusive jurisdiction of the CIAC.
Spouses Rune and Lea Stroem (Spouses Stroem) entered into an Owners-Contractor Agreement with Asis-Leif & Company,
Inc. (Asis-Leif) for the construction of a two-storey house on the lot owned by Spouses Stroem. The lot was located at Lot 4A,
Block 24, Don Celso Tuason Street, Valley Golf Subdivision, Barangay Mayamot, Antipolo, Rizal.
4

On November 15, 1999, pursuant to the agreement, Asis-Leif secured Performance Bond No. LP/G(13)83056 in the amount
of P4,500,000.00 from Stronghold Insurance Company, Inc. (Stronghold). Stronghold and Asis-Leif, through Ms. Ma. Cynthia
Asis-Leif, bound themselves jointly and severally to pay the Spouses Stroem the agreed amount in the event that the
construction project is not completed.
6

Asis-Leif failed to finish the projecton time despite repeated demands of the Spouses Stroem.

Spouses Stroem subsequently rescinded the agreement. They then hired an independent appraiser to evaluate the progress of
the construction project.
9

10

Appraiser Asian Appraisal Company, Inc.s evaluation resulted in the following percentage of completion: 47.53% of the
residential building, 65.62% of the garage, and 13.32% of the swimming pool, fence, gate, and land development.
11

On April 5, 2001, Stronghold sent a letter to Asis-Leif requesting that the company settle its obligations withthe Spouses Stroem.
No response was received from Asis-Leif.
12

On September 12, 2002, the Spouses Stroem filed a Complaint (with Prayer for Preliminary Attachment) for breach of contract
and for sum of money with a claim for damages against Asis-Leif, Ms. Cynthia Asis-Leif, and Stronghold. Only Stronghold was
served summons. Ms. Cynthia Asis-Leif allegedly absconded and moved out of the country.
13

14

15

On July 13, 2010, the Regional Trial Court rendered a judgment in favor of the Spouses Stroem. The trial court ordered
Stronghold to pay the Spouses Stroem P4,500,000.00 with 6% legal interest from the time of first demand. The dispositive
portion of the trial court Decision reads:
16

WHEREFORE, finding plaintiffs cause of action to be sufficiently established being supported by evidence on records,
judgement is hereby rendered in favor of the plaintiff spouses Rune and Lea Stroem and against the defendant Stronghold
Insurance Company Incorporated ordering the latter topay the plaintiff the sums of:
1) Php4,500,000.00 with six (6%) percent legal interest from the time of first demand and interest due shall earn legal
interest from the time of judicial demand until fully paid.
2) Php35,000.00 by way of attorneys fees and other litigation expenses.
Defendant is further ordered topay the costs of this suit.
SO ORDERED.

17

Both Stronghold and the Spouses Stroem appealed to the Court of Appeals.

18

The Court of Appeals affirmed with modification the trial courts Decision. It increased the amount of attorneys fees
to P50,000.00.
19

The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE,the appeal of Stronghold Company, Inc[.] is DISMISSED, while the appeal of spouses Rune and Lea Stroem is
PARTLY GRANTED. The November 27, 2009 Decision of the Regional Trial Court of Makati City is AFFIRMED with
MODIFICATION that the award of attorneys fees is increased to P50,000.00
SO ORDERED.

20

On March 20, 2013, this court required the Spouses Stroem to submit their Comment on the Petition. We noted the Spouses
Stroems Comment on July 31, 2013. We also required Stronghold to file its Reply to the Comment, which was noted on
December 9, 2013.
21

22

23

24

Stronghold argues that the trial court did not acquire jurisdiction over the case and, therefore, the Court of Appeals committed
reversible error when it upheld the Decision of the Regional Trial Court. The lower courts should have dismissed the case in
viewof the arbitration clause in the agreement and considering that "[Republic Act No. 876] explicitly confines the courts
authority only to pass upon the issue of whether there is [an] agreement . . . providing for arbitration. In the affirmative, the
statute ordains that the court shall issue an order summarily directing the parties to proceed with the arbitration in accordance
with the terms thereof." Moreover, "the stipulations in said Agreement are part and parcel of the conditions in the bond. Were it
not for such stipulations in said agreement, [Stronghold] would not have agreed to issue a bond in favor of the Spouses Stroem.
The parties tothe bond are ALB/Ms. Asis-[L]eif, Spouses Stroem and [Stronghold] suchthat ALB/Ms. Asis-[L]eif never ceased to
be a party to the surety agreement."
25

26

27

In any case, Strongholds liability under the performance bond is limited only to additional costs for the completion of the
project. In addition, the Court of Appeals erred inholding that Stronghold changed its theory with regard to the notice
requirement and in modifying the trial courts award of attorneys fees.
28

29

30

On the other hand, the Spouses Stroem argue that Stronghold committed forum shopping warranting dismissal of the
case. According to the Spouses Stroem, Stronghold deliberately committed forum shopping when it filed the present petition
despite the pendency of the Spouses Stroems Motion for Partial Reconsideration of the Court of Appeals Decision dated
November 20, 2012.
31

32

More importantly, the Owners-Contractor Agreement is "separate and distinct from the Bond. The parties to the Agreement are
ALB/Ms. Asis-Leif and Spouses Stroem, while the parties to the Bond are Spouses Stroem and Stronghold. The considerations
for the two contracts are likewise distinct. Thus, the arbitration clause in the Agreement is binding only on the parties thereto,
specifically ALB/Ms. Asis-Leif and Spouses Stroem[.]"
33

Contrary to Strongholds argument, Spouses Stroem argues that stronghold is liable for the full amountof the performance bond.
The terms of the bond clearly show that Stronghold is liable as surety. Verily, notice to Stronghold is not required for its liability
to attach.
34

35

The issues for consideration are:

(1) Whether the dispute involves a construction contract;
(2) Whether the CIAC has exclusive jurisdiction over the controversy between the parties;
(3) Whether the Regional Trial Court should have dismissed the petition outright as required by law and jurisprudence
and referred the matter to the CIAC; and
(4) Whether petitioner Stronghold Insurance Company, Inc. is liable under Performance Bond No. LP/G(13)83056.
(a) Whether petitioner Stronghold Insurance Company, Inc. is only liable as to the extent of any additional cost for the
completion of the project due toany increase in prices for labor and materials.
(b) Whether the case involves ordinary suretyship or corporate suretyship.
After considering the parties arguments and the records of this case, this court resolves to deny the Petition.
On forum-shopping
Respondents argue that petitioner committed forum shopping; hence, the case should have been dismissed outright.
Records show that petitioner received a copy of the Decision of the Court of Appeals on December 5, 2012. Petitioner did not
file a Motion for Reconsideration of the assailed Decision. It filed before this court a Motion for Extension of Time To File Petition
for Review requesting an additional period of 30 days from December 20, 2012 or until January 19, 2013 to file the Petition.
36

37

Respondents filed their Motion for Partial Reconsideration of the Court of Appeals Decision on December 11, 2012. They
sought the modification of the Decision as to the amounts of moral damages, exemplary damages, attorneys fees, and costs of
the suit.
38

39

Respondents alleged in their Comment that as early as January 9, 2013, petitioner received a copy of the Court of Appeals
Resolution requiring Comment on the Motion for Partial Reconsideration. Still, petitioner did not disclose in its Verification and
Certification Against Forum Shopping the pendency of respondents Motion for Partial Reconsideration.
40

41

For its part, petitioner claims that it did not commit forum shopping. It fully disclosed in its Petition that what it sought to be
reviewed was the Decision dated November 20, 2012 of the Court of Appeals. "Petitioner merely exercised its available remedy
with respect to the Decision of the Court of Appeals by filing [the] Petition." What the rules mandate to be stated in the
Certification Against Forum Shopping is the status of "any other action." This other action involves the same issues and parties
but is an entirely different case.
42

Indeed, petitioner is guilty of forum shopping.

There is forum shopping when:

as a result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another.
The principle applies not only with respect to suits filed in the courts but also in connection with litigations commenced in the
courts while an administrative proceeding is pending[.] (Citation omitted)
43

This court has enumerated the elements of forum-shopping: "(a) identity of parties, or at least such parties as represent the
same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts;
and (c) the identity with respect to the two preceding particulars in the two cases issuch that any judgment rendered in the
pending cases, regardless of which party is successful, amount to res judicatain the other case." Rule 42, Section 2 in relation
to Rule 45, Section 4 of the Rules of Court mandates petitioner to submit a Certification Against Forum Shopping and promptly
inform this court about the pendency of any similar action or proceeding before other courts or tribunals. The rules purpose is to
deter the unethical practice of pursuing simultaneous remedies in different forums, which "wreaks havoc upon orderly judicial
procedure." Failure to comply with the rule is a sufficient ground for the dismissal of the petition.
44

46

45

47

Records show that petitioners duly authorized officer certified the following on January 21, 2013: 4. I further certify that: (a) I
have not commenced any other action or proceeding involving the same issues in the Supreme Court, Court of Appeals, or any
other tribunal or agency; (b) to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, the
Court of Appeals or different Divisions thereof, or any tribunal or agency; (c) if I should thereafter learn that a similar action or
proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different Divisions thereof, or any
other tribunal or agency, I undertake to promptly inform the aforesaid courts and such tribunal or agency of the fact within five (5)
days therefrom.
48

Petitioner failed to carry out its duty of promptly informing this court of any pending action or proceeding before this court,the
Court of Appeals, or any other tribunal or agency. This court cannot countenance petitioners disregard of the rules.
This court has held before that:
[u]ltimately, what is truly important to consider in determining whether forum-shopping exists or not is the vexation caused the
courts and parties-litigant by a party who asks different courts and/or administrative agencies to rule on the same or related
causes and/or to grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions
being rendered by the different fora upon the same issue. (Emphasis supplied)
49

On this basis, this case should be dismissed.

On arbitration and the CIACs jurisdiction
Petitioner changed the theory of its case since its participation in the trial court proceedings. It raised the issue of lack of
jurisdiction in view of an arbitration agreement for the first time. Generally, parties may not raise issues for the first time on
appeal. Such practice is violative of the rules and due process and is frowned upon by the courts. However, it is also wellsettled that jurisdiction can never be waived or acquired by estoppel. Jurisdiction is conferred by the Constitution or by
law. "Lack of jurisdiction of the court over an action or the subject matter of an action cannot be cured by the silence, by
acquiescence, or even by express consent of the parties."
50

51

52

53

Section 4 of Executive Order No. 1008 is clear in defining the exclusive jurisdiction of the CIAC:
54

SECTION 4. Jurisdiction The CIAC shall have original and exclusive jurisdiction over disputes arising from, or connected with,
contracts entered into by parties involved in construction in the Philippines, whether the dispute arises before or after the
completion of the contract, or after the abandonment or breach thereof. These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit the same to voluntary arbitration.
The jurisdiction of the CIAC may include but is not limited to violation of specifications for materials and workmanship; violation
of the terms of agreement; interpretation and/or application of contractual timeand delays; maintenance and defects; payment,
default of employer or contractor and changes in contract cost.

Excluded from the coverage of thislaw are disputes arising from employer-employee relationships which shall continue to be
covered by the Labor Code of the Philippines. (Emphasis supplied)
Similarly, Section 35 of RepublicAct No. 9285 or the Alternative Dispute Resolution Act of 2004 states:
SEC. 35. Coverage of the Law. - Construction disputes which fall within the original and exclusive jurisdiction of the Construction
Industry Arbitration Commission (the "Commission") shall include those between or among parties to, or who are otherwise
bound by, an arbitration agreement, directly or by reference whether such parties are project owner, contractor, subcontractor,
quantity surveyor, bondsman or issuer of an insurance policy in a construction project.
The Commission shall continue to exercise original and exclusive jurisdiction over construction disputes although the arbitration
is "commercial" pursuant to Section 21 of this Act. (Emphasis supplied)
In Heunghwa Industry Co., Ltd., v. DJ Builders Corporation, this court held that "there are two acts which may vest the CIAC
with jurisdiction over a construction dispute. One is the presence of an arbitration clause in a construction contract, and the other
is the agreement by the parties to submit the dispute to the CIAC."
55

56

This court has ruled that when a dispute arises from a construction contract, the CIAC has exclusive and original
jurisdiction. Construction has been defined as referring to "all on-site works on buildings or altering structures, from land
clearance through completion including excavation,ERECTION and assembly and installation of components and equipment."
57

58

In this case, there is no dispute asto whether the Owners-Contractor Agreement between Asis-Leif and respondents is a
construction contract. Petitioner and respondents recognize that CIAC has jurisdiction over disputes arising from the agreement.
What is at issue in this case is the parties agreement, or lack thereof, to submit the case to arbitration. Respondents argue that
petitioner is not a party to the arbitration agreement. Petitioner did not consent to arbitration. It is only respondent and Asis-Leif
thatmay invoke the arbitration clause in the contract.
This court has previously held that a performance bond, which is meant "to guarantee the supply of labor,materials, tools,
equipment, and necessary supervision to complete the project[,]" is significantly and substantially connected to the construction
contract and, therefore, falls under the jurisdiction of the CIAC.
59

60

Prudential Guarantee and Assurance Inc. v. Anscor Land, Inc. involved circumstances similar to the present case. In Prudential,
property owner Anscor Land, Inc. (ALI) entered into a contract for the construction of an eight-unit townhouse located inCapitol
Hills, Quezon City with contractor Kraft Realty and Development Corporation (KRDC). KRDC secured the completion of the
construction project through a surety and performance bond issued by Prudential Guarantee and Assurance Inc. (PGAI).
61

62

63

The delay in the construction project resulted in ALIs termination of the contract and claim against the performance bond. "ALI
[subsequently] commenced arbitration proceedings against KRDC and PGAI in the CIAC." PGAI, however, argued that it was
not a party to the construction contract.
64

65

66

The CIAC ruled that PGAI was not liable under the performance bond. Upon review, the Court of Appeals held that PGAI was
jointly and severally liable with KRDC under the performance bond.
67

68

PGAI appealed the Court of Appeals Decision and claimed that CIAC did not have jurisdiction over the performance bond. This
court ruled:
69

A guarantee or a surety contract under Article 2047 of the Civil Code of the Philippines is an accessory contract because it is
dependent for its existence upon the principal obligation guaranteed by it.
In fact, the primary and only reason behind the acquisition of the performance bond by KRDC was to guarantee to ALI that the
construction project would proceed in accordance with the contract terms and conditions. In effect, the performance bond
becomes liable for the completion of the construction project in the event KRDC fails in its contractual undertaking. Because of
the performance bond, the construction contract between ALI and KRDC is guaranteed to be performed even if KRDC fails in its
obligation. In practice, a performance bond is usually a condition or a necessary component of construction contracts. In the

case at bar, the performance bond was so connected with the construction contract that the former was agreed by the parties to
be a condition for the latter to push through and at the same time, the former is reliant on the latter for its existence as an
accessory contract.
Although not the construction contract itself, the performance bond is deemed as an associate of the main construction contract
that it cannot be separated or severed from its principal. The Performance Bond is significantly and substantially connected to
the construction contract that there can be no doubt it is the CIAC, under Section 4 of EO No. 1008, which has jurisdiction over
any dispute arising from or connected with it. (Emphasis supplied, citations omitted)
70

At first look, the Owners-Contractor Agreement and the performance bond reference each other; the performance bond was
issued pursuant to the construction agreement.
A performance bond is a kind of suretyship agreement. A suretyship agreement is an agreement "whereby a party, called the
surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of
another party, called the obligee." In the same vein, a performance bond is "designed to afford the project owner security that
the . . . contractor, will faithfully comply with the requirements of the contract . . . and make good [on the] damages sustained by
the project owner in case of the contractors failure to so perform."
71

72

It is settled that the suretys solidary obligation for the performance of the principal debtors obligation is indirect and merely
secondary. Nevertheless, the suretys liability tothe "creditor or promisee of the principal is said to be direct, primary and
absolute; in other words, he is directly and equally bound with the principal."
73

74

Verily, "[i]n enforcing a surety contract, the complementary contracts-construed-together doctrine finds application. According to
this principle, an accessory contract must beread in its entirety and together with the principal agreement." Article 1374 of the
Civil Code provides:
75

ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which
may result from all of them taken jointly.
Applying the "complementary-contracts-construed-together" doctrine, this court in Prudential held that the surety willingly
acceded to the terms of the construction contract despite the silence of the performance bond as to arbitration:
In the case at bar, the performance bond was silent with regard to arbitration. On the other hand, the construction contract was
clear as to arbitration in the event of disputes. Applying the said doctrine, we rule that the silence of the accessory contract in
this case could only be construed as acquiescence to the main contract. The construction contract breathes life into the
performance bond. We are not ready to assume that the performance bond contains reservations with regard to some of the
terms and conditions in the construction contract where in fact it is silent. On the other hand, it is more reasonable to assume
that the party who issued the performance bond carefully and meticulously studied the construction contract that it guaranteed,
and if it had reservations, it would have and should have mentioned them in the surety contract. (Emphasis supplied)
76

This court, however, cannot apply the ruling in Prudential to the present case. Several factors militate against petitioners claim.
The contractual stipulations in this case and in Prudential are different. The relevant provisions of the Owners-Contractor
Agreement in this case state:
ARTICLE 5. THE CONTRACT DOCUMENTS
The following documents prepared by the CONTRACTOR shall constitute an integral part of this contract as fully as if hereto
attached or herein stated, except asotherwise modified by mutual agreement of parties, and attached to this agreement.
Attachment 5.1 Working Drawings
Attachment 5.2 Outline Specifications
Attachment 5.3 Bill of Quantities

Attachment 5.4 CONTRACTOR Business License

....
ARTICLE 7. PERFORMANCE (SURETY) BOND
7.1 Within 30 days of the signing of this agreement, CONTRACTOR shall provide to OWNERS a performance bond,
issued by a duly licensed authority acceptable to the OWNERS, and equal to the amount of PHP 4,500,000.00 (Four
Million and Five Hundred Thousand Philippine Pesos),with the OWNERS as beneficiary.
7.2 The performance bond will guarantee the satisfactory and faithful performance by the CONTRACTOR of all
provisions stated within this contract.
ARTICLE 8. ARBITRATION
8.1 Any dispute between the parties hereto which cannot be amicably settled shall be finally settled by arbitration in accordance
with the provision of Republic Act 876, of The Philippines, as amended by the Executive Order 1008 dated February 4,
1985. (Emphasis in the original)
77

In contrast, the provisions of the construction contract in Prudential provide:

Article 1
CONTRACT DOCUMENTS
1.1 The following shall form part of this Contractand together with this Contract, are known as the "Contract Documents":
a. Bid Proposal
....
d. Notice to proceed
....
j. Appendices A & B (respectively, Surety Bond for Performance and, Supply of Materials by the Developer) (Emphasis
supplied)
78

This court in Prudential held that the construction contract expressly incorporated the performance bond into the contract. In the
present case, Article 7 of the Owners-Contractor Agreement merely stated that a performance bond shall be issued in favor of
respondents, in which case petitioner and Asis-Leif Builders and/or Ms. Ma. Cynthia Asis-Leif shall pay P4,500,000.00 in the
event that Asis-Leif fails to perform its duty under the Owners-Contractor Agreement. Consequently, the performance bond
merely referenced the contract entered into by respondents and Asis-Leif, which pertained to Asis-Leifs duty toconstruct a twostorey residence building with attic, pool, and landscaping over respondents property.
79

80

81

To be clear, it is in the Owners-Contractor Agreement that the arbitration clause is found. The construction agreement was
signed only by respondents and the contractor, Asis-Leif, as represented by Ms. Ma. Cynthia Asis-Leif. It is basic that "[c]ontracts
take effect only between the parties, their assigns and heirs[.]" Not being a party to the construction agreement, petitioner
cannot invoke the arbitration clause. Petitioner, thus, cannot invoke the jurisdiction of the CIAC.
1wphi1

82

Moreover, petitioners invocation of the arbitration clause defeats the purpose of arbitration in relation to the construction
business. The state has continuously encouraged the use of dispute resolution mechanisms to promote party autonomy. In
LICOMCEN, Incorporated v. Foundation Specialists, Inc., this court upheld the CIAC's jurisdiction in line with the state's policy
to promote arbitration:
83

84

The CIAC was created through Executive Order No. 1008 (E. 0. 1008), in recognition of the need to establish an arbitral
machinery that would expeditiously settle construction industry disputes. The prompt resolution of problems arising from or
connected with the construction industry was considered of necessary and vital for the fulfillment of national development goals,
as the construction industry provides employment to a large segment of the national labor force and is a leading contributor to
the gross national product. (Citation omitted)
85

However, where a surety in a. construction contract actively participates in a collection suit, it is estopped from raising jurisdiction
later. Assuming that petitioner is privy to the construction agreement, we cannot allow petitioner to invoke arbitration at this late
stage of the proceedings since to do so would go against the law's goal of prompt resolution of cases in the construction
industry.
WHEREFORE, the petition is DENIED. The case is DISMISSED. Petitioner's counsel is STERNLY WARNED that a repetition or
similar violation of the rule on Certification Against Forum Shopping will be dealt with more severely.
SO ORDERED.

G.R. No. 206540

April 20, 2015

ALICE G. AFRICA, Petitioner,

vs.
INSURANCE SAVINGS AND INVESTMENT AGENCY, INC. (ISIA) represented by its President, DELIA DE BORJA; acting
Register Of Deeds, Las Pias City, ATTY. ABRAHAM N. VERMUDEZ, Respondents.
RESOLUTION
PEREZ, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court brought directly before us by petitioner Alice G.
Africa on pure questions of law assailing the Decision dated 14 November 2012 and Order dated 26 March 2013 of the Regional
Trial Court (RTC), Branch 275, Las Pifias City in SCA Case No. 12-0010.
1

The subject property of this case is a parcel of land located along Zapote Road, Almanza, Las Pias City, with an area of
221,688 square meters (sq. m.), covered by Transfer Certificate of Title No. 38910-A registered in the name of the Spouses
Wilson P. Orfinada and Lucresia Kiocho (Spouses Orfinada). This same property is likewise the subject matter of litigation, its
ownership and titling, of cases reaching the Court and resulting in conflicting rulings, to wit:
1. G.R. No. 91413, Fusilero, et al., v. Court of Appeals, et al., 2 July 1990, decreeing that Benito J. Lopez and Pepito Ng
are innocent purchasers for value and in good faith of lands registered under TCT Nos. S-61176 and S-61177;
2. G.R. No. 123751, Heirs of Irene Garcia v. Court of Appeals, et al., 21 October 1996, which affirmed in toto the CA
Decision dated 27 November 1995 in CA-G.R. CV No. 45297.The Supreme Court held that TCT Nos. S-61176 and S61177, cancelling TCT No. 31346, cover a property located in Almanza, Las Pias, Metro Manila;
3. G.R. No. 141145, Republic v. Wilson Orfinada, Sr., and Lucresia K. Orfinada, 12 November 2004, which upheld the
Spouses Orfinadas TCT No. 38910-A as a valid title including its antecedent title OCT No. 383 in the name of Guillermo
Cruz, thereby denying the Republics petition and affirming the "Joint Decision" of the appellate court in CA-G.R. CV No.
32815;
4. G.R. No. 194029, Antonio V. Martel, Jr. and Spouses Pepito and Violeta Ng v. Wilson Orfinada, Sr. represented by
Alice Africa, 30 May 2011which denied the petition of Antonio V. Martel (Martel) and the Spouses Pepito and Violeta Ng
(Spouses Ng), who all likewise claim ownership over the subject property, specifically 185, 317 sq m. thereof, and upheld
the Decision of the appellate court ruling on procedural matters. Ultimately, this case dismissed the cross claim of Martel
and the Spouses Ng against the Spouses Orfinada (all defendants in the suit for annulment of title filed by ISIA against
them), for failing to file a written motion for reconsideration of the trial courts order of dismissal. However, on motion for
reconsideration of Martel and the Spouses Ng which we eventually denied via a Minute Resolution dated 1 April 2014,
were manded the case to the Court of Appeals for the purpose of hearing and receiving evidence to determine all parties
conflicting claims of ownership over the subject property.
We now proceed to the factual antecedents of this case before us. Herein respondent Insurance Savings and Investment
Agency, Inc. (ISIA) filed a Special Civil Action for Mandamus under Rule 65 of the Rules of Court before the RTC, Las Pias City,
against the Register of Deeds of Las Pias City praying that the latter be commanded to: (a) cancel TCT No. 38910-A issued in
the name of the Spouses Orfinada, and thereafter, (b) issue a new title to the subject property in the name of ISIA.
In its petition for mandamus, ISIA primarily alleged that in 1981, ISIA purchased from the Spouses Orfinada, through their then
attorney-in-fact, Modesto Jimenez (Jimenez), the subject property covered by TCT No. 38910-A. The sale is evidencedby a
Deed of Absolute Sale executed on 18 May 1981 signed by ISIA and Jimenez.

For clarity, considering that the subject property in this case is likewise the subject matter in at least four (4) other cases
concerning the ownership and titling thereof, which has already resulted in conflicting rulings used as basis by various opposing
parties, we quote the trial courts narration of antecedents to confine our holding here into only the pertinent legal issues before
us:
[T]he following taxes and fees were paid for purposes of the transfer of ownership, to wit:
a. [R]eal estate taxes as shown by real property tax receipts (Annexes "H" to "H-5" of petition); b. [C]apital gains tax in
the amount of Php44,322,600.00 as shown by capital gains tax return form no. 1706 (Annex "J") and Land Bank BIR tax
payment deposit slip (Annex "J-1");
c. [D]ocumentary stamp tax in the amount of Php1,385,550.00 as shown by the documentary stamp tax
declaration/return BIR form no. 2000-OT (Annex "K") and the Land Bank BIR Tax payment deposit slip (Annex "K-1");
and
d. BIR certification fee of Php100 as shown by BIR Payment Form No. 0605 (Annex "L").
On the basis of the foregoing payments made by [ISIA], the Bureau of Internal Revenue issued on 28 June 2012 a Certificate
Authorizing Registration (CAR) and Tax Clearance Certificate No. OCN 9TA0000219327 in favor of [ISIA] x x x. In addition, [ISIA]
paid the amount of Php11,068,764.93 representing the transfer tax, surcharge, monthly interests and confirmation fee assessed
by the Office of the City Assessor of Las Pias. Subsequently, a Confirmation of Payment No. 014149 was issued by the Office
of the Treasurer of Las Pias City confirming that [ISIA] paid the transfer tax due on the subject title x x x.
After completing all the necessary requirements for the transfer of title, [ISIA] then went to the Registry of Deeds to submit for
registration the Deed of Absolute Sale together with all supporting documents including the surrender of the owners duplicate
copy of TCT No. 38910-A x x x.
However, the then Registrar of Deeds, Atty. Joel Paner, denied the registration of the sale on the ground that another owners
duplicate copy of the subject title is in possession ofa certain Alice Africa [herein respondent]. Atty. Paner further statedin his
Notice of Denial dated 24 August 2012 that the subject title bears the annotation of the affidavit of Alice Africa x x x.
Atty. Joel Paner filed his Comment on the Petition recognizing the validity of the sale of the subject property by the Sps. Wilson
Orfinada and Lucresia Kiocho in favor of ISIA by virtue of the Decision dated 12 November 2004 rendered by the Supreme Court
in Republic of the Philippines v. Sps. Orfinada, G.R. No. 141145. Atty. Paner also aver that under normal circumstances, the
transfer of title is immediately effected upon payment of the necessary government taxes but in this case, registration of the sale
can be done provided that the affidavit of Alice Africa is carried over to the new title.
Although not impleaded as one of the respondents [therein], Alice Africa [herein petitioner] filed a Vehement Opposition on the
instant petition contending primarily that the sale between ISIA and Sps. Orfinada represented by their attorney-in-fact Modesto
Jimenez is tainted with fraud hence not valid. [Africa] anchors her argument on the Order dated 3 December 1993 rendered by
Branch 150 of RTC in Makati City in LRC Case No. M-2917, directing defendant Jimenez to surrender to the Register of Deeds
of Las Pias City the owners duplicate copy of TCT No. 38910-A (13674-A) based on the findings of the said court, among
others, that the sale of the subject property between Jimenez and ISIA is void ab initio. The Order dated 3 December 1993 was
affirmed by the Court of Appeals in its Decision dated 14 March 1997 and by the Supreme Court in its Resolution dated 25
August 1997.
3

At this stage of the proceedings, with Africa as oppositor, the RTC rendered the assailed decision, granting ISIAs petition for
mandamus, thus ordering the Register of Deeds to: (a) register the Deed of Absolute Sale executed by ISIA and the Spouses
Orfinada and its supporting documents, (b) cancel TCT No. 38910-A, and (c) issue a new title to the subject property in the
name of ISIA. The RTC disposed of the special civil action in this wise:
Alice Africa could have supported her claim of being in possession of the subject title when she filed her opposition. While she
attached several documents to her petition[,] x x x she failed to append thereto a copy of the alleged second owners duplicate
copy of the title. The omission is quite telling of whether or not Africa is indeed in possession of the subject title.

The Registry of Deeds gave too much faith on a mere claim in the affidavit of Alice Africa annotated on the title connecting this to
the 1993 Order of the Makati Court. Such reliance is misplaced as the affidavit is self-serving and unsubstantiated. Atty. Joel
Paner, the Registrar of Deeds, appears to have realized his misplaced reliance when he eventually corrected it in his Comment
by saying that the registration of the sale of the subject property in favor of ISIA can be effected. Significantly, the acting
Registrar of Deeds, Atty. Abraham N. Vermudez, who replaced Atty. Paner did not adopt this misplaced reliance in his
memorandum and opted not to tackle this issue. Again, the 1993 Order of the Makati Court is mum on the authority of Africa to
take possession of the title.
Undeniably, the Registry of Deeds has a public duty towards [ISIA] to admit the sale documents for registration. The said office
cannot assume that another copy of the title exists based merely on the affidavit.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED. The Registry of Deeds for Las Pias City is
hereby immediately commanded to proceed with the registration of the Deed of Absolute Sale dated 18 May 1981 executed by
Sps. Wilso P. Orfinada and Lucresia Kiocho and [respondent] ISIA together with all supporting documents and thereafter, to
cancel Transfer Certificate of Title No. 38910-A issued in the name of the Sps. Wilson P. Orfinada and Lucresia Kiocho, and in
lieu thereof, to issue a new title to the subject property in the name of [ISIA].
Anent the Urgent Motion for Recording of Attorneys Lien filed by movant Atty. Antonio M. Chavez, the same is hereby DENIED
due course as this can be filed properly in a separate action.
4

Africa and the Register of Deeds filed separate motions for reconsideration of the RTCs decision.
Both Africa and the Register of Deeds argued that the existence of the "owners duplicate copy" of TCT No. 38910-A, with
annotation of Africas affidavit thereon, claimed to be in Africas possession precludes the registration of the subject property in
ISIAs name since it would result to double titling. On this score, the RTC noted that Africa failed to present and attach a certified
true copy of the purported "owners duplicate copy" in her possession, in numerous instances, to wit: (1) The Affidavit in Entry
No. 4115-28; (2) Africas Vehement Comment/Opposition to the Petition; (3) Africas Urgent Motion for Reconsideration despite
the trial courts observation that she failed to attach a copy of the supposed title to her Opposition; (4) Africas Urgent Motion for
Voluntary Inhibition; and (5) the two hearings scheduled by the RTC, on 1 and 8 March 2013,for the sole purpose of having
Africa present the title for examination by the Register of Deeds and the trial court.
5

Prior to the scheduled 8 March 2013 hearing, Africa filed an "Urgent Motion to Dispense with the Appearance of Alice G. Africa to
submit Owners Duplicate Copy of TCT No. 38910-A" with a condition for the RTC to order the National Bureau of Investigation
(NBI) to escort her copy. Curiously, Africas counsel, on 5 March 2013, filed a motion attaching a photocopy of her alleged
"owners duplicate copy." However, the Register of Deeds, upon a preliminary examination thereof on the scheduled 8 March
2013 hearing, found the document spurious.
In the herein assailed Order dated 26 March 2013, the RTC denied the separate motions for reconsideration of Africa and the
Register of Deeds, and Africas Urgent Motion to dispense with the Appearance of Alice G. Africa to submit the Owners
Duplicate Copy of TCT No. 38910-A. The RTC gave no evidentiary weight whatsoever to the copy of the document belatedly
produced and presented by Africas counsel:
6

Court : Will you show that to the Register of Deeds. Are you familiar with this TCT?
Atty. Vermudez : I havent seen this, your Honor.
Court : You havent seen that?
Atty. Vernudez : I havent seen this. Since no transaction has been entered yet, your Honor. Atty. Espiritu : Sa Amin Yan.
Atty. Vernudez : Is this the owners copy?
Atty. Espiritu : Yeah
Atty. Vernudez : I havent seen this.

xxxx
But just the same, the certified true copy presented in [c]ourt on March 8 by Atty. Espiritu is wanting in authenticity and credibility
that [it] even failed to convince the Register of Deeds.
Ms. Africa must realize that it is her obligation to present her copy and the [c]ourt cannot be hoodwinked by her antics nor
swayed by mere allegation. It is well-settled that the "party alleging a fact has the burden of proving it as mere allegation not
evidence. [sic]" The [c]ourt needs proof and the Register of Deeds through his counsel agreed on this point when he stated that:
Atty. Abesamis: x x x It is crucial, Your Honor, please, that the Owners Copyin the possession of Oppositor Alice Africa will be
likewise presented because that will give opportunity for the court to compare the original copy on file with the Registry of Deeds,
as well as the owners copy with the possession of Alice Africa, the new owners copy, Your Honor, which was issued upon court
directive.
xxxx
This [c]ourt finds and so holds that Alice Africas and her counsels, Atty. Renecio Espiritus, reasons for not presenting in court
the subject owners duplicate copy are not candid but evasive and adroitly conjured. x x x
xxxx
Accordingly, the failure of Alice Africa to prove her possession of a valid owners duplicate copy of TCT No. 38910-A confirmed
this [c]ourt[s] observation in its 14 November 2012 Decision that reliance by the Register of Deeds on Ms. Africas affidavit to
prove existence of her owners duplicate copy of TCT No. 38910-A is "misplaced" and "the said office cannot assume that
another copy of the title exists based merely on the affidavit" and that "the Register of Deeds has a public duty towards [ISIA] to
admit the sale documents for registration. x x x
xxxx
WHEREFORE, the aforestated Motions for Reconsideration of the Decision dated 14 November 2012, respectively filed by the
Register of Deeds of Las Pias City and Alice Africa are DENIED for lack of merit. The Urgent Motion to Dispense with the
Appearance of Alice G. Africa to submit the Owners Duplicate Copy of TCT No. 38910-A is likewise DENIED.
The Register of Deeds of Las Pias City is directed to cancel Entry No. 411528-28 in TCT No. 38910-A and thereafter comply
with the [c]ourts disposition in its 14 November 2012 Decision.
7

Feeling aggrieved by the trial courts rulings, Africa, still on behalf of the Spouses Orfinada, filed the present petition for review
on certiorari.
In this petition8 filed on 19 April 2013, Africa alleged that her contract of agency with the Spouses Orfinada is coupled with
interest without explicitly stating her interest therein. Conveniently, Africa failed to mention that both the Spouses Orfinada were
already dead: Wilson in the year 2000, Lucresia in 2012.
On 3 July 2013,9we deferred action on Africas petition and required her to submit proof of authority to file it on behalf of the
Spouses Orfinada who were the registered owners of the subject property covered by TCT No. 38910-A, the title herein sought
to be annulled by ISIA and then titled in its name.
Africa filed a Compliance to our 3 July 2013 Resolution by maintaining that it has complied with the requirements of Section 1,
in relation to Sections 4 and 7, of Rule 45 of the Rules of Court, and attaching the Special Power of Attorney (SPA) executed by
the Spouses Orfinada in Africas favor sometime in July 1997. Yet again, Africa failed to state the fact of the deaths of the
Spouses Orfinada.
10

ISIA forthwith filed a Comment to Africas compliance moving for the outright dismissal of Africas petition considering the deaths
of the Spouses Orfinada, whose civil personalities were thereby extinguished and who can no longer be represented in this
petition by Africa.
11

Africa filed a Reply to ISIAs Comment to her Compliance which now explicitly argues that the contract of agency was not
extinguished by the death of Africas principals, the Spouses Orfinada, since the agency is coupled with interest. For the first
time, indirectly and collaterally, Africa claims ownership over the herein subject property. Africa alleged in her Reply:
12

8. [Africa] is "Agent with Interest" because [the] Spouses Orfinada, during their lifetime, had already sold to [Africa] the [subject
property] containing an area of 221,688 square meters located at Las Pias City and covered by TCT No. (38910), 13674-A, the
subject of this case. The photocopy of the Deed of Sale is hereto attached as Annex "A".
13

The purported Deed of Sale between Africa and the Spouses Orfinada is dated 5 June 1997, roughly a month prior to the
Special Power of Attorney executed by the Spouses Orfinada in Africas favor.
14

Subsequently, on 13 October 2014, Africa filed a Motion for Leave to Admit Compliance with Motion to Consolidate Case with
G.R. No. 194029, one of the cases mentioned herein involving conflicting claims of ownership over the subject property by
opposing parties, ISIA against Martel and the Spouses Ng (other transferees of the Spouses Orfinada) and the Spouses
Orfinada. Africas basis for her motion to consolidate is that the subject property herein is the same property involved in G.R. No.
194209.
Africa alleges, in pertinent part:
9. Verily, the instant case should be consolidated with G.R. No. 194209 which, significantly, is an offshoot of a main case filed by
ISIA, Inc. prior to the finality of the judgment of the Regional Trial Court of Makati City, Branch 150 in LRC Case No. M-2917
entitled: "Orfinada, Sr., represented by Africa v. ISIA, Inc." x x x declaring the sale of the property subject of the instant litigation
to ISIA, null and void. Consolidation of the two (2) cases will put to rest the conflicting claims of ownership by Orfinada, Sr., rep.
by Alice Africa, ISIA, Inc., Martel, Jr. and the Spouses Ng over the same lot.
WHEREFORE, it is respectfully prayed that the Motion be GRANTED thereby admitting the attached Verification and
Certification Against Forum Shopping, in the interest of justice, and consolidating the instant case with G.R. No. 194029 entitled:
"Martel, Jr. and Sps. Ng vs. Orfinada, Sr.".
15

On 15 October 2014, ISIA filed a Respectful Motion to Dismiss the Petition maintaining that the death of the Spouses Orfinada
prior to the filing of the present petition extinguished the contract of agency between them and Africa, thus, this petition filed by
Africa on behalf of the Spouses Orfinada should be dismissed.
16

Pending before us then is the sufficiency of Africas petition to litigate this case before us in her own name. Effectively, Africa,
without filing the appropriate registration proceedings, an original action, before a Regional Trial Court pursuant to law, seeks to
defend and protect herein the subject property covered by TCT No. 38910-A registered in the names of the Spouses Orfinada.
Corollary thereto, as pending incidents resulting from Africas oblique compliance to our 3 July 2013 Resolution, are: (1) the
Motion to Consolidate this case with G.R. No. 194029 filed by Africa; and (2) Respectful Motion to Dismiss this petition filed by
ISIA.
17

Before anything else, we note that in G.R. No. 194209, Africa is simply a representative of the Spouses Orfinada who were sued
by herein respondent ISIA claiming ownership of the subject property and seeking to annul TCT No. 38910-A. ISIA filed a case
for annulment of title against the Republic of the Philippines and a Supplemental Complaint No. 9 against Wilson Orfinada,
Martel and the Spouses Ng.
While we ultimately denied the petition in G.R. No. 194209 for absence of reversible error in the assailed ruling of the appellate
court, we remanded the case to the Court of Appeals for the purpose of hearing and receiving evidence to adjudicate the
conflicting claims of ownership by the opposing parties (given the overall factual milieu herein) over the subject property. In our 1
April 2014 Resolution in G.R. No. 194209, we noted, thus:
18

We take note that petitioners [Martels and the Spouses Ngs] right over the subject land has been upheld by the Supreme Court
in several cases and they were even considered as innocent purchasers in good faith and for value. Nevertheless, taking into
consideration that Orfinada's title was also upheld by no less than this Court in another Decision, we hold that the petitioners and
Orfinadas rights have been established separately, only that these were determined against their corresponding opposing
parties in those cases. Pitted against each other, however, the petitioners and Orfinada would have to present evidence anew as

this Court cannot cancel a Torrens title without a direct proceeding for that purpose. Section 48 of the Property Registration
Decree provides: (Emphasis supplied)
Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be
altered, modified, or cancelled except in a direct proceeding in accordance with law.
Based on the evidence to be presented in appropriate proceedings, this Court may finally adjudicate whose title should be
annulled. It must be borne in mind that the petition is but an offshoot of a main case, which might be improperly affected by any
shortcut in the proceedings. "[C]onsidering that there are factual and legal issues that still need to be threshed out, and that this
Court is not a trier of facts, the appropriate action is to remand the case to the CA for further proceedings."
19

Palpable, even in this case, is the existence of factual issues which we cannot pass upon. However, such finding still does not
translate to the sufficiency of Africas petition to litigate in her own name the issue here which is whether the Register of Deeds
via a writ of mandamus may be
20

compelled to cancel TCT No. 38910-A and issue a new title over the subject property in the name of ISIA.
Even without delving into the factual finding of the court a quoin this case that Africa, through subterfuge, never even presented
a certified true copy of the "owners duplicate copy" which she claims to be in her possession, we deny due course to this
petition, Africa not being a proper party under Rule 3, Section 3 of the Rules of Court which reads:
Sec. 3. Representatives as parties.Where the action is allowed to be prosecuted or defended by a representative or someone
acting in a fiduciary capacity, the beneficiary shall be included in the title of the case and shall be deemed to be the real party in
interest. A representative may be a trustee of an express trust, a guardian, an executor or administrator, or a party authorized by
law or these Rules. An agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without
joining the principal except when the contract involves things belonging to the principal.
In her Compliance, Africa quotes Sections 1, 4, and 7 of Rule 45 of the Rules of Court, insisting that she has complied with
the requisites for the filing of an appeal by certiorari thereunder. Sticking out of the cited Rule, however, is the first section, first
sentence which unequivocally states: "A party desiring to appeal by certiorari from a judgment, final order or resolution x x x."
21

22

23

In this instance, with the death of the Spouses Orfinada and despite the claim of ownership by Africa over the subject property,
Africa is not the proper party to file an appeal by certiorari from the adverse rulings of the trial court. Section 3 of Rule 3 of the
Rules of Court is explicit on the requirement that an agent as party may sue without joining the principal except when the
contract involves things belonging to the principal. The herein subject property is ostensibly owned by the Spouses Orfinada
covered by TCT No. 38910-A registered in their names. This TCT No. 38910-A is one of the titles ISIA seeks to annul as part of
its claim of ownership over vast tracts of land bounded by the Pasig River in the North, by the Tunisan River in the South, by
Laguna de Bay in the East, and by the Manila de Bay in the West. The claim covers about 143,102,167 sq. m., more or less,
comprising one-half of Metro Manila. ISIAs claim includes the subject parcel of land covered by TCT No. 38910-A, which ISIA
seeks to recover from herein parties resulting in all kinds of litigation between the opposing parties, including this suit for
mandamus before the court a quo. Africas belated claim of ownership via purchase cannot make her a proper party to this case
and circumvent the requirements for establishing ownership over the subject property.
24

We can draw a parallel ruling from Tamondong v. Court of Appeals, where we specifically ruled that the lack of authority of the
representative from the real party-in-interest, results in the complaint deemed as not filed. It does not make the representative as
the actual plaintiff in the case. We held, thus:
25

If a complaint is filed for and in behalf of the plaintiff who is not authorized to do so, the complaint is not deemed filed. An
unauthorized complaint does not produce any legal effect. Hence, the court should dismiss the complaint on the ground that it
has no jurisdiction over the complaint and the plaintiff. On the other hand, if a complaint is filed by an agent or plaintiff, for and in
behalf of the principal, the plaintiff who is merely the agent is not the proper party. The reason being that every action must be
presented in the name of the real party-in-interest. The complaint may be dismissed on the ground that the plaintiff has no cause
of action against the defendants, conformably to Section 1(g), Rule 16 of the 1997 Rules of Civil Procedure. (Emphasis
supplied)
1wphi1

26

Moreover, it has not escaped our attention that while Africa claims to be a representative of the Spouses Orfinada, armed with
an SPA, she simultaneously claims filing and litigating this case on her own. As we have already observed, Africa is using a
shotgun approach to obliquely, indirectly and collaterally, claim ownership over the subject property to ensure her continued
participation in this litigation.
Without meaning to point Africa to the appropriate remedies she should have taken or could have availed of to protect and
defend her claim over the subject property, we mention the following to accentuate the shortcomings of her present position:
27

1. With the deaths of the Spouses Orfinada, the subject property registered in their names became part of their estate
with the heirs, compulsory or otherwise, having inchoate right thereto where rights to the succession vests from the
moment of death of the decedent.
28

2. As part of the decedents estate, rights over property included therein is settled and litigated by the administrator or
executor of the estate.
29

3. To establish her claim over the subject property and for the proper titling thereof, the Civil Code and the Property
Registration Decree maps out the remedies of Africa.
Finally, despite the remand of G.R. No. 194209 to the Court of Appeals for hearing and reception of evidence to finally adjudicate
whose title over the subject property should be annulled, we cannot consolidate this petition filed in Africas name with G.R. No.
194209, this petition being an offshoot of the mandamus case filed by ISIA against the Register of Deeds.
G.R. No. 194209 involves the conflicting claims of ownership over the subject properties initiated by ISIA against Wilson
Orfinada, Martel and the Spouses Ng. The validity of TCT No. 38910-A is already part of G.R. No. 194209 and is a completely
different legal issue from the issue raised in this petition, involving a separate question of law, i.e., whether the court a quo
correctly issued the writ of mandamus to compel the Register of Deeds to register the subject property in ISIA's name and
cancel TCT No. 38910-A, the title to the subject property in the Spouses Orfinada's name. The only commonality between G.R.
No. 194209 and this petition is TCT No. 38910-A and the subject property itself.
As a final caveat, our holding herein is only confined to Africa's preclusion from continuing to litigate this appeal by certiorari. We
do not rule on the correctness and propriety of the Decision and Order of the R TC . as such can only be questioned and
assailed by the proper party. WHEREFORE, the petition is DENIED DUE COURSE, petitioner Alice Africa not being a proper
party to question the Regional Trial Court's Decision and Order dated 14 November 2012 and 26 March 2013, respectively, in
SCA Case No. 12-0010.
SO ORDERED.

G.R. No. 212092

April 8, 2015

PEOPLES GENERAL INSURANCE CORP. (FORMERLY: PEOPLE'S TRANS-EAST ASIA INSURANCE CORP.),Petitioner,
vs.
COL. FELIX MATEO A. RUNES, Respondent.
RESOLUTION
MENDOZA, J.:
On June 25, 2014, the Court denied the petition for review on certiorari for failure of the petitioner to show any reversible error in
the challenged decision of the Court of Appeals (CA) in CA-G.R. CV No. 93649, which affirmed the judgment of the Regional
Trial Court, Branch 19, Manila (RTC) in Civil Case No. 01-101210 rendered in favor of respondent Col. Felix Mateo A. Runes
(Col. Runes).
Before there could be an entry of judgment, the opposing parties reached an amicable settlement on January 14, 2015 to end
the present controversy. They submitted to the Court the Joint Motion for Judgment Based on Attached Compromise
Agreement, the terms and conditions of which are as follows:
1

COL. FELIX MATEO A. RUNES, Filipino, of legal age, a resident of 4710 Rd. 2 V. Mapa Sta. Mesa, Sampaloc, Manila,
hereinafter referred to as the FIRST PARTY;
-andPEOPLES GENERAL INSURANCE CORPORATION, a corporation duly organized and existing under and by virtue of
Philippine laws, with office address at 420 Calle Magallanes, Intramuros, Manila, represented in this act by the Chairman of its
Board of Directors, ERNESTO J. DEL ROSARIO, hereinafter referred to as the SECOND PARTY.
WITNESSETH that:
WHEREAS, the FIRST PARTY filed an action for Sum of Money with Damages against the SECOND PARTY and Spouses Ver
and Jovencia Manuzon ("SPOUSES MANUZON"), doing business under the name and style of Empherical Construction, which
case was assigned to Branch 19 of the Regional Trial Court of Manila, and docketed therein as Civil Case No. 01-101210. The
SECOND PARTY was impleaded in the said case under the Performance Bond it issued in favor of the FIRST PARTY in the
amount of Php1,470,134.70;
WHEREAS, on 28 July 2008, the Regional Trial Court of Manila, Branch 19, rendered a judgment in favor of the FIRST PARTY,
the dispositive portion of which reads as follows: "WHEREFORE, in view of the foregoing, this court finds for the plaintiff and
against the defendants-spouses Manuzon doing business under the name and style of Empherical Construction and Peoples
General Insurance Corporation (formerly Peoples Trans-East Asia Insurance Corporation, which are hereby jointly and severally
ordered as follows:
1. The defendants to pay the sum of not less than P1,047,000.00 representing plaintiffs overpayments with legal
interest from the filing of this case until fully paid;
2. The defendants to pay the plaintiff the sum of not less than Php300,000.00 as actual damages with legal
interest from the filing of this case until fully paid;
3. The defendants to pay the plaintiff the sum of not less than 1/10 of 1% of the total remaining works for every
day of delay as liquidated damages;
4. The defendants to pay the plaintiff the sum equivalent to not less than 15% of plaintiffs total claims as and for
attorneys fees.
1wphi1

SO ORDERED."
WHEREAS, the said judgment in Civil Case No. 01-101210 was affirmed by the Court of Appeals in CA-G.R. CV No. 93649, with
modification in that the award of attorneys fees was set aside. In the Decision of the Court of Appeals, it was categorically stated
that the SECOND PARTY is jointly and severally liable with the Spouses Manuzon to the extent of the bond which is in the
amount of Php1,470,134.70;
WHEREAS, in SC G.R. No. 212092, the Supreme Court likewise affirmed the decision of the Court of Appeals by denying the
SECOND PARTYs Petition for Review. The SECOND PARTY moved for the reconsideration on the said denial, and is now
deemed submitted for resolution; WHEREAS, to put an end to expenses and inconvenience of a prolonged litigation, and not as
an admission of any liability, the parties have mutually decided to amicably settle the aforesaid Civil Case under just and
equitable terms.
NOW, THEREFORE, for and in consideration of the foregoing premises, the Parties agree as follows:
1. The SECOND PARTY shall pay the FIRST PARTY, the amount of ONE MILLION PESOS (Php1,000,000.00),
payable in six monthly instalments of One Hundred Sixty Six Thousand Six Hundred Sixty Six Pesos and 67/100
(Php166,666.67);
2. To cover the above-mentioned monthly payments, the SECOND PARTY will issue in favor of the FIRST
PARTY twelve checks, to wit:
DATE
January 12, 2015

PAYEE
FELIX MATEO A. RUNES

AMOUNT
Php83,333.33

January 12, 2015

ATTY. MANUEL N. CAMACHO

83,333.33

February 20, 2015

FELIX MATEO A. RUNES

83,333.33

February 20, 2015

ATTY. MANUEL N. CAMACHO

83,333.33

March 20, 2015

FELIX MATEO A. RUNES

83,333.33

March 20, 2015

ATTY. MANUEL N. CAMACHO

83,333.33

April 20, 2015

FELIX MATEO A. RUNES

83,333.33

April 20, 2015

ATTY. MANUEL N. CAMACHO

83,333.33

May 20, 2015

FELIX MATEO A. RUNES

83,333.34

May 20, 2015

ATTY. MANUEL N. CAMACHO

83,333.34

June 20, 2015

FELIX MATEO A. RUNES

83,333.34

June 20, 2015

ATTY. MANUEL N. CAMACHO

83,333.34

3. Upon the execution of this Compromise Agreement, both parties will sign and execute a "Joint Motion for
Judgment Based on Compromise Agreement" which will be submitted to the Supreme Court for its approval;
4. The payment of the said amount shall represent full and final satisfaction of all the claims of the FIRST PARTY
in the aforesaid civil case and any other claim that may arise out of the transactions subject thereof; Thus, for
and in consideration of the foregoing circumstances and of the total sum above, the FIRST PARTY, freely,
voluntarily and forever releases, discharges, acquits and waives all claims against the SECOND PARTY from all
actions, claims and demands whatsoever in law or in equity, whether civil, criminal, administrative or otherwise;
5. It is understood that should the SECOND PARTY default in at least two installments, the entire amount of One
Million Pesos (Php1,000,000.00) or the outstanding balance of the obligation if payment/s have been made, shall
become due and demandable and the FIRST PARTY shall forthwith be entitled to the issuance of a writ of
execution for the payment of the unpaid amount;
6. Both parties, through their respective duly authorized representatives have read this Agreement and all its
terms and conditions carefully and they acknowledge that the same is entered into free of duress, force,
misinterpretation, intimidation, and any and all other forms of vice of consent.
IN WITNESS WHEREOF, the parties have hereunto signed this COMPROMISE AGREEMENT, this 14th day of January, 2015 in
___________, Philippines.
Sgd)
COL. FELIX MATEO A. RUNES

(Sgd)
PEOPLE'S GENERAL INSURANCE CORPORATION
By:
ERNESTO J. DEL ROSARIO

Assisted By:
(Sgd)ATIY. MANUEL N. CAMACHO
Counsel for Respondent
xxx.
WHEREFORE, it appearing that the Compromise Agreement is not contrary to law, morals, good customs, public policy and
public order, the Joint Motion for Judgment Based on Attached Compromise Agreement is GRANTED. The Compromise
Agreement is hereby APPROVED and ADOPTED as the decision of this Court.

The parties are hereby ordered to faithfully comply with the terms and conditions of the said agreement.
The case is considered CLOSED and TERMINATED, but without prejudice to the rights, if any, of other parties. No Costs.
SO ORDERED.