First Division (G.R. No. 138497. January 16, 2002.) IMELDA RELUCIO, Petitioner, v. ANGELINA MEJIA LOPEZ, Respondent. Decision

FIRST DIVISION
[G.R. No. 138497. January 16, 2002.]
IMELDA RELUCIO, Petitioner, v. ANGELINA MEJIA LOPEZ, Respondent.
DECISION
PARDO, J.:
The Case
The case is a petition for review on certiorari 1 seeking to set aside the decision 2 of the Court of Appeals that denied a petition for certiorari
assailing the trial courts order denying petitioners motion to dismiss the case against her inclusion as party defendant therein.chanrob1es virtua1
1aw 1ibrary
The Facts
The facts, as found by the Court of Appeals, are as follows:jgc:chanrobles.com.ph
"On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff below) filed a petition for "APPOINTMENT AS SOLE
ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF PROPERTIES, FORFEITURE, ETC., against defendant Alberto Lopez and petitioner
Imelda Relucio, docketed as Spec. Proc. M-3630, in the Regional Trial Court of Makati, Branch 141. In the petition, private-respondent alleged
that sometime in 1968, defendant Lopez, who is legally married to the private respondent, abandoned the latter and their four legitimate children;
that he arrogated unto himself full and exclusive control and administration of the conjugal properties, spending and using the same for his sole
gain and benefit to the total exclusion of the private respondent and their four children; that defendant Lopez, after abandoning his family,
maintained an illicit relationship and cohabited with herein petitioner since 1976.
"It was further alleged that defendant Lopez and petitioner Relucio, during their period of cohabitation since 1976, have amassed a fortune
consisting mainly of stockholdings in Lopez-owned or controlled corporations, residential, agricultural, commercial lots, houses, apartments and
buildings, cars and other motor vehicles, bank accounts and jewelry. These properties, which are in the names of defendant Lopez and petitioner
Relucio singly or jointly or their dummies and proxies, have been acquired principally if not solely through the actual contribution of money,
property and industry of defendant Lopez with minimal, if not nil, actual contribution from petitioner Relucio.
"In order to avoid defendant Lopez obligations as a father and husband, he excluded the private respondent and their four children from sharing
or benefiting from the conjugal properties and the income or fruits there from. As such, defendant Lopez either did not place them in his name or
otherwise removed, transferred, stashed away or concealed them from the private-respondent. He placed substantial portions of these conjugal
properties in the name of petitioner Relucio.
"It was also averred that in the past twenty five years since defendant Lopez abandoned the private-respondent, he has sold, disposed of alienated,
transferred, assigned, canceled, removed or stashed away properties, assets and income belonging to the conjugal partnership with the private-
respondent and either spent the proceeds thereof for his sole benefit and that of petitioner Relucio and their two illegitimate children or
permanently and fraudulently placed them beyond the reach of the private-respondent and their four children.cralaw : red
"On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner on the ground that private respondent has no cause of
action against her.
"An Order dated February 10, 1994 was issued by herein respondent Judge denying petitioner Relucios Motion to Dismiss on the ground the she
is impleaded as a necessary or indispensable party because some of the subject properties are registered in her name and defendant Lopez, or
solely in her name.
"Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order of the respondent Judge dated February 10, 1994 but
the same was likewise denied in the Order dated May 31, 1994." 3
On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the trial courts denial of her motion to dismiss. 4
On May 31, 1996, the Court of Appeals promulgated a decision denying the petition. 5 On June 26, 1996, petitioner filed a motion for
reconsideration. 6 However, on April 6, 1999, the Court of Appeals denied petitioners motion for reconsideration. 7
Hence, this appeal. 8
The Issues
1. Whether respondents petition for appointment as sole administratrix of the conjugal property, accounting, etc. against her husband Alberto J.
Lopez established a cause of action against petitioner.
2. Whether petitioners inclusion as party defendant is essential in the proceedings for a complete adjudication of the controversy. 9
The Courts Ruling

We grant the petition. We resolve the issues in seriatim.
First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause of action is an act or omission of one party the
defendant in violation of the legal right of the other." 10 The elements of a cause of action are:chanrob1es virtual 1aw library
(1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect or not to violate such right; and
(3) an act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the
defendant to the plaintiff for which the latter may maintain an action for recovery of damages. 11
A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were admitted or approved. 12
In order to sustain a motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does not exist, rather than that
a claim has been merely defectively stated or is ambiguous, indefinite or uncertain. 13
Hence, to determine the sufficiency of the cause of action alleged in Special Proceedings M-3630, we assay its allegations.
In Part Two on the "Nature of [the] Complaint," respondent Angelina Mejia Lopez summarized the causes of action alleged in the complaint
below.
The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought against petitioner. Respondents cause of action were all against her husband.
The first cause of action is for judicial appointment of respondent as administratrix of the conjugal partnership or absolute community property
arising from her marriage to Alberto J. Lopez. Petitioner is a complete stranger to this cause of action. Article 128 of the Family Code refers only
to spouses, to wit:chanrob1es virtua1 1aw 1ibrary
"If a spouse without just cause abandons the other or fails to comply with his or her obligations to the family, the aggrieved spouse may petition
the court for receivership, for judicial separation of property, or for authority to be the sole administrator of the conjugal partnership
property . . ."cralaw virtua1aw library
The administration of the property of the marriage is entirely between them to the exclusion of all other persons. Respondent alleges that Alberto
J. Lopez is her husband. Therefore, her first cause of action is against Alberto J. Lopez. There is no right-duty relation between petitioner and
respondent that can possibly support a cause of action. In fact, none of the three elements of a cause of action exists.
The second cause of action is for an accounting "by respondent husband." 14 The accounting of conjugal partnership arises from or is an incident
of marriage.
Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no cause of action can exist against petitioner on this
ground.
Respondents alternative cause of action is for forfeiture of Alberto J. Lopez share in the co-owned property "acquired during his illicit
relationship and cohabitation with [petitioner]" 15 and for all the "dissolution of the conjugal partnership of gains between him [Alberto J. Lopez]
and the [respondent]."cralaw virtua1aw library
The third cause of action is essentially for forfeiture of Alberto J. Lopez share in property co-owned by him and petitioner. It does not involve the
issue of validity of the co-ownership between Alberto J. Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J.
Lopez share, if any there be, in property co-owned by him with petitioner.
Respondents asserted right to forfeit extend to Alberto J. Lopez share alone. Failure of Alberto J. Lopez to surrender such share, assuming the
trial court finds in respondents favor, results in a breach of an obligation to respondent and gives rise to a cause of action. 16 Such cause of
action, however, pertains to Alberto J. Lopez, not petitioner.
The respondent also sought support. Support cannot be compelled from a stranger.
The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez own words, one by "an aggrieved wife against her husband."
17 References to petitioner in the common and specific allegations of the fact in the complaint are merely incidental, to set forth facts and
circumstances that prove the causes of action alleged against Alberto J. Lopez.chanrob1es virtua1 1aw 1ibrary
Finally, as to the moral damages, respondents claim for moral damages is against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint must have the character of an action for interference with marital or family
relations under the Civil Code.
A real party in interest is one who stands "to be benefited or injured by the judgment of the suit." 18 In this case, petitioner would not be affected
by any judgment in Special Proceedings M-3630.
If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable party is one without whom there can be no final
determination of an action. 19 Petitioners participation in Special Proceedings M-36-30 is not indispensable. Certainly, the trial court can issue a
judgment ordering Alberto J. Lopez to make an accounting of his conjugal partnership with respondent, and give support to respondent and their
children, and dissolve Alberto J. Lopez conjugal partnership with respondent, and forfeit Alberto J. Lopez share in property co-owned by him
and petitioner. Such judgment would be perfectly valid and enforceable against Alberto J. Lopez.
Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party is one who is not indispensable but who ought to be
joined as party if complete relief is to be accorded those already parties, or for a complete determination or settlement of the claim subject of the
action. 20 In the context of her petition in the lower court, respondent would be accorded complete relief if Alberto J. Lopez were ordered to
account for his alleged conjugal partnership property with respondent, give support to respondent and her children, turn over his share in the co-
ownership with petitioner and dissolve his conjugal partnership or absolute community property with Respondent.
The Judgment
WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of Appeals. 21 The Court DISMISSES Special
Proceedings M-3630 of the Regional Trial Court, Makati Branch 141 as against petitioner.chanrob1es virtua1 1aw 1ibrary
No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concur.

SECOND DIVISION
[G.R. No. 169558 : September 29, 2008]
PHILIPPINE CROP INSURANCE CORPORATION, Petitioner, v. COURT OF APPEALS, HON. JUDGE ELMO N. ALAMEDA,
RENATO S. ALLAS, LYDIA H. ALMERON, WILLIE U. ANTALAN, RAMON P. AQUINO, NESTOR M. DE ROMA, ROBERTO T.
FERI, OSMUNDO M. GUMASING, ROSA P. CALUBAQUIB, TELITA C. BARASI, PATROCINIA D. HERRERO, CHARITO A.
MALLILLIN, TERESITA A. CARANGUIAN, DELFIN B. CRUZ, ROMEO P. MAPAGU, ESTRELLA MAY K. MIGUEL, VICENTE T.
PADDAYUMAN, DELFRANDO T. SEVILLA, ELVIRA SIMANGAN-INTERIOR, CELESTINO P. TABANIAG AND CIRILO B.
TEGA, JR., Respondents.
DECISION
QUISUMBING, J.:
In this special civil action for certiorari before us, petitioner seeks the nullification of the Decision 1 dated January 27, 2005 and the Resolution2
dated August 4, 2005 of the Court of Appeals in CA-G.R. SP No. 77773, which had dismissed its earlier petition for certiorari assailing the
Order3 dated May 13, 2003 of the Regional Trial Court (RTC) of Tuguegarao City, Cagayan, Branch 5, in Civil Case No. 6123.
The facts in this case are as follows.
Petitioner Philippine Crop Insurance Corporation (PCIC) is a government-owned and controlled corporation engaged in the business of crop
insurance. Private respondents Renato S. Allas, Lydia H. Almeron, Willie U. Antalan, Ramon P. Aquino, Nestor M. de Roma, Roberto T. Feri,
Osmundo M. Gumasing, Rosa P. Calubaquib, Telita C. Barasi, Patrocinia D. Herrero, Charito A. Mallillin, Teresita A. Caranguian, Delfin B.
Cruz, Romeo P. Mapagu, Estrella May K. Miguel, Vicente T. Paddayuman, Delfrando T. Sevilla, Elvira Simangan-Interior, Celestino P. Tabaniag
and Cirilo B. Tega, Jr. are all retired employees and officers of petitioner.
Prior to the effectivity on July 1, 1989 of Republic Act No. 6758,4 or the Compensation and Position Classification Act of 1989, private
respondents were employed with PCIC and were receiving cost of living allowance (COLA) equivalent to 40% of their basic salary, amelioration
allowance equivalent to 10% of their basic salary and additional COLA known as equity pay.
To implement the law, the Department of Budget and Management (DBM) issued Corporate Compensation Circular (CCC) No. 10 5 specifying
that the COLA, amelioration allowance and equity pay previously granted to government employees shall be deemed included in the basic salary.
It disallowed without qualification all allowances and fringe benefits granted to said employees on top of their basic salary effective November 1,
1989. Pursuant to DBM-CCC No. 10, petitioner stopped paying the aforecited benefits to private respondents.
On August 12, 1998, the Supreme Court nullified DBM-CCC No. 10 in De Jesus v. Commission on Audit 6 due to its non-publication in the
Official Gazette or in a newspaper of general circulation in the country.7
On February 4, 2003, private respondents instituted an action for specific performance against petitioner before the Regional Trial Court of
Tuguegarao City, Cagayan, Branch 5. They prayed that petitioner be ordered to pay them the subject benefits from July 1, 1989 up to their
respective retirement dates or the publication of DBM-CCC No. 10, whichever is earlier. They alleged that the nullification of DBM-CCC No. 10
rendered the integration of the subject benefits into their salaries ineffective. They added that the Office of the Government Corporate Counsel 8
and the Commission on Audit9 sustained their entitlement to the subject benefits. But petitioner still refused to pay them.
On March 11, 2003, petitioner filed a Motion to Dismiss10 on the grounds that (1) the complaint stated no cause of action since the parties have no
contractual relationship; (2) the subject benefits have already been integrated into the basic salaries of private respondents; and (3) private
respondents' reliance on the De Jesus case was misplaced since said case involved the payment of a different benefit which was not integrated
into the basic salaries of the employees concerned.
In their opposition,11 private respondents averred that the sufficiency of the complaint should be tested based on the strength of its allegations and
no other. They also argued that there was a contractual relationship between the parties since their claim for the subject benefits accrued when
they were still petitioner's employees.
On May 13, 2003, the trial court issued an Order denying the motion to dismiss. It noted that the allegations in the complaint for specific
performance constituted a valid cause of action on which the court could render a valid judgment. It held that where the allegations are sufficient
but the veracity of the facts is assailed, the motion to dismiss should be denied.
Dissatisfied, petitioner filed a special civil action for certiorari 12 with the Court of Appeals. It argued that public respondent judge committed
grave abuse of discretion amounting to lack or excess of jurisdiction in denying its motion to dismiss despite the fact that (1) the complaint stated
no cause of action since the parties have no contractual relationship; (2) private respondents failed to exhaust all administrative remedies; (3) the
claim was barred by laches; (4) the claim had already been paid in full since the subject benefits were already integrated into the basic salaries of
private respondents; and (5) the De Jesus case did not invalidate the mandatory consolidation of allowances and compensation of government
employees.
The appellate court dismissed the petition and thus affirmed that the complaint stated a cause of action. First, it ruled that while the complaint is
labeled as an action for specific performance thereby giving the impression that it is based on contract, a close reading of its allegations reveals
that the action is based on law, particularly Section 1213 of Rep. Act No. 6758. In determining the sufficiency of a cause of action, only the facts
alleged in the complaint and no other should be considered. Thus, it is the body of the complaint and not its title which defines a cause of action.
Second, it held that private respondents have sufficiently alleged in their complaint facts constituting the elements of a cause of action: (1) that
they are entitled to the subject benefits under Rep. Act No. 6758; (2) that petitioner is bound by said law to pay the subject benefits; and (3) that
petitioner has refused to pay said benefits. Third, it declared that the doctrine of exhaustion of administrative remedies does not apply since
private respondents' claim to the subject benefits involves a purely legal issue. Fourth, it noted that private respondents made several demands on
petitioner to pay the subject benefits but they were compelled to commence legal action only after petitioner refused to heed their demands.
Hence, they are not barred by laches since they have not slept on their rights.
In sum, the appellate court ruled that public respondent judge did not commit grave abuse of discretion in denying petitioner's motion to dismiss.
The decretal portion of the decision reads:
WHEREFORE, for lack of merit, the instant petition is DENIED due course and, accordingly, DISMISSED. The assailed order of the Regional
Trial Court of Cagayan (Tuguegarao, Branch 5) dated May 13, 2003 is hereby AFFIRMED.
SO ORDERED.14
In the present petition, petitioner submits these issues for our consideration:
I.
THERE WAS NO CAUSE OF ACTION, ABSENT A BINDING CONTRACT BETWEEN THE PETITIONER AND THE PRIVATE
RESPONDENTS.
II.
THE ACTION FOR SPECIFIC PERFORMANCE IS CAPABLE OF PECUNIARY ESTIMATION. THERE WAS NO CAUSE OF ACTION
BECAUSE THE PRIVATE RESPONDENTS FAILED AND OMITTED TO QUANTIFY THE AMOUNTS OF THEIR RESPECTIVE CLAIMS.
ALSO, THE COURT DID NOT ACQUIRE JURISDICTION OVER THE CASE DUE TO NON-PAYMENT OF DOCKET FEES.
III.
THE PRIVATE RESPONDENTS EXPRESSLY ADMITTED THAT THEIR COLA, AMELIORATION ALLOWANCE AND EQUITY PAY
WERE ALREADY PAID THRU SALARY INTEGRATION BY VIRTUE OF BOARD RESOLUTION NO. 89-055 AND 90-002.
IV.
THE INTEGRATION OR CONSOLIDATION OF THE COLA, AMELIORATION ALLOWANCE AND EQUITY PAY IS MANDATED BY
SECTION 12 OF R.A. [NO.] 6758, NOTWITHSTANDING THE DE JESUS RULING DECLARING THE NULLITY OF DBM CIRCULAR
NO. 10 DUE TO NON-PUBLICATION.
V.
THE ISSUE INVOLVED IN THE CASE IS NOT PURELY LEGAL AND THE PRIVATE RESPONDENTS HAVE NOT EXHAUSTED ALL
ADMINISTRATIVE REMEDIES IN THE DEPARTMENT OF BUDGET AND MANAGEMENT.
VI.
THE CLAIM OF THE PRIVATE RESPONDENTS ARE DEEMED TO [HAVE] BEEN ABANDONED AND ARE NOW BARRED BY
LACHES AFTER A PERIOD OF INACTION FOR MORE THAN 14 YEARS.15
Petitioner contends that a complaint for specific performance implies that the basis is a contractual relationship between the parties. In this case,
private respondents failed to make any allegation, much less produce any evidence, to support the existence of any express contract with
petitioner. Thus, the complaint should have been dismissed outright for lack of or failure to state a cause of action. Petitioner adds that private
respondents failed to specify the amounts they are claiming although the same were capable of pecuniary estimation. In that way, they were able
to avoid the payment of the correct docket fees, which is also a ground to dismiss their complaint. Petitioner also argues that private respondents
themselves admitted that their COLA, amelioration allowance and equity pay were already paid through salary integration. Moreover, the validity
of Rep. Act No. 6758 and the integration of the COLA, amelioration allowance and equity pay in private respondents' salaries remained valid
notwithstanding the De Jesus ruling. Petitioner further argues that the issues in this case are not purely legal and private respondents have not
exhausted all administrative remedies. Finally, petitioner posits that private respondents' claims are deemed to have been abandoned and barred
by laches after a period of inaction for more than 14 years.
Private respondents counter that the present petition is improper since it seeks to reverse the decision of the Court of Appeals on questions of law
which is not covered by Rule 65. Further, the issues raised have already been passed upon by the appellate court, some of which are defenses
which should be threshed out during the trial proper. In any event, private respondents insist that their complaint stated a cause of action since it
sought to compel petitioner to pay their COLA, amelioration allowance and equity pay.rbl r l l lbrr
Notwithstanding petitioner's formulation of six issues, we only have to resolve one issue, i.e., whether the Court of Appeals gravely erred and
abused its discretion when it affirmed public respondent judge's order denying petitioner's motion to dismiss. The appellate court upheld the
public respondent judge's ruling that the complaint stated a cause of action.
Section 1,16 Rule 8 of the Rules of Court requires the complaint to contain a plain, concise and direct statement of the ultimate facts upon which
the plaintiff bases his claim. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action inadequate. A
complaint states a cause of action only when it has its three indispensable elements, namely: (1) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right;
and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to
the plaintiff for which the latter may maintain an action for recovery of damages.17
These elements are present in the case at bar. Private respondents have sufficiently alleged in their complaint that (1) they are entitled to the
subject benefits under Rep. Act No. 6758; (2) petitioner is bound by said law to pay the subject benefits; and (3) petitioner has refused to pay said
benefits.
Although the complaint is labeled as an action for specific performance thereby giving the impression that it is based on contract, the allegations
therein reveal that the action is based on law, i.e., Rep. Act No. 6758. We have ruled that the cause of action is determined from the allegations of
a complaint, not from its caption.18 Moreover, the focus is on the sufficiency, not the veracity, of the material allegations. The determination is
confined to the four corners of the complaint and nowhere else.19
We need not pass upon the other issues raised by petitioner since the same are matters best threshed out in a hearing on the merits. Reason
dictates that the parties proceed with the trial where they can present their respective evidence.
Everything considered, there was no grave abuse of discretion by the Court of Appeals when it affirmed public respondent judge's order denying
petitioner's motion to dismiss.
WHEREFORE, the Decision dated January 27, 2005 and the Resolution dated August 4, 2005 of the Court of Appeals in CA-G.R. SP No. 77773
are AFFIRMED. Accordingly, the Regional Trial Court of Tuguegarao City, Cagayan, Branch 5, is hereby DIRECTED to continue with the
proceedings in Civil Case No. 6123 and decide the said case with dispatch.
No pronouncement as to costs.
SO ORDERED.
Carpio-Morales, Tinga, Velasco, Jr., and Brion, JJ., concur.

THIRD DIVISION
[G.R. NO. 157438 : October 18, 2004]
HEIRS OF GREGORIO LICAROS; namely, CONCEPCION B. LICAROS and ABELARDO B. LICAROS, Petitioners, v.
SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents.
DECISION
PANGANIBAN, J.:
Basic is the rule that only the allegations of a complaint may be used to determine whether a cause of action is being pleaded. Whether these are
true or false is unimportant at this point. The test is, assuming the allegations to be true, can a valid judgment, as prayed for by the plaintiff, be
rendered by the court? If so, then the complaint states a cause of action.
In the present case, the Second Amended Complaint contains sufficient allegations to implicate Gregorio S. Licaros in an alleged conspiracy to
accumulate ill-gotten wealth. The contentions that his acts were done in good faith, or by the Monetary Board are matters of defense that cannot
abate the Complaint upon a motion to dismiss.
The Case
Before the Court is a Petition for Certiorari1 under Rule 65 of the Rules of Court, seeking to nullify the August 13, 20022 and the February 6,
20033 Resolutions of the Sandiganbayan in Civil Case No. 0005. The decretal portion of the first assailed Resolution reads:
"WHEREFORE, for lack of merit, the motion to dismiss is hereby DENIED."4
The second challenged Resolution denied petitioners' Motion for Reconsideration.
The Facts
Gregorio S. Licaros, petitioners' predecessor-in-interest, served as governor of the Central Bank of the Philippines from 1970 to 1980, during the
incumbency of then President Ferdinand E. Marcos. He died on August 3, 1983.
On July 17, 1987, the Republic of the Philippines - - through the Presidential Commission on Good Government (PCGG), assisted by the Office
of the Solicitor General (OSG) - - filed a Complaint for reversion, reconveyance, restitution, accounting and damages against former President
Marcos and his alleged crony, Lucio C. Tan. The Complaint, docketed as Sandiganbayan Case No. 0005, summed up the nature of the action as
follows:
"x x x. This is a civil action against Defendants Lucio C. Tan, Ferdinand E. Marcos, Imelda R. Marcos and the rest of the Defendants to recover
from them ill-gotten wealth consisting of funds and other property which they, in unlawful concert with one another, had acquired and
accumulated in flagrant breach of trust and of their fiduciary obligations as public officers, with grave abuse of right and power and in brazen
violation of the Constitution and laws of the Republic of the Philippines, thus resulting in their unjust enrichment during Defendant Ferdinand E.
Marcos' 20 years of rule from December 30, 1965 to February 25, 1986, first as President of the Philippines under the 1935 Constitution and,
thereafter, as one-man ruler under martial law and Dictator under the 1973 Marcos-promulgated Constitution." 5
Aside from the main defendants (Marcos, his wife Imelda R. Marcos, and Tan), twenty-three other persons - - who had purportedly acted as their
dummies, nominees or agents - - were likewise impleaded in the Complaint. It alleged, among others, that Tan - - with the connivance of some
government officials, including Central Bank Governor Gregorio S. Licaros - - had fraudulently acquired the assets of the General Bank and Trust
Company (GBTC), now known as the Allied Bank. A pertinent portion of the Complaint reads thus:
"SPECIFIC AVERMENTS OF
DEFENDANTS' ILLEGAL ACTS
"13. Defendant Lucio C. Tan, by himself and/or in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and taking
undue advantage of his relationship and influence with Defendant spouses, among others:
(a) without sufficient collateral and for a nominal consideration, with the active collaboration, knowledge and willing participation of Defendant
Willy Co, arbitrarily and fraudulently acquired control of the General Bank and Trust Company which eventually became Allied Banking
Corporation, through then Central Bank Governor Gregorio Licaros x x x." 6 (Emphasis supplied)cralawlibrary
Despite the allegation, Licaros was not impleaded in this Complaint or in the subsequent Expanded Complaint.
On September 13, 1991, four years after the filing of the original action,7 the Republic filed a Motion for Leave to Amend Complaint and for
Admission of a Second Amended Complaint, which impleaded the Estate/Heirs of Licaros for the first time. The Amended Complaint, reiterating
earlier allegations in the Expanded Complaint, detailed Licaros' participation in the alleged unholy conspiracy as follows:
"THE PARTIES
"5a. Former Central Bank Governor Licaros, now deceased, had facilitated the fraudulent acquisition of the assets of General Bank and Trust
Company (GBTC) worth over P688 Million at that time, to favor the Marcoses and the Lucio Tan Group who acquired said GBTC's assets for a
measly sum of P500,000.00. Hence, his Estate represented by his heirs must be impleaded as a party defendant for the purpose of obtaining
complete relief. The said heirs may be served with summons and other court processes at Home Bankers Trust, 105 Paseo de Roxas, Makati,
Metro Manila.
xxx
"SPECIFIC AVERMENTS OF DEFENDANTS'
ILLEGAL ACTS
"14. Defendant Lucio C. Tan, by himself and/or in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, taking undue
advantage of his relationship and influence with Defendant spouses, and embarking upon devices, schemes and strat[a]gems, including the use of
Defendant Corporations, among others:
Willy Co, arbitrarily and fraudulently acquired control of the General Bank and Trust Company (GBTC) which eventually became Allied
Banking Corporation. Through the manipulation of then Central Bank Governor Gregorio Licaros and of then President Panfilo O. Domingo of
the Philippine National Bank (PNB), as shown by, but not limited to the following circumstances:
(1) In 1976, the General Bank and Trust Company, (GBTC for short) got into financial difficulties. The Central Bank then extended an emergency
loan to GBTC reaching a total of P310 million. In extending this loan, the CB, however, took control of GBTC when the latter executed an
irrevocable Proxy of 2/3 of GBTC's outstanding shares in favor of the CB and 7 of the 11-member Board of Directors were CB nominees.
Subsequently, on March 25, 1977, the Monetary Board of CB issued a Resolution declaring GBTC insolvent, forbidding it to do business and
placing it under receivership.
(2) In the meantime, a public bidding for the sale of GBTC assets and liabilities was scheduled at 7:00 P.M. on March 28, 1977. Among the
conditions of the bidding were: (a) submission by the bidder of Letter of Credit issued by a bank acceptable to CB to guaranty payment or as
collateral of the CB emergency loan; and (b) a 2-year period to repay the said CB emergency loan. On March 29, 1977, CB thru a Monetary
Board Resolution, approved the bid of the group of Lucio Tan and Willy Co. This bid, among other things, offered to pay only P500,000.00 for
GBTC assets estimated at P688,201,301; Capital Accounts of P103,984,477.55; Cash of P25,698,473.00; and the takeover of the GBTC Head
Office and branch offices. The required Letter of Credit was not also attached to the bid. What was attached to the bid was a letter of Defendant
Panfilo O. Domingo as PNB President promising to open an irrevocable letter of credit to secure the advances of the Central Bank in the amount
of P310 Million. Without this letter of commitment, the Lucio Tan bid would have not been approved. But such letter of commitment was a fraud
because it was not meant to be fulfilled. Defendants Ferdinand E. Marcos, Gregorio Licaros and Panfilo O. Domingo conspired together in giving
the Lucio Tan group undue favors such as the doing away with the required irrevocable letter of credit, the extension of the term of payment from
two years to five years, the approval of the second mortgage as collateral for the Central Bank advances which was deficient by more than P90
Million, and other concessions to the great prejudice of the government and of the GBTC stockholders." 8
The Amended Complaint restated the same causes of action originally appearing in the initial Complaint: (1) abuse of right and power in violation
of Articles 19, 20 and 21 of the Civil Code; (2) unjust enrichment; (3) breach of public trust; (4) accounting of all legal or beneficial interests in
funds, properties and assets in excess of lawful earnings and income; and (5) actual, moral, temperate, nominal and exemplary damages.
On September 3, 2001, the heirs of Licaros filed a Motion to Dismiss the Complaint. Essentially, it raised the following grounds therefor: (1) lack
of cause of action and (2) prescription. On October 12, 2001, the Republic filed its Opposition to the Motion.
Ruling of the Sandiganbayan
The Sandiganbayan held that the averments in the Second Amended Complaint had sufficiently established a cause of action against former
Central Bank Governor Licaros. Ruled untenable was the argument of petitioners that he could not be held personally liable, because the GBTC
assets had been acquired by Tan through a public bidding duly approved by the Monetary Board. According to the anti-graft court, this argument
was a matter of defense that could not be resorted to in a motion to dismiss, and that did not constitute a valid ground for dismissal.
It was immaterial that Licaros was not a business associate of the main defendants; and not an officer, a director, or a stockholder of any of the
defendant corporations. The paramount issue hinged on his acts as Central Bank governor, particularly his participation in an allegedly illegal
conspiracy with Marcos and Domingo to give undue advantage to Tan's bid for the GBTC assets.
The Sandiganbayan also brushed aside the claim of petitioners that the action against Licaros had already prescribed. It pointed to Section 15 of
Article XI of the 1987 Constitution, which mandated that "[t]he right of the State to recover properties unlawfully acquired by public officials or
employees, from them or from their nominees or transferees, shall not be barred by prescription, laches or estoppel."
Hence, this Petition.9
Issues
In their Memorandum, petitioners raise the following issues10 for our consideration:
"A.
Whether or not the Second Amended Complaint states a cause of action against petitioners.
"B.
Whether or not the Second Amended Complaint is barred by prescription and laches.
"C.
Whether or not Respondent Court has jurisdiction to determine the validity of the liquidation of General Bank and Trust Company (GENBANK
or GBTC) and its acquisition by the Lucio Tan group and the consequent culpability of the late Central Bank Governor Licaros in view of the
pendency of the issues in G.R. No. 152551 (General Bank and Trust Co. v. Central Bank of the Philippines, et. al.)." 11
The Court's Ruling
The Petition has no merit.
First Issue:
Cause of Action
A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part of the named defendant to respect and not to violate that right; and (3) an act or omission
constituting a breach of obligation of the defendant to the plaintiff or violating the right of the plaintiff, for which the latter may maintain an
action for recovery of damages.12
The allegations in the Second Amended Complaint clearly and unequivocally outlines its cause of action against Defendant Licaros as follows:
"The wrongs committed by Defendants, acting singly or collectively and in unlawful concert with one another, include the misappropriation and
theft of public funds, plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement and other acts of corruption, betrayal of public
trust and brazen abuse of power, as more fully described below, all at the expense and to the grave and irreparable damage of the plaintiff and the
Filipino people.
xxx
"Former Central Bank Governor Gregorio Licaros, now deceased, had facilitated the fraudulent acquisition of the assets x x x General Bank and
Trust Company (GBTC) worth over P688-Million at that time, to favor the Marcoses and the Lucio Tan group who acquired said GBTC's assets
for a measly sum of P500,000.00. Hence, his Estate represented by his heirs must be impleaded as a party defendant for the purpose of obtaining
complete relief."13
The Second Amended Complaint was unambiguous when it charged that Licaros, during his lifetime, had conspired with the main defendants - -
particularly former President Ferdinand E. Marcos, Imelda R. Marcos, Lucio Tan and Philippine National Bank President Panfilo O. Domingo - -
in facilitating the allegedly questionable transfer of the GBTC assets to Tan.
This charge of "conspiracy" casts a wide net, sufficiently extensive to include all acts and all incidents incidental, related to or arising from the
charge of systematic plunder and pillage against the main defendants in Sandiganbayan Case No. 0005. The assailed role of Licaros as Central
Bank governor in the questioned GBTC deal is not excluded therefrom. If proven, the allegation of conspiracy may make him liable with his co-
defendants.
The alleged conspiracy to defraud the Republic put the case against the Estate/Heirs of Licaros squarely under the exclusive jurisdiction of the
Sandiganbayan. Said the Court:
"Under Section 2 of the President's Executive Order No. 14 issued on May 7, 1986, all cases of the Commission regarding the 'Funds, Moneys,
Assets and Properties Illegally Acquired or Misappropriated by Former President Ferdinand Marcos, their close Relatives, Subordinates, Business
Associates, Dummies, Agents or Nominees' whether civil or criminal are lodged with the 'exclusive and original jurisdiction of the
Sandiganbayan' and all incidents arising from, incident to, or related to, such cases necessarily fall likewise under the Sandiganbayan's exclusive
and original jurisdiction, subject to the review on certiorari exclusively by the Supreme Court."14 (Emphasis supplied)cralawlibrary
No Ground to Dismiss the Amended Complaint.

In Virata v. Sandiganbayan,15 a similar case for reconveyance, reversion, accounting and restitution of the allegedly hidden loot of the Marcos
regime, this Court denied petitioners' prayer for the dismissal of the Expanded Complaint, insofar as it had impleaded him. Applicable to the
instant case is our pronouncement therein:
"The essential elements of a cause of action are a legal right of the plaintiff, a correlative obligation of the defendant, and an act or omission of
the defendant violative of said legal right. The test of sufficiency of the facts to constitute a cause of action is whether or not, admitting the facts
alleged, the court could render a valid judgment upon the same in accordance with the prayer. As stated in Adamos v. J.M. Tuason & Co., Inc.,
(25 SCRA 529), 'It is a well-settled rule that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the
question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. Whether these allegations are true or
not is beside the point, for their truth is hypothetically admitted. The issue rather is: admitting them to be true, may the court render a valid
judgment in accordance with the prayer in the complaint? So rigid is the norm prescribed that if the court should doubt the truth of the facts
averred, it must not dismiss the complaint but require an answer and proceed to hear the case on the merits.' "16
Starkly similar to the foregoing discussion, the herein petitioners are seeking the dismissal of the present case, because (1) the actions imputed to
Licaros as Central Bank governor were allegedly official acts of the members of the Monetary Board acting as a collegial body; and (2) the
acquisition was done through a public bidding and in good faith. These contentions are evidently matters of defense, the veracity of which must
be determined in a full-blown trial (or in a pretrial stipulation), and not in a mere motion to dismiss.
Second Issue:
Prescription
The instant action for reconveyance, restitution, and accounting impleads the Estate/Heirs of Gregorio Licaros for previous acts committed by the
decedent during his lifetime, more particularly for conspiring with the main defendants to prejudice the Republic. An action to recover ill-gotten
wealth is outside the purview of the ordinary rules on prescription, as contained in Article 1146 of the Civil Code. 17 Section 15 of Article XI of the
1987 Constitution states:
"Section 15. The right of the State to recover properties unlawfully acquired by public officials or employees, from them or from their nominees
or transferees, shall not be barred by prescription, laches or estoppel."
The intendment of the foregoing constitutional provision - - exempting actions to recover ill-gotten wealth from the operation of the general rules
of prescription - - presumably lies in the special attendant circumstances and the primordial state interests involved in cases of such nature.
From the preceding discussion, it is clear that any action involving the recovery of unlawfully acquired properties against Licaros or his
transferees, may not be deemed to have prescribed. The language of the Constitution, the law and the Rules of Court is clear and unequivocal.
Clearly, the Sandiganbayan did not commit any grave abuse of discretion amounting to lack or excess of jurisdiction when it issued the assailed
Resolutions denying, for lack of merit, petitioners' Motion to Dismiss.
Third Issue:
Pendency of GR No. 152551 Inconsequential
Petitioners further argue that in not dismissing the Complaint against Licaros for his acts as Central Bank governor, the anti-graft court is in effect
passing judgment on the validity of the liquidation of the GBTC and its acquisition by the Lucio Tan group. They contend that the Second
Amended Complaint, insofar as it had impleaded Licaros, was clearly pushed beyond the Sandiganbayan's jurisdiction, as the issue is presently
being raised in GR No. 152551 (General Bank and Trust Co. v. Central Bank of the Philippines et al.), pending before this Court.
Suffice it to say that, having established the jurisdiction of the Sandiganbayan over the Second Expanded Complaint and without prejudging the
merits of the aforementioned case, this Court believes, and so holds, that a further discussion of this third alleged error raised by petitioners is no
longer necessary.
Epilogue
This Court is as interested as the government in recovering ill-gotten wealth. We commend the present leadership of both the PCGG and the OSG
for their demonstrated zeal in prosecuting this case. Asking only for an extended period of 40 days, the Office of the Solicitor General has filed its
Comment and Memorandum within record time.18 Petitioners are also to be lauded for their timeliness in filing their Reply and Memorandum, 19
which manifest a candid intent to settle the issues raised and not to delay unduly the resolution of Sandiganbayan Case No. 0005.
The conduct of both parties in the foregoing case has made it possible for the Court to dispose of the matter in less than a year after the last
pleading was filed. Such conduct should characterize the ideal that must be aspired for by parties involved in cases of ill-gotten wealth, when they
prosecute and defend their causes before the courts - - with utmost dispatch.
The Court, however, cannot ignore earlier lapses, particularly the past lackadaisical prosecution of the present case. The voluminous records show
that while the original Complaint had been filed on August 20, 1987, and subsequently expanded in 1988 to include additional and more specific
allegations, it was only in 1991 - - or more than four years later - - when it was amended to include as party-defendants Gregorio Licaros, his
heirs and his estate. No new evidence had surfaced within the interim period to justify their belated inclusion. The Amended Complaint was, in
essence, a rehash of the earlier Expanded Complaint.
While the rules allow amendments, they must be made on just and reasonable grounds. An amendment is unwarranted if it involves facts already
within the knowledge of the plaintiffs at the time of the filing of the original action; otherwise, the protracted trial involving the allegedly ill-
gotten wealth of Marcos - - almost twenty years in the running - - may further stretch unreasonably with no end in sight.
More incredibly, from the time the Second Amended Complaint was filed in 1991, it took the then PCGG and the then OSG ten long years to
cause the service of summons on the heirs of Gregorio Licaros. 20 The OSG cannot, as it did in its Memorandum, so cavalierly dismiss the delay
by conveniently pointing to the clerk of court as the official who had the duty to issue summonses to the defendants. While indeed the Rules of
Court entrusts that task to the clerk of court, it behooved the plaintiff to ascertain and inform the court where the summons could be served.
As manifested in the present Petition, Mrs. Concepcion Licaros, the widow of Gregorio S. Licaros, has been living at 802 Harvard Street,
Mandaluyong City, to this day. The same address appears on both the private and the official records of the deceased - - particularly on his Death
Certificate,21 which respondents could have obtained with facility. That it took the then OSG all of ten years just to cause the service of summons
on the Licaros heirs is certainly dismaying.
After nearly twenty years, the commitment to exorcise the specter of the bygone dictatorship, a resolve that was forged on the streets of EDSA in
1986, may have sadly been lost to memory. Those who are tasked to undo past wrongs and transgressions are exhorted to tenaciously and
steadfastly keep the resolve alive, so that our people could at last put a closure to this dark chapter in our history, avoid the same thorny path, and
move forward in the quest for our nation's destiny.
WHEREFORE, the Petition is hereby DISMISSED and the assailed Resolutions AFFIRMED.
Costs against petitioners.
Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia *, JJ., concur.

THIRD DIVISION
[G.R. NO. 157438 : October 18, 2004]
HEIRS OF GREGORIO LICAROS; namely, CONCEPCION B. LICAROS and ABELARDO B. LICAROS, Petitioners, v.
SANDIGANBAYAN and REPUBLIC OF THE PHILIPPINES, Respondents.
DECISION
PANGANIBAN, J.:
Basic is the rule that only the allegations of a complaint may be used to determine whether a cause of action is being pleaded. Whether these are
true or false is unimportant at this point. The test is, assuming the allegations to be true, can a valid judgment, as prayed for by the plaintiff, be
rendered by the court? If so, then the complaint states a cause of action.
In the present case, the Second Amended Complaint contains sufficient allegations to implicate Gregorio S. Licaros in an alleged conspiracy to
accumulate ill-gotten wealth. The contentions that his acts were done in good faith, or by the Monetary Board are matters of defense that cannot
abate the Complaint upon a motion to dismiss.
The Case
Before the Court is a Petition for Certiorari1 under Rule 65 of the Rules of Court, seeking to nullify the August 13, 20022 and the February 6,
20033 Resolutions of the Sandiganbayan in Civil Case No. 0005. The decretal portion of the first assailed Resolution reads:
"WHEREFORE, for lack of merit, the motion to dismiss is hereby DENIED."4
The second challenged Resolution denied petitioners' Motion for Reconsideration.
The Facts
Gregorio S. Licaros, petitioners' predecessor-in-interest, served as governor of the Central Bank of the Philippines from 1970 to 1980, during the
incumbency of then President Ferdinand E. Marcos. He died on August 3, 1983.
On July 17, 1987, the Republic of the Philippines - - through the Presidential Commission on Good Government (PCGG), assisted by the Office
of the Solicitor General (OSG) - - filed a Complaint for reversion, reconveyance, restitution, accounting and damages against former President
Marcos and his alleged crony, Lucio C. Tan. The Complaint, docketed as Sandiganbayan Case No. 0005, summed up the nature of the action as
follows:
"x x x. This is a civil action against Defendants Lucio C. Tan, Ferdinand E. Marcos, Imelda R. Marcos and the rest of the Defendants to recover
from them ill-gotten wealth consisting of funds and other property which they, in unlawful concert with one another, had acquired and
accumulated in flagrant breach of trust and of their fiduciary obligations as public officers, with grave abuse of right and power and in brazen
violation of the Constitution and laws of the Republic of the Philippines, thus resulting in their unjust enrichment during Defendant Ferdinand E.
Marcos' 20 years of rule from December 30, 1965 to February 25, 1986, first as President of the Philippines under the 1935 Constitution and,
thereafter, as one-man ruler under martial law and Dictator under the 1973 Marcos-promulgated Constitution." 5
Aside from the main defendants (Marcos, his wife Imelda R. Marcos, and Tan), twenty-three other persons - - who had purportedly acted as their
dummies, nominees or agents - - were likewise impleaded in the Complaint. It alleged, among others, that Tan - - with the connivance of some
government officials, including Central Bank Governor Gregorio S. Licaros - - had fraudulently acquired the assets of the General Bank and Trust
Company (GBTC), now known as the Allied Bank. A pertinent portion of the Complaint reads thus:
"SPECIFIC AVERMENTS OF
DEFENDANTS' ILLEGAL ACTS
"13. Defendant Lucio C. Tan, by himself and/or in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, and taking
undue advantage of his relationship and influence with Defendant spouses, among others:
Willy Co, arbitrarily and fraudulently acquired control of the General Bank and Trust Company which eventually became Allied Banking
Corporation, through then Central Bank Governor Gregorio Licaros x x x." 6 (Emphasis supplied)cralawlibrary
Despite the allegation, Licaros was not impleaded in this Complaint or in the subsequent Expanded Complaint.
On September 13, 1991, four years after the filing of the original action,7 the Republic filed a Motion for Leave to Amend Complaint and for
Admission of a Second Amended Complaint, which impleaded the Estate/Heirs of Licaros for the first time. The Amended Complaint, reiterating
earlier allegations in the Expanded Complaint, detailed Licaros' participation in the alleged unholy conspiracy as follows:
"THE PARTIES
"5a. Former Central Bank Governor Licaros, now deceased, had facilitated the fraudulent acquisition of the assets of General Bank and Trust
Company (GBTC) worth over P688 Million at that time, to favor the Marcoses and the Lucio Tan Group who acquired said GBTC's assets for a
measly sum of P500,000.00. Hence, his Estate represented by his heirs must be impleaded as a party defendant for the purpose of obtaining
complete relief. The said heirs may be served with summons and other court processes at Home Bankers Trust, 105 Paseo de Roxas, Makati,
Metro Manila.
xxx
"SPECIFIC AVERMENTS OF DEFENDANTS'
ILLEGAL ACTS
"14. Defendant Lucio C. Tan, by himself and/or in unlawful concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos, taking undue
advantage of his relationship and influence with Defendant spouses, and embarking upon devices, schemes and strat[a]gems, including the use of
Defendant Corporations, among others:
Willy Co, arbitrarily and fraudulently acquired control of the General Bank and Trust Company (GBTC) which eventually became Allied
Banking Corporation. Through the manipulation of then Central Bank Governor Gregorio Licaros and of then President Panfilo O. Domingo of
the Philippine National Bank (PNB), as shown by, but not limited to the following circumstances:
(1) In 1976, the General Bank and Trust Company, (GBTC for short) got into financial difficulties. The Central Bank then extended an emergency
loan to GBTC reaching a total of P310 million. In extending this loan, the CB, however, took control of GBTC when the latter executed an
irrevocable Proxy of 2/3 of GBTC's outstanding shares in favor of the CB and 7 of the 11-member Board of Directors were CB nominees.
Subsequently, on March 25, 1977, the Monetary Board of CB issued a Resolution declaring GBTC insolvent, forbidding it to do business and
placing it under receivership.
(2) In the meantime, a public bidding for the sale of GBTC assets and liabilities was scheduled at 7:00 P.M. on March 28, 1977. Among the
conditions of the bidding were: (a) submission by the bidder of Letter of Credit issued by a bank acceptable to CB to guaranty payment or as
collateral of the CB emergency loan; and (b) a 2-year period to repay the said CB emergency loan. On March 29, 1977, CB thru a Monetary
Board Resolution, approved the bid of the group of Lucio Tan and Willy Co. This bid, among other things, offered to pay only P500,000.00 for
GBTC assets estimated at P688,201,301; Capital Accounts of P103,984,477.55; Cash of P25,698,473.00; and the takeover of the GBTC Head
Office and branch offices. The required Letter of Credit was not also attached to the bid. What was attached to the bid was a letter of Defendant
Panfilo O. Domingo as PNB President promising to open an irrevocable letter of credit to secure the advances of the Central Bank in the amount
of P310 Million. Without this letter of commitment, the Lucio Tan bid would have not been approved. But such letter of commitment was a fraud
because it was not meant to be fulfilled. Defendants Ferdinand E. Marcos, Gregorio Licaros and Panfilo O. Domingo conspired together in giving
the Lucio Tan group undue favors such as the doing away with the required irrevocable letter of credit, the extension of the term of payment from
two years to five years, the approval of the second mortgage as collateral for the Central Bank advances which was deficient by more than P90
Million, and other concessions to the great prejudice of the government and of the GBTC stockholders." 8
The Amended Complaint restated the same causes of action originally appearing in the initial Complaint: (1) abuse of right and power in violation
of Articles 19, 20 and 21 of the Civil Code; (2) unjust enrichment; (3) breach of public trust; (4) accounting of all legal or beneficial interests in
funds, properties and assets in excess of lawful earnings and income; and (5) actual, moral, temperate, nominal and exemplary damages.
On September 3, 2001, the heirs of Licaros filed a Motion to Dismiss the Complaint. Essentially, it raised the following grounds therefor: (1) lack
of cause of action and (2) prescription. On October 12, 2001, the Republic filed its Opposition to the Motion.
Ruling of the Sandiganbayan
The Sandiganbayan held that the averments in the Second Amended Complaint had sufficiently established a cause of action against former
Central Bank Governor Licaros. Ruled untenable was the argument of petitioners that he could not be held personally liable, because the GBTC
assets had been acquired by Tan through a public bidding duly approved by the Monetary Board. According to the anti-graft court, this argument
was a matter of defense that could not be resorted to in a motion to dismiss, and that did not constitute a valid ground for dismissal.
It was immaterial that Licaros was not a business associate of the main defendants; and not an officer, a director, or a stockholder of any of the
defendant corporations. The paramount issue hinged on his acts as Central Bank governor, particularly his participation in an allegedly illegal
conspiracy with Marcos and Domingo to give undue advantage to Tan's bid for the GBTC assets.
The Sandiganbayan also brushed aside the claim of petitioners that the action against Licaros had already prescribed. It pointed to Section 15 of
Article XI of the 1987 Constitution, which mandated that "[t]he right of the State to recover properties unlawfully acquired by public officials or
employees, from them or from their nominees or transferees, shall not be barred by prescription, laches or estoppel."
Hence, this Petition.9
Issues
In their Memorandum, petitioners raise the following issues10 for our consideration:
"A.
Whether or not the Second Amended Complaint states a cause of action against petitioners.
"B.
Whether or not the Second Amended Complaint is barred by prescription and laches.
"C.
Whether or not Respondent Court has jurisdiction to determine the validity of the liquidation of General Bank and Trust Company (GENBANK
or GBTC) and its acquisition by the Lucio Tan group and the consequent culpability of the late Central Bank Governor Licaros in view of the
pendency of the issues in G.R. No. 152551 (General Bank and Trust Co. v. Central Bank of the Philippines, et. al.)." 11
The Court's Ruling
The Petition has no merit.
First Issue:
Cause of Action
A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created; (2) an obligation on the part of the named defendant to respect and not to violate that right; and (3) an act or omission
constituting a breach of obligation of the defendant to the plaintiff or violating the right of the plaintiff, for which the latter may maintain an
action for recovery of damages.12
The allegations in the Second Amended Complaint clearly and unequivocally outlines its cause of action against Defendant Licaros as follows:
"The wrongs committed by Defendants, acting singly or collectively and in unlawful concert with one another, include the misappropriation and
theft of public funds, plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement and other acts of corruption, betrayal of public
trust and brazen abuse of power, as more fully described below, all at the expense and to the grave and irreparable damage of the plaintiff and the
Filipino people.
xxx
"Former Central Bank Governor Gregorio Licaros, now deceased, had facilitated the fraudulent acquisition of the assets x x x General Bank and
Trust Company (GBTC) worth over P688-Million at that time, to favor the Marcoses and the Lucio Tan group who acquired said GBTC's assets
for a measly sum of P500,000.00. Hence, his Estate represented by his heirs must be impleaded as a party defendant for the purpose of obtaining
complete relief."13
The Second Amended Complaint was unambiguous when it charged that Licaros, during his lifetime, had conspired with the main defendants - -
particularly former President Ferdinand E. Marcos, Imelda R. Marcos, Lucio Tan and Philippine National Bank President Panfilo O. Domingo - -
in facilitating the allegedly questionable transfer of the GBTC assets to Tan.
This charge of "conspiracy" casts a wide net, sufficiently extensive to include all acts and all incidents incidental, related to or arising from the
charge of systematic plunder and pillage against the main defendants in Sandiganbayan Case No. 0005. The assailed role of Licaros as Central
Bank governor in the questioned GBTC deal is not excluded therefrom. If proven, the allegation of conspiracy may make him liable with his co-
defendants.
The alleged conspiracy to defraud the Republic put the case against the Estate/Heirs of Licaros squarely under the exclusive jurisdiction of the
Sandiganbayan. Said the Court:
"Under Section 2 of the President's Executive Order No. 14 issued on May 7, 1986, all cases of the Commission regarding the 'Funds, Moneys,
Assets and Properties Illegally Acquired or Misappropriated by Former President Ferdinand Marcos, their close Relatives, Subordinates, Business
Associates, Dummies, Agents or Nominees' whether civil or criminal are lodged with the 'exclusive and original jurisdiction of the
Sandiganbayan' and all incidents arising from, incident to, or related to, such cases necessarily fall likewise under the Sandiganbayan's exclusive
and original jurisdiction, subject to the review on certiorari exclusively by the Supreme Court."14 (Emphasis supplied)cralawlibrary
No Ground to Dismiss the Amended Complaint.

In Virata v. Sandiganbayan,15 a similar case for reconveyance, reversion, accounting and restitution of the allegedly hidden loot of the Marcos
regime, this Court denied petitioners' prayer for the dismissal of the Expanded Complaint, insofar as it had impleaded him. Applicable to the
instant case is our pronouncement therein:
"The essential elements of a cause of action are a legal right of the plaintiff, a correlative obligation of the defendant, and an act or omission of
the defendant violative of said legal right. The test of sufficiency of the facts to constitute a cause of action is whether or not, admitting the facts
alleged, the court could render a valid judgment upon the same in accordance with the prayer. As stated in Adamos v. J.M. Tuason & Co., Inc.,
(25 SCRA 529), 'It is a well-settled rule that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the
question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. Whether these allegations are true or
not is beside the point, for their truth is hypothetically admitted. The issue rather is: admitting them to be true, may the court render a valid
judgment in accordance with the prayer in the complaint? So rigid is the norm prescribed that if the court should doubt the truth of the facts
averred, it must not dismiss the complaint but require an answer and proceed to hear the case on the merits.' "16
Starkly similar to the foregoing discussion, the herein petitioners are seeking the dismissal of the present case, because (1) the actions imputed to
Licaros as Central Bank governor were allegedly official acts of the members of the Monetary Board acting as a collegial body; and (2) the
acquisition was done through a public bidding and in good faith. These contentions are evidently matters of defense, the veracity of which must
be determined in a full-blown trial (or in a pretrial stipulation), and not in a mere motion to dismiss.
Second Issue:
Prescription
The instant action for reconveyance, restitution, and accounting impleads the Estate/Heirs of Gregorio Licaros for previous acts committed by the
decedent during his lifetime, more particularly for conspiring with the main defendants to prejudice the Republic. An action to recover ill-gotten
wealth is outside the purview of the ordinary rules on prescription, as contained in Article 1146 of the Civil Code. 17 Section 15 of Article XI of the
1987 Constitution states:
"Section 15. The right of the State to recover properties unlawfully acquired by public officials or employees, from them or from their nominees
or transferees, shall not be barred by prescription, laches or estoppel."
The intendment of the foregoing constitutional provision - - exempting actions to recover ill-gotten wealth from the operation of the general rules
of prescription - - presumably lies in the special attendant circumstances and the primordial state interests involved in cases of such nature.
From the preceding discussion, it is clear that any action involving the recovery of unlawfully acquired properties against Licaros or his
transferees, may not be deemed to have prescribed. The language of the Constitution, the law and the Rules of Court is clear and unequivocal.
Clearly, the Sandiganbayan did not commit any grave abuse of discretion amounting to lack or excess of jurisdiction when it issued the assailed
Resolutions denying, for lack of merit, petitioners' Motion to Dismiss.
Third Issue:
Pendency of GR No. 152551 Inconsequential
Petitioners further argue that in not dismissing the Complaint against Licaros for his acts as Central Bank governor, the anti-graft court is in effect
passing judgment on the validity of the liquidation of the GBTC and its acquisition by the Lucio Tan group. They contend that the Second
Amended Complaint, insofar as it had impleaded Licaros, was clearly pushed beyond the Sandiganbayan's jurisdiction, as the issue is presently
being raised in GR No. 152551 (General Bank and Trust Co. v. Central Bank of the Philippines et al.), pending before this Court.
Suffice it to say that, having established the jurisdiction of the Sandiganbayan over the Second Expanded Complaint and without prejudging the
merits of the aforementioned case, this Court believes, and so holds, that a further discussion of this third alleged error raised by petitioners is no
longer necessary.
Epilogue
This Court is as interested as the government in recovering ill-gotten wealth. We commend the present leadership of both the PCGG and the OSG
for their demonstrated zeal in prosecuting this case. Asking only for an extended period of 40 days, the Office of the Solicitor General has filed its
Comment and Memorandum within record time.18 Petitioners are also to be lauded for their timeliness in filing their Reply and Memorandum, 19
which manifest a candid intent to settle the issues raised and not to delay unduly the resolution of Sandiganbayan Case No. 0005.
The conduct of both parties in the foregoing case has made it possible for the Court to dispose of the matter in less than a year after the last
pleading was filed. Such conduct should characterize the ideal that must be aspired for by parties involved in cases of ill-gotten wealth, when they
prosecute and defend their causes before the courts - - with utmost dispatch.
The Court, however, cannot ignore earlier lapses, particularly the past lackadaisical prosecution of the present case. The voluminous records show
that while the original Complaint had been filed on August 20, 1987, and subsequently expanded in 1988 to include additional and more specific
allegations, it was only in 1991 - - or more than four years later - - when it was amended to include as party-defendants Gregorio Licaros, his
heirs and his estate. No new evidence had surfaced within the interim period to justify their belated inclusion. The Amended Complaint was, in
essence, a rehash of the earlier Expanded Complaint.
While the rules allow amendments, they must be made on just and reasonable grounds. An amendment is unwarranted if it involves facts already
within the knowledge of the plaintiffs at the time of the filing of the original action; otherwise, the protracted trial involving the allegedly ill-
gotten wealth of Marcos - - almost twenty years in the running - - may further stretch unreasonably with no end in sight.
More incredibly, from the time the Second Amended Complaint was filed in 1991, it took the then PCGG and the then OSG ten long years to
cause the service of summons on the heirs of Gregorio Licaros. 20 The OSG cannot, as it did in its Memorandum, so cavalierly dismiss the delay
by conveniently pointing to the clerk of court as the official who had the duty to issue summonses to the defendants. While indeed the Rules of
Court entrusts that task to the clerk of court, it behooved the plaintiff to ascertain and inform the court where the summons could be served.
As manifested in the present Petition, Mrs. Concepcion Licaros, the widow of Gregorio S. Licaros, has been living at 802 Harvard Street,
Mandaluyong City, to this day. The same address appears on both the private and the official records of the deceased - - particularly on his Death
Certificate,21 which respondents could have obtained with facility. That it took the then OSG all of ten years just to cause the service of summons
on the Licaros heirs is certainly dismaying.
After nearly twenty years, the commitment to exorcise the specter of the bygone dictatorship, a resolve that was forged on the streets of EDSA in
1986, may have sadly been lost to memory. Those who are tasked to undo past wrongs and transgressions are exhorted to tenaciously and
steadfastly keep the resolve alive, so that our people could at last put a closure to this dark chapter in our history, avoid the same thorny path, and
move forward in the quest for our nation's destiny.
WHEREFORE, the Petition is hereby DISMISSED and the assailed Resolutions AFFIRMED.
Costs against petitioners.
Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia *, JJ., concur.

SECOND DIVISION
[G.R. NO. 157447. April 29, 2005]
NEMENCIO C. EVANGELISTA, PASCUAL G. QUINTO, LUIS B. BUENA, EUSEBIA V. TABLADA, CANUTO G. TISBE, DAVID R.
CARULLO, SOFONIAS E. COLEGADO, FELIX B. BUENA, TORIBIO C. EVANGELISTA, LEBRADA A. NICOLAS, ALECIA J.
RAMOS, MILA G. DE LOS REYES, SALVADOR I. DE LA TORRE, MOISES CRUZ, RUFINO INFANTE, ALICIA ASTROLOGO,
TRINIDAD LUMIQUED, LUZMINIDA QUINIQUINI, & TEODORA C. TEMERAS, Petitioners, v. CARMELINO M. SANTIAGO,
Respondents.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review under Rule 45 of the Rules of Court, petitioners pray for the reversal of the Decision of the Court of Appeals in CA-
G.R. CV No. 64957,1 affirming the Order of the Regional Trial Court (RTC) of San Mateo, Rizal, Branch 77, in Civil Case No. 1220, 2 dismissing
petitioners' Complaint for declaration of nullity of Original Certificate of Title (OCT) No. 670 and all other titles emanating therefrom.
In their Complaint, petitioners alleged that they occupied and possessed parcels of land, located in Sitio Panayawan, Barangay San Rafael,
Montalban (now Rodriquez), Province of Rizal (Subject Property), by virtue of several Deeds of Assignment, dated 15 April 1994 and 02 June
1994, executed by a certain Ismael Favila y Rodriguez.3
According to the Deeds of Assignment, the Subject Property was part of a vast tract of land called "Hacienda Quibiga," which extended to
Paraaque, Las Pias, Muntinlupa, Cavite, Batangas, Pasay, Taguig, Makati, Pasig, Mandaluyong, Quezon City, Caloocan, Bulacan, and Rizal;
awarded to Don Hermogenes Rodriguez by the Queen of Spain and evidenced by a Spanish title. Ismael Favila claimed to be one of the heirs and
successors-in-interest of Don Hermogenes Rodriguez. Acting as Attorney-in-Fact pursuant to a Special Power of Attorney executed by his "mga
kapatid" on 25 February 1965, Ismael Favila signed the aforementioned Deeds of Assignment, assigning portions of the Subject Property to the
petitioners, each portion measuring around 500 to 1,000 square meters, in exchange for the labor and work done on the Subject Property by the
petitioners and their predecessors.4
Petitioners came by information that respondent was planning to evict them from the Subject Property. Two of the petitioners had actually
received notices to vacate. Their investigations revealed that the Subject Property was included in Transfer Certificates of Titles (TCTs) No.
53028, No. 281660, No. N-39258 and No. 205270, all originating from OCT No. 670, and now in the name of respondent. 5
OCT No. 670 was issued in the name of respondent's mother, Isabel Manahan y Francisco, and three other individuals, pursuant to Decree No.
10248, dated 13 February 1913, in Case No. 8502 of the Court of Land Registration of the Philippine Islands. The whole property covered by
OCT No. 670 was subsequently adjudicated in favor of Isabel Manahan Santiago (formerly Isabel Manahan y Francisco). Consequently, OCT No.
670 was cancelled and TCT No. T-53028 was issued exclusively in the name of Isabel Manahan Santiago. On 28 December 1968, Isabel
Manahan Santiago executed a Deed of Donation transferring the property to her son, respondent herein, who subsequently secured TCTs No.
281660, No. N-39258 and No. 205270 in his own name.6
Petitioners filed with the trial court, on 29 April 1996, an action for declaration of nullity of respondent's certificates of title on the basis that OCT
No. 670 was fake and spurious. Among the defects of OCT No. 670 pointed out by petitioners were that: (1) OCT No. 670 was not signed by a
duly authorized officer; (2) Material data therein were merely handwritten and in different penmanships; (3) OCT No. 670 was not printed on the
Official Form used in 1913, the year it was issued; (4) It failed to indicate the Survey Plan which was the basis of the Technical Description of the
property covered by the title; (5) Decree No. 10248 referred to in OCT No. 670 was issued only on 11 April 1913, while OCT No. 670 was issued
earlier, on 13 February 1913; and (6) Decree No. 10248 was issued over a property other than the one described in OCT No. 670, although also
located in the Province of Rizal.7
Respondent filed his Answer with Prayer for Preliminary Hearing on the Affirmative Defenses on 03 July 1996. According to respondent, "[t]he
allegations in the Complaint would readily and patently show that the same are flimsy, fabricated, malicious, without basis in law and in fact' " 8
As an affirmative defense, respondent claimed that the petitioners had no legal capacity to file the Complaint, and thus, the Complaint stated no
cause of action. Since OCT No. 670 was genuine and authentic on its face, then OCT No. 670 and all of respondent's land titles derived
therefrom, are incontrovertible, indefeasible and conclusive against the petitioners and the whole world. 9
Citing the consolidated cases of Director of Forestry, et al. v. Hon. Emmanuel M. Muoz, et al. and Pinagcamaligan Indo-Agro Development
Corporation v. Hon. Macario Peralta, Jr., et al.,10 respondent argued that the Spanish title, on which petitioners based their claim, was neither
indefeasible nor imprescriptible. Moreover, Presidential Decree (P.D.) No. 892, which took effect on 16 February 1976, required all holders of
Spanish titles or grants to apply for registration of their lands under Republic Act No. 496, otherwise known as the Land Registration Act, 11 within
six months from effectivity of the decree. After the given period, Spanish titles could no longer be used as evidence of land ownership in any
registration proceedings under the Torrens System. 12
Respondent also raised the affirmative defense of prescription. He pointed out that any action against his certificates of title already prescribed,
especially with regard to OCT No. 670, which was issued in 1913 or more than 83 years prior to the filing of the Complaint by the petitioners. At
the very least, respondent contended, "it must be presumed that the questioned land titles were issued by the public officials concerned in the
performance of their regular duties and functions pursuant to the law." 13
Even assuming arguendo that the petitioners entered and occupied the Subject Property, they did so as mere intruders, squatters and illegal
occupants, bereft of any right or interest, since the Subject Property was already covered by Torrens certificates of title in the name of respondent
and his predecessors-in-interest.14
Lastly, respondent denied knowing the petitioners, much less, threatening to evict them. In fact, petitioners were not included as defendants in
Civil Case No. 783 entitled, "Carmelino M. Santiago v. Remigio San Pascual, et al.," which respondent instituted before the same trial court
against squatters occupying the Subject Property. In its decision, dated 01 July 1992, the trial court held that "there is no doubt that the plaintiff
(respondent herein) is the owner of the land involved in this case on which the defendants have built their houses and shanties'" Although the
decision in Civil Case No. 783 was appealed to the Court of Appeals, it had become final and executory for failure of the defendants-appellants
therein to file their appellants' brief.15
In the instant case, the trial court held a preliminary hearing on the affirmative defenses as prayed for by the respondent. During said hearing,
petitioners presented their lone witness, Engineer Placido Naval, a supposed expert on land registration laws. In response to questions from
Honorable Judge Francisco C. Rodriguez of the trial court, Engineer Naval answered that a parcel of land titled illegally would revert to the State
if the Torrens title was cancelled, and that it was the State, through the Office of the Solicitor General, that should file for the annulment or
cancellation of the title. Respondent, on the other hand, did not present any evidence but relied on all the pleadings and documents he had so far
submitted to the trial court.16
After the preliminary hearing, the trial court issued the questioned Order, dated 05 February 1999, dismissing petitioners' Complaint. Pertinent
portions of the Order of the trial court read:
After considering the testimonial and documentary evidence presented, this Court is inclined not to grant plaintiffs (sic) prayer. Finding credence
and giving weight to plaintiffs (sic) lone but "expert witness", it is crystal clear that, to quote:
1. "a parcel of land titled illegally will revert to the State
2. it is the State who must file the corresponding case of annulment of title through the Office of the Solicitor General, and
3. a land illegally titled in the name of private individual, the State through the Office of the Solicitor General should file the corresponding case
for cancellation of title." (TSN August 26, 1997).
The above quoted testimony is straight from horse (sic) mouth so to speak as this was the testimony of the plaintiffs (sic) expert witness. And
judging from the said testimony alone aforecited, plaintiffs (sic) cause [of action] is bound to fail. "Plaintiffs (sic) own testimony" wrote "finis" to
their case. From the record, this case was initiated and filed by private individuals, Nemencio Evangelista, et. al., contradicting their witness (sic)
testimony. To reiterate, this Court finds credence to the testimony of the plaintiffs (sic) witness, i.e., is (sic) the State through the Office of the
Solicitor General who must initiate and file a case of this nature when title to a land is being claimed to be obtained through fraud and allegedly
spurious.
The opinion of this Court anent the testimony of the witness is not without basis. Explicit is the pronouncement of the Supreme Court in the
recent case of Heirs of Marciano Nagano v. Court of Appeals, to wit:
An action for reversion has to be instituted by the Solicitor General pursuant to Section 101, Commonwealth Act No. 141. (282 SCRA 43).
As to the documentary evidence, having gone through with the "Deed of Assignment/s" purportedly executed by and between a certain Ismael
Favila y Rodriguez and the plaintiffs, which is the principal if not the only basis of plaintiffs claim ownership and possession of the subject parcel
of land, the same does not hold water in a manner of speaking, for being self-serving. "Assignor Ismael Favila y Rodriguez" claimed in said Deed
that he is the Attorney-in-Fact by virtue of an alleged Special Power of Attorney executed in his favor by his "mga kapatid" on February 23, 1965,
but said Special Power of Attorney was not presented before this Court, thus there arises a doubt as to its existence and execution not to mention
doubt on the existence of his "mga kapatid" who as alleged executed said Special Power Attorney (sic) in his favor.
Even if this Court granting arguendo would admit the authenticity of said "Deeds of Assignment/s", that will not alter the outcome of the pending
incident/s before this Court. Why? Because the said "Deed of Assignment/s" which were based on Spanish title have lost their evidentiary value
pursuant to the Presidential Decree No. 892 i.e. "DISCONTINUANCE OF THE SPANISH MORTGAGE SYSTEM OF REGISTRATION AND
OF THE USE OF SPANISH TITLES AS EVIDENCE IN LAND REGISTRATION PROCEEDINGS."
There is no need to elaborate on the above-cited provisions of PD 892 as they are self-explanatory. Suffice it to say that there is no showing, that
plaintiffs complied with the said law i.e. to "apply for registration of their lands under Act No. 496, otherwise known as the Land Registration
Act, within six (6) months from the effectivity of this decree (February 16, 1976). Thereafter, Spanish titles cannot be used as evidence of land
ownership in any registration proceedings under the Torrens System."
This being the case and likewise being clear that plaintiffs were not the lawful owners of the land subject of this case, for they did not comply
with PD 892, the said plaintiffs do not have the legal standing to bring before this Court the instant complaint'
Moreover, the principal issue in this case is for the declaration of nullity of defendant's title, which has nothing to do with plaintiffs (sic) claim of
ownership and possession even if we set aside, albeit momentarily, the truth that plaintiffs (sic) claim were based on barred Spanish Title/s, and
thus plaintiffs were never the owners of the parcel of land subject of this case.
Further, defendants (sic) title especially so with the mother title OCT 670 was entered and issued in 1913 or more than Eighty Three (83) years
ago, the same not having been questioned by any party. Only now that it is being questioned, but sad to say, plaintiffs who are on the offensive
and relying on their lone expert witness, instead of bolstering their case, unwittingly sealed their fate' 17
After the trial court denied petitioners' Motion for Reconsideration in its Order, dated 20 July 1999,18 petitioners appealed both Orders of the trial
court to the Court of Appeals.
The Court of Appeals, in its Decision, dated 29 July 2002,19 affirmed the Order of the trial court, dated 05 February 1999, dismissing petitioners'
Complaint. The Court of Appeals denied petitioners' Motion for Reconsideration in its Resolution, dated 14 February 2003. 20
Thus, petitioners filed this Petition for Review 21 under Rule 45 of the Rules of Court, raising the following issues and praying for the reversal of
the aforementioned Decision of the Court of Appeals affirming the Order of dismissal of the trial court:
I. Whether the lower court's dismissal of the petitioners' complaint should be proscribed by the rules of evidence it being based inter alia on Engr.
Naval's testimony, which was indisputably not based on facts but conclusion of law.
II. Whether the lower court's dismissal of petitioners' complaint should be proscribed by the rules of evidence it being done sans ample evidence
except bare allegations of respondent.
III. Whether the provision of P.D. 892, i.e., Spanish titles cannot be used as evidence of land ownership in any registration proceedings under the
Torrens system, holds of an exception.
IV. Whether an action for quieting of title, specifically where petitioners are in possession of subject land, can be subject of prescription.
In his Comment,22 the respondent, for the most part, reiterated the findings of the trial court and the Court of Appeals.
The Court believes that the trial court rightfully dismissed petitioners' Complaint, but for reasons different from those relied upon by the trial
court and the Court of Appeals.
According to the respondent, petitioners had no legal capacity to file the Complaint, and thus, the Complaint filed before the trial court stated no
cause of action.
Before anything else, it should be clarified that "the plaintiff has no legal capacity to sue" 23 and "the pleading asserting the claim states no cause
of action"24 are two different grounds for a motion to dismiss or are two different affirmative defenses. Failure to distinguish between "the lack of
legal capacity to sue" from "the lack of personality to sue" is a fairly common mistake. The difference between the two is explained by this Court
in Columbia Pictures, Inc. v. Court of Appeals:25
Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue and that the complaint states no cause of
action. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to
appear in the case, or does not have the character or representation he claims. On the other hand, a case is dismissible for lack of personality to
sue upon proof that the plaintiff is not the real party-in-interest, hence grounded on failure to state a cause of action. The term "lack of capacity to
sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiff's general disability to sue, such as on
account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the
fact that the plaintiff is not the real party - in-interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of
lack of legal capacity to sue; whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face
thereof, evidently states no cause of action.
In the present case, this Court may assume that the respondent is raising the affirmative defense that the Complaint filed by the petitioners before
the trial court stated no cause of action because the petitioners lacked the personality to sue, not being the real party-in-interest. It is the
respondent's contention that only the State can file an action for annulment of his certificates of title, since such an action will result in the
reversion of the ownership of the Subject Property to the State.
The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss based on the same ground, requires a
hypothetical admission of the facts alleged in the Complaint. In the case of Garcon v. Redemptorist Fathers,26 this Court laid down the rules as
far as this ground for dismissal of an action or affirmative defense is concerned:
It is already well-settled by now that, in a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court for
determination is the sufficiency of the allegations of fact made in the complaint to constitute a cause of action, and not on whether these
allegations of fact are true, for said motion must hypothetically admit the truth of the facts alleged in the complaint; that the test of the sufficiency
of the facts alleged in the complaint is whether or not, admitting the facts alleged, the court could render a valid judgment upon the same in
accordance with the prayer of said complaint. Stated otherwise, the insufficiency of the cause of action must appear in the face of the complaint in
order to sustain a dismissal on this ground, for in the determination of whether or not a complaint states a cause of action, only the facts alleged
therein and no other matter may be considered, and the court may not inquire into the truth of the allegations, and find them to be false before a
hearing is had on the merits of the case; and it is improper to inject in the allegations of the complaint facts not alleged or proved, and use these as
basis for said motion.
In resolving whether or not the Complaint in the present case stated a cause of action, the trial court should have limited itself to examining the
sufficiency of the allegations in the Complaint. It was proscribed from inquiring into the truth of the allegations in the Complaint or the
authenticity of any of the documents referred or attached to the Complaint, since these are deemed hypothetically admitted by the respondent.
The trial court evidently erred in making findings as to the authenticity of the Deeds of Assignment executed by Ismael Favila in favor of
petitioners on 15 April 1994 and 02 June 1994; and questioning the existence and execution of the Special Power of Attorney in favor of said
Ismael Favila by his siblings on 25 February 1965. These matters may only be resolved after a proper trial on the merits.
Petitioners alleged in their Complaint, and respondent hypothetically admitted that: (1) Petitioners' predecessors-in-interest, in the concept of
owners, had been in actual, physical, open, continuous and adverse possession of the Subject Property against the whole world since time
immemorial; (2) The Subject Property was part of the vast tract of land called "Hacienda Quibiga" awarded to Don Hermogenes Rodriguez by the
Queen of Spain by virtue of a Spanish title; (3) Ismael Favila, an heir and successor-in-interest of Don Hermogenes Rodriguez, acting as
Attorney-in-Fact pursuant to a Special Power of Attorney executed by his "mga kapatid" on 25 February 1965, executed Deeds of Assignment
covering the Subject Property in favor of petitioners; (4) Petitioners still occupied and possessed the Subject Property, on which their houses were
erected, when they discovered that the Subject Property was already covered by Torrens certificates of title in the name of respondent; and (5)
That petitioners filed the Complaint to prevent their eviction by the respondent. To determine whether these allegations are sufficient to constitute
a cause of action, it is important for this Court to establish first the nature of petitioners' action.
Indeed, petitioners' Complaint filed before the trial court was captioned as an action for declaration of nullity of respondent's certificates of title.
However, the caption of the pleading should not be the governing factor, but rather the allegations therein should determine the nature of the
action, because even without the prayer for a specific remedy, the courts may nevertheless grant the proper relief as may be warranted by the facts
alleged in the Complaint and the evidence introduced.27
The trial court believed that petitioners' action was ultimately one for reversion of the Subject Property to the public domain. Based on the
testimony of Engineer Naval and the case of Nagao v. Court of Appeals,28 it declared that the State, represented by the Office of the Solicitor
General, is the party-in-interest in an action for cancellation of a certificate of title illegally issued in the name of a private individual, because the
eventual effect of such cancellation is the reversion of the property to the State.
The Court disagrees in this pronouncement of the trial court, and calls for a far closer review of its decision in Nagao v. Court of Appeals,29
wherein the Court held that -
It is then clear from the allegations in the complaint that private respondents claim ownership of the 2,250 square meter portion for having
possessed it in the concept of an owner, openly, peacefully, publicly, continuously and adversely since 1920. This claim is an assertion that the lot
is private land, or that even assuming it was part of the public domain, private respondents had already acquired imperfect title thereto under
Section 48(b) of C.A. No. 141, otherwise known as the Public Land Act, as amended by R.A. No. 1942'
Under Section 48, a subject lot is, for all legal intents and purposes, segregated from the public domain, because the beneficiary is "conclusively
presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of
this chapter."
Consequently, merely on the basis of the allegations in the complaint, the lot in question is apparently beyond the jurisdiction of the Director of
the Bureau of Lands and could not be the subject of a Free Patent. Hence, dismissal of private respondents' complaint was premature and trial on
the merits should have been conducted to thresh out evidentiary matters.
It would have been entirely different if the action were clearly for reversion, in which case, it would have to be instituted by the Solicitor General
pursuant to Section 101 of C.A. No. 141, which provides:
Sec. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the
Solicitor General or the officer acting in his stead, in the proper courts, in the name of the [Republic] of the Philippines.
In the more recent case of Heirs of Ambrocio Kionisala v. Heirs of Honorio Dacut,30 the difference between an action for declaration of nullity of
land titles from an action for reversion was more thoroughly discussed as follows:
An ordinary civil action for declaration of nullity of free patents and certificates of title is not the same as an action for reversion. The difference
between them lies in the allegations as to the character of ownership of the realty whose title is sought to be nullified. In an action for reversion,
the pertinent allegations in the complaint would admit State ownership of the disputed land. Hence, in Gabila v. Barriga [41 SCRA 131], where
the plaintiff in his complaint admits that he has no right to demand the cancellation or amendment of the defendant's title because even if the title
were canceled or amended the ownership of the land embraced therein or of the portion affected by the amendment would revert to the public
domain, we ruled that the action was for reversion and that the only person or entity entitled to relief would be the Director of Lands.
On the other hand, a cause of action for declaration of nullity of free patent and certificate of title would require allegations of the plaintiff's
ownership of the contested lot prior to the issuance of such free patent and certificate of title as well as the defendant's fraud or mistake, as the
case may be, in successfully obtaining these documents of title over the parcel of land claimed by plaintiff. In such a case, the nullity arises
strictly not from the fraud or deceit but from the fact that the land is beyond the jurisdiction of the Bureau of Lands to bestow and whatever patent
or certificate of title obtained therefore is consequently void ab initio. The real party-in-interest is not the State but the plaintiff who alleges a pre-
existing right of ownership over the parcel of land in question even before the grant of title to the defendant'
In their Complaint, petitioners never alleged that the Subject Property was part of the public domain. On the contrary, petitioners asserted title
over the Subject Property by virtue of their actual, physical, open, continuous and adverse possession thereof, in the concept of owners, by
themselves and through their predecessors-in-interest, since time immemorial. The Deeds of Assignment executed in their favor and attached to
their Complaint referred to a Spanish title granted by the Queen of Spain to their predecessor-in-interest, Don Hermogenes Rodriguez. Clearly,
petitioners are asserting private title over the Subject Property, and consequently, their action could not be one for reversion.
In their instant Petition, petitioners further averred that rather than an action for nullity of respondent's certificates of title, theirs was more
appropriately an action to remove a cloud on or to quiet their title over the Subject Property.
Article 476 of the Civil Code, on removal of a cloud on or quieting of title, provides that:
Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or
proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial
to said title, an action may be brought to remove such cloud or to quiet the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.
Respondent's certificates of title over the Subject Property appeared valid or effective; but according to the petitioners, they were fake, spurious
and/or fraudulent, and a cloud on their title to the same property that needed to be removed. A cloud on title has been defined as follows:
Cloud on Title. 'A cloud on title is an outstanding instrument, record, claim, encumbrance or proceeding which is actually invalid or inoperative,
but which may nevertheless impair or affect injuriously the title to property. The matter complained of must have a prima facie appearance of
validity or legal efficacy. The cloud on title is a semblance of title which appears in some legal form but which is in fact unfounded. The
invalidity or inoperativeness of the instrument is not apparent on the face of such instrument, and it has to be proved by extrinsic evidence' 31
Even as this Court agrees with the petitioners that their action was one for removal of a cloud on or quieting of title, it does arrive at the same
conclusion as the trial court and the Court of Appeals that petitioners had no personality to file the said action, not being the parties-in-interest,
and their Complaint should be dismissed for not stating a cause of action.
According to Article 477 of the Civil Code, the plaintiff, in an action to remove a cloud on or to quiet title, must have legal or equitable title to, or
interest in, the real property which is the subject matter of the action. 32 Petitioners failed to establish in their Complaint that they had any legal or
equitable title to, or legitimate interest in, the Subject Property so as to justify their right to file an action to remove a cloud on or to quiet title.
Title to real property refers to that upon which ownership is based. It is the evidence of the right of the owner or the extent of his interest, by
which means he can maintain control and, as a rule, assert right to exclusive possession and enjoyment of the property.33
In their Complaint, petitioners claimed title to the Subject Property by virtue of their actual and continuous possession of the same since time
immemorial, by themselves and through their predecessors-in-interest. Yet, the Deeds of Assignment executed by Ismael Favila in their favor,
attached to and an integral part of their Complaint, revealed that petitioners' predecessors-in-interest based their right to the Subject Property on
the Spanish title awarded to Don Hermogenes Rodriguez.
There existed a contradiction when petitioners based their claim of title to the Subject Property on their possession thereof since time
immemorial, and at the same time, on the Spanish title granted to Don Hermogenes Rodriguez. Possession since time immemorial carried the
presumption that the land had never been part of the public domain or that it had been private property even before the Spanish conquest. 34 If
the Subject Property was already private property before the Spanish conquest, then it would have been beyond the power of the Queen of Spain
to award or grant to anyone.
The title to and possession of the Subject Property by petitioners' predecessors-in-interest could be traced only as far back as the Spanish title of
Don Hermogenes Rodriguez. Petitioners, having acquired portions of the Subject Property by assignment, could acquire no better title to the said
portions than their predecessors-in-interest, and hence, their title can only be based on the same Spanish title.
Respondent maintained that P.D. No. 892 prevents petitioners from invoking the Spanish title as basis of their ownership of the Subject Property.
P.D. No. 892 strengthens the Torrens system by discontinuing the system of registration under the Spanish Mortgage Law, and by categorically
declaring all lands recorded under the latter system, not yet covered by Torrens title, unregistered lands. It further provides that within six months
from its effectivity, all holders of Spanish titles or grants should apply for registration of their land under what is now P.D. No. 1529, otherwise
known as the Land Registration Decree. Thereafter, Spanish titles can no longer be used as evidence of land ownership in any registration
proceedings under the Torrens system.35 Indubitably, P.D. No. 892 divests the Spanish titles of any legal force and effect in establishing ownership
over real property.
P.D. No. 892 became effective on 16 February 1976. The successors of Don Hermogenes Rodriguez had only until 14 August 1976 to apply for a
Torrens title in their name covering the Subject Property. In the absence of an allegation in petitioners' Complaint that petitioners' predecessors-
in-interest complied with P.D. No. 892, then it could be assumed that they failed to do so. Since they failed to comply with P.D. No. 892, then the
successors of Don Hermogenes Rodriguez were already enjoined from presenting the Spanish title as proof of their ownership of the Subject
Property in registration proceedings.
Registration proceedings under the Torrens system do not create or vest title, but only confirm and record title already created and vested. 36 By
virtue of P.D. No. 892, the courts, in registration proceedings under the Torrens system, are precluded from accepting, confirming and recording a
Spanish title. Reason therefore dictates that courts, likewise, are prevented from accepting and indirectly confirming such Spanish title in some
other form of action brought before them (i.e., removal of cloud on or quieting of title), only short of ordering its recording or registration. To rule
otherwise would open the doors to the circumvention of P.D. No. 892, and give rise to the existence of land titles, recognized and affirmed by the
courts, but would never be recorded under the Torrens system of registration. This would definitely undermine the Torrens system and cause
confusion and instability in property ownership that P.D. No. 892 intended to eliminate.
Petitioners argued that the Spanish title may still be presented as proof of ownership on the basis of the exception provided in the fourth whereas
clause of P.D. No. 892, which reads:
WHEREAS, Spanish titles to lands which have not yet been brought under the operation of the Torrens system, being subject to prescription, are
now ineffective to prove ownership unless accompanied by proof of actual possession; . . .
Since Petitioners alleged that they were in actual possession of the Subject Property, then they could still present the Spanish title as evidence of
their ownership of the Subject Property.37
This Court cannot sustain petitioners' argument. Actual proof of possession only becomes necessary because, as the same whereas clause points
out, Spanish titles are subject to prescription. A holder of a Spanish title may still lose his ownership of the real property to the occupant who
actually possesses the same for the required prescriptive period.38 Because of this inherent weakness of a Spanish title, the applicant for
registration of his Spanish title under the Torrens system must also submit proof that he is in actual possession of the real property, so as to
discount the possibility that someone else has acquired a better title to the same property by virtue of prescription.
Moreover, legislative intent must be ascertained from a consideration of the statute as a whole, and not just a particular provision alone. A word or
phrase taken in the abstract may easily convey a meaning quite different from the one actually intended and evident when the word or phrase is
considered with those with which it is associated. An apparently general provision may have a limited application if read together with other
provisions of the statute.39
The fourth whereas clause of P.D. No. 892 should be interpreted and harmonized with the other provisions of the whole statute. 40 Note that the
tenor of the whole presidential decree is to discontinue the use of Spanish titles and to strip them of any probative value as evidence of ownership.
It had clearly set a deadline for the filing of applications for registration of all Spanish titles under the Torrens system (i.e., six months from its
effectivity or on 14 August 1976), after which, the Spanish titles may no longer be presented to prove ownership.
All holders of Spanish titles should have filed applications for registration of their title on or before 14 August 1976. In a land registration
proceeding, the applicant should present to the court his Spanish title plus proof of actual possession of the real property. However, if such land
registration proceeding was filed and initiated after 14 August 1976, the applicant could no longer present his Spanish title to the court to
evidence his ownership of the real property, regardless of whether the real property was in his actual possession.
Therefore, the fact that petitioners were in actual possession of the Subject Property when they filed the Complaint with the trial court on 29 April
1996 does not exclude them from the application of P.D. No. 892, and their Spanish title remain inadmissible as evidence of their ownership of
the Subject Property, whether in a land registration proceeding or in an action to remove a cloud on or to quiet title.
The preceding discussion does not bar holders of Spanish titles from claiming ownership of the real property on some other basis, such as those
provided in either the Land Registration Decree41 or the Public Land Act.42 Petitioners though failed to allege any other basis for their titles in
their Complaint aside from possession of the Subject Property from time immemorial, which this Court has already controverted; and the Spanish
title, which is already ineffective to prove ownership over the Subject Property.
Therefore, without legal or equitable title to the Subject Property, the petitioners lacked the personality to file an action for removal of a cloud on,
or quieting of, title and their Complaint was properly dismissed for failing to state a cause of action. In view of the dismissal of the case on this
ground, it is already unnecessary for this Court to address the issue of prescription of the action.
Wherefore, this Court DENIES the instant petition and AFFIRMS the Decision of the Court of Appeals, dated 29 July 2002, and the Order of the
Regional Trial Court of San Mateo, Rizal, Branch 77, dated 05 February 1999, dismissing petitioners' Complaint for failure to state a cause of
action.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

FIRST DIVISION
[G.R. No. 49470. April 8, 1991.]
DARIO N. LOZANO, in his capacity as administrator of the estate of the deceased AGUSTO N. LOZANO, PATROCINIO DEL PRADO
and ANTONIO LOZANO, Plaintiffs-Appellants, v. IGNACIO BALLESTEROS, Defendant-Appellee.
Tomas V . Tadeo, Jr., for Plaintiffs-Appellants.
Generoso T . Tarlit, for Defendant-Appellee.
SYLLABUS
1. CIVIL LAW; LAND REGISTRATION ACT; FORMAL REQUISITES OF AN ADVERSE CLAIM. 1. the adverse claimant must state the
following in writing: a. his alleged right or interest; b. how and under whom such alleged right or interest is acquired; c. the description of the
land in which the right or interest is claimed, and d. the certificate of title number 2. the statement must be signed and sworn to before a notary
public or other officer authorized to administer oath; and 3. the claimant should state his residence or the place to which all notices may be served
upon him.
2. ID.; ID.; ID.; NOT COMPLIED WITH IN CASE AT BAR. The lower court quoted in part the adverse claim filed by the plaintiffs, to wit:
"That this adverse claim is being filed prior to the filing of a court action because all the properties above-described formerly belong to my
husband, the late Augusto Lozano." (Record on Appeal, p. 32) However, the lower court noted that "the adverse claim filed and annotated on the
back of the title of Marciana de Dios and later to the title of the herein defendant, did not meet the requirements provided for in Section 110 of
Act 496, that is setting forth fully how or under whom the heirs of Lozano acquired the property." We adhere to the lower courts findings and
find appellees position meritorious. A cursory reading of the aforequoted adverse claim filed by the plaintiffs shows that the same has failed to
comply with the formal requisites of Section 110 of Act 496, more specifically the appellants failure to state how and under whom their alleged
right or interest is acquired. Thus, the effect of such non-compliance renders the adverse claim non-registrable and ineffective.
3. ID.; ID.; PURCHASER IN BAD FAITH INCONSEQUENTIAL WHERE ADVERSE CLAIM IS A NULLITY. Despite the appellees
alleged knowledge of the appellants claims against De Dios, We still find the allegation of bad faith on the part of the appellee devoid of merit. It
should be stressed that bad faith is inconsequential because of the ineffectiveness of the adverse claim.
4. ID.; DAMAGES; AWARD OF MORAL DAMAGES; NOT WARRANTED. We already emphasized that most of the items for which moral
damages can be awarded under Article 2219 of the new Civil Code are such as affect the moral feelings and personal pride of the person seeking
recovery, and they should be weighed in determining the indemnity to be awarded. (Layda v. Court of Appeals, Et Al., 90 Phil 724) Thus, if the
court has no proof or evidence upon which the claim for moral damages could be based, such indemnity could not be outrightly awarded.
5. ID.; ID.; AWARD OF EXEMPLARY DAMAGES DEPENDENT ON COMPENSATORY DAMAGES. It has been held that under Articles
2229, 2233 and 2234 of the New Civil Code, "exemplary damages may be imposed by way of example or correction only in addition, among
others, to compensatory damages, but they cannot be recovered as a matter of right, their determination depending upon the discretion of the
court. It further appears that the amount of exemplary damages need not be proved, because its determination depends upon the amount of
compensatory damages that may be awarded to the claimant. If the amount of exemplary damages need not be proved, it need not also be alleged
and the reason is obvious because it is merely incidental or dependent upon what the court may award as compensatory damages. Unless and until
this premise is determined and established, what may be claimed as exemplary damages would amount to a mere surmise or speculation."
(Singson, Et. Al. v. Aragon and Lorza, 92 Phil 515, 518.) Hence, in the absence of any claim and proof of compensatory damages, the award of
exemplary damages has no leg to stand on.
6. REMEDIAL; LAW; CIVIL PROCEDURE; INDISPENSABLE PARTY; NOT INCLUDED AS PARTY LITIGANT DECISION HAD NULL
AND VOID. Anent the appellants contention that appellee is bound by the decision in the former reconveyance case against De Dios, the
lower court stressed that it is convinced that the decision rendered in Civil Case No. D-1953 is a nullity, because an indispensable party like the
defendant herein was not brought as party therein. The failure of the plaintiffs to implead the present defendant in that case, constituted a legal
obstacle to the exercise of judicial power in said case, and rendered any judgment therein an absolute nullity.
7. ID.; ID.; ID.; DEFINED. "An indispensable party is one without whom the action cannot be finally determined, whose interests in the
subject matter of the suit and in the relief sought are so bound up with that of the other parties that his legal presence as a party to the proceeding
is an absolute necessity. (Co v. Intermediate Appellate Court, G.R. No. 65928, 21 June 1988,162 SCRA 390, 399)
8. ID.; ACTION FOR RECONVEYANCE; OWNERS OF PROPERTY CONSIDERED INDISPENSABLE PARTY. We rule that "owners of
property over which reconveyance is asserted are indispensable parties, without whom no relief is available and without whom the court can
render no valid judgment." (see Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati v. Regional Trial Court of Makati,
Branch 57, G.R. No. 81564, 24 April 1990,184 SCRA 622, 633)
9. ID.; AWARD OF ATTORNEYS FEES; JUSTIFICATION NECESSARY. The rule on the award of attorneys fees is that there must be a
justification for the same. In the absence of a statement why attorneys fees were awarded, the same should be disallowed.
DECISION
MEDIALDEA, J.:
This is an appeal elevated to Us by the Court of Appeals on pure questions of law seeking the reversal of the decision of the respondent Court of
First Instance of Pangasinan, Third Judicial District, Dagupan City in Civil Case No. D-2107 dismissing the complaint for lack of merit, declaring
defendant Ignacio Ballesteros the absolute owner of the land in question, ordering the cancellation of the plaintiffs adverse claim and the
payment to defendant of damages, attorneys fees and cost of suit.
The antecedent facts of this case as recounted by the trial court and adopted partially from the parties stipulation of facts are as
follows:chanrob1es virtual 1aw library
Maria Nieves Nuez Tuazon, deceased mother of the plaintiffs, was the original registered exclusive owner of the land in question comprising
Lots Q, B and O as evidenced by Original Certificate of Title No. 46076. However only Lot Q is the subject of this present action. On March 6,
1958, by virtue of a deed of absolute sale, Tuazon sold the land in question to Marciana de Dios.
On June 2, 1958, Augusto, Dario, Jaime, Cresencia, Lourdes and Alicia, all surnamed Lozano, together with Marciana de Dios filed a verified
petition before the Court of First Instance of Pangasinan seeking the approval of the consolidation-subdivision plan and for the annotation of
several documents at the back of the Original Certificate of Title No. 46076. Acting on the verified petition, the court approved the consolidation-
subdivision plan and directed the inscription, among others, of said deed of sale at the back of the title.
Transfer Certificate of Title No. 26537 was issued in the name of Marciana de Dios who later mortgaged the land to Kaluyagan Rural Bank in
San Carlos City, Pangasinan.
On January 22, 1963, plaintiffs caused the annotation of their adverse claim at the back of the title of the said lot.
Thereafter, a petition for the settlement of the estate of Augusto Lozano was filed by the plaintiffs in the Court of First Instance of Pangasinan. On
November 18, 1965, plaintiffs through the administrator filed an inventory which included said lot Q.
On August 25, 1966, De Dios sold lot Q to defendant Ignacio Ballesteros and Transfer Certificate of Title No. 63171 was later transferred in his
name.
On September 21, 1966, plaintiffs filed an action for reconveyance against De Dios in Civil Case No. D-1953, alleging that the estate of Augusto
Lozano is the absolute owner of Lots Q, O and B. On June 8, 1967, the court rendered a default decision in favor of the plaintiffs. However, the
judgment was not satisfied on the ground that De Dios was insolvent and did not have any registered property.
Having failed to effect the recovery and/or reconveyance of the lots, plaintiffs filed several complaints in Civil Cases Nos. D-2107, D-2109 and
D-2115 before the Court of First Instance of Pangasinan for reconveyance and recovery of possession. The trial court in Civil Case No. D-2107
rendered a decision on October 21, 1969, the dispositive portion is hereunder quoted as follows:cralawnad
"IN VIEW OF THE FOREGOING CONSIDERATIONS, the court hereby renders judgment (1) dismissing the complaint for lack of merit; (2)
declaring defendant Ignacio Ballesteros the absolute owner of the land in question; (3) ordering the cancellation of plaintiffs adverse claim at the
back of Transfer Certificate of Title No. 63171 at the expense of the plaintiffs; and (4) ordering plaintiffs to pay, jointly and severally, the herein
defendant in the amount of P1,000.00 damages, and P500.00 for attorneys fees and the cost of suit.
SO ORDERED." (Record on Appeal, p. 35).
Hence, plaintiffs interposed an appeal to the Court of Appeals docketed as CA-G.R. No. 46169-R. However, the Court of Appeals in its resolution
dated November 16, 1978 ruled that "the matter submitted for determination is purely a question of law that is beyond the jurisdiction of this
court." (Rollo, p. 50). Thus, the records of the case were elevated to this Court, to wit:jgc:chanrobles.com.ph
"WHEREFORE, let the records of this case be elevated to the Honorable Supreme Court as a matter pertaining to its exclusive appellate
jurisdiction.
"SO ORDERED." (Rollo, p. 50).
It should be noted that during the pendency of the appeal before the Court of Appeals, the appellants manifested in the motion for extension to file
brief their intention of filing a joint brief for all cases pending before the same court because of the relationship and similarity of issues of the
afore-mentioned cases.
Thereupon, said appellants as well as appellees filed their respective joint briefs.
The appellants raised the following seven (7) assignments of errors:chanrob1es virtual 1aw library
"I
"THE LOWER COURT ERRED IN NOT FINDING THAT THE ADVERSE CLAIM OF HEREIN PLAINTIFFS-APPELLANTS FILED AND
ANNOTATED AT THE BACK OF THE PRIOR TITLES OF MARCIANA DE DIOS AS ENTRY NO. 194992 AND ENTRY NO. 197335 ARE
BINDING AND VALID AS AGAINST DEFENDANTS-APPELLEES WHO ARE SUBSEQUENT PURCHASERS FROM MARCIANA DE
DIOS.
"II
"THE LOWER COURT ERRED IN NOT FINDING THAT BY VIRTUE OF SAID ADVERSE CLAIM THE DEFENDANTS-APPELLEES
PURCHASERS ARE BOUND BY THE DECISION AGAINST MARCIANA DE DIOS IN CIVIL CASE NO. D-1953 (EXHIBIT "I").
"III
"THE LOWER COURT ERRED IN DECLARING NULL AND VOID AS AGAINST THE DEFENDANTS-APPELLEES THE DECISION IN
CIVIL CASE NO. D-1953.
"IV
"THE LOWER COURT ERRED IN NOT FINDING THAT AS LONG AS THE ADVERSE CLAIM REMAINS AS AN ENCUMBRANCE ON
THE TITLES THE SAME IS DESIGNED TO PROTECT THE INTEREST OF THE ADVERSE CLAIMANTS AGAINST CLAIMS OF
SUBSEQUENT PURCHASERS.
"V
"THE LOWER COURT ERRED IN NOT DECLARING THE DEFENDANTS-APPELLEES AS PURCHASERS IN BAD FAITH AS THEY
HAVE KNOWLEDGE OF HEREIN PLAINTIFFS-APPELLANTS CLAIMS AGAINST MARCIANA DE DIOS.
"VI
"THE LOWER COURT ERRED IN AWARDING DAMAGES AND ATTORNEYS FEES TO THE DEFENDANTS-APPELLEES DESPITE
THE LACK OF EVIDENCE OF DAMAGES AND DESPITE THE FACT THAT THERE IS NO EVIDENCE THAT HEREIN PLAINTIFFS
COMPLAINT WERE FILED IN GROSS BAD FAITH OR WITH MALICE.
"VII
"THE LOWER COURT ERRED IN DECIDING THE CASES IN FAVOR OF APPELLEES. (Rollo, pp. 49-50).
Appellants maintain that the first five assignments of errors should be discussed jointly because these errors boil down to the issue of the validity
and effectivity of the adverse claim. The appellants insist that "the said adverse claim has been carried along in the subsequent titles of the
defendants." (Joint Brief for Plaintiffs-Appellants, p. 7) Thus, they conclude that the consequence of this cautionary notice is that whatever would
be the result of their claim against Marciana de Dios is binding on subsequent purchasers or successors-in-interest. They contend that the
"defendants-appellees should have waited for the decision of the court on the question of the validity of the adverse claim or should have first
moved for the removal or cancellation of the adverse claim." (Ibid, p. 8) Hence, appellants conclude that defendants-appellees are purchasers in
bad faith as they have knowledge of the claims against De Dios.chanrobles virtual lawlibrary
However, the appellee stresses that "a cursory examination of the adverse claim filed by the plaintiffs-appellants . . . readily reveals that the same
has failed to comply with the formal requirements of Section 110 of Act 496 with respect to adverse claims. And for which, and for all legal
purposes, the adverse claim under comment is not valid and effective." (Joint Brief for Defendants-Appellees, pp. 15-16) Appellee argues that
"there was a fatal non-joinder of necessary or indispensable parties." (Ibid, p. 21) Thus, the position of the appellants is untenable because "the
non-joinder of necessary and indispensable parties renders null and void as against them any decision in a case in which they were not made
parties-litigants." (Ibid, p. 23) Furthermore, appellee "submits that the protection given by the law to adverse claimants in regard to the property
subject to an adverse claim is available only to the party whose registered adverse claim meets all the formal requisites of law, and not when the
same is a nullity." (Ibid, p. 26) Hence, appellee concludes that "an invalid and ineffective adverse claim cannot validly serve as a notice or
warning to third parties who may deal with the properties subject thereto because such adverse claim by reason of its nullity is deemed not
existent and unregistered." (Ibid, p. 27)
The appellants claim that "there are several reasons why the decision of the lower court in the matter of damages and attorneys fees should be
reversed, to wit:jgc:chanrobles.com.ph
"First, defendants did not present evidence on damages and attorneys fees.
"Second, there is no proof of mental suffering, mental anguish, fright, and the like to entitle defendants to moral damages.
"Third, there is no showing by the defendants that herein plaintiffs complaints were filed in gross bad faith or malice.
"Fourth, the decision itself did not make finding of facts which would show that defendants are entitled to damages and attorneys fees. The
reason for this is that these cases were submitted mainly on stipulation of facts and exhibits. In the stipulation of facts, there is no stipulation as to
damages and attorneys fees.
"Fifth, the herein plaintiffs-appellants in coming to court are just pursuing a proprietary claim which has legal and factual basis." (Joint Brief for
Plaintiffs-Appellants, p. 11)
However, the appellee argues that when he was unfoundedly sued by the appellants, the former was under pain of default. Whether he liked it or
not, he had to come to court and defend himself. Thus, he was compelled to unnecessarily incur expenses for the services of their counsel. (Joint
Brief for Defendants-Appellees, p. 33)
In sum, the appellants insist that "the lower court erred in deciding the cases in favor of appellees." (Joint Brief for Plaintiffs-Appellants, p. 1)
We find appellants contentions devoid of merit except that pertaining to the award of damages and attorneys fees and therefore uphold the ruling
of the lower court with modification.
The applicable law in the case at bar is still Section 110 of Act No. 496, otherwise known as the Land Registration Act despite the modification
introduced by Section 70 of Presidential Decree No. 1529. The said section particularly deals with adverse claim, to wit:jgc:chanrobles.com.ph
"Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to date of the original registration,
may, if no other provision is made in this Act for registering the same, make a statement in writing setting forth fully his alleged right or interest,
and how or under whom acquired, and a reference to the volume and page of the certificate of title of the registered owner, and a description of
the land in which the right or interest is claimed.
"The statement shall be signed and sworn to, and shall state the adverse claimants residence, and designate a place at which all notices may be
served upon him. This statement shall be entitled to registration as an adverse claim, and the court, upon a petition of any party in interest, shall
grant a speedy hearing upon the question of the validity of such adverse claim and shall enter such decree therein as justice and equity may
require. If the claim is adjudged to be invalid, the registration shall be cancelled. If in any case the court after notice and hearing shall find that a
claim thus registered was frivolous or vexatious, it may tax the adverse claimant double or treble costs in its discretion."cralaw virtua1aw library
Hence, for the purpose of registration and as required by the abovequoted provision, as amended, the following are the formal requisites of an
adverse claim:.
1. the adverse claimant must state the following in writing:chanrob1es virtual 1aw library
a. his alleged right or interest;
b. how and under whom such alleged right or interest is acquired;

c. the description of the land in which the right or interest is claimed, and
d. the certificate of title number
2. the statement must be signed and sworn to before a notary public or other officer authorized to administer oath; and
3. the claimant should state his residence or the place to which all notices may be served upon him.
The lower court quoted in part the adverse claim filed by the plaintiffs, to wit:jgc:chanrobles.com.ph
"That this adverse claim is being filed prior to the filing of a court action because all the properties above-described formerly belong to my
husband, the late Augusto Lozano." (Record on Appeal, p. 32)
However, the lower court noted that "the adverse claim filed and annotated on the back of the title of Marciana de Dios and later to the title of the
herein defendant, did not meet the requirements provided for in Section 110 of Act 496, that is setting forth fully how or under whom the heirs of
Lozano acquired the property." (Record on Appeal, p. 33)
We adhere to the lower courts findings and find appellees position meritorious. A cursory reading of the aforequoted adverse claim filed by the
plaintiffs shows that the same has failed to comply with the formal requisites of Section 110 of Act 496, more specifically the appellants failure
to state how and under whom their alleged right or interest is acquired. Thus, the effect of such non-compliance renders the adverse claim non-
registrable and ineffective.
In a case where the adverse claim filed for registration did not fully comply with the formal requisites of Section 110 of Act No. 496, or more
specifically, there being no description of the land in which right or interest is claimed nor the place to which all notices may be served upon the
adverse claimant given, such adverse claim could not be registered. (LRC Consulta No. 144, Register of Deeds of Quezon City, pet., February 18,
1957)
Despite the appellees alleged knowledge of the appellants claims against De Dios, We still find the allegation of bad faith on the part of the
appellee devoid of merit. It should be stressed that bad faith is inconsequential because of the ineffectiveness of the adverse claim.
Anent the appellants contention that appellee is bound by the decision in the former reconveyance case against De Dios, the lower court stressed
that it is convinced that the decision rendered in Civil Case No. D-1953 is a nullity, because an indispensable party like the defendant herein was
not brought as party therein. The failure of the plaintiffs to implead the present defendant in that case, constituted a legal obstacle to the exercise
of judicial power in said case, and rendered any judgment therein an absolute nullity. (Record on Appeal, p. 30)chanrobles virtual lawlibrary
Rule 3, Section 7 of the Revised Rules of Court provides that:jgc:chanrobles.com.ph
"Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs or defendants."cralaw
virtua1aw library
We rule that "owners of property over which reconveyance is asserted are indispensable parties, without whom no relief is available and without
whom the court can render no valid judgment." (see Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati v. Regional Trial
Court of Makati, Branch 57, G.R. No. 81564, 24 April 1990,184 SCRA 622, 633.)
As defined, "an indispensable party is one without whom the action cannot be finally determined, whose interests in the subject matter of the suit
and in the relief sought are so bound up with that of the other parties that his legal presence as a party to the proceeding is an absolute necessity.
(Co v. Intermediate Appellate Court, G.R. No. 65928, 21 June 1988,162 SCRA 390, 399)
On the basis of the above-mentioned definition, We believe that the point of the appellee was well taken by the court and We therefore conclude
that the defendant-appellee was correctly considered as an indispensable party, ergo, the court cannot rule that said party is bound by the previous
decision in favor of the appellants.
Finally, the appellants claim against the lower courts award of damages and attorneys fees is meritorious.
The lower court is admonished in ordering the payment of damages without mentioning the specific type of damages being awarded. In view of
the lower courts inaccuracy as well as its failure to state any basis for the award of the indemnity, the same must be deleted.
More specifically, We already emphasized that most of the items for which moral damages can be awarded under Article 2219 of the new Civil
Code are such as affect the moral feelings and personal pride of the person seeking recovery, and they should be weighed in determining the
indemnity to be awarded. (Layda v. Court of Appeals, Et Al., 90 Phil 724) Thus, if the court has no proof or evidence upon which the claim for
moral damages could be based, such indemnity could not be outrightly awarded.
In relation to appellees prayer for exemplary damages, it has been held that under Articles 2229, 2233 and 2234 of the New Civil Code,
"exemplary damages may be imposed by way of example or correction only in addition, among others, to compensatory damages, but they
cannot be recovered as a matter of right, their determination depending upon the discretion of the court. It further appears that the amount of
exemplary damages need not be proved, because its determination depends upon the amount of compensatory damages that may be awarded to
the claimant. If the amount of exemplary damages need not be proved, it need not also be alleged and the reason is obvious because it is merely
incidental or dependent upon what the court may award as compensatory damages. Unless and until this premise is determined and established,
what may be claimed as exemplary damages would amount to a mere surmise or speculation." (Singson, Et. Al. v. Aragon and Lorza, 92 Phil 515,
518.)
Hence, in the absence of any claim and proof of compensatory damages, the award of exemplary damages has no leg to stand on.
Finally, the rule on the award of attorneys fees is that there must be a justification for the same. In the absence of a statement why attorneys fees
were awarded, the same should be disallowed.
All premises considered, the Court is convinced that the lower court committed no error in adjudicating in favor of the defendant-appellee except
as to the award of damages and attorneys fees which We find erroneous.
ACCORDINGLY, the appealed judgment of the lower court is hereby AFFIRMED with modification insofar as it awarded damages amounting to
P1,000.00, and attorneys fees amounting to P500.00 which are hereby deleted.
SO ORDERED.
Narvasa, Cruz and Grino-Aquino, JJ., concur.

Gancayco, J., took no part.
SECOND DIVISION
[G.R. No. L-68111. December 20, 1988.]
BERNOLI P. ARQUERO, Petitioner, v. HONORABLE NAPOLEON J. FLOJO, Presiding Judge, Branch VI, Regional
Trial Court, Second Judicial Region, Aparri, Cagayan and RADIO COMMUNICATION OF THE PHILIPPINES
(RCPI), Respondents.
Hermenegildo G. Rapanan for Petitioner.
Treas, Pagada & Associates for Respondents.
SYLLABUS
REMEDIAL LAW; AGREEMENT OF PARTIES AS TO THE VENUE OF ACTIONS; VALID AND LEGALLY EFFECTIVE;
CASE OF CENTRAL AZUCARERA DE TARLAC VS. DE LEON, 56 PHIL. 169, CITED. The agreement of the parties in
the case at bar as to venue is not contrary to law, public order, public policy, morals or good customs. Section 3, Rule 4,
Revised Rules of Court sanctions such stipulation by providing that "by written agreement of the parties the venue of action
may be changed or transferred from one province to another." (Bautista v. de Borja, 18 SCRA 474). As aptly held in the case of
Central Azucarera de Tarlac v. De Leon, 56 Phil. 169, "By said agreement the parties waived the legal venue, and such
waiver is valid and legally effective, because it was merely a personal privilege they waived, which is not contrary to public
policy or to the prejudice of third persons. It is a general principle that a person may renounce any right which the law give
unless such renunciation is expressly prohibited or the right conferred is of such nature that its renunciation would be against
public policy."
DECISION
PARAS, J.:
On November 27, 1983, the petitioner and private respondent Radio Communications of the Philippines, Inc. (RCPI), entered
into a contract for services for the transmission of a telegraphic message thru RCPIs branch office in Aparri, Cagayan to Atty.
Eleazar S. Calasan at his office address in Quiapo, Manila. The text of the telegram contract form for transmission (as well as
the telegram itself) reads:jgc:chanrobles.com.ph
"Send the following message subject to the condition that the RCPI shall not be liable for any damage howsoever same may
arise except for the refund of telegraphic tolls. The sender agrees that as a condition precedent for a cause of action against the
RCPI any complaint relative to the transmittal of this telegram must be brought to the attention of the company within three
months from date, and that venue thereof shall be in the courts of Quezon City alone and in no other courts.
ATTY. CALASAN
ROOM 401 PAYAWAL BLDG.
709 PATERNO, QUIAPO, MANILA.
CONGRATULATIONS PREPARE ONE XEROX COPY DECISION SEE YOU BONIS BIRTHDAY.
BERNOLI"
(Annex "D", p. 16, Rollo).
Atty. Eleazar S. Calasan received a copy of the telegram the next day but he was made to pay the sum of P7.30 for delivery
charges. Thereafter, on November 30, 1983, at the birthday party of Asst. Fiscal Bonifacio Sison in Quezon City, Atty. Calasan
confronted and censured the petitioner anent the said telegram. Despite the petitioners explanation that the telegram had been
duly paid for he was branded as a "stingy mayor who cannot even afford to pay the measely sum of P7.30 for the telegram," (p.
2 Memorandum; p. 55, Rollo) in the presence of many persons.
Thus, the petitioner filed an action for damages against RCPI before the Regional Trial Court of Aparri, Cagayan. RCPI filed a
motion to dismiss on the ground of improper venue, contending that pursuant to the service contract, the parties had agreed that
the venue of any action which may arise out of the transmittal of the telegram shall be in the courts of Quezon City alone.
On February 13, 1984, the trial court dismissed the case and denied the motion for reconsideration re said dismissal.
Hence, the instant petition. Citing the case of Sweet Lines, Inc. v. Bernardo Teves, Et Al., 83 SCRA 361, the petitioner claims
that the condition with respect to venue appearing on the ready printed form of RCPIs telegram for transmission is void and
unenforceable because the petitioner had no hand in its preparation. The Court there held that contracts of adhesion, where the
provisions have been drafted only by one party and the only participation of the other party is the signing of his signature or his
adhesion thereto, are contrary to public policy as they are injurious to the public or public good.
WE DISAGREE.chanrobles law library
The agreement of the parties in the case at bar as to venue is not contrary to law, public order, public policy, morals or good
customs.
The parties do not dispute that in the written contract sued upon, it was expressly stipulated that any action relative to the
transmittal of the telegram against the RCPI must be brought in the Courts of Quezon City alone. We note that neither party to
the contract reserved the right to choose the venue of action as fixed by law (i.e., where the plaintiff or defendant resides, at the
election of the plaintiff [par.b], Section 2, Rule 4, Revised Rules of Court), as is usually done if the parties purported to retain
that right of election granted by the Rules. Such being the case, it can reasonably be inferred that the parties intended to
definitely fix the venue of action, in connection with the written contract sued upon, in the courts of Quezon City only Section
3, Rule 4, Revised Rules of Court sanctions such stipulation by providing that "by written agreement of the parties the venue of
action may be changed or transferred from one province to another." (Bautista v. de Borja, 18 SCRA 474). As aptly held in the
case of Central Azucarera de Tarlac v. De Leon, 56 Phil. 169,
"By said agreement the parties waived the legal venue, and such waiver is valid and legally effective, because it was merely a
personal privilege they waived, which is not contrary to public policy or to the prejudice of third persons. It is a general
principle that a person may renounce any right which the law give unless such renunciation is expressly prohibited or the right
conferred is of such nature that its renunciation would be against public policy."cralaw virtua1aw library
In Sweet Lines, Inc. v. Teves, Et. Al. supra, the Supreme Court, in declaring the stipulation which limited the venue of actions
as void and unenforceable held:jgc:chanrobles.com.ph
"By the peculiar circumstances under which contracts of adhesion are entered into namely, that it is drafted only by one
party, usually the corporation, and is sought to be accepted or adhered to by the other party, in this instance the passengers,
private respondents, who cannot change the same and who are thus made to adhere hereto on the take it or leave it basis
certain guidelines in the determination of their validity and/or enforceability have been formulated in order to insure that justice
and fair play characterize the relationship of the contracting parties.
"It is a matter of public knowledge, of which we can take judicial notice, that there is a dearth of and acute shortage in inter-
island vessels plying between the countrys several islands, and the facilities they offer leave much to be desired. Thus, even
under ordinary circumstances, the piers are congested with passengers and their cargo waiting to be transported. The conditions
are even worse at peak and/or the rainy seasons, when passengers literally scramble to secure whatever accommodations may
be availed of, even through circuitous routes, and/or at the risk of their safety . . . Under these circumstances, it is hardly just
and proper to expect the passengers to examine their tickets received from crowded/congested counters, more often than not
during rush hours, for conditions that may be printed thereon, much less charge them with having consented to the conditions,
so printed, especially if there are a number of such conditions in fine print, as in this case.
"It should also be stressed that shipping companies are franchise holders of certificates of public convenience and, therefore,
possess a virtual monopoly over the business of transporting passengers between the ports covered by their franchise. This
being so, shipping companies, like petitioner, engaged in inter-island shipping, have a virtual monopoly of the business of
transporting passengers and may thus dictate their terms of passage, leaving passengers with no choice but to buy their tickets
and avail of their vessels and facilities. Finally, judicial notice may be taken of the fact that the bulk of those who board these
inter-island vessels come from the low-income groups and are less literate, and who have little or no choice but to avail of
petitioners vessels."cralaw virtua1aw library
In the instant case, the condition with respect to venue in the telegram form for transmission was printed clearly in the upper
front portion of the form. Considering the petitioners educational attainment (being a lawyer by profession and the Municipal
Mayor of Sta. Teresita, Cagayan), he must be charged with notice of the condition limiting the venue to Quezon City, and by
affixing his signature thereon, he signified his assent thereto. Thus, the ruling in Sweet Lines, Inc. v. Teves, Et Al., is not
applicable in this case.cralawnad
WHEREFORE, the petition is hereby DISMISSED for lack of merit.
SO ORDERED.
Melencio-Herrera (Chairman), Padilla and Regalado, JJ., concur.
Sarmiento J., on leave.

THIRD DIVISION
[G.R. No. 138822. January 23, 2001.]
EVANGELINE ALDAY, Petitioner, v. FGU INSURANCE CORPORATION, Respondent.
DECISION
GONZAGA-REYES, J.:
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional Trial Court of Makati, 1 alleging that petitioner
Evangeline K. Alday owed it P114,650.76, representing unliquidated cash advances, unremitted costs of premiums and other charges incurred by
petitioner in the course of her work as an insurance agent for Respondent. 2 Respondent also prayed for exemplary damages, attorneys fees, and
costs of suit. 3 Petitioner filed her answer and by way of counterclaim, asserted her right for the payment of P104,893.45, representing direct
commissions, profit commissions and contingent bonuses earned from 1 July 1986 to 7 December 1986, and for accumulated premium reserves
amounting to P500,000.00. In addition, petitioner prayed for attorneys fees, litigation expenses, moral damages and exemplary damages for the
allegedly unfounded action filed by Respondent. 4 On 23 August 1989, respondent filed a "Motion to Strike Out Answer With Compulsory
Counterclaim And To Declare Defendant In Default" because petitioners answer was allegedly filed out of time. 5 However, the trial court
denied the motion on 25 August 1989 and similarly rejected respondents motion for reconsideration on 12 March 1990. 6 A few weeks later, on
11 April 1990, respondent filed a motion to dismiss petitioners counterclaim, contending that the trial court never acquired jurisdiction over the
same because of the non-payment of docket fees by petitioner. 7 In response, petitioner asked the trial court to declare her counterclaim as exempt
from payment of docket fees since it is compulsory and that respondent be declared in default for having failed to answer such counterclaim. 8
In its 18 September 1990 Order, the trial court 9 granted respondents motion to dismiss petitioners counterclaim and consequently, denied
petitioners motion. The court found petitioners counterclaim to be merely permissive in nature and held that petitioners failure to pay docket
fees prevented the court from acquiring jurisdiction over the same. 10 The trial court similarly denied petitioners motion for reconsideration on
28 February 1991.chanrob1es virtua1 1aw 1ibrary
On 23 December 1998, the Court of Appeals 11 sustained the trial court, finding that petitioners own admissions, as contained in her answer,
show that her counterclaim is merely permissive. The relevant portion of the appellate courts decision 12 is quoted herewith
Contrary to the protestations of appellant, mere reading of the allegations in the answer a quo will readily show that her counterclaim can in no
way be compulsory. Take note of the following numbered paragraphs in her answer:jgc:chanrobles.com.ph
"(14) That, indeed, FGUs cause of action which is not supported by any document other than the self-serving Statement of Account dated
March 28,1988 . . .
(15) That it should be noted that the cause of action of FGU is not the enforcement of the Special Agents Contract but the alleged cash
accountabilities which are not based on written agreement . . . .
x x x
(19) . . . A careful analysis of FGUs three-page complaint will show that its cause of action is not for specific performance or enforcement of the
Special Agents Contract rather, it is for the payment of the alleged cash accountabilities incurred by defendant during the period form [sic] 1975
to 1986 which claim is executory and has not been ratified. It is the established rule that unenforceable contracts, like this purported money claim
of FGU, cannot be sued upon or enforced unless ratified, thus it is as if they have no effect. . . . ." cralawlibrary : red
To support the heading "Compulsory Counterclaim" in her answer and give the impression that the counterclaim is compulsory appellant alleged
that "FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special Agents Contract . . . ." The
reference to said contract was included purposely to mislead. While on one hand appellant alleged that appellees cause of action had nothing to
do with the Special Agents Contract, on the other hand, she claim that FGU violated said contract which gives rise of [sic] her cause of action.
Clearly, appellants cash accountabilities cannot be the offshoot of appellees alleged violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioners motion for reconsideration, 13 giving rise to the present petition.
Before going into the substantive issues, the Court shall first dispose of some procedural matters raised by the parties. Petitioner claims that
respondent is estopped from questioning her non-payment of docket fees because it did not raise this particular issue when it filed its first motion
the "Motion to Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default" with the trial court; rather, it was
only nine months after receiving petitioners answer that respondent assailed the trial courts lack of jurisdiction over petitioners counterclaims
based on the latters failure to pay docket fees. 14 Petitioners position is unmeritorious. Estoppel by laches arises from the negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to
assert it. 15 In the case at bar, respondent cannot be considered as estopped from assailing the trial courts jurisdiction over petitioners
counterclaim since this issue was raised by respondent with the trial court itself the body where the action is pending even before the
presentation of any evidence by the parties and definitely, way before any judgment could be rendered by the trial court.chanrob1es virtua1 1aw
1ibrary
Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal filed by petitioner from the 18 September 1990 and 28
February 1991 orders of the trial court. It is significant to note that this objection to the appellate courts jurisdiction is raised for the first time
before this Court; respondent never having raised this issue before the appellate court. Although the lack of jurisdiction of a court may be raised
at any stage of the action, a party may be estopped from raising such questions if he has actively taken part in the very proceedings which he
questions, belatedly objecting to the courts jurisdiction in the event that the judgment or order subsequently rendered is adverse to him. 16 In this
case, respondent actively took part in the proceedings before the Court of Appeals by filing its appellees brief with the same. 17 Its participation,
when taken together with its failure to object to the appellate courts jurisdiction during the entire duration of the proceedings before such court,
demonstrates a willingness to abide by the resolution of the case by such tribunal and accordingly, respondent is now most decidedly estopped
from objecting to the Court of Appeals assumption of jurisdiction over petitioners appeal. 18
The basic issue for resolution in this case is whether or not the counterclaim of petitioner is compulsory or permissive in nature. A compulsory
counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence
constituting the subject matter of the opposing partys claim and does not require for its adjudication the presence of third parties of whom the
court cannot acquire jurisdiction. 19
In Valencia v. Court of Appeals, 20 this Court capsulized the criteria or tests that may be used in determining whether a counterclaim is
compulsory or permissive, summarized as follows:chanrob1es virtual 1aw library
1. Are the issues of fact and law raised by the claim and counterclaim largely the same?
2. Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiffs claim as well as defendants counterclaim?
4. Is there any logical relation between the claim and the counterclaim?chanrob1es virtua1 1aw 1ibrary
Another test, applied in the more recent case of Quintanilla v. Court of Appeals, 21 is the "compelling test of compulsoriness" which requires "a
logical relationship between the claim and counterclaim, that is, where conducting separate trials of the respective claims of the parties would
entail a substantial duplication of effort and time by the parties and the court."cralaw virtua1aw library
As contained in her answer, petitioners counterclaims are as follows:chanrob1es virtual 1aw library
(20) That defendant incorporates and repleads by reference all the foregoing allegations as may be material to her Counterclaim against FGU.
(21) That FGU is liable to pay the following just, valid and legitimate claims of defendant:chanrob1es virtual 1aw library
(a) the sum of at least P104,893.45 plus maximum interest thereon representing, among others, direct commissions, profit commissions and
contingent bonuses legally due to defendant; and
(b) the minimum amount of P500,000.00 plus the maximum allowable interest representing defendants accumulated premium reserve for 1985
and previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special Agents Contract and in
contravention of the principle of law that "every person must, in the exercise of his rights and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good faith."cralaw virtua1aw library
(22) That as a result of the filing of this patently baseless, malicious and unjustified Complaint, and FGUs unlawful, illegal and vindictive
termination of their Special Agents Contract, defendant was unnecessarily dragged into this litigation and to defense [sic] her side and assert her
rights and claims against FGU, she was compelled to hire the services of counsel with whom she agreed to pay the amount of P30,000.00 as and
for attorneys fees and stands to incur litigation expenses in the amount estimated to at least P20,000.00 and for which FGU should be assessed
and made liable to pay defendant.chanrob1es virtua1 1aw 1ibrary
(23) That considering further the malicious and unwarranted action of defendant in filing this grossly unfounded action, defendant has suffered
and continues to suffer from serious anxiety, mental anguish, fright and humiliation. In addition to this, defendants name, good reputation and
business standing in the insurance business as well as in the community have been besmirched and for which FGU should be adjudged and made
liable to pay moral damages to defendant in the amount of P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and malicious suits like FGUs Complaint, and by way of serving [as] an example for the
public good, FGU should be penalized and assessed exemplary damages in the sum of P100,000.00 or such amount as the Honorable Court may
deem warranted under the circumstances. 22
Tested against the abovementioned standards, petitioners counterclaim for commissions, bonuses, and accumulated premium reserves is merely
permissive. The evidence required to prove petitioners claims differs from that needed to establish respondents demands for the recovery of cash
accountabilities from petitioner, such as cash advances and costs of premiums. The recovery of respondents claims is not contingent or
dependent upon establishing petitioners counterclaim, such that conducting separate trials will not result in the substantial duplication of the time
and effort of the court and the parties. One would search the records in vain for a logical connection between the parties claims. This conclusion
is further reinforced by petitioners own admissions since she declared in her answer that respondents cause of action, unlike her own, was not
based upon the Special Agents Contract. 23 However, petitioners claims for damages, allegedly suffered as a result of the filing by respondent of
its complaint, are compulsory. 24
There is no need for petitioner to pay docket fees for her compulsory counterclaim. 25 On the other hand, in order for the trial court to acquire
jurisdiction over her permissive counterclaim, petitioner is bound to pay the prescribed docket fees. 26 The rule on the payment of filing fees has
been laid down by the Court in the case of Sun Insurance Office, Ltd. v. Hon. Maximiano Asuncion 27
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or
reglementary period.chanrob1es virtua1 1aw 1ibrary
2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and
unless the filing fee prescribed therefor is paid. The court may allow payment of said fee within a reasonable time but also in no case beyond its
applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized
deputy to enforce said lien and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Suson v. Court of Appeals. 28 In Suson, the Court
explained that although the payment of the prescribed docket fees is a jurisdictional requirement, its non-payment does not result in the automatic
dismissal of the case provided the docket fees are paid within the applicable prescriptive or reglementary period. Coming now to the case at bar, it
has not been alleged by respondent and there is nothing in the records to show that petitioner has attempted to evade the payment of the proper
docket fees for her permissive counterclaim. As a matter of fact, after respondent filed its motion to dismiss petitioners counterclaim based on
her failure to pay docket fees, petitioner immediately filed a motion with the trial court, asking it to declare her counterclaim as compulsory in
nature and therefore exempt from docket fees and, in addition, to declare that respondent was in default for its failure to answer her counterclaim.
29 However, the trial court dismissed petitioners counterclaim. Pursuant to this Courts ruling in Sun Insurance, the trial court should have
instead given petitioner a reasonable time, but in no case beyond the applicable prescriptive or reglementary period, to pay the filing fees for her
permissive counterclaim.
Petitioner asserts that the trial court should have declared respondent in default for having failed to answer her counterclaim. 30 Insofar as the
permissive counterclaim of petitioner is concerned, there is obviously no need to file an answer until petitioner has paid the prescribed docket
fees for only then shall the court acquire jurisdiction over such claim. 31 Meanwhile, the compulsory counterclaim of petitioner for damages
based on the filing by respondent of an allegedly unfounded and malicious suit need not be answered since it is inseparable from the claims of
Respondent. If respondent were to answer the compulsory counterclaim of petitioner, it would merely result in the former pleading the same facts
raised in its complaint. 32
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998 and its 19 May 1999 Resolution are hereby
MODIFIED. The compulsory counterclaim of petitioner for damages filed in Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the
Regional Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket fees for her permissive counterclaim
(direct commissions, profit commissions, contingent bonuses and accumulated premium reserves), after ascertaining that the applicable
prescriptive period has not yet set in. 33
SO ORDERED.chanrob1es virtua1 1aw 1ibrary
Melo, Vitug, Panganiban and Sandoval-Gutierrez, JJ., concur.

First Division (G.R. No. 138497. January 16, 2002.) IMELDA RELUCIO, Petitioner, v. ANGELINA MEJIA LOPEZ, Respondent. Decision

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First Division (G.R. No. 138497. January 16, 2002.) IMELDA RELUCIO, Petitioner, v. ANGELINA MEJIA LOPEZ, Respondent. Decision

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FIRST DIVISION

[G.R. No. 138497. January 16, 2002.]

IMELDA RELUCIO, Petitioner, v. ANGELINA MEJIA LOPEZ, Respondent.

The facts, as found by the Court of Appeals, are as follows:jgc:chanrobles.com.ph

Hence, this appeal. 8

The Courts Ruling

The complaint is by an aggrieved wife against her husband.

Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ., concur.

[G.R. No. 169558 : September 29, 2008]

The facts in this case are as follows.

Carpio-Morales, Tinga, Velasco, Jr., and Brion, JJ., concur.

[G.R. NO. 157438 : October 18, 2004]

"WHEREFORE, for lack of merit, the motion to dismiss is hereby DENIED."4

The second challenged Resolution denied petitioners' Motion for Reconsideration.

DEFENDANTS' ILLEGAL ACTS

"SPECIFIC AVERMENTS OF DEFENDANTS'

Ruling of the Sandiganbayan

The Court's Ruling

The Petition has no merit.

No Ground to Dismiss the Amended Complaint.

Pendency of GR No. 152551 Inconsequential

Costs against petitioners.

Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia *, JJ., concur.

[G.R. NO. 157438 : October 18, 2004]

"WHEREFORE, for lack of merit, the motion to dismiss is hereby DENIED."4

The second challenged Resolution denied petitioners' Motion for Reconsideration.

DEFENDANTS' ILLEGAL ACTS

"SPECIFIC AVERMENTS OF DEFENDANTS'

Ruling of the Sandiganbayan

The Court's Ruling

The Petition has no merit.

No Ground to Dismiss the Amended Complaint.

Pendency of GR No. 152551 Inconsequential

Costs against petitioners.

Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia *, JJ., concur.

[G.R. NO. 157447. April 29, 2005]

1. "a parcel of land titled illegally will revert to the State

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

[G.R. No. 49470. April 8, 1991.]

Tomas V . Tadeo, Jr., for Plaintiffs-Appellants.

Generoso T . Tarlit, for Defendant-Appellee.

SO ORDERED." (Record on Appeal, p. 35).

"SO ORDERED." (Rollo, p. 50).

a. his alleged right or interest;

b. how and under whom such alleged right or interest is acquired;

d. the certificate of title number

Rule 3, Section 7 of the Revised Rules of Court provides that:jgc:chanrobles.com.ph

Narvasa, Cruz and Grino-Aquino, JJ., concur.

[G.R. No. L-68111. December 20, 1988.]

Hermenegildo G. Rapanan for Petitioner.

Treas, Pagada & Associates for Respondents.

ROOM 401 PAYAWAL BLDG.

709 PATERNO, QUIAPO, MANILA.

(Annex "D", p. 16, Rollo).

WE DISAGREE.chanrobles law library

WHEREFORE, the petition is hereby DISMISSED for lack of merit.

Melencio-Herrera (Chairman), Padilla and Regalado, JJ., concur.

Sarmiento J., on leave.

[G.R. No. 138822. January 23, 2001.]

EVANGELINE ALDAY, Petitioner, v. FGU INSURANCE CORPORATION, Respondent.

SO ORDERED.chanrob1es virtua1 1aw 1ibrary

Melo, Vitug, Panganiban and Sandoval-Gutierrez, JJ., concur.

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