NEWSWEEK VS.

IAC Defamatory remarks directed at a class or group of persons in general

Facts:
"An Island of Fear" was published by Newsweek in its Feb 23, 1981. It
allegedly portrayed the island province of Negros Occidental as a place
dominated by big landowners or sugarcane planters who not only
exploited the impoverished workers, but also brutalized and killed them
with impunity. #peachesdiaries
Newsweek filed a motion to dismiss on the grounds that
language only, are not actionable by individuals composing the class or
group unless the statements are sweeping.
The case at bar is not a class suit. It is not a case where one or more may
sue for the benefit of all
We have here a case where each of the plaintiffs has a separate and distinct
reputation in the community. They do not have a common or general interest
in the subject matter of the controversy

the printed article sued upon is not actionable in fact and in law;

the complaint is bereft of allegations that state, much less support a cause
of action.

Trial court denied the motion to dismiss. Complaint on its face states a
valid cause of action; and the question as to whether the printed article
sued upon its actionable or not is a matter of evidence.

Petitioner: Complaint failed to state a cause of action because:

Complaint made no allegation the article referred specifically to any one of

the private respondents;

Libel can be committed only against individual reputation;

in cases where libel is claimed to have been directed at a group, there is

actionable defamation only if the libel can be said to reach beyond the mere
collectivity to do damage to a specific, individual group member's
reputation.

Issue: WON the complaint must be dismissed? YES.

In Corpus vs. Cuaderno, Sr.:

"in order to maintain a libel suit, it is essential that the victim be identifiable,
although it is not necessary that he be named (19 A.L.R. 116)."

In Uy Tioco vs. Yang Shu Wen:

1
MIAA vs. Rivera Village Lessee Homeowners Assoc., Inc.
Facts:
The Civil Aeronautics Administration (CAA) was entrusted with the
administration of Manila Int’l Airport (now MIAA). CAA entered into a 25-year
contract of lease of 4 hectares of land in Rivera Village. On January 1995,
MIAA stopped accepted rental payments from the lessees. As a result,
Rivera Village Lessee Homeowners Association (homeowners association)
requested MIAA to sell the leased property to its members. MIAA denied the
request because the property is intended for airport-related activities.
Homeowners association filed a petition for mandamus and prohibition with
prayer for the issuance of a preliminary injunction. RTC denied the petition.
CA issued a writ of preliminary injunction restraining MIAA from evicting the
members of Rivera Village Association from their lots.
Issue:
narrowly and restrictively construed, and its application should be neither
dogmatic nor rigid at all times but viewed in consonance with extant realities
and practicalities. The dismissal of this case based on the lack of personality
to sue of petitioner-association will only result in the filing of multiple suits by
the individual members of the association.
Ratio:
Section 3, Rule 3: Where the action is allowed to be prosecuted or defended
by a representative or someone acting in a fiduciary capacity, the beneficiary
shall be included in the title of the case and shall be deemed to be the real
party in interest. A representative may be a trustee of an express trust, a
guardian, an executor or administrator, or a party authorized by law or these
Rules. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the
contract involves things belonging to the principal.

W/N Rivera Village Lessee Homeowners Association has personality to sue.

– YES.

Held:

It is a settled rule that every action must be prosecuted or defended in the

name of the real partyin-interest. Where the action is allowed to be
prosecuted or defended by a representative acting in a fiduciary capacity, the
beneficiary must be included in the title of the case and shall be deemed to
be the real party-in-interest. The name of such beneficiaries shall, likewise,
be included in the complaint.

In the case at bar, the petition was filed by the homeowners association
through its president. The president is suing in a representative capacity as
authorized by a Board Resolution to file all the necessary action in court to
have the land titled to the members of the association. Although the names
of the individual members of the homeowners association who are the
beneficiaries and real parties-in-interest in the suit were not indicated in the
title of the petition, this defect can be cured by the simple expedient of
requiring the association to disclose the names of the principals and to
amend the title and averments of the petition accordingly.

The purpose of the rule that actions should be brought or defended in the
name of the real party-ininterest is to protect against undue and unnecessary
litigation and to ensure that the court will have the benefit of having before it
the real adverse parties in the consideration of a case. This rule is not to be

2
Re: Request of the heirs of the passengers of Dona Paz Ruling:

Facts:
A complaint for damages amounting to 1.5 billion pesos was files in the
name and behalf of the relatives or heirs of the sinking of Dona Paz, caused
by its collision with another vessel. The action is class suit, prosecuted by the
27 named plaintiffs in their behalf and in representation of about 4,000
persons who are close relatives and legal heirs of the passengers against the
defendants, the Management of Dona Paz.
Plaintiff’s prayer that judgment be rendered in their favor by ordering
defendants to pay jointly and severally:
(a) P200, 000 to P400, 000 per victim by way of actual or compensatory,
or the to total amount from P800 million to P1, 200 Million;
(b) An amount which the honorable court may deem just and reasonable
and by way of attorney’s fees and, under the circumstance of this
case, P10 million would be reasonable.
(1) No. For the class suit to prosper, the circumstance should be that
there is only one right or cause of action pertaining or belonging in
common to many persons, not separately or severally distinct
individuals. It is needful that the parties be so numerous that it would
be impracticable to bring them all before the court. The case at bar is
not being proper for a class suit, because the action may not be
maintained by a representative few in behalf of all the others.
(2) No. The Dona Paz tragedy that claimed so many unsuspecting
victims in what has been described as the worst single disaster in
maritime history which became the aspect of national importance.
Yet, it does not under any existing law or rule justify excusing such
parties from paying the required judicial fees or costs. There must be
a proper showing that every would-be litigant, who seeks exemption
from the payment of the fees, must establish, not simply allege, his
lack of means by affidavits, certificate from the corresponding
provincial, city or municipal treasurer, or otherwise.

Now together with the complaint, plaintiffs file a “MOTION FOR LEAVE
TO FILE CASE AS PAUPER LITIGANTS”. This motion was granted by
Judge Chingcuangco in his capacity as Executive Judge only in so far as the
7 plaintiffs were concerned. It was this order of Judge Chingcuangco dated
January 4, 1988 that the plaintiffs requested the Supreme Court to set side.

The High Tribunal allowed parties to files their parties to make

comments, including the Executive Judge. The defendant maintained that:

(i) there were only 1, 493 passengers on board at the time of the
tragedy;
(ii) each claimant is a class unto himself in terms of the legal basis
for the claim and the amount of damages recoverable.
(iii) It is doubtful whether 27 plaintiffs are numerous and
representative to fully protect the interest of all.
(iv) there are in truth only 7 plaintiffs qualified to sue as pauper
litigants.
Issues:

(1) Whether or not a class suit is a proper?

(2) Whether or not the numerous claimants joined as parties plaintiff
maybe allowed as pauper litigants;

3
Chua vs. Torres
Facts:
A complaint for damages was lodged before the Regional Trial Court. The
complaint was filed by Christine Chua impleading her brother Jonathan Chua
as a necessary co-plaintiff. Named as defendants in the suit were herein
respondents Jorge Torres and Antonio Beltran.
Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was
explicitly qualified in the second paragraph of the complaint that he was
being impleaded here-in as a necessary party-plaintiff. There was no
allegation in the complaint of any damage or injury sustained by Jonathan,
and the prayer therein expressly named petitioner as the only party to whom
respondents were sought to recompense. Neither did Jonathan Chua sign
any verification or certification against forum-shopping, although petitioner
did sign an attestation, wherein she identified herself as the principal plaintiff.
Upon motion of respondents, the RTC ordered the dismissal of the
complaint on the ground that Jonathan Chua had not executed a certification
against forum-shopping stressing Section 5, Rule 7 of the Rules of Civil
Procedure.
Issue:
Whether the absence of the signature in the required verification and
certification against forum-shopping of a party misjoined as a plaintiff is a
valid ground for the dismissal of the complaint.
Held:
The SC ruled that it is not so, and that the RTC erred in dismissing the
instant complaint. There is no judicial precedent affirming or rejecting such a
view, but we are comfortable with making such a pronouncement. A
misjoined party plaintiff has no business participating in the case as a plaintiff
in the first place, and it would make little sense to require the misjoined party
in complying with all the requirements expected of plaintiffs.
At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure
states:
Neither misjoinder nor non-joinder of parties is ground for dismissal of an
action. Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on such terms
4
as are just. Any claim against a misjoined party may be severed and
proceeded with separately.
Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits
dismissal of a suit on the ground of non-joinder or misjoinder of
parties. Moreover, the dropping of misjoined parties from the complaint may
be done motu proprio by the court, at any stage, without need for a motion to
such effect from the adverse party. Section 11, Rule 3 indicates that the
misjoinder of parties, while erroneous, may be corrected with ease through
amendment, without further hindrance to the prosecution of the suit.
It should then follow that any act or omission committed by a misjoined party
plaintiff should not be cause for impediment to the prosecution of the case,
much less for the dismissal of the suit. After all, such party should not have
been included in the first place, and no efficacy should be accorded to
whatever act or omission of the party. Since the misjoined party plaintiff
receives no recognition from the court as either an indispensable or
necessary party-plaintiff, it then follows that whatever action or inaction the
misjoined party may take on the verification or certification against forum-
shopping is inconsequential. Hence, it should not have mattered to the RTC
that Jonathan Chua had failed to sign the certification against forum-
shopping, since he was misjoined as a plaintiff in the first place. The fact that
Jonathan was misjoined is clear on the face of the complaint itself, and the
error of the RTC in dismissing the complaint is not obviated by the fact that
the adverse party failed to raise this point. After all, the RTC could have motu
proprio dropped Jonathan as a plaintiff, for the reasons above-stated which
should have been evident to it upon examination of the complaint.
*Cruz v. Cruz, G.R. No. 173292, September 1, 2010.

Facts:

Memoracion Z. Cruz filed with the RTC a Complaint against her son,
Oswaldo Z. Cruz, for “Annulment of Sale, Reconveyance and Damages.”
After Memoracion finished presenting her evidence in chief, she died. The
RTC was informed, albeit belatedly, of the death of Memoracion, and was
supplied with the name and address of her legal representative, Edgardo
Cruz.

Issue:

Whether or not Petition for Annulment of Deed of Sale, Reconveyance and

Damages is a purely personal action which did not survive the death of
petitioner.

Ruling:

NO. The question as to whether an action survives or not depends on the

nature of the action and the damage sued for. In the causes of action which
survive, the wrong complained [of] affects primarily and principally property
and property rights, the injuries to the person being merely incidental, while
in the causes of action which do not survive, the injury complained of is to the
person, the property and rights of property affected being incidental. Here,
the petition for annulment of deed of sale involves property and property
rights, and hence, survives the death of petitioner Memoracion.

5
*Gojo v. Goyala
FACTS:
1. May 26 1951 - Respondent Goyala together with his now deceased
wife Antonina Almoguera, who was also named respondent or
defendant in the complaint or petition in the court below, sold to
petitioner by a "Deed of Pacto de Retro Sale" a certain parcel of
agricultural land with 1 year to repurchase.
2. July 4, 1951 - The vendee (petitioner) paid another P100.00 as
addition to the purchase price.
3. April 12, 1961 - After 10 years of execution, the vendee filed with
the Court of First Instance of Sorsogon the present case against the
vendors by way of a petition for consolidation of ownership of the
land described and involved in the "Deed of Pacto de Retro Sale." In
his petition, the petitioner alleged, that the date for repurchase,
May 26, 1952, having expired and the vendors not having been able
to repurchase the same under the terms and conditions of the
agreement, the ownership over the land involved had become
consolidated in him; and that for the purpose of recording in the
Registry of Property the said consolidation of ownership, it was
necessary that a judicial order be issued to that effect and
accordingly prayed for such an order.
4. May 26, 1961 – Respondent Segundo Goyala filed an opposition. He
alleged that his wife Antonina Almoguera had died in the year 1959
and denied the allegation in the petition regarding the pacto de
retro sale. He mentioned that on May 26, 1951, the respondents
obtained a cash load of P750.00 from the petitioner payable in one
year without interest.
5. And that Dolores Goyala, daughter of respondent, obtained: (1) 50
pesos to be added and credited to respondents’ account (2) 10
pesos also to respondents’ account. So the amount of total loan of
the respondents is 810. And to cover such loan, respondents
executed a mortgage in favor of the petitioner a parcel of land to
6
guarantee the loan of 810. And even if the deed was in the form of
pacto de retro sale, their real intention was to secure the payment
of the original loan of 750 plus the additional amount, making it
810, payable within 1 year. He also alleged that he and his wife
tendered the amount of 810 to petitioner but the latter refused and
does not want to cancel the document of mortgage
6. December 1, 1962 - Goyala filed a manifestation informing the trial
court that the named defendant (respondent) Antonina Almoguera
was already dead,
7. January 26, 1963 - appellee Goyala filed a motion to dismiss the
complaint or petition on the ground that notwithstanding the lapse
of 43 days after appellant's receipt of a copy of the above-quoted
order of the trial court, said appellant had failed and neglected to
submit the amended complaint required of him. The motion was
opposed by appellant. The trial court dismissed it.
8. July 10, 1963- Respondent filed a motion to declare appellant in
default in respect of said appellee's counterclaim, contained in his
answer (opposition) to the dismissed complaint petition) of
appellant. This was granted by the trial court and ordered the
respondent to submit his evidence before the Clerk of Court.
9. November 15, 1963 - The Clerk of Court received the evidence of
appellee in respect of his counterclaim and, thereafter, the trial
court rendered judgment in favor of the respondent.
10. Petitioner appealed to the CA (raising the issues below). CA, having
found the issue being purely questions of law, ceritified the case to
the SC.
ISSUES: WON LOWER COURT ERRED IN DECLARING PLAINTIFF IN DEFAULT
WITH RESPECT TO DEFENDANT'S COUNTERCLAIM
WON THE LOWER COURT ERRED IN DEPUTIZING OR COMMISSIONING THE
CLERK OF COURT TO RECEIVE THE EVIDENCE OF THE DEFENDANT SEGUNDO
GOYALA
HELD: 1. Yes. The lower court erred in ruling the issue.
SC held: The first assignment of error of appellant is well taken. It is now
settled that a plaintiff who fails or chooses not to answer a compulsory
counterclaim may not be declared in default, principally because the issues
raised in the counterclaim are deemed automatically joined by the
allegations of the complaint. In the instant case, there can be no doubt that
appellant's counterclaim was a compulsory one in as much as it arises out of
or is necessarily connected with transaction or occurrence that is the
subject matter of the complaint; the complaint alleged that the right of
appellee to repurchase the property in question had already expired and
asked for an order of consolidation; on the other hand, appellant's
counterclaim was for reformation of the deed claiming that it was only a
mortgage. Thus the counterclaim was clearly inconsistent with and directly
controverted; the whole theory and basic allegations of the complaint. In
consequence, appellant's complaint stood as the answer to appellee's
counterclaim; hence, the incorrectness of the trial court's order declaring
the appellant in default in regard to said counterclaim is evident.
The trial court committed reversible error in ordering the dismissal of the
complaint. It is true that under Section 3 of Rule 17, a complaint may be
dismissed for failure to prosecute if the plaintiff fails to comply with an
order of the court, but it is obvious that the said provision cannot apply
when the order supposedly ignored is a void one, as in this case. Here, the
trial court ordered petitioner to amend the complaint only because it was
informed that one of the defendants had died, the court directing that the
plaintiff should name the heirs of the deceased as defendants in lieu of said
deceased. Such an order runs counter to the ruling of this Court in Caseñas
vs. Resales, et al. 2 which is squarely applicable to the Situation herein
obtaining. In that case, We held:.
When certain of the parties to Civil Case No. 261 died and due notice
thereof was given to the trial court, it devolved on the said court to order,
not the amendment of the complaint, but the appearance of the legal
representatives of the deceased in accordance with the procedure and
manner outlined in Rule 3, Section 17 of the Rules of Court, which provide:.
7
"SECTION 17. Death of party. — After a party dies and the claim is not
thereby extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be
granted. If the legal representative fails to appear within said time, the
court may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court,
and the representative shall immediately appear for and on behalf of the
interest of the deceased.
In line with the principle underlying Sec. 2 of Rule 17, it is not proper to
dismiss a complaint when a compulsory counterclaim has been pleaded by
defendant. The reason is obvious. Under the cited provision, the right of the
plaintiff to move for the dismissal of an action after the defendant has filed
his answer is qualified by the clause providing that: "If a counterclaim has
been pleaded by a defendant prior to the service upon him of the plaintiff's
motion to dismiss, the action shall not be dismissed against the defendant's
objection unless the counterclaim can remain pending for independent
adjudication by the court." With this limitation, the power of the court to
dismiss the complaint upon motion of plaintiff, which is usually without
prejudice, is not purely discretionary.3 The purpose is to avoid multiplicity
of suits over the same matter which would necessarily entail unnecessary
expense and, what is worse, possibility of conflict and inconsistency in the
resolution of the same questions. The same considerations would obtain, if
the defendant were the one to ask for dismissal. The best interests of justice
require that conflicting claims regarding the same matter should be decided
in one single proceeding. Dismissing the complaint without prejudice, just
like the trial court did, will not prevent the undesirable multiplication of
suits and reventilation of the same issues in the subsequent action that may
be filed by virtue of the reservation made in the disputed order of dismissal.
Being that the decision on the 1st issue, answering the second issue is
unnecessary.
Case remanded to lower court.
Del Castillo vs. Jaymalin, Bitranco, L. Ammen
Transfer of rights: The rights of Severo to claim damages for his son were
1. Causative event transferable. Severo had transferred his rights as plaintiff to Wenceslao
2. Father del Castillo files action for recovery of damages against bus Haloc but after the assignment the case continued in Severo's name and
company and operator in trial court. there was no immediate and formal substitution of party plaintiff. This is but a
⁃ Bus companies file their defenses. formality, however, and the fact remains that, after the
⁃ Severo dies.
⁃ Bus companies files Motion for Annulment of assignment, the substantial plaintiff and real party in interest became Haloc,
Proceedings due to death of Severo Del Castillo. with Severo as a sort of trustee of whatever fruits the litigation would bring.
The proper procedure would have been for the transferee to have been
⁃ Severo's counsel files Motion to Admit Amended
substituted for the transferor as plaintiff.
Complaint substituting Severo's son-in-law,
Wenceslao Haloc, by virtue of a Deed of
... where an assignable right has been transferred before action brought, the
Assignment.
proceeding ought to be instituted in the name of the assignee; and where an
⁃ Trial court admits amended complaint. assignment is effect pendente lite, it is proper to have the assignee
⁃ But trial court dismisses the case. substituted for the original plaintiff. If such substitution should not be effected
3. Haloc appeals to SC. and the transfer of the right of action should not be brought to the attention of
⁃ Statement of issues the court, the original plaintiff, if successful in the litigation, would hold the
fruits of the action as a sort of trustee for the use and benefit of his assignee.
⁃ On applicable rule: transfer of rights ...
⁃ Haloc/del Castillo wins.
Conclusion: action did not die with him.
Causative event: Mario del Castillo, a deaf-mute son of Severo del Castillo,
fell from bus. Bus is owned by Bitranco. Operator is AL Ammen. Severo is
the sole heir.

Defenses of bus company and operator: due diligence in selection &

supervision / proximate cause is negligence of deceased

Deed of Assignment: assigning rights to the indemnity for the death of son,
from Severo to son-in-law Haloc.

Dismissal by trial court: Since Severo del Castillo died before the conclusion
of this case, this action died with him. Wenceslao Haloc is without personality
to continue this case. He is not even an heir of Severo del Castillo.

Issues:

1) In construing the Deed of Assignment as not a deed that transfers any

benefit to the transferee.

2) In dismissing the case in virtue of the death of Severo del Castillo after
the deed of assignment was executed and further still after the evidence
testimonial and documentary were already presented.
8
 b) Petition accepted; there being a failure to abide by the basic requirement
PEOPLE VS. SOLA that the prosecution be heard in a case where the accused is charged with a
capital offense, prior to bail being granted.
Facts:
Whether the motion for bail of a defendant who is in custody for a capital
Following search and seizure of bodies from hacienda of Pablo Sola, 7 offense be resolved in a summary proceeding or in the course of a regular
separate complaints of murder were filed against the accused Pablo Sola, trial, the prosecution must be given an opportunity to present, within a
Francisco Garcia, Ricardo Garcia, Jose Bethoven Cabral, Florendo Baliscao reasonable time, all the evidence that it may desire to introduce before the
and fourteen (14) other persons of unknown names. After due preliminary court should resolve the motion for bail. If, as in the criminal case involved in
examination of the complainant’s witnesses and other evidence, the the instant special civil action, the prosecution should be denied such an
municipal court found probable cause against the accused and issued an opportunity, there would be a violation of procedural due process, and the
order for their arrest. However, without giving the prosecution the opportunity order of the court granting bail should be considered void on that ground.
to prove that the evidence of guilt of the accused is strong, the court granted
them the right to post bail for their temporary release. The accused Pablo
Sola, Francisco Garcia, and Jose Bethoven Cabral availed themselves of this
right and were released from detention. The witnesses informed the
prosecution of their fears that if the trial is held at the Court of First Instance
branch in Himamaylan which is but 10 kilometers from Kabankalan, their
safety could be jeopardized. At least two of the accused are officials with
power and influence in Kabankalan and they have been released on bail. In
addition, most of the accused remained at large. There had been reports
made to police authorities of threats made on the families of the witnesses.”
Prosecution petitioned for a) change of venue for trial and b) cancellation of
the bail bonds.

Issue:

a) Whether or not the plea for a change of venue for trial is justified.
b) Whether or not the cancellation of bail bonds is justified.

Decision:

a) Change of venue has become moot and academic with the transfer of the
case to Bacolod City. However, the case proceeds with this discussion: To
compel the prosecution to proceed to trial in a locality where its witnesses will
not be at liberty to reveal what they know is to make a mockery of the judicial
process, and to betray the very purpose for which courts have been
established. The witnesses in the case are fearful of their lives. They are
afraid they would be killed on their way to or from Himamaylan during any of
the days of trial. Because of this fear, they may either refuse to testify or
testify falsely to save their lives.

Petition accepted; hostile sentiment against the accused at the place of trial
is a justification for transfer of venue.
9
Time, Inc. v Reyes
Nature of the Case:
This is a petition for certiorari and prohibition, with preliminary
injunction, to annul certain orders of the respondent Court of First Instance of
Rizal, issued in its Civil Case entitled "Antonio J. Villegas and Juan Ponce
Enrile vs. Time, Inc., and Time-Life International, Publisher of 'Time'
Magazine (Asia Edition)", and to prohibit the said court from further
proceeding with the said civil case.
Facts of the Case:
The petition alleges that petitioner Time, Inc., is an American
corporation with principal offices at Rocketfeller Center, New York City, N. Y.,
and is the publisher of "Time", a weekly news magazine; the petition,
however, does not allege the petitioner's legal capacity to sue in the courts of
the Philippine.
In the aforesaid civil case, therein plaintiffs-respondents Antonio J.
Villegas and Juan Ponce Enrile seek to recover from petitioner Time, Inc.
damages upon an alleged libel arising from a publication of Time (Asia
Edition) magazine, in its issue of Aug. 18, 1967, of an essay, entitled
"Corruption in Asia", which talks about the investigation of Manila mayor
Antonio Villegas due to the discovery of his excessive and unreasonable
resources. More specifically, the plaintiffs' complaint alleges that Time
magazine published a libelous article, publicly, falsely and maliciously
imputing to plaintiffs the commission of the crimes of graft, corruption and
nepotism, that said publication particularly referred to plaintiff Mayor Antonio
J. Villegas as a case in point in connection with graft, corruption and
nepotism in Asia; that said publication without any doubt referred to co-
plaintiff Juan Ponce Enrile as the high government official who helped under
curious circumstances plaintiff Mayor Villegas in lending the latter
approximately P30,000.00 without interest because he was the Mayor's
compadre; that the purpose of said Publications is to cause the dishonor,
discredit and put in public contempt the plaintiffs. At the time of the
publication of the allegedly offending essay, private respondents Antonio
Villegas and Juan Ponce Enrile were the Mayor Of the City of Manila and
Undersecretary of Finance and concurrently Acting Commissioner of
Customs, respectively, with offices in the City of Manila.
10
On motion of the respondents-plaintiffs, the respondent judge of CFI-
Rizal on November 25, 1967, granted them leave to take the depositions "of
Mr. Anthony Gonzales, Time-Life international", and "Mr. Cesar B. Enriquez,
Muller & Phipps (Manila) Ltd.", in connection with the activities and
operations in the Philippines of the petitioner, and, on November 27, 1967,
issued a writ of attachment on the real and personal estate of Time, Inc.
Petitioner received the summons and a copy of the complaint at its offices in
New York on December 13, 1967. It filed a motion to dismiss the complaint
for lack of jurisdiction and improper venue on Dec. 27, 1967, relying upon the
provisions of Republic Act 4363. Private respondents opposed the motion.
On February 26, 1968, respondent court deferred the determination
of the motion to dismiss until after trial of the case on the merits, the court
having considered that the grounds relied upon in the motion do not appear
to be indubitable. Petitioner moved for reconsideration of the deferment
private respondents again opposed. Respondent judge issued an order re-
affirming the previous order of deferment for the reason that "the rule laid
down under Republic Act. No. 4363, amending Article 360 of the Revised
Penal Code, is not applicable to actions against non-resident defendants,
and because questions involving harassment and inconvenience, as well as
disruption of public service do not appear indubitable. ..."
Failing in its efforts to discontinue the taking of the depositions,
previously adverted to, and to have action taken, before trial, on its motion to
dismiss, petitioner filed the instant petition for certiorari and prohibition.
Issues:
1. Whether or not, under the provisions of RA 4363 the respondent CFI of
Rizal has jurisdiction to take cognizance of the civil suit for damages arising
from an allegedly libelous publication, considering that the action was
instituted by public officers whose offices were in the City of Manila at the
time of the publication; if it has no jurisdiction, whether or not its erroneous
assumption of jurisdiction may be challenged by a foreign corporation by writ
of certiorari or prohibition;
2. Whether or not RA 4363 is applicable to action against a foreign
corporation or nonresident defendant.
RULING OF THE COURT:
Issue No. 1:
The respondent Court of First Instance of Rizal is without jurisdiction to take
cognizance of its Civil Case.
Provisions of RA No. 4363 provides that Art. 360 of the of the
Revised Penal Code is further amended to read that any person who shall
publish, exhibit, or cause the publication or exhibition of any defamation in
writing or by similar means, shall be responsible for the same. The complaint
lodged in the court of Rizal by respondents does not allege that the libelous
article was printed and first published in the province of Rizal and, since the
respondents-plaintiffs are public officers with offices in Manila at the time of
the commission of the alleged offense, it is clear that the only place left for
them wherein to file their action, is the Court of First Instance of Manila.
The limitation of the choices of venue, as introduced into the Penal
Code through its amendments by Republic Act 4363, was intended " to
minimize or limit the filing of out-of-town libel suits" to protect an alleged
offender from "hardships, inconveniences and harassments" and,
furthermore, to protect "the interest of the public service" where one of the
offended parties is a public officer. But since the offending publication was
not printed in the Philippines, the alternative venue was not open to
respondent Mayor Villegas of Manila and Undersecretary of Finance Enrile,
who were the offended parties.
Issue No. 2:
Time, Inc, argue that RA No. 4363 is not applicable where the action
is against non-existent defendant. They urge that, in enacting RA No. 4363,
Congress did not intend to protect non-resident defendants because since a
non-resident defendant is not in a position to comply with the conditions
imposed for the effectivity of the statute, such defendant may not invoke its
provisions. Time Inc. also reasoned that a foreign corporation is not
inconvenienced by an out-of-town libel suit and that it would be absurd in the
absence of an extradition treaty, for the law to give to public officers with
office in Manila the second option of filing a criminal case in the court of the
place where the libelous article is printed and first published if the defendant
is a foreign corporation and that, under the "single publication" rule which
11
originated in the United States and imported into the Philippines, the rule was
understood to mean that publications in another state are not covered by
venue statutes of the forum.
The Court see nothing in the text of the law that would sustain
unequal protection as invoked by Time, Inc. to some of those who may be
charged with libel. In the promulgation of RA 4364 no terms are employed
therein to indicate that the law can or will be effective only as to some, but
not all, of those that may be charged with libeling public officers. The
assertion that a foreign corporation or a non-resident defendant is not
inconvenienced by an out-of-town suit is irrelevant and untenable, for venue
and jurisdiction are not dependent upon convenience or inconvenience to a
party. Venue was fixed under RA 4363 to protect the interest of the public
service when the offended party is a public officer, by minimizing as much as
possible any interference with the discharge of his duties.
The contention of Time, Inc. that respondents-plaintiffs could not file
a criminal case for libel against a non-resident defendant does not make RA
No. 4363 incongruous or absurd, for such inability to file a criminal case
against a non-resident natural person equally exists in crimes other than
libel. It is a fundamental rule of international jurisdiction that no state can by
its laws, and no court which is only a creature of the state, can by its
judgments or decrees, directly bind or affect property or persons beyond the
limits of the state. But if the accused is a corporation, no criminal action can
lie against it, whether such corporation or resident or non-resident. At any
rate, the case filed by respondents-plaintiffs is case for damages. The rule is
that where a statute creates a right and provides a remedy for its
enforcement, the remedy is exclusive. And where it confers jurisdiction upon
a particular court, that jurisdiction is likewise exclusive, unless otherwise
provided. Hence, the venue provisions of RA No. 4363 should be deemed
mandatory for the party bringing the action, unless the question of venue
should be waived by the defendant, which was not the case here. Only thus
can the policy of the Act be upheld and maintained. Respondents asked for
the dismissal of the present petition on the ground that Time, Inc. as a
foreign corporation failed to allege its capacity to sue in the courts of the
Philippines.
Respondents rely on Section 69 of the Corporation law, which
provides that no foreign corporation or corporations formed, organized, or
existing under any laws other than those of the Philippines shall be permitted
to maintain by itself or assignee any suit for the recovery of any debt, claim,
or demand whatever, unless it shall have the license prescribed in the
section immediately preceding. Respondent also cited several jurisprudence
stating that no foreign corporation may be permitted to maintain any suit in
the local courts unless it shall have the license required by the law. The
Court ruled that the respondents’ contention is wrong since the petitioner
Time, Inc. is not "maintaining any suit" but is merely defending one against
itself; it did not file any complaint but only a corollary defensive petition to
prohibit the lower court from further proceeding with a suit that it had no
jurisdiction to entertain. Petitioner's failure to aver its legal capacity to
institute the present petition however is not fatal, for a foreign corporation
may, by writ of prohibition, seek relief against the wrongful assumption of
jurisdiction. The writ of preliminary injunction heretofore issued by this
Supreme Court is made permanent.

12
Pilipino Telephone Corporation vs. Tecson

Facts:

Mr. Tecson applied for six cellular phone subscriptions with Pilipino
Telephone Corporation (PILTEL). The applications were approved and
covered by six mobiline service agreements, all of which provides: “Venue of
all suits arising from this Agreement or any other suit directly or indirectly
arising from the relationship between PILTEL and subscriber shall be in the
proper courts of Makati, Metro Manila. Subscriber hereby expressly waives
any other venues.”

Mr. Tecson filed with the RTC, Iligan City, Lanao Del Norte, a complaint
against petitioner for a “Sum of Money and Damages.” PILTEL moved for the
dismissal of the complaint on the ground of improper venue.

Issue:

Whether or not the complaint was filed in the wrong venue.

Held:

Section 4, Rule 4, of the Revised Rules of Civil Procedure allows the parties
to agree and stipulate in writing, before the filing of an action, on the
exclusive venue of any litigation between them. Such an agreement would be
valid and binding provided that the stipulation on the chosen venue is
exclusive in nature or in intent, that it is expressed in writing by the parties
thereto, and that it is entered into before the filing of the suit.

The provision contained in paragraph 22 of the “Mobile Service Agreement,”

a standard contract made out by petitioner PILTEL to its subscribers,
apparently accepted and signed by respondent, states that the venue of all
suits arising from the agreement, or any other suit directly or indirectly arising
from the relationship between PILTEL and subscriber, “shall be in the proper
courts of Makati, Metro Manila.” The added stipulation that the subscriber
“expressly waives any other venue” should indicate, clearly enough, the
intent of the parties to consider the venue stipulation as being preclusive in
character.

13
IRENE MARCOS-ARANETA VS. CA degree of interest in the subject of the action which would warrant and entail
the desirably active participation expected of litigants in a case."
Facts:

Irene and several co-plaintiffs filed a case before the RTC of Batac, Ilocos
Norte against Benedicto and his business associates for conveyance of
shares of stocks. Irene alleges that several years back, Benedicto created 2
companies where 65% of the shareholdings were being held by Benedicto
and associates in trust for Irene. Benedicto filed a motion to dismiss on the
ground that the venue is improperly laid. Benedicto was claiming that Irene is
not a resident of Batac but rather, a resident of Makati City. Irene, on the
other hand, claims that her co-plaintiffs are residing in Batac.

RTC: venue improperly laid since Irene is a resident of Makati and not Batac.
CA: since co-plaintiffs are residents of Batac, venue is not improperly laid

Issue:

Is the venue improperly laid?

SC:

YES. Motion to dismiss granted. First of all, the action is one in personam.
The fact that the companies’ assets include properties does not materially
change the nature of the action.

Second, there can be no serious dispute that the real party-in-interest plaintiff
is Irene. As selfstyled beneficiary of the disputed trust, she stands to be
benefited or entitled to the avails of the present suit. It is undisputed too that
three other persons, all from Ilocos Norte, were included as co-plaintiffs in
the complaint as Irene's new designated trustees. As trustees, they can only
serve as mere representatives of Irene.

Sec. 2 of Rule 4 indicates quite clearly that when there is more than one
plaintiff in a personal action case, the residences of the principal parties
should be the basis for determining proper venue. According to the late
Justice Jose Y. Feria, "the word `principal' has been added [in the uniform
procedure rule] in order to prevent the plaintiff from choosing the residence of
a minor plaintiff or defendant as the venue." Eliminate the qualifying term
"principal" and the purpose of the Rule would "be defeated where a nominal
or formal party is impleaded in the action since the latter would not have the
14
Young v. Sy
Facts:
This case originated from 2 petitions. 1 regarding the supplemental
complaint (topic at hand), 2 regarding the non-suit (not related to the topic).
NOTE: The case didn’t say how case number 1 initiated it just jumped to the
supplemental complaint. So assuming procedurally… petitioner filed a
complaint then she filed a “supplemental complaint.”
Lili Dy Young the mother of Genalyn D. Young (petitioner) caused an
extrajudicial partition which adjudicated an unregistered parcel of land solely
in the latter’s favor is unenforceable. She contends that, since at the time of
the execution she was only 15 years old and no court approval had been
procured. This was due to the fact that the mother obtained a loan from
spouses Sy (respondents) and mortgaged the subject property. The property
was foreclosed and sold to the Sy’s through auction. Hence the cases.
(Jumping to the supplemental complaint) The problem arose when
the petitioner filed a motion to admit supplemental complaint. The
supplemental complaint invoked her right, as co-owner, to exercise the legal
redemption. In comparison to the original complaint which is to enforce
unenforceability.
RTC and CA:
Both the RTC and the CA dismissed her complaint. They ruled that
the supplemental complaint constituted a substantial amendment of the
original complaint because of the relief prayed for and the causes of action
were different from the original complaint which is prohibited.
Issue:
W/N the dismissal of the supplemental complaint filed by the Petitioner is
proper.
Held:
The dismissal of both the lower courts were improper. The Supreme
Court reversed and set aside their decisions.
15
Ratio: (I don’t want to short it up… cus it’s highly procedural)
In this case, the consolidation of title over the subject property in the
name of respondent Manuel Sy and the issue as to whether it precluded
petitioner as alleged co-owner from exercising the right of legal redemption,
are new matters that occurred after the filing of the original complaint. The
relief prayed for in the Supplemental Complaint, which is the exercise of the
right of legal redemption accorded to co-owners of property, is germane to
and intertwined with the cause of action in the Complaint for the nullification
of the "Second Supplemental to the Extrajudicial Partition" on the ground that
it lacked the approval of a guardianship court.
The petitioner's right to redeem the property is dependent on the
nullification of the partition which is the subject of the original complaint.
Unless the partition is nullified or declared without any force or effect, the
petitioner will not be considered a co-owner of the property and,
consequently, she will be unable to exercise any right of legal redemption
under Article 1620 of the Civil Code granted to co-owners of property.
The right of legal redemption as co-owner is conferred by law and is
merely a natural consequence of co-ownership. Hence, the petitioner's cause
of action for legal redemption as embodied in her Supplemental Complaint
stems directly from and is an extension of her rights as co-owner of the
property subject of the Complaint.
Furthermore, the evidence required to prove petitioner's right of legal
redemption in the Supplemental Complaint will be exactly the same evidence
required to prove the nullification of the partition in the Complaint.
If a separate action is filed for the subject covered by the
Supplemental Complaint, there will be multiplicity of suits. Should a separate
complaint be filed before the nullification of the partition, the same would be
dismissed for being premature pending the resolution of the Complaint for
nullification.
Notes: Yes very substantial case with lots of doctrines which should be read.
Section 6, Rule 10 of the Revised Rules of Court provides:
 SECTION 6. Supplemental Pleadings. - Upon motion of a party the
court may, upon reasonable notice and upon such terms as are just,
permit him to serve a supplemental pleading setting forth
transactions, occurrences or events which have happened since the
date of the pleading sought to be supplemented. The adverse party
may plead thereto within ten (10) days from notice of the order
admitting the supplemental pleading.

As its very name denotes, a supplemental pleading only serves to bolster or

add something to the primary pleading. A supplement exists side by side with
the original. It does not replace that which it supplements.16Moreover, a
supplemental pleading assumes that the original pleading is to stand and that
the issues joined with the original pleading remained an issue to be tried in
17
the action. It is but a continuation of the complaint. Its usual office is to set
up new facts which justify, enlarge or change the kind of relief with respect to
the same subject matter as the controversy referred to in the original
complaint.

The purpose of the supplemental pleading is to bring into the records new
facts which will enlarge or change the kind of relief to which the plaintiff is
entitled; hence, any supplemental facts which further develop the original
right of action, or extend to vary the relief, are available by way of
supplemental complaint even though they themselves constitute a right of
action.

In Leobrera v. Court of Appeals,20 the Court ruled that when the cause of
action stated in the supplemental complaint is different from the causes of
action mentioned in the original complaint, the court should not admit the
supplemental complaint; the parties may file supplemental pleadings only to
supply deficiencies in aid of an original pleading, but not to introduce new
and independent causes of action. However, in Planters Development Bank
v. LZK Holdings and Development Co., the Court held that a broad definition
of causes of action should be applied: while a matter stated in a
supplemental complaint should have some relation to the cause of action set
forth in the original pleading, the fact that the supplemental pleading
technically states a new cause of action should not be a bar to its allowance
but only a factor to be considered by the court in the exercise of its
discretion; and of course, a broad definition of "cause of action" should be
applied here as elsewhere.

16
SPOUSES ERNESTO TATLONGHARI & EUGENIA TATLONGHARI v.
BANGKO KABAYAN-IBAAN RURAL BANK, GR No. 219783, 2016-08-03
Facts:
On August 3, 2004, a certain Pedro V. Ilagan (Pedro) filed a complaint[4] for
annulment of special power of attorney (SPA), promissory notes, and real
estate mortgage (civil case) against respondent Bangko Kabayan-Ibaan
Rural Bank, Inc. (the bank) and the Provincial Sheriff of Batangas Province
(defendants) before the RTC.
He alleged that the Office of the Ex-Officio Sheriff of the RTC had posted and
published notices of Sheriffs Sale against him as the attorney-in-fact of a
certain Matilde Valdez (Valdez), married to Crispin Brual (Brual), and herein
petitioners spouses Ernesto and Eugenia Tatlonghari (Sps. Tatlonghari),
setting the auction sale of properties belonging respectively to the said
couples allegedly for the satisfaction of Pedro's indebtedness to the bank
amounting to P3,000,000.00.
Pedro denied that he obtained a loan from the bank and that Sps.
Tatlonghari or Valdez constituted him as an attorney-in-fact for the purpose
of mortgaging their respective properties as collateral to the bank.
Pedro convinced Sps. Tatlonghari to join him in the civil case against the
bank.
the bank used a falsified SPA and made it appear that they had authorized
him to obtain a loan from it, secured by a real estate mortgage on their
property which was the subject of foreclosure proceedings.
As Sps. Tatlonghari did not issue any SPA or authorization in favor of Pedro,
they agreed to join him as plaintiffs in the civil case against the bank and
likewise accepted the offer for Pedro's counsel, Atty. Bienvenido Castillo
(Atty. Castillo), to represent them.
Sps. Tatlonghari and Pedro, together with Valdez and Brual, as plaintiffs,
filed an amended complaint... against defendants.
Atty. Eliseo Magno Salva (Atty. Salva) of the Salva Salva & Salva Law Office
entered[12] the appearance of the law firm as collaborating counsel for
plaintiffs. Thereafter, plaintiffs, through Atty. Salva, filed a Manifestation and
Motion for Leave to File and to Admit Second Amended Complaint[13]
asserting the need to file a Second Amended Complaint for the purpose of,
inter alia, including as additional plaintiffs Sps. Tolentino A. Sandoval
(Tolentino) and Evelyn C. Sandoval (Evelyn; collectively, Sps. Sandoval),
who had previously purchased the mortgaged property of Valdez.
17
Incidentally, Valdez and Brual had since died; thus, the Second Amended
Complaint also sought to include their estate and heirs as defendants, as the
latter's consent to substitute their predecessors could not be secured.[14]
Additionally, Eugenia Ilagan (Eugenia), Pedro's spouse, was included as
plaintiff.
While the case was pending, Sps. Tatlonghari allegedly discovered evidence
which led them to believe that it was Tolentino, one of their co-plaintiffs, who
was responsible for involving their property in the purportedly anomalous
transactions with the bank.
As Attys. Castillo and Salva, the collaborating counsels of record, were both
hired by Pedro and Tolentino, Sps. Tatlonghari decided to engage the
services of their own counsel.
on August 3, 2011, Atty. Marlito I. Villanueva (Arty. Villanueva) entered[17]
his appearance as counsel for Sps. Tatlonghari.
Subsequently, Atty. Villanueva filed a motion for leave to file third amended
complaint[19] on behalf of Sps. Tatlonghari.
In their motion, they alleged that the title to their property had already been
consolidated in favor of the bank, and that the original and amended
complaints contained no allegations or prayer pertaining specifically to their
cause of action against the bank, which might bar them from getting
complete relief in the civil case.
the Third Amended Complaint[20] fully described the property in question
and stated that it was an entirely different property from the one covered by
the real estate mortgage in favor of the bank.
In view thereof, Sps. Tatlonghari prayed, inter alia, for the reconveyance of
their property, which the bank maliciously and unlawfully foreclosed and
transferred in its name, and for the award of damages.
the RTC denied Sps. Tatlonghari's motion, explaining that while it graciously
allowed the second amendment of the complaint, it can no longer allow a
third amendment in view of the delay in the adjudication of the merits of the
case. Moreover, it noted that Sps. Tatlonghari's motion did not bear the
signature of Atty. Salva, the current counsel of record of all the plaintiffs.
Since records are bereft of evidence that Atty. Salva had withdrawn as
counsel, he is still the Sps. Tatlonghari's counsel as far as the RTC was
concerned,notwithstanding Atty. Villanueva's entry of appearance on behalf
of Sps. Tatlonghari.
the CA found no grave abuse of discretion on the part of the RTC in denying
Sps. Tatlonghari's motion
Issues:

whether or not the CA erred in upholding the denial of Sps. Tatlonghari's

motion for leave to file third amended complaint and in finding that there was
no valid substitution of counsels of record insofar as Sps. Tatlonghari were
concerned.
Ruling:
With respect to the lack of conforme of Atty. Salva on the Sps. Tatlonghari's
motion, there is no rule requiring the written consent of a former attorney
prior to his substitution.
Section 26, Rule 138 of the Rules of Court provides:Section 26. Change of
attorneys. - An attorney may retire at any time from any action or special
proceeding, by the written consent of his client filed in court. He may also
retire at any time from an action or special proceeding, without the consent of
his client, should the court, on notice to the client and attorney, and on
hearing, determine that he ought to be allowed to retire. In case of
substitution, the name of the attorney newly employed shall be entered on
the docket of the court in place of the former one, and written notice of the
change shall be given to the adverse party.
A client may at any time dismiss his attorney or substitute another in his
place, but if the contract between client and attorney has been reduced to
writing and the dismissal of the attorney was without justifiable cause, he
shall be entitled to recover from the client the full compensation stipulated in
the contract. However, the attorney may, in the discretion of the court,
intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the
payment of money, and executions issued in pursuance of such judgment,
rendered in the case wherein his services had been retained by the client.
Nowhere in the foregoing provision is it stated that the written consent of an
attorney previously engaged by a client should be obtained before
substitution can be had; instead, what the rule requires is mere notice to the
adverse party.
a client may effect substitution of attorneys at any time subject to certain
conditions,... in this case, the Sps. Tatlonghari's - sole prerogative whom to
engage to represent their interests and prosecute the case on their behalf,
which prerogative cannot be negated or supplanted by the non-existent
requirement of written consent of the previous attorney.

18
ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, transactions. These documents need not be attached to or stated in the
Petitioner, v. LOURDES K. MENDOZA, Respondent. complaint as these are evidentiary in nature. In fact, Mendoza’s cause of
action is not based on these documents but on the contract of sale between
G.R. No. 176949, 27 June 2012. the parties.

DEL CASTILLO, J.:
Lourdes K. Mendoza (Mendoza), sole proprietor of Highett Steel Fabricators
(Highett), a Complaint for a sum of money against Asian Construction and
Development Corporation (ACDC), a duly registered domestic corporation.
Mendoza alleged that ACDC purchased from Highett various fabricated steel
materials and supplies amounting to P1,206,177.00, exclusive of interests;
that despite demand, ACDC failed and/or refused to pay.
Although the Charge Invoices are not actionable documents, these, along
with the Purchase Orders, are sufficient to prove that ACDC indeed ordered
supplies and materials from Highett and that these were duly delivered.
Moreover, contrary to the claim of ACDC, the Charge Invoices were properly
identified and authenticated by witness Tejero who was present when the
supplies and materials were delivered to ACDC and when the invoices were
stamped received by its employee.

Petitioner moved for a bill of particulars on the ground that no copies of the
purchase orders and invoices were attached to the complaint to enable
petitioner to prepare a responsive pleading to the complaint, which motion
was denied by the court. Accordingly, ACDC filed its Answer with
Counterclaim denying liability for the claims and interposing the defense of
lack of cause of action.
Mendoza presented the testimonies her salesman Artemio Tejero who
confirmed the delivery of the supplies and materials to ACDC.

The presentation of evidence for petitioner, however, was deemed waived

and terminated due to the repeated non-appearance of ACDC and counsel.

The Court ruled in favor of Mendoza, finding ACDC liable for purchase price
of the materials it ordered.

On appeal before the Supreme Court, ACDC argues that a charge or sales
invoice is not an actionable document; thus, its failure to deny under oath its
genuineness and due execution does not constitute an admission thereof.
ACDC likewise insists that respondent was not able to prove her claim as the
invoices offered as evidence were not properly authenticated by her
witnesses.

ISSUE: W/N ACDC is liable for the materials ordered.

RULING: Yes.

A document is actionable when an action or defense is grounded upon such

written instrument or document. In the instant case, the Charge Invoices are
not actionable documents per se as these only provide details on the alleged

19
Metropolitan Bank vs. Absolute Management Corp. | G.R. No. 170498 | mistake. Solutio indebiti, as defined in Article 2154 of the Civil Code, has two
January 9, 2013 indispensable requisites: first, that something has been unduly delivered
through mistake; and second, that something was received when there was
Facts: no right to demand it.

Metrobank deposited the AMC checks to Ayala Lumber and Hardware’s

account; because of Chua’s control over AMC’s operations, Metrobank
assumed that the checks payable to AMC could be deposited to Ayala
Lumber and Hardware’s account.

Ayala Lumber and Hardware had no right to demand and receive the checks
that were deposited to its account; despite Chua’s control over AMC and
Ayala Lumber and Hardware, the two entities are distinct, and checks
exclusively and expressly payable to one cannot be deposited in the account
of the other.

In its fourth-party complaint, Metrobank claims that Chua’s estate should

reimburse it if it becomes liable on the checks that it deposited to Ayala
Lumber and Hardware’s account.

Issue:

Whether or not Ayala Lumber must return the amount of said checks to
Metrobank.

Held:

Metrobank acted in a manner akin to a mistake when it deposited the AMC

checks to Ayala Lumber and Hardware’s account because it assumed that
the checks payable to AMC could be deposited to Ayala Lumber and
Hardware’s account. This disjunct created an obligation on the part of Ayala
Lumber and Hardware, through its sole proprietor, Chua, to return the
amount of these checks to Metrobank.

This fulfills the requisites of solutio indebiti. Metrobank’s fourth-party

complaint falls under the quasi-contracts enunciated in Article 2154 of the
Civil Code. Article 2154 embodies the concept "solutio indebiti" which arises
when something is delivered through mistake to a person who has no right to
demand it. It obligates the latter to return what has been received through
20
Meliton vs. Court of Appeals
Petitioner: Spouses Lydia and Virgilio Meliton
Respondent: Court of Appeals and Nelia A. Ziga, represented by her
Attorney-in-Fact Ramon A. Arejola
FACTS:
This is an appeal by certiorari to review the decision of the Court Appeals.
On June 22, 1988, private respondent Nelia Ziga and Emma A. Ziga-Siy,
filed a complaint in RTC Branch 27, Naga City for rescission of contract of
lease over a parcel of land situated at Elias Angeles Street, Naga City.
Alleged grounds are:
(a) petitioner’s failure as lessee to deposit one month rental and to pay the
montly rentals due;
(b) her construction of a concrete wall and roof on the site of a demolished
house in the leased premises without the lessor’s written consent; and
(c) her unauthorized sublease of the leased property to a third party.
Now petitioner Lydia Meliton filed an answer to the complaint denying the
material averments thereof and setting up three (3) counterclaims for:
(i) Recovery of the value of her kitchenette constructed on the leased
parcel of land and which was demolished by private respondent in the
amount of P 34,000.00;
(ii) The value of the improvements introduced in the kitchenette to beautify
it, in the amount of P10,000.00, plus the value of the furniture and
fixtures purchased for used in the kitchenette in the amount of
P23,000.00; and
(iii) Moral damages in the amount of P20,000.00 (aside from attorneys
fees of P5,000.00) and P250.00 per court appearance with litigation
expenses in the amount of P 1,000.00).
On May 29, 1989, the trial court, on motion of private respondent contending
that her cause of action had already become moot and academic by the
expiration of the lease contract on February 7, 1989, dismissed the
complaint. The counterclaim of petitioner Lydia Meliton was also dismissed
21
for the non-payment of the docket fees, holding that it had not acquired
jurisdiction over the same.
December 6, 1989 petitioners filed a complaint against private respondent for
the recovery of the same amount involved and alleged in their counterclaims
(previous cased which was dismissed, civil case no. RTC 88-1480).
February 15, 1991, Private respondent filed a motion to dismiss the
complaint on the ground that the cause of action therein was barred by prior
judgment in civil case no. RTC 88-1480, the order of dismissal was rendered
on May 29, 1989. The new case being civil case no. RTC 89-1942.
February 22, 1991, trial court denied private respondent’s motion to dismiss
the complaint in the new civil case on the ground that the dismissal of the
petitioner’s counterclaims in civil case no. RTC 88-1480 is not adjudication
on the merits as the court did not acquire jurisdiction over the counterclaims
for failure to pay the legal fees. Hence, it is believe that the said dismissal
does not constitute a bar to the filing of the later complaint.
Dissatisfied private respondent went to the Supreme Court via a petition for
certiorari. It was later referred to the Court of Appeals for proper
determination and disposition pursuant to section 9, paragraph 1, of BP 129.
In August 9, 1991, Court of Appeals (CA) granted the petition of the private
respondent in the motion to dismissed in connection to Cicil Case No. RTC
89-1942. According to CA, respondent’s counterclaim against the petitioner
in CC No. RTC 88-1480 is a compulsory counterclaim, it having arisen out of
or being necessarily connected with the transaction or the subject matter of
the petitioner’s complaint.
ISSUES:
Petitioners are now assailing the said judgment of the Court of Appeals and
praying for the annulment thereof. There are two issues:
(1) Whether or not the counterclaims of petitioner are compulsory in
nature; and
(2) Whether or not petitioner, having failed to seek reconsideration or to
take an appeal from the order of dismissal of their counterclaims, is
barred from asserting the same in another action.
RULING
(1) YES. From Rule 9, Section 4, a counterclaim is compulsory if

(a) it arises out of, or is necessarily connected with, the transaction

or occurrence which is the subject matter of the opposing
party’s claim;

(b) it does not require for its adjudication the presence of third
parties of whom the court cannot acquire jurisdiction; AND

(c) the court has jurisdiction to entertain the claim.

The Supreme Court said that one compelling test of compulsoriness is the
logical relationship between the claim alleged in the complaint and that in the
counterclaim; that is, where conducting separate trials of the respective
claims of the parties would entail a substantial duplication of effort and time,
as where they involve many of the same factual and/or legal issues.

(2) NO. Rule 9, Section 9 of the rules of court:

“That a counterclaim not set up shall be barred if it arises out
of or is necessarily connected with the transaction or
occurrence that is the subject matter of the opposing
party’s claim AND does not require for its adjudication the
presence of third parties of whom the court cannot acquire
jurisdiction”.

This rule is not applicable to the case at bar. The Supreme Court said
that in order that a prior judgment will constitute a bar to a subsequent
case, the following requisite must concur:
(i) The judgment must be final;

(ii) The judgment must have been rendered by a court having

jurisdiction over the subject matter and the parties;

(iii) The judgment must be on the merits; and

(iv) The must be between the first and the second actions identity
of parties of subject matter, and of causes of actions.

It further explained that under the rules, there is no need to pay docket fee
for a compulsory counterclaim. Had the trial court correctly specified that
petitioner’s counterclaims were compulsory, petitioners could have objected
to the dismissal sought by private respondents on the ground that said
counterclaims could not remain pending for independent adjudication.s

22
FAUSTINO GOJO, petitioner-appellant, vs.
SEGUNDO GOYALA and ANTONINA ALMOGUERA, respondents-
appellees.
Appeal from the favorable decision of the CFI of Sorsogon on the
counterclaim of respondents (herein appellees) in its Civil Case No. 1657-84
— the complaint (petition) of therein petitioner (herein appellant) having beet
previously dismissed, without prejudice, for his failure to submit an amended
complaint as required of him in the court a quo's earlier order.
Parties:
 Gojo – buyer
 Goyola and Almoguera - seller
Action:
 Gojo: Petition for consolidation of ownership
 Goyola: reformation of instrument
Facts
On 26 May 1951, Segundo, Goyala together with his now deceased wife
Antonina Almoguera sold to appellant by a "Deed of Pacto de Retro Sale" a
certain parcel of agricultural land (2.5 ha for P750.00), the repurchase to be
made, according to the deed, within one year.
On July 4, 1951, the vendee paid another P100.00 as addition to the
purchase price.
About ten (10) years after the execution of the said document, the vendee
filed with the CFI by way of a petition for consolidation of ownership of the
land described and involved in the "Deed of Pacto de Retro Sale."
The vendee alleged that the date for repurchase, May 26, 1952, having
expired and the vendors not having been able to repurchase, the ownership
over the land involved had become consolidated in him; and that for the
purpose of recording in the Registry of Property the said consolidation of
ownership, it was necessary that a judicial order be issued to that effect and
accordingly prayed for such an order.
23
Segundo Goyala filed an opposition or answer to the petition and alleged the
ff:
his wife Antonina had died in the year 1959
denied the pacto de retro sale, it was a cash loan of P750.00 payable in one
year without interest
additional 60 pesos was granted as loan
respondents executed a mortgage in favor of the petitioner on a parcel of
coconut land described
although the deed was executed in the form of a pacto de retro sale, the true
and real intention of the parties thereto was that the same was a mere
mortgage to secure the payment of the original loan of P750.00 together
with the additional amount received thereafter, making a total loan of
P810.00, payable within, one year without interest.
in the evening of May 26, 1952, he and his wife went to the house of the
petitioner andtendered to him the sum of P810.00 to pay the debt, but
said petitioner refused to receive the same and to cancel the document
of mortgage.
He filed a counterclaim and prayed that
Court dismiss the petition
Order Gojo to accept the 810
Declare the document to be mortgage and not a pacto de retro sale, and
ordering the same cancelled and with no more force and effect;
Ordering the petitioner to pay the respondents the sum of P1,800.00 per
annum beginning May 26, 1951 until the final termination of this case as the
reasonable monetary value of the products for the said property, and from
this amount, there should be deducted however, the corresponding legal
interest annually on said loans;
In case, however, that this Court should find the said instrument to be a
true pacto de retro sale, and not a mere mortgage, it is hereby prayed that
the petitioner be ordered to execute a deed of resale or repurchase of said
property in favor of the respondents in accordance with Art. 1606 third
paragraph of the Civil Code."
Goyala informed the trial court that the Antonina was already dead and that
her surviving nearest kin are her children, namely: Leonor, Pedro, Juliana,
Dolores, Valentina, Soledad, Penya, Mamerta, Salvador, Genesa, Felipe,
Elegio — all surnamed Goyala.
RTC required the plaintiff is to submit an amended Complaint substituting
therein for one of the defendants, Antonina Almoguera, now deceased her
successors in interest as party defendants, within the reglementary period.
Goyala filed a motion to dismiss the complaint or petition on the ground that
43 days had lapsed after appellant's receipt of the trial court order, yet
he failed and neglected to submit the amended complaint required of
him.
Trial court granted the MTD.
Goyola filed a motion to declare Gojo in default in respect of said
appellee's counterclaim. TC granted the petition
The Trial court ruled in favor of the defendant (counterclaim)
Deed of Pacto de Retro Sale an equitable mortgage and Goyala and
Almoguera are allowed to redeem the property;
orders Faustino Gojo to withdraw the amount of P810.00 deposited with the
Clerk of Court in full settlement of the loan,
cancels and declares without force and effect the aforementioned Deed of
Pacto de Retro Sale executed by the spouses Segundo Goyala and Antonina
Almoguera in favor of Faustino Gojo. Without costs
ordering the plaintiff to deliver and restore the possession of the land in
question to the defendants.
Appellant appealed to the Court of Appeals which upon its finding that the
said appeal involves purely questions of law, certified the same to this Court
for resolution.
24
Issues
[RELEVANT ISSUE] WON THE TRIAL COURT ERRED IN DISMISSING
PETITIONER’S COMPLAINT
It is true that under Section 3 of Rule 17, a complaint may be dismissed for
failure to prosecute if the plaintiff fails to comply with an order of the court,
but it is obvious that the said provision cannot apply when the order
supposedly ignored is a void one, as in this case.
The trial court ordered petitioner to amend the complaint only because it was
informed that one of the defendants had died, the court directing that the
plaintiff should name the heirs of the deceased as defendants in lieu of said
deceased. Such an order runs counter to Caseñas vs. Resales, et al.:
When certain parties die and due notice was given to the trial court, it
devolved on the said court to order, not the amendment of the complaint,
but the appearance of the legal representatives of the deceased in
accordance with the procedure and manner outlined in Rule 3, Section 17 of
the Rules of Court, which provide:.
"SECTION 17. Death of party. — After a party dies and the claim is not
thereby extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be
granted. If the legal representative fails to appear within said time, the court
may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court, and
the representative shall immediately appear for and on behalf of the interest
of the deceased. The court charges involved in procuring such appointment,
if defrayed by the opposing party, may be recovered as costs. The heirs of
the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may
appoint guardian ad litem for the minor heirs."
Barrameda vs. Barbara: an order to amend the complaint, before the proper
substitution of parties as directed by the rule has been effected, is void
and imposes upon the plaintiff no duty to comply therewith to the end
that an order dismissing the said complaint, for such non-compliance,
would similarly be void.
Ferriera, et al. vs. Gonzales (1958), the continuance of a proceedings during
the pendency of which a party thereto dies, without such party having been
validly substituted in accordance with the rules, amounts to a "lack of
jurisdiction".
 WON PLAINTIFF IS IN DEFAULT WITH RESPECT TO DEFENDANT'S
COUNTERCLAIM;
No occasion for the trial court to declare him in default in respect of
appellee's counterclaim in this case, for the reasons that:
(a) counterclaim "falls within the category of compulsory counterclaim" which
does not call for an independent answer as the complaint already denies its
material allegations; and
(b) dismissal of the complaint in this case without prejudice carried with it the
dismissal of the said counterclaim.
claims regarding the same matter should be decided in one single
proceeding. Dismissing the complaint without prejudice, as the trial court has
done in this case, albeit upon motion of the defendant, will not prevent the
undesirable multiplication of suits and reventilation of the same issues in the
subsequent action that may be filed by virtue of the reservation made in the
disputed order of dismissal.
Case remanded.

A plaintiff who fails or chooses not to answer a compulsory counterclaim may

not be declared in default, principally because the issues raised in the
counterclaim are deemed automatically joined by the allegations of the
complaint.
There can be no doubt that appellant's counterclaim was a compulsory one
in as much as it arises out of or is necessarily connected with transaction or
occurrence that is the subject matter of the complaint; the complaint alleged
that the right of appellee to repurchase the property in question had already
expired and asked for an order of consolidation.
Appellant's counterclaim was for reformation of the deed claiming that it
was only a mortgage. Thus the counterclaim was clearly inconsistent
with and directly controverted; the whole theory and basic allegations of
the complaint. In consequence, appellant's complaint stood as the answer to
appellee's counterclaim; hence, the incorrectness of the trial court's order
declaring the appellant in default in regard to said counterclaim is evident.

Besides, in line with the principle underlying Sec. 2 of Rule 17, it is not proper
to dismiss a complaint when a compulsory counterclaim has been pleaded
by defendant.

The reason is obvious. Under the cited provision, the right of the plaintiff to
move for the dismissal of an action after the defendant has filed his answer is
qualified by the clause providing that: "If a counterclaim has been pleaded by
a defendant prior to the service upon him of the plaintiff's motion to dismiss,
the action shall not be dismissed against the defendant's objection unless the
counterclaim can remain pending for independent adjudication by the court."
With this limitation, the power of the court to dismiss the complaint upon
motion of plaintiff, which is usually without prejudice, is not purely
discretionary. The purpose is to avoid multiplicity of suits over the same
matter which would necessarily entail unnecessary expense and, what is
worse, possibility of conflict and inconsistency in the resolution of the same
questions. The same considerations would obtain, if the defendant were the
one to ask for dismissal. The best interests of justice require that conflicting

25
National Marketing Corporation vs. Federation of United NAMARCO
Distributor’s Inc. G.R. No. L-22578 January 31, 1973
Topic: Test to Determine the Nature of Counterclaim
Facts:
1. NAMARCO and the FEDERATION entered into a Contract of Sale.
NAMARCO was authorized to import the following items with the
corresponding dollar value totalling $2,001,031.00. Among the goods
covered by the Contract of Sale were 2,000 cartons of PK Chewing
Gums, 1,000 cartons of Juicy Fruit Chewing Gums, 500 cartons of
Adams Chicklets, 168 cartons of Blue Denims, and 138 bales of Khaki
Twill.
2. To insure the payment of those goods by the FEDERATION, the
NAMARCO accepted three domestic letters of credit.
3. FEDERATION received from the NAMARCO the 2,000 cartons of PK
Chewing Gums, 1,000 cartons of Juicy Fruit Chewing Gums, and 500
cartons of Adams Chicklets, all with a total value of P277,357.91, under
the condition that the cost thereof would be paid in cash through PNB
Domestic L/C No. 600570; and on February 20, 1960, the FEDERATION
received from the NAMARCO the 168 cartons of Blue Denims and 183
bales of Khaki Twill, with a total value of P135,891.82 and P197,804.12,
respectively, under the condition that the cost thereof would be paid in
cash through PNB Domestic L/C Nos. 600606 and 600586, respectively.
4. FEDERATION filed a complaint against the NAMARCO for specific
performance and damages, alleging that after the NAMARCO had
delivered a great portion of the goods listed in the Contract of Sale, it
refused to deliver the other goods mentioned in the said contract.
a. In its answer, NAMARCO has refused and declined to accept the
cash payments by the FEDERATION. According to NAMARCO, the
Contract of Sale was not validly entered into by the NAMARCO and,
therefore, it is not bound by the provisions thereof.
b. NAMARCO tried to encash the three domestic letters but PNB
denied.
i. The common condition of the three letters of credit is that the sight
drafts drawn on them must be duly accepted by the FEDERATION
before they will be honored by the Philippine National Bank. But the
said drafts were not presented to the FEDERATION for acceptance.
26
ii. NAMARCO demanded from the FEDERATION the payment of the
total amount of P611,053.35, but the latter failed and refused to pay
the said amount. CFI Manila promulgated its decision ordering the
NAMARCO to specifically perform its obligation in the Contract of
Sale, by delivering to the FEDERATION the undelivered goods. SC
affirms
5. Then, NAMARCO instituted the present action (Civil Case No. 46124)
alleging, that the FEDERATION'S act or omission in refusing to satisfy
the former's valid, just and demandable claim has compelled it to file the
instant action; and praying that the FEDERATION be ordered to pay the
NAMARCO the sum of P611,053.35, representing the cost of
merchandise mentioned in the preceding paragraph, with interest.
a. FEDERATION: being a compulsory claim, in that it arose out of or is
necessarily connected with the transaction or occurrence that is the
subject matter of the action of the previous civil case, it must’ve been
set up in accordance with rule 10 sec 4. Failure to set up a
counterclaim precludes NAMARCO from instituting an independent
action.
b. NAMARCO: claim for recovery of the cost of merchandise is not
connected with the suit for specific performance and evidence would
not support or refute both. Ergo, it is not counterclaim
Issue:
WoN the present suit instituted by NAMARCO is a counterclaim. Hence,
barred by previous suit. (short version)
Whether or not this action of NAMARCO for the collection of the payment of
the merchandise delivered to, but not yet paid by, the FEDERATION, is
already barred as a consequence of the failure of NAMARCO to set it up as a
counterclaim in the previous case, (Civil Case No. 42684) (long version lol)
Held:
Rule on compulsory counterclaim [barred when not set up]: (1) that it arises
out of, or is necessarily connected with, the transaction or occurrence that is
the subject matter of the opposing party's claim (2) that it does not require for
its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction; and (3) that the court has jurisdiction to entertain the
claim.
Rule on permissive counterclaim [not barred if not set up]: logical connection
with the subject matter but the court has no jurisdiction or it requires for
adjudication the presence of 3rd parties.
Test to determine:
Additional discussion:
An after-acquired counterclaim, is one of the recognized exceptions to the
general rule that a counterclaim is compulsory and must be asserted if it
arises out of the same transaction as the opposing party's claim.

1. Issue identity –
2. that the counterclaim is compulsory if it would be barred by res judicata
3. same evidence or substantial identity in the evidence relating to the claim
and counterclaim
4. the logical relationship between the claim and counterclaim (compelling
test of compulsariness)
5.
a. It is the one circumstance without which neither party could have
found it necessary to seek relief.
It must be noted that one of the requisites for the application of the rule on
compulsory counterclaim is that the counterclaim should at least be
connected with or must arise out of the transaction or occurrence which gave
rise to the opposing party's claim.
While the refusal of NAMARCO to deliver the remainder of the goods
contracted for in its "trade assistance agreement" with FEDERATION, is the
important link in the chain of facts and events that constituted the transaction
upon which Federation's cause of action was based in Civil Case No. 42684,
it is not even a part of the transaction constituting the subject matter of
NAMARCO's present suit. For the action of FEDERATION on March 2,
1960, to compel NAMARCO to recognize the validity of their agreement and
deliver the remainder of the goods to be paid "on cash basis" in no way
involved the payment of the merchandise worth P609,014.73, already
delivered and paid for in cash by means of the domestic letters of credit.
Such non-payment by FEDERATION was a matter which was distinct and
separate from and had no logical relationship with the subject matter of
FEDERATION's own suit. These two claims are separate and distinct, as
they involve totally different factual and legal issues and do not represent the
same "basic controversy".
Thus a party who fails to interpose a counterclaim although arising out of or
is necessarily connected with the transaction or occurrence of the plaintiff's
suit but which did not exist or mature at the time said party files his answer is
not thereby barred from interposing such claim in a future litigation.
Doctrine:
"We have indicated that a counterclaim is compulsory if it bears a "logical
relationship" to an opposing party's claim. Zion v. Sentry Safety Control
Corp., 3 Cir., 1959. 258 F. 2d 31. See also United Artists Corp. v.
Masterpiece Productions, Inc. 2 Cir., 1955, 221 F. 2d 213, 216. The phrase
"logical relationship" is given meaning by the purpose of the rule which it was
designed to implement. Thus, a counterclaim is logically related to the
opposing party's claim where separate trials of each of their respective
claims would involve a substantial duplication of effort and time by the parties
and the courts. Where multiple claims involve many of the same factual
issues, or the same factual and legal issues, or where they are off-shoots of
the same basic controversy between the parties, fairness and considerations
of convenience and of economy require that the counterclaimant be
permitted to maintain his cause of action. ...

The right of the NAMARCO to the cost of the goods existed upon delivery of
the said goods to the FEDERATION which, under the Contract of Sale, had
to pay for them Therefore, the claim of the NAMARCO for the cost of the
goods delivered arose out of the failure of the FEDERATION to pay for the
said goods, and not out of the refusal of the NAMARCO to deliver the other
goods to the FEDERATION.

27
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), VS. HEIRS OF
FERNANDO F. CABALLERO
(PERMISSIVE COUNTERCLAIM)
FACTS:
Fernando and his wife, Sylvia Caballero, secured a mortgage secured by
their residential lot from petitioner Government Service Insurance System
(GSIS) in the amount of P20,000.00. However, Fernando defaulted on the
payment of his loan with the GSIS. GSIS wrote a letter to Fernando,
informing him of the consolidation of title in its favor, and requesting payment
of monthly rental in view of Fernando's continued occupancy of the subject
property. Negotiation as to repurchase also takes place.
GSIS scheduled the subject property for a 2nd public bidding after a failed
negotiation with Fernando to buy back his property. In this bidding, Jocelyn
Caballero, Fernando’s daughter submitted a bid but unfortunately defeated
by CMTC. With this, Fernando, filed with the Regional Trial Court (RTC) of
Kabacan, Cotabato a Complaint against CMTC, the GSIS and its responsible
officers Fernando prayed, among others, that judgment be rendered:
declaring GSIS Board of Trustees Resolution No. 199, dated May 16, 1989,
null and void for the irregularities in the conduct of the bidding.
GSIS and its officers filed their Answer with Affirmative Defenses and
Counterclaim. GSIS alleged that Fernando owed of P130,365.81,
representing back rentals, including additional interests from January 1973 to
February 1987, and the additional amount of P249,800.00. Caballero, on the
other hand, alleged that GSIS's counterclaim is permissive and its failure to
pay the prescribed docket fees results into the dismissal of its claim.
After trial, the RTC, in its Decision, 1994, ruled in favor of GSIS and
dismissed the complaint. In the same decision, the trial court granted GSIS's
counterclaim and directed Fernando to pay GSIS the rentals paid by CMTC
in the amount of P249,800.00.
ISSUE:
Whether or not the CA committed an error of law in holding that GSIS’s
counterclaim of rentals collected by the Caballero’s against CMTC is in the
nature of a permissive counterclaim which required the payment of GSIS of
docket fees before the Trial Court can acquire jurisdiction over the said
counterclaim.
28
HELD:
YES. The test was also established by the Supreme Court in this case to
determine whether a counterclaim is compulsory or not. The Court has
devised the following tests: (a) Are the issues of fact and law raised by the
claim and by the counterclaim largely the same? (b) Would res judicata bar a
subsequent suit on defendant's claims, absent the compulsory counterclaim
rule? (c) Will substantially the same evidence support or refute plaintiff's
claim as well as the defendant's counterclaim? and (d) Is there any logical
relation between the claim and the counterclaim? A positive answer to all
four questions would indicate that the counterclaim is compulsory.
Tested against the above-mentioned criteria, the SC agreed with the CA's
view that GSIS's counterclaim for the recovery of the amount representing
rentals collected by Fernando from the CMTC is permissive. The evidence
needed by Fernando to cause the annulment of the bid award, deed of
absolute sale and TCT is different from that required to establish GSIS's
claim for the recovery of rentals.
The issue in the main action, i.e., the nullity or validity of the bid award, deed
of absolute sale and TCT in favor of CMTC, is entirely different from the
issue in the counterclaim, i.e., whether GSIS is entitled to receive the
CMTC's rent payments over the subject property when it (GSIS) became the
owner of the subject property by virtue of the consolidation of ownership of
the property in its favor.
The rule in permissive counterclaims is that for the trial court to acquire
jurisdiction, the counterclaimant is bound to pay the prescribed docket fees.
This, GSIS did not do, because it asserted that its claim for the collection of
rental payments was a compulsory counterclaim. Since petitioner failed to
pay the docket fees, the RTC did not acquire jurisdiction over its permissive
counterclaim. The judgment rendered by the RTC, insofar as it ordered
Fernando to pay GSIS the rentals which he collected from CMTC, is
considered null and void. Any decision rendered without jurisdiction is a total
nullity and may be struck down at any time, even on appeal before this Court.
CALO V. AJAX INTERNATIONAL 22 SCRA 996 (1968) the complaint on the ground that the defendant has a bigger credit. Since the
defendant still has to institute a separate action for the remaining balance of
FACTS: Plaintiff Calo ordered from defendant Ajax International 1,200 ft of his counterclaim, the previous litigation did not really settle all related
John Shaw wire rope evidenced by Charge Order no 37071 for P3,420 controversies.

1. Plaintiff alleged that when the said rope was delivered, it was 300 ft Plaintiff Calo's claim of P12,000.00 not being a compulsory counterclaim in
short. Plaintiff then wrote a letter asking for complete delivery or
Civil Case No. VI-93062, it need not be filed there. The pendency then of
account adjustment of the alleged undelivered wire rope
2. Incidentally, Adolfo Benavides acquired the outstanding credit of said civil case could not be pleaded in abatement of Civil Case No. 860.
Calo from Ajax. Benavides filed a complaint against Calo before Consequently, the lower court erred in dismissing plaintiff's complaint.
MTC Manila. A judgment by default was entered and a writ of
execution was issued against Calo. The case was later remanded for DISPOSITIVE: The order of dismissal is reversed and the case is remanded
further proceedings for further proceedings
3. In turn, Calo filed before CFI Agusan a complaint against Ajax asking
for either complete delivery of charge order no 37071 of that she be
relieved from paying P855
4. Instead of filing an answer, Ajax moved for the dismissal of the case
on the ground that the subject matter involved was related to a
pending case filed in Manila by Benavides. The trial court sustained
the motion and dismissed the case. Plaintiff filed MR (denied).
5. The dismissal of the case in CFI Agusan was premised on the
theory that the petitioner’s claim is a compulsory counterclaim
to the case filed before MTC Manila

ISSUE: WON the case filed in CFI Agusan is a compulsory counter-claim

HELD: No, the plaintiff’s claim is not a compulsory counterclaim for the
simple reason that the amount thereof exceeds the jurisdiction of the
municipal trial court. The rule that a compulsory counterclaim not set
up is barred, when applied to the municipal court, presupposes that the
amount is within the said court’s jurisdiction. Otherwise, it would result to
an absurd situation where a claim must be filed within the MTC which is
prohibited from taking cognizance of, being beyond its jurisdiction.

Besides, the reason underlying the rule, which is to settle all related
controversies in one sitting only, is not obtained. Even if the counterclaim in
excess of the amount cognizable by the inferior court is set up, the defendant
cannot obtain positive relief. The rules allow this only for the defendant to
prevent plaintiff from recovering from him. This means that should the court
find both plaintiff’s complaint and the defendant’s counterclaim (for an
amount exceeding said court’s jurisdiction) meritorious, it will simply dismiss

29
CHAVEZ VS. SANDIGANBAYAN of the case, it was ruled that the charges pressed by respondent Enrile for
G.R. No. 91391 January 24, 1991 damages under Article 32 of the Civil Code arising from the filing of an
Petitioner: Francisco I. Chavez alleged harassment suit with malice and evident bad faith do not constitute a
compulsory counterclaim. To vindicate his rights, Senator Enrile has to file a
Respondent: The Hon. Sandiganbayan (First Division), Juan Ponce Enrile separate and distinct civil action for damages against the Solicitor General.
Ponente: J. Gutierrez Jr. To allow a counterclaim against a lawyer who files a complaint for his clients,
who is merely their representative in court and not a plaintiff or complainant
Facts: in the case would lead to mischievous consequences.

On July 31, 1987, the Republic of the Philippines, through the Presidential
Commission on Good Government (PCGG) with the assistance of Solicitor
General Francisco Chavez filed with the respondent Sandiganbayan a
complaint against Eduardo Cojuangco, Jr. and Juan Ponce Enrile for
reconveyance, reversion and accounting, restitution and damages.

After the denial of his motion to dismiss, respondent Enrile filed his answer
with compulsory counterclaim and cross-claim with damages.

Respondent Enrile then requested leave from the Sandiganbayan to implead

the petitioner and the PCGG officials as party defendants for lodging this
alleged "harassment suit" against him. The motion was granted in a
resolution dated June 8, 1989. In the case, the counterclaim was filed against
the lawyer, not against the party plaintiff itself.

Thereafter, all the PCGG officials filed their answer to the counterclaims
invoking their immunity from suits as provided in Section 4 of Executive
Order No. 1. The petitioner comes to the Court assailing the resolutions as
rendered with grave abuse of discretion amounting to lack of jurisdiction.

Issue:

Whether or not the petitioner is immune from being impleaded as additional

party defendant in the counterclaim filed by respondent Enrile.

Ruling:

Yes, it is not suggested that a lawyer enjoys a special immunity from damage
suits.

However, when he acts in the name of a client, he should not be sued on a

counterclaim in the very same case he has filed only as counsel and not as a
party. Any claim for alleged damages or other causes of action should be
filed in an entirely separate and distinct civil action. Under the circumstances
30
Chan v. CA
G.R. No. 109020; March 3, 1994 Petitioners: Felisa Chan Respondents: Hon.
Court of Appeals and Grace Cu
Doctrine/s:
A counterclaim for ejectment may be set up in a complaint for consignation.
Facts:
Felisa Chan and Grace Cu entered into a contract of lease whereby the latter
will occupy for residential purposes Room 401 and the rooftop of Room 442
of a building owned by the former located in Manila. The term of the lease is
1 year. In the contracts, it was agreed that the premises shall be used as a
learning center. The monthly rental was raised every year.
Said contract of lease was renewed every year for 2 successive years or up
to February 1, 1986. After February 1, 1986, there was no written contract of
lease executed by the parties, but Cu has continuously occupied the
premises as a learning center.
Sometime in November 1989, Chan padlocked the way to the rooftop.
Cu insisted that she should be allowed to use the rooftop while Chan
maintained that only Room 401 was leased and that the use of the rooftop
was merely tolerated.
Eventually, Chan terminated the lease, giving Cu until January 1, 1990 to
vacate the premises.
Because of the dispute between the parties, Chan did not collect the rental
for December 1989. Whereupon, Cu tendered to Chan a check, which the
latter refused to accept.
Cu’s lawyer tendered the payment in cash in the same amount with notice to
Chan that if she will not accept the payment, the same will be deposited in
court by way of consignation.
Chan allowed Cu to hold classes only up to March 1990.
31
On January 15, 1990, Cu filed a civil case for consignation with the
Metropolitan Trial Court of Manila. She alleged that Chan refused to accept,
without justifiable cause, the rentals for the premises in question.
Chan interposed in her answer a counterclaim for ejectment. She contended
that the lease, being month to month, had expired but that despite demand,
Cu refused to vacate the premises.
The MeTC declared that the rooftop is included in the lease and fixed the
term of the lease over the subject premises until June 30, 1992. It declared
the consignation of rentals made by Cu to be valid and legal and released Cu
from the obligation of paying the said rentals.
Both parties appealed to the RTC of Manila.
Cu maintained that the MeTC should have fixed a longer period, while Chan
contended that the court erred in extending the term of the lease and in
upholding the validity of the consignation.
RTC affirmed the MeTC’s decision.
CA reversed and set aside the decisions of the MeTC and the RTC and
dismissed the complaint for consignation for lack of merit.
o The MeTC and the RTC erred in passing upon the issue of ejectment
raised in Chan’s counterclaim since an action for ejectment can only be
initiated through a verified complaint, not a counterclaim. Thus, the courts
should not have fixed the term of the lease. This issue can only be decided in
a case of ejectment.
o In dismissing the complaint for consignation, CA ruled that Chan’s refusal
to accept the rental was justified and that she may not be compelled to
accept such rental payments.
Issue/s:
Whether the counterclaim for unlawful detainer was properly included in the
complaint for consignation. – YES.
Held:
It must be emphasized that the parties have conceded the propriety of the
counterclaim for ejectment and accepted the MeTC’s jurisdiction thereon. As
a matter of fact, the consignation was relegated to the background and the
parties heatedly tangled on the nagging issues on the duration of the lease
after the expiration of the last written contract, the power of the court to
extend the lease, and the length of the extension – all of which were
provoked by and linked to the counterclaim for ejectment. A counterclaim is
any claim for money or other relief which a defending party may have against
an opposing party. It need not diminish or defeat the recovery sought by the
opposing party, but may claim relief exceeding in amount or different in kind
from that sought by the opposing party’s claim.
Dispositive Portion:
WHEREFORE, the instant petition is GRANTED and the challenged Decision
of 20 January 1993 of the Court of Appeals in CAG. R. SP No. 28870 is
hereby SET ASIDE, and the Decisions of 27 March 1992 of Branch 11 of the
Regional Trial Court of Manila in Civil Case No. 9155879, and of 18
December 1990 of Branch 15 of the Metropolitan Trial Court of Manila in Civil
Case No. 131203CV are REINSTATED. Costs against the private
respondent. SO ORDERED.

Counterclaims are designed to enable the disposition of a whole controversy

of interested parties’conflicting claims, at one time and in one action,
provided all the parties can be brought before the court and the matter
decided without prejudicing the rights of any party.

A counterclaim “is in itself a distinct and independent cause of action, so that

when properly stated as such, the defendant becomes, in respect to the
matter stated by him, an actor, and there are two simultaneous actions
pending between the same parties, wherein each is at the same time both a
plaintiff and a defendant . . . . A counterclaim stands on the same footing and
is to be tested by the same rules, as if it were an independent action.”

In short, the defendant is a plaintiff with respect to his counterclaim. Section

8, Rule 6 of the Rules of Court provides that the answer may contain any
counterclaim which a party may have against the opposing party provided
that the court has jurisdiction to entertain the claim and can, if the presence
of third parties is essential for its adjudication, acquire jurisdiction of such
parties.

Under Section 4 of Rule 9, a counterclaim not set up shall be barred if it

arises out of or is necessarily connected with the transaction or occurrence
that is the subject matter of the opposing party’s claim and does not require
for its adjudication the presence of third parties of whom the court cannot
acquire jurisdiction. A counterclaim may be compulsory or permissive.

The former is that covered by Section 4 of Rule 9. Chan’s counterclaim for

ejectment is a compulsory counterclaim because it is necessarily connected
with the transaction or occurrence which is the subject matter of Cu’s
complaint, viz., the lease contract between them.

Consequently, the CA erred when it held that Chan’s cause of action for
ejectment could not be set up in a counterclaim.

32
Phil. Advertising Counselors, Inc. vs. Revilla GR No. L-31869, 8 August Considering that private respondent has not shown that it has a good and
1973 substantial defense which it may prove before the court a quo, a re-hearing
of the case by the trial court would be an exercise in futility, for, then, the
FACTS issue whether private respondent's answer failed to tender an issue will
again be laid before the court; and, as We have already said, it is quite clear
In a complaint filed on June 21, 1968 by petitioner against respondent that the said issue must have to be resolved in the negative.
Southern Industrial Projects, Inc. with the Court of First Instance of Rizal, it
alleged that from July 1, 1962 up to November 1, 1963, respondent
corporation engaged petitioner's services in promoting and advertising the
former's products; that as of July 20, 1965, said respondent had accumulated
unpaid accounts with petitioner in the total amount of P97,952.08.

Respondent admitted its indebtedness to petitioner in the sum of P97,952.08

and undertook to pay the same in periodic amortizations, as per its letter of
August 18, 1965. Respondent corporation made partial payments, but
eventually defaulted in spite of repeated demands from the petitioner.
Plaintiff filed a complaint against the respondent corporation. However,
respondent corporation prayed for the dismissal of the complaint on the
grounds that the defendant is without sufficient knowledge or information to
form a belief as to the truth, correctness or accuracy of the allegations set
forth in the plaintiff’s complaint.

Trial court rendered a decision in favor of the respondent on the grounds that
said answer really failed to tender any issue and that the claims alleged in
the complaint are, therefore, deemed admitted. Upon appeal to the CA, the
CA dismissed the petition. Hence, this petition.

ISSUE + RULING

Whether private respondent’s answer failed to tender an issue.

The rule authorizing an answer to the effect that the defendant has no
knowledge or information sufficient to form a belief as to the truth of an
averment and giving such answer the effect of a denial does not apply where
the fact as to which want of knowledge is asserted is so plainly and
necessarily within the defendant's knowledge that his averment of ignorance
must be palpably untrue. A mere allegation of ignorance of the facts alleged
in the complaint is insufficient to raise an issue for the defendant must aver
positively or state how it is that he is ignorant of the facts so alleged.

In the light of these doctrinal considerations, it is apparent, on the basis of

the undisputed facts appearing from the pleadings, that private respondent
was indebted to petitioner in the sum of P89,100.03, which debt was already
overdue; petitioner was, therefore, entitled to a judgment as a matter of law.

33
Liam Law vs. Olympic Sawmill
GR L-30771, 28 May 1984
Facts: On 7 September 1957, Liam Law (plaintiff) loaned P10,000.00,
without interest, to Olympic Sawmill Co. and Elino Lee Chi, as the latter’s
managing partner (defendants). The loan became ultimately due on 31
January 1960, but was not paid on that date, with the debtors asking for an
extension of 3 months, or up to 30 April 1960. On 17 March 1960, the parties
executed another loan document. Payment of the P10,000.00 was extended
to 30 April 1960, but the obligation was increased by P6,000 which formed
part of the principal obligation to answer for attorney’s fees, legal interest,
and other cost incident thereto to be paid unto the creditor and his
successors in interest upon the termination of this agreement. The
defendants again failed to pay their obligation.
On 23 September 1960, the plaintiff instituted the collection case before the
Court of First Instance of Bulacan. The defendants admitted the P10,000.00
principal obligation, but claimed that the additional P6,000.00 constituted
usurious interest. Upon the plaintiff’s application, the Trial Court issued a writ
of Attachment on real and personal properties of defendants. After the Writ of
Attachment was implemented, proceedings before the Trial Court versed
principally in regards to the attachment. On 18 January 1961, an Order was
issued by the Trial Court allowing both parties to simultaneously submit a
Motion for Summary Judgment. On 26 June 1961, the Trial Court rendered
decision ordering defendants to pay the plaintiff the amount of P10,000.00
plus the further sum of P6,000.00. The defendants appealed before the then
court of Appeals, which endorsed it to the Supreme Court stating that the
issue involved was one of law.
Issue [1]: Whether the allegation of usury should be made in writing and
under oath, pursuant to Section 9 of the Usury Law.
Held [1]: Section 9 of the Usury Law provides that “the person or corporation
sued shall file its answer in writing under oath to any complaint brought or
filed against said person or corporation before a competent court to recover
the money or other personal or real property, seeds or agricultural products,
charged or received in violation of the provisions of this Act. The lack of
taking an oath to an answer to a complaint will mean the admission of the
facts contained in the latter.” It envisages a complaint filed against an entity
34
which has committed usury, for the recovery of the usurious interest paid. In
that case, if the entity sued shall not file its answer under oath denying the
allegation of usury, the defendant shall be deemed to have admitted the
usury. The provision does not apply to a case where it is the defendant, not
the plaintiff, who is alleging usury.
Issue [2]: Whether the repeal of Rules of Court or any procedural law is with
retroactive effect.
Held [2]: The Court opined that the Rules of Court in regards to allegations
of usury, procedural in nature, should be considered repealed with
retroactive effect. It has been previously held (People vs. Sumilang, and De
Lopez, et al. vs. Vda. de Fajardo, et al.) that statutes regulating the
procedure of the courts will be construed as applicable to actions pending
and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent.
Comments (required in assignment): The last sentence of Section 11,
Rule 9, of the 1997 Rules of Civil Procedure provides that “Allegation of
usury in a complaint to recover usurious interest are deemed admitted if not
denied under oath,” and is similar in context to Section 9 of Usury Law, which
was raised in this 1984 case (although improperly applied). The reiteration of
matters pertaining to usury in the 1997 rules is perplexing as the 1984
decision itself admits that “usury has been legally non-existent; as interest
can now be charged as lender and borrower may agree upon,” and that the
“Rules of Court in regards to allegations of usury, procedural in nature,
should be considered repealed with retroactive effect.” These incongruent
realities, however, are secondary only to the fact that a mere Central Bank
circular or memorandum effectively suspended the application of the Usury
Law to a degree tantamount to its “repeal”.
Philippine Banking Corporation vs CA
January 13, 2004
Petitioner: Philippine Banking Corporation
Respondents: CA and Leonilo
Facts:
In 1982, the BANK through Florencio Pagsaligan persuaded Leonilo Marcos
to deposit money with the BANK. Marcos made a time deposit with the BANK
on two occasions. The first was on 11 March 1982 for P664,897.67.
On 12 March 1982, Marcos claimed he again made a time deposit with the
BANK for P764,897.67. The BANK did not issue an official receipt for this
time deposit but it acknowledged a deposit of this amount through a letter-
certification Pagsaligan issued.
In March 1983, Marcos wanted to withdraw from the BANK his time deposits
and the accumulated interests. However, the BANK convinced Marcos to
keep his time deposits intact and instead to open several domestic letters of
credit. The BANK required Marcos to give a marginal deposit of 30% of the
total amount of the letters of credit. The time deposits of Marcos would
secure 70%of the letters of credit. Marcos signed blank printed forms of the
application for the domestic letters of credit, trust receipt agreements and
promissory notes. He executed three Trust Receipt Agreements.
Marcos believed that he and the BANK became creditors and debtors of
each other. Marcos expected the BANK to offset automatically a portion of
his time deposits and the accumulated interest with the amount covered by
the three trust receipts totalling P851,250 less the 30% marginal deposit that
he had paid. Marcos argued that if only the BANK applied his time deposits
and the accumulated interest to his remaining obligation, he would have paid
completely his debt.
Marcos accused the BANK of unjustly demanding payment for the total
amount of the trust receipt agreements without deducting the 30% marginal
deposit that he had already made. He decried the BANK’s unlawful charging
of accumulated interest because he claimed there was no agreement as to
the payment of interest. Marcos also denied that he obtained another loan
from the BANK for P500,000 with interest at 25% pa supposedly covered by
Promissory Note No. 20-979-83 dated 24 October 1983.
The BANK denied the allegations in the complaint. The BANK believed that
the suit was Marcos’ desperate attempt to avoid liability under several trust
35
receipt agreements that were the subject of a criminal complaint. The BANK
pointed out that Marcos delivered to the BANK the time deposit certificates
by virtue of the Deed of Assignment dated 2 June 1989. Marcos executed
the Deed of Assignment to secure his various loan obligations. When Marcos
defaulted in the payment of Promissory Note No. 20-979-83, the BANK
debited his time deposits and applied the same to the obligation that is now
considered fully paid. The BANK insisted that the Deed of Assignment
authorized it to apply the time deposits in payment of Promissory Note No.
20-979-83. The BANK claimed that Marcos freely entered into the trust
receipt agreements. When Marcos failed to account for the goods delivered
or for the proceeds of the sale, the BANK filed a complaint for violation of
Presidential Decree No. 115 or the Trust Receipts Law. Instead of initiating
negotiations for the settlement of the account, Marcos filed this suit.
The BANK was declared in default, but this was later set aside. The bank
filed a motion praying to cross examine Marcos who testified during the ex
parte hearing (when bank was still in default). The trial court denied the
motion.The trial court rendered its decision in favor of Marcos. The CA
modified the decision of the trial court by reducing the amount of actual
damages and deleting the attorney’s fees awarded to Marcos.
Issue:
WON there was a violation of the Bank’s right to due process when the court
denied the motion to cross examine Marcos
Held: No
Ratio:
Prior to the denial of the motion, the trial court had properly declared the
BANK in default. Since the BANK was in default, Marcos was able to present
his evidence ex-parte including his own testimony. When the trial court lifted
the order of default, the BANK was restored to its standing and rights in the
action. However, as a rule, the proceedings already taken should not be
disturbed. Nevertheless, it is within the trial court’s discretion to reopen the
evidence submitted by the plaintiff and allow thed efendant to challenge the
same, by cross- examining the plaintiff’s witnesses or introducing
countervailing evidence.
The records show that the BANK did not ask the trial court to restore its right
to cross-examine Marcos when it sought thelifting of the default order on 9
January 1990. It was only on 2 March 1990 that the BANK filed the motion to
cross-examine Marcos. During the 12 March 1990 hearing, the trial court
denied the bank’s oral manifestation to grant its motion to cross-examine
Marcos because there was no proof of service on Marcos. The bank’s
counsel pleaded for reconsideration but the trial court denied the plea and
ordered the bank to present its evidence. Instead of presenting its evidence,
the BANK moved for the resetting of the hearing and when the trial court
denied the same, the bank informed the trial court that it was elevating the
denial to the “upper court.”
We do not agree with the appellate court’s ruling that a motion to cross-
examine is a non-litigated motion and that the trial court gravely abused its
discretion when it denied the motion to cross-examine. A motion to cross-
examine is adversarial. The adverse party in this case had the right to resist
the motion to cross-examine because the movant had previously forfeited its
right to cross-examine the witness. The purpose of a notice of a motion is to
avoid surprises on the opposite party and to give him time to study and meet
the arguments. In a motion to cross-examine, the adverse party has the right
not only to prepare a meaningful opposition to the motion but also to be
informed that his witness is being recalled for cross-examination. The proof
of service was therefore indispensable and the trial court was correct in
denying the oral manifestation to grant the motion for cross-examination.
While the right to cross-examine is a vital element of procedural due process,
the right does not necessarily require an actual cross-examination, but
merely an opportunity to exercise this right if desired by the party entitled to
it. Clearly, the BANK’s failure to cross-examine is imputable to the BANK
when it lost this right as it was in default and failed thereafter to exhaust the
remedies to secure the exercise of this right at the earliest opportunity.
Issue:
Failure to deny under oath actionable document – admission on the part of
Marcos? NO
Ratio:
The BANK cannot claim that Marcos had admitted the due execution of the
documents attached to its answer because the BANK filed its answer late
and even failed to serve it on Marcos. The BANK’s answer, including the
actionable documents it pleaded and attached to its answer, was a mere
scrap of paper. There was nothing that Marcos could specifically deny under
oath. Marcos had already completed the presentation of his evidence when
the trial court lifted the order of default and admitted the BANK’s answer. The
provision of the Rules of Court governing admission of actionable documents
36
was not enacted to reward a party in default. We will not allow a party to gain
an advantage from its disregard of the rules.
Issue:
Right to present evidence? WAIVED
Ratio: The BANK had waived this right. The BANK cannot now claim that it
was deprived of its right to conduct a re-direct examination of Pagsaligan.
The BANK postponed the hearings three times because of its inability to
secure Pagsaligan’s presence during the hearings. The BANK could have
presented another witness or its other evidence but it obstinately insisted on
the resetting of the hearing because of Pagsaligan’s absence allegedly due
to illness.
The BANK’s propensity for postponements had long delayed the case. Its
motion for postponement based on Pagsaligan’s illness was not even
supported by documentary evidence such as a medical certificate.
Documentary evidence of the illness is necessary before the trial court could
rule that there is a sufficient basis to grant the postponement.
Issue:
WON the existence of the promissory note was proven
Held: No
Ratio: The bank failed to produce the best evidence — the original copies of
the loan application and promissory note. The Best Evidence Rule provides
that the court shall not receive any evidence that is merely substitutionary in
its nature, such as photocopies, as long as the original evidence can be had.
Absent a clear showing that the original writing has been lost, destroyed or
cannot be produced in court, the photocopy must be disregarded, being
unworthy of any probative value and being inadmissible evidence.
What the BANK presented were merely the “machine copies of the duplicate”
of the loan application and promissory note.
No explanation was ever offered by the BANK for its inability to produce the
original copies of the documentary evidence. The BANK also did not comply
with the orders of the trial court to submit the originals. The absence of the
original of the documentary evidence casts suspicion on the existence of
Promissory Note No. 20-979-83 considering the BANK’s fiduciary duty to
keep efficiently a record of its transactions with its depositors. Moreover, the
 circumstances enumerated by the trial court bolster the conclusion that
Promissory Note No. 20-979-83 is bogus. The BANK has only itself to blame
for the dearth of competent proof to establish the existence of Promissory
Note No. 20-979-83.
Issue:
WON the bank is liable to Marcos
Held: Yes
Ratio:
The BANK is liable to Marcos for offsetting his time deposits with a fictitious
promissory note. The existence of Promissory Note No. 20-979-83 could
have been easily proven had the BANK presented the original copies of the
promissory note and its supporting evidence. In lieu of the original copies, the
BANK presented the “machine copies of the duplicate” of the documents.
These substitute documents have no evidentiary value. The BANK’s failure
to explain the absence of the original documents and to maintain a record of
the offsetting of this loan with the time deposits bring to fore the BANK’s
dismal failure to fulfill its fiduciary duty to Marcos. Section 2 of Republic Act
No. 8791 expressly imposes this fiduciary duty on banks when it declares
that the State recognizes the “fiduciary nature of banking that requires high
standards of integrity and performance.” This statutory declaration merely
echoes the earlier pronouncement of the Supreme Court in Simex. v. CA
requiring banks to “treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship.”
The Court reiterated this fiduciary duty of banks in subsequent cases.
Although RA No. 8791 took effect only in the year 2000, at the time that the
BANK transacted with Marcos, jurisprudence had already imposed on banks
the same high standard of diligence required under RA No. 8791.[35] This
fiduciary relationship means that the bank’s obligation to observe “high
standards of integrity and performance” is deemed written into every de posit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good
father of a family.
Thus, the BANK’s fiduciary duty imposes upon it a higher level of
accountability than that expected of Marcos, a businessman, who negligently
signed blank forms and entrusted his certificates of time deposits to
Pagsaligan without retaining copies of the certificates. The business of
37
banking is imbued with public interest. The stability of banks largely depends
on the confidence of the people in the honesty and efficiency of banks.\
As the BANK’s depositor, Marcos had the right to expect that the BANK was
accurately recording his transactions with it.
Upon the maturity of his time deposits, Marcos also had the right to withdraw
the amount due him after the BANK had correctly debited his outstanding
obligations from his time deposits. By the very nature of its business, the
BANK should have had in its possession the original copies of the disputed
promissory note and the records and ledgers evidencing the offsetting of the
loan with the time deposits of Marcos. The BANK inexplicably failed to
produce the original copies of these documents. Clearly, the BANK failed to
treat the account of Marcos with meticulous care. The BANK claims that it is
a reputable banking institution and that it has no reason to forge Promissory
Note No. 20-979-83.The trial court and appellate court did not rule that it was
the bank that forged the promissory note. It was Pagsaligan, the BANK’s
branch manager and a close friend of Marcos, whom the trial court
categorically blamed for the fictitious loan agreements. The trial court held
that Pagsaligan made up the loan agreement to cover up his inability to
account for the time deposits of Marcos.
Whether it was the BANK’s negligence and inefficiency or Pagsaligan’s
misdeed that deprived Marcos of the amount due him will not excuse the
BANK from its obligation to return to Marcos the correct amount of his time
deposits with interest. The duty to observe “high standards of integrity and
performance” imposes on the BANK that obligation. The BANK cannot also
unjustly enrich itself by keeping Marcos’ money.
Assuming Pagsaligan was behind the spurious promissory note, the BANK
would still be accountable to Marcos. We haveheld that a bank is liable for
the wrongful acts of its officers done in the interest of the bank or in their
dealings as bank representatives but not for acts outside the scope of their
authority.
Issue: Total amount due to Marcos
Ratio:
The BANK has always argued that Marcos’ time deposits only totalled
P764,897.67. What the BANK insists on in this petition is the trial court’s
violation of its right to procedural due process and the absence of any
obligation to pay or return anything to Marcos. Marcos, on the other hand,
merely prays for the affirmation of either the trial court or appellate court
decision. We uphold the finding of the Court of Appeals as to the amount of
the time deposits as such finding is in accord with the evidence on record.
Marcos claimed that the certificates of time deposit were with Pagsaligan for
safekeeping. Marcos was only able to present the receipt dated 11 March
1982 and the letter-certification dated 12 March 1982 to prove the total
amount of his time deposits with the BANK. The foregoing certification is
clear. The total amount of time deposits of Marcos as of 12 March 1982
isP764,897.67, inclusive of the sum of P664,987.67 that Marcos placed on
time deposit on 11 March 1982. This is plainly seen from the use of the word
“aggregate.”

We are not swayed by Marcos’ testimony that the certification is actually for
the first time deposit that he placed on 11 March 1982. The letter-
certification speaks of “various Time Deposits Certificates with an ‘aggregate
value’ of P764,897.67.” If the amount stated in the letter-certification is for a
single time deposit only, and did not include the 11 March 1982 time deposit,
then Marcos should have demanded a new letter of certification from
Pagsaligan. Marcos is a businessman. While he already made an error in
judgment in entrusting to Pagsaligan the certificates of time deposits, Marcos
should have known the importance of making the letter-certification reflect
the true nature of the transaction. Marcos is bound by the letter-certification
since he was the one who prodded Pagsaligan to issue it. We modify the
amount that the CA ordered the BANK to return to Marcos. The appellate cou
rt did not offset Marcos’ outstanding debt with the BANK covered by the three
trust receipt agreements even though Marcos admits his obligation under
thethree trust receipt agreements. The total amount of the trust receipts is
P851,250 less the 30% marginal deposit of P255,375 that Marcos had
already paid the BANK. This reduced Marcos’ total debt with the BANK to
P595,875 under the trust receipts.

The BANK’s dismal failure to account for Marcos’ money justifies the award
of moral and exemplary damages. Certainly, the bank, as employer, is liable
for the negligence or the misdeed of its branch manager which caused
Marcos mental anguish and serious anxiety. Moral damages of P100,000 is
reasonable and is in accord with our rulings in similar cases involving banks’
negligence with regard to the accounts of their depositors. We also award
P20,000 to Marcos as exemplary damages. The law allows the grant of
exemplary damages by way of example for the public good.

The public relies on the banks’ fiduciary duty to observe the highest degree
of diligence. The banking sector is expected to maintain at all times this high
level of meticulousness.

38
Katon v. Palanca, et al., G.R. No. 151149, 07 September 2004.
FACTS:
Petitioner Katon contends that the whole area known as Sombrero Island,
located in Tagpait, Aborlan, Palawan, had been classified from forest land to
agricultural land and certified available for disposition upon his request and at
his instance. However, Palawan authorities then favorably endorsed the
request of Respondent Palanca, together with some others, which resulted in
the issuance of homestead patent in Palanca’s favor in 1977 among others.
In 1999, filed a petition which seeks to nullify the homestead patents and
original certificates of title issued in favor of the Palanca et al. as well as the
reconveyance of the whole island in his favor. Palanca et al. filed their
Answer and Motion to Dismiss. The trial court dismissed Katon’s Complaint
as well as his subsequent motion for reconsideration.
Katon filed a petition for certiorari with the Court of Appeals (CA). The
petition was dismissed motu proprio pursuant to the appellate court’s residual
prerogative. The CA ruled that prescription had already barred the action for
reconveyance. Katon questions this dismissal. He submits that the CA
erroneously invoked its residual prerogatives under Section 1 of Rule 9 of the
Rules of Court when it motu proprio dismissed the Petition for lack of
jurisdiction and prescription. According to him, residual prerogative refers to
the power that the trial court, in the exercise of its original jurisdiction, may
still validly exercise even after perfection of an appeal. It follows that such
powers are not possessed by an appellate court.
jurisdiction is embodied in Section 9 of Rule 41 of the Rules of Court, xxx
The residual jurisdiction of trial courts is available at a stage in which the
court is normally deemed to have lost jurisdiction over the case or the subject
matter involved in the appeal. This stage is reached upon the perfection of
the appeals by the parties or upon the approval of the records on appeal, but
prior to the transmittal of the original records or the records on appeal. In
either instance, the trial court still retains its so-called residual jurisdiction to
issue protective orders, approve compromises, permit appeals of indigent
litigants, order execution pending appeal, and allow the withdrawal of the
appeal.
The CA’s motu proprio dismissal of petitioners Complaint could not have
been based, therefore, on residual jurisdiction under Rule 41. Undeniably,
such order of dismissal was not one for the protection and preservation of the
rights of the parties, pending the disposition of the case on appeal. What the
CA referred to as residual prerogatives were the general residual powers of
the courts to dismiss an action motu proprio upon the grounds mentioned in
Section 1 of Rule 9 of the Rules of Court and under authority of Section 2 of
Rule 1 of the same rules.

ISSUE:

Was the Court of Appeals correct in applying residual prerogative in

dismissing a case motu proprio based on prescription?

HELD: YES.

Petitioner has confused what the CA adverted to as its residual prerogatives

under Section 1 of Rule 9 of the Rules of Court with the residual jurisdiction
of trial courts over cases appealed to the CA.

Under Section 1 of Rule 9 of the Rules of Court, defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived,
except when (1) lack of jurisdiction over the subject matter, (2) litis pendentia,
(3) res judicata and (4) prescription are evident from the pleadings or the
evidence on record. In the four excepted instances, the court shall motu
proprio dismiss the claim or action. xxx On the other hand, residual

39