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On February 7, 1990, Quisumbing opposed SLDC's motion for intervention.

He
argued that SLDC's interest in the subject property was a mere contingency or
expectancy, which was dependent on any judgment which might be rendered for or
against PNB as transferor. He further argued that the allowance of SLDC's motion
[G.R. No. 106194. January 28, 1997] would only make the proceedings complicated, expensive and interminable.[5]

On March 30, 1990, the lower court issued an order granting petitioner's motion
for intervention and admitting its answer in intervention. The court also directed the
substitution of heirs in view of Norberto J. Quisumbing's demise and submitted for
SANTIAGO LAND DEVELOPMENT CORPORATION, petitioner, vs. The resolution PNB's motion to dismiss.[6]
HONORABLE COURT OF APPEALS and the HEIRS OF NORBERTO J.
QUISUMBING, respondents. Petitioner SLDC, as intervenor, then served interrogatories upon private
respondents and moved for the production, inspection and copying of certain
documents.[7] SLDC wanted to know whether there were documents to show that a
consideration had been paid for the assignment of the right of redemption; if so,
whether payment was made in cash or by check; and, if it was by check, in what
DECISION banks the checking accounts were kept and whether the checks were still in its
custody or possession.
MENDOZA, J.:
Private respondents filed a motion to quash or disallow the interrogatories, which
petitioner opposed. Subsequently, private respondents filed a reply to which petitioner
This is a petition for review on certiorari of the decision of the Court of Appeals,
SLDC responded by filing a rejoinder.[8]
annulling certain orders issued by the Regional Trial Court of Makati, Branch 62 in
Civil Case No. 10513, entitled Norberto J. Quisumbing v. Philippine National Bank, to On March 21, 1991, the trial court denied private respondents' motion to quash
wit: or disallow interrogatories and instead granted petitioner SLDC's motion for the
production, inspection and copying of certain documents.[9] Private respondents moved
(1) Order, dated March 30, 1990, granting petitioner Santiago Land
for a reconsideration, but their motion was denied by the lower court in its order of
Development Corporation's motion for intervention and order admitting its
July 30, 1991. Private respondents therefore filed a petition for certiorari with the
answer in intervention;
Court of Appeals which rendered the decision, now the subject of this review, setting
(2) Order, dated March 21, 1991, denying private respondent Quisumbing's aside the orders dated March 30, 1990, March 21, 1991, and July 30, 1991 of the trial
motion to quash or disallow interrogatories and court.

(3) Order, dated July 30, 1991, denying Quisumbing's motion for In its petition before the Court, SLDC contends that the Court of Appeals erred
reconsideration. thus:

The facts are as follows: [1] THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION,
EXCEEDED ITS JURISDICTION AND/OR WAS PATENTLY IN ERROR IN TAKING
Norberto J. Quisumbing brought an action against the Philippine National Bank COGNIZANCE OF AND RULING UPON THE FIRST ISSUE RAISED BY PRIVATE
to enforce an alleged right to redeem certain real properties foreclosed by the Philippine RESPONDENTS IN CA-G.R. SP NO. 25826 WHEN THIS ISSUE WAS NOT EVEN
National Bank.Quisumbing brought the suit as assignee of the mortgagor, Komatsu RAISED BY THEM BEFORE THE TRIAL COURT.
Industries (Phils.), Incorporated.
[2] THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION
On November 21, 1989, with notice of the pending civil action,[1] petitioner EXCEEDED ITS JURISDICTION AND/OR WAS PATENTLY IN ERROR IN TAKING
Santiago Land Development Corporation purchased from PNB one of the properties COGNIZANCE OF THE PETITION RAISED BY PRIVATE RESPONDENTS IN CA-
subject of the litigation, situated along Pasong Tamo Extension in Makati, for P90 G.R. SP NO. 25826 SINCE THEY DID NOT RAISE ANY JURISDICTIONAL ERROR
Million.[2] THEREIN BUT ONLY RAISED QUESTIONS AS TO PROCEDURAL ORDERS
ISSUED BY THE TRIAL COURT IN THE RIGHTFUL EXERCISE OF ITS
On December 11, 1989, petitioner SLDC filed a motion to intervene, with its JURISDICTION AND DISCRETION.
answer in intervention attached, alleging that it was the transferee pendente lite of the
property and that any adverse ruling or decision which might be rendered against PNB [3] EVEN IF THE COURT OF APPEALS WAS AUTHORIZED TO PASS UPON
would necessarily affect it (petitioner).[3] In its attached answer, SLDC, aside from THE PROCEDURAL QUESTION RAISED BY PRIVATE RESPONDENTS IN CA-G.R.
adopting the answer filed by PNB, raised as affirmative defenses the trial court's lack of SP NO. 25826, IT ERRED IN BARRING THE TRIAL COURT, IN THE SOUND
jurisdiction based on the alleged failure of plaintiff Quisumbing to pay the docket fee EXERCISE OF ITS SOUND DISCRETION, FROM ALLOWING PETITIONER TO
and Quisumbing's alleged lack of cause of action against the PNB due to the invalidity INTERVENE IN ONE OF THE CLASSIC OR RECOGNIZED INSTANCES OF
of the deed of assignment to him.[4] INTERVENTION IN THE CIVIL ACTION UNDER SECTION 2 OF RULE 12 OF THE

1
RULES OF COURT DESPITE COMPLIANCE WITH THE STANDARDS FOR In applying the rule on transfer of interest pendente lite (Rule 3, 20) rather than
INTERVENTION PRESCRIBED THEREIN. the rule on intervention (Rule 12, 2), the Court of Appeals stated:

[4] THE COURT OF APPEALS DENIED PETITIONER OF THE RIGHT TO


GENUINELY OR EFFECTIVELY DEFEND ITSELF IN THE CIVIL ACTION DESPITE While it may be that respondent SLDC has a legal interest in the subject matter of the
ITS HAVING ACQUIRED A REAL AND SUBSTANTIVE INTEREST IN THE litigation, its interest as transferee pendente lite is different from that of an
SUBJECT MATTER OF THE CIVIL ACTION. intervenor. Section 2 of Rule 12 refers to all other persons or entities whose legal
interests stand to be affected by a litigation, but it does not cover a transferee pendente
[5] PRIVATE RESPONDENTS FAILED TO OBJECT TO THE lite because such transferee is already specifically governed by Section 20 of Rule 3.
INTERROGATORIES IN THE MANNER PRESCRIBED BY THE RULES OF COURT Otherwise, Section 20 of Rule 3 on transferees pendente lite would be rendered
AND THEY WERE THEREFORE BARRED FROM RAISING THEIR OBJECTIONS ineffectual and useless. Since it specifically covers transferees pendente lite, any such
TO THE INTERROGATORIES. transferee cannot just disregard said provision and instead, opt to participate as an
intervenor when it is more convenient for it to do so. Indeed, there has never been a
[6] THE TRIAL COURT CORRECTLY DENIED PRIVATE RESPONDENTS' rule, authority or decision holding that a transferee pendente lite has the option to
MOTION TO QUASH PETITIONER'S INTERROGATORIES.[10] avail of either Rule 3, Section 20 or Rule 12, Section 2.
Petitioner's contentions are without merit.
. . . It has been consistently held that a transferee pendente lite stands in exactly the
Petitioner's first contention is without basis in fact. The fact is that the issue same position as its predecessor-in-interest, that is, the original defendant. . . .
regarding the propriety of petitioner's motion for intervention was raised by private However, should the transferee pendente litechoose to participate in the proceedings, it
respondents before the trial court in their opposition to said motion.[11] Moreover, can only do so as a substituted defendant or as a joint party-defendant. The
petitioner SLDC is estopped from questioning the appellate court's ruling on this issue transferee pendente lite is a proper but not an indispensable party as it would in any
since petitioner did not object to its consideration by the court in its comment on the event be bound by the judgment against his predecessor-in-interest. This would be
petition filed in that court.[12] true even if respondent SLDC is not formally included as a party-defendant through an
amendment of the complaint. As such the transferee pendente lite is bound by the
Nor is it true that private respondents' petition for certiorari in the Court of proceedings already had in the case before the property was transferred to it (Jocson
Appeals did not raise a jurisdictional question. The petition specifically charged the vs. CA, 183 SCRA 589, citing Fetalino vs. Sanz, 44 Phil. 691; Associacion de
RTC with gravely abusing its discretion in issuing its questioned orders, in granting Agricultores de Talisay Silay, Inc. vs. Talisay Silay Milling Co., Inc., 88 SCRA 294)
petitioner's motion for intervention and in denying private respondents' motion to
quash or disallow interrogatories. Clearly, the Court of Appeals correctly took
cognizance of the issue regarding the propriety of petitioner SLDC's motion for Petitioner asserts that Rule 12, 2 and Rule 3, 20 can be applied interchangeably
intervention. and that the Court of Appeals is in error in its insistence on the application of Rule 3,
20 solely.Petitioner thus overlooks a substantial difference in the nature and
This brings us to the main question raised in the third and fourth assignments of consequences of the two rules. The purpose of Rule 12, 2 on intervention is to enable a
errors, namely, whether petitioner, as transferee pendente lite of the property in stranger to an action to become a party to protect his interest and the court
litigation has a right to intervene. incidentally to settle all conflicting claims.[13] On the other hand, the purpose of Rule 3,
20 is to provide for the substitution of the transferee pendente lite precisely because he
Rule 12, 2 of the Rules of Court provides: is not a stranger but a successor-in-interest of the transferor, who is a party to the
action. As such, a transferee's title to the property is subject to the incidents and
Sec. 2. Intervention. A person may, before or during a trial be permitted by the court, in results of the pending litigation and is in no better position than the vendor in whose
its discretion, to intervene in an action, if he has legal interest in the matter in shoes he now stands.[14] As held in Fetalino v. Sanz:[15]
litigation, or in the success of either of the parties, or an interest against both, or when
he is so situated as to be adversely affected by a distribution or other disposition of As such, he stands exactly in the shoes of his predecessor in interest, the original
property in the custody of the court or of an officer thereof. defendant, and is bound by the proceedings had in the case before the property was
transferred to him. He is a proper, but not an indispensable, party as he would, in any
The question is whether this provision applies to petitioner in view of Rule 3, 20 event, have been bound by the judgment against his predecessor.
governing transfers of interest pendente lite such as was alleged in the trial court by
petitioner. This provision reads: How then can it legally be possible for a transferee pendente lite to still intervene
when, for all intents and purposes, the law already considers him joined or substituted
Sec. 20. Transfer of interest. In case of any transfer of interest, the action may be in the pending action, commencing at the exact moment when the transfer of interest
continued by or against the original party, unless the court upon motion directs the is perfected between the original party-transferor and the transferee pendente lite? And
person to whom the interest is transferred to be substituted in the action or joined this even if the transferee is not formally joined as a party in the action. On the other
with the original party. hand, one who intervenes has a choice not to intervene and thus not to be concluded
by any judgment that may be rendered between the original parties to the action.

2
Because the transferee pendente lite simply takes the place of the transferor, he Respondent spouses Jose and Guillermina Gabor are the registered owners of a parcel
is barred from presenting a new or different claim. The appellate court therefore of land with an area of Sixty-One Thousand Eighty-Five (61,085) square meters, more
properly refused to pass upon petitioner's attempt to inquire into the consideration or less, situated at Barrio Mapunso, Tanay, Rizal Province, and covered by Transfer
paid for the assignment of the right of redemption to the late Norberto J. Quisumbing, Certificate of Title (TCT) No. M-25565 issued by the Register of Deeds of Morong.3
as well as petitioner's claim that the transfer of interest to Quisumbing was made in
violation of Art. 1491(5) of the Civil Code, prohibiting attorneys from acquiring property
On November 14, 1985, the Spouses Gabor executed a Deed of Assignment
or interest which is the object of the litigation in which they take part as such. This
transferring Twenty Thousand Six Hundred Thirty-One (20,631) square meters
matter was never alleged by PNB in its answer to Quisumbing's complaint.
undivided portion of the aforementioned parcel of land in favor of petitioner Emiliano
Since petitioner is a transferee pendente lite with notice of the pending litigation S. Samson as attorney’s fees in payment for the services rendered by the latter for the
between Quisumbing and PNB, petitioner stands exactly in the shoes of defendant PNB former.
and is bound by any judgment or decree which may be rendered for or against
PNB.[16] Under Rule 3, 20, the action may be continued against PNB, the original On October 22, 1987, petitioner Samson executed a Deed of Assignment transferring
defendant. In the alternative although it was not essential that the transferee be the same undivided portion in favor of Ma. Remedios P. Ramos. Upon learning of the
substituted and the latter insist on such substitution the trial court could have sale, respondent spouses filed an action for legal redemption with the RTC of Tanay,
directed that petitioner be either substituted as party-defendant or joined with Rizal. Immediately thereafter, petitioner Samson and Ramos executed an Agreement of
defendant PNB.[17] Rescission revoking the transfer of the undivided portion.4 On July 25, 1989, the RTC
dismissed the suit for legal redemption. On appeal, however, the CA, in CA-G.R. CV
But petitioner could not be allowed to intervene for the reason already stated that
No. 25530, reversed the decision of the RTC and upheld the Spouses Gabor’s right of
the conditions under which one may be allowed to intervene are significantly far
legal redemption. No further appeals were pursued.
different from the conditions under which a transferee pendente lite is substituted in
place of the original party. For the fact is that an intervenor can withdraw and refuse
to be bound by any decision that may be rendered in the case but the fortunes of a Instead, during the pendency of CA-G.R. CV No. 25530, petitioner Samson filed an
transferee pendente lite, although not formally impleaded as a party, are bound up action for Partition of Real Property and Damages5 against respondent spouses with
with those of his transferor. the RTC of Morong, Rizal, which dismissed the same on the ground that the finalityof
CA-G.R. CV No. 25530 effectively barred the action for partition.6 Agreeing with the
With respect to the fifth and sixth assignments of errors, suffice it to say that RTC, the CA, in CA-G.R. CV No. 38373,7 upheld the lower court’s decision, in the
because petitioner did not have a right to intervene, it did not have the right to file following wise:
interrogatories or seek the production of documents by private respondents, either.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED. The appeal is not meritorious. In view of the final and executory decision in CA-G.R.
No. 25530 upholding the right of defendantsappellees to exercise their right oflegal
SO ORDERED. redemption over the 20,631 square meters involved, plaintiff-appellant is devoid of any
legal right or personality to ask for partition of [the] subject property formerly owned in
G.R. No. 182970 July 23, 2014 common. Having assigned his undivided share therein to Ma. Remedios P. Ramos,
plaintiff-appellant ceased to be a co-owner. By exercising their right of legal
redemption, which thisCourt upheld by final judgment, defendants-appellees now own
EMILIANO S. SAMSON, Petitioner, the entire area covered by TCT No. M-25565.
vs.
SPOUSES JOSE and GUILLERMINA GABOR, TANAY RURAL BANK, INC., and
REGISTER OF DEEDS OF MORONG, RIZAL, Respondents. The subsequent execution of the Agreement of Rescission by plaintiff-appellant and
Ma. Remedios P. Ramos did not divest defendantsappellees of the right of legal
redemption vested in them upon the consummation of the assignment plaintiff-
DECISION appellant made to Ma. Remedios P. Ramos. x x x

PERALTA, J.: When the pending appeal in CA-G.R. No. CV 25530 was decided and judgment therein
became final and executory, the lower court had to follow what was adjudged by this
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court,and while plaintiff-appellant was not a party in the said Civil CaseNo. 125-T and
Court seeking to reverse and set aside the Order1 dated August 18, 2006 of the CA-G.R. CV No. 25530, plaintiff-appellant is bound by the judgment therein because
Regional Trial Court (RTC) of Pasig City in Civil Case No. 70750 and Decision2 dated he was fully aware of the pendency of such cases. Asa matter of fact, he testified in
May 9, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 88335. Civil Case No. 125-T. Therefore, the Agreement of Rescission he later entered into with
Ma. Remedios P. Ramos during the pendency of the said case, did not deprive
defendants-appellees of their right of legal redemption. The supposed re-acquisition by
The antecedents of the case are as follows: plaintiff-appellant of his undivided share in question, having been effected pendente
lite, the same was subject to the outcome of the case.8

3
Petitioner Samson then appealed to this Court via petition for review on certiorari,but PETITIONER’S COMPLAINT IS NOT BARRED BY RES JUDICATA.
the same was dismissed in a minute resolution9 dated June 8, 1994 for failure to
submit an affidavit of service. This court further denied Samson’s motion for
The petition lacks merit.
reconsideration with finality in its Resolution10 dated July 25, 1994 for having no
compelling reason to warrant the reconsideration sought.
We agree with the CA’s decision to dismiss petitioner’s appeal, pursuant to Section 2,
Rule 50 of the 1997 Rules of Civil Procedure which mandates the dismissal of an
On April 4, 2006, petitioner Samson filed a Complaint11 before the RTC of Pasig City
appeal that raises only questions of law.14 The appeal of petitioner, as correctly held by
for Recovery of Property or its Value against respondent spouses, Tanay Rural Bank,
the CA, essentially raised issues purely of law.
Inc., and the Register of Deeds of Morong, Rizal, claiming that he had been payinghis
one-third (1/3) share of realty taxes covering the subject portion of land for the years
2002 to 2004. In 2005, however, his payment was rejected by the Municipal Treasurer Time and again, this Court has distinguished cases involving pure questions of law
of Tanay, Rizal, at such time he discovered that respondent spouses had already from those of pure questions of fact in the following manner:
mortgaged the entire property in favor of respondent Bank back in November 2002.
A question of fact exists when a doubt or difference arises as to the truth or falsity of
On August 18, 2006, the RTC of Pasig City dismissed the complaint on the grounds of alleged facts. If the query requires a re-evaluation of the credibility of witnesses or the
improper venue, res judicata, and that the complaint states no cause of action.12 It existence or relevance of surrounding circumstances and their relation to each other,
held that the suit is a real action which should be filed in the RTC of Morong, Rizal, the issue in that query is factual. On the other hand, there is a question of law when
where the property subject of the case is situated. Moreover, the lower court pointed the doubt or difference arises as to what the law is on certain state of facts and which
out that as early as 1991, herein petitioner had already filed a Complaint for Partition does not call for an existence of the probative value of the evidence presented by the
of Real Property and Damages involving the same subject property against the same parties-litigants. In a case involving a question of law, the resolution of the issue rests
parties, which complaint was already dismissed by this Court with finality. Thus, the solely on what the law provides on the given set of circumstances. Ordinarily, the
principle of res judicataapplies. Finally, the trial court held that petitioner’s complaint determination of whether an appeal involves only questions of law or both questions of
states no cause ofaction against herein respondent Bank as it does not allege any law and fact is best left to the appellate court.All doubts as to the correctness of the
details as to the liability or any violation of petitioner’s rights. conclusions of the appellate court will be resolved in favor of the CA unless it commits
an error or commits a grave abuse of discretion.15
Claiming that the lower court erred in dismissing his complaint, petitioner Samson
filed an appeal with the CA, which likewise dismissed the same for having been In the instant case, petitioner appealed the Order of the trial court which dismissed his
improperly brought before it. The appellate court ruled in its Decision13dated May 9, complaint for improper venue, lack of cause of action, and res judicata.16 Dismissals
2008 that since petitioner’s appeal raised only issues purely of law, it should be based on these grounds do not involve a review of the facts of the case but merely the
dismissed outright. application of the law, specifically in this case, Rule 16 of the Revised Rules of Civil
Procedure. The issue to be resolved is limited towhether or not saidrule was properly
applied, which will only involve a reviewof the complaint, the motions to dismiss, and
Undaunted, petitioner filed the instant petition invoking the following arguments:
the trial court’s order of dismissal, but not the probative value of the evidence
submitted nor the truthfulness or falsity of the facts. Considering, therefore, that the
I. subjectappeal raised only questions of law, the CA committed no error in dismissing
the same.
THE COURT OF APPEALS HAS JURISDICTION OVER PETITIONER’S APPEAL
FROM THE ORDER OF THE REGIONAL TRIAL COURT OF PASIG CITY. We, likewise, agree with the decision of the RTC of Pasig City dismissing petitioner’s
complaint on the ground that the same should have been filed in the RTC of Morong,
Rizal, where the property subject of this case is situated. Petitioner claims that as
II.
shown by the caption of his complaint which reads "For Recovery of Property or its
Value," his cause of action is in the alternative, both real and personal. As such, his
SINCE THE PETITIONER’S COMPLAINT IS BOTH REAL AND PERSONAL, IT action may be commenced and tried where the petitioner resides or where any of the
WAS PROPERLY FILED WITH THE REGIONAL TRIAL COURT OF PASIG CITY. respondents resides, at the election of the petitioner.17 Petitioner’s argument is
misplaced. In Latorre v. Latorre,18 we ruled that:
III.
Sections 1 and 2, Rule 4 of the 1997 Rules of Civil Procedure provide an answer to the
issue of venue. Actions affecting title to or possession of real property or an interest
PETITIONER’S COMPLAINT STATES A CAUSE OF ACTION.
therein (real actions) shall be commenced and tried in the proper court that has
territorial jurisdiction over the area where the real property is situated. On the other
IV. hand, all other actions (personal actions) shall be commenced and tried in the proper

4
courts where the plaintiff or any of the principal plaintiffs resides or where the 3. Act or omission on the part of such defendant in violation of the right of
defendant or any of the principal defendants resides. x x x. the plaintiff or constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery of damages
or other appropriate relief.
In this jurisdiction, we adhere to the principle that the nature of an action is
determined by the allegations in the Complaint itself, rather than by its title or
heading. Itis also a settled rule that what determines the venue of a case is the primary It is, thus, only upon the occurrence of the last element that a cause of action arises,
objective for the filing of the case. x x x 19 While the complaint of the petitioner was giving the plaintiff the right to maintain an action in court for recovery of damages or
denominated as one for "Recovery of Property or its Value," all of his claims are other appropriate relief. In determining whether an initiatory pleading states a cause
actually anchored on his claim of ownership over the one-third (1/3) portion of the ofaction, "the test is as follows: admitting the truth of the facts alleged, can the court
subject property. In his complaint, petitioner sought the return of the portion of the render a valid judgment in accordance with the prayer?" To be taken into account are
subject property or its value on the basis of his co-ownership thereof. Necessarily, his only the material allegations in the complaint; extraneous facts and circumstances or
alternative claim for the value of the property is still dependent on the determination of other matters aliundeare not considered. The court may consider in addition to the
ownership, which is an action affecting title to or possession of real property or an complaint the appended annexes or documents, other pleadings of the plaintiff, or
interest therein. Clearly, petitioner’s claim is a realaction which should have been filed admissions in the records.22
in the court where the property lies, which in this case, is the RTC of Morong, Rizal.
As already mentioned, there is nothing in the complaint herein which states specific
We further agree with the RTC of Pasig City when it dismissed petitioner’s complaint overt acts to show thatrespondent Bank acted in disregard of the petitioner’s rights.
on the ground that the same states no cause of action in the following wise: Nowhere in the complaint was it alleged that respondent Bank had knowledge nor
could have known with the exercise of due diligence that respondent spouses had
acted illegally, in order to commit a wrong against the petitioner. Petitioner should
The complaint states no cause of action as herein defendant was impleaded without
have at least specified the details of his cause of action against respondent Bank. The
stating any details ofits liabilities nor any allegation of its violations to the plaintiff’s
complaint of petitioner in Nacua-Jao v. China Banking Corporation,23 sheds light on
rights. The only allegation of the rights violated are Articles 19, 20, and 21 of the Civil
the specific allegations which must at least bestated to constitute a statement of cause
Code. More importantly, there are no allegations in the complaint that defendant TRB
of action, to wit:
has violated the aforesaid laws. There is no detailon why the defendant TRB has been
impleaded in the instant case.20
We are unable to subscribe to the foregoing view of the CA. Even a cursory reading of
the Complaint readily reveals a clear statement of the cause of action of petitioner. The
A perusal of the complaint would show that aside from the fact that respondent
Complaint reads:
spouses had mortgaged the property subject herein to respondent bank, there is no
other allegation of an act or omission on the part of respondent Bank in violation ofa
right of petitioner. In Spouses Zepeda v. China Banking Corporation,21 We had "x x x xxx xxx
occasion to discuss the definition of the term "cause of action," to wit:
3. That plaintiff is the lawfulowner of Lot No. 561 and its improvements xxx
A cause of action is a formal statement of the operative facts that give rise to a covered by Title No. T-525552 issued in her name xxx.
remedial right. The question of whether the complaint states a cause of action is
determined by its averments regarding the acts committed by the defendant. Thus it
xxx xxx xxx
"must contain a concise statement of the ultimate or essential facts constituting the
plaintiff’s cause of action." Failure to make a sufficient allegation of a cause of action in
the complaint "warrants its dismissal." 9. That sometime this year, plaintiff was only shocked to learn that a falsified
and fraudulent Deed of Absolute Sale executed on January 19, 1996 was
presented to the Register of Deeds xxx in order to cause the cancellation of
As defined in Section 2, Rule 2 of the Rules of Court, a cause of action is the act or
plaintiff's title x x x.
omission by which a party violates the right of another. Its essential elements are as
follows:
10. That consequently, TCT No. T-525552 xxx was illegally cancelled and
replaced by TCT No. T-602202 in the name of defendant Gan spouses x x x.
1. A right in favor of the plaintiff by whatever means and under whatever law
it arises or is created;
xxx xxx xxx
2. An obligation on the part of the named defendant to respect or not to
violate such right; and 12. That Lot No. 561, now covered by TCT No. T-602202 (Annex "H") in the
name of defendantGan spouses is presently mortgaged to defendant China
Banking Corporation in the amount of ₱1,600,000.00; the mortgage is

5
annotated at the backof Annex "H" and the annotation is marked as Annex parties, subject matter, causes of action as are present in the civil cases below. The
"H-1"; all the proceeds thereof went to defendant Gan Spouses. foundation principle upon which the doctrine of res judicatarests is that parties ought
not to be permitted to litigate the same issue more than once; that when a right or fact
has been judicially tried and determined by a court of competent jurisdiction, so long
13. That on knowing the falsification and the illegal cancellation of her title,
asit remains unreversed, it should be conclusive upon the parties and those in privity
plaintiff wrote defendant Jackson Gan and defendant China Banking
with them in law or estate.27
Corporation protesting against the unlawful transactions that not
onlyinvolved Lot No. 561 at Ternate, Cavite but also Lot No. 9, Blk. 89 at
Parañaque, Metro Manila; machine copies of the letter-protestsare hereto In Selga v. Brar,28 we held that:
attached as Annexes "I" and "J", respectively, and made integral parts hereof;
Res judicatameans "a matter adjudged; a thing judicially acted upon or decided; a
xxx xxx xxx thing ormatter settled by judgment." It lays the rule that an existing final judgment or
decree rendered on the merits, without fraud or collusion, by a court of competent
jurisdiction, upon any matter within its jurisdiction, is conclusive ofthe rights of the
15. That from the foregoing, therefore, it is very evident that defendants had
parties or their privies, in all other actions or suits in the same or any other judicial
connived and conspired to effect the so-called sale and mortgage of Lot No.
tribunal of concurrent jurisdiction on the points and matters in issue in the first suit.
561 and the transfer of the title thereof to Gan spouses' name. (Emphasis
ours)
It must be remembered that it is to the interest of the public that there should be an
end to litigation by the parties over a subject fully and fairly adjudicated. The doctrine
xxxx
of res judicatais a rule that pervades every well-regulated system of jurisprudence and
is founded upon two grounds embodied in various maxims of the common law,
It appears that the aforementioned properties were unlawfully and criminally namely: (1) public policy and necessity, which dictates that it would be in the interest
mortgaged to your Bankby one Jackson Gan xxx who forged or caused to be forged of the State that there should be an end to litigation – republicae ut sit litium; and (2)
and/or falsified or caused to be falsified two (2) separate instruments of sale in his the hardship on the individual that he should be vexed twice for the same cause –
favor, covering the aforesaid properties making it appear that the said instruments nemo debet bis vexari pro una et eadem causa. A contrary doctrine would subject
were signed by our client when in truth and in fact were not." public peace and quiet to the will and neglect of individuals and prefer the gratification
of the litigious disposition on the part ofsuitors to the preservation of public tranquility
and happiness.
In sum, the Complaint recites that (1) petitioner was the registered owner of the
subject property; (2) she was defrauded of her rights to the property when title thereto
was transferred in the name of Spouses Gan based on a forged deed of sale; and (3) Res judicatahas two concepts. The first is bar by prior judgment under Rule 39,
she was further defrauded of her rights to the property when respondentaccepted the Section 47(b), and the second is conclusiveness of judgment under Rule 39, Section
same as security for the payment of a loan acquiredby Spouses Gan even when the 47(c).These concepts differ as to the extent of the effect of a judgment or final order as
latter's title to the property is void.x x x24 follows:

In contrast, the most that petitioner’s complaint herein stated was Articles 19, 20, and SEC. 47. Effect of judgments or final orders. - The effect of a judgment or final order
21 of the Civil Code and that "he found out that in November 2002, defendants Gabor rendered by a court of the Philippines, having jurisdiction to pronounce the judgment
mortgaged the whole property x x x in favor of the defendant bank."25 Said bare or final order, may be as follows:
allegation is insufficient to establish any right or cause of action in favor of the
petitioner.
xxxx

Going now to the fourth and final argument, petitioner insists that his current action
(b) In other cases, the judgment or final order is, with respect to the matter
for Recovery of Property or its Value is not barred by res judicata. He claims that not
directly adjudged or as to any other matter that could have been raised in
all the elements of the principle of res judicata are present in this case, since the
relation thereto, conclusive between the parties and their successors-in-
decision of this Court in the prior partition case was not a judgment on the merits but
interest by title subsequent to the commencement of the action or special
due to sheer technicality and that the cause of action in the prior case is partition
proceeding, litigating for the same thing and under the same title and in the
while the cause of action herein is for recovery of property.26
same capacity; and

We disagree. In order for res judicata to bar the institution of a subsequent action, the
(c) In any other litigation between the same parties or their successors in
following requisites must concur: (1) the judgment sought to bar the new action must
interest, that only is deemed to have been adjudged in a former judgment or
be final; (2) the decision must have been rendered by a court having jurisdiction over
final order which appears upon its face to have been so adjudged, or which
the subject matter and the parties; (3) the disposition of the case must be a judgment
was actually and necessarily included therein or necessary thereto.
on the merits; and (4) there must be as between the first and second action, identity of
6
Jurisprudence taught uswell that res judicata under the first concept or as a bar Petitioner, however, contends that the causes of action in both cases differ inasmuch
against the prosecution of a second action exists when there is identity of parties, as in the prior case, the cause of action is partition while in the case at hand, the
subject matter and cause of action in the first and second actions. The judgment in the cause of action is the recovery of property or its value.34
first action is final as to the claim or demand in controversy, including the parties and
those in privity with them, not only as to every matter which was offered and received
Petitioner is mistaken. In Philippine National Bank v. Gateway Property Holdings,
to sustain or defeat the claim or demand, but as to any other admissible matter which
Inc.,35 we have laid down certain guidelines in determining whether there is identity of
might have been offered for that purpose and of all matters that could have been
causes of action in the following manner:
adjudged in that case. In contrast, res judicata under the second concept or estoppel
by judgment exists when there is identity of parties and subject matter but the causes
of action are completely distinct. The first judgment is conclusive only as to those The crux of the controversy in the instant case is whether there is an identity of causes
matters actually and directly controverted and determined and not as to matters of action inCivil Case Nos. TM-1022 and TM-1108.
merely involved herein.29
Section 2, Rule 2 of the Rules of Court defines a cause of action as "the act or omission
Guided by the above discussion, Weobserve that the case at hand satisfies the by which a party violates a right of another." Section 3 of Rule 2 provides that "[a]
essential requisites of res judicataunder the first concept. With respect to the first party may not institute more than one suit for a single cause of action." Anent the act
three (3) requisites,We find that the judgment sought to bar the instant case was a of splitting a single cause of action, Section 4 of Rule 2 explicitly states that "[i]f two or
judgment on the merits by a court having jurisdiction over the subject matter and the more suits are instituted on the basis of the same cause of action, the filing of one or a
parties, which properly obtained its finality. As the records reveal, the decision to judgment upon the merits in any one is available as a ground for the dismissal of the
dismiss petitioner’s earlier complaint for Partition ofReal Property and Damages 30 was others."
rendered by the RTC of Morong, Rizal, having jurisdiction over the subject matter and
the parties, after a consideration of the evidence or stipulations submitted by the
Apropos, Carlet v. Court of Appealsstates that:
parties at the trial of the case. Saidjudgment was rendered based on the evidence and
witnesses presented by the parties who were given ample opportunity to be heard as
well as a valid judgment by the CA, in the separate legal redemption case upholding As regards identity of causes ofaction, the test often used in determining whether
spouses Gabor’s right of legal redemption, which became final and executory upon the causes of action are identical is to ascertain whether the same evidence which is
expiration of the period of appealing the same, the parties pursuing no further appeal. necessary to sustain the second action would have been sufficient toauthorize a
recovery in the first, even if the forms or nature of the two actions be different. If the
same facts or evidence would sustain both actions, the two actions are considered the
In the same way, petitioner’s complaint for partition likewise obtained finality when it
same within the rule that the judgment in the former is a bar to the subsequent action;
was dismissed by this Court of last resort.1âwphi1 Petitioner contends that his
otherwise, it is not.36
Petition for Review on Certiorari was dismissed in a minute resolution 31dated June 8,
1994 for failure to submit an affidavit of service, a sheer technicality, which is not a
judgment on the merits. He failed to mention, however, that this Court further denied Applying the above guideline to the instant case, while the two cases are captioned
his motion for reconsideration with finality in its Resolution32 dated July 25, 1994 for differently, petitioner cannot claim that there is no res judicata by simply changing the
having no compelling reason to warrantthe reconsideration sought. Thus, while this title of the action from "Complaint for Partition of Real Property and Damages" to a
Court initially dismissed petitioner’s appeal on a mere technicality, it had sufficient "Complaint for Recovery of Property or its Value." The records clearlyreveal that the
opportunity to reverse its dismissal on motion for reconsideration if it found that any evidence submitted by the parties in both cases are identical. Petitioner, in claiming
error or injustice has been committed. It, however, did not and in fact evenaffirmed the that he had either the right to partition or to recover the subject property, submitted
dismissal by further denying petitioner’s motion for reconsideration. There is no the same Deed of Assignment37 transferring in his favor the subject property as
question, therefore, that the dismissal of petitioner’s partition case is final and payment for his legal services as well as the same Agreement of Rescission of his
executory. earlier transfer of the subject property to Ms. Ramos. As previously mentioned, all of
his claims in both actions are actually anchored on his claim of ownership over the
one-third (1/3) portion of the subject property. If it be proven that he is not a co-owner
Anent the fourth and final requisite, it is undisputed that there exists an identity of the
of the subject portion, he will neither have the right to partition in the prior action nor
parties and subjectmatter between the prior action for partition and the instant
will he have the right to recover the subject property or its value in the
subsequent action for recovery of property, the same being filed by herein petitioner
subsequentaction. Hence, the ultimate question which the trial court had to resolve in
against the same spouses Gabor over the same portion of land in Tanay, Rizal. The fact
both cases was whether or not petitioner is a co-owner ofthe subject property.
that respondents Bank and Register of Deeds were only impleaded in the subsequent
case is of no moment since absolute identity of parties is not required; mere
substantial identity of parties, or a community of interests between the party in the Contrary to petitioner’s allegation thatan action of partition is merely a possessory
first case and the party in the subsequent case, shall suffice.33 action which could not bar a subsequent action, the issue of ownership or co-
ownership is necessarilyresolved before the trial court may issue an order of
partition,as we have held in Reyes-De Leon v. Del Rosario,38 viz.:

7
The issue of ownership or co-ownership, to be more precise, must first be resolved in [G.R. No. 151037. June 23, 2005]
order to effect a partition of properties. This should be done in the action for partition
itself.As held in the case of Catapusan v. Court of Appeals:

In actions for partition, the court cannot properly issue an order to divide the property, SAN MIGUEL CORPORATION, petitioner, vs. TROY FRANCIS L.
unless it first makes a determination as to the existence of co -ownership. The court MONASTERIO, respondent.
must initially settle the issue of ownership, the first stage in an action for partition.
Needless to state, an action for partition will not lie if the claimant has no rightful
interest over the subject property.In fact, Section 1 of Rule 69 requires the party filing RESOLUTION
the action to state in his complaint the "nature and extent of his title" to the real
estate. Until and unless the issue of ownership is definitely resolved, it would be QUISUMBING, J.:
premature to effect a partition of the properties. x x x.39
This appeal by certiorari seeks to reverse and set aside the Decision[1] dated July
Considering, therefore, that the RTC of Morong had long before resolved the issue of 16, 2001, and the Resolution[2] dated November 27, 2001, of the Court of Appeals in
co-ownership against petitioner in his complaint for Partition of Real Property, which CA-G.R. SP No. 52622. The Court of Appeals dismissed the special civil action
was affirmed with finality by this Court, no less, petitioner’s subsequent claim for for certiorari filed by San Miguel Corporation (SMC)[3] assailing the Orders[4]of the
Recovery ofProperty or its Value must likewise necessarily fail. To reiterate, even if the Regional Trial Court of Naga City, Branch 20, which denied its Motion to Dismiss on
forms or nature of actions in both cases are different, since the issues raised the ground of improper venue and the subsequent Motion for Reconsideration in Civil
essentially involve the claim of ownership over the subjectproperty, there isidentity of Case No. RTC98-4150.
the causes of action.40
The facts are as follows:

It is, therefore, clear from the discussion above that since all of the elements of res On August 1, 1993, petitioner SMC entered into an Exclusive Warehouse
judicata are present, the instant suit for Recovery of Property or its Value is barred by Agreement[5] (hereafter EWA for brevity) with SMB Warehousing Services (SMB),
said principle. As we have consistently held, a udgment which has acquired finality represented by its manager, respondent Troy Francis L. Monasterio. SMB undertook to
becomes immutable and unalterable, hence, may no longer be modified in any respect provide land, physical structures, equipment and personnel for storage, warehousing
except to correct clerical errors or mistakes, all the issues between the parties being and related services such as, but not limited to, segregation of empty bottles, stock
deemed resolved and laid to rest.41 It is a fundamental principle in our judicial system handling, and receiving SMC products for its route operations at Sorsogon, Sorsogon
that every litigation must end and terminate sometime and somewhere, and it is and Daet, Camarines Norte.
essential to an effective and efficient administration of justice that, once a judgment
The agreement likewise contained a stipulation on venue of actions, to wit:
has become final, the winning party be, not through a mere subterfuge, deprived of the
fruits of the verdict.42
26. GENERAL PROVISIONS
Exceptions to the immutability of final judgment are allowed only under the most
extraordinary of circumstances.43Yet, when petitioner is given ample opportunity to be ...
heard, unbridled access to the appellate comis, as well as unbiased judgments
rendered after a consideration of evidence presented by the parties, as in the case at
b. Should it be necessary that an action be brought in court to
hand, We cannot recklessly reverse the findings of the courts below.
enforce the terms of this Agreement or the duties or rights of the
parties herein, it is agreed that the proper court should be in the
In view of the foregoing, we find no compelling reason to disturb the findings of the courts of Makati or Pasig, Metro Manila, to the exclusion of the other
RTC of Pasig City and CA. The RTC of Pasig City correctly dismissed the complaint on courts at the option of the COMPANY.[6] [Underscoring supplied.]
the grounds of improper venue, res judicata, and that the complaint states no cause of
action. The CA likewise correctly dismissed petitioner's appeal for raising only issues
...
purely of law.

On November 3, 1998, respondent Monasterio, a resident of Naga City, filed a


WHEREFORE, premises considered, the instant petition is DENIED. The Order dated
complaint docketed as Civil Case No. RTC98-4150 for collection of sum of money
August 18, 2006 of the Regional Trial Court of Pasig City in Civil Case No. 70750 and
against petitioner before the Regional Trial Court of Naga City, Branch 20.
Decision dated May 9, 2008 of the Court of Appeals in CA-G.R. CV No. 88335 are
hereby AFFIRMED. In his Complaint,[7] Monasterio claimed P900,600 for unpaid cashiering fees. He
alleged that from September 1993 to September 1997 and May 1995 to November
SO ORDERED. 1997, aside from rendering service as warehouseman, he was given the additional task
of cashiering in SMCs Sorsogon and Camarines Norte sales offices for which he was

8
promised a separate fee. He claims that of approximately 290 million pesos in cash Petitioner filed a motion for reconsideration which was denied by the Court of
and checks of the sales office and the risks of pilferage, theft, robbery and hold-up, he Appeals. Hence, this petition wherein petitioner raises the following as issues:[18]
had assumed what amounted to approximately 35 million pesos per annum for
Sorsogon, Sorsogon, and 60 million pesos for Daet, Camarines Norte. He also said that 1. Whether or not this Honorable Court may review the finding of the Court
he hired personnel for the job. Respondent added that it was only on December 1, of Appeals that the Complaint and Amended Complaint were filed in the
1997, that petitioner SMC started paying him P11,400 per month for his cashiering wrong venue.
services.
2. Assuming arguendo that this Honorable Court may review the finding of
Monasterio demanded P82,959.32 for warehousing fees, P11,400 for cashiering the Court of Appeals that the Complaint and Amended Complaint were
fees for the month of September, 1998, as well as exemplary damages, and attorneys filed in the wrong venue, whether or not such finding should be
fees in the amount of P500,000 and P300,000, respectively.[8] reversed.

On November 19, 1998, SMC filed a Motion to Dismiss [9] on the ground of 3. Whether or not the Court of Appeals gravely erred in ruling that SMCs
improper venue. SMC contended that respondents money claim for alleged unpaid Petition For Certiorari has become moot and academic in view of the
cashiering services arose from respondents function as warehouse contractor thus the filing of Monasterios Amended Complaint and SMCs Answer (Ex
EWA should be followed and thus, the exclusive venue of courts of Makati or Pasig, Abundanti Cautela).[19]
Metro Manila is the proper venue as provided under paragraph 26(b) of the Exclusive
In our view, two issues only require resolution: (1) Did the RTC of Naga City err in
Warehouse Agreement. SMC cites in its favor Section 4(b) in relation to Section 2 of
denying the motion to dismiss filed by SMC alleging improper venue? (2) Did the CA
Rule 4[10] of the Rules of Court allowing agreement of parties on exclusive venue of
gravely err in ruling that SMCs petition for certiorari has become moot?
actions.
On disputes relating to the enforcement of the rights and duties of the
Respondent filed an Opposition[11] contending that the cashiering service he
contracting parties, the venue stipulation in the EWA should be construed as
rendered for the petitioner was separate and distinct from the services under the EWA.
mandatory. Nothing therein being contrary to law, morals, good custom or public
Hence, the provision on venue in the EWA was not applicable to said services. Hence,
policy, this provision is binding upon the parties.[20] The EWA stipulation on venue is
respondent insists that in accordance with Section 2 of Rule 4 of the Rules of Court
clear and unequivocal, thus it ought to be respected.
the venue should be in Naga City, his place of residence.
However, we note that the cause of action in the complaint filed by the
On February 22, 1999, the Regional Trial Court, of Naga City, Branch 20 issued
respondent before the RTC of Naga was not based on the EWA, but concern services
an Order[12] denying petitioners motion to dismiss. The court held that the services
not enumerated in the EWA. Records show also that previously, respondent received a
agreed upon in said contract is limited to warehousing services and the claim of
separate consideration of P11,400 for the cashiering service he rendered to SMC.
plaintiff in his suit pertains to the cashiering services rendered to the defendant, a
Moreover, in the amended complaint, the respondents cause of action was specifically
relationship which was not documented, and is certainly a contract separate and
limited to the collection of the sum owing to him for his cashiering service in favor of
independent from the exclusive warehousing agreements.[13]
SMC. He already omitted petitioners non-payment of warehousing fees. As previously
SMCs subsequent Motion for Reconsideration was likewise denied.[14] While the ruled, allegations in the complaint determines the cause of action or the nature of the
motion was pending, the respondent filed an Amended Complaint[15] deleting his claim case.[21] Thus, given the circumstances of this case now before us, we are constrained
for unpaid warehousing and cashiering fees but increasing the exemplary damages to hold that it would be erroneous to rule, as the CA did, that the collection suit of the
from P500,000 to P1,500,000.[16] respondent did not pertain solely to the unpaid cashiering services but pertain likewise
to the warehousing services.[22]
Petitioner elevated the controversy to the Court of Appeals by way of a special
civil action for certiorari with a prayer for the issuance of a Temporary Restraining Exclusive venue stipulation embodied in a contract restricts or confines parties
Order and/or Writ of Preliminary Injunction, imputing grave abuse of discretion on the thereto when the suit relates to breach of the said contract. But where the exclusivity
RTC Naga City for denying its motion to dismiss and subsequent motion for clause does not make it necessarily all encompassing, such that even those not related
reconsideration. to the enforcement of the contract should be subject to the exclusive venue, the
stipulation designating exclusive venues should be strictly confined to the specific
On June 11, 1999, during the pendency of the certiorari petition SMC filed before undertaking or agreement. Otherwise, the basic principles of freedom to contract might
the trial court an answer ex abundanti cautela[17] with a compulsory counterclaim for work to the great disadvantage of a weak party-suitor who ought to be allowed free
moral and exemplary damages and attorneys fees. SMC averred lack of cause of action, access to courts of justice.
payment, waiver, abandonment and extinguishment.
Restrictive stipulations are in derogation of the general policy of making it more
In its decision dated July 16, 2001, the Court of Appeals found respondents convenient for the parties to institute actions arising from or in relation to their
claim for cashiering services inseparable from his claim for warehousing services, thus, agreements.[23] Thus, the restriction should be strictly construed as relating solely to
the venue stipulated in the EWA is the proper venue. However, the Court of Appeals the agreement for which the exclusive venue stipulation is embodied. Expanding the
noted that prior to the filing of SMCs petition, respondent Monasterio filed an amended scope of such limitation on a contracting party will create unwarranted restrictions
complaint to which SMC filed an answer. Thus, the Court of Appeals dismissed San which the parties might find unintended or worse, arbitrary and oppressive.
Miguels petition for certiorari, stating that the case was already moot and academic.

9
Moreover, since convenience is the raison detre of the rules on venue,[24] venue On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS)
stipulation should be deemed merely permissive, and that interpretation should be lodged a complaint for annulment of contracts of loan and real estate mortgage against
adopted which most serves the parties convenience.[25] Contrawise, the rules mandated herein petitioner Antonio T. Chua before the Regional Trial Court of Pasig City. The
by the Rules of Court should govern.[26] Accordingly, since the present case for the case was docketed as Civil Case No. 67736 and was raffled to the sala of Judge Lorifel
collection of sum of money filed by herein respondent is a personal action, [27] we find Lacap Pahimna.
no compelling reason why it could not be instituted in the RTC of Naga City, the place
where plaintiff resides. The said suit sought to annul a loan contract allegedly extended by petitioner to
respondent TOPROS in the amount of ten million four hundred thousand pesos
Having settled the issue on venue, we need not belabor the issue of whether
(P10,400,000) and the accessory real estate mortgage contract covering two parcels of
SMCs petition has become moot.
land situated in Quezon City as collateral.
WHEREFORE, it is hereby ruled that no reversible error was committed by
the Regional Trial Court of Naga City, Branch 20, in denying petitioners motion to It appeared on the face of the subject contracts that TOPROS was represented by its
dismiss. Said RTC is the proper venue of the amended complaint for a sum of money filed president John Charles Chang, Jr. However, TOPROS alleged that the purported loan
by respondent against petitioner San Miguel Corporation, in connection with his and real estate mortgage contracts were fictitious, since it never authorized anybody,
cashiering services. The case is hereby REMANDED to the RTC of Naga City, Branch 20, not even its president, to enter into said transaction.
for further proceedings on respondents amended complaint, without further delay.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper
Costs against petitioner.
venue. He contended that the action filed by TOPROS affects title to or possession of
SO ORDERED. the parcels of land subject of the real estate mortgage. He argued that it should thus
have been filed in the Regional Trial Court of Quezon City where the encumbered real
FIRST DIVISION properties are located, instead of Pasig City where the parties reside.

ANTONIO T. CHUA, G.R. No. 152808 On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss.
Petitioner, She reasoned that the action to annul the loan and mortgage contracts is a personal
Present: action and thus, the venue was properly laid in the RTC of Pasig City where the parties
reside.
Davide, Jr., C.J.,
(Chairman),
Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied
- versus - Quisumbing,
in its order of October 6, 2000. Hence, petitioner filed with the Court of Appeals a
Ynares-Santiago,
special civil action for certiorari alleging:
Carpio, and
Azcuna, JJ. THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE
OF DISCRETION IN DISREGARDING THE RULING OF THE
SUPREME COURT IN PASCUAL VS. PASCUAL REGARDING THE
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), Promulgated: RULE ON PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO
INC., BE A PERSONAL ACTION A CIVIL COMPLAINT FOR THE
Respondent. September 30, 2005 ANNULMENT OF AN ALLEGEDLY FICTITIOUS CONTRACT.[5]
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION The Court of Appeals dismissed said petition in its decision dated November 28, 2001.
It held that the authorities relied upon by petitioner, namely Pascual v.
QUISUMBING, J.: Pascual[6] and Banco Espaol-Filipino v. Palanca,[7] are inapplicable in the instant case.
The appellate court instead applied Hernandez v. Rural Bank of Lucena, Inc.[8] wherein
we ruled that an action for the cancellation of a real estate mortgage is a personal
For review on certiorari is the decision[1] dated November 28, 2001 of the Court of action if the mortgagee has not foreclosed the mortgage and the mortgagor is in
possession of the premises, as neither the mortgagors title to nor possession of the
Appeals and its resolution[2] of April 1, 2002 in CA-G.R. SP No. 62592. The assailed
property is disputed.
decision and resolution dismissed the special civil action for certiorari against the
orders of August 9, 2000[3] and October 6, 2000[4]issued by Judge Lorifel Lacap
Pahimna in Civil Case No. 67736. Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals
denied for lack of merit in its resolution of April 1, 2002.
The pertinent facts, based on the records, are as follows:

10
Undeterred, petitioner now comes to us on a petition for review raising the following declaration of nullity of a loan contract for lack of consent and consideration remains a
issues: personal action even if the said action will necessarily affect the accessory real estate
mortgage.
WHETHER AN ACTION TO ANNUL A LOAN AND
MORTGAGE CONTRACT DULY ALLEGED AS FICTITIOUS FOR
BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL TOPROS argues that Pascual is inapplicable because the subject contract therein was
ACTION OR REAL ACTION? a contract of sale of a parcel of land where title and possession were already
transferred to the defendant. TOPROS further contends that Banco Espaol-Filipino is
also inapplicable since the personal action filed therein was one which affected the
WHETHER IN AN ACTION TO ANNUL A LOAN AND personal status of a nonresident defendant.
MORTGAGE CONTRACT DULY ALLEGED AS FICTITIOUS FOR
BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON
ALLEGED TO HAVE [LACKED] AUTHORITY TO ENTER INTO SAID Considering the facts and the submission of the parties, we find the petition bereft of
CONTRACTS IS AN INDISPENSABLE PARTY?[9] merit.

Well-settled is the rule that an action to annul a contract of loan and its accessory real
estate mortgage is a personal action. In a personal action, the plaintiff seeks the
Petitioner contends that Hernandez should not be applied here because in the said recovery of personal property, the enforcement of a contractor the recovery of
case: (1) venue was improperly laid at the outset; (2) the complaint recognized the damages.[12] In contrast, in a real action, the plaintiff seeks the recovery of real
validity of the principal contract involved; and (3) the plaintiff sought to compel property, or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real
acceptance by the defendant of plaintiffs payment of the latters mortgage debt. He action is an action affecting title to real property or for the recovery of possession, or for
insists that the Pascual case should be applied instead. He invokes our partition or condemnation of, or foreclosure of mortgage on, real property.[13]
pronouncement in Pascual, to wit:
It appearing, however, that the sale is alleged to be fictitious, with In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was
absolutely no consideration, it should be regarded as a non-existent, assailed as fictitious for lack of consideration. We held that there being no contract to
not merely null, contract. And there being no contract between the begin with, there is nothing to annul. Hence, we deemed the action for annulment of
deceased and the defendants, there is in truth nothing to annul by the said fictitious contract therein as one constituting a real action for the recovery of
action. The action brought cannot thus be for annulment of the fishpond subject thereof.
contract, but is one for recovery of a fishpond, a real action that
should be, as it has been, brought in Pampanga, where the property We cannot, however, apply the foregoing doctrine to the instant case. Note that
is located.[10] in Pascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the instant
case, ownership of the parcels of land subject of the questioned real estate mortgage
Petitioner likewise cites the Banco Espaol-Filipino case, thus: was never transferred to petitioner, but remained with TOPROS. Thus, no real action
for the recovery of real property is involved. This being the case, TOPROS action for
Where the defendant in a mortgage foreclosure lives out of the annulment of the contracts of loan and real estate mortgage remains a personal action.
Islands and refuses to appear or otherwise submit himself to the
authority of the court, the jurisdiction of the latter is limited to the Petitioners reliance on the Banco Espaol-Filipino case is likewise misplaced. That case
mortgaged property, with respect to which the jurisdiction of the involved a foreclosure of real estate mortgage against a nonresident. We held therein
court is based upon the fact that the property is located within the that jurisdiction is determined by the place where the real property is located and that
district and that the court, under the provisions of law applicable in personal jurisdiction over the nonresident defendant is nonessential and, in fact,
such cases, is vested with the power to subject the property to the cannot be acquired.
obligation created by the mortgage. In such case personal
jurisdiction over the nonresident defendant is nonessential and in
fact cannot be acquired.[11] Needless to stress, the instant case bears no resemblance to the Banco
Espaol-Filipino case. In the first place, this is not an action involving foreclosure of real
estate mortgage. In the second place, none of the parties here is a nonresident. We find
no reason to apply here our ruling in Banco Espaol-Filipino.
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS, who
allegedly entered into the questioned loan and real estate mortgage contracts, is an The Court of Appeals finds that Hernandez v. Rural Bank of Lucena,
indispensable party who has not been properly impleaded. Inc. provides the proper precedent in this case. In Hernandez, appellants contended
that the action of the Hernandez spouses for the cancellation of the mortgage on their
TOPROS, however, maintains that the appellate court correctly sustained the lower lots was a real action affecting title to real property, which should have been filed in
courts finding that the instant complaint for annulment of loan and real estate the place where the mortgaged lots were situated. Rule 4, Section 2 (a), of the then
mortgage contracts is a personal action. TOPROS points out that a complaint for the Rules of Court, was applied, to wit:
11
SEC. 2. Venue in Courts of First Instance. (a) Real actions. it will not necessarily be directly or injuriously affected by a decree which does
Actions affecting title to, or for recovery of possession, or for complete justice between them.[17]
partition or condemnation of, or foreclosure of mortgage on, real
property, shall be commenced and tried in the province where the Is John Charles Chang, Jr., the president of TOPROS who allegedly entered
property or any part thereof lies. into the disputed contracts of loan and real estate mortgage, an indispensable party in
this case?

The Court pointed out in the Hernandez case that with respect to mortgage, We note that although it is Changs signature that appears on the assailed
the rule on real actions only mentions an action for foreclosure of a real estate real estate mortgage contract, his participation is limited to being a representative of
mortgage. It does not include an action for the cancellation of a real estate TOPROS, allegedly without authority. The document[18]which constitutes as the
mortgage. Exclusio unios est inclusio alterius. The latter thus falls under the catch-all contract of real estate mortgage clearly points to petitioner and TOPROS as the sole
provision on personal actions under paragraph (b) of the above-cited section, to wit: parties-in-interest to the agreement as mortgagee and mortgagor therein, respectively.
Any rights or liabilities arising from the said contract would therefore bind only the
SEC. 2 (b) Personal actions. All other actions may be petitioner and TOPROS as principal parties. Chang, acting as mere representative of
commenced and tried where the defendant or any of the defendants TOPROS, acquires no rights whatsoever, nor does he incur any liabilities, arising from
resides or may be found, or where the plaintiff or any of the plaintiffs the said contract between petitioner and TOPROS. Certainly, in our view, the only
resides, at the election of the plaintiff. indispensable parties to the mortgage contract are petitioner and TOPROS alone.

We thus hold that John Charles Chang, Jr., is not an indispensable party in
In the same vein, the action for annulment of a real estate mortgage in the Civil Case No. 67736. This is without prejudice to any separate action TOPROS may
present case must fall under Section 2 of Rule 4, to wit: institute against Chang, Jr., in a proper proceeding.
SEC. 2. Venue of personal actions. All other actions may be
commenced and tried where the plaintiff or any of the principal WHEREFORE, the petition is DENIED. The assailed decision dated November
plaintiffs resides, or where the defendant or any of the principal 28, 2001 and resolution dated April 1, 2002 of the Court of Appeals upholding the
defendants resides, or in the case of a non-resident defendant where Orders of Judge Lorifel Lacap Pahimna are AFFIRMED.
he may be found, at the election of the plaintiff.[14]
No pronouncement as to costs.

Thus, Pasig City, where the parties reside, is the proper venue of the action to SO ORDERED.
nullify the subject loan and real estate mortgage contracts. The Court of Appeals
committed no reversible error in upholding the orders of the Regional Trial Court G.R. No. L-49252 November 13, 1946
denying petitioners motion to dismiss the case on the ground of improper venue.
FERNANDO GUEVARRA, and MARCOS GUEVARRA, petitioners,
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court vs.
provides: VICENTE DEL ROSARIO, Judge of First Instance of Tayabas, HERMOGENES
SEC. 7. Compulsory joinder of indispensable parties. Parties CALUAG, PASTOR C. JAVIER, CARLOS A. BUENDIA, and SEBASTIAN A.
in interest without whom no final determination can be had of an LIWAG, respondents.
action shall be joined either as plaintiffs or defendants. (Emphasis
ours) Alidio Lainez and Eligir for petitioners.
Office of the Solicitor Vicente Arguelles for respondent Judge.

The presence of indispensable parties is necessary to vest the court with PADILLA, J.:
jurisdiction. The absence of an indispensable party renders all subsequent actuations
of the court null and void, because of that courts want of authority to act, not only as
to the absent parties but even as to those present.[15] Thus, whenever it appears to the Fernando Guevarra and Marcos Guevarra pray for a writ of mandamus to compel the
court in the course of a proceeding that an indispensable party has not been joined, it respondent court to conduct a preliminary investigation upon a complaint filed by
is the duty of the court to stop the trial and order the inclusion of such party.[16] them on June 28, 1944, charging Hermogenes Calaug, Provincial Fiscal of Tayabas,
Pastor C. Javier, Municipal Mayor of Candelaria, Tayabas, Carlos A. Buendia, Justice
of the Peace of Sariaya and Candelaria, Tayabas, and Sebastian A. Liwag, Clerk of
A person is not an indispensable party, however, if his interest in the Court of the Justice of the Peace of Candelaria, Tayabas, with the crime of falsification
controversy or subject matter is separable from the interest of the other parties, so that of public documents, defined and punished under article 171 of the Revised Penal

12
Code. They also pray that the respondent court be compelled to communicate on the Assailed in this petition for certiorari1 are the Decision2 dated March 5, 2012 and the
subject matter of the complaint with the Secretary of Justice so that the latter may Resolution3 dated October 4, 2012 of the Court of Appeals(CA) in CA-G.R. SP No.
appoint an acting fiscal in view of the incumbent's disqualification to act in the case. 117474, which annulled the Orders dated September 20, 2010 4 and October 22,
20105 of the Regional Trial Court of Manila, Branch 173 (RTC) in Civil Case No. 10-
124040, denying private respondent Cash Asia Credit Corporation�s (Cash Asia)
Two days after the filing of the complaint referred to, the respondent court acting
motion to dismiss on the ground of improper venue.cralawred
thereon ordered the return of the complaint to the petitioners, for the reason that the
Ministry of Justice or the Bureau of Public Prosecution of the Republic of the
Philippines should first be heard before the complaint might be entertained. A motion The Facts
for reconsideration of the order was denied on July 14, 1944.
The instant case arose from a Complaint6 dated August 2, 2010 filed by Virgilio C.
Briones (Briones) for Nullity of Mortgage Contract, Promissory Note, Loan Agreement,
The Director of Prisons reports in CA-G.R. No. 77 that the petitioners died in Bilibid Foreclosure of Mortgage, Cancellation of Transfer Certificate of Title (TCT) No.290846,
Prisons. Emilio Guevarra and Ciriaco Guevarra, son and brother of the petitioners, and Damages against Cash Asia before the RTC.7 In his complaint, Briones alleged that
pray to be allowed to substitute the petitioners in this case. he is the owner of a property covered by TCT No. 160689 (subject property),and that,
on July 15, 2010, his sister informed him that his property had been foreclosed and a
The substitution prayed for calls for determination of the question whether, upon the writ of possession had already been issued in favor of Cash Asia.8 Upon investigation,
death of the petitioners, the action brought in this proceeding survived to their heirs or Briones discovered that: (a) on December 6, 2007, he purportedly executed a
legal representatives. The action survived if the cause of action survived. The cause of promissory note,9 loan agreement,10 and deed of real estate mortgage 11covering the
action, upon which this proceeding in mandamus is predicated, arose from the failure subject property (subject contracts) in favor of Cash Asia in order to obtain a loan in
of the respondent court to conduct a preliminary investigation upon a complaint filed the amount of P3,500,000.00 from the latter;12 and (b) since the said loan was left
by the petitioners charging certain officers with the crime of falsification of public unpaid, Cash Asia proceeded to foreclose his property.13 In this relation, Briones
documents. The right of the petitioners to file a complaint charging the commission of claimed that he never contracted any loans from Cash Asia as he has been living and
a crime is personal. It is so, because as required in section 2, Rule 106, a complaint working in Vietnam since October 31, 2007. He further claimed that he only went back
charging a person with an offense must be subscribed by the offended party. The right to the Philippines on December 28, 2007 until January 3, 2008 to spend the holidays
being personal, the complaint filed by the petitioners with the respondent court abated with his family, and that during his brief stay in the Philippines, nobody informed him
upon their death. of any loan agreement entered into with Cash Asia. Essentially, Briones assailed the
validity of the foregoing contracts claiming his signature to be
forged.14chanRoblesvirtualLawlibrary
Likewise, the cause of action, upon which this proceeding in mandamus is based, is
personal. The failure of the respondent court to conduct a preliminary investigation For its part, Cash Asia filed a Motion to Dismiss15 dated August 25, 2010, praying for
which gave rise to this proceeding was upon petitioners' complaint. The heirs or legal the outright dismissal of Briones�s complaint on the ground of improper venue.16 In
representatives of the late petitioners could not justly complain of the failure of the this regard, Cash Asia pointed out the venue stipulation in the subject contracts
respondent court to conduct a preliminary investigation, because they had filed no
stating that �all legal actions arising out of this notice in connection with the Real
complaint. It was the complaint of the deceased petitioners. The cause of action in this
Estate Mortgage subject hereof shall only be brought in or submitted to the jurisdiction
proceeding did not survive to the heirs or legal representatives of the late petitioners,
of the proper court of Makati City.�17 In view thereof, it contended that all actions
because the complaint filed by the petitioners with the respondent court, from which
arising out of the subject contracts may only be exclusively brought in the courts of
the cause of action in this proceeding arose, abated upon the death of said petitioners.
Hence this proceeding cannot be prosecuted or continued by the heirs or legal Makati City, and as such, Briones�s complaint should be dismissed for having been
representatives of the late petitioners, for the cause of action upon which it is filed in the City of Manila.18chanRoblesvirtualLawlibrary
predicated is personal and did not survive to said heirs and legal representatives.
In response, Briones filed an opposition,19 asserting, inter alia, that he should not be
covered by the venue stipulation in the subject contracts as he was never a party
Motion for substitution is denied and petition for a writ of mandamus abated, without therein. He also reiterated that his signatures on the said contracts were
costs. forgeries.20chanRoblesvirtualLawlibrary

G.R. No. 204444, January 14, 2015 The RTC Ruling

In an Order21 dated September 20, 2010, the RTC denied Cash Asia�s motion to
VIRGILIO C. BRIONES, Petitioner, v. COURT OF APPEALS AND CASH ASIA CREDIT
dismiss for lack of merit. In denying the motion, the RTC opined that the parties must
CORPORATION, Respondents.
be afforded the right to be heard in view of the substance of Briones�s cause of action
against Cash Asia as stated in the complaint.22chanRoblesvirtualLawlibrary
DECISION
Cash Asia moved for reconsideration23 which was, however, denied in an Order24 dated
October 22, 2010. Aggrieved, it filed a petition for certiorari25 before the CA.cralawred
PERLAS-BERNABE, J.:
13
The CA Ruling SEC. 2. Venue of personal actions. � All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant or
In a Decision26 dated March 5, 2012, the CA annulled the RTC Orders, and any of the principal defendants resides, or in the case of a non-resident defendant
accordingly, dismissed Briones�s complaint without prejudice to the filing of the same where he may be found, at the election of the plaintiff.
before the proper court in Makati City.27 It held that the RTC gravely abused its
discretion in denying Cash Asia�s motion to dismiss, considering that the subject SEC. 3. Venue of actions against nonresidents. � If any of the defendants does not
contracts clearly provide that actions arising therefrom should be exclusively filed reside and is not found in the Philippines, and the action affects the personal status of
before the courts of Makati City only.28 As such, the CA concluded that Briones�s the plaintiff, or any property of said defendant located in the Philippines, the action
complaint should have been dismissed outright on the ground of improper may be commenced and tried in the court of the place where the plaintiff resides, or
venue,29 this, notwithstanding Briones�s claim of forgery. where the property or any portion thereof is situated or found.

Dissatisfied, Briones moved for reconsideration,30 which was, however, denied in a SEC. 4. When Rule not applicable. � This Rule shall not apply �
Resolution31 dated October 4, 2012, hence, this petition.
(a) In those cases where a specific rule or law provides otherwise; or
The Issue Before the Court
(b) Where the parties have validly agreed in writing before the filing of the action on the
The primordial issue for the Court�s resolution is whether or not the CA gravely exclusive venue thereof.
abused its discretion in ordering the outright dismissal of Briones�s complaint on the
Based therefrom, the general rule is that the venue of real actions is the court which
ground of improper venue.
has jurisdiction over the area wherein the real property involved, or a portion thereof,
is situated; while the venue of personal actions is the court which has jurisdiction
The Court�s Ruling where the plaintiff or the defendant resides, at the election of the plaintiff. As an
exception, jurisprudence in Legaspi v. Rep. of the Phils.33 instructs that the parties,
The petition is meritorious. thru a written instrument, may either introduce another venue where actions arising
from such instrument may be filed, or restrict the filing of said actions in a certain
At the outset, the Court stresses that �[t]o justify the grant of the extraordinary exclusive venue, viz.:chanroblesvirtuallawlibrary
remedy of certiorari, [the petitioner] must satisfactorily show that the court or quasi-
judicial authority gravely abused the discretion conferred upon it. Grave abuse of
The parties, however, are not precluded from agreeing in writing on an exclusive
discretion connotes judgment exercised in a capricious and whimsical manner that is
venue, as qualified by Section 4 of the same rule. Written stipulations as to venue
tantamount to lack of jurisdiction. To be considered �grave,� discretion must be may be restrictive in the sense that the suit may be filed only in the place agreed
exercised in a despotic manner by reason of passion or personal hostility, and must be
upon, or merely permissive in that� the parties may file their suit not only in
so patent and gross as to amount to an evasion of positive duty or to a virtual refusal
the place agreed upon but also in the places fixed by law. As in any other
to perform the duty enjoined by or to act at all in contemplation of
agreement, what is essential is the ascertainment of the intention of the parties
law.�32chanRoblesvirtualLawlibrary respecting the matter.
Guided by the foregoing considerations, the Court finds that the CA gravely abused its As regards restrictive stipulations on venue, jurisprudence instructs that it must
discretion in ordering the outright dismissal of Briones�s complaint against Cash be shown that such stipulation is exclusive. In the absence of qualifying or
Asia, without prejudice to its re-filing before the proper court in Makati City. restrictive words, such as �exclusively,� �waiving for this purpose any other
venue,� �shall only� preceding the designation of venue, �to the exclusion of the
Rule 4 of the Rules of Court governs the rules on venue of civil actions, to
other courts,� or words of similar import, the stipulation should be deemed as
wit:chanroblesvirtuallawlibrary
merely an agreement on an additional forum, not as limiting venue to the
specified place.34 (Emphases and underscoring supplied)
Rule 4
VENUE OF ACTIONS In this relation, case law likewise provides that in cases where the complaint assails
only the terms, conditions, and/or coverage of a written instrument and not its
SECTION 1. Venue of real actions. � Actions affecting title to or possession of real validity, the exclusive venue stipulation contained therein shall still be binding on the
property, or interest therein, shall be commenced and tried in the proper court which parties, and thus, the complaint may be properly dismissed on the ground of improper
has jurisdiction over the area wherein the real property involved, or a portion thereof, venue.35 Conversely, therefore, a complaint directly assailing the validity of the written
is situated. instrument itself should not be bound by the exclusive venue stipulation contained
therein and should be filed in accordance with the general rules on venue.To be sure,
Forcible entry and detainer actions shall be commenced and tried in the municipal it would be inherently consistent for a complaint of this nature to recognize the
trial court of the municipality or city wherein the real property involved, or a portion exclusive venue stipulation when it, in fact, precisely assails the validity of the
thereof, is situated. instrument in which such stipulation is contained.

14
DECISION
In this case, the venue stipulation found in the subject contracts is indeed restrictive
in nature, considering that it effectively limits the venue of the actions arising
therefrom to the courts of Makati City. However, it must be emphasized that
Briones�s complaint directly assails the validity of the subject contracts, claiming
forgery in their execution. Given this circumstance, Briones cannot be expected to LEONARDO-DE CASTRO, J.:
comply with the aforesaid venue stipulation, as his compliance therewith would mean
an implicit recognition of their validity. Hence, pursuant to the general rules on venue,
Briones properly filed his complaint before a court in the City of Manila where the
subject property is located.

In conclusion, the CA patently erred and hence committed grave abuse of discretion in This is a Petition for Review on Certiorari assailing the Decision[1] of the Court
dismissing Briones�s complaint on the ground of improper venue.chanrobleslaw of Appeals dated September 8, 2006 in CA-G.R. SP No. 94382 and its
Resolution[2] dated December 12, 2006, denying the Motion for Reconsideration.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated March 5,
2012 and the Resolution dated October 4, 2012 of the Court of Appeals in CA-G.R. SP
No. 117474 are hereby ANNULLED and SET ASIDE. The Orders dated September 20,
2010 and October 22, 2010 of the Regional Trial Court of Manila, Branch 173 in Civil On August 30, 2005, respondent Lepanto Consolidated Mining Company filed
Case No. 10-124040 are REINSTATED. with the Regional Trial Court (RTC) of Makati City a Complaint[3] against petitioner NM
Rothschild & Sons (Australia) Limited praying for a judgment declaring the loan and
SO ORDERED.cralawlawlibrary hedging contracts between the parties void for being contrary to Article 2018[4] of the
NM ROTHSCHILD & SONS (AUSTRALIA) G.R. No. 175799 Civil Code of the Philippines and for damages. The Complaint was docketed as Civil
LIMITED, Case No. 05-782, and was raffled to Branch 150. Upon respondents (plaintiffs) motion,
Present: the trial court authorized respondents counsel to personally bring the summons and
Petitioner, Complaint to the Philippine Consulate General in Sydney, Australia for the latter office
to effect service of summons on petitioner (defendant).
CORONA, C.J.,

Chairperson,
On October 20, 2005, petitioner filed a Special Appearance With Motion to
LEONARDO-DE CASTRO, Dismiss[5] praying for the dismissal of the Complaint on the following grounds: (a) the
court has not acquired jurisdiction over the person of petitioner due to the defective
BERSAMIN, and improper service of summons; (b) the Complaint failed to state a cause of action
and respondent does not have any against petitioner; (c) the action is barred by
- versus - DEL CASTILLO, and estoppel; and (d) respondent did not come to court with clean hands.

VILLARAMA, JR., JJ.

On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to
take the deposition of Mr. Paul Murray (Director, Risk Management of petitioner) before
Promulgated: the Philippine Consul General; and (2) a Motion for Leave to Serve Interrogatories on
respondent.

LEPANTO CONSOLIDATED MINING


COMPANY, On December 9, 2005, the trial court issued an Order[6] denying the Motion to
November 28, 2011 Dismiss. According to the trial court, there was a proper service of summons through
Respondent. the Department of Foreign Affairs (DFA) on account of the fact that the defendant has
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x neither applied for a license to do business in the Philippines, nor filed with the
Securities and Exchange Commission (SEC) a Written Power of Attorney designating
some person on whom summons and other legal processes maybe served. The trial
court also held that the Complaint sufficiently stated a cause of action. The other

15
allegations in the Motion to Dismiss were brushed aside as matters of defense which Whether petitioner is a real
can best be ventilated during the trial. party in interest

On December 27, 2005, petitioner filed a Motion for Reconsideration.[7] On March 6,


2006, the trial court issued an Order denying the December 27, 2005 Motion for
Reconsideration and disallowed the twin Motions for Leave to take deposition and serve
written interrogatories.[8]
Respondent argues that the present Petition should be dismissed on the
ground that petitioner no longer existed as a corporation at the time said Petition was
filed on February 1, 2007. Respondent points out that as of the date of the filing of the
On April 3, 2006, petitioner sought redress via a Petition for Certiorari[9] with Petition, there is no such corporation that goes by the name NM Rothschild and Sons
the Court of Appeals, alleging that the trial court committed grave abuse of discretion (Australia) Limited. Thus, according to respondent, the present Petition was not filed by
in denying its Motion to Dismiss. The Petition was docketed as CA-G.R. SP No. 94382. a real party in interest, citing our ruling in Philips Export B.V. v. Court of
Appeals,[10] wherein we held:

On September 8, 2006, the Court of Appeals rendered the assailed Decision


dismissing the Petition for Certiorari. The Court of Appeals ruled that since the denial of A name is peculiarly important as necessary to the very
a Motion to Dismiss is an interlocutory order, it cannot be the subject of a Petition existence of a corporation (American Steel Foundries vs. Robertson,
for Certiorari, and may only be reviewed in the ordinary course of law by an appeal from 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon Valley
the judgment after trial. On December 12, 2006, the Court of Appeals rendered the R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co.,
assailed Resolution denying the petitioners Motion for Reconsideration. 40 W Va 530, 23 SE 792). Its name is one of its attributes, an
element of its existence, and essential to its identity (6 Fletcher
[Perm Ed], pp. 3-4). The general rule as to corporations is that each
corporation must have a name by which it is to sue and be sued and
Meanwhile, on December 28, 2006, the trial court issued an Order directing do all legal acts. The name of a corporation in this respect
respondent to answer some of the questions in petitioners Interrogatories to Plaintiff designates the corporation in the same manner as the name of an
dated September 7, 2006. individual designates the person (Cincinnati Cooperage Co. vs. Bate,
96 Ky 356, 26 SW 538; Newport Mechanics Mfg. Co. vs. Starbird, 10
NH 123); and the right to use its corporate name is as much a part
of the corporate franchise as any other privilege granted (Federal
Notwithstanding the foregoing, petitioner filed the present petition assailing Secur. Co. vs. Federal Secur. Corp., 129 Or 375, 276 P 1100, 66
the September 8, 2006 Decision and the December 12, 2006 Resolution of the Court of ALR 934; Paulino vs. Portuguese Beneficial Association, 18 RI 165,
Appeals. Arguing against the ruling of the appellate court, petitioner insists that (a) an 26 A 36).[11]
order denying a motion to dismiss may be the proper subject of a petition for certiorari;
and (b) the trial court committed grave abuse of discretion in not finding that it had not
validly acquired jurisdiction over petitioner and that the plaintiff had no cause of
action.

In its Memorandum[12] before this Court, petitioner started to refer to itself


as Investec Australia Limited (formerly NM Rothschild & Sons [Australia] Limited) and
Respondent, on the other hand, posits that: (a) the present Petition should be captioned said Memorandum accordingly. Petitioner claims that NM Rothschild and
dismissed for not being filed by a real party in interest and for lack of a proper Sons (Australia) Limited still exists as a corporation under the laws of Australia under
verification and certificate of non-forum shopping; (b) the Court of Appeals correctly said new name. It presented before us documents evidencing the process in the
ruled that certiorari was not the proper remedy; and (c) the trial court correctly denied Australian Securities & Investment Commission on the change of petitioners company
petitioners motion to dismiss. name from NM Rothschild and Sons (Australia) Limited to Investec Australia Limited.[13]

Our discussion of the issues raised by the parties follows: We find the submissions of petitioner on the change of its corporate name
satisfactory and resolve not to dismiss the present Petition for Review on the ground of
not being prosecuted under the name of the real party in interest.While we stand by
our pronouncement in Philips Export on the importance of the corporate name to the

16
very existence of corporations and the significance thereof in the corporations right to discretion in its denial of petitioners Motion to Dismiss. A mere error in judgment on
sue, we shall not go so far as to dismiss a case filed by the proper party using its the part of the trial court would undeniably be inadequate for us to reverse the
former name when adequate identification is presented. A real party in interest is the disposition by the Court of Appeals.
party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.[14] There is no doubt in our minds that the party who
filed the present Petition, having presented sufficient evidence of its identity and being
represented by the same counsel as that of the defendant in the case sought to be Issues more properly
dismissed, is the entity that will be benefited if this Court grants the dismissal prayed ventilated during the trial of
for. the case

Since the main objection of respondent to the verification and certification


against forum shopping likewise depends on the supposed inexistence of the
corporation named therein, we give no credit to said objection in light of the foregoing As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782
discussion. on the following grounds: (a) lack of jurisdiction over the person of petitioner due to the
defective and improper service of summons; (b) failure of the Complaint to state a cause
of action and absence of a cause of action; (c) the action is barred by estoppel; and (d)
respondent did not come to court with clean hands.
Propriety of the Resort to a
Petition for Certiorari with
the Court of Appeals
As correctly ruled by both the trial court and the Court of Appeals, the alleged
absence of a cause of action (as opposed to the failure to state a cause of action), the
alleged estoppel on the part of petitioner, and the argument that respondent is in pari
delicto in the execution of the challenged contracts, are not grounds in a Motion to
Dismiss as enumerated in Section 1, Rule 16[17] of the Rules of Court. Rather, such
We have held time and again that an order denying a Motion to Dismiss is an defenses raise evidentiary issues closely related to the validity and/or existence of
interlocutory order which neither terminates nor finally disposes of a case as it leaves respondents alleged cause of action and should therefore be threshed out during the
something to be done by the court before the case is finally decided on the merits. The trial.
general rule, therefore, is that the denial of a Motion to Dismiss cannot be questioned
in a special civil action for Certiorari which is a remedy designed to correct errors of
jurisdiction and not errors of judgment.[15] However, we have likewise held that when
the denial of the Motion to Dismiss is tainted with grave abuse of discretion, the grant As regards the allegation of failure to state a cause of action, while the same is
of the extraordinary remedy of Certiorari may be justified. By grave abuse of discretion usually available as a ground in a Motion to Dismiss, said ground cannot be ruled
is meant: upon in the present Petition without going into the very merits of the main case.

[S]uch capricious and whimsical exercise of judgment that is It is basic that [a] cause of action is the act or omission by which a party
equivalent to lack of jurisdiction. The abuse of discretion must be violates a right of another.[18] Its elements are the following: (1) a right existing in favor
grave as where the power is exercised in an arbitrary or despotic of the plaintiff, (2) a duty on the part of the defendant to respect the plaintiff's right,
manner by reason of passion or personal hostility, and must be so and (3) an act or omission of the defendant in violation of such right.[19] We have held
patent and gross as to amount to an evasion of positive duty or to a that to sustain a Motion to Dismiss for lack of cause of action, the complaint must
virtual refusal to perform the duty enjoined by or to act all in show that the claim for relief does not exist and not only that the claim was defectively
contemplation of law.[16] stated or is ambiguous, indefinite or uncertain.[20]

The trial court held that the Complaint in the case at bar contains all the
three elements of a cause of action, i.e., it alleges that: (1) plaintiff has the right to ask
The resolution of the present Petition therefore entails an inquiry into whether for the declaration of nullity of the Hedging Contracts for being null and void and
the Court of Appeals correctly ruled that the trial court did not commit grave abuse of contrary to Article 2018 of the Civil Code of the Philippines; (2) defendant has the

17
corresponding obligation not to enforce the Hedging Contracts because they are in the Whether such an agreement is void is a mere allegation of a conclusion of law,
nature of wagering or gambling agreements and therefore the transactions which therefore cannot be hypothetically admitted. Quite properly, the relevant
implementing those contracts are null and void under Philippine laws; and (3) portions of the contracts sought to be nullified, as well as a copy of the contract itself,
defendant ignored the advice and intends to enforce the Hedging Contracts by are incorporated in the Complaint. The determination of whether or not the Complaint
demanding financial payments due therefrom.[21] stated a cause of action would therefore involve an inquiry into whether or not the
assailed contracts are void under Philippine laws. This is, precisely, the very issue to be
determined in Civil Case No. 05-782. Indeed, petitioners defense against the charge of
nullity of the Hedging Contracts is the purported intent of the parties that actual
The rule is that in a Motion to Dismiss, a defendant hypothetically admits the deliveries of gold be made pursuant thereto. Such a defense requires the presentation
truth of the material allegations of the ultimate facts contained in the plaintiff's of evidence on the merits of the case. An issue that requires the contravention of the
complaint.[22] However, this principle of hypothetical admission admits of allegations of the complaint, as well as the full ventilation, in effect, of the main merits
exceptions. Thus, in Tan v. Court of Appeals, [23] we held: of the case, should not be within the province of a mere Motion to Dismiss.[26] The trial
court, therefore, correctly denied the Motion to Dismiss on this ground.

The flaw in this conclusion is that, while conveniently


echoing the general rule that averments in the complaint are It is also settled in jurisprudence that allegations of estoppel and bad faith
deemed hypothetically admitted upon the filing of a motion to require proof. Thus, in Paraaque Kings Enterprises, Inc. v. Court of Appeals,[27] we ruled:
dismiss grounded on the failure to state a cause of action, it did not
take into account the equally established limitations to such
rule, i.e., that a motion to dismiss does not admit the truth of
mere epithets of fraud; nor allegations of legal conclusions; nor an Having come to the conclusion that the complaint states a
erroneous statement of law; nor mere inferences or conclusions from valid cause of action for breach of the right of first refusal and that
facts not stated; nor mere conclusions of law; nor allegations of the trial court should thus not have dismissed the complaint, we
fact the falsity of which is subject to judicial notice; nor matters of find no more need to pass upon the question of whether the
evidence; nor surplusage and irrelevant matter; nor scandalous complaint states a cause of action for damages or whether the
matter inserted merely to insult the opposing party; nor to legally complaint is barred by estoppel or laches. As these
impossible facts; nor to facts which appear unfounded by a record matters require presentation and/or determination of facts,
incorporated in the pleading, or by a document referred to; and, nor they can be best resolved after trial on the merits.[28] (Emphases
to general averments contradicted by more specific averments. A supplied.)
more judicious resolution of a motion to dismiss, therefore,
necessitates that the court be not restricted to the consideration of
the facts alleged in the complaint and inferences fairly deducible
therefrom. Courts may consider other facts within the range of
judicial notice as well as relevant laws and jurisprudence which the
courts are bound to take into account, and they are also fairly On the proposition in the Motion to Dismiss that respondent has come to
entitled to examine records/documents duly incorporated into court with unclean hands, suffice it to state that the determination of whether one
the complaint by the pleader himself in ruling on the demurrer acted in bad faith and whether damages may be awarded is evidentiary in
to the complaint.[24] (Emphases supplied.) nature. Thus, we have previously held that [a]s a matter of defense, it can be best
passed upon after a full-blown trial on the merits.[29]

Jurisdiction over the person


In the case at bar, respondent asserts in the Complaint that the Hedging of petitioner
Contracts are void for being contrary to Article 2018[25] of the Civil Code. Respondent
claims that under the Hedging Contracts, despite the express stipulation for deliveries
of gold, the intention of the parties was allegedly merely to compel each other to pay the
difference between the value of the gold at the forward price stated in the contract and Petitioner alleges that the RTC has not acquired jurisdiction over its person on
its market price at the supposed time of delivery. account of the improper service of summons. Summons was served on petitioner
through the DFA, with respondents counsel personally bringing the summons and
Complaint to the Philippine Consulate General in Sydney, Australia.

18
defendant from any interest therein, or the property of the defendant
has been attached within the Philippines, service may, by leave of
In the pleadings filed by the parties before this Court, the parties entered into court, be effected out of the Philippines by personal service as under
a lengthy debate as to whether or not petitioner is doing business in the section 6; or by publication in a newspaper of general circulation in
Philippines. However, such discussion is completely irrelevant in the case at bar, for such places and for such time as the court may order, in which case
two reasons. Firstly, since the Complaint was filed on August 30, 2005, the provisions a copy of the summons and order of the court shall be sent by
of the 1997 Rules of Civil Procedure govern the service of summons. Section 12, Rule registered mail to the last known address of the defendant, or in any
14 of said rules provides: other manner the court may deem sufficient. Any order granting
such leave shall specify a reasonable time, which shall not be less
than sixty (60) days after notice, within which the defendant must
answer.
Sec. 12. Service upon foreign private juridical entity. When
the defendant is a foreign private juridical entity which has
transacted business in the Philippines, service may be made on
its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official
designated by law to that effect, or on any of its officers or agents Respondent argues[31] that extraterritorial service of summons upon foreign
within the Philippines. (Emphasis supplied.) private juridical entities is not proscribed under the Rules of Court, and is in fact
within the authority of the trial court to adopt, in accordance with Section 6, Rule 135:

Sec. 6. Means to carry jurisdiction into effect. When by law


This is a significant amendment of the former Section 14 of said rule which previously jurisdiction is conferred on a court or judicial officer, all auxiliary
provided: writs, processes and other means necessary to carry it into effect
may be employed by such court or officer; and if the procedure to be
followed in the exercise of such jurisdiction is not specifically
pointed out by law or by these rules, any suitable process or mode of
Sec. 14. Service upon private foreign corporations. If the proceeding may be adopted which appears comformable to the spirit
defendant is a foreign corporation, or a nonresident joint stock of said law or rules.
company or association, doing business in the Philippines, service
may be made on its resident agent designated in accordance with
law for that purpose, or if there be no such agent, on the
government official designated by law to that effect, or on any of its
officers or agents within the Philippines. (Emphasis supplied.)
Section 15, Rule 14, however, is the specific provision dealing precisely with
the service of summons on a defendant which does not reside and is not found in the
Philippines, while Rule 135 (which is in Part V of the Rules of Court entitled Legal
Ethics) concerns the general powers and duties of courts and judicial officers.

The coverage of the present rule is thus broader.[30] Secondly, the service of summons
to petitioner through the DFA by the conveyance of the summons to the Philippine
Consulate General in Sydney, Australia was clearly made not through the above-quoted Breaking down Section 15, Rule 14, it is apparent that there are only four
Section 12, but pursuant to Section 15 of the same rule which provides: instances wherein a defendant who is a non-resident and is not found in the country
may be served with summons by extraterritorial service, to wit: (1) when the action
affects the personal status of the plaintiffs; (2) when the action relates to, or the subject
of which is property, within the Philippines, in which the defendant claims a lien or an
Sec. 15. Extraterritorial service. When the defendant does interest, actual or contingent; (3) when the relief demanded in such action consists,
not reside and is not found in the Philippines, and the action affects wholly or in part, in excluding the defendant from any interest in property located in
the personal status of the plaintiff or relates to, or the subject of the Philippines; and (4) when the defendant non-resident's property has been attached
which is property within the Philippines, in which the defendant has within the Philippines. In these instances, service of summons may be effected by (a)
or claims a lien or interest, actual or contingent, or in which the personal service out of the country, with leave of court; (b) publication, also with leave
relief demanded consists, wholly or in part, in excluding the of court; or (c) any other manner the court may deem sufficient.[32]

19
to compel a defendant to specifically perform some act or actions to
fasten a pecuniary liability on him.[36]
Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd.
v. Dakila Trading Corporation[33] that:

Undoubtedly, extraterritorial service of summons It is likewise settled that [a]n action in personam is lodged against a person based on
applies only where the action is in rem or quasi in rem, but not personal liability; an action in rem is directed against the thing itself instead of the
if an action is in personam. person; while an action quasi in rem names a person as defendant, but its object is to
subject that persons interest in a property to a corresponding lien or obligation.[37]

When the case instituted is an action in rem or quasi in


rem, Philippine courts already have jurisdiction to hear and decide The Complaint in the case at bar is an action to declare the loan and
the case because, in actions in rem and quasi in rem, jurisdiction Hedging Contracts between the parties void with a prayer for damages. It is a suit
over the person of the defendant is not a prerequisite to confer in which the plaintiff seeks to be freed from its obligations to the defendant under a
jurisdiction on the court, provided that the court acquires contract and to hold said defendant pecuniarily liable to the plaintiff for entering into
jurisdiction over the res. Thus, in such instance, extraterritorial such contract. It is therefore an action in personam, unless and until the plaintiff
service of summons can be made upon the defendant. The said attaches a property within the Philippines belonging to the defendant, in which case
extraterritorial service of summons is not for the purpose of vesting the action will be converted to one quasi in rem.
the court with jurisdiction, but for complying with the requirements
of fair play or due process, so that the defendant will be informed of
the pendency of the action against him and the possibility that
property in the Philippines belonging to him or in which he has an Since the action involved in the case at bar is in personam and since the
interest may be subjected to a judgment in favor of the plaintiff, and defendant, petitioner Rothschild/Investec, does not reside and is not found in the
he can thereby take steps to protect his interest if he is so Philippines, the Philippine courts cannot try any case against it because of the
minded. On the other hand, when the defendant or respondent impossibility of acquiring jurisdiction over its person unless it voluntarily appears in
does not reside and is not found in the Philippines, and the court.[38]
action involved is in personam, Philippine courts cannot try
any case against him because of the impossibility of acquiring
jurisdiction over his person unless he voluntarily appears in
court.[34](Emphases supplied.) In this regard, respondent vigorously argues that petitioner should be held to
have voluntarily appeared before the trial court when it prayed for, and was actually
afforded, specific reliefs from the trial court.[39] Respondent points out that while
petitioners Motion to Dismiss was still pending, petitioner prayed for and was able to
avail of modes of discovery against respondent, such as written interrogatories,
requests for admission, deposition, and motions for production of documents.[40]
In Domagas v. Jensen,[35] we held that:

Petitioner counters that under this Courts ruling in the leading case of La
[T]he aim and object of an action determine its character. Whether a Naval Drug Corporation v. Court of Appeals,[41] a party may file a Motion to Dismiss on
proceeding is in rem, or in personam, or quasi in rem for that matter, the ground of lack of jurisdiction over its person, and at the same time raise affirmative
is determined by its nature and purpose, and by these only. A defenses and pray for affirmative relief, without waiving its objection to the acquisition
proceeding in personam is a proceeding to enforce personal rights of jurisdiction over its person.[42]
and obligations brought against the person and is based on the
jurisdiction of the person, although it may involve his right to, or the
exercise of ownership of, specific property, or seek to compel him to
control or dispose of it in accordance with the mandate of the It appears, however, that petitioner misunderstood our ruling in La Naval. A
court. The purpose of a proceeding in personam is to impose, close reading of La Naval reveals that the Court intended a distinction between the
through the judgment of a court, some responsibility or liability raising of affirmative defenses in an Answer (which would not amount to acceptance of
directly upon the person of the defendant. Of this character are suits

20
the jurisdiction of the court) and the prayer for affirmative reliefs (which would be no real cause for what may understandably be
considered acquiescence to the jurisdiction of the court): its apprehension, i.e., that by its participation
during the trial on the merits, it may, absent
an invocation of separate or independent
reliefs of its own, be considered to have
In the same manner that a plaintiff may assert two or voluntarily submitted itself to the court's
more causes of action in a court suit, a defendant is likewise jurisdiction.[43] (Emphases supplied.)
expressly allowed, under Section 2, Rule 8, of the Rules of
Court, to put up his own defenses alternatively or even
hypothetically. Indeed, under Section 2, Rule 9, of the Rules of
Court, defenses and objections not pleaded either in a motion to
dismiss or in an answer, except for the failure to state a cause of
action, are deemed waived. We take this to mean that a defendant In order to conform to the ruling in La Naval, which was decided by this
may, in fact, feel enjoined to set up, along with his objection to the Court in 1994, the former Section 23, Rule 14 [44] concerning voluntary appearance was
court's jurisdiction over his person, all other possible defenses. It amended to include a second sentence in its equivalent provision in the 1997 Rules of
thus appears that it is not the invocation of any of such defenses, Civil Procedure:
but the failure to so raise them, that can result in waiver or
estoppel. By defenses, of course, we refer to the grounds
provided for in Rule 16 of the Rules of Court that must be
asserted in a motion to dismiss or by way of affirmative SEC. 20. Voluntary appearance. The defendant's voluntary
defenses in an answer. appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant
shall not be deemed a voluntary appearance. (Emphasis
Mindful of the foregoing, in Signetics Corporation vs. supplied.)
Court of Appeals and Freuhauf Electronics Phils., Inc. (225
SCRA 737, 738), we lately ruled:

This is not to say, however, that the The new second sentence, it can be observed, merely mentions other grounds
petitioner's right to question the jurisdiction in a Motion to Dismiss aside from lack of jurisdiction over the person of the
of the court over its person is now to be defendant. This clearly refers to affirmative defenses, rather than affirmative reliefs.
deemed a foreclosed matter. If it is true, as
Signetics claims, that its only involvement in the
Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that Thus, while mindful of our ruling in La Naval and the new Section 20, Rule
TEAM Pacific is not its agent, then it cannot really 20, this Court, in several cases, ruled that seeking affirmative relief in a court is
be said to be doing business in the Philippines. It tantamount to voluntary appearance therein.[45] Thus, in Philippine Commercial
is a defense, however, that requires the International Bank v. Dy Hong Pi,[46] wherein defendants filed a Motion for Inhibition
contravention of the allegations of the complaint, without submitting themselves to the jurisdiction of this Honorable Court subsequent
as well as a full ventilation, in effect, of the main to their filing of a Motion to Dismiss (for Lack of Jurisdiction), we held:
merits of the case, which should not thus be
within the province of a mere motion to dismiss.
So, also, the issue posed by the petitioner as to
whether a foreign corporation which has done Besides, any lingering doubts on the issue of voluntary
business in the country, but which has ceased to appearance dissipate when the respondents' motion for inhibition is
do business at the time of the filing of a considered. This motion seeks a sole relief: inhibition of Judge
complaint, can still be made to answer for a cause Napoleon Inoturan from further hearing the case. Evidently, by
of action which accrued while it was doing seeking affirmative relief other than dismissal of the case,
business, is another matter that would yet have to respondents manifested their voluntary submission to the
await the reception and admission of court's jurisdiction. It is well-settled that the active participation of
evidence. Since these points have seasonably a party in the proceedings is tantamount to an invocation of the
been raised by the petitioner, there should be
21
court's jurisdiction and a willingness to abide by the resolution of The facts of the case are as follows:
the case, and will bar said party from later on impugning the court's
jurisdiction.[47] (Emphasis supplied.) Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife.
They are both residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A.
Petitioner Alfredo D. Valmonte, who is a member of the Philippine bar, however,
practices his profession in the Philippines, commuting for this purpose between his
residence in the state of Washington and Manila, where he holds office at S-304
Gedisco Centre, 1564 A. Mabini, Ermita, Manila.
In view of the above, we therefore rule that petitioner, by seeking affirmative On March 9, 1992, private respondent Rosita Dimalanta, who is the sister of
reliefs from the trial court, is deemed to have voluntarily submitted to the jurisdiction petitioner Lourdes A. Valmonte, filed a complaint for partition of real property and
of said court. A party cannot invoke the jurisdiction of a court to secure affirmative accounting of rentals against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte
relief against his opponent and after obtaining or failing to obtain such relief, repudiate before the Regional Trial Court of Manila, Branch 48. The subject of the action is a
or question that same jurisdiction.[48]Consequently, the trial court cannot be three-door apartment located in Paco, Manila.
considered to have committed grave abuse of discretion amounting to lack or excess of
jurisdiction in the denial of the Motion to Dismiss on account of failure to acquire In her Complaint, private respondent alleged:
jurisdiction over the person of the defendant.
The plaintiff is of legal age, a widow and is at present a resident of 14823 Conway
Road, Chesterfield, Missouri, U.S.A., while the defendants are spouses, of legal age and
at present residents of 90222 Carkeek Drive, South Seattle, Washington, U.S.A., but,
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision for purposes of this complaint may be served with summons at Gedisco Center, Unit
of the Court of Appeals dated September 8, 2006 and its Resolution dated December 304, 1564 A. Mabini St., Ermita, Manila where defendant Alfredo D. Valmonte as
12, 2006 in CA-G.R. SP No. 94382 are hereby AFFIRMED. defendant Lourdes Arreola Valmontes spouse holds office and where he can be found.

Apparently, the foregoing averments were made on the basis of a letter previously
sent by petitioner Lourdes A. Valmonte to private respondents counsel
No pronouncement as to costs. in which, in regard to the partition of the property in question, she referred
private respondents counsel to her husband as the party to whom all communications
intended for her should be sent. The letter reads:

SO ORDERED.
July 4, 1991

Dear Atty. Balgos:

[G.R. No. 108538. January 22, 1996]


This is in response to your letter, dated 20 June 1991, which I received on 3 July
1991. Please address all communications to my lawyer, Atty. Alfredo D. Valmonte,
whose address, telephone and fax numbers appear below.

LOURDES A. VALMONTE and ALFREDO D. VALMONTE, petitioners, vs. THE c/o Prime Marine
HONORABLE COURT OF APPEALS, THIRD DIVISION and ROSITA Gedisco Center, Unit 304
DIMALANTA, respondents. 1564 A. Mabini, Ermita
Metro Manila
DECISION Telephone: 521-1736
Fax: 21-2095
MENDOZA, J.:
Service of summons was then made upon petitioner Alfredo D. Valmonte, who at
the time, was at his office in Manila. Petitioner Alfredo D. Valmonte accepted the
Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in summons, insofar as he was concerned, but refused to accept the summons for his
an action for partition filed against her and her husband, who is also her attorney, wife, Lourdes A. Valmonte, on the ground that he was not authorized to accept the
summons intended for her may be served on her husband, who has a law office in process on her behalf. Accordingly the process server left without leaving a copy of the
the Philippines. The Regional Trial Court of Manila, Branch 48, said no and refused to summons and complaint for petitioner Lourdes A. Valmonte.
declare Lourdes A. Valmonte in default, but the Court of Appeals said yes. Hence this
petition for review on certiorari.

22
Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim. to the conjugal partnership of the defendants (the spouses Valmonte). It is highly
Petitioner Lourdes A. Valmonte, however, did not file her Answer. For this reason inconceivable and certainly it would be contrary to human nature for the
private respondent moved to declare her in default. Petitioner Alfredo D. Valmonte lawyer/husband/co-defendant to keep to himself the fact that they (the spouses
entered a special appearance in behalf of his wife and opposed the private respondents Valmonte) had been sued with regard to a property which he claims to be conjugal.
motion. Parenthetically, there is nothing in the records of the case before Us regarding any
manifestation by private respondent Lourdes A. Valmonte about her lack of knowledge
In its Order dated July 3, 1992, the trial court, denied private respondents about the case instituted against her and her lawyer/husband/co-defendant by her
motion to declare petitioner Lourdes A. Valmonte in default. A motion for sister Rosita.
reconsideration was similarly denied on September 23, 1992. Whereupon, private
respondent filed a petition for certiorari, prohibition and mandamus with the Court of
Appeals. PREMISES CONSIDERED, the instant petition for certiorari, prohibition and
mandamus is given due course. This Court hereby Resolves to nullify the orders of the
On December 29, 1992, the Court of Appeals rendered a decision granting the court a quo datedJuly 3, 1992 and September 23, 1992 and further declares private
petition and declaring Lourdes A. Valmonte in default. A copy of the appellate courts respondent Lourdes Arreola Valmonte as having been properly served with summons.
decision was received by petitioner Alfredo D. Valmonte on January 15, 1993 at
his Manila office and on January 21, 1993 in Seattle, Washington. Hence, this petition.
Petitioners assail the aforequoted decision, alleging that the Court of Appeals
The issue at bar is whether in light of the facts set forth above, petitioner Lourdes erred (1) in refusing to apply the provisions of Rule 14, 17 of the Revised Rules of
A. Valmonte was validly served with summons. In holding that she had been, the Court and applying instead Rule 14, 8 when the fact is that petitioner Lourdes A.
Court of Appeals stated:[1] Valmonte is a nonresident defendant; and (2) because even if Rule 14, 8 is the
applicable provision, there was no valid substituted service as there was no strict
compliance with the requirement by leaving a copy of the summons and complaint
[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the with petitioner Alfredo D. Valmonte. Private respondent, upon the other hand, asserts
aforementioned counsel of Dimalanta to address all communications (evidently referring that petitioners are invoking a technicality and that strict adherence to the rules would
to her controversy with her sister Mrs. Dimalanta over the Paco property, now the only result in a useless ceremony.
subject of the instant case) to her lawyer who happens also to be her husband. Such
directive was made without any qualification just as was her choice/designation of her We hold that there was no valid service of process on Lourdes A. Valmonte.
husband Atty. Valmonte as her lawyer likewise made without any qualification or
reservation. Any disclaimer therefore on the part of Atty. Valmonte as to his being his To provide perspective, it will be helpful to determine first the nature of the action
wifes attorney (at least with regard to the dispute vis-a-vis [sic] the Paco property) filed against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private
would appear to be feeble or trifling, if not incredible. respondent, whether it is an action in personam, in rem or quasi in rem. This is because
the rules on service of summons embodied in Rule 14 apply according to whether an
action is one or the other of these actions.
This view is bolstered by Atty. Valmontes subsequent alleged special appearance made
on behalf of his wife. Whereas Mrs. Valmonte had manifestly authorized her husband In an action in personam, personal service of summons or, if this is not possible
to serve as her lawyer relative to her dispute with her sister over the Paco property and and he cannot be personally served, substituted service, as provided in Rule 14, 7-
to receive all communications regarding the same and subsequently to appear on her 8[2] is essential for the acquisition by the court of jurisdiction over the person of a
behalf by way of a so-called special appearance, she would nonetheless now insist that defendant who does not voluntarily submit himself to the authority of the court.[3] If
the same husband would nonetheless had absolutely no authority to receive summons defendant cannot be served with summons because he is temporarily abroad, but
on her behalf. In effect, she is asserting that representation by her lawyer (who is also otherwise he is a Philippine resident, service of summons may, by leave of court, be
her husband) as far as the Paco property controversy is concerned, should only be made by publication.[4] Otherwise stated, a resident defendant in an action in
made by him when such representation would be favorable to her but not otherwise. It personam, who cannot be personally served with summons, may be summoned either
would obviously be inequitable for this Court to allow private respondent Lourdes A. by means of substituted service in accordance with Rule 14, 8 or by publication as
Valmonte to hold that her husband has the authority to represent her when an provided in 17 and 18 of the same Rule.[5]
advantage is to be obtained by her and to deny such authority when it would turn out
to be her disadvantage. If this be allowed, Our Rules of Court, instead of being an In all of these cases, it should be noted, defendant must be a resident of
instrument to promote justice would be made use of to thwart or frustrate the same. the Philippines, otherwise an action in personam cannot be brought because
jurisdiction over his person is essential to make a binding decision.

xxx xxx xxx On the other hand, if the action is in rem or quasi in rem, jurisdiction over the
person of the defendant is not essential for giving the court jurisdiction so long as the
court acquires jurisdiction over the res. If the defendant is a nonresident and he is not
Turning to another point, it would not do for Us to overlook the fact that the disputed
found in the country, summons may be served extraterritorially in accordance with
summons was served not upon just an ordinary lawyer of private respondent Lourdes
Rule 14, 17, which provides:
A. Valmonte, but upon her lawyer husband. But that is not all, the same
lawyer/husband happens to be also her co-defendant in the instant case which
involves real property which, according to her lawyer/husband/ co-defendant, belongs
23
17. Extraterritorial service. - When the defendant does not reside and is not found in We hold it cannot. This mode of service, like the first two, must be made outside
the Philippines and the action affects the personal status of the plaintiff or relates to, the Philippines, such as through the Philippine Embassy in the foreign country where
or the subject of which is, property within the Philippines, in which the defendant has the defendant resides.[8] Moreover, there are several reasons why the service of
or claims a lien or interest, actual or contingent, or in which the relief demanded summons on Atty. Alfredo D. Valmonte cannot be considered a valid service of
consists, wholly or in part, in excluding the defendant from any interest therein, or the summons on petitioner Lourdes A. Valmonte. In the first place, service of summons on
property of the defendant has been attached within the Philippines, service may, by petitioner Alfredo D. Valmonte was not made upon the order of the court as required
leave of court, be effected out of the Philippines by personal service as under Section 7; by Rule 14, 17 and certainly was not a mode deemed sufficient by the court which in
or by publication in a newspaper of general circulation in such places and for such fact refused to consider the service to be valid and on that basis declare petitioner
time as the court may order, in which case a copy of the summons and order of the Lourdes A. Valmonte in default for her failure to file an answer.
court shall be sent by registered mail to the last known address of the defendant, or in
any other manner the court may deem sufficient. Any order granting such leave shall In the second place, service in the attempted manner on petitioner was not made
specify a reasonable time, which shall not be less than sixty (60) days after notice, upon prior leave of the trial court as required also in Rule 14, 17. As provided in 19,
within which the defendant must answer. such leave must be applied for by motion in writing, supported by affidavit of the
plaintiff or some person on his behalf and setting forth the grounds for the application.

In such cases, what gives the court jurisdiction in an action in rem or quasi in Finally, and most importantly, because there was no order granting such leave,
rem is that it has jurisdiction over the res, i.e. the personal status of the plaintiff who is petitioner Lourdes A. Valmonte was not given ample time to file her Answer which,
domiciled in the Philippines or the property litigated or attached. Service of summons according to the rules, shall be not less than sixty (60) days after notice. It must be
in the manner provided in 17 is not for the purpose of vesting it with jurisdiction but noted that the period to file an Answer in an action against a resident defendant differs
for complying with the requirements of fair play or due process, so that he will be from the period given in an action filed against a nonresident defendant who is not
informed of the pendency of the action against him and the possibility that property in found in the Philippines. In the former, the period is fifteen (15) days from service of
the Philippines belonging to him or in which he has an interest may be subjected to a summons, while in the latter, it is at least sixty (60) days from notice.
judgment in favor of the plaintiff and he can thereby take steps to protect his interest if
he is so minded.[6] Strict compliance with these requirements alone can assure observance of due
process. That is why in one case,[9] although the Court considered publication in
Applying the foregoing rules to the case at bar, private respondents action, which the Philippines of the summons (against the contention that it should be made in the
is for partition and accounting under Rule 69, is in the nature of an action quasi in foreign state where defendant was residing) sufficient, nonetheless the service was
rem. Such an action is essentially for the purpose of affecting the defendants interest considered insufficient because no copy of the summons was sent to the last known
in a specific property and not to render a judgment against him. As explained in the correct address in the Philippines.
leading case of Banco Espaol Filipino v. Palanca :[7]
Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-
463 (1975), in which it was held that service of summons upon the defendants
[An action quasi in rem is] an action which while not strictly speaking an action in husband was binding on her. But the ruling in that case is justified because summons
rem partakes of that nature and is substantially such. . . . The action quasi in were served upon defendants husband in their conjugal home in Cebu City and the
rem differs from the true action in rem in the circumstance that in the former an wife was only temporarily absent, having gone to Dumaguete City for a vacation. The
individual is named as defendant and the purpose of the proceeding is to subject his action was for collection of a sum of money. In accordance with Rule 14, 8, substituted
interest therein to the obligation or lien burdening the property. All proceedings having service could be made on any person of sufficient discretion in the dwelling place of the
for their sole object the sale or other disposition of the property of the defendant, defendant, and certainly defendants husband, who was there, was competent to
whether by attachment, foreclosure, or other form of remedy, are in a general way thus receive the summons on her behalf. In any event, it appears that defendant in that
designated. The judgment entered in these proceedings is conclusive only between the case submitted to the jurisdiction of the court by instructing her husband to move for
parties. the dissolution of the writ of attachment issued in that case.

As petitioner Lourdes A. Valmonte is a nonresident who is not found in the On the other hand, in the case of Gemperle v. Schenker,[10] it was held that service
Philippines, service of summons on her must be in accordance with Rule 14, 17. Such on the wife of a nonresident defendant was found sufficient because the defendant had
service, to be effective outside the Philippines, must be made either (1) by personal appointed his wife as his attorney-in-fact. It was held that although defendant Paul
service; (2) by publication in a newspaper of general circulation in such places and for Schenker was a Swiss citizen and resident of Switzerland, service of summons upon
such time as the court may order, in which case a copy of the summons and order of his wife Helen Schenker who was in the Philippines was sufficient because she was her
the court should be sent by registered mail to the last known address of the defendant; husbands representative and attorney-in-fact in a civil case, which he had earlier filed
or (3) in any other manner which the court may deem sufficient. against William Gemperle. In fact Gemperles action was for damages arising from
allegedly derogatory statements contained in the complaint filed in the first case. As
Since in the case at bar, the service of summons upon petitioner Lourdes A. this Court said, i]n other words, Mrs. Schenker had authority to sue, and had actually
Valmonte was not done by means of any of the first two modes, the question is sued, on behalf of her husband, so that she was, also, empowered to represent him in
whether the service on her attorney, petitioner Alfredo D. Valmonte, can be justified suits filed against him, particularly in a case, like the one at bar, which is a
under the third mode, namely, in any . . . manner the court may deem sufficient. consequence of the action brought by her on his behalf.[11] Indeed, if instead of filing an
independent action Gemperle filed a counterclaim in the action brought by Mr.

24
Schenker against him, there would have been no doubt that the trial court could have Assailed in this petition for review under Rule 45 of the Rules of Court is the
acquired jurisdiction over Mr. Schenker through his agent and attorney-in-fact, Mrs. May 31, 2005 Decision[1] of the Court of Appeals in CA-G.R. CV No. 78456, which held
Schenker. that venue was properly laid before the Regional Trial Court of Bulanao, Tabuk,
Kalinga (Kalinga RTC), and reversed the trial courts September 3, 2002
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint Resolution[2] dismissing the complaint of respondent Warren Embes Lubayen in Civil
her husband as her attorney-in-fact. Although she wrote private respondent s attorney Case No. 511, on the ground of improper venue.
that all communications intended for her should be addressed to her husband who is
also her lawyer at the latters address in Manila, no power of attorney to receive
summons for her can be inferred therefrom. In fact the letter was written seven
months before the filing of this case below, and it appears that it was written in The facts show that on October 24, 2001, respondent, a resident of Magsaysay, Tabuk,
connection with the negotiations between her and her sister, respondent Rosita Kalinga, filed with the Kalinga RTC a complaint[3] for damages against petitioner
Dimalanta, concerning the partition of the property in question. As is usual in Auction in Malinta, Inc., a corporation with business address at Malinta, Valenzuela
negotiations of this kind, the exchange of correspondence was carried on by counsel City, and engaged in public auction of heavy equipments, trucks, and assorted
for the parties. But the authority given to petitioners husband in these negotiations machineries. Respondent alleged that in an auction conducted by petitioner on May
certainly cannot be construed as also including an authority to represent her in 29, 2001, he was declared the highest bidder for a wheel loader T.C.M. 75B, series no.
any litigation. 3309. On June 7, 2001, respondent tendered the payment for the said item but
For the foregoing reasons, we hold that there was no valid service on petitioner petitioner could no longer produce the loader. It offered a replacement but failed to
Lourdes A. Valmonte in this case. deliver the same up to the filing of the complaint. Hence, respondent instituted this
case to recover actual, moral, and exemplary damages plus attorneys fees.
WHEREFORE, the decision appealed from is REVERSED and the orders
dated July 3, 1992 and September 23, 1992 of the Regional Trial Court of Manila,
Branch 48 are REINSTATED.
Petitioner filed a motion to dismiss on the ground of improper venue. It argued that the
SO ORDERED. correct venue is the RTC of Valenzuela City pursuant to the stipulation in the Bidders
Application and Registration Bidding Agreement which states that:
AUCTION IN MALINTA, INC., G.R. No. 173979
Petitioner,
Present:
- versus - Ynares-Santiago, J. (Chairperson),
ALL COURT LITIGATION PROCEDURES SHALL BE CONDUCTED IN
Austria-Martinez,
THE APPROPRIATE COURTS OF VALENZUELA CITY,
METRO MANILA.[4]
Callejo, Sr.,

Chico-Nazario, and
In a Resolution dated September 3, 2002, the Kalinga RTC held that the clear
Nachura, JJ.
intention of the parties was to limit the venue to the proper court
of Valenzuela City and thus dismissed respondents complaint on the ground of
WARREN EMBES LUYABEN, improper venue.[5]
Respondent. Promulgated:

February 12, 2007 Aggrieved, respondent appealed to the Court of Appeals which reversed the
Resolution of the Kalinga RTC and reinstated the complaint. The dispositive portion
x ---------------------------------------------------------------------------------------- x thereof, reads:

DECISION WHEREFORE, the Resolution appealed from is hereby


REVERSED and SET ASIDE. The case is remanded to the RTC
which is ordered to reinstate plaintiffs complaint for damages.
YNARES-SANTIAGO, J.:

25
SO ORDERED.[6]

The Polytrade doctrine was further applied in the case of Unimasters


Conglomeration, Inc. v. Court of Appeals,[15] which analyzed the various jurisprudence
Petitioners motion for reconsideration was denied; hence, the instant petition. rendered after the Polytrade case. In Unimasters, we held that a stipulation stating that
[a]ll suits arising out of this Agreement shall be filed with/in the proper Courts of
Quezon City,[16] is only permissive and does not limit the venue to the Quezon
City courts. As explained in the said case:
The sole issue is whether the stipulation in the parties Bidders Application
and Registration Bidding Agreement effectively limited the venue of the instant case
exclusively to the proper court of Valenzuela City.
In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue
of actions between them to be laid only and exclusively at a definite
The Court rules in the negative. place, and to disregard the prescriptions of Rule 4, agreements on
venue are not to be regarded as mandatory or restrictive, but merely
permissive, or complementary of said rule. The fact that in their
agreement the parties specify only one of the venues mentioned in
The general rule on the venue of personal actions, as in the instant case for Rule 4, or fix a place for their actions different from those specified
damages[7] filed by respondent, is embodied in Section 2, Rule 4 of the Rules of by said rule, does not, without more, suffice to characterize the
Court. It provides: agreement as a restrictive one. There must, to repeat, be
accompanying language clearly and categorically expressing their
purpose and design that actions between them be litigated only at
the place named by them, regardless of the general precepts of Rule
4; and any doubt or uncertainty as to the parties intentions must be
Sec. 2. Venue of personal actions. All other actions may be
resolved against giving their agreement a restrictive or mandatory
commenced and tried where the plaintiff or any of the principal
aspect. Any other rule would permit of individual, subjective judicial
plaintiffs resides, or where the defendant or any of the principal
interpretations without stable standards, which could well result in
defendants resides, or in the case of a nonresident defendant, where
precedents in hopeless inconsistency.[17]
he may be found, at the election of the plaintiff.

The rule enunciated in Unimasters and Polytrade was reiterated in


The aforequoted rule, however, finds no application where the parties, before
subsequent cases where the following agreements on venue were likewise declared to
the filing of the action, have validly agreed in writing on an exclusive venue.[8] But
be merely permissive and do not limit the venue to the place specified therein, to wit:
the mere stipulation on the venue of an action is not enough to preclude parties from
bringing a case in other venues. It must be shown that such stipulation is exclusive. In
the absence of qualifying or restrictive words, such as exclusively and waiving for this
purpose any other venue,[9] shall only preceding the designation of venue,[10] to the
exclusion of the other courts,[11] or words of similar import, the stipulation should be 1. If court litigation becomes necessary to enforce collection, an
deemed as merely an agreement on an additional forum, not as limiting venue to the additional equivalent (sic) to 25% of the principal amount will be
specified place.[12] charged. The agreed venue for such action is Makati, Metro Manila,
Philippines.[18]

This has been the rule since the 1969 case of Polytrade Corporation v.
Blanco.[13] It was held therein that the clause [t]he parties agree to sue and be sued in 2. In case of litigation hereunder, venue shall be in the City Court or
the Courts of Manila, does not preclude the filing of suits in the court which has Court of First Instance of Manila as the case may be for
jurisdiction over the place of residence of the plaintiff or the defendant. The plain determination of any and all questions arising thereunder.[19]
meaning of the said provision is that the parties merely consented to be sued
in Manila considering that there are no qualifying or restrictive words which would
indicate that Manila, and Manila alone, is the agreed venue. It simply is permissive
and the parties did not waive their right to pursue remedy in the courts specifically Then too, the doctrine that absent qualifying or restrictive words, the venue
mentioned in Section 2 of Rule 4 of the Rules of Court.[14] shall either be that stated in the law or rule governing the action or the one agreed in

26
the contract, was applied to an extra-judicial foreclosure sale under Act No.
3135.[20] In Langkaan Realty Development, Inc. v. United Coconut Planters
Bank,[21] where the provision on the venue employed the word shall to refer to the place Costs against petitioner.
where the foreclosure will be held, the Court ruled that said provision lack(s) qualifying
or restrictive words to indicate the exclusivity of the agreed forum, and therefore the
stipulated place is considered only as an additional, not a limiting venue.[22] The said
stipulation reads: SO ORDERED.

MA. TERESA CHAVES BIACO, G.R. No. 161417


Petitioner,
It is hereby agreed that in case of foreclosure of this Present:
mortgage under Act 3135, as amended, and Presidential Decree No.
385, the auction sale shall be held at the capital of the province, if QUISUMBING, J.,
the property is within the territorial jurisdiction of the province Chairperson,
concerned, or shall be held in the city, if the property is within the - versus - CARPIO,
territorial jurisdiction of the city concerned.[23] CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.
PHILIPPINE COUNTRYSIDE RURAL
In the instant case, the stipulation in the parties agreement, i.e., all Court BANK,
litigation procedures shall be conducted in the appropriate Courts of Valenzuela City, Respondent. Promulgated:
Metro Manila, evidently lacks the restrictive and qualifying words that will limit venue February 8, 2007
exclusively to the RTC of Valenzuela City. Hence, the Valenzuela courts should only be
considered as an additional choice of venue to those mentioned under Section 2, Rule x----------------------------------------------------------------------------x
4 of the Rules of Court.Accordingly, the present case for damages may be filed with the
(a) RTC ofValenzuela City as stipulated in the bidding agreement; (b) RTC of Bulanao,
Tabuk, Kalinga which has jurisdiction over the residence of respondent (plaintiff); or DECISION
with the (c) RTC of Valenzuela City which has jurisdiction over the business address of
petitioner (defendant). The filing of the complaint in the RTC of Bulanao, Tabuk, TINGA, J.:
Kalinga, is therefore proper, respondent being a resident of Tabuk, Kalinga.
Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision[1] of the Court of
Appeals in CA-G.R. No. 67489 dated August 27, 2003, which denied her petition for
annulment of judgment, and the Resolution[2] dated December 15, 2003 which denied
The case of Hoechst Philippines, Inc. v. Torres,[24] promulgated in 1978, and her motion for reconsideration.
invoked by petitioner in its motion to dismiss, had already been superseded by current
decisions on venue. In the said case, the Court construed the proviso: [i]n case of any The facts as succinctly stated by the Court of Appeals are as follows:
litigation arising out of this agreement, the venue of action shall be in the competent
courts of the Province of Rizal,[25] as sufficient to limit the venue to the proper court of Ernesto Biaco is the husband of petitioner Ma. Teresa
Rizal. However, in Supena v. De la Rosa,[26] we ruled that Hoechst had been rendered Chaves Biaco. While employed in the Philippine Countryside Rural
obsolete by recent jurisprudence applying the doctrine enunciated in Polytrade. Bank (PCRB) as branch manager, Ernesto obtained several loans
from the respondent bank as evidenced by the following promissory
notes:

In sum, we find that the Court of Appeals correctly declared that venue in the Feb. 17, 1998 P 65,000.00
instant case was properly laid with the RTC of Bulanao, Tabuk, Kalinga. Mar. 18, 1998 30,000.00
May 6, 1998 60,000.00
May 20, 1998 350,000.00
July 30, 1998 155,000.00
WHEREFORE, the petition is DENIED. The May 31, 2005 Decision of the Sept. 8, 1998 40,000.00
Court of Appeals in CA-G.R. CV No. 78456 which reversed the September 3, 2002 Sept. 8, 1998 120,000.00
Resolution of the Regional Trial Court of Bulanao, Tabuk, Kalinga; reinstated the
complaint in Civil Case No. 511; and remanded the case to the said court, As security for the payment of the said loans, Ernesto
is AFFIRMED. executed a real estate mortgage in favor of the bank covering the
parcel of land described in Original Certificate of Title (OCT) No. P-
27
14423. The real estate mortgages bore the signatures of the spouses FORTY THREE CENTAVOS (P252,030.43) and cost of this
Biaco. suit.

When Ernesto failed to settle the above-mentioned loans on In case of non-payment within the period, the
its due date, respondent bank through counsel sent him a written Sheriff of this Court is ordered to sell at public auction the
demand on September 28, 1999. The amount due as of September mortgaged Lot, a parcel of registered land (Lot 35802, Cad.
30, 1999 had already reached ONE MILLION EIGHTY THOUSAND 237 {Lot No. 12388-B, Csd-10-002342-D}), located at Gasi,
SIX HUNDRED SEVENTY SIX AND FIFTY CENTAVOS Laguindingan, Misamis Oriental and covered by TCT No. P-
(P1,080,676.50). 14423 to satisfy the mortgage debt, and the surplus if there
be any should be delivered to the defendants spouses
The written demand, however, proved futile. ERNESTO and MA. THERESA [CHAVES] BIACO. In the
event however[,] that the proceeds of the auction sale of the
On February 22, 2000, respondent bank filed a complaint mortgage[d] property is not enough to pay the outstanding
for foreclosure of mortgage against the spouses Ernesto and Teresa obligation, the defendants are ordered to pay any deficiency
Biaco before the RTC of Misamis Oriental. Summons was served to of the judgment as their personal liability.
the spouses Biaco through Ernesto at his office (Export and Industry
Bank) located at Jofelmor Bldg., Mortola Street, Cagayan de Oro SO ORDERED.
City.
On July 12, 2000, the sheriff personally served the above-
Ernesto received the summons but for unknown reasons, mentioned judgment to Ernesto Biaco at his office at Export and
he failed to file an answer. Hence, the spouses Biaco were declared Industry Bank. The spouses Biaco did not appeal from the adverse
in default upon motion of the respondent bank. The respondent decision of the trial court. On October 13, 2000, the respondent
bank was allowed to present its evidence ex parte before the Branch bank filed an ex parte motion for execution to direct the sheriff to
Clerk of Court who was then appointed by the court as sell the mortgaged lot at public auction. The respondent bank
Commissioner. alleged that the order of the court requiring the spouses Biaco to pay
within a period of 90 days had passed, thus making it necessary to
sell the mortgaged lot at public auction, as previously mentioned in
the order of the court. The motion for execution was granted by the
trial court per Order dated October 20, 2000.

Arturo Toring, the branch manager of the respondent bank, On October 31, 2000, the sheriff served a copy of the writ
testified that the spouses Biaco had been obtaining loans from the of execution to the spouses Biaco at their residence in #92
bank since 1996 to 1998. The loans for the years 1996-1997 had 9th Street, Nazareth, Cagayan de Oro City. The writ of execution was
already been paid by the spouses Biaco, leaving behind a balance personally received by Ernesto. By virtue of the writ of execution
of P1,260,304.33 representing the 1998 loans. The amount being issued by the trial court, the mortgaged property was sold at public
claimed is inclusive of interests, penalties and service charges as auction in favor of the respondent bank in the amount of ONE
agreed upon by the parties. The appraisal value of the land subject HUNDRED FIFTY THOUSAND PESOS (P150,000.00).
of the mortgage is only P150,000.00 as reported by the Assessors
Office. The amount of the property sold at public auction being
insufficient to cover the full amount of the obligation, the
Based on the report of the Commissioner, the respondent respondent bank filed an ex parte motion for judgment praying for
judge ordered as follows: the issuance of a writ of execution against the other properties of the
spouses Biaco for the full settlement of the remaining obligation.
WHEREFORE, judgment is hereby rendered Granting the motion, the court ordered that a writ of execution be
ordering defendants spouses ERNESTO R. BIACO and MA. issued against the spouses Biaco to enforce and satisfy the
THERESA [CHAVES] BIACO to pay plaintiff bank within a judgment of the court for the balance of ONE MILLION THREE
period of not less than ninety (90) days nor more than one HUNDRED SIXTY NINE THOUSAND NINE HUNDRED SEVENTY
hundred (100) days from receipt of this decision the loan of FOUR PESOS AND SEVENTY CENTAVOS (P1,369,974.70).
ONE MILLION TWO HUNDRED SIXTY THOUSAND THREE
HUNDRED FOUR PESOS and THIRTY THREE CENTAVOS The sheriff executed two (2) notices of levy against
(P1,260,304.33) plus litigation expenses in the amount of properties registered under the name of petitioner Ma. Teresa
SEVEN THOUSAND SIX HUNDRED FORTY PESOS Chaves Biaco. However, the notices of levy were denied registration
(P7,640.00) and attorneys fees in the amount of TWO because Ma. Teresa had already sold the two (2) properties to her
HUNDRED FIFTY TWO THOUSAND THIRTY PESOS and daughters on April 11, 2001.[3]

28
Petitioner asserts that extrinsic fraud consisted in her husbands concealment
Petitioner sought the annulment of the Regional Trial Court decision of the loans which he obtained from respondent PCRB; the filing of the complaint for
contending that extrinsic fraud prevented her from participating in the judicial judicial foreclosure of mortgage; service of summons; rendition of judgment by default;
foreclosure proceedings. According to her, she came to know about the judgment in and all other proceedings which took place until the writ of garnishment was served.[10]
the case only after the lapse of more than six (6) months after its finality. She claimed
that extrinsic fraud was perpetrated against her because the bank failed to verify the Extrinsic fraud exists when there is a fraudulent act committed by
authenticity of her signature on the real estate mortgage and did not inquire into the the prevailing party outside of the trial of the case, whereby the defeated party was
reason for the absence of her signature on the promissory notes. She moreover prevented from presenting fully his side of the case by fraud or deception practiced on
asserted that the trial court failed to acquire jurisdiction because summons were him by the prevailing party.[11] Extrinsic fraud is present where the unsuccessful
served on her through her husband without any explanation as to why personal party had been prevented from exhibiting fully his case, by fraud or deception
service could not be made. practiced on him by his opponent, as by keeping him away from court, a false promise
of a compromise; or where the defendant never had knowledge of the suit, being kept
The Court of Appeals considered the two circumstances that kept petitioner in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without
in the dark about the judicial foreclosure proceedings: (1) the failure of the sheriff to authority assumes to represent a party and connives at his defeat; or where the
personally serve summons on petitioner; and (2) petitioners husbands concealment of attorney regularly employed corruptly sells out his clients interest to the other
his knowledge of the foreclosure proceedings. On the validity of the service of side. The overriding consideration is that the fraudulent scheme of the prevailing
summons, the appellate court ruled that judicial foreclosure proceedings are litigant prevented a party from having his day in court.[12]
actions quasi in rem. As such, jurisdiction over the person of the defendant is not
essential as long as the court acquires jurisdiction over the res. Noting that the With these considerations, the appellate court acted well in ruling that there
spouses Biaco were not opposing parties in the case, the Court of Appeals further was no fraud perpetrated by respondent bank upon petitioner, noting that the spouses
ruled that the fraud committed by one against the other cannot be considered extrinsic Biaco were co-defendants in the case and shared the same interest.Whatever fact or
fraud. circumstance concealed by the husband from the wife cannot be attributed to
respondent bank.
Her motion for reconsideration having been denied, petitioner filed the instant
Petition for Review,[4] asserting that even if the action is quasi in rem, personal service Moreover, petitioners allegation that her signature on the promissory notes
of summons is essential in order to afford her due process.The substituted service was forged does not evince extrinsic fraud. It is well-settled that the use of forged
made by the sheriff at her husbands office cannot be deemed proper service absent instruments during trial is not extrinsic fraud because such evidence does not
any explanation that efforts had been made to personally serve summons upon her but preclude the participation of any party in the proceedings.[13]
that such efforts failed. Petitioner contends that extrinsic fraud was perpetrated not so
much by her husband, who did not inform her of the judicial foreclosure proceedings, The question of whether the trial court has jurisdiction depends on the
but by the sheriff who allegedly connived with her husband to just leave a copy of the nature of the action, i.e., whether the action is in personam, in rem, or quasi in
summons intended for her at the latters office. rem. The rules on service of summons under Rule 14 of the Rules of Court likewise
apply according to the nature of the action.
Petitioner further argues that the deficiency judgment is a personal judgment
which should be deemed void for lack of jurisdiction over her person. An action in personam is an action against a person on the basis of his
personal liability. An action in rem is an action against the thing itself instead of
Respondent PCRB filed its Comment,[5] essentially reiterating the appellate against the person. An action quasi in rem is one wherein an individual is named as
courts ruling. Respondent avers that service of summons upon the defendant is not defendant and the purpose of the proceeding is to subject his interest therein to the
necessary in actions quasi in rem it being sufficient that the court acquire jurisdiction obligation or lien burdening the property.[14]
over the res. As regards the alleged conspiracy between petitioners husband and the
sheriff, respondent counters that this is a new argument which cannot be raised for In an action in personam, jurisdiction over the person of the defendant is
the first time in the instant petition. necessary for the court to validly try and decide the case. In a proceeding in
rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite
We required the parties to file their respective memoranda in the to confer jurisdiction on the court provided that the court acquires jurisdiction over
Resolution[6] dated August 18, 2004. Accordingly, petitioner filed her the res. Jurisdiction over the res is acquired either (1) by the seizure of the property
Memorandum[7] dated October 10, 2004, while respondent filed its Memorandum for under legal process, whereby it is brought into actual custody of the law; or (2) as a
Respondent[8] dated September 9, 2004. result of the institution of legal proceedings, in which the power of the court is
recognized and made effective.[15]
Annulment of judgment is a recourse equitable in character, allowed only in
exceptional cases as where there is no available or other adequate Nonetheless, summons must be served upon the defendant not for the
remedy. Jurisprudence and Sec. 2, Rule 47 of the 1997 Rules of Civil Procedure (Rules purpose of vesting the court with jurisdiction but merely for satisfying the due process
of Court) provide that judgments may be annulled only on grounds of extrinsic fraud requirements.[16]
and lack of jurisdiction or denial of due process.[9]

29
A resident defendant who does not voluntarily appear in court, such as amended complaint against Abelardo, this time impleading Carmelita and Rallye as
petitioner in this case, must be personally served with summons as provided under additional defendants. Summons was served on Abelardothrough publication in
Sec. 6, Rule 14 of the Rules of Court. If she cannot be personally served with summons the Manila Evening Post. Abelardo failed to file an answer and was declared in
within a reasonable time, substituted service may be effected (1) by leaving copies of default. Carmelita went on certiorari to the Court of Appeals assailing as grave abuse
the summons at the defendants residence with some person of suitable age and of discretion the declaration of default of Abelardo. The Court of Appeals dismissed the
discretion then residing therein, or (2) by leaving the copies at defendants office or petition and denied reconsideration.
regular place of business with some competent person in charge thereof in accordance
with Sec. 7, Rule 14 of the Rules of Court. In her petition with this Court, Carmelita raised the issue of whether the trial
court acquired jurisdiction over her husband, a non-resident defendant, by the
In this case, the judicial foreclosure proceeding instituted by respondent publication of summons in a newspaper of general circulation in the Philippines. The
PCRB undoubtedly vested the trial court with jurisdiction over the res. A judicial Court sustained the correctness of extrajudicial service of summons by publication in
foreclosure proceeding is an action quasi in rem. As such, jurisdiction over the person such newspaper.
of petitioner is not required, it being sufficient that the trial court is vested with
jurisdiction over the subject matter. The Court explained, citing El Banco Espaol-Filipino v. Palanca,[19]that
foreclosure and attachment proceedings are both actions quasi in rem. As such,
There is a dimension to this case though that needs to be delved jurisdiction over the person of the (non-resident) defendant is not essential. Service of
into.Petitioner avers that she was not personally served summons. Instead, summons summons on a non-resident defendant who is not found in the country is required, not
was served to her through her husband at his office without any explanation as to why for purposes of physically acquiring jurisdiction over his person but simply in
the particular surrogate service was resorted to. The Sheriffs Return of Service pursuance of the requirements of fair play, so that he may be informed of the
dated March 21, 2000 states: pendency of the action against him and the possibility that property belonging to him
xxxx or in which he has an interest may be subjected to a judgment in favor of a resident,
and that he may thereby be accorded an opportunity to defend in the action, should he
That on March 16, 2000, the undersigned served the copies be so minded.
of Summons, complaint and its annexes to the defendants Sps.
Ernesto R. & Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,] Significantly, the Court went on to rule, citing De Midgely v. Ferandos, et.
defendant of the above-entitled case at his office EXPORT & al.[20] and Perkins v. Dizon, et al.[21] that in a proceeding in rem or quasi in rem, the only
INDUSTRY relief that may be granted by the court against a defendant over whose person it has
BANK, Jofelmore Bldg.[,] Mortola St., Cagayan de Oro City and he not acquired jurisdiction either by valid service of summons or by voluntary
acknowledged receipt thereof as evidenced with his signature submission to its jurisdiction, is limited to the res.
appearing on the original copy of the Summons.[17] [Emphasis
supplied] Similarly, in this case, while the trial court acquired jurisdiction over the res,
its jurisdiction is limited to a rendition of judgment on the res. It cannot extend its
Without ruling on petitioners allegation that her husband and the sheriff jurisdiction beyond the res and issue a judgment enforcing petitioners personal
connived to prevent summons from being served upon her personally, we can see that liability. In doing so without first having acquired jurisdiction over the person of
petitioner was denied due process and was not able to participate in the judicial petitioner, as it did, the trial court violated her constitutional right to due process,
foreclosure proceedings as a consequence. The violation of petitioners constitutional warranting the annulment of the judgment rendered in the case.
right to due process arising from want of valid service of summons on her warrants the
annulment of the judgment of the trial court. WHEREFORE, the instant petition is GRANTED. The Decision dated August
27, 2003 and the Resolution dated December 15, 2003 of the Court of Appeals in CA-
There is more, the trial court granted respondent PCRBs ex-parte motion for G.R. SP No. 67489 are SET ASIDE. The Judgment dated July 11, 2000 and Order
deficiency judgment and ordered the issuance of a writ of execution against the dated February 9, 2001 of the Regional Trial Court ofCagayan de Oro City, Branch 20,
spouses Biaco to satisfy the remaining balance of the award. In short, the trial court are likewise SET ASIDE.
went beyond its jurisdiction over the res and rendered a personal judgment against the
spouses Biaco. This cannot be countenanced. SO ORDERED.
PERKIN ELMER SINGAPORE PTE G.R. No. 172242
In Sahagun v. Court of Appeals,[18] suit was brought against a non-resident LTD.,
defendant, Abelardo Sahagun, and a writ of attachment was issued and subsequently Present:
levied on a house and lot registered in his name. Claiming ownership of the house, his Petitioner,
wife, Carmelita Sahagun, filed a motion to intervene. For failure of plaintiff to serve
summons extraterritorially upon Abelardo, the complaint was dismissed without YNARES-
prejudice. SANTIAGO, J.,Chairperson,
AUSTRIA-MARTINEZ,
Subsequently, plaintiff filed a motion for leave to serve summons by
publication upon Abelardo. The trial court granted the motion. Plaintiff later filed an

30
CHICO-NAZARIO, and Respondent entered into a Distribution Agreement[5] on 1 June
1990with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a corporation duly
- versus - NACHURA, JJ. organized and existing under the laws of Singapore and engaged in the business of
manufacturing, producing, selling or distributing various laboratory/analytical
instruments. By virtue of the said agreement, PEIA appointed the respondent as the
sole distributor of its products in the Philippines. The respondent was likewise granted
Promulgated: the right to purchase and sell the products of PEIA subject to the terms and conditions
set forth in the Distribution Agreement. PEIA, on the other hand, shall give respondent
a commission for the sale of its products in the Philippines.

DAKILA TRADING CORPORATION, August 14, 2007

Respondent. Under the same Distribution Agreement, respondent shall order the products
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x of PEIA, which it shall sell in the Philippines, either from PEIA itself or from Perkin-
Elmer Instruments (Philippines) Corporation (PEIP), an affiliate of PEIA. PEIP is a
corporation duly organized and existing under Philippine laws, and involved in the
business of wholesale trading of all kinds of scientific, biotechnological, and analytical
instruments and appliances.PEIA allegedly owned 99% of the shares of PEIP.

DECISION
On 2 August 1997, however, PEIA unilaterally terminated the Distribution
Agreement, prompting respondent to file before the RTC of Mandaluyong City, Branch
212, a Complaint[6] for Collection of Sum of Money and Damages with Prayer for
Issuance of a Writ of Attachment against PEIA and PEIP, docketed as Civil Case No.
CHICO-NAZARIO, J.: MC99-605.

The RTC issued an Order,[7] dated 26 March 1999, denying respondents


prayer for the issuance of a writ of attachment. The respondent moved for the
The case before this Court is a Petition for Review[1] on Certiorariunder Rule reconsideration of the said Order but it was denied in another Order, dated 11
45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the January 2000.[8]
Decision,[2] dated 4 April 2006, of the Court of Appeals in CA-G.R. SP No. 78981, which
affirmed the Orders, dated 4 November 2002[3] and 20 June 2003,[4] of the
Mandaluyong City Regional Trial Court (RTC), Branch 212, in Civil Case No. MC99-
605, which, in turn, denied the Motion to Dismiss and subsequent Motion for Respondent then filed Ex-Parte Motions for Issuance of Summons and for
Reconsideration of herein petitioner Perkin Elmer Singapore Pte Ltd. Leave of Court to Deputize Respondents General Manager, Richard A. Tee, to Serve
Summons Outside of the Philippines,[9] which the RTC granted in its Order, dated 27
April 2000.[10] Thus, an Alias Summons, dated 4 September 2000, was issued by the
RTC to PEIA. But the said Alias Summons was served on 28 September 2000 and
Petitioner is a corporation duly organized and existing under the laws received by Perkinelmer Asia, a Singaporean based sole proprietorship, owned by the
of Singapore. It is not considered as a foreign corporation doing business in petitioner and, allegedly, a separate and distinct entity from PEIA.
the Philippines. Herein respondent Dakila Trading Corporation is a corporation
organized and existing under Philippine laws, and engaged in the business of selling
and leasing out laboratory instrumentation and process control instrumentation, and
trading of laboratory chemicals and supplies. PEIP moved to dismiss[11] the Complaint filed by respondent on the ground
that it states no cause of action. Perkinelmer Asia, on the other hand, through its
counsel, sent letters, dated 12 October 2000[12] and 15 November 2000,[13] to the
respondent and to the RTC, respectively, to inform them of the wrongful service of
The antecedents of the present case are as follows: summons upon Perkinelmer Asia.

31
Accordingly, respondent filed an Ex-Parte Motion to Admit Amended
Complaint, together with the Amended Complaint claiming that PEIA had become a
sole proprietorship[14] owned by the petitioner, and subsequently changed its name to The [petitioner] hinges its dismissal on the failure of the [respondent]
Perkinelmer Asia. Being a sole proprietorship of the petitioner, a change in PEIAs name to state a cause of action. The [RTC] would like to emphasize that in
and juridical status did not detract from the fact that all its due and outstanding a Motion to Dismiss, it hypothetically admits the truth of the facts
obligations to third parties were assumed by the petitioner. Hence, in its Amended alleged in a complaint.
Complaint[15] respondent sought to change the name of PEIA to that of the
petitioner. In an Order, dated 24 July 2001,[16] the RTC admitted the Amended
Complaint filed by the respondent.Respondent then filed another Motion [17] for the
Issuance of Summons and for Leave of Court to Deputize Respondents General When the ground for dismissal is that the complaint states no cause
Manager, Richard A. Tee, to Serve Summons Outside the Philippines. In another of action, such fact can be determined only from the facts alleged in
Order, dated 4 March 2002,[18] the RTC deputized respondents General Manager to the complaint x x x and from no other x x x and the Court cannot
serve summons on petitioner in Singapore. The RTC thus issued summons[19] to the consider other matters aliunde x x x. This implies that the issue
petitioner. Acting on the said Order, respondents General Manager went must be passed upon on the basis of the allegations and declare
to Singapore and served summons on the petitioner. them to be false, otherwise it would be a procedural error and a
denial of due process to the [respondent] x x x.

Meanwhile, in an Order, dated 10 October 2001, the RTC denied the Motion
to Dismiss filed by PEIP, compelling the latter to file its Answer to the Amended The three (3) essential elements of a cause of action are the
Complaint. following:

Petitioner subsequently filed with the RTC a Special Appearance and Motion a) The plaintiffs legal rights;
to Dismiss[20] respondents Amended Complaint on 30 May 2002 based on the following
grounds: (1) the RTC did not acquire jurisdiction over the person of the petitioner; (2) b) A correlative obligation of the defendant;
the respondent failed to state a cause of action against the petitioner because it is not
the real party-in-interest; (3) even assuming arguendo that the respondent correctly c) The omission of the defendant in violation of the
filed the case against the petitioner, the Distribution Agreement which was the basis of legal rights.
its claim grants PEIA the right to terminate the contract at any time; and (4) the venue
was improperly laid. The RTC in its Order, dated 4 November 2002, denied petitioners
Motion to Dismiss, ratiocinating as follows:
A cursory reading of the Amended Complaint would reveal
that all of the essential elements of a cause of action are attendant
in the Amended Complaint.
Prescinding from the above arguments of both parties, the [RTC] is
inclined to DENY the Motion to Dismiss.

As for the contention that venue was improperly laid, x x x, the


[RTC] in its ultimate desire that the ends of justice could be served
A careful scrutiny on (sic) the allegation in the (Amended) Complaint in its fullest, cannot rule that venue was improperly laid.
would show that [herein respondent] alleges ownership by the
[herein petitioner] of shares of stocks in the [PEIP]. Such allegation
of ownership of shares of stocks by the [petitioner] would reveal that
there is an allegation of personal property in the Philippines. Shares
xxxx
of stocks represent personal property of the shareholder. Thus, it
follows that even though the Amended Complaint is primarily for
damages, it does relate to a property of the [petitioner], to which the
latter has a claim interest (sic), or an actual or contingent lien,
which will make it fall under one of the requisite (sic) for The stipulation as to the venue of a prospective action does not
extraterritorial service under Section 15, Rule 14, of the Rules of preclude the filing of the suit in the residence of the [respondent]
Court. Thus, it could be gainfully said that the summons had been under Section 2, Rule 4, Rules of Court, especially where the venue
validly served for [RTC] to acquire jurisdiction over the [petitioner]. stipulation was imposed by the [petitioner] for its own benefits.

32
WHETHER OR NOT THE COURT OF APPEALS
SHOULD HAVE GRANTED THE PETITION
xxxx FOR CERTIORARI AND REVERSED THE RTC
ORDERS ON THE GROUND THAT THE
AMENDED COMPLAINT FAILED TO STATE A
CAUSE OF ACTION AGAINST PETITIONER.
The [RTC] further believes that it is imperative that in order to ferret
out the truth, a full-blown trial is necessary for parties to be able to
prove or disprove their allegations.[21]
1. BASED ON THE ALLEGATIONS IN
Petitioner moved for the reconsideration of the aforesaid Order but, it was THE EX-PARTE MOTION TO ADMIT AMENDED
denied by the RTC in its Order, dated 20 June 2003. COMPLAINT, AMENDED COMPLAINT, AND ALL
DOCUMENTS ATTACHED AND/OR RELATED
THERETO, PETITIONER IS NOT THE REAL
PARTY-IN-INTEREST DEFENDANT IN THE CASE
Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the BELOW.
1997 Revised Rules of Civil Procedure with application for temporary restraining order
and/or preliminary injunction before the Court of Appeals alleging that the RTC
committed grave abuse of discretion amounting to lack or excess of jurisdiction in
refusing to dismiss the Amended Complaint. The Court of Appeals never issued any 2. ASSUMING ARGUENDO THAT
temporary restraining order or writ of injunction. On 4 April 2006, the Court of RESPONDENT DAKILA FILED THIS CASE
Appeals rendered a Decision affirming the RTC Orders of 4 November 2002 and 20 AGAINST THE CORRECT [PARTY], INASMUCH AS
June 2003. THE DISTRIBUTION AGREEMENT DATED 1
JUNE 1990 GRANTS [PEIA] THE RIGHT TO
TERMINATE THE CONTRACT AT ANY TIME,
RESPONDENT DAKILA FAILS TO STATE A
This brings us to the present Petition before this Court wherein petitioner CAUSE OF ACTION IN THE CASE BELOW.
raised the following issues.

B.
I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED


REVERSIBLE ERROR IN NOT RULING THAT THE SERVICE OF WHETHER OR NOT THE COURT OF APPEALS
SUMMONS ON PETITIONER WAS DEFECTIVE AND THAT THE SHOULD HAVE GRANTED THE PETITION
TRIAL COURT THUS FAILED TO ACQUIRE JURISDICTION OVER FOR CERTIORARI AND REVERSED THE RTC
THE PERSON OF THE PETITIONER. ORDERS ON THE GROUND OF IMPROPER
VENUE.

II.
III.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
REVERSIBLE ERROR IN RULING THAT THE SOLE ISSUE IN THE
PETITION FOR CERTIORARI FILED BEFORE IT IS THE QUESTION
OF WHETHER THE TRIAL COURT ACQUIRED JURISDICTION WHETHER OR NOT PETITIONER IS ENTITLED TO A TEMPORARY
OVER THE PERSON OF THE PETITIONER THROUGH THE RESTRAINING ORDER AND/OR WRIT OF INJUNCTION.
EXTRATERRITORIAL SERVICE OF SUMMONS.

A.

33
The foregoing issues raised by petitioner essentially requires this Court to Lastly, it is the contention of the petitioner that the appellate court should
make a determination of the (1) proper service of summons and acquisition of have granted its Petition for Certiorari because the RTC committed grave abuse of
jurisdiction by the RTC over the person of the petitioner; (2) existence of a cause of discretion amounting to lack or excess of jurisdiction in refusing to dismiss Civil Case
action against petitioner in respondents Amended Complaint; and (3) proper venue for No. MC99-605 for having been filed in an improper venue. Petitioner asserts that in
respondents civil case against petitioner. the Distribution Agreement entered into between the respondent and PEIA, both had
mutually agreed to the exclusive jurisdiction of the courts of Singapore or of
the Philippines as elected by PEIA. Absent any waiver by PEIA of its right to choose the
venue of the dispute, the Complaint filed by the respondent before the RTC in
Petitioner contends that Civil Case No. MC99-605 involves an action for the Philippines should have been dismissed on the ground of improper venue.
collection of sum of money and damages arising from the alleged breach of the
Distribution Agreement. The action is one in personam, or an action against a person
based on his personal liability; and for the court a quo to acquire jurisdiction over the
person of the petitioner, personal service of summons, and not extraterritorial service The Petition is meritorious.
of summons, must be made within the state even if the petitioner is a non-
resident. Petitioner avers that extraterritorial service of summons stated under Section
15, Rule 14 of the 1997 Revised Rules of Civil Procedure, is only proper in in
rem and quasi in rem cases; thus, resort to an extraterritorial service of summons in Jurisdiction is the power with which courts are invested for administering
the case at bar was erroneous. Petitioner asseverates that the allegations in the justice; that is, for hearing and deciding cases. In order for the court to have authority
respondents Amended Complaint that the petitioner has personal properties within the to dispose of the case on the merits, it must acquire jurisdiction over the subject
Philippines does not make the present case one that relates to, or the subject of which matter and the parties.[22]
is, property within the Philippines warranting the extraterritorial service of summons
under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure. Petitioner
states that for an action to be considered as one that relates to, or the subject of which
is, property within the Philippines, the main subject matter of the action must be the Jurisdiction of the court over the subject matter is conferred only by the
property within the Philippines itself, and such was not the situation in this Constitution or by law. It is determinable on the basis of allegations in the
case. Likewise, the prayer in respondents Amended Complaint for the issuance of a complaint.[23]
writ of attachment over the personal property of PEIP, which is 99% owned by
petitioner (as the supposed successor of PEIA), did not convert the action from one in
personam to one that is quasi in rem. Also, the petitioner points out that since the
respondents prayer for the issuance of a writ of attachment was denied by the RTC in Courts acquire jurisdiction over the plaintiffs upon the filing of the complaint,
its Order, dated 26 March 1999, then the nature of Civil Case No. MC99-605 while jurisdiction over the defendants in a civil case is acquired either through the
remains in personam, contrary to the ruling of the Court of Appeals that by the service of summons upon them in the manner required by law or through their
attachment of the petitioners interest in PEIP the action in personam was converted to voluntary appearance in court and their submission to its authority. If the defendants
an action quasi in rem. Resultantly, the extraterritorial service of summons on the have not been summoned, unless they voluntarily appear in court, the court acquires
petitioner was not validly effected, and did not give the RTC jurisdiction over the no jurisdiction over their persons and a judgment rendered against them is null and
petitioner. void. To be bound by a decision, a party should first be subjected to the courts
jurisdiction.[24]

Petitioner further argues that the appellate court should have granted its
Petition for Certiorari on the ground that the RTC committed grave abuse of discretion Thus, one of the modes of acquiring jurisdiction over the person of the
amounting to lack or excess of jurisdiction in refusing to dismiss respondents defendant or respondent in a civil case is through service of summons. It is intended to
Amended Complaint for failure to state a cause of action against petitioner which was give notice to the defendant or respondent that a civil action has been commenced
not the real party-in-interest in Civil Case No. MC99-605. Petitioner claims that it had against him. The defendant or respondent is thus put on guard as to the demands of
never used the name PEIA as its corporate name, and neither did it change its name the plaintiff or the petitioner.[25]
from that of PEIA. Petitioner stresses that PEIA is an entirely different corporate entity
that is not connected in whatever manner to the petitioner. Even
assuming arguendo that petitioner is the real party-in-interest in Civil Case No. MC99-
605 or that petitioner and PEIA are one and the same entity, petitioner still avows that
The proper service of summons differs depending on the nature of the civil
the respondent failed to state a cause of action against it because the Distribution
case instituted by the plaintiff or petitioner: whether it is in personam, in rem, or quasi
Agreement expressly grants PEIA the right to terminate the said contract at any time.
in rem. Actions in personam, are those actions brought against a person on the basis of
his personal liability; actions in rem are actions against the thing itself instead of
against the person; and actions are quasi in rem, where an individual is named as

34
defendant and the purpose of the proceeding is to subject his or her interest in a In the instant petition, [respondents] cause of action in
property to the obligation or loan burdening the property.[26] Civil Case No. MC99-605 is anchored on the claim that petitioner
unilaterally terminated the Distribution Agreement. Thus,
[respondent] prays in its [C]omplaint that Upon the filing of the
Complaint, issue an Order fixing the amount of the bond and issue a
Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure, there writ of attachment requiring the sheriff to attach the properties of
are only four instances wherein a defendant who is a non-resident and is not found in [Perkin-Elmer Philippines], which are not exempt from execution, and
the country may be served with summons by extraterritorial service, to wit: (1) when as much as may be sufficient to satisfy [respondents] demands.
the action affects the personal status of the plaintiff; (2) when the action relates to, or
the subject of which is property, within the Philippines, in which the defendant claims
a lien or an interest, actual or contingent; (3) when the relief demanded in such action
consists, wholly or in part, in excluding the defendant from any interest in property The action instituted by [respondent] affects the parties
located in the Philippines; and (4) when the defendant non-residents property has been alone, not the whole world. Hence, it is an action in personam, i.e.,
attached within the Philippines. In these instances, service of summons may be any judgment therein is binding only upon the parties properly
effected by (a) personal service out of the country, with leave of court; (b) publication, impleaded.
also with leave of court; or (c) any other manner the court may deem sufficient.[27]
xxxx

Undoubtedly, extraterritorial service of summons applies only where the


action is in rem or quasi in rem, but not if an action is in personam. The objective sought in [respondents] [C]omplaint was to
establish a claim against petitioner for its alleged unilateral
termination of [D]istribution [A]greement. Hence, to repeat, Civil
Case No. MC99-605 is an action in personam because it is an
When the case instituted is an action in rem or quasi in rem, Philippine courts action against persons, namely, herein petitioner, on the basis
already have jurisdiction to hear and decide the case because, in actions in of its personal liability. As such, personal service of summons
rem and quasi in rem, jurisdiction over the person of the defendant is not a prerequisite upon the [petitioner] is essential in order for the court to
to confer jurisdiction on the court, provided that the court acquires jurisdiction over acquire of (sic) jurisdiction over [its person].[32] (Emphasis
the res.[28] Thus, in such instance, extraterritorial service of summons can be made supplied.)
upon the defendant. The said extraterritorial service of summons is not for the purpose
of vesting the court with jurisdiction, but for complying with the requirements of fair
play or due process, so that the defendant will be informed of the pendency of the
action against him and the possibility that property in the Philippines belonging to him
or in which he has an interest may be subjected to a judgment in favor of the plaintiff,
and he can thereby take steps to protect his interest if he is so minded.[29] On the other Thus, being an action in personam, personal service of summons within
hand, when the defendant or respondent does not reside and is not found in the Philippines is necessary in order for the RTC to validly acquire jurisdiction over the
the Philippines,[30] and the action involved is in personam, Philippine courts cannot try person of the petitioner, and this is not possible in the present case because the
any case against him because of the impossibility of acquiring jurisdiction over his petitioner is a non-resident and is not found within the Philippines.Respondents
person unless he voluntarily appears in court.[31] allegation in its Amended Complaint that petitioner had personal property within
the Philippines in the form of shares of stock in PEIP did not make Civil Case No.
MC99-605 fall under any of the four instances mentioned in Section 15, Rule 14 of the
Rules of Court, as to convert the action in personam to an action in rem or quasi in
In the case at bar, this Court sustains the contention of the petitioner that rem and, subsequently, make the extraterritorial service of summons upon the
there can never be a valid extraterritorial service of summons upon it, because the petitioner valid.
case before the court a quo involving collection of a sum of money and damages is,
indeed, an action in personam, as it deals with the personal liability of the petitioner to
the respondent by reason of the alleged unilateral termination by the former of the
Distribution Agreement. Even the Court of Appeals, in its Decision dated 4 April 2004, It is incorrect for the RTC to have ruled that the allegations made by the
upheld the nature of the instant case as an action in personam. In the said Decision respondent in its Amended Complaint, which is primarily for collection of a sum of
the appellate court ruled that: money and damages, that the petitioner owns shares of stock within the Philippines to
which the petitioner claims interest, or an actual or contingent lien, would make the
case fall under one of the aforesaid instances wherein extraterritorial service of
summons under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure,

35
would be valid. The RTC in arriving at such conclusions relied on the second instance, xxxx
mentioned under Section 15, Rule 14 of the 1997 Revised Rules of Civil Procedure (i.e.,
when the action relates to, or the subject of which is property, within the Philippines,
in which the defendant claims a lien or interest, actual or contingent), where
extraterritorial service of summons can be properly made. However, the aforesaid Hence, it is submitted that one of the instances when
second instance has no application in the case before this Court. Primarily, the exterritorial service of summons under Section 15, Rule 14 of the
Amended Complaint filed by the respondent against the petitioner was for the Rules of Court is proper may be considered to have been met. This is
collection of sum of money and damages. The said case was neither related nor because the [C]omplaint for collection of sum of money which is an
connected to any property of the petitioner to which it claims a lien or interest.The action in personam was converted into an action quasi in rem by the
action for collection of a sum of money and damages was purely based on the personal attachment of [petitioners] interest in [Perkin-
liability of the petitioner towards the respondent. The petitioner is correct in saying Elmer Philippines].[34] (Emphasis supplied.)
that mere allegations of personal property within the Philippines does not necessarily
make the action as one that relates to or the subject of which is, property within the
Philippines as to warrant the extraterritorial service of summons. For the action to be
considered one that relates to, or the subject of which, is the property within Respondents allegation in its Amended Complaint that petitioner had
the Philippines, the main subject matter of the action must be the property itself of the personal property within the Philippines in the form of shares of stock in PEIP does not
petitioner in the Philippines. By analogy, an action involving title to or possession of convert Civil Case No. MC99-605 from an action in personam to one quasi in rem, so as
real or personal property -- such as the foreclosure of real estate or chattel mortgage to qualify said case under the fourth instance mentioned in Section 15, Rule 14 of the
where the mortgagor does not reside or is not found in the Philippines -- can be 1997 Revised Rules of Civil Procedure (i.e., when the non-resident defendants property
considered as an action which relates to, or the subject of which is, property within the has been attached within the Philippines), wherein extraterritorial service of summons
Philippines, in which the defendant claims a lien or interest, actual or contingent; and upon the petitioner would have been valid. It is worthy to note that what is required
in such instance, judgment will be limited to the res.[33] under the aforesaid provision of the Revised Rules of Civil Procedure is not a mere
allegation of the existence of personal property belonging to the non-resident defendant
within the Philippines but, more precisely, that the non-resident defendants personal
property located within the Philippines must have been actually attached. This Court in
Moreover, the allegations made by the respondent that the petitioner has the case of Venturanza v. Court of Appeals[35] ruled that when the attachment was void
property within the Philippines were in support of its application for the issuance of a from the beginning, the action in personamwhich required personal service of
writ of attachment, which was denied by the RTC. Hence, it is clear from the foregoing summons was never converted into an action in rem where service by publication
that the Complaint filed by the respondent against the petitioner does not really relate would have been valid. Hence, the appellate court erred in declaring that the present
to, or the subject of which is, property within the Philippines of the petitioner. case, which is an action in personam, was converted to an action quasi in rem because
of respondents allegations in its Amended Complaint that petitioner had personal
This Court also finds error in the Decision of the Court of Appeals. It is property within the Philippines.
provided for in the said Decision, thus:

Glaringly, respondents prayer in its Amended Complaint for the issuance of a


However, let it be emphasized that in the [C]omplaint filed writ of attachment over petitioners purported shares of stock in PEIP located within
before the trial court, [respondent] prayed that Upon the filing of the the Philippines was denied by the court a quo in its Order dated 26 March
Complaint, issue an Order fixing the amount of the bond and issue a 1999. Respondents Motion for Reconsideration of the said Order was likewise denied
writ of attachment requiring the sheriff to attach the properties of by the RTC in its subsequent Order, dated 11 January 2000. Evidently, petitioners
[Perkin-Elmer Philippines], which are not exempt from execution, and alleged personal property within the Philippines, in the form of shares of stock in PEIP,
as much as may be sufficient to satisfy [respondents] demands. had not been attached; hence, Civil Case No. MC99-605, for collection of sum of money
and damages, remains an action in personam. As a result, the extraterritorial service of
summons was not validly effected by the RTC against the petitioner, and the RTC thus
failed to acquire jurisdiction over the person of the petitioner. The RTC is therefore
In other words, although the [C]omplaint before the trial bereft of any authority to act upon the Complaint filed before it by the respondent
court does not involve the personal status of the [respondent], insofar as the petitioner is concerned.
nevertheless, the case involves property within the Philippines in
which the [petitioner] has or claim an interest, or which the
[respondent] has attached, which is one of the instances where
extraterritorial service of summons is proper. If there was no valid summons served upon petitioner, could RTC have
acquired jurisdiction over the person of the petitioner by the latters voluntary
appearance? As a rule, even if the service of summons upon the defendant or
respondent in a civil case is defective, the court can still acquire jurisdiction over his
36
person when he voluntary appears in court or submits himself to its unequivocal and intentional estoppel. Most telling is Section 20, Rule 14 of the Rules
authority. Nonetheless, voluntary appearance, as a mode of acquiring jurisdiction over of Court, which expressly provides:
the person of the defendant, is likewise inapplicable in this case.

SEC. 20. Voluntary appearance. - The defendants voluntary


It is settled that a party who makes a special appearance in court for the appearance in the action shall be equivalent to service of
purpose of challenging the jurisdiction of said court, based on the invalidity of the summons. The inclusion in a motion to dismiss of other grounds aside
service of summons, cannot be considered to have voluntarily submitted himself to the from lack of jurisdiction over the person of the defendant shall not be
jurisdiction of the court.[36] In the present case, petitioner has been consistent in all its deemed a voluntary appearance.[43] (Emphasis supplied.)
pleadings in assailing the service of summons upon it and the jurisdiction of the RTC
over its person. Thus, the petitioner cannot be declared in estoppel when it filed an
Answer ad cautelam with compulsory counterclaim before the RTC while the instant
Petition was still pending before this Court. The petitioner was in a situation wherein it In sum, this Court finds that the petitioner did not submit itself voluntarily to
had no other choice but to file an Answer; otherwise, the RTC would have already the authority of the court a quo; and in the absence of valid service of summons, the
declared that petitioner had waived its right to file responsive pleadings. [37] Neither can RTC utterly failed to acquire jurisdiction over the person of the petitioner.
the compulsory counterclaim contained in petitioners Answer ad cautelam be
considered as voluntary appearance of petitioner before the RTC. Petitioner seeks to
recover damages and attorneys fees as a consequence of the unfounded suit filed by
respondent against it. Thus, petitioners compulsory counterclaim is only consistent Anent the existence of a cause of action against petitioner and the proper
with its position that the respondent wrongfully filed a case against it and the RTC venue of the case, this Court upholds the findings of the RTC on these issues.
erroneously exercised jurisdiction over its person.
Dismissal of a Complaint for failure to state a cause of action is provided for
by the Rules of Court.[44] When a Motion to Dismiss is grounded on the failure to state
a cause of action, a ruling thereon should be based only on the facts alleged in the
Distinction must be made in Civil Case No. MC99-605 as to the jurisdiction of complaint. The court must pass upon this issue based solely on such allegations,
the RTC over respondents complaint and over petitioners counterclaim -- while it may assuming them to be true. For it to do otherwise would be a procedural error and a
have no jurisdiction over the former, it may exercise jurisdiction over the latter. The denial of plaintiffs right to due process.[45] While, truly, there are well-recognized
compulsory counterclaim attached to petitioners Answer ad cautelam can be treated as exceptions[46] to the rule that the allegations are hypothetically admitted as true and
a separate action, wherein petitioner is the plaintiff while respondent is the inquiry is confined to the face of the complaint,[47] none of the exceptions apply in this
defendant.[38] Petitioner could have instituted a separate action for the very same case.Hence, the general rule applies. The defense of the petitioner that it is not the real
claims but, for the sake of expediency and to avoid multiplicity of suits, it chose to party-in-interest is evidentiary in nature which must be proven in trial.The appellate
demand the same in Civil Case No. MC99-605.[39] Jurisdiction of the RTC over the court, then, cannot be faulted for not granting petitioners Motion to Dismiss on the
subject matter and the parties in the counterclaim must thus be determined separately ground of failure to state a cause of action.
and independently from the jurisdiction of the same court in the same case over the
subject matter and the parties in respondents complaint. In the same way, the appellate court did not err in denying petitioners Motion
to Dismiss Civil Case No. MC99-605 on the ground of improper venue. In arriving at
such conclusion, this Court quotes with approval the following ratiocination of the
RTC:
Moreover, even though the petitioner raised other grounds in its Motion to
Dismiss aside from lack of jurisdiction over its person, the same is not tantamount to As for the contention that venue was improperly laid, x x x,
its voluntary appearance or submission to the authority of the court a quo. While in De the [trial court] in its ultimate desire that the ends of justice could
Midgely v. Ferandos,[40] it was held that, in a Motion to Dismiss, the allegation of be served in its fullest, cannot rule that venue was improperly laid.
grounds other than lack of jurisdiction over the person of the defendant, including a
prayer "for such other reliefs as" may be deemed "appropriate and proper" amounted to
voluntary appearance, such ruling must be deemed superseded by the declaration of
this Court in La Naval Drug Corporation v. Court of Appeals[41] that estoppel by xxxx
jurisdiction must be unequivocal and intentional. It would be absurd to hold that
petitioner unequivocally and intentionally submitted itself to the jurisdiction of the
court by seeking other reliefs to which it might be entitled when the only relief that it
could properly ask from the trial court is the dismissal of the complaint against
The stipulation as to the venue of a prospective action does not
it.[42] Thus, the allegation of grounds other than lack of jurisdiction with a prayer for
preclude the filing of the suit in the residence of the
such other reliefs as may be deemed appropriate and proper cannot be considered as
[respondent] under Section 2, Rule 4, Rules of Court, especially

37
where the venue stipulation was imposed by the [petitioner] for jurisdiction to entertain the main action of the case and dismisses the same, then the
its own benefits.[48] (Emphasis supplied.) compulsory counterclaim, being ancillary to the principal controversy, must likewise
be dismissed since no jurisdiction remained for any grant of relief under the
counterclaim.[53] If we follow the aforesaid pronouncement of the Court in the cases
mentioned above, the counterclaim of the herein petitioner being compulsory in nature
Despite the venue stipulation found in the Distribution Agreement stipulating that must also be dismissed together with the Complaint. However, in the case of Pinga vs.
the exclusive jurisdiction over disputes arising from the same shall lie in the courts of Heirs of German Santiago,[54] the Court explicitly expressed that:
Singapore or of the Territory (referring to the Philippines), whichever is elected by PEIA
(or petitioner, as PEIAs alleged successor), the RTC of the Philippines cannot be
considered as an improper venue. Truly, the venue stipulation used the word
exclusive, however, a closer look on the Distribution Agreement would reveal that the Similarly, Justice Feria notes that the present rule
venue stipulation was really in the alternative i.e., courts of Singapore or of the reaffirms the right of the defendant to move for the dismissal of the
Territory, meaning, the Philippines; thus, the court a quo is not an improper venue for complaint and to prosecute his counterclaim, as stated in the
the present case. separate opinion [of Justice Regalado in BA Finance]. Retired Court
of Appeals Justice Hererra pronounces that the amendment to
Section 3, Rule 17 [of the 1997 Revised Rules of Civil
Procedure] settles that nagging question whether the dismissal
Nonetheless, it bears to emphasize that despite our findings that based on the of the complaint carries with it the dismissal of the
allegations in respondents Complaint in Civil Case No. MC99-605, respondent appears counterclaim, and opines that by reason of the amendments, the
to have a cause of action against the petitioner and that the RTC is the proper venue rulings in Metals Engineering, International Container, and BA
for the said case, Civil Case No. MC99-605 is still dismissible, for the RTC never Finance may be deemed abandoned. x x x.
acquired jurisdiction over the person of the petitioner. The extraterritorial service of
summons upon the petitioner produces no effect because it can only be done if the
action is in rem or quasi in rem. The case for collection of sum of money and damages
filed by the respondent against the petitioner being an action in personam, then x x x, when the Court promulgated the 1997 Rules of Civil
personal service of summons upon the petitioner within the Philippines is essential for Procedure, including the amended Rule 17, those previous jural
the RTC to validly acquire jurisdiction over the person of the petitioner. Having failed doctrines that were inconsistent with the new rules incorporated in
to do so, the RTC can never subject petitioner to its jurisdiction. The mere allegation the 1997 Rules of Civil Procedure were implicitly
made by the respondent that the petitioner had shares of stock within the Philippines abandoned insofar as incidents arising after the effectivity of the
was not enough to convert the action from one in personam to one that was quasi in new procedural rules on 1 July 1997. BA Finance, or even the
rem, for petitioners purported personal property was never attached; thus, the doctrine that a counterclaim may be necessarily dismissed along
extraterritorial service of summons upon the petitioner remains invalid. In light of the with the complaint, clearly conflicts with the 1997 Rules of Civil
foregoing findings, this Court concludes that the RTC has no power to hear and decide Procedure.The abandonment of BA Finance as doctrine extends as
the case against the petitioner, because the extraterritorial service of summons was far back as 1997, when the Court adopted the new Rules of Civil
not validly effected upon the petitioner and the RTC never acquired jurisdiction over its Procedure. If, since then, abandonment has not been affirmed in
person. jurisprudence, it is only because no proper case has arisen that
would warrant express confirmation of the new rule. That
opportunity is here and now, and we thus rule that the dismissal
of a complaint due to fault of the plaintiff is without prejudice
Finally, as regards the petitioners counterclaim, which is purely for damages and to the right of the defendant to prosecute any pending
attorneys fees by reason of the unfounded suit filed by the respondent against it, it has counterclaims of whatever nature in the same or separate
long been settled that the same truly falls under the classification of compulsory action. We confirm that BA Finance and all previous rulings of
counterclaim and it must be pleaded in the same action, otherwise, it is barred.[49] In the Court that are inconsistent with this present holding
the case at bar, this Court orders the dismissal of the Complaint filed by the are now abandoned.[55] [Emphasis supplied].
respondent against the petitioner because the court a quo failed to acquire
jurisdiction over the person of the latter. Since the Complaint of the respondent
was dismissed, what will happen then to the counterclaim of the petitioner? Does the
dismissal of the complaint carry with it the dismissal of the counterclaim? It is true that the aforesaid declaration of the Court refers to instances
covered by Section 3, Rule 17 of the 1997 Revised Rules of Civil Procedure [56] on
dismissal of the complaint due to the fault of the plaintiff.Nonetheless, it does not also
preclude the application of the same to the instant case just because the dismissal of
In the cases of Metal Engineering Resources Corp. v. Court of respondents Complaint was upon the instance of the petitioner who correctly argued
Appeals,[50] International Container Terminal Services, Inc. v. Court of Appeals,[51]and BA lack of jurisdiction over its person.
Finance Corporation v. Co.,[52] the Court ruled that if the court does not have
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counterclaim which must be pleaded in the same action or, otherwise, it shall be
barred. It will then be iniquitous and the height of injustice to require the petitioner to
Also in the case of Pinga v. Heirs of German Santiago, the Court discussed the make the counterclaim in the present action, under threat of losing his right to claim
situation wherein the very filing of the complaint by the plaintiff against the defendant the same ever again in any other court, yet make his right totally dependent on the
caused the violation of the latters rights. As to whether the dismissal of such a fate of the respondents complaint.
complaint should also include the dismissal of the counterclaim, the Court
acknowledged that said matter is still debatable, viz: If indeed the Court dismisses petitioners counterclaim solely on the basis of
the dismissal of respondents Complaint, then what remedy is left for the petitioner? It
Whatever the nature of the counterclaim, it bears the same can be said that he can still file a separate action to recover the damages and attorneys
integral characteristics as a complaint; namely a cause (or causes) of fees based on the unfounded suit for he cannot be barred from doing so since he did
action constituting an act or omission by which a party violates the file the compulsory counterclaim in the present action, only that it was dismissed
right of another.The main difference lies in that the cause of action when respondents Complaint was dismissed. However, this reasoning is highly flawed
in the counterclaim is maintained by the defendant against the and irrational considering that petitioner, already burdened by the damages and
plaintiff, while the converse holds true with the complaint. Yet, as attorneys fees it may have incurred in the present case, must again incur more
with a complaint, a counterclaim without a cause of action cannot damages and attorneys fees in pursuing a separate action, when, in the first place, it
survive. should not have been involved in any case at all.

x x x if the dismissal of the complaint somehow eliminates Since petitioners counterclaim is compulsory in nature and its cause of
the cause(s) of the counterclaim, then the counterclaim cannot action survives that of the dismissal of respondents complaint, then it should be
survive. Yet that hardly is the case, especially as a general resolved based on its own merits and evidentiary support.
rule. More often than not, the allegations that form the counterclaim
are rooted in an act or omission of the plaintiff other than the WHEREFORE, premises considered, the instant Petition is
plaintiffs very act of filing the complaint. Moreover, such acts or hereby GRANTED. The Decision of the Court of Appeals, dated 4 April 2006, in CA-
omissions imputed to the plaintiff are often claimed to have occurred G.R. SP No. 78981, affirming the Orders, dated 4 November 2002 and 20 June 2003,
prior to the filing of the complaint itself. The only apparent of the Regional Trial Court of Mandaluyong City, Branch 212, in Civil Case No. MC99-
exception to this circumstance is if it is alleged in the 605, is hereby REVERSED AND SET ASIDE.Respondents Amended Complaint in Civil
counterclaim that the very act of the plaintiff in filing the Case No. MC99-605 as against the petitioner is hereby ordered DISMISSED, and all
complaint precisely causes the violation of the defendants the proceedings against petitioner in the court a quo by virtue thereof are
rights. Yet even in such an instance, it remains debatable hereby DECLARED NULL AND VOID. The Regional Trial Court of Mandaluyong City,
whether the dismissal or withdrawal of the complaint is Branch 212, is DIRECTED to proceed without further delay with the resolution of
sufficient to obviate the pending cause of action maintained by respondents Complaint in Civil Case No. MC99-605 as to defendant PEIP, as well as
the defendant against the plaintiff.[57] petitioners counterclaim. No costs.

Based on the aforequoted ruling of the Court, if the dismissal of the complaint SO ORDERED.
somehow eliminates the cause of the counterclaim, then the counterclaim cannot
survive. Conversely, if the counterclaim itself states sufficient cause of action then
it should stand independently of and survive the dismissal of the complaint. Now,
having been directly confronted with the problem of whether the compulsory
counterclaim by reason of the unfounded suit may prosper even if the main complaint
had been dismissed, we rule in the affirmative.

It bears to emphasize that petitioners counterclaim against respondent is for


damages and attorneys fees arising from the unfounded suit. While respondents
Complaint against petitioner is already dismissed, petitioner may have very well
already incurred damages and litigation expenses such as attorneys fees since it was
forced to engage legal representation in the Philippines to protect its rights and to
assert lack of jurisdiction of the courts over its person by virtue of the improper service
of summons upon it. Hence, the cause of action of petitioners counterclaim is not
eliminated by the mere dismissal of respondents complaint.

It may also do well to remember that it is this Court which mandated that
claims for damages and attorneys fees based on unfounded suit constitute compulsory
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