Replevin

REPLEVIN
652
SUPREME COURT REPORTS ANNOTATED
Orosa vs. Court of Appeals
G.R. No. 111080. April 5, 2000.*
JOSE S. OROSA and MARTHA P. OROSA, petitioners, vs. HON. COURT OF APPEALS, FCP CREDIT CORPORATION,
respondents.
Appeals; Jurisdiction; Estoppel; A party cannot assail the jurisdiction of the Court of Appeals after having actively
participated in the appeal and after praying for affirmative relief.—Jurisdiction is simply the power or authority to hear a
case. The appellate jurisdiction of the Court of Appeals to review decisions and orders of lower courts is conferred by
Batas Pambansa Blg. 129. More importantly, petitioner cannot now assail the Court of Appeals’ jurisdiction after having
actively participated in the appeal and after praying for affirmative relief.
Judgments; Res Judicata; Res judicata cannot be interposed to bar the determination of a subsequent case if the first
and second cases involve different subject matters, parties and seek different reliefs.—Neither can petitioner argue that
res judicata bars the determination of the present case. The two cases involve different subject matters, parties and
seek different reliefs. The petition docketed as CA-G.R. SP No. 14938 was for certiorari with injunction, brought by
Stronghold Insurance Company, Inc. alleging that there was grave abuse of discretion when the trial court adjudged it
liable for damages without due process, in violation of Rule 60, Section 10 in relation to Rule 57, Section 20, of the Rules
of Court. The surety also questioned the propriety of the writ of execution issued by the
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* FIRST DIVISION.
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trial court pending appeal. On the other hand, CA-GR. CV No. 25929 was filed by petitioner Orosa under Rule 45 of the
Revised Rules of Court raising alleged errors of law on the part of the trial court. The subject of the appeal was the main
decision, while the subject of the petition in CA-G.R. SP No. 14938 was the Supplemental Decision.
Actions; Appeals; Pleadings and Practice; Basic is the rule that matters not raised in the complaint cannot be raised for
the first time on appeal.—Private respondent argued that based on the provisions of the Promissory Note itself,
petitioner incurred in default since, even though there was actual payment of the installments which fell due on July 28,
1984, as well as the three installments on August 28 to October 28, 1984, the payments were all late and irregular.
Private respondent also argued that petitioner assigned the subject car to his daughter without the written consent of
the obligee, and hence, violated the terms of the chattel mortgage. Meritorious as these arguments are, they come too
late in the day. Basic is the rule that matters not raised in the complaint cannot be raised for the first time on appeal.
Damages; Moral Damages; Elements; A party may only recover moral damages if they are the proximate result of the
other party’s wrongful act or omission.—We now come to the matter of moral damages. Petitioner insists that he
suffered untold embarrassment when the complaint was filed against him. According to petitioner, the car subject of
this case was being used by his daughter, married to Jose Concepcion III, a scion of a prominent family. Petitioner
laments that he assigned the car to his daughter so that she could “approximate without equaling the status of her in-
laws.” This being the case, petitioner experienced anguish and unquantifiable humiliation when he had to face his
daughter’s wealthy in-laws to explain the “why and the whats of the subject case.” Petitioner further insists that an
award of moral damages is especially justified since he is no ordinary man, but a businessman of high social standing, a
graduate of De La Salle University and belongs to a well known family of bankers. We must deny the claim. The law
clearly states that one may only recover moral damages if they are the proximate result of the other party’s wrongful act
or omission, two elements are required. First, the act or omission must be the proximate result of the physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock,
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social humiliation and similar injury. Second, the act must be wrongful.
Same; Same; A person who brought the embarrassment upon himself cannot complain that another person be held
liable for the mental anguish and humiliation he suffered.—Petitioner maintains that embarrassment resulted when he
had to explain the suit to his daughter’s in-laws. However, that could have been avoided had he not assigned the car to
his daughter and had he been faithful and prompt in paying the installments required. Petitioner brought the situation
upon himself and cannot now complain that private respondent is liable for the mental anguish and humiliation he
suffered.
Same; Same; Actions; Malicious Prosecution; To constitute malicious prosecution, there must be proof that the
prosecution was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately,
knowing that the charges were false and groundless; The rule has always been that moral damages cannot be recovered
from a person who has filed a complaint against another in good faith.—We agree with the appellate court that when
private respondent brought the complaint, it did so only to exercise a legal right, believing that it had a meritorious
cause of action clearly borne out by a mere perusal of the promissory note and chattel mortgage. To constitute
malicious prosecution, there must be proof that the prosecution was prompted by a sinister design to vex and humiliate
a person, and that it was initiated deliberately, knowing that the charges were false and groundless. Such was not the
case when the instant complaint was filed. The rule has always been that moral damages cannot be recovered from a
person who has filed a complaint against another in good faith. The law always presumes good faith such that any
person who seeks to be awarded damages due to acts of another has the burden of proving that the latter acted in bad
faith or with ill motive.
Same; Attorney’s Fees; No premium should be placed on the right to litigate and not every winning party is entitled to
an automatic grant of attorney’s fees.—In the matter of attorney’s fees, petitioner avers that to prosecute and defend
this case in the lower court and in the appellate court, he incurred expenses amounting to P50,000.00, and as such,
attorney’s fees should be granted. We deny the claim. No premium should be placed on the right to litigate and
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not every winning party is entitled to an automatic grant of attorney’s fees. The party must show that he falls under one
of the instances enumerated in Article 2208 of the Civil Code. This, petitioner failed to do. Furthermore, where the
award of moral and exemplary damages is eliminated, so must the award for attorney’s fees he deleted.
Actions; Chattel Mortgage; Replevin; It is error for a court to order a creditor to return the car earlier seized by virtue of
a writ of replevin or to pay its equivalent, value when the debtor has not yet fully paid the purchase price.—We also
agree with the Court of Appeals that the trial court erred when it ordered private respondent to return the subject car or
its equivalent considering that petitioner had not yet fully paid the purchase price. Verily, to sustain the trial court’s
decision would amount to unjust enrichment. The Court of Appeals was correct when it instead ordered private
respondent to return, not the car itself, but only the amount equivalent to the fourteen installments actually paid with
interest.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Aladdin F. Trinidad for petitioners.
Ongkiko, Kalaw, Manhit, Acorda, Panga & Velasco Law Offices for private respondent.
YNARES-SANTIAGO, J.:
On December 6, 1984, private respondent FCP Credit Corporation filed a complaint for replevin and damages1 in the
Regional Trial Court of Manila against petitioner Jose S. Orosa and one John Doe to recover possession of a 1983 Ford
Laser 1.5 Sedan with Motor and Serial No. SUNKBT-14584. The complaint alleged that on September 28, 1983, petitioner
purchased the subject motor vehicle on installment from Fiesta Motor Sales Corporation. He executed and delivered to
Fiesta Motor Sales Corp. a promissory note in the sum of
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1 Records, p. 1.
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P133,824.00 payable in monthly installments.2 To secure payment, petitioner executed a chattel mortgage over the
subject motor vehicle in favor of Fiesta Motor Sales Corp. On September 28, 1983, Fiesta Motor Sales assigned the
promissory note and chattel mortgage to private respondent FCP Credit Corporation. The complaint further alleged that
petitioner failed to pay part of the installment which fell due on July 28, 1984 as well as three (3) consecutive
installments which fell due on August 28, September 28, and October 28, 1984. Consequently, private respondent FCP
Credit Corporation demanded from petitioner payment of the entire outstanding balance of the obligation amounting to
P106,154.48 with accrued interest and to surrender the vehicle which petitioner was allegedly detaining.
After trial, the lower court dismissed private respondent’s complaint in a Decision dated March 25, 1988, the decretal
portion of which reads:
WHEREFORE, judgment is rendered for the defendant, and against the plaintiff:
1) Dismissing the complaint for lack of merit;
2) Declaring that the plaintiff was not entitled to the Writ of Replevin, issued on January 7, 1985, and is now liable to
the defendant for actual damages under the Replevin bond it filed;
3) On defendant’s counter-claim, ordering the plaintiff to pay the defendant the sum of P400,000.00 as moral
damages, P100,000.00 as exemplary damages, and P50,000.00 as, and for, attorney’s fees;
4) Ordering the plaintiff to return to the defendant the subject 1983 Ford Laser Sedan, with Motor or Serial No.
SUNKBT-14584, or its equivalent, in kind or value, in cash, as of this date, and to pay the costs.
SO ORDERED.
The trial court ruled that private respondent FCP had no reason to file the present action since petitioner already paid
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2 Ibid.
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the installments for the months of July to November 1984, which are the sole bases of the complaint. The lower court
declared that private respondent was not entitled to the writ of replevin, and was liable to petitioner for actual damages
under the replevin bond it filed.3
Ruling on petitioner’s counterclaim, the trial court stated that there was no legal or factual basis for the writ of replevin
and that its enforcement by the sheriff was “highly irregular, and unlawful, done, as it was, under shades of extortion,
threats and force.”4 The trial court ordered private respondent to pay the sum of P400,000.00 as moral damages;
P100,000.00 as exemplary damages and P50,000.00 as attorney’s fees. Private respondent was also ordered to return to
petitioner the 1983 Ford Laser 1.5 Sedan, or its equivalent, in kind or value in cash, as of date of judgment and to pay
the costs of the suit.5
On June 7, 1988, a “Supplemental Decision” was rendered by the trial court ordering private respondent’s surety.
Stronghold Insurance Co., Inc. to jointly and severally [with private respondent] return to petitioner the 1983 Ford Laser
1.5 Sedan or its equivalent in kind or in cash and to pay the damages specified in the main decision to the extent of the
value of the replevin bond in the amount of P210,000.00.6
The surety company filed with the Court of Appeals a petition for certiorari to annul the Order of the trial court denying
its motion for partial reconsideration, as well as the Supplemental Decision. On the other hand, private respondent
appealed the decision of the RTC Manila to the Court of Appeals.
The surety company’s petition for certiorari, docketed as CA-G.R. SP No. 14938, was dismissed by the Court of Appeals’
First Division which upheld the trial court’s order of
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3 Rollo, p. 66.
4 Rollo, p. 67.
5 Rollo, p. 68.
6 Records, p. 321.
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execution pending appeal.7 On November 6, 1989, this Court affirmed the Court of Appeals decision, but deleted the
order for the issuance of a writ of execution pending appeal.8
Meanwhile, in private respondent’s appeal, the Court of Appeals’ Eighth Division partially affirmed the ruling of the trial
court, in a Decision dated April 19, 1993, the dispositive portion of which reads:9
WHEREFORE, the Decision of 25 March 1988 of the Regional Trial Court, Branch 3, Manila is hereby AFFIRMED with the
following modifications:
(1) The award of moral damages, exemplary damages and attorney’s fees is DELETED;
(2) The order directing plaintiff-appellant FCP Credit Corporation to return to defendant-appellee Jose S. Orosa the
subject 1983 Ford Laser Sedan, with Motor and Serial No. SUNKBT-14584, its equivalent, in kind or value in cash, as of 25
March 1988, and to pay the costs is DELETED; and
(3) Plaintiff-appellant FCP Credit Corporation is ordered to pay defendant-appellee Jose S. Orosa the amount
equivalent to the value of the fourteen (14) monthly installments made by the latter to the former on the subject motor
vehicle, with interest from the time of filing of the complaint or from 6 December 1984.
No costs.
SO ORDERED.
Hence, this petition for review, on the following assignments of error:10
(1) The Hon. Court of Appeals (former Eighth Division) acted without or in excess of jurisdiction when it reversed a
final decision dated September 9, 1988, of a co-equal division of the Hon. Court of Appeals (Special First Division)
promulgated in CA G.R. No. 14938, and which was sustained by the Hon. Supreme Court in a final
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7 Rollo, pp. 220-228.
8 Rollo, pp. 230-241.
9 Rollo, pp. 49-59.
10 Rollo, p. 12.
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decision promulgated in G.R. No. 84979 dated November 6, 1989 which cases have the same causes of action, same
set of facts, the same parties and the same relief.
(2) The Hon. Court of Appeals (former Eighth Division) acted with grave abuse of discretion and authority when it
considered causes of actions not allege in the complaint and which were raised for the first time on appeal in deciding
this case.
(3) The Hon. Court of Appeals (former Eighth Division) committed serious error in applying the case of Filinvest Credit
Corporation vs. Ivans Mendez, 152 SCRA 598, as basis in deciding this case when said case has a different set of facts
from this case.
In its first assignment of error, petitioner alleges that the Eighth Division of the Court of Appeals had no jurisdiction to
review the present case since the First Division of the Court of Appeals already passed upon the law and the facts of the
same. Petitioner alleges that the present appeal involves the same causes of action, same parties, same facts and same
relief involved in the decision rendered by the First Division and affirmed by this Court in G.R. No. 84979.11
Petitioner’s argument is untenable. Jurisdiction is simply the power or authority to hear a case. The appellate jurisdiction
of the Court of Appeals to review decisions and orders of lower courts is conferred by Batas Pambansa Blg. 129. More
importantly, petitioner cannot now assail the Court of Appeals’ jurisdiction after having actively participated in the
appeal and after praying for affirmative relief.12
Neither can petitioner argue that res judicata bars the determination of the present case. The two cases involve
different subject matters, parties and seek different reliefs.
The petition docketed as CA-G.R. SP No. 14938 was for certiorari with injunction, brought by Stronghold Insurance
Company, Inc. alleging that there was grave abuse of discre-
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11 Rollo, p. 11.
12 Francisco Motors Corporation v. Court of Appeals and Spouses Gregorio and Librada Manuel, G.R. No. 100812, June
25, 1999, 309 SCRA 72.
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tion when the trial court adjudged it liable for damages without due process, in violation of Rule 60, Section 10 in
relation to Rule 57, Section 20, of the Rules of Court. The surety also questioned the propriety of the writ of execution
issued by the trial court pending appeal.13
On the other hand, CA-G.R. CV No. 25929 was filed by petitioner Orosa under Rule 45 of the Revised Rules of Court
raising alleged errors of law on the part of the trial court. The subject of the appeal was the main decision, while the
subject of the petition in CA-G.R. SP No. 14938 was the Supplemental Decision.
We agree with the Court of Appeals that:14

The decisions of the Court of Appeals in CA-G.R. SP No. 14938 and the Supreme Court in G.R. No. 84979 did not pass on
the merits of this case. It merely ruled on the issues of whether the surety, Stronghold Insurance Co., Inc., can be held
jointly and solidarity liable with plaintiff-appellant and whether execution pending appeal is proper under the facts and
circumstances of this case. Consequently, this Court is not estopped from reviewing the conclusions reached by the
court a quo. (italics ours)
In its second assigned error, petitioner posits that the Court of Appeals committed grave abuse of discretion when it
considered causes of actions which were raised for the first time on appeal.15
True, private respondent submitted issues to the Court of Appeals which were not raised in the original complaint.
Private respondent belatedly pointed out that:16
1.1. It is pertinent to note that Defendant-Appellee has waived prior notice and demand in order to be rendered in
default, as in fact the Promissory Note expressly stipulates that the monthly
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13 Records, p. 341.
14 Rollo, p. 52.
15 Rollo, p. 12.
16 Rollo, p. 85.
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installments shall be paid on the date they fall due, without need of prior notice or demand.
1.2. Said Promissory Note likewise expressly stipulates that a late payment charge of 2% per month shall be added on
each unpaid installment from maturity thereof until fully paid.
1.3. Of equal significance is the Acceleration Clause in the Promissory Note which states that if default be made in the
payment of any of the installments or late payment charges thereon when the same became due and payable, the total
principal sum then remaining unpaid, together with the agreed late payment charges thereon, shall at once become due
and payable.
Private respondent argued that based on the provisions of the Promissory Note itself, petitioner incurred in default
since, even though there was actual payment of the installments which fell due on July 28, 1984, as well as the three
installments on August 28 to October 28, 1984, the payments were all late and irregular.17 Private respondent also
argued that petitioner assigned the subject car to his daughter without the written consent of the obligee, and hence,
violated the terms of the chattel mortgage.18 Meritorious as these arguments are, they come too late in the day. Basic
is the rule that matters not raised in the complaint cannot be raised for the first time on appeal.
Contrary to petitioner’s accusation, the Court of Appeals restricted the determination of the case to matters alleged in
the complaint and raised during trial.19 Citing jurisprudence,20 the Court of Appeals held that “it would be offensive to
the
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17 Rollo, p. 90.
18 Rollo, pp. 99-100.
19 Said the Court of Appeals: “Accordingly, the Court will limit itself to the determination of whether or not defendant-
appellee Jose S. Orosa did in fact fail to pay the monthly installments that fell due from 28 July 1984 to 28 October
1984.” (Rollo, p. 55.)
20 Medida, et al. v. Court of Appeals, et al., 208 SCRA 887 (1992); Gevero, et al. v. Intermediate Appellate Court, et al.,
189 SCRA 201 (1990).
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basic rule of fair play, justice and due process” if it considered issues raised for the first time on appeal.21
The Court of Appeals’ statement that “under the terms and conditions of the chattel mortgage, defendant-appellee Jose
S. Orosa was already in default,” was made only to justify the deletion of the trial court’s award of moral, exemplary
damages and attorney’s fees, in consonance with its finding that private respondent was motivated by a sincere belief
that it had sufficient basis and acted in good faith when it filed the claim.22
We now come to the matter of moral damages. Petitioner insists that he suffered untold embarrassment when the
complaint was filed against him. According to petitioner, the car subject of this case was being used by his daughter,
married to Jose Concepcion III, a scion of a prominent family. Petitioner laments that he assigned the car to his daughter
so that she could “approximate without equaling the status of her in-laws.” This being the case, petitioner experienced
anguish and unquantifiable humiliation when he had to face his daughter’s wealthy in-laws to explain the “why and the
whats of the subject case.” Petitioner further insists that an award of moral damages is especially justified since he is no
ordinary man, but a businessman of high social standing, a graduate of De La Salle University and belongs to a well
known family of bankers.23
We must deny the claim. The law clearly states that one may only recover moral damages if they are the proximate
result of the other party’s wrongful act or omission.24 Two elements are required. First, the act or omission must be the
proximate result of the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injury. Second, the act must be wrongful.
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21 Rollo, p. 55.
22 Rollo, p. 57.
23 Rollo, p. 36.
24 Civil Code, Art. 2217.
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Petitioner maintains that embarrassment resulted when he had to explain the suit to his daughter’s in-laws. However,
that could have been avoided had he not assigned the car to his daughter and had he been faithful and prompt in paying
the installments required. Petitioner brought the situation upon himself and cannot now complain that private
respondent is liable for the mental anguish and humiliation he suffered.
Furthermore, we agree with the appellate court that when private respondent brought the complaint, it did so only to
exercise a legal right, believing that it had a meritorious cause of action clearly borne out by a mere perusal of the
promissory note and chattel mortgage. To constitute malicious prosecution, there must be proof that the prosecution
was prompted by a sinister design to vex and humiliate a person, and that it was initiated deliberately, knowing that the
charges were false and groundless.25 Such was not the case when the instant complaint was filed. The rule has always
been that moral damages cannot be recovered from a person who has filed a complaint against another in good faith.26
The law always presumes good faith such that any person who seeks to be awarded damages due to acts of another has
the burden of proving that the latter acted in bad faith or with ill motive.27
Anent the award of exemplary damages, jurisprudence provides that where a party is not entitled to actual or moral
damages, an award of exemplary damages is likewise baseless.28
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25 Drilon, et al. v. Court of Appeals, et al., 270 SCRA 211 (1997).
26 Mijares, et al. v. Court of Appeals, et al., 271 SCRA 558 (1997).
27 Ford Philippines, Inc., et al. v. Court of Appeals, et al., 267 SCRA 320 (1997).
28 Bernardo v. Court of Appeals (Special Sixth Division), et al., 275 SCRA 413 (1997).
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In the matter of attorney’s fees, petitioner avers that to prosecute and defend this case in the lower court and in the
appellate court, he incurred expenses amounting to P50,000.00,29 and as such, attorney’s fees should be granted. We
deny the claim. No premium should be placed on the right to litigate and not every winning party is entitled to an
automatic grant of attorney’s fees.30 The party must show that he falls under one of the instances enumerated in
Article 2208 of the Civil Code.31 This, petitioner failed to do. Furthermore,
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29 Rollo, p. 37.
30 Philtranco Service Enterprises, Inc., et al. v. Court of Appeals, et al., 273 SCRA 562 (1997).
31 Article 2208 of the Civil Code provides: In the absence of stipulation, attorney’s fees and expenses of litigation, other
than judicial costs cannot be recovered except:
(1) When exemplary damages are awarded;
(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses
to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation
should be recovered.
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where the award of moral and exemplary damages is eliminated, so must the award for attorney’s fees be deleted.32
We also agree with the Court of Appeals that the trial court erred when it ordered private respondent to return the
subject car or its equivalent considering that petitioner had not yet fully paid the purchase price. Verily, to sustain the
trial court’s decision would amount to unjust enrichment. The Court of Appeals was correct when it instead ordered
private respondent to return, not the car itself, but only the amount equivalent to the fourteen installments actually
paid with interest.33
WHEREFORE, above premises considered, the petition is DENIED, and the Court of Appeals’ Decision of April 19, 1993
and its Resolution of July 22, 1993 are AFFIRMED in toto.
No costs.
SO ORDERED. Orosa vs. Court of Appeals, 329 SCRA 652, G.R. No. 111080 April 5, 2000
Smart Communications, Inc. vs. Astorga
G.R. No. 148132. January 28, 2008.*
SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent.
G.R. No. 151079. January 28, 2008.*
SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent.
G.R. No. 151372. January 28, 2008.*
REGINA M. ASTORGA, petitioner, vs. SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO, respondents.
Actions; Provisional Remedies; Replevin; Words and Phrases; Replevin is an action whereby the owner or person entitled
to repossession of goods or chattels may recover those goods or chattels from one who has wrongfully distrained or
taken, or who wrongfully detains such goods or chattels; The term may refer either to the action itself, for the recovery
of personality, or to the provisional remedy traditionally associated with it, by which possession of the property may be
obtained by the plaintiff and retained during the pendency of the action.—Replevin is an action whereby the owner or
person entitled to repossession of goods or chattels may recover those goods or chattels from one who has wrongfully
distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one having right to
possession to recover property in specie from one who has wrongfully taken or detained the property. The term may
refer either to the action itself, for the recovery of personalty, or to the provisional remedy traditionally associated with
it, by which possession of the property may be obtained by the plaintiff and retained during the pendency of the action.
Same; Same; Same; Jurisdictions; Labor Law; An employer’s demand for payment of the market value of the car or, in
the alternative, the surrender of the car, is not a labor, but a civil, dispute; A
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* THIRD DIVISION.
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dispute which involves the relationship of debtor and creditor rather than employee-employer relations falls within the
jurisdiction of the regular courts.—Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction over the
suit and acted well within its discretion in denying Astorga’s motion to dismiss. SMART’s demand for payment of the
market value of the car or, in the alternative, the surrender of the car, is not a labor, but a civil, dispute. It involves the
relationship of debtor and creditor rather than employeeemployer relations. As such, the dispute falls within the
jurisdiction of the regular courts.
Labor Law; Termination of Employment; Redundancy; Management Prerogatives; Words and Phrases; Redundancy in an
employer’s personnel force necessarily or even ordinarily refers to duplication of work; A position is redundant where it
is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring
of workers, decreased volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise; The characterization of an employee’s services as superfluous or no
longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer.
The wisdom and soundness of such characterization or decision is not subject to discretionary review provided, of
course, that a violation of law or arbitrary or malicious action is not shown.—Astorga was terminated due to
redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of redundancy as an
authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations
Commission, 193 SCRA 665 (1991), viz.: x x x redundancy in an employer’s personnel force necessarily or even ordinarily
refers to duplication of work. That no other person was holding the same position that private respondent held prior to
termination of his services does not show that his position had not become redundant. Indeed, in any well organized
business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one
person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is
redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors,
such as overhir-
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ing of workers, decreased volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. The characterization of an employee’s services as superfluous or no
longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer.
The wisdom and soundness of such characterization or decision is not subject to discretionary review provided, of
course, that a violation of law or arbitrary or malicious action is not shown.
Same; Same; Same; Due Process; The validity of termination can exist independently of the procedural infirmity of the
dismissal.—SMART’s assertion that Astorga cannot complain of lack of notice because the organizational realignment
was made known to all the employees as early as February 1998 fails to persuade. Astorga’s actual knowledge of the
reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees
are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to give
them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the
impact of termination. In this case, notwithstanding Astorga’s knowledge of the reorganization, she remained uncertain
about the status of her employment until SMART gave her formal notice of termination. But such notice was received by
Astorga barely two (2) weeks before the effective date of termination, a period very much shorter than that required by
law. Be that as it may, this procedural infirmity would not render the termination of Astorga’s employment illegal. The
validity of termination can exist independently of the procedural infirmity of the dismissal. In DAP Corporation v. CA, 477
SCRA 792 (2005), we found the dismissal of the employees therein valid and for authorized cause even if the employer
failed to comply with the notice requirement under Article 283 of the Labor Code. This Court upheld the dismissal, but
held the employer liable for noncompliance with the procedural requirements.
PETITIONS for review on certiorari of the decisions and resolutions of the Court of Appeals.
Picazo, Buyco, Tan, Fider & Santos for Smart Communications, Inc. and Ann Margaret V. Santiago.
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Federico C. Leynes & Partners for Regina Astorga.

NACHURA, J.:
For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of
Court. G.R. No. 148132 assails the February 28, 2000 Decision1 and the May 7, 2001 Resolution2 of the Court of Appeals
(CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001 Decision3 and the December 18,
2001 Resolution4 in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8,
1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was
receiving a monthly salary of P33,650.00. As District Sales Manager, Astorga enjoyed additional benefits, namely, annual
performance incentive equivalent to 30% of her annual gross salary, a group life and hospitalization insurance coverage,
and a car plan in the amount of P455,000.00.5
In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made
known to the employees on February 27, 1998.6 Part of the reorganization was the outsourcing of the marketing and
sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multime-
_______________
1 Penned by Associate Justice Elvi John S. Asuncion (dismissed), with Associate Justices Corona Ibay-Somera (retired) and
Portia Aliño-Hormachuelos, concurring; Rollo (G.R. No. 148132), pp. 146-152.
2 Rollo, pp. 164-165.
3 Penned by Associate Justice Romeo Brawner (retired), with Associate Justices Remedios Salazar-Fernando and Josefina
Guevara-Salonga, concurring; Rollo (G.R. No. 151079), pp. 24-36.
4 Id., at pp. 42-45.
5 Rollo (G.R. No. 151372), pp. 58-59.
6 Rollo (G.R. No. 151079), p. 46.
438
438
dia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD,
Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by
SMART. SMART then conducted a performance evaluation of CSMG personnel and those who garnered the highest
ratings were favorably recommended to SNMI. Astorga landed last in the performance evaluation, thus, she was not
recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department,
but she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART issued a
memorandum advising Astorga of the termination of her employment on ground of redundancy, effective April 3, 1998.
Astorga received it on March 16, 1998.7
The termination of her employment prompted Astorga to file a Complaint8 for illegal dismissal, non-payment of salaries
and other benefits with prayer for moral and exemplary damages against SMART and Ann Margaret V. Santiago
(Santiago). She claimed that abolishing CSMG and, consequently, terminating her employment was illegal for it violated
her right to security of tenure. She also posited that it was illegal for an employer, like SMART, to contract out services
which will displace the employees, especially if the contractor is an in-house agency.9
SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy,
which is an authorized cause for termination of employment, and the dismissal was effected in accordance with the re-
_______________
7 Rollo (G.R. No. 151372), p. 62.
8 Id., at pp. 40-42.
9 Id., at pp. 43-54.

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439
quirements of the Labor Code. The redundancy of Astorga’s position was the result of the abolition of CSMG and the
creation of a specialized and more technically equipped SNMI, which is a valid and legitimate exercise of management
prerogative.10
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of
the Honda Civic Sedan which was given to her under the company’s car plan program, or to surrender the same to the
company for proper disposition.11 Astorga, however, failed and refused to do either, thus prompting SMART to file a
suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The case was docketed as Civil Case
No. 981936 and was raffled to Branch 57.12
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii)
litis pendentia; and (iv) forum-shopping. Astorga posited that the regular courts have no jurisdiction over the complaint
because the subject thereof pertains to a benefit arising from an employment contract; hence, jurisdiction over the
same is vested in the labor tribunal and not in regular courts.13
Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter rendered a Decision14 dated
August 20, 1998, declaring Astorga’s dismissal from employment illegal. While recognizing SMART’s right to abolish any
of its departments, the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its
control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the control of SMART,
but a ploy to terminate Astorga’s employment. The Arbiter also
_______________
10 Id., at pp. 68-78.
11 Rollo (G.R. No. 148132), p. 47.
12 Id., at pp. 30-34.

13 Id., at pp. 51-59.
14 Rollo (G.R. No. 151372), pp. 79-92.
440
440
ruled that contracting out the functions performed by Astorga to an in-house agency like SNMI was illegal, citing Section
7(e), Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
“WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and unjust. [SMART and
Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of seniority rights
and other privileges, with full backwages, inclusive of allowances and other benefits from the time of [her] dismissal to
the date of reinstatement, which computed as of this date, are as follows:
(a)
Astorga
BACKWAGES; (P33,650.00 x 4 months)
= P134,600.00
UNPAID SALARIES (February 15, 1998-
April 3, 1998
February 15-28, 1998
= P 16,823.00
March 1-31, [1998]
= P 33,650.00
April 1-3, 1998
= P 3,882.69
CAR MAINTENANCE ALLOWANCE
(P2,000.00 x 4)
= P 8,000.00
FUEL ALLOWANCE (300 liters/mo. x
4 mos. at P12.04/liter)
= P 14,457.83
TOTAL
= P211,415.52
xxxx
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary damages in the amount of
P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorney’s fees.
SO ORDERED.”15
_______________
15 Id., at pp. 90-92.
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441
Subsequently, on March 29, 1999, the RTC issued an Order16 denying Astorga’s motion to dismiss the replevin case. In
so ruling, the RTC ratiocinated that:
“Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the defendant
under a car plan privilege arrangement. The car is registered in the name of the plaintiff. Recovery thereof via replevin
suit is allowed by Rule 60 of the 1997 Rules of Civil Procedure, which is undoubtedly within the jurisdiction of the
Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant refused to return
said car. This is clearly sufficient statement of plaintiff’s cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the judgment in the
labor dispute will not constitute res judicata to bar the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.
SO ORDERED.”17
Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999.18
Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision,19 reversed
the RTC ruling. Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is
intertwined with Astorga’s complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over
the complaint. SMART’s motion for reconsideration having
_______________
16 Rollo (G.R. No. 148132), pp. 79-80.
17 Id.
18 Id., at p. 110.
19 Id., at pp. 146-152.
442
442

been denied,20 it elevated the case to this Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the National
Labor Relations Commission (NLRC). In its September 27, 1999 Decision,21 the NLRC sustained Astorga’s dismissal.
Reversing the Labor Arbiter, the NLRC declared the abolition of CSMG and the creation of SNMI to do the sales and
marketing services for SMART a valid organizational action. It overruled the Labor Arbiter’s ruling that SNMI is an in-
house agency, holding that it lacked legal basis. It also declared that contracting, subcontracting and streamlining of
operations for the purpose of increasing efficiency are allowed under the law. The NLRC further found erroneous the
Labor Arbiter’s disquisition that redundancy to be valid must be impelled by economic reasons, and upheld the
redundancy measures undertaken by SMART.
The NLRC disposed, thus:
“WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further ordered to
immediately return the company vehicle assigned to her. [Smart and Santiago] are hereby ordered to pay the final
wages of [Astorga] after [she] had submitted the required supporting papers therefor.
SO ORDERED.”22
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999.23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision24 affirming with modification
the resolutions of the NLRC. In gist, the CA agreed with
_______________
20 Id., at pp. 164-165.
21 Rollo (G.R. No. 151079), pp. 102-120.
22 Id., at p. 120.
23 Id., at p. 122.
24 Id., at pp. 24-36.
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443
the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG was a legitimate exercise of
management prerogative. It rejected Astorga’s posturing that her non-absorption into SNMI was tainted with bad faith.
However, the CA found that SMART failed to comply with the mandatory one-month notice prior to the intended
termination. Accordingly, the CA imposed a penalty equivalent to Astorga’s one-month salary for this non-compliance.
The CA also set aside the NLRC’s order for the return of the company vehicle holding that this issue is not essentially a
labor concern, but is civil in nature, and thus, within the competence of the regular court to decide. It added that the
matter had not been fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On December
18, 2001, the CA resolved the motions, viz.:
“WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is hereby ordered to pay
[Astorga] her backwages from 15 February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is outrightly
DENIED.
SO ORDERED.”25
Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R. Nos.
151079 and 151372. On February 27, 2002, this Court ordered the consolidation of these petitions with G.R. No.
148132.26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S DISMISSAL DESPITE THE FACT THAT HER
DISMISSAL WAS EFFECTED IN CLEAR VIOLATION
_______________
25 Id., at p. 45.
26 Rollo (G.R. No. 151372), p. 175.
444
444
OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE GROUND FOR
HER DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF
THE LABOR CODE, ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE
COMPLAINT FOR RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT SMART DID NOT COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO
TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE
SUBSTANTIAL COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.
_______________
27 Rollo (G.R. No. 151079), p. 250.
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445
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION FINDS APPLICATION IN
THE CASE AT BAR CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN
ACCORD WITH LAW OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE
POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE
COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY VEHICLE FROM A FORMER EMPLOYEE
WHO WAS LEGALLY DISMISSED.
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE
IS NOT THE ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER BE
CONSIDERED AS AN EMPLOYEE OF SMART UNDER THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for
lack of jurisdiction, which is the issue raised in G.R. No. 148132.
_______________
28 Id., at p. 273.
29 Rollo (G.R. No. 148132), p. 266.
446
446

Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those
goods or chattels from one who has wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It
is designed to permit one having right to possession to recover property in specie from one who has wrongfully taken or
detained the property.30 The term may refer either to the action itself, for the recovery of personalty, or to the
provisional remedy traditionally associated with it, by which possession of the property may be obtained by the plaintiff
and retained during the pendency of the action.31
That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of
doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following
disquisition, viz.:
“[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment package. We doubt
that [SMART] would extend [to Astorga] the same car plan privilege were it not for her employment as district sales
manager of the company. Furthermore, there is no civil contract for a loan between [Astorga] and [Smart].
Consequently, We find that the car plan privilege is a benefit arising out of employer-employee relationship. Thus, the
claim for such falls squarely within the original and exclusive jurisdiction of the labor arbiters and the NLRC.”32
We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well
within its discretion in denying Astorga’s motion to dismiss. SMART’s demand for payment of the market value of the car
or, in the alternative, the surrender of the car, is not a
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30 Black’s Law Dictionary, Fifth Edition, p. 1168.
31 Tillson v. Court of Appeals, G.R. No. 89870, May 28, 1991, 197 SCRA 587, 598.
32 Id., at p. 148.
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VOL. 542, JANUARY 28, 2008
447
labor, but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer relations.33
As such, the dispute falls within the jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained:
“Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief sought
therein is the return of the property in specie wrongfully detained by another person. It is an ordinary statutory
proceeding to adjudicate rights to the title or possession of personal property. The question of whether or not a party
has the right of possession over the property involved and if so, whether or not the adverse party has wrongfully taken
and detained said property as to require its return to plaintiff, is outside the pale of competence of a labor tribunal and
beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues raised in each
forum can be resolved independently on the other. In fact in 18 November 1986, the NLRC in the case before it had
issued an Injunctive Writ enjoining the petitioners from blocking the free ingress and egress to the Vessel and ordering
the petitioners to disembark and vacate. That aspect of the controversy is properly settled under the Labor Code. So also
with petitioners’ right to picket. But the determination of the question of who has the better right to take possession of
the Vessel and whether petitioners can deprive the Charterer, as the legal possessor of the Vessel, of that right to
possess in addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid down by pertinent
laws.”
_______________
33 See Nestlé Philippines Inc. v. National Labor Relations Commission, G.R. No. 85197, March 18, 1991, 195 SCRA 340,
343.
34 G.R. L-75837, December 11, 1987, 156 SCRA 299, 303-304.
448
448
The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the
replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The
nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v.
National Labor Relations Commission,35 viz.:
“x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication of work. That no
other person was holding the same position that private respondent held prior to termination of his services does not
show that his position had not become redundant. Indeed, in any well organized business enterprise, it would be
surprising to find duplication of work and two (2) or more people doing the work of one person. We believe that
redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of
workers, decreased volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise.”
The characterization of an employee’s services as superfluous or no longer necessary and, therefore, properly
terminable, is an exercise of business judgment on the part of the employer. The wisdom and soundness of such
characterization or decision is not subject to discretionary review provided, of course, that a violation of law or arbitrary
or malicious action is not shown.36
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35 G.R. No. 82249, February 7, 1991, 193 SCRA 665, 672.
36 Dole Philippines, Inc. v. National Labor Relations Commission, 417 Phil. 428, 440; 365 SCRA 124, 134 (2001).
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VOL. 542, JANUARY 28, 2008
449
Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the
reorganization was done in order to get rid of her. But except for her barefaced allegation, no convincing evidence was
offered to prove it. This Court finds it extremely difficult to believe that SMART would enter into a joint venture
agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a particular employee,
such as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried a lower salary rank and rate. If indeed SMART simply
wanted to get rid of her, it would not have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was no compelling economic
reason for redundancy. But contrary to her claim, an employer is not precluded from adopting a new policy conducive to
a more economical and effective management even if it is not experiencing economic reverses. Neither does the law
require that the employer should suffer financial losses before he can terminate the services of the employee on the
ground of redundancy. 37
We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of
CSMG/FSD and termination of Astorga’s employment was an honest effort to make SMART’s sales and marketing
departments more efficient and competitive. As the CA had taken pains to elucidate:
“x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization
undertaken by SMART is for no purpose other than its declared objective—as a labor and cost savings device. Indeed,
this Court finds no fault in SMART’s decision to outsource the corporate sales market to SNMI
_______________
37 Id.
450
450
in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under the Fixed Services
Division (CSMG/ FSD), a distinct sales force of SMART in charge of selling SMART’s telecommunications services to the
corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s requirement,
abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a
joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD does not have the necessary technical
expertise required for the value added services. By transferring the duties of CSMG/FSD to SNMI, SMART has created a
more competent and specialized organization to perform the work required for corporate accounts. It is also relieved
SMART of all administrative costs—management, time and money-needed in maintaining the CSMG/FSD. The
determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on
relevant criteria and is therefore a legitimate exercise of management prerogative.”
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld
his cause in most of his conflicts with his employer. This favored treatment is consonant with the social justice policy of
the Constitution. But while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right
of the employer to reasonable returns for his investment.38 In this light, we must acknowledge the prerogative of the
employer to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects of
economic gains, albeit always within the framework of existing laws. Accordingly, we sustain the reorganization and
redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to
termination. The record is clear that Astorga received the notice of
_______________
38 Asian Alcohol Corporation v. National Labor Relations Commission, 364 Phil. 912, 924-925; 305 SCRA 416, 427-428
(1999).
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VOL. 542, JANUARY 28, 2008

451
termination only on March 16, 199839 or less than a month prior to its effectivity on April 3, 1998. Likewise, the
Department of Labor and Employment was notified of the redundancy program only on March 6, 1998.40
Article 283 of the Labor Code clearly provides:
“Art. 283. Closure of establishment and reduction of personnel.—The employer may also terminate the employment of
any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof x x x.”
SMART’s assertion that Astorga cannot complain of lack of notice because the organizational realignment was made
known to all the employees as early as February 1998 fails to persuade. Astorga’s actual knowledge of the
reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees
are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to give
them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the
impact of termination. In this case, notwithstanding Astorga’s knowledge of the reorganization, she remained uncertain
about the status of her employment until SMART gave her formal notice of termination. But such notice was received by
Astorga barely two (2) weeks before the effective date of termination, a period very much shorter than that required by
law.
Be that as it may, this procedural infirmity would not render the termination of Astorga’s employment illegal. The
validity of termination can exist independently of the proce-
_______________
39 Rollo (G.R. No. 151372), p. 62.
40 Id., at p. 56.
452
452
dural infirmity of the dismissal.41 In DAP Corporation v. CA,42 we found the dismissal of the employees therein valid
and for authorized cause even if the employer failed to comply with the notice requirement under Article 283 of the
Labor Code. This Court upheld the dismissal, but held the employer liable for non-compliance with the procedural
requirements.
The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at the same time, awarding
indemnity for violation of Astorga’s statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on
SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food
Processing Corporation v. Pacot,43 viz.:
“[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect,
initiated by an act imputable to the employee, and (2) if the dismissal is based on an authorized cause under Article 283
but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employer’s exercise of his management prerogative.”
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least one (1)
month salary or to at least one (1) month’s pay for every year of service, whichever is higher. The records show that
Astorga’s length of service is less than a year. She is, there-
_______________
41 DAP Corporation v. Court of Appeals, G.R. No. 165811, December 14, 2005, 477 SCRA 792, 798.
42 Id.
43 G.R. No. 151378, March 28, 2005, 454 SCRA 119, 125-126.
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VOL. 542, JANUARY 28, 2008
453
fore, also entitled to separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted
by SMART in the proceedings a quo. No proof of payment was presented by SMART to disprove the allegation. It is
settled that in labor cases, the burden of proving payment of monetary claims rests on the employer.44 SMART failed to
discharge the onus probandi. Accordingly, it must be held liable for Astorga’s salary from February 15, 1998 until the
effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to
an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal
dismissal from work.45 The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed
the Labor Arbiter’s ruling and categorically declared Astorga’s dismissal valid. This ruling was affirmed by the CA in its
assailed Decision. Since Astorga’s dismissal is for an authorized cause, she is not entitled to backwages. The CA’s award
of backwages is totally inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000 Decision and the
May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of
Makati City, Branch 57 is DIRECTED to proceed with the trial of Civil Case No. 98-1936 and render its Decision with
reasonable dispatch.
_______________
44 G & M (Phil.), Inc. v. Batomalaque, G.R. No. 151849, June 23, 2005, 461 SCRA 111, 118.
45 Filflex Industrial & Manufacturing Corporation v. National Labor Relations Commission, G.R. No. 115395, February 12,
1998, 286 SCRA 245, 253.
454
454
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June
11, 2001 Decision and the December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION.
Astorga is declared validly dismissed. However, SMART is ordered to pay Astorga P50,000.00 as indemnity for its
noncompliance with procedural due process, her separation pay equivalent to one (1) month pay, and her salary from
February 15, 1998 until the effective date of her termination on April 3, 1998. The award of backwages is DELETED for
lack of basis.
SO ORDERED. Smart Communications, Inc. vs. Astorga, 542 SCRA 434, G.R. No. 148132, G.R. No. 151079, G.R. No.
151372 January 28, 2008
A.M. No. P-07-2384. June 18, 2008.*
KENNETH HAO, complainant, vs. ABE C. ANDRES, Sheriff IV, Regional Trial Court, Branch 16, Davao City, respondent.
Court Personnel; Sheriffs; Replevin; The rules provide that property seized under a writ of replevin is not to be delivered
immediately to the plaintiff.—The rules provide that property seized under a writ of replevin is not to be delivered
immediately to the plaintiff. In accordance with the said rules, Andres should have waited no less than five days in order
to give the complainant an opportunity to object to the sufficiency of the bond or of the surety or sureties thereon, or
require the return of the seized motor vehicles by filing a counter-bond. This, he failed to do.
Same; Same; The rule is clear that the property seized should not be immediately delivered to the plaintiff, and the
sheriff must retain custody of the seized property for at least five days.—It matters not that Silver was in possession of
the seized vehicles merely for safekeeping as stated in the depository receipts. The rule is clear that the property seized
should not be immediately delivered to the plaintiff, and the sheriff must retain custody of the seized property for at
least five days. Hence, the act of Andres in delivering the seized vehicles immediately after seizure to Silver for whatever
purpose, without observing the five-day requirement finds no legal justification.
_______________
* SECOND DIVISION.
VOL. 555, JUNE 18, 2008
Hao vs. Andres
Same; Same; In this case, the purpose of the five (5) days is to give a chance to the defendant to object to the sufficiency
of the bond or the surety or sureties thereon or require the return of the property by filing a counterbond.—In Pardo v.
Velasco, 212 SCRA 323 (1992), this Court held that …Respondent as an officer of the Court is charged with certain
ministerial duties which must be performed faithfully to the letter. Every provision in the Revised Rules of Court has a
specific reason or objective. In this case, the purpose of the five (5) days is to give a chance to the defendant to object to
the sufficiency of the bond or the surety or sureties thereon or require the return of the property by filing a
counterbond.… (Emphasis supplied.)
Same; Same; It must be stressed that from the moment an order of delivery in replevin is executed by taking possession
of the property specified therein, such property is in custodia legis.—It must be stressed that from the moment an order
of delivery in replevin is executed by taking possession of the property specified therein, such property is in custodia
legis. As legal custodian, it is Andres’ duty to safekeep the seized motor vehicles. Hence, when he passed his duty to
safeguard the motor vehicles to Silver, he committed a clear neglect of duty.
Same; Same; It must be stressed that as court custodian, it was Andres’ responsibility to ensure that the motor vehicles
were safely kept and that the same were readily available upon order of the court or demand of the parties
concerned.—It must be stressed that as court custodian, it was Andres’ responsibility to ensure that the motor vehicles
were safely kept and that the same were readily available upon order of the court or demand of the parties concerned.
Specifically, sheriffs, being ranking officers of the court and agents of the law, must discharge their duties with great care
and diligence. In serving and implementing court writs, as well as processes and orders of the court, they cannot afford
to err without affecting adversely the proper dispensation of justice. Sheriffs play an important role in the
administration of justice and as agents of the law, high standards of performance are expected of them. Hence, his
failure to return the motor vehicles at the time when its return was still feasible constitutes another instance of neglect
of duty.
Same; Same; The procedure for the execution of writs and other processes, enumerated.—Under Section 9, Rule 141 of
the Rules of
10
10
Hao vs. Andres
Court, the procedure for the execution of writs and other processes are: First, the sheriff must make an estimate of the
expenses to be incurred by him; Second, he must obtain court approval for such estimated expenses; Third, the
approved estimated expenses shall be deposited by the interested party with the Clerk of Court and ex officio sheriff;
Fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and Fifth, the executing sheriff shall
liquidate his expenses within the same period for rendering a return on the writ.
Same; Same; Words and Phrases; Gross negligence refers to negligence characterized by the want of even slight care,
acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with
a conscious indifference to consequences in so far as other persons may be affected.—In view of the foregoing, there is
no doubt that Andres failed to live up to the standards required of his position. The number of instances that Andres
strayed from the regular course observed in the proper implementation of the orders of the court cannot be
countenanced. Thus, taking into account the numerous times he was found negligent and careless of his duties coupled
with his utter disregard of legal procedures, he cannot be considered guilty merely of simple negligence. His acts
constitute gross negligence. As we have previously ruled: …Gross negligence refers to negligence characterized by the
want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but
willfully and intentionally, with a conscious indifference to consequences in so far as other persons may be affected. It is
the omission of that care which even inattentive and thoughtless men never fail to take on their own property.…
(Emphasis supplied.) …Gross neglect, on the other hand, is such neglect from the gravity of the case, or the frequency of
instances, becomes so serious in its character as to endanger or threaten the public welfare. The term does not
necessarily include willful neglect or intentional official wrongdoing. (Emphasis supplied.)
Same; Same; He is expected to live up to the exacting standards of his office and his conduct must at all times be
characterized by rectitude and forthrightness, and so above suspicion and mistrust as well.—Good faith on the part of
Andres, or lack of it, in proceeding to
11
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Hao vs. Andres
properly execute his mandate would be of no moment, for he is chargeable with the knowledge that being an officer of
the court tasked therefor, it behooves him to make due compliance. He is expected to live up to the exacting standards
of his office and his conduct must at all times be characterized by rectitude and forthrightness, and so above suspicion
and mistrust as well. Thus, an act of gross neglect resulting in loss of properties in custodia legis ruins the confidence
lodged by the parties to a suit or the citizenry in our judicial process. Those responsible for such act or omission cannot
escape the disciplinary power of this Court.
Same; Same; When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any instructions to the
contrary, to proceed with reasonable celerity and promptness to execute it according to its mandate.—When a writ is
placed in the hands of a sheriff, it is his duty, in the absence of any instructions to the contrary, to proceed with
reasonable celerity and promptness to execute it according to its mandate. However, the prompt implementation of an
order of seizure is called for only in instances where there is no question regarding the right of the plaintiff to the
property. Where there is such a question, the prudent recourse for Andres is to desist from executing the order and
convey the information to his judge and to the plaintiff. True, sheriffs must comply with their mandated ministerial duty
to implement writs promptly and expeditiously, but equally true is the principle that sheriffs by the nature of their
functions must at all times conduct themselves with propriety and decorum and act above suspicion. There must be no
room for anyone to conjecture that sheriffs and deputy sheriffs as officers of the court have conspired with any of the
parties to a case to obtain a favorable judgment or immediate execution. The sheriff is at the front line as representative
of the judiciary and by his act he may build or destroy the institution.
Same; Penalties; Following Sections 53 and 54, Rule IV of the Uniform Rules on Administrative Cases in the Civil Service,
we have to consider that Andres is a first-time offender; hence, a lighter penalty than dismissal from the service would
suffice.—We come to the matter of penalties. The imposable penalty for gross neglect of duty is dismissal. While the
penalty imposable for grave abuse of authority (oppression) is suspension for six (6) months one (1) day to one (1) year.
Section 55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil Service provides that if the respondent is
found
12
12
Hao vs. Andres
guilty of two or more charges or counts, the penalty to be imposed should be that corresponding to the most serious
charge or count and the rest shall be considered as aggravating circumstances. In the instant case, the penalty for the
more serious offense which is dismissal should be imposed on Andres. However, following Sections 53 and 54, Rule IV of
the Uniform Rules on Administrative Cases in the Civil Service, we have to consider that Andres is a first-time offender;
hence, a lighter penalty than dismissal from the service would suffice. Consequently, instead of imposing the penalty of
dismissal, the penalty of suspension from office for one (1) year without pay is proper for gross neglect of duty, and
another six (6) months should be added for the aggravating circumstance of grave abuse of authority (oppression).
ADMINISTRATIVE MATTER in the Supreme Court. Gross Neglect of Duty, Grave Abuse of Authority (Oppression) and
Violation of R.A. No. 3019.
The facts are stated in the resolution of the Court.
RESOLUTION
QUISUMBING, J.:
Before us is an administrative complaint for gross neglect of duty, grave abuse of authority (oppression) and violation of
Republic Act No. 30191 filed by complainant Kenneth Hao against respondent Abe C. Andres, Sheriff IV of the Regional
Trial Court (RTC) of Davao City, Branch 16.
The antecedent facts are as follows:
Complainant Hao is one of the defendants in a civil case for replevin docketed as Civil Case No. 31, 127-20052 entitled
“Zenaida Silver, doing trade and business under the name and style ZHS Commercial v. Loreto Hao, Atty. Amado Can-
_______________
1 Anti-Graft and Corrupt Practices Act, approved on August 17, 1960.
2 Also known as “Civil Case No. 31, 137-2005” in other parts of the Rollo.
13
VOL. 555, JUNE 18, 2008
13
Hao vs. Andres
tos, Kenneth Hao and John Does,” pending before the RTC of Davao City, Branch 16.
On October 17, 2005, Judge Renato A. Fuentes3 issued an Order of Seizure4 against 22 motor vehicles allegedly owned
by the complainant. On the strength of the said order, Andres was able to seize two of the subject motor vehicles on
October 17, 2005; four on October 18, 2005, and another three on October 19, 2005, or a total of nine motor vehicles.5
In his Affidavit-Complaint6 against Andres before the Office of the Court Administrator (OCA), Hao alleged that Andres
gave undue advantage to Zenaida Silver in the implementation of the order and that Andres seized the nine motor
vehicles in an oppressive manner. Hao also averred that Andres was accompanied by unidentified armed personnel on
board a military vehicle which was excessive since there were no resistance from them. Hao also discovered that the
compound where the seized motor vehicles were placed is actually owned by Silver.7
On October 21, 2005, in view of the approval of the complainant’s counter-replevin bond, Judge Emmanuel C. Carpio8
ordered Andres to immediately cease and desist from further implementing the order of seizure, and to return the
seized motor vehicles including its accessories to their lawful owners.9
However, on October 24, 2005, eight of the nine seized motor vehicles were reported missing. In his report,10 Andres
_______________
3 Then pairing judge of Branch 16, who became the executive judge of RTC-Davao City.
4 Rollo, pp. 157-158.
5 Id., at pp. 159-167.
6 Id., at pp. 95-96.
7 Id., at p. 124.
8 Presiding Judge of Branch 16, RTC-Davao City at the time of the issuance of the Order.
9 Rollo, p. 102; Order erroneously dated October 21, 2004.
10 Id., at pp. 53-56.
14
14
Hao vs. Andres

stated that he was shocked to find that the motor vehicles were already missing when he inspected it on October 22,
2005. He narrated that on October 21, 2005, PO3 Rodrigo Despe, one of the policemen guarding the subject motor
vehicles, reported to him that a certain “Nonoy” entered the compound and caused the duplication of the vehicles’
keys.11 But Andres claimed the motor vehicles were still intact when he inspected it on October 21, 2005.
Subsequently, Hao reported that three of the carnapped vehicles were recovered by the police.12 He then accused
Andres of conspiring and conniving with Atty. Oswaldo Macadangdang (Silver’s counsel) and the policemen in the
carnapping of the motor vehicles. Hao also accused Andres of concealing the depository receipts from them and pointed
out that the depository receipts show that Silver and Atty. Ma-cadangdang were the ones who chose the policemen who
will guard the motor vehicles.
In his Comment13 dated March 3, 2006, Andres vehemently denied violating Rep. Act No. 3019 and committing gross
neglect of duty.
Andres denied implementing the Order of Seizure in an oppressive manner. He said he took the vehicles because they
were the specific vehicles ordered to be seized after checking their engine and chassis numbers. Andres likewise denied
that he was accompanied by military personnel in the implementation of the order. He claimed that he was merely
escorted by policemen pursuant to the directive of Police Senior Supt. Catalino S. Cuy, Chief of the Davao City Police
Office. Andres also maintained that no form of harassment or oppression was committed during the implementation of
the order, claiming that the presence of the policemen was only for the purpose of preserving peace and order,
considering
_______________
11 Id., at p. 342.
12 Id., at pp. 2-8.
13 Id., at pp. 145-156.
15
VOL. 555, JUNE 18, 2008
15
Hao vs. Andres
there were 22 motor vehicles specified in the Order of Seizure. Andres added that he exercised no discretion in the
selection of the policemen who assisted in the implementation of the order, much less of those who will guard the
seized motor vehicles.
Andres disputed the allegation that he neglected his duty to safeguard the seized vehicles by pointing out that he placed
all the motor vehicles under police watch. He added that the policemen had control of the compound where the seized
motor vehicles were kept.
Andres likewise contended that after the unauthorized duplication of the vehicles’ keys was reported to him, he
immediately advised the policemen on duty to watch the motor vehicles closely.14 He negated the speculations that he
was involved in the disappearance of the seized motor vehicles as he claims to be the one who reported the incident to
the court and the police.
As to the allegation of undisclosed depository receipts, Andres maintained that he never denied the existence of the
depository receipts. He said the existence of the depository receipts was immediately made known on the same day that
the subject motor vehicles were discovered missing. He even used the same in the filing of the carnapping case against
Silver and her co-conspirators.
Finally, Andres insisted that the guarding of properties under custodia legis by policemen is not prohibited, but is even
adopted by the court. Hence, he prays that he be held not liable for the loss of the vehicles and that he be relieved of his
duty to return the vehicles.15
After the OCA recommended that the matter be investigated, we referred the case to Executive Judge Renato A. Fuentes
for investigation, report and recommendation.16
_______________
14 Id., at p. 342.
15 Id., at pp. 121-122.
16 Id., at pp. 305-306.
16
16
Hao vs. Andres
In his Investigation Report17 dated September 21, 2006, Judge Fuentes found Andres guilty of serious negligence in the
custody of the nine motor vehicles. He recommended that Andres be suspended from office.
Judge Fuentes found numerous irregularities in the implementation of the writ of replevin/order of seizure, to wit: (1) at
the time of the implementation of the writ, Andres knew that the vehicles to be seized were not in the names of any of
the parties to the case; (2) one vehicle was taken without the knowledge of its owner, a certain Junard Escudero; (3)
Andres allowed Atty. Macadangdang to get a keymaster to duplicate the vehicles’ keys in order to take one motor
vehicle; and (4) Andres admitted that prior to the implementation of the writ of seizure, he consulted Silver and Atty.
Macadangdang regarding the implementation of the writ and was accompanied by the latter in the course of the
implementation. Judge Fuentes observed that the motor vehicles were speedily seized without strictly observing
fairness and regularity in its implementation.18
Anent the safekeeping of the seized motor vehicles, Judge Fuentes pointed out several instances where Andres lacked
due diligence to wit: (1) the seized motor vehicles were placed in a compound surrounded by an insufficiently locked
see-through fence; (2) three motor vehicles were left outside the compound; (3) Andres turned over the key of the gate
to the policemen guarding the motor vehicles; (4) Andres does not even know the full name of the owner of the
compound, who was merely known to him as “Gloria”; (5) except for PO3 Despe and SPO4 Nelson Salcedo, the identities
of the other policemen tapped to guard the compound were unknown to Andres; (6) Andres also admitted that he only
stayed at least one hour each day from October 19-21, 2005 during his visits to the compound; and (7) even after it was
reported to him
_______________
17 Id., at pp. 545-563.
18 Id., at p. 559.
17
VOL. 555, JUNE 18, 2008

17
Hao vs. Andres
that a certain “Nonoy” entered the compound and duplicated the keys of the motor vehicles, he did not exert his best
effort to look for that “Nonoy” and to confiscate the duplicated keys.19
Judge Fuentes also observed that Andres appeared to be more or less accommodating to Silver and her counsel but
hostile and uncooperative to the complainant. He pointed out that Andres depended solely on Silver in the selection of
the policemen who would guard the seized motor vehicles. He added that even the depository receipts were not turned
over to the defendants/third-party claimants in the replevin case but were in fact concealed from them. Andres also
gave inconsistent testimonies as to whether he has in his possession the depository receipts.20
The OCA disagreed with the observations of Judge Fuentes. It recommended that Andres be held liable only for simple
neglect of duty and be suspended for one (1) month and one (1) day.21
We adopt the recommendation of the investigating judge.
Being an officer of the court, Andres must be aware that there are well-defined steps provided in the Rules of Court
regarding the proper implementation of a writ of replevin and/or an order of seizure. The Rules, likewise, is explicit on
the duty of the sheriff in its implementation. To recapitulate what should be common knowledge to sheriffs, the
pertinent provisions of Rule 60, of the Rules of Court are quoted hereunder:
“SEC. 4. Duty of the sheriff.—Upon receiving such order, the sheriff must serve a copy thereof on the adverse party,
together with a copy of the application, affidavit and bond, and must forthwith take the property, if it be in the
possession of the adverse party, or his agent, and retain it in his custody. If the property
_______________
19 Id., at pp. 559-560.
20 Id., at pp. 560-561.
21 Id., at pp. 603-613.

18
18
Hao vs. Andres
or any part thereof be concealed in a building or enclosure, the sheriff must demand its delivery, and if it be not
delivered, he must cause the building or enclosure to be broken open and take the property into his possession. After
the sheriff has taken possession of the property as herein provided, he must keep it in a secure place and shall be
responsible for its delivery to the party entitled thereto upon receiving his fees and necessary expenses for taking and
keeping the same. (Emphasis supplied.)
SEC. 6. Disposition of property by sheriff.—If within five (5) days after the taking of the property by the sheriff, the
adverse party does not object to the sufficiency of the bond, or of the surety or sureties thereon; or if the adverse party
so objects and the court affirms its approval of the applicant’s bond or approves a new bond, or if the adverse party
requires the return of the property but his bond is objected to and found insufficient and he does not forthwith file an
approved bond, the property shall be delivered to the applicant. If for any reason the property is not delivered to the
applicant, the sheriff must return it to the adverse party.” (Emphasis supplied.)
First, the rules provide that property seized under a writ of replevin is not to be delivered immediately to the plaintiff.22
In accordance with the said rules, Andres should have waited no less than five days in order to give the complainant an
opportunity to object to the sufficiency of the bond or of the surety or sureties thereon, or require the return of the
seized motor vehicles by filing a counter-bond. This, he failed to do.
Records show that Andres took possession of two of the subject motor vehicles on October 17, 2005, four on October
18, 2005, and another three on October 19, 2005. Simultaneously, as evidenced by the depository receipts, on October
18, 2005, Silver received from Andres six of the seized motor vehicles, and three more motor vehicles on October 19,
2005. Consequently, there is no question that Silver was already in
_______________
22 Spouses Normandy and Ruth Bautista v. Ernesto L. Sula, Sheriff IV, Regional Trial Court, Branch 98, Quezon City, A.M.
No. P-04-1920, August 17, 2007, 530 SCRA 406, 422.
19
VOL. 555, JUNE 18, 2008
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Hao vs. Andres
possession of the nine seized vehicles immediately after seizure, or no more than three days after the taking of the
vehicles. Thus, Andres committed a clear violation of Section 6, Rule 60 of the Rules of Court with regard to the proper
disposal of the property.
It matters not that Silver was in possession of the seized vehicles merely for safekeeping as stated in the depository
receipts. The rule is clear that the property seized should not be immediately delivered to the plaintiff, and the sheriff
must retain custody of the seized property for at least five days.23 Hence, the act of Andres in delivering the seized
vehicles immediately after seizure to Silver for whatever purpose, without observing the five-day requirement finds no
legal justification.
In Pardo v. Velasco,24 this Court held that
“…Respondent as an officer of the Court is charged with certain ministerial duties which must be performed faithfully to
the letter. Every provision in the Revised Rules of Court has a specific reason or objective. In this case, the purpose of the
five (5) days is to give a chance to the defendant to object to the sufficiency of the bond or the surety or sureties
thereon or require the return of the property by filing a counterbond.…25 (Emphasis supplied.)
In Sebastian v. Valino,26 this Court reiterated that
“Under the Revised Rules of Court, the property seized under a writ of replevin is not to be delivered immediately to the
plaintiff. The sheriff must retain it in his custody for five days and he shall return it to the defendant, if the latter, as in
the
_______________
23 Rules of Court, Rule 60, Secs. 4 and 6.

24 Adm. Matter Nos. P-90-408 & P-90-453, August 7, 1992, 212 SCRA 323.
25 Id., at pp. 328-329.
26 A.M. No. P-91-549, July 5, 1993, 224 SCRA 256.
20
20
Hao vs. Andres
instant case, requires its return and files a counterbond.…”27 (Emphasis supplied.)
Likewise, Andres’ claim that he had no knowledge that the compound is owned by Silver fails to convince us. Regardless
of who actually owns the compound, the fact remains that Andres delivered the vehicles to Silver prematurely. It
violates the rule requiring him to safekeep the vehicles in his custody.28 The alleged lack of facility to store the seized
vehicles is unacceptable considering that he should have deposited the same in a bonded warehouse. If this was not
feasible, he should have sought prior authorization from the court issuing the writ before delivering the vehicles to
Silver.
Second, it must be stressed that from the moment an order of delivery in replevin is executed by taking possession of
the property specified therein, such property is in custodia legis. As legal custodian, it is Andres’ duty to safekeep the
seized motor vehicles. Hence, when he passed his duty to safeguard the motor vehicles to Silver, he committed a clear
neglect of duty.
Third, we are appalled that even after PO3 Despe reported the unauthorized duplication of the vehicles’ keys, Andres
failed to take extra precautionary measures to ensure the safety of the vehicles. It is obvious that the vehicles were put
at risk by the unauthorized duplication of the keys of the vehicles. Neither did he immediately report the incident to the
police or to the court. The loss of the motor vehicles could have been prevented if Andres immediately asked the court
for an order to transfer the vehicles to another secured place as soon as he discovered the unauthorized duplication.
Under these circumstances, even an ordinary prudent man would have exercised extra diligence. His warning to the
policemen to closely watch the vehicles was insufficient. Andres cannot toss back to Silver or to the policemen the
responsibility for
_______________
27 Id., at p. 259.
28 Rules of Court, Rule 60, Sec. 4.
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VOL. 555, JUNE 18, 2008
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Hao vs. Andres
the loss of the motor vehicles since he remains chiefly responsible for their safekeeping as legal custodian thereof.
Indeed, Andres’ failure to take the necessary precaution and proper monitoring of the vehicles to ensure its safety
constitutes plain negligence.
Fourth, despite the cease and desist order, Andres failed to return the motor vehicles to their lawful owners. Instead of
returning the motor vehicles immediately as directed, he opted to write Silver and demand that she put up an indemnity
bond to secure the third-party claims. Consequently, due to his delay, the eventual loss of the motor vehicles rendered
the order to return the seized vehicles ineffectual to the prejudice of the complaining owners.
It must be stressed that as court custodian, it was Andres’ responsibility to ensure that the motor vehicles were safely
kept and that the same were readily available upon order of the court or demand of the parties concerned. Specifically,
sheriffs, being ranking officers of the court and agents of the law, must discharge their duties with great care and
diligence. In serving and implementing court writs, as well as processes and orders of the court, they cannot afford to err
without affecting adversely the proper dispensation of justice. Sheriffs play an important role in the administration of
justice and as agents of the law, high standards of performance are expected of them.29 Hence, his failure to return the
motor vehicles at the time when its return was still feasible constitutes another instance of neglect of duty.
Fifth, as found by the OCA, we agree that Andres also disregarded the provisions of Rule 14130 of the Rules of Court
with regard to payment of expenses.
_______________
29 Chupungco v. Cabusao, Jr., A.M. No. P-03-1758, December 10, 2003, 417 SCRA 365, 369.
30 As amended by A.M. No. 04-2-04-SC, took effect on August 16, 2004.
22
22
Hao vs. Andres
Under Section 9,31 Rule 141 of the Rules of Court, the procedure for the execution of writs and other processes are:
First, the sheriff must make an estimate of the expenses to be incurred by him; Second, he must obtain court approval
for such estimated expenses; Third, the approved estimated expenses shall be deposited by the interested party with
the Clerk of Court and ex officio sheriff; Fourth, the Clerk of Court shall disburse the amount to the executing sheriff; and
Fifth, the executing sheriff shall liquidate his expenses within the same period for rendering a return on the writ.
In this case, no estimate of sheriff’s expenses was submitted to the court by Andres. Without approval of the court, he
also allowed Silver to pay directly to the policemen the expenses for the safeguarding of the motor vehicles including
their meals.32 Obviously, this practice departed from the accepted procedure provided in the Rules of Court.
In view of the foregoing, there is no doubt that Andres failed to live up to the standards required of his position. The
number of instances that Andres strayed from the regular
_______________
31 SEC. 9. Sheriffs and other persons serving processes.—
xxxx
In addition to the fees hereinabove fixed, the party requesting the process of any court, preliminary, incidental, or final,
shall pay the sheriff’s expenses in serving or executing the process, or safeguarding the property, levied upon, attached
or seized, including kilometrage for each kilometer of travel, guards’ fees, warehousing and similar charges, in an
amount estimated by the sheriff, subject to the approval of the court. Upon approval of said estimated expenses, the
interested party shall deposit such amount with the clerk of court and ex officio sheriff, who shall disburse the same to
the deputy sheriff assigned to effect the process, subject to liquidation within the same period for rendering a return on
the process. Any unspent amount shall be refunded to the party making the deposit. A full report shall be submitted by
the deputy sheriff assigned with his return, and the sheriff’s expenses shall be taxed as costs against the judgment
debtor.
32 Rollo, pp. 334-335.
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Hao vs. Andres
course observed in the proper implementation of the orders of the court cannot be countenanced. Thus, taking into
account the numerous times he was found negligent and careless of his duties coupled with his utter disregard of legal
procedures, he cannot be considered guilty merely of simple negligence. His acts constitute gross negligence.
As we have previously ruled:
“. . .Gross negligence refers to negligence characterized by the want of even slight care, acting or omitting to act in a
situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to
consequences in so far as other persons may be affected. It is the omission of that care which even inattentive and
thoughtless men never fail to take on their own property.…33 (Emphasis supplied.)
. . .Gross neglect, on the other hand, is such neglect from the gravity of the case, or the frequency of instances, becomes
so serious in its character as to endanger or threaten the public welfare. The term does not necessarily include willful
neglect or intentional official wrongdoing.”34 (Emphasis supplied.)
Good faith on the part of Andres, or lack of it, in proceeding to properly execute his mandate would be of no moment,
for he is chargeable with the knowledge that being an officer of the court tasked therefor, it behooves him to make due
compliance. He is expected to live up to the exacting standards of his office and his conduct must at all times be
characterized by rectitude and forthrightness, and so above suspicion and mistrust as well.35 Thus, an act of gross
neglect resulting in loss of properties in custodia legis ruins the confidence lodged
_______________
33 Brucal v. Desierto, G.R. No. 152188, July 8, 2005, 463 SCRA 151, 166.
34 Report on the Alleged Spurious Bailbonds and Release Orders Issued by the RTC, Br. 27, Sta. Cruz, Laguna, A.M. No.
04-6-332-RTC, April 5, 2006, 486 SCRA 500, 518.
35 Chupungco v. Cabusao, Jr., supra note 29.
24
24
Hao vs. Andres
by the parties to a suit or the citizenry in our judicial process. Those responsible for such act or omission cannot escape
the disciplinary power of this Court.
Anent the allegation of grave abuse of authority (oppression), we likewise agree with the observations of the
investigating judge. Records show that Andres started enforcing the writ of replevin/order of seizure on the same day
that the order of seizure was issued. He also admitted that he took the vehicles of persons who are not parties to the
replevin case.36 He further admitted that he took one vehicle belonging to a certain Junard Escudero without the
latter’s knowledge and even caused the duplication of its keys in order that it may be taken by Andres.37 Certainly,
these are indications that Andres enforced the order of seizure with undue haste and without giving the complainant
prior notice or reasonable time to deliver the motor vehicles. Hence, Andres is guilty of grave abuse of authority
(oppression).
When a writ is placed in the hands of a sheriff, it is his duty, in the absence of any instructions to the contrary, to
proceed with reasonable celerity and promptness to execute it according to its mandate. However, the prompt
implementation of an order of seizure is called for only in instances where there is no question regarding the right of the
plaintiff to the property.38 Where there is such a question, the prudent recourse for Andres is to desist from executing
the order and convey the information to his judge and to the plaintiff.
True, sheriffs must comply with their mandated ministerial duty to implement writs promptly and expeditiously, but
equally true is the principle that sheriffs by the nature of their functions must at all times conduct themselves with
propriety and decorum and act above suspicion. There must
_______________
36 Rollo, pp. 319-320, 326-327.
37 Id., at pp. 327-328.
38 Mamanteo v. Magumun, A.M. No. P-98-1264, July 28, 1999, 311 SCRA 259, 265.
25
VOL. 555, JUNE 18, 2008
25
Hao vs. Andres
be no room for anyone to conjecture that sheriffs and deputy sheriffs as officers of the court have conspired with any of
the parties to a case to obtain a favorable judgment or immediate execution. The sheriff is at the front line as
representative of the judiciary and by his act he may build or destroy the institution.39
However, as to the charge of graft and corruption, it must be stressed that the same is criminal in nature, thus, the
resolution thereof cannot be threshed out in the instant administrative proceeding. We also take note that there is a
pending criminal case for carnapping against Andres;40 hence, with more reason that we cannot rule on the allegation
of graft and corruption as it may preempt the court in its resolution of the said case.
We come to the matter of penalties. The imposable penalty for gross neglect of duty is dismissal. While the penalty
imposable for grave abuse of authority (oppression) is suspension for six (6) months one (1) day to one (1) year.41
Section 55, Rule IV, of the Uniform Rules on Administrative Cases in the Civil Service provides that if the respondent is
found guilty of
_______________
39 Id., at p. 266.
40 Rollo, pp. 648-663.
41 Civil Service Commission Resolution No. 991936 (1999) also known as the Uniform Rules on Administrative Cases in
the Civil Service, Rule IV, Section 52.
RULE IV — PENALTIES
Section 52. Classification of Offenses.—Administrative offenses with corresponding penalties are classified into grave,
less grave or light, depending on their gravity or depravity and effects on the government service.
xxxx
2. Gross Neglect of Dut
1st offense – Dismissal
xxxx
14. Oppression
1st offense – Suspension (6 mos. 1 day to 1 year)
xxxx
26
26
Hao vs. Andres
two or more charges or counts, the penalty to be imposed should be that corresponding to the most serious charge or
count and the rest shall be considered as aggravating circumstances.
In the instant case, the penalty for the more serious offense which is dismissal should be imposed on Andres. However,
following Sections 5342 and 54,43 Rule IV of the Uniform Rules on Administrative Cases in the Civil Service, we have to
consider that Andres is a first-time offender; hence, a lighter penalty than dismissal from the service would suffice.
Consequently, instead of imposing the penalty of dismissal, the penalty of suspension from office for one (1) year
without pay is proper for gross neglect of duty, and another six (6) months should be added for the aggravating
circumstance of grave abuse of authority (oppression).
_______________
42 Section 53. Extenuating, Mitigating, Aggravating, or Alternative Circumstances.—In the determination of the
penalties to be imposed, mitigating, aggravating and alternative circumstances attendant to the commission of the
offense shall be considered.
xxxx
43 Section 54. Manner of Imposition.—When applicable, the imposition of the penalty may be made in accordance
with the manner provided herein below:
a. The minimum of the penalty shall be imposed where only mitigating and no aggravating circumstances are present.
b. The medium of the penalty shall be imposed where no mitigating and aggravating circumstances are present.
c. The maximum of the penalty shall be imposed where only aggravating and no mitigating circumstances are present.
d. Where aggravating and mitigating circumstances are present, paragraph [a] shall be applied where there are more
mitigating circumstances present; paragraph [b] shall be applied when the circumstances equally offset each other; and
paragraph [c] shall be applied when there are more aggravating circumstances. (Emphasis supplied.)
27
VOL. 555, JUNE 18, 2008
27
Hao vs. Andres
WHEREFORE, the Court finds Abe C. Andres, Sheriff IV, RTC of Davao City, Branch 16, GUILTY of gross neglect of duty and
grave abuse of authority (oppression) and is SUSPENDED for one (1) year and six (6) months without pay. He is also
hereby WARNED that a repetition of the same or similar offenses in the future shall be dealt with more severely.
SO ORDERED. Hao vs. Andres, 555 SCRA 8, A.M. No. P-07-2384 June 18, 2008
CASES REPORTED
____________________
G.R. No. 153788. November 27, 2009.*
ROGER V. NAVARRO, petitioner, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and
KAREN T. GO, doing business under the name KARGO ENTERPRISES, respondents.
Civil Procedure; Parties; The 1977 Rules of Civil Procedure requires that every action must be prosecuted or defended in
the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit,
or the party entitled to the avails of the suit.—The 1977 Rules of Civil Procedure requires that every action must be
prosecuted or defended in the
_______________
* SECOND DIVISION.
2
Navarro vs. Escobido
name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or
the party entitled to the avails of the suit.
Civil Law; Conjugal Properties; Registration of the trade name in the name of one person—a woman—does not
necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when the woman is
married; By law, all property acquired during the marriage, whether the acquisition appears to have been made,
contracted or registered in one or both spouses, is presumed to be conjugal unless the contrary is proved.—The
registration of the trade name in the name of one person—a woman—does not necessarily lead to the conclusion that
the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired during
the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both
spouses, is presumed to be conjugal unless the contrary is proved.
Same; Same; The conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict
with what is expressly determined in this chapter or by spouses in their marriage settlement. In other words, the
property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of
the Family Code and, suppletorily, by the spouses’ marriage settlement and by the rules on partnership under the Civil
Code.—Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their
marriage settlements. In other words, the property relations of the husband and wife shall be governed primarily by
Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses’ marriage settlement
and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between
the spouses Go, we look at the Civil Code provision on partnership for guidance.3
VOL. 606, NOVEMBER 27, 2009
Same; Partnership; In this connection, Article 1811 of the Civil Code provides that “[a] partner is a co-owner with the
other partners of specific partnership property.” Taken with the presumption of the conjugal nature of the funds used to
finance the four checks used to pay for the petitioners’ stocks subscription, and with the presumption that the credits
themselves are part of the conjugal funds.—In this connection, Article 1811 of the Civil Code provides that “[a] partner is
a co-owner with the other partners of specific partnership property.” Taken with the presumption of the conjugal nature
of the funds used to finance the four checks used to pay for petitioners’ stock subscriptions, and with the presumption
that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners
of the alleged credit.
Same; Same; Only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable partners. They are not even
necessary parties, for a complete relief can be accorded in a suit even without their participation, since the suit is
presumed to have been filed for the benefit of all co-owners.—In sum, in suits to recover properties, all co-owners are
real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them
may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners,
namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto.
The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be
accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all
co-owners.
Civil Law; Property; Replevin; We see nothing in these provisions which requires the applicant to make a prior demand
on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition
precedent to an action for a writ of replevin.—We see nothing in these provisions which requires the applicant to make
a prior demand on the
possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition
precedent to an action for a writ of replevin.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Primitivo S. Bella, Jr. for petitioner.

Lagamon, Barba, Lupeba & Associates for private respondent.
BRION, J.:
This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2 dated October 16,
2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 20004 and
March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner
Roger V. Navarro’s (Navarro) motion to dismiss.
Background Facts
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first
_______________
1 Under Rule 45 of the 1997 Revised Rules of Civil Procedure; Rollo, pp. 11-46.
2 Penned by Associate Justice Eliezer R. De Los Santos, with the concurrence of Associate Justice Godardo A. Jacinto and
Associate Justice Bernardo P. Abesamis (all retired); Id., at pp. 48-53.
3 Id., at p. 55.
4 Id., at pp. 105-107.
5 Id., at pp. 108-109.
5
complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against
Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor
vehicles in Navarro’s possession.
The first complaint stated:
“1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and
doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of
the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant
ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may
be served with summons and other processes of the Honorable Court; that defendant “JOHN DOE” whose real name
and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose
possession and custody the personal property subject matter of this suit may be found if the same is not in the
possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling
trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said
defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows—
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
_______________
6 Id., at pp. 129-140.
7 Id., at pp. 143-154.

6
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES,
then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in
accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER
NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE
HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that
when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS—CAGAYAN DE ORO BRANCH CHECKS NOS.
017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or
credit, the same were dishonored and/or returned by the drawee bank for the common reason that the current deposit
account against which the said checks were issued did not have sufficient funds to cover the amounts thereof; that the
total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on
the basis of the provisions of the above LEASE AGREEMENT WITH RIGHT TO PURCHASE; that demands, written and oral,
were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED
SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE
AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of
herein plaintiff; xxx
4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law,
or seized under an execution or an attachment as against herein plaintiff;
xxx7

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the
above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits
and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal
property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the
order for replevin prayed for may be found out to having not been properly issued.”
The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement
with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount of P100,000.00,
to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment.8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff
seized the two vehicles and delivered them to the possession of Karen Go.
In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no
_______________
8 Philippine Bank of Communications—Cagayan de Oro Branch Check No. 017020 dated January 1, 1998.
9 Rollo, p. 155.
10 Id., at p. 156.
8
8
cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease
agreements)—the actionable documents on which the complaints were based.
On Navarro’s motion, both cases were duly consolidated on December 13, 1999.
In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26, 2000,11 the RTC issued another order dated
July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Go’s leasing business is a
conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against
Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on
Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the
inclusion of Glenn Go as co-plaintiff.
When the RTC denied Navarro’s motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with
the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of
the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to
Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by
mere amendment or supplemental pleading.
_______________
11 Id., at pp. 179-181.
12 Section 4. Spouses as parties.—Husband and wife shall sue or be sued jointly, except as provided by law.
9
On October 16, 2001, the CA denied Navarro’s petition and affirmed the RTC’s order.13 The CA also denied Navarro’s
motion for reconsideration in its resolution of May 29, 2002,14 leading to the filing of the present petition.
The Petition
Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the
requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen
Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a
cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-
plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot
be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower
court created a cause of action for Karen Go when there was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the
complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed
that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner
of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred
when it ordered the inclusion of Glenn Go as a co-plaintiff.
_______________
13 Supra note 2.
14 Supra note 3.
10
10
Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to
amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were
premature because no prior demand was made on him to comply with the provisions of the lease agreements before
the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were
illegally seized from his possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject
of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo
Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go
maintains that Navarro’s insistence that Kargo Enterprises is Karen Go’s paraphernal property is without basis. Based on
the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property.
Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the
RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue
jointly, and was not meant to cure the complaints’ lack of cause of action.
The Court’s Ruling
We find the petition devoid of merit.11
11

Karen Go is the real party-in-interest
The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real
party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled
to the avails of the suit.15
Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he
still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were
in Kargo Enterprises’ name, this was merely a trade name without a juridical personality, so the actual parties to the
lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of
Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.
We do not find Navarro’s arguments persuasive.
The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name
appears in the title of the Complaint where the plaintiff was identified as “KAREN T. GO doing business under the name
KARGO ENTERPRISES,” and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined
the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant “leased
from plaintiff a certain motor vehicle” that was thereafter described. Significantly, the Complaint specifies and attaches
as its integral
_______________
15 Rules of Court, Rule 3, Sec. 2.
12
12

part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name
KARGO ENTERPRISES entered the picture as this Lease Agreement provides:
“This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER;
representing KARGO ENTERPRISES as its Manager,
xxx”
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the
express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and
the latter is clearly the real party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a
juridical person, as defined by Article 44 of the Civil Code:
“Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins
as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each shareholder, partner or member.”
13
13
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil action. This legal
reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo
Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza,17 where we said:
“Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes
the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and
requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to
the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to
file or defend an action in court.
Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The
allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the
business conducted under the name and style Juasing Hardware. The descriptive words “doing business as Juasing
Hardware” may be added to the title of the case, as is customarily done.”18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:
“SEC. 2. Parties in interest.—A real party in interest is the party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the
_______________
16 Sec. 1. Who may be parties.—Only natural or juridical persons or entities authorized by law may be parties in a civil
action.
17 201 Phil. 369, 372-373; 115 SCRA 783, 786 (1982).
18 Id., at pp. 372-373; pp. 786-787.
14
14
suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of
the real party in interest.”
As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a
judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real party-in-interest, and it is legally
incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease
Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease
Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as
this is a matter for the trial court to consider in a trial on the merits.
Glenn Go’s Role in the Case
We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go,19 who described herself in
the Complaints to be “a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing
business under the trade name KARGO ENTERPRISES.”20 That Glenn Go and Karen Go are married to each other is a fact
never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married
woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal
properties. To restate the parties’ positions, Navarro alleges that Kargo Enterprises is Karen
_______________
19 Rollo, p. 185.
20 Id., at pp. 129 and 143.
15

15
Go’s paraphernal property, emphasizing the fact that the business is registered solely in Karen Go’s name. On the other
hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property.
The registration of the trade name in the name of one person—a woman—does not necessarily lead to the conclusion
that the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired
during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one
or both spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the records of the case
does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only
the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat:22
“Petitioners also overlook Article 160 of the New Civil Code. It provides that “all property of the marriage is presumed to
be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife.” This article does
not require proof that the property was acquired with funds of the partnership. The presumption applies even when the
manner in which the property was acquired does not appear.”23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is
conjugal or paraphernal property, we hold that it is conjugal property.
Article 124 of the Family Code, on the administration of the conjugal property, provides:
_______________
21 Family Code, Article 116; Civil Code, Article 160.
22 445 Phil. 284, 293; 397 SCRA 271, 280 (2003).
23 Id., at p. 293; p. 280.
16
16
“Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly.
In case of disagreement, the husband’s decision shall prevail, subject to recourse to the court by the wife for proper
remedy, which must be availed of within five years from the date of the contract implementing such decision.
xxx”
This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal
property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing
an act of administration or any act that does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in
all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage
settlements. In other words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on
Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses’ marriage settlement and by the rules
on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go,
we look at the Civil Code provision on partnership for guidance.
A rule on partnership applicable to the spouses’ circumstances is Article 1811 of the Civil Code, which states:
“Art. 1811. A partner is a co-owner with the other partners of specific partnership property.
The incidents of this co-ownership are such that:
(1)“A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with
his partners to possess specific
17
17
partnership property for partnership purposes; xxx”
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered
under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil
Code, which states that “in default of contracts, or special provisions, co-ownership shall be governed by the provisions
of this Title,” we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action
in ejectment with respect to the co-owned property.”
While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the
circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman.24 In this case, one spouse
filed an action for the recovery of credit, a personal property considered conjugal property, without including the other
spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in
the action for the recovery of the credit, we said:
“Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang,
seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If
she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the
complaint pursuant to Section 9, Rule 3.”
Article 108 of the Family Code provides:
_______________
24 G.R. No. 160347, November 29, 2006, 508 SCRA 469.
18
18
“Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.”
This provision is practically the same as the Civil Code provision it superseded:
“Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in
conflict with what is expressly determined in this Chapter.”
“In this connection, Article 1811 of the Civil Code provides that “[a] partner is a co-owner with the other partners of
specific partnership property.” Taken with the presumption of the conjugal nature of the funds used to finance the four
checks used to pay for petitioners’ stock subscriptions, and with the presumption that the credits themselves are part of
conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery
thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-
owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners
as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in
that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-
owners may bring an action for ejectment, covers all kinds of action for the recovery of possession.
In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the
Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-
owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the
co-owned
19
19

property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even
necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is
presumed to have been filed for the benefit of all co-owners.”25[Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo
Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code,
supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do
not dispose of or encumber the property in question without the other spouse’s consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the
leased vehicles, he only needs to be impleaded as a pro forma party to the suit, based on Section 4, Rule 4 of the Rules,
which states:
“Section 4. Spouses as parties.—Husband and wife shall sue or be sued jointly, except as provided by law.”
Non-joinder of indispensable parties
not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases26 that the
misjoinder or non-joinder of indispensable parties in a
_______________
25 Id., at pp. 486-488.
26 Domingo v. Scheer, 466 Phil. 235; 421 SCRA 468 (2004); Vesagas, et al. v. Court of Appeals, et al., 422 Phil. 860; 371
SCRA 508 (2001); Salvador, et al. v. Court of Appeals, et al., 313 Phil. 36; 243 SCRA 239 (1995); Cuyugan v. Dizon, 79 Phil.
80 (1947); Alonso v. Villamor, 16 Phil. 315 (1910).
20
20
complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag:27
“Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the
dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties.—Neither misjoinder nor non-joinder of parties is ground for dismissal
of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at
any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and
proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable
party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of
the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable
parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order
of the court, the complaint may be dismissed upon motion of the defendant or upon the court’s own motion. Only upon
unjustified failure or refusal to obey the order to include or to amend is the action dismissed.”
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully
in order.
Demand not required prior
to filing of replevin action
In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a
replevin action to an unlawful detainer.
_______________
27 G.R. No. 161237, January 14, 2009, 576 SCRA 70.
21
21
For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule
60 of the Rules, which states:
“Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other person who personally knows the facts:
(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession
thereof;
(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to
the best of his knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a
writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt
from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the
affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the
payment to the adverse party of such sum as he may recover from the applicant in the action.”
We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the
property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action
for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has al-
22
22
ready admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his
unpaid obligations or return the leased motor vehicles. Navarro’s position that a demand is necessary and has not been
made is therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V.
Navarro.
SO ORDERED. Navarro vs. Escobido, 606 SCRA 1, G.R. No. 153788 November 27, 2009
G.R. No. 182963. June 3, 2013.*
SPOUSES DEO AGNER and MARICON AGNER, petitioners, vs. BPI FAMILY SAVINGS BANK, INC., respondent.
Remedial Law; Civil Procedure; Appeals; An issue is factual when the doubt or difference arises as to the truth or
falsehood of alleged facts, or when the query invites calibration of the whole evidence, considering mainly the credibility
of witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other and to the
whole, and the probabilities of the situation.—With respect to the first issue, it would be sufficient to state that the
matter surrounding the Deed of Assignment had already been considered by the trial court and the CA. Likewise, it is an
issue of fact that is not a proper subject of a petition for review under Rule 45. An issue is factual when the doubt or
difference arises as to the truth or falsehood of alleged facts, or when the query invites calibration of the whole
evidence, considering mainly the credibility of witnesses, existence and relevancy of specific surrounding circumstances,
their relation to each other and to the whole, and the probabilities of the situation. Time and again, We stress that this
Court is not a trier of facts and generally does not weigh anew evidence which lower courts have passed upon.
Same; Provisional Remedies; Replevin; Prior demand is not a condition precedent to an action for a writ of replevin,
since there is nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make a demand on the
possessor of the property before an action for a writ of replevin could be filed.—A provision on waiver of notice or
demand has been recognized as legal and valid in Bank of the Philippine Islands v. Court of Appeals, 490 SCRA 168
(2006), wherein We held: The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time
the obligor demands the fulfillment of the obligation from the obligee. However, the law expressly provides that
demand is not necessary under certain circumstances, and one of these circumstances is when the parties expressly
waive demand. Hence, since the co-signors expressly waived
_______________
* THIRD DIVISION.
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90
Agner vs. BPI Family Savings Bank, Inc.

demand in the promissory notes, demand was unnecessary for them to be in default. Further, the Court even ruled in
Navarro v. Escobido, 606 SCRA 1 (2009), that prior demand is not a condition precedent to an action for a writ of
replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make a demand
on the possessor of the property before an action for a writ of replevin could be filed.
Civil Law; Payment; Burden of Proof; Jurisprudence abounds that, in civil cases, one who pleads payment has the burden
of proving it; the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment.—
Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment. When the creditor is in possession of
the document of credit, proof of non-payment is not needed for it is presumed. Respondent’s possession of the
Promissory Note with Chattel Mortgage strongly buttresses its claim that the obligation has not been extinguished. As
held in Bank of the Philippine Islands v. Spouses Royeca, 559 SCRA 207 (2008): x x x The creditor’s possession of the
evidence of debt is proof that the debt has not been discharged by payment. A promissory note in the hands of the
creditor is a proof of indebtedness rather than proof of payment. In an action for replevin by a mortgagee, it is prima
facie evidence that the promissory note has not been paid. Likewise, an uncanceled mortgage in the possession of the
mortgagee gives rise to the presumption that the mortgage debt is unpaid.
Same; Interest Rates; Settled is the principle which the Supreme Court has affirmed in a number of cases that stipulated
interest rates of three percent (3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant.—
Settled is the principle which this Court has affirmed in a number of cases that stipulated interest rates of three percent
(3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant. While Central Bank Circular No.
905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche
authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets. Since the stipula-
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91
tion on the interest rate is void for being contrary to morals, if not against the law, it is as if there was no express
contract on said interest rate; thus, the interest rate may be reduced as reason and equity demand.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
YF Lim & Associates for petitioners.
Benedicto, Versosa, Felipe & Burkley Law Offices for respondent.
PERALTA, J.:
This is a petition for review on certiorari assailing the April 30, 2007 Decision1 and May 19, 2008 Resolution2 of the
Court of Appeals in CA-G.R. CV No. 86021, which affirmed the August 11, 2005 Decision3 of the Regional Trial Court,
Branch 33, Manila City.
On February 15, 2001, petitioners spouses Deo Agner and Maricon Agner executed a Promissory Note with Chattel
Mortgage in favor of Citimotors, Inc. The contract provides, among others, that: for receiving the amount of
Php834,768.00, petitioners shall pay Php17,391.00 every 15th day of each succeeding month until fully paid; the loan is
secured by a 2001 Mitsubishi Adventure Super Sport; and an interest of 6% per month shall be imposed for failure to
pay each installment on or before the stated due date.4 On the same day, Citimotors, Inc. assigned all its rights, title and
_______________
1 Penned by Associate Justice Vicente Q. Roxas, with Associate Justices Josefina Guevara-Salonga and Ramon R. Garcia,
concurring; Rollo, pp. 49-54.
2 Id., at p. 56.
3 Records, pp. 149-151.
4 Id., at p. 28.
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92
interests in the Promissory Note with Chattel Mortgage to ABN AMRO Savings Bank, Inc. (ABN AMRO), which, on May
31, 2002, likewise assigned the same to respondent BPI Family Savings Bank, Inc.5
For failure to pay four successive installments from May 15, 2002 to August 15, 2002, respondent, through counsel, sent
to petitioners a demand letter dated August 29, 2002, declaring the entire obligation as due and demandable and
requiring to pay Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the letter.6 As the
demand was left unheeded, respondent filed on October 4, 2002 an action for Replevin and Damages before the Manila
Regional Trial Court (RTC).
A writ of replevin was issued.7 Despite this, the subject vehicle was not seized.8 Trial on the merits ensued. On August
11, 2005, the Manila RTC Br. 33 ruled for the respondent and ordered petitioners to jointly and severally pay the amount
of Php576,664.04 plus interest at the rate of 72% per annum from August 20, 2002 until fully paid, and the costs of suit.
Petitioners appealed the decision to the Court of Appeals (CA), but the CA affirmed the lower court’s decision and,
subsequently, denied the motion for reconsideration; hence, this petition.
Before this Court, petitioners argue that: (1) respondent has no cause of action, because the Deed of Assignment
executed in its favor did not specifically mention ABN AMRO’s account receivable from petitioners; (2) petitioners
cannot be considered to have defaulted in payment for lack of competent proof that they received the demand letter;
and (3) respondent’s remedy of resorting to both actions of replevin and collection of sum of money is contrary to the
provision of Arti-
_______________
5 Id., at pp. 29, 33-35.
6 Id., at p. 36.
7 Id., at p. 40.
8 TSN, November 23, 2004, p. 15.

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cle 14849 of the Civil Code and the Elisco Tool Manufacturing Corporation v. Court of Appeals10 ruling.
The contentions are untenable.
With respect to the first issue, it would be sufficient to state that the matter surrounding the Deed of Assignment had
already been considered by the trial court and the CA. Likewise, it is an issue of fact that is not a proper subject of a
petition for review under Rule 45. An issue is factual when the doubt or difference arises as to the truth or falsehood of
alleged facts, or when the query invites calibration of the whole evidence, considering mainly the credibility of
witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other and to the whole,
and the probabilities of the situation.11 Time and again, We stress that this Court is not a trier of facts and generally
does not weigh anew evidence which lower courts have passed upon.
As to the second issue, records bear that both verbal and written demands were in fact made by respondent prior to the
institution of the case against petitioners.12 Even assuming, for argument’s sake, that no demand letter was sent by re-
_______________
9 ART. 1484. In a contract of sale of personal property, the price of which is payable in installments, the vendor may
exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee’s failure to pay cover two or more installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee’s failure to pay
cover two or more installments. In this case, he shall have no further action against the purchaser to recover any unpaid
balance of the price. Any agreement to the contrary shall be void.
10 G.R. No. 109966, May 31, 1999, 307 SCRA 731.
11 Royal Cargo Corporation v. DFS Sports Unlimited, Inc., G.R. No. 158621, December 10, 2008, 573 SCRA 414, 421.
12 TSN, November 23, 2004, p. 11.
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94
spondent, there is really no need for it because petitioners legally waived the necessity of notice or demand in the
Promissory Note with Chattel Mortgage, which they voluntarily and knowingly signed in favor of respondent’s
predecessor-in-interest. Said contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay under this note and/or
any other obligation which I/We or any of us may now or in the future owe to the holder of this note or to any other
party whether as principal or guarantor x x x then the entire sum outstanding under this note shall, without prior notice
or demand, immediately become due and payable. (Emphasis and underscoring supplied)
A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the Philippine Islands v.
Court of Appeals,13 wherein We held:
The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor demands the
fulfillment of the obligation from the obligee. However, the law expressly provides that demand is not necessary under
certain circumstances, and one of these circumstances is when the parties expressly waive demand. Hence, since the co-
signors expressly waived demand in the promissory notes, demand was unnecessary for them to be in default.14
Further, the Court even ruled in Navarro v. Escobido15 that prior demand is not a condition precedent to an action for a
writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court that requires the applicant to make a
de-
_______________
13 523 Phil. 548; 490 SCRA 168 (2006).
14 Id., at p. 560; p. 177.
15 G.R. No. 153788, November 27, 2009, 606 SCRA 1, 20-21.
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95
mand on the possessor of the property before an action for a writ of replevin could be filed.
Also, petitioners’ representation that they have not received a demand letter is completely inconsequential as the mere
act of sending it would suffice. Again, We look into the Promissory Note with Chattel Mortgage, which provides:
All correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any
judicial or extrajudicial action shall be sent to the MORTGAGOR at the address indicated on this promissory note with
chattel mortgage or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE or
his/its assignee. The mere act of sending any correspondence by mail or by personal delivery to the said address shall be
valid and effective notice to the mortgagor for all legal purposes and the fact that any communication is not actually
received by the MORTGAGOR or that it has been returned unclaimed to the MORTGAGEE or that no person was found
at the address given, or that the address is fictitious or cannot be located shall not excuse or relieve the MORTGAGOR
from the effects of such notice.16 (Emphasis and underscoring supplied)
The Court cannot yield to petitioners’ denial in receiving respondent’s demand letter. To note, their postal address
evidently remained unchanged from the time they executed the Promissory Note with Chattel Mortgage up to time the
case was filed against them. Thus, the presumption that “a letter duly directed and mailed was received in the regular
course of the mail”17 stands in the absence of satisfactory proof to the contrary.
_______________
16 Records, p. 31.
17 Rules of Court, Rule 131, Sec. 3 (v).
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96
Petitioners cannot find succour from Ting v. Court of Appeals18 simply because it pertained to violation of Batas
Pambansa Blg. 22 or the Bouncing Checks Law. As a higher quantum of proof — that is, proof beyond reasonable doubt
— is required in view of the criminal nature of the case, We found insufficient the mere presentation of a copy of the
demand letter allegedly sent through registered mail and its corresponding registry receipt as proof of receiving the
notice of dishonor.
Perusing over the records, what is clear is that petitioners did not take advantage of all the opportunities to present
their evidence in the proceedings before the courts below. They miserably failed to produce the original cash deposit
slips proving payment of the monthly amortizations in question. Not even a photocopy of the alleged proof of payment
was appended to their Answer or shown during the trial. Neither have they demonstrated any written requests to
respondent to furnish them with official receipts or a statement of account. Worse, petitioners were not able to make a
formal offer of evidence considering that they have not marked any documentary evidence during the presentation of
Deo Agner’s testimony.19
Jurisprudence abounds that, in civil cases, one who pleads payment has the burden of proving it; the burden rests on the
defendant to prove payment, rather than on the plaintiff to prove non-payment.20 When the creditor is in possession of
the
_______________
18 398 Phil. 481; 344 SCRA 551 (2000).
19 Records, p. 145.
20 Royal Cargo Corporation v. DFS Sports Unlimited, Inc., supra note 11, at p. 422; Bank of the Philippine Islands v.
Spouses Royeca, G.R. No. 176664, July 21, 2008, 559 SCRA 207, 216; Benguet Corporation v. Department of Environment
and Natural Resources-Mines Adjudication Board, G.R. No. 163101, February 13, 2008, 545 SCRA 196, 213; Citibank, N.A.
v. Sabeniano, 535 Phil. 384, 419; 504 SCRA 378, 418 (2006); Keppel Bank Philippines, Inc. v. Adao, 510 Phil. 158, 166-167;
473 SCRA 372, 380-381 (2005); and Far East
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97
document of credit, proof of non-payment is not needed for it is presumed.21 Respondent’s possession of the
Promissory Note with Chattel Mortgage strongly buttresses its claim that the obligation has not been extinguished. As
held in Bank of the Philippine Islands v. Spouses Royeca:22
x x x The creditor’s possession of the evidence of debt is proof that the debt has not been discharged by payment. A
promissory note in the hands of the creditor is a proof of indebtedness rather than proof of payment. In an action for
replevin by a mortgagee, it is prima facie evidence that the promissory note has not been paid. Likewise, an uncanceled
mortgage in the possession of the mortgagee gives rise to the presumption that the mortgage debt is unpaid.23
Indeed, when the existence of a debt is fully established by the evidence contained in the record, the burden of proving
that it has been extinguished by payment devolves upon the debtor who offers such defense to the claim of the
creditor.24 The debtor has the burden of showing with legal certainty that the obligation has been discharged by
payment.25
_______________
Bank and Trust Company v. Querimit, 424 Phil. 721, 730-731; 373 SCRA 665, 671 (2002).
21 Tai Tong Chuache & Co. v. Insurance Commission, 242 Phil. 104, 112; 158 SCRA 366, 373 (1988).
22 Supra note 20.
23 Bank of the Philippine Islands v. Spouses Royeca, id., at p. 219.
24 Id., at p. 216; Citibank, N.A. v. Sabeniano, supra note 20; and Coronel v. Capati, 498 Phil. 248, 255; 459 SCRA 205, 213
(2005).
25 Royal Cargo Corporation v. DFS Sports Unlimited, Inc., supra note 11, at p. 422; Bank of the Philippine Islands v.
Spouses Royeca, supra note 20; Benguet Corporation v. Department of Environment and Natural Resources-Mines
Adjudication Board, supra note 20; Citibank, N.A. v. Sabeniano, supra note 20; Coronel v. Capati, supra note 24, at p.
256; p. 213; and Far East Bank and Trust Company v. Querimit, supra note 20.
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98
Lastly, there is no violation of Article 1484 of the Civil Code and the Court’s decision in Elisco Tool Manufacturing
Corporation v. Court of Appeals.26
In Elisco, petitioner’s complaint contained the following prayer:
WHEREFORE, plaintiffs [pray] that judgment be rendered as follows:

ON THE FIRST CAUSE OF ACTION
Ordering defendant Rolando Lantan to pay the plaintiff the sum of P39,054.86 plus legal interest from the date of
demand until the whole obligation is fully paid;
ON THE SECOND CAUSE OF ACTION
To forthwith issue a Writ of Replevin ordering the seizure of the motor vehicle more particularly described in paragraph
3 of the Complaint, from defendant Rolando Lantan and/or defendants Rina Lantan, John Doe, Susan Doe and other
person or persons in whose possession the said motor vehicle may be found, complete with accessories and equipment,
and direct deliver thereof to plaintiff in accordance with law, and after due hearing to confirm said seizure and plaintiff’s
possession over the same;
ON THE ALTERNATIVE CAUSE OF ACTION
In the event that manual delivery of the subject motor vehicle cannot be effected for any reason, to render judgment in
favor of plaintiff and against defendant Rolando Lantan ordering the latter to pay the sum of SIXTY THOUSAND PESOS
(P60,000.00) which is the estimated actual value of the above-described motor vehicle, plus the accrued monthly rentals
thereof with in-
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26 Supra note 10.
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99
terests at the rate of fourteen percent (14%) per annum until fully paid;
PRAYER COMMON TO ALL CAUSES OF ACTION
1. Ordering the defendant Rolando Lantan to pay the plaintiff an amount equivalent to twenty-five percent (25%) of
his outstanding obligation, for and as attorney’s fees;
2. Ordering defendants to pay the cost or expenses of collection, repossession, bonding fees and other incidental
expenses to be proved during the trial; and
3. Ordering defendants to pay the costs of suit.
Plaintiff also prays for such further reliefs as this Honorable Court may deem just and equitable under the premises.27
The Court therein ruled:
The remedies provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise of the
others. This limitation applies to contracts purporting to be leases of personal property with option to buy by virtue of
Art. 1485. The condition that the lessor has deprived the lessee of possession or enjoyment of the thing for the purpose
of applying Art. 1485 was fulfilled in this case by the filing by petitioner of the complaint for replevin to recover
possession of movable property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the
vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not returned to private
respondent until April 16, 1989, after two (2) years and eight (8) months, upon issuance by the Court of Appeals of a writ
of execution.
_______________
27 Elisco Tool Manufacturing Corporation v. Court of Appeals, id., at pp. 735-736.
100
100

Petitioner prayed that private respondents be made to pay the sum of P39,054.86, the amount that they were supposed
to pay as of May 1986, plus interest at the legal rate. At the same time, it prayed for the issuance of a writ of replevin or
the delivery to it of the motor vehicle “complete with accessories and equipment.” In the event the car could not be
delivered to petitioner, it was prayed that private respondent Rolando Lantan be made to pay petitioner the amount of
P60,000.00, the “estimated actual value” of the car, “plus accrued monthly rentals thereof with interests at the rate of
fourteen percent (14%) per annum until fully paid.” This prayer of course cannot be granted, even assuming that private
respondents have defaulted in the payment of their obligation. This led the trial court to say that petitioner wanted to
eat its cake and have it too.28
In contrast, respondent in this case prayed:
(a) Before trial, and upon filing and approval of the bond, to [forthwith] issue a Writ of Replevin ordering the seizure of
the motor vehicle above-described, complete with all its accessories and equipments, together with the Registration
Certificate thereof, and direct the delivery thereof to plaintiff in accordance with law and after due hearing, to confirm
the said seizure;
(b) Or, in the event that manual delivery of the said motor vehicle cannot be effected to render judgment in favor of
plaintiff and against defendant(s) ordering them to pay to plaintiff, jointly and severally, the sum of P576,664.04 plus
interest and/or late payment charges thereon at the rate of 72% per annum from August 20, 2002 until fully paid;
(c) In either case, to order defendant(s) to pay jointly and severally:
(1) the sum of P297,857.54 as attorney’s fees, liquidated damages, bonding fees and other
_______________
28 Id., at pp. 743-744.
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expenses incurred in the seizure of the said motor vehicle; and
(2) the costs of suit.
Plaintiff further prays for such other relief as this Honorable Court may deem just and equitable in the premises.29
Compared with Elisco, the vehicle subject matter of this case was never recovered and delivered to respondent despite
the issuance of a writ of replevin. As there was no seizure that transpired, it cannot be said that petitioners were
deprived of the use and enjoyment of the mortgaged vehicle or that respondent pursued, commenced or concluded its
actual foreclosure. The trial court, therefore, rightfully granted the alternative prayer for sum of money, which is
equivalent to the remedy of “[e]xact[ing] fulfillment of the obligation.” Certainly, there is no double recovery or unjust
enrichment30 to speak of.
All the foregoing notwithstanding, We are of the opinion that the interest of 6% per month should be equitably reduced
_______________
29 Records, pp. 24-25.
30 In Cabrera v. Ameco Contractors Rental, Inc. (G.R. No. 201560, June 20, 2012 Second Division Minute Resolution), We
held:
The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:
Article 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him.
There is unjust enrichment “when a person unjustly retains a benefit to the loss of another, or when a person retains
money or property of another against the fundamental principles of justice, equity and good conscience.” The principle
of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2)
that such benefit is derived at the expense of another.
102
102
to one percent (1%) per month or twelve percent (12%) per annum, to be reckoned from May 16, 2002 until full
payment and with the remaining outstanding balance of their car loan as of May 15, 2002 as the base amount.
Settled is the principle which this Court has affirmed in a number of cases that stipulated interest rates of three percent
(3%) per month and higher are excessive, iniquitous, unconscionable, and exorbitant.31 While Central Bank Circular No.
905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as granting carte blanche
authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a
hemorrhaging of their assets.32 Since the stipulation on the interest rate is void for being contrary to morals, if not
against the law, it is as if there was no express contract on said interest rate; thus, the interest rate may be reduced as
reason and equity demand.33
WHEREFORE, the petition is DENIED and the Court AFFIRMS WITH MODIFICATION the April 30, 2007 Decision and May
19, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 86021. Petitioners spouses Deo Agner and Maricon Agner
are ORDERED to pay, jointly and severally, respondent BPI Family Savings Bank, Inc. (1) the remaining outstanding
balance of their auto loan obligation as of May 15, 2002 with interest at one percent (1%) per month from May 16, 2002
until fully paid; and (2) costs of suit.
_______________
31 Arthur F. Menchavez v. Marlyn M. Bermudez, G.R. No. 185368, October 11, 2012, 684 SCRA 168.
32 Macalinao v. Bank of the Philippine Islands, G.R. No. 175490, September 17, 2009, 600 SCRA 67, 77, citing Chua v.
Timan, G.R. No. 170452, August 13, 2008, 562 SCRA 146, 149-150.
33 Arthur F. Menchavez v. Marlyn M. Bermudez, G.R. No. 185368, October 11, 2012, 684 SCRA 168, citing Macalinao v.
Bank of the Philippine Islands, supra, at p. 77, and Chua v. Timan, supra, at p. 150.
103
VOL. 697, JUNE 3, 2013
103
SO ORDERED. Agner vs. BPI Family Savings Bank, Inc., 697 SCRA 89, G.R. No. 182963 June 3, 2013

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SUPREME COURT REPORTS ANNOTATED

Orosa vs. Court of Appeals

G.R. No. 111080. April 5, 2000.*

VOL. 329, APRIL 5, 2000

SUPREME COURT REPORTS ANNOTATED

Orosa vs. Court of Appeals

VOL. 329, APRIL 5, 2000

Orosa vs. Court of Appeals

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Aladdin F. Trinidad for petitioners.

SUPREME COURT REPORTS ANNOTATED

Orosa vs. Court of Appeals

1) Dismissing the complaint for lack of merit;

VOL. 329, APRIL 5, 2000

SUPREME COURT REPORTS ANNOTATED

Orosa vs. Court of Appeals

Hence, this petition for review, on the following assignments of error:10

7 Rollo, pp. 220-228.

8 Rollo, pp. 230-241.

9 Rollo, pp. 49-59.

VOL. 329, APRIL 5, 2000

Orosa vs. Court of Appeals

SUPREME COURT REPORTS ANNOTATED

Orosa vs. Court of Appeals

We agree with the Court of Appeals that:14

VOL. 329, APRIL 5, 2000

Orosa vs. Court of Appeals

18 Rollo, pp. 99-100.

Orosa vs. Court of Appeals

24 Civil Code, Art. 2217.

Orosa vs. Court of Appeals

25 Drilon, et al. v. Court of Appeals, et al., 270 SCRA 211 (1997).

26 Mijares, et al. v. Court of Appeals, et al., 271 SCRA 558 (1997).

SUPREME COURT REPORTS ANNOTATED

Orosa vs. Court of Appeals

(1) When exemplary damages are awarded;

(3) In criminal cases of malicious prosecution against the plaintiff;

(6) In actions for legal support;

(10) When at least double judicial costs are awarded;

VOL. 329, APRIL 5, 2000

Orosa vs. Court of Appeals

Smart Communications, Inc. vs. Astorga

G.R. No. 148132. January 28, 2008.*

SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent.

G.R. No. 151079. January 28, 2008.*

SMART COMMUNICATIONS, INC., petitioner, vs. REGINA M. ASTORGA, respondent.

G.R. No. 151372. January 28, 2008.*

VOL. 542, JANUARY 28, 2008

Smart Communications, Inc. vs. Astorga

SUPREME COURT REPORTS ANNOTATED

Smart Communications, Inc. vs. Astorga

The facts are stated in the opinion of the Court.

VOL. 542, JANUARY 28, 2008

Smart Communications, Inc. vs. Astorga

Federico C. Leynes & Partners for Regina Astorga.

2 Rollo, pp. 164-165.

4 Id., at pp. 42-45.

5 Rollo (G.R. No. 151372), pp. 58-59.

6 Rollo (G.R. No. 151079), p. 46.

Smart Communications, Inc. vs. Astorga

7 Rollo (G.R. No. 151372), p. 62.

8 Id., at pp. 40-42.