G.R. No.

181293 February 23, 2015 collection of toll fees and the operation of toll facilities by the
private sector.
ANA THERESIA "RISA" HONTIVEROS-BARAQUEL,
DANIEL L. EDRALIN, VICTOR M. GONZALES, SR., JOSE On the same date, P.D. 11132 was issued granting to the
APOLLO R. ADO, RENE D. SORIANO, ALLIANCE OF Construction and Development Corporation of the Philippines
PROGRESSIVE LABOR, BUKLURAN NG (now Philippine National Construction Corporation or PNCC)
MANGGAGAWANG PILIPINO, LAHING PILIPINO the right, privilege, and authority to construct, operate, and
MULTIPURPOSE TRANSPORT SERVICE COOPERATIVE, maintain toll facilities in the North and South Luzon Toll
PNCC SKYWAY CORPORATION EMPLOYEES UNION Expressways for a period of 30 years starting 1 May1977.
(PSCEU), and PNCC TRAFFIC MANAGEMENT &
SECURITY DEPARTMENT WORKERS ORGANIZATION TRB and PNCC later entered into a Toll Operation
(PTMSDWO), Petitioners, Agreement,3 which prescribed the operating conditions of the
vs. right granted to PNCC under P.D. 1113.
TOLL REGULATORY BOARD, THE SECRETARY OF THE
DEPARTMENT OF TRANSPORTATION AND
P.D. 1113 was amended by P.D. 1894,4 which granted PNCC
COMMUNICATIONS (DOTC), PNCC SKYWAY
the right, privilege, and authority to construct, maintain, and
CORPORATION, PHILIPPINE NATIONAL
operate the North Luzon, South Luzon and Metro Manila
CONSTRUCTION CORPORATION, SKYWAY O & M
Expressways, together with the toll facilities appurtenant
CORPORATION, and CITRA METRO MANILA TOLLWAYS
thereto. The term of 30 years provided under P. D. 1113
CORP.,Respondents.
starting from 1 May 1977 remained the same for the North and
the South Luzon Expressways, while the franchise granted for
DECISION the Metro Manila Expressway (MME) provided a term of 30
years commencing from the date of completion of the project.
SERENO, CJ:
On 22 September 1993, PNCC entered into an agreement5 with
This is an original petition for certiorari and prohibition under PT Citra Lamtoro Gung Persada (CITRA), a limited liability
Rule 65 of the Rules of Court, with a prayer for the issuance of company organized and established under the laws of the
a writ of preliminary injunction and/or temporary restraining Republic of Indonesia, whereby the latter committed to provide
order, seeking the annulment of the following: PNCC with a pre-feasibility study on the proposed MME project.
The agreement was supplemented6 on 14 February 1994 with
1. The Amendment to the Supplemental Toll a related undertaking on the part of CITRA. CITRA was to
Operation Agreement executed on 18 July 2007 provide a preliminary feasibility study on the Metro Manila
between the Republic of the Philippines, the Philippine Skyways (MMS) project, a system of elevated roadway
National Construction Corporation, and Citra Metro networks passing through the heart of the Metropolitan Manila
Manila Tollways Corporation; area. In order to accelerate the actual implementation of both
the MME and the MMS projects, PNCC and CITRA entered into
a second agreement.7 Through that agreement, CITRA
2. The Memorandum dated 20 July 2007 of the
committed to finance and undertake the preparation, updating,
Secretary of Transportation and Communications,
and revalidation of previous studies on the construction,
approving the Amendment to the Supplemental Toll
operation, and maintenance of the projects.
Operation Agreement;

As a result of the feasibility and related studies, PNCC and

3. The Memorandum of Agreement executed on 21
CITRA submitted, through the TRB, a Joint Investment
December 2007 between the Philippine National
Proposal (JIP) to the Republic of the Philippines.8 The JIP
Construction Corporation, PNCC Skyway Corporation,
embodied the implementation schedule for the financing,
and Citra Metro Manila Tollways Corporation; and
design and construction of the MMS in three stages: the South
Metro Manila Skyway, the North Metro Manila Skyway, and the
4. The Toll Operation Certificate issued by the Toll Central Metro Manila Skyway.9
Regulatory Board on 28 December 2007 in favor of
Skyway O & M Corporation.
The TRB reviewed, evaluated and approved the JIP,
particularly as it related to Stage 1, Phases 1 and 2; and Stage
The annulment of the above is sought for being 2, Phase 1 of the South Metro Manila Skyway.
unconstitutional, contrary to law, and grossly disadvantageous
to the government. Petitioners also seek to prohibit Skyway O
On 30 August 1995, PNCC and CITRA entered into a Business
& M Corporation from assuming operations and maintenance
and Joint Venture Agreement10 and created the Citra Metro
responsibilities over the Skyway toll facilities. ANTECEDENT
Manila Tollways Corporation (CMMTC). CMMTC was a joint
FACTS
venture corporation organized under Philippine laws to serve
as a channel through which CITRA shall participate in the
The Toll Regulatory Board (TRB) was created on 31 March construction and development of the project.
1977 by Presidential Decree No. (P.D.) 11121 in order to
supervise and regulate, on behalf of the government, the

1
On 27 November 1995, the Republic of the Philippines -
through the TRB - as Grantor, CMMTC as Investor, and PNCC
as Operator executed a Supplemental Toll Operation
Agreement (STOA)11 covering Stage 1, Phases 1 and 2; and
Stage 2, Phase 1 of the South Metro Manila Skyway. Under the
STOA, the design and construction of the project roads
became the primary and exclusive privilege and responsibility
of CMMTC. The operation and maintenance of the project
roads became the primary and exclusive privilege and
responsibility of the PNCC Skyway Corporation (PSC), a wholly
owned subsidiary of PNCC, which undertook and performed
the latter's obligations under the STOA.
CMMTC completed the design and construction of Stage 1 of
the South Metro Manila Skyway, which was operated and
maintained by PSC.12
On 18 July 2007, the Republic of the Philippines, through the
TRB, CMMTC, and PNCC executed the assailed Amendment to
the Supplemental Toll Operation Agreement (ASTOA).13 The
ASTOA incorporated the amendments, revisions, and
modifications necessary to cover the design and construction
of Stage 2 of the South Metro Manila Skyway. Also under the
ASTOA, Skyway 0 & M Corporation (SOMCO) replaced PSC in
performing the operations and maintenance of Stage 1 of the
South Metro Manila Skyway.
Pursuant to the authority granted to him under Executive
Order No. (E.O.) 49714 dated 24 January 2006, Department of
Transportation and Communications (DOTC) Secretary Leandro
Mendoza approved the ASTOA through the challenged
Memorandum dated 20 July 2007.15
On 21 December 2007, PNCC, PSC, and CMMTC entered into
the assailed Memorandum of Agreement (MOA)16providing for
the successful and seamless assumption by SOMCO of the
operations and maintenance of Stage 1 of the South Metro
Manila Skyway. Under the MOA, PSC received the amount of
₱320 million which was used for the settlement of its liabilities
arising from the consequent retrenchment or separation of its
affected employees.
The TRB issued the challenged Toll Operation Certificate
(TOC)17 to SOM CO on 28 December 2007, authorizing the
latter to operate and maintain Stage 1 of the South Metro
Manila Skyway effective 10:00 p.m. on 31December2007.
Meanwhile, on 28 December 2007, petitioner PNCC Traffic
Management and Security Department Workers Organization
(PTMSDWO) filed a Notice of Strike against PSC on the ground
of unfair labor practice, specifically union busting.18 The
Secretary of Labor and Employment19 assumed jurisdiction
over the dispute in an Order dated 31 December 2007 and set
the initial hearing of the case on 2 January 2008.20
On 3 January 2008, petitioners PTMSDWO and PNCC Skyway
Corporation Employees Union (PSCEU) filed before the
Regional Trial Court of Parañaque City, Branch 258 (RTC), a
complaint against respondents TRB, PNCC, PSC, CMMTC, and
SOMCO. The complaint was for injunction and prohibition with
a prayer for a writ of preliminary injunction and/or a temporary
2
restraining order, and sought to prohibit the implementation of
the AS TOA and the MOA, as well as the assumption of the toll
operations by SOMCO.21 Petitioners PSCEU and PTMSDWO also
sought the subsequent nullification of the ASTOA and the MOA
for being contrary to law and for being grossly
disadvantageous to the government.22 They later filed an
Amended Complaint23 dated 8 January 2008, additionally
praying that PSC be allowed to continue the toll operations.
With the exception of TRB, all defendants therein filed their
Opposition.
On 23 January 2008, the RTC issued an Order24 denying the
prayer for the issuance of a temporary restraining order and/or
writ of preliminary injunction. According to the RTC, petitioners
were seeking to enjoin a national government infrastructure
project. Under Republic Act No. (R.A.) 8975,25 lower courts are
prohibited from issuing a temporary restraining order or
preliminary injunction against the government - or any person
or entity acting under the government's direction - to restrain
the execution, implementation, or operation of any such
contract or project. Furthermore, the RTC ruled that it could no
longer issue a temporary restraining order or preliminary
injunction, considering that the act sought to be restrained had
already been consummated.26 The AS TOA, the MOA, and the
assumption of the toll operations by SOMCO took effect at
10:00 p.m. on 31 December 2007, while petitioners PSCEU and
PTMSDWO sought to prohibit their implementation only on 3
January 2008.
In view of its denial of the ancillary prayer, the RTC required
defendants to file their respective Answers to the Amended
Complaint.27
On 28 January 2008, petitioners PSCEU and PTMSDWO filed a
Notice of Dismissal with Urgent Ex-Parte Motion for the
Issuance of Order Confirming the Dismissal,28 considering that
no Answers had yet been filed. On the basis thereof, the R TC
dismissed the case without prejudice on 29 January 2008.29
On 4 February 2008, petitioners filed the instant
Petition30 before this Court. On 13 February 2008, we required
respondents to comment on the same.31
Meanwhile, defendants PNCC32 and PSC33 filed their respective
Motions for Partial Reconsideration of the Order of the R TC
dismissing the case without prejudice. Both argued that the
RTC should have dismissed the case with prejudice. They
pointed out that petitioners PSCEU and PTMSDWO had acted
in bad faith by filing the complaint before the RTC, despite the
pendency of a labor case over which the Secretary of Labor
and Employment had assumed jurisdiction. Defendant CMMTC
joined PNCC and PSC in moving for a partial reconsideration of
the RTC Order.34
The RTC denied the Motions for Partial Reconsideration in an
Order dated 13 June 2008.35
Before this Court, SOMCO,36 PSC,37 PNCC,38 CMMTC,39 and
TRB40 filed their respective Comments on the Petition.
THE PARTIES' POSITIONS
Petitioners argue that the franchise for toll operations was
exclusively vested by P.D. 1113 in PNCC, which exercised the
powers under its franchise through PSC in accordance with the
STOA. By agreeing to the arrangement whereby SOMCO would
replace PSC in the toll operations and management, PNCC
seriously breached the terms and conditions of its undertaking
under the franchise and effectively abdicated its rights and
privileges in favor of SOMCO.
Furthermore, the TOC granted to SOMCO was highly irregular
and contrary to law, because 1) it did not indicate the
conditions that shall be imposed on SOMCO as provided under
P.D. 1112;41 2) none of the requirements on public bidding,
negotiations, or even publication was complied with before the
issuance of the TOC to SOMCO; 3) applying the stricter
"grandfather rule," SOMCO does not qualify as a facility
operator as defined under R.A. 6957,42 as amended by R.A.
7718;43 and 4) there were no public notices and hearings
conducted wherein all legitimate issues and concerns about the
transfer of the toll operations would have been properly
ventilated.
Petitioners also claim that the approval by the DOTC Secretary
of the AS TOA could not take the place of the presidential
approval required under P.D. 111344 and P.D.
189445 concerning the franchise granted to PNCC.
Finally, petitioners claim that the assumption of the toll
operations by SOM CO was grossly disadvantageous to the
government, because 1) for a measly capital investment of
₱2.5 million, SOMCO stands to earn ₱400 million in gross
revenues based on official and historical records; 2) with its
measly capital, SOMCO would not be able to cover the direct
overhead for personal services in the amount of ₱226 million
as borne out by Commission on Audit reports; 3) the net
revenue from toll operations would go to private shareholders
of SOMCO, whereas all earnings of PSC when it was still in
charge of the toll operations went to PNCC - the mother
company whose earnings, as an "acquired-asset corporation,"
formed part of the public treasury; 4) the new arrangement
would result in the poor delivery of toll services by SOMCO,
which had no proven track record; 5) PSC received only ₱320
million as settlement for the transfer of toll operations to
SOMCO.
All respondents counter that petitioners do not have the
requisite legal standing to file the petition. According to
respondents, petitioner Hontiveros-Baraquel filed the instant
petition as a legislator in her capacity as party-list
representative of Akbayan. As such, she was only allowed to
sue to question the validity of any official action when it
infringed on her prerogative as a legislator.46 Presently, she
has cited no such prerogative, power, or privilege that is
adversely affected by the assailed acts.47
While suing as citizens, the individual petitioners have not
shown any personal or substantial interest in the case
indicating that they sustained or will sustain direct injury as a
result of the implementation of the assailed acts.48 The
maintenance of the suit by petitioners as taxpayers has no
merit either because the assailed acts do not involve the
disbursement of public funds.49 Finally, the bringing of the suit
3
by petitioners as people's organizations does not automatically
confer legal standing, especially since petitioner-organizations
do not even allege that they represent their members,50 nor do
they cite any particular constitutional provision that has been
violated or disregarded by the assailed acts.51 In fact, the suit
raises only issues of contract law, and none of the petitioners
is a party or is privy to the assailed agreements and
issuances.52
Respondents also argue that petitioners violate the hierarchy
of courts. In particular, it is alleged that while lower courts are
prohibited from issuing temporary restraining orders or
preliminary injunctions against national government projects
under R.A. 8975, the law does not preclude them from
assuming jurisdiction over complaints that seek the nullification
of a national government project as ultimate relief.53
As a final procedural challenge to the petition, respondents
aver that petitioners are guilty of forum shopping. When
petitioners filed the instant petition, the case before the R TC
seeking similar reliefs was still pending, as respondents PNCC,
PSC and CMMTC had moved for the partial reconsideration of
the RTC's Order of dismissal within the reglementary
period.54 Furthermore, the instant case and the one before the
RTC were filed while petitioners' labor grievances seeking
similar reliefs were also being heard before the Department of
Labor and Employment.55
On the merits of the arguments in the petition, respondents
argue that nothing in the ASTOA, the approval thereof by the
DOTC Secretary, the MOA, or the TOC was violative of the
Constitution. It is argued that the authority to operate a public
utility can be granted by administrative agencies when
authorized by law.56 Under P.D. 1112, the TRB is empowered
to grant authority and enter into contracts for the construction,
operation, and maintenance of a toll facility,57 such as the
ASTOA in this case. Also, the ASTOA was an amendment, not
to the legislative franchise of PNCC, but to the STOA previously
executed between the Republic of the Philippines through the
TRB, PNCC, and CMMTC.58 In fact, PNCC's franchise was never
sold, transferred, or otherwise assigned to SOMCO59 in the
same way that PSC's previous assumption of the operation and
maintenance of the South Metro Manila Skyway did not
amount to a sale, transfer or assignment of PNCC's franchise.60
There can be no valid objection to the approval of the ASTOA
by the DOTC Secretary, because he was authorized by the
President to do so by virtue of E.O. 497.61 Also, the phrase
"subject to the approval of the President of the Philippines" in
P.D. 1112 and 1113 does not in any way mean that the
presidential approval must be obtained prior to the execution
of a contract, or that the approval be made personally by the
President.62 The presidential approval may be obtained under
the doctrine of qualified political agency.63
Respondents argue that there is no merit in the claim that the
TOC granted to SOMCO was highly irregular and contrary to
law. First, the TOC clearly states that the toll operation and
maintenance by SOMCO shall be regulated by the Republic of
the Philippines in accordance with P.D. 1112, the STOA, the
toll operations and maintenance rules and regulations, and
lawful orders, instructions, and conditions that may be
imposed from time to time. 64Second, there is no need to
comply with the public bidding and negotiation requirements,
because the South Metro Manila Skyway is an ongoing project,
not a new one.65 Furthermore, the STOA, which was the basis
for the ASTOA, was concluded way before the effectivity of
R.A. 918466 in 2003.67
Third, SOMCO is a Filipino corporation with substantial 72%
Filipino ownership.68 Fourth, the law requires prior notice and
hearing only in an administrative body's exercise of quasi-
judicial functions.69 In this case, the transfer of the toll
operations and maintenance to SOM CO was a contractual
arrangement entered into in accordance with law.70
Finally, the assumption of the toll operation and maintenance
by SOMCO is not disadvantageous to the government.
Petitioners belittle the ₱2.5 million capitalization of SOMCO,
considering that PSC's capitalization at the time it was
incorporated was merely ₱500,000.71
Respondents claim that under the ASTOA, PNCC shall get a
direct share in the toll revenues without any corollary
obligation, unlike the arrangement in the STOA whereby
PNCC's 10% share in the toll revenues was intended primarily
for the toll operation and maintenance by PSC.72
Finally, respondents assert that there is no reason to fear that
the assumption by SOMCO would result in poor delivery of toll
services. CITRA and the other shareholders of SOMCO are
entities with experience and proven track record in toll
operations.73 Also, SOM CO hired or absorbed more than 300
PSC employees,74 who brought with them their work expertise
and experience.
ISSUES
The instant case shall be resolved on the basis of the following
issues:
Procedural:
I. Whether petitioners have standing;
II. Whether petitioners are guilty of forum-shopping;
Substantive:
III. Whether the TRB has the power to grant
authority to operate a toll facility;
IV. Whether the TOC issued to SOMCO was valid;
V. Whether the approval of the ASTOA by the DOTC
Secretary was valid; and
VI. Whether the assumption of toll operations by
SOMCO is disadvantageous to the government.
OUR RULING
4
I
Not all petitioners have personality to sue.
Standing is a constitutional law concept allowing suits to be
brought not necessarily by parties personally injured by the
operation of a law or official action, but by concerned citizens,
taxpayers, or voters who sue in the public
interest.75 Determining the standing of concerned citizens,
taxpayers, or voters requires a partial consideration of the
substantive merit of the constitutional question,76 or at least a
preliminary estimate thereof.77
In this case, petitioners raise the power of Congress to grant
franchises as a constitutional question. They allege that the
execution of the ASTOA and the MOA, the approval of the AS
TOA by the DOTC Secretary and the issuance of the TOC
infringed on the constitutional power of Congress, which has
the sole authority to grant franchises for the operation of
public utilities. This Court has had a few occasions to rule that
a franchise from Congress is not required before each and
every public utility may operate.78 Unless there is a law that
specifically requires a franchise for the operation of a public
utility, particular agencies in the executive branch may issue
authorizations and licenses for the operation of certain classes
of public utilities.79 In the instant case, there is no law that
states that a legislative franchise is necessary for the operation
of toll facilities.
In PAL v. Civil Aeronautics Board,80 this Court enunciated:
Congress has granted certain administrative agencies the
power to grant licenses for, or to authorize the operation of
certain public utilities. With the growing complexity of modem
life, the multiplication of the subjects of governmental
regulation, and the increased difficulty of administering the
laws, there is a constantly growing tendency towards the
delegation of greater powers by the legislature, and towards
the approval of the practice by the courts. It is generally
recognized that a franchise may be derived indirectly from the
state through a duly designated agency, and to this extent, the
power to grant franchises has frequently been delegated, even
to agencies other than those of a legislative nature. In
pursuance of this, it has been held that privileges conferred by
grant by local authorities as agents for the state constitute as
much a legislative franchise as though the grant had been
made by an act of the Legislature.81
It is thus clear that Congress does not have the sole authority
to grant franchises for the operation of public utilities.
Considering the foregoing, we find that the petition raises no
issue of constitutional import. More particularly, no legislative
prerogative, power, or privilege has been impaired. Hence,
legislators have no standing to file the instant petition, for they
are only allowed to sue to question the validity of any official
action when it infringes on their prerogatives as members of
Congress.82 Standing is accorded to them only if there is an
unmistakable showing that the challenged official act affects or
impairs their rights and prerogatives as legislators.83
In line with our ruling in Kilosbayan, Inc. v. Morato,84 the rule
concerning a real party in interest - which is applicable to
private litigation – rather than the liberal rule on standing,
should be applied to petitioners.
A real party in interest is one who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the
avails of the suit.85 One's interest must be personal and not
one based on a desire to vindicate the constitutional right of
some third and unrelated party.86 The purposes of the rule are
to prevent the prosecution of actions by persons without any
right or title to or interest in the case; to require that the
actual party entitled to legal relief be the one to prosecute the
action; to avoid a multiplicity of suits; and to discourage
litigation and keep it within certain bounds, pursuant to sound
public policy.87
At bottom, what is being questioned in the petition is the
relinquishment by PSC of the toll operations in favor of
SOMCO, effectively leading to the cessation of the former' s
business. In this case, we find that among petitioners, the only
real parties in interest are the labor unions PSCEU and
PTMSDWO.
PSCEU and PTMSDWO filed the petition not as a representative
suit on behalf of their members who are rank-and-file
employees of PSC, but as people's organizations "invested with
a public duty to defend the rule of law."88PSCEU and
PTMSDWO cite Kilosbayan v. Ermita89 as authority to support
their standing to file the instant suit.
It is well to point out that the Court, in Ermita, accorded
standing to people's organizations to file the suit, because the
matter involved therein was the qualification of a person to be
appointed as a member of this Court -"an issue of utmost and
far-reaching constitutional importance."90 As discussed, the
instant petition raises no genuine constitutional issues.
Nevertheless, for a different reason, we accord standing to
PSCEU and PTMSDWO to file the instant suit. With the transfer
of toll operations to SOMCO and the resulting cessation of
PSC's business comes the retrenchment and separation of all
its employees. The existence of petitioner labor unions would
terminate with the dissolution of its employer and the
separation of its members. This is why the petition also prays
that this Court issue an order "that would smoothly preserve
the toll operations services of respondent PNCC and/or
respondent PSC under its legislative franchise."91
We have recognized that the right of self-preservation is
inherent in every labor union or any organization for that
matter.92 Thus, PSCEU and PTMSDWO, as real parties in
interest, have the personality to question the assumption of
the toll operations by SOMCO.
II
PSCEU and PTMSDWO are not guilty of forum-shopping.
Forum shopping refers to the act of availing of several
remedies in different courts and/or administrative agencies,
5
either simultaneously or successively, when these remedies are
substantially founded on the same material facts and
circumstances and raise basically the same issues either
pending in or already resolved by some other court or
administrative agency.93 What is pivotal in determining
whether forum shopping exists is the vexation caused to the
courts and litigants and the possibility of conflicting decisions
being rendered by different courts and/or administrative
agencies upon the same issues.94
The elements of forum shopping are as follows: a) identity of
parties or at least such parties that represent the same
interests in both actions; b) identity of rights asserted and the
relief prayed for, the relief founded on the same facts; and c)
identity of the two preceding particulars, such that any
judgment rendered in one action will amount to res judicata in
the other.95 Respondents argue that petitioners PSCEU and
PTMSDWO committed forum shopping by filing the complaint
for injunction and prohibition before the RTC during the
pendency of NCMB-NCR-NS-12-188-07 entitled In Re: Labor
Dispute at PNCC Skyway Corporation. It was a case they also
filed, over which the Secretary of Labor and Employment has
assumed jurisdiction.
The case involves a Notice of Strike filed against PSC on the
ground of unfair labor practice. While the specific act in
question is not specified, the prohibited acts constituting unfair
labor practice96 essentially relate to violations concerning the
workers' right to self-organization.97 When compared with the
complaint filed with the RTC for injunction and prohibition
seeking to prohibit the implementation of the ASTOA and the
MOA, as well as the assumption of the toll operations by SOM
CO for being unconstitutional, contrary to law and
disadvantageous to the government, it is easily discernible that
there is no identity of rights asserted and relief prayed for.
These cases are distinct and dissimilar in their nature and
character.
For the sake of argument, let us assume that, in order to hurt
the unions, PSC feigned a cessation of business that led to the
retrenchment and separation of all employees. That is an
unfair labor practice. In that complaint, the unions cannot be
expected to ask for, or the Secretary of Labor and Employment
to grant, the annulment of the ASTOA and the MOA and the
continuation of toll operations by PSC. The Secretary would
only focus on the legality of the retrenchment and separation,
and on the presence or absence of bad faith in PSC's cessation
of business. On the other hand, the complaint before the RTC
would require it to focus on the legality of the ASTOA, the
MOA and the transfer of toll operations. Ultimately, even if the
Secretary of Labor and Employment makes a finding of unfair
labor practice, this determination would not amount to res
judicata as regards the case before the RTC.
We also reject the claim of respondents that petitioners PSCEU
and PTMSDWO committed forum shopping by filing the instant
petition before this Court while the motion for partial
reconsideration of the RTC's Order of dismissal without
prejudice was still pending. Section 1, Rule 17 of the Rules of
Court states:
SECTION 1. Dismissal upon notice by plaintiff. - A complaint
may be dismissed by the plaintiff by filing a notice of dismissal
at any time before service of the answer or of a motion for
summary judgment. Upon such notice being filed, the court
shall issue an order confirming the dismissal. Unless otherwise
stated in the notice, the dismissal is without prejudice, except
that a notice operates as an adjudication upon the merits
when filed by a plaintiff who has once dismissed in a
competent court an action based on or including the same
claim.
In this case, petitioners PSCEU and PTMSDWO had filed a
notice of dismissal of the complaint before the RTC on 28
January 2008, before respondents filed their Answers. The
following day, the RTC issued an order confirming the
dismissal. Under the above-cited rule, this confirmation is the
only qualification imposed on the right of a party to dismiss the
action before the adverse party files an answer.98 In this case,
the dismissal of the action therefore became effective upon
that confirmation by the RTC despite the subsequent filing of
the motions for partial reconsideration.
Thus, when the instant petition was filed on 4 February 2008,
the complaint before the RTC was no longer pending. The
complaint was dismissed without prejudice by virtue of the
notice of dismissal filed by petitioners PSCEU and PTMSDWO.
Consequently, there was not even any need for petitioners to
mention the prior filing and dismissal of the complaint in the
certificate of non-forum shopping in the instant petition,99 but
they did so anyway.100
Parenthetically, in their motions for partial reconsideration,
respondents PNCC and PSC insisted that the dismissal should
have been with prejudice, because petitioners allegedly acted
in bad faith in filing the notice of dismissal, were guilty of
forum shopping, and did not notify respondents of their
intention to file a notice of dismissal. With regard to the first
and the third allegation, petitioners may ask for dismissal at
any time before the filing of the answer as a matter of right,
even if the notice cites "the most ridiculous of grounds for
dismissal."101 As to the second, we have already ruled that
there was no forum shopping as regards the successive filings
of the labor case and the complaint before the RTC.
II
TRB has the power to grant authority to operate a toll facility.
This matter has already been settled by the Court in Francisco,
Jr. v. TRB,102 which ruled thus:
It is abundantly clear that Sections 3 (a) and (e) of P.D. 1112
in relation to Section 4 of P.D. 1894 have invested the TRB
with sufficient power to grant a qualified person or entity with
authority to construct, maintain, and operate a toll facility and
to issue the corresponding toll operating permit or TOC.
Sections 3 (a) and (e) of P.D. 1112 and Section 4 of P.D. 1894
amply provide the power to grant authority to operate toll
facilities:
6
Section 3. Powers and Duties of the Board. - The Board shall
have in addition to its general powers of administration the
following powers and duties:
(a) Subject to the approval of the President of the Philippines,
to enter into contracts in behalf of the Republic of the
Philippines with persons, natural or juridical, for the
construction, operation and maintenance of toll facilities such
as but not limited to national highways, roads, bridges, and
public thoroughfares. Said contract shall be open to citizens of
the Philippines and/or to corporations or associations qualified
under the Constitution and authorized by law to engage in toll
operations;
xxxx
(e) To grant authority to operate a toll facility and to issue
therefore the necessary "Toll Operation Certificate" subject to
such conditions as shall be imposed by the Board including
inter alia the following:
(1) That the Operator shall desist from collecting toll
upon the expiration of the Toll Operation Certificate.
(2) That the entire facility operated as a toll system
including all operation and maintenance equipment
directly related thereto shall be turned over to the
government immediately upon the expiration of the
Toll Operation Certificate.
(3) That the toll operator shall not lease, transfer,
grant the usufruct of, sell or assign the rights or
privileges acquired under the Toll Operation
Certificate to any person, firm, company, corporation
or other commercial or legal entity, nor merge with
any other company or corporation organized for the
same purpose, without the prior approval of the
President of the Philippines. In the event of any valid
transfer of the Toll Operation Certificate, the
Transferee shall be subject to all the conditions,
terms, restrictions and limitations of this Decree as
fully and completely and to the same extent as if the
Toll Operation Certificate has been granted to the
same person, firm, company, corporation or other
commercial or legal entity.
(4) That in time of war, rebellion, public peril,
emergency, calamity, disaster or disturbance of peace
and order, the President of the Philippines may cause
the total or partial closing of the toll facility or order
to take over thereof by the Government without
prejudice to the payment of just compensation.
(5) That no guarantee, Certificate of Indebtedness,
collateral, securities, or bonds shall be issued by any
government agency or government-owned or
controlled corporation on any financing program of
the toll operator in connection with his undertaking
under the Toll Operation Certificate.
 (6) The Toll Operation Certificate may be amended,
modified or revoked whenever the public interest so
requires.
(a) The Board shall promulgate rules and
regulations governing the procedures for the
grant of Toll Certificates. The rights and
privileges of a grantee under a Toll
Operation Certificate shall be defined by the
Board.
(b) To issue rules and regulations to carry
out the purposes of this Decree.
SECTION 4. The Toll Regulatory Board is hereby given
jurisdiction and supervision over the GRANTEE with respect to
the Expressways, the toll facilities necessarily appurtenant
thereto and, subject to the provisions of Section 8 and 9
hereof, the toll that the GRANTEE will charge the users
thereof.
By explicit provision of law, the TRB was given the power to
grant administrative franchise for toll facility
projects.103(Emphases supplied)
We cannot abide by the contention of petitioners that the
franchise for toll operations was exclusively vested in PNCC,
which effectively breached its franchise when it transferred the
toll operations to SOMCO. First, there is nothing in P.D. 1113
or P.D. 1894 that states that the franchise granted to PNCC is
to the exclusion of all others.
Second, if we were to go by the theory of petitioners, it is only
the operation and maintenance of the toll facilities that is
vested with PNCC. This interpretation is contrary to the
wording of P.D. 1113 and P.D. 1894 g ranting PNCC the right,
privilege and authority to construct, operate and maintain the
North Luzon, South Luzon and Metro Manila Expressways and
their toll facilities.
It appears that petitioners have confused the franchise granted
under P.D. 1113 and P.D. 1894 with particular provisions in the
STOA. To clarify, the operation and maintenance of the project
roads were the primary and exclusive privilege and
responsibility of PNCC through PSC under the STOA. On the
other hand, the design and construction of the project roads
were the primary and exclusive privilege and responsibility of
CMMTC. However, with the execution of the AS TOA, the
parties agreed that SOM CO shall replace PSC in undertaking
the operations and maintenance of the project roads. Thus,
the "exclusivity clause" was a matter of agreement between
the parties, which amended it in a later contract; it was not a
matter provided under the law.
Third, aside from having been granted the power to grant
administrative franchises for toll facility projects, TRB is also
empowered to modify, amend, and impose additional
conditions on the franchise of PNCC in an appropriate contract,
particularly when public interest calls for it. This is provided
under Section 3 of P.D. 1113 and Section 6 of P.D. 1894, to
wit:
7
SECTION 3. This franchise is granted subject to such
conditions as may be imposed by the [Toll Regulatory] Board
in an appropriate contract to be executed for this purpose, and
with the understanding and upon the condition that it shall be
subject to amendment, alteration or repeal when public
interest so requires.
xxx
SECTION 6. This franchise is granted subject to such
conditions, consistent with the provisions of this Decree, as
may be imposed by the Toll Regulatory Board in the Toll
Operation Agreement and such other modifications or
amendments that may be made thereto, and with the
understanding and upon the condition that it shall be subject
to amendment or alteration when public interest so dictates.
Section 6 of P.D. 1894 specifically mentions the Toll Operation
Agreement. The STOA was one such modification or
amendment of the franchise of PNCC. So was the ASTOA,
which further modified the franchise. PNCC cannot be said to
have breached its franchise when it transferred the toll
operations to SOMCO. PNCC remained the franchise holder for
the construction, operation, and maintenance of the project
roads; it only opted to partner with investors in the exercise of
its franchise leading to the organization of companies such as
PSC and SOMCO.
Again, considering that PNCC was granted the right, privilege,
and authority to construct, operate, and maintain the North
Luzon, South Luzon, and Metro Manila Expressways and their
toll facilities, we have not heard petitioners decrying the
"breach" by PNCC of its franchise when it agreed to make
CMMTC responsible for the design and construction of the
project roads under the STOA.
IV
The TOC issued to SOMCO was not irregular.
Petitioners argue that the conditions provided under Section
3(e) of P.D. 1112104 were not imposed on SOMCO, because
these do not appear on the face of the TOC. Petitioners are
mistaken.
The TOC, as a grant of authority from the government, is
subject to the latter's control insofar as the grant affects or
concerns the public.105 Like all other franchises or licenses
issued by the government, the TOC is issued subject to terms,
conditions, and limitations under existing laws and
agreements. This rule especially holds true in this instance
since the TRB has the power to issue "the necessary 'Toll
Operation Certificate' subject to such conditions as shall be
imposed by the Board including inter alia" those specified
under Section 3(e) of P.D. 1112. Thus, impliedly written into
every TOC are the conditions prescribed therein.
In any case, part of the TOC issued to SOMCO reads:
Pursuant to Section 3(e) of Presidential Decree No. 1112 or the
Toll Operation Decree, Skyway O & M Corporation is hereby
given authority to operate and maintain Stage 1 of the South
Metro Manila Skyway effective as of 10:00 p.m. of 31
December 2007.
This authorization is issued upon the clear understanding that
the operation and maintenance of Stage 1 of the South Metro
Manila Skyway as a toll facility and the collection of toll fees
shall be closely supervised and regulated by the Grantor, by
and through the Board of Directors, in accordance with the
terms and conditions set forth in the STOA, as amended, the
rules and regulations duly promulgated by the Grantor for toll
road operations and maintenance, as well as the lawful orders,
instructions and conditions which the Grantor, through the
TRB, may impose from time to time in view of the public
nature of the facility.
As regards the allegation that none of the requirements for
public bidding was observed before the TOC was issued to
SOMCO, this matter was also squarely answered by the Court
in Francisco, Jr. v. TRB,106 to wit:
Where, in the instant case, a franchisee undertakes the tollway
projects of construction, rehabilitation and expansion of the
tollways under its franchise, there is no need for a public
bidding. In pursuing the projects with the vast resource
requirements, the franchisee can partner with other investors,
which it may choose in the exercise of its management
prerogatives. In this case, no public bidding is required upon
the franchisee in choosing its partners as such process was
done in the exercise of management prerogatives and in
pursuit of its right of delectus personae. Thus, the subject
tollway projects were undertaken by companies, which are the
product of the joint ventures between PNCC and its chosen
partners.107
Under the STOA in this case, PNCC partnered with CMMTC in
Stages 1 and 2 of the South Metro Manila Skyway. The STOA
gave birth to PSC, which was put in charge of the operation
and maintenance of the project roads. The ASTOA had to be
executed for Stage 2 to accommodate changes and
modifications in the original design. The ASTOA then brought
forth the incorporation of SOMCO to replace PSC in the
operations and maintenance of Stage 1 of the South Metro
Manila Skyway. Clearly, no public bidding was necessary
because PNCC, the franchisee, merely exercised its
management prerogative when it decided to undertake the
construction, operation, and maintenance of the project roads
through companies which are products of joint ventures with
chosen partners.
Petitioners also insist that SOMCO is not qualified to operate a
toll facility, because it does not meet the nationality
requirement for a corporation when scrutinized under the
"grandfather rule." Other than advancing this argument,
however, petitioners have not shown how SOMCO fails to meet
the nationality requirement for a public utility operator.
Petitioners only aver in their petition that 40% of SOMCO is
owned by CMMTC, a foreign company, while the rest is owned
by the following: a) Toll Road Operation and Maintenance
Venture Corporation (TROMVC), almost 40% of which is
8
owned by a Singaporean company; b) Asset values Holding
Company, Inc. (AHCI), of which almost 40% is Dutch-owned;
and c) Metro Strategic Infrastructure Holdings, Inc. (MSIHI),
40% of which is owned by Metro Pacific Corporation, whose
ownership or nationality was not specified.108
Section 11, Article XII of the Constitution provides that "[n]o
franchise, certificate, or any other form of authorization for the
operation of a public utility shall be granted except to citizens
of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum of
whose capital is owned by such citizens x x x." Clearly, under
the Constitution, a corporation at least 60% of whose capital is
owned by Filipinos is of Philippine nationality. Considering this
constitutional provision, petitioners' silence on the ownership
of the remaining 60% of the corporations cited is very telling.
In order to rebut petitioners' allegations, respondents readily
present matrices showing the itemization of percentage
ownerships of the subscribed capital stock of SOMCO, as well
as that of TROMVC, AHCI, and MSIHI. Respondents attempt to
show that all these corporations are of Philippine nationality,
with 60% of their capital stock owned by Filipino citizens. We
need not reproduce the itemization here. Suffice it to say that
in their Consolidated Reply,109petitioners did not refute the
unanimous claim of respondents. It is axiomatic that one who
alleges a fact has the burden of proving it. On this matter, we
find that petitioners have failed to prove their allegation that
SOMCO is not qualified to operate a toll facility for failure to
meet the nationality requirement under the Constitution.
Finally, no public notices and hearings were necessary prior to
the issuance of the TOC to SOMCO. For the same reason that
a public bidding is not necessary, PNCC cannot be required to
call for public hearings concerning matters within its
prerogative. At any rate, we have studied P.D. 1112 and the
Implementing Rules and Regulations Authorizing the
Establishment of Toll Facilities and found no provision requiring
the issuance of public notices and the conduct of public
hearings prior to the issuance of a TOC.
V
Approval of the AS TOA by the DOTC Secretary was approval
by the President.
The doctrine of qualified political agency declares that, save in
matters on which the Constitution or the circumstances require
the President to act personally, executive and administrative
functions are exercised through executive departments headed
by cabinet secretaries, whose acts are presumptively the acts
of the President unless disapproved by the latter.110 As
explained in Villena v. Executive Secretary,111 this doctrine is
rooted in the Constitution:
x x x With reference to the Executive Department of the
government, there is one purpose which is crystal-clear and is
readily visible without the projection of judicial searchlight, and
that is, the establishment of a single, not plural, Executive. The
first section of Article VII of the Constitution, dealing with the
Executive Department, begins with the enunciation of the
principle that "The executive power shall be vested in a
President of the Philippines." This means that the President of
the Philippines is the Executive of the Government of the
Philippines, and no other. The heads of the executive
departments occupy political positions and hold office in an
advisory capacity, and, in the language of Thomas Jefferson,
"should be of the President's bosom confidence," and, in the
language of Attorney-General Cushing, "are subject to the
direction of the President." Without minimizing the importance
of the heads of the various departments, their personality is in
reality but the projection of that of the President. Stated
otherwise, and as forcibly characterized by Chief Justice Taft of
the Supreme Court of the United States, "each head of a
department is, and must be, the President's alter ego in the
matters of that department where the President is required by
law to exercise authority." Secretaries of departments, of
course, exercise certain powers under the law but the law
cannot impair or in any way affect the constitutional power of
control and direction of the President. As a matter of executive
policy, they may be granted departmental autonomy as to
certain matters but this is by mere concession of the executive,
in the absence of valid legislation in the particular field. If the
President, then, is the authority in the Executive Department,
he assumes the corresponding responsibility. The head of a
department is a man of his confidence; he controls and directs
his acts; he appoints him and can remove him at pleasure; he
is the executive, not any of his secretaries.112 x x x (Citations
omitted)
Applying the doctrine of qualified political agency, we have
ruled that the Secretary of Environment and Natural Resources
can validly order the transfer of a regional office by virtue of
the power of the President to reorganize the national
government.113 In Constantino v. Cuisia,114 the Court upheld
the authority of the Secretary of Finance to execute debt-relief
contracts. The authority emanates from the power of the
President to contract foreign loans under Section 20, Article VII
of the Constitution. In Angeles v. Gaite,115 the Court ruled that
there can be no issue with regard to the President's act of
limiting his power to review decisions and orders of the
Secretary of Justice, especially since the decision or order was
issued by the secretary, the President's "own alter ego."116
There can be no question that the act of the secretary is the
act of the President, unless repudiated by the latter. In this
case, approval of the ASTOA by the DOTC Secretary had the
same effect as approval by the President. The same would be
true even without the issuance of E.O. 497, in which the
President, on 24 January 2006, specifically delegated to the
DOTC Secretary the authority to approve contracts entered
into by the TRB.
Petitioners are unimpressed. They cite Section 8 of P.D. 1113
and Section 13 of P.D. 1894 as follows:
SECTION 8. The GRANTEE shall not lease, transfer, grant the
usufruct of, sell or assign this franchise nor the rights or
privileges acquired hereby, to any person, firm, company,
corporation or other commercial or legal entity, nor merge with
any other company or corporation without the prior approval
of the President of the Philippines. In the event that this
franchise is sold, transferred or assigned, the transferee shall
9
be subject to all the conditions, terms, restrictions and
limitations of this Decree as fully and completely and to the
same extents as if the franchise has been granted to the same
person, firm, company, corporation or other commercial or
legal entity. (Emphasis supplied)
SECTION 13. The GRANTEE shall not lease, transfer, grant the
usufruct of, sell or assign this franchise nor the rights or
privileges required hereby, to any person, firm, company,
corporation or other legal entity, nor merge with any other
company or corporation without the prior approval of the
President of the Philippines. In the event that this franchise is
sold, transferred or assigned, the transferee shall be subject to
all the conditions, terms, restrictions and limitations of this
Decree as fully and completely and to the same extent as if the
franchise has been granted to the said person, firm, company,
corporation or other legal entity. (Emphasis supplied)
Petitioners insist that based on the above provisions, it is the
President who should give personal approval considering that
the power to grant franchises was exclusively vested in
Congress. Hence, to allow the DOTC Secretary to exercise the
power of approval would supposedly dilute that legislative
prerogative.
The argument of petitioners is founded on the assumption that
PNCC in some way leased, transferred, granted the usufruct
of, sold, or assigned to SOMCO its franchise or the rights or
privileges PNCC had acquired by it. Here lies the error in
petitioners' stand. First, as discussed above, the power to
grant franchises or issue authorizations for the operation of a
public utility is not exclusively exercised by Congress. Second,
except where the situation falls within that special class that
demands the exclusive and personal exercise by the President
of constitutionally vested power,117 the President acts through
alter egos whose acts are as if the Chief Executive's own.
Third, no lease, transfer, grant of usufruct, sale, or assignment
of franchise by PNCC or its merger with another company ever
took place.
The creation of the TRB and the grant of franchise to PNCC
were made in the light of the recognition on the part of the
government that the private sector had to be involved as an
alternative source of financing for the pursuance of national
infrastructure projects. As the franchise holder for the
construction, maintenance and operation of infrastructure toll
facilities, PNCC was equipped with the right and privilege, but
not necessarily the means, to undertake the project. This is
where joint ventures with private investors become necessary.
A joint venture is an association of companies jointly
undertaking a commercial endeavor, with all of them
contributing assets and sharing risks, profits, and losses.118 It
is hardly distinguishable from a partnership considering that
their elements are similar and, thus, generally governed by the
law on partnership.119
In joint ventures with investor companies, PNCC contributes
the franchise it possesses, while the partner contributes the
financing - both necessary for the construction, maintenance,
and operation of the toll facilities. PNCC did not thereby lease,
transfer, grant the usufruct of, sell, or assign its franchise or
other rights or privileges. This remains true even though the
partnership acquires a distinct and separate personality from
that of the joint venturers or leads to the formation of a new
company that is the product of such joint venture, such as PSC
and SOMCO in this case.
Hence, when we say that the approval by the DOTC Secretary
in this case was approval by the President, it was not in
connection with the franchise of PNCC, as required under
Section 8 of P.D. 1113 and Section 13 of P.D. 1894. Rather,
the approval was in connection with the powers of the TRB to
enter into contracts on behalf of the government as provided
under Section 3(a) of P.D. 1112, which states:
SECTION 3. Powers and Duties of the Board. - The Board shall
have in addition to its general powers of administration the
following powers and duties:
(a) Subject to the approval of the President of the Philippines,
to enter into contracts in behalf of the Republic of the
Philippines with persons, natural or juridical, for the
construction, operation and maintenance of toll facilities such
as but not limited to national highways, roads, bridges, and
public thoroughfares. Said contract shall be open to citizens of
the Philippines and/or to corporations or associations qualified
under the Constitution and authorized by law to engage in toll
operations; (Emphasis supplied)
VI
Petitioners have not shown that the transfer of toll operations
to SOM CO was grossly disadvantageous to the government.
In support of their contention that the transfer of toll
operations from PSC to SOMCO was grossly disadvantageous
to the government, petitioners belittle the initial capital
investment, private ownership, and track record of SOMCO.
When one uses the term "grossly disadvantageous to the
government," the allegations in support thereof must reflect
the meaning accorded to the phrase. "Gross" means glaring,
reprehensible, culpable, flagrant, and shocking.120 It requires
that the mere allegation shows that the disadvantage on the
part of the government is unmistakable, obvious, and certain.
In this case, we find that the allegations of petitioners are
nothing more than speculations, apprehensions, and
suppositions.1âwphi1 They speculate that with its "measly"
capital investment, SOMCO would not be able to cover the
overhead expenses for personal services alone. They fear that
the revenue from toll operations would go to "private pockets"
in exchange for a small settlement amount to be given to PSC.
Given that SOMCO has no proven track record, petitioners
deduce that its assumption of the toll operations would lead to
poor delivery of toll services to the public.
The aim in the establishment of toll facilities is to draw from
private resources the financing of government infrastructure
projects. Naturally, these private investors would want to
receive reasonable return on their investments. Thus, the
collection of toll fees for the use of public improvements has
10
been authorized, subject to supervision and regulation by the
national government.121 As regards the ₱320 million settlement
given to PSC, the amount was to be used principally for the
payment of its liabilities of PSC arising from the retrenchment
of its employees. We note that under the MOA, the residual
assets of PSC shall still be offered for sale to CMMTC, subject
to valuation.122 Thus, it would be inaccurate to say that PSC
would receive only ₱320 million for the entire arrangement.
It is quite understandable that SOMCO does not yet have a
proven track record in toll operations, considering that it was
only the ASTOA and the MOA that gave birth to it. We are not
prepared to rule that this lack of track record would result in
poor delivery of toll services, especially because most of the
former employees of PSC have been rehired by SOMCO, an
allegation of respondents that was never refuted by
petitioners. Neither are we prepared to take the amount of
SOMCO's initial capital investment against it, as it is
considerably higher than ₱500,000, the authorized capital
stock of PSC as of 2002.123
A FINAL NOTE
R.A. 8975 prohibits lower courts from issuing any temporary
restraining order, preliminary injunction, or preliminary
mandatory injunction against the government - or any of its
subdivisions, officials or any person or entity, whether public or
private, acting under the government's direction - to restrain,
prohibit or compel acts related to the implementation and
completion of government infrastructure projects.
The rationale for the law is easily discernible. Injunctions and
restraining orders tend to derail the expeditious and efficient
implementation and completion of government infrastructure
projects; increase construction, maintenance and repair costs;
and delay the enjoyment of the social and economic benefits
therefrom. Thus, unless the matter is of extreme urgency
involving a constitutional issue, judges of lower courts who
shall issue injunctive writs or restraining orders in violation of
the law shall be administratively liable.
The law is clear that what is prohibited is merely the issuance
of provisional orders enjoining the implementation of a
national government project. R.A. 8975 does not bar lower
courts from assuming jurisdiction over complaints that seek
the nullification or implementation of a national government
infrastructure project as ultimate relief.124
There is no question that the ultimate prayer in the instant
case is the nullification of a national government project
considering that the ASTOA involved the design and
construction of Stage 2 of the South Metro Manila Skyway, as
well as the operation and maintenance of Stage 1 thereof. The
prayer is grounded on the contract's alleged
unconstitutionality, violation of the law, and gross
disadvantage to the government. Such principal action and
relief were within the jurisdiction of the RTC, which acted
correctly when it ordered respondents to file their respective
answers to the complaint, even while it denied the prayer for
the issuance of a writ of preliminary injunction and/or
temporary restraining order in observance of R.A. 8975.
It was therefore error on the part of petitioners to come
directly before this Court for the sole reason that the lower
courts will not be able to grant the prayer for the issuance of a
writ of preliminary injunction and/or temporary restraining
order to enjoin the assumption of toll operations by SOMCO.
The error even takes on a whole new meaning, because
SOMCO assumed responsibility for the operations and
maintenance of the South Metro Manila Skyway at 10:00 p.m.
on 31 December 2007. On the other hand, the complaint
before the RTC seeking to enjoin the assumption by SOMCO
was filed only on 3 January 2008, while the instant petition
was filed on 4 February 2008.

As we held in Aznar Brothers Realty, Inc. v. CA,125 injunction

does not lie when the act sought to be enjoined has already
become a fait accompli or an accomplished or consummated
act.

Parties must observe the hierarchy of courts before seeking

relief from this Court. Observance thereof minimizes the
imposition on the already limited time of this Court and
prevents delay, intended or otherwise, in the adjudication of
cases.126 We do not appreciate the litigants' practice of directly
seeking recourse before this Court, relying on the gravitas of a
personality yet making serious claims without the proof to
support them.

WHEREFORE, the petition is DISMISSED. The prayer for the

issuance of a writ of preliminary injunction and/or temporary
restraining order is DENIED.

SO ORDERED.

11
G.R. No. 176973 February 25, 2015
DAVID M. DAVID, Petitioner,
vs.
FEDERICO M. PARAGAS, JR., Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 seeking
to annul and set aside the July 31, 2006 Decision1and the
February 23, 2007 Resolution2 of the Court of Appeals (CA) in
CA-G.R. SP No. 80942. The said issuances modified the July
21, 2003 Order3 of the Regional Trial Court, Branch 200, Las
Piñas City (RTC) in Civil Case No. LP-02-0165, a case for
Declaratory Relief and Sum of Money with Damages filed by
petitioner David M. David (David) against Philam Plans Inc.
(PPI), Severo Henry G. Lobrin (Lobrin), respondent Federico M.
Paragas, Jr. (Paragas), Rodelio S. Datoy (Datoy), Rizal
Commercial Banking Corporation, Paranaque Branch (RCBC),
and Gerald P.S. Agarra (Agarra).
The RTC Order resolved the Motion to Admit Supplemental
Complaint filed by David and the Joint Omnibus Motion4filed by
David, Lobrin and Datoy. In the said Order, the RTC admitted
the attached supplemental complaint and approved the
compromise agreement.5 The questioned CA decision nullified
the approval by the RTC of the compromise agreement.
The Antecedents
Sometime in 1995, David, Paragas and Lobrin agreed to
venture into a business in Hong Kong (HK). They created
Olympia International, Ltd. (Olympia)under HK laws. Olympia
had offices in HK and the Philippines. David handled the
marketing aspect of the business while Lobrin and Datoy were
in charge of operations. In late1995, Olympia started with
"selling, through catalogs, consumer products such as
appliances, furniture and electronic equipment to the OFWs in
Hong Kong, to be delivered to their addresses in the
Philippines. They coined the name Kayang-Kaya for the
venture."6
In early 1998, Olympia became the exclusive general agent in
HK of PPI’s pre-need plans through the General Agency
Agreement. In late 2001, Olympia launched the Pares-Pares
program by which planholders would earn points with cash
equivalents for successfully enlisting new subscribers. The cash
equivalents, in turn, would be used for the payment of monthly
premiums of the planholders. PPI authorized Olympia to accept
the premium payments, including the cash equivalent of the
bonus points, and to remit the same, net of commissions, to
PPI in the Philippines. The money from HK was to be remitted
through Olympia’s account in RCBC. In turn, Olympia was to
pay the planholders’ bonuses as well as the share of profits for
the directors.7 David was tasked to personally remit said
amounts to PPI as he was the only signatory authorized to
transact on behalf of Olympia regarding the RCBC accounts.
12
As Paragas alleged, the amount remitted by Olympia to RCBC
from September 2001 to May 25, 2002 reached
₱82,978,543.00, representing the total net earnings from the
pre-need plans, 30% of which comprised the bonus points
earned by the subscribers under the Pares-Pares program. The
rest was to be distributed among the four partners.
In 2002, the state of affairs among the partners went sour
upon Lobrin’s discovery that David failed to remit to PPI the
30% cash equivalent of the bonus points.
In a meeting held on June 1, 2002 in HK, David tried to explain
his side, but no settlement was reached.
Later, Lobrin discovered that only ₱19,302,902.13 remained of
the ₱82,978,543.00 remitted from HK to the RCBC account. As
the Chairperson of Olympia’s Board of Directors (BOD),he
demanded the return of the entire ₱82,978,543.00.
On June 17, 2002, the BOD stripped David of his position as a
director. It then informed RCBC of his removal. In another
letter, it also instructed RCBC to prohibit any transaction
regarding the funds or their withdrawal therefrom pending the
determination of their rightful owner/s. Meanwhile, a Watch-
List Order was issued against David pursuant to the letter sent
by Paragas’ counsel to the Bureau of Immigration. As a result,
he was prevented from boarding a flight to Singapore on June
29, 2002.
Constrained by these circumstances, David filed a complaint
for Declaratory Relief, Sum of Money and Damages before the
RTC. He insisted on his entitlement to the commissions due
under the regular and Pares-Pares programs in his capacity as
Principal Agent under the General Agency Agreement with PPI;
that he be allowed to hold the cash deposits of ₱19,302,902.00
to the extent of ₱18,631,900.00 as a trust fund for the benefit
of the subscribers of the Pares-Pares program; that RCBC be
ordered to recognize no other signatory relative to the said
deposits except him; and that Paragas, Lobrin and Datoy be
held liable in an amount not less than ₱20,000,000.00,
representing the missing amount and/or unauthorized
disbursements from the funds of Olympia, plus the payment of
moral damages, exemplary damages and attorney’s fees.
Paragas and Lobrin filed their answers with compulsory
Counterclaims8 against David, to wit:
First Counterclaim - to mandate David to render an accounting
of the amounts mentioned;
Second Counterclaim - to require David to turn over such
books of accounts and other documents owned by Olympia as
well as all records pertaining to Olympia’s business
transactions in the Philippines;
Third Counterclaim - to make David pay the amount of
₱24,893,562.90 to Philam as cash bonuses of the respective
original subscribers;
Fourth Counterclaim - to make David pay Lobrin and Paragas
the amount of ₱24,521,245.00 each, as and by way of actual
damages, representing (1) Lobrin and Paragas’ respective
shares as co-owners in the net profit of Olympia from the sale
of the Pre-need plan under the pares-pares program in the
amount of ₱14,521,245.00 and the amount of ₱10,000,000.00
representing the cost of plane fares, living allowances and
unrealized profit;
Fifth Counterclaim - to hold David liable to pay Lobrin and
Paragas the amount of ₱20,000,000.00 each, as and by way of
moral damages;
Sixth Counterclaim - to make David pay the amount of
₱10,000,000.00 as and by way of exemplary damages; and
Seventh Counterclaim - to hold David personally liable to pay
Lobrin and Paragas the amount of ₱1,000,000.00 as attorney’s
fees, plus such amount as may be proved during the trial as
litigation expenses and cost of suit.9
On March 5, 2003, David filed the supplemental complaint,
with a manifestation that an amicable settlement was struck
with Lobrin and Datoy whereby they agreed to withdraw the
complaint and counterclaims against each other. On May 6,
2003, Lobrin and Olympia through their counsel, confirmed
that on March 26, 2003, they had arrived at a
compromise.10 The agreement clearly stated that Lobrin was
acting on Olympia’s behalf, on the basis of a resolution passed
during the board meeting held on March 21, 2003. The
settlement reads:
COMPROMISE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement, entered into by and between:
DAVID M. DAVID, of legal age, married, Filipino and with
address at 23 Pablo Roman Street, BF Homes, Paranaque,
hereinafter referred to as DMD;
-and-
OLYMPIA INTERNATIONAL LIMITED, a corporation organized
and existing under the laws of Hong Kong, with principal office
at 13/F Li Dong Building, 7-11 Li Yuen Street East, Central,
Hong Kong, and herein represented by its Attorney-in-Fact,
Henry G. Lobrin, and herein after referred to as Olympia;
WITNESSETH: That –
WHEREAS, Olympia has passed a board resolution during the
meeting of its Board of Directors held in Hong Kong on 21
March 2003 constituting and appointing as such its herein
Attorney-in-Fact for the purposes stated in said resolution, a
copy of which is hereto attached as Annex "A"; WHEREAS,
there is a pending case before Branch 200 of the Regional Trial
Court of Las Pi[ñ]as City docketed as Civil Case No. LP-02-0165
("the Case") and among the defendants in said Case are Henry
13
G. Lobrin, Federico M. Paragas, Jr. and Roberto S. Datoy who
are presently directors of Olympia;
WHEREAS, the causes of action in the complaint in said Case
against aforesaid Lobrin, Paragas, Jr. and Datoy are in their
capacity as shareholders/directors of Olympia, and likewise
concern the relationship and rights between DMD and Olympia
International Ltd., including the status of the latter’s operations
and financial position;
WHEREAS, another issue in said case is the respective rights of
herein parties DMD and Olympia under and pursuant to the
General Agency Agreement (GAA) with Philam Plans Inc.,
("PPI") dated 10 February 1998;
WHEREAS, corollary to the issue of the GAA is the respective
obligation of DMD and Olympia to the planholders of PPI under
the regular and pares pares program, specifically the binhing
yaman and pamilyaman benefits due to approximately 12,000
planholders of Philam Plans Inc. ("PPI") as per the list attached
to the complaint in said Case;
WHEREAS, both DMD and Olympia are desirous of settling the
Case amicably under mutually acceptable terms and
conditions:
NOW, THEREFORE, parties hereby agree as follows:
1. Olympia hereby waives its rights and
interests to the trust fund presently in
Account Nos. 1-214-25224-0, 07214108903-
003 and 0000005292 with the Rizal
Commercial Banking Corporation ("RCBC")
and Account No. 0301-01334-5 with the
Equitable PCI Bank pertaining to the cash
benefits of the approximately 12,000
planholders of Philam Plans, Inc., per the list
attached to the complaint in the Case;
2. Olympia further agrees that the same
shall be settled exclusively by DMD, subject
to the requirement that it shall be furnished
a copy of the Statement of Benefits
pertaining to each planholder;
3. Olympia likewise no longer interposes any
objection/opposition to the payment of the
cash benefits to the planholders from said
trust funds, and shall make of record in the
Case the withdrawal of its opposition;
4. DMD shall drop as party Defendants from
the Case Severo Henry G. Lobrin, Federico
M. Paragas, Jr. and Rodelio S. Datoy;
5. Olympia shall withdraw its First
Compulsory Counterclaim, Second
Compulsory Counterclaim and Third
Compulsory Counterclaim as stated in the
"Answer with Compulsory Counterclaims"
 dated 3 October 2002 filed in said Case,
because the subject matters of said
compulsory counterclaims are exclusively the
concern of Olympia as a corporation and are
now the subject of this Compromise
Agreement;
6. Olympia shall likewise withdraw the
Fourth Compulsory Counterclaim, Fifth
Compulsory Counterclaim, Sixth Compulsory
Counterclaim and Seventh Compulsory
Counterclaim in so far as they refer to claims
to which the claimants will be entitled in
their capacity as shareholder and/or director
of Olympia;
7. The Fourth Compulsory Counterclaim,
Fifth Compulsory Counterclaim, Sixth
Compulsory Counterclaim and Compulsory
Counterclaim (sic) will also be withdrawn by
Henry G. Lobrin in his personal capacity;
8. For this purpose, the following motions
shall be filed pursuant to this Agreement;
a. A Joint Motion shall be filed in
the case for the dismissal of the
complaint and compulsory
counterclaims as above stated;
b. A Motion to Withdraw Opposition
to the Motion to Release Benefits
and Supplemental Motion (to
Release Benefits) be filed by
Olympia through its Attorney-in-
Fact.
IN WITNESS WHEREOF, parties hereto set their hands this
____ day of _________ in ____________________.
1âwphi1
DAVID M. DAVID OLYMPIA
INTERNATIONAL
Ltd.
By:
HENRY
Attorney-in Fact
HENRY
In his personal capacity they refer to the claims pertaining to Defendants
[Emphases supplied]11
On May 15, 2003, David and Lobrin filed the Joint Omnibus
Motion to formally inform the RTC of the compromise
agreement. They asserted the following:
14
2. Said agreement was executed between Plaintiff
and Olympia, the latter being represented by
Defendant Lobrin as Olympia’s Attorney-in-Fact,
pursuant to a resolution passed by a majority vote
during the board meeting held in Hong [Kong] on 21
March 2003 wherein Defendants Lobrin, Paragas, Jr.
and Datoy were all present, authorizing said Attorney-
in-Fact to negotiate a compromise settlement
regarding instant case, the payment of the accrued
benefits due the planholders of Philam Plan, Inc.
under the regular and Pares-Pares program as well as
the disposition of the cash and other deposits with
Rizal Commercial Banking Corporation (RCBC) and
other accounts in other banks. Said resolution is
appended to the Agreement as its Annex "A";
3. By virtue of said Agreement, Olympia no longer
questions and hereby waives whatever rights and
interest it may have to the deposits constituting the
trust fund pertaining to the cash benefits of the
approximately 12,000 planholders of Philam Plans
Inc., per the list attached to the complaint in instant
case in Account Nos. 1-214-25224-0, 07214108903-
003 and 0000005292 with RCBC and Account No.
0301-01334-5 with the Equitable-PCI Bank;
4. Olympia further withdraws its objection/opposition
to the payment of the cash benefits to the
planholders from said trust funds which shall remain
to be the sole responsibility/accountability of Plaintiff,
subject to the requirement that Olympia through its
authorized Attorney-in-Fact shall be furnished a copy
of the Statement of Benefits pertaining to each
planholder;
5. As a consequence of the above, Defendants Severo
Henry G. Lobrin, Federico M. Paragas, Jr. and Rodelio
S. Datoy shall be dropped as party defendants in
instant case, to which no objection will be interposed
by Plaintiff, and the motion to declare Defendant
Datoy in default for failure to file his Answer is
similarly withdrawn for having been rendered moot
and academic by the Agreement;
6. Olympia hereby withdraw[s] its First, Second and
Third Compulsory Counterclaims against herein
Plaintiff considering that the legal and factual bases
thereof are matters which are exclusively the concern
of Olympia as a corporation and have been the
subject
G. of the Agreement;
LOBRIN
7. Olympia likewise withdraws the Fourth, Fifth, Sixth
and
G. Seventh Compulsory
LOBRINCounterclaim in so far as
Paragas, Lobrin and Datoy in their capacity as
shareholders and/or directors of Olympia;
8. Defendant Lobrin likewise withdraws the Fourth,
Fifth, Sixth and Seventh Compulsory Counterclaim in
so far as they refer to claims pertaining to him in his
personal capacity;
 9. Plaintiff likewise withdraws his complaint against
Defendant Gera[l]d P.S. Algarra based on the
statements contained in the latter’s Answer, and said
Defendant likewise withdraws his Counterclaims
against plaintiff, however, Plaintiff reserves his right
to implead the proper party Defendant; and
10. This motion is without prejudice to the right of
Defendant Paragas to join and/or avail of the benefits
of the Agreement and instant Motion hereinafter.12
On May 8, 2003, Paragas questioned the existence of the cited
BOD resolution granting Lobrin the authority to settle the case,
as well as the validity of the agreement through an affidavit
duly authenticated by the Philippine Consul, Domingo
Lucinario, Jr. He pointed to the fact that Olympia, as an entity,
was never a party in the controversy.
On July 21, 2003, the RTC granted David’s Motion to Admit the
Supplemental Complaint and approved the compromise
agreement, to wit:
Further, finding the agreement in the JOINT OMNIBUS
MOTION to be well-taken, not contrary to law, public policy
and morals, the same is hereby APPROVED and the motion
GRANTED. The resolution is hereby rendered based thereon,
thus, the parties concerned are enjoined to faithfully comply
with all the terms and conditions stated therein. As prayed for
by the parties concerned in the JOINT OMNIBUS MOTION, let
Henry G. Lobrin, Rodelio S. Datoy and Gera[l]d PS Algarra BE
DROPPED as party defendants except defendant Federico
Paragas, Jr. who filed an Opposition thereto, and the
compulsory counterclaims between defendants Lobrin, Datoy
and Algarra and plaintiff David against each other DISMISSED.
The withdrawal of the motion to declare defendant Datoy is
hereby noted.13
On August 15, 2003, Paragas moved for
reconsideration,14 claiming that although the parties had the
prerogative to settle their differences amicably, the intrinsic
and extrinsic validity of the compromise agreement, as well as
its basis, may be questioned if illicit and unlawful.
In its September 30, 2003 Order,15 the RTC denied the motion
of Paragas.
Unperturbed, Paragas elevated the issue to the CA via a
petition for certiorari under Rule 65 of the Rules of Court.
In its July 31, 2006 Decision, the CA reversed the RTC’s
approval of the compromise agreement. It explained that the
agreement entered into by David, Lobrin and Datoy was invalid
for two reasons: First, the agreement was between David and
Olympia, which was not a party in the case; and second,
assuming that Olympia could be considered a party, there was
no showing that the signatory had the authority from Olympia
or from the other parties being sued to enter into a
compromise.
David moved for reconsideration. In its February 23, 2007
Resolution, the CA denied his motion. Hence, this petition.
15
GROUNDS OF THE PETITION
I. RESPONDENT COURT LACKEDAND/OR EXCEEDED
ITS JURISDICTION WHEN IT MODIFIED THE ORDER
OF THE TRIAL COURT DATED JULY21, 2003,
DESPITE THE ASSIGNMENT OF ERROR
BEINGSPECIFICALLY LIMITED TO THE ORDER OF
THE TRIAL COURT DATED SEPTEMBER 30, 2003
WHICH DENIED THE MOTION FOR
RECONSIDERATION FILED BY HEREIN PRIVATE
RESPONDENT
II. OLYMPIA IS NOT A PARTY TO THE CASE BELOW,
HENCE, THE DISMISSAL OF THE COMPLAINT AND
COMPULSORY COUNTERCLAIMS ARE PERSONAL IN
NATURE TO THE PARTIES AND IS WITHIN THE
PURVIEW OF SECTION 2 OF RULE 17
III. THERE IS DENIAL OF DUE PROCESS OF LAW
WHEN RESPONDENT COURT ANNULLED THE
COMPROMISE AGREEMENT BASED ON
UNSUBSTANTIATED ALLEGATIONS OF FACT
CONTAINED IN THE PETITION.16
In his reply,17 David limited his "discussion to the issue that
still has a practical bearing on the case below,"18 that is,
whether or not the nullification of the Compromise Agreement
similarly nullified the dismissal of both the complaint as against
the defendants xxx.19
In the Resolution, dated February 16,2011, the Court gave due
course to the petition and directed the parties to file their
respective memoranda.20 While Paragas was able to file his
memorandum on May 16, 2011, David’s memorandum was
dispensed with in a resolution, dated June 19, 2013, for his
failure to file one within the extended period granted by the
Court.21 Position of David
David charges the CA with grave abuse of discretion in
dispensing a relief more than what Paragas prayed for.
According to David, the CA exceeded its jurisdiction when it
annulled the compromise agreement despite the fact that the
assignment of error in the petition of Paragas before the CA
was limited only to the review of the correctness of the RTC’s
September 30, 2003 Order denying the motion for
reconsideration and not the July 21, 2003 Order approving the
compromise agreement. In other words, David is of the view
that because Paragas did not assail the July 21, 2003 Order,
the same should not have been modified by the CA.
He further insists that the CA should not have annulled the
compromise agreement because the July 21, 2003 RTC Order
did not refer to the approval of the compromise agreement,
but to the agreement of the parties to dismiss the claims and
counterclaims against each other. In support of this position,
David takes refuge in the RTC statement that the parties had
the right to "amicably settle their issues even if subject
compromise agreement had not been entered into." To him, it
was not the "Compromise Agreement" that was approved, but
the "underlying agreement between the parties to withdraw
their claims against each other which are personal to them in
nature."
Lastly, David submits that he was denied due process of law
when the CA annulled the compromise agreement based on
unsubstantiated allegations of fact, that is, the allegation that
the board meeting granting Lobrin the authority to enter into
compromise with him on behalf of Olympia and on behalf of
the other parties did not take place. He believes that Paragas
failed to prove his allegations and, therefore, the meeting, as
supported by the minutes signed by one Flordeliza Sacapano,
must be respected as a matter of fact.
The Court’s Ruling
The Court denies the petition.
The CA did not exceed its
jurisdiction in modifying
the July 21, 2003 RTC Order
In his petition, David claims that the CA exceeded its
jurisdiction when it modified the July 21, 2003 Order of the
RTC by admitting David’s supplemental complaint and
approving the earlier mentioned compromise agreement even
though Paragas’ petition for certiorari before the CA only
questioned the September 30, 2003 Order of the RTC denying
his motion for reconsideration.22
This Court is unmoved by this position advocated by David.
In countless cases, the Court has allowed the consideration of
other grounds or matters not raised or assigned as errors. In
the case of Cordero vs. F.S. Management & Development
Corporation,23 the Court wrote:
While a party is required to indicate in his brief an assignment
of errors and only those assigned shall be considered by the
appellate court in deciding the case, appellate courts have
ample authority to rule on matters not assigned as errors in an
appeal if these are indispensable or necessary to the just
resolution of the pleaded issues. Thus this Court has allowed
the consideration of other grounds or matters not raised or
assigned as errors, to wit: 1) grounds affecting jurisdiction
over the subject matter; 2) matters which are evidently plain
or clerical errors within the contemplation of the law; 3)
matters the consideration of which is necessary in arriving at a
just decision and complete resolution of the case or to serve
the interest of justice or to avoid dispensing piecemeal justice;
4) matters of record which were raised in the trial court and
which have some bearing on the issue submitted which the
parties failed to raise or which the lower court ignored; 5)
matters closely related to an error assigned; and 6) matters
upon which the determination of a question properly assigned
is dependent.[Emphases supplied]24
In this case, while it is true that Paragas’ petition for certiorari
before the CA only assailed the subsequent order of the RTC
denying his August 15, 2003 Motion for Reconsideration, he
did pray in the said motion for reconsideration that it set aside
16
and reverse its approval of the Joint Omnibus Motion. The
prayer reads:
WHEREFORE, it is respectfully prayed of this Honorable Court
that the Order dated 21 July 2003 be MODIFIED to SET ASIDE
and REVERSE the approval of the Joint Omnibus Motion dated
15 May 2003 and a new one be issued DENYING said motion.25
Obviously, the resolution of his motion for reconsideration
necessarily involved the July 21, 2003 Order of the RTC as it
was indispensable and inextricably linked with the September
30, 2003 Order being assailed.
The CA did not err in annulling the
compromise agreement.
At the outset, David asserts that the CA based the annulment
of the compromise agreement exclusively on the
unsubstantiated allegations of Paragas.
The Court disagrees. A careful reading of the assailed CA
decision reveals that it did not merely rely on the claims of
Paragas. What the CA did was to analyze and appreciate the
circumstances behind the compromise agreement. In revisiting
and delving deep into the records, the Court indeed agrees
with the CA that the RTC gravely abused its discretion in
approving the agreement for the following reasons:
First, the subject compromise agreement could not be the
basis of the withdrawal of the respective complaint and
counterclaims of the parties for it was entered into by David
with a non-party in the proceedings. Even if the Court
interprets that the RTC approved the underlying agreement to
withdraw the claims and counterclaims between the parties,
the terms and conditions of the subject compromise
agreement cannot cover the interests of Olympia, being a non-
party to the suit.
Second, the RTC had no authority to approve the said
compromise agreement because Olympia was not impleaded
as a party, although its participation was indispensable to the
resolution of the entire controversy.
A compromise agreement could not be
the basis of dismissal/withdrawal of a
complaint and counterclaims if it was
entered into with a non-party to the
suit.
A compromise agreement is a contract whereby the parties
make reciprocal concessions in order to resolve their
differences and, thus, avoid or put an end to a lawsuit. They
adjust their difficulties in the manner they have agreed upon,
disregarding the possible gain in litigation and keeping in mind
that such gain is balanced by the danger of losing. It must not
be contrary to law, morals, good customs and public policy,
and must have been freely and intelligently executed by and
between the parties.26 A compromise agreement may be
executed in and out of court. Once a compromise agreement is
given judicial approval, however, it becomes more than a
contract binding upon the parties. Having been sanctioned by
the court, it is entered as a determination of a controversy and
has the force and effect of a judgment.27
Verily, a judicially approved compromise agreement, in order
to be binding upon the litigants with the force and effect of a
judgment, must have been executed by them. In this case, the
compromise agreement was signed by David in his capacity as
the complainant in the civil case, and Olympia, through Lobrin
as its agent. The agreement made plain that the terms and
conditions the "parties" were to follow were agreed upon by
David and Olympia. Datoy and Paragas never appeared to
have agreed to such terms for it was Olympia, despite not
being a party to the civil case, which was a party to the
agreement. Despite this, David claims that the concessions
were made by Olympia on behalf of the non-signatory parties
and such should be binding on them.
David must note that Olympia is a separate being, or at least
should be treated as one distinct from the personalities of its
owners, partners or even directors. Under the doctrine of
processual presumption, this Court has to presume that Hong
Kong laws is the same as that of the Philippines particularly
with respect to the legal characterization of Olympia’s legal
status as an artificial person. Elementary is the rule that under
Philippine corporate and partnership laws, a corporation or a
partnership possesses a personality separate from that of its
incorporators or partners. Olympia should, thus, be accorded
the status of an artificial being at least for the purpose of this
controversy.
On that basis, Olympia’s interest should be detached from
those of directors Paragas, Lobrin, Datoy, and even David.
Their (individual directors) interest are merely indirect,
contingent and inchoate. Because Olympia’s involvement in the
compromise was not the same as that of the other parties who
were, in the first place, never part of it, the compromise
agreement could not have the force and effect of a judgment
binding upon the litigants, specifically Datoy and Paragas.
Conversely, the judicially approved withdrawal of the claims on
the basis of that compromise could not be given effect for such
agreement did not concern the parties in the civil case.
David, nevertheless, points out that the validity of the
dismissal of the claims and counterclaims must remain on the
argument that the compromise agreement was made in their
personal capacities inasmuch as he filed the complaint against
Paragas, Lobrin and Datoy also in their personal capacities. He
draws support from the Answer with Compulsory
Counterclaims28 filed by Paragas and Lobrin. The counterclaims
against him did not involve Olympia, save for the demand to
render an accounting as well as to turn over the books of
account and records pertaining to the latter. David, thus,
stated:
It is very clear from the order of July 21, 2003 that the
agreement being referred to as having been approved is not
the Compromise Agreement but the agreement of the parties
to dismiss the claims and counterclaims against each other.
This is obvious when the order stated that it is within the right
of the parties to amicably settle the issues even if subject
Compromise Agreement had not been entered into. Clearly, it
was not the Compromise Agreement that was approved,
17
because precisely it involved Olympia, but the underlying
agreement between the parties to withdraw their claims
against each other which are personal to them in nature. As
noted by the trial court, even without the Compromise
Agreement, parties could still settle the case amicably and
withdraw the claims against one another which is precisely
what the parties did.29
His contention is devoid of merit.
While David repeatedly claims that his complaint against
Paragas, Lobrin and Datoy was personal in character, a review
of the causes of action raised by him in his complaint shows
that it primarily involved Olympia. As defined, a cause of action
is an act or omission by which a party violates a right of
another. It requires the existence of a legal right on the part of
the plaintiff, a correlative obligation of the defendant to
respect such right and an act or omission of such defendant in
violation of the plaintffs’s rights.30
In his complaint, David raised three causes of action. The first
one dealt with the alleged omission on the part of the other
venture partners to respect his right, being Olympia’s beneficial
owner and PPI’s principal agent under the GAA, over the
income generated from the sale PPI’s pre-need plans. The
second dealt with his right over all amounts that the venture
partners disbursed in excess of those authorized by him, under
the premise that he remained Olympia’s beneficial owner. The
third dealt with the acts of the venture partners in causing
undue humiliation and shame when he was prevented from
boarding his Singapore-bound plane pursuant to the Watch-
List Order issued by the Bureau of Immigration at the behest
of a letter sent by the counsel of Paragas. Accordingly, David
prayed that the RTC:
a. Declare him as the one entitled to the commission due
under the regular and Pares-Pares programs net of the agents’
commission in his capacity as Principal Agent under the
General Agency Agreement with Philam Plans, Inc.;
b. Hold the cash deposits of ₱19,302,902.00 to the extent of
₱18,631,900.00 as a trust fund for the benefit of the
subscribers of the Pares-Pares Program and validly held in
trust by [him];
c. Order Defendant RCBC to recognize no other signatory to
said deposits except [him].
x x x x31
Essentially, David was asking for judicial determination of his
rights over Olympia’s revenues, funds in the RCBC bank
accounts and the amounts used and expended by Olympia
through the acts of its directors/defendants. Nothing therein
can be said to be "personal" claims against Paragas, Lobrin
and Datoy, except for his claim for damages resulting from the
humiliation he suffered when he was prevented from boarding
his Singapore-bound plane. Obviously, the argument that they
executed the compromise agreement in their personal
capacities does not hold water.
For even if the Court looks closer at the concessions made,
many provisions deal with Olympia’s interests instead of the
personal claims they have against one another. A review of the
Joint Omnibus Motion would also show that the compromise
agreement dealt more with David and Olympia. Given this,
Olympia did not have the standing in court to enter into a
compromise agreement unless impleaded as a party. The RTC
did not have the authority either to determine Olympia’s rights
and obligations. Furthermore, to allow the compromise
agreement to stand is to deprive Olympia of its properties and
interest for it was never shown that the person who signed the
agreement on its behalf had any authority to do so.
More importantly, Lobrin, who signed the compromise
agreement, failed to satisfactorily prove his authority to bind
Olympia. The CA observed, and this Court agrees, that the
"board resolution" allegedly granting authority to Lobrin to
enter into a compromise agreement on behalf of Olympia was
more of a part of the "minutes" of a board meeting containing
a proposal to settle the case with David or to negotiate a
settlement. It should be noted that the said document was not
prepared or issued by the Corporate Secretary of Olympia but
by a "Secretary to the Meeting." Moreover, the said resolution
was neither acknowledged before a notarial officer in Hong
Kong nor authenticated before the Philippine Consul in Hong
Kong.32 Considering these facts, the RTC should have denied
the Joint Omnibus Motion and disapproved the compromise
agreement. In fine, Olympia was not shown to have properly
consented to the agreement, for the rule is, a corporation can
only act through its Board of Directors or anyone with the
authority of the latter. To allow the compromise agreement to
stand is to deprive Olympia of its properties and interest for it
was never shown that Lobrin had the necessary authority to
sign the agreement on Olympia’s behalf.
Olympia is an indispensable
Party
RTC which flows from the absence of Olympia, being an
indispensable party, necessarily negates any binding effect of
the subject judicially-approved compromise agreement.
Time and again, the Court has held that the absence of an
indispensable party renders all subsequent actions of the court
null and void for want of authority to act, not only as to the
absent parties but even to those present. The failure to
implead an indispensable party is not a mere procedural
matter. Rather, it brings to fore the right of a disregarded
party to its constitutional rights to due process. Having
Olympia's interest being subjected to a judicially-approved
agreement, absent any participation in the proceeding leading
to the same, is procedurally flawed. It is unfair for being
violative of its right to due process. In fine, a holding that is
based on a compromise agreement that springs from a void
proceeding for want of jurisdiction over the person of an
indispensable party can never become binding, final nor
executory and it may be "ignored wherever and whenever it
exhibits its head."35
Lest it be misunderstood, after the remand of this case to the
R TC, the parties can still enter into a compromise agreement
on matters which are personal to them. That is their absolute
right. They can dismiss their claims and counterclaims against
each other, but the dismissal should not be dependent or
contingent on a compromise agreement, one signatory to
which is not a party. It should not also involve or affect the
rights of Olympia, the non-party, unless it is properly
impleaded as one. Needless to state, a judicial determination
of the rights of Olympia, when it is not a party, would
necessarily affect the rights of its shareholders or partners, like
Paragas, without due process of law.
WHEREFORE, the petition is DENIED. The July 31, 2006
Decision of the Court of Appeals and its February 23, 2007
Resolution in CA-G.R. SP No. 80942 are hereby AFFIRMED.

In Lotte Phil. Co., Inc. v. Dela Cruz,33 the Court reiterated that SO ORDERED.
an indispensable party is a party-in-interest without whom no
final determination can be had of an action, and who shall be
joined either as plaintiffs or defendants. The joinder of
indispensable parties is mandatory. The presence of
indispensable parties is necessary to vest the court with
jurisdiction, which is "the authority to hear and determine a
cause, the right to act in a case."34

Considering that David was asking for judicial determination of

his rights in Olympia, it is without a doubt, an indispensable
party as it stands to be injured or benefited by the outcome of
the main proceeding. It has such an interest in the controversy
that a final decree would necessarily affect its rights. Not
having been impleaded, Olympia cannot be prejudiced by any
judgment where its interests and properties are adjudicated in
favor of another even if the latter is a beneficial owner. It
cannot be said either to have consented to the judicial
approval of the compromise, much less waived substantial
rights, because it was never a party in the proceedings.

Moreover, Olympia’s absence did not confer upon the RTC the
jurisdiction or authority to hear and resolve the whole
controversy.1âwphi1 This lack of authority on the part of the
18
G.R. No. 208928 July 8, 2015
ANDY ANG, Petitioner,
vs.
SEVERINO PACUNIO, TERESITA P. TORRALBA, SUSANA
LOBERANES, CHRISTOPHER N. PACUNIO, and PEDRITO
P. AZARCON, represented by their attorney-in-fact,
GALILEO P. TORRALBA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 under Rule 45
of the Rules of Court are the Decision2 dated September 28,
2012 and the Resolution3 dated August 13, 2013 of the Court
of Appeals (CA) in CA-G.R. CV No. 00992-MIN, which affirmed
the Summary Judgment4 dated September 12, 2006 of the
Regional Trial Court of Cagayan de Oro City, Branch 38 (RTC)
in Civil Case No. 2003-115 with modification declaring, inter
alia, the Deed of Absolute Sale between petitioner Andy Ang
(petitioner) and Felicisima Udiaan (Udiaan) null and void.
The Facts
The instant case arose from a Complaint5 dated March I 9,
2003 for Declaration of Nullity of Sale, Reconveyance, and
Damages filed by Pedrito N. PaGunio, Editha P. Yaba, and
herein respondents Severino Pacunio, Teresita P. Torralba,
Susana Loberanes, Christopher N. Pacunio, and Pedrito P.
Azaron (respondents) against petitioner before the RTC
involving a 98,851 square meter (sq. m.) parcel of land
originally registered in Udiaan's name as evidenced by Original
Certificate of Title (OCT) No. T-35936 (subject land). In their
Complaint, respondents alleged that they are the grandchildren
and successors-in-interest of Udiaan who died7 on December
15, 1972 in Cagayan de Oro City and left the subject land as
inheritance to her heirs. However, on July 12, 1993, an
impostor falsely representing herself as Udiaan sold the subject
land to petitioner, as evidenced by a Deed of Absolute Sale8 of
even date (Questioned Deed of Absolute Sale). Consequently,
OCT No. T-3593 was cancelled and Transfer Certificate of Title
(TCT) No. T-790519 was issued in the latter's name. In 1997,
petitioner entered the subject land and used the same in his
livestock business. Respondents then informed petitioner that
he did not validly acquire the subject land, and thereafter,
demanded for its return, but to no avail.10 Hence, they filed the
aforesaid complaint, essentially contending that Udiaan could
not have validly sold the subject land to petitioner considering
that she was already dead for more than 20 years when the
sale occurred.11
In his Answer,12 petitioner denied respondents' allegations and
countered that: (a) at first, he bought the subject land from a
person representing herself as Udiaan who showed a
community tax certificate as proof of identity, has in her
possession OCT No. T-3593, knew the location of the subject
land, and was not afraid to face the notary public when they
executed the Questioned Deed of Absolute Sale; ( b) he was
initially prevented from entering the subject land since it was
being occupied by the Heirs of Alfredo Gaccion (Heirs of
19
Gaccion); (c) in order to buy peace, he had to "buy" the
subject land anew from the Heirs of Gaccion; (d) he was a
buyer in good faith, for value, and was without any knowledge
or participation in the alleged defects of the title thereof; and (
e) respondents were never in possession of the subject land
and they never paid real property taxes over the same.
Ultimately, petitioner claimed that he was duped and swindled
into buying the subject land twice.13
After the pre-trial conference, the parties submitted the case
for summary judgment on the basis of the documents and
pleadings already filed.1awp++i1 The RTC then ordered the
parties to simultaneously submit their memoranda in support
of their respective positions.14
The RTC Ruling
In a Summary Judgment15 dated September 12, 2006, the RTC
ruled in petitioner's favor and accordingly, dismissed the case
for lack of merit.16 It found that while respondents claimed to
be Udiaan's successors-in-interest over the subject land, there
is dearth of evidence proving their successional rights to
Udiaan's estate, specifically, over the subject land. As such, the
RTC concluded that respondents are not the real parties in
interest to institute an action against petitioner, warranting the
dismissal of their complaint.17
Dissatisfied, respondents appealed18 to the CA.
The CA Ruling
In a Decision19 dated September 28, 2012, the CA affirmed
with modification the RTC ruling in that: (a) it nullified the
Questioned Deed of Absolute Sale; (b) declared valid the deed
of absolute sale between petitioner and the Heirs of Gaccion
over a 3,502-sq. m. portion of the subject land; and ( c)
distributed portions of the subject land to the Heirs of Gaccion
and to the children of Udiaan.20
It agreed with the RTC's finding that respondents are not real
parties in interest to the instant case, considering that, as
mere grandchildren of Udiaan, they have no successional
rights to Udiaan's estate. In this regard, the CA ratiocinated
that respondents could only succeed from said estate by right
of representation if their mother, who is one of Udiaan's
children,21 predeceased Udiaan. However, such fact was not
established.22
This notwithstanding, the CA nullified the Questioned Deed of
Absolute Sale because it was clearly executed by a person
other than Udiaan, who died more than 20 years before such
sale occurred.23 Considering, however, that some of Udiaan's
heirs had already sold a 9,900-sq. m. portion of the subject
land to the Heirs of Gaccion, who in turn, sold a 3,502-sq. m.
portion to petitioner, the CA apportioned the subject land as
follows: (a) 3,502 sq. m. to petitioner; (b) 6,398 sq. m. to the
Heirs of Gaccion; and (c) the remainder of the subject land to
Udiaan's children.24
Aggrieved, petitioner moved for reconsideration,25 but was
denied in a Resolution26 dated August 13, 2013; hence, this
petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the
CA correctly declared the nullity of the Questioned Deed of
Absolute Sale and distributed portions of the subject land to
different parties, among others, despite ruling that
respondents are not real parties in interest to the instant case.
The Court's Ruling
The petition is meritorious.
Section 2, Rule 3 of the Rules of Court lays down the definition
of a real party in interest as follows:
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 suit. Unless
otherwise provided by law or these Rules, every action must
be prosecuted or defended in the name of the real party in
interest.
The rule on real parties in interest has two (2) requirements,
namely: (a) to institute an action, the plaintiff must be the real
party in interest; and (b) the action must be prosecuted in the
name of the real party in interest. Interest within the meaning
of the Rules of Court means material interest or an interest in
issue to be affected by the decree or judgment of the case, as
distinguished from mere curiosity about the question involved.
One having no material interest cannot invoke the jurisdiction
of the court as the plaintiff in an action. When the plaintiff is
not the real party in interest, the case is dismissible on the
ground of lack of cause of action.27 In Spouses Oco v.
Limbaring,28 the Court expounded on the purpose of this rule,
to wit: Necessarily, the purposes of this provision are 1) to
prevent the prosecution of actions by persons without any
right, title or interest in the case; 2) to require that the actual
party entitled to legal relief be the one to prosecute the action;
3) to avoid multiplicity of suits; and 4) discourage litigation and
keep it within certain bounds, pursuant to public policy.29
testate.33 However, as correctly pointed out by the CA, nothing
in the records would show that the right of representation is
available to respondents. Hence, the RTC and the CA correctly
found that respondents are not real parties in interest to the
instant case. It is well-settled that factual findings of the RTC,
when affirmed by the CA, are entitled to great weight and
respect by the Court and are deemed final and conclusive
when supported by the evidence on record,34 as in this case.
Having established that respondents are not the real parties in
interest to the instant suit, the proper course of action was for
the CA to merely affirm the RTC's dismissal of their complaint.
It therefore erred in proceeding to resolve the other
substantive issues of the case and granting one of the principal
reliefs sought by respondents, which is the declaration of the
nullity of the Questioned Deed of Absolute Sale.35 In the same
vein, the CA erred in awarding portions of the subject land to
various non-parties to the case, such as the Heirs of Gaccion
and Udiaan's children. Basic is the rule that no relief can be
extended in a judgment to a stranger or one who is not a party
to a case.36
In sum, the CA transgressed prevailing law and jurisprudence
in resolving the substantive issues of the instant case despite
the fact that respondents are not real parties in interest to the
same. Necessarily, a reinstatement of the R TC ruling is in
order.
WHEREFORE, the petition is GRANTED. Accordingly, the
Decision dated September 28, 2012 and the Resolution dated
August 13, 2013 of the Court of Appeals in CA-G.R. CV No.
00992-MIN are hereby REVERSED and SET ASIDE.
Accordingly, the Summary Judgment dated September 12,
2006 of the Regional Trial Court of Cagayan de Oro City,
Branch 38 in Civil Case No. 2003-115 is REINSTATED.
SO ORDERED.

In the instant case, respondents claim to be the successors-in-

interest of the subject land just because they are Udiaan's
grandchildren.1âwphi1 Under the law, however, respondents
will only be deemed to have a material interest over the
subject land - and the rest of Udiaan' s estate for that matter -
if the right of representation provided under Article 970,30 in
relation to Article 982,31 of the Civil Code is available to them.
In this situation, representatives will be called to the
succession by the law and not by the person represented; and
the representative does not succeed the person represented
but the one whom the person represented would have
succeeded.32

For such right to be available to respondents, they would have

to show first that their mother: (a) predeceased Udiaan; (b) is
incapacitated to inherit; or (c) was disinherited, if Udiaan died
20
G.R. No. 193978 February 28, 2012
JELBERT B. GALICTO, Petitioner,
vs.
H.E. PRESIDENT BENIGNO SIMEON C. AQUINO III, in
his capacity as President of the Republic of the
Philippines; ATTY. PAQUITO N. OCHOA, JR., in his
capacity as Executive Secretary; and FLORENCIO B.
ABAD, in his capacity as Secretary of the Department of
Budget and Management, Respondents.
RESOLUTION
BRION, J.:
Before us is a Petition for Certiorari and Prohibition with
Application for Writ of Preliminary Injunction and/or Temporary
Restraining Order,1 seeking to nullify and enjoin the
implementation of Executive Order No. (EO) 7 issued by the
Office of the President on September 8, 2010. Petitioner
Jelbert B. Galicto asserts that EO 7 is unconstitutional for
having been issued beyond the powers of the President and
for being in breach of existing laws.
The petitioner is a Filipino citizen and an employee of the
Philippine Health Insurance Corporation (PhilHealth).2 He is
currently holding the position of Court Attorney IV and is
assigned at the PhilHealth Regional Office CARAGA.3
Respondent Benigno Simeon C. Aquino III is the President of
the Republic of the Philippines (Pres. Aquino); he issued EO 7
and has the duty of implementing it. Respondent Paquito N.
Ochoa, Jr. is the incumbent Executive Secretary and, as the
alter ego of Pres. Aquino, is tasked with the implementation of
EO 7. Respondent Florencio B. Abad is the incumbent
Secretary of the Department of Budget and Management
(DBM) charged with the implementation of EO 7.4
The Antecedent Facts
On July 26, 2010, Pres. Aquino made public in his first State of
the Nation Address the alleged excessive allowances, bonuses
and other benefits of Officers and Members of the Board of
Directors of the Manila Waterworks and Sewerage System – a
government owned and controlled corporation (GOCC) which
has been unable to meet its standing
obligations.5 Subsequently, the Senate of the Philippines
(Senate), through the Senate Committee on Government
Corporations and Public Enterprises, conducted an inquiry in
aid of legislation on the reported excessive salaries,
allowances, and other benefits of GOCCs and government
financial institutions (GFIs).6
Based on its findings that "officials and governing boards of
various [GOCCs] and [GFIs] x x x have been granting
themselves unwarranted allowances, bonuses, incentives,
stock options, and other benefits [as well as other] irregular
and abusive practices,"7 the Senate issued Senate Resolution
No. 17 "urging the President to order the immediate
suspension of the unusually large and apparently excessive
21
allowances, bonuses, incentives and other perks of members
of the governing boards of [GOCCs] and [GFIs]."8
Heeding the call of Congress, Pres. Aquino, on September 8,
2010, issued EO 7, entitled "Directing the Rationalization of the
Compensation and Position Classification System in the
[GOCCs] and [GFIs], and for Other Purposes." EO 7 provided
for the guiding principles and framework to establish a fixed
compensation and position classification system for GOCCs and
GFIs. A Task Force was also created to review all
remunerations of GOCC and GFI employees and officers, while
GOCCs and GFIs were ordered to submit to the Task Force
information regarding their compensation. Finally, EO 7
ordered (1) a moratorium on the increases in the salaries and
other forms of compensation, except salary adjustments under
EO 8011 and EO 900, of all GOCC and GFI employees for an
indefinite period to be set by the President,9 and (2) a
suspension of all allowances, bonuses and incentives of
members of the Board of Directors/Trustees until December
31, 2010.10
EO 7 was published on September 10, 2010.11 It took effect on
September 25, 2010 and precluded the Board of Directors,
Trustees and/or Officers of GOCCs from granting and releasing
bonuses and allowances to members of the board of directors,
and from increasing salary rates of and granting new or
additional benefits and allowances to their employees.
The Petition
The petitioner claims that as a PhilHealth employee, he is
affected by the implementation of EO 7, which was issued with
grave abuse of discretion amounting to lack or excess of
jurisdiction, based on the following arguments:
I.
EXECUTIVE ORDER NO. 7 IS NULL AND VOID FOR
LACK OF LEGAL BASIS DUE TO THE FOLLOWING
GROUNDS:
A. P.D. 985 IS NOT APPLICABLE AS BASIS
FOR EXECUTIVE ORDER NO. 7 BECAUSE
THE GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS WERE
SUBSEQUENTLY GRANTED THE POWER TO
FIX COMPENSATION LONG AFTER SUCH
POWER HAS BEEN REVOKED BY P.D. 1597
AND R.A. 6758.
B. THE GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS DO NOT
NEED TO HAVE ITS COMPENSATION PLANS,
RATES AND POLICIES REVIEWED BY THE
DBM AND APPROVED BY THE PRESIDENT
BECAUSE P.D. 1597 REQUIRES ONLY THE
GOCCs TO REPORT TO THE OFFICE TO THE
PRESIDENT THEIR COMPENSATION PLANS
AND RATES BUT THE SAME DOES NOT GIVE
THE PRESIDENT THE POWER OF CONTROL
OVER THE FISCAL POWER OF THE GOCCs.
 C. J.R. NO. 4, [SERIES] 2009 IS NOT
APPLICABLE AS LEGAL BASIS BECAUSE IT
HAD NOT RIPENED INTO X X X LAW, THE
SAME NOT HAVING BEEN PUBLISHED.
D. ASSUMING ARGUENDO THAT J.R. NO. 1,
S. 2004 (sic) AND J.R. 4, S. 2009 ARE
VALID, STILL THEY ARE NOT APPLICABLE
AS LEGAL BASIS BECAUSE THEY ARE NOT
LAWS WHICH MAY VALIDLY DELEGATE
POWER TO THE PRESIDENT TO SUSPEND
THE POWER OF THE BOARD TO FIX
COMPENSATION.
II.
EXECUTIVE ORDER NO. 7 IS INVALID FOR
DIVESTING THE BOARD OF DIRECTORS OF [THE]
GOCCS OF THEIR POWER TO FIX THE
COMPENSATION, A POWER WHICH IS A
LEGISLATIVE GRANT AND WHICH COULD NOT BE
REVOKED OR MODIFIED BY AN EXECUTIVE FIAT.
III.
EXECUTIVE ORDER NO. 7 IS BY SUBSTANCE A LAW,
WHICH IS A DEROGATION OF CONGRESSIONAL
PREROGATIVE AND IS THEREFORE
UNCONSTITUTIONAL.
IV.
THE ACTS OF SUSPENDING AND IMPOSING
MORATORIUM ARE ULTRA VIRES ACTS BECAUSE J.R.
NO. 4 DOES NOT EXPRESSLY AUTHORIZE THE
PRESIDENT TO EXERCISE SUCH POWERS.
V.
EXECUTIVE ORDER NO. 7 IS AN INVALID ISSUANCE
BECAUSE IT HAS NO SUFFICIENT STANDARDS AND
IS THEREFORE ARBITRARY, UNREASONABLE AND A
VIOLATION OF SUBSTANTIVE DUE PROCESS.
VI.
EXECUTIVE ORDER NO. 7 INVOLVES THE
DETERMINATION AND DISCRETION AS TO WHAT
THE LAW SHALL BE AND IS THEREFORE INVALID
FOR ITS USURPATION OF LEGISLATIVE POWER.
VII.
CONSISTENT WITH THE DECISION OF THE SUPREME
COURT IN PIMENTEL V. AGUIRRE CASE, EXECUTIVE
ORDER NO. 7 IS ONLY DIRECTORY AND NOT
MANDATORY.12
The Case for the Respondents
22
On December 13, 2010, the respondents filed their Comment.
They pointed out the following procedural defects as grounds
for the petition’s dismissal: (1) the petitioner lacks locus
standi; (2) the petitioner failed to attach a board resolution or
secretary’s certificate authorizing him to question EO 7 in
behalf of PhilHealth; (3) the petitioner’s signature does not
indicate his PTR Number, Mandatory Continuing Legal
Education (MCLE) Compliance Number and Integrated Bar of
the Philippines (IBP) Number; (4) the jurat of the Verification
and Certification of Non-Forum Shopping failed to indicate a
valid identification card as provided under A.M. No. 02-8-13-
SC; (5) the President should be dropped as a party respondent
as he is immune from suit; and (6) certiorari is not applicable
to this case.13
The respondents also raised substantive defenses to support
the validity of EO 7. They claim that the President exercises
control over the governing boards of the GOCCs and GFIs;
thus, he can fix their compensation packages. In addition, EO
7 was issued in accordance with law for the purpose of
controlling the grant of excessive salaries, allowances,
incentives and other benefits to GOCC and GFI employees.
They also advocate the validity of Joint Resolution (J.R.) No. 4,
which they point to as the authority for issuing EO 7.14
Meanwhile, on June 6, 2011, Congress enacted Republic Act
(R.A.) No. 10149,15 otherwise known as the "GOCC
Governance Act of 2011." Section 11 of RA 10149 expressly
authorizes the President to fix the compensation framework of
GOCCs and GFIs.
The Court’s Ruling
We resolve to DISMISS the petition for its patent formal and
procedural infirmities, and for having been mooted by
subsequent events.
A. Certiorari is not the proper remedy.
Under the Rules of Court, petitions for Certiorari and
Prohibition are availed of to question judicial, quasi-judicial and
mandatory acts. Since the issuance of an EO is not judicial,
quasi-judicial or a mandatory act, a petition for certiorari and
prohibition is an incorrect remedy; instead a petition for
declaratory relief under Rule 63 of the Rules of Court, filed
with the Regional Trial Court (RTC), is the proper recourse to
assail the validity of EO 7:
Section 1. Who may file petition. Any person interested under
a deed, will, contract or other written instrument, whose rights
are affected by a statute, executive order or regulation,
ordinance, or any other governmental regulation may, before
breach or violation thereof, bring an action in the appropriate
Regional Trial Court to determine any question of construction
or validity arising, and for a declaration of his rights or duties,
thereunder. (Emphases ours.)
Liga ng mga Barangay National v. City Mayor of Manila16 is a
case in point.17 In Liga, we dismissed the petition for certiorari
to set aside an EO issued by a City Mayor and insisted that a
petition for declaratory relief should have been filed with the
RTC. We painstakingly ruled:
After due deliberation on the pleadings filed, we resolve to
dismiss this petition for certiorari.
First, the respondents neither acted in any judicial or quasi-
judicial capacity nor arrogated unto themselves any judicial or
quasi-judicial prerogatives. A petition for certiorari under Rule
65 of the 1997 Rules of Civil Procedure is a special civil action
that may be invoked only against a tribunal, board, or officer
exercising judicial or quasi-judicial functions.
Section 1, Rule 65 of the 1997 Rules of Civil Procedure
provides:
SECTION 1. Petition for certiorari. — When any tribunal, board
or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that
judgment be rendered annulling or modifying the proceedings
of such tribunal, board or officer, and granting such incidental
reliefs as law and justice may require.
Elsewise stated, for a writ of certiorari to issue, the following
requisites must concur: (1) it must be directed against a
tribunal, board, or officer exercising judicial or quasi-judicial
functions; (2) the tribunal, board, or officer must have acted
without or in excess of jurisdiction or with grave abuse of
discretion amounting [to] lack or excess of jurisdiction; and (3)
there is no appeal or any plain, speedy, and adequate remedy
in the ordinary course of law.
A respondent is said to be exercising judicial function where he
has the power to determine what the law is and what the legal
rights of the parties are, and then undertakes to determine
these questions and adjudicate upon the rights of the parties.
Quasi-judicial function, on the other hand, is "a term which
applies to the actions, discretion, etc., of public administrative
officers or bodies … required to investigate facts or ascertain
the existence of facts, hold hearings, and draw conclusions
from them as a basis for their official action and to exercise
discretion of a judicial nature."
Before a tribunal, board, or officer may exercise judicial or
quasi-judicial acts, it is necessary that there be a law that gives
rise to some specific rights of persons or property under which
adverse claims to such rights are made, and the controversy
ensuing therefrom is brought before a tribunal, board, or
officer clothed with power and authority to determine the law
and adjudicate the respective rights of the contending parties.
The respondents do not fall within the ambit of tribunal, board,
or officer exercising judicial or quasi-judicial functions. As
correctly pointed out by the respondents, the enactment by
the City Council of Manila of the assailed ordinance and the
23
issuance by respondent Mayor of the questioned executive
order were done in the exercise of legislative and executive
functions, respectively, and not of judicial or quasi-judicial
functions. On this score alone, certiorari will not lie.
Second, although the instant petition is styled as a petition
for certiorari, in essence, it seeks the declaration by this Court
of the unconstitutionality or illegality of the questioned
ordinance and executive order. It, thus, partakes of the nature
of a petition for declaratory relief over which this Court has
only appellate, not original, jurisdiction. Section 5, Article VIII
of the Constitution provides:
Sec. 5. The Supreme Court shall have the following powers:
(1) Exercise original jurisdiction over cases affecting
ambassadors, other public ministers and consuls, and
over petitions for certiorari, prohibition,
mandamus, quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on
appeal or certiorari as the law or the Rules of Court
may provide, final judgments and orders of lower
courts in:
(a) All cases in which the constitutionality or
validity of any treaty, international or
executive agreement, law, presidential
decree, proclamation, order,
instruction, ordinance, or regulation is in
question. (Italics supplied).
As such, this petition must necessar[ily] fail, as this Court does
not have original jurisdiction over a petition for declaratory
relief even if only questions of law are involved.18
Likewise, in Southern Hemisphere Engagement Network, Inc.
v. Anti Terrorism Council,19 we similarly dismissed the petitions
for certiorari and prohibition challenging the constitutionality of
R.A. No. 9372, otherwise known as the "Human Security Act of
2007," since the respondents therein (members of the Anti-
Terrorism Council) did not exercise judicial or quasi-judicial
functions.
While we have recognized in the past that we can exercise the
discretion and rulemaking authority we are granted under the
Constitution,20 and set aside procedural considerations to
permit parties to bring a suit before us at the first instance
through certiorari and/or prohibition,21 this liberal policy
remains to be an exception to the general rule, and thus, has
its limits. In Concepcion v. Commission on Elections
(COMELEC),22 we emphasized the importance of availing of the
proper remedies and cautioned against the wrongful use of
certiorari in order to assail the quasi-legislative acts of the
COMELEC, especially by the wrong party. In ruling that
liberality and the transcendental doctrine cannot trump blatant
disregard of procedural rules, and considering that the
petitioner had other available remedies (such as a petition for
declaratory relief with the appropriate RTC under the terms of
Rule 63 of the Rules of Court), as in this case, we categorically
ruled:
The petitioner’s unusual approaches and use of Rule 65 of the
Rules of Court do not appear to us to be the result of any error
in reading Rule 65, given the way the petition was crafted.
Rather, it was a backdoor approach to achieve what the
petitioner could not directly do in his individual capacity under
Rule 65. It was, at the very least, an attempted bypass of
other available, albeit lengthier, modes of review that the
Rules of Court provide. While we stop short of concluding that
the petitioner’s approaches constitute an abuse of process
through a manipulative reading and application of the Rules of
Court, we nevertheless resolve that the petition should be
dismissed for its blatant violation of the Rules. The
transgressions alleged in a petition, however weighty they may
sound, cannot be justifications for blatantly disregarding the
rules of procedure, particularly when remedial measures were
available under these same rules to achieve the petitioner’s
objectives. For our part, we cannot and should not – in the
name of liberality and the "transcendental importance"
doctrine – entertain these types of petitions. As we held in the
very recent case of Lozano, et al. vs. Nograles, albeit from a
different perspective, our liberal approach has its limits and
should not be abused.23 [emphasis supplied]
B. Petitioner lacks locus standi.
"Locus standi or legal standing has been defined as a personal
and substantial interest in a case such that the party has
sustained or will sustain direct injury as a result of the
governmental act that is being challenged. The gist of the
question on standing is whether a party alleges such personal
stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of
issues upon which the court depends for illumination of difficult
constitutional questions."24 This requirement of standing
relates to the constitutional mandate that this Court settle only
actual cases or controversies.25
Thus, as a general rule, a party is allowed to "raise a
constitutional question" when (1) he can show that he will
personally suffer some actual or threatened injury because of
the allegedly illegal conduct of the government; (2) the injury
is fairly traceable to the challenged action; and (3) the injury is
likely to be redressed by a favorable action.26
Jurisprudence defines interest as "material interest, an interest
in issue and to be affected by the decree, as distinguished
from mere interest in the question involved, or a mere
incidental interest. By real interest is meant a present
substantial interest, as distinguished from a mere expectancy
or a future, contingent, subordinate, or consequential
interest."27
To support his claim that he has locus standi to file the present
petition, the petitioner contends that as an employee of
PhilHealth, he "stands to be prejudiced by [EO] 7, which
suspends or imposes a moratorium on the grants of salary
increases or new or increased benefits to officers and
employees of GOCC[s] and x x x curtail[s] the prerogative of
those officers who are to fix and determine his
compensation."28 The petitioner also claims that he has
standing as a member of the bar in good standing who has an
24
interest in ensuring that laws and orders of the Philippine
government are legally and validly issued and implemented.
The respondents meanwhile argue that the petitioner is not a
real party-in-interest since future increases in salaries and
other benefits are merely contingent events or
expectancies.29 The petitioner, too, is not asserting a public
right for which he is entitled to seek judicial protection. Section
9 of EO 7 reads:
Section 9. Moratorium on Increases in Salaries, Allowances,
Incentives and Other Benefits. –Moratorium on increases in the
rates of salaries, and the grant of new increases in the rates of
allowances, incentives and other benefits, except salary
adjustments pursuant to Executive Order No. 8011 dated June
17, 2009 and Executive Order No. 900 dated June 23, 2010,
are hereby imposed until specifically authorized by the
President. [emphasis ours]
In the present case, we are not convinced that the petitioner
has demonstrated that he has a personal stake or material
interest in the outcome of the case because his interest, if any,
is speculative and based on a mere expectancy. In this case,
the curtailment of future increases in his salaries and other
benefits cannot but be characterized as contingent events or
expectancies. To be sure, he has no vested rights to salary
increases and, therefore, the absence of such right deprives
the petitioner of legal standing to assail EO 7.
It has been held that as to the element of injury, such aspect
is not something that just anybody with some grievance or
pain may assert. It has to be direct and substantial to make it
worth the court’s time, as well as the effort of inquiry into the
constitutionality of the acts of another department of
government. If the asserted injury is more imagined than real,
or is merely superficial and insubstantial, then the courts may
end up being importuned to decide a matter that does not
really justify such an excursion into constitutional
adjudication.30 The rationale for this constitutional requirement
of locus standi is by no means trifle. Not only does it assure
the vigorous adversary presentation of the case; more
importantly, it must suffice to warrant the Judiciary’s
overruling the determination of a coordinate, democratically
elected organ of government, such as the President, and the
clear approval by Congress, in this case. Indeed, the rationale
goes to the very essence of representative democracies.31
Neither can the lack of locus standi be cured by the petitioner’s
claim that he is instituting the present petition as a member of
the bar in good standing who has an interest in ensuring that
laws and orders of the Philippine government are legally and
validly issued. This supposed interest has been branded by the
Court in Integrated Bar of the Phils. (IBP) v. Hon.
Zamora,32 "as too general an interest which is shared by other
groups and [by] the whole citizenry."33 Thus, the Court ruled in
IBP that the mere invocation by the IBP of its duty to preserve
the rule of law and nothing more, while undoubtedly true, is
not sufficient to clothe it with standing in that case. The Court
made a similar ruling in Prof. David v. Pres. Macapagal-
Arroyo34 and held that the petitioners therein, who are national
officers of the IBP, have no legal standing, having failed to
allege any direct or potential injury which the IBP, as an
institution, or its members may suffer as a consequence of the
issuance of Presidential Proclamation No. 1017 and General
Order No. 5.35
We note that while the petition raises vital constitutional and
statutory questions concerning the power of the President to
fix the compensation packages of GOCCs and GFIs with
possible implications on their officials and employees, the same
cannot "infuse" or give the petitioner locus standi under the
transcendental importance or paramount public interest
doctrine. In Velarde v. Social Justice Society,36 we held that
even if the Court could have exempted the case from the
stringent locus standi requirement, such heroic effort would be
futile because the transcendental issue could not be resolved
any way, due to procedural infirmities and shortcomings, as in
the present case.37 In other words, giving due course to the
present petition which is saddled with formal and procedural
infirmities explained above in this Resolution, cannot but be an
exercise in futility that does not merit the Court’s liberality. As
we emphasized in Lozano v. Nograles,38 "while the Court
has taken an increasingly liberal approach to the rule
of locus standi, evolving from the stringent
requirements of ‘personal injury’ to the broader
‘transcendental importance’ doctrine, such liberality is
not to be abused."39
Finally, since the petitioner has failed to demonstrate a
material and personal interest in the issue in dispute, he
cannot also be considered to have filed the present case as a
representative of PhilHealth. In this regard, we cannot ignore
or excuse the blatant failure of the petitioner to provide a
Board Resolution or a Secretary’s Certificate from PhilHealth to
act as its representative.
C. The petition has a defective jurat.
The respondents claim that the petition should be dismissed
for failing to comply with Section 3, Rule 7 of the Rules of Civil
Procedure, which requires the party or the counsel
representing him to sign the pleading and indicate an address
that should not be a post office box. The petition also allegedly
violated the Supreme Court En Banc Resolution dated
November 12, 2001, requiring counsels to indicate in their
pleadings their Roll of Attorneys Number, their PTR Number
and their IBP Official Receipt or Lifetime Member Number;
otherwise, the pleadings would be considered unsigned and
dismissible. Bar Matter No. 1922 likewise states that a counsel
should note down his MCLE Certificate of Compliance or
Certificate of Exemption in the pleading, but the petitioner had
failed to do so.40
We do not see any violation of Section 3, Rule 7 of the Rules
of Civil Procedure as the petition bears the petitioner’s
signature and office address. The present suit was brought
before this Court by the petitioner himself as a party litigant
and not through counsel. Therefore, the requirements under
the Supreme Court En Banc Resolution dated November 12,
2001 and Bar Matter No. 1922 do not apply. In Bar Matter No.
1132, April 1, 2003, we clarified that a party who is not a
lawyer is not precluded from signing his own pleadings as this
is allowed by the Rules of Court; the purpose of requiring a
counsel to indicate his IBP Number and PTR Number is merely
25
to protect the public from bogus lawyers. A similar construction
should be given to Bar Matter No. 1922, which requires
lawyers to indicate their MCLE Certificate of Compliance or
Certificate of Exemption; otherwise, the provision that allows
parties to sign their own pleadings will be negated.
However, the point raised by the respondents regarding the
petitioner’s defective jurat is correct. Indeed, A.M. No. 02-8-
13-SC, dated February 19, 2008, calls for a current
identification document issued by an official agency bearing
the photograph and signature of the individual as competent
evidence of identity. Nevertheless, we hasten to clarify that the
defective jurat in the Verification/Certification of Non-Forum
Shopping is not a fatal defect, as we held in In-N-Out Burger,
Inc. v. Sehwani, Incorporated.41 The verification is only a
formal, not a jurisdictional, requirement that the Court may
waive.
D. The petition has been mooted by supervening events.
Because of the transitory nature of EO 7, it has been pointed
out that the present case has already been rendered moot by
these supervening events: (1) the lapse on December 31, 2010
of Section 10 of EO 7 that suspended the allowances and
bonuses of the directors and trustees of GOCCs and GFIs; and
(2) the enactment of R.A. No. 10149 amending the provisions
in the charters of GOCCs and GFIs empowering their board of
directors/trustees to determine their own compensation
system, in favor of the grant of authority to the President to
perform this act.
With the enactment of the GOCC Governance Act of 2011, the
President is now authorized to fix the compensation framework
of GOCCs and GFIs. The pertinent provisions read:
Section 5. Creation of the Governance Commission for
Government-Owned or -Controlled Corporations. — There is
hereby created an advisory, monitoring, and oversight body
with authority to formulate, implement and coordinate policies
to be known as the Governance Commission for Government-
Owned or-Controlled Corporations, hereinafter referred to as
the GCG, which shall be attached to the Office of the
President. The GCG shall have the following powers and
functions:
xxxx
h) Conduct compensation studies, develop and recommend to
the President a competitive compensation and remuneration
system which shall attract and retain talent, at the same time
allowing the GOCC to be financially sound and sustainable;
xxxx
Section 8. Coverage of the Compensation and Position
Classification System. — The GCG, after conducting a
compensation study, shall develop a Compensation and
Position Classification System which shall apply to all officers
and employees of the GOCCs whether under the Salary
Standardization Law or exempt therefrom and shall consist of
classes of positions grouped into such categories as the GCG
may determine, subject to approval of the President.

Section 9. Position Titles and Salary Grades. — All positions in

the Positions Classification System, as determined by the GCG
and as approved by the President, shall be allocated to their
proper position titles and salary grades in accordance with an
Index of Occupational Services, Position Titles and Salary
Grades of the Compensation and Position Classification
System, which shall be prepared by the GCG and approved by
the President.

xxxx

[N]o GOCC shall be exempt from the coverage of the

Compensation and Position Classification System developed by
the GCG under this Act.

As may be gleaned from these provisions, the new law

amended R.A. No. 7875 and other laws that enabled certain
GOCCs and GFIs to fix their own compensation frameworks;
the law now authorizes the President to fix the compensation
and position classification system for all GOCCs and GFIs, as
well as other entities covered by the law. This means that, the
President can now reissue an EO containing these same
provisions without any legal constraints.1âwphi1

A moot case is "one that ceases to present a justiciable

controversy by virtue of supervening events, so that a
declaration thereon would be of no practical use or
value."42 "[A]n action is considered ‘moot’ when it no longer
presents a justiciable controversy because the issues involved
have become academic or dead[,] or when the matter in
dispute has already been resolved and hence, one is not
entitled to judicial intervention unless the issue is likely to be
raised again between the parties x x x. Simply stated, there is
nothing for the x x x court to resolve as [its] determination x x
x has been overtaken by subsequent events."43

This is the present situation here. Congress, thru R.A. No.

10149, has expressly empowered the President to establish the
compensation systems of GOCCs and GFIs. For the Court to
still rule upon the supposed unconstitutionality of EO 7 will
merely be an academic exercise. Any further discussion of the
constitutionality of EO 7 serves no useful purpose since such
issue is moot in its face in light of the enactment of R.A. No.
10149. In the words of the eminent constitutional law expert,
Fr. Joaquin Bernas, S.J., "the Court normally [will not]
entertain a petition touching on an issue that has become
moot because x x x there would [be] no longer x x x a ‘flesh
and blood’ case for the Court to resolve."44

All told, in view of the supervening events rendering the

petition moot, as well as its patent formal and procedural
infirmities, we no longer see any reason for the Court to
resolve the other issues raised in the certiorari petition.

WHEREFORE, premises considered, the petition is DISMISSED.

No costs.

SO ORDERED.
26
G.R. No. 214934, April 12, 2016
PACIFIC REHOUSE CORPORATION, Petitioner, v. JOVEN
L. NGO, AS REPRESENTED BY OSCAR J.
GARCIA, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1
are the
Decision2 dated March 20, 2014 and the Resolution3 dated
October 8, 2014 of the Court of Appeals (CA) in CA-G.R. SP.
No. 122222, which set aside the Omnibus Order4 dated April 7,
2011 and the Order5 dated September 30, 2011 of the
Regional Trial Court of Imus, Cavite, Branch 20 (RTC), in
consolidated Civil Case No. 2031-08 and LRC Case No.
1117-09 and consequently dismissed the complaint for
specific performance and damages docketed as Civil Case
No. 2031-08.
The Facts
On February 17, 1994, petitioner Pacific Rehouse Corporation
(petitioner) entered into a Deed of Conditional Sale6 with
Benjamin G. Bautista (Bautista) for the purchase of a 52,341-
square meter parcel of land located in Imus, Cavite and
covered by Transfer Certificate of Title (TCT) No. T-800 issued
by the Registry of Deeds of the Province of Cavite (subject
property), for a total consideration of P7,327,740.00. Under
the contract, petitioner was to make a down payment of
P2,198,322.00 upon its execution, with the balance to be paid
upon completion by Bautista of the pertinent documents
necessary for the transfer of the said
property.7ChanRoblesVirtualawlibrary
However, despite receipt of payment in the total amount of
P6,598,322.00 and repeated offers to pay the balance in full,
Bautista failed and refused to comply with his obligation to
execute the corresponding deed of absolute sale and deliver
the certificate of title of the subject property, and even sold
the property to another buyer.8 Hence, on April 30, 2008,
petitioner filed a complaint9 for specific performance and
damages against Bautista, docketed as Civil Case No. 2031-
08, praying for the delivery of a deed of transfer and other
documents necessary to transfer the title in its favor, as well as
the Owner's Copy of TCT No. T-800.10 Further, on May 9,
2008, petitioner caused the annotation of a Notice of Lis
Pendens on TCT No. T-800 under Entry No. 940511 in order to
protect its rights over the subject property pending
litigation.12ChanRoblesVirtualawlibrary
After the parties had filed their respective responsive
pleadings,13 the case was set for pre-trial. However, before the
same could proceed, Bautista's counsel filed a Manifestation
and Notice of Death14informing the RTC that Bautista had died
on February 14, 2009. Thus, in an Order 15 dated May 19,
2009, the RTC directed Bautista's counsel to substitute the
latter's heirs and/or representatives in the action pursuant to
Section 16, Rule 3 of the Rules of Court. Unfortunately, said
counsel failed to comply due to lack of personal knowledge of
the identities of the heirs of Bautista and their respective
27
residences.16ChanRoblesVirtualawlibrary
On the other hand, petitioner manifested that it had located
Bautista's surviving spouse, Rosita Bautista, and as a result,
was directed to amend the complaint to implead her as
such.17 For failure of petitioner to comply with the foregoing
directive, however, the RTC issued an Order18dated
February 23, 2010dismissing Civil Case No. 2031-
08 pursuant to Section 3, Rule 17 of the Rules of Court.
Upon petitioner's motion for reconsideration,19 the RTC issued
an Order20dated September 20, 2010setting aside its
earlier Order dismissing Civil Case No. 2031-08. However, it
held in abeyance the proceedings in said case until petitioner
procures the appointment of an executor or administrator for
the estate of Bautista pursuant to Section 16, Rule 3 of the
Rules of Court.21ChanRoblesVirtualawlibrary
Meanwhile, on May 6, 2009, respondent Joven L. Ngo,
represented22 by Oscar J. Garcia (respondent), filed a Verified
Petition for Cancellation of Notice of Lis Pendens23 against
petitioner and the Register of Deeds of the Province of Cavite
before the RTC, docketed as LRC Case No. 1117-09.
Respondent alleged, inter alia, that on July 23, 2007, Bautista
obtained a loan from him in the amount of P8,000,000.00
secured by a real estate mortgage over the subject property,
and that the mortgage was registered with the Registry of
Deeds of Cavite and annotated on TCT No. T-800 on July 24,
2007.24Upon Bautista's default, the mortgage was foreclosed
and the subject property was sold at a public auction, with
respondent emerging as the highest bidder. Accordingly, a
Certificate of Sale25 was issued in his favor, which was likewise
registered and annotated26 on TCT No. T-800 on January 27,
2009. According to respondent, it was only on May 9, 2008
that he discovered petitioner's claimed interest over the
subject property when he saw the latter's Notice of Lis
Pendens in TCT No. T-800 under Entry No. 9405.27 In view of
the said averments, respondent contended that Entry No. 9405
should be removed. He maintained that petitioner was aware
of the real estate mortgage that was annotated on TCT No. T-
800 in his favor as early as July 24, 2007 and that petitioner
may no longer recover the subject property, considering that
Bautista had lost ownership thereof when it was sold at a
public auction and a certificate of sale was issued in
respondent's favor.28 On February 11, 2010, TCT No. T-
132274829 was issued in his name with Entry No. 9405 carried
over as an annotation.
In its opposition to LRC Case No. 1117-09,30 petitioner
countered that respondent was not a mortgagee in good faith,
having knowledge of the sale of the subject property to
petitioner as early as November 2007 or even prior to the
foreclosure proceedings.31 Likewise, asserting that the petition
for cancellation of the notice lis pendens should have been
filed instead in Civil Case No. 2031-08 and not in a land
registration case where the RTC exercised limited jurisdiction,
petitioner moved for the consolidation of Civil Case No.
2031-08 and LRC Case No. 1117-
09.32ChanRoblesVirtualawlibrary
In an Order33 dated February 24, 2010, the RTC denied
petitioner's motion to consolidate Civil Case No. 2031-
08 and LRC Case No. 1117-09, holding that while both
cases involved the same property and, as such, would
adversely affect their respective claims, the former case had
already been dismissed in an Order dated February 23,
2010.34ChanRoblesVirtualawlibrary
Thereafter, on November 3, 2010, respondent filed an Urgent
Motion for Cancellation of Notice of Lis Pendens35 praying for
the cancellation of Entry No. 9405 carried over to TCT No. T-
1322748. Petitioner opposed the said urgent motion36 and
reiterated its prayer for the consolidation of Civil Case No.
2031-08 and LRC Case No. 1117-
09.37ChanRoblesVirtualawlibrary
In an Omnibus Order38dated April 7, 2011 (April 7, 2011
Omnibus Order), the RTC denied respondent's motion for
being premature and for lack of legal basis, and instead,
ordered the consolidation of Civil Case No. 2031-
08 and LRC Case No. 1117-09. The RTC ruled that while it
had initially denied the consolidation, it was premised on an
order of dismissal that was subsequently set aside.39 In this
regard, the RTC opined that the consolidation was necessary in
order to fully adjudicate the issues of the two cases, noting
that the outcome in Civil Case No. 2031-08 would adversely
affect LRC Case No. 1117-09 which involved the same
subject property; conversely, a decision in the latter case
would pre-empt the outcome of the former case. Further, the
RTC ruled that Civil Case No. 2031-08 would survive
Bautista's death since it primarily involved property and
property rights. Thus, the RTC directed petitioner to comply
with its previous Order dated September 20, 2010 to procure
the appointment of an administrator pursuant to Section 16,
Rule 3 of the Rules of Court within a period of thirty (30)
days.40ChanRoblesVirtualawlibrary
Respondent's motion for reconsideration41 therefrom was
denied in an Order42dated September 30, 2011.
Accordingly, in compliance with the April 7, 2011 Omnibus
Order, petitioner filed on July 20, 2011 a petition 43 for the
appointment of an administrator over the estate of Bautista
before the RTC, docketed as Sp. Proc. Case No. 1075-11.
Finding the petition to be sufficient in form and substance, the
RTC issued a Notice of Hearing44 dated September 12, 2011,
setting the case for initial hearing on November 14,
2011.45ChanRoblesVirtualawlibrary
On November 8, 2011, respondent filed an Omnibus Motion to
Dismiss46Sp. Proc. Case No. 1075-11on the grounds that:
(a) the RTC has no jurisdiction over the subject matter of the
case, over the person of Bautista's surviving spouse, and over
his person;47 (b) the petition failed to state a proper cause of
action;48 (c) petitioner failed to comply with Rule 78 of the
Rules of Court;49 and (d) the petition violated the rule on
forum shopping and litis
pendentia.50ChanRoblesVirtualawlibrary
Thereafter, respondent also filed on December 2, 2011 a
petition for certiorari51 before the CA, docketed as CA-G.R. SP
No. 122222, claiming that the following orders of the RTC were
issued without or in excess of its jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction:
(a) Order dated February 24, 2010 initially denying the
consolidation of Civil Case No. 2031-08 and LRC Case No.
28
1117-09; (b) Order dated September 20, 2010
reinstating Civil Case No. 2031-08; (c) April 7, 2011
Omnibus Order consolidating Civil Case No. 2031-
08 and LRC Case No. 1117-09 and ordering the petitioner
to procure the appointment of an executor or administrator for
the estate of Bautista; (d) Order dated September 30, 2011
upholding the April 7, 2011 Omnibus Order upon motion for
reconsideration, and (e) the Notice of Hearing dated
September 12, 2011 in Sp. Proc. Case No. 1075-11.
The CA Ruling
In a Decision52 dated March 20, 2014, the CA gave due course
to the petition only with respect to the assailed April 7, 2011
Omnibus Order which ordered the consolidation of Civil Case
No. 2031-08 and LRC Case No. 1117-09 and dismissed the
petition as to the four (4) other assailed orders of the RTC due
to procedural lapses.53 Nevertheless, the CA ruled in favor of
respondent and accordingly, set aside the April 7, 2011
Omnibus Order of the RTC and ordered the dismissal of Civil
Case No. 2031-08.54ChanRoblesVirtualawlibrary
The CA held that the complaint for specific performance and
damages in Civil Case No. 2031-08 was an action in
personam since its object was to compel Bautista to perform
his obligations under the Deed of Conditional Sale and hence,
rendered him pecuniarily liable. As such, the obligations in the
contract attached to him alone and did not burden the subject
property. Since the action was founded on a personal
obligation, it did not survive Bautista's death. Hence, the CA
concluded that the dismissal of the complaint by reason
thereof, and not a resort to Section 16, Rule 3 of the Rules of
Court, was the proper course of action. Consequently, the CA
opined that the issue involving the propriety of the
consolidation of the two cases had become moot and
academic.55ChanRoblesVirtualawlibrary
Petitioner moved for reconsideration56 but was denied in a
Resolution57 dated October 8, 2014; hence, this petition.
The Issue Before the Court
The primordial issue for the Court's resolution is whether or
not the CA correctly dismissed Civil Case No. 2031-08 in
view of Bautista's death.
The Court's Ruling
The petition is meritorious.
Section 16, Rule 3 of the Rules of Court governs the rule on
substitution in case of death of any of the parties to a pending
suit. It reads in full:chanRoblesvirtualLawlibrary
SEC. 16. Death of party; duty of counsel. - Whenever a party
to a pending action dies, and the claim is not thereby
extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact
thereof, and to give the name and address of his legal
representative or representatives. Failure of counsel to comply
with this duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for
the deceased, without requiring the appointment of an
executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or
representatives to appear and be substituted within a period of
thirty (30) days from notice.
If no legal representative is named by the counsel for the
deceased party, or if the one so named shall fail to appear
within the specified period, the court may order the opposing
party, within a specified time, to procure the appointment of
an executor or administrator for the estate of the deceased
and the latter shall immediately appear for and on behalf of
the deceased. The court charges in procuring such
appointment, if defrayed by the opposing party, may be
recovered as costs. (Emphasis and underscoring
supplied)cralawred
Section 16, Rule 3 of the Rules of Court allows the substitution
of a party-litigant who dies during the pendency of a case by
his heirs, provided that the claim subject of said case is
not extinguished by his death. As early as in Bonilla v.
Barcena,58 the Court has settled that if the claim in an action
affects property and property rights, then the action survives
the death of a party-litigant, viz.:chanRoblesvirtualLawlibrary
The question as to whether an action survives or not depends
on the nature of the action and the damage sued for. In the
causes of action which survive the wrong complained
affects primarily and principally property and property
rights, the injuries to the person being merely
incidental, while in the causes of action which do not survive
the injury complained of is to the person, the property and
rights of property affected being incidental. x x x. 59 (Emphasis
and underscoring supplied)cralawred
In the instant case, although the CA correctly pointed out
that Civil Case No. 2031-08 involves a complaint for specific
performance and damages, a closer perusal of petitioner's
complaint reveals that it actually prays for, inter alia, the
delivery of ownership of the subject land through Bautista's
execution of a deed of sale and the turnover of TCT No. T-800
in its favor. This shows that the primary objective and nature
of Civil Case No. 2031-08 is to recover the subject property
itself and thus, is deemed to be a real
action.60ChanRoblesVirtualawlibrary
In Gochan v. Gochan,61 the Court explained that complaints
like this are in the nature of real actions, or actions affecting
title to or recovery of possession of real property, to
wit:chanRoblesvirtualLawlibrary
In this jurisdiction, the dictum adhered to is that the nature of
an action is determined by the allegations in the body of the
pleading or complaint itself, rather than by its title or
heading. The caption of the complaint below was
denominated as one for "specific performance and
damages." The relief sought, however, is the
conveyance or transfer of real property, or ultimately,
the execution of deeds of conveyance in their favor of
the real properties enumerated in the provisional
memorandum of agreement. Under these
circumstances, the case below was actually a real
action, affecting as it does title to or possession of real
property.
In the case of Hernandez v. Rural Bank of Lucena, this Court
29
held that a real action is one where the plaintiff seeks the
recovery of real property or, as indicated in Section 2(a) of
Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil
Procedure), a real action is an action affecting title to or
recovery of possession of real property.
It has also been held that where a complaint is entitled
as one for specific performance but nonetheless prays
for the issuance of a deed of sale for a parcel of land,
its primary objective and nature is one to recover the
parcel of land itself and, thus, is deemed a real action. x
x x.
x x x x
In the case at bar, therefore, the complaint filed with the trial
court was in the nature of a real action, although ostensibly
denominated as one for specific performance.62 (Emphases
and underscoring supplied)cralawred
Evidently, Civil Case No. 2031-08 is a real action affecting
property and property rights over the subject land. Therefore,
the death of a party-litigant, i.e., Bautista, did not render the
case dismissible on such ground, but rather, calls for the
proper application of Section 16, Rule 3 of the Rules of Court
on substitution of party-litigants. Similarly, in Carabeo v.
Spouses Dingco,63 the Court held that an action for specific
performance based on the "Kasunduan sa Bilihan ng Karapatan
sa Lupa" was in pursuit of a property right and, as such,
survives the death of a party thereto.
In sum, the CA erred in dismissing Civil Case No. 2031-
08 based solely on Bautista's death. As such, it should be
reinstated and consolidated with LRC Case No. 1117-09,
considering that the two cases involve the same property and,
as correctly opined by the court a quo, any adjudication in
either case would necessarily affect the other.64 In this
relation, case law states that consolidation of cases, when
proper, results in the simplification of proceedings, which saves
time, the resources of the parties and the courts, and a
possible major abbreviation of trial. It is a desirable end to be
achieved, within the context of the present state of affairs
where court dockets are full and individual and state finances
are limited. It contributes to the swift dispensation of justice,
and is in accord with the aim of affording the parties a just,
speedy, and inexpensive determination of their cases before
the courts. Likewise, it avoids the possibility of conflicting
decisions being rendered by the courts in two or more cases
which would otherwise require a single
judgment.65ChanRoblesVirtualawlibrary
WHEREFORE, the petition is GRANTED. The Decision dated
March 20, 2014 and the Resolution dated October 8, 2014 of
the Court of Appeals in CA-G.R. SP No. 122222, dismissing Civil
Case No. 2031-08 are hereby REVERSED and SET ASIDE.
Accordingly, the Omnibus Order dated April 7, 2011 and the
Order dated September 30, 2011 of the Regional Trial Court of
Imus, Cavite, Branch 20, in consolidated cases docketed as
Civil Case No. 2031-08 and LRC Case No. 1117-09
are REINSTATED.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 181186, February 03, 2016 After the CA's decision regarding the widow's allowance
became final and executory, SRMO, on April 24, 1991,
SIGUION REYNA MONTECILLO AND ONGSIAKO LAW accordingly filed a motion with the RTC for the payment of the
OFFICES, Petitioners, v. HON. NORMA CHIONLO-SIA, IN allowance then amounting to a total of P315,000.00.9 A few
HER CAPACITY AS PRESIDING JUDGE OF BRANCH 56 months after, the Estate of Deceased Susano J. Rodriguez
OF THE REGIONAL TRIAL COURT OF LUCENA CITY, (Estate) remitted to SRMO three (3) checks totaling this
AND THE TESTATE ESTATE OF DECEASED SUSANO amount.10
RODRIGUEZ, REPRESENTED BY THE SPECIAL
ADMINISTRATRIX, Respondents. A Partial Project of Partition of the Estate dated January 10,
199711 was approved by the RTC on January 20,
1997.12 Sometime in 2002, Remedios filed an "Urgent Omnibus
Motion and Notice of Termination of the Services of Petitioner's
Counsel of Record."13 Therein, Remedios questioned the RTC's
Order approving the partition and denied the execution of the
DECISION Deed of Sale in favor of Gerardo. She also demanded that
SRMO return the amount it received from the
JARDELEZA, J.: partition.14 Before the motion could be resolved, however,
Remedios filed a Notice of Withdrawal of the same motion. 15
We resolve the core issue of whether a law firm acting as
The withdrawal of the motion notwithstanding, the RTC, in an
counsel for one of the parties in the intestate proceedings a
Order dated August 21, 2003, motu propriodirected SRMO to
quo can file a petition for certiorari before the Court of Appeals
reimburse the Estate the amount of P315,000.00 representing
to protect its own interests.
the widow's allowance it received in 1991.16
I
In its Explanation with Motion to Excuse
Reimbursement,17 SRMO moved to be excused from
Petitioner Siguion Reyna Montecillo & Ongsiako Law Offices
reimbursing the Estate. According to SRMO, when it sought the
(SRMO) acted as counsel for Remedios N. Rodriguez
payment of the widow's allowance, it was merely seeking the
(Remedios) when she commenced an action for the intestate
enforcement of a judgment credit in favor of its client,
settlement of the estate of her deceased husband Susano J.
Remedios, who had, in turn, sold her interests to Gerardo, also
Rodriguez before the Regional Trial Court (RTC) of Lucena
represented by SRMO.18
City. Her action was docketed as Sp. Proc. No. 4440. 1 During
the pendency of the intestate proceedings, Remedios asked for
In its Order dated December 22, 2003, the RTC denied SRMO's
the payment of widow's allowance. This, however, was denied
motion.19 It disagreed with SRMO's position because (1) "the
by the RTC in an Order dated August 8, 1983.2 On review, the
sale of inheritance was never made known" to the RTC and
Court of Appeals (CA) promulgated a decision reversing the
that (2) the sale cannot comprehend a widow's allowance
RTC's Order and granted Remedios a monthly widow's
because such allowance is "personal in nature."20
allowance of P3,000.00 effective August 1982.3
Aggrieved by the RTC's orders, SRMO elevated the case to the
On February 29, 1988, while the case was pending before the
CA through a petition for certiorari.21SRMO argued that it
CA, Remedios executed a Deed of Sale of Inheritance (Deed of
merely acted as representative of Gerardo, Remedios'
Sale) wherein she agreed to sell all her rights, interests and
successor-in-interest, when it received the sum corresponding
participation in the estate of Susano J. Rodriguez to a certain
to the widow's allowance.22 Without going into the merits of
Remigio M. Gerardo (Gerardo) in consideration of
the case, however, the CA denied SRMO's petition on the
P200,000.00.4
ground that the latter was not a party in the case before the
lower court and therefore had no standing to question the
As a condition subsequent to the sale, Remedios, on March 1,
assailed order.23 The CA later denied SRMO's motion for
1988, executed a special power of attorney5 (SPA) authorizing
reconsideration.24
Gerardo to, among others, "receive from any person, entity,
government agency or instrumentality, or from any court, any
SRMO is now before this Court contending that while it was
property, real or personal, cash, checks or other commercial
not a party in the intestate proceedings, it is nevertheless an
documents which may be due to me or payable to me by
"aggrieved party" which can file a petition for certiorari. It
virtue of any contract, inheritance or any other legal means,"
claims that the RTC's order of reimbursement violated SRMO's
and to "receive said property... in his own name and for his
right to due process. SRMO further argues that the RTC erred
own account and to deposit the same at his sole discretion for
in ordering it to reimburse the widow's allowance since SRMO
his own account, and dispose of [the] same without any
received said allowance only in favor of Gerardo as buyer of
limitation."6 Gerardo later on executed a document titled as
Remedios' interests pursuant to the Deed of Sale.
"Substitution of Attorney-in-Fact,"7 where he designated SRMO
as substitute attorney pursuant to the power of substitution
In its Comment, the Estate maintains that SRMO has no
granted to him in the earlier SPA. Gerardo subsequently
standing to file the petition for certiorari as it is not "the real
executed his own SPA authorizing SRMO "[t]o appear... and
party in interest who stands to lose or gain from the verdict
represent [Gerardo] in any and all proceedings and incidents in
[that] the Court may hand in the case at bar."25 Having only
the aforementioned case."8
acted in the proceedings below as counsel for Remedios and,

30
upon transfer of interest, for Gerardo, SRMO had no
personality independent of its client.26 Recognizing that SRMO
received the amount not for its own benefit but only in
representation of its client, the Estate claims that SRMO is only
being made to return the amount it received for and in behalf
of its client; it is not being made to pay out of its own
pocket.27 The Estate also asserts that since Remedios already
sold her share in the estate to Gerardo on February 29, 1988,
she was no longer entitled to any widow's allowance from that
time on.28chanroblesvirtuallawlibrary
II
Section 1, Rule 65 of the Rules of Court provides in
full:chanRoblesvirtualLawlibrary
Section 1. Petition for certiorari. — When any tribunal, board
or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and
adequate remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.
The petition shall be accompanied by a certified true copy of
the judgment, order or resolution subject thereof, copies of all
pleadings and documents relevant and pertinent thereto, and a
sworn certification of non-forum shopping as provided in the
third paragraph of section 3, Rule 46.
(Emphasis supplied.)
The "aggrieved party" referred to in the above-quoted
provision is one who was a party to the original proceedings
that gave rise to the original action for certiorari under Rule
65. In Tang v. Court of Appeals,29 we
explained:chanRoblesvirtualLawlibrary
Although Section 1 of Rule 65 provides that the special civil
action of certiorari may be availed of by a "person aggrieved"
by the orders or decisions of a tribunal, the term "person
aggrieved" is not to be eonstrued to mean that any
person who feels injured by the lower court's order or
decision can question the said court's disposition
via certiorari. To sanction a contrary interpretation would
open the floodgates to numerous and endless litigations which
would undeniably lead to the clogging of court dockets and,
more importantly, the harassment of the party who prevailed
in the lower court.
In a situation wherein the order or decision being
questioned underwent adversarial proceedings before
a trial court, the "person aggrieved" referred to under
Section 1 of Rule 65 who can avail of the special civil
action of certioraripertains to one who was a party in
the proceedings before the lower court. The correctness
of this interpretation can be gleaned from the fact that a
special civil action for certiorari may be dismissed motu
proprio if the party elevating the case failed to file a motion for
reconsideration of the questioned order or decision before the
lower court. Obviously, only one who was a party in the case
before the lower court can file a motion for reconsideration
31
since a stranger to the litigation would not have the
legal standing to interfere in the orders or decisions of
the said court. In relation to this, if a non-party in the
proceedings before the lower court has no standing to file a
motion for reconsideration, logic would lead us to the
conclusion that he would likewise have no standing to question
the said order or decision before the appellate court
via certiorari.30chanroblesvirtuallawlibrary
(Emphasis supplied.)
The general rule, therefore, is that a person not a party to the
proceedings in the trial court cannot maintain an action
for certiorari in the CA or the Supreme Court to have the order
or decision of the trial court reviewed. Under normal
circumstances, the CA would have been correct in dismissing a
petition for certiorari filed by a non-party. The peculiar facts of
this case, however, call for a less stringent application of the
rule.
The facts show that SRMO became involved in its own
capacity only when the RTC ordered it to return the money
that it received on behalf of its client. The order of
reimbursement was directed to SRMO in its personal capacity—
not in its capacity as counsel for either Remedios or Gerardo.
We find this directive unusual because the order for
reimbursement would typically have been addressed to the
parties of the case; the counsel's role and duty would be to
ensure that his client complies with the court's order. The
underlying premise of the RTC's order of reimbursement is
that, logically, SRMO kept or appropriated the money. But the
premise itself is untenable because SRMO never claimed the
amount for its own account. In fact, it is uncontroverted that
SRMO only facilitated the transfer of the amount to Gerardo. 31
Under the law of agency, an agent is not personally liable for
the obligations of the principal unless he performs acts outside
the scope of his authority or he expressly binds himself to be
personally liable.32Otherwise, the principal is solely liable. Here,
there was no showing that SRMO bound itself personally for
Gerardo's obligations. SRMO also acted within the bounds of
the authority issued by Gerardo, as the transferee pendente
lite of the widow's interest, to receive the payment.33
It appears that the RTC's primary justification for ordering
SRMO to return the money from its own pocket is due to the
latter's failure to formally report the transfer of interest from
Remedios to Gerardo.34While it certainly would have been
prudent for SRMO to notify the RTC, the Rules of Court do not
require counsels of parties to report any transfer of interest.
The Rules do not even mandate the substitution of parties in
case of a transfer of interest. Rule 3, Section 19 of the Rules of
Court provides:chanRoblesvirtualLawlibrary
Section. 19. Transfer of interest. — In case of any transfer of
interest, the action may be continued by or against the original
party, unless the court upon motion directs the person to
whom the interest is transferred to be substituted in the action
or joined with the original party.cralawlawlibrary
Otherwise stated, unless the court upon motion directs the
transferee pendente lite to be substituted, the action is simply
continued in the name of the original party. For all intents and
purposes, the Rules already consider Gerardo joined or
substituted in the proceeding a quo, commencing at the exact
moment when the transfer of interest was perfected between
original party-transferor, Remedios, and the
transferee pendente lite, Gerardo.35
Given the foregoing, we find that the RTC was unjustified in
ordering SRMO, in its own capacity, to return the money to the
Estate despite the fact, as certified to by Gerardo's heirs, that
SRMO had already accounted for all monies or funds it had
received on its client's behalf to Gerardo.36 If the RTC was
convinced that the Estate had a right to reimbursement, it
should have ordered the party who ultimately benefited from
any unwarranted payment—not his lawyer—to return the
money.
While the general rule laid down in Tang (which limits the
availability of the remedy of certiorari under Rule 65 only to
parties in the proceedings before the lower court) must be
strictly adhered to, it is not without exception. In Republic v.
Eugenio, Jr.,37 we allowed the wife of a respondent in two
cases filed by the Anti-Money Laundering Council (AMLC) to
challenge via certiorari the inquiry orders issued by the
respective regional trial courts. There, we found that the wife
had adequately demonstrated her joint ownership of the
accounts subject of the inquiry orders. Thus, notwithstanding
the fact that she was not named as a respondent in the cases
filed by the AMLC or identified as a subject of the inquiry
orders, we ruled that her joint ownership of the accounts
clothed her with standing to assail, via certiorari, the inquiry
orders authorizing the examination of said accounts in violation
of her statutory right to maintain said accounts' secrecy.38
Considering that the RTC's order of reimbursement is
specifically addressed to SRMO and the established fact that
SRMO only received the subject money in its capacity as
counsel/agent of Gerardo, there is then more reason to apply
the exception here. Unlike Tang, which involved neighboring
lot owners as petitioners, SRMO's interest can hardly be
considered as merely incidental. That SRMO is being required
to reimburse from its own coffers money already transmitted
to its client is sufficient to give SRMO direct interest to
challenge the RTC's order. Neither can SRMO be considered a
total stranger to the proceedings. We have stated in one case
that "a counsel becomes the eyes and ears in the prosecution
or defense of his or her client's case."39 This highly fiduciary
relationship between counsel and client makes the party/non-
party delineation prescribed by Tang inadequate in resolving
the present controversy.
As a corollary, we have, in a number of instances, ruled that
technical rules of procedures should be used to promote, not
frustrate, the cause of justice. Rules of procedure are tools
designed not to thwart but to facilitate the attainment of
justice; thus, their strict and rigid application may, for good
and deserving reasons, have to give way to, and be
subordinated by, the need to aptly dispense substantial justice
in the normal cause.40 In this case, ordering SRMO to
reimburse the widow's allowance from its own pocket would
result in the unjust enrichment of Gerardo, since the latter
would retain the money at the expense of his own counsel. To
avoid such injustice, a petition for certiorari is an adequate
remedy available to SRMO to meet the situation presented.
Another important consideration for allowing SRMO to file a
petition lor certiorari is the rule on real party in interest, which
32
is applicable to private litigation.41 A real party in interest is
one "who stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the
suit."42 In Ortigas & Co., Ltd. v. Court of Appeals,43 we
stated:chanRoblesvirtualLawlibrary
..."Interest" within the meaning of the rule means material
interest, an interest in issue and to be affected by the decree,
as distinguished from mere interest in the question involved, or
a mere incidental interest. By real interest is meant a present
substantial interest, as distinguished from a mere expectancy
or a future, contingent, subordinate, or consequential
interest.44ChanRoblesVirtualawlibrarycralawlawlibrary
Simply put, a real party in interest is the person who will suffer
(or has suffered) the wrong. In this case, it is SRMO who
stands to be injured by the RTC's order of reimbursement
considering that it is being made to return money received on
behalf of, and already accounted to, its client.
III
Section 3, Rule 83 of the Rules of Court45 provides for the
allowance granted to the widow and family of the deceased
person during the settlement of the estate. This allowance is
rooted on the right and duty to support under the Civil Code.
The right to support is a purely personal right essential to the
life of the recipient, so that it cannot be subject to attachment
or execution.46 Neither can it be renounced or transmitted to a
third person.47 Being intransmissible, support cannot be the
object of contracts.48Nonetheless, it has also been held that
support in arrears is a different thing altogether. It may be
compensated, renounced and transmitted by onerous or
gratuitous title.49
The Estate contends that since Remedios already sold her
Estate to Gerardo on February 29, 1988, she was no longer
entitled to any widow's allowance from that point on. 50 SRMO,
on the other hand, maintains that the right of Remedios to
receive widow's allowance remains from 1988 up to 1991
because she remained a nominal party in the case, and that
this formed part of the interests sold to Gerardo.51
However, neither of the parties to the Deed of Sale is
impleaded in the present petition; hence, this particular issue
cannot be fully resolved. Following the principle of relativity of
contracts,52 the Deed of Sale is binding only between
Remedios and Gerardo, and they alone acquired rights and
assumed obligations thereunder. Any ruling that affects the
enforceability of the Deed of Sale will therefore have an effect
on their rights as seller and buyer, respectively. Both are,
therefore, indispensable parties insofar as the issue of
enforceability of the Deed of Sale is concerned.53 The failure to
implead them is fatal to the Estate's challenge on this
front.cralaw-red
WHEREFORE, the petition is GRANTED. The September 24,
2007 Decision and December 28, 2007 Resolution of the Court
of Appeals in CA-G.R. SP No. 83082 are SET ASIDE. The
Orders dated August 21, 2003 and December 22, 2003 issued
by Branch 56 of the Regional Trial Court of Lucena City in Sp.
Proc. No. 4440 are likewise SET ASIDE.
SO ORDERED.
G.R. No. 175796 July 22, 2015
BPI FAMILY SAVINGS BANK INC., Petitioner,
vs.
SPOUSES BENEDICTO & TERESITA
YUJUICO, Respondents,
DECISION
BERSAMIN, J.:
An action to recover the deficiency after extrajudicial
foreclosure of a real property mortgage is a personal action
because it does not affect title to or possession of real
property, or any interest therein.
The Case
This appeal is taken by the petitioner to overturn the decision
promulgated on March 31, 2006,1 whereby the Court of
Appeals (CA) set aside the orders issued by the Regional Trial
Court, Branch 60, in Makati City (Makati RTC) on October 17,
2003 2 and February 1, 2005 3 dismissing
their action against the respondents to recover the deficiency
after the extrajudicial foreclosure of their mortgage (Civil Case
No.03-450) on the ground of improper venue.
Antecedents
On August 22, 1996, the City of Manila filed a complaint
against the respondents for the expropriation of five parcels of
land located in Tondo, Manila and registered in the name of
respondent Teresita Yujuico. Two of the parcels of land,
covered by Transfer Certificate of Title (TCT) No. 261331 and
TCT No. 261332, were previously mortgaged to Citytrust
Banking Corporation, the petitioner's predecessor-in-interest,
under a First Real Estate Mortgage Contract.4On June 30,
2000, the Regional Trial Court in Manila (Manila RTC) rendered
its judgment declaring the five parcels of land expropriated for
public use. The judgment became final and executory on
January 28, 2001 and was entered in the book of entries of
judgment on March 23, 2001.5 The petitioner subsequently
filed a Motion to Intervene in Execution with Partial Opposition
to Defendant's Request to Release, but the RTC denied the
motion for having been "filed out of time." Hence, the
petitioner decided to extrajudicially foreclose the mortgage
constituted on the two parcels of land subject of the
respondents' loan. After holding the public auction, the sheriff
awarded the two lots to the petitioner as the highest bidder at
₱10, 000, 000.00. 6
Claiming a deficiency amounting to Pl8, 522155.42, the
pet1t1oner sued the respondents to recover such deficiency in
the Makati RTC (Civil Case No. 03-450).1âwphi1 The
respondents moved to dismiss the complaint on several
grounds, namely: that the suit was barred by res judicata; that
the complaint stated no cause of action; and that the plaintiffs
claim had been waived, abandoned, or extinguished. 7
33
In its order issued on October 17, 2003, the Makati RTC denied
the respondents' motion to dismiss, ruling that there was no
res judicata; that the complaint stated a sufficient cause of
action to recover the deficiency; and that there was nothing to
support the claim that the obligation had been abandoned or
extinguished apart from the respondents' contention that the
properties had been subjected to expropriation by the City of
Manila.8
On November 4, 2003, the respondents moved for
reconsideration, reiterating their grounds earlier made in their
motion to dismiss. 9
In turn, the petitioner adopted its comment/opposition to the
motion to dismiss. 10
The respondents then filed their reply, 11 in which they raised
for the first time their objection on the ground of improper
venue. They contended that the action for the recovery of the
deficiency, being a supplementary action of the extrajudicial
foreclosure proceedings, was a real action that should have
been brought in the Manila RTC because Manila was the place
where the properties were located.12
On February 1, 2005, the Makati RTC denied the respondents'
motion for reconsideration for its lack of merit; and held on the
issue of improper venue that:
It would be improper for this Court to dismiss the plaintiffs
complaint on the ground of improper venue, assuming that the
venue is indeed improperly laid, since the said ground was not
raised in the defendant's Motion to Dismiss. On this point, it
was held in the case of Malig, et al. vs. Bush, L 22761, May 31,
1969 that "an action cannot be dismissed on a ground not
alleged in the motion therefore even if said ground, e.g.,
prescription, is provided in Rule 16. 13
Decision of the CA
Not satisfied, the respondents assailed the orders dated
October 1 7, 2003 and February 1, 2005 by petition for
certiorari.14 They submitted for consideration by the CA the
following issues, namely:
x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED ITS
ASSAILED ORDERS CONSIDERING THAT:
A THE COMPLAINT A QUO IS BARRED BY RES
JUDICATA.
B. THE COMPLAINT STATED NO CAUSE OF ACTION.
C. PRIVATE RESPONDENT'S CLAIM HAS BEEN
WAIVED, ABANDONED OR OTHERWISE
EXTINGUISHED.
D. VENUE WAS IMPROPERLY LAID. 15
On March 31, 2006, the CA granted the petition for certiorari
of the respondents on the basis of the fourth issue, opining:
xxxx
Thus, a suit for recovery of the deficiency after the foreclosure
of a mortgage is in the nature of a mortgage action because its
purpose is precisely to enforce the mortgage contract; it is
upon a written contract and upon an obligation of the
mortgage-debtor to pay the deficiency which is created by law.
As such, the venue of an action for recovery of deficiency must
necessarily be the same venue as that of the extrajudicial
foreclosure of mortgage.
xxxx
In this regard, We take note that the parcels of land subject of
the mortgage contract are located in Tondo, Manila, under
Transfer Certificates of Title Nos. 216331 and 216332. On the
other hand, the extrajudicial foreclosure of the real estate
mortgage took place at the R TC of Manila on January 28,
2003. Thus, the suit for judgment on the deficiency filed by
respondent BPI against petitioners Yujuico, being an action
emanating from the foreclosure of the real estate mortgage
contract between them, must necessarily be filed also at the
RTC of Manila, not at the RTC of Makati.
xxxx 16
The CA denied the respondents' Motion for Partial
Reconsideration and the petitioner's Partial Motion for
Reconsideration on December 7, 2006.17
Issues
Hence, this appeal by the petitioner, to assail the CA's
dismissal of Civil Case No. 03-450 on the ground of improper
venue upon the following grounds,18 namely:
I.
WHETHER OR NOT THE HONORA.BLE COURT OF APPEALS'
DENIAL OF THE PETITIONER'S PARTIAL MOTION FOR
RECONSIDERATION ON THE GROUND OF IMPROPER VENUE
AS A RESULT DISMISSED THE COMPLAINT FOR SUM OF
MONEY IS CONTRARY TO LAW.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS[']
ACT OF APPRECIATING THE ADDITIONAL GROUND OF
IMPROPER VENUE, ONLY RAISED IN THE MOTION FOR
RECONSIDERATION FILED IN THE LOWER COURT AFTER IT
DENIED RESPONDENTS' MOTION TO DISMISS, IS CONTRARY
TO LAW AND JURISPRUDENCE.19
Ruling of the Court
We grant the petition for review on certiorari.
34
It is basic that the venue of an action depends on whether it is
a real or a personal action. The determinants of whether an
action is of a real or a personal nature have been fixed by the
Rules of Court and relevant jurisprudence. According to
Section 1, Rule 4 of the Rules of Court, a real action is one that
affects title to or possession of real property, or an interest
therein. Thus, an action for partition or condemnation of, or
foreclosure of mortgage on, real property is a real
action. 20 The real action is to be commenced and tried in the
proper court having jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated, which
explains why the action is also referred to as a local action. In
contrast, the Rules of Court declares all other actions as
personal actions. 21 such actions may include those brought for
the recovery of personal property, or for the enforcement of
some contract or recovery of damages for its breach, or for the
recovery of damages for the commission of an injury to the
person or property.22 The venue of a personal action is the
place where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant
where he may be found, at the election of the plaintiff, 23 for
which reason the action is considered a transitory one.
Based on the distinctions between real and personal actions,
an action to recover the deficiency after the extrajudicial
foreclosure of the real property mortgage is a personal action,
for it does not affect title to or possession of real property, or
any interest therein.
It is true that the Court has said in Caltex Philippines, Inc. v.
Intermediate Appellate Court 24 that "a suit for the recovery of
the deficiency after the foreclosure of a mortgage is in the
nature of a mortgage action because its purpose is precisely to
enforce the mortgage contract." However, the CA erred in
holding, upon the authority of Caltex Philippines, Inc., that the
venue of Civil Case No. 03 450 must necessarily be Manila, the
same venue as that of the extrajudicial foreclosure of
mortgage. An examination of Caltex Philippines, Inc. reveals
that the Court was thereby only interpreting the prescriptive
period within which to bring the suit for the recovery of the
deficiency after the foreclosure of the mortgage, and was not
at all ruling therein on the venue of such suit or on the nature
of such suit being either a real or a personal action.
Given the foregoing, the petitioner correctly brought Civil Case
No.03-450 in the Makati RTC because Makati was the place
where the main office of the petitioner was located.1avvphi1
Moreover, the Makati RTC observed, and the observation is
correct in our view, that it would be improper to dismiss Civil
Case No. 03-450 on the ground of improper venue, assuming
that the venue had been improperly laid, considering that the
respondents had not raised such ground in their Motion to
Dismiss. As earlier indicated, they came to raise the objection
of improper venue for the first time only in their reply to the
petitioner's comment on their Motion for Reconsideration. They
did so belatedly.
We underscore that in civil proceedings, venue is procedural,
not jurisdictional, and may be waived by the defendant if not
seasonably raised either in a motion to dismiss or in the
answer.25 Section 1, Rule 9 of the Rules of Court thus
expressly stipulates that defenses and objections not pleaded
either in a motion to dismiss or in the answer are deemed
waived. As it relates to the place of trial, indeed, venue is
meant to provide convenience to the parties, rather than to
restrict their access to the courts.26 In other words, unless the
defendant seasonably objects, any action may be tried by a
court despite its being the improper venue.

WHEREFORE, we GRANT the petition for review on certiorari;

REVERSE and SET ASIDE the decision promulgated by the
Court of Appeals on March 31, 2006; REINSTATE the orders
dated October 17, 2003 and February 1, 2005 of the Regional
Trial Court, Branch 60, in Makati City; and ORDER the
respondents to pay the costs of suit.

SO ORDERED.

35
G.R. No. 192877 March 23, 2011
SPOUSES HERMES P. OCHOA and ARACELI
OCHOA, Petitioners,
vs.
CHINA BANKING CORPORATION, Respondent.
RESOLUTION
NACHURA, J.:
For resolution is petitioners’ motion for reconsideration1 of our
January 17, 2011 Resolution2 denying their petition for review
on certiorari3 for failing to sufficiently show any reversible error
in the assailed judgment4 of the Court of Appeals (CA).
Petitioners insist that it was error for the CA to rule that the
stipulated exclusive venue of Makati City is binding only on
petitioners’ complaint for Annulment of Foreclosure, Sale, and
Damages filed before the Regional Trial Court of Parañaque
City, but not on respondent bank’s Petition for Extrajudicial
Foreclosure of Mortgage, which was filed with the same court.
We disagree.
The extrajudicial foreclosure sale of a real estate mortgage is
governed by Act No. 3135, as amended by Act No. 4118,
otherwise known as "An Act to Regulate the Sale of Property
Under Special Powers Inserted In or Annexed to Real-Estate
Mortgages." Sections 1 and 2 thereof clearly state:
Section 1. When a sale is made under a special power inserted
in or attached to any real-estate mortgage hereafter made as
security for the payment of money or the fulfillment of any
other obligation, the provisions of the following sections shall
govern as to the manner in which the sale and redemption
shall be effected, whether or not provision for the same is
made in the power.
Sec. 2. Said sale cannot be made legally outside of the
province in which the property sold is situated; and in case the
place within said province in which the sale is to be made is
the subject of stipulation, such sale shall be made in said place
or in the municipal building of the municipality in which the
property or part thereof is situated.5
The case at bar involves petitioners’ mortgaged real property
located in Parañaque City over which respondent bank was
granted a special power to foreclose extra-judicially. Thus, by
express provision of Section 2, the sale can only be made in
Parañaque City.
The exclusive venue of Makati City, as stipulated by the
parties6 and sanctioned by Section 4, Rule 4 of the Rules of
Court,7 cannot be made to apply to the Petition for
Extrajudicial Foreclosure filed by respondent bank because the
provisions of Rule 4 pertain to venue of actions, which an
extrajudicial foreclosure is not.
Pertinent are the following disquisitions in Supena v. De la Rosa:8
Section 1, Rule 2 [of the Rules of Court] defines an action in this wise:
D. "Action means an ordinary suit in a court of justice, by which one party
prosecutes another for the enforcement or protection of a right, or the
prevention or redress of a wrong."
Hagans v. Wislizenus does not depart from this definition when it
states that "[A]n action is a formal demand of one's legal rights in a
court of justice in the manner prescribed by the court or by the law. x
x x." It is clear that the determinative or operative fact which converts
a claim into an "action or suit" is the filing of the same with a "court of
justice." Filed elsewhere, as with some other body or office not a court
of justice, the claim may not be categorized under either term. Unlike
an action, an extrajudicial foreclosure of real estate mortgage is
initiated by filing a petition not with any court of justice but with the
office of the sheriff of the province where the sale is to be
made.1avvphi1 By no stretch of the imagination can the office of the
sheriff come under the category of a court of justice. And as aptly
observed by the complainant, if ever the executive judge comes into
the picture, it is only because he exercises administrative supervision
over the sheriff. But this administrative supervision, however, does not
change the fact that extrajudicial foreclosures are not judicial
proceedings, actions or suits.9
These pronouncements were confirmed on August 7, 2001 through
A.M. No. 99-10-05-0, entitled "Procedure in Extra-Judicial Foreclosure
of Mortgage," the significant portions of which provide:
In line with the responsibility of an Executive Judge under
Administrative Order No. 6, date[d] June 30, 1975, for the
management of courts within his administrative area, included in which
is the task of supervising directly the work of the Clerk of Court, who is
also the Ex-Office Sheriff, and his staff, and the issuance of
commissions to notaries public and enforcement of their duties under
the law, the following procedures are hereby prescribed in extra-
judicial foreclosure of mortgages:
1. All applications for extrajudicial foreclosure of mortgage whether
under the direction of the sheriff or a notary public, pursuant to Act
3135, as amended by Act 4118, and Act 1508, as amended, shall be
filed with the Executive Judge, through the Clerk of Court who is also
the Ex-Officio Sheriff.
Verily then, with respect to the venue of extrajudicial foreclosure sales,
Act No. 3135, as amended, applies, it being a special law dealing
particularly with extrajudicial foreclosure sales of real estate
mortgages, and not the general provisions of the Rules of Court on
Venue of Actions.
Consequently, the stipulated exclusive venue of Makati City is relevant
only to actions arising from or related to the mortgage, such as
petitioners’ complaint for Annulment of Foreclosure, Sale, and
Damages.
The other arguments raised in the motion are a mere reiteration of
those already raised in the petition for review. As declared in this
Court’s Resolution on January 17, 2011, the same failed to show any
sufficient ground to warrant the exercise of our appellate jurisdiction.
WHEREFORE, premises considered, the motion for reconsideration is
hereby DENIED.
SO ORDERED.
36
G.R. No. 179018 June 18, 2012
PAGLAUM MANAGEMENT & DEVELOPMENT CORP. and
HEALTH MARKETING TECHNOLOGIES, INC.,Petitioners,
vs.
UNION BANK OF THE PHILIPPINES, NOTARY PUBLIC
JOHN DOE, and REGISTER OF DEEDS of Cebu City and
Cebu Province Respondents.
J. KING & SONS CO., INC. Intervenor.
DECISION
SERENO, J.:
Before this Court is a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, assailing the Decision dated 31
May 20071 and Resolution dated 24 July 20072 issued by the
Court of Appeals (CA).
Petitioner Paglaum Management and Development Corporation
(PAGLAUM) is the registered owner of three parcels of land
located in the Province of Cebu3 and covered by Transfer
Certificate of Title (TCT) Nos. 112488,4112489,5 and T-
68516.6 These lots are co-owned by Benjamin B. Dy, the
president of petitioner Health Marketing Technologies, Inc.
(HealthTech), and his mother and siblings.7
On 3 February 1994, respondent Union Bank of the Philippines
(Union Bank) extended HealthTech a credit line in the amount
of ₱ 10,000,000.8 To secure this obligation, PAGLAUM executed
three Real Estate Mortgages on behalf of HealthTech and in
favor of Union Bank.9 It must be noted that the Real Estate
Mortgage, on the provision regarding the venue of all suits and
actions arising out of or in connection therewith, originally
stipulates:
Section 9. Venue. – The venue of all suits and actions arising
out of or in connection with this Mortgage shall be in Makati,
Metro Manila or in the place where any of the Mortgaged
Properties is located, at the absolute option of the Mortgagee,
the parties hereto waiving any other venue.10 (Emphasis
supplied.)
However, under the two Real Estate Mortgages dated 11
February 1994, the following version appears:
Section 9. Venue. – The venue of all suits and actions arising
out of or in connection with this Mortgage shall be in Cebu City
Metro Manila or in the place where any of the Mortgaged
Properties is located, at the absolute option of the Mortgagee,
the xxxxxxxxxxxxx any other venue.11 (Emphasis supplied.)
Meanwhile, the same provision in the Real Estate Mortgage
dated 22 April 1998 contains the following:
Section 9. Venue. – The venue of all suits and actions arising
out of or in connection with this Mortgage shall be in
_________ or in the place where any of the Mortgaged
Properties is located, at the absolute option of the Mortgagee,
the parties hereto waiving any other venue.12
37
HealthTech and Union Bank agreed to subsequent renewals
and increases in the credit line,13 with the total amount of debt
reaching ₱ 36,500,000.14 Unfortunately, according to
HealthTech, the 1997 Asian financial crisis adversely affected
its business and caused it difficulty in meeting its obligations
with Union Bank.15 Thus, on 11 December 1998, both parties
entered into a Restructuring Agreement,16 which states that
any action or proceeding arising out of or in connection
therewith shall be commenced in Makati City, with both parties
waiving any other venue.17
Despite the Restructuring Agreement, HealthTech failed to pay
its obligation, prompting Union Bank to send a demand letter
dated 9 October 2000, stating that the latter would be
constrained to institute foreclosure proceedings, unless
HealthTech settled its account in full.18
Since HealthTech defaulted on its payment, Union Bank extra-
judicially foreclosed the mortgaged properties.19 The bank, as
the sole bidder in the auction sale, was then issued a
Certificate of Sale dated 24 May 2001.20 Thereafter, it filed a
Petition for Consolidation of Title.21
Consequently, HealthTech filed a Complaint for Annulment of
Sale and Titles with Damages and Application for Temporary
Restraining Order and Writ of Injunction dated 23 October
2001, praying for: (a) the issuance of a temporary restraining
order, and later a writ of preliminary injunction, directing Union
Bank to refrain from exercising acts of ownership over the
foreclosed properties; (b) the annulment of the extra-judicial
foreclosure of real properties; (c) the cancellation of the
registration of the Certificates of Sale and the resulting titles
issued; (d) the reinstatement of PAGLAUM’s ownership over
the subject properties; and (e) the payment of damages.22 The
case was docketed as Civil Case No. 01-1567 and raffled to the
Regional Trial Court, National Capital Judicial Region, Makati
City, Branch 134 (RTC Br. 134), which issued in favor of
PAGLAUM and HealthTech a Writ of Preliminary Injunction
restraining Union Bank from proceeding with the auction sale
of the three mortgaged properties.23
On 23 November 2001, Union Bank filed a Motion to Dismiss
on the following grounds: (a) lack of jurisdiction over the
issuance of the injunctive relief; (b) improper venue; and (c)
lack of authority of the person who signed the
Complaint.24 RTC Br. 134 granted this Motion in its Order dated
11 March 2003, resulting in the dismissal of the case, as well
as the dissolution of the Writ of Preliminary Injunction.25 It
likewise denied the subsequent Motion for Reconsideration
filed by PAGLAUM and HealthTech.26
PAGLAUM and HealthTech elevated the case to the CA, which
affirmed the Order dated 11 March 200327 and denied the
Motion for Reconsideration.28
In the instant Petition, PAGLAUM and HealthTech argue that:
(a) the Restructuring Agreement governs the choice of venue
between the parties, and (b) the agreement on the choice of
venue must be interpreted with the convenience of the parties
in mind and the view that any obscurity therein was caused by
Union Bank.29
On the other hand, Union Bank contends that: (a) the
Restructuring Agreement is applicable only to the contract of
loan, and not to the Real Estate Mortgage, and (b) the
mortgage contracts explicitly state that the choice of venue
exclusively belongs to it.30
Meanwhile, intervenor J. King & Sons Company, Inc. adopts
the position of Union Bank and reiterates the position that
Cebu City is the proper venue.31
The sole issue to be resolved is whether Makati City is the
proper venue to assail the foreclosure of the subject real
estate mortgage. This Court rules in the affirmative.
Civil Case No. 01-1567, being an action for Annulment of Sale
and Titles resulting from the extrajudicial foreclosure by Union
Bank of the mortgaged real properties, is classified as a real
action. In Fortune Motors v. Court of Appeals,32 this Court held
that a case seeking to annul a foreclosure of a real estate
mortgage is a real action, viz:
An action to annul a real estate mortgage foreclosure sale is
no different from an action to annul a private sale of real
property. (Muñoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the
recovery of title or possession of the property in question, his
action for annulment of sale and his claim for damages are
closely intertwined with the issue of ownership of the building
which, under the law, is considered immovable property, the
recovery of which is petitioner’s primary objective. The
prevalent doctrine is that an action for the annulment or
rescission of a sale of real property does not operate to efface
the fundamental and prime objective and nature of the case,
which is to recover said real property. It is a real action.33
Being a real action, the filing and trial of the Civil Case No. 01-
1567 should be governed by the following relevant provisions
of the Rules of Court (the Rules):
Rule
VENUE OF ACTIONS
Section 1. Venue of real actions. – Actions affecting title to or
possession of real property, or interest therein, shall be
commenced and tried in the proper court which has jurisdiction
over the area wherein the real property involved, or a portion
thereof, is situated.
Forcible entry and detainer actions shall be commenced and
tried in the municipal trial court of the municipality or city
wherein the real property involved, or a portion thereof, is
situated.
Sec. 3. When Rule not applicable. – This Rule shall not apply –
(a) In those cases where a specific rule or law
provides otherwise; or
(b) Where the parties have validly agreed in writing
before the filing of the action on the exclusive venue
thereof. (Emphasis supplied.)
In Sps. Lantin v. Lantion,34 this Court explained that a venue
stipulation must contain words that show exclusivity or
restrictiveness, as follows:
At the outset, we must make clear that under Section 4 (b) of
Rule 4 of the 1997 Rules of Civil Procedure, the general rules
on venue of actions shall not apply where the parties, before
the filing of the action, have validly agreed in writing on an
exclusive venue. The mere stipulation on the venue of an
action, however, is not enough to preclude parties from
bringing a case in other venues. The parties must be able to
show that such stipulation is exclusive. In the absence of
qualifying or restrictive words, the stipulation should be
deemed as merely an agreement on an additional forum, not
as limiting venue to the specified place.
xxx xxx xxx
Clearly, the words "exclusively" and "waiving for this purpose
any other venue" are restrictive and used advisedly to meet
the requirements.35 (Emphasis supplied.)
According to the Rules, real actions shall be commenced and
tried in the court that has jurisdiction over the area where the
property is situated. In this case, all the mortgaged properties
are located in the Province of Cebu. Thus, following the
general rule, PAGLAUM and HealthTech should have filed their
case in Cebu, and not in Makati.
However, the Rules provide an exception, in that real actions
can be commenced and tried in a court other than where the
property is situated in instances where the parties have
previously and validly agreed in writing on the exclusive venue
thereof. In the case at bar, the parties claim that such an
agreement exists. The only dispute is whether the venue that
should be followed is that contained in the Real Estate
4 Mortgages, as contended by Union Bank, or that in the
Restructuring Agreement, as posited by PAGLAUM and
HealthTech. This Court rules that the venue stipulation in the
Restructuring Agreement should be controlling.
The Real Estate Mortgages were executed by PAGLAUM in
favor of Union Bank to secure the credit line extended by the
latter to HealthTech. All three mortgage contracts contain a
dragnet clause, which secures succeeding obligations,
including renewals, extensions, amendments or novations
thereof, incurred by HealthTech from Union Bank, to wit:
Section 1. Secured Obligations. – The obligations secured by
this Mortgage (the "Secured Obligations") are the following:
a) All the obligations of the Borrower and/or the
Mortgagor under: (i) the Notes, the Agreement, and
this Mortgage; (ii) any and all instruments or
documents issued upon the renewal, extension,
amendment or novation of the Notes, the Agreement
and this Mortgage, irrespective of whether such
38
 obligations as renewed, extended, amended or
novated are in the nature of new, separate or
additional obligations; and (iii) any and all
instruments or documents issued pursuant to the
Notes, the Agreement and this Mortgage;
b) All other obligations of the Borrower and/or the
Mortgagor in favor of the Mortgagee, whether
presently owing or hereinafter incurred and whether
or not arising from or connected with the Agreement,
the Notes and/or this Mortgage; and
c) Any and all expenses which may be incurred in
collecting any and all of the above and in enforcing
any and all rights, powers and remedies of the
Mortgagee under this Mortgage.36
On the other hand, the Restructuring Agreement was entered
into by HealthTech and Union Bank to modify the entire loan
obligation. Section 7 thereof provides:
Security. – The principal, interests, penalties and other charges
for which the BORROWER may be bound to the BANK under
the terms of this Restructuring Agreement, including the
renewal, extension, amendment or novation of this
Restructuring Agreement, irrespective of whether the
obligations arising out of or in connection with this
Restructuring Agreement, as renewed, extended, amended or
novated, are in the nature of new, separate or additional
obligations, and all other instruments or documents covering
the Indebtedness or otherwise made pursuant to this
Restructuring Agreement (the "Secured Obligations"), shall
continue to be secured by the following security arrangements
(the "Collaterals"):
a. Real Estate Mortgage dated February 11, 1994
executed by Paglaum Management and Development
Corporation over a 474 square meter property
covered by TCT No. 112489;
b. Real Estate Mortgage dated February 11, 1994
executed by Paglaum Management and Development
Corporation over a 2,796 square meter property
covered by TCT No. T-68516;
c. Real Estate Mortgage dated April 22, 1998
executed by Paglaum Management and Development
Corporation over a 3,711 square meter property
covered by TCT No. 112488;
d. Continuing Surety Agreement of Benjamin B. Dy;
Without need of any further act and deed, the existing
Collaterals, shall remain in full force and effect and continue to
secure the payment and performance of the obligations of the
BORROWER arising from the Notes and this Restructuring
Agreement.37 (Emphasis supplied.)
Meanwhile, Section 20 of the Restructuring Agreement as
regards the venue of actions state:
39
20. Venue – Venue of any action or proceeding arising out of
or connected with this Restructuring Agreement, the Note, the
Collateral and any and all related documents shall be in Makati
City, [HealthTech] and [Union Bank] hereby waiving any other
venue.38 (Emphasis supplied.)
These quoted provisions of the Real Estate Mortgages and the
later Restructuring Agreement clearly reveal the intention of
the parties to implement a restrictive venue stipulation, which
applies not only to the principal obligation, but also to the
mortgages. The phrase "waiving any other venue" plainly
shows that the choice of Makati City as the venue for actions
arising out of or in connection with the Restructuring
Agreement and the Collateral, with the Real Estate Mortgages
being explicitly defined as such, is exclusive.
Even if this Court were to consider the venue stipulations
under the Real Estate Mortgages, it must be underscored that
those provisions did not contain words showing exclusivity or
restrictiveness. In fact, in the Real Estate Mortgages dated 11
February 1994, the phrase "parties hereto waiving" – from the
entire phrase "the parties hereto waiving any other venue" –
was stricken from the final executed contract. Following the
ruling in Sps. Lantin as earlier quoted, in the absence of
qualifying or restrictive words, the venue stipulation should
only be deemed as an agreement on an additional forum, and
not as a restriction on a specified place.1âwphi1
Considering that Makati City was agreed upon by the parties to
be the venue for all actions arising out of or in connection with
the loan obligation incurred by HealthTech, as well as the Real
Estate Mortgages executed by PAGLAUM, the CA committed
reversible error in affirming the dismissal of Civil Case No. 01-
1567 by RTC Br. 134 on the ground of improper venue.
WHEREFORE, the Petition for Review is GRANTED. The
Decision dated 31 May 2007 and Resolution dated 24 July
2007 in CA-G.R. CV No. 82053 of the Court of Appeals, as well
as the Orders dated 11 March 2003 and 19 September 2003
issued by the Regional Trial Court, Makati City, Branch 134,
are REVERSED and SET ASIDE. The Complaint in Civil Case No.
01-1567 is hereby REINSTATED.
SO ORDERED.
G.R. No. 204444 January 14, 2015
VIRGILIO C. BRIONES, Petitioner,
vs.
COURT OF APPEALS and CASH ASIA CREDIT
CORPORATION, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the Decision2 dated
March 5, 2012 and the Resolution3 dated October 4, 2012 of
the Court of Appeals (CA) in CA-G.R. SP No. 117474, which
annulled the Orders dated September 20, 20104 and October
22, 20105 of the Regional Trial Court of Manila, Branch 173
(RTC) in Civil Case No. 10-124040, denying private respondent
Cash Asia Credit Corporation's (Cash Asia) motion to dismiss
on the ground of improper venue.
The Facts
The instant case arose from a Complaint6 dated August 2,
2010 filed by Virgilio C. Briones (Briones) for Nullity of
Mortgage Contract, Promissory Note, Loan Agreement,
Foreclosure of Mortgage, Cancellation of Transfer Certificate of
Title (TCT) No. 290846, and Damages against Cash Asia before
the RTC.7 In his complaint, Briones alleged that he is the
owner of a property covered by TCT No. 160689 (subject
property), and that, on July 15, 2010, his sister informed him
that his property had been foreclosed and a writ of possession
had already been issued in favor of Cash Asia. 8 Upon
investigation, Briones discovered that: (a) on December 6,
2007, he purportedly executed a promissory note,9 loan
agreement,10 and deed of real estate mortgage11 covering the
subject property (subject contracts) in favor of Cash Asia in
order to obtain a loan in the amount of ₱3,500,000.00 from
the latter;12 and (b) since the said loan was left unpaid, Cash
Asia proceeded to foreclose his property. 13 In this relation,
Briones claimed that he never contracted any loans from Cash
Asia as he has been living and working in Vietnam since
October 31, 2007. He further claimed that he only went back
to the Philippines on December 28, 2007 until January 3, 2008
to spend the holidays with his family, and that during his brief
stay in the Philippines, nobody informed him of any loan
agreement entered into with Cash Asia. Essentially, Briones
assailed the validity of the foregoing contracts claiming his
signature to be forged.14
For its part, Cash Asia filed a Motion to Dismiss15 dated August
25, 2010, praying for the outright dismissal of Briones’s
complaint on the ground of improper venue.16 In this regard,
Cash Asia pointed out the venue stipulation in the subject
contracts stating that "all legal actions arising out of this notice
in connection with the Real Estate Mortgage subject hereof
shall only be brought in or submitted tothe jurisdiction of the
proper court of Makati City."17In view thereof, it contended
that all actions arising out of the subject contracts may only be
exclusively brought in the courts of Makati City, and as such,
Briones’s complaint should be dismissed for having been filed
in the City of Manila.18
40
In response, Briones filed an opposition,19 asserting, inter alia,
that he should not be covered by the venue stipulation in the
subject contracts as he was never a party therein. He also
reiterated that his signatures on the said contracts were
forgeries.20
The RTC Ruling
In an Order21 dated September 20, 2010, the RTC denied Cash
Asia’s motion to dismiss for lack of merit. In denying the
motion, the RTC opined that the parties must be afforded the
right to be heard in view of the substance of Briones’s cause of
action against Cash Asia as stated in the complaint.22
Cash Asia moved for reconsideration23 which was, however,
denied in an Order24 dated October 22, 2010. Aggrieved, it
filed a petition for certiorari25 before the CA.
The CA Ruling
In a Decision26 dated March 5, 2012, the CA annulled the RTC
Orders, and accordingly, dismissed Briones’s complaint without
prejudice to the filing of the same before the proper court in
Makati City.27 It held that the RTC gravely abused its discretion
in denying Cash Asia’s motion to dismiss, considering that the
subject contracts clearly provide that actions arising therefrom
should be exclusively filed before the courts of Makati City
only.28 As such, the CA concluded that Briones’s complaint
should have been dismissed outright on the ground of
improper venue,29this, notwithstanding Briones’s claim of
forgery.
Dissatisfied, Briones moved for reconsideration,30 which was,
however, denied in a Resolution31 dated October 4, 2012,
hence, this petition.
The Issue Before the Court
The primordial issue for the Court’s resolution is whether or
not the CA gravely abused its discretion in ordering the
outright dismissal of Briones’s complaint on the ground of
improper venue.
The Court’s Ruling
The petition is meritorious.
At the outset, the Court stresses that "[t]o justify the grant of
the extraordinary remedy of certiorari, [the petitioner] must
satisfactorily show that the court or quasi-judicial authority
gravely abused the discretion conferred upon it. Grave abuse
of discretion connotes judgment exercised in a capricious and
whimsical manner that is tantamount to lack of jurisdiction. To
be considered ‘grave,’ discretion must be exercised in a
despotic manner by reason of passion or personal hostility, and
must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty
enjoined by or to act at all in contemplation of law."32 Guided
by the foregoing considerations, the Court finds that the CA
gravely abused its discretion in ordering the outright dismissal
of Briones’s complaint against Cash Asia, without prejudice to
its re-filing before the proper court in Makati City.
Rule 4 of the Rules of Court governs the rules on venue of civil
actions, to wit:
Rule
VENUE OF ACTIONS
SECTION 1. Venue of real actions. — Actions affecting title to
or possession of real property, or interest therein, shall be
commenced and tried in the proper court which has jurisdiction
over the area wherein the real property involved, or a portion
thereof, is situated.
Forcible entry and detainer actions shall be commenced and
tried in the municipal trial court of the municipality or city
wherein the real property involved, or a portion thereof, is
situated.
SEC. 2. Venue of personal actions. — All other actions may be
commenced and tried where the plaintiff or any of the principal
plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the
plaintiff.
SEC. 3. Venue of actions against nonresidents. — If any of the
defendants does not resideand is not found in the Philippines,
and the action affects the personal status of the plaintiff, or
any property of said defendant located in the Philippines,the
action may be commenced and tried in the court of the place
where the plaintiff resides, or where the property or any
portion thereof is situated or found.
SEC. 4. When Rule not applicable. — This Rule shall not apply
– circumstance, Briones cannot be expected to comply with the
(a) In those cases where a specific rule or law
provides otherwise; or
(b) Where the parties have validly agreed in writing
before the filing of the action on the exclusive venue
thereof.
Based therefrom, the general rule is that the venue of real
actions is the court which has jurisdiction over the area
wherein the real property involved, or a portion thereof, is
situated; while the venue of personal actions is the court which
has jurisdiction where the plaintiff or the defendant resides, at
the election of the plaintiff. As an exception, jurisprudence in
Legaspi v. Rep. of the Phils.33 instructs that the parties, thru a
written instrument, may either introduce another venue where
actions arising from such instrument may be filed, or restrict
the filing of said actions in a certain exclusive venue, viz.:
The parties, however, are not precluded from agreeing in
writing on an exclusive venue, as qualified by Section 4 of the
same rule. Written stipulations as to venue may be restrictive
in the sense that the suit may be filed only in the place agreed
upon, or merely permissive in that the parties may file their
suitnot only in the place agreed upon but also in the places
fixed by law. As in any other agreement, what is essential is
the ascertainment of the intention of the parties respecting the
matter.
4 As regards restrictive stipulations on venue, jurisprudence
instructs that it must be shown thatsuch stipulation is
exclusive.1âwphi1 In the absence of qualifying or restrictive
words, such as "exclusively," "waiving for this purpose any
other venue," "shall only" preceding the designation of venue,
"to the exclusion of the other courts," or words of similar
import, the stipulation should be deemed as merely an
agreement on an additional forum,not as limiting venue to the
specified place.34 (Emphases and underscoring supplied)
In this relation, case law likewise provides that in cases where
the complaint assails only the terms, conditions, and/or
coverage of a written instrument and not its validity, the
exclusive venue stipulation contained therein shall still be
binding on the parties, and thus, the complaint may be
properly dismissed on the ground of improper
venue.35 Conversely, therefore, a complaint directly assailing
the validity of the written instrument itself should not be bound
by the exclusive venue stipulation contained therein and
should be filed in accordance with the general rules on venue.
To be sure, it would be inherently consistent for a complaint of
this nature to recognize the exclusive venue stipulation when
it, in fact, precisely assails the validity of the instrument in
which such stipulation is contained.
In this case, the venue stipulation found in the subject
contracts is indeed restrictive in nature, considering that it
effectively limits the venue of the actions arising therefrom to
the courts of Makati City. However, it must be emphasized that
Briones' s complaint directly assails the validity of the subject
contracts, claiming forgery in their execution. Given this
aforesaid venue stipulation, as his compliance therewith would
mean an implicit recognition of their validity. Hence, pursuant
to the general rules on venue, Briones properly filed his
complaint before a court in the City of Manila where the
subject property is located.
In conclusion, the CA patently erred and hence committed
grave abuse of discretion in dismissing Briones's complaint on
the ground of improper venue.
WHEREFORE, the petition is GRANTED. Accordingly, the
Decision dated March 5, 2012 and the Resolution dated
October 4, 2012 of the Court of Appeals in CA-G.R. SP No.
117474 are hereby ANNULLED and SET ASIDE. The Orders
dated September 20, 2010 and October 22, 2010 of the
Regional Trial Court of Manila, Branch 173 in Civil Case No. 10-
124040 are REINSTATED.
SO ORDERED.
41
January 30, 2017
G.R. No. 175949
UNITED ALLOY PHILIPINES CORPORATION, SPOUSES
DAVID C. CHUA and LUTEN CHUA, Petitioners
vs.
UNITED COCONUT PLANTERS BANK, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking
the reversal and setting aside of the Decision 1 and
Resolution2 of the Court of Appeals (CA), dated September 21,
2006 and December 11, 2006, respectively, in CA-G.R. CV No.
81079. The assailed Decision affirmed the Decision of the
Regional Trial Court (RTC) of Makati City, Branch 135, in Civil
Case No. 01-1332, while the questioned Resolution denied
petitioners' Motion for Reconsideration.
The pertinent factual and procedural antecedents of the case
are as follows:
On December 18, 2000, herein petitioner corporation, United
Alloy Philippines Corporation (UNIALLOY) applied for and was
granted a credit accommodation by herein respondent United
Coconut Planters Bank
(UCPB) in the amount of PhP50,000,000.00, as evidenced by a
Credit Agreement. 3 Part of UNIALLOY's obligation under the
Credit Agreement was secured by a Surety Agreement,4 dated
December 18, 2000, executed by UNIALLOY Chairman, Jakob
Van Der Sluis (Van Der Sluis), UNIALLOY President, David
Chua and his spouse, Luten Chua (Spouses Chua), and one
Yang Kim Eng (Yang). Six (6) Promissory Notes,5 were later
executed by UNIALLOY in UCPB's favor, to wit:
1) #8111-00-20031-1, executed on December 18, 2000, in the
amount ofUS$110,000.00;
2) #8111-00-00110-6, executed on December 18, 2000, in the
amount of PhP6,000,000.00;
3) #8111-00-00112-2, executed on December 27, 2000, in the
amount of PhP3,900,000.00;
4) #8111-01-20005-6, executed on February 7, 2001, in the
amount of US$320,000.00;
5) #8111-01-00009-0, executed on February 26, 2001, in the
amount of PhPl,600,000.00;
6) #8111-01-00030-8, executed on April 30, 2001, in the
amount of PhP16,029,320.88.
In addition, as part of the consideration for the credit
accommodation, UNIALLOY and UCPB also entered into a
42
"lease-purchase" contract wherein the former assured the
latter that it will purchase several real properties which UCPB
co-owns with the Development Bank of the Philippines.
Subsequently, UNIALLOY failed to pay its loan obligations. As a
result, UCPB filed against UNIALLOY, the spouses Chua, Yang
and Van Der Sluis an action for Sum of Money with Prayer for
Preliminary Attachment6 on August 27, 2001. The collection
case was filed with the Regional Trial Court of Makati City (RTC
of Makati) and docketed as Civil Case No. 01-1332.
Consequently, UCPB also unilaterally rescinded its
leasepurchase contract with UNIALLOY.
On the other hand, on even date, UNIALLOY filed against
UCPB, UCPB Vice-President Robert Chua and Van Der Sluis a
complaint for Annulment and/or Reformation of Contract with
Damages, with Prayer for a Writ of Preliminary Injunction or
Temporary Restraining Order.7 Claiming that it holds office and
conducts its business operations in Tagoloan, Misamis Oriental,
UNIALLOY filed the case with the Regional Trial Court of
Cagayan De Oro City (RTC of CDO) and was docketed as Civil
Case No. 2001-219. UNIALLOY contended that Van Der Sluis,
in cahoots with UCPB Vice-President Robert Chua, committed
fraud, manipulation and misrepresentation to obtain the
subject loan for their own benefit. UNIALLOY prayed, among
others, that three (3) of the six (6) Promissory Notes it
executed be annulled or reformed or that it be released from
liability thereon.
On September 12, 2001, UNIALLOY filed an Urgent Motion to
Dismiss8 the collection case (Civil Case No. 01-1332) filed by
UCPB on the ground of litis pendentia and forum shopping.
UNIALLOY contended that its complaint for annulment of
contract (Civil Case No. 2001-219) and the collection case filed
by UCPB involves the same parties and causes of action. On
October 31, 2001, the RTC of Makati issued an Order 9 denying
UNIALLOY's motion to dismiss.
In the meantime, UCPB and its co-defendants also filed a
Motion to Dismiss UNIALLOY's complaint for annulment of
contract on the grounds of improper venue, forum shopping,
litis pendentia, and harassment or nuisance suit. On
September 13, 2001, the RTC of CDO issued an
Order10 dismissing UNIALLOY's complaint for annulment of
contract. The dispositive portion of the Order reads, thus:
ACCORDINGLY, finding meritorious that the venue is
improperly laid and the complain[ant] engaged in forum-
shopping and harassment of defendant Jakob Van Der Sluis,
this case is hereby DISMISSED rendering the prayer for
issuance of a writ of preliminary injunction moot and
academic, and ordering plaintiff to turn over possession of the
subject premises of the properties in question at Barangay
Gracia, Tagoloan, Misamis Oriental to defendant United
Coconut Planters Bank.
SO ORDERED. 11
Thereafter, on motion, the RTC of CDO issued an Order of
Execution, dated September 14, 2001, directing UNIALLOY to
tum over to UCPB the property subject of their lease-purchase
agreement.
UNIALLOY then filed a petition for certiorari and mandamus
with the CA questioning the September 13 and September 14,
2001 Orders of the RTC of CDO. UNIALLOY also prayed for the
issuance of a writ of preliminary injunction. The case was
docketed as CA G.R. SP. No. 67079.
On February 18, 2002, the CA promulgated a
Resolution 12 granting UNIALLOY's prayer for the issuance of a
writ of preliminary injunction. UCPB questioned the above CA
Resolution by filing a petition for certiorari with this Court,
which was docketed as G.R. No. 152238. On March 18, 2002,
this Court issued a Resolution which restrained the CA from
enforcing its February 18, 2002 Resolution.
On January 28, 2005, this Court, rendered its Decision in G.R.
No. 152238 denying UCPB's petition for certiorariand affirming
the CA Resolution granting the writ of preliminary injunction.
Thereafter, on August 17, 2007, the CA promulgated a
Decision dismissing UNIALLOY's certiorari petition and
affirming the September 13 and September 14, 2001 Orders of
the RTC of CDO. UNIALLOY then filed a petition for review
on certiorari challenging the above CA Decision. The case was
docketed as G.R. No. 179257.
On November 23, 2015, this Court promulgated a Decision in
G.R. No. 179257 denying UNIALLOY's petition. This Court held
that the CA did not err in affirming the dismissal of UNIALLOY's
complaint on the grounds of improper venue, forum shopping
and for being a harassment suit. This Court also ruled that the
August 17, 2007 Decision of the CA neither violated this Comi's
January 28, 2005 Decision in G.R. No. 152238 nor contradicted
the CA's February 18, 2002 Resolution granting the preliminary
injunction prayed for by UNIALLOY because the dismissal of
UNIALLOY's main action carried with it the dissolution of any
ancillary relief previously granted in the said case, such as the
abovementioned preliminary injunction. Subsequently, this
Court's Decision in G.R. No. 179257 became final and
executory per Entry of Judgment dated January 20, 2016.
Meanwhile, on March 15, 2002, UNIALLOY filed with the RTC
of Makati an omnibus motion praying for the suspension of the
proceedings of the collection case in the said court on the
ground of pendency of the certioraripetition it filed with this
Court.13 However, the RTC denied UNIALLOY's motion in its
Order14 dated August 19, 2002.
Subsequently, on June 17, 2003, the RTC of Makati rendered
Judgment in the collection case in favor of UCPB. The
dispositive portion of the RTC Decision reads, thus:
WHEREFORE, premises considered, judgment is hereby
rendered in favor of plaintiff. Defendants are hereby ordered
to pay plaintiff the following:
a. The sum of US DOLLARS: (US$435,494.44) with interest
and penalty charges from August 1, 2001 until fully paid.
43
b. The sum of ₱26,940,950.80 with interest and penalty
charges from August 1, 2001 until fully paid.
c. Attorney's fees in the amount of ₱1,000,000.00.
d. Costs of suit.
SO ORDERED. 15
UNIALLOY appealed the above RTC Decision with the CA.
On September 21, 2006, the CA rendered its assailed
judgment denying UNIALLOY's appeal and affirming the
questioned RTC Decision.
Hence, the instant petition raising the following issues:
5.01 THE HONORABLE COURT OF APPEALS COMMITTED A
SERIOUS, REVERSIBLE ERROR, IF NOT GRAVE ABUSE OF
DISCRETION, IN REFUSING TO RESOLVE AS TO -
I
WHETHER OR NOT THE TRIAL COURT ERRED IN DENYING
PETITIONERS' URGENT MOTION TO DISMISS
II
WHETHER OR NOT THE TRIAL COURT ERRED IN DENYING
PETITIONERS' OMNIBUS MOTION TO SUSPEND
PROCEEDINGS AND TO LIFT WRIT OF PRELIMINARY
ATTACHMENT
III
WHETHER OR NOT THE TRIAL COURT ERRED AND/OR
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR IN EXCESS OF JURISDICTION IN RENDERING THE
ASSAILED QUESTIONED DECISION WHEN THERE IS A
PENDING CIVIL ACTION BEFORE THE REGIONAL TRIAL
COURT OF CAGAYAN DE ORO, BRANCH 40, INVOLVING THE
SAME PARTIES AND SUBJECT MATTER WHICH CASE, IS NOW
PENDING AND ASSAILED BY THE PLAINTIFF-APPELLEE VIA
PETITION BEFORE THE HONORABLE SUPREME COURT.
5.02 THE HONORABLE COURT OF APPEALS COMMITTED A
SERIOUS, REVERSIBLE ERROR IF NOT GRAVE ABUSE OF
DISCRETION, IN DENYING PETITIONERS' URGENT MOTION
FOR RECONSIDERATION WITHOUT STATING CLEARLY AND
DISTINCTLY THE FACTUAL AND LEGAL BASIS THEREOF.16
Petitioners' basic argument is that the resolution of the instant
petition basically hinges on the outcome of the petition filed
under G.R. No. 179257. Considering that the promissory notes
subject of G.R. No. 179257 are among the promissory notes
which are also involved in the present case, petitioner
contends that a judgment by this Court in G.R. No. 179257
that reverses the Decision of the RTC of Cagayan de Oro City,
which in effect would declare the nullity of the subject
promissory notes, may conflict with the Decision of this Court
in the present petition, which involves the collection of the sum
being represented in the same promissory notes. Thus,
petitioner prays for the dismissal of the collection case (Civil
Case No. 01- 1332) filed by UCPB or the suspension of
proceedings therein pending resolution of its petition in G.R.
No. 179257.
However, as mentioned above, on November 23, 2015, the
2nd Division of this Court already came up with a Decision in
G.R. No. 179257 which affirmed the RTC's dismissal of
UNIALLOY's complaint. Pe1iinent portions of the said Decision
read as follows:
CA CDO did not err in affirming the
dismissal of UniAlloy's Complaint on the
grounds of improper venue, forum shopping
and for being a harassment suit
The RTC was correct in dismissing UniAlloy's Complaint on the
ground of improper venue. In general, personal actions must
be commenced and tried (i) where the plaintiff or any of the
principal plaintiffs resides, (ii) where the defendant or any of
the principal defendants resides, or (III) in the case of a
resident defendant where he may be found, at the election of
the plaintiff. Nevertheless, the parties may agree in writing to
limit the venue of future actions between them to a specified
place.
In the case at bench, paragraph 18 of the LPA expressly
provides that "[a]ny legal action arising out of or in connection
with this Agreement shall be brought exclusively in the proper
courts of Makati City, Metro Manila." Hence, UniAlloy should
have filed its complaint before the RTC of Makati City, and not
with the RTC of Cagayan de Oro City. But to justify its choice
of venue, UniAlloy insists that the subject matter of its
Complaint in Civil Case No. 2001-219 is not the LPA, but the
fictitious loans that purportedly matured on April 17, 2001.
UniAlloy's insistence lacks merit. Its Complaint unequivocally
sought to declare "as null and void the unilateral rescission
made by defendant UCPB of its subsisting Lease Purchase
Agreement with [UniAlloy]." What UCPB unilaterally rescinded
is the LPA and without it there can be no unilateral rescission
to speak of. Hence, the LPA is the subject matter or at least
one of the subject matters of the Complaint. Moreover, and to
paraphrase the aforecited paragraph 18 of the LPA, as long as
the controversy arises out of or is connected therewith, any
legal action should be filed exclusively before the proper courts
of Makati City. Thus, even assuming that the LPA is not the
main subject matter, considering that what is being sought to
be annulled is an act connected and inseparably related
thereto, the Complaint should have been filed before the
proper courts in Makati City.
With regard forum-shopping, our review of the records of this
case revealed that UniAlloy did not disclose in the
Verification/Certification of the Complaint the pendency of Civil
Case No. 2001-156 entitled "Ernesto Paraiso and United Alloy
Philippines Corporation v. Jakob Van Der Sluis." The trial court
took judicial notice of its pendency as said case is also
44
assigned and pending before it. Thus, we adopt the following
unrebutted finding of the RTC:
These two civil cases have identical causes of action or issues
against defendant Jakob Van Der Sluis for having
misrepresented to plaintiff and its stockholders that he can
extend financial assistance in running the operation of the
corporation, such that on April 6, 2001 plaintiff adopted a
Stockholders Resolution making defendant Jakob chairman of
the corporation for having the financial capability to provide
the financial needs of plaintiff and willing to finance the
operational needs thereof; that a Memorandum of Agreement
was subsequently entered between the parties whereby
defendant Jakob obligated to provide sufficient financial loan
to plaintiff to make it profitable; that Jakob malicious! y and
willfiilly reneged [on] his financial commitments to plaintiff
prompting the stockholders to call his attention and warned
him of avoiding the said agreement; that defendant who had
then complete control of plaintiffs bank account with
defendant UCPB, through fraudulent machinations and
manipulations, was able to maliciously convince David C. Chua
to pre-sign several checks; that defendant Jakob facilitated
several huge loans purportedly obtained by plaintiff which
defendant himself could not even account and did not even
pay the debts of the corporation but instead abused and
maliciously manipulated plaintiffs account. Forum-shopping
indeed exists in this case, for both actions involve the same
transactions and same essential facts and circumstances as
well as identical causes of action, subject matter and issues, x
xx
As mentioned above, this Court's Decision in the above case
has become final and executory on January 20, 2016.
Thus, contrary to petitioners' position, there is no longer any
possibility that the Decision of the RTC of CDO may conflict
with the disposition of the present case because UNIALLOY's
complaint for annulment of contract has already been
dismissed with finality. This Court will, thus, proceed to resolve
the merits of the instant case.
The fundamental issue here is whether or not herein
petit10ners, together with their co-defendants Van Der Sluis
and Yang, are liable to pay respondent the amounts awarded
by the RTC of Makati City in its June 17, 2003 Decision. 17
The Court rules in the affirmative.
As ruled upon by both the RTC and the CA, UNIALLOY failed to
pay its obligations under the above promissory notes and that
herein petitioner Spouses Chua, together with their co-
defendants Van Der Sluis and Yang freely executed a Surety
Agreement whereby they bound themselves jointly and
severally with UNIALLOY, to pay the latter's loan obligations
with UCPB. Pertinent portions of the said Surety Agreement
are reproduced hereunder, to wit:
xxxx
ARTICLE I
LIABILITIES OF SURETIES
Section 1.01. The SURETIES, jointly and severally with the
PRINCIPAL, hereby unconditionally and irrevocably guarantee
the full and complete payment when due, whether at stated
maturity, by acceleration or otherwise, of all sums payable by
the PRINCIPAL under the Credit Agreement, the Note/s and
other related documents or instruments referred to therein
(hereinafter referred to collectively as the "Loan Documents")
the terms and conditions of which are hereby deemed
incorporated by reference.
The liability of the SURETIES shall not be limited to the
aggregate principal amount of FIFTY MILLION PESOS
(₱50,000,000.00), Philippine Currency, or its foreign
currency equivalent, but shall include such interest, fees,
penalties and other charges due thereon, as well as any and all
renewals, extensions, restructurings or conversions of the
Accommodation or any portion thereof, as may appear in the
books and records of account of the BANK.
Such extension/s, renewal/s, restructuring/s, or conversion/s
of the Accommodation or any portion thereof, including any
increase in the principal amount thereof, or the imposable
interest rates and other bank charges, shall be binding upon
the SURETIES under the terms of this SURETY
AGREEMENT, without need of any further notice to or
consent or conformity of the SURETIES, all of which are
hereby expressly waived.1âwphi1
Section 1.02. This SURETY AGREEMENT is a guarantee of
payment and not merely of collection and is intended to be a
perfect and continuing indemnity in favor of the BANK for the
amounts and to the extent stated above. For this purpose,
the SURETIES hereby commit that for as long as
this SURETY AGREEMENT is in effect, the SURETIES shall
not sell, lease, transfer, assign or encumber any of its present
and future properties without the written consent of
the BANK, which consent will not be unreasonably withheld.
The liability of the SURETIES shall be absolute, irrevocable,
unconditional, direct, immediate and not contingent upon the
pursuit by the BANK of whatever remedies it may have
against the PRINCIPAL or the other sureties for the
Accommodation, and shall be performed by
the SURETIES strictly in accordance with the terms hereof
and under any and all circumstances, including the existence
of any claim, set-off, defense or other rights which
the SURETIES or any person or entity may have at any time
against the BANK for any reason whatsoever, whether or not
related to this SURETY AGREEMENT, the Loan Documents or
under such other documents executed in relation thereto, or
contemplated hereunder.
ARTICLE II
TERM
Section 2.01. This SURETY AGREEMENT shall remain in full
force and effect until payment in full of all amount for which
the PRINCIPAL is or may be liable as set forth in ARTICLE I
45
hereof, regardless of the absence of any further or other
assent or conformity of, or notice to the SURETIES, or any
circumstance, or provision of law which might otherwise
constitute a defense or discharge of the SURETIES, all of
which are hereby expressly waived.
ARTICLE III
DEFAULT
Section 3.01. If the BANK shall declare the obligation of
the PRINCIPAL to be due and payable because of the
happening of any of the event of default as defined in
the Credit Agreement, the SURETIES, upon receipt of
written notice from the BANK, shall forthwith pay to
the BANK the full amount of the said obligations, without
need of demand, protest or notice of any kind, other than the
notice provided herein, all of which are likewise expressly
waived by the SURETIES. In this connection, the BANK is
hereby given full power and authority to apply whatever
moneys or things of value belonging to the SURETIES which
may be in the possession or control of the BANK in payment
of the obligations mentioned above.
ARTICLE IV
BINDING EFFECT
Section 4.01. This SURETY AGREEMENT shall except upon
the other SURETIES, if any whose liability(ies) is/are
extinguished by way of compromise or otherwise be binding
upon the SURETIES, their heirs and successors in interest and
shall inure to the benefit of and be enforceable by the BANK,
its assigns and successors in interest. For this purpose,
the SURETIES have agreed, as they hereby agree, that an
extinguishment of liability(ies) of any of the SURETIES shall
not be an obstacle to the BANK from demanding payment
from the other SURETIES, if any, so long as the
Accommodation has not been fully collected.
x x x x18
Petitioners do not deny their liability under the abovequoted
Surety Agreement. As correctly held by both the RTC and the
CA, Article 1159 of the Civil Code expressly provides that
"[o]bligations arising from contracts have the force of law
between the contracting parties and should be complied with
in good faith." The RTC as well as the CA found nothing which
would justify or excuse petitioners from non-compliance with
their obligations under the contract they have entered into.
Thus, it becomes apparent that petitioners are merely
attempting to evade or, at least, delay the inevitable
performance of their obligation to pay under the Surety
Agreement and the subject promissory notes which were
executed in respondent's favor.
The Court notes, however, that the interest rates imposed on
the subject promissory notes were made subject to review and
adjustment at the sole discretion and under the exclusive will
of UCPB. Moreover, aside from the Consolidated Statement of
Account attached to the demand letters addressed to petitioner
spouses Chua and their co-defendants,19 no other competent (4) an interest of 6% from July 1, 2013 until fully paid.
evidence was shown to prove the total amount of interest due
on the above promissory notes. In fact, based on the attached SO ORDERED.
Consolidated Statement of Account, UCPB has already imposed
a 24% interest rate on the total amount due on respondents'
peso obligation for a short period of six months. Settled is the
rule that any contract which appears to be heavily weighed in
favor of one of the parties so as to lead to an unconscionable
result is void.19 a Any stipulation regarding the validity or
compliance of the contract which is left solely to the will of one
of the parties, is likewise, invalid.20

Moreover, courts have the authority to strike down or to

modify provisions in promissory notes that grant the lenders
unrestrained power to increase interest rates, penalties and
other charges at the latter's sole discretion and without giving
prior notice to and securing the consent of the
borrowers.21 This unilateral authority is anathema to the
mutuality of contracts and enable lenders to take undue
advantage of borrowers.22 Although the Usury Law has been
effectively repealed, courts may still reduce iniquitous or
unconscionable rates charged for the use of
money. 23 Furthermore, excessive interests, penalties and
other charges not revealed in disclosure statements issued by
banks, even if stipulated in the promissory notes, cannot be
given effect under the Truth in Lending Act.24

The Court, thus, finds it proper to modify the interest rates

imposed on respondents' obligation. Pursuant to the ruling
in Nacar v. Gallery Frames, et. al.,25 the sums of
US$435,494.44 and PhP26,940,950.80 due to UCPB shall earn
interest at the rate of 12% per annum from the date of
default, on August, 1, 2001, until June 30, 2013 and
thereafter, at the rate of 6% per annum, from July 1, 2013
until finality of this Decision. The total amount owing to UCPB
as set forth in this Decision shall further earn legal interest at
the rate of 6o/o per annum from its finality until full payment
thereof, this interim period being deemed to be by then an
equivalent to a forbearance of credit.1âwphi1

Finally, pursuant to the parties' Credit Agreement as well as

the subject Promissory Notes, respondents are also liable to
pay a penalty charge at the rate of 1 % per month or 12% per
annum.

WHEREFORE, the instant petition is DENIED. The Decision

and Resolution of the Court of Appeals, dated September 21,
2006 and December 11, 2006, respectively, in CA-G.R. CV No.
81079, are AFFIRMED with MODIFICATION by directing
petitioners and their codefendants to pay respondent UCPB the
following:

(1) the principal amounts of US$435,494.44 and

PhP26,940,950.80;

(2) legal interest of 12% per annum on the above principal

amounts reckoned from August 1, 2001 until June 30, 2013;

(3) penalty charge of 12% per annum from August 1, 2001

until fully paid; and

46