EASTERN SHIPPING LINES, INC., petitioner, vs.

COURT OF APPEALS and

MANILA GAS CORPORATION, respondents.

DECISION
PARDO, J.:

The Case

The case is a petition for review on certiorari of the decision of the Court of
Appeals[1] which reversed that of the Regional Trial Court, Manila[2] directing the
Metropolitan Trial Court, Manila to hold in abeyance the enforcement of its
decision[3] for ejectment, pending the rendition of decision in civil cases involving
the same parties on the issue of ownership of the subject property.

The Facts

The facts, as found by the Court of Appeals, are as follows:

Manila Gas Corporation (petitioner), a government controlled corporation, is the

owner of a parcel of land situated at the eastern side of Sanciangco Street, Paco,
Manila with two frontages on the northern side of Paz M. Guanzon Street containing
an area of 12,600 square meters, more or less.

On November 9, 1982, petitioner entered into a contract of lease with Eastern

Shipping Lines, Inc. (private respondent) whereby it leased to the latter the aforesaid
property for a period of ten (10) years beginning November 15, 1982 up
to November 15, 1992. The parties agreed, among other things, to the following
pertinent stipulations, to wit:

1. PERIOD OF LEASE The lease shall be for ten (10) years commencing on
November 15, 1982 and shall expire on November 15, 1992, unless the same be
extended for another period subject to mutual agreement of both parties. However,
should the LESSOR decide to sell the leased premises during the term of the leased
period, he should notify the LESSEE at least thirty (30) days from receipt of the
notice under the terms and conditions as may be mutually agreed upon by the parties.
2. PRE-TERMINATION Paragraph 1 above notwithstanding, the parties
hereto agree after the fifth year of lease of the option/right to preterminate this
Contract of Lease on any ground whatsoever without penalty provided all
outstanding obligations have been settled and giving one to the other 120 days prior
notice. (Underscoring supplied)

On November 22, 1982, the parties amended the contract by limiting the area to be
covered by the lease to 12,189 square meters only, hereinafter referred to as the
leased premises.

On January 30, 1989, learning that petitioner was among the government-owned or
controlled corporations under consideration for privatization and sale, private
respondent wrote petitioner of its intention to exercise its option under Clause 1 of
the lease contract to purchase the leased premises.

Responding, petitioner wrote private respondent that since the government mandate
is to privatize or sell its shares or the entire interest of the National Development
Company (NDC) with petitioner and not just assets and/or land, it was the opinion
of its Board of Directors that Clause 1 may not be invoked. Petitioner,
however, assured private respondent that in the preparation of the bidding
guidelines, it would take cognizance of the lease and present the same to the bidding
public as part of NDCs disclosures.

On September 17, 1991, private respondent again wrote petitioner, advising it of its
intention to extend the term of the lease contract for another ten (10) years after its
expiration on November 15, 1992, and reiterating its previous offer to purchase the
leased premises.

On October 28, 1991, petitioner advised private respondent that it could not grant its
request for a 10-year extension as it had already drawn up its final plans to sell the
entire parcel which consists of 4 lots covered by 4 titles and containing a total area
of 15, 469.50 sq. m. (hereinafter referred to as the property in question) including
the leased premises and was planning to sell it before the year ended. And petitioner
invoked its right to pre-terminate the contract under Clause 2 thereof, advising
private respondent, however, to participate, if it wished, in the public bidding.

Two public biddings were later held by petitioner but failed on account of which it
decided to instead sell the property in question on the bases of a negotiated sale
which it announced would be held on February 10, 1992.
On February 10, 1992, three bidders of the property in question including private
respondent who made clear that its participation should not be interpreted as a waiver
of its option to purchase under the contract tendered their respective offers. The law
firm of Carag, Caballes, Jamora & Somera who made a bid for an undisclosed client
emerged as the highest bidder at P80,218,000.00 for the property in question.

Private respondent then informed petitioner, by letter of February 17, 1992, that it
was exercising its preferential right to purchase the property in question for the same
amount as that tendered by the highest bidder, enclosing therewith a cashiers check
for P5,646,404 representing 10% of the purchase price, and promising to pay the
remaining 90% within 30 days from execution of the final deed of absolute sale in
its favor. Private respondent at the same time reserved its right to question the offer
of the highest bidder on the ground of violation of certain bidding rules and
regulation and offered to purchase the property in question, in the event the said
highest bidder is disqualified, at the next highest tendered price of P65,004,360.00.

Petitioner returned the cashiers check to private respondent and, by letter of March
16, 1992 sent by its counsel, the Office of the Government Corporate Counsel,
formally demanded private respondent to vacate the leased premises within 5 days
from receipt thereof, alleging that its continued occupancy beyond February 25,
1992, the expiration of the 120-day grace period from October 29, 1991 given to it
in accordance with the contract had become unlawful.

Private respondent refused to leave the leased premises, however, hence, petitioner
filed on April 15, 1992 the present unlawful detainer case against it with the
Metropolitan Trial Court (MTC) of Manilawhich was docketed as Civil Case No.
94-71393 and raffled to Branch 1 thereof.

Private respondent, as defendant, alleged in its Answer with Counterclaim that

petitioner, as plaintiff, had come to court with unclean hands, and had suppressed
the true facts of the case in order to disguise it as one for ejectment when it was not
as the lease contract they entered into is coupled with interest; that at the most, it is
deemed to have purchased the leased premises at the terms and conditions of the
highest bidder at the negotiated sale proceedings on February 10, 1992 or, at the
least, it is entitled to exercise its right of first refusal; and that at the very least, it is
entitled to a declaration that the lease is deemed renewed for another ten (10) years
beginning November 16, 1992.

On March 2, 1993, petitioner filed a Supplemental Complaint averring that as the

10-year lease period had already expired, the continued occupancy by private
respondent of the leased premises had become unlawful and without bases
irrespective of whether or not the contract of lease was preterminated. Private
respondent, in its Supplemental Answer with Counterclaim, countered that petitioner
is barred by estoppel and laches from invoking the automatic expiration of the
contract.

During the pendency of the ejectment case before the MTC, a certain
Santiago Cua (Cua) filed a case for injunction before the Regional Trial Court (RTC)
of Manila against petitioner seeking to enjoin petitioner from proceeding with its
bidding of the property in question, claiming that he was the highest bidder in a
previous bidding and, therefore, petitioner should award and sell the same to it. The
case was docketed as Civil Case No. 92-60965 and was raffled to Branch 49 of the
said court. Private respondent intervened in said case, invoking its right of first
refusal. Cua later moved to dismiss the case which was granted. The dismissal was
appealed by private respondent to this Court and is now pending consideration in
CA-G. R. CV No. 40997.

On April 14, 1994, private respondent filed at the RTC of Manila a case against
petitioner and Cua, docketed as Civil Case No. 94-70140, seeking to annul the sale
of a 3,198.80 square meter lot covered by TCT 39482 executed by petitioner in favor
of Cua, which lot does not form part of the property in question.

The pendency of the two above-mentioned cases was invoked by private respondent
in its Position Paper filed on July 22, 1993 with the MTC as ground for the
suspension of the ejectment proceedings.

In a decision of June 16, 1994, the MTC rejected private respondents position and
upheld petitioners pretermination of the lease contract due to the absence of a mutual
agreement by the parties for its extension. The MTC held that since the parties failed
to reach a mutual agreement on the purchase of the leased premises, there is no basis
in concluding that private respondent had purchased the same; and that
the pendency of the two other civil cases was not a bar to the resolution of
the ejectment case.

The decretal part of the MTC decision reads:

Wherefore, judgment is hereby rendered in favor of plaintiff, ordering defendant, its

representatives, agents, employees and assigns, to vacate the leased premises and to
pay to plaintiff the following:
 a) Payment for the use of the leased premised in the amount of One
Hundred Twenty Six Thousand Pesos (P126,000. 00) per month
starting on February 25, 1992, until defendant vacates the leased
premises;

b) Attorneys fees in the amount of Fifty Thousand Pesos (P50,000.00);

c) Costs of suit.

Private respondent appealed the MTC decision to the RTC of Manila where it was
docketed as Civil Case No. 94-1393.

On June 2, 1995, respondent court, Branch 34 of the RTC of Manila to which the
appeal was raffled, rendered a decision the dispositive portion of which reads:

WHEREFORE, let the record be remanded to the Court a quo with further order to
hold the enforcement of the decision in abeyance pending final decision of the cases,
namely, CA-G. R. CV No. 40997, entitled Santiago Cua, plaintiff-appellee vs.
Manila Gas Corporation, et al., defendant-appellant, Eastern Shipping Lines, Inc.,
plaintiff-intervenor-appellant being considered by the Court of Appeals and Civil
Case No. 94-70140, entitled Eastern Shipping Lines vs. Manila Gas Corporation, et
al. pending trial before Branch 47 of the Regional Trial Court of
Manila. Thereafter, to render a decision based from thefinal decision on the above-
captioned case. (Underscoring supplied). [4]

On August 28, 1995, respondent Manila Gas Corporation filed with the Court of
Appeals a petition for review of the regional trial court decision.[5] On December 1,
1993, petitioner Eastern Shipping Lines, Inc. filed an answer to the petition.[6]
On March 13, 1998, the Court of Appeals promulgated a decision,[7] reversing
the decision of the Regional Trial Court, Manila, Branch 34[8]8Petition, Annex
U, Rollo, pp. 241-255.8 and reinstating the decision of the Metropolitan Trial Court,
Manila, Branch 1.[9]
On April 7, 1998, petitioner ESLI filed a motion for reconsideration [10] of the
decision. On October 19, 1998, the Court of Appeals denied the motion.[11]
Hence, this appeal.[12]

The Issue
 The only issue raised is whether petitioner Eastern Shipping Lines, Inc. has
unlawfully withheld possession of the subject premises from respondent Manila Gas
Corporation.

The Courts Ruling

We deny the petition.

An action for unlawful detainer may be filed when possession by a landlord,
vendor, vendee or other person against whom the possession of any land or building
is unlawfully withheld, after the expiration or termination of the right to hold
possession, by virtue of a contract, express or implied.[13] In Manuel v. Court of
Appeals,[14] we categorically stated that:

Proceedings in forcible entry and detainer are wholly summary in nature. The fact
of lease and the expiration of its terms are the only elements of this kind of
action. The question of ownership is unessential and should be raised by the
defendant in an appropriate action. Any controversy over ownership rights could and
should be settled after the party who had the prior, peaceful and actual possession is
returned to the property.

In the case at bar, the lease contract between the parties was
effectively preterminated pursuant to the stipulations thereof. At any rate, the lease
period expired on November 15, 1992.Thus, as correctly held by the Court of
Appeals, even assuming that the pre-termination of the contract was not validly
exercised, the contract of lease has nonetheless expired without the parties entering
into a mutual agreement either extending or renewing it, thus rendering unlawful the
occupation of the premises by petitioner Eastern Shipping Lines, Inc.
Consequently, having been given a demand to vacate the premises in question,
petitioner Eastern Shipping Lines, Inc. is now unlawfully withholding possession of
the leased property from Manila Gas Corporation, which is entitled to physical
possession as the registered owner of the subject land. The age-old rule is that the
person who has a torrens title over a land is entitled to possession thereof.[15]
In Co Tiamco v. Diaz,[16] we emphasized that the principle underlying the
brevity and simplicity of pleadings in forcible entry and unlawful detainer cases rests
upon considerations of public policy. Cases of forcible entry and detainer are
summary in nature for they involve perturbation of social order which may be
restored as promptly as possible, and, accordingly, technicalities or details of
procedure which may cause unnecessary delays should be carefully
avoided.[17] Such cases are designed to provide for an expeditious means of
protecting actual possession or the right to possession of the property involved.[18]
Eastern Shipping Lines, Inc. which is occupying the premises up to the present
time is clearly unlawfully withholding possession after termination of the lease
period and refuses to leave the property despite demand to vacate the
premises.[19] Hence, a complaint for unlawful detainer was properly filed within one
(1) year therefrom.[20]
In actions of forcible entry and detainer, the main issue is possession de
facto,[21] independently of any claim of ownership or possession de jure that either
party may set forth in his pleading.[22] As incidents of the main issue of possession de
facto, the inferior court can decide the questions of (a) whether or not the relationship
between the parties is one of landlord and tenant; (b) whether or not there is a lease
contract between the parties, the period of such lease contract and whether or not the
lease contract has already expired; (c) the just and reasonable amount of the
rent[23] and the date when it will take effect; (d) the right of the tenant to keep the
premises against the will of the landlord; and (e) if the defendant has built on the
land a substantial and valuable building and there is no dispute between the parties
as to the ownership of the land and the building, their rights according to the Civil
Code. Defendants claim of ownership of the property from which plaintiff seeks to
eject him is not sufficient to divest the inferior court of its jurisdiction over the action
of forcible entry and detainer.[24]
In an unlawful detainer case, the only issue is whether the defendant has
unlawfully withheld possession of the premises after the expiration or termination
of its right to hold possession under any contract, express or implied. Thus, when
the relationship of lessor and lessee is established in an unlawful detainer case, any
attempt of the parties to inject the question of ownership into the case is futile, except
insofar as it might throw light on the right of possession.
Petitioner, however, insists on its right or option of first refusal to purchase the
property belonging to Manila Gas Corporation to hold tenaciously on to the
premises.
As correctly ruled by the Court of Appeals, even if (petitioner) had the right of
first refusal, its exercise could not be equated with automatic ownership, given the
injunction under Clause 1 (under terms and conditions as may
be mutually agreed upon by the parties) of the contract that the parties must first
arrive at terms and conditions mutually acceptable to them, but there was none.[25]
Nonetheless, any supposed issue as to petitioner Eastern Shipping Lines, Inc.s
right or option of first refusal is litigated before the Regional Trial Court,
Manila,[26] where a case for specific performance (praying for the issuance of a
Notice of Award) was filed by Eastern Shipping Lines, Inc., as plaintiff-
intervenor therein and is still pending before the trial court.
As heretofore stated, petitioners right of first refusal could be settled in the
appropriate court hearing the case. However, in the ejectment case, it is enough that
the lease earlier enteredinto by the parties has expired and petitioner is unlawfully
withholding possession of the premises from its owner, the Manila Gas
Corporation. Hence, petitioner Eastern Shipping Lines, Inc. may be
evicted therefrom.

The Fallo

WHEREFORE, the Court DISMISSES the petition for lack of merit, and
AFFIRMS the decision of the Court of Appeals[27] in toto.
No costs.
SO ORDERED.

G.R. Nos. 79937-38 February 13, 1989

SUN INSURANCE OFFICE, LTD., (SIOL), E.B. PHILIPPS and D.J.

WARBY, petitioners,
vs.
HON. MAXIMIANO C. ASUNCION, Presiding Judge, Branch 104, Regional Trial
Court, Quezon City and MANUEL CHUA UY PO TIONG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles Law Offices for
petitioners. Tanjuatco, Oreta, Tanjuatco, Berenguer & Sanvicente Law Offices for
private respondent.

GANCAYCO, J.:

Again the Court is asked to resolve the issue of whether or not a court acquires
jurisdiction over a case when the correct and proper docket fee has not been paid.

On February 28, 1984, petitioner Sun Insurance Office, Ltd. (SIOL for brevity) filed
a complaint with the Regional Trial Court of Makati, Metro Manila for the
consignation of a premium refund on a fire insurance policy with a prayer for the
judicial declaration of its nullity against private respondent Manuel Uy Po Tiong.
Private respondent as declared in default for failure to file the required answer within
the reglementary period.

On the other hand, on March 28, 1984, private respondent filed a complaint in the
Regional Trial Court of Quezon City for the refund of premiums and the issuance of
a writ of preliminary attachment which was docketed as Civil Case No. Q-41177,
initially against petitioner SIOL, and thereafter including E.B. Philipps and D.J.
Warby as additional defendants. The complaint sought, among others, the payment
of actual, compensatory, moral, exemplary and liquidated damages, attorney's fees,
expenses of litigation and costs of the suit. Although the prayer in the complaint did
not quantify the amount of damages sought said amount may be inferred from the
body of the complaint to be about Fifty Million Pesos (P50,000,000.00).

Only the amount of P210.00 was paid by private respondent as docket fee which
prompted petitioners' counsel to raise his objection. Said objection was disregarded
by respondent Judge Jose P. Castro who was then presiding over said case. Upon the
order of this Court, the records of said case together with twenty-two other cases
assigned to different branches of the Regional Trial Court of Quezon City which
were under investigation for under-assessment of docket fees were transmitted to
this Court. The Court thereafter returned the said records to the trial court with the
directive that they be re-raffled to the other judges in Quezon City, to the exclusion
of Judge Castro. Civil Case No. Q-41177 was re-raffled to Branch 104, a sala which
was then vacant.

On October 15, 1985, the Court en banc issued a Resolution in Administrative Case
No. 85-10-8752-RTC directing the judges in said cases to reassess the docket fees
and that in case of deficiency, to order its payment. The Resolution also requires all
clerks of court to issue certificates of re-assessment of docket fees. All litigants were
likewise required to specify in their pleadings the amount sought to be recovered in
their complaints.

On December 16, 1985, Judge Antonio P. Solano, to whose sala Civil Case No. Q-
41177 was temporarily assigned, issuedan order to the Clerk of Court instructing
him to issue a certificate of assessment of the docket fee paid by private respondent
and, in case of deficiency, to include the same in said certificate.
On January 7, 1984, to forestall a default, a cautionary answer was filed by
petitioners. On August 30,1984, an amended complaint was filed by private
respondent including the two additional defendants aforestated.

Judge Maximiano C. Asuncion, to whom Civil Case No. Q41177 was thereafter
assigned, after his assumption into office on January 16, 1986, issued a
Supplemental Order requiring the parties in the case to comment on the Clerk of
Court's letter-report signifying her difficulty in complying with the Resolution of
this Court of October 15, 1985 since the pleadings filed by private respondent did
not indicate the exact amount sought to be recovered. On January 23, 1986, private
respondent filed a "Compliance" and a "Re-Amended Complaint" stating therein a
claim of "not less than Pl0,000,000. 00 as actual compensatory damages" in the
prayer. In the body of the said second amended complaint however, private
respondent alleges actual and compensatory damages and attorney's fees in the total
amount of about P44,601,623.70.

On January 24, 1986, Judge Asuncion issued another Order admitting the second
amended complaint and stating therein that the same constituted proper compliance
with the Resolution of this Court and that a copy thereof should be furnished the
Clerk of Court for the reassessment of the docket fees. The reassessment by the Clerk
of Court based on private respondent's claim of "not less than P10,000,000.00 as
actual and compensatory damages" amounted to P39,786.00 as docket fee. This was
subsequently paid by private respondent.

Petitioners then filed a petition for certiorari with the Court of Appeals questioning
the said order of Judie Asuncion dated January 24, 1986.

On April 24, 1986, private respondent filed a supplemental complaint alleging an

additional claim of P20,000,000.00 as d.qmages so the total claim amounts to about
P64,601,623.70. On October 16, 1986, or some seven months after filing the
supplemental complaint, the private respondent paid the additional docket fee of
P80,396.00.1

On August 13, 1987, the Court of Appeals rendered a decision ruling, among others,
as follows:

WHEREFORE, judgment is hereby rendered:

1. Denying due course to the petition in CA-G.R. SP No. 1, 09715

insofar as it seeks annulment of the order
 (a) denying petitioners' motion to dismiss the complaint, as amended,
and

(b) granting the writ of preliminary attachment, but giving due course
to the portion thereof questioning the reassessment of the docketing fee,
and requiring the Honorable respondent Court to reassess the docketing
fee to be paid by private respondent on the basis of the amount of
P25,401,707.00. 2

Hence, the instant petition.

During the pendency of this petition and in conformity with the said judgment of
respondent court, private respondent paid the additional docket fee of P62,432.90 on
April 28, 1988. 3

The main thrust of the petition is that the Court of Appeals erred in not finding that
the lower court did not acquire jurisdiction over Civil Case No. Q-41177 on the
ground of nonpayment of the correct and proper docket fee. Petitioners allege that
while it may be true that private respondent had paid the amount of P182,824.90 as
docket fee as herein-above related, and considering that the total amount sought to
be recovered in the amended and supplemental complaint is P64,601,623.70 the
docket fee that should be paid by private respondent is P257,810.49, more or less.
Not having paid the same, petitioners contend that the complaint should be dismissed
and all incidents arising therefrom should be annulled. In support of their theory,
petitioners cite the latest ruling of the Court in Manchester Development
Corporation vs. CA, 4 as follows:

The Court acquires jurisdiction over any case only upon the payment
of the prescribed docket fee. An amendment of the complaint or similar
pleading will not thereby vest jurisdiction in the Court, much less the
payment of the docket fee based on the amounts sought in the amended
pleading. The ruling in the Magaspi Case in so far as it is inconsistent
with this pronouncement is overturned and reversed.

On the other hand, private respondent claims that the ruling in Manchester cannot
apply retroactively to Civil Case No. Q41177 for at the time said civil case was filed
in court there was no such Manchester ruling as yet. Further, private respondent
avers that what is applicable is the ruling of this Court in Magaspi v.
Ramolete, 5 wherein this Court held that the trial court acquired jurisdiction over the
case even if the docket fee paid was insufficient.
The contention that Manchester cannot apply retroactively to this case is untenable.
Statutes regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 6

In Lazaro vs. Endencia and Andres, 7 this Court held that the payment of the full
amount of the docket fee is an indispensable step for the perfection of an appeal. In
a forcible entry and detainer case before the justice of the peace court of Manaoag,
Pangasinan, after notice of a judgment dismissing the case, the plaintiff filed a notice
of appeal with said court but he deposited only P8.00 for the docket fee, instead of
P16.00 as required, within the reglementary period of appeal of five (5) days after
receiving notice of judgment. Plaintiff deposited the additional P8.00 to complete
the amount of the docket fee only fourteen (14) days later. On the basis of these
facts, this court held that the Court of First Instance did notacquire jurisdiction to
hear and determine the appeal as the appeal was not thereby perfected.

In Lee vs. Republic, 8 the petitioner filed a verified declaration of intention to

become a Filipino citizen by sending it through registered mail to the Office of the
Solicitor General in 1953 but the required filing fee was paid only in 1956, barely
5V2 months prior to the filing of the petition for citizenship. This Court ruled that
the declaration was not filed in accordance with the legal requirement that such
declaration should be filed at least one year before the filing of the petition for
citizenship. Citing Lazaro, this Court concluded that the filing of petitioner's
declaration of intention on October 23, 1953 produced no legal effect until the
required filing fee was paid on May 23, 1956.

In Malimit vs. Degamo, 9 the same principles enunciated in Lazaro and Lee were
applied. It was an original petition for quo warranto contesting the right to office of
proclaimed candidates which was mailed, addressed to the clerk of the Court of First
Instance, within the one-week period after the proclamation as provided therefor by
law.10However, the required docket fees were paid only after the expiration of said
period. Consequently, this Court held that the date of such payment must be deemed
to be the real date of filing of aforesaid petition and not the date when it was mailed.

Again, in Garica vs, Vasquez, 11 this Court reiterated the rule that the docket fee
must be paid before a court will act on a petition or complaint. However, we also
held that said rule is not applicable when petitioner seeks the probate of several wills
of the same decedent as he is not required to file a separate action for each will but
instead he may have other wills probated in the same special proceeding then
pending before the same court.
Then in Magaspi, 12 this Court reiterated the ruling in Malimit and Lee that a case is
deemed filed only upon payment of the docket fee regardless of the actual date of its
filing in court. Said case involved a complaint for recovery of ownership and
possession of a parcel of land with damages filed in the Court of First Instance of
Cebu. Upon the payment of P60.00 for the docket fee and P10.00 for the sheriffs fee,
the complaint was docketed as Civil Case No. R-11882. The prayer of the complaint
sought that the Transfer Certificate of Title issued in the name of the defendant be
declared as null and void. It was also prayed that plaintiff be declared as owner
thereof to whom the proper title should be issued, and that defendant be made to pay
monthly rentals of P3,500.00 from June 2, 1948 up to the time the property is
delivered to plaintiff, P500,000.00 as moral damages, attorney's fees in the amount
of P250,000.00, the costs of the action and exemplary damages in the amount of
P500,000.00.

The defendant then filed a motion to compel the plaintiff to pay the correct amount
of the docket fee to which an opposition was filed by the plaintiff alleging that the
action was for the recovery of a parcel of land so the docket fee must be based on its
assessed value and that the amount of P60.00 was the correct docketing fee. The trial
court ordered the plaintiff to pay P3,104.00 as filing fee.

The plaintiff then filed a motion to admit the amended complaint to include the
Republic as the defendant. In the prayer of the amended complaint the exemplary
damages earlier sought was eliminated. The amended prayer merely sought moral
damages as the court may determine, attorney's fees of P100,000.00 and the costs of
the action. The defendant filed an opposition to the amended complaint. The
opposition notwithstanding, the amended complaint was admitted by the trial court.
The trial court reiterated its order for the payment of the additional docket fee which
plaintiff assailed and then challenged before this Court. Plaintiff alleged that he paid
the total docket fee in the amount of P60.00 and that if he has to pay the additional
fee it must be based on the amended complaint.

The question posed, therefore, was whether or not the plaintiff may be considered to
have filed the case even if the docketing fee paid was not sufficient. In Magaspi, We
reiterated the rule that the case was deemed filed only upon the payment of the
correct amount for the docket fee regardless of the actual date of the filing of the
complaint; that there was an honest difference of opinion as to the correct amount to
be paid as docket fee in that as the action appears to be one for the recovery of
property the docket fee of P60.00 was correct; and that as the action is also one, for
damages, We upheld the assessment of the additional docket fee based on the
damages alleged in the amended complaint as against the assessment of the trial
court which was based on the damages alleged in the original complaint.

However, as aforecited, this Court

overturned Magaspi in Manchester. Manchester involves an action for torts and
damages and specific performance with a prayer for the issuance of a temporary
restraining order, etc. The prayer in said case is for the issuance of a writ of
preliminary prohibitory injunction during the pendency of the action against the
defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for
the property in question, the attachment of such property of defendants that may be
sufficient to satisfy any judgment that may be rendered, and, after hearing, the
issuance of an order requiring defendants to execute a contract of purchase and sale
of the subject property and annul defendants' illegal forfeiture of the money of
plaintiff. It was also prayed that the defendants be made to pay the plaintiff jointly
and severally, actual, compensatory and exemplary damages as well as 25% of said
amounts as may be proved during the trial for attorney's fees. The plaintiff also asked
the trial court to declare the tender of payment of the purchase price of plaintiff valid
and sufficient for purposes of payment, and to make the injunction permanent. The
amount of damages sought is not specified in the prayer although the body of the
complaint alleges the total amount of over P78 Millon allegedly suffered by plaintiff.

Upon the filing of the complaint, the plaintiff paid the amount of only P410.00 for
the docket fee based on the nature of the action for specific performance where the
amount involved is not capable of pecuniary estimation. However, it was obvious
from the allegations of the complaint as well as its designation that the action was
one for damages and specific performance. Thus, this court held the plaintiff must
be assessed the correct docket fee computed against the amount of damages of about
P78 Million, although the same was not spelled out in the prayer of the complaint.

Meanwhile, plaintiff through another counsel, with leave of court, filed an amended
complaint on September 12, 1985 by the inclusion of another co-plaintiff and
eliminating any mention of the amount of damages in the body of the complaint. The
prayer in the original complaint was maintained.

On October 15, 1985, this Court ordered the re-assessment of the docket fee in the
said case and other cases that were investigated. On November 12, 1985, the trial
court directed the plaintiff to rectify the amended complaint by stating the amounts
which they were asking for. This plaintiff did as instructed. In the body of the
complaint the amount of damages alleged was reduced to P10,000,000.00 but still
no amount of damages was specified in the prayer. Said amended complaint was
admitted.

Applying the principle in Magaspi that "the case is deemed filed only upon payment
of the docket fee regardless of the actual date of filing in court," this Court held that
the trial court did not acquire jurisdiction over the case by payment of only P410.00
for the docket fee. Neither can the amendment of the complaint thereby vest
jurisdiction upon the Court. For all legal purposes there was no such original
complaint duly filed which could be amended. Consequently, the order admitting
the amended complaint and all subsequent proceedings and actions taken by the trial
court were declared null and void.13

The present case, as above discussed, is among the several cases of under-assessment
of docket fee which were investigated by this Court together with Manchester. The
facts and circumstances of this case are similar to Manchester. In the body of the
original complaint, the total amount of damages sought amounted to about P50
Million. In the prayer, the amount of damages asked for was not stated. The action
was for the refund of the premium and the issuance of the writ of preliminary
attachment with damages. The amount of only P210.00 was paid for the docket fee.
On January 23, 1986, private respondent filed an amended complaint wherein in the
prayer it is asked that he be awarded no less than P10,000,000.00 as actual and
exemplary damages but in the body of the complaint the amount of his pecuniary
claim is approximately P44,601,623.70. Said amended complaint was admitted and
the private respondent was reassessed the additional docket fee of P39,786.00 based
on his prayer of not less than P10,000,000.00 in damages, which he paid.

On April 24, 1986, private respondent filed a supplemental complaint alleging an

additional claim of P20,000,000.00 in damages so that his total claim is
approximately P64,601,620.70. On October 16, 1986, private respondent paid an
additional docket fee of P80,396.00. After the promulgation of the decision of the
respondent court on August 31, 1987 wherein private respondent was ordered to be
reassessed for additional docket fee, and during the pendency of this petition, and
after the promulgation of Manchester, on April 28, 1988, private respondent paid an
additional docket fee of P62,132.92. Although private respondent appears to have
paid a total amount of P182,824.90 for the docket fee considering the total amount
of his claim in the amended and supplemental complaint amounting to about
P64,601,620.70, petitioner insists that private respondent must pay a docket fee of
P257,810.49.
The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is obvious
not only in the filing of the original complaint but also in the filing of the second
amended complaint.

However, in Manchester, petitioner did not pay any additional docket fee until] the
case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.

In the present case, a more liberal interpretation of the rules is called for considering
that, unlike Manchester, private respondent demonstrated his willingness to abide
by the rules by paying the additional docket fees as required. The promulgation of
the decision in Manchester must have had that sobering influence on private
respondent who thus paid the additional docket fee as ordered by the respondent
court. It triggered his change of stance by manifesting his willingness to pay such
additional docket fee as may be ordered.

Nevertheless, petitioners contend that the docket fee that was paid is still insufficient
considering the total amount of the claim. This is a matter which the clerk of court
of the lower court and/or his duly authorized docket clerk or clerk in-charge should
determine and, thereafter, if any amount is found due, he must require the private
respondent to pay the same.

Thus, the Court rules as follows:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but
the payment of the prescribed docket fee, that vests a trial court with jurisdiction
over the subject matter or nature of the action. Where the filing of the initiatory
pleading is not accompanied by payment of the docket fee, the court may allow
payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.

2. The same rule applies to permissive counterclaims, third party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee
prescribed therefor is paid. The court may also allow payment of said fee within a
reasonable time but also in no case beyond its applicable prescriptive or
reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but, subsequently, the
judgment awards a claim not specified in the pleading, or if specified the same has
been left for determination by the court, the additional filing fee therefor shall
constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court
or his duly authorized deputy to enforce said lien and assess and collect the
additional fee.

WHEREFORE, the petition is DISMISSED for lack of merit. The Clerk of Court of
the court a quo is hereby instructed to reassess and determine the additional filing
fee that should be paid by private respondent considering the total amount of the
claim sought in the original complaint and the supplemental complaint as may be
gleaned from the allegations and the prayer thereof and to require private respondent
to pay the deficiency, if any, without pronouncement as to costs.

SO ORDERED.

Fernan (C.J), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,

Padilla, Bidin, Sarmiento, Cortes, Griño-Aquino, Medialdea and Regalado, JJ.,
concur.

Footnotes

1 Annexes 1, 1-A, 1-B of Comment of private respondent.

2 Page 34, Decision of the Court of Appeals; p. 57 Rollo.

3 Annex 2 to Memorandum of private respondent.

4 149 SCRA 562 (1987).

5 115 SCRA 193, 204 (1982).

6 People vs. Sumilang, 77 Phil. 764 (1946); Alday vs. Camilon, 120
SCRA 521 (1983) and Palomo Building Tenants Association, Inc. vs.
Intermediate Appellate Court, 133 SCRA 168 (1984).

7 57 Phil. 552 (1932).

 8 SCRA 65 (1964).

9 12 SCRA 450 (1964).

10 Section 173, Revised Election Code.

11 28 SCRA 3301 (1969).

12 Supra.

13 Supra, pp. 567-568.

EN BANC

[G.R. No. 126361. June 19, 1997]

VICTOR R. MIRANDA, and JOSE M. FRANCISCO, petitioners, vs. JESSIE B.

CASTILLO, LORENZO S. GAWARAN, the COMMISSION ON
ELECTIONS, HON. JUDGE LUCENITO TAGLE, Executive Judge, RTC,
Imus, Cavite, Branch XX, respondents.

DECISION
PUNO, J.:

In this petition for certiorari and prohibition, petitioners VICTOR MIRANDA

and JOSE M. FRANCISCO seek to annul the September 5, 1996 Resolution of
public respondent COMELEC reversing the Order of respondent RTC Judge
Lucenito Tagle which dismissed the election protests filed by private respondents.
The facts. In the May 8, 1995 elections, petitioners VICTOR
MIRANDA and JOSE FRANCISCO were proclaimed as the duly-elected mayor
and vice-mayor, respectively, of Bacoor, Cavite.
On May 24, 1995 private respondents JESSIE B. CASTILLO and LORENZO
S. GAWARAN, who also ran for the position of mayor and vice-mayor,
respectively, filed election protests contesting petitioners' election with the RTC of
Imus, Cavite. These protests were consolidated.
On October 27, 1995, petitioners moved to dismiss the protests on the ground of
lack of jurisdiction of the trial court for failure of protestants to pay the P300.00
filing fee. Private respondents, however, claim that the amount of P414.00 they paid
were for the filing fees.
On January 24, 1996, the trial court granted the motion and dismissed the
protests.[1] It found that no payment was made by private respondents. The amount
of P414.00, although denominated as filing fee, corresponded to the docket
fee collected pursuant to Section 7(b), Supreme Court Administrative Circular No.
31-90, dated October 15, 1990, for actions where the value of the subject matter
cannot be estimated. The trial court cited the case of Gatchalian v. Court of
Appeals,[2] to the effect that it is the payment of the filing fee that vests jurisdiction
on the court over the election protest, not the payment of docket fees for the claim
of damages and attorney's fees.[3]
Their motion for reconsideration having been denied, private respondents filed
a petition for certiorari with the COMELEC.
In its September 5, 1996 Resolution,[4] the COMELEC reversed the RTC's order
of dismissal and directed the latter to continue the proceedings. It ruled that private
respondents paid only what was demanded by the RTC Clerk of Court who was
duty-bound to assess the correct fees. They were thus in good faith when they relied
on and paid the assessment made by the RTC Clerk of Court. The COMELEC cited
the case of Pahilan v. Tabalba[5] where it was held that incomplete payment of filing
fee upon an incorrect assessment by the Clerk of Court is equivalent to substantial
compliance of the rules regarding payment of filing fees.[6] The COMELEC ruled
that protestants may thus be ordered to pay the additional amount.
Hence this petition for certiorari and prohibition.
While the case is pending before this Court, private respondents (protestants)
filed a motion before the sala of respondent RTC Judge Tagle seeking
to inhibit[7] the latter from further hearing election protests B-95-2 and B-95-3 on the
ground that considerable delay has been caused by his erroneous dismissal of their
cases. Petitioners opposed the motion. In the spirit of delicadeza and to avoid any
tinge or suspicion of partiality, respondent Judge Tagle, in his October 28, 1996
Order,[8] granted the motion and voluntarily inhibited himself from further hearing
the election cases.
In this petition for certiorari and prohibition, petitioners contend that
the COMELEC erred: (1) in finding that the filing fees have been duly paid; and, (2)
in taking cognizance of private respondent's petition for certiorari questioning the
RTC's dismissal of the protest cases since the period to appeal said dismissal has
already lapsed.
Anent the first issue, petitioners maintain that there was absolutely no payment
of filing fees since a breakdown of the fees paid shows that the amount of P414.00
was for the Judiciary Development Fund (JDF). Private respondents, however, claim
that upon filing of their protests, the RTC Clerk of Court assessed them the amount
of P414.00 as filing fee, which even exceeds the P300.00 fee required under
COMELEC rules.
We find no merit in the petition.
In filing the election protests, private respondents were each assessed the
following fees:
FILING FEE (GF) - OR# 4740749 P 32.00
SUMMONS (GF) - OR# 4740875 P 4.00
JDF - OR# 4740369 P414.00
LEGAL RESEARCH FUND FEE - OR# 5031047 P 10.00
VICTIM COMPENSATION FEE - OR# 5031434 P 5.00
----------
P465.00[9]
It would seem from the foregoing that it was the amount of P32.00 which was
incorrectly considered by the RTC Clerk of Court as full payment of filing fee for
the protest cases. The amount of P414.00 was clearly not intended for the filing fee
but for the Judiciary Development Fund, payment of which is mandated under SC
Administrative Circular 31-90. Thus, there was an incomplete payment of the filing
fees by private respondents in the amount of P32.00. We note that a number of cases
involving payment of the incorrect filing fees have been brought before this Court. In
fact, the case at bar is similar to the recent case of Loyola v. COMELEC[10] where
the Clerk of Court likewise assessed the incorrect filing fee of P32.00 and the trial
court remedied the situation by requiring the parties to pay the balance
of P268.00. In said case, we traced the confusion as to the assessment of the correct
fees, thus:
"The key issue is whether the RTC acquired jurisdiction over private
respondent's election protest despite the payment, upon the filing thereof, of
only a part of the filing fee fixed in Section 9 of Rule 35 of the COMELEC
Rules of Procedure which fixes the filing fee at P300. Yet, the Clerk of Court
assessed and collected only the sum of P32. Evidently, the Clerk of Court
had in mind the former Section 5(a)(11), Rule 141 of the Rules of Court on
 filing fees. The error of the Clerk of Court could be due to ignorance of
Section 9 of Rule 35 of the COMELEC Rules of Procedure and this Court's
4 September 1990 resolution amending Rule 141 of the Rules of Court on
filing fees. Or it could be due to sheer confusion as to which rule would apply
in assessing the filing fee considering that the election protest falls within the
exclusive original jurisdiction of the Regional Trial Court, in which case the
Rules of Court may govern, and that the COMELEC Rules of Procedure was
primarily intended to govern election cases before the COMELEC. This
ignorance or confusion, however, was not fatal to private respondent's
cause. The application by the Clerk of Court of Section 5 of Rule 141 of the
Rules of Court substantially vested the RTC with jurisdiction over the
election protest. Although this Court had given its imprimatur to said Section
9 of Rule 35 of the COMELEC Rules of Procedure, the failure of the Clerk
of Court to take said section into account is a technicality which cannot be
allowed to defeat the viability of the election protest." (Emphasis supplied.)
Thus, in the case at bar, it was the amount of P32.00 which was incorrectly
assessed by the clerk of court as filing fee. This constitutes an incomplete
payment of the P300.00 filing fee required under the COMELEC Rules
and correctible by payment of the deficiency in the amount of P268.00.[11] The case
of Gatchalian v. COMELEC[12] finds no application to the case at bar for in said case
there was absolutely no payment of the required fee. The P414.00 paid by private
respondents for the Judiciary Development Fund (JDF) could not have been part of
the filing fee required under the COMELEC Rules, but was paid pursuant to this
Court's Administrative Circular 31-90, dated October 15, 1990, for actions not
involving property.
Nonetheless, we reiterate the caveat in Loyola v. COMELEC[13] that in view
of said case and those of Pahilan and Gatchalian, the Court would no longer tolerate
any mistake in the payment of the full amount of filing fees for election cases filed
after the promulgation of the Loyola decision on March 25, 1997.
As to the second issue, petitioners contend that under Section 3, Rule 22 of the
COMELEC Rules, when the RTC dismissed the protest cases, private respondents'
remedy was to file a notice of appeal with the RTC within five (5) days after
promulgation of the decision. Instead of appealing the order, respondents filed a
petition for certiorari with COMELEC after their period to appeal has already
lapsed. Thus, after private respondents lost their right to appeal, COMELEC had no
jurisdiction to entertain their petition for certiorari.
Although it is established that certiorari would not lie as a substitute for a lost
appeal, yet, time and again, this Court has not allowed a rigid application of this rule
where primordial interests of justice would be best served.[14] The hearing of election
cases is aimed at ascertaining the true choice of the electorate. In the case at bar, the
dismissal of the election protests was improper in the light of current
jurisprudence. Procedural technicality should be disregarded for an immediate and
final resolution of these cases.
As to the motion of private respondents to inhibit respondent RTC Executive
Judge Tagle, we find that the erroneous dismissal of their election protests was a
mere error of judgment and, by itself, is not enough to cast suspicion of foul play or
intentional delay on the part of respondent judge. Moreover, for an orderly
administration of justice, it is best that the revision of ballots, already started
by respondent judge, is continued to its finality by the same judge, there being no
concrete proof of bias or partiality on his part.
IN VIEW WHEREOF, the petition is DISMISSED. The temporary restraining
order issued on November 8, 1996 is LIFTED. The October 28, 1996 Order of public
respondent Executive Judge Lucenito N. Tagle, of the Regional Trial Court of Imus,
Cavite, Branch XX, voluntarily inhibiting himself from hearing the election cases is
SET ASIDE. Executive Judge Tagle is directed to: (1) issue an Order directing
private respondents Gawaran and Castillo to pay the deficiency of filing fees for
Election Case Nos. B-95-2 and B-95-3, respectively, and; (2) proceed with the
resolution of said cases. No costs.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Vitug,
Kapunan, Mendoza, Francisco, Hermosisima, Jr., Panganiban, and Torres, Jr.,
JJ., concur.

[1]
See January 24, 1996 Order; Rollo, pp. 42-44.
[2]
245 SCRA 208 [1995].
[3]
See Orders dated January 24 and February 26,1996; Rollo, pp. 42-44 and 56-57.
[4]
Rollo, pp. 124-132.
[5]
230 SCRA 205 [1994].
[6]
See September 5, 1996 Resolution; Rollo, pp. 124-132.
[7]
Rollo, pp. 167-169.
[8]
Id., p. 173.
[9]
Figures appearing on petitioners' motion to dismiss; Rollo, at p. 40.
[10]
G.R. No. 124137, March 25, 1997.
[11]
Pahilan v. Tabalba, 230 SCRA 205 [1994].
[12]
245 SCRA 208 [1995].
[13]
Supra.
[14]
Luna v. Court of Appeals, 216 SCRA 107, 111 [1992]; Goldloop Properties,
Inc. v. Court of Appeals, 212 SCRA 498, 504 [1992]; Legarda v. Court of
Appeals, 195 SCRA 418, 426 [1991].

The Lawphil Project - Arellano Law Foundation

FIRST DIVISION

[G.R. Nos. 120435. December 22, 1997]

ESTATE OF THE LATE MERCEDES JACOB represented by MERCEDITA

JACOB, DONATO JACOB JR., ERENEO JACOB and LILIAN JACOB
QUINTO, petitioners, vs. COURT OF APPEALS, SPOUSES RAMON R.
TUGBANG and VIRGINIA S. TUGBANG, REGISTER OF DEEDS OF
QUEZON CITY and CITY TREASURER OF QUEZON CITY, respondents.

[G.R. No. 120974. December 22, 1997]

CITY TREASURER OF QUEZON CITY, petitioner vs. COURT OF APPEALS

and BERNARDITA C. TOLENTINO., respondents.

DECISION
BELLOSILLO, J.:
 These two (2) petitions are heard jointly by the Court for the reason that they
involve a common issue of jurisdiction over the nature of the action.
G.R. No. 120435
Petitioners allege that in 1981 Mercedes Jacob, registered owner of the land
subject matter hereof and covered by Transfer Certificate of Title No. 39178, left for
the United States.Before she did, she asked her son-in-law Luciano Quinto Jr. to pay
the real estate taxes on her property. However, Luciano Jr. was not allowed to pay
by the City Treasurer's Office as he had no written authorization from her. Luciano
Jr. and his wife Lilian Jacob Quinto attempted several times to pay but they were as
many times refused.
In 1984 respondent City Treasurer of Quezon City sent a notice to Mercedes
Jacob through her daughter Lilian Jacob Quinto that her real estate taxes on the
property were delinquent.Lilian was also informed that the land was already sold at
public auction on 24 August 1983 to private respondent Virginia Tugbang
for P6,800.00 to satisfy the tax delinquency of the land.
Mercedes Jacob came to know of the sale on 6 September 1983 when she
received from respondent City Treasurer a Notice of Sale of Real Property addressed
to her husband.Members of Mercedes' family tried to redeem the property from
Virginia Tugbang but she evaded them until the Final Bill of Sale was issued to her.
On 30 September 1985 Virginia filed a petition for the cancellation of TCT No.
39178 and the issuance of a new certificate of title in her name alleging in par. 4 of
her petition that -

x x x (On) August 27, 1985, the period of redemption on the sold property having
already expired and the registered owner-delinquent taxpayer, Mercedes Jacob, and
any other interested party, did not, within the said period, take any step to redeem
the property and pursue any lawful remedy to impeach the proceedings or to enforce
any lien or claim thereon, thereby allowing the sale to become final and absolute, [1]

thereby disregarding and frustrating the efforts of the Jacobs to redeem the property
after depositing P2,000.00 with the City Treasurer as redemption price. On 3 March
1989 TCT No. 39178 was canceled and TCT No. 81860 was issued in the name of
Virginia Tugbang.
On 17 May 1993 petitioners Mercedita Jacob, Donato Jacob, Jr., Ereneo Jacob
and Lilian Jacob-Quinto, heirs of the late Mercedes Jacob, filed a complaint with the
Regional Trial Court of Quezon City against respondent spouses Ramon R. Tugbang
and Virginia S. Tugbang, docketed as Civil Case No. Q-93-15976, for annulment or
cancellation of the auction sale, the final bill of sale, TCT No. 81860, and for
redemption of the property plus damages. However, the trial court dismissed the
petition purportedly for lack of jurisdiction as the petition was deemed to be -

x x x in reality a petition to annul and set aside the Decision rendered on March 13,
1994 by the Regional Trial Court, Quezon City, Branch 106, canceling petitioner
Mercedes Jacob's TCT No. 39178 x x x x consolidating title to the property covered
thereby in herein private respondent Virginia S. Tugbang, and ordering the issuance
of a new title in her favor. [2]

On 12 October 1994 petitioners filed with us a petition for review on certiorari

under Rule 45 of the Rules of Court which we certified on 9 November 1994 to the
Court of Appeals. The appellate court however dismissed the petition for lack of
merit. Thus this petition for reversal of the decision of the Court of Appeals and for
judgment directing the RTC - Br. 82, Quezon City, to proceed with the trial of Civil
Case No. Q-93-15976.
The petition must be granted. It is axiomatic that the averments of the complaint
determine the nature of the action, hence, the jurisdiction of the
courts. This is because the complaintmust contain a concise statement of the
ultimate facts constituting the plaintiff's cause of action and specify the relief
sought. [3]
A cursory examination of the petition readily shows that it is an action for
reconveyance. The petition states that "petitioners are not after the annulment of the
judgment of the Regional Trial Court, Quezon City, Branch 106. The remedy of
petitioners under the law is an action for reconveyance the jurisdiction of which is
vested in the Regional Trial Court." [4] In Sevilla v. De los Angeles [5] reconveyance
was allowed where the procurement of a transfer certificate of title was made under
circumstances of constructive trust based on fraudulent representations. In the
instant case the complaint alleges that respondent Virginia Tugbang procured a
transfer certificate of title upon her fraudulent representation in her petition for
cancellation of title. This way of acquiring title creates what is called "constructive
trust" in favor of the defrauded party and grants to the latter a right to the
reconveyance of the property. Thus it has been held that if a person obtains legal title
to property by fraud or concealment courts will impress upon the title a so-called
"constructive trust" in favor of the defrauded party. The use of the word "trust" in
this sense is not technically accurate but as courts are agreed in administering the
same remedy in a certain class of frauds as are administered in fraudulent breaches
of trusts, and as courts and the profession have concurred in calling such frauds
constructive trusts, there can be no misapprehension in continuing the same
phraseology, while a change might lead to confusion and misunderstanding. [6]
In Alzua v. Johnson [7] we declared that under our system of pleading it is the
duty of the courts to grant the relief to which the parties are shown to be entitled by
the allegations in their pleadings and the facts proved at the trial, and the mere fact
that they themselves misconstrued the legal effect of the facts thus alleged and
proved will not prevent the court from placing the just construction thereon and
adjudicating the issue accordingly.
As the petition makes out a case for reconveyance and not a mere annulment of
an RTC judgment as viewed under par. (2), Sec. 9, BP Blg. 129, jurisdiction over
the case is clearly vested in the Regional Trial Court of Quezon City as provided in
par. (2), Sec. 19, BP Blg. 129 -

Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction: x x x x (2) In all civil actions which involve the title to, or
possession of, real property, or any interest therein, except actions for forcible entry
into and unlawful detainer of lands or buildings, original jurisdiction over which is
conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts x x x x

Moreover, the Regional Trial Court has jurisdiction over the petition as it may
be considered only as a continuation of the original proceeding for cancellation of
title which in view of its non-litigious character is summary in nature. Furthermore,
under Sec. 2 of PD 1529 otherwise known as the Property Registration Decree, the
jurisdiction of the Regional Trial Court sittingas a land registration court is no
longer as circumscribed as it was under the former Land Registration Act (Act 496),
so that now a Regional Trial Court, like the RTC of Quezon City which issued a new
title to respondent Virginia Tugbang in lieu of the old one, has the authority to act
not only on applications for original registration but also over all petitions filed after
original registration of title, with power to hear and determine all questions arising
from such applications or petitions. [8]
As to whether such an action should be granted requires further evidence culled
from a full-blown trial; hence, Civil Case No. Q-93-15976 previously dismissed by
the trial court should be reinstated so that the parties may be able to present their
evidence.
G.R. No. 120974
Alberto Sta. Maria owned a parcel of land covered by TCT No. 68818 which he
sold in 1964 to Teresa L. Valencia who, as a consequence, had the title canceled and
TCT No. 79818 issued in her name. She however failed to have the tax declaration
transferred in her name. Thus she paid the real estate taxes from 1964 to 1978 in the
name of its previous owner Alberto Sta. Maria.
On 20 December 1973 Valencia entered into a contract of sale of the property
on installment with a mortgage in favor of respondent Bernardita
C. Tolentino. However, from 1979 to 1983 Valencia failed to pay the real estate
taxes due on the land. As a result, notices of tax delinquency and intent to sell the
property [9] were sent to Alberto Sta.
Maria's address which was simply stated as "Olongapo, Zambales." The notices
were then returned to petitioner City Treasurer of Quezon City for a "better complete
address." [10]
In the auction sale on 29 February 1984 the spouses Romeo and Verna Chua
bought the land in question, which was already covered by TCT No. 79818 in the
name of Teresa L. Valencia. On 5 March 1984 a certificate of sale was issued to the
Chua spouses but it showed on its face that the land was still covered by TCT No.
68818 and not TCT No. 79818.Apparently, the Office of the City Treasurer was
unaware that TCT No. 68818 had already been canceled by TCT No.
79818. However, in the Final Bill of Sale issued to the Chua spouses on 15 May
1985 TCT No. 79818 still appeared in the name of Alberto Sta. Maria, the former
owner, [11] so that the vendee spouses lost no time in filing a petition with the
Regional Trial Court of Quezon City for the cancellation of TCT No. 79818 and the
issuance of a new title in their name. On 4 February 1987 the court granted their
petition and TCT No. 357727 was issued in the name of the spouses Romeo and
Verna Chua.
In the meantime, on 2 February 1987, respondent Bernardita C. Tolentino paid
in full the purchase price of the property so that Teresa L. Valencia executed a
deed of absolute sale in her favor. On 2 August 1988, in view of the fire that gutted
the Office of the Register of Deeds of Quezon City, Tolentino filed a petition for
reconstitution of TCT No. 79818.
Sometime in April 1989, as purchasers of the property in the auction sale, the
Chuas demanded delivery of possession from Bernardita C. Tolentino and Teresa L.
Valencia. As a consequence, Tolentino sued for annulment of the auction sale in the
Regional Trial Court of Quezon City. Finding the action to be well taken, the trial
court granted the petition. The Court of Appeals affirmed the court a quo. Hence this
petition for review on certiorari by the City Treasurer of Quezon City under Rule 45
of the Rules of Court.
 Petitioner City Treasurer cites Galutira v. Ramones, [12] a decision of the Court
of Appeals, in support of his position that the trial court has no jurisdiction over the
case as it is one for annulment and cancellation of TCT No. 357727 which is vested
in the Court of Appeals pursuant to par. (2), Sec. 9, BP Blg. 129. [13] In Galutira it
was held that "in the law of pleading, courts are called upon to pierce the form and
go into the substance, not to be misled by a false or wrong name given to a pleading
because the title thereof is not controlling and the court should be guided by its
averments x x x x" Apparently the ruling is contrary to petitioner's very own
position. While the complaint of Bernardita C. Tolentino is captioned as one for
annulment of auction sale with damages, it is not an action for annulment of
judgment which should be filed with the Court of Appeals. In fact, from the
allegations in the complaint it can be gathered that a reconveyance was intended by
Tolentino, in which case, jurisdiction is vested in the trial court.
Under Sec. 55 of the Land Regitration Act, as amended by Sec. 53 of PD No.
1529, [14] an original owner of registered land may seek the annulment of the transfer
thereof on the ground of fraud and the proper remedy is reconveyance. However,
such remedy is without prejudice to the rights of an innocent purchaser for value
holding a certificate of title.
As regards the propriety of the nullification of the auction sale in the instant case,
which still remains unresolved, petitioner submits that he had done everything
incumbent upon him to do in proceeding with the auction sale. Besides, not only
was original vendee Valencia remiss in her obligation to secure a new tax declaration
in her name but she likewise failed to pay the real property taxes for 1979 to
1983. Therefore, petitioner City Treasurer of Quezon City reiterates, the validity of
the auction sale should instead be sustained conformably with Estella v.Court of
Appeals. [15]
Section 73 of PD No. 464 provides -

Sec. 73. Advertisement of sale of real property at public auction. - After the
expiration of the year for which the tax is due, the provincial or city treasurer shall
advertise the sale at public auction of the entire delinquent real property, except real
property mentioned in subsection (a) of Section forty hereof, to satisfy all the taxes
and penalties due and the costs of sale. Such advertisement shall be made by posting
a notice for three consecutive weeks at the main entrance of the provincial building
and of all municipal buildings in the province, or at the main entrance of the city or
municipal hall in the case of cities, and in a public and conspicuous place in (the)
barrio or district wherein the property is situated, in English, Spanish and the local
dialect commonly used, and by announcement for at least three market days at the
market by the crier, and, in the discretion of the provincial or city treasurer, by
publication once a week for three consecutive weeks in a newspaper of general
circulation published in the province or city.

The notice, publication, and announcement by crier shall state the amount of the
taxes, penalties and costs of sale; the date, hour, and place of sale, the name of the
taxpayer against whom the tax was assessed; and the kind or nature of property and,
if land, its approximate area, lot number, and location stating the street and block
number, district or barrio, municipality and the province or city where the property
to be sold is situated (italics supplied).

Copy of the notice shall forthwith be sent either by registered mail or by messenger,
or through the barrio captain, to the delinquent taxpayer, at his address as shown in
the tax rolls or property tax recordcards of the municipality or city where
the property is located, or at his residence, if known to said treasurer or barrio
captain; Provided, however, that a return of the proof of service under oath shall be
filedby the person making the service with the provincial or city treasurer
concerned (italics supplied).

There is no dispute that the requirements of law as regards posting of the notice,
publication and announcement by crier have been complied with. [16] The
controversy lies in the failure of petitioner City Treasurer to notify effectively the
delinquent taxpayer who at the time of the auction sale was Teresa L. Valencia.
Apparently, petitioner proceeded on the wrong premise that the property was still
owned by the former registered owner, Alberto Sta. Maria, who sold the property to
Valencia in 1964. In fact, at the time of the auction sale, the property was already
covered by a conditional sale on installment in favor of respondent Bernardita C.
Tolentino. Plainly, at the time of the auction sale, Alberto Sta. Maria who appeared
to have been notified of the auction sale was no longer the registered owner, much
less the delinquent taxpayer.
In ascertaining the identity of the delinquent taxpayer, for purposes of notifying
him of his tax delinquency and the prospect of a distraint and auction of his
delinquent property, petitioner City Treasurer should not have simply relied
on the tax declaration. The property being covered by the Torrens system, it would
have been more prudent for him, which was not difficult to do, to verify from the
Office of the Register of Deeds of Quezon City where the property is situated and as
to who the registered owner was at the time the auction sale was to take place, to
determine who the real delinquent taxpayer was within the purview of the third
paragraph of Sec. 73. For one who is no longer the lawful owner of the land cannot
be considered the "present registered owner" because, apparently, he has already lost
interest in the property, hence is not expected to defend the property from the sale at
auction. The purpose of PD No. 464 is to collect taxes from
the delinquent taxpayer and, logically, one who is no longer the owner of the
property cannot be considered the delinquent taxpayer.
While we understand the earnestness and initiative of local
governments to collect taxes, the same must be collected from the rightful debtors
and not from those who may only appear to be the registered owners in the official
files. Certainly, properties change hands as fast as their owners can, and to deprive
the present owners of their properties by notifying only the previous owners who no
longer have any interest in them will amount not only to inequity and injustice but
even to a violation of their constitutional rights to property and due process. This
interpretation as well as its ratiocination was explained as early as 1946 in Cabrera
v. The Provincial Treasurer of Tayabas [17] where the parties therein seemed to be in
the same predicament as the parties herein.
In Cabrera the notice of auction sale was sent to the declared owner but was
returned "unclaimed." Nevertheless, the auction sale proceeded and the property was
sold to the highest bidder. It turned out that the property had been
previously conveyed by the declared owner to another who, upon learning of the
sale, filed a complaint attacking the validity of the auction sale for lack of notice to
the registered owner, and that although the land remained in the assessment books
in the name of her transferor, she had become its registered owner several years prior
to the auction sale. We resolved the controversy in this manner -

x x x x The appellee was admittedly not notified of the auction sale, and this also
vitiates the proceeding. She is the registered owner of the land and, since
1934, has become liable for the taxes thereon. For all purposes, she is the
delinquent taxpayer 'against whom the taxes were assessed' referred to in
Section 34 of the Commonwealth Act No. 470. It cannot be Nemesio Cabrera
(declared owner) for the latter's obligation to pay taxes ended where the appellee's
liability began (underscoring supplied).

x x x x The sale in favor of the appellant (purchaser at auction sale) cannot bind the
appellee, since the land purportedly conveyed was owned by Nemesio Cabrera, not
by the appellee; and at the time of sale, Nemesio Cabrera had no interest whatsoever
in the land in question that could have passed to the appellant.

The appellee may be criticized for her failure to have the land transferred to her name
in the assessment record. The circumstance, nevertheless, cannot supplant the
absence of notice. Of course, it is the duty of any person acquiring at the time real
property to prepare and submit a tax declaration within sixty days (Commonwealth
Act No. 470, section 12), but it is no less true that when the owner refuses or fail to
make the required declaration, the provincial assessor should himself declare the
property in the name of the defaulting owner (Commonwealth Act No. 470, Sec.
14). In this case, there is absolutely no showing that the appellee
had deliberately failed to make the declaration to defraud the tax officials; and it may
be remarked that there can be no reason why her Torren title, which binds the whole
world, cannot at least charge the Government which had issued it, with notice
thereof x x x x

Forty years later, in Serfino v. Court of Appeals, [18] we reiterated

the Cabrera doctrine and nullified the auction sale because -

x x x x the prescribed procedure in auction sales of property for tax delinquency

being in derogation of property rights should be followed punctiliously. Strict
adherence to the statutes governing tax sales is imperative not only for the protection
of the taxpayers, but also to allay any possible suspicion of collusion between the
buyer and the public officials called upon to enforce such laws. Notice of sale to the
delinquent landowners and to the public in general is an essential and indispensable
requirement of law, the non-fulfillment of which vitiates the sale x x x x A purchaser
of real estate at the tax sale obtains only such title as that held by the taxpayer,
the principle of caveat emptor applies. Where land is sold for delinquency taxes
under the provisions of the Provincial Assessment Law, rights of registered but
undeclared owners of the land are not affected by the proceedings and the sale
conveys only such interest as the person who has declared the property
for taxation has therein.

The principle in Cabrera, reiterated in Serfino, should be, as it still is, considered
valid doctrine today, despite Estella which petitioner invokes as the latest rule on the
matter. Quite significantly, Estella did not make any reference to
the Cabrera and Serfino cases, much less did it pass upon, reverse or modify them;
instead, the Court simply declared -

Under the particular circumstances of the case, we hold that the City Treasurer had
done everything that was legally incumbent upon him. Not only did he send the
pertinent notices to the declared owner, he also caused the mandatory publication of
the notice of public auction in two (2) newspapers of general circulation pursuant to
Section 65 of PD No. 464. The notices were understandably mailed toConcepcion
because as far as the City Treasurer was concerned, she was still the 'declared owner'
since the assessment of the property in question was still in her name. It should be
recalled that while petitioners had promptly secured a new transfer certificate of
title in their name after the 1970 acquisition, they neglected to effect the
necessary change in the tax declaration as then required by (Sec. 12 of
Commonwealth Act No. 470 Assessment Law) and later by P.D. No. 464 x x x
x (italics supplied).

All told, if it were really true that petitioners were never given the opportunity to
protect their rights, they had only themselves to blame for the catastrophe that befell
them. Not having been apprised bypetitioners of a change in ownership of the
subject property, the government was never placed in a position to give
them that opportunity (italics supplied).

In Estella we relied on our ruling in Paguio v. Ruiz [19] where we emphasized the
requirement of declaration by the owner under Sec. 2484 of the Revised
Administrative Code [20]-

x x x x the duty of each person acquiring real estate in the city to make a new
declaration thereof with the advertence that failure to do so shall make the
assessment in the name of the previous owner valid and binding on all persons
interested, and for all purposes, as though the same had been assessed in the name
of its actual owner (italics supplied).

When the property was sold by Sta. Maria to Valencia in 1964 the law applicable
was RA No. 537 [21] which provided for the same requirement under its Sec.
48. [22] However, the law in force at the time of the auction sale on 29 February 1984
was already PD No. 464 [23] which did not contain the aforecited phrase. The new
law, Sec. 11 of PD No. 464, merely states -

Any person who shall transfer real property to another shall notify the assessor of
the province or city wherein the property is situated within sixty (60) days from the
date of such transfer. The notification shall include the particulars of the transfer, the
description of the property alienated and the name and address of the transferee.

The fact that the pertinent phrase, "'failure to do so shall make the assessment in
the name of the previous owner valid and binding on all persons interested, and for
all purposes, as though the same had been assessed in the name of its actual
owner," found in both RA No. 537 and RA No. 409 was not incorporated in PD No.
464 implies that the assessment of the subject property in 1983 in the name of Sta.
Maria would not bind, much less adversely affect, Valencia. This, in spite of the
non-declaration by Valencia of the property in her name as required by the law, for
there is no longer any statutory waiver of the right to contest assessment by the actual
owner due to mere non-declaration. We can infer from the omission that the
assessment in the name of the previous owner is no longer deemed an assessment in
the name of the actual owner.
It is therefore clear that the delinquent taxpayer referred to under Sec. 72 of PD
No. 464 is the actual owner of the property at the time of the delinquency and mere
compliance by the provincial or city treasurer with Sec. 65 of the decree is no longer
enough. [24] The notification to the right person, i.e., the real owner, is an essential
and indispensable requirement of the law, non-compliance with which renders the
auction sale void.
The registered owner need not be entirely blamed for her failure to transfer the
tax declaration in her name. Section 7 of PD No. 464 directs the assessor, in case the
owner fails to make a return, to list the real estate for taxation and charge the tax
against the true owner if known, and if unknown, then as against the unknown
owner. In this way, a change of ownership may be ascertained. Along the same line
did we rule in Cabrera.
WHEREFORE, the petition in G.R. No. 120435 is GRANTED. The decision
and resolution of respondent Court of Appeals which affirmed the dismissal of the
complaint of petitioners by the RTC-Br. 82, Quezon City, are SET ASIDE and Civil
Case No. Q-93-15976 is REINSTATED. The trial court is directed to hear and
decide this case with deliberate dispatch.
The petition in G.R. No. 120974, on the other hand, is DENIED. The decision
and resolution of respondent Court of Appeals affirming with modification that of
the trial court are AFFIRMED. The public auction sale conducted on 29 February
1984 is declared VOID for lack of notice to the registered owner Teresa L.
Valencia. Transfer Certificate Title No. 357727 and Tax Declaration No. B-091-
01469 in the name of the spouses Romeo and Verna Chua are ANNULLED. The
Register of Deeds of Quezon City is ordered to cancel TCT No. 357727 and issue in
lieu thereof a new one in the name of respondent Bernardita C. Tolentino. Petitioner
City Treasurer of Quezon City is ordered to cancel likewise Tax Declaration No. B-
091-01469 and issue in lieu thereof a new tax declaration in the name of respondent
Bernardita C. Tolentino. The award of attorney's fees is deleted.
SO ORDERED.
Davide, Jr., (Chairman), Vitug, and Kapunan, JJ., concur.

[1]
Rollo, p. 19.
[2]
Id., p. 71.
[3]
Abad v. Court of First Instance of Pangasinan, G.R. Nos. 58507-08, 26 February
1992, 206 SCRA 567.
[4]
Rollo, p. 23.
[5]
97 Phil. 875 (1955).
[6]
Id, p. 879.
[7]
21 Phil. 308 (1912).
[8]
Quiroz v. Munoz, G.R. No. 48162, 18 June 1992, 210 SCRA 60, 67, citing Vda.
de Arceo v. Court of Appeals, G.R. No. 81401, 18 May 1990, 185 SCRA 489;
see also Averia, Jr. v. Caguioa, G.R. No. 65129, 29 December 1986, 146
SCRA 459, 462.
[9]
Exh. "9," Folder of Exhibits, p. 16.
[10]
Exh. "G," id., p. 17.
[11]
Exh. "7," id., p. 12.
[12]
CA 510, 51 O.G. No. 11, p. 5740.
[13]
Sec. 9. Jurisdiction. - The Court of Appeals shall exercise:
x x x x (2) Exclusive original jurisdiction over actions for annulment of judgment of
Regional Trial Courts x x x x .
[14]
Sec. 53. Presentation of owner's duplicate upon entry of new certificate. -
x x x x In all cases of registration procured by fraud, the owner may pursue all his
legal and equitable remedies against the parties to such fraud without
prejudice, however, to the rights of any innocent holder for value of a
certificate of title x x x x .
[15]
G.R. No. 76884, 28 May 1990, 185 SCRA 732.
[16]
See Note 9.
[17]
75 Phil. 780 (1946).
[18]
No. L-40858, 15 September 1987, 154 SCRA 19.
[19]
93 Phil. 306 (1953).
[20]
RA No. 409, the Revised Charter of the City of Manila, expressly repealed Secs.
2427 to 2539 of the Administrative Code.
 [21]
Charter of Quezon City, enacted 16 June 1950.
[22]
Sec. 48. Declaration by real estate owner. - It shall be the duty of each person
who at any time acquires real estate in the city x x x x to prepare and present
to the City Assessor, within a period of sixty (60) days next succeeding the
acquisition x x x x a sworn declaration setting forth the value of the real estate
acquired x x x and containing a description of such property sufficient to
enable the City Assessor readily to identify the same. Any person who fails to
make and present such declaration of real estate newly acquired by him within
the said period of sixty (60) days shall be deemed to have waived his right to
notice of the assessment of such property, and the assessment of the same in
the name of the former owner shall, in all such cases, be valid and binding on
all persons interested, and for all purposes, as though the same had been
assessed in the name of its actual owner.
[23]
Real Property Code enacted 20 May 1974.
[24]
Sec. 65. Notice of delinquency in the payment of the real property tax. - Upon
the real property tax or any installment thereof becoming delinquent, the
provincial or city treasurer shall immediately cause notice of the fact to be
posted at the main entrance of the provincial building and of all municipal
buildings or municipal or city hall and in a public and conspicuous place in
each barrio of the municipality of the province or city as the case may be. The
notice of delinquency shall also be published once a week for three
consecutive weeks, in a newspaper of general circulation in the province or
city, if any there be, and announced by a crier at the market place for at least
three market days.

Today is Tuesday, October 23, 2018

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. L-18692 January 31, 1963

MANUEL B. RUIZ, plaintiff-appellant,

vs.
J.M. TUASON & CO., INC., ET AL., defendants-appellees.

Manuel B. Ruiz for and in his own behalf as plaintiff-appellant.

Tuason & Sison for defendants-appellees.

BAUTISTA ANGELO, J.:

Manuel B. Ruiz brought an action before the Court of Instance of Manila praying (a) that J. M. Tuason &
Co., Inc. and the sheriff of Quezon City be enjoined from executing the writ of execution issued in Civil
Case No. Q-3492 against Sixto M. Cacho but which is being enforced against him by ejecting him from the
property in question and demolishing the house erected thereon, and (b) that J.M. Tuason & Co., Inc., be
ordered to execute a final deed of sale in his favor of a parcel of land with an area of 420 sq. m. upon payment
by him of the purchase price at the rate of P7.00 per sq. m. and to consider the sum of P855.00 already paid
by him to defendant Florencio Deudor as partial payment thereof.

Florencio Deudor, one of the defendants, filed a motion to dismiss on the grounds that (1) the venue of
action is improperly laid, (2) plaintiff has no cause of action against said defendant; and (3) plaintiff's cause
of action, if any, has prescribed. Defendant J. M. Tuason & Co., lnc., in turn filed a motion for bill of
particulars.

Disregarding plaintiff's opposition to the motion to dismiss and while the motion for bill of particulars was
pending consideration, the court a quo, on March 11, 1961, issued an order dismissing the case on the ground
that, the property in question being situated in Quezon City, and the action being one affecting real property
or involving title thereto, the venue of action is improperly laid. His motion for reconsideration having been
denied, plaintiff interposed the present appeal.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by
this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not
covered by this stipulation of facts. 1äwphï1.ñët

The case having been dismissed on the basis of a mere motion to dismiss, the only facts that may be
considered for the purpose of this appeal are those alleged in the complaint. The pertinent facts may be stated
as follows:
 That ... defendant Florencio Deudor was ... the absolute owner and possessor of a piece of land
situated in Barrio Tatalon, Quezon City, Philippines, containing an area of ... 210,000 square
meters, covered by a possessory information title in the name of his deceased father, Telesforo
Deudor, ....

That ... said Florencio Deudor, in consideration of the sum of ... P4,800.00, ... by way of
absolute sale, sold, transferred and conveyed unto Severino G. Navarro, Jose Dinglasan and
Teofilo P. Bantug, ... a portion of the parcel of land referred to in the next preceding paragraph,
which portion is more particularly described as follows, to wit:

A parcel of land known as Lot No. 72 on Subdivision Plan, Psu — situated in the Barrio
of Tatalon, Quezon City; Bounded on the North by Lot No. 74; on the East by Lot No.
73; on the South by Quezon Blvd.; and on the West by Road; — Hunters ROTC Ave.;
....'

That ... after the sale aforestated ... said vendee, Jose Dinglasan, took possession of his portion of the land
sold containing an area of 420 square meters, and built two houses of strong materials thereon declared for
purposes of taxation in his name, under Tax No. 11876 and Tax No. 11935, both of Quezon City, ....

That sometime in ... 1950, Jose Dingsalan tried to make payments on the balance of the purchase price of
the land aforestated, but ... Florencio Deudor refused to accept said payment because there was then pending
an action (Civil Case No. Q-135) before the Court of First Instance of Rizal, Quezon City Branch, involving
the ownership of the parcel of land referred to above, and of which the lot bought by Jose Dinglasan is a
part, ....

That in Civil Case No. Q-135 above referred to, together with Civil Case Nos. Q-139, 174, 177 and 186 of
the same Court, ... after a ... joint trial the parties thereto, ... on March 16, 1953, entered into a 'Compromise
Agreement', ... paragraph 7 of which provides:

SEVENTH. That the sales of the property rights claimed by the DEUDORS, are described in
the lists submitted by them to the OWNERS which are attached hereto marked Annexes "B"
and "C" and made a part hereof. Whatever amounts may have been collected by the DEUDORS
on account thereof, shall be deducted from the total sum of P1,201,063.00 to be paid to them.
It shall be the joint and solidary obligation of the DEUDORS to make the buyers of the lots
purportedly sold by them to recognize the title of the OWNERS over the property purportedly
bought by them, and to make them sign, whenever possible, new contracts of purchase for said
property at the current prices and terms specified by the OWNERS in their sales of lots to their
subdivision known as "Sta. Mesa Heights Subdivision." The DEUDORS hereby advise the
OWNERS that the buyers listed in Annex "B" herein with the annotation "continue" shall buy
the lots respectively occupied by them and shall sign new contracts, but the sums already paid
by them to the DEUDORS amounting to P134,992.84 (subject to verification by the Court)
 shall be credited to the buyers and shall be deducted from the sums to be paid to the DEUDORS
by the OWNERS. The DEUDORS also advise the OWNERS that the buyers listed in Annex
"C" herein with the annotation "Refund" have decided not to continue with their former
contracts of purchase with the DEUDORS and the sums already paid by them to the DEUDORS
totalling P101,182.42 (subject to verification by the Court) shall be refunded to them by the
OWNERS and deducted from the sums that may be due the DEUDORS from the OWNERS.'

That in the list of purchasers ... the name of Jose Dinglasan appears in Number 13 thereof, who has paid the
amount of P865.00 ....

That our Honorable Supreme Court in the case of Lucina Evangelista vs. Deudor, et al., G.R. No. L-12826,
promulgated on September 10, 1959, ruled and held that, by the said Compromise Agreement, a sort of
contractual relation has existed between ... J.M. Tuason & Co., Inc. and the purchaser of the land from the
'Deudors' as regards the sales of their respective lots, and that J.M. Tuason & Co., Inc. assumed certain
obligations in favor of said purchasers, among whom is Jose Dinglasan, ....

That ... Jose Dinglasan sold, transferred and conveyed unto the spouses Sixto M. Cacho and Julita de Jesus,
all his rights and interests over the portion of land of 420 square meters referred to above, including all the
improvements thereon, ... who in turn sold, transferred and conveyed unto appellant all their rights and
interest in the portion of land of 420 square meters .....

That immediately after said transfer, ... herein plaintiff took possession of said portion of land and the
improvements thereon, in the concept of an owner thereof, ....

That the subject property corresponds to a portion of Lot No. 10, Block No. 504 of the Subdivision plan of
J. M. Tuason & Co., Inc. ... located in Barrio Matalahib, Tatalon, Quezon City and covered by TCT No.
1267 of the Register of Deeds of Quezon City....

That ... plaintiff made a demand upon J. M. Tuason & Co., Inc., through its agent and administrator Gregorio
Araneta, Inc., to execute a new contract in his favor of the subject property ... at P7.00 per square meter
pursuant to paragraph 7 of the Compromise Agreement but ... Tuason & Co., through its agent Gregorio
Araneta, Inc., refused to do so; ... that plaintiff was and is always ready and willing to pay ... the price of the
lot in question ... at the rate of P7.00 per square meter....

That ... Tuason & Co., on November 20, 1958, filed an action ... against Sixto M. Cacho in the Court of First
Instance of Rizal, Quezon City Branch IV, docketed as Civil Case No. Q-3492, wherein a judgment by
default was rendered against Sixto M. Cacho .....

That ... J. M. Tuason & Co. secured a writ of execution of the aforementioned judgment by default against
said Sixto M. Cacho in said Civil Case No. Q-3492, dated May 20, 1959, and armed with said writ, and with
the aid of the defendant Sheriff of Quezon City, now threatens, and is about, to eject herein plaintiff from
the property in question and demolish his houses therein, including the house where he is now living .....

That the execution of the judgment against Sixto M. Cacho in Civil Case No. Q-3492 will ... cause
irreparable injury ... and injustice to the plaintiff ....

Appellant contends that the present action is transitory because it is one for specific performance and its
object is to compel J. M. Tuason & Co., Inc. to execute a final deed of sale of the property in question in
favor of appellant founded upon compliance with the compromise agreement wherein said company
recognized the sale made by Florencio Deudor of said property in favor of Jose Dinglasan who, in the same
agreement, was recognized by the company as a purchaser who had already made partial payment of the
purchase price of the land.

This contention has no merit. Although appellant's complaint is entitled to be one for specific performance,
yet the fact that he asked that a deed of sale of a parcel of land situated in Quezon City be issued in his favor
and that a transfer certificate of title covering said land be issued to him shows that the primary objective
and nature of the action is to recover the parcel of land itself because to execute in favor of appellant the
conveyance requested there is need to make a finding that he is the owner of the land which in the last
analysis resolves itself into an issue of ownership. Hence, the action must be commenced in the province
where the property is situated pursuant to Section 3, Rule 5, of the Rules of Court, which provides that
actions affecting title to or recovery of possession of real property shall be commenced and tried in the
province where the property or any part thereof lies. This contention finds support in the following
authorities:

An action by which plaintiff seeks to have it adjudged that he is the owner of an undivided third
of mining property, and to have defendants directed to execute to him a conveyance thereof, is
within Code Civ. Proc. Section 392, providing that actions for recovery of real property or of
an interest therein, or for the determination of such interest, must be tried in the country in
which the subject of the action is situated. (McFarland v. Martin, et al., 78 P. 239)

Suit by purchaser for ascertainment of amount due on contract and for vendors' execution of
deed on payment thereof held suit for specific performance, triable where land was situated.
(Kopke v. Carlson. et al. 276 P. 606)

It should further be noted that among the reliefs prayed for in the complaint is the prayer that defendants J.
M. Tuason & Co., Inc. and the sheriff of Quezon City be enjoined from executing the writ of execution
issued by court of first instance of said city in Civil Case No. Q-3492 wherein said sheriff is allegedly trying
to enforce against appellant by ejecting him and demolishing the house he has on the land located in Quezon
City, which claim necessarily involves a determination of ownership and possession of said property as a
preliminary step to determining the validity of the writ of execution. The complaint having been filed in the
Court of First Instance of Manila it is apparent that venue is improperly laid. This is in accordance with the
rule that if an action necessarily involves a determination of an interest in land, the suit must be brought in
the place where the land is situated. The fact that an injunction is sought as an ancillary to the principal
action does not make the case transitory or personal.

The primary object of a suit for injunction is determinative on the question of venue. If the suit
necessarily involves a determination of an interest in land, the suit must be brought in the
country where the land lies.... The fact that an injunction is sought as relief ancillary to the main
suit does not make it transitory." (92 C.J.S., pp. 748-749)

WHEREFORE, the order appealed from is affirmed. No costs.

Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L, Barrera, Parades, Dizon, Regala and
Makalintal, JJ., concur.

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EN BANC

G.R. No. L-4472 May 8, 1952

ESPIRIDION RONE, CLUADIA AGUZAR, DIONISIA GORDOLAN,

GUILLERMO AND AMABLE, both surnamed VENTURA, Plaintiffs-Appellants,
vs. VICTOR CLARO and SIMEON BAQUIRING, Defendants-Appellees.
Florencio Dumapas for appellants.
Justino Z. Benito for appellees.

MONTEMAYOR, J.:

The plaintiffs herein are appealing from an order of the Court of First Instance of
Pangasinan, dated April 1, 1950, dismissing the case. Said order reads as follows:

It appearing from the allegations of the complaint that defendant Victor Claro has
obtained a deed of sale from the plaintiff Espiridion Rone over the land in question
in 1929 which the plaintiffs learned in March, 1941 but failed to bring the action
thereon on account of poverty, it is quite evident that they should have instituted an
action within four years after the discovery of said fraud in accordance with Section
44 of Act 190. And since the present action has been instituted on February 2, 1950,
the conclusion is unavoidable that same has already
prescribed.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the Court hereby sustains the motion to dismiss and decrees the
dismissal of this case without pronouncement as to costs.

There was no trial. Instead of answering the complaint defendants filed a motion for
dismissal of the complaint on the ground that it stated no cause of action and that it
was barred by the statue of limitations. The facts, consequently, have to be gathered
from the complaint. It is not easy to understand the allegations of said pleading which
counsel for the defendants not without reason, calls vague and unintellegible; but for
the purpose of establishing the issue involved in the case as decided by the trial court,
roughly, we can state the following as gleaned from the
complaint.chanroblesvirtualawlibrary chanrobles virtual law library

On and before the year 1929 the plaintiffs were or claimed to be the owners of lot
4651 of the Cadastral Survey of Asingan, Pangasinan, described in Original
Certificate of Title No. 6288. In that year, the defendants or one of them, it is said,
through fraud, deceit and breach of faith, succeeded in getting the Owner's Duplicate
Original Certificate of Title from one of the plaintiffs. About the year 1932,
(although in a portion of the complaint, it is alleged, probably through error, to be
1926), the defendants, it is alleged, again with the use of fraud, deceit, breach of
faith, and other machinations, succeeded in having the plaintiffs execute a deed of
sale of the lot in question in defendants favor, but it was only in the year 1941 that
this fraud, including the possession and enjoyment of the lot by defendants, was
discovered by the plaintiffs. Because of poverty, plaintiffs were unable to take the
necessary steps to recover the land. The complaint was filed in the lower court only
on February 20, 1950.chanroblesvirtualawlibrary chanrobles virtual law library

The action herein is to annul the deed of sale by the plaintiffs in favor of the
defendants on the ground of fraud and the trial court was correct in applying Section
44, paragraph 3 of Act 190 and in ruling that the action had prescribed, since more
than four years had elapsed since the discovery of the fraud. Section 44 of Act 190,
known as the Code of Civil Procedure, in part, reads as follows:

Other Civil Actions: How Limited - Civil actions other than for the recovery of real
property can only be brought within the following periods after the right of action
accrues:

xxx xxx x x xchanrobles virtual law library

. . . 3. With four years: ... an action for relief on the ground of fraud, but the right of
action in such case shall not be deemed to have accrued until the discovery of the
fraud.

Appellants however now insist that their action was not to annul the deed of sale on
the basis of fraud, but to recover the title and possession of land. This change of front
is, obviously, calculated to avoid the fatal effects of Section 44 above quoted by now
invoking Section 40 of the same Act which prescribes ten years as the period within
which an actin to recover title to land may be instituted. Section 40 of Act 190 reads
thus:

An action for the recovery of title to, or possession of, real property, or an interest
therein, can only be brought within ten (10) years after the cause of such action
accrues.

The purpose of an action or suit and the law to govern it, including the period of
prescription, is to be determined not by the claim of the party filing the action, made
in his argument or brief, but rather by the complaint itself, its allegations and the
prayer for relief. Here, the complaint clearly and expressly alleges the supposed
fraud and deceit in procuring the execution of the deed of sale of the land in question
in favor of the defendants, and the discovery of the said fraud on a day years after
the date of the supposed fraud a and deed. From this it may be gathered that this
allegation and claim was made in order to excuse the apparent neglect or delay in
the filing of the action, a delay involving a period of almost twenty years, from the
date of the deed of sale to the filing of the suit. Then, among the prayers for relief,
is one asking that the deed of sale be declared fraudulent. Another prayer is that
defendants be ordered to execute a deed of conveyance of the lot in favor of
plaintiffs, meaning that at present, defendants are owners of the lot, though by virtue
of a supposed fraudulent deed. From all this, it is obvious, as already stated. that the
action was for the annulment of contract or deed on the ground of fraud, which action
should be filed within four years after the discovery of the
fraud.chanroblesvirtualawlibrary chanrobles virtual law library

It may be that the recovery of title and possession of the lot was the ultimate
objective of plaintiffs, but to attain that goal, they must needs first travel over the
road of relief on the ground of fraud; otherwise even if the present action were to be
regarded as a direct action to recover title and possession, it would, nevertheless, be
futile and could not prosper for the reason that the defendants could always defeat it
by merely presenting the deed of sale, which is good and valid to legalize and justify
the transfer of the land to the defendants, until unnulled unless the action of annul
had been filed within four years after the discovery of the fraud in 1941. So, from
whatever angle we view the case, the claimed of plaintiffs-appellants must
fail.chanroblesvirtualawlibrary chanrobles virtual law library

Lastly, appellants contend that the trial court erred in not applying the provisions of
the new Civil Code. Considering that all the transactions involved in the present case
from the execution of the alleged fraudulent deed and transfer of the possession and
title to the land in favor of the defendant until the filing of the present action,
including the order of dismissal of the case by the trial court, had all taken place
before the new Civil Code took effect, it is clear that the provisions of the said new
Civil Code are not applicable.chanroblesvirtualawlibrary chanrobles virtual law
library

Finding no reversible error in the order appealed from, the same is hereby affirmed
with costs.chanroblesvirtualawlibrary chanrobles virtual law library

Paras, C.J., Feria, Pablo Bengzon, Tuason, Bautista Angelo and Labrador,
JJ.,concur.

THIRD DIVISION

[G.R. No. 142523. November 27, 2001]

MARIANO L. GUMABON, JOSEFA GUMABON TOLENTINO, TERESA
GUMABON EUGENIO, MARIO GUEVARRA, FAUSTINO GUMABON
ONDEVILLA, WILFREDO GUMABON, GUILLERMO GUMABON,
BRAULIO GUMABON and NOEL DOLOJAN, petitioners, vs. AQUILINO
T. LARIN, respondent.

DECISION
VITUG, J.:

The Petition for Review on Certiorari raises before the Court one simple query
Whether or not a trial court judge can motu proprio dismiss an action for its improper
venue. The Court here rules in the negative.
Petitioners executed, on 29 April 1958, in favor of respondent Aquilino Larin a
Deed of Sale With Right of Repurchase over a parcel of land covered by Transfer
Certificate of Title ("TCT") No. 6643, located in Pangdara, Candaba,
Pampanga. The terms of repurchase, spelled out in the deed, were that the vendors,
or any one of them, could repurchase the property, or their respective undivided
shares, "at any time, from the date of the contract, after each harvest of each crop
year," by repaying Larin the purchase price and such other sums of money as might
have been or be advanced to them.
Thirty-nine years later, petitioners filed a complaint against respondent before
the Regional Trial Court ("RTC") of Quezon City, seeking the return of the
certificate of title from Larin who, it was alleged, refused to hand over the certificate
despite the full payment, nearly seven times the original amount, of their loan. In his
answer with counterclaim, respondent averred that the transaction was not, as
petitioners so asserted, an equitable mortgage but a true sale with a right to
repurchase; that no repurchase amount was paid to him; and that the period for the
right of repurchase had already prescribed.Petitioners filed a reply together with a
motion to dismiss the counterclaim which asseverated that the counterclaim
contained no certification of non-forum shopping prescribed by Section 5, Rule 7,
of the 1997 Rules of Civil Procedure. On 07 November 1997, the RTC dismissed
the counterclaim on the basis of that technicality. The failure of respondent and his
counsel to submit a pre-trial brief, as well as to attend the pre-trial scheduled on 16
September 1997, enabled petitioners, upon motion, to present their evidence ex-
parte. Demurring to the evidence and contending that petitioners had no right to the
relief sought, respondent moved for the dismissal of the case. The RTC, in its order
of 06 May 1999, after noting the exceptions taken by respondent, admitted the
offered exhibits of petitioners, denied due course to the demurrer of respondent to
the evidence, and gave petitioners thirty days within which to submit their
memorandum. On 18 May 1999, respondent moved for the reconsideration of the
order asking, at the same time, for the inhibition of Judge Thelma A. Ponferrada
from further hearing the case. The motion was objected to by
petitioners. Meanwhile, on 14 June 1999, petitioners filed their memorandum.On 24
July 1999, Judge Thelma A. Ponferrada voluntarily inhibited herself.
The case was raffled to Branch 82 of RTC Quezon City, presided over by Judge
Salvador C. Ceguera, which forthwith set the motion for reconsideration of
respondent for hearing. In due time, Judge Ceguera issued the assailed order,
dismissing the complaint on the ground that, being a real action, the case should have
been filed before the RTC of Pampanga, not the RTC of Quezon City, which could
validly take cognizance of the controversy. The order came unexpectedly, according
to petitioners, for not only was it issued motu proprio; it was also made at the
homestretch stage of the proceedings.
In questioning the ruling of the trial court in the instant recourse, petitioners
would emphasize that respondent Larin never assailed, at any stage theretofore, the
venue of the case nor raised in issue the competence of the RTC of Quezon City to
try the case. Instead, petitioners pointed out that Larin had impliedly affirmed his
assent to venue by persistently seeking affirmative reliefs from the court and a
favorable judgment on his demurrer to evidence.
The Court will limit itself to the parameters of the legal inquiry posed, i.e.,
whether or not the trial court, given the circumstances, has acted correctly in
dismissing the case on the ground of improper venue.
Petitioners assert that the relief they seek is not to be declared the owners of the
land, as TCT No. 6643 is already in their name, nor to regain possession thereof, as
they have been the continuous occupants of the property up until now, but merely to
compel respondent to return the certificate of title back to them.
Sections 1 and 2, Rule 4, of the 1997 Rules of Civil Procedure, under the title
Venue of Actions, provide:

"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.

"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."
 Real actions, as so opposed to personal actions, are those which affect the title
to or possession of real property. Where a contrary claim to ownership is made by
an adverse party, and where the relief prayed for cannot be granted without the court
deciding on the merits the issue of ownership and title, more specifically so as to
who, between the contending parties, would have a better right to the property, the
case can only be but a real action.
In Espineli, et al. vs. Santiago,[1] cited by Judge Ceguera in dismissing the case,
the Court there ruled:

"Under the facts set forth in the complaint and in the motion to intervene filed in said
Civil Case No. U-152, the issue therein is, who, as between Mrs. Ramirez, on the
one hand, and the Espinelis on the other, has a better right to the aforementioned Lot
No. 34, which is situated in Quezon City. The main relief sought therein by Mrs.
Ramirez - the delivery of the certificate of title covering said Lot is entirely
dependent upon the aforesaid issue. Thus, it is not possible for the Court of First
Instance of Pangasinan to decide the case, without passing upon the claim of the
parties with respect to the title and possession of said Lot No. 34, which claim shall
be determined pursuant to the above-quoted provision in the province where' said
'property or any part thereof lies.'"

Referring to the place where a civil action must be tried, venue, unlike
jurisdiction which is conferred by law, essentially concerns a rule of procedure
which looks primarily at the convenience of the litigants. A plaintiff impliedly elects
venue by choosing the court where he files his complaint. Venue can even be the
subject of agreement by the parties.[2] Under Section 4, Rule 4, of
the old rules,[3] such an agreement to venue may be impliedly made by the defendant
when he fails to seasonably object to it. While the present 1997 Rules of Civil
Procedure, particularly Section 1, Rule 9,[4] thereof, does not contain provisions
similar to Sections 3 and 4 of the old rules, the deletion, however, cannot be taken
to mean that objection to venue may now be raised at any time but that, rather, an
objection to venue may still be made in an answer if no motion to dismiss is filed.[5]
As so aptly observed by Mr. Justice Jose A.R. Melo during the deliberations,
the motu proprio dismissal of a case was traditionally limited to instances when the
court clearly had no jurisdiction over the subject matter and when the plaintiff did
not appear during trial, failed to prosecute his action for an unreasonable length of
time or neglected to comply with the rules or with any order of the court. [6] Outside
of these instances, any motu proprio dismissal would amount to a violation of the
right of the plaintiff to be heard. Except for qualifying and expanding Section
2,[7] Rule 9, and Section 3,[8] Rule 17, of the Revised Rules of Court, the amendatory
1997 Rules of Civil Procedure[9] brought about no radical change. Under the new
rules, a court may motu proprio dismiss a claim when it appears from the pleadings
or evidence on record that it has no jurisdiction over the subject matter; when there
is another cause of action pending between the same parties for the same cause, or
where the action is barred by a prior judgment or by statute of limitations. Improper
venue not being included in the enumeration, it should follow that motu
proprio dismissal on said ground would still not be allowed under the 1997 Rules of
Civil Procedure. Sections 6,[10] Rule 16, of the 1997 Rules of Civil Procedure further
provides that if no motion to dismiss has been filed, any of the grounds for dismissal
provided under the rules, including improper venue, may be pleaded as an
affirmative defense in the answer, and upon the discretion of the court, a preliminary
hearing may be made thereon as if a motion to dismiss has been filed. But, as it is,
improper venue not having been so raised by respondent as a ground to dismiss, he
must be deemed to have waived the same.[11]
Jurisdiction, on the other hand, is more substantive than procedural. It refers to
the authority of the court to hear and decide a case, and, it is one that is dictated by
law,[12] and the matter ordinarily can be raised at any stage of the trial, even upon
appeal. The rule, of course, deviates from this general rule in criminal cases
where locus criminis itself defines the jurisdiction of the trial court.[13]
The wrong venue in Civil Case No. 97-31709, being merely a procedural
infirmity, not a jurisdictional impediment, does not, without timely exception,
disallow the RTC of Quezon City to take cognizance of, and to proceed with, the
case.[14] In failing to raise his objection to it either in a motion to dismiss or in his
answer, coupled by his having sought relief from the court and favorable judgment
on his demurrer to evidence, respondent has himself evinced an acceptance on the
venue of the action. The court a quo has thus erred in dismissing motu proprio the
complaint on the ground of improper venue.[15]
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The orders
of the Regional Trial Court of Quezon City, Branch 82, dated 25 October 1999 and
15 March 1999, are SET ASIDE.Civil Case No. Q-97-31709 is ordered
REINSTATED, and the case is remanded to the court a quo for further
proceedings. No costs.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, and Carpio, JJ., concur.
Melo, J., (Chairman), please see concurring opinion.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 77760 December 11, 1987

SPOUSES VIOLETA S. VENTURANZA and ROMY

VENTURANZA, petitioners,
vs.
HON. COURT OF APPEALS, HON. JUDGE BERNARDO P. PARDO,
PRESIDING JUDGE OF REGIONAL TRIAL COURT OF MANILA, BRANCH
XLIII, HON. JUDGE ERNESTO MADAMBA, PRESIDING JUDGE OF
METROPOLITAN TRIAL COURT OF MANILA, BRANCH XVII AND NIEVES
SENORAN, respondents.

PADILLA, J.:

Petition for review on certiorari of the decision * of the Court of Appeals, dated 6
March 1987, in CA-G.R. No. SP-08971 entitled "Spouses Violeta S. Venturanza and
Romy Venturanza, petitioners, vs. Hon. Judge Bernardo Pardo, et al., respondents,"
affirming the decision ** of the Regional Trial Court of Manila, Branch XLI I I.

On 22 May 1985, plaintiff Nieves Y. Senoran (now private respondent) filed a

complaint against spouses Violeta S. Venturanza and Romy Venturanza (now
petitioners) with the Metropolitan Trial Court of Manila, Branch XVI 1, docketed as
Civil Case No. 109950, for collection of sums of money in the aggragate amount of
P9,711.50, representing several loans evidenced by promissory notes which had
become due and demandable but unpaid despite repeated demands. 1 On 10 June
and served 1985, summons was issued against the petitioners on Augusto Soan,
father of petitioner Violeta S. Venturanza, at 3412 B.A. Tan Street. Barrio Obrero
Tondo, Manila, the address of petitioners stated in the complaint. The sheriff's
Return, states as follows: 2

I certify that on this date I served a copy of this Summons together with
a copy of the corresponding Complaint on Violeta Venturanza and
Romy Venturanza at the address designated herein/at
_______________Manila, personally/thru Mr./Miss/Mrs. Augusto
 Soan, father, a person working/residing therein who is of sufficient age
and discretion and/or duly authorized to receive services of this nature
and who signed/but who, however, refused to sign for the receipt
hereof, as evidenced by his/her/the latter's signature appearing on the
face of this summons.

Manila, Philippines, June 10, 1985.

For failure of the petitioners to file their Answer, a decision dated 12 August 1985
was rendered by the court a quobased on the allegations of fact in the complaint, and
ordering the petitioners to pay jointly and severally the private respondent the sum
of P9,711.50 with interest thereon at the rate of twelve percent (12%) per annum
from due date per promissory notes until fully paid, to pay P1,000.00 as attorney's
fees and costs of suit. 3 Considering that, as per sheriff's Return, dated 17 August
1985, said decision could not be served upon the petitioners at 3412 B.A. Tan St.,
Barrio Obrero Tondo, Manila, on the ground that they were no longer at said address,
the same was served on 16 September 1985 upon Violeta S. Venturanza in her office
at Asian Development Bank, Roxas Blvd., Pasay City. 4

On 22 September 1985, petitioners filed a "Motion to Set Aside Decision and to

Declare Past Proceedings Null and Void for Lack of Jurisdiction," alleging that there
had been no proper and valid service of summons upon them in accordance with
either Section 7 or Section 8 of Rule 14 of the Rules of Court 5 and that the court a
quo never acquired jurisdiction over the person of the petitioners, considering that
the address where the summons was served is the residence of Violeta S.
Venturanza's father, Augusto Soan, and not the residence or dwelling house of the
petitioners, and that since April 1985, petitioners had been already residing at Aurora
Street, Pasay City. 6 In an order dated 20 October 1985, the court a quo denied the
motion, for lack of merit, stating thus:

The preponderance of evidence weighs heavily in favor of an

affirmative resolution of the issue.

In the affidavit of Deputy Sheriff, Jose L. Cruz, attached as Annex "A"

of plaintiff's opposition to the motion under consideration, he positively
states that upon his service at defendants' abovementioned given
address, he inquired from one Augusto Soan, who Identified himself to
be defendant's father whether defendants were residents of the place.
Upon confirming that defendants were in fact residents thereat, Jose L.
Cruz forthwith handed to said Augusto Soan the summons together
 with a copy of the complaint requesting the latter to serve the same upon
defendants.

The Telephone Directory of Asian Development Bank for February,

1984, attached and marked as Annex "B " of plaintiff 's opposition
clearly indicates therein that defendant Violeta S. Venturanza is a
resident of 3412 B.A. Tan, Bo. Obrero Tondo, Manila (Annex "B").
The Telephone Directory of the same Asian Development Bank, where
defendant, Violeta S. Venturanza is employed for October, 1984
(Annex "C"), bears the same information (Annex "C-1"). Indeed the
PLDT Telephone Directory for 1985-1986 (Annex "F") also bears a
substantial Identical information as to defendant, Violeta S.
Venturanza's residence.

In the light of all the foregoing evidence indubitably showing that

defendants have always been residents of 3412 B.A. Tan St., Bo.
Obrero Tondo, Manila up to the present, the bare allegation in
defendants' motion that they have been residing at Aurora St., Pasay
City since April 1985, unsupported by any other independent
competent evidence, is, utmost (sic), self-serving, and devoid of any
probative value.

WHEREFORE, let defendants' motion be, as it is hereby denied, for

lack of merit.

SO ORDERED. 7

On appeal to the Regional Trial Court of Manila, Branch XLIII, the appeal being
docketed as Civil Case No. 86-34319, the decision of the court a quo was affirmed
with a slight modification, i.e., lowering the amount of attomey's fees to P
500.00. 8 On 6 March 1987, a petition for review was filed with the Court of
Appeals. Said RTC decision was affirmed in toto. 9 Hence, this petition for review
on certiorari

The issues raised and to be resolved in this instance, are the following

I. Whether or not the Metropolitan Trial Court validly acquired

jurisdiction over the persons of the petitioners when the summons was
served upon Augusto Soan, father of petitioner Violeta S. Venturanza
at 3412 B.A. Tan St., Bo. Obrero Tondo, Manila, which address is no
longer the residence nor the place of business of petitioners.
 II. Whether or not the provisions of Section 8, Rule 14 of the Rules of
Court was legally complied with by the Sheriff in serving the summons
upon the father of one of the petitioners. 10

The court a quo, in its findings of fact, reached the conclusion that the address at
3412 B.A. Tan St., Bo. Obrero Tondo, Manila, where summons was served by the
branch sheriff, Jose L. Cruz, was the place of residence of the petitioners, after the
latter allegedly failed to submit any evidence to prove their allegation that they were
no longer residents of said address and had transferred to 2511 Aurora St., Pasay
City. 11 The court a quo relied heavily on what appeared in the 1984 Telephone
Directory of Asian Development Bank, where defendant Violeta S. Venturanza is
employed, in the PLDT Telephone Directory for 1985-1986, and the sheriff's
affidavit dated 16 October 1985 stating that, upon inquiry from Augusto Soan on
whether the defendants were residents of the above-said address, the latter confirmed
the same. 12

It is the general rule that findings of fact of the Court of Appeals when supported by
substantial evidence, are beyond this Court's power of review. 13 However, in the
instant case, we cannot but consider that the address of defendant Violeta S.
Venturanza found in the 1984 Asian Development Bank Directory and the PLDT
Telephone Directory for 1985- 86, together with the affidavit of the branch sheriff,
are not sufficient to substantiate the findings of the court a quo that petitioners
were bona fide residents of 3412 B.A. Tan St., Barrio Obrero Tondo, Manila at the
time summons was served on Augusto Soan.

There is no question, and in fact it was admitted by the petitioners, that in 1984 they
were actual residents of 3412 B.A. Tan St., Barrio Obrero Tondo, Manila and, as
correctly reflected in the 1984 Asian Development Bank Directory. However, the
change of their address, upon their transfer to Pasay City in April 1985, could not be
reflected in the 1985-86 PLDT Telephone Directory, because this directory had
already been printed and circulated to the public before their transfer in April 1985
to Aurora St. in Pasay City. Moreover, the copy of the contract of lease dated April
1985 between petitioner Romualdo Venturanza as lessee and Linda Galvez as lessor
over an apartment unit located at 2511 Aurora St., Pasay City 14 and the affidavit of
Augusto Soan dated 29 April 1986 stating that he never told the sheriff that the
defendants were residing in his house at 3412 B.A. Tan St., Barrio Obrero Tondo,
Manila, sufficiently negate the conclusion of the court a quo. 15

Under Rule 14 of the Rules of Court, there are three (3) methods of service of
summons in civil actions, namely: 1) personal service (See. 7); 2) substituted service
(Sec. 8); and 3) service by publication. 16 Strict compliance with these modes of
service is required in order that the court may require jurisdiction over the person of
the defendant. 17 Service of summons upon the defendant is the means by which the
court acquires jurisdiction over his person. This process is for the benefit of the
defendant, and is intended to afford the latter an opportunity to be heard on the claim
against him. 18 In the absence of valid waiver trial and judgment, without such
service, are null and void.

There is no question that the case at bar which is an action for collection of sum of
money is an action in personam thereby requiring personal service of summons on
the defendants.

In an action strictly in personam, personal sevice of summons within

the forum is essential to the acquisition of jurisdiction over the person
of the defendant who does not voluntarily submit himself to the
authority of the court. (Pantaleon vs. Asuncion, 105 Phil. 761; Sequito
vs. Letrondo 10 Phil. 1139),

It is only when a defendant can not be personally served with summons within a
reasonable time that a substituted service may be availed of, the same to be effected
in the following manner: a) by leaving copies of the summons at the defendants'
dwelling house or residence, with some person of suitable age and discretion then
residing therein, or b) by leaving the copies at defendant's office or regular place of
business, with some competent person in charge thereof. 19 For a substituted service
to be valid, summons served at the defendant's residence must be served at his
residence at the time of such service and not at his former place of residence.

The terms "dwelling house" or "residence" are generally held to refer

to the time of service, hence it is not sufficient "to leave the copy at
defendant's former dwelling house, residence, or place of abode, as the
case may be, after his removal therefrom." They refer to the place where
the person named in the summons is living at the time when the service
is made, even though he may be temporarily out of the country at the
time. (Keister v. Navarro, 77 SCRA 209, May 31, 1977)

It is further required by law that an effort or attempt should first be made to

personally serve the summons and after this has failed, a substituted service may be
caused upon the defendant, and the same must be reflected in the proof of service. 20

The substituted service should be availed of only when the defendant

cannot be served promptly in person. Impossibility of prompt service
 should be shown by stating the efforts made to find the defendant
personally and the failure of such efforts. The statement should be made
in the proof of service. This is necessary because substituted service is
in derogation of the usual method of service. It has been held that it is
a method extraordinary in character, and hence may be used only as
prescribed in the circumstances authorized by statute. Thus, the
statutory requirements of substituted service must be followed strictly,
faithfully, and any substituted service other than that authorized by the
statute is considered ineffective ... (Arevalo vs. Quitalon 166 SCRA
707)

Upon careful examination of the sheriff 's Return in this case, dated 10 June 1985,
which purports to serve as proof that summons had been served upon the defendants,
together with a copy of the complaint, through Augusto Soan, no statement is made
that an effort or attempt was exerted to personally serve the summons on the
defendants and that the same had failed. In fact, said Return does not even indicate
the address of the defendants to whom summons was supposed to have been served.
The presumption of regularity in the performance of official functions by the sheriff
is not applicable in this case where it is patent that the sheriff's return is defective.

WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and SET
ASIDE. The case is remanded to the court of origin for further proceedings,
including a valid service of summons. No costs.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Paras and Sarmiento, JJ., concur.

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-34124 April 30, 1985

MR. & MRS. TADEO P. DAEL, petitioners,

vs.
THE HON. BERNARDO TEVES, as Presiding Judge, Court of First Instance of
Misamis Oriental, Branch VIII and DIONISIO EDOROT, VIDAL EDOROT,
PONCIANO EDOROT, PETRA EDOROT, DIOSDADA EDOROT, JUANA
EDOROT, and the late HERMINIGILDO EDOROT, represented by his heirs.
VICTOR EDOROT, PEDRITO EDOROT and JACOBO EDOROT, respondents.

CUEVAS, J.:

Petition for Review on certiorari of the Order of the Hon. respondent Presiding Judge
of the Court of First Instance of Misamis Oriental-Branch VIII, issued on July 27,
1971 in Civil Case No. 3531 entitled "Mr. & Mrs. Tadeo P. Dael versus Dionisio
Edorot, et al", dismissing petitioners' complaint; and his Honor's order of August 12,
1971 denying petitioners' motion for reconsideration of the said order of dismissal.

On October 19, 1970, petitioners filed with the then Court of First Instance of
Misamis Oriental, a complaint for: "Ownership, Recovery of Possession &
Damages" against the private respondents. The case was docketed in the said court
as Civil Case No. 3531.

The complaint, among others, alleged that petitioners, then plaintiffs, are the true
and absolute owners in fee simple of a parcel of land with an area of 18,000 square
meters, more or less, situated at Aplaya, Jasaan, Misamis Oriental, having purchased
the same from the late Esteban Edorot on May 17 1962; and that sometime in the
month of February 1964, after the death of Esteban Edorot, the defendants (herein
private respondents) by means of force, threats and intimidation surreptitiously
occupied the said property.

Private respondents, through counsel, filed their Answer with Counterclaim on

January 18, 1911, claiming that the property in question is owned by them pro-
indiviso by inheritance from their deceased parents.

The issue having been joined, the case was set for pre-trial on various occasions in
Branch VIII of the Court of First Instance of Misamis Oriental then still presided by
the Hon. Severo Malvar "to give the parties more chance to arrive at an amicable
settlement." 1 In all these pre-trial conferences, counsel for private respondents and
respondent Vidal Edorot appeared. The latter had a special power of attorney to
appear for defendants Dionisio, Diosdada, Ponciano and Juana. The two other
defendants, Petra and Herminigildo, died long before the filing of the complaint.

After June 2, 1971. Judge Severo Malvar was transferred to another judicial district
and respondent Judge Bernardo Teves was appointed to take his place.
On June 29, 1971 when the case was set for pre-trial for the first time before
respondent Judge Bernardo Teves, an Order reading as follows-

Considering that, as manifested before the Court, two of the defendants

died before the filing of this case; the plaintiffs are hereby given until
July 15, 1971 within which to file an amended complaint to include the
heirs or representatives of said deceased defendants, furnishing copy
thereof to Atty. Dumlao.

was issued by the respondent Judge.

On July 27, 1971, counsel for private respondents filed an Ex- Parte Manifestation,
praying that the case be dismissed pursuant to Section 3, Rule 17 of the Rules of
Court for failure of petitioners to comply with the aforequoted order of the Court to
file an amended complaint. Acting thereon, the trial court on July 27, 1971 issued
the order now assailed dismissing the complaint, which reads-

As prayed for by the defendants, through counsel, Atty. Florentino

Dumlao, Jr. in his ex-parte manifestation of July 27, 1971, which the
Court finds well-founded, this case is hereby dismissed for failure of
the plaintiffs to comply with the Order of this Court dated June 29,
1971. No pronouncement as to costs.

SO ORDERED.

Petitioners' motion to reconsider the foregoing Order having been denied, they now
come before Us through the instant petition, contending that respondent Judge -

1. acted without jurisdiction or with grave abuse of discretion in ordering petitioners

to file an amended complaint, to include the alleged heirs and/or representatives of
respondents Petra Edorot and Herminigildo Edorot, deceased;

2. committed a legal error in admitting respondents' ex-parte motion to dismiss Civil

Case No. 3531 and in issuing the order dismissing Civil Case No. 3531; and

3. acted without or in excess of its jurisdiction in denying petitioners' motion for

reconsideration.

In their complaint, petitioners (then plaintiffs) claim that they are the owners of the
parcel of land in question. 2Private respondents, on the other hand, in their Answer
controvert such assertion. 3 They also claim to be the owners and possessors, pro-
indiviso by inheritance from their deceased parents, of the subject litigated parcel.
Necessarily then, deceased defendants Herminigildo Edorot and Petra Edorot have
an undivided interest, right and participation adverse to that of the petitioners' in the
property in litigation. Since both of them are already dead (Herminigildo died on
September 29, 1969 and Petra died on April 5, 1970) even prior to the filing of the
complaint against them in the court below and their interest in the property in
question having inured by intestacy to their heirs, the latter thereby became the real
parties in interest who should be impleaded as defendants without whom no final
determination of Civil Case No. 3531 can be had. Decidedly then they are
indispensable parties who should be compulsory joined as defendants in the instant
case. Sections 2 and 7, Rule 3 of the Rules of Court provides-

Section 2. Parties in interest. —Every action must be prosecuted and

defended in the name of the real party in interest. All persons having an
interest in the subject of the action and in obtaining the relief demanded
shall be joined as plaintiffs. All persons who claim an interest in the
controversy or the subject thereof adverse to the plaintiff, or who are
necessary to complete determination or settlement of the question
involved therein shall be joined as defendants.

Section 7. Compulsory joinder of indispensable parties.—Parties in

interest without whom no final determination can be had of an action
shall be joined either as plaintiffs or defendants.

The heirs of deceased defendants in the case at bar being clearly indispensable
parties, respondent Judge acted properly in ordering the amendment of the complaint
so as to include the said heirs as defendants. Since the petitioners failed to comply
with this Order, respondent Judge acted within his prerogative in dismissing the
complaint 4 pursuant to Section 3, Rule 17 of the Rules of Court which provides
that—

If the plaintiff fails to appear at the time of the trial, or to prosecute his
action for unreasonable length of time, or to comply with these rules
or any order of the court the action maybe dismissed upon motion of
the defendant or upon the court's own motion. This dismissal shall have
the effect of an adjudication upon the merits unless provided by the
court. (Emphasis supplied)

Thus, it has been held that—

 Where the Court orders the plaintiff to amend its complaint within a
certain period of time in order to implead as party defendants one who
is not a party to the case but who is an indispensable party, plaintiff's
refusal to comply with such order is a ground for the dismissal of the
complaint. (Garchitorena, et al. vs. de los Santos, et al. No. L-17045,
June 30, 1962, 115 Phil. 490, citing Bautista vs. Teodoro, 54 O.G. 619;
Dizon vs. Garcia, et al., G.R. No. L-14690, November 29, 1960)

Petitioners now claim that their failure to amend the complaint was due to the fact
that private respondents' counsel failed to inform the Court of the names of the heirs
and/or representatives of the deceased defendants (Herminigildo and Petra Edorot)
pursuant to Section 16, Rule 3, New Rules of Court which provides-

Section 16. Duty of attorney upon death incapacity or incompetency of

party.—Whenever a party to a pending case dies,
becomes incapacitated, or incompetent, it shall be the duty of his
attorney to inform the court promptly of such death, incapacity or
incompetency and to give the name and residence of his executor,
administrator, guardian or other legal representative (Emphasis
supplied)

We find petitioners' reliance on the aforequoted provision as misplaced. Rule 3,

Section 16 of the Rules applies to a situation where a party (whether plaintiff or
defendant) dies after the filing of the complaint and during the pendency of the case.
This is not the situation in the case at bar since the two defendants, whose heirs are
to be impleaded died even before the filing of the complaint.

The other contention of petitioners that there is no more necessity of amending the
complaint because allegedly an affidavit of waiver of rights have been executed by
one Victor Edorot is also not meritorious. It is not disputed that said Victor Edorot
is only one of the heirs of deceased defendant Herminigildo Edorot. He is not the
sole owner of the entire interest of Herminigildo. Neither is his waiver binding upon
the other heirs of said deceased.

Finally, anent the contention of petitioners that private respondents "ex-parte

manifestation" did not comply with the required notice of motions pursuant to
Sections 4, 5 and 6 of Rule 15 of the Rules of Court, suffice it to state that the said
"manifestation" informing the Court that petitioners have not complied with the
order to amend the complaint, is not a litigated or contentious motion and may be
acted upon even without proof of service on the adverse party. 5 In fact, under
Section 3 of Rule 17, quoted earlier, the Court can motu proprio or on its own
motion, dismiss the case for failure to comply with its order.

Upon the foregoing facts, We find that respondent Judge committed no error in
dismissing the complaint. However, to avoid injustice, such dismissal should not
operate as an adjudication on the merits. 6

WHEREFORE, the lower court's Order of dismissal, which should be understood to

be without prejudice, is AFFIRMED. Cost against petitioners.

SO ORDERED.

Makasiar, Abad Santos and Escolin JJ., concur.

Concepcion Jr., J., is on leave.

THIRD DIVISION

G.R. No. L-51058 January 27, 1992

ASIA PRODUCTION CO., INC., WANG TA PENG and WINSTON

WANG, petitioners,
vs.
HON. ERNANI CRUZ PAñO, as Judge of the Court of First Instance of Rizal
(Quezon City, Branch XVIII), LOLITA LEE LE HUA and ALBERTO
DY, respondents.

Ismael J. Andres for petitioner Asia Production Co., Inc.

Burgos, Sarte, Rebueno & Sarte for petitioners.

Roman Careaga for Alberto Dy.

DAVIDE, JR. J.:

The simple issue in this case is whether or not an action for the refund of partial
payments of the purchase price of a building covered by an oral agreement to sell it
with an oral promise to assign the contract of lease on the lot where the building is
constructed is barred by the Statute of Frauds.

Sometime in March 1976, private respondents, who claimed to be the owners of a

building constructed on a lot leased from Lucio San Andres and located in
Valenzuela, Bulacan, offered to sell the building to the petitioners for P170,000.00.
Petitioners agreed because of private respondents' assurance that they will also
assign to the petitioners the contract of lease over the land. The above agreement and
promise were not reduced to writing. Private respondents undertook to deliver to the
petitioners the deed of conveyance over the building and the deed of assignment of
the contract of lease within sixty (60) days from the date of payment of the
downpayment of P20,000.00. The balance was to be paid in monthly installments.
On 20 March 1976, petitioners paid the downpayment and issued eight (8) postdated
checks drawn against the Equitable Banking Corporation for the payment of the
eight (8) monthly installments, as follows:

Check No. Amount Due Date

10112253 P10,000.00 June 30, 1976

10112254 20,000.00 July 30, 1976
10112255 20,000.00 August 30, 1976
10112256 20,000.00 September 30, 1976
10112257 20,000.00 October 30, 1976
10112258 20,000.00 November 30, 1976
10112259 20,000.00 December 30, 1976
10112260 20,000.00 January 31, 1977

Relying on the good faith of private respondents, petitioners constructed in May

1976 a weaving factory on the leased lot. Unfortunately, private respondents, despite
extensions granted, failed to comply with their undertaking to execute the deed to
sale and to assign the contract despite the fact that they were able to encash the
checks dated 30 June and 30 July 1976 in the total amount of P30,000.00. Worse,
the lot owner made it plain to petitioners that he was unwilling to give consent to the
assignment of the lease unless petitioners agreed to certain onerous terms, such as
an increase in rental, or the purchase of the land at a very unconscionable price.

Petitioners were thus compelled to request for a stop payment order of the six (6)
remaining checks. Succeeding negotiations to save the transaction proved futile by
reason of the continued failure of private respondents to execute the deed of sale of
the building and the deed of assignment of the contract of lease.
So, on or about 29 December 1976, upon prior agreement with private respondents,
petitioners removed all their property, machinery and equipment from the building,
vacated the same and returned its possession to private respondents. Petitioners
demanded from the latter the return of their partial payment for the purchase price
of the building in the total sum of P50,000.00. Private respondents refused to return
it. Hence, petitioners, filed against private respondents a complaint 1 for its recovery
and for actual, moral and exemplary damages and attorney's fees with the then Court
of First Instance (now Regional Trial Court) of Quezon City, which was docketed
as Civil Case No. Q-23593. The case was raffled to Branch XVIII of the court which
was then presided over by herein respondent Judge.

Private respondent Lolita Lee Le Hua did not file an Answer; hence, she was
declared in default.

Upon the other hand, private respondent Alberto Dy filed a motion

to dismiss the complaint on the ground that the claim on which the action is based
— an alleged purchase of a building which is not evidenced by any writing — cannot
be proved by parol evidence since Article 1356 in relation to Article 1358 of the
Civil Code requires that it should be in writing. 2 In their
opposition 3 to said motion, petitioners argue that their complaint is essentially for
collection of a sum of money; it does not seek to enforce the sale, but aims to compel
private respondents to refund a sum of money which was paid to them as purchase
price in a sale which did not materialize by reason of their bad faith. Furthermore,
the execution of the document was an undertaking of the private respondents, which
they refused to comply with. Hence, they cannot now be heard to complain against
something which they themselves brought about.

In his Order 4 of 18 April 1979, respondent Judge granted the motion to dismiss on
the ground that the complaint is barred by the Statute of Frauds. He says:

It cannot be disputed that the contract in this case is condemned by the

Statutes of Fraud (sic) it involves not merely the sale of real property
(the building), it also includes an alleged lease agreement that must
certainly be for more than one year (See Art. 1403, No. 2, subparagraph
e, New Civil Code).

Plaintiffs cannot avoid the Statutes of Fraud (sic) by saying that this is
merely an action for the collection of a sum of money. To be entitled to
the sum of P50,000.00, it is necessary to show that such contract was
 executed and the same was violated but — plaintiffs are prevented from
proving this alleged agreement by parol evidence.

Neither may plaintiffs claim that by the payment of the sum of

P50,000.00 the contract was removed from the Statutes of Fraud (sic).
This is so because plaintiffs have not fully complied with their
obligation to pay P170,000.00. If there had been full payment of
P170,000.00, the situation would have been different.

Plaintiffs knew or should have known that their contract (as described
by them in their complaint) was unenforceable; they had thereby
voluntarily assumed the risks attendant to such contract. Moreover, the
primordial aim of the Statutes of Fraud (sic) is to prevent fraud and
perjury in the enforcement of obligations depending upon the
unassisted memory of witnesses (Shoemaker vs. La Tondeña, 68 Phil.
24). The Court would find it difficult to determine whether the sum of
P50,000.00 was paid because of the unenforceable contract or for some
other transactions.

Their motion for reconsideration 5 having been denied by respondent Judge in his
Order 6 of 21 June 1979 for the reason that the oral contract in this case was not
removed from the operation of the Statute of Frauds because there was no full or
complete performance by the petitioners of the contract as required in Paterno
vs. Jao Yan 7 and Babao vs. Perez, 8 petitioners filed this petition 9 on 16 July 1979,
alleging therein as ground therefor grave abuse of discretion on the part of
respondent Judge in issuing the orders of 18 April 1979 and 21 June 1979.

After private respondent Alberto Dy filed his Comment 10 to the petition in

compliance with the resolution 11 of 23 July 1979 and petitioners filed their
Reply 12 to said comment on 2 April 1980, this Court gave due course 13 to the
petition. Private respondent Lolita Lee Le Hua was considered to have waived her
right to file her comment to the petition.14

Petitioners were subsequently required to file their Brief, which they complied with
on 13 October 1981; 15 they make the following assignment of errors:

The lower court erred in holding that for a contract of purchase and sale
to be removed from the operation of the Statute of Frauds, there must
be full and complete payment of the purchase price.
 II

The lower court erred in failing to appreciate the nature of petitioners'

cause of action.

III

The lower court erred in not finding that this case is not covered by the
Statute of Frauds.

IV

The lower court erred in not following the procedure prescribed by this
Honorable Court in cases when partial performance is alleged.

The lower court erred in dismissing the case.

Private respondents did not file their Brief.

We find merit in the petition. Respondent Judge committed grave abuse of discretion
in dismissing the complaint on the ground that the claim is barred by the Statute of
Frauds.

Article 1403 of the Civil Code declares the following contracts, among others,
as unenforceable, unless they are ratified:

xxx xxx xxx

(2) Those that do not comply with the Statute of Frauds as set forth in
this number. In the following cases an agreement hereafter made shall
be unenforceable by action, unless the same, or some note or
memorandum thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot
be received without the writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed

within a year from the making thereof;

(b) A special promise to answer for the debt, default, or

miscarriage of another;
 (c) An agreement made in consideration of marriage, other
than a mutual promise to marry;

(d) An agreement for the sale of goods, chattels or things

in action, at a price not less than five hundred pesos, unless
the buyer accept and receive part of such goods and
chattels, or the evidences, or some of them, of such things
in action, or pay at the time some part of the purchase
money; but when a sale is made by auction and entry is
made by the auctioneer in his sales book, at the time of the
sale, of the amount and kind of property sold, terms of sale,
price, names of the purchasers and person on whose
account the sale is made, it is a sufficient memorandum;

(e) An agreement for the leasing for a longer period than

one year, or for the sale of real property or of an interest
therein;

(f) A representation to the credit of a third person.

xxx xxx xxx

The purpose of the statute is to prevent fraud and perjury in the enforcement of
obligations depending for their evidence on the unassisted memory of witnesses by
requiring certain enumerated contracts and transactions to be evidenced by a writing
signed by the party to be charged. 16 It was not designed to further or perpetuate
fraud. Accordingly, its application is limited. It makes only ineffective actions for
specific performance of the contracts covered by it; it does not declare them
absolutely void and of no effect. As explicitly provided for in the above-quoted
paragraph (2), Article 1403 of the Civil Code, the contracts concerned are simply
"unenforceable" and the requirement that they — or some note or memorandum
thereof — be in writing refers only to the manner they are to be proved. It goes
without saying then, as held in the early case of Almirol, et al. vs. Monserrat, 17 that
the statute will apply only to executory rather than executed contracts. Partial
execution is even enough to bar the application of the statute. In Carbonnel
vs. Poncio, et al., 18 this Court held:

. . . It is well-settled in this jurisdiction that the Statute of Frauds is

applicable only to executory contracts (Facturan vs. Sabanal, 81 Phil.
512), not to contracts that are totally or partially performed (Almirol, et
 al. vs. Monserrat, 48 Phil. 67, 70; Robles vs. Lizarraga Hermanos, 50
Phil. 387; Diana vs. Macalibo, 74 Phil. 70).

Subject to a rule to the contrary followed in a few

jurisdictions, it is the accepted view that part performance
of a parol contract for the sale of real estate has the effect,
subject to certain conditions concerning the nature and
extent of the acts constituting performance and the right to
equitable relief generally, of taking such contract from the
operation of the statute of frauds, so that chancery may
decree its specific performance or grant other equitable
relief. It is well settled in Great Britain and in this country,
with the exception of a few states, that a sufficient part
performance by the purchaser under a parol contract for
the sale of real estate removes the contract form the
operation of the statute of frauds (49 Am. Jur. 722-723).

In the words of former Chief Justice Moran: "The reason is simple. In

executory contracts there is a wide field for fraud because unless they
be in writing there is no palpable evidence of the intention of the
contracting parties. The statute has precisely been enacted to prevent
fraud." (Comments on the Rules of Court, by Moran, Vol. III [1957 ed.]
p. 178). However, if a contract has been totally or partially performed,
the exclusion of parol evidence would promote fraud or bad faith, for it
would enable the defendant to keep the benefits already derived by him
form the transaction in litigation, and, at the same time, evade the
obligations, responsibilities or liabilities assumed or contracted by him
thereby.

It follows then that the statute applies only to executory contracts and in
actions for their specific performance. It does not apply to actions which are
neither for violation of a contract nor for the performance thereof. 19

There can be no dispute that the instant case is not for specific performance of the
agreement to sell the building and to assign the leasehold right. Petitioners merely
seek to recover their partial payment for the agreed purchase price of the building,
which was to be paid on installments, with the private respondents promising to
execute the corresponding deed of conveyance, together with the assignment of the
leasehold rights, within two (2) months from the payment of the agreed
downpayment of P20,000.00. By their motion to dismiss, private respondents
theoretically or hypothetically admitted the truth of the allegations of fact in the
complaint. 20 Among the allegations therein are:
(1) that the P50,000.00 sought to be recovered represents the downpayment of
P20,000.00 and two (2) monthly installments of the purchase price, and (2) that
petitioners decided, in effect, to withdraw from the agreement by ordering the stop
payment of the remaining six (6) checks and to return the possession of the building
to private respondents because of the latter's failure to comply with their agreement.
The action is definitely not one for specific performance, hence the Statute of Frauds
does not apply. And even if it were for specific performance, partial execution
thereof by petitioners effectively bars the private respondents from invoking it. Since
it is for refund of what petitioners had paid under the agreement, originally
unenforceable under the statute, because petitioners had withdrawn therefrom due to
the "bad faith" of the private respondents, the latter cannot be allowed to take shelter
under the statute and keep the P50,000.00 for themselves. If this were the case, the
statute would only become a shield for fraud, allowing private respondents not only
to escape performance of their obligations, but also to keep what they had received
from petitioners, thereby unjustly enriching themselves.

Besides, even if the action were for specific performance, it was premature for the
respondent Judge to dismiss the complaint by reason of the Statute of Frauds despite
the explicit allegations of partial payment. As this Court stated in Carbonnel
vs. Poncio, et al.: 21

For obvious reasons, it is not enough for a party to allege partial

performance in order to hold that there has been such performance and
to render a decision declaring that the Statute of Frauds is inapplicable.
But neither is such party required to establish such partial performance
by documentaryproof before he could have the opportunity to
introduce oral testimony on the transaction. Indeed, such oral testimony
would usually be unnecessary if there were documents proving partial
performance. Thus, the rejection of any and all testimonial evidence on
partial performance, would nullify the rule that the Statute of Frauds is
inapplicable to contracts which have been partly executed, and lead to
the very evils that the statute seeks to prevent.

xxx xxx xxx

When the party concerned has pleaded partial performance, such party
is entitled to a reasonable chance to establish by parol evidence the truth
of this allegation, as well as the contract itself. "The recognition of the
 exceptional effect of part performance in taking an oral contract out of
the statute of frauds involves the principle that oral evidence is
admissible in such cases to prove both the contract and the part
performance of the contract" (49 Am. Jur. 927).

We thus rule that an action by a withdrawing party to recover his partial payment of
the consideration of a contract, which is otherwise unenforceable under the Statute
of Frauds, by reason of the failure of the other contracting party to comply with his
obligation, is not covered by the Statute of Frauds.

WHEREFORE, the petition is hereby GRANTED. The challenged Orders of 18

April 1979 and 21 June 1979 in Civil Case No. Q-23593 of the court below are
hereby ANNULLED and SET ASIDE, and the complaint in said case is hereby
ordered REINSTATED. The default order against private respondent Lolita Lee Le
Hua shall stand and private respondent Alberto Dy is ordered to file his Answer to
the complaint with the court below within ten (10) days from receipt of this decision.
This decision shall be immediately executory.

Costs against private respondents.

IT IS SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Romero, JJ., concur.

THIRD DIVISION

[G.R. No. 135384. April 4, 2001]

MARIANO DE GUIA and APOLONIA DE GUIA, petitioners, vs. CIRIACO,

LEON, VICTORINA, TOMASA and PABLO, all surnamed DE
GUIA, respondents.

DECISION
PANGANIBAN, J.:
 Under the pre-1997 Rules of Civil Procedure, a notice of pretrial must be served
separately on the counsel and the client. If served only on the counsel, the notice
must expressly direct the counsel to inform the client of the date, the time and the
place of the pretrial conference. The absence of such notice renders the proceedings
void, and the judgment rendered therein cannot acquire finality and may be attacked
directly or collaterally.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing
the February 17, 1998 Decision[1] of the Court of Appeals (CA) in CA-GR CV No.
42971. The dispositive portion of the CA Decision reads as follows:

WHEREFORE, without anymore touching on the merit of the judgment, we hereby

SET ASIDE the default Order of June 18, 1992 which the lower court had
improvidently issued as well as the ensuing judgment which suffers from the same
fatal infirmity. Let the case be remanded to the lower court, which is directed to
promptly set the case for pre-trial conference in accordance with the present Rules,
and for further proceedings.[2]

Also assailed is the September 11, 1998 CA Resolution[3] which denied

petitioners Motion for Reconsideration.

The Facts

The appellate court summarized the antecedents of the case as follows:

The record shows that on October 11, 1990, plaintiffs Mariano De Guia, Apolonia
De Guia, Tomasa De Guia and Irene Manuel filed with the court below a complaint
for partition against defendants Ciriaco, Leon, Victorina and Pablo De Guia. They
alleged x x x that the real properties therein described were inherited by plaintiffs
and defendants from their predecessors-in-interest, and that the latter unjustly
refused to have the properties subdivided among them. Shortly after defendants filed
their traverse, an amended complaint was admitted by the lower court, in which
plaintiff Tomasa De Guia was impleaded as one of the defendants for the reason that
she had become an unwilling co-plaintiff.
It is further shown in the record that on June 11, 1992, the Branch Clerk of Court
issued a Notice setting the case for pre-trial conference on June 18, 1992 at 8:30 a.m.
Copies of said notices were sent by registered mail to parties and their counsel. It
turned out that both defendants and counsel failed to attend the pre-trial conference.
Hence, upon plaintiffs motion, defendants were declared as in default and plaintiffs
were allowed to present their evidence ex-parte.

It appears that on July 6, 1992, defendants filed their Motion for Reconsideration of
the June 16, 1992 Order which declared them as in default. They explained therein
that they received the Notice of pre-trial only in the afternoon of June 18, 1992,
giving them no chance to appear for such proceeding in the morning of that day. The
Motion was opposed by plaintiffs who pointed out that per Postal Delivery Receipt,
defendants counsel actually received his copy of the Notice on June 17, 1992 or one
day before the date of pre-trial. Citing Section 2, Rule 13 of the Rules of Court,
plaintiffs further urged that counsels receipt of the said notice on June 17, 1992 was
sufficient to bind defendants who received said notice on the next day. Finally, they
faulted defendants for failing to support their Motion for Reconsideration with an
affidavit of merit showing among others that they had a meritorious defense.

In an Order dated August 19, 1992, plaintiffs motion for reconsideration was denied
and on June 11, 1993, judgment was rendered ordering the partition of the
controverted parcels of land.[4]

The CA Ruling

The CA sustained respondents claim that the trial court had improperly declared
them in default. It held that the Notice of pretrial received by their counsel a day
before the hearing did not bind the clients, because the Rules of Court in effect at
the time mandated separate service of such Notice upon the parties and their
counsel. Said the appellate court:

In fine, we hold that the lower court committed a reversible error in declaring
appellants as in default for their failure to attend the pre-trial conference [of] which
they were not properly served x x x notice and in subsequently rendering the herein
appealed judgment. And while we commend the lower court for its apparent interest
in disposing of the case with dispatch, the imperatives of procedural due process
constrain us to set aside the default order and the appealed judgment, both of which
were entered in violation of appellants right to notice of pre-trial as required by the
Rules.[5]
 Hence, this Petition.[6]

Issues

Petitioners impute the following alleged errors to the CA:

I

The Respondent Court of Appeals, with grave abuse of discretion, erred in not
finding private respondents as in default despite the existence of fraud, for being
contrary to law, and for being contrary to the findings of the trial court.

II

The Respondent Court, with grave abuse of discretion, erred in reversing the trial
courts Decision notwithstanding private respondents violations of Rule 15, Sections
4 and 5 and Administrative Circular No. 04-94 and Revised Circular No. 28-91.

III

The Respondent Court of Appeals, with grave abuse of discretion, erred in not
affirming the compromise agreement which has the effect and authority of res
judicata even if not judicially approved.

IV

The Respondent Court gravely erred in not applying Rule 135, Section 8 as
warranted by the facts, admission and the evidence of the parties.[7]

In the main, petitioners raise the following core issues: (1) the propriety of the
trial courts order declaring respondents in default; and (2) petitioners allegation of
procedural prejudice.

The Courts Ruling

The Petition has no merit.

First Issue: The Propriety of the Default Order

 When the present dispute arose in 1992, the applicable rule was Section 1, Rule
20 of the pre-1997 Rules of Civil Procedure, which provided as follows:

SECTION 1. Pre-trial mandatory. -- In any action after the last pleading has been
filed, the court shall direct the parties and their attorneys to appear before it for a
conference to consider:

x x x x x x x x x.
This provision mandated separate service of the notice of pretrial upon the
parties and their lawyers.[8] In Taroma v. Sayo,[9] the Court explained:

For the guidance of the bench and bar, therefore, the Court in reaffirming the ruling
that notice of pre-trial must be served separately upon the party and his counsel of
record, restates that while service of such notice to party may be made directly to the
party, it is best that the trial courts uniformly serve such notice to party through or
care of his counsel at counsels address with the express imposition upon counsel of
the obligation of notifying the party of the date, time and place of the pre-trial
conference and assuring that the party either appear thereat or deliver counsel a
written authority to represent the party with power to compromise the case, with the
warning that a party who fails to do so may be non-suited or declared in default.
(emphasis supplied)

Hence, before being declared non-suited or considered in default, parties and

their counsel must be shown to have been served with notice of the pretrial
conference.[10] Moreover, if served only on the counsel, the notice must expressly
direct him or her to inform the client of the date, the time and the place of the pretrial
conference. The absence of such notice renders the proceedings void, and the
judgment rendered therein cannot acquire finality and may be attacked directly or
collaterally.[11]
In this case, respondents received the notice on the afternoon of June 18, 1992,
or after the pretrial scheduled on the morning of that day. Moreover, although the
Notice was also sent to their counsel, it did not contain any imposition or directive
that he inform his clients of the pretrial conference. The Notice merely stated: You
are hereby notified that the above-entitled case will be heard before this court on the
18th day of June, 1992, at 8:30 a.m. for pre-trial.[12]
Such belated receipt of the notice, which was not attributable to respondents,
amounted to a lack of notice. Thus, the lower court erred in declaring them in default
and in denying them the opportunity to fully ventilate and defend their claim in court.
 Of course, this situation would not have arisen under Section 3, [13] Rule 18 of the
1997 Rules of Civil Procedure. It specifically provides that notice of pretrial shall be
served on counsel, who is charged with the duty of notifying the client. Considering
the milieu of the present case, however, such amended proviso is not applicable.

Second Issue: Allegation of Procedural Bias

Petitioners allege that, to their detriment, the appellate court disregarded

established procedural precepts in resolving the case, and that it did so for three
reasons. First, respondents Manifestation and Motion to Lift the Order of Default,
filed with the trial court, was merely pro forma because the former lacked the
requisite notice of hearing. Second, it also lacked an affidavit of merit. Third,
respondents Appeal Brief did not contain a certificate of non-forum shopping.
Granting that respondents Manifestation and Motion to Lift the Order of Default
was pro forma, this issue has become moot, not only because the trial court had
denied such Motion, but also because what was appealed was the judgment rendered
by the lower court. For the same reason, we must also reject petitioners insistence
that an affidavit of merit was absent. In any case, there was no need to attach an
affidavit of merit to the Motion, as the defenses of respondents had been set out in
their Answer.
With regard to the absence of a certification of non-forum shopping, substantial
justice behooves us to agree with the disquisition of the appellate court. We do not
condone the shortcomings of respondents counsel, but we simply cannot ignore the
merits of their claim. Indeed, it has been held that [i]t is within the inherent power
of the Court to suspend its own rules in a particular case in order to do justice.[14]
One last point. Petitioners fault the CA for remanding the case to the trial court,
arguing that the appellate court should have resolved the case on its merit.
We understand petitioners apprehension at the prospect of re-hearing the case;
after all, it has been nine years since the filing of the Complaint. However, their
claim and the evidence supporting it -- and respondents as well -- can be best
threshed out and justly resolved in the lower court. In this regard, we cannot pass
upon the validity of the Agreement of Partition between Mariano de Guia and
Ciriaco de Guia, for such action would amount to a prejudgment of the case.
WHEREFORE, the Petition is DENIED and the assailed Decision and
Resolution AFFIRMED. No pronouncement as to costs.
SO ORDERED.
 Melo, (Chairman), Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.

[1]
Rollo, pp. 34-38; penned by Justice Godardo A. Jacinto, with the concurrence of
Justices Artemon D. Luna (Division chairman) and Roberto A. Barrios.
[2]
CA Decision, p. 5; rollo, p. 38.
[3]
Rollo, p. 42.
[4]
CA Decision, pp. 1-2; rollo, pp. 34-35.
[5]
Ibid., p. 37.
[6]
The case was deemed submitted for decision on October 4, 2000, upon receipt by
the Court of the Manifestation of respondents, signed by Atty. Edgardo V. Cruz,
stating that they were adopting their Brief (should be Comment) as their
Memorandum. Petitioners Memorandum, signed by Atty. Renato J. Santiago, was
received by the Court on October 15, 1999.
[7]
Petition, pp. 6-7; rollo, pp. 14-15; these are repeated in petitioners Memorandum.
[8]
Ng v. Alfaro, 238 SCRA 486, December 1, 1994; Samson v. Court of
Appeals, 105 SCRA 786, July 24, 1981; Patalinhug v. Peralta, 90 SCRA 51, May 5,
1979; Sagarino v. Pelayo, 77 SCRA 402, June 20, 1977; Lim v. Animas, 63 SCRA
409, April 18, 1975.
[9]
67 SCRA 508, October 30, 1975, per Teehankee, J. (later CJ). See also Service
Specialists v. Sheriff of Manila, 145 SCRA 139, October 17, 1986; Five Star Bus
Co., Inc. v. Court of Appeals, 259 SCRA 120, July 17, 1996; Agravante v.
Patriarca, 183 SCRA 113, March 14, 1990.
[10]
Taroma v. Sayo, supra.
[11]
Barde v. Posiquit, 164 SCRA 304, August 15, 1988.
[12]
Rollo, p. 63.
[13]
It reads: SEC. 3. Notice of pre-trial. The notice of pre-trial shall be served on
counsel, or on the party who has no counsel. The counsel served with such notice is
charged with the duty of notifying the party represented by him.
[14]
Anacleto v. Van Twest, GR No. 131411, August 29, 2000, per Mendoza, J. See
also Villanueva v. CA, 285 SCRA 180, January 28, 1998; Ginete v. CA, 296 SCRA
38, September 24, 1998; Batara v. CA, 300 SCRA 237, December 16, 1998; Uy v.
Land Bank of the Philippines, GR No. 136100, July 24, 2000.

[G.R. No. 150611. June 10, 2003]

JACINTO SAGUID, petitioner, vs. HON. COURT OF

APPEALS, THE REGIONAL TRIAL COURT, BRANCH 94, BOAC,
MARINDUQUE and GINA S. REY,respondents.

DECISION
YNARES-SANTIAGO, J.:

The regime of limited co-ownership of property governing the union of parties

who are not legally capacitated to marry each other, but who nonetheless live
together as husband and wife, applies to properties acquired during said cohabitation
in proportion to their respective contributions. Co-ownership will only be up to the
extent of the proven actual contribution of money, property or industry. Absent proof
of the extent thereof, their contributions and corresponding shares shall be presumed
to be equal.[1]
Seventeen-year old Gina S. Rey was married,[2] but separated de facto from her
husband, when she met petitioner Jacinto Saguid in Marinduque, sometime in July
1987.[3] After a brief courtship, the two decided to cohabit as husband and wife in a
house built on a lot owned by Jacintos father.[4] Their cohabitation was not blessed
with any children. Jacinto made a living as the patron of their fishing vessel Saguid
Brothers.[5] Gina, on the other hand, worked as a fish dealer, but decided to work as
an entertainer in Japan from 1992 to 1994 when her relationship with Jacintos
relatives turned sour. Her periodic absence, however, did not ebb away the conflict
with petitioners relatives. In 1996, the couple decided to separate and end up their
9-year cohabitation.[6]
On January 9, 1997, private respondent filed a complaint for Partition and
Recovery of Personal Property with Receivership against the petitioner with the
Regional Trial Court of Boac, Marinduque. She alleged that from her salary of
$1,500.00 a month as entertainer in Japan, she was able to contribute P70,000.00 in
the completion of their unfinished house. Also, from her own earnings as an
entertainer and fish dealer, she was able to acquire and accumulate appliances, pieces
of furniture and household effects, with a total value of P111,375.00. She prayed
that she be declared the sole owner of these personal properties and that the amount
of P70,000.00, representing her contribution to the construction of their house, be
reimbursed to her.
Private respondent testified that she deposited part of her earnings in her savings
account with First Allied Development Bank.[7] Her Pass Book shows that as of May
23, 1995, she had a balance of P21,046.08.[8] She further stated that she had a total
of P35,465.00[9] share in the joint account deposit which she and the petitioner
maintained with the same bank.[10] Gina declared that said deposits were spent for
the purchase of construction materials, appliances and other personal properties.[11]
In his answer[12] to the complaint, petitioner claimed that the expenses for the
construction of their house were defrayed solely from his income as a captain of their
fishing vessel. He averred that private respondents meager income as fish dealer
rendered her unable to contribute in the construction of said house. Besides, selling
fish was a mere pastime to her; as such, she was contented with the small quantity
of fish allotted to her from his fishing trips. Petitioner further contended that Gina
did not work continuously in Japan from 1992 to 1994, but only for a 6-month
duration each year. When their house was repaired and improved sometime in 1995-
1996, private respondent did not share in the expenses because her earnings as
entertainer were spent on the daily needs and business of her parents. From his
income in the fishing business, he claimed to have saved a total of P130,000.00,
P75,000.00 of which was placed in a joint account deposit with private
respondent. This savings, according to petitioner was spent in purchasing the
disputed personal properties.
On May 21, 1997, the trial court declared the petitioner as in default for failure
to file a pre-trial brief as required by Supreme Court Circular No. 1-89.[13]
On May 26, 1997, petitioner filed a motion for reconsideration[14] of the May 21,
1997 order, which was denied on June 2, 1997, and private respondent was allowed
to present evidence ex parte.[15] Petitioner filed another motion for reconsideration
but the same was also denied on October 8, 1997.
On July 15, 1998, a decision[16] was rendered in favor of private respondent, the
dispositive portion of which reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor

of the plaintiff Gina S. Rey against defendant Jacinto Saguid:
a) Ordering the partition of the house identified as plaintiffs Exhibit C and D and
directing the defendant to return and/or reimburse to the plaintiff the amount of
seventy thousand pesos (P70,000,00) which the latter actually contributed to its
construction and completion;

b) Declaring the plaintiff as the exclusive owner of the personal properties listed on
Exhibit M;

c) Ordering the defendant, and/or anyone in possession of the aforesaid personal

properties, to return and/or deliver the same to the plaintiff; and

d) Ordering the defendant to pay the plaintiff moral damages in the sum of fifty
thousand pesos (P50,000.00) plus the costs of suit.

SO ORDERED.[17]

On appeal, said decision was affirmed by the Court of Appeals; however, the
award of P50,000.00 as moral damages was deleted for lack of basis.[18] The
appellate court ruled that the propriety of the order which declared the petitioner as
in default became moot and academic in view of the effectivity of the 1997 Rules of
Civil Procedure. It explained that the new rules now require the filing of a pre-trial
brief and the defendants non-compliance therewith entitles the plaintiff to present
evidence ex parte.
Both parties filed motions for reconsideration which were denied; hence,
petitioner filed the instant petition based on the following assigned errors:
A.

THE HONORABLE COURT OF APPEALS COMMIT[TED] A REVERSIBLE

ERROR IN APPLYING RETROACTIVELY THE 1997 RULES OF CIVIL
PROCEDURE IN THE PRESENT CASE AND HOLDING THE FIRST
ASSIGNED ERROR THEREIN MOOT AND ACADEMIC THUS, FAILED TO
RULE ON THE PROPRIETY OF THE TRIAL COURTS REFUSAL TO SET
ASIDE THE ORDER OF DEFAULT DUE TO MISTAKE AND/OR EXCUSABLE
NEGLIGENCE COMMITTED BY PETITIONER.

B.

THE HONORABLE COURT OF APPEALS COMMIT[TED] A REVERSIBLE

ERROR IN RELYING ON THE FACTUAL FINDINGS OF THE TRIAL COURT
WHICH RECEIVED THE EVIDENCE OF HEREIN RESPONDENT ONLY EX
PARTE.[19]

The issues for resolution are: (1) whether or not the trial court erred in allowing
private respondent to present evidence ex parte; and (2) whether or not the trial
courts decision is supported by evidence.
Under Section 6, Rule 18 of the 1997 Rules of Civil Procedure, the failure of the
defendant to file a pre-trial brief shall have the same effect as failure to appear at the
pre-trial, i.e., the plaintiff may present his evidence ex parte and the court shall
render judgment on the basis thereof.[20] The remedy of the defendant is to file a
motion for reconsideration[21] showing that his failure to file a pre-trial brief was due
to fraud, accident, mistake or excusable neglect.[22] The motion need not really stress
the fact that the defendant has a valid and meritorious defense because his answer
which contains his defenses is already on record.[23]
In the case at bar, petitioner insists that his failure to file a pre-trial brief is
justified because he was not represented by counsel. This justification is not,
however, sufficient to set aside the order directing private respondent to present
evidence ex parte, inasmuch as the petitioner chose at his own risk not to be
represented by counsel. Even without the assistance of a lawyer, petitioner was able
to file a motion for extension to file answer,[24] the required answer stating therein
the special and affirmative defenses,[25] and several other motions.[26] If it were true
that petitioner did not understand the import of the April 23, 1997 order directing
him to file a pre-trial brief, he could have inquired from the court or filed a motion
for extension of time to file the brief. Instead, he waited until May 26, 1997, or 14
days from his alleged receipt of the April 23, 1997 order before he filed a motion
asking the court to excuse his failure to file a brief. Pre-trial rules are not to be
belittled or dismissed because their non-observance may result in prejudice to a
partys substantive rights. Like all rules, they should be followed except only for the
most persuasive of reasons when they may be relaxed to relieve a litigant of an
injustice not commensurate with the degree of his thoughtlessness in not complying
with the procedure prescribed.[27]
In the instant case, the fact that petitioner was not assisted by a lawyer is not a
persuasive reason to relax the application of the rules. There is nothing in the
Constitution which mandates that a party in a non-criminal proceeding be
represented by counsel and that the absence of such representation amounts to a
denial of due process. The assistance of lawyers, while desirable, is not
indispensable. The legal profession is not engrafted in the due process clause such
that without the participation of its members the safeguard is deemed ignored or
violated.[28]
 However, the Court of Appeals erred in ruling that the effectivity of the 1997
Rules of Civil Procedure, specifically, Section 6, Rule 18 thereof, rendered moot and
academic the issue of whether or not the plaintiff may be allowed to present
evidence ex parte for failure of the defendant to file a pre-trial brief. While the rules
may indeed be applied retroactively, the same is not called for in the case at
bar. Even before the 1997 Rules of Civil Procedure took effect on July 1, 1997, the
filing of a pre-trial brief was required under Circular No. 1-89 which became
effective on February 1, 1989. Pursuant to the said circular, [f]ailure to file pre-trial
briefs may be given the same effect as the failure to appear at the pre-trial, that is,
the party may be declared non-suited or considered as in default.[29]
Coming now to the substantive issue, it is not disputed that Gina and Jacinto
were not capacitated to marry each other because the former was validly married to
another man at the time of her cohabitation with the latter. Their property regime
therefore is governed by Article 148[30] of the Family Code, which applies to
bigamous marriages, adulterous relationships, relationships in a state of
concubinage, relationships where both man and woman are married to other persons,
and multiple alliances of the same married man. Under this regime, only the
properties acquired by both of the parties through their actual joint contribution of
money, property, or industry shall be owned by them in common in proportion to
their respective contributions ...[31] Proof of actual contribution is required.[32]
In the case at bar, although the adulterous cohabitation of the parties commenced
in 1987, which is before the date of the effectivity of the Family Code on August 3,
1998, Article 148 thereof applies because this provision was intended precisely to
fill up the hiatus in Article 144 of the Civil Code.[33] Before Article 148 of the Family
Code was enacted, there was no provision governing property relations of couples
living in a state of adultery or concubinage. Hence, even if the cohabitation or the
acquisition of the property occurred before the Family Code took effect, Article 148
governs.[34]
In the cases of Agapay v. Palang,[35] and Tumlos v. Fernandez,[36] which
involved the issue of co-ownership of properties acquired by the parties to a
bigamous marriage and an adulterous relationship, respectively, we ruled that proof
of actual contribution in the acquisition of the property is essential. The claim of co-
ownership of the petitioners therein who were parties to the bigamous and adulterous
union is without basis because they failed to substantiate their allegation that they
contributed money in the purchase of the disputed properties.Also in Adriano v.
Court of Appeals,[37] we ruled that the fact that the controverted property was titled
in the name of the parties to an adulterous relationship is not sufficient proof of co-
ownership absent evidence of actual contribution in the acquisition of the property.
 As in other civil cases, the burden of proof rests upon the party who, as
determined by the pleadings or the nature of the case, asserts an affirmative
issue. Contentions must be proved by competent evidence and reliance must be had
on the strength of the partys own evidence and not upon the weakness of the
opponents defense.[38] This applies with more vigor where, as in the instant case, the
plaintiff was allowed to present evidence ex parte. The plaintiff is not automatically
entitled to the relief prayed for. The law gives the defendant some measure of
protection as the plaintiff must still prove the allegations in the complaint. Favorable
relief can be granted only after the court is convinced that the facts proven by the
plaintiff warrant such relief.[39] Indeed, the party alleging a fact has the burden of
proving it and a mere allegation is not evidence.[40]
In the case at bar, the controversy centers on the house and personal properties
of the parties. Private respondent alleged in her complaint that she contributed
P70,000.00 for the completion of their house. However, nowhere in her testimony
did she specify the extent of her contribution. What appears in the record are
receipts[41] in her name for the purchase of construction materials on November 17,
1995 and December 23, 1995, in the total amount of P11,413.00.
On the other hand, both parties claim that the money used to purchase the
disputed personal properties came partly from their joint account with First Allied
Development Bank. While there is no question that both parties contributed in their
joint account deposit, there is, however, no sufficient proof of the exact amount of
their respective shares therein. Pursuant to Article 148 of the Family Code, in the
absence of proof of extent of the parties respective contribution, their share shall be
presumed to be equal. Here, the disputed personal properties were valued at
P111,375.00, the existence and value of which were not questioned by the
petitioner. Hence, their share therein is equivalent to one-half, i.e., P55,687.50 each.
The Court of Appeals thus erred in affirming the decision of the trial court which
granted the reliefs prayed for by private respondent. On the basis of the evidence
established, the extent of private respondents co-ownership over the disputed house
is only up to the amount of P11,413.00, her proven contribution in the construction
thereof. Anent the personal properties, her participation therein should be limited
only to the amount of P55,687.50.
As regards the trial courts award of P50,000.00 as moral damages, the Court of
Appeals correctly deleted the same for lack of basis.
WHEREFORE, in view of all the foregoing, the Decision of the Court of
Appeals in CA-G.R. CV No. 64166 is AFFIRMED with MODIFICATION. Private
respondent Gina S. Rey is declared co-owner of petitioner Jacinto Saguid in the
controverted house to the extent of P11,413.00 and personal properties to the extent
of P55,687.50. Petitioner is ordered to reimburse the amount of P67,100.50 to
private respondent, failing which the house shall be sold at public auction to satisfy
private respondents claim.
SO ORDERED.

SECOND DIVISION

[G.R. No. 116710. June 25, 2001]

DANILO D. MENDOZA, also doing business under the name and style of
ATLANTIC EXCHANGE PHILIPPINES, petitioner, vs. COURT OF
APPEALS, PHILIPPINE NATIONAL BANK, FERNANDO MARAMAG,
JR., RICARDO G. DECEPIDA and BAYANI A. BAUTISTA, respondents.

DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] dated August 8,

1994 of the respondent Court of Appeals (Tenth Division) in CA-G.R. CV No.
38036 reversing the judgment[2] of the Regional Trial Court (RTC) and dismissing
the complaint therein.
Petitioner Danilo D. Mendoza is engaged in the domestic and international
trading of raw materials and chemicals. He operates under the business name
Atlantic Exchange Philippines (Atlantic), a single proprietorship registered with the
Department of Trade and Industry (DTI). Sometime in 1978 he was granted by
respondent Philippine National Bank (PNB) a Five Hundred Thousand Pesos
(P500,000.00) credit line and a One Million Pesos (P1,000,000.00) Letter of
Credit/Trust Receipt (LC/TR) line.
As security for the credit accommodations and for those which may thereinafter
be granted, petitioner mortgaged to respondent PNB the following: 1) three (3)
parcels of land[3] with improvements in F. Pasco Avenue, Santolan, Pasig; 2) his
house and lot in Quezon City; and 3) several pieces of machinery and equipment in
his Pasig coco-chemical plant.
The real estate mortgage[4] provided the following escalation clause:
(f) The rate of interest charged on the obligation secured by this mortgage as well as
the interest on the amount which may have been advanced by the Mortgagee in
accordance with paragraph (d) of the conditions herein stipulated shall be subject
during the life of this contract to such increase within the rates allowed by law, as
the Board of Directors of the Mortgagee may prescribe for its debtors.

Petitioner executed in favor of respondent PNB three (3) promissory notes

covering the Five Hundred Thousand Pesos (P500,000.00) credit line, one dated
March 8, 1979 for Three Hundred Ten Thousand Pesos (P310,000.00); another dated
March 30, 1979 for Forty Thousand Pesos (P40,000.00); and the last dated
September 27, 1979 for One Hundred Fifty Thousand Pesos (P150,000.00). The said
1979 promissory notes uniformly stipulated: "with interest thereon at the rate of 12%
per annum, until paid, which interest rate the Bank may, at any time, without notice,
raise within the limits allowed by law xxx."[5]
Petitioner made use of his LC/TR line to purchase raw materials from foreign
importers. He signed a total of eleven (11) documents denominated as "Application
and Agreement for Commercial Letter of Credit,"[6] on various dates from February
8 to September 11, 1979, which uniformly contained the following clause: "Interest
shall be at the rate of 9% per annum from the date(s) of the draft(s) to the date(s) of
arrival of payment therefor in New York. The Bank, however, reserves the right to
raise the interest charges at any time depending on whatever policy it may follow in
the future."[7]
In a letter dated January 3, 1980 and signed by Branch Manager Fil S. Carreon
Jr., respondent PNB advised petitioner Mendoza that effective December 1, 1979,
the bank raised its interest rates to 14% per annum, in line with Central Bank's
Monetary Board Resolution No. 2126 dated November 29, 1979.
On March 9, 1981, he wrote a letter to respondent PNB requesting for the
restructuring of his past due accounts into a five-year term loan and for an additional
LC/TR line of Two Million Pesos (P2,000,000.00).[8] According to the letter,
because of the shut-down of his end-user companies and the huge amount spent for
the expansion of his business, petitioner failed to pay to respondent bank his LC/TR
accounts as they became due and demandable.
Ceferino D. Cura, Branch Manager of PNB Mandaluyong replied on behalf of
the respondent bank and required petitioner to submit the following documents
before the bank would act on his request: 1) Audited Financial Statements for 1979
and 1980; 2) Projected cash flow (cash in - cash out) for five (5) years detailed
yearly; and 3) List of additional machinery and equipment and proof of ownership
thereof. Cura also suggested that petitioner reduce his total loan obligations to Three
Million Pesos (P3,000,000.00) "to give us more justification in recommending a plan
of payment or restructuring of your accounts to higher authorities of the Bank."[9]
On September 25, 1981, petitioner sent another letter addressed to PNB Vice-
President Jose Salvador, regarding his request for restructuring of his loans. He
offered respondent PNB the following proposals: 1) the disposal of some of the
mortgaged properties, more particularly, his house and lot and a vacant lot in order
to pay the overdue trust receipts; 2) capitalization and conversion of the balance into
a 5-year term loan payable semi-annually or on annual installments; 3) a new Two
Million Pesos (P2,000,000.00) LC/TR line in order to enable Atlantic Exchange
Philippines to operate at full capacity; 4) assignment of all his receivables to PNB
from all domestic and export sales generated by the LC/TR line; and 5) maintenance
of the existing Five Hundred Thousand Pesos (P500,000.00) credit line.
The petitioner testified that respondent PNB Mandaluyong Branch found his
proposal favorable and recommended the implementation of the
agreement. However, Fernando Maramag, PNB Executive Vice-President,
disapproved the proposed release of the mortgaged properties and reduced the
proposed new LC/TR line to One Million Pesos (P1,000,000.00).[10] Petitioner
claimed he was forced to agree to these changes and that he was required to submit
a new formal proposal and to sign two (2) blank promissory notes.
In a letter dated July 2, 1982, petitioner offered the following revised proposals
to respondent bank: 1) the restructuring of past due accounts including interests and
penalties into a 5-year term loan, payable semi-annually with one year grace period
on the principal; 2) payment of Four Hundred Thousand Pesos (P400,000.00) upon
the approval of the proposal; 3) reduction of penalty from 3% to 1%; 4) capitalization
of the interest component with interest rate at 16% per annum; 5) establishment of a
One Million Pesos (P1,000,000.00) LC/TR line against the mortgaged properties; 6)
assignment of all his export proceeds to respondent bank to guarantee payment of
his loans.
According to petitioner, respondent PNB approved his proposal. He further
claimed that he and his wife were asked to sign two (2) blank promissory note
forms. According to petitioner, they were made to believe that the blank promissory
notes were to be filled out by respondent PNB to conform with the 5-year
restructuring plan allegedly agreed upon. The first Promissory Note,[11] No. 127/82,
covered the principal while the second Promissory Note,[12] No. 128/82, represented
the accrued interest.
Petitioner testified that respondent PNB allegedly contravened their verbal
agreement by 1) affixing dates on the two (2) subject promissory notes to make them
mature in two (2) years instead of five (5) years as supposedly agreed upon; 2)
inserting in the first Promissory Note No. 127/82 an interest rate of 21% instead of
18%; 3) inserting in the second Promissory Note No. 128/82, the amount stated
therein representing the accrued interest as One Million Five Hundred Thirty Six
Thousand Four Hundred Ninety Eight Pesos and Seventy Three Centavos
(P1,536,498.73) when it should only be Seven Hundred Sixty Thousand Three
Hundred Ninety Eight Pesos and Twenty Three Centavos (P760,398.23) and
pegging the interest rate thereon at 18% instead of 12%.
The subject Promissory Notes Nos. 127/82 and 128/82 both dated December 29,
1982 in the principal amounts of Two Million Six Hundred Fifty One Thousand One
Hundred Eighteen Pesos and Eighty Six Centavos (P2,651,118.86) and One Million
Five Hundred Thirty Six Thousand Seven Hundred Ninety Eight and Seventy Three
Centavos (P1,536,798.73) respectively and marked Exhibits BB and CC
respectively, were payable on equal semi-annual amortization and contained the
following escalation clause:

x x x which interest rate the BANK may increase within the limits allowed by law
at any time depending on whatever policy it may adopt in the future; Provided, that,
the interest rate on this note shall be correspondingly decreased in the event that the
applicable maximum interest rate is reduced by law or by the Monetary Board. In
either case, the adjustment in the interest rate agreed upon shall take effect on the
effectivity date of the increase or decrease in the maximum interest rate. x x x

It appears from the record that the subject Promissory Notes Nos. 127/82 and
128/82 superseded and novated the three (3) 1979 promissory notes and the eleven
(11) 1979 Application and Agreement for Commercial Letter of Credit which the
petitioner executed in favor of respondent PNB.
According to the petitioner, sometime in June 1983 the new PNB Mandaluyong
Branch Manager Bayani A. Bautista suggested that he sell the coco-chemical plant
so that he could keep up with the semi-annual amortizations. On three (3) occasions,
Bautista even showed up at the plant with some unidentified persons who claimed
that they were interested in buying the plant.
Petitioner testified that when he confronted the PNB management about the two
(2) Promissory Notes Nos. 127/82 and 128/82 (marked Exhibits BB and CC
respectively) which he claimed were improperly filled out, Bautista and Maramag
assured him that the five-year restructuring agreement would be implemented on the
condition that he assigns 10% of his export earnings to the Bank.[13] In a letter dated
August 22, 1983, petitioner Mendoza consented to assign 10% of the net export
proceeds of a Letter of Credit covering goods amounting to One Hundred Fourteen
Thousand Dollars ($114,000.00).[14] However, petitioner claimed that respondent
PNB subsequently debited 14% instead of 10% from his export proceeds.[15]
Pursuant to the escalation clauses of the subject two (2) promissory notes, the
interest rate on the principal amount in Promissory Note No. 127/82 was increased
from 21% to 29% on May 28, 1984, and to 32% on July 3, 1984 while the interest
rate on the accrued interest per Promissory Note No. 128/82 was increased from 18%
to 29% on May 28, 1984, and to 32% on July 3, 1984.
Petitioner failed to pay the subject two (2) Promissory Notes Nos. 127/82 and
128/82 (Exhibits BB and CC) as they fell due. Respondent PNB extra-judicially
foreclosed the real and chattel mortgages, and the mortgaged properties were sold at
public auction to respondent PNB, as highest bidder, for a total of Three Million
Seven Hundred Ninety Eight Thousand Seven Hundred Nineteen Pesos and Fifty
Centavos (P3,798,719.50).
The petitioner filed in the RTC in Pasig, Rizal a complaint for specific
performance, nullification of the extra-judicial foreclosure and damages against
respondents PNB, Fernando Maramag Jr., Ricardo C. Decepida, Vice-President for
Metropolitan Branches, and Bayani A. Bautista. He alleged that the Extrajudicial
Foreclosure Sale of the mortgaged properties was null and void since his loans were
restructured to a five-year term loan; hence, it was not yet due and demandable; that
the escalation clauses in the subject two (2) Promissory Notes Nos. 127/82 and
128/82 were null and void, that the total amount presented by PNB as basis of the
foreclosure sale did not reflect the actual loan obligations of the plaintiff to PNB;
that Bautista purposely delayed payments on his exports and caused delays in the
shipment of materials; that PNB withheld certain personal properties not covered by
the chattel mortgage; and that the foreclosure of his mortgages was premature so that
he was unable to service his foreign clients, resulting in actual damages amounting
to Two Million Four Thousand Four Hundred Sixty One Pesos (P2,004,461.00).
On March 16, 1992, the trial court rendered judgment in favor of the petitioner
and ordered the nullification of the extrajudicial foreclosure of the real estate
mortgage, the Sheriffs sale of the mortgaged real properties by virtue of
consolidation thereof and the cancellation of the new titles issued to PNB; that PNB
vacate the subject premises in Pasig and turn the same over to the petitioner; and
also the nullification of the extrajudicial foreclosure and sheriff's sale of the
mortgaged chattels, and that the chattels be returned to petitioner Mendoza if they
were removed from his Pasig premises or be paid for if they were lost or rendered
unserviceable.
The trial court also ordered respondent PNB to restructure to five-years
petitioner's principal loan of Two Million Six Hundred Fifty One Thousand One
Hundred Eighteen Pesos and Eighty Six Centavos (P2,651,118.86) and the
accumulated capitalized interest on the same in the amount of Seven Hundred Sixty
Thousand Three Hundred Eighty Nine Pesos and Twenty Three Centavos
(P760,389.23) as of December 1982, and that respondent PNB should compute the
additional interest from January 1983 up to October 15, 1984 only when respondent
PNB took possession of the said properties, at the rate of 12% and 9% respectively.
The trial court also ordered respondent PNB to grant petitioner Mendoza an
additional Two Million Pesos (P2,000,000.00) loan in order for him to have the
necessary capital to resume operation. It also ordered respondents PNB, Bayani A.
Bautista and Ricardo C. Decepida to pay to petitioner actual damages in the amount
of Two Million One Hundred Thirteen Thousand Nine Hundred Sixty One Pesos
(P2,113,961.00) and the peso equivalent of Six Thousand Two Hundred Fifteen
Dollars ($6,215.00) at the prevailing foreign exchange rate on October 11, 1983; and
exemplary damages in the amount of Two Hundred Thousand Pesos (P200,000.00).
Respondent PNB appealed this decision of the trial court to the Court of Appeals.
And the Court of Appeals reversed the decision of the trial court and dismissed the
complaint. Hence, this petition.
It is the petitioners contention that the PNB management restructured his
existing loan obligations to a five-year term loan and granted him another Two
Million Pesos (P2,000,000.00) LC/TR line; that the Promissory Notes Nos. 127/82
and 128/82 evidencing a 2-year restructuring period or with the due maturity date
December 29, 1984 were filled out fraudulently by respondent PNB, and contrary to
his verbal agreement with respondent PNB; hence, his indebtedness to respondent
PNB was not yet due and the extrajudicial foreclosure of his real estate and chattel
mortgages was premature. On the other hand, respondent PNB denies that
petitioner's loan obligations were restructured to five (5) years and maintains that the
subject two (2) Promissory Notes Nos. 127/82 and 128/82 were filled out regularly
and became due as of December 29, 1984 as shown on the face thereof.
Respondent Court of Appeals held that there is no evidence of a promise from
respondent PNB, admittedly a banking corporation, that it had accepted the
proposals of the petitioner to have a five-year restructuring of his overdue loan
obligations. It found and held, on the basis of the evidence adduced, that "appellee's
(Mendoza) communications were mere proposals while the bank's responses were
not categorical that the appellee's request had been favorably accepted by the bank."
Contending that respondent PNB had allegedly approved his proposed five-year
restructuring plan, petitioner presented three (3) documents executed by respondent
PNB officials. The first document is a letter dated March 16, 1981 addressed to the
petitioner and signed by Ceferino D. Cura, Branch Manager of PNB Mandaluyong,
which states:

x x x In order to study intelligently the feasibility of your above request, please

submit the following documents/papers within thirty (30) days from the date
thereof, viz:

1. Audited Financial Statements for 1979 and 1980;

2. Projected cash flow (cash in - cash out) for five years detailed yearly; and
3. List of additional machinery and equipment and proof of ownership
thereof.

We would strongly suggest, however, that you reduce your total obligations to at
least P3 million (principal and interest and other charges) to give us more
justification in recommending a plan of payment or restructuring of your accounts
to higher authorities of this bank.

The second document is a letter dated May 11, 1981 addressed to Mr. S. Pe
Benito, Jr., Managing Director of the Technological Resources Center and signed
by said PNB Branch Manager, Ceferino D. Cura. According to petitioner, this letter
showed that respondent PNB seriously considered the restructuring of his loan
obligations to a five-year term loan, to wit:
xxx

At the request of our client, we would like to furnish you with the following
information pertinent to his accounts with us:

xxx

We are currently evaluating the proposal of the client to re-structure his accounts
with us into a five-year plan.

We hope that the above information will guide you in evaluating the proposals of
Mr. Danilo Mendoza.

xxx
The third document is a letter dated July 8, 1981 addressed to petitioner and
signed by PNB Assistant Vice-President Apolonio B. Francisco.
xxx
Considering that your accounts/accommodations were granted and carried in the
books of our Mandaluyong Branch, we would suggest that your requests and
proposals be directed to Ceferino Cura, Manager of our said Branch.

We feel certain that Mr. Cura will be pleased to discuss matters of mutual interest
with you.

xxx
Petitioner also presented a letter which he addressed to Mr. Jose Salvador, Vice-
President of the Metropolitan Branches of PNB, dated September 24, 1981, which
reads:

Re: Restructuring of our Account into a 5-year Term Loan and Request for the
Establishment of a P2.0 Million LC/TR Line

Dear Sir:

In compliance with our discussion last September 17, we would like to formalize
our proposal to support our above requested assistance from the Philippine National
Bank.

xxx

Again we wish to express our sincere appreciation for your open-minded approach
towards the solution of this problem which we know and will be beneficial and to
the best interest of the bank and mutually advantageous to your client.

xxx
Petitioner argues that he submitted the requirements according to the instructions
given to him and that upon submission thereof, his proposed five-year restructuring
plan was deemed automatically approved by respondent PNB.
We disagree.
Nowhere in those letters is there a categorical statement that respondent PNB
had approved the petitioners proposed five-year restructuring plan. It is stretching
the imagination to construe them as evidence that his proposed five-year
restructuring plan has been approved by the respondent PNB which is admittedly a
banking corporation. Only an absolute and unqualified acceptance of a definite offer
manifests the consent necessary to perfect a contract.[16] If anything, those
correspondences only prove that the parties had not gone beyond the preparation
stage, which is the period from the start of the negotiations until the moment just
before the agreement of the parties.[17]
There is nothing in the record that even suggests that respondent PNB assented
to the alleged five-year restructure of petitioners overdue loan obligations to
PNB. However, the trial court ruled in favor of petitioner Mendoza, holding that
since petitioner has complied with the conditions of the alleged oral contract, the
latter may not renege on its obligation to honor the five-year restructuring period,
under the rule of promissory estoppel. Citing Ramos v. Central Bank,[18] the trial
court said:

The broad general rule to the effect that a promise to do or not to do something in
the future does not work an estoppel must be qualified, since there are numerous
cases in which an estoppel has been predicated on promises or assurances as to future
conduct. The doctrine of promissory estoppel is by no means new, although the
name has been adopted only in comparatively recent years. According to that
doctrine, an estoppel may arise from the making of a promise, even though without
consideration, if it was intended that the promise should be relied upon and in fact it
was relied upon, and if a refusal to enforce it would be virtually to sanction the
perpetration of fraud or would result in other injustice. In this respect, the reliance
by the promisee is generally evidenced by action or forbearance on his part, and the
idea has been expressed that such action or forbearance would reasonably have been
expected by the promissor. xxx

The doctrine of promissory estoppel is an exception to the general rule that a

promise of future conduct does not constitute an estoppel. In some jurisdictions, in
order to make out a claim of promissory estoppel, a party bears the burden of
establishing the following elements: (1) a promise reasonably expected to induce
action or forebearance; (2) such promise did in fact induce such action or
forebearance, and (3) the party suffered detriment as a result.[19]
It is clear from the forgoing that the doctrine of promissory estoppel presupposes
the existence of a promise on the part of one against whom estoppel is claimed. The
promise must be plain and unambiguous and sufficiently specific so that the
Judiciary can understand the obligation assumed and enforce the promise according
to its terms.[20] For petitioner to claim that respondent PNB is estopped to deny the
five-year restructuring plan, he must first prove that respondent PNB had promised
to approve the plan in exchange for the submission of the proposal. As discussed
earlier, no such promise was proven, therefore, the doctrine does not apply to the
case at bar. A cause of action for promissory estoppel does not lie where an alleged
oral promise was conditional, so that reliance upon it was not reasonable. [21] It does
not operate to create liability where it does not otherwise exist.[22]
Since there is no basis to rule that petitioner's overdue loan obligations were
restructured to mature in a period of five (5) years, we see no other option but to
respect the two-year period as contained in the two (2) subject Promissory Notes
Nos. 127/82 and 128/82, marked as Exhibits BB and CC respectively which
superseded and novated all prior loan documents signed by petitioner in favor of
respondent PNB. Petitioner argues, in his memorandum, that "respondent Court of
Appeals had no basis in saying that the acceptance of the five-year restructuring is
totally absent from the record."[23] On the contrary, the subject Promissory Notes
Nos. 127/82 and 128/82 are clear on their face that they were due on December 29,
1984 or two (2) years from the date of the signing of the said notes on December 29,
1982.
Petitioner claims that the two (2) subject Promissory Notes Nos. 127/82 and
128/82 were signed by him in blank with the understanding that they were to be
subsequently filled out to conform with his alleged oral agreements with PNB
officials, among which is that they were to become due only after five (5) years. If
petitioner were to be believed, the PNB officials concerned committed a fraudulent
act in filling out the subject two (2) promissory notes in question. Private
transactions are presumed to be fair and regular.[24] The burden of presenting
evidence to overcome this presumption falls upon petitioner.Considering that
petitioner imputes a serious act of fraud on respondent PNB, which is a banking
corporation, this court will not be satisfied with anything but the most convincing
evidence. However, apart from petitioner's self-serving verbal declarations, we find
no sufficient proof that the subject two (2) Promissory Notes Nos. 127/82 and 128/82
were completed irregularly. Therefore, we rule that the presumption has not been
rebutted.
Besides, it could be gleaned from the record that the petitioner is an astute
businessman who took care to reduce in writing his business proposals to the
respondent bank. It is unthinkable that the same person would commit the careless
mistake of leaving his subject two (2) promissory notes in blank in the hands of other
persons. As the respondent Court of Appeals correctly pointed out:

Surely, plaintiff-appellee who is a C.P.A and a Tax Consultant (p. 3 TSN, January
9, 1990) will insist that the details of the two promissory notes he and his wife
executed in 1982 should be specific to enable them to make the precise computation
in the event of default as in the case at bench. In fact, his alleged omission as a C.P.A.
and a Tax Consultant to insist that the two promissory notes be filled up on important
details like the rates of interest is inconsistent with the legal presumption of a person
who takes ordinary care of his concerns (Section 3 (c), Rule 131, Revised Rules on
Evidence).

As pointed out by the Court of Appeals, Orlando Montecillo, Chief, Loans and
Discounts, PNB Mandaluyong Branch, testified that the said Promissory Notes Nos.
127/82 and 128/82 were completely filled out when Danilo Mendoza signed them
(Rollo, p. 14).
In a last-ditch effort to save his five-year loan restructuring theory, petitioner
contends that respondent PNB's action of withholding 10% from his export proceeds
is proof that his proposal had been accepted and the contract had been partially
executed. He claims that he would not have consented to the additional burden if
there were no corresponding benefit. This contention is not well taken. There is no
credible proof that the 10% assignment of his export proceeds was not part of the
conditions of the two-year restructuring deal. Considering that the resulting amount
obtained from this assignment of export proceeds was not even enough to cover the
interest for the corresponding month,[25] we are hard-pressed to construe it as the
required proof that respondent PNB allegedly approved the proposed five-year
restructuring of petitioners overdue loan obligations.
It is interesting to note that in his Complaint, petitioner made no mention that
the assignment of his export proceeds was a condition for the alleged approval of his
proposed five-year loan restructuring plan. The Complaint merely alleged that
"plaintiff in a sincere effort to make payments on his obligations agreed to assign
10% of his export proceeds to defendant PNB." This curious omission leads the court
to believe that the alleged link between the petitioners assignment of export proceeds
and the alleged five-year restructuring of his overdue loans was more contrived than
real.
It appears that respondent bank increased the interest rates on the two (2) subject
Promissory Notes Nos. 127/82 and 128/82 without the prior consent of the
petitioner. The petitioner did not agree to the increase in the stipulated interest rate
of 21% per annum on Promissory Note No. 127/82 and 18% per annum on
Promissory Note No. 128/82. As held in several cases, the unilateral determination
and imposition of increased interest rates by respondent bank is violative of
the principle of mutuality of contracts ordained in Article 1308 of the Civil
Code.[26] As held in one case:[27]

It is basic that there can be no contract in the true sense in the absence of the element
of agreement, or of mutual assent of the parties. If this assent is wanting on the part
of one who contracts, his act has no more efficacy than if it had been done under
duress or by a person of unsound mind.
Similarly, contract changes must be made with the consent of the contracting
parties. The minds of all the parties must meet as to the proposed modification,
especially when it affects an important aspect of the agreement. In the case of loan
contracts, it cannot be gainsaid that the rate of interest is always a vital component,
for it can make or break a capital venture.

It has been held that no one receiving a proposal to change a contract to which
he is a party is obliged to answer the proposal, and his silence per se cannot be
construed as an acceptance.[28] Estoppel will not lie against the petitioner regarding
the increase in the stipulated interest on the subject Promissory Notes Nos. 127/82
and 128/82 inasmuch as he was not even informed beforehand by respondent bank
of the change in the stipulated interest rates. However, we also note that the said two
(2) subject Promissory Notes Nos. 127/82 and 128/82 expressly provide for a penalty
charge of 3% per annum to be imposed on any unpaid amount when due.
Petitioner prays for the release of some of his movables[29] being withheld by
respondent PNB, alleging that they were not included among the chattels he
mortgaged to respondent bank. However, petitioner did not present any proof as to
when he acquired the subject movables and hence, we are not disposed to believe
that the same were after-acquired chattels not covered by the chattel and real estate
mortgages.
In asserting its rights over the subject movables, respondent PNB relies on a
common provision in the two (2) subject Promissory Notes Nos. 127/82 and 128/82
which states:

In the event that this note is not paid at maturity or when the same becomes due
under any of the provisions hereof, we hereby authorized the BANK at its option
and without notice, to apply to the payment of this note, any and all moneys,
securities and things of value which may be in its hands on deposit or otherwise
belonging to me/us and for this purpose. We hereby, jointly and severally,
irrevocably constitute and appoint the BANK to be our true Attorney-in-Fact with
full power and authority for us in our name and behalf and without prior notice to
negotiate, sell and transfer any moneys securities and things of value which it may
hold, by public or private sale and apply the proceeds thereof to the payment of this
note.

It is clear, however, from the above-quoted provision of the said promissory

notes that respondent bank is authorized, in case of default, to sell things of value
belonging to the mortgagor which may be on its hands for deposit or otherwise
belonging to me/us and for this purpose. Besides the petitioner executed not only a
chattel mortgage but also a real estate mortgage to secure his loan obligations to
respondent bank.
A stipulation in the mortgage, extending its scope and effect to after-acquired
property is valid and binding where the after-acquired property is in renewal of, or
in substitution for, goods on hand when the mortgage was executed, or is purchased
with the proceeds of the sale of such goods.[30] As earlier pointed out, the petitioner
did not present any proof as to when the subject movables were acquired.
More importantly, respondent bank makes a valid argument for the retention of
the subject movables. Respondent PNB asserts that those movables were in fact
"immovables by destination" under Art. 415 (5) of the Civil Code. [31] It is an
established rule that a mortgage constituted on an immovable includes not only the
land but also the buildings, machinery and accessories installed at the time the
mortgage was constituted as well as the buildings, machinery and accessories
belonging to the mortgagor, installed after the constitution thereof.[32]
Petitioner also contends that respondent PNBs bid prices for this foreclosed
properties in the total amount of Three Million Seven Hundred Ninety Eight
Thousand Seven Hundred Nineteen Pesos and Fifty Centavos (P3,798,719.50), were
allegedly unconscionable and shocking to the conscience of men. He claims that the
fair market appraisal of his foreclosed plant site together with the improvements
thereon located in Pasig, Metro Manila amounted to Five Million Four Hundred
Forty One Thousand Six Hundred Fifty Pesos (P5,441,650.00) while that of his
house and lot in Quezon City amounted to Seven Hundred Twenty Two Thousand
Pesos (P722,000.00) per the appraisal report dated September 20, 1990 of Cuervo
Appraisers, Inc.[33] That contention is not well taken considering that:
1. The total of the principal amounts alone of petitioners subject Promissory
Notes Nos. 127/82 and 128/82 which are both overdue amounted to Four
Million One Hundred Eighty Seven Thousand Nine Hundred Seventeen
Pesos and Fifty Nine Centavos (P4,187,917.59).
2. While the appraisal of Cuervo Appraisers, Inc. was undertaken in
September 1990, the extrajudicial foreclosure of petitioners real estate and
chattel mortgages have been effected way back on October 15, 1984,
October 23, 1984 and December 21, 1984.[34] Common experience shows
that real estate values especially in Metro Manila tend to go upward due
to developments in the locality.
3. In the public auction/foreclosure sales, respondent PNB, as mortgagee,
was not obliged to bid more than its claims or more than the amount of
petitioners loan obligations which are all overdue. The foreclosed real
 estate and chattel mortgages which petitioner earlier executed are
accessory contracts covering the collaterals or security of his loans with
respondent PNB. The principal contracts are the Promissory Notes Nos.
127/82 and 128/82 which superseded and novated the 1979 promissory
notes and the 1979 eleven (11) Applications and Agreements for
Commercial Letter of Credit.
Finally, the record shows that petitioner did not even attempt to tender any
redemption price to respondent PNB, as highest bidder of the said foreclosed real
estate properties, during the one-year redemption period.
In view of all the foregoing, it is our view and we hold that the extrajudicial
foreclosure of petitioners real estate and chattel mortgages was not premature and
that it was in fact legal and valid.
WHEREFORE, the petition is hereby DENIED. The challenged Decision of the
Court of Appeals in CA-G.R. CV No. 38036 is AFFIRMED with modification that
the increase in the stipulated interest rates of 21% per annum and 18% per annum
appearing on Promissory Notes Nos. 127/82 and 128/82 respectively is hereby
declared null and void.
SO ORDERED.

[G.R. No. 127064. August 31, 1999]

FIVE STAR BUS COMPANY INC., and IGNACIO

TORRES, petitioners, vs. COURT OF APPEALS, JUDGE JAIME F.
BAUTISTA, RTC-Br. 75, Valenzuela, Metro Manila and SAMUEL KING
SAGARAL II, respondents.

DECISION
BELLOSILLO, J.:

The threshold issue in this petition for review on certiorari is whether the Court
of Appeals can summarily dismiss a petition on the ground that the certification on
non-forum shopping required by Supreme Court Circular No. 28-91 was signed by
counsel and not by petitioners themselves.
On 9 November 1991, at around 11:00 oclock in the evening, along the
MacArthur Highway in Valenzuela, Metro Manila, the Suzuki Supercarry Mini-Van
driven by private respondent Samuel King Sagaral II collided with a passenger bus
owned and operated by petitioner Five Star Bus Company and driven by co-
petitioner Ignacio Torres.[1]
On 1 April 1992 private respondent Sagaral filed a civil action for damages
against petitioners and the case was assigned to Branch 171 of the Valenzuela
Regional Trial Court and docketed as Civil Case No. 3812-V-92.
When amicable settlement failed, trial ensued with private respondent Sagaral
(plaintiff in the court a quo) initially presenting his evidence. Several years passed
and on 26 December 1996 Sagaral finally rested his case.[2] On 12 March 1996 the
trial court ordered petitioners herein (defendants in the court a quo) to present their
evidence on 25 April 1996 and 9 May 1996.[3]
The presentation of evidence by petitioners was snagged by several
postponements. The first was when Presiding Judge Adriano R. Osorio reset the 25
April 1996 hearing to 9 May 1996 as he had to go on forced vacation leave from 23
April 1996 to 25 April 1996.[4] But during the 9 May 1996 hearing, petitioner Ignacio
Torres failed to appear prompting the lower court to cancel the hearing. According
to petitioners, Torres was then detained in jail due to a separate pending criminal
case filed against him by Sagaral before Br. 172 of the RTC of
Valenzuela. Petitioners further explained that Torres could not post bail earlier for
his provisional liberty since no notice was sent to him regarding the criminal
complaint.[5]
On 4 June 1996 Judge Osorio ordered the civil case to be unloaded in view of
his courts designation as a permanent special court to exclusively try heinous crimes
under RA 7659.[6] On 17 June 1996 the case was re-raffled to Br. 75 of the same
RTC, this time under Judge Jaime F. Bautista who immediately scheduled a hearing
for the initial presentation of petitioners' evidence on 8 August 1996.[7]Nonetheless
on 9 July 1996 petitioners filed a motion to reset the hearing scheduled on 8 August
1996 to 15 August 1996 citing as reason their counsels conflict of schedule.[8]
It seemed however that even prior to the scheduled hearing of 8 August 1996,
former Presiding Judge Osorio had already set a hearing for 2 July 1996 and 16 July
1996. But instead of conducting a hearing on said dates, Judge Bautista issued an
order on 2 July 1996, thus -
It appearing from the records that this case had been previously set by Branch 171
today and July 16, 1996 and considering the Urgent Motion to Reset filed by the
defendants thru counsel, the hearing set for today is hereby cancelled and is reset to
July 16, 1996 as previously scheduled and August 8, 1996 both at 8:30 a.m. x x x
x[9]

When the case was called for hearing on 16 July 1996, counsel for petitioners
was not present. In fact he arrived twenty (20) minutes late. Thus, upon motion of
respondent Sagaral, the trial court issued the disputed Order-

There being no certainty as to what time defendants counsel would be in court, and
upon manifestation of plaintiffs counsel that lawyer should be aware of his time x x
x as prayed for, the defendants right to present their evidence is deemed waived
and the case is now submitted for decision x x x x (underscoring supplied).[10]

Petitioners forthwith filed a motion for reconsideration of the above-mentioned

Order arguing that the right to be heard was a basic tenet guaranteed by the
Constitution which the courts could not impinge upon in the absence of any
justifying reason to do so. They also blamed the heavy traffic for their lawyer's
tardiness.
To simplify the proceedings due to the various motions filed by petitioners,
Judge Bautista cancelled the 8 August 1996 hearing and reset it to 20 August
1996. He also set for hearing petitioner's motion for reconsideration on 20 August
1996.[11]
However, as if trying to test the patience of the trial court, petitioners once again
filed on 5 August 1996 an Urgent Motion to Reset the 20 August 1996 hearing. Their
counsel pleaded that he could not make it on such date because he had previously
committed himself to appear before the Antipolo Regional Trial Court. He prayed
that the hearing be moved to 2 September 1996.[12]
The hearing set for 20 August 1996 was cancelled[13] and the trial court on that
day issued instead its Order denying petitioners' motion for reconsideration of its
Order dated 16 July 1996 which considered the case submitted for resolution. The
lower court noted that the case had been pending for more than four (4) years and it
had always been at the "mercy" of petitioners when it acted favorably on their
motions. There would be no end to this litigation if the court would give due course
to this motion.[14]
Undeterred, petitioners sought recourse in the Court of Appeals through a
petition for certiorari. But in the assailed Resolution dated 23 September 1996 the
appellate court summarily dismissed their petition on the ground that the affidavit of
non-forum shopping was signed and executed by counsel for petitioners and not by
petitioners themselves, or one of them, as required by Circular No. 28-91 of the
Supreme Court.[15]
Petitioners moved for reconsideration which the Court of Appeals rejected in its
Resolution of 31 October 1996.[16] Petitioners are now before us contending that the
appellate court erred in affirming the Order of the trial court dated 16 July 1996 and
in dismissing their petition for non-compliance with the requirement of Circular No.
28-91. They pray that the appellate court remand the case to the court of origin for
further proceedings.
Circular No. 28-91, which took effect on 1 April 1994, provides inter alia:

(1) (I)n every petition filed with the Supreme Court or the Court of Appeals, the
petitioner, aside from complying with the pertinent provisions of the Rules of Court
and existing circulars, must certify under oath all of the following facts or
undertakings x x x x;

(2) Any violation of this revised Circular will entail the following sanctions: (a) it
shall be a cause for the summary dismissal of the multiple petitions or complaints; x
x x x (underscoring supplied).

Circular No. 28-91 has its roots in the rule that a party-litigant shall not be
allowed to pursue simultaneous remedies in two (2) different fora, for such practice
works havoc upon orderly judicial procedure. Forum shopping has been
characterized as an act of malpractice that is prohibited and condemned as trifling
with the courts and abusing their processes. It constitutes improper conduct which
tends to degrade the administration of justice. It has also been aptly described as
deplorable because it adds to the congestion of the already heavily burdened dockets
of the courts.[17]
Nonetheless, we are not unmindful of this Courts ruling in Gabionza v. Court of
Appeals,[18] Loyola v. Court of Appeals,[19] and Kavinta v. Castillo, Jr.[20] that
substantial compliance with Circular No. 28-91 is sufficient:

It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and
applied to achieve the purposes projected by the Supreme Court when it promulgated
that circular. Circular No. 28-91 was designed to serve as an instrument to promote
and facilitate the orderly administration of justice and should not be interpreted with
such absolute literalness as to subvert its own ultimate and legitimate objective or
the goal of all rules of procedure which is to achieve substantial justice as
expeditiously as possible.

The fact that the Circular requires that it be strictly complied with merely
underscores its mandatory nature in that it cannot be dispensed with or its
requirements altogether disregarded, but it does not thereby interdict substantial
compliance with its provisions under justifiable circumstances.

In the instant case, we cannot apply the "substantial compliance" rule to

petitioners and be as liberal minded. For one thing, counsel for petitioners gave a
rather frail excuse for his non-compliance, i.e., oversight and haste in ensuring that
the petition would be filed at the earliest possible time for the protection of his clients
interests thereby overlooking the aforesaid circular.[21]
In Ortiz v. Court of Appeals[22] which involves a similar set of facts, we ruled -

(I)t should be recalled that Revised Circular No. 28-91 provides that the party must
certify under oath that he has not commenced any other action or proceeding
involving the same issues in the Supreme Court, the Court of Appeals, or different
Divisions thereof, or any other tribunal or agency, and that to the best of his
knowledge, no such action or proceeding is pending in the Supreme Court x x x x

Petitioners admit that their lawyer x x x signed the Certification on Non-Forum

Shopping. Allegedly, Atty. Paulite has personal knowledge that the Ortizes had not
commenced any other action or proceeding involving the same parties and causes of
action. Petitioners now assert that their lawyers signature must be accepted as
substantial compliance with the requirements of the Circular.

Regrettably, we find that substantial compliance will not suffice in a matter

involving strict observance as provided for in Circular No. 28-91. The attestation
contained in the certification on non-forum shopping requires personal knowledge
by the party who executed the same. To merit the Courts consideration, petitioners
here must show reasonable cause for failure to personally sign the certification. The
petitioners must convince the court that the outright dismissal of the petition would
defeat the administration of justice. However, the petitioners did not give any
explanation to warrant their exemption from the strict application of the rule utter
disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction x x x x
 Finally, petitioners argue that the delay in the proceedings in the court below
was not entirely their fault "as various circumstances and incidents beyond (their)
control contributed to the delay."[23]
Contrary to petitionerss assertions, their failure to present their evidence was
their own undoing. A review of the records shows that the trial court had scheduled
a total of six (6) hearing dates for the presentation of their evidence. These were 25
April 1996, 9 May 1996, 2 July 1996, 16 July 1996, 8 August 1996 and 20 August
1996. Five (5) of these trial dates were cancelled at the instance of petitioners.They
themselves admitted that the 9 May 1996 hearing was postponed when Isagani
Torres failed to appear in court because he was then incarcerated. Likewise, through
a motion petitioners were able to have the hearing on 2 July 1996 moved to 16 July
1996. However on said date petitioners counsel failed to appear on time, thus
prompting the trial court to declare petitioners right to present evidence as waived.As
to the 8 August 1996 hearing, they moved to have the same reset, citing as reason
the conflict of schedule of their counsel. And when the trial court granted the motion
and transferred the hearing to 20 August 1996, petitioners once again submitted a
motion praying that the hearing be reset to 2 September 1996. From these repeated
resettings, it can be gleaned that the delay in the proceedings was largely, if not
mainly, due to petitioners.
We also do not miss the fact that petitioners were represented by a law firm
which meant that any of its members could lawfully act as their counsel during the
trial. As such petitioners frequent motions to reset hearings by reason of their
counsels unavailability should be cautiously considered to make sure that these were
not mere dilatory tactics. As observed by the lower court, a perusal of the records
shows that the case has been pending for a long period of time, with the court often
accommodating petitioners. Thus there could be no grave abuse of discretion when
the trial court finally ordered petitioners right to present evidence as waived to put
an end to their foot dragging. Indeed, it is never too often to say that justice delayed
is justice denied.
WHEREFORE, there being no reversible error committed by the Court of
Appeals, the petition for review on certiorari is DENIED and the assailed Resolution
of 23 September 1996 summarily dismissing the petition for certiorari and the
Resolution of 31 October 1996 denying reconsideration are
AFFIRMED. Consequently, the Regional Trial Court of Valenzuela, Metro Manila,
is DIRECTED forthwith to render its decision in Civil Case No. 3812-V-92 without
delay. Costs against petitioners.
SO ORDERED.
G.R. No. L-4472 May 8, 1952

ESPIRIDION RONE, CLUADIA AGUZAR, DIONISIA GORDOLAN,

GUILLERMO AND AMABLE, both surnamed VENTURA, Plaintiffs-Appellants,
vs. VICTOR CLARO and SIMEON BAQUIRING, Defendants-Appellees.

Florencio Dumapas for appellants.

Justino Z. Benito for appellees.

MONTEMAYOR, J.:

The plaintiffs herein are appealing from an order of the Court of First Instance of
Pangasinan, dated April 1, 1950, dismissing the case. Said order reads as follows:

It appearing from the allegations of the complaint that defendant Victor Claro has
obtained a deed of sale from the plaintiff Espiridion Rone over the land in question
in 1929 which the plaintiffs learned in March, 1941 but failed to bring the action
thereon on account of poverty, it is quite evident that they should have instituted an
action within four years after the discovery of said fraud in accordance with Section
44 of Act 190. And since the present action has been instituted on February 2, 1950,
the conclusion is unavoidable that same has already
prescribed.chanroblesvirtualawlibrary chanrobles virtual law library

WHEREFORE, the Court hereby sustains the motion to dismiss and decrees the
dismissal of this case without pronouncement as to costs.

There was no trial. Instead of answering the complaint defendants filed a motion for
dismissal of the complaint on the ground that it stated no cause of action and that it
was barred by the statue of limitations. The facts, consequently, have to be gathered
from the complaint. It is not easy to understand the allegations of said pleading which
counsel for the defendants not without reason, calls vague and unintellegible; but for
the purpose of establishing the issue involved in the case as decided by the trial court,
roughly, we can state the following as gleaned from the
complaint.chanroblesvirtualawlibrary chanrobles virtual law library

On and before the year 1929 the plaintiffs were or claimed to be the owners of lot
4651 of the Cadastral Survey of Asingan, Pangasinan, described in Original
Certificate of Title No. 6288. In that year, the defendants or one of them, it is said,
through fraud, deceit and breach of faith, succeeded in getting the Owner's Duplicate
Original Certificate of Title from one of the plaintiffs. About the year 1932,
(although in a portion of the complaint, it is alleged, probably through error, to be
1926), the defendants, it is alleged, again with the use of fraud, deceit, breach of
faith, and other machinations, succeeded in having the plaintiffs execute a deed of
sale of the lot in question in defendants favor, but it was only in the year 1941 that
this fraud, including the possession and enjoyment of the lot by defendants, was
discovered by the plaintiffs. Because of poverty, plaintiffs were unable to take the
necessary steps to recover the land. The complaint was filed in the lower court only
on February 20, 1950.chanroblesvirtualawlibrary chanrobles virtual law library

The action herein is to annul the deed of sale by the plaintiffs in favor of the
defendants on the ground of fraud and the trial court was correct in applying Section
44, paragraph 3 of Act 190 and in ruling that the action had prescribed, since more
than four years had elapsed since the discovery of the fraud.
Section 44 of Act 190, known as the Code of Civil Procedure, in part, reads as
follows:

Other Civil Actions: How Limited - Civil actions other than for the recovery of real
property can only be brought within the following periods after the right of action
accrues:

xxx xxx x x xchanrobles virtual law library

. . . 3. With four years: ... an action for relief on the ground of fraud, but the right of
action in such case shall not be deemed to have accrued until the discovery of the
fraud.

Appellants however now insist that their action was not to annul the deed of sale on
the basis of fraud, but to recover the title and possession of land. This change of front
is, obviously, calculated to avoid the fatal effects of Section 44 above quoted by now
invoking Section 40 of the same Act which prescribes ten years as the period within
which an actin to recover title to land may be instituted. Section 40 of Act 190 reads
thus:

An action for the recovery of title to, or possession of, real property, or an interest
therein, can only be brought within ten (10) years after the cause of such action
accrues.

The purpose of an action or suit and the law to govern it, including the period of
prescription, is to be determined not by the claim of the party filing the action, made
in his argument or brief, but rather by the complaint itself, its allegations and the
prayer for relief. Here, the complaint clearly and expressly alleges the supposed
fraud and deceit in procuring the execution of the deed of sale of the land in question
in favor of the defendants, and the discovery of the said fraud on a day years after
the date of the supposed fraud a and deed. From this it may be gathered that this
allegation and claim was made in order to excuse the apparent neglect or delay in
the filing of the action, a delay involving a period of almost twenty years, from the
date of the deed of sale to the filing of the suit. Then, among the prayers for relief,
is one asking that the deed of sale be declared fraudulent. Another prayer is that
defendants be ordered to execute a deed of conveyance of the lot in favor of
plaintiffs, meaning that at present, defendants are owners of the lot, though by virtue
of a supposed fraudulent deed. From all this, it is obvious, as already stated. that the
action was for the annulment of contract or deed on the ground of fraud, which action
should be filed within four years after the discovery of the
fraud.chanroblesvirtualawlibrary chanrobles virtual law library

It may be that the recovery of title and possession of the lot was the ultimate
objective of plaintiffs, but to attain that goal, they must needs first travel over the
road of relief on the ground of fraud; otherwise even if the present action were to be
regarded as a direct action to recover title and possession, it would, nevertheless, be
futile and could not prosper for the reason that the defendants could always defeat it
by merely presenting the deed of sale, which is good and valid to legalize and justify
the transfer of the land to the defendants, until unnulled unless the action of annul
had been filed within four years after the discovery of the fraud in 1941. So, from
whatever angle we view the case, the claimed of plaintiffs-appellants must
fail.chanroblesvirtualawlibrary chanrobles virtual law library
Lastly, appellants contend that the trial court erred in not applying the provisions of
the new Civil Code. Considering that all the transactions involved in the present case
from the execution of the alleged fraudulent deed and transfer of the possession and
title to the land in favor of the defendant until the filing of the present action,
including the order of dismissal of the case by the trial court, had all taken place
before the new Civil Code took effect, it is clear that the provisions of the said new
Civil Code are not applicable.chanroblesvirtualawlibrary chanrobles virtual law
library

Finding no reversible error in the order appealed from, the same is hereby affirmed
with costs.chanroblesvirtualawlibrary chanrobles virtual law library

Paras, C.J., Feria, Pablo Bengzon, Tuason, Bautista Angelo and Labrador,
JJ.,concur.

[G.R. Nos. 120435. December 22, 1997]

ESTATE OF THE LATE MERCEDES JACOB represented by MERCEDITA

JACOB, DONATO JACOB JR., ERENEO JACOB and LILIAN JACOB
QUINTO, petitioners, vs. COURT OF APPEALS, SPOUSES RAMON R.
TUGBANG and VIRGINIA S. TUGBANG, REGISTER OF DEEDS OF
QUEZON CITY and CITY TREASURER OF QUEZON CITY, respondents.
[G.R. No. 120974. December 22, 1997]

CITY TREASURER OF QUEZON CITY, petitioner vs. COURT OF APPEALS

and BERNARDITA C. TOLENTINO., respondents.

DECISION

BELLOSILLO, J.:

These two (2) petitions are heard jointly by the Court for the reason that they
involve a common issue of jurisdiction over the nature of the action.

G.R. No. 120435

Petitioners allege that in 1981 Mercedes Jacob, registered owner of the land
subject matter hereof and covered by Transfer Certificate of Title No. 39178, left for
the United States.Before she did, she asked her son-in-law Luciano Quinto Jr. to pay
the real estate taxes on her property. However, Luciano Jr. was not allowed to pay
by the City Treasurer's Office as he had no written authorization from her. Luciano
Jr. and his wife Lilian Jacob Quinto attempted several times to pay but they were as
many times refused.

In 1984 respondent City Treasurer of Quezon City sent a notice to Mercedes

Jacob through her daughter Lilian Jacob Quinto that her real estate taxes on the
property were delinquent.Lilian was also informed that the land was already sold at
public auction on 24 August 1983 to private respondent Virginia Tugbang
for P6,800.00 to satisfy the tax delinquency of the land.

Mercedes Jacob came to know of the sale on 6 September 1983 when she
received from respondent City Treasurer a Notice of Sale of Real Property addressed
to her husband.Members of Mercedes' family tried to redeem the property from
Virginia Tugbang but she evaded them until the Final Bill of Sale was issued to her.

On 30 September 1985 Virginia filed a petition for the cancellation of TCT No.
39178 and the issuance of a new certificate of title in her name alleging in par. 4 of
her petition that -

x x x (On) August 27, 1985, the period of redemption on the sold property having
already expired and the registered owner-delinquent taxpayer, Mercedes Jacob, and
any other interested party, did not, within the said period, take any step to redeem
the property and pursue any lawful remedy to impeach the proceedings or to enforce
any lien or claim thereon, thereby allowing the sale to become final and absolute, [1]

thereby disregarding and frustrating the efforts of the Jacobs to redeem the property
after depositing P2,000.00 with the City Treasurer as redemption price. On 3 March
1989 TCT No. 39178 was canceled and TCT No. 81860 was issued in the name of
Virginia Tugbang.

On 17 May 1993 petitioners Mercedita Jacob, Donato Jacob, Jr., Ereneo Jacob
and Lilian Jacob-Quinto, heirs of the late Mercedes Jacob, filed a complaint with the
Regional Trial Court of Quezon City against respondent spouses Ramon R. Tugbang
and Virginia S. Tugbang, docketed as Civil Case No. Q-93-15976, for annulment or
cancellation of the auction sale, the final bill of sale, TCT No. 81860, and for
redemption of the property plus damages. However, the trial court dismissed the
petition purportedly for lack of jurisdiction as the petition was deemed to be -

x x x in reality a petition to annul and set aside the Decision rendered on March 13,
1994 by the Regional Trial Court, Quezon City, Branch 106, canceling petitioner
Mercedes Jacob's TCT No. 39178 x x x x consolidating title to the property covered
thereby in herein private respondent Virginia S. Tugbang, and ordering the issuance
of a new title in her favor. [2]

On 12 October 1994 petitioners filed with us a petition for review on certiorari

under Rule 45 of the Rules of Court which we certified on 9 November 1994 to the
Court of Appeals. The appellate court however dismissed the petition for lack of
merit. Thus this petition for reversal of the decision of the Court of Appeals and for
judgment directing the RTC - Br. 82, Quezon City, to proceed with the trial of Civil
Case No. Q-93-15976.

The petition must be granted. It is axiomatic that the averments of the complaint
determine the nature of the action, hence, the jurisdiction of the
courts. This is because the complaintmust contain a concise statement of the
ultimate facts constituting the plaintiff's cause of action and specify the relief
sought. [3]

A cursory examination of the petition readily shows that it is an action for

reconveyance. The petition states that "petitioners are not after the annulment of the
judgment of the Regional Trial Court, Quezon City, Branch 106. The remedy of
petitioners under the law is an action for reconveyance the jurisdiction of which is
vested in the Regional Trial Court." [4] In Sevilla v. De los Angeles [5] reconveyance
was allowed where the procurement of a transfer certificate of title was made under
circumstances of constructive trust based on fraudulent representations. In the
instant case the complaint alleges that respondent Virginia Tugbang procured a
transfer certificate of title upon her fraudulent representation in her petition for
cancellation of title. This way of acquiring title creates what is called "constructive
trust" in favor of the defrauded party and grants to the latter a right to the
reconveyance of the property. Thus it has been held that if a person obtains legal title
to property by fraud or concealment courts will impress upon the title a so-called
"constructive trust" in favor of the defrauded party. The use of the word "trust" in
this sense is not technically accurate but as courts are agreed in administering the
same remedy in a certain class of frauds as are administered in fraudulent breaches
of trusts, and as courts and the profession have concurred in calling such frauds
constructive trusts, there can be no misapprehension in continuing the same
phraseology, while a change might lead to confusion and misunderstanding. [6]

In Alzua v. Johnson [7] we declared that under our system of pleading it is the
duty of the courts to grant the relief to which the parties are shown to be entitled by
the allegations in their pleadings and the facts proved at the trial, and the mere fact
that they themselves misconstrued the legal effect of the facts thus alleged and
proved will not prevent the court from placing the just construction thereon and
adjudicating the issue accordingly.

As the petition makes out a case for reconveyance and not a mere annulment of
an RTC judgment as viewed under par. (2), Sec. 9, BP Blg. 129, jurisdiction over
the case is clearly vested in the Regional Trial Court of Quezon City as provided in
par. (2), Sec. 19, BP Blg. 129 -

Sec. 19. Jurisdiction in civil cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction: x x x x (2) In all civil actions which involve the title to, or
possession of, real property, or any interest therein, except actions for forcible entry
into and unlawful detainer of lands or buildings, original jurisdiction over which is
conferred upon Metropolitan Trial Courts, Municipal Trial Courts, and Municipal
Circuit Trial Courts x x x x

Moreover, the Regional Trial Court has jurisdiction over the petition as it may
be considered only as a continuation of the original proceeding for cancellation of
title which in view of its non-litigious character is summary in nature. Furthermore,
under Sec. 2 of PD 1529 otherwise known as the Property Registration Decree, the
jurisdiction of the Regional Trial Court sittingas a land registration court is no
longer as circumscribed as it was under the former Land Registration Act (Act 496),
so that now a Regional Trial Court, like the RTC of Quezon City which issued a new
title to respondent Virginia Tugbang in lieu of the old one, has the authority to act
not only on applications for original registration but also over all petitions filed after
original registration of title, with power to hear and determine all questions arising
from such applications or petitions. [8]

As to whether such an action should be granted requires further evidence culled

from a full-blown trial; hence, Civil Case No. Q-93-15976 previously dismissed by
the trial court should be reinstated so that the parties may be able to present their
evidence.

G.R. No. 120974

Alberto Sta. Maria owned a parcel of land covered by TCT No. 68818 which he
sold in 1964 to Teresa L. Valencia who, as a consequence, had the title canceled and
TCT No. 79818 issued in her name. She however failed to have the tax declaration
transferred in her name. Thus she paid the real estate taxes from 1964 to 1978 in the
name of its previous owner Alberto Sta. Maria.

On 20 December 1973 Valencia entered into a contract of sale of the property

on installment with a mortgage in favor of respondent Bernardita
C. Tolentino. However, from 1979 to 1983 Valencia failed to pay the real estate
taxes due on the land. As a result, notices of tax delinquency and intent to sell the
property [9] were sent to Alberto Sta.
 Maria's address which was simply stated as "Olongapo, Zambales." The notices
were then returned to petitioner City Treasurer of Quezon City for a "better complete
address." [10]

In the auction sale on 29 February 1984 the spouses Romeo and Verna Chua
bought the land in question, which was already covered by TCT No. 79818 in the
name of Teresa L. Valencia. On 5 March 1984 a certificate of sale was issued to the
Chua spouses but it showed on its face that the land was still covered by TCT No.
68818 and not TCT No. 79818.Apparently, the Office of the City Treasurer was
unaware that TCT No. 68818 had already been canceled by TCT No.
79818. However, in the Final Bill of Sale issued to the Chua spouses on 15 May
1985 TCT No. 79818 still appeared in the name of Alberto Sta. Maria, the former
owner, [11] so that the vendee spouses lost no time in filing a petition with the
Regional Trial Court of Quezon City for the cancellation of TCT No. 79818 and the
issuance of a new title in their name. On 4 February 1987 the court granted their
petition and TCT No. 357727 was issued in the name of the spouses Romeo and
Verna Chua.

In the meantime, on 2 February 1987, respondent Bernardita C. Tolentino paid

in full the purchase price of the property so that Teresa L. Valencia executed a
deed of absolute sale in her favor. On 2 August 1988, in view of the fire that gutted
the Office of the Register of Deeds of Quezon City, Tolentino filed a petition for
reconstitution of TCT No. 79818.

Sometime in April 1989, as purchasers of the property in the auction sale, the
Chuas demanded delivery of possession from Bernardita C. Tolentino and Teresa L.
Valencia. As a consequence, Tolentino sued for annulment of the auction sale in the
Regional Trial Court of Quezon City. Finding the action to be well taken, the trial
court granted the petition. The Court of Appeals affirmed the court a quo. Hence this
petition for review on certiorari by the City Treasurer of Quezon City under Rule 45
of the Rules of Court.

Petitioner City Treasurer cites Galutira v. Ramones, [12] a decision of the Court
of Appeals, in support of his position that the trial court has no jurisdiction over the
case as it is one for annulment and cancellation of TCT No. 357727 which is vested
in the Court of Appeals pursuant to par. (2), Sec. 9, BP Blg. 129. [13] In Galutira it
was held that "in the law of pleading, courts are called upon to pierce the form and
go into the substance, not to be misled by a false or wrong name given to a pleading
because the title thereof is not controlling and the court should be guided by its
averments x x x x" Apparently the ruling is contrary to petitioner's very own
position. While the complaint of Bernardita C. Tolentino is captioned as one for
annulment of auction sale with damages, it is not an action for annulment of
judgment which should be filed with the Court of Appeals. In fact, from the
allegations in the complaint it can be gathered that a reconveyance was intended by
Tolentino, in which case, jurisdiction is vested in the trial court.

Under Sec. 55 of the Land Regitration Act, as amended by Sec. 53 of PD No.

1529, [14] an original owner of registered land may seek the annulment of the transfer
thereof on the ground of fraud and the proper remedy is reconveyance. However,
such remedy is without prejudice to the rights of an innocent purchaser for value
holding a certificate of title.

As regards the propriety of the nullification of the auction sale in the instant case,
which still remains unresolved, petitioner submits that he had done everything
incumbent upon him to do in proceeding with the auction sale. Besides, not only
was original vendee Valencia remiss in her obligation to secure a new tax declaration
in her name but she likewise failed to pay the real property taxes for 1979 to
1983. Therefore, petitioner City Treasurer of Quezon City reiterates, the validity of
the auction sale should instead be sustained conformably with Estella v.Court of
Appeals. [15]

Section 73 of PD No. 464 provides -

Sec. 73. Advertisement of sale of real property at public auction. - After the
expiration of the year for which the tax is due, the provincial or city treasurer shall
advertise the sale at public auction of the entire delinquent real property, except real
property mentioned in subsection (a) of Section forty hereof, to satisfy all the taxes
and penalties due and the costs of sale. Such advertisement shall be made by posting
a notice for three consecutive weeks at the main entrance of the provincial building
and of all municipal buildings in the province, or at the main entrance of the city or
municipal hall in the case of cities, and in a public and conspicuous place in (the)
barrio or district wherein the property is situated, in English, Spanish and the local
dialect commonly used, and by announcement for at least three market days at the
market by the crier, and, in the discretion of the provincial or city treasurer, by
publication once a week for three consecutive weeks in a newspaper of general
circulation published in the province or city.

The notice, publication, and announcement by crier shall state the amount of the
taxes, penalties and costs of sale; the date, hour, and place of sale, the name of the
taxpayer against whom the tax was assessed; and the kind or nature of property and,
if land, its approximate area, lot number, and location stating the street and block
number, district or barrio, municipality and the province or city where the property
to be sold is situated (italics supplied).

Copy of the notice shall forthwith be sent either by registered mail or by messenger,
or through the barrio captain, to the delinquent taxpayer, at his address as shown in
the tax rolls or property tax recordcards of the municipality or city where
the property is located, or at his residence, if known to said treasurer or barrio
captain; Provided, however, that a return of the proof of service under oath shall be
filedby the person making the service with the provincial or city treasurer
concerned (italics supplied).

There is no dispute that the requirements of law as regards posting of the notice,
publication and announcement by crier have been complied with. [16] The
controversy lies in the failure of petitioner City Treasurer to notify effectively the
delinquent taxpayer who at the time of the auction sale was Teresa L. Valencia.
Apparently, petitioner proceeded on the wrong premise that the property was still
owned by the former registered owner, Alberto Sta. Maria, who sold the property to
Valencia in 1964. In fact, at the time of the auction sale, the property was already
covered by a conditional sale on installment in favor of respondent Bernardita C.
Tolentino. Plainly, at the time of the auction sale, Alberto Sta. Maria who appeared
to have been notified of the auction sale was no longer the registered owner, much
less the delinquent taxpayer.

In ascertaining the identity of the delinquent taxpayer, for purposes of notifying

him of his tax delinquency and the prospect of a distraint and auction of his
delinquent property, petitioner City Treasurer should not have simply relied
on the tax declaration. The property being covered by the Torrens system, it would
have been more prudent for him, which was not difficult to do, to verify from the
Office of the Register of Deeds of Quezon City where the property is situated and as
to who the registered owner was at the time the auction sale was to take place, to
determine who the real delinquent taxpayer was within the purview of the third
paragraph of Sec. 73. For one who is no longer the lawful owner of the land cannot
be considered the "present registered owner" because, apparently, he has already lost
interest in the property, hence is not expected to defend the property from the sale at
auction. The purpose of PD No. 464 is to collect taxes from
the delinquent taxpayer and, logically, one who is no longer the owner of the
property cannot be considered the delinquent taxpayer.

While we understand the earnestness and initiative of local

governments to collect taxes, the same must be collected from the rightful debtors
and not from those who may only appear to be the registered owners in the official
files. Certainly, properties change hands as fast as their owners can, and to deprive
the present owners of their properties by notifying only the previous owners who no
longer have any interest in them will amount not only to inequity and injustice but
even to a violation of their constitutional rights to property and due process. This
interpretation as well as its ratiocination was explained as early as 1946 in Cabrera
v. The Provincial Treasurer of Tayabas [17] where the parties therein seemed to be in
the same predicament as the parties herein.

In Cabrera the notice of auction sale was sent to the declared owner but was
returned "unclaimed." Nevertheless, the auction sale proceeded and the property was
sold to the highest bidder. It turned out that the property had been
previously conveyed by the declared owner to another who, upon learning of the
sale, filed a complaint attacking the validity of the auction sale for lack of notice to
the registered owner, and that although the land remained in the assessment books
in the name of her transferor, she had become its registered owner several years prior
to the auction sale. We resolved the controversy in this manner -

x x x x The appellee was admittedly not notified of the auction sale, and this also
vitiates the proceeding. She is the registered owner of the land and, since
1934, has become liable for the taxes thereon. For all purposes, she is the
delinquent taxpayer 'against whom the taxes were assessed' referred to in
Section 34 of the Commonwealth Act No. 470. It cannot be Nemesio Cabrera
(declared owner) for the latter's obligation to pay taxes ended where the appellee's
liability began (underscoring supplied).

x x x x The sale in favor of the appellant (purchaser at auction sale) cannot bind the
appellee, since the land purportedly conveyed was owned by Nemesio Cabrera, not
by the appellee; and at the time of sale, Nemesio Cabrera had no interest whatsoever
in the land in question that could have passed to the appellant.

The appellee may be criticized for her failure to have the land transferred to her name
in the assessment record. The circumstance, nevertheless, cannot supplant the
absence of notice. Of course, it is the duty of any person acquiring at the time real
property to prepare and submit a tax declaration within sixty days (Commonwealth
Act No. 470, section 12), but it is no less true that when the owner refuses or fail to
make the required declaration, the provincial assessor should himself declare the
property in the name of the defaulting owner (Commonwealth Act No. 470, Sec.
14). In this case, there is absolutely no showing that the appellee
had deliberately failed to make the declaration to defraud the tax officials; and it may
be remarked that there can be no reason why her Torren title, which binds the whole
world, cannot at least charge the Government which had issued it, with notice
thereof x x x x

Forty years later, in Serfino v. Court of Appeals, [18] we reiterated

the Cabrera doctrine and nullified the auction sale because -

x x x x the prescribed procedure in auction sales of property for tax delinquency

being in derogation of property rights should be followed punctiliously. Strict
adherence to the statutes governing tax sales is imperative not only for the protection
of the taxpayers, but also to allay any possible suspicion of collusion between the
buyer and the public officials called upon to enforce such laws. Notice of sale to the
delinquent landowners and to the public in general is an essential and indispensable
requirement of law, the non-fulfillment of which vitiates the sale x x x x A purchaser
of real estate at the tax sale obtains only such title as that held by the taxpayer,
the principle of caveat emptor applies. Where land is sold for delinquency taxes
under the provisions of the Provincial Assessment Law, rights of registered but
undeclared owners of the land are not affected by the proceedings and the sale
conveys only such interest as the person who has declared the property
for taxation has therein.

The principle in Cabrera, reiterated in Serfino, should be, as it still is, considered
valid doctrine today, despite Estella which petitioner invokes as the latest rule on the
matter. Quite significantly, Estella did not make any reference to
the Cabrera and Serfino cases, much less did it pass upon, reverse or modify them;
instead, the Court simply declared -

Under the particular circumstances of the case, we hold that the City Treasurer had
done everything that was legally incumbent upon him. Not only did he send the
pertinent notices to the declared owner, he also caused the mandatory publication of
the notice of public auction in two (2) newspapers of general circulation pursuant to
Section 65 of PD No. 464. The notices were understandably mailed toConcepcion
because as far as the City Treasurer was concerned, she was still the 'declared owner'
since the assessment of the property in question was still in her name. It should be
recalled that while petitioners had promptly secured a new transfer certificate of
title in their name after the 1970 acquisition, they neglected to effect the
necessary change in the tax declaration as then required by (Sec. 12 of
Commonwealth Act No. 470 Assessment Law) and later by P.D. No. 464 x x x
x (italics supplied).

All told, if it were really true that petitioners were never given the opportunity to
protect their rights, they had only themselves to blame for the catastrophe that befell
them. Not having been apprised bypetitioners of a change in ownership of the
subject property, the government was never placed in a position to give
them that opportunity (italics supplied).

In Estella we relied on our ruling in Paguio v. Ruiz [19] where we emphasized the
requirement of declaration by the owner under Sec. 2484 of the Revised
Administrative Code [20]-

x x x x the duty of each person acquiring real estate in the city to make a new
declaration thereof with the advertence that failure to do so shall make the
assessment in the name of the previous owner valid and binding on all persons
interested, and for all purposes, as though the same had been assessed in the name
of its actual owner (italics supplied).

When the property was sold by Sta. Maria to Valencia in 1964 the law applicable
was RA No. 537 [21] which provided for the same requirement under its Sec.
48. [22] However, the law in force at the time of the auction sale on 29 February 1984
was already PD No. 464 [23] which did not contain the aforecited phrase. The new
law, Sec. 11 of PD No. 464, merely states -

Any person who shall transfer real property to another shall notify the assessor of
the province or city wherein the property is situated within sixty (60) days from the
date of such transfer. The notification shall include the particulars of the transfer, the
description of the property alienated and the name and address of the transferee.
 The fact that the pertinent phrase, "'failure to do so shall make the assessment in
the name of the previous owner valid and binding on all persons interested, and for
all purposes, as though the same had been assessed in the name of its actual
owner," found in both RA No. 537 and RA No. 409 was not incorporated in PD No.
464 implies that the assessment of the subject property in 1983 in the name of Sta.
Maria would not bind, much less adversely affect, Valencia. This, in spite of the
non-declaration by Valencia of the property in her name as required by the law, for
there is no longer any statutory waiver of the right to contest assessment by the actual
owner due to mere non-declaration. We can infer from the omission that the
assessment in the name of the previous owner is no longer deemed an assessment in
the name of the actual owner.

It is therefore clear that the delinquent taxpayer referred to under Sec. 72 of PD

No. 464 is the actual owner of the property at the time of the delinquency and mere
compliance by the provincial or city treasurer with Sec. 65 of the decree is no longer
enough. [24] The notification to the right person, i.e., the real owner, is an essential
and indispensable requirement of the law, non-compliance with which renders the
auction sale void.

The registered owner need not be entirely blamed for her failure to transfer the
tax declaration in her name. Section 7 of PD No. 464 directs the assessor, in case the
owner fails to make a return, to list the real estate for taxation and charge the tax
against the true owner if known, and if unknown, then as against the unknown
owner. In this way, a change of ownership may be ascertained. Along the same line
did we rule in Cabrera.

WHEREFORE, the petition in G.R. No. 120435 is GRANTED. The decision

and resolution of respondent Court of Appeals which affirmed the dismissal of the
complaint of petitioners by the RTC-Br. 82, Quezon City, are SET ASIDE and Civil
Case No. Q-93-15976 is REINSTATED. The trial court is directed to hear and
decide this case with deliberate dispatch.

The petition in G.R. No. 120974, on the other hand, is DENIED. The decision
and resolution of respondent Court of Appeals affirming with modification that of
the trial court are AFFIRMED. The public auction sale conducted on 29 February
1984 is declared VOID for lack of notice to the registered owner Teresa L.
Valencia. Transfer Certificate Title No. 357727 and Tax Declaration No. B-091-
01469 in the name of the spouses Romeo and Verna Chua are ANNULLED. The
Register of Deeds of Quezon City is ordered to cancel TCT No. 357727 and issue in
lieu thereof a new one in the name of respondent Bernardita C. Tolentino. Petitioner
City Treasurer of Quezon City is ordered to cancel likewise Tax Declaration No. B-
091-01469 and issue in lieu thereof a new tax declaration in the name of respondent
Bernardita C. Tolentino. The award of attorney's fees is deleted.

SO ORDERED.

RUBEN SAW, DIONISIO SAW, LINA S. CHUA, LUCILA S. RUSTE AND

EVELYN SAW, petitioners,
vs.
HON. COURT OF APPEALS, HON. BERNARDO P. PARDO, Presiding Judge of
Branch 43, (Regional Trial Court of Manila), FREEMAN MANAGEMENT AND
DEVELOPMENT CORPORATION, EQUITABLE BANKING CORPORATION,
FREEMAN INCORPORATED, SAW CHIAO LIAN, THE REGISTER OF
DEEDS OF CALOOCAN CITY, and DEPUTY SHERIFF ROSALIO G.
SIGUA, respondents.

Benito O. Ching, Jr. for petitioners.

William R. Vetor for Equitable Banking Corp.
Pineda, Uy & Janolo for Freeman, Inc. and Saw Chiao.
CRUZ, J.:

A collection suit with preliminary attachment was filed by Equitable Banking

Corporation against Freeman, Inc. and Saw Chiao Lian, its President and General
Manager. The petitioners moved to intervene, alleging that (1) the loan transactions
between Saw Chiao Lian and Equitable Banking Corp. were not approved by the
stockholders representing at least 2/3 of corporate capital; (2) Saw Chiao Lian had
no authority to contract such loans; and (3) there was collusion between the officials
of Freeman, Inc. and Equitable Banking Corp. in securing the loans. The motion to
intervene was denied, and the petitioners appealed to the Court of Appeals.

Meanwhile, Equitable and Saw Chiao Lian entered into a compromise agreement
which they submitted to and was approved by the lower court. But because it was
not complied with, Equitable secured a writ of execution, and two lots owned by
Freeman, Inc. were levied upon and sold at public auction to Freeman Management
and Development Corp.

The Court of Appeals1 sustained the denial of the petitioners' motion for
intervention, holding that "the compromise agreement between Freeman, Inc.,
through its President, and Equitable Banking Corp. will not necessarily prejudice
petitioners whose rights to corporate assets are at most inchoate, prior to the
dissolution of Freeman, Inc. . . . And intervention under Sec. 2, Rule 12 of the
Revised Rules of Court is proper only when one's right is actual, material, direct and
immediate and not simply contingent or expectant."

It also ruled against the petitioners' argument that because they had already filed a
notice of appeal, the trial judge had lost jurisdiction over the case and could no longer
issue the writ of execution.

The petitioners are now before this Court, contending that:

1. The Honorable Court of Appeals erred in holding that the petitioners cannot
intervene in Civil Case No. 88-44404 because their rights as stockholders of
Freeman are merely inchoate and not actual, material, direct and immediate
prior to the dissolution of the corporation;

2. The Honorable Court of Appeals erred in holding that the appeal of the
petitioners in said Civil Case No. 88-44404 was confined only to the order
denying their motion to intervene and did not divest the trial court of its
jurisdiction over the whole case.
The petitioners base their right to intervene for the protection of their interests as
stockholders on Everett v. Asia Banking Corp.2 where it was held:

The well-known rule that shareholders cannot ordinarily sue in equity to

redress wrongs done to the corporation, but that the action must be brought by
the Board of Directors, . . . has its exceptions. (If the corporation [were] under
the complete control of the principal defendants, . . . it is obvious that a
demand upon the Board of Directors to institute action and prosecute the same
effectively would have been useless, and the law does not require litigants to
perform useless acts.

Equitable demurs, contending that the collection suit against Freeman, Inc, and Saw
Chiao Lian is essentially in personam and, as an action against defendants in their
personal capacities, will not prejudice the petitioners as stockholders of the
corporation. The Everett case is not applicable because it involved an action filed by
the minority stockholders where the board of directors refused to bring an action in
behalf of the corporation. In the case at bar, it was Freeman, Inc. that was being sued
by the creditor bank.

Equitable also argues that the subject matter of the intervention falls properly within
the original and exclusive jurisdiction of the Securities and Exchange Commission
under P.D. No. 902-A. In fact, at the time the motion for intervention was filed, there
was pending between Freeman, Inc. and the petitioners SEC Case No. 03577 entitled
"Dissolution, Accounting, Cancellation of Certificate of Registration with
Restraining Order or Preliminary Injunction and Appointment of Receiver." It also
avers in its Comment that the intervention of the petitioners could have only caused
delay and prejudice to the principal parties.

On the second assignment of error, Equitable maintains that the petitioners' appeal
could only apply to the denial of their motion for intervention and not to the main
case because their personality as party litigants had not been recognized by the trial
court.

After examining the issues and arguments of the parties, the Court finds that the
respondent court committed no reversible error in sustaining the denial by the trial
court of the petitioners' motion for intervention.

In the case of Magsaysay-Labrador v. Court of Appeals,3 we ruled as follows:

Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this
Court affirms the respondent court's holding that petitioners herein have no
legal interest in the subject matter in litigation so as to entitle them to intervene
in the proceedings below. In the case of Batama Farmers' Cooperative
Marketing Association, Inc. v. Rosal, we held: "As clearly stated in Section 2
of Rule 12 of the Rules of Court, to be permitted to intervene in a pending
action, the party must have a legal interest in the matter in litigation, or in the
success of either of the parties or an interest against both, or he must be so
situated as to be adversely affected by a distribution or other disposition of the
property in the custody of the court or an officer thereof."

To allow intervention, [a] it must be shown that the movant has legal interest
in the matter in litigation, or otherwise qualified; and [b] consideration must
be given as to whether the adjudication of the rights of the original parties may
be delayed or prejudiced, or whether the intervenor's rights may be protected
in a separate proceeding or not. Both requirements must concur as the first is
not more important than the second.

The interest which entitles a person to intervene in a suit between other parties
must be in the matter in litigation and of such direct and immediate character
that the intervenor will either gain or lose by the direct legal operation and
effect of the judgment. Otherwise, if persons not parties of the action could be
allowed to intervene, proceedings will become unnecessarily complicated,
expensive and interminable. And this is not the policy of the law.

The words "an interest in the subject" mean a direct interest in the cause of
action as pleaded, and which would put the intervenor in a legal position to
litigate a fact alleged in the complaint, without the establishment of which
plaintiff could not recover.

Here, the interest, if it exists at all, of petitioners-movants is indirect,

contingent, remote, conjectural, consequential and collateral. At the very
least, their interest is purely inchoate, or in sheer expectancy of a right in the
management of the corporation and to share in the profits thereof and in the
properties and assets thereof on dissolution, after payment of the corporate
debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the

property of the corporation, it does not vest the owner thereof with any legal
right or title to any of the property, his interest in the corporate property being
equitable or beneficial in nature. Shareholders are in no legal sense the owners
 of corporate property, which is owned by the corporation as a distinct legal
person.

On the second assignment of error, the respondent court correctly noted that the
notice of appeal was filed by the petitioners on October 24, 1988, upon the denial of
their motion to intervene, and the writ of execution was issued by the lower court on
January 30, 1989. The petitioners' appeal could not have concerned the "whole" case
(referring to the decision) because the petitioners "did not appeal the decision as
indeed they cannot because they are not parties to the case despite their being
stockholders of respondent Freeman, Inc." They could only appeal the denial of their
motion for intervention as they were never recognized by the trial court as party
litigants in the main case.

Intervention is "an act or proceeding by which a third person is permitted to become

a party to an action or proceeding between other persons, and which results merely
in the addition of a new party or parties to an original action, for the purpose of
hearing and determining at the same time all conflicting claims which may be made
to the subject matter in litigation.4

It is not an independent proceeding, but an ancillary and supplemental one which, in

the nature of things, unless otherwise provided for by the statute or Rules of Court,
must be in subordination to the main proceeding.5 It may be laid down as a general
rule that an intervenor is limited to the field of litigation open to the original parties.6

In the case at bar, there is no more principal action to be resolved as a writ of

execution had already been issued by the lower court and the claim of Equitable had
already been satisfied. The decision of the lower court had already become final and
in fact had already been enforced. There is therefore no more principal proceeding
in which the petitioners may intervene.

As we held in the case of Barangay Matictic v. Elbinias:7

An intervention has been regarded, as merely "collateral or accessory or

ancillary to the principal action and not an independent proceedings; and
interlocutory proceeding dependent on and subsidiary to, the case between the
original parties." (Fransisco, Rules of Court, Vol. 1, p. 721). With the final
dismissal of the original action, the complaint in intervention can no longer
be acted upon. In the case of Clareza v. Resales, 2 SCRA 455, 457-458, it was
stated that:
 That right of the intervenor should merely be in aid of the right of the
original party, like the plaintiffs in this case. As this right of the
plaintiffs had ceased to exist, there is nothing to aid or fight for. So the
right of intervention has ceased to exist.

Consequently, it will be illogical and of no useful purpose to grant or even

consider further herein petitioner's prayer for the issuance of a writ
of mandamus to compel the lower court to allow and admit the petitioner's
complaint in intervention. The dismissal of the expropriation case has no less
the inherent effect of also dismissing the motion for intervention which is but
the unavoidable consequence.

The Court observes that even with the denial of the petitioners' motion to intervene,
nothing is really lost to them.1âwphi1The denial did not necessarily prejudice them
as their rights are being litigated in the case now before the Securities and Exchange
Commission and may be fully asserted and protected in that separate proceeding.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so

ordered.

Narvasa, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

Republic of the Philippines, petitioner, vs. Sandiganbayan, Major General Josephus

Q. Ramas and Elizabeth Dimaano, respondents.

DECISION
CARPIO, J.:

The Case

Before this Court is a petition for review on certiorari seeking to set aside the
Resolutions of the Sandiganbayan (First Division)[1] dated 18 November 1991 and
25 March 1992 in Civil Case No. 0037. The first Resolution dismissed petitioners
Amended Complaint and ordered the return of the confiscated items to respondent
Elizabeth Dimaano, while the second Resolution denied petitioners Motion for
Reconsideration. Petitioner prays for the grant of the reliefs sought in its Amended
Complaint, or in the alternative, for the remand of this case to the Sandiganbayan
(First Division) for further proceedings allowing petitioner to complete the
presentation of its evidence.

Antecedent Facts

Immediately upon her assumption to office following the successful EDSA

Revolution, then President Corazon C. Aquino issued Executive Order No. 1 (EO
No. 1) creating the Presidential Commission on Good Government (PCGG). EO No.
1 primarily tasked the PCGG to recover all ill-gotten wealth of former President
Ferdinand E. Marcos, his immediate family, relatives, subordinates and close
associates. EO No. 1 vested the PCGG with the power (a) to conduct investigation
as may be necessary in order to accomplish and carry out the purposes of this order
and the power (h) to promulgate such rules and regulations as may be necessary to
carry out the purpose of this order. Accordingly, the PCGG, through its then
Chairman Jovito R. Salonga, created an AFP Anti-Graft Board (AFP Board) tasked
to investigate reports of unexplained wealth and corrupt practices by AFP personnel,
whether in the active service or retired.[2]
Based on its mandate, the AFP Board investigated various reports of alleged
unexplained wealth of respondent Major General Josephus Q. Ramas (Ramas). On
27 July 1987, the AFP Board issued a Resolution on its findings and
recommendation on the reported unexplained wealth of Ramas. The relevant part of
the Resolution reads:

III. FINDINGS and EVALUATION:

Evidence in the record showed that respondent is the owner of a house and lot located
at 15-Yakan St., La Vista, Quezon City. He is also the owner of a house and lot
located in Cebu City. The lot has an area of 3,327 square meters.

The value of the property located in Quezon City may be estimated modestly
at P700,000.00.
The equipment/items and communication facilities which were found in the
premises of Elizabeth Dimaano and were confiscated by elements of the PC
Command of Batangas were all covered by invoice receipt in the name of CAPT.
EFREN SALIDO, RSO Command Coy, MSC, PA. These items could not have been
in the possession of Elizabeth Dimaano if not given for her use by respondent
Commanding General of the Philippine Army.

Aside from the military equipment/items and communications equipment, the

raiding team was also able to confiscate money in the amount of P2,870,000.00 and
$50,000 US Dollars in the house of Elizabeth Dimaano on 3 March 1986.

Affidavits of members of the Military Security Unit, Military Security Command,

Philippine Army, stationed at Camp Eldridge, Los Baos, Laguna, disclosed that
Elizabeth Dimaano is the mistress of respondent. That respondent usually goes and
stays and sleeps in the alleged house of Elizabeth Dimaano in Barangay Tengga,
Itaas, Batangas City and when he arrives, Elizabeth Dimaano embraces and kisses
respondent. That on February 25, 1986, a person who rode in a car went to the
residence of Elizabeth Dimaano with four (4) attache cases filled with money and
owned by MGen Ramas.

Sworn statement in the record disclosed also that Elizabeth Dimaano had no visible
means of income and is supported by respondent for she was formerly a mere
secretary.

Taking in toto the evidence, Elizabeth Dimaano could not have used the military
equipment/items seized in her house on March 3, 1986 without the consent of
respondent, he being the Commanding General of the Philippine Army. It is also
impossible for Elizabeth Dimaano to claim that she owns the P2,870,000.00 and
$50,000 US Dollars for she had no visible source of income.

This money was never declared in the Statement of Assets and Liabilities of
respondent. There was an intention to cover the existence of these money because
these are all ill-gotten and unexplained wealth.Were it not for the affidavits of the
members of the Military Security Unit assigned at Camp Eldridge, Los Baos,
Laguna, the existence and ownership of these money would have never been known.

The Statement of Assets and Liabilities of respondent were also submitted for
scrutiny and analysis by the Boards consultant. Although the amount
of P2,870,000.00 and $50,000 US Dollars were not included, still it was disclosed
that respondent has an unexplained wealth of P104,134. 60.

IV. CONCLUSION:

In view of the foregoing, the Board finds that a prima facie case exists against
respondent for ill-gotten and unexplained wealth in the amount of P2,974,134.00
and $50,000 US Dollars.

V. RECOMMENDATION:

Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted

and tried for violation of RA 3019, as amended, otherwise known as Anti-Graft and
Corrupt Practices Act and RA 1379, as amended, otherwise known as The Act for
the Forfeiture of Unlawfully Acquired Property.[3]

Thus, on 1 August 1987, the PCGG filed a petition for forfeiture under Republic
Act No. 1379 (RA No. 1379) [4] against Ramas.
Before Ramas could answer the petition, then Solicitor General Francisco I.
Chavez filed an Amended Complaint naming the Republic of the Philippines
(petitioner), represented by the PCGG, as plaintiff and Ramas as defendant. The
Amended Complaint also impleaded Elizabeth Dimaano (Dimaano) as co-
defendant.
The Amended Complaint alleged that Ramas was the Commanding General of
the Philippine Army until 1986. On the other hand, Dimaano was a confidential
agent of the Military Security Unit, Philippine Army, assigned as a clerk-typist at
the office of Ramas from 1 January 1978 to February 1979. The Amended
Complaint further alleged that Ramas acquired funds, assets and properties
manifestly out of proportion to his salary as an army officer and his other income
from legitimately acquired property by taking undue advantage of his public office
and/or using his power, authority and influence as such officer of the Armed Forces
of the Philippines and as a subordinate and close associate of the deposed President
Ferdinand Marcos.[5]
The Amended Complaint also alleged that the AFP Board, after a previous
inquiry, found reasonable ground to believe that respondents have violated RA No.
1379.[6] The Amended Complaint prayed for, among others, the forfeiture of
respondents properties, funds and equipment in favor of the State.
 Ramas filed an Answer with Special and/or Affirmative Defenses and
Compulsory Counterclaim to the Amended Complaint. In his Answer, Ramas
contended that his property consisted only of a residential house at La Vista
Subdivision, Quezon City, valued at P700,000, which was not out of proportion to
his salary and other legitimate income. He denied ownership of any mansion in Cebu
City and the cash, communications equipment and other items confiscated from the
house of Dimaano.
Dimaano filed her own Answer to the Amended Complaint. Admitting her
employment as a clerk-typist in the office of Ramas from January-November 1978
only, Dimaano claimed ownership of the monies, communications equipment,
jewelry and land titles taken from her house by the Philippine Constabulary raiding
team.
After termination of the pre-trial,[7] the court set the case for trial on the merits
on 9-11 November 1988.
On 9 November 1988, petitioner asked for a deferment of the hearing due to its
lack of preparation for trial and the absence of witnesses and vital documents to
support its case. The court reset the hearing to 17 and 18 April 1989.
On 13 April 1989, petitioner filed a motion for leave to amend the complaint in
order to charge the delinquent properties with being subject to forfeiture as having
been unlawfully acquired by defendant Dimaano alone x x x.[8]
Nevertheless, in an order dated 17 April 1989, the Sandiganbayan proceeded
with petitioners presentation of evidence on the ground that the motion for leave to
amend complaint did not state when petitioner would file the amended
complaint. The Sandiganbayan further stated that the subject matter of the amended
complaint was on its face vague and not related to the existing complaint. The
Sandiganbayan also held that due to the time that the case had been pending in court,
petitioner should proceed to present its evidence.
After presenting only three witnesses, petitioner asked for a postponement of the
trial.
On 28 September 1989, during the continuation of the trial, petitioner manifested
its inability to proceed to trial because of the absence of other witnesses or lack of
further evidence to present. Instead, petitioner reiterated its motion to amend the
complaint to conform to the evidence already presented or to change the averments
to show that Dimaano alone unlawfully acquired the monies or properties subject of
the forfeiture.
The Sandiganbayan noted that petitioner had already delayed the case for over a
year mainly because of its many postponements. Moreover, petitioner would want
the case to revert to its preliminary stage when in fact the case had long been ready
for trial. The Sandiganbayan ordered petitioner to prepare for presentation of its
additional evidence, if any.
During the trial on 23 March 1990, petitioner again admitted its inability to
present further evidence. Giving petitioner one more chance to present further
evidence or to amend the complaint to conform to its evidence, the Sandiganbayan
reset the trial to 18 May 1990. The Sandiganbayan, however, hinted that the re-
setting was without prejudice to any action that private respondents might take under
the circumstances.
However, on 18 May 1990, petitioner again expressed its inability to proceed to
trial because it had no further evidence to present. Again, in the interest of justice,
the Sandiganbayan granted petitioner 60 days within which to file an appropriate
pleading. The Sandiganbayan, however, warned petitioner that failure to act would
constrain the court to take drastic action.
Private respondents then filed their motions to dismiss based on Republic v.
Migrino.[9] The Court held in Migrino that the PCGG does not have jurisdiction to
investigate and prosecute military officers by reason of mere position held without
a showing that they are subordinates of former President Marcos.
On 18 November 1991, the Sandiganbayan rendered a resolution, the dispositive
portion of which states:

WHEREFORE, judgment is hereby rendered dismissing the Amended Complaint,

without pronouncement as to costs. The counterclaims are likewise dismissed for
lack of merit, but the confiscated sum of money, communications equipment,
jewelry and land titles are ordered returned to Elizabeth Dimaano.
The records of this case are hereby remanded and referred to the Hon. Ombudsman,
who has primary jurisdiction over the forfeiture cases under R.A. No. 1379, for such
appropriate action as the evidence warrants. This case is also referred to the
Commissioner of the Bureau of Internal Revenue for a determination of any tax
liability of respondent Elizabeth Dimaano in connection herewith.
SO ORDERED.

On 4 December 1991, petitioner filed its Motion for Reconsideration.

In answer to the Motion for Reconsideration, private respondents filed a Joint
Comment/Opposition to which petitioner filed its Reply on 10 January 1992.
On 25 March 1992, the Sandiganbayan rendered a Resolution denying the
Motion for Reconsideration.

Ruling of the Sandiganbayan

The Sandiganbayan dismissed the Amended Complaint on the following

grounds:

(1.) The actions taken by the PCGG are not in accordance with the rulings of the
Supreme Court in Cruz, Jr. v. Sandiganbayan[10] and Republic v.
Migrino[11] which involve the same issues.

(2.) No previous inquiry similar to preliminary investigations in criminal cases

was conducted against Ramas and Dimaano.

(3.) The evidence adduced against Ramas does not constitute a prima facie case
against him.

(4.) There was an illegal search and seizure of the items confiscated.

The Issues

Petitioner raises the following issues:

A. RESPONDENT COURT SERIOUSLY ERRED IN
CONCLUDING THAT PETITIONERS EVIDENCE
CANNOT MAKE A CASE FOR FORFEITURE AND
THAT THERE WAS NO SHOWING OF CONSPIRACY,
COLLUSION OR RELATIONSHIP BY
CONSANGUINITY OR AFFINITY BY AND BETWEEN
RESPONDENT RAMAS AND RESPONDENT
 DIMAANO NOTWITHSTANDING THE FACT THAT
SUCH CONCLUSIONS WERE CLEARLY UNFOUNDED
AND PREMATURE, HAVING BEEN RENDERED
PRIOR TO THE COMPLETION OF THE
PRESENTATION OF THE EVIDENCE OF THE
PETITIONER.
B. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING
THAT THE ACTIONS TAKEN BY THE PETITIONER,
INCLUDING THE FILING OF THE ORIGINAL
COMPLAINT AND THE AMENDED COMPLAINT,
SHOULD BE STRUCK OUT IN LINE WITH THE
RULINGS OF THE SUPREME COURT IN CRUZ, JR. v.
SANDIGANBAYAN, 194 SCRA 474 AND REPUBLIC v.
MIGRINO, 189 SCRA 289, NOTWITHSTANDING THE
FACT THAT:

1. The cases of Cruz, Jr. v. Sandiganbayan, supra, and Republic

v. Migrino, supra, are clearly not applicable to this case;

2. Any procedural defect in the institution of the complaint in

Civil Case No. 0037 was cured and/or waived by
respondents with the filing of their respective answers
with counterclaim; and

3. The separate motions to dismiss were evidently improper

considering that they were filed after commencement of
the presentation of the evidence of the petitioner and even
before the latter was allowed to formally offer its evidence
and rest its case;

C. RESPONDENT COURT SERIOUSLY ERRED IN HOLDING

THAT THE ARTICLES AND THINGS SUCH AS SUMS
OF MONEY, COMMUNICATIONS EQUIPMENT,
JEWELRY AND LAND TITLES CONFISCATED FROM
THE HOUSE OF RESPONDENT DIMAANO WERE
ILLEGALLY SEIZED AND THEREFORE EXCLUDED
AS EVIDENCE.[12]
The Courts Ruling

First Issue: PCGGs Jurisdiction to Investigate Private Respondents

This case involves a revisiting of an old issue already decided by this Court
in Cruz, Jr. v. Sandiganbayan[13] and Republic v. Migrino.[14]
The primary issue for resolution is whether the PCGG has the jurisdiction to
investigate and cause the filing of a forfeiture petition against Ramas and Dimaano
for unexplained wealth under RA No. 1379.
We hold that PCGG has no such jurisdiction.
The PCGG created the AFP Board to investigate the unexplained wealth and
corrupt practices of AFP personnel, whether in the active service or retired.[15] The
PCGG tasked the AFP Board to make the necessary recommendations to appropriate
government agencies on the action to be taken based on its findings.[16] The PCGG
gave this task to the AFP Board pursuant to the PCGGs power under Section 3 of
EO No. 1 to conduct investigation as may be necessary in order to accomplish and
to carry out the purposes of this order. EO No. 1 gave the PCGG specific
responsibilities, to wit:

SEC. 2. The Commission shall be charged with the task of assisting the President in
regard to the following matters:

(a) The recovery of all ill-gotten wealth accumulated by former President

Ferdinand E. Marcos, his immediate family, relatives, subordinates
and close associates, whether located in the Philippines or abroad,
including the takeover and sequestration of all business enterprises
and entities owned or controlled by them, during his administration,
directly or through nominees, by taking undue advantage of their
public office and/ or using their powers, authority, influence,
connections or relationship.

(b) The investigation of such cases of graft and corruption as the President
may assign to the Commission from time to time.

x x x.
 The PCGG, through the AFP Board, can only investigate the unexplained wealth
and corrupt practices of AFP personnel who fall under either of the two categories
mentioned in Section 2 of EO No. 1. These are: (1) AFP personnel who have
accumulated ill-gotten wealth during the administration of former President Marcos
by being the latters immediate family, relative, subordinate or close associate, taking
undue advantage of their public office or using their powers, influence x x x; [17] or
(2) AFP personnel involved in other cases of graft and corruption provided the
President assigns their cases to the PCGG.[18]
Petitioner, however, does not claim that the President assigned Ramas case to
the PCGG. Therefore, Ramas case should fall under the first category of AFP
personnel before the PCGG could exercise its jurisdiction over him. Petitioner
argues that Ramas was undoubtedly a subordinate of former President Marcos
because of his position as the Commanding General of the Philippine
Army. Petitioner claims that Ramas position enabled him to receive orders directly
from his commander-in-chief, undeniably making him a subordinate of former
President Marcos.
We hold that Ramas was not a subordinate of former President Marcos in the
sense contemplated under EO No. 1 and its amendments.
Mere position held by a military officer does not automatically make him a
subordinate as this term is used in EO Nos. 1, 2, 14 and 14-A absent a showing that
he enjoyed close association with former President Marcos. Migrino discussed this
issue in this wise:

A close reading of EO No. 1 and related executive orders will readily show what is
contemplated within the term subordinate. The Whereas Clauses of EO No. 1
express the urgent need to recover the ill-gotten wealth amassed by former President
Ferdinand E. Marcos, his immediate family, relatives, and close associates both here
and abroad.

EO No. 2 freezes all assets and properties in the Philippines in which former
President Marcos and/or his wife, Mrs. Imelda Marcos, their close relatives,
subordinates, business associates, dummies, agents, or nominees have any interest
or participation.

Applying the rule in statutory construction known as ejusdem generis that is-
[W]here general words follow an enumeration of persons or things by words of a
particular and specific meaning, such general words are not to be construed in their
widest extent, but are to be held as applying only to persons or things of the same
kind or class as those specifically mentioned [Smith, Bell & Co, Ltd. vs. Register of
Deeds of Davao, 96 Phil. 53, 58, citing Black on Interpretation of Laws, 2 ndEd., 203].

[T]he term subordinate as used in EO Nos. 1 & 2 refers to one who enjoys a close
association with former President Marcos and/or his wife, similar to the immediate
family member, relative, and close associate in EO No. 1 and the close relative,
business associate, dummy, agent, or nominee in EO No. 2.

xxx

It does not suffice, as in this case, that the respondent is or was a government official
or employee during the administration of former President Marcos. There must be a
prima facie showing that the respondent unlawfully accumulated wealth by virtue of
his close association or relation with former Pres. Marcos and/or his wife. (Emphasis
supplied)

Ramas position alone as Commanding General of the Philippine Army with the
rank of Major General[19] does not suffice to make him a subordinate of former
President Marcos for purposes of EO No. 1 and its amendments. The PCGG has to
provide a prima facie showing that Ramas was a close associate of former President
Marcos, in the same manner that business associates, dummies, agents or nominees
of former President Marcos were close to him. Such close association is manifested
either by Ramas complicity with former President Marcos in the accumulation of ill-
gotten wealth by the deposed President or by former President Marcos acquiescence
in Ramas own accumulation of ill-gotten wealth if any.
This, the PCGG failed to do.
Petitioners attempt to differentiate the instant case from Migrino does not
convince us. Petitioner argues that unlike in Migrino, the AFP Board Resolution in
the instant case states that the AFP Board conducted the investigation pursuant to
EO Nos. 1, 2, 14 and 14-A in relation to RA No. 1379. Petitioner asserts that there
is a presumption that the PCGG was acting within its jurisdiction of investigating
crony-related cases of graft and corruption and that Ramas was truly a subordinate
of the former President. However, the same AFP Board Resolution belies this
contention. Although the Resolution begins with such statement, it ends with the
following recommendation:

V. RECOMMENDATION:

Wherefore it is recommended that Maj. Gen. Josephus Q. Ramas (ret.) be prosecuted

and tried for violation of RA 3019, as amended, otherwise known as Anti-Graft and
Corrupt Practices Act and RA 1379, as amended, otherwise known as The Act for
the Forfeiture of Unlawfully Acquired Property.[20]

Thus, although the PCGG sought to investigate and prosecute private respondents
under EO Nos. 1, 2, 14 and 14-A, the result yielded a finding of violation of Republic
Acts Nos. 3019 and 1379 without any relation to EO Nos. 1, 2, 14 and 14-A. This
absence of relation to EO No. 1 and its amendments proves fatal to petitioners case.
EO No. 1 created the PCGG for a specific and limited purpose, and necessarily its
powers must be construed to address such specific and limited purpose.
Moreover, the resolution of the AFP Board and even the Amended Complaint
do not show that the properties Ramas allegedly owned were accumulated by him in
his capacity as a subordinate of his commander-in-chief. Petitioner merely
enumerated the properties Ramas allegedly owned and suggested that these
properties were disproportionate to his salary and other legitimate income without
showing that Ramas amassed them because of his close association with former
President Marcos. Petitioner, in fact, admits that the AFP Board resolution does not
contain a finding that Ramas accumulated his wealth because of his close association
with former President Marcos, thus:

10. While it is true that the resolution of the Anti-Graft Board of the New Armed
Forces of the Philippines did not categorically find a prima facie evidence showing
that respondent Ramas unlawfully accumulated wealth by virtue of his close
association or relation with former President Marcos and/or his wife, it is submitted
that such omission was not fatal. The resolution of the Anti-Graft Board should be
read in the context of the law creating the same and the objective of the investigation
which was, as stated in the above, pursuant to Republic Act Nos. 3019 and 1379 in
relation to Executive Order Nos. 1, 2, 14 and 14-a;[21] (Emphasis supplied)

Such omission is fatal. Petitioner forgets that it is precisely a prima

facie showing that the ill-gotten wealth was accumulated by a subordinate of former
President Marcos that vests jurisdiction on PCGG. EO No. 1[22] clearly premises the
creation of the PCGG on the urgent need to recover all ill-gotten wealth amassed by
former President Marcos, his immediate family, relatives, subordinates and close
associates. Therefore, to say that such omission was not fatal is clearly contrary to
the intent behind the creation of the PCGG.
In Cruz, Jr. v. Sandiganbayan,[23] the Court outlined the cases that fall under the
jurisdiction of the PCGG pursuant to EO Nos. 1, 2,[24] 14,[25] 14-A:[26]

A careful reading of Sections 2(a) and 3 of Executive Order No. 1 in relation with
Sections 1, 2 and 3 of Executive Order No. 14, shows what the authority of the
respondent PCGG to investigate and prosecute covers:

(a) the investigation and prosecution of the civil action for the recovery of
ill-gotten wealth under Republic Act No. 1379, accumulated by former
President Marcos, his immediate family, relatives, subordinates and
close associates, whether located in the Philippines or abroad, including
the take-over or sequestration of all business enterprises and entities
owned or controlled by them, during his administration, directly or
through his nominees, by taking undue advantage of their public office
and/or using their powers, authority and influence, connections or
relationships; and

(b) the investigation and prosecution of such offenses committed in the

acquisition of said ill-gotten wealth as contemplated under Section 2(a)
of Executive Order No. 1.

However, other violations of the Anti-Graft and Corrupt Practices Act not otherwise
falling under the foregoing categories, require a previous authority of the President
for the respondent PCGG to investigate and prosecute in accordance with Section 2
(b) of Executive Order No. 1. Otherwise, jurisdiction over such cases is vested in the
Ombudsman and other duly authorized investigating agencies such as the provincial
and city prosecutors, their assistants, the Chief State Prosecutor and his assistants
and the state prosecutors. (Emphasis supplied)

The proper government agencies, and not the PCGG, should investigate and
prosecute forfeiture petitions not falling under EO No. 1 and its amendments. The
preliminary investigation of unexplained wealth amassed on or before 25 February
1986 falls under the jurisdiction of the Ombudsman, while the authority to file the
corresponding forfeiture petition rests with the Solicitor General.[27] The
Ombudsman Act or Republic Act No. 6770 (RA No. 6770) vests in the Ombudsman
the power to conduct preliminary investigation and to file forfeiture proceedings
involving unexplained wealth amassed after 25 February 1986.[28]
After the pronouncements of the Court in Cruz, the PCGG still pursued this case
despite the absence of a prima facie finding that Ramas was a subordinate of former
President Marcos. The petition for forfeiture filed with the Sandiganbayan should be
dismissed for lack of authority by the PCGG to investigate respondents since there
is no prima facie showing that EO No. 1 and its amendments apply to respondents.
The AFP Board Resolution and even the Amended Complaint state that there are
violations of RA Nos. 3019 and 1379. Thus, the PCGG should have recommended
Ramas case to the Ombudsman who has jurisdiction to conduct the preliminary
investigation of ordinary unexplained wealth and graft cases. As stated in Migrino:

[But] in view of the patent lack of authority of the PCGG to investigate and cause
the prosecution of private respondent for violation of Rep. Acts Nos. 3019 and 1379,
the PCGG must also be enjoined from proceeding with the case, without prejudice
to any action that may be taken by the proper prosecutory agency. The rule of law
mandates that an agency of government be allowed to exercise only the powers
granted to it.

Petitioners argument that private respondents have waived any defect in the
filing of the forfeiture petition by submitting their respective Answers with
counterclaim deserves no merit as well.
Petitioner has no jurisdiction over private respondents. Thus, there is no
jurisdiction to waive in the first place. The PCGG cannot exercise investigative or
prosecutorial powers never granted to it. PCGGs powers are specific and
limited. Unless given additional assignment by the President, PCGGs sole task is
only to recover the ill-gotten wealth of the Marcoses, their relatives and
cronies.[29] Without these elements, the PCGG cannot claim jurisdiction over a case.
Private respondents questioned the authority and jurisdiction of the PCGG to
investigate and prosecute their cases by filing their Motion to Dismiss as soon as
they learned of the pronouncement of the Court in Migrino. This case was decided
on 30 August 1990, which explains why private respondents only filed their Motion
to Dismiss on 8 October 1990.Nevertheless, we have held that the parties may raise
lack of jurisdiction at any stage of the proceeding.[30] Thus, we hold that there was
no waiver of jurisdiction in this case. Jurisdiction is vested by law and not by the
parties to an action.[31]
Consequently, the petition should be dismissed for lack of jurisdiction by the
PCGG to conduct the preliminary investigation. The Ombudsman may still conduct
the proper preliminary investigation for violation of RA No. 1379, and if warranted,
the Solicitor General may file the forfeiture petition with the Sandiganbayan.[32] The
right of the State to forfeit unexplained wealth under RA No. 1379 is not subject to
prescription, laches or estoppel.[33]

Second Issue: Propriety of Dismissal of Case

Before Completion of Presentation of Evidence

Petitioner also contends that the Sandiganbayan erred in dismissing the case
before completion of the presentation of petitioners evidence.
We disagree.
Based on the findings of the Sandiganbayan and the records of this case, we find
that petitioner has only itself to blame for non-completion of the presentation of its
evidence. First, this case has been pending for four years before the Sandiganbayan
dismissed it. Petitioner filed its Amended Complaint on 11
August 1987, and only began to present its evidence on 17 April 1989. Petitioner
had almost two years to prepare its evidence. However, despite this sufficient time,
petitioner still delayed the presentation of the rest of its evidence by filing numerous
motions for postponements and extensions. Even before the date set for the
presentation of its evidence, petitioner filed, on 13 April 1989, a Motion for Leave
to Amend the Complaint.[34]The motion sought to charge the delinquent properties
(which comprise most of petitioners evidence) with being subject to forfeiture as
having been unlawfully acquired by defendant Dimaano alone x x x.
The Sandiganbayan, however, refused to defer the presentation of petitioners
evidence since petitioner did not state when it would file the amended complaint. On
18 April 1989, the Sandiganbayan set the continuation of the presentation of
evidence on 28-29 September and 9-11 October 1989, giving petitioner ample time
to prepare its evidence. Still, on 28 September 1989, petitioner manifested its
inability to proceed with the presentation of its evidence. The Sandiganbayan issued
an Order expressing its view on the matter, to wit:

The Court has gone through extended inquiry and a narration of the above events
because this case has been ready for trial for over a year and much of the delay
hereon has been due to the inability of the government to produce on scheduled dates
for pre-trial and for trial documents and witnesses, allegedly upon the failure of the
military to supply them for the preparation of the presentation of evidence
thereon. Of equal interest is the fact that this Court has been held to task in public
about its alleged failure to move cases such as this one beyond the preliminary stage,
when, in view of the developments such as those of today, this Court is now faced
with a situation where a case already in progress will revert back to the preliminary
stage, despite a five-month pause where appropriate action could have been
undertaken by the plaintiff Republic.[35]

On 9 October 1989, the PCGG manifested in court that it was conducting a

preliminary investigation on the unexplained wealth of private respondents as
mandated by RA No. 1379.[36]The PCGG prayed for an additional four months to
conduct the preliminary investigation. The Sandiganbayan granted this request and
scheduled the presentation of evidence on 26-29 March 1990. However, on the
scheduled date, petitioner failed to inform the court of the result of the preliminary
investigation the PCGG supposedly conducted. Again, the Sandiganbayan gave
petitioner until 18 May 1990 to continue with the presentation of its evidence and to
inform the court of what lies ahead insofar as the status of the case is concerned x x
x.[37] Still on the date set, petitioner failed to present its evidence. Finally, on 11 July
1990, petitioner filed its Re-Amended Complaint.[38] The Sandiganbayan correctly
observed that a case already pending for years would revert to its preliminary stage
if the court were to accept the Re-Amended Complaint.
Based on these circumstances, obviously petitioner has only itself to blame for
failure to complete the presentation of its evidence. The Sandiganbayan gave
petitioner more than sufficient time to finish the presentation of its evidence. The
Sandiganbayan overlooked petitioners delays and yet petitioner ended the long-
string of delays with the filing of a Re-Amended Complaint, which would only
prolong even more the disposition of the case.
Moreover, the pronouncements of the Court in Migrino and Cruz prompted the
Sandiganbayan to dismiss the case since the PCGG has no jurisdiction to investigate
and prosecute the case against private respondents. This alone would have been
sufficient legal basis for the Sandiganbayan to dismiss the forfeiture case against
private respondents.
Thus, we hold that the Sandiganbayan did not err in dismissing the case before
completion of the presentation of petitioners evidence.

Third Issue: Legality of the Search and Seizure

Petitioner claims that the Sandiganbayan erred in declaring the properties

confiscated from Dimaanos house as illegally seized and therefore inadmissible in
evidence. This issue bears a significant effect on petitioners case since these
properties comprise most of petitioners evidence against private respondents.
Petitioner will not have much evidence to support its case against private
respondents if these properties are inadmissible in evidence.
On 3 March 1986, the Constabulary raiding team served at Dimaanos residence
a search warrant captioned Illegal Possession of Firearms and
Ammunition. Dimaano was not present during the raid but Dimaanos cousins
witnessed the raid. The raiding team seized the items detailed in the seizure receipt
together with other items not included in the search warrant. The raiding team seized
these items: one baby armalite rifle with two magazines; 40 rounds of 5.56
ammunition; one pistol, caliber .45; communications equipment, cash consisting
of P2,870,000 and US$50,000, jewelry, and land titles.
Petitioner wants the Court to take judicial notice that the raiding team conducted
the search and seizure on March 3, 1986 or five days after the successful EDSA
revolution.[39]Petitioner argues that a revolutionary government was operative at that
time by virtue of Proclamation No. 1 announcing that President Aquino and Vice
President Laurel were taking power in the name and by the will of the Filipino
people.[40] Petitioner asserts that the revolutionary government effectively withheld
the operation of the 1973 Constitution which guaranteed private respondents
exclusionary right.
Moreover, petitioner argues that the exclusionary right arising from an illegal
search applies only beginning 2 February 1987, the date of ratification of the 1987
Constitution. Petitioner contends that all rights under the Bill of Rights had already
reverted to its embryonic stage at the time of the search. Therefore, the government
may confiscate the monies and items taken from Dimaano and use the same in
evidence against her since at the time of their seizure, private respondents did not
enjoy any constitutional right.
Petitioner is partly right in its arguments.
The EDSA Revolution took place on 23-25 February 1986. As succinctly stated
in President Aquinos Proclamation No. 3 dated 25 March 1986, the EDSA
Revolution was done in defiance of the provisions of the 1973 Constitution.[41] The
resulting government was indisputably a revolutionary government bound by no
constitution or legal limitations except treaty obligations that the revolutionary
government, as the de jure government in the Philippines, assumed under
international law.
The correct issues are: (1) whether the revolutionary government was bound by
the Bill of Rights of the 1973 Constitution during the interregnum, that is, after the
actual and effective take-over of power by the revolutionary government following
the cessation of resistance by loyalist forces up to 24 March 1986 (immediately
before the adoption of the Provisional Constitution); and (2) whether the protection
accorded to individuals under the International Covenant on Civil and Political
Rights (Covenant) and the Universal Declaration of Human Rights (Declaration)
remained in effect during the interregnum.
We hold that the Bill of Rights under the 1973 Constitution was not operative
during the interregnum. However, we rule that the protection accorded to individuals
under the Covenant and the Declaration remained in effect during the interregnum.
During the interregnum, the directives and orders of the revolutionary
government were the supreme law because no constitution limited the extent and
scope of such directives and orders. With the abrogation of the 1973 Constitution by
the successful revolution, there was no municipal law higher than the directives and
orders of the revolutionary government. Thus, during the interregnum, a person
could not invoke any exclusionary right under a Bill of Rights because there was
neither a constitution nor a Bill of Rights during the interregnum. As the Court
explained in Letter of Associate Justice Reynato S. Puno:[42]

A revolution has been defined as the complete overthrow of the established

government in any country or state by those who were previously subject to it or as
a sudden, radical and fundamental change in the government or political system,
usually effected with violence or at least some acts of violence. In Kelsen's book,
General Theory of Law and State, it is defined as that which occurs whenever the
legal order of a community is nullified and replaced by a new order . . . a way not
prescribed by the first order itself.

It was through the February 1986 revolution, a relatively peaceful one, and more
popularly known as the people power revolution that the Filipino people tore
themselves away from an existing regime. This revolution also saw the
unprecedented rise to power of the Aquino government.

From the natural law point of view, the right of revolution has been defined as an
inherent right of a people to cast out their rulers, change their policy or effect radical
reforms in their system of government or institutions by force or a general uprising
when the legal and constitutional methods of making such change have proved
inadequate or are so obstructed as to be unavailable. It has been said that the locus
of positive law-making power lies with the people of the state and from there is
derived the right of the people to abolish, to reform and to alter any existing form of
government without regard to the existing constitution.

xxx

It is widely known that Mrs. Aquinos rise to the presidency was not due to
constitutional processes; in fact, it was achieved in violation of the provisions of the
1973 Constitution as a Batasang Pambansa resolution had earlier declared Mr.
Marcos as the winner in the 1986 presidential election. Thus it can be said that the
organization of Mrs. Aquinos Government which was met by little resistance and
her control of the state evidenced by the appointment of the Cabinet and other key
officers of the administration, the departure of the Marcos Cabinet officials, revamp
of the Judiciary and the Military signaled the point where the legal system then in
effect, had ceased to be obeyed by the Filipino. (Emphasis supplied)

To hold that the Bill of Rights under the 1973 Constitution remained operative
during the interregnum would render void all sequestration orders issued by the
Philippine Commission on Good Government (PCGG) before the adoption of the
Freedom Constitution. The sequestration orders, which direct the freezing and even
the take-over of private property by mere executive issuance without judicial action,
would violate the due process and search and seizure clauses of the Bill of Rights.
 During the interregnum, the government in power was concededly a
revolutionary government bound by no constitution. No one could validly question
the sequestration orders as violative of the Bill of Rights because there was no Bill
of Rights during the interregnum. However, upon the adoption of the Freedom
Constitution, the sequestered companies assailed the sequestration orders as contrary
to the Bill of Rights of the Freedom Constitution.
In Bataan Shipyard & Engineering Co. Inc. vs. Presidential Commission on
Good Government,[43] petitioner Baseco, while conceding there was no Bill of
Rights during the interregnum, questioned the continued validity of the sequestration
orders upon adoption of the Freedom Constitution in view of the due process clause
in its Bill of Rights. The Court ruled that the Freedom Constitution, and later the
1987 Constitution, expressly recognized the validity of sequestration orders, thus:

If any doubt should still persist in the face of the foregoing considerations as to the
validity and propriety of sequestration, freeze and takeover orders, it should be
dispelled by the fact that these particular remedies and the authority of the PCGG to
issue them have received constitutional approbation and sanction. As already
mentioned, the Provisional or Freedom Constitution recognizes the power and duty
of the President to enact measures to achieve the mandate of the people to . . .
(r)ecover ill-gotten properties amassed by the leaders and supporters of the previous
regime and protect the interest of the people through orders of sequestration or
freezing of assets or accounts. And as also already adverted to, Section 26, Article
XVIII of the 1987 Constitution treats of, and ratifies the authority to issue
sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986.

The framers of both the Freedom Constitution and the 1987 Constitution were
fully aware that the sequestration orders would clash with the Bill of Rights. Thus,
the framers of both constitutions had to include specific language recognizing the
validity of the sequestration orders. The following discourse by Commissioner
Joaquin G. Bernas during the deliberations of the Constitutional Commission is
instructive:

FR. BERNAS: Madam President, there is something schizophrenic about the

arguments in defense of the present amendment.
For instance, I have carefully studied Minister Salongas lecture in the
Gregorio Araneta University Foundation, of which all of us have been given
a copy. On the one hand, he argues that everything the Commission is doing
is traditionally legal. This is repeated by Commissioner Romulo also.
Minister Salonga spends a major portion of his lecture developing that
argument. On the other hand, almost as an afterthought, he says that in the
end what matters are the results and not the legal niceties, thus suggesting
that the PCGG should be allowed to make some legal shortcuts, another word
for niceties or exceptions.
Now, if everything the PCGG is doing is legal, why is it asking the
CONCOM for special protection? The answer is clear. What they are doing
will not stand the test of ordinary due process, hence they are asking for
protection, for exceptions. Grandes malos, grandes remedios, fine, as the
saying stands, but let us not say grandes malos, grande y malos remedios.
That is not an allowable extrapolation. Hence, we should not give the
exceptions asked for, and let me elaborate and give three reasons:
First, the whole point of the February Revolution and of the work of the
CONCOM is to hasten constitutional normalization. Very much at the heart
of the constitutional normalization is the full effectivity of the Bill of Rights.
We cannot, in one breath, ask for constitutional normalization and at the
same time ask for a temporary halt to the full functioning of what is at the
heart of constitutionalism. That would be hypocritical; that would be a
repetition of Marcosian protestation of due process and rule of law. The New
Society word for that is backsliding. It is tragic when we begin to backslide
even before we get there.
Second, this is really a corollary of the first. Habits tend to become ingrained.
The committee report asks for extraordinary exceptions from the Bill of
Rights for six months after the convening of Congress, and Congress may
even extend this longer.
Good deeds repeated ripen into virtue; bad deeds repeated become vice.
What the committee report is asking for is that we should allow the new
government to acquire the vice of disregarding the Bill of Rights.
Vices, once they become ingrained, become difficult to shed. The
practitioners of the vice begin to think that they have a vested right to its
practice, and they will fight tooth and nail to keep the franchise. That would
be an unhealthy way of consolidating the gains of a democratic revolution.
 Third, the argument that what matters are the results and not the legal niceties
is an argument that is very disturbing. When it comes from a staunch
Christian like Commissioner Salonga, a Minister, and repeated verbatim by
another staunch Christian like Commissioner Tingson, it becomes doubly
disturbing and even discombobulating. The argument makes the PCGG an
auctioneer, placing the Bill of Rights on the auction block. If the price is
right, the search and seizure clause will be sold. Open your Swiss bank
account to us and we will award you the search and seizure clause. You can
keep it in your private safe.
Alternatively, the argument looks on the present government as hostage to
the hoarders of hidden wealth. The hoarders will release the hidden health if
the ransom price is paid and the ransom price is the Bill of Rights,
specifically the due process in the search and seizure clauses. So, there is
something positively revolving about either argument. The Bill of Rights is
not for sale to the highest bidder nor can it be used to ransom captive dollars.
This nation will survive and grow strong, only if it would become convinced
of the values enshrined in the Constitution of a price that is beyond monetary
estimation.
For these reasons, the honorable course for the Constitutional Commission
is to delete all of Section 8 of the committee report and allow the new
Constitution to take effect in full vigor. If Section 8 is deleted, the PCGG has
two options. First, it can pursue the Salonga and the Romulo argument that
what the PCGG has been doing has been completely within the pale of the
law. If sustained, the PCGG can go on and should be able to go on, even
without the support of Section 8. If not sustained, however, the PCGG has
only one honorable option, it must bow to the majesty of the Bill of Rights.
The PCGG extrapolation of the law is defended by staunch Christians. Let
me conclude with what another Christian replied when asked to toy around
with the law. From his prison cell, Thomas More said, "I'll give the devil
benefit of law for my nations safety sake. I ask the Commission to give the
devil benefit of law for our nations sake. And we should delete Section 8.
Thank you, Madam President. (Emphasis supplied)

Despite the impassioned plea by Commissioner Bernas against the amendment

excepting sequestration orders from the Bill of Rights, the Constitutional
Commission still adopted the amendment as Section 26,[44] Article XVIII of the 1987
Constitution. The framers of the Constitution were fully aware that absent Section
26, sequestration orders would not stand the test of due process under the Bill of
Rights.
Thus, to rule that the Bill of Rights of the 1973 Constitution remained in force
during the interregnum, absent a constitutional provision excepting sequestration
orders from such Bill of Rights, would clearly render all sequestration orders void
during the interregnum. Nevertheless, even during the interregnum the Filipino
people continued to enjoy, under the Covenant and the Declaration, almost the same
rights found in the Bill of Rights of the 1973 Constitution.
The revolutionary government, after installing itself as the de jure government,
assumed responsibility for the States good faith compliance with the Covenant to
which the Philippines is a signatory. Article 2(1) of the Covenant requires each
signatory State to respect and to ensure to all individuals within its territory and
subject to its jurisdiction the rights[45] recognized in the present Covenant. Under
Article 17(1) of the Covenant, the revolutionary government had the duty to insure
that [n]o one shall be subjected to arbitrary or unlawful interference with his privacy,
family, home or correspondence.
The Declaration, to which the Philippines is also a signatory, provides in its
Article 17(2) that [n]o one shall be arbitrarily deprived of his property. Although the
signatories to the Declaration did not intend it as a legally binding document, being
only a declaration, the Court has interpreted the Declaration as part of the generally
accepted principles of international law and binding on the State. [46] Thus, the
revolutionary government was also obligated under international law to observe the
rights[47] of individuals under the Declaration.
The revolutionary government did not repudiate the Covenant or the Declaration
during the interregnum. Whether the revolutionary government could have
repudiated all its obligations under the Covenant or the Declaration is another matter
and is not the issue here. Suffice it to say that the Court considers the Declaration as
part of customary international law, and that Filipinos as human beings are proper
subjects of the rules of international law laid down in the Covenant. The fact is the
revolutionary government did not repudiate the Covenant or the Declaration in the
same way it repudiated the 1973 Constitution. As the de jure government, the
revolutionary government could not escape responsibility for the States good faith
compliance with its treaty obligations under international law.
 It was only upon the adoption of the Provisional Constitution on 25 March 1986
that the directives and orders of the revolutionary government became subject to a
higher municipal law that, if contravened, rendered such directives and orders
void. The Provisional Constitution adopted verbatim the Bill of Rights of the 1973
Constitution.[48] The Provisional Constitution served as a self-limitation by the
revolutionary government to avoid abuses of the absolute powers entrusted to it by
the people.
During the interregnum when no constitution or Bill of Rights existed, directives
and orders issued by government officers were valid so long as these officers did not
exceed the authority granted them by the revolutionary government. The directives
and orders should not have also violated the Covenant or the Declaration. In this
case, the revolutionary government presumptively sanctioned the warrant since the
revolutionary government did not repudiate it. The warrant, issued by a judge upon
proper application, specified the items to be searched and seized. The warrant is thus
valid with respect to the items specifically described in the warrant.
However, the Constabulary raiding team seized items not included in the
warrant. As admitted by petitioners witnesses, the raiding team confiscated items not
included in the warrant, thus:

Direct Examination of Capt. Rodolfo Sebastian

AJ AMORES

Q. According to the search warrant, you are supposed to seize only for
weapons. What else, aside from the weapons, were seized from the
house of Miss Elizabeth Dimaano?
A. The communications equipment, money in Philippine currency and
US dollars, some jewelries, land titles, sir.
Q. Now, the search warrant speaks only of weapons to be seized from
the house of Elizabeth Dimaano. Do you know the reason why your
team also seized other properties not mentioned in said search
warrant?
A. During the conversation right after the conduct of said raid, I was
informed that the reason why they also brought the other items not
included in the search warrant was because the money and other
jewelries were contained in attach cases and cartons with markings
 Sony Trinitron, and I think three (3) vaults or steel safes. Believing
that the attach cases and the steel safes were containing firearms,
they forced open these containers only to find out that they
contained money.

xxx

Q. You said you found money instead of weapons, do you know the
reason why your team seized this money instead of weapons?
A. I think the overall team leader and the other two officers assisting him
decided to bring along also the money because at that time it was
already dark and they felt most secured if they will bring that
because they might be suspected also of taking money out of those
items, your Honor.[49]

Cross-examination
Atty. Banaag

Q. Were you present when the search warrant in connection with this
case was applied before the Municipal Trial Court of Batangas,
Branch 1?
A. Yes, sir.
Q. And the search warrant applied for by you was for the search and
seizure of five (5) baby armalite rifles M-16 and five (5) boxes of
ammunition?
A. Yes, sir.

xxx

AJ AMORES

Q. Before you applied for a search warrant, did you conduct surveillance
in the house of Miss Elizabeth Dimaano?
A. The Intelligence Operatives conducted surveillance together with the
MSU elements, your Honor.
 Q. And this party believed there were weapons deposited in the house of
Miss Elizabeth Dimaano?
A. Yes, your Honor.
Q. And they so swore before the Municipal Trial Judge?
A. Yes, your Honor.
Q. But they did not mention to you, the applicant for the
search warrant, any other properties or contraband which could be
found in the residence of Miss Elizabeth Dimaano?
A. They just gave us still unconfirmed report about some hidden items,
for instance, the communications equipment and money. However,
I did not include that in the application for search warrant
considering that we have not established concrete evidence about
that. So when
Q. So that when you applied for search warrant, you had reason to
believe that only weapons were in the house of Miss Elizabeth
Dimaano?
A. Yes, your Honor.[50]

xxx

Q. You stated that a .45 caliber pistol was seized along with one
armalite rifle M-16 and how many ammunition?
A. Forty, sir.
Q. And this became the subject of your complaint with the issuing Court,
with the fiscals office who charged Elizabeth Dimaano for Illegal
Possession of Firearms and Ammunition?
A. Yes, sir.
Q. Do you know what happened to that case?
A. I think it was dismissed, sir.
Q. In the fiscals office?
A. Yes, sir.
 Q. Because the armalite rifle you seized, as well as the .45 caliber
pistol had a Memorandum Receipt in the name of Felino Melegrito,
is that not correct?
A. I think that was the reason, sir.
Q. There were other articles seized which were not included in
the search warrant, like for instance, jewelries. Why did you seize
the jewelries?
A. I think it was the decision of the overall team leader and his assistant
to bring along also the jewelries and other items, sir. I do not really
know where it was taken but they brought along also these articles.
I do not really know their reason for bringing the same, but I just
learned that these were taken because they might get lost if they will
just leave this behind.

xxx

Q. How about the money seized by your raiding team, they were not also
included in the search warrant?
A. Yes sir, but I believe they were also taken considering that the money
was discovered to be contained in attach cases. These attach cases
were suspected to be containing pistols or other high powered
firearms, but in the course of the search the contents turned out to
be money. So the team leader also decided to take this considering
that they believed that if they will just leave the money behind, it
might get lost also.
Q. That holds true also with respect to the other articles that were seized
by your raiding team, like Transfer Certificates of Title of lands?
A. Yes, sir. I think they were contained in one of the vaults that were
opened.[51]
It is obvious from the testimony of Captain Sebastian that the warrant did not
include the monies, communications equipment, jewelry and land titles that the
raiding team confiscated.The search warrant did not particularly describe these items
and the raiding team confiscated them on its own authority. The raiding team had no
legal basis to seize these items without showing that these items could be the subject
of warrantless search and seizure.[52] Clearly, the raiding team exceeded its authority
when it seized these items.
The seizure of these items was therefore void, and unless these items are
contraband per se,[53] and they are not, they must be returned to the person from
whom the raiding seized them. However, we do not declare that such person is the
lawful owner of these items, merely that the search and seizure warrant could not be
used as basis to seize and withhold these items from the possessor. We thus hold that
these items should be returned immediately to Dimaano.
WHEREFORE, the petition for certiorari is DISMISSED. The questioned
Resolutions of the Sandiganbayan dated 18 November 1991 and 25 March 1992 in
Civil Case No. 0037, remanding the records of this case to the Ombudsman for such
appropriate action as the evidence may warrant, and referring this case to the
Commissioner of the Bureau of Internal Revenue for a determination of any tax
liability of respondent Elizabeth Dimaano, are AFFIRMED.
SO ORDERED.
ARCANGEL GUTIB, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE
PHILIPPINES, respondents.

RESOLUTION
BELLOSILLO, J.:

This motion for reconsideration impels this Court to make a choice between two
(2) courses of action: (a) to hold fast to the rule that the trial courts denial of a
demurrer to evidence may not be disturbed but reviewed only through an ordinary
appeal from the judgment after trial, not certiorari, and thus deny the motion for
reconsideration and allow the court a quo to proceed with the trial; or, (b) to give
weight, as an overriding consideration, to the fact that the totality of the prosecution
evidence is grossly insufficient to convict the accused of the crime charged and
therefore grant the motion as well as the demurrer to the evidence, and dismiss the
case then and there.
Arcangel Gutib, Godofredo Jayme, Abraham Felix, Carlos Tisoy, Rodolfo
Caballes, Antonio Rosales and Paulino Hortelano were charged with Qualified Theft
before the Regional Trial Court of Cebu City.[1] The Information alleged that Jayme,
Felix, Tisoy, Caballes, Rosales and Hortelano, who were drivers of ERS Trucking
Services (ERS) and who had access to the diesel fuel account of ERS through
purchase orders (POs) issued by its owners, connived and confederated with Gutib,
the cashier of Honeywest gasoline station, and with grave abuse of confidence, took,
stole and carried away diesel fuel valued at P380,400.00, to the prejudice of ERS.[2]
The spouses Eduardo and Filomena Sy were the owners and operators of ERS
which was engaged in the business of providing hauling services within the province
of Cebu. ERS procured the fuel requirements of its trucks at Honeywest, among
others. Whenever its drivers refilled the fuel tanks of their trucks, they only had to
present ERS purchase orders to cashier Gutib who in turn would instruct the gasoline
boy to load diesel fuel into the tanks corresponding to the amounts indicated in the
purchase orders. The spouses Sy accused Gutib of conniving with the truck drivers
in short selling them alleging that on several occasions Gutib induced the drivers to
underfill their fuel tanks by giving them goodwill money, or exchanging their unused
POs with cash.
In the Reinvestigation Report submitted to the trial court by the public
prosecutor, it was recommended that five (5) of the accused drivers - Godofredo
Jayme, Abraham Felix, Carlos Tisoy, Antonio Rosales and Paulino Hortelano - be
discharged from the Information to be utilized as state witnesses against the
remaining accused - Arcangel Gutib and Rodolfo Caballes - considering that the
prosecution evidence was very much insufficient to secure a conviction.[3] The
Presiding Judge of RTC-Br. 16 to whom the case was originally assigned approved
the recommendation and ordered the discharge of the five (5) accused drivers. Thus,
accused Gutib moved to inhibit the judge alleging that he was no longer confident
that his case would be disposed of impartially. His motion was granted and the case
was re-assigned to RTC-Br. 9. However, accused Caballes found out that the Branch
Clerk of Court of Br. 9 was a relative of private complainants, hence, he also moved
for the inhibition of the judge. The case was re-raffled to RTC-Br. 24, but since the
same accused Caballes also had a relative there, he asked again for another
assignment of the case. Ultimately, the case found its way to RTC-Br. 13 presided
over by Judge Meinrado P. Paredes.
After the presentation of evidence by the prosecution, accused Gutib and
Caballes filed their separate demurrers to the evidence with prior leave of
court. Private complainants opposed the demurrer of Gutib but did not contest that
of Caballes.
 On 26 April 1996 Judge Paredes denied Gutibs demurrer to the evidence for lack
of factual and legal basis, but granted that of Caballes; consequently, the case against
Caballes was dismissed for "gross insufficiency of evidence."
Accused Gutib moved for the inhibition of Judge Paredes and reserved the filing
of his motion for reconsideration with the next judge to whom the case would
eventually be assigned.
On 26 September 1996 Gutib received notice that his case had been raffled to
RTC-Br. 21. Forthwith, he filed his motion for reconsideration of the 26 April 1996
Order of RTC-Br. 13. However, Judge Jose P. Soberano Jr. of RTC-Br. 21 denied
the motion.
Accused Gutib elevated the matter to the Court of Appeals on a petition
for certiorari under Rule 65, but on 30 June 1997 the appellate court dismissed the
petition for lack of merit holding that -

x x x x it has been the consistent ruling of the Supreme Court that certiorari does not
lie to challenge the trial courts interlocutory order denying a motion to dismiss by
way of demurrer to evidence. The proper course of action is for the accused to
present his evidence and await the decision which he may in due time appeal, if
adverse.[4]

His motion for reconsideration having been denied by the appellate court on 28
October 1997, accused Gutib filed before us the instant petition for review. On 4
February 1998 and 13 May 1998, we denied the petition for review as well as the
motion for reconsideration, respectively, for lack of reversible error. Seemingly
unfazed by the series of setbacks suffered by him, petitioner Gutib filed on 19 June
1998 with leave of court another motion for reconsideration. This time we required
respondents Court of Appeals and the People of the Philippines through the Solicitor
General to comment on the second motion for reconsideration within ten (10) days
from notice. On 25 November 1998, after several extensions of time, the Solicitor
General submitted his comment thereon.
The issues to be resolved are: whether the trial court committed grave abuse of
discretion amounting to lack or excess of jurisdiction in denying petitioners
demurrer to the evidence; and, whether a petition for certiorari is the proper,
appropriate and available remedy to question the trial courts order denying the
demurrer to the evidence.
 A second hard look at the records, particularly petitioners demurrer to the
evidence, convinces this Court of the merit of the instant motion and to grant
reconsideration.
The trial court premised its denial of petitioners demurrer to the evidence on the
following: (a) the testimonies of the discharged witnesses zeroed in on petitioner as
the alleged mastermind who induced them to exchange their POs with cash or
underfill their fuel tanks; and (b) the demurrer to the evidence centered on credibility
of witnesses, inconsistencies in the testimonies of prosecution witnesses, and weight
and value of the prosecution evidence, which matters should be raised during the
trial, and not prematurely on a demurrer to the evidence.[5]
We resolve. Demurrer to the evidence is an objection by one of the parties in an
action, to the effect that the evidence which his adversary produced is insufficient in
point of law, whether true or not, to make out a case or sustain the issue.[6] The party
demurring challenges the sufficiency of the whole evidence to sustain a verdict. The
court, in passing upon the sufficiency of the evidence raised in a demurrer, is merely
required to ascertain whether there is competent or sufficient evidence to sustain the
indictment or to support a verdict of guilt.
In the instant case, we have thoroughly reviewed the records and we cannot help
being drawn to the conclusion that the prosecution evidence against the accused is
grossly insufficient to support a finding of guilt. The public prosecutor
himself considered, to start with, that there was not enough evidence to secure a
conviction, hence, the necessity of discharging five (5) of the accused to be utilized
as state witnesses. But even so, as will be shown in the succeeding discussion, the
testimonies of these witnesses were unable to make up for the inherent weakness of
the prosecution; and, far from proving the precise degree of culpability of petitioner,
they only disclosed exculpatory facts which clearly justify the grant of the demurrer,
or warrant the dismissal of the case against petitioner -
First. Filomena Sy, one of the owners of ERS and complainant in this case,
herself testified it was she and her husband who computed the number of fuel in
liters that should appear on every PO based on the driving needs of the drivers for
each destination --
Q: Who will determine the number of diesel fuel that will be listed in the PO to
be given to the drivers?
A: My husband, myself and ........
 Q: What is the basis for the number (sic) of diesel fuel that will be given to any
driver for a particular trip that he will undertake?
A: That will all depend on the distance and how many trips that (he can) make
that day.
Q: The distance from pier area to Mandaue City, what is the average diesel fuel
that you and your husband will write in the PO?
A: The estimate is based in 1990 and earlier because the traffic condition now is
different. Based on that period, from pier to Mandaue City, we give an
allowance of twenty (20) liters per trip.
Q: x x x x what is the estimated distance per liter that will be the basis of the PO
that you are going to issue to each driver?
A: Actually, I admit I am not an expert but I have here the certification issued by
the Secretary and President of Cebu Truckers Association, and this was given
to me by my husband, who in three decades been also in that business, that
per liter he estimated that it will run for two (2) kilometers, but according to
Columbian Motors, because he also approached this firm, the ratio is three (3)
kilometers per liter x x x x
Q: Why is it that your husband and you had an estimate only of two (2) kilometers
per liter consumption of your truck of diesel fuel considering that, according
to you, there is a Columbian Motors estimate that per liter it can go as far as
three and a half (3.5) kilometers?
A: Because the estimate given by Columbian Motors [was] based on brand new
[trucks], although our trucks are all in good condition because when the
engine is out of order, we usually buy new engine instead of having it
repaired.[7]
Second. Antonio Rosales, one of the accused discharged to be a state witness,
corroborated the testimony of Filomena Sy when the former testified that the drivers
were each given a limit of 20 liters of fuel per trip, which was only sufficient to
negotiate the distance within Mandaue City -
Q: So, when you request for the purchase order, you only request for the number
of liters sufficient to negotiate the distance between the garage towards the
destination and back to the garage, is that correct?
 A: It is not correct, sir, because we were given a limit of twenty (20) liters per trip
xxxx
Q: In other words, this twenty (20) liters based on your estimate, is it sufficient
volume to negotiate the distance of your hauling service?
A: Yes, sir, within Mandaue [City] only.[8]
Moreover, he testified that the POs were given only when there were hauling
assignments, thus -
Q: And the management of ERS Trucking will not give you purchase orders if
there was no hauling assignment given you, is that right?
A: Usually, we drivers of trailers ask for purchase orders when we are going to
have some container vans x x x x
Q: Will you please tell us how the management will determine that your transport
facilities already need fuel?
A: Because everytime we will have a trip, sir, we will ask for crude oil because I
do not want to run out of fuel.[9]
Thus, it is evident that the issuance of the POs was tightly regulated, subject only
to the availability of hauling assignments and the amount of fuel indicated in the
POs was just sufficient for a particular hauling assignment.
Third. Godofredo Jayme, another accused discharged to be a witness for the
government, testified that each PO was good for 20 liters which in turn was enough
for two (2) hauling trips. Before another PO could be issued, the drivers of ERS were
required to report that they had already undertaken two (2) hauling trips. He further
testified that sometimes twenty (20) liters of fuel were not even sufficient if the trip
was long, so they had to request for another PO -
Q: In other words, it is the intention of your employer that one PO will be good
for one (1) hauling trip?
A: Twenty (20) liters is good for two (2) haulings, sir.
Q: In other words, before a PO is given, the employer will ask you whether you
have completed two (2) trips before he gives you another PO?
A: Yes, sir, because when we will have our first trip in the morning if the gasoline
is not sufficient because we have a long trip, we will ask another PO.
 Q: In other words, the purpose of your employer in giving a PO sufficient only
for two (2) trips is to prevent the drivers from selling or stealing unused
gasoline, is that correct?
A: I do not know but that is what they want us to observe and comply.
Q: Now, in other words, if you were able to negotiate two (2) hauling trips, you
have to again ask for another PO, is that correct?
A: Yes, sir.
Q: And if you are not given a second PO for a third trip you cannot perform your
hauling trip because you already have no fuel for your truck, is that correct?
A: Yes, sir, because our fuel will be consumed already.
Q: Was there any instance that you ran out, you failed to perform any hauling
assignment because you ran out of fuel?
A: There was never an instance that I ran out of fuel, sir.[10]
Fourth. Carlos Tisoy, still another accused utilized to be state witness, confirmed
that a PO was good only for one (1) trip and the driver had to ask for another PO in
order to make a second trip, and without a second PO, no second trip could be
undertaken because the first PO was sufficient only for the first trip.[11] He also
testified that never was there any complaint from the customers that ERS failed to
undertake any delivery for lack of fuel.[12]
Culled from the foregoing, it is obvious that the possibility of short-filling of fuel
tanks and/or exchanging POs with cash was remote because: (a) the amount of fuel
represented by one (1) PO was sufficient only for a particular trip so that another PO
was required to undertake another trip; (b) if the fuel tanks of the trucks were under-
filled, there would have been instances when the drivers were unable to complete a
particular hauling trip for lack of fuel provisions. But they were in unison when they
asserted that there was no occasion when they ever ran out of fuel; (c) the issuance
of POs was strictly regulated and monitored, i.e., before the drivers could procure a
second PO from ERS they must first report to their employer that they had
accomplished a prior hauling assignment for which a previous PO was issued; and,
(d) if there was truly an anomaly regarding the fuel requisitioning of ERS trucks, it
would have been easily detected and prevented by merely verifying from ERS
records whether the total number of POs issued to the drivers for a given period
tallied with the total number of hauling assignments undertaken by its trucks for the
same period. Significantly, no evidence was presented to show that the number of
completed hauling trips was not equal to the number of POs issued to the drivers.
Private complainants, obviously prudent businessmen, must have taken adequate
measures to protect their interests from theft and other crimes against property to
ensure the success of their business enterprise. Thus, it is reasonable to assume that
ERS conducted regular inspections on the hauling area to verify whether the drivers
were performing their duties; counter-checked with the different gasoline stations to
make sure that the fuel represented by the POs was loaded into the trucks; and,
sufficiently indicated in the POs the name of the specific gas station to which it could
be presented and exchanged with gasoline to minimize the risk of, if not totally
eliminate, pilferage.[13]
Paradoxically, despite the alleged pilferage of its fuel, Filomena Sy admitted
that ERS Trucking steadily gained net profits from 1988 to 1992 ranging from more
than P300,000.00 in 1988 to more than P400,000.00 in 1992,[14] and her fleet of 9
trucks when ERS started its trucking business in 1983 had grown to 32 trucks with
28 drivers in 1990.[15] These figures all the more confirm that ERS had never been a
victim of any anomaly or business sabotage concerning the fuel requisitioning of its
trucks, otherwise, ERS would have seriously suffered from huge losses in profits.
Sufficient evidence for purposes of frustrating a demurrer thereto is such
evidence in character, weight or amount as will legally justify the judicial or official
action demanded according to the circumstances.[16] To be considered sufficient
therefore, the evidence must prove: (a) the commission of the crime, and (b) the
precise degree of participation therein by the accused. In the instant case, the
prosecution miserably failed to establish by sufficient evidence the existence of the
crime of qualified theft. It is not enough that the state witnesses implicated petitioner
as the one who masterminded the alleged pilferage of diesel fuel belonging to ERS
either by under-filling the tanks of its trucks or by inducing ERS drivers to exchange
their POs with cash; rather, it must be sufficiently proved that there was indeed fuel
pilferage, with petitioner amassing in the process hundreds of thousands of pesos
worth of diesel fuel, as alleged in the Information.
Prescinding from the foregoing, it was grave abuse of discretion for the trial
court to refuse to weigh the prosecution evidence against petitioner, which was its
bounden duty to do as trier of facts, and cursorily to ignore the arguments raised in
his demurrer to the evidence on the simplistic explanation that they -
x x x centered on credibility of witnesses, inconsistencies in the testimonies of
prosecution witnesses, and weight and value of the evidence presented by the
prosecution x x x x[17]

Had the trial court been more punctilious and thorough in its study and
preparation of the case, it could have fully appreciated the weakness of the state
evidence against petitioner, and that it was useless, not to say a waste of time and
money, to proceed with the tedious process of trial and direct petitioner to adduce
evidence in his defense, since it was obvious even from the beginning that petitioner
could not be convicted of the crime charged. Curiously enough, the trial court
disposed of the demurrer to the evidence of accused Caballes on the merits, while
refused to do the same with that of petitioner. Why the apparent discrimination?
On the second issue, the Court of Appeals held that certiorari does not lie to
challenge the trial courts interlocutory order denying a motion to dismiss by way of
a demurrer to the evidence. According to respondent appellate court, the proper
remedy was for the accused to present his evidence during the trial after which the
court, on its own assessment of the evidence submitted by both parties, would then
render its judgment of acquittal or conviction. If the verdict is one of acquittal the
case ends there. But if it is one of conviction, then appeal is the proper
recourse.[18] But the rule is not absolute and admits of an exception. Thus where, as
in the instant case, the denial of the motion to dismiss by the trial court was tainted
with grave abuse of discretion amounting to lack or excess of jurisdiction, the
aggrieved party may assail the order of denial on certiorari.
Moreover, it has been said that a wide breadth of discretion is granted a court of
justice in certiorari proceedings.[19] The cases in which certiorari will issue cannot
be defined, because to do so would be to destroy its comprehensiveness and
usefulness. So wide is the discretion of the court that authority is not wanting to
show that certiorari is more discretionary than either prohibition or mandamus.[20] In
the exercise of our superintending control over inferior courts, we are to be guided
by all the circumstances of each particular case as the ends of justice may require.
So it is that the writ will be granted where necessary to prevent a substantial wrong
or to do substantial justice.[21]
This case presents compelling and exceptional facts which call for this
appropriate remedy. As discussed elsewhere, petitioner satisfactorily demonstrated
in his exhaustive demurrer to the evidence that the prosecution failed to prove the
very crime for which he was being held to answer and, hence, there was no reason
to hold him for trial. Indeed, an accused is always presumed innocent until the
contrary is proved. Parenthetically, he has the right to be protected against hasty,
malicious and oppressive prosecutions; to be secure from an open and public
accusation of a crime; and, from the trouble, expenses and anxiety of a public
trial. Similarly situated is the state, which must be shielded at all times from useless
and expensive litigations that only contribute to the clogging of court dockets and
lay heavy toll on its limited time and meager resources. For this reason, it is better
on balance that we look beyond procedural requirements and overcome the ordinary
disinclination to exercise our supervisory powers. And this, to the end that the orders
issued below may be controlled to make them conformable to law and justice.[22]
WHEREFORE, the instant motion for reconsideration is GRANTED. The Court
of Appeals Decision of 30 June 1997 dismissing the petition for certiorari and its
Resolution of 28 October 1997 denying reconsideration thereof, are REVERSED
and SET ASIDE. The evidence not being sufficient to establish the guilt of petitioner
ARCANGEL GUTIB his demurrer to the evidence is GRANTED, and the
Information for Qualified Theft is DISMISSED. Consequently, he is ACQUITTED
of the crime charged, and the bail bond posted for his provisional liberty is cancelled
and released.
SO ORDERED.

JAIME D. DELA CRUZ, Petitioner, v. PEOPLE OF THE

PHILIPPINES, Respondent.

DECISION

SERENO, C.J.:

This is a Petition for Review on Certiorari, filed by petitioner Jaime D. dela Cruz,
from the Decision1 dated 22 June 2011 issued by the Twentieth Division of the Court
of Appeals (CA) and Resolution2 dated 2 February 2012 issued by the Former
Twentieth Division of the CA in CA- G.R. C.R. No. 00670.

THE ANTECEDENT FACTS

Petitioner Jaime D. dela Cruz was charged with violation of Section 15, Article II of
Republic Act No. (R.A.) 9165, or The Comprehensive Dangerous Drugs Act of
2002, by the Graft Investigation and Prosecution Officer of the Office of the
Ombudsman – Visayas, in an Information3 dated 14 February 2006, which
reads:chanroblesvirtuallawlibrary

That on or about the 31st day of January 2006, at Cebu City, Philippines, and within
the jurisdiction of this Honorable Court, the above-named accused, JAIME D. DE
LA CRUZ, a public officer, having been duly appointed and qualified to such public
position as Police Officer 2 of the Philippine National Police (PNP) assigned in the
Security Service Group of the Cebu City Police Office, after having been arrested
by agents of the National Bureau of Investigation (NBI) in an entrapment operation,
was found positive for use of METHAMPHETAMINE
HYDROCHLORIDE commonly known as “Shabu”, the dangerous drug after a
confirmatory test conducted on said accused.

CONTRARY TO LAW.

When arraigned, petitioner, assisted by counsel de parte, pleaded not guilty to the
charge. The records do not reveal whether De la Cruz was likewise charged for
extortion.

VERSION OF THE PROSECUTION

The evidence of the prosecution reveals that at 8:00 a.m. of 31 January 2006, the
agents and special investigators of the National Bureau of Investigation, Central
Visayas Regional Office (NBI-CEVRO) or simply NBI, received a Complaint from
Corazon Absin (Corazon) and Charito Escobido (Charito). The complainants
claimed that at 1:00 a.m. of that same day, Ariel Escobido (Ariel), the live-in partner
of Corazon and son of Charito, was picked up by several unknown male persons
believed to be police officers for allegedly selling drugs. An errand boy gave a
number to the complainants, and when the latter gave the number a ring, they were
instructed to proceed to the Gorordo Police Office located along Gorordo Avenue,
Cebu City. In the said police office, they met “James” who demanded from them
?100,000, later lowered to ?40,000, in exchange for the release of Ariel. After the
meeting, the complainants proceeded to the NBI-CEVRO to file a complaint and
narrate the circumstances of the meeting to the authorities. While at the NBI-
CEVRO, Charito even received calls supposedly from “James” instructing her to
bring the money as soon as possible.

The special investigators at the NBI-CEVRO verified the text messages received by
the complainants. A team was immediately formed to implement an entrapment
operation, which took place inside a Jollibee branch at the corner of Gen. Maxilom
and Gorordo Avenues, Cebu City. The officers were able to nab Jaime dela Cruz by
using a pre-marked ?500 bill dusted with fluorescent powder, which was made part
of the amount demanded by “James” and handed by Corazon. Petitioner was later
brought to the forensic laboratory of the NBI-CEVRO where forensic examination
was done by forensic chemist Rommel Paglinawan. Petitioner was required to
submit his urine for drug testing. It later yielded a positive result for presence of
dangerous drugs as indicated in the confirmatory test result labeled as Toxicology
(Dangerous Drugs) Report No. 2006-TDD-2402 dated 16 February 2006.

VERSION OF THE DEFENSE

The defense presented petitioner as the lone witness. He denied the charges and
testified that while eating at the said Jollibee branch, he was arrested allegedly for
extortion by NBI agents. When he was at the NBI Office, he was required to extract
urine for drug examination, but he refused saying he wanted it to be done by the
Philippine National Police (PNP) Crime Laboratory and not by the NBI. His request
was, however, denied. He also requested to be allowed to call his lawyer prior to the
taking of his urine sample, to no avail.

THE RULING OF THE RTC

The Regional Trial Court (RTC) Branch 58 of Cebu City, in its Decision 4 dated 6
June 2007, found the accused guilty beyond reasonable doubt of violating Section
15, Article II of R.A. 9165 and sentenced him to suffer the penalty of compulsory
rehabilitation for a period of not less than six (6) months at the Cebu Center for the
Ultimate Rehabilitation of Drug Dependents located at Salinas, Lahug, Cebu City. 5

Petitioner filed an appeal assigning as error the RTC’s validation of the result of the
urine test despite its dubiousness having been admitted in spite of the lack of legal
basis for its admission. First, he alleges that the forensic laboratory examination was
conducted despite the fact that he was not assisted by counsel, in clear violation of
his constitutional right. Secondly, he was allegedly held guilty beyond reasonable
doubt notwithstanding the lack of sufficient basis to convict him.

THE RULING OF THE CA

The CA found the appeal devoid of merit and affirmed the ruling of the RTC.

Petitioner filed a timely Motion for Reconsideration. He argued that the CA

overlooked prevailing jurisprudence, which states that drug testing conducted under
circumstances similar to his would violate a person’s right to privacy. The appellate
court nevertheless denied the motion.

Petitioner thus filed the present Petition for Review on certiorari. He assigns as
errors the use of hearsay evidence as basis for his conviction and the questionable
circumstances surrounding his arrest and drug test.

Respondent, through the Office of the Solicitor General, filed its Comment,6 saying
that “petitioner’s arguments cannot be the subject of a petition for review
on certiorari under Rule 45, as they involve questions of facts which may not be the
subject thereof; after his arraignment, he can no longer contest the validity of his
arrest, less so at this stage of the proceedings; his guilt has been adequately
established by direct evidence; and the manner in which the laboratory examination
was conducted was grounded on a valid and existing law.

THE ISSUE

We deem it proper to give due course to this Petition by confronting head-on the
issue of whether or not the drug test conducted upon the petitioner is legal.

OUR RULING

We declare that the drug test conducted upon petitioner is not grounded upon any
existing law or jurisprudence.

We gloss over petitioner’s non-compliance with the Resolution7 ordering him to

submit clearly legible duplicate originals or certified true copies of the assailed
Decision and Resolution.

Petitioner was charged with use of dangerous drugs in violation of the law, the
pertinent provision of which reads:chanroblesvirtuallawlibrary

Section 15. Use of Dangerous Drugs. – A person apprehended or arrested, who is

found to be positive for use of any dangerous drug, after a confirmatory test, shall
be imposed a penalty of a minimum of six (6) months rehabilitation in a government
center for the first offense, subject to the provisions of Article VIII of this Act. If
apprehended using any dangerous drug for the second time, he/she shall suffer the
penalty of imprisonment ranging from six (6) years and one (1) day to twelve (12)
years and a fine ranging from Fifty thousand pesos (?50,000.00) to Two hundred
thousand pesos (?200,000.00): Provided, That this Section shall not be applicable
where the person tested is also found to have in his/her possession such quantity of
any dangerous drug provided for under Section 11 of this Act, in which case the
provisions stated therein shall apply.8

The RTC subsequently convicted petitioner, ruling that the following elements of
Section 15 were established: (1) the accused was arrested; (2) the accused was
subjected to drug test; and (3) the confirmatory test shows that he used a dangerous
drug.

Disregarding petitioner’s objection regarding the admissibility of the evidence, the

lower court also reasoned that “a suspect cannot invoke his right to counsel when he
is required to extract urine because, while he is already in custody, he is not
compelled to make a statement or testimony against himself. Extracting urine from
one’s body is merely a mechanical act, hence, falling outside the concept of a
custodial investigation.”

We find the ruling and reasoning of the trial court, as well as the subsequent
affirmation by the CA, erroneous on three counts.

The drug test in Section 15 does not cover

persons apprehended or arrested for any
unlawful act, but only for unlawful acts
listed under Article II of R.A. 9165.
First, “[a] person apprehended or arrested” cannot literally mean any person
apprehended or arrested for any crime. The phrase must be read in context and
understood in consonance with R.A. 9165. Section 15 comprehends persons arrested
or apprehended for unlawful acts listed under Article II of the law.

Hence, a drug test can be made upon persons who are apprehended or arrested for,
among others, the “importation,”9 “sale, trading, administration, dispensation,
delivery, distribution and transportation”,10“manufacture”11 and “possession”12 of
dangerous drugs and/or controlled precursors and essential chemicals; possession
thereof “during parties, social gatherings or meetings” 13; being “employees and
visitors of a den, dive or resort”;14 “maintenance of a den, dive or resort”;15 “illegal
chemical diversion of controlled precursors and essential chemicals”16;
“manufacture or delivery”17 or “possession”18 of equipment, instrument, apparatus,
and other paraphernalia for dangerous drugs and/or controlled precursors and
essential chemicals; possession of dangerous drugs “during parties, social gatherings
or meetings”19; “unnecessary”20 or “unlawful”21 prescription thereof; “cultivation or
culture of plants classified as dangerous drugs or are sources thereof”; 22and
“maintenance and keeping of original records of transactions on dangerous drugs
and/or controlled precursors and essential chemicals.”23To make the provision
applicable to all persons arrested or apprehended for any crime not listed under
Article II is tantamount to unduly expanding its meaning. Note that accused
appellant here was arrested in the alleged act of extortion.

A charge for violation of Section 15 of R.A. 9165 is seen as expressive of the intent
of the law to rehabilitate persons apprehended or arrested for the unlawful acts
enumerated above instead of charging and convicting them of other crimes with
heavier penalties. The essence of the provision is more clearly illustrated in People
v. Martinez24as follows:chanroblesvirtuallawlibrary

On a final note, this Court takes the opportunity to be instructive on Sec. 11

(Possession of Dangerous Drugs) and Sec. 15 (Use of Dangerous Drugs) of R.A. No.
9165, with regard to the charges that are filed by law enforcers. This Court notes the
practice of law enforcers of filing charges under Sec. 11 in cases where the presence
of dangerous drugs as basis for possession is only and solely in the form of residue,
being subsumed under the last paragraph of Sec. 11. Although not incorrect, it
would be more in keeping with the intent of the law to file charges under Sec. 15
instead in order to rehabilitate first time offenders of drug use, provided that there is
a positive confirmatory test result as required under Sec. 15. The minimum penalty
under the last paragraph of Sec. 11 for the possession of residue is imprisonment of
twelve years and one day, while the penalty under Sec. 15 for first time offenders of
drug use is a minimum of six months rehabilitation in a government center. To file
charges under Sec. 11 on the basis of residue alone would frustrate the objective of
the law to rehabilitate drug users and provide them with an opportunity to recover
for a second chance at life.

In the case at bench, the presence of dangerous drugs was only in the form of residue
on the drug paraphernalia, and the accused were found positive for use of dangerous
drugs. Granting that the arrest was legal, the evidence obtained admissible, and the
chain of custody intact, the law enforcers should have filed charges under Sec. 15,
R.A. No. 9165 or for use of dangerous drugs and, if there was no residue at all, they
should have been charged under Sec. 14 (Possession of Equipment, Instrument,
Apparatus and Other Paraphernalia for Dangerous Drugs During Parties, Social
Gatherings or Meetings). Sec. 14 provides that the maximum penalty under Sec.
12(Possession of Equipment, Instrument, Apparatus and Other Paraphernalia for
Dangerous Drugs) shall be imposed on any person who shall possess any equipment,
instrument, apparatus and other paraphernalia for dangerous drugs. Under Sec. 12,
the maximum penalty is imprisonment of four years and a fine of P50,000.00. In
fact, under the same section, the possession of such equipment, apparatus or other
paraphernalia is prima facie evidence that the possessor has used a dangerous drug
and shall be presumed to have violated Sec. 15.

In order to effectively fulfill the intent of the law to rehabilitate drug users, this Court
thus calls on law enforcers and prosecutors in dangerous drugs cases to exercise
proper discretion in filing charges when the presence of dangerous drugs is only and
solely in the form of residue and the confirmatory test required under Sec. 15 is
positive for use of dangerous drugs. In such cases, to afford the accused a chance to
be rehabilitated, the filing of charges for or involving possession of dangerous drugs
should only be done when another separate quantity of dangerous drugs, other than
mere residue, is found in the possession of the accused as provided for in Sec. 15.
(Emphasis supplied)

Furthermore, making the phrase “a person apprehended or arrested” in Section 15

applicable to all persons arrested or apprehended for unlawful acts, not only under
R.A. 9165 but for all other crimes, is tantamount to a mandatory drug testing of all
persons apprehended or arrested for any crime. To overextend the application of this
provision would run counter to our pronouncement in Social Justice Society v.
Dangerous Drugs Board and Philippine Drug Enforcement Agency,25to
wit:chanroblesvirtuallawlibrary

x x x [M]andatory drug testing can never be random and suspicionless. The ideas of
randomness and being suspicionless are antithetical to their being made defendants
in a criminal complaint. They are not randomly picked; neither are they beyond
suspicion. When persons suspected of committing a crime are charged, they are
singled out and are impleaded against their will. The persons thus charged, by the
bare fact of being haled before the prosecutor’s office and peaceably submitting
themselves to drug testing, if that be the case, do not necessarily consent to the
procedure, let alone waive their right to privacy. To impose mandatory drug testing
on the accused is a blatant attempt to harness a medical test as a tool for criminal
prosecution, contrary to the stated objectives of RA 6195. Drug testing in this case
would violate a person’s right to privacy guaranteed under Sec. 2, Art. III of the
Constitution. Worse still, the accused persons are veritably forced to incriminate
themselves. (Emphasis supplied)

The drug test is not covered by

allowable non-testimonial
compulsion.

We find that petitioner never raised the alleged irregularity of his arrest before his
arraignment and raises the issue only now before this tribunal; hence, he is deemed
to have waived his right to question the validity of his arrest curing whatever defect
may have attended his arrest.26 However, “a waiver of an illegal warrantless arrest
does not mean a waiver of the inadmissibility of evidence seized during an illegal
warrantless arrest.”27

We are aware of the prohibition against testimonial compulsion and the allowable
exceptions to such proscription. Cases where non-testimonial compulsion has been
allowed reveal, however, that the pieces of evidence obtained were all material to
the principal cause of the arrest.
The constitutional right of an accused against self-incrimination proscribes the use
of physical or moral compulsion to extort communications from the accused and not
the inclusion of his body in evidence when it may be material. Purely mechanical
acts are not included in the prohibition as the accused does not thereby speak his
guilt, hence the assistance and guiding hand of counsel is not required. (People vs.
Olvis, 238 Phil. 513 [1987]) The essence of the right against self-incrimination is
testimonial compulsion, that is, the giving of evidence against himself through a
testimonial act. (People vs. Casinillo, 213 SCRA 777 [1992]; People vs. Tranca, 235
SCRA 455 [1994]; People vs. Rondero, 378 Phil. 123 [1999]) Hence, it has been
held that a woman charged with adultery may be compelled to submit to physical
examination to determine her pregnancy; (Villaflor vs. Summers, 41 Phil. 62 [1920])
and an accused may be compelled to submit to physical examination and to have a
substance taken from his body for medical determination as to whether he was
suffering from gonorrhea which was contracted by his victim;(U.S. vs. Tan Teng,
23 Phil. 145 [1912]) to expel morphine from his mouth; (U.S. vs. Ong Siu Hong, 36
Phil. 735 [1917]) to have the outline of his foot traced to determine its identity with
bloody footprints; (U.S. vs. Salas, 25 Phil. 337 [1913]; U.S. vs. Zara, 42 Phil. 308
[1921]) and to be photographed or measured, or his garments or shoes removed or
replaced, or to move his body to enable the foregoing things to be done.(People vs.
Otadora, 86 Phil. 244 [1950]) 28 (Emphasis supplied)

In the instant case, we fail to see how a urine sample could be material to the charge
of extortion. The RTC and the CA, therefore, both erred when they held that the
extraction of petitioner’s urine for purposes of drug testing was “merely a
mechanical act, hence, falling outside the concept of a custodial investigation.”

We note a case where a urine sample was considered as admissible. In Gutang v.

People,29 the petitioner therein and his companions were arrested in connection with
the enforcement of a search warrant in his residence. A PNP-NARCOM team found
and confiscated shabu materials and paraphernalias. The petitioner and his
companions in that case were also asked to give urine samples, which yielded
positive results. Later, the petitioner therein was found guilty of the crime of illegal
possession and use of prohibited drugs. Gutang claimed that the latter’s urine sample
was inadmissible in evidence, since it was derived in effect from an uncounselled
extrajudicial confession.
In the Gutang et al. case, the Court clarified that “what the Constitution prohibits is
the use of physical or moral compulsion to extort communication from the accused,
but not an inclusion of his body in evidence, when it may be material.” The situation
in Gutang was categorized as falling among the exemptions under the freedom from
testimonial compulsion since what was sought to be examined came from the body
of the accused. The Court said:chanroblesvirtuallawlibrary

This was a mechanical act the accused was made to undergo which was not meant
to unearth undisclosed facts but to ascertain physical attributes determinable by
simple observation. In fact, the record shows that petitioner and his co-accused were
not compelled to give samples of their urine but they in fact voluntarily gave the
same when they were requested to undergo a drug test.

Assuming arguendo that the urine samples taken from the petitioner are inadmissible
in evidence, we agree with the trial court that the record is replete with other pieces
of credible evidence including the testimonial evidence of the prosecution which
point to the culpability of the petitioner for the crimes charged.

We emphasize that the circumstances in Gutang are clearly different from the
circumstances of petitioner in the instant case. First, Gutang was arrested in relation
to a drug case. Second, he volunteered to give his urine. Third, there were other
pieces of evidence that point to his culpability for the crimes charged. In the present
case, though, petitioner was arrested for extortion; he resisted having his urine
sample taken; and finally, his urine sample was the only available evidence that was
used as basis for his conviction for the use of illegal drugs.

The drug test was a violation of

petitioner’s right to privacy and
right against self-incrimination.

It is incontrovertible that petitioner refused to have his urine extracted and tested for
drugs. He also asked for a lawyer prior to his urine test. He was adamant in
exercising his rights, but all of his efforts proved futile, because he was still
compelled to submit his urine for drug testing under those circumstances.

The pertinent provisions in Article III of the Constitution are

clear:chanroblesvirtuallawlibrary
Section 2. The right of the people to be secure in their persons, houses, papers, and
effects against unreasonable searches and seizures of whatever nature and for any
purpose shall be inviolable, and no search warrant or warrant of arrest shall issue
except upon probable cause to be determined personally by the judge after
examination under oath or affirmation of the complainant and the witnesses he may
produce, and particularly describing the place to be searched and the persons or
things to be seized.

Section 17. No person shall be compelled to be a witness against himself.

In the face of these constitutional guarantees, we cannot condone drug testing of all
arrested persons regardless of the crime or offense for which the arrest is being made.

While we express our commendation of law enforcement agents as they vigorously

track down offenders in their laudable effort to curb the pervasive and deleterious
effects of dangerous drugs on our society, they must, however, be constantly mindful
of the reasonable limits of their authority, because it is not unlikely that in their clear
intent to purge society of its lawless elements, they may be knowingly or
unknowingly transgressing the protected rights of its citizens including even
members of its own police force.

WHEREFORE, premises considered, the assailed Decision dated 22 June 2011

issued by the Twentieth Division, and the Resolution dated 2 February 2012 issued
by the former Twentieth Division of the Court of Appeals, in CA-G.R. C.R. No.
00670 are SET ASIDE. Petitioner is hereby ACQUITTED.

SO ORDERED.

THIRD DIVISION

G.R. No. 202176, August 01, 2016

METROPOLITAN BANK & TRUST COMPANY, Petitioner, v. CHUY LU TAN,
MR. ROMEO TANCO, DR. SY SE HIONG, AND TAN CHU HSIU
YEN, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari seeking to reverse and set aside
the Decision1 and Resolution2 of the Court of Appeals (CA), dated March 20, 2012
and June 11, 2012, respectively, in CA-G.R. CV No. 92543. The assailed CA
Decision reversed and set aside the July 17, 2008 Decision 3 of the Regional Trial
Court (RTC) of Makati City, Branch 61, in an action for collection of a sum of
money, docketed as Civil Case No. 00-349, while the CA Resolution denied
petitioner's motion for reconsideration.

The facts of the case are as follows:

chanRoblesvirtualLawlibraryBetween February 26, 19-96 and May 8, 1996, herein

respondents Chuy Lu Tan (Chuy) and Romeo Tanco (Tanco) obtained five loans
from herein petitioner Metropolitan Bank & Trust Company (Metrobank) with an
aggregate amount of Nineteen Million Nine Hundred Thousand Pesos
(P19,900,000.00). These loans are evidenced by five Promissory Notes executed by
Chuy and Tanco on various dates.4 As security for the said loans, Chuy executed a
Real Estate Mortgage5 on February 26, 1996 over a 1,449.70 square meter parcel of
land in Quezon City covered by Transfer Certificate of Title No. RT-53314
(288923). In addition to the said mortgage, herein respondents Sy Se Hiong (Sy) and
Tan Chu Hsiu Yen (Tan) also executed a Continuing Surety Agreement6 whereby
they bound themselves to be solidarily liable with Chuy and Tanco for the principal
amount of P19,900,000.00 "plus interests thereon at the rate or rates stated in the
obligation secured thereby, any or all penalties, costs and expenses which may be
incurred by [Metrobank] in granting and/or collecting the aforesaid
obligations/indebtedness/instruments, and including those for the custody,
maintenance, and preservation of the securities given therefor, as may be incurred
by [Metrobank] before or after the date of [the] Surety Agreement."7chanrobleslaw

Subsequently, Chuy and Tanco failed to settle their loans despite Metrobank's
repeated demands for payment. In a final demand letter dated October 27, 1999,
Metrobank's counsel notified respondent Chuy that as of October 15, 1999, their
obligations, comprising the principal amount loaned, together with interest and
penalties, amounted to P24,353,062.03.8 Consequently, on December 14, 1999,
Metrobank extrajudicially foreclosed the mortgage and the property was sold to it
(Metrobank) as the highest bidder for the amount of P24,572,268.00.9chanrobleslaw

However, in separate letters to the respondents, which were all dated January 26,
2000, Metrobank claimed that after application of the bid price to the respondents'
outstanding obligation and the payment of the costs of foreclosure, accrued interest,
penalty charges, attorney's fees and other related expenses, there remained a
deficiency of P1,641,815.00, as of January 15, 2000.10 As such, Metrobank
demanded from respondents the payment of the said deficiency. For respondents'
failure to heed Metrobank's demand, the latter filed a suit for collection of a sum of
money with the RTC of Makati.

The case was then set for pre-trial. Subsequently, Chuy was declared in default for
failure to attend the pre-trial and to file her pre-trial brief.

Thereafter, trial ensued wherein Metrobank was allowed to present its evidence ex
parte against Chuy.

On July 17, 2008, the RTC rendered its Decision11 and disposed of the case as
follows:

WHEREFORE, premises duly considered, judgment is hereby rendered ordering the

herein defendants, namely, Chuy Lu Tan (Ms. Chuy), Romeo Tanco (Mr. Tanco),
Sy Se Hong (Mr. Sy) and Tan Chu Hsiu Yen (Mr. Tan) to PAY, jointly and severally,
the herein plaintiff Metropolitan Bank and Trust Company (Metrobank) the sum
of ONE MILLION SIX HUNDRED FORTY-ONE THOUSAND EIGHT
HUNDRED FIFTEEN PESOS (P1,641,815.00), with interest at the legal rate from
16 January 2000 until the amount is fully paid, and the cost of suit.

SO ORDERED.
Both petitioner and respondents, with the exception of Chuy, appealed the RTC
Decision with the CA.
In its appeal, Metrobank made the following Assignment of Errors:
A. THE TRIAL COURT ERRED IN NOT APPLYING THE INTEREST RATES,
PENALTY CHARGES STIPULATED IN THE PROMISSORY NOTES ON THE
UNPAID OBLIGATION OF [RESPONDENTS].

B. THE TRIAL COURT ERRED IN NOT AWARDING ATTORNEY'S FEES IN

FAVOR OF X X X METROBANK.12
On the other hand, respondents raised the following issues in their appeal, to wit:
I

WHETHER THE TRIAL COURT ERRED IN FAILING TO RESOLVE THE

ISSUE OF THE EXCESSIVE AND UNFOUNDED AMOUNT OF THE
ALLEGED DEFICIENCY BALANCE DUE TO X X X METROBANK IN THE
AMOUNT OF P1,641,815.00 CONSISTING OF PENALTIES AND
SURCHARGES, WHEN THE VALUE OF THE PROPERTY FORECLOSED
WAS ALREADY MORE THAN ENOUGH TO PAY THE DEBT IN FULL.

II

WHETHER THE TRIAL COURT ERRED IN FINDING THAT

[RESPONDENTS] ARE JOINTLY AND SEVERALLY LIABLE TO X X X
METROBANK, DESPITE THE FACT THAT [RESPONDENTS] HAVE
ESTABLISHED BY PREPONDERANCE OF EVIDENCE THAT
[METROBANK] HAD ALREADY RECOVERED THE UNPAID BALANCE ON
THE PRINCIPAL OBLIGATION AND ALREADY SUBSTANTIALLY GAINED
FROM THE FORECLOSURE OF THE COLLATERAL PROPERTIES. AS A
COURT OF EQUITY, THIS HONORABLE COURT SHOULD NOT TOLERATE
AND SHOULD THEREFORE STRIKE OFF SUCH UNREASONABLE AND
EXORBITANT PENALTIES AND SURCHARGES BEING CLAIMED BY
[METROBANK] IN THIS CASE.

III

WHETHER THE TRIAL COURT ERRED IN FAILING TO RULE THAT

RESPONDENT DR. SY'S CONJUGAL PARTNERSHIP [PROPERTIES] WITH
HIS WIFE LYDIA SY CANNOT BE HELD ANSWERABLE FOR
[METROBANK'S] CLAIMS. HAVING ENTERED INTO THE SURETYSHIP
AGREEMENT WITHOUT THE CONSENT OF HIS WIFE, THE CONJUGAL
ASSETS OF DR. SY CANNOT BE HELD ANSWERABLE FOR ANY OF
[METROBANK'S] CLAIMS ABSENT ANY SHOWING THAT IT
REDOUNDED TO THE BENEFIT OF THEIR CONJUGAL PARTNERSHIP.13
On March 20, 2012, the CA promulgated its assailed Decision by reversing and
setting aside the July 17, 2008 Decision of the RTC and dismissing Metrobank's
complaint. The CA ruled that to allow Metrobank to recover the amount it seeks
from respondents would be iniquitous, unconscionable and would amount to unjust
enrichment.

Metrobank filed a Motion for Reconsideration,14 but the CA denied it in its

Resolution dated June 11, 2012.

Hence, the present petition with a lone Assignment of Error, to wit:

THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND
SETTING ASIDE THE TRIAL COURT'S DECISION DATED 17 JULY 2008.15
In support of its contention, petitioner argues that the CA erred in denying its
deficiency claim on the ground that such claim, which allegedly consisted almost
entirely of interest and penalties, is iniquitous, unconscionable and exorbitant.
Petitioner also posits that the CA erred in ruling that the mortgaged property is worth
more than the bid price and, hence, bars petitioner from claiming any deficiency.
Lastly, petitioner claims that its deficiency claim should not have been dismissed
because respondents have admitted default in the payment of their obligations.

In the instant case, there is no dispute with respect to the total amount of the
outstanding loan obligation that respondents owed petitioner at the time of the
extrajudicial foreclosure sale of the property subject of the real estate mortgage.
Likewise, it is uncontested that by subtracting the amount obtained at the sale of the
property, a loan balance still remains. Petitioner merely contends that, contrary to
the ruling of the CA, it has the right to collect from respondents the remainder of
their obligation after deducting the amount obtained from the extrajudicial
foreclosure sale. On the other hand, respondent avers that since the supposed value
of the subject property shows that it is more than the amount of their outstanding
obligation, then respondents can no longer be held liable for the balance, especially
because it was petitioner who bought the property at the foreclosure sale.

The Court rules for the petitioner.

Settled is the rule that a creditor is not precluded from recovering any unpaid balance
on the principal obligation if the extrajudicial foreclosure sale of the property subject
of the real estate mortgage results in a deficiency.16 In Spouses Rabat v. Philippine
National Bank, 17 this Court held:
x x x it is settled that if the proceeds of the sale are insufficient to cover the debt in
an extrajudicial foreclosure of the mortgage, the mortgagee is entitled to claim the
deficiency from the debtor. For when the legislature intends to deny the right of a
creditor to sue for any deficiency resulting from foreclosure of security given to
guarantee an obligation it expressly provides as in the case of pledges [Civil Code,
Art. 2115] and in chattel mortgages of a thing sold on installment basis [Civil Code,
Art. 1484(3)]. Act No. 3135, which governs the extrajudicial foreclosure of
mortgages, while silent as to the mortgagee's right to recover, does not, on the other
hand, prohibit recovery of deficiency. Accordingly, it has been held that a deficiency
claim arising from the extrajudicial foreclosure is allowed.18
Indeed, the fact that the mortgaged property was sold at an amount less than its actual
market value should not militate against the right to such recovery.19 This Court has
likewise ruled that in deference to the rule that a mortgage is simply a security and
cannot be considered payment of an outstanding obligation, the creditor is not barred
from recovering the deficiency even if it bought the mortgaged property at the
extrajudicial foreclosure sale at a lower price than its market value notwithstanding
the fact that said value is more than or equal to the total amount of the debtor's
obligation.20 Thus, in the case of Suico Rattan & Buri Interiors, Inc. v. Court of
Appeals, 21 this Court explained that:
Hence, it is wrong for petitioners to conclude that when respondent bank supposedly
bought the foreclosed properties at a very low price, the latter effectively prevented
the former from satisfying their whole obligation. Petitioners still had the option of
either redeeming the properties and, thereafter, selling the same for a price which
corresponds to what they claim as the properties' actual market value or by simply
selling their right to redeem for a price which is equivalent to the difference between
the supposed market value of the said properties and the price obtained during the
foreclosure sale. In either case, petitioners will be able to recoup the loss they claim
to have suffered by reason of the inadequate price obtained at the auction sale and,
thus, enable them to settle their obligation with respondent bank. Moreover,
petitioners are not justified in concluding that they should be considered as having
paid their obligations in full since respondent bank was the one who acquired the
mortgaged properties and that the price it paid was very inadequate. The fact that it
is respondent bank, as the mortgagee, which eventually acquired the mortgaged
properties and that the bid price was low is not a valid reason for petitioners to refuse
to pay the remaining balance of their obligation. Settled is the rule that a mortgage
is simply a security and not a satisfaction of indebtedness.
As to petitioner's entitlement to the amount sought to be recovered, respondents, in
their Special and Affirmative Defenses,22 contained in their Answer with
Compulsory Counterclaim, as well as in their Appellant's Brief 23 filed with the CA,
never disputed the amount and computation of the deficiency sought to be recovered
by petitioner. What respondents are insisting is that petitioner is barred from
recovering any deficiency because the bid price is considerably inadequate as
compared to the alleged actual value of the foreclosed property. However, as
discussed above, the settled rule is that when there is right to redeem, the inadequacy
of the price becomes immaterial since the judgment debtor may reacquire the
property or sell his right to redeem.

In the same manner, what is being implied in the assailed CA Decision is that the
bid price should approximate the value of the mortgaged property.

The Court does not agree.

Act No. 3135, which governs extrajudicial foreclosure of real estate mortgages, has
no requirement for the determination of the mortgaged properties' appraisal value.
Nothing in the law likewise indicates that the mortgagee-creditor's appraisal value
shall be the basis for the bid price. Neither is there any rule nor any guideline
prescribing the minimum amount of bid, nor that the bid should be at least equal to
the properties' current appraised value. What the law only provides are the
requirements, procedure, venue and the mortgagor's right to redeem the
property.24chanrobleslaw
Throughout a long line of jurisprudence, this Court has declared that unlike in an
ordinary sale, inadequacy of the price at a forced sale is immaterial and does not
nullify a sale since, in a forced sale, a low price is more beneficial to the mortgage
debtor for it makes redemption of the property easier.25cralawredchanrobleslaw

Thus, even if the Court were to assume that the valuation of the property at issue is
correct, the Court still holds that the inadequacy of the price at which it was sold at
public auction does not prevent petitioner from claiming any deficiency not covered
by the said foreclosure sale.

Contrary to the ruling of the CA, the Court may not temper respondents' liability to
the petitioner on the ground of equity. The Court is barred by its own often repeated
admonition that equity, which has been aptly described as "justice outside legality,"
is applied only in the absence of, and never against, statutory law or judicial rules of
procedure.26 For all its conceded merit, equity is available only in the absence of law
and not as its replacement.27 The law and jurisprudence on the matter are clear
enough to close the door on a recourse to equity, insofar as the present case is
concerned.

Indeed, Article 1159 of the Civil Code expressly provides that obligations arising
from contracts have the force of law between the contracting parties and should be
complied with in good faith. In the present case, it is clear under the Promissory
Notes, Real Estate Mortgage contract and the Continuing Surety Agreement
executed by respondents that they voluntarily bound themselves to pay the amounts
being claimed by petitioner.

Furthermore, there is no convincing evidence nor argument which would show that
petitioner is not entitled to the deficiency it claims. The CA simply says that to allow
petitioner to recover the amount it seeks, which is allegedly over and above the actual
value of the property it bought at public auction, would amount to unjust enrichment.
However, the Court does not see any unjust enrichment resulting from upholding the
right of the petitioner to collect any deficiency from respondents. Unjust enrichment
exists when a person unjustly retains a benefit to the loss of another, or when a person
retains money or property of another against the fundamental principles of justice,
equity and good governance. As discussed above, there is a strong legal basis for
petitioner's claim against respondents for the balance of their loan obligation.
Nonetheless, the Court does not totally agree with petitioner's contention that the
rate of penalty charges which should be imposed on the deficiency claim, as well as
the recoverable attorney's fees, should be that embodied in the contract entered into
by the parties. As earlier mentioned, a contract is the law between the parties and
courts have no choice but to enforce such contract.29 This principle, however, is
subject to the condition that the contract is not contrary to law, morals, good customs
or public policy.30chanrobleslaw

In the instant case, the Promissory Notes executed by respondents indicate that the
interest rates were pegged at sixteen percent (16%) per annum, computed from the
dates of execution thereof. Under settled jurisprudence, twenty-four percent (24%)
interest rate is not considered unconscionable.31Hence, the Court finds the sixteen
percent (16%) interest rate imposed by petitioner as fair.

With respect to the penalty charge, this Court has held that the surcharge or penalty
stipulated in a loan agreement in case of default partakes of the nature of liquidated
damages under Article 2226 of the Civil Code, and is separate and distinct from
interest payment.32 Also referred to as a penalty clause, it is expressly recognized by
law. It is an accessory undertaking to assume greater liability on the part of an
obligor in case of breach of an obligation.33chanrobleslaw

Nonetheless, under Article 2227 of the Civil Code, liquidated damages, whether
intended as an indemnity or a penalty, shall be equitably reduced if they are
iniquitous or unconscionable.

In the same vein, Article 1229 of the same Code provides:

The judge shall equitably reduce the penalty when the principal obligation has been
partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.34
In the instant case, the Court finds the eighteen percent (18%) penalty charge
imposed by petitioner on the deficiency claim, computed from the time of default,
as excessive and, accordingly, reduces it considering that petitioner was already able
to recover a large portion of respondents' principal obligation. In consonance with
prevailing jurisprudence,35 the Court finds it proper to reduce the rate of penalty
charge imposed on the deficiency claim from eighteen percent (18%) per annum to
twelve percent (12%) per annum.

As to the attorney's fees, the law allows a party to recover attorney's fees under a
written agreement.36In Barons Marketing Corporation v. Court of Appeals, 37 the
Court ruled that:
[T]he attorney's fees here are in the nature of liquidated damages and the stipulation
therefor is aptly called a penal clause. It has been said that so long as such stipulation
does not contravene law, morals, or public order, it is strictly binding upon
defendant. The attorney's fees so provided are awarded in favor of the litigant, not
his counsel, x x x38
The foregoing notwithstanding, even if such attorney's fees are allowed by law, as
in the case of the above-discussed penalty charge, the courts still have the power to
reduce the same if the said fees are unreasonable.39chanrobleslaw

In the present case, the subject Promissory Notes provide for the payment of
attorney's fees at the rate often percent (10%) of the amount due. The same must be
equitably reduced taking into account the fact that: (1) petitioner has already
recovered the principal amount it seeks during the foreclosure sale; (2) petitioner has
likewise recovered a sizeable portion of the interest and penalty charges which were
imposed on the principal amount due; (3) the attorney's fees are not an integral part
of the cost of borrowing but a mere incident of collection; and (4) the attorney's fees
were intended as penal clause to answer for liquidated damages, which is similar to
the purpose of the imposition of penalty charge.40Hence, the rate of ten percent
(10%) of the total amount due, as suggested by petitioner, is too onerous. Under the
premises, attorney's fees equivalent to ten percent (10%) of the deficiency claim is
reasonable.

Lastly, pursuant to prevailing jurisprudence,41 the total monetary awards shall earn
interest at the prevailing rate of six percent (6%) per annum from finality of this
Decision until full satisfaction thereof, which takes the form of a judicial debt.

WHEREFORE, the petition is PARTLY GRANTED. The March 20, 2012 Decision
and June 11, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 92543
are REVERSED and SET ASIDE. The July 17, 2008 Decision of the Regional Trial
Court of Makati City, Branch 61 is REINSTATED with the MODIFICATION that
the sum of P1,641,815.00 due to petitioner shall earn interest at the rate of sixteen
percent (16%) per annum and penalty charge at the rate of twelve percent (12%) per
annum,computed from January 16, 2000 until finality of this Decision. Respondents
are also ORDERED to PAYattorney's fees in the amount of P164,181.50, which is
equivalent to ten percent (10%) of the deficiency claim. The total monetary awards
shall earn interest at the rate of six percent (6%) per annum,computed from the
finality of this Decision until their full satisfaction.

SO ORDERED.chanRoblesvirtualLawlibrary
SPOUSES MA. CRISTINA D. TIRONA and OSCAR TIRONA, SPOUSES MA.
PAZ D. BAUTISTA and CESAR BAUTISTA, SPOUSES MA. ARANZAZU
D. ORETA and CANUTO ORETA, SPOUSES MA. CORAZON D.
BAUTISTA and PABLO S. BAUTISTA, JR., and DEO S.
DIONISIO, petitioners, vs. HON. FLORO P. ALEJO as Presiding Judge,
Regional Trial Court of Valenzuela, Metro Manila, Branch 172, JUANITO
IGNACIO and LUIS NUEZ, respondents.

DECISION
QUISUMBING, J.:

This petition for review assails the joint decision[1] dated April 10, 1997, of the
Regional Trial Court of Valenzuela, Branch 172, in Civil Cases Nos. 5169-V-97 and
5093-V-97.
The factual background of this petition are culled from the records of the cases.
A. Civil Case No. 5093-V-97:
On March 25, 1996, herein petitioners sued private respondent Luis Nuez before
the Metropolitan Trial Court of Valenzuela, Branch 81. The suit was docketed as
Civil Case No. 6633 for ejectment.Petitioners claimed to be owners of various
fishpond lots located at Coloong, Valenzuela.[2] They alleged, among others that: (1)
on January 20, 1996, private respondent Nuez, by means of force, stealth, or strategy,
unlawfully entered the said fishpond lots and occupied the same against their will,
thereby depriving them of possession of said fishponds; (2) Nuez illegally occupied
a house owned by and built on the lot of petitioner Deo Dionisio; and (3) Nuez
unlawfully operated and used petitioners fishponds, despite their demands to vacate
the same. Petitioners prayed that the court order Nuez to vacate Dionisios house;
surrender possession of the fishponds to them; remove all milkfish fingerlings at his
expense; and pay a monthly compensation of P29,000.00 from January 20, 1996 to
the time he surrenders possession, with interest at twelve percent (12%) yearly until
fully paid.
Nuez admitted in his answer that petitioners owned the fishponds, but denied the
other allegations. He raised the following affirmative defenses: (1) the MeTC had
no jurisdiction over the case, for petitioners failure to allege prior physical
possession in their complaint; (2) petitioners action was premature in view of the
pendency of a complaint he filed with the Department of Agrarian Reform
Adjudication Board (DARAB), docketed as Case No. IV-MM-0099-95R, where the
issue of possession in the concept of tenancy is the same as that raised by petitioners
in Civil Case No. 6633; and (3) petitioners are guilty of forum-shopping since they
were fully aware of the said DARAB case. He moved that the ejectment suit be
dismissed.
On October 1, 1996, the MeTC of Valenzuela, Branch 81, decided Civil Case
No. 6633 as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiffs and against the defendant and all persons claiming rights under him:

1. To peacefully vacate and surrender the subject premises to the plaintiffs;

2. To peacefully vacate and surrender the house belonging to plaintiff Deo
S. Dionisio;
3. To pay the amount of P27,000.00 a month as reasonable compensation
from January 20, 1996 up to the time he finally vacates the subject
premises;
4. To pay the amount of P10,000.00 as and for attorneys fees; and
5. To pay the costs of suit.

SO ORDERED.[3]

On November 15, 1996, Nuez appealed said decision to the Regional Trial Court
of Valenzuela, which docketed the appeal as Civil Case No. 5093-V-97.
B. Civil Case No. 5169-V-97
 On March 25, 1996, petitioners also instituted Civil Case No. 6632 for ejectment
against private respondent Juanito Ignacio with the Metropolitan Trial Court of
Valenzuela, Branch 82. The allegations were essentially the same as those against
private respondent Nuez, except it is alleged that Ignacio also illegally occupied the
house constructed on the lot of, and belonging to the plaintiff Spouses Ma. Paz D.
Bautista and Cesar Bautista. Petitioners sought the same relief prayed for in Civil
Case No. 6633.
Ignacio raised similar defenses as those offered by Nuez in Civil Case No.
6633. Like Nuez, he also moved for dismissal of the ejectment suit against him.
On February 11, 1997, the MeTC of Valenzuela, Branch 82 issued an order
dismissing Civil Case No. 6632 against Ignacio, thus:

WHEREFORE, PREMISES CONSIDERED, defendants motion to cite plaintiffs in

contempt of court is denied, and his other motion to dismiss the case is hereby
GRANTED.

Accordingly, the above-entitled case is DISMISSED without pronouncement as to

costs.

SO ORDERED.[4]

In granting Ignacios Motion to Dismiss, the MeTC said:

It is now clear to the mind of the Court that the issue of recovery of possession
pursued by plaintiffs in this case is pending also for adjudication among other issues
in DARAB Case No. IV-MM-0099-95.There is no dispute that both this case and
the DARAB case involve the same real property or at least, adjoining lots covered
by titles in the names of some of the plaintiffs, which lots are also involved in this
case.

xxx

Clearly, said DARAB case is a prejudicial question to the case at bar, and or vice
versa (stress in the original). The possibility that this Court and the DARAB may
come up with two contradicting decisions on issue of possession shall always be
there, and since the DARAB case was filed first, there appears compelling necessity
to halt proceedings in this case.[5]
 On February 27, 1997, petitioners appealed the foregoing Order to the Regional
Trial Court of Valenzuela, which docketed their appeal as Civil Case No. 5169-V-
97.
Since Civil Cases Nos. 5093-V-97 and 5169-V-97 involved essentially the same
parties, the same subject matter, and the same issues, the cases were jointly heard
before Branch 172 of the RTC of Valenzuela.
On April 10, 1997, Civil Cases Nos. 5093-V-97 and 5169-V-97 were jointly
decided.

WHEREFORE, judgment is hereby rendered as follows:

1. Affirming the appealed Order of the trial court dated February 11, 1997
dismissing Civil Case No. 6632, with the modification that the plaintiffs
be made liable to pay the costs of suit; and
2. Reversing the appealed decision of the trial court dated October 1, 1996
in Civil Case No. 6633 and dismissing the above-entitled case for the
reasons stated above. The plaintiffs are ordered to pay the costs of suit.

SO ORDERED.[6]

In ruling against herein petitioners, the RTC found:

(1) As correctly pointed out by the counsel for the defendants in his memorandum
on appeal, it is now settled that a complaint for forcible entry to fall within the
jurisdiction of the inferior court must allege plaintiffs prior physical possession of
the property by any of the means provided in Section 1 of Rule 70 of the Revised
Rules of Court. Bare allegation in the complaint that the plaintiff was deprived of
the possession of the property is insufficient to make the action one for forcible entry
(citation omitted)

In the instant case, while the complainants allege that the defendants (Ignacio in
Civil Case No. 6632 and Nuez in Civil Case No. 6633) by means of force, stealth or
strategy unlawfully entered the said fishpond lots and occupied the same against the
will of the plaintiffs, there is no allegation that the plaintiffs had prior physical
possession of the property in dispute. The complaint(s) in the above-entitled cases
therefore did not fall within the jurisdiction of the trial courts.
(2) The DARAB case (Case No. IV-MM-0099-95R) between the herein parties and
covering the same subject matter was filed way ahead of the instant cases. The
allegation in the DARAB complaint that the complainants are agricultural or share
tenants is opposed to the claim of the respondents in their answer that the
complainants are their industrial partners. The DARAB case thus presented a dispute
that is clearly agrarian in nature. Under existing lawsthe Department of Agrarian
Reform, thru the DARAB, is vested with exclusive jurisdiction over all agrarian
reform matters or agrarian disputes.

The principal issue in the instant cases for forcible entry whether or not to eject the
defendants from the fishponds is necessarily connected with the agrarian dispute
now pending resolution before the DARAB. It is therefore beyond the competence
of the inferior court to resolve.

xxx

(3) The plaintiffs were less than honest in certifying under oath that they have no
knowledge of any case pending before any tribunal or agency involving the same
issues raised in the instant cases. At the time of their certification, there was pending
before the DARAB of a case between the same parties with the same subject matter
and where the issue of possession as raised in the instant cases is necessarily included
in the larger issue of agricultural tenancy. The plaintiffs therefore violated
Administrative Order No. 04-94 of the Supreme Court, which is a ground for
dismissal.[7]

On May 6, 1997, petitioners filed with the RTC a joint Motion for Leave to
Amend Complaint in Civil Cases Nos. 6632 and 6633 and a Motion for
Reconsideration, together with the proposed Amended Complaints. On May 20,
1997, the RTC denied the aforementioned motions.
Hence, the instant petition. Petitioners assign the following as errors committed
by the RTC:
1. THE LOWER COURT ERRED IN GIVING PRIME IMPORTANCE TO
THE FAILURE OF PLAINTIFFS TO AVER IN THEIR
COMPLAINT(S) THAT THEY WERE IN POSSESSION AT THE
TIME OF THE FORCIBLE ENTRY MADE BY PRIVATE
RESPONDENTS.
 2. THE LOWER COURT ERRED IN FAILING TO MAKE A FINDING
THAT PLAINTIFFS WERE IN POSSESSION OF THEIR
PROPERTIES AT THE TIME OF FORCIBLE ENTRY THEREUNTO
BY PRIVATE RESPONDENTS, FOR WHICH RELIEFS SHOULD
HAVE BEEN GRANTED TO HEREIN PETITIONERS.
3. THE PENDENCY OF THE SUIT FILED BY PRIVATE
RESPONDENTS IN THE DEPARTMENT OF AGRARIAN REFORM
DID NOT PROSCRIBE THE INSTITUTION OF THE EJECTMENT
CASE(S).
4. THERE HAD BEEN NO INFRACTION ON THE AFFIDAVIT OF
NON-FORUM SHOPPING REQUIREMENTS.
The main issue for our resolution involves the jurisdiction of the metropolitan
trial courts: was petitioners failure to allege prior physical possession in a case for
forcible entry fatal to the jurisdiction of the inferior courts? Ancillary thereto, we
also must inquire (a) whether the pendency of the Case No. IV-MM-0099-95R
before the DARAB barred the filing of Civil Cases Nos. 6632 and 6633 for forcible
entry; and (b) whether petitioners violated Supreme Court Administrative Circular
No. 04-94 proscribing forum shopping.
On the main issue, petitioners contend that the averment of the identities of the
persons in possession of the disputed properties at the time of the forcible entry
thereunto is not jurisdictional in character.Petitioners argue that the deficiency, if
any, could have been remedied by amended or supplemental pleadings or by the
submission of admissible evidence. They point out that the MeTC, Branch 81 in
Civil Case No. 6633 had received evidence of petitioners actual possession, resulting
in a finding of fact of actual possession in its Decision of October 1, 1996. It was,
therefore, an error for the RTC to have disregarded said finding of fact on the ground
that the requisites for the MeTC to acquire jurisdiction over the forcible entry cases
had not been complied with. It was likewise error for the RTC to have denied the
admission of petitioners Amended Complaints.
Private respondents argue that a closer scrutiny of the allegations in the
complaints in Civil Cases Nos. 6632 and 6633 filed with the court of origin will
clearly show that there is no allegation whatsoever of prior physical possession on
petitioners part. All that is averred is unlawful deprivation by private
respondents. They submit that this glaring defect is fatal enough to deprive the
inferior court of jurisdiction over the forcible entry cases. With respect to the denial
of admission of petitioners Amended Complaints, private respondents point out that
amendments for the purpose of making the complaint confer jurisdiction upon the
court are not allowed.
The jurisdiction of a court is determined by the allegations of the complaint, and
the rule is no different in actions for ejectment.[8] Thus, in ascertaining whether or
not the action is one for forcible entry falling within the exclusive jurisdiction of the
inferior courts, the averments of the complaint and the character of the relief sought
are to be examined. Petitioners complaints in Civil Cases Nos. 6632 and 6633 are
virtually identical, save as to the names of the defendants and the owners of the
houses allegedly occupied by private respondents. The pertinent allegations in Civil
Case No. 6633 read:

3) That plaintiffs in their individual rights, are respective owners in fee simple of
fishpond lots located at Barangay Coloong, Municipality of Valenzuela, Metro
Manila, with areas, lot numbers, and titles, xerox copies of which are Annexed hereto

xxx

4) That on or about January 20, 1996, said defendant Luis Nuez by means of force,
stealth or strategy, unlawfully entered the said fishpond lots and occupied the same
against the will of the plaintiffs thereby depriving said owners of the possession of
the same;

5) That defendant Luis Nuez also illegally occupied the house constructed on the lot
of, and belonging to, plaintiff Deo S. Dionisio;

6) That said defendant also planted bangus fingerlings in the said fishponds and
despite demands for them to remove the same and vacate the fishpondsstill continue
to unlawfully, illegally, and wantonly occupy said house and operate said fishponds
to the great damage and prejudice of the plaintiffs.[9]

Petitioners submit that the phrase thereby depriving said owners of the
possession of the same in paragraph 4 is tantamount to an averment of prior physical
possession since private respondents could not have deprived them of possession
unless the latter had been previously in possession of the subject properties.
We are not persuaded. It cannot be inferred from the aforecited phrase that the
possession that petitioners were supposedly deprived of is a prior physical
possession. The question arises, what sort of prior physical possession is to be
averred? The word possession as used in forcible entry and unlawful detainer, means
nothing more than physical possession, (stress supplied) not legal possession in the
sense contemplated in civil law.[10] The allegation must likewise show priority in
time. Both requisites are wanting in the phrase relied upon by petitioners.
A reading of the allegations in the complaints leads us to conclude that
petitioners action was one for forcible entry, not unlawful detainer. The distinctions
between the two actions are: (1) In an action for forcible entry, the plaintiff must
allege and prove that he was in prior physical possession of the premises until
deprived thereof, while in illegal detainer, the plaintiff need not have been in prior
physical possession; and (2) in forcible entry, the possession by the defendant is
unlawful ab initio because he acquires possession by force, intimidation, threat,
strategy, or stealth, while in unlawful detainer, possession is originally lawful but
becomes illegal by reason of the termination of his right of possession under his
contract with the plaintiff. In pleadings filed in courts of special jurisdiction, the
special facts giving the court jurisdiction must be specially alleged and set
out. Otherwise, the complaint is demurrable.[11] Hence, in actions for forcible entry,
two allegations are mandatory for the municipal court to acquire jurisdiction: First,
the plaintiff must allege his prior physical possession of the property. Second, he
must also allege that he was deprived of his possession by any of the means provided
for in Section 1, Rule 70 of the Rules of Court, namely: force, intimidation, threats,
strategy, and stealth.[12] Recall that the complaints in Civil Cases Nos. 6632 and 6633
failed to allege prior physical possession of the property on the part of petitioners.
All that is alleged is unlawful deprivation of their possession by private
respondents. The deficiency is fatal to petitioners actions before the Metropolitan
Trial Court of Valenzuela. Such bare allegation is insufficient for the MeTC to
acquire jurisdiction. No reversible error was, therefore, committed by the RTC when
it held that the Metropolitan Trial Court acquired no jurisdiction over Civil Cases
Nos. 6632 and 6633 for failure of the complaints to aver prior physical possession
by petitioners.
But was the deficiency remedied, however, when petitioners submitted their
Amended Complaints?
The policy in this jurisdiction is that amendments to pleadings are favored and
liberally allowed in the interests of substantial justice. Thus, amendments of the
complaint may be allowed even if an order for its dismissal has been issued so long
as the motion to amend is filed before the order of dismissal acquired
finality.[13] Note, however, that it is not a hard and fast rule. An amendment is not
allowed where the court has no jurisdiction over the original complaint and the
purpose of the amendment is to confer jurisdiction upon the court,[14] or where the
action originally pleaded in the complaint was outside the jurisdiction of the
court.[15] We have carefully perused petitioners proposed amendments and found
them to include the allegation that petitioners were in prior physical possession of
the disputed fishponds before said possession was allegedly disturbed. Clearly, the
purpose is to sidestep the RTC ruling that MeTC had no jurisdiction over their
complaints and allow the inferior court to acquire jurisdiction. This we cannot allow.
Where the court of origin had no jurisdiction over the original complaint in the first
place, amendments may not be had. It is axiomatic that before an amendment can be
permitted, the trial court must have acquired jurisdiction over the case in the first
instance.[16]
Regarding the second issue, petitioners contend that the DARAB had no
jurisdiction over Case No. IV-MM-0099-95R. They submit that with the passage of
Republic Act No. 7881[17] on February 20, 1995, private lands directly and
exclusively used for prawn farms and fishponds are exempt from the coverage of the
Comprehensive Agrarian Reform Law or Republic Act No. 6657. No agrarian
relation thus subsisted between the parties for the DARAB to take cognizance
of. Thus, litis pendentia did not bar the filing of Civil Cases Nos. 6632 and
6633. Stated differently, the pendency of Case No. IV-MM-0099-95R did not divest
the MeTC of its jurisdiction to hear and try the forcible entry cases.
Private respondents contend that a comparison between DARAB Case No. IV-
MM-0099-95R and Civil Cases Nos. 6632 and 6633 would show the same parties,
the same subject matter of controversy, and the same issues. In other words, litis
pendentia lies and may be availed of to dismiss the cases for forcible entry filed with
the MeTC.
At the outset, we must point out that petitioners reliance upon Republic Act No.
7881 is off tangent. It is not disputed that at the time of the filing of Civil Cases Nos.
6632 and 6633, an agrarian relations dispute was pending before the DARAB. The
records show that private respondents as the complainants in Case No. IV-MM-
0099-95R, were asserting tenancy rights, including the right to possession of the
disputed fishponds or parts thereof, under Republic Act Nos. 3844[18] and
1199.[19] Private respondents were thus claiming vested substantive rights, dating
back to 1975 in the case of respondent Ignacio and 1979 in the case of respondent
Nuez, under substantive laws. A substantive law is a law, which creates, defines, or
regulates rights concerning life, liberty, or property, or the powers of agencies or
instrumentalities for the administration of public affairs.[20] Republic Act No. 7881,
in exempting prawn farms and fishponds from the coverage of the Comprehensive
Agrarian Reform Law of 1988, is a substantive law. By its very nature and essence,
substantive law operates prospectively[21] and may not be construed retroactively
without affecting previous or past rights. Hence, in view of the absence of a contrary
intent in its provisions, Republic Act No. 7881 should be given a prospective
operation and may not affect rights claimed under previous agrarian legislation.
Under Rule 16, Section 1 of the Rules of Court, litis pendentia or pendency of
another action is a ground for the dismissal of the second action. Recall that in the
motions to dismiss filed by private respondents in Civil Cases Nos. 6632 and 6633,
the pendency of the DARAB case was one of the grounds relied upon in seeking the
dismissal of both actions. For litis pendentia to lie, the following requisites must be
satisfied:
1. Identity of parties or representation in both cases;
2. Identity of rights asserted and relief prayed for;
3. The relief must be founded on the same facts and the same basis; and
4. Identity of the two preceding particulars should be such that any judgment,
which may be rendered in the other action, will, regardless of which party
is successful, amount to res judicata on the action under consideration.[22]
These requisites, in our view, are present in this case. For one, the parties in the
DARAB case and in the forcible entry cases filed with the MeTC are the same. Also,
there is identity of rights asserted and reliefs prayed for. The action in Case No. IV-
MM-0099-95R is for declaration of tenancy, accounting, recovery of possession,
specific performance, recovery of sum of money, plus damages against
petitioners. Note that the properties that private respondents seek to recover
possession of in the DARAB case form part of the properties from which petitioners
seek the ejectment of private respondents. The evident and logical conclusion then
is that any decision that may be rendered in the DARAB case regarding the question
of possession will also resolve the question of possession in the forcible entry
cases.Undergirding the principle of litis pendentia is the theory that a party is not
allowed to vex another more than once regarding the same subject matter and for the
same cause of action. This theory is founded on the public policy that the same
matter should not be subject of controversy in court more than once in order that
possible conflicting judgments may be avoided, for the sake of the stability in the
rights and status of persons. The MeTC of Valenzuela, Branch 82, recognized this
doctrine when it dismissed Civil Case No. 6632 to avoid the possibility of two
contradictory decisions on the question of possession emanating from the DARAB
and the trial court. In turn, the RTC was correct in finding that the issue of possession
was inextricably intertwined with the agrarian dispute, an issue which was beyond
the jurisdiction and competence of the inferior court to settle. In so doing, the RTC
deferred to the primary jurisdiction and administrative expertise of the DARAB to
settle agrarian cases. Thus, we are constrained to conclude that under the concept
of litis pendentia, the pendency of DARAB Case No. IV-MM-0099-95R served as a
bar to the filing of Civil Cases Nos. 6632 and 6633.
On the third issue, petitioners maintain that the petitioner-affiant who subscribed
the requisite Affidavit of Non-forum Shopping understood that the issues pending
resolution before the DARAB had no relation to petitioners actions for forcible
entry, and hence had seen no need to report anymore the pendency of the DARAB
case. Moreover, private respondents claim that in their pleadings they early enough
disclosed the pendency of the DARAB case to the courts hearing the ejectment
cases. Hence, they aver that there was no violation whatsoever of the non-forum
shopping requirements.
Private respondents argue that petitioners explanations on the matter amount to
a mea culpa on account of wild speculation and assumption of the facts of the
case. They ask us to affirm the findings below that petitioners violated the Courts
Circular proscribing forum shopping.
Supreme Court Administrative Circular No. 04-94, imposing additional
requisites in civil complaints, petitions, and other initiatory pleadings filed in all
courts and agencies to prevent forum shopping, provides in part:

1. The plaintiff, petitioner, applicant or principal party seeking relief in the

complaint, petition, application or other initiatory pleading shall certify under oath
in such original pleading, or in a sworn certification annexed thereto and
simultaneously filed therewith to the truth of the following facts and undertakings:
(a) he has not theretofore commenced any other action or proceeding involving the
same issues in the Supreme Court, the Court of Appeals, or any other tribunal or
agency; (b) to the best of his knowledge, no such action or proceeding is pending in
the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if there
is any such action or proceeding which is either pending or may have been
terminated, he must state the status thereof; and (d) if should thereafter learn that a
similar action or proceeding has been filed or is pending before the Supreme Court,
the Court of Appeals, or any other tribunal or agency, he undertakes to report that
fact within five (5) days therefrom to the court or agency wherein the original
pleading and sworn certificate contemplated herein have been filed.

xxx

2. Any violation of this Circular shall be a cause for the dismissal of the complaint,
petition, application or other initiatory pleading, upon motion and after hearing

That there was a DARAB case pending involving the same parties with the same
subject matter at the time petitioners filed Civil Cases Nos. 6632 and 6633 is not
contested. Petitioners admit that they assumed that the issues in the agrarian case
and the forcible entry cases were different and hence saw no need to report the
pendency of the former to the trial court in their certification of non-forum
shopping.We fail to see the basis for this assumption. The records disclose that the
issue of possession as raised in the forcible entry cases is necessarily included in the
question of agricultural tenancy raised in the DARAB case. Note that petitioners
actively participated in the latter case and thus, could not have been unaware that the
possession of the subject fishponds or parts thereof was in issue before the
Board.Petitioners failure to see that paragraph 1(b), 1(c), or 1(d) of Administrative
Circular No. 04-94 applied to them is simply incomprehensible. We agree with the
RTC in certifying under oath that they have no knowledge of any case pending
before any other tribunal or agency involving the same issue raised in their forcible
entry cases, petitioners were less than candid.
To determine whether a party violated the rule against forum shopping, the test
applied is whether the elements of litis pendentia are present or whether a final
judgment in one case will amount to res judicata in another.[23] Recall that as earlier
discussed, the requisites of litis pendentia barred the filing of Civil Cases Nos. 6632
and 6633 given the pendency of DARAB Case No. IV-MM-0099-95R. Based
thereon, the Regional Trial Court correctly dismissed the forcible entry cases on the
additional ground of forum shopping.
WHEREFORE, the instant petition is DENIED, and the Decision of the
Regional Trial Court of Valenzuela, Branch 172, in Civil Cases Nos. 5093-V-97 and
5169-V-97 is AFFIRMED. Costs against petitioners.
 SO ORDERED.

ROSARIO TEXTILE MILLS, INC., CORPORATE OFFICERS AND BOARD OF

DIRECTORS OF ROSARIO TEXTILE MILLS, INC., and EDILBERTO
YUJUICO, petitioners, vs. COURT OF APPEALS, HONORABLE LUIS R.
TONGCO, Presiding Judge, Branch 155, Regional Trial Court, Pasig City,
PETER PAN CORP. and RMC GARMENTS, INC., respondents.

DECISION
CARPIO, J.:

The Case

Before us is a petition for review on certiorari[1] assailing the Decision[2] of the

Court of Appeals dated 31 July 1998, as well as the Resolution dated 22 January
1999 denying the motion for reconsideration in CA-G.R. SP No. 46825. The Court
of Appeals dismissed the special civil action for certiorari questioning the
Orders[3] dated 23 May 1997 and 4 December 1997 of the Regional Trial Court of
Pasig City, Branch 155 (trial court) in Civil Case No. 54163.

The Antecedents

On 1 August 1984, RMC Garments, Inc. (RMC) leased from Peter Pan
Corporation (Peter Pan) its properties (Leased Premises) located on Ortigas Avenue
Extension, Pasig, Metro Manila. The Leased Premises were covered by Transfer
Certificates of Title Nos. 144376 (7060), 144377 (7061), and 144460 (7062) issued
in the name of Peter Pan by the Rizal Register of Deeds. RMC, a garments
manufacturing company, installed machinery on the Leased Premises and brought
in furniture, office equipment and supplies.
On 20 December 1986, Rosario Textile Mills Corp. (Rosario Textile) advised
RMC in a letter that it had acquired the Leased Premises, including the chattels found
inside, from GBC Corporation (GBC) through a Deed of Assignment of Rights and
Interests. GBC in turn, bought the Leased Premises at a foreclosure sale by the
Development Bank of the Philippines (DBP) on 15 August 1983. Rosario Textile
demanded that RMC vacate the Leased Premises within 10 days and warned that it
would avail of its rights of ownership either judicially or extra-judicially if RMC
failed to do so. RMC replied that it neither mortgaged to DBP nor sold to Rosario
Textile the Leased Premises. RMC explained that Rosario Textile may have
mistaken it for Riverside Mills Corporation, another garments corporation whose
properties DBP had foreclosed.
Despite this letter, Rosario Textile proceeded to exercise its right of self-help.
Representatives of Rosario Textile entered the Leased Premises in the evening of 2
January 1987 and cut off RMCs power supply and communication lines. They
barricaded the road leading to the Leased Premises, padlocked the entrances and
posted guards to prevent entry. Subsequently, Rosario Textile removed the
machinery, equipment, garments and other chattels found inside the Leased
Premises.
RMC and Peter Pan filed an injunction suit in the trial court to remove all the
obstructions and the grant of a right of way to the Leased Premises. Rosario Textile,
DBP and the Philippine National Bank (PNB) opposed the injunction on the ground
that RMC had not shown a clear right in esse that the court should protect.
On 20 January 1987, the trial court issued an Order[4] granting RMC access to
the Leased Premises upon posting a P50,000 bond. Upon entry, RMC
representatives discovered the removal of its chattels from the Leased
Premises. Consequently, RMC filed a motion for the issuance of a writ of
preliminary mandatory injunction for the return of the missing chattels.Rosario
Textile opposed the motion claiming ownership over the building and its contents.
The trial court granted RMCs motion in the Order dated 23 February 1987, the
dispositive portion of which reads:

Wherefore, plaintiffs said Very Urgent Motion to Return Plaintiffs Garment/Sewing

Machines, dated February 3, 1987 is hereby granted, and defendant Rosario Textile
Mills Corporation, its agents and all persons acting on its behalf are hereby directed
to return forthwith all the sewing machines taken and removed by it from plaintiffs
premises, particularly those enumerated in Annex A of plaintiffs said very urgent
motion. (Emphasis supplied)

x x x.[5]

Rosario Textile assailed the Order in a special civil action for certiorari with the
Court of Appeals. The Court of Appeals upheld the validity of the Order in a
Decision dated 30 June 1987. The Supreme Court affirmed the Decision, which
attained finality with the entry of judgment on 17 August 1988.
On 2 February 1989, the trial court issued an Order[6] requiring Rosario Textile
to comply with the 20 January 1987 and 23 February 1987 Orders. The trial court
reiterated its orders directing defendants to allow entry to the Leased Premises and
to return the various machineries they took. The Sheriffs Report stated that copy of
the Order was served on Rosario Textiles counsel in the presence of its Vice-
President for Operations/Personnel, Mr. Antonio Angco. However, Rosario Textile
did not comply. In 1993 and 1994, RMC filed two motions to cite Rosario Textiles
board of directors and officers in contempt of court for refusing to comply with the
trial courts final order. Rosario Textiles board of directors and officers opposed the
motion claiming they had no knowledge of the order requiring them to return the
sewing machines since their counsel did not inform them of the order. On 8 April
1996, the trial court issued another Order[7] requiring the responsible officers[8] of
Rosario Textile (petitioners officers) to return the sewing machines within 5 days
from notice under pain of contempt. Petitioners officers moved for reconsideration,
which the trial court denied on 30 August 1996.
Petitioners filed a Manifestation and Compliance on 7 January 1997 stating that
they could no longer return the sewing machines since these were gutted by the fire
that razed Rosario Textiles warehouse 6 years before on 22 August 1991. Petitioners
attached the fire marshals report stating that the fire was accidental.
On 23 May 1997, the trial court issued the Order ruling that the alleged
destruction of the sewing machines did not extinguish petitioners obligation to return
these machines. The trial court held that petitioners were already in default at the
time the fire allegedly destroyed the machines. The dispositive portion of the Order
reads:

WHEREFORE, in view of the foregoing, and pursuant to Administrative Circular

No. 22-95, Re: Amendment of Sections 1 and 6, Rule 71 of the Rules of Court, the
responsible officers of defendant namely, Edilberto V. Yujuico, Chairman of the
Board, Antonio E. Angco, VP-Administration, Romualdo Dizon, Director, Ricardo
S.D. Ledesma, Director, and Elpidio C. Ocampo, Director, are hereby ordered to
make complete restitution to the plaintiff of the value of the sewing machines they
failed to return, within ten (10) days from receipt of a copy of this
Order.[9] (Emphasis supplied)

The trial court denied petitioners motion for reconsideration in the Order dated
4 December 1997.[10]
 Petitioners assailed the Orders dated 23 May and 4 December 1997 in a petition
for certiorari with the Court of Appeals. Petitioners contended that the trial court
gravely abused its discretion when it ordered petitioners to make a complete
restitution of the value of the sewing machines pursuant to Supreme Court
Administrative Circular No. 22-95. They also claimed that the trial court gravely
abused its discretion in denying the motion for reconsideration based on the doctrine
of piercing the veil of corporate fiction and on the theory of special capacities.
The Court of Appeals dismissed the petition for lack of merit in the assailed
Decision dated 31 July 1998. The appellate court denied the motion to reconsider
the same in the Resolution dated 22 January 1999.
Hence, the instant petition.

The Ruling of the Court of Appeals

The Court of Appeals held that a violation of a writ of injunction subjects a party
to a citation for civil or criminal contempt, punishable by a fine or
imprisonment. Courts may punish for contempt officers and agents of corporations
for breach of an injunction regardless of whether the injunction is directed against
them or the corporation only. The trial court did not deny petitioners officers due
process even though they were not impleaded as parties in the main case. The trial
court gave petitioners sufficient opportunity to be heard and to present their side in
the contempt proceedings. The Court of Appeals explained that since petitioners
violated the writ of injunction issued for the benefit of a private party, a civil
contempt arose, which only requires a quantum of evidence higher than a mere
preponderance. Simply put, the law does not require proof beyond reasonable doubt
in civil contempt.
The Court of Appeals also held that the trial courts order of complete restitution
of the value of the sewing machines was not a prejudgment of the case on the issue
of ownership. The Court of Appeals explained that the trial court did not order
restitution of the value of the sewing machines as a declaration of ownership in
RMCs favor. Rather, the trial court used the value only as a measure of the amount
of penalty for the violation of the injunction when restitution of the machines became
impossible.

The Issues
 Petitioners contend that:
a. THE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN
LAW BY SUBSTITUTING ITS OWN INTERPRETATION OF THE
DECISION OF THE LOWER COURT THAT THE VALUE OF THE
SEWING MACHINES WAS USED BY THE TRIAL COURT ONLY
AS A MEASURE OF THE AMOUNT OF PENALTY FOR THE
VIOLATION OF THE INJUNCTION IN VIEW OF THE
ALLEGATION OF PETITIONERS THAT RESTITUTION IS NO
LONGER POSSIBLE;
b. THE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN
LAW WHEN IT UPHELD AS VALID THE ORDER OF THE LOWER
COURT ORDERING THE CORPORATE OFFICERS OF PETITIONER
ROSARIO TEXTILE TO MAKE COMPLETE RESTITUTION TO
RMC OF THE VALUE OF THE SEWING MACHINES;
c. THE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN
LAW WHEN IT UPHELD THE DENIAL OF THE MOTION FOR
RECONSIDERATION OF ITS ORDER DATED 23 MAY 1997 FILED
BY PETITIONERS BASED ON THE DOCTRINE OF PIERCING THE
CORPORATE VEIL AND ON THE THEORY OF SPECIAL
CAPACITIES;
d. THE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN
LAW WHEN IT RULED THAT THE CORPORATE OFFICERS OF
ROSARIO TEXTILE WERE VALIDLY DECLARED IN CONTEMPT
OF COURT.
Two principal issues arise from petitioners contentions: (1) whether the order
finding petitioners in contempt of court is valid; and (2) whether complete restitution
of the value of the sewing machines by petitioners in their personal capacities is
proper.

The Courts Ruling

The petition is bereft of merit.

Whether the Order Finding Petitioners Guilty

of Indirect Contempt is Valid
No Denial of Due Process

Petitioners officers lament their citation for indirect contempt on the ground that
the trial court did not give them notice of the injunction order they supposedly
violated. Petitioners claim that the trial court merely presumed their knowledge of
the injunction order from its receipt by Rosario Textiles former counsel.
Whether petitioners officers had notice or knowledge of the injunction order is
patently a question of fact beyond the pale of Rule 45 of the Rules of Court, which
mandates that only questions of law be raised in the petition. In a petition for review
on certiorari, the Courts jurisdiction is limited to reviewing errors of law that the
lower courts may have committed.[11]Moreover, prevailing jurisprudence uniformly
holds that findings of fact of the trial court, particularly when affirmed by the Court
of Appeals, are generally binding on this Court. Hence, the trial courts factual
finding affirmed by the Court of Appeals that petitioners had knowledge of the
injunction order is binding on us. Indeed, the Court of Appeals had sufficiently
disposed of this issue as follows:

We find that the officers of the petitioner corporation cannot credibly disclaim
knowledge of the order requiring the corporation to return the sewing
machines. They claim that their lawyer never informed them of the said order. The
petitioners do not dispute the allegation made by the private respondent that the
president of the petitioner corporation and that of the respondent corporation met in
the presence of then Department of Trade and Industry Secretary, Jose Concepcion,
for the amicable settlement of the controversy and that the president of the private
respondent corporation asked for the return of the sewing machines but the president
of the petitioner corporation refused. The petitioners knew or should have known
that their personnel took possession of the chattels inside the private respondents
factory and transferred them to the petitioners warehouse and that the private
respondent demanded the return of the subject machines. The sheriffs Report dated
February 22, 1989 states that the legal counsel for the petitioner corporation and the
Vice-President for operations and personnel were present when he tried to enforce
the order of the court against the petitioner but he was prevented by its security
officers. It is not believable that the officers of the corporation were unaware of the
sheriffs attempts to enforce the final order against the corporation ordering it to
release, among others, more than 120 units of sewing machines (pp. 172-174, Rollo,
CA GR SP No. 11445) from its warehouse. At the very least, the officers of the
petitioner corporation had actual notice of the order.
 We likewise reject the claim of petitioners officers that the trial court did not
afford them sufficient notice and opportunity to be heard in the contempt
proceedings. To comply with the procedural requirements of indirect contempt
under Rule 71 of the Rules of Court, there must be (1) a complaint in writing which
may either be a motion for contempt filed by a party or an order issued by the court
requiring a person to appear and explain his conduct, and (2) an opportunity for the
person charged to appear and explain his conduct.[12]
The trial court complied with these requirements in this case. When RMC filed
motions for contempt, the trial court gave petitioners officers an opportunity to
explain their side.Petitioners officers filed oppositions to the motions for contempt
and even filed motions to reconsider the orders of the trial court requiring them to
return the sewing machines.

Distinction Between Civil and Criminal Contempt

Equally devoid of merit is petitioners argument that the Supreme Court treats
contempt proceedings regardless of whether these are civil or criminal as partaking
of the nature of a criminal proceeding. It is not correct to say that in contempt
proceedings a court should observe all the due process requirements attending a
criminal proceeding and that proof beyond reasonable doubt should support a
finding of contempt of court.
In Cagayan Valley Enterprises, Inc. v. Court of Appeals,[13] the Court held:

xxx True it is that generally, contempt proceedings are characterized as criminal in

nature, but the more accurate juridical concept is that contempt proceedings may
actually be either civil or criminal, even if the distinction between one and the other
may be so thin as to be almost imperceptible. But it does exist in law. It is criminal
when the purpose is to vindicate the authority of the court and protect its outraged
dignity. It is civil when there is failure to do something ordered by a court to be done
for the benefit of a party (3 Moran Rules of Court, pp. 343-344, 1970 ed.; see also
Perkins vs. Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil.
741.)

Thus, the Court held in Remman Enterprises, Inc. v. Court of Appeals[14] that:

In general, criminal contempt proceedings should be conducted in accordance with

the principles and rules applicable to criminal cases, in so far as such procedure is
consistent with the summary nature of contempt proceedings. So it has been held
that the strict rules that govern criminal prosecutions apply to a prosecution for
criminal contempt, that the accused is to be afforded many of the protections
provided in regular criminal cases, and that proceedings under statutes governing
them are to be strictly construed. However, criminal proceedings are not required to
take any particular form so long as the substantial rights of the accused are preserved.

Civil contempt proceedings, on the other hand, are generally held to be remedial and
civil in nature; that is, for the enforcement of some duty, and essentially a remedy
resorted to, to preserve and enforce the rights of a private party to an action and to
compel obedience to a judgment or decree intended to benefit such a party
litigant. The rules of procedure governing criminal contempt proceedings, or
criminal prosecutions, ordinarily are inapplicable to civil contempt
proceedings. (Emphasis supplied)

The contempt involved in this case is civil since it arose from petitioners act of
defying the trial courts writ of preliminary injunction, which clearly ordered
petitioners officers to return all the sewing machines taken from the Leased
Premises.

Whether Restitution of the Value of the Sewing

Machines by Petitioners in their Personal
Capacities is Proper

Petitioners contend that the Court of Appeals went beyond the issues properly
cognizable in a special civil action for certiorari in substituting its own justification
for the validity of the trial courts orders. This contention deserves scant
consideration. Such a narrow interpretation will deprive appellate courts of the
power to sustain orders of trial courts that are correct in the result even though the
appellate courts may have different reasons for sustaining the orders. In any event,
in the present case the trial court correctly cited Supreme Court Administrative
Circular No. 22-95 in requiring restitution, which the appellate court amplified as
the basis for determining the amount of the restitution.
Rosario Textile also contends that the Court of Appeals failed to address directly
the issue on whether the trial courts reliance on the doctrine of piercing the veil of
corporate fiction is proper. Rosario Textile also asserts that the appellate court failed
to address the question whether the orders constituted a partial judgment of the
case. Petitioners officers argue that there is no basis in piercing the veil of corporate
fiction to make them personally liable for the value of the sewing machines. They
point out that no fraudulent scheme exists in this case and the corporation is fully
capable of satisfying the obligation. They further argue that the orders in effect made
a finding that RMC is the owner of the sewing machines which issue must still be
resolved in the main case.
These arguments do not persuade us.
RMC initiated this action way back in 1986 or more than 17 years ago today. The
trial court issued in 1987 the first of several orders to the agents and persons acting
in behalf of Rosario Textile to return the sewing machines in 1987. The Court of
Appeals and the Supreme Court sustained this order more than 15 years ago in
1988. Still, RMCs efforts to recover possession of the sewing machines proved
futile. RMC then sought to cite petitioners in contempt of court in 1993 and 1994
since non-compliance with the trial courts orders was in utter disregard of the courts
authority.
Petitioners continued to defy the trial courts orders to return the sewing machines
until they manifested in 1997 that a fire destroyed the sewing machines in 1991. The
trial court then directed the petitioners to restitute the monetary value of the
destroyed sewing machines in their personal capacities on the ground that petitioners
were in delay at the time of the destruction of the machines. The trial court justified
its order by correctly invoking Supreme Court Administrative Circular No. 22-95. In
denying petitioners motion for reconsideration, the trial court in addition applied the
doctrine of piercing the veil of corporate fiction and the theory on personal
capacities.
An injunction duly issued must be obeyed, however erroneous the action of the
court may be, until a higher court overrules such decision.[15] As affirmed by the
Court of Appeals and this Court, the trial court properly issued the injunction order
directing petitioners to return the sewing machines.
Supreme Court Administrative Circular No. 22-95 which took effect on 16
November 1995 amended Sections 1 and 6, Rule 71 of the Rules of Court [16] which
provide the penalties for direct and indirect contempt committed against superior
and inferior courts. Section 6 of Rule 71 as amended reads:

SECTION 6. Punishment if found guilty. If the accused is thereupon adjudged guilty

of contempt committed against a superior court or judge, he may be fined not
exceeding thirty thousand pesos or imprisoned not more than six (6) months, or both;
if adjudged guilty of contempt committed against an inferior court or judge, he may
be fined not exceeding five thousand pesos or imprisoned not more than one (1)
month, or both, and if the contempt consists in the violation of an injunction, he may
also be ordered to make complete restitution to the party injured by such
violation. (Emphasis supplied)

Under the amendment, in case of violation of writs of injunction or restraining

orders, the rule now provides that the court may order complete restitution through
the return of the property or the payment of the amount alleged and proved. [17] As
aptly pointed out by RMC, restitution is defined as the act of making good or giving
equivalent for any loss, damage or injury; and indemnification.[18] Petitioners are not
excused from complying with the writ of injunction on the ground a fire destroyed
the machines, considering that the fire occured years after the court had ordered
petitioners to return the machines.
In Quinio v. Court of Appeals,[19] Toyota Bel Air, Inc. similarly failed to comply
repeatedly with a final order of the trial court to return a vehicle to the adverse
party. The trial court then directed the corporations President and General Manager
to comply. For their continued defiance, the Court affirmed the citation for contempt
and ordered Toyota Bel Air, Inc.s president, general manager and counsel
incarcerated until they return the vehicle.
Unlike in the Quinio case, there is nothing more to return in this case because of
the destruction of the sewing machines. However, just like in Quinio, petitioners
officers must be held personally liable for the restitution of the money equivalent of
the lost sewing machines. Petitioners have only themselves to blame for refusing to
return the sewing machines while still able to do so. Verily, the trial courts orders
were merely an offshoot of the contempt proceedings and not a judgment on the
merits of the case. As correctly pointed out by the Court of Appeals, the trial court
ordered the restitution of the value of the sewing machines not as a declaration of
ownership in RMCs favor but pursuant to Supreme Court Administrative Circular
No. 22-95.Not only did Rosario Textile deprive RMC of the sewing
machines. Petitioners blatantly disregarded the trial courts orders to return the same
despite their ability to comply with the orders.Petitioners have not shown any
justifiable reason why they have repeatedly ignored the trial courts orders.
We affirm the complete restitution of the value of the sewing machines to RMC
by petitioners consistent with the remedial and preservative principles of citations
for contempt, and as demanded by the respect due the orders, writs and processes of
the courts of justice.
WHEREFORE, we DENY the petition for lack of merit.
SO ORDERED.
Jose M. Luison for private respondent.

BARREDO, J.:

Petition for certiorari and prohibition seeking the nullification and setting aside of
the order of dismissal and denial of the petition for the issuance of the writ of
preliminary injunction dated January 30, 1974 of respondent Judge Herminio A.
Avendaño of the Court of First Instance of Laguna in Civil Case No. 929 as well as
all his subsequent orders confirmatory of or enforcing the same, particularly, that of
January 28, 1975 declaring his order of November 11, 1974 final and executory, and
the writ of execution and order of demolition issued by respondent Judge Wenceslao
E. Herce of the Municipal Court of San Pedro, Laguna in Civil Case No. 953 of said
court, an action for ejectment, and to enjoin enforcement of said orders by
respondent sheriff, upon the main ground that the issue of ownership between
petitioner and private respondent over the property involved is precisely being
litigated in said Civil Case No. 929, an action for quieting of title.

On June 21, 1971, private respondent Jose O. Legaspi and Pilar O. Legaspi filed
with the Municipal Court of San Pedro, Laguna presided by respondent Judge Herce
an action for forcible entry with preliminary injunction against petitioner to recover
a residential lot (Lot 17, Block 56, Poblacion "A", Tunasan Homesite at A. Mabini
Street of said municipality) on which the defendant had a building with a dancing
hall and bowling alleys therein, the plaintiffs being brother and sister and the
defendant claiming to be the widow of a brother of said plaintiffs. After said
defendant had unsuccessfully moved for the dismissal of said case on the ground of
lack of jurisdiction, since the issue of ownership of the premises involved was being
raised by her, she was declared in default for having failed to file answer. Judgment
was subsequently rendered against her, which became final, and so a writ of
execution and later an order of demolition were issued, whereupon, said defendant,
herein petitioner, instituted Civil Case No. 927, in the Court of First Instance of
Laguna on February 12, 1972, a special civil action for certiorari to set aside the said
proceedings. Petitioner succeeded in securing a writ of preliminary injunction, which
was however questioned by private respondent in an appropriate special civil action
in the Court of Appeals in CA-G.R. No. 01551.
In the meanwhile, on March 8, 1972, petitioner filed in the same Court of First
Instance of Laguna another action, Civil Case No. 929, for quieting of the title over
the lot in issue, and as a preliminary remedy therein, prayed for the issuance of a
writ of preliminary injunction likewise to suspend the demolition ordered by the
municipal court. The record is not clear as to whether petition in the Court of Appeals
in CA-G.R. No.
01551 did actually involve both Civil Cases Nos. 927 and 929. All that appears is
that the prayer of the petition read thus:

WHEREFORE, PREMISES CONSIDERED, it is most prespecfully

prayed of this Honorable Court of Appeals:

(a) That upon the filing of this Petition for certiorari and Prohibition
with this Honorable Court, and the posting by petitioner of a bond of
P500.00 or in the amount which this Court may fix, duly approved by
this Court, A Writ of Preliminary Injunction be forthwith issued against
the respondent in this case, restraining them from proceeding with the
trial of the Petition of certiorari in Civil Case No. B-927 and of the
Complaint in Civil Case No. B-929, now pending before the respondent
Court of First Instance of Laguna, Branch I, on December 21 and 28,
1972 at 8:30 a.m. or at any time or date thereafter until further orders
from this Honorable Court;

(b) That after due hearing, judgment be rendered in the above-entitled

case as follows:

(1) Annulling and setting aside the orders of the

respondent Judge in Civil Case No. B-927 dated April 5,
1972 (Annex "GG") and August 21, 1972 (Annex "LL"),
and dissolving the Writ of Preliminary Injunction issued
by the respondent Judge under the said order;

(2) Prohibiting the respondent Judge from entertaining,

hearing and deciding Civil Case No. B-927 for certiorari;

(3) Dismissing the petition for certiorari in Civil Case No.

B-927 of the respondent Court of First Instance of Laguna,
Branch I;
 (4) Making the Writ of Preliminary Injunction theretofore
issued by this Honorable Court final, permanent and
perpetual;

(5) Ordering the private respondent to pay to the petitioner

the costs of this suit; and

(6) ( 6) Granting to the petitioner herein such other and

further reliefs which may be deemed just and equitable in
the premises. (Pp. 5 to 6, Record.)

In due course, and after having previously issued a writ of preliminary injunction
restraining the lower court from further proceeding with Civil Cases Nos. 927 and
929, the Court of Appeals rendered the following judgment on July 9, 1973 in said
CA-G.R. No. 01551:

WHEREFORE, judgment is hereby rendered —

1. Annulling and setting aside the order of respondent Judge in Civil

Case No. B-927, Annexes GG and LL, dated April 5, 1972,
respectively, and dissolving the writ of preliminary injunction issued
pursuant to said orders;

2. Enjoining respondent Judge from hearing and deciding Civil Case

No. B-927 which is hereby ordered dismissed;

3. Making the writ of preliminary injunction issued in this case

permanent; and

4. Ordering the private respondent to pay the costs of the suit.

IT IS SO ORDERED. (Page 6, Record.)

Petitioner moved for reconsideration, but her motion was denied, hence she came to
this Court on October 1, 1973 for a review of the Court of Appeals decision, and on
October 4, 1973, We issued the following resolution:

L-37554 (Hon. Herminio A. Avendaño, etc., et al. vs. Court of Appeals,

et al.). — Considering the allegations contained, the issues raised and
 the arguments adduced in the petition for review on certiorari of the
decision of the Court of Appeals, the Court Resolved to DENY the
petition, without prejudice to petitioners' seeking injunction in Civil
Case No. B-929 for quieting of title to real property, pending in the
Court of First Instance of Laguna, Branch I, in Biñan. (Page 7; Record.)

This resolution eventually became final.

It turned out that as early as July 14, 1973, petitioner had already virtually pressed
for the issuance of a writ of preliminary injunction in Civil Case No. 929 by filing a
motion to that effect, apparently in reiteration of her original prayer in the petition
in said case of March 8, 1972. The proceedings relative to said motion were
overtaken by Our above resolution of October 8, 1973. But evently misconstruing
both Our resolution as well as the decision of the Court of Appeals, respondent judge
not only refused to grant petitioner's motion for a writ of preliminary injunction but
even to proceed with the trial on the merit of Civil Case No. 929, dismissing the
same.

Upon this premises, We do not hesitate in holding that respondent judge acted
precipitately and the grave abuse of discretion in issuing the orders complained of.
Considering the basic nature of the controversy between petitioner and private
respondent which simply is who between them has the better right to the lot in
question, the same being up to the present a public land with a standing award
apparently in favor of petitioner, but impugned by said respondent, it is quite clear
that the finality of the decision in the forcible entry case in the Municipal Court of
San Pedro, Laguna, Civil Case No. 953, is of very little consequence in the resolution
of this case. It is elementary that matters involving dominical rights are beyond the
jurisdiction of municipal courts, except chartered cities, hence the San Pedro court
decision just mentioned may not be deemed to have in any manner foreclosed the
right of petitioner to retain possession of the subject lot so long as the appropriate
judicial action to determine petitioner's right thereto has not been finally terminated
and the corresponding writ of preliminary injunction has been issued.

On the other hand, the vehement claim of respondent's counsel that the decision of
the Court of Appeals in CA-G.R. No. 01551 setting aside the writ of preliminary
injunction issued by the Court of First Instance of Laguna in Civil Case No. 927
settled the issue on dominical right between the parties is farfetched and obviously
nothing but a subjective rationalization. Nowhere in the appellate court's opinion
rendered in said case is any reference whatsoever made to the issue of ownership
raised by herein petitioner, much less is any mention at all made therein of Civil
Case No. 929. Rightly or wrongly, despite its having issued a writ of preliminary
injunction restraining proceedings in both Civil Cases Nos. 927 and 929, in its whole
opinion, the Court of Appeals made no validly binding pronouncement as regards
the propriety of the filing by herein petitioner of the action for quieting title in Civil
Case No. 929. The appellate court limited itself exclusively to the issue of whether
or not it was in order for the Court of First Instance of Laguna to restrain in Civil
Case No. 927, which involved no more than a petition for certiorari against the
inferior court premised on the sole proposition that said court had acted
improvidently in its Civil Case No. 953, the writ of execution and order of
demolition issued by said inferior court. And in so far as that particular point is
concerned, the Court of Appeals acted correctly, hence when its decision was
brought to this Court for review, We dismissed the petition, as may be seen in Our
aforequoted resolution of October 4, 1973 .

As matters have developed, however, it is the import of this resolution of October 4,

1973 that has become the bone of contention in the case at bar. Obviously induced
and persuaded by the arguments of counsel for herein private respondent, respondent
judge has taken the position that the said resolution may not be deemed as modifying
that part of the dispositive portion of the decision of the Court of Appeals "making
the writ of preliminary injunction issued in this case permanent." It is claimed that
since the preliminary injunction was in regard to the proceedings in both Civil Cases
Nos. 927 and 929 and the same was made permanent and that decision is already
final, respondent judge had no more authority relative to Civil Case No. 929 except
to dismiss the same. Such is the sense of His Honor's order of January 30, 1974. And
in the subsequent order of November 11, 1974, His Honor made the following
observation:

The plaintiff's further claim that when the Supreme Court issued its
resolution dated October 4, 1973 wherein it denied the petition of the
plaintiffs' "without prejudice to petitioner" seeking injunction in Civil
Case No. B-929 for quieting of title to real property pending in the
Court of First Instance of Laguna, Branch I, in Biñan' it had intended to
modify the decision of the Court of Appeals. There is no legal basis for
making such a conclusion considering that if the Honorable Supreme
Court wanted to allow this Court to continue hearing and deciding this
 case, it could have easily lifted and/or dissolved the injunction issued
by the Court of Appeals. (Page 137-A Printed Petition.)

It is thus evident that respondent judge made no real effort to imbibe the thrust of
Our resolution in proper light. Indeed, were We not convinced that His Honor may
have acted in good faith, We could consider his action on said resolution a deliberate
misreading thereof warranting administrative sanction against him from this Court.
In effect, to say that We could have worded Our resolution differently had We
intended to modify the decision of the Court of Appeals is to suggest that this Court
was not aware of the peculiar circumstances on which its resolution is premised. The
fact is that We well understood them. As already pointed out above, We did take
note of the fact that the appellate court decision did not pass on any issue related to
Civil Case No. 929 and could not, therefore, have validly meant to make permanent
its preliminary injunction referring thereto. That petitioner had specifically invited
in its motion for reconsideration attention to such an omission about that case but
the court denied said motion in a minute resolution did not impart to the court's
decision the legal significance respondents allege they see in it. Much less did it
produce the substantial effect of a resolution on the merits of petitioner's cause in
Civil Case No. 929.

As a matter of fact, the reason why We inserted in Our resolution the reservation
about Civil case no. 929 was precisely Our view that it is appropriate remedy open
to petitioner to counteract the result of the forcible entry case. Contrary to the
observation of respondent judge, We did not have to spell out this point in black and
white. It should have been obvious to all concerned, assuming requisite objectivity
and the adequate knowledge of the law on their part, particularly His Honor.
Respondent judge should have known that in situation similar to those obtaining in
the instant case, and whenever the special circumstances obtaining permit it, for the
sake of expediency and to save time in indicating what should be done, the Supreme
Court may dismiss petitions filed to correct errors of lower court's, but without
prejudice to such directives and instructions to the private and/or public respondents
delineating the proper course that should be pursued in the premises, almost as if the
petition has been found meritorious, and all courts and parties are expected to act
accordingly. to give due course to petitioners, particularly those involving
procedural matter, and thereby be required for further pleadings from the parties and
hearing the case, from the indubitable facts already before it, the matter in issue is
already clear and can be readily resolved, is a procedure not really consistent with
the speedy administration of justice and may even be detrimental to it. Accordingly,
the Court has for sometime now resorted to the practice of merely indicating what
should be done, without having to give due course to petitions for review or in
special civil actions, thereby lessening its burden and at the same time disposing of
procedural matters with utmost deliberate dispatch.

Now, coming to the basic procedural issue before Us in the instant case, which is,
whether or not the final judgment in the ejectment case, Civil Case No. 953 of the
San Pedro court, should be fully executed before the final termination of the action
for quieting of title, Civil Case No. 929 in the Court of First Instance of Laguna, it
is Our considered opinion that it is at least a matter of equity that petitioner's physical
possession of the premises in controversy should not be disturbed in the meanwhile.
Actions of forcible entry and unlawful detainer are intended to avoid dirsuption of
public order by those who would take the law in their hands purportedly to enforce
their claimed right possession. In other words, the special civil action under Rule 70
has been designe to summarily restore possession of land or building to one who has
been forcibly deprived thereof, without prejudice to the settlement of the opposing
claims of the parties to legal possession in the corresponding appropriate. Where the
action, therefore, is one of illegal detainer, as distinguished from one of forcible
entry, and the right of the plaintiff to recover the premises is seriously placed in issue
in a proper judicial proceeding, it is more equitable and just and less productive of
confusion and disturbance physical possession, with all its concomitant
inconvenience and expenses. For the Court in which the issue of legal possession,
whether involving ownerhsip or not, is brought to restrain, should a petition for
preliminary injunction be filed with it, the effects of any order or decision in the
unlawful detainer case in order to await the final judgment in the more substantive
case involving legal possession or ownership. It is only where there has been forcible
entry that as a matter of public policy the right to physical possession or ownerhisp.
It is only where there has been forcible entry that as a matter of public policy the
right to physical possession should be immediately set at rest in favor of the prior
possession regardless of the fact that the other party might ultimately be found to
have superior claim to the premises involved, thereby to discourage any attempt to
recover possession thru force, strategy or stealth and without resorting to the court.

In the instant case, the record before Us seems to indicate that notwithstanding that
private respondent denominated his complaint in Civil Case No. 953 as one of
forcible entry, the actual situation at the time the said complaint was filed was that
petitioner had been in possession thereof for sometime already, even more than one
year. In other words, petitioner is actually the prior possession as between her and
private respondent. Accordingly, the true nature of the action from which the whole
controversy in this case originated is, to view it in the light most favorable to
respondents, that of possible unlawful detainer. It results, therefore, that pursuant to
the above pronouncement, petitioner's motion for preliminary injunction in Civil
Case No. 929 was in order. And in this connection, it may be added that it was not
really Our intention in the resolution of October 4, 1973 to direct respondent judge
therein to issue the writ outright. By said resolution, all that We meant was for
petitioner to file the corresponding motion for preliminary injunction with the trial
court and for that court to grant or deny the same, after hearing both parties, as the
facts shown to it by them might warrant, with the understanding naturally that in
determining the propriety of its action, the court should not be bound by what the
inferior court in the ejectment case might have already done or is doing. Indeed, We
contemplated in said resolution, that if circumstances should so require, the
proceedings in the ejectment case may be suspended in whatever stage it may be
found, in which event, the rentals due or whatever income might be derived from the
premises owing to whoever may ultimately be declared rightfully entitled to
possession, should be ordered deposited with the inferior court until the main case
before it is finally terminated. To this end, all that is needed is for the party concerned
to include the prayer to that effect in the petition for preliminary injunction which
may be acted upon by the Court of Firs Instance without requiring joinder of the
inferior court, albeit notice of the petition and the subsequent developments should
be given to it.

Incidentally, it may be stated that the same procedure as that just discussed should
be observed whenever two different parties are contesting between themselves the
right to receive rentals or the income from the occupants of the same premises, who
are not claiming any right adverse thereto, are already litigating in court in an
appropriate proceeding their respective claims, even if a proper special civil action
of interpleader under Rule 63 has not been filed, considering, that in such an
eventually, the pending action between the adverse claimants would already serve
the purposes of such interpleading. Of course, no such interpleader may be filed in
an inferior court, because of its limited jurisdiction, hence the inferior court in which
any unlawful detainer suit is filed by any of the adverse claimants against the
occupants of the premises concerned must have to await and make all its actuations
subordinate to the developments in and the disposition of the main case in the Court
of First Instance.

IN VIEW OF ALL THE FOREGOING, all the impugned orders of respondent Judge
Avendaño are hereby nullified and set aside, with the consequence that Civil Case
No. 929 of the Court of Firs Instance of Laguna may now take its regular course for
its decision on the merits, and respondent Judge Herce and the sheriff, Rogelio S.
Medina, or whoever is acting in his stead, are ordered to suspend the enforcement
and implementation of the writ of execution and order of demolition issued in Civil
Case No. 953 until after the final termination of Civil Case No. 929, when proper
action may be taken consonant with the result of said case. Costs against private
respondent.

Fernando (Chairman), Antonio, Aquino, Concepcion Jr. and Santos, JJ., concur.