V. Rule 3 – Sections 1-3: Parties to a Civil Action P.D. No.

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August
1973.1 When ISA's original term expired on 10 October 1978, its term was extended for another
Republic of the Philippines ten (10) years by Executive Order No. 555 dated 31 August 1979.
SUPREME COURT
Manila The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National
Development Corporation which is itself an entity wholly owned by the National Government,
THIRD DIVISION embarked on an expansion program embracing, among other things, the construction of an
integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority
G.R. No. 102976 October 25, 1995
and major industrial project of the Government. Pursuant to the expansion program of the NSC,
IRON AND STEEL AUTHORITY, petitioner, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982
vs. withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER in area) located in Iligan City, and reserving that land for the use and immediate occupancy of
CORPORATION, respondents. NSC.

FELICIANO, J.:
Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272
dated 9 August 1973 in order, generally, to develop and promote the iron and steel industry in
the Philippines. The objectives of the ISA are spelled out in the following terms:
Sec. 2. Objectives — The Authority shall have the following objectives:
(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and
export markets for the products of the industry;
(b) to promote the consolidation, integration and rationalization of the industry in order to
increase industry capability and viability to service the domestic market and to compete in
international markets;
(c) to rationalize the marketing and distribution of steel products in order to achieve a balance
between demand and supply of iron and steel products for the country and to ensure that industry
prices and profits are at levels that provide a fair balance between the interests of investors,
consumers suppliers, and the public at large;
(d) to promote full utilization of the existing capacity of the industry, to discourage investment
in excess capacity, and in coordination, with appropriate government agencies to encourage
capital investment in priority areas of the industry;
(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to
reduce the excessive dependence of the country on imports of iron and steel.
The list of powers and functions of the ISA included the following:
Sec. 4. Powers and Functions. — The authority shall have the following powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent
resale and/or lease to the companies involved if it is shown that such use of the State's power is
necessary to implement the construction of capacity which is needed for the attainment of the
objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
Since certain portions of the public land subject matter Proclamation No. 2239 were occupied
by a non-operational chemical fertilizer plant and related facilities owned by private respondent
Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also
dated 16 November 1982, was issued directing the NSC to "negotiate with the owners of
MCFC, for and on behalf of the Government, for the compensation of MCFC's present
occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private
respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of
LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272
and to initiate expropriation proceedings in respect of occupancy rights of private respondent
MCFC relating to the subject public land as well as the plant itself and related facilities and to
cede the same to the NSC.2
Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August
1983, petitioner ISA commenced eminent domain proceedings against private respondent
MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in
possession of the property involved upon depositing in court the amount of P1,760,789.69
representing ten percent (10%) of the declared market values of that property. The Philippine
National Bank, as mortgagee of the plant facilities and improvements involved in the
expropriation proceedings, was also impleaded as party-defendant.
On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA
in turn placed NSC in possession and control of the land occupied by MCFC's fertilizer plant
installation.
The case proceeded to trial. While the trial was ongoing, however, the statutory existence of
petitioner ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending
that no valid judgment could be rendered against ISA which had ceased to be a juridical person.
Petitioner ISA filed its opposition to this motion.
In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did
dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that
"only natural or juridical persons or entities authorized by law may be parties in a civil
case."3 The trial court also referred to non-compliance by petitioner ISA with the requirements
of Section 16, Rule 3 of the Rules of Court.4
Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the
expiration of its term, its juridical existence continued until the winding up of its affairs could
be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being
the real party-in-interest, should be allowed to be substituted for petitioner ISA. In this
connection, ISA referred to a letter from the Office of the President dated 28 September 1988
which especially directed the Solicitor General to continue the expropriation case.
The trial court denied the motion for reconsideration, stating, among other things that:
The property to be expropriated is not for public use or benefit [__] but for the use and benefit
[__] of NSC, a government controlled private corporation engaged in private business and for
profit, specially now that the government, according to newspaper reports, is offering for sale
to the public its [shares of stock] in the National Steel Corporation in line with the pronounced
policy of the present administration to disengage the government from its private business
ventures.5 (Brackets supplied)
Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court
of Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that
petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have
the same rights as an ordinary corporation and that the ISA, unlike corporations organized under
the Corporation Code, was not entitled to a period for winding up its affairs after expiration of
its legally mandated term, with the result that upon expiration of its term on 11 August 1987,
ISA was "abolished and [had] no more legal authority to perform governmental functions." The
Court of Appeals went on to say that the action for expropriation could not prosper because the
basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had
become ineffective as a result of the delegate's dissolution, and could not be continued in the
name of Republic of the Philippines, represented by the Solicitor General:
It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has
to be dismissed without prejudice to the refiling of a new complaint for expropriation if the
Congress sees it fit." (Emphases supplied)
At the same time, however, the Court of Appeals held that it was premature for the trial court to
have ruled that the expropriation suit was not for a public purpose, considering that the parties
had not yet rested their respective cases.
In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted
the action for expropriation in its capacity as agent of the Republic of the Philippines, the
Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after
the agent ISA's term had expired.
Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a
law further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent
to terminate the juridical existence of ISA," and that the authorization issued by the Office of
the President to the Solicitor General for continued prosecution of the expropriation suit could
not prevail over such negative intent. It is also contended that the exercise of the eminent domain
by ISA or the Republic is improper, since that power would be exercised "not on behalf of the
National Government but for the benefit of NSC."
The principal issue which we must address in this case is whether or not the Republic of the
Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will
be made clear below, this is really the only issue which we must resolve at this time.
Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:
Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized by law
may be parties in a civil action.
Under the above quoted provision, it will be seen that those who can be parties to a civil action
may be broadly categorized into two (2) groups:
(a) those who are recognized as persons under the law whether natural, i.e., biological persons,
on the one hand, or juridical person such as corporations, on the other hand; and
(b) entities authorized by law to institute actions.
Examination of the statute which created petitioner ISA shows that ISA falls under category (b)
above. P.D. No. 272, as already noted, contains express authorization to ISA to commence
expropriation proceedings like those here involved:
Sec. 4. Powers and Functions. — The Authority shall have the following powers and functions:
xxx xxx xxx
(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent
resale and/or lease to the companies involved if it is shown that such use of the State's power is
necessary to implement the construction of capacity which is needed for the attainment of the
objectives of the Authority;
xxx xxx xxx
(Emphasis supplied)
It should also be noted that the enabling statute of ISA expressly authorized it to enter into
certain kinds of contracts "for and in behalf of the Government" in the following terms:
xxx xxx xxx
(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government,
for the bulk purchase of materials, supplies or services for any sectors in the industry, and to
maintain inventories of such materials in order to insure a continuous and adequate supply
thereof and thereby reduce operating costs of such sector;
xxx xxx xxx
(Emphasis supplied)
Clearly, ISA was vested with some of the powers or attributes normally associated with juridical
personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing
general or comprehensive juridical personality separate and distinct from that of the
Government. The ISA in fact appears to the Court to be a non-incorporated agency or
instrumentality of the Republic of the Philippines, or more precisely of the Government of the
Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of
the Government of the Republic are cast in corporate form, that is to say, are incorporated
agencies or instrumentalities, sometimes with and at other times without capital stock, and
accordingly vested with a juridical personality distinct from the personality of the Republic.
Among such incorporated agencies or instrumentalities are: National Power
Corporation;6 Philippine Ports Authority;7 National Housing Authority;8 Philippine National
Oil Company;9 Philippine National Railways; 10 Public Estates Authority; 11 Philippine
Virginia Tobacco Administration,12 and so forth. It is worth noting that the term "Authority" has
been used to designate both incorporated and non-incorporated agencies or instrumentalities of
the Government.
We consider that the ISA is properly regarded as an agent or delegate of the Republic of the
Philippines. The Republic itself is a body corporate and juridical person vested with the full
panoply of powers and attributes which are compendiously described as "legal personality." The
relevant definitions are found in the Administrative Code of 1987:
Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context as a
whole, or a particular statute, require a different meaning:
(1) Government of the Republic of the Philippines refers to the corporate governmental
entity through which the functions of government are exercised throughout the Philippines,
including, save as the contrary appears from the context, the various arms through which
political authority is made effective in the Philippines, whether pertaining to the autonomous
regions, the provincial, city, municipal or barangay subdivisions or other forms of local
government.
xxx xxx xxx
(4) Agency of the Government refers to any of the various units of the Government, including a
department, bureau, office, instrumentality, or government-owned or controlled corporation, or
a local government or a distinct unit therein.
xxx xxx xxx
(10) Instrumentality refers to any agency of the National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with some
if not all corporate powers, administering special funds, and enjoying operational autonomy,
usually through a charter. This term includes regulatory agencies, chartered institutions and
government-owned or controlled corporations.
xxx xxx xxx
(Emphases supplied)
When the statutory term of a non-incorporated agency expires, the powers, duties and functions
as well as the assets and liabilities of that agency revert back to, and are re-assumed by, the
Republic of the Philippines, in the absence of special provisions of law specifying some other
disposition thereof such as, e.g., devolution or transmission of such powers, duties, functions,
etc. to some other identified successor agency or instrumentality of the Republic of the
Philippines. When the expiring agency is an incorporated one, the consequences of such expiry
must be looked for, in the first instance, in the charter of that agency and, by way of
supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a
non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets
and liabilities are properly regarded as folded back into the Government of the Republic of the
Philippines and hence assumed once again by the Republic, no special statutory provision
having been shown to have mandated succession thereto by some other entity or agency of the
Republic.
The procedural implications of the relationship between an agent or delegate of the Republic of
the Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The
general rule is, of course, that an action must be prosecuted and defended in the name of the real
party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the
expropriation proceedings, a real party in interest, having been explicitly authorized by its
enabling statute to institute expropriation proceedings. The Rules of Court at the same time
expressly recognize the role of representative parties:
Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor or
administrator, or a party authorized by statute may sue or be sued without joining the party for
whose benefit the action is presented or defended; but the court may, at any stage of the
proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied)
In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or
delegate or representative of the Republic of the Philippines pursuant to its authority under P.D.
No. 272. The present expropriation suit was brought on behalf of and for the benefit of the
Republic as the principal of ISA. Paragraph 7 of the complaint stated:
7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the
construction and installation of iron and steel manufacturing facilities that are indispensable to
the integration of the iron and steel making industry which is vital to the promotion of public
interest and welfare. (Emphasis supplied)
The principal or the real party in interest is thus the Republic of the Philippines and not the
National Steel Corporation, even though the latter may be an ultimate user of the properties
involved should the condemnation suit be eventually successful.
From the foregoing premises, it follows that the Republic of the Philippines is entitled to be
substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term
of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by
itself require or justify the dismissal of the eminent domain proceedings.
It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration
of ISA's statutory term, was not a ground for dismissal of such proceedings since a party may
be dropped or added by order of the court, on motion of any party or on the court's own initiative
at any stage of the action and on such terms as are just. 13 In the instant case, the Republic has
precisely moved to take over the proceedings as party-plaintiff.
In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court
recognized that the Republic may initiate or participate in actions involving its agents. There the
Republic of the Philippines was held to be a proper party to sue for recovery of possession of
property although the "real" or registered owner of the property was the Philippine Ports
Authority, a government agency vested with a separate juridical personality. The Court said:
It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted
as principal of the Philippine Ports Authority, directly exercising the commission it had earlier
conferred on the latter as its agent. . . .15 (Emphasis supplied)
In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again
another proceeding, as the trial court and Court of Appeals had required, was to generate
unwarranted delay and create needless repetition of proceedings:
More importantly, as we see it, dismissing the complaint on the ground that the Republic of the
Philippines is not the proper party would result in needless delay in the settlement of this
matter and also in derogation of the policy against multiplicity of suits. Such a decision would
require the Philippine Ports Authority to refile the very same complaint already proved by the
Republic of the Philippines and bring back as it were to square one.16 (Emphasis supplied)
As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the
Philippines for the ISA upon the ground that the action for expropriation could not prosper
because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate,
had become legally ineffective by reason of the expiration of the statutory term of the agent or
delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted
to the Republic of the Philippines upon the termination of the statutory term of ISA, the question
should be addressed whether fresh legislative authority is necessary before the Republic of the
Philippines may continue the expropriation proceedings initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the legislative
department of the government, we believe and so hold that no new legislative act is necessary
should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the
expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing
or standing delegation of authority to the President of the Philippines to exercise, or cause the
exercise of, the power of eminent domain on behalf of the Government of the Republic of the
Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the
commencement of the present expropriation proceedings before the Iligan Regional Trial Court,
provided that:
Sec. 64. Particular powers and duties of the President of the Philippines. — In addition to his
general supervisory authority, the President of the Philippines shall have such other specific
powers and duties as are expressly conferred or imposed on him by law, and also, in particular,
the powers and duties set forth in this Chapter.
before the trial court. Those proceedings have yet to produce a decision on the merits, since trial
was still on going at the time the Regional Trial Court precipitously dismissed the expropriation
proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-
plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings
should be continued in view of all the subsequent developments in the iron and steel sector of
the country including, though not limited to, the partial privatization of the NSC.
WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991
to the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is
hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which
shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel
Authority and for further proceedings consistent with this Decision. No pronouncement as to
costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

Among such special powers and duties shall be: FIRST DIVISION

xxx xxx xxx G.R. No. 78646 July 23, 1991

(h) To determine when it is necessary or advantageous to exercise the right of eminent domain PABLO RALLA, substituted by his wife and co-defendant CARMEN MUÑOZ-RALLA,
in behalf of the Government of the Philippines; and to direct the Secretary of Justice, where and his legal heirs, HILDA RALLA-ALMINE, BELISTA, RENE RALLA-BELISTA and
such act is deemed advisable, to cause the condemnation proceedings to be begun in the court GERARDO M. RALLA, petitioners,
having proper jurisdiction. (Emphasis supplied) vs.
PEDRO RALLA, substituted by his legal heirs, LEONI, PETER, and MARINELA all
The Revised Administrative Code of 1987 currently in force has substantially reproduced the surnamed RALLA, and COURT OF APPEALS, respondents.
foregoing provision in the following terms:
Rafael Triunfante and Teodorico C. Almine, Jr. for petitioners.
Sec. 12. Power of eminent domain. — The President shall determine when it is necessary or Ruben R. Basa for private respondents.
advantageous to exercise the power of eminent domain in behalf of the National Government,
and direct the Solicitor General, whenever he deems the action advisable, to institute CRUZ, J.:
expopriation proceedings in the proper court. (Emphasis supplied)
Rosendo Ralla had two sons, Pablo and Pedro. The father apparently loved the former but not
In the present case, the President, exercising the power duly delegated under both the 1917 and the latter, Pablo and his family lived with Rosendo, who took care of all the household expenses.
1987 Revised Administrative Codes in effect made a determination that it was necessary and Pablo administered part of the family properties and received a monthly salary of P250.00 plus
advantageous to exercise the power of eminent domain in behalf of the Government of the part of the produce of the land. Pedro lived with his mother, Paz Escarella, in another town. He
Republic and accordingly directed the Solicitor General to proceed with the suit. 17 was not on good terms with his father.

It is argued by private respondent MCFC that, because Congress after becoming once more the
depository of primary legislative power, had not enacted a statute extending the term of ISA,
such non-enactment must be deemed a manifestation of a legislative design to discontinue or
abort the present expropriation suit. We find this argument much too speculative; it rests too
much upon simple silence on the part of Congress and casually disregards the existence of
Section 12 of the 1987 Administrative Code already quoted above.
Paz Escarella died in 1957 and the two brothers partitioned 63 parcels of land she left as her
paraphernalia property. The partition was sustained by this Court in G.R. Nos. 63253-54 on
April 27, 1989.1 Meanwhile, on December 22, 1958, Rosendo executed a will disinheriting
Pedro and leaving everything he owned to Pablo, to whom he said he had earlier sold a part of
his property for P10,000.00. Rosendo himself filed for the probate of the will but pendente
lite died on October 1, 1960.

Other contentions are made by private respondent MCFC, such as, that the constitutional
requirement of "public use" or "public purpose" is not present in the instant case, and that the
indispensable element of just compensation is also absent. We agree with the Court of Appeals
in this connection that these contentions, which were adopted and set out by the Regional Trial
Court in its order of dismissal, are premature and are appropriately addressed in the proceedings
On November 3, 1966, the probate judge converted SP 564 into an intestate proceeding. On
February 28, 1978, a creditor of the deceased filed a petition for the probate of Rosendo's will
in SP 1106, which was heard jointly with SP 564. On August 3, 1979, the order of November 3,
1966, was set aside.
The last will and testament of Rosendo Ralla was allowed on June 7, 1982 2 but on October 20,
1982, the disinheritance of Pedro was disapproved.3 This order was elevated to the Court of
Appeals in AC-G.R. Nos. 00472, 00489.
In a decision dated July 25, 1986, the Court of Appeals4 reversed the trial court and reinstated
the disinheritance clause after finding that the requisites of a valid disinheritance had been
complied with in the will. The appellate court noted that Pedro had threatened to kill his father,
who was afraid of him and had earlier sued him for slander and grave oral defamation.
The decision was assailed before this Court in G.R. Nos. 76657-58, which was dismissed in our
resolution of August 26, 1987, reading as follows:
. . . Assuming that, as claimed, the petitioners' counsel received a copy of the questioned decision
only on August 15, 1986 (although it should have been earlier because it was mailed to him at
his address of record on July 28, 1986), they had 15 days, or until August 30, 1986, within which
to move for its reconsideration or appeal therefrom by certiorari to this Court. Instead, they filed
on August 28, 1986, a motion for extension of time to file a motion for reconsideration, which
was not allowed under our ruling in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, and
so did not interrupt the running of the reglementary period. Indeed, even if the period were to
be counted from October 7, 1986, when notice of the denial of the motion for extension was
received by the petitioners, the petition would still be 30 days late, having been filed on
December 8, 1986. Moreover, the petitioners have not shown that the questioned decision is
tainted with grave abuse of discretion or that it is not in accord with law and jurisprudence. For
these reasons, the Court Resolved to DISMISS the petition.
The motion for reconsideration was denied with finality in the following resolution dated
October 26, 1987:
. . . The Court, after deliberation, Resolved to DENY with finality the motion for
reconsideration, wherein the petitioners pray that they be relieved from the effects of our ruling
in Habaluyas Enterprises, Inc. v. Japson, 142 SCRA 208, under which the petition was denied
for tardiness. Counsel are expected to be abreast of current developments in law and
jurisprudence and cannot plead ignorance thereof as an excuse for non-compliance with the
same. As earlier observed, the petition was filed extremely late, and, moreover, it was inadequate
even on the merits, same having failed to show that the questioned decision was tainted with
grave abuse of discretion or reversible error.
What is involved in the present petition is the correctness of the decision of the respondent court
annulling the deed of sale executed by Rosendo Ralla in favor of Pablo over 149 parcels of land.
Pedro had filed on May 19, 1972, a complaint to annul the transaction on the ground that it was
simulated.5 The original decision of the trial court declared the sale null and void. 6 In the
resolution of the motion for reconsideration, however, Judge Jose F. Madara completely
reversed himself and held the deed of sale to be valid. 7 This order was in turn set aside by the
respondent court, which reinstated the original decision invalidating the deed of sale.
It is indeed intriguing that the trial judge should, in resolving the motion for reconsideration,
make a complete turnabout on the basis of the same evidence and jurisprudence that he
considered in rendering the original decision. It is no less noteworthy that the respondent court,
after studying the two conclusions reached by him, saw fit to sustain his original findings as the
correct appreciation of the evidence and the applicable law.
But we find that, regardless of these curious resolutions, the petition must nevertheless be
sustained albeit not on the ground that the deed of sale was indeed valid. The Court is inclined
to support the findings of the respondent court. However, we do not and cannot make any
decision on this matter because of one insuperable obstacle. That obstacle is the proper party
personality of Pedro Ralla to question the transaction.
The decision of the Court of Appeals in AC-G.R. Nos. 00472, 00489 approved the disinheritance
of Pedro Ralla. That decision was appealed to this Court, but the petition for review was
dismissed as above related. The decision has long since become final. Since then, Pedro Ralla
no longer had the legal standing to question the validity of the sale executed by Rosendo in favor
of his other son Pablo.
The real party-in-interest is the party who stands to be benefited or injured by the judgment or
the party entitled to the avails of the suit. "Interest" within the meaning of the rule means material
interest, an interest in issue and to be affected by the decree, as distinguished from mere interest
in the question involved, or a mere incidental interest. As a general rule, one having no right or
interest to protect cannot invoke the jurisdiction of the court as a party-plaintiff in an action.
As the sole heir, Pablo Ralla had the right to inherit the totality of his father's estate after payment
of all its debts. Even if it be assumed that the deed of sale was indeed invalid, the subject-matter
thereof nevertheless devolved upon Pablo as the universal successor of his father Rosendo. In
his wig, Rosendo claimed the 149 parcels as "part of my property" –– as distinguished from the
conjugal estate –– which he had earlier sold to Pablo. Significantly, Pedro did not deny this
description of the property in his Comment to the present petition, confining himself to assailing
the validity of the sale.
The Court must note the lackadaisical attitude of the heirs of Pedro Ralla, who substituted him
upon his death.1âwphi1 They seem to have lost interest in this litigation, probably because of
the approval of their father's disinheritance by the respondent court. When the parties were
required to submit their respective memoranda after we gave due course to this petition, the
petitioners did but not the private respondents. Although the period to do so had already expired,
the Court relaxed its rules to give the private respondents another opportunity to comply with
the requirement. When the resolution of August 22, 1990, could not be served upon the private
respondents' counsel, we directed that it be served on the private respondents themselves. 9 On
January 18, 1991, the heirs of Pedro Ralla informed the Court that they were retaining another
counsel and asked that they be furnished a copy of the petition and given 30 days within which
to file their memorandum.10 This motion was granted. The records show that they received a
copy of the petition on February 26, 1991, but their memorandum was never filed. On May 29,
1991, the Court, noting this omission, finally resolved to dispense with the memorandum and to
decide this case on the basis of the available records.
Our decision is that as a validly disinherited heir, and not claiming to be a creditor of his
deceased father, Pedro Ralla had no legal personality to question the deed of sale dated
November 29, 1957, between Rosendo Ralla and his son Pablo. Legally speaking, Pedro Ralla
was a stranger to the transaction as he did not stand to benefit from its annulment. His
disinheritance had rendered him hors de combat.
WHEREFORE, the decision of the respondent court dated January 23, 1987, is set aside and
another judgment is hereby rendered dismissing Civil Case 194 (originally Civil Case 4624) in
this Regional Trial Court of Ligao, Albay, Branch 5.
SO ORDERED
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 76225 March 31, 1992
ESPIRIDION TANPINGCO, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, and BENEDICTO HORCA, SR., respondents.
GUTIERREZ, JR., J.:
May a tenanted parcel of land be donated by the landowner so that it can be the site of a public
high school without securing the consent of the tenant-lessee? Who bears the responsibility of
paying disturbance compensation? These are the issues raised in this case.
On May 10, 1985, a complaint for payment of disturbance compensation with damages was
filed by petitioner Espiridion Tanpingco against respondent Benedicto Horca, Sr. with the
Regional Trial Court of Palo, Leyte.
It is alleged in the complaint that the petitioner is the tenant-lessee in the respondent's parcel of
agricultural riceland situated at Brgy. Buenavista, Jaro, Leyte under a leasehold contract entered
into sometime in April, 1976; that in a letter dated April 9, 1985, the respondent through his
representative informed him to desist from working on the subject land, having already donated
the same on February 3, 1985; that the respondent openly ordered the petitioner to vacate the
landholding and is determined to oust him from the premises in violation of the law; that the
petitioner is willing to accept payment of disturbance compensation in an amount computed in
accordance with law and in the alternative to remain as tenant-lessee of the subject riceland.
On July 5, 1985, the case was called for pre-trial following which the trial court gave the
respondent until July 9, 1985 to file his answer. The respondent filed instead a Motion to Dismiss
alleging principally that the complaint states no cause of action because the respondent is not
the real party-in-interest having already donated the subject land to the Ministry of Education,
Culture, and Sports, Region VIII, as a school site of the Buenavista Barangay High School; and
that the donation not having in anyway benefited the respondent, no disturbance compensation
is due the petitioner since under Section 36 (1) of the Agrarian Reform Code as amended,
disturbance compensation holds true only in cases wherein the lessor-owner derives financial
benefits from the conversion of the agricultural land into non-agricultural purposes.
The trial court granted the respondent's Motion to Dismiss and denied the petitioner's Motion
for Reconsideration.
On June 20, 1986, the Intermediate Appellate Court rendered the decision now assailed, the
dispositive portion of which reads as follows:
WHEREFORE, finding no merit in the instant appeal, the same is hereby DISMISSED with
costs taxed against the appellant.
From the aforesaid decision, petitioner Esperidion Tanpingco interposed the present petition
under the following assignment of errors.
I
Was it proper for the trial court to grant the Motion to Dismis filed by the defendant inspite of
explicit mandate against such action as contained in Section 17 of P.D. No. 946?
II
Was respondent Court correct in sustaining the validity of the conversion of the subject tenanted
riceland into a school site?
III
Was it correct in ruling that a tenant is not entitled to payment of disturbance compensation in
case his tenanted landholding is donated and converted into a school site?
Anent the first assignment of error, the petitioner anchors his contention mainly on Section 17
of Presidential Decree No. 946 which provides:
Sec. 17. Pleading, Hearing, Limitation on Postponements. — The defendant shall file answer
to the complaint (not a motion to dismiss), within a non-extendible period of ten (10) days from
service of
summons . . .
In Sucaldito and De Guzman v. Hon. Montejo (193 SCRA 556 [1991]), the Court declared that
where the law speaks in clear and categorical language, there is no room for interpretation.
However, technicalities may be disregarded in order to resolve the case on its merits. (Ruiz v.
Court of Appeals, G.R. No. 93454, September 13, 1991 citing Tesoro v. Mathay, 185 SCRA
124 [1990]).
On this point, the respondent appellate court noted that:
The rationale of the rule requiring a defendant in an agrarian case to file an answer and not a
motion to dismiss is to expedite the proceedings. The filing of the motion to dismiss and the
granting thereof by the lower court based upon indubitable grounds precisely expedited the
proceedings and conforms with the spirit and intention of P.D. 946 which requires courts trying
agrarian cases to employ every reasonable means to ascertain the facts of every case in
accordance with justice and equity without regard to technicalities of law and procedure and
empowering the Court to adopt any appropriate measure or procedure in any situation or matter
not provided for or covered by the Decree (Section 16, 3rd and 4th sentences, P.D. 946).
We, therefore, take exception to the literal application of Section 17 of P.D. No. 946 for as stated
in Salonga v. Warner Barnes and Co., Ltd. (88 Phil. 125 [1951], an action is brought for a
practical purpose, nay to obtain actual and positive relief. If the party sued upon is not the proper
party, any decision that may be rendered against him would be futile, for it cannot be enforced
or executed. The effort that may be employed will be wasted.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted in the name
of the real party-in-interest. A corollary proposition to this rule is that an action must be brought
against the real party-in-interest, or against a party which may be bound by the judgment to be
rendered therein (Salonga v. Warner Barnes and Co., Ltd. supra citing Salmon and Pacific
Commercial Co., v. Tan Cuenco, 36 Phil. 556 [1917]). The real party-in-interest is one who
stands to be benefited or be injured by the judgment, or the party entitled to the avails of the suit
(Rebollido v. Court of Appeals, 170 SCRA 800 [1989] citing Samahan ng mga Nangungupahan
sa Azcarraga Textile Market, Inc., et al. v. Court of Appeals, 165 SCRA 598 [1988]). If the suit
is not brought against the real party-in-interest, a motion to dismiss may be filed on the ground
that the complaint states no cause of action (Section 1(g), Rule 16, Rules of Court).
Hence, the resolution of the dispute hinges upon the determination of whether or not the private
respondent is the real party-in-interest against whom the suit should be brought.
The private respondent bolsters his claim that he is not the real party-in-interest on Section 10
of Republic Act No. 3844 (Code of Agrarian Reforms of the Philippines) which provides that:
. . . In the case the agricultural lessor sells, alienates or transfers the legal possession of the
landholding, the purchaser or transferee thereof shall be subrogated to the rights and substituted
to the obligation of the agricultural lessor.
In effect, the private respondent is of the view that the Ministry of Education, Culture and Sports,
as donee, became the new lessor of the agricultural lessee by operation of law and is therefore
the real party-in-interest against whom the claim for disturbance compensation should be
directed.
We agree with the contentions of the private respondent. The petitioner should have impleaded
the Ministry of Education, Culture and Sports as the party-defendant for as stated in Roman
Catholic Archbishop of Manila v. Court of Appeals (198 SCRA 300 [1991]), a donation, as a
mode of acquiring ownership, results in an effective transfer of title over the property from the
donor to the donee and once a donation is accepted, the donee becomes the absolute owner of
the property donated.
Under Article 428 of the New Civil Code, the owner has the right to dispose of a thing without
other limitations than those established by law. As an incident of ownership therefore, there is
nothing to prevent a landowner from donating his naked title to the land. However, the new
owner must respect the rights of the tenant. Section 7 of R.A. No. 3844, as amended (Code of
Agrarian Reforms of the Philippines) gives the agricultural lessee the right to work on the
landholding once the leasehold relationship is established. It also entitles him to security of
tenure on his landholding. He can only be ejected by the court for cause. Time and again, this
Court has guaranteed the continuity and security of tenure of a tenant even in cases of a mere
transfer of legal possession. As elucidated in the case of Bernardo v. Court of Appeals (168
SCRA 439 [1988]), security of tenure is a legal concession to agricultural lessees which they
value as life itself and deprivation of their landholdings is tantamount to deprivation of their
only means of livelihood. Also, under Section 10 of the same Act, the law explicitly provides
that the leasehold relation is not extinguished by the alienation or transfer of the legal possession
of the landholding. The only instances when the agricultural leasehold relationship is
extinguished are found in Section 8, 28 and 36 of the Code of Agrarian Reforms of the
Philippines. The donation of the land did not terminate the tenancy relationship. However, the
donation itself is valid.
Considering that the tenant in the case at bar is willing to accept payment of disturbance
compensation in exchange for his right to cultivate the landholding in question, the real issue is
who should pay the compensation. We rule that the Ministry of Education, Culture and Sports
as the new owner cannot oust the petitioner from the subject riceland and build a public high
school thereon until after there is payment of the disturbance compensation in accordance with
Section 36 (1) of R.A. No. 3844, as amended.
In view of the foregoing, we are of the opinion and so hold that the trial court correctly dismissed
the complaint for payment of disturbance compensation because the private respondent is not
the real party-in-interest. And having arrived at this conclusion, we do not deem it necessary to
pass upon the other errors assigned by the petitioner for as stated in Filamer Christian Institute
v. Court of Appeals (190 SCRA 485 [1990]), a person who was not impleaded in the complaint
could not be bound by the decision rendered therein, for no man shall be affected by a
proceeding to which he is a stranger. The remedy then of the petitioner is to claim his disturbance
compensation from the new owner or whatever agency, local or national, is in a position to pay
for it.
WHEREFORE, the petition is hereby DENIED. The decision dated 20 June 1986 of the
Intermediate Appellate Court is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
FIRST DIVISION
G.R. No. 161298 January 31, 2006
Spouses ANTHONY and PERCITA OCO, Petitioners,
vs.
VICTOR LIMBARING, Respondent.
DECISION
PANGANIBAN, CJ.:
Basic in procedural law is the rule that every action must be prosecuted or defended in the name
of the real party in interest. In the present case, the respondent, who was not a party to the
contracts being sued upon, was not able to prove material interest in the litigation. For his failure
to do so, the trial court cannot be faulted for dismissing the action to rescind the contracts. His
status as trustor remained a bare allegation, as he had failed to rebut the legal presumption: that
there is absence of a trust when the purchase price in a deed of sale is paid by a parent in favor
of a child. Here, the prima facie presumption is "that there is a gift in favor of the child." Any
allegation to the contrary must be proven by clear and satisfactory evidence, a burden that was
not discharged by the plaintiff.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the August
26, 2003 Decision2 and the November 25, 2003 Resolution3 of the Court of Appeals (CA) in
CA-GR CV No. 69386. The challenged Decision disposed as follows:
"WHEREFORE, the order dated October 2, 2000 of the Regional Trial Court, Branch 15,
Ozami[s] City in Civil Case No. OZC 99-14 is hereby REVERSED. The agreement entered
upon by plaintiff-appellant and defendant-appellee Percita L. Oco is hereby RESCINDED. After
returning the agreed purchase amount of P60,000.00 to defendants-appellees, the Register of
Deeds of Ozami[s] City shall issue the new Transfer Certificates of Title in the name of plaintiff-
appellant thereby canceling the TCT Nos. T-22073 and T-22072."4
The Facts
The pertinent facts are not disputed. Sometime in 1996, Sabas Limbaring subdivided his Lot
2325-D, covered by Transfer Certificate of Title (TCT) No. 5268, into two lots denominated as
Lot Nos. 2325-D-1 and 2325-D-2.5 He then executed in favor of Jennifer Limbaring a Deed of
Sale for Lot 2325-D-2 for P60,000; and, in favor of Sarah Jane Limbaring, another Deed for Lot
2325-D-1 for P14,440. Accordingly, TCT No. 5268 was cancelled and TCT Nos. T-21921 and
T-21920 were issued in the names of Jennifer and Sarah Jane, respectively. 6
Sensing some irregularities in the transaction, Percita Oco, the daughter of Sabas Limbaring,
left Puerto Princesa City and went to Ozamis City.7 She then filed a case of perjury and
falsification of documents against respondent, her uncle who was the father of Jennifer and
Sarah Jane. During the pre-litigation conference called by City Prosecutor Luzminda Uy on July
1, 1996, the parties agreed that the two parcels of land should be reconveyed to Percita, who
was to pay respondent all the expenses that had been and would be incurred to transfer the titles
to her name.8
Respondent demanded P30,000 for the estimated expenses for documentation, capital gains, and
documentary stamp taxes; registration fees for the Register of Deeds; and other incidental
expenses for clearances from the Department of Agrarian Reform (DAR).9 Percita succeeded in
lowering the amount to P25,000, for which she executed an undertaking worded as follows:
"I, Percita Oco, of legal age, and residing at Puerto Princesa, do hereby undertake to give the
full amount of Twenty Five Thousand (P25,000.00) Pesos to my uncle Victor Limbaring after
document No. 230, series of 1996; Transfer Certificate of Title No. T-21920 and Transfer
Certificate of Title No. T-21921 shall have been cancelled and revoked.
"Ozamis City, Philippines, July 1, 1996."10
Pursuant to their agreement, respondent facilitated the transfer of the titles to her from the names
of his daughters. After the transfer had been effected on July 12, 1996, Percita left for Puerta
Princesa on July 17, 1996, without paying the P25,000. Several demands were made, but she
refused to pay.
On April 6, 1999, respondent filed against Spouses Anthony and Percita Oco a Complaint for
the rescission of the sales contracts, with recovery of possession and ownership of the two
parcels of land.11 Among others, he claimed 1) that he was the actual buyer of the lots, but the
vendees whose names appeared on the Deeds were his daughters; 2) that he initially refused to
reconvey the properties because he had paid for them with his hard-earned money, which was
partly used by Sabas Limbaring for medical expenses; 3) that Percita had prepared the two Deeds
of Sale, which his daughters signed despite receiving no consideration as stated in the Deeds; 4)
that because she refused to pay the P25,000, the Limbaring clan held a meeting on October 26,
1996, during which it was agreed that P1,000 per month would be given to respondent from the
rentals of Sabas Limbaring’s house; and 5) that the agreement was not implemented, because
Percita had failed to cooperate.12
On May 27, 1999, Spouses Oco filed a Motion to Dismiss on the ground that the plaintiff (herein
respondent) was not the real party in interest.13 In his Opposition to the Motion to Dismiss,
respondent contended that he was a trustor, whose property was being held in trust by his
daughters.14 He also averred that, on the assumption that he was not the real party in interest, he
was entitled to an amendment of the pleadings.15
On August 30, 1999, the RTC issued an Order denying the Motion to Dismiss. It ruled that
evidence was required to resolve the parties’ respective allegations.16
On October 4, 1999, Spouses Oco filed an Answer with Counterclaim, alleging in the main: 1)
that respondent had tried to secure a DAR clearance and to have a certificate of title issued in
his name, but failed because Republic Act (RA) 6657 prohibited the acquisition of more than
five hectares of agricultural land; 2) that through deceit and manipulation, respondent was able
to convince Sabas Limbaring to execute the two Deeds of Sale, notwithstanding the lack of any
consideration; 3) that Sabas informed Percita that the agricultural land had never been sold; 4)
that she refused to pay the P25,000, because the suspensive conditions stated in the Promissory
Note had not been complied with; 5) that she paid for all the expenses incurred in their
transaction; 6) that for her alleged failure to pay the P25,000 and for "other deceits," respondent
filed a criminal Complaint docketed as Criminal Case No. 2985; 7) that respondent was guilty
of forum shopping for filing that case despite the institution of the civil aspect in the criminal
case; 8) that respondent was not the real party in interest and had no legal standing to sue; 9)
that the lots, which were acquired by Jennifer and Sarah Jane without paying any consideration,
should be returned to Percita without any consideration; and 10) that the Deeds of Sale
reconveying the lots acknowledged receipt of consideration.17
Respondent testified on his behalf. He then formally offered his exhibits.18 After filing their
Comments to Plaintiff’s Formal Offer of Exhibits, Spouses Oco filed a Demurrer to Evidence,
to which he filed his Opposition.19
On October 2, 2000, the RTC granted the demurrer and dismissed the Complaint and
Counterclaim,20 on the ground that respondent was not the real party in interest. The trial court
also held that Jennifer and Sarah Jane had already acknowledged receipt of the consideration
for the reconveyance of the lots. It added that the P25,000 was an independent obligation for the
reimbursement of the expenses incurred for the transfer of the titles.21
Ruling of the Court of Appeals
The CA held that a trust relationship was created when respondent purchased the lots in favor
of his daughters.22Thus, he was a real party in interest.
The appellate court also ruled that the P25,000 was part of the consideration for the
reconveyance of the two parcels of land.23 The CA held that, since Percita had admitted her
failure to pay the amount, respondent had the right to rescind the contracts of reconveyance. 24
The assailed November 25, 2003 CA Resolution denied reconsideration. Hence, this Petition. 25
The Issues
Petitioners state the issues in this wise:
"I. The Honorable Court of Appeals gravely erred in finding respondent the trustor of the subject
properties and in declaring respondent the real party in interest for the rescission of the two
deeds of absolute sale executed by Jennifer Limbaring and Sarah Jane Limbaring in favor of the
petitioners.
"II. The Honorable Court of Appeals gravely erred in declaring that respondent has fully
complied [with] his obligation in the undertaking executed by petitioner after the ownership of
the subject properties were transferred to petitioners.
"III. The Honorable Court of Appeals gravely erred and gravely abused [its] discretion in
ordering the rescission of the Deed of Absolute Sale executed by Jennifer Limbaring and Sarah
Jane Limbaring in favor of the petitioners involving the subject properties.
"IV. The Honorable Court of Appeals gravely abused [its] discretion when it ignored the
pending case before the Fourth Division of the Honorable Court of Appeals with the same
transaction, essential facts and circumstances in this case."26
The threshold issue is whether respondent, who was the plaintiff in the trial court, was a real
party in interest in the suit to rescind the Deeds of Reconveyance.
The Court’s Ruling
The Petition is meritorious.
Main Issue:
Real Party in Interest
Petitioners contend that respondent was not a trustor, and therefore not the real party in interest
and had no legal right to institute the suit.27 The real parties in interest were Jennifer and Sarah
Jane, to whom the subject properties had been given as gifts.28
The controversy centers on Rule 3 of the Rules of Court, specifically an elementary rule in
remedial law, which is quoted as follows:
"Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of
the real party in interest."
As applied to the present case, this provision has two requirements: 1) to institute an action, the
plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of
the real party in interest.29 Necessarily, the purposes of this provision are 1) to prevent the
prosecution of actions by persons without any right, title or interest in the case; 2) to require that
the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity
of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to sound
public policy.30
Interest within the meaning of the Rules means material interest or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about the
question involved.31 One having no material interest to protect cannot invoke the jurisdiction of
the court as the plaintiff in an action.32 When the plaintiff is not the real party in interest, the
case is dismissible on the ground of lack of cause of action. 33
Action on Contracts
The parties to a contract are the real parties in interest in an action upon it, as consistently held
by the Court.34 Only the contracting parties are bound by the stipulations in the contract;35 they
are the ones who would benefit from and could violate it. 36 Thus, one who is not a party to a
contract, and for whose benefit it was not expressly made, cannot maintain an action on it. One
cannot do so, even if the contract performed by the contracting parties would incidentally inure
to one’s benefit.37
As an exception, parties who have not taken part in a contract may show that they have a real
interest affected by its performance or annulment.38 In other words, those who are not
principally or subsidiarily obligated in a contract, in which they had no intervention, may show
their detriment that could result from it.39 Contracts pour autrui are covered by this
exception.40 In this latter instance, the law requires that the "contracting parties must have
clearly and deliberately conferred a favor upon a third person." A "mere incidental benefit is not
enough."
Action on the Contracts
Presently Involved
Respondent’s Complaint, entitled "Rescission of Contract & Recovery of Possession &
Ownership of Two Parcels of Land," is clearly an action on a contract. The agreements sought
to be rescinded41 clearly show that the parties to the Deeds of Absolute Sale were Jennifer and
Sarah Jane Limbaring42 as vendors and Percita Oco as vendee. Clearly then, the action upon the
contracts may -- as a rule -- be instituted only by Jennifer and Sarah Jane against Percita.
Respondent is not a real party in interest. He was not a party to the contracts and has not
demonstrated any material interest in their fulfillment. Evidently, the allegations in the
Complaint do not show that the properties would be conveyed to him, even if Percita were to be
proven to have committed a breach of the subject agreements.
Trust Relationship
To show material interest, respondent argues that a trust was created when he purchased the
properties from Sabas Limbaring in favor of his daughters. As trustor, he allegedly stands to be
benefited or injured by any decision in the case.43
Trust is the legal relationship between one person who has equitable ownership of a property
and another who owns the legal title to the property.44 The trustor is the one who establishes the
trust; the beneficiary, the person for whose benefit the trust was created; and the trustee, the one
in whom, by conferment of a legal title, confidence has been reposed as regards the property of
the beneficiary.45
Trusts may be either express or implied.46 Express trusts are those created by direct and positive
acts of the parties, such as by some writing, deed or will; or by words either expressly or
impliedly evidencing an intention to create a trust. Implied trusts are those that, without being
expressed, are deducible from the nature of the transaction as matters of intent; or that are super-
induced in the transaction by operation of law as a matter of equity, independently of the
particular intention of the parties.47
Respondent has presented only bare assertions that a trust was created. Noting the need to prove
the existence of a trust, this Court has held thus:
"As a rule, the burden of proving the existence of a trust is on the party asserting its existence,
and such proof must be clear and satisfactorily show the existence of the trust and its elements.
While implied trusts may be proved by oral evidence, the evidence must be trustworthy and
received by the courts with extreme caution, and should not be made to rest on loose, equivocal
or indefinite declarations. Trustworthy evidence is required because oral evidence can easily be
fabricated."48
On this point, the Civil Code states as follows:
"ART. 1448. There is an implied trust when property is sold, and the legal estate is granted to
one party but the price is paid by another for the purpose of having the beneficial interest of the
property. The former is the trustee, while the latter is the beneficiary. However, if the person to
whom the title is conveyed is a child, legitimate or illegitimate, of the one paying the price of
the sale, no trust is implied by law, it being disputably presumed that there is a gift in favor of
the child."
Under the last sentence of Article 1448, respondent’s alleged acts -- paying the price of the
subject properties and, in the titles, naming his children as owners -- raise the presumption that
a gift was effected in their favor. Respondent failed to rebut this presumption. Absent any clear
proof that a trust was created, he cannot be deemed a real party in interest.49 That he should be Pursuant to the SPA, Sagario filed on October 14, 2002 before the Isabela RTC at Roxas a
deemed a trustor on the basis merely of having paid the purchase price is plainly contradicted complaint entitled "Dante M. Pascual, plaintiff v. Marilou M. Pascual and Register of Deeds,
by the presumption based on Article 1448 of the Civil Code "that there is a gift in favor of the Defendants," docketed as Civil Case No. Br. 23-713-02, for Annulment of Transfer Certificate
child," not a trust in favor of the parent. of Title No. T-271657 of Isabela and Deed of Absolute Sale of Registered Land and/or
Reconveyance with Damages.2
Other Issues
To the Complaint the defendant-herein respondent Marilou M. Pascual filed a Motion to
Having found that respondent is not a real party in interest, this Court deems it no longer Dismiss3 on two grounds one of which was non-compliance with the requirement under Section
necessary to rule on the other issues raised by petitioner. 412 of the Local Government Code,4 she contending that there is no showing that the dispute
was referred to the barangay court before the case was filed in court.
WHEREFORE, the Petition is GRANTED, and the assailed Decision and Resolution are SET
ASIDE. Civil Case No. OZC99-14, entitled "Victor Limbaring v. Spouses Percita L. Oco and By the assailed Order of February 10, 2003,5 Branch 23 of the Isabela RTC at Roxas granted
Anthony Oco," is DISMISSED. No pronouncement as to costs. respondent’s Motion to Dismiss in this wise:
SO ORDERED. . . . RA 7160 repealing P.D. 1508 otherwise known as the Revised Katarungang Pambarangay
provides under Section 409 "All disputes involving real property or any interest therein shall be
Republic of the Philippines
brought in the barangay where the real property or the larger portion thereof is situated." Hence,
SUPREME COURT
the reliance of the plaintiff on Section 408 of R.A. 7160 is incorrect. When real property or any
THIRD DIVISION interest therein is involved, the dispute shall be filed before the barangay where the property is
located, regardless of the residence of the parties. Besides, it is incorrect to say that the parties
G.R. No. 157830 November 17, 2005 are not residents of the same place, Vira, Roxas, Isabela. The Attorney-in-fact of the plaintiff
in the person of Reymel R. Sagario is a resident of Vira, Roxas, Isabela, and he
DANTE M. PASCUAL, represented by REYMEL R. SAGARIO, Petitioner, substitute (sic) Dante Pascual by virtue of said Special Power of Attorney. Hence, said
vs. Attorney-in-fact should have brought the dispute before barangay Vira, Roxas, Isabela, where
MARILOU M. PASCUAL, Respondent. the property is located. In the case of Royales vs. Intermediate Appellate Court 127 SCRA 470,
"Ordinarily, non-compliance with the condition precedent prescribed by P.D. 1508 could affect
DECISION the sufficiency of the plaintiff’s cause of action and make his complaint vulnerable to dismissal
CARPIO MORALES, J.: on ground of lack of cause of action or prematurity."6 (Emphasis and underscoring supplied)

On challenge via Petition for Review on Certiorari is the February 10, 2003 Order of the
Regional Trial Court (RTC) of Isabela, Branch 23 at Roxas dismissing, on motion of herein
respondent Marilou M. Pascual, the complaint filed against her by her brother-herein petitioner
Dante M. Pascual, represented by his attorney-in-fact Reymel R. Sagario (Sagario), for non-
compliance with the conciliation provision-pre condition to filing of complaint in court under
R.A. 7160 (the Local Government Code).
Petitioner, a permanent resident of the United States of America, appointed Sagario as his
attorney-in-fact by a Special Power of Attorney (SPA) dated April 10, 2002:
1. To file a case for the cancellation of Transfer Certificate of Title No. T-271656 issued in the
name of Marilou M. Pascual as well as the Deed of Sale of Registered Land (Dec. No. 639; Page
No. 52; Book No. XXI; Series of 1994) and/or Reconveyance at the appropriate court;
2. To collect the monthly rentals from the tenant;
3. To enter into amicable settlement with Marilou M. Pascual or any other mode of
payment/and/or dispute resolution;
Petitioner’s Motion for Reconsideration7 of the above-said order was denied by Order of March
24, 2003:8
xxx
Consequently, the Court is [of] the opinion that the said Attorney-in-fact shall be deemed to
be the real party in interest, reading from the tenor of the provisions of the Special Power of
Attorney. Being a real party in interest, the Attorney-in-fact is therefore obliged to bring this
case first before the Barangay Court. Sec. 3, Rule 3 of the Rules of Court provides that "Where
the action is allowed to be prosecuted or defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the case and shall be deemed
to be the real party in interest.
xxx
Being the real party in interest, the Attorney-in-fact may therefore bring the necessary complaint
before the Lupon Tagapayapa and appear in person as if he is the owner of the
land.9 (Emphasis and underscoring supplied)

4. To execute and sign any and all papers, contracts/documents which may be necessary relative Hence, the present petition questioning "the palpable legal errors" of the RTC.
to the above acts. Petitioner argues that since he, not his attorney-in-fact Sagario, is the real party in interest, and
xx x1 since he actually resides abroad, the lupon would have no jurisdiction to pass upon the dispute
involving real property, he citing Agbayani v. Belen.10
Respondent submits, on the other hand, that Section 408, paragraph (f), of the Local Government
Code, is qualified by paragraph (c) of Section 409 of the same Code the latter of which provides
that "[a]ll disputes involving real property or any interest therein shall be brought in the barangay
where the real property is located," hence, the use of the word "shall" makes it mandatory for
the bringing of the dispute before the lupon.
That attorney-in-fact Sagario is a resident of the same barangay as that of hers, respondent
argues in any event, brings the matter under the jurisdiction of the lupon, for Sagario, following
Section 3 of Rule 3 of the 1997 Rules of Civil Procedure which provides:
Sec. 3. Representative as parties. - Where the action is allowed to be prosecuted or defended by
a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in
the title of the case and shall be deemed to be the real party in interest. A representative may be
a trustee of an express trust, a guardian, an executor or administrator, or a party authorized by
law or these Rules. An agent acting in his own name for the benefit of an undisclosed principal
may sue or be sued without joining the principal except when the contract involves things
belonging to the principal,
being a substitute, becomes the real party-in-interest.
Respondent’s submissions do not lie.
The pertinent provisions of the Local Government Code read:
SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. – The lupon of each
barangay shall have authority to bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except:
(a) Where one party is the government or any subdivision or instrumentality thereof;
(b) Where one party is a public officer or employee, and the dispute relates to the performance
of his official functions;
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five
Thousand pesos (P5,000.00);
(d) Offenses where there is no private offended party;
(e) Where the dispute involves real properties located in different cities or municipalities unless
the parties thereto agree to submit their differences to amicable settlement by an appropriate
lupon;
(f) Disputes involving parties who actually reside in barangays of different cities or
municipalities, except where such barangay units adjoin each other and the parties thereto agree
to submit their differences to amicable settlement by an appropriate lupon; and
(g) Such other classes of disputes which the President may determine in the interest of justice
or upon the recommendation of the Secretary of Justice.
The court in which non-criminal cases not falling within the authority of the lupon under this
Code are filed may, at any time before trial, motu proprio refer the case to the lupon concerned
for amicable settlement. (Emphasis supplied)
SEC. 409. Venue. – (a) Disputes between persons actually residing in the same barangay shall
be brought for amicable settlement before the lupon of said barangay .
(b) Those involving actual residents of different barangays within the same city or municipality
shall be brought in the barangay where the respondent or any of the respondents actually resides,
at the election of the complainant.
(c) All disputes involving real property or any interest therein shall be brought in the barangay
where the real property or the larger portion thereof is situated.
(d) Those arising at the workplace where the contending parties are employed or at the institution
where such parties are enrolled for study shall be brought in the barangay where such workplace
or institution is located.
Objections to venue shall be raised in the mediation proceedings before the punong barangay;
otherwise, the same shall be deemed waived. Any legal question which may confront the punong
barangay in resolving objections to venue herein referred to may be submitted to the Secretary
of Justice or his duly designated representative whose ruling thereon shall be binding. (Emphasis
supplied)
In the 1982 case of Tavora v. Veloso,11 this Court held that where the parties are not actual
residents in the same city or municipality or adjoining barangays, there is no requirement for
them to submit their dispute to the lupon as provided for in Section 6 vis a vis Sections 2 and 3
of P.D. 1508 (Katarungang Pambarangay Law).
[B]y express statutory inclusion and exclusion, the Lupon shall have no jurisdiction over
disputes where the partiesare not actual residents of the same city or municipality, except where
the barangays in which they actually reside adjoin each other. (Underscoring supplied)
In the 2000 case of Vercide v. Hernandez,12 this Court, noting that the Tavora ruling, reiterated
in other cases including the 1996 case of Agbayani13 cited by petitioner, was decided under the
provisions of P.D. No. 1508 (Katarungang Pambarangay) Law which were, except for some
modifications, echoed in Sections 408-409 of the Local Government Code which took effect on
January 1, 1992, held that the Tavora ruling remained.
To construe the express statutory requirement of actual residency as applicable to the attorney-
in-fact of the party-plaintiff, as contended by respondent, would abrogate the meaning of a "real
party in interest" as defined in Section 2 of Rule 314 of the 1997 Rules of Court vis a vis Section
3 of the same Rule which was earlier quoted but misread and misunderstood by respondent.
In fine, since the plaintiff-herein petitioner, the real party in interest, is not an actual resident
of the barangay where the defendant-herein respondent resides, the local lupon has no
jurisdiction over their dispute, hence, prior referral to it for conciliation is not a pre-condition to
its filing in court.
The RTC thus erred in dismissing petitioner’s complaint.
WHEREFORE, the petition is granted. The assailed February 10, 2003 Order, as well as the
March 24, 2003 Order denying reconsideration of the first, of Branch 23 of the Regional Trial
Court of Isabela at Roxas is SET ASIDE. Said court is accordingly directed to reinstate Civil
Case No. 23-713-02 to its docket and take appropriate action thereon with dispatch.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION prosecution caused the service of the subpoena too late for the hearing on February 20. For the
next three months, the prosecution simply did not apply for a subpoena. The Court finds that the
G.R. No. 157952 September 8, 2009 intention to delay the proceedings is evident. As prayed for, the prosecution is declared to have
terminated further evidence.
JOWETT K. GOLANGCO, Petitioner,
vs. The prosecution is given 20 days from today to make its formal offer with copy furnished the
JONE B. FUNG, Respondent. defense counsel who is given 15 days from receipt to make his comment and thereafter the offer
will be deemed submitted for resolution.
DECISION
SO ORDERED.
BERSAMIN, J.:
The petitioner, by his lonesome, assailed on certiorari in the Court of Appeals the order dated
We have before us a petition for review on certiorari seeking the review of the decision dated
May 23, 2001, claiming that the RTC judge thereby committed grave abuse of discretion for not
September 12, 2002 (dismissing the petitioner’s petition for certiorari)1 and the resolution dated
issuing the subpoena to require Atty. Ramos to appear and testify in the May 23, 2001 hearing.
April 2, 2003 (denying the petitioner’s motion for reconsideration), 2 both promulgated by the
He contended that his prior request for the subpoena for the February 20, 2001 hearing should
Court of Appeals in C.A.-G.R. SP No. 66616 entitled Jowett K. Golangco v. The Presiding
have been treated as a continuing request for the subpoena considering that the Rules of Court
Judge of Branch 53, Regional Trial Court of Manila and Jone B. Fung.
did not require a party to apply for a subpoena again should it not be served in the first time. 6
Antecedents
In its decision dated September 12, 2002, the Court of Appeals rebuffed the petitioner and
C.A.-G.R. SP No. 66616 was a special civil action for certiorari commenced by the petitioner dismissed the petition for certiorari, holding:
to assail the order issued by the Regional Trial Court (RTC), Branch 53, in Manila in Criminal
Axiomatically, any request for a subpoena to a witness must indicate the date and time when the
Case No. 95-145703 entitled People v. Jone B. Fung, whereby the RTC declared the Prosecution
witness must appear in court to give his or her testimony. It is on the basis of that request that
to have terminated the presentation of further evidence and required the Prosecution to file a
the court personnel prepares the subpoena indicating the title of the case, the date and time for
written offer of evidence within 20 days, furnishing a copy of the offer to the accused who in
the appearance of the intended witness. This is where petitioner fell into error. His urgent request
turn had to comment on the offer within 15 days from receipt.
for subpoena (Annex "A") failed to contain the date and time when the intended witness, Atty.
Criminal Case No. 95-145703, a prosecution for libel initiated by the petitioner as the Oscar Ramos, must appear in court to testify.
complainant against the respondent, was commenced in 1995.3 Allegedly, the respondent had
Even then, granting that the subpoena issued for February 20, 2001 hearing was properly served
issued an office memorandum dated May 10, 1995 maliciously imputing against the petitioner
but which hearing was later on postponed, there is still a need to ask for a new subpoena to the
the commission of bribery and had sent copies of the memorandum to the petitioner’s superiors
same witness for the next scheduled hearing. The court cannot be tasked to guess whether or not
in the Philippine Overseas Employment Administration (POEA) and to other public officers and
petitioner still intends to present the witness at the next hearing. An intention to still present the
personalities not connected with the POEA, causing damage and prejudice to the petitioner. 4
witness necessarily requires another request for a subpoena.
After almost 6 years, the Prosecution had presented only two witnesses in Criminal Case No.
Moreover, the case was last heard on January 23, 2001 prior to the February 20, 2001
95-145703. On February 16, 2001, the Prosecution requested that a subpoena ad testificandum
hearing. Apropos, to ask for a subpoena to his next witness on February 16, 2001, for the hearing
be issued to and served on Atty. Oscar Ramos, Resident Ombudsman of the POEA, to compel
on February 20, 2001 was rather late. As the complainant in the case, petitioner should have
him to testify in the criminal case on February 20, 2001. The hearing of February 20, 2001 was,
exercised due diligence or proper zeal in the prosecution of his case which has long been pending
however, reset to May 23, 2001 due to the unavailability of Atty. Ramos.
for five (5) years, let alone that it was the last chance given by the court to the prosecution to
On May 23, 2001, the Prosecution still failed to present Atty. Ramos as its witness because no the prosecution to produce its witness on February 20, 2001 on account of its previous failure
subpoena had been issued to and served on him for the purpose. Consequently, the RTC judge to do so.
issued an order terminating the Prosecution’s presentation of evidence, 5 as follows:
Then, again, as correctly observed by the court a quo, from February 20, 2001 to May 23, 2001,
ORDER a good three (3) months period passed without the prosecution requesting for a subpoena for its
intended witness. When the respondent court, as a consequence, deemed the prosecution
When the case was called for hearing, the accused is in court with his lawyer Atty. Benigno evidence terminated and required it to formally offer its evidence, it was not committing any
Palamos. Private prosecutor Atty. Agripino Baybay is in court but he has no witnesses today. error nor abuse of discretion. Here, petitioner created its own predicament and should suffer
He manifested that he has to present Atty. Oscar Ramos, but since the last hearing on February from its adverse effect.7
20, to this date he has not asked for any subpoena. Defense counsel moves to terminate the
presentation of prosecution evidence in view of the failure of the prosecution to present Hence, this appeal.
witnesses despite numerous postponements. The private prosecutor asks for another
Issue
continuance. The records show that on January 23, 2001 this Court gave a stern warning to the
prosecutor that it is giving one final postponement for the production of witnesses. Yet the
The issue is whether the Court of Appeals correctly ruled on the petition for certiorari of the
petitioner.
Ruling of the Court
We find no reversible error on the part of the Court of Appeals.
I
Before dealing with the petition for review, we point out the gross procedural misstep committed
by the petitioner in the Court of Appeals.
The petitioner did not join the People of the Philippines as a party in his action for certiorari in
the Court of Appeals. He thereby ignored that the People of the Philippines were indispensable
parties due to his objective being to set aside the trial court’s order dated May 23, 2001 that
concerned the public aspect of Criminal Case No. 95-145703. The omission was fatal and
already enough cause for the summary rejection of his petition for certiorari.
The petitioner did not also obtain the consent of the Office of the Solicitor General (OSG) to his
petition for certiorari. At the very least, he should have furnished a copy of the petition for
certiorari to the OSG prior to the filing thereof,8but even that he did not do. Thereby, he violated
Section 35(l), Chapter 12, Title III of Book IV of Executive Order No. 292 (The Administrative
Code of 1987), which mandates the OSG to represent "the Government in the Supreme Court
and the Court of Appeals in all criminal proceedings; represent the Government and its officers
in the Supreme Court, the Court of Appeals, and all other courts or tribunals in all civil actions
and special proceedings in which the Government or any officer thereof in his official capacity
is a party."1avvphi1
Although the petition for certiorari bore the conformity of the public prosecutor (i.e., Assistant
City Prosecutor Danilo Formoso of Manila), that conformity alone did not suffice. The authority
of the City Prosecutor or his assistant to appear for and represent the People of the Philippines
was confined only to the proceedings in the trial court.
II
Even on the merits, the petition for review fails.
The criminal case had been pending since 1995 and the petitioner as the complainant had
presented only two witnesses as of the issuance of the assailed order. The trial court had not
been wanting in giving warnings to the Prosecution on the dire consequences should the
Prosecution continue to fail to complete its evidence. The Prosecution had retained the duty to
ensure that its witnesses would be present during the trial, for its obligation to the administration
of justice had been to prove its case sans vexatious and oppressive delays. Yet, the warnings of
the trial court had gone unheeded. Instead, the Prosecution would deflect the responsibility for
the delays to the failure of the trial court to issue the subpoena to its proposed witness and to
cause the subpoena to be served. Such attitude of the Prosecution, which included the petitioner
as the complainant, manifested a lack of the requisite diligence required of all litigants coming
to the courts to seek redress.
We find that the trial judge did not act capriciously, arbitrarily or whimsically in issuing the
assailed order. Thus, the Court of Appeals properly dismissed the petition for certiorari. The
petitioner now needs to be reminded that certiorari is an extraordinary remedy to correct a grave
abuse of discretion amounting to lack or excess of jurisdiction when an appeal, or any plain,
speedy and adequate remedy in the ordinary course of law is not available. In this regard, grave
abuse of discretion implies a capricious and whimsical exercise of judgment that is equivalent
to lack of jurisdiction whenever the power is exercised in an arbitrary or despotic manner by
reason of passion, prejudice or personal aversion amounting to an evasion of a positive duty or
to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law.91avvphi1
Also, it does not escape our notice that the trial court’s assailed order terminating the
Prosecution’s presentation of evidence was merely interlocutory. This fact surely adds
justification to the Court of Appeals’ rejection of the petition for certiorari, because it is the
settled rule that certiorari does not lie to review an interlocutory order, but only a final judgment
or order that terminates the proceedings. Certiorari will be refused where there has been no final
judgment or order and the proceeding for which the writ is sought is still pending and
undetermined in the lower court. Indeed, a writ of certiorari is not intended to correct every
controversial interlocutory ruling unless the ruling is attended by grave abuse of discretion or
tainted by whimsical exercise of judgment equivalent to lack of jurisdiction, for the function of
certiorari is limited to keeping an inferior court within its jurisdiction and to relieving persons
from its arbitrary acts – acts that courts or judges have no power or authority in law to perform.
Instead, the proper remedy for the petitioner was to proceed in the action until judgment, which,
once rendered, might then be reviewed on appeal, along with the assailed interlocutory
order.10 As long as the trial court acted within its jurisdiction, its alleged error committed in the
exercise of its jurisdiction amounted to nothing more than an error of judgment that was
reviewable by a timely appeal, not by a special civil action of certiorari. 11
WHEREFORE, we affirm the decision dated September 12, 2002 rendered in CA-G.R. SP No.
66616.
Costs of suit to be paid by the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
G.R. No. 178529 September 4, 2009
EQUITABLE PCI BANK, INC. (now known as BANCO DE ORO - EPCI,
INC.) Petitioner,
vs.
HEIRS OF ANTONIO C. TIU, namely: ARLENE T. FU, MICHAEL U. TIU, ANDREW
U. TIU, EDGAR U. TIU and ERWIN U. TIU, Respondents.
DECISION
CARPIO MORALES, J.:
To secure loans in the aggregate amount of ₱7 Million obtained by one Gabriel Ching from
herein petitioner Equitable PCI Bank, Inc. (now known as Banco de Oro-EPCI, Inc.),1 Antonio
C. Tiu (Antonio), of which herein respondents allege to be heirs, executed on July 6, 1994 a
Real Estate Mortgage (REM)2 in favor of petitioner covering a lot located in Tacloban City.
Before the words "With my Marital Consent" appearing in the REM is a signature attributed to
Antonio’s wife Matilde.
On October 5, 1998, Antonio executed an Amendment to the Real Esate Mortgage3 (AREM)
increasing the amount secured by the mortgage to ₱26 Million, also bearing a signature
attributed to his wife Matilde above the words "With my Marital Consent."
The property mortgaged was covered by TCT No. T-1381 of the Tacloban Register of Deeds
which, the AREM states, was "registered in the name of the Mortgagor."
Antonio died on December 26, 1999.4
The loan obligation having remained unsettled, petitioner filed in November 2003 before the
Regional Trial Court (RTC) of Tacloban City a "Petition for Sale"5 dated November 4, 2003,
for the extrajudicial foreclosure of the AREM and the sale at public auction of the lot covered
thereby. Acting on the petition, the RTC Clerk of Court and Ex-Oficio Sheriff scheduled the
public auction on December 17, 2003.6
A day before the scheduled auction sale or on December 16, 2003, the herein respondents, Heirs
of Antonio C. Tiu, namely Arlene T. Fu, Michael U. Tiu, Andrew U. Tiu, Edgar U. Tiu, and
Erwin U. Tiu, filed a Complaint/Petition7before the RTC of Tacloban against petitioner and the
Clerk of Court-Ex Oficio Sheriff, docketed as Civil Case No. 2003-12-205 for annulment of the
AREM, injunction with prayer for issuance of writ of preliminary injunction and/or temporary
restraining order and damages, alleging, among other things, that
x x x the said AREM is without force and effect, the same having been executed without the
valid consent of the wife of mortgagor Antonio C. Tiu who at the time of the execution of the
said instrument was already suffering from advance[d] Alzheimer’s Disease and, henceforth,
incapable of giving consent, more so writing and signing her name[.] 8 (Emphasis and
underscoring supplied.)1awphi1
The RTC issued a temporary restraining order,9 and subsequently, a writ of preliminary
injunction.10
To the Complaint petitioner filed a Motion to Dismiss,11 raising the following grounds:
I SEC. 2 Parties in interest. ─ A real party in interest is the party who stands to be benefited or
THE PLAINTIFFS/PETITIONERS NOT BEING THE REAL PARTIES-IN-INTEREST,
THEIR COMPLAINT STATES NO CAUSE OF ACTION;
II
EVEN IF THERE IS A CAUSE OF ACTION, THE SAME IS ALREADY BARRED BY THE
STATUTE OF LIMITATIONS; and
III
THE PRESENT ACTION BEING A PERSONAL ONE, THE VENUE IS IMPROPERLY
LAID.12(Underscoring supplied)
By Resolution13 of April 14, 2004, Branch 8 of the Tacloban RTC denied the Motion to Dismiss
in this wise:
From the facts of the case, herein plaintiffs/petitioners are so situated that they will either be
benefited or injured in subject action. They are therefore real parties in interest, as they will be
damnified and injured or their inheritance rights and interest on the subject property protected
and preserved in this action. As they are real parties in interest, they therefore have a cause of
action against herein defendant.14
It thus ordered petitioner to file Answer within the reglementary period. Petitioner’s motion for
reconsideration of the said Resolution having been denied,15 it filed a Petition16 for Certiorari,
Prohibition, and Mandamus with prayer for preliminary injunction before the Court of Appeals
which it denied by Decision17 of August 30, 2006, quoting with approval the trial court’s ratio
in denying petitioner’s Motion to Dismiss.
Hence, the present Petition,18 petitioner faulting the Court of Appeals in affirming the trial
court’s denial of its Motion to Dismiss.
Petitioner argues, in the main, that as respondents are not the real parties in interest, their
complaint states no cause of action. Citing Travel Wide Associated, Inc. v. Court of
Appeals,19 petitioner adds that since the party in interest is respondents’ mother but the
complaint is not brought in her name, respondents’ complaint states no cause of action.
The issue in the main thus is whether the complaint filed by respondents-children of Antonio,
without impleading Matilde who must also be Antonio’s heir and who, along with Antonio,
was principally obliged under the AREM sought to be annulled, is dismissible for lack of cause
of action.
The pertinent provision of the Civil Code on annulment of contracts reads:
Art. 1397. The action for the annulment of contracts may be instituted by all who are thereby
obliged principally or subsidiarily. However, persons who are capable cannot allege the
incapacity of those with whom they contracted; nor can those who exerted intimidation,
violence, or undue influence, or employed fraud, or caused mistake base their action upon these
flaws of the contract. (Emphasis and underscoring supplied)
Upon the other hand, the pertinent provisions of Rule 3 of the Rules of Court (Parties to Civil
Actions) read:
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise
authorized by law or these Rules, every action must be prosecuted or defended in the name of
the real party in interest. (Emphasis and underscoring supplied)
SEC. 3. Representatives as parties. ─ Where the action is allowed to be prosecuted or defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
in the title of the case and shall be deemed to be the real party in interest. A representative may
be a trustee of an express trust, a guardian, an executor or administrator, or a party authorized
by law or these Rules. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the contract involves
things belonging to the principal. (Emphasis and underscoring supplied)
The AREM was executed by Antonio, with the marital consent of Matilde. Since the mortgaged
property is presumed conjugal, she is obliged principally under the AREM. It is thus she,
following Art. 1397 of the Civil Code vis a vis Sec. 2 of Rule 3 of the Rules of Court, who is
the real party in interest, hence, the action must be prosecuted in her name as she stands to be
benefited or injured in the action.
Assuming that Matilde is indeed incapacitated, it is her legal guardian who should file the action
on her behalf. Not only is there no allegation in the complaint, however, that respondents have
been legally designated as guardians to file the action on her behalf. The name of Matilde, who
is deemed the real party in interest, has not been included in the title of the case, in violation of
Sec. 3 of Rule 3 of the Rules of Court.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated August
30, 2006 is REVERSED and SET ASIDE. Civil Case No. 2003-12-205 lodged before Branch 8
of the Regional Trial Court of Tacloban City is DISMISSED for lack of cause of action.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No.190486 November 26, 2014
STANLEY FINE FURNITURE, ELENAAND CARLOS WANG, Petitioners,
vs.
VICTOR T. GALLANO AND ENRIQUITO SIAREZ, Respondents.
DECISION
LEONEN, J.:
To terminate the employment of workers simply because they asserted their legal rights by filing
a complaint is illegal. It violates their right to security of tenure an'd should not be tolerated.
In this petition for review1 on certiorari filed by Elena Briones,2 we are asked to reverse the
decision3 of the Court of Appeals in CA-G.R. SP No. 101145. The Court of Appeals found grave
abuse of discretion on the part of the National Labor Relations Commission, and reinstated the
decision of the Labor Arbiter dated August 2, 2006 finding that respondents Victor Gallano and
Enriquito Siarez were illegally dismissed.4
Stanley Fine Furniture (Stanley Fine), through its owners Elena and Carlos Wang, hired
respondents Victor T. Gallano and Enriquito Siarez in 1995 as painters/carpenters. Victor and
Enriquito each received 215.00 basic salary per day.5
On May 26, 2005, Victor and Enriquito filed a labor complaint6 for underpayment/non-payment
of salaries, wages, Emergency Cost of Living Allowance (ECOLA), and 13th month pay. They
indicated in the complaint form that they were "still working"7 for Stanley Fine.
Victor and Enriquito filed an amended complaint8 on May 31, 2005, for actual illegal dismissal,
underpayment/non-payment of overtime pay, holiday pay, premium for holiday pay, service
incentive leave pay, 13th month pay, ECOLA, and Social Security System (SSS) benefit. In the
amended complaint, Victor and Enriqui to claimed that they were dismissed on May 26,
2005.9 Victor and Enriquito were allegedly scolded for filing a complaint for money claims.
Later on, they were not allowed to work.10
On the other hand, petitioner Elena Briones claimed that Victor and Enriquito were "required to
explain their absences for the month of May 2005, but they refused."11
In the decision12 dated August 2, 2006, the Labor Arbiter found that Victor and Enriqui to were
illegally dismissed. The Labor Arbiter noted the following contradictory statements inStanley
Fine’s position paper, thus:
Also, Stanley Fine was forced todeclare them dismissed due to their failure to report back to
work for a considerable length of time and also, due to the filing of an unmeritorious labor case
against it by the two complainants. . . .
....
The main claim of the complainants is their allegation that they were dismissed. They were NOT
DISMISSED.13(Emphasis in the original)
The Labor Arbiter resolved these contradictory statements in the following manner:
In fact, the admission that complainants were dismissed due to the filing of a case against them
by complainants is a blatant transgression of the Labor Code that no retaliatory measure shall
be levelled against an employee by reason of an action commenced against an employer. This
is virtually a confession of judgment and a death [k]nell to the cause of respondents. It actually
lends credence tothe fact that complainants were dismissed upon respondents’ knowledge of the
complaint before the NLRC as attested by the fact that four days after the filing of the complaint,
the same was amended to include illegal dismissal.14
The Labor Arbiter also awarded moral and exemplary damages to respondents, reasoning that:
Finding malice, and ill-will in the dismissal of complainants, which exhibits arrogance and
defiance of labor laws on the part of respondents, moral and exemplary damages for ₱50,000
and ₱30,000 respectively for each of the complainants are hereby granted.
WHEREFORE, premises considered, respondents are hereby declared guilty of illegal
dismissal. As a consequence, they are ORDERED to reinstate complainant to their former
position and pay jointly and severally complainants’ full backwages from date of dismissal until
actual reinstatement[.]15
On appeal, the National Labor Relations Commission reversed16 the Labor Arbiter’s decision,
ruling that the Labor Arbiter erred in considering the statement, "due to the filing ofan
unmeritorious labor case," as an admission against interest.17 The National Labor Relations
Commission held that:
Contrary to the findings of the Labor Arbiter below . . . respondents-appellants’ allegations in
paragraph 5 of their position paper is not an admission that they dismissed complainants-
appellees moreso [sic], in retaliation for complainants-appellees’ filing a complaint against
them. Had the Labor Arbiter been more circumspect analyzing the facts brought before him by
the herein parties pleadings, he could have easily discerned that complainants-appellees were
merely required to explain their unauthorized absences they committed for the month of May
2005 alone. Complainants-appellees did notdeny knowledge of the memoranda issued to them
on May 23, 25 and 27, 2005 for complainant-appellee Siarez and June 1, 2005 memo for
Gallano. That they simply refused receipt of them cannot extricate themselves from its legal
effects as the last of which clearly show that itwas sent to them thru the mails.
....
The same holds true with the findings of the Labor Arbiter below that respondents-appellants’
evidence, Annexes "7" to "74" "cannot be admissible in evidence" for being mere xerox copies
and "are easily subjected to interpolation and tampering."
Suffice it to state that these pieces of evidence were adduced during the arbitral proceedings
below, where complainants-appellees were afforded the opportunity to controvert and deny its
truthfulness and veracity that complainants-appellees never objected thereto or deny its
authenticity, certainly did not render said documents tampered or interpolated.
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSEDand
SET ASIDE.Respondents-appellants are however ordered to reinstate complainants-appellees
to their former position without loss of seniority rights and benefits appurtenant thereto, without
backwages.
SO ORDERED.18
Victor and Enriquito filed a motion for reconsideration,19 which the National Labor Relations
Commission denied in the resolution20 dated August 15, 2007.
Thus, Victor and Enriquito filed a petition for certiorari before the Court of Appeals. Generally,
petitions for certiorari are limited to the determination and correction of grave abuse of
discretion amounting to lack or excess of jurisdiction. However,the Court of Appeals reviewed
the findings of facts and of law of the labor tribunals, considering that the Labor Arbiter and the
National Labor Relations Commission had different findings.21
The Court of Appeals found that Stanley Fine failed to show any valid cause for Victor and
Enriquito’s termination and to comply with the twonotice rule.22 Also, the Court of Appeals
noted that Stanley Fine’s statements — that it was "forced to declare them dismissed"23 due to
their absences and "due to the filing of an unmeritorious labor case against it by the two
complainants"24 — were admissions against interest and binding upon Stanley Fine. Thus: An
admission against interest is the best evidence which affords the greatest certainty of the facts
in dispute since no man would declare anything against himself unless such declaration is true.
Thus, an admission against interest binds the person who makes the same, and absent any
showing that this was made thru palpable mistake, no amount of rationalization can offset it. 25
The Court of Appeals also held that the immediate amendment of Victor and Enriquito’s
complaint negated their alleged abandonment.26
With regard to the National Labor Relations Commission’s deletion of the monetary award, the
Court of Appeals ruled that:
Notably, private respondents’ claim of payment is again belied by their own admission in their
position paper that they failed to pay petitioners their ECOLA and to ask for exemption from
payment of said benefits to their employees. In any event, private respondents’ allegation of
payment of money claims is not supported by substantial evidence. The Labor Arbiter found
that the documents presented by private respondents were mere photocopies, with no
appropriate signatures of petitioners and could be easily subjected to interpolation and
tampering.27
The Court of Appeals, thus, granted the petition, set aside the resolutions of the National Labor
Relations Commission, and reinstated the decision of the Labor Arbiter. 28 The dispositive
portion of its decision reads:
WHEREFORE, the assailed Resolutions dated June 18, 2007 and August 15, 2007 of public
respondent NLRC are set aside and the Labor Arbiter’s Decision dated August 2, 2006 is
reinstated.
SO ORDERED.29
Stanley Fine filed a motion for reconsideration,30 which the Court of Appeals denied in the
resolution31 dated November 27, 2009.
On December 21, 2009, Stanley Fine, Elena, and Carlos Wang filed a motion for extension of
time to file petition for review on certiorari.32
On January 21, 2010, Elena Briones filed a petition for review.33 Elena alleged that she is the
"registered owner/proprietress of the business operation doing business under the name and style
‘Stanley Fine Furniture.’"34She argued that the Court of Appeals erred in ruling that Victor and
Enriquito were illegally dismissed considering that she issued several memoranda to them, but
they refused to accept the memoranda and explain their absences.35 As to the statement, "due to
the filing of an unmeritorious labor case,"36 it was error on the part of her former counsel which
should not bind her.37 Further, the monetary claims should not have been awarded because these
were based on the allegations in the complaint form,38 whereas Elena presented documentary
evidence to show that Victor and Enriquito’s money claims had been paid. They never rebutted
her documentary evidence.39 As to the award of moral and exemplary damages and attorney’s
fees, Victor and Enriquito did not present any evidence to support their claim, thus, it was error
for the Court of Appeals to have reinstated the Labor Arbiter’s decision. 40
In compliance with this court’s resolution41 dated February 17, 2010, Victor and Enriquito filed
their comment42 and argued that the petition should be denied because Elena "is neither the
respondent, party in interest or representatives as parties."43 With regard to Victor’s two
absences and Enriquito’s five absences, these should not be interpreted as refusal to go back to
work tantamount to abandonment.44 Considering that Elena’s arguments had been passed upon
by the labor tribunals and the Court of Appeals, this petition should be denied. 45
Elena filed her reply46 and posited that she has legal standing to file the petition for review
because she isthe owner/proprietress of Stanley Fine.47 In addition, she argued that Victor and
Enriquito knew that she, Elena, is the real party-in-interest because during the pendency of the
labor case, she filed an ex-parte manifestation, attaching her Department of Trade and Industry
certificate of registration of business name,48 showing that the registration is under her maiden
name, Elena Y. Briones. As per the Department of Trade and Industry’s certification, 49 Stanley
Fine is a sole proprietorship owned by "Elena Briones Yam-Wang." Thus, this court is asked to
resolve procedural and substantive issues in this petition as follows:>
1. Whether Elena Briones has standing to file this petition for review on certiorari;
2. Whether the Court of Appeals erred in ruling that Victor Gallano and Enriquito Siarez were
illegally dismissed;
3. Whether the Court of Appeals erred when it agreed with the Labor Arbiter that the statement,
"filing of an unmeritorious labor case," is an admission against interest and binding against
Stanley Fine Furniture; and
4. Whether the Court of Appeals erred in awarding the monetary claims and damages to Victor
Gallano and Enriquito Siarez, considering that they did not produce evidence to support their
claims.
I.
Petitioner Elena Briones has standing to file this case
On this issue, petitioners claimed that Elena Briones is not the real party-in-interest; hence, the
decision of the Court of Appeals is final and executory since the petition for review was not
properly filed.50
In her reply, Elena argued that she is the sole proprietor of Stanley Fine, a fact known to
respondents.51 As the sole proprietor, she has standing to file this petition.52
Respondents cannot deny Elena Briones’ standing to file this petition considering that in their
amended complaint filed before the Labor Arbiter, they wrote "Stanley Fine Furniture, Elina
[sic] Briones Wang as ownerand Carlos Wang" as their employers. 53
Also, respondents did not refute Elena’s allegation that Stanley Fine is a sole proprietorship. In
Excellent Quality Apparel, Inc. v. Win Multi-Rich Builders, Inc.,54 this court stated that:
A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise. The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and
requires its proprietor or owner to secure licenses and permits, register its business name, and
pay taxes to the national government. The law does not vest a separate legal personality on the
sole proprietorship or empower it to file or defend an action in court. 55 (Emphasis supplied)
Thus, Stanley Fine, being a sole proprietorship, does not have a personality separate and distinct
from its owner, Elena Briones. Elena, being the proprietress of Stanley Fine, can be considered
as a real party-in-interest and has standing to file this petition for review.
II.
Review of procedural parameters
In her petition for review, Elena raised the following issues: (a) whether "the filing of an
Establishment Termination Report"56 is an act of dismissal; (b) whether counsel’s allegation that
an employee was dismissed due to the filing of an "unmeritorious" case against the employer is
binding;57 (c) whether a Labor Arbiter can award monetary claims based on the allegations in
the complaint form;58 and (d) whether the award of moral and exemplary damages and
attorney’s fees is proper even without supporting evidence.59
In a Rule 45 petition for review of a Court of Appeals decision rendered under Rule 65, this
court is guided by the following rules:
[I]n a Rule 45 review (of the CA decision rendered under Rule 65), the question of law that
confronts the Court is the legal correctness of the CA decision – i.e., whether the CA correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before
it, and not on the basis of whether the NLRC decision on the merits of the case was correct. . . .
Specifically, in reviewing a CA labor ruling under Rule 45 of the Rules of Court, the Court’s
review is limited to:
(1) Ascertaining the correctness of the CA’s decision in finding the presence or absence of a
grave abuse of discretion. This is done by examining, on the basis of the parties’ presentations,
whether the CA correctly determined that at the NLRC level, all the adduced pieces of evidence
were considered; no evidence which should not have been considered was considered; and the
evidence presented supports the NLRC findings; and
(2) Deciding any other jurisdictional error that attended the CA’s interpretation or application
of the law.60(Citation omitted)
Thus, the proper issue in this case is whether the Court of Appeals correctly determined the
presence of grave abuse of discretion on the part of the National Labor Relations Commission.
III.
There was no just cause in the dismissal of respondents
The Court of Appeals found grave abuse of discretion on the part of the National Labor Relations
Commission when it reversed the Labor Arbiter’s decision. The Court of Appeals held that
respondents were illegally dismissed because no valid causefor dismissal was shown. Also, there
was no compliance withthe two-notice requirement.61
Elena admitted that no notices of dismissal were issued to respondents. However, memoranda
were given to respondents, requiring them to explain their absences. She claimed that the notices
to explain disprove respondents’ allegation that there was intent to dismiss them.62
Grounds for termination of employment are provided under the Labor Code. 63 Just causes for
termination ofan employee are provided under
Article 282 of the Labor Code: ARTICLE 282. Termination by employer.- An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
Although abandonment of work is not included in the enumeration, this court has held that
"abandonment is a form of neglect of duty."64 To prove abandonment, two elements must
concur:
1. Failure to report for work orabsence without valid or justifiable reason; and
2. A clear intention to sever the employer-employee relationship.65
In Hodieng Concrete Products v. Emilia,66 this court held that:
Absence must be accompanied by overt acts unerringly pointing to the fact that the employee
simply does not want to work anymore. And the burden of proof to show that there was
unjustified refusal to go back to work rests on the employer.67
The Court of Appeals ruled that the alleged abandonment of work is negated by the immediate
filing of the complaint for illegal dismissal on May 31, 2005. 68 The Court of Appeals further
stated that:
Long standing is the rule that the filing of the complaint for illegal dismissal negates the
allegation of abandonment. Human experience dictates that no employee in his right mind would
go through the trouble of filing a case unless the employer had indeed terminated the services
of the employee.69
In this case, Elena failed to pinpoint the overt acts of respondents that show they had abandoned
their work. There was a mere allegation that she was "forced to declare them dismissed dueto
their failure to report back to work for a considerable length of time"but no evidence to prove
the intent to abandon work.70 It is the burden of the employer to prove that the employee was
not dismissed or, if dismissed, that such dismissal was not illegal.71 Unfortunately for Elena, she
failed to do so.
IV.
Generally, errors of counsel bind the client
Elena’s position paper states the following:
5. Also, Stanley Fine was forced to declare them dismissed due to their failure to report back to
work for a considerable length of time and also, due to the filing of an unmeritorious labor case
against itby the two complainants. . . . (Emphasis supplied)
....
8. The main claim of the complainants is their allegation that they were dismissed. They were
NOT DISMISSED. Management was [sic] has only instructed them to submit a written
explanation for their absence before they would be allowed back to work. . . . 72 (Underscoring
in the original)
Elena argued that the use of the word "unmeritorious" should not be taken against her because
it is commonly used in pleadings. Also, the use of the word "unmeritorious" came from her
previous counsel.73 In an effort to persuade this court, Elena further argued in her reply that the
statement "unmeritorious case" was a mistake committed by her former counsel which should
not bind her, considering its grave consequence.74
On the other hand, respondents alleged in their position paper75 that they were requesting from
their employer an increase in pay to comply with the minimum wage law.76 However, they were
reprimanded and were told "not to work anymore."77
Respondents filed a reply78 to Elena’s position paper and argued that:
6. The words "Nag complain pa kayo sa Labor ha, tanggal na kayo" were clear, unequivocal and
categorical. These circumstances were sufficient to create the impression in the mind of
complainants – and correctly so – that their services were being terminated. The acts of
respondents were indicative of their intention to dismiss complainants from their employment. 79
On this issue, the National Labor Relations Commission held that the phrase, "filing of an
unmeritorious labor complaint,"80 if read together with the other allegations in Elena’s position
paper, would show that respondents were not dismissed but simply required to explain their
absences.81
On the other hand, the Court of Appeals agreed with the Labor Arbiter that Elena’s statement is
an admission against interest and binding upon her. The Court of Appeals explained that:
An admission against interest is the best evidence which affords the greatest certainty of the
facts in dispute since no man would declare anything against himself unless such declaration is
true. Thus, an admission against interest binds the person who makes the same, and absent any
showing that this was made thru palpable mistake, no amount of rationalization can offset it.82
The general rule is that errors of counsel bind the client. The reason behind this rule was
discussed in Building Care Corporation v. Macaraeg:83
It is however, an oft-repeated ruling that the negligence and mistakes of counsel bind the
client.1âwphi1 A departure from this rule would bring about never-ending suits, so long as
lawyers could allege their own fault or negligence to support the client’scase and obtain
remedies and reliefs already lost by operation of law. The only exception would be, where the
lawyer’s gross negligence would result in the grave injustice of depriving his client of the due
process of law.84 (Citations omitted)
There is not an iota of proof that the lawyer committed gross negligence in this case. That
counsel did not reflect his client’s true intentions is a bare allegation. It is not a mere afterthought
meant to escape liability for such illegal act. Elena’s counsel reflected the true reason for
dismissing respondents. Both position papers state that Elena dismissed respondents because of
the filing of a labor complaint. Thus, the Court of Appeals did not err in affirming the Labor
Arbiter’s ruling that the statement, "unmeritorious labor complaint," is an admission against
interest.
V.
Non-compliance with procedural
due process supports the finding of
illegal dismissal
Assuming that the statement, "filing of an unmeritorious labor case," is not an admission against
interest, still, the Court of Appeals did not err in reinstating the Labor Arbiter’sdecision. Elena
admitted85 that no notices of dismissal were issued.
Elena pointed out that there is no evidence showing that at the time she sent the memoranda,
she already knew of the complaint for money claims filed by respondents. 86 The allegation that
she told respondents "Nag complain pa kayo sa Labor ha, sige tanggal na kayo"87 is hearsay and
inadmissible.88
In cases of termination of employment, Article 277(b) of the Labor Code provides that:
ARTICLE 277. Miscellaneous provisions. –
....
(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to the
requirement of notice under Article 283 of this Code, the employer shall furnish the worker
whose employment is sought to be terminated a written notice containing a statement of the
causes for termination and shall afford the latter ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires in accordance with company
rules and regulations promulgated pursuant to guidelines set by the Department of Labor and
Employment. Any decision taken by the employer shall be without prejudice to the right of the
worker to contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission. The burden of proving that the termination
was for a valid or authorized cause shall rest on the employer[.]
Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code further
provides:
Section 2. Security of tenure. . . .
....
(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:
For termination of employment based on just causes as defined in Article 282 of the Code:
(i) A written notice served on the employee specifying the ground or grounds for termination,
and giving said employee reasonable opportunity within which to explain his side.
(ii) A hearing or conference during which the employee concerned, with the assistance of
counsel if heso desires is given opportunity to respond to the charge, present his evidence, or
rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his termination.
King of Kings Transport, Inc. v. Mamac89 extensively discussed the two-notice requirement and
the procedure that must be observed in cases of termination, thus:
(1) The first written noticeto be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management must
accord to the employees to enable them to prepare adequately for their defense. This should be
construed as a period of at least five (5) calendar days from receipt of the notice to give the
employees an opportunity to study the accusation against them, consult a union official or
lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation
and defenses, the notice should contain a detailed narration of the facts and circumstances that
will serve as basis for the charge against the employees. A general description of the charge will
not suffice. Lastly, the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify their
defenses to the charge against them; (2) present evidence insupport of their defenses; and (3)
rebut the evidence presented against them by the management. During the hearing or conference,
the employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference or hearing could be used by
the parties as an opportunity to cometo an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) grounds have been established to
justify the severance of their employment.90 (Emphasis in the original, citation omitted)
Elena presented photocopies of the memoranda to prove that notices to explain were sent to
respondents. These photocopies were not considered by the Labor Arbiter, on the ground that
they had no probative value. Elena argued that even if the annexes were mere photocopies, they
formed part of the position paper, which is a verified pleading under oath.91 Elena also cited Lee
v. Regional Trial Court of Quezon City, Branch 8592 where this court allegedly ruled that
photocopies of documents attached to a verified motion, which have not been controverted, are
admissible.93
In Lee v. Regional Trial Court of Quezon City, Branch 85, this court stated the following:
Before we discuss the substance of private respondent’s motion, we note that attached to it
weremere photocopies of the supporting documents and not "certified true copies of documents
or papers involved therein" as required by the Rules of Court. However, given that the motion
was verified and petitioners, who were given a chance to oppose or comment on it, made no
objection thereto, we brush aside the defect in form and proceed to discuss the merits of the
motion.94 (Citation omitted)
A review of the decision in Lee v. Regional Trial Court of Quezon City, Branch 85 shows that
the case involved an omnibus motion to cite Jose C. Lee and the other parties in indirect
contempt, and to impose disciplinary sanctions or disbar Jose C. Lee’s counsel.95 The statement
cited by Elena is not the controlling doctrine in that case. In addition, it appears that this court
brushed aside "the defect in form" in the exercise of its discretion and, thus, it should not be
taken as the controllingdoctrine. Hence, no error can be attributed to the Court of Appeals when
it agreed with the Labor Arbiter’s ruling that the photocopies of the memoranda have no
probative value since they are mere photocopies.96
Even if this court considers Annexes 1 to 5,97 these pieces of evidence would not save Elena’s
cause. Annexes 1 to 3 are the memoranda issued to Enriquito with a notation that he refused to
sign. Annex 2 is dated May 25, 2005, but the date when Enriquito allegedly refused to sign is
not indicated.98 Annex 3 is dated May 23, 2005, but again, the memorandum does not show
when it was served upon Enriquito and the date he refused to sign.99 It is quite possible that
these memoranda were antedated.
Annex 4 is dated June 1, 2005 and was sent to Enriquito Siarez via registered mail.100 Annex 5
is the memorandum issued to Victor Gallano and is likewise dated June 1, 2005. 101 Respondents
were allegedly dismissed on May 26, 2005;102 hence, Annex 1 dated May 27, 2005,103 Annex 4
dated June 1, 2005, and Annex 5 also dated June 1, 2005, were issued as a mere afterthought.
VI.
The Court of Appeals did not err in
awarding money claims and damages
With regard to the award of money claims,104 Elena likewise argues that the Labor Arbiter erred
in notadmitting Annexes 7 to 74, citing Lee v. Regional Trial Court of Quezon City, Branch 85.
On this matter, the Court of Appeals quoted the Labor Arbiter’s decision, stating that:
With respect to Annexes 7 to 74 to prove compliance of labor standards, the same cannot be
admissible in evidence because they are mere Xerox copies which are easily subjected to
interpolation and tampering.
Besides, Annex 69 which purports to be payment of 13th month pay for 2004 of complainant
Gallano but no amount is indicated. Again, Annex 71 states 13th month pay for ₱4,500.00 for
complainant Gallano yet there is no signature of Gallano acknowledging receipt thereof. If one
document is tainted with fraud, all other Xerox documents are fraudulent. 105
In their comment, respondents argued that Elena’s claim of payment is refuted by her own
admission that she did not pay respondents’ ECOLA and she even asked for exemption from
paying them.106
The Court of Appeals found that, indeed, Elena admitted that respondents were not paid their
ECOLA and that she asked for exemption from doing so. 107 In addition, Elena’s allegations of
payment of the other monetary claims, such as 13th month pay, holiday pay, and premium for
holiday pay, were not supported by substantial evidence. 108
A review of the records reveals that even if the Court of Appeals considered the vouchers
marked as Annexes 7 to 74 and submitted by Elena, these would only disprove her claim of
payment.
Annexes 7 to 74109 are vouchers showing payment of holiday pay, 13th month pay, and service
incentive leave pay to respondents. However, not all vouchers were signed by them. Further, in
some of the vouchers, the amount given to respondents was not written. Hence, these vouchers
do not prove Elena's claim of payment.
As to the award of money claims, including moral and exemplary damages, Elena argued that
respondents did not present evidence to prove their entitlement to damages.110
Considering the circumstances surrounding respondents' dismissal, the Court of Appeals did not
err in upholding the Labor Arbiter's award of moral and exemplary damages. Indeed, there was
malice when, as a retaliatory measure, petitioners dismissed respondents because they filed a
labor complaint. Further, Elena violated respondents' rights to substantive and procedural due
process when she failed to issue notices to explain and notices of termination.
Gone are the days when workers were reduced to mendicant despondency by their
employers.1âwphi1 Within our legal order, workers have legal rights and procedures to claim
these rights. The only way for employers to avoid legal action from their workers is to give them
what they may be due in law and.as human beings. Businesses thrive through the acumen of
their owners and entrepreneurs. But, none of them will exist without the outcome of the
sacrifices and toil of their workers. Our economy thrives through this partnership based upon
mutual respect. At the very least, these are the values which are congealed in our present laws.
Apparently, in this case, the owners forgot that labor is not merely a factor of production. It is a
human product no matter how modest it may seem to them.
WHEREFORE, premises considered, the Court of Appeals' decision dated July 28, 2009, and
its resolution dated November 27, 2009, reinstating the Labor Arbiter's decision dated August
2, 2006, are hereby AFFIRMED.
SO ORDERED.
FIRST DIVISION
G.R. No. 206540, April 20, 2015
ALICE G. AFRICA, Petitioner, v. INSURANCE SAVINGS AND INVESTMENT
AGENCY, INC. (ISIA) REPRESENTED BY ITS PRESIDENT, DELIA DE BORJA;
ACTING REGISTER OF DEEDS, LAS PINAS CITY, ATTY. ABRAHAM N.
VERMUDEZ, Respondents.
RESOLUTION
PEREZ, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court brought
directly before us by petitioner Alice G. Africa on pure questions of law assailing the
Decision1 dated 14 November 2012 and Order2 dated 26 March 2013 of the Regional Trial Court
(RTC), Branch 275, Las Pinas City in SCA Case No. 12-0010.
The subject property of this case is a parcel of land located along Zapote Road, Almanza, Las
Piñas City, with an area of 221, 688 square meters (sq. m.), covered by Transfer Certificate of
Title No. 38910-A registered in the name of the Spouses Wilson P. Orfmada and Lucresia
Kiocho (Spouses Orfinada). This same property is likewise the subject matter of litigation, its
ownership and titling, of cases reaching the Court and resulting in conflicting rulings, to wit:
1. G.R. No. 91413, Fusilero, et al., v. Court of Appeals, et al., 2 July 1990, decreeing. that
Benito J. Lopez and Pepito Ng are innocent purchasers for value and in good faith of lands
registered under TCT Nos. S- 61176andS-61177;
2. G.R. No. 123751, Heirs of Irene Garcia v. Court of Appeals, et al., 21 October 1996,
which affirmed in toto the CA Decision dated 27 November 1995 in CA-G.R. CV No. 45297.
The Supreme Court held that TCT Nos. S-61176 and S-61177, cancelling TCT No. 31346, cover
a property located in Almanza, Las Pinas, Metro Manila;
3. G.R. No. 141145, Republic v. Wilson Orfinada, Sr., and Lucresia K. Orfinada, 12
November 2004, which upheld the Spouses Orfinada's TCT No. 3 8910-A as a valid title
including its antecedent title OCT No. 383 in the name of Guillermo Cruz, thereby denying the
Republic's petition and affirming the "Joint Decision" of the appellate court in CA-G.R. CV No.
32815; .
4. G.R. No. 194029, Antonio V. Martel, Jr. and Spouses Pepito and Violeta Ng v. Wilson
Orfinada, Sr. represented by Alice Africa, 30 May 2011 which denied the petition of Antonio
V. Martel (Martel) and the Spouses Pepito and Violeta Ng (Spouses Ng), who all likewise claim
ownership over the subject property, specifically 185,317 sq m. thereof, and upheld the Decision
of the appellate court ruling on procedural matters. Ultimately, this case dismissed the cross
claim of Martel and the Spouses Ng against the Spouses Orfinada (all defendants in the suit for
annulment of title filed by ISIA against them), for failing to file a written motion for
reconsideration of the trial court's order of dismissal. However, on motion for reconsideration
of Martel and the Spouses Ng which we eventually denied via a Minute Resolution dated 1 April
2014, we remanded the case to the Court of Appeals for the purpose of hearing and receiving
evidence to determine all parties' conflicting claims of ownership over the subject property.
We now proceed to the factual antecedents of this case before us. Herein respondent Insurance
Savings and Investment Agency, Inc. (ISIA) filed a Special Civil Action for Mandamus under
Rule 65 of the Rules of Court before the RTC, Las Pinas City, against the Register of Deeds of
Las Piñas City praying that the latter be commanded to: (a) cancel TCT No. 38910-A issued in
the name of the Spouses Orfmada, and thereafter, (b) issue a new title to the subject property in
the name of ISIA.
In its petition for mandamus, ISIA primarily alleged that in 1981, ISIA purchased from the
Spouses Orfmada, through their then attorney-in-fact, Modesto Jimenez (Jimenez), the subject
property covered by TCT No. 38910-A. The sale is evidenced by a Deed of Absolute Sale
executed on 18 May 1981 signed by ISIA and Jimenez.
For clarity, considering that the subject property in this case is likewise the subject matter in at
least four (4) other cases concerning the ownership and titling thereof, which has already
resulted in conflicting rulings used as basis by various opposing parties, we quote the trial court's
narration of antecedents to confine our holding herein to only the pertinent legal issues before
us:
[T]he following taxes and fees were paid for purposes of the transfer of ownership, to wit:
a. [R]eal estate taxes as shown by real property tax receipts (Annexes "H" to "H-5" of petition);
b. [Cjapital gains tax in the amount of Php44,322,600.00 as shown by capital gains tax return
form no. 1706 (Annex "J") and Land Bank BIR tax payment deposit slip (Annex "J-l");
c. [Documentary stamp tax in the amount of Phpl,385,550.00 as shown by the documentary
stamp tax declaration/return BIR form no. 2000-OT (Annex "K") and the Land Bank BIR Tax
payment deposit slip (Annex "K-P'); and
d. BIR certification fee of PhplOO as shown by BIR Payment Form No. 0605 (Annex "L").
On the basis of the foregoing payments made by [ISIA], the Bureau of Internal Revenue issued
on 28 June 2012 a Certificate Authorizing Registration (CAR) and Tax Clearance Certificate
No. OCN 9TA0000219327 in favor of [ISIA] x x x. In addition, [ISIA] paid the amount of Phpl
1,068,764.93 representing the transfer tax, surcharge, monthly interests and confirmation fee
assessed by the Office of the City Assessor of Las Pinas. Subsequently, a Confirmation of
Payment No. 014149 was issued by the Office of the Treasurer of Las Pifias City confirming
that [ISIA] paid the transfer tax due on the subject title x x x.
After completing all the necessary requirements for the transfer of title, [ISIA] then went to the
Registry of Deeds to submit for registration the Deed of Absolute Sale together with all
supporting documents including the surrender of the owner's duplicate copy of TCT No. 38910-
A x x x. However, the then Registrar of Deeds, Atty. Joel Paner, denied the registration of the
sale on the ground that another owner's duplicate copy of the subject title is in possession of a
certain Alice Africa [herein respondent]. Atty. Paner further stated in his Notice of Denial dated
24 August 2012 that the subject title bears the annotation of the affidavit of Alice Africa x x x.
Atty. Joel Paner filed his Comment on the Petition recognizing the validity of the sale of the
subject property by the Sps. Wilson Orfmada and Lucresia Kiocho in favor of ISIA by virtue of
the Decision dated 12 November 2004 rendered by the Supreme Court in Republic of the
Philippines v. Sps. Orfinada, G.R. No. 141145. Atty. Paner also aver that under normal
circumstances, the transfer of title is immediately effected upon payment of the necessary
government taxes but in this case, registration of the sale can be done provided that the affidavit
of Alice Africa is carried over to the new title.
Although not impleaded as one of the respondents [therein], Alice Africa [herein petitioner]
filed a Vehement Opposition on the instant petition contending primarily that the sale between
ISIA and Sps. Orfmada represented by their attorney-in-fact Modesto Jimenez is tainted with
fraud hence not valid. [Africa] anchors her argument on the Order dated 3 December 1993
rendered by Branch 150 of RTC in Makati City in LRC Case No. M-2917, directing defendant
Jimenez to surrender to the Register of Deeds of Las Pifias City the owner's duplicate copy of
TCT No. 38910-A (13674-A) based on the findings of the said court, among others, that the sale
of the subject property between Jimenez and ISIA is void ab initio. The Order dated 3 December
1993 was affirmed by the Court of Appeals in its Decision dated 14 March 1997 and by the
Supreme Court in its Resolution dated 25 August 1997.3
At this stage of the proceedings, with Africa as oppositor, the RTC rendered the assailed
decision, granting ISIA's petition for mandamus, thus ordering the Register of Deeds to: (a)
register the Deed of Absolute Sale executed by ISIA and the Spouses Orfmada and its supporting
documents, (b) cancel TCT No. 38910-A, and (c) issue a new title to the subject property in the
name of ISIA. The RTC disposed of the special civil action in this wise:
Alice. Africa could have supported her claim of being in possession of the subject title when she
filed her opposition. While she attached several documents to her petition[,] x x x she failed to
append thereto a copy of the alleged second owner's duplicate copy of the title. The omission is
quite telling of whether or not Africa is indeed in possession of the subject title.
The Registry of Deeds gave too much faith on a mere claim in the affidavit of Alice Africa
annotated on the title connecting this to the 1993 Order of the Makati Court. Such reliance is
misplaced as the affidavit is self-serving and unsubstantiated. Atty. Joel Paner, the Registrar of
Deeds, appears to have realized his misplaced reliance when he eventually corrected it in his
Comment by saying that the registration of the sale of the subject property in favor of ISIA can
be effected. Significantly, the acting Registrar of Deeds, Atty. Abraham N. Vermudez, who
replaced Atty. Paner did not adopt this misplaced reliance in his memorandum and opted not to
tackle this issue. Again, the 1993 Order of the Makati Court is mum on the authority of Africa
to take possession of the title.
Undeniably, the Registry of Deeds has a public duty towards [ISIA] to admit the sale documents
for registration. The said office cannot assume that another copy of the title exists based merely
on the affidavit.
WHEREFORE, in view of the foregoing, the instant petition is hereby GRANTED. The Registry
of Deeds for Las Pifias City is hereby immediately commanded to proceed with the registration
of the Deed of Absolute Sale dated 18 May 1981 executed by Sps. Wilso P. Orfmada and
Lucresia Kiocho and [respondent] ISIA together with all supporting documents and thereafter,
to cancel Transfer Certificate of Title No. 38910-A issued in the name of the Sps. Wilson P.
Orfmada and Lucresia Kiocho, and in lieu thereof, to issue a new title to the subject property in
the name of [ISIA].
Anent the Urgent Motion for Recording of Attorney's Lien filed by movant Atty. Antonio M.
Chavez, the same is hereby DENIED due course as this can be filed properly in a separate
action.4
Africa and the Register of Deeds filed separate motions for reconsideration of the RTC's
decision.
Both Africa and the Register of Deeds argued that the existence of the "owner's duplicate copy"
of TCT No. 38910-A, with annotation of Africa's affidavit thereon, claimed to be in Africa's
possession precludes the registration of the subject property in ISIA's name since it would result
to double titling. On this score, the RTC noted that Africa failed to present and attach a'certified
true copy of the purported "owner's duplicate copy" in her possession, in numerous instances,
to wit: (1) The Affidavit in Entry No. 4115-28; (2) Africa's Vehement Comment/Opposition to
the Petition; (3) Africa's Urgent Motion for Reconsideration despite the trial court's observation
that she failed to attach a copy of the supposed title to her Opposition; (4) Africa's Urgent Motion
for Voluntary Inhibition; and (5) the two hearings scheduled by the RTC, on 1 and 8 March
2013, for the sole purpose of having Africa present the title for examination by the Deeds and
the trial court.5
Prior to the scheduled 8 March 2013 hearing, Africa filed an "Urgent Motion to Dispense with
the Appearance of Alice G. Afric to submit Owner's Duplicate Copy of TCT No. 38910-A" with
a condition for the RTC to order the National Bureau of Investigation (NBI) to escort her copy.
Curiously, Africa's counsel, on 5 March 2013, filed a motion attaching a photocopy of her
alleged "owner's duplicate copy." However, the Register of of Deeds, upon a preliminary
examination thereof on the scheduled 8 March 2013 hearing, found the document spurious.

In the herein assailed Order6 dated 26 March 2013, the RTC denied the separate motions for
reconsideration of Africa and the Register of Deeds, and Africa's Urgent Motion to dispense
with the Appearance of Alice G. Africa to submit the Owner's Duplicate Copy of TCT No.
38910-A.
copy of TCT No. 38910-A confirmed this [c]ourt['s] observation in its 14 November 2012
Decision that reliance by the Register of Deeds on Ms. Africa's affidavit to prove existence of
her owner's duplicate copy of TCT No. 38910-A is "misplaced" and "the said office cannot
assume that another copy of the title exists based merely on the affidavit" and that "the Register
of Deeds has a public duty towards [ISIA] to admit the sale documents for registration, x x x

The RTC gave no evidentiary weight whatsoever to the copy of the document belatedly x x x x
produced and presented by Africa's counsel:
WHEREFORE, the aforestated Motions for Reconsideration of the Decision dated 14 November
Court : Will you show that to the Register of Deeds. Are you familiar with 2012, respectively filed by the Register of Deeds of Las Pinas City and Alice Africa are
this TCT? DENIED for lack of merit. The Urgent Motion to Dispense with the Appearance of Alice G.
Africa to submit the Owner's Duplicate Copy of TCT No. 38910-A is likewise DENIED.
Atty. Vermudez : I haven't seen this, your Honor.

Court : You haven't seen that? The Register of Deeds of Las Pinas City is directed to cancel Entry No. 411528-28 in TCT No.
38910-A and thereafter comply with the [cjourt's disposition in its 14 November 2012 Decision.7
Atty. Vernudez : I haven't seen this. Since no transaction has been entered yet, your
Honor.
Feeling aggrieved by the trial court's rulings, Africa, still on behalf of the Spouses Orfmada,
Atty. Espiritu : Sa Amin Yan. filed the present petition for review on certiorari.

Atty. Vernudez : Is this the owner's copy? In this petition8 filed on 19 April 2013,-Africa alleged that her contract of agency with the
Spouses Orfmada is coupled with interest without explicitly stating her interest therein.
Atty. Espiritu : Yeah Conveniently, Africa failed to mention that both the Spouses Orfmada were already dead:
Atty. Vernudez : I haven't seen this. Wilson in the year 2000, Lucresia in 2012.

xxxx
But just the same, the certified true copy presented in [c]ourt on March 8 by Atty. Espiritu is
wanting in authenticity and credibility that [it] even failed to convince the Register of Deeds.
Ms. Africa must realize that it is her obligation to present her copy arjd the [c]ourt cannot be
hoodwinked by her antics nor swayed by mere allegation. It is well-settled that the "party
alleging a fact has the burden of proving it as mere allegation not evidence, [sic]" The
[c]ourt needs proof and the Register of Deeds through his counsel agreed on this point when he
stated that:
Atty. Abesamis: x x x It is crucial, Your Honor, please, that the Owner's Copy in the possession
ofOppositor Alice Africa will be likewise presented because that will give opportunity for the
court to compare the original copy on file with the Registry of Deeds, as well as the owner's
copy with the possession of Alice Africa, the new owner's copy, Your Honor, which was issued
upon court directive.
x x x x
This [c]ourt finds and so holds that Alice Africa's and her counsel's, Atty. Renecio Espiritu's,
reasons for not presenting in court the subject owner's duplicate copy are not candid but evasive
and adroitly conjured, x x x.
x x x x
On 3 July 2013,9 we deferred action on Africa's petition and required her to submit proof of
authority to file it on behalf of the Spouses Orfmada who were the registered owners of the
subject property covered by TCT No. 38910-A, the title herein sought to be annulled by ISIA
and then titled in its name.
Africa filed a Compliance10 to our 3 July 2013 Resolution by maintaining that it has complied
with the requirements of Section 1, in relation to Sections 4 and 7, of Rule 45 of the Rules of
Court, and attaching the Special Power of Attorney (SPA) executed by the Spouses Orfmada in
Africa's favor sometime in July 1997. Yet again, Africa failed to state the fact of the deaths of
the Spouses Orfmada.
ISIA forthwith filed a Comment11 to Africa's compliance moving for the outright dismissal of
Africa's petition considering the deaths of the Spouses Orfmada, whose civil personalities were
thereby extinguished and who carl no longer be represented in this petition by Africa.
Africa filed a Reply12 to ISIA's Comment to her Compliance which now explicitly argues that
the contract of agency was not extinguished by the death of Africa's principals, the Spouses
Orfmada, since the agency is coupled with interest. For the first time, indirectly and
collaterally, Africa claims ownership over the herein subject property. Africa alleged in her
Reply:
8. [Africa] is "Agent with Interest" because [the] Spouses Orfmada, during their lifetime, had
already sold to [Africa] the [subject property] containing an area of 221,688 square meters
located at Las Piflas City and covered by TCT No. (38910), 13674-A, the subject of this case.
The photocopy of the Deed of Sale is hereto attached as Annex "A".13

Accordingly, the failure of Alice Africa to prove her possession of a valid owner's duplicate

The purported Deed of Sale between Africa and the Spouses Orfmada is dated 5 June 1997,
roughly a month prior to the Special Power of Attorney executed by the Spouses Orfmada in
Africa's favor.14
Subsequently, on 13 October 2014, Africa filed a Motion for Leave to Admit Compliance with
Motion to Consolidate Case with G.R. No. 194029, one of the cases mentioned herein involving
conflicting claims of ownership over the subject property by opposing parties, ISIA against
Martel and the Spouses Ng (other transferees of the Spouses Orfmada) and the Spouses
Orfmada. Africa's basis for her motion to consolidate is that the subject property herein is the
same property involved in G.R. No. 194209.
Africa alleges, in pertinent part:
9. Verily, the instant case should be consolidated with G.R. No. 194209 which, significantly, is
an offshoot of a main case filed by ISIA, Inc. prior to the finality of the judgment of the Regional
Trial Court of Makati City, Branch 150 in LRC Case No. M-2917 entitled: "Orfmada, Sr.,
represented by Africa v. ISIA, Inc." x x x declaring the sale of the property subject of the instant
litigation to ISIA, null and void. Consolidation of the two (2) cases will put to rest the conflicting
claims of ownership by Orfmada, Sr., rep. by Alice Africa, ISIA, Inc., Martel, Jr. and the
Spouses Ng over the same lot.
WHEREFORE, it is respectfully prayed that the Motion be GRANTED thereby admitting the
attached Verification and Certification Against Forum Shopping, in the interest of justice,
and consolidating the instant case with G.R. No. 194029 entitled: "Martel, Jr. and Sps. Ng vs.
Orfmada, Sr."15
On 15 October 2014, ISIA filed a Respectful Motion to Dismiss the Petition 16 maintaining that
the death of the Spouses Orfmada prior to the filing of the present petition extinguished the
contract of agency between them and Africa, thus, this petition filed by Africa on behalf of the
Spouses Orfmada should be dismissed.
Pending before us then is the sufficiency of Africa's petition to litigate this case before us in her
own name. Effectively, Africa, without filing the appropriate registration proceedings, an
original action, before a Regional Trial Court pursuant to law, 17 seeks to defend and protect
herein the subject property covered by TCT No. 38910-A registered in the names of the Spouses
Orfinada. Corollary thereto, as pending incidents resulting from Africa's oblique compliance to
our 3 July 2013 Resolution, are: (1) the Motion to Consolidate this case with G.R. No. 194029
filed by Africa; and (2) Respectful Motion to Dismiss this petition filed by ISIA.
Before anything else, we note that in G.R. No. 194209, Africa is simply a representative of the
Spouses Orfinada who were sued by herein respondent ISIA claiming ownership of the subject
property and seeking to annul TCT No. 38910-A. ISIA filed a case for annulment of title against
the Republic of the Philippines and a Supplemental Complaint No. 9 against Wilson Orfinada,
Martel and the Spouses Ng.
While we ultimately denied the petition in G.R. No. 194209 for absence of reversible error in
the assailed ruling of the appellate court, we remanded the case to the Court of Appeals for the
purpose of hearing and receiving evidence to adjudicate the conflicting claims of ownership by
the opposing parties (given the overall factual milieu herein) over the subject property. In our 1
April 2014 Resolution18 in G.R. No. 194209, we noted, thus:
We take note that petitioners' [Martel's and the Spouses Ng's] right over the subject land has
been upheld by the Supreme Court in several cases and they were even considered as innocent
purchasers in good faith and for value. Nevertheless, taking into consideration that Orfinada's
title was also upheld by no less than this Court in another Decision, we hold that the petitioners
and Orfinada's rights have been established separately, only that these were determined against
their corresponding opposing parties in those cases. Pitted against each other, however, the
petitioners and Orfinada would have to present evidence anew as this Court cannot cancel
a Torrens title without a direct proceeding for that purpose. Section 48 of the Property
Registration Decree provides: (Emphasis supplied)
Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct
proceeding in accordance with law.
Based on the evidence to be presented in appropriate proceedings, this Court may finally
adjudicate whose title should be annulled. It must be borne in mind that the petition is but an
offshoot of a main case, which might be improperly affected by any shortcut in the proceedings."
[Considering that there are factual and legal issues that still need to be threshed out, and that this
Court is not a trier of facts, the appropriate action is to remand the case to the CA for further
proceedings."19
Palpable, even in this case, is the existence of factual issues which we cannot pass
upon.20 However, such finding still does not translate to the sufficiency of Africa's petition to
litigate in her own name the issue here which is whether the Register of Deeds via a writ
of mandamus may be compelled to cancel TCT No. 38910-A and issue a new title over the
subject property in the name of ISIA.
Even without delving into the factual finding of the court a quo in this case that Africa, through
subterfuge, never even presented a certified true copy of the "owner's duplicate copy" which she
claims to be in her possession, we deny due course to this petition, Africa not being a proper
party under Rule 3, Section 3 of the Rules of Court which reads:
Sec. 3. Representatives as parties.— Where the action is allowed to be prosecuted or defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
in the title of the case and shall be deemed to be the real party in interest. A representative may
be a trustee of an express trust, a guardian, an executor or administrator, or a party authorized
by law or these Rules. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the contract involves
things belonging to the principal.
In her Compliance, Africa quotes Sections 1,21 4,22 and 723 of Rule 45 of the Rules of Court,
insisting that she has complied with the requisites for the filing of an appeal
by certiorari thereunder. Sticking out of the cited Rule, however, is the first section, first
sentence which unequivocally states: "A partydesiring to appeal by certiorari from a judgment,
final order or resolution x x x."
In this instance, with the death of the Spouses Orfinada and despite the claim of ownership by
Africa over the subject property, Africa is not the proper party to file an appeal
by certiorari from the adverse rulings of the trial court. Section 3 of Rule 3 of the Rules of Court
is explicit on the requirement that an agent as party may sue without joining the principal except
when the contract involves things belonging to the principal. The herein subject property is
ostensibly owned by the Spouses Orfinada covered by TCT No. 38910-A registered in their G.R. No. 194209 involves the conflicting claims of ownership over the subject properties
names. This TCT No. 38910-A is one of the titles ISIA seeks to annul as part of its claim of initiated by ISIA against Wilson Orfmada, Martel and the Spouses Ng. The validity of TCT No.
ownership over vast tracts of land bounded by the Pasig River in the North, by the Tunisan River 38910-A is already part of G.R. No. 194209 and is a completely different legal issue from the
in the South, by Laguna de Bay in the East, and by the Manila de Bay in the West. The claim issue raised in this petition, involving a separate question of law, i.e., whether the court a
covers about 143,102,167 sq. m., more or less, comprising one-half of Metro Manila. ISIA's quo correctly issued the writ of mandamus to compel the Register of Deeds to register the
claim includes the subject parcel of land covered by TCT No. 38910-A, which ISIA seeks to subject property in ISIA's name and cancel TCT No. 38910-A, the title to the subject property
recover from herein parties resulting in all kinds of litigation between the opposing parties, in the Spouses Orfinada's name. The only commonality between G.R. No. 194209 and this
including this suit for mandamus before the court a quo.24Africa's belated claim of ownership petition is TCT No. 38910-A and the subject property itself.
via purchase cannot make her a proper party to this case and circumvent the requirements
for establishing ownership over the subject property. As a final caveat, our holding herein is only confined to Africa's preclusion from continuing to
litigate this appeal by certiorari. We do not rule on the correctness and propriety of the Decision
We can draw a parallel ruling from Tamondong v. Court of Appeals,25 where we specifically and Order of the RTC as such can only be questioned and assailed by the proper party.
ruled that the lack of authority of the representative from the real party-in-interest, results in the
complaint deemed as not filed. It does not make the representative as the actual plaintiff in the WHEREFORE, the petition is DENIED DUE COURSE, petitioner Alice Africa not being a
case. We held, thus: proper party to question the Regional Trial Court's Decision and Order dated 14 November 2012
and 26 March 2013, respectively, in SCA Case No. 12-0010.
If a complaint is filed for and in behalf of the plaintiff who is not authorized to do so, the
complaint is not deemed filed. An unauthorized complaint does not produce any legal effect. SO ORDERED.
Hence, the court should dismiss the complaint on the ground that it has no jurisdiction over the
complaint and the plaintiff. On the other hand, if a complaint is filed by an agent or plaintiff, Republic of the Philippines
for and in behalf of the principal, the plaintiff who is merely the agent is not the proper SUPREME COURT
party. The reason being that every action must be presented in the name of the real party- Manila
in-interest. The complaint may be dismissed on the ground that the plaintiff has no cause of
action against the defendants, conformably to Section l(g), Rule 16 of the 1997 Rules of Civil SECOND DIVISION
Procedure.26 (Emphasis supplied)
G.R. No. 186305 July 22, 2015

V-GENT, INC., Petitioner,

Moreover, it has not escaped our attention that while Africa claims to be a representative of the
vs.
Spouses Orfinada, armed with an SPA, she simultaneously claims filing and litigating this case
MORNING STAR TRAVEL and TOURS, INC., Respondent.
on her own. As we have already observed, Africa is using a shotgun approach to obliquely,
indirectly and collaterally, claim ownership over the subject property to ensure her continued DECISION
participation in this litigation.
BRION, J.:
Without meaning to point Africa to the appropriate remedies she should have taken or could
have availed of to protect and defend her claim over the subject property, 27 we mention the We resolve the petition for review on certiorari filed to challenge the November 11, 2008
following to accentuate the shortcomings of her present position: Decision and February 5, 2009 Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
97032.1
1. With the deaths of the Spouses Orfmada, the subject property registered in their names
became part of their estate with the heirs, compulsory or otherwise, having inchoate right thereto ANTECEDENTS
where rights to the succession vests from the moment of death of the decedent. 28 Sometime in June and in September 1998, the petitioner V-Gent, Inc. (V-Gent) bought twenty-
six (26)2 two-way plane tickets (Manila-Europe-Manila) from the respondent Morning Star
2. As part of the decedents' estate, rights over property included therein is settled and litigated Travel and Tours, Inc. (Morning Star).
by the administrator or executor of the estate.29
On June 24, 1998 and September 28, 1998, V-Gent returned a total of fifteen (15) unused tickets
3. To establish her claim over the subject property and for the proper titling thereof, the Civil worth $8,747.50 to the defendant. Of the 15, Morning Star refunded only six (6) tickets worth
Code and the Property Registration Decree maps out the remedies of Africa. $3,445.62. Morning Star refused to refund the remaining nine (9) unused tickets despite repeated
demands.
Finally, despite the remand of G.R. No. 194209 to the Court of Appeals for hearing and
reception of evidence to finally adjudicate whose title over the subject property should be On December 15, 2000, petitioner V-Gent filed a money claim against Morning Star for
annulled, we cannot consolidate this petition filed in Africa's name with G.R. No. 194209, this payment of the unrefunded $5,301.88 plus attorney's fees. The complaint was raffled to Branch
petition being an offshoot of the mandamus case filed by ISIA against the Register of Deeds. 2 of the Metropolitan Trial Court (MeTC) of Manila and docketed as Civil Case No. 169296-
CV.
Morning Star countered that V-Gent was not entitled to a refund because the tickets were bought
on the airline company's "buy one, take one" promo. It alleged that there were only fourteen
(14) unused tickets and only seven (7) of these were refundable; considering that it had already
refunded six (6) tickets (which is more or less 50o/o of 14), then there was nothing else to refund.
Morning Star also questioned V-Gent's personality to file the suit. It asserted that the passengers,
in whose names the tickets were issued, are the real parties-in-interest.
On January 27, 2006, after due proceedings, the MeTC dismissed the complaint for lack of a
cause of action. Citing Rule 3, Section 3 of the Rules of Court,3 the MeTC declared that, as
agent of the passengers who paid for the tickets, V-Gent stood as the real party-in-interest.
Nevertheless, it still dismissed the complaint because V-Gent failed to prove its claim by a
preponderance of evidence.
V-Gent appealed to the Regional Trial Court (RTC) and the case was docketed as Civil Case
No. 06-115050.
On September 25, 2006, the RTC granted the appeal after finding that V-Gent had established
its claim by a preponderance of evidence. It set aside the MeTC's judgment and ordered Morning
Star to pay V-Gent the value of the nine (9) unrefunded tickets plus attorney's fees. Morning
Star filed a petition for review with the CA; the case was docketed as CA-G.R. SP No. 97032.
Morning Star questioned the RTC's appreciation of the evidence and factual conclusions. It also
reiterated its question about V-Gent's legal standing, submitting once again that V-Gent is not
the real party-in-interest.
On November 11, 2008, the CA granted the petition for review and dismissed V-Gent's
complaint. The CA held that V-Gent is not a real party-in-interest because it merely acted as an
agent of the passengers who bought the tickets from Morning Star with their own money.
V-Gent moved for reconsideration, which motion the CA denied on February 5, 2009, thus
clearing the way for the present petition for review on certiorari.
THE PETITION
V-Gent argues that the CA erred in ruling that it is not the real party-in-interest. It asserts: (1)
that the issue of its legal standing to file the complaint has already become final because
Morning Star did not appeal the MeTC's ruling on the issue; (2) that it is a real party-in-interest
in filing the complaint; and (3) that Morning Star is already estopped from questioning V-Gent's
legal standing to file the complaint.
In its Comment, Morning Star counters: (1) that it had no obligation to appeal the MeTC
judgment dismissing the complaint in its favor; (2) that the MeTC did not specifically state that
V-Gent is the real party-in-interest; (3) that the real parties-in-interest are the passengers named
on the tickets; and (4) that it made no admissions that would estop it from denying the refund.
OUR RULING
V-Gent maintains that the MeTC determined that it was the real party-in-interest. It argues that
since Morning Star did not appeal this specific finding with the RTC, then the MeTC's ruling
on this point had already become final and conclusive; therefore, Morning Star can no longer
revive the issue before the CA.
We disagree with V -Gent.
The MeTC dismissed V-Gent's complaint against Morning Star for failure to prove its claim.
This dismissal meant that the plaintiff did not prove a violation of its right for which the
defendant should be held liable. This ruling was plainly a judgment in Morning Star's favor and
one that it had no cause to question. Indeed, it would be legally illogical for Morning Star to file
an appeal to question a ruling of dismissal in its favor.
V-Gent also argues that it is a real party-in-interest with legal standing to institute the complaint
against Morning Star.1âwphi1 In the present petition, it states:
36. The Court of Appeals chose to ignore the fact that while the plane tickets bore the names of
the individual passengers, the respondent admitted that it was the petitioner that transacted
business with it concerning the purchase of these plane tickets. Both the purchase order and
receipt of payments were under the name of the petitioner. Thus, since it was the petitioner who
purchased these plane tickets on behalf of the passengers, the respondent voluntarily refunded
to the former the value of six (6) unused return tickets in the total amount of US$3,445.62.
Though, for reasons it did not reveal to petitioner, it refused to refund the rest. 4 (Emphasis
supplied.)
V-Gent admits that it purchased the plane tickets on behalf of the passengers as the latter's
agent.5 The tickets were issued in the name of the passengers and paid for with the passengers'
money. No dispute or conclusion in the lower courts' minds on this point; hence, both the
MeTC6 and the CA7 commonly found that V-Gent acted as an agent of the passengers when it
purchased the passengers' plane tickets.
However, while the MeTC held that V-Gent could sue as an agent acting in his own name on
behalf of an undisclosed principal, the CA held that it could not because the requirements for
such a suit by the agent had not been satisfied.
We agree with the Court of Appeals.
Every action must be prosecuted or defended in the name of the real party-in-interest - the party
who stands to be benefited or injured by the judgment in the suit. 8 In suits where an agent
represents a party, the principal is the real party-in-interest; an agent cannot file a suit in his own
name on behalf of the principal.
Rule 3, Section 3 of the Rules of Court provides the exception when an agent may sue or be
sued without joining the principal.
Section 3. Representatives as parties. - Where the action is allowed to be prosecuted and
defended by a representative or someone acting in a fiduciary capacity, the beneficiary shall be
included in the title of the case and shall be deemed to be the real party-in-interest. A
representative may be a trustee of an express trust, a guardian, an executor or administrator, or
a party authorized by law or these Rules. An agent acting in his own name and for the benefit
of an undisclosed principal may sue or be sued without joining the principal except when the
contract involves things belonging to the principal. (Emphasis supplied.)
Thus an agent may sue or be sued solely in its own name and without joining the principal when
the following elements concur: (1) the agent acted in his own name during the transaction; (2)
the agent acted for the benefit of an undisclosed principal; and (3) the transaction did not involve
the property of the principal.
When these elements are present, the agent becomes bound as if the transaction were its own.
This rule is consistent with Article 1883 of the Civil Code which says:
Art. 1883. If an agent acts in his own name, the principal has no right of action against the
persons with whom the agent has contracted; neither have such persons against the principal. In
such case, the agent is the one directly bound in favor of the person with whom he has contracted,
as if the transaction were his own, except when the contract involves things belonging to the
principal.
The provisions of this article shall be understood to be without prejudice to the actions between
the principal and agent.
In the present case, only the · first element is present; the purchase order and the receipt were in
the name of V-Gent. However, the remaining elements are absent because: (1) V-Gent disclosed
the names of the passengers to Morning Star - in fact the tickets were in their names; and (2) the
transaction was paid using the passengers' money. Therefore, Rule 3, Section 3 of the Rules of
Court cannot apply.
To define the actual factual situation, V-Gent, the agent, is suing to recover the money of its
principals - the passengers - who are the real parties-in-interest because they stand to be injured
or benefited in case Morning Star refuses or agrees to grant the refund because the money
belongs to them. From this perspective, V-Gent evidently does not have a legal standing to file
the complaint.
Finally, V-Gent argues that by making a partial refund, Morning Star was already estopped from
refusing to make a full refund on the ground that V-Gent is not the real party-in-interest to
demand reimbursement.9
We find no merit in this argument.
The power to collect and receive payments on behalf of the principal is an ordinary act of
administration covered by the general powers of an agent.10 On the other hand, the filing of suits
is an act of strict dominion.
Under Article 1878 (15) of the Civil Code, a duly appointed agent has no power to exercise any
act of strict dominion on behalf of the principal unless authorized by a special power of attorney.
An agent's authority to file suit cannot be inferred from his authority to collect or receive
payments; the grant of special powers cannot be presumed from the grant of general powers.
Moreover, the authority to exercise special powers must be duly established by evidence, even
though it need not be in writing.11
By granting the initial refund, Morning Star recognized V-Gent's authority to buy the tickets
and collect refunds on behalf of the passengers. However, Morning Star's recognition of V-
Gent's authority to collect a refund for the passengers is not equivalent to recognition of V-
Gent's authority to initiate a suit on behalf of the passengers. Morning Star therefore, is not
estopped from questioning V-Gent's legal standing to initiate the suit.
WHEREFORE, premises considered, we DENY the petition for lack of merit.
SO ORDERED.
FIRST DIVISION
G.R. No. 193138, August 20, 2018
ANICETO G. SALUDO, JR., Petitioner, v. PHILIPPINE NATIONAL BANK, Respondent.
DECISION
JARDELEZA, J.:
In this petition, we emphasize that a partnership for the practice of law, constituted in accordance
with the Civil Code provisions on partnership, acquires juridical personality by operation of law.
Having a juridical personality distinct and separate from its partners, such partnership is the real
party-in-interest in a suit brought in connection with a contract entered into in its name and by
a person authorized to act on its behalf.
Petitioner Aniceto G. Saludo, Jr. (Saludo) filed this petition for review on certiorari1 assailing
the February 8, 2010 Decision2 and August 2, 2010 Resolution3 issued by the Court of Appeals
(CA) in CA-G.R. SP No. 98898. The CA affirmed with modification the January 11, 2007
Omnibus Order4 issued by Branch 58 of the Regional Trial Court (RTC) of Makati City in Civil
Case No. 06-678, and ruled that respondent Philippine National Bank's (PNB) counterclaims
against Saludo and the Saludo Agpalo Fernandez and Aquino Law Office (SAFA Law Office)
should be reinstated in its answer.
Records show that on June 11, 1998, SAFA Law Office entered into a Contract of Lease 5 with
PNB, whereby the latter agreed to lease 632 square meters of the second floor of the PNB
Financial Center Building in Quezon City for a period of three years and for a monthly rental
fee of P189,600.00. The rental fee is subject to a yearly escalation rate of 10%. 6 SAFA Law
Office then occupied the leased premises and paid advance rental fees and security deposit in
the total amount of P1,137,600.00.7
On August 1, 2001, the Contract of Lease expired.8 According to PNB, SAFA Law Office
continued to occupy the leased premises until February 2005, but discontinued paying its
monthly rental obligations after December 2002.9 Consequently, PNB sent a demand
letter10 dated July 17, 2003 for SAFA Law Office to pay its outstanding unpaid rents in the
amount of P4,648,086.34. PNB sent another letter11demanding the payment of unpaid rents in
the amount of P5,856,803.53 which was received by SAFA Law Office on November 10, 2003.
In a letter12 to PNB dated June 9, 2004, SAFA Law Office expressed its intention to negotiate.
It claimed that it was enticed by the former management of PNB into renting the leased premises
by promising to: (1) give it a special rate due to the large area of the place; (2) endorse PNB's
cases to the firm with rents to be paid out of attorney's fees; and (3) retain the firm as one of
PNB's external counsels. When new management took over, it allegedly agreed to uphold this
agreement to facilitate rental payments. However, not a single case of significance was referred
to the firm. SAFA Law Office then asked PNB to review and discuss its billings, evaluate the
improvements in the area and agree on a compensatory sum to be applied to the unpaid rents,
make good its commitment to endorse or refer cases to SAFA Law Office under the intended
terms and conditions, and book the rental payments due as receivables payable every time
attorney's fees are due from the bank on the cases it referred. The firm also asked PNB to give
a 50% discount on its unpaid rents, noting that while it was waiting for case referrals, it had paid
a total amount of P13,457,622.56 from January 1999 to December 2002, which included the
accelerated rates of 10% per annum beginning August 1999 until July 2003.
In February 2005, SAFA Law Office vacated the leased premises.13 PNB sent a demand
letter14 dated July 7, 2005 requiring the firm to pay its rental arrears in the total amount of
P10,951,948.32. In response, SAFA Law Office sent a letter dated June 8, 2006, proposing a
settlement by providing a range of suggested computations of its outstanding rental obligations,
with deductions for the value of improvements it introduced in the premises, professional fees
due from Macroasia Corporation, and the 50% discount allegedly promised by Dr. Lucio
Tan.15 PNB, however, declined the settlement proposal in a letter16 dated July 17, 2006, stating
that it was not amenable to the settlement's terms. Besides, PNB also claimed that it cannot
assume the liabilities of Macroasia Corporation to SAFA Law Office as Macroasia Corporation
has a personality distinct and separate from the bank. PNB then made a final demand for SAFA
Law Office to pay its outstanding rental obligations in the amount of P25,587,838.09.
On September 1, 2006, Saludo, in his capacity as managing partner of SAFA Law Office, filed
an amended complaint17 for accounting and/or recomputation of unpaid rentals and damages
against PNB in relation to the Contract of Lease.
On October 4, 2006, PNB filed a motion to include an indispensable party as plaintiff,18 praying
that Saludo be ordered to amend anew his complaint to include SAFA Law Office as principal
plaintiff. PNB argued that the lessee in the Contract of Lease is not Saludo but SAFA Law
Office, and that Saludo merely signed the Contract of Lease as the managing partner of the law
firm. Thus, SAFA Law Office must be joined as a plaintiff in the complaint because it is
considered an indispensable party under Section 7, Rule 3 of the Rules of Court. 19
On October 13, 2006, PNB filed its answer.20 By way of compulsory counterclaim, it sought
payment from SAFA Law Office in the sum of P25,587,838.09, representing overdue
rentals.21 PNB argued that as a matter of right and equity, it can claim that amount from SAFA
Law Office in solidum with Saludo.22
On October 23, 2006, Saludo filed his motion to dismiss counterclaims, 23 mainly arguing that
SAFA Law Office is neither a legal entity nor party litigant. As it is only a relationship or
association of lawyers in the practice of law and a single proprietorship which may only be sued
through its owner or proprietor, no valid counterclaims may be asserted against it. 24
On January 11, 2007, the RTC issued an Omnibus Order denying PNB's motion to include an
indispensable party as plaintiff and granting Saludo's motion to dismiss counterclaims in this
wise:
The Court DENIES the motion of PNB to include the SAFA Law Offices. Plaintiff has shown
by documents attached to his pleadings that indeed SAFA Law Offices is a mere single
proprietorship and not a commercial and business partnership. More importantly, plaintiff has
admitted and shown sole responsibility in the affairs entered into by the SAFA Law Office. PNB
has even admitted that the SAFA Law Office, being a partnership in the practice of law, is a
non-legal entity. Being a non-legal entity, it cannot be a proper party, and therefore, it cannot
sue or be sued.
Consequently, plaintiff's Motion to Dismiss Counterclaims (claimed by defendant PNB)
should be GRANTED. The counterclaims prayed for to the effect that the SAFA Law Offices
be made to pay in solidum with plaintiff the amounts stated in defendant's Answer is disallowed
since no counterclaims can be raised against a non-legal entity.25
PNB filed its motion for reconsideration26 dated February 5, 2007, alleging that SAFA Law
Office should be included as a co-plaintiff because it is the principal party to the contract of
lease, the one that occupied the leased premises, and paid the monthly rentals and security
deposit. In other words, it was the main actor and direct beneficiary of the contract. Hence, it is
the real party-in-interest.27 The RTC, however, denied the motion for reconsideration in an
Order28 dated March 8, 2007.
Consequently, PNB filed a petition for certiorari29 with the CA. On February 8, 2010, the CA
rendered its assailed Decision,30 the dispositive portion of which reads:
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Omnibus Order dated
11 January 2007 and Order dated 8 March 2007, issued by respondent Court in Civil Case No.
06-678, respectively, are AFFIRMED with MODIFICATION in that petitioner's
counterclaims should be reinstated in its Answer.
SO ORDERED.31
The CA ruled that an order granting Saludo's motion to dismiss counterclaim, being
interlocutory in nature, is not appealable until after judgment shall have been rendered on
Saludo's complaint. Since the Omnibus Order is interlocutory, and there was an allegation of
grave abuse of discretion, a petition for certiorari is the proper remedy.32
On the merits, the CA held that Saludo is estopped from claiming that SAFA Law Office is his
single proprietorship. Under the doctrine of estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the person
relying thereon. Here, SAFA Law Office was the one that entered into the lease contract and not
Saludo. In fact, the latter signed the contract as the firm's managing partner. The alleged
Memorandum of Understanding33 (MOU) executed by the partners of SAFA Law Office, .which
states, among others, that Saludo alone would be liable for the firm's losses and liabilities, and
the letter of Saludo to PNB confirming that SAFA Law Office is his single proprietorship did
not convert the firm to a single proprietorship. Moreover, SAFA Law Office sent a letter to PNB
regarding its unpaid rentals which Saludo signed as a managing partner. The firm is also
registered as a partnership with the Securities and Exchange Commission (SEC). 34
On the question of whether SAFA Law Office is an indispensable party, the CA held that it is
not. As a partnership, it may sue or be sued in its name or by its duly authorized representative.
Saludo, as managing partner, may execute all acts of administration, including the right to sue.
Furthermore, the CA found that SAFA Law Office is not a legal entity. A partnership for the
practice of law is not a legal entity but a mere relationship or association for a particular purpose.
Thus, SAFA Law Office cannot file an action in court. Based on these premises, the CA held
that the RTC did not gravely abuse its discretion in denying PNB's motion to include an
indispensable party as plaintiff.35
Nonetheless, the CA ruled that PNB's counterclaims against SAFA Law Office should not be
dismissed. While SAFA Law Office is not a legal entity, it can still be sued under Section
15,36 Rule 3 of the Rules of Court considering that it entered into the Contract of Lease with
PNB.37
The CA further ruled that while it is true that SAFA Law Office's liability is not in solidum with
Saludo as PNB asserts, it does not necessarily follow that both of them cannot be made parties
to PNB's counterclaims. Neither should the counterclaims be dismissed on the ground that the
nature of the alleged liability is solidary. According to the CA, the presence ofSAFA Law Office
is required for the granting of complete relief in the determination of PNB's counterclaim. The
court must, therefore, order it to be brought in as defendant since jurisdiction over it can be
obtained pursuant to Section 12,38 Rule 6 of the Rules of Court.39
Finally, the CA emphasized that PNB's counterclaims are compulsory, as they arose from the
filing of Saludo's complaint. It cannot be made subject of a separate action but should be asserted
in the same suit involving the same transaction. Thus, the Presiding Judge of the RTC gravely
abused his discretion in dismissing PNB's counterclaims as the latter may forever be barred from
collecting overdue rental fees if its counterclaims were not allowed. 40
Saludo and PNB filed their respective motions for partial reconsideration dated February 25,
201041 and February 26, 2010.42 In a Resolution dated August 2, 2010, the CA denied both
motions on the ground that no new or substantial matters had been raised therein. Nonetheless,
the CA addressed the issue on the joining of SAFA Law Office as a defendant in PNB's
compulsory counterclaim. Pertinent portions of the CA Resolution read:
The Private Respondent claims that a compulsory counterclaim is one directed against an
opposing party. The SAFA Law Office is not a party to the case below and to require it to be
brought in as a defendant to the compulsory counterclaim would entail making it a co-plaintiff.
Otherwise, the compulsory counterclaim would be changed into a third-party complaint. The
Private Respondent also argues that Section 15, Rule 3 of the Rules of Court (on entities without
juridical personality) is only applicable to initiatory pleadings and not to compulsory
counterclaims. Lastly, it is claimed that since the alleged obligations of the SAFA Law Office
is solidary with the Private Respondent, there is no need to make the former a defendant to the
counterclaim.
We disagree with the reasoning of the Private Respondent. That a compulsory counterclaim can
only be brought against an opposing party is belied by considering one of the requisites of a
compulsory counterclaim it does not require for its adjudication the presence of third parties of
whom the court cannot acquire jurisdiction. This shows that non-parties to a suit may be brought
in as defendants to such a counterclaim. x x x
xxxx
In the case at bench, the trial court below can acquire jurisdiction over the SAFA Law Office
considering the amount and the nature of the counterclaim. Furthermore, the inclusion of the
SAFA Law Office as a defendant to the counterclaim will enable the granting of complete relief
in view [of] the liability of a partner to the partnership's creditors under the law.43
Hence, this petition, where Saludo raises the following issues for our resolution:
(1)
Whether the CA erred in including SAFA Law Office as defendant to PNB's counterclaim
despite its holding that SAFA Law Office is neither an indispensable party nor a legal entity;
(2)
Whether the CA went beyond the issues in the petition for certiorari and prematurely dealt with
the merits of PNB's counterclaim; and
(3)
Whether the CA erred when it gave due course to PNB's petition for certiorari to annul and set
aside the RTC's Omnibus Order dated January 11, 2007.44
The petition is bereft of merit.
We hold that SAFA Law Office is a juridical entity and the real party-in-interest in the suit filed
with the RTC by Saludo against PNB. Hence, it should be joined as plaintiff in that case.
I.
Contrary to Saludo's submission, SAFA Law Office is a partnership and not a single
proprietorship.
Article 1767 of the Civil Code provides that by a contract of partnership, two or more persons
bind themselves to contribute money, property, or industry to a common fund, with the intention
of dividing the profits among themselves. Two or more persons may also form a partnership for
the exercise of a profession. Under Article 1771, a partnership may be constituted in any form,
except where immovable property or real rights are contributed thereto, in which case a public
instrument shall be necessary. Article 1784, on the other hand, provides that a partnership begins
from the moment of the execution of the contract, unless it is otherwise stipulated.
Here, absent evidence of an earlier agreement, SAFA Law Office was constituted as a
partnership at the time its partners signed the Articles of Partnership 45 wherein they bound
themselves to establish a partnership for the practice of law, contribute capital and industry for
the purpose, and receive compensation and benefits in the course of its operation. The opening
paragraph of the Articles of Partnership reveals the unequivocal intention of its signatories to
form a partnership, to wit:
WE, the undersigned ANICETO G. SALUDO, JR., RUBEN E. AGPALO, FILEMON L.
FERNANDEZ, AND AMADO D. AQUINO, all of legal age, Filipino citizens and members of
the Philippine Bar, have this day voluntarily associated ourselves for the purpose of forming a
partnership engaged in the practice of law, effective this date, under the terms and conditions
hereafter set forth, and subject to the provisions of existing laws[.] 46
The subsequent registration of the Articles of Partnership with the SEC, on the other hand, was
made in compliance with Article 1772 of the Civil Code, since the initial capital of the
partnership was P500,000.00.47 Said provision states:
Art. 1772. Every contract of partnership having a capital ofThree thousand pesos or more, in
money or property, shall appear in a public instrument, which must be recorded in the Office of
the Securities and Exchange Commission.
xxxx
The other provisions of the Articles of Partnership also positively identify SAFA Law Office as
a partnership. It constantly used the words "partners" and "partnership." It designated petitioner
Saludo as managing partner,48 and Attys. Ruben E. Agpalo, Filemon L. Fernandez, and Amado
D. Aquino as industrial partners.49 It also provided for the term of the partnership,50 distribution
of net profits and losses, and management of the firm in which "the partners shall have equal
interest in the conduct of [its] affairs."51 Moreover, it provided for the cause and manner of
dissolution of the partnership.52 These provisions would not have been necessary if what had
been established was a sole proprietorship. Indeed, it may only be concluded from the
circumstances that, for all intents and purposes, SAFA Law Office is a partnership created and
organized in accordance with the Civil Code provisions on partnership.
Saludo asserts that SAFA Law Office is a sole proprietorship on the basis of the MOU executed
by the partners of the firm. The MOU states in full:53
MEMORANDUM OF UNDERSTANDING
WHEREAS, the undersigned executed and filed with the SEC the Articles of Incorporation of
SALUDO, AGPALO, FERNANDEZ and AQUINO on March 13, 1997; [Sgd.]

WHEREAS, among the provisions of said Articles of Incorporation are the following: [Sgd.]

[Sgd.]
1. That partners R. E. Agpalo, F. L. Fernandez and A. D. Aquino shall be industrial partners,
and they shall not contribute capital to the partnership and shall not in any way be liable for RUBEN E. AGPALO
any loss or liability that may be incurred by the law firm in the course of its operation.
FILEMON L. FERNANDEZ
2. That the partnership shall be dissolved by agreement of the partners or for any cause as and
in accordance with the manner provided by law, in which event the Articles of Dissolution of AMADO D. AQUINO
said partnership shall be filed with the Securities and Exchange Commission. All remaining
assets upon dissolution shall accrue exclusively to A. G. Saludo, Jr. and all liabilities shall be The foregoing evinces the parties' intention to entirely shift any liability that may be incurred
solely for his account. by SAFA Law Office in the course of its operation to Saludo, who shall also receive all the
remaining assets of the firm upon its dissolution. This MOU, however, does not serve to convert
WHEREAS, the SEC has not approved the registration of the Articles of Incorporation and its SAFA Law Office into a sole proprietorship. As discussed, SAFA Law Office was manifestly
Examiner required that the phrase "shall not in any way be liable for any loss or liability that established as a partnership based on the Articles of Partnership. The MOU, from its tenor,
may be incurred by the law firm in the course of its operation" in Article VII be deleted; reinforces this fact. It did not change the nature of the organization of SAFA Law Office but
only excused the industrial partners from liability.
WHEREAS, the SEC Examiner likewise required that the sentence "All remaining assets upon
dissolution shall accrue exclusively to A. G. Saludo, Jr. and all liabilities shall be solely for his The law, in its wisdom, recognized the possibility that partners in a partnership may decide to
account" in Article X be likewise deleted; place a limit on their individual accountability. Consequently, to protect third persons dealing
with the partnership, the law provides a rule, embodied in Article 1816 of the Civil Code, which
WHEREAS, in order to meet the objections of said Examiner, the objectionable provisions have states:
been deleted and new Articles of Incorporation deleting said objectionable provisions have been Art. 1816. All partners, including industrial ones, shall be liable pro rata with all their property
executed by the parties and filed with the SEC. and after all the partnership assets have been exhausted, for the contract which may be entered
into in the name and for the account of the partnership, under its signature and by a person
NOW, THEREFORE, for and in consideration of the premises and the mutual covenant of the authorized to act for the partnership. However, any partner may enter into a separate obligation
parties, the parties hereby agree as follows: to perform a partnership contract.
1. Notwithstanding the deletion of the portions objected to by the said Examiner, by reason of The foregoing provision does not prevent partners from agreeing to limit their liability, but such
which entirely new Articles of Incorporation have been executed by the parties removing the agreement may only be valid as among them. Thus, Article 1817 of the Civil Code provides:
objected portions, the actual and real intent of the parties is still as originally envisioned,
namely: Art. 1817. Any stipulation against the liability laid down in the preceding article shall be void,
except as among the partners.
a) That partners R. E. Agpalo, F. L. Fernandez and A. D. Aquino shall not in any way be liable
for any loss or liability that may be incurred by the law firm in the course of its operation; The MOU is an agreement forged under the foregoing provision. Consequently, the sole liability
being undertaken by Saludo serves to bind only the parties to the MOU, but never third persons
like PNB.
b) That all remaining assets upon dissolution shall accrue exclusively to A. G. Saludo, Jr. and Considering that the MOU is sanctioned by the law on partnership, it cannot change the nature
all liabilities shall be solely for his account. of a duly-constituted partnership. Hence, we cannot sustain Saludo's position that SAFA Law
Office is a sole proprietorship.
2. That the parties hereof hereby bind and obligate themselves to adhere and observe the real II.
intent of the parties as above-stated, any provisions in the Articles of Incorporation as filed to
meet the objections of the SEC Examiner to the contrary notwithstanding.
Having settled that SAFA Law Office is a partnership, we hold that it acquired juridical
IN WITNESS WHEREOF, we have set our hands this _____ day of May, 1997 at Makati City, personality by operation of law. The perfection and validity of a contract of partnership brings
Philippines. about the creation of a juridical person separate and distinct from the individuals comprising the
partnership. Thus, Article 1768 of the Civil Code provides:
[Sgd.]

A.G. SALUDO, JR.

Art. 1768. The partnership has a juridical personality separate and distinct from that of each of of holding property."60 These are direct quotes from the US case of In re Crawford's
the partners, even in case of failure to comply with the requirements of Article 1772, first Estate.61 We hold, however, that our reference to this US case is an obiter dictum which cannot
paragraph. serve as a binding precedent.62

Article 44 of the Civil Code likewise provides that partnerships are juridical persons, to wit: An obiter dictum is an opinion of the court upon a question which was not necessary to the
decision of the case before it. It is an opinion uttered by the way, not upon the point or question
Art. 44. The following are juridical persons:
pending, as if turning aside from the main topic of the case to collateral subjects, or an opinion
(1) that does not embody the court's determination and is made without argument or full
consideration of the point. It is not a professed deliberate determination of the judge himself.63
The State and its political subdivisions;
The main issue raised for the court's determination in the Sycip case is whether the two petitioner
(2) law firms may continue using the names of their deceased partners in their respective firm
names. The court decided the issue in the negative on the basis of "legal and ethical
Other corporations, institutions and entities for public interest or purpose, created by law; their impediments."64 To be sure, the pronouncement that a partnership for the practice of law is not
personality begins as soon as they have been constituted according to law; a legal entity does not bear on either the legal or ethical obstacle for the continued use of a
(3) deceased partner's name, inasmuch as it merely describes the nature of a law firm. The
pronouncement is not determinative of the main issue. As a matter of fact, if deleted from the
Corporations, partnerships and associations for private interest or purpose to which the law judgment, the rationale of the decision is neither affected nor altered.
grants a juridical personality, separate and distinct from that of each shareholder, partner or
member.54 Moreover, reference of the Sycip case to the In re Crawford's Estate case was made without a
full consideration of the nature of a law firm as a partnership possessed with legal personality
It is this juridical personality that allows a partnership to enter into business transactions to fulfill under our Civil Code. First, we note that while the Court mentioned that a partnership for the
its purposes. Article 46 of the Civil Code provides that "[j]uridical persons may acquire and practice of law is not a legal entity, it also identified petitioner law firms as partnerships over
possess property of all kinds, as well as incur obligations and bring civil or criminal actions, in whom Civil Code provisions on partnership apply.65 The Court thus cannot hold that a
conformity with the laws and regulations of their organization." partnership for the practice of law is not a legal entity without running into conflict with Articles
44 and 1768 of the Civil Code which provide that a partnership has a juridical personality
SAFA Law Office entered into a contract of lease with PNB as a juridical person to pursue the separate and distinct from that of each of the partners.
objectives of the partnership. The terms of the contract and the manner in which the parties
implemented it are a glaring recognition of SAFA Law Office's juridical personality. Thus, the Second, our law on partnership does not exclude partnerships for the practice of law from its
contract stated that it is being executed by PNB as the lessor and "SALUDO AGPALO coverage. Article 1767 of the Civil Code provides that "[t]wo or more persons may also form a
FERNANDEZ & AQUINO, a partnership organized and existing under the laws of the partnership for the exercise of a profession." Article 1783, on the other hand, states that "[a]
Republic of the Philippines," as the lessee.55 It also provided that the lessee, i.e., SAFA Law particular partnership has for its object determinate things, their use or fruits, or a specific
Office, shall be liable in case of default.56 undertaking, or the exercise of a profession or vocation." Since the law uses the word
"profession" in the general sense, and does not distinguish which professional partnerships are
Furthermore, subsequent communications between the parties have always been made for or on covered by its provisions and which are not, then no valid distinction may be made.
behalf ofPNB and SAFA Law Office, respectively.57
Finally, we stress that unlike Philippine law, American law does not treat of partnerships as
In view of the above, we see nothing to support the position of the RTC and the CA, as well as forming a separate juridical personality for all purposes. In the case of Bellis v. United
Saludo, that SAFA Law Office is not a partnership and a legal entity. Saludo's claims that SAFA States,66 the US Supreme Court stated that law firms, as a form of partnership, are generally
Law Office is his sole proprietorship and not a legal entity fail in light of the clear provisions of regarded as distinct entities for specific purposes, such as employment, capacity to be sued,
the law on partnership. To reiterate, SAFA Law Office was created as a partnership, and as such, capacity to hold title to property, and more.67 State and federal laws, however, do not treat
acquired juridical personality by operation of law. Hence, its rights and obligations, as well as partnerships as distinct entities for all purposes.68
those of its partners, are determined by law and not by what the partners purport them to be.
Our jurisprudence has long recognized that American common law does not treat of partnerships
III. as a separate juridical entity unlike Philippine law. Hence, in the case of Campos Rueda & Co.
v. Pacific Commercial Co.,69 which was decided under the old Civil Code, we held:
In holding that SAFA Law Office, a partnership for the practice of law, is not a legal entity, the Unlike the common law, the Philippine statutes consider a limited partnership as a juridical
CA cited58the case of Petition for Authority to Continue Use of the Firm Name "Sycip, Salazar, entity for all intents and purposes, which personality is recognized in all its acts and contracts
Feliciano, Hernandez & Castillo"59 (Sycip case) wherein the Court held that "[a] partnership for (art. 116, Code of Commerce). This being so and the juridical personality of a limited
the practice of law is not a legal entity. It is a mere relationship or association for a particular partnership being different from that of its members, it must, on general principle, answer for,
purpose. x x x It is not a partnership formed for the purpose of carrying on trade or business or
and suffer, the consequence of its acts as such an entity capable of being the subject of rights
and obligations.70 x x x
On the other hand, in the case of Commissioner of Internal Revenue v. Suter.71 which was
decided under the new Civil Code, we held:
It being a basic tenet of the Spanish and Philippine law that the partnership has a juridical
personality of its own, distinct and separate from that of its partners (unlike American and
English law that does not recognize such separate juridical personality), the bypassing of the
existence of the limited partnership as a taxpayer can only be done by ignoring or disregarding
clear statutory mandates and basic principles of our law.72 x x x
Indeed, under the old and new Civil Codes, Philippine law has consistently treated partnerships
as having a juridical personality separate from its partners. In view of the clear provisions of the
law on partnership, as enriched by jurisprudence, we hold that our reference to In re Crawford's
Estate in the Sycip case is an obiter dictum.
IV.
Having settled that SAFA Law Office is a juridical person, we hold that it is also the real party-
in-interest in the case filed by Saludo against PNB.
Section 2, Rule 3 of the Rules of Court defines a real party-in-interest as the one "who stands to
be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit."
In Lee v. Romillo, Jr.,73 we held that the "real [party-in-interest]-plaintiffis one who has a legal
right[,] while a real[party-in-interest]-defendant is one who has a correlative legal obligation
whose act or omission violates the legal rights of the former."74
SAFA Law Office is the party that would be benefited or injured by the judgment in the suit
before the RTC. Particularly, it is the party interested in the accounting and/or recomputation of
unpaid rentals and damages in relation to the contract of lease. It is also the party that would be
liable for payment to PNB of overdue rentals, if that claim would be proven. This is because it
is the one that entered into the contract of lease with PNB. As an entity possessed of a juridical
personality, it has concomitant rights and obligations with respect to the transactions it enters
into. Equally important, the general rule under Article 1816 of the Civil Code is that partnership
assets are primarily liable for the contracts entered into in the name of the partnership and by a
person authorized to act on its behalf. All partners, including industrial ones, are only liable pro
rata with all their property after all the partnership assets have been exhausted.
In Guy v. Gacott,75 we held that under Article 1816 of the Civil Code, the partners' obligation
with respect to the partnership liabilities is subsidiary in nature. It is merely secondary and only
arises if the one primarily liable fails to sufficiently satisfy the obligation. Resort to the
properties of a partner may be made only after efforts in exhausting partnership assets have
failed or if such partnership assets are insufficient to cover the entire obligation.76 Consequently,
considering that SAFA Law Office is primarily liable under the contract of lease, it is the real
party-in-interest that should be joined as plaintiff in the RTC case.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted or defended
in the name of the real party-in-interest. As the one primarily affected by the outcome of the
suit, SAFA Law Office should have filed the complaint with the RTC and should be made to
respond to any counterclaims that may be brought in the course of the proceeding.
In Aguila, Jr. v. Court of Appeals,77 a case for declaration of nullity of a deed of sale was filed
against a partner of A.C. Aguila & Sons, Co. We dismissed the complaint and held that it was
the partnership, not its partners, which should be impleaded for a cause of action against the
partnership itself. Moreover, the partners could not be held liable for the obligations of the
partnership unless it was shown that the legal fiction of a different juridical personality was
being used for fraudulent, unfair, or illegal purposes. We held:
Rule 3, §2 of the Rules of Court of 1964, under which the complaint in this case was filed,
provided that "every action must be prosecuted and defended in the name of the real party in
interest." A real party in interest is one who would be benefited or injured by the judgment, or
who is entitled to the avails of the suit. This ruling is now embodied in Rule 3, §2 of the 1997
Revised Rules of Civil Procedure. Any decision rendered against a person who is not a real party
in interest in the case cannot be executed. Hence, a complaint filed against such a person should
be dismissed for failure to state a cause of action.
Under Art. 1768 of the Civil Code, a partnership "has a juridical personality separate and distinct
from that of each of the partners." The partners cannot be held liable for the obligations of the
partnership unless it is shown that the legal fiction of a different juridical personality is being
used for fraudulent, unfair, or illegal purposes. In this case, private respondent has not shown
that A.C. Aguila & Sons, Co., as a separate juridical entity, is being used for fraudulent, unfair,
or illegal purposes. Moreover, the title to the subject property is in the name of A.C. Aguila &
Sons, Co. and the Memorandum of Agreement was executed between private respondent, with
the consent of her late husband, and A.C. Aguila & Sons, Co., represented by petitioner. Hence,
it is the partnership, not its officers or agents, which should be impleaded in any litigation
involving property registered in its name. A violation of this rule will result in the dismissal of
the complaint.78
In this case, there is likewise no showing that SAFA Law Office, as a separate juridical entity,
is being used for fraudulent, unfair, or illegal purposes. Hence, its partners cannot be held
primarily liable for the obligations of the partnership. As it was SAFA Law Office that entered
into a contract of lease with respondent PNB, it should also be impleaded in any litigation
concerning that contract.
Accordingly, the complaint filed by Saludo should be amended to include SAFA Law Office as
plaintiff. Section 11,79 Rule 3 of the Rules of Court gives power to the court to add a party to
the case on its own initiative at any stage of the action and on such tenns as are just. We have
also held in several cases80that the court has full powers, apart from that power and authority
which are inherent, to amend processes, pleadings, proceedings, and decisions by substituting
as party-plaintiff the real party-in-interest.
In view of the above discussion, we find it unnecessary to discuss the other issues raised in the
petition. It is unfortunate that the case has dragged on for more than 10 years even if it involves
an issue that may be resolved by a simple application of Civil Code provisions on partnership.
It is time for trial to proceed so that the parties' substantial rights may be adjudicated without
further unnecessary delay.
WHEREFORE, the petition is DENIED. Petitioner is hereby ordered to amend his complaint
to include SAFA Law Office as plaintiff in Civil Case No. 06-678 pending before Branch 58 of
the Regional Trial Court of Makati City, it being the real party-in-interest.
SO ORDERED.
VI. Rule 3, Sections 4-6: Parties to a Civil Action
FIRST DIVISION
G.R. No. 191170, September 14, 2016
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., Petitioner, v. FIDEL O.
CHUA AND FILIDEN REALTY AND DEVELOPMENT CORP., Respondent.
DECISION
SERENO, C.J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to nullify
the Court of Appeals (CA) Decision1 and Resolution2 in CA-G.R. SP No. 103809. The CA
Decision annulled the Orders3 of the Regional Trial Court of Parañaque City, Branch 258 (RTC
Branch 258), which joined petitioner as party-defendant in Civil Case No. 01-0207. The CA
Resolution denied petitioner's motion for reconsideration.
FACTS
Meanwhile, respondents filed a Motion to Admit Amended Complaint17 with attached Amended
Verified Complaint18 for annulment of foreclosure of mortgage, declaration of nullity of
certificate of sale, and injunction.
On 17 October 2007, petitioner filed a Motion for Joinder of Party and/or Substitution. 19 It
alleged that by virtue of a Deed of Absolute Sale dated 17 September 2003, 20 Metrobank sold
to Asia Recovery Corporation (ARC) its credit against respondents including all rights, interests,
claims and causes of action arising out of the loan and mortgage agreements between Metrobank
and respondents. ARC, in turn, specifically assigned the credit to petitioner through a Deed of
Assignment dated 31 March 2006.21Petitioner prayed that it be substituted in lieu of Metrobank
in the proceedings before RTC Branch 258.
Aside from its conforme to the motion filed by petitioner, Metrobank also filed a
Comment22 stating that the bank had no objection to its substitution by petitioner. Metrobank
explained that the account of respondents had been declared a nonperforming loan pursuant to
Republic Act No. 9182 (Special Purpose Vehicle Act of 2002 or SPV Act) and, as such, had
been included among the other accounts sold to ARC by virtue of the Deed of Absolute
Sale.23chanrobleslaw

The motion of petitioner was, however, vigorously opposed by respondents.24 They alleged that
In 1988, respondents obtained an initial loan of P4 million from the Metropolitan Bank and they were entitled to a full disclosure of the details of the sale, as well as of the transfer and
Trust Co. (Metrobank). The loan was secured by a real estate mortgage constituted over three assignment of their debt pursuant to their right of redemption under the SPV Act and Article
parcels of land located in Parañaque City (subject property).4 The real estate mortgage was 163425cralawred of the Civil Code.
amended several times to accommodate additional loans they incurred over the years. 5 On 13
January 2000, respondents and Metrobank restructured the obligation through a Debt Settlement RULING OF THE RTC
Agreement over the outstanding obligation of P88,101,093.98. 6chanrobleslaw
In an Order dated 28 December 2007,26 RTC Branch 258 granted the motion and ordered
For failure of respondents to pay, Metrobank sought the extrajudicial foreclosure of the real petitioner to be joined as party-defendant, but without dropping Metrobank as defendant.
estate mortgage over the subject property. On 4 May 2001, it sent them a Notice of Sale7 setting
the public auction on 31 May 2001. Seeking to stop the intended public auction, respondents In the Order dated 9 April 2008,27 RTC Branch 258 denied respondents' motion for
filed a Complaint8docketed as Civil Case No. 01-0207 for injunction with prayer for the issuance reconsideration. It ruled that petitioner was a necessary party to the final determination of the
of a temporary restraining order (TRO), preliminary injunction and damages. case.
The Regional Trial Court of Parañaque City, Branch 257 (RTC Branch 257), issued a Aggrieved, petitioners filed a special civil action for certiorari under Rule 65 of the Rules of
TRO.9 However, upon the expiration of the TRO, Metrobank scheduled another public auction Court before the CA.
on 8 November 2001. On the morning of that day, RTC Branch 257 issued an Order directing
Metrobank to reschedule the intended sale to a date after the resolution of the application for RULING OF THE CA
preliminary injunction.10 However, the latter allegedly received the Order only on 12 November
2001 and pushed through with the scheduled public auction on 8 November 2001. A Certificate
of Sale11 was thereafter issued in its favor on 9 November 2001. In the assailed Decision dated 26 August 2009,28 the CA granted the petition and annulled the
Orders of RTC Branch 258.
In an Order dated 6 March 2002,12 the application for preliminary injunction filed by
respondents was denied by RTC Branch 257 for mootness in view of the consummated public The CA ruled that if it was true that Metrobank had divested itself of any interest in respondents'
auction sale. When their motion for reconsideration was denied, 13 respondents filed a petition debt, then the trial court should have forthwith ordered the bank's exclusion from the
for certiorari before the CA. The appellate court reversed and set aside the Order dated 6 March proceedings.29 According to the CA, the trial court provided for a provisional
2002 issued by RTC Branch 257 and remanded Civil Case No. 01-0207 for further joinder/substitution of parties - a practice that cannot be countenanced due to the basic rule that
proceedings.14chanrobleslaw every action must be prosecuted or defended in the name of the real party in
interest.30chanrobleslaw
Upon motion of respondents, the presiding judge of RTC Branch 257 inhibited from further
hearing the case.15 The case was later re-raffled to RTC Branch 258.16chanrobleslaw The appellate court also doubted whether substitution was proper, because the Deed of Absolute
Sale between Metrobank and ARC did not specify whether respondents' debt was included in
the portfolio of nonperforming loans sold.31chanrobleslaw
At bottom, the CA ruled that petitioner could not substitute for Metrobank in the proceedings
before the trial court without first disclosing the consideration paid by petitioner for the transfer
of interest.32chanrobleslaw
Petitioner filed a motion for reconsideration, which the CA denied in the challenged Resolution
dated 11 February 2010.33chanrobleslaw
ISSUE
The issue to be resolved in this case is simple: whether petitioner may be joined as party-
defendant in Civil Case No. 01-0207.
OUR RULING
We grant the petition.
As stated at the outset, the instant petition seeks a Rule 45 review of a Rule 65 decision of the
CA. We stated in Montoya v. Transmed Manila Corp.34 that our task in these cases is not to
determine the correctness of the ruling of the trial court, but to examine whether the CA correctly
determined the existence of grave abuse of discretion in the Orders of RTC Branch 258 allowing
the joinder of petitioner in Civil Case No. 01-0207.
Section 6, Rule 3 of the Rules of Court, provides the rule on the joinder of
parties:ChanRoblesVirtualawlibrary
Section 6. Permissive joinder of parties. — All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions is alleged to
exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these
Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law
or fact common to all such plaintiffs or to all such defendants may arise in the action; but the
court may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no
interest.
The rationale for allowing parties to join in a proceeding that delves on a common question of
law or fact concerning them is trial convenience; i.e., to save the parties unnecessary work,
trouble and expense.35In order to meet the requirements of justice and convenience, the rule on
the joinder of parties is construed with considerable flexibility.36 Hence, courts are given broad
discretion in determining who may properly be joined in a proceeding. 37chanrobleslaw
The rules also provide that in case of a transfer of interest, the court, upon motion, may direct
the person to whom the interest is transferred to be substituted in the action or joined with the
original party.38chanrobleslaw
Indeed, a transferee pendente lite is a proper party that stands exactly in the shoes of the
transferor, the original party.39 Transferees are bound by the proceedings and judgment in the
case, such that there is no need for them to be included or impleaded by name. 40 We have even
gone further and said that the transferee is joined or substituted in the pending action by
operation of law from the exact moment when the transfer of interest is perfected between the
original party and the transferee.41chanrobleslaw
Nevertheless, "[w]hether or not the transferee should be substituted for, or should be joined with,
the original party is largely a matter of discretion."42 That discretion is exercised in pursuance
of the paramount consideration that must be afforded for the protection of the parties' interests
and right to due process.43chanrobleslaw
Notably, unless the exercise of that discretion is shown to be arbitrary, this Court is not inclined
to review acts committed by the courts a quo.44chanrobleslaw
In this case, part of the reason why the CA ascribed grave abuse of discretion to the trial court
was the latter's statement in the Order dated 28 December 2007 as
follows:ChanRoblesVirtualawlibrary
Thus, the Court hereby grants that [petitioner] be joined as party defendant in this case without
dropping Metrobank at this stage conditioned, however, that if in the course of the trial, the
Court finds that based on the testimonial and documentary evidence to be presented by
Metrobank that it can be dropped, the same shall be effected pursuant to Section 11, Rule 3 of
the 1997 Rules of Civil Procedure.45chanroblesvirtuallawlibrary
According to the CA, this statement allowed for a "provisional" joinder/substitution of parties.
It is difficult to fathom how the above statement of the trial court could have constituted grave
abuse of discretion when the ruling was in accordance with Section 11, Rule 3 of the Rules of
Court. The rule provides that parties may be dropped or added by order of the court on motion
of any party or on the court's own initiative at any stage of the action and on such terms as are
just. For the CA to say that, as between Metrobank and petitioner, "only one of them is clothed
with the personality to actively participate in the proceedings below"46 is to show a regrettable
lack of understanding of the rules and an unwarranted restriction of the trial court's discretion.
Contrary to the finding of the CA, there is enough evidence in the records to support the fact of
the transfer of interest between Metrobank and petitioner. The CA highlights only that it was
not clear whether respondents' debt was included in the portfolio of nonperforming loans sold
to ARC. The appellate court then turned a blind eye to the representations of Metrobank before
the trial court confirming the fact of the transfer of interest to ARC and then later to petitioner.
The admission by Metrobank sufficiently supplied whatever was omitted by the non-
presentation of the entire portfolio of nonperforming loans. The non-presentation may be
understandable in view of the sensitive nature of the portfolio and its contents. At any rate, the
Deed of Assignment clearly spelled out that all of the rights, title, and interest over respondents'
loan, which had an outstanding principal balance of P88,101,093.98, had been transferred by
ARC to petitioner.
We observe that the CA effectively ruled that the disclosure of the consideration for the transfer
of rights was a condition precedent for the joinder of petitioner in the proceedings.
In order not to preempt judgment or make a pronouncement as to any matter other than the
pertinent issue before it, this Court will simply remind the CA and the parties that a disclosure
of the consideration for the transfer of interest is not among the following requirements for a
party to be joined in a proceeding: (1) the right to relief arises out of the same transaction or
series of transactions; (2) there is a question of law or fact common to all the parties; and (3) the
joinder is not otherwise prohibited by the rules on jurisdiction and venue. 47chanrobleslaw
In fine, we find that the CA erred in ruling that RTC Branch 258 committed grave abuse of
discretion when the latter allowed the joinder of petitioner as party-defendant in Civil Case No.
01-0207. Under the rules, the trial court is given wide discretion and enough leeway to determine
who may be joined in a proceeding, or whether a party may properly be substituted by another
due to a transfer of interest. Within the premises, the trial court's grant of the joinder cannot be
seriously assailed.
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision dated 26 August
2009 and Resolution dated 11 February 2010 in CA-G.R. SP No. 103809
are REVERSED and SET ASIDE.
Section VII of AO 10 was later amended by AO 66 series of 2000, 8 which provided that the
two-year accreditation period may be recalled, suspended or revoked only after due
deliberation, hearing and notice by the DOH Accreditation Committee, through its Chairman.
On August 28, 2000, the DOH issued Memorandum No. 171-C9 which provided for a list and
category of sanctions to be imposed on accredited government suppliers of pharmaceutical
products in case of adverse findings regarding their products (e.g. substandard, fake, or
misbranded) or violations committed by them during their accreditation.

In line with Memorandum No. 171-C, the DOH, through former Undersecretary Ma. Margarita
The Orders dated 28 December 2007 and 9 April 2008 issued by the Regional Trial Court of
M. Galon (Galon), issued Memorandum No. 209 series of 2000,10 inviting representatives of 24
Parañaque City, Branch 258, are REINSTATED.
accredited drug companies, including herein respondent Phil Pharmawealth, Inc. (PPI) to a
meeting on October 27, 2000. During the meeting, Undersecretary Galon handed them copies
SO ORDERED
of a document entitled "Report on Violative Products"11 issued by the Bureau of Food and
Republic of the Philippines Drugs12 (BFAD), which detailed violations or adverse findings relative to these accredited drug
SUPREME COURT companies’ products. Specifically, the BFAD found that PPI’s products which were being sold
Manila to the public were unfit for human consumption.

SECOND DIVISION During the October 27, 2000 meeting, the 24 drug companies were directed to submit within 10
days, or until November 6, 2000, their respective explanations on the adverse findings covering
G.R. No. 182358 February 20, 2013 their respective products contained in the Report on Violative Products.

DEPARTMENT OF HEALTH, THE SECRETARY OF HEALTH, and MA. Instead of submitting its written explanation within the 10-day period as required, PPI belatedly
MARGARITA M. GALON, Petitioners, sent a letter13 dated November 13, 2000 addressed to Undersecretary Galon, informing her that
vs. PPI has referred the Report on Violative Products to its lawyers with instructions to prepare the
PHIL PHARMA WEALTH, INC., Respondent. corresponding reply. However, PPI did not indicate when its reply would be submitted; nor did
it seek an extension of the 10-day period, which had previously expired on November 6, 2000,
DECISION much less offer any explanation for its failure to timely submit its reply. PPI’s November 13,
2000 letter states:
DEL CASTILLO, J.:
Madam,
The state may not be sued without its consent. Likewise, public officials may not be sued for
acts done in the perfom1ance of their official functions or within the scope of their authority. This refers to your directive on 27 October 2000, on the occasion of the meeting with selected
accredited suppliers, during which you made known to the attendees of your requirement for
This Petition for Review on Certiorari1assails the October 25, 2007 Decision2
of the Court of
them to submit their individual comments on the Report on Violative Products (the "Report")
Appeals (CA) in CA-G.R. CV No. 85670, and its March 31, 2008 Reso1ution 3 denying
compiled by your office and disseminated on that date.
petitioners' Motion for Reconsideration.4
In this connection, we inform you that we have already instructed our lawyers to prepare on our
Factual Antecedents
behalf the appropriate reply to the Report furnished to us. Our lawyers in time shall revert to
On December 22, 1998, Administrative Order (AO) No. 27 series of 1998 5 was issued by then you and furnish you the said reply.
Department of Health (DOH) Secretary Alfredo G. Romualdez (Romualdez). AO 27 set the
Please be guided accordingly.
guidelines and procedure for accreditation of government suppliers of pharmaceutical products
for sale or distribution to the public, such accreditation to be valid for three years but subject to Very truly yours,
annual review.
(signed)
On January 25, 2000, Secretary Romualdez issued AO 10 series of 2000 6 which amended AO ATTY. ALAN A.B. ALAMBRA
27. Under Section VII7 of AO 10, the accreditation period for government suppliers of
pharmaceutical products was reduced to two years. Moreover, such accreditation may be Vice-President for Legal and Administrative Affairs14
recalled, suspended or revoked after due deliberation and proper notice by the DOH
Accreditation Committee, through its Chairman. In a letter-reply15 dated November 23, 2000 Undersecretary Galon found "untenable" PPI’s
November 13, 2000 letter and therein informed PPI that, effective immediately, its accreditation
has been suspended for two years pursuant to AO 10 and Memorandum No. 171-C.
In another December 14, 2000 letter16 addressed to Undersecretary Galon, PPI through counsel
questioned the suspension of its accreditation, saying that the same was made pursuant to
Section VII of AO 10 which it claimed was patently illegal and null and void because it arrogated
unto the DOH Accreditation Committee powers and functions which were granted to the BFAD
under Republic Act (RA) No. 372017 and Executive Order (EO) No. 175.18 PPI added that its
accreditation was suspended without the benefit of notice and hearing, in violation of its right
to substantive and administrative due process. It thus demanded that the DOH desist from
implementing the suspension of its accreditation, under pain of legal redress.
On December 28, 2000, PPI filed before the Regional Trial Court of Pasig City a
Complaint19 seeking to declare null and void certain DOH administrative issuances, with prayer
for damages and injunction against the DOH, former Secretary Romualdez and DOH
Undersecretary Galon. Docketed as Civil Case No. 68200, the case was raffled to Branch 160.
On February 8, 2002, PPI filed an Amended and Supplemental Complaint, 20 this time
impleading DOH Secretary Manuel Dayrit (Dayrit). PPI claimed that AO 10, Memorandum No.
171-C, Undersecretary Galon’s suspension order contained in her November 23, 2000 letter,
and AO 14 series of 200121 are null and void for being in contravention of Section 26(d) of RA
3720 as amended by EO 175, which states as follows:
SEC. 26. x x x
(d) When it appears to the Director [of the BFAD] that the report of the Bureau that any article
of food or any drug, device, or cosmetic secured pursuant to Section twenty-eight of this Act is
adulterated, misbranded, or not registered, he shall cause notice thereof to be given to the person
or persons concerned and such person or persons shall be given an opportunity to be heard before
the Bureau and to submit evidence impeaching the correctness of the finding or charge in
question.
For what it claims was an undue suspension of its accreditation, PPI prayed that AO 10,
Memorandum No. 171-C, Undersecretary Galon’s suspension order contained in her November
23, 2000 letter, and AO 14 be declared null and void, and that it be awarded moral damages of
₱5 million, exemplary damages of ₱1 million, attorney’s fees of ₱1 million, and costs of suit.
PPI likewise prayed for the issuance of temporary and permanent injunctive relief.
In their Amended Answer,22 the DOH, former Secretary Romualdez, then Secretary Dayrit, and
Undersecretary Galon sought the dismissal of the Complaint, stressing that PPI’s accreditation
was suspended because most of the drugs it was importing and distributing/selling to the public
were found by the BFAD to be substandard for human consumption. They added that the DOH
is primarily responsible for the formulation, planning, implementation, and coordination of
policies and programs in the field of health; it is vested with the comprehensive power to make
essential health services and goods available to the people, including accreditation of drug
suppliers and regulation of importation and distribution of basic medicines for the public.
Petitioners added that, contrary to PPI’s claim, it was given the opportunity to present its side
within the 10-day period or until November 6, 2000, but it failed to submit the required
comment/reply. Instead, it belatedly submitted a November 13, 2000 letter which did not even
constitute a reply, as it merely informed petitioners that the matter had been referred by PPI to
its lawyer. Petitioners argued that due process was afforded PPI, but because it did not timely
avail of the opportunity to explain its side, the DOH had to act immediately – by suspending
PPI’s accreditation – to stop the distribution and sale of substandard drug products which posed
a serious health risk to the public. By exercising DOH’s mandate to promote health, it cannot
be said that petitioners committed grave abuse of discretion.
In a January 8, 2001 Order,23 the trial court partially granted PPI’s prayer for a temporary
restraining order, but only covering PPI’s products which were not included in the list of
violative products or drugs as found by the BFAD.
In a Manifestation and Motion24 dated July 8, 2003, petitioners moved for the dismissal of Civil
Case No. 68200, claiming that the case was one against the State; that the Complaint was
improperly verified; and lack of authority of the corporate officer to commence the suit, as the
requisite resolution of PPI’s board of directors granting to the commencing officer – PPI’s Vice
President for Legal and Administrative Affairs, Alan Alambra, – the authority to file Civil Case
No. 68200 was lacking. To this, PPI filed its Comment/Opposition.25
Ruling of the Regional Trial Court
In a June 14, 2004 Order,26 the trial court dismissed Civil Case No. 68200, declaring the case to
be one instituted against the State, in which case the principle of state immunity from suit is
applicable.
PPI moved for reconsideration,27 but the trial court remained steadfast.28
PPI appealed to the CA.
Ruling of the Court of Appeals
Docketed as CA-G.R. CV No. 85670, PPI’s appeal centered on the issue of whether it was
proper for the trial court to dismiss Civil Case No. 68200.
The CA, in the herein assailed Decision,29 reversed the trial court ruling and ordered the remand
of the case for the conduct of further proceedings. The CA concluded that it was premature for
the trial court to have dismissed the Complaint. Examining the Complaint, the CA found that a
cause of action was sufficiently alleged – that due to defendants’ (petitioners’) acts which were
beyond the scope of their authority, PPI’s accreditation as a government supplier of
pharmaceutical products was suspended without the required notice and hearing as required by
Section 26(d) of RA 3720 as amended by EO 175. Moreover, the CA held that by filing a motion
to dismiss, petitioners were deemed to have hypothetically admitted the allegations in the
Complaint – which state that petitioners were being sued in their individual and personal
capacities – thus negating their claim that Civil Case No. 68200 is an unauthorized suit against
the State.
The CA further held that instead of dismissing the case, the trial court should have deferred the
hearing and resolution of the motion to dismiss and proceeded to trial. It added that it was
apparent from the Complaint that petitioners were being sued in their private and personal
capacities for acts done beyond the scope of their official functions. Thus, the issue of whether
the suit is against the State could best be threshed out during trial on the merits, rather than in
proceedings covering a motion to dismiss.
The dispositive portion of the CA Decision reads:
WHEREFORE, the appeal is hereby GRANTED. The Order dated June 14, 2004 of the
Regional Trial Court of Pasig City, Branch 160, is hereby REVERSED and SET-
ASIDE. ACCORDINGLY, this case is REMANDED to the trial court for further proceedings.
SO ORDERED.30
Petitioners sought, but failed, to obtain a reconsideration of the Decision. Hence, they filed the
present Petition.
Issue
Petitioners now raise the following lone issue for the Court’s resolution:
Should Civil Case No. 68200 be dismissed for being a suit against the State? 31
Petitioners’ Arguments
Petitioners submit that because PPI’s Complaint prays for the award of damages against the
DOH, Civil Case No. 68200 should be considered a suit against the State, for it would require
the appropriation of the needed amount to satisfy PPI’s claim, should it win the case. Since the
State did not give its consent to be sued, Civil Case No. 68200 must be dismissed. They add that
in issuing and implementing the questioned issuances, individual petitioners acted officially and
within their authority, for which reason they should not be held to account individually.
Respondent’s Arguments
Apart from echoing the pronouncement of the CA, respondent insists that Civil Case No. 68200
is a suit against the petitioners in their personal capacity for acts committed outside the scope of
their authority.
Our Ruling
The Petition is granted.
The doctrine of non-suability.
The discussion of this Court in Department of Agriculture v. National Labor Relations
Commission32 on the doctrine of non-suability is enlightening.
The basic postulate enshrined in the constitution that ‘(t)he State may not be sued without its
consent,’ reflects nothing less than a recognition of the sovereign character of the State and an
express affirmation of the unwritten rule effectively insulating it from the jurisdiction of courts.
It is based on the very essence of sovereignty. x x x [A] sovereign is exempt from suit, not
because of any formal conception or obsolete theory, but on the logical and practical ground
that there can be no legal right as against the authority that makes the law on which the right
depends. True, the doctrine, not too infrequently, is derisively called ‘the royal prerogative of
dishonesty’ because it grants the state the prerogative to defeat any legitimate claim against it
by simply invoking its nonsuability. We have had occasion to explain in its defense, however,
that a continued adherence to the doctrine of non-suability cannot be deplored, for the loss of
governmental efficiency and the obstacle to the performance of its multifarious functions would
be far greater in severity than the inconvenience that may be caused private parties, if such
fundamental principle is to be abandoned and the availability of judicial remedy is not to be
accordingly restricted.
The rule, in any case, is not really absolute for it does not say that the state may not be sued
under any circumstance. On the contrary, as correctly phrased, the doctrine only conveys, ‘the
state may not be sued without its consent;’ its clear import then is that the State may at times be
sued. The State’s consent may be given either expressly or impliedly. Express consent may be
made through a general law or a special law. x x x Implied consent, on the other hand, is
conceded when the State itself commences litigation, thus opening itself to a counterclaim or
when it enters into a contract. In this situation, the government is deemed to have descended to
the level of the other contracting party and to have divested itself of its sovereign immunity.
This rule, x x x is not, however, without qualification. Not all contracts entered into by the
government operate as a waiver of its non-suability; distinction must still be made between one
which is executed in the exercise of its sovereign function and another which is done in its
proprietary capacity.33
As a general rule, a state may not be sued. However, if it consents, either expressly or impliedly,
then it may be the subject of a suit.34 There is express consent when a law, either special or
general, so provides. On the other hand, there is implied consent when the state "enters into a
contract or it itself commences litigation."35 However, it must be clarified that when a state
enters into a contract, it does not automatically mean that it has waived its non-suability. 36 The
State "will be deemed to have impliedly waived its non-suability [only] if it has entered into a
contract in its proprietary or private capacity. [However,] when the contract involves its
sovereign or governmental capacity[,] x x x no such waiver may be implied."37 "Statutory
provisions waiving [s]tate immunity are construed in strictissimi juris. For, waiver of immunity
is in derogation of sovereignty."38
The DOH can validly invoke state immunity.
a) DOH is an unincorporated agency which performs sovereign or governmental functions.
In this case, the DOH, being an "unincorporated agency of the government"39 can validly invoke
the defense of immunity from suit because it has not consented, either expressly or impliedly,
to be sued. Significantly, the DOH is an unincorporated agency which performs functions of
governmental character.
The ruling in Air Transportation Office v. Ramos40 is relevant, viz:
An unincorporated government agency without any separate juridical personality of its own
enjoys immunity from suit because it is invested with an inherent power of sovereignty.
Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of
sovereign immunity is violated. However, the need to distinguish between an unincorporated
government agency performing governmental function and one performing proprietary
functions has arisen. The immunity has been upheld in favor of the former because its function
is governmental or incidental to such function; it has not been upheld in favor of the latter whose
function was not in pursuit of a necessary function of government but was essentially a
business.41
b) The Complaint seeks to hold the DOH solidarily and jointly liable with the other defendants
for damages which constitutes a charge or financial liability against the state.
Moreover, it is settled that if a Complaint seeks to "impose a charge or financial liability against
the state,"42 the defense of non-suability may be properly invoked. In this case, PPI specifically
prayed, in its Complaint and Amended and Supplemental Complaint, for the DOH, together
with Secretaries Romualdez and Dayrit as well as Undersecretary Galon, to be held jointly and
severally liable for moral damages, exemplary damages, attorney’s fees and costs of
suit.43 Undoubtedly, in the event that PPI succeeds in its suit, the government or the state through
the DOH would become vulnerable to an imposition or financial charge in the form of damages.
This would require an appropriation from the national treasury which is precisely the situation
which the doctrine of state immunity aims to protect the state from.
The mantle of non-suability extends to complaints filed against public officials for acts done
in the performance of their official functions.
As regards the other petitioners, to wit, Secretaries Romualdez and Dayrit, and Undersecretary
Galon, it must be stressed that the doctrine of state immunity extends its protective mantle also
to complaints filed against state officials for acts done in the discharge and performance of their
duties.44 "The suability of a government official depends on whether the official concerned was
acting within his official or jurisdictional capacity, and whether the acts done in the performance
of official functions will result in a charge or financial liability against the
government."45 Otherwise stated, "public officials can be held personally accountable for acts
claimed to have been performed in connection with official duties where they have acted ultra
vires or where there is showing of bad faith."46 Moreover, "[t]he rule is that if the judgment
against such officials will require the state itself to perform an affirmative act to satisfy the same,
such as the appropriation of the amount needed to pay the damages awarded against them, the
suit must be regarded as against the state x x x. In such a situation, the state may move to dismiss
the [C]omplaint on the ground that it has been filed without its consent." 47
It is beyond doubt that the acts imputed against Secretaries Romualdez and Dayrit, as well as
Undersecretary Galon, were done while in the performance and discharge of their official
functions or in their official capacities, and not in their personal or individual capacities.
Secretaries Romualdez and Dayrit were being charged with the issuance of the assailed orders.
On the other hand, Undersecretary Galon was being charged with implementing the assailed
issuances. By no stretch of imagination could the same be categorized as ultra vires simply
because the said acts are well within the scope of their authority. Section 4 of RA 3720
specifically provides that the BFAD is an office under the Office of the Health Secretary. Also,
the Health Secretary is authorized to issue rules and regulations as may be necessary to
effectively enforce the provisions of RA 3720.48 As regards Undersecretary Galon, she is
authorized by law to supervise the offices under the DOH’s authority,49 such as the BFAD.
Moreover, there was also no showing of bad faith on their part. The assailed issuances were not
directed only against PPI. The suspension of PPI’s accreditation only came about after it failed
to submit its comment as directed by Undersecretary Galon. It is also beyond dispute that if
found wanting, a financial charge will be imposed upon them which will require an
appropriation from the state of the needed amount. Thus, based on the foregoing considerations,
the Complaint against them should likewise be dismissed for being a suit against the state which
absolutely did not give its consent to be sued. Based on the foregoing considerations, and
regardless of the merits of PPI’s case, this case deserves a dismissal. Evidently, the very
foundation of Civil Case No. 68200 has crumbled at this initial juncture.
PPI was not denied due process.
However, we cannot end without a discussion of PPI’s contention that it was denied due process
when its accreditation was suspended "without due notice and hearing." It is undisputed that
during the October 27, 2000 meeting, Undersecretary Galon directed representatives of
pharmaceutical companies, PPI included, to submit their comment and/or reactions to the Report
on Violative Products furnished them within a period of 10 days. PPI, instead of submitting its
comment or explanation, wrote a letter addressed to Undersecretary Galon informing her that
the matter had already been referred to its lawyer for the drafting of an appropriate reply. Aside
from the fact that the said letter was belatedly submitted, it also failed to specifically mention
when such reply would be forthcoming. Finding the foregoing explanation to be unmeritorious,
Undersecretary Galon ordered the suspension of PPI’s accreditation for two years. Clearly these
facts show that PPI was not denied due process. It was given the opportunity to explain its side.
Prior to the suspension of its accreditation, PPI had the chance to rebut, explain, or comment on
the findings contained in the Report on Violative Products that several of PPI’s products are not
fit for human consumption. However, PPI squandered its opportunity to explain. Instead of
complying with the directive of the DOH Undersecretary within the time allotted, it instead
haughtily informed Undersecretary Galon that the matter had been referred to its lawyers.
Worse, it impliedly told Undersecretary Galon to just wait until its lawyers shall have prepared
the appropriate reply. PPI however failed to mention when it will submit its "appropriate reply"
or how long Undersecretary Galon should wait. In the meantime, PPI’s drugs which are included
in the Report on Violative Products are out and being sold in the market. Based on the foregoing,
we find PPI’s contention of denial of due process totally unfair and absolutely lacking in basis.
At this juncture, it would be trite to mention that "[t]he essence of due process in administrative
proceedings is the opportunity to explain one’s side or seek a reconsideration of the action or
ruling complained of. As long as the parties are given the opportunity to be heard before
judgment is rendered, the demands of due process are sufficiently met. What is offensive to due
process is the denial of the opportunity to be heard. The Court has repeatedly stressed that parties
who chose not to avail themselves of the opportunity to answer charges against them cannot
complain of a denial of due process."50
Incidentally, we find it inieresting that in the earlier case of Department q( Health v. Phil
Pharmawealth, Inc. 51respondent filed a Complaint against DOH anchored on the same
issuances which it assails in the present case. In the earlier case of Department of Health v. Phil
Pharmawealth, Jnc., 52 PPI submitted to the DOH a request for the inclusion of its products in
the list of accredited drugs as required by AO 27 series of 1998 which was later amended by
AO 10 series of 2000. In the instant case, however, PPI interestingly claims that these issuances
are null and void.
WHEREFORE, premises considered, the Petition is GRANTED. Civil Case No. 68200 is
ordered DISMISSED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 159402 February 23, 2011
AIR TRANSPORTATION OFFICE, Petitioner,
vs.
SPOUSES DAVID* ELISEA RAMOS, Respondents.
RESOLUTION
BERSAMIN, J.:
The State’s immunity from suit does not extend to the petitioner because it is an agency of the
State engaged in an enterprise that is far from being the State’s exclusive prerogative.
Under challenge is the decision promulgated on May 14, 2003, 1 by which the Court of Appeals
(CA) affirmed with modification the decision rendered on February 21, 2001 by the Regional
Trial Court, Branch 61 (RTC), in Baguio City in favor of the respondents. 2
Antecedents
Spouses David and Elisea Ramos (respondents) discovered that a portion of their land registered
under Transfer Certificate of Title No. T-58894 of the Baguio City land records with an area of
985 square meters, more or less, was being used as part of the runway and running shoulder of
the Loakan Airport being operated by petitioner Air Transportation Office (ATO). On August
11, 1995, the respondents agreed after negotiations to convey the affected portion by deed of
sale to the ATO in consideration of the amount of ₱778,150.00. However, the ATO failed to
pay despite repeated verbal and written demands.
Thus, on April 29, 1998, the respondents filed an action for collection against the ATO and some
of its officials in the RTC (docketed as Civil Case No. 4017-R and entitled Spouses David and
Elisea Ramos v. Air Transportation Office, Capt. Panfilo Villaruel, Gen. Carlos Tanega, and
Mr. Cesar de Jesus).
In their answer, the ATO and its co-defendants invoked as an affirmative defense the issuance
of Proclamation No. 1358, whereby President Marcos had reserved certain parcels of land that
included the respondents’ affected portion for use of the Loakan Airport. They asserted that the
RTC had no jurisdiction to entertain the action without the State’s consent considering that the
deed of sale had been entered into in the performance of governmental functions.
On November 10, 1998, the RTC denied the ATO’s motion for a preliminary hearing of the
affirmative defense.
After the RTC likewise denied the ATO’s motion for reconsideration on December 10, 1998,
the ATO commenced a special civil action for certiorari in the CA to assail the RTC’s orders.
The CA dismissed the petition for certiorari, however, upon its finding that the assailed orders
were not tainted with grave abuse of discretion.3
Subsequently, February 21, 2001, the RTC rendered its decision on the merits, 4 disposing:
WHEREFORE, the judgment is rendered ORDERING the defendant Air Transportation Office
to pay the plaintiffs DAVID and ELISEA RAMOS the following: (1) The amount of
₱778,150.00 being the value of the parcel of land appropriated by the defendant ATO as
embodied in the Deed of Sale, plus an annual interest of 12% from August 11, 1995, the date of
the Deed of Sale until fully paid; (2) The amount of ₱150,000.00 by way of moral damages and
₱150,000.00 as exemplary damages; (3) the amount of ₱50,000.00 by way of attorney’s fees
plus ₱15,000.00 representing the 10, more or less, court appearances of plaintiff’s counsel; (4)
The costs of this suit.
SO ORDERED.
In due course, the ATO appealed to the CA, which affirmed the RTC’s decision on May 14,
2003,5 viz:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby AFFIRMED,
with MODIFICATION that the awarded cost therein is deleted, while that of moral and
exemplary damages is reduced to ₱30,000.00 each, and attorney’s fees is lowered to ₱10,000.00.
No cost.
SO ORDERED.
Hence, this appeal by petition for review on certiorari.
Issue
The only issue presented for resolution is whether the ATO could be sued without the State’s
consent.
Ruling
The petition for review has no merit.
The immunity of the State from suit, known also as the doctrine of sovereign immunity or non-
suability of the State, is expressly provided in Article XVI of the 1987 Constitution, viz:
Section 3. The State may not be sued without its consent.
The immunity from suit is based on the political truism that the State, as a sovereign, can do no
wrong. Moreover, as the eminent Justice Holmes said in Kawananakoa v. Polyblank: 6
The territory [of Hawaii], of course, could waive its exemption (Smith v. Reeves, 178 US 436,
44 L ed 1140, 20 Sup. Ct. Rep. 919), and it took no objection to the proceedings in the cases
cited if it could have done so. xxx But in the case at bar it did object, and the question raised is
whether the plaintiffs were bound to yield. Some doubts have been expressed as to the source
of the immunity of a sovereign power from suit without its own permission, but the answer has
been public property since before the days of Hobbes. Leviathan, chap. 26, 2. A sovereign is
exempt from suit, not because of any formal conception or obsolete theory, but on the logical
and practical ground that there can be no legal right as against the authority that makes the law
on which the right depends. "Car on peut bien recevoir loy d'autruy, mais il est impossible par
nature de se donner loy." Bodin, Republique, 1, chap. 8, ed. 1629, p. 132; Sir John Eliot, De
Jure Maiestatis, chap. 3. Nemo suo statuto ligatur necessitative. Baldus, De Leg. et Const. Digna
Vox, 2. ed. 1496, fol. 51b, ed. 1539, fol. 61. 7
Practical considerations dictate the establishment of an immunity from suit in favor of the State.
Otherwise, and the State is suable at the instance of every other individual, government service
may be severely obstructed and public safety endangered because of the number of suits that the
State has to defend against.8 Several justifications have been offered to support the adoption of
the doctrine in the Philippines, but that offered in Providence Washington Insurance Co. v.
Republic of the Philippines9 is "the most acceptable explanation," according to Father Bernas, a
recognized commentator on Constitutional Law,10 to wit:
[A] continued adherence to the doctrine of non-suability is not to be deplored for as against the
inconvenience that may be caused private parties, the loss of governmental efficiency and the
obstacle to the performance of its multifarious functions are far greater if such a fundamental
principle were abandoned and the availability of judicial remedy were not thus restricted. With
the well-known propensity on the part of our people to go to court, at the least provocation, the
loss of time and energy required to defend against law suits, in the absence of such a basic
principle that constitutes such an effective obstacle, could very well be imagined.
An unincorporated government agency without any separate juridical personality of its own
enjoys immunity from suit because it is invested with an inherent power of sovereignty.
Accordingly, a claim for damages against the agency cannot prosper; otherwise, the doctrine of
sovereign immunity is violated.11 However, the need to distinguish between an unincorporated
government agency performing governmental function and one performing proprietary
functions has arisen. The immunity has been upheld in favor of the former because its function
is governmental or incidental to such function;12 it has not been upheld in favor of the latter
whose function was not in pursuit of a necessary function of government but was essentially a
business.13
Should the doctrine of sovereignty immunity or non-suability of the State be extended to the
ATO?
In its challenged decision,14 the CA answered in the negative, holding:
On the first assignment of error, appellants seek to impress upon Us that the subject contract of
sale partook of a governmental character. Apropos, the lower court erred in applying the High
Court’s ruling in National Airports Corporation vs. Teodoro (91 Phil. 203 [1952]), arguing that
in Teodoro, the matter involved the collection of landing and parking fees which is a proprietary
function, while the case at bar involves the maintenance and operation of aircraft and air
navigational facilities and services which are governmental functions.
We are not persuaded.
Contrary to appellants’ conclusions, it was not merely the collection of landing and parking fees
which was declared as proprietary in nature by the High Court in Teodoro, but management and
maintenance of airport operations as a whole, as well. Thus, in the much later case of Civil
Aeronautics Administration vs. Court of Appeals (167 SCRA 28 [1988]), the Supreme Court,
reiterating the pronouncements laid down in Teodoro, declared that the CAA (predecessor
of ATO) is an agency not immune from suit, it being engaged in functions pertaining to a private
entity. It went on to explain in this wise:
xxx
The Civil Aeronautics Administration comes under the category of a private entity. Although
not a body corporate it was created, like the National Airports Corporation, not to maintain a
necessary function of government, but to run what is essentially a business, even if revenues be
not its prime objective but rather the promotion of travel and the convenience of the travelling
public. It is engaged in an enterprise which, far from being the exclusive prerogative of state,
may, more than the construction of public roads, be undertaken by private concerns. [National
Airports Corp. v. Teodoro, supra, p. 207.]
xxx
True, the law prevailing in 1952 when the Teodoro case was promulgated was Exec. Order 365
(Reorganizing the Civil Aeronautics Administration and Abolishing the National Airports
Corporation). Republic Act No. 776 (Civil Aeronautics Act of the Philippines), subsequently
enacted on June 20, 1952, did not alter the character of the CAA’s objectives under Exec. Order
365. The pertinent provisions cited in the Teodoro case, particularly Secs. 3 and 4 of Exec. Order
365, which led the Court to consider the CAA in the category of a private entity were retained
substantially in Republic Act 776, Sec. 32(24) and (25). Said Act provides:
Sec. 32. Powers and Duties of the Administrator. – Subject to the general control and
supervision of the Department Head, the Administrator shall have among others, the following
powers and duties:
xxx
(24) To administer, operate, manage, control, maintain and develop the Manila International
Airport and all government-owned aerodromes except those controlled or operated by the
Armed Forces of the Philippines including such powers and duties as: (a) to plan, design,
construct, equip, expand, improve, repair or alter aerodromes or such structures, improvement
or air navigation facilities; (b) to enter into, make and execute contracts of any kind with any
person, firm, or public or private corporation or entity; …
(25) To determine, fix, impose, collect and receive landing fees, parking space fees, royalties on
sales or deliveries, direct or indirect, to any aircraft for its use of aviation gasoline, oil and
lubricants, spare parts, accessories and supplies, tools, other royalties, fees or rentals for the use
of any of the property under its management and control.
xxx
From the foregoing, it can be seen that the CAA is tasked with private or non-governmental
functions which operate to remove it from the purview of the rule on State immunity from suit.
For the correct rule as set forth in the Teodorocase states:
xxx
Not all government entities, whether corporate or non-corporate, are immune from
suits. Immunity from suits is determined by the character of the objects for which the entity was
organized. The rule is thus stated in Corpus Juris:
Suits against State agencies with relation to matters in which they have assumed to act in private
or non-governmental capacity, and various suits against certain corporations created by the state
for public purposes, but to engage in matters partaking more of the nature of ordinary business
rather than functions of a governmental or political character, are not regarded as suits against
the state. The latter is true, although the state may own stock or property of such a corporation
for by engaging in business operations through a corporation, the state divests itself so far of its
sovereign character, and by implication consents to suits against the corporation. (59 C.J., 313)
[National Airports Corporation v. Teodoro, supra, pp. 206-207; Italics supplied.]
This doctrine has been reaffirmed in the recent case of Malong v. Philippine National
Railways [G.R. No. L-49930, August 7, 1985, 138 SCRA 63], where it was held that the
Philippine National Railways, although owned and operated by the government, was not
immune from suit as it does not exercise sovereign but purely proprietary and business functions.
Accordingly, as the CAA was created to undertake the management of airport operations which
primarily involve proprietary functions, it cannot avail of the immunity from suit accorded to
government agencies performing strictly governmental functions.15
In our view, the CA thereby correctly appreciated the juridical character of the ATO as an
agency of the Government not performing a purely governmental or sovereign function, but was
instead involved in the management and maintenance of the Loakan Airport, an activity that
was not the exclusive prerogative of the State in its sovereign capacity. Hence, the ATO had no
claim to the State’s immunity from suit. We uphold the CA’s aforequoted holding.
We further observe the doctrine of sovereign immunity cannot be successfully invoked to defeat
a valid claim for compensation arising from the taking without just compensation and without
the proper expropriation proceedings being first resorted to of the plaintiffs’ property. 16 Thus,
in De los Santos v. Intermediate Appellate Court,17 the trial court’s dismissal based on the
doctrine of non-suability of the State of two cases (one of which was for damages) filed by
owners of property where a road 9 meters wide and 128.70 meters long occupying a total area
of 1,165 square meters and an artificial creek 23.20 meters wide and 128.69 meters long
occupying an area of 2,906 square meters had been constructed by the provincial engineer of
Rizal and a private contractor without the owners’ knowledge and consent was reversed and the
cases remanded for trial on the merits. The Supreme Court ruled that the doctrine of sovereign
immunity was not an instrument for perpetrating any injustice on a citizen. In exercising the
right of eminent domain, the Court explained, the State exercised its jus imperii, as distinguished
from its proprietary rights, or jus gestionis; yet, even in that area, where private property had
been taken in expropriation without just compensation being paid, the defense of immunity from
suit could not be set up by the State against an action for payment by the owners.
Lastly, the issue of whether or not the ATO could be sued without the State’s consent has been
rendered moot by the passage of Republic Act No. 9497, otherwise known as the Civil Aviation
Authority Act of 2008.
R.A. No. 9497 abolished the ATO, to wit:
Section 4. Creation of the Authority. – There is hereby created an independent regulatory body
with quasi-judicial and quasi-legislative powers and possessing corporate attributes to be known
as the Civil Aviation Authority of the Philippines (CAAP), herein after referred to as the
"Authority" attached to the Department of Transportation and Communications (DOTC) for the
purpose of policy coordination. For this purpose, the existing Air transportation Office
created under the provisions of Republic Act No. 776, as amended is hereby abolished.
xxx
Under its Transitory Provisions, R.A. No. 9497 established in place of the ATO the Civil
Aviation Authority of the Philippines (CAAP), which thereby assumed all of the ATO’s powers,
duties and rights, assets, real and personal properties, funds, and revenues, viz:
CHAPTER XII
TRANSITORTY PROVISIONS
Section 85. Abolition of the Air Transportation Office. – The Air Transportation Office (ATO)
created under Republic Act No. 776, a sectoral office of the Department of Transportation and
Communications (DOTC), is hereby abolished.1avvphi1
All powers, duties and rights vested by law and exercised by the ATO is hereby transferred
to the Authority.
All assets, real and personal properties, funds and revenues owned by or vested in the
different offices of the ATO are transferred to the Authority. All contracts, records and
documents relating to the operations of the abolished agency and its offices and branches
are likewise transferred to the Authority. Any real property owned by the national
government or government-owned corporation or authority which is being used and
utilized as office or facility by the ATO shall be transferred and titled in favor of the
Authority.
Section 23 of R.A. No. 9497 enumerates the corporate powers vested in the CAAP, including
the power to sue and be sued, to enter into contracts of every class, kind and description, to
construct, acquire, own, hold, operate, maintain, administer and lease personal and real
properties, and to settle, under such terms and conditions most advantageous to it, any claim by
or against it.18
With the CAAP having legally succeeded the ATO pursuant to R.A. No. 9497, the obligations
that the ATO had incurred by virtue of the deed of sale with the Ramos spouses might now be
enforced against the CAAP.
WHEREFORE, the Court denies the petition for review on certiorari, and affirms the decision
promulgated by the Court of Appeals.
No pronouncement on costs of suit.
SO ORDERED.
EN BANC
G.R. No. L-27058 January 17, 1973
AMERICAN EXPRESS COMPANY, INC., Plaintiff-Appellee, vs. CIRIO H.
SANTIAGO, Defendant-Appellant.
William H. Quasha and Associates for plaintiff-appellee.
Ernesto T. Zschornack, Jr. for defendant-appellant.
MAKALINTAL, J.:
This case is on appeal directly to this Court by the defendant from the decision of the Court of
First Instance of Manila in its Civil Case No. 48318, sentencing him to pay the plaintiff the
amount of $15,297.53, plus interest at the legal rate from the date the complaint was filed and
25% of the amount due by way of attorneys fees.chanroblesvirtualawlibrarychanrobles virtual
law library
The essential facts were the subject of stipulation in court below after the parties had filed their
respective pleadings and the court had scheduled the case for pre-
trial.chanroblesvirtualawlibrarychanrobles virtual law library
The plaintiff is a foreign corporation with main office in New York City and a branch office in
the Philippines which is duly registered and licensed to transact business as a travel agent. As
part of such business and for convenience of its customers the plaintiff has adopted a credit
system known as the American Express Credit Card whereby upon application of a customer
the plaintiff may issue to him a credit card by means of which he may enjoy charge privileges
in establishments all over the world listed in directories issued periodically by the company for
the guidance of its card holders. On November 6, 1959 the defendant applied for one such card
to the plaintiff at the latter's office in New York City and upon such application the
corresponding American Express Credit Card was issued to him. Thereafter and before the card
expired was cancelled as of June 20, 1961 the defendant used it in making purchases and
obtaining services on credit in various foreign countries, such as Hongkong in June of 1960, and
France, Switzerland, Germany, Spain, Italy and HongKong in May and June of 1961. The credit
charges he obtained ran up to a total of $15,297.53. In September 1961 the plaintiff made
demands for payment upon the defendant, and after the latter refused to pay filed the presented
suit for collection.chanroblesvirtualawlibrarychanrobles virtual law library
The main defense raised by the defendant in his answer to the complaint and now reiterated in
his brief as appellant before this Court is that the appellee has no cause of action against him,
not being the real party in interest, the allegation that the credit card issued by the appellee was
merely to introduce the appellant to the different establishments from which he made purchases
and obtained services on credit and that it was these establishments who should properly have
brought the suit.chanroblesvirtualawlibrarychanrobles virtual law library
The court below, however, found as a fact - and this is not disputed here - that the stores or
establishments which sold goods and services to the appellant on credit "bills the American
Express Corporation which settles the accounts directly and, in turn bills the customers who
possess the credit cards." The court added: "in other words, with the possession of the credit
card, the possessor could purchase on credit from any store, and he could do that because the
purchases on credit are backed-up by the American Express Corporation thru the credit card.
This corporation pays for the purchase and the defendant has to reimburse such payment to the
owner of the credit card; in this case to the plaintiff."chanrobles virtual law library
The appellant presented no evidence in his behalf, only relying on the stipulation of facts. On
the other hand the appellee presented as evidence not only the application signed by the appellant
for the issuance of the credit card, manifesting conformity to the condition therein stated but
also the testimony, in the form of deposition upon written interrogatories, of its employee,
George R. de Salvio, who described the operation of the company's credit card system as
follows:
A.-6: We appoint service establishments who accept our credit card. They perform services or
deliver goods to our cardholders and in turn they bill American Express Company for these
goods and services. The American Express Company reimburses the establishments and in turn
bills the credit card holders for whom the goods were delivered or services performed. The credit
card holders are sent a statement once a month supported by all original charge forms.
xxx xxx xxx
A.-8 The service establishments submit charges and summaries to the American Express
Company and we pay for these summaries, less the discount, once a
week.chanroblesvirtualawlibrarychanrobles virtual law library
Question 9: After the cardholder's accounts are paid to the establishments concerned by plaintiff,
what obligation, if any, has the cardholder to plaintiff concerning the accounts thus paid by
plaintiff?chanrobles virtual law library
A.-9 He is obligated to pay the American Express Company upon receipt of this monthly billing.
On the same point the witness also stated that the charge orders of the appellant were in due
course of business submitted by the establishments concerned to the appellee for payment and
paid by the latter. There can be no doubt, therefore, that the appellee is the creditor of the
appellant and as such is the proper party to file this suit for
collection.chanroblesvirtualawlibrarychanrobles virtual law library
The other points raised by the appellant in his brief have to do with certain objections of his to
a number of questions directed by the appellee to its employee and witness, George R. de Salvio,
in the latter's deposition taken upon written interrogatories. The objections were mostly on
technical grounds, such as, for example, that the matter sought to be elicited from the witness
had already been admitted in the stipulation of facts, or that it was irrelevant and immaterial;
that the question was leading, or vague, or sought to obtain from the witness a conclusion. We
have considered the nature and the phrasing of the questions objected to and We find that the
objections are either groundless or have no material bearing on the merits of the
case.chanroblesvirtualawlibrarychanrobles virtual law library
The appellant also objected to the admission of the aforesaid deposition as a whole on the ground
that the procedure prescribed in Section 20 of Rule 24 was not followed, particularly that portion
which states that the officer who took the deposition shall "promptly file it with the court in
which the action is pending or send it by registered mail to the Clerk of Court thereof for filing."
The non-compliance with this rule, according to the appellant, consists in the fact that it was the
appellee's counsel who picked up the deposition from the Department of Foreign Affairs and
delivered it to the Clerk of Court instead of its being filed directly with the
latter.chanroblesvirtualawlibrarychanrobles virtual law library
The appellee's explanation in this regard, which stands uncontradicted and which the trial court
considered satisfactory, is as follows:
xxx xxx xxxchanrobles virtual law library
... . The Philippine Consulate in New York by letter dated October 8, 1965 notified the
undersigned of the transmission on said date of the deposition "through the Department of
Foreign Affairs to the Clerk of Court; yet, it was verified from the Clerk of Court that as of
November 19, 1965 the deposition was not yet received. Upon inquiry with the Department of
Foreign Affairs, the latter advised the undersigned that it received the sealed envelope from the
consulate on October 20, 1965 and turned it over on October 25, 1965, to its record section,
which until November 19, 1965, had done nothing towards transmitting the deposition to the
court. This prompted the Department of Foreign Affairs to request the undersigned to take care
of having the deposition filed with the court, which the undersigned consented to do, and did by
means of their letter to the Clerk of Court dated November 19, 1965 (Exh. G-1) only to expedite
filing of the deposition and "to accommodate the Department of Foreign Affairs." The
undersigned received the sealed envelope from the Department of Foreign Affairs and delivered
it in exactly the same condition to the Clerk of Court.chanroblesvirtualawlibrarychanrobles
virtual law library
xxx xxx xxx
We do not believe that the manner, in which the deposition was delivered to the Clerk of Court,
as above related, so affected its integrity as to render it inadmissible. After all there is no pretense
here that the appellant did not contract the indebtedness for the collection of which he is being
sued or that the same has been paid, the only important issue posed in this appeal being whether
or not the appellee is the real party in interest. On this score the finding of the lower court,
supported as it is by the evidence before it, is conclusive.chanroblesvirtualawlibrarychanrobles
virtual law library
WHEREFORE, the judgment appealed from is affirmed, with modification as to the principal
amount to be paid by the appellant, which is reduced to US $14,952.31 in view of the waiver by
the appellee of its claim to US $345.22, and the further modification that payment of the said
amount, together with the attorneys fees and costs, both in this instance and below, should be
made in Philippine currency according to the prevailing rate of exchange at the time of such
payment.
Rule 3, Sections 7 to 12 (Parties to a Civil Action)
SECOND DIVISION
G.R. No. 159156 January 31, 2005
RAMON P. ARON, petitioner,
vs.
FRANCISCO, DOMINGO REALON and FELIPE REALON, representing the HEIRS OF MARCIANO
REALON and ROMAN REALON, EMILIANO R. PURIFICACION, representing the HEIRS OF
ALFREDO REALON and ROMAN REALON, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals2 (CA) in
CA-G.R. CV No. 68979 which affirmed the Decision3 of the Regional Trial Court (RTC) of Bacoor,
Cavite, Branch 89, in Civil Case No. BCV 96-29.
The antecedents are as follows:
Roman Realon was the owner of two (2) parcels of land, one of which was Lot No. 1253 4 of the
Carmona Cadastre with 146,948 square meters, more or less, located in Barrio Lantik,
Carmona, Cavite, and covered by Tax Declaration No. 621. The other parcel of land, Lot No.
602,5 of the Carmona Cadastre, with an area of 3,105 square meters, is located in Barrio
Maduya, in the same town.
When he died intestate on April 4, 1946, Roman was survived by his son Alfredo and the
children of his deceased son, Buenaventura, namely, Marciano, Joaquino, Florentino, Felipe,
Marcelo, Sesinando, and Montano.6
Emiliano Realon Purificacion, Alfredo’s grandson had worked on the property as a tenant since
1970 and planted palay, pineapple, bananas and other fruit crops.7 On May 14, 1979, Alfredo,
together with his nephews Marciano, Joaquino, Florentino, Felipe, Marcelo, Sesinando, and
Montano, executed an Extrajudicial Settlement entitled "Manahan Sa Labas ng
Hukuman"8 wherein they adjudicated Lot No. 602 in its entirety to Alfredo, and that Lot No.
1253 was to be divided and adjudicated as follows: 84,632 square meters to Alfredo; and the
remaining 62,316 square meters to Marciano, Joaquino, Florentino, Felipe, Marcelo,
Sesinando, and Montano.
On the same day, May 14, 1979, Felipe, Sesinando, Montano, Marcelo, Florentino and
Joaquino, constituted their brother Marciano Realon as their attorney-in-fact in selling
their pro-indiviso shares in Lot No. 1253.9 Thus, on July 31, 1979, Marciano, in his behalf and
in behalf of his brothers, executed a Contract to Sell10 covering Lot No. 1253 in favor of the
petitioner for the price of ₱186,948.00 payable as follows: ₱44,867.52 upon the execution of
the deed; and ₱142,080.48 on or before May 23, 1980, or as soon as the vendees shall have
secured an original certificate of title (OCT) over the property under their names. The vendors
obliged themselves to execute a final deed of sale upon full payment of the purchase price of
the property11 and to pay the tenant working on the land, Emiliano, the amount of ₱47,593.48
upon receipt of ₱142,080.48 from the petitioner, to wit:
That I and the other persons and whose behalf I have executed this instrument further bind
ourselves to execute the final Deed of Sale upon receipt of the balance of ONE HUNDRED
FORTY-TWO THOUSAND [PESOS] (₱142,000.00) to complete the amount of the consideration
or selling price for the 62,316 square meters which is agreed to be ₱186,948.00;
That furthermore, we bind ourselves to pay the tenant working on the land the amount of
₱47,593.48 upon our receipt of the amount of the balance of ₱142,080.48, which payment is
to be taken from said balance;
Finally, we bind ourselves to execute the Final Deed of Sale on or before May 23, 1980, or
whenever we will be able to bring under the operations of the Torrens System of registration
the portion of land with an area of 62,316 sq. meters, subject of this contract and upon our
receipt of the said balance of ₱142,080.48.12
On July 31, 1979, Alfredo also executed a Contract to Sell13 over his undivided share in Lot No.
1253 in favor of the petitioner, for and in consideration of ₱253,196.00. The latter made a
partial payment of ₱60,935.04 upon the execution of the contract. Alfredo obliged himself to
execute a final deed of sale over the property upon the petitioner’s payment of the balance of
the purchase price on or before May 23, 1980, or as soon as the vendor shall have secured the
OCT over the property.14
However, the vendors failed to file a petition for the registration of the property under the
Torrens System. Consequently, the petitioner, as vendee, refused to pay the balance of the
purchase price.
On November 11, 1983, the petitioner himself filed an application15 for the registration of Lot
No. 1253 under his name. He alleged therein that he was the owner of the property based on
a deed of sale executed by Alfredo and his nephews; the property was unoccupied; and to the
best of his knowledge and belief, there was never a mortgage or encumbrance of any kind,
affecting the said property, or any person having an interest therein, legal or equitable or in
possession thereof. The petitioner appended to his application a copy 16 of the July 31, 1979
Contract to Sell executed in his favor by Alfredo and his nephews.
The case was docketed as LRC Case No. 83-15. Notice of initial hearing of the case was issued
to all concerned parties which included Alfredo and his nephews, who were the vendors.17
On January 8, 1985, Marciano, and in behalf of his brothers, executed a Deed of Sale with
Mortgage18 in favor of the petitioner over their undivided shares in Lot No. 1253, this time, for
the price of ₱186,948.00, payable as follows:
a. The sum of NINETY-ONE THOUSAND SEVEN HUNDRED SEVENTEEN and FORTY-FOUR
(₱91,717.44) PESOS inclusive of the earnest money and part payment which was paid before
hand and upon the signing of this documents and receipt of which is hereby acknowledged by
the VENDORS-MORTGAGEES.
b. The sum of NINETY-FIVE THOUSAND TWO HUNDRED THIRTY and FIFTY-SIX PESOS
(₱95,230.56) balance upon issuance of title to VENDEE-MORTGAGOR.
To secure the payment of the balance of the purchase price of the property, the petitioner
mortgaged the property to the vendor, thus:
5. That to secure the full and complete payment of the sum of NINETY-FIVE THOUSAND TWO
HUNDRED THIRTY and FIFTY-SIX PESOS (₱95,230.56) in manner herein mentioned, the
VENDEE-MORTGAGOR hereby CEDES, TRANSFERS and CONVEYS by way of first mortgage in
favor of the VENDORS-MORTGAGEES the pro-indivisointerests herein sold.
On even date, Alfredo executed a similar Deed of Sale with Mortgage19 in favor of the
petitioner over his undivided share of 84,632 square meters over Lot No. 1253 in consideration
of ₱253,196.00, payable as follows:
a. The sum of ONE HUNDRED TWENTY-FOUR THOUSAND FIVE HUNDRED FORTY-SIX AND
SEVENTY-SEVEN (₱124,546.77) PESOS inclusive of the earnest money and part payment which
was paid before hand and upon the signing of this document and receipt of which is hereby
acknowledged by the VENDOR-MORTGAGEE.
b. The sum of ONE HUNDRED TWENTY-NINE THOUSAND THREE HUNDRED FORTY-NINE AND
SEVENTY THREE (₱129,349.73) PESOS balance upon issuance of title of VENDEE-MORTGAGOR.
To secure the payment of the balance of the purchase price, the petitioner likewise mortgaged
the property to the vendor.
5. That to secure the full and complete payment of the sum of ONE HUNDRED TWENTY-NINE
THOUSAND THREE HUNDRED FORTY-NINE AND SEVENTY THREE (₱129,349.73) PESOS in the
manner hereinafter mentioned, the VENDEE-MORTGAGOR hereby cedes, transfers and coveys
by way of first mortgage in favor of the VENDOR-MORTGAGEE the pro-indiviso interest herein
sold.
The petitioner adduced in evidence the Contracts to Sell executed by Alfredo and his nephews
in 197920 in LRC Case No. 83-15. Alfredo and Marciano testified for the petitioner.21 On January
24, 1985, the RTC rendered judgment in favor of the applicant, with the following dispositive
portion:
WHEREFORE, finding the application to be well-taken, applicants having presented the
required quantum of evidence to prove possession; this Court confirms applicant Ramon P.
Aron’s title to the parcel of land covered by Plan Ap-04-003288 (Exhibit "F") and described in
its technical description (Exhibit "J") with his above-described personal circumstances, subject
to the remaining balance of ₱129,349.73.1awphi1.nét
Once this decision becomes final, let the corresponding decree of registration issue.
SO ORDERED.22
The decision became final and executory. On March 12, 1985, the court ordered the issuance
of a decree.23 In the meantime, Alfredo died in 1989, while Marciano died intestate on June
22, 1990.24 On September 9, 1993, the Register of Deeds issued under the petitioner’s name
OCT No. O-2348 covering Lot No.1253. Annotated therein was the following: "subject to such
encumbrances mentioned in Section 44 of said Decree as may be subsisting, and subject to the
remaining balance of ₱129,349.73."
Sometime in August 1994, the petitioner, through his attorney-in-fact25 Engr. Aldersen Ilaban,
filed an amended complaint26 for consignation against the heirs of Alfredo, namely, Ruperta
Mapanso, Florentino Purificacion, Emiliano Purificacion, Serafin Purificacion and Leonedes
Purificacion; the heirs of Marciano Realon, namely, Domingo Realon and Francisco Realon; and
the heirs of Marcelo Realon, namely, Ma. Luz R. Librado, Santiago Realon, Isidro R. Manabo,
Rufina B. Mercado and Romel Realon, with the RTC of Imus, Cavite. 27 The complaint was
docketed as Civil Case No. BCV 94-28.
The petitioner alleged, inter alia, that pursuant to the two (2) deeds of sale with mortgage, he
had already paid Alfredo the total sum of ₱217,046.77, and to Marciano and his siblings, the
sum of ₱180,948.00; having paid a total of ₱397,994.77, his total balance of the purchase price
of the property was only ₱42,849.23; he learned about the death of Alfredo and Marciano in
1993 when some persons claiming to be their heirs wanted to collect the money from him, but
none of them could present any authority to collect for and in behalf of the heirs of the
vendors. The complaint contained the following prayer:
WHEREFORE, it is prayed that upon filing of this complaint, an order be issued allowing plaintiff
to deposit the sum of ₱42,849.23 before this Court representing the balance due under both
Deeds of Sale with Mortgage, and that after notice and due consideration, judgment be
rendered, as follows:
1. Declaring plaintiff’s obligation under the Deed of Sale discharged and/or released pursuant
to the first paragraph of Article 1260 of the Civil Code;
2. Ordering defendants to pay, jointly and severally, the sum of ₱15,000.00, as attorney’s fees
and further sum of ₱1,000.00 as appearance fee per court attendance, the cost of consignation
or litigation cost pursuant to Article 1259 of the New Civil Code.
3. Other reliefs and remedies just and equitable in the premises are likewise prayed.28
The petitioner then deposited the amount of ₱42,849.23 with the Clerk of Court of the RTC.
He adduced in evidence the Deed of Sale29 with Mortgage dated January 8, 1985 executed by
Alfredo and his nephews.
In their answer30 to the complaint, the defendants therein alleged that their predecessors-in-
interest did not sell the property to the petitioner.
On November 27, 1995, the trial court rendered its decision31 in Civil Case No. BCV 94-28. It
declared the consignation to be valid and released the petitioner from his obligation under the
Deed of Sale with Mortgage.32 The said decision became final and executory.1awphi1.nét
On March 18, 1996, Francisco Realon, Domingo Realon and Felipe Realon, allegedly
representing the heirs of Marciano and Roman Realon, together with Emiliano R. Purificacion,
allegedly representing also the heirs of Alfredo and Roman Realon, filed a complaint for
reconveyance and ownership against the petitioner with the RTC of Bacoor, Cavite. The case
was docketed as Civil Case No. BCV 96-29.33
The plaintiffs alleged, inter alia, that they were representing the heirs of Marciano, Alfredo and
Roman Realon; under the contracts to sell executed by their predecessors to the petitioner
over Lot No. 1253, the latter still had a balance of ₱379,908.96; contrary to the terms of the
contracts to sell, the petitioner filed an application for the registration of the title over the land
in his name where he falsely claimed that he was the owner of the property, free of all liens
and encumbrances or claim of any person whatsoever; worse, the defendant induced Marcelo
and his uncle, Alfredo, who were illiterates, to execute separate deeds of sale with real estate
mortgage in his favor over the property on the promise that the title to the property will be
under the names of all the vendors or their heirs as enumerated in the said deeds; the said
deeds of sale with mortgage were not registered in the Office of the Register of Deeds; they
learned of the existence of OCT No. 0-2348 in the name of the petitioner, through the RTC’s
decision in the consignation case; the petitioner had never been in possession of the subject
property; realty taxes of the subject property were still being paid in the name of Roman
Realon despite the issuance of the said title in the name of the petitioner; and the plans over
the property had been approved under the name of Roman Realon.
The plaintiffs prayed that after notice and hearing, judgment be rendered in their favor:
WHEREFORE, it is most respectfully prayed that, after notice and hearing the Honorable Court
render judgment in favor of the plaintiffs and against the defendants, as follows:
1). Declaring that the ownership of the land described in OCT No. O-2348 belongs to the heirs
of the late Roman Realon represented by the plaintiffs;
2). Ordering the defendants to surrender OCT No. O-2348 to effect the cancellation and
transfer thereof to herein plaintiffs, by way of reconveyance of ownership;
3). Ordering and authorizing the Register of Deeds for the Province of Cavite to cancel said OCT
No. O-2348, and to issue a new Certificate of Title in the name of herein plaintiffs, in case of
failure of the defendants to surrender to plaintiffs OCT No. O-2348;
4). Ordering the cancellation of the annotation on OCT No. O-2348 reading and stated "and to
the remaining balance of ₱129,349.73" and that the new Certificate of Title be free and clear
from such encumbrance; and,
5). Ordering defendants to pay to plaintiffs attorneys’ fees in the amount of ₱50,000.00,
appearance and costs of suit.
Plaintiffs pray for such further reliefs just and equitable in the premises.34
In his answer to the complaint, the petitioner alleged, among others, that the contracts to sell
had been superseded and modified by the two (2) subsequent deeds of sale with mortgage
executed in his favor on January 8, 1985, in that the purchase price agreed upon had almost
been paid except for the balance of ₱42,849.23, which he consigned with the court in Civil Case
No. BCV 94-28. He also denied making false pretenses in his application for registration of title,
and interposed the following special and affirmative defenses:
14. That plaintiff has no cause of action against defendant absent any showing that plaintiffs
are authorized to sue in a representative capacity, there being no testate nor intestate
proceedings for the estate of the deceased whom they represent;
15. That the property embraced by OCT 2348 were (sic) alienated during the lifetime of Alfredo
and Marciano Realon, consequently, the rights of the plaintiffs or the heirs they represent have
been lost by such alienation;
15.1 Plaintiffs have, in fact, no right to sue under the contracts executed by the deceased
Alfredo and Marciano Realon during their lifetime. And should they have, the same has already
prescribed;
16. That the registration proceedings filed by defendant Aron being a proceeding in rem, binds
the whole world so that the decree of registration and issuance of original certificate of title
may not be invalidated or vitiated by any claim or interest of any person.1a\^/phi1.net
17. That defendant had already paid the agreed purchase price including the balance through
consignation (BCV No. 94-28); …35
Emiliano R. Purificacion testified that he was the great grandson of Roman Realon, being the
son of Beatriz Realon, a daughter of Alfredo Realon and Celestina Purificacion.36 He and the
other heirs inherited the property and had been paying the realty taxes therefore. 37 He also
testified that he had been a tenant on the property since 1970. He claimed that he had not
received any payment of the balance of the purchase price as stipulated in the contracts to
sell38 in favor of the petitioner. He claimed that the contracts to sell executed by Alfredo and
Marciano, in favor of the petitioner, had been cancelled since his cousin Francisco Realon had
written a letter to the petitioner to that effect.39
Francisco Realon testified that being the son of Marciano, he was the great grandson of Roman
Realon.40 He pointed out that all the tax declarations of the subject property were in the name
of Roman and that the corresponding taxes were duly paid.41 He, likewise, claimed to have
prepared a letter before Christmas of 1980, canceling the contracts to sell executed and duly
signed by Alfredo and Marciano. However, he could not present any copy of the letter as he
did not retain any copy thereof.42
For his part, Felipe Realon declared that he was one of the heirs of Roman Realon and that he
executed a special power of attorney in favor of his brother, Marciano, to deal with their
inheritance.43 He stressed that the special power of attorney had never been revoked during
the lifetime of Marciano.44
The petitioner no longer testified and rested his case after the admission of his documentary
evidence.
On August 13, 1999, the trial court rendered its decision45 in favor of the plaintiffs. The decretal
portion reads:
ACCORDINGLY, judgment is hereby rendered in favor of the plaintiffs and against the
defendant, to wit:
1. Declaring that the ownership of the land described in Original Certificate of Title No. 0-2348
belongs to the plaintiffs;
2. Ordering the defendant to surrender Original Certificate of Title No. 0-2348 to the plaintiffs
to effect its cancellation and transfer it in favor of the latter by way of reconveyance.
3. Ordering the Register of Deeds for the Province of Cavite to cancel Original Certificate of
Title No. 0-2348 and issue a new one in favor of the plaintiffs;
4. Ordering the plaintiffs to reimburse the defendant the sum of ₱310,794.27, plus legal
interest, to be computed from the time it was received by plaintiffs’ predecessor-in-interest;
5. Ordering the defendant to pay plaintiffs attorneys’ fees in the amount of ₱50,000.00 plus
appearance fees of ₱1,000.00 per appearance, plus costs of suit.
SO ORDERED.46
The trial court held that the petitioner falsely alleged in his application in LRC Case No. 83-15
that he was the owner of the property based on a deed of sale, when in fact under the contracts
to sell executed by Alfredo and his nephews, he would acquire title over the property only
upon payment of the full purchase price thereof and by the vendors’ execution of a final deed
of sale over the property. The trial court ruled that the petitioner had no right to file the
application in LRC Case No. 83-15. It held that the plaintiffs continued to be in the possession
of the property and paid realty taxes therein under the name of Roman Realon, the original
owner of the property.
The petitioner appealed the decision and assigned the following error, to wit:
THE TRIAL COURT ERRED IN HOLDING THAT THE ALLEGED FRAUD IN THE APPLICATION FOR
THE REGISTRATION OF THE LAND IS THE KIND OF FRAUD CONTEMPLATED BY LAW TO
WARRANT RECONVEYANCE OF THE SUBJECT PROPERTY.47
On November 26, 2002, the CA rendered judgment dismissing the appeal.48 The appellate
court agreed with the trial court that the petitioner employed fraud when he filed his
application in LRC Case No. 83-15, and falsely alleged that he was the owner of the property
subject thereof.
The petitioner, thus, filed the instant petition for review on certiorari and assigned the
following errors:
I.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AFFIRMED IN TOTO THE
DECISION OF THE COURT A QUO AND RULED THAT RESPONDENTS ARE ENTITLED TO A
RECONVEYANCE OF THE SUBJECT PROPERTY CONSIDERING THAT THE LATTER FAILED TO
PROVE THE EXISTENCE OF FRAUD UPON WHICH THE RELIEF SOUGHT WAS BASED.
II.
ASSUMING, ARGUENDO, THAT RESPONDENTS ARE ENTITLED TO THE RECONVEYANCE OF THE
SUBJECT PROPERTY, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT RULED
THAT RESPONDENTS SHOULD ONLY REIMBURSE PETITIONER THE SUM OF PHP310,794.27,
PLUS LEGAL INTEREST.
III.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT AFFIRMED IN TOTO THE
DECISION OF THE COURT A QUO AND RULED THAT RESPONDENTS ARE ENTITLED TO AN
AWARD OF ATTORNEY’S FEES.49
The petition is granted.
The settled rule is that every action must be prosecuted or defended in the name of the real
party-in-interest.50Where the action is allowed to be prosecuted or defended by a
representative acting in a fiduciary capacity, the beneficiary must be included in the title of the
case and shall be deemed to be the real party-in-interest.51 The name of such beneficiaries
shall, likewise, be included in the complaint.52
Section 4, Rule 8 of the Rules of Court further provides that facts showing the capacity of a
party to sue or be sued, or the authority of a party to sue or be sued in a representative capacity
must be averred in the complaint. In order to maintain an action in a court of justice, the
plaintiff must have an actual legal existence, that is, he or she or it must be a person in law and
possessed of a legal entity as either a natural or an artificial person, and no suit can lawfully be
prosecuted in the name of that person. The party bringing suit has the burden of proving the
sufficiency of the representative character that he claims. If a complaint is filed by one who
claims to represent a party as plaintiff but who, in fact, is not authorized to do so, such
complaint is not deemed filed and the court does not acquire jurisdiction over the complaint.
It must be stressed that an unauthorized complaint does not produce any legal
effect.53 Corollary, the defendant can assail the facts alleged therein through a motion to
dismiss on the ground that the plaintiff has no capacity to sue under Section 1(d) of Rule 16 of
the Rules of Court, that is, that he does not have the representative he claims.54
Section 7, Rule 3 of the Rules of Court reads:
SEC. 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.
Thus, the presence of all indispensable parties is a condition sine qua non for the exercise of
judicial power. It is precisely when an indispensable party is not before the court that the action
should be dismissed. The plaintiff is mandated to implead all indispensable parties, and the
absence of one renders all subsequent actions of the court null and void for want of authority
to act, not only as to the absent parties, but even as to those present. 55 One who is a party to
a case is not bound by any decision of the court; otherwise, he will be deprived of his right to
due process.
The records show that when Roman Realon died intestate on April 4, 1946, he was survived by
his son, Alfredo, and his nephews, who were the children of his deceased son, Buenaventura,
namely, Marciano, Joaquino, Florentino, Felipe, Marcelo, Sesinando and Montano, all
surnamed Realon. On the other hand, when Alfredo died intestate, he was survived by his
heirs, Ruperta Mapanso, Florentino Purificacion, Emiliano Purificacion, the son of his deceased
daughter, Beatriz Realon, Serafin Purificacion and Leonedes Purificacion. Marcelo Realon was
survived by his heirs, namely, Ma. Luz Librado, Santiago Realon, Isidro R. Manabo, Rufina B.
Mercado and Romel Realon. Only Joaquino, Florentino, Felipe, Sesinando and Montano are
still alive.
The four (4) respondents herein, who were the plaintiffs in the trial court, sought the
nullification of the Contract to Sell in favor of the petitioner executed by Marciano and his
brothers, as well as the Contract to Sell executed by Alfredo over the undivided shares in Lot
No. 1253, the deed of sale with mortgage executed by Marciano Realon and his brothers, and
the deed of sale with mortgage executed by Alfredo in favor of the petitioner. They likewise
sought to nullify OCT No. O-2348 under the name of the petitioner and the reconveyance of
the said lot to the respondents, free from all liens and encumbrances on their allegation that
the petitioner committed fraud in the execution of the said deeds and in receiving the said
title. Hence, all the surviving signatories to the said documents, namely, Joaquino, Francisco,
Felipe, Sesinando and Montano, all surnamed Realon, and the other surviving heirs of Alfredo
Realon and Marciano and Marcelo, were indispensable parties as plaintiffs. Moreover, if the
trial court rendered judgment against the petitioner, ordering him to convey the property to
the vendors, the latter, as the predecessor-in-interest of the vendors, would have to refund to
the vendee the amount they received from the latter. Hence, the respondents herein should
have impleaded them in their complaint. However, the only plaintiffs impleaded in the
complaint were the respondents herein, namely, Francisco, Domingo and Felipe, all surnamed
Realon and Emiliano Purificacion. The surviving signatories of the assailed deeds and the other
heirs of the deceased vendors were not impleaded as plaintiffs. Without the presence of all
the other heirs as plaintiffs, the trial court could not validly render judgment and grant relief
in favor of the respondents; it could, likewise, not rule in favor of the petitioner for the refund
of his payments made to the respondents as the successors-in-interest of the vendors. The
failure of the respondents to implead the said signatories and all the other heirs as parties-
plaintiffs constituted a legal obstacle to the trial court and the appellate court’s exercise of
judicial power over the said case, and thereby rendered any orders or judgments made therein
a nullity.56 To reiterate, the absence of an indispensable party renders all subsequent actions
of the court null and void for want of authority to act, not only as to the absent parties, but
even as to those present.57 Thus, the RTC should have ordered the dismissal of the complaint.58
The Court notes that the respondents even failed to include the names of all the other heirs,
including the signatories to the assailed deeds in the complaint and in the title thereof, and
appending thereto a copy of any special power of attorney authorizing the respondents to sue
in their respective capacity for said heirs. Thus, the petitioner was prevented from questioning
the capacity of the said heirs to sue in their respective capacity either in a motion to dismiss
the complaint or in his answer to the complaint.
We note that of the four (4) plaintiffs, Domingo Realon failed to sign the certification of non-
forum shopping. On the other hand, the three other plaintiffs who signed the certification
failed to append to the complaint a special power of attorney signed by all the surviving
vendors and other heirs specifically authorizing them to sign the same for and in their behalf.
This is fatal to the complaint and warrants the dismissal thereof.59
In sum then, the trial court should have rendered judgment dismissing the respondents’
complaint, and the Court of Appeals should have reversed the appealed decision of the RTC.
Indeed, even if the complaint of the respondents did not suffer from any substantial defects,
the appellate court should still have reversed the trial court’s decision on the ground that the
respondents failed to prove that the petitioner secured OCT No. O-2348 through actual or
extrinsic fraud; and that the Contracts to Sell and Deeds of Sale with Mortgage were
fraudulent.
As a ground for the nullification of the decision in LRC Case No. 83-15, and OCT No. O-2348
issued on the basis thereof, fraud must be extrinsic or actual, and not intrinsic. The Court
elaborated on the distinction of the two species of frauds, thus:
Fraud may also be either extrinsic or intrinsic. Fraud is regarded as intrinsic where the
fraudulent acts pertain to an issue involved in the original action, or where the acts constituting
the fraud were or could have been litigated therein and is regarded as extrinsic where it
prevents a party from having a trial or from presenting his entire case to the court, or where it
operates upon matters pertaining not to the judgment itself but to the manner in which it is
procured, so that there is no fair submission of the controversy. Extrinsic fraud is also actual
fraud, but collateral to the transaction sued upon.
The distinctions are significant because only actual fraud or extrinsic fraud has been accepted
as grounds for a judgment to be annulled or, as in this case, a decree of registration reopened
and reviewed. In the oft-cited Macabingkil v. People’s Homesite and Housing Corporation case,
the Court drew from American jurisprudence stating that "relief has been granted on the
ground that, by some fraud practiced directly upon the party seeking relief against the
judgment or decree, (and) that party has been prevented from presenting all of his case to the
court." The "fraud" contemplated by the law in this case (Section 32, P.D. No. 1529) is actual
and extrinsic, which includes an intentional omission of fact required by law. For fraud to justify
a review of a decree, it must be extrinsic or collateral, and the facts upon which it is based have
not been controverted or resolved in the case where the judgment sought to be annulled was
rendered. Persons who were fraudulently deprived of their opportunity to be heard in the
original registration case are entitled to a review of a decree or registration. 60
In contrast to actual fraud, constructive fraud is construed as such because of its detrimental
effect upon public interests, as well as public or private confidence in the Torrens System, even
though the act is not done or committed with an actual design to commit positive fraud or
injury upon other persons.
The records show that in his application in LRC Case No. 83-15, the petitioner, who was the
applicant, alleged that he was the owner of the property, having acquired the same based on
the Contract to Sell dated July 31, 1979, executed in his favor by Alfredo and Marciano Realon.
He also alleged that the property was unoccupied and that there was no lien or encumbrance
of any kind whatsoever affecting the said land, and that he had no knowledge of any person
having any interest therein, legal or equitable.
The allegation that the petitioner was the owner of the property is admittedly incorrect
because the deeds executed by Marciano and Alfredo Realon on July 31, 1979 were
the contracts to sell, under which the petitioner, as buyer, would acquire title over the
property only upon his payment of the balance of the purchase price thereof on or before May
23, 1980; or the issuance of a torrens title in the names of the vendees and the execution by
the seller of a final deed of sale. Also, the property was tenanted by respondent Emiliano
Purificacion.
When he filed his application on November 11, 1983, the petitioner had not yet paid the
balance of the purchase price of the property. The vendors themselves failed to file an
application for the issuance of a torrens title over the property in their names. Hence, the
petitioner had not yet acquired ownership over the property when he filed his application.
However, the Court believes that there was no intention on the part of the petitioner to
deceive Alfredo and Marciano Realon, and deprive them of their right to be heard on the said
application because (a) the petitioner appended to his application and adduced in evidence
copies of the contracts to sell in favor of the petitioner executed by Alfredo and Marciano
Realon, the latter for and in his behalf, and those of this brothers; and (b) Alfredo and Marciano
Realon were served with copies of the notice of hearing of the said application, even testified
for the petitioner and affirmed the validity of the said deeds. The respondents, as successors-
in-interest of the vendees, can no longer assail the admissions of Alfredo and Marciano when
they testified for the petitioner in LRC Case No. 83-15.61
As gleaned from the decision of the trial court, the petitioner still had a balance on the
purchase price of the property due to the vendees amounting to ₱129,349.73.
We agree with the appellate court that the RTC erred in its decision in LRC Case No. 83-15
declaring the petitioner, who was the applicant in the RTC, to be the legal owner of the
property based on the contracts to sell executed in his favor by Alfredo and his nephews.
However, there is no showing in the records that the decision was appealed to the Court of
Appeals. Indeed, the decision had become final and executory, and the court had issued a
decree based on its decision. In due course, the Register of Deeds issued OCT No. 1248 in favor
of the petitioner. Hence, even if erroneous, the decision can no longer be altered.
Consequently, the respondents were barred by the decision of the RTC in Civil Case No. BCV
94-28 from impugning the deed of sale with mortgage executed in favor of the petitioner by
Alfredo and his nephews on January 8, 1985. In its decision in the said case, the RTC declared:
At the trial, Engr. Aldersen Ilaban was called to the stand who testified that he is the authorized
representative of the plaintiff, having been designated as administrator of his properties (Exh.
"E"). He averred that his principal bought the parcel of land in question located at Carmona,
Cavite, from its former owners, Alfredo Realon, Marciano Realon, in two (2) separate deeds of
sale with mortgage (Exh. "A" & "B"). He further declared that the sellers undertook to deliver
to the plaintiff the title covering the subject property upon payment of the balance of the
purchase price. However, despite plaintiff’s offer to pay the entire consideration of the sale
after plaintiff exerted effort to secure the torrens title over the subject lot, defendants refused
to accept the same in view of their demand for a higher consideration. This prompted plaintiff
to write a letter to defendants on October 15, 1993 whereby he tendered payment of the
remaining balance (Exh. "C"). Four months thereafter, he again wrote defendants advising
them that if they would still refuse to accept the payment, he would deposit the amount of
₱42,849.23 directly in open court (Exh. "D").62
Considering that the respondents, as defendants therein, failed to appeal the decision, it
became final and executory and can no longer be assailed.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed decision of the Court
of Appeals in CA-G.R. CV No. 68979, and that of the Regional Trial Court, are SET ASIDE. No
costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 166302. July 28, 2005
LOTTE PHIL. CO., INC., Petitioners,
vs.
ERLINDA DELA CRUZ, LEONOR MAMAUAG, LOURDES CAUBA, JOSEPHINE DOMANAIS,
ARLENE CAGAYAT, AMELITA YAM, VIVIAN DOMARAIS, MARILYN ANTALAN, CHRISTOPHER
RAMIREZ, ARNOLD SAN PEDRO, MARISSA SAN PEDRO, LORELI JIMENEZ, JEFFREY BUENO,
CHRISTOPHER CAGAYAT, GERARD CABILES, JOAN ENRIQUEZ, JOSEPH DE LA CRUZ, NELLY
CLERIGO, DULCE NAVARETTE, ROWENA BELLO, DANIEL RAMIREZ, AILEEN BAUTISTA and
BALTAZAR FERRERA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review on certiorari1
assails the July 9, 2004 decision2
of the Court of Appeals
in CA-G.R. SP No. 72732 and its November 26, 2004 resolution3 denying reconsideration
thereof.
The established facts of this case are as follows:
Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation.
Petitioners (respondents herein) are among those who were hired and assigned to the
confectionery facility operated by private respondent.
On December 14, 1995 – and yearly thereafter until the year 2000 – 7J Maintenance and
Janitorial Services ("7J") entered into a contract with private respondent to provide manpower
for needed maintenance, utility, janitorial and other services to the latter. In compliance with
the terms and conditions of the service contract, and to accommodate the needs of private
respondent for personnel/workers to do and perform "piece works," petitioners, among
others, were hired and assigned to private respondent as repackers or sealers.
However, either in October, 1999 or on February 9, 2000, private respondent dispensed with
their services allegedly due to the expiration/termination of the service contract by respondent
with 7J. They were either told "hwag muna kayong pumasok at tatawagan na lang kung may
gawa"; or were asked to wait "pag magrereport sila sa trabaho." Unfortunately, petitioners
were never called back to work again.
Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J,
for illegal dismissal, regularization, payment of corresponding backwages and related
employment benefits, 13th month pay, service incentive leave, moral and exemplary damages
and attorney’s fees based on total judgment award.4
On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment5 declaring 7J
as employer of respondents.6 The arbiter also found 7J guilty of illegal dismissal7 and ordered
to reinstate respondents,8 pay P2,374,710.00 as backwages, P713,648.00 as 13th month pay
and P117,000.00 as service incentive leave pay.9
Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte
be declared as their direct employer because 7J is merely a labor-only contractor. In its
decision10 dated April 24, 2002, the NLRC found no cogent reason to disturb the findings of the
labor arbiter and affirmed its ruling that 7J is the employer of respondents and solely liable for
their claims.
Respondents’ motion for reconsideration was denied by the NLRC in a resolution dated June
18, 2002.
Undaunted, they filed a petition for certiorari in the Court of Appeals11 against the NLRC and
Lotte, insisting that their employer is Lotte and not 7J.
Lotte, however, denied that respondents were its employees. It prayed that the petition be
dismissed for failure to implead 7J who is a party interested in sustaining the proceedings in
court, pursuant to Section 3, Rule 46 of the Revised Rules of Civil Procedure.
On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter
and the NLRC. In its decision, the Court of Appeals declared Lotte as the real employer of
respondents and that 7J who engaged in labor-only contracting was merely the agent of Lotte.
Respondents who performed activities directly related to Lotte’s business were its regular
employees under Art. 280 of the Labor Code. As such, they must be accorded security of tenure
and their services terminated only on "just" and "authorized" causes.
Lotte’s motion for reconsideration was denied, hence this petition, on the following issues:
8. Whether or not petitioner herein had the burden of proof to establish before the
proceedings in the Court of Appeals that 7J Maintenance and Janitorial Service was not a labor-
only contractor.
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply
with Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure.12
We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an
indispensable party and should have been impleaded in respondents’ petition in the Court of
Appeals. It claims that the petition before the Court of Appeals was dismissible for failure to
comply with Section 3,13 Rule 46 in relation to Section 514 of Rule 65 of the Revised Rules of
Civil Procedure.
Petitioner’s contention is tenable.
An indispensable party is a party in interest without whom no final determination can be had
of an action,15 and who shall be joined either as plaintiffs or defendants.16 The joinder of
indispensable parties is mandatory.17 The presence of indispensable parties is necessary to
vest the court with jurisdiction, which is "the authority to hear and determine a cause, the right
to act in a case".18 Thus, without the presence of indispensable parties to a suit or proceeding,
judgment of a court cannot attain real finality.19 The absence of an indispensable party renders
all subsequent actions of the court null and void for want of authority to act, not only as to the
absent parties but even as to those present.20
In the case at bar, 7J is an indispensable party. It is a party in interest because it will be affected
by the outcome of the case. The Labor Arbiter and the NLRC found 7J to be solely liable as the
employer of respondents. The Court of Appeals however rendered Lotte jointly and severally
liable with 7J who was not impleaded by holding that the former is the real employer of
respondents. Plainly, its decision directly affected 7J.
In Domingo v. Scheer,21 we held that the non-joinder of indispensable parties is not a ground
for the dismissal of an action22 and the remedy is to implead the non-party claimed to be
indispensable.23 Parties may be added by order of the court on motion of the party or on its
own initiative at any stage of the action and/or such times as are just. If the petitioner refuses
to implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiff’s failure to comply therefor.24
Although 7J was a co-party in the case before the Labor Arbiter and the NLRC, respondents
failed to include it in their petition for certiorari in the Court of Appeals. Hence, the Court of
Appeals did not acquire jurisdiction over 7J. No final ruling on this matter can be had without
impleading 7J, whose inclusion is necessary for the effective and complete resolution of the
case and in order to accord all parties with due process and fair play.
In light of the foregoing, the Court sees no need to discuss the second issue raised by
petitioner.
WHEREFORE, the July 9, 2004 decision of the Court of Appeals in CA-G.R. SP No. 72732 and the
November 26, 2004 resolution, are SET ASIDE. Let the case be REMANDED to the Court of
Appeals to include 7J Maintenance and Janitorial Services as an indispensable party to the case
for further proceedings.
SO ORDERED.
Republic of the Philippines
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.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-44339 December 2, 1987
CRISANTA F. SENO, CAROLA SENO SANTOS, MANUEL SENO, JR., DIANA SENO CONDER,
EMILY SENO and WALTER SENO, plaintiffs,
vs.
MARCOS MANGUBAT and Spouses FRANCISCO LUZAME and VERGITA PENAFLOR, ANDRES
EVANGELISTA and BIENVENIDO MANGUBAT, defendants.
GANCAYCO, J.:
This is an appeal that was certified to this Court by the Court of Appeals 1 from the order of
the Court of First Instance of Rizal, Branch 1, dated September 29,1972 in Civil Case No. 12205
dismissing the action for reformation of instrument and annulment of subsequent sale. 2
This case stemmed from a complaint filed by plaintiffs on August 29, 1969 seeking 1) the
reformation of a Deed of Sale executed in favor of defendant Marcos Mangubat and, 2) the
annulment of a subsequent sale to defendant spouses Francisco Luzame and Vergita Penaflor
of a parcel of land in Barrio Dongalo, Paranaque, Rizal covered by OCT No. 1197 of the Land
Registry of Rizal.
The material allegations of the complaint so far as they affect the present appeal are to the
following effect: that plaintiff Crisanta Seno, a widow, approached defendant Marcos
Mangubat sometime in 1961 to negotiate with him a mortgage over the subject parcel of land
so she can pay off a previous indebtedness; that she had herein defendant agreed on a
mortgage for the sum of P15,000.00 with interest of 2% a month payable every month and
that as long as the interest is being paid, the mortgage over the property will not be foreclosed;
that on the assurance of defendant Marcos Mangubat, a practicing lawyer, that he win respect
their true agreement on the mortgage, plaintiff Crisanta F. Seno agreed to the execution of a
Deed of Absolute Sale over the subject property for a consideration of P5,000.00 in favor of
defendant Marcos Mangubat and certain Andres Evangelista and Bienvenido Mangubat on July
17, 1961; 3 that defendant Marcos Mangubat was able to obtain a title in his name and the
other alleged vendees Andres Evangelista and Bienvenido Mangubat; that on January 8, 1962
Andres Evangelista and Bienvenido Mangubat executed a Deed of Absolute Sale transferring
their share in the subject property to defendant Marcos Mangubat; that defendant Marcos
Mangubat was able to obtain a title over the subject property in his name by virtue of this
latter sale; that plaintiff Crisanta F. Seno continued paying defendant Marcos Mangubat the
usurious 2% interest per month; that sometime in 1963, when plaintiff Crisanta F. Seno failed
to pay the monthly interest of 2%, she was sued for ejectment by defendant Marcos Mangubat
alleging non-payment of rentals; that sometime in the later week of January 1969, plaintiff
Crisanta F. Seno learned that defendant Marcos Mangubat sold the subject property in favor
of spouses Francisco Luzame and Vergita Penaflor for the sum of P10,000.00 on January 14,
1969;4 that defendant spouses Francisco Luzame and Vergita Penaflor bought the property in
bad faith since they had knowledge of the circumstances surrounding the transaction between
plaintiff and defendant Marcos Mangubat; that defendant spouses Luzame filed an ejectment
case against plaintiff Crisanta Seno for alleged non-payment of rentals.
On motion of defendant spouses Luzame and Penaflor, the trial court ordered on October 20,
1975 the inclusion as defendants of Andres Evangelista and Bienvenido Mangubat on the
ground that they are indispensable parties, on December 29, 1971, plaintiffs filed their
amended complaint in compliance with the court's order of October 20, impleading Andres
Evangelista and Bienvenido Mangubat as defendants.
The newly impleaded defendants moved for the dismissal of the case against them on the
ground of prescription which motion was granted by the court in its order of July 3, 1972, the
dispositive portion of which reads —
xxx xxx xxx
Considering that under Art. 1144 of the Civil Code of the Philippines, an action upon a written
contract must be brought within 10 years from the time the right of action accrued, and
considering further the opposition of plaintiffs which we find to be justified and meritorious,
this Court resolves to dismiss as it hereby dismisses the case only as against defendants Andres
Evangelista and Bienvenido Mangubat.
xxx xxx xxx 5
Defendants Luzame and Penaflor in their motion for reconsideration represented by Atty. Jose
Manacop and defendant Marcos Mangubat in his Supplement to motion for reconsideration
or in support of Atty. Manacop's motion for reconsideration asked the court a quo to dismiss
the case against all the defendants. The court a quo in its order of September 27, 1972
reconsidered its order of July 3rd and dismissed the case against all the defendants holding
that the court is no longer in a position to grant plaintiffs' demands, principally the reformation
of subject Deed of Absolute Sale.
The motion for reconsideration filed by the plaintiffs of the foregoing order was denied by the
trial court in its order of January 17, 1973; 6 hence, an appeal was brought before the Court of
Appeals praying for the reversal of the orders of the court a quo dated September 27, 1972
and January 17, 1973 and for the remand of the case to the court a quo for further
proceedings.
The Court of Appeals certified the instant case to this Court holding that the assignment of
errors made by plaintiffs in their appeal raised purely legal questions, to wit —
1) Are defendants Andres Evangelista and Bienvenido Mangubat indispensable parties in the
case without whom no action can be properly taken thereon?
2) If they are such, has the action prescribed against them in view of Art. I 1 44, Civil Code?
3) If they are not, was the dismissal of said defendants a legal grounds for dismissal of the
complaint as against the other defendants? and
4) Was the dismissal of the case without a hearing on the merits in accordance with law? 7
The first issue We need to resolve is whether or not defendants Andres Evangelista and
Bienvenido Mangubat are indispensable parties. Plaintiffs contend that said defendants being
more dummies of defendant Marcos Mangubat and therefore not real parties in interest, there
is no room for the application of Sec. 7, Rule 3 of the Revised Rules of Court.
For the determination of this issue, We find it necessary to consider the distinction between
indispensable and proper parties as clearly stated in Sections 7 and 8, Rule 3 of the Revised
Rules of Court which provide:
Sec. 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.
Sec. 8. Joinder of proper parties. — When persons who are not indispensable but who ought
to be parties if complete relief is to be accorded as between those already parties, have not
been made parties and are subject to the jurisdiction of the court as to both service of process
and venue, the court shall order them summoned to appear in the action. But the court may,
in its discretion, proceed in the action without making such persons parties, and the judgment
rendered therein shall be without prejudice to the rights of such persons.
Under Section 7, indispensable parties must always be joined either as plaintiffs or defendants,
for the court cannot proceed without them. Necessary parties 8 must be joined, under Section
8, in order to adjudicate the whole controversy and avoid multiplicity of suits. 9
Indispensable parties are those with such an interest in the controversy that a final decree
would necessarily affect their rights, so that the courts cannot proceed without their presence.
Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
but whose interests are so far separable that a final decree can be made in their absence
without affecting them. 10
Defendants cite Alberto vs. Mananghala 11 to support their theory that defendants Andres
Evangelista and Bienvenido Mangubat are indispensable parties. Thus —
xxx xxx xxx
One of the issues raised by the parties is whether the transactions carried out by and between
Arcadio Ramos and the deceased Vicente Feliciano is a sale with pacto de retro or simply an
equitable mortgage. If it be held that it is an equitable mortgage, then their right would be
defeated and they would be held liable for warranty and eviction under the law to Casimiro
Mananghala This being so, it would seem clear that the presence of all the heirs of Vicente
Feliciano in this case is indispensable in order that they may protect their interests. They are
entitled to be heard. They may have a valid defense which may have the effect of defeating
the claim of the plaintiffs. This however, was not done, for some of the heirs of Vicente
Feliciano were not served with summons and consequently have not entered their
appearance. This is in violation of Section 7, Rule 3 of the Rules of Court.
xxx xxx xxx
We, however, find this case inapplicable to the case at bar.
In the present case, there are no rights of defendants Andres Evangelista and Bienvenido
Mangubat to be safeguarded if the sale should be held to be in fact an absolute sale nor if the
sale is held to be an equitable mortgage. Defendant Marcos Mangubat became the absolute
owner of the subject property by virtue of the sale to him of the shares of the aforementioned
defendants in the property. Said defendants no longer have any interest in the subject
property. However, being parties to the instrument sought to be reformed, their presence is
necessary in order to settle all the possible issues of tile controversy. Whether the disputed
sale be declared an absolute sale or an equitable mortgage, the rights of all the defendants will
have been amply protected. Defendants-spouses Luzame in any event may enforce their rights
against defendant Marcos Mangubat.
In fact the plaintiffs were not after defendants Andres Evangelista and Bienvenido Mangubat
as shown by their non-inclusion in the complaint and their opposition to the motion to include
said defendants in the complaint as indispensable parties. It was only because they were
ordered by the court a quo that they included the said defendants in the complaint. The lower
court erroneously held that the said defendants are indispensable parties.
Notwithstanding, defendants Andres Evangelista and Bienvenido Mangubat not being
indispensable parties but only proper parties, their joinder as parties defendants was correctly
ordered being in accordance with Sec. 8 of Rule 3.
We, therefore, need to settle the next issue of whether the action against them has prescribed
in view of Art. 1144, Civil Code, which provides:
The following actions must be brought ten years from the time the right of action accrues:
1) Upon a written contract;
xxx xxx xxx
The complaint clearly alleged that the deed of sale executed on July 17, 1961 did not express
the true intention of the parties and should be reformed into the mortgage it actually was.
Such allegations are binding for purposes of determining the motion to dismiss (which
hypothetically admits the allegations in the complaint). The prescriptive period for such actions
based upon a written contract and for reformation thereof is ten years as provided in Article
1144 of the Civil Code. Such right to reformation is expressly recognized in Article 1365 of the
same Code which provides:
If two parties agree upon the mortgage or pledge of real or personal property, but the
instrument states that the property is sold absolutely or with a right of repurchase, reformation
of the instrument is proper. 12
Article 1605 of the Civil Code 13 in conjunction with Article 1604 14 likewise allows the
apparent vendor to ask for the reformation of the instrument.
Plaintiffs argue that:
A grave and palpable error was committed by the court a quo in holding that the prescriptive
period must be counted from the date of execution of the deed of sale on July 17, 1961 up to
the date of filing of the Amended Complaint on December 29, 1971.
The important reckoning point is the date of filing of the original complaint on August 29, 1969.
It has been held that amendments in pleadings do not necessarily expunge those previously
filed; That amendments made, more so when ordered by the court, relate back to the date of
the original complaint, as in the case at bar, the claim asserted in the amended pleading arose
out of the same conduct, transaction or occurrence, and that amendment presupposes the
existence of something to be amended, and, therefore, the tolling of the period should relate
back to the filing of the pleading sought to be amended (Philippine Independent Church v.
Mateo, et al., L-14793, April 28, 1961). 15
In the case of Pangasinan Transportation Co. vs. Philippine Farming Co., Ltd., 16 this Court held
that where the original complaint states a cause of action but does it imperfectly and
afterwards an amended complaint is filed correcting the defect, the plea of prescription will
relate to the time of the filing of the original complaint. However, in the case of Aetna
Insurance Co. vs. Luzon Stevedoring Corporation, 17 We held that this rule would not apply to
the party impleaded for the first time in the amended complaint.
In Aetna, the defendant Barber Lines Far East Service was impleaded for the first time in the
amended complaint which was filed after the one-year period for prescription. The order of
the lower court dismissing the amended complaint against the said defendant was affirmed by
this Court.
In the instant case, defendants Andres Evangelista and Bienvenido Mangubat were only
impleaded in the amended complaint of December 29, 1971 or ten (10) years, five (5) months
and twelve (12) days from July 17, 1961 the date of execution of the subject Deed of Absolute
Sale, clearly more than the ten (10) year prescriptive period.
Anent the third and fourth issues, the theory of the plaintiffs is that the complaint should not
have been dismiss as against said defendants but instead the court a quo should have
proceeded with a trial on the merits because there is an issue of fact appearing on the
pleadings, that is, that defendants Andres Evangelista and Bienvenido Mangubat were mere
dummies of defendant Marcos Mangubat.
It should be remembereenvenidd that the court a quo dismissed the complaint against
defendants Andres Evangelista and Bio Mangubat upon their motion to dismiss on the ground
of prescription.
Section 3, Rule 16 relating to motion to dismiss , provides that "after hearing, the court may
deny or grant the motion or allow amendment, or may defer the hearing and determination
of the motion until the trial if the ground alleged therein does not appear to be indubitable."
A motion to dismiss on the ground of prescription will be given due course only if the complaint
shows upon its face that the action has already prescribed. 18 If it does not so appear, the
determination of the motion to dismiss must be deferred until trial. 19
Under the circumstances of this case, the ground of prescription alleged by aforementioned
defendants was apparent on the face of the complaint. As earlier pointed out in this decision,
the action against said defendants has prescribed. The court a quo properly ordered its
dismissal as what it originally did in its order of July 3, 1972.
The plaintiffs now maintain that assuming the action against defendants Andres Evangelista
and Bienvenido Mangubat had already prescribed, this defense was personal to them and
could not legally encompass the position of defendant Marcos Mangubat; that the latter
defendant, could be held solely responsible to plaintiffs, having become absolute owner of the
property subject matter of the July 17, 1961 instrument, or in the least he could be held
accountable for his 1/3 share of the property.20
One case which the lower court particularly applied to justify dismissal of the case against the
other defendants was Pillado vs. Francisco. 21 In said case, plaintiffs filed an action for the
annulment of the contract of sale of a certain real estate executed by the Philippine National
Bank (PNB) in favor of the spouses Estela Francisco and Vivencio Lasala Defendant PNB
submitted an answer while defendant spouses filed a motion to dismiss on the ground that the
complaint stated no cause of action and that plaintiffs have no legal capacity to sue. Said
defendant spouses subsequently filed an additional motion to dismiss on the ground that the
cause of action of plaintiff, if any, had prescribed. The court ordered the dismissal of the
complaint which dismissal became final. Plaintiffs then asked the court to continue the case
against PNB but the latter moved for the dismissal on the ground that the court had lost, or
had been divested of its jurisdiction over the case through the release of the defendant
spouses, who were indispensable parties. The court granted the motion to dismiss holding that
defendant spouses who were the vendees were indispensable parties in an action for the
rescission of the sale. From this order, the plaintiff appealed to this Court. This Court affirmed
the order holding that the indispensable parties having been discharged by the trial court, the
Court is no longer in a position to grant the plaintiff's demands, principally the revocation of
the Deed of Sale in their favor.
As We have already held that defendants Andres Evangelista and Bienvenido Mangubat are
not indispensable but proper parties, Pillado cannot therefore, be applied to the case at bar.
In that case, the parties discharged were indispensable being the purchasers and the present
holders of the subject property. In the instant case, the parties discharged were the original
vendees who have since transferred their interest in the subject property to one of the original
co-vendees, and the latter after having been vested with absolute title over the subject
property sold the same to defendants spouses Luzame. Whereas in the former case, the court
was no longer in a position to grant the relief sought by the plaintiffs, in the latter, the trial
court may still be able to grant plaintiffs' demands for reformation of the instrument and
annulment of subsequent sale if after trial on the merits, plaintiffs prove their allegations that
defendants Andres Evangelista and Bienvenido Mangubat were in fact were dummies of
Marcos Mangubat and that the sale executed on July 17, 1961 was in reality an equitable
mortgage.
By the dismissal of the case against defendants Andres Evangelista and Bienvenido Mangubat,
the court a quo had lost jurisdiction over them. We have already pointed out that the joinder
of proper parties is necessary in order to determine all the possible issues of the controversy;
but if for some reason or another it is not possible to join them, as when they are out of the
jurisdiction of the Court, the court may proceed without them, and the judgment that may be
rendered shall be without prejudice to their rights. 22 Hence, notwithstanding the absence of
said defendants, the court could still proceed with the trial of the case as against the remaining
defendants in accordance with Sec. 8 of Rule 3.
Nevertheless, the court is constrained to affirm the dismissal of the complaint against all the
defendants as there is merit in the argument raised by defendants-appellees that plaintiffs are
barred by laches to bring suit against them.
Laches (or estoppel by laches) is unreasonable delay in the bringing of a cause of action before
the courts of justice. 23 As defined by this Court, "laches is failure or neglect for an
unreasonable and unexplained length of time, to do that which by exercising due diligence,
could or should have been done earlier, it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled thereto either has
abandoned it or declined to assert it.24
A perusal of the records shows that from t he time of the execution of the deed of sale on July
17, 1961 to the time of the filing of the present complaint on August 29, 1969 or a period of 8
years, I month and 12 days, plaintiffs never took any step to enforce their rights which they
claim to have despite the several opportunities available to them.
Defendant Marcos Mangubat filed an ejectment suit against plaintiff Crisanta Seno in 1963 and
this fact was admitted by the plaintiffs in their complaint. For failure of plaintiff to appear in
the case, a decision was rendered by the trial court ordering plaintiffs to vacate the subject
property 25 which decision was duly executed. 26
It further appears from the complaint that plaintiffs were well aware of the transfer of the title
from the name of plaintiff Crisanta Seno to the names of defendants Marcos Mangubat, Andres
Evangelista and Bienvenido Mangubat and subsequently to the name of defendant Marcos
Mangubat alone as early as 1963 when the ejectment case was filed against plaintiffs, and also
they did not do anything about it.
In January 1969, plaintiffs learned of the sale of the subject property to defendants-spouses
Luzame. but it was only on August 29, 1969 when plaintiffs brought this action and only after
an ejectment case was filed by said defendant spouses against plaintiff Crisanta Seno before
the Municipal Court of Paranaque, Rizal on August 4, 1969.
As defendants-appellees contend, before the nine-year period lapsed, plaintiffs never raised a
voice to protest against all these proceedings. They chose to sleep on their rights and to rely
on defendants' alleged word that their true agreement would be respected rather than bring
their grievances to a court of law. However, when an ejectment case was filed against them
just when the 10-year prescriptive period for bringing of their suit was nearly over, they finally
decided to stake their claim against the defendants.
The essence of laches is not merely lapse of time. It is essential that there be also acquiescence
in the alleged wrong or lack of diligence in seeking a remedy. 27 The doctrine of laches or of
"stale demands" is based on public policy which requires, for the peace of society, the
discouragement of stale claims and, unlike the statute of limitations not a mere question of
time but is principally a question of the inequity or unfairness of permitting a right or claim to
be enforced or asserted. 28
By the negligence of plaintiffs in asserting their rights for an unreasonable length of time, they
are now forever precluded from enforcing whatever right they may have against defendants.
Indeed, it is an indicia of the infirmity of their claim.
Moreover, as against plaintiff's allegation that the defendant spouses Luzame are purchasers
in bad faith. We hold that the legal presumption of good faith on the part of said defendant
spouses must prevail.
Plaintiffs would have Us believe that defendant spouses being their erstwhile neighbors and
friends had knowledge of the circumstances surrounding the transaction between plaintiff
Crisanta Seno and Defendant Marcos Mangubat which therefore makes them purchasers in
bad faith.
Defendant spouses, however, claim that they came to know of the existence of the original
title of plaintiff Crisanta Seno only when they verified the title to the land in 1969 when it was
being offered to them by co-defendant Marcos Mangubat. They deny that they are neighbors
much less friends of plaintiffs,
In order that a purchaser of land with a Torrens title may be considered as a purchaser in good
faith, it is enough that he examines the latest certificate of title which in this case is that issued
in the name of the immediate transferor. 29 The purchaser is not bound by the original
certificate of title but only by the certificate of title of the person from whom he has purchased
the property. 30
Good faith, while it is always to be presumed in the absence of proof to the contrary, requires
a well-founded belief that the person from whom title was received was himself the owner of
the land, with the right to convey it. 31 In this regard, a buyer of real estate should exercise
ordinary care in purchasing land, 32 so that one who purchases real property should make
inquiries about the right of those in possession thereof. 33
The well-known rule in this jurisdiction is that a person dealing with a registered land has a
right to rely upon the face of the Torrens Certificate of Title and to dispense with the need of
inquiring further, except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry. 34
It is true that by the possession of plaintiffs of the subject property, defendant spouses Luzame
should have been put on their guard and should have taken precautionary steps in ascertaining
the interest of the possessors of the land. The defendant spouses did verify the title to the
property with the Register of Deeds and finding that the latest title was in the name of
defendant Marcos Mangubat, they, had every reason to rely on such title. Besides, there was
the ejectment suit filed by defendant Marcos Mangubat against plaintiff Crisanta Seno which
was decided in favor of the former. The defendant spouses could not be faulted for believing
that the possession of the plaintiffs was in the concept of lessee; in fact said defendant spouses
also filed an ejectment suit against plaintiffs.
This Court had occasion to rule that possession by the appellees, either by themselves or 1983, whereby Nicencio Tan Quiombing and Dante Biscocho, as the First Party, jointly and
through their predecessors in interest, if there was such possession at all, would be unavailing severally bound themselves to construct a house for private respondents Francisco and
against the holder of a Torrens Certificate of Title covering the parcels of land now in Manuelita Saligo, as the Second Party, for the contract price of P137,940.00, which the latter
question. 35 agreed to pay.

Thus, where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the torrens system would have to
inquire in every instance as to whether the title had been regularly or irregularly issued by the
court. Indeed, this is contrary to the evident purpose of the law. Every person dealing with
registered land may safely rely on the correctness of the certificate of title issued therefore
and the law will in no way oblige him to go behind the certificate to determine the condition
of the property. Stated differently, an innocent purchaser for value relying on a torrens title
issued is protected . 36
We therefore hold and find that defendants spouses Luzame are purchasers in good faith and
for value of the questioned property.
IN VIEW OF THE FOREGOING CONSIDERATIONS, the order of dismissal dated September 29,
1972 and the order denying the motion for reconsideration dated January 13, 1973 of the
Court of First Instance of Rizal, Branch I, are hereby AFFIRMED. No costs.
SO ORDERED.
FIRST DIVISION
[G.R. No. 93010. August 30, 1990.]
NICENCIO TAN QUIOMBING, Petitioner, v. COURT OF APPEALS, and Sps. FRANCISCO and
MANUELITA A. SALIGO, Respondents.
On October 10, 1984, Quiombing and Manuelita Saligo entered into a second written
agreement 2 under which the latter acknowledged the completion of the house and undertook
to pay the balance of the contract price in the manner prescribed in the said second
agreement.
On November 19, 1984, Manuelita Saligo signed a promissory note for P125,363.50
representing the amount still due from her and her husband, payable on or before December
31, 1984, to Nicencio Tan Quiombing. 3
On October 9, 1986, Quiombing filed a complaint for recovery of the said amount, plus charges
and interests, which the private respondents had acknowledged and promised to pay — but
had not, despite repeated demands — as the balance of the contract price for the construction
of their house. 4
Instead of filing an answer, the defendants moved to dismiss the complaint on February 4,
1987, contending that Biscocho was an indispensable party and therefore should have been
included as a co-plaintiff. The motion was initially denied but was subsequently reconsidered
and granted by the trial court. The complaint was dismissed, but without prejudice to the filing
of an amended complaint to include the other solidary creditor as a co-plaintiff. 5
Rather than file the amended complaint, Quiombing chose to appeal the order of dismissal to
the respondent court, where he argued that as a solidary creditor he could act by himself alone
in the enforcement of his claim against the private respondents. Moreover, the amounts due
were payable only to him under the second agreement, where Biscocho was not mentioned at
all.cralawnad

M.B. Tomacruz Law Office for Petitioner. The respondent court sustained the trial court and held that it was not correct at that point to
assume that Quiombing and Biscocho were solidary obligees only. It noted that as they had
Jose J. Francisco for Private Respondents. also assumed the reciprocal obligation of constructing the house, they should also be
DECISION considered obligors of the private respondents under the contract. If, as was possible, the
answer should allege a breach of the agreement, "the trial court cannot decide the dispute
CRUZ, J.: without the involvement of Biscocho whose rights will necessarily be affected since he is a part
of the First Party.
May one of the two solidary creditors sue by himself alone for the recovery of amounts due to
both of them without joining the other creditor as a co-plaintiff? In such a case, is the Refuting the petitioner’s second contention, the respondent court declared that the "second
defendant entitled to the dismissal of the complaint on the ground of non-joinder of the agreement referred to the Construction and Service Agreement as its basis and specifically
second creditor as an indispensable party? More to the point, is the second solidary creditor stated that it (was) merely a `part of the original agreement.’" 6
an indispensable party?
The concept of the solidary obligation requires a brief restatement.
These questions were raised in the case at bar, with both the trial and respondent courts ruling
in favor of the defendants. The petitioner is now before us, claiming that the said courts Distinguishing it from the joint obligation, Tolentino makes the following observations in his
committed reversible error and misread the applicable laws in dismissing his complaint. distinguished work on the Civil Code:

This case stemmed from a "Construction and Service Agreement" 1 concluded on August 30, A joint obligation is one in which each of the debtors is liable only for a proportionate part of
the debt, and each creditor is entitled only to a proportionate part of the credit. A solidary right of recourse against Biscocho.
obligation is one in which each debtor is liable for the entire obligation, and each creditor is
entitled to demand the whole obligation. Hence, in the former, each creditor can recover only The respondent court was correct in ruling that the second agreement, which was concluded
his share of the obligation, and each debtor can be made to pay only his part; whereas, in the alone by the petitioner with the private respondents, was based on the original Construction
latter, each creditor may enforce the entire obligation, and each debtor may be obliged to pay and Service Agreement. So too in fact was the promissory note later signed by Manuelita Saligo
it in full. 7 since it was for the amount owing on the construction cost. However, this matter is not really
that important now in view of our conclusion that the complaint could have been filed alone
The same work describes the concept of active solidarity thus: by the petitioner.

The essence of active solidarity consists in the authority of each creditor to claim and enforce The rest of the pieces should easily fall into place.
the rights of all, with the resulting obligation of paying every one what belongs to him; there
is no merger, much less a renunciation of rights, but only mutual representation. 8 Section 7, Rule 3 of the Rules of Court mandates the inclusion of indispensable parties as
follows:
It would follow from these observations that the question of who should sue the private Sec. 7. Compulsory joinder of indispensable parties. — Parties in interest without whom no
respondents was a personal issue between Quiombing and Biscocho in which the spouses final determination can be had of an action shall be joined either as plaintiffs or defendants.
Saligo had no right to interfere. It did not matter who as between them filed the complaint
because the private respondents were liable to either of the two as a solidary creditor for the Indispensable parties are those with such an interest in the controversy that a final decree
full amount of the debt. Full satisfaction of a judgment obtained against them by Quiombing would necessarily affect their rights, so that the court cannot proceed without their presence.
would discharge their obligation to Biscocho, and vice versa; hence, it was not necessary for Necessary parties are those whose presence is necessary to adjudicate the whole controversy,
both Quiombing and Biscocho to file the complaint. Inclusion of Biscocho as a co-plaintiff, but whose interests are so far separable that a final decree can be made in their absence
when Quiombing was competent to sue by himself alone, would be a useless formality. without affecting them. 9 (Necessary parties are now called proper parties under the 1964
amendments of the Rules of Court.) 10
Article 1212 of the Civil Code provides:
According to Justice Jose Y. Feria, "where the obligation of the parties is solidary, either one of
Each one of the solidary creditors may do whatever may be useful to the others, but not the parties is indispensable, and the other is not even necessary (now proper) because
anything which may be prejudice to the latter. complete relief may be obtained from either." 11

Suing for the recovery of the contract price is certainly a useful act that Quiombing could do We hold that, although he signed the original Construction and Service Agreement, Biscocho
by himself alone. need not be included as a co-plaintiff in the complaint filed by the petitioner against the private
respondents. Quiombing as solidary creditor can by himself alone enforce payment of the
Parenthetically, it must be observed that the complaint having been filed by the petitioner, construction costs by the private respondents and as a solidary debtor may by himself alone
whatever amount is awarded against the debtor must be paid exclusively to him, pursuant to be held liable for any possible breach of contract that may be proved by the private
Article 1214. This provision states that "the debtor may pay any of the solidary creditors; but respondents. In either case, the participation of Biscocho is not at all necessary, much less
if any demand, judicial or extrajudicial, has been made by any one of them, payment should indispensable.
be made to him."
WHEREFORE, the petition is GRANTED. The decision of the respondent court dated March 27,
If Quiombing eventually collects the amount due from the solidary debtors, Biscocho may later 1990, is SET ASIDE, and the Regional Trial Court of Antipolo, Rizal, is directed to REINSTATE Civil
claim his share thereof, but that decision is for him alone to make. It will affect only the Case No. 913-A. Costs against the private respondents.
petitioner as the other solidary creditor and not the private respondents, who have absolutely
nothing to do with this matter. As far as they are concerned, payment of the judgment debt to SO ORDERED.
the complainant will be considered payment to the other solidary creditor even if the latter
was not a party to the suit. SECOND DIVISION

G.R. No. 154745 January 29, 2004

Regarding the possibility that the private respondents might plead breach of contract in their
answer, we agree with the petitioner that it is premature to consider this conjecture — for COMMISSIONER ANDREA D. DOMINGO, BUREAU OF IMMIGRATION, Petitioner,
such it is — at this stage. The possibility may seem remote, indeed, since they have actually vs.
acknowledged the completion of the house in the second agreement, where they also agreed HERBERT MARKUS EMIL SCHEER, Respondent.
to pay the balance of the contract price. At any rate, the allegation, if made and proved, could
still be enforceable against the petitioner alone as one of the solidary debtors, subject to his DECISION
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the Rules of Court, as amended, of the Decision1 of
the Court of Appeals in CA-G.R. SP No. 71094 granting the respondent’s petition for certiorari
and prohibition annulling the order of arrest issued by the petitioner, and permanently
enjoining her from deporting the respondent from the Philippines. Through its decision, the
CA virtually reversed the Summary Deportation Order2 of the Board of Commissioners (BOC)
and its Omnibus Resolution3 denying the respondent’s Urgent Motion for Reconsideration of
said Order, and enjoining the petitioner from deporting the respondent.
The facts as culled from the records are as follows:
Respondent Herbert Markus Emil Scheer, a native of Ochsenfurt, Germany, was a frequent
visitor of the Philippines. On July 18, 1986, his application for permanent resident status was
granted.4 The Bureau of Immigration and Deportation (BID) issued in favor of the respondent
Alien Certificate of Registration No. B-396907 dated September 16, 19875 and Immigration
Certificate of Residence No. 256789 dated February 24, 1988.6 The Commissioner stated that
the granting of the petition would redound to the benefit of the Filipino people. 7 During his
sojourn in the Philippines, the respondent married widowed Edith delos Reyes8 with whom he
had two daughters. They had a son, Herbert Scheer, Jr., but he passed away on November 13,
1995.9 They resided in Puerto Princesa City, Palawan, where the respondent established and
managed the Bavaria Restaurant. On May 21, 1991, he was appointed Confidential Agent by
then NBI Director Alfredo S. Lim.10
In a Letter dated June 29, 1995, Vice Consul Jutta Hippelein informed the Philippine
Ambassador to Bonn, Germany, that the respondent had police records and financial liabilities
in Germany.11
The Department of Foreign Affairs received from the German Embassy in Manila Note Verbale
No. 369/95 dated July 26, 1995, informing it that the respondent was wanted by the German
Federal Police; that a warrant of arrest had been issued against him; and that the respondent
will be served with an official document requesting him to turn over his German passport to
the Embassy which was invalidated on July 2, 1995.12 The Embassy requested the Department
of Foreign Affairs to inform the competent Philippine authorities of the matter. The BOC
thereafter issued a Summary Deportation Order dated September 27, 1997. The penultimate
paragraph of the Order reads:
WHEREFORE, the foregoing considered, the Board of Commissioners hereby orders the
following:
1. Cancellation of respondent’s permanent residence visa;
2. Respondent’s summary deportation and permanent exclusion from the Philippines; and
3. Inclusion of his name on the Bureau’s Blacklist.
PROVIDED, however that said summary deportation should be held in abeyance in case said
alien has a pending final and executory criminal conviction where the imposed penalty is
imprisonment, in which case, he has to serve first such imposed penalty, and/or has a pending
criminal, civil or administrative action and a Hold Departure Order has been issued or that his
presence in said action is indispensable. In such instances, the alien should remain in the
custody of the Bureau until his turnover to the proper authorities in case he has to serve
imprisonment or in case of pendency of civil or criminal administrative action, he shall remain
in the custody of the Bureau until such time that his pending cases shall have been decided,
terminated or settled, as the case may be, unless circumstances demand the immediate
implementation of this summary deportation.
...
SO ORDERED.13
In issuing the said order, the BOC relied on the correspondence from the German Vice Consul
on its speculation that it was unlikely that the German Embassy will issue a new passport to
the respondent; on the warrant of arrest issued by the District Court of Germany against the
respondent for insurance fraud; and on the alleged illegal activities of the respondent in
Palawan.14 The BOC concluded that the respondent was not only an undocumented but an
undesirable alien as well.
When the respondent was apprised of the deportation order, he forthwith aired his side to
then BID Commissioner Leandro T. Verceles. The Commissioner allowed the respondent to
remain in the Philippines, giving the latter time to secure a clearance and a new passport from
the German Embassy.15 Then Presidential Assistant Teodorico K. Imperial wrote a Testimonial
dated November 24, 1995, in behalf of the respondent addressed to Commissioner Verceles.
Nonetheless, the respondent, through counsel, filed on December 5, 1995 an Urgent Motion
for Reconsideration of the Summary Deportation Order of the BOC. 16 In his motion, the
respondent alleged, inter alia, that:
1. The elementary rules of due process require notice and opportunity to be heard before a
person can be lawfully deprived of his right (Ute Paterok vs. Bureau of Customs, 193 SCRA 132).
In the instant case, although it is acknowledged that the Honorable Office may conduct
summary deportation proceedings, respondent was not given notice and opportunity to be
heard before said Summary Deportation Order was issued. Respondent’s right to procedural
due process was therefore violated. Consequently, the Summary Deportation Order is invalid.
2. In issuing, the Summary Deportation Order, this Honorable Office relied on Note Verbal No.
369/95 issued by the Embassy of the Federal Republic of Germany, Manila, notifying the
Department of Foreign Affairs and this Honorable Office about the warrant of arrest against
respondent for alleged illegal insurance fraud and illegal activities. However, a close scrutiny
of said note verbal shows that nowhere therein does it state that respondent was involved in
insurance fraud or in any kind of illegal activities in Germany or anywhere else in the world,
such as in Palawan. Therefore, the main basis of the Summary Deportation Order is
incompetent as evidence against respondent who is, like every Filipino, presumed to be
innocent until his guilt is proven beyond reasonable doubt.
3. The power to deport alien is a police power measure necessary against undesirable alien
whose presence in the country is injurious to the public good and domestic tranquility of the
country (Board of Commissioner Commission on Immigration vs. De la Rosa, 197 SCRA 853). It
is respectfully submitted that respondent is not an undesirable alien. He has stayed in the
Philippines for more or less than (10) years. He has married a Filipina and has three (3) minor
children. He has established his business in Palawan and he has no police record whatsoever.
Respondent has considered the Philippines his second home and he has nowhere else to go
back to in Germany. Under the circumstances and for humanitarian considerations,
respondent is not an undesirable alien whose deportation is warranted. Likewise, the mere
fact that his passport was not renewed by the German Embassy does not also automatically
justify the deportation of respondent.17
However, the BOC did not resolve the respondent’s motion. The respondent was neither
arrested nor deported.
Meanwhile, on February 15, 1996, the District Court of Straubing rendered a Decision
dismissing the criminal case against the respondent for physical injuries.18 The German
Embassy in Manila, thereafter, issued a temporary passport to the respondent.
In a Letter dated March 1, 1996, the respondent informed Commissioner Verceles that his
passport had been renewed following the dismissal of the said criminal case. He reiterated his
request for the cancellation of the Summary Deportation Order dated September 27, 1995 and
the restoration of his permanent resident status. 19Subsequently, on March 12, 1996, the
German Embassy issued to the respondent a regular passport, to expire on March 11, 2006.
The BOC still failed to resolve the respondent’s Urgent Motion for Reconsideration.
Commissioner Verceles did not respond to the respondent’s March 1, 1996 Letter. The
respondent remained in the Philippines and maintained his business in Palawan. On March 20,
1997, the Department of Labor and Employment approved his application for Alien
Employment Registration Certificate as manager of the Bavaria Restaurant in Puerto Princesa
City.
In the meantime, petitioner Immigration Commissioner Andrea T. Domingo assumed office.
She wrote the German Embassy and inquired if the respondent was wanted by the German
police. On April 12, 2002, the German Embassy replied that the respondent was not so
wanted.20 At about midnight on June 6, 2002, Marine operatives and BID agents apprehended
the respondent in his residence on orders of the petitioner. He was whisked to the BID Manila
Office and there held in custody while awaiting his deportation. Despite entreaties from the
respondent’s wife21 and his employees, the petitioner refused to release the respondent.22
Shocked at the sudden turn of events, the respondent promptly communicated with his
lawyer. The latter filed with the BID a motion for bail to secure the respondent’s temporary
liberty. On June 11, 2002, the respondent’s counsel filed with the Court of Appeals a petition
for certiorari, prohibition and mandamus with a prayer for temporary restraining order and
writ of preliminary injunction, to enjoin the petitioner from proceeding with the respondent’s
deportation.23 The respondent (petitioner therein) alleged, inter alia, that his arrest and
detention were premature, unjust, wrongful, illegal and unconstitutional, effected without
sufficient cause and without jurisdiction or with grave abuse of discretion. He asserted that
there was no speedy remedy open to him in the ordinary course of law 24 and that his Urgent
Motion for Reconsideration of the Summary Deportation Order of the BOC had not yet been
resolved despite the lapse of more than six years. The respondent averred that he was a fully
documented alien, a permanent resident and a law-abiding citizen. He, thus, prayed as follows:
PRAYER
WHEREFORE, it is most respectfully prayed of this Honorable Court that:
1. Upon the filing of this Petition, this Honorable Court issue a Temporary Restraining Order to
enjoin respondent Commissioner from enforcing any order to deport petitioner;
2. After due hearing, a writ of preliminary and mandatory injunction be correspondingly issued
to maintain the status quo pending resolution of the Petition on the merits.
3. After hearing, judgment be rendered:
a) Directing and mandating respondent Commissioner and the body she heads to resolve the
Motion for Reconsideration filed in 1995, in his favor, and nullifying or suspending the
implementation of any order, oral or written, she may have issued or issue to deport
petitioner; and
b) Making the injunction in petitioner’s favor permanent.
Petitioner likewise prays for such other and further relief as may be deemed just and equitable
in the premises, such as directing respondent, if Herbert Scheer is deported before the matter
is heard on notice, to authorize his return.25
The BOC ruled that its September 27, 1995 Order had become final and executory after the
lapse of one year, citing our rulings in Sy vs. Vivo,26 and Lou vs. Vivo.27 The BOC also held that
it was not competent to reverse the September 27, 1995 Order, citing our ruling in Immigration
Commissioner vs. Fernandez.28 It declared that the respondent may seek the waiver of his
exclusion via deportation proceedings through the exceptions provided by Commonwealth Act
No. 613,29 Section 29 (a)(15), but that his application for the waiver presupposes his prior
removal from the Philippines.
In a parallel development, the respondent procured a letter from the National Bureau of
Investigation (NBI) in Puerto Princesa City certifying that he had no pending criminal
record.30 The Puerto Princesa City Philippine National Police (PNP) also issued a certification
that the respondent had no pending criminal or derogatory records in the said office.31
Meanwhile, on June 26, 2002, the Court of Appeals issued a status quo order restraining the
petitioner from deporting the respondent on a bond of ₱100,000.00. 32 On July 18, 2002, the
BOC issued an Omnibus Resolution dated June 14, 2002, pendente lite denying the
respondent’s Urgent Motion for Reconsideration, Motion for Bail/Recognizance, and the
Letter dated June 11, 2002. The decretal portion of the resolution reads:
Wherefore, in view of the foregoing circumstances, we deny the prayers of the Urgent Motion
for Reconsideration of 5 December 1995, the Motion for Bail/Recognizance dated 7 June 2002
and the Letter of 11 June 2002. Further, we hereby order the following:
1. Subject to the submission of appropriate clearances, the summary deportation order the
respondent Herbert Scheer, German, under BI Office Memorandum Order No. 34 (series of
1989) and the BOC Summary Deportation Order of 27 September 1995;
2. Permanent exclusion of Herbert Scheer from the Philippines under C.A. No. 613, Section 40
(a)(15).
3. Inclusion of the name of Herbert Scheer in the Immigration Black List; and
4. Forfeiture of the bail bond, if any, of Herbert Scheer under C.A. No. 613, Section 40 (a)(15).
...
IT IS SO ORDERED.33
During the hearing of the respondent’s plea for a writ of preliminary mandatory injunction
before the CA on July 22, 2002, the Office of the Solicitor General (OSG) manifested that the
State had no opposition to the respondent’s re-entry and stay in the Philippines, provided that
he leave the country first and re-apply for admission and residency status with the assurance
that he would be re-admitted.34 The respondent’s counsel manifested to the appellate court
that he had just been informed by the OSG of the Omnibus Resolution of the BOC dated June
14, 2002.
In her Comment on the Petition, the petitioner (the respondent therein) alleged, inter alia, the
following:
1) that the BOC was an indispensable party to the petition;
2) the petitioner’s failure to implead the BOC warranted the denial of the petition;
3) the allowance by then Immigration Commissioner Leandro Verceles for the petitioner
therein to renew his passport and secure clearances, even if proved, was not binding on the
BOC;
4) the September 27, 1995 Order of the BOC was already executory when the respondent filed
her petition in the CA;
5) the German Embassy’s issuance of a new passport did not legalize the respondent’s stay in
this country, which became illegal on July 2, 1995 when his passport expired;
6) the respondent therein did not act with abuse of discretion in causing the arrest and
detention of the respondent based on the BOC’s Summary Deportation Order; and
7) the BOC did not act with grave abuse of discretion in issuing its Summary Deportation Order
and Omnibus Resolution and such order and resolution were not mooted by the German
Embassy’s issuance of a new passport in favor of the respondent.
In view of the Omnibus Resolution of the BOC, the respondent (petitioner therein) in his
Memorandum prayed for the nullification of the BOC’s Order, as well as its Omnibus Resolution
denying his Urgent Motion for Reconsideration considering that with the issuance of a new
passport, there was no more basis for his deportation, thus:
RELIEF
WHEREFORE, it is most respectfully prayed of this Honorable Court that:
1. Upon the filing of this Memorandum, this Honorable Court forthwith direct and authorize
the immediate release of petitioner, even on undersigned’s recognizance, until further orders
from this Honorable Court;
2. The Summary Deportation Order of September 27, 19[9]5, affirmed by respondent allegedly
on June 14, 2002 and made known only yesterday, be nullified to the extent that it directs the
deportation of petitioner, who has removed the very basis of said Order of not having a valid
passport, and that the Resolution of June 14, 2002 be nullified in toto; and,
3. The Temporary Restraining Order of June 26, 2002 be converted into a permanent injunction
or writ of prohibition.
Petitioner likewise prays for such other and further relief as may be deemed just and equitable
in the premises.35
Surprisingly, the respondent’s counsel received on July 24, 2003 a Letter from the petitioner
dated July 16, 2002 stating that, "the BOC was in the course of reviewing the deportation case
against Mr. Scheer, and that its findings would be given in due time."36
On August 20, 2002, the Court of Appeals rendered a Decision in favor of the respondent
granting his petition for certiorari and prohibition and permanently enjoining the petitioner
from deporting the respondent. The decretal portion of the Decision reads:
WHEREFORE, premises considered, the petitions for certiorari and prohibition are hereby
GRANTED. Accordingly, any order, oral or written, issued by respondent Commissioner
Domingo against petitioner, in relation to his deportation, is hereby ANNULLED, and
respondent Commissioner Domingo is hereby permanently enjoined/prohibited from
deporting petitioner, in so far as this case is concerned.
It is likewise ordered that petitioner be released from his confinement/detention in the Bureau
of Immigration UNLESS there is/are fresh new grounds/cases that will warrant his continued
detention.
SO ORDERED.37
The Court of Appeals ruled that the German Embassy’s subsequent issuance of passport to the
respondent before the BOC’s issuance of its Omnibus Resolution had mooted the September
27, 1995 Summary Deportation Order, as well as the arrest and detention of the respondent.
According to the court, it made no sense to require the respondent to leave the country and
thereafter re-apply for admission with the BOC. Furthermore, since the grounds cited by the
BOC in its Summary Deportation Order no longer existed, there was no factual and legal basis
to disqualify the respondent from staying in the country.
On the issue of whether the members of the BOC were indispensable parties, the CA ruled as
follows:
a) There are quite a number of cases in relevant jurisprudence wherein only the Immigration
Commissioner was impleaded to decide whether an alien may stay or be deported, such as in
the case of Vivo vs. Arca (19 SCRA 878) and Vivo vs. Cloribel (22 SCRA 159).
b) In the case of Caruncho III vs. COMELEC (315 SCRA 693), it was pronounced that: "Ordinarily,
the nonjoinder of an indispensable party or the real party interest is not by itself a ground for
the dismissal of the petition. The court before which the petition is filed must first require the
joinder of such party. It is the noncompliance with said order that would be a ground for the
dismissal of the petition."
thus, c) respondent may be estopped for not raising such issue earlier.38
Aggrieved, the respondent therein, now the petitioner, through the Office of the Solicitor
General, appealed to us for relief. The petitioner contends that the Court of Appeals erred on
a question of law in granting the respondent’s petition in CA-G.R. SP No. 71094.39
In support of his contention, the Solicitor General has submitted the following arguments:
I. THE WRIT OF MANDAMUS DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF
IMMIGRATION TO RESOLVE RESPONDENT’S URGENT MOTION FOR RECONSIDERATION OF THE
SUMMARY DEPORTATION ORDER, CONSIDERING THAT IT IS THE BOARD OF COMMISSIONERS,
AND NOT THE COMMISSIONER ALONE, WHICH HAS AUTHORITY TO MAKE SAID RESOLUTION.
II. THE WRIT OF CERTIORARI DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF
IMMIGRATION, CONSIDERING THAT IT IS THE BOARD OF COMMISSIONERS, AND NOT THE
COMMISSIONER ALONE, WHICH ISSUED THE SUMMARY DEPORTATION ORDER AND THE
OMNIBUS RESOLUTION.
III. THE WRIT OF PROHIBITION DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU
OF IMMIGRATION, PROHIBITING THE IMPLEMENTATION OF THE SUMMARY DEPORTATION
ORDER AND THE OMNIBUS RESOLUTION, CONSIDERING THAT THE BOARD OF
COMMISSIONERS WAS NOT IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R.
SP NO. 71094.
IV. ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS WAS
PROPERLY IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094,
NEVERTHELESS, THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION WERE
NOT ISSUED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION.
V. FURTHER ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS
WAS PROPERLY IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO.
71094, THE COMMISSIONER OF THE BUREAU OF IMMIGRATION DID NOT ACT WITHOUT OR IN
EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN IMPLEMENTING THE SUMMARY DEPORTATION ORDER AND THE
OMNIBUS RESOLUTION.40
Elucidating on his first three arguments, the petitioner maintains that the respondent’s
petition for certiorari, prohibition and mandamus before the Court of Appeals should have
been dismissed because he failed to implead the real party-in-interest as mandated by Rule 3,
Section 7 of the Rules of Court, as amended; in this case, the BOC. According to the Solicitor
General, this was a fatal procedural error. The inclusion of the BOC as respondent in the case
was necessary in order that its actions could be directly attacked and for the court to acquire
jurisdiction over it. The fact that Immigration Commissioner Andrea T. Domingo was impleaded
as the sole respondent was not enough, as she is only one of the four Commissioners.
Furthermore, the assailed Orders were issued by the Board, and not by the Immigration
Commissioner alone.
The respondent counters that the petitioner is already estopped from raising this issue. He
argues that -
In quite a number of jurisprudence, only the Immigration Commissioner is impleaded to decide
whether an alien may stay here or not. The bottom line is petitioner, head of the Bureau of
Immigration, was more than fully heard on its institutional position, a Bureau which speaks
with a single voice in this case. She is in estoppel for not raising the issue earlier, either in a
timely Comment or during the oral argument…41
In Caruncho III v. Comelec, it was held that-
[O]rdinarily, the nonjoinder of an indispensable party or real party in interest is not by itself a
ground for the dismissal of the petition. The court before which the petition is filed must first
require the joinder of such party. It is the noncompliance with said order that would be a
ground for the dismissal of the petition.
But even as the Court of Appeals did not require respondent of such joinder of parties, the
respondent, in fact, begged leave, ad cautelam, in its Reply Memorandum dated July 31, 2002
to implead the Board which speaks with a single voice anyway in this case, and therefore, no
claim can be made that a valid point of view has not been heard… 42
Moreover, according to the respondent, the petitioner is clearly the BID’s chosen
instrumentality for the relevant purpose. What the respondent ultimately questioned are the
acts or orders of the petitioner for the arrest and immediate deportation of the respondent by
way of implementing the BOC’s Summary Deportation Order.
By way of reply, the Office of the Solicitor General asserted that the Summary Deportation
Order and Omnibus Resolution were collegial actions of the BOC and not of the petitioner
alone. Although its Chairperson, the petitioner, is merely a member thereof, her decisions and
actions are still subject to the collective will of the majority.43
The Ruling of the Court
The BOC is an
Indispensable
Party
We agree with the petitioner’s contention that the BOC was an indispensable party to the
respondent’s petition for certiorari, prohibition and mandamus in the Court of Appeals. The
respondent was arrested and detained on the basis of the Summary Deportation Order of the
BOC. The petitioner caused the arrest of the respondent in obedience to the said Deportation
Order. The respondent, in his Memorandum, prayed that the CA annul not only the Summary
Deportation Order of the BOC but also the latter’s Omnibus Resolution, and, thus, order the
respondent’s immediate release. The respondent also prayed that the CA issue a writ of
mandamus for the immediate resolution of his Urgent Motion for Reconsideration. The said
motion had to be resolved by the BOC as the order sought to be resolved and reconsidered
was issued by it and not by the petitioner alone. The powers and duties of the BOC may not be
exercised by the individual members of the Commission.44
Section 7, Rule 3 of the Rules of Court, as amended, requires indispensable parties to be joined
as plaintiffs or defendants. The joinder of indispensable parties is mandatory. Without the
presence of indispensable parties to the suit, the judgment of the court cannot attain real
finality.45 Strangers to a case are not bound by the judgment rendered by the court.46 The
absence of an indispensable party renders all subsequent actions of the court null and void.
Lack of authority to act not only of the absent party but also as to those present.47 The
responsibility of impleading all the indispensable parties rests on the petitioner/plaintiff.48
However, the non-joinder of indispensable parties is not a ground for the dismissal of an action.
Parties may be added by order of the court on motion of the party or on its own initiative at
any stage of the action and/or such times as are just. 49 If the petitioner/plaintiff refuses to
implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/petition for the petitioner/plaintiff’s failure to comply therefor.50 The remedy is to
implead the non-party claimed to be indispensable.51 In this case, the CA did not require the
respondent (petitioner therein) to implead the BOC as respondent, but merely relied on the
rulings of the Court in Vivo v. Arca,52 and Vivo v. Cloribel.53 The CA’s reliance on the said rulings
is, however, misplaced. The acts subject of the petition in the two cases were those of the
Immigration Commissioner and not those of the BOC; hence, the BOC was not a necessary nor
even an indispensable party in the aforecited cases.
according to the regulations so established, except in so far as the judicial department has
been authorized by treaty or by statute, or is required by the Constitution to intervene. 59 The
judicial department cannot properly express an opinion upon the wisdom or the justice of the
measures executed by Congress in the exercise of the power conferred on it,60 by statute or as
required by the Constitution. Congress may, by statute, allow the decision or order of the
Immigration Commissioner or the BOC to be reviewed by the President of the Philippines or
by the courts, on the grounds and in the manner prescribed by law.

The Non-joinder of an Article VIII, Section 1 of the Constitution has vested judicial power in the Supreme Court and
the lower courts such as the Court of Appeals, as established by law. Although the courts are
Indispensable Party is not without power to directly decide matters over which full discretionary authority has been
a Ground for the Dismissal delegated to the legislative or executive branch of the government and are not empowered to
of the Petition execute absolutely their own judgment from that of Congress or of the President, 61 the Court
may look into and resolve questions of whether or not such judgment has been made with
The Court may be curing the defect in this case by adding the BOC as party-petitioner. The
grave abuse of discretion, when the act of the legislative or executive department violates the
petition should not be dismissed because the second action would only be a repetition of the
law or the Constitution. In Harvy Bridges v. I.F. Wixon,62 the United States Federal Supreme
first.54 In Salvador, et al., v. Court of Appeals, et al.,55 we held that this Court has full powers,
Court reversed an Order of Deportation made by the Attorney General for insufficiency of
apart from that power and authority which is inherent, to amend the processes, pleadings,
evidence and for "improper admission of evidence." In Nging v. Nagh,63 the United States Court
proceedings and decisions by substituting as party-plaintiff the real party-in-interest. The Court
of Appeals (9th Circuit Court) held that conclusions of administrative offices on the issues of
has the power to avoid delay in the disposition of this case, to order its amendment as to
facts are invulnerable in courts unless when they are not rendered by fair-minded men; hence,
implead the BOC as party-respondent. Indeed, it may no longer be necessary to do so taking
are arbitrary. In Toon v. Stump,64 the Court ruled that courts may supervise the actions of the
into account the unique backdrop in this case, involving as it does an issue of public
administrative offices authorized to deport aliens and reverse their rulings when there is no
interest.56 After all, the Office of the Solicitor General has represented the petitioner in the
evidence to sustain them. When acts or omissions of a quasi-judicial agency are involved, a
instant proceedings, as well as in the appellate court, and maintained the validity of the
petition for certiorari or prohibition may be filed in the Court of Appeals as provided by law or
deportation order and of the BOC’s Omnibus Resolution. It cannot, thus, be claimed by the
by the Rules of Court, as amended.65
State that the BOC was not afforded its day in court, simply because only the petitioner, the
Chairperson of the BOC,57 was the respondent in the CA, and the petitioner in the instant In this case, the respondent alleges that the petitioner acted arbitrarily, contrary to law and
recourse. In Alonso v. Villamor,58 we had the occasion to state: with grave abuse of discretion in causing his arrest and detention at a time when his Urgent
Motion for Reconsideration of the BOC’s Summary Deportation Order had yet to be resolved.
There is nothing sacred about processes or pleadings, their forms or contents.1âwphi1 Their
There was no factual or legal basis for his deportation considering that he was a documented
sole purpose is to facilitate the application of justice to the rival claims of contending parties.
alien and a law-abiding citizen; the respondent, thus, prayed for a writ of mandamus to compel
They were created, not to hinder and delay, but to facilitate and promote, the administration
the petitioner, the Chairperson of the BOC, to resolve the said motion. The petition before the
of justice. They do not constitute the thing itself, which courts are always striving to secure to
CA did not involve the act or power of the President of the Philippines to deport or exclude an
litigants. They are designed as the means best adapted to obtain that thing. In other words,
alien from the country. This being so, the petition necessarily did not call for a substitution of
they are a means to an end. When they lose the character of the one and become the other,
the President’s discretion on the matter of the deportation of the respondent with that of the
the administration of justice is at fault and courts are correspondingly remiss in the
judgment of the CA.
performance of their obvious duty.
Irrefragably, the CA had jurisdiction over the petition of the respondent.
The CA had Jurisdiction
The BOC Committed a Grave
Over the Petition for
Abuse of Discretion Amounting
Certiorari, Prohibition
To Lack or Excess of Jurisdiction
and Mandamus
In Issuing its Summary Deportation
We do not agree with the petitioner’s contention that the issue before the CA, as to the power Order and Omnibus Resolution; The
of the President to determine whether an alien may remain or be deported from the Petitioner Committed a Grave Abuse
Philippines, is beyond the appellate court’s competence to delve into and resolve. The Of Her Discretion Amounting to
contention of the petitioner is based on a wrong premise. Lack or Excess of Jurisdiction in
Causing the Arrest and Detention
The settled rule is that the authority to exclude or expel aliens by a power affecting Of The Private Respondent
international relation is vested in the political department of the government, and is to be
regulated by treaty or by an act of Congress, and to be executed by the executive authority
On the Solicitor General’s fourth and fifth arguments, we are convinced that the BOC
committed a grave abuse of discretion amounting to excess or lack of jurisdiction in issuing its
Summary Deportation Order and Omnibus Resolution, and that the petitioner committed
grave abuse of discretion amounting to excess or lack of jurisdiction in causing the arrest and
detention of the private respondent.
The settled rule is that the entry or stay of aliens in the Philippines is merely a privilege and a
matter of grace; such privilege is not absolute nor permanent and may be revoked. However,
aliens may be expelled or deported from the Philippines only on grounds and in the manner
provided for by the Constitution, the Immigration Act of 1940, as amended, and administrative
issuances pursuant thereto. In Mejoff v. Director of Prisons,66 we held, thus:
Moreover, by its Constitution (Art. II, Sec. 3) the Philippines "adopts the generally accepted
principles of international law a part of the law of Nation." And in a resolution entitled
"Universal Declaration of Human Rights" and approved by the General Assembly of the United
Nations of which the Philippines is a member, at its plenary meeting on December 10, 1948,
the right to life and liberty and all other fundamental rights as applied to all human beings
were proclaimed. It was there resolved that "All human beings are born free and equal in
degree and rights" (Art. 1); that "Everyone is entitled to all the rights and freedom set forth in
this Declaration, without distinction of any kind, such as race, color, sex, language, religion,
political or other opinion, nationality or social origin, property, birth, or other status" (Art. 2);
that "Every one has the right to an effective remedy by the competent national tribunals for
acts violating the fundamental rights granted him by the Constitution or by law" (Art. 8); that
"No one shall be subjected to arbitrary arrest, detention or exile" (Art. 9); etc.
In this case, the BOC ordered the private respondent’s deportation on September 27, 1995
without even conducting summary deportation proceedings. The BOC merely relied on the
June 29, 1995 Letter of the German Vice Consul and of the German Embassy’s Note Verbale
No. 369/95 dated July 26, 1995. It issued the Summary Deportation Order on September 27,
1995 allegedly under paragraph 3 of Office Memorandum Order No. 34 dated August 21, 1989
which reads:
3. If a foreign embassy cancels the passport of the alien or does not reissue a valid passport to
him, the alien loses the privilege to remain in the country, under the Immigration Act, Sections
10 and 15 (Schonemann vs. Santiago, et al., G.R. No. 81461, 30 May 1989). The automatic loss
of the privilege obviates deportation proceedings. In such instance, the Board of
Commissioners may issue summary judgment of deportation which shall be immediately
executory.
However, as gleaned from the Summary Deportation Order, the respondent was ordered
deported not only because his passport had already expired; the BOC speculated that the
respondent committed insurance fraud and illegal activities in the Philippines and would not,
thus, be issued a new passport. This, in turn, caused the BOC to conclude that the respondent
was an undesirable alien. Section 37(c) of Commonwealth Act No. 613, as amended, provides
that:
No alien shall be deported without being informed of the specific grounds for deportation or
without being given a hearing under rules of procedure to be prescribed by the Commissioner
of Immigration.
Under paragraphs 4 and 5 of Office Memorandum Order No. 34, an alien cannot be deported
unless he is given a chance to be heard in a full deportation hearing, with the right to adduce
evidence in his behalf, thus:
4. All other cases shall be tried in full deportation hearing, with due observance of the pertinent
provisions of Law Instruction No. 39.
5. In all cases, the right of the alien to be informed of the charges against him, to be notified
of the time and place of hearing, when necessary, to examine the evidence against him, and
to present evidence in his own behalf, where appropriate, shall be observed.
The respondent was not afforded any hearing at all. The BOC simply concluded that the
respondent committed insurance fraud and illegal activities in Palawan without any evidence.
The respondent was not afforded a chance to refute the charges. He cannot, thus, be arrested
and deported without due process of law as required by the Bill of Rights of the Constitution.
In Lao Gi v. Court of Appeals,67 we held that:
Although a deportation proceeding does not partake of the nature of a criminal action,
however, considering that it is a harsh and extraordinary administrative proceeding affecting
the freedom and liberty of a person, the constitutional right of such person to due process
should not be denied. Thus, the provisions of the Rules of Court of the Philippines particularly
on criminal procedure are applicable to deportation proceedings.
It must be noted that the respondent was a permanent resident before his passport expired
on July 2, 1995. In Chew v. Colding,68 the United States Federal Supreme Court ruled:
It is well established that if an alien is a lawful permanent resident of the United States and
remains physically present there, he is a person within the protection of the Fifth Amendment.
He may not be deprived of his life, liberty or property without due process of law. Although it
later may be established, as respondents contend, that petitioner can be expelled and
deported, yet before his expulsion, he is entitled to notice of the nature of the charge and a
hearing at least before an executive or administrative tribunal. Although Congress may
prescribe conditions for his expulsion and deportation, not even Congress may expel him
without allowing him a fair opportunity to be heard.
As Mr. Justice Murphy said in his concurring opinion in Bridges v. Wixon:69
The Bill of Rights belongs to them as well as to all citizens. It protects them as long as they
reside within the boundaries of our land. It protects them in the exercise of the great individual
rights necessary to a sound political and economic democracy.
According to Vattal,70 an alien who is a permanent resident in a country is a member of the
new society, at least as a permanent inhabitant, and is a kind of citizen of inferior order from
the native citizens; but is, nevertheless, limited and subject to the society, without participating
in all its advantages. Sir Robert Philconse called them "de facto," though not de jure citizens of
the country of their domicile.71
Such permanent resident72 may be classified as a "denizen," a kind of middle state between
alien and a natural-born subject and partakes of both. Paraphrasing Justice Brewer in his
dissenting opinion in Fong Yue Ting v. United States,73 when the right to liberty and residence
is involved, some other protection than the mere discretion of the petitioner or the BOC is
required. We recall the warning of the United States Supreme Court in Boyd v. United States: 74
Illegitimate and unconstitutional practices get their first footing in that way, namely, by silent
approaches and slight deviations from legal modes of procedure. This can only be obviated by
adhering to the rule that constitutional provisions for the security of person and property
should be liberally construed. A close and literal construction deprives them of half their
efficacy, and leads to a gradual depreciation of the right, as if it consisted more in sound than
in substance. It is the duty of the courts to be watchful for the constitutional rights of the
citizen, and against any stealthy encroachments thereon. Their motto should be obsta
principiis.
In sum, the arrest and detention of the respondent and his deportation under the Summary
Deportation Order of the BOC for insurance fraud and illegal activities in Palawan violated his
constitutional and statutory rights to due process.
The Respondent’s Arrest and
Detention was Premature,
Unwarranted and Arbitrary
We agree that the Immigration Commissioner is mandated to implement a legal and valid
Summary Deportation Order within a reasonable time. But in this case, the arrest of the
respondent in his house, at near midnight, and his subsequent detention was premature,
unwarranted and arbitrary. Like a thunderbolt in the sky, the BID agents and marines arrested
the respondent on June 6, 2002, on orders of the petitioner based on the September 27, 1995
Summary Deportation Order. Under the basic rudiments of fair play and due process, the
petitioner was required to first resolve the respondent’s Urgent Motion for Reconsideration of
the said Order, which was filed more than six years before or on December 5, 1995.
It may be argued that respondent’s filing of an Urgent Motion for Reconsideration did not ipso
facto suspend the efficacy of the BOC’s deportation order. However, such an argument cannot
be sustained in this case because of the extant and peculiar factual milieu. It bears stressing
that more than six years had elapsed, from the time the Summary Deportation Order was
issued, until the respondent was finally arrested. Supervening facts and circumstances
rendered the respondent’s arrest and detention unjust, unreasonable, barren of factual and
legal basis. The BOC should have set the respondent’s motion for hearing to afford him a
chance to be heard and adduce evidence in support thereon. It was bad enough that the BOC
issued its Summary Deportation Order without a hearing; the BOC dealt the respondent a more
severe blow when it refused to resolve his motion for reconsideration before causing his arrest
on June 6, 2002.
As aforestated, the BOC ordered the deportation of the respondent after a summary
proceeding without prior notice on the following grounds: (a) the respondent’s German
passport had expired; (b) there was a pending criminal case for physical injuries against him in
Germany; (c) the respondent indulged in illegal activities in Palawan; (d) that in all likelihood,
the respondent’s passport will not be renewed by the German Embassy as he was wanted for
insurance fraud in Germany; and, (e) he was an undesirable alien. But then, in response to the
written query of no less than the petitioner herself, the German Embassy declared that the
respondent was not wanted by the German police for any crime, including insurance fraud.
This could only mean that the warrant of arrest issued by the German Federal police
mentioned in Note Verbale No. 369/95 had been lifted, and that the respondent was not
involved in any illegal activities in Germany. The criminal case against the respondent for
physical injuries, which does not involve moral turpitude, was dismissed by the German District
Court. Furthermore, there was no evidence of insurance fraud against the respondent.
The BOC issued its Summary Deportation Order without affording the respondent the right to
be heard on his motion and adduce evidence thereon. It merely concluded that the respondent
was involved in "illegal activities in Palawan." What made matters worse was that the BOC
indulged in sheer speculation, that the German Embassy is unlikely to issue a new passport to
the respondent. The deportation of aliens should not be based on mere speculation or a mere
product of procrastinations as in this case. As it turned out, the German Embassy re-issued the
respondent’s passport; he was issued a temporary passport, and, thereafter, a regular
passport, yet to expire on March 12, 2006. The petitioner cannot feign ignorance of this matter
because the respondent himself, six years before he was arrested, informed then Immigration
Commissioner Verceles in a Letter dated March 1, 1996. The respondent’s letter forms part of
the records of the BOC. There is no evidence on record that the respondent committed any
illegal activities in Palawan. He was even designated as special agent of the NBI, and was, in
fact, issued clearances by the PNP and the NBI no less. Despite all the foregoing, the petitioner
ordered and caused the arrest and detention of the respondent.
What is most nettlesome is the apparent antedating of the BOC Omnibus Resolution. The
records show that the petitioner sought to assuage the respondent’s concern on the belated
resolution of his pending urgent motion for reconsideration in a Letter to the latter’s counsel
dated July 18, 2002 in which the petitioner assured the respondent that the BOC will provide
him of its action on the said motion:
Dear Atty. Sagisag,
We respond to your letter of 17 June 2002 by informing you that the case of Mr. Herbert Scheer
is being evaluated by the Board of Commissioners (BOC). The BOC will provide you of the
results of its collegial action in due time.
Very truly yours,
(Sgd.) ANDREA D. DOMINGO
Commissioner75
However, the Omnibus Resolution of the BOC was dated June 14, 2002, although on its face it
was filed with the Records Division of the BID only on July 18, 2002.
The foregoing gave reason for the CA to suspect that the Omnibus Resolution of the BOC was
antedated.76 The petition of the respondent in the CA must have jolted the petitioner and the
BOC from its stupor because it came out with its Omnibus Resolution on July 18, 2002, which
was, however, dated as early as June 14, 2002. The respondent had to wait in anxiety for the
BOC to quench his quest for justice. The BOC’s wanton acts amounted to an abdication of its
duty to act and/or resolve cases/incidents with reasonable dispatch. To recall our ruling in
Board of Commissioners v. De la Rosa,77 citing Sheor v. Bengson,78 thus:
This inaction or oversight on the part of the immigration officials has created an anomalous
situation which, for reasons of equity, should be resolved in favor of the minor herein involved.
The petitioner and the BOC should have taken to heart the following pronouncement in
Commissioner of Immigration v. Fernandez:79
In the face of the disclosure that Teban Caoili had been all along working in the Avenue
Electrical Supply Co. (Avesco), located at No. 653 Rizal Avenue, Manila, until his arrest, and the
documentary evidence showing that he had been issued a Philippine Passport; had regularly
paid his Residence Tax Certificates (A & B), and filed Income Tax Returns, a finding of fact is
necessary whether the Commissioner really had intended to notify Teban Caoili of the
exclusion proceedings the Board had conducted in his absence. While it may be true that the
proceedings is purely administrative in nature, such a circumstance did not excuse the serving
of notice. There are cardinal primary rights which must be respected even in proceedings of
administrative character, the first of which is the right of the party interested or affected to
present his own case and submit evidence in support thereof.80
...
Since the proceedings affected Caoili’s status and liberty, notice should have been given. And
in the light of the actuations of the new Board of Commissioners, there is a necessity of
determining whether the findings of the Board of Special Inquiry and the old Board of
Commissioners are correct or not. This calls for an examination of the evidence, and, the law
on the matter.81
Apparently, the BOC did not bother to review its own records in resolving the respondent’s
Urgent Motion for Reconsideration. It anchored its Omnibus Resolution only on the following:
the membership of the BOC had changed when it issued its September 27, 1995 Summary
Deportation Order and under Commonwealth Act No. 613, Section 27(b); the BOC is precluded
from reversing a previous order issued by it;82 and, the September 27, 1995 Order of the BOC
had become final and could no longer be reviewed and reversed by it after the lapse of one
year.83 However, the rulings cited by the petitioner are not applicable in the instant case, as
the said cases cited involve appeals to the BOC from the decisions of the Board of Special
Inquiry (BSI). In Sy v. Vivo84 and Lou v. Vivo,85 we ruled that under Section 27(b) of
Commonwealth Act No. 613, as amended, the Decision of the BOC on appeal from the decision
of the BSI becomes final and executory after one year:
(b) A board of special inquiry shall have authority (1) to determine whether an alien seeking to
enter or land in the Philippines shall be allowed to enter or land or shall be excluded, and (2)
to make its findings and recommendations in all the cases provided for in section twenty-nine
of this Act wherein the Commissioner of Immigration may admit an alien who is otherwise
inadmissible. For this purpose, the board or any member thereof, may administer oaths and
take evidence and in case of necessity may issue subpoena and/or subpoena duces tecum. The
hearing of all cases brought before a board of special inquiry shall be conducted under rules of
procedure to be prescribed by the Commissioner of Immigration. The decision of any two
members of the board shall prevail and shall be final unless reversed on appeal by the Board
of Commissioners as hereafter stated, or in the absence of an appeal, unless reversed by the
Board of Commissioners after a review by it, motu propio, of the entire proceedings within one
year from the promulgation of the decision.
In Commissioner of Immigration v. Fernandez,86 we held that the BOC composed of new
members is precluded from reversing, motu proprio, the decision of the BOC on appeal from
a BSI decision. But not to be ignored was our ruling that "at any rate, the issue of authority
should be made in accordance with the procedure established by law, with a view to protecting
the rights of individuals."87
In this case, the Summary Deportation Order was issued by the BOC in the exercise of its
authority under Office Memorandum Order No. 34, and not in the exercise of its appellate
jurisdiction of BSI decisions. There is no law nor rule which provides that a Summary
Deportation Order issued by the BOC in the exercise of its authority becomes final after one
year from its issuance,88 or that the aggrieved party is barred from filing a motion for a
reconsideration of any order or decision of the BOC. The Rules of Court may be applied in a
suppletory manner to deportation proceedings89 and under Rule 37, a motion for
reconsideration of a decision or final order may be filed by the aggrieved party.
Neither is there any law nor rule providing that the BOC, composed of new members, cannot
revise a Summary Deportation Order previously issued by a different body of Commissioners.
The BOC that issued the Summary Deportation Order and the BOC which resolved the
respondent’s Urgent Motion for Reconsideration are one and the same government entity,
with the same powers and duties regardless of its membership. Similarly, an RTC judge who
replaces another judge who presided over a case may review the judgment or order of his
predecessor as long as the said judgment or order has not as yet become final or executory.
The act subject of review is not the act of the judge but the act of the court.
The petitioner’s contention that it failed to resolve the respondent’s motion for
reconsideration because of the change of administration in the BOC was branded by the CA as
flimsy, if not bordering on the absurd:
Firstly, it was issued three days (June 14, 2002) after petitioner filed this instant petition on
June 11, 2002 or almost seven years from the time the motion for reconsideration was filed;
Secondly, respondent’s counsel’s excuse that it took such time to resolve it because it was only
later that the motion for reconsideration was discovered because of change of administration,
is flimsy, if not bordering on the absurd;90
The Issuance of a New and Regular
Passport to the Respondent
Rendered the Summary
Deportation Order Moot and
Academic, and the Omnibus
Resolution of the BOC Lacking
in Legal Basis
We agree with the petitioner that a foreign embassy’s cancellation of the passport it had issued
to its citizens, or its refusal to issue a new one in lieu of a passport that has expired, will result
in the loss of the alien’s privilege to stay in this country and his subsequent deportation
therefrom. But even the BOC asserted in its Summary Deportation Order that an embassy’s
issuance of a new passport to any of its citizens may bar the latter’s deportation, citing the
resolution of this Court in Schonemann v. Commissioner Santiago.91
Irrefragably, Commissioner Verceles was mandated to cause the arrest of the respondent
preparatory to his deportation from the Philippines. However, there was no fixed period in the
Order within which to comply with the same. The Commissioner is not mandated to deport an
alien immediately upon receipt of the BOC’s deportation order. It is enough that the
Commissioner complies with the Order within a "reasonable time," which, in Mejoff v. Director
of Prisons,92 we held to connote as follows:
The meaning of "reasonable time" depends upon the circumstances, specially the difficulties
of obtaining a passport, the availability of transportation, the diplomatic arrangements with
the governments concerned and the efforts displayed to send the deportee away; but the
Court warned that "under established precedents, too long a detention may justify the
issuance of a writ of habeas corpus.
In this case, the BOC had yet to act on the respondent’s Urgent Motion for Reconsideration.
The respondent was also given a chance to secure a clearance and a new passport with the
German Embassy. After all, the possibility that the German Embassy would renew the
respondent’s passport could not be ruled out. This was exactly what happened: the German
Embassy issued a new passport to the respondent on March 12, 1996 after the German District
Court dismissed the case for physical injuries. Thus, the respondent was no longer an
undocumented alien; nor was he an undesirable one for that matter.
The petitioner even admits that there is no longer a legal or factual basis to disqualify the
respondent from remaining in the country as a permanent resident. Yet, the OSG insists that
he has to be deported first so that the BOC’s Summary Deportation Order could be
implemented. This contention was rejected by the CA, thus:
During the hearing of petitioner’s prayer for issuance of a writ of preliminary injunction before
Us, respondent’s counsel from the Office of the Solicitor General had the occasion to manifest
in open court that the State has no opposition to petitioner’s stay in the country provided he
first leave and re-enter and re-apply for residency if only to comply with the Summary
Deportation Order of 1995. That, to Our mind, seems preposterous, if not ridiculous. An
individual’s human rights and rights to freedom, liberty and self-determination recognize no
boundaries in the democratic, free and civilized world. Such rights follow him wherever he may
be. If presently, there is no factual or legal impediment to disqualify petitioner in his stay in
the country, other than allegedly those relied upon in the Summary Deportation Order of 1995
(as hereinbefore discussed, had ceased to exist), requiring petitioner to leave the country and
re-enter and re-apply for residency makes little sense or no sense at all, more so, in the case
of petitioner who, for many years past, had lived herein and nurtured a family that is Filipino.
Thus, opined, We, therefore, believe and hereby rule, that there is presently every reason to
enjoin/prohibit the Bureau of Immigration, respondent Commissioner Domingo in particular,
from presently deporting petitioner.93
We agree with the Court of Appeals. The Summary Deportation Order had been rendered moot
and academic upon the German Embassy’s issuance of a new passport to the respondent. The
respondent had been in the Philippines as a permanent resident since July 18, 1986, and had
married a Filipino citizen, with whom he has two children. He is not a burden to the country
nor to the people of Palawan. He put up, and has been managing, the Bavaria Restaurant with
about 30 employees. He has no pending criminal case; nor does he have any derogatory record.
The respondent was allowed by then Immigration Commissioner Verceles to renew his
passport and was given time to secure a clearance from the German Embassy. The respondent
was able to do so. The case against him for physical injuries was dismissed by the German
District Court. Thus, the inceptual basis for the respondent’s deportation had ceased to exist.
The power to deport is a police matter against undesirable aliens, whose presence in the
country is found to be injurious to the public good. We believe that the deportation of the
respondent late in the day did not achieve the said purpose. The petitioner admitted that there
is no longer a factual and legal basis to disqualify the respondent from staying in the country.
He is not an undesirable alien; nor is his presence in the country injurious to public good. He is
even an entrepreneur and a productive member of society.
Arrest, detention and deportation orders of aliens should not be enforced blindly and
indiscriminately, without regard to facts and circumstances that will render the same unjust,
unfair or illegal.94 To direct the respondent to leave the country first before allowing him re-
entry is downright iniquitous.95 If the respondent does leave the country, he would thereby be
accepting the force and effect of the BOC’s Summary Deportation Order with its attendant
infirmities. He will thereby lose his permanent resident status and admit the efficacy of the
cancellation of his permanent resident visa. Moreover, his entry into the country will be subject
to such conditions as the petitioner may impose.
The deportation of an alien is not intended as a punishment or penalty.1âwphi1 But in a real
sense, it is. In Bridges v. Wixon,96 Mr. Justice Murphy declared that the impact of deportation
upon the life of an alien is often as great if not greater than the imposition of a criminal
sentence. In dealing with deportation, there is no justifiable reason for disregarding the
democratic and human tenets of our legal system and descending to the practices of
despotism. As Justice Brewer opined in Fong Yue Ting v. United States,97 deportation is a
punishment because it requires first, an arrest, a deprivation of liberty and second, a removal
from home, from family, from business, from property. To be forcibly taken away from home,
family, business and property and sent across the ocean to a distant land is punishment; and
that oftentimes is most severe and cruel. It would be putting salt on the respondent’s woes
occasioned by the BOC’s ineptitude. Considering the peculiar backdrop and the equities in this
case, the respondent’s deportation and the cancellation of his permanent resident visa as a
precondition to his re-entry into this country is severe and cruel; it is a form of punishment.
Our ruling in Vivo v. Cloribel,98 has no application in this case, precisely because the factual
milieu here is entirely different. In that case, the Commissioner of Immigration required the
respondents to leave the country on or before September 12, 1962, because their stay in the
country as approved by the Secretary of Justice had been cancelled. Our ruling in Bing v.
Commission on Immigration,99 even buttresses the case for the respondent since we ruled
therein that an alien entitled to a permanent stay cannot be deported without being accorded
due notice and hearing.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals
is AFFIRMED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 151900 August 30, 2005
 CHRISTINE CHUA, Petitioners, certification against forum-shopping, although petitioner did sign an attestation, wherein she
vs. identified herself as "the principal plaintiff".8
JORGE TORRES and ANTONIO BELTRAN, Respondents.
Upon motion of respondents, the RTC ordered the dismissal of the complaint9 on the ground
DECISION that Jonathan Chua had not executed a certification against forum-shopping. The RTC stressed
that Section 5, Rule 7 of the Rules of Civil Procedure, the rule requiring the
Tinga, J.:
certification, makes no distinction whether the plaintiff required to execute the certification is
The Court settles an issue, heretofore undecided, on whether the absence of the signature in a principal party, a nominal party or a necessary party. Instead, the provision requires that a
the required verification and certification against forum-shopping of a party misjoined as a plaintiff or principal party who files a complaint or initiatory pleading execute such
plaintiff is a valid ground for the dismissal of the complaint. We rule in the negative. certification. Jonathan Chua, being a plaintiff in this case, was obliged to execute or sign such
certification.10 Hence, his failure to do so in violation of the mandatory rule requiring the
The relevant facts in this Petition for Review are culled from the records.
certification against forum-shopping constituted valid cause for the dismissal of the petition.11
On 24 October 2001, a complaint for damages was lodged before the Regional Trial Court (RTC)
After the RTC denied the motion for reconsideration12 lodged by petitioner, the matter was
of Caloocan City, Branch 126.1 The complaint was filed by Christine Chua, herein petitioner,
elevated directly to this Court by way of petition for review under Rule 45, raising a purely legal
impleading her brother Jonathan Chua as a necessary co-plaintiff. Named as defendants in the
question,13 cast, if somewhat unwieldily, as "whether or not a co-plaintiff impleaded only as a
suit were herein respondents Jorge Torres and Antonio Beltran. Torres was the owner of the
necessary party, who however has no claim for relief or is not asserting any claim for relief in
9th Avenue Caltex Service Center (Caltex Service Center), while Beltran was an employee of
the complaint, should also make a certification against forum shopping."14
the said establishment as the head of its Sales and Collection Division.2
Preliminarily, it bears noting that Jonathan Chua did not sign as well any verification to the
The complaint alleged that on 3 April 2000, Jonathan Chua issued in favor of the Caltex Service
complaint, ostensibly in violation of Section 7, Rule 4 of the Rules of Civil Procedure. The RTC
Center his personal Rizal Commercial Banking Corporation (RCBC) Check No. 0412802 in the
failed to mention such fact, as does petitioner in her present petition. In their arguments
amount of Nine Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos (₱9,849.20)
before this Court, respondents do refer in passing to the verification requirement15 , but do
in payment for purchases of diesel oil. However, the check was dishonored by the drawee bank
not place any particular focus thereto. The verification requirement is separate from the
when presented for payment on the ground that the account was closed. Beltran then sent
certification requirement.16 It is noted that as a matter of practice, the verification is usually
petitioner a demand letter informing her of the dishonor of the check and demanding the
accomplished at the same time as the certification against forum-shopping; hence the
payment thereof. Petitioner ignored the demand letter on the ground that she was not the
customary nomenclature, "Verification and Certification of Non Forum-Shopping" or its
one who issued the said check.
variants. For this reason, it is quite possible that the RTC meant to assail as well the failure of
Without bothering to ascertain who had actually issued the check, Beltran instituted against Jonathan Chua to verify the complaint.
petitioner a criminal action for violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently,
The verification requirement is significant, as it is intended to secure an assurance that the
a criminal information was filed against petitioner with the Metropolitan Trial Court (MTC) of
allegations in the pleading are true and correct and not the product of the imagination or a
Caloocan City, Branch 50.3 The MTC then issued a warrant of arrest against petitioner. The
matter of speculation, and that the pleading is filed in good faith.17 The absence of a proper
police officers tasked with serving the warrant looked for her in her residence, in the auto
verification is cause to treat the pleading as unsigned and dismissible.18 It would be as well that
repair shop of her brother, and even at the Manila Central University were she was enrolled as
the Court discuss whether under the circumstances, Jonathan Chua is also required to execute
a medical student, all to the alleged embarrassment and "social humiliation" of petitioner.4
a verification in respect to petitioner’s complaint.
Beltran’s purported negligence amounted to either malicious prosecution or serious
Having established the proper parameters of the petition, we proceed to the core issues. We
defamation in prosecuting petitioner resulting from the issuance of a check she herself did not
find the petition has merit, although we appreciate the situation differently from petitioner.
draw, and served cause for a claim of moral damages. On the other hand, Torres, as employer
Our decision proceeds from the fundamental premise that Jonathan Chua was misjoined as a
of Beltran, was alleged to have failed to observe the diligence of a good father of the family to
party plaintiff in this case.
prevent the damage suffered by petitioner. Exemplary damages and attorney’s fees were
likewise sought, thus bringing the It is elementary that it is only in the name of a real party in interest that a civil suit may be
aggregate total of damages claimed to Two Million Pesos (₱2,000,000.00), plus costs of suit. 5 prosecuted.19 Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party in interest is
the party who stands to be benefited or injured by the judgment in the suit, or the party
Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was explicitly qualified
entitled to the avails of the suit. "Interest" within the meaning of the rule means material
in the second paragraph of the complaint that he was being "impleaded here-in as a necessary
interest, an interest in issue and to be affected by the decree, as distinguished from mere
party-plaintiff".6 There was no allegation in the complaint of any damage or injury sustained
interest in the question involved, or a mere incidental interest.20 One having no right or interest
by Jonathan, and the prayer therein expressly named petitioner as the only party to whom
to protect cannot invoke the jurisdiction of the court as a party plaintiff in an action.21 To
respondents were sought to recompense.7 Neither did Jonathan Chua sign any verification or
qualify a person to be a real party in interest in whose name an action must be prosecuted, he
must appear to be the present real owner of the right sought to enforced.22
The subject complaint does not allege any rights of Jonathan Chua violated by respondents,
present any rights of his to be enforced, or seek in his behalf any rights to the avails of suit. In
short, Jonathan claims nothing, and for nothing, in the subject complaint. If he alone filed the
complaint, it would have been dismissed on the ground that the complaint states no cause of
action, instituted as it was by a person who was not a real party in interest.
But was it proper for petitioner to have even impleaded Jonathan as a co-plaintiff in the first
place? Petitioner alleged in her complaint that Jonathan was a necessary party, and remains
consistent to that claim even before this Court. She however fails to demonstrate how
Jonathan can be considered as a necessary party, other than by noting that he was "the one
who really
issued the check in controversy."23 Such fact, if proven, may establish the malice of
respondents in filing the criminal case against petitioner for violation of B.P. 22, but does not
create the need to require Jonathan’s participation as a necessary party.
Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary party as "one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to
those already parties, or for a complete determination or settlement of the claim subject of
the action."24 Necessary parties are those whose presence is necessary to adjudicate the whole
controversy, but whose interests are so far separable that a final decree can be made in their
absence without affecting them.25
An example of a necessary party may be found in Seno v. Mangubat.26 Petitioner therein sold
her property through a deed of sale to three vendees. Two of the vendees then sold their
shares to the third buyer, who then sold the property to another set of persons. Thereafter,
petitioner, who claimed that the true intent of the first sale was an equitable mortgage, filed
a complaint seeking the reformation of the deed of sale and the annulment of the second sale.
The question arose whether the two vendees who had since disposed of their shares should
be considered as indispensable parties or necessary parties. In concluding that they were only
necessary parties, the Court reasoned:
In the present case, there are no rights of defendants Andres Evangelista and Bienvenido
Mangubat to be safeguarded if the sale should be held to be in fact an absolute sale nor if the
sale is held to be an equitable mortgage. Defendant Marcos Mangubat became the absolute
owner of the subject property by virtue of the sale to him of the shares of the aforementioned
defendants in the property. Said defendants no longer have any interest in the subject
property. However, being parties to the instrument sought to be reformed, their presence is
necessary in order to settle all the possible issues of the controversy. Whether the disputed
sale be declared an absolute sale or an equitable mortgage, the rights of all the defendants will
have been amply protected. Defendants-spouses Luzame in any event may enforce their rights
against defendant Marcos Mangubat.27
In Seno, the persons deemed by the Court as necessary parties may have had already disposed
of their interests in the property. However, should the lower court therein grant the prayer for
the reformation of the deed of sale, the ruling will undoubtedly have an effect on such parties,
on matters such as the purchase price which they may have received, and on whatever
transmission of rights that may have occurred between them and the vendor.
In contrast, Jonathan Chua does not stand to be affected should the RTC rule either favorably
or unfavorably of the complaint. This is due to the nature of the cause of action of the
complaint, which alleges an injury personal to petitioner, and the relief prayed for, which is to
be adjudicated solely to petitioner. There is no allegation in the complaint alleging any violation
or omission of any right of Jonathan, either arising from contract or from law.
It may be so that Jonathan may be called to testify by his sister, in order to prove the essential
allegation that she did not issue the check in question, and perhaps such testimony would be
vital to petitioner’s cause of action. But this does not mean that Jonathan should be deemed
a necessary party, as such circumstance would merely place him in the same class as those
witnesses whose testimony would be necessary to prove the allegations of the complaint. But
the fact remains that Jonathan would stand unaffected by the final ruling on the complaint.
The judicial confirmation or rejection of the allegations therein, or grant or denial of the reliefs
prayed for will not infringe on or augment any of his rights under the law. If there would be
any effect to Jonathan of the RTC’s ultimate decision on the complaint, it would be merely
emotional, arising from whatever ties of kinship he may retain towards his sister, and no
different from whatever effects that may be similarly sustained on petitioner’s immediate
family.
Since we are unconvinced by petitioner’s basic premise that Jonathan was a necessary party,
it is unnecessary to directly settle the issue as couched by petitioner of "whether or not a co-
plaintiff impleaded only as a necessary party, who however has no claim for relief or is not
asserting any claim for relief in the complaint, should also make a certification against forum
shopping."28 We can note, as the RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil
Procedure makes no distinctions that would expressly exempt a necessary party from
executing the certification against forum shopping. Nonetheless, there are dimensions to the
matter, heretofore unraised, that may unsettle a strict application of the rule, such as if the
necessary party is impleaded as a plaintiff or counterclaimant without his knowledge or against
his will.29 But these circumstances relevant to a necessary party are not present in this case,
and thus require no further comment upon for now.
Instead, what the Court may rule upon is whether the absence of the signature of the person
misjoined as a party-plaintiff in either the verification page or certification against forum-
shopping is ground for the dismissal of the action. We rule that it is not so, and that the RTC
erred in dismissing the instant complaint. There is no judicial precedent affirming or rejecting
such a view, but we are comfortable with making such a pronouncement. A misjoined party
plaintiff has no business participating in the case as a plaintiff in the first place, and it would
make little sense to require the misjoined party in complying with all the requirements
expected of plaintiffs.
At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure states:
Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may
be dropped or added by order of the court on motion of any party or on its own initiative at
any stage of the action and on such terms as are just. Any claim against a misjoined party may
be severed and proceeded with separately.30
Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits dismissal of a suit
on the ground of non-joinder or misjoinder of parties. 31 Moreover, the dropping of misjoined
parties from the complaint may be done motu proprio by the court, at any stage, without need
for a motion to such effect from the adverse party.32 Section 11, Rule 3 indicates that the
misjoinder of parties, while erroneous, may be corrected with ease through amendment,
without further hindrance to the prosecution of the suit.
It should then follow that any act or omission committed by a misjoined party plaintiff should
not be cause for impediment to the prosecution of the case, much less for the dismissal of the
suit. After all, such party should not have been included in the first place, and no efficacy should
be accorded to whatever act or omission of
the party.33 Since the misjoined party plaintiff receives no recognition from the court as either
an indispensable or necessary party-plaintiff, it then follows that whatever action or inaction
the misjoined party may take on the verification or certification against forum-shopping is
inconsequential. Hence, it should not have mattered to the RTC that Jonathan Chua had failed
to sign the certification against forum-shopping, since he was misjoined as a plaintiff in the
first place. The fact that Jonathan was misjoined is clear on the face of the complaint itself, and
the error of the RTC in dismissing the complaint is not obviated by the fact that the adverse
party failed to raise this point. After all, the RTC could have motu proprio dropped Jonathan as
a plaintiff, for the reasons above-stated which should have been evident to it upon
examination of the complaint.
There may be a school of thought that would nonetheless find some satisfaction in petitioner’s
woes before the RTC, as it was her error in the first place of wrongfully impleading her brother
as a party plaintiff which ultimately served as cause for the dismissal of the complaint. The
blame may in the final analysis lie with petitioner, yet we should not construe the rules of
procedure to quench an unnecessary thirst to punish at the expense of the intellectual integrity
of the rules. For our Rules of Court do not regard the misjoinder of parties as an error of fatal
consequence, and the logical extension of this principle is to consider those procedural acts or
omissions of misjoined parties as of similar import.
WHEREFORE, the Petition is GRANTED. The Orders dated 3 December 2001 and 15 January
2002 of the Regional Trial Court of Caloocan City, Branch 126, in Civil Case No. C-19863 are SET
ASIDE, and the Complaint in the aforementioned case is REINSTATED. The lower court is
enjoined to hear and decide the case with deliberate dispatch. No pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 84895 May 4, 1989
REPUBLIC OF THE PHILIPPINES, petitioner, JOSE D. CAMPOS, JR., petitioner-intervenor,
vs.
THE HONORABLE SANDIGANBAYAN, FIRST DIVISION, TEODORO Q. PEÑA, GORGONIO
MACARIOLA, ORLANDO PACIENCIA, JESUS TUPALAR SEVERINO DELA CRUZ, and FE
CORTEZO, respondents.
Napoleon M. Gamo for respondent Teodoro Pena.
Apostol, Bernas, Gumaru & Ora for private respondents.
GUTIERREZ, JR., J.:
The petitioner charges the Sandiganbayan with grave abuse of discretion amounting to lack or
excess of jurisdiction in denying its motion to drop Jose D. Campos, Jr. as defendant in its
complaint for reconveyance, reversion, accounting, restitution and damages filed against Jose
D. Campos, Jr. and the other defendants in Civil Case No. 0010. The antecedent facts are stated
by the Solicitor General as follows:
1. On July 22, 1987, petitioner filed with respondent Court a complaint for reconveyance,
reversion, accounting, restitution and damages against Alfredo (Bejo) T. Romualdez, Ferdinand
E. Marcos, Imelda R. Marcos, Jose D. Campos, Jr. and forty five (45) other defendants including
the above-named private respondents, docketed thereat as Civil Case No. 0010 (PCGG 11),
seeking to 'recover from them ill-gotten wealth consisting of funds and other property which
they [acting singly or collectively and] in unlawful concert with one another, had acquired and
accumulated in flagrant breach of trust and of their fiduciary obligations as public officers, with
grave abuse of right and power and in brazen violation of the Constitution and laws of the
Republic of the Philippines', including the misappropriation and theft of public funds, plunder
of the nations wealth, extortion, blackmail, bribery, embezzlement and other acts of
corruption, betrayal of public trust and brazen abuse of power, as more fully described in the
Complaint thus 'resulting in their unjust enrichment during defendant Ferdinand E. Marcos' 20
years of rule from December 30, 1965 to February 25, 1986, first as President of the Republic
of the Philippines under the 1935 Constitution and, therafter, as one-man ruler under martial
law and Dictator under the 1973 Marcos promulgated Constitution ... at the expense and to
the grave and irreparable damage of Plaintiff and the Filipino people. (pp. 2-3, complaint).
2. Summonses were subsequently issued in due time by there-respondent Court against
defendants therein.
3. Some time in the later part of August 1987, defendant Jose D, Campos, Jr., having been
served with summons on August 5, 1987, filed with the respondent Court an undated
'Manifestation and Motion to Dismiss Complaint with Respect to Jose D. Campos' praying that
he be removed as party defendant from the complaint on the grounds that he had 'voluntarily
surrendered or turned over [any share in his name on any of the corporations referred to, aside
from claiming any interest, ownership or right thereon] to the Government of the Republic of
the Philippines' and that he was 'entitled to the immunity granted by the Presidential
Commission on Good Government pursuant to Executive Order No. 14, under the
Commission's Resolution dated May 28, 1986 ... to Mr. Jose Y. Campos (and) his family he
'being a member of the immediate family of Jose Y. Campos.' Xerox copy of said Manifestation
and Motion, etc., is hereto attached as Annex "C" hereof.
4. On September 23, 1987, petitioner filed with the respondent Court a 'Motion' seeking to
drop defendant Jose D. Campos, Jr. from the Complaint on the ground that the Presidential
Commission on Good Government (PCGG for short) had, in a Resolution dated May 28, 1986,
granted immunity to Mr. Jose Y. Campos and his family, which immunity necessarily extends
to defendant Jose D. Campos, Jr. who is the son of said Mr. Jose Y. Campos. Xerox copy of said
Motion is hereto attached as Annex 'D' hereof.
5. The private respondents opposed petitioner's motion. Defendant Jose D. Campos, Jr. filed
his reply.
6. Meanwhile, on January 28, 1988, petitioner filed with the respondent Court an
Amended/Expanded Complaint, xerox copy of which is hereto attached as Annex 'E' hereof.
7. On February 8, 1988, respondent Court issued a Resolution (Annex 'A' hereof) which, as
abovestated, denied petitioner's and Jose D. Campos, Jr.'s motions to drop him from the
complaint.
8. On March 7, 1988, defendant Jose D. Campos, Jr. filed a 'Motion for Reconsideration of the
Resolution Dated February 8, 1988', xerox copy of which is hereto attached as Annex 'F' hereof.
9. On March 10, 1988, petitioner also filed its separate 'Motion for Reconsideration of the
Resolution of February 8, 1988, xerox copy of which is hereto attached as Annex 'G' hereof.
10. On August l8, 1988, respondent Court issued a Resolution Annex 'B' hereof) denying
petitioner's and defendant Jose D. Campos, Jr.'s motions for reconsideration. A copy of the
Resolution was received by the Office of the Solicitor General on August 24, 1988. (pp. 4-8
Rollo)
The original petition was against the Sandiganbayan and six private respondents who opposed
the motion to drop Campos, Jr. from the complaint.
Upon motion, we allowed Jose D. Campos, Jr. to file a petition in intervention.
In a resolution dated March 29, 1988, we issued a temporary restraining order ordering the
Sandiganbayan to cease and desist from proceeding with Civil Case No. 0010.
The main issue in the instant petition hinges on whether or not the petitioner can validly drop
Jose D. Campos, Jr. as party defendant in Civil Case No. 0010 by virtue of the PCGG's grant of
immunity in favor of his father Jose Y. Campos and the latter's family.
The Sandiganbayan ruled in the negative. It denied the Republic's and petitioner Jose D.
Campos, Jr.'s motions for reconsideration on the following grounds.
1) The PCGG did not then and does not now have the power to grant civil immunity;
2) Even if it did, the grant of immunity itself rendered in the PCGG's resolution dated May 28,
1986 has not been shown to cover the transactions involving the corporations and or
properties for which Jose D. Campos, Jr., is now sought to be held accountable, i.e., Metroport
Services, Inc.;
3) The fact is that nowhere, either in the original motions or in the Motion for Reconsideration
before this Court has it been shown that, save for the alleged unqualified immunity, there no
longer exists any demandable claim against Jose D. Campos, Jr., arising from the transactions
resulting in his being impleaded thereon. In other words, were it not for the supposed grant of
immunity, Jose D. Campos, Jr., would remain liable in the matter of Metroport Services, Inc.,
and for the 60% which Alfredo (Bejo) Romualdez acquired therein according to paragraph 14
(c) of the Complaint (supra) which does not appear to have been restored or compensated for.
(p. 54, Rollo)
The petitioner contends otherwise. The Solicitor General asserts that the name of Jose D.
Campos, Jr. was included as defendant in the complaint through mistake or oversight and that
pursuant to Section 11, Rule 3 of the Revised Rules of Court it has a right to drop him as
defendant without prior consent of any party. The Solicitor General also maintains that
although the defendants in the case were charged solidarily, Campos, Jr. was not an
indispensable party since Article 1216 of the Civil Code allows the petitioner as solidary
creditor to choose among the solidary debtors against whom it win enforce collection.
Jose Campos, Jr. adds that the petitioner's motion to drop him as defendant should be
considered as one filed under section 1, Rule 17 of the Revised Rules of Court thus giving it the
absolute right to dismiss the action by mere notice of dismissal.
Above all these technicalities, the petitioner maintains that the resolutions of the
Sandiganbayan which ruled that the PCGG does not have the power to grant civil immunity
frustrated the earnest efforts at recovery of ill-gotten wealth recognized in the Constitution,
and Executive Orders Numbers 1, 2, 14 and 14-A. The petitioner contends that the non-
observance of the immunity provision granted by the PCGG will hinder the voluntary
cooperation of known Marcos cronies to enter into amicable settlements or compromises with
respect to the recovery of ill-gotten wealth. The petitioner also argues that the PCGG's power
to grant criminal immunity under Section 5 of Executive Order No. 14 carries with it the implied
power to enter into compromises and amicable settlements in line with its duty to recover ill-
gotten wealth expeditiously, efficiently and effectively.
Given these considerations, the petitioner insists that the May 28, 1986 resolution of the PCGG
which granted immunity from both civil and criminal prosecution to Jose Y. Campos and his
family is a valid official act of the PCGG and since Jose Campos, Jr. is a legitimate son of Jose Y.
Campos, he must be deemed covered by the grant of immunity.
Furthermore, petitioner-intervenor Campos, Jr. states that the Sandiganbayan has no
jurisdiction to determine the validity of the grant of immunity and release from civil liability to
the intervenor as there is no dispute between him and the PCGG. Thus, Campos, Jr. argues that
"Except in a litigation arising from a disagreement between the one claiming to be a beneficiary
and the PCGG/Republic, the Sandiganbayan is without competence to review the validity or
extent of the PCGG granted and the Republic supported grant of immunity from criminal
prosecution and release from civil liability." (p. 216, Rollo)
We first ascertain whether or not the Sandiganbayan has jurisdiction to look into the validity
of the immunity granted by the PCGG to Jose Y. Campos which was extended to his son,
petitioner-intervenor herein, Jose Campos, Jr.
Executive Order No. 14 defines "the jurisdiction over cases involving the ill-gotten wealth of
former President Ferdinand E. Marcos, Mrs. Imelda R. Marcos, members of their immediate
family, close relatives, subordinates, close and/or business associates, dummies, agents and
nominees." Section 2 thereof provides that the PCGG shall file all such cases, whether civil or
criminal, with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof "
In the case of Presidential Commission on Good Goverment v. Pena (159 SCRA 556 [1988]), the
court interpreted the Sandiganbayan's jurisdiction under this statute to extend to "all cases of
the commission ... , and all incidents arising from, incidental to, or related to (them), such cases
necessarily fall likewise under the Sandiganbayan's exclusive and original jurisdiction subject
to review on certiorari exclusively by the Supreme Court." (pp. 561-562; Emphasis supplied).
Likewise, in the case of Bataan Shipyard & Engineering Co., Inc. v. Presidential Commission on
Good Government, (150 SCRA 181 [1987]), we said:
It should also by now be reasonably evident from what has thus far been said that the PCGG is
not, and was never intended to act as, a judge. Its general function is to conduct investigations
in order to collect evidence establishing instances of 'ill-gotten wealth;' issue sequestration,
and such orders as may be warranted by the evidence thus collected and as may be necessary
to preserve and conserve the assets of which it takes custody and control and prevent their
disappearance, loss or dissipation; and eventually file and prosecute in the proper court of
competent jurisdiction all cases investigated by it as may be warranted by its findings. It does
not try and decide, or hear and determine, or adjudicate with any character of finality or
compulsion, cases involving the essential issue of whether or not property should be forfeited
and transferred to the State because 'ill-gotten' within the meaning of the Constitution and
the executive orders. This function is reserved to the designated court, in this case, the
Sandiganbayan. (Ex. Ord. No. 14)
The powers of the PCGG are not unlimited. Its jurisdiction over cases involving ill-gotten wealth
must be within the parameters stated in Executive Order No. 14. Necessarily, the jurisdiction
of the Sandiganbayan which is tasked to handle the ill-gotten wealth cases must include the
jurisdiction to determine whether or not the PCGG exceeded its power to grant immunity
pursuant to the provisions of Executive Order No. 14.
We now decide the pivotal issue which is the extent, if any, of . 1 the PCGG's power to grant
civil immunity. Section 5 of Executive Order No. 14 provides:
SECTION 5. The Presidential Commission on Good Government is authorized to grant immunity
from criminal prosecution to any person who testifies to the unlawful manner in which any
respondent, defendant or accused has acquired or accumulated the property or properties in
question in cases where such testimony is necessary to prove violation of existing laws.
Since the aforecited provision mentions the grant of immunity only in criminal prosecutions
and under certain circumstances, the Sandiganbayan concluded that the PCGG does not have
the power to grant civil immunity much less extend the civil immunity granted to Jose Y.
Campos to his son Jose Campos, Jr.
The conclusion is erroneous.
A cursory reading of Executive Order No. 14 shows that the PCGG is authorized to file both
criminal and civil cases against persons suspected of having acquired ill-gotten wealth. Section
3 thereof provides:
SECTION 3. Civil suits for restitution, reparation of damages, or indemnification for
consequential damages, forfeiture proceedings provided for under Republic Act No. 1379, or
any other civil actions under the Civil Code or other existing laws, in connection with Executive
Order No. 1 dated February 28, 1986 and Executive Order No. 2 dated March 12, 1986, may be
filed separately from and proceed independently of any criminal proceedings and may be
proved by a preponderance of evidence.
This provision, together with section 5 of the law in relation to the purposes for which the
PCGG was created must be taken into consideration in determining whether or not the PCGG
has authority to grant civil immunity.
...Legislative intent must be ascertained from a consideration of the statute as a whole.
The0particular words, clauses and phrases should not be studied as detached and isolated
expressions, but the whole and every part of the statute must be considered in fixing the
meaning of any of its parts and in order to produce a harmonious whole (Araneta v.
Concepcion, 99 Phil. 709; Tamayo v. Gsell, 35 Phil. 953; Lopez v. El Hogar Filipino, 47 Phil, 249;
Chartered Bank v. Imperial, 48 Phil. 931). A statute must be so construed as to harmonize and
give effect to all its provisions whenever possible (People v. Polmon, 86 Phil. 350). The meaning
of the law, it must be borne in mind, is not to be extracted from any single part, portion or
section or from isolated words and phrases, clauses or sentences but from a general
consideration or view of the act as a whole (82 C.J.S., Section 345, pp. 699-700). Every part of
the statute must be interpreted with reference to the context. This means that every part of
the statute must be considered together with the other parts, and kept subseivient to the
general intent of the whole enactment, not separately and independently (Tamayo v. Gsell, 35
Phil, 953). More importantly, the doctrine of associated words (Noscitur a Sociis) provides that
where a particular word or phrase in a statement is ambiguous in itself or is equally susceptible
of various meanings, its true meaning may be made clear and specific by considering the
company in which it is found or with which it is associated (Co Kim Cham v. Valdez Tan Keh &
Dizon, 75 Phil. 371). (Aisporna v. The Court of Appeals, 113 SCRA 459 [1982])
It is crystal clear from the law that the PCGG may file an independent civil action separate from
the criminal action. Hence, section 5 thereof which empowers the PCGG to grant criminal
immunity must be interpreted to relate only to a criminal action and not to a civil action. In
case of a civil action, the power to grant immunity or the making of the decision not to file a
civil case or to drop one already in progress must be related to section 3 of the law which
specifically provides for the procedures and the applicable laws in the prosecution of civil suits.
The well-settled doctrine is that amicable settlements and/or compromises are not only
allowed but actually encouraged in civil cases. Article 2028 of the Civil Code categorically
states: "A compromise is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced." On the other hand, there is no
similar general rule in criminal prosecutions. Immunity must be specifically granted.
In the instant case, the PCGG issued a resolution dated May 28, 1986, granting immunity from
both civil and criminal prosecutions to Jose Y. Campos and his family. The pertinent provisions
of the resolution read as follows:
3.0. In consideration of the full cooperation of Mr. Jose Y. Campos to this Commission, his
voluntary surrender of the properties and asset. disclosed and declared by him to belong to
deposed President Ferdinand E. Marcos to the Government of the Republic of the Philippines,
his full, complete and truthful disclosures, and his commitment to pay a sum of money as
determined by the Philippine Government, this Commission has decided and agreed:
3.1. To grant to Mr. Jose Y. Campos, his family, Mariano K. Tan and Francisco de Guzman
immunity from criminal prosecutions, as provided in Section 5 of Executive Order No. 14.
3.2. To release Mr. Jose Y. Campos, his family, Mariano K Tan and Francisco de Guzman from
any and all civil liabilities with respect to all matters arising from his/their past relationship
with deposed President Ferdinand E. Marcos.
3.3. To exclude Jose Y. Campos, his family, Mariano K. Tan and Francisco de Guzman from the
complaint filed by the Solicitor General with the Commission docketed as Republic of the
Philippines v. Ferdinand E. Marcos, et al., PCGG I.S. No. 1 for graft and corrupt practices and
other issues related to public service. .... (Emphasis supplied.) (pp18-19, Rollo)
Undoubtedly, this resolution embodies a compromise agreement between the PCGG on one
hand and Jose Y. Campos on the other. Hence, in exchange for the voluntary surrender of the
ill-gotten properties acquired by the then President Ferdinand E. Marcos and his family which
were in Jose Campos' control, the latter and his family were given full immunity in both civil
and criminal prosecutions. In the absence of an express prohibition, the rule on amicable
settlements and/or compromises on civil cases under the Civil Code is applicable to PCGG
cases. This is the proper interpretation of the law in the light of the purposes enumerated in
Executive Order No. 14, to wit:
... the vital task of the Commission involves the just and expeditious recovery of such ill-gotten
wealth in order that the finds assets and other properties may be used to hasten national
economic recovery;
... the overriding considerations of national interest and national survival require that the
Presidential Commission on Good Government achieve its vital task efficiently and effectively,
with due regard to the requirements of fairness and due process;
Since petitioner-intervenor Jose Campos, Jr. is a legitimate son of Jose Y. Campos, the full
immunity granted to the latter and his family must also extend to the former pursuant to the
May 28, 1986 resolution of the PCGG.
We note that the law governing the issues raised in this petition calls for the setting aside of
technical rules when necessary to achieve the purposes behind the PCGUs creation.
It is to be reiterated that paragraph 2 of section 3, of Executive Order No. 14 reads:
xxx xxx xxx
The technical rules of procedure and evidence shag not be strictly applied to the civil cases
filed hereunder.
Section 7 thereof also provides:
SECTION 7. The provision of this Executive Order shall prevail over any and all laws, or parts
thereof, as regards the investigation, prosecution, and trial of cases for violations of laws
involving the acquisition and accumulation of ill-gotten wealth as mentioned in Executive
Order Nos. 1 and 2.
A settled rule on construction is found in the case of Leveriza v. Intermediate Appellate Court,
(157 SCRA 282 [1988]):
... that another basic principle of statutory construction mandates that general legislation must
give way to special legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable (Sto. Domingo v. De los
Angeles, 96 SCRA 139), that a specific statute prevails over a general statute (De Jesus v.
People, 120 SCRA 760) and that where two statutes are of equal theoretical application to a
particular case, the one designed therefor specially should prevail (Wil Wilhensen Inc. v.
Baluyot, 83 SCRA 38).
On this score alone, the Sandiganbayan's rejection of the petitioner's motion on the ground
that dropping Campos, Jr. as defendant in the civil case would amount to a violation of the
Rules of Court is based on shaky ground.
The Sandiganbayan's objections will hamper PCGG efforts in this similar cases.
By virtue of the PCGG's May 28, 1986 resolution, Jose Campos, Jr. was given full immunity from
both civil and criminal prosecutions in exchange for the "full cooperation from Jose Y Campos
to this Commission, his voluntary surrender of the properties and assets disclosed and declared
by him to belong to deposed President Ferdinand E. Marcos to the Government Of the Republic
of the Philippines, his full, complete and truthful disclosures, and his commitment to pay a sum
of money as determined by the Philippine Government." In addition, Campos, Jr. had already
waived and surrendered to the Republic his registered equity interest in the
Marcos/Romualdez corporations involved in the civil case. Thus, as far as the petitioner is
concerned, it had already released Campos. Jr. from an criminal and civil liabilities in
connection with his association with the said corporations. Under the law, civil liabilities would
include restitution and damages in favor of the government.
It is immaterial whether or not Campos, Jr. was given specific or individual immunity from his
liabilities as regards the Marcos/Romualdez corporations, the subject matter of Civil Case No.
0010. The grant of full immunity to Campos, Senior and his family covers all of Campos, Jr.'s
liabilities, criminal or civil, arising from association with the Marcoses including transactions
with the corporations involved in the said civil case.
Even from the viewpoint of procedure, the PCGG was right when it filed a motion to drop Jose
Campos, Jr. as defendant in the civil case. Section 11, Rule 3 of the Rules of Court states:
SECTION 11, RULE 3. Misjoinder and non-joinder of parties Misjoinder of parties.-is not ground
for dismissal of an action. Parties may be dropped or added by order of the court on motion of
any patty or of its own initiative at any stage of the action and on such terms as are just. ...
(Emphasis supplied)
We interpreted this rule in the case of Lim Tanhu v. Ramolete 66 SCRA 425 (l975):
... the latter rule does not comprehend whimsical and irrational dropping or adding of parties
in a complaint. that it really contemplates is erroneous or mistaken non-joinder and misjoinder
of parties. No one is free to join anybody in a complaint in court only to drop him
unceremoniously later at the pleasure of the plaintiff. The rule presupposes that the original
inclusion had been made in the honest conviction that it was proper and the subsequent
dropping is requested because it turned out that such inclusion was a mistake. And this is the
reason why the rule ordains that the dropping be 'on such terms as are just-just to all the other
parties.
There is nothing whimsical or capricious in dropping the petitioner-intervenor from the
complaint. Quite the contrary, it is based on sound and salutary reasons.
As discussed earlier, the PCGG's motion to drop Campos, Jr. as defendant in Civil Case No. 0010
has legal basis under Executive Order No. 14. The fact that Campos, Jr. and all the other
defendants were charged solidarily in the complaint does not make him an indispensable
party. We have ruled in the case of Operators Incorporated v. American Biscuit Co., Inc., [154
SCRA 738 (1987)] that "Solidarity does not make a solidary obligor an indispensable party in a
suit filed by the creditor. Article 1216 of the Civil Code says that the creditor 'may proceed
against anyone of the solidary debtors or some or all of them simultaneously."
There is no showing that the dropping of Jose Campos, Jr. as in defendant would be unjust to
the other defendants in the civil case because, the other defendants can still pursue the case
and put up their defenses. In the case of Lim Tanhu v. Ramolete, (supra), the main reason why
we did not allow the dropping of two defendants who were charged solidarily with the other
remaining defendants, despite the motion of the plaintiff, is the fact that the latter filed such
motion after the two remaining defendants defaulted. Thus, we said:
... In the case at bar, there is nothing in the record to legally justify the dropping of the non-
defaulted defendants, Lim and Leonardo. The motion of October 18, 1974 cites none. From all
appearances, plaintiff just decided to ask for it, without any relevant explanation at all. Usually,
the court in granting such a motion inquires for the reasons and in the appropriate instances
directs the granting of some form of compensation for the trouble undergone by the defendant
in answering the complaint, preparing for or proceeding partially to trial, hiring counsel and
making corresponding expenses in the premises. Nothing of these, appears in the order in
question. Most importantly, His Honor ought to have considered that the outright dropping of
the non-defaulted defendants Lim and Leonardo, over their objection at that, would certainly
be unjust not only to the petitioners, their own parents, who would in consequence be entirely
defenseless, but also to Lim and Leonardo themselves who would naturally correspondingly
suffer from the eventual judgment againts their parents. Respondent court paid no heed at all
to the mandate that such dropping must be on such terms as are just meaning'-to all concerned
with its legal and factual effects.
There is no similar reason in this case.
Moreover, as correctly stated by the herein petitioner: "Under the law, the solidary debtor
who pays shall have a right of action against the others for the amount of their respective
shares. And, with the dropping of a defendant who pays his share, the other solidary co-
defendants are also benefited to the extent of that paid share. Truly, each solidary debtor ends
up paying his own share, including the defendant who had been dropped. Hence, there is no
justice." (p. 28, Rollo)
WHEREFORE, the instant petition is hereby GRANTED. The questioned resolutions of the
Sandiganbayan are REVERSED and SET ASIDE. The Sandiganbayan is ordered to drop Jose
Campos, Jr. as defendant in Civil Case No. 0010. The temporary restraining order issued on
November 29, 1988 is made permanent insofar as Jose D. Campos, Jr. is concerned. No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 166519 March 31, 2009
NIEVES PLASABAS and MARCOS MALAZARTE, Petitioners,
vs.
COURT OF APPEALS (Special Former Ninth Division), DOMINADOR LUMEN, and AURORA
AUNZO,Respondents.
DECISION
NACHURA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Court are the
May 12, 2004 Decision1of the Court of Appeals (CA) in CA-G.R. CV No. 43085 and the December
1, 2004 Resolution2 denying reconsideration of the challenged decision.
The pertinent facts and proceedings follow.
In 1974, petitioners3 filed a complaint for recovery of title to property with damages before
the Court of First Instance (now, Regional Trial Court [RTC]) of Maasin, Southern Leyte against
respondents. The case was docketed as Civil Case No. R-1949. The property subject of the case
was a parcel of coconut land in Canturing, Maasin, Southern Leyte, declared under Tax
Declaration No. 3587 in the name of petitioner Nieves with an area of 2.6360 hectares. 4In their
complaint, petitioners prayed that judgment be rendered confirming their rights and legal title
to the subject property and ordering the defendants to vacate the occupied portion and to pay
damages.5
Respondents, for their part, denied petitioners’ allegation of ownership and possession of the
premises, and interposed, as their main defense, that the subject land was inherited by all the
parties from their common ancestor, Francisco Plasabas.6
Revealed in the course of the trial was that petitioner Nieves, contrary to her allegations in the
complaint, was not the sole and absolute owner of the land. Based on the testimonies of
petitioners’ witnesses, the property passed on from Francisco to his son, Leoncio; then to
Jovita Talam, petitioner Nieves’ grandmother; then to Antonina Talam, her mother; and then
to her and her siblings—Jose, Victor and Victoria.7
After resting their case, respondents raised in their memorandum the argument that the case
should have been terminated at inception for petitioners’ failure to implead indispensable
parties, the other co-owners – Jose, Victor and Victoria.
In its April 19, 1993 Order,8 the trial court, without ruling on the merits, dismissed the case
without prejudice, thus:
This Court, much as it wants to decide the instant case on the merits, being one of the old
inherited cases left behind, finds difficulty if not impossibility of doing so at this stage of the
proceedings when both parties have already rested their cases. Reluctantly, it agrees with the
defendants in the observation that some important indispensable consideration is
conspicuously wanting or missing.
It is not the Court’s wish to turn its back on the crucial part of the case, which is the
pronouncement of the judgment to settle the issues raised in the pleadings of the parties once
and for all, after all the time, effort and expense spent in going through the trial process.
But, rules are rules. They have to be followed, to arrive at a fair and just verdict. Section 7, Rule
3 of the Rules of Court provides:
"x x x 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."
What the Court wants to say here is that the instant case should have been dismissed without
prejudice a long time ago for lack of cause of action as the plaintiffs spouses Marcos Malazarte
and Nieves Plasabas Malazarte have no complete legal personality to sue by themselves alone
without joining the brothers and sisters of Nieves who are as INDISPENSABLE as the latter in
the final determination of the case. Not impleading them, any judgment would have no
effectiveness.
They are that indispensable that a final decree would necessarily affect their rights, so that the
Court cannot proceed without their presence. There are abundant authorities in this regard.
Thus –
"The general rule with reference to the making of parties in a civil action requires the joinder
of all indispensable parties under any and all conditions, their presence being a sine qua non
of the exercise of judicial power. (Borlasa v. Polistico, 47 Phil. 345, 348) For this reason, our
Supreme Court has held that when it appears of record that there are other persons interested
in the subject matter of the litigation, who are not made parties to the action, it is the duty of
the court to suspend the trial until such parties are made either plaintiffs or defendants.
(Pobre, et al. v. Blanco, 17 Phil. 156). x x x Where the petition failed to join as party defendant
the person interested in sustaining the proceeding in the court, the same should be dismissed.
x x x When an indispensable party is not before the court, the action should be dismissed.
(People, et al. v. Rodriguez, et al., G.R. Nos. L-14059-62, September 30, 1959) (sic)
"Parties in interest without whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants. (Sec. 7, Rule 3, Rules of Court). The burden of procuring the
presence of all indispensable parties is on the plaintiff. (39 Amjur [sic] 885). The evident
purpose of the rule is to prevent the multiplicity of suits by requiring the person arresting a
right against the defendant to include with him, either as co-plaintiffs or as co-defendants, all
persons standing in the same position, so that the whole matter in dispute may be determined
once and for all in one litigation. (Palarca v. Baginsi, 38 Phil. 177, 178).
"An indispensable party is a party who has such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his absence, without inquiring or affecting such
interest; a party who has not only an interest of such a nature that a final decree cannot be
made without affecting his interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. (67 C.J.S. 892).
Indispensable parties are those without whom no action can be finally determined." (Sanidad
v. Cabataje, 5 Phil. 204)
WHEREFORE, IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, both the complaint and the
counterclaim in the instant case are ordered DISMISSED without prejudice. No pronouncement
as to costs.
SO ORDERED.9
Aggrieved, petitioners elevated the case to the CA. In the challenged May 12, 2004
Decision,10 the appellate court affirmed the ruling of the trial court. The CA, further, declared
that the non-joinder of the indispensable parties would violate the principle of due process,
and that Article 487 of the Civil Code could not be applied considering that the complaint was
not for ejectment, but for recovery of title or a reivindicatory action.11
With their motion for reconsideration denied in the further assailed December 1, 2004
Resolution,12 petitioners filed the instant petition.
The Court grants the petition and remands the case to the trial court for disposition on the
merits.
Article 487 of the Civil Code provides that any one of the co-owners may bring an action for
ejectment.1avvphi1.zw+ The article covers all kinds of actions for the recovery of possession,
including an accion publiciana and a reivindicatory action. A co-owner may file suit without
necessarily joining all the other co-owners as co-plaintiffs because the suit is deemed to be
instituted for the benefit of all. Any judgment of the court in favor of the plaintiff will benefit
the other co-owners, but if the judgment is adverse, the same cannot prejudice the rights of
the unimpleaded co-owners.13
With this disquisition, there is no need to determine whether petitioners’ complaint is one for
ejectment or for recovery of title. To repeat, Article 487 of the Civil Code applies to both
actions.
Thus, petitioners, in their complaint, do not have to implead their co-owners as parties. The
only exception to this rule is when the action is for the benefit of the plaintiff alone who claims
to be the sole owner and is, thus, entitled to the possession thereof. In such a case, the action
will not prosper unless the plaintiff impleads the other co-owners who are indispensable
parties.14
Here, the allegation of petitioners in their complaint that they are the sole owners of the
property in litigation is immaterial, considering that they acknowledged during the trial that
the property is co-owned by Nieves and her siblings, and that petitioners have been authorized
by the co-owners to pursue the case on the latter’s behalf.15Impleading the other co-owners
is, therefore, not mandatory, because, as mentioned earlier, the suit is deemed to be instituted
for the benefit of all.
In any event, the trial and appellate courts committed reversible error when they summarily
dismissed the case, after both parties had rested their cases following a protracted trial
commencing in 1974, on the sole ground of failure to implead indispensable parties. The rule
is settled that the non-joinder of indispensable parties is not a ground for the dismissal of an
action. The remedy is to implead the non-party claimed to be indispensable. Parties may be
added by order of the court on motion of the party or on its own initiative at any stage of the
action and/or at such times as are just. If petitioner refuses to implead an indispensable party
despite the order of the court, the latter may dismiss the complaint/petition for the
plaintiff’s/petitioner's failure to comply therewith.16
WHEREFORE, premises considered, the instant petition is GRANTED, and the case is
REMANDED to the trial court for appropriate proceedings. The trial court is further DIRECTED
to decide on the merits of the civil case WITH DISPATCH.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 178411 June 23, 2010
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ADMINISTRATOR OF
PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF PARAÑAQUE CITY, OFFICE OF THE
CITY PLANNING AND DEVELOPMENT COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN
AND SANGGUNIANG PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA
A. GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M. ARGOTE,
CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES, ESTER C. ASEHAN,
MANUEL A. FUENTES, and MYRNA P. ROSALES, Petitioners,
vs.
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO, EDUARDO V. EBIO,
RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL V.
EBIO, Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the January 31, 2007 Decision1 and June 8, 2007
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being contrary
to law and jurisprudence. The CA had reversed the Order 3 of the Regional Trial Court (RTC) of
Parañaque City, Branch 196, issued on April 29, 2005 in Civil Case No. 05-0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land consisting of 406
square meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez, Parañaque
City and covered by Tax Declaration Nos. 01027 and 01472 in the name of respondent Mario
D. Ebio. Said land was an accretion of Cut-cut creek. Respondents assert that the original
occupant and possessor of the said parcel of land was their great grandfather, Jose Vitalez.
Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on, Pedro
continuously and exclusively occupied and possessed the said lot. In 1966, after executing an
affidavit declaring possession and occupancy,4 Pedro was able to obtain a tax declaration over
the said property in his name.5 Since then, respondents have been religiously paying real
property taxes for the said property.6
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida. Upon Pedro’s
advice, the couple established their home on the said lot. In April 1964 and in October 1971,
Mario Ebio secured building permits from the Parañaque municipal office for the construction
of their house within the said compound.7 On April 21, 1987, Pedro executed a notarized
Transfer of Rights8 ceding his claim over the entire parcel of land in favor of Mario Ebio.
Subsequently, the tax declarations under Pedro’s name were cancelled and new ones were
issued in Mario Ebio’s name.9
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No.
08, series of 199910seeking assistance from the City Government of Parañaque for the
construction of an access road along Cut-cut Creek located in the said barangay. The proposed
road, projected to be eight (8) meters wide and sixty (60) meters long, will run from Urma Drive
to the main road of Vitalez Compound11 traversing the lot occupied by the respondents. When
the city government advised all the affected residents to vacate the said area, respondents
immediately registered their opposition thereto. As a result, the road project was temporarily
suspended.12
In January 2003, however, respondents were surprised when several officials from the
barangay and the city planning office proceeded to cut eight (8) coconut trees planted on the
said lot. Respondents filed letter-complaints before the Regional Director of the Bureau of
Lands, the Department of Interior and Local Government and the Office of the Vice
Mayor.13 On June 29, 2003, the Sangguniang Barangay of Vitalez held a meeting to discuss the
construction of the proposed road. In the said meeting, respondents asserted their opposition
to the proposed project and their claim of ownership over the affected property.14 On
November 14, 2003, respondents attended another meeting with officials from the city
government, but no definite agreement was reached by and among the parties.15
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering
them to vacate the area within the next thirty (30) days, or be physically evicted from the said
property.16 Respondents sent a letter to the Office of the City Administrator asserting, in sum,
their claim over the subject property and expressing intent for a further dialogue. 17 The
request remained unheeded.1avvphi1
Threatened of being evicted, respondents went to the RTC of Parañaque City on April 21, 2005
and applied for a writ of preliminary injunction against petitioners.18 In the course of the
proceedings, respondents admitted before the trial court that they have a pending application
for the issuance of a sales patent before the Department of Environment and Natural
Resources (DENR).19
On April 29, 2005, the RTC issued an Order20 denying the petition for lack of merit. The trial
court reasoned that respondents were not able to prove successfully that they have an
established right to the property since they have not instituted an action for confirmation of
title and their application for sales patent has not yet been granted. Additionally, they failed
to implead the Republic of the Philippines, which is an indispensable party.
Respondents moved for reconsideration, but the same was denied.21
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the
Court of Appeals issued its Decision in favor of the respondents. According to the Court of
Appeals--
The issue ultimately boils down to the question of ownership of the lands adjoining Cutcut
Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of 291 square
meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-62176. The same RL 8
appears to have been donated by the Guaranteed Homes to the City Government of Parañaque
on 22 March 1966 and which was accepted by the then Mayor FLORENCIO BERNABE on 5 April
1966. There is no evidence however, when RL 8 has been intended as a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed the accreted
property since 1930 per his Affidavit dated 21 March 1966 for the purpose of declaring the
said property for taxation purposes. The property then became the subject of Tax Declaration
No. 20134 beginning the year 1967 and the real property taxes therefor had been paid for the
years 1966, 1967, 1968, 1969, 1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996, 1997, 1998,
1999, 2000, 2001, 2002, 2003, and 2004. Sometime in 1964 and 1971, construction permits
were issued in favor of Appellant MARIO EBIO for the subject property. On 21 April 1987,
PEDRO VITALEZ transferred his rights in the accreted property to MARIO EBIO and his
successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary evidence, it
could be concluded that Guaranteed Homes is the owner of the accreted property considering
its ownership of the adjoining RL 8 to which the accretion attached. However, this is without
the application of the provisions of the Civil Code on acquisitive prescription which is likewise
applicable in the instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion which [was]
duly proven by the Appellants. It is clear that since 1930, Appellants together with their
predecessor-in-interest, PEDRO VITALEZ[,] have been in exclusive possession of the subject
property and starting 1964 had introduced improvements thereon as evidenced by their
construction permits. Thus, even by extraordinary acquisitive prescription[,] Appellants have
acquired ownership of the property in question since 1930 even if the adjoining RL 8 was
subsequently registered in the name of Guaranteed Homes. x x x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8 registered in its
name, which is almost fifty years from the time PEDRO VITALEZ occupied the adjoining
accreted property in 1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants which bolster
their right over the subject property. x x x.
xxxx
In sum, We are fully convinced and so hold that the Appellants [have] amply proven their right
over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The challenged
Order of the court a quo is REVERSED and SET ASIDE.
SO ORDERED.22
On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration. Hence,
this petition raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT OF APPEALS
THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN ACCORD WITH THE LAW AND ESTABLISHED
JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT OF
APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE PRESCRIPTION IS IN ACCORD
WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;] AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE COMPLAINT … FILED BY
RESPONDENTS IN THE LOWER COURT.23
The issues may be narrowed down into two (2): procedurally, whether the State is an
indispensable party to respondents’ action for prohibitory injunction; and substantively,
whether the character of respondents’ possession and occupation of the subject property
entitles them to avail of the relief of prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically to restrain or command the performance of an
act.24 It is distinct from the ancillary remedy of preliminary injunction, which cannot exist
except only as part or as an incident to an independent action or proceeding. Moreover, in an
action for injunction, the auxiliary remedy of a preliminary prohibitory or mandatory injunction
may issue.25
In the case at bar, respondents filed an action for injunction to prevent the local government
of Parañaque City from proceeding with the construction of an access road that will traverse
through a parcel of land which they claim is owned by them by virtue of acquisitive
prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is classified as
part of the public domain, any land that may have formed along its banks through time should
also be considered as part of the public domain. And respondents should have included the
State as it is an indispensable party to the action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial deposits that have
gradually settled along the banks of Cut-cut creek. This being the case, the law that governs
ownership over the accreted portion is Article 84 of the Spanish Law of Waters of 1866, which
remains in effect,26 in relation to Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial
deposits along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and
lakes, by accessions or sediments from the waters thereof, belong to the owners of such
lands.27
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they
gradually receive from the effects of the current of the waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a
creek do not form part of the public domain as the alluvial property automatically belongs to
the owner of the estate to which it may have been added. The only restriction provided for by
law is that the owner of the adjoining property must register the same under the Torrens
system; otherwise, the alluvial property may be subject to acquisition through prescription by
third persons.28
In contrast, properties of public dominion cannot be acquired by prescription. No matter how
long the possession of the properties has been, there can be no prescription against the State
regarding property of public domain.29 Even a city or municipality cannot acquire them by
prescription as against the State.30
Hence, while it is true that a creek is a property of public dominion,31 the land which is formed
by the gradual and imperceptible accumulation of sediments along its banks does not form
part of the public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such that a final
decree would necessarily affect his/her right, so that the court cannot proceed without their
presence.32 In contrast, a necessary party is one whose presence in the proceedings is
necessary to adjudicate the whole controversy but whose interest is separable such that a final
decree can be made in their absence without affecting them.33
In the instant case, the action for prohibition seeks to enjoin the city government of Parañaque
from proceeding with its implementation of the road construction project. The State is neither
a necessary nor an indispensable party to an action where no positive act shall be required
from it or where no obligation shall be imposed upon it, such as in the case at bar. Neither
would it be an indispensable party if none of its properties shall be divested nor any of its rights
infringed.
We also find that the character of possession and ownership by the respondents over the
contested land entitles them to the avails of the action.
A right in esse means a clear and unmistakable right.34
A party seeking to avail of an injunctive
relief must prove that he or she possesses a right in esse or one that is actual or existing.35 It
should not be contingent, abstract, or future rights, or one which may never arise.36
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, had
occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario Ebio
secured a permit from the local government of Parañaque for the construction of their family
dwelling on the said lot. In 1966, Pedro executed an affidavit of possession and occupancy
allowing him to declare the property in his name for taxation purposes. Curiously, it was also
in 1966 when Guaranteed Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which
adjoins the land occupied by the respondents, donated RL 8 to the local government of
Parañaque.
From these findings of fact by both the trial court and the Court of Appeals, only one conclusion
can be made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the
local government of Parañaque in its corporate or private capacity sought to register the
accreted portion. Undoubtedly, respondents are deemed to have acquired ownership over the
subject property through prescription. Respondents can assert such right despite the fact that
they have yet to register their title over the said lot. It must be remembered that the purpose
of land registration is not the acquisition of lands, but only the registration of title which the
applicant already possessed over the land. Registration was never intended as a means of
acquiring ownership.37 A decree of registration merely confirms, but does not confer,
ownership.38
Did the filing of a sales patent application by the respondents, which remains pending before
the DENR, estop them from filing an injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through judicial
proceedings or through administrative process. In the instant case, respondents admitted that
they opted to confirm their title over the property administratively by filing an application for
sales patent.
Respondents’ application for sales patent, however, should not be used to prejudice or
derogate what may be deemed as their vested right over the subject property. The sales patent
application should instead be considered as a mere superfluity particularly since ownership
over the land, which they seek to buy from the State, is already vested upon them by virtue of
acquisitive prescription. Moreover, the State does not have any authority to convey a property
through the issuance of a grant or a patent if the land is no longer a public land.39
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is equally
applicable even against a sovereign entity that is the State.
WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision, as well
as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350 are hereby
AFFIRMED.
With costs against petitioners.
SO ORDERED.
FIRST DIVISION
G.R. No. 160347 November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision 1 and
Resolution affirming the Regional Trial Court (RTC) Decision rendering herein petitioners
Arcadio and Luisa Carandang [hereinafter referred to as spouses Carandang] jointly and
severally liable for their loan to Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate
officers of Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent
(54%) and forty six percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from ₱500,000 to P1.5 million
and ₱345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on
March 3, 1989, MBS again increased its capital stock, from ₱1.5 million to ₱3 million, [the
spouses Carandang] yet again subscribed to the increase. They subscribed to ₱93,750 worth
of newly issued capital stock.
[De Guzman] claims that, part of the payment for these subscriptions were paid by him,
₱293,250 for the November 26, 1983 capital stock increase and ₱43,125 for the March 3, 1989
Capital Stock increase or a total of ₱336,375. Thus, on March 31, 1992, [de Guzman] sent a
demand letter to [the spouses Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation
agreement was executed between [Arcadio Carandang] and [de Guzman], whereby the latter
promised to pay for the stock subscriptions of the former without cost, in consideration for
[Arcadio Carandang’s] technical expertise, his newly purchased equipment, and his skill in
repairing and upgrading radio/communication equipment therefore, there is no indebtedness
on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the ₱336,375 together
with damages. After trial on the merits, the trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman].
Accordingly, [the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to
wit:
(1) ₱336,375.00 representing [the spouses Carandang’s] loan to de Guzman;
(2) interest on the preceding amount at the rate of twelve percent (12%) per annum from June
5, 1992 when this complaint was filed until the principal amount shall have been fully paid;
(3) ₱20,000.00 as attorney’s fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the
same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No costs. 2
The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the
Court of Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our
Decision of April 22, 2003, which is based on applicable law and jurisprudence on the matter
is hereby AFFIRMED and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for Review on
Certiorari, bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING
THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE, CONTRARY TO
EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE
DISREGARD OF THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN VIOLATION OF
ARTICLE 1207 OF THE NEW CIVIL CODE.4
Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the
Rules of Court
The spouses Carandang claims that the Decision of the RTC, having been rendered after the
death of Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules
of Court, which provides:
SEC. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within
thirty (30) days after such death of the fact thereof, and to give the name and address of his
legal representative or representatives. Failure of counsel to comply with this duty shall be a
ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order the legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs.
The spouses Carandang posits that such failure to comply with the above rule renders void the
decision of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court
of Appeals5 and Ferreria v. Vda. de Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no order is issued
by the court for the appearance of the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution has ever been effected,
the trial held by the court without such legal representatives or heirs and the judgment
rendered after such trial are null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the trial and judgment would
be binding.7
In the present case, there had been no court order for the legal representative of the deceased
to appear, nor had any such legal representative appeared in court to be substituted for the
deceased; neither had the complainant ever procured the appointment of such legal
representative of the deceased, including appellant, ever asked to be substituted for the
deceased. As a result, no valid substitution was effected, consequently, the court never
acquired jurisdiction over appellant for the purpose of making her a party to the case and
making the decision binding upon her, either personally or as a representative of the estate of
her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and is not
subject to the discretion of the parties,9 jurisdiction over the person of the parties to the case
may be waived either expressly or impliedly.10Implied waiver comes in the form of either
voluntary appearance or a failure to object.11
In the cases cited by the spouses Carandang, we held that there had been no valid substitution
by the heirs of the deceased party, and therefore the judgment cannot be made binding upon
them. In the case at bar, not only do the heirs of de Guzman interpose no objection to the
jurisdiction of the court over their persons; they are actually claiming and embracing such
jurisdiction. In doing so, their waiver is not even merely implied (by their participation in the
appeal of said Decision), but express (by their explicit espousal of such view in both the Court
of Appeals and in this Court). The heirs of de Guzman had no objection to being bound by the
Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which
can only be asserted by the party who can thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a formal substitution of
heirs. The underlying principle therefor is not really because substitution of heirs is a
jurisdictional requirement, but because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not duly notified of the proceedings,
are substantially affected by the decision rendered therein.12 Such violation of due process can
only be asserted by the persons whose rights are claimed to have been violated, namely the
heirs to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v.
Florendo,13 where we likewise held that the proceedings that took place after the death of the
party are void, we gave another reason for such nullity: "the attorneys for the offended party
ceased to be the attorneys for the deceased upon the death of the latter, the principal x x x."
Nevertheless, the case at bar had already been submitted for decision before the RTC on 4
June 1998, several months before the passing away of de Guzman on 19 February 1999. Hence,
no further proceedings requiring the appearance of de Guzman’s counsel were conducted
before the promulgation of the RTC Decision. Consequently, de Guzman’s counsel cannot be
said to have no authority to appear in trial, as trial had already ceased upon the death of de
Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the
Rules of Court, because of the express waiver of the heirs to the jurisdiction over their persons,
and because there had been, before the promulgation of the RTC Decision, no further
proceedings requiring the appearance of de Guzman’s counsel.
Before proceeding with the substantive aspects of the case, however, there is still one more
procedural issue to tackle, the fourth issue presented by the spouses Carandang on the non-
inclusion in the complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to state a cause of action,
considering that Milagros de Guzman, allegedly an indispensable party, was not included as a
party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay their stock
subscriptions were issued in the name of Milagros de Guzman, the latter should be considered
an indispensable party. Being such, the spouses Carandang claim, the failure to join Mrs. de
Guzman as a party-plaintiff should cause the dismissal of the action because "(i)f a suit is not
brought in the name of or against the real party in interest, a motion to dismiss may be filed
on the ground that the complaint states no cause of action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from
which the four (4) checks were drawn is part of their conjugal property and under both the
Civil Code and the Family Code the husband alone may institute an action for the recovery or
protection of the spouses’ conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the New
Civil Code, the husband is the administrator of the conjugal partnership. In fact, he is the sole
administrator, and the wife is not entitled as a matter of right to join him in this endeavor. The
husband may defend the conjugal partnership in a suit or action without being joined by the
wife. x x x Under the Family Code, the administration of the conjugal property belongs to the
husband and the wife jointly. However, unlike an act of alienation or encumbrance where the
consent of both spouses is required, joint management or administration does not require that
the husband and wife always act together. Each spouse may validly exercise full power of
management alone, subject to the intervention of the court in proper cases as provided under
Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in
interest" and "indispensable party." A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of the
suit.15 On the other hand, an indispensable party is a party in interest without whom no final
determination can be had of an action,16 in contrast to a necessary party, which is one who is
not indispensable but who ought to be joined as a party if complete relief is to be accorded as
to those already parties, or for a complete determination or settlement of the claim subject of
the action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action."18 However, what dismissal on this ground entails is an
examination of whether the parties presently pleaded are interested in the outcome of the
litigation, and not whether all persons interested in such outcome are actually pleaded. The
latter query is relevant in discussions concerning indispensable and necessary parties,
but not in discussions concerning real parties in interest. Both indispensable and necessary
parties are considered as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3
August 1988. As they did not execute any marriage settlement, the regime of conjugal
partnership of gains govern their property relations.19
All property acquired during the marriage, whether the acquisition appears to have been
made, contracted or registered in the name of one or both spouses, is presumed to be conjugal
unless the contrary is proved.20 Credits are personal properties,21 acquired during the time the
loan or other credit transaction was executed. Therefore, credits loaned during the time of the
marriage are presumed to be conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses Carandang
are liable, such credits are presumed to be conjugal property. There being no evidence to the
contrary, such presumption subsists. As such, Quirino de Guzman, being a co-owner of specific
partnership property,22 is certainly a real party in interest. Dismissal on the ground of failure
to state a cause of action, by reason that the suit was allegedly not brought by a real party in
interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed. 23 The
absence of an indispensable party renders all subsequent actuations of the court void, for want
of authority to act, not only as to the absent parties but even as to those present. 24 On the
other hand, the non-joinder of necessary parties do not result in the dismissal of the case.
Instead, Section 9, Rule 3 of the Rules of Court provides for the consequences of such non-
joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. – Whenever in any pleading in which a
claim is asserted a necessary party is not joined, the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the court find the reason for the omission
unmeritorious, it may order the inclusion of the omitted necessary party if jurisdiction over his
person may be obtained.
The failure to comply with the order for his inclusion, without justifiable cause, shall be
deemed a waiver of the claim against such party.
The non-inclusion of a necessary party does not prevent the court from proceeding in the
action, and the judgment rendered therein shall be without prejudice to the rights of such
necessary party.
Non-compliance with the order for the inclusion of a necessary party would not warrant the
dismissal of the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal
of the complaint for failure to comply with an order of the court, as Section 9, Rule 3 specifically
provides for the effect of such non-inclusion: it shall not prevent the court from proceeding in
the action, and the judgment rendered therein shall be without prejudice to the rights of such
necessary party. Section 11, Rule 3 likewise provides that the non-joinder of parties is not a
ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of parties: the pro-
forma parties, which are those who are required to be joined as co-parties in suits by or against
another party as may be provided by the applicable substantive law or procedural rule. 25 An
example is provided by Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided
by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor
necessary. The third case occurs if, for example, a husband files an action to recover a property
which he claims to be part of his exclusive property. The wife may have no legal interest in
such property, but the rules nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule
under Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal.
Hence, in a case concerning an action to recover a sum of money, we held that the failure to
join the spouse in that case was not a jurisdictional defect.26 The non-joinder of a spouse does
not warrant dismissal as it is merely a formal requirement which may be cured by
amendment.27
Conversely, in the instances that the pro-forma parties are also indispensable or necessary
parties, the rules concerning indispensable or necessary parties, as the case may be, should be
applied. Thus, dismissal is warranted only if the pro-forma party not joined in the complaint is
an indispensable party.
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to
the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is
not warranted, whether or not there was an order for her inclusion in the complaint pursuant
to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership
in all that is not in conflict with what is expressly determined in this Chapter or by the spouses
in their marriage settlements.
This provision is practically the same as the Civil Code provision it superceded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership
in all that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with
the other partners of specific partnership property." Taken with the presumption of the
conjugal nature of the funds used to finance the four checks used to pay for petitioners’ stock
subscriptions, and with the presumption that the credits themselves are part of conjugal funds,
Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular28 and Adlawan
v. Adlawan,29 we held that, in a co-ownership, co-owners may bring actions for the recovery
of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is presumed to have been filed for the benefit of his co-owners. In the latter
case and in that of De Guia v. Court of Appeals,30 we also held that Article 487 of the Civil Code,
which provides that any of the co-owners may bring an action for ejectment, covers all kinds
of action for the recovery of possession.31
In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring
an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of
the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable parties.
They are not even necessary parties, for a complete relief can be accorded in the suit even
without their participation, since the suit is presumed to have been filed for the benefit of all
co-owners.32
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the
recovery of the allegedly loaned money to the spouses Carandang. As such, she need not have
been impleaded in said suit, and dismissal of the suit is not warranted by her not being a party
thereto.
Whether or not respondents were able to prove the loan sought to be collected from
petitioners
In the second and third issues presented by the spouses Carandang, they claim that the de
Guzmans failed to prove the alleged loan for which the spouses Carandang were held liable.
As previously stated, spouses Quirino and Milagros de Guzman paid for the stock subscriptions
of the spouses Carandang, amounting to ₱336,375.00. The de Guzmans claim that these
payments were in the form of loans and/or advances and it was agreed upon between the late
Quirino de Guzman, Sr. and the spouses Carandang that the latter would repay him.
Petitioners, on the other hand, argue that there was an oral pre-incorporation agreement
wherein it was agreed that Arcardio Carandang would always maintain his 46% equity
participation in the corporation even if the capital structures were increased, and that Quirino
de Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang
with no cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove
by preponderance of evidence, either the existence of the purported loan or the non-payment
thereof.
Simply put, preponderance of evidence means that the evidence as a whole adduced by one
side is superior to that of the other. The concept of preponderance of evidence refers to
evidence that is of greater weight, or more convincing, than that which is offered in opposition
to it; it means probability of truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation
agreement, to which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the
plaintiff or complainant has to prove his affirmative allegations in the complaints and the
defendant or respondent has to prove the affirmative allegations in his affirmative defenses
and counterclaims.33
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself,
having presented evidence only of the payment in favor of the Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A" decides
to pay for Mr. "B’s" obligation, that payment by Mr. "A" cannot, by any stretch of imagination,
possibly mean that there is now a loan by Mr. "B" to Mr. "A". There is a possibility that such
payment by Mr. "A" is purely out of generosity or that there is a mutual agreement between
them. As applied to the instant case, that mutual agreement is the pre-incorporation
agreement (supra) existing between Mr. de Guzman and the petitioners --- to the effect that
the former shall be responsible for paying stock subscriptions of the latter. Thus, when Mr. de
Guzman paid for the stock subscriptions of the petitioners, there was no loan to speak of, but
only a compliance with the pre-incorporation agreement.34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "B’s"
obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has
been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third person who
has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor, he can recover only insofar as
the payment has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of
the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from
a mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of
payment by a third person, and even in cases where the third person paid against the will of
the debtor, such payment would produce a debt in favor of the paying third person. In fact,
the only consequences for the failure to inform or get the consent of the debtor are the
following: (1) the third person can recover only insofar as the payment has been beneficial to
the debtor; and (2) the third person is not subrogated to the rights of the creditor, such as
those arising from a mortgage, guarantee or penalty.35
We say, however, that this is merely a presumption. By virtue of the parties’ freedom to
contract, the parties could stipulate otherwise and thus, as suggested by the spouses
Carandang, there is indeed a possibility that such payment by Mr. "A" was purely out of
generosity or that there was a mutual agreement between them. But such mutual agreement,
being an exception to presumed course of events as laid down by Articles 1236 and 1237, must
be adequately proven.
The de Guzmans have successfully proven their payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang.
Consequently, it is now up to the spouses Carandang to prove the existence of the pre-
incorporation agreement that was their defense to the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on the existence
and substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was
stricken off the record because he did not submit himself to a cross-examination of the
opposing party. On the other hand, the testimonies of Romeo Saavedra, 36 Roberto S.
Carandang,37 Gertrudes Z. Esteban,38 Ceferino Basilio,39 and Ma. Luisa Carandang40touched on
matters other than the existence and substance of the pre-incorporation agreement. So aside
from the fact that these witnesses had no personal knowledge as to the alleged existence of
the pre-incorporation agreement, the testimonies of these witnesses did not even mention
the existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even
contradicted the existence of a pre-incorporation agreement because when they were asked
by their counsel regarding the matter of the check payments made by the late Quirino A. de
Guzman, Sr. in their behalf, they said that they had already paid for it thereby negating their
own defense that there was a pre-incorporation agreement excusing themselves from paying
Mr. de Guzman the amounts he advanced or loaned to them. This basic and irrefutable fact
can be gleaned from their testimonies which the private respondents are quoting for easy
reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of
the plaintiff in this case charging you that you paid for this year and asking enough to paid (sic)
your tax?
A: We have paid already, so, we are not liable for anything payment (sic).41
b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: ₱40,000.00 to ₱50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the
payment of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
I’m showing to you these receipts so marked by the plaintiff as their exhibits which were issued
in the name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will you please
go over this Official Receipt and state for the records, who made for the payment stated in
these receipts in your name?
A: I paid for those shares."42
There being no testimony or documentary evidence proving the existence of the pre-
incorporation agreement, the spouses Carandang are forced to rely upon an alleged admission
by the original plaintiff of the existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the pre-
incorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph 4
of private respondents’ Reply.
Paragraphs 13 and 14 of petitioners’ Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M.
Carandang to a joint venture by pooling together their technical expertise, equipments,
financial resources and franchise. Plaintiff proposed to defendant and mutually agreed on the
following:
1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
equipments into high proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources and franchise.
3. That defendant would always maintain his 46% equity participation in the corporation even
if the capital structures are increased, and that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with no cost to the latter.
4. That because of defendant’s expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would maintain such relations in
the joint venture without any mental reservation for their common benefit and success of the
business.
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54%
of the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43
Meanwhile, paragraphs 3 and 4 of private respondents’ Reply dated 29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and
defendant Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting
Systems, Inc. Plaintiff specifically denies the other allegations in paragraph 13 of the Answer,
the same being devoid of any legal or factual bases. The truth of the matter is that defendant
Arcadio M. Carandang was not able to pay plaintiff the agreed amount of the lease for a
number of months forcing the plaintiff to terminate lease. Additionally, the records would
show that it was the defendant Arcadio M. Carandang who proposed a joint venture with the
plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally because of a
directive of then President Marcos indicating the need to broaden the ownership of radio
broadcasting stations. The plaintiff owned the franchise, the radio transmitter, the antenna
tower, the building containing the radio transmitter and other equipment. Verily, he would be
placed in a great disadvantage if he would still have to personally pay for the shares of
defendant Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer.44
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he
admitted paragraph 14 of the Answer, which incidentally contained the opening clause
"(h)aving mutually agreed on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported admission by Quirino
de Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above
arrangements," seems to be a mere introduction to the statement that the single
proprietorship of Quirino de Guzman had been converted into a corporation. If Quirino de
Guzman had meant to admit paragraph 13.3, he could have easily said so, as he did the other
paragraphs he categorically admitted. Instead, Quirino de Guzman expressly stated the
opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13 of the
Answer."45 The Reply furthermore states that the only portion of paragraph 13 which Quirino
de Guzman had admitted is paragraph 13.1, and only insofar as it said that Quirino de Guzman
and Arcardio Carandang organized Mabuhay Broadcasting Systems, Inc.46
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged
pre-incorporation agreement. As there was no admission, and as the testimony of Arcardio
Carandang was stricken off the record, we are constrained to rule that there was no pre-
incorporation agreement rendering Quirino de Guzman liable for the spouses Carandang’s
stock subscription. The payment by the spouses de Guzman of the stock subscriptions of the
spouses Carandang are therefore by way of loan which the spouses Carandang are liable to
pay.1âwphi1
Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary
liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or documentary, showing that the purported
obligation of [the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as
one of the obligations required by law to be solidary x x x."
It is apparent from the facts of the case that [the spouses Carandang] were married way before
the effectivity of the Family Code hence; their property regime is conjugal partnership under
the Civil Code.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an
obligation entered into by the husband and wife is chargeable against their conjugal
partnership and it is the partnership, which is primarily bound for its repayment. Thus, when
the spouses are sued for the enforcement of the obligation entered into by them, they are
being impleaded in their capacity as representatives of the conjugal partnership and not as
independent debtors, such that the concept of joint and solidary liability, as between them,
does not apply.47
The Court of Appeals is correct insofar as it held that when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their capacity
as representatives of the conjugal partnership and not as independent debtors. Hence, either
of them may be sued for the whole amount, similar to that of a solidary liability, although the
amount is chargeable against their conjugal partnership property. Thus, in the case cited by
the Court of Appeals, Alipio v. Court of Appeals,48 the two sets of defendant-spouses therein
were held liable for ₱25,300.00 each, chargeable to their respective conjugal partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against
the spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses
Carandang are ORDERED to pay the following amounts from their conjugal partnership
properties:
(1) ₱336,375.00 representing the spouses Carandang’s loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
(3) ₱20,000.00 as attorney’s fees.
No costs.
SO ORDERED.
FIRST DIVISION
March 11, 2015
G.R. No. 196750
MA. ELENA R. DIVINAGRACIA, as Administratrix of the ESTATE OF THE LATE SANTIAGO C.
DIVINAGRACIA, Petitioner,
vs.
CORONACION PARILLA, CELESTIAL NOBLEZA, CECILIA LELINA, CELEDONIO NOBLEZA,
MAUDE NOBLEZA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated March 26, 2009 and
the Resolution3 dated April 6, 2011 of the Court of Appeals (CA) in CA-G.R. CV. No. 80167,
which set aside the Decision4 dated November 29, 2002 and the Order5 dated April 4, 2003 of
the Regional Trial Court of Iloilo City, Branch 31 (RTC) in Civil Case No. 19003 and,
consequently, dismissed Santiago C. Divinagracia's (Santiago) complaint for judicial partition.
The Facts
Conrado Nobleza, Sr. (Conrado, Sr.) owned a 313-square meter parcel of land located at Cor.
Fuentes-Delgado Streets, Iloilo City denominated as Lot 133-B-1-A and covered by Transfer
Certificate of Title (TCT) No. T- 12255 (subject land).6 During his lifetime, he contracted two
marriages: (a) the first was with Lolita Palermo with whom he had two (2) children, namely,
Cresencio and Conrado, Jr.; and (b) the second was with Eusela Niangar with whom he had
seven (7) children, namely, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo,7 and
Cebeleo, Sr. Conrado, Sr. also begot three (3) illegitimate children, namely, Eduardo, Rogelio,
and Ricardo.8 Mateo, Sr. pre-deceased Conrado, Sr. and was survived by his children Felcon,
Landelin, Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord. Cebeleo, Sr. also pre-deceased his
father and was survived by his wife, Maude, and children Cebeleo, Jr. and Neobel.9
According to Santiago, upon Conrado, Sr.’s death, Cresencio, Conrado, Jr., Felcon (in
representation of his father, Mateo, Sr., and his siblings), Coronacion, Celestial, Cecilia, Rogelio,
Eduardo, and Ricardo sold their respective interests over the subject land to Santiago for a
consideration of 447,695.66, as embodied in a Deed of Extrajudicial Settlement or Adjudication
with Deed of Sale10 dated November 22, 1989 (subject document),11 which was, however, not
signed by the other heirs who did not sell their respective shares, namely, Ceruleo, Celedonio,
and Maude (in representation of his husband, Cebeleo, Sr., and their children).12 On December
22, 1989, the same parties executed a Supplemental Contract13 whereby the vendors-heirs and
Santiago agreed that out of the aforesaid consideration, only 109,807.93 will be paid up front,
and that Santiago will only pay the remaining balance of 337,887.73 upon the partition of the
subject land.14 However, Santiago was not able to have TCT No. T-12255 cancelled and the
subject document registered because of Ceruleo, Celedonio, and Maude’s refusal to surrender
the said title. This fact, coupled with Ceruleo, Celedonio, and Maude’s failure to partition the
subject land, prompted Santiago to file a Complaint 15 dated January 3, 1990 for judicial
partition and for receivership.16
For their part, Ceruleo, Celedonio, and Maude maintained that Santiago had no legal right to
file an action for judicial partition nor compel them to surrender TCT No. T-12255 because,
inter alia: (a) Santiago did not pay the full purchase price of the shares sold to him; and (b) the
subject land is a conjugal asset of Conrado Sr. and Eusela Niangar and, thus, only their
legitimate issues may validly inherit the same.17
The RTC Ruling
In a Decision18 dated November 29, 2002, the RTC ordered, among others, the partition of the
subject land between Santiago on the one hand, and Ceruleo, Celedonio, Maude, and the heirs
of Mateo, Sr. (i.e., Felcon, et al.) on the other hand and, consequently, the cancellation of TCT
No. T- 12255 and the issuance of a new owner’s duplicate certificate in favor of Santiago and
the group of Ceruleo, Celedonio, Maude, and the heirs of Mateo, Sr. 19 The RTC found that
through the subject document, Santiago became a co-owner of the subject land and, as such,
has the right to demand the partition of the same. However, the RTC held that Santiago did
not validly acquire Mateo, Sr.’s share over the subject land, considering that Felcon admitted
the lack of authority to bind his siblings with regard to Mateo, Sr.’s share thereon. 20
On reconsideration21 of Ceruleo and herein respondents Celedonio, Maude, Celestial,
Coronacion, and Cecilia (respondents), the RTC issued an Order22 dated April 4, 2003 further
ordering Santiago to comply with the provisions of the Supplemental Contract dated December
22, 1989 by paying the amount of 337,887.73 upon the partition of the subject land.
Dissatisfied, respondents appealed23 to the CA. Records are bereft of any showing that the
other heirs made similar appeals thereto.
The CA Ruling
In a Decision24 dated March 26, 2009, the CA set aside the RTC Rulings and, consequently,
dismissed Santiago’s complaint for judicial partition.25 It held that Felcon’s siblings, as well as
Maude’s children, are indispensable parties to the judicial partition of the subject land and,
thus, their non-inclusion as defendants in Santiago’s complaint would necessarily result in its
dismissal.26
Aggrieved, the heirs of Santiago27 moved for reconsideration28 which was, however, denied in
a Resolution29 dated April 6, 2011, hence, this petition instituted by herein petitioner, Ma.
Elena R. Divinagracia, as administratrix of Santiago’s estate.
The Issues Before the Court
The issues for the Court’s resolution are whether or not the CA correctly: (a) ruled that Felcon’s
siblings and Cebeleo, Sr. and Maude’s children are indispensable parties to Santiago’s
complaint for judicial partition; and (b) dismissed Santiago’s complaint for his failure to
implead said omitted heirs.
The Court’s Ruling
The petition is partly meritorious.
An indispensable party is one whose interest will be affected by the court’s action in the
litigation, and without whom no final determination of the case can be had. The party’s interest
in the subject matter of the suit and in the relief sought are so inextricably intertwined with
the other parties’ that his legal presence as a party to the proceeding is an absolute necessity.
In his absence, there cannot be a resolution of the dispute of the parties before the court which
is effective, complete, or equitable.30 Thus, the absence of an indispensable party renders all
subsequent actions of the court null and void, for want of authority to act, not only as to the
absent parties but even as to those present.31
With regard to actions for partition, Section 1, Rule 69 of the Rules of Court requires that all
persons interested in the property shall be joined as defendants, viz.:
SEC. 1. Complaint in action for partition of real estate. – A person having the right to compel
the partition of real estate may do so as provided in this Rule, setting forth in his complaint the
nature and extent of his title and an adequate description of the real estate of which partition
is demanded and joining as defendants all other persons interested in the property. (Emphasis
and underscoring supplied)
Thus, all the co-heirs and persons having an interest in the property are indispensable parties;
as such, an action for partition will not lie without the joinder of the said parties.32
In the instant case, records reveal that Conrado, Sr. has the following heirs, legitimate and
illegitimate, who are entitled to a pro-indiviso share in the subject land, namely: Conrado, Jr.,
Cresencio, Mateo, Sr., Coronacion, Cecilia, Celestial, Celedonio, Ceruleo, Cebeleo, Sr., Eduardo,
Rogelio, and Ricardo. However, both Mateo, Sr. and Cebeleo, Sr. pre-deceased Conrado, Sr.
and, thus, pursuant to the rules on representation under the Civil Code,33 their respective
interests shall be represented by their children, namely: (a) for Mateo, Sr.: Felcon, Landelin,
Eusela, Giovanni, Mateo, Jr., Tito, and Gaylord; and (b) for Cebeleo, Sr.: Cebeleo, Jr. and
Neobel.34
The aforementioned heirs – whether in their own capacity or in representation of their direct
ascendant – have vested rights over the subject land and, as such, should be impleaded as
indispensable parties in an action for partition thereof. However, a reading of Santiago’s
complaint shows that as regards Mateo, Sr.’s interest, only Felcon was impleaded, excluding
therefrom his siblings and co-representatives. Similarly, with regard to Cebeleo, Sr.’s interest
over the subject land, the complaint impleaded his wife, Maude, when pursuant to Article
97235 of the Civil Code, the proper representatives to his interest should have been his
children, Cebeleo, Jr. and Neobel. Verily, Santiago’s omission of the aforesaid heirs renders his
complaint for partition defective.
Santiago’s contention that he had already bought the interests of the majority of the heirs and,
thus, they should no longer be regarded as indispensable parties deserves no merit. As
correctly noted by the CA, in actions for partition, the court cannot properly issue an order to
divide the property, unless it first makes a determination as to the existence of co- ownership.
The court must initially settle the issue of ownership, which is the first stage in an action for
partition.36 Indubitably, therefore, until and unless this issue of co-ownership is definitely and
finally resolved, it would be premature to effect a partition of the disputed properties.37
In this case, while it is conceded that Santiago bought the interests of majority of the heirs of
Conrado, Sr. as evidenced by the subject document, as a vendee, he merely steps into the
shoes of the vendors-heirs. Since his interest over the subject land is merely derived from that
of the vendors- heirs, the latter should first be determined as co-owners thereof, thus
necessitating the joinder of all those who have vested interests in such land, i.e., the aforesaid
heirs of Conrado, Sr., in Santiago’s complaint.
In fine, the absence of the aforementioned indispensable parties in the instant complaint for
judicial partition renders all subsequent actions of the RTC null and void for want of authority
to act, not only as to the absent parties, but even as to those present. 38 Therefore, the CA
correctly set aside the November 29, 2002 Decision and the April 4, 2003 Order of the RTC.
However, the CA erred in ordering the dismissal of the complaint on account of Santiago’s
failure to implead all the indispensable parties in his complaint.1âwphi1 In Heirs of Mesina v.
Heirs of Fian, Sr.,39 the Court definitively explained that in instances of non-joinder of
indispensable parties, the proper remedy is to implead them and not to dismiss the case, to
wit:
The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any
stage of a judicial proceeding and/or at such times as are just, parties may be added on the
motion of a party or on the initiative of the tribunal concerned. If the plaintiff refuses to
implead an indispensable party despite the order of the court, that court may dismiss the
complaint for the plaintiff’s failure to comply with the order.
The remedy is to implead the non-party claimed to be indispensable. x x x40 (Underscoring
supplied; emphases in the original)
In view of the foregoing, the correct course of action in the instant case is to order its remand
to the RTC for the inclusion of those indispensable parties who were not impleaded and for
the disposition of the case on the merits.41
WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the Decision dated March 26, 2009
and the Resolution dated April 6, 2011 of the Court of Appeals in CA-G.R. CV. No. 80167, setting
aside the Decision dated November 29, 2002 and the Order dated April 4, 2003 of the Regional
Trial Court of Iloilo City, Branch 31 in Civil Case No. 19003, are hereby AFFIRMED with
MODIFICATION REMANDING the instant case to the court a quo, which is hereby DIRECTED to
implead all indispensable parties and, thereafter, PROCEED with the resolution of the case on
the merits WITH DISPATCH.
SO ORDERED.
SPECIAL THIRD DIVISION
March 6, 2017
G.R. No. 180654
NATIONAL POWER CORPORATION, Petitioner
vs
PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN OF BATAAN,
PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN)
and THE REGISTER OF DEEDS OF THE PROVINCE OF BATAAN, Respondents
RESOLUTION
LEONEN, J.:
For resolution is respondents' Motion for Reconsideration1 of this Court's April 21, 2014
Decision,2 which granted the petition of National Power Corporation (Napocor), and set aside
the Court of Appeals' Resolution3 dated November 27, 2007. The Decision further remanded
"the case to the Regional Trial Court so that the Power Sector Assets and Liabilities
Management Corporation [PSALM Corporation] and the National Transmission Corporation
[TRANSCO] may be impleaded as proper parties."4
Recalling the facts of this case:
On March 28, 2003, petitioner National Power Corporation (NPC) received a notice of franchise
tax delinquency from the respondent Provincial Government of Bataan (the Province) for
₱45.9 million covering the years 2001, 2002, and 2003. The Province based its assessment on
[Napocor's] sale of electricity that it generated from two power plants in Bataan. Rather than
pay the tax or reject it, [Napocor] chose to reserve its right to contest the [amounts of franchise
tax stated in the notice, including the] computation pending the decision of the Supreme Court
in National Power Corporation v. City of Cabanatuan, a case [where] the issue of [Napocor's]
exemption from the payment of local franchise tax was then pending.
On May 12 and 14, 2003 the Province again sent notices of tax due to [Napocor], calling its
attention to the Court's decision in National Power Corporation v. City of Cabanatuan that held
[Napocor] liable for the payment of local franchise tax. [Napocor] replied, however, that it had
ceased to be liable for the payment of that tax after Congress enacted
Republic Act (R.A.) 9136, also known as the Electric Power Industry Reform Act (EPIRA) that
took effect on June 26, 2001. The new law relieved [Napocor] of the function of [transmitting
electricity] beginning that year. Consequently, the Province has no right to further assess it for
the 2001, 2002, and 2003 local franchise tax.
Ignoring [Napocor's] view, the Province issued a "Warrant of Levy" [dated January 29,
2004]5 on 14 real properties that it used to own in Limay, Bataan. [Through a letter dated
February 17, 2004, Napocor requested a "deferment of [the Province's] chosen course of
action and give [Napocor] Management and Board of Directors, as well as the OSG, to
reconsider the matter at hand."]6 In March 2004 the Province caused their sale at public
auction with itself as the winning bidder. Shortly after, [Napocor] received a copy of the
Certificate of Sale of Real Property covering the auctioned properties for ₱60,477,285.22, the
amount of its franchise tax delinquency, [including surcharges and interest].
On July 7, 2004, [Napocor] filed with the Regional Trial Court (RTC) of Mariveles, Bataan, a
petition for declaration of nullity of the foreclosure sale with prayer for preliminary mandatory
injunction against the Province, the provincial treasurer, and the Sangguniang Panlalawigan.
[Napocor] alleged that the foreclosure had no legal basis since R.A. 7160 which authorized the
collection of local franchise tax had been modified by the EPIRA. The latter law provided that
power generation is not a public utility operation requiring a franchise, hence, not taxable.
What remains subject to such tax is the business of transmission and distribution of electricity
since these required a national franchise. As it happened, [Napocor] had ceased by operation
of the EPIRA in 2001 to engage in power transmission, given that all its facilities for this
function, including its nationwide franchise, had been transferred to the National Transmission
Corporation (TRANSCO).
Thus, [Napocor] asked the RTC to issue a preliminary injunction, enjoining the transfer of title
and the sale of the foreclosed lands to Bataan and, after trial, to make the injunction
permanent, declare [Napocor] exempt from the local franchise tax and annul the foreclosure
sale.
On November 3, 2005 the RTC dismissed [Napocor's] petition, stating that the franchise tax
was not based on ownership of property but on [Napocor's] exercise of the privilege of doing
business within Bataan. Further, [Napocor] presented no evidence that it had ceased to
operate its power plants in that jurisdiction.
[Napocor] appealed the RTC Decision to the Court of Appeals (CA) but the Province moved to
dismiss the same for lack of jurisdiction of that court over the subject matter of the case. The
Province pointed out that, although [Napocor] denominated its suit before the RTC as one for
declaration of nullity of foreclosure sale, it was essentially a local tax case questioning the
validity of the Province's imposition of the local franchise tax. Any appeal from the action
should, therefore, be lodged with the Court of Tax Appeals (CTA). On November 27, 2007 the
CA granted the Province's motion and dismissed the petition on the ground cited. 7 (Citation
omitted)
On January 18, 2008, Napocor filed by registered mail a Petition for Review
on Certiorari,8 assailing the correctness of the Court of Appeals' dismissal of its appeal for lack
of jurisdiction. Napocor prayed that "judgment be rendered reversing and setting aside the
Court of Appeals' Resolution dated November 27, 2007 and in lieu thereof, directing said Court
to reinstate and give due course to petitioner's appeal in CA-G.R. CV No. 87218."9
In a Decision dated April 21, 2014, this Court granted the petition and set aside the resolution
of the Court of Appeals. This Court ruled that with the transfer of Napocor's power
transmission and generation functions, and their associated facilities by operation of the
Electric Power Industry Reform Act (EPIRA) in June 2001, Napocor was not the proper party
subject to the local franchise tax.10 The Province also could not levy on the transmission
facilities to satisfy the tax assessment against Napocor.11 This Court further found the
proceedings in the court a quo a nullity for failure to include PSALM Corporation and TRANSCO,
companies which were indispensable parties to the case.12 At this point, this Court opined that
it did not matter where the Regional Trial Court decision was appealed, whether before the
Court of Appeals or the Court of Tax Appeals,13 and remanded the case to the Regional Trial
Court so that PSALM Corporation and TRANSCO may be impleaded as proper parties.14
Hence, this Motion for Reconsideration15 was filed by the respondents. The issues raised in the
motion are:
1. Whether Napocor is the real party in interest; and
2. Whether the foreclosure sale on March 2, 2004 is valid.
Respondents argue that from this Court's disquisition on the purported transfer of Napocor's
power generation and transmission functions to PSALM Corporation, and its corresponding
generation and transmission facilities to TRANSCO, it follows that petitioner was not the real
party in interest and had no legal personality to file the complaint before the Regional Trial
Court in the first place.16 Accordingly, they pray that instead of remanding the case to the trial
court for the inclusion of indispensable parties, the complaint should be ordered dismissed for
lack of cause of action.17
Respondents further contend that Napocor was estopped from invoking the EPIRA as a shield
against the franchise tax impositions.18 They assert that Napocor could have raised the EPIRA
provisions at the earliest instance when it received the notice of franchise tax delinquency on
March 28, 2003, close to two (2) years after the effectivity of EPIRA. Instead, Napocor merely
chose to reserve its right to contest the franchise tax assessment and suspend its payment
pending the decision of this Court in NPC v. City of Cabanatuan.19
Respondents lastly argue that EPIRA was not self-executing and the transfer of the
transmission functions and assets to TRANSCO was not made to take place by operation of
law.20 It cites Section 8 of EPIRA, which provides that "[w]ithin six (6) months from the
effectivity of this Act, the transmission and subtransmission facilities of [Napocor] and all other
assets related to transmission operations, including the nationwide franchise of [Napocor] for
the operation of the transmission system and the grid, shall be transferred to the TRANSCO."
It also renders that "[p]rior to the transfer of the transmission functions by [Napocor] to
TRANSCO, and before promulgation of the Grid Code, ERC shall ensure that [Napocor] shall
provide to all electric power industry participants open and nondiscriminatory access to its
transmission system."21 Similarly, respondents assert that the transfer of the generation assets
to PSALM Corporation did not take place upon the effectivity of EPIRA, citing Section 4 7 of the
law.22 Thus, the court a quo correctly dismissed Napocor's complaint on the latter's failure "to
present evidence that it no longer owned [the property] or operated the business subject to
local franchise tax."23
In its Comment,24 petitioner partially agrees with the respondents that the case should not be
ordered remanded to the court of origin. According to petitioner, the trial court will then be
"confronted with a bizarre situation of ordering PSALM and the TRANSCO to be party-
plaintiffs/petitioners when, in truth and in fact, there is no actual controversy confronting
them at the moment" as no assessments have yet been issued to these corporations.25
However, contrary to respondents' submissions, petitioner avers that "the instant case is not
dismissible on the ground of lack of cause of action." 26 Petitioner asserts that it "has a valid
cause of action against respondents for the nullification of the foreclosure sale" since, as found
by this Court, it is not the proper party subject to the local franchise tax being imposed by
respondents.27
On respondents' claim of estoppel, petitioner submits that as a government-owned and
controlled corporation, it is "protected by the principle that estoppel does not lie against the
government as it is not bound by the errors committed by its agents." 28 Moreover, petitioner
maintains that it has consistently invoked that it is not liable for the local franchise tax being
collected by respondents because "it has ceased to operate its electric transmission functions
upon effectivity of the EPIRA in 200 l ."29 Allegedly, this has been its stand from the time it filed
its complaint with the Regional Trial Court.30
Lastly, petitioner counters that it does not need to present "evidence to prove its position that
it no longer owned or operated the business subject to local franchise tax," and that the
properties, which respondent Provincial Government of Bataan levied on, did not belong to
it.31
We partially grant the motion for reconsideration.
I
The Court of Appeals correctly dismissed the appeal for lack of jurisdiction. We deem it proper
to clarify the last sentence in the decision that "[i]t did not matter where the RTC decision was
appealed, whether before the C[ourt of A[ppeals] or the C[ourt of T[ax] A[ppeals]."32
Republic Act No. 9282, which amended Republic Act No. 1125, took effect on April 23, 2004,
and significantly expanded the extent and scope of the cases that the Court of Tax Appeals was
tasked to hear and adjudicate. Under Section 7, paragraph (a)(3), the Court of Tax Appeals is
vested with the exclusive appellate jurisdiction over, among others, appeals from the
"decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided
or resolved by them in the exercise of their original or appellate jurisdiction."
The case a quo is a local tax case that is within the exclusive appellate jurisdiction of the Court
of Tax Appeals. Parenthetically, the case arose from the dispute between Napocor and
respondents over the purported franchise tax delinquency of Napocor. Although the complaint
filed with the trial court is a Petition for declaration of nullity of foreclosure sale with prayer for
preliminary mandatory injunction, a reading of the petition shows that it essentially assails the
correctness of the local franchise tax assessments by the Provincial Government of Bataan.
Indeed, one of the prayers in the petition is for the court a quo to declare Napocor "as exempt
from payment of local franchise taxes."33 Basic is the rule that allegations in the complaint and
the character of the relief sought determine the nature of an action.34 In order for the trial
court to resolve the complaint, the issues regarding the correctness of the tax assessment and
collection must also necessarily be dealt with. As correctly ruled by the Court of Appeals, "the
issue of the validity and legality of the foreclosure sale is essentially related to the issue of the
demandability of the local franchise tax."35
Therefore, the dismissal of Napocor's appeal by the Court of Appeals was in order. Napocor's
procedural lapse would have been sufficient to reconsider this Court's decision and instead
deny the instant petition. However, the substantial merits of the case and the patent error
committed by the Bataan Regional Trial Court compels this Court to exercise its power of
judicial review for purposes of judicial economy.
II
"A real party in interest is the party who stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit."36 In the instant case, petitioner's
complaint has sought not only the nullification of the foreclosure sale but also a declaration
from the trial court that it is exempt from the local franchise tax. The action began when
respondent ignored petitioner's claim for exemption from franchise tax, and pursued its
collection of the franchise tax delinquency by issuing the warrant of levy and conducting the
sale at public auction - where the Provincial Government of Bataan was declared as purchaser
- of the transmission assets, despite the purported prior mutual agreement to suspend
administrative remedies for the collection of taxes. The assets were sold to enforce collection
of a franchise tax delinquency against the petitioner. Petitioner thus had to assail the
correctness of the local franchise tax assessments made against it by instituting the complaint
with the Regional Trial Court; otherwise, the assessment would become conclusive and
unappealable.37 Certainly, petitioner is a real party in interest, which stands to gain or lose
from the judgment that the trial court may render.
III
The main issue for the court a quo was a legal issue38 on whether Napocor was liable to pay
the assessed franchise tax imposed under Section 137 of Republic Act No. 7160 (the Local
Government Code of 1991) by virtue of EPIRA.
Section 137 of the Local Government Code provides:
Section 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other
special law, the province may impose a tax on businesses enjoying a franchise, at a rate not
exceeding fifty percent (50%) of one percent (1% ) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized, within its territorial
jurisdiction.
In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one
percent (1 %) of the capital investment. In the succeeding calendar year, regardless of when
the business started to operate, the tax shall be based on the gross receipts for the preceding
calendar year, or any fraction thereon, as provided herein.
Section 137 is categorical in stating that franchise tax can only be imposed on businesses
enjoying a franchise. This goes without saying that without a franchise, a local government unit
cannot impose franchise tax.
The Regional Trial Court relied heavily on the ruling in NPC v. City of Cabanatuan39 in
concluding that Napocor "is a commercial enterprise enjoying a franchise under Section 137 of
the Local Government Code."40 It held that Napocor was "enjoying the privilege of doing
business within the territory of the Province of Bataan[;] hence, it is liable to the franchise
tax."41 The Regional Trial Court further held that Napocor was subject to franchise tax even
granting the transfer of its power transmission function to TRANSC0.42 The court a quo found
that "no evidence was adduced showing that [Napocor] is no longer operating the [power
plants in Bataan], or that it already ceased generating electricity" from it.43
The court a quo's reliance on the ruling in NPC v. City of Cabanatuan44 was misplaced. That
case involved franchise taxes, which became due to the local government unit concerned prior
to the passage of Republic Act No. 9136 or the EPIRA, and the issue of exemption from
payment of franchise tax under EPIRA was not discussed.
Indeed, the enactment of EPIRA separated the transmission and sub-transmission functions of
the state-owned Napocor from its generation function, and transferred all its transmission
assets to the then newly-created TRANSCO, which was wholly owned by PSALM Corporation
at that time.45 Power generation is no longer considered a public utility operation, and
companies which shall engage in power generation and supply of electricity are no longer
required to secure a national franchise. This is expressly provided under Section 6 of EPIRA,
which reads:
Section 6. Generation Sector. - Generation of electric power, a business affected with public
interest, shall be competitive and open.
Upon the effectivity of this Act, any new generation company shall, before it operates, secure
from the Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the
standards set forth in this Act, as well as health, safety and environmental clearances from the
appropriate government agencies under existing laws.
Any law to the contrary notwithstanding, power generation shall not be considered a public
utility operation. For this purpose, any person or entity engaged or which shall engage in power
generation and supply of electricity shall not be required to secure a national franchise.
Upon implementation of retail competition and open access, the prices charged by a
generation company for the supply of electricity shall not be subject to regulation by the ERC
except as otherwise provided in this Act.
Pursuant to the objective of lowering electricity rates to end-users, sales of generated power
by generation companies shall be value added tax zero-rated.
The ERC shall, in determining the existence of market power abuse or anti-competitive
behavior, require from generation companies the submission of their financial
statements.1avvphi1 (Emphasis supplied)
EPIRA effectively removed power generation from the ambit of local franchise taxes. Hence,
as regards Napocor's business of generating electricity, the franchise taxes sought to be
collected by the Provincial Government of Bataan for the latter part of 2001 up to 2003 are
devoid of any statutory basis.
As regards Napocor's electric transmission function, under Section 8 of the same law, all
transmission assets of Napocor were to be transferred to TRANSCO within six (6) months from
the effectivity of EPIRA,46 or by December 26, 2001. The EPIRA Implementing Rules and
Regulations further required Napocor, PSALM Corporation, and TRANSCO to -
take such measures and execute such documents to effect the transfer of the ownership and
possession of the transmission and subtransmission facilities of [Napocor] and all other assets
related to transmission operations.1âwphi1 Upon such transfer, the nationwide franchise of
Napocor for the operation of the transmission system and the Grid shall transfer from Napocor
to TRANSCO.47
Hence, until the transfer date of the transmission assets, which by express provision of
EPIRA shall not be later than December 26, 2001, these assets, as well as the franchise, belong
to and are operated by N apocor, and the latter is consequently subject to the local franchise
tax.1âwphi1
Even so, it is quite apparent that at the time of the levy and auction of the 14 properties
sometime in January 2004 and March 2004, respectively, the properties were by virtue of
EPIRA already owned by TRANSCO. Thus, the foreclosure sale of the properties must be
declared null and void.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED. The decision dated April
21, 2014 insofar as it ordered the remand of the case to the Regional Trial Court is SET
ASIDE. The foreclosure sale of the 14 properties in Limay, Bataan is hereby declared NULL and
VOID.
SO ORDERED.
FIRST DIVISION
February 3, 2016
G.R. No. 208343
SPOUSES CEFERINO C. LAUS and MONINA P. LAUS, and SPOUSES ANTONIO O. KOH and
ELISA T. KOH, Petitioners
vs.
OPTIMUM SECURITY SERVICES, INC., Respondent.
DECISION
PERLAS-BERNABE, J.:
Before the Court is a petition for review on certiorari1assailing the Decision2 dated March 25,
2013 and the Resolution3 dated July 22, 2013 of the Court of Appeals (CA) in CA-G.R. SP No.
122258, which lifted the writ of preliminary injunction (WPI) issued by the Regional Trial Court
of Angeles City, Branch 62 (RTC) in Civil Case No. 12307 in favor of petitioners Spouses Ceferino
C. Laus and Monina P. Laus, and Spouses Antonio O. Koh and Elisa T. Koh (petitioners), and
dismissed their complaint for damages against respondent Optimum Security Services, Inc.
(respondent).
The Facts
On October 3, 2005, petitioners filed a complaint,4 denominated as one for "Damages with
Application for a Temporary Restraining Order [(TRO)] and [WPI]," docketed as Civil Case No.
12307, against respondent, several security guards employed by it, including Ronnie Marivalles
(Marivalles) and Rodrigo Olivette, and TIPCO Estate Corporation (TIPCO; collectively, other
defendants). Petitioners alleged that on three (3) separate occasions in August 2005, they were
prevented by armed security guards working for respondent and TIPCO from entering the eight
(8) parcels of land in Mabalacat, Pampanga belonging to them, covered by Transfer Certificates
of Title (TCT) Nos. 576602-R,5 578037-R,6 578038-R,7 578039-R,8 575138-R,9 575112-
R,10 576601-R,11 and 576603-R12 (subject properties).13 Thus, petitioners prayed
that: (a) moral, exemplary, and liquidated damages be awarded to them; (b) a TRO and WPI
be issued directing the respondent and the other defendants to refrain from interfering with
the exercise of their rights as owners of the subject properties; and (c) after trial, the injunction
be made permanent.14
Opposing petitioners' application for TRO and WPI, respondent and Marivalles
countered15 that petitioners are not entitled to the TRO and WPI prayed for because they do
not own the subject properties. They maintained that Margarita dela Rosa, Manuel dela Pefia,
Michael Pineda, Fermin Dizon, William Lee, and Odon Sibug are the real owners thereof, who
authorized16 Mr. Ranilo M. Arceo (Mr. Arceo) to enter into the Security Service Contract17 with
respondent to secure the subject properties.18 Respondent and Marivalles further insisted that
they acted in good faith in denying petitioners and their agents access to the subject properties
as they were merely complying with a contractual obligation.19 Moreover, they claimed that
the signatures appearing on the Deeds of Sale, which were the source of petitioners' titles,
were forged and, in fact, a petition for cancellation of petitioners' titles was filed by Jose
Bermudo, one of the original holders of the emancipation patent over three (3) parcels of land
in the subject properties, which was still pending before another court.20
Respondent and Marivalles subsequently filed their Answer21 where they added that
petitioners did not suffer any injury as no wrongful act was committed against
them.22 Accordingly, they prayed that the complaint be dismissed for lack of merit, and that
damages and attorney's fees be awarded to them.23
On the other hand, TIPCO denied preventing petitioners from entering the subject properties.
It pointed out that it did not claim ownership or possession thereof, and, as such, did not hire
the armed security guards who prevented petitioners from entering the subject properties.24
The RTC Ruling
In an Order25 dated October 6, 2010, the R TC granted the application for WPI based on its
finding that petitioners had presented sufficient evidence to establish that they are the
registered owners of the subject properties and thereby, have the right to possess the same.
It found no merit in respondent's defense that petitioners were not the real owners of the said
properties, observing that the former failed to ·present the alleged real owners of the subject
properties to support its claim. Accordingly, it enjoined respondent and the other defendants
from interfering with petitioners' exercise of acts of ownership over the same.26
Dissatisfied, respondent and TIPCO separately moved for reconsideration,27 but were denied
in an Order28 dated August 31, 2011. Consequently, respondent elevated the case to the
CA via a petition for certiorari and prohibition, docketed as CA-G.R. SP No. 122258.29
The CA Ruling
In a Decision30 dated March 25, 2013, the CA reversed the RTC ruling and thereby, lifted the
WPI and ordered the dismissal of petitioners' complaint.
In so ruling, the CA observed, inter alia, that the WPI was intended to oust respondent and the
other defendants from the subject properties, which, under prevailing jurisprudence, is not
allowed where the claimant's title has not been clearly established by law, as in this case where
petitioners' titles are under contest and they have failed to establish their prior possession of
the subject properties.31 To this, it emphasized that the purpose of a WPI is to preserve
the status quo ante or the last actual, peaceful, and uncontested status prior to the
controversy; but in this case, the injunctive writ created another situation by transferring the
possession of the subject properties to the petitioners.32
Further, the CA held that respondent was not a real party in interest as it was merely
contracted to secure the subject properties under the Security Service Contract, which had
since lapsed without being renewed.33 In this relation, it opined that the alleged real owners
of the subject properties are the real parties in interest, without whom there can be no final
determination of the issues involved.34 Thus, the CA ordered the dismissal of petitioners'
complaint.
Aggrieved, petitioners filed a motion for reconsideration,35 which was, however, denied in a
Resolution36 dated July 22, 2013; hence, the present petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA erred in lifting the WPI
issued by the R TC and in dismissing petitioners' complaint.
The Court's Ruling
The petition is partly meritorious.
I.
To be entitled to an injunctive writ, the right to be protected and the violation against that
right must be shown. A writ of preliminary injunction may be issued only upon clear showing
of an actual existing right to be protected during the pendency of the principal action. When
the complainant's right or title is doubtful or disputed, he does not have a clear legal right and,
therefore, the issuance of injunctive relief is not proper.37 Corollarily, preliminary injunction is
not a proper remedy to take property out of the possession and control of one party and to
deliver the same to the other party where such right is being disputed.38After all, a writ of
preliminary injunction is issued to preserve the status quo or the last actual, peaceable, and
uncontested situation which precedes a controversy.39
While it is a general rule that a trial court's discretion in issuing injunctive writs should not be
interfered with,40 the Court finds the CA's lifting of the WPI issued by the RTC in this case to be
proper, considering that the foregoing parameters were not observed, thus, tainting the trial
court's issuance with grave abuse of discretion 'amounting to lack or excess of jurisdiction.
As aptly pointed out by the CA, although petitioners appear to be the registered owners of the
subject properties, they nonetheless failed to establish that they were in actual physical
possession of the same at the time the incidents in August 2005 transpired. In fact, a cursQry
perusal of the complaint readily shows that petitioners never alleged that they were in prior
possession of the subject properties. All that was stated therein is that respondent and the
other defendants "[refuse] to recognize and respect [their] ownership and peaceful
possession" of the subject properties.41 Meanwhile, respondent alleged in its Opposition and
Answer that petitioners were not in possession of the subject properties, and that the real
owners thereof have been in possession of the subject properties since 1996 and 1997. 42 The
dispute concerning the ownership of the subject properties was detailed by the CA as follows:
As alleged by [respondent], these subject parcels ofland were from four (4) original
emancipation patent holders, namely: Marciano Lansangan, Vivencio Mercado, Crisencio
Pineda[,] and Jose Bermudo. Said persons sold the same in 1996 and 1997 to certain
individuals, namely: Margarita dela Rosa, Manuel dela Pefia, Michael Pineda, Fermin Dizon,
William Lee[,] and Odon Sibug, whom [respondent] pointed to as its principals. These
aforementioned buyers were among those who authorized [Mr. Arceo] as their Attomey-in-
[F]act to enter into a Security Service Contract with [respondent]. True to their claim of
ownership over [the subject properties], Alexander Bermudo, one of the alleged patent
holders, filed a Petition for Annulment of Title with Damages against [petitioners]. Likewise,
Margarita dela Rosa[,] one of [respondent's] alleged principals, also filed a case against
[petitioners] involving Lot 61 which is also claimed by them, and which case is still pending
before the same lower court.43
To reiterate, preliminary injunction is not a proper remedy to take property out of the
possession and control of one party and to deliver the same to the other party where such
right is being disputed, as in this case. As earlier intimated, preliminary injunction is a
preservative remedy. Therefore, it should not create new relations between the parties, but
must only maintain the status quo until the merits of the case is fully heard.44 Hence, for these
reasons, the RTC gravely abused its discretion in issuing the WPI involved herein.
Besides, as the CA further observed, the WPI issued by the RTC no longer serves any purpose,
considering that respondent already vacated the subject properties since the Security Service
Contract with Mr. Arceo had already expired.45 Time and again, the Court has repeatedly held
that when the act sought to be enjoined has become fait accompli, the prayer for preliminary
injunction should be denied.46 Indeed, when the events sought to be prevented by injunction
or prohibition had already happened, nothing more could be enjoined or prohibited. 47 An
injunction will not issue to restrain the performance of an act already done.48
II.
While the CA was correct in lifting the WPI, it, however, ened in ordering the dismissal of the
complaint.1âwphi1 The error springs from the CA's misconception that the alleged real owners
of the subject properties, while real parties in interest, are indispensable parties to the case.
The distinction between the two and the operational parameters as to each are well-settled in
jurisprudence.
As held in Carandang v. Heirs of de Guzman,49the Court clarified that:
A real party in interest is the party who stands to be benefited or injured by the judgment of
the suit, or the party entitled to the avails of the suit. On the other hand, an indispensable
party is a party in interest without whom no final determination can be had of an action, in
contrast to a necessary party, which is one who is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.
x x x "[I]f a suit is not brought in the name of or against the real party in interest, a motion
to dismiss may be filed on the ground that the complaint states no cause of action." However,
[the dismissal on this ground entails] an examination of whether the parties presently pleaded
are interested in the outcome of the litigation, and not whether all persons interested in such
outcome are actually pleaded. The latter query is relevant in discussions concerning
indispensable and necessary parties, but not in discussions concerning real parties in interest.
Both indispensable and necessary parties are considered as real parties in interest, since both
classes of parties stand to be benefited or injured by the judgment of the suit. 50 (Emphases
and underscoring supplied)
Meanwhile, in Plasabas v. CA,51it was held that "the non-joinder of indispensable parties is
not a ground for the dismissal of an action. The remedy is to implead the non-party claimed
to be indispensable. Parties may be added by order of the court on motion of the party or on
its own initiative at any stage of the action and/or at such times as are just. If petitioner refuses
to implead an indispensable party despite the order of the court, the latter may dismiss the
complaint/getition for the plaintiff's/petitioner's failure to comply therewith."52
In this case, while the alleged real owners of the subject properties may be considered as real
parties in interest for the reason that their supposed rights over these properties stand to be
prejudiced, they are not indispensable parties to the instant suit. Despite its denomination as
an action for "damages' in the complaint's caption,53 the action, as may be gleaned from the
pleading's allegations,54 is really one for injunction as it ultimately seeks to permanently enjoin
respondent and the other defendants, from restricting petitioners' access to the subject
properties.55 The crux of the main case, therefore, is whether or not respondent and said
defendants were justified in preventing petitioners from conducting the relocation survey on
the subject properties. Damages are also sought as ancillary relief for the acts complained of.
These issues can be resolved independent of the participation of the alleged real owners of
the subject properties. Hence, they are not indispensable parties, without whom no final
determination can be had.
In any event, even on the assumption that they are indispensable parties, the non-joinder of
indispensable parties is, as above-discussed, still not a ground for the dismissal of the suit. The
proper course of action is for the court to order that they be impleaded. Only upon refusal of
or non-compliance with such directive, may the complaint be dismissed.
In view of the nature of the case as above-explained, respondent and the other defendants are
real parties in interest.1âwphi1 Clearly, they stand to be directly injured by an adverse
judgment. They are the parties against whom the prayed for injunction is directed and are also
alleged to be liable for the resultant damage.
In fine, the petition is partially granted. While the CA's lifting of the WPI is affirmed, its order
dismissing the complaint is reversed. As a consequence, the complaint should be reinstated
and the main case should be remanded to the RTC for further proceedings. With this
pronouncement, there is no need to delve on the ancillary issues raised herein.
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated March 25, 2013 and the
Resolution dated July 22, 2013 of the Court of Appeals in CA-G.R. SP No. 122258 are
hereby AFFIRIMED with MODIFICATION in that the complaint is REINSTATED. The main case
is REMANDED to the Regional Trial Court of Angeles City, Branch 62 for further proceedings.
SO ORDERED.
FIRST DIVISION
G.R. No. 198124, September 12, 2018
JOHN CARY TUMAGAN, ALAM HALIL, AND BOT PADILLA, Petitioners, v. MARIAM K.
KAIRUZ, Respondent.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1 seeking to set aside the Decision2 dated December
21, 2010 and Resolution3 dated July 22, 2011 of the Court of Appeals (CA) in CA-G.R. SP No.
112613. The CA granted respondent's petition and reversed the Decision4 dated December 11,
2009 of Branch 10 of the Regional Trial Court (RTC), La Trinidad, Benguet, which affirmed the
dismissal of the complaint for ejectment on the ground of failure to implead an indispensable
party rendered by the 5th Municipal Circuit Trial Court (MCTC), Tuba-Sablan, Benguet.5
I.
In her complaint for ejectment filed before the MCTC, respondent Mariam K. Kairuz (Mariam)
alleged that she had been in actual and physical possession of a 5.2-hectare property located
at Tadiangan, Tuba, Benguet (property) until May 28, 2007. She alleged that in the afternoon
of May 28, 2007, petitioners John Cary Tumagan (John), Alam Halil (Alam), and Bot Padilla (Bot)
conspired with each other and took possession of the property by means of force, intimidation,
strategy, threat, and stealth with the aid of armed men. After forcibly gaining entry into the
property, petitioners then padlocked its three gates, posted armed men, and excluded Mariam
from the property.6 Mariam likewise sought the issuance of a temporary restraining order
(TRO) and/or a writ of preliminary injunction (WPI) against petitioners. 7
In their answer, petitioners averred that Mariam could not bring the present action for forcible
entry because she was never the sole owner or possessor of the property. 8 They alleged that
Mariam is the spouse of the late Laurence Ramzy Kairuz (Laurence), who co-owned the
property with his sisters, Vivien Kairuz (Vivien) and Elizabeth D' Alessandri (Elizabeth).
Petitioners claimed that the property is a good source of potable water and is publicly known
as Kairuz Spring. During his lifetime, Laurence, in his own capacity and as attorney-in-fact for
his sisters, entered into a Memorandum of Agreement 9 (MOA) with Balibago Waterworks
System Incorporated (BWSI) and its affiliate company, PASUDECO, to establish a new
corporation, Bali Irisan Resources, Inc. (BIRI). As stipulated in the MOA, Laurence and his two
sisters will sell the property containing Kairuz Spring and other improvements to BIRI for
P115,000,000.00. Eventually, the Kairuz family sold the property, including the bottling
building, Kairuz Spring, machineries, equipment, and other facilities following the terms of the
MOA. BIRI took full possession over the property and caused new certificates of title 10 to be
issued. BIRI is 30% owned by the Kairuz family and 70% owned by BWSI and its allied company,
PASUDECO. Its Board of Directors is composed of seven members, with a three-person
Management Committee (ManCom) handling its day-to-day operations. The one seat
accorded to the Kairuz family in the ManCom was initially occupied by Laurence, while the two
other seats in the ManCom were occupied by John and one Victor Hontiveros. Petitioners
alleged that Mariam was aware of the MOA, the ManCom, and of the operations of the BIRI
properties precisely because she succeeded Laurence's seat in the Board of Directors and
ManCom after his death.11
Petitioners also asserted that under the MOA, the Kairuz family assigned their Baguio Spring
Mineral Water Corporation (BSMWC) shares and water rights through the BSMWC water
permit. The MOA also stipulated the continued operation of the truck water business by the
Kairuzes and this was honored by BIRI. However, this privilege enjoyed by the Kairuzes is
contingent on their compliance with their own obligations and conditions as set forth in the
MOA. Unfortunately, upon Mariam's assumption of the truck water business as well as Lexber
Subdivision water service, she started to commit actions in conflict with the best interest of
BIRI, such as: (a) she opposed the required transfer of the BSMWC water permit to BIRI before
the National Water Resources Board; (b) she intervened in the case filed by Baguio Water
District against BIRI, weakening BIRI's position; (c) she filed a complaint before the RTC of
Angeles City questioning the Deed of Assignment of the BSMWC shares executed by the Kairuz
family in favor of BIRI; and (d) she asked the barangay officials at Tadiangan, Tuba
and Sangguniang Bayan Members of Tuba to deny BIRI's offer to service the water
requirements of Tuba residents.12 This prompted BIRI's shareholders to write Mariam
regarding her default on the provisions of the MOA, warning her that unless appropriate
remedies are fulfilled, the MOA will be terminated.13 Mariam refused to receive the registered
mail sent by BIRI14 and ignored their official communications, choosing instead to file the
present ejectment complaint against petitioners.15
Furthermore, petitioners claimed that contrary to Mariam's allegations, on May 28, 2007, BIRI,
as a corporation and owner of the spring property, merely exercised its legal right to prevent
unauthorized persons from entering its property. The deployment of licensed security guards
was intended to secure its property and prevent forcible entry into the area, specifically by
people who are "persona non-grata" to the company.16
Petitioners claim that the MCTC has no jurisdiction over the action filed by Mariam because
the same is an intra-corporate dispute which falls under the jurisdiction of the appropriate
RTC. They further assert that BIRI's actions in terminating the MOA, disallowing entry of
unauthorized persons, and the continuance of Mariam's truck water business are all pursuant
to the MOA, which is the law between the parties. Thus, petitioners prayed for the dismissal
of the complaint.17
On March 9, 2009, the MCTC dismissed the case due to Mariam's failure to implead BIRI, an
indispensable party.18 It ruled that the joinder of all indispensable parties must be made under
any and all conditions, their presence being sine qua non to the exercise of judicial power.
Thus, although it made a finding on Mariam's prior physical possession of the property,
ultimately, the MCTC ruled that if an indispensable party is not impleaded, as in this case, there
can be no final determination of the action.19
SO ORDERED.23
On appeal, the RTC upheld the MCTC's dismissal of the case. It ruled that since petitioners were
able to establish that they acted as mere employees or agents of BIRI, the issue of possession
cannot be resolved without the court first acquiring jurisdiction over BIRI. The defendants in
the complaint for ejectment are John, the branch manager of BIRI who carried out BIRI 's order Hence, this petition for review where petitioners argue that the CA gravely erred in: (1)
to secure the property with the assistance of security guards, Alam, and Bot, who are both reversing the Decisions of the MCTC and the RTC dismissing the complaint for failure to
licensed geodetic engineers hired by BIRI to conduct a location survey of the property. The implead BIRI, an indispensable party; (2) agreeing with Mariam's baseless claim of possession;
facts clearly show that they all acted in behalf of BIRI which was, in tum, allegedly exercising and (3) not finding that the issues are intra-corporate in nature which should be best resolved
its right of possession as the owner of the property that would be benefited or injured by the before the RTC in Angeles City.24
judgment.20
The petition is meritorious.
Aggrieved, Mariam filed a petition for review before the CA.
An indispensable party is a party in interest without whom no final determination can be had
On December 21, 2010, the CA granted the petition and reversed the RTC Decision. It ruled of an action and who shall be joined either as plaintiffs or defendants. The presence of
that the MCTC and the RTC should have limited the issue to who had prior physical possession indispensable parties is necessary to vest the court with jurisdiction.25
of the disputed land. It ruled that the MCTC erred in dismissing Mariam's complaint because
of a technical rule of failure to implead an indispensable party, BIRI. It pointed out that Rule 3, Here, as correctly held by the MCTC and the RTC, it is indisputable that BIRI is an indispensable
Section 11 of the Rules of Court provides that neither misjoinder nor non-joinder of parties is party, being the registered owner of the property and at whose behest the petitioner-
a ground for the dismissal of an action. The remedy is to implead the non-party claimed to be employees acted.26 Thus, without the participation of BIRI, there could be no full
indispensable either by order of the court on motion of the party or on its own initiative at any determination of the issues in this case considering that it was sufficiently established that
stage of the action. If the party refuses to implead the indispensable party despite order of the petitioners did not take possession of the property for their own use but for that of BIRI's.
court, then the latter may dismiss the complaint/petition for the plaintiffs failure to comply Contrary to the CA's opinion, the joinder of indispensable parties is not a mere technicality.
therewith. Here, the CA held that the records do not disclose that there was such an order for We have ruled that the joinder of indispensable parties is mandatory and the responsibility of
petitioners to implead the supposed indispensable party, thus, dismissal of the case for failure impleading all the indispensable parties rests on the plaintiff.27 In Domingo v. Scheer,28 we
to implead BIRI is improper.21 Furthermore, since BIRI owns the property and pursuant to the ruled that without the presence of indispensable parties to the suit, the judgment of the court
MOA, the Kairuzes own 30% of BIRI, then Mariam, who was unlawfully ousted from the cannot attain real finality. Otherwise stated, the absence of an indispensable party renders all
property by mere employees of BIRI, may file the case for ejectment. Furthermore, under subsequent actions of the court null and void for want of authority to act not only as to the
Article 487 of the Civil Code, any one of the co-owners may bring an action for ejectment absent party but even as to those present.29
without necessarily joining all other co-owners. The CA, thus, upheld Mariam's right to possess
the property concurrently with her co-owners.22 The dispositive portion of the CA Decision In this case, while the CA correctly pointed out that under Rule 3, Section 11 of the Rules of
reads: Court, failure to implead an indispensable party is not a ground for the dismissal of an action,
it failed to take into account that it remains essential that any indispensable party be
WHEREFORE, the Decision of the Regional Tr[ia]l Court dated December 11, 2009 impleaded in the proceedings before the court renders judgment.30 Here, the CA simply
is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered, ordering: proceeded to discuss the merits of the case and rule in Mariam's favor, recognizing her prior
physical possession of the subject property. This is not correct. The Decision and Resolution of
a) Respondents, their agents, deputies and employees and all persons under them, to the CA in this case is, therefore, null and void for want of jurisdiction, having been rendered in
allow petitioner's entry to the subject premises; and the absence of an indispensable party, BIRI.31

Nonetheless, while a remand of the case to the MCTC for the inclusion of BIRI, the non-party
claimed to be indispensable, seems to be a possible solution, a review of the records reveals
that the remand to the MCTC is not warranted considering that the MCTC itself did not acquire
jurisdiction over Mariam's complaint for forcible entry.

From the beginning, petitioners were consistent in their position that the MCTC has no
b) Respondents to pay petitioner the amount of P25,000.00 as attorney's fees. jurisdiction over the action filed by Mariam. They claim that Mariam is not only a shareholder
of BIRI, she is also the successor of her late husband, Laurence, and the case involves
management of corporate property, an intra-corporate dispute which falls under the
jurisdiction of the appropriate commercial court. Thus, pursuant to Article XII of the
MOA,32 Mariam should have brought the case before the RTC of Angeles,
Pampanga.33 Petitioners also argue that Mariam has already filed a case earlier against BIRI for
annulment of the Deed of Assignment before the RTC of Angeles City, that this case is merely
an attempt to split causes of action, and that Mariam purposely did not mention material facts
in order to obtain a favorable judgment. Petitioners likewise point out that Mariam cannot
feign ignorance that petitioners were merely acting on the orders of BIRI considering that both
Mariam and John are members of the same ManCom which oversaw the day-to-day business
operations of BIRI.34
In Matling Industrial and Commercial Corporation v. Coros, 35 the Court summarized the
guidelines for determining whether a dispute constitutes an intra-corporate controversy or
not. There, we held that in order that the SEC (now the RTC) 36 can take cognizance of a case,
the controversy must pertain to any of the following relationships: (a) between the
corporation, partnership, or association and the public; (b) between the corporation,
partnership, or association and its stockholders, partners, members, or officers; (c) between
the corporation, partnership, or association and the State as far as its franchise, permit, or
license to operate is concerned; and (d) among the stockholders, partners, or associates
themselves. However, not every conflict between a corporation and its stockholders involves
corporate matters. Concurrent factors, such as the status or relationship of the parties, or the
nature of the question that is the subject of their controversy, must be considered in
determining whether the SEC (now the RTC) has jurisdiction over the controversy. 37
Here, the Court considers two elements in determining the existence of an intra-corporate
controversy, namely: (a) the status or relationship of the parties; and (b) the nature of the
question that is the subject of their controversy.38
As discussed earlier, the parties involved in the controversy are respondent Mariam (a
shareholder of BIRI and successor to her late husband's position on the ManCom), petitioner
John (then the branch manager, shareholder, and part of the BIRI ManCom), and petitioners
Bot and Alam (licensed geodetic engineers engaged by BIRI for a contract to survey the
property subject of the dispute). The controversy also involves BIRI itself, the corporation of
which Mariam is a shareholder, and which through Board Resolutions No. 2006-0001,39 2007-
000440 and 2007-000541 authorized John, its branch manager, to do all acts fit and necessary
to enforce its corporate rights against the Kairuz family, including the posting of guards to
secure the property. The controversy is thus one between corporation and one of its
shareholders.
Moreover, the CA erred in characterizing the action as an ejectment case filed by a co-owner
who was illegally deprived of her right to possess the property by the presence of armed men.
TheCA ruled that since the Kairuzes own 30% of the shares of stocks of BIRI, Mariam, as a co-
owner who was unlawfully ousted from BIRI property by its employees, may bring an action
for ejectment against the employees. This is not correct.
Here, it is undisputed that the property has already been transferred to BIRI and registered in
its name.42 It is likewise undisputed that based on the MOA, the Kairuzes own 30% of the
outstanding capital stock of BIRI. This, however, does not make Mariam a co-owner of the
property of BIRI, including the property subject of this case. Shareholders are in no legal sense
the owners of corporate property, which is owned by the corporation as a distinct legal
person.43 At most, Mariam's interest as a shareholder is purely inchoate, or in sheer
expectancy of a right, in the management of the corporation and to share in its profits, and in
its properties and assets on dissolution after payment of the corporate debts and obligations.44
While Mariam insists that the case is one for forcible entry where the only issue is the physical
possession and not ownership of the property, her prior physical possession has not been
established in the courts below. In fact, the MCTC found that prior to the events of May 28,
2007, both petitioners and respondent were in actual possession of the property: petitioners,
on behalf of BIRI as the owner of the property, and respondent Mariam, by virtue of the
accommodation granted to her by BIRI under the MOA allowing her to continue her water
reloading business on the property even after the transfer of its ownership to BIRI. 45
In sum, what appears on record as the true nature of the controversy is that of a shareholder
seeking relief from the court to contest the management's decision to: (1) post guards to
secure the premises of the corporate property; (2) padlock the premises; and (3) deny her
access to the same on May 28, 2007 due to her alleged default on the provisions of the MOA.
Thus, we agree with petitioners that while the case purports to be one for forcible entry filed
by Mariam against BIRI's employees and contractors in their individual capacities, the true
nature of the controversy is an intra-corporate dispute between BIRI and its shareholder,
Mariam, regarding the management of, and access to, the corporate property subject of the
MOA. We therefore find that the MCTC never acquired jurisdiction over the ejectment case
filed by Mariam.
WHEREFORE, the petition is GRANTED. The Decision dated December 21, 2010 and Resolution
dated July 22, 2011 of the Court of Appeals in CA-G.R. SP No. 112613 are REVERSED and SET
ASIDE. The complaint for ejectment in Civil Case No. 272 filed before the 5th Municipal Circuit
Trial Court, Tuba-Sablan, Benguet, is DISMISSED for lack of jurisdiction.
SO ORDERED.
Rule 3, Sections 13 to 19: Parties to a Civil Action
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-58028 April 18, 1989
CHIANG KAI SHEK SCHOOL, petitioner,
vs.
COURT OF APPEALS and FAUSTINA FRANCO OH, respondents.
CRUZ, J.:
An unpleasant surprise awaited Fausta F. Oh when she reported for work at the Chiang Kai
Shek School in Sorsogon on the first week of July, 1968. She was told she had no assignment
for the next semester. Oh was shocked. She had been teaching in the school since 1932 for a
continuous period of almost 33 years. And now, out of the blue, and for no apparent or given
reason, this abrupt dismissal.
Oh sued. She demanded separation pay, social security benefits, salary differentials, maternity
benefits and moral and exemplary damages. 1 The original defendant was the Chiang Kai Shek
School but when it filed a motion to dismiss on the ground that it could not be sued, the
complaint was amended. 2 Certain officials of the school were also impleaded to make them
solidarily liable with the school.
The Court of First Instance of Sorsogon dismissed the complaint. 3 On appeal, its decision was
set aside by the respondent court, which held the school suable and liable while absolving the
other defendants. 4 The motion for reconsideration having been denied, 5 the school then
came to this Court in this petition for review on certiorari.
The issues raised in the petition are:
1. Whether or not a school that has not been incorporated may be sued by reason alone of its
long continued existence and recognition by the government,
2. Whether or not a complaint filed against persons associated under a common name will
justify a judgment against the association itself and not its individual members.
3. Whether or not the collection of tuition fees and book rentals will make a school profit-
making and not charitable.
4. Whether or not the Termination Pay Law then in force was available to the private
respondent who was employed on a year-to-year basis.
5. Whether or not the awards made by the respondent court were warranted.
We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of the
Rules of Court clearly provides that "only natural or juridical persons may be parties in a civil
action." It is also not denied that the school has not been incorporated. However, this omission
should not prejudice the private respondent in the assertion of her claims against the school.
As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180, which
provided as follows:
Unless exempted for special reasons by the Secretary of Public Instruction, any private school
or college recognized by the government shall be incorporated under the provisions of Act No.
1459 known as the Corporation Law, within 90 days after the date of recognition, and shall file
with the Secretary of Public Instruction a copy of its incorporation papers and by-laws.
Having been recognized by the government, it was under obligation to incorporate under the
Corporation Law within 90 days from such recognition. It appears that it had not done so at
the time the complaint was filed notwithstanding that it had been in existence even earlier
than 1932. The petitioner cannot now invoke its own non-compliance with the law to
immunize it from the private respondent's complaint.
There should also be no question that having contracted with the private respondent every
year for thirty two years and thus represented itself as possessed of juridical personality to do
so, the petitioner is now estopped from denying such personality to defeat her claim against
it. According to Article 1431 of the Civil Code, "through estoppel an admission or
representation is rendered conclusive upon the person making it and cannot be denied or
disproved as against the person relying on it."
As the school itself may be sued in its own name, there is no need to apply Rule 3, Section 15,
under which the persons joined in an association without any juridical personality may be sued
with such association. Besides, it has been shown that the individual members of the board of
trustees are not liable, having been appointed only after the private respondent's dismissal. 6
It is clear now that a charitable institution is covered by the labor laws 7 although the question
was still unsettled when this case arose in 1968. At any rate, there was no law even
then exempting such institutions from the operation of the labor laws (although they were
exempted by the Constitution from ad valorem taxes). Hence, even assuming that the
petitioner was a charitable institution as it claims, the private respondent was nonetheless still
entitled to the protection of the Termination Pay Law, which was then in force.
While it may be that the petitioner was engaged in charitable works, it would not necessarily
follow that those in its employ were as generously motivated. Obviously, most of them would
not have the means for such charity. The private respondent herself was only a humble school
teacher receiving a meager salary of Pl80. 00 per month.
At that, it has not been established that the petitioner is a charitable institution, considering
especially that it charges tuition fees and collects book rentals from its students. 8 While this
alone may not indicate that it is profit-making, it does weaken its claim that it is a non-profit
entity.
The petitioner says the private respondent had not been illegally dismissed because her
teaching contract was on a yearly basis and the school was not required to rehire her in 1968.
The argument is that her services were terminable at the end of each year at the discretion of
the school. Significantly, no explanation was given by the petitioner, and no advance notice
either, of her relief after teaching year in and year out for all of thirty-two years, the private
respondent was simply told she could not teach any more.
The Court holds, after considering the particular circumstance of Oh's employment, that she
had become a permanent employee of the school and entitled to security of tenure at the time
of her dismissal. Since no cause was shown and established at an appropriate hearing, and the
notice then required by law had not been given, such dismissal was invalid.
The private respondent's position is no different from that of the rank-and-file employees
involved in Gregorio Araneta University Foundation v. NLRC, 9 of whom the Court had the
following to say:
Undoubtedly, the private respondents' positions as deans and department heads of the
petitioner university are necessary in its usual business. Moreover, all the private respondents
have been serving the university from 18 to 28 years. All of them rose from the ranks starting
as instructors until they became deans and department heads of the university. A person who
has served the University for 28 years and who occupies a high administrative position in
addition to teaching duties could not possibly be a temporary employee or a casual.
The applicable law is the Termination Pay Law, which provided:
SECTION 1. In cases of employment, without a definite period, in a commercial, industrial, or
agricultural establishment or enterprise, the employer or the employee may terminate at any
time the employment with just cause; or without just cause in the case of an employee by
serving written notice on the employer at least one month in advance, or in the case of an
employer, by serving such notice to the employee at least one month in advance or one-half
month for every year of service of the employee, whichever, is longer, a fraction of at least six
months being considered as one whole year.
The employer, upon whom no such notice was served in case of termination of employment
without just cause may hold the employee liable for damages.
The employee, upon whom no such notice was served in case of termination of employment
without just cause shall be entitled to compensation from the date of termination of his
employment in an I amount equivalent to his salaries or wages correspond to the required
period of notice. ... .
The respondent court erred, however, in awarding her one month pay instead of only one-half
month salary for every year of service. The law is quite clear on this matter. Accordingly, the
separation pay should be computed at P90.00 times 32 months, for a total of P2,880.00.
Parenthetically, R.A. No. 4670, otherwise known as the Magna Carta for Public School
Teachers, confers security of tenure on the teacher upon appointment as long as he possesses
the required qualification. 10 And under the present policy of the Department of Education,
Culture and Sports, a teacher becomes permanent and automatically acquires security of
tenure upon completion of three years in the service. 11
While admittedly not applicable to the case at bar, these I rules nevertheless reflect the
attitude of the government on the protection of the worker's security of tenure, which is now
guaranteed by no less than the Constitution itself. 12
We find that the private respondent was arbitrarily treated by the petitioner, which has shown
no cause for her removal nor had it given her the notice required by the Termination Pay Law.
As the respondent court said, the contention that she could not report one week before the
start of classes is a flimsy justification for replacing her. 13 She had been in its employ for all of
thirty-two years. Her record was apparently unblemished. There is no showing of any previous
strained relations between her and the petitioner. Oh had every reason to assume, as she had
done in previous years, that she would continue teaching as usual.
It is easy to imagine the astonishment and hurt she felt when she was flatly and without
warning told she was dismissed. There was not even the amenity of a formal notice of her
replacement, with perhaps a graceful expression of thanks for her past services. She was simply
informed she was no longer in the teaching staff. To put it bluntly, she was fired.
For the wrongful act of the petitioner, the private respondent is entitled to moral
damages. 14 As a proximate result of her illegal dismissal, she suffered mental anguish, serious
anxiety, wounded feelings and even besmirched reputation as an experienced teacher for
more than three decades. We also find that the respondent court did not err in awarding her
exemplary damages because the petitioner acted in a wanton and oppressive manner when it
dismissed her. 15
The Court takes this opportunity to pay a sincere tribute to the grade school teachers, who are
always at the forefront in the battle against illiteracy and ignorance. If only because it is they
who open the minds of their pupils to an unexplored world awash with the magic of letters
and numbers, which is an extraordinary feat indeed, these humble mentors deserve all our
respect and appreciation.
WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED except for the award
of separation pay, which is reduced to P2,880.00. All the other awards are approved. Costs
against the petitioner.
This decision is immediately executory.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. L-42699 to L-42709 May 26, 1981
THE HEIRS OF THE LATE FLORENTINA NUGUID VDA. DE HABERER, petitioner,
vs.
COURT OF APPEALS, ** FEDERICO MARTINEZ, BALDOMERO MANALO, FAUSTINO
BAGALAWIS, FEDERICO STA. TERESA, ANGELITO KING, GREGORIO DEL ROSARIO,
LEODOVICO TORRES, LEON SORIANO, SANTIAGO TUMANG, LUIS PASTOR and CRISTINO
LIBRAMANTE, respondents.
TEEHANKEE, J
The Court grants the petition for review by way of appeal from the Resolutions of respondent
Court of Appeals dated November 24, 1975 and January 15, 1976 dismissing the appeal of the
late Florentino Nuguid Vda. de Haberer in CA-G. R. No. 53680—90-R and ordering all pleadings
filed in said cases after the death of said appellant stricken off the records, for having been
issued with grave error of law if not with grave abuse of discretion and remands the case for
proper proceedings and determination of the appeal on the merits.
This case originated from the Court of First Instance of Rizal where the late Florentina Nuguid
Vda. de Haberer as the duly registered owner filed in 1964 and 1965 (11) complaints for
recovery of possession of the parcel of land evidenced by Transfer Certificate of Title No. 15043
of the Register of Deeds of Rizal issued in her name, situated at Mandaluyong, Rizal, alleging
that private respondents had surreptitiously entered the land and built their houses thereon.
The lower court, after trial on the merits, rendered a consolidated decision, dated May 26, 197
l, dismissing all the complaints. On motion of the late Florentina Nuguid Vda. de Haberer the
cases were reopened and retried on grounds of newly discovered evidence. On September 15,
1972, the lower court issued an order reviving its decision of May 26, 1971. The decision was
thus appealed to the Court of Appeals.
In the Court of Appeals, the cases were erroneously dismissed once before, on the ground that
the appeal was allegedly filed out of time. The issue was brought to this Court in Cases Nos. L-
39366 and L-39620-29, entitled "Florentina Nuguid Vda. de Haberer vs. Federico Martinez, et
al., 1 On January 29, 1975, this Court rendered its judgment setting aside the appellate court's
dismissal of the appeal and ordering the reinstatement of the same for proper disposition on
the merits, having found "that contrary to respondent court's erroneous premises and
computation, petitioner duly and timely perfected her appeal within the reglementary period
and in compliance with the material data rule requiring that the Record on Appeal state such
data as will show that the appeal was perfected on time. "
The cases were remanded to the Court of Appeals where appellant was required to file printed
brief within forty-five days from her receipt of notice. Three days before the period was to
expire, or on June 18, 1975, appellant's counsel requested for an extension of time within
which to file appellant's brief. Respondent court in a resolution dated June 23, 1975 granted
the request and gave appellant a 90-day extension (with warning of no further extension) from
receipt on June 27, 1975 or up to September 25, 1975 within which to file the appellant's
printed brief. On June 23, 1975, private respondent opposed the extension by filing a "Motion
to Set Aside Order Granting Extension of Time to File Brief." Appellant was directed by
respondent court to comment on the said opposition and appellant's counsel complied by
submitting its comments on July 15, 1975.
In the meantime, appellant Florentina Nuguid Vda. de Haberer had died on May 26, 1975.
Appellant's counsel Attorneys Bausa, Ampil and Suarez accordingly gave respondent court
notice of the death of their client in their motion of June 28, 1975 and asked for the suspension
of the running of the period within which to file the appellant's brief pending the appointment
of an executor of the estate left by their client in the Court of First Instance of Quezon City (Sp.
Proc. No. Q-2026) where a petition for the probate of the alleged will of the deceased had been
filed by another lawyer, Atty. Sergio Amante. Respondents in turn contended that the lawyers
of he deceased had "no longer any legal standing and her atorneys could no longer act for and
in her behalf for the reason that their client-attorney relationship had been automatically
erminated or severed" and asked that the appeal be dismissed for failure to prosecute." 2
Since their motion of June 28, 1975 remained unacted upon and the original extension granted
by the respondent court for the deceased appellant to file her printed brief was about to
expire, her counsel filed on September 18, 1975 a manifestation and/or motion asking either
for an extension of sixty (60) days and/or resolution suspending the running of the period
within which to submit appellant's printed brief. Still, respondent, court remained silent.
Not certain whether their services would still be retained by the heirs of the deceased, counsel
for the late Florentina Nuguid Vda. de Haberer reiterated their request in a motion dated
November 14, 1975 either for an extension of time to file appellant's brief or for the issuance
of a resolution suspending the running of the period for filing the same, pending the
appointment of an administrator or executor of the estate of the deceased appellant.
Finally, acting on counsel's motion of November 14, 1975, respondent court denied the
request for extension and at the same time dismissed the appeal, ruling in its resolution dated
November 24, 1975 as follows:1äwphï1.ñët
Upon consideration of the manifestation and/or for another extension to file appellant's brief
dated November 14, 1975, filed by counsel for the appellant on the grounds therein stated,
and considering that appellant has already been given a total of one hundred ninety-five (195)
days within which to file brief, the Court Resolved to deny the motion for another extension
to file brief and to dismiss the appeal.
Counsel for the deceased appellant forthwith filed their urgent motion for reconsideration of
December 8, 1975 explaining their predicament that the requests for extension/suspension of
period to file brief was due to the uncertainty that their services may no longer be retained by
the heirs or legal representatives of their deceased client but they felt obligated to preserve
the right of such heirs/successors to continue the appeal pursuant to Rule 3, Section 17 of the
Rules of Court, pending the settlement of the question of who among them should be the
executor of the deceased's estate and presented therewith, for admission, the printed "brief
for the appellant" the printing of which they had deferred "for professional ethical
considerations," pending respondent court's action on their request for suspension of the
period. They further submitted therewith copies of 2 separate orders of September 3, 1975
and August 26, 1975 issued by the Court of Agrarian Relations and the Court of First Instance
both at Guimba, Nueva Ecija, respectively, wherein the deceased Florentina Nuguid Vda. de
Haberer was party-defendant, granting the deceased's counsel's prayer to hold in abeyance
further proceedings therein pending the appointment of an administrator for the estate of the
deceased.
Respondent court, however, denied reconsideration, per its Resolution of January 15, 1976
citing the general principle that "litigants have no right to assume that such extensions will be
granted as a matter of course." But respondent court erred in applying this general principle
and summarily denying reconsideration and denying admission of the appellant's brief
conditioned upon the administrator of the deceased's estate making his appearance upon his
appointment and being granted leave to file his supplemental brief/memorandum, 3 in view of
the intervening event of appellant's death and the interposition of the equally established
principle that the relation of attorney and client is terminated by the death of the client, as
acknowledged by respondent court itself as well as respondents. ln the absence of a retainer
from the heirs or authorized representatives of his deceased client, the attorney would
thereafter have no further power or authority to appear or take any further action in the case,
save to inform the court of the client's death and take the necessary steps to safeguard the
deceased's rights in the case.
This is what the deceased's counsel did in the case at bar. They properly informed respondent
court of the death of the appellant and sought suspension of the proceedings and of the period
for filing appeliant's brief pending the appointment of the executor of the deceased's estate in
the proper probate proceedings filed with the Court of First Instance of Quezon City. Section
17, Rule 3 of the Rules of Court 4 sets the rule on substitution of parties in case of death of any
of the parties. Under the Rule, it is the court that is called upon, after notice of a party's death
and the claim is not thereby extinguished, to order upon proper notice the legal representative
of the deceased to appear within a period of 30 days or such tlnie as it may grant. Since no
administrator of the estate of the deceased appellant had yet been appointed as the same was
still pending determination in the Court of First Instance of Quezon City, the motion of the
deceased's counsel for the suspension of the running of the period within which to file
appellant's brief was well-taken. More, under the Rule, it should have set a period for the
substitution of the deceased party with her legal representative or heirs, failing which, the
court is called upon to order the opposing party to procure the appointment of a legal
representative of the deceased at the cost of the deceased's estate, and such representative
shall then "immediately appear for and on behalf of the interest of the deceased."
Respondent court gravely erred in not following the Rule and requiring the appearance of the
legal representative of the deceased and instead dismissing the appeal of the deceased who
yet had to be substituted in the pending appeal. Thus, it has been held that when a party dies
in an action that survives, and no order is issued by the court for the appearance of the legal
representative or of the heirs of the deceased in substitution of the deceased, and as a matter
of fact no such substitution has ever been effected, the trial held by the court without such
legal representatives or heirs and the judgment rendered after such trial are null and void
because the court acquired no jurisdiction over the persons of the legal representatives or of
the heirs upon whom the trial and the judgment would be binding. 5
Respondent court therefore erred in ruling that since upon the demise of the party-appellant,
the attorney-client relationship between her and her counsels "was automatically severed and
terminated," whatever pleadings filed by said counsel with it after the death of said appellant
"are mere scraps of paper." 6 If at all, due to said death on May 25, 1975 and severance of the
attorney-client relationship, further proceedings and specifically the running of the original 45-
day period for filing the appellnt's brief should be legally deemed as having been automatically
suspended, until the proper substitution of the deceased appellant by her executor or
administrator or her heirs shall have been effected within the time set by respondent court
pursuant to the cited Rule.
Respondent court likewise gravely erred in dismissing the appeal on "(its) belief that the
supervening death of the appellant Florentina Nuguid Vda. de Haberer rendered the
continuance of the appeal unnecessary" on the basis of a totally inapplicable citation of a ruling
in Velasco vs. Rosenberg, 29 Phil. 212, 214 that "If pending appeal, an event occurs which
renders it impossible for the appellate court to grant any relief, the appeal will be dismissed."
Manifestly, the appenant's death in no way impedes that the deceased's appeal to recover the
parcel of land registered in her name be continued and determined for the benefit of her estate
and heirs.
Prescinding from the foregoing, justice and equity dictate under the circumstances of the case
at bar that the rules, while necessary for the speedy and orderly administration of justice,
should not be applied with the rigidity and inflexibility of respondent court's
resolutions. 7 What should guide judicial action is the principle that a party litigant is to be
given the fullest opportunity to establish the merits of his complaint or defense rather than for
him to lose life, liberty, honor or property on technicalities. 8 A liberal, rather than a strict and
inflexible adherence to the Rules, is justified not only because appellant (in this case, her estate
and/or heirs) should be given every opportunity to be heard but also because no substantial
injury or prejudice can well be caused to the adverse parties principally, since they are in actual
possession of the disputed land. 9 The better and certainly the more prudent course of action
in every judicial proceeding is to hear both sides and decide on the merits rather than dispose
of a case on technicalities, 10 especially where no substantial prejudice is caused to the adverse
party. 11
The dismissal of an appeal based on the appellant's failure to file brief is based on a power
granted to respondent Court of Appeals and not on a specific and mandatory duty imposed
upon it by the Rules. 12 Since the power or authority is not mandatory but merely directory,
the exercise thereof requires a great deal of circumspection, considering all the attendant
circumstances. 13 The failure of an appellant to file his brief within the time prescribed does
not have the effect of dismissing the appeal automatically. 14 Rather, the Court of Appeals has
the discretion to dismiss or not to dismiss appellant's appeal, which discretion must be a sound
one to be exercised in accordance with the tenets of justice and fair play having in mind the
circumstances obtaining in each case. l5
Paraphrasing what the Court stressed in the leading case of Berkenkotter vs. Court of
Appeals, 16 a reading of the appellant's brief discloses that petitioners-appellants have a prima
facie meritorious case which should be properly determined on the merits and "the element
of rigidity should not be affixed to procedural concepts and made to cover the matter," 17 for
to dismiss the appeal would not serve the ends of justice.
A final note: On March 19, 1976, counsels submitted with their Manifestation the written
authority dated January 20, 1976 individually signed by instituted heirs and/or legal
representatives of the testate estate of the deceased Florentina Nuguid Vda. de Haberer
granting said counsels full authority to file and prosecute the case and any other incidental
cases for and in their behalf, 18 which was duly noted in the Court's Resolution of March 26,
1976. Such manifestation and authority may be deemed the formal substitution of the
deceased by her heirs, as in fact they appear as petitioners in the title of the case at bar. Hence,
the proper determination of the pending appeal may now proceed, as herein directed.
ACCORDINGLY, the petition is granted and respondent court's resolutions of November 24,
1975 and January 15, 1976 are set aside. The appellant's brief filed with respondent court in
the pending appeal in CA-G.R. Nos. 53680-90-R is ordered admitted and the cases are
remanded to respondent, Court of Appeals for further proceedings and proper determination
of the appeal on the merits. With costs against private respondents.
The Court has noted that upon recommendation of the Solicitor General in Adm. Case No. 2148
entitled "Francisco Ortigas, Jr., et al. vs. Atty. Felipe C. Navarro" that counsel for respondents
Felipe C. Navarro be disbarred for "gross misconduct and/or malpractice," he has been
suspended from the practice of law during the pendency of said proceedings. The Court,
however, directs that copy of this decision be served on said counsel for the sole purpose of
apprising private respondents through him of the promulgation of this judgment and to require
respondents (1) to inform the Court of their new counsel, if any, and to direct him to enter his
appearance or (2) if they have no new or other counsel, to inform the Court of their respective
addresses for purposes of service of the Court's processes, within ten (10) days from notice
hereof.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 121510 November 23, 1995
FABIANA C. VDA. DE SALAZAR, petitioner,
vs.
COURT OF APPEALS, PRIMITIVO NEPOMUCENO and EMERENCIANA
NEPOMUCENO, respondents.
HERMOSISIMA, JR., J.:
Where the defendant in an ejectment case dies before the rendition by the trial court of its
decision therein, does the trial court's failure to effectuate a substitution of heirs before its
rendition of judgment render such judgment jurisdictionally infirm?
On July 23, 1970, both private respondents Primitive Nepomuceno and Emerenciana
Nepomuceno filed separate complaints1 with the then Court of Agrarian Relations of Malolos,
Bulacan, for ejectment on the ground of personal cultivation and conversion of land for useful
non-agricultural purposes against petitioner's deceased husband, Benjamin Salazar. After
protracted proceedings in the agrarian court and then the Regional Trial Court2 spanning from
1970 to 1993, the trial court rendered its joint decision3 in favor of private respondents. An
appeal4 therefrom was interposed in the name of petitioner's deceased husband on the
ground that private respondents herein failed to satisfy the requirements pertaining to
personal cultivation and conversion of the landholdings into non-agricultural uses. The Court
of Appeals rejected such contention upon finding that the record was replete with evidence
justifying private respondents' assertion of their right of cultivation and conversion of their
landholdings.5
Almost a year after the termination of that appeal, the same trial court decision subject thereof
was once again assailed before the Court of Appeals through a petition6 for annulment of
judgment. Herein petitioner assailed the same trial court decision as having been rendered by
a court that did not have jurisdiction over her and the other heirs of her deceased husband
because notwithstanding the fact that her husband had already died on October 3, 1991, the
trial court still proceeded to render its decision on August 23, 1993 without effecting the
substitution of heirs in accordance with Section 17, Rule 3, of the Rules of Court thereby
depriving her of her day in court.
Petitioner, not having asserted the matter of fraud or collusion in her petition for annulment
of judgment, the Court of Appeals decided the same on the basis of the sole issue of non-
jurisdiction resulting from the alleged deprivation of petitioner's right to due process and ruled
in favor of the validity of the challenged decision.7 Petitioner filed a motion for reconsideration
of the decision of the appellate court reiterating the trial court's lack of jurisdiction over the
heirs of petitioner's deceased husband as a consequence of the failure of the trial court to
effectuate a valid substitution of heirs. Said motion was denied in a resolution promulgated on
August 14, 1995. Hence this petition.
The petition is bereft of merit.
The need for substitution of heirs is based on the right to due process accruing to every party
in any proceeding.8The rationale underlying this requirement in case a party dies during the
pendency of proceedings of a nature not extinguished by such death, is that
. . . the exercise of judicial power to hear and determine a cause implicitly presupposes in the
trial court, amongst other essentials, jurisdiction over the persons of the parties. That
jurisdiction was inevitably impaired upon the death of the protestee pending the proceedings
below such that unless and until a legal representative is for him duly named and within the
jurisdiction of the trial court, no adjudication in the cause could have been accorded any
validity or binding effect upon any party, in representation of the deceased, without trenching
upon the fundamental right to a day in court which is the very essence of the constitutionally
enshrined guarantee of due process.9
We are not unaware of several cases10 where we have ruled that a party having died in an
action that survives, the trial held by the court without appearance of the deceased's legal
representative or substitution of heirs and the judgment rendered after such trial, are null and
void because the court acquired no jurisdiction over the persons of the legal representatives
or of the heirs upon whom the trial and the judgment would be binding. This general rule
notwithstanding, in denying petitioner's motion for reconsideration, the Court of Appeals
correctly ruled that formal substitution of heirs is not necessary when the heirs themselves
voluntarily appeared, participated in the case and presented evidence in defense of deceased
defendant. Attending the case at bench, after all, are these particular circumstances which
negate petitioner's belated and seemingly ostensible claim of violation of her rights to due
process. We should not lose sight of the principle underlying the general rule that formal
substitution of heirs must be effectuated for them to be bound by a subsequent judgment.
Such had been the general rule established not because the rule on substitution of heirs and
that on appointment of a legal representative are jurisdictional requirements per se but
because non-compliance therewith results in the undeniable violation of the right to due
process of those who, though not duly notified of the proceedings, are substantially affected
by the decision rendered therein. Viewing the rule on substitution of heirs in this light, the
Court of Appeals, in the resolution denying petitioner's motion for reconsideration, thus
expounded:
Although the jurisprudential rule is that failure to make the substitution is a jurisdictional
defect, it should be noted that the purpose of this procedural rule is to comply with due
process requirements. The original party having died, he could not continue to defend himself
in court despite the fact that the action survived him. For the case to continue, the real party
in interest must be substituted for the deceased. The real party in interest is the one who
would be affected by the judgment. It could be the administrator or executor or the heirs. In
the instant case, the heirs are the proper substitutes. Substitution gives them the opportunity
to continue the defense for the deceased. Substitution is important because such opportunity
to defend is a requirement to comply with due process. Such substitution consists of making
the proper changes in the caption of the case which may be called the formal aspect of it. Such
substitution also includes the process of letting the substitutes know that they shall be bound
by any judgment in the case and that they should therefore actively participate in the defense
of the deceased. This part may be called the substantive aspect. This is the heart of the
procedural rule because this substantive aspect is the one that truly embodies and gives effect
to the purpose of the rule. It is this court's view that compliance with the substantive aspect
of the rule despite failure to comply with the formal aspect may be considered substantial
compliance. Such is the situation in the case at bench because the only inference that could be
deduced from the following facts was that there was active participation of the heirs in the
defense of the deceased after his death:
1. The original lawyer did not stop representing the deceased. It would be absurd to think that
the lawyer would continue to represent somebody if nobody is paying him his fees. The lawyer
continued to represent him in the litigation before the trial court which lasted for about two
more years. A dead party cannot pay him any fee. With or without payment of fees, the fact
remains that the said counsel was allowed by the petitioner who was well aware of the instant
litigation to continue appearing as counsel until August 23, 1993 when the challenged decision
was rendered;
2. After the death of the defendant, his wife, who is the petitioner in the instant case, even
testified in the court and declared that her husband is already deceased. She knew therefore
that there was a litigation against her husband and that somehow her interest and those of
her children were involved;
3. This petition for annulment of judgment was filed only after the appeal was decided against
the defendant on April 3, 1995, more than one and a half year (sic) after the decision was
rendered (even if we were to give credence to petitioner's manifestation that she was not
aware that an appeal had been made);
4. The Supreme Court has already established that there is such a thing as jurisdiction by
estoppel. This principle was established even in cases where jurisdiction over the subject
matter was being questioned. In the instant case, only jurisdiction over the person of the heirs
is in issue. Jurisdiction over the person may be acquired by the court more easily than
jurisdiction over the subject matter. Jurisdiction over the person may be acquired by the simple
appearance of the person in court as did herein petitioner appear;
5. The case cited by the herein petitioner (Ferreria et al. vs. Manuela Ibarra vda. de Gonzales,
et al.) cannot be availed of to support the said petitioner's contention relative to non-
acquisition of jurisdiction by the court. In that case, Manolita Gonzales was not served notice
and, more importantly, she never appeared in court, unlike herein petitioner who appeared
and even testified regarding the death of her husband.11
Consequently, we rule that, as in the case at bench, the defendant in an ejectment case having
died before the rendition by the trial court of its decision therein, its failure to effectuate a
formal substitution of heirs before its rendition of judgment, does not invalidate such
judgment where the heirs themselves appeared before the trial court, participated in the
proceedings therein, and presented evidence in defense of deceased defendant, it undeniably
being evident that the heirs themselves sought their day in court and exercised their right to
due process.
Respondent Court of Appeals also correctly ruled that ejectment, being an action involving
recovery of real property, is a real action which as such, is not extinguished by the defendant's
death.
. . . The question as to whether an action survives or not depends on the nature of the action
and the damage sued for. In the causes of action which survive, the wrong complained affects
primarily and principally property and property rights, the injuries to the person being merely
incidental, while in the causes of action which do not survive, the injury complained of is to the
person, the property and rights of property affected being incidental.12
There is no dispute that an ejectment case survives the death of a party, which death did not
extinguish the deceased's civil personality.13 More significantly, a judgment in an ejectment
case is conclusive between the parties and their successors in interest by title subsequent to
the commencement of the action.14 Thus, we have held that:
. . . In such a case and considering that the supervening death of appellant did not extinguish
her civil personality, the appellate court was well within its jurisdiction to proceed as it did with
the case. There is no showing that the appellate court's proceedings in the case were tainted
with irregularities.
It appears that petitioners are heirs of Adela Salindon. In fact, it was because of this
relationship that the petitioners were able to transfer the title of Adela Salindon over the
subject lot to their names. . . . Considering all this, the appellate decision is binding and
enforceable against the petitioners as successors-in-interest by title subsequent to the
commencement of the action (Section 49 [b] Rule 39, Rules of Court). Furthermore, . . .
judgment in an ejectment case may be enforced not only against defendants therein but also
against the members of their family, their relatives, or privies who derive their right of
possession from the defendants (Ariem v. De los Angeles, 49 SCRA 343). Under the
circumstances of this case, the same rule should apply to the successors-in-interest . . . .15
While it is true that a decision in an action for ejectment is enforceable not only against the
defendant himself but also against members of his family, his relatives, and his privies who
derived their right of possession from the defendant and his successors-in-interest,16 it had
been established that petitioner had, by her own acts, submitted to the jurisdiction of the trial
court. She is now estopped to deny that she had been heard in defense of her deceased
husband in the proceedings therein. As such, this petition evidently has no leg to stand on.
WHEREFORE, the instant petition is dismissed for lack of merit. Costs against petitioner.
SO ORDERED.
THIRD DIVISION
G.R. No. 131889 March 12, 2001
VIRGINIA O. GOCHAN, FELIX Y. GOCHAN III, MAE GOCHAN EFANN, LOUISE Y. GOCHAN,
ESTEBAN Y. GOCHAN JR., DOMINIC Y.GOCHAN, FELIX 0. GOCHAN III, MERCEDES R.
GOCHAN, ALFREDO R. GOCHAN, ANGELINA R. GOCHAN-HERNAEZ, MARIA MERCED R.
GOCHAN, CRISPO R. GOCHAN JR., MARION R. GOCHAN, MACTAN REALTY DEVELOPMENT
CORPORATION and FELIX GOCHAN & SONS REALTY CORPORATION, petitioner,
vs.
RICHARD G. YOUNG, DAVID G. YOUNG, JANE G. YOUNG-LLABAN, JOHN D. YOUNG JR.,
MARY G. YOUNG-HSU and ALEXANDER THOMAS G. YOUNG as heirs of Alice Gochan; the
INTESTATE ESTATE OF JOHN D. YOUNG SR.; and CECILIA GOCHAN-UY and MIGUEL C. UY, for
themselves and on behalf and for the benefit of FELIX GOCHAN & SONS REALTY
CORPORATION, respondents.
PANGANIBAN, J.:
A court or tribunal's jurisdiction over the subject matter is determined by the allegations in the
complaint. The fact that certain persons are not registered as stockholders in the books of the
corporation will not bar them from filing a derivative suit, if it is evident from the allegations
in the complaint that they are bona fide stockholders. In view of RA 8799, intra-corporate
controversies are now within the jurisdiction of courts of general jurisdiction, no longer of the
Securities and Exchange Commission. 1âwphi1.nêt
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. The Petition
assails the February 28, 1996 Decision1 of the Court of Appeals (CA), as well as its December
18, 1997 Resolution denying petitioner's Motion for Reconsideration. The dispositive part of
the CA Decision reads as follows:
"WHEREFORE, the petition as far as the heirs of Alice Gochan, is DISMISSED, without prejudice
to filing the same in the regular courts.
SO ORDERED."2
In dismissing the Complaint before the SEC regarding only Alice Gochan's heirs but not the
other complainants, the CA effectively modified the December 9, 1994 Order of the hearing
officer3 of the Securities and Exchange Commission (SEC). The Order, which was affirmed in
full by the SEC en banc, dismissed the entire case.
The Facts
The undisputed facts are summarized by the Court of Appeals as follows:
"Felix Gochan and Sons Realty Corporation (Gochan Realty, for brevity) was registered with the
SEC on June, 1951, with Felix Gochan, Sr., Maria Pan Nuy Go Tiong, Pedro Gochan, Tomasa
Gochan, Esteban Gochan and Crispo Gochan as its incorporators.
"Felix Gochan Sr.'s daughter, Alice, mother of [herein respondents], inherited 50 shares of
stock in Gochan Realty from the former.
"Alice died in 1955, leaving the 50 shares to her husband, John Young, Sr.
"In 1962, the Regional Trial Court of Cebu adjudicated 6/14 of these shares to her children,
herein [respondents] Richard Young, David Young, Jane Young Llaban, John Young Jr., Mary
Young Hsu and Alexander Thomas Young.
"Having earned dividends, these stocks numbered 179 by 20 September 1979.
"Five days later (25 September), at which time all the children had reached the age of majority,
their father John Sr., requested Gochan Realty to partition the shares of his late wife by
cancelling the stock certificates in his name and issuing in lieu thereof, new stock certificates
in the names of [herein respondents].
"On 17 October 1979, respondent Gochan Realty refused, citing as reason, the right of first
refusal granted to the remaining stockholders by the Articles of Incorporation.
"On 21, 1990, [sic] John, Sr. died, leaving the shares to the [respondents].
"On 8 February 1994, [respondents] Cecilia Gochan Uy and Miguel Uy filed a complaint with
the SEC for issuance of shares of stock to the rightful owners, nullification of shares of stock,
reconveyance of property impressed with trust, accounting, removal of officers and directors
and damages against respondents. A Notice of Lis Pendens was annotated as [sic] real
properties of the corporation.
"On 16 March 1994, [herein petitioners] moved to dismiss the complaint alleging that: (1) the
SEC ha[d] no jurisdiction over the nature of the action; (2) the [respondents] [were] not the
real parties-in-interest and ha[d] no capacity to sue; and (3) [respondents'] causes of action
[were] barred by the Statute of Limitations.
"The motion was opposed by herein [respondents].
"On 29 March 1994, [petitioners'] filed a Motion for cancellation of Notice of Lis Pendens.
[Respondents] opposed the said motion.
"On 9 December 1994, the SEC, through its Hearing Officer, granted the motion to dismiss and
ordered the cancellation of the notice of lis pendens annotated upon the titles of the corporate
lands. In its order, the SEC opined:
'In the instant case, the complaint admits that complainants Richard G. Young, David G. Young,
Jane G. Young Llaban, John D. Young, Jr., Mary G. Young Hsu and Alexander Thomas G. Young,
who are the children of the late Alice T. Gochan and the late John D. Young, Sr. are suing in
their own right and as heirs of and/or as the beneficial owners of the shares in the capital stock
of FGSRC held in trust for them during his lifetime by the late John D. Young. Moreover, it has
been shown that said complainants ha[d] never been x x x stockholder[s] of record of FGSRC
to confer them with the legal capacity to bring and maintain their action. Conformably, the
case cannot be considered as an intra-corporate controversy within the jurisdiction of this
Commission.
'The complainant heirs base what they perceived to be their stockholders' rights upon the fact
of their succession to all the rights, property and interest of their father, John D. Young, Sr.
While their heirship is not disputed, their right to compel the corporation to register John D.
Young's Sr. shares of stock in their names cannot go unchallenged because the devolution of
property to the heirs by operation of law in succession is subject to just obligations of the
deceased before such property passes to the heirs. Conformably, until therefore the estate is
settled and the payment of the debts of the deceased is accomplished, the heirs cannot as a
matter of right compel the delivery of the shares of stock to them and register such transfer in
the books of the corporation to recognize them as stockholders. The complainant heirs
succeed to the estate of [the] deceased John D. Young, Sr. but they do not thereby become
stockholders of the corporation.
'Moreover, John D. [Young Sr.'s] shares of stocks form part of his estate which is the subject of
Special Proceedings No. 3694-CEB in the Regional Trial Court of Cebu, Branch VIII, [par. 4 of
the complaint]. As complainants clearly claim[,] the Intestate Estate of John D. Young, Sr. has
an interest in the subject matter of the instant case. However, actions for the recovery or
protection of the property [such as the shares of stock in question] may be brought or
defended not by the heirs but by the executor or administrator thereof.
'Complainants further contend that the alleged wrongful acts of the corporation and its
directors constitute fraudulent devices or schemes which may be detrimental to the
stockholders. Again, the injury [is] perceived[,] as is alleged[,] to have been suffered by
complainants as stockholders, which they are not. Admittedly, the SEC has no jurisdiction over
a controversy wherein one of the parties involved is not or not yet a stockholder of the
corporation. [SEC vs. CA, 201 SCRA 134].
'Further, by the express allegation of the complaint, herein complainants bring this action as
[a] derivative suit on their own behalf and on behalf of respondent FGSRC.
'Section 5, Rule III of the Revised Rules of Procedure in the Securities and Exchange Commission
provides:
'Section 5. Derivative Suit. No action shall be brought by stockholder in the right of a
corporation unless the complainant was a stockholder at the time the questioned transaction
occurred as well as at the time the action was filed and remains a stockholder during the
pendency of the action. x x x.'
'The rule is in accord with well settled jurisprudence holding that a stockholder bringing a
derivative action must have been [so] at the time the transaction or act complained of [took]
place. (Pascual vs. Orozco, 19 Phil. 82; Republic vs. Cuaderno, 19 SCRA 671; San Miguel
Corporation vs. Khan, 176 SCRA 462-463) The language of the rule is mandatory, strict
compliance with the terms thereof thus being a condition precedent, a jurisdictional
requirement to the filing of the instant action.
'Otherwise stated, proof of compliance with the requirement must be sufficiently established
for the action to be given due course by this Commission. The failure to comply with this
jurisdictional requirement on derivative action must necessarily result in the dismissal of the
instant complaint.' (pp. 77-79, Rollo)
"[Respondents] moved for a reconsideration but the same was denied for being pro-forma.
"[Respondents] appealed to the SEC en banc, contending, among others, that the SEC ha[d]
jurisdiction over the case.
"[Petitioners], on the other hand, contend that the appeal was 97 days late, beyond the 30-
day period for appeals.
"On 3 March 1995, the SEC en banc ruled for the [petitioners,] holding that the [respondents']
motion for reconsideration did not interrupt the 30-day period for appeal because said motion
was pro-forma."4
Aggrieved, herein respondents then filed a Petition for Review with the Court of Appeals.
Ruling of the Court of Appeals
The Court of Appeals ruled that the SEC had no jurisdiction over the case as far as the heirs of
Alice Gochan were concerned, because they were not yet stockholders of the corporation. On
the other hand, it upheld the capacity of Respondents Cecilia Gochan Uy and her spouse,
Miguel Uy. It also held that the Intestate Estate of John Young Sr. was an indispensable party.
The appellate court further ruled that the cancellation of the notice of lis pendens on the titles
of the corporate real estate was not justified. Moreover, it declared that respondents' Motion
for Reconsideration before the SEC was not pro forma; thus, its filing tolled the appeal period.
Hence, this Petition.5
The Issues
These are the issues presented before us:
"A. Whether or not the Spouses Uy have the personality to file an action before the SEC against
Gochan Realty Corporation.
"B. Whether or not the Spouses Uy could properly bring a derivative suit in the name of Gochan
Realty to redress wrongs allegedly committed against it for which the directors refused to sue.
"C. Whether or not the intestate estate of John D. Young Sr. is an indispensable party in the
SEC case considering that the individual heirs' shares are still in the decedent stockholder's
name.
"D. Whether or not the cancellation of [the] notice of lis pendens was justified considering that
the suit did not involve real properties owned by Gochan Realty."6
In addition, the Court will determine the effect of Republic Act No.87997 on this case.
The Court's Ruling
The Petition has no merit. In view of the effectivity of RA 8799, however, the case should be
remanded to the proper regional trial court, not to the Securities and Exchange Commission.
First Issue:
Personality of the Spouses Uy to File a Suit Before the SEC
Petitioners argue that Spouses Cecilia and Miguel Uy had no capacity or legal standing to bring
the suit before the SEC on February 8, 1994, because the latter were no longer stockholders at
the time. Allegedly, the stocks had already been purchased by the corporation. Petitioners
further assert that, being allegedly a simple contract of sale cognizable by the regular courts,
the purchase by Gochan Realty of Cecilia Gochan Uy's 210 shares does not come within the
purview of an intra-corporate controversy.
As a general rule, the jurisdiction of a court or tribunal over the subject matter is determined
by the allegations in the complaint.8 For purposes of resolving a motion to dismiss, Cecilia Uy's
averment in the Complaint -that the purchase of her stocks by the corporation was null and
void ab initio - is deemed admitted. It is elementary that a void contract produces no effect
either against or in favor of anyone; it cannot create, modify or extinguish the juridical relation
to which it refers.9 Thus, Cecilia remains a stockholder of the corporation in view of the nullity
of the Contract of Sale. Although she was no longer registered as a stockholder in the corporate
records as of the filing of the case before the SEC, the admitted allegations in the Complaint
made her still a bona fide stockholder of Felix Gochan & Sons Realty Corporation (FGSRC), as
between said parties.
In any event, the present controversy, whether intra-corporate or not, is no longer cognizable
by the SEC, in view of RA 8799, which transferred to regional trial courts the former's
jurisdiction over cases involving intra-corporate disputes.
Action Has Not Prescribed
Petitioners contend that the statute of limitations already bars the Uy spouses' action, be it
one for annulment of a voidable contract or one based upon a written contract. The Complaint,
however, contains respondents' allegation that the sale of the shares of stock was not merely
voidable, but was void ab initio. Below we quote its relevant portion:
"38. That on November 21, 1979, respondent Felix Gochan & Sons Realty Corporation did not
have unrestricted retained earnings in its books to cover the purchase price of the 208 shares
of stock it was then buying from complainant Cecilia Gochan Uy, thereby rendering said
purchase null and void ab initio for being violative of the trust fund doctrine and contrary to
law, morals good customs, public order and public policy;"
Necessarily, petitioners' contention that the action has prescribed cannot be sustained.
Prescription cannot be invoked as a ground if the contract is alleged to be void ab initio. 10 It is
axiomatic that the action or defense for the declaration of nullity of a contract does not
prescribe.11
Second Issue:
Derivative Suit and the Spouses Uy
Petitioners also contend that the action filed by the Spouses Uy was not a derivative suit,
because the spouses and not the corporation were the injured parties. The Court is not
convinced. The following quoted portions of the Complaint readily shows allegations of injury
to the corporation itself:
"16. That on information and belief, in further pursuance of the said conspiracy and for the
fraudulent purpose of depressing the value of the stock of the Corporation and to induce the
minority stockholders to sell their shares of stock for an inadequate consideration as aforesaid,
respondent Esteban T. Gochan . . ., in violation of their duties as directors and officers of the
Corporation . . ., unlawfully and fraudulently appropriated [for] themselves the funds of the
Corporation by drawing excessive amounts in the form of salaries and cash advances. . . and
by otherwise charging their purely personal expenses to the Corporation."
xxx xxx xxx
"41. That the payment of P1,200,000.00 by the Corporation to complainant Cecilia Gochan Uy
for her shares of stock constituted an unlawful, premature and partial liquidation and
distribution of assets to a stockholder, resulting in the impairment of the capital of the
Corporation and prevented it from otherwise utilizing said amount for its regular and lawful
business, to the damage and prejudice of the Corporation, its creditors, and of complainants
as minority stockholders;"12
As early as 1911, this Court has recognized the right of a single stockholder to file derivative
suits. In its words:
"[W]here corporate directors have committed a breach of trust either by their frauds, ultra
vires acts, or negligence, and the corporation is unable or unwilling to institute suit to remedy
the wrong, a single stockholder may institute that suit, suing on behalf of himself and other
stockholders and for the benefit of the corporation, to bring about a redress of the wrong done
directly to the corporation and indirectly to the stockholders."13
In the present case, the Complaint alleges all the components of a derivative suit. The
allegations of injury to the Spouses Uy can coexist with those pertaining to the corporation.
The personal injury suffered by the spouses cannot disqualify them from filing a derivative suit
on behalf of the corporation. It merely gives rise to an additional cause of action for damages
against the erring directors. This cause of action is also included in the Complaint filed before
the SEC.
The Spouses Uy have the capacity to file a derivative suit in behalf of and for the benefit of the
corporation. The reason is that, as earlier discussed, the allegations of the Complaint make
them out as stockholders at the time the questioned transaction occurred, as well as at the
time the action was filed and during the pendency of the action.
Third Issue:
Capacity of the Intestate Estate of John D. Young Sr.
Petitioners contend that the Intestate Estate of John D. Young Sr. is not an indispensable party,
as there is no showing that it stands to be benefited or injured by any court judgement.
It would be useful to point out at this juncture that one of the causes of action stated in the
Complaint filed with the SEC refers to the registration, in the name of the other heirs of Alice
Gochan Young, of 6/14th of the shares still registered under the name of John D. Young Sr.
Since all the shares that belonged to Alice are still in his name, no final determination can be
had without his estate being impleaded in the suit. His estate is thus an indispensable party
with respect to the cause of action dealing with the registration of the shares in the names of
the heirs of Alice.
Petitioners further claim that the Estate of John Young Sr. was not properly represented. They
claim that "when the estate is under administration, suits for the recovery or protection of the
property or rights of the deceased may be brought only by the administrator or executor as
approved by the court."14 The rules relative to this matter do not, however, make any such
categorical and confining statement.
Section 3 of Rule 3 of the Rules of Court, which is cited by petitioners in support of their
position, reads:
"Sec. 3. Representatives as parties. - Where the action is allowed to be prosecuted or defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included
in the title of the case and shall be deemed to be the real party in interest. A representative
may be a trustee of an express trust, a guardian, an executor or administrator, or a party
authorized by law or these Rules. An agent acting in his own name and for the benefit of an
undisclosed principal may sue or be sued without joining the principal except when the
contract involves things belonging to the principal."
Section 2 of Rule 87 of the same Rules, which also deals with administrators, states:
"Sec. 2. Executor or administrator may bring or defend actions which survive. -For the recovery
or protection of the property or rights of the deceased, an executor or administrator may bring
or defend, in the right of the deceased, actions for causes which survive."
The above-quoted rules, while permitting an executor or administrator to represent or to bring
suits on behalf of the deceased, do not prohibit the heirs from representing the deceased.
These rules are easily applicable to cases in which an administrator has already been
appointed. But no rule categorically addresses the situation in which special proceedings for
the settlement of an estate have already been instituted, yet no administrator has been
appointed. In such instances, the heirs cannot be expected to wait for the appointment of an
administrator; then wait further to see if the administrator appointed would care enough to
file a suit to protect the rights and the interests of the deceased; and in the meantime do
nothing while the rights and the properties of the decedent are violated or
dissipated.1âwphi1.nêt
The Rules are to be interpreted liberally in order to promote their objective of securing a just,
speedy and inexpensive disposition of every action and proceeding.15 They cannot be
interpreted in such a way as to unnecessarily put undue hardships on litigants. For the
protection of the interests of the decedent, this Court has in previous instances 16 recognized
the heirs as proper representatives of the decedent, even when there is already an
administrator appointed by the court. When no administrator has been appointed, as in this
case, there is all the more reason to recognize the heirs as the proper representatives of the
deceased. Since the Rules do not specifically prohibit them from representing the deceased,
and since no administrator had as yet been appointed at the time of the institution of the
Complaint with the SEC, we see nothing wrong with the fact that it was the heirs of John D.
Young Sr. who represented his estate in the case filed before the SEC.
Fourth Issue
Notice of Lis Pendens
On the issue of the annotation of the Notice of Lis Pendens on the titles of the properties of
the corporation and the other respondents, we still find no reason to disturb the ruling of the
Court of Appeals.
Under the third, fourth and fifth causes of action of the Complaint, there are allegations of
breach of trust and confidence and usurpation of business opportunities in conflict with
petitioners' fiduciary duties to the corporation, resulting in damage to the Corporation. Under
these causes of action, respondents are asking for the delivery to the Corporation of possession
of the parcels of land and their corresponding certificates of title. Hence, the suit necessarily
affects the title to or right of possession of the real property sought to be reconveyed. The
Rules of Court17 allows the annotation of a notice of lis pendens in actions affecting the title or
right of possession of real property.18 Thus, the Court of Appeals was correct in reversing the
SEC Order for the cancellation of the notice of lis pendens.
The fact that respondents are not stockholders of the Mactan Realty Development Corporation
and the Lapu-Lapu Real Estate Corporation does not make them non-parties to this case. To
repeat, the jurisdiction of a court or tribunal over the subject matter is determined by the
allegations in the Complaint. In this case, it is alleged that the aforementioned corporations
are mere alter egos of the directors-petitioners, and that the former acquired the properties
sought to be re conveyed to FGSRC in violation of the directors-petitioners' fiduciary duty to
FGSRC. The notion of corporate entity will be pierced or disregarded and the individuals
composing it will be treated as identical19 if, as alleged in the present case, the corporate entity
is being used as a cloak or cover for fraud or illegality; as a justification for a wrong; or as an
alter ego, an adjunct, or a business conduit for the sole benefit of the stockholders.
Effect of RA 8799
While we sustain the appellate court, the case can no longer be remanded to the SEC. As earlier
stated, RA 8799, which became effective on August 8, 2000, transferred SEC's jurisdiction over
cases involving intra-corporate disputes to courts of general jurisdiction or to the regional trial
courtS.20 Section 5.2 thereof reads as follows:
"5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate
Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may
designate the Regional Trial Court branches that shall exercise jurisdiction over these cases.
The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes
submitted for final resolution which should be resolved within one (1) year from the enactment
of this Code. The Commission shall retain jurisdiction over pending suspension of
payments/rehabilitation cases filed as of 30 June 2000 until finally disposed."
In the light of the Resolution issued by this Court in AM No. 00-8-10-SC,21 the Court
Administrator and the Securities and Exchange Commission should be directed to cause the
transfer of the records of SEC Case No. 02-94-4674 to the appropriate court of general
jurisdiction.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED, subject to
the modification that the case be remanded to the proper regional trial court. The December
9, 1994 Order of Securities and Exchange Commission hearing officer dismissing the Complaint
and directing the cancellation of the notice of lis pendens, as well as the March 3, 1995 Order
denying complainants' motion for reconsideration are REVERSED and SET ASIDE. Pursuant to
AM No. 00-8-10-SC, the Office of the Court Administrator and the SEC are DIRECTED to cause
the actual transfer of the records of SEC Case No.02-94-467 4 to the appropriate regional trial
court.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 149787 June 18, 2008
JUDGE ANTONIO C. SUMALJAG, petitioner,
vs.
SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES MAGLASANG
RODRIGO, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision1of the Court of Appeals ("CA") dated June 26, 2001 and its related
Resolution2 dated September 4, 2001 in CA-G.R. SP No. 59712. The assailed Decision dismissed
the petition for certiorari filed by petitioner Judge Antonio C. Sumaljag (the "petitioner") in the
interlocutory matter outlined below in Civil Cases B-1239 and B-1281 before the trial court.
The challenged Resolution denied the petitioner's motion for reconsideration.
ANTECEDENT FACTS
On November 16, 1993, Josefa D. Maglasang ("Josefa") filed with the Regional Trial Court
("RTC"), Branch 14, Baybay, Leyte a complaint3 (docketed as Civil Case No. B-1239) for the
nullity of the deed of sale of real property purportedly executed between her as vendor and
the spouses Diosdidit and Menendez Literato (the "respondent spouses") as vendees. The
complaint alleged that this deed of sale dated October 15, 1971 of Lot 1220-D is spurious.
Josefa was the sister of Menendez Maglasang Literato ("Menendez"). They were two (2) of the
six (6) heirs who inherited equal parts of a 6.3906-hectare property (Lot 1220) passed on to
them by their parents Cristito and Inecita Diano Maglasang.4 Lot 1220-D was partitioned to
Josefa, while Lot 1220-E was given to Menendez.
The respondent spouses' response to the complaint was an amended answer with
counterclaim5 denying that the deed of sale was falsified. They impleaded the petitioner with
Josefa as counterclaim defendant on the allegation that the petitioner, at the instance of
Josefa, occupied Lot 1220-D and Lot 1220-E without their (the respondent spouses') authority;
Lot 1220-E is theirs by inheritance while 1220-D had been sold to them by Josefa. They also
alleged that the petitioner acted in bad faith in acquiring the two (2) lots because he prepared
and notarized on September 26, 1986 the contract of lease over the whole of Lot 1220 between
all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, with the lease running from
1986 to 1991; thus, the petitioner then knew that Josefa no longer owned Lot 1220-D.
Civil Case No. 12816 is a complaint that Menendez filed on April 4, 1996 with the RTC for the
declaration of the inexistence of lease contract, recovery of possession of land, and damages
against the petitioner and Josefa after the RTC dismissed the respondent spouses'
counterclaim in Civil Case No. 1239. The complaint alleged that Josefa, who had previously sold
Lot 1220-D to Menendez, leased it, together with Lot 1220-E, to the petitioner. Menendez
further averred that the petitioner and Josefa were in bad faith in entering their contract of
lease as they both knew that Josefa did not own the leased lots. Menendez prayed, among
others, that this lease contract between Josefa and the petitioner be declared null and void.
Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and B-1281.
On August 13, 1999, Atty. Zenen A. Puray ("Atty. Puray") - the petitioner's and Josefa's common
counsel - asked the RTC in Civil Case No. 1239 that he be given an extended period or up to
September 10, 1999 within which to file a formal notice of death and substitution of party.
The RTC granted the motion in an order dated August 13, 1999. 7 On August 26, 1999, Atty.
Puray filed with the RTC a notice of death and substitution of party, 8 praying that Josefa - in
his capacity as plaintiff and third party counterclaim defendant - be substituted by the
petitioner. The submission alleged that prior to Josefa's death, she executed a Quitclaim
Deed9 over Lot 1220-D in favor of Remismundo D. Maglasang10 who in turn sold this property
to the petitioner.
Menendez, through counsel, objected to the proposed substitution, alleging that Atty. Puray
filed the notice of death and substitution of party beyond the thirty-day period provided under
Section 16, Rule 3 of the 1997 Rules of Civil Procedure, as amended. She recommended instead
that Josefa be substituted by the latter's full-blood sister, Michaeles Maglasang Rodrigo
("Michaeles").
The RTC denied Atty. Puray's motion for substitution and instead ordered the appearance of
Michaeles as representative of the deceased Josefa. This Order provides:
WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of merit and
instead order the appearance of Mrs. Mechailes Maglasang-Rodrigo of Brgy. Binulho, Albuera,
Leyte, as representative of the deceased Josefa Maglasang.
SO ORDERED.11
The RTC subsequently denied the petitioner's motion for reconsideration in an order 12 dated
May 25, 2000.
The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP No. 59712)
to question the above interlocutory orders. In a Decision13 dated June 26, 2001, the CA
dismissed the petition for lack of merit. The appellate court similarly denied the petitioner's
motion for reconsideration in its Resolution14 dated September 4, 2001.
The present petition essentially claims that the CA erred in dismissing CA-G.R. No. SP 59712
since: (a) the property under litigation was no longer part of Josefa's estate since she was no
longer its owner at the time of her death; (b) the petitioner had effectively been subrogated
to the rights of Josefa over the property under litigation at the time she died; (c) without an
estate, the heir who was appointed by the lower court no longer had any interest to represent;
(d) the notice of death was seasonably submitted by the counsel of Josefa to the RTC within
the extended period granted; and (e) the petitioner is a transferee pendente lite who the
courts should recognize pursuant to Rule 3, Section 20 of the Rules of Court.
THE COURT'S RULING
We resolve to deny the petition for lack of merit.
The Governing Rule.
The rule on substitution in case of death of a party is governed by Section 16, Rule 3 of the
1997 Rules of Civil Procedure, as amended, which provides:
Section 16. Death of a party; duty of counsel. -Whenever a party to a pending action dies, and
the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court
within thirty (30) days after such death of the fact thereof, and to give the name and address
of his legal representative or representatives. Failure of counsel to comply with this duty shall
be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased, and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs. (Emphasis ours)
The purpose behind this rule is the protection of the right to due process of every party to the
litigation who may be affected by the intervening death. The deceased litigant is herself or
himself protected as he/she continues to be properly represented in the suit through the duly
appointed legal representative of his estate.15
Application of the Governing Rule.
a. Survival of the pending action
A question preliminary to the application of the above provision is whether Civil Case Nos. B-
1239 and B-1281 are actions that survive the death of Josefa. We said in Gonzalez v. Pagcor:16
"The criteria for determining whether an action survives the death of a plaintiff or petitioner
was elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as follows:
. . . The question as to whether an action survives or not depends on the nature of the action
and the damage sued for. In the causes of action which survive, the wrong complained [of]
affects primarily and principally property and property rights, the injuries to the person being
merely incidental, while in the causes of action which do not survive, the injury complained of
is to the person, the property and rights of property affected being incidental. . . .
Since the question involved in these cases relate to property and property rights, then we are
dealing with actions that survive so that Section 16, Rule 3 must necessarily apply.
b. Duty of Counsel under the Rule.
The duty of counsel under the aforecited provision is to inform the court within thirty (30) days
after the death of his client of the fact of death, and to give the name and address of the
deceased's legal representative or representatives. Incidentally, this is the only representation
that counsel can undertake after the death of a client as the fact of death terminated any
further lawyer-client relationship.17
In the present case, it is undisputed that the counsel for Josefa did in fact notify the lower
court, although belatedly, of the fact of her death.18 However, he did as well inform the lower
court that -
"2. That before she died she executed a QUITCLAIM DEED in favor of REMISMUNDO D.
MAGLASANG over the land in question (Lot No. 1220-D of Benolho, Albuera, Leyte), evidenced
by a QUITCLAIM DEED, copy of which is hereto attached as Annex "B" who in turn sold it in
favor of JUDGE ANTONIO SUMALJAG, evidenced by a DEED OF ABSOLUTE SALE, copy of which
is hereto attached as Annex "C"."
Further, counsel asked that "the deceased Josefa Maglasang in her capacity as plaintiff and as
Third Party Counterclaim Defendant be substituted in the case at bar by JUDGE ANTONIO
SUMALJAG whose address is 38 Osmena Street, Ormoc City" pursuant to "Section 16, Rule 3 of
the 1997 Rules of Civil Procedure".
This notification, although filed late, effectively informed the lower court of the death of
litigant Josefa Maglasang so as to free her counsel of any liability for failure to make a report
of death under Section 16, Rule 3 of the Rules of Court. In our view, counsel satisfactorily
explained to the lower court the circumstances of the late reporting, and the latter in fact
granted counsel an extended period. The timeliness of the report is therefore a non-issue.
The reporting issue that goes into the core of this case is whether counsel properly gave the
court the name and address of the legal representative of the deceased that Section 16, Rule
3 specifies. We rule that he did not. The "legal representatives" that the provision speaks of,
refer to those authorized by law - the administrator, executor or guardian19 who, under the
rule on settlement of estate of deceased persons,20 is constituted to take over the estate of
the deceased. Section 16, Rule 3 likewise expressly provides that "the heirs of the deceased
may be allowed to be substituted for the deceased, without requiring the appointment of an
executor or administrator . . .". Significantly, the person - now the present petitioner - that
counsel gave as substitute was not one of those mentioned under Section 16, Rule 3. Rather,
he is a counterclaim co-defendant of the deceased whose proferred justification for the
requested substitution is the transfer to him of the interests of the deceased in the litigation
prior to her death.
Under the circumstances, both the lower court and the CA were legally correct in not giving
effect to counsel's suggested substitute.
First, the petitioner is not one of those allowed by the Rules to be a substitute. Section 16, Rule
3 speaks for itself in this respect.
Second, as already mentioned above, the reason for the Rule is to protect all concerned who
may be affected by the intervening death, particularly the deceased and her estate. We note
in this respect that the Notice that counsel filed in fact reflects a claim against the interest of
the deceased through the transfer of her remaining interest in the litigation to another party.
Interestingly, the transfer is in favor of the very same person who is suggested to the court as
the substitute. To state the obvious, the suggested substitution effectively brings to naught
the protection that the Rules intend; plain common sense tells us that the transferee who has
his own interest to protect, cannot at the same time represent and fully protect the interest of
the deceased transferor.
Third, counsel has every authority to manifest to the court changes in interest that transpire
in the course of litigation. Thus, counsel could have validly manifested to the court the transfer
of Josefa's interests in the subject matter of litigation pursuant to Section 19, Rule 3.21 But this
can happen only while the client-transferor was aliveand while the manifesting counsel was
still the effective and authorized counsel for the client-transferor, not after the death of the
client when the lawyer-client relationship has terminated. The fact that the alleged transfer
may have actually taken place is immaterial to this conclusion, if only for the reason that it is
not for counsel, after the death of his client, to make such manifestation because he then has
lost the authority to speak for and bind his client. Thus, at most, the petitioner can be said to
be a transferee pendente lite whose status is pending with the lower court.
Lastly, a close examination of the documents attached to the records disclose that the subject
matter of the Quitclaim allegedly executed by Josefa in favor of Remismundo is Lot 1220-E,
while the subject matter of the deed of sale executed by Remismundo in the petitioner's favor
is Lot 1220-D. This circumstance alone raises the possibility that there is more than meets the
eye in the transactions related to this case.
c. The Heirs as Legal Representatives.
The CA correctly harked back to the plain terms of Section 16, Rule 3 in determining who the
appropriate legal representative/s should be in the absence of an executor or administrator.
The second paragraph of the Section 16, Rule 3 of the 1997 Rules of Court, as amended, is clear
- the heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator. Our decisions on this matter have
been clear and unequivocal. In San Juan, Jr. v. Cruz, this Court held:
The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority is given to the
legal representative of the deceased (the executor or administrator) and that it is only in case
of unreasonable delay in the appointment of an executor or administrator, or in cases where
the heirs resort to an extra-judicial settlement of the estate that the court may adopt the
alternative of allowing the heirs of the deceased to be substituted for the deceased, is no
longer true.22 (Emphasis ours)
We likewise said in Gochan v. Young: 23
For the protection of the interests of the decedent, this Court has in previous instances
recognized the heirs as proper representatives of the decedent, even when there is already an
administrator appointed by the court. When no administrator has been appointed, as in this
case, there is all the more reason to recognize the heirs as the proper representatives of the
deceased.
Josefa's death certificate24 shows that she was single at the time of her death. The records do
not show that she left a will. Therefore, as correctly held by the CA, in applying Section 16, Rule
3, her heirs are her surviving sisters (Michaelis, Maria, Zosima, and Consolacion) and the
children of her deceased sister, Lourdes (Manuel, Cesar, Huros and Regulo) who should be her
legal representatives. Menendez, although also a sister, should be excluded for being one of
the adverse parties in the cases before the RTC.
WHEREFORE, premises considered, we DENY the petition for lack of merit. We AFFIRM the
Court of Appeals decision that the surviving heirs of the deceased Josefa - namely Michaelis
M. Rodrigo; Maria M. Cecilio; Zosima D. Maglasang; Consolacion M. Bag-aw; and the children
of Lourdes M. Lumapas, namely Manuel Lumapas, Cesar Lumapas, Huros Lumapas and Regulo
Maquilan - should be her substitutes and are hereby so ordered to be substituted for her in
Civil Case Nos. B-1239 and B-1281.
Costs against the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 180325 February 20, 2013
O. VENTANILLA ENTERPRISES CORPORATION, Petitioner,
vs.
ADELINA S. TAN and SHERIFF REYNANTE G. VELASQUEZ, Presiding Judge,* Respondents.
DECISION
PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying
that the Resolution1of the Court of Appeals (CA), dated May 24, 2007, refusing to recall its
entry of judgment, and its Resolution2 dated October 19, 2007, denying petitioner's Motion
for Reconsideration, be reversed and set aside.
The records of the case bear out the following antecedent facts.
Petitioner leased out two of its properties in Cabanatuan City to Alfredo S. Tan and herein
private respondent Adelina S. Tan (the Tans). Due to the failure of the Tans to comply with the
terms of the lease, petitioner filed a complaint against the Tans for cancellation and
termination of contract of lease with the Regional Trial Court of Cabanatuan City (RTC). On
December 10, 1996, the RTC rendered a Decision,3 the dispositive portion of which reads as
follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Oscar Ventanilla Enterprises
Corporation and against the defendants Alfredo S. Tan, Sr. and Adelina S. Tan, ordering the
latter to:
(1) surrender possession and complete control of the premises, Avelune and Capital Theaters,
as well as the properties enumerated in the addendum to the lease contract dated 22 June
1992, to the plaintiff;
(2) pay the plaintiff the sum of ₱4,297,004.84 plus interest thereon that may become due at
the rate stipulated in the lease contract entered into by the parties on June 22, 1992;
(3) pay the plaintiff the sum of ₱250,000.00 as exemplary damages to serve as deterrent for
others who in the future may follow the bad example set by the herein defendants;
(4) pay the plaintiff by way of liquidated damages as agreed upon in paragraph 23 of the lease
contract the sum equivalent to 50% of the unpaid rentals;
(5) declaring the deposit initially made as forfeited in favor of the plaintiff; [and]
(6) pay the sum equivalent to 15% of the unpaid rentals by way of Attorney's fees, and to pay
the costs of the suit.
SO ORDERED.4
Both Alfredo S. Tan and private respondent Adelina S. Tan appealed from said Decision.
However, herein petitioner filed a motion for execution pending appeal and the same was
granted by the trial court. Several properties and bank accounts of private respondent and
Alfredo S. Tan were levied upon. The Tans decided to pay the amounts as ordered in the RTC
Decision, and on September 24, 1997, the trial court issued Orders5 lifting and cancelling the
Notice of Levy on private respondent Adelina Tan's properties and also on several bank
accounts in the name of the Tans. Both orders stated that after the court allowed the writ of
execution pending appeal, defendant tendered payment in the amount of ₱9,073,694.76 in
favor of herein petitioner, who through Mr. Moises C. Ventanilla, acknowledged receipt of said
amount as complete and full satisfaction of the adjudged obligations of the Tans to petitioner
in this case.6
The appeal filed by Alfredo S. Tan was dismissed by the CA, but the appeal filed by herein
private respondent Adelina S. Tan (docketed as CAG. R. CV No. 58817), proceeded in due
course. On October 21, 2002, the CA promulgated its Decision, 7 the dispositive portion of
which is reproduced hereunder:
WHEREFORE, the appeal is PARTIALLY GRANTED. For lack of legal and factual justification, the
awards of exemplary damages and attorney's fees shall be DELETED. Likewise, the award of
liquidated damages under paragraph 23 of the lease contract is further REDUCED to 25% of
the unpaid rentals. All the other aspects of the decision are AFFIRMED.
SO ORDERED.8
None of the parties filed any motion for reconsideration or appeal from the CA Decision, thus,
the same became final and executory on November 21, 2002, per the Entry of
Judgment9 issued by the CA.
Private respondent Adelina Tan then filed with the trial court a Motion for Execution10 dated
March 27, 2003, praying that the excess of the amounts she previously paid as exemplary
damages, attorney's fees and liquidated damages be refunded to her, in accordance with the
judgment of the CA. To counter such move, on June 19, 2003, petitioner filed with the CA in
CA-G.R. CV No. 58817, an Omnibus Motion (with entry of appearance), praying that the entry
of judgment be recalled, lifted and set aside; that the CA Decision dated October 21, 2002 in
CA-G.R. CV No. 58817 be recalled, reconsidered, and/or vacated and, thereafter, the appeal of
Adelina Tan be dismissed or the appeal be reopened to allow petitioner to file an appeal brief.
Petitioner argued that its counsel, Atty. Liberato Bauto died on March 29, 2001, hence, any
notice sent to him must be deemed ineffective; that the parties have arrived at a settlement
of the case, as shown by the fact that private respondent already paid ₱9,073,694.76 as
complete and full satisfaction of the adjudged obligations of the defendants to petitioner, and
thus, the appeal should have been deemed mooted.
Meanwhile, the RTC granted the motion for execution, and in an Order11 dated January 23,
2004, ordered as follows:
Thus, based on the amount computed by defendant Adelina Tan in her motion for execution
and following the reduction of the award to the plaintiffs made by the Court of Appeals in its
decision, the defendants are entitled to the following amounts:
Php 250,000.00 - amount of the deleted exemplary damages
Php 644,550.606 - amount of the deleted attorney's fees
Php 1,074,251.01 - amount of the reduced liquidated damages
(25% of the unpaid rentals)
Php1,968,801.616 - total amount to be refunded
WHEREFORE, in view of the foregoing, the Motion for Reconsideration is hereby GRANTED and
the Order dated December 2, 2003 is hereby RECONSIDERED and SET ASIDE.
Let an Alias Writ of Execution issue stating the amount to be refunded to defendants which is
Php1,968,801.616, the same to be enforced against the herein plaintiff.
SO ORDERED.12
On March 8, 2004, petitioner filed with the RTC a Very Urgent Motion (for recall and
reconsideration of order and quashal of alias writ of execution, levy, and notice of sheriff's sale,
etc.),13 but this motion was denied in an Order14dated March 10, 2004. Petitioner then filed a
petition for certiorari with the CA (docketed as CA-G.R. SP No. 82608) to assail the trial court's
denial of the Very Urgent Motion, but as admitted by petitioner in the present petition,15 said
action for certiorari was denied due course and dismissed by the CA on March 12, 2004.
As to petitioner's Omnibus Motion (with entry of appearance) filed with the CA in CA-G.R. CV
No. 58817, the appellate court issued a Resolution16 dated March 19, 2004, merely noting
petitioner's motion because its Decision dated October 21, 2002 has long become final and
executory. Undaunted, petitioner again filed on October 2, 2006, a Manifestation and Motion
in CA-G.R. CV No. 58817, praying that its Omnibus Motion and Supplemental Motion be
resolved on the merits instead of merely being noted as the CA did in its Resolution dated
March 19, 2004; that the petition for certiorari be resolved and granted; and that the
proceedings in the trial court with regard to the execution of the CA Decision in CA-G.R. CV No.
58817, be annulled and set aside.
On May 24, 2007, the CA promulgated the Resolution denying the above-mentioned
Manifestation and Motion filed by petitioner on October 2, 2006. The CA pointed out that the
separate petition for certiorari which petitioner sought to be resolved had already been
dismissed on March 12, 2004. The CA also ruled that petitioner's prayer for the recall of the
entry of judgment cannot be granted, as petitioner's bare assertion, that its former counsel
had not received notices of orders, resolutions or decisions of the court because said counsel
died while the appeal was pending, does not qualify as one of those cases where the court
allowed such recall. Petitioner moved for reconsideration of said Resolution, but on October
19, 2007, the CA issued a Resolution denying the same. The CA reiterated that it could not find
any reason to recall the entry of judgment.
Hence, the present petition.
Although the petition is an appeal from the Resolution of the CA issued on May 24, 2007,
refusing to recall its entry of judgment, and its Resolution dated October 19, 2007, denying
reconsideration of the earlier resolution, petitioner is actually making a vain attempt to reopen
a case that has long been final and executory. The Court frowns upon such conduct of litigants
and their lawyers.
The Court strikes down the argument that the CA Decision in CA-G. R. CV No. 58817 did not
attain finality because petitioner's counsel, who died while the case was pending before the
CA, was unable to receive a copy thereof. The CA was correct in ruling that there is no
extraordinary circumstance in this case that would merit a recall of the entry of judgment to
reopen the case. The reason given by petitioner, that its former counsel had died before the
CA Decision was promulgated, hence, it was not properly notified of the judgment, is too
tenuous to be given serious consideration. In Mojar, et al. v. Agro Commercial Security Service
Agency, Inc.,17 the Court explained that it is the party's duty to inform the court of its counsel's
demise, and failure to apprise the court of such fact shall be considered negligence on the part
of said party. Expounding further, the Court stated:
x x x It is not the duty of the courts to inquire, during the progress of a case, whether the law
firm or partnership representing one of the litigants continues to exist lawfully, whether the
partners are still alive, or whether its associates are still connected with the firm.
x x x They cannot pass the blame to the court, which is not tasked to monitor the changes in
the circumstances of the parties and their counsel.
xxxx
In Ampo v. Court of Appeals, this Court explained the vigilance that must be exercised by a
party:
xxxx
Litigants who are represented by counsel should not expect that all they need to do is sit back,
relax and await the outcome of their cases. Relief will not be granted to a party who seeks
avoidance from the effects of the judgment when the loss of the remedy at law was due to his
own negligence. The circumstances of this case plainly show that petitioner only has himself
to blame. Neither can he invoke due process. The essence of due process is simply an
opportunity to be heard. Due process is satisfied when the parties are afforded a fair and
reasonable opportunity to explain their respective sides of the controversy. Where a party,
such as petitioner, was afforded this opportunity to participate but failed to do so, he cannot
complain of deprivation of due process. If said opportunity is not availed of, it is deemed
waived or forfeited without violating the constitutional guarantee.
Thus, for failure of petitioner to notify the CA of the death of its counsel of record and have
said counsel substituted, then service of the CA Decision at the place or law office designated
by its counsel of record as his address, is sufficient notice. The case then became final and
executory when no motion for reconsideration or appeal was filed within the reglementary
period therefor.
Petitioner's next allegation, that the trial court erred in ordering the issuance of a writ of
execution against petitioner, ordering it to refund the amount of ₱1,968,801.616 to herein
private respondent, is also unfounded.
Petitioner insists that the fact that private respondent had previously paid petitioner the
amount of ₱9,073,694.76 when the trial court granted petitioner's motion for execution
pending appeal, means that the parties have arrived at a compromise settlement which should
have terminated the case between them. The argument holds no water.
First of all, as held in Legaspi v. Ong,18 "[e]xecution pending appeal does not bar the
continuance of the appeal on the merits, for the Rules of Court precisely provides for
restitution according to equity in case the executed judgment is reversed on appeal." 19
Secondly, contrary to petitioner's claim, private respondent merely paid the amount of
₱9,073,694.76 in compliance with the writ of execution pending appeal, and not by reason of
a compromise agreement. No such agreement or contract appears on
record.1âwphi1 Furthermore, petitioner's claim is belied by the fact that private respondent
actively pursued the appeal of the case, which resulted in the CA Decision decreasing the
amounts awarded by the RTC.
Petitioner then contends that there is a substantial variance between the writ of execution and
the CA Decision, as the latter did not make mention of petitioner having to make a refund.
However, note Section 5, Rule 39 of the Rules of Court, which provides that:
Sec. 5. Effect of reversal of executed judgment. - Where the executed judgment is reversed
totally or partially, or annulled, on appeal or otherwise, the trial court may, on motion, issue
such orders of restitution or reparation of damages as equity and justice may warrant under
the circumstances. (Emphasis supplied)
Evidently, the action of the RTC in ordering the issuance of the writ of execution against herein
petitioner for it to return the excess amount private respondent has paid in compliance with
the execution pending appeal, is in accordance with the Rules.
ln sum, there is nothing amiss in ordering petitiOner to refund the amount of Pl ,968,801.616
to herein private respondent, as the appellate court has ruled with finality that petitioner is
not entitled to such amount.
WHEREFORE, the petition is DENIED for utter lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 175910 July 30, 2009
ATTY. ROGELIO E. SARSABA, Petitioner,
vs.
FE VDA. DE TE, represented by her Attorney-in-Fact, FAUSTINO CASTAÑEDA, Respondents.
DECISION
DEL CASTILLO, J.:
Before us is a petition for review on certiorari1 with prayer for preliminary injunction assailing
the Order2 dated March 22, 2006 of the Regional Trial Court (RTC), Branch 19, Digos City, Davao
del Sur, in Civil Case No. 3488.
The facts, as culled from the records, follow.
On February 14, 1995, a Decision was rendered in NLRC Case No. RAB-11-07-00608-93
entitled, Patricio Sereno v. Teodoro Gasing/Truck Operator, finding Sereno to have been
illegally dismissed and ordering Gasing to pay him his monetary claims in the amount of
₱43,606.47. After the Writ of Execution was returned unsatisfied, Labor Arbiter Newton R.
Sancho issued an Alias Writ of Execution3 on June 10, 1996, directing Fulgencio R. Lavarez,
Sheriff II of the National Labor Relations Commission (NLRC), to satisfy the judgment award.
On July 23, 1996, Lavarez, accompanied by Sereno and his counsel, petitioner Atty. Rogelio E.
Sarsaba, levied a Fuso Truck bearing License Plate No. LBR-514, which at that time was in the
possession of Gasing. On July 30, 1996, the truck was sold at public auction, with Sereno
appearing as the highest bidder.4
Meanwhile, respondent Fe Vda. de Te, represented by her attorney-in-fact, Faustino
Castañeda, filed with the RTC, Branch 18, Digos, Davao del Sur, a Complaint5 for recovery of
motor vehicle, damages with prayer for the delivery of the truck pendente lite against
petitioner, Sereno, Lavarez and the NLRC of Davao City, docketed as Civil Case No. 3488.
Respondent alleged that: (1) she is the wife of the late Pedro Te, the registered owner of the
truck, as evidenced by the Official Receipt6 and Certificate of Registration;7 (2) Gasing merely
rented the truck from her; (3) Lavarez erroneously assumed that Gasing owned the truck
because he was, at the time of the "taking,"8 in possession of the same; and (4) since neither
she nor her husband were parties to the labor case between Sereno and Gasing, she should
not be made to answer for the judgment award, much less be deprived of the truck as a
consequence of the levy in execution.
Petitioner filed a Motion to Dismiss9 on the following grounds: (1) respondent has no legal
personality to sue, having no real interests over the property subject of the instant complaint;
(2) the allegations in the complaint do not sufficiently state that the respondent has cause of
action; (3) the allegations in the complaint do not contain sufficient cause of action as against
him; and (4) the complaint is not accompanied by an Affidavit of Merit and Bond that would
entitle the respondent to the delivery of the tuck pendente lite.
The NLRC also filed a Motion to Dismiss10 on the grounds of lack of jurisdiction and lack of
cause of action.
Meanwhile, Lavarez filed an Answer with Compulsory Counterclaim and Third-Party
Complaint.11 By way of special and affirmative defenses, he asserted that the RTC does not
have jurisdiction over the subject matter and that the complaint does not state a cause of
action.
On January 21, 2000, the RTC issued an Order12 denying petitioner's Motion to Dismiss for lack
of merit.
In his Answer,13 petitioner denied the material allegations in the complaint. Specifically, he
cited as affirmative defenses that: respondent had no legal personality to sue, as she had no
interest over the motor vehicle; that there was no showing that the heirs have filed an intestate
estate proceedings of the estate of Pedro Te, or that respondent was duly authorized by her
co-heirs to file the case; and that the truck was already sold to Gasing on March 11, 1986 by
one Jesus Matias, who bought the same from the Spouses Te. Corollarily, Gasing was already
the lawful owner of the truck when it was levied on execution and, later on, sold at public
auction.
Incidentally, Lavarez filed a Motion for Inhibition,14 which was opposed15 by respondent.
On October 13, 2000, RTC Branch 18 issued an Order16 of inhibition and directed the transfer
of the records to Branch 19. RTC Branch 19, however, returned the records back to Branch 18
in view of the appointment of a new judge in place of Judge-designate Rodolfo A. Escovilla.
Yet, Branch 19 issued another Order17 dated November 22, 2000 retaining the case in said
branch.
Eventually, the RTC issued an Order18 dated May 19, 2003 denying the separate motions to
dismiss filed by the NLRC and Lavarez, and setting the Pre-Trial Conference on July 25, 2003.
On October 17, 2005, petitioner filed an Omnibus Motion to Dismiss the Case on the following
grounds:19 (1) lack of jurisdiction over one of the principal defendants; and (2) to discharge
respondent's attorney-in-fact for lack of legal personality to sue.
It appeared that the respondent, Fe Vda. de Te, died on April 12, 2005.20
Respondent, through her lawyer, Atty. William G. Carpentero, filed an
Opposition,21 contending that the failure to serve summons upon Sereno is not a ground for
dismissing the complaint, because the other defendants have already submitted their
respective responsive pleadings. He also contended that the defendants, including herein
petitioner, had previously filed separate motions to dismiss the complaint, which the RTC
denied for lack of merit. Moreover, respondent's death did not render functus officio her right
to sue since her attorney-in-fact, Faustino Castañeda, had long testified on the complaint on
March 13, 1998 for and on her behalf and, accordingly, submitted documentary exhibits in
support of the complaint.
On March 22, 2006, the RTC issued the assailed Order22 denying petitioner's aforesaid motion.
Petitioner then filed a Motion for Reconsideration with Motion for Inhibition, 23 in which he
claimed that the judge who issued the Order was biased and partial. He went on to state that
the judge's husband was the defendant in a petition for judicial recognition of which he was
the counsel, docketed as Civil Case No. C-XXI-100, before the RTC, Branch 21, Bansalan, Davao
del Sur. Thus, propriety dictates that the judge should inhibit herself from the case.
Acting on the motion for inhibition, Judge Carmelita Sarno-Davin granted the same24 and
ordered that the case be re-raffled to Branch 18. Eventually, the said RTC issued an Order25 on
October 16, 2006 denying petitioner's motion for reconsideration for lack of merit.
Hence, petitioner directly sought recourse from the Court via the present petition involving
pure questions of law, which he claimed were resolved by the RTC contrary to law, rules and
existing jurisprudence.26
There is a "question of law" when the doubt or difference arises as to what the law is on certain
state of facts, and which does not call for an examination of the probative value of the evidence
presented by the parties-litigants. On the other hand, there is a "question of fact" when the
doubt or controversy arises as to the truth or falsity of the alleged facts. Simply put, when
there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom
is correct, is a question of law.27
Verily, the issues raised by herein petitioner are "questions of law," as their resolution rest
solely on what the law provides given the set of circumstances availing. The first issue involves
the jurisdiction of the court over the person of one of the defendants, who was not served
with summons on account of his death. The second issue, on the other hand, pertains to the
legal effect of death of the plaintiff during the pendency of the case.
At first brush, it may appear that since pure questions of law were raised, petitioner's resort
to this Court was justified and the resolution of the aforementioned issues will necessarily
follow. However, a perusal of the petition requires that certain procedural issues must initially
be resolved before We delve into the merits of the case.
Notably, the petition was filed directly from the RTC which issued the Order in the exercise of
its original jurisdiction. The question before Us then is: whether or not petitioner correctly
availed of the mode of appeal under Rule 45 of the Rules of Court.
Significantly, the rule on appeals is outlined below, to wit:28
(1) In all cases decided by the RTC in the exercise of its original jurisdiction, appeal may be
made to the Court of Appeals by mere notice of appeal where the appellant raises questions
of fact or mixed questions of fact and law;
(2) In all cases decided by the RTC in the exercise of its original jurisdiction where the
appellant raises only questions of law, the appeal must be taken to the Supreme Court on a
petition for review on certiorariunder Rule 45.
(3) All appeals from judgments rendered by the RTC in the exercise of its appellate jurisdiction,
regardless of whether the appellant raises questions of fact, questions of law, or mixed
questions of fact and law, shall be brought to the Court of Appeals by filing a petition for review
under Rule 42.
Accordingly, an appeal may be taken from the RTC which exercised its original jurisdiction,
before the Court of Appeals or directly before this Court, provided that the subject of the same
is a judgment or final order that completely disposes of the case, or of a particular matter
therein when declared by the Rules to be appealable.29The first mode of appeal, to be filed
before the Court of Appeals, pertains to a writ of error under Section 2(a), Rule 41 of the Rules
of Court, if questions of fact or questions of fact and law are raised or involved. On the other
hand, the second mode is by way of an appeal by certiorari before the Supreme Court under
Section 2(c), Rule 41, in relation to Rule 45, where only questions of law are raised or
involved.30
An order or judgment of the RTC is deemed final when it finally disposes of a pending action,
so that nothing more can be done with it in the trial court. In other words, the order or
judgment ends the litigation in the lower court.31 On the other hand, an order which does not
dispose of the case completely and indicates that other things remain to be done by the court
as regards the merits, is interlocutory. Interlocutory refers to something between the
commencement and the end of the suit which decides some point or matter, but is not a final
decision on the whole controversy.32
The subject of the present petition is an Order of the RTC, which denied petitioner's Omnibus
Motion to Dismiss, for lack of merit.
We have said time and again that an order denying a motion to dismiss is
interlocutory.33 Under Section 1(c), Rule 41 of the Rules of Court, an interlocutory order is not
appealable. As a remedy for the denial, a party has to file an answer and interpose as a defense
the objections raised in the motion, and then to proceed to trial; or, a party may immediately
avail of the remedy available to the aggrieved party by filing an appropriate special civil action
for certiorari under Rule 65 of the Revised Rules of Court. Let it be stressed though that a
petition for certiorari is appropriate only when an order has been issued without or in excess
of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction.
Based on the foregoing, the Order of the RTC denying petitioner's Omnibus Motion to Dismiss
is not appealable even on pure questions of law. It is worth mentioning that the proper
procedure in this case, as enunciated by this Court, is to cite such interlocutory order as an
error in the appeal of the case -- in the event that the RTC rules in favor of respondent -- and
not to appeal such interlocutory order. On the other hand, if the petition is to be treated as a
petition for review under Rule 45, it would likewise fail because the proper subject would only
be judgments or final orders that completely dispose of the case.34
Not being a proper subject of an appeal, the Order of the RTC is considered interlocutory.
Petitioner should have proceeded with the trial of the case and, should the RTC eventually
render an unfavorable verdict, petitioner should assail the said Order as part of an appeal that
may be taken from the final judgment to be rendered in this case. Such rule is founded on
considerations of orderly procedure, to forestall useless appeals and avoid
undue inconvenience to the appealing party by having to assail orders as they are promulgated
by the court, when all such orders may be contested in a single appeal.
In one case,35 the Court adverted to the hazards of interlocutory appeals:
It is axiomatic that an interlocutory order cannot be challenged by an appeal. Thus, it has been
held that "the proper remedy in such cases is an ordinary appeal from an adverse judgment on
the merits, incorporating in said appeal the grounds for assailing the interlocutory order.
Allowing appeals from interlocutory orders would result in the `sorry spectacle’ of a case being
subject of a counterproductive ping-pong to and from the appellate court as often as a trial
court is perceived to have made an error in any of its interlocutory rulings. x x x.
Another recognized reason of the law in permitting appeal only from a final order or judgment,
and not from an interlocutory or incidental one, is to avoid multiplicity of appeals in a single
action, which must necessarily suspend the hearing and decision on the merits of the case
during the pendency of the appeal. If such appeal were allowed, trial on the merits of the case
would necessarily be delayed for a considerable length of time and compel the adverse party
to incur unnecessary expenses, for one of the parties may interpose as many appeals as
incidental questions may be raised by him, and interlocutory orders rendered or issued by the
lower court.36
And, even if We treat the petition to have been filed under Rule 65, the same is still dismissible
for violating the principle on hierarchy of courts. Generally, a direct resort to us in a petition
for certiorari is highly improper, for it violates the established policy of strict observance of the
judicial hierarchy of courts.37 This principle, as a rule, requires that recourse must first be made
to the lower-ranked court exercising concurrent jurisdiction with a higher court. However, the
judicial hierarchy of courts is not an iron-clad rule. A strict application of the rule is not
necessary when cases brought before the appellate courts do not involve factual but legal
questions.38
In the present case, petitioner submits pure questions of law involving the effect of non-service
of summons following the death of the person to whom it should be served, and the effect of
the death of the complainant during the pendency of the case. We deem it best to rule on
these issues, not only for the benefit of the bench and bar, but in order to prevent further
delay in the trial of the case. Resultantly, our relaxation of the policy of strict observance of
the judicial hierarchy of courts is warranted.
Anent the first issue, petitioner argues that, since Sereno died before summons was served on
him, the RTC should have dismissed the complaint against all the defendants and that the same
should be filed against his estate.
The Sheriff's Return of Service39 dated May 19, 1997 states that Sereno could not be served
with copy of the summons, together with a copy of the complaint, because he was already
dead.
In view of Sereno's death, petitioner asks that the complaint should be dismissed, not only
against Sereno, but as to all the defendants, considering that the RTC did not acquire
jurisdiction over the person of Sereno.1avvph!1
Jurisdiction over a party is acquired by service of summons by the sheriff, his deputy or other
proper court officer, either personally by handing a copy thereof to the defendant or by
substituted service.40 On the other
hand, summons is a writ by which the defendant is notified of the action brought against him.
Service of such writ is the means by which the court may acquire jurisdiction over his person.41
Records show that petitioner had filed a Motion to Dismiss on the grounds of lack of legal
personality of respondent; the allegations in the complaint did not sufficiently state that
respondent has a cause of action or a cause of action against the defendants; and, the
complaint was not accompanied by an affidavit of merit and bond. The RTC denied the motion
and held therein that, on the basis of the allegations of fact in the complaint, it can render a
valid judgment. Petitioner, subsequently, filed his answer by denying all the material
allegations of the complaint. And by way of special and affirmative defenses, he reiterated that
respondent had no legal personality to sue as she had no real interest over the property and
that while the truck was still registered in Pedro Te's name, the same was already sold to
Gasing.
Significantly, a motion to dismiss may be filed within the time for but before the filing of an
answer to the complaint or pleading asserting a claim.42 Among the grounds mentioned is the
court's lack of jurisdiction over the person of the defending party.
As a rule, all defenses and objections not pleaded, either in a motion to dismiss or in an answer,
are deemed waived.43 The exceptions to this rule are: (1) when the court has no jurisdiction
over the subject matter, (2) when there is another action pending between the parties for the
same cause, or (3) when the action is barred by prior judgment or by statute of limitations, in
which cases, the court may dismiss the claim.
In the case before Us, petitioner raises the issue of lack of jurisdiction over the person of
Sereno, not in his Motion to Dismiss or in his Answer but only in his Omnibus Motion to Dismiss.
Having failed to invoke this ground at the proper time, that is, in a motion to dismiss, petitioner
cannot raise it now for the first time on appeal.
In fine, We cannot countenance petitioner's argument that the complaint against the other
defendants should have been dismissed, considering that the RTC never acquired jurisdiction
over the person of Sereno. The court's failure to acquire jurisdiction over one's person is a
defense which is personal to the person claiming it. Obviously, it is now impossible for Sereno
to invoke the same in view of his death. Neither can petitioner invoke such ground, on behalf
of Sereno, so as to reap the benefit of having the case dismissed against all of the defendants.
Failure to serve summons on Sereno's person will not be a cause for the dismissal of the
complaint against the other defendants, considering that they have been served with copies
of the summons and complaints and have long submitted their respective responsive
pleadings. In fact, the other defendants in the complaint were given the chance to raise all
possible defenses and objections personal to them in their respective motions to dismiss and
their subsequent answers.
We agree with the RTC in its Order when it resolved the issue in this wise:
As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the
person of Patricio Sereno since there was indeed no valid service of summons insofar as
Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a copy
of the complaint and its annexes, could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one of the defendants
herein does not render the action DISMISSIBLE, considering that the three (3) other
defendants, namely, Atty. Rogelio E. Sarsaba, Fulgencio Lavares and the NLRC, were validly
served with summons and the case with respect to the answering defendants may still proceed
independently. Be it recalled that the three (3) answering defendants have previously filed a
Motion to Dismiss the Complaint which was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a
claim against the estate of Patricio Sereno, but the case with respect to the three (3) other
accused will proceed.
Anent the second issue, petitioner moves that respondent's attorney-in-fact, Faustino
Castañeda, be discharged as he has no more legal personality to sue on behalf of Fe Vda. de
Te, who passed away on April 12, 2005, during the pendency of the case before the RTC.
When a party to a pending action dies and the claim is not extinguished, the Rules of Court
require a substitution of the deceased.44 Section 1, Rule 87 of the Rules of Court enumerates
the actions that survived and may be filed against the decedent's representatives as follows:
(1) actions to recover real or personal property or an interest thereon, (2) actions to enforce
liens thereon, and (3) actions to recover damages for an injury to a person or a property. In
such cases, a counsel is obliged to inform the court of the death of his client and give the name
and address of the latter's legal representative.45
The rule on substitution of parties is governed by Section 16,46 Rule 3 of the 1997 Rules of Civil
Procedure, as amended.
Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but a
requirement of due process. The rule on substitution was crafted to protect every party's right
to due process. It was designed to ensure that the deceased party would continue to be
properly represented in the suit through his heirs or the duly appointed legal representative
of his estate. Moreover, non-compliance with the Rules results in the denial of the right to due
process for the heirs who, though not duly notified of the proceedings, would be substantially
affected by the decision rendered therein. Thus, it is only when there is a denial of due process,
as when the deceased is not represented by any legal representative or heir, that the court
nullifies the trial proceedings and the resulting judgment therein.47
In the case before Us, it appears that respondent's counsel did not make any manifestation
before the RTC as to her death. In fact, he had actively participated in the proceedings. Neither
had he shown any proof that he had been retained by respondent's legal representative or any
one who succeeded her.
However, such failure of counsel would not lead Us to invalidate the proceedings that have
long taken place before the RTC. The Court has repeatedly declared that failure of the counsel
to comply with his duty to inform the court of the death of his client, such that no substitution
is effected, will not invalidate the proceedings and the judgment rendered thereon if the action
survives the death of such party. The trial court's jurisdiction over the case subsists despite the
death of the party.48
The purpose behind this rule is the protection of the right to due process of every party to the
litigation who may be affected by the intervening death. The deceased litigants are themselves
protected as they continue to be properly represented in the suit through the duly appointed
legal representative of their estate.49
Anent the claim of petitioner that the special power of attorney50 dated March 4, 1997
executed by respondent in favor of Faustino has become functus officio and that the agency
constituted between them has been extinguished upon the death of respondent, corollarily,
he had no more personality to appear and prosecute the case on her behalf.
Agency is extinguished by the death of the principal. 51 The only exception where the agency
shall remain in full force and effect even after the death of the principal is when if it has been
constituted in the common interest of the latter and of the agent, or in the interest of a third
person who has accepted the stipulation in his favor.52
A perusal of the special power of attorney leads us to conclude that it was constituted for the
benefit solely of the principal or for respondent Fe Vda. de Te. Nowhere can we infer from the
stipulations therein that it was created for the common interest of respondent and her
attorney-in-fact. Neither was there any mention that it was to benefit a third person who has
accepted the stipulation in his favor.
On this ground, We agree with petitioner. However, We do not believe that such ground would
cause the dismissal of the complaint. For as We have said, Civil Case No. 3488, which is an
action for the recovery of a personal property, a motor vehicle, is an action that survives
pursuant to Section 1, Rule 87 of the Rules of Court. As such, it is not extinguished by the death
of a party.
In Gonzalez v. Philippine Amusement and Gaming Corporation,53 We have laid down the
criteria for determining whether an action survives the death of a plaintiff or petitioner, to wit:
x x x The question as to whether an action survives or not depends on the nature of the action
and the damage sued for. If the causes of action which survive the wrong complained [of]
affects primarily and principally property and property rights, the injuries to the person being
merely incidental, while in the causes of action which do not survive the injury complained of
is to the person the property and rights of property affected being incidental. x x x
Thus, the RTC aptly resolved the second issue with the following ratiocination:
While it may be true as alleged by defendants that with the death of Plaintiff, Fe Vda. de Te,
the Special Power of Attorney she executed empowering the Attorney-in-fact, Faustino
Castañeda to sue in her behalf has been rendered functus officio, however, this Court believes
that the Attorney-in-fact had not lost his personality to prosecute this case.
It bears stressing that when this case was initiated/filed by the Attorney-in-fact, the plaintiff
was still very much alive.
Records reveal that the Attorney-in-fact has testified long before in behalf of the said plaintiff
and more particularly during the state when the plaintiff was vehemently opposing the
dismissal of the complainant. Subsequently thereto, he even offered documentary evidence in
support of the complaint, and this court admitted the same. When this case was initiated,
jurisdiction was vested upon this Court to try and hear the same to the end. Well-settled is the
rule to the point of being elementary that once jurisdiction is acquired by this Court, it attaches
until the case is decided.
Thus, the proper remedy here is the Substitution of Heirs and not the dismissal of this case
which would work injustice to the plaintiff.
SEC. 16, RULE 3 provides for the substitution of the plaintiff who dies pending hearing of the
case by his/her legal heirs. As to whether or not the heirs will still continue to engage the
services of the Attorney-in-fact is another matter, which lies within the sole discretion of the
heirs.
In fine, We hold that the petition should be denied as the RTC Order is interlocutory; hence,
not a proper subject of an appeal before the Court. In the same breath, We also hold that, if
the petition is to be treated as a petition for certiorari as a relaxation of the judicial hierarchy
of courts, the same is also dismissible for being substantially insufficient to warrant the Court
the nullification of the Order of the RTC.
Let this be an occasion for Us to reiterate that the rules are there to aid litigants in prosecuting
or defending their cases before the courts. However, these very rules should not be abused so
as to advance one's personal purposes, to the detriment of orderly administration of justice.
We can surmise from the present case herein petitioner's manipulation in order to circumvent
the rule on modes of appeal and the hierarchy of courts so that the issues presented herein
could be settled without going through the established procedures. In Vergara, Sr. v.
Suelto,54 We stressed that this should be the constant policy that must be observed strictly by
the courts and lawyers, thus:
x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily
perform the functions assigned to it by the fundamental charter and immemorial tradition. It
cannot and should not be burdened with the task of dealing with causes in the first instance.
Its original jurisdiction to issue the so-called extraordinary writs should be exercised only
where absolutely necessary or where serious and important reasons exist therefor. Hence, that
jurisdiction should generally be exercised relative to actions or proceedings before the Court
of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for some
reason or another are not controllable by the Court of Appeals. Where the issuance of an
extraordinary writ is also within the competence of the Court of Appeals or a Regional Trial
Court, it is in either of these courts that the specific action for the writ’s procurement must be
presented. This is and should continue to be the policy in this regard, a policy that courts and
lawyers must strictly observe.55
WHEREFORE, premises considered, the Petition is DENIED. The Order dated March 22, 2006 of
the Regional Trial Court, Branch 19, Digos, Davao del Sur in Civil Case No. 3488, is hereby
AFFIRMED. Costs against the petitioner.
SO ORDERED.
THIRD DIVISION
February 15, 2017
G.R. No. 194272
 SPOUSES AMADO O. IBAÑEZ and ESTHER R. IBAÑEZ, Petitioners
vs.
JAMES HARPER as Representative of the Heirs of FRANCISCO MUÑOZ, SR., the REGISTER OF
DEEDS OF MANILA and the SHERIFF OF MANILA, Respondents
DECISION
JARDELEZA, J.:
This is an Amended Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of
Court assailing the Decision2 dated October 29, 2009 (assailed Decision) and Resolution3 dated
September 29, 2010 (assailed Resolution) of the Court of Appeals (CA) in CA-G.R. SP No. 98623.
The CA set aside the Orders dated August 11,20064 and February 20, 20075 and reinstated the
Order dated March 24, 20066 of the Regional Trial Court (RTC) of Manila, Branch 40, in Civil
Case No. 97-86454.
I of Manila be enjoined from registering the certificate of sale.18
Sometime in October 1996, spouses Amado and Esther Ibañez (spouses Ibañez) borrowed from
Francisco E. Muñoz, Sr. (Francisco), Consuelo Estrada (Consuelo) and Ma. Consuelo E. Muñoz
(Ma. Consuelo) the amount of ₱1,300,000, payable in three months, with interest at the rate
of 3% a month.7
On October 14, 1996, the spouses Ibanez issued a Promissory Note8 binding themselves jointly
and severally to pay Ma. Consuelo and Consuelo the loan amount with interest, to wit:
FOR VALUE RECEIVED, I jointly and severally, promise to pay to MA. CONSUELO E. MUÑOZ &
CONSUELO C. ESTRADA, at their office at x x x, the principal sum of ONE MILLION THREE
HUNDRED THOUSAND ONLY (₱1,300,000.00), Philippine Currency, with interest thereon at the
rate of three percent (3%) per month, subject to one (1%) percent penalty if not paid on
monthly due date. Interest not paid when due shall be added to and become part of the
principal and shall likewise bear interest at the same rate compounded monthly. Payable
within a period of three (3) months from the date hereof, beginning Nov. 14, 1996 and every
month thereafter, until the whole sum of principal and interest shall have been fully paid.
Upon default of three (3) monthly installments when due, all the other installments shall
become due and payable. Interest not paid when due shall be added to, and become part of
the principal and shall likewise bear interest at the same rate, compounded monthly. 9
As security, on October 1 7, 1996, the spouses Ibañez executed a Deed of Real Estate
Mortgage10 in favor of Ma. Consuelo and Consuelo over a parcel of land and its improvements
covered by Transfer of Certificate Title (TCT) No. 202978. The mortgage contained the same
terms as the promissory note. It further stipulated that Ma. Consuelo and Consuelo shall have
the right to immediately foreclose the mortgage upon the happening of the following events:
(1) filing by the mortgagor of any petition for insolvency or suspension of payment; and/or (2)
failure of the mortgagor to perform or comply with any covenant, agreement, term or
condition of the mortgage.11
On September 23, 1997, alleging that the conditions of the mortgage have been violated since
November 17, 1996 and that all check payments were dishonored by the drawee, Ma.
Consuelo and Consuelo applied for foreclosure of the real estate mortgage.12
On December 8, 1997, the spouses Ibañez filed in the RTC of Manila a Complaint13 for
injunction and damages with prayers for writ of preliminary injunction and temporary
restraining order against Francisco, Ma. Consuelo, Consuelo, the Clerk of Court and Ex-
Officio Sheriff, Sheriff-in-Charge and Register of Deeds of the City of Manila. Docketed as Civil
Case No. 97-86454, the Complaint alleged that there is no reason to proceed with the
foreclosure because the real estate mortgage was novated.14 They prayed that the public
auction of the property be enjoined and that Francisco, Ma. Consuelo and Consuelo be held
liable for actual and compensatory, moral and exemplary damages, as well as attorney's fees
and costs of suit.15
On December 12, 1997, the spouses Ibañez filed an Amended Complaint.16 They alleged that
the public auction was conducted, with Francisco, Ma. Consuelo and Consuelo as the highest
bidders17 and prayed that the Ex-Officio Sheriff and the Sheriff-in-Charge be enjoined from
executing the certificate of sale in favor of Francisco, Ma. Consuelo and Consuelo. In the event
the certificate of sale is already issued, they alternatively prayed for that the Register of Deeds
On December 16, 1997, the RTC issued a status quo order.19
On June 11, 2002, the parties filed a Joint Motion for Approval of Amended Compromise
Agreement.20 The Amended Compromise Agreement,21 signed by the spouses Ibañez and
Francisco, for himself and on behalf of Ma. Consuelo and Consuelo, reads:
AMENDED COMPROMISE AGREEMENT
PARTIES PLAINTIFFS and DEFENDANTS, assisted by their respective counsels, unto this
Honorable Court, most respectfully submit this AMENDED COMPROMISE AGREEMENT, to wit:
I- STIPULATIONS OF THE PARTIES:
1.1. On October 16, 1996, plaintiffs obtained a loan from the defendants, in the principal
amount of ₱l,300,000.00, with interest thereon, payable within three (3) months therefrom;
1.2. The loan has been secured by a Real Estate Mortgage, constituted on a parcel of land,
situated in the District of Singalong, Malate, Manila, containing an area of 135. 70 Square
Meters, registered in the name of Amado O. Ibañez, married to Esther R. Iba[ñ]ez, embraced
under Transfer Certificate of Title No. [202978], of the Registry of Deeds for the City of Manila;
1.3. Thereafter, the mortgage was extra-judicially foreclosed by the defendants, for failure to
pay the loan obligation, plus interests due thereon, within the agreed period;
1.4. The property in question was not redeemed within the period prescribed by law. Hence,
on December 10, 1997, after Notice, the Office of the Clerk of Court and Ex-Officio Sheriff of
Manila, sold the same property at public auction where defendant Francisco E. Munoz, Sr.
was the highest bidder;
1.5. However, the Certificate of Sale, was not issued in view of the institution by plaintiffs of
the present case.
II- TERMS AND CONDITIONS:
2.1. The plaintiffs shall pay unto the defendants, the total sum of THREE MILLION PESOS
(₱3,000,000.00), Philippine Currency, portion of which shall be paid through the proceeds of a
real estate loan, being secured from the Government Service[] Insurance System (GSIS), and
the remaining balance, from such other sources determined by the plaintiffs, subject to the
conformity of the defendants;
2.2. The defendants accept, as initial payment, the amount of PESOS: TWO MILLION
(₱2,000,000.00) Philippine Currency, from the proceeds of the said real estate loan to be
released by the Government Service[] Insurance System (GSIS), which amount is hereby
unconditionally committed by the plaintiffs to be paid in full to the defendants, immediately
upon release thereof, or within a period of three (3) months from date of this agreement;
2.3. The amount to be released by the Government Service Insurance System
(GSIS), representing proceeds of the above-stated loan shall be assigned by the plaintiffs, in
favor of the defendants, upon execution of this agreement;
2.4. The remaining balance of the total obligation stated in paragraph 2.1 above, amounting
to One Million (₱l,000,000.00), shall be payable within one (1) year from date hereof, with
interest at the rate of two (2%) per month, and to be secured by a real estate mortgage, to
be constituted on a property registered in the names of the plaintiffs, situated at Puerto Azul,
Brgy. Zapang, Ternatc, Cavite, identified as Lot 1-J of the subdivision plan Psd-04-133674,
portion of Lot 1, (LRC) Psd-88692, L.R.C. Record No. N-33296, containing an area of Twenty
(20) hectares, more or less;
2.5. In the event, that the above-mentioned GSIS loan application will not materialize, parties
hereby agree to immediately cause the lifting or recall of the Status Quo Order issued by this
Honorable Court, on December 16, 1997. Thereafter, the defendants shall immediately cause
the issuance of the Certificate of Sale over the subject property in their favor, and the plaintiffs
agree not to further delay the same, with any Court action or otherwise;
2.6. Parties hereby agree to WAIVE such other claims by one party against the other, relative
to or connected with the instant case;
2.7. In the event of failure of the plaintiffs to comply with any of the terms and conditions of
this agreement, the defendants shall be entitled to a Writ of Execution, to implement this
agreement of the parties.
IN WITNESS WHEREOF, parties have hereunto signed this Compromise Agreement, this x x x,
in the City of Manila.
(Signed) (Signed)
AMADO O. IBANEZ FRANCISCO E. MUNOZ, SR.
Plaintiff Defendant
For himself and on behalf of his Co-
defendants
(Signed)
ESTHER R. IBANEZ
Plaintiff
ASSISTED BY:
(Signed) (Signed)
ATTY. CESAR G. VIOLA ATTY. PROSPERO A. ANAVE
Counsel for the Plaintiffs Counsel for the Defendants
x x x22 (Emphasis and underscoring in the original.)
On June 17, 2002, the RTC approved the Amended Compromise Agreement and adopted it as
its Hatol.23
On September 24, 2002, the spouses Ibañez manifested that: (1) there will be a slight delay in
their compliance due to new loan requirements of the Government Service Insurance System
(GSIS);24 and (2) they have executed a Real Estate Mortgage25 dated August 10, 2002 in favor
of Ma. Consuelo and Consuelo over a property covered by TCT No. T-77676, as per the parties'
Amended Compromise Agreement.
On February 28, 2006, Atty. Roberto C. Bermejo (Atty. Bermejo), representing himself as
collaborating counsel for Francisco, Ma. Consuelo and Consuelo, filed an Omnibus Motion for
Execution and Lifting of the Status Quo Order of December 16, 1997 and for the Issuance of
Writ of Possession.26 Atty. Bermejo alleged that the spouses Ibañez failed to comply with their
obligation under the Amended Compromise Agreement. Consequently, and following the
terms of the Amended Compromise Agreement, the RTC's status quo order must be lifted and
a certificate of sale over the subject property be immediately issued.27
On March 24, 2006, the RTC granted Atty. Bermejo's motion. It found that the spouses Ibañez
have yet to pay the amount due, in violation of the terms of the Amended Compromise
Agreement.28 The Order dated March 24, 2006 reads:
WHEREFORE, in view of the foregoing, Order is issued: (1) lifting the status quo order of
December 16, 1997; (2) directing the issuance of a writ of possession directing the private
defendant[ s] be placed in possession of the subject property; and (3) directing the Office of
the Sheriff of Manila to issue a certificate of sale in favor of the private
defendant[s].29 (Emphasis omitted.)
The spouses Ibañez moved to reconsider30 this order on the following grounds: (1) Francisco
died in June 2004; (2) Atty. Prospero A. Anave (Atty. Anave), counsel on record of Francisco,
Ma. Consuelo and Consuelo, failed to inform the court of such fact; thus, there was no valid
substitution of parties; and (3) Atty. Bermejo had no authority to file the omnibus motion as it
is without knowledge, approval and consent of Atty. Anave.31
On June 15, 2006, the RTC granted the spouses Ibañez' Motion for Reconsideration. 32 It held
that: (1) Atty. Anave's failure to report Francisco's death to the court for purposes of
substitution rendered the proceedings thereat null and void; (2) Atty. Anave's subsequent
conformity to Atty. Bermejo's actions did not cure the initial defect in the filing of the Omnibus
Motion; neither did it mean the withdrawal, dismissal or substitution of Atty. Anave by Atty.
Bermejo; and (3) a formal entry of appearance with Atty. Anave's conformity is necessary
before Atty. Bermejo can legally act as collaborating counsel.
On June 29, 2006, the spouses Ibañez filed a Motion for the Implementation of the Amended
Compromise Agreement.33 They argued that since there was no proper substitution of the
heirs of Francisco, the proper parties to substitute him are Ma. Consuelo and Consuelo. They
also argued that the Amended Compromise Agreement had already been partially complied
with: (1) they have already executed a Deed of Assignment assigning to Ma. Consuelo and
Consuelo the proceeds of the GSIS loan pursuant to paragraph 2.3; and (2) on May 19, 2006,
they have already executed the Real Estate Mortgage provided under paragraph 2.4.34 They
further allege that the delay in the implementation of the assignment was due to the assignees'
failure to deliver to the GSIS the owner's copy of TCT No. 202978 (the same lot which served
as security for the Promissory Note executed by the spouses Ibañez on October 14, 1996) and
the discharge of the corresponding Real Estate Mortgage executed by the spouses Ibañez on
October 17, 1996.
The spouses Ibañez thus prayed that the Amended Compromise Agreement be considered
initially implemented and that Ma. Consuelo and Consuelo be ordered to surrender the
owner's copy of TCT No. 202978 or to consider the title lost should the same not be
surrendered.35
On July 5, 2006, citing irreconcilable differences, Atty. Anave filed his Notice of Withdrawal of
Appearance36 as counsel for Francisco, Ma. Consuelo and Consuelo.
On even date, Atty. Bermejo filed a Notice of Death37 of Francisco and named James Harper
(James) as Francisco's legal representative. Atty. Bermejo also filed his Entry of
Appearance38 as counsel for James, Ma. Consuelo and Consuelo.
On July 31, 2006, the spouses Ibañez filed a Motion to Adopt/Consider the Judicial Compromise
Agreement dated June 17, 2002 Designated as "Hatol" as the Final and Executory
Decision.39 The motion prayed that since all the stipulations in the Amended Compromise
Agreement have been complied with to the entire satisfaction of all the contending parties,
the Compromise Agreement should be considered and adopted as the trial court's decision on
the merits.40 The motion was signed by Amado Ibañez with the conformity of Consuelo, signing
for herself and Ma. Consuelo.41 Atty. Anave and the Branch Clerk of Court were notified of the
hearing. Only Atty. Anave, Ma. Consuelo and Consuelo were, however, furnished copies of the
motion.42
In an Order dated August 11, 2006,43 the RTC granted the spouses Ibañez' motion, thus:
x x x It appearing that all the stipulations in the "Hatol", dated June 10, 2002, have been
complied with accordingly to the entire satisfaction of each one of the contending parties and
the terms and conditions set forth therein were duly performed and satisfied. As prayed for,
the said "Hatol ", dated June 10, 2002, is considered, regarded and adopted as this Court's
decision on the merits with finality which was approved by this Court on June 17, 2002.
SO ORDERED.44
On same date, the RTC issued an Order45 noting Atty. Anave's withdrawal as counsel and Atty.
Bermejo's entry of appearance.
On August 18, 2006, Ma. Consuelo and Consuelo filed a Manifestation46 disclaiming Atty.
Bermejo as their counsel and naming Atty. Marigold Ana C. Barcelona (Atty. Barcelona) as their
counsel. Attached to the Manifestation is Atty. Barcelona's Entry of Appearance.47
On August 24, 2006, James, as Francisco's legal representative, and through Atty. Bermejo,
sought reconsideration48 of the RTC's August 11, 2006 Order. He argued that the trial court
erred in holding that all the stipulations in the Hatol have been complied with to the
satisfaction of all the parties. According to James, the spouses Ibañez made it appear that only
Ma. Consuelo and Consuelo remained as parties after Francisco's death. Since James, as
Francisco's representative, was excluded from the Deed of Assignment, the Amended
Compromise Agreement could not have been completely complied with.
On February 20, 2007, the RTC denied49 James' motion for reconsideration of the trial court's
August 11, 2006 Order, to wit:
A judicial compromise, once stamped with judicial approval becomes more than a contract
binding upon the parties and having the sanction of the Court and entered as its determination
of the controversy, it has the force and effect and (sic) any other judgment. It has also the
effect of res judicata and it is immediately executory and not appeallable (sic).
In this case, the judicial compromise agreement entered into by the parties was already
approved by this Court in its HATOL, dated June 17, 2002 and considered it as its decision on
the merits with finality. Therefore, the same has become immediately final and executory and
could no longer be reconsidered and set aside.
Moreover, there is no reason to disturb this Court's finding that all the stipulations in the
HATOL have already been complied with according to the entire satisfaction of each one of the
contending parties. James Harper cannot be made a party thereto, there being no valid
substitution of parties made.
WHEREFORE, James Harper, through counsel's motion for reconsideration is DENIED for lack
of merit.50 (Emphasis in the original, citations omitted.)
Aggrieved, the heirs of Francisco, identified as Maria C. Muñoz, Angelina M. Crocker and Maria
Elena M. Webster and represented by James Harper, filed before the CA a Petition
for Certiorari51 under Rule 65 of the Revised Rules of Court. They assailed the Orders dated
August 11, 2006 and February 20, 2007 of the trial court and clarified that contrary to the
findings of the trial court, they are pushing for the execution of the Amended Compromise
Agreement. The heirs emphasized that under the terms of the Compromise Agreement, the
obligations of the spouses Ibañez are as follows: (1) To pay ₱2,000,000 to be sourced from the
proceeds of a GSIS loan and released three months from the date of the agreement; and (2) to
pay ₱1,000,000 within one year from the date of the agreement and secured by a real estate
mortgage on the spouses Ibañez' property in Puerto Azul. The heirs are of the view that since
the spouses Ibañez have not complied with any of the foregoing stipulations, the December
16, 1997 status quo order of the trial court should already be lifted. They likewise argue that
the trial court gravely and seriously erred when it disregarded Francisco and his heirs by
holding that there was no proper substitution of parties.52
Meanwhile, on April 17, 2007, the spouses Ibañez filed a Motion for Execution53 and prayed
that Ma. Consuelo and Consuelo be ordered to surrender to them the owner's copy of TCT No.
202978. In case of failure to surrender, they alternately prayed that the Register of Deeds of
Manila be ordered to declare the owner's copy lost for purposes of subsequent
reconstitution. 54
On May 18, 2007, James filed his Opposition55 to the Motion for Execution and moved to
suspend further proceedings in the trial court due to the pendency of his petition
for certiorari in the CA.
On May 31, 2007, the trial court issued its Order56 granting the Motion for Execution and
denying James' motion to suspend. According to the trial court, there was no valid substitution;
thus, it did not acquire jurisdiction over James. On June 26, 2007, the trial court issued a Writ
of Execution.57
On September 20, 2007, Sheriff Gavin P. Reyala (Sheriff Reyala) filed his Return58 indicating
that Consuelo failed to surrender the owner's copy of TCT No. 202978 as it was allegedly in
James' possession. Thus, the Registry of Deeds of Manila, in compliance with the Writ of
Execution, issued a new owner's copy of TCT No. 202978 which Sheriff Reyala delivered to the
spouses Ibañez.
On October 29, 2009, the CA resolved James' petition for certiorari, the dispositive portion of
which states:
WHEREFORE, the instant petition is GRANTED. Setting aside the assailed Orders dated August
11, 2006 and February 20, 2007, the RTC's March 24, 2006 Order granting the February 28,
2006 Omnibus Motion for Execution and the Lifting of the RTC's December 16, 1997 Status
Quo Order is hereby Reinstated.
SO ORDERED.59 (Emphasis in the original.)
The CA ruled that the Amended Complaint and the Hatol identified Francisco, Ma. Consuelo
and Consuelo as the creditors and the parties who were supposed to receive the proceeds of
the Amended Compromise Agreement. Since the Deed of Assignment was executed only in
favor of Ma. Consuelo and Consuelo, the loan obligation of the spouses Ibañez to
Francisco remained unsettled. The heirs of Francisco thus retain the right to invoke paragraph
2.5 of the Compromise Agreement which provides for the lifting of the trial court's status
quo order.60 The CA disagreed that there was no valid substitution of parties and noted from
the records that the RTC was notified of Francisco's death on June 29, 2006. The late filing of
the notice of death did not divest the RTC of jurisdiction to favorably act on the heirs' motion
to lift the status quo order and issue the writ of execution. Based on Section 16, Rule 3 of the
Revised Rules of Court, it is the counsel, not the heirs of the deceased, who will be penalized
for the failure to comply with the duty to notify the court of the client's death.61
The CA denied the spouses Ibañez' Urgent Motion for Reconsideration62 via its assailed
Resolution.
Hence, this petition.The issues presented are:
1. Whether Francisco was a real party in interest;
2. Whether there was valid substitution of parties; and
3. Whether all the provisions of the Amended Compromise Agreement have been complied
with.
II
In their Amended Petition for Review on Certiorari,63 the spouses Ibañez claim that neither
James nor Francisco, the person he seeks to substitute, are parties in interest in Civil Case No.
97-86454. As such, James has no personality to file the petition for certiorari in the CA and the
issue of whether Francisco was validly substituted is moot and academic.64 Alternatively, the
spouses Ibañez argue that the CA erred in ruling that James has validly substituted Francisco
as the notice of death and substitution was made beyond the mandatory 30-day period.65
Section 2, Rule 3 of the Revised Rules of Court provides:
Sec. 2. Parties in interest. - A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
"Interest," within the meaning of the rule, means material interest, an interest in issue and to
be affected by the decree, as distinguished from mere interest in the question involved, or a
mere incidental interest.66
In their Complaint and Amended Complaint, the spouses Ibañez impleaded Francisco as a
defendant and described him as the capitalist. They also alleged that they took a loan from
Francisco, Ma. Consuelo and Consuelo.67 They also narrated that a public auction over the
mortgaged property was conducted where Francisco, Ma. Consuelo and Consuelo emerged as
the highest bidders.68
Further, attachments to the Complaint and Amended Complaint show that Amado Ibañez and
Francisco communicated with each other regarding the payment of the loan. 69 The Amended
Compromise Agreement, approved by the trial court and which served as the basis for
the Hatol, referred to the spouses Ibañez as the plaintiffs while the defendants they
covenanted to pay are Francisco, Consuelo and Ma. Consuelo. It was signed by the spouses
Ibañez and Francisco, for himself and on behalf of Ma. Consuelo and Consuelo.70 These facts
indicate that Francisco has a material interest in the case as it is in his interest to be paid the
money he lent the spouses Ibañez. Any judgment which will be rendered will either benefit or
injure Francisco; thus, he is a real party in interest.
We now resolve whether Francisco's heirs have validly substituted him as parties in the case.
Section 16, Rule 3 of the Revised Rules of Court provides:
Sec. 16. Death of party; duty of counsel. - Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within
thirty (30) days after such death of the fact thereof, and to give the name and address of his
legal representative or representatives. Failure of counsel to comply with this duty shall be a
ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.1âwphi1
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs.
The rationale behind the rule on substitution is to apprise the heir or the substitute that he is
being brought to the jurisdiction of the court in lieu of the deceased party by operation of
law.71 It serves to protect the right of every party to due process. It is to ensure that the
deceased party would continue to be properly represented in the suit through the duly
appointed legal representative of his estate. Non-compliance with the rule on substitution
would render the proceedings and the judgment of the trial court infirm because the court
acquires no jurisdiction over the persons of the legal representatives or of the heirs on whom
the trial and the judgment would be binding.72
Nevertheless, there are instances when formal substitution may be dispensed with. In Vda. de
Salazar v. Court of Appeals,73 we ruled that the defendant's failure to effect a formal
substitution of heirs before the rendition of judgment does not invalidate the court's judgment
where the heirs themselves appeared before the trial court, participated in the proceedings,
and presented evidence in defense of the deceased defendant. The court there found it
undeniably evident that the heirs themselves sought their day in court and exercised their right
to due process.74
Similarly, in Berot v. Siapno,75 we ruled that the continued appearance and participation of
Rodolfo, the estate's representative, in the proceedings of the case dispensed with the formal
substitution of the heirs in place of the deceased.76
Here, while there may have been a failure to strictly observe the provisions of the rules and
there was no formal substitution of heirs, the heirs of Francisco, represented by James,
voluntarily appeared and actively participated in the case, particularly in the enforcement of
the Hatol. As the records show, they have filed multiple pleadings and moved several times to
implement the Hatol to protect Francisco's interest. Following our rulings in Vda. de
Salazar and Berot, a formal substitution of parties is no longer required under the
circumstances.
The trial court therefore committed grave abuse of discretion when it declared that Harper
cannot be made a party in the case because of the lack of a valid substitution.77 Its refusal to
recognize Francisco's heirs deprived them of the opportunity to exact compliance with
whatever rights they may have under the terms of the Amended Compromise Agreement.
Anent the third issue, the spouses Ibañez argued that the CA erred in reversing the August 11,
2006 and February 20, 2007 Orders of the trial court. They claim that since the Hatol, rendered
by the RTC based on the Amended Compromise Agreement, is already final, executory and, in
fact, partially executed,78 Harper cannot anymore file a petition for certiorari to assail them.79
A compromise agreement is a contract whereby the parties, make reciprocal concessions to
avoid a litigation or put an end to one already commenced. In a compromise, the parties adjust
their difficulties in the manner they have agreed upon, disregarding the possible gain in
litigation and keeping in mind that such gain is balanced by the danger of losing.80 It
encompasses the objects stated, although it may include other objects by necessary
implication. It is binding on the contractual parties, being expressly acknowledged as a juridical
agreement between them, and has the effect and authority of res judicata.81
Here, the spouses Ibañez agreed to pay Francisco, Ma. Consuelo and Consuelo the total
amount of ₱3,000,000, with the initial payment of ₱2,000,000 to be sourced from the proceeds
of a GSIS loan and secured by the spouses Ibanez while the remaining balance of ₱l,000,000 to
be paid one year from the date of the Amended Compromise Agreement.
As correctly identified by the CA, the Amended Compromise Agreement clearly refers to the
spouses Ibañez as plaintiffs and Francisco, Consuelo and Ma. Consuelo as the defendants they
covenanted to pay. There is nothing in the Hatol, and the Amended Compromise Agreement
it is based on, which shows a declaration that the obligation created was solidary.
In any case, solidary obligations cannot be inferred lightly. They must be positively and clearly
expressed.82 Articles 1207 and 1208 of the Civil Code provide:
Art. 1207. The concurrence of two or more creditors or of two or more debtors in one and
the same obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the prestations. There
is a solidary liability only when the obligation expressly so states, or when the law or the nature
of the obligation requires solidarity.
Art. 1208. If from the law, or the nature or the wording of the obligations to which the
preceding article refers the contrary does not appear, the credit or debt shall be presumed to
be divided into as many equal shares as there are creditors or debtors, the credits or debts
being considered distinct from one another, subject to the Rules of Court governing the
multiplicity of suits. (Emphasis supplied.)
In this case, given that solidarity could not be inferred from the agreement, the presumption
under the law applies-the obligation is joint.
As defined in Article 1208, a joint obligation is one where there is a concurrence of several
creditors, or of several debtors, or of several debtors, or of several creditors and debtors, by
virtue of which each of the creditors has a right to demand, and each of the debtors is bound
to render compliance with his proportionate part of the prestation which constitutes the
object of the obligation.83 Each debtor answers only for a part of the whole liability and to each
obligee belongs only a part of the correlative rights 84 as it is only in solidary obligations that
payment made to any one of the solidary creditors extinguishes the entire obligation. 85 This
means that Francisco, Ma. Consuelo and Consuelo are each entitled to equal shares in the
₱3,000,000 agreed upon in the Amended Compromise Agreement and that payment to
Consuelo and Ma. Consuelo will not have the effect of discharging the obligation with respect
to Francisco.
The spouses Ibañez assigned the proceeds of the GSIS loan and executed a real estate
mortgage over the Puerto Azul property only in Ma. Consuelo and Consuelo's favour. By doing
so, they did not discharge their obligation in accordance with the terms of the Amended
Compromise Agreement and left their loan obligation to Francisco unsettled. Thus, and as
correctly held by the CA, it was gravely erroneous for the trial court to rule that all the
stipulations in the Hatol have been complied with. Under the circumstances, the obligations
to Francisco, and consequently, his heirs, have clearly not been complied with.
The trial court deprived the heirs of Francisco of the opportunity to assert their rights under
the Amended Compromise Agreement not only in its August 11, 2006 and February 20, 2007
Orders finding that the stipulations in the Amended Compromise Agreement have been
complied with to the satisfaction of all parties, but also in its June 15, 2006 Order which set
aside the March 24, 2006 Order granting the motion filed by the counsel for Francisco's heirs.
As earlier discussed, while there might have been a failure to strictly observe the rule on formal
substitution of heirs, the trial court's refusal to recognize the heirs of Francisco even after their
voluntary appearance and active participation in the case constitutes grave abuse of discretion.
Thus, in addition to the August 11, 2006 and February 20, 2007 Orders of the RTC, its June 15,
2006 Order must also be set aside.
WHEREFORE, the petition is DENIED. The Decision dated October 29, 2009 and Resolution
dated September 29, 2010 of the CA in CA-G.R. SP No. 98623 which REINSTATED the RTC's
March 24, 2006 Order and SET ASIDE the August 11, 2006 and February 20, 2007 Orders of the
RTC, Manila, Branch 40, in Civil Case No. 97-86454 are hereby AFFIRMED with the
MODIFICATION that the June 15, 2006 Order of the RTC is likewise ANNULLED and SET ASIDE.
SO ORDERED.
EN BANC
G.R. Nos. 161166-67 February 03, 2005
MAYOR RHUSTOM L. DAGADAG, petitioner,
vs.
MICHAEL C. TONGNAWA and ANTONIO GAMMOD, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari1 assailing the joint Decision2 dated July 31, 2003
and Resolution dated December 10, 2003 of the Court of Appeals in CA-G.R. SP Nos. 54511 and
57315. The dispositive portion of the joint Decision reads:
"WHEREFORE, these consolidated Petitions for Review are hereby GRANTED. The assailed
Resolutions dated October 21, 1997 and May 31, 1999 of the Civil Service Commission
upholding Respondent’s [now petitioner Mayor Rhustom L. Dagadag] Order of Suspension
dated June 29, 1999, and January 24, 2000 upholding Respondent’s Order of Separation, are
hereby REVERSED AND SET ASIDE. Petitioners Michael C. Tongnawa and Antonio B. Gammod
are hereby accordingly REINSTATED WITH CORRESPONDING BACKWAGES.
SO ORDERED."3
Petitioner was formerly the mayor of the municipality of Tanudan, Province of Kalinga. Michael
Tongnawa and Antonio Gammod, respondents, are the municipal engineer and municipal
planning and development coordinator, respectively, of the said municipality.
On July 24, 1995, petitioner, while then the mayor of Tanudan, sent respondents a
memorandum ordering them to explain within 72 hours why they should not be
administratively sanctioned for acts unbecoming of public servants and failure to perform their
duties. Respondents submitted to petitioner their respective explanations.
On August 1, 1995, petitioner issued Executive Order No. 95-002 creating a Municipal
Grievance Committee to investigate the charges against respondents. Guilbert Dangpason,
then the vice-mayor of Tanudan, was designated Chairman.
After investigation, the Committee found respondents liable for insubordination, non-
performance of duties and absences without official leaves (AWOL).
On November 27, 1995, petitioner issued an order suspending respondents from their
respective positions for two months or from December 1, 1995 to February 28, 1996.
Respondents then appealed to the Civil Service Commission (CSC) contending that their right
to due process has been violated. On May 23, 1996, during the pendency of respondents’
appeal, petitioner issued an order dropping them from the roll of employees effective May 28,
1996 by reason of their unauthorized absences. Again, they appealed to the CSC.
On October 21, 1997, the CSC issued Resolution No. 974229 affirming petitioner’s
order suspending respondents from the service for two months. They moved for a
reconsideration but was denied by the CSC on May 31, 1999, prompting them to file with the
Court of Appeals a petition for review, docketed as CA-G.R. SP No. 54511.
Meanwhile, on June 29, 1999, the CSC issued Resolution No. 991136 affirming petitioner’s
order dropping respondents from the roll. When their motion for reconsideration was denied
by the CSC, respondents filed with the Court of Appeals a petition for review, docketed as CA-
G.R. SP 57315.
As mentioned earlier, the Court of Appeals, in its joint Decision in CA-G.R. SP Nos. 54511 and
57315, granted respondents’ petitions for review, reversing the CSC challenged Resolutions
and reinstating them to their respective positions and ordering the payment of their
corresponding backwages.
In reversing the CSC, the Court of Appeals held:
"As a general rule, findings of the CSC are not disturbed on appeal, but if there are substantial
facts which may alter the results of the case, this Court is tasked to evaluate and take them
into consideration.
Petitioners (now respondents) ascribed irregularities in the conduct of the Grievance
Committee hearing and submitted two Affidavits subscribed by one William Tumbali and by
former Vice-Mayor Guilbert Dangpason, then chairman of the said Grievance Committee.
Dangpason attested that while it is true that there was a meeting held, no investigation was
actually conducted. The Petitioners maintained that they were not given an opportunity to
explain their side and prove their defenses. They claimed that the minutes on which the
suspension of the Petitioners was solely based do not state the true proceedings, therefore,
depriving them of their right to be heard.
None other than the Chairman of the Grievance Committee, assigned to investigate the alleged
negligence of the Petitioners, had renounced the contents of the minutes of the supposed
investigation. Dangpason who ‘wish(ed) to set the record straight…in fairness to all concerned’
categorically declared that the Petitioners were not given an opportunity to defend themselves
since there was no actual investigation conducted and even expressed his willingness ‘to testify
and confirm’ his declarations just to ascertain the truth. These declarations of Dangpason and
Tumbali were not denied by the Respondent. In the absence therefore of any showing of ill
intent or bad faith on the part of Dangpason and Tumbali, their Affidavits are to be afforded
great weight and credence.
In the light of this clear and convincing evidence, Petitioners were able to rebut or overcome
the presumption of regularity in the conduct of the Grievance Committee hearing. Accordingly,
the minutes cannot solely be the basis for Petitioners’ suspension.
xxx
x x x, we find that the suspension of the Petitioners has no factual basis.
xxx
It must be emphasized that, in administrative proceedings, it is not the duty of Petitioners to
disperse what the Respondent failed to prove. The Respondent must first affirmatively show
rationally adequate evidence that Petitioners’ suspension was for a justifiable cause.
Petitioners’ suspension was not justified and, therefore, illegal because Respondent failed to
prove the allegations and accusations against the Petitioners.
The Petitioners likewise assailed the resolution of the CSC affirming Respondent’s Order of
Separation as having been done in violation of their right to due process.
xxx
The previous rule required that the absences of an officer or employee before he can be
dropped from the roll must be ‘for at least thirty (30) days without approved leave.’ However,
the above-quoted rule now provides that the absences without authorized leave must be
continuous, which means uninterrupted, or unbroken totaling at least 30 days. Clearly, the
amendment is intended to make the requirement on absences ‘continuous’ and not just
totaling ‘at least 30 days.’
Considering that statutes prescribing the grounds for the suspension or removal of an officer
are penal in nature, the same should be strictly construed. Thus, where the law enumerates
the grounds for disciplinary action, no other grounds may be invoked for his suspension or
removal. Hence, although the unauthorized absences of Petitioners Tongnawa and Gammod
totaled 41 and 43 days, respectively, it is clear from the records that the days when the
Petitioners were absent, although more than 30 days, were not continuous as required by the
law, but intermittent. Furthermore, there was no evidence, much less allegation, that the gap
or break was a special or a regular holiday. Clearly, one of the requirements for the dropping
from the rolls is not attendant. Hence, there was no valid termination of Petitioners’ services.
Inescapable then is the conclusion that since the Petitioners were illegally suspended and
unjustifiably separated from their work, they are entitled to reinstatement and backwages."
Petitioner filed a joint motion for reconsideration but was denied by the Court of Appeals.
Hence, the instant petition.
Basically, petitioner alleges that his "suspension and dismissal orders against the respondents
are supported by substantial evidence."4 Moreover, the sworn declarations of William Tumbali
and Guilbert Dangpason, the designated Chairman of the Municipal Grievance Committee, that
there was actually no investigation conducted on petitioner’s charges, are "devoid of
credibility."5
In their joint comment, respondents aver that petitioner has no legal personality to file the
instant petition because he had ceased to be the municipal mayor of Tanudan, Kalinga; and
that the CSC, being the aggrieved party, is the proper party to file this petition.
The fundamental issue before us is: who may appeal from the Decision of the Court of Appeals?
In resolving the issue, the concept of "real party in interest" becomes relevant.
Section 2, Rule 3 of the 1997 Rules of Civil Procedure, as amended, provides:
"SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest."
The established rule is that a real party in interest is one who would be benefited or injured by
the judgment, or one entitled to the avails of the suit. The word "interest," as contemplated
by the Rules, means material interest or an interest in issue and to be affected by the judgment,
as distinguished from mere interest in the question involved or a mere incidental interest.
Stated differently, the rule refers to a real or present substantial interest as distinguished from
a mere expectancy, or a future, contingent, subordinate, or consequential interest. As a
general rule, one who has no right or interest to protect cannot invoke the jurisdiction of the
court as party-plaintiff in an action.6
We hold that the CSC and the mayor of Tanudan are real parties in interest in this case and,
therefore, can contest the assailed joint Decision of the Court of Appeals before us.
The CSC is the party adversely affected by the questioned Decision of the Court of Appeals
because it has been mandated by the Constitution to preserve and safeguard the integrity of
our civil service system.7 Thus, any transgression by herein respondents of the CSC rules and
regulations will adversely affect its integrity. Significantly, it has not challenged the assailed
Decision.
As regards the mayor of Tanudan, there are two (2) reasons why he may interpose such appeal.
The first is rooted in his power to appoint officials and employees of his municipality.8 Both
respondents were appointed by petitioner during his incumbency. In Francisco Abella, Jr. vs.
Civil Service Commission,9 the Court En Banc (through Justice Artemio V. Panganiban) held that
the municipal mayor, being the appointing authority, is the real party in interest to challenge
the CSC’s disapproval of the appointment of his appointee, thus:
"x x x. The power of appointment necessarily entails the exercise of judgment and discretion
(Sevilla vs. Parina, 128 Phil. 639, 643, October 30, 1967; Manalang vs. Quitoriano, 94 Phil. 903,
911, April 30, 1954). Luego vs. Civil Service Commission (227 Phil. 303, August 5, 1986)
declared:
‘Appointment is an essentially discretionary power and must be performed by the officer in
which it is vested according to his best lights, the only condition being that the appointee
should possess the qualifications required by law. If he does, then the appointment cannot be
faulted on the ground that there are others better qualified who should have been preferred.
This is a political question involving considerations of wisdom which only the appointing
authority can decide’ (Rimonte vs. Civil Service Commission, 314 Phil. 421, 430, May 29, 1995).
Significantly, ‘the selection of the appointee – taking into account the totality of his
qualifications, including those abstract qualities that define his personality – is the prerogative
of the appointing authority (Lapinid vs. Civil Service Commission, 274 Phil. 381, 387, May 14,
1991, per Cruz J.; Jimenez vs. Francisco, 127 Phil. 1025, 1032, February 28, 1957; Branganza vs.
Commission on Elections, 127 Phil. 442, 447, August 15, 1967). No tribunal, not even this Court
(Lapinid vs. Civil Service Commission, supra; Amponin vs. Commission on Elections, 128 Phil.
412, 415, September 29, 1967), may compel the exercise of an appointment for a favored
person (Sevilla vs. Patrina, supra; Manalang vs. Quitoriano, supra; Torio vs. Civil Service
Commission, 209 SCRA 677, 691, June 9, 1992; Medalla vs. Sto. Tomas, 208 SCRA 351, 357, May
5, 1992).
The CSC’s disapproval of an appointment is a challenge to the exercise of the appointing
authority’s discretion. The appointing authority must have the right to contest the
disapproval. Thus, Section 2 of Rule VI of CSC Memorandum Circular 40, s. 1998 is justified
insofar as it allows the appointing authority to request reconsideration or appeal.
In Central Bank vs. Civil Service Commission (171 SCRA 744, 756, April 10, 1989), this Court
has affirmed that the appointing authority stands to be adversely affected when the CSC
disapproves an appointment. Thus, the said authority can ‘defend its appointment since it
knows the reasons for the same’ (id., p. 757, per Gancayco, J.). It is also the act of the
appointing authority that is being questioned when an appointment is disapproved (id.).
x x x." (underscoring ours)
Similarly, where a municipal mayor orders the suspension or dismissal of a municipal
employee on grounds he believes to be proper, but his order is reversed or nullified by the CSC
or the Court of Appeals (as in this case), he has the right to contest such adverse ruling. His
right to appeal flows from the fact that his power to appoint carries with it the power to
remove. Being chief executive of the municipality, he possesses this disciplinary power over
appointive municipal officials and employees.10 To be sure, whenever his order imposing
administrative sanctions upon erring municipal personnel is challenged, he should be allowed
to defend his action considering that he is the appointing authority.
The second reason why the municipal mayor of Tanudan has legal personality to challenge the
Decision of the Court of Appeals is because the salaries of the respondents, being municipal
officials, are drawn from the municipal funds. Obviously, the mayor has real and substantial
interest in the outcome of the administrative cases against respondents.
Admittedly, however, petitioner, at the time he filed with this Court the instant petition
assailing the Appellate Court Decision, was no longer the mayor of Tanudan.
Section 17, Rule 3 of the 1997 Rules of Civil Procedure, as amended, is relevant, thus:
"Sec. 17. Death or separation of a party who is a public officer. – When a public officer is a
party in an action in his official capacity and during its pendency dies, resigns or
otherwise ceases to hold office, the action may be continued and maintained by or against
his successor if, within thirty (30) days after the successor takes office or such time as may be
granted by the court, it is satisfactorily shown to the court by any party that there is a
substantial need for continuing or maintaining it and that the successor adopts or continues
or threatens to adopt or continue the action of his predecessor. Before a substitution is made,
the party or officer to be affected, unless expressly assenting thereto, shall be given reasonable
notice of the application therefor and accorded an opportunity to be heard." (underscoring
ours)
Interpreting the above rule, in gr_ Miranda vs. Carreon,11 gr_ Heirs of Mayor Nemencio Galvez
vs. Court of Appeals,12 and Roque, et al. vs. Delgado, et al.,13 we held that where the petitioner
(a public officer) ceases to be mayor, the appeal and/or action he initiated may be continued
and maintained by his successor if there is substantial need to do so. If the successor failed to
pursue the appeal and/or action, the same should be dismissed.
Records show that upon petitioner’s cessation from public office, his successor did not file any
manifestation to the effect that he is continuing and maintaining this appeal.
We thus agree with the respondents that petitioner has lost his legal personality to interpose
the instant petition.
WHEREFORE, the instant petition is hereby DENIED. Costs against petitioner.
SO ORDERED.
FIRST DIVISION
G.R. No. 160347 November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision1 and
Resolution affirming the Regional Trial Court (RTC) Decision rendering herein petitioners
Arcadio and Luisa Carandang [hereinafter referred to as spouses Carandang] jointly and
severally liable for their loan to Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate
officers of Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent
(54%) and forty six percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from ₱500,000 to P1.5 million
and ₱345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on
March 3, 1989, MBS again increased its capital stock, from ₱1.5 million to ₱3 million, [the
spouses Carandang] yet again subscribed to the increase. They subscribed to ₱93,750 worth
of newly issued capital stock.
[De Guzman] claims that, part of the payment for these subscriptions were paid by him,
₱293,250 for the November 26, 1983 capital stock increase and ₱43,125 for the March 3, 1989
Capital Stock increase or a total of ₱336,375. Thus, on March 31, 1992, [de Guzman] sent a
demand letter to [the spouses Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation
agreement was executed between [Arcadio Carandang] and [de Guzman], whereby the latter
promised to pay for the stock subscriptions of the former without cost, in consideration for
[Arcadio Carandang’s] technical expertise, his newly purchased equipment, and his skill in
repairing and upgrading radio/communication equipment therefore, there is no indebtedness
on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the ₱336,375 together
with damages. After trial on the merits, the trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman].
Accordingly, [the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to
wit:
(1) ₱336,375.00 representing [the spouses Carandang’s] loan to de Guzman;
(2) interest on the preceding amount at the rate of twelve percent (12%) per annum from June
5, 1992 when this complaint was filed until the principal amount shall have been fully paid;
(3) ₱20,000.00 as attorney’s fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the
same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No costs. 2
The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the
Court of Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our
Decision of April 22, 2003, which is based on applicable law and jurisprudence on the matter
is hereby AFFIRMED and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for Review on
Certiorari, bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING
THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE, CONTRARY TO
EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE
DISREGARD OF THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN VIOLATION OF
ARTICLE 1207 OF THE NEW CIVIL CODE.4
Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the
Rules of Court
The spouses Carandang claims that the Decision of the RTC, having been rendered after the
death of Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules
of Court, which provides:
SEC. 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within
thirty (30) days after such death of the fact thereof, and to give the name and address of his
legal representative or representatives. Failure of counsel to comply with this duty shall be a
ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order the legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs.
The spouses Carandang posits that such failure to comply with the above rule renders void the
decision of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court
of Appeals5 and Ferreria v. Vda. de Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no order is issued
by the court for the appearance of the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution has ever been effected,
the trial held by the court without such legal representatives or heirs and the judgment
rendered after such trial are null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the trial and judgment would
be binding.7
In the present case, there had been no court order for the legal representative of the deceased
to appear, nor had any such legal representative appeared in court to be substituted for the
deceased; neither had the complainant ever procured the appointment of such legal
representative of the deceased, including appellant, ever asked to be substituted for the
deceased. As a result, no valid substitution was effected, consequently, the court never
acquired jurisdiction over appellant for the purpose of making her a party to the case and
making the decision binding upon her, either personally or as a representative of the estate of
her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and is not
subject to the discretion of the parties,9 jurisdiction over the person of the parties to the case
may be waived either expressly or impliedly.10Implied waiver comes in the form of either
voluntary appearance or a failure to object.11
In the cases cited by the spouses Carandang, we held that there had been no valid substitution
by the heirs of the deceased party, and therefore the judgment cannot be made binding upon
them. In the case at bar, not only do the heirs of de Guzman interpose no objection to the
jurisdiction of the court over their persons; they are actually claiming and embracing such
jurisdiction. In doing so, their waiver is not even merely implied (by their participation in the
appeal of said Decision), but express (by their explicit espousal of such view in both the Court
of Appeals and in this Court). The heirs of de Guzman had no objection to being bound by the
Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which
can only be asserted by the party who can thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a formal substitution of
heirs. The underlying principle therefor is not really because substitution of heirs is a
jurisdictional requirement, but because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not duly notified of the proceedings,
are substantially affected by the decision rendered therein.12 Such violation of due process can
only be asserted by the persons whose rights are claimed to have been violated, namely the
heirs to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v.
Florendo,13 where we likewise held that the proceedings that took place after the death of the
party are void, we gave another reason for such nullity: "the attorneys for the offended party
ceased to be the attorneys for the deceased upon the death of the latter, the principal x x x."
Nevertheless, the case at bar had already been submitted for decision before the RTC on 4
June 1998, several months before the passing away of de Guzman on 19 February 1999. Hence,
no further proceedings requiring the appearance of de Guzman’s counsel were conducted
before the promulgation of the RTC Decision. Consequently, de Guzman’s counsel cannot be
said to have no authority to appear in trial, as trial had already ceased upon the death of de
Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the
Rules of Court, because of the express waiver of the heirs to the jurisdiction over their persons,
and because there had been, before the promulgation of the RTC Decision, no further
proceedings requiring the appearance of de Guzman’s counsel.
Before proceeding with the substantive aspects of the case, however, there is still one more
procedural issue to tackle, the fourth issue presented by the spouses Carandang on the non-
inclusion in the complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to state a cause of action,
considering that Milagros de Guzman, allegedly an indispensable party, was not included as a
party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay their stock
subscriptions were issued in the name of Milagros de Guzman, the latter should be considered
an indispensable party. Being such, the spouses Carandang claim, the failure to join Mrs. de
Guzman as a party-plaintiff should cause the dismissal of the action because "(i)f a suit is not
brought in the name of or against the real party in interest, a motion to dismiss may be filed
on the ground that the complaint states no cause of action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from
which the four (4) checks were drawn is part of their conjugal property and under both the
Civil Code and the Family Code the husband alone may institute an action for the recovery or
protection of the spouses’ conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the New
Civil Code, the husband is the administrator of the conjugal partnership. In fact, he is the sole
administrator, and the wife is not entitled as a matter of right to join him in this endeavor. The
husband may defend the conjugal partnership in a suit or action without being joined by the
wife. x x x Under the Family Code, the administration of the conjugal property belongs to the
husband and the wife jointly. However, unlike an act of alienation or encumbrance where the
consent of both spouses is required, joint management or administration does not require that
the husband and wife always act together. Each spouse may validly exercise full power of
management alone, subject to the intervention of the court in proper cases as provided under
Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in
interest" and "indispensable party." A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of the
suit.15 On the other hand, an indispensable party is a party in interest without whom no final
determination can be had of an action,16 in contrast to a necessary party, which is one who is
not indispensable but who ought to be joined as a party if complete relief is to be accorded as
to those already parties, or for a complete determination or settlement of the claim subject of
the action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action."18 However, what dismissal on this ground entails is an
examination of whether the parties presently pleaded are interested in the outcome of the
litigation, and not whether all persons interested in such outcome are actually pleaded. The
latter query is relevant in discussions concerning indispensable and necessary parties,
but not in discussions concerning real parties in interest. Both indispensable and necessary
parties are considered as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3
August 1988. As they did not execute any marriage settlement, the regime of conjugal
partnership of gains govern their property relations.19
All property acquired during the marriage, whether the acquisition appears to have been
made, contracted or registered in the name of one or both spouses, is presumed to be conjugal
unless the contrary is proved.20 Credits are personal properties,21 acquired during the time the
loan or other credit transaction was executed. Therefore, credits loaned during the time of the
marriage are presumed to be conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses Carandang
are liable, such credits are presumed to be conjugal property. There being no evidence to the
contrary, such presumption subsists. As such, Quirino de Guzman, being a co-owner of specific
partnership property,22 is certainly a real party in interest. Dismissal on the ground of failure
to state a cause of action, by reason that the suit was allegedly not brought by a real party in
interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed. 23 The
absence of an indispensable party renders all subsequent actuations of the court void, for want
of authority to act, not only as to the absent parties but even as to those present. 24 On the
other hand, the non-joinder of necessary parties do not result in the dismissal of the case.
Instead, Section 9, Rule 3 of the Rules of Court provides for the consequences of such non-
joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. – Whenever in any pleading in which a
claim is asserted a necessary party is not joined, the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the court find the reason for the omission
unmeritorious, it may order the inclusion of the omitted necessary party if jurisdiction over his
person may be obtained.
The failure to comply with the order for his inclusion, without justifiable cause, shall be
deemed a waiver of the claim against such party.
The non-inclusion of a necessary party does not prevent the court from proceeding in the
action, and the judgment rendered therein shall be without prejudice to the rights of such
necessary party.
Non-compliance with the order for the inclusion of a necessary party would not warrant the
dismissal of the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal
of the complaint for failure to comply with an order of the court, as Section 9, Rule 3 specifically
provides for the effect of such non-inclusion: it shall not prevent the court from proceeding in
the action, and the judgment rendered therein shall be without prejudice to the rights of such
necessary party. Section 11, Rule 3 likewise provides that the non-joinder of parties is not a
ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of parties: the pro-
forma parties, which are those who are required to be joined as co-parties in suits by or against
another party as may be provided by the applicable substantive law or procedural rule. 25 An
example is provided by Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided
by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor
necessary. The third case occurs if, for example, a husband files an action to recover a property
which he claims to be part of his exclusive property. The wife may have no legal interest in
such property, but the rules nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule
under Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal.
Hence, in a case concerning an action to recover a sum of money, we held that the failure to
join the spouse in that case was not a jurisdictional defect.26 The non-joinder of a spouse does
not warrant dismissal as it is merely a formal requirement which may be cured by
amendment.27
Conversely, in the instances that the pro-forma parties are also indispensable or necessary
parties, the rules concerning indispensable or necessary parties, as the case may be, should be
applied. Thus, dismissal is warranted only if the pro-forma party not joined in the complaint is
an indispensable party.
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to
the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is
not warranted, whether or not there was an order for her inclusion in the complaint pursuant
to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership
in all that is not in conflict with what is expressly determined in this Chapter or by the spouses
in their marriage settlements.
This provision is practically the same as the Civil Code provision it superceded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership
in all that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with
the other partners of specific partnership property." Taken with the presumption of the
conjugal nature of the funds used to finance the four checks used to pay for petitioners’ stock
subscriptions, and with the presumption that the credits themselves are part of conjugal funds,
Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular28 and Adlawan
v. Adlawan,29 we held that, in a co-ownership, co-owners may bring actions for the recovery
of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is presumed to have been filed for the benefit of his co-owners. In the latter
case and in that of De Guia v. Court of Appeals,30 we also held that Article 487 of the Civil Code,
which provides that any of the co-owners may bring an action for ejectment, covers all kinds
of action for the recovery of possession.31
In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring
an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of
the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable parties.
They are not even necessary parties, for a complete relief can be accorded in the suit even
without their participation, since the suit is presumed to have been filed for the benefit of all
co-owners.32
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the
recovery of the allegedly loaned money to the spouses Carandang. As such, she need not have
been impleaded in said suit, and dismissal of the suit is not warranted by her not being a party
thereto.
Whether or not respondents were able to prove the loan sought to be collected from
petitioners
In the second and third issues presented by the spouses Carandang, they claim that the de
Guzmans failed to prove the alleged loan for which the spouses Carandang were held liable.
As previously stated, spouses Quirino and Milagros de Guzman paid for the stock subscriptions
of the spouses Carandang, amounting to ₱336,375.00. The de Guzmans claim that these
payments were in the form of loans and/or advances and it was agreed upon between the late
Quirino de Guzman, Sr. and the spouses Carandang that the latter would repay him.
Petitioners, on the other hand, argue that there was an oral pre-incorporation agreement
wherein it was agreed that Arcardio Carandang would always maintain his 46% equity
participation in the corporation even if the capital structures were increased, and that Quirino
de Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang
with no cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove
by preponderance of evidence, either the existence of the purported loan or the non-payment
thereof.
Simply put, preponderance of evidence means that the evidence as a whole adduced by one
side is superior to that of the other. The concept of preponderance of evidence refers to
evidence that is of greater weight, or more convincing, than that which is offered in opposition
to it; it means probability of truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation
agreement, to which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the
plaintiff or complainant has to prove his affirmative allegations in the complaints and the
defendant or respondent has to prove the affirmative allegations in his affirmative defenses
and counterclaims.33
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself,
having presented evidence only of the payment in favor of the Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A" decides
to pay for Mr. "B’s" obligation, that payment by Mr. "A" cannot, by any stretch of imagination,
possibly mean that there is now a loan by Mr. "B" to Mr. "A". There is a possibility that such
payment by Mr. "A" is purely out of generosity or that there is a mutual agreement between
them. As applied to the instant case, that mutual agreement is the pre-incorporation
agreement (supra) existing between Mr. de Guzman and the petitioners --- to the effect that
the former shall be responsible for paying stock subscriptions of the latter. Thus, when Mr. de
Guzman paid for the stock subscriptions of the petitioners, there was no loan to speak of, but
only a compliance with the pre-incorporation agreement.34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "B’s"
obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has
been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third person who
has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor, he can recover only insofar as
the payment has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of
the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from
a mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of
payment by a third person, and even in cases where the third person paid against the will of
the debtor, such payment would produce a debt in favor of the paying third person. In fact,
the only consequences for the failure to inform or get the consent of the debtor are the
following: (1) the third person can recover only insofar as the payment has been beneficial to
the debtor; and (2) the third person is not subrogated to the rights of the creditor, such as
those arising from a mortgage, guarantee or penalty.35
We say, however, that this is merely a presumption. By virtue of the parties’ freedom to
contract, the parties could stipulate otherwise and thus, as suggested by the spouses
Carandang, there is indeed a possibility that such payment by Mr. "A" was purely out of
generosity or that there was a mutual agreement between them. But such mutual agreement,
being an exception to presumed course of events as laid down by Articles 1236 and 1237, must
be adequately proven.
The de Guzmans have successfully proven their payment of the spouses Carandang’s stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang.
Consequently, it is now up to the spouses Carandang to prove the existence of the pre-
incorporation agreement that was their defense to the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on the existence
and substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was
stricken off the record because he did not submit himself to a cross-examination of the
opposing party. On the other hand, the testimonies of Romeo Saavedra, 36 Roberto S.
Carandang,37 Gertrudes Z. Esteban,38 Ceferino Basilio,39 and Ma. Luisa Carandang40touched on
matters other than the existence and substance of the pre-incorporation agreement. So aside
from the fact that these witnesses had no personal knowledge as to the alleged existence of
the pre-incorporation agreement, the testimonies of these witnesses did not even mention
the existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even
contradicted the existence of a pre-incorporation agreement because when they were asked
by their counsel regarding the matter of the check payments made by the late Quirino A. de
Guzman, Sr. in their behalf, they said that they had already paid for it thereby negating their
own defense that there was a pre-incorporation agreement excusing themselves from paying
Mr. de Guzman the amounts he advanced or loaned to them. This basic and irrefutable fact
can be gleaned from their testimonies which the private respondents are quoting for easy
reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of
the plaintiff in this case charging you that you paid for this year and asking enough to paid (sic)
your tax?
A: We have paid already, so, we are not liable for anything payment (sic).41
b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: ₱40,000.00 to ₱50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the
payment of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
I’m showing to you these receipts so marked by the plaintiff as their exhibits which were issued
in the name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will you please
go over this Official Receipt and state for the records, who made for the payment stated in
these receipts in your name?
A: I paid for those shares."42
There being no testimony or documentary evidence proving the existence of the pre-
incorporation agreement, the spouses Carandang are forced to rely upon an alleged admission
by the original plaintiff of the existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the pre-
incorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph 4
of private respondents’ Reply.
Paragraphs 13 and 14 of petitioners’ Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M.
Carandang to a joint venture by pooling together their technical expertise, equipments,
financial resources and franchise. Plaintiff proposed to defendant and mutually agreed on the
following:
1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
equipments into high proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources and franchise.
3. That defendant would always maintain his 46% equity participation in the corporation even
if the capital structures are increased, and that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with no cost to the latter.
4. That because of defendant’s expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would maintain such relations in
the joint venture without any mental reservation for their common benefit and success of the
business.
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54%
of the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43
Meanwhile, paragraphs 3 and 4 of private respondents’ Reply dated 29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and
defendant Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting
Systems, Inc. Plaintiff specifically denies the other allegations in paragraph 13 of the Answer,
the same being devoid of any legal or factual bases. The truth of the matter is that defendant
Arcadio M. Carandang was not able to pay plaintiff the agreed amount of the lease for a
number of months forcing the plaintiff to terminate lease. Additionally, the records would
show that it was the defendant Arcadio M. Carandang who proposed a joint venture with the
plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally because of a
directive of then President Marcos indicating the need to broaden the ownership of radio
broadcasting stations. The plaintiff owned the franchise, the radio transmitter, the antenna
tower, the building containing the radio transmitter and other equipment. Verily, he would be
placed in a great disadvantage if he would still have to personally pay for the shares of
defendant Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer.44
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he
admitted paragraph 14 of the Answer, which incidentally contained the opening clause
"(h)aving mutually agreed on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported admission by Quirino
de Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above
arrangements," seems to be a mere introduction to the statement that the single
proprietorship of Quirino de Guzman had been converted into a corporation. If Quirino de
Guzman had meant to admit paragraph 13.3, he could have easily said so, as he did the other
paragraphs he categorically admitted. Instead, Quirino de Guzman expressly stated the
opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13 of the
Answer."45 The Reply furthermore states that the only portion of paragraph 13 which Quirino
de Guzman had admitted is paragraph 13.1, and only insofar as it said that Quirino de Guzman
and Arcardio Carandang organized Mabuhay Broadcasting Systems, Inc.46
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged
pre-incorporation agreement. As there was no admission, and as the testimony of Arcardio
Carandang was stricken off the record, we are constrained to rule that there was no pre-
incorporation agreement rendering Quirino de Guzman liable for the spouses Carandang’s
stock subscription. The payment by the spouses de Guzman of the stock subscriptions of the
spouses Carandang are therefore by way of loan which the spouses Carandang are liable to
pay.1âwphi1
Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary
liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or documentary, showing that the purported
obligation of [the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as
one of the obligations required by law to be solidary x x x."
It is apparent from the facts of the case that [the spouses Carandang] were married way before
the effectivity of the Family Code hence; their property regime is conjugal partnership under
the Civil Code.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an
obligation entered into by the husband and wife is chargeable against their conjugal
partnership and it is the partnership, which is primarily bound for its repayment. Thus, when
the spouses are sued for the enforcement of the obligation entered into by them, they are
being impleaded in their capacity as representatives of the conjugal partnership and not as
independent debtors, such that the concept of joint and solidary liability, as between them,
does not apply.47
The Court of Appeals is correct insofar as it held that when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their capacity
as representatives of the conjugal partnership and not as independent debtors. Hence, either
of them may be sued for the whole amount, similar to that of a solidary liability, although the
amount is chargeable against their conjugal partnership property. Thus, in the case cited by
the Court of Appeals, Alipio v. Court of Appeals,48 the two sets of defendant-spouses therein
were held liable for ₱25,300.00 each, chargeable to their respective conjugal partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against
the spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses
Carandang are ORDERED to pay the following amounts from their conjugal partnership
properties:
(1) ₱336,375.00 representing the spouses Carandang’s loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
(3) ₱20,000.00 as attorney’s fees.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173946 June 19, 2013
BOSTON EQUITY RESOURCES, INC., Petitioner,
vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the
Decision,1 dated 28 February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court
of Appeals in CA-G.R. SP No. 88586. The challenged decision granted herein respondent's
petition for certiorari upon a finding that the trial court committed grave abuse of discretion
in denying respondent's motion to dismiss the complaint against her.3 Based on this finding,
the Court of Appeals reversed and set aside the Orders, dated 8 November 20044 and 22
December 2004,5respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the
issuance of a writ of preliminary attachment against the spouses Manuel and Lolita
Toledo.6 Herein respondent filed an Answer dated 19 March 1998 but on 7 May 1998, she filed
a Motion for Leave to Admit Amended Answer7 in which she alleged, among others, that her
husband and co-defendant, Manuel Toledo (Manuel), is already dead.8 The death certificate9of
Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a motion, dated
5 August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance with the
verbal order of the court during the 11 October 1999 hearing of the case, respondent
submitted the required names and addresses of the heirs.11Petitioner then filed a Motion for
Substitution,12 dated 18 January 2000, praying that Manuel be substituted by his children as
party-defendants. It appears that this motion was granted by the trial court in an Order dated
9 October 2000.13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order
containing, among others, the dates of hearing of the case. 14
The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and
its exhibits were thereafter admitted.
On 26 May 2004, the reception of evidence for herein respondent was cancelled upon
agreement of the parties. On 24 September 2004, counsel for herein respondent was given a
period of fifteen days within which to file a demurrer to evidence. 15 However, on 7 October
2004, respondent instead filed a motion to dismiss the complaint, citing the following as
grounds: (1) that the complaint failed to implead an indispensable party or a real party in
interest; hence, the case must be dismissed for failure to state a cause of action; (2) that the
trial court did not acquire jurisdiction over the person of Manuel pursuant to Section 5, Rule
86 of the Revised Rules of Court; (3) that the trial court erred in ordering the substitution of
the deceased Manuel by his heirs; and (4) that the court must also dismiss the case against
Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16
The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having
been filed out of time, citing Section 1, Rule 16 of the 1997 Rules of Court which states that:
"Within the time for but before filing the answer to the complaint or pleading asserting a claim,
a motion to dismiss may be made x x x."17 Respondent’s motion for reconsideration of the
order of denial was likewise denied on the ground that "defendants’ attack on the jurisdiction
of this Court is now barred by estoppel by laches" since respondent failed to raise the issue
despite several chances to do so.18
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the
trial court seriously erred and gravely abused its discretion in denying her motion to dismiss
despite discovery, during the trial of the case, of evidence that would constitute a ground for
dismissal of the case.19
The Court of Appeals granted the petition based on the following grounds:
It is elementary that courts acquire jurisdiction over the person of the defendant x x x only
when the latter voluntarily appeared or submitted to the court or by coercive process issued
by the court to him, x x x. In this case, it is undisputed that when petitioner Boston filed the
complaint on December 24, 1997, defendant Manuel S. Toledo was already dead, x x x. Such
being the case, the court a quo could not have acquired jurisdiction over the person of
defendant Manuel S. Toledo.
x x x the court a quo’s denial of respondent’s motion to dismiss was based on its finding that
respondent’s attack on the jurisdiction of the court was already barred by laches as respondent
failed to raise the said ground in its [sic] amended answer and during the pre-trial, despite her
active participation in the proceedings.
However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal. By timely raising the issue on jurisdiction in her
motion to dismiss x x x respondent is not estopped from raising the question on jurisdiction.
Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet
decided the case, hence, there is no basis for the court a quo to invoke estoppel to justify its
denial of the motion for reconsideration;
It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was
already dead. The complaint should have impleaded the estate of Manuel S. Toledo as
defendant, not only the wife, considering that the estate of Manuel S. Toledo is an
indispensable party, which stands to be benefited or be injured in the outcome of the case. x
xx
xxxx
Respondent’s motion to dismiss the complaint should have been granted by public respondent
judge as the same was in order. Considering that the obligation of Manuel S. Toledo is solidary
with another debtor, x x x, the claim x x x should be filed against the estate of Manuel S. Toledo,
in conformity with the provision of Section 6, Rule 86 of the Rules of Court, x x x.20
The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:
1. Respondent is already estopped from questioning the trial court’s jurisdiction;
2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an
indispensable party;
3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the
dismissal of the case before the lower court; and
4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner
file its claim against the estate of Manuel.
In essence, what is at issue here is the correctness of the trial court’s orders denying
respondent’s motion to dismiss.
The Ruling of the Court
We find merit in the petition.
Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of
respondent. Well settled is the rule that the special civil action for certiorari is not the proper
remedy to assail the denial by the trial court of a motion to dismiss. The order of the trial court
denying a motion to dismiss is merely interlocutory, as it neither terminates nor finally disposes
of a case and still leaves something to be done by the court before a case is finally decided on
the merits.21 Therefore, "the proper remedy in such a case is to appeal after a decision has
been rendered."22
As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education: 23
A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is
resorted only to correct a grave abuse of discretion or a whimsical exercise of judgment
equivalent to lack of jurisdiction. Its function is limited to keeping an inferior court within its
jurisdiction and to relieve persons from arbitrary acts – acts which courts or judges have no
power or authority in law to perform. It is not designed to correct erroneous findings and
conclusions made by the courts. (Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse
of discretion in denying respondent’s motion to dismiss. It, in fact, acted correctly when it
issued the questioned orders as respondent’s motion to dismiss was filed SIX YEARS AND FIVE
MONTHS AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone already
warranted the outright dismissal of the motion for having been filed in clear contravention of
the express mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this provision,
a motion to dismiss shall be filed within the time for but before the filing of an answer to the
complaint or pleading asserting a claim.24
More importantly, respondent’s motion to dismiss was filed after petitioner has completed the
presentation of its evidence in the trial court, giving credence to petitioner’s and the trial
court’s conclusion that the filing of the motion to dismiss was a mere ploy on the part of
respondent to delay the prompt resolution of the case against her.
Also worth mentioning is the fact that respondent’s motion to dismiss under consideration
herein is not the first motion to dismiss she filed in the trial court. It appears that she had filed
an earlier motion to dismiss26 on the sole ground of the unenforceability of petitioner’s claim
under the Statute of Frauds, which motion was denied by the trial court. More telling is the
following narration of the trial court in its Order denying respondent’s motion for
reconsideration of the denial of her motion to dismiss:
As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of
defendants’ evidence was set on March 31, and April 23, 2004 x x x . On motion of the
defendants, the hearing on March 31, 2004 was cancelled.
On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces
tecum to one Gina M. Madulid, to appear and testify for the defendants on April 23, 2004.
Reception of defendants’ evidence was again deferred to May 26, June 2 and June 30, 2004, x
x x.
On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad
testificandum to the said Gina Madulid. On May 26, 2004, reception of defendants [sic]
evidence was cancelled upon the agreement of the parties. On July 28, 2004, in the absence of
defendants’ witness, hearing was reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file
a demurrer to evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x
x.27
Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss and
then the motion to dismiss at issue here, as well as several motions for postponement, lends
credibility to the position taken by petitioner, which is shared by the trial court, that
respondent is
deliberately impeding the early disposition of this case. The filing of the second motion to
dismiss was, therefore, "not only improper but also dilatory."28 Thus, the trial court, "far from
deviating or straying off course from established jurisprudence on the matter, x x x had in fact
faithfully observed the law and legal precedents in this case."29 The Court of Appeals,
therefore, erred not only in entertaining respondent’s petition for certiorari, it likewise erred
in ruling that the trial court committed grave abuse of discretion when it denied respondent’s
motion to dismiss.
On whether or not respondent is estopped from
questioning the jurisdiction of the trial court
At the outset, it must be here stated that, as the succeeding discussions will demonstrate,
jurisdiction over the person of Manuel should not be an issue in this case. A protracted
discourse on jurisdiction is, nevertheless, demanded by the fact that jurisdiction has been
raised as an issue from the lower court, to the Court of Appeals and, finally, before this Court.
For the sake of clarity, and in order to finally settle the controversy and fully dispose of all the
issues in this case, it was deemed imperative to resolve the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial
court’s jurisdiction was filed more than six years after her amended answer was filed.
According to petitioner, respondent had several opportunities, at various stages of the
proceedings, to assail the trial court’s jurisdiction but never did so for six straight years. Citing
the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al. 30 petitioner claimed
that respondent’s failure to raise the question of jurisdiction at an earlier stage bars her from
later questioning it, especially since she actively participated in the proceedings conducted by
the trial court.
Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction
has several aspects, namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the
parties; (3) jurisdiction over the issues of the case; and (4) in cases involving property,
jurisdiction over the res or the thing which is the subject of the litigation.31
The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by
laches is jurisdiction over the subject matter. Thus, in Tijam, the case relied upon by petitioner,
the issue involved was the authority of the then Court of First Instance to hear a case for the
collection of a sum of money in the amount of ₱1,908.00 which amount was, at that time,
within the exclusive original jurisdiction of the municipal courts.
In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the
jurisdiction of the trial court over the subject matter of the case. Accordingly, in Spouses
Gonzaga v. Court of Appeals,32 the issue for consideration was the authority of the regional
trial court to hear and decide an action for reformation of contract and damages involving a
subdivision lot, it being argued therein that jurisdiction is vested in the Housing and Land Use
Regulatory Board pursuant to PD 957 (The Subdivision and Condominium Buyers Protective
Decree). In Lee v. Presiding Judge, MTC, Legaspi City,33 petitioners argued that the respondent
municipal trial court had no jurisdiction over the complaint for ejectment because the issue of
ownership was raised in the pleadings. Finally, in People v. Casuga, 34 accused-appellant
claimed that the crime of grave slander, of which she was charged, falls within the concurrent
jurisdiction of municipal courts or city courts and the then courts of first instance, and that the
judgment of the court of first instance, to which she had appealed the municipal court's
conviction, should be deemed null and void for want of jurisdiction as her appeal should have
been filed with the Court of Appeals or the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective
courts concerned over the subject matter of the case based on estoppel by laches, declaring
that parties cannot be allowed to belatedly adopt an inconsistent posture by attacking the
jurisdiction of a court to which they submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the trial court was
that court’s jurisdiction over the person of defendant Manuel. Thus, the principle of estoppel
by laches finds no application in this case. Instead, the principles relating to jurisdiction over
the person of the parties are pertinent herein.
The Rules of Court provide:
RULE 9 in this case are similar to those in the case of Sarsaba v. Vda. de Te.41
EFFECT OF FAILURE TO PLEAD
Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either
in a motion to dismiss or in the answer are deemed waived. However, when it appears from
the pleadings or the evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for the same cause, or
that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss
the claim.
RULE 15
MOTIONS
Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion attacking
a pleading, order, judgment, or proceeding shall include all objections then available, and all
objections not so included shall be deemed waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived
even if not alleged in a motion to dismiss or the answer is lack of jurisdiction over the subject
matter. x x x Lack of jurisdiction over the subject matter can always be raised anytime, even
for the first time on appeal, since jurisdictional issues cannot be waived x x x subject, however,
to the principle of estoppel by laches."36
Since the defense of lack of jurisdiction over the person of a party to a case is not one of those
defenses which are not deemed waived under Section 1 of Rule 9, such defense must be
invoked when an answer or a motion to dismiss is filed in order to prevent a waiver of the
defense.37 If the objection is not raised either in a motion to dismiss or in the answer, the
objection to the jurisdiction over the person of the plaintiff or the defendant is deemed waived
by virtue of the first sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court.38
The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its
questioned decision, stating that "issue on jurisdiction may be raised at any stage of the
proceeding, even for the first time on appeal" and that, therefore, respondent timely raised
the issue in her motion to dismiss and is, consequently, not estopped from raising the question
of jurisdiction. As the question of jurisdiction involved here is that over the person of the
defendant Manuel, the same is deemed waived if not raised in the answer or a motion to
dismiss. In any case, respondent cannot claim the defense since "lack of jurisdiction over the
person, being subject to waiver, is a personal defense which can only be asserted by the party
who can thereby waive it by silence."39
2. Jurisdiction over the person of a defendant is acquired through a valid service of summons;
trial court did not acquire jurisdiction over the person of Manuel Toledo
In the first place, jurisdiction over the person of Manuel was never acquired by the trial court.
A defendant is informed of a case against him when he receives summons. "Summons is a writ
by which the defendant is notified of the action brought against him. Service of such writ is the
means by which the court acquires jurisdiction over his person."40
In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since
there was no valid service of summons upon him, precisely because he was already dead even
before the complaint against him and his wife was filed in the trial court. The issues presented
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed
from employment and ordering the payment of his monetary claims. To satisfy the claim, a
truck in the possession of Sereno’s employer was levied upon by a sheriff of the NLRC,
accompanied by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in that case. A
complaint for recovery of motor vehicle and damages, with prayer for the delivery of the truck
pendente lite was eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by
the registered owner of the truck. After his motion to dismiss was denied by the trial court,
petitioner Sarsaba filed his answer. Later on, however, he filed an omnibus motion to dismiss
citing, as one of the grounds, lack of jurisdiction over one of the principal defendants, in view
of the fact that Sereno was already dead when the complaint for recovery of possession was
filed.
Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of
the issues submitted for resolution in both cases is similar: whether or not a case, where one
of the named defendants was already dead at the time of its filing, should be dismissed so that
the claim may be pursued instead in the proceedings for the settlement of the estate of the
deceased defendant. The petitioner in the Sarsaba Case claimed, as did respondent herein,
that since one of the defendants died before summons was served on him, the trial court
should have dismissed the complaint against all the defendants and the claim should be filed
against the estate of the deceased defendant. The petitioner in Sarsaba, therefore, prayed that
the complaint be dismissed, not only against Sereno, but as to all the defendants, considering
that the RTC did not acquire jurisdiction over the person of Sereno. 42 This is exactly the same
prayer made by respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioner’s argument that the complaint against the other
defendants should have been dismissed, considering that the RTC never acquired jurisdiction
over the person of Sereno. The court’s failure to acquire jurisdiction over one’s person is a
defense which is personal to the person claiming it. Obviously, it is now impossible for Sereno
to invoke the same in view of his death. Neither can petitioner invoke such ground, on behalf
of Sereno, so as to reap the benefit of having the case dismissed against all of the defendants.
Failure to serve summons on Sereno’s person will not be a cause for the dismissal of the
complaint against the other defendants, considering that they have been served with copies
of the summons and complaints and have long submitted their respective responsive
pleadings. In fact, the other defendants in the complaint were given the chance to raise all
possible defenses and objections personal to them in their respective motions to dismiss and
their subsequent answers.43 (Emphasis supplied.)
Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against
Sereno only.
Based on the foregoing pronouncements, there is no basis for dismissing the complaint against
respondent herein. Thus, as already emphasized above, the trial court correctly denied her
motion to dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court states:
SEC. 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.
An indispensable party is one who has such an interest in the controversy or subject matter of
a case that a final adjudication cannot be made in his or her absence, without injuring or
affecting that interest. He or she is a party who has not only an interest in the subject matter
of the controversy, but "an interest of such nature that a final decree cannot be made without
affecting that interest or leaving the controversy in such a condition that its final determination
may be wholly inconsistent with equity and good conscience. It has also been considered that
an indispensable party is a person in whose absence there cannot be a determination between
the parties already before the court which is effective, complete or equitable." Further, an
indispensable party is one who must be included in an action before it may properly proceed.44
On the other hand, a "person is not an indispensable party if his interest in the controversy or
subject matter is separable from the interest of the other parties, so that it will not necessarily
be directly or injuriously affected by a decree which does complete justice between them. Also,
a person is not an indispensable party if his presence would merely permit complete relief
between him or her and those already parties to the action, or if he or she has no interest in
the subject matter of the action." It is not a sufficient reason to declare a person to be an
indispensable party simply because his or her presence will avoid multiple litigations. 45
Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel
is not an indispensable party to the collection case, for the simple reason that the obligation
of Manuel and his wife, respondent herein, is solidary.
The contract between petitioner, on the one hand and respondent and respondent’s husband,
on the other, states:
FOR VALUE RECEIVED, I/We jointly and severally 46 (in solemn) promise to pay BOSTON EQUITY
RESOURCES, INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (₱1,400,000.00)] x x
x.47
The provisions and stipulations of the contract were then followed by the respective signatures
of respondent as "MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216
of the Civil Code, petitioner may collect the entire amount of the obligation from respondent
only. The aforementioned provision states: "The creditor may proceed against any one of the
solidary debtors or some or all of them simultaneously. The demand made against one of them
shall not be an obstacle to those which may subsequently be directed against the others, so
long as the debt has not been fully collected."
In other words, the collection case can proceed and the demands of petitioner can be satisfied
by respondent only, even without impleading the estate of Manuel. Consequently, the estate
of Manuel is not an indispensable party to petitioner’s complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of respondent, held that the
claim of petitioner should have been filed against the estate of Manuel in accordance with
Sections 5 and 6 of Rule 86 of the Rules of Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims
for money against the decedent, arising from contract, express or implied, whether the same
be due, not due, or contingent, all claims for funeral expenses and judgment for money against
the decedent, must be filed within the time limited in the notice; otherwise, they are barred
forever, except that they may be set forth as counterclaims in any action that the executor or
administrator may bring against the claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with
another debtor, the claim shall be filed against the decedent as if he were the only debtor,
without prejudice to the right of the estate to recover contribution from the other debtor. x x
x.
The Court of Appeals erred in its interpretation of the above-quoted provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86
of the Revised Rules of Court, which latter provision has been retained in the present Rules of
Court without any revisions, the Supreme Court, in the case of Manila Surety & Fidelity Co.,
Inc. v. Villarama, et. al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was
taken, this Court held that where two persons are bound in solidum for the same debt and one
of them dies, the whole indebtedness can be proved against the estate of the latter, the
decedent’s liability being absolute and primary; x x x. It is evident from the foregoing that
Section 6 of Rule 87 provides the procedure should the creditor desire to go against the
deceased debtor, but there is certainly nothing in the said provision making compliance with
such procedure a condition precedent before an ordinary action against the surviving solidary
debtors, should the creditor choose to demand payment from the latter, could be entertained
to the extent that failure to observe the same would deprive the court jurisdiction to take
cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code
expressly allows the creditor to proceed against any one of the solidary debtors or some or all
of them simultaneously. There is, therefore, nothing improper in the creditor’s filing of an
action against the surviving solidary debtors alone, instead of instituting a proceeding for the
settlement of the estate of the deceased debtor wherein his claim could be filed.
The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank
v. Asuncion51where the Supreme Court pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing
therein prevents a creditor from proceeding against the surviving solidary debtors. Said
provision merely sets up the procedure in enforcing collection in case a creditor chooses to
pursue his claim against the estate of the deceased solidary debtor. The rule has been set forth
that a creditor (in a solidary obligation) has the option whether to file or not to file a claim
against the estate of the solidary debtor. x x x
xxxx
It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this
matter. Said provision gives the creditor the right to "proceed against anyone of the solidary
debtors or some or all of them simultaneously." The choice is undoubtedly left to the solidary
creditor to determine against whom he will enforce collection. In case of the death of one of
the solidary debtors, he (the creditor) may, if he so chooses, proceed against the surviving
solidary debtors without necessity of filing a claim in the estate of the deceased debtors. It is
not mandatory for him to have the case dismissed as against the surviving debtors and file its
claim against the estate of the deceased solidary debtor, x x x. For to require the creditor to
proceed against the estate, making it a condition precedent for any collection action against
the surviving debtors to prosper, would deprive him of his substantive rightsprovided by Article
1216 of the New Civil Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were
applied literally, Article 1216 of the New Civil Code would, in effect, be repealed since under
the Rules of Court, petitioner has no choice but to proceed against the estate of [the deceased
debtor] only. Obviously, this provision diminishes the [creditor’s] right under the New Civil
Code to proceed against any one, some or all of the solidary debtors. Such a construction is
not sanctioned by principle, which is too well settled to require citation, that a substantive law
cannot be amended by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised
Rules of Court cannot be made to prevail over Article 1216 of the New Civil Code, the former
being merely procedural, while the latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party and the case can
proceed as against respondent only. That petitioner opted to collect from respondent and not
from the estate of Manuel is evidenced by its opposition to respondent’s motion to dismiss
asserting that the case, as against her, should be dismissed so that petitioner can proceed
against the estate of Manuel.
On whether or not the inclusion of Manuel as
party defendant is a misjoinder of party
Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of
parties is ground for dismissal of an action. Parties may be dropped or added by order of the
court on motion of any party or on its own initiative at any stage of the action and on such
terms as are just. Any claim against a misjoined party may be severed and proceeded with
separately."
Based on the last sentence of the afore-quoted provision of law, a misjoined party must have
the capacity to sue or be sued in the event that the claim by or against the misjoined party is
pursued in a separate case. In this case, therefore, the inclusion of Manuel in the complaint
cannot be considered a misjoinder, as in fact, the action would have proceeded against him
had he been alive at the time the collection case was filed by petitioner. This being the case,
the remedy provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as
party-defendant cannot simply be dropped from the case. Instead, the procedure taken by the
Court in Sarsaba v. Vda. de Te,52whose facts, as mentioned earlier, resemble those of this case,
should be followed herein. There, the Supreme Court agreed with the trial court when it
resolved the issue of jurisdiction over the person of the deceased Sereno in this wise:
As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the
person of Patricio Sereno since there was indeed no valid service of summons insofar as
Patricio Sereno is concerned. Patricio Sereno died before the summons, together with a copy
of the complaint and its annexes, could be served upon him.
However, the failure to effect service of summons unto Patricio Sereno, one of the defendants
herein, does not render the action DISMISSIBLE, considering that the three (3) other
defendants, x x x, were validly served with summons and the case with respect to the
answering defendants may still proceed independently. Be it recalled that the three (3)
answering defendants have previously filed a Motion to Dismiss the Complaint which was
denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a
claim against the estate of Patricio Sereno, but the case with respect to the three (3) other
accused [sic] will proceed. (Emphasis supplied.) 53
As a result, the case, as against Manuel, must be dismissed.
In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule
3 of the Rules of Court, which states that: only natural or juridical persons, or entities
authorized by law may be parties in a civil action." Applying this provision of law, the Court, in
the case of Ventura v. Militante,54 held:
Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of
justice, the plaintiff must have an actual legal existence, that is, he, she or it must be a person
in law and possessed of a legal entity as either a natural or an artificial person, and no suit can
be lawfully prosecuted save in the name of such a person.
The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he
institutes a judicial proceeding, to name the proper party defendant to his cause of action. In
a suit or proceeding in personam of an adversary character, the court can acquire no
jurisdiction for the purpose of trial or judgment until a party defendant who actually or legally
exists and is legally capable of being sued, is brought before it. It has even been held that the
question of the legal personality of a party defendant is a question of substance going to the
jurisdiction of the court and not one of procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as represented by
surviving spouse Ms. Sulpicia Ventura" as the defendant.1âwphi1 Petitioner moved to dismiss
the same on the ground that the defendant as named in the complaint had no legal personality.
We agree.
x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same
extent, a decedent does not have the capacity to be sued and may not be named a party
defendant in a court action. (Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized
by law, the complaint may be dismissed on the ground that the pleading asserting the claim
states no cause of action or for failure to state a cause of action pursuant to Section 1(g) of
Rule 16 of the Rules of Court, because a complaint cannot possibly state a cause of action
against one who cannot be a party to a civil action.55
Since the proper course of action against the wrongful inclusion of Manuel as party-defendant
is the dismissal of the case as against him, thus did the trial court err when it ordered the
substitution of Manuel by his heirs. Substitution is proper only where the party to be
substituted died during the pendency of the case, as expressly provided for by Section 16, Rule
3 of the Rules of Court, which states:
Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is
not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty
(30) days after such death of the fact thereof, and to give the name and address of his legal
representative or representatives. x x x
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator x x x.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice. (Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the complaint, the court never
acquired jurisdiction over his person and, in effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the
Resolution dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED
and SET ASIDE. The Orders of the Regional Trial Court dated 8 November 2004 and 22
December 2004, respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional Trial
Court, Branch 24, Manila is hereby DIRECTED to proceed with the trial of Civil Case No. 97-
86672 against respondent Lolita G. Toledo only, in accordance with the above
pronouncements of the Court, and to decide the case with dispatch.
SO ORDERED.
Rule 3, Sections 18 to 22
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 177836 September 4, 2009
EDWINO A. TORRES (deceased), represented and substituted by ALFONSO P. TORRES III and
FATIMA P. TORRES, son and daughter, respectively, of deceased petitioner, Petitioners,
vs.
BALLIGI V. RODELLAS, Respondent.
DECISION
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari,1 under Rule 45 of the Revised Rules of Court, seeks the
review of the 29 November 20062 and 2 May 20073 Resolutions of the Court of Appeals in CA-
G.R. SP No. 81305, entitled "Edwino A. Torres (deceased) represented and substituted by
Alfonso P. Torres III, Fatima P. Torres, son and daughter of deceased petitioner," which,
respectively, dismissed the petition assailing the decision of the Office of the President, and
denied the subsequent motion for reconsideration thereof.
The root of the present controversy is a 111-square meter parcel of alienable and disposable
residential land, described as Lot No. 4, Sgs-04-000316-D, located at Poblacion, San Jose,
Occidental Mindoro (subject property).
Respondent Balligi V. Rodellas (Balligi) and her family began occupying the subject property
sometime in 1967. They built thereon a residential house (the Rodellas’ house), initially made
of light materials, but eventually renovated and replaced using stronger materials.
In October 1986, Balligi filed a Miscellaneous Sales Application (MSA) for the subject property
with the Department of Environment and Natural Resources (DENR). Said application was
docketed as MSA No. (IV-18) 3524.
In 1989, Balligi and her family left Occidental Mindoro for Manila in order to find work. On 1
October 1989, Balligi left the country to join her husband in Saudi Arabia as an Overseas Filipino
Worker (OFW). In the meantime, the house built by Balligi and her family on the subject
property was left in the care and possession of her relatives, namely, her half-brother, Aster
Vallejos; her sister, Bituin Vallejos; her cousin-in-law, Sonia Jaravata; her sister and brother-in-
law, spouses Inanama Vallejos (Inanama) and Oscar Gallardo; Milagros Olarte; and Ildefonso
Ruiz and family.
Sometime thereafter, still in 1989, petitioner Edwino A. Torres (Edwino) and his spouse moved
into the house on the subject property, occupying the portion vacated by Aster Vallejos.
Edwino claimed that Balligi already sold him the subject property and the house built thereon
for ₱60,000.00, as evidenced by an Affidavit of Relinquishment/Sale of Right supposedly signed
by the parties thereto and notarized on 9 October 1989. From that time on, Edwino collected
monthly rental of ₱300.00 from the other occupants of the house.
On the basis of the Affidavit of Relinquishment/Sale of Right, Edwino filed with the DENR an
MSA in his own name for the subject property, docketed as MSA No. (IV-18) 3780.
After conducting an investigation and ocular inspection, Wilfredo M. Paguia, Land Investigator,
DENR, issued a Report on 10 June 1991, recommending that Edwino’s MSA be given due
course. On 15 July 1991, the Provincial Environment and Natural Resources Officer (PENRO)
issued an Order 1) rejecting Balligi’s MSA No. (IV-18) 3524; and 2) giving due course to Edwino’s
MSA No. (IV-18) 3780.
In 1992, respondent Balligi’s son, Eugenio V. Rodellas, Jr. (Eugenio), returned to Occidental
Mindoro. While there, he came to learn that Edwino claimed ownership of the subject property
and the house thereon by virtue of the Affidavit of Relinquishment/Sale of Right.
On 8 December 1992, Eugenio, alleging to act on behalf of his mother, Balligi, but without
presenting any written authority from the latter, filed before the Community Environment and
Natural Resources Office (CENRO), San Jose, Occidental Mindoro, a Protest against Edwino’s
MSA No. (IV-18) 3780. Eugenio prayed, inter alia, for the cancellation of said MSA on the
ground that the Affidavit of Relinquishment/Sale of Right, the very basis of the application, was
a forged document. Eugenio insisted that Balligi never entered into any sale of the subject
property and house, much less signed the purported Affidavit of Relinquishment/Sale of
Right on 9 October 1989, considering that Balligi and her husband were in Saudi Arabia at that
time. Eugenio’s Opposition to Edwino’s MSA was docketed as DENR Case No. 5438.
On 8 March 1993, Eugenio and his aunt, Inanama, filed an Amended Protest against Edwino’s
MSA No. (IV-18) 3780. Attached to the Amended Protest was a Special Power of
Attorney, which Balligi executed in favor of Eugenio and Inanama, and acknowledged before
Vice Consul Alimatar M. Garangan, Philippine Embassy, Riyadh, Kingdom of Saudi Arabia in
January 1993.
In an Order4 dated 4 June 1993, Antonio G. Principe, Regional Executive Director, Regional
Office (RO) No. IV, DENR, dismissed the protests against Edwino’s MSA No. (IV-18) 3780 for
lack of merit, to wit:
WHEREFORE, in view of the foregoing, the Protest as well as the Amended Protest is (sic)
hereby as it is ordered DISMISSED for lack of merit and whatever amount paid on account
thereof is forfeited in favor of the government. The MSA No. (IV-18) 3780 of Edwino A. Torres
is hereby given further due course.
According to DENR-RO No. IV, neither Eugenio nor Inanama had the personality to represent
Balligi. It credited no value to the Special Power of Attorney in favor of Eugenio and Inanama,
as the "document itself was highly questionable. Close scrutiny of the same shows that the
authentication was done on the 25th day of January 1993 [even] before the execution of the
said document by Balligi Letty V. Rodellas on January 26, 1993."5 DENR-RO No. IV also
mentioned in its Order that it was not in a position to determine and resolve the genuineness
and due execution of the Affidavit of Relinquishment/Sale of Right presented by Edwino, the
same being within the jurisdiction of the courts.
On 21 June 1993, Balligi, still through her son, Eugenio, filed a Request for Extension of Time
to file a motion for reconsideration of the 4 January 1993 Order of DENR-RO No. IV. However,
DENR- RO No. IV, in an Order dated 10 September 1993, denied Balligi’s request for extension,
because it was supposedly filed beyond the 15-day reglementary period within which to appeal
the assailed order. The dispositive portion of the 10 September 1993 Order reads:
WHEREFORE, in view of the foregoing premises, the Motion for Reconsideration dated June
21, 1993 filed by herein [petitioner Balligi], represented by Eugenio V. Rodellas, Jr. and
Inanama V. Gallardo, is hereby as it is ordered DENIED for lack of merit.
Consequently thereto, the Order dated June 4, 1993 issued in the above-entitled case is
deemed final and executory.6
Determined, respondent Balligi, who had arrived back in the Philippines, herself filed, on 15
April 1994, another Opposition/Protest against petitioner Edwino’s MSA No. (IV-18) 3780.
On 6 June 1994, another Order was issued by the DENR-RO No. IV directing the conduct of an
investigation of the matters alleged in Balligi’s Opposition/Protest; and holding the processing
of Edwino’s MSA No. (IV-18) 3780 in abeyance.
After an evaluation of the record of the case, DENR-RO No. IV dismissed respondent Balligi’s
Opposition/Protest in an Order dated 13 December 1995, the fallo of which states:
WHEREFORE, premises considered, the instant "OPPOSITION AND/OR PROTEST" filed by Balligi
V. Rodellas is hereby, as it is ordered, DISMISSED for lack of merit. Let the MSA No. (IV-18)
3780 of Edwino A. Torres be now given further due course leading to the issuance of patent
therefor.7
Citing its 10 September 1993 Order, DENR-RO No. IV reasoned that Balligi’s Opposition/Protest
was barred by res judicata.
Balligi moved for the reconsideration of the Order dated 13 December 1995 of DENR-RO No.
IV before the Office of the DENR Secretary. Her Motion for Reconsideration, docketed as DENR
Case No. 7771, was denied by the DENR Secretary in an Order8 dated 29 June 1998. The DENR
Secretary held that "there is no showing that she, [herein respondent Balligi] Rodellas, ever
filed a complaint with the proper forum, i.e., the Court, against the herein [petitioner Edwino]
involving the alleged falsified and spurious document. Mere allegation that such document is
spurious and forged do not make such document spurious and a forgery."9
Undaunted, Balligi filed an appeal with the Office of the President, docketed as O.P. Case No.
98-8537.
In a Decision10 promulgated on 5 August 2003, the Office of the President reversed and set
aside the assailed orders of the DENR Secretary and the DENR-RO No. IV. The Office of the
President adjudged that the principle of res judicata was not applicable to the facts of O.P.
Case No. 98-8537, given that:
A careful review of the order of June 4, 1993, which the DENR claims constitutes a bar to
subsequent litigation, would reveal that the same does not comply with the third requisite
enumerated above, that the judgment must be on the merits. It will be recalled that the
Regional Executive Director (RED) refused to rule on the main issue raised in the protest, which
is the alleged forged and spurious Affidavit of Relinquishment/Sale of Right, claiming that his
Office is not in the position to determine and resolve the genuineness and due execution of
the aforesaid document; and claiming further that "the said protest should not have been
entertained in the first place considering that upon its filing, Eugenio V. Rodellas Jr. has no
personality to represent Balligi V. Rodellas."
The Office of the President opined that "the DENR should have applied res ipsa loquitur"
instead, since:
It should have been very clear that the alleged Affidavit of Relinquishment/Sale of Right is
nothing but a forgery. [Respondent Balligi] was in the Kingdom of Saudi Arabia at the time she
was supposed to have executed the document, as duly evidenced by the entries in her
passport. She left the Philippines on October 1, 1989, while the Affidavit is dated October 9,
1989 x x x. In fact, at the inception of the case, she was still there in Saudi Arabia, which was
why the RED did not want to recognize the legal personality of her son to represent her. If the
DENR knew that appellant was out of the country all along, how can it even entertain the
thought that she was the one who signed the document in Occidental Mindoro? It is important
to note that [Edwino] never questioned the veracity of the entries in [Balligi]’s passport.11
The Office of the President disposed:
WHEREFORE, the decision of the Acting Secretary of Environment and Natural Resources dated
September 19, 1997, and the order dated June 29, 1998, reiterating it, are hereby REVERSED
and SET ASIDE. The Department of Environment and Natural Resources is hereby ordered to
reject the Miscellaneous Sales Application No. (IV-18) 3780 of Edwino A. Torres and reinstate
Miscellaneous Sales Application No. (IV-18) 3524 of Balligi V. Rodellas, and give due course
thereto. All persons occupying the subject property by virtue of the Miscellaneous Sales
Application of Edwino A. Torres, his heirs and assigns, are hereby ordered to vacate the same. 12
Atty. Alexander Restor (Atty. Restor), Edwino’s counsel, received a copy of the 5 August 2003
Decision of the Office of the President on 29 August 2003. On 15 September 2003, Atty. Restor
filed a Motion for Reconsideration of said Decision, and at the same time, manifested that his
client, Edwino, had since passed away, but without actually intimating the exact date of the
latter’s death.
In an Order dated 27 October 2003, the Office of the President ruled that the Motion for
Reconsideration filed by Atty. Restor was –
DISMISSED for being filed out of time and for lack of personality of the movant.131avvphi1
According to the Office of the President, Ewino’s death extinguished his agency relationship
with Atty. Restor. Hence, Atty. Restor had no more authority to continue to act on Edwino’s
behalf. In addition, the Motion for Reconsideration was filed by Atty. Restor beyond the 15-
day reglementary period.
On 16 November 2003, Edwino’s representatives and legal heirs executed a Letter of
Appointment14 "[appointing] and [engaging] the legal services of Atty. Alexander Restor in O.P.
Case No. 988537 before the Office of the President and to further represent [them] in the
event that the afore-mentioned case is appealed to the Court of Appeals/Supreme Court."
Subsequently, on 9 December 2003, Atty. Restor filed, on behalf of Edwino, represented and
substituted by the latter’s son and daughter, Alfonso P. Torres III (Alfonso) and Fatima P. Torres
(Fatima), respectively, a Petition for Review with the Court of Appeals, challenging the 5 August
2003 Decision and 27 October 2003 Order of the Office of the President. Their Petition was
docketed as CA-G.R. SP No. 81305.
In a Resolution promulgated on 29 November 2006, the appellate court dismissed the Petition
in CA-G.R. SP No. 81305, thus:
IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED.15
The Court of Appeals affirmed the finding of the Office of the President that the 5 August 2003
Decision of the latter had long since attained finality in view of the late filing of Edwino’s
Motion for Reconsideration of the same. Moreover, the appellate court agreed that Atty.
Restor had no personality to move for the reconsideration of the decision in question, and as
a result, "no motion for reconsideration of the August 5, 2003 Decision of the Office of the
President could have been considered filed."16
As expected, Alfonso and Fatima filed a Motion for Reconsideration of the 29 November 2006
Resolution of the Court of Appeals, arguing therein that Atty. Restor had timely filed the
Motion for Reconsideration of the 5 August 2003 Decision of the Office of the President. Atty.
Restor received a copy of the challenged Decision of the Office of the President on 29 August
2003, and the 15th day or last day for filing a motion for reconsideration of the same, 13
September 2003, was a Saturday; hence, Atty. Restor was able to file such a motion only on 15
September 2003, Monday, the next working day.
In its Resolution dated 2 May 2007, the Court of Appeals reconsidered its initial position on the
point of the late filing of the Motion for Reconsideration of the 5 August 2003 Decision of the
Office of the President, conceding that:
It is true, as [herein petitioners Alfonso and Fatima] argue, that the Office of the President
failed to take into consideration that the 15th day fell on a Saturday and therefore, the Motion
for Reconsideration, which was filed on the 17th day, cannot be said to have been filed out of
time.17
But the appellate court remained steadfast in its resolve that Atty. Restor lacked the legal
personality to file the Motion for Reconsideration of the 5 August 2003 Decision of the Office
of the President despite the Letter of Appointment, dated 16 November 2003, executed by
Edwino’s representatives and legal heirs in Atty. Restor’s favor. The Court of Appeals
pronounced that:
[T]he Letter of Appointment (citation omitted) appended by the petitioners to the Petition for
Review cannot cure Atty. Restor’s lack of authority in filing the Motion for Reconsideration
before the Office of the President. Not only was said letter not presented before the latter. It
was likewise executed only after the Office of the President issued the assailed Order. That
being the case, Atty. Restor’s lack of authority cannot be said to have been cured.18
In the end, the Court of Appeals concluded that:
Thus, while the petition for review appears to have been filed on time, the fact is that the
decision sought to be reviewed has already become final and executory. In view of said finality,
this Court is without authority to review said Decision anymore. 19
Hence, this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court
bringing forth the following assignment of errors:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE RULING OF THE OFFICE OF THE PRESIDENT
THAT ATTY. RESTOR, PETITIONER’S FORMER COUNSEL, HAD NO LEGAL PERSONALITY TO FILE
THE MOTION FOR RECONSIDERATION BEFORE THE OFFICE OF THE PRESIDENT, IN VIEW OF
EDWINO’S DEATH, PURSUANT TO SECTION 16, RULE 3 OF THE RULES OF COURT AND ARTICLE
1919(3) OF THE CIVIL CODE;
II.
THE COURT OF APPEALS ERRED IN REFUSING TO RULE ON THE PROPRIETY OF THE DISMISSAL
OF PETITIONER’S MOTION FOR RECONSIDERATION BY THE OFFICE OF THE PRESIDENT; and
III
THE DECISION OF THE DENR REGIONAL EXECUTIVE DIRECTOR DATED JUNE 4, 1993 IN DENR
CASE NO. IV-5438 IN FAVOR OF PETITIONERS HAS LONG BECOME FINAL AND EXECUTORY. AS
SUCH, RESPONDENT’S SUBSEQUENT OPPOSITION AND/OR PROTEST DATED APRIL 15, 1994
DOCKETED AS DENR CASE NO. IV-B-5520 VIOLATES THE PRINCIPLE OF RES JUDICATA.
At the crux of this Petition is the issue of whether the Court of Appeals erred in dismissing the
Petition for Review of Edwino’s legal heirs in CA-G.R. SP No. 81305 on the ground that the 5
August 2003 Decision of the Office of the President in O.P. Case No. 98-8537, being assailed in
the latter Petition, had already attained finality.
Alfonso and Fatima maintain that the Court of Appeals erred in affirming the 27 October 2003
Order of the Office of the President which dismissed the Motion for Reconsideration filed by
Atty. Restor based on a misapplication of Section 16, Rule 3 of the Revised Rules of Court. They
aver that the failure to comply with said procedural rule should not invalidate the proceedings
and the judgment rendered therein if the action survives the death of the party to the case.
The action in this case "survives the death of Edwino A. Torres as the subject of said action was
ownership of real property and not some personal liability." Thus, Edwino’s death "did not
extinguish his civil personality." Alfonso and Fatima argue further that their "right to due
process would be violated if their motion for reconsideration would be brushed aside just
because counsel failed to move for a substitution of a party. x x x. In any case, Atty. Restor
submitted a Letter of Appointment appointing him as counsel which ratified his representation
of petitioners."20
In defense of the assailed resolutions of the Court of Appeals, Balligi contends that the
arguments of Edwino’s heirs are untenable as "[p]etitioners’ stand is premised on the
assumption that the proceedings and the judgment had before the Office of the President were
invalid."21 Quite the reverse, Balligi asserts that "said proceedings stand for even petitioners
ADMITTED the non-personality of Atty. Restor under (sic) their Motion for Reconsideration
before the Honorable Court of Appeals x x x."22 That said, however, Balligi, through a new
counsel, Atty. Amando S. Fabros, digressed from previous arguments. Balligi now claims that
"[t]he ruling of the Office of the President was not so much based on the failure of either Atty.
Alfredo A. Castillo (Atty. Castillo) or Atty. Restor to give advice or information as to the death
of Edwino A. Torres but on the apparent non-withdrawal of Atty. Castillo who was handling
the appeal, and the unceremonious taking over of said appeal by Atty. Restor without such
withdrawal and written authority of petitioners." 23 She insists that "what was invalidated or
not given force and effect was the Motion for Reconsideration filed by Atty. Restor without
legal authority or personality."24 Balligi submits that "if a party appears in an action by
attorney, he must be heard only through such attorney, who, so long as he remains the
attorney of record, has the exclusive management and control of the action and of all steps
and proceedings taken therein to enforce the rights and remedies of his client."25
We agree with petitioners that the Office of the President misapplied the rule on substitution
upon the death of a party litigant.
Note that the rules and regulations governing appeals to the Office of the President of the
Philippines are embodied in Administrative Order No. 18, Series of 1987, entitled "Prescribing
Rules and Regulations Governing Appeals to the Office of the President of the Philippines."
Though nothing therein provides for substitution of a party in case of death, the same states
in its Section 9 that:
SECTION 9. The Rules of Court shall apply in a suppletory character whenever practicable.
Sec. 16, Rule 3 of the Revised Rules of Court, thus, finds application herein, in that it covers the
situation in case of the death of a party. The rule provides:
Section 16. Death of party; duty of counsel. – Whenever a party to a pending action dies, and
the claim is not thereby extinguished, it shall be the duty of his counsel to inform the court
within thirty (30) days after such death of the fact thereof, and to give the name and address
of his legal representative or representatives. Failure of counsel to comply with his duty shall
be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs. (Emphases ours.)
Clear from the aforequoted provision that a deceased party may be substituted by his heirs,
but it must be emphasized that substitution may only be allowed in actions that survive the
death of a party thereto. In Gonzales v. Philippine Amusement and Gaming
Corporation,26 citing Bonilla v. Barcena,27 we declared that the determination of whether an
action survives the death of a party depends on the nature of the action and the damage sued
for. We explicated:
In the causes of action which survive the wrong complained of affects primarily and principally
property and property rights, the injuries to the person being merely incidental, while in the
causes of action which do not survive the injury complained of is to the person, the property
and rights of property affected being incidental x x x.
In the case at bar, both parties accuse the other of unlawfully depriving them of their
respective rights to acquire the subject property, together with the house built thereon, by
means of an MSA grant from the State. Evidently, what are primarily and principally affected
herein are the property and property rights of the parties, and any injuries to their persons
(i.e., damages) are only incidental. Such property and property rights survived Edwino’s death
and may pass on by succession to his heirs. Therefore, the heirs must be allowed to continue
any litigation to protect said property or property rights and to substitute themselves for the
deceased party in accordance with appropriate rules.
According to Section 16, Rule 3 of the Revised Rules of Court, a counsel, within 30 days from
his client’s death, is duty-bound to inform the court of such fact, and to submit the name/s and
address/es of the deceased client’s legal representative/s. Thereafter, the court shall order,
forthwith, the appearance of and substitution by the deceased party’s legal representative/s
within another period of 30 days from notice.
Nowhere is it mentioned in the instant case when exactly Edwino died. Atty. Restor just
informed the Office of the President of the fact of Edwino’s death in the Motion for
Reconsideration of the 5 August 2003 Decision, which he filed on 15 September 2003 on behalf
of his deceased client. With no exact date of Edwino’s death, we have no basis for determining
whether Atty. Restor was able to inform the Office of the President of such fact within the
requisite period of 30 days. Nevertheless, even assuming that Atty. Restor belatedly notified
the Office of the President of Edwino’s death, Section 16, Rule 3 of the Revised Rules of Court
only provided that, in case of failure of the counsel to comply with his duty as stated in the first
paragraph thereof, it would be a ground for disciplinary action against said counsel, not that
he/she would already be without personality to appear as counsel in the proceedings for the
benefit of his/her client or the latter’s heirs.
Instructive herein is our ruling in Heirs of F. Nuguid Vda. de Haberer v. Court of
Appeals.28 Florentina Nuguid Vda. de Haberer (Florentina) was the appellant in the case still
pending before the Court of Appeals when she died. Florentina’s counsel, Attorneys Bausa,
Ampil and Suarez, gave the Court of Appeals notice of their client’s death and requested the
suspension of the running of the period within which to file the appellant's brief, pending the
appointment by the probate court of an executor of the latter’s estate. The Court of Appeals
denied the motion for extension/suspension of time to file appellant’s brief and dismissed the
appeal. Florentina’s counsels filed their urgent motion for reconsideration, explaining that
their predicament over the requests for extension/suspension of period to file a brief was due
to the uncertainty of whether their services would still be retained by the heirs or legal
representatives of their deceased client. Florentina’s counsels still felt obligated, however, to
preserve the right of Florentina’s heirs/successors to continue the appeal, pursuant to what is
now Section 16, Rule 3 of the Revised Rules of Court, pending the settlement of the question
of who among such heirs/successors should be the executor of the deceased's estate. Hence,
Florentina’s counsel presented, for admission, the printed "brief for the appellant," the
printing of which they had deferred "for professional ethical considerations," pending action
by the appellate court on their request for suspension of the period. Despite the foregoing
explanation by Florentina’s counsel, the Court of Appeals still refused to reconsider its earlier
dismissal of the appeal and to admit the submitted appellant’s brief. In addition to invoking
the general principle that "litigants have no right to assume that such extensions will be
granted as a matter of course"; the appellate court also cited the equally established principle
that the relation of attorney and client is terminated by the death of the client. In the absence
of a retainer from the heirs or authorized representatives of his deceased client, the attorney
would thereafter have no further power or authority to appear or take any further action in
the case, save to inform the court of the client's death and take the necessary steps to
safeguard the deceased's rights in the case. Upon appeal to us, we found that the Court of
Appeals gravely erred in not following the Rule and requiring the appearance of the legal
representative of the deceased and instead dismissing the appeal of the latter who had yet to
be substituted in the pending appeal. We held that:
Respondent court therefore erred in ruling that since upon the demise of the party-appellant,
the attorney-client relationship between her and her counsels "was automatically severed and
terminated," whatever pleadings filed by said counsel with it after the death of said appellant
"are mere scraps of paper." If at all, due to said death on May 25, 1975 and severance of the
attorney-client relationship, further proceedings and specifically the running of the original 45-
day period for filing the appellant's brief should be legally deemed as having been
automatically suspended, until the proper substitution of the deceased appellant by her
executor or administrator or her heirs shall have been effected within the time set by
respondent court pursuant to the cited Rule.
xxxx
Prescinding from the foregoing, justice and equity dictate under the circumstances of the case
at bar that the rules, while necessary for the speedy and orderly administration of justice,
should not be applied with the rigidity and inflexibility of respondent court's resolutions. What
should guide judicial action is the principle that a party litigant is to be given the fullest
opportunity to establish the merits of his complaint or defense rather than for him to lose life,
liberty, honor or property on technicalities. x x x.29 (Emphases supplied.)
In this case, Atty. Restor is in much the same situation as Florentina’s counsels. Though
incomplete, the mention by Atty. Restor of Edwino’s death in the Motion for Reconsideration
effectively informed the Office of the President of the same. Having been apprised of the fact
of Edwino’s death, it was incumbent upon the Office of the President, even without Atty.
Restor’s motion to such effect, to order the legal representative/s of the deceased party to
appear and be substituted; or, at the very least, to direct the counsel to furnish the court with
the names and addresses of such representative/s.
Since Atty. Restor filed the Motion for Reconsideration within the reglementary period and no
longer requested for suspension/extension of time to do so, the Office of the President need
not suspend the running of said reglementary period as in Heirs of F. Nuguid Vda. de Haberer,
but it could have deferred any action on said Motion until a substitution had been effected and
it had ascertained that the substituted heirs chose to retain Atty. Restor’s services as legal
counsel. Conspicuously, the Office of the President completely failed to act on the information
that Edwino had died so as to effect proper substitution by the latter’s heirs, as set forth in
Section 16, Rule 3 of the Revised Rules of Court. The only action the Office of the President
took as regards said information was to deny the Motion for Reconsideration filed by Atty.
Restor for his lack of personality, given his client’s death. This we find totally contrary to equity
and fair play since Edwino’s heirs were, in effect, deprived of their right to seek reconsideration
or appeal of the adverse decision of the Office of the President which was itself partly
responsible for their non-substitution.
We emphasize that the purpose behind Section 16, Rule 3 of the Revised Rules of Procedure is
the protection of the right to due process of every party to a litigation who may be affected by
the intervening death. The deceased litigant is himself or herself protected, as he/she
continues to be properly represented in the suit through the duly appointed legal
representative of his estate.30 The spirit behind the general rule requiring a formal substitution
of heirs is "not really because substitution of heirs is a jurisdictional requirement, but because
non-compliance therewith results in the undeniable violation of the right to due process of
those who, though not duly notified of the proceedings, are substantially affected by the
decision rendered therein."31
It must also be remembered that, unless properly relieved, the counsel is responsible for the
conduct of the case;32he is obligated by his client and the court to do what the interest of his
client requires until the end of litigation or his representation is terminated formally and there
is a termination of record.33 And the only way the Office of the President could have
ascertained whether Atty. Restor still had the authority to file the Motion for Reconsideration
on behalf of Edwino’s heirs, or otherwise had been relieved or his representation terminated,
was by having Edwino’s heirs come forth as the rules required. In fact, in the Letter of
Appointment dated 16 November 2003, which was presented before the Court of Appeals,
Alfonso and Fatima, as Edwino’s legal representatives and heirs, explicitly retained the services
of Atty. Restor by "[appointing] and [engaging] [his] legal services x x x in O.P. Case No. 98-
8537 before the Office of the President and to further represent [them] in the event that the
afore-mentioned case is appealed to the Court of Appeals/Supreme Court." 34 Even though
belatedly executed, such Letter of Appointment demonstrates that if they were just given the
opportunity by the Office of the President, Alfonso and Fatima could have easily confirmed the
authority of Atty. Restor to continue acting as their counsel in the proceedings and to submit
the Motion for Reconsideration of the 5 August 2003 Decision of the Office of the
President.1avvphi1
Interestingly, if, as argued by the Office of the President and the Court of Appeals, Atty. Restor
no longer had the personality to represent Edwino upon the latter’s death, assuming he died
prior to the rendition of the decision of the Office of the President, should it not also follow
that the sending of a copy of the 5 August 2003 Decision of the Office of the President to Atty.
Restor, as counsel of record, could no longer be deemed a notice to the party, and his receipt
of the same could not have caused the commencement of the period within which to file a
motion for reconsideration? As a consequence, the reglementary period within which to move
for reconsideration of the assailed decision in O.P. Case No. 98-8537 had really not yet begun
to toll.
Given the foregoing, the 5 August 2003 Decision of the Office of the President could not have
attained finality. It being partly responsible for the non-substitution of the heirs for the
deceased Edwino, the Office of the President could not dismiss the Motion for Reconsideration
filed by Atty. Restor, to the prejudice of said heirs. Justice and equity demand that Edwino’s
heirs be given the opportunity to contest the adverse judgment that affects the property and
property rights to which they succeeded. A rule intended to protect due process cannot be
invoked to defeat the same.
This having been said, we address the recent theory35 of Atty. Fabros, Balligi’s new counsel,
that Atty. Restor’s lack of personality to file the Motion for Reconsideration of the 5 August
2003 Decision of the Office of the President was due to the failure of Atty. Castillo, Edwino’s
previous counsel, to formally withdraw as such, and of Atty. Restor to formally substitute for
Atty. Castillo. A thorough review of the Order dated 27 October 2003 of the Office of the
President (dismissing the Motion for Reconsideration of the Decision dated 5 August 2003 filed
by Atty. Restor, due to the latter’s lack of personality), and the Resolutions dated 29 November
2006 and 2 May 2007 of the Court of Appeals (affirming the dismissal by the Office of the
President of said Motion for Reconsideration) reveal no such pronouncement. The plain reason
for the dismissal of the Motion for Reconsideration was that Atty. Restor had no more
personality to file the same, given that Edwino’s death extinguished the attorney-client
relationship between them.
But even assuming, for the sake of argument, that the Office of the President and the Court of
Appeals did find that Atty. Restor had no personality to file the Motion for Reconsideration in
question because Atty. Castillo had not withdrawn as Edwino’s counsel and Atty. Restor had
not substituted for Atty. Castillo; such finding would have likewise been erroneous. A party
may have two or more lawyers working in collaboration in a given litigation,36 but the fact that
a second attorney enters his appearance for the same party does not necessarily raise the
presumption that the authority of the first attorney has been withdrawn.37 The second counsel
should only be treated as a collaborating counsel despite his appearance as "the new counsel
of record." A lawyer is presumed to be properly authorized to represent any cause in which he
appears;38 the second counsel, in this case Atty. Restor, is presumed to have acted within his
authority as collaborating counsel when he filed the Motion for Reconsideration of the 5
August 2003 Decision of the Office of the President.
Finally, we stop short of resolving the issue of whose MSA should be given due course, because
in order to do so, we must first make findings of fact concerning the authenticity and validity
of the Affidavit of Relinquishment/Sale of Right dated 9 October 1989, allegedly executed by
Balligi in favor of Edwino. It must be noted that the DENR and the Office of the President made
divergent findings thereon. We cannot, as of yet, make such findings given the derth of
evidence on record. To arrive at an ultimate determination, the remand of the case to the
Court of Appeals is in order, so that it can give due course to the Petition for Review in CA-G.R.
SP No. 81305. Time and again, we have stated that this Court is not a trier of fact or otherwise
structurally capacitated to receive and evaluate evidence de novo, unlike the Court of Appeals.
The Court of Appeals generally has the authority to review findings of fact, and even hold
hearings for further reception of evidence. Its conclusions as to findings of fact are generally
accorded great respect by this Court. It is a body that is fully capacitated and has a surfeit of
experience in appreciating factual matters, including documentary evidence.
WHEREFORE, premises considered, the instant Petition is PARTLY GRANTED. The assailed twin
Resolutions dated 29 November 2006 and 2 May 2007 of the Court of Appeals in CA-G.R. SP
No. 81305 are REVERSED and SET ASIDE, insofar as they affirmed the declarations of the Office
of the President in the latter’s Order dated 27 October 2003 in O.P. Case No. 98-8537 that,
given the death of his client, Edwino A. Torres, Atty. Alexander Restor lacked the personality
to file the Motion for Reconsideration of the Decision dated 5 August 2003; and that, since no
motion for reconsideration or appeal had been timely filed, the said Decision dated 5 August caused by tortious conduct of a defendant (as in the case at bar) survive the death of the latter.
2003 of the Office of the President had become final and executory. Under Rule 87, section 5, the actions that are abated by death are: (1) claims for funeral
expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) "all
The case is hereby REMANDED to the Court of Appeals, which is ORDERED to give due course claims for money against the decedent, arising from contract express or implied". None of
to the Petition for Review filed in CA-G.R. SP No. 81305 and to hold further proceedings in these includes that of the plaintiffs-appellants; for it is not enough that the claim against the
accordance with this Decision. deceased party be for money, but it must arise from "contract express or implied", and these
words (also used by the Rules in connection with attachments and derived from the common
SO ORDERED.
law) were construed in Leung Ben vs. O'Brien, 38 Phil., 182, 189-194.
Republic of the Philippines
to include all purely personal obligations other than those which have their source
SUPREME COURT
in delict or tort.
Manila
Upon the other hand, Rule 88, section 1, enumerates actions that survive against a decedent's
EN BANC
executors or administrators, and they are: (1) actions to recover real and personal property
G.R. No. L-18107 August 30, 1962 from the estate; (2) actions to enforce a lien thereon; and (3) actions to recover damages for
an injury to person or property. The present suit is one for damages under the last class, it
MARIA G. AGUAS, FELIX GUARDINO and FRANCISCO SALINAS, plaintiffs-appellants, having been held that "injury to property" is not limited to injuries to specific property, but
vs. extends to other wrongs by which personal estate is injured or diminished (Baker vs. Crandall,
HERMOGENES LLEMOS, deceased defendant substituted by his representatives, 47 Am. Rep. 126; also 171 A.L.R., 1395). To maliciously cause a party to incur unnecessary
PERPETUA YERRO-LLEMOS, HERMENEGILDO LLEMOS, FELINO LLEMOS and AMADO expenses, as charged in this case, is certainly injurious to that party's property (Javier vs.
LLEMOS,defendants-appellees. Araneta, L-4369, Aug. 31, 1953).

Jesus M. Aguas for plaintiffs-appellants. Be that as it may, it now appears from a communication from the Court of First Instance of
Serafin P. Ramento for defendants-appellees. Samar that the parties have arrived at an amicable settlement of their differences, and that
they have agreed to dismiss this appeal. The settlement has been approved and embodied in
REYES, J.B.L., J.: an order of the Court of First Instance.
On 14 March 1960, Francisco Salinas and the spouses Felix Guardino and Maria Aguas jointly The case having thus become moot, it becomes unnecessary to resolve the questions raised
filed an action in the Court of First Instance of Catbalogan, Samar (Civil Case No. 4824), to therein. This appeal is, therefore, ordered dismissed, without special pronouncement as to
recover damages from Hermogenes Llemos, averring that the latter had served them by costs.
registered mail with a copy of a petition for a writ of possession, with notice that the same
would be submitted to the said court of Samar on February 23, 1960 at 8: 00 a.m.; that in view THIRD DIVISION
of the copy and notice served, plaintiffs proceeded to the court from their residence in Manila
accompanied by their lawyers, only to discover that no such petition had been filed; and that G.R. No. 150135 October 30, 2006
defendant Llemos maliciously failed to appear in court, so that plaintiffs' expenditure and
SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA, petitioners,
trouble turned out to be in vain, causing them mental anguish and undue embarrassment.
vs.
On 1 April 1960, before he could answer the complaint, the defendant died. Upon leave of THE LOCAL GOVERNMENT UNIT OF THE CITY OF NAGA, ATTY. MANUEL TEOXON, ENGR.
court, plaintiffs amended their complaint to include the heirs of the deceased. On 21 July 1960, LEON PALMIANO, NATHAN SERGIO and BENJAMIN NAVARRO, SR., respondents.
the heirs filed a motion to dismiss, and by order of 12 August 1960, the court below dismissed
DECISION
it, on the ground that the legal representative, and not the heirs, should have been made the
party defendant; and that anyway the action being for recovery of money, testate or intestate VELASCO, JR., J.:
proceedings should be initiated and the claim filed therein (Rec. on Appeal, pp. 26-27).
Anyone who has ever struggled with poverty
Motion for reconsideration having been denied, the case was appealed to us on points of knows how extremely expensive it is to be poor.
law.1äwphï1.ñët –– James Baldwin
Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the The Constitution affords litigants—moneyed or poor—equal access to the courts; moreover, it
Rules of Court, those concerning claims that are barred if not filed in the estate settlement specifically provides that poverty shall not bar any person from having access to the
proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted courts.1 Accordingly, laws and rules must be formulated, interpreted, and implemented
against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for damages pursuant to the intent and spirit of this constitutional provision. As such, filing fees, though
one of the essential elements in court procedures, should not be an obstacle to poor litigants'
opportunity to seek redress for their grievances before the courts.
The Case
This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order
of the Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403
entitled Spouses Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of
the City of Naga, et al., dismissing the case for failure of petitioners Algura spouses to pay the
required filing fees.2 Since the instant petition involves only a question of law based on facts
established from the pleadings and documents submitted by the parties, 3 the Court gives due
course to the instant petition sanctioned under Section 2(c) of Rule 41 on Appeal from the
RTCs, and governed by Rule 45 of the 1997 Rules of Civil Procedure.
The Facts
On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 19994 for damages against the Naga City Government and its
officers, arising from the alleged illegal demolition of their residence and boarding house and
for payment of lost income derived from fees paid by their boarders amounting to PhP
7,000.00 monthly.
Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,5 to which
petitioner Antonio Algura's Pay Slip No. 2457360 (Annex "A" of motion) was appended,
showing a gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP
10,474.00) and a net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine
Centavos (PhP 3,616.99) for [the month of] July 1999.6 Also attached as Annex "B" to the
motion was a July 14, 1999 Certification7 issued by the Office of the City Assessor of Naga City,
which stated that petitioners had no property declared in their name for taxation purposes.
Finding that petitioners' motion to litigate as indigent litigants was meritorious, Executive
Judge Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order, 8 granted
petitioners' plea for exemption from filing fees.
Meanwhile, as a result of respondent Naga City Government's demolition of a portion of
petitioners' house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their
boarders' rentals. With the loss of the rentals, the meager income from Lorencita Algura's sari-
sari store and Antonio Algura's small take home pay became insufficient for the expenses of
the Algura spouses and their six (6) children for their basic needs including food, bills, clothes,
and schooling, among others.
On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10,
1999,9 arguing that the defenses of the petitioners in the complaint had no cause of action,
the spouses' boarding house blocked the road right of way, and said structure was a
nuisance per se.
Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed
their Reply with Ex-Parte Request for a Pre-Trial Setting10 before the Naga City RTC on October
19, 1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days
within which to file a Motion to Disqualify Petitioners as Indigent Litigants.
On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of
Filing Fees dated March 10, 2000.11 They asserted that in addition to the more than PhP
3,000.00 net income of petitioner Antonio Algura, who is a member of the Philippine National
Police, spouse Lorencita Algura also had a mini-store and a computer shop on the ground floor
of their residence along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that
petitioners' second floor was used as their residence and as a boarding house, from which they
earned more than PhP 3,000.00 a month. In addition, it was claimed that petitioners derived
additional income from their computer shop patronized by students and from several boarders
who paid rentals to them. Hence, respondents concluded that petitioners were not indigent
litigants.
On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion12 to
respondents' motion to disqualify them for non-payment of filing fees.
On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent
litigants on the ground that they failed to substantiate their claim for exemption from payment
of legal fees and to comply with the third paragraph of Rule 141, Section 18 of the Revised
Rules of Court—directing them to pay the requisite filing fees.13
On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order.
On May 8, 2000, respondents then filed their Comment/Objections to petitioner's Motion for
Reconsideration.
On May 5, 2000, the trial court issued an Order14 giving petitioners the opportunity to comply
with the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.
On May 13, 2000, petitioners submitted their Compliance15 attaching the affidavits of
petitioner Lorencita Algura16and Erlinda Bangate,17 to comply with the requirements of then
Rule 141, Section 18 of the Rules of Court and in support of their claim to be declared as
indigent litigants.
In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their
small dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her
husband, and their six (6) minor children had to rely mainly on her husband's salary as a
policeman which provided them a monthly amount of PhP 3,500.00, more or less. Also, they
did not own any real property as certified by the assessor's office of Naga City. More so,
according to her, the meager net income from her small sari-sari store and the rentals of some
boarders, plus the salary of her husband, were not enough to pay the family's basic necessities.
To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit
of Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura
and Lorencita Algura, who were her neighbors; that they derived substantial income from their
boarders; that they lost said income from their boarders' rentals when the Local Government
Unit of the City of Naga, through its officers, demolished part of their house because from that
time, only a few boarders could be accommodated; that the income from the small store, the
boarders, and the meager salary of Antonio Algura were insufficient for their basic necessities
like food and clothing, considering that the Algura spouses had six (6) children; and that she
knew that petitioners did not own any real property.
Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17,
200018 Order denying the petitioners' Motion for Reconsideration.
Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the "GROSS
INCOME or TOTAL EARNINGS of plaintiff Algura [was] ₧10,474.00 which amount [was] over
and above the amount mentioned in the first paragraph of Rule 141, Section 18 for pauper
litigants residing outside Metro Manila."19 Said rule provides that the gross income of the
litigant should not exceed PhP 3,000.00 a month and shall not own real estate with an assessed
value of PhP 50,000.00. The trial court found that, in Lorencita S.J. Algura's May 13, 2000
Affidavit, nowhere was it stated that she and her immediate family did not earn a gross income
of PhP 3,000.00.
The Issue
Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue
for the consideration of the Court: whether petitioners should be considered as indigent
litigants who qualify for exemption from paying filing fees.
The Ruling of the Court
The petition is meritorious.
A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is
necessary before the Court rules on the issue of the Algura spouses' claim to exemption from
paying filing fees.
When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found
in Rule 3, Section 22 which provided that:
Section 22. Pauper litigant.—Any court may authorize a litigant to prosecute his action or
defense as a pauper upon a proper showing that he has no means to that effect by affidavits,
certificate of the corresponding provincial, city or municipal treasurer, or otherwise. Such
authority[,] once given[,] shall include an exemption from payment of legal fees and from filing
appeal bond, printed record and printed brief. The legal fees shall be a lien to any judgment
rendered in the case [favorable] to the pauper, unless the court otherwise provides.
From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any
provision on pauper litigants.
On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of
Court Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141
of the Rules of Court to generate funds to effectively cover administrative costs for services
rendered by the courts.20 A provision on pauper litigants was inserted which reads:
Section 16. Pauper-litigants exempt from payment of court fees.—Pauper-litigants include
wage earners whose gross income do not exceed P2,000.00 a month or P24,000.00 a year for
those residing in Metro Manila, and P1,500.00 a month or P18,000.00 a year for those residing
outside Metro Manila, or those who do not own real property with an assessed value of not
more than P24,000.00, or not more than P18,000.00 as the case may be.
Such exemption shall include exemption from payment of fees for filing appeal bond, printed
record and printed brief.
The legal fees shall be a lien on the monetary or property judgment rendered in favor of the
pauper-litigant.
To be entitled to the exemption herein provided, the pauper-litigant shall execute an affidavit
that he does not earn the gross income abovementioned, nor own any real property with the
assessed value afore-mentioned [sic], supported by a certification to that effect by the
provincial, city or town assessor or treasurer.
When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure
(inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8,
1997, which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court
was superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:
Section 21. Indigent party.—A party may be authorized to litigate his action, claim or defense
as an indigent if the court, upon an ex parte application and hearing, is satisfied that the party
is one who has no money or property sufficient and available for food, shelter and basic
necessities for himself and his family.
Such authority shall include an exemption from payment of docket and other lawful fees, and
of transcripts of stenographic notes which the court may order to be furnished him. The
amount of the docket and other lawful fees which the indigent was exempted from paying
shall be a lien on any judgment rendered in the case favorable to the indigent, unless the court
otherwise provides.
Any adverse party may contest the grant of such authority at any time before judgment is
rendered by the trial court. If the court should determine after hearing that the party declared
as an indigent is in fact a person with sufficient income or property, the proper docket and
other lawful fees shall be assessed and collected by the clerk of court. If payment is not made
within the time fixed by the court, execution shall issue for the payment thereof, without
prejudice to such other sanctions as the court may impose.
At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.
On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended
Section 16 of Rule 141, making it Section 18, which now reads:
Section 18. Pauper-litigants exempt from payment of legal fees.—Pauper litigants (a) whose
gross income and that of their immediate family do not exceed four thousand (P4,000.00)
pesos a month if residing in Metro Manila, and three thousand (P3,000.00) pesos a month if
residing outside Metro Manila, and (b) who do not own real property with an assessed value
of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal
fees.
The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper
litigant, unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he
and his immediate family do not earn the gross income abovementioned, nor do they own any
real property with the assessed value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant's affidavit.
Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to strike
out the pleading of that party, without prejudice to whatever criminal liability may have been
incurred.
It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without
revoking or amendingSection 21 of Rule 3, which provides for the exemption of pauper
litigants from payment of filing fees. Thus, on March 1, 2000, there were two existing rules on
pauper litigants; namely, Rule 3, Section 21 and Rule 141, Section 18.
On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No.
04-2-04-SC, which became effective on the same date. It then became Section 19 of Rule 141,
to wit:
Sec. 19. Indigent litigants exempt from payment of legal fees.– INDIGENT LITIGANTS
(A) WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED AN
AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND (B) WHO DO NOT
OWN REAL PROPERTY WITH A FAIR MARKET VALUE AS STATED IN THE CURRENT TAX
DECLARATION OF MORE THAN THREE HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE
EXEMPT FROM PAYMENT OF LEGAL FEES.
The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent
litigant unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall execute an affidavit that
he and his immediate family do not earn a gross income abovementioned, and they do not
own any real property with the fair value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant's affidavit. The current tax
declaration, if any, shall be attached to the litigant's affidavit.
Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to dismiss
the complaint or action or to strike out the pleading of that party, without prejudice to
whatever criminal liability may have been incurred. (Emphasis supplied.)
Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August
16, 2004 amendment, the ceiling for the gross income of litigants applying for exemption and
that of their immediate family was increased from PhP 4,000.00 a month in Metro Manila and
PhP 3,000.00 a month outside Metro Manila, to double the monthly minimum wage of an
employee; and the maximum value of the property owned by the applicant was increased from
an assessed value of PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able
to accommodate more indigent litigants and promote easier access to justice by the poor and
the marginalized in the wake of these new increases in filing fees.
Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment
or recall of Rule 3, Section 21 on indigent litigants.
With this historical backdrop, let us now move on to the sole issue—whether petitioners are
exempt from the payment of filing fees.
It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied
Rule 141, Section 18 on Legal Feeswhen the applicable rules at that time were Rule 3, Section
21 on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper
Litigants which became effective on July 19, 1984 up to February 28, 2000.
The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a
pauper litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00
a month or PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month
or PhP 18,000.00 a year for those residing outside Metro Manila or those who do not own real
property with an assessed value of not more than PhP 24,000.00 or not more than PhP
18,000.00 as the case may be. Thus, there are two requirements: a) income requirement—the
applicants should not have a gross monthly income of more than PhP 1,500.00, and b) property
requirement––they should not own property with an assessed value of not more than PhP
18,000.00.
In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura
and neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross
monthly income of PhP 10,474.00,21 and a Certification of the Naga City assessor stating that
petitioners do not have property declared in their names for taxation.22 Undoubtedly,
petitioners do not own real property as shown by the Certification of the Naga City assessor
and so the property requirement is met. However with respect to the income requirement, it
is clear that the gross monthly income of PhP 10,474.00 of petitioner Antonio F. Algura and the
PhP 3,000.00 income of Lorencita Algura when combined, were above the PhP 1,500.00
monthly income threshold prescribed by then Rule 141, Section 16 and therefore, the income
requirement was not satisfied. The trial court was therefore correct in disqualifying petitioners
Alguras as indigent litigants although the court should have applied Rule 141, Section 16 which
was in effect at the time of the filing of the application on September 1, 1999. Even if Rule 141,
Section 18 (which superseded Rule 141, Section 16 on March 1, 2000) were applied, still the
application could not have been granted as the combined PhP 13,474.00 income of petitioners
was beyond the PhP 3,000.00 monthly income threshold.
Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14,
2000 Order disqualifying them as indigent litigants23 that the rules have been relaxed by relying
on Rule 3, Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate
their action as indigents if the court is satisfied that the party is "one who has no money or
property sufficient and available for food, shelter and basic necessities for himself and his
family." The trial court did not give credence to this view of petitioners and simply applied Rule
141 but ignored Rule 3, Section 21 on Indigent Party.
The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate
as indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule
141, Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule
141, Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141, Section
16 on Legal Fees.
The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August
16, 2003, which is now the present rule) are still valid and enforceable rules on indigent
litigants.
For one, the history of the two seemingly conflicting rules readily reveals that it was not the
intent of the Court to consider the old Section 22 of Rule 3, which took effect on January 1,
1994 to have been amended and superseded by Rule 141, Section 16, which took effect on July
19, 1984 through A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the
recommendation of the Committee on the Revision on Rules, could have already deleted
Section 22 from Rule 3 when it amended Rules 1 to 71 and approved the 1997 Rules of Civil
Procedure, which took effect on July 1, 1997. The fact that Section 22 which became Rule 3,
Section 21 on indigent litigant was retained in the rules of procedure, even elaborating on the
meaning of an indigent party, and was also strengthened by the addition of a third paragraph
on the right to contest the grant of authority to litigate only goes to show that there was no
intent at all to consider said rule as expunged from the 1997 Rules of Civil Procedure.
Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and
the second on August 16, 2004; and yet, despite these two amendments, there was no attempt
to delete Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain
the two (2) rules on indigent litigants to cover applications to litigate as an indigent litigant.
It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and
2004 amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals
are frowned upon unless the intent of the framers of the rules is unequivocal. It has been
consistently ruled that:
(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that the
legislature so intended. As laws are presumed to be passed with deliberation and with full
knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing a
statute[,] it was not intended to interfere with or abrogate any former law relating to same
matter, unless the repugnancy between the two is not only irreconcilable, but also clear and
convincing, and flowing necessarily from the language used, unless the later act fully embraces
the subject matter of the earlier, or unless the reason for the earlier act is beyond
peradventure removed. Hence, every effort must be used to make all acts stand and if, by any
reasonable construction they can be reconciled, the later act will not operate as a repeal of the
earlier.24 (Emphasis supplied).
Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by
Section 18 and later Section 19 of Rule 141, the Court finds that the two rules can and should
be harmonized.
The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to
harmonize them. Hence, "every statute [or rule] must be so construed and harmonized with
other statutes [or rules] as to form a uniform system of jurisprudence."25
In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation
of seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus
ruled:
Consequently, every statute should be construed in such a way that will harmonize it with
existing laws. This principle is expressed in the legal maxim 'interpretare et concordare leges
legibus est optimus interpretandi,' that is, to interpret and to do it in such a way as to
harmonize laws with laws is the best method of interpretation.26
In the light of the foregoing considerations, therefore, the two (2) rules can stand together and
are compatible with each other. When an application to litigate as an indigent litigant is filed,
the court shall scrutinize the affidavits and supporting documents submitted by the applicant
to determine if the applicant complies with the income and property standards prescribed in
the present Section 19 of Rule 141—that is, the applicant's gross income and that of the
applicant's immediate family do not exceed an amount double the monthly minimum wage of
an employee; and the applicant does not own real property with a fair market value of more
than Three Hundred Thousand Pesos (PhP 300,000.00). If the trial court finds that the applicant
meets the income and property requirements, the authority to litigate as indigent litigant is
automatically granted and the grant is a matter of right.
However, if the trial court finds that one or both requirements have not been met, then it
would set a hearing to enable the applicant to prove that the applicant has "no money or
property sufficient and available for food, shelter and basic necessities for himself and his
family." In that hearing, the adverse party may adduce countervailing evidence to disprove the
evidence presented by the applicant; after which the trial court will rule on the application
depending on the evidence adduced. In addition, Section 21 of Rule 3 also provides that the
adverse party may later still contest the grant of such authority at any time before judgment
is rendered by the trial court, possibly based on newly discovered evidence not obtained at the
time the application was heard. If the court determines after hearing, that the party declared
as an indigent is in fact a person with sufficient income or property, the proper docket and
other lawful fees shall be assessed and collected by the clerk of court. If payment is not made
within the time fixed by the court, execution shall issue or the payment of prescribed fees shall
be made, without prejudice to such other sanctions as the court may impose.
The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section
21 does not clearly draw the limits of the entitlement to the exemption. Knowing that the
litigants may abuse the grant of authority, the trial court must use sound discretion and
scrutinize evidence strictly in granting exemptions, aware that the applicant has not hurdled
the precise standards under Rule 141. The trial court must also guard against abuse and misuse
of the privilege to litigate as an indigent litigant to prevent the filing of exorbitant claims which
would otherwise be regulated by a legal fee requirement.
Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras
after their affidavits and supporting documents showed that petitioners did not satisfy the
twin requirements on gross monthly income and ownership of real property under Rule 141.
Instead of disqualifying the Alguras as indigent litigants, the trial court should have called a
hearing as required by Rule 3, Section 21 to enable the petitioners to adduce evidence to show
that they didn't have property and money sufficient and available for food, shelter, and basic
necessities for them and their family.27 In that hearing, the respondents would have had the
right to also present evidence to refute the allegations and evidence in support of the
application of the petitioners to litigate as indigent litigants. Since this Court is not a trier of
facts, it will have to remand the case to the trial court to determine whether petitioners can
be considered as indigent litigants using the standards set in Rule 3, Section 21.
Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets
the salary and property requirements under Section 19 of Rule 141, then the grant of the
application is mandatory. On the other hand, when the application does not satisfy one or both
requirements, then the application should not be denied outright; instead, the court should
apply the "indigency test" under Section 21 of Rule 3 and use its sound discretion in
determining the merits of the prayer for exemption.
Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief
Justice Hilario G. Davide, Jr., placed prime importance on 'easy access to justice by the poor'
as one of its six major components. Likewise, the judicial philosophy of Liberty and
Prosperity of Chief Justice Artemio V. Panganiban makes it imperative that the courts shall not
only safeguard but also enhance the rights of individuals—which are considered sacred under
the 1987 Constitution. Without doubt, one of the most precious rights which must be shielded
and secured is the unhampered access to the justice system by the poor, the underprivileged,
and the marginalized.
WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the
disqualification of petitioners, the July 17, 2000 Order denying petitioners' Motion for
Reconsideration, and the September 11, 2001 Order dismissing the case in Civil Case No. RTC-
99-4403 before the Naga City RTC, Branch 27 are ANNULLED and SET ASIDE. Furthermore, the
Naga City RTC is ordered to set the "Ex-Parte Motion to Litigate as Indigent Litigants" for
hearing and apply Rule 3, Section 21 of the 1997 Rules of Civil Procedure to determine whether
petitioners can qualify as indigent litigants.
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A. M. No. 09-6-9-SC August 19, 2009
RE: Query of Mr. Roger C. Prioreschi Re Exemption from Legal and Filing Fees of the Good
Shepherd Foundation, Inc.
RESOLUTION
BERSAMIN, J.:
In his letter dated May 22, 2009 addressed to the Chief Justice, Mr. Roger C. Prioreschi,
administrator of the Good Shepherd Foundation, Inc., wrote:
The Good Shepherd Foundation, Inc. is very grateful for your 1rst. Indorsement to pay a
nominal fee of Php 5,000.00 and the balance upon the collection action of 10 million pesos,
thus giving us access to the Justice Systempreviously denied by an up-front excessive court fee.
The Hon. Court Administrator Jose Perez pointed out to the need of complying with OCA
Circular No. 42-2005 and Rule 141 that reserves this "privilege" to indigent persons. While
judges are appointed to interpret the law, this type of law seems to be extremely detailed with
requirements that do not leave much room for interpretations.
In addition, this law deals mainly with "individual indigent" and it does not include Foundations
or Associations that work with and for the most Indigent persons. As seen in our Article of
Incorporation, since 1985 the Good Shepherd Foundation, Inc. reached-out to the poorest
among the poor, to the newly born and abandoned babies, to children who never saw the
smile of their mother, to old people who cannot afford a few pesos to pay for "common
prescriptions", to broken families who returned to a normal life. In other words, we have been
working hard for the very Filipino people, that the Government and the society cannot reach
to, or have rejected or abandoned them.
Can the Courts grant to our Foundation who works for indigent and underprivileged people,
the same option granted to indigent people?
The two Executive Judges, that we have approached, fear accusations of favoritism or other
kind of attack if they approve something which is not clearly and specifically stated in the law
or approved by your HONOR.
Can your Honor help us once more?
Grateful for your understanding, God bless you and your undertakings.
We shall be privileged if you find time to visit our orphanage – the Home of Love – and the
Spiritual Retreat Center in Antipolo City.
To answer the query of Mr. Prioreschi, the Courts cannot grant to foundations like the Good
Shepherd Foundation, Inc. the same exemption from payment of legal fees granted to indigent
litigants even if the foundations are working for indigent and underprivileged people.
The basis for the exemption from legal and filing fees is the free access clause, embodied in
Sec. 11, Art. III of the 1987 Constitution, thus:
Sec. 11. Free access to the courts and quasi judicial bodies and adequate legal assistance shall
not be denied to any person by reason of poverty.
The importance of the right to free access to the courts and quasi judicial bodies and to
adequate legal assistance cannot be denied. A move to remove the provision on free access
from the Constitution on the ground that it was already covered by the equal protection clause
was defeated by the desire to give constitutional stature to such specific protection of the
poor.1
In implementation of the right of free access under the Constitution, the Supreme Court
promulgated rules, specifically, Sec. 21, Rule 3, Rules of Court,2 and Sec. 19, Rule 141, Rules of
Court,3 which respectively state thus:
Sec. 21. Indigent party. — A party may be authorized to litigate his action, claim or defense as
an indigent if the court, upon an ex parte application and hearing, is satisfied that the party is
one who has no money or property sufficient and available for food, shelter and basic
necessities for himself and his family.
Such authority shall include an exemption from payment of docket and other lawful fees, and
of transcripts of stenographic notes which the court may order to be furnished him. The
amount of the docket and other lawful fees which the indigent was exempted from paying
shall be a lien on any judgment rendered in the case favorable to the indigent, unless the court In view of the foregoing, the Good Shepherd Foundation, Inc. cannot be extended the
otherwise provides. exemption from legal and filing fees despite its working for indigent and underprivileged
people.
Any adverse party may contest the grant of such authority at any time before judgment is
rendered by the trial court. If the court should determine after hearing that the party declared SO ORDERED.
as an indigent is in fact a person with sufficient income or property, the proper docket and
other lawful fees shall be assessed and collected by the clerk of court. If payment is not made
within the time fixed by the court, execution shall issue for the payment thereof, without
prejudice to such other sanctions as the court may impose. (22a)1avvphi1

Sec. 19. Indigent litigants exempt from payment of legal fees.– Indigent litigants (a) whose
gross income and that of their immediate family do not exceed an amount double the monthly
minimum wage of an employee and (b) who do not own real property with a fair market value
as stated in the current tax declaration of more than three hundred thousand (P300,000.00)
pesos shall be exempt from payment of legal fees.

The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent
litigant unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he
and his immediate family do not earn a gross income abovementioned, and they do not own
any real property with the fair value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant’s affidavit. The current tax
declaration, if any, shall be attached to the litigant’s affidavit.

Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to dismiss
the complaint or action or to strike out the pleading of that party, without prejudice to
whatever criminal liability may have been incurred.

The clear intent and precise language of the aforequoted provisions of the Rules of Court
indicate that only a natural party litigant may be regarded as an indigent litigant. The Good
Shepherd Foundation, Inc., being a corporation invested by the State with a juridical
personality separate and distinct from that of its members, 4 is a juridical person. Among
others, it has the power to acquire and possess property of all kinds as well as incur obligations
and bring civil or criminal actions, in conformity with the laws and regulations of their
organization.5 As a juridical person, therefore, it cannot be accorded the exemption from legal
and filing fees granted to indigent litigants.

That the Good Shepherd Foundation, Inc. is working for indigent and underprivileged people
is of no moment. Clearly, the Constitution has explicitly premised the free access clause on a
person’s poverty, a condition that only a natural person can suffer.

There are other reasons that warrant the rejection of the request for exemption in favor of a
juridical person. For one, extending the exemption to a juridical person on the ground that it
works for indigent and underprivileged people may be prone to abuse (even with the
imposition of rigid documentation requirements), particularly by corporations and entities
bent on circumventing the rule on payment of the fees. Also, the scrutiny of compliance with
the documentation requirements may prove too time-consuming and wasteful for the courts.