Rule 18 Pre-Trial:When(Sec.
1) petitioner-spouses, with an area of 71 square meters located at Baguio City
G.R. No. 170606 November 23, 2007
LCK INDUSTRIES INC., CHIKO LIM and ELIZABETH T. LIM, Petitioners,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is the Petition for Review on Certiorari under Rule 45 of
the Revised Rules of Court filed by petitioners LCK Industries Inc. (LCK),
Chiko Lim and Elizabeth Lim, seeking the reversal and the setting aside of
the Decision1 dated 1 April 2005 and the Resolution2 dated 29 November
2005 of the Court of Appeals in CA-G.R. CV No. 73944. The appellate court,
in its assailed Decision and Resolution, reversed the Decision3 of the
Regional Trial Court (RTC) of Quezon City, Branch 81, dated 3 September
2001, in Civil Case No. Q-98-33835, which found respondent Planters
Development Bank (respondent bank) liable for the amount of
₱1,856,416.67, representing overpayment.
Petitioner LCK is a domestic corporation duly organized and existing as
such under Philippine laws.4
Respondent bank is a banking institution duly authorized to engage in
banking business under Philippine laws.5
On 1 September 1995, petitioner LCK obtained a loan from the respondent
bank in the amount of ₱3,000,000.00 as evidenced by two promissory
notes.6
As a security for the loan obligation, petitioners-spouses Chiko and
Elizabeth Lim executed a Real Estate Mortgage over a parcel of land
covered by Transfer Certificate of Title (TCT) No. T-138623, registered
under their names and located at Quezon City, with an area of 68 square
meters (Quezon City property).7 Later on, to secure the same obligation,
another Real Estate Mortgage was executed over another parcel of land
covered by TCT No. T-62773, also registered under the names of the
(Baguio City property).8
Subsequently, petitioner LCK incurred default in its payment; thus, making
the obligation due and demandable. Several demands were thereafter
made by the respondent bank to no avail.9 On 13 October 1997, a final
letter-demand was sent by respondent bank to petitioner LCK asking for the
payment of its obligation in the amount of ₱2,962,500.00. Such final
demand notwithstanding, petitioner LCK failed or refused to pay its
obligation.
Consequently, respondent bank caused the extrajudicial foreclosure of the
Baguio City property which was sold at the public auction for ₱2,625,000.00
as shown in the Certificate of Sale10 dated 29 January 1998. Since the
proceeds of the foreclosed Baguio City property were not enough to satisfy
the entire loan obligation which amounted to ₱2,962,500.00, respondent
bank further caused the extrajudicial foreclosure of the Quezon City
property. As evidenced by the Certificate of Sale11 dated 18 March 1998,
signed by Notary Public Atty. Allene Anigan (Atty. Anigan), the foreclosed
Quezon City property was sold at a public auction for ₱2,231,416.67. The
respondent bank was the highest bidder on both occasions.
Prior to the auction sale of the Quezon City property on 18 March 1998,
petitioners, on 12 March 1998, filed with the RTC of Quezon City, Branch
81, an action for Annulment of the Foreclosure of Mortgage and Auction
Sale of the Quezon City property with Restraining Order/Preliminary
Injunction and with Damages against respondent bank and Atty.
Anigan.12 The case was docketed as Civil Case No. Q-98-33835.
In their Complaint,13 petitioners alleged that respondent bank failed to
comply with the posting and publication requirements as well as with the
filing of the Petition for the Extrajudicial Foreclosure of the Real Estate
Mortgage with the Clerk of Court as required by Act No. 3135.14 Petitioners
prayed for the issuance of temporary restraining order (TRO) in order to
enjoin the respondent bank from conducting the auction sale, and in the
alternative, to enjoin the Registry of Deeds of Quezon City from transferring
the ownership of the Quezon City property to the purchaser at the auction
sale.
In its Answer with the Opposition to the Prayer for the Issuance of
Temporary Restraining Order (TRO), respondent bank averred that it had
fully observed the posting and publication requirements of Act No. 3135. It
insisted that the filing of the Petition for Extrajudicial Foreclosure of the
Mortgage Property with the Notary Public was sanctioned by the same
statute. Respondent bank thus prayed for the dismissal of petitioners’
complaint for lack of merit.15
For failure of the counsels for both petitioners and respondent bank to
appear in the scheduled hearing for the issuance of temporary restraining
order, the RTC, in an Order dated 15 May 1998, deemed the prayer for
TRO abandoned.16
Thereafter, the RTC conducted a pre-trial conference. In the Pre-Trial
Order17 dated 8 September 2000, the parties made the following
admissions and stipulations:
(1) the real estate mortgage executed by the plaintiffs in favor of the
defendant bank covers the loan obligation in the total amount of
₱3,000,000.00;
(2) there were two promissory notes executed by the plaintiffs: one for
₱2,700,000.00 and another for ₱300,000.00;
(3) a demand letter dated 13 October 1997 was sent to petitioner LCK by
respondent bank stating that the remaining balance of petitioner LCK’s loan
obligation was ₱2,962,500.00 as of 13 October 1997;
(4) a Notice of Auction Sale by Notary Public was made by the respondent
bank in foreclosing the Baguio City property, and in the Certificate of Sale
issued by the Notary Public, the respondent bank bid ₱2,625,000.00 for the
property;
(5) the respondent bank also foreclosed the real estate mortgage over the
petitioners’ Quezon City property on 18 March 1998 and said defendant
bank bid ₱2,231,416.67 for the property;
(6) the foreclosure of petitioners’ Quezon City property was made by a
notary public;
(7) the petition for foreclosure was not included in the raffle of judicial
notice;
(8) the petitioners failed to fully pay their loan obligation as of 13 October
1997 in the amount of ₱962,500.00; and
(9) despite the demands, petitioners failed to pay their due obligations.
The court further defined the issues as follows:
(1) whether or not the petition was filed with the Office of the Clerk of Court;
(2) whether or not the extra-judicial foreclosure of real estate mortgage by
defendant bank was made in accordance with the provisions of Act 3135,
as amended; and
(3) whether or not the parties are entitled to their respective claims for
attorney’s fees and damages.18
The parties were given 15 days from receipt of the Pre-Trial Order to make
amendments or corrections thereon.
On 18 April 2001, the parties agreed to submit the case for the decision of
the RTC based on the stipulations and admissions made at the pre-trial
conference. The parties further manifested that they were waiving their
respective claims for attorney’s fees. On the same day, the RTC required
the parties to submit their respective memoranda.19
In their Memorandum,20 petitioners, aside from reiterating issues previously
raised in their Complaint, further claimed that there was an overpayment of
the loan obligation by ₱1,856,416.67. As shown in the letter-demand dated
13 October 1997 received by petitioner LCK, its outstanding loan obligation
amounted to ₱2,962,500.00. The Baguio City property was purchased by
respondent bank at the public auction for ₱2,625,000.00, while the Quezon
City property was purchased for ₱2,231,416.67.
For its part, respondent bank maintained in its Memorandum21 that the
complaint filed by petitioners is devoid of merit. It further asseverated that
petitioners’ claim for overpayment was not among the issues submitted for
the resolution of the RTC. It is clear from the Pre-Trial Order that the issues
to be resolved are limited to whether the petition for the foreclosure of the
real estate mortgage was filed before the Clerk of Court and whether or not
the extrajudicial foreclosure of real estate mortgage was made by the
respondent bank in accordance with the provisions of Act No. 3135. For
failure of petitioners to promptly raise the alleged overpayment, the RTC is
now barred from adjudicating this issue.
On 3 September 2001, the RTC rendered its Decision22 declaring the
foreclosure and the auction sale of the Quezon City property legal and valid,
but ordered respondent bank to return the overpayment made by
petitioners in the amount of ₱1,856,416.67. The dispositive portion of the
RTC Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered as
follows:
1. Declaring the extra-judicial foreclosure and auction sale of the Quezon
City property of plaintiffs LCK Industries, Inc., Chiko Lim and Elizabeth Lim
subject of this case legal and valid;
2. Ordering defendant Planters Development Bank to pay to plaintiffs the
amount of ₱1,856,416.67 representing overpayment;
3. Dismissing plaintiffs’ claim for attorney’s fees and other litigation
expenses;
4. Dismissing the case against defendant Atty. Allene M. Anigan; and
5. Dismissing the counterclaims of defendants Planters Development Bank
and Atty. Arlene M. Anigan.23
For lack of merit, the Motion for Reconsideration filed by the respondent
bank was denied by the RTC in its Order dated 3 December 2001.24
Aggrieved, respondent bank elevated the matter to the Court of Appeals by
assailing the portion of the RTC Decision ordering it to pay petitioners the
amount of ₱1,856,416.67 representing the alleged overpayment. The
respondent bank’s appeal was docketed as CA-G.R. CV No. 73944.25
On 1 April 2005, the Court of Appeals granted the appeal of the respondent
bank and partially reversed the RTC Decision insofar as it ordered
respondent bank to pay the overpaid amount of ₱1,856,416.67 to
petitioners. In deleting the award of overpayment, the appellate court
emphasized that the primary purpose of pre-trial is to make certain that all
issues necessary for the disposition of the case are properly raised in order
to prevent the element of surprise. Since the alleged overpayment was only
raised by the petitioners long after the pre-trial conference, the court a
quo cannot dispose of such issue without depriving the respondent bank of
its right to due process.26
The Motion for Reconsideration filed by petitioners was denied by the Court
of Appeals in its Resolution27 dated 29 November 2005.
Petitioners are now before this Court via a Petition for Review
on Certiorari,28 under Rule 45 of the Revised Rules of Court, assailing the
Court of Appeals Decision and raising the following issues as grounds:
I.
WHETHER OR NOT THE EXCESS AMOUNT OF ₱1,893,916.67 WHICH
THE RESPONDENT BANK ACQUIRED FROM THE AUCTION SALE OF
THE PETITIONERS’ PROPERTIES SHALL BE RETURNED TO THEM.
II.
WHETHER OR NOT THE ISSUE OF OVERPAYMENT WAS RAISED BY
THE PARTIES AND INCLUDED IN THE PRE-TRIAL ORDER.29
The petition centers on the claim propounded by petitioners that there was
an overpayment of the loan obligation in the amount of ₱1,856,416.67.
Petitioners insist they are entitled to the reimbursement of the overpaid
amount invoking the elementary principle of in rem verso30 in human
relations and the rule on the disposition of the proceeds of the sale
providing that the balance or the residue after deducting the cost of the sale
and the payment of the mortgage debt due, shall be paid to the junior
encumbrancers, and in the absence of junior encumbrancers, to the
mortgagor or his duly authorized representative.31
On the other hand, respondent bank counters that the question of
overpayment, not being included in the issues stipulated in Pre-Trial Order
dated 8 September 2000, and totally unrelated therein, cannot be
considered by the RTC. The belated ventilation of the alleged overpayment
precluded the RTC from ruling on the matter in consonance with the
primordial purpose of the pre-trial conference which is to delineate the
issues necessary for the disposition of the case. 32
The conduct of pre-trial in civil actions has been mandatory as early as 1
January 1964 upon the effectivity of the Revised Rules of Court.33 Pre-trial
is a procedural device intended to clarify and limit the basic issues between
the parties34 and to take the trial of cases out of the realm of surprise and
maneuvering.35
Pre-trial is an answer to the clarion call for the speedy disposition of cases.
Hailed as the most important procedural innovation in Anglo-Saxon justice
in the nineteenth century,36 pre-trial is a device intended to clarify and limit
the basic issues between the parties.37 It thus paves the way for a less
cluttered trial and resolution of the case.38 Pre-trial seeks to achieve the
following:
(a) The possibility of an amicable settlement or of a submission to
alternative modes of dispute resolution;
(b) The simplification of the issues;
(c) The necessity or desirability of amendments to the pleadings;
(d) The possibility of obtaining stipulations or admissions of facts and of
documents to avoid unnecessary proof;
(e) The limitation of the number of witnesses;
(f) The advisability of a preliminary reference of issues to a commissioner;
(g) The propriety of rendering judgment on the pleadings, or summary
judgment, or of dismissing the action should a valid ground therefor be
found to exist;
(h) The advisability or necessity of suspending the proceedings; and
(i) Such other matters as may aid in the prompt disposition of the action.39
The purpose of entering into a stipulation of facts is to expedite trial and to
relieve the parties and the court as well of the costs of proving facts which
will not be disputed on trial and the truth of which can be ascertained by
reasonable inquiry. Its main objective is to simplify, abbreviate and expedite
the trial, or totally dispense with it.40
The parties themselves or their representative with written authority from
them are required to attend in order to arrive at a possible amicable
settlement, to submit to alternative modes of dispute resolution, and to
enter into stipulations or admissions of facts and documents. All of the
matters taken up during the pre-trial, including the stipulation of facts and
the admissions made by the parties, are required to be recorded in a
pre-trial order.41
Thus, Section 7, Rule 18 of the Revised Rules of Court provides:
SEC. 7. Record of pre-trial. – The proceedings in the pre-trial shall be
recorded. Upon the termination thereof, the court shall issue an order which
shall recite in detail the matters taken up in the conference, the action taken
thereon, the amendments allowed to the pleadings, and the agreements or
admissions made by the parties as to any of the matters considered.
Should the action proceed to trial, the order shall explicitly define and limit
the issues to be tried. The contents of the order shall control the
subsequent course of the action, unless modified before trial to prevent
manifest injustice.
In the Pre-Trial Order dated 8 September 2000, the RTC defined the issues
as follows: (1) whether or not the petition was filed with the Office of the
Clerk of Court; (2) whether or not the extrajudicial foreclosure of real estate
mortgage by defendant bank was made in accordance with the provisions
of Act No. 3135; and (3) whether or not the parties are entitled to their
respective claims for attorney’s fees and damages.
Based on the admissions and stipulations during the pre-trial conference
and the issues defined by the court a quo as embodied in the Pre-Trial
Order, the parties agreed to submit the case for the resolution of the RTC.
Both petitioners and respondent also manifested that they would forego
their respective claims for attorney’s fees, leaving solely the issue of the
validity of the foreclosure of mortgage and auction sale for the RTC’s
disposition. However, in petitioners’ Memorandum filed after the case was
submitted for resolution, petitioners raised the question of overpayment, a
new issue that was included neither in their Complaint nor in the issues
defined in the Pre-Trial Order issued by the RTC.
Generally, pre-trial is primarily intended to make certain that all issues
necessary to the disposition of a case are properly raised. Thus, to obviate
the element of surprise, parties are expected to disclose at the pre-trial
conference all issues of law and fact they intend to raise at the
trial.42 However, in cases in which the issue may involve privileged or
impeaching matters,43 or if the issues are impliedly included therein or may
be inferable therefrom by necessary implication to be integral parts of the
pre-trial order as much as those that are expressly stipulated, the general
rule will not apply.44 Thus, in Velasco v. Apostol,45 this Court highlighted the
aforesaid exception and ruled in this wise:
A pre-trial order is not meant to be a detailed catalogue of each and every
issue that is to be or may be taken up during the trial. Issues that are
impliedly included therein or may be inferable therefrom by necessary
implication are as much integral parts of the pre-trial order as those that are
expressly stipulated.
In fact, it would be absurd and inexplicable for the respondent company to
knowingly disregard or deliberately abandon the issue of non-payment of
the premium on the policy considering that it is the very core of its defense.
Correspondingly, We cannot but perceive here an undesirable resort to
technicalities to evade an issue determinative of a defense duly averred.
(Emphasis supplied).
The case at bar falls under this particular exception. Upon scrupulous
examination of the Pre-Trial Order dated 8 September 2000, it can be
deduced that the parties stipulated that the remaining sum of petitioner
LCK’s obligation as of 13 October 1997 was ₱2,962,500.00. In the same
Pre-Trial Order, the parties likewise stipulated that the Baguio City property
was sold at the public auction for ₱2,625,000.00 and the Quezon City
property for ₱2,231,416.67. On both occasions, respondent bank emerged
as the highest bidder. By applying simple mathematical operation, the
mortgaged properties were purchased by the respondent at the public
auctions for ₱4,856,416.67; thus, after deducting therefrom the balance of
petitioner LCK’s obligation in the amount of ₱2,962,500.00, an excess in
the sum of ₱1,893,916.67 remains.
Needless to say, the fact of overpayment, though not expressly included in
the issues raised in the Pre-Trial Order dated 8 September 2000, can be
evidently inferred from the stipulations and admissions made by the parties
therein. Even only upon plain reading of the said Pre-Trial Order, it can be
readily discerned that there was an overpayment.
The pertinent provisions of the Revised Rules of Court on extrajudicial
foreclosure sale provide:
Rule 39. SEC. 21. Judgment obligee as purchaser. – When the purchaser
is the judgment obligee, and no third-party claim has been filed, he need
not pay the amount of the bid if it does not exceed the amount of the
judgment. If it does, he shall pay only the excess.
Rule 68. SEC. 4. Disposition of proceeds of sale.- The amount realized
from the foreclosure sale of the mortgaged property shall, after deducting
the costs of the sale, be paid to the person foreclosing the mortgage, and
when there shall be any balance or residue, after paying off the mortgage
debt due, the same shall be paid to junior encumbrancers in the order of
their priority, to be ascertained by the court, or if there be no such
encumbrancers or there be a balance or residue after payment to them,
then to the mortgagor or his duly authorized agent, or to the person entitled
to it. (Emphasis supplied.)
The renowned jurist Florenz Regalado, in Sulit v. Court of
Appeals,46 underscored the obligation of the mortgagee with respect to the
surplus money resulting from a foreclosure sale of the mortgaged property:
The application of the proceeds from the sale of the mortgaged property to
the mortgagor’s obligation is an act of payment, not payment by dation;
hence, it is the mortgagee’s duty to return any surplus in the selling price to
the mortgagor. Perforce, a mortgagee who exercises the power of sale
contained in a mortgage is considered a custodian of the fund, and, being
bound to apply it properly, is liable to the persons entitled thereto if he fails
to do so. And even though the mortgagee is not strictly considered a trustee
in a purely equitable sense, but as far as concerns the unconsumed
balance, the mortgagee is deemed a trustee for the mortgagor or owner of
the equity of redemption.1âwphi1
Commenting on the theory that a mortgagee, when he sells under a power,
cannot be considered otherwise than as a trustee, the vice-chancellor in
Robertson v. Norris (1 Giff. 421) observed: "That expression is to be
understood in this sense: that with the power being given to enable him to
recover the mortgage money, the court requires that he shall exercise the
power of sale in a provident way, with a due regard to the rights and
interests of the mortgagor in the surplus money to be produced by the
sale. (Emphasis supplied.)
Petitioner LCK’s obligation with the respondent bank was already fully
satisfied after the mortgaged properties were sold at the public auction for
more than the amount of petitioner LCK’s remaining debt with the
respondent bank. As the custodian of the proceeds from the foreclosure
sale, respondent bank has no legal right whatsoever to retain the excess of
the bid price in the sum of ₱1,893,916.67, and is under clear obligation to
return the same to petitioners.
In any case, this Court would not allow respondent bank to hide behind the
cloak of procedural technicalities in order to evade its obligation to return
the excess of the bid price, for such an act constitutes a violation of the
elementary principle of unjust enrichment in human relations.
Under the principle of unjust enrichment - nemo cum alterius detrimento
locupletari potest - no person shall be allowed to enrich himself unjustly at
the expense of others.47 This principle of equity has been enshrined in our
Civil Code, Article 22 of which provides:
Art. 22. Every person who through an act of performance by another, or any
other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same to
him.
We have held that there is unjust enrichment when a person unjustly
retains a benefit to the loss of another, or when a person retains the money
or property of another against the fundamental principles of justice, equity
and good conscience.48
Equity, as the complement of legal jurisdiction, seeks to reach and
complete justice where courts of law, through the inflexibility of their rules
and want of power to adapt their judgments to the special circumstances of
cases, are incompetent to do so. Equity regards the spirit and not the letter,
the intent and not the form, the substance rather than the circumstance, as
it is variously expressed by different courts.49
It is the policy of the Court to afford party-litigants the amplest opportunity to
enable them to have their cases justly determined, free from constraints of
technicalities. Since the rules of procedures are mere tools designed to
facilitate the attainment of justice, it is well recognized that this Court is
empowered to suspend its operation, or except a particular case from its
operation, when the rigid application thereof tends to frustrate rather
promote the ends of justice.50
Court litigations are primarily for search of truth, and a liberal interpretation
of the rules by which both parties are given the fullest opportunity to adduce
proofs is the best way to ferret such truth. The dispensation of justice and
vindication of legitimate grievances should not be barred by technicalities.51
Given the foregoing discussion, this Court finds the respondent bank liable
not only for retaining the excess of the bid price or the surplus money in the
sum of ₱1,893,916.67, but also for paying the interest thereon at the rate of
6% per annum from the time of the filing of the complaint until finality of
judgment. Once the judgment becomes final and executory, the interest of
12% per annum, should be imposed, to be computed from the time the
judgment becomes final and executory until fully satisfied.52
WHEREFORE, premises considered, the instant Petition is GRANTED.
The Court of Appeals Decision dated 1 April 2005 and its Resolution dated
29 November 2005 in CA-G.R. CV No. 73944 are hereby REVERSED.
Respondent Planters Development Bank is ORDERED to return to the
petitioners LCK Industries Inc., Chiko Lim and Elizabeth Lim, the sum of
₱1,893,916.67 with interest computed at 6% per annum from the time of
the filing of the complaint until its full payment before finality of judgment.
Thereafter, if the amount adjudged remains unpaid, the interest rate shall
be 12% per annum computed from the time the judgment became final and
executory until fully satisfied. Costs against respondent Planters
Development Bank.
SO ORDERED.
Rule 18 Pre-Trial:Effect of failute to appear(Sec. 5-6)
G.R. No. 103185 January 22, 1993
CONRADO CALALANG, petitioner,
vs.
THE COURT OF APPEALS and FILIPINAS MANUFACTURERS
BANK, respondents.
Fernando C. Conjuanco for petitioner.
Crisostomo J. Danguila for private respondent.
CAMPOS, JR., J.:
This is a petition for review on certiorari seeking to annul the
decision ** of the Court of Appeals which set aside the order of dismissal
issued by the lower court, *** in Civil Case No. 36907 entitled "Filipinas
Manufacturers Bank, plaintiff, versus Hugo Arca, Conrado Calalang, Rio
Arturo R. Salceda and Acropolis Trading Corporation, defendants".
The antecedent facts, as culled from the records, are as follows:
On April 29, 1980, respondent Filipinas Manufacturers Bank filed a
complaint for collection of a sum of money against petitioner Conrado
1
Calalang and 3 other defendants namely, Hugo M. Arca, Rio Arturo
Salceda and the Acropolis Trading Corporation with the Court of First
Instance of Rizal, 7th Judicial District, Branch 36, Makati under Judge
Segundo M. Zosa.
Petitioner, after having been served with summons on May 19, 1980, filed a
Motion to Dismiss on June 2, 1980. The other summoned defendant, Hugo
M. Arca, filed a Motion for Bill of Particulars on June 5, 1980. The two other
defendants namely, the Acropolis Trading Corporation and Rio Arturo
Salceda were also summoned but only a clerk-employee of the Acropolis
Trading Corporation received the summons while Arturo R. Salceda was no
longer residing at his given address.
Over a year after, the Motion for Bill of Particulars was granted on August
24, 1981 by Judge Zosa. Meanwhile, the Motion to Dismiss filed by
petitioner Calalang was left unresolved. The last pleading filed regarding
the Motion to Dismiss was the reply of petitioner Calalang to the opposition
to the motion to dismiss by respondent bank which was filed on August 5,
1980.
On August 10, 1981, Batas Pambansa Blg. 129 (The Judiciary
Reorganization Act) was passed by the Batasang Pambansa and
subsequently approved by then President Marcos on August 14, 1981.
On November 27, 1981, defendant Arca filed a Motion to Dismiss which
necessitated the filing of various pleadings in relation thereto by respondent
bank herein, and defendant Arca.
On May 25, 1983, a hearing was scheduled under Judge Florentino Dela
Peña of the Makati Regional Trial Court, Branch 134. But then, the case
was transferred to the Makati Regional Trial Court, Branch 150, presided
over by Judge Benigno M. Puno who, on August 8, 1985, issued an Order
to wit:
After a careful and thorough study of the defendant Calalang's (petitioner
herein) motion to dismiss, dated May 31, 1980 and the Counter
Manifestation and motion to dismiss dated November 25, 1981, filed by
defendant Arca, together with the plaintiff's opposition, defendant movants'
replies or rejoinder, the Court finds that the matters relied upon by said
movants for the dismissal of the Complaint are evidentiary in character, the
truth or veracity of which are better determined at the hearing on the merits
and, therefore, said motions are DENIED for lack of merit.
WHEREFORE, defendants are hereby ordered to file their answers to the
Complaint within the reglementary period.
SO ORDERED. 2
On October 3, 1986, Gella Reyes Vergara Alcala and Associates entered
its appearance as counsel for respondent bank.
On October 30, 1985, defendant Arca filed his answer with compulsory
counterclaim to the complaint which was received by respondent bank 's
former counsel, Emerito M. Salva and Associates on November 4, 1985.
It appears that this case has been set several times for pre-trial (November
29, 1985, January 29, 1986, May 12,1986, November 19, 1986, January 14,
1987 and February 27, 1987). For the first two scheduled hearings,
respondent bank's counsel failed to appear causing the dismissal without
prejudice of the case which was nevertheless set aside upon respondent
bank's motion for reconsideration of the dismissal. The November 19, 1986
hearing was transferred to January 14, 1987 upon agreement by both
counsels. For the last two scheduled dates counsel for the defendant Hugo
Arca failed to appear.
Judge Benigno M. Puno was replaced by Judge Federico Y. Alikpala, Jr. as
the presiding judge of the Makati Regional Trial Court, Branch 150 who, on
March 6, 1987, issued an Order, quoted hereunder as follows:
The records of this case show that among the defendants herein are: (a)
Rio Arturo R. Salceda; and (b) Acropolis Trading Corporation. The Sheriff's
Return, dated June 4, 1980 (Records Page 33) show the following report on
the service of summons thereto:
As to defendant Acropolis Trading Corporation: "Served upon the
defendant thru Miss BETH REYES, Clerk-employee, employed thereat,
who signed for the receipt thereof.
As to defendant Rio Arturo Salceda: "Not serve (sic), defendant is not
residing at the given address, occupant is Leonito Acuron.
The Court hereby informs the plaintiff that it shall not consider defendant
Acropolis Trading Corporation as having been properly brought under the
jurisdiction of this Court in view of the improper service of summons on said
corporation (Sec. 13 of Rule 14, Revised Rules of Court).
In view of the foregoing, plaintiff is hereby directed to inform the Court,
within ten (10) days from its receipt hereof, what steps plaintiff intends to
take with respect to the said two defendants so that the Court will know
whether plaintiff is still interested in the prosecution and/or outcome of this
case.
With respect to defendants Conrado T. Calalang, the latter had filed a
motion to dismiss which, however, was denied by the Court per Order
dated August 8, 1985. The records of this case do not, however, show
whether a copy of the said Order was transmitted to, or received by,
counsel for the said defendant. In any event, said defendant had not filed
any motion for the reconsideration of the said Order, nor had said
defendant filed his answer in this case. Let, therefore, a copy of the Order
dated August 8, 1985 be sent to the defendant Conrado T. Calalang,
through his counsel of record, Attys. N.J. Quisumbing & Associates of the
Lawyers' Inn.
Inasmuch as it would appear that the setting of this case for pre-trial was
premature, since issues herein do not appear to have been really joined,
the pre-trial conference scheduled in this case for April 8, 1987 is cancelled
until further assignment or until any of the parties herein shall make the
appropriate steps in connection therewith.
xxx xxx xxx 3
The above Order was received by petitioner's counsel on March 13, 1987. 4
On March 17, 1987, respondent bank, in response to the Order dated
March 6, 1987, filed a manifestation stating that:
1. It is very much interested in prosecuting the complaint against the
defendants Acropolis Trading and Salceda;
2. Pursuant to this, counsel has requested the Credit Investigation
Department of plaintiff to verify the correct address of said defendants
including all necessary facts for the proper service of summons on them;
3. Upon verification, plaintiff will then move for the issuance of Alias
Summons on the said defendants. 5
Thereafter, on March 24, 1987, petitioner Calalang moved to dismiss the
complaint on the ground that respondent bank failed to prosecute the case
for an unreasonable length of time. 6
On April 3, 1987, the trial court issued another Order, to wit:
Before this Court is plaintiff's "Manifestation" filed on March 18, 1987 stating
that plaintiff is interested in prosecuting its complaint against defendants
Acropolis Trading and Rio Arturo R. Salceda; this manifestation was made
as a consequence of the directives set out in the second paragraph of the
Order dated March 6, 1987.
Since the Court cannot let an unreasonable period pass for plaintiff to
cause service of alias summons on the aforesaid defendants, the Court
hereby resolves that if plaintiff shall still be unable to cause service of alias
summons on the said defendants within thirty (30) days from plaintiff's
receipts hereof, then this Court will dismiss the complaint as against said
defendants and proceedings herein shall be limited to the defendants on
whom summons had been served as of the lapse of said 30-days' period. 7
Thereafter, on May 8, 1987, respondent bank moved for the issuance of
alias summons on defendant Acropolis Trading Corporation through its
President/Director Conrado T. Calalang or through its director Hugo M.
Arca.8
Judge Zosimo Z. Angeles of the Makati Regional Trial Court, Branch 58, to
whom the case was assigned after Judge Federico Y. Alikpala, Jr., then
issued an Order, dated July 16, 1987, denying the Motion to Dismiss filed
by petitioner for lack of merit. The motion for alias summons was granted.
Entry of appearance of Atty. Crisostomo J. Danguilan as counsel for
respondent bank was noted in the same order. 9
Petitioner then filed his answer only on November 10, 1987. 10
On November 16, 1987, the trial court issued an Order setting the
pre-trial of the case for January 7, 1988 at 8:30 a.m. 11
At the pre-trial conference, respondent bank's counsel arrived 15 minutes
late or at 8:45 a.m.. However, the case had already been dismissed. Thus,
in the Order of January 7, 1988, the court declared:
For failure of plaintiff's counsel to appear inspite of notice and considering
that this case has been pending for seven (7) years, without plaintiff having
taken positive steps to prosecute the same, it is hereby DISMISSED
pursuant to Section 3, Rule 17, Rules of Court. Defendants' counterclaim is
likewise dismissed. 12
On January 12, 1988, counsel for the respondent bank filed a Motion for
Reconsideration of the order of dismissal citing as reason for his late arrival
"the unusually heavy traffic he encountered along Kamias Road in Quezon
City, which was caused by a stalled jeepney along the main
thoroughfare." The motion was denied on January 26, 1988. The
13
respondent bank appealed the dismissal to the respondent Court. On
October 25, 1991, the respondent Court promulgated the assailed decision,
the dispositive portion of which is quoted hereunder:
WHEREFORE, the Order of the court a quo dated January 9, 1988
dismissing this case and its Order dated January 26, 1988 denying
reconsideration of the first order are hereby SET ASIDE, and this case is
ordered remanded to the court of origin for further proceedings.
No pronouncement as to costs.
SO ORDERED. 14
The petitioner's Motion for Reconsideration having been denied by the
Court of Appeals, he filed this instant petition with this Court alleging that
the respondent Court erred in:
1.) absolving respondent bank for the delay in the pursuit of the case;
2.) declaring the January 7, 1988 pre-trial as premature;
3.) holding that respondent bank "did not entirely fail to appear;
4.) invoking the liberal application of the rules of procedure in favor of the
respondent bank;
5.) not having found abuse in the dismissal by the lower court of the case at
bar, there is no basis for the respondent court to reverse the order of
dismissal.
The pre-trial conference scheduled for January 8, 1987 was not premature.
A pre-trial cannot validly be held until the last pleading has been filed, which
last pleading may be the plaintiff's reply, except where the period to file the
last pleading has lapsed. The period to appear and file the necessary
15
pleading having expired on the Acropolis Trading Corporation, the lower
court can direct that a pre-trial conference be held among the answering
defendants. However, though it is within the discretion of the trial court to
declare a party non-suited for non-appearance in the pre-trial conference,
such discretion must not be abused. The precipitate haste of the lower
court in declaring the respondent bank non-suited was uncalled for and
deserved a second look. Considering the fact that the counsel for the
plaintiff/respondent bank did arrive for the pre-trial conference, though a bit
late and that counsel for the defendant was himself also late, the trial court
should have called the case again. An admonition to both counsels to be
more prompt in appearing before the Court as scheduled would have
sufficed, instead of having dismissed the complaint outright.
Unless a party's conduct is so negligent, irresponsible, contumacious, or
dilatory as to provide substantial grounds for dismissal for non-appearance,
the courts should consider lesser sanctions which would still amount into
achieving the desired end. 16
Inconsiderate dismissals, even if without prejudice, do not constitute a
panacea nor a solution to the congestion of court dockets; while they lend a
deceptive aura of efficiency to records of individual judges, they merely
postpone the ultimate reckoning between the parties. In the absence of
clear lack of merit or intention to delay, justice is better served by a brief
continuance, trial on the merits, and final disposition of the cases before the
court.17
And there is authority that an order dismissing a plaintiff's complaint without
prejudice for failure of his counsel to appear at a pre-trial conference must
be reversed as too severe a sanction to visit on a litigant where the record
is devoid of evidence reflecting the litigant's willful or flagrant disregard for
the Court's authority.18
Petitioner's contention that the respondent Court erred in absolving
respondent bank for the delay in the resolution of this case, maintaining that
"the case was dismissed out of its inordinate refusal to heed the warnings
of the court", is not borne out by the records of this case. The seven-year
delay is not attributable to the respondent bank alone but to circumstances
beyond its control. The respondent Court found that:
While it is true that the case had been pending for that length of time we
find that the delay is not to be attributed entirely to the plaintiff in this case.
The records show that various incidents were raised by the defendants
Calalang and Arca who filed separate pleadings and were represented by
different counsels.
Calalang filed a motion for the dismissal of the case on the ground that the
plaintiff had no cause of action against him. This necessitated the filing of
an opposition from the plaintiff, a reply to said opposition from the
defendant Calalang, and a rejoinder to the said reply. The defendant Arca,
on the other hand, initially sought an extension of time to file a responsive
pleading, then filed a motion for a bill of particulars, then later also a motion
to dismiss the case. After his motion to dismiss was denied Arca filed a
motion for reconsideration. In all these incidents pleadings and
counter-pleadings were filed and hearings held on the motions, which
resulted in the case dragging on for a considerable time.
The case was set for pre-trial several times when, as aforestated, the
issues were not yet joined for only Arca had initially filed his answer to the
complaint. The case was ordered dismissed at least two (2) times when the
plaintiff's counsel failed to appear at these pre-trials but the dismissals were
reconsidered and the class set anew.
Another factor that contributed to the confusion in the proceedings and the
delay in the case is the fact that the case was assigned from one judge to
another due probably to the judicial reorganization that took place. The
records show that there were no less than four (4) judges who handled the
case — Judges Segundo Zosa, Benigno M. Puno, Federico Alikpala, Jr.,
and Zosimo Angeles.
The answer of defendant Arca to the complaint was filed only on October
30, 1985 while that of defendant Calalang was filed only on November 10,
1987. 19
Again, petitioner's contention that the fact that respondent bank had not
caused service of summons on the two other defendants, the Acropolis
Trading Corporation and Rio Arturo Salceda, for almost seven years after
the complaint was filed on April 29, 1980 indicated "abuse of judicial
leniency and tolerance" is bereft of merit. Summons is issued by the clerk of
court upon the filing of the complaint. When it was informed later on by
Judge Alikpala, Jr. in his Order dated March 6, 1987 that there was an
improper service on defendants Acropolis Trading Corporation and Rio
Arturo Salceda, respondent bank, in compliance therewith, filed a motion
for alias summons, as permitted by the law.
Considering the judicial reorganization which took place during the
pendency of this case and the numerous instances raised by both petitioner
and respondent bank as contributing to the delay, petitioner cannot now
claim that respondent bank's "abuse of judicial leniency and tolerance is the
single greatest component of this delay". 20
The acts of the respondent bank do not manifest lack of interest to
prosecute, in the absence of proof that it indeed abandoned or intended to
abandon its case against petitioner and the other defendants. Admittedly
there was delay in this case, but such delay, We hold, is not the delay
warranting dismissal. To be a sufficient ground for dismissal, delay must not
only be lengthy but also unnecessary and dilatory resulting in the trifling of
judicial processes.
In Marahay vs. Melicor, the Court set forth the test for dismissal of a case
21
due to failure to prosecute, to wit:
While a court can dismiss a case on the ground of non prosequitur, the real
test for the exercise of such power is whether, under the circumstances,
plaintiff is chargeable with want of due diligence in failing to proceed with
reasonable promptitude. In the absence of a pattern or scheme to delay the
disposition of the case or a wanton failure to observe the mandatory
requirement of the rules on the part of the plaintiff, as in the case at bar,
courts should decide to dispense with rather than wield their authority to
dismiss.
Dismissal of a case for failure to prosecute is a matter addressed to the
sound discretion of the court. That discretion, however, must not be abused.
Thus, courts may not enter a dismissal which is not warranted by the
circumstances of the case. The availability of this recourse must be
22
determined according to each case's procedural history, situation at the
time of the dismissal and whether, and under the circumstances of the
particular case, the plaintiff is chargeable with want of due diligence in
failing to proceed with reasonable promptitude. 23
. . . The desideratum of a speedy disposition of cases should not, if at all
possible, result in the precipitate loss of a party's right to present evidence
and either in plaintiff's being non-suited or the defendant's being
pronounced liable under an ex-parte judgment.
. . (T)rial courts have . . the duty to dispose of controversies after trial on the
merits whenever possible. It is deemed an abuse of discretion for them, on
their own motion, "to enter a dismissal which is not warranted by the
circumstances of the case" (Municipality of Dingras v. Bonoan, 85 Phil.
458-59 [1950]). While it is true that the dismissal of an action on grounds
specified under Section 3, Rule 17 of the Revised Rules of Court is
addressed to their discretion (Flores v. Phil. Alien Property Administrator,
107 Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958];
Adorable v. Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc.
v. De la Gerna, L-17631, October 19, 1966, 18 SCRA 390), such discretion
must be exercised soundly with a view to the circumstances surrounding
each particular case (Vernus-Sanciangco v. Sanciangco,
L-12619, April 28, 1962, 4 SCRA 1209). If facts obtain that serve as
mitigating circumstances for the delay, the same should be considered and
dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672; Cervi v.
Greenwood, 147 Colo 190, 362 P. 2d 1050 [1961]), especially where the
suit appears to be meritorious and the plaintiff was not culpably negligent
and no injury results to defendant (27 C.J.S. 235-36, 15 ALR 3rd 680)."
(Abinales vs. Court of First Instance of Zamboanga City, Br. I, 70 SCRA
590, 595).
It is true that the allowance or denial of petitions for postponement and the
setting aside of orders previously issued, rest principally upon the sound
discretion of the judge to whom they are addressed, but always predicated
on the consideration that more than the mere convenience of the courts or
of the parties of the case, the ends of justice and fairness would be served
thereby (Camara Vda. de Zubiri v. Zubiri, et al., L-16745, December 17,
1966). . . . .
24
IN VIEW OF THE FOREGOING, the petition is DISMISSED. The decision
of the Court of Appeals dated October 25, 1991 and its Resolution of
December 12, 1991 are both AFFIRMED. Costs against petitioner.
SO ORDERED.
Rule 18 Pre-Trial
G.R. No. 102300. March 17, 1993.
CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA, SANTIAGO
M. KAPUNAN and LUIS L. VICTOR, ASSOCIATE JUSTICES OF THE
HON. COURT OF APPEALS, THIRD DIVISION, MANILA, HON.
LEONARDO B. CANARES, Judge of Regional, Trial Court of Cebu, Branch
10, and SPOUSES CRESENCIO AND ZENAIDA VELEZ, respondents.
SYLLABUS
1. COMMERCIAL LAW; PRIVATE CORPORATIONS; LEVELS OF
CONTROL IN CORPORATE HIERARCHY; BOARD OF DIRECTORS MAY
VALIDLY DELEGATE SOME FUNCTIONS TO INDIVIDUAL OFFICERS
OR AGENTS. — In the corporate hierarchy, there are three levels of control:
(1) the board of directors, which is responsible for corporate policies and
the general management of the business affairs of the corporation; (2) the
officers, who in theory execute the policies laid down by the board, but in
practice often have wide latitude in determining the course of business
operations; and (3) the stockholders who have the residual power over
fundamental corporate changes, like amendments of the articles of
incorporation. However, just as a natural person may authorize another to
do certain acts in his behalf, so may the board of directors of a corporation
validly delegate some of its functions to individual officers or agents
appointed by it.
2. ID.; ID.; HOW CORPORATE POWERS CONFERRED UPON
CORPORATE OFFICERS OR AGENTS; EXERCISE OF POWERS
INCIDENTAL TO EXPRESS POWERS CONFERRED. — Corporate
powers may be directly conferred upon corporate officers or agents by
statute, the articles of incorporation, the by-laws or by resolution or other
act of the board of directors. In addition, an officer who is not a director may
also appoint other agents when so authorized by the by-laws or by the
board of directors. Such are referred to as express powers. There are also
powers incidental to express powers conferred. It is a fundamental principle
in the law of agency that every delegation of authority, whether general or
special, carries with it, unless the contrary be expressed, implied authority
to do all of those acts, naturally and ordinarily done in such cases, which
are reasonably necessary and proper to be done in order to carry into effect
the main authority conferred. Since the by-laws are a source of authority for
corporate officers and agents of the corporation, a resolution of the Board
of Directors of Citibank appointing an attorney in fact to represent and bind
it during the pre-trial conference of the case at bar is not necessary
because its by-laws allow its officers, the Executing Officer and the
Secretary Pro-Tem, to execute a power of attorney to a designated bank
officer, William W. Ferguson in this case, clothing him with authority to
direct and manage corporate affairs.
3. ID.; ID.; ADOPTION OF BY-LAWS; PROVISION OF SECTION 46 OF
CORPORATION CODE REFERRING TO EFFECTIVITY OF CORPORATE
BY-LAWS APPLICABLE ONLY TO DOMESTIC CORPORATIONS. — A
corporation can submit its by-laws, prior to incorporation, or within one
month after receipt of official notice of the issuance of its certificate of
incorporation by the SEC. When the third paragraph of the above provision
mentions "in all cases", it can only refer to these two options; i.e., whether
adopted prior to incorporation or within one month after incorporation, the
by-laws shall be effective only upon the approval of the SEC. But even
more important, said provision starts with the phrase "Every corporation
formed under this Code", which can only refer to corporations incorporated
in the Philippines. Hence, Section 46, in so far as it refers to the effectivity
of corporate by-laws, applies only to domestic corporations and not to
foreign corporations.
4. ID.; FOREIGN CORPORATIONS; ISSUANCE OF LICENSE TO
TRANSACT BUSINESS IN THE PHILIPPINES; REQUISITES; GRANT OF
LICENSE IN EFFECT APPROVAL BY SEC OF FOREIGN
CORPORATION'S BY-LAWS. — Section 125 of the same Code requires
that a foreign corporation applying for a license to transact business in the
Philippines must submit, among other documents, to the SEC, a copy of its
articles of incorporation and by-laws, certified in accordance with law.
Unless these documents are submitted, the application cannot be acted
upon by the SEC. In the following section, the Code specifies when the
SEC can grant the license applied for. Section 126 provides in part: "SEC.
126. Issuance of a license. — If the Securities and Exchange Commission
is satisfied that the applicant has complied with all the requirements of this
Code and other special laws, rules and regulations, the Commission shall
issue a license to the applicant to transact business in the Philippines for
the purpose or purposes specified in such license . . ." Since the SEC will
grant a license only when the foreign corporation has complied with all the
requirements of law, it follows that when it decides to issue such license, it
is satisfied that the applicant's by-laws, among the other documents, meet
the legal requirements. This, in effect, is an approval of the foreign
corporations by-laws. It may not have been made in express terms, still it is
clearly an approval. Therefore, petitioner bank's by-laws, though originating
from a foreign jurisdiction, are valid and effective in the Philippines.
5. CIVIL LAW; AGENCY; SPECIAL POWER OF ATTORNEY; WHEN
POWER OF ATTORNEY COMPREHENSIVE ENOUGH TO INCLUDE
AUTHORITY TO APPEAR AT PRE-TRIAL CONFERENCE. — It is also
error on the part of the Court of Appeals to state that the power of attorney
given to the four (4) Citibank employees is not a special power of attorney
as required in paragraph 3, Article 1878 of the Civil Code and Section 1 (a),
Rule 20 of the Rules of Court. In the case of Tropical Homes, Inc. vs.
Villaluz, the special power of attorney executed by petitioner bank therein
contained the following pertinent terms — "to appear for and in its behalf in
the above-entitled case in all circumstances where its appearance is
required and to bind it in all said instances". The court ruled that: "Although
the power of attorney in question does not specifically mention the authority
of petitioner's counsel to appear and bind the petitioner at the pre-trial
conference, the terms of said power of attorney are comprehensive enough
as to include the authority to appear for the petitioner at the pre-trial
conference."
6. ID.; ID.; ID.; LEGAL COUNSEL APPOINTED TO REPRESENT BANK IN
COURT PURSUANT TO BY-LAW PROVISION CONSIDERED AN
EMPLOYEE FOR A SPECIAL PURPOSE. — Attorney was sufficient under
the by-law provision authorizing Ferguson to delegate any of his functions
to any one or more employees of the petitioner bank. A reasonable
interpretation of this provision would include an appointment of a legal
counsel to represent the bank in court, for, under the circumstances, such
legal counsel can be considered, and in fact was considered by the
petitioner bank, an employee for a special purpose. Furthermore, Ferguson,
who heads the Philippine office thousands of miles away from its main
office in the United States, must be understood to have sufficient powers to
act promptly in order to protect the interests of his principal.
7. REMEDIAL LAW; CIVIL PROCEDURE; PRECIPITATE ORDERS OF
DEFAULT FROWNED UPON BY SUPREME COURT; REASON
THEREFOR; WHEN PARTY MAY BE PROPERLY DEFAULTED. — We
reiterate the previous admonitions of this Court against "precipitate orders
of default as these have the effect of denying the litigant the chance to be
heard. While there are instances, to be sure, when a party may be properly
defaulted, these should be the exceptions rather than the rule and should
be allowed only in clear cases of an obstinate refusal or inordinate neglect
to comply with the orders of the court. Absent such a showing, the party
must be given every reasonable opportunity to present his side and to
refute the evidence of the adverse party in deference to due process of
law".
8. LEGAL ETHICS; AUTHORITY OF ATTORNEYS TO BIND CLIENTS. —
Under Rule 138, Section 23 of the Rules of Court, an attorney has authority
to bind his client in any case by an agreement in relation thereto made in
writing, and this authority would include taking appeals and all matters of
ordinary judicial procedure. But he cannot, without special authority,
compromise his client's litigation or receive anything in discharge of a
client's claim but the full amount in cash. The special powers of attorney
separately executed by Florencia Tarriela and William W. Ferguson granted
to J.P. Garcia & Associates are very explicit in their terms as to the
counsel's authority in the case at bar.
DECISION
CAMPOS, JR., J p:
Petitioner is a foreign commercial banking corporation duly licensed to do
business in the Philippines. Private respondents, spouses Cresencio and
Zenaida Velez, were good clients of petitioner bank's branch in Cebu until
March 14, 1986 when they filed a complaint for specific performance and
damages against it in Civil Case No. CEB-4751 before the Regional Trial
Court of Cebu, Branch 10.
Private respondents alleged in their complaint that the petitioner bank
extended to them credit lines sufficiently secured with real estate and
chattel mortgages on equipment. They claim that petitioner offered them
special additional accommodation of Five Million Pesos (P5,000,000.00) to
be availed of in the following manner:
"a. Defendant would and did purchase check or checks from the plaintiffs
by exchanging it with defendant's manager's check on a regular daily basis
as reflected in the defendant's own ledger furnished to plaintiffs;
b. It was further agreed that on the following day, defendant CITIBANK
would again purchase from the plaintiffs, check or checks, by exchanging
the same with defendant's manager's check, which check, however, will be
deposited by the plaintiffs with their other banks to cover the check or
checks previously issued by the plaintiffs mentioned above;
c. The same regular and agreed activity would be undertaken by the
plaintiffs and defendant CITIBANK herein every banking day thereafter;" 1
This arrangement started on September 4, 1985 until March 11, 1986,
when private respondents tried to exchange with petitioner bank six checks
amounting to P3,095,000.00 but petitioner bank allegedly refused to
continue with the arrangement even after repeated demands. Instead,
petitioner bank suggested to private respondents that the total amount
covered by the "arrangement be restructured to thirty (30) months with
prevailing interest rate on the diminishing balance". 2 Private respondents
agreed to such a proposal. Then as a sign of good faith, they issued and
delivered a check for P75,000.00 in favor of petitioner bank which was
refused by the latter demanding instead full payment of the entire amount.
For the failure of petitioner bank to comply with this restructuring agreement
private respondents sued for specific performance and damages.
Petitioner bank has a different version of the business relationship that
existed between it and private respondents. Thus:
". . . starting sometime on September 4 of 1985, he (private respondent
Crescencio Velez) deposited his unfunded personal checks with his current
account with the petitioner. But prior to depositing said checks, he would
present his personal checks to a bank officer asking the latter to have his
personal checks immediately credited as if it were a cash deposit and at the
same time assuring the bank officer that his personal checks were fully
funded. Having already gained the trust and confidence of the officers of
the bank because of his past transactions, the bank's officer would always
accommodate his request. After his requests are granted which is done by
way of the bank officer affixing his signature on the personal checks, private
respondent Cresencio Velez would then deposit his priorly approved
personal checks to his current account and at the same time withdraw
sums of money from said current account by way of petitioner bank's
manager's check. Private respondent would then deposit petitioner bank's
manager's check to his various current accounts in other commercial banks
to cover his previously deposited unfunded personal checks with petitioner
bank. Naturally, petitioner bank and its officers never discovered that his
personal check deposits were unfunded. On the contrary, it gave the
petitioner bank the false impression that private respondent's construction
business was doing very well and that he was one big client who could be
trusted. This deceptive and criminal scheme he did every banking day
without fail from September 4, 1985 up to March 11, 1986. The amounts
that he was depositing and withdrawing during this period (September 4,
1985 to March 11, 1986) progressively became bigger. It started at
P46,000.00 on September 4, 1985 and on March 11, 1986 the amount of
deposit and withdrawal already reached over P3,000,000.00. At this point in
time (March 11, 1986), the private respondent Cresencio Velez presumably
already feeling that sooner or later he would be caught and that he already
wanted to cash in on his evil scheme, decided to run away with petitioner's
money. On March 11, 1986, he deposited various unfunded personal
checks totalling P3,095,000.00 and requested a bank officer that the same
be credited as cash and after securing the approval of said bank officer,
deposited his various personal checks in the amount of P3,095,000.00 with
his current account and at the same time withdrew the sum of
P3,244,000.00 in the form of petitioner's manager's check. Instead of using
the proceeds of his withdrawals to cover his unfunded personal checks, he
ran away with petitioner bank's money. Thus, private respondent Cresencio
Velez's personal checks deposited with petitioner bank on March 11, 1986
in the total aggregate amount of P3,095,000.00 bounced. The checks
bounced after said personal checks were made the substantial basis of his
withdrawing the sum of P3,244,000.00 from his current account with
petitioner bank." 3
Subsequently, on August 19, 1986, petitioner bank filed a criminal
complaint against private respondents for violation of Batas Pambansa Blg.
22 (Bouncing Checks Law) and estafa (six counts) under Article 315 par.
2(d) of the Revised Penal Code. On April 28, 1988, the investigating fiscal
recommended the filing of an information against private respondents for
violations of the mentioned laws.
On June 13, 1989, petitioner bank submitted its answer to the complaint
filed by private respondents. In the Order dated February 20, 1990, the
case was set for pre-trial on March 30, 1990 and petitioner bank was
directed to submit its pre-trial brief at least 3 days before the pre-trial
conference. Petitioner bank only filed its pre-trial brief on March 30, 1990.
On March 30, 1990, the date of the pre-trial conference, counsel for
petitioner bank appeared, presenting a special power of attorney executed
by Citibank officer Florencia Tarriela in favor of petitioner bank's counsel,
the J.P. Garcia & Associates, to represent and bind petitioner bank at the
pre-trial conference of the case at bar.
Inspite of this special power of attorney, counsel for private respondents
orally moved to declare petitioner bank as in default on the ground that the
special power of attorney was not executed by the Board of Directors of
Citibank. Petitioner bank was then required to file a written opposition to
this oral motion to declare it as in default. In said opposition petitioner bank
attached another special power of attorney made by William W. Ferguson,
Vice President and highest ranking officer of Citibank, Philippines,
constituting and appointing the J.P. Garcia & Associates to represent and
bind the BANK at the pre-trial conference and/or trial of the case of
"Cresencio Velez, et al. vs. Citibank, N.A.". 4 In an Order dated April 23,
1990, respondent judge denied private respondents' oral motion to declare
petitioner bank as in default and set the continuation of the pre-trial
conference for May 2, 1990.
On the scheduled pre-trial conference, private respondents reiterated, by
way of asking for reconsideration, their oral motion to declare petitioner
bank as in default for its failure to appear through an authorized agent and
that the documents presented are not in accordance with the requirements
of the law. Petitioner bank again filed on May 14, 1990 its opposition thereto,
stating as follows:
". . . While it has been the practice of Citibank to appoint its counsels as its
attorney-in-fact in civil cases because it considers said counsels equivalent
to a Citibank employee, yet, in order to avoid further arguments on the
matter, the defendant Citibank will secure another power of attorney from
Mr. William W. Ferguson in favor of its employee/s who will represent the
defendant Citibank in the pre-trial conferences of this case. As soon as the
said special power of attorney is secured, the defendant will present it
before this Honorable Court and in pursuance therewith, the defendant
hereby makes a reservation to present such document as soon as
available." 5
In compliance with the above promise, petitioner bank filed a manifestation,
dated May 23, 1990, attaching therewith a special power of attorney
executed by William W. Ferguson in favor of Citibank employees to
represent and bind Citibank on the pre-trial conference of the case at bar. 6
On August 15, 1990, respondent judge issued an order declaring petitioner
bank as in default. This order, received by petitioner bank on September 27,
1990, cited the following as reason for the declaration of default:
"Defendant-bank, although a foreign corporation, is bound by Philippine
laws when doing and conducting business in the Philippines (Sec. 129, B.P.
Blg. 68), and its corporate powers could only be exercised by its Board of
Directors (Sec. 23, B.P. Blg. 68). The exercise by the Board of Directors of
such power could only be valid if it bears the approval of the majority of the
Board (Sec. 25, par. 2, Corporation Code). The records does not show the
requisite document. The alleged authority (Special Power of Attorney,
Annex "A") executed by Mr. William W. Ferguson in favor of the alleged
Citibank employees, assuming the same to be a delegable authority, to
represent the defendant in the pre-trial conference, made no mention of J.P.
Garcia & Associates as one of the employees of the defendant.
It stands to reason therefore, that the defendant-bank has no proper
representation during the pre-trial conference on May 2, 1990 for purposes
of Sec. 2, Rule 20 of the Rules of Court." 7
On October 1, 1990, petitioner bank filed a motion for reconsideration of the
above order but it was denied on December 10, 1990.
Petitioner bank then filed a petition for certiorari, prohibition and mandamus
with preliminary injunction and/or temporary restraining order with the Court
of Appeals. On June 26, 1991, the Court of Appeals dismissed the petition
on the following grounds:
". . . In the first place, petitioner admitted that it did not and could not
present a Board resolution from the bank's Board of Directors appointing its
counsel, Atty. Julius Z. Neri, as its attorney-in-fact to represent and bind it
during the pre-trial conference of this case. This admission is contained on
pages 12 and 13 of the instant petition.
In the second place, the "By-Laws" of petitioner which on its face authorizes
(sic) the appointment of an attorney-in-fact to represent it in any litigation,
has not been approved by the Securities and Exchange Commission, as
required by Section 46 of the Corporation Code of the Philippines.
Apparently, the "By-Laws" in question was (sic) approved under the laws of
the United States, but there is no showing that the same was given the
required imprimatur by the Securities and Exchange Commission. Since
petitioner is a foreign corporation doing business in the Philippines, it is
bound by all laws, rules and regulations applicable to domestic corporations
(Sec. 129, Corporation Code).
In the third place, no special power of attorney was presented authorizing
petitioner's counsel of record, Atty. Julius Neri and/or J.P. Garcia
Associates, to appear for and in behalf of petitioner during the pre-trial.
What petitioner exhibited to the court a quo was a general power of attorney
given to one William W. Ferguson who in turn executed a power of attorney
in favor of five (5) (sic) Citibank employees to act as attorney-in-fact in Civil
Case No. CEB-4751. Yet, during the pre-trial not one of said employees
appeared, except counsel who is not even a bank employee.
Furthermore, even assuming the validity of the power of attorney issued by
petitioner in favor of Ferguson as well as the power of attorney he issued to
five (5) (sic) Citibank employees, said power of attorney has not been
shown to be a Special Power of Attorney precisely intended not only to
represent the bank at the pre-trial of the case on a certain date but also to
enter into any compromise as required in paragraph 3, Article 1878 of the
Civil Code and Section 1 (a), Rule 20, Rules of Court." 8
Hence, this instant petition.
Petitioner bank contends that no board resolution was necessary for its
legal counsel, Atty. Julius Z. Neri, or Citibank employees to act as its
attorney-in-fact in the case at bar because petitioner bank's by-laws grant
to its Executing Officer and Secretary Pro-Tem the power to delegate to a
Citibank officer, in this case William W. Ferguson, the authority to represent
and defend the bank and its interests.
Furthermore, it contends that the Court of Appeals erred in holding that the
by-laws of petitioner bank cannot be given effect because it did not have
the imprimatur of the Securities and Exchange Commission (SEC) as
required by Section 46 of the Corporation Code of the Philippines.
Private respondents refute both contentions. They assail the authority of
petitioner bank's legal counsel to appear at the pre-trial conference on two
grounds, namely: first, that the authority did not come from the Board of
Directors which has the exclusive right to exercise corporate powers; and
second, that the authority granted to the Executing Officer in the by-laws
was ineffective because the same were not submitted to, nor approved by,
the SEC.
There are thus two issues in this case. First, whether a resolution of the
board of directors of a corporation is always necessary for granting
authority to an agent to represent the corporation in court cases. And
second, whether the by-laws of the petitioner foreign corporation which has
previously been granted a license to do business in the Philippines, are
effective in this jurisdiction. If the by-laws are valid and a board resolution is
not necessary as petitioner bank claims, then the declaration of default
would have no basis.
In the corporate hierarchy, there are three levels of control: (1) the board of
directors, which is responsible for corporate policies and the general
management of the business affairs of the corporation; (2) the officers, who
in theory execute the policies laid down by the board, but in practice often
have wide latitude in determining the course of business operations; and (3)
the stockholders who have the residual power over fundamental corporate
changes, like amendments of the articles of incorporation. However, just as
a natural person may authorize another to do certain acts in his behalf, so
may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it.
Section 23 of the Corporation Code of the Philippines in part provides:
"SEC. 23. The board of directors or trustees. Unless otherwise provided in
this Code, the corporate powers of all corporations formed under this Code
shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be
elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1)
year and until their successors are elected and qualified.
xxx xxx xxx" (Emphasis supplied).
Thus, although as a general rule, all corporate powers are to be exercised
by the board of directors, exceptions are made where the Code provides
otherwise.
Section 25 of said Code provides that the directors of the corporation shall
elect its corporate officers, and further provides as follows:
"SEC. 25. Corporate officers; quorum. — . . . The directors or trustees and
officers to be elected shall perform the duties enjoined on them by law and
by the by-laws of the corporation . . ."
Furthermore, Section 47 of the same Code enumerates what may be
contained in the by-laws, among which is a provision for the "qualifications,
duties and compensation of directors or trustees, officers and employees".
(Emphasis supplied.)
Taking all the above provisions of law together, it is clear that corporate
powers may be directly conferred upon corporate officers or agents by
statute, the articles of incorporation, the by-laws or by resolution or other
act of the board of directors. In addition, an officer who is not a director may
also appoint other agents when so authorized by the by-laws or by the
board of directors. Such are referred to as express powers. 9 There are
also powers incidental to express powers conferred. It is a fundamental
principle in the law of agency that every delegation of authority, whether
general or special, carries with it, unless the contrary be expressed, implied
authority to do all of those acts, naturally and ordinarily done in such cases,
which are reasonably necessary and proper to be done in order to carry into
effect the main authority conferred. 10
Since the by-laws are a source of authority for corporate officers and
agents of the corporation, a resolution of the Board of Directors of Citibank
appointing an attorney in fact to represent and bind it during the pre-trial
conference of the case at bar is not necessary because its by-laws allow its
officers, the Executing Officer and the Secretary Pro-Tem, ** to execute a
power of attorney to a designated bank officer, William W. Ferguson in this
case, clothing him with authority to direct and manage corporate affairs.
The relevant provision in the general power of attorney granted to him are
as follows:
"A. That the Executing Officer and the Secretary Pro-Tem are of full age,
competent to act in the premises, to me personally known, and that they are
authorized to execute this instrument by virtue of the powers granted to
them pursuant to the By-Laws of the Bank and the laws of the United States
of America, and that the Executing Officer said that he, on the one hand,
hereby revokes and cancels any instrument of power of attorney previously
executed on behalf of the Bank for use in the PHILIPPINES, in favor of
WILLIAM W. FERGUSON (hereinafter referred to as the "Attorney-in-fact"),
of legal age, a Banker, and now residing in the PHILIPPINES, and that he
(the Executing Officer), on the other hand, does hereby authorize and
empower the Attorney-in-fact, acting in the name or on behalf of the Bank,
or any of its Branches, or any interest it or they may have or represent, said
revocation and authorization to be effective as of this date as follows:
xxx xxx xxx
XVII. To represent and defend the Bank and its interest before any and all
judges and courts, of all classes and jurisdictions, in any action, suit or
proceeding in which the Bank may be a party or may be interested in
administrative, civil, criminal, contentious or contentious-administrative
matters, and in all kinds of lawsuits, recourses or proceedings of any kind or
nature, with complete and absolute representation of the Bank, whether as
plaintiff or defendant, or as an interested party for any reason
whatsoever . . .
xxx xxx xxx
XXI. To substitute or delegate this Power of Attorney in whole or in part in
favor of such one or more employees of the Bank, as he may deem
advisable, but without divesting himself of any of the powers granted to him
by this Power of Attorney; and to grant and execute in favor of any one or
more such employees, powers of attorney containing all or such
authorizations, as he may deem advisable. . . " 11
Since paragraph XXI above specifically allows Ferguson to delegate his
powers in whole or in part, there can be no doubt that the special power of
attorney in favor, first, of J.P. Garcia & Associates and later, of the bank's
employees, constitutes a valid delegation of Ferguson's express power
(under paragraph XVII above) to represent petitioner bank in the pre-trial
conference in the lower court.
This brings us to the second query: whether petitioner bank's by-laws,
which constitute the basis for Ferguson's special power of attorney in favor
of petitioner bank's legal counsel are effective, considering that petitioner
bank has been previously granted a license to do business in the
Philippines.
The Court of Appeals relied on Section 46 of the Corporation Code to
support its conclusion that the by-laws in question are without effect
because they were not approved by the SEC. Said section reads as
follows:
"SEC. 46. Adoption of by-laws. — Every corporation formed under this
Code must, within one (1) month after receipt of official notice of the
issuance of its certificate of incorporation by the Securities and Exchange
Commission, adopt a code of by-laws for its government not inconsistent
with this Code. For the adoption of by-laws by the corporation, the
affirmative vote of the stockholders representing at least a majority of the
outstanding capital stock, or of at least a majority of the members in the
case of non-stock corporations, shall be necessary. The by-laws shall be
signed by the stockholders or members voting for them and shall be kept in
the principal office of the corporation, subject to the inspection of the
stockholders or members during office hours; and a copy thereof, duly
certified to by a majority of the directors or trustees and countersigned by
the secretary of the corporation, shall be filed with the Securities and
Exchange Commission which shall be attached to the original articles of
incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be
adopted and filed prior to incorporation; in such case, such by-laws shall be
approved and signed by all the incorporators and submitted to the
Securities and Exchange Commission, together with the articles of
incorporation.
In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws are
not inconsistent with this Code."
A careful reading of the above provision would show that a corporation can
submit its by-laws, prior to incorporation, or within one month after receipt
of official notice of the issuance of its certificate of incorporation by the SEC.
When the third paragraph of the above provision mentions "in all cases", it
can only refer to these two options; i.e., whether adopted prior to
incorporation or within one month after incorporation, the by-laws shall be
effective only upon the approval of the SEC. But even more important, said
provision starts with the phrase "Every corporation formed under this Code",
which can only refer to corporations incorporated in the Philippines. Hence,
Section 46, in so far as it refers to the effectivity of corporate by-laws,
applies only to domestic corporations and not to foreign corporations.
On the other hand, Section 125 of the same Code requires that a foreign
corporation applying for a license to transact business in the Philippines
must submit, among other documents, to the SEC, a copy of its articles of
incorporation and by-laws, certified in accordance with law. Unless these
documents are submitted, the application cannot be acted upon by the SEC.
In the following section, the Code specifies when the SEC can grant the
license applied for. Section 126 provides in part:
"SEC. 126. Issuance of a license. — If the Securities and Exchange
Commission is satisfied that the applicant has complied with all the
requirements of this Code and other special laws, rules and regulations, the
Commission shall issue a license to the applicant to transact business in
the Philippines for the purpose or purposes specified in such license . . ."
Since the SEC will grant a license only when the foreign corporation has
complied with all the requirements of law, it follows that when it decides to
issue such license, it is satisfied that the applicant's by-laws, among the
other documents, meet the legal requirements. This, in effect, is an
approval of the foreign corporations by-laws. It may not have been made in
express terms, still it is clearly an approval. Therefore, petitioner bank's
by-laws, though originating from a foreign jurisdiction, are valid and
effective in the Philippines.
In pursuance of the authority granted to him by petitioner bank's by-laws, its
Executing Officer appointed William W. Ferguson, a resident of the
Philippines, as its Attorney-in-Fact empowering the latter, among other
things, to represent petitioner bank in court cases. In turn, William W.
Ferguson executed a power of attorney in favor of J.P. Garcia & Associates
(petitioner bank's counsel) to represent petitioner bank in the pre-trial
conference before the lower court. This act of delegation is explicity
authorized by paragraph XXI of his own appointment, which we have
previously cited.
It is also error for the Court of Appeals to insist that the special power of
attorney, presented by petitioner bank authorizing its counsel, Atty. Julius
Neri and/or J.P. Garcia & Associates, to appear for and in behalf of
petitioner bank during the pre-trial, is not valid. The records do not sustain
this finding. We quote with approval the contention of petitioner bank as it is
borne by the records, to wit:
". . . The records of this case would show that at the start, the petitioner,
thru counsel, presented a special power of attorney executed by then
Citibank Officer Florencio (sic) J. Tarriela which was marked as Exhibit "1"
in the pre-trial of this case . . . This is precisely the reason why the court
denied, in an Order dated April 23, 1990 . . . the private respondent's oral
motion to declare the defendant in fault. The said special power of attorney
executed by Florencio (sic) J. Tarriela was granted by Mr. Rafael B.
Buenaventura, who was then the Senior Vice-President of Citibank and the
highest ranking office of Citibank in the Philippines. Considering that at the
time of the presentation of the said special power of attorney Rafael B.
Buenaventura was no longer connected with Citibank, the petitioner again
presented another special power of attorney executed by William W.
Ferguson in favor of J.P. Garcia & Associates, . . .
Finding that the authority of William W. Ferguson to delegate his authority
to act for and in behalf of the bank in any civil suit is limited to individuals
who are employees of the bank the petitioner again on May 23, 1990
presented another special power of attorney dated May 16, 1990 wherein
William W. Ferguson appointed as attorney-in-fact the following employees
of petitioner, namely: Roberto Reyes, Nemesio Solomon, Aimee Yu and
Tomas Yap. The said special power of attorney was filed and presented by
the petitioner through its Manifestation filed in the Trial Court on May 23,
1990, . . ." 12
Under Rule 138, Section 23 of the Rules of Court, an attorney has authority
to bind his client in any case by an agreement in relation thereto made in
writing, and this authority would include taking appeals and all matters of
ordinary judicial procedure. But he cannot, without special authority,
compromise his client's litigation or receive anything in discharge of a
client's claim but the full amount in cash. The special powers of attorney
separately executed by Florencia Tarriela and William W. Ferguson granted
to J.P. Garcia & Associates are very explicit in their terms as to the
counsel's authority in the case at bar. We quote the relevant provisions of
the special powers of attorney showing sufficient compliance with the
requirements of Section 23, Rule 138, to wit:
"That the BANK further authorized the said J.P. GARCIA & ASSOCIATES
to enter into an amicable settlement, stipulation of facts and/or compromise
agreement with the party or parties involved under such terms and
conditions which the said J.P. GARCIA & ASSOCIATES may deem
reasonable (under parameters previously defined by the principal) and
execute and sign said documents as may be appropriate.
HEREBY GIVING AND GRANTING unto J.P. GARCIA & ASSOCIATES full
power and authority whatsoever requisite necessary or proper to be done in
or about the premises, as fully to all intents and purposes as the BANK
might or could lawfully do or cause to be done under and by virtue of these
presents." 13
It is also error on the part of the Court of Appeals to state that the power of
attorney given to the four (4) Citibank employees is not a special power of
attorney as required in paragraph 3, Article 1878 of the Civil Code and
Section 1 (a), Rule 20 of the Rules of Court. In the case of Tropical Homes,
Inc. vs. Villaluz, 14 the special power of attorney executed by petitioner
bank therein contained the following pertinent terms — "to appear for and in
its behalf in the above-entitled case in all circumstances where its
appearance is required and to bind it in all said instances". The court ruled
that:
"Although the power of attorney in question does not specifically mention
the authority of petitioner's counsel to appear and bind the petitioner at the
pre-trial conference, the terms of said power of attorney are comprehensive
enough as to include the authority to appear for the petitioner at the pre-trial
conference."
In the same manner, the power of attorney granted to petitioner bank's
employees should be considered a special power of attorney. The relevant
portion reads:
"WHEREAS, the Bank is the Defendant in Civil Case No. CEB-4751,
entitled "Cresencio Velez, et al. vs. Citibank, N.A.," pending before the
Regional Trial Court of Cebu City, Branch X;
NOW, THEREFORE, under and by virtue of Article XXI of the Power of
Attorney executed by the Bank in favor of the Attorney-in-Fact (Annex "A"),
which provision is quoted above, the Attorney-in-Fact has nominated,
designated and appointed, as by these presents he nominates, designates
and appoints, as his substitutes and delegates, with respect to the said
Power of Attorney, ROBERTO REYES, Vice President and/or NEMESIO
SOLOMON, JR., Manager, AIMEE YU, Assistant Vice President and/or
TOMAS YAP, Assistant Manager (hereinafter referred to as the
"DELEGATES"), all of legal age, citizens of the Republic of the Philippines
and with business address at Citibank Center, Paseo de Roxas, Makati,
Metro Manila, Philippines, the Attorney-in-Fact hereby granting, conferring
and delegating such authorities and binding the Bank in the Pre-Trial
Conference and/or Trial of the abovementioned case, pursuant to Rule 20
of the Revised Rules of Court, to the DELEGATES. The attorney-in-Fact
furthermore hereby ratifying and confirming all that the DELEGATES shall
lawfully do or cause to be done under and by virtue of these presents." 15
From the outset, petitioner bank showed a willingness, if not zeal, in
pursuing and defending this case. It even acceded to private respondent's
insistence on the question of proper representation during the pre-trial by
presenting not just one, but three, special powers of attorney. Initially, the
special power of attorney was executed by Florencia Tarriela in favor of J.P.
Garcia & Associates, petitioner bank's counsel. Private respondents
insisted that this was not proper authority required by law. To avoid further
argument, a second special power of attorney was presented by petitioner
bank, executed by William W. Fersugon, the highest ranking officer of
Citibank in the Philippines, in favor of its counsel J.P. Garcia & Associates.
But since the authority to delegate of William A. Fersugon in favor of an
agent is limited to bank employees, another special power of attorney from
Wiliam W. Fersugon in favor of the Citibank employees was presented. But
the respondent trial court judge disregarded all these and issued the
assailed default order. There is nothing to show that petitioner bank
"miserably failed to oblige"; on the contrary, three special powers of
attorney manifest prudence and diligence on petitioner bank's part.
In fact, there was no need for the third power of attorney because we
believe that the second power of attorney was sufficient under the by-law
provision authorizing Fersugon to delegate any of his functions to any one
or more employees of the petitioner bank. A reasonable interpretation of
this provision would include an appointment of a legal counsel to represent
the bank in court, for, under the circumstances, such legal counsel can be
considered, and in fact was considered by the petitioner bank, an employee
for a special purpose. Furthermore, Fersugon, who heads the Philippine
office thousands of miles away from its main office in the United States,
must be understood to have sufficient powers to act promptly in order to
protect the interests of his principal.
We reiterate the previous admonitions of this Court against "precipitate
orders of default as these have the effect of denying the litigant the chance
to be heard. While there are instances, to be sure, when a party may be
properly defaulted, these should be the exceptions rather than the rule and
should be allowed only in clear cases of an obstinate refusal or inordinate
neglect to comply with the orders of the court. Absent such a showing, the
party must be given every reasonable opportunity to present his side and to
refute the evidence of the adverse party in deference to due process of law".
16
Considering further that petitioner bank has a meritorious defense and that
the amount in contest is substantial, the litigants should be allowed to settle
their claims on the arena of the court based on a trial on the merits rather
than on mere technicalities.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED.
The decision of the Court of Appeals dated June 26, 1991 and its resolution
denying the motion for reconsideration of petitioner bank dated September
26, 1991 are both REVERSED and SET ASIDE. The order of default issued
on August 15, 1990 in Civil Case CEB-4751 of the Regional Trial Court of
Cebu is ANNULLED and SET ASIDE and the case is hereby REMANDED
to the court of origin for further proceedings.
SO ORDERED.
Rule 33: Demurrer to evidence
G.R. No. 148246 February 16, 2007
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
JUAN C. TUVERA, VICTOR P. TUVERA and TWIN PEAKS
DEVELOPMENT CORPORATION, Respondents.
DECISION
TINGA, J.:
The long-term campaign for the recovery of ill-gotten wealth of former
President Ferdinand E. Marcos, his wife Imelda, and their associates, has
been met with many impediments, some of which are featured in this case,
that have led to doubts whether there is still promise in that enterprise. Yet
even as the prosecution of those cases have drudged on and on, the era of
their final reckoning is just beginning before this Court. The heavy hammer
of the law is just starting to fall.
The instant action originated from a civil complaint for restitution and
damages filed by the Republic of the Philippines against Marcos and his
longtime aide Juan Tuvera, as well as Tuvera's son Victor and a
corporation the younger Tuvera had controlled. Trial on the case against
the Tuveras proceeded separately before the Sandiganbayan. After the
Republic had presented its evidence, the Tuveras successfully moved for
the dismissal of the case on demurrer to evidence. The demurrer was
sustained, and it falls upon this Court to ascertain the absence or existence
of sufficient proof to support the relief sought by the Republic against the
Tuveras.
I.
We begin with the facts.
Twin Peaks Development Corporation (Twin Peaks) was organized on 5
March 1984 as a corporation with a principal purpose of engaging in the
real estate business. There were five incorporating stockholders, including
respondent Victor Tuvera (Victor)1 who owned 48% of the shares of the
fledgling corporation. Victor was the son of respondent Juan Tuvera, who
was then Presidential Executive Assistant of President Marcos.
Acting on a letter dated 31 May 1984 of Twin Peaks’ Vice-President and
Treasurer Evelyn Fontanilla in behalf of the corporation, President Marcos
granted the award of a Timber License Agreement (TLA), more specifically
TLA No. 356, in favor of Twin Peaks to operate on 26,000 hectares of forest
land with an annual allowable cut of 60,000 cubic meters of timber and to
export 10,000 cubic meters of mahogany of the narra species.2 As a result,
Twin Peaks was able to engage in logging operations.
On 25 February 1986, President Marcos was ousted, and Corazon C.
Aquino assumed the presidency. Among her first acts as President was to
establish the Philippine Commission on Good Government (PCGG), tasked
with tracking down the ill-gotten wealth procured by Marcos, his family, and
associates during his 20-year rule. Among the powers granted to the PCGG
was the power to issue writs of sequestration.3 On 13 June 1988, the
PCGG issued a Writ of Sequestration on all assets, properties, records,
documents, and shares of stock of Twin Peaks on the ground that all the
assets of the corporation are ill-gotten wealth for having been acquired
directly or indirectly through fraudulent and illegal means.4 This was
followed
two days later by Mission Order No. MER-88 (Mission Order), also issued
by the PCGG, implementing the aforementioned Writ of Sequestration.5
On 9 December 1988, the PCGG, in behalf of the Republic, filed the
Complaint now subject of this Petition.6Impleaded as defendants in the
Complaint7 were Juan and Victor Tuvera, as well as the then-exiled
President Marcos. Through the Complaint, the Republic sought to recover
funds allegedly acquired by said parties in flagrant breach of trust and
fiduciary obligations with grave abuse of right and power in violation of the
Constitution and the laws of the Republic of the Philippines.8
In particular, the Complaint alleged that Juan Tuvera, as Presidential
Executive Assistant of President Marcos, took advantage of his relationship
to influence upon and connection with the President by engaging in a
scheme to unjustly enrich himself at the expense of the Republic and of the
Filipino people. This was allegedly accomplished on his part by securing
TLA No. 356 on behalf of Twin Peaks despite existing laws expressly
prohibiting the exportation of mahogany of the narra species9 and Twin
Peaks’ lack of qualification to be a grantee thereof for lack of sufficient
logging equipment to engage in the logging business.10 The Complaint
further alleged that Twin Peaks exploited the country’s natural resources by
engaging in large-scale logging and the export of its produce through its
Chinese operators whereby respondents obtained a revenue of
approximately ₱45 million.
The Complaint prayed that (1) TLA No. 356 be reverted to the State or
cancelled; (2) respondents be jointly and severally ordered to pay ₱48
million11 as actual damages; and (3) respondents pay moral, temperate and
exemplary damages, litigation expenses, and treble judicial costs.12 It cited
as grounds for relief, gross abuse of official position and authority, breach
of public trust and fiduciary obligations, brazen abuse of right and power,
unjust enrichment, and violation of the Constitution.13
In their Answer,14 respondents Victor Tuvera and Twin Peaks claimed that
Twin Peaks was awarded TLA No. 356 only after its articles of incorporation
had been amended enabling it to engage in logging operations,15 that the
Republic’s reference to Chinese operations and revenue of approximately
₱45 million were merely
imagined,16 and that the PCGG has no statutory authority to institute the
action.17 By way of counterclaim, respondents asked that the Republic be
ordered to pay Victor Tuvera moral damages and to pay both Victor Tuvera
and Twin Peaks exemplary damages, and to reimburse their attorney’s
fees.18
Anent the allegation that Twin Peaks sold about ₱3 million worth of lumber
despite the Writ of Sequestration issued by the PCGG, respondents
stressed that the Director of Forest Development acted within the scope of
his authority and the courts have no supervising power over the actions of
the Director of Forest Development and the Secretary of the Department of
Environment and Natural Resources (DENR) in the performance of their
official duties.19
As an affirmative and special defense, respondents Victor Tuvera and Twin
Peaks alleged that after Twin Peaks was granted TLA No. 356 in 24 August
1984, Felipe Ysmael, Jr. and Co., Inc. had filed a motion for the cancellation
of the same with the DENR
Secretary. When respondents submitted their Answer, the denial by the
DENR of the Ysmael motion was under review before the Court.20
Juan Tuvera, who was abroad when the case was filed on 9 December
1988, later submitted his own Answer on 6 December 1989.21 He also
denied the allegations of the Republic and alleged that as Presidential
Executive Assistant of then President Marcos, he acted within the confines
of his duties and had perpetrated no unlawful acts. He merely transmitted
communications of approval in the course of his duties and had nothing to
do with the decisions of then President Marcos.22 He denied having
anything to do with Twin Peaks.
Juan Tuvera filed a compulsory counterclaim on the ground that the instant
action had besmirched his reputation and caused serious anxiety and
mental anguish thus entitling him to moral and exemplary damages and
litigation expenses.23
On 3 May 1989, respondents filed an Omnibus Motion to Nullify Writ of
Sequestration and/or the Mission Order.24The Sandiganbayan issued a
Temporary Restraining Order against the PCGG requiring it to cease,
refrain and desist from further implementing the Writ of Sequestration and
the Mission Order.25 Subsequently, on motion of respondents, the
Sandiganbayan granted a Writ of Preliminary Injunction covering the
Mission Order. The Sandiganbayan deferred its resolution on the Motion to
Lift the Writ of Sequestration.26
From 1988 to 1993, the proceedings before the Sandiganbayan were
delayed owing to the difficulty of acquiring jurisdiction over the person of
President Marcos, who was by then already in exile. Thus, upon motion by
respondents, the Sandiganbayan granted them a separate pre-trial/trial
from President Marcos.27
Respondents submitted their documentary evidence in the Pre-Trial
Conference while the Republic reserved to present the same during trial.
After the pre-trial conference, the Sandiganbayan issued a Pre-Trial
Order28 dated 3 November 1993, which presented the issues for litigation
as follows:
Whether or not defendant Juan C. Tuvera who was a Presidential
Executive Assistant at the time material to this case, by himself and in
concert with his co-defendants Ferdinand E. Marcos and Victor Tuvera, 3-F-2 Decision, Supreme Court, 18 October 1990
took advantage of his relation and connection with the late Marcos, secure
(sic) a timber concession for Twin Peaks Development Corporation and,
engage (sic) in a scheme to unjustly enrich himself at the expense of the 3-G Resolution, Supreme Court, 5 June 1991
Republic and the Filipino People.29
4 Complaint, DENR, Almario F, Mendoza, 9 March 1990
The Pre-Trial Order also indicated that the Republic admitted the exhibits
by respondents, subject to the presentation of certified true copies thereof. 4-A Answer/Comment, DENR, Almario F. Mendoza, dated 20 April 1990
Respondents’ exhibits were as follows:30
4-B Decision, DENR, dated 28 August 1990
Exhibit
Description
Nos. 5 Complaint, Ombudsman, etc., Case No. 0-90-0708, 9 March 1990

1 Amended Articles of Incorporation dated 31 July 1984 6, 6-A Answer/Counter-Affidavit, etc.

2 TLA No. 356 6-B Decision, Ombudsman Case No. 0-90-0708, dated 8 August 1990

3 Order, Minister Ernesto M. Maceda, 22 July 1986

The Republic presented three (3) witnesses during the trial. The first
3-A Order, Minister Ernesto M. Maceda, 10 October 1986 witness was Joveniana M. Galicia, Chief of the National Forest
Management Division of the Forest Management Bureau. She identified
TLA No. 356 of Twin Peaks dated 20 August 1984 and a Memorandum
3-B Order, Minister Ernesto M. Maceda, 26 November 1986, O.P. Case No. 3521
dated 18 July 1984. She testified that TLA No. 356 covers 26,000 hectares
of forest land located in the Municipality of Isabela, Province of
3-C Resolution, Office of the President, 6 July 1987, O.P. Case No. 3521 Quirino.31 The Memorandum dated 18 July 1984 addressed to Director
Edmundo Cortez recited then President Marcos’ grant of the timber
3-D Order, Office of the President, 14 August 1987, I.S. No. 66 concession to Twin Peaks. Identified and marked in the same
memorandum were the name and signature of Juan Tuvera.32 Upon
cross-examination, Galicia stated that she was not yet the chief of the
3-E Complaint, PCGG, dated 20 July 1988
Division when the documents she identified were submitted to the Bureau.
She further stated it was her first time to see the aforementioned
3-E-1, documents
and when she was asked to bring the same before the trial court.
33
I.S. No. 66 Affidavit, PCGG, Almario F. Mendoza, Ltv. Ramon F. Mendoza
3-E-2,
Affidavit, Isidro Santiago
3-E-3 The next witness was Fortunato S. Arcangel, Regional Technical Director
III of the DENR. He testified that he is a Technical Director under the Forest
3-F Counter-Affidavit, Juan C. Tuvera, 17 August 1989 Management Services of the DENR.34 He identified Forestry Administration
Order (FAO) No. 11 dated 1 September 1970. He said he was aware of
PCGG, Motion to Withdraw, Jose Restituto F. Mendoza, 10 May 1989TLA No. 356 of Twin Peaks because at the time it was issued, he was the
35
3-F-1
chief of the Forestry Second Division and his duties included the evaluation
and processing of applications for licenses and permits for the disposition Secretary Development Corp.
and distribution of timber and other forest products.36 Consequently,

To prove that Twin Peaks Realty Developm

he was aware of the process by which TLA No. 356 was issued to Twin
Forestry Administrative Order was granted a timber license agreement w
Peaks.37 According to him, they processed the application insofar as they C
No. 11 (Revised) following the procedure outlined in the fore
evaluated the location of the area concerned and its present vegetative
and regulation and in violation of law.
state, examined the records, and determined the annual allowable land.
After the examination, the license agreement was prepared and submitted
for approval.38 He continued that under FAO No. 11, a public bidding is Income Tax Return of Victor To prove that Victor Tuvera was not a legi
D
required before any license agreement or permit for the utilization of timber Tuvera stockholder of Twin Peaks Realty Develop
within the forestry land is issued39 but no public bidding was conducted for
TLA No. 356.40 He explained that no such bidding was conducted because Income Tax Return of Evelyn To prove that Evelyn Fontanilla was not a
of a Presidential Instruction not to accept any application for timber E
Fontanilla stockholder of Twin Peaks Realty Develop
licensing as a consequence of which bidding procedures were
stopped.41 Upon cross-examination, Arcangel said that at the time TLA No.
Income Tax Return of To prove that Feliciano Salvana was not a
356 was issued, the Revised Forestry Code of the Philippines42 was already F
Feliciano Salvana stockholder of Twin Peaks Realty Develop
in effect but there were still provisions in FAO No. 11 that remained
applicable such as the terms and conditions of granting a license. He also
stated that the issuance of the license to Twin Peaks emanated from the Articles of Incorporation of To prove that Twin Peaks Realty Developm
President of the Philippines.43 G Twin Peaks Realty was organized to engage in the real estate
Development Corp. (original) and not in the logging industry.
The Republic’s third and last witness was Teresita M. Zuñiga, employee of
the Bureau of Internal Revenue. She identified the 1986 Income Tax Timber Manifestation Report
Returns of Victor P. Tuvera, Evelyn Fontanilla and Feliciano O. Salvana, of [Twin Peaks Realty To show that Twin Peaks Realty Developm
H
stockholders of Twin Peaks.44 Development Corp.] lacks equipment to process logs.
consigned to Scala Sawmill46
On 24 June 1994, the Republic rested its case after its formal offer of
evidence, as follows:45 Timber Manifestation Report
To show that Twin Peaks Realty Developm
I of Twin Peaks consigned to
lacks equipment to process logs.
Exhibits Documents Purpose La Peña Sawmill47

Timber License Agreement To prove that the Timber License Agreement was
Respondents subsequently submitted certified true copies of the exhibits
No. 356 of Twin Peaks executed prior to the amendment of the Articles of
A they had presented during the pre-trial conference.48
Realty Development Corp. Incorporation of Twin Peaks Realty Development
dated 20 August 1984 Corp.
With leave of court, respondents filed a Demurrer to Evidence.
Respondents argued that the Republic failed to present sufficient legal
Memorandum dated 18 July affirmative
B To prove the participation of Juan C. Tuvera in theevidence to prove its claim. In particular, respondents’ demurrer
1984 of Juan C. Tuvera,
grant of the timber concession of Twin contends that the memorandum (Exh. B) and TLA No. 356 are not "legal
Peaks Realty
Presidential Executive evidence" because "legal evidence" is not meant to raise a mere suspicion
or doubt. Respondents also claim that income tax returns are not sufficient
to show one’s holding in a corporation. Respondents also cited the factual
antecedents culminating with the Court’s decision in Felipe Ysmael, Jr. &
Corp., Inc. v. Sec. of Environment and Natural Resources.49
The Republic filed a Manifestation, contending that the demurrer is not
based on the insufficiency of its evidence but on the strength of the
evidence of respondents as shown by their own exhibits. The Republic
claimed that the Revised Forestry Code of the Philippines does not
dispense with the requirement of public bidding. The Republic added that
Sec. 5 of said law clearly provides that all applications for a timber license
agreement must be filed before the Bureau of Forest Development and that
respondents still have to prove compliance with the requirements for
service contracts.50
Respondents opposed the Manifestation, maintaining that since the
Republic admitted the exhibits of respondents during the pre-trial, it is
bound by its own admission. Further, these same exhibits contain
uncontroverted facts and laws that only magnify the conclusion that the
Republic has no right to relief.51
In its Resolution dated 23 May 2001,52 the Sandiganbayan sustained the
demurrer to evidence and referred to the decision of this Court in Ysmael in
holding that res judicata applies. The Anti-Graft Court also did not give
credence to the Republic’s allegations concerning respondents’ abuse of
power and/or public trust and consequent liability for damages in view of its
failure to establish any violation of Arts. 19, 20 and 21 of the Civil Code.
In essence, the Sandiganbayan held that the validity of TLA No. 356 was
already fully adjudicated in a Resolution/Order issued by the Office of the
President on 14 August 1987, which had become final and executory with
the failure of the aggrieved party to seek a review thereof. The
Sandiganbayan continued that the above pronouncement is supported by
this Court in Ysmael. Consequently, the Sandiganbayan concluded, the
Republic is barred from questioning the validity of TLA No. 356 in
consonance with the principle of res judicata.
The Republic now questions the correctness of the Sandiganbayan’s
decision to grant the demurrer to evidence because it was not based solely
on the insufficiency of its evidence but also on the evidence of respondent
mentioned during the pre-trial conference. The Republic also challenges
the applicability of res judicata.
II.
Preliminarily, we observe that respondents had filed before the
Sandiganbayan a pleading captioned Motion to Dismiss or Demurrer to
Evidence, thus evincing that they were seeking the alternative reliefs of
either a motion to dismiss or a demurrer to evidence. However, the
Sandiganbayan, in resolving this motion, referred to it as Motion to
Dismiss on Demurrer to Evidence, a pleading of markedly different
character from a Motion to Dismiss or Demurrer to Evidence. Still, a close
reading of the Sandiganbayan Resolution reveals clearly that the
Sandiganbayan was treating the motion as a demurrer, following Rule 33,
Section 1 of the Rules of Court, rather than a motion to dismiss under Rule
16, Section 1.
This notwithstanding, the Sandiganbayan justified the grant of demurrer
with res judicata as rationale. Res judicata is an inappropriate ground for
sustaining a demurrer to evidence, even as it stands as a proper ground for
a motion to dismiss. A demurrer may be granted if, after the presentation of
plaintiff’s evidence, it appears upon the facts and the law that the plaintiff
has shown no right to relief. In contrast, the grounds for res judicata present
themselves even before the presentation of evidence, and it should be at
that stage that the defense of res judicata should be invoked as a ground
for dismissal. Properly speaking, the movants for demurral who wish to rely
on a controlling value of a settled case as a ground for demurrer should
invoke the ground of stare decisis in lieu of res judicata.
In Domondon v. Lopez,53 we distinguished a motion to dismiss for failure of
the complainant to state a cause of action from a motion to dismiss based
on lack of cause of action. The first is governed by Rule 16, Section
1(g),54while the second by Rule 3355 of the Rules of Court, to wit:
x x x The first [situation where the complaint does not alleged cause of
action] is raised in a motion to dismiss under Rule 16 before a responsive
pleading is filed and can be determined only from the allegations in the
initiatory pleading and not from evidentiary or other matter aliunde. The
second [situation where the evidence does not sustain the cause of
action alleged] is raised in a demurrer to evidence under Rule 33 after the
plaintiff has rested his case and can be resolved only on the basis of the
evidence he has presented in support of his claim. The first does not
concern itself with the truth and falsity of the allegations while the second
arises precisely because the judge has determined the truth and falsity of
the allegations and has found the evidence wanting.
Hence, a motion to dismiss based on lack of cause of action is filed by the
defendant after the plaintiff has presented his evidence on the ground that
the latter has shown no right to the relief sought. While a motion to dismiss
under Rule 16 is based on preliminary objections which can be ventilated
before the beginning of the trial, a motion to dismiss under Rule 33 is in the
nature of a demurrer to evidence on the ground of insufficiency of evidence
and is presented only after the plaintiff has rested his case.56 [Emphasis
supplied]
III.
We shall first discuss the question of whether or not a demurrer to evidence
may be granted based on the evidence presented by the opposing parties.
An examination of the Sandiganbayan’s Resolution shows that dismissal of
the case on demurrer to evidence was principally anchored on the
Republic’s failure to show its right to relief because of the existence of a
prior judgment which consequently barred the relitigation of the same issue.
In other words, the Sandiganbayan did
not dismiss the case on the insufficiency of the Republic’s evidence nor on
the strength of respondents’ evidence. Rather, it based its dismissal on the
existence of the Ysmael case which, according to it, would render the case
barred by res judicata.
Prescinding from this procedural miscue, was the Sandiganbayan correct in
applying res judicata to the case at bar? To determine whether or not res
judicata indeed applies in the instant case, a review of Ysmael is proper.
In brief, Felipe Ysmael, Jr. & Co., Inc. was a grantee of a timber license
agreement, TLA No. 87. Sometime in August 1983, the Bureau of Forest
Development cancelled TLA No. 87 despite the company’s letter for the
reconsideration of the revocation. Barely one year thereafter, one-half (or
26,000 hectares) of the area formerly covered by TLA No. 87 was
re-awarded to Twin Peaks under TLA No. 356.
In 1986, Felipe Ysmael, Jr. & Co., Inc. sent separate letters to the Office of
the President and the Ministry of Natural Resources primarily seeking the
reinstatement of TLA No. 87 and the revocation of TLA No. 356. Both
offices denied the relief prayed for. Consequently, Felipe Ysmael, Jr. & Co.,
Inc. filed a petition for review before this Court.
The Court, through the late Justice Irene Cortes, held that Ysmael’s letters
to the Office of the President and to the Ministry of Natural Resources in
1986 sought the reconsideration of a memorandum order by the Bureau of
Forest Development canceling their timber license agreement in 1983 and
the revocation of TLA No. 356 subsequently issued by the Bureau in 1984.
Ysmael did not attack the administrative actions until after 1986. Since the
decision of the Bureau has become final, it has the force and effect of a final
judgment within the purview of the doctrine of res judicata. These decisions
and orders, therefore, are conclusive upon the rights of the affected parties
as though the same had been rendered by a court of general jurisdiction.
The Court also denied the petition of Ysmael because it failed to file the
special civil action for certiorari under Rule 65 within a reasonable time, as
well as in due regard for public policy considerations and the principle of
non-interference by the courts in matters which are addressed to the sound
discretion of government agencies entrusted with the regulation of activities
coming under the special technical knowledge and training of such
agencies.
In Sarabia and Leido v. Secretary of Agriculture and Natural Resources, et
al.,57 the Court discussed the underlying principle for res judicata, to wit:
The fundamental principle upon which the doctrine of res judicata rests is
that parties ought not to be permitted to litigate the same issue more than
once; that, when a right or fact has been judicially tried and determined by a
court of competent jurisdiction, or an opportunity for such trial has been
given, the judgment of the court, so long as it remains unreversed, should
be conclusive upon the parties and those in privity with them in law or
estate.
For res judicata to serve as an absolute bar to a subsequent action, the
following requisites must concur: (1) the former judgment or order must be
final; (2) the judgment or order must be on the merits; (3) it must have been
rendered by a court having jurisdiction over the subject matter and parties;
and (4) there must be between the first and second actions, identity of
parties, of subject matter, and of causes of action.58 When there is only
identity of issues with no identity of causes of action, there exists res
judicata in the concept of conclusiveness of judgment.59
In Ysmael, the case was between Felipe Ysmael Jr. & Co., Inc. and the
Deputy Executive Secretary, the Secretary of Environment and Natural
Resources, the Director of the Bureau of Forest Development and Twin
Peaks Development and Realty Corporation. The present case, on the
other hand, was initiated by the Republic of
the Philippines represented by the Office of the Solicitor General. No
amount of imagination could let us believe that there was an identity of
parties between this case and the one formerly filed by Felipe Ysmael Jr. &
Co., Inc.
The Sandiganbayan held that despite the difference of parties, res judicata
nevertheless applies on the basis of the supposed sufficiency of the
"substantial identity" between the Republic of the Philippines and Felipe
Ysmael, Jr. Co., Inc. We disagree. The Court in a number of cases
considered the substantial identity of parties in the application of res
judicata in instances where there is privity between the two parties, as
between their successors in interest by title60 or where an additional party
was simply included in the subsequent case61 or where one of the parties to
a previous case was not impleaded in the succeeding case.62
The Court finds no basis to declare the Republic as having substantial
interest as that of Felipe Ysmael, Jr. & Co., Inc. In the first place, the
Republic’s cause of action lies in the alleged abuse of
power on respondents’ part in violation of R.A. No. 301963 and breach of
public trust, which in turn warrants its claim for restitution and damages.
Ysmael, on the other hand, sought the revocation of TLA No. 356 and the
reinstatement of its own timber license agreement. Indeed, there is no
identity of parties and no identity of causes of action between the two
cases.
IV.
What now is the course of action to take since we cannot affirm the
Sandiganbayan’s grant of the demurrer to evidence? Rule 33, Sec. 1 reads:
Sec. 1. Effect of judgment on demurrer to evidence. – After the plaintiff has
completed the presentation of his evidence, the defendant may move for
dismissal on the ground that upon the facts and the law the plaintiff has
shown no right to relief. If his motion is denied, he shall have the right to
present evidence. If the motion is granted but on appeal the order of
dismissal is reversed he shall have be deemed to have waived the right to
present evidence.
The general rule is that upon the dismissal of the demurrer in the appellate
court, the defendant loses the right to present his evidence and the
appellate court shall then proceed to render judgment on the
merits on the basis of plaintiff’s evidence. As the Court explained in
Generoso Villanueva Transit Co., Inc. v. Javellana:64
The rationale behind the rule and doctrine is simple and logical. The
defendant is permitted, without waiving his right to offer evidence in the
event that his motion is not granted, to move for a dismissal (i.e., demur to
the plaintiff’s evidence) on the ground that upon the facts as thus
established and the applicable law, the plaintiff has shown no right to relief.
If the trial court denies the dismissal motion, i.e., finds that plaintiff’s
evidence is sufficient for an award of judgment in the absence of contrary
evidence, the case still remains before the trial court which should then
proceed to hear and receive the defendant’s evidence so that all the facts
and evidence of the contending parties may be properly placed before it for
adjudication as well as before the appellate courts, in case of appeal.
Nothing is lost. The doctrine is but in line with the established procedural
precepts in the conduct of trials that the trial court liberally receive all
proffered evidence at the trial to enable it to render its decision with all
possibly relevant proofs in the record, thus assuring that the appellate
courts upon appeal have all the material before them necessary to make a
correct judgment, and avoiding the need of remanding the case for retrial or
reception of improperly excluded evidence, with the possibility thereafter of
still another appeal, with all the concomitant delays. The rule, however,
imposes the condition by the same token that if his demurrer is granted by
the trial court, and the order of dismissal is reversed on appeal, the movant
loses his right to present evidence in his behalf and he shall have been
deemed to have elected to stand on the insufficiency of plaintiff’s case and
evidence. In such event, the appellate court which reverses the order of
dismissal shall proceed to render judgment on the merits on the basis of
plaintiff’s evidence.65
It thus becomes the Court's duty to rule on the merits of the complaint, duly
taking into account the evidence presented by the Republic, and without
need to consider whatever evidence the Tuveras have, they having waived
their right to present evidence in their behalf.
V.
Executive Order No. 14-A66 establishes that the degree of proof required in
cases such as this instant case is preponderance of evidence. Section 3
thereof reads:
SEC. 3. The civil suits to recover unlawfully acquired property under
Republic Act No. 1379 or for restitution, reparation of damages, or
indemnification for consequential and other damages or any other civil
actions under the Civil Code or other existing laws filed with the
Sandiganbayan against Ferdinand E. Marcos, Imelda R. Marcos, members
of their immediate family, close relatives, subordinates, close and/or
business associates, dummies, agents and nominees, may proceed
independently of any criminal proceedings and may be proved by a
preponderance of evidence. [Emphasis supplied.]
Thus, the Court recently held in Yuchengco v. Sandiganbayan,67 that in
establishing the quantum of evidence required for civil cases involving the
Marcos wealth held by their immediate family, close relatives, subordinates,
close and/or business associates, dummies,
agents and nominees filed before the Sandiganbayan, that "the
Sandiganbayan, x x x was not to look for proof beyond reasonable doubt,
but to determine, based on the evidence presented, in light of common
human experience, which of the theories proffered by the parties is more
worthy of credence."
In order that restitution may be proper in this case, it must be first
established that the grant of the TLA to Twin Peaks was illegal. With the
illegality of the grant established as fact, finding Victor Tuvera, the major
stockholder of Twin Peaks, liable in this case should be the ineluctable
course. In order that Juan Tuvera may be held answerable as well, his own
participation in the illegal grant should also be substantiated.
Regarding the first line of inquiry, the Complaint adverted to several
provisions of law which ostensibly were violated by the grant of the TLA in
favor of Twin Peaks. These include R.A. No. 3019, otherwise known as the
Anti-Graft and Corrupt Practices Act, and Articles 19, 20 and 21 of the Civil
Code.
Still, the most organic laws that determine the validity or invalidity of the
TLA are those that governed the issuance of timber license agreements in
1984. In that regard, the Republic argues that the absence of a bidding
process is patent proof of the irregularity of the issuance of the TLA in favor
of Twin Peaks.
A timber license agreement authorizes a person to utilize forest resources
within any forest land with the right of possession and exclusion of
others.68 The Forestry Reform Code prohibits any person from utilizing,
exploiting, occupying, possessing or conducting any activity within any
forest land unless he had been authorized to do so under a license
agreement, lease, license or permit.69 The Code also mandates that no
timber license agreement shall be issued unless the applicant satisfactorily
proves that he has the financial resources and technical capability not only
to minimize utilization, but also to practice forest protection, conservation
and development measures to insure the perpetuation of said forest in
productive condition.70 However, the Code is silent as to the procedure in
the acquisition of such timber license agreement. Such procedure is more
particularly defined under FAO No. 11, dated 1 September 1970, which
provides for the "revised forestry license regulations."
FAO No. 11 establishes that it is the Director of Forestry who has the power
"to grant timber licenses and permits."71It also provides as a general policy
that timber license agreements shall be
granted through no other mode than public bidding.72 However, Section 24
of FAO No. 11 does admit that a timber license agreement may be granted
through "negotiation," as well as through "public bidding."
26. When license may be issued.–A license under this Regulations may be
issued or granted only after an application and an award either
through bidding or by negotiation has been made and the Director of
Forestry is satisfied that the issuance of such license shall not be
inconsistent with existing laws and regulations or prejudicial to public
interest, and that the necessary license fee, bond deposit and other
requirements of the Bureau of Forestry have been paid and complied
with.73 [Emphasis supplied.]
However, even a person who is granted a TLA through "negotiation" is still
required to submit the same requirements and supporting papers as
required for public bidding. The pertinent provisions of FAO No. 11 state:
18. Requirements and supporting papers to be submitted.—The following
requirements with accompanying supporting papers or documents shall be
submitted in addition to the requirements of Section 12:
a. With bid application:
The applicant shall support his bid application with the required application
fee duly paid and proofs of the following:
(1) Capitalization.—Cash deposits and established credit line by applicant
in domestic bank certified to by the bank President or any of its authorized
officials, duly attested by depositor as his own to be used exclusively in
logging and wood processing operations if awarded the area. The bank
certificate shall be accompanied by a written consent by the
applicant-depositor for the Director of Forestry or his authorized
representative to verify such cash deposit with bank authorities.
Capitalization and financial statements.— A minimum capitalization of
₱20.00 per cubit meter in cash and an established credit line of ₱150.00
per cubic meter based on the allowable annual cut are required. Financial
statements certified by the independent and reputable certified public
accountants must accompany the application as proof of the necessary
capitalization.
Additional capitalization, Real Estate.— In the event that the capitalization
of the applicant is less than the minimum or less than that set by the
Director of Forestry for the area, the applicant bidder may be asked to
submit an affidavit signifying his readiness, should the area be awarded to
him, to convert within a specified time any specified unencumbered and
titled real estate into cash for use in operating and developing the area.
Presentation of real estate should show location by municipality and
province, hectarage, title number, latest land tax declaration, assessed
value of land and improvements (stating kind of improvements), and
encumbrances if any.
(2) Logging machinery and equipment.—Evidence of ownership or capacity
to acquire the requisite machinery or equipment shall accompany the bid
application. The capacity or ability to acquire machineries and equipments
shall be determined by the committee on award. Leased equipment or
machineries may be considered in the determination by the Committee if
expressly authorized in writing by the Director of Forestry.
(3) Technical know-how.—To assure efficient operation of the area or
concession, the applicant shall submit proof of technical competence and
know-how and/or his ability to provide hired services of competent
personnel.
(4) Operation or development plan.— An appropriate plan of operation and
development of the forest area applied for shall be submitted, including
phasing plans and the fund requirements therefor, consistent with selective
logging methods and the sustained yield policy of the Bureau of Forestry.
This plan must be in general agreement with the working unit plan for the
area as contained in Chapter III, Section 6(a) hereinabove.
(5) Processing plant.—The bidder or applicant shall show evidence of
ownership of, or negotiation to acquire, a wood processing plant. The kind
and type of plant, such as plywood, veneer, bandmill, etc. shall be specified.
The plant should be capable of processing at least 60% of the allowable
annual cut.
(6) Forestry Department.—The applicant shall submit assurance under
oath that he shall put a forestry department composed of trained or
experienced foresters to carry out forest management activities such as
selective logging, planting of denuded or logged-over areas within the
concessions as specified by the Director of Forestry and establish a forest
nursery for the purpose.
(7) Statement on sustained yield operations, reforestation, and protection
under management plans.— The bidder or applicant shall submit a sworn
statement of his agreement and willingness to operate the area under
sustained yield to reforest cleared areas and protect the concession or
licensed area and under the approved management plan, and to abide with
all existing forestry laws, rules and regulations and those that may hereafter
be promulgated; and of his agreement that any violation of these conditions
shall be sufficient cause for the cancellation of the licenses.
(8) Organization plan.–Other important statement connected with sound
management and operation of the area, such as the submission among
others, of the organizational plan and employment of concession guards,
shall be submitted. In this connection, the applicant shall submit a sworn
statement to the effect no alien shall be employed without prior approval of
proper authorities.
(9) Unauthorized use of heave equipment.—The applicant shall give his
assurance that he shall not introduce into his area additional heave
equipment and machinery without approval of the Director of Forestry.
(10) Such other inducements or considerations to the award as will serve
public interest may also be required from time to time.
xxxx
d) With applications for areas to be negotiated.—All the foregoing
requirements and supporting papers required for bidding under Section
18(a) hereinabove and of Section 20(b) hereinbelow shall also apply to all
areas that may be granted through negotiation. In no case shall an area
exceeding 100,000 hectares be granted thru negotiation.74
The rationale underlying the very elaborate procedure that entails prior to
the grant of a timber license agreement is to avert the haphazard
exploitation of the State's forest resources as it provides that only the most
qualified applicants will be allowed to engage in timber activities within the
strict limitations of the grant and that cleared forest areas will have to be
renewed through reforestation. Since timber is not a readily renewable
natural resource, it is essential and appropriate that the State serve and act
as a jealous and zealous guardian of our forest lands, with the layers of
bureaucracy that encumber the grant of timber license agreements
effectively serving as a defensive wall against the thoughtless ravage of our
forest resources.
There is no doubt that no public bidding occurred in this case. Certainly,
respondents did not raise the defense in their respective answers. The
absence of such bidding was testified on by prosecution witness Arcangel.
Yet even if we consider that Twin Peaks could have acquired the TLA
through "negotiation," the prescribed requirements for "negotiation" under
the law were still not complied with.
It is evident that Twin Peaks was of the frame of mind that it could simply
walk up to President Marcos and ask for a timber license agreement
without having to comply with the elaborate application procedure under the
law. This is indicated by the letter dated 31 May 198475 signed by Twin
Peaks’ Vice President and Treasurer Evelyn Fontanilla, addressed directly
to then President Marcos, wherein Twin Peaks expressed that "we would
like to request a permit to export 20,000 cubic meters of logs and to cut and
process 10,000 cubic meters of the narra species in the same area."76 A
marginal note therein signed by Marcos indicates an approval thereof.
Neither the Forestry Reform Code nor FAO No. 11 provide for the
submission of
an application directly to the Office of the President as a proper mode for
the issuance of a TLA. Without discounting the breadth and scope of the
President’s powers as Chief Executive, the authority of the President with
respect to timber licenses is, by the express terms of the Revised Forestry
Code, limited to the amendment, modification, replacement or rescission of
any contract, concession, permit, license or any other form of privilege
granted by said Code.77
There are several factors that taint this backdoor application for a timber
license agreement by Twin Peaks. The forest area covered by the TLA was
already the subject of a pre-existing TLA in favor of Ysmael. The Articles of
Incorporation of Twin Peaks does not even stipulate that logging was either
a principal or secondary purpose of the corporation. Respondents do allege
that the Articles was amended prior to the grant in order to accommodate
logging as a corporate purpose, yet since respondents have waived their
right to present evidence by reason of their resort to demurrer, we cannot
consider such allegation as proven.
Sec. 18(a)(1) of FAO No. 11 requires that an applicant must have a
minimum capitalization of ₱20.00 per cubic meter in cash and an
established credit line of ₱150.00 per cubic meter based on the allowable
annual cut. TLA No. 356 allowed Twin Peaks to operate on 26,000 hectares
of forest land with an annual allowable cut of 60,000 cubic meters of timber.
With such annual allowable cut, Twin
Peaks, therefore, must have at least ₱1,200,000.00 in cash as its minimum
capitalization, following FAO No. 11. An examination of Twin Peaks’
Articles of Incorporation shows that its paid-up capital was only
₱312,500.00.78 Clearly, Twin Peaks’ paid-up capital is way below the
minimum capitalization requirement.
Moreover, Sec. 18(5) provides that the bidder or applicant shall show
evidence of ownership of, or negotiation to acquire, a wood processing
plant. However, although TLA No. 356 was issued to Twin Peaks in 1984, it
continued to engage the services of at least two sawmills79 as late as 1988.
Four (4) years from the issuance of the license, Twin Peaks remained
incapable of processing logs.
What could have made Twin Peaks feel emboldened to directly request
President Marcos for the grant of Timber License Agreement despite the
obvious problems relating to its capacity to engage in timber activities? The
reasonable assumption is that the official and personal proximity of Juan
Tuvera to President Marcos was a key factor, considering that he was the
father of Twin Peaks' most substantial stockholder.
The causes of action against respondents allegedly arose from Juan
Tuvera’s abuse of his relationship, influence and connection as Presidential
Executive Assistant of then President Marcos. Through Juan Tuvera’s
position, the Republic claims that Twin Peaks was able to secure a Timber
License Agreement despite its lack of qualification and the absence of a
public bidding. On account of the unlawful issuance of a timber license
agreement, the natural resources of the country were unlawfully exploited
at the expense of the Filipino people. Victor Tuvera, as son of Juan Tuvera
and a major stockholder of Twin Peaks, was included as respondent for
having substantially benefited from this breach of trust. The circumstance of
kinship alone may not be enough to disqualify Victor Tuvera from seeking a
timber license agreement. Yet the basic ethical principle
of delicadeza should have dissuaded Juan Tuvera from any official or
unofficial participation or intervention in behalf of the "request" of Twin
Peaks for a timber license.
Did Juan Tuvera do the honorable thing and keep his distance from Twin
Peaks' "request"? Apparently not. Instead, he penned a Memorandum
dated 18 July 1984 in his capacity as Presidential Executive Assistant,
directed at the Director of Forestry, the official who, under the law,
possessed the legal authority to decide whether to grant the timber license
agreements after deliberating on the application and its supporting
documents. The Memorandum reads in full:
Office of the President of the Philippines
Malacanang
18 July 1984
74-84
MEMORANDUM to
Director Edmundo Cortes
Bureau of Forest Development
I wish to inform you that the President has granted the
award to the Twin Peaks Realty Development Corporation,
of the concession to manage, operate and develop in
accordance with existing policies and regulations half of the
timber area in the Province of Quirino covered by TLA No.
87, formerly belonging to the Felipe Ysmael, Jr. & Company
and comprising 54,920 hectares, and to export half of the
requested 20,000 cubic meters of logs to be gathered from
the area.
Herewith is a copy of the letter concering (sic) this matter of
Ms. Evelyn F. Fontanilla, Vice-President and Treasurer of
the Twin Peaks Realty Development Corporation, on which
the President indicated such approval in his own hand,
which I am furnishing you for your information and
appropriate action.
(signed)
JUAN C. TUVERA
Presidential Executive Assistant80
The Memorandum establishes at the very least that Tuvera knew about the
Twin Peaks "request," and of President Marcos's favorable action on such
"request." The Memorandum also indicates that Tuvera was willing to
convey those facts to the Director of Forestry, the ostensible authority in
deciding whether the Twin Peaks "request" should have been granted. If
Juan Tuvera were truly interested in preventing any misconception that his
own position had nothing to do with the favorable action on the "request"
lodged by the company controlled by his son, he would not have prepared
or signed the Memorandum at all. Certainly, there were other officials in
Malacañang who could have performed that role had the intent of the
Memorandum been merely to inform the Director of Forestry of such
Presidential action.
Delicadeza is not merely a stentorian term evincing a bygone ethic. It is a
legal principle as embodied by certain provisions of the Anti-Graft and
Corrupt Practices Act. Section 3 of R.A. No. 3019 states in part:
Sec. 3. Corrupt practices of public officers.—In addition to acts or
omissions of public officers already penalized by existing law, the following
shall constitute corrupt practices of any public officer and are hereby
declared to be unlawful:
(a) Persuading, inducing or influencing another public officer to perform an
act constituting a violation of rules and regulations duly promulgated by
competent authority or an offense in connection with the official duties of
the latter, or allowing himself to be persuaded, induced or influenced to
commit such violation or offense.
xxxx
(h) Directly or indirectly having financial or pecuniary interest in any
business, contract or transaction in connection with which he intervenes or
takes part in his official capacity, or in which he is prohibited by the
Constitution or by any law from having any interest.
The Memorandum signed by Juan Tuvera can be taken as proof that he
"persuaded, induced or influenced" the Director of Forestry to
accommodate a timber license agreement in favor of Twin Peaks, despite
the failure to undergo public bidding, or to comply with the requisites for the
grant of such agreement by negotiation, and in favor of a corporation that
did not appear legally capacitated to be granted such agreement. The fact
that the principal stockholder of Twin Peaks was his own son establishes
his indirect pecuniary interest in the transaction he appears to have
intervened in. It may have been possible on the part of Juan Tuvera to
prove that he did not persuade, induce or influence the Director of Forestry
or any other official in behalf of the timber license agreement of Twin Peaks,
but then again, he waived his right to present evidence to acquit himself of
such suspicion. Certainly, the circumstances presented by the evidence of
the prosecution are sufficient to shift the burden of evidence to Tuvera in
establishing that he did not violate the provisions of the Anti-Graft and
Corrupt Practices Act in relation to the Twin Peaks "request." Unfortunately,
having waived his right to present evidence, Juan Tuvera failed to disprove
that he failed to act in consonance with his obligations under the Anti-Graft
and Corrupt Practices Act.
In sum, the backdoor recourse for a hugely priced favor from the
government by itself, and more in tandem with other brazen relevant
damning circumstances, indicates the impudent abuse of power and the
detestable misuse of influence that homologously made the acquisition of
ill-gotten wealth a reality. Upon the facts borne out by the evidence for the
Republic and guideposts supplied by the governing laws, the Republic has
a clear right to the reliefs it seeks.
VI.
If only the Court's outrage were quantifiable in sums of money, respondents
are due for significant pecuniary hurt. Instead, the Court is forced to explain
in the next few paragraphs why respondents could not be forced to
recompensate the Filipino people in appropriate financial terms. The fault
lies with those engaged by the government to litigate this case in behalf of
the State.
It bears to the most primitive of reasons that an action for recovery of sum
of money must prove the amount sought to be recovered. In the case at bar,
the Republic rested its case without presenting any evidence, documentary
or testimonial, to establish the amount that should be restituted to the State
by reason of the illegal acts committed by the respondents. There is the
bare allegation in the complaint that the State is entitled to ₱48 million by
way of actual damages, but no single proof presented as to why the State is
entitled to such amount.
Actual damages must be proven, not presumed.81 The Republic failed to
prove damages. It is not enough for the Republic to have established, as it
did, the legal travesty that led to the wrongful obtention by Twin Peaks of
the TLA. It should have established the degree of injury sustained by the
State by reason of such wrongful act.
We fail to comprehend why the Republic failed to present any proof of
actual damages. Was it the inability to obtain the necessary financial
documents that would establish the income earned by Twin Peaks during
the period it utilized the TLA, despite the presence of the discovery
processes? Was it mere indolence or sheer incompetence? Whatever the
reason, the lapse is inexcusable, and the injury ultimately conduces to the
pain of the Filipino people. If the litigation of this case is indicative of the
mindset in the prosecution of ill-gotten wealth cases, it is guaranteed to
ensure that those who stole from the people will be laughing on their way to
the bank.
The claim for moral damages deserves short shrift. The claimant in this
case is the Republic of the Philippines, a juridical person. We explained
in Filipinas Broadcasting v. Ago Medical & Educational Center-Bicol
Christian College of Medicine (AMEC-BCCM):82
A juridical person is generally not entitled to moral damages because,
unlike a natural person, it cannot experience physical suffering or such
sentiments as wounded feelings, serious anxiety, mental anguish or moral
shock. The Court of Appeals cites Mambulao Lumber Co. v. PNB, et al. to
justify the award of moral damages. However, the Court's statement in
Mambulao that "a corporation may have a good reputation which, if
besmirched, may also be a ground for the award of moral damages" is an
obiter dictum.
Nevertheless, AMEC's claim for moral damages falls under item 7 of Article
2219 of the Civil Code. This provision expressly authorizes the recovery of
moral damages in cases of libel, slander or any other form of defamation.
Article 2219(7) does not qualify whether the plaintiff is a natural or juridical
person. Therefore, a juridical person such as a corporation can validly
complain for libel or any other form of defamation and claim for moral
damages.83
As explained, a juridical person is not entitled to moral damages under
Article 2217 of the Civil Code. It may avail of moral damages under the
analogous cases listed in Article 2219, such as for libel, slander or any
other form of defamation. Suffice it to say that the action at bar does not
involve any of the analogous cases under Article 2219, and indeed upon an
intelligent reading of Article 2219, it is difficult to see how the Republic could
sustain any of the injuries contemplated therein. Any lawyer for the
Republic who poses a claim for moral damages in behalf of the State
stands in risk of serious ridicule.
However, there is sufficient basis for an award of temperate damages, also
sought by the Republic notwithstanding the fact that a claim for both actual
and temperate damages is internally inconsistent. Temperate or moderate
damages avail when "the court finds that some pecuniary loss has been
suffered but its amount can not from the nature of the case, be proved with
certainty."84 The textual language might betray an intent that temperate
damages do not avail when the case, by its nature, is susceptible to proof of
pecuniary loss; and certainly the Republic could have proved pecuniary
loss herein.85 Still, jurisprudence applying Article 2224 is clear that
temperate damages may be awarded even in instances where pecuniary
loss could theoretically have been proved with certainty. 1 awphi 1.ne t
In a host of criminal cases, the Court has awarded temperate damages to
the heirs of the victim in cases where the amount of actual damages was
not proven due to the inadequacy of the evidence presented by the
prosecution. These cases include People v. Oliano,86 People v.
Suplito,87 People v. De la Tongga,[88] People v. Briones,89 and People v.
Plazo.90 In Viron Transportation Co., Inc. v. Delos Santos,91 a civil action for
damages involving a vehicular collision, temperate damages were awarded
for the resulting damage sustained by a cargo truck, after the plaintiff had
failed to submit competent proof of actual damages.
We cannot discount the heavy influence of common law, and its reliance on
judicial precedents, in our law on tort and damages. Notwithstanding the
language of Article 2224, a line of jurisprudence has emerged authorizing
the award of temperate damages even in cases where the amount of
pecuniary loss could have been proven with certainty, if no such adequate
proof was presented. The allowance of temperate damages when actual
damages were not adequately proven is ultimately a rule drawn from equity,
the principle affording relief to those definitely injured who are unable to
prove how definite the injury. There is no impediment to apply this doctrine
to the case at bar, which involves one of the most daunting and noble learned from the national trauma of the rule of Marcos, it is that kleptocracy
undertakings of our young democracy–the recovery of ill-gotten wealth cannot pay. As those dark years fade into the backburner of the collective
salted away during the Marcos years. If the doctrine can be justified to memory, and a new generation emerges without proximate knowledge of
answer for the unlawful damage to a cargo truck, it is a how bad it was then, it is useful that the Court serves a reminder here and
now.
compounded wrath if it cannot answer for the unlawful exploitation of our
forests, to the injury of the Filipino people. The amount of ₱1,000,000.00 as WHEREFORE, the petition is GRANTED. The Resolution of the
temperate damages is proper. Sandiganbayan dated 23 May 2001 is REVERSED. Respondents Juan C.
Tuvera, Victor P. Tuvera and Twin Peaks Development Corporation are
The allowance of temperate damages also paves the way for the award of hereby ordered to jointly and severally pay to the Republic of the
exemplary damages. Under Article 2234 of the Civil Code, a showing that Philippines One Million (₱1,000,000.00) Pesos, as and for temperate
the plaintiff is entitled to temperate damages allows for the award of damages, and One Million (₱1,000,000.00) Pesos, as and for exemplary
exemplary damages. Even as exemplary damages cannot be recovered as damages, plus costs of suit.
a matter of right, the courts are empowered to decide whether or not they
should be adjudicated. Ill-gotten wealth cases are hornbook SO ORDERED.
demonstrations where damages by way of example or correction for the
public good should be awarded. Fewer causes of action deserve the stigma
left by exemplary damages, which "serve as a deterrent against or as a
negative incentive to curb socially deleterious actions."92 The obtention of
the timber license agreement by Twin Peaks through fraudulent and illegal
means was highlighted by Juan Tuvera’s abuse of his position as
Presidential Executive Assistant. The consequent exploitation of 26
hectares of forest land benefiting all respondents is a grave case of unjust
enrichment at the expense of the Filipino people and of the environment
which should never be countenanced. Considering the expanse of forest
land exploited by respondents, the volume of timber that was necessarily
cut by virtue of their abuse and the estimated wealth acquired by
respondents through grave abuse of trust and public office, it is only
reasonable that petitioner be granted the amount of ₱1,000,000.00 as
exemplary damages.

The imposition of exemplary damages is a means by which the State,

through its judicial arm, can send the clear and unequivocal signal best
expressed in the pithy but immutable phrase, "never again." It is severely
unfortunate that the Republic did not exert its best efforts in the full recovery
of the actual damages caused by the illegal grant of the Twin Peaks TLA.
To the best of our ability, through the appropriate vehicle of exemplary
damages, the Court will try to fill in that deficiency. For if there is a lesson
that should be
Rule 33: Demurrer to evidence
G.R. No. 159189 February 21, 2007
THE MANILA BANKING CORPORATION, Petitioner,
vs.
UNIVERSITY OF BAGUIO, INC. and GROUP DEVELOPERS,
INC., Respondents.
DECISION
QUISUMBING, J.:
On appeal is the Order1 dated April 11, 2002 of the Regional Trial Court
(RTC) of Makati City, Branch 61, in Civil Case No. 90-389, dismissing
petitioner’s amended complaint for a sum of money with application for
preliminary attachment. In the appeal under Section 2, Rule 41, on a pure
question of law, petitioner alleges that the assailed Order of the RTC was
manifestly not in accord with law and jurisprudence. Also assailed is the
trial court’s June 27, 2003 Order2 denying the motion for reconsideration.
1awphi1.ne t
The facts are culled from the records.
On November 26, 1981, petitioner Manila Banking Corporation granted a
₱14 million credit line3 to respondent University of Baguio, Inc. for the
construction of additional buildings and purchase of new equipment.4 On
behalf of the university, then Vice-Chairman Fernando C. Bautista,
Jr.5 signed Promissory Note (PN) Nos. 10660, 10672, 10687, and
107086 and executed a continuing suretyship agreement.7 However,
Bautista, Jr. diverted the net proceeds of the loan. He endorsed and
delivered the four checks representing the net proceeds to respondent
Group Developers, Inc. (GDI).8 The loan was not paid.
On February 12, 1990, the bank filed a complaint for a sum of money with
application for preliminary attachment9against the university, Bautista, Jr.
and his wife Milagros, before the RTC of Makati City. Five years later, on
March 31, 1995, the bank amended the complaint and impleaded GDI as
additional defendant.
In the amended complaint,10 the bank alleged that it was unaware and did
not approve the diversion of the loan to GDI; that it granted the loan without
collateral upon the university’s undertaking that it would construct new
buildings; and that GDI connived with the university and Bautista, Jr. in
fraudulently contracting the debt.
In its Answer, the university claimed that the bank and GDI approved the
diversion. Allegedly, Victor G. Puyat, then GDI’s President, and Vicente G.
Puyat, then the bank’s President, decided to use the proceeds of the loan.
The university stated that Vicente G. Puyat and Victor G. Puyat even
assured the university, in separate letters11 both dated October 22, 1981,
that it would be relieved of any liability from the loan. Consequently, even if
the loan was overdue, the bank did not demand payment until February 8,
1989. By way of cross-claim, the university prayed that GDI be ordered to
pay the university the amount it would have to pay the bank. In addition, the
university filed a third-party complaint against Victor G. Puyat and the heirs
of Vicente G. Puyat.
On December 14, 1995, the bank and GDI executed a deed of dacion en
pago.12 As attorney-in-fact of Batulao Bio-Loop Farms, Inc., GDI ceded and
transferred to the bank a parcel of land consisting of 210,000 square
meters located in Nasugbu, Batangas and covered by Transfer Certificate
of Title No. T-70784. The dacion en pago was for a consideration of ₱78
million and in full settlement of the loan under PN Nos. 10660, 10672,
10687, and 10708, subject of Civil Case No. 90-389.13
In an Omnibus Order14 dated April 21, 1997, the trial court dismissed the
third-party complaint against the heirs of Vicente G. Puyat for being
premature since the bank’s cause of action was against the university as a
"dummy" of GDI. The trial court also dismissed the case as to Fernando
Bautista, Jr. and his wife upon Fernando’s death. The trial court further
ruled that the university’s motion to implead GDI as third-party defendant,
and GDI’s motions to dismiss the amended complaint and cross-claim, had
been mooted by the dacion en pago.
On March 19, 1998, the university moved to dismiss the amended
complaint on the grounds that: (1) there was "no more cause of action"
against it since the loan had been settled by GDI; and (2) the bank "failed to
prosecute the action for an unreasonable length of time."15 In an
Order16 dated August 17, 1999, the trial court denied the motion since the
"matters relied upon by the university were evidentiary in nature."
On October 14, 1999, the university moved to set the case for pre-trial on
December 2, 1999.17
On August 3, 2000, the trial court resolved GDI’s motion to resolve the
motions to dismiss and defer pre-trial; expunged from the record the deed
of dacion en pago; and reinstated GDI’s motions to dismiss the amended
complaint and cross-claim on the ground that no compromise agreement
was submitted for its approval.18
On August 29, 2001, the university filed a manifestation with motion for
reconsideration of the August 17, 1999 Order denying the university’s
motion to dismiss the amended complaint. The university argued that the
grounds for its motion to dismiss were not evidentiary as the deed of dacion
en pago and the bank’s judicial admission thereof were on record.
The bank opposed the motion on the ground that the motion for
reconsideration of the August 17, 1999 Order was filed after more than two
years. The bank noted that it was the university which moved to set the
case for pre-trial; thus, its claim of not seeking reconsideration of the
August 17, 1999 Order because of the scheduled pre-trial was
preposterous. The bank concluded that the motion to dismiss lacked basis
since the deed of dacion en pago had already been expunged.
In the appealed Order of April 11, 2002, the trial court ruled that the bank
had no cause of action against the defendants because its claim for a sum
of money had been paid through the dacion en pago. The trial court noted
that the bank even admitted the settlement. It disposed of the case as
follows:
WHEREFORE, in view of the foregoing, defendant [respondent herein]
University of Baguio’s Motion to Dismiss Amended Complaint is herein
GRANTED and this complaint for collection of sum of money is herein
DISMISSED.
Defendant UBI [respondent university] shall file the appropriate
Manifestation in Court specifying the dates in June when it will be available
to present evidence on its counterclaim.
Hence, this appeal where petitioner alleges:
I.
The RTC seriously erred in granting the Motion to Dismiss of respondent
UBI on the basis of a document that has already been indisputably stricken
off from (sic) the records of the case.
ii.
The RTC seriously erred in granting ubi’s Motion to Dismiss when the
issues raised therein are evidentiary in nature and did not refer to the
allegations in the complaint.
iii.
The RTC seriously erred in ruling, without trial, that the Deed of Dacion en
Pago between petitioner and respondent ubI [Should be gdi] has not been
rescinded.
iv.
The RTC should have denied ubi’s Manifestation (with Motion for
Reconsideration) as the filing of the Motion to Dismiss after respondent ubi
filed its Answer violated the Rules of Court.
V.
The RTC, without justifiable nor legal basis, adopted different policies to
parties similarly situated.
vi.
The RTC, without justifiable nor legal basis, resolved for the second time a
Motion to Dismiss which it has earlier denied instead of resolving the
Manifestation (with Motion for Reconsideration of said denial) which it was
being asked to resolve.20

SO ORDERED.19
In essence, the issue for our resolution is, did the trial court err in
dismissing the amended complaint, without trial, upon motion of respondent
university?
Petitioner argues that the university’s motion to dismiss on alleged lack of
cause of action because of the deed of dacion en pago, an
evidence aliunde, was improper since petitioner has yet to present its
evidence. Petitioner also argues that the April 11, 2002 appealed Order
was flawed because it was based on evidence expunged from the record.
Respondent university counters that the amended complaint deserved
dismissal because petitioner admitted the dacion en pago and stated its
lack of interest to pursue the case against respondent university. The
university contends that petitioner’s acceptance of the Batangas property,
as equivalent of performance, extinguished the obligation under the four
promissory notes. Thus, the university concludes that no more cause of
action lies against it.
For its part, respondent GDI maintains that the dacion en pago has no
"legal effect" but also avers that the dacion en pago effectively paid the loan
warranting dismissal of the complaint, cross-claim and counterclaim against
it.
Prefatorily, we note the trial court’s inconsistent rulings in this case. To
recall, the Omnibus Order dated April 21, 1997 appeared to have
considered the dacion en pago as full settlement of the case. The trial court
thus ruled that the dacion en pago mooted the motion to implead GDI as
third-party defendant, and GDI’s motions to dismiss amended complaint
and third-party cross-claim.21 Yet, in the same order, the trial court
dismissed the case against the heirs of Vicente G. Puyat on the ground of
prematurity, since petitioner’s cause of action was against respondent
university as "dummy" of GDI, implying that the case was not yet actually
settled. Recall also that the August 17, 1999 Order ruled that the payment
of the loan through the dacion en pago was "evidentiary"22 or had to be
proved. The order was silent on whether it reversed the trial court’s earlier
statement that the dacion en pago settled the loan and the case.
A year later, on August 3, 2000, the trial court expunged the deed of dacion
en pago and reinstated GDI’s motions to dismiss the amended complaint
and cross-claim.23 Then, the appealed Order of April 11, 2002 ruled that
petitioner had "no cause of action" against the defendants since the loan
was settled by the dacion en pago,24 despite the order which expunged the
deed.
In Domondon v. Lopez,25 we distinguished a motion to dismiss for failure of
the complaint to state a cause of action from a motion to dismiss based on
lack of cause of action. The first is governed by Section 1 (g),26 Rule 16,
while the second by Rule 33,27 of the Rules of Court, to wit:
. . . The first [situation where the complaint does not allege a sufficient
cause of action] is raised in a motion to dismiss under Rule 16 before a
responsive pleading is filed and can be determined only from the
allegations in the initiatory pleading and not from evidentiary or other
matters aliunde. The second [situation where the evidence does not sustain
the cause of action alleged] is raised in a demurrer to evidence under Rule
33 after the plaintiff has rested his case and can be resolved only on the
basis of the evidence he has presented in support of his claim. The first
does not concern itself with the truth and falsity of the allegations while the
second arises precisely because the judge has determined the truth and
falsity of the allegations and has found the evidence wanting.
Hence, a motion to dismiss based on lack of cause of action is filed by the
defendant after the plaintiff has presented his evidence on the ground that
the latter has shown no right to the relief sought. While a motion to dismiss
under Rule 16 is based on preliminary objections which can be ventilated
before the beginning of the trial, a motion to dismiss under Rule 33 is in the
nature of a demurrer to evidence on the ground of insufficiency of evidence
and is presented only after the plaintiff has rested his case.28 (Emphasis
supplied.)
In this case, the university’s March 19, 1998 motion to dismiss the
amended complaint was improper under Rule 16 because it was filed after
respondent university filed its responsive pleading, its Answer. Also, the
motion’s merit could not be determined based solely on the allegations of
the initiatory pleading, the amended complaint, since the motion was based
on the deed of dacion en pago, which was not even alleged in the complaint.
And since the deed of dacion en pago had been expunged from the record,
the trial court erred in its finding of payment and lack of cause of action
based on the deed. In fact, on January 11, 2002 or just three months before
it dismissed the amended complaint, the trial court had even noted
petitioner counsel’s manifestation regarding the parties’ initial efforts to
enter into a "dacion en pago but not based on the previous offer made but proceed with the pre-trial and hear this case with dispatch. No
on a new proposal involving new properties"29 and urged them to pursue pronouncement as to costs.
further settlement discussions.30
SO ORDERED.
In addition, the motion alleged that petitioner had "no more cause of action"
or lacked a cause of action against the university. Following Domondon,
that motion was a motion to dismiss under Rule 33 in the nature of
demurrer to evidence and would be proper only after petitioner had
presented its evidence and rested its case. In the case at bar, there had
been no presentation of evidence yet and petitioner had not rested its case.
Therefore, the August 17, 1999 Order properly denied the motion to dismiss
for being improper under either Rule 16 or 33.

The trial court had also made a premature statement in its Omnibus Order
dated April 21, 1997 that the dacion en pago settled the loan and the case,
even as it also stated that respondent university was used as a "dummy" of
GDI. If indeed there was fraud, considering the uncollateralized loan, its
diversion, nonpayment, absence of demand although overdue, and the
dacion en pago where title of the property accepted as payment cannot be
transferred, the fraud should be uncovered to determine who are liable to
pay the loan. We note too that the April 11, 2002 Order was unclear if it
ruled again on the university’s March 19, 1998 motion to dismiss or acted
on its August 29, 2001 manifestation with motion for reconsideration of the
two-year old August 17, 1999 Order. To reiterate, the August 17, 1999
Order aptly denied the motion. Thus, we reverse the April 11, 2002 and
June 27, 2003 assailed Orders.

Lastly, it must be pointed out that while the Court allows a relaxation in the
application of procedural rules in some instances, courts and litigants are
enjoined to follow rules strictly because they are designed to facilitate the
adjudication of cases.31 Instead of rules being followed, however, we find
their misapplication in this case resulting to inconsistent rulings, confusion
and delay. Had the trial court exercised its inherent power to control its
proceedings,32 it would not have taken this long to reach pre-trial, which had
been first set on December 2, 1999 through respondent university’s motion.
Significantly, even the trial court had tentatively set the pre-trial on June 7,
200233 but erroneously dismissed the amended complaint on April 11,
2002.

WHEREFORE, we GRANT the petition and SET ASIDE the trial court’s
April 11, 2002 and June 27, 2003 Orders. The trial court is ORDERED to
Rule 34: Judgment on the Pleadings
G.R. No. 156304 October 23, 2006
ANACLETO R. MENESES, FRANCISCO C. MENESES, CECILIA C.
MEMESES, RAMON M. VASCO, CARMENCITA M. VASCO-ALIVIA,
VICTOR A. MENESES, MA. ROSARIO MENESES-CARREON, GAVINO
A. MENESES, ARTEMIO A. MENESES, JR., MA. CARMEN R. BONGGA,
MA. THERESA M. RODRIGO, JACINTO M. RODRIGO, MA. ELIZABETH
M. RODRIGO, MARTIN M. RODRIGO, JOSE ANTONIO M. RODRIGO,
DOMINGO M. SALONGA, CAROLINA M. SALONGA, CORAZON M.
SALONGA, CRISTINA M. SALONGA, CARMELITA M. SALONGA,
CYNTHIA M. SALONGA and MARILYN F. SALONGA, petitioners,
vs.
SECRETARY OF AGRARIAN REFORM, LAND BANK OF THE
PHILIPPINES, RODRIGO VELAYO, ANGEL SOLIMAN, RICARDO
MASASU, REGINA STA. ANA, JUANITO CASTRO, SEVERINO LIGON,
MARCELINO CUEVAS, MANOLO GARCIA, RODRIGO URBANO, FELIX
BINUYA, GORGONIO CATU, ERLINDA ABLAZA, IGMEDIO SANTOS,
FLORENTINA SUSPAN, PEDRO SUPAN, GABRIEL PONCE, FELIPE
PONCE, MAGNO PONCE, RELELCIO PONCE, IRENEO RAMOS,
ORLANDO TAYAO, EULALIO TRINIDAD, MOISES MORALES, LAZARO
MATIAS, FORTUNATA MANUGON, ROMEO MANUZON, and DAMASO
DURIA, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Petitioners were co-owners pro-indiviso of an irrigated rice land
in Barangay Batasan, San Miguel, Bulacan, measuring 60.8544 hectares
and registered in the name of their grandparents, the spouses Ramon
Meneses and Carmen Rodriguez-Meneses. On October 21, 1972, the
property was distributed to farmer-beneficiaries by virtue of Presidential
Decree No. 27 (P.D. No. 27).
On July 16, 1993, petitioners filed with the Regional Trial Court (RTC) of
Bulacan, Branch 13, a complaint for determination and payment of just
compensation. Petitioners alleged that from the time the land was
distributed to farmer-beneficiaries in 1972 up to the time of the filing of the
complaint, no payment or rentals has been made, and titles have already
been issued to the farmer-beneficiaries. Petitioners also alleged that the fair
market value of the property is P6,000,000.00.1
The farmer-beneficiaries, the Land Bank of the Philippines-Land Valuation
and Landowners' Compensation III (LBP-LVLCO III), the Department of
Agrarian Reform (DAR) Secretary, and the DAR all filed their respective
Answers. For their part, the farmer-beneficiaries alleged that the land
valuation establishing the average gross production per hectare by the
Barangay Committee on Land Production (BCLP) based on three normal
crop years before P.D. No. 27 is in accordance with the existing guidelines
and procedure on Operation Land Transfer; they have no unpaid rentals;
and jurisdiction over the case lies with the Department of Agrarian Reform
Adjudication Board (DARAB).2
Meanwhile, the LBP-LVLCO III averred that it has been acting in good faith
in discharging its obligations, and that the computation was obtained
through the valuation processes of the DAR on lands covered by P.D. No.
27 and Executive Order No. 228 (E.O. No. 228). The LBP-LVLCO III
likewise alleged that jurisdiction over the case lies with the DARAB.3
The DAR Secretary, on the other hand, alleged that the valuation of the
property was pursuant to the Operation Land Transfer under P.D. No. 27
and the reckoning date should be at the time of the taking of the
property, i.e., October 21, 1972.4
Lastly, the DAR claimed that the filing of the case is premature since there
is no valuation yet made by the DAR based on E.O. No. 228, and
petitioners must cooperate with the DAR by submitting all the necessary
papers for proper valuation and expeditious payment of the land. The DAR
also claimed that it must first determine the valuation before resort to the
court can be made.5
Thereafter, in an Order dated June 22, 1994, the RTC dismissed the
complaint for lack of cause of action. According to the RTC, the
determination of just compensation must first be filed with the DAR and not
the Special Agrarian Court.6
Petitioners filed a motion for reconsideration, which was partially granted by
the RTC in its Order dated September 7, 1994, setting aside its order of
dismissal, ordering the suspension of the proceedings and archiving the
case until primary determination has been made on the issue of just
compensation.7
On October 5, 1994, petitioners filed a complaint for determination and
payment of just compensation with the DARAB. The DARAB, however,
dismissed the complaint on the ground that it has no jurisdiction to hear and
decide valuation cases covered by P.D. No. 27, as the same is within the
exclusive administrative powers of the Office of the Secretary.8 Because of
the foregoing dismissal, petitioners filed with the RTC a motion to re-open
and calendar case for hearing,9 which was granted by the RTC.
In an Order dated May 9, 1996, the RTC, with the agreement of the parties,
constituted Commissioners to determine just compensation,10 but the same
was dissolved per its Report and Recommendation dated October 9,
1996, 11as granted by the RTC in its Order dated October 11, 1996.12
Pre-trial was terminated on July 10, 1997, and petitioners were scheduled
to present their evidence.13 During the hearing held on August 14, 1997, the
parties agreed as to the issue to be resolved – "whether or not the plaintiffs
[petitioners] are entitled to just compensation as provided for in Republic
Act No. 6657 (R.A. No. 6657) and the Constitution of 1987 and not P.D. No.
27 which was the basis of valuation made by defendants Secretary of
Agrarian Reform and the Land Bank of the Philippines of the subject parcel
of land which was acquired in October 21, 1972."14 The parties were then
given a period within which to fie their respective motions for judgment on
the pleadings and comment/opposition thereto, after which the case shall
be deemed submitted for resolution.15
On February 7, 1998, the RTC rendered its Decision dismissing the
complaint. It was the RTC's ruling that since the subject property was taken
from petitioners on October 21, 1972 under the DAR's Operation Land
Transfer pursuant to P.D. No. 27, then just compensation must be based on
the value of the property at the time of taking.
Thus, petitioners filed an appeal with the Court of Appeals (CA), docketed
as CA-G.R. CV No. 60355, where petitioners prayed for a remand of the
case to the RTC for further proceedings and/or reception of evidence on the
just and fair market value of the property.
On May 30, 2002, the CA16 rendered its Decision dismissing the
appeal.17 Petitioners filed a motion for reconsideration, but the same was
denied on the grounds that it was filed 44 days late and the CA found no
cogent reason to reverse or modify its Decision.18
Hence, this petition for review on certiorari based on the following reasons:
I - THAT THE APPEALED DECLISION (sic) IS RENDERED BY THE
COURT OF APPEALS NOT IN ACCORDANCE WITH LAW OR WITH
APPLICABLE DECISIONS OF THE SUPREME COURT.19
II - THAT THE COURT OF APPEALS HAS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS OR
HAS SANCTIONED SUCH DEPARTURE BY THE LOWER COURT.20
Petitioners argue that the CA erred in sustaining the propriety of the motion
for judgment on the pleadings filed by respondents with the RTC. It was the
CA's ruling that the motion for judgment on the pleadings was proper since
respondents can be considered as plaintiffs in a counter-claim. Petitioners
also impute error in the CA's ruling that the RTC properly dismissed the
case since it appears that there was no initial valuation yet made by the
DARAB.
Respondents, however, argue that the CA Decision dated May 30, 2002 is
already final and executory due to petitioners' failure to seasonably file a
motion for reconsideration. Respondents also argue, among others, that
the applicable law in this case is P.D. No. 27 and E.O. No. 228, which
provides for the formula for the determination of just compensation, as
recognized in the cases of Land Bank of the Philippines v. Court of Appeals,
378 Phil. 1248 (1999), and Gabatin v. Land Bank of the Philippines, G.R.
No. 148223, November 25, 2004, 444 SCRA 176.
The Courts finds merit in the petition.
It is true that petitioners' failure to file their motion for reconsideration within
the reglementary period rendered the CA Decision dated May 30, 2002 final
and executory. For all intents and purposes, said Decision should now be
immutable and unalterable; however, the Court relaxes this rule in order to
serve substantial justice considering (a) matters of life, liberty, honor or
property, (b) the existence of special or compelling circumstances, (c) the
merits of the case, (d) a cause not entirely attributable to the fault or
negligence of the party favored by the suspension of the rules, (e) a lack of
any showing that the review sought is merely frivolous and dilatory, and (f)
the other party will not be unjustly prejudiced thereby.21
The explanation of petitioners' counsel for the delayed filing of the motion
for reconsideration was that their law firm secretary failed to inform the
court of their change of address.22 This, of course, is not a valid excuse. As
a general rule, a client is bound by the acts of his counsel, including even
the latter's mistakes and negligence. But where such mistake or neglect
would result in serious injustice to the client, a departure from this rule is
warranted. To cling to the general rule is to condone rather than rectify a
serious injustice to petitioners whose only fault was to repose his faith and
entrust his innocence to his lawyer.23
In Ginete v. Court of Appeals,24 the Court disregarded the failure of the
petitioners to file a motion for reconsideration of the CA's dismissal, and
instead, ruled that their counsel's negligence should not prejudice the
merits of their case, as they were bound to lose their alleged rightful share
in their inheritance to a 59-hectare property.
In Philippine Ports Authortity v. Sargasso Construction & Development
Corp.,25 the Court excused the Office of the Government Corporate
Counsel's belated filing of the notice of appeal because sustaining the
finality of the CA's dismissal of the appeal would leave the petitioner no
other remedy to assail the decision of the trial court, and it would then have
to implement the award of the reclamation project to the respondents for
the enhancement of the San Fernando, La Union port for the price
of P30,794,230.89 without the benefit of a public bidding, and sans the
approval of its Board of Directors.
After reviewing the records of this case, the Court resolves to give due
course to the case in order to put to rest the issues herein presented,
specially in light of the Court's ruling in Solmayor v. Arroyo,26 to wit:
Furthermore, we must bear in mind that procedural rules are intended to
ensure the proper administration of law and justice. The rules of procedure
ought not to be applied in a very rigid, technical sense, for they are adopted
to help secure, not override, substantial justice. A deviation from its rigid
enforcement may thus be allowed to attain its prime objective, for after all,
the dispensation of justice is the core reason for the existence of
courts. Moreover, we cannot shy away from our constitutionally
mandated duty to questions of law set forth in this petition which
hinges on the determination of the rights of herein litigants in the light
of a very important piece of social legislation, Presidential Decree No.
27, which aims for the equitable distribution and ownership of land,
without disregarding the property rights of landowners. Thus, for
pragmatic reasons and consideration of justice and equity, the Court must
put to rest the issues presented before us. (Emphasis supplied)
If the Court sustains the CA Decision, which affirmed the RTC Decision,
petitioners will be left holding an empty bag, so to speak. It should be noted
that the property subject of this case has already been distributed to the
farmer-beneficiaries way back in 1972, and up to now, 34 years later,
petitioners have yet to enjoy the fruits of its value. Moreover, petitioners will
be left without any recourse as regards the resolution of the issue of just
compensation since both the RTC and the DARAB already dismissed the
separate complaints for just compensation filed before them. Indeed, the
"Court has the power to except a particular case from the operation of the
rule whenever the purposes of justice requires it because what should
guide judicial action is that a party is given the fullest opportunity to
establish the merits of his action or defense rather than for him to lose life,
honor, or property on mere technicalities."27
On the propriety of the filing of a motion for judgment on the pleadings by
the LBP and adopted by the DAR Secretary – the Court finds that the CA
erred in sustaining its propriety.
Rule 34, Section 1 of the Rules of Court,28 provides that a judgment on the
pleadings is proper when an answer fails to render an issue or otherwise
admits the material allegations of the adverse party's pleading. The
essential question is whether there are issues generated by the pleadings.
A judgment on the pleadings may be sought only by a claimant, who is the
party seeking to recover upon a claim, counterclaim or cross-claim; or to
obtain a declaratory relief.29
In this case, the separate Answers filed by the respondents definitely
tendered issues, as it made specific denials of the material allegations in
the complaint and asserted affirmative defenses, which would bar recovery
by petitioners. Moreover, it was erroneous for the RTC to require the filing
of a motion for judgment on the pleadings and for the LBP and the DAR
Secretary to file the same since in the first place, the latter are neither
plaintiffs in the case nor counter-claimants or cross-claimants.
What the RTC obviously meant to be filed was a motion for summary
judgment, a procedural device designed for the prompt disposition of
actions, which may be rendered if the pleadings, supporting affidavits,
depositions and admissions on file show that, after a summary hearing,
there is no genuine issue regarding any material fact, except as to the
amount of damages, and the moving party is entitled to a judgment as a
matter of law, and which may be applied for by either a claimant or a
defending party.30 This is obvious from the fact that although the Answers
raised issues, these were not factual ones requiring trial, nor were they
genuine issues,31 as the parties were able to agree to limit the same to
whether petitioners are entitled to just compensation under R.A. No. 6657
and not P.D. No. 27.32
The Court also finds that the CA erred in sustaining the RTC ruling that just
compensation in this case should be based on the value of the property at
the time of taking, October 21, 1972, which is the effectivity date of P.D. No.
27.
Respondent correctly cited the case of Gabatin v. Land Bank of the
Philippines,33 where the Court ruled that "in computing the just
compensation for expropriation proceedings, it is the value of the land at
the time of the taking [or October 21, 1972, the effectivity date of P.D. No.
27], not at the time of the rendition of judgment, which should be taken into
consideration." Under P.D. No. 27 and E.O. No. 228, the following formula
is used to compute the land value for palay:
LV (land value) = 2.5 x AGP x GSP x (1.06)n
It should also be pointed out, however, that in the more recent case of Land
Bank of the Philippines vs. Natividad,34the Court categorically ruled: "the
seizure of the landholding did not take place on the date of effectivity of P.D.
No. 27 but would take effect on the payment of just compensation." Under
Section 17 of R.A. No. 6657, the following factors are considered in
determining just compensation, to wit:
Sec. 17. Determination of Just Compensation. - In determining just
compensation, the cost of acquisition of the land, the current value of
like properties, its nature, actual use and income, the sworn valuation
by the owner, the tax declarations, and the assessment made by
government assessors shall be considered. The social and economic
benefits contributed by the farmers and the farm-workers and by the
Government to the property as well as the non-payment of taxes or
loans secured from any government financing institution on the said
land shall be considered as additional factors to determine its valuation.
(Emphasis supplied)
Consequently, the question that arises is which of these two rulings should
be applied?
Under the circumstances of this case, the Court deems it more equitable to
apply the ruling in the Natividad case. In said case, the Court applied the
provisions of R.A. No. 6657 in computing just compensation for property
expropriated under P.D. No. 27, stating, viz.:
Land Bank's contention that the property was acquired for purposes of
agrarian reform on October 21, 1972, the time of the effectivity of PD 27,
ergo just compensation should be based on the value of the property as of
that time and not at the time of possession in 1993, is likewise erroneous.
In Office of the President, Malacañang, Manila v. Court of Appeals, we
ruled that the seizure of the landholding did not take place on the date of
effectivity of PD 27 but would take effect on the payment of just
compensation.
Under the factual circumstances of this case, the agrarian reform
process is still incomplete as the just compensation to be paid private
respondents has yet to be settled. Considering the passage of
Republic Act No. 6657 (RA 6657) before the completion of this process,
the just compensation should be determined and the process
concluded under the said law. Indeed, RA 6657 is the applicable law,
with PD 27 and EO 228 having only suppletory effect, conformably
with our ruling in Paris v. Alfeche.
xxxx
It would certainly be inequitable to determine just compensation based on
the guideline provided by PD 27 and EO 228 considering the DAR's failure
to determine the just compensation for a considerable length of time. That
just compensation should be determined in accordance with RA 6657, and
not PD 27 or EO 228, is especially imperative considering that just
compensation should be the full and fair equivalent of the property taken
from its owner by the expropriator, the equivalent being real, substantial, full
and ample.
In this case, the trial court arrived at the just compensation due private
respondents for their property, taking into account its nature as irrigated
land, location along the highway, market value, assessor's value and the
volume and value of its produce. This Court is convinced that the trial court
correctly determined the amount of just compensation due private
respondents in accordance with, and guided by, RA 6657 and existing
jurisprudence.35 (Emphasis supplied)
case. Petitioners' case was obviously thrown back and forth between the
two venues, and with the RTC's second dismissal, they were left hanging
and without any recourse, which, of course, is iniquitous considering that
their property has already long been expropriated by the government and
its fruits enjoyed by the farmer-beneficiaries.
Given the foregoing conclusion, this case should then be remanded to the
Regional Trial Court (RTC) of Bulacan, Branch 13, for the final
determination of just compensation.
WHEREFORE, the petition is GRANTED. The Decision dated May 30,
2002 and Resolution dated December 9, 2002 rendered by the Court of
Appeals in CA-G.R. CV No. 60355 is REVERSED and SET ASIDE. The
records of this case is ordered REMANDED to Regional Trial Court (RTC)
of Bulacan, Branch 13, for further proceedings with deliberate dispatch and
in accordance with the Court's discussion in this Decision.
No costs.

As previously noted, the property was expropriated under the Operation SO ORDERED.
Land Transfer scheme of P.D. No. 27 way back in 1972. More than 30
years have passed and petitioners are yet to benefit from it, while the
farmer-beneficiaries have already been harvesting its produce for the
longest time. Events have rendered the applicability of P.D. No. 27
inequitable. Thus, the provisions of R.A. No. 6657 should apply in this case.

Finally, the Court sustains petitioners' contention that the CA erred in ruling
that the RTC correctly dismissed their complaint. Even assuming that the
RTC was correct in holding that P.D. No. 27 applies, still it should not have
simply dismissed the complaint after resolving the issue of which law
should apply. Instead, it should have proceeded to determine the just
compensation due to petitioners.

Records show that the complaint for just compensation was first filed in the
RTC, but this was dismissed in the Order dated June 22, 1994, for the
reason that the determination of just compensation must first be filed with
the DAR.36 Conformably with said ruling, petitioners filed the complaint with
the DAR, which dismissed the same on the ground that it has no jurisdiction
to hear and decide valuation cases covered by P.D. No. 27.37 Because of
said dismissal, petitioners went back to the RTC for the re-opening of the
Rule 34: Judgment on the Pleadings
G.R. No. 131466 November 27, 1998
Cristina Diman, Clarissa Diman, George Diman, Felipe Diman and
Florina Diman, petitioners,
vs.
Hon. Florentino M. Alumbres, Presiding Judge, Regional Trial Court,
Las Piñas, Branch 255; Heirs of Veronica V. Moreno Lacalle,
represented by Jose Moreno Lacalle, respondent.
NARVASA, C.J.:
The petition for review on certiorari in this case was initially dismissed by
Resolution dated January 14, 1998; but after deliberating on petitioners
motion for reconsideration dated February 23, 1998, the private respondent
comment thereon, the reply to the comment, as well as the record of the
case itself, the Court was convinced that the order of dismissal should be
reconsidered and the petition reinstated. It accordingly promulgated a
resolution to that effect on October 12, 1998, and required "respondent to
file their Comment on the petition within ten (10) days from notice **."
Notice of the Resolution was duly served on private respondent attorney on
October 21, 1998. The latter filed a motion for extension of time of thirty (30)
days to file comment, counted from October 31. The Court granted the
extension sought, but only for fifteen (15) days.
The comment was filed late, on November 20, 1998. Counsel's explanation
is that he had sought an extension of 30 days "due to the other volume of
legal works similarly situated and school work of the undersigned as
professor of law and dean of the University of Manila," and had entertained
"the honest belief" that it would be granted. However, he learned belatedly
that only a 15-day extension had been conceded. He forthwith completed
the comment and filed it, albeit five days late.
The Court admits the late comment, but takes this occasion to reiterate the
familiar doctrine that no party has a right to an extension of time to comply
with an obligation within the period set therefor by law; motions for
extension are not granted as a matter of course; their concession lies in the
sound discretion of the Court exercised in accordance with the attendant
circumstances; the movant is not justified in assuming that the extension
sought will be granted, or that it will be granted for the lenght of time
suggested by him. It is thus incumbent on any movant for extension to
exercise due diligence to inform himself as soon as possible of the Court's
action on his motion, by timely inquiry of the Clerk of Court. Should he
neglect to do so, he runs the risk of time running out on him, for which he
will have nobody but himself to blame.
Now, the petition for review on certiorari appends practically all the material
pleadings, motions, orders and judgements in the Regional Trial Court and
the Court of Appeals. The respondents' comment on the petition has been
filed, as just mentioned, and opposes its material averments. There is now
no impediment to the adjudication of petitioners' appeal on the merits on the
basis of the record as it stands at this time. This, the Court will now proceed
to do.
In 1991, more that fifty years after the effectivity of the Rules of Court —
1
containing provisions relative inter aliato the modes of
discovery — this Court had occasion to observe that "among far too
2
many lawyers (and not a few judges), there is, if not a regrettable
unfamiliarity and even outright ignorance about the nature, purposes
and operation of the modes of discovery, at least a strong yet
unreasoned and unreasonable disinclination to resort to them —
which is a great pity for the intelligent and adequate use of the
deposition-discovery procedure, could, as the experience of other
jurisdictions convincing demonstrates, effectively shorten the period
of ligation and speed up adjudication. 3
The case at bar deals with one of such modes of discovery — a
request for admission under Rule 26 of the Rules of 1964; more
particularly, the legal consequences of the failure to respond thereto
in the manner indicated by law. It also treats of other adjective devices
to expedite litigation: a summary judgment under Rule 34, and a 4
judgment on demurrer to evidence under Rule 35. Had the principles
5
involved been better understood and more faithfully observed, the
case might have been more quickly decided.
Actually, there are several adjective tools incorporated in the Rules of
Court explicitly designed, like those just mentioned, to abbreviate
litigation or abort it at certain stages. Their obvious purpose is to
unmask as quickly as may be feasible, and give short shrift to,
untenable causes of action or defenses and thus avoid waste of time,
effort and money. For reasons yet to be fathomed, these devices
5
seem to be of scant familiarity and of infrequent availment, as above
observed, with the result that the salutary objective of the Rules of
bringing about a simple, inexpensive and expeditious system of
litigation has not been fully achieved.
Now, to come to grips with the case. There is no disagreement about
the antecedents. The case began in the Regional Trial Court of Las
Pinas (Branch 255), where a complaint for "Quieting of Title and
Damages" was filed by the Heirs of Veronica V. Moreno Lacalle
(represented by Jose Moreno Lacalle) against Cristina Diman,
Clarissa Diman, George Diman, Felipe Diman and Florina Diman. In 7
their complaint, the Lacalle heirs claimed that:
a) their mother, the late Veronica V. Moreno Lacalle (who died in 1992),
was the owner of a "parcel of land situated at Brgy. Pulang Lupa Uno,
Las Piñas, ** covered by Transfer Certificate of Title No. 273301 of the
Registry of Deeds of the Province of Rizal;"
b) Veronica Lacalle had acquired the land in 1959 by virtue of a deed
of absolute sale, and retained as caretakers the persons she found in
occupancy of the lot at the time of the sale, namely: Julian Nario and
his wife, Adelaida Legaspi, "with arrangement to share the
agricultural fruits" until the former would have need of the property:
c) the caretakers of the lot were served with a notice for them to
vacate the land (dated November 22, 1994) and an alias writ of
demolition (dated June 7, 1994) issued by the Metropolitan Trial Court
in Civil Case No. 2619 — a case for "ejectment with damages" filed by
the Dimans against the Narios, judgment in which, commanding the
Narios' ouster, had supposedly been affirmed by the Makati Regional
Trial Court (Branch 137);
d) neither the deceased Veronica nor any of her heirs had been made
parties to said ejectment action;
e) the complaint for ejectment contains false assertions, and had
caused them injury for which the Dimans should be made to pay
damages.
In their answer with counterclaim dated February 2, 1995, the Dimans
8
alleged that:
a) they are the registered and absolute owners of the land registered
in their names under TCT Nos. 90628, 90629 and 58676 (Pasay City),
and have no knowledge of the land claimed by the Lacalle Heirs;
b) they are entitled to eject from their land the Nario Spouses, who
were falsely claiming to be their lessees;
c) if the Heirs' theory is that the land in their title, No 273301, is the
same as that covered by the Dimans' titles, then said title No. 2733101
is spurious because :
(1) no less than three official agencies — (i) the Office of the Registrar
of Deeds for Rizal and Regional Registrar for Region IV, (ii) the
Register of Deeds of Pasay City, and (iii) the Pangasiwaan Pangtalaan
ng Lupain (Land Registration Authority) — have certified to the
absence of any entry in their records concerning TCT No. 273301
covering land with an area of 22,379 square meters in the name of
Veronica Vda. de Moreno Lacalle;
(2) Decree No. N-11601 explicitly cited as basis by TCT No. 273301
refers to land in Mauban, Ouezon Province, according to the records
of the Land Registration Authority: and GLRO Record No. 14978 also
expressly mentioned as basis for TCT No. 273301, refers to a
registration case heard in Pangasinan;
and
d) they are entitled to damages on their counterclaim.
After joinder of the issues, the Dimans served on the Heirs on
February 2, 1995 a REQUEST FOR ADMISSION (dated February 2,
1995) of the truth of the following specified matters of fact, to wit:
9
a) the Heirs' TCT 273301 (Rizal) is not recorded in the Registry of Rizal,
or of Pasay City, or of Parañaque, or of Las Pinas;
b) the Dimans' transfer certificates of title are all duly registered in
their names in Pasay City, as alleged in their answer;
c) in the Index Records of Registered Property Owners under Act No.
496 in the Office of the Land Registration Authority, there is no record
of any property situated in Las Piñas in the name of Veronica Lacalle,
more particularly described in TCT 273301;
4) the Heirs cannot produce a certified true copy of TCT 273301:
5) neither Veronica Lacalle nor any of her heirs ever declared the
property under TCT 273301 for taxation purposes since its alleged
acquisition on February 24, 1959 or since the issuance of said title on
August 7, 1959;
6) not a single centavo has been paid by the Heirs as real estate taxes;
and
7) no steps have been taken by the Heirs to ascertain the genuineness
and authenticity of the conflicting titles.
The REQUEST FOR ADMISSION was received by Jose Lacalle himself
through registered mail on February 6, 1995, and copy thereof, by the
latter's lawyer (Atty. Cesar T. Ching) on February 4, 1995. However, no
response whatever was made to the request by Lacalle, his lawyer, or
anyone else, despite the lapse of the period therefor fixed by Section
2 of Rule 26 (not less than ten days after service). The Dimans
thereupon filed with the Court a "MANIFESTATION WITH MOTION TO
REOUIRE PLAINTIFFS TO ANSWER REQUEST FOR ADMISSION,"
dated March 28, 1995, giving the Heirs ten (10) more days to file their
10
answer to the request for admission, a copy of which was personally
delivered to the latter's lawyer; but again, no response whatever was
made.
The Dimans then submitted a "MOTION FOR SUMMARY JUDGMENT"
dated April 17, 1995. In that motion they drew attention to the Heirs'
11
failure to file any Pre-Trial Brief, and the several instances when the
Heirs failed to appear at scheduled hearings resulting in the dismissal
of their complaint, which was however later reinstated. They argued
that because the Heirs had failed to respond to their REQUEST FOR
ADMISSION, each of the matters of which an admission was
requested, was deemed admitted pursuant to Section 2, Rule 26. On
this basis, and on the basis of the joint affidavit of Clarissa Diman de
los Reyes and Florina Diman Tan — attached to the motion and
substantiating the facts recited in the request for admission — the
Dimans asserted that no genuine issue existed and prayed that "a
summary judgment be entered dismissing the case for lack of merit."
The Heirs counsel filed a two-page opposition dated May 15, 1995 in 12
which, betraying an unfortunate unfamiliarity with the concept of
summary judgments, he asserted inter alia that:
In order for defendants (Dimans) to successfully pray for judgment on
the pleadings, they have to clearly allege in their permissive
counterclaim their cause of action and if the answer of the plaintiffs
(Heirs) to such kind of counterclaim admit (sic) it or the answer to the
counterclaim is a sham, that is the time for the defendants to move for
a judgment summarily. ** ** (D)efendants have no cause of action for
praying for summary judgment. It is the plaintiffs who will pray for that
and not the defendants.
Subsequently, the Dimans submitted a reply dated May 23, 1995; the 13
Heirs, a rejoinder dated June 1, 1995; and the Dimans, a pleading
14
entitled "Exceptions and Comment to Plaintiffs' Rejoinder" dated
June 8, 1995. 15
The Trial Court denied the Dimans' motion for summary judgment. In
its Order of June 14, 1995, the Court declared that a "perusal of the
16
Complaint and the Answer will clearly show that material issue is
raised in that both plaintiffs and defendants claimed ownership over
the land in dispute, presenting their respective titles thereto and
accused each other of possessing false title to the land." It stressed,
citing jurisprudence, that a summary judgment "is not proper where
the defendant presented defenses tendering factual issues which call
for the presentation of evidence.:"
The case proceeded to trial in due course. At its start, the Heirs'
counsel, Atty. Michael Moralde, responding to questions of the Court,
admitted that his clients did not have the original copy of the title
which was the basis for their cause of action, but asserted that they
were "still searching" for it since "(i)n every municipality there are
several Registry of Deeds." He theorized that the word "'title' ** is a
relative term **(and) does not only refer to a document but refers to
ownership. 17
Only Jose Moreno Lacalle gave evidence for the plaintiff Heirs. Like
Atty. Moralde, he admitted that he had no copy "of the document
which says ** (his) mother is the registered owner;" that the deed of
sale was not the only basis for his and his co-heirs' claim to the land,
but also "a xerox copy of the ** title ** except that **(he) cannot find
the original;" that "maybe" the original was in possession of the
person who was his mother's agent in all her transactions, a certain
Mr. Lopez, whom he could no longer locate; that he had tried to verify
the existence of the title "from the Register of Deeds of Pasig and
Pasay" without success; that he had not, however, gone to the
Register of Deeds of Parañaque or Las Piñas. 18
The Heir's ducumentary evidence consisted of (1) Veronica Lacalle's
death certificate, (2) the special power of attorney authorizing Jose
Lacalle to act for his brothers and sisters; and (3) the deed of absolute
sale purportedly executed by Eusebio Mojica, Clara Mojica, Maria
Mojica, Antonia Mojica, Amanda Mojica and Teodora Aranda which
deeded over to Veronica Lacalle the "land 'known as Lot 1
PSU-151453,'" but which made no reference to any Torrens title over
it.
Shortly after the Heirs rested their case, the Dimans filed a "Motion for
Judgment on Demurrer to Evidence," dated June 25, 1996. They 19
summarized the Heirs' evidence — focusing attention on the Heirs'
failure to present "even an unauthenticated photocopy of the title,"
and the absence of any proof that any proceedings for registration of
the land under the Torrens Act had been instituted — and emphasized
anew said Heirs' implied admissions resulting from their failure to
answer their (the Dimans') request therefor as a mode of discovery.
On these premises, the Dimans contended that a judgment on
demurrer should be rendered, there being no genuine issue between
the parties notwithstanding the ostensible conflict of averments in
their basic pleadings.
The Heirs presented a three-page opposition, dated July 7, 1996. In it
20
their counsel set out the startling contention that "(d)emurrer to
evidence is violative to due process as the judgment be rendered
without giving the plaintiff the opportunity to cross-examine the
defendant," and petulantly inquired, "How could the truth come out
without cross-examination of the defendants by the plaintiffs?"
particularly, as regards "whether their (the Dimans') title is not fake."
Said counsel also posited the amazing notion that "Demurrer to
evidence may be correct only in criminal cases as it is the right of the
accused to remain silent, and that includes his right to file demurrer
for fear of cross-examination. But not in Civil Cases." Once more
counsel regrettably exposed his ignorance of quite elementary legal
principles.
Again, the Dimans' efforts at expediting disposition of the litigation
were unsuccessful. By Order dated December 2, 1996, the Trial Court
21
denied their motion to dismiss. Respecting the Heirs' omission to
present in evidence any copy (even a photocopy) of TCT No. 273301,
the Court remarked that "Not being able to prove the genuineness and
authenticity of TCT No. 273301, it being only a mere xerox copy ** (the
Heirs) did not formally offer the same in evidence." However, the
Court said, the deed of sale of the land in Veronica Lacalle's favor that
was submitted instead — the "genuineness and authenticity ** (of
which had) been fully established" by the certification of the Clerk of
Court of the Manila RTC — was adequate for the purpose. According
to the Court, "(e)xecution of a deed of conveyance in a certain
prescribed form gave effect to the transfer of a title to the land
conveyed ** (and) without being controverted by any convincing
evidence to the contrary can be a sufficient basis in granting the
plaintiffs' relief for quieting of their title." The Order passed sub
silentio on the quaint contentions in the Heirs' opposition.
The Dimans moved for reconsideration under date of January 2,
1997, inter alia (1) alleging that although the photocopy of TCT
22
2773301 annexed to the Heirs' complaint states that the "certificate is
a transfer from T.C.T. No. 259150" (and this, presumably, would be the
vendors' [the Mojicas'] title), no effort whatever was made to submit
proof thereof, and (2) reiterating the proposition that the Heirs were
bound by their implied admissions under Rule 26.
The Dimans also submitted a "SUPPLEMENT TO MOTION FOR
RECONSIDERATION" dated January 7, 1997 in which they invited
23
attention to the identity of the technical description of the land
contained in the deed of sale to Veronica Lacalle and that set out in
TCT No. 273301. It must therefore have been Veronica Lacalle, they
reasoned, who had instituted the registration proceedings leading to
the supposed issuance of said TCT No. 273301. Yet the Heirs failed to
present evidence of the record of any such registration proceedings,
just as they failed to present evidence of any authentic copy of the
title itself.
The Heirs filed a one-page "Vehement Opposition **" dated February
15, 1997. Once again they reiterated the astounding argument that
24
the Dimans' "insistence ** (on the demurrer to evidence) is
tantamount to suppression of their evidence as they are afraid of
cross-examination "!
Again the Trial Court rebuffed the Dimans. In its Order of February 28,
1997, the Court ruled that the issues raised in the motion for
25
reconsideration and its supplement had already been passed upon in
the Order of December 2, 1996. It then set the case "for the reception
of defendants' evidence on April 22, 1997 **.
What the Dimans did was to commence a special civil action
of certiorari, mandamus and prohibition in the Court of Appeals
praying (a) that it set aside the Orders of June 14, 1995 (denying
summary judgment), of December 2, 1996 (denying demurrer to
evidence), and February 28, 1997 (denying reconsideration); (b) that
the Trial Judge be commanded to dismiss the case before it; and (c)
that said judge be prohibited from conducting further proceedings in
the case.
But once again their efforts met with failure. The Appellate Tribunal
(Seventh Division) promulgated judgment on September 9, 1997
decreeing that their petition, be "DENIED due course and
DISMISSED." The Court of Appeals held that insofar as concerned the
Order of June 14, 1995, the petition for its invalidation had not been
filed within a reasonable time; and that as regards the Order of
December 2, 1996, the remedy of certiorari was improper because: (1)
said order was merely interlocutory, (2) any error therein constituted
only an error of judgment correctible by appeal, and (3) there was no
capriciousness or whimsicality attendant upon the order. The Dimans'
motion for reconsideration was later denied by the Court of Appeals
by Resolution dated November 5, 1997. 26
The Dimans thereupon filed with this Court a petition for review
on certiorari of the Appellate Tribunal's Decision of September 9, 1997.
But seemingly consistent with the pattern of judicial misfortune which
they had theretofore been traversing, their petition for review was
dismissed, by Resolution dated January 14, 1998. Their appeal was
however subsequently reinstated, as earlier recounted.
Now, what first strikes the Court about the case at bar is the
regrettable absence of familiarity, therein laid bare, with the rules of
discovery and with the underlying philosophy and principles of the
cognate remedy of summary judgment. That resulted in the undue
protaction of the present action despite ample demonstration of the
absence of any genuine issue — that is to say, that the issues
ostensibly arising from the pleadings were sham or fictitious.
A Trial Court has no discretion to determine what the consequences
of a party's refusal to allow or make discovery should be; it is the law
which makes that determination; and it is grave abuse of discretion
for the Court to refuse to recognize and observe the effects of that
refusal as mandated by law. Particularly as regards requests for
admission under Rule 26 of the Rules of Court, the law ordains that
when a party is served with a written request that he admit: (1) the
genuineness of any material and relevant document described in and
exhibited with the request, or (2) the truth of any material and relevant
matter of fact set forth in the request, said party is bound within the
period designated in the request, to file and serve on the party
27
requesting the admission a sworn statement either (1) denying
specifically the matters of which an admission is requested or (2)
setting forth in detail the reason why cannot truthfully either admit or
deny those matters. If the party served does not respond with such a
sworn statement, each of the matters of which an admission is
requested shall be deemed admitted. 28
In this case, the Dimans' request for admission was duly served by
registered mail on Jose Lacalle on February 6, 1995, and a copy
thereof on his lawyer on February 4, 1995. Neither made any response
whatever within the reglementary period. Nor did either of them do so
even after receiving copy of the Dimans' "MANIFESTATION WITH
MOTION TO REQUIRE PLAINTIFFS TO ANSWER REQUEST FOR
ADMISSION," dated March 28, 1995. On account thereof, in legal
contemplation, the Heirs impliedly admitted all the facts listed in the
request for admission. These plain and simple legal propositions were
disregarded by His Honor.
It is also the law which determines when a summary judgment is
proper. It declares that although the pleadings on their face appear to
raise issues of fact — e.g., there are denials of, or a conflict in, factual
allegations — if it is shown by admissions, depositions or affidavits,
that those issues are sham, fictitious, or not genuine, or, in the
language of the Rules, that "except as to the amount of damages,
there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law." the Court shall
29
render a summary judgment for the plaintiff or the defendant. as the
30 31
case may be. 32
Parenthetically, the existence or appearance of ostensible issues in
the pleadings, on the one hand, and their sham or fictitious character,
on the other, are what distinguish a proper case for a summary
judgment from one for a judgment on the pleadings under Rule 19 of
33
the 1964 Rules. In the latter case, there is no ostensible issue at all,
34
but the absence of any because of the failure of the defendings party's
answer to raise an issue. Rule 19 expresses the principle as follows:
Where an answer fails to tender an issue, or otherwise admits the
material allegations of the adverse party's pleading, the court may, on
motion of that party, direct judgment on such pleading **. 35
On the other hand, in the case of a summary judgment issues
apparently exist — i.e., facts are asserted in the complaint regarding
which there is as yet no admission, disavowal or qualification; or
specific denials or affirmative defenses are in truth set out in the
answer — but the issues thus arising from the pleadings are sham,
fictitious, not genuine, as shown by admissions, depositions or
admissions. In other words, as a noted authority remarks, a judgment
on the pleadings is a judgment on the facts as pleaded, while a
summary judgment is a judgment on the facts as summarily proven
by affidavits, depositions or admissions. Another distinction is that
36
while the remedy of a judgment on the pleadings may be sought only
by a claimant (one seeking to recover upon a claim, counterclaim, or
cross-claim or to obtain a declaratory relief, supra), a summary
judgment may be applied for by either a claimant or a defending party.
These basic distinctions escaped His Honor. He denied the Dimans'
motion for summary judgment in his Order of June 14, 1995, opining
that a "perusal of the Complaint and the Answer will clearly show that
material issue is raised in that both plaintiffs and defendants claimed
ownership over the land in dispute, presenting their respective titles
thereto and accused each other of possessing false title to the land."
He added, citing cases, that a summary judgment "is not proper
where the defendant presented defenses tendering factual issues
which call for the presentation of evidence." Such a ratiocination is
grossly erroneous. Clearly, the grounds relied on by the Judge are
proper for the denial of a motion for judgment on the pleadings — as
to which the essential question, as already remarked, is: are there
issues arising from or generated by the pleadings? — but not as
regards a motion for summary judgment — as to which the crucial
question is: issues having been raised by the pleadings, are those
issues genuine, or sham or fictitious, as shown by affidavits,
depositions or admissions accompanying the application therefor?
Errors on principles so clear and fundamental as those herein
involved cannot but be deemed so egregious as to constitute grave
abuse of discretion, being tantamount to whimsical or capricious
exercise of judicial prerogative.
When the Heirs closed their evidence as party plaintiffs, and the
Dimans moved to dismiss on ground of insufficiency of the Heirs'
evidence, the Trial Judge was charged with the duty to assess the
evidence to ascertain whether or not "upon the facts and the law the
plaintiff(s) ** (have) shown no right to relief." It was in the first place
incumbent on His Honor to hold the Heirs bound to their admissions
appearing in the record, express and implied. In accordance with
Section 2, Rule 26 of the 1964 Rules of Court, the Heirs were impliedly,
but no less indubitably, deemed to have admitted the facts on which
admissions had been duly requested by reason of their failure to reply
thereto. Said Section 2 reads as follows:
Sec. 2. Implied admission. — Each of the matters of which an
admission is requested shall be deemed admitted unless, within a
period designated in the request, which shall not be less than ten (10)
days after service thereof, or within such further time as the court may
allow on motion and notice, the party to whom the request is
directed serves upon the party requestring the admission a sworn
statemant either denying specifically the matters on which an
admission is requested or setting forth in detail the reasons why he
cannot truthfully either admit or deny those matters.
Objections on the ground of irrelevancy or impropriety of the matter
requested shall be promptly submitted to the court for resolution. 37
In determining the chief issue in the case, the Trial Judge should have
taken due account of the following circumstances on record and
obvious legal propositions:
1) the Heirs' admissions of the following facts, viz.:
a) the Heirs' TCT 273301 (Rizal) is not recorded in the Registry of Rizal,
or of Pasay City, or of Parañaque, or of Las Piñas;
b) on the other hand, the Dimans' transfer certificates of title are all
duly registered in their names in Pasay City;
c) there is no record of any property situated in Las Piñas in the name
of Veronica Lacalle — more particularly described in TCT 273301 — in
the Index Records of Registered Property Owners under Act No. 496
in the Office of the Land Registration Authority;
d) the Heirs do not have and cannot produce even a certified true copy
of TCT 273301;
e) neither Veronica Lacalle nor any of her heirs ever declared the
property under TCT 273301 for taxation purposes since its alleged
acquisition on February 24, 1959 or since the issuance of said title on
August 7, 1959;
f) not a single centavo was ever paid by the Heirs as real estate taxes;
and
g) no steps were ever taken by the Heirs to ascertain the genuineness
and authenticity of the conflicting titles.
2) the statement in open Court of the Heirs' own counsel that his
clients did not have the original copy of the title, that they were in fact
"still searching" for the titless;
38
3) the testimony of Jose Moreno Lacalle that he had no copy "of the
document which says **(his) mother is the registered owner" of the
land in question; that he "cannot find the original" which "maybe" was
in possession of his mother's agent, a certain Mr. Lopez, whom he
could no longer locate: that he had tried to verify the existence of the
title "from the Register of Deeds of Pasig and Pasay" without success;
that he had not, however, gone to the Register of Deeds of Parañaque
or Las Piñas; 39
4) that the only document bearing on the issue submitted by the Heirs,
the deed of absolute sale purportedly executed by Eusebio Mojica,
Clara Mojica, Maria Mojica, Antonia Mojica, Amanda Mojica and
Teodora Aranda — which deeded over to Veronica Lacalle the "land
'known as Lot 1 PSU-151453,'" but which made no reference to any
Torrens title over it — was not accompanied by proof of the vendors'
ownership of the land in question:
5) that the land subject of the Heirs' action for quieting of title being
registered land (being in fact registered in the Dimans' favor), the
unregistered deed of sale relied upon by the Heirs cannot and does
not affect said land, or bind any third party (including the Dimans) for
the reason that, as a matter of law:
"** (N)o deed, mortgage, lease or other voluntary instrument, except a
will purporting to convey or affect registered land, shall take effect as
a conveyance or bind the land, but shall operate only as a contract
between the parties and as evidence of authority to the Register of
Deeds to make registration;" and it is the "act of registration (that)
shall be the operative act to convey or affect the land in so far as third
person are concerned," which "registration shall be made in Moreno Lacalle versus Cristina Diman, Clarissa Diman, George Diman,
the ** Register of Deeds for the province or city where the land lies.
40
Felipe Diman and Florina Diman" — are annulled; and said Civil Case
No. 94-3085 is DISMISSED. Costs against private respondents.
and
IT IS SO ORDERED.
6) that there is no proof whatever of the ownership or character of the
rights of the vendors (the Mojicas) over the property purportedly
conveyed.

In fine, the Heirs had proven nothing whatever to justify a judgment in

their favor. They had not presented any copy whatever of the title they
wished to be quieted. They had not adduced any proof worthy of the
name to establish their precedessors' ownership of the land. On the
contrary, their own evidence, from whatever aspect viewed, more than
persuasively indicated their lack of title over the land, or the
spuriousness of their claim of ownership thereof. The evidence on
record could not be interpreted in any other way, and no other
conclusion could be drawn therefrom except the unmeritoriousness
of the complaint. The case at bar is a classic example of the eminent
propriety of a summary judgment, or a judgment on demurrer to
evidence.

Considering these circumstances, including the outlandish grounds

of opposition advanced by the Heirs against the Dimans' motions for
summary judgment and for demurrer to evidence, no less than the
obviously mistaken grounds cited by the Trial Court for denying said
motions, this Court has no hesitation in declaring that it was indeed
grave abuse of discretion on the part of the Trial Court to have refused
to render a summary judgment or one on demurrer to evidence. In no
sense may the Trial Court's errors be considered, as the Court of
Appeals did in its judgment of September 9, 1997, as mere errors of
judgment correctible by appeal, untarnished by any capriciousness or
whimsicality.

WHEREFORE, the challenged Decision of the Court of Appeals

promulgated on September 9, 1997 is REVERSED and SET ASIDE: the
Orders dated July 14, 1996 and December 2, 1996 rendered in the
action for "Quieting of Title and Damages" — docketed as Civil Case
No. 94-3085 of the Regional Trial Court at Las Piñas (Branch 255) and
entitled "Heirs of Veronica V. Moreno Lacalle, represented by Jose
Rule 35 Summary Judgments
G.R. No. 159224 January 20, 2006
JOSE D. ONTIMARE, JR., and RENE D. ONTIMARE, as sons/heirs,
substituted for their deceased father and the original party JOSE M.
ONTIMARE, SR., Petitioners,
vs.
SPS. RENATO and ROSARIO ELEP, Respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the Decision,1 dated July 18, 2003, of the Court
of Appeals in CA-G.R. CV No. 69138, affirming with modifications
the Summary Judgment2 dated July 11, 2000 of the Regional Trial Court
of Quezon City, Branch 77, in Civil Case No. Q-96-28991. The RTC
ordered Jose M. Ontimare, Sr. to pay respondents actual and
compensatory damages in the amount of P75,000 per month from July
1996 to September 1998, exemplary damages amounting to P50,000,
attorney’s fees in the amount of P30,000, and the sum of P150,000 as
reimbursement for the damage on respondents’ wood parquet floors, wall
paintings and ceiling.
The facts, as borne by the records, are as follows:
Ontimare Sr. and respondents are neighbors in Hyacinth Street, Roxas
District, Quezon City. Respondents wanted to build a four-door, two-storey
apartment on their lot at No. 74 Hyacinth Street and applied for a building
permit with the Building Official of Quezon City sometime in December
1995.
Ontimare Sr. owned the adjoining house and adjacent lot on No. 72
Hyacinth Street. His terrace extends to the boundary between his property
and respondents’. On December 3, 1995, respondents wrote Ontimare Sr.
a letter seeking his written consent to the construction of a firewall adjacent
to his existing firewall.
Instead of consenting, on December 20, 1995, Ontimare Sr. filed a
Complaint with the Building Official asking that the request for a building
permit be withheld since a firewall would adversely affect the ventilation and
market value of his property.
Despite a building permit issued to respondents on January 8, 1996,3 a
Cease and Desist Order4 to stop the construction of the four-door
apartment was issued on January 12, 1996, as a result of the Complaint of
Ontimare Sr.
However, when respondents wrote the City Engineer and explained they
were constructing a one-sided firewall within their property, the Cease and
Desist Order was forthwith lifted on January 16, 1996.
On January 26, 1996, the complaint of Ontimare Sr. was dismissed. He
appealed to the City Mayor, who ordered an investigation on the matter.
On February 2, 1996, Ontimare Sr. filed a Notarial Prohibition.
After hearings conducted on June 18 and 25, 1996, the Building Official
dismissed the complaint on July 11, 1996 and ordered Ontimare Sr. to
make the adjustments in the construction of his house.5 Respondents were
issued a new building permit on July 16, 1996.6
Meanwhile, the day before, on July 15, 1996, while respondents’ workers
were plastering and water-proofing the firewall, Ontimare Sr. fired his
shotgun, threatening to kill anyone who would enter his property and work
on respondents’ construction.7 As a result, a portion of the firewall remained
unfinished. According to respondents, water seeped in the building and
damaged the sanding, the wood parquet floors and the ceiling.
Respondents filed an action for damages with application for preliminary
injunction and restraining order against Ontimare Sr. before the Regional
Trial Court of Quezon City, Branch 77.
After trial, Ontimare Sr. moved for a summary judgment while the
respondents moved for the resolution of the case on the merits. The RTC
issued the summary judgment, the dispositive portion of which reads,
WHEREFORE, premises considered, judgment is hereby rendered in favor
of the plaintiffs, and the defendant is hereby ordered to pay the plaintiffs:
1. Actual and compensatory damages in the form of unrealized income and
bank amortization interest in the amount of P75,000.00 per month from July,
1996 to September, 1998;
2. The amount of P150,000.00 as reimbursement for the damage on the
wood parquet floors, wall paintings and ceiling;
3. P50,000.00 as and by way of exemplary damages; and
4. P30,000.00 as and by way of attorney’s fees.
SO ORDERED.8
On appeal, the Court of Appeals affirmed the assailed summary judgment
with modification,
WHEREFORE, premises considered, judgment is hereby rendered in favor
of the plaintiffs, and the defendant is hereby ordered to pay the plaintiffs:
1. Compensatory damages in the form of unrealized income in the total
amount of Two Hundred Eighty-eight Thousand Pesos (P288,000.00) for
Apartments A, B and C, and bank amortization interest from July 1996 to
July 1997 in the total amount of Three Hundred Forty-four Thousand Eight
Hundred Seventy-five Pesos and 74/100 centavos (P344,875.74);
2. The amount of P150,000.00 as reimbursement for the damage on the
wood parquet floors, wall paintings and ceiling;
3. P50,000.00 as and by way of exemplary damages; and
4. P30,000 as and by way of attorney’s fees.
SO ORDERED.9
Meanwhile, while the case was on appeal, Ontimare Sr. died. He was
survived by his two sons, petitioners herein, who now come to us on a
petition for review on certiorari on the ground that:
1. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
MAINTAINING THE TRIAL COURT’S SUMMARY JUDGMENT AGAINST
MOVANT DEFENDANT
2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
OVERLOOKING MATERIAL FACTS TO FIND DEFENDANT SOLELY
LIABLE FOR THE DELAY IN THE PLASTERING OF THE FIREWALL
3. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
NOT HOLDING THAT THE LOWER COURT ERRED IN CONSIDERING
DEFENDANT’S MOTION FOR RECONSIDERATION AS A MERE SCRAP
OF PAPER WHICH COULD NOT BE ACTED UPON BY THE COURT
4. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
AWARDING UNEARNED RENT AND REIMBURSEMENT OF BANK
INTEREST AMORTIZATION FOR ANY PERIOD AFTER THE REWORK
ON THE FIREWALL HAD BEEN COMPLETED IN SEPTEMBER 1996
5. THE COURT OF APPEALS COMMITTED A PATENT ERROR IN
GRANTING DAMAGES EQUIVALENT TO ELEVEN MONTHS WHEN THE
LIABILITY PERIOD IT COMPUTED ONLY ADDED UP TO TEN MONTHS
6. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
AWARDING EXEMPLARY DAMAGES WITHOUT ANY BAD FAITH ON
THE PART OF DEFENDANT10
Simply put, there are two issues for resolution, namely (1) Is the summary
judgment rendered by the trial court proper? (2) Are petitioners liable for the
damages awarded?
Anent the first issue, petitioners argue that summary judgment may issue
only in favor of a moving party and only when there is no genuine issue on
any material fact, except for the amount of damages. Petitioners insist that
the summary judgment in this case was rendered against the movant and
despite the existence of disputed facts.
On the other hand, respondents counter that Ontimare Sr., in moving for
summary judgment indicated that he did not want a de riguer trial. Further,
respondents argue that he waived his right to question the said summary
judgment when he did not object to respondents’ motion that the case be
resolved on its merits.
On this issue, Rule 34, Section 3 of the Rules of Court is pertinent. It
provides:
SEC. 3. Motion and proceedings thereon. - … After the hearing, the
judgment sought shall be rendered forthwith if the pleading, depositions,
and admissions on file together with the affidavits, show that, except as to
the amount of damages, there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a matter of law.
Hence, for summary judgment to be proper, two (2) requisites must concur,
to wit: (1) there must be no genuine issue on any material fact, except for
the amount of damages; and (2) the moving party must be entitled to a
judgment as a matter of law.
When, on their face, the pleadings tender a genuine issue, summary
judgment is not proper. An issue is genuine if it requires the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim.11
In the instant case, the summary judgment was rendered after the
presentation of evidence by both parties in a full blown trial. Records show
that during the two-year trial of the case, Ontimare Sr. had presented his
own witnesses, all four of them, and had cross-examined the witnesses of
the opposing party.
The trial court’s decision was merely denominated as summary judgment.
But in essence, it is actually equivalent to a judgment on the merits, making
the rule on summary judgment inapplicable in this case.
Anent the second issue, petitioners contend that respondents were issued
locational clearance only on July 16, 1996 and hence, the start of the
construction work should be reckoned not earlier than the said date. When
the shotgun incident happened on July 15, 1996, respondents had no
locational clearance.
Petitioners also argue that the unearned rent and reimbursement of bank
interest amortization should be counted up to and not from the completion
of the rework because the apartments could have been rented out and
could have started to earn once the rework was completed. Petitioners
insist the period for the computation of unrealized income should have been
ten months.
Lastly, petitioners maintain that Ontimare Sr. did not act in bad faith nor
abusively in the protection of his rights, thus no exemplary damages should
be granted.
For their part, respondents counter that petitioners raise pure questions of
fact already ruled upon by the Court of Appeals, hence, the instant petition
should be denied outright. Granting arguendo that the petition should be
given due course, respondents aver that Ontimare Sr., despite knowledge
that respondents had already acquired a building permit, nevertheless,
threatened bodily harm on workers of respondents to prevent the
construction. He should thus be held liable for damages for abuse of his
rights to the prejudice of respondents.
Respondents alleged that rework on the firewall started from September
1996, as evidenced by the receipts issued by the contractor. The
compensatory damages in the form of unearned rent started to accrue on
October 1, 1996 until the completion of the rework on August 1, 1997 for
Apartment A (a total of eleven months) and until July 15, 1997 for
Apartments B and C (a total of ten months and fifteen days).
Lastly, respondents posit that Ontimare Sr.’s threats with use of a firearm
constitute bad faith.
At the outset, it bears stressing that, except for the issue on exemplary
damages, petitioners raise pure questions of fact, which may not be the
subject of a petition for review on certiorari.12 Well-settled is the rule that the
Supreme Court is not a trier of facts. When supported by substantial
evidence, the findings of fact of the Court of Appeals are conclusive and
binding on the parties and are not reviewable by this Court, unless the case
falls under any of the following recognized exceptions:
(1) When the conclusion is a finding grounded entirely on speculation,
surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond the
issues of the case and the same is contrary to the admissions of both
appellant and appellee;

(7) When the findings are contrary to those of the trial court;

(8) When the findings of fact are conclusions without citation of specific
evidence on which they are based;

(9) When the facts set forth in the petition as well as in the petitioners’ main
and reply briefs are not disputed by the respondents; and

(10) When the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on
record.13

Petitioners failed to show that their case falls under any of the
above-quoted exceptions. Hence, we see no reason to disturb the findings
of the Court of Appeals, which we find supported by evidence on record.

We are likewise constrained from reversing the award of exemplary

damages. Exemplary damages are imposed by way of example or
correction for the public good.14 Ontimare Sr.’s firing his shotgun at
respondents’ workers cannot be countenanced by this Court. Exemplary
damages in the amount of P50,000 is proper.

WHEREFORE, the petition is DENIED. The assailed Decision, of the Court

of Appeals dated July 18, 2003, in CA-G.R. CV No. 69138
is AFFIRMED. Costs against petitioners.

SO ORDERED.
Rule 35 Summary Judgments
G.R. No. 153827 April 25, 2006
ASIAN CONSTRUCTION AND DEVELOPMENT
CORPORATION, Petitioner,
vs.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Respondent.
DECISION
GARCIA, J.:
In this petition for review under Rule 45 of the Rules of Court, petitioner
Asian Construction and Development Corporation or "ASIAKONSTRUKT,"
seeks the reversal and setting aside of the decision1dated March 15, 2002
and the Resolution2 dated June 3, 2002 of the Court of Appeals (CA) in
CA-G.R. CV No. 68189. The assailed decision affirm with modification the
Summary Judgment rendered by the Regional Trial Court (RTC) of Makati
City in an action for a sum of money thereat commenced by the herein
respondent, Philippine Commercial International Bank (PCIBANK) against
the petitioner, while the challenged resolution denied petitioner’s motion for
reconsideration.
The facts:
On February 24, 1999, in the RTC of Makati City, respondent PCIBANK
filed a complaint3 for a sum of money with prayer for a writ of preliminary
attachment against petitioner ASIAKONSTRUKT. Docketed as Civil Case
No. 99-432, the complaint alleged, inter alia, as follows:
FIRST CAUSE OF ACTION
2.01 On various occasions, ASIAKONSTRUKT obtained U.S. dollar
denominated credit accommodations from PCIBANK in the amount of Four
Million Four Hundred Eighty Seven Thousand U.S. dollars
(US$4,487,000.00), exclusive of interests, charges and fees thereon and
the cost of collecting the same. These credit accommodations are covered
by the following promissory notes:
xxx xxx xxx
2.02 Prompt and faithful payment of all the foregoing promissory notes was
secured by the following deeds of assignment executed by
ASIAKONSTRUKT in favor of PCIBANK:
(a) Deed of Assignment of Receivables/Contract Proceeds dated 20 July
1994… where ASIAKONSTRUKT assigned its receivables from its
Contract … with the National Power Corporation (NPC) in the amount
of ….P54,500,000;
(b) Deed of Assignment of Receivables … dated 28 June 1995 … where
ASIAKONSTRUKT assigned its receivables from its Contract … with the
NPC in the amount of …P26,281,000.00;
(c) Deed of Assignment of Receivables dated 28 August 1995 … where
ASIAKONSTRUKT assigned its receivables from its Sub-Contract with ABB
Power, Inc., in the amount of P43,000,000.00;
(d) Deed of Assignment of Contract Proceeds dated 27 March 1996 …
where ASIAKONSTRUKT assigned its receivables from its contracts with
PNOC … in the aggregate amount of P46,000,000.00; and
(e) Deed of Assignment of Contract Proceeds … dated 20 February
1997 … where ASIAKONSTRUKT assigned its receivables from the Ormat
Philippines, Inc., in the aggregate amount of US$3,350,000.00;
2.03 All the foregoing deeds of assignments stipulate, among others, the
following terms and conditions:
a) The assignment is for the purpose of securing payment of the principal
amount and the interests and bank charges accruing thereon, the costs of
collecting the same and all other expenses which PCIBANK may be put in
connection with or as an incident of the assignment;
b) That the assignment secures also any extension or renewal of the credit
which is the subject thereof as any and all other obligations of
ASIAKONSTRUKT of whatever kind and nature as appear in the records of
PCIBANK, which ASIAKONSTRUKT accepts as the final and conclusive
evidence of such obligations to PCIBANK, "whether contracted before,
during or after the constitution of [the assignment agreement]";
c) That PCIBANK authorizes ASIAKONSTRUKT, at the latter’s expense, to
"collect and receive for [PCIBANK] all the Receivables"; and
d) That ASIAKONSTRUKT "shall have no right, and agrees not to use any
of the proceeds of any collections, it being agreed by the parties that
[ASIAKONSTRUKT] divests itself of all the rights, title and interest in said
Receivables and the proceeds of the collection received thereon." 1avvphil.net
2.04 The promissory notes have remained not fully paid despite their
having become due and demandable. Repeated verbal and written
demands were made upon ASIAKONSTRUKT, but to no avail. It has failed
and refused, and continues to fail and refuse, to pay its outstanding
obligations to PCIBANK…;
2.05 As a result of ASIAKONSTRUKT’s refusal to pay its outstanding
obligations, PCIBANK was constrained to refer the matter … to counsel and
thus incur attorney’s fees and legal costs.
2.06 The aggregate unpaid obligation of ASIAKONSTRUKT to PCIBANK,
as of 31 December 1998, amounts to… US$4,553,446.06, broken down as
follows:
Principal US$ 4,067,867.23
Interest US$ 291,263.27
Penalties US$ 194,315.56
TOTAL
US$ 4,553,446.06
For its second cause of action, PCIBANK alleged in the same complaint as
follows:
SECOND CAUSE OF ACTION
4.02 … as a result of the fraudulent acts of ASIAKONSTRUKT, PCIBANK
suffered the following damages, all of which ASIAKONSTRUKT must be
held to pay PCIBANK:
4.02.1 Exemplary damages, in the interest of public good and purposes of
correction, in the amount of not less than ….P50,000.00;
4.02.2 Attorney’s fees in the amount of not less than …. P1,800,000.00;
and
4.02.3 Costs of suit.
In support of its prayer for a writ of preliminary attachment embodied in the
complaint, plaintiff PCIBANK alleges the following:
3.02 … ASIAKONSTRUKT is guilty of fraud in contracting the debt, in the
performance thereof, or both, xxx;
303. PCIBANK agreed to enter into the above-mentioned credit
accommodations primarily because of the existence of the deeds of
assignment listed above. However, from telephone inquiries made with
responsible officers of the National Power Corporation, ABB Power, Inc.,
PNOC and Ormat Philippines, Inc., PCIBANK was surprised to learn that
ASIAKONSTRUKT had long ago collected the contract proceeds, or
portions thereof, which were previously assigned to PCIBANK. However, to
date, it has yet to turn over these proceeds to PCIBANK. Worse, PCIBANK
learned that the contract proceeds were used by ASIAKONSTRUKT for its
own purposes – clear evidence of fraud, which has deprived PCIBANK of
its security. ASIAKONSTRUKT’s unauthorized use of the contract proceeds
for its own purposes was subsequently confirmed by Mr. Napoleon Garcia,
Vice President for Finance of ASIAKONSTRUKT, in a telephone discussion
on 12 January 1999 with Ms. Maricel E. Salaveria of PCIBANK. xxx
Needless to say, ASIAKONSTRUKT has fraudulently collected such
receivables to the prejudice of PCIBANK.
3.04 … it is evident that ASIAKONSTRUKT never had any intention of
complying with the deeds of assignment. ASIAKONSTRUKT only misled
PCIBANK into believing that it had sufficient security to ensure payment of
its loan obligations.
3.05 Alternatively, granting, in argumenti gratia, that ASIAKONSTRUKT, at
the time it executed the foregoing deeds of assignment, really intended to
abide by their terms and conditions, it nevertheless committed manifest
fraud when it collected the contract proceeds, and instead of remitting them
to PCIBANK, used them for its own purposes.
In an order4 dated April 13, 1999, the trial court, after receiving ex parte
PCIBANK’s evidence in support of its prayer for preliminary attachment,
directed the issuance of the desired writ, thus:
WHEREFORE, let a writ of preliminary attachment issue against all the
property of defendant not exempt from execution or so much thereof as
may be sufficient to satisfy plaintiff’s principal claim of US$4,553,446.06,
representing the alleged unpaid obligation of defendant, inclusive of interest
and penalty charges, as of December 31, 1998, which is equivalent
to P174,260,380.72, upon plaintiff’s filing of a bond in an equal amount to
answer for all it may sustain by reason of the attachment if the Court shall
finally adjudge that plaintiff was not entitled thereto.
SO ORDERED.
With plaintiff PCIBANK having posted the requisite bond, a writ of
preliminary attachment was thereafter issued by the trial court. Per records,
defendant ASIAKONSTRUKT did not file any motion for the quashal or
dissolution of the writ.
Meanwhile, on August 27, 1999, defendant ASIAKONSTRUKT filed its
Answer,5 thereunder making admissions and denials. Defendant admits,
subject to its defenses, the material allegations of the Complaint as regards
its indebtedness to plaintiff PCIBANK and its execution of the various deeds
of assignment enumerated therein. It, however, denies, for lack of
knowledge sufficient to form a belief as to the truth thereof, the averments
in the Complaint that it has not paid, despite demands, its due and
demandable obligations, as well as the amounts due the plaintiff as
itemized in paragraph 2.06, supra, of the Complaint. It likewise denies
PCIBANK’s allegations in the same Complaint in support of its prayer for a
writ of preliminary attachment, particularly its having fraudulently
misappropriated for its own use the contract proceeds/receivables under
the contracts mentioned in the several deeds of assignments, claiming in
this respect that it has still remaining receivables from those contracts.
By way of defenses, defendant pleads in its Answer the alleged "severe
financial and currency crisis" which hit the Philippines in July 1997, which
adversely affected and ultimately put it out of business. Defendant adds
that the deeds of assignments it executed in favor of PCIBANK were
standard forms proposed by the bank as pre-condition for the release of the
loans and therefore partake of the nature of contracts of adhesion, leaving
the defendant to the alternative of "taking it or leaving it." By way of
counterclaim, defendant prayed for an award of P1,000,000.00 as and for
attorney’s fees and P200,000.00 as litigation expenses.
On January 24, 2000, plaintiff PCIBANK filed a verified Motion for Summary
Judgment,6 therein contending that the defenses interposed by the
defendant are sham and contrived, that the alleged financial crisis pleaded
in the Answer is not a fortuitous event that would excuse debtors from their
loan obligations, nor is it an exempting circumstance under Article 1262 of
the New Civil Code where, as here, the same is attended by bad faith. In
the same motion, PCIBANK also asserts that the deeds of assignments
executed in its favor are not contracts of adhesion, and even if they were,
the same are valid.
To the Motion for Summary Judgment, defendant interposed an
Opposition7 insisting that its Answer tendered or raised genuine and
substantial issues of material facts which require full-blown trial, namely:
1. Whether or not defendant received all or part of the proceeds/receivables
due from the contracts mentioned in the deeds of assignment at the time
the complaint was filed;
2. Granting that defendant received those proceeds/receivables, whether or
not defendant fraudulently misappropriated the same;
3. Whether or not defendant is virtually insolvent as a result of the
regionwide economic crisis that hit Asia, causing the Philippine peso to
depreciate drastically; and
4. Whether the parties dealt with each other on equal footing with respect to
the execution of the deeds of assignment as to give the defendant an
honest opportunity to reject the onerous terms imposed therein.
Significantly, defendant did not append to its aforementioned Opposition
any affidavit in support of the alleged genuine issues of material facts
mentioned therein.
Before the pending incident (motion for summary judgment) could be
resolved by the trial court, plaintiff PCIBANK waived its claim for exemplary
damages and agreed to reduce its claim for attorney’s fees
from P1,800,000.00 to P1,260,000.00, but made it clear that its waiver of
exemplary damages and reduction of attorney’s fees are subject to the
condition that a full and final disposition of the case is obtained via
summary judgment.
On May 16, 2000, the trial court, acting favorably on PCIBANK’s motion for
summary judgment, came out with its Summary Judgment,8 the decretal
portion of which reads:
WHEREFORE, judgment is hereby rendered ordering defendant to pay
plaintiff:
1. the sum of US$4,553,446.06, or its equivalent in Philippine currency at
the time of payment, with interest thereon at the rate of 8.27% per annum
from February 24, 1999 until fully paid;
2. P1,260,000.00 as and for attorney’s fees; and
3. the costs of suit.
SO ORDERED.
Explains the trial court in rendering its Summary Judgment:
A thorough examination of the parties’ pleadings and their respective stand
in the foregoing motion, the court finds that indeed with defendant’s
admission of the first cause of action there remains no question of facts in
issue. Further, the proffered defenses are worthless, unsubstantial, sham
and contrived.
Considering that there is no more issue to be resolved, the court hereby
grants plaintiff’s Motion and renders Judgment in favor of the plaintiff
against the defendant based on their respective pleadings in accordance
with Section 4, Rule 35 of the Rules of Court.
In time, petitioner went to the CA whereat its appellate recourse was
docketed as CA-G.R. CV No. 68189. As stated at the threshold hereof, the
CA, in its decision9 of May 15, 2002, affirmed with modification the
Summary Judgment rendered by the trial court, the modification being as
regards the award for attorney’s fees which the CA reduced
to P1,000,000.00, to wit:
IN THE LIGHT OF ALL THE FOREGOING, the appeal is PARTIALLY
GRANTED. The "Decision" appealed from is AFFIRMED with the
MODIFICATION THAT THE AWARD FOR ATTORNEY’S FEES is reduced
to P1,000,000.00.
SO ORDERED.
With its motion for reconsideration having been denied by the CA in its
Resolution10 of June 3, 2002, petitioner is now with us via the present
recourse, raising the following issues:
I WHETHER OR NOT THERE IS A GENUINE ISSUE AS
TO A MATERIAL FACT WHICH RULES OUT THE
PROPRIETY OF A SUMMARY JUDGMENT.
II WHETHER OR NOT THE AWARD OF ATTORNEY’S
FEES IS EXORBITANT OR UNCONSCIONABLE.
We DENY.
As in the two courts below, it is petitioner’s posture that summary judgment
is improper in this case because there are genuine issues of fact which
have to be threshed out during trial, to wit: (a) whether or not petitioner was
able to collect only a portion of the contract proceeds/receivables it was
bound to deliver, remit and tender to respondent under the several deeds of
assignment it executed in favor of the latter; and (b) whether or not
petitioner fraudulently misappropriated and used for its benefit the said
proceeds/receivables. Ergo, so petitioner maintains, genuine triable issues
of fact are present in this case, which thereby precludes rendition of
summary judgment.
We are not persuaded.
Under Rule 35 of the 1997 Rules of Procedure, as amended, except as to
the amount of damages, when there is no genuine issue as to any material
fact and the moving party is entitled to a judgment as a matter of law,
summary judgment may be allowed.11 Summary or accelerated judgment is
a procedural technique aimed at weeding out sham claims or defenses at
an early stage of litigation thereby avoiding the expense and loss of time
involved in a trial.12
Under the Rules, summary judgment is appropriate when there are no
genuine issues of fact which call for the presentation of evidence in a
full-blown trial. Even if on their face the pleadings appear to raise issues,
when the affidavits, depositions and admissions show that such issues are
not genuine, then summary judgment as prescribed by the Rules must
ensue as a matter of law. The determinative factor, therefore, in a motion
for summary judgment, is the presence or absence of a genuine issue as to
any material fact.
A "genuine issue" is an issue of fact which requires the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim.
When the facts as pleaded appear uncontested or undisputed, then there is
no real or genuine issue or question as to the facts, and summary judgment
is called for. The party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that the
issue posed in the complaint is patently unsubstantial so as not to
constitute a genuine issue for trial. Trial courts have limited authority to
render summary judgments and may do so only when there is clearly no
genuine issue as to any material fact. When the facts as pleaded by the
parties are disputed or contested, proceedings for summary judgment
cannot take the place of trial.13
The CA, in its challenged decision, stated and we are in full accord with it:
In the present recourse, the [petitioner] relied not only on the judicial
admissions … in its pleadings, more specifically its "Answer" to the
complaint, the testimony of Maricel Salaveria as well as Exhibits "A" to
"T-3", adduced in evidence by the [respondent], during the hearing on its
plea for the issuance, by the Court a quo, of a writ of preliminary attachment.
Significantly, the [petitioner] did not bother filing a motion for the quashal of
the "Writ" issued by the Court a quo.
It must be borne in mind, too, that the [petitioner] admitted, in its
"Answer" … the due execution and authenticity of the documents appended
to the complaint … . The [petitioner] did not deny its liability for the principal
amount claimed by the [respondent] in its complaint. The [petitioner] merely
alleged, by way of defenses, that it failed to pay its account … because of
the region-wide economic crisis that engulfed Asia, in July, 1997, and the
"Deeds of Assignment" executed by it in favor of the [respondent] were
contracts of adhesion:
xxx xxx xxx
The [petitioner] elaborated on and catalogued its defenses in its "Appellants
Brief" what it believed, as "genuine issues".
"(i) Whether or not [petitioner] received all or part of the
proceeds/receivables due from the construction contracts at the time the
civil action was filed;
(ii) Granting that [petitioner] received the proceeds/receivables from the
construction contracts, whether or not [petitioner] fraudulently
misappropriated the same;
(iii) Whether or not [petitioner] had become virtually insolvent as a result of
the region-wide economic crisis that hit Asia, causing the Philippine peso to
depreciate dramatically; and
(iv) Whether or not [respondent] and [petitioner] dealt with each other on
equal footing with respect to the execution of the deeds of assignment of
receivables as to give [petitioner] an honest opportunity to reject the
onerous terms imposed on it."
However, the [petitioner] failed to append, to its "Opposition" to the "Motion
for Summary Judgment", … "Affidavits" showing the factual basis for its
defenses of "extraordinary deflation," including facts, figures and data
showing its financial condition before and after the economic crisis and that
the crisis was the proximate cause of its financial distress. It bears stressing
that the [petitioner] was burdened to demonstrate, by its "Affidavits" and
documentary evidence, that, indeed, the Philippines was engulfed in an
extraordinary deflation of the Philippine Peso and that the same was the
proximate cause of the financial distress, it claimed, it suffered.
xxx xxx xxx
Where, on the basis of the records, inclusive of the pleadings of the parties,
and the testimonial and documentary evidence adduced by the
[respondent], supportive of its plea for a writ of preliminary attachment, the
[respondent] had causes of action against the [petitioner], it behooved the
[petitioner] to controvert the same with affidavits/documentary evidence
showing a prima facie genuine defense. As the Appellate Court of Illinois so
aptly declared:
The defendant must show that he has a bona fide defense to the action,
one which he may be able to establish. It must be a plausible ground of
defense, something fairly arguable and of a substantial character. This he
must show by affidavits or other proof.
The trial court, of course, must determine from the affidavits filed whether
the defendant has interposed a sufficiently good defense to entitle it to
defend, but where defendant’s affidavits present no substantial triable
issues of fact, the court will grant the motion for summary judgment.
xxx xxx xxx
The failure of the [petitioner] to append to its "Opposition" any "Affidavits"
showing that its defenses were not contrived or cosmetic to delay
judgment … created a presumption that the defenses of the [petitioner]
were not offered in good faith and that the same could not be sustained
(Unites States versus Fiedler, et al., Federal Reported, 2nd, 578).
If, indeed, the [petitioner] believed it that was prevented from complying
with its obligations to the [respondent], under its contracts, it should have
interposed a counterclaims for rescission of contracts, conformably with the
pronouncement of our Supreme Court, thus:
xxx xxx xxx
The [petitioner] did not. This only exposed the barrenness of the pose of the
[petitioner].
The [petitioner] may have experienced financial difficulties because of
the "1997 economic crisis" that ensued in Asia. However, the same does
not constitute a valid justification for the [petitioner] to renege on its
obligations to the [respondent]. The [petitioner] cannot even find solace in
Articles 1266 and 1267 of the New Civil Code for, as declared by our
Supreme Court:
It is a fundamental rule that contracts, once perfected, bind both contracting
parties, and obligations arising therefrom have the force of law between the
parties and should be complied with in good faith. But the law recognizes
exceptions to the principle of the obligatory force of contracts. One
exception is laid down in Article 1266 of the Civil Code, which reads: ‘The
debtor in obligations to do shall also be released when the prestation
becomes legally or physically impossible without the fault of the obligor.’
Petitioner cannot, however, successfully take refuge in the said article,
since it is applicable only to obligations "to do," and not obligations "to give."
An obligation "to do" includes all kinds of work or service; while an
obligation "to give" is a prestation which consists in the delivery of a
movable or an immovable thing in order to create a real right, or for the use
of the recipient, or for its simple possession, or in order to return it to its
owner.
xxx xxx xxx
In this case, petitioner wants this Court to believe that the abrupt change in
the political climate of the country after the EDSA Revolution and its poor
financial condition "rendered the performance of the lease contract
impractical and inimical to the corporate survival of the petitioner."
(Philippine National Construction Corporation versus Court of Appeals, et
al., 272 SCRA 183, at pages 191-192, supra)
The [petitioner] even failed to append any "Affidavit" to its "Opposition"
showing how much it had received from its construction contracts and how
and to whom the said collections had been appended. The [petitioner] had
personal and sole knowledge of the aforesaid particulars while the
[respondent] did not.
In fine, we rule and so hold that the CA did not commit any reversible error
in affirming the summary judgment rendered by the trial court as, at bottom,
there existed no genuine issue as to any material fact. We also sustain the
CA’s reduction in the award of attorney’s fees to only P1,000,000.00, given
the fact that there was no full-blown trial.

WHEREFORE, the assailed CA decision is AFFIRMED in toto and this

petition is DENIED for lack of merit.

Costs against petitioner.

SO ORDERED.
Rule 36:Judgments, Final Orders and Entry
G.R. No. 73794 September 19, 1988
ETERNAL GARDENS MEMORIAL PARKS CORPORATION, petitioner,
vs.
FIRST SPECIAL CASES DIVISION INTERMEDIATE APPELLATE
COURT and NORTH PHILIPPINE UNION MISSION OF THE
SEVENTH-DAY ADVENTISTS, respondents.
PARAS, J.:
This is a special civil action for certiorari, prohibition and mandamus seeking to set aside the two
resolutions of public respondent First Special Cases Division of the then Intermediate Appellate Court in
AC-G.R. No. 04869 entitled "North Philippine Union Mission of the Seventh Day Adventists versus Hon.
Antonia Corpus-Macandog, Presiding Judge, Branch CXX, Regional Trial Court, Caloocan City and
Eternal Gardens Memorial Park Corporation, (a) dated September 5, 1985 (Rollo, pp. 21-25)
reconsidering its Decision 1 of February 27, 1985 (Rollo, pp. 38-48) and ordering petitioner to deposit
whatever amounts due from it under the Land Development Agreement, and (b) dated February 13, 1986
(Rollo, p. 27) denying for lack of merit petitioner's motion for reconsideration.
Petitioner Eternal Gardens Memorial Parks Corporation and private
respondent North Philippine Union Mission Corporation of the Seventh Day
Adventists (MISSION for short) are corporations duly organized and
existing under and by virtue of the laws of the Republic of the Philippines.
They executed a Land Development Agreement (Rollo, pp. 179-182) on
October 6, 1976 whereby the former undertook to introduce and construct
at its own expense and responsibility necessary improvements on the
property owned by private respondent into a memorial park to be
subdivided into and sold as memorial plot lots, at a stipulated area and
price per lot. Out of the proceeds from the sale, private respondent is
entitled to receive 40% of the net gross collection from the project to be
remitted monthly by petitioner to private respondent through a designated
depositary trustee bank. On the same date private respondent executed in
petitioner's favor a Deed of Absolute Sale with Mortgage (Rollo, pp.
183-186) on the lots with titles involved in the land development project.
The deed was supplemented by a Sale of Real Property with Mortgage and
Special Conditions dated October 28, 1978 (Rollo, pp. 189-194 The
amounts totalling about P984,110.82 paid by petitioner were to be
considered as part of the 40% due private respondent under the Land
Development Agreement. All went well until Maysilo Estate asserted its
claim of ownership over the parcel of land in question. Confronted with such
conflicting claims, petitioner as plaintiff filed a complaint for interpleader
(Rollo, pp. 169-179) against private respondent MISSION and Maysilo
Estate, docketed as Special Court Case No. C-9556 of the then CFI of Rizal,
Branch XII, Caloocan, alleging among others, that in view of the conflicting
claims of ownership of the defendants (herein private respondent and
Maysilo Estate) over the properties subject matter of the contracts, over
which plaintiff corporation (herein petitioner) has no claim of ownership
except as a purchaser thereof, and to protect the interests of plaintiff
corporation which has no interest in the subject matter of the dispute and is
willing to pay whoever is entitled or declared to be the owners of said
properties, the defendants should be required to interplead and litigate their
several claims between themselves (Rollo, p. 177).
An order was issued by the presiding judge requiring defendants to
2
interplead on October 22, 1981. MISSION filed a motion to dismiss dated
November 10, 1981 for lack of cause of action but also presented an
answer dated November 12, 1981. The motion to dismiss was denied in an
Order dated January 12, 1982. The heirs of Maysilo Estate filed their own
answer dated November 11, 1981 and an amended answer dated October
20, 1983 thru the estate's special receiver. The heirs of Pedro Banon filed
an "Answer in Intervention with Special and Affirmative Defenses" dated
October 24, 1983, while Lilia B. Sevilla and husband Jose Seelin filed their
"Answer in Cross-claim" dated October 31, 1983 (Rollo, p. 30). The heirs of
Sofia O'Farrel y Patino, et al. filed their Answer in Intervention dated
November 10, 1983.
However, earlier on November 21, 1982, private respondent presented a
motion for the placing on judicial deposit the amounts due and unpaid from
petitioner. Acting on such motion, the trial court denied judicial deposit in
3
its order dated February 13, 1984, the decretal portion of which reads:
PREMISES CONSIDERED, all or the full amount the plaintiff, Eternal
Gardens Memorial Parks Corporation have already paid the North
Philippine Union Mission Corporation of the Seventh Day Adventist is
hereby ordered to deposit the same to this Court within thirty (30) days from
receipt of this order considering that real or true owner of the subject
properties in question, due hearing of this court has yet to be undergone in
order to decide as to who is the true owner which is a prejudicial question.
Hence the motion dated November 21, 1983 of the NPUM for the Eternal
Gardens Corporation to deposit the balance due and unpaid is hereby
ordered denied and the opposition thereto dated December 19, 1983 is
hereby ordered granted.
The contract between the Eternal Gardens Corporation and the North
Philippine Union Mission dated October 16, 1976 is ordered and declared
ineffective as of today, February 13, 1984 because the subject matter of the
sale is not existing between the contracting parties until after the question
of ownership is resolved by this court. The court will order the revival of the
contract if the North Philippine Union Mission will win.
If not, the declared winner among the intervenors will be the party to enter
into a contract of sale with the plaintiff as aforementioned. (Rollo, p. 66).
Another order dated October 26, 1984 was issued amending the February
13, 1984 order and setting aside the order for private respondent's deposit
of the amounts it had previously received from petitioner, thus:
WHEREFORE IN VIEW OF ALL THE FOREGOING CONSIDERATIONS
the order of February 13, 1984, is hereby ordered amended, reconsidered
and modified by this same Court as follows:
(a) The order directing the NORTH PHILIPPINE UNION MISSION
CORPORATION OF SEVENTH-DAY ADVENTISTS to deposit the
amounts it received under the implementation of the LAND
DEVELOPMENT AGREEMENT which is not questioned by the plaintiff,
Eternal Gardens, is hereby ordered set aside for the reason that the titles to
ownership, the North Philippine Union Mission Corporation of Seventh Day
Adventists on the lots subject matter of the aforesaid agreement is not
established invalid, and the alleged titles of intervenors are not proven yet
by competent evidence;
(b) The motion to require Eternal Gardens to deposit the balance under the
Land Development Agreement is likewise hereby ordered denied
considering the fact the aforesaid plaintiff had not denied its obligations
under the aforesaid contract; and
(c) The trial or hearing is hereby ordered as scheduled to proceed on
November 29, 1984 and on December 6, 1984 at 8:30 in the morning per
order of this Court dated October 4, 1984 in order to determine the alleged
claims of ownership by the intervenors and all claims and allegations of
each party to the instant" case will be considered and decided carefully by
this court on just and meritorious grounds. (Rollo, p. 39)
Said Orders were assailed twice in the Intermediate Appellate Court (Court
of Appeals) and in the Supreme Court as follows:
In G.R. No. 73569 it appeared that on January 11, 1985, MISSION filed a
motion to dismiss the Interpleader and the claims of the Maysilo Estate and
the Intervenors and to order the Eternal Gardens to comply with its Land
Management with MISSION.
On January 28, 1985, the trial court passed a resolution, the dispositive
portion of which reads:
WHEREFORE, premises considered, this Court, after a lengthy, careful
judicious study and perusal of all the stand of each and everyone of all the
parties participating in this case, hereby orders the dismissal of the
interpleader, and the interventions filed by the intervenors, heirs of Pedro
Banon, heirs of O'Farrel, heirs of Rivera, heirs of Maria del Concepcion
Vidal, consolidated with the Maysilo Estate as represented by receiver
Arturo Salientes the heirs of Vicente Singson Encarnacion, and Lilia Sevilla
Seeling
This Court likewise orders the plaintiff, Eternal Gardens Memorial Parks
Corporation to comply with the Land Development Agreement dated
October 6, 1978, it entered into with the North Philippine Union Mission
Corporation of the Seventh-Day Adventists. (Rollo. p. 68)
The heirs of the Maysilo Estate moved for reconsideration of the
aforementioned order of dismissal, the hearing of which was requested to
be set on February, 28, 1985. However, the trial judge, on February 14,
1985 issued the following orders:
Considering Motions for Reconsideration filed, the Court resolves that the
same be GRANTED and instead of a hearing of the said motions on
February 20, 1985, at 8:30 a.m., a hearing on the merits shall be held.
(Rollo, p. 68)
In spite of the February 14, 1985 order, MISSION filed on March 6, 1985 a
motion for Writ of Execution of the resolution of January 28, 1985. This was
denied on June 25, 1985. The said court further set the case for pre-trial
and trial on July 18, 1985.
It was elevated on certiorari and mandamus to the Intermediate Appellate
Court (Court of Appeals), docketed as AC-G.R. Sp No. 06696 "North
Philippine Union Mission of the Seventh Day Adventists, vs. Hon. Antonia
Corpus-Macandog Presiding Judge, Branch CXX, Regional Trial Court,
Caloocan City, Eternal Gardens Memorial Parks Corporation, and Heirs of
Vicente Singson Encarnacion It was raffled to the Second Special Division.
MISSION assailed the February 14, 1985 and June 25, 1985 orders as
violative of due process and attended by grave abuse of discretion
amounting to lack of jurisdiction. The petition was however dismissed in the
decision of said Appellate Court, promulgated on December 4, 1985, the
dispositive portion of which reads:
WHEREFORE, for want of merit the petition for certiorari and mandamus
under consideration cannot be given due course and is accordingly,
DISMISSED, without any pronouncement, as to costs. The restraining
order embodied in Our Resolution of July 31, 1985, is hereby lifted. (Rollo,
G.R. No. 73569 p. 232)
The private respondent challenged the above decision in the Supreme
Court in G.R. No. 73569. In its resolution dated June 11, 1986, the
Supreme Court denied the petition for review on certiorari for lack of merit,
as follows:
G.R. No. 73569 (North Philippine Union Mission Corporation of the Seventh
Day Adventists vs. Intermediate Appellate Court, et al.) considering the
allegations, issues, and arguments adduced in the petition for review on
certiorari, the Court Resolved to DENY the same for lack of merit. (Ibid p.
263)
Said resolution has become final and executory on July 16, 1986. (Ibid p.
269)
Earlier in 1983, the heirs of the late spouses Vicente Singson Encarnacion
and Lucila Conde filed Civil Case No. C-11836 for quieting of title with
Branch CXXII, Regional Trial Court, Caloocan City, where petitioner and
private respondent were named as defendants.
Said case is still pending in the lower Court.
In the case at bar, G.R. No. 73794, MISSION, herein private respondent
filed a petition for certiorari with the then Intermediate Appellate Court
docketed as AC-G.R. No. 04869 praying that the aforementioned Orders of
February 13, 1984 and October 26, 1984 of the Regional Trial Court be set
aside and that an order be issued to deposit in court or in a depositor
trustee bank of any and all payments, plus interest thereon, due the private
respondent MISSION under the Land Development Agreement, said
amounts deposited to be paid to whomever may be found later to be
entitled thereto, with costs. (Rollo, G.R. No. 73794 p. 38)
The Intermediate Appelate Court, acting through its First Special Cases
Division dismissed the petition in its decision on February 27, 1985 (Rollo,
4
pp. 38-48). In its Resolution promulgated on September 5, 1985, the Court
5
however, reversed its decision, thus:
WHEREFORE, the Court reconsiders its decision of February 27, 1986,
and sets aside the questioned portions of the respondent Court's orders of
February 13 and October 26, 1984. The private respondent is hereby
ordered to deposit whatever amounts are due from it under the Land
Development Agreement of October 6, 1976 with a reputable bank to be
designated by the respondent court to be the depository trustee of the said
amounts to be paid to whoever shall be found entitled thereto. No costs.
(Rollo, p. 25)
Eternal Gardens moved for a reconsideration of the above decision but it
was denied for lack of merit in a resolution promulgated on February 13,
1986, which states:
The private respondent Eternal Gardens Memorial Park Corporation's
Motion for Reconsideration of the Court's resolution promulgated
September 5, 1985 requiring it "to deposit whatever amounts are due from
it under the Land Development Agreement of October 6, 1976 ...," which
was strongly opposed by the petitioner North Philippine Union Mission of
the Seventh Day Adventists, is hereby denied for lack of merit, reiterating
as it does, the very same issues and arguments that were passed upon and
considered by the Court in the very same resolution sought to be
reconsidered. (Rollo, p. 27)
Hence, this petition. On July 8,1987, the Third Division of this Court issued
the following resolution:
... the court RESOLVED to give due course to this petition and require the
parties to file memoranda.
In the meantime, to avoid possible wastage of funds, the Court RESOLVED
to require the private respondent to DEPOSIT its accruing installments
6
within ten (10) days from notice with a reputable commercial bank in a
savings deposit account, in the name of the Supreme Court of the
Philippines, with the details to be reported or manifested to this Court within
ten (10) days from the time the deposit/deposits are made, such deposits
not to be withdrawn without authority from this Court. (Rollo, p. 162)
Petitioner's Memorandum With Prayer for the Deferment of Time to Make
Deposit (Rollo, p. 218-236) was filed on July 14, 1987. Its prayer was
granted for a period of ten (10) days for the purpose, in the resolution of
July 29, 1987 (Rollo, p. 238). Private respondent filed its Opposition to
Deferment of Time to Make Deposit (Rollo, pp. 239-253) on July 24, 1987
to which petitioner filed its Reply to Opposition on August 4, 1987 (Rollo, pp.
256-267). Both were noted by the Court in its resolution dated September 7,
1987 (Rollo, p. 270). On August 25, 1987, private respondent filed its
Rejoinder to Petitioner's Reply to Opposition (Rollo, pp. 271-292).
Petitioner filed its Supplemental Memorandum with Reply to Opposition (To
Deferment of time to Make Deposit) on August 31, 1987 (Rollo, pp. 294-313)
and a Sur-rejoinder on September 1, 1987 (Rollo, pp. 304-315).
The main issues in this case are:
I now the subject of the interpleader case ...
Whether or not respondent Court of Appeals abused its discretion
amounting to lack of jurisdiction in reconsidering its resolution of February
27, 1985 and in requiring instead in the resolution of September 5, 1985,
that petitioner Eternal Gardens deposit whatever amounts are due from it
under the Land Development Agreement with a reputable bank to be
designated by the respondent court.
II
Whether or not the dismissal of AC-G.R. SP No. 06696 (North Philippine
Union Mission of the Seventh Day Adventists vs. Hon. Macandog, et al.) by
the Second Special Cases Division of the IAC which was affirmed by the
Supreme Court in G.R. No. 73569 constitutes a basis for the dismissal of
the case at bar on the ground of res adjudicata.
I
There is no question that courts have inherent power to amend their
judgments, to make them conformable to the law applicable provided that
said judgments have not yet attained finality (Villanueva v. Court of First
Instance of Oriental Mindoro, Pinamalayan Branch II, 119 SCRA 288
[1982]). In fact, motions for reconsideration are allowed to convince the
courts that their rulings are erroneous and improper Siy v. Court of Appeals,
138 SCRA 543-544 [1985]; Guerra Enterprises Co., Inc. v. CFI of Lanao del
Sur (32 SCRA 317 [1970]) and in so doing, said courts are given sufficient
opportunity to correct their errors.
In the case at bar, a careful analysis of the records will show that petitioner
admitted among others in its complaint in Interpleader that it is still
obligated to pay certain amounts to private respondent; that it claims no
interest in such amounts due and is willing to pay whoever is declared
entitled to said amounts. Such admissions in the complaint were reaffirmed
in open court before the Court of Appeals as stated in the latter court's
resolution dated September 5, 1985 in A.C. G.R. No. 04869 which states:
The private respondent (MEMORIAL) then reaffirms before the Court its
original position that it is a disinterested party with respect to the property
In the light of the willingness, expressly made before the court, affirming the
complaint filed below, that the private respondent (MEMORIAL) will pay
whatever is due on the Land Development Agreement to the rightful
owner/owners, there is no reason why the amount due on subject
agreement has not been placed in the custody of the Court. (Rollo, p. 227).
Under the circumstances, there appears to be no plausible reason for
petitioner's objections to the deposit of the amounts in litigation after having
asked for the assistance of the lower court by filing a complaint for
interpleader where the deposit of aforesaid amounts is not only required by
the nature of the action but is a contractual obligation of the petitioner under
the Land Development Program (Rollo, p. 252).
As correctly observed by the Court of Appeals, the essence of an
interpleader, aside from the disavowal of interest in the property in litigation
on the part of the petitioner, is the deposit of the property or funds in
controversy with the court. it is a rule founded on justice and equity: "that
the plaintiff may not continue to benefit from the property or funds in
litigation during the pendency of the suit at the expense of whoever will
ultimately be decided as entitled thereto." (Rollo, p. 24).
The case at bar was elevated to the Court of Appeals on certiorari with
prohibitory and mandatory injunction. Said appellate court found that more
than twenty million pesos are involved; so that on interest alone for savings
or time deposit would be considerable, now accruing in favor of the Eternal
Gardens. Finding that such is violative of the very essence of the complaint
for interpleader as it clearly runs against the interest of justice in this case,
the Court of Appeals cannot be faulted for finding that the lower court
committed a grave abuse of discretion which requires correction by the
requirement that a deposit of said amounts should be made to a bank
approved by the Court. (Rollo, p.-25)
Petitioner would now compound the issue by its obvious turn-about,
presently claiming in its memorandum that there is a novation of contract so
that the amounts due under the Land Development Agreement were
allegedly extinguished, and the requirement to make a deposit of said
amounts in a depositary bank should be held in abeyance until after the
conflicting claims of ownership now on trial before Branch CXXII
RTC-Caloocan City, has finally been resolved.
All these notwithstanding, the need for the deposit in question has been
established, riot only in the lower courts and in the Court of Appeals but
also in the Supreme Court where such deposit was required in "the
resolution of July 8, 1987 to avoid wastage of funds.
II
The claim that this case should be barred by res judicata is even more
untenable.
The requisite of res judicata are: (1) the presence of a final former judgment;
(2) the former judgment was rendered by a court having jurisdiction over
the subject matter and the parties; (3) the former judgment is a judgment on
the merits; and (4) there is between the first and the second action identity
of parties, of subject matter, and of causes of action Arguson v. Miclat 135
SCRA 678 [1985]; Carandang v. Venturanza, 133 SCRA 344 [1984]).
There is no argument against the rule that parties should not be permitted
to litigate the same issue more than once and when a right or fact has been
judicially tried and determined by a court of competent jurisdiction, so long
as it remains unreversed, it should be conclusive upon the parties and
those in privity with them in law or estate (Sy Kao v. Court of Appeals, 132
SCRA 302 [1984]).
But a careful review of the records shows that there is no judgment on the
merits in G.R. No. 73569 and in the case at bar, G.R. No. 73794; both of
which deal on mere incidents arising therefrom.
In G.R. No 73569, the issue raised is the propriety of the grant of the motion
for reconsideration without a hearing thereon and the denial of the motion
for execution, while in the case at bar, what is assailed is the propriety of
the order of respondent appellant court that petitioner Eternal Gardens
should deposit whatever amounts are due from it under the Land
Development Agreement with a reputable bank to be designated by the
Court. In fact, there is a pending trial on the merits in the trial court which
the petitioner insists is a prejudicial question which should first be resolved.
Moreover, while there may be Identity of parties and of subject matter, the
Land Development Contract, there is no Identity of issues as clearly shown
by the petitions filed.
PREMISES CONSIDERED, (a) the petition is DISMISSED for lack of merit;
(b) this case (together with all the claims of the intervenors on the merits) is
REMANDED to the lower court for further proceedings; and (c) the
resolution of the Third Division of this Court of July 8, 1987 requiring the
deposit by the petitioner (see footnote No. 6) of the amounts contested in a
depositary bank STANDS (the Motion for Reconsideration thereof being
hereby DENIED for reasons already discussed) until after the decision on
the merits shall have become final and executory.

SO ORDERED.
Rule 36:Judgments, Final Orders and Entry
G.R. No. 94005. April 6, 1993.
LUISA LYON NUÑAL, herein represented by ALBERT NUÑAL, and ANITA
NUÑAL HORMIGOS, petitioners,
vs.
THE COURT OF APPEALS and EMMA LYON DE LEON in her behalf and
as guardian ad litem of the minors HELEN SABARRE and KENNY
SABARRE, EDUARDO GUZMAN, MERCEDEZ LYON TAUPAN,
WILFREDO GUZMAN, MALLY LYON ENCARNACION and DORA LYON
DELAS PEÑAS, respondents.
SYLLABUS
1. REMEDIAL LAW; CIVIL PROCEDURE; JUDGMENT; ONCE IT
BECOMES FINAL, MAY NO LONGER BE MODIFIED IN ANY RESPECT;
EXCEPTIONS. — In the case of Manning International Corporation v.
NLRC, (195 SCRA 155, 161 [1991]) We held that ". . ., nothing is more
settled in the law than that when a final judgment becomes executory, it
thereby becomes immutable and unalterable. The judgment may no longer
be modified in any respect, even if the modification is meant to correct what
is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the Court rendering it
or by the highest Court of land. The only recognized exceptions are the
correction of clerical errors or the making of so-called nunc pro tunc entries
which cause no prejudice to any party, and, of course, where the judgment
is void." Furthermore, "(a)ny amendment or alteration which substantially
affects a final and executory judgment is null and void for lack of jurisdiction,
including the entire proceedings held for that purpose."
2. ID.; ID.; ID.; ID.; REMEDY OF AGGRIEVED PARTY. — In the case at
bar, the decision of the trial court in Civil Case No. 872 has become final
and executory. Thus, upon its finality, the trial judge lost his jurisdiction over
the case. Consequently, any modification that he would make, as in this
case, the inclusion of Mary Lyon Martin would be in excess of his authority.
The remedy of Mary Lyon Martin is to file an independent suit against the
parties in Civil Case No. 872 and all other heirs for her share in the subject
property, in order that all the parties in interest can prove their respective
claims.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** dated February
22, 1990 of the Court of Appeals in CA-G.R. CV No. 14889 entitled "Emma
Lyon de Leon, et al., plaintiffs-appellees versus Luisa Lyon Nuñal, now
deceased herein represented by Albert Nuñal, et al., defendants
appellants," dismissing petitioners' appeal and affirming the trial court's
order *** dated January 9, 1987 for the inclusion of Mary Lyon Martin as
one of the heirs who shall benefit from the partition.
The facts as culled from the records of the case are as follows.
This case originated from a suit docketed as Civil Case No. 872 filed by
Emma Lyon de Leon in her behalf and as guardian ad litem of the minors
Helen Sabarre and Kenny Sabarre, Eduardo Guzman, Mercedes Lyon
Taupan, Wilfredo Guzman, Mally Lyon Encarnacion and Dona Lyon de las
Peñas, (herein private respondents) against Luisa Lyon Nuñal, now
deceased and herein represented by her heirs, Albert Nuñal and Anita
Nuñal Hormigos (herein petitioners), for partition and accounting of a parcel
of land located in Isabela, Basilan City. Subject parcel of land was formerly
owned by Frank C. Lyon and May Ekstrom Lyon, deceased parents of
Helen, Dona, Luisa, Mary, Frank and William James. Private respondents
claimed that said parcel of land, formerly covered by Transfer Certificate of
Title No. 3141 in the name of Frank C. Lyon, has been in possession of
petitioner Luisa Lyon Nuñal since 1946 and that she made no accounting of
the income derived therefrom, despite demands made by private
respondents for the partition and delivery of their shares.
On December 17, 1974, after trial and hearing, the then Court of First
Instance (now Regional Trial court) rendered its judgment in favor of private
respondents and ordered the partition of the property but dismissing private
respondents' complaint for accounting. The dispositive portion of the
judgment reads as follows:
"WHEREFORE, judgment is hereby rendered ordering the partition of the
land covered by Transfer Certificate of Title No. 3141 among the plaintiffs
and defendant. The parties shall make partition among themselves by
proper instruments of conveyance, subject to the Court's confirmation,
should the parties be unable to agree on the partition, the court shall
appoint commissioners to make the partition, commanding them to set off
to such party in interest such part and proportion of the property as the
Court shall direct. Defendant is further ordered to pay plaintiffs attorney's
fees in the sum of P2,000.00." 1
On July 30, 1982, the order of partition was affirmed in toto by the Court of
Appeals in CA-G.R. No. 57265-R. The case was remanded to the court of
origin for the ordered partition. 2
On May 17, 1984, an order for the issuance of the writ of execution was
issued by the court a quo. 3
On July 17, 1984, Mary Lyon Martin, daughter of the late Frank C. Lyon and
Mary Ekstrom Lyon, assisted by her counsel filed a motion to quash the
order of execution with preliminary injunction. In her motion, she contends
that not being a party to the above-entitled case her rights, interests,
ownership and participation over the land should not be affected by a
judgment in the said case; that the order of execution is unenforceable
insofar as her share, right, ownership and participation is concerned, said
share not having been brought within the Jurisdiction of the court a quo.
She further invokes Section 12, Rule 69 of the Rules of Court. 4
On June 26, 1985, the trial court issued an order revoking the appointment
of the three commissioners and in lieu thereof, ordered the issuance of a
writ of execution. 5
On February 4, 1986, the said court issued an order appointing a Board of
Commissioners to effect the partition of the contested property. 6
On May 28, 1986, the trial court dismissed the motion to quash order of
execution with preliminary injunction filed by Mary Lyon Martin and directed
the partition of the property among the original party plaintiffs and
defendants. 7
On September 24, 1986, the Commissioners manifested to the trial court
that in view of the fact that the name of Mary Lyon Martin also appears in
the Transfer Certificate of Title, she could therefore be construed as one of
the heirs. A ruling from the trial court was then sought. 8
On September 29, 1986, the lower court issued an order directing the
counsel of Emma Lyon de Leon to furnish the court within five days from
receipt thereof all the names the of heirs entitled to share in the partition of
the subject property. 9
On October 1, 1986, the petitioners filed a manifestation praying that the
court issue an order directing the partition of the property in consonance the
decision dated December 17, 1974 of the trial court the order of said court
dated May 28, 1986. 10
Without ruling on the manifestation, the lower court issued an order
directing the Board of Commissioners to immediately partition the said
property. 11
On January 3, 1987, the private respondents filed motion for clarification as
to whether the partition of property is to be confined merely among the party
plaintiffs and defendants, to the exclusion of Mary Lyon Martin. 12
On January 9, 1987, the lower court issued the assailed order directing the
inclusion of Mary Lyon Martin as co-owner with a share in the partition of
the property, to wit:
"After a perusal of the decision of the Court of Appeals CA-G.R. No.
57265-R, where this case was appealed by the unsatisfied parties, there is
a finding that Mary now Mary Lyon Martin is one of the legitimate children of
Frank C. Lyon and Mary Ekstrom. (Page 3 of the decision).
In view of this finding, it would be unfair and unjust if she would be left out in
the partition of this property now undertaking (sic) by the said court
appointed commissioners.
WHEREFORE, premises considered, the court appointed commissioners is
hereby directed to include Mary Lyon Martin as co-owner in the said
property subject of partition with the corresponding shares adjudicated to
her.
SO ORDERED." 13
Petitioners' motion for reconsideration 14 of the aforesaid order was denied
by the trial court. 15
On February 22, 1990 the Court of Appeals rendered its decision
dismissing petitioners' appeal, the dispositive portion of which reads as
follows:
"WHEREFORE, premises considered, there being no legal impediment to
the inclusion of Mary Lyon Martin by the court-appointed Board of
Commissioners as one of the heirs who shall benefit from the partition, the
instant appeal is DISMISSED for lack of merit.
NO COSTS.
SO ORDERED." 16
Petitioners' motion for reconsideration was denied on June 6, 1990. 17
Petitioners filed this petition for review alleging that the Court of Appeals
has decided questions of substance contrary to law and the applicable
decisions of this Court, for the following reasons:
"1.) BY SUSTAINING THE ORDER OF THE REGIONAL TRIAL COURT
DIRECTING THE COURT APPOINTED BOARD OF COMMISSIONERS
TO INCLUDE MARY L. MARTIN TO SHARE IN THE PARTITION OF THE
PROPERTY IN LITIGATION DESPITE THE FACT, OVER WHICH THERE
IS NO DISPUTE, THAT SHE HAS NOT LITIGATED EITHER AS A PARTY
PLAINTIFF OR DEFENDANT IN CIVIL CASE NO. 872, IT HAS REFUSED
TO RECOGNIZE THAT THE REGIONAL TRIAL COURT HAS NO
JURISDICTION TO AMEND OR MODIFY THE JUDGMENT IN CIVIL
CASE NO. 872 AND THE REGIONAL TRIAL COURT'S ORDER DATED
28 MAY 1986 WHICH HAS BECOME FINAL AND EXECUTORY.
2.) WHEN THE COURT OF APPEALS HAS CATEGORICALLY STATED
THAT MARY L. MARTIN "NEVER LITIGATED AS ONE OF THE
PLAINTIFFS IN SAID CASE," AND HER ONLY PARTICIPATION
THEREIN WAS SIMPLY CONFINED "AS A WITNESS FOR
DEFENDANT-SISTER LUISA LY ON NUÑAL," AND TO ALLOW HER TO
SHARE IN THE PARTITION THIS LATE WITHOUT REQUIRING A
PROCEEDING WHERE THE PARTIES COULD PROVE THEIR
RESPECTIVE CLAIMS, IS TANTAMOUNT TO DENYING THE NUÑALS
OF THEIR RIGHT TO DUE PROCESS. 18
The crux of this case is whether of not the trial court may order the inclusion
of Mary L. Martin as co-heir entitled to participate in the partition of the
property considering that she was neither a party plaintiff nor a party
defendant in Civil Case No. 872 for partition and accounting of the
aforesaid property and that the decision rendered in said case has long
become final and executory.
Petitioners contend that the trial court's decision dated December 14, 1974
in Civil Case No. 872 ordering the partition of the parcel of land covered by
Transfer Certificate of Title No. 3141 among plaintiffs and defendants has
long become final and executory. Hence the trial court has no jurisdiction to
issue the questioned Order dated January 9, 1987 ordering the Board of
Commissioners to include Mary Lyon Martin to share in the partition of said
property despite the fact that she was not a party to the said case. Said
Order, therefore, resulted in an amendment or modification of its decision
rendered in Civil Case No. 872.
We find merit in the instant petition.
In the ease of Manning International Corporation v. NLRC, 19 We held that
". . ., nothing is more settled in the law than that when a final judgment
becomes executory, it thereby becomes immutable and unalterable. The
judgment may no longer be modified in any respect, even if the modification
is meant to correct what is perceived to be an erroneous conclusion of fact
or law, and regardless of whether the modification is attempted to be made
by the Court rendering it or by the highest Court of land. The only
recognized exceptions are the correction of clerical errors or the making of
so-called nunc pro tunc entries which cause no prejudice to any party, and,
of course, where the judgment is void."
Furthermore, "(a)ny amendment. or alteration which substantially affects a
final and executory judgment is null and void for lack of jurisdiction,
including the entire proceedings held for that purpose." 20
In the case at bar, the decision of the trial court in Civil Case No. 872 has
become final and executory. Thus, upon its finality, the trial judge lost his
jurisdiction over the case. Consequently, any modification that he would
make, as in this case, the inclusion of Mary Lyon Martin would be in excess
of his authority.
The remedy of Mary Lyon Martin is to file an independent suit against the
parties in Civil Case No. 872 and all other heirs for her share in the subject
property, in order that all the parties in interest can prove their respective
claims.

WHEREFORE, the petition is GRANTED. The Order dated January 9, 1987

of the trial Court as affirmed by the Court of Appeals is hereby REVERSED
and SET ASIDE. The decision of the trial court dated December 17, 1974 in
Civil Case No. 872 is hereby REINSTATED.

SO ORDERED.
Rule 36:Judgments, Final Orders and Entry
G.R. No. 111985 June 30, 1994
INDUSTRIAL TIMBER CORP. and/or LORENZO TANGSOC, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CONCORDIA DOS
PUEBLOS and LOLITA SANCHEZ, respondents.
Patrick R. Battad for petitioner.
Estanislao Ebarle, Jr. for private respondents.
CRUZ, J.:
In the earlier case of Industrial Timber Corporation v. NLRC, G.R.
No. 83616, this Court affirmed the finding of the NLRC that the petitioners
1
are the employers of private respondents and remanded the case for a
determination of the validity of the quitclaim allegedly signed by the latter.
In its resolution dated February 3, 1992, the NLRC affirmed in toto the
2
decision of Labor Arbiter Amado M. Solamo on February 26, 1987, ordering
the petitioners to reinstate the private respondents (complainants therein)
without loss of seniority rights and privileges, and to pay them back wages,
ECOLA, 13th month pay, holiday pay, vacation and sick leave pay in the
amount of P24,300 each, moral and exemplary damages of P10,000 each,
and attorney’s fees equivalent to 10% of the total award.
In view of the lapse of time since the promulgation of the decision, the
NLRC likewise directed the petitioners to pay the private respondents
severance benefits equivalent to one month pay for every year of service
computed from the date of their employment up to the promulgation of the
resolution should reinstatement of the private respondents to their former
position be no longer possible. 3
This resolution became final and executory on March 9, 1992, and entry of
judgment was made on March 25, 1992.
The private respondents meanwhile had filed on March 20, 1992, an ex
parte motion for issuance of a writ of execution with manifestation that from
February 26, 1987, up to the present, they have not been reinstated and
thus were entitled to back salaries for the said period and until actual
reinstatement shall have been made.
Executive Labor Arbiter Benjamin E. Pelaez thereupon directed the Fiscal
Examiner of the Arbitration Branch to compute the actual amount that the
private respondents should receive. In a report dated March 22,
1992, Fiscal Examiner Renrico N. Pacamo found that each of them was
4
entitled to P175,964.84, representing three years back wages, ECOLA
under Wage Order No. 6, 13th month pay, legal holiday pay, vacation and
sick leave pay and other privileges under the collective bargaining
agreement likewise for a period of three years. In addition, the private
respondents should also be awarded moral and exemplary damages of
P10,000 each and attorney’s fees equivalent to 10% of the total monetary
award. In sum, the petitioners were held liable to the private respondents
for the total amount of P387,122.65.
Both the petitioners and the private respondents filed their respective
objections to this computation. Meanwhile, the Executive Labor Arbiter
transferred the case to Labor Arbiter Leon P. Murillo, who thereafter issued
an order dated November 19, 1992, concurring with the computation of
5
the Fiscal Examiner Pacamo.
The Commission, on appeal of the computation, only made a slight
modification of the amount of the award and directed the petitioners to pay
the private respondents the sum of P375,795.20. The motion for
6
reconsideration filed by the petitioners through JRS-Butuan, a private
letter-forwarding company, reached the NLRC a day late and was denied
on August 31, 1993, mainly for tardiness. 7
In this petition now before us, the NLRC is faulted with grave abuse of
discretion for merely modifying the award of damages and denying the
motion for reconsideration.
On the first issue, the petitioners submit that the NLRC decision of February
3, 1992, which affirmed in toto the order of Arbiter Solamo and remanded
the case for immediate execution need not be recomputed because the
monetary awards due the private respondents had already been
determined and fixed in the said order. It is argued that to allow the decision
of Arbiter Murillo to prevail and sizably increase the monetary award to the
private respondents would in effect allow an arbiter to change a decision of
the Commission that has become final and executory. Arbiter Murillo’s duty,
it is stressed, is limited to the ministerial act of executing the NLRC
decision.
We disagree.
It is true that after a judgment has become final and executory, it can no
longer be modified or otherwise disturbed. However, this principle admits of
exceptions, as where facts and circumstances transpire which render its
execution impossible or unjust and it therefore becomes necessary, "in the
interest of justice, to direct its modification in order to harmonize the
disposition with the prevailing circumstances." 8
The general rule is indeed, that once a judgment becomes final and
executory, said judgment can no longer be disturbed, altered or modified.
That principle, however, admits of exceptions as in cases where, because
of supervening events, it becomes imperative, in the higher interest of
justice, to direct its modification in order to harmonize the disposition with
the prevailing circumstances (Seavan Carrier Inc. vs. GTI Sportswear Corp.,
137 SCRA 580) or whenever it is necessary to accomplish the aims of
justice (Pascual vs. Tan, 85 Phil. 164; Central Textile Mills vs. United
Textile Workers Union, 94 SCRA 883). In the case at bar, the modification
of the judgment, rendered by the Labor Arbiter on
4 May 1993, is warranted by the fact that the Bank had been placed under
liquidation thereby permanently foreclosing the possibility for the Bank to
resume its business. Reinstatement of Galindez, as Cashier, therefore was
rendered inappropriate considering the Bank’s eventual closure. (Emphasis
supplied).9
Applying this exception to the case at bar, we note with approval the
following observations of the Solicitor General: 10
It may be true that the amount of backwages and other benefits due to the
private respondents as recomputed, is not in harmony with the literal import
of the dispositive portion of the decision subject of execution. However,
sight must not be lost of the fact that at the time the recomputation was
made in 1992, five (5) years had already elapsed from the time the Labor
Arbiter rendered his Decision on February 26, 1987. Thus, a recomputation
was necessary to arrive at a just and proper determination of the monetary
awards due the private respondents.
Indeed, the back wages and other benefits awarded by Arbiter Solamo to
each of the private respondents in the amount of P24,300.00 correspond
merely to the period between their illegal dismissal on April 26, 1986, up to
the time of the rendition of the decision on February 26, 1987. There is no
dispute that from April 26, 1986, to this date, the private respondents have
not been reinstated nor has payment of the monetary awards decreed by
the NLRC been made to them.
A similar action was taken in the recent case of Sampaguita Garments
Corporation v. NLRC, where this Court upheld the nullification of a
11
decision of the NLRC ordering the reinstatement of an employee after her
conviction of the same offense of which she was absolved in the
administrative case.
On the issue of the timeliness of the petitioners’ motion for reconsideration,
we find that the NLRC correctly applied the rule that where a pleading is
filed by ordinary mail or by private messengerial service, it is deemed filed
on the day it is actually received by the court, not on the day it was mailed
or delivered to the messengerial service.
As this Court held in Benguet Electric Cooperative, Inc. v. NLRC: 12
The established rule is that the date of delivery of pleadings to a private
letter-forwarding agency is not to be considered as the date of filing thereof
in court, and that in such cases, the date of actual receipt by the court, and
not the date of delivery to the private carrier, is deemed the date of filing of
that pleading.
The 10th day for filing the motion for reconsideration was June 26, 1993,
which fell on a Saturday. The last day for filing would have been the
following business day, June 28, 1993, which was a Monday. The
petitioners’ counsel claims he was able to deliver the pleading to
JRS-Butuan on June 26, 1993, but the motion for reconsideration reached
the Commission on June 29, 1993, or a day late.
At any rate, the respondent Commission noted that the motion contained no
substantial matters to warrant the reconsideration sought and could have
been denied just the same on that ground.

WHEREFORE, the petition is DISMISSED. The resolutions of the

respondent NLRC dated May 31, 1993, and August 31, 1993, are
AFFIRMED, with costs against the petitioners. It is so ordered.