THIRD DIVISION [G.R. No.
160736, March 23 : 2011] Following the grant of its motion to withdraw the notice of
AIR ADS INCORPORATED, PETITIONER, VS. TAGUM
AGRICULTURAL DEVELOPMENT CORPORATION
(TADECO), RESPONDENT.
DECISION
BERSAMIN, J.:
Assailed via petition for review on certiorari are the two
resolutions promulgated on February 24, 2003[1] and
November 13, 2003,[2] whereby the Court of Appeals (CA)
respectively dismissed the petitioner's petition for certiorari
and prohibition, and denied the petitioner's motion for
reconsideration of the dismissal.
We find no reversible error on the part of the CA, and affirm
the dismissal of the petitioner's petition for certiorari.
Antecedents
This case stemmed from Civil Case No. 27802-2000 of the
Regional Trial Court, Branch 15, in Davao City (RTC) entitled
Elva O. Pormento v. Tagum Agricultural Development
Corporation and Edwin Yap, an action to recover damages
for the death of the plaintiffs husband and attorney's fees
On April 6, 2000, respondent Tagum Agricultural
Development Corporation (TADECO), as defendant, filed
through counsel ACCRA Law Office an answer with
compulsory counterclaims and motion for leave to file third
party complaint,[3] impleading petitioner Air Ads, Inc. and
Pioneer Insurance and Surety Corporation (Pioneer) as third-
party defendants. The RTC admitted TADECO's third party
complaint on April 14, 2000.[4] On June 16, 2000, however,
ACCRA Law Office, upon realizing that Pioneer was a client
of its Makati Office, filed a notice of dismissal without
prejudice to third party complaint only against Pioneer
Insurance and Surety Corporation.[5]
Ten days later, TADECO filed through another counsel
Dominguez Paderna & Tan Law Offices (Dominguez Law
Office) a motion to withdraw notice of dismissal without
prejudice of third party complaint only against Pioneer
Insurance & Surety Corporation or motion for
reconsideration,[6] alleging that the notice of dismissal
without prejudice etc. filed by ACCRA Law Office had been
made without its consent. On June 29, 2000, the RTC granted
the notice of dismissal without prejudice etc.[7]
Nearly a month later, the RTC also granted the motion to
withdraw notice of dismissal without prejudice of third party
complaint only against Pioneer Insurance & Surety
Corporation or motion for reconsideration, and set aside the
dismissal of the third party complaint against Pioneer.
dismissal etc., TADECO, still through Dominguez Law
Office, filed a motion to admit third party complaint in
substitution of the third party complaint filed by the third
party plaintiff's former counsel,[8] explaining that the
substitute third party complaint was being filed to avoid
putting ACCRA Law Office in an awkward situation, and to
avoid the appearance that new counsel Dominguez Law
Office was merely adopting the previous third party
complaint.
It is noted that the substitute third party complaint contained
allegations pertaining only to Pioneer as third party
defendant, to wit:
5. Under the heading "ADMISSIONS" of the answer of
TADECO it alleged:
"TADECO admits the allegations in the following paragraphs
of the complaint:
"1.3 Paragraph 3 only in so far as it is alleged that TADECO
is the owner of the CESSNA 550 Citation jetplane; and that
the aircraft is duly registered with the Air Transportation
Office."
6. The CESSNA 550 Citation jetplane, hereinafter referred to
as the Citation jetplane, was insured by PIONEER
INSURANCE under Aircraft Insurance Policy No. AV-HO-
96-60014 effective December 02, 1996 to December 02, 1997, a
copy of which is attached as Annex "C" by virtue of which
PIONEER INSURANCE agreed to be bound by the following
stipulation:
"SECTION II - Third Party Liability
The Company will indemnify the Assured for all sums which
the Assured shall become legally liable to pay and shall pay
as compensation, including costs awarded, in respect of
accidental bodily injury (fatal or non-fatal) or accidental
damage to property provided such injury or damage is
caused directly by the Aircraft or by objects falling
therefrom."
7. Should TADECO be found liable to the plaintiff under the
complaint, the third-party plaintiff is entitled to recover from
PIONEER INSURANCE indemnification for its liability to
the plaintiff.
WHEREFORE, the third party plaintiff respectfully prays
that in the remote probability that TADECO would be held
liable to the plaintiffs under the complaint, that judgment be
rendered ordering Pioneer Insurance to indemnify TADECO
all sums which the latter maybe found liable to the plaintiffs.
xxx[9]
On August 28, 2000, the RTC granted the motion to admit
third party complaint in substitution of the third party
In view whereof the Motion to Dismissed [sic] is denied for
complaint filed by the third party plaintiff s former
lack of merit. Air-ads is given ten (10) days from receipt of
counsel,[10] viz:
this order to file its answer.
The dismissal of defendant and Third Party Plaintiffs-Tagum
The pre-trial shall be on September 18, 2002.
Agricultural Development Corporation complaint was
without prejudice. Considering further that the dismissal Notify all the parties of this order.
was filed by its former counsel who is also the lawyer of
Pioneer Insurance and Surety Corporation, the Motion to SO ORDERED.
Admit Third Party complaint in substitution of the Third
Air Ads filed a motion for reconsideration,[14] but the RTC
Party complaint that was dismissed is hereby granted.
denied the motion for reconsideration on September 20,
SO ORDERED. 2002,[15] stating:

Air Ads then filed a motion to dismiss against the third party
complaint,[11] averring that it had been dropped as third
party defendant under TADECO's substitute third party
complaint; and arguing that the filing of the substitute third
party complaint had the effect of entirely superseding the
original third party complaint, which should consequently be
stricken out from the records.
TADECO, represented by ACCRA Law Office, countered
that it had never been the intention of Dominguez Law Office
to file a new third party complaint against Air Ads because
Dominguez Law Office represented TADECO only in
regards to the third party complaint against Pioneer.[12]
On July 25, 2002, the RTC denied Air Ads' motion to
dismiss,[13] holding that the notice of dismissal etc. filed by
ACCRA Law Office did not have the effect of dropping Air
Ads as a third party defendant due to the notice of dismissal
etc. being expressly restrictive about the dismissal being only
with respect to Pioneer, to wit:
xxx
The first, third party complaint as against Air-ads was not
dismissed so there is no reason to grant Air-ads' Motion to
Dismiss.
It should be emphasized that the Notice of Dismissal filed by
the former counsel of third party plaintiff was restrictive that
the dismissal was its third complaint against Pioneer only,
Air-ads is still a third party defendant there is nothing to
show that it was dropped as a third party defendant by virtue
of the said dismissal.
The motion that the first third party complaint filed by the
former counsel of Tadeco be removed from the record and
declared as no longer existing and that Air-ads should no
longer be treated as a party is without any legal basis.
Third Party defendant Air Ads' Motion for Reconsideration
is denied for lack of merit. This issue was repeatedly
discussed by the parties in their pleadings and the court
resolution on this matter is clear. The pre-trial conference
shall be on October 4, 2002 at 2:30 p.m.
SO ORDERED.
After receiving the order of denial on October 4, 2002,[16] Air
Ads brought a petition for i>certiorari and prohibition
docketed in the CA (C.A.-G.R. SP No. 73418).[17] However,
on November 13, 2002, the CA dismissed the petition for
failure to attach the board resolution designating the
petitioner's duly authorized representative to sign the
verification and certification against forum shopping in its
behalf.[18]
Instead of filing a motion for reconsideration, Air Ads filed a
new petition for certiorari and prohibition on December 2,
2002 in the CA (C.A.-G.R. SP No. 74152),[19] already
including the proper board certificate.
While C.A.-G.R. SP No. 74152 was pending, the CA's
resolution dismissing C.A.-G.R. SP No. 73418 became final
and executory on December 10, 2002.[20]
On February 24, 2003, the CA issued the first assailed
resolution in C.A.-G.R. SP No. 74152,[21] viz:
xxx
Petitioner's reasoning is specious. The notice of dismissal
clearly stated that the dismissal pertains only to the third
party complaint against Pioneer Insurance, not as against
petitioner Air Ads. The third-party complaint against
petitioner was never dismissed. Thus, when TADECO's new
counsel sought to revive the third-party complaint against
Pioneer, the allegations in the substitute third-party
complaint pertain only to Pioneer since petitioner Air Ads
was never dropped as third-party defendant in the
proceedings. Petitioner's motion to dismiss was correctly
denied by the trial court.
ACCORDINGLY, the petition is DENIED due course and
DISMISSED.
Air Ads insists that the filing of the substitute third party
complaint had the effect of dropping it as third party
defendant in Civil Case No. 27802-2000; and that the
substitute third party complaint superseded the original
third party complaint.

SO ORDERED.
On the other hand, TADECO counters that the filing of the
The CA denied Air Ads's motion for reconsideration through
second petition for certiorari and prohibition in the CA
the second assailed resolution of November 13, 2003.[22]
violated the rule against forum shopping and was already
Hence, this appeal by petition for review on certiorari. barred by res judicata due to the dismissal of the first being
an adjudication on the merits; and that Air Ads continued to
TADECO, through ACCRA Law Office, filed its comment on be a third party defendant because the third party complaint
March 30, 2004,23 but on April 26, 2004, TADECO, through against Air Ads had not been withdrawn or dismissed.
Dominguez Law Office, filed a motion to dispense with
comment of Tagum Agricultural Development Corporation Ruling
as third-party plaintiff against Pioneer Insurance
Corporation[24] Accordingly, the Court directed TADECO
to manifest which between ACCRA Law Office and The petition for review lacks merit.
Dominguez Law Office was its principal counsel.[25] In
I.
compliance, TADECO manifested that ACCRA Law Office
was its counsel in Civil Case No. 27802-2000 and in the third Refiling of the petition for certiorari did not
party complaint against Air Ads, while Dominguez Law
Office was its counsel in the third party complaint against constitute forum shopping or res judicata
Pioneer.[26] After the Court directed the parties to submit
their respective memoranda,27 TADECO, through
Dominguez Law Office and as third-party plaintiff against
Pioneer, filed a manifestation and motion,[28] praying that it
TADECO's contention, that Air Ads' filing of the second
be excused from filing a memorandum considering that
petition while the first petition was still pending was a clear
Pioneer was not involved in the present recourse. On June
case of forum shopping; and that, accordingly, the second
20, 2005, the Court granted the manifestation and motion[29]
petition of Air Ads was already barred by res judicata due to
the dismissal of the first petition having resulted in an
adjudication upon the merits, conformably with Denoso v.
Issues
Court of Appeals[30] has no substance.

The issues to be resolved are as follows:

The dispositive portion of the CA's resolution of November
I. 13, 2002 in C.A.-G.R. SP No. 73418, which dismissed the first
petition, reads:
DOES THE FILING OF AN IDENTICAL PETITION
FOLLOWING THE DISMISSAL OF THE FIRST PETITION
ON THE GROUND OF DEFECTIVE AND INSUFFICIENT
WHEREFORE, the instant petition is hereby DISMISSED for
VERIFICATION AND CERTIFICATION CONSTITUTE
defective and insufficient verification and certification
FORUM SHOPPING?
against forum shopping.
II.

DOES A SUBSTITUTE THIRD PARTY COMPLAINT HAVE

SO ORDERED.
THE EFFECT OF SUPERSEDING THE ORIGINAL THIRD
PARTY COMPLAINT?

Section 5, Rule 7 of the 1997 Rules of Civil Procedure, defines

the effect of the failure to comply with the requirements for
the certification against forum shopping, viz:
 petition for certiorari, thereby causing the dismissal of the
petition. They had then sought reconsideration by submitting
Section 5. Certification against forum shopping. — The
the omitted documents, but the CA denied their motion for
plaintiff or principal party shall certify under oath in the
reconsideration. On appeal, the Court upheld the dismissal
complaint or other initiatory pleading asserting a claim for
of the petition on the ground that it amounted to an
relief, or in a sworn certification annexed thereto and
adjudication upon the merits pursuant to Section 3, Rule 17
simultaneously filed therewith: (a) that he has not theretofore
of the Rules of Court,[31] which provides that failure to
commenced any action or filed any claim involving the same
comply with the rules shall result in the dismissal that has the
issues in any court, tribunal or quasi-judicial agency and, to
effect of an adjudication upon the merits. The lack of any
the best of his knowledge, no such other action or claim is
qualification that the dismissal of the petition was without
pending therein; (b) if there is such other pending action or
prejudice rendered the dismissal an adjudication on the
claim, a complete statement of the present status thereof; and
merits.
(c) if he should thereafter learn that the same or similar action
or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his
Herein, however, Section 5 of Rule 7, supra, promulgated
aforesaid complaint or initiatory pleading has been filed.
after the Denoso pronouncement, provides that "the
dismissal of the case (is) without prejudice, unless otherwise
provided." In this connection, the apt precedent is Heirs of
Failure to comply with the foregoing requirements shall not
Juan Valdez v. Court of Appeals,[32] where the respondent
be curable by mere amendment of the complaint or other
corporation filed two petitions for certiorari in the CA, the
initiatory pleading but shall be cause for the dismissal of the
first of which was dismissed without prejudice due to
case without prejudice, unless otherwise provided, upon
insufficient certification. After receiving the resolution
motion and after hearing. The submission of a false
dismissing the first petition, the respondent corporation
certification or non-compliance with any of the undertakings
refiled its petition, which was docketed and raffled to another
therein shall constitute indirect contempt of court, without
division of the CA. The issue of whether the filing of the
prejudice to the corresponding administrative and criminal
second petition constituted forum shopping reached this
actions. If the acts of the party or his counsel clearly constitute
Court, which resolved the issue thuswise:
willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall
constitute direct contempt, as well as a cause for
We have no doubt that it was within the CA's power and
administrative sanctions. (n)
prerogative to issue what either resolution decreed without
committing an abuse of discretion amounting to lack of
excess of jurisdiction. In the first May 5, 2003 Resolution, the
The first sentence of the second paragraph expressly
CA correctly dismissed the petition for the deficiency it
provides that the dismissal of a petition due to failure to
found in the non-forum shopping certification. Section 5,
comply with the requirements therein is without prejudice
Rule 7 of the Revised Rules of Court provides that "Failure to
unless otherwise provided by the court. Accordingly, the
comply with the foregoing requirements shall not be curable
plaintiff or petitioner is not precluded from filing a similar
by mere amendment of the complaint or other initiatory
action in order to rectify the defect in the certification where
pleading but shall be cause for the dismissal of the case
the court states in its order that the action is dismissed due to
without prejudice, unless otherwise provided, upon motion
such defect, unless the court directs that the dismissal is with
and after hearing." On the other hand, the requirement
prejudice, in which case the plaintiff is barred from filing a
specific to petitions filed with the appellate court simply
similar action by res judicata. In the context of the
provides as a penalty that the failure of the petitioner to
aforequoted rule, the dismissal of C.A.-G.R. SP No. 73418,
comply with the listed requirements, among them the need
being without any qualification, was a dismissal without
for a certification against forum shopping, "shall be sufficient
prejudice, plainly indicating that Air Ads could not be barred
ground for the dismissal of the petition." Thus, the Ninth
from filing the second petition.
Division correctly dismissed the petition without prejudice.

xxx
TADECO cited Denoso v. Court of Appeals, supra, to
The question of whether Lopez Resources forum shopped
buttress its contention that the present recourse was already
when it re-filed its petition is largely rendered moot and
barred by res judicata. There, the petitioners had failed to
academic by the terms of the assailed May 5, 2003 order
attach the necessary copies of the relevant pleadings to their
which dismissed the case without prejudice. Lopez
Resources, who cannot be blamed for the CA's mistake, only
followed what the assailed order allowed. Thus, we cannot
say that it forum shopped by filing another petition while the
first petition was pending. Insofar as it was concerned, its
first petition had been dismissed without prejudice; hence,
there was no bar, either by way of forum shopping, litis
pendentia or res adjudicata, to the petition it re-filed.[33]
correcting a mistake in the name of a party or a mistaken or
inadequate allegation or description in any other respect. A
perusal of the original and the substitute third party
complaints shows that their averments are substantially the
same; and that the substitute third party complaint did not
strike out any allegation of the prior one.

Indeed, Air Ads' options to correct its dire situation included

Lastly, Air Ads attributes error to the CA and the RTC for
the refiling, for, although the Rules of Court declares that the
disregarding the caption and the allegations of the substitute
failure to comply with the requirements of Section 5 of Rule
third party complaint that would have led them to rule that
7 shall not be cured by amendment, nowhere does the rule
the original third party complaint was effectively superseded
prohibit the filing of a similar complaint or pleading
and supplanted by the substitute third party complaint. It
following the dismissal without qualification of the earlier
submits that "substitution" signifies "to put in the place of
one.
another;" and "something that is put in place of something
II. else or is available for use instead of something else."

Substitute third party complaint did not

supersede original third party complaint
The posture of Air Ads that the original third party complaint
was automatically expunged from the records upon the
admission of the substitute third party complaint[34] is bereft
of any basis in fact and in law.
Air Ads' submission is flawed. It is not the caption of the
pleading that determines the nature of the complaint but
rather its allegations.[37] Although Air Ads' observation that
the substitute third party complaint contained allegations
only against Pioneer is correct, sight should not be lost of the
fact that Dominguez Law Office represented TADECO in its
third party complaint only against Pioneer, which was
precisely why the substitute third party complaint referred
only to Pioneer.

The records indicate that: firstly, both TADECO and Pioneer WHEREFORE, we deny the petition for review on certiorari,
were clients of ACCRA Law Office; secondly, TADECO and affirm the resolutions the Court of Appeals promulgated
engaged Dominguez Law Office as its counsel in lieu of on February 24, 2003 and November 13, 2003.
ACCRA Law Office with respect only to its third party
complaint against Pioneer; thirdly, the RTC dismissed the
third party complaint only against Pioneer upon the notice of
Costs against the petitioner.
withdrawal filed by TADECO through ACCRA Law Office;
and fourthly, the RTC granted the motion to admit the
substitute third party complaint only against Pioneer. These
SO ORDERED.
rendered it plain and clear that the substitute third party
complaint merely replaced the third party complaint earlier Carpio Morales, (Chairperson), Brion, Villarama, Jr., and
filed against Pioneer. Sereno, JJ., concur.

Air Ads' urging that the filing of the substitute third party
complaint effectively superseded the third party complaint
impleading it as third party defendant ostensibly harks back DIVISION
to Section 8 of Rule 10 of the Rules of Court, which states that
[ GR No. 211113, Jun 29, 2015 ]
the amended pleading supersedes the pleading that it
amends.[35] However, the substitution of the third party ADERITO Z. YUJUICO v. UNITED RESOURCES
complaint could not produce the effect that an amendment of
PEREZ, J.:
an existing pleading produces. Under Section I,[36] Rule 10
of the Rules of Court, an amendment is done by adding or
striking out an allegation or the name of any party, or by
This case is an appeal[1] from the Decision[2] dated 12
August 2013 and Resolution[3] dated 29 January 2014 of the
Court of Appeals in CA-G.R. SP No. 117431.
The antecedents:
Prelude
The Strategic Alliance Development Corporation
(STRADEC) is a domestic corporation operating as a business
development and investment company.
In 2000, several stockholders[4] of STRADEC executed
Pledge Agreements[5] whereby they pledged a certain
amount of their stocks[6] in the said company in favor of the
respondent United Resources Asset Management, Inc.
(URAMI). These pledges were meant to secure the loan
obligations of STRADEC to URAMI under their Loan
Agreement[7] of 28 December 2000.
One of the stockholders of STRADEC who so pledged his
shares in STRADEC was petitioner Aderito Z. Yujuico.
The Notice and Civil Case No. 70027
Apparently, STRADEC had not been able to comply with its
payment obligations under the Loan Agreement.
On 18 June 2004, STRADEC and its stockholders received a
notice[8] informing them about an impending auction sale of
the stocks pledged under the Pledge Agreements in order to
satisfy STRADEC's outstanding obligations[9] under the
Loan Agreement. The notice was sent and signed by
respondent Atty. Richard J. Nethercott (Atty. Nethercott),
who claimed to be the attorney-in-fact of URAMI.
The notice stated that, pursuant to the request[10] earlier filed
by Atty. Nethercott before "the notary public of Bayambang,
Pangasinan" the public auction of the pledged STRADEC
stocks had been set at 8:30 in the morning of 23 June 2004 in
front of the municipal building of Bayambang,
Pangasinan.[11]
On 21 June 2004, petitioner filed before the Regional Trial
Court (RTC) of Pasig City an injunction complaint[12]
seeking to enjoin the sale at public auction mentioned in Atty.
Nethercott's notice. Impleaded as defendants in such
complaint were URAMI, Atty. Nethercott and herein
respondent Atty. Honorato R. Mataban (Atty. Mataban)—the
notary public referred to in the notice as the one requested by
Atty. Nethercott to conduct the auction of the pledged stocks.
In the complaint, petitioner argued that the planned auction
sale of the stocks pledged under the Pledge Agreements is
void as the same suffers from a multitude of fatal defects; one
of which is the supposed lack of authority of Atty. Nethercott
to initiate such a sale on behalf of URAMI. As petitioner
elaborated:
(k) [Atty. Nethercott] has no valid authority to represent
URAMI for any purpose, xxx. He is neither the counsel nor
the agent of URAMI, whose authorized representative under
Section 9, paragraph 10 of the Loan Agreement is its Chief
Operating Officer, Ms. Lorna P. Feliciano. There has been no
modification of this provision in accordance with paragraph
9.04 of the same provision.[13]
The injunction complaint, which also contained prayers for
the issuance of a temporary restraining order and of a writ of
preliminary injunction, was docketed in the RTC as Civil
Case No. 70027.
The Sale and URAMI's Answer with Counterclaim
As the RTC did not issue a temporary restraining order in
Civil Case No. 70027, the public auction of the pledged
STRADEC stocks pushed through, as scheduled, on 23 June
2004. In that auction, URAMI emerged as the winning bidder
for all of the stocks pledged under the Pledge Agreements.
On 5 July 2004, however, the RTC issued a writ of
preliminary injunction, which effectively prevented URAMI
from appropriating the stocks it had purchased during the
auction sale. On the same day, Atty. Nethercott filed his
answer denying the material allegations of the injunction
complaint.
More than a year later, or on 21 April 2006, URAMI—which
until then was still not able to file an answer of its own—filed
with the RTC a motion for leave to file an answer. Attached
to the motion was a copy of URAMFs answer.[14] On 5
September 2006, the RTC granted URAMI's motion and
allowed the admission of its answer.
In its answer, URAMI agreed with the petitioner that the 23
June 2004 auction sale was void; URAMI admitted that it
never authorized Atty. Nethercott to cause the sale of the
stocks pledged under the Pledge Agreements. URAMI,
however, pointed out that, since it never sanctioned the 23
June 2004 auction sale, it similarly cannot be held liable to the
petitioner for any prejudice that may be caused by the
conduct of such auction sale, viz.:
4.1 The [injunction complaint] dated 28 June 2004 fails to state
a cause of action only insofar as it seeks judgment ordering
URAMI to pay [petitioner] the amounts of Five Hundred
Thousand Pesos (Php 500,000.00) as attorney's fees and One
Hundred Thousand Pesos (Php 100,000.00) as legal expenses.
4.1.1. It bears emphasizing that the extra-judicial foreclosure
of the pledged shares conducted by [Atty. Nethercott] was
without valid authority from URAMI. Consequently, it
cannot be made liable for the acts of another.
4.1.2. URAMI never sanctioned or directed the questioned
auction sale. Neither did URAMI give its consent, explicit or
otherwise, to said foreclosure or any subsequent acts of [Atty.
Nethercott] pursuant thereto. Hence, no liability whatsoever
may be imputed to URAMI.
4.1.3. If at all, the recourse of the plaintiff is solely against
[Atty. Nethercott].[15]
Hence, overall, URAMI prayed for the dismissal of the
injunction complaint against it.
Petitioner's Motion for Summary Judgment and the
Suspension of Civil Case No. 70027
On 29 May 2007, petitioner filed with the RTC a motion for
summary judgment[16] arguing that, in view of the
admissions made by URAMI in its answer regarding Atty.
Nethercott's lack of authority to cause the auction sale of
pledged stocks, there was no longer any genuine issue left to
be resolved in trial.
URAMI and Atty. Nethercott both filed comments on
petitioner's motion for summary judgment.
The resolution of petitioner's motion for summary judgment,
however, was deferred when, on 25 July 2007, this Court
issued in G.R. No. 177068[17] a temporary restraining
order[18] calling to a halt the conduct of further proceedings
in Civil Case No. 70027. This temporary restraining order
remained in effect for more than a year until it was finally
lifted by this Court on 13 October 2008.[19]
Thereafter, proceedings in Civil Case No. 70027 resumed.
URAMI's Change of Counsel and Amended Answer
On 26 January 2009, URAMI changed its counsel of record for
Civil Case No. 70027. The law firm Villlanueva, Gabionza &
De Santos (VGD law firm), which hitherto had been URAMI's
counsel of record, was thus replaced by Atty. Edward P.
Chico (Atty. Chico).
Under the counsel of Atty. Chico, URAMI filed with the RTC
an amended answer with compulsory counterclaim
(amended answer)[20] on 23 February 2009. The amended
answer was meant to supplant URAMI's original answer,
which had been prepared by the VGD law firm.
In its amended answer, URAMI still vouched for the
dismissal of the injunction complaint but reneged from its
previous admissions under the original answer. This time,
URAMI claimed that the 23 June 2004 auction sale was valid
and that it duly authorized Atty. Nethercott to initiate such
sale on its behalf.[21]
On 12 March 2009, petitioner filed with the RTC a motion to
strike out URAMI's amended answer on the grounds that: (1)
it was not timely filed; (2) it was filed without leave of court;
and (3) its admission would prejudice petitioner's rights. In
an order of even date, however, the RTC denied petitioner's
motion and allowed admission of URAMI's amended
answer.
On 27 March 2009, petitioner filed with the RTC a motion for
reconsideration of the order allowing admission of URAMI's
amended answer.
On 18 August 2009, the RTC issued an order granting
petitioner's motion for reconsideration and setting aside its
earlier order allowing admission of URAMI's amended
answer. In the said order, the RTC explained that the
amended answer could not be admitted just yet as the same
had been filed by URAMI without first securing leave of
court.
Thus, on 21 September 2009, URAMI filed with the RTC a
motion for leave to file an amended answer (motion for
leave).[22] In the said motion, URAMI formally asked
permission from the RTC to allow it to file the amended
answer explaining that the original answer filed by its
previous counsel "does not bear truthful factual allegations
and is indubitably not supported by evidence on record."[23]
On 10 November 2009, the RTC issued an Order[24] granting
URAMI's motion for leave.
Petitioner filed a motion for reconsideration against the 10
November 2009 Order, but the same was denied by the RTC
in its Order[25] of 27 September 2010.
CA-G.R. SP No. 117431 and the Present Appeal
Defeated but undeterred, petitioner next challenged the
Orders dated 10 November 2009 and 27 September 2010 of
the RTC through a certiorari petition before the Court of
Appeals. This certiorari petition was docketed in the Court of
Appeals as CA-G.R. SP No. 117431.
On 12 August 2013, the Court of Appeals rendered a
Decision[26] sustaining the challenged orders of the RTC and
dismissing petitioner's certiorari petition. Petitioner moved
for reconsideration, but the Court of Appeals remained
steadfast.[27]
Hence, the present appeal.
In the present appeal, petitioner argues that the Court of
Appeals erred in sustaining the orders of the RTC allowing
URAMI to file its amended answer. Petitioner argues that
URAMI should not have been so allowed for the following
reasons:[28]
URAMI had not shown that the admissions it made under
the original answer were made through "palpable mistake"
Hence, pursuant to Section 4 of Rule 129 of the Rules of
Court,[29] URAMI is barred from contradicting such
admissions through the filing of its amended answer.
The amended answer is merely a ploy of URAMI to further
delay the proceedings in Civil Case No. 70027.
Thus, petitioner prays that we set aside the decision of the
Court of Appeals, disallow URAMI's amended answer and
direct the RTC in Civil Case No. 70027 to resolve his motion
for summary judgment with dispatch.[30]
OUR RULING
Our rules of procedure allow a party in a civil action to
amend his pleading as a matter of right, so long as the
pleading is amended only once and before a responsive
pleading is served (or, if the pleading sought to be amended
is a reply, within ten days after it is served).[31] Otherwise, a
party can only amend his pleading upon prior leave of
court.[32]
As a matter of judicial policy, courts are impelled to treat
motions for leave to file amended pleadings with
liberality.[33] This is especially true when a motion for leave
is filed during the early stages of proceedings or, at least,
before trial.[34] Our case law had long taught that bona fide
amendments to pleadings should be allowed in the interest
of justice so that every case may, so far as possible, be
determined on its real facts and the multiplicity of suits thus
be prevented.[35] Hence, as long as it does not appear that
the motion for leave was made with bad faith or with intent
to delay the proceedings,[36] courts are justified to grant
leave and allow the filing of an amended pleading. Once a
court grants leave to file an amended pleading, the same
becomes binding and will not be disturbed on appeal unless
it appears that the court had abused its discretion.[37]
In this case, URAMI filed its motion for leave seeking the
admission of its amended answer more than two (2) years
after it filed its original answer. Despite the considerable
lapse of time between the filing of the original answer and
the motion for leave, the RTC still granted the said motion.
Such grant was later affirmed on appeal by the Court of
Appeals.
Petitioner, however, opposes the grant of leave arguing that
URAMI is precluded from filing an amended answer by
Section 4 of Rule 129 of the Rules of Court and claiming that
URAMI's amended answer was only interposed for the
purpose of delaying the proceedings in Civil Case No. 70027.
We rule in favor of allowing URAMI's amended answer.
Hence, we deny the present appeal.
First. We cannot subscribe to petitioner's argument that
Section 4 of Rule 129 of the Rules of Court precludes URAMI
from filing its amended answer. To begin with, the said
provision does not set the be-all and end-all standard upon
which amendments to pleadings may or may not be allowed.
Matters involving the amendment of pleadings are primarily
governed by the pertinent provisions of Rule 10 and not by
Section 4 of Rule 129 of the Rule of Court. Hence, allegations
(and admissions) in a pleading—even if not shown to be
made through "palpable mistake"—can still be corrected or
amended provided that the amendment is sanctioned under
Rule 10 of the Rules of Court.
Nevertheless, even if we are to apply Section 4 of Rule 129 to
the present case, we still find the allowance of URAMI's
amended answer to be in order. To our mind, a consideration
of the evidence that URAMI plans to present during trial
indubitably reveals that the admissions made by URAMI
under its original answer were a product of clear and patent
mistake.
One of the key documents that URAMI plans to present
during trial, which it also attached in its amended answer as
"Annex 8" thereof, is URAMI's Board Resolution[38] dated 21
June 2004 that evinces Atty. Nethercott's authority to cause
the foreclosure on the pledged stocks on behalf of URAMI.
With the existence of such board resolution, the statement in
URAMI's original answer pertaining to the lack of authority
of Atty. Nethercott to initiate the 23 June 2004 auction sale
thus appears mistaken, if not entirely baseless and
unfounded. Hence, we find it only right and fair, that URAMI
should be given a chance to file its amended answer in order
to rectify such mistakes in its original answer.
measure. Readily observable from the established facts is that
the perceived delay between the filing of the motion for leave
and the filing of the original answer is not purely attributable
to URAMI. It must be remembered that some time after the
original answer was filed, we issued a temporary restraining
order in G.R. No. 177068 that effectively suspended the
proceedings in Civil Case No. 70027 for more than a year.
Thus, even if it wanted to, URAMI really could not have filed
a motion for leave to file amended answer sooner than it
already had. On this score, we note that it only took URAMI
a little over three months after the lifting of the temporary
restraining order to replace its previous counsel of record in
Civil Case No. 70027 and to file its amended answer.
Fourth. All in all, we find absolutely no cause to overrule the
grant of leave granted to URAMI to file its amended answer.
The said grant is consistent with our time-honored judicial
policy of affording liberal treatment to amendments to
pleadings, especially those made before the conduct of trial.
We should always remember that our rules of procedure are
mere tools designed to facilitate the attainment of justice.
Their application should never be allowed to frustrate the
truth and the promotion of substantial justice.[39] Were we
to succumb to petitioner's arguments today, however, we
would have sanctioned an outcome totally inconsistent with
the underlying purpose of our procedural laws. That, we
simply cannot countenance.
WHEREFORE, premises considered, the petition is hereby
DENIED. The Decision dated 12 August 2013 and Resolution
dated 29 January 2014 of the Court of Appeals in CA-G.R. SP
No. 117431 are hereby AFFIRMED.
SO ORDERED.

Second. We also cannot agree with the petitioner's accusation

that the amended answer was only interposed to further
delay the proceedings in Civil Case No. 70027. As the
previous discussion reveal, the amended answer aims to
correct certain allegations of fact in the original answer
which, needless to state, are crucial to a full and proper
disposition of Civil Case No. 70027. It is, therefore, in the best
interest of justice and equity that URAMI should be allowed
to file the amended answer.

Third. The mere fact that URAMI filed its motion for leave
years after the original answer is also not reason enough in
itself to discredit the amended answer as a sheer dilatory
THIRD DIVISION
HENRY CHING TIU, CHRISTOPHER HALIN GO, and
GEORGE CO,
Petitioners,- versus - PHILIPPINE BANK OF
COMMUNICATIONS,
Respondent.
G.R. No. 151932
This is a petition for review on certiorari, under Rule 45 of the
Rules of Court, seeking to annul and set aside the Decision[1]
dated September 28, 2001, rendered by the Court of Appeals
(CA) in CA-G.R. SP No. 57732, dismissing the petition and
affirming the assailed Orders of the Regional Trial Court
(RTC) of Cagayan de Oro City, Branch 21 in Civil Case No.
99-352, dated December 14, 1999 and January 11, 2000
The factual and procedural antecedents are as follows:
In June 1993, Asian Water Resources, Inc. (AWRI),
represented by herein petitioners, applied for a real estate
loan with the Philippine Bank of Communications (PBCOM)
to fund its purified water distribution business. In support of
the loan application, petitioners submitted a Board
Resolution[2] dated June 7, 1993. The loan was guaranteed by
collateral over the property covered by Transfer Certificate of
Title No. T-13020.[3] The loan was eventually approved.[4]
In August 1996, AWRI applied for a bigger loan from
PBCOM for additional capitalization using the same Board
Resolution, but without any additional real estate collateral.
Considering that the proposed additional loan was
unsecured, PBCOM required all the members of the Board of
Directors of AWRI to become sureties. Thus, on August 16,
1996, a Surety Agreement[5] was executed by its Directors
and acknowledged by a notary public on the same date. All
copies of the Surety Agreement, except two, were kept by
PBCOM. Of the two copies kept by the notary public, one
copy was retained for his notarial file and the other was sent
to the Records Management and Archives Office, through the
Office of the RTC Clerk of Court.[6]
Thereafter, on December 16, 1998, AWRI informed the bank
of its desire to surrender and/or assign in its favor, all the
present properties of the former to apply as dacion en pago
for AWRIs existing loan obligation to the bank.[7] On January
11, 1999, PBCOM sent a reply denying the request. On May
12, 1999, PBCOM sent a letter to petitioners demanding full
payment of its obligation to the bank.[8]
Its demands having remained unheeded, PBCOM instructed
its counsel to file a complaint for collection against
petitioners. The case was docketed as Civil Case No. 99-352.
On July 3, 1999, petitioners filed their Answer. It alleged,
among other things, that they were not personally liable on
the promissory notes, because they signed the Surety
Agreement in their capacities as officers of AWRI. They
claimed that the Surety Agreement attached to the complaint
as Annexes A to A-2[9] were falsified, considering that when
they signed the same, the words In his personal capacity did
not yet appear in the document and were merely intercalated
thereon without their knowledge and consent.[10]
In support of their allegations, petitioners attached to their
Answer a certified photocopy of the Surety Agreement
issued on March 25, 1999 by the Records Management and
Archives Office in Davao City,[11] showing that the words In
his personal capacity were not found at the foot of page two
of the document where their signatures appeared.[12
Because of this development, PBCOMs counsel searched for
and retrieved the file copy of the Surety Agreement. The
notarial copy showed that the words In his personal capacity
did not appear on page two of the Surety Agreement.[13]
Petitioners counsel then asked PBCOM to explain the
alteration appearing on the agreement. PBCOM
subsequently discovered that the insertion was ordered by
the bank auditor. It alleged that when the Surety Agreement
was inspected by the bank auditor, he called the attention of
the loans clerk, Kenneth Cabahug, as to why the words In his
personal capacity were not indicated under the signature of
each surety, in accordance with bank standard operating
procedures. The auditor then ordered Mr. Cabahug to type
the words In his personal capacity below the second
signatures of petitioners. However, the notary public was
never informed of the insertion.[14] Mr. Cabahug
subsequently executed an affidavit[15] attesting to the
circumstances why the insertion was made.
PBCOM then filed a Reply and Answer to Counterclaim with
Motion for Leave of Court to Substitute Annex A of the
Complaint,[16] wherein it attached the duplicate original
copy retrieved from the file of the notary public. PBCOM also
admitted its mistake in making the insertion and explained
that it was made without the knowledge and consent of the
notary public. PBCOM maintained that the insertion was not
a falsification, but was made only to speak the truth of the
parties intentions. PBCOM also contended that petitioners
were already primarily liable on the Surety Agreement
whether or not the insertion was made, having admitted in
their pleadings that they voluntarily executed and signed the
Surety Agreement in the original form. PBCOM, invoking a
liberal application of the Rules, emphasized that the motion
incorporated in the pleading can be treated as a motion for
leave of court to amend and admit the amended complaint
pursuant to Section 3, Rule 10 of the Rules of Court.
On December 14, 1999, the RTC issued an Order[17] allowing
the substitution of the altered document with the original
Surety Agreement, the pertinent portion of which reads:
August 16, 1996 attached as Annexes A to A-2 of the reply
and answer Resolving the Motion to Substitute Annexes A to
A-2 of the complaint and the opposition thereto by the
defendant, this Court, in the interest of justice, hereby allows
the substitution of said Annexes A to A-2 of the complaint
with the duplicate original of notarial copy of the Agreement
dated to counter-claim.
SO ORDERED.
Petitioners filed a motion for reconsideration,[18] but it was
denied in the Order[19] dated January 11, 2000, to wit:
Resolving the motion for reconsideration and the opposition
thereto, the Court finds the motion substantially a reiteration
of the opposition to plaintiffs motion.
Additionally, the instant motion for reconsideration treats on
evidentiary matter which can be properly ventilated in the
trial proper, hence, there is no cogent reason to disturb the
Courts order of December 14, 1999.
SO ORDERED.
Aggrieved, petitioners sought recourse before the CA via a
petition for certiorari under Rule 65 of the Rules of Court,
docketed as CA-G.R. SP No. 57732.
Petitioners claimed that the RTC acted without or in excess
of jurisdiction, or with grave abuse of discretion amounting
to lack or excess of jurisdiction in denying their motion for
reconsideration and in allowing PBCOM to substitute the
altered copy of the Surety Agreement with the duplicate
original notarial copy thereof considering that the latters
cause of action was solely and principally founded on the
falsified document marked as Annexes A to A-2.[20]
On September 28, 2001, the CA rendered a Decision
dismissing the petition for lack of merit, the decretal portion
of which reads:
WHEREFORE, foregoing considered, the instant petition is
hereby DENIED DUE COURSE and, accordingly,
DISMISSED for lack of merit. The assailed Orders dated
December 14, 1999 and January 11, 2000 of the Regional Trial
Court of Cagayan de Oro City, Branch 21, are hereby
AFFIRMED in toto.
SO ORDERED.[21]
Hence, the petition assigning the following errors:
I
THE COURT COMMITTED A REVERSIBLE ERROR IN
AFFIRMING IN TOTO THE ORDER OF THE LOWER
COURT ALLOWING THE SUBSTITUTION OF THE
FALSIFIED DOCUMENT BY RELYING ON THE
PROVISION OF SECTION 3, RULE 10 OF THE RULES OF
COURT
II
ACTING AS THE COURT ON THE PETITION FOR
CERTIORARI, THE COURT COMMITTED A REVERSIBLE
ERROR HAVING NO JURISDICTION TO RULE ON THE
OBLIGATION OF THE PETITIONERS BASED ON THE
FALSIFIED DOCUMENT
III
THE COURT ERRED IN GIVING CREDENCE TO THE
ALLEGATION OF RESPONDENT BANK THAT FROM
AUGUST 15 TO DECEMBER 9, 1997 ASIAN WATER
RESOURCES INC. OBTAINED SEVERAL AVAILMENTS
OF NEW BIGGER AND ADDITIONAL LOANS
TOTALLING P2,030,000.00 EVIDENCED BY 4
PROMISSORY NOTES MARKED AS ANNEXES B, B-1, B-2
AND B-3.
IV
THE COURT FAILED TO CONSIDER THE
MISAPPLICATION OF THE PRINCIPLE OF EQUITY
COMMITTED BY THE LOWER COURT IN ORDERING
THE SUBSTITUTION OF THE FALSIFIED
DOCUMENT.[22]
Petitioners argue that the CA committed a reversible error in
affirming the Order of the RTC allowing the substitution of
the document by relying on Section 3, Rule 10 of the Rules of
Court. Petitioners assert that the Rules do not allow the
withdrawal and substitution of a falsified document once
discovered by the opposing party.
Petitioners maintain that PBCOMs cause of action was solely
and principally founded on the alleged falsified document
originally marked as
Annexes A to A-2. Thus, the withdrawal of the document
results in the automatic withdrawal of the whole complaint
on the ground that there is no more cause of action to be
maintained or enforced by plaintiff against petitioners. Also,
petitioners argue that if the substitution will be allowed, their
defenses that were anchored on Annexes A to A-2 would be
gravely affected. Moreover, considering that the said
document was already removed, withdrawn, and
disregarded by the RTC, the withdrawal and substitution of
the document would prevent petitioners from introducing
the falsified documents during the trial as part of their
evidence.[23]
Petitioners submit that the RTC misapplied the principle of
equity when it allowed PBCOM to substitute the document
with the original agreement. Petitioners also claim that the
remedy of appeal after the termination of the case in the RTC
would become ineffective and inadequate if the Order of the
RTC allowing the withdrawal and substitution of the
document would not be nullified, because the falsified
document would no longer be found in the records of the case
during the appeal.[24]
Petitioners contend that the CA went beyond the issue raised
before it when it interpreted the provisions of the Surety
Agreement, particularly paragraph 4 thereof, and then ruled
on the obligations of the parties based on
the document. Petitioners posit that the CA prematurely
ruled on petitioners obligations, considering that their
obligations should be determined during trial on the merits,
after the parties have been given the opportunity to present
their evidence in support of their respective claims.
Petitioners stress that the CA went into the merit of the case
when it gave credence to the statement of fact of PBCOM that
From August 15 to December 9, 1997, Asian Water Resources,
Inc. obtained several availments on its additional loans
totalling P2,030,000.00 as evidenced by 4 promissory notes
marked as Annexes B, B-1, B-2, and B-3. Thus, the conclusion
of the CA in declaring the petitioners liable as sureties
violated their right to due process.[25]
For its part, PBCOM argues that since the complaint is based
on an actionable document, i.e., the surety agreement, the
original or a copy thereof should be attached to the pleading
as an exhibit, which shall be deemed part of the pleading.
Considering that the surety agreement is annexed to the
complaint, it is an integral part thereof and its substitution
with another copy is in the nature of a substantial
amendment, which is allowed by the Rules, but with prior
leave of court
Moreover, PBCOM alleges that since the Rules provides that
substantial amendments may be made upon leave of court,
the authority of the RTC to allow the amendment is
discretionary. Thus, the CA correctly held that the act of
granting the said substitution was within the clear and
proper discretion of the RTC.
The petition is without merit.
As to the substitution of the earlier surety agreement that was
annexed to the complaint with the original thereof, this Court
finds that the RTC did not err in allowing the substitution
The pertinent rule on actionable documents is found in
Section 7, Rule 8 of the Rules of Court, which provides that
when the cause of action is anchored on a document, its
substance must be set forth, and the original or a copy thereof
shall be attached to the pleading as an exhibit and deemed a
part thereof, to wit:
Section 7. Action or defense based on document. Whenever
an action or defense is based upon a written instrument or
document, the substance of such instrument or document
shall be set forth in the pleading, and the original or a copy
thereof shall be attached to the pleading as an exhibit, which
shall be deemed to be a part of the pleading, or said copy may
with like effect be set forth in the pleading.
With respect to PBCOMs right to amend its complaint,
including the documents annexed thereto, after petitioners
have filed their answer, Section 3, Rule 10 of the Rules of
Court specifically allows amendment by leave of court. The
said Section states:
SECTION 3. Amendments by leave of court. Except as
provided in the next preceding section, substantial
amendments may be made only upon leave of court. But such
leave may be refused if it appears to the court that the motion
was made with intent to delay. Orders of the court upon the
matters provided in this section shall be made upon motion
filed in court, and after notice to the adverse party, and an
opportunity to be heard.
This Court has emphasized the import of Section 3, Rule 10
of the 1997 Rules of Civil Procedure in Valenzuela v. Court of
Appeals,[26] thus:
Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil
Procedure amended the former rule in such manner that the
phrase or that the cause of action or defense is substantially
altered was stricken-off and not retained in the new rules.
The clear import of such amendment in Section 3, Rule 10 is
that under the new rules, the amendment may (now)
substantially alter the cause of action or defense. This should
only be true, however, when despite a substantial change or
alteration in the cause of action or defense, the amendments
sought to be made shall serve the higher interests of
substantial justice, and prevent delay and equally promote
the laudable objective of the rules which is to secure a just,
speedy and inexpensive disposition of every action and
proceeding.[27]
The granting of leave to file amended pleading is a matter
particularly addressed to the sound discretion of the trial
court; and that discretion is broad, subject only to the
limitations that the amendments should not substantially
change the cause of action or alter the theory of the case, or
that it was not made to delay the action.[28] Nevertheless, as
enunciated in Valenzuela, even if the amendment
substantially alters the cause of action or defense, such
amendment could still be allowed when it is sought to serve
the higher interest of substantial justice; prevent delay; and
secure a just, speedy and inexpensive disposition of actions
and proceedings.
The courts should be liberal in allowing amendments to
pleadings to avoid a multiplicity of suits and in order that the
real controversies between the parties are presented, their
rights determined, and the case decided on the merits
without unnecessary delay. This liberality is greatest in the
early stages of a lawsuit, especially in this case where the
amendment was made before the trial of the case, thereby
giving the petitioners all the time allowed by law to answer
and to prepare for trial.[29]
Furthermore, amendments to pleadings are generally
favored and should be liberally allowed in furtherance of
justice in order that every case, may so far as possible, be
determined on its real facts and in order to speed up the trial
of the case or prevent the circuity of action and unnecessary
expense. That is, unless there are circumstances such as
inexcusable delay or the taking of the adverse party by
surprise or the like, which might justify a refusal of
permission to amend.[30]
In the present case, there was no fraudulent intent on the part
of PBCOM in submitting the altered surety agreement. In
fact, the bank admitted that it was a mistake on their part to
have submitted it in the first place instead of the original
agreement. It also admitted that, through inadvertence, the
copy that was attached to the complaint was the copy
wherein the words IN HIS PERSONAL CAPACITY were
inserted to conform to the banks standard practice. This
alteration was made without the knowledge of the notary
public. PBCOMs counsel had no idea that what it submitted
was the altered document, thereby necessitating the
substitution of the surety agreement with the original
thereof, in order that the case would be judiciously resolved.
Verily, it is a cardinal rule of evidence, not just one of
technicality but of substance, that the written document is the
best evidence of its own contents. It is also a matter of both
principle and policy that when the written contract is
established as the repository of the parties stipulations, any
other evidence is excluded, and the same cannot be used to
substitute for such contract, or even to alter or contradict the
latter.[31] The original surety agreement is the best evidence
that could establish the parties respective rights and
obligations. In effect, the RTC merely allowed the
amendment of the complaint, which consequently included
the substitution of the altered surety agreement with a copy
of the original.
It is well to remember at this point that rules of procedure are
but mere tools designed to facilitate the attainment of justice.
Their strict and rigid application that would result in
technicalities that tend to frustrate rather than promote
substantial justice must always be avoided.[32] Applied to
the instant case, this not only assures that it would be
resolved based on real facts, but would also aid in the speedy
disposition of the case by utilizing the best evidence possible
to determine the rights and obligations of the party- litigants.
Moreover, contrary to petitioners contention, they could not
be prejudiced by the substitution since they can still present
the substituted documents, Annexes A to A-2, as part of the
evidence of their affirmative defenses. The substitution did
not prejudice petitioners or delay the action. On the contrary,
it tended to expedite the determination of the controversy.
Besides, the petitioners are not precluded from filing the
appropriate criminal action against PBCOM for attaching the
altered copy of the surety agreement to the complaint. The
substitution of the documents would not, in any way, erase
the existence of falsification, if any. The case before the RTC
is civil in nature, while the alleged falsification is criminal,
which is separate and distinct from another. Thus, the RTC
committed no reversible error when it allowed the
substitution of the altered surety agreement with that of the
original.
A Petition for Certiorari under Rule 65 of the Rules of Court
is intended for the correction of errors of jurisdiction only or
grave abuse of discretion amounting to lack or excess of
jurisdiction. Its principal office is only to keep the inferior
court within the parameters of its jurisdiction or to prevent it
from committing such a grave abuse of discretion amounting
to lack or excess of jurisdiction.[33]
For a petition for certiorari to prosper, the essential requisites
that have to concur are: (1) the writ is directed against a
tribunal, a board or any officer exercising judicial or quasi-
judicial functions; (2) such tribunal, board or officer has acted
without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (3)
there is no appeal or any plain, speedy and adequate remedy
in the ordinary course of law.[34]
The phrase without jurisdiction means that the court acted
with absolute lack of authority or want of legal power, right
or authority to hear and determine a cause or causes,
considered either in general or with reference to a particular
matter. It means lack of power to exercise authority. Excess
of jurisdiction occurs when the court transcends its power or
acts without any statutory authority; or results when an act,
though within the general power of a tribunal, board or
officer (to do) is not authorized, and is invalid with respect to
the particular proceeding, because the conditions which
alone authorize the exercise of the general power in respect
of it are wanting. Grave abuse of discretion implies such
capricious and whimsical exercise of judgment as to be
equivalent to lack or excess of jurisdiction; simply put, power
is exercised in an arbitrary or despotic manner by reason of
passion, prejudice, or personal hostility; and such exercise is
so patent or so gross as to amount to an evasion of a positive
duty or to a virtual refusal either to perform the duty
enjoined or to act at all in contemplation of law.[35]

The present case failed to comply with the above-stated

requisites. In the instant case, the soundness of the RTCs
Order allowing the substitution of the document involves a
matter of judgment and discretion, which cannot be the
proper subject of a petition for certiorari under Rule 65. This
rule is only intended to correct defects of jurisdiction and not
to correct errors of procedure or matters in the trial courts
findings or conclusions.

However, this Court agrees with the petitioners contention

that the CA should not have made determinations as regards
the parties respective rights based on the surety agreement.
The CA went beyond the issues brought before it and
effectively preempted the RTC in making its own
determinations. It is to be noted that the present case is still
pending determination by the RTC. The CA should have
been more cautious and not have gone beyond the issues
submitted before it in the petition for certiorari; instead, it
should have squarely addressed whether or not there was
grave abuse of discretion on the part of the RTC in issuing the
Orders dated December 14, 1999 and January 11, 2000.

WHEREFORE, premises considered, the petition is DENIED.

Subject to the above disquisitions, the Decision of the Court
of Appeals in CA-G.R. SP No. 57732, dated September 28,
2001, and the Orders of the Regional Trial Court of Cagayan
de Oro City, Branch 21, in Civil Case No. 99-352, dated
December 14, 1999 and January 11, 2000, are AFFIRMED

SO ORDERED.
FIRST DIVISION
G.R. No. 174433 February 24, 2014
PHILIPPINE NATIONAL BANK, Petitioner, vs.SPOUSES
ENRIQUE MANALO & ROSALINDA JACINTO, ARNOLD
J. MANALO, ARNEL J. MANALO, and ARMA J. MANALO,
Respondents.
DECISION
BERSAMIN, J.:
Although banks are free to determine the rate of interest they
could impose on their borrowers, they can do so only
reasonably, not arbitrarily. They may not take advantage of
the ordinary borrowers' lack of familiarity with banking
procedures and jargon. Hence, any stipulation on interest
unilaterally imposed and increased by them shall be struck
down as violative of the principle of mutuality of contracts.
Antecedents
Respondent Spouses Enrique Manalo and Rosalinda Jacinto
(Spouses Manalo) applied for an All-Purpose Credit Facility
in the amount of ₱1,000,000.00 with Philippine National Bank
(PNB) to finance the construction of their house. After PNB
granted their application, they executed a Real Estate
Mortgage on November 3, 1993 in favor of PNB over their
property covered by Transfer Certificate of Title No. S- 23191
as security for the loan.1 The credit facility was renewed and
increased several times over the years. On September 20,
1996, the credit facility was again renewed for ₱7,000,000.00.
As a consequence, the parties executed a Supplement to and
Amendment of Existing Real Estate Mortgage whereby the
property covered by TCT No. 171859 was added as security
for the loan.
The additional security was registered in the names of
respondents Arnold, Arnel, Anthony, and Arma, all
surnamed Manalo, who were their children.2
It was agreed upon that the Spouses Manalo would make
monthly payments on the interest. However, PNB claimed
that their last recorded payment was made on December,
1997. Thus, PNB sent a demand letter to them on their
overdue account and required them to settle the account.
PNB sent another demand letter because they failed to heed
the first demand.3
After the Spouses Manalo still failed to settle their unpaid
account despite the two demand letters, PNB foreclose the
mortgage. During the foreclosure sale, PNB was the highest
bidder for ₱15,127,000.00 of the mortgaged properties of the
Spouses Manalo. The sheriff issued to PNB the Certificate of
Sale dated November 13, 2000.4
After more than a year after the Certificate of Sale had been
issued to PNB, the Spouses Manalo instituted this action for
the nullification of the foreclosure proceedings and damages.
They alleged that they had obtained a loan for ₱1,000,000.00
from a certain Benito Tan upon arrangements made by
Antoninus Yuvienco, then the General Manager of PNB’s
Bangkal Branch where they had transacted; that they had
been made to understand and had been assured that the
₱1,000,000.00 would be used to update their account, and that
their loan would be restructured and converted into a long-
term loan;5 that they had been surprised to learn, therefore,
that had been declared in default of their obligations, and that
the mortgage on their property had been foreclosed and their
property had been sold; and that PNB did not comply with
Section 3 of Act No. 3135, as amended.6
PNB and Antoninus Yuvienco countered that the
₱1,000,000.00 loan obtained by the Spouses Manalo from
Benito Tan had been credited to their account; that they did
not make any assurances on the restructuring and conversion
of the Spouses Manalo’s loan into a long-term one;7 that
PNB’s right to foreclose the mortgage had been clear
especially because the Spouses Manalo had not assailed the
validity of the loans and of the mortgage; and that the
Spouses Manalo did not allege having fully paid their
indebtedness.8
Ruling ofthe RTC
After trial, the RTC rendered its decision in favor of PNB,
holding thusly:
In resolving this present case, one of the most significant
matters the court has noted is that while during the pre-trial
held on 8 September 2003, plaintiff-spouses Manalo with the
assistance counsel had agreed to stipulate that defendants
had the right to foreclose upon the subject properties and that
the plaintiffs[‘] main thrust was to prove that the foreclosure
proceedings were invalid, in the course of the presentation of
their evidence, they modified their position and claimed
[that] the loan document executed were contracts of adhesion
which were null and void because they were prepared
entirely under the defendant bank’s supervision. They also
questioned the interest rates and penalty charges imposed
arguing that these were iniquitous, unconscionable and
therefore likewise void.
Not having raised the foregoing matters as issues during the
pre-trial, plaintiff-spouses are presumably estopped from
allowing these matters to serve as part of their evidence,
more so because at the pre-trial they expressly recognized the
defendant bank’s right to foreclose upon the subject property
(See Order, pp. 193-195).
However, considering that the defendant bank did not
interpose any objection to these matters being made part of
plaintiff’s evidence so much so that their memorandum
contained discussions rebutting plaintiff spouses arguments
on these issues, the court must necessarily include these
matters in the resolution of the present case.9
The RTC held, however, that the Spouses Manalo’s "contract
of adhesion" argument was unfounded because they had still
accepted the terms and conditions of their credit agreement
with PNB and had exerted efforts to pay their obligation;10
that the Spouses Manalo were now estopped from
questioning the interest rates unilaterally imposed by PNB
because they had paid at those rates for three years without
protest;11 and that their allegation about PNB violating the
notice and publication requirements during the foreclosure
proceedings was untenable because personal notice to the
mortgagee was not required under Act No. 3135.12
The Spouses Manalo appealed to the CA by assigning a
singular error, as follows:
THE COURT A QUO SERIOUSLY ERRED IN DISMISSING
PLAINTIFF-APPELLANTS’ COMPLAINT FOR BEING (sic)
LACK OF MERIT NOTWITHSTANDING THE FACT THAT
IT WAS CLEARLY SHOWN THAT THE FORECLOSURE
PROCEEDINGS WAS INVALID AND ILLEGAL.13
The Spouses Manalo reiterated their arguments, insisting
that: (1) the credit agreements they entered into with PNB
were contracts of adhesion;14 (2) no interest was due from
them because their credit agreements with PNB did not
specify the interest rate, and PNB could not unilaterally
increase the interest rate without first informing them;15 and
(3) PNB did not comply with the notice and publication
requirements under Section 3 of Act 3135.16 On the other
hand, PNB and Yuvienco did not file their briefs despite
notice.17
Ruling ofthe CA
In its decision promulgated on March 28, 2006,18 the CA
affirmed the decision of the RTC insofar as it upheld the
validity of the foreclosure proceedings initiated by PNB, but
modified the Spouses Manalo’s liability for interest. It
directed the RTC to see to the recomputation of their
indebtedness, and ordered that should the recomputed
amount be less than the winning bid in the foreclosure sale,
the difference should be immediately returned to the Spouses
Manalo.
The CA found it necessary to pass upon the issues of PNB’s
failure to specify the applicable interest and the lack of
mutuality in the execution of the credit agreements
considering the earlier cited observation made by the trial
court in its decision. Applying Article 1956 of the Civil Code,
the CA held that PNB’s failure to indicate the rate of interest
in the credit agreements would not excuse the Spouses
Manalo from their contractual obligation to pay interest to
PNB because of the express agreement to pay interest in the
credit agreements. Nevertheless, the CA ruled that PNB’s
inadvertence to specify the interest rate should be construed
against it because the credit agreements were clearly
contracts of adhesion due to their having been prepared
solely by PNB.
The CA further held that PNB could not unilaterally increase
the rate of interest considering that the credit agreements
specifically provided that prior notice was required before an
increase in interest rate could be effected. It found that PNB
did not adduce proof showing that the Spouses Manalo had
been notified before the increased interest rates were
imposed; and that PNB’s unilateral imposition of the
increased interest rate was null and void for being violative
of the principle of mutuality of contracts enshrined in Article
1308 of the Civil Code. Reinforcing its "contract of adhesion"
conclusion, it added that the Spouses Manalo’s being in dire
need of money rendered them to be not on an equal footing
with PNB. Consequently, the CA, relying on Eastern
Shipping Lines, v. Court of Appeals,19 fixed the interest rate
to be paid by the Spouses Manalo at 12% per annum,
computed from their default.
The CA deemed to be untenable the Spouses Manalo’s
allegation that PNB had failed to comply with the
requirements for notice and posting under Section 3 of Act
3135. The CA stated that Sheriff Norberto Magsajo’s
testimony was sufficient proof of his posting of the required
Notice of Sheriff’s Sale in three public places; that the
notarized Affidavit of Publication presented by Sheriff
Magsajo was prima facie proof of the publication of the
notice; and that the Affidavit of Publication enjoyed the
presumption of regularity, such that the Spouses Manalo’s
bare allegation of non-publication without other proof did
not overcome the presumption.
On August 29, 2006, the CA denied the Spouses Manalo’s
Motion for Reconsideration and PNB’s Partial Motion for
Reconsideration.20
Issues
In its Memorandum,21 PNB raises the following issues:
I
WHETHER OR NOT THE COURT OF APPEALS WAS
CORRECT IN NULLIFYING THE INTEREST RATES
IMPOSED ON RESPONDENT SPOUSES’ LOAN AND IN
FIXING THE SAME AT TWELVE PERCENT (12%) FROM
DEFAULT, DESPITE THE FACT THAT (i) THE SAME WAS
RAISED BY THE RESPONDENTS ONLY FOR THE FIRST
TIME ON APPEAL (ii) IT WAS NEVER PART OF THEIR
COMPLAINT (iii) WAS EXLUDED AS AN ISSUE DURING
PRE-TRIAL, AND WORSE, (iv) THERE WAS NO
FORMALLY OFFERED PERTAINING TO THE SAME
DURING TRIAL.
II
WHETHER OR NOT THE COURT OF APPEALS
CORRECTLY RULED THAT THERE WAS NO
MUTUALITY OF CONSENT IN THE IMPOSITION OF
INTEREST RATES ON THE RESPONDENT SPOUSES’
LOAN DESPITE THE EXISTENCE OF FACTS AND
CIRCUMSTANCES CLEARLY SHOWING RESPONDENTS’
ASSENT TO THE RATES OF INTEREST SO IMPOSED BY
PNB ON THE LOAN.
Anent the first issue, PNB argues that by passing upon the
issue of the validity of the interest rates, and in nullifying the
rates imposed on the Spouses Manalo, the CA decided the
case in a manner not in accord with Section 15, Rule 44 of the
Rules of Court, which states that only questions of law or fact
raised in the trial court could be assigned as errors on appeal;
that to allow the Spouses Manalo to raise an issue for the first
time on appeal would "offend the basic rules of fair play,
justice and due process;"22 that the resolution of the CA was
limited to the issues agreed upon by the parties during pre-
trial;23 that the CA erred in passing upon the validity of the
interest rates inasmuch as the Spouses Manalo did not
present evidence thereon; and that the Judicial Affidavit of
Enrique Manalo, on which the CA relied for its finding, was
not offered to prove the invalidity of the interest rates and
was, therefore, inadmissible for that purpose.24
As to the substantive issues, PNB claims that the Spouses
Manalo’s continuous payment of interest without protest
indicated their assent to the interest rates imposed, as well as
to the subsequent increases of the rates; and that the CA erred
in declaring that the interest rates and subsequent increases
were invalid for lack of mutuality between the contracting
parties.
Ruling
The appeal lacks merit.
1.Procedural Issue
Contrary to PNB’s argument, the validity of the interest rates
and of the increases, and on the lack of mutuality between the
parties were not raised by the Spouses Manalo’s for the first
time on appeal. Rather, the issues were impliedly raised
during the trial itself, and PNB’s lack of vigilance in voicing
out a timely objection made that possible.
It appears that Enrique Manalo’s Judicial Affidavit
introduced the issues of the validity of the interest rates and
the increases, and the lack of mutuality between the parties
in the following manner, to wit:
5. True to his words, defendant Yuvienco, after several days,
sent us a document through a personnel of defendant PNB,
Bangkal, Makati City Branch, who required me and my wife
to affix our signature on the said document;
6. When the document was handed over me, I was able to
know that it was a Promissory Note which was in ready
made form and prepared solely by the defendant PNB;
21. As above-noted, the rates of interest imposed by the
defendant bank were never the subject of any stipulation
between us mortgagors and the defendant PNB as
mortgagee;
22. The truth of the matter is that defendant bank imposed
rate of interest which ranges from 19% to as high as 28% and
which changes from time to time;
23. The irregularity, much less the invalidity of the
imposition of iniquitous rates of interest was aggravated by
the fact that we were not informed, notified, nor the same had
our prior consent and acquiescence therefor. x x x25
PNB cross-examined Enrique Manalo upon his Judicial
Affidavit. There is no showing that PNB raised any objection
in the course of the cross examination.26 Consequently, the
RTC rightly passed upon such issues in deciding the case,
and its having done so was in total accord with Section 5,
Rule 10 of the Rules of Court, which states:
Section 5. Amendment to conform to or authorize
presentation of evidence. – When issues not raised by the
pleadings are tried with the express or implied consent of the
parties, they shall be treated in all respects as if they had been
raised in the pleadings. Such amendment of the pleadings as
may be necessary to cause them to conform to the evidence
and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend
does not affect the result of the trial of these issues. If
evidence is objected to at the trial on the ground that it is not
within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if
the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
In Bernardo Sr. v. Court of Appeals,27 we held that:
It is settled that even if the complaint be defective, but the
parties go to trial thereon, and the plaintiff, without objection,
introduces sufficient evidence to constitute the particular
cause of action which it intended to allege in the original
complaint, and the defendant voluntarily produces witnesses
to meet the cause of action thus established, an issue is joined
as fully and as effectively as if it had been previously joined
by the most perfect pleadings. Likewise, when issues not
raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects as
if they had been raised in the pleadings.
The RTC did not need to direct the amendment of the
complaint by the Spouses Manalo. Section 5, Rule 10 of the
Rules of Court specifically declares that the "failure to amend
does not affect the result of the trial of these issues."
According to Talisay-Silay Milling Co., Inc. v. Asociacion de
Agricultores de Talisay-Silay, Inc.:28
The failure of a party to amend a pleading to conform to the
evidence adduced during trial does not preclude an
adjudication by the court on the basis of such evidence which
may embody new issues not raised in the pleadings, or serve
as a basis for a higher award of damages. Although the
pleading may not have been amended to conform to the
evidence submitted during trial, judgment may nonetheless
be rendered, not simply on the basis of the issues alleged but
also on the basis of issues discussed and the assertions of fact
proved in the course of trial.1âwphi1 The court may treat the
pleading as if it had been amended to conform to the
evidence, although it had not been actually so amended.
Former Chief Justice Moran put the matter in this way:
When evidence is presented by one party, with the expressed
or implied consent of the adverse party, as to issues not
alleged in the pleadings, judgment may be rendered validly
as regards those issues, which shall be considered as if they
have been raised in the pleadings. There is implied, consent
to the evidence thus presented when the adverse party fails
to object thereto." (Emphasis supplied)
Clearly, a court may rule and render judgment on the basis
of the evidence before it even though the relevant pleading
had not been previously amended, so long as no surprise or
prejudice is thereby caused to the adverse party. Put a little
differently, so long as the basic requirements of fair play had
been met, as where litigants were given full opportunity to
support their respective contentions and to object to or refute
each other's evidence, the court may validly treat the
pleadings as if they had been amended to conform to the
evidence and proceed to adjudicate on the basis of all the
evidence before it.
There is also no merit in PNB’s contention that the CA should
not have considered and ruled on the issue of the validity of
the interest rates because the Judicial Affidavit of Enrique
Manalo had not been offered to prove the same but only "for
the purpose of identifying his affidavit."29 As such, the
affidavit was inadmissible to prove the nullity of the interest
rates.
We do not agree.
Section 5, Rule 10 of the Rules of Court is applicable in two
situations.1âwphi1 The first is when evidence is introduced
on an issue not alleged in the pleadings and no objection is
interposed by the adverse party. The second is when
evidence is offered on an issue not alleged in the pleadings
but an objection is raised against the offer.30 This case comes
under the first situation. Enrique Manalo’s Judicial Affidavit
would introduce the very issues that PNB is now assailing.
The question of whether the evidence on such issues was
admissible to prove the nullity of the interest rates is an
entirely different matter. The RTC accorded credence to
PNB’s evidence showing that the Spouses Manalo had been
paying the interest imposed upon them without protest. On
the other hand, the CA’s nullification of the interest rates was
based on the credit agreements that the Spouses Manalo and
PNB had themselves submitted.
Based on the foregoing, the validity of the interest rates and
their increases, and the lack of mutuality between the parties
were issues validly raised in the RTC, giving the Spouses
Manalo every right to raise them in their appeal to the CA.
PNB’s contention was based on its wrong appreciation of
what transpired during the trial. It is also interesting to note
that PNB did not itself assail the RTC’s ruling on the issues
obviously because the RTC had decided in its favor. In fact,
PNB did not even submit its appellee’s brief despite notice
from the CA.
2.Substantive Issue
The credit agreement executed succinctly stipulated that the
loan would be subjected to interest at a rate "determined by
the Bank to be its prime rate plus applicable spread,
prevailing at the current month."31 This stipulation was
carried over to or adopted by the subsequent renewals of the
credit agreement. PNB thereby arrogated unto itself the sole
prerogative to determine and increase the interest rates
imposed on the Spouses Manalo. Such a unilateral
determination of the interest rates contravened the principle
of mutuality of contracts embodied in Article 1308 of the Civil
Code.32
The Court has declared that a contract where there is no
mutuality between the parties partakes of the nature of a
contract of adhesion,33 and any obscurity will be construed
against the party who prepared the contract, the latter being
presumed the stronger party to the agreement, and who
caused the obscurity.34 PNB should then suffer the
consequences of its failure to specifically indicate the rates of
interest in the credit agreement. We spoke clearly on this in
Philippine Savings Bank v. Castillo,35 to wit:
The unilateral determination and imposition of the increased
rates is violative of the principle of mutuality of contracts
under Article 1308 of the Civil Code, which provides that
‘[t]he contract must bind both contracting parties; its validity
or compliance cannot be left to the will of one of them.’ A
perusal of the Promissory Note will readily show that the
increase or decrease of interest rates hinges solely on the
discretion of petitioner. It does not require the conformity of
the maker before a new interest rate could be enforced. Any
contract which appears to be heavily weighed in favor of one
of the parties so as to lead to an unconscionable result, thus
partaking of the nature of a contract of adhesion, is void. Any
stipulation regarding the validity or compliance of the
contract left solely to the will of one of the parties is likewise
invalid. (Emphasis supplied)
PNB could not also justify the increases it had effected on the
interest rates by citing the fact that the Spouses Manalo had
paid the interests without protest, and had renewed the loan
several times. We rule that the CA, citing Philippine National
Bank v. Court of Appeals,36 rightly concluded that "a
borrower is not estopped from assailing the unilateral
increase in the interest made by the lender since no one who
receives a proposal to change a contract, to which he is a
party, is obliged to answer the same and said party’s silence
cannot be construed as an acceptance thereof."37
Lastly, the CA observed, and properly so, that the credit
agreements had explicitly provided that prior notice would
be necessary before PNB could increase the interest rates. In
failing to notify the Spouses Manalo before imposing the
increased rates of interest, therefore, PNB violated the
stipulations of the very contract that it had prepared. Hence,
the varying interest rates imposed by PNB have to be vacated
and declared null and void, and in their place an interest rate
of 12% per annum computed from their default is fixed
pursuant to the ruling in Eastern Shipping Lines, Inc. v. Court
of Appeals.38
The CA’s directive to PNB (a) to recompute the Spouses
Manalo’s indebtedness under the oversight of the RTC; and
(b) to refund to them any excess of the winning bid submitted
during the foreclosure sale over their recomputed
indebtedness was warranted and equitable. Equally
warranted and equitable was to make the amount to be
refunded, if any, bear legal interest, to be reckoned from the
promulgation of the CA’s decision on March 28, 2006.39
Indeed, the Court said in Eastern Shipping Lines, Inc. v.
Court of Appeals40 that interest should be computed from
the time of the judicial or extrajudicial demand. However,
this case presents a peculiar situation, the peculiarity being
that the Spouses Manalo did not demand interest either
judicially or extrajudicially. In the RTC, they specifically
sought as the main reliefs the nullification of the foreclosure
proceedings brought by PNB, accounting of the payments
they had made to PNB, and the conversion of their loan into
a long term one.41 In its judgment, the RTC even upheld the
validity of the interest rates imposed by PNB.42 In their
appellant’s brief, the Spouses Manalo again sought the
nullification of the foreclosure proceedings as the main
relief.43 It is evident, therefore, that the Spouses Manalo
made no judicial or extrajudicial demand from which to
reckon the interest on any amount to be refunded to them.
Such demand could only be reckoned from the promulgation
of the CA’s decision because it was there that the right to the
refund was first judicially recognized. Nevertheless,
pursuant to Eastern Shipping Lines, Inc. v. Court of
Appeals,44 the amount to be refunded and the interest
thereon should earn interest to be computed from the finality
of the judgment until the full refund has been made.
Anent the correct rates of interest to be applied on the amount
to be refunded by PNB, the Court, in Nacar v. Gallery
Frames45 and S.C. Megaworld Construction v. Parada,46
already applied Monetary Board Circular No. 799 by
reducing the interest rates allowed in judgments from 12%
per annum to 6% per annum.47 According to Nacar v.
Gallery Frames, MB Circular No. 799 is applied
prospectively, and judgments that became final and
executory prior to its effectivity on July 1, 2013 are not to be
disturbed but continue to be implemented applying the old
legal rate of 12% per annum. Hence, the old legal rate of 12%
per annum applied to judgments becoming final and
executory prior to July 1, 2013, but the new rate of 6% per
annum applies to judgments becoming final and executory
after said dater.
Conformably with Nacar v. Gallery Frames and S.C.
Megaworld Construction v. Parada, therefore, the proper
interest rates to be imposed in the present case are as follows:
1. Any amount to be refunded to the Spouses Manalo shall
bear interest of 12% per annum computed from March 28,
2006, the date of the promulgation of the CA decision, until
June 30, 2013; and 6% per annum computed from July 1, 2013
until finality of this decision; and
2. The amount to be refunded and its accrued interest shall
earn interest of 6% per annum until full refund.
WHEREFORE, the Court AFFIRMS the decision
promulgated by the Court of Appeals on March 28, 2006 in
CA-G.R. CV No. 84396, subject to the MODIFICATION that
any amount to be refunded to the respondents shall bear
interest of 12% per annum computed from March 28, 2006
until June 30, 2013, and 6% per annum computed from July
1, 2013 until finality hereof; that the amount to be refunded
and its accrued interest shall earn interest at 6o/o per annum
until full refund; and DIRECTS the petitioner to pay the costs
of suit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 172825 October 11, 2012
SPOUSES MINIANO B. DELA CRUZ and LETA L. DELA
CRUZ, Petitioners,
vs.
ANA MARIE CONCEPCION, Respondent.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari under Rule
45 of the Rules of Court filed by petitioners spouses Miniano
B. Dela Cruz and Leta L. Dela Cruz against respondent Ana
Marie Concepcion are the Court of Appeals (CA) Decision1
dated March 31, 2005 and Resolution2 dated May 24, 2006 in
CA-G.R. CV No. 83030.
The facts of the case are as follows:
On March 25, 1996, petitioners (as vendors) entered into a
Contract to Sell3 with respondent (as vendee) involving a
house and lot in Cypress St., Phase I, Town and Country
Executive Village, Antipolo City for a consideration of
P2,000,000.00 subject to the following terms and conditions:
a) That an earnest money of P100,000.00 shall be paid
immediately;
b) That a full down payment of Four Hundred Thousand
Pesos (P400,000.00) shall be paid on February 29, 1996;
c) That Five Hundred Thousand Pesos (P500,000.00) shall be
paid on or before May 5, 1996; and
d) That the balance of One Million Pesos (P1,000,000.00) shall
be paid on installment with interest of Eighteen Percent (18%)
per annum or One and a half percent (1-1/2 %) interest per
month, based on the diminishing balance, compounded
monthly, effective May 6, 1996. The interest shall continue to
run until the whole obligation shall have been fully paid. The
whole One Million Pesos shall be paid within three years
from May 6, 1996;
e) That the agreed monthly amortization of Fifty Thousand
Pesos (P50,000.00), principal and interest included, must be
paid to the Vendors, without need of prior demand, on or
before May 6, 1996, and every month thereafter. Failure to
pay the monthly amortization on time, a penalty equal to Five
Percent (5%) of the amount due shall be imposed, until the
account is updated. In addition, a penalty of One Hundred
Pesos per day shall be imposed until the account is updated;
f) That after receipt of the full payment, the Vendors shall
execute the necessary Absolute Deed of Sale covering the
house and lot mentioned above x x x4
Respondent made the following payments, to wit: (1)
P500,000.00 by way of downpayment; (2) P500,000.00 on May
30, 1996; (3) P500,000.00 paid on January 22, 1997; and (4)
P500,000.00 bounced check dated June 30, 1997 which was
subsequently replaced by another check of the same amount,
dated July 7, 1997. Respondent was, therefore, able to pay a
total of P2,000,000.00.5
Before respondent issued the P500,000.00 replacement check,
she told petitioners that based on the computation of her
accountant as of July 6, 1997, her unpaid obligation which
includes interests and penalties was only P200,000.00.6
Petitioners agreed with respondent and said "if P200,000.00
is the correct balance, it is okay with us."7
Meanwhile, the title to the property was transferred to
respondent. Petitioners later reminded respondent to pay
P209,000.00 within three months.8 They claimed that the said
amount remained unpaid, despite the transfer of the title to
the property to respondent. Several months later, petitioners
made further demands stating the supposed correct
computation of respondent’s liabilities.9 Despite repeated
demands, petitioners failed to collect the amounts they
claimed from respondent. Hence, the Complaint for Sum of
Money With Damages10 filed with the Regional Trial Court
(RTC)11 of Antipolo, Rizal. The case was docketed as Civil
Case No. 98-4716.
In her Answer with Compulsory Counterclaim,12
respondent claimed that her unpaid obligation to petitioners
is only P200,000.00 as earlier confirmed by petitioners and
not P487,384.15 as later alleged in the complaint. Respondent
thus prayed for the dismissal of the complaint. By way of
counterclaim, respondent prayed for the payment of moral
damages and attorney’s fees. During the presentation of the
parties’ evidence, in addition to documents showing the
statement of her paid obligations, respondent presented a
receipt purportedly indicating payment of the remaining
balance of P200,000.00 to Adoracion Losloso (Losloso) who
allegedly received the same on behalf of petitioners.13
On March 8, 2004, the RTC rendered a Decision14 in favor of
respondent, the dispositive portion of which reads:
WHEREFORE, premises considered, this case is hereby
DISMISSED. The plaintiff is hereby ordered to pay the
defendant’s counterclaim, amounting to wit:
a) P300,000 as moral damages; and
b) P100,000 plus P2,000 per court appearance as attorney’s
fees.
SO ORDERED.15
The RTC noted that the evidence formally offered by
petitioners have not actually been marked as none of the
markings were recorded. Thus, it found no basis to grant
their claims, especially since the amount claimed in the
complaint is different from that testified to. The court, on the
other hand, granted respondent’s counterclaim.16
On appeal, the CA affirmed the decision with modification
by deleting the award of moral damages and attorney’s fees
in favor of respondent.17 It agreed with the RTC that the
evidence presented by petitioners cannot be given credence
in determining the correct liability of respondent.18
Considering that the purchase price had been fully paid by
respondent ahead of the scheduled date agreed upon by the
parties, petitioners were not awarded the excessive penalties
and interests.19 The CA thus maintained that respondent’s
liability is limited to P200,000.00 as claimed by respondent
and originally admitted by petitioners.20 This amount,
however, had already been paid by respondent and received
by petitioners’ representative.21 Finally, the CA pointed out
that the RTC did not explain in its decision why moral
damages and attorney’s fees were awarded. Considering also
that bad faith cannot be attributed to petitioners when they
instituted the collection suit, the CA deleted the grant of their
counterclaims.22
Aggrieved, petitioners come before the Court in this petition
for review on certiorari under Rule 45 of the Rules of Court
raising the following errors:
I.
"THE TRIAL COURT ERRED IN DISMISSING THE
COMPLAINT ON THE GROUND THAT PLAINTIFF
FAILED TO FORMALLY OFFER THEIR EVIDENCE AS
DEFENDANT JUDICIALLY ADMITTED IN HER ANSWER
WITH COMPULS[O]RY COUNTERCLAIM HER
OUTSTANDING OBLIGATION STILL DUE TO
PLAINTIFFS AND NEED NO PROOF.
II.
THE TRIAL COURT ERRED IN DISMISSING THE
COMPLAINT FOR ALLEGED FAILURE OF PLAINTIFFS
TO PRESENT COMPUTATION OF THE AMOUNT BEING
CLAIMED AS DEFENDANT JUDICIALLY ADMITTED
HAVING RECEIVED THE DEMAND LETTER DATED
OCTOBER 22, 1997 WITH COMPUTATION OF THE
BALANCE DUE.
III.
THE TRIAL COURT ERRED IN DISMISSING THE
COMPLAINT ON THE GROUND THAT THE
DEFENDANT FULLY PAID THE CLAIMS OF PLAINTIFFS
BASED ON THE ALLEGED RECEIPT OF PAYMENT BY
ADORACION LOSLOSO FROM ANA MARIE
CONCEPCION MAGLASANG WHICH HAS NOTHING
TO DO WITH THE JUDICIALLY ADMITTED OBLIGATION
OF APPELLEE."23
Invoking the rule on judicial admission, petitioners insist that
respondent admitted in her Answer with Compulsory
Counterclaim that she had paid only a total amount of P2
million and that her unpaid obligation amounts to
P200,000.00.24 They thus maintain that the RTC and the CA
erred in concluding that said amount had already been paid
by respondent. Petitioners add that respondent’s total
liability as shown in the latter’s statement of account was
erroneously computed for failure to compound the monthly
interest agreed upon.25 Petitioners also claim that the RTC
and the CA erred in giving credence to the receipt presented
by respondent to show that her unpaid obligation had
already been paid having been allegedly given to a person
who was not armed with authority to receive payment.26
The petition is without merit.
It is undisputed that the parties entered into a contract to sell
a house and lot for a total consideration of P2 million.
Considering that the property was payable in installment,
they likewise agreed on the payment of interest as well as
penalty in case of default. It is likewise settled that
respondent was able to pay the total purchase price of P2
million ahead of the agreed term. Afterwhich, they agreed on
the remaining balance by way of interest and penalties which
is P200,000.00. Considering that the term of payment was not
strictly followed and the purchase price had already been
fully paid by respondent, the latter presented to petitioners
her computation of her liabilities for interests and penalties
which was agreed to by petitioners. Petitioners also
manifested their conformity to the statement of account
prepared by respondent.
In paragraph (9) of petitioners’ Complaint, they stated that:

9) That the Plaintiffs answered the Defendant as follows: "if
P200,000 is the correct balance, it is okay with us." x x x.27
But in paragraph (17) thereof, petitioners claimed that
defendant’s outstanding liability as of November 6, 1997 was
P487,384.15.28 Different amounts, however, were claimed in
their demand letter and in their testimony in court.
With the foregoing factual antecedents, petitioners cannot be
permitted to assert a different computation of the correct
amount of respondent’s liability.
It is noteworthy that in answer to petitioners’ claim of her
purported unpaid obligation, respondent admitted in her
Answer with Compulsory Counterclaim that she paid a total
amount of P2 million representing the purchase price of the
subject house and lot. She then manifested to petitioners and
conformed to by respondent that her only balance was
P200,000.00. Nowhere in her Answer did she allege the
defense of payment. However, during the presentation of her
evidence, respondent submitted a receipt to prove that she
had already paid the remaining balance. Both the RTC and
the CA concluded that respondent had already paid the
remaining balance of P200,000.00. Petitioners now assail this,
insisting that the court should have maintained the judicial
admissions of respondent in her Answer with Compulsory
Counterclaim, especially as to their agreed stipulations on
interests and penalties as well as the existence of outstanding
obligations.
It is, thus, necessary to discuss the effect of failure of
respondent to plead payment of its obligations.
Section 1, Rule 9 of the Rules of Court states that "defenses
and objections not pleaded either in a motion to dismiss or in
the answer are deemed waived." Hence, respondent should
have been barred from raising the defense of payment of the
unpaid P200,000.00. However, Section 5, Rule 10 of the Rules
of Court allows the amendment to conform to or authorize
presentation of evidence, to wit:
Section 5. Amendment to conform to or authorize
presentation of evidence. – When issues not raised by the
pleadings are tried with the express or implied consent of the
parties, they shall be treated in all respects as if they had been
raised in the pleadings. Such amendment of the pleadings as
may be necessary to cause them to conform to the evidence
and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend
does not affect the result of the trial of these issues. If
evidence is objected to at the trial on the ground that it is not
within the issues made by the pleadings, the court may allow
the pleadings to be amended and shall do so with liberality if
the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
The foregoing provision envisions two scenarios, namely,
when evidence is introduced in an issue not alleged in the
pleadings and no objection was interjected; and when
evidence is offered on an issue not alleged in the pleadings
but this time an objection was raised.29 When the issue is
tried without the objection of the parties, it should be treated
in all respects as if it had been raised in the pleadings.30 On
the other hand, when there is an objection, the evidence may
be admitted where its admission will not prejudice him.31
Thus, while respondent judicially admitted in her Answer
that she only paid P2 million and that she still owed
petitioners P200,000.00, respondent claimed later and, in fact,
submitted an evidence to show that she already paid the
whole amount of her unpaid obligation. It is noteworthy that
when respondent presented the evidence of payment,
petitioners did not object thereto. When the receipt was
formally offered as evidence, petitioners did not manifest
their objection to the admissibility of said document on the
ground that payment was not an issue. Apparently,
petitioners only denied receipt of said payment and assailed
the authority of Losloso to receive payment. Since there was
an implied consent on the part of petitioners to try the issue
of payment, even if no motion was filed and no amendment
of the pleading has been ordered,32 the RTC cannot be
faulted for admitting respondent’s testimonial and
documentary evidence to prove payment.33
As stressed by the Court in Royal Cargo Corporation v. DFS
Sports Unlimited, Inc.,34
The failure of a party to amend a pleading to conform to the
evidence adduced during trial does not preclude
adjudication by the court on the basis of such evidence which
may embody new issues not raised in the pleadings. x x x
Although, the pleading may not have been amended to
conform to the evidence submitted during trial, judgment
may nonetheless be rendered, not simply on the basis of the
issues alleged but also on the issues discussed and the
assertions of fact proved in the course of the trial. The court
may treat the pleading as if it had been amended to conform
to the evidence, although it had not been actually amended.
x x x Clearly, a court may rule and render judgment on the
basis of the evidence before it even though the relevant
pleading had not been previously amended, so long as no
surprise or prejudice is thereby caused to the adverse party.
Put a little differently, so long as the basic requirements of
fair play had been met, as where the litigants were given full
opportunity to support their respective contentions and to
object to or refute each other's evidence, the court may validly
treat the pleadings as if they had been amended to conform
to the evidence and proceed to adjudicate on the basis of all
the evidence before it. (Emphasis supplied)35
To be sure, petitioners were given ample opportunity to
refute the fact of and present evidence to prove payment.
With the evidence presented by the contending parties, the
more important question to resolve is whether or not
respondent’s obligation had already been extinguished by
payment.
Admittedly, payment of the remaining balance of
P200,000.00 was not made to the creditors themselves.
Rather, it was allegedly made to a certain Losloso.
Respondent claims that Losloso was the authorized agent of
petitioners, but the latter dispute it.
Losloso’s authority to receive payment was embodied in
petitioners’ Letter39 addressed to respondent, dated August
7, 1997, where they informed respondent of the amounts they
advanced for the payment of the 1997 real estate taxes. In said
letter, petitioners reminded respondent of her remaining
balance, together with the amount of taxes paid. Taking into
consideration the busy schedule of respondent, petitioners
advised the latter to leave the payment to a certain "Dori"
who admittedly is Losloso, or to her trusted helper. This is an
express authority given to Losloso to receive payment.
Moreover, as correctly held by the CA:

We rule in the affirmative as aptly held by the RTC and the Furthermore, that Adoracion Losloso was indeed an agent of
CA. the appellant spouses is borne out by the following
admissions of plaintiff-appellant Atty. Miniano dela Cruz, to
Respondent’s obligation consists of payment of a sum of wit:
money. In order to extinguish said obligation, payment
should be made to the proper person as set forth in Article Q: You would agree with me that you have authorized this
1240 of the Civil Code, to wit: Doiry Losloso to receive payment of whatever balance is due
you coming from Ana Marie Concepcion, that is correct?
Article 1240. Payment shall be made to the person in whose
favor the obligation has been constituted, or his successor in A: In one or two times but not total authority, sir.
interest, or any person authorized to receive it. (Emphasis
Q: Yes, but you have authorized her to receive payment?
supplied)
A: One or two times, yes x x x. (TSN, June 28, 1999, pp. 16-
The Court explained in Cambroon v. City of Butuan,36 cited
17)40
in Republic v. De Guzman,37 to whom payment should be
made in order to extinguish an obligation: Thus, as shown in the receipt signed by petitioners’ agent and
pursuant to the authority granted by petitioners to Losloso,
Payment made by the debtor to the person of the creditor or
payment made to the latter is deemed payment to petitioners.
to one authorized by him or by the law to receive it
We find no reason to depart from the RTC and the CA
extinguishes the obligation. When payment is made to the
conclusion that payment had already been made and that it
wrong party, however, the obligation is not extinguished as
extinguished respondent's obligations.
to the creditor who is without fault or negligence even if the
debtor acted in utmost good faith and by mistake as to the WHEREFORE, premises considered, the petition is DENIED
person of the creditor or through error induced by fraud of a for lack of merit. The Court of Appeals Decision dated March
third person. 31, 2005 and Resolution dated May 24, 2006 in CA-G.R. CV
No. 83030, are AFFIRMED.
In general, a payment in order to be effective to discharge an
obligation, must be made to the proper person. Thus, SO ORDERED.
payment must be made to the obligee himself or to an agent
having authority, express or implied, to receive the particular
payment. Payment made to one having apparent authority to
receive the money will, as a rule, be treated as though actual
authority had been given for its receipt. Likewise, if payment
is made to one who by law is authorized to act for the
creditor, it will work a discharge. The receipt of money due
on a judgment by an officer authorized by law to accept it
will, therefore, satisfy the debt.38
FIRST DIVISION
PCI LEASING and FINANCE, INC.,- versus -
ANTONIO C. MILAN, Doing Business Under the Name and
Style of A. MILAN TRADING, and LAURA M. MILAN,
G.R. No. 151215
This Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Court is directed against the Resolutions of the Court
of Appeals dated September 20, 2001[2] and December 20,
2001[3] in CA-G.R. SP No. 66546. The Resolution dated
September 20, 2001 of the Court of Appeals dismissed the
Petition for Certiorari filed by herein petitioner, which
assailed the Resolution[4] dated August 3, 2001 of the
Regional Trial Court (RTC) of Quezon City, Branch 226, in
Civil Case No. Q-00-40010, dismissing the appeal of herein
petitioner for having been taken out of time. The Motion for
Reconsideration of the September 20, 2001 Resolution was
denied by the Court of Appeals in the Resolution dated
December 20, 2001. Furthermore, the instant petition seeks
the reversal of the Order[5] dated October 13, 2000 of the RTC
in Civil Case No. Q-00-40010, which dismissed the complaint
filed by petitioner against the herein respondents.
The instant case was commenced on February 18, 2000, upon
the filing of a Complaint for Sum of Money[6] by petitioner
PCI Leasing and Finance, Inc. (PCI Leasing) against herein
respondents Antonio C. Milan (Antonio) and Laura M.
Milan. The complaint was docketed as Civil Case No. Q-00-
40010 in the RTC of Quezon City, Branch 226.
PCI Leasing alleged that it extended loans to respondents on
September 4, 1997, September 26, 1997 and November 5,
1997, for which Deeds of Assignment[7] were duly executed
by respondents. Under the terms of the Deeds, respondents
sold, assigned and transferred to PCI Leasing the formers
rights to various checks for and in consideration of the
various amounts obtained. In case of default or nonpayment
of the checks, respondents were obligated to pay the face
value of the checks, interests and late payment charges.
Subsequently, when PCI Leasing presented the checks for
payment, the same were dishonored for different reasons,
i.e., Payment Stopped,[8] Drawn Against Insufficient
Funds,[9] and Account Closed.[10] Despite repeated
demands, respondents failed to settle their obligation, which
amounted to P2,327,833.33 as of January 15, 2000. PCI
Leasing was then compelled to litigate to enforce payment of
the total loan obligation, plus interests, penalties, attorneys
fees, expenses of litigation and costs of suit.
On March 2, 2000, the RTC issued summons[11] to
respondents, addressed to their place of residence as stated
in the complaint, which is at No. 47 San Ildefonso Drive,
Torres Village, Novaliches, Quezon City.
On March 10, 2000, the process server of the RTC filed his
Officers Return,[12] stating that he went to the
aforementioned address on two occasions to serve the
summons and the copy of the complaint to the respondents.
At both times, however, the process server was told by the
people he encountered there that respondents had already
transferred to an unknown location. The summons and the
copy of the complaint were, thus, returned unserved.
In view of the above situation, PCI Leasing filed on April 10,
2000 a Motion to Archive[13] Civil Case No. Q-00-40010,
asserting that it was then conducting an investigation in
order to ascertain the whereabouts of the respondents. PCI
Leasing prayed that the case be archived, subject to its
reinstatement after the whereabouts of the respondents was
determined.
In an Order[14] dated April 13, 2000, the RTC denied the
Motion to Archive given that the circumstances of the case
were not within the purview of the provisions of paragraph
II (c) of Administrative Circular No. 7-A-92 (Guidelines in the
Archiving of Cases),[15] which read:
In civil cases, the court may motu proprio or upon motion,
order that a civil case be archived only in the following
instances:
xxxx
c) When defendant, without fault or neglect of plaintiff,
cannot be served with summons within six (6) months from
issuance of original summons.
Subsequently, on July 13, 2000, the RTC issued an Order,[16]
directing PCI Leasing to take the necessary steps to actively
prosecute the instant case within ten days from receipt under
pain of dismissal of the case for lack of interest.
On July 31, 2000, PCI Leasing filed a Motion for Issuance of
Alias Summons.[17] Said motion was, however, denied by
the RTC via an Order[18] dated August 3, 2000 on the ground
that the same was a mere scrap of paper for apparently
containing a defective notice of hearing.[19]
On September 5, 2000, PCI Leasing filed another Motion for
Issuance of Alias Summons,[20] which the RTC scheduled for
hearing on October 13, 2000.[21] During the hearing of the
motion on said date, there was no appearance from both
counsels of PCI Leasing and respondents.[22] Accordingly,
the RTC issued an Order dated October 13, 2000 in Civil Case
No. Q-00-40010, declaring thus:
When this case was called for hearing on the Motion for
Issuance of Alias Summons, there was no appearance for
[PCI Leasing]. It should be recalled that as early as July 13,
2000, [PCI Leasing] had been ordered to take the necessary
steps to actively prosecute this case, otherwise, the same shall
be dismissed. In view of the absence of the counsel for [PCI
Leasing] today, the case is hereby DISMISSED.[23]
NOTICE OF APPEAL
(Emphasis ours.)
Plaintiff, through counsel, to this Honorable Court
PCI Leasing sought a reconsideration[24] of the above Order,
respectfully gives notice that it is appealing to the Honorable
explaining that its counsel was already in the courtroom
Court of Appeals its 13 October 2000 Order received on 13
when Judge Leah S. Domingo-Regala of the RTC was
November 2000 which dismissed the case, its 04 January 2001
dictating the order of dismissal. Allegedly, the counsel of PCI
Resolution received on 17 January 2001 denying the Motion
Leasing even expressed profuse apologies to the trial court
for Reconsideration dated 17 October 2000 and its 06 April
for his late appearance. PCI Leasing prayed that the order of
2001 Resolution received on 03 May 2001 denying the Ex-
dismissal be reconsidered and the second Motion for
parte Motion for Reconsideration dated 23 January 2001, on
Issuance of Alias Summons be considered submitted for
the ground that said Order and Resolutions are contrary to
resolution.
the applicable laws and jurisprudence on the matter.
In a Resolution[25] dated January 4, 2001, the RTC denied the (Emphases ours.)
Motion for Reconsideration. After briefly summarizing the
On August 3, 2001, the RTC rendered a Resolution
incidents of the case before it, the trial court declared that:
dismissing the Notice of Appeal, given that the same was
[I]t is clear that [PCI Leasing] had been remiss in its duty to filed beyond the reglementary period, to wit:
prosecute this case diligently.
At any rate, the Notice of Appeal was filed late. Record shows
The Court has already given [PCI Leasing] several chances that the Resolution of January 4, 2001 [which denied the
within a span of almost one (1) year to prosecute the instant Motion for Reconsideration of the Order dated October 13,
case but [PCI Leasing] failed to do so. 2000, dismissing Civil Case No. Q-00-40010] was received by
[the counsel of PCI Leasing] on January 17, 2001. On January
If only to serve as a lesson to [PCI Leasing] to be more
26, 2001 (or on the 9th day from receipt of the Resolution of
considerate of the time and resources of the Court, the Court
January 4, 2001), [PCI Leasing] filed its Ex-Parte Motion for
resolves to DENY the instant motion for reconsideration.
Reconsideration. On April 6, 2001, the Court issued a
WHEREFORE, premises considered, the Motion for Resolution denying the Ex-Parte Motion for Reconsideration.
Reconsideration is DENIED, for lack of merit. (Emphases The Resolution of April 6, 2001 was received by [the counsel
ours.) of PCI Leasing] on May 3, 2001.

On January 26, 2001, PCI Leasing filed an Ex Parte Motion for Thus [PCI Leasing] had only seven (7) days from receipt of
Reconsideration,[26] once more seeking a reconsideration of the Resolution of April 6, 2001 within which to file the Notice
the dismissal of its case. Given the alleged amount of the of Appeal, or up to May 10, 2001. The Notice of Appeal was
respondents liability, PCI Leasing stressed that it had a valid filed on May 11, 2001.[30] (Emphases ours.)
cause of action against the former and it never lost interest in
Quoting the pertinent doctrines on the finality of judgments,
the prosecution of its case. PCI Leasing then implored the
the RTC underlined that:
RTC to revisit the Order dated October 13, 2000 and the
Resolution dated January 4, 2001 to make the dismissal On this score, the Hon. Supreme Court has time and again
without prejudice, in order for PCI Leasing to maintain its emphasized that an award or judgment becomes final and
right to re-file its legal claim against respondents. executory upon the expiration of the period to appeal and no
appeal was made within the reglementary period. The basic
The RTC denied the Ex Parte Motion for Reconsideration in
rule of finality of judgment is applicable indiscriminately to
a Resolution[27] dated April 6, 2001. The trial court observed,
one and all since the rule is grounded on fundamental
inter alia, that the Ex Parte Motion was already the second
considerations of public policy and sound practice that at the
motion for reconsideration filed by PCI Leasing. Also, the
risk of occasional error, the judgments of courts must become
RTC made mention of the provisions of Section 3, Rule 17[28]
final at some definite date fixed by law. (Alto Sales
of the Rules of Court relating to the dismissal of a case due to
Corporation vs. IAC, 197 SCRA 618)
the fault of a plaintiff.
Although in a few instances, the court had disregarded
On May 11, 2001, PCI Leasing filed a Notice of Appeal[29] in
procedural lapses so as to give due course to appeals beyond
an attempt to challenge the Order dated October 13, 2000 of
the reglementary period, the court did so on the basis of
the RTC, as well as the Resolutions dated January 4, 2001 and
strong and compelling reasons, such as serving the ends of
April 6, 2001. The Notice of Appeal recited, thus:
justice and preventing a grave miscarriage thereof. (Vide
Retoni, Jr. vs. CA, 218 SCRA 468)
Thus, the perfection of an appeal within the reglementary
period fixed by the rules is mandatory and jurisdictional and
the failure to do so renders the questioned decision final and
executory that deprives the appellate court of jurisdiction to
alter the final judgment much less to entertain the appeal. (De
Castro, Jr. vs. CA, 158 SCRA 288.)[31]
The RTC decreed, thus:
WHEREFORE, the Notice of Appeal is DISMISSED, for
having been taken out of time.[32] (Emphasis ours.)
Without filing a Motion for Reconsideration, PCI Leasing
assailed the above Resolution before the Court of Appeals
through a Petition for Certiorari under Rule 65 of the Rules
of Court, which was docketed as CA-G.R. SP No. 66546.
The appellate court, however, dismissed outright the
aforesaid petition in a Resolution dated September 20, 2001,
holding:
This is a petition for certiorari seeking to set aside the
Resolutions of respondent Judge dismissing the appeal of
[PCI Leasing] for having been taken out of time.
Section 13, Rule 41 of the 1997 Rules of Civil Procedure
provides that the trial court may, motu proprio or on motion,
dismiss the appeal for having been taken out of time.
Settled is the rule that the perfection of an appeal in the
manner and within the period permitted by law is not only
mandatory, but jurisdictional and the failure to perfect that
appeal renders the judgment of the court final and executory.
Moreover, the notice of appeal filed by [PCI Leasing] states
that it is appealing the assailed Order and resolutions to the
Court of Appeals on the ground that the same are contrary to
the applicable laws and jurisprudence on the matter. In Reyes
vs. Zamora, it was pointed out that when one alleges that an
order is contrary to law and jurisprudence, plain common
sense dictates that the order is being attacked on question of
law. Section 2(c), Rule 41 of the 1997 Rules of Civil Procedure
provides that in all cases where only questions of law are
raised or involved, the appeal shall be to the Supreme Court
by petition for review on certiorari in accordance with Rule
45. (Emphases ours.)
WHEREFORE, the petition is DISMISSED for lack of
merit.[33] (Emphases ours, citations omitted.)
Petitioner filed a Motion for Reconsideration[34] of the
aforementioned Court of Appeals Resolution but the same
was denied in a Resolution issued on December 20, 2001, to
wit:
[The motion for reconsideration of PCI Leasing] dated
September 20, 2001 must be denied for lack of merit.
Admittedly, the filing of the notice of appeal was late by one
day. Moreover, [PCI Leasing] has not disputed that as stated
in the notice of appeal, it is appealing the assailed Orders and
Resolutions of respondent Judge to this Court on the ground
that the same are contrary to the applicable law and
jurisprudence and, therefore, this Court has no jurisdiction
over the intended appeal as only questions of law would be
raised therein.
WHEREFORE, the motion for reconsideration is DENIED for
lack of merit.[35]
On January 16, 2002, PCI Leasing elevated this case to the
Court by way of the instant Petition for Review on Certiorari
under Rule 45 of the Rules of Court.
On February 4, 2002, the Court resolved[36] to require the
respondents to comment on the petition within ten days from
notice. This resolution was sent to the address of respondents
set forth in the petition, which is at No. 47 San Ildefonso
Drive, Torres Village, Novaliches, 1100 Quezon City. The
same, however, was returned unserved with the postmasters
notation RTS moved. We, thereafter, directed PCI Leasing to
inform the Court of the correct address of the respondents
within ten days from notice, or else the petition would be
dismissed.[37]
On July 10, 2002, PCI Leasing submitted its Compliance,[38]
stating that the respondents new address is at Vista Verde
North Executive Village, Kaybiga, Caloocan City. On January
31, 2003, the Court Resolution dated February 4, 2002 was
sent again to the new address.[39]
Considering that respondents still failed to file their comment
to the petition within the period required therefor, the Court
issued a Resolution[40] dated May 17, 2004, ordering
respondent Antonio[41] to (a) SHOW CAUSE why he should
not be held in contempt of court for such failure, and (b)
COMPLY with the said resolution of February 4, 2002, both
within ten days from notice hereof.
The above resolution was apparently not complied with as
well. Thus, in a Resolution[42] dated August 18, 2004, the
Court imposed a fine of P1,000.00 against Antonio, payable
to the Court within ten days from notice. If the fine is not paid
within said period, a penalty of imprisonment of five days
would instead be imposed. Antonio was also required to file
a comment to the petition filed by PCI Leasing within ten
days from notice. The said Resolution was once more
returned unserved, with the postmasters notation RTS, Mr.
Antonio Milan, unknown; Ms. Laura Milan, deceased; ML
Merchandising PG Dealer refused to received.[43]
Accordingly, we again required[44] PCI Leasing to notify this
Court of the correct address of Antonio within a non-
extendible period of ten days from notice; otherwise, the case
will be dismissed.
On January 27, 2005, PCI Leasing filed its Compliance,[45]
stating that it sent its Credit Investigator/Appraiser to the
place where Antonio was reportedly maintaining his
business, M.L. Merchandising PG Dealer, at Gen. Luis Street,
Novaliches, Quezon City to determine the address of said
respondent. The person found in the store at the said address
allegedly refused to reply to inquiries made or to reveal his
identity to the Credit Investigator/Appraiser.
On February 28, 2005, the Court ordered[46] that copies of the
Resolutions dated February 4, 2002, May 17, 2004 and August
18, 2004 be sent to respondent Antonio at the address stated
in the Compliance filed by PCI Leasing. The same were also
returned unserved with the postmasters notation RTS-
refused to accept. On June 27, 2005, the Court resolved:
(a) to let the said copies of the resolutions of February 4,
2002, May 17, 2004 and August 18, 2004 be DEEMED
SERVED on respondent Milan;
(b) to ISSUE an ALIAS WARRANT OF ARREST against
respondent Milan, directing the NBI to cause his immediate
arrest and to DETAIN him until he complies with the said
resolutions of February 4, 2002, May 17, 2004 and August 18,
2004; and
(c) to require the NBI to make a RETURN thereof within ten
(10) days from notice hereof.[47]
On March 24, 2006, Antonio was arrested and detained by the
National Bureau of Investigation (NBI)[48] by virtue of a
Warrant of Arrest[49] issued against him by the Court on
June 27, 2005.
On March 28, 2006, Antonio paid[50] the fine earlier imposed
upon him. He likewise filed an Explanation on Failure to File
Comment with Urgent Motion for Immediate Release from
Detention with Prayer for Time to File Comment,[51]
maintaining that he had not received any of the Resolutions
of the Court, hence, the failure to abide by the same.
In a Resolution[52] dated March 29, 2006, the Court denied
Antonios motion for immediate release from detention and
granted him ten days from notice within which to file his
comment
On March 30, 2006, Antonio filed an Urgent Motion for
Immediate Release from Detention,[53] as well as a
Compliance[54] with the above resolution, wherein he
incorporated his comment to the petition filed by PCI
Leasing. Antonio also manifested therein that his wife,
respondent Laura M. Milan, passed away on March 15,
2004.[55]
On April 3, 2006, the Court ordered[56] the immediate release
of Antonio from detention at the NBI, unless he was
otherwise lawfully detained for some other causes. PCI
Leasing was also directed to file a REPLY to the comment
within ten days from notice.
PCI Leasing thereafter filed its Reply[57] on May 22, 2006.
In the Resolution[58] dated June 14, 2006, we decided to give
due course to the petition and required both parties to submit
their respective memoranda within 30 days from notice. PCI
Leasing and Antonio filed their memoranda, respectively, on
August 17, 2006[59] and September 15, 2006.[60]
In its Memorandum, PCI Leasing put forward only one issue
for our resolution, to wit:
THE COURT OF APPEALS, IN DISMISSING THE
PETITION FILED BY PETITIONER BEFORE IT AND, IN
EFFECT, DEPRIVING PETITIONER OF ITS RIGHT TO
RECOVER THE SUMS IT HAD LOANED TO THE PRIVATE
RESPONDENTS, HAS DECIDED A QUESTION OF
SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD
WITH THE APPLICABLE DECISIONS OF THIS
HONORABLE COURT.[61]
As what it emphasized in the Petition for Certiorari filed
before the Court of Appeals, PCI Leasing likewise brings to
the attention of the Court the details of the so-called
procedural path that was taken by the RTC and the supposed
mistakes it committed along the way.[62] On the basis of its
allegations, PCI Leasing points out that the case it laid out
before the Court of Appeals involved not only questions of
law but a combination of facts and law, such that the said case
would fall within the purview of the appellate courts
jurisdiction. However, PCI Leasing laments that the Court of
Appeals ignored the formers efforts to seek a rectification of
the acts of the RTC. PCI Leasing accuses both the Court of
Appeals and the RTC of defeating its right to recover the
sums of money it had loaned to the respondents simply
because it allegedly committed some procedural lapses in the
prosecution of its case. If the rulings of the Court of Appeals
and the RTC would be allowed to stand, the respondents
would allegedly be enriched by the amounts they had
obtained from PCI Leasing. Although it acknowledges that
there was some measure of breach of procedure on its part,
PCI Leasing contends that the consequence imposed by the
Court of Appeals and the RTC was disproportionate to the
breach committed. Calling for a liberal application of the
pertinent rules of procedure and invoking the inherent equity
jurisdiction of courts, PCI Leasing ultimately prays for the
reinstatement of Civil Case No. Q-00-40010, which it
previously filed before the RTC.
We grant the petition.
The Court of Appeals indeed committed a mistake in issuing
the Resolutions dated September 20, 2001 and December 20,
2001 in CA-G.R. SP No. 66546, which dismissed outright the
Petition for Certiorari filed by PCI Leasing and denied the
latters Motion for Reconsideration.
To recall, the Court of Appeals based the dismissal of the
Petition for Certiorari on the fact that (1) the appeal of PCI
Leasing was filed out of time and (2) the Notice of Appeal
supposedly involved pure questions of law.
For purposes of clarity and organization, the Court deems it
proper to address the second of the above grounds first.
The Court of Appeals concluded that the Notice of Appeal
involved pure questions of law on the basis of the statement
therein that the Order dated October 13, 2000, the Resolution
dated January 4, 2001 and the Resolution dated April 6, 2001
of the RTC would be appealed to the Court of Appeals on the
ground that the same were contrary to the applicable laws
and jurisprudence on the matter. The Court of Appeals was
of the opinion that it would not have jurisdiction over the
intended appeal since the same should be raised to the
Supreme Court via a Petition for Review on Certiorari under
Rule 45 of the Rules of Court.
We hold that the Court of Appeals was unreasonably hasty
in inferring its lack of jurisdiction over the intended appeal
of PCI Leasing. The above-stated conclusion of the Court of
Appeals was simply uncalled for, notwithstanding the said
statement in the Notice of Appeal.
Under Rule 41, Section 5 of the Rules of Court, a notice of
appeal is only required to indicate (a) the parties to the
appeal, (b) the final judgment or order or part thereof
appealed from, (c) the court to which the appeal is being
taken, and (d) the material dates showing the timeliness of
the appeal. In usual court practice, a notice of appeal would
consist of one or two pages.
Only after the specific issues and arguments of PCI Leasing
are laid out in detail before the Court of Appeals in the
appropriate substantive pleading can it make a conclusion as
to whether or not the issues raised therein involved pure
questions of law.
As regards the ruling of the Court of Appeals that the appeal
of PCI Leasing was filed out of time, the same was in
concurrence with the findings of the RTC that the Notice of
Appeal was filed one day late. On this matter, we hold that
the conclusion of the RTC that PCI Leasing belatedly filed its
appeal was correct, but the premise therefor was evidently
mistaken.
In accordance with Section 3, Rule 41[63] of the Rules of
Court, an ordinary appeal of a judgment by the RTC shall be
taken within fifteen (15) days from notice of the judgment or
final order appealed from. Said period shall be interrupted
by a timely motion for new trial or reconsideration. In
Neypes v. Court of Appeals,[64] the Court had the occasion
to clarify the rule regarding the period within which an
appeal may be taken should a motion for new trial or
reconsideration be filed. Thus:
To standardize the appeal periods provided in the Rules and
to afford litigants fair opportunity to appeal their cases, the
Court deems it practical to allow a fresh period of 15 days
within which to file the notice of appeal in the Regional Trial
Court, counted from receipt of the order dismissing a motion
for a new trial or motion for reconsideration.
Henceforth, this fresh period rule shall also apply to Rule 40
governing appeals from the Municipal Trial Courts to the
Regional Trial Courts; Rule 42 on petitions for review from
the Regional Trial Courts to the Court of Appeals; Rule 43 on
appeals from quasi-judicial agencies to the Court of Appeals
and Rule 45 governing appeals by certiorari to the Supreme
Court. The new rule aims to regiment or make the appeal
period uniform, to be counted from receipt of the order
denying the motion for new trial, motion for reconsideration
(whether full or partial) or any final order or resolution.
To recapitulate, a party litigant may either file his notice of
appeal within 15 days from receipt of the Regional Trial
Courts decision or file it within 15 days from receipt of the
order (the final order) denying his motion for new trial or
motion for reconsideration. Obviously, the new 15-day
period may be availed of only if either motion is filed;
otherwise, the decision becomes final and executory after the
lapse of the original appeal period provided in Rule 41,
Section 3. (Emphases ours.)
In the case at bar, PCI Leasing filed a Motion for
Reconsideration of the RTC Order dated October 13, 2000,
which dismissed Civil Case No. Q-00-40010. On January 4,
2001, the RTC rendered a Resolution, denying the Motion for
Reconsideration. Said Resolution was received by PCI
Leasing on January 17, 2001.[65] Therefore, PCI Leasing
should have filed its Notice of Appeal within 15 days from
January 17, 2001 or until February 1, 2001. PCI Leasing
actually filed its Notice of Appeal on May 11, 2001 or 114 days
after receipt of the Resolution denying its Motion for
Reconsideration.
Contrary to the findings of the RTC, the period within which
to file the Notice of Appeal should not be reckoned from May
3, 2001,[66] the date of receipt of the RTC Resolution dated
April 6, 2001, which denied the Ex Parte Motion for
Reconsideration of PCI Leasing.
The aforesaid Ex Parte Motion for Reconsideration was
already the second attempt on the part of PCI Leasing to seek
a reconsideration of the RTC Order dated October 13, 2000,
dismissing Civil Case No. Q-00-40010. It is, thus, in the nature
of a second motion for reconsideration. Under Section 5, Rule
37 of the Rules of Court, such motion for reconsideration is a
prohibited pleading, which does not toll the period within
which an appeal may be taken, to wit:
SEC. 5. Second motion for new trial. A motion for new trial
shall include all grounds then available and those not so
included shall be deemed waived. A second motion for new
trial, based on a ground not existing nor available when the
first motion was made, may be filed within the time herein
provided excluding the time during which the first motion
had been pending.
No party shall be allowed a second motion for
reconsideration of a judgment or final order. (Emphasis
ours.)
As PCI Leasing was not able to file the Notice of Appeal
within the reglementary period allowed therefor, the RTC
Order dated October 13, 2000, dismissing Civil Case No. Q-
00-40010, should be deemed final and executory.
Social Security System v. Isip[67] reiterates the well-
established doctrine regarding finality of judgments, thus:
A judgment becomes "final and executory" by operation of
law. Finality becomes a fact when the reglementary period to
appeal lapses and no appeal is perfected within such period.
As a consequence, no court (not even this Court) can exercise
appellate jurisdiction to review a case or modify a decision
that has became final.
When a final judgment is executory, it becomes immutable
and unalterable. It may no longer be modified in any respect
either by the court which rendered it or even by this Court.
The doctrine is founded on considerations of public policy
and sound practice that, at the risk of occasional errors,
judgments must become final at some definite point in time.
The doctrine of immutability and inalterability of a final
judgment has a two-fold purpose: (1) to avoid delay in the
administration of justice and thus, procedurally, to make
orderly the discharge of judicial business and (2) to put an
end to judicial controversies, at the risk of occasional errors,
which is precisely why courts exist. Controversies cannot
drag on indefinitely. The rights and obligations of every
litigant must not hang in suspense for an indefinite period of
time.
Notwithstanding the doctrine on immutability of final
judgments, the Court finds, after a through review of the
records, that compelling circumstances are extant in this case,
which clearly warrant the exercise of our equity jurisdiction.
Relevantly, Barnes v. Padilla[68] states an exception to the
rule on the finality of judgments in this wise:
However, this Court has relaxed 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.
Invariably, rules of procedure should be viewed as mere tools
designed to facilitate the attainment of justice. Their strict and
rigid application, which would result in technicalities that
tend to frustrate rather than promote substantial justice, must
always be eschewed. Even the Rules of Court reflects this
principle. The power to suspend or even disregard rules can
be so pervasive and compelling as to alter even that which
this Court itself had already declared to be final.
In the instant case, the crux of the controversy involves the
property of PCI Leasing, i.e., the sum of money supposedly
owed to it by the respondents. To our mind, it will not serve
the ends of substantial justice if the RTCs dismissal of the case
with prejudice on pure technicalities would be perfunctorily
upheld by appellate courts likewise on solely procedural
grounds, unless the procedural lapses committed were so
gross, negligent, tainted with bad faith or tantamount to
abuse or misuse of court processes.
In this instance, PCI Leasing would be left without any
judicial recourse to collect the amount of P2,327,833.33 it
loaned to the respondents. Corollarily, if PCI Leasing would
be forever barred from collecting the aforesaid amount,
respondent Antonio stands to be unjustly enriched at the
expense of PCI Leasing.
Thus, in order to obviate the occurrence of the above-
mentioned scenario, the Court finds it necessary to subject to
judicial review the RTC Order dated October 13, 2000,
dismissing Civil Case No. Q-00-40010.
Section 3, Rule 17 of the Rules of Court is the applicable rule
in the instant case, which provision reads:
Sec. 3. Dismissal due to fault of plaintiff. If, for no justifiable
cause, the plaintiff fails to appear on the date of the
presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to
comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of the defendant
or upon the courts own motion, without prejudice to the right
of the defendant to prosecute his counterclaim in the same or
in a separate action. This dismissal shall have the effect of an
adjudication upon the merits, unless otherwise declared by
the court.
Gomez v. Alcantara[69] explains that [t]he aforequoted
provision enumerates the instances when a complaint may
be dismissed due to the plaintiff's fault: (1) if he fails to
appear on the date for the presentation of his evidence in
chief on the complaint; (2) if he fails to prosecute his action
for an unreasonable length of time; or (3) if he fails to comply
with the Rules or any order of the court. The dismissal of a
case for failure to prosecute has the effect of adjudication on
the merits, and is necessarily understood to be with prejudice
to the filing of another action, unless otherwise provided in
the order of dismissal. Stated differently, the general rule is
that dismissal of a case for failure to prosecute is to be
regarded as an adjudication on the merits and with prejudice
to the filing of another action, and the only exception is when
the order of dismissal expressly contains a qualification that
the dismissal is without prejudice.
Furthermore, in Marahay v. Melicor,[70] we pronounced that
[w]hile 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.
Guided by the foregoing principles, we find that the RTC
grievously erred in dismissing Civil Case No. Q-00-40010.
According to the RTC Order dated October 13, 2000, the trial
court dismissed the case filed by PCI Leasing in view of the
absence of the latters counsel at the hearing scheduled for
that day. PCI Leasing had also been directed, on July 13, 2000,
to take the necessary steps to actively prosecute [its] case,
otherwise, the same shall be dismissed.
To our mind, the above circumstances do not constitute
sufficient bases to warrant the conclusion that PCI Leasing
had lost interest in prosecuting Civil Case No. Q-00-40010.
In its Motion for Reconsideration of the Order dated October
13, 2000, PCI Leasing explained that its counsel merely came
late during the hearing scheduled for the said date, arriving
at the time when Judge Domingo-Regala was already
dictating the order of dismissal. Said hearing was not even
for the presentation of the evidence in chief of PCI Leasing,
where the latters presence would be indispensable, but
merely for the issuance of Alias Summons. Incidentally, the
Motion for Issuance of Alias Summons filed by PCI Leasing
is non-litigious in nature, which does not require a hearing
under the Rules, as the same could have been acted upon by
the RTC without prejudicing the rights of the
respondents.[71] All facts necessary for the determination of
the motion are already specified therein or a matter of record
and there was yet no adverse party to dispute the same as the
court had not even acquired jurisdiction over the person of
the respondents. It was serious error on the part of the trial
court to have denied the first motion for issuance of alias
summons for want of notice of hearing. It was also not
mandatory for the trial court to set the second motion for
hearing.
Despite this, the RTC still dismissed the case and eventually
denied the Motion for Reconsideration thereof. While trial
courts have the discretion to impose sanctions on counsels or
litigants for tardiness or absence at hearings, such sanctions
should be proportionate to the offense and should still
conform to the dictates of justice and fair play.
Likewise, only a period of one month has passed since PCI
Leasing was ordered by the RTC to actively pursue its case,
up to the time when Civil Case No. Q-00-40010 was actually
dismissed. It does not escape this Courts notice that PCI
Leasing failed to successfully prosecute the case for several
months due to the difficulties it encountered in locating
respondents, who appeared to have a propensity for
changing addresses and refusing to accept court processes.
Under these circumstances, the delay in the trial court
proceedings was not entirely the fault of PCI Leasing.
Verily, it can hardly be said that PCI Leasing engaged in a
pattern or scheme to delay the disposition of Civil Case No.
Q-00-40010 or committed a wanton failure to observe the
mandatory requirement of the rules.
On this score, Calalang v. Court of Appeals[72] underscores
that [u]nless 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.
WHEREFORE, premises considered, the Petition for Review
on Certiorari under Rule 45 of the Rules of Court is
GRANTED. The assailed Resolutions dated September 20,
2001 and December 20, 2001 of the Court of Appeals in CA-
G.R. SP No. 66546, as well as the Order dated October 13,
2000 and the Resolution dated August 3, 2001 of the Regional
Trial Court of Quezon City, Branch 226, in Civil Case No.
Q00-40010, are hereby REVERSED and SET ASIDE. Civil
Case No. Q-00-40010 is hereby ordered REINSTATED. No
costs.SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 195619 September 5, 2012
PLANTERS DEVELOPMENT BANK, Petitioner,
vs.
JULIE CHANDUMAL, Respondent.
In this petition for review under Rule 45 of the Rules of Court,
Planters Development Bank (PDB) questions the Decision1
dated July 27, 2010 of the Court of Appeals (CA), as well as
its Resolution2 dated February 16, 2011, denying the
petitioner's motion for reconsideration in CA-G.R. CV No.
82861. The assailed decision nullified the Decision3 dated
May 31, 2004 of the Regional Trial Court (RTC), Las Piñas
City, Branch 255 in Civil Case No. LP-99-0137.
Antecedent Facts
The instant case stemmed from a contract to sell a parcel of
land, together with improvements, between BF Homes, Inc.
(BF Homes) and herein respondent Julie Chandumal
(Chandumal). The property subject of the contract is located
in Talon Dos, Las Piñas City and covered by Transfer
Certificate of Title No. T-10779. On February 12, 1993, BF
Homes sold to PDB all its rights, participations and interests
over the contract.
Chandumal paid her monthly amortizations from December
1990 until May 1994 when she began to default in her
payments. In a Notice of Delinquency and Rescission of
Contract with Demand to Vacate4 dated July 14, 1998, PDB
gave Chandumal a period of thirty (30) days from receipt
within which to settle her installment arrearages together
with all its increments; otherwise, all her rights under the
contract shall be deemed extinguished and terminated and
the contract declared as rescinded. Despite demand,
Chandumal still failed to settle her obligation.
On June 18, 1999, an action for judicial confirmation of
notarial rescission and delivery of possession was filed by
PDB against Chandumal, docketed as Civil Case No. LP-99-
0137. PDB alleged that despite demand, Chandumal failed
and/or refused to pay the amortizations as they fell due;
hence, it caused the rescission of the contract by means of
notarial act, as provided in Republic Act (R.A.) No. 6552.5
According to PDB, it tried to deliver the cash surrender value
of the subject property, as required under R.A. No. 6552, in
the amount of ₱ 10,000.00; however, the defendant was
unavailable for such purpose.6
Consequently, summons was issued and served by deputy
sheriff Roberto T. Galing (Sheriff Galing). According to his
return, Sheriff Galing attempted to personally serve the
summons upon Chandumal on July 15, 19 and 22, 1999 but it
was unavailing as she was always out of the house on said
dates. Hence, the sheriff caused substituted service of
summons on August 5, 1999 by serving the same through
Chandumal’s mother who acknowledged receipt thereof.7
For her failure to file an answer within the prescribed period,
PDB filed on April 24, 2000 an ex parte motion to declare
Chandumal in default. On January 12, 2001, the RTC issued
an Order granting the motion of PDB.8
On February 23, 2001, Chandumal filed an Urgent Motion to
Set Aside Order of Default and to Admit Attached Answer.
She maintained that she did not receive the summons and/or
was not notified of the same. She further alleged that her
failure to file an answer within the reglementary period was
due to fraud, mistake or excusable negligence. In her answer,
Chandumal alleged the following defenses: (a) contrary to
the position of PDB, the latter did not make any demand for
her to pay the unpaid monthly amortization; and (b) PDB did
not tender or offer to give the cash surrender value of the
property in an amount equivalent to fifty percent (50%) of the
actual total payment made, as provided for under Section
3(b) of R.A. No. 6552. Moreover, Chandumal claimed that
since the total payment she made amounts to ₱ 782,000.00,
the corresponding cash surrender value due her should be ₱
391,000.00.9
Per Order10 dated August 2, 2001, the RTC denied
Chandumal’s motion to set aside the order of default. Her
motion for reconsideration was also denied for lack of
merit.11 Conformably, the RTC allowed PDB to present its
evidence ex parte.12 On May 31, 2004, the RTC rendered a
Decision13 in favor of PDB, the dispositive portion of which
reads:
WHEREFORE, the foregoing considered, judgment is hereby
rendered in favor of the plaintiff Planters Development Bank
and against defendant Julie Chandumal as follows, to wit:
1. Declaring the notarial rescission of the Contract to Sell
dated 03 January 1990 made by the plaintiff per the Notice of
Delinquency and Rescission of Contract with Demand to
Vacate dated 14 July 1998 as judicially confirmed and ratified;
2. Requiring the plaintiff to deposit in the name of the
defendant the amount of ₱ 10,000.00 representing the cash
surrender value for the subject property with the Land Bank
of the Philippines, Las Pi[ñ]as City Branch in satisfaction of
the provisions of R.A. No. 6552; and,
3. Ordering the defendant to pay the plaintiff the amount of
₱ 50,000.00 as and by way of attorney’s fees, including the
costs of suit.
SO ORDERED.14
From the foregoing judgment, Chandumal appealed to the
CA.
On July 27, 2010, the CA, without ruling on the propriety of
the judicial confirmation of the notarial rescission, rendered
the assailed decision nullifying the RTC decision due to
invalid and ineffective substituted service of summons. The
dispositive portion of the CA decision provides:
WHEREFORE, premises considered, the decision of Branch
255 of the Regional Trial Court of Las Piñas City, dated May
31, 2004, in Civil Case No. LP-99-0137 is hereby NULLIFIED
and VACATED.
SO ORDERED.15
PDB filed a motion for reconsideration but it was denied by
the CA in its Resolution dated February 16, 2011.
Hence, this petition based on the following assignment of
errors:
I
The Honorable Court of Appeals erred in reversing the
decision of the trial court on the ground of improper service
of summons;
II
The decision of the trial court is valid as it duly acquired
jurisdiction over the person of respondent Chandumal
through voluntary appearance; and
III
The trial court did not err in confirming and ratifying the
notarial rescission of the subject contract to sell.16
PDB contends that the RTC properly acquired jurisdiction
over the person of Chandumal.1âwphi1 According to PDB,
there was proper service of summons since the sheriff
complied with the proper procedure governing substituted
service of summons as laid down in Section 7, Rule 14 of the
Rules of Court. PDB alleges that it is clear from the sheriff’s
return that there were several attempts on at least three (3)
different dates to effect personal service within a reasonable
period of nearly a month, before he caused substituted
service of summons. The sheriff likewise stated the reason for
his failure to effect personal service and that on his fourth
attempt, he effected the service of summons through
Chandumal’s mother who is unarguably, a person of legal
age and with sufficient discretion. PDB also argues that
Chandumal voluntarily submitted herself to the jurisdiction
of the court when she filed an Urgent Motion to Set Aside
Order of Default and to Admit Attached Answer.
For her part, Chandumal asserts that she never received a
copy of the summons or was ever notified of it and she only
came to know of the case sometime in July or August 2000,
but she was already in the United States of America by that
time, and that the CA correctly ruled that there was no valid
service of summons; hence, the RTC never acquired
jurisdiction over her person.
Issues
1. Whether there was a valid substituted service of summons;
2. Whether Chandumal voluntarily submitted to the
jurisdiction of the trial court; and
3. Whether there was proper rescission by notarial act of the
contract to sell.
Our Ruling
The fundamental rule is that jurisdiction over a defendant in
a civil case is acquired either through service of summons or
through voluntary appearance in court and submission to its
authority. If a defendant has not been properly summoned,
the court acquires no jurisdiction over its person, and a
judgment rendered against it is null and void.17
Where the action is in personam18 and the defendant is in the
Philippines, service of summons may be made through
personal service, that is, summons shall be served by handing
to the defendant in person a copy thereof, or if he refuses to
receive and sign for it, by tendering it to him.19 If the
defendant cannot be personally served with summons within
a reasonable time, it is then that substituted service may be
made.20 Personal service of summons should and always be her return. The "efforts" exerted by the sheriff clearly do not
the first option, and it is only when the said summons cannot suffice to justify substituted service and his failure to comply
be served within a reasonable time can the process server with the requisites renders such service ineffective.26
resort to substituted service.21

No valid substituted service of

Respondent voluntarily submitted
summons
to the jurisdiction of the trial court
In this case, the sheriff resorted to substituted service of
summons due to his failure to serve it personally. In Manotoc
v. Court of Appeals,22 the Court detailed the requisites for a Despite that there was no valid substituted service of
valid substituted service of summons, summed up as summons, the Court, nevertheless, finds that Chandumal
follows: (1) impossibility of prompt personal service – the voluntarily submitted to the jurisdiction of the trial court.
party relying on substituted service or the sheriff must show
that the defendant cannot be served promptly or there is
impossibility of prompt service; (2) specific details in the
Section 20, Rule 14 of the Rules of Court states:
return – the sheriff must describe in the Return of Summons
the facts and circumstances surrounding the attempted Sec. 20. Voluntary appearance. – The defendant’s voluntary
personal service; (3) a person of suitable age and discretion – appearance in the action shall be equivalent to service of
the sheriff must determine if the person found in the alleged summons. The inclusion in a motion to dismiss of other
dwelling or residence of defendant is of legal age, what the grounds aside from lack of jurisdiction over the person of the
recipient’s relationship with the defendant is, and whether defendant shall not be deemed a voluntary appearance.
said person comprehends the significance of the receipt of the
When Chandumal filed an Urgent Motion to Set Aside Order
summons and his duty to immediately deliver it to the
of Default and to Admit Attached Answer, she effectively
defendant or at least notify the defendant of said receipt of
submitted her person to the jurisdiction of the trial court as
summons, which matters must be clearly and specifically
the filing of a pleading where one seeks an affirmative relief
described in the Return of Summons; and (4) a competent
is equivalent to service of summons and vests the trial court
person in charge, who must have sufficient knowledge to
with jurisdiction over the defendant’s person. Thus, it was
understand the obligation of the defendant in the summons,
ruled that the filing of motions to admit answer, for
its importance, and the prejudicial effects arising from
additional time to file answer, for reconsideration of a default
inaction on the summons.23 These were reiterated and
judgment, and to lift order of default with motion for
applied in Pascual v. Pascual,24 where the substituted service
reconsideration is considered voluntary submission to the
of summon made was invalidated due to the sheriff’s failure
trial court’s jurisdiction.27 The Court notes that aside from
to specify in the return the necessary details of the failed
the allegation that she did not receive any summons,
attempts to effect personal service which would justify resort
Chandumal’s motion to set aside order of default and to
to substituted service of summons.
admit attached answer failed to positively assert the trial
court’s lack of jurisdiction. In fact, what was set forth therein
was the substantial claim that PDB failed to comply with the
In applying the foregoing requisites in the instant case, the
requirements of R.A. No. 6552 on payment of cash surrender
CA correctly ruled that the sheriff’s return failed to justify a
value,28 which already delves into the merits of PDB’s cause
resort to substituted service of summons. According to the
of action. In addition, Chandumal even appealed the RTC
CA, the Return of Summons does not specifically show or
decision to the CA, an act which demonstrates her
indicate in detail the actual exertion of efforts or any positive
recognition of the trial court’s jurisdiction to render said
step taken by the officer or process server in attempting to
judgment.
serve the summons personally to the defendant. The return
merely states the alleged whereabouts of the defendant Given Chandumal’s voluntary submission to the jurisdiction
without indicating that such information was verified from a of the trial court, the RTC, Las Piñas City, Branch 255, had all
person who had knowledge thereof.25 Indeed, the sheriff’s authority to render its Decision dated May 31, 2004. The CA,
return shows a mere perfunctory attempt to cause personal therefore, erred in nullifying said RTC decision and
service of the summons on Chandumal. There was no dispensing with the resolution of the substantial issue raised
indication if he even asked Chandumal’s mother as to her herein, i.e., validity of the notarial rescission. Instead,
specific whereabouts except that she was "out of the house", however, of remanding this case to the CA, the Court will
where she can be reached or whether he even tried to await
resolve the same considering that the records of the case are the notice of cancellation or demand for rescission by a
already before us and in order to avoid any further delay.29 notarial act and the full payment of the cash surrender
value.32
There is no valid rescission of the

contract to sell by notarial act

pursuant to Section 3(b), R.A. No. 6552
That the RTC had jurisdiction to render the decision does not
necessarily mean, however, that its ruling on the validity of
the notarial rescission is in accord with the established facts
of the case, the relevant law and jurisprudence.1âwphi1
PDB claims that it has validly rescinded the contract by
notarial act as provided under R.A. No. 6552. Basically, PDB
instituted Civil Case No. LP-99-0137 in order to secure
judicial confirmation of the rescission and to recover
possession of the property subject of the contract.
In Leaño v. Court of Appeals,30 it was held that:
In this case, it is an admitted fact that PDB failed to give
Chandumal the full payment of the cash surrender value. In
its complaint,33 PDB admitted that it tried to deliver the cash
surrender value of the subject property as required under
R.A. No. 6552 but Chandumal was "unavailable" for such
purpose. Thus, it prayed in its complaint that it be ordered to
"deposit with a banking institution in the Philippines, for the
account of Defendants (sic), the amount of Ten Thousand
Pesos (₱ 10,000.00), Philippine Currency, representing the
cash surrender value of the subject property; x x x."34 The
allegation that Chandumal made herself unavailable for
payment is not an excuse as the twin requirements for a valid
and effective cancellation under the law, i.e., notice of
cancellation or demand for rescission by a notarial act and the
full payment of the cash surrender value, is mandatory.35
Consequently, there was no valid rescission of the contract to
sell by notarial act undertaken by PDB and the RTC should
not have given judicial confirmation over the same.

R. A. No. 6552 recognizes in conditional sales of all kinds of

real estate (industrial, commercial, residential) the right of
WHEREFORE, the petition is DENIED. The Decision dated
the seller to cancel the contract upon non-payment of an
July 27, 2010 of the Court of Appeals, as well as its Resolution
installment by the buyer, which is simply an event that
dated February 16, 2011, denying the Motion for
prevents the obligation of the vendor to convey title from
Reconsideration in CA-G.R. CV No. 82861 are AFFIRMED in
acquiring binding force. The law also provides for the rights
so far as there was no valid service of summons. Further, the
of the buyer in case of cancellation. Thus, Sec. 3 (b) of the law
Court DECLARES that there was no valid rescission of
provides that:
contract pursuant to R.A. No. 6552. Accordingly, the Decision
"If the contract is cancelled, the seller shall refund to the dated May 31, 2004 of the Regional Trial Court, Las Piñas
buyer the cash surrender value of the payments on the City, Branch 255 in Civil Case No. LP-99-0 137 is REVERSED
property equivalent to fifty percent of the total payments and SET ASIDE, and is therefore, DISMISSED for lack of
made and, after five years of installments, an additional five merit.
percent every year but not to exceed ninety percent of the
total payments made: Provided, That the actual cancellation
of the contract shall take place after thirty days from receipt SO ORDERED.
by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full
payment of the cash surrender value to the buyer."31 BIENVENIDO L. REYES
(Citation omitted and emphasis ours)
Associate Justice

R.A. No. 6552 recognizes the right of the seller to cancel the
contract but any such cancellation must be done in
conformity with the requirements therein prescribed. In
addition to the notarial act of rescission, the seller is required
to refund to the buyer the cash surrender value of the
payments on the property. The actual cancellation of the
contract can only be deemed to take place upon the expiry of
a thirty (30)-day period following the receipt by the buyer of
G.R. No. 183370, August 17, 2015
NATION PETROLEUM GAS, INCORPORATED, NENA
ANG, MARIO ANG, ALISON A. SY, GUILLERMO G. SY,
NELSON ANG, LUISA ANG, RENATO C. ANG, PAULINE
T. ANG, RICKY C. ANG,1 AND MELINDA ANG,
Petitioners, v. RIZAL COMMERCIAL BANKING
CORPORATION, SUBSTITUTED BY PHILIPPINE ASSET
GROWTH ONE, INC., Respondent.
This petition for review on certiorari under Rule 45 of the
1997 Revised Rules of Civil Procedure (Rules) seeks to
reverse and set aside the December 12, 2007 Decision2 and
June 17, 2008 Resolution3 of the Court of Appeals (CA) in
CA-G.R. SP No. 98787, which affirmed the March 29, 2007
Order4 of the Regional Trial Court (RTC), Branch 66, Makati
City, in Civil Case No. 06-882, denying petitioners' Special
Appearance with Motion to Dismiss for alleged improper
service of summons.
On October 16, 2006, respondent Rizal Commercial Banking
Corporation filed against petitioner corporation and its
directors/officers a Complaint5 for civil damages arising
from estafa in relation to violations of the Trust Receipts Law.
On October 26, 2006, after an ex parte hearing was conducted,
respondent's prayer for a writ of preliminary attachment was
granted and the corresponding writ was issued.6 Thereafter,
Sheriff Leodel N. Roxas served upon petitioners a copy of the
summons, complaint, application for attachment,
respondent's affidavit and bond, and the order and writ of
attachment. The Sheriffs Report dated November 13, 2006
narrated:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
The undersigned sheriff respectfully submits the following
report to wit:LawlibraryofCRAlaw
On 26 October 2006, [a] copy of Writ of Attachment dated 26
October 2006, issued by the Court in the above-entitled case
was received by the undersigned for service and
implementation.
On even date, the undersigned served the Summons, copy of
[the] Complaint, application for attachment, the plaintiffs
affidavit and bond, and the Order and Writ of Attachment,
on the defendants Nation Petroleum Gas et al, at BPI
Building, Rizal Street, Candelaria, Quezon. Said summons
and all pertinent papers, upon telephone instruction of
defendant Melinda Ang, were received by Claudia Abante,
[defendants'] [Liaison] Officer, as evidenced by her signature
at the original copy of Summons and Writ. I also served
copies to other defendants at their given addresses, but they
refused to acknowledge receipt thereof.
On the same day, at the instance of the plaintiff's counsel and
representative, the undersigned levied the real properties of
the defendants at the Register of Deeds of Lucena City,
Makati City, Pasig City, Quezon City and the Register of
Deeds of Manila. I also levied a property (plant equipment)
in NPGI plant in Sariaya, Quezon. Copies of the notices of
levy on attachment are hereto attached.
WHEREFORE, the original copies of the Summonses, Order,
Writ of Attachment and all pertinent papers are hereby
returned to the Court of origin for record and information.7
Petitioners filed through counsel a Special Appearance with
Motion to Dismiss8 on November 15, 2006. They asserted that
the trial court did not acquire jurisdiction over the
corporation since the summons was improperly served upon
Claudia Abante (Abante), who is a mere liaison officer and
not one of the corporate officers specifically enumerated in
Section 11, Rule 14 of the Rules. Likewise, the individual
petitioners argued that the sheriff and/or process server did
not personally approach them at their respective address as
stated in the Complaint. Neither did he resort to substituted
service of summons, and that, even if he did, there was no
strict compliance with Section 7, Rule 14 of the Rules. The
Court's pronouncements in Spouses Mason v. Court of
Appeals,9E. B. Villarosa & Partner Co., Ltd. v. Judge
Benito,10Laus v. Court of Appeals,11 and Samartino v.
Raon12 were invoked in praying for the dismissal of the
complaint and the discharge of the writ of attachment.
Respondent countered in its Opposition with Motion to
Declare Defendants in Default13 that there was valid service
of summons upon petitioners. With respect to the
corporation, Abante received the summons upon the express
authority and instruction of the corporate secretary,
petitioner Melinda Ang (Ang). As regards the individual
petitioners, the Sheriffs Report reflects that they were served
"at their given addresses, but they refused to acknowledge
receipt thereof." Respondent stressed that said Report is
prima facie evidence of the facts stated therein and that the
sheriff enjoys the presumption of regularity in the
performance of his official functions. In any case, it averred
that, according to Oaminal v. Castillo,14 petitioners already
voluntarily submitted to the court's jurisdiction when they
prayed for the discharge of the writ of attachment, which is protestations. There is no reason for the Court to doubt the
an affirmative relief apart from the dismissal of the case. regularity of the Sheriffs service of summons as in fact its
regularity is presumed. It bears stressing that defendants did
not per se deny having received summonses. Perforce, they
A Reply with Comment/Opposition (to the motion to declare are challenging the manner of service of the same. Having
defendants in default)15 was then filed by petitioners. In ultimately received the summonses upon them and
support of their contention that the court lacks jurisdiction considering the rules on service of the same was substantially
over their persons, they submitted their Joint Affidavit16 and complied with, the Court finds no reason to deny the instant
the Affidavit17 of Abante, claiming, among others, that they Motion to Dismiss.21
neither personally met the sheriff and/or the process server
Petitioners elevated the jurisdictional issue to the CA via
nor were handed a copy of the court documents; that Ang did
petition for certiorari and prohibition.22 As afore-stated, the
not give Abante telephone instructions to receive the same;
appellate court later dismissed the petition and denied the
and that Abante did not receive any instruction from Ang.
motion for reconsideration; hence, this petition raising the
Petitioners further held that Oaminal finds no application in
following issues for resolution:LawlibraryofCRAlaw
the instant case since they only filed one motion and that the
additional relief prayed for, which is the discharge of the ChanRoblesVirtualawlibrary
writ, is complementary to and a necessary consequence of a
I.
finding that the court has no jurisdiction over their persons.
Instead, Our ruling in Avon Insurance PLC v. Court of
Appeals18 was relied upon.
WHETHER OR NOT THE TRIAL COURT ACQUIRED
JURISDICTION OVER THE PERSON OF THE
DEFENDANT CORPORATION BY SERVICE OF
In its Rejoinder with Motion to Strike,19 respondent stood
SUMMONS UPON ITS MERE EMPLOYEE.
firm in defending the court's jurisdiction. The denials of Ang
and Abante were viewed as self-serving and could not
prevail over the presumption of regularity which the sheriff
enjoys as an officer of the court. Even assuming that the II.
Sheriffs Return does not state in detail the fact that the
summons was served upon the individual petitioners
through substituted service, respondent asserted that this WHETHER OR NOT THE TRIAL COURT ACQUIRED
does not conclusively prove that such service is invalid JURISDICTION OVER THE PERSONS OF THE
because it may still be shown through extraneous evidence INDIVIDUAL DEFENDANTS BY RESORTING TO
similar to the case of BPI v. Spouses Evangelista.20redarclaw SUBSTITUTED SERVICE OF SUMMONS DESPITE
ABSENCE OF EARNEST EFFORTS ON THE PART OF THE
SERVING OFFICER TO SERVE SUMMONS
On March 29, 2007, the RTC denied petitioners' motion to PERSONALLY.23
dismiss and respondent's motion to declare them in default.
We deny.
In upholding the jurisdiction of the court over the persons of
petitioners and requiring them to file an Answer, the Order
ratiocinated:LawlibraryofCRAlaw
Summons is a writ by which the defendant is notified of the
ChanRoblesVirtualawlibrary action brought against him or her.24 Its purpose is two-fold:
to acquire jurisdiction over the person of the defendant and
The very essence of service of summons is for the defendants
to notify the defendant that an action has been commenced
to be aware of an existing suit against them and for them to
so that he may be given an opportunity to be heard on the
file an answer or responsive pleading thereto. When
claim against him.25 "[C]ompliance with the rules regarding
corporate and individual defendants were served with
the service of summons is as much an issue of due process as
summons through the [liaison] officer who received the same
of jurisdiction. The essence of due process is to be found in
for and in their behalf as per instruction of defendant
the reasonable opportunity to be heard and submit any
Melinda Ang, and when defendants filed a responsive
evidence one may have in support of his defense. It is
pleading in the form of a Motion to Dismiss, the essence of
elementary that before a person can be deprived of his
service of summons was met and defendants are deemed to
property, he should first be informed of the claim against him
have ultimately received the summons despite their
and the theory on which such claim is premised."26redarclaw

Service of summons on domestic corporation, partnership or
other juridical entity is governed by Section 11, Rule 14 of the
Rules, which states:LawlibraryofCRAlaw
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SECTION 11. Service upon domestic private juridical entity.
- When the defendant is a corporation, partnership or
association organized under the laws of the Philippines with
a juridical personality, service may be made on the president,
managing partner, general manager, corporate secretary,
treasurer, or in-house counsel.
When the defendant is a domestic corporation like herein
petitioner, service of summons may be made only upon the
persons enumerated in Section 11, Rule 14 of the Rules.27 The
enumeration of persons to whom summons may be served is
restricted, limited and exclusive following the rule on
statutory construction expressio unios est exclusio alterius.28
Substantial compliance cannot be invoked.29 Service of
summons upon persons other than those officers specifically
mentioned in Section 11, Rule 14 is void, defective and not
binding to said corporation.30
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Basic is the rule that a strict compliance with the mode of
service is necessary to confer jurisdiction of the court over a
corporation. The officer upon whom service is made must be
one who is named in the statute; otherwise, the service is
insufficient. The purpose is to render it reasonably certain
that the corporation will receive prompt and proper notice in
an action against it or to insure that the summons be served
on a representative so integrated with the corporation that
such person will know what to do with the legal papers
served on him.31
As correctly argued by petitioners, Sps. Mason already
resolved that substantial compliance on service of summons
upon a domestic corporation is no longer an excuse.
Thus:LawlibraryofCRAlaw
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The question of whether the substantial compliance rule is
still applicable under Section 11, Rule 14 of the 1997 Rules of
Civil Procedure has been settled in Villarosa which applies
squarely to the instant case. In the said case, petitioner E.B.
Villarosa & Partner Co. Ltd. (hereafter Villarosa) with
principal office address at 102 Juan Luna St., Davao City and
with branches at 2492 Bay View Drive, Tambo, Parailaque,
Metro Manila and Kolambog, Lapasan, Cagayan de Oro City,
entered into a sale with development agreement with private
respondent Imperial Development Corporation. As Villarosa
failed to comply with its contractual obligation, private
respondent initiated a suit for breach of contract and
damages at the Regional Trial Court of Makati. Summons,
together with the complaint, was served upon Villarosa
through its branch manager at Kolambog, Lapasan, Cagayan
de Oro City. Villarosa filed a Special Appearance with
Motion to Dismiss on the ground of improper service of
summons and lack of jurisdiction. The trial court denied the
motion and ruled that there was substantial compliance with
the rule, thus, it acquired jurisdiction over Villarosa. The
latter questioned the denial before us in its petition for
certiorari. We decided in Villarosa's favor and declared the
trial court without jurisdiction to take cognizance of the case.
We held that there was no valid service of summons on
Villarosa as service was made through a person not included
in the enumeration in Section 11, Rule 14 of the 1997 Rules of
Civil Procedure, which revised the Section 13, Rule 14 of the
1964 Rules of Court. We discarded the trial court's basis for
denying the motion to dismiss, namely, private respondent's
substantial compliance with the rule on service of summons,
and fully agreed with petitioner's assertions that the
enumeration under the new rule is restricted, limited and
exclusive, following the rule in statutory construction that
expressio unios est exclusio alterius. Had the Rules of Court
Revision Committee intended to liberalize the rule on service
of summons, we said, it could have easily done so by clear
and concise language. Absent a manifest intent to liberalize
the rule, we stressed strict compliance with Section 11, Rule
14 of the 1997 Rules of Civil Procedure.
Neither can herein petitioners invoke our ruling in
Millennium to support their position for said case is not on
all fours with the instant case. We must stress that
Millennium was decided when the 1964 Rules of Court were
still in force and effect, unlike the instant case which falls
under the new rule. Hence, the cases cited by petitioners
where we upheld the doctrine of substantial compliance
must be deemed overturned by Villarosa, which is the later
case.
At this juncture, it is worth emphasizing that notice to enable
the other party to be heard and to present evidence is not a
mere technicality or a trivial matter in any administrative or
judicial proceedings. The service of summons is a vital and
indispensable ingredient of due process. x x x32
The foregoing notwithstanding, We agree with the CA that
there was a valid and effective service of summons upon
petitioner corporation through its liaison officer who acted as
the agent of the corporate secretary. It
ruled:LawlibraryofCRAlaw
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Petitioner corporation asserts that based on the said rule
[Section 11, Rule 14 of the Rules], the service of summons
made by the sheriff upon its liaison officer, Claudia Abante,
was defective for the reason that a liaison officer is not one of
the corporate officers enumerated therein upon whom
service of summons is authorized to be made. It contends that
there having been no valid service, the trial court
consequently did not acquire jurisdiction to hear the
complaint a quo.
The contention deserves full credence only if it is to be
assumed that Claudia Abante received the summons in her
official capacity as petitioner corporation's liaison officer.
However, this is not true in the instant case, since according
to the sheriff, Abante proceeded to receive the summons and
accompanying documents only after receiving instructions to
do so from Melinda Ang, an individual petitioner herein and
the petitioner corporation's corporate secretary. It is clear,
therefore, that Abante, in so receiving the summons, did so
in representation of Ang who, as corporate secretary, is one
of the officers competent under the Rules of Court to receive
summons on behalf of a private juridical person. Thus, while
it may be true that there was no direct, physical handing of
the summons to Ang, the latter could at least be charged with
having constructively received the same, which in Our view,
amounts to a valid service of summons.
Having herself instructed Abante to receive the summons,
Ang, and for that matter, petitioner corporation, is thus now
precluded from impugning the jurisdiction of the trial court
on the ground of invalid service of summons. In point in this
regard is the principle of estoppel which, under our remedial
laws, is an effective bar against any claim of lack of
jurisdiction. Under said doctrine, an admission or
representation is rendered conclusive upon the person
making it and cannot be denied or disproved as against the
person relying thereon.
Thus, despite the assertions of Ang and Abante that, as
between them, no such instruction had been relayed and
received, the sheriffs statement belying the allegations
should be accorded weight.
The sheriffs report is further bolstered by the presumption of
regularity in the performance of public duty as the same is
provided for in Rule 131 of the Rules of Court. The
presumption applies so long as it is shown that the officer, in
performing his duties, is not inspired by any improper
motive, a fact that is true with the sheriff in the case at bar.
And, if the presumption may be made to apply to public
officers in general, with more reason should its benefit be
accorded to the sheriff, who is an officer of the court.
True, the presumption is disputable, but to overcome the
same, more concrete evidence than the affidavit of Abante is
required. As correctly pointed out by the respondent, in line
with the ruling of the Supreme Court in R. Transport
Corporation vs. Court of Appeals and Talsan Enterprises,
Inc. vs. Baliwag, Abante's affidavit is self-serving in nature,
and being so, is not sufficient to overturn the said
presumption.
On this aspect, petitioners score the respondent, asserting
that the two above-cited cases are not applicable to the case
at hand inasmuch as these were decided before the advent of
the 1997 Revised Rules of Civil Procedure, adding likewise
that the cited cases and the instant case differ in their
respective factual milieus. We are not persuaded. Under
either the former or the present rules, it is clear that Abante's
denial that she received instructions from Ang is evidence
that would pale in comparison to the declaration of an officer
of the court indisputably performing his duty objectively and
free from any malicious and ill motives.33
Petitioner corporation cannot conveniently rely on the sworn
statements of the individual petitioners and Abante. Upon
examination, Ang's denial of having spoken with any process
server to give instruction to serve the summons and other
pertinent papers to Abante34 is not incompatible with the
Sheriffs Report stating that "[s]aid summons and all pertinent
papers, upon telephone instruction of defendant Melinda
Ang, were received by Claudia Abante, [defendants']
[Liaison] Officer, as evidenced by her signature at the original
copy of Summons and Writ." While it may be true that Ang
had not talked to the sheriff or process server, it still does not
rule out the possibility that she in fact spoke to Abante and
instructed the latter to receive the documents in her behalf.
As to the Affidavit of Abante, her disavowal of having
spoken to Ang or receiving telephone instructions from her
is truly self-serving. Evidence as simple as a telephone billing
statement or an affidavit of a disinterested third person,
among others, could have been presented to refute the
sheriffs claim, but there was none. Likewise, no substantial
proofs were credibly shown to support Abante's allegation
that the sheriff insisted on having the court processes
received and that she was "intimidated by the presence of a
court personnel who was quite earnest in accomplishing his
task."35redarclaw
It is well to note that the certificate of service of the process
server is prima facie evidence of the facts as set out therein.
This is fortified by the presumption of the regularity of
performance of official duty. To overcome the presumption
of regularity of official functions in favor of such sheriffs
return, the evidence against it must be clear and convincing.
Sans the requisite quantum of proof to the contrary, the
presumption stands deserving of faith and
credit.36redarclaw
The same conclusion, however, could not be said with respect
to the service of summons upon the individual petitioners.
Section 7, in relation to Section 6, Rule 14 of the Rules,
provides for substituted service of
summons:LawlibraryofCRAlaw
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Section 6. Service in person on defendant. - Whenever
practicable, the summons shall be served by handling a copy
thereof to the defendant in person, or, if he refuses to receive
and sign for it, by tendering it to him.
Section 7. Substituted service. - If, for justifiable causes, the
defendant cannot be served within a reasonable time as
provided in the preceding section, service may be effected (a)
by leaving copies of the summons at the defendant's
residence with some person of suitable age and discretion
then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some
competent person in charge thereof.
Sections 6 and 7 of the Rules cannot be construed to apply
simultaneously and do not provide for alternative modes of
service of summons which can either be resorted to on the
mere basis of convenience to the parties for, under our
procedural rules, service of summons in the persons of the
defendants is generally preferred over substituted service.37
Resort to the latter is permitted when the summons cannot
be promptly served on the defendant in person and after
stringent formal and substantive requirements have been
complied with.38 The failure to comply faithfully, strictly
and fully with all the requirements of substituted service
renders the service of summons ineffective.39redarclaw
Manotoc v. Court of Appeals40 painstakingly elucidated the
requirements of the Rules as follows:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
We can break down this section into the following
requirements to effect a valid substituted
service:LawlibraryofCRAlaw
(1) Impossibility of Prompt Personal Service
The party relying on substituted service or the sheriff must
show that defendant cannot be served promptly or there is
impossibility of prompt service. Section 8, Rule 14 provides
that the plaintiff or the sheriff is given a "reasonable time" to
serve the summons to the defendant in person, but no
specific time frame is mentioned. "Reasonable time" is
defined as "so much time as is necessary under the
circumstances for a reasonably prudent and diligent man to
do, conveniently, what the contract or duty requires that
should be done, having a regard for the rights and possibility
of loss, if any[,] to the other party." Under the Rules, the
service of summons has no set period. However, when the
court, clerk of court, or the plaintiff asks the sheriff to make
the return of the summons and the latter submits the return
of summons, then the validity of the summons lapses. The
plaintiff may then ask for an alias summons if the service of
summons has failed. What then is a reasonable time for the
sheriff to effect a personal service in order to demonstrate
impossibility of prompt service? To the plaintiff, "reasonable
time" means no more than seven (7) days since an expeditious
processing of a complaint is what a plaintiff wants. To the
sheriff, "reasonable time" means 15 to 30 days because at the
end of the month, it is a practice for the branch clerk of court
to require the sheriff to submit a return of the summons
assigned to the sheriff for service. The Sheriffs Return
provides data to the Clerk of Court, which the clerk uses in
the Monthly Report of Cases to be submitted to the Office of
the Court Administrator within the first ten (10) days of the
succeeding month. Thus, one month from the issuance of
summons can be considered "reasonable time" with regard to
personal service on the defendant.
Sheriffs are asked to discharge their duties on the service of
summons with due care, utmost diligence, and reasonable
promptness and speed so as not to prejudice the expeditious
dispensation of justice. Thus, they are enjoined to try their
best efforts to accomplish personal service on defendant. On
the other hand, since the defendant is expected to try to avoid
and evade service of summons, the sheriff must be
resourceful, persevering, canny, and diligent in serving the
process on the defendant. For substituted service of
summons to be available, there must be several attempts by
the sheriff to personally serve the summons within a
reasonable period [of one month] which eventually resulted
in failure to prove impossibility of prompt service. "Several
attempts" means at least three (3) tries, preferrably on at least
two different dates. In addition, the sheriff must cite why
such efforts were unsuccessful. It is only then that
impossibility of service can be confirmed or accepted.
(2) Specific Details in the Return
The sheriff must describe in the Return of Summons the facts
and circumstances surrounding the attempted personal
service. The efforts made to find the defendant and the
reasons behind the failure must be clearly narrated in detail
in the Return. The date and time of the attempts on personal
service, the inquiries made to locate the defendant, the
name/s of the occupants of the alleged residence or house of
defendant and all other acts done, though futile, to serve the
summons on defendant must be specified in the Return to
justify substituted service. The form on Sheriffs Return of
Summons on Substituted Service prescribed in the
Handbook for Sheriffs published by the Philippine Judicial
Academy requires a narration of the efforts made to find the
defendant personally and the fact of failure. Supreme Court
Administrative Circular No. 5 dated November 9, 1989
requires that "impossibility of prompt service should be
shown by stating the efforts made to find the defendant
personally and the failure of such efforts," which should be
made in the proof of service.
(3) A Person of Suitable Age and Discretion
If the substituted service will be effected at defendant's house
or residence, it should be left with a person of "suitable age
and discretion then residing therein." A person of suitable
age and discretion is one who has attained the age of full legal
capacity (18 years old) and is considered to have enough
discernment to understand the importance of a summons.
"Discretion" is defined as "the ability to make decisions which
represent a responsible choice and for which an
understanding of what is lawful, right or wise may be
presupposed". Thus, to be of sufficient discretion, such
person must know how to read and understand English to
comprehend the import of the summons, and fully realize the
need to deliver the summons and complaint to the defendant
at the earliest possible time for the person to take appropriate
action. Thus, the person must have the "relation of
confidence" to the defendant, ensuring that the latter would
receive or at least be notified of the receipt of the summons.
The sheriff must therefore determine if the person found in
the alleged dwelling or residence of defendant is of legal age,
what the recipient's relationship with the defendant is, and
whether said person comprehends the significance of the
receipt of the summons and his duty to immediately deliver
it to the defendant or at least notify the defendant of said
receipt of summons. These matters must be clearly and
specifically described in the Return of Summons.
(4) A Competent Person in Charge
If the substituted service will be done at defendant's office or
regular place of business, then it should be served on a
competent person in charge of the place. Thus, the person on
whom the substituted service will be made must be the one
managing the office or business of defendant, such as the
president or manager; and such individual must have
sufficient knowledge to understand the obligation of the
defendant in the summons, its importance, and the
prejudicial effects arising from inaction on the summons.
Again, these details must be contained in the Return.41
In resorting to the substituted service, the sheriff in this case
pithily declared in his Report that he "also served copies to
other defendants at their given addresses, but they refused to
acknowledge receipt thereof." Obviously, the Sheriffs Report
dated November 13, 2006 does not particularize why
substituted service was resorted to and the precise manner
by which the summons was served upon the individual
petitioners. The disputable presumption that an official duty
has been regularly performed will not apply where it is
patent from the sheriffs or server's return that it is
defective.42redarclaw
To avail themselves of substituted service of summons,
courts must rely on a detailed enumeration of the sheriffs
actions and a showing that the defendant cannot be served
despite diligent and reasonable efforts.43 The Court requires
that the Sheriffs Return clearly and convincingly show the
impracticability or hopelessness of personal service.44 The
impossibility of personal service justifying availment of
substituted service should be explained in the proof of
service; why efforts exerted towards personal service failed.
The pertinent facts and circumstances attendant to the service
of summons must be stated in the proof of service or Officer's
Return; otherwise, the substituted service cannot be
upheld.45redarclaw
Under exceptional terms, the circumstances warranting
substituted service of summons may be proved by evidence
aliunde.46 Substituted service will still be considered as a.3. However, Ms. Abante volunteered to call defendant
regular if other evidence of the efforts to serve summons was Melinda Ang on the phone to inform her that summons was
presented.47BPI v. Spouses Evangelista48 teaches Us that a beings served upon defendant NPGI.
defect in the service of summons, which is apparent on the
face of the return, does not necessarily constitute conclusive
proof that the actual service has in fact been improperly a.4. Subsequently, Ms. Abante informed the Sheriff that
made. In the interest of speedy justice, the trial court has to defendant Melinda Ang authorized her to receive the
immediately ascertain whether the patent defect is real and, summons for defendant NPGI.
if so, to fully determine whether prior attempts at personal
service have in fact been done and resort to the substituted
service was justified. Should the returns not show
a.5. Considering that she claimed to be authorized by
compliance with the Rules on substituted service, actual and
defendant Melinda Ang, who is the Corporate Secretary of
correct service may still be proven by evidence extraneous to
defendant NPGI, to receive the summons on behalf of
it. If substituted service is indeed improper, the trial court
defendant NPGI, the Sheriff entrusted the same to her, as
must issue new summons and serve it in accordance with the
well as the Complaint and the Writ of Attachment, among
Rules.
others, and Ms. Abante voluntarily signed the receiving copy
thereof.

In the present case, while no actual hearing was conducted to

verify the validity of the grounds for substituted service of
a.6 the Sheriff did not intimidate Ms. Abante into receiving
summons, the parties exchanged pleadings in support of
the summons. In fact, she volunteered to receive the same.
their respective positions. To justify, respondent
contends:LawlibraryofCRAlaw b. Copies of the Complaint, summons and Writ of
Attachment, among others, were likewise served to
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defendant NPGI at its office located at 39th Floor, Yuchengco
34. In the instant case, representatives of the undersigned Tower, RCBC Plaza, 6819 Ayala Avenue, corner Sen. Gil
counsel and plaintiff RCBC personally observed the service Puyat Avenue, Makati City, Metro Manila ('RCBC Plaza
of summons on the defendants. Based on their account, the Office').
following facts and circumstances
ChanRoblesVirtualawlibrary
transpired:LawlibraryofCRAlaw
b.1. The personnel from said office also stated that all the
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defendant NPGI Directors were not around and were
a. On [October 26, 2006], the Sheriff served summons on probably at home. As such, a copy of the Complaint,
defendant NPGI at the G/F BPI Building, Rizal Street, summons and Writ of Attachment, among others, were left
Candelaria, Quezon, the reported office address of defendant with said office.
NPGI in the latter's General Information Sheet submitted
c. Thereafter, summons on the individual defendants were
with the Securities and Exchange Commission.
served at the following addresses:LawlibraryofCRAlaw
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a. 1. In the said address, the Sheriff met a person who
c. 1. Renato Ang, Nena Ang, Melinda Ang, Pauline Ang -
introduced herself as Ms. Claudia Abante, the Liaison
1348 Palm Avenue, Dasmarinas Village, Makati City;
[Officer] of defendant NPGI.

c.2. Guillermo Sy and Alison Sy - 1320 Glorioso Streets,

a.2. Upon inquiry, the Sheriff was informed that defendants
Dasmarinas Village, Makati City;
NPGI Officers were all not around to receive the summons
for defendant NPGI considering that, according to Ms.
Abante, the defendant NPGI Directors do not hold office at
c.3. Nelson Ang, Luisa Ang - 19 Swallow Drive,
said address.
Greenmeadows, Quezon City;
c.4. Mario Ang - Diamond Furniture, Cabunyag Street,
Candelaria, Quezon; and
c.5. Ricky Ang - Rizal Street, Candelaria, Quezon.
d. Upon service of the summons upon them, it became
apparent that the individual defendants were evading
service of summons considering that the sheriff was being
given a run-around.
ChanRoblesVirtualawlibrary
d.1. In their respective residences, their house helpers stated
that the individual defendants were not at home but in the
RCBC Plaza Office.
d.2. However, considering that the Sheriff had already been
to the RCBC Plaza Office and the personnel at said office
previously stated that all the defendants were not at said
office, it became apparent that all the defendants were trying
to evade service of summons.
d.3. Given the obvious attempt of defendants to evade service
of summons, it was futile for the Sheriff to go back to the
RCBC Plaza Office.
d.4. Hence, summons were served to the individual
defendants through substituted service by entrusting the
same to their house helpers residing at the respective
addresses, all of whom are of suitable age and discretion.
xxxx
36. Indeed, in the instant case, contrary to the allegations
contained in the Motion to Dismiss, the summons were
properly served to the individual defendants through
substituted service considering that there were justifiable
causes existing which prevented personal service upon all
the individual defendants within a reasonable time.
ChanRoblesVirtualawlibrary
36.1. It should be noted that aside from defendant NPGI,
there are ten (10) other individual defendants in the instant
case who are residing in addresses which are far apart (i.e.,
Makati City, Pasig City, City of Manila and Quezon
Province).
36.2. Summons were attempted to be served to all defendant
NPGI Directors, Luisa Ang, Guillermo Sy and Pauline Ang
on the following addresses:LawlibraryofCRAlaw
Renato Ang, Nena Ang, Melinda Ang, Pauline Ang - 1348
Palm Avenue, Dasmarinas Village, Makati
City;chanRoblesvirtualLawlibrary
Guillermo Sy and Alison Sy - 1320 Glorioso Streets,
Dasmarinas Village, Makati
City;chanRoblesvirtualLawlibrary
Nelson Ang, Luisa Ang - 19 Swallow Drive, Greenmeadows,
Quezon City;chanRoblesvirtualLawlibrary
Mario Ang - Diamond Furniture, Cabunyag Street,
Candelaria, Quezon; and
Ricky Ang - Rizal Street, Candelaria, Quezon.
36.3. To require the sheriff to return several times at the
residences of the ten (10) defendants as suggested by the
defendants, despite the apparent intention of the defendants
to evade service of summons, and the considerable distances
between all their residences (i.e., Makati City, Pasig City, City
of Manila and Quezon Province), would clearly be
unreasonable.49
According to respondent's version, copies of the complaint,
summons and writ of attachment, among others, were served
to petitioner corporation at its offices in Candelaria, Quezon
and RCBC Plaza. In the Quezon office, the sheriff was
informed that the individual petitioners were all not around
to receive the summons for the corporation considering that
they do not hold office at said address. Likewise, a staff from
the RCBC Plaza office stated that all them were not around
and were probably at home. Thereafter, summons was
served on the individual petitioners at their respective
addresses in Makati City, Quezon City, and Candelaria,
Quezon. Their house helpers told that they were not at home
but were in the RCBC Plaza office. Considering that the
sheriff already went there and its personnel said that they
were not at said office, it became apparent on the sheriff that
the individual petitioners were trying to evade service of
summons. Thus, given this predicament, it was futile for him
to go back to the RCBC Plaza office.
It is argued that the summons was properly served to the
individual petitioners through substituted service because
there were justifiable causes existing which prevented
personal service within a reasonable period of time.
Respondent asserts that requiring the sheriff to return several
times at the residences of the ten (10) individual petitioners
despite their intention to evade service of summons and the
considerable distances of their residences would clearly be
unreasonable.
Respondent's explanations do not suffice.
In the instant case, it appears that the sheriff hastily and
capriciously resorted to substituted service of summons
without actually exerting any genuine effort to locate the
individual petitioners. The "reasonable time" within which to
personally serve the summons - 7 days for the plaintiff or 15-
30 days for the sheriff as stated in Manotoc - has not yet
elapsed at the time the substituted service was opted to.
Remarkably, based on the Sheriffs Report and the narration
of petitioners, the personal service of summons upon the
corporation and the individual petitioners as well as the levy
of their personal and real properties were all done in just one
day. Manotoc stresses that for substituted service of
summons to be available, there must be several attempts by
the sheriff to personally serve the summons within a
reasonable period which eventually resulted in failure in
order to prove impossibility of prompt service. To reiterate,
"several attempts" means at least three (3) tries, preferrably
on at least two different dates.
Further, except for the Quezon Province, there is, in fact, no
considerable distance between the residences of the
individual petitioners since the cities of Makati and Quezon
are part of the National Capital Region; hence, accessible
either by private or public modes of transportation.
Assuming that there is, the distance would not have been
insurmountable had respondent took its time and not
unnecessarily rushed to accomplish personal service in just a
single day.
Finally, respondent alleges that the summons was served to
the individual petitioners through substituted service by
entrusting the same to their house helpers, all of whom are of
suitable age and discretion. It did not, however, elaborate
that these persons know how to read and understand English
to comprehend the import of the summons, and fully realize
the need to deliver the summons and complaint to the
individual petitioners at the earliest possible time for them to
take appropriate action. There is no way for Us to
conclusively ascertain that the sheriff ensured, among others,
that the persons found in the alleged dwelling or residence
comprehend the significance of the receipt of the summons
and the duty to immediately deliver it to the individual
petitioners or at least notify them of said receipt of summons.
The foregoing considered, it can be deduced that since there
were no actual efforts exerted and no positive steps
undertaken to earnestly locate the individual petitioners,
there is no basis to convincingly say that they evaded the
personal service of summons and merely gave the sheriff a
run-around, thus, justifying substituted service upon them.
Despite improper service of summons upon their persons,
the individual petitioners are deemed to have submitted to
the jurisdiction of the court through their voluntary
appearance. The second sentence of Section 20,50 Rule 14 of
the Rules that "[t]he inclusion in a motion to dismiss of other
grounds aside from lack of jurisdiction over the person of the
defendant shall not be deemed a voluntary appearance"
clearly refers to affirmative defenses, not affirmative
reliefs.51redarclaw
In the present case, the individual petitioners prayed, among
others, for the following: (1) discharge of the writ of
attachment on their properties; (2) denial of the motion to
declare them in default; (3) admission of the
Comment/Opposition (to the motion to declare them in
default) filed on December 19, 2006; and (4) denial of
respondent's motion to strike off from the records (their
opposition to the motion to declare them in default). By
seeking affirmative reliefs from the trial court, the individual
petitioners are deemed to have voluntarily submitted to the
jurisdiction of said court. A party cannot invoke the
jurisdiction of a court to secure affirmative relief against his
opponent and after obtaining or failing to obtain such relief,
repudiate or question that same jurisdiction.52 Therefore, the
CA cannot be considered to have erred in affirming the trial
court's denial of the Special Appearance with Motion to
Dismiss for alleged improper service of summons.
WHEREFORE, premises considered, the petition is DENIED.
The December 12, 2007 Decision and June 17, 2008 Resolution
of the Court of Appeals in CA-G.R. SP No. 98787, which
sustained the March 29, 2007 Order of the Regional Trial
Court, Branch 66, Makati City, in Civil Case No. 06-882, are
hereby AFFIRMED.
SO ORDERED.cralawlawlibrary

MA. IMELDA M. MANOTOC, G.R. No. 130974
- versus - CA
DECISION
VELASCO, JR., J.:
The courts jurisdiction over a defendant is founded on a valid
service of summons. Without a valid service, the court cannot
acquire jurisdiction over the defendant, unless the defendant
voluntarily submits to it. The defendant must be properly
apprised of a pending action against him and assured of the
opportunity to present his defenses to the suit. Proper service
of summons is used to protect ones right to due process.
The Case
This Petition for Review on Certiorari[1] under Rule 45
presents the core issue whether there was a valid substituted
service of summons on petitioner for the trial court to acquire
jurisdiction. Petitioner Manotoc claims the court a quo
should have annulled the proceedings in the trial court for
want of jurisdiction due to irregular and ineffective service of
summons.
The Facts
Petitioner is the defendant in Civil Case No. 63337 entitled
Agapita Trajano, pro se, and on behalf of the Estate of
Archimedes Trajano v. Imelda Imee R. Marcos-Manotoc[2]
for Filing, Recognition and/or Enforcement of Foreign
Judgment. Respondent Trajano seeks the enforcement of a
foreign courts judgment rendered on May 1, 1991 by the
United States District Court of Honolulu, Hawaii, United
States of America, in a case entitled Agapita Trajano, et al. v.
Imee Marcos-Manotoc a.k.a. Imee Marcos, Civil Case No. 86-
0207 for wrongful death of deceased Archimedes Trajano
committed by military intelligence officials of the Philippines
allegedly under the command, direction, authority,
supervision, tolerance, sufferance and/or influence of
defendant Manotoc, pursuant to the provisions of Rule 39 of
the then Revised Rules of Court.
Based on paragraph two of the Complaint, the trial court
issued a Summons[3] on July 6, 1993 addressed to petitioner
at Alexandra Condominium Corporation or Alexandra
Homes, E2 Room 104, at No. 29 Meralco Avenue, Pasig City.
On July 15, 1993, the Summons and a copy of the Complaint
were allegedly served upon (Mr.) Macky de la Cruz, an
alleged caretaker of petitioner at the condominium unit
mentioned earlier.[4] When petitioner failed to file her
Answer, the trial court declared her in default through an
Order[5] dated October 13, 1993.
On October 19, 1993, petitioner, by special appearance of
counsel, filed a Motion to Dismiss[6] on the ground of lack of
jurisdiction of the trial court over her person due to an invalid
substituted service of summons. The grounds to support the
motion were: (1) the address of defendant indicated in the
Complaint (Alexandra Homes) was not her dwelling,
residence, or regular place of business as provided in Section
8, Rule 14 of the Rules of Court; (2) the party (de la Cruz),
who was found in the unit, was neither a representative,
employee, nor a resident of the place; (3) the procedure
prescribed by the Rules on personal and substituted service
of summons was ignored; (4) defendant was a resident of
Singapore; and (5) whatever judgment rendered in this case
would be ineffective and futile.
During the hearing on the Motion to Dismiss, petitioner
Manotoc presented Carlos Gonzales, who testified that he
saw defendant Manotoc as a visitor in Alexandra Homes only
two times. He also identified the Certification of Renato A. de
Leon, which stated that Unit E-2104 was owned by Queens
Park Realty, Inc.; and at the time the Certification was issued,
the unit was not being leased by anyone. Petitioner also
presented her Philippine passport and the
Disembarkation/Embarkation Card[7] issued by the
Immigration Service of Singapore to show that she was a
resident of Singapore. She claimed that the person referred to
in plaintiffs Exhibits A to EEEE as Mrs. Manotoc may not
even be her, but the mother of Tommy Manotoc, and
granting that she was the one referred to in said exhibits, only
27 out of 109 entries referred to Mrs. Manotoc. Hence, the
infrequent number of times she allegedly entered Alexandra
Homes did not at all establish plaintiffs position that she was
a resident of said place.
On the other hand, Agapita Trajano, for plaintiffs estate,
presented Robert Swift, lead counsel for plaintiffs in the
Estate of Ferdinand Marcos Human Rights Litigation, who
testified that he participated in the deposition taking of
Ferdinand R. Marcos, Jr.; and he confirmed that Mr. Marcos,
Jr. testified that petitioners residence was at the Alexandra
Apartment, Greenhills.[8] In addition, the entries[9] in the
logbook of Alexandra Homes from August 4, 1992 to August
2, 1993, listing the name of petitioner Manotoc and the
Sheriffs Return,[10] were adduced in evidence.
On October 11, 1994, the trial court rejected Manotocs Motion
to Dismiss on the strength of its findings that her residence,
for purposes of the Complaint, was Alexandra Homes, Unit
E-2104, No. 29 Meralco Avenue, Pasig, Metro Manila, based
on the documentary evidence of respondent Trajano. The
trial court relied on the presumption that the sheriffs
substituted service was made in the regular performance of
official duty, and such presumption stood in the absence of
proof to the contrary. [11]

On December 21, 1994, the trial court discarded Manotocs
plea for reconsideration for lack of merit.[12]
Undaunted, Manotoc filed a Petition for Certiorari and
Prohibition[13] before the Court of Appeals (CA) on January
20, 1995, docketed as CA-G.R. SP No. 36214 seeking the
annulment of the October 11, 1994 and December 21, 1994
Orders of Judge Aurelio C. Trampe.
Ruling of the Court of Appeals
On March 17, 1997, the CA rendered the assailed
Decision,[14] dismissing the Petition for Certiorari and
Prohibition. The court a quo adopted the findings of the trial
court that petitioners residence was at Alexandra Homes,
Unit E-2104, at No. 29 Meralco Avenue, Pasig, Metro Manila,
which was also the residence of her husband, as shown by
the testimony of Atty. Robert Swift and the Returns of the
registered mails sent to petitioner. It ruled that the
Disembarkation/Embarkation Card and the Certification
dated September 17, 1993 issued by Renato A. De Leon,
Assistant Property Administrator of Alexandra Homes, were
hearsay, and that said Certification did not refer to July
1993the month when the substituted service was effected.
In the same Decision, the CA also rejected petitioners
Philippine passport as proof of her residency in Singapore as
it merely showed the dates of her departure from and arrival
in the Philippines without presenting the boilerplates last
two (2) inside pages where petitioners residence was
indicated. The CA considered the withholding of those pages
as suppression of evidence. Thus, according to the CA, the
trial court had acquired jurisdiction over petitioner as there
was a valid substituted service pursuant to Section 8, Rule 14
of the old Revised Rules of Court.
On April 2, 1997, petitioner filed a Motion for
Reconsideration[15] which was denied by the CA in its
Resolution[16] dated October 8, 1997.
Hence, petitioner has come before the Court for review on
certiorari.
The Issues
Petitioner raises the following assignment of errors for the
Courts consideration:
I. RESPONDENT COURT OF APPEALS COMMITTED [A]
SERIOUS ERROR IN RENDERING THE DECISION AND
RESOLUTION IN QUESTION (ANNEXES A AND B) IN
DEFIANCE OF LAW AND JURISPRUDENCE IN RULING
THAT THE TRIAL COURT ACQUIRED JURISDICTION
OVER THE PERSON OF THE PETITIONER THROUGH A
SUBSTITUTED SERVICE OF SUMMONS IN
ACCORDANCE WITH SECTION 8, RULE 14 OF THE
REVISED RULES OF COURT.
II. RESPONDENT COURT OF APPEALS COMMITTED [A]
SERIOUS ERROR WHEN IT RULED THAT THERE WAS A
VALID SERVICE OF SUMMONS ON AN ALLEGED
CARETAKER OF PETITIONERS RESIDENCE IN
COMPLETE DEFIANCE OF THE RULING IN CASTILLO
VS. CFI OF BULACAN, BR. IV, G.R. NO. L-55869,
FEBRUARY 20, 1984, 127 SCRA 632 WHICH DEFINES THE
PROPRIETY OF SUCH SERVICE UPON MERE OVERSEERS
OF PREMISES WHERE A PARTY SUPPOSEDLY RESIDES.
III. RESPONDENT COURT OF APPEALS COMMITTED [A]
SERIOUS ERROR IN CONCLUDING THAT THE
RESIDENCE OF THE HUSBAND IS ALSO THE
RESIDENCE OF HIS WIFE CONTRARY TO THE RULING
IN THE BANK OF THE PHILIPPINE ISLANDS VS. DE
COSTER, G.R. NO. 23181, MARCH 16, 1925, 47 PHIL. 594.
IV. RESPONDENT COURT OF APPEALS COMMITTED [A]
SERIOUS ERROR IN FAILING TO APPLY THE RULE ON
EXTRA-TERRITORIAL SERVICE OF SUMMONS UNDER
SECTIONS 17 AND 18, RULE 14 OF THE REVISED RULES
OF COURT.[17]
The assigned errors bring to the fore the crux of the
disagreementthe validity of the substituted service of
summons for the trial court to acquire jurisdiction over
petitioner.
The Courts Ruling
We GRANT the petition.
Acquisition of Jurisdiction
Jurisdiction over the defendant is acquired either upon a
valid service of summons or the defendants voluntary
appearance in court. When the defendant does not
voluntarily submit to the courts jurisdiction or when there is
no valid service of summons, any judgment of the court
which has no jurisdiction over the person of the defendant is
null and void.[18] In an action strictly in personam, personal
service on the defendant is the preferred mode of service, that
is, by handing a copy of the summons to the defendant in
person. If defendant, for excusable reasons, cannot be served
with the summons within a reasonable period, then
substituted service can be resorted to. While substituted
service of summons is permitted, it is extraordinary in
character and in derogation of the usual method of
service.[19] Hence, it must faithfully and strictly comply with
the prescribed requirements and circumstances authorized
by the rules. Indeed, compliance with the rules regarding the
service of summons is as much important as the issue of due
process as of jurisdiction.[20]

Requirements for Substituted Service
Section 8 of Rule 14 of the old Revised Rules of Court which
applies to this case provides:
SEC. 8. [21] Substituted service. If the defendant cannot be
served within a reasonable time as provided in the preceding
section [personal service on defendant], service may be
effected (a) by leaving copies of the summons at the
defendants residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies
at defendants office or regular place of business with some
competent person in charge thereof.
We can break down this section into the following
requirements to effect a valid substituted service:
(1) Impossibility of Prompt Personal Service
The party relying on substituted service or the sheriff must
show that defendant cannot be served promptly or there is
impossibility of prompt service.[22] Section 8, Rule 14
provides that the plaintiff or the sheriff is given a reasonable
time to serve the summons to the defendant in person, but no
specific time frame is mentioned. Reasonable time is defined
as so much time as is necessary under the circumstances for
a reasonably prudent and diligent man to do, conveniently,
what the contract or duty requires that should be done,
having a regard for the rights and possibility of loss, if any[,]
to the other party.[23] Under the Rules, the service of
summons has no set period. However, when the court, clerk
of court, or the plaintiff asks the sheriff to make the return of
the summons and the latter submits the return of summons,
then the validity of the summons lapses. The plaintiff may
then ask for an alias summons if the service of summons has
failed.[24] What then is a reasonable time for the sheriff to
effect a personal service in order to demonstrate
impossibility of prompt service? To the plaintiff, reasonable
time means no more than seven (7) days since an expeditious
processing of a complaint is what a plaintiff wants. To the
sheriff, reasonable time means 15 to 30 days because at the
end of the month, it is a practice for the branch clerk of court
to require the sheriff to submit a return of the summons
assigned to the sheriff for service. The Sheriffs Return
provides data to the Clerk of Court, which the clerk uses in
the Monthly Report of Cases to be submitted to the Office of
the Court Administrator within the first ten (10) days of the
succeeding month. Thus, one month from the issuance of
summons can be considered reasonable time with regard to
personal service on the defendant.
Sheriffs are asked to discharge their duties on the service of
summons with due care, utmost diligence, and reasonable
promptness and speed so as not to prejudice the expeditious
dispensation of justice. Thus, they are enjoined to try their
best efforts to accomplish personal service on defendant. On
the other hand, since the defendant is expected to try to avoid
and evade service of summons, the sheriff must be
resourceful, persevering, canny, and diligent in serving the
process on the defendant. For substituted service of
summons to be available, there must be several attempts by
the sheriff to personally serve the summons within a
reasonable period [of one month] which eventually resulted
in failure to prove impossibility of prompt service. Several
attempts means at least three (3) tries, preferably on at least
two different dates. In addition, the sheriff must cite why
such efforts were unsuccessful. It is only then that
impossibility of service can be confirmed or accepted.
(2) Specific Details in the Return
 recipients relationship with the defendant is, and whether
said person comprehends the significance of the receipt of the
summons and his duty to immediately deliver it to the
The sheriff must describe in the Return of Summons the facts defendant or at least notify the defendant of said receipt of
and circumstances surrounding the attempted personal summons. These matters must be clearly and specifically
service.[25] The efforts made to find the defendant and the described in the Return of Summons.
reasons behind the failure must be clearly narrated in detail
in the Return. The date and time of the attempts on personal
service, the inquiries made to locate the defendant, the
name/s of the occupants of the alleged residence or house of
defendant and all other acts done, though futile, to serve the
summons on defendant must be specified in the Return to (4) A Competent Person in Charge
justify substituted service. The form on Sheriffs Return of
Summons on Substituted Service prescribed in the
Handbook for Sheriffs published by the Philippine Judicial
Academy requires a narration of the efforts made to find the
defendant personally and the fact of failure.[26] Supreme
Court Administrative Circular No. 5 dated November 9, 1989
If the substituted service will be done at defendants office or
requires that impossibility of prompt service should be
regular place of business, then it should be served on a
shown by stating the efforts made to find the defendant
competent person in charge of the place. Thus, the person on
personally and the failure of such efforts, which should be
whom the substituted service will be made must be the one
made in the proof of service.
managing the office or business of defendant, such as the
president or manager; and such individual must have
sufficient knowledge to understand the obligation of the
defendant in the summons, its importance, and the
prejudicial effects arising from inaction on the summons.
Again, these details must be contained in the Return.
(3) A Person of Suitable Age and Discretion

Invalid Substituted Service in the Case at Bar

If the substituted service will be effected at defendants house
or residence, it should be left with a person of suitable age
and discretion then residing therein.[27] A person of suitable
age and discretion is one who has attained the age of full legal
capacity (18 years old) and is considered to have enough
discernment to understand the importance of a summons.
Let us examine the full text of the Sheriffs Return, which
Discretion is defined as the ability to make decisions which
reads:
represent a responsible choice and for which an
understanding of what is lawful, right or wise may be
presupposed.[28] Thus, to be of sufficient discretion, such
person must know how to read and understand English to
comprehend the import of the summons, and fully realize the
need to deliver the summons and complaint to the defendant
at the earliest possible time for the person to take appropriate THIS IS TO CERTIFY that on many occasions several
action. Thus, the person must have the relation of confidence attempts were made to serve the summons with complaint
to the defendant, ensuring that the latter would receive or at and annexes issued by this Honorable Court in the above
least be notified of the receipt of the summons. The sheriff entitled case, personally upon the defendant IMELDA IMEE
must therefore determine if the person found in the alleged MARCOS-MANOTOC located at Alexandra Condominium
dwelling or residence of defendant is of legal age, what the Corpration [sic] or Alexandra Homes E-2 Room 104 No. 29
Merlaco [sic] Ave., Pasig, Metro-Manila at reasonable hours surrounding the service of summons be described with more
of the day but to no avail for the reason that said defendant particularity in the Return or Certificate of Service.
is usually out of her place and/or residence or premises. That
on the 15th day of July, 1993, substituted service of summons
was resorted to in accordance with the Rules of Court in the
Philippines leaving copy of said summons with complaint
and annexes thru [sic] (Mr) Macky de la Cruz, caretaker of
the said defendant, according to (Ms) Lyn Jacinto,
Besides, apart from the allegation of petitioners address in
Receptionist and Telephone Operator of the said building, a
the Complaint, it has not been shown that respondent
person of suitable age and discretion, living with the said
Trajano or Sheriff Caelas, who served such summons, exerted
defendant at the given address who acknowledged the
extraordinary efforts to locate petitioner. Certainly, the
receipt thereof of said processes but he refused to sign
second paragraph of the Complaint only states that
(emphases supplied).
respondents were informed, and so [they] allege about the
address and whereabouts of petitioner. Before resorting to
substituted service, a plaintiff must demonstrate an effort in
good faith to locate the defendant through more direct
means.[32] More so, in the case in hand, when the alleged
petitioners residence or house is doubtful or has not been
WHEREFORE, said summons is hereby returned to this clearly ascertained, it would have been better for personal
Honorable Court of origin, duly served for its record and service to have been pursued persistently.
information.

In the case Umandap v. Sabio, Jr.,[33] it may be true that the

Pasig, Metro-Manila July 15, 1993.[29] Court held that a Sheriffs Return, which states that despite
efforts exerted to serve said process personally upon the
defendant on several occasions the same proved futile,
conforms to the requirements of valid substituted service.
However, in view of the numerous claims of irregularities in
substituted service which have spawned the filing of a great
number of unnecessary special civil actions of certiorari and
A meticulous scrutiny of the aforementioned Return readily
appeals to higher courts, resulting in prolonged litigation and
reveals the absence of material data on the serious efforts to
wasteful legal expenses, the Court rules in the case at bar that
serve the Summons on petitioner Manotoc in person. There
the narration of the efforts made to find the defendant and
is no clear valid reason cited in the Return why those efforts
the fact of failure written in broad and imprecise words will
proved inadequate, to reach the conclusion that personal
not suffice. The facts and circumstances should be stated with
service has become impossible or unattainable outside the
more particularity and detail on the number of attempts
generally couched phrases of on many occasions several
made at personal service, dates and times of the attempts,
attempts were made to serve the summons x x x personally,
inquiries to locate defendant, names of occupants of the
at reasonable hours during the day, and to no avail for the
alleged residence, and the reasons for failure should be
reason that the said defendant is usually out of her place
included in the Return to satisfactorily show the efforts
and/or residence or premises. Wanting in detailed
undertaken. That such efforts were made to personally serve
information, the Return deviates from the rulingin Domagas
summons on defendant, and those resulted in failure, would
v. Jensen[30] and other related cases[31]that the pertinent
prove impossibility of prompt personal service.
facts and circumstances on the efforts exerted to serve the
summons personally must be narrated in the Return. It
cannot be determined how many times, on what specific
dates, and at what hours of the day the attempts were made.
Given the fact that the substituted service of summons may
be assailed, as in the present case, by a Motion to Dismiss, it
is imperative that the pertinent facts and circumstances
Moreover, to allow sheriffs to describe the facts and
circumstances in inexact terms would encourage routine
performance of their precise duties relating to substituted
servicefor it would be quite easy to shroud or conceal
carelessness or laxity in such broad terms. Lastly, considering
that monies and properties worth millions may be lost by a
defendant because of an irregular or void substituted service,
it is but only fair that the Sheriffs Return should clearly and
convincingly show the impracticability or hopelessness of
personal service.
Even American case law likewise stresses the principle of
strict compliance with statute or rule on substituted service,
thus:
The procedure prescribed by a statute or rule for substituted
or constructive service must be strictly pursued.[35] There
must be strict compliance with the requirements of statutes
authorizing substituted or constructive service.[36]

Granting that such a general description be considered

adequate, there is still a serious nonconformity from the
requirement that the summons must be left with a person of
Where, by the local law, substituted or constructive service is
suitable age and discretion residing in defendants house or
in certain situations authorized in the place of personal
residence. Thus, there are two (2) requirements under the
service when the latter is inconvenient or impossible, a strict
Rules: (1) recipient must be a person of suitable age and
and literal compliance with the provisions of the law must be
discretion; and (2) recipient must reside in the house or
shown in order to support the judgment based on such
residence of defendant. Both requirements were not met. In
substituted or constructive service.[37] Jurisdiction is not to
this case, the Sheriffs Return lacks information as to
be assumed and exercised on the general ground that the
residence, age, and discretion of Mr. Macky de la Cruz, aside
subject matter of the suit is within the power of the court. The
from the sheriffs general assertion that de la Cruz is the
inquiry must be as to whether the requisites of the statute
resident caretaker of petitioner as pointed out by a certain
have been complied with, and such compliance must appear
Ms. Lyn Jacinto, alleged receptionist and telephone operator
on the record.[38] The fact that the defendant had actual
of Alexandra Homes. It is doubtful if Mr. de la Cruz is
knowledge of attempted service does not render the service
residing with petitioner Manotoc in the condominium unit
effectual if in fact the process was not served in accordance
considering that a married woman of her stature in society
with the requirements of the statute.[39]
would unlikely hire a male caretaker to reside in her
dwelling. With the petitioners allegation that Macky de la
Cruz is not her employee, servant, or representative, it is
necessary to have additional information in the Return of
Summons. Besides, Mr. Macky de la Cruzs refusal to sign the
Receipt for the summons is a strong indication that he did not
have the necessary relation of confidence with petitioner. To
protect petitioners right to due process by being accorded
proper notice of a case against her, the substituted service of
summons must be shown to clearly comply with the rules. Based on the above principles, respondent Trajano failed to
demonstrate that there was strict compliance with the
requirements of the then Section 8, Rule 14 (now Section 7,
Rule 14 of the 1997 Rules of Civil Procedure).

It has been stated and restated that substituted service of

summons must faithfully and strictly comply with the
prescribed requirements and in the circumstances authorized
by the rules. [34]
Due to non-compliance with the prerequisites for valid
substituted service, the proceedings held before the trial
court perforce must be annulled.
 fact would not make an irregular and void substituted
service valid and effective.
The court a quo heavily relied on the presumption of
regularity in the performance of official duty. It reasons out
that [t]he certificate of service by the proper officer is prima
facie evidence of the facts set out herein, and to overcome the
presumption arising from said certificate, the evidence must
be clear and convincing.[40]
IN VIEW OF THE FOREGOING, this Petition for Review is
hereby GRANTED and the assailed March 17, 1997 Decision
and October 8, 1997 Resolution of the Court of Appeals and
the October 11, 1994 and December 21, 1994 Orders of the
Regional Trial Court, National Capital Judicial Region, Pasig
City, Branch 163 are hereby REVERSED and SET ASIDE. No
The Court acknowledges that this ruling is still a valid
costs.
doctrine. However, for the presumption to apply, the Sheriffs
Return must show that serious efforts or attempts were
exerted to personally serve the summons and that said efforts
failed. These facts must be specifically narrated in the Return.
To reiterate, it must clearly show that the substituted service
must be made on a person of suitable age and discretion
living in the dwelling or residence of defendant. Otherwise, SO ORDERED.
the Return is flawed and the presumption cannot be availed
of. As previously explained, the Return of Sheriff Caelas did
not comply with the stringent requirements of Rule 14,
Section 8 on substituted service.

In the case of Venturanza v. Court of Appeals,[41] it was held

that x x x the presumption of regularity in the performance
of official functions by the sheriff is not applicable in this case
where it is patent that the sheriffs return is defective
(emphasis supplied). While the Sheriffs Return in the
Venturanza case had no statement on the effort or attempt to
personally serve the summons, the Return of Sheriff Caelas
in the case at bar merely described the efforts or attempts in
general terms lacking in details as required by the ruling in
the case of Domagas v. Jensen and other cases. It is as if
Caelas Return did not mention any effort to accomplish
personal service. Thus, the substituted service is void.

On the issue whether petitioner Manotoc is a resident of

Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue,
Pasig City, our findings that the substituted service is void
has rendered the matter moot and academic. Even assuming
that Alexandra Homes Room 104 is her actual residence, such