YU CHUCK, MACK YUENG, and DING MOON, plaintiffs-appellees, in any event, C. C.
in any event, C. C. Chen had no power or authority to bind the defendant corporation
vs.
"KONG LI PO," defendant-appellant.
J. W. Ferrier for appellant.
G. E. Campbell for appellees.
OSTRAND, J.:
The defendant is a domestic corporation organized in accordance with the laws of
the Philippine Islands and engaged in the publication of a Chinese newspaper
styled Kong Li Po. Its articles of incorporation and by-laws are in the usual form
and provide for a board of directors and for other officers among them a president
whose duty it is to "sign all contracts and other instruments of writing." No special
provision is made for a business or general manager.
Some time during the year 1919 one C. C. Chen or T. C. Chen was appointed
general business manager of the newspaper. During the month of December of
that year he entered into an agreement with the plaintiffs by which the latter
bound themselves to do the necessary printing for the newspaper for the sum of
P580 per month as alleged in the complaint. Under this agreement the plaintiffs
worked for the defendant from January 1, 1920, until January 31, 1921, when they
were discharged by the new manager, Tan Tian Hong, who had been appointed in
the meantime, C. C. Chen having left for China. The letter of dismissal stated no
special reasons for the discharge of the plaintiffs.
The plaintiffs thereupon brought the present action alleging, among other things,
in the complaint that their contract of employment was for a term of three years
from the first day of January, 1920; that in the case of their discharge by the
defendant without just cause before the expiration of the term of the contract,
they were to receive full pay for the remaining portion of the term; that they had
been so discharged without just cause and therefore asked judgment for damages
in the sum of P20,880.
In its amended answer the defendant denies generally and specifically the
allegations of the complaint and sets up five special defenses and counterclaims.
The first of these is to the effect that C. C. Chen, the person whose name appears
to have been signed to the contract of employment was not authorized by the
defendant to execute such a contract in its behalf. The second special defense and
counterclaim is to the effect that during the month of January, 1921, the plaintiffs
purposely delayed the issuance of defendant's newspaper on three separate and
distinct occasions causing damage and injury to the defendant in the amount of
P300. Under the third special defense and counterclaim it is alleged that the
plaintiffs failed, neglected, and refused to prepare extra pages for the January 1,
1921, issue of the defendant's newspaper and thus compelled the defendant to
secure the preparation of said extra pages by other persons at a cost of P110. In
the fourth special defense and counterclaim the defendant alleged that the
plaintiffs neglected and failed to correct errors in advertisements appearing in
defendant's newspaper, although their attention was specifically called to such
errors and they were requested to make the corrections, as a result of which
certain advertisers withdrew their patronage from the paper and refused to pay for
the advertisements, thus causing a loss to the defendant of P160.50. For its fifth
special defense and counterclaim the defendant alleged that the plaintiffs
neglected and refused to do certain job printing such neglect and refusal causing
injury and damage to the defendant in the sum of P150.
At the trial of the case the plaintiffs presented in evidence Exhibit A which purports
to be a contract between Chen and the plaintiffs and which provides that in the
event the plaintiffs should be discharged without cause before the expirations of
the term of three years from January 1, 1920, they would be given full pay for the
unexpired portion of the term "even if the said paper has to fall into bankruptcy."
The contract is signed by the plaintiffs and also bears the signature "C. C. Chen,
manager of Kong Li Po." The authenticity of the latter signature is questioned by
the defendant, but the court below found that the evidence upon this point
preponderate in favor of the plaintiffs and there appears to be no sufficient reason
to disturb this finding.
The trial court further found that the contract had been impliedly ratified by the
defendant and rendered judgment in favor of the plaintiffs for the sum of P13,340,
with interest from the date of the filing of the complaint and the costs. From this
judgment the defendant appeals to this court and makes eighteen assignments of
error. The fourth and seventeenth assignments relate to defendant's special
defense and counterclaims; the sum and substance of the other assignments is
that the contract on which the action is based was not signed by C. C. Chen; that,
by such contract; and that there was no ratification of the contract by the corporation.
Before entering upon a discussion of the questions raised by the assignments of error,
we may draw attention to a matter which as not been mentioned either by counsel or
by the court below, but which, to prevent misunderstanding, should be briefly
explained: It is averred in the complaint that it is accompanied by a copy of the
contract between the parties (Exhibit A) which copy, by the terms of the complaint, is
made a part thereof. The copy is not set forth in the bill of exceptions and aside from
said avernment, there is no indication that the copy actually accompanied the
complaint, but an examination of the record of the case in the Court of First Instance
shows that a translation of the contract was attached to the complaint and served upon
the defendant. As this translation may be considered a copy and as the defendant
failed to deny its authenticity under oath, it will perhaps be said that under section 103
of the Code of Civil Procedure the omission to so deny it constitutes an admission of
the genuineness and due execution of the document as well as of the agent's authority
to bind the defendant. (Merchant vs. International Banking Corporation, 6 Phil., 314.)
In ordinary circumstances that would be true. But this case appears to have been tried
upon the theory that the rule did not apply; at least, it was wholly overlooked or
disregarded by both parties. The plaintiffs at the beginning of the trial presented a
number of witnesses to prove the due execution of the document as well as the agent's
authority; no objections were made to the defendant's evidence in refutation and no
exceptions taken; and the matter is not mentioned in the decision of the trial court.
The object of the rule is "to relieve a party of the trouble and expense of proving in the
first instance an alleged fact, the existence or nonexistence of which is necessarily
within the knowledge of the adverse party, and of the necessity (to his opponent's
case) of establishing which such adverse party is notified by his opponent's pleading."
(Nery Lim-Chingco vs. Terariray, 5 Phil., at p. 124.)lawphi1.net
The plaintiff may, of course, waive the rule and that is what he must be considered to
have done in the present case by introducing evidence as to the execution of the
document and failing to object to the defendant's evidence in refutation; all this
evidence is now competent and the case must be decided thereupon. Moreover, the
question as to the applicability of the rule is not even suggested in the briefs and is not
properly this court. In these circumstances it would, indeed, be grossly unfair to the
defendant if this court should take up the question on its own motion and make it
decisive of the case, and such is not the law. Nothing of what has here been said is in
conflict with former decisions of this court; it will be found upon examination that in all
cases where the applicability of the rule has been sustained the party invoking it has
relied on it in the court below and conducted his case accordingly.
The principal question presented by the assignments of error is whether Chen had the
power to bind the corporation by a contract of the character indicated. It is conceded
that he had no express authority to do so, but the evidence is conclusive that he, at the
time the contract was entered into, was in effect the general business manager of the
newspaper Kong Li Po and that he, as such, had charge of the printing of the paper,
and the plaintiff maintain that he, as such general business manager, had implied
authority to employ them on the terms stated and that the defendant corporation is
bound by his action. The general rule is that the power to bind a corporation by
contract lies with its board of directors or trustees, but this power may either expressly
or impliedly be delegated to other officers or agents of the corporation, and it is well
settled that except where the authority of employing servants and agent is expressly
vested in the board of directors or trustees, an officer or agent who has general control
and management of the corporation's business, or a specific part thereof, may bind the
corporation by the employment of such agent and employees as are usual and
necessary in the conduct of such business. But the contracts of employment must be
reasonable. (14a C. J., 431.)
In regard to the length of the term of employment, Corpus Juris says:
In the absence of express limitations, a manager has authority to hire an employee for
such a period as is customary or proper under the circumstances, such as for a year, for
the season, or for two season. But unless he is either expressly authorized, or held out
as having such authority, he cannot make a contract of employment for a long future
period, such as for three years, although the contract is not rendered invalid by the
mere fact that the employment extends beyond the term of the manager's own
employment. . . . (14a C. J., 431.)
From what has been said, there can be no doubt that Chen, as general manager of the
Kong Li Po, had implied authority to bind the defendant corporation by a reasonable
and usual contract of employment with the plaintiffs, but we do not think that the
contract here in question can be so considered. Not only is the term of employment
unusually long, but the conditions are otherwise so onerous to the defendant that the
possibility of the corporation being thrown into insolvency thereby is expressly
contemplated in the same contract. This fact in itself was, in our opinion, sufficient
to put the plaintiffs upon inquiry as to the extent of the business manager's
authority; they had not the rights to presume that he or any other single officer or
employee of the corporation had implied authority to enter into a contract of
employment which might bring about its ruin.
Neither do we think that the contention that the corporation impliedly ratified the
contract is supported by the evidence. The contention is based principally on the
fact that Te Kim Hua, the president of the corporation for the year 1920, admitted
on the witness stand that he saw the plaintiffs work as printers in the office of the
newspaper. He denied, however, any knowledge of the existence of the contract
and asserted that it was never presented neither to him nor to the board of
directors. Before a contract can be ratified knowledge of its existence must, of
course, be brought home to the parties who have authority to ratify it or
circumstances must be shown from which such knowledge may be presumed. No
such knowledge or circumstances have been shown here. That the president of the
corporation saw the plaintiffs working in its office is of little significance; there
were other printers working there at that time and as the president had nothing to
do with their employment, it was hardly to be expected that be would inquire into
the terms of their contracts. Moreover, a ratification by him would have been of no
avail; in order to validate a contract, a ratification by the board of directors was
necessary. The fact that the president was required by the by-laws to sign the
documents evidencing contracts of the corporation, does not mean that he had
power to make the contracts.
In his decision his Honor, the learned judge of the court below appears to have
placed some weight on a notice inserted in the January 14th issue of the Kong Li
Po by T. C. Chen and which, in translation, reads as follows:
To Whom It May Concern: Announcement is hereby given that thereafter all
contracts, agreements and receipts are considered to be null and void unless duly
signed by T. C. Chen, General Manager of this paper.
(Sgd.) CHEN YOU MAN
General Manager of this paper
(The evidence shows that Chen You Man and T. C. Chen is one and the same
person.)
His Honor evidently overestimated the importance of this notice. It was published
nearly a month after the contract in question is alleged to have been entered into
and can therefore not have been one of the circumstances which led the plaintiffs
to think that Chen had authority to make the contract. It may further be observed
that the notice confers no special powers, but is, in effect, only an assertion by
Chen that he would recognize no contracts, agreements, and receipts not duty
signed by him. It may be presumed that the contracts, agreements, and receipts
were such as were ordinarily made in the course of the business of managing the
newspaper. There is no evidence to show that the notice was ever brought to the
attention of the officers of the defendant corporation.
The defendant's counterclaims have not been sufficiently established by the
evidence.
The judgment appealed from is reversed and the defendant corporation is
absolved from the complaint. No costs will be allowed. So ordered.
G.R. No. L-11106 January 27, 1917
ENRIQUE LEGARDA KOH, plaintiff-appellee,
vs.
LUCIO ONGSIACO, defendant-appellant.
Roberto Moreno and Pedro Guevara for appellant.
Marcelo Caringal for appellee.
TORRES, J.:
This appeal by bill of exceptions was taken by counsel for the defendant from the
judgment of April 5, 1915, in which the trial court condemned the defendant to
pay the plaintiff the sum of P1,020, the amount of the profits the latter failed to
collect, and to pay the costs of the trial.
On December 16, 1914, plaintiff Enrique Legarda Koh filed a complaint, dated
December 15, 1915 [1914], in the Court of First Instance of Manila against Lucio
Ongsiaco, alleging that he had leased the apartments (accesorias) Nos. 511 and 513 on
Calle Santo Cristo, district of Binondo, Manila, owned by the defendant, for the term of
one year counting from December 1, 1913, extendible for one year more; that,
notwithstanding that the plaintiff had informed the defendant, prior to December 1,
1914, that he desired to lease the said properties for another year, to wit, until
December 1, 1915, the defendant, unlawfully, against the will of the lessee and to his
injury and prejudice, seized and took possession of the accesorias, camarin and bodega
leased by the plaintiff; that the later was thereby unable to sublease the same to other
persons as he had contracted to do; and that by such unlawful seizure and taking
possession he had suffered damages amounting to the sum of P3,000. Plaintiff
therefore prayed the court to render judgment against the defendant, ordering the
latter to pay to him the said amount of damages together with the costs.
On December 17, 1914, counsel for the defendant, in answer to the aforementioned
complaint, denied each and all the allegations therein contained and, in special
defense, set forth that it was true the plaintiff had leased the properties specified in the
complaint from December 1, 1913, at a monthly rental of P240; that the term of the
lease was extendible for an indeterminate period of time, at the will of the parties, as
shown in the lease contract which was attached to his answer and made a part thereof;
and that as the defendant and the plaintiff had not come to an agreement with respect
to the extension of the said lease, the defendant took possession of the properties on
December 1, 1914. Said counsel therefore prayed that his client be absolved from the
complaint with the costs against the plaintiff.
After trial and the introduction of evidence by both parties, the court rendered the
judgment aforementioned, to which the defendant excepted and in writing moved for
a reopening of the case and a new trial. This motion was overruled, exception was
entered by the defendant and, upon presentation of the proper bill of exceptions, the
same was approved and transmitted to the Clerk of this Court.
The defendant unquestionably leased the apartments or accesorias, together with the
warehouse or bodega in the rear, situated at Nos. 511 and 513 Calle Santo Cristo,
Binondo, to the plaintiff Enrique Legarda Koh for the fixed and determined period of
one year from December 1, 1913, which term, according to the copy of the said
contract of lease, Exhibit 1, was to be extendible at the will of the parties.
The questions, then, submitted to the decision of this court are whether the plaintiff-
lessee was or was not entitled to the agreed extension of the term of the lease and to
continue to lease the said properties under the said contract of lease at the expiration
of the term of one year fixed therein; and, if so, whether the plaintiff is or is not entitled
to recover losses and damages occasioned through his failure to collect a greater rental
by subrenting the said two apartments and the warehouse connected therewith.
The record shows that on November 14, 1913, the defendant Lucio Ongsiaco executed
a written contract, Exhibit 1, whereby he leased to the plaintiff Legarda Koh the
apartments Nos. 511 and 513 Calle Santo Cristo, at a rental price of P120 for each door
or apartment. The fourth condition of the said contract reads as follows;
The term of the said contract shall be that of one year, counting from the 1st of
December of the present year (1913), which term shall be extendible at the will of both
parties.
The record further shows that about the 7th or 8th of December, 1914, the plaintiff
went to Ongsiaco's house and urged him to execute a new contract for the lease of his
properties for another year, in accordance with the clause providing for the extension
of the term of the contract, Exhibit 1; that the defendant agreed to do this, telling the
plaintiff to return on the following day and to leave with defendant the copy of the said
contract Exhibit 1 which the plaintiff was carrying; that the latter did so, but the said
copy was not returned to the plaintiff; that in spite of the fact that he went several
times to the lessor's house the defendant always avoided meeting him so that, before
the plaintiff had finished his negotiations for the renewal of the contract, the
defendant's caretaker of said properties, Juan de los Santos, notified the sublessee of
the said apartments that from the month of December, 1914, the rental of P325 should
be paid to the defendant and not to the plaintiff; that this was in fact done, the
sublessee refusing to pay the said rental to the plaintiff; that the plaintiff, therefore,
deposited the sum of P240, the rental price he was paying, in court and filed his
complaint in these proceedings.
As the plaintiff had no copy of the contract of lease, Exhibit 1, having left his with the
defendant — a statement which was not contradicted by the defense — the only proof
of the said contract is the copy furnished by the defendant himself. Said copy says that
the said lease shall be extendible at the will of the both parties. The plaintiff admitted
the genuineness of his signature to the lease contract and also the authenticity of
this document, with the exception of the words at the will of both parties
contained in the fourth paragraph thereof — these having been inserted by
someone without his knowledge and consent. In effect, the defendant's only
witness, the caretaker of the defendant's properties, testified that it was he who
inserted the said words at the will of both parties, adding them to the end of the
fourth paragraph after the document had already been executed and had been
certified to before the notary, through this witness furthermore said that the
plaintiff's copy also bore the same interlineation, and that it was made with the
plaintiff's knowledge and consent.
The words added at the end of the fourth paragraph are not initialed by the
person who wrote them, nor do they appear to have been written with the
concurrence of both parties, inasmuch as the signature of the persons affected but
the said change do not appear on the margin. The omission if contrary to the
custom usually observed in drawing up documents, for, when a written contract is
amended by inserting an addition or making any alteration by hand, the parties
should write their initials on the margin of the document opposite the place where
the amendment was made, or should mention it at the end of the document in
token of their consent. As this requisite was not complied with in the contract in
question it must be concluded that the amendment was made without the
plaintiff's consent. Therefore in the original and true contract stipulated between
the parties it was covenanted that the term of the lease should be that of one year,
counting from December 1, 1913, and that this term should be extendible. (Exhibit
1.)
According to article 1091 of the Civil Code, obligations arising from contracts have
legal force between the contracting parties and must be fulfilled in accordance
with their stipulations. Therefore, if the defendant bound himself to lease his
properties for the period of one year, which term should be extendible, it is
evident and strictly in accord with justice that the plaintiff-lessee has a right, at the
termination of the first period of one year, to have the said contract of lease
renewed in fulfillment of the stipulated extension of the term of the lease;
otherwise, the clause contained in the document Exhibit 1, that the lease at its
termination would be extendible, would be worthless.
The defendant-appellant is wrong in his contention that the renewal, or extension
of the contract depended solely upon himself, notwithstanding the stipulations
contained in said contract, inasmuch as the renewal and continuation of the lease
could not be left wholly to the plaintiff's free will, without counting on the
defendant's consent — a consent expressly granted in the promise that the term
would be extended, which term, although its duration was not fixed, should be
understood to be for another year, a period equal to and not greater than the
term of the lease.
When a contract of lease provides that the term thereof is extendible, the
agreement is understood as being in favor of the lessee, and the latter is
authorized to renew the contract and to continue to occupy the leased property,
after notifying the lessor to that effect. The lessor can withdraw from the said
contract only after having fulfilled his promise to grant the extension of time
stipulated therein, unless the lessee has failed to comply with or has violated the
conditions of the contract. It is not necessary that the extension be expressly
conceded by the lessor because the consented thereto in the original contract.
The plaintiff-lessee, therefore, had a right to continue to lease the defendant's two
apartments until November 30, 1915.
The fact that the plaintiff only paid the sum of P240 per month as rental for the
two accesorias and the bodega, and that he subleased these properties to the
Chinaman Yu Tek for the sum of P325 per month is unquestioned. The plaintiff-
lessee therefore made a net profit of P85 every month. The trial judge, taking this
sum as a basis, found that for the twelve months ending December 1, 1915, the
plaintiff had been injured in the amount of P1,020, the net value of the profits
which he was unable to collect through the fault of defendant and he therefore
ordered the latter to pay this amount to the plaintiff.
The foregoing facts lead to the conclusion that the lessor, Ongsiaco, violated the
fourth paragraph of the contract of lease by refusing to comply with the
agreement to extend the lease and, notwithstanding that the plaintiff in his
pleadings did not deny under oath the authenticity and due insertion in the
contract Exhibit 1 of the phrase at the will of both parties, yet the defendant in
allowing evidence to be presented at the trial with regard to whether the said
phrase at the will of both parties was written in the contract before or after the
document had been signed by the contracting parties and ratified by them before
the notary and as to whether they were inserted with the plaintiff's knowledge,
consented to the questions being submitted to the court and waived his right to claim
that the said phrase was written in the contract with the actual knowledge and consent
of the plaintiff lessee.
If the terms of a contract are clear and leave no doubt as to the intentions of the
contracting parties, the literal sense of its stipulations shall be observed. (Civ. Code, art.
1281.)
In order to judge as to the intention of the contracting parties, attention must
principally be paid to their acts, contemporaneous and subsequent to the contract. (Civ.
Code, art. 1282.)
The contracting parties agreed that Enrique Legarda Koh should lease the properties of
Lucio Ongsiaco for the term of one year and that this period should be extendible, as
the length of the extension was not fixed, it must be understood that the renewed
period should be for at least one year. The contracting parties stipulated that the one-
year period, at its expiration, might be extended as is so stated in the written contract,
and no reason has been advanced by the lessor to justify any failure to comply with the
said stipulation, to the lessee's detriment.
For the foregoing reasons, whereby the errors assigned to the judgment appealed from
are deemed to have been refuted, the said judgment should be, as it is hereby,
affirmed, with the costs against the appellant. So ordered.
Carson, Trent, and Araullo, JJ., concur.
G.R. No. 142896 September 12, 2007
CANELAND SUGAR CORPORATION, petitioners,
vs.
HON. REYNALDO M. ALON, LAND BANK OF THE PHILIPPINES, and ERIC B. DE VERA,
respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
On July 15, 1999, Caneland Sugar Corporation (petitioner) filed with the Regional Trial
Court (RTC) of Silay City, Branch 40, a complaint for damages, injunction, and nullity of
mortgage against the Land Bank of the Philippines (respondent) and Sheriff Eric B. de
Vera, docketed as Civil Case No. 2067-40, praying for the following reliefs: issuance of a
temporary restraining order enjoining respondent and the Sheriff from proceeding with
the auction sale of petitioner’s property; declaration of nullity of any foreclosure sale to
be held; declaration of nullity of the mortgage constituted over petitioner’s property
covered by TCT No. T-11292 in favor of respondent; and award of damages.1
On July 21, 1999, the RTC issued an Order holding in abeyance the auction sale set on
July 23, 1999, as agreed upon by the parties.2 Notwithstanding said directive, another
foreclosure sale was scheduled on October 15, 1999. Per RTC Order dated October 14,
1999, the October 15 scheduled sale was held in abeyance; but re-scheduled the sale
on November 15, 1999, for the following reasons:
However, P.D. 385 provides that it shall be mandatory for government financial
institution to foreclose collaterals and/or securities for any loan, credit
accommodations and/or guarantees granted by them whenever the arrearages on such
account, including accrued interest and other charges amount to at least 20% of the
total outstanding obligation as appearing in the books of the financial institution.
Moreover, no restraining order, temporary or permanent injunction shall be issued by
the court against any government financial institution in any action taken by such
institution in compliance with the mandatory foreclosure provided by said law. x x x
The defendant Land Bank of the Philippines and Eric B. De Vera, Sheriff of this Court,
are hereby authorized to proceed with the extrajudicial foreclosure sale on November
15, 1999.3
Petitioner filed a Motion for Reconsideration of the trial court’s Order, but this was
denied per Order dated November 8, 1999.4
Petitioner then filed with the Court of Appeals (CA) a Petition for Certiorari and
Prohibition with Injunction, docketed as CA-G.R. SP No. 56137. In a Decision5 dated
March 22, 2000, the CA, finding that the RTC did not commit any grave abuse of
discretion, denied due course and dismissed the petition for lack of merit.6 Petitioner
sought reconsideration of the Decision, which was eventually denied by the CA in a
Resolution dated April 17, 2000.7

Hence, the present Petition for Review on Certiorari under Rule 45 of the Rules of
Court.
Petitioner contends in the main that the RTC’s act of authorizing the foreclosure of
its property amounts to a prejudgment of the case since it amounts to a ruling
that respondent has a valid mortgage in its favor. Petitioner also argues, among
others, that Presidential Decree (P.D.) No. 385 is not applicable inasmuch as at the
time of the lease to Sunnix, Inc., the management and control of its operations has
already been virtually taken over by respondent.
On the other hand, respondent maintains that: P.D. No. 385 prohibits the issuance
of an injunctive order against government financial institutions; the CA did not
commit any grave abuse of discretion; the RTC Order merely dealt with the
propriety of the injunctive order and not the validity of the mortgage; and the
issue of the propriety of the injunctive order has been rendered moot and
academic by the foreclosure sale conducted and the issuance of a certificate of
sale by the sheriff.8
Based on the arguments of the parties, the principal issue is whether the CA erred
in finding that the RTC did not commit grave abuse of discretion in not enjoining
the extrajudicial foreclosure of the properties subject of this case.
Without first resolving the foregoing issue, the Court finds that the petition should
be denied for the sole reason that the act sought to be enjoined by petitioner is
already fait accompli. In Transfield Philippines, Inc. v. Luzon Hydro Corporation,9
the Court held that –
[I]njunction would not lie where the acts sought to be enjoined have already
become fait accompli or an accomplished or consummated act. In Ticzon v. Video
Post Manila, Inc. this Court ruled that where the period within which the former
employees were prohibited from engaging in or working for an enterprise that
competed with their former employer— the very purpose of the preliminary
injunction —has expired, any declaration upholding the propriety of the writ would
be entirely useless as there would be no actual case or controversy between the
parties insofar as the preliminary injunction is concerned.10
Records show that the foreclosure sale which petitioner sought to be enjoined by
the RTC has already been carried out by the Sheriff, and in fact, a Certificate of Sale
dated June 26, 2000 was issued to respondent.11 There is, therefore, no more
actual case or controversy between the parties insofar as the RTC’s refusal to
enjoin the sale is concerned, and any resolution by the Court of the impropriety or
propriety of the RTC’s refusal to issue any restraining or injunctive relief against
the foreclosure sale will serve no purpose but merely lend further addle to Civil
Case No. 2067-40 pending before the RTC.
Nevertheless, even if petitioner’s quest for the issuance of an injunctive relief has
been rendered moot and academic by the holding of the foreclosure sale and
issuance of Certificate of Sale, the Court finds it necessary to resolve the merits of
the principal issue raised for the future guidance of both bench and bar. As the
Court stated in Acop v. Guingona, Jr.,12 "courts will decide a question otherwise
moot and academic if it is ‘capable of repetition, yet evading review.’"
Petitioner does not dispute its loan obligation with respondent. Petitioner’s bone
of contention before the RTC is that the promissory notes are silent as to whether
they were covered by the Mortgage Trust Indenture and Mortgage Participation
on its property covered by TCT No. T-11292.13 It does not categorically deny that
these promissory notes are covered by the security documents. These vague
assertions are, in fact, negative pregnants, i.e., denials pregnant with the admission
of the substantial facts in the pleading responded to which are not squarely
denied. As defined in Republic of the Philippines v. Sandiganbayan,14 a negative
pregnant is a "form of negative expression which carries with it an affirmation or at
least an implication of some kind favorable to the adverse party. It is a denial
pregnant with an admission of the substantial facts alleged in the pleading. Where
a fact is alleged with qualifying or modifying language and the words of the
allegation as so qualified or modified are literally denied, has been held that the
qualifying circumstances alone are denied while the fact itself is admitted."
Petitioner’s allegations do not make out any justifiable basis for the granting of
any injunctive relief. Even when the mortgagors were disputing the amount being
sought from them, upon the non-payment of the loan, which was secured by the
mortgage, the mortgaged property is properly subject to a foreclosure sale. This is
in consonance with the doctrine that to authorize a temporary injunction, the
plaintiff must show, at least prima facie, a right to the final relief.15
The foregoing conclusion finds greater force in light of the provisions of P.D. No.
385,16 Section 1 of which, provides for a mandatory foreclosure, viz.:
Section 1. It shall be mandatory for government financial institutions, after the lapse of
sixty (60) days from the issuance of this Decree, to foreclose the collaterals and/or
securities for any loan, credit, accommodation, and/or guarantees granted by them
whenever the arrearages on such account, including accrued interest and other
charges, amount to at least twenty (20%) of the total outstanding obligations, including
interest and other charges, as appearing in the books of account and/or related records
of the financial institution concerned. This shall be without prejudice to the exercise by
the government financial institution of such rights and/or remedies available to them
under their respective contracts with their debtors, including the right to foreclose on
loans, credits, accommodations, and or guarantees on which the arrearages are less
than twenty percent (20%).
while Section 2 prohibits the issuance of restraining orders or injunctions against
government financial institutions in any foreclosure action taken by such institutions, to
wit:
Section 2. No restraining order, temporary or permanent injunction shall be issued by
the court against any government financial institution in any action taken by such
institution in compliance with the mandatory foreclosure provided in Section 1 hereof
whether such restraining order, temporary or permanent injunction is sought by the
borrower(s) or any third party or parties, except after due hearing in which it is
established by the borrower and admitted by the government financial institution
concerned that twenty percent (20%) of the outstanding arrearages had been paid
after the filing of foreclosure proceedings.
Petitioner cannot find any solace in its contention that the case of Filipinas Marble
Corporation v. Intermediate Appellate Court17 is applicable to the present case. In
Filipinas Marble, it was the DBP-imposed management of FMC that brought the
corporation to ruin, not to mention that there were prima facie findings of
mismanagement and misappropriation of the loan proceeds by DBP and Bancom.
Moreover, the liability of FMC for the loan, which was the basis of the mortgage being
foreclosed, was not yet settled. These circumstances prompted the Court to grant an
injunction against the foreclosure sale. The Court ruled –
x x x P.D. 385 was never meant to protect officials of government lending institutions
who take over the management of a borrower corporation, lead that corporation to
bankruptcy through mismanagement or misappropriation of its funds, and who, after
ruining it, use the mandatory provisions of the decree to avoid the consequences of
their misdeeds.
The designated officers of the government financing institution cannot simply walk
away and then state that since the loans were obtained in the corporation’s name, then
P.D. 385 must be peremptorily applied and that there is no way the borrower
corporation can prevent the automatic foreclosure of the mortgage on its properties
once the arrearages reach twenty percent (20%) of the total obligation no matter who
was responsible.18
In the case at bench, petitioner does not deny its liability. While petitioner alleged that
the management and control of its operations has already been virtually taken over by
respondent, thus, implying that it was respondent that caused petitioner's present
miserable financial state, this allegation is obviously merely an attempt to place itself
under the Filipinas Marble situation in order to preempt the operation of P.D. No. 385.
Petitioner’s claim is more appropriately threshed out and determined after trial on the
merits.
The Court likewise cannot sustain petitioner's argument that the RTC’s refusal to grant
any injunctive relief amounts to a prejudgment of the issues before it. The RTC’s sole
basis for allowing the foreclosure sale to proceed is P.D. No. 385. It did not make any
finding or disposition on the issue of the validity of the mortgage.
In any event, such issue of the validity of the mortgage, not to mention the issue of the
nullity of the foreclosure sale as well as petitioner’s prayer for damages, still has to be
resolved in the trial court.
As ruled in Philippine National Bank v. Court of Appeals,19 to wit:
In the instant case, aside from the principal action for damages, private respondent
sought the issuance of a temporary restraining order and writ of preliminary injunction
to enjoin the foreclosure sale in order to prevent an alleged irreparable injury to private
respondent. It is settled that these injunctive reliefs are preservative remedies for the
protection of substantive rights and interests. Injunction is not a cause of action in itself
but merely a provisional remedy, an adjunct to a main suit. When the act sought to be
enjoined ha[d] become fait accompli, only the prayer for provisional remedy
should be denied. However, the trial court should still proceed with the
determination of the principal action so that an adjudication of the rights of the
parties can be had.20 (Emphasis supplied)
WHEREFORE, the petition is DENIED.
Costs against petitioner.
SO ORDERED.
G.R. No. L-30771 May 28, 1984
LIAM LAW, plaintiff-appellee,
vs.
OLYMPIC SAWMILL CO. and ELINO LEE CHI, defendants-appellants.
Felizardo S.M. de Guzman for plaintiff-appellee.
Mariano M. de Joya for defendants-appellants.
MELENCIO-HERRERA, J.:
This is an appeal by defendants from a Decision rendered by the then Court of
First Instance of Bulacan. The appeal was originally taken to the then Court of
Appeals, which endorsed it to this instance stating that the issue involved was one
of law.
It appears that on or about September 7, 1957, plaintiff loaned P10,000.00, without
interest, to defendant partnership and defendant Elino Lee Chi, as the managing
partner. The loan became ultimately due on January 31, 1960, but was not paid on
that date, with the debtors asking for an extension of three months, or up to April
30, 1960.
On March 17, 1960, the parties executed another loan document. Payment of the
P10,000.00 was extended to April 30, 1960, but the obligation was increased by
P6,000.00 as follows:
That the sum of SIX THOUSAND PESOS (P6,000.00), Philippine currency shall form
part of the principal obligation to answer for attorney's fees, legal interest, and
other cost incident thereto to be paid unto the creditor and his successors in
interest upon the termination of this agreement.
Defendants again failed to pay their obligation by April 30, 1960 and, on
September 23, 1960, plaintiff instituted this collection case. Defendants admitted
the P10,000.00 principal obligation, but claimed that the additional P6,000.00
constituted usurious interest.
Upon application of plaintiff, the Trial Court issued, on the same date of
September 23, 1960, a writ of Attachment on real and personal properties of
defendants located at Karanglan, Nueva Ecija. After the Writ of Attachment was
implemented, proceedings before the Trial Court versed principally in regards to
the attachment.
On January 18, 1961, an Order was issued by the Trial Court stating that "after
considering the manifestation of both counsel in Chambers, the Court hereby
allows both parties to simultaneously submit a Motion for Summary Judgment. 1
The plaintiff filed his Motion for Summary Judgment on January 31, 1961, while
defendants filed theirs on February 2, 196l. 2
On June 26, 1961, the Trial Court rendered decision ordering defendants to pay
plaintiff "the amount of P10,000.00 plus the further sum of P6,000.00 by way of
liquidated damages . . . with legal rate of interest on both amounts from April 30,
1960." It is from this judgment that defendants have appealed.
We have decided to affirm.
Under Article 1354 of the Civil Code, in regards to the agreement of the parties
relative to the P6,000.00 obligation, "it is presumed that it exists and is lawful,
unless the debtor proves the contrary". No evidentiary hearing having been held, it
has to be concluded that defendants had not proven that the P6,000.00 obligation
was illegal. Confirming the Trial Court's finding, we view the P6,000.00 obligation
as liquidated damages suffered by plaintiff, as of March 17, 1960, representing loss of
interest income, attorney's fees and incidentals.
The main thrust of defendants' appeal is the allegation in their Answer that the
P6,000.00 constituted usurious interest. They insist the claim of usury should have been
deemed admitted by plaintiff as it was "not denied specifically and under oath". 3
Section 9 of the Usury Law (Act 2655) provided:
SEC. 9. The person or corporation sued shall file its answer in writing under oath to any
complaint brought or filed against said person or corporation before a competent
court to recover the money or other personal or real property, seeds or agricultural
products, charged or received in violation of the provisions of this Act. The lack of
taking an oath to an answer to a complaint will mean the admission of the facts
contained in the latter.
The foregoing provision envisages a complaint filed against an entity which has
committed usury, for the recovery of the usurious interest paid. In that case, if the
entity sued shall not file its answer under oath denying the allegation of usury, the
defendant shall be deemed to have admitted the usury. The provision does not apply
to a case, as in the present, where it is the defendant, not the plaintiff, who is alleging
usury.
Moreover, for sometime now, usury has been legally non-existent. Interest can now be
charged as lender and borrower may agree upon. 4 The Rules of Court in regards to
allegations of usury, procedural in nature, should be considered repealed with
retroactive effect.
Statutes regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. 5
... Section 24(d), Republic Act No. 876, known as the Arbitration Law, which took effect
on 19 December 1953, and may be retroactively applied to the case at bar because it is
procedural in nature. ... 6
WHEREFORE, the appealed judgment is hereby affirmed, without pronouncement as to
costs.
SO ORDERED.
G.R. No. 187487 June 29, 2015
GO TONG ELECTRICAL SUPPLY CO., INC. and GEORGE C. GO, Petitioners,
vs.
BPI FAMILY SAVINGS BANK, INC., substituted by PHILIPPINE INVESTMENT ONE [SPV-
AMC], INC.,* Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated February 17,
2009 and the Resolution3 dated April 13, 2009 of the Court of Appeals (CA) in CA-G.R.
CV No. 86749 which affirmed the Decision 4 dated September 6, 2005 of the Regional
Trial Court of Makati City, Branch 143 (RTC) in Civil Case No. 02-1203, an action for
collection of sum of money, rendered in favor of respondent BPI Family Savings Bank,
Inc. (respondent).
The Facts
On October 4, 2002, respondent filed a complaint5against petitioners Go Tong
Electrical Supply Co., Inc. (Go Tong Electrical) and its President, George C. Go (Go;
collectively petitioners), docketed as Civil Case No. 02-1203, seeking that the latter be
held jointly and severally liable to it for the payment of their loan obligation in the
aggregate amount of ₱87,086,398.71, inclusive of the principal sum, interests, and
penalties as of May 28, 2002, as well as attorney’s fees, litigation expenses, and costs of
suit.6 As alleged by respondent as early as 1996, Go Tong Electrical had applied for and
was granted financial assistance by the then Bank of South East Asia (BSA).
Subsequently, DBS7 Bank of the Philippines, Inc. (DBS) became the successor in interest
of BSA. The application for financial assistance was renewed on January 6, 1999
through a Credit Agreement.8 On even date, Go Tong Electrical, represented by Go,
among others, obtained a loan from DBS in the principal amount of ₱40,491,051.65, for
which Go Tong Electrical executed Promissory Note No. 82-91-00176-79 (PN) for
the same amount in favor of DBS, maturing on February 5, 200010 Under the PN’s
terms, Go Tong Electrical bound itself to pay a default penalty interest at the rate
of one percent (1%) per month in addition to the current interest rate,11 as well as
attorney’s fees equivalent to twenty-five percent (25%) of the amount sought to
be recovered.12 As additional security, Go executed a Comprehensive Surety
Agreement13 (CSA) covering any and all obligations undertaken by Go Tong
Electrical, including the aforesaid loan.14 Upon default of petitioners, DBS – and
later, its successor-in-interest, herein respondent15 – demanded payment from
petitioners,16 but to no avail,17 hence, the aforesaid complaint.
In their Answer with Counterclaim18 (Answer), petitioners merely stated that they
"specifically deny" 19 the allegations under the complaint. Of particular note is
their denial of the execution of the loan agreement, the PN, and the CSA "for
being self-serving and pure conclusions intended to suit [respondent's]
purposes."20 By way of special and affirmative defenses, petitioners argued,
among others, that: (a) the real party-in-interest should be DBS and not
respondent; (b) no demand was made upon them; and (c) Go cannot be held liable
under the CSA since there was supposedly no solidarity of debtors.21 Petitioners
further interposed counterclaims for the payment of moral and exemplary
damages, as well as litigation and attorney's fees in the total amount of
₱1,250,000.00.22During trial, respondent presented Ricardo 0. Suñio23 (Suñio ),
the Account Officer handling petitioners' loan accounts, as its witness. Sunio
attested to the existence of petitioners' loan obligation in favor of respondent, 24
and identified a Statement of Account25 which shows the amount due as of June
16, 2004 as follows:
SUMMARY
PRINCIPAL ₱40,491,051.65
PAST DUE INTEREST ₱31,437,800.28
PENALTY ₱47,473,042.27
SUB-TOTAL ₱119,401,894.20
PLUS
UNPAID INTEREST ₱1,805,507.21
UNPAID PENALTY ₱1,776,022.80
SUB-TOTAL ₱122,983,424.21
LESS: PAYMENTS -1,877,286.08
121,106,138.1326
On cross-examination, Suñio nonetheless admitted that he had no knowledge of
how the PN was prepared, executed, and signed, nor did he witness its signing27
For their part, petitioners presented Go Tong Electrical's Finance Officer, Jocelyn
Antonette Lim, who testified that Go Tong Electrical was able to pay its loan, albeit
partially. However, she admitted that she does not know how much payments
were made, nor does she have a rough estimate thereof, as these were allegedly
paid for in dollars.28
The RTC Ruling
In a Decision29 dated September 6, 2005, the RTC ruled in favor of respondent,
thereby ordering petitioners to jointly and severally pay the former: (a) the
principal sum of ₱40,491,051.65, with legal interest to be reckoned from the filing
of the Complaint; ( b) penalty interest of one percent (1 %) per month until the
obligation is fully paid; and (c) attorney's fees in the sum of ₱50,000.00.30
It found that respondent had amply demonstrated by competent evidence that it
was entitled to the reliefs it prayed for. Particularly, respondent's documentary
evidence - the authenticity of which the RTC observed to be undisputed - showed
the existence of petitioners' valid and demandable obligation. On the other hand,
petitioners failed to discharge the burden of proving that they had already paid
the same, even partially. 31 Further, the RTC debunked petitioners' denial of the
demands made by respondent since, ultimately, the Credit Agreement, PN, and
CSA clearly stated that no demand was needed to render them in default.32
Likewise, the argument that Go could not be held solidarily liable was not
sustained since he bound himself as a surety under the CSA, which was executed
precisely to induce respondent's predecessor-in-interest, DBS, to grant the loan.
33 Separately, the RTC found the penalty interest at three percent (3%) per month
sought by respondent to be patently iniquitous and unconscionable and thus, was
reduced to twelve percent(12%) per annum, or one percent (1 %) per month.
Attorney's fees were also tempered to the reasonable amount of ₱50,000.00.34
Unconvinced, petitioners appealed35 to the CA.
The CA Ruling
In a Decision36 dated February 17, 2009, the CA sustained the RTC's ruling in toto,
finding the following facts to be beyond cavil: (a) that Go Tong Electrical applied for
and was granted a loan accommodation from DBS in the amount of ₱40,491,051.65
after the execution of the Credit Agreement and the PN dated January 6, 1999,
maturing on February 5, 2000; (b) that as additional security, Go executed the CSA
binding himself jointly and severally to pay the obligation of Go Tong Electrical; and (c)
that petitioners failed to pay the loan obligation upon maturity, despite written
demands from then DBS, now, herein respondent.37 In this relation, the CA discredited
petitioners' argument that respondent's sole witness, Suñio, was incompetent to testify
on the documentary evidence presented as he had no personal knowledge of the loan
documents' execution,38 given that petitioners, in their Answer, did not deny under
oath the genuineness and due execution of the PN and CSA and, hence, are deemed
admitted under Section 8, Rule 8 of the Rules of Court (Rules).39 Besides, the CA
observed that, despite the aforesaid admission, respondent still presented the
testimony of Suñio who, having informed the court that the loan documents were in his
legal custody as the designated Account Officer when DBS merged with herein
respondent, had personal knowledge of the existence of the loan documents. 40 It
added that, although he was not privy to the execution of the same, it does not
significantly matter as their genuineness and due execution were already admitted.41
Petitioners filed a motion for reconsideration,42 which was, however, denied in a
Resolution43 dated April 13, 2009, hence, this petition.
The Issue Before The Court
The issue for the Court's resolution is whether or not the CA erred in upholding the
RTC's ruling.
The Court's Ruling
The petition lacks merit. The Court concurs with the CA Decision holding that the
genuineness and due execution of the loan documents in this case were deemed
admitted by petitioners under the parameters of Section 8, Rule 8 of the Rules which
provides:
SEC. 8. How to contest such documents. - When an action or defense is founded upon
a written instrument, copied in or attached to the corresponding pleading as provided
in the preceding Section, the genuineness and due execution of the instrument shall be
deemed admitted unless the adverse party, under oath, specifically denies them, and
sets forth what he claims to be the facts; but the requirement of an oath does not apply
when the adverse party does not appear to be a party to the instrument or when
compliance with an order for an inspection of the original instrument is refused.
A reading of the Answer shows that petitioners failed to specifically deny the execution
of the Credit Agreement, PN, and CSA under the auspices of the above-quoted rule.
The mere statement in paragraph 4 of their Answer, i.e., that they "specifically deny"
the pertinent allegations of the Complaint "for being self-serving and pure conclusions
intended to suit plaintiffs purposes,"44 does not constitute an effective specific denial
as contemplated by law.45 Verily, a denial is not specific simply because it is so
qualified by the defendant. Stated otherwise, a general denial does not become specific
by the use of the word "specifically."46 Neither does it become so by the simple
expedient of coupling the same with a broad conclusion of law that the allegations
contested are "self-serving" or are intended "to suit plaintiffs purposes."
In Permanent Savings & Loan Bank v. Velarde47 (Permanent Savings & Loan Bank),
citing the earlier case of Songco v. Sellner,48 the Court expounded on how to deny the
genuineness and due execution of an actionable document, viz.:
This means that the defendant must declare under oath that he did not sign the
document or that it is otherwise false or fabricated. Neither does the statement of the
answer to the effect that the instrument was procured by fraudulent representation
raise any issue as to its genuineness or due execution. On the contrary such a plea is
an- admission both of the genuineness and due execution thereof, since it seeks to
avoid the instrument upon a ground not affecting either.49
To add, Section 8, Rule 8 of the Rules further requires that the defendant "sets forth
what he claims to be the facts," which requirement, likewise, remains absent from the
Answer in this case.
Thus, with said pleading failing to comply with the "specific denial under oath"
requirement under Section 8, Rule 8 of the Rules, the proper conclusion, as arrived at
by the CA, is that petitioners had impliedly admitted the due execution and
genuineness of the documents evidencing their loan obligation to respondent.
To this, case law enlightens that "[t]he admission of the genuineness and due execution
of a document means that the party whose signature it bears admits that he
voluntarily signed the document or it was signed by another for him and with his
authority; that at the time it was signed it was in words and figures exactly as set
out in the pleading of the party relying upon it; that the document was delivered;
and that any formalities required by law, such as a seal, an acknowledgment, or
revenue stamp, which it lacks, are waived by him. Also, it effectively eliminated any
defense relating to the authenticity and due execution of the document, e.g., that
the document was spurious, counterfeit, or of different import on its face as the
one executed by the parties; or that the signatures appearing thereon were
forgeries; or that the signatures were unauthorized."50
Accordingly, with petitioners' admission of the genuineness and due execution of
the loan documents as above-discussed, the competence of respondent's witness
Suñio to testify in order to authenticate the same is therefore of no moment. As
the Court similarly pointed out in Permanent Savings & Loan Bank, "[w]hile Section
[20],51 Rule 132 of the [Rules] requires that private documents be proved of their
due execution and authenticity before they can be received in evidence, i.e.,
presentation and examination of witnesses to testify on this fact; in the present
case, there is no need for proof of execution and authenticity with respect to the
loan documents because of respondent's implied admission thereof."52
The Court clarifies that while the "[ f]ailure to deny the genuineness and due
execution of an actionable document does not preclude a party from arguing
against it by evidence of fraud, mistake, compromise, payment, statute of
limitations, estoppel and want of consideration [nor] bar a party from raising the
defense in his answer or reply and prove at the trial that there is a mistake or
imperfection in the writing, or that it does not express the true agreement of the
parties, or that the agreement is invalid or that there is an intrinsic ambiguity in
the writing,"53 none of these defenses were adequately argued or proven during
the proceedings of this case.
Of particular note is the affirmative defense of payment raised during the
proceedings a quo. While petitioners insisted that they had paid, albeit partially,
their loan obligation to respondent, the fact of such payment was never
established by petitioners in this case. Jurisprudence abounds that, in civil cases,
one who pleads payment has the burden of proving it; the burden rests on the
defendant, i.e., petitioners, to prove payment, rather than on the plaintiff, i.e.,
respondent, to prove non-payment. When the creditor is in possession of the
document of credit, proof of non-payment is not needed for it is presumed. 54
Here, respondent's possession of the Credit Agreement, · PN, and CSA, especially
with their genuineness and due execution already having been admitted, cements
its claim that the obligation of petitioners has not been extinguished. Instructive
too is the Court's disquisition in Jison v. CA55 on the evidentiary burdens
attendant in a civil proceeding, to wit:
Simply put, he who alleges the affirmative of the issue has the burden of proof,
and upon the plaintiff in a civil case, the burden of proof never parts. However, in
the course of trial in a civil case, once plaintiff makes out a prima facie case in his
favor, the duty or the burden of evidence shifts to defendant to controvert
plaintiffs prima facie case, otherwise, a verdict must be returned in favor of
plaintiff. Moreover, in civil cases, the party having the burden of proof must
produce a preponderance of evidence thereon, with plaintiff having to rely on the
strength of his own evidence and not upon the weakness of the defendant's. The
concept of "preponderance of evidence" refers to evidence which is of greater
weight, or more convincing, that which is offered in opposition to it; at bottom, it
means probability of truth.56
Finally, the Court finds as untenable petitioners' theory on Go's supposed non-
liability. As established through the CSA, Go had clearly bound himself as a surety
to Go Tong Electrical's loan obligation. Thus, there is no question that Go's liability
thereto is solidary with the former. As provided in Article 204757 of the Civil Code,
"the surety undertakes to be bound solidarily with the principal obligor. That
undertaking makes a surety agreement an ancillary contract as it presupposes the
existence of a principal contract. Although the contract of a surety is in essence
secondary only to a valid principal obligation, the surety becomes liable for the
debt or duty of another although it possesses no direct or personal interest over
the obligations nor does it receive any benefit therefrom. Let it be stressed that
notwithstanding the fact that the surety contract is secondary to the principal
obligation, the surety assumes liability as a regular party to the undertaking,"58 as
Go in this case.
However, while petitioners' liability has been upheld in this case, the Court finds it
proper to modify the RTC's ruling, as affirmed by the CA, with respect to the
following:
First, the partial payment made by Go Tong Electrical on June 16, 2004 in the amount
of ₱1,877,286.08, as admitted by respondent through a Statement of Account,59
formally offered as Exhibit "G" and duly identified by Suñio during trial, should be
deducted from the principal amount of ₱40,491,05 l .65 due respondent.
Second, with respect to the interests and penalties:
(a) petitioners should be held liable for the twenty percent (20%) per annum stipulated
interest rate reckoned 31 days from January 6, 1999, as agreed upon in the PN,60 until
its maturity date on February 5, 2000, which period is regarded as the initial period in
said PN. Said interest rate should be upheld as this was stipulated by the parties, and
the rate cannot be considered unconscionable.61 The same shall be computed based
on the entire principal amount due, i.e., ₱40,491,05 l.65, since the records disclose that
the admitted partial payment of Pl,877,286.08 was still unpaid before the complaint
was filed on October 4, 2002,62 or before the February 5, 2000 maturity date; and
(b) the reduced interest rate of one percent (1%) per month and penalty rate of one
percent (1%) per month are upheld,63 but should accrue from the PN's February 5,
2000 maturity date64 until June 16, 2004, or the date when the partial payment of
₱1,877,286.08 has been made by Go Tong Electrical, and computed based on the entire
principal amount of ₱40,491,051.65. Interest and penalty, at the same reduced rate, due
thereafter (i.e., from June 17, 2004 until full payment) shall be computed based on the
net amount of ₱38,613,765.57 (i.e., the amount arrived at after deducting the partial
payment of ₱1,877,286.08 from the principal amount of ₱40,491,051.65).
WHEREFORE, the petition is DENIED. The Decision dated February 17, 2009 and the
Resolution dated April 13, 2009 of the Court of Appeals in CA-G.R. CV No. 86749 are
hereby AFFIRMED with the above-stated MODIFICATIONS.
SO ORDERED.
G.R. No. 194548, February 10, 2016
JUANA VDA. DE ROJALES, SUBSTITUTED BY HER HEIRS, REPRESENTED BY CELERINA
ROJALES-SEVILLA, Petitioner, v. MARCELINO DIME, SUBSTITUTED BY HIS HEIRS,
REPRESENTED BY BONIFACIA MANIBAY, Respondent.
DECISION
PERALTA, J.:
Challenged and sought to be set aside in this petition for review on certiorari dated
December 9, 2010 of petitioner Juana Vda. de Rojales, substituted by her heirs Celerina
Rojales, Reynaldo Rojales, Pogs Rojales, Olive Rojales and Josefina Rojales is the
Decision1 dated August 16, 2010 of the Court of Appeals (CA), as reiterated in its
Resolution2 dated November 15, 2010 in CA-G.R. CV No. 92228, reversing and setting
aside the Decision3 dated May 7, 2008 of the Regional Trial Court (RTC) of Nasugbu,
Batangas, Branch 14, which dismissed the petition for the consolidation of ownership
and title over Lot 4-A covered by Transfer Certificate of Title (TCT) No. T-55726 in the
name of the respondent Marcelino Dime.
The antecedents are as follows:
Petitioner Juana Vda. de Rojales owned a parcel of land (Lot 4-A) located at Barrio
Remanente, Municipality of Nasugbu, Batangas consisting of 2,064 square meters
covered by TCT No. T-55726.4chanroblesvirtuallawlibrary
In a petition dated May 30, 2000 filed before the RTC of Nasugbu, Batangas, Branch 14,
respondent Marcelino Dime alleged that on May 16, 1999, petitioner conveyed under a
pacto de retro contract Lot 4-A in favor of respondent for and in consideration of the
sum of P2,502,932.10.5 Petitioner reserved the right to repurchase the property for the
same price within a period of nine (9) months from March 24, 1999 to December 24,
1999.6 Despite repeated verbal and formal demands to exercise her right, petitioner
refused to exercise her right to repurchase the subject
property.7chanroblesvirtuallawlibrary
In her answer, petitioner denied the execution of the pacto de retro sale in favor of
respondent and alleged that she had not sold the subject property.8 She claimed that
the document presented by respondent was falsified since the fingerprint appearing
therein was not hers and the signature of the Notary Public Modesto S. Alix was not
his.9 She also averred that she filed falsification and use of falsified documents charges
against respondent.10chanroblesvirtuallawlibrary
In her sworn statement attached to her Answer, petitioner alleged that she
mortgaged the subject property with the Batangas Savings and Loan Bank for
P100,000.00 when her daughter Violeta Rojales Rufo needed the money for
application of overseas work; Antonio Barcelon redeemed the property and paid
P260,000.00 for the debt plus the unpaid interest with the bank; when Barcelon
entered the mayoralty race, he demanded payment of the debt, then mortgaged
the title of the subject property with respondent; and the signatures appearing in
the documents were falsified.11chanroblesvirtuallawlibrary
During the pre-trial, the parties agreed that petitioner is the registered owner of
the subject property, and that she once mortgaged the property with the Batangas
Savings & Loan Bank in order to secure a loan of P200,000.00 from the bank.12
They also submitted the following issues for resolution: whether the pacto de retro
sale was executed by petitioner; whether the consideration of the sale has been
paid to petitioner; and whether the contract of sale con pacto de retro is
genuine.13chanroblesvirtuallawlibrary
Upon the joint motion of the parties, the RTC issued an Order dated November 16,
2000 directing the questioned thumbmark be referred to the fingerprint expert of
the National Bureau of Investigation (NBI) to determine whether the thumbmark
appearing in the pacto de retro contract and the specimen thumbmark of the
petitioner are the same.14chanroblesvirtuallawlibrary
On April 16, 2001, the NBI submitted a copy of Dactyloscopic Report FP Case No.
2000-349 by Fingerprint Examiner Eriberto B. Gomez, Jr. to the court. It was
concluded therein that the questioned thumbmark appearing on the original-
duplicate copy of the notarized pacto de retro sale and the standard right
thumbmark, taken by Police Officer Marcelo Quintin Sosing, were impressed by
and belong to the same person, the petitioner.15chanroblesvirtuallawlibrary
Respondent passed away on June 22, 2002 before the trial on the merits of the
case ensued. Being his compulsory heirs, respondent's estranged wife Bonifacia
Dime and their children Cesario Antonio Dime and Marcelino Dime, Jr., substituted
him in the suit.16chanroblesvirtuallawlibrary
On July 11, 2006, the heirs of respondent filed a Manifestation and Motion to
Dismiss the Complaint on the ground that it was Rufina Villamin, respondent's
common law wife, who was the source of the fund in purchasing Lot 4-A.17 They
alleged that the consolidation of ownership and title to respondent would be
prejudicial to Villamin and would unjustly enrich them.18 Consequently, the RTC,
through Judge Christino E. Judit, in an Order dated July 12, 2006, dismissed the
case with prejudice on the ground that the case was not filed by an indispensable
party, Villamin.19chanroblesvirtuallawlibrary
However, on August 2, 2006, Atty. Pedro N. Belmi, the counsel of respondent, filed
a Motion for Reconsideration praying to set aside the dismissal with prejudice on
the ground that Villamin and the daughters of petitioner, Manilyn Rojales Sevilla
and Olivia Rojales, tricked and manipulated the respondent's widow and her
children to affix their signatures on the motion to dismiss.20 Atty. Belmi insisted
that the RTC erred in giving credence to the motion without his verification that
the motion was indeed freely and voluntarily executed by the
parties.21chanroblesvirtuallawlibrary
Feeling that the respondent's counsel already lost his trust and confidence to his
impartiality and lack of bias to resolve the case, Judge Judit inhibited himself from
the case on January 25, 2007 without waiting for the petitioner to file a motion for
inhibition against him.22 This Court designated Judge Wilfredo De Joya Mayor to
replace Judge Judit.23chanroblesvirtuallawlibrary
In an Order dated October 25, 2007, Judge Mayor set aside the order of dismissal
of the case and set the hearing for further reception of
evidence.24chanroblesvirtuallawlibrary
Thereafter, the RTC ruled in favor of the petitioner. The court a quo ratiocinated
that it is a clear mistake to rule on the merits of the case knowing that such was
not filed by the indispensable party, hence, the judgment will be void.25 The RTC
considered the unverified motion for reconsideration filed by Atty. Belmi as an
unsigned pleading.26 It further held that the manifestation and motion to dismiss
deserved the presumption of validity since there was no sufficient proof that the
compulsory heirs who substituted respondent were made to sign such motion
without knowing its content.27 The fallo of the decision
reads:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the above-captioned case is hereby DISMISSED
for utterly lack of merit.
SO ORDERED.28chanroblesvirtuallawlibrary
Aggrieved, respondent assailed the decision before the CA. In a Decision dated August
16, 2010, the CA reversed and set aside the decision of the RTC. The dispositive portion
of the decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the instant appeal is GRANTED and the herein
assailed Decision of the trial court dated May 7, 2008 is hereby REVERSED and SET
ASIDE. Accordingly, judgment is hereby rendered ordering the consolidation of
ownership over the property (Lot 4-A) covered by TCT No. T-55726 in the name of the
vendee a retro Marcelino Dime.
SO ORDERED.29chanroblesvirtuallawlibrary
The CA rejected the ruling of the court a quo that Villamin was an indispensable party.
It ruled that the person who provided the funds for the purchase of the property is not
considered as an indispensable party in a case of consolidation of title filed by
respondent, the vendee, in whose favor the petitioner sold the subject property under
the contract of sale con pacto de retro.30chanroblesvirtuallawlibrary
Upon the denial of her Motion for Reconsideration by the CA, petitioner filed the
instant petition raising the following issues:ChanRoblesVirtualawlibrary
THE HONORABLE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO THIS
APPEAL DESPITE THE MANIFESTATION OF THE HEIRS OF MARCELINO DIME TO
DISMISS THE CASE.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISREGARDED THE NECESSITY
OF VERIFICATION OF THE RESPONDENTS IN THE MOTION FOR RECONSIDERATION
FILED BEFORE THE REGIONAL TRIAL COURT.
THE HONORABLE COURT OF APPEALS ERRED IN ALLOWING THE CONSOLIDATION OF
THE TITLE DESPITE THE MANIFESTATION AND ADMISSION OF THE RESPONDENTS
THAT CONTINUING SO WOULD CONSTITUTE UNJUST ENRICHMENT.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT RULED THAT THE PETITIONERS
FAILED TO OVERCOME THE PRESUMPTION OF REGULARITY OF THE SUBJECT PACTO
DE RETRO SALE.
This Court finds the instant petition devoid of merit.
Bisecting the first and third issues, this Court notes that the petitioner basically argues
that the CA erred in ordering the consolidation of ownership and title in the name of
respondent Dime since his heirs have filed a motion to dismiss which admitted therein
that a ruling of the trial court in respondent's favor is tantamount to unjust enrichment
considering that Villamin provided the funds for the purchase of the subject property.
Relying on the principle that the client has the exclusive control of the cause of action
on the claim or demand sued upon, petitioner insists that the filing of the
manifestation reflected the intention of the heirs of respondent to enter into a
settlement with the petitioner.31chanroblesvirtuallawlibrary
Settled is the rule that a client has an undoubted right to settle her litigation without
the intervention of the attorney, for the former is generally conceded to have exclusive
control over the subject matter of the litigation and may at anytime, if acting in good
faith, settle and adjust the cause of action out of court before judgment, even without
the attorney's intervention.32chanroblesvirtuallawlibrary
While we agree with the petitioner that the heirs, as the client, has the exclusive control
over the subject matter of litigation and may settle the case without the attorney's
intervention, we deny the rationale of the filing of the motion to dismiss by the heirs. It
was alleged that they would be unjustly enriched should the court order the
consolidation of the title of Lot 4-A in the name of respondent since the source of the
consideration was Villamin, respondent's common-law wife.
As relevant to the case at bar, Articles 1311 and 1607 of the Civil Code
provide:ChanRoblesVirtualawlibrary
Article 1311. Contracts take effect only between the parties, their assigns and heirs,
except in case where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by provision of law. The heir is not
liable beyond the value of the property he received from the decedent.
If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a
third person. (Emphasis supplied).
xxxx
Article 1607. In case of real property, the consolidation of ownership in the vendee
by virtue of the failure of the vendor to comply with the provisions of article 1616
shall not be recorded in the Registry of Property without a judicial order, after the
vendor has been duly heard.
We have consistently held that the parties to a contract are the real parties-in-
interest in an action upon it.33 The basic principle of relativity of contracts is that
contracts can only bind the parties who entered into it, and cannot favor or
prejudice a third person, even if he is aware of such contract and has acted with
knowledge thereof.34 Hence, one who is not a party to a contract, and for whose
benefit it was not expressly made, cannot maintain an action on it.35 One cannot
do so, even if the contract performed by the contracting parties would incidentally
inure to one's benefit.36chanroblesvirtuallawlibrary
As evidenced by the contract of Pacto de Retro sale,37 petitioner, the vendor,
bound herself to sell the subject property to respondent, the vendee, and reserved
the right to repurchase the same property for the same amount within a period of
nine (9) months from March 24, 1999 to December 24, 1999.38 Therefore, in an
action for the consolidation of title and ownership in the name of vendee in
accordance with Article 161639 of the Civil Code, the indispensable parties are the
parties to the Pacto de Retro Sale - the vendor, the vendee, and their assigns and
heirs.
Villamin, as the alleged source of the consideration, is not privy to the contract of
sale between the petitioner and the respondent. Therefore, she could not maintain
an action for consolidation of ownership and title of the subject property in her
name since she was not a party to the said contract.
Where there is no privity of contract, there is likewise no obligation or liability to
speak about.40 This Court, in defining the word "privy" in the case of Republic vs.
Grijaldo41 said that the word privy denotes the idea of succession, thus, he who by
succession is placed in the position of one of those who contracted the judicial
relation and executed the private document and appears to be substituting him in
the personal rights and obligation is a privy.42chanroblesvirtuallawlibrary
For not being an heir or an assignee of the respondent, Villamin did not substitute
respondent in the personal rights and obligation in the pacto de retro sale by
succession. Since she is not privy to the contract, she cannot be considered as
indispensable party in the action for consolidation of title and ownership in favor
of respondent. A cursory reading of the contract reveals that the parties did not
clearly and deliberately confer a favor upon Villamin, a third person.
Petitioner alleges that the consolidation of the title should not be allowed since
the heirs admitted that they would be unjustly enriched, Villamin being the source
of the fund used for the purchase of the subject
property.43chanroblesvirtuallawlibrary
Unjust enrichment exists when a person unjustly retains a benefit at the loss of
another, or when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience.44 The prevention
of unjust enrichment is a recognized public policy of the State, as embodied in
Article 22 of the Civil Code which provides that "[e]very person who through an act
of performance by another, or any other means, acquires or comes into possession
of something at the expense of the latter without just or legal ground, shall return
the same to him."45chanroblesvirtuallawlibrary
This Court notes that the RTC relied on the bare assertions of the heirs in
dismissing the case with prejudice. The records are bereft of evidence to support
the allegation that Villamin has indeed provided the consideration. Not being a
privy to the pacto de retro sale, Villamin cannot be considered to have been
prejudiced with the consolidation of title in respondent's name. Assuming
arguendo that she was indeed the source of the consideration, she has a separate
cause of action against respondent. The legal obligation of respondent to her is
separate and distinct from the contract of sale cow pacto de retro, thus, the award
of consolidation of title in her name would be untenable.
Anent the issue on verification, Section 4, Rule 7 of the Rules of Court provides as
follows:ChanRoblesVirtualawlibrary
Sec. 4. Verification. - Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on
authentic records.
We do not agree with petitioner's assertion that the motion for reconsideration should
not have been allowed since the respondent failed to pose a reasonable explanation on
the absence of verification.
Time and again, we have said that non-compliance with verification or a defect therein
does not necessarily render the pleading fatally defective.46 Verification, like in most
cases required by the rules of procedure, is a formal requirement, not jurisdictional.47 It
is mainly intended to secure an assurance that matters which are alleged are done in
good faith or are true and correct and not of mere speculation.48 Thus, when
circumstances so warrant, "the court may simply order the correction of unverified
pleadings or act on it and waive strict compliance with the rules in order that the ends
of justice may thereby be served."49chanroblesvirtuallawlibrary
The RTC waived the strict compliance for verification when it acted on the motion for
reconsideration in the interest of justice and equity and allowed the further reception
of evidence. Therefore, it is erroneous to dismiss the case based on the non-
compliance of verification. As discussed earlier, Villamin is not privy to the pacto de
retro sale between the petitioner and the respondent. Hence, the case should not have
been dismissed because Villamin is not an indispensable party in an action for
consolidation of ownership and title emanating from the contract of pacto de retro
sale.
Petitioner's allegation that respondent should have executed affidavits in denying what
was written in the manifestation and motion to dismiss based on Rule 8, Section 850 of
the Rules of Court is unfounded. Such rule is applicable in contesting an action or
defense based on a written instrument or document copied or attached to the
pleading. In the case at bar, it is the motion to dismiss that is being contested and not
a written instrument or document which an action or defense is based on.
Petitioner avers that the CA erred in relying on the NBI Fingerprint Examination. She
alleges that the opinion of one claiming to be an expert is not binding upon the court.
There is nothing on record that would compel this Court to believe that said witness,
Fingerprint Examiner Gomez, has improper motive to falsely testify against the
petitioner nor was his testimony not very certain. His testimony is worthy of full faith
and credit in the absence of evidence of an improper motive. His straightforward and
consistent testimonies bear the earmarks of credibility.
Gomez testified during direct and cross examination, the process of examination of the
fingerprints and his conclusion:51chanroblesvirtuallawlibrary
ATTY: BELMI:
Q:
Will you kindly tell the court what was the result of your examination?
A:
After having thorough examination, comparison and analysis, the thumbmark
appearing on the [Pacto] de Retro and the right thumbmark appearing on the original
copy of PC/INP Fingerprint form taken by SPO3 Marcelo Quintin Sosing were
impressed by one and the same person.
xxxx
Q:
How do you go about this comparison to determine whether that thumbmark were
impressed by the same person?
A:
We must locate the three elements of comparing, the number 1 is type of fingerprint
pattern.
xxxx
A:
There are three elements, after knowing the fingerprint pattern and they are of the
same fingerprint the next step is to know the flow of the rages of the fingerprint
pattern or the shape.
xxxx
Q:
Then what is next?
A:
After number 2, the last is the most important one because you must locate the
number of ridges of characteristics and their relationship with each other because it is
the basis of identification of the fingerprint.
Q:
Meaning the description of the ridges?
A:
Yes, sir, the identification features appearing on the fingerprint.
Q:
What did you see? she never really sold the property a retro to anybody. That is the property covered by
A: Transfer Certificate of Title. That is at presently subject of the complaint.
I found that there were 13 identical points to warrant the positive identification.
Q: COURT:
[Those] 13 points [are] more than enough to determine whether those
thumbmark[s] [are] done by one and the same person? How about the documents which was turned out to be tampered?
A:
Yes, sir. ATTY. SALANGUIT:
xxxx
Q: Your honor, I understand that based on the records of the case[,] (petitioner's] counsel
Where did you base your conclusion that the thumbprint on the Pacto de Retro has already found himself to be bound by the result of the NBI investigation. Actually,
Sale over and above the name Juana Vda. de Rojales is genuine thumbprint of the your honor, there is no more issue about the authenticity and genuineness of the
same person? thumbmark of the defendant, so what we only prove today is that the defendant never
A: really intentionally sold the property to anybody.
Well, we only respon[d]ed to the request of the court to compare with the
thumbprint appearing on the Pacto de Retro Sale to that of the fingerprint ATTY. BELMI:
appearing on the thumbprint form.
Q: With that manifestation, we will allow the defendant, in the interest of justice.
You mean to say you were provided with the standard fingerprint of the subject?
A: xxx
Yes. sir. The CA ruled that the presumption of regularity accorded to a public document must
xxxx stand in the presence of the evidence showing that the thumbmark in the contract
COURT: belongs to the petitioner, and due to her failure to present clear and convincing
Q: evidence to overcome such legal presumption.
Now, with this photograph blown-up, you have here 13 points, will you please
explain to the court how these 13 points agree from that standard to that Settled is the rule that generally, a notarized document carries the evidentiary weight
questioned document? conferred upon it with respect to its due execution, and documents acknowledged
A: before a notary public have in their favor the presumption of regularity.55 In other
I found 2x4 bifurcation, it means that single rage splitting into two branches. words, absent any clear and convincing proof to the contrary, a notarized document
Q: enjoys the presumption of regularity and is conclusive as to the truthfulness of its
You pointed out? contents.56 Irregularities in the notarization of the document may be established by
A: oral evidence of persons present in said proceeding.57chanroblesvirtuallawlibrary
I found the bifurcation on the standard that corresponds exactly to the bifurcation
which I marked number 1 in both photograph[s]. We rule that petitioner failed to present clear and convincing evidence to overcome
Q: such presumption of regularity of a public document. Petitioner submitted the
From the center? specimen signature of the notary public but the same was never presented during the
A: trial nor was authenticated. Records disclose that after she admitted to being bound
As to the number and location with respect to the core, I found that both with conclusion of the NBI regarding the issue on the thumbmark, petitioner did not
questioned and standard coincide. present any evidence to rebut the due execution of the notarized contract of sale con
xxxx pacto de retro. Instead, she presented her testimony and the testimony of her daughter
Q: Josefma Rojales to prove that she never intended to sell her property.
Now, but the layer does not change in point 1, how many layer from the core?
A: The inconsistencies in petitioner's claims cast doubt to the credibility of her
From the core, there are 4 intervening layers from number 1 to number 2 and it testimonies. We note that petitioner admitted, as reflected in the pre-trial order,58 that
appears also the questioned 4 intervening layers between number 1 and number she once mortgaged her property to the bank. However, she denied the same during
2, so, the intervening rages between ends of this characteristics are all both in the trial and further claimed that it was the respondent who mortgaged the title with
agreement. the bank.59chanroblesvirtuallawlibrary
xxxx
ATTY. SALANGUIT: To prove her lack of intention to sell the property, petitioner maintained that the
Q: respondent borrowed the title from her. She herself took the witness stand and
Can you say that based on the questioned thumbmark, you would be able to arrive testified during the direct and cross examination that,60chanroblesvirtuallawlibrary
an accurate evaluation between the questioned thumbmark and standard COURT:
thumbmark? Q:
A: Are you aware of any or were you shown a purported document wherein it was alleged
Yes, [ma'am]. that you sold that property to the plaintiff Marcelino Dime?
Q: A:
Even if the questioned thumbmark is a little bit blurred as to the standard No, sir, I am already old and I don't know.
thumbmark? xxxx
A: Q:
[Even though] the questioned thumbmark is a little bit blurred but still the ridge You mean to say that you did not bother to go to Marcelino Dime after a complaint
characteristics is still discernible. was filed against you considering that he was a neighbor of yours?
Q: A:
You are telling us that among many people here in the world, nobody have the He just borrowed the title, sir, and I don't know.
same thumbmark as another person and that include the thumbmark of a twins? Q:
A: You mean to say that [you have] a title over that property and that property was
Yes, [ma'am]. borrowed by Marcelino Dime, [is that] what you mean?
xxx A:
A meticulous perusal of the records reveals that during the trial, petitioner's lawyer Yes, sir.
manifested that the petitioner, through her former counsel, has bound herself with xxxx
the result of the NBI Fingerprint Examination.52 It was further admitted in the ATTY. BELMI:
court that there is no more issue about the authenticity and genuineness of the Q:
thumbmark.53 Petitioner's counsel manifested:54chanroblesvirtuallawlibrary Mrs. Witness, when Dime took from you the title, you asked him why he was taking the
ATTY. SALANGUIT: title?
A:
Your honor, the nature of the testimony of the defendant is to prove the fact that Yes, sir, he told me that he will just borrow the title.
xxxx
Q:
This property covered by the title was mortgaged with the Batangas Savings and
Loan Bank?
A:
He (respondent) was the one who mortgaged the title but he did not give the
money to us, sir.
Q:
So, when he took the title from you, Dime told you that he will mortgage the
property with the bank?
A:
Yes, sir, he will use the money.
Q:
So, you mean to say that you were not the one who mortgaged the property with
the bank?
A:
He (respondent) was the one who mortgaged the property, sir.
xxxx
COURT:
Q:
Are you aware that Marcelino Dime could not be able to mortgage the property to
the bank if you [do not] have any document, a Special Power of Attorney
authorizing Dime to mortgage the property with the bank?
A:
I did not give any authority, sir.
xxxx
Her daughter Josefina claimed otherwise. She averred that her mother has
previously mortgaged the property with the bank and that it was Barcelon who
redeemed the property from the bank.61 She admitted that Barcelon borrowed
the title from her mother because there was already a buyer.62 She also alleged
that Barangay Captain Esguerra and his secretary Laila Samonte, upon the
instruction of Barcelon, took the title from them.63 Thus, her testimony contradicts
her mother's claim that respondent borrowed the title from her.
We have consistently decreed that the nomenclature used by the contracting
parties to describe a contract does not determine its nature.64 The decisive factor
is their intention - as shown by their conduct, words, actions and deeds - prior to,
during, and after executing the agreement.65 Thus, even if a contract is
denominated as apacto de retro, the owner of the property may still disprove it by
means of parole evidence,66 provided that the nature of the agreement is placed
in issue by the pleadings filed with the trial court.67chanroblesvirtuallawlibrary
Petitioner failed to specifically allege in all her pleadings that she did not intend to
sell her property to respondent, instead, she maintained that there was no pacto
de retro sale because her thumbmark and the notary public's signature were
falsified. She should have raised the issue that respondent merely borrowed the
title from her and promised to pay her in her pleadings and not belatedly claimed
the same after the NBI ruled that the thumbmark in the contract was hers.
In light of petitioner's inconsistent and bare allegations and the conflicting
testimony of her other witness, we rule that petitioner failed to overcome the
presumption of regularity of the notarized contract of Pacto de Retro sale.
Moreover, this Court is unconvinced that petitioner has successfully proven that
her agreement with respondent was not a pacto de retro sale but a contract of
loan secured by a mortgage of the subject property.
WHEREFORE, the petition for review on certiorari dated December 9, 2010 of
petitioner Juana Vda. de Rojales, substituted by her heirs Celerina Rojales,
Reynaldo Rojales, Pogs Rojales, Olive Rojales and Josefina Rojales is hereby
DENIED. The Decision and Resolution, dated August 16, 2010 and November 15,
2010, respectively, of the Court of Appeals in CA-G.R. CV No. 92228 are hereby
AFFIRMED.
SO ORDERED.cralawlawlibrary
G.R. No. 201074, October 19, 2016
SPOUSES RAMON SY AND ANITA NG, RICHARD SY, JOSIE ONG, WILLIAM SY AND
JACKELINE DE LUCIA, Petitioners, v. WESTMONT BANK (NOW UNITED OVERSEAS
BANK PHILIPPINES) AND PHILIPPINE DEPOSIT INSURANCE CORPORATION, AS
ASSIGNEE OF UNITED OVERSEAS BANK PHILIPPINES, Respondents.
DECISION
MENDOZA, J.:
This is a Petition for Review on Certiorari seeking to reverse and set aside the August 4,
2011 Decision1 and the March 19, 2012 Resolution2 of the Court of Appeals (CA) in
CA-G.R. CV No, 90425, which affirmed the November 9, 2007 Decision3 and February 6,
2008 Order4 of the Regional Trial Court, Branch 12, Manila (RTC) in Civil Case No. 99-
95945.
The Facts
The present case stemmed from a Complaint for Sum of Money,5 dated August 30,
1999, filed by respondent Westmont Bank (Westmont), now United Overseas Bank
Philippines (UOBP), against petitioners Spouses Ramon Sy and Anita Ng, Richard Sy,
Josie Ong, William Sy, and Jackeline de Lucia (petitioners) before the RTC.
Westmont alleged that on October 21, 1997, petitioners, doing business under the
trade name of Moondrops General Merchandising (Moondrops), obtained a loan in the
amount of P2,429,500.00, evidenced by Promissory Note No. GP-52806 (PN 5280),
payable on November 20, 1997. Barely a month after, or on November 25, 1997,
petitioners obtained another loan from Westmont Bank in the amount of
P4,000,000.00, evidenced by Promissory Note No. GP-52857 (PN 5285), payable on
December 26, 1997. Disclosure Statements on the Loan/Credit Transactions8 were
signed by the parties. Earlier, a Continuing Suretyship Agreement,9 dated February 4,
1997, was executed between Westmont and petitioners for the purpose of securing any
future indebtedness of Moondrops.
Westmont averred that petitioners defaulted in the payment of their loan obligations. It
sent a Demand Letter,10 dated August 27, 1999, to petitioners, but it was unheeded.
Hence, Westmont filed the subject complaint.
In their Answer,11 petitioners countered that in August 1997, Ramon Sy and Richard Sy
applied for a loan with Westmont Bank, through its bank manager William Chu Lao
(Lao). According to them, Lao required them to sign blank forms of promissory notes
and disclosure statements and promised that he would notify them immediately
regarding the status of their loan application.
In September 1997, Lao informed Ramon Sy and Richard Sy that their application was
disapproved. He, however, offered to help them secure a loan through Amado Chua
(Chua), who would lend them the amounts of P2,500,000.00 and P4,000,000.00, both
payable within three (3) months. Ramon Sy and Richard Sy accepted Lao's offer and
received the amounts of P2,429,500.00 and P3,994,000.00, respectively, as loans from
Chua. Petitioners claimed that they paid Chua the total amount of their loans.
Petitioners insisted that their loan applications from Westmont were denied and it was
Chua who lent them the money. Thus, they contended that Westmont could not
demand the payment of the said loans.
In the pre-trial conference, the parties agreed on one issue - whether or not the
defendants obtained loans from Westmont in the total amount of P6,429,500.00.12
During trial, Westmont presented, among others, its employee Consolacion Esplana,
who testified that the proceeds of the loan were credited to the account of Moondrops
per its loan manifold.13 Westmont, however, never offered such loan manifold in
evidence.14
On the other hand, petitioners presented a Cashier's Check,15 dated October 21, 1997,
in the amount of P2,429,500.00, purchased from Chua, to prove that the said loan was
obtained from Chua, and not from Westmont. The cashier's check for the subsequent
loan of P4,000,000.00 could not have been obtained from Westmont.
The RTC Ruling
In its decision, dated November 9, 2007, the RTC ruled in favor of Westmont. It held
that Westmont's cause of action was based on PN 5280 and PN 5285, the promissory
notes executed by petitioners. The RTC opined that petitioners admitted the
genuineness and due execution of the said actionable documents because they failed
to make a specific denial in the answer. It added that it should be presumed that the
two (2) loan transactions were fair and regular; that the ordinary course of business was
followed; and that they were issued for a sufficient consideration.
The RTC underscored that Ramon Sy never took any steps to have the promissory
notes cancelled and annulled, which led to the conclusion that their obligations to
Westmont were valid and binding. The fallo of the decision
reads:chanRoblesvirtualLawlibrary
WHEREFORE, the foregoing premises considered, judgment is hereby rendered in
favor of plaintiff WESTMONT BANK (now United Overseas Bank) and against
defendants Spouses Ramon Sy and Anita Ng, Richard Sy, Josie Ong, William Sy
and Jackeline De Lucia, and to pay plaintiff the following amounts, as
follows:cralawlawlibrary
P20,573,948.66, representing the outstanding amounts due on the aforementioned
loan accounts as of February 15, 2001;
Interests and penalty charges due thereon as stipulated under the respective
promissory notes from and after February 15, 2001, until fully paid;
20% of the total outstanding sum, as and by way of attorney's fees; and
Costs of suit.
SO ORDERED.16
chanrobleslaw
Petitioners moved for reconsideration, arguing that it had sufficiently denied the
genuineness and due execution of the promissory notes in their answer.
In its Order, dated February 6, 2008, the RTC repeated that petitioners were
deemed to have admitted the genuineness and due execution of the actionable
documents. It, however, modified the dispositive portion of its decision as
follow:chanRoblesvirtualLawlibrary
WHEREFORE, the foregoing premises considered, judgment is hereby rendered in
favor of plaintiff WESTMONT BANK (now United Overseas Bank) and against
defendants Spouses Ramon Sy and Anita Ng, Richard Sy, Josie Ong, William Sy
and Jackeline De Lucia, and to pay plaintiff the following amounts, as
follows:cralawlawlibrary
On Promissory Note No. PN-GP 5280:
a)
The sum of Two Million Four Hundred Twenty Nine Thousand Five Hundred Pesos
(P2,429,500.00), representing the principal amount of the promissory note;
b)
The sum of Seven Hundred Twenty Eight Thousand Eight Hundred Fifty Pesos
(P728,850.00), representing interest due on the promissory note payable on
November 20,1997;
c)
The above amounts shall collectively earn interest at the rate of thirty-six (36)
percent per annum by way of liquidated damages, reckoned from November
20,1997, until fully paid.
On Promissory Note No. PN-GP 5285:
a)
The sum of Four Million Pesos (P4,000,000.00), representing the principal amount
of the promissory note;
b)
The sum of One Million One Hundred Sixty Thousand Pesos (P1,160,000.00),
representing interest due on the promissory note payable on December 26,1997;
c)
The above amounts shall collectively earn interest at the rate of thirty-six (36)
percent per annum by way of liquidated damages, reckoned from December
26,1997, until fully paid.
The sum equivalent to twenty (20) percent of the total amount due (referred to in
Items 1 and 2 hereof), by way of attorney's fees; and costs of suit.
SO ORDERED.17
Aggrieved, petitioners elevated an appeal before the CA.
The CA Ruling
In its assailed August 4, 2011 decision, the CA affirmed the ruling of the RTC. It
wrote that petitioners failed to specifically deny the genuineness and due
execution of the promissory notes in their answer before the trial court.
Accordingly, the CA ruled that under Section 8, Rule 8 of the Rules of Court
(Section 8 of Rule 8), the genuineness and due execution of the promissory notes
were deemed admitted by petitioners. It added that the admission of the said
actionable documents created a prima facie case in favor of Westmont which
dispensed with the necessity of presenting evidence that petitioners actually
received the loan proceeds. The CA disposed the case in this
wise:chanRoblesvirtualLawlibrary
WHEREFORE, the instant appeal is DENIED. The assailed Decision dated November 9,
2007 as amended by the assailed Order dated February 6, 2008 of the Regional Trial
Court of Manila, Branch 12, is hereby AFFIRMED.
SO ORDERED.18
chanrobleslaw
Petitioners filed a motion for reconsideration, but it was denied by the CA in its assailed
decision, dated March 19, 2012.
Hence, this petition, raising the following
ISSUES
I.
THE HONORABLE COURT OF APPEALS ERRONEOUSLY RULED, AS A MATTER OF LAW,
THAT PETITIONERS SPS. RAMON SY AND ANITA NG, RICHARD SY, JOSIE ONG,
WILLIAM SY AND JACKELINE DE LUCIA FAILED TO SPECIFICALLY DENY THE
ACTIONABLE DOCUMENTS UNDER OATH AND THUS, PETITIONERS DEEMED TO HAVE
ADMITTED THEIR GENUINENESS AND DUE EXECUTION.chanroblesvirtuallawlibrary
II.
THE HONORABLE COURT OF APPEALS FAILED TO RULE THAT THE PIECES OF
EVIDENCE PRESENTED AND FORMALLY OFFERED BY WESTMONT BANK ARE
INADMISSIBLE AND HENCE, SHOULD NOT HAVE BEEN CONSIDERED.19
Petitioners argue that: they specifically denied the allegations of Westmont under oath
in their answer filed before the RTC; although they signed blank forms of promissory
notes, disclosure statements and continuing suretyship agreements, they were
informed that their loan application were denied; these should be considered as
sufficient compliance with Section 8 of Rule 8; Westmont Bank failed to prove the
existing loan obligations; and the original copy of the promissory notes were never
presented in court.
In a Resolution,20 dated July 4, 2012, the Court initially denied the petition for failure to
show any reversible error in the challenged decision and resolution of the CA. In a
Resolution,21 dated June 15, 2015, however, the Court granted petitioners' motion for
reconsideration, reinstated the petition and required the respondents to file their
comment.
In its Entry of Appearance with Compliance/Manifestation,22 dated October 19, 2015,
UOBP, formerly Westmont, informed the Court that all their interests in the present
litigated case were already transferred to the Philippine Deposit Insurance Corporation
(PDIC).
In its Comment,23 dated September 23, 2015, the PDIC stated that the CA correctly
ruled that petitioners failed to specifically deny the actionable documents in their
answer and were deemed to have admitted the genuieness and due execution thereof
Citing Permanent Savings and Loan Bank v. Velarde,24 the PDIC underscored that the
specific denial meant that the defendant must declare under oath that he did not sign
the document or that it was otherwise false or fabricated.
In their Reply,25 dated November 2, 2015, petitioners insisted that they made a
categorical specific denial in their answer and never admitted the genuineness and due
execution of the promissory notes, disclosure statements and continuing surety
agreements; the promissory notes presented by Westmont were mere photocopies;
and Westmont failed to establish that they received the proceeds of any
loan.chanroblesvirtuallawlibrary
The Court's Ruling
The Court finds the petition meritorious.
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.26 The said instrument or document is called an
actionable document and Section 8 of Rule 8 provides the proper method for the
adverse party to deny its genuineness and due execution, to
wit:chanRoblesvirtualLawlibrary
Sec. 8. How to contest such documents. — When an action or defense is founded
upon a written instrument, copied in or attached to the corresponding pleading as
provided in the preceding Section, the genuineness and due execution of the
instrument shall be deemed admitted unless the adverse party, under oath,
specifically denies them, and sets forth what he claims to be the facts; but the
requirement of an oath does not apply when the adverse party does not appear to
be a party to the instrument or when compliance with an order for an inspection
of the original instrument is refused. [Emphasis supplied]
chanrobleslaw
Accordingly, to deny the genuineness and due execution of an actionable
document: (1) there must be a specific denial in the responsive pleading of the
adverse party; (2) the said pleading must be under oath; and (3) the adverse party
must set forth what he claims to be the facts. Failure to comply with the prescribed
procedure results in the admission of the genuineness and due execution of the
actionable document.
In Toribio v. Bidin,27 the Court expounded that the purpose of specifically denying
an actionable document "appears to have been to relieve a party of the trouble
and expense of proving in the first instance an alleged fact, the existence or non-
existence of which is necessarily within the knowledge of the adverse party, and of
the necessity (to his opponent's case) of establishing which such adverse party is
notified by his opponent's pleading."28 In other words, the reason for the rule is to
enable the adverse party to know beforehand whether he will have to meet the
issue of genuineness or due execution of the document during trial.29
In that said case, the petitioners therein failed to file a responsive pleading to
specifically deny a deed of sale, the actionable document, attached in the answer
of the respondents therein. Despite such failure, the Court held that Section 8, Rule
8, was sufficiently complied with because they had already stated under oath in
their complaint that they never sold, transferred, or disposed of their shares in the
inheritance to others. Thus, respondents therein were placed on adequate notice
that they would be called upon during trial to prove the genuineness or due
execution of the disputed deeds of sale. Notably, the Court exercised liberality in
applying the rules of procedure so that substantial justice may be served.
Similarly, in Titan Construction Corporation v. David, Sr.,30 the Court relaxed the
rules of procedure regarding Section 8 of Rule 8. In that case, the respondent
failed to file a responsive pleading under oath to specifically deny the special
power of attorney, the actionable document therein, which was attached to the
answer of the petitioner therein. Notwithstanding such deficiency, the Court ruled
that there was substantial compliance because the respondent therein consistently
denied the genuineness and due execution of the actionable document in his
complaint and during trial.
In fine, although Section 8 of Rule 8 provides for a precise method in denying the
genuineness and due execution of an actionable document and the dire
consequences of its non-compliance, it must not be applied with absolute rigidity.
What should guide judicial action is the principle that a party-litigant is to be given
the fullest opportunity to establish the merits of his complaint or defense rather
than for him to lose life, liberty, honor, or property on technicalities.
In the present case, the actionable documents attached to the complaint of
Westmont were PN 5280 and PN 5285. The CA opined that petitioners failed to
specifically deny the genuineness and due execution of the said instruments
because nowhere in their answer did they "specifically deny" the genuineness and
due execution of the said documents.
After a judicious study of the records, the Court finds that petitioners sufficiently
complied with Section 8 of Rule 8 and grants the petition.
Petitioners specifically
denied the genuineness
and due execution of the
promissory notes
The complaint of Westmont alleged, among others, that:chanRoblesvirtualLawlibrary
3. On or about October 21, 1997, defendants Richard Sy and Ramon Sy, under the
trade name and style of "Moondrops General Merchandising," obtained a loan from
the plaintiff in the principal amount of Two Million Four Hundred Twenty-Nine
Thousand Five Hundred Pesos (P2, 429, 500.00), Philippine Currency, in evidence of
which said defendants executed in plaintiffs favor Promissory Note No. GP- 5280, xxx.
4. Again, on or about November 25, 1997, defendants Richard Sy and Ramon Sy, under
the trade name and style of "Moondrops General Merchandising," applied for and were
granted another loan by the plaintiff in the principal amount of Four Million Pesos (P4,
000, 000.00), Philippine Currency, in evidence of which said defendants executed in
plaintiffs favor Promissory Note No. GP- 5285, xxx.
6. The defendants Anita Ng, Josie Ong, William Sy and Jackeline De Lucia, for purposes
of securing the payment of said loans, collectively executed a Continuing Suretyship
Agreement, xxx, whereby they jointly and severally bound themselves to plaintiff for the
payment of the obligations of defendants Richard Sy and Ramon Sy/Moondrops
General Merchandising thereto.
7. The defendants defaulted in the payment of the aforementioned loan obligations
when the same fell due and, despite demands, continue to fail and/or refuse to pay the
same, to the prejudice of the plaintiff, xx.
8. As of November 9, 1999, the defendants' outstanding obligation to the plaintiff on
both loans amounted to Fifteen Million Six Hundred Thirty-Nine Thousand Five
Hundred Eighty Nine and 25/100 Pesos, xxx.31
chanrobleslaw
On the other hand, petitioners alleged in the answer, under
oath:chanRoblesvirtualLawlibrary
2. Paragraphs 3, 4, 5, 6, 7 and 8 are specifically denied, the truth of the matter being
those alleged in the Special and Affirmative Defenses hereunder.
3. Paragraph 9 is specifically denied for want of knowledge or information sufficient to
form a belief as to the truth or falsity thereof. Besides, the plaintiff has no one to blame
except itself and its personnel for maliciously filing the instant complaint for collection
knowing fully well that the alleged loan obligations were not consummated; and by
way of -
SPECIAL AND AFFIRMATIVE DEFENSES
4. The complaint does not state a cause of action.
5. While the limited partnership Moondrops General Merchandising Co., Ltd.
(Moondrops for brevity) appears in the alleged loan documents to be the borrower
and, therefore, the real party in interest, it is not impleaded as a party, xxx.
6. The alleged loan obligations were never consummated for want of consideration.
7. Sometime in August, 1997, Moondrops desperately needed additional working
capital, thus it applied for a loan of P6,500, 000.00 with the plaintiff Westmont Bank
through the Manager of Grace Park Branch William Chu Lao.
8. Manager William Chu Lao required herein defendants to sign blank forms of
plaintiffs promissory notes, Disclosure Statements and Continuing Suretyship
Agreement.
9. Sometime in September, 1997, Manager William Chu Lao informed herein
defendants that the application of Moondrops for an additional working capital was
disapproved by Westmont Bank but that, however, he offered to lend the defendants,
through Mr. Amado Chua, the initial amount of P2,500,000.00 payable in three (3)
months, and then another P4,000,000.00 likewise payable in three (3) months, against
customers' checks.
10. Since Moondrops desperately needed the additional working capital,
defendants agreed to and accepted the offer of Manager William Chu Lao, thus
Mr. Amado Chua loaned to defendants the amounts of P2,500,000.00 and P4,000,
000.00.
11. Pursuant to the agreement between Mr. Amado Chua and the defendants, the
latter delivered to the former customers' checks in the total amount of
P6,500,000.00.
12. Defendants have fully paid Mr. Amado Chua the loan obligations in the
amounts of P2,500, 000.00 and P4,000,000.00, including the interests thereon.32
chanrobleslaw
The answer above readily shows that petitioners did not spell out the words
"specifically deny the genuineness and due execution of the promissory notes."
Nevertheless, when the answer is read as whole, it can be deduced that petitioners
specifically denied the paragraphs of the complaint regarding the promissory
notes. More importantly, petitioners were able to set forth what they claim to be
the facts, which is a crucial element under Section 8 of Rule 8. In particular, they
alleged that although Ramon Sy and Richard Sy signed blank forms of promissory
notes and disclosure statements, they were later informed that their loans were
not approved. Such disapproval led them to seek loans elsewhere, through Lao
and Chua, but definitely not with the bank anymore.
Verily, petitioners asserted throughout the entire proceedings that the loans they
applied from Westmont were disapproved, and that they never received the loan
proceeds from the bank. Stated differently, they insisted that the promissory notes
and disclosure statement attached to the complaint were false and different from
the documents they had signed. These significant and consistent denials by
petitioners sufficiently informed Westmont beforehand that it would have to meet
the issue of genuineness or due execution of the actionable documents during
trial.
Accordingly, petitioners substantially complied with Section 8 of Rule 8. Although
their answer did not indicate the exact words contained in the said provision, the
questionable loans and the non-delivery of its proceeds compel the Court to relax
the rules of procedure in the present case. Law and jurisprudence grant to courts
the prerogative to relax compliance with procedural rules of even the most
mandatory character, mindful of the duty to reconcile both the need to put an end
to litigation speedily and the parties' right to an opportunity to be heard.[33]
Westmont failed to prove
that it delivered the
proceeds of the loan to
petitioners
A simple loan or mutuum is a contract where one of the parties delivers to
another, either money or other consumable thing, upon the condition that the
same amount of the same kind and quality shall be paid.34 A simple loan is a real
contract and it shall not be perfected until the delivery of the object of the
contract.35 Necessarily, the delivery of the proceeds of the loan by the lender to
the borrower is indispensable to perfect the contract of loan. Once the proceeds
have been delivered, the unilateral characteristic of the contract arises and the
borrower is bound to pay the lender an amount equal to that received.36
Here, there were purported contracts of loan entered between Westmont and
petitioners for the amounts of P2,429,500.00 and P4,000,000.00, respectively. The
promissory notes evidencing such loans were denied by petitioners, thus, the
genuineness and due execution of such documents were not admitted. Petitioners
averred that they never received such loans because their applications were
disapproved by the bank and they had to acquire loans from other persons. They
presented a cashier's check, in the amount of P2,429,500.00, obtained from Chua,
which showed that the latter personally provided the loan, and not the bank. As
the proceeds of the loan were not delivered by the bank, petitioners stressed that
there was no perfected contract of loan. In addition, they doubt the reliability of
the promissory notes as their original copies were not presented before the RTC.
Due to the doubtful circumstances surrounding the loan transactions, Westmont
cannot rely on the disputable presumptions that private transactions have been
fair and regular and that the ordinary course of business has been followed. The
afore-stated presumptions are disputable, meaning, they are satisfactory if
uncontradicted, but may be contradicted and overcome by other evidence.37
At any rate, granting that they did execute the promissory note and other
actionable documents, still it was incumbent on Westmont, as plaintiff, to establish that
the proceeds of the loans were delivered to petitioners, resulting into a perfected
contract of loan.38 Notably, these documents also did not state that the loan proceeds
had been delivered to petitioners, and that they had acknowledged its receipt.
In civil cases, the burden of proof rests upon the plaintiff who is required to establish
his case by a preponderance of evidence.39 As aptly stated by the RTC, the primordial
issue that must be resolved is whether petitioners obtained loans from Westmont in
the total amount of P6,429,500.00.40
The Court finds that Westmont miserably failed to establish that it released and
delivered the proceeds of the loans in the total amount of P6,429,500.00 to petitioners.
Westmont could have easily presented a receipt, a ledger, a loan release manifold, or a
statement of loan release to indubitably prove that the proceeds were actually released
and received by petitioners. During trial, Westmont committed to the RTC that it would
submit as evidence a loan manifold indicating the names of petitioners as recipients of
the loans,41 but these purported documents were never presented, identified or
offered.42
As Westmont failed to prove that it had delivered the loan proceeds to respondents,
then there is no perfected contract of loan.
WHEREFORE, the petition is GRANTED. The August 4, 2011 Decision and the March 19,
2012 Resolution of the Court of Appeals in CA-G.R. CV No. 90425 are hereby REVERSED
and SET ASIDE. The Complaint, dated August 30, 1999, docketed as Civil Case No. 99-
95945 filed before the Regional Trial Court, Branch 12, City of Manila, is DISMISSED.
SO ORDERED
G.R. No. 214406
BP OIL AND CHEMICALS INTERNATIONAL PHILIPPINES, INC., Petitioner
vs.
TOTAL DISTRIBUTION & LOGISTIC SYSTEMS, INC., Respondents
DECISION
PERALTA, J.:
Before this Court is the Petition for Review on Certiorari under Rule 45, dated
November 10, 2014 of petitioner BP Oil and Chemicals International Philippines, Inc.
(BP Oil) that seeks to reverse and set aside the Decision1 dated April 30, 2014 of the
Court of Appeals (CA) which, in turn, reversed and set aside the Decision2 dated
January 21, 2011 of the Regional Trial Court (RTC), Branch 148, Makati City, in a case for
a collection of sum of money.
The antecedent facts follow.
A Complaint for Sum of Money was filed by petitioner BP Oil against respondent Total
Distribution & Logistic Systems, Inc. (TDLSI) on April 15, 2002, seeking to recover the
sum of ₱36,440,351.79 representing the total value of the moneys, stock and accounts
receivables that TDLSI has allegedly refused to return to BP Oil.
The allegations of the parties, as summarized by the RTC, are as follows:
According to the allegations in the complaint, the defendant entered into an Agency
Agreement (the Agreement) with BP Singapore on September 30, 1997, whereby it was
given the right to act as the exclusive agent of the latter for the sales and distribution
of its industrial lubricants in the Philippines. The agency was for a period of five years
from 1997 to 2002. In return, the defendant was supposed to meet the target sales
volume set by BP Singapore for each year of the Agreement. As agreed in the
Supplemental Agreement they executed on January 6, 1998, the defendant was
supposed to deposit the proceeds of the sales it made to a depositary account that the
defendant will open for the purpose. On April 27, 1998, BP Singapore assigned its
rights under the Agreement to the plaintiff effective March 1, 1998.
When the defendant did not meet its target sales volume for the first year of the
Agreement, the plaintiff informed the defendant that it was going to appoint other
distributors to sell the BP's industrial lubricant products in the Philippines. The
defendant did not object to the plan of the plaintiff but asked for ₱10,000,000.00 as
compensation for the expenses. The plaintiff did not agree to the demand made by the
defendant.
On August 19, 1999, the defendant through its lawyer, wrote the plaintiff a letter
where it demanded that it be paid damages in the amount of ₱40,000,000.00 and
announced that it was withholding remittance of the sales until it was paid by the
plaintiff. On September 1, 1999, the plaintiff wrote the defendant back to give
notice that it was terminating the Agreement unless the defendant rectified the
breaches it committed within a period of 30 days. The plaintiff also demanded that
the defendant pay the plaintiff its outstanding obligations and return the unsold
stock in its possession.
On October 11, 1999, the plaintiff gave the defendant formal notice of [sic] that it
was terminating the Agreement after it did not hear from the defendant. The
plaintiff would find out that the defendant had filed a request for arbitration with
the Philippine Dispute Resolution Center, Inc. (PDRCI).
On October 9, 2000, the plaintiff, through Mr. Lau Hock Lee, sent the defendant
another letter to reiterate its demand for the defendant to return the unremitted
collections and stocks in its possession.
On April 30, 2001, the defendant, through Mr. Miguel G. de Asis, its Chief Finance
Officer, wrote the plaintiff a letter admitting that as of the said date, it had in its
possession collections against sales in the amount of ₱27,261,305.75, receivables
in the amount of ₱8,767,656.26 and stocks valued at ₱1,155,000.00.
On July 9, 2001, the law firm of Siguion Reyna Montecillo & Ongsiako sent the
defendant a formal demand letter for the payment of the total amount of
₱36,440,351.79 representing the total amount of the collections, receivables and
stocks that defendant should have returned to the plaintiff as of May 31, 2001. The
amount was based on a summary of account prepared by Ms. Aurora B. Osanna,
plaintiffs Business Development Supervisor.
On April 15, 2002, the plaintiff filed the instant complaint for collection against the
defendant. The defendant initially filed a Motion to Dismiss the complaint on the
ground for [sic] lack of cause of action because of the existence of an arbitration
agreement, as well as a previously filed arbitration proceeding between the parties.
This Court denied the defendant's Motion to Dismiss for lack of merit in its Order
dated February 21, 2003. The Motion for Reconsideration filed by the defendant
was likewise denied by this Court on April 30, 2003. The Defendant went up to the
Court of Appeals to question the denial of its Motion to Dismiss via a Petition for
Certiorari and Prohibition.
On June 9, 2003, the Defendant filed its Answer Ad Cautelam with Compulsory
Counterclaim Ad Cautelam.
In its answer, the defendant alleged that it was appointed as the exclusive agent of
the plaintiff to sell BP brand industrial lubricants in the Philippines. The agency was
to last for five years from signing of the Agreement, or until September 29, 2001.
As the exclusive agent of BP products, the defendant was tasked to promote,
market, distribute and sell the BP products supplied the plaintiff.
The defendant further alleged that it did not fail to meet the sales target for Year I.
Delays on the part of the plaintiff in shipping the products moved the
commencement of the Agreement from January 1997 to August 1997, making the
stipulated sales target no longer applicable.
On June 8, 1999, the plaintiff unexpectedly informed the defendant of its intention
to assume more control of Philippine operations, including the appointment of a
full-time representative in the Philippines and new distributors. No reason was
given for this policy change.
Although the defendant pointed out to the plaintiff that the appointment of a new
distributor would violate the Agency Agreement, the plaintiff ignored the
defendant's protests and affirmed that it would proceed with taking over control
of the distribution in the Philippines of BP products and with appointing additional
distributors.
While business proceeded, the defendant's counsel, Atty. Eugeniano E. Perez III,
sent the plaintiff a letter dated August 19, 1999 pointing out, among others, that:
a) The plaintiffs plan to take over the lubricant business and appoint other
distributors was in breach of the Agency Agreement; b) the defendant incurred
losses because of the plaintiffs non-compliance with the Agreement and lack of
support; and c) the defendant would be carrying on the business would be
withholding any funds to be collected pending compliance with the demand.
Instead of heeding the consequences of its proposed illegal acts, the plaintiffs took
steps to take over the distribution of BP Products in the Philippines and to appoint
new agents for this purpose. Even before the termination of the Agreement, the
plaintiff cut off the supply of BP products to the defendant, and even tried to sell
directly to the defendant's customers, without the defendant's knowledge. To protect
its rights, and pursuant to the arbitration clause under the Agreement, the defendant
filed a Request for Arbitration before the Philippine Dispute Resolution Center, Inc.
(PDRCI) on 5 October 1999.
By way of affirmative defenses, the defendant argued that: 1.) it has the right to retain
in pledge objects subject of the agency until it is indemnified by the plaintiff for the
damages it suffered under Article 1914 in relation to Articles 1912 and 1913 of the Civil
Code; 2.) the complaint is dismissible on the ground of lack of cause of action for being
prematurely filed and/or litis pendencia because the issue in the case is already a sub-
issue in the arbitration proceedings; and 3.) the action should be stayed in accordance
with Republic Act No. 876.
On March 21, 2004, the Court of Appeals came out with its Decision affirming this
Court's denial of the defendant's Motion to Dismiss after the defendant filed it Answer
Ad Cautelam. The Court of Appeals also denied the defendant's Motion for
Reconsideration on August 16, 2004. The Decision of the Court of Appeals sustaining
this Court attained finality with the denial by the Supreme Court on November 10, 2004
of the Petition for Review on Certiorari filed by the defendant as well as its Motion for
Reconsideration from the said denial.
In light of the finality of the decision of the Court of Appeals, the defendant lost its
right to invoke the pendency of the arbitration proceedings as part of its affirmative
defenses. The defendant is therefore left with only one affirmative defense to the
complaint of the plaintiff, and this is the right of retention given to an agent under
Article 1912, 1913 and 1914 of the Civil Code.
This makes the issue to be resolved by this Court uncomplicated: 1) whether the
plaintiff has the right to collect the amount of ₱36,440,35 l. 79 from the defendant
together with legal interest computed from September 1, 1999, attorney's fees and
costs of suit; and 2) whether the defendant is justified in retaining the amounts and
stocks in its possession by virtue of the aforementioned provisions of the Civil Code on
agency.3
In its Decision dated January 21, 2011, the RTC ruled in favor of the petitioner, the
dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered, granting the claim of
the plaintiff and directing the defendant to pay the plaintiff the sum of:
(1) Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-Nine
Pesos and Thirteen Centavos (₱36,943,829.13) for the value of the stocks and the
moneys received and retained by the defendant in its possession pursuant to the
Agreement with legal interest computed at 6% per annum from July 19, 2001 up to the
finality of this decision and at 12% per annum from finality of this decision up to the
date of payment.
(2) Attorney's fees in the amount of One Million Five Hundred Thousand Pesos
(₱1,500,000.00) and costs of suit amounting to Four Hundred Thirty-Nine Thousand
Eight Hundred Forty Pesos (₱439,840.00).
SO ORDERED.4
After the respondent elevated the case to the CA, the latter court reversed and set
aside the decision of the RTC and found in favor of the respondent in its Decision
dated April 30, 2014, thus:
WHEREFORE, the instant appeal is GRANTED. The assailed Decision dated January 21,
2011 of the Regional Trial Court of Makati City, Branch 148 is REVERSED and SET ASIDE.
The instant complaint is DISMISSED.
SO ORDERED.5
The CA ruled, among others, that the admission made by respondent in Exhibit "J ,"
that it was withholding moneys, receivables and stocks respectively valued at
₱27,261,305.75, ₱8,767,656.26 and ₱1,155,000.00 from petitioner, has no evidentiary
weight, thus, petitioner was not able to preponderantly establish its claim.
Hence, the present petition where petitioner states the following grounds:
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN RENDERING ITS
DECISION AS WELL AS IN DENYING BP OIL'S MOTION FOR
RECONSIDERATION.SPECIFICALLY:

I
THE COURT OF APPEALS ERRED IN NOT RULING THAT TDLSI HAS MADE A
JUDICIAL ADMISSION THAT IT HAS POSSESSION OF THE STOCKS, MONEYS AND
RECEIVABLES THAT BP OIL SEEKS TO RECOVER IN THE COMPLAINT BELOW,
CONSIDERING THAT:
a. EXHIBIT "J' QUALIFIES AS AN ACTIONABLE DOCUMENT WHOSE AUTHENTICITY
AND DUE EXECUTION WERE DEEMED ADMITTED BY TDLSI FOLLOWING ITS FAIL
URE TO SPECIFICALLY DENY THE SAME UNDER OATH IN ITS ANSWER.
b. REGARDLESS OF WHETHER EXHIBIT "J" MAY BE CONSIDERED AS AN
ACTIONABLE DOCUMENT, THE FACT REMAINS THAT TD LSI HAD ACTUALLY
ADMITTED PREPARING AND SENDING THE SAME TO BP OIL IN ITS ANSWER.
i. NO RESERVATION WAS EVER MADE BY TD LSI REGARDING THE AUTHENTICITY
OF ITS CONTENTS AND NO WITNESS WAS EVER PRESENTED BY TDLSI TO
DISOWN ITS DUE EXECUTION.
ii. ASIDE FROM BEING SELF-SERVING, THE ANSWER TO WRITTEN
INTERROGATORIES GIVEN BY TDLSI'S MR. MIGUEL DE ASIS AND CITED IN THE
DECISION AS A BASIS TO NEGATE TDLSI'S ADMISSION OF EXHIBIT "J" WAS NEVER
OFFERED IN EVIDENCE. THE COURT OF APPEALS SHOULD NOT HAVE EVEN
CONSIDERED THE SAME IN RENDERING ITS DECISION.
c. THE RIGHT OF RETENTION INVOKED BY TDLSI IN ITS ANSWER CARRIES WITH IT
THE ADMISSION: (i) THAT BP OIL IS ENTITLED TO THE STOCKS, MONEYS AND
RECEIVABLES SUBJECT OF THE COMPLAINT BELOW, AND (ii) THAT TDLSI IS
WITHHOLDING THE SAME FROM BP OIL.
II
THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT WITH OR
WITHOUT EXHIBIT "J," BP OIL HAS MET THE QUANTUM OF PROOF REQUIRED BY
LAW TO PROVE ITS CLAIM.
a. CIVIL CASES ONLY REQUIRE A PREPONDERANCE OF EVIDENCE AND BP OIL
HAS DISCHARGED ITS BURDEN OF MEETING THIS STANDARD OF PROOF.
b. THE REFUSAL OF THE COURT TO GIVE WEIGHT TO SOME OF THE PIECES OF
EVIDENCE PRESENTED BY BP OIL HAS NO LEGAL BASIS.
c. THE DENIAL OF TDLSI'S DEMURRER TO EVIDENCE SHOWS THAT BP OIL HAS
MADE OUT A PRIMA F ACIE CASE IN SUPPORT OF ITS CLAIMS AGAINST TDLSI
AND TDLSI'S FAILURE TO CONTROVERT THIS PRIMA F ACIE CASE JUSTIFIES A
RULING IN FAVOR OF BP OIL.
According to petitioner, Exhibit "J" qualifies as an actionable document whose
authenticity and due execution were deemed admitted by respondent or TDLSI
following its failure to specifically deny the same under oath. Petitioner insists that
it has met the quantum of proof required by law.
In its Comment dated March 24, 2015, respondent reiterates the ruling of the CA
that Exhibit "J" is not an actionable document and cannot be considered a judicial
admission on its part.
The petition is devoid of any merit.
The Rules of Court require that only questions of law should be raised in petitions
filed under Rule 45.6 This court is not a trier of facts. It will not entertain questions
of fact as the factual findings of the appellate courts are "final, binding[,] or
conclusive on the parties and upon this [c]ourt"7 when supported by substantial
evidence.8 Factual findings of the appellate courts will not be reviewed nor
disturbed on appeal to this court.9
This Court's Decision in Cheesman v. Intermediate Appellate Court10distinguished
questions of law from questions of fact:
As distinguished from a question of law - which exists "when the doubt or
difference arises as to what the law is on a certain state of facts" - "there is a
question of fact when the doubt or difference arises as to the truth or the
falsehood of alleged facts;" or when the "query necessarily invites calibration of
the whole evidence considering mainly the credibility of witnesses, existence and
relevancy of specific surrounding circumstances, their relation to each other and to
the whole and the probabilities of the situation."11
Seeking recourse from this court through a petition for review on certiorari under Rule
45 bears significantly on the manner by which this court shall treat findings of fact and
evidentiary matters. As a general rule, it becomes improper for this court to consider
factual issues: the findings of fact of the trial court, as affirmed on appeal by the Court
of Appeals, are conclusive on this court. "The reason behind the rule is that [this] Court
is not a trier of facts and it is not its duty to review, evaluate, and weigh the probative
value of the evidence adduced before the lower courts."12
However, these rules do admit exceptions.13 Over time, the exceptions to these rules
have expanded. At present, there are 10 recognized exceptions that were first listed in
Medina v. Mayor Asistio, Jr.:14
(1) When the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; (2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion; (4) When the judgment is based on a
misapprehension of facts; (5) When the findings of fact are conflicting; (6) When the
Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (7) The findings of
the Court of Appeals are contrary to those of the trial court; (8) When the findings of
fact are conclusions without citation of specific evidence on which they are based; (9)
When the facts set forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondents; and (10) The finding of fact of the Court of
Appeals is premised on the supposed absence of evidence and is contradicted by the
evidence on record.15
A close reading of the present petition shows that what this Court is being asked to
resolve is, what should prevail - the findings of facts of the RTC or the findings of facts
of the CA on the alleged misapprehension of facts of the RTC. The findings of facts of
both Courts are obviously conflicting, hence, the need for this Court to rule on the
present petition.
On the issue of whether Exhibit "J" is an actionable document, the CA ruled:
Here, plaintiff-appellee relies heavily on its Exhibit "J", defendant-appellant's purported
letter dated April 30, 2001, which it alleged to be an "actionable document" which
defendant-appellant failed to deny under oath. It does amounts to a judicial admission
on the part of defendant-appellant that it has possession of its stocks, moneys and
receivables belonging to plaintiff-appellee.
x x xx
Here, the purported April 30, 2001 letter is not an actionable document per se. The
present complaint is an action for collection of sum of money arising from the
termination of the Agency Agreement between the parties. Plaintiff-appellee's cause of
action is primarily based on the alleged non-payment of outstanding debts of
defendant-appellant as well as the unremitted collections/payments and unsold stocks,
despite demand. In other words, plaintiff-appellee's cause of action is not based solely
on the April 30, 2001 letter allegedly stating the "present value of stocks, collections
and accounts receivables" of defendant-appellant. Clearly, said document is not an
actionable document contemplated in Section 7, Rule 8 of the 1997 Rules of Court but
is merely evidentiary in nature. As such, there was no need for defendant-appellant to
deny its genuineness and due execution under oath. We thus cannot sustain plaintiff-
appellee' s contention that the aforesaid Exhibit "J" amounted to a judicial admission
because it's due execution and authenticity was never denied under oath by defendant
appellant.
Verily, an admission is any statement of fact made by a party against its interest or
unfavorable to the conclusion for which he contends or is inconsistent with the facts
alleged by him. To be admissible, an admission must (a) involve matters of fact, and not
of law; (b) be categorical and definite; (c) be knowingly and voluntarily made; and (d)
be adverse to the admitter' s interests, otherwise it would be self-serving and
inadmissible.
In this case, the alluded Exhibit "J" was introduced in evidence by plaintiff-appellee
alleging in its Complaint that:
"18. Under date of 30 April 2001, TDLSI wrote BP Oil a letter admitting that the
following stocks, collections and accounts receivable were still in their possession as of
even date:
Amount collected against sales ₱27,261,305.75
Accounts Receivable 8,767,656.26
Estimated Value of Stocks 1,155,000.00
A copy of the 30 April 2001 letter of TDLSI is hereto attached as Annex "J" and
made an integral part hereof."
In its Answer Ad Cautelam with Compulsory Counterclaim Ad Cautelam,
defendant-appellant TDLSI averred, viz.:
"17. Paragraph 18 is admitted, with qualification [that] TDLSI's letter dated 30 April
2001 was prepared and sent to BP Oil solely on the latter's representations that the
figures were being sought only to negotiate a settlement of the parties' dispute
and end the pending arbitration. Instead, in shocking bad faith, BP Oil refused to
settle and made TDLSI's letter the basis of the instant Complaint."
Hence, while defendant-appellant admitted said Exhibit "J'', it nevertheless
qualified and limited said admission to, merely, the existence thereof. In fact, in its
Comment to Plaintiff's Exhibits, defendant clearly stated:
"(9) EXH. "J" - only the existence of the letter sent by Defendant to Plaintiff dated
April 30, 2001, signed by Miguel de Asis and addressed to Hok Lee Hau, is
admitted. The contents as well as the factual basis thereof, are not admitted.
Besides, the circumstances leading to the sending of this letter were thoroughly
explained by Miguel de Asis in his answer to Plaintiffs written interrogatories."
x x xx
Evidently, the afore-quoted letter does not, in any way, categorically declare that
the figures stated therein are "still in [the] possession of' or, in the hands of,
defendant-appellant TDLSI. The "present value" of the accounts receivables,
collections and stocks is one thing, the "value in possession or on hand" of said
accounts is another.
Sans the above-discussed Exhibit "J", therefore, this Court is not convinced that
plaintiff-appellee BP Oil was able to preponderantly establish its claim against
defendant-appellant TDLSI in the amount of ₱36,440,351.79 for the value of the
moneys, stock and accounts receivables which the latter allegedly refused to
deliver to the former. As aptly argued by defendant-appellant TDLSI, the
purported Acknowledgment Receipts and Delivery Receipts presented by
plaintiffappellee BP Oil the purpose of which is "to prove that TD LSI, through its
General manager, Mr. Ivor Williams, acknowledged receipt and delivery of the
stocks" are totally baseless since the same were never signed as having been
"received by" said Mr. Ivor Williams. Hence, without the latter's signature, the
purpose for which said documents were offered becomes nil.
The above findings of the CA are partially correct.
Exhibit "J" reads as follows:
Mr. Lau,
Some considerable time has passed since either party had the opportunity to
review their respective position (sic) on the disagreement between us. It was
pleasing to note that a discussion has now started between us again and you give
the impression that a settlement is a better solution for both parties than to
continue through the legal route.
The present value of stocks, collections and accounts receivable was requested. As
of today, we can state the following:
Amount Collected against Sales₱27,261,305.75
Accounts receivables ₱8,767,656.26
Estimated Value of Stocks ₱1,155,000.00
Please note that the stock value is estimated because the drums are no longer
sealable due to their condition. However, this is not significant in number.
To the mind of the Court, Exh. "J" is not an actionable document but is an evidence
that may be admissible and; hence, need not be denied under oath. Sections 7 and
8 of the 1997 Rules of Court provide:
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.
Section 8. How to contest such documents. - When an action or defense is
founded upon a written instrument, copied in or attached to the corresponding
pleading as provided in the preceding Section, the genuineness and due execution of
the instrument shall be deemed admitted unless the adverse party, under oath,
specifically denied them, and sets forth what he claims to be the facts, but the
requirement of an oath does not apply when the adverse party does not appear to be a
party to the instrument or when compliance with an order for an inspection of the
original instrument is refused.
A document, therefore, is actionable when an action or defense is grounded upon such
written instrument or document. The complaint filed by petitioner is an action for
collection of sum of money arising from the termination of the Agency Agreement with
TDLSI. The CA, therefore, was correct when it stated that petitioner's cause of action is
primarily based on the alleged non-payment of outstanding debts of respondent as
well as the unremitted collections/payments and unsold stocks, despite demand. Thus,
petitioner's cause of action is not based solely on the April 30, 2001 letter allegedly
stating the "present value of stocks, collections and accounts receivables" of TDLSI.
Noteworthy is the denial of respondent TDLSI' s Demurrer to Evidence by the RTC
because it clearly discussed petitioner's cause of action and the sufficiency of the
evidence it presented, thus:
Upon consideration of the pleadings and arguments filed by the parties, the Court is
convinced to DENY the demurrer.
The record shows that the plaintiff presented sufficient evidence that will
preponderantly establish its claim against the defendant. Among the evidence
presented which might prove the claim or right to relief of the plaintiff against the
defendant include (I) the purchase orders of TDLSI's third party customers; (2) original
approved copies of the requests for approval sent by TDLSI to BP Oil from May 21,
1998 to August 14, 1999; (3)TDLSI invoices covering the products subject of the
purchase orders and requests for approval; and (4) The sales invoices issued by BP Oil
to TDLSI to its customers.
The aforesaid evidence presented was to the mind of the Court contain pertinent facts
and such evidence will prove that the plaintiff has a cause of action against the
defendant. As correctly pointed out by the plaintiff, TDLSI cannot premise its demurrer
on any supposed lack of proof of delivery by BP Oil of certain moneys and receivables.
The allegations in the complaint, as well as the evidence presented by BP Oil, establish
that generated as they were by the sales made by TDLSI, the moneys and receivables
have always been in TDLSI's possession and it is the obligation of the latter to deliver
them to BP Oil.
The Court is of the view that the better way to weigh and decide this case based on
merits is for the defendant to present its own evidence to refute the plaintiff's
allegations. It is better that the defendant be given a day in court to prove its defenses
in a full-blown trial.
The Court cannot just dismiss the case on the ground that upon the facts and law
presented by the plaintiff it was not able to show a right to relief when in fact the
evidence presented, testimonial and documentary, show otherwise and its claim
appears to be meritorious. To ensure that justice would be served and that the case be
decided on its real merits upon a careful review and appreciation of facts and evidence
presented it would be best that defendant should instead present its own defenses in a
formal trial and not just to dismiss the case allegedly in the absence of clear proof that
plaintiff has no right to the reliefs prayed for.
Moreover, the Court noted that this case has been prolonged for so long and this
Court can no longer allow any more delay to this case.1âwphi1
WHEREFORE, premises considered, the Demurrer to Evidence is hereby DENIED for lack
of merit.16
It is basic that whoever alleges a fact has the burden of proving it because a mere
allegation is not evidence.17 In civil cases, the burden of proof is on the party who
would be defeated if no evidence is given on either side.18 The RTC's denial of TDLSI's
Demurrer to Evidence shows and proves that petitioner had indeed laid a prima facie
case in support of its claim. Having been ruled that petitioner's claim is meritorious, the
burden of proof, therefore, was shifted to TDLSI to controvert petitioner's prima facie
case.
The CA, however, ruled that while TDLSI admitted Exhibit "J", it nevertheless qualified
and limited said admission to, merely, the existence thereof, thus, without Exhibit "J"
the same court was not convinced that petitioner was able to preponderantly establish
its claim against TDLSI in the amount of ₱36,440,351.79 for the value of the moneys,
stock and accounts receivables which TDLSI allegedly refused to deliver to petitioner.
This is erroneous. The fact is, TDLSI indeed admitted the existence of Exhibit "J." Thus,
Exhibit "J" can be considered as an admission against interest. Admissions against
interest are those made by a party to a litigation or by one in privity with or
identified in legal interest with such party, and are admissible whether or not the
declarant is available as a witness.19 An admission against interest is the best
evidence that affords the greatest certainty of the facts in dispute, based on the
presumption that no man would declare anything against himself unless such
declaration is true.20 It is fair to presume that the declaration corresponds with the
truth, and it is his fault if it does not.21 No doubt, admissions against interest may
be refuted by the declarant.22 In this case, however, respondent failed to refute
the contents of Exhibit "J."
Be that as it may, the qualification made by respondent in the admission of Exhibit
"J" is immaterial as the contents thereof were merely corroborative of the other
pieces of evidence presented by petitioner and that respondent failed in its
defense, to present evidence to defeat the claim of petitioner. As aptly ruled by the
RTC:
After going over the allegations and the evidence presented by the parties, the
Court finds as it did in its Order denying the Demurrer to Evidence of the
defendant that the plaintiff presented sufficient evidence that will preponderantly
establish its claim against the defendant. The Court notes that apart from not
presenting any evidence in support of its defense, the defendant did not really put
up any serious defense to defeat the claim of the plaintiff, and its only remaining
defense consisting of the right of retention given to agents under Articles 1912,
1913 and 1914 of the Civil Code, even if proven to exist, will not negate the finding
that the plaintiff is entitled to the value of the moneys and stocks in the
defendant's possession.
To the mind of the court, the evidence presented by the plaintiff, unrebutted by
any evidence on the part of the defendant and even aided by the admissions
made by the defendant in its letter dated April 30, 2001 to the plaintiff (Exhibit "J"),
proves that the plaintiff has a cause of action for the payment of the amount of
Thirty-Six Million Nine Hundred Forty-Three Thousand Eight Hundred Twenty-Nine
Pesos and Thirteen Centavos (₱36,943,829.13) for the value of the stocks and the
moneys received and retained by the defendant in its possession pursuant to the
Agreement with legal interest computed at 6% per annum from July 19, 2001,
when formal demand (Exhibit "L") was made by the plaintiff for the
liquidatedamount of ₱36,943,829.13, up to the finality of this decision up to the
date of payment thereof.
Considering that the plaintiff was compelled to engage in litigation for almost 10
years, it must also be indemnified for the costs of suit corresponding to filing fees
in the amount of ₱429,840.00 and attorney's fees equivalent to ₱1,500,000.00.23
Section 1,24 Rule 133 of the Rules of Court mandates that in civil cases, the party
having the burden of proof must establish his case by a preponderance of
evidence. By preponderance of evidence, according to Raymundo v. Lunaria,25
[means] that the evidence as a whole adduced by one side is superior to that of
the other. It refers to the weight, credit and value of the aggregate evidence on
either side and is usually considered to be synonymous with the term "greater
weight of evidence" or "greater weight of the credible evidence." It is evidence
which is more convincing to the court as worthy of belief than that which is offered
in opposition thereto.
Upon close analysis, therefore, this Court is inclined to believe the findings of the
RTC that petitioner was able to prove its case by a preponderance of evidence and
that respondent failed to disprove petitioner's claim. As such, the CA gravely erred
in reversing the decision of the RTC.
A modification, however, must be made as to the rate of interest applied by the
RTC. The RTC ordered the respondent to pay the amount adjudged "with legal
interest computed at 6% per annum from July 19, 2001 up to the finality of the
decision and at 12% per annum from finality of the decision up to the date of
payment." Now, the interest imposed should be 12% per annum from July 19,
2001 until June 30, 2013 and 6% per annum from July 1, 2013 until full satisfaction
per decision of this Court in Secretary of the Department of Public Works and
Highways, et al. v. Spouses Heracleo and Ramona Tecson26 which set forth the
following guidelines:
In summary, the interest rates applicable to loans and forbearance of money, in
the absence of an express contract as to such rate of interest, for the period of
1940 to present are as follows:
Law, Rule and Regulations, BSP Issuances Date of Effectivity Interest Rate
Act No. 2655 May 1, 1916 6%
CB Circular No. 416 July 29, 1974 12%
CB Circular No. 905 December 22, 1982 12%
CB Circular No. 799 July 1, 2013 6%
It is important to note, however, that interest shall be compounded at the time judicial
demand is made pursuant to Article 221227 of the Civil Code of the Philippines, and
sustained in Eastern Shipping Lines v. Court of Appeals,28 then later on in Nacar v.
Gallery Frames,29 save for the reduction of interest rate to 6% for loans or forbearance
of money, thus:
1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 6% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.30
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court
dated November 10, 2014 of BP Oil and Chemicals International Philippines, Inc. is
GRANTED. Consequently, the Decision dated April 30, 2014 of the Court of Appeals is
REVERSED and SET ASIDE and the Decision dated January 21, 2011 of the Regional Trial
Court, Branch 148, Makati City is AFFIRMED and REINSTATED, with the MODIFICATION
that the interest imposed should be 12% per annum from July 19, 2001 until June 30,
2013 and 6% per annum from July 1, 2013 until fully paid.
SO ORDERED.
G.R. No. 191838 October 20, 2014
YKR CORPORATION, MA. TERESA J. YULO-GOMEZ, JOSE ENRIQUE J. YULO, MA.
ANTONIAJ. YULO-LOYZAGA, JOSE MANUEL J. YULO, MA. CARMEN J. YULO and JOSE
MARIAJ. YULO, Petitioners,
vs.
PHILIPPINE AGRI-BUSINESS CENTER CORPORATION, Respondent.
x-----------------------x
G.R. No. 191863
REPUBLIC OF THE PHILIPPINES, Petitioner,
vs.
PHILIPPINE AGRI-BUSINESS CENTER CORPORATION, Respondent.
DECISION
VILLARAMA, JR., J.:
At bar are two consolidated petitions for review on certiorari of the Resolutions
promulgated on June 30, 20091 and April 8, 20102 of the Sandiganbayan, 5th Division,
in Civil Case No. 0024 entitled Republic of the Philippines v. Peter Sabido, et al.,
rendering summary judgment in favor of respondent Philippine Agri-Business Center
Corporation (PABC).
In G.R. No. 191838, petitioners YuloKing Ranch Corporation (which later changed its
name to YKR Corporation and hereafter will be referred to as such) and six out of the
ten Yulo heirs raise purely questions of law as they seek to set aside or modify the
assailed Resolutions. YKR Corporation is a domestic corporation with office address at
C-J Yulo & Sons Building, Pasong Tamo corner Don Bosco Road, Makati City. The six
out of the ten Yulo heirs include six out of the nine children and legal heirs of the late
spouses Luis A. Yulo and Teresa J. Yulo. The late Luis A. Yulo was one of the original
defendants in this civil case. After his death on January 10, 1999, his late wife Teresa J.
Yulo and their six children became substitute defendants. Teresa J. Yulo subsequently
passed away on July 21, 2008. Petitioners have three other siblings who, according to
the petition, "have gone their own separate way[s] when Luis A. Yulo died."3 The
petition further states that "[p]etitioners haveno knowledge or information sufficient to
form a belief if their siblings are aware of the proceedings in (Sandiganbayan) Civil
Case No. 0024, including respondent’s move for a summary judgment and the assailed
resolutions of the Sandiganbayan."4 Respondent PABC, a domestic corporation, is a
plaintiff-in-intervention in Civil Case No. 0024 which sought, among others, that the
Sandiganbayan adjudge it as the true and lawful owner of a real property known as the
"Yulo King Ranch" located in Busuanga, Palawan, and order petitioner Republic of the
Philippines (Republic) to lift the sequestration and return possession of the subject
property to said respondent. The Sandiganbayan issued the assailed Resolutions in its
favor.

G.R. No. 191863 is a petition filed by the Republic, represented by the Presidential
Commission on Good Government (PCGG). The Republic is the plaintiff in Civil
Case No. 0024 – anaction for reversion, reconveyance, restitution, accounting and
damages. Similar to the petition in G.R. No. 191838, petitioner Republic raises a
pure question of law on whether the Sandiganbayan erred in granting respondent
PABC’s motion for summary judgment.5
The facts are statedin the Resolution6 promulgated on June 30, 2009 of the
Sandiganbayan: On 27 September 1988, plaintiff-in-intervention PABC filed a
Motion for Intervention and a Complaint-in-intervention to recover possession
(not title) of real properties registered in its name (PABC's Busuanga Properties),
located in Busuanga, Palawan, and covered by Transfer Certificate of Title Nos.
6110 and 6111. PABC prayed that: (a) it be adjudged the true and lawful owner of
the subject properties; and (b) defendant-in-intervention Republic be ordered to
return possession of the subject parcels of land to plaintiff-in-intervention.
In its Complaint-in-intervention, PABC explained that:
1. Among the assets allegedly belonging to defendants-inintervention Ferdinand E.
Marcos and Imelda R. Marcos sought to be forfeited or reconveyed to plaintiff in
the instant action is the real property known as the Yulo King Ranch located at
Busuanga, Palawan, listed in Annex A of the complaint and the expanded
complaint, as part of the properties of defendant-inintervention Peter Sabido;
2. The property (i.e. Yulo King Ranch) was, prior to sequestration, then controlled
by defendant-inintervention YKR Corporation wherein defendants-inintervention
Sabido and Yulo are the controlling stockholders on record;
3. The Yulo King Ranch includes two (2) parcels of land and all the improvements
therein which are owned by the plaintiff-in-intervention;
4. Sometime in 1975, without the knowledge or consent of the plaintiff-in-
intervention, the defendant-inintervention YKR Corporation unlawfully entered
into and occupied said two (2) parcels of land and all the improvements thereon
which are owned by the plaintiff-in-intervention;
5. On or about 2 April 1986, defendant-in-intervention Republic of the Philippines,
through the PCGG, sequestered the Yulo King Ranch and gave the possession and
control of all the assets in said ranch, including the two parcels of land owned by
plaintiff-inintervention, to the then Ministry of Agriculture; and
6. Defendant-in-intervention Republic of the Philippines is obligated to x x x return
possession of those (2 parcels of) lands to plaintiff-in-intervention which was a
victim of the Marcos rule.
On 14 November 1988, the Court issued a Resolution granting PABC’s Motion to
Intervene and admitting the Complaint-in-intervention. Defendant-in-intervention
Republic filed a Motion for Reconsideration, which was denied by the Court ina
Resolution dated 4 January 1989.
On 31 January 1989, PABC received Sabido’s Answer with Compulsory
Counterclaim (to Complaint-in-intervention), wherein Sabido:
1. Denied that he had acted inconcert with defendants-in- intervention Ferdinand
E. Marcos and Imelda R. Marcos in illegally acquiring the real property which is the
subject of the Complaint-in-intervention, the truth being that at the time of the
alleged unlawful act in 1975, defendant-in-intervention Sabido had no
involvement directly or indirectly with co-defendantsin-intervention Marcoses and
YKR Corporation, much less in the alleged unlawful acquisition of said property; 2.
Denied that the Yulo King Ranch forms part of his properties;
3. Admitted that the Republic through the PCGG[,] sequestered the Yulo King
Ranch.
On 26 April 2007, PABC served a Request for Admissions on all the defendants-in-
intervention, requesting the admission of the following:
1.2. Title to the properties [PABC's Busuanga properties] is registered in the name
of plaintiff-in-intervention PABC;
1.3. The properties are legally and beneficially owned by plaintiff-in-intervention
PABC;
1.4. The properties have never been registered in the names of any of the
defendants-in-intervention;
1.5. Plaintiff-in-intervention PABC did not execute any deed or document transferring
the ownership or possession of the propertiesto any of the defendantsin-intervention
or to any other person;
1.6. Plaintiff-in-intervention PABC is, and has never ceased to be, the true, lawfuland
registered owner of the properties;
1.7. The properties are not assets of defendant-inintervention YKR;
xxxx
1.10. Sometime in 1975, without the knowledge or consent of plaintiff-in-intervention
PABC, defendant-in-intervention YKR entered into and occupied the properties and
used them for its cattle breeding and dispersal operations;
1.11. Defendant-in-intervention YKR possessed and had control of the properties
during the time that the Marcos Government declared Martial Law;
1.12. Plaintiff-in-intervention PABC demanded that defendant-in-intervention YKR
vacate the properties, but the demand was not heeded;
1.13. Plaintiff-in-intervention PABC could not take any judicial action without risk to
itself and its stockholders, because they had been warned that defendants-in-
intervention YKR and its owners were close to or associated with defendants-
inintervention Marcoses, and that such action would be futile;
1.14. Plaintiff-in-intervention PABC could not obtain judicial relief during the Martial
Law regime without incurring the ire of the Marcoses and risking retaliation;
xxxx
1.17. On or about 2 April 1986, defendant-in-intervention Republic, through the PCGG,
sequestered YKR and gave the possession and control of all its assets to the then
Ministry of Agriculture.
Defendant-in-intervention Republicfiled its "Reply" on 9 May 2007 admitting the
following:
1. Prior to the issuance of the Sequestration Order dated 2 April 1986, the properties
were possessed by defendants-in-intervention YKR;
2. YKR entered into and occupied the properties and used them for its cattle breeding
and dispersal operations;
3. YKR possessed and had control of the properties during the time that the Marcos
Government declared Martial Law;
4. On or about 2 April 1986, defendant-in-intervention Republic, through the PCGG,
sequestered YKR’s assets and turned over the management and operation of the ranch
x x x to the Bureau of Animal Industry;
5. The properties are not assets of defendant-in-intervention YKR.
In the same Reply, Republic denied that: a) the properties are legally and beneficially
owned by PABC; b) the properties have never been registered in the names of any of
the defendants-in-intervention; and c) PABC is, and has never ceased to be, the true,
lawful and registered owner of the properties on account ofthe existence of
Presidential Proclamation No. 1387, entitled "Reserving and Establishing As a Pasture
Reserve a Certain Parcel of Land of the Public Domain Situated in the Island of
Busuanga, Province of Palawan" and Presidential Decree No. 1297, entitled
"Centralizing the Importation of Ruminants for Breeding and Slaughter And Beef"’,
which placed the entire Busuanga Ranch as reserved grazing public land.
On 11 May 2007, defendants-in-intervention YKR Corporation and seven out of the ten
Yulo Heirs filed their Answer to the Request for Admissions, wherein they answered
thatthey cannot truthfully admit or deny the following matters:
1. Title to the properties is registered in the name of plaintiff-in-intervention PABC;
2. The properties are legally and beneficially owned by plaintiff-in-intervention PABC;
3. The properties have never been registered in the names of any of the defendants-in-
intervention;

4. Plaintiff-in-intervention PABC did not execute any deed or document
transferring the ownership or possession of the properties to any of the
defendants-inintervention or to any other person;
5. Plaintiff-in-intervention PABC is, and has never ceased to be, the true, lawful and
registered owner of the properties;
6. The properties are not assets of defendant-inintervention YKR;
7. Prior to the issuance of the Sequestration Order dated 2 April 1986, the
properties were possessed by defendants-in-intervention YKR;
8. Sometime in 1975, without the knowledge or consent of plaintiff-in-intervention
PABC, defendant-inintervention YKR entered into and occupied the properties and
used them for its cattle breeding and dispersal operations;
9. Defendants-in-intervention YKR possessed and had control of the properties
during the time that the Marcos Government declared Martial Law.
According to YKR Corporation and seven out of the ten Yulo Heirs, a truthful
admission or denial of the above-stated matters could not be made because all
the records of YKR Corporation have been taken by the PCGG when it was
sequestered.
On the other hand, [d]efendant-in-intervention Sabido did not answer PABC’s
Request for Admissions despite due notice.
In their Motion for Summary Judgment pursuant to Section 1, Rule 35 of the
Revised Rules of Court, plaintiff-in-intervention PABC contends that:
1. There is no genuine issue thatdefendant-in-intervention Sabido has any interest
in the Busuanga Properties, as he has admitted or should be deemed to have
admitted PABC’s title over the same. Having failed to file an answer to PABC’s
Request for Admissions, Sabido is deemed to have admitted each of the matters of
which an admission is requested, pursuant to Rule 26, Section 2, of the Rules of
Court.
2. There is no genuine issue thatYKR Corporation and seven out of the ten Yulo
Heirs have any interestin the Busuanga Properties, as they have not validly denied
PABC’s title over the same. Defendants-inintervention YKR Corporation and seven
out of the ten Yulo Heirs neither admitted nor denied most of the facts stated in
PABC’s Request for Admissions, including PABC’s ownership of the Busuanga
Properties, on the ground that all records of YKR Corporation have been taken by
the PCGG when it was sequestered. Furthermore, PABC contends that YKR
Corporation and seven out of the ten Yulo Heirs’ Answer is obviously evasive and
cannot be considered a specific denial considering that they do not expressly
admit or deny PABC’s ownership of the Busuanga Properties – a matter which,
even withoutthe records, ought to be within their personal knowledge. PABC
concludes that YKR Corporation and seven out of the ten Yulo Heirs’ response is in
the nature of a negative pregnant which is equivalent to an admission, it being
pregnant with admissions of the substantial facts alleged in the Request for
Admission of PABC.
3. There is no genuine issue that the Republic has any interest in the Busuanga
Properties, as it has not validly denied PABC’s title over the same. PABC contends
that the provisions of Presidential Proclamation No. 1387 and Presidential Decree
No. 1297 are not inconsistent with and do not affect PABC’s registered title to the
Busuanga Properties; and as such, the Republic should be deemed to have failed
to specifically deny the matters stated in PABC’s Request for Admissions, including
PABC’s registered title to the Busuanga Properties. Moreover, Presidential
Proclamation No. 1387 was issued only on 13 February 1975, or many decades
after the Busuanga Properties were originally registered in the Register of Deeds of
Palawan, as private properties on 1 July 1916 and 21 May 1919, respectively.
Likewise, Presidential Decree No. 1297 does not contain anything that would
support the PCGG’s claim of ownership over the Busuanga Properties. In fact,
Presidential Decree No. 1297 provides that the approximately 40,000 hectares of
grazing land located in Busuanga, Palawan, are placed under the management of
King Ranch pursuant to a Technical Assistance Agreement. Thus, Presidential
Decree No. 1297 also shows that YKR Corporation never had title to these
properties.
4. There is no genuine issue that the Busuanga Properties are either ill-gotten
wealth or sequestered assets. Since the Republic admits that the Busuanga
Properties are neither ill-gotten nor sequestered, then the PCGG which was
created and tasked torecover ill-gotten wealth of the Marcoses and their associates,
had absolutely no authority to take possession of the Busuanga Properties on the basis
of Presidential Proclamation No. 1387 and Presidential Decree No. 1297, considering
that the laws defining the statutory authority of the PCGG, Executive Order Nos. 1, 2
and 14, state that the PCGG canonly seize and recover ill-gotten wealth accumulated by
former President Ferdinand E. Marcos, his immediate family, relatives and close
associates. It is the Solicitor General and not the PCGG which is the government agency
tasked to resolve issues of whether a real property is land of the public domain under
Presidential Proclamation No. 1387 and Presidential Decree No. 1297 and whether
PABC’s titles to the property are invalid.
On the other hand, defendants YKR Corporation and seven out of the ten Heirs of the
Late Luis A. Yulo filed their "OPPOSITION TO MOTION FOR SUMMARY JUDGMENT"
and argued that the motion for summary judgment filed by plaintiff-in-intervention
PABC is not proper considering that herein defendants have not filed an answer to the
complaint-in-intervention.
In its Reply, PABC claims that the contention raised by defendants is lacking in merit. It
asserts that this Court, in a Resolution dated 28 November 1991, already ruled that the
filing of answers to PABC’s Complaint-in-intervention is only permissive and not
mandatory, citing Rule 12, Section 2(c), of the former Rules of Court, hence, the non-
filing of such an answer cannot be a valid basis to oppose the Motion for Summary
Judgment; secondly, YKR Corporation and seven out of the ten Yulo Heirs are estopped
from claiming that they have the right to file an answer to PABC’s complaint-in-
intervention and from relying on their choice to not file an answer as a basis for
opposing the Motion for Summary Judgment. PABC further contends that YKR and
seven out of the ten Yulo Heirs’ Answer to PABC’s Request for Admissions provides
sufficient basis for the rendition of a summary judgment as they actually already
responded to PABC’s allegations and causes of action therein.
For its part, plaintiff Republic filed a Comment/Opposition wherein it argues that the
BusuangaBreeding and Experimental Station (BBES) in Busuanga, Palawan, is not a
sequestered asset because it belongs to the government pursuant toPresidential
Proclamation No. 1387 and Presidential Decree No. 1297 which placed the same as
reserved grazing public land. It also added that the term Busuanga Properties, as used
by PABC, is misleading. Said term tends to encompass all the properties located in the
BBES such as the land and all the improvements thereon, including all the assets and
properties of YKR Corporation which were sequestered by the PCGG, when, in fact,
PABC’s claim is confined only to two (2) parcels of land situated within the BBES in
Busuanga, Palawan, and does not include the assets and properties of YKR Corporation.
Plaintiff Republic also noted that its interest in the subject land finds basis not from a
Sequestration Order but from Presidential Proclamation No. 1387 and Presidential
Decree No. 1297 which classified the BBES as a reserved grazing publicland, and
pointed out that these laws came before the subject lands were registered in the name
of PABC on 12 May 1975, hence, whatever rights PABC may have acquired thereon
must be subjected to the rights ofthe government, as conferred by the above-
mentioned laws. It further emphasized that PABC’s claim that the Republic’s denials
relating to PABC’s ownership of the subject lands are in the nature of a negative
pregnant, is erroneous, considering that the Republic has denied all of the PABC’s
allegations relating to its ownership of the said parcels of land by invoking the
provisions of Presidential Proclamation No. 1387, Presidential Decree No. 1297 and
Presidential Decree No. 1593.
Secondly, Republic contends that the Sandiganbayan is not the proper court to decide
PABC’s claim of ownership over the subject land considering that under Republic Act
No. 7975, the Sandiganbayan does not have the power and jurisdiction to determine
ownership of land not falling within the civil cases filed pursuant to and in connection
with Executive Order Nos. 1, 2, 14 and 14-a.
In its Reply to Republic’s Comment/Opposition, PABC reiterated its arguments and
insisted that it isclear that the PCGG did not have authority to seize control and
possession of the Busuanga Properties pursuant to Presidential Proclamation No. 1387
and Presidential Decree No. 1297, and further stressed that the Republic has never
denied that it was PCGG and not another governmentagency which actually seized
possession of the Busuanga Properties and that the Republic, through the PCGG, took
possession of the sameby reason of the inapplicable Sequestration Order dated 2 April
1986 and not because of Presidential Proclamation No. 1387 and Presidential Decree
No. 1297. PABC claims that it does not need to file any action to prove its ownership of
the Busuanga Properties, because it is clear and undisputed that PABC is the registered
owner by virtue of its Transfer Certificate of Title Nos. 6110 and 6111 dated 12 May
1975, which are presumed to be valid and binding on the whole world.7
The Sandiganbayan granted the motion. In its assailed Resolution promulgated on June
30, 2009, the court a quostated, viz.:
When the pleadings on file show that there are no genuine issues of fact to be
tried, the Rules of Court allows a party to obtain immediate relief by way of
summary judgment. Rule 35 of the Rules of Court which gives authority to trial
courts to grant relief by summary judgment is intended to expedite or promptly
dispose of cases where the facts appear undisputed and certain from the
pleadings, admissions and affidavits. That is, when the facts are not in dispute, the
court is allowed to decide the case summarily by applying the law to the material
facts. In other words, in a motion for summary judgment, the crucial question is:
are the issues raised in the pleadings genuine, sham or fictitious, as shown by
affidavits, depositions or admissions accompanying the motion?8
The Sandiganbayan ruled that there was no genuine issue of fact in the case at bar
since none of the parties to whom the Request for Admissions was served by
respondent PABC specifically denied the latter’s ownership over the subject
properties. The court a quoformulated the following conclusions:
1. Since respondent Sabido failed to file an answer to respondent PABC’s Request
for Admissions, the court considered him to have impliedly admitted each of the
matters to which an admission was requested.
2. For petitioners YKR Corporation and then seven out of the ten Yulo heirs, they
did not make a categorical admission or denial of the matters set forth in the
Request for Admissions "allegedly because all the records of YKR have been taken
by the PCGG when it was sequestered."9 The court a quo, while conceding that
this form of response to the Request for Admissions is allowed by the Rules of
Court, found the reason given to be "unconvincing because the matters requested
for admission ought to be within the personal knowledge of YKR Corporation and
seven out of the ten Yulo Heirs."10
3. Petitioner Republic, claiming a superior right to the subject properties by virtue
of Presidential Proclamation No. 1387 and Presidential Decree No. 1297 (PD 1297),
asserted thatwhatever rights PABC may have acquired on the properties "must
yield to or at least be subjected to the rights of the government, as conferred by
[thecited laws] which came before the subject lands were registered in the name of
PABC on 12 May 1975."11 On this form of answer, the court a quo concluded that
"[e]ven plaintiff Republic did not specifically deny PABC’s title to the properties."12
Petitioner Republic also questioned the jurisdiction ofthe Sandiganbayan to
determine the ownership of the subject lands under Republic Act No. 7975,13
where the Sandiganbayan allegedly does not have the power and jurisdiction to
determine ownership of land not falling within the civil cases filed under Executive
Orders Nos. 1, 2, 14 and 14-a. The Republic contended that since the subject
properties are neither ill-gotten wealth nor sequestered assets as they are reserved
grazing public landsbelonging to the government pursuant to Presidential
Proclamation No. 1387 and PD 1297, the Sandiganbayan does not have
jurisdiction to resolve any claim of ownership involving the subject properties.
Based on the foregoing conclusions of the court a quo, it ruled that it was evident
that no genuine issues of fact existed in the case at bar, especially as to
respondent PABC’s ownership of the subject lands. It granted the motion for
summary judgment and decided the instant case on the conclusion that the
instant controversy posed only pure questions of law, as follows:
1. Whether or not the Court has jurisdiction to resolve PABC’s claim over the
subject lands; and 2. Whether or not the government has a superior right than that
of PABC’s over the subject properties by virtue of Presidential Proclamation No.
1387 and Presidential Decree No. 1297.14
According to the court a quo, the resolution of these issues does not require an
examination of the evidence of the parties, but only "entail[s] an application of
prevailing laws to the particular facts ofthe instant case."15
Anent the first issue, the court held that it has exclusive and original jurisdiction
over all civil or criminalcases involving the PCGG regarding the "Funds, Moneys,
Assets, and Properties Illegally Acquired or Misappropriated by Former President
Ferdinand Marcos, Mrs. Imelda Romualdez Marcos, and their Close Relatives,
Subordinates, Business Associates, Dummies, Agents, or Nominees," and all
incidents arising from, incidental to, or related to, such cases, subject to review on
certiorari exclusively by the Supreme Court.16 It further held that it also has
jurisdiction to determine whether the PCGG "has gravely abused its discretion or
has overstepped the boundaries of the power conferred upon it by law"17 – as in
this case where at issue is the propriety of the PCGG’s take-over of the subject
parcels of land and their subsequent turn-over to the Bureau of Animal Industry
pursuantto Presidential Proclamation No. 1387 and PD 1297.18
On the issue of ownership, the court a quo upheld respondent PABC’s titles to the
parcels of land based on Transfer Certificates of Title (TCTs) Nos. 6110 and 6111 dated
May 12, 1975 issued in its name. The court a quo considered these TCTs as
"uncontroverted evidence proving PABC’s ownership" over the subject properties.The
court based its ruling on PD 1297 and especially on the following provision of
Presidential Proclamation No. 1387 which states, viz.: Upon the recommendation of the
Secretary of Natural Resources, and pursuant to the authority vested in me by law, I,
FERDINAND E. MARCOS, President of the Philippines, do hereby withdraw from sale,
settlement or any other form of disposition, exploration or exploitation, and reserve as
a pasture reserve, subject to private rights, if any there be, a certain parcel of landof the
public domain situated in the island of Busuanga, Province of Palawan, x x x.19
The Sandiganbayan construed the phrase "subject to private rights" in the above-
quoted provision to mean "private rights that were acquired before the issuance of said
proclamation on 13 February 1975."20 Petitioner Republic counterclaimed that these
laws were issued by the executive department before the subject properties were
registered in the name of respondent PABC, hence, "whatever rights PABC may have
acquired on the properties must necessarily yield, or at least be subjected to the rights
of the government."21 The court a quoresolved the parties’ conflicting claims as
follows:
x x x Nonetheless, while it is true that PABC’s Certificates of Title to the properties were
registered in its name only on 12 May 1975, PABC’s predecessors-in-interest have
already acquired private rights over the subject lands upon issuance of Original
Certificates of Title in the name of said predecessors-in-interestas early as 1 July 1916
and 21 May 1919, or more than 50 years before the issuance of Presidential
Proclamation No. 1387, as reflected in PABC’s Transfer Certificate[s] of Title Nos. 6110
and 6111. Evidently, as early as 1916 and 1919, the subject lands were already under
the private ownership of PABC’s predecessors-in-interest, and no longer part of the
lands of the public domain.
Consequently, given that the verylaw cited by plaintiff Republic provides that its
provisionsand operation are subject to private rights, hence, the government must
necessarilyyield to the private rights of PABC’s predecessors-in-interest over the parcels
of land as vested by their titles to the property which they acquired decades before the
reservation of said land as pasture reserve. Among these rights which said
predecessors-in-interest may exercise is the disposition and transfer of said land in
favor of PABC. And by virtue of said transfer of title over the subject land, PABC has
acquired all vested rights which its predecessors-in-interest exercised over said
property, which rights are recognized and respected by Presidential Proclamation No.
1387. Hence, the withdrawal from sale, settlement or any other form of disposition,
exploration or exploitation, and the subsequent reservation as a pasture reserve of the
described parcel of land situated in the island of Busuanga, Palawan, as ordered by
Presidential Proclamation No. 1387, cannot be made to apply to the titled property
belonging to PABC as the same no longer forms part of the lands of the public
domain.22
With the foregoing disquisitions, the Sandiganbayan ruled in its assailed June 30, 2009
Resolution, viz.:
WHEREFORE, premises considered, the instant Motion for Summary Judgment is
hereby GRANTED. Philippine Agri-Business Center Corporation is hereby declared the
lawful owner of the real properties located in Busuanga, Palawan, covered by Transfer
Certificate of Title Nos. 6110 and 6111. Plaintiff Republic of the Philippines is hereby
ordered to return possession of said properties to Philippine AgriBusiness Center
Corporation.
SO ORDERED.23
Both petitioners moved for reconsideration and prayed that the June 30, 2009
Resolution be set aside and a new one be issued denying respondent PABC’s Motion
for Summary Judgment for lack of merit. Both motions were denied in the assailed
Resolution promulgated on April 8, 2010, viz.:
WHEREFORE, the Motion for Reconsideration dated July 20, 2009 filed by defendants-
in-intervention YKR Corporation and six out of the ten legal heirs of the late Luis A.
Yulo, and the Motion for Reconsideration dated July21, 2009 filed by the Plaintiff,
Republic of the Philippines, are both denied, and the Resolution dated June 18, 2009
stands.
SO ORDERED.24
Petitioners now come before this Court raising similar grounds for review. In a
Resolution issued by the Court on August 11, 2010, the petitions at bar were
consolidated "to avoid conflicting rulings in similar cases brought before this Court for
resolution considering that the petitions in both cases involve the same parties and
similar facts and assail the same Sandiganbayan resolutions in Civil Case No.
0024."25
In G.R. No. 191838, petitioners YKR Corporation and six out of the ten Yulo heirs
raised the following issues:
[I.] THE SANDIGANBAYAN DISREGARDED THE LAW AND APPLICABLE
JURISPRUDENCE IN RENDERING SUMMARY JUDGMENT AGAINST PETITIONERS.
[II.] THE SANDIGANBAYAN HAS NO JURISDICTION OVER THE COMPLAINT-IN-
INTERVENTION.26
In G.R. No. 191863, petitioner Republic assigned a lone error:
WITH ALL DUE RESPECT, THE SANDIGANBAYAN ERRED IN LAW WHEN IT
GRANTED RESPONDENT’S MOTION FOR SUMMARY JUDGMENT EVEN IF THE
SAME IS NOT SUPPORTED BY DEPOSITION, AFFIDAVIT OR ADMISSION ON THE
RECORDS.27
We grant the petitions.
The 1997 Rules of Civil Procedure, asamended, states the following provisions on
summary judgments under Rule 35:
SECTION 1. Summary judgment for claimant. – A party seeking to recover upon a
claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any
time after the pleading in answer thereto has been served, move with supporting
affidavits, depositions or admissions for a summary judgment in his favorupon all
or any part thereof.
SEC. 2. Summary judgment for defending party. – A party against whom a claim,
counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any
time, move with supporting affidavits, depositions or admissions for a summary
judgment in his favor as to all or any part thereof.
SEC. 3. Motion and proceedings thereon. — The motion shall be served at least ten
(10) days before the time specified for the hearing. The adverse party may serve
opposing affidavits, depositions, or admissions at least three (3) days before the
hearing. After the hearing, the judgment sought shall be rendered forthwith if the
pleadings, supporting affidavits, depositions, and admissions on file, showthat,
except as to the amount of damages, there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.
The disposition of a civil action viasummary judgment is a method sanctioned
under the Rules where there exists no question or controversy as to the material
facts. Thus, when a party moves for summary judgment, this is premised on the
assumption that a scrutiny of the facts will disclose that the issues presented need
not be tried either because these are patently devoid of substance or that there is
no genuine issue as to any pertinent fact. A judgment on the motion must be
"rendered forthwith if the pleadings, supporting affidavits, depositions, and
admissions on file show that, except as to the amount of damages, there isno
genuine issue and that the moving party is entitled to a judgment as a matter of
law."28 The case of Viajar v. Judge Estenzo29 incisively explains the rationale for
this sanctioned, albeit expedited, procedure: Relief by summary judgment is
intended to expedite or promptly dispose of cases where the facts appear
undisputed and certain from the pleadings, depositions, admissions and affidavits.
But if there be a doubt as to such facts and there be an issue orissues of fact
joined by the parties, neither one of them can pray for a summary judgment.
Where the facts pleaded by the parties are disputed or contested, proceedings for
a summary judgment cannot take the place of a trial.30
In the same case, the Court expounded that caution must be exercised when
courts dispose of a civil case viasummary judgment because this procedural device
does away with trial and deprives parties the opportunity to present their evidence
in court, viz.:
An examination of the Rules willreadily show that a summary judgment is by no
means a hasty one. Itassumes a scrutiny of facts in a summary hearing after the
filing of a motion for summary judgment by one party supported by affidavits,
depositions, admissions, or other documents, with notice upon the adverse party
who may file an opposition to the motion supported also by affidavits,
depositions, or other documents (Section 3, Rule 34). In spite of its expediting
character, relief by summary judgment can only be allowed after compliance with
the minimum requirement of vigilance by the court in a summary hearing
considering that this remedy is in derogation of a party’s right to a plenary trial of
his case. At any rate, a party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that the issue posed
in the complaint is so patently unsubstantial as not to constitute a genuine issue for
trial,and any doubt as to the existence of such an issue is resolved against the
movant.31
To determine whether summary judgment was properly rendered by the court a quo,
we shall examine if the following requisites under Rule 35 of the Rules obtain in the
case at bar, viz.:
1. there must be no genuine issue as toany material fact, except for the amount of
damages; and
2. the party presenting the motion for summary judgment must be entitled to a
judgment as a matter of law.
A "genuine issue of fact" is an issue "which requires the presentation of evidence as
distinguished from a sham, fictitious, contrived or false claim. When the facts as
pleaded appear uncontested or undisputed, then there is no real or genuine issue or
question as to the facts, and summary judgment is called for. The party who moves for
summary judgment has the burden of demonstrating clearly the absence of any
genuine issue of fact, or that the issue posed in the complaint is patently unsubstantial
so as not to constitute a genuine issue for trial. x x x When the facts as pleaded by the
parties are disputed or contested, proceedings for summary judgment cannot take the
place of trial."32
A prudent examination of the evidence on record yields to no other conclusion that
there exists a genuine issue of fact as raised in both petitions.
In G.R. No. 191838, petitioners YKR Corporation and then seven out of the ten Yulo
heirs responded to the Request for Admissions by making no categorical admission or
denial of the matters set forth inthe Request for Admissions allegedly because all the
records of YKR Corporation have been taken by the PCGG when they were sequestered.
This answer is a permissible way of making a specific denial under the Rules. In Section
10, Rule 8 thereof, there are three waysof making a specific denial: (1) by specifying
each material allegation of the fact in the complaint, the truth of which the defendant
does not admit, and whenever practicable, setting forth the substance of the matters
which he will rely upon to support his denial; (2) by specifying so much of an averment
in the complaint as is true and material and denying only the remainder; and, (3) by
stating that the defendant is without knowledge or information sufficientto form a
belief as to the truth of a material averment in the complaint, which has the effect of a
denial.33
With respect to the aforesaid third form of denial, this Court ruled in Philippine Bank of
Communications v. Court of Appeals34 that the defendant’s contention thatit had no
knowledge or information sufficient to form a belief as to the truth of the deed of
exchange was an invalid or ineffectual denial pursuant to the Rules of Court, as it could
have easily asserted whether or not it had executed the deed of exchange attached to
the petition. Citing Capitol Motors Corporations v. Yabut,35 the Court stated that:
x x x The rule authorizing an answer to the effect that the defendant has no knowledge
or information sufficient to form a belief as to the truth of an averment and giving such
answer the effect of a denial, does not apply where the fact as to which want
ofknowledge is asserted, is so plainly and necessarily within the defendant’s knowledge
that his averment of ignorance must be palpably true.36 (Emphasis supplied.)
The court a quo, while it recognized that the response given by YKR Corporation and
the then seven out of the ten Yulo heirs is allowed by the Rules, did not accept the
specific denial and ruled that there existed no genuine issue of fact because despite the
sequestration by the PCGG of YKR’s records, the matters "ought to be within the
personal knowledge of YKR Corporation and [the then] seven out of the ten Yulo
heirs."37 On this issue, we agree with petitioners YKR Corporation and the remaining
six out of the ten Yulo heirs that the Sandiganbayan erred when it issued an
unsubstantiated statement that the matters requested for admission in respondent
PABC’s Request for Admission "ought to be within the personal knowledge" of YKR
Corporation and the then seven out of the ten Yulo heirs, without citing any basis both
in fact and in law.1âwphi1 We quote the relevant portion of the assailed Resolution
promulgated on June 30, 2009 of the court a quo:
In the case at bar, none of the parties to whom a Request for Admissions was served by
PABC have specifically denied PABC’s ownership over the subject properties. x x x On
the other hand, YKR Corporation and seven out of the ten Yulo Heirs made no
categorical admission or denial of the matters set forth in the Request for Admissions
allegedly because all the records ofYKR have been taken by the PCGG when it was
sequestered. Although this form of response to a Request for Admissions is allowed by
the Rules, the reason given by YKR Corporation and seven out of the ten Yulo
Heirs that a truthful admission or denial of the matters set forth inthe Request for
Admissions cannot be made because all the records of YKR have been taken by
the PCGG when it was sequestered is unconvincing because the matters requested
for admission ought to be within the personal knowledge of YKR Corporation and
seven out of the ten Yulo Heirs.38
In ruling on the issue of whether a genuine issue of fact exists, there was no
mention of any circumstance or situation upon which the court a quo derived its
conclusion that the matters requested for admission "ought to be within the
personal knowledge" of YKR Corporation and seven out of the ten Yulo Heirs. We
cannot thus properly ascertain whether the facts which the latter could not make
any truthful admission or denial are so plainly and necessarily within their
knowledge. The only other instance that the court a quodiscussed this issue was in
the following quoted paragraph of its assailed Resolution promulgated on April 8,
2010, viz.:
If indeed YKR or the Yulo heirs have any right or interest in the properties covered
by Transfer Certificates of Title Nos. 6110 and 6111 of the Register of Deeds of
Palawan, then they ought to have made allegations of any knowledge or
information as to the nature of such right or interest, or at the very least denied
PABC’s ownership or right to possession over the subject properties, in their
Answer to Request for Admissions of PABC dated May 11, 2007. x x x39
Considering that petitioners YKR Corporation and the remaining six out of the ten
Yulo heirs were deprived of their day in court, the court a quo should have made
its ruling as to the non-existence of genuine issues of fact by clearly stating its
basis both in fact and in law and not on purely conjectural determinations, i.e., that
"the matters requested for admission ought to be within the personal knowledge
of YKR Corporation and [the then] seven out of the ten Yulo Heirs"40 and that
"they ought to have made allegations of any knowledge or information as to the
nature of such right or interest, or at the very least denied PABC’s ownership or
right to possession over the subject properties."41 To be sure, YKR Corporation
and the then seven out of the ten Yulo heirs tendered an answer which is a
permissible form of making a specific denial under Section 10, Rule 8 of the Rules.
The court a quoitself stated in the assailed June 30, 2009 Resolution that "this form
of response to a Request for Admissions is allowed by the Rules."42 Even
respondent PABC – the party that moved for summary judgment and which has
the burden to prove that there are no genuine issues of fact in the case at bar –
did not submit any supporting affidavits, depositions or admissions to prove that
the matters requested for admission "ought to be within the personal knowledge
of YKR Corporation and [the then] seven out of the ten Yulo Heirs."43
There also exists a genuine issue of fact as to petitioner Republic.
In the assailed Resolution promulgated on June 30, 2009, the court a quostated,
viz.:
Even plaintiff Republic did not specifically deny PABC’s title to the properties, but
instead claims a superior right to the subject properties by virtue of Presidential
Proclamation No. 1387 and Presidential Decree No. 1297. Plaintiff Republic argues
that whatever rights PABC may have acquired on the property must yield to or at
least be subjected to the rights of the government, as conferred by Presidential
Proclamation No. 1387 and Presidential Decree No. 1297 which came before the
subject lands were registered in the name of PABC on 12 May 1975. x x x44
We do not agree. Petitioner Republictendered a specific denial as required under
Section 10, Rule 8 of the 1997 Rules of Civil Procedure, as amended, viz.:
REPLY [TO REQUEST FOR ADMISSION NO. 1.1.] – Plaintiff cannot truthfully affirm
or deny the Request No. 1.1 because the land subject matter thereof forms part
and parcel of the land specially declared by Presidential Proclamation No. 1387
(Reserving and Establishing As A Pasture Reserve A Certain Parcel Of Land Of The
Public Domain Situated In The Island Of Busuanga, Province Of Palawan) and
Presidential Decree No. 1297 (Centralizing The Importation Of Ruminants For
Breeding And Slaughter And Beef) as reserved land intended for grazing
purposes.45
The court a quoruled that even the very law cited by petitioner Republic states that
its provisions and operation are "subject to private rights," so the government
must yield to the private rights of respondent PABC’s predecessors-in-interest over
the parcels of land as vested by their titles to the subject properties. The court a
quonoted that respondent PABC’s predecessors-in-interest acquired their titles
decades before the subject land was declared as a pasture reserve. According to
the assailed June 30, 2009 Resolution, when these predecessors-in-interest
transferred the subject land in favor of respondent PABC, the private rights transferred
to the latter must be recognized and respected under Presidential Proclamation No.
1387. The court a quothus concluded that "the withdrawal from sale, settlement or any
other form of disposition,exploration or exploitation, and the subsequent reservation as
a pasture reserve of the described parcel of land situated in the island of Busuanga,
Palawan, as ordered by Presidential Proclamation No. 1387, cannot be made to apply
to the titled property belonging to PABC as the same no longer forms part of the lands
of the public domain."46 The Sandiganbayan stated, viz.:
x x x Nonetheless, while it is true that PABC’s Certificates of Title to the properties were
registered in its name only on 12 May 1975, PABC’s predecessors-in-interest have
already acquired private rights over the subject lands upon issuance of the Original
Certificates of Title in the name of said predecessors-in-interestas early as 1 July 1916
and 21 May 1919, or more than 50 years before the issuance of Presidential
Proclamation No. 1387, as reflected in PABC’s Transfer Certificate[s] of Title Nos. 6110
and 6111. Evidently, as early as 1916 and 1919, the subject lands were already under
the private ownership of PABC’s predecessors-in-interest, and no longer part of the
lands of the public domain.47
We disagree.
While the Sandiganbayan correctly pointed out that, on their face, the original
certificates of title – from which the transfer certificates of title of respondent PABC
were derived – were issued in the name of respondent PABC’s predecessors-in-interest
as early as July 1, 1916 and May 21, 1919, evidence is still required to prove that the
"private rights" acquired by respondent PABC are superior over the rights of petitioner
Republic which also claims to have a better right over the same properties by virtue of
Presidential Proclamation No. 1387 and PD1297. To be sure, respondent PABC’s Motion
for Summary Judgment48 was not supported by "supporting affidavits, depositions or
admissions"49 as stated under the Rules. Without clear, positive and absolute evidence
that respondent PABC has a better right than petitioner Republic, such "genuine issue
of fact" could not be resolved because we simply do not have the facts to rule on the
issue.
Finally, petitioners YKR Corporation and six out of the ten Yulo heirs raise the issue that
the Sandiganbayan did not have jurisdiction to entertain r espondent PABC's
Complaint-in-Intervention50 dated August 31, 1988. It is now too late in the day for
petitioners to raise the issue of jurisdiction over a complaint-in-intervention that was
filed 26 years ago. Petitioners should have raised the alleged jurisdictional defect at the
earliest possible opportunity when respondent PABC filed its Motion for Intervention51
and the subject Complaint-in-Intervention. However, instead of filing an opposition to
the court a quo 's admission of the Complaint-in-Intervention, petitioners even filed
their Answer to Request for Admissions of PABC52 on May 11, 2007, their Opposition
to Motion for Summary Judgment53 on January 21, 2008, and their Motion for
Reconsideration (Re: Resolution dated June 18, 2009)54 on July 20, 2009. It is of no
moment that petitioners did not file an answer to the Complaint-in-Intervention. As
respondent P ABC correctly pointed out, viz.:
The Sandiganbayan ruled 22 years ago that unless allowed to intervene, P ABC "may
not have any other logical or practical remedy for the protection of its rights in view of
the extraordinary scope and nature of the instant sequestration proceedings."
Petitioners never questioned said ruling - until now, 22 long years after. Clearly,
petitioners are estopped from assailing the said ruling by the Sandiganbayan, which
has long been final.55
WHEREFORE, in view of the foregoing, the consolidated petitions for review are
GRANTED. The Resolutions promulgated on June 30, 2009 and April 8, 2010 of the
Sandiganbayan, 5th Division, in Civil Case No. 0024, are REVERSED and SET ASIDE. The
case is hereby REMANDED to the Sandiganbayan for further proceedings with
DELIBERATE DISPATCH. No pronouncement as to costs.
SO ORDERED.
G.R. NO. 207970
FERNANDO MEDICAL ENTERPRISES, INC., Petitioner,
vs.
WESLEYAN UNIVERSITY PHILIPPINES, INC., Respondent.
DECISION
BERSAMIN, J.:
The trial court may render a judgment on the pleadings upon motion of the
claiming party when the defending party's answer fails to tender an issue, or
otherwise admits the material allegations of the adverse party's pleading. For that
purpose, only the pleadings of the parties in the action are considered. It is error
for the trial court to deny the motion for judgment on the pleadings because the
defending party's pleading in another case supposedly tendered an issue of fact.
The Case
The petitioner appeals the decision promulgated on July 2, 2013,1 whereby the
Court of Appeals (CA) affirmed the order issued on November 23, 2011 by the
Regional Trial Court (RTC), Branch 1, in Manila, denying its motion for judgment on
the pleadings in Civil Case No. 09-122116 entitled Fernando Medical Enterprises,
Inc. v. Wesleyan University-Philippines.2
Antecedents
From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation
dealing with medical equipment and supplies, delivered to and installed medical
equipment and supplies at the respondent’s hospital under the following
contracts:
a. Memorandum of Agreement dated January 9, 2006 for the supply of medical
equipment in the total amount of P18,625,000.00;3
b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas
pipeline system valued at P8,500,000.00;4
c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of Diamond
Select Slice CT and one unit of Diamond Select CV-P costing P65,000,000.00;5 and
d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings and
equipment worth P32,926,650.00.6
According to the petitioner, the respondent paid only P67,357,683.23 of its total
obligation of P123,901,650.00, leaving unpaid the sum of P54,654,195.54.7
However, on February 11, 2009, the petitioner and the respondent, respectively
represented by Rafael P. Fernando and Guillermo T. Maglaya, Sr., entered into an
agreement,8 whereby the former agreed to reduce its claim to only
P50,400,000.00, and allowed the latter to pay the adjusted obligation on
installment basis within 36 months.9
In the letter dated May 27, 2009,10 the respondent notified the petitioner that its
new administration had reviewed their contracts and had found the contracts
defective and rescissible due to economic prejudice or lesion; and that it was
consequently declining to recognize the February 11, 2009 agreement because of
the lack of approval by its Board of Trustees and for having been signed by
Maglaya whose term of office had expired.
On June 24, 2009, the petitioner sent a demand letter to the respondent.11
Due to the respondent’s failure to pay as demanded, the petitioner filed its
complaint for sum of money in the RTC,12 averring as follows:
xxxx
2. On January 9, 2006, plaintiff supplied defendant with hospital medical
equipment for an in consideration of P18,625,000.00 payable in the following
manner: (2.1) For nos. 1 to 9 of items to be sourced from Fernando Medical
Equipment, Inc. (FMEI) – 30% down payment of P17,475,000 or P5,242,500 with the
balance of P12,232,500 or 70% payable in 24 equal monthly instalments of
P509,687.50 and (2.2.) cash transaction amounting to P1,150,000.00 (2.3) or an
initial cash payment of P6,392,500.00 with the remaining balance payable in 24
equal monthly installments every 20th day of each month until paid, as stated in
the Memorandum of Agreement, copy of which is hereto attached as Annex "A";
3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the
latter’s hospital building complex for and in consideration of P8,500,000.00
payable upon installation thereof under a Deed of Undertaking, copy of which is
hereto attached as Annex "B";
4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice
CT and one (1) unit Diamond Select CV-9 for and in consideration of
P65,000,000.00 thirty percent (30%) of which shall be paid as down payment and
the balance in 30 equal monthly instalments as provided in that Deed of
Undertaking, copy of which is hereto attached as Annex "C";
5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and
equipment for an in consideration of P32,926,650.00 twenty percent (20%) of which
was to be paid as downpayment and the balance in 30 months under a Deed of
Undertaking, copy of which is hereto attached as Annex "D";
6. Defendant’s total obligation to plaintiff was P123,901,650.00 as of February 15, 2009,
but defendant was able to pay plaintiff the sum of P67,357,683.23 thus leaving a
balance P54,654,195.54 which has become overdue and demandable;
7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and
extended its payment for 36 months provided defendants shall pay the same within 36
months and to issue 36 postdated checks therefor in the amount of P1,400,000.00 each
to which defendant agreed under an Agreement, copy of which is hereto attached as
Annex "E";
8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the
[a]mount of P1,400,000.00 but after four (4) of the said checks in the sum of
P5,600,000.00 were honored defendant stopped their payment thus making the entire
obligation of defendant due and demandable under the February 11, 2009 agreement;
9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4)
agreements may be rescissible and one of them is unenforceable while the Agreement
dated February 11, 2009 was without the requisite board approval as it was signed by
an agent whose term of office already expired, copy of which letter is hereto attached
as Annex "F";
10. Consequently, plaintiff told defendant that if it does not want to honor the February
11, 2009 contract then plaintiff will insists [sic] on its original claim which is
P54,654,195.54 and made a demand for the payment thereof within 10 days from
receipt of its letter copy of which is hereto attached as Annex "G";
11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid
plaintiff any amount, either in the first four contracts nor in the February 11, 2009
agreement, hence, the latter was constrained to institute the instant suit and thus
incurred attorney’s fee equivalent to 10% of the overdue account but only after
endeavouring to resolve the dispute amicable and in a spirit of friendship[;]
12. Under the February 11, 2009 agreement the parties agreed to bring all actions or
proceedings thereunder or characterized therewith in the City of Manila to the
exclusion of other courts and for defendant to pay plaintiff 3% per months of delay
without need of demand;13
xxxx
The respondent moved to dismiss the complaint upon the following grounds,14
namely: (a) lack of jurisdiction over the person of the defendant; (b) improper venue; (c)
litis pendentia; and (d) forum shopping. In support of the ground of litis pendentia, it
stated that it had earlier filed a complaint for the rescission of the four contracts and of
the February 11, 2009 agreement in the RTC in Cabanatuan City; and that the resolution
of that case would be determinative of the petitioner’s action for collection.15
After the RTC denied the motion to dismiss on July 19, 2009,16 the respondent filed its
answer (ad cautelam),17 averring thusly:
xxxx
2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED
subject to the special and affirmative defenses hereafter pleaded;
3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack of
knowledge or information sufficient to form a belief as to the truth or falsity thereof,
inasmuch as the alleged transactions were undertaken during the term of office of the
past officers of defendant Wesleyan University-Philippines. At any rate, these
allegations are subject to the special and affirmative defenses hereafter pleaded;
4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject
to the special and affirmative defenses hereafter pleaded;
5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being
conclusions of law.18
xxxx
The petitioner filed its reply to the answer.19
On September 28, 2011, the petitioner filed its Motion for Judgment Based on the
Pleadings,20 stating that the respondent had admitted the material allegations of
its complaint and thus did not tender any issue as to such allegations.
The respondent opposed the Motion for Judgment Based on the Pleadings,
arguing that it had specifically denied the material allegations in the complaint,
particularly paragraphs 6, 7, 8, 11 and 12.21
On November 23, 2011, the RTC issued the order denying the Motion for
Judgment Based on the Pleadings of the petitioner, to wit:
At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the
plaintiff thru counsel, Atty. Jose Mañacop on September 28, 2011, the court issued
an Order dated October 27, 2011 which read in part as follows:
xxxx
Considering that the allegations stated on the Motion for Judgment Based on the
Pleadings, are evidentiary in nature, the Court, instead of acting on the same,
hereby sets this case for pre-trial, considering that with the Answer and the Reply,
issues have been joined.
xxxx
In view therefore of the Order of the Court dated October 27, 2011, let the Motion
for Judgment Based on the Pleadings be hereby ordered DENIED on reasons as
abovestated and hereto reiterated.
xxxx
SO ORDERED.22
The petitioner moved for reconsideration,23 but its motion was denied on
December 29, 2011.24
The petitioner assailed the denial in the CA on certiorari.25
Judgment of the CA
On July 2, 2013, the CA promulgated its decision. Although observing that the
respondent had admitted the contracts as well as the February 11, 2009
agreement, viz.:
It must be remembered that Private Respondent admitted the existence of the
subject contracts, including Petitioner’s fulfilment of its obligations under the
same, but subjected the said admission to the "special and affirmative defenses"
earlier raised in its Motion to Dismiss.
xxxx
Obviously, Private Respondent’s special and affirmative defenses are not of such
character as to avoid Petitioner’s claim. The same special and affirmative defenses
have been passed upon by the RTC in its Order dated July 19, 2010 when it denied
Private Respondent’s Motion to Dismiss. As correctly found by the RTC, Private
Respondent’s special and affirmative defences of lack of jurisdiction over its
person, improper venue, litis pendentia and wilful and deliberate forum shopping
are not meritorious and cannot operate to dismiss Petitioner’s Complaint. Hence,
when Private Respondent subjected its admission to the said defenses, it is as
though it raised no defense at all.
Not even is Private Respondent’s contention that the rescission case must take
precedence over Petitioner’s Complaint for Sum of Money tenable.1avvphi1 To
begin with, Private Respondent had not yet proven that the subject contracts are
rescissible. And even if the subject contracts are indeed rescissible, it is well-settled
that rescissible contracts are valid contracts until they are rescinded. Since the
subject contracts have not yet been rescinded, they are deemed valid contracts
which may be enforced in legal contemplation.
In effect, Private Respondent admitted that it entered into the subject contracts
and that Petitioner had performed its obligations under the same.
As regards Private Respondent’s denial by disavowal of knowledge of the
Agreement dated February 11, 2009, We agree with Petitioner that such denial was
made in bad faith because such allegations are plainly and necessarily within its
knowledge.
In its letter dated May 27, 2009, Private Respondent made reference to the Agreement
dated February 11, 2009, viz.:
"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of
the University without the requisite authority from the Board of Trustees, and executed
when said agent’s term of office had already expired. Consequently, such contract is,
being an unenforceable contract."
Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it
attached to its Motion to Dismiss, that:
"13. On 6 February 2009, when the terms of office of plaintiff’s Board of Trustess
chaired by Dominador Cabasal, as well as of Atty. Guillermo C. Maglaya as President,
had already expired, thereby rendering them on a hold-over capacity, the said Board
once again authorized Atty. Maglaya to enter into another contract with defendant
FMEI, whereby the plaintiff was obligated to pay and deliver to defendant FMEI the
amount of Fifty Million Four Hundred Thousand Pesos (Php50,400,000.00) in thirty five
(35) monthly instalments of One Million Four Hundred Thousand Pesos
(Php1,400,000.00), representing the balance of the payment for the medical equipment
supplied under the afore-cited rescissible contracts. This side agreement, executed five
(5) days later, or on 11 February 2009, and denominated as "AGREEMENT", had no
object as a contract, but was entered into solely for the purpose of getting the plaintiff
locked-in to the payment of the balance price under the rescissible contracts; x x x"
From the above averments, Private Respondent cannot deny knowledge of the
Agreement dated February 11, 2009. In one case, it was held that when a respondent
makes a "specific denial" of a material allegation of the petition without setting forth
the substance of the matters relied upon to support its general denial, when such
matters where plainly within its knowledge and the defendant could not logically
pretend ignorance as to the same, said defendant fails to properly tender an issue.26
the CA ruled that a judgment on the pleadings would be improper because the
outstanding balance due to the petitioner remained to be an issue in the face of the
allegations of the respondent in its complaint for rescission in the RTC in Cabanatuan
City, to wit:
However, Private Respondent’s disavowal of knowledge of its outstanding balance is
well-taken. Paragraph 6 of Petitioner’s Complaint states that Private Respondent was
able to pay only the amount of P67,357,683.23. Taken together with paragraph 8, which
states that Private Respondent was only able to make good four (4) check payments
worth P1,400,000.00 or a total of P5,600,000.00, Private Respondent’s total payments
would be, in Petitioner’s view, P72,957,683.23. However, in its Complaint for Rescission,
attached to its Motion to Dismiss Petitioner’s Complaint for Sum of Money, Private
Respondent alleged that:
"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million
Four Hundred One Thousand Six Hundred Fifty Pesos (P78,401,650.00)"
It is apparent that Private Respondent’s computation and Petitioner’s computation of
the total payments made by Private Respondent are different. Thus, Private Respondent
tendered an issue as to the amount of the balance due to Petitioner under the subject
contracts.27
Hence, this appeal.
Issue
The petitioner posits that the CA erred in going outside of the respondent’s answer by
relying on the allegations contained in the latter’s complaint for rescission; and insists
that the CA should have confined itself to the respondent’s answer in the action in
order to resolve the petitioner’s motion for judgment based on the pleadings.1âwphi1
In contrast, the respondent contends that it had specifically denied the material
allegations of the petitioner’s complaint, including the amount claimed; and that the
CA only affirmed the previous ruling of the RTC that the pleadings submitted by the
parties tendered an issue as to the balance owing to the petitioner.
Did the CA commit reversible error in affirming the RTC’s denial of the petitioner’s
motion for judgment on the pleadings?
Ruling of the Court
The appeal is meritorious.
The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of
Court, which provides thus:
Section 1. Judgment on the pleadings. – Where an answer fails to tender an issue,
or otherwise admits the material allegations of the adverse party’s pleading, the
court may, on motion of that party, direct judgment on such pleading. x x x
The essential query in resolving a motion for judgment on the pleadings is
whether or not there are issues of fact generated by the pleadings.28 Whether
issues of fact exist in a case or not depends on how the defending party’s answer
has dealt with the ultimate facts alleged in the complaint. The defending party’s
answer either admits or denies the allegations of ultimate facts in the complaint or
other initiatory pleading. The allegations of ultimate facts the answer admit, being
undisputed, will not require evidence to establish the truth of such facts, but the
allegations of ultimate facts the answer properly denies, being disputed, will
require evidence.
The answer admits the material allegations of ultimate facts of the adverse party’s
pleadings not only when it expressly confesses the truth of such allegations but
also when it omits to deal with them at all.29 The controversion of the ultimate
facts must only be by specific denial. Section 10, Rule 8 of the Rules of Court
recognizes only three modes by which the denial in the answer raises an issue of
fact. The first is by the defending party specifying each material allegation of fact
the truth of which he does not admit and, whenever practicable, setting forth the
substance of the matters upon which he relies to support his denial. The second
applies to the defending party who desires to deny only a part of an averment,
and the denial is done by the defending party specifying so much of the material
allegation of ultimate facts as is true and material and denying only the remainder.
The third is done by the defending party who is without knowledge or information
sufficient to form a belief as to the truth of a material averment made in the
complaint by stating so in the answer. Any material averment in the complaint not
so specifically denied are deemed admitted except an averment of the amount of
unliquidated damages.30
In the case of a written instrument or document upon which an action or defense
is based, which is also known as the actionable document, the pleader of such
document is required either to set forth the substance of such instrument or
document in the pleading, and to attach the original or a copy thereof to the
pleading as an exhibit, which shall then be deemed to be a part of the pleading, or
to set forth a copy in the pleading.31 The adverse party is deemed to admit the
genuineness and due execution of the actionable document unless he specifically
denies them under oath, and sets forth what he claims to be the facts, but the
requirement of an oath does not apply when the adverse party does not appear to
be a party to the instrument or when compliance with an order for an inspection
of the original instrument is refused.32
In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2,
3, 4, 5, 9 and 10 of the complaint. The admission related to the petitioner’s
allegations on: (a) the four transactions for the delivery and installation of various
hospital equipment; (b) the total liability of the respondent; (c) the payments made
by the respondents; (d) the balance still due to the petitioner; and (e) the
execution of the February 11, 2009 agreement. The admission of the various
agreements, especially the February 11, 2009 agreement, significantly admitted the
petitioner’s complaint. To recall, the petitioner’s cause of action was based on the
February 11, 2009 agreement, which was the actionable document in the case. The
complaint properly alleged the substance of the February 11, 2009 agreement, and
contained a copy thereof as an annex. Upon the express admission of the
genuineness and due execution of the February 11, 2009 agreement, judgment on
the pleadings became proper.33 As held in Santos v. Alcazar:34
There is no need for proof of execution and authenticity with respect to
documents the genuineness and due execution of which are admitted by the
adverse party. With the consequent admission engendered by petitioners’ failure
to properly deny the Acknowledgment in their Answer, coupled with its proper
authentication, identification and offer by the respondent, not to mention
petitioners’ admissions in paragraphs 4 to 6 of their Answer that they are indeed
indebted to respondent, the Court believes that judgment may be had solely on
the document, and there is no need to present receipts and other documents to
prove the claimed indebtedness. The Acknowledgment, just as an ordinary
acknowledgment receipt, is valid and binding between the parties who executed it,
as a document evidencing the loan agreement they had entered into. The absence
of rebutting evidence occasioned by petitioners’ waiver of their right to present
evidence renders the Acknowledgment as the best evidence of the transactions
between the parties and the consequential indebtedness incurred. Indeed, the effect of
the admission is such that a prima facie case is made for the plaintiff which dispenses
with the necessity of evidence on his part and entitled him to a judgment on the
pleadings unless a special defense of new matter, such as payment, is interposed by
the defendant.35 (citations omitted)
The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of
knowledge or information sufficient to form a belief as to the truth or falsity thereof,
inasmuch as the alleged transactions were undertaken during the term of office of the
past officers of defendant Wesleyan University-Philippines." Was the manner of denial
effective as a specific denial?
We answer the query in the negative. Paragraph no. 6 alleged that the respondent’s
total obligation as of February 15, 2009 was P123,901,650.00, but its balance thereafter
became only P54,654,195.54 because it had since then paid P67,357,683.23 to the
petitioner. Paragraph no. 7 stated that the petitioner had agreed with the respondent
on February 11, 2009 to reduce the balance to only P50,400,000.00, which the
respondent would pay in 36 months through 36 postdated checks of P1,400,000.00
each, which the respondent then issued for the purpose. Paragraph no. 8 averred that
after four of the checks totalling P5,600,000.00 were paid the respondent stopped
payment of the rest, rendering the entire obligation due and demandable pursuant to
the February 11, 2009 agreement. Considering that paragraphs no. 6, 7 and 8 of the
complaint averred matters that the respondent ought to know or could have easily
known, the answer did not specifically deny such material averments. It is settled that
denials based on lack of knowledge or information of matters clearly known to the
pleader, or ought to be known to it, or could have easily been known by it are
insufficient, and constitute ineffective36 or sham denials.37
That the respondent qualified its admissions and denials by subjecting them to its
special and affirmative defenses of lack of jurisdiction over its person, improper venue,
litis pendentia and forum shopping was of no consequence because the affirmative
defenses, by their nature, involved matters extrinsic to the merits of the petitioner’s
claim, and thus did not negate the material averments of the complaint.
Lastly, we should emphasize that in order to resolve the petitioner’s Motion for
Judgment Based on the Pleadings, the trial court could rely only on the answer of the
respondent filed in Civil Case No. 09-122116. Under Section 1, Rule 34 of the Rules of
Court, the answer was the sole basis for ascertaining whether the complaint’s material
allegations were admitted or properly denied. As such, the respondent’s averment of
payment of the total of P78,401,650.00 to the petitioner made in its complaint for
rescission had no relevance to the resolution of the Motion for Judgment Based on the
Pleadings. The CA thus wrongly held that a factual issue on the total liability of the
respondent remained to be settled through trial on the merits. It should have openly
wondered why the respondent's answer in Civil Case No. 09-122116 did not allege the
supposed payment of the P78,401,650.00, if the payment was true, if only to buttress
the specific denial of its alleged liability. The omission exposed the respondent's denial
of liability as insincere.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on July 2,
2013; DIRECTS the Regional Trial Court, Branch 1, in Manila to resume its proceedings
in Civil Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan
University-Philippines, and to forthwith act on and grant the Motion for Judgment
Based on the Pleadings by rendering the proper judgment on the pleadings; and
ORDERS the respondent to pay the costs of suit.
SO ORDERED.
G.R. No. 191088, August 17, 2016
FRILOU CONSTRUCTION, INC., Petitioner, v. AEGIS INTEGRATED STRUCTURE
CORPORATION, Respondent.
DECISION
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision1 of the Court of Appeals in CA-G.R. CV No. 92108 which reversed and set
aside the Decision2 of the Regional Trial Court, Branch 58, Makati City in Civil Case No.
05-711, a suit for a Sum of Money filed by respondent Aegis Integrated Structure
Corporation against petitioner Frilou Construction, Inc.
Respondent's Complaint alleged, in pertinent part,:ChanRoblesVirtualawlibrary
xx xx
2. On October 5, 2004, [petitioner] engaged the services of
[respondent] to supply, fabricate, deliver and erect the structural steel
requirements of [petitioner] for the proposed Exhibit Building for and in
consideration of P5,000,000.00 under Purchase Order No. 0461, x x x.
3. On November 19, 2004, [petitioner], again, engaged the services of
[respondent] to supply, fabricate, deliver and erect the structural
requirements of [petitioner] for the proposed Residential Bldg. for and in
consideration of P1,024,306.00 under Purchase Order No. 0500, x x x;
4. Payment of the sum of P6,024,306.00 has long been overdue in that
[respondent] had long supplied, fabricated, delivered and erected the structural
steel requirements of [petitioners] but the latter has paid [respondent] the
sum of F4s490,014.32 only thereby leaving an unpaid balance off 1,534,291.68;
5. [Respondent] made repeated demands for the sum of
Pl,534,291.68 but [petitioner] failed/refused to pay, hence, it was
necessary for [respondent] to institute the instant suit for which it incurred
attorney's fee of P 150,000.00;
WHEREFORE, it is respectfully prayed that judgment be rendered ordering
[petitioner] to pay [respondent] the following:
chanRoblesvirtualLawlibrary1. Pl,534,291.68 plus interest thereon at the legal rate
from May 25, 2005 until fully paid;
2. P150,000.00 as attorney's fee;
3. Cost of suit;
[Respondent] prays for such other relief as may be deemed just and equitable
under the foregoing premises.3chanroblesvirtuallawlibrary
Petitioner filed its Answer and countered that:ChanRoblesVirtualawlibrary
xx xx
2. [Petitioner] likewise ADMITS paragraphs 2 and 3 of the Complaint,
the truth of the matter being those stated in the Special and Affirmative Defenses;
3. Similarly, [petitioner] also DENIES paragraphs 4 and 5 for being contrary to the
facts and circumstances surrounding the case;
4. As and by way of Special and Affirmative Defenses, [petitioner] respectfully
states:
SPECIAL AND AFFIRMATIVE DEFENSES
5. While [petitioner] does not deny having engaged [the] services of
[respondent] for the supply and delivery of steel requirements, such delivery had
already been paid in the amount of Php4,490,014.32 as of March 2005;
6. [Respondent] failed to show evidence that indeed [petitioner] still owes the
balance of P1,534,291.68 as alleged in the Complaint;
7. No demand whatsoever was made against herein [petitioner] for the alleged
balance complained of.
WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court
to DISMISS and DENY the aforementioned Complaint for lack of merit in fact and
in law.
[Petitioner] further prays for such other reliefs and remedies just and equitable
under the premises.4chanroblesvirtuallawlibrary
During trial, respondent presented its Sales Engineer, Geronimo S. Mangubat,
whose testimony was summarized by the Court of Appeals,
thus:ChanRoblesVirtualawlibrary
[Respondent] supplies and fabricates building materials for its clients.
[Mangubat's] duties include offering the services of [respondent] to clients and
negotiating with the latter. He knows [petitioner] which contracted their services
for the supply and delivery of construction materials. The first transaction worth
P5,000,000.00 took place on October 5, 2004, covered by Purchase Order No.
0461, while the second under Purchase Order No. [0]500 with a consideration of f
1,024,306.00 happened on November 19, 2004. The purchase orders were signed
for and in behalf of [petitioner] by Architect George Matunog, the Vice-President
for Operations. After receipt of the purchase orders, [respondent] supplied the
materials and erected the same at the construction site. They submitted billings
and [petitioner] issued checks in payment thereof. All in all, [petitioner] paid a total
of P4,490,014.32 out of the total contract price of P6,024,306.00. With respect to
the balance in the amount of PI,534,291.68, the same remains unpaid, thus they
sent two (2) demand letters, both signed by Filomeno H. Castillo, Jr., [respondent's]
Vice-President, informing [petitioner] of the deficiency and inviting its representative to
a meeting. When [petitioner's] representative failed to show up in the meeting,
[respondent] referred the matter to its lawyer, Atty. Jose F. Manacop, who sent a
demand letter to [petitioner] and filed this case in court against the latter. For the filing
of this case, [respondent] Aegis incurred expenses in the amount of P150,000.00.
On cross-examination, Engr. Mangubat testified that [petitioner] Frilou signed a
Certificate of Completion, but he did not present it as evidence. He also stated that he
personally delivered one of the letters to [petitioner] through a staff of Architect
Matunog.5chanroblesvirtuallawlibrary
For its part, petitioner only had one witness, its employee, Jess de Guia, Jr. (De Guia),
who, since 2003, has been in charge of petitioner's warehouse and responsible for
receiving deliveries of materials at the construction site. De Guia testified that he
received the deliveries of respondent and signed receipt thereof. De Guia further
testified that he does not know the value of the materials delivered by respondent; only
that petitioner had already paid for these deliveries.
The trial court dismissed the complaint for insufficiency of evidence sustaining
petitioner's contention that respondent failed to show evidence of petitioner's
supposed remaining liability for the balance amount of Pl,534,291.68. The trial court
rejected respondent's stance that petitioner already admitted its liability for the total
amount of the two (2) Purchase Orders when petitioner stated in paragraph 2 of its
Answer that: "[it] ADMITS paragraphs 2 and 3 of the Complaint, the truth of the matter
being those stated in the Special and Affirmative Defenses." For the trial court, the
admission was qualified in that petitioner had already paid the amount of
P4,490,014.32 and respondent did not show further evidence of petitioner's liability for
the remaining balance. The trial court sustained petitioner's argument that the
existence of the Purchase Orders in the amount of P6,024,306.00 was not equivalent to
respondent's delivery of the materials to petitioner in the same amount. In all, the trial
court ruled that respondent did not discharge the requisite burden of proof in civil
case, i.e. preponderance of evidence.
On appeal by respondent, the appellate court reversed and set aside the trial court's
ruling on the sole issue of whether [respondent] established its claim of the balance
amount of P1,534,219.68 even absent presentation of delivery receipts. The appellate
court ruled that:
chanRoblesvirtualLawlibrary(1) Petitioner's judicial admission of the existence of the
Purchase Orders worked to establish respondent's claim of the balance amount of
P1,534,291.68 by a preponderance of evidence;
(2) In failing to specifically deny respondent's allegation that respondent supplied,
delivered and erected the structural steel requirements of petitioner in the amount of
P6,024,306.00, the latter is deemed to have admitted the same:
chanRoblesvirtualLawlibrary(3) Consequently of paragraphs 1 and 2, respondent's
material allegations thereon need not be proven;
(4) The Purchase Orders numbered 0461 and 0500 evidence a meeting of the
minds such that a valid contract existed and became the law between the parties;
(5) Petitioner's contention that the contract price was actually only P4,490,014.32, the
amount petitioner has already paid, is inconsistent with its confirmation of the
Purchase Orders in the amount of P6,024,306.0p as the original contract price; (6)
Petitioner is thus estopped from claiming a reduced amount of the contract price; and
(7) Petitioner itself failed to present evidence that respondent only partially complied
with its obligation under the Purchase Orders for just the amount of P4,490,014.32.
Hence, this appeal by certiorari of petitioner insisting on the appellate court's error in
granting respondent's complaint and holding petitioner liable to respondent for the
balance amount of P1,534,291.68. i.e. Petitioner quibbles that it did not admit liability
for the entire amount of the Purchase Orders, but only for the value of the actual
deliveries by respondent hereunder in the amount of P4,490,014.32. Petitioner
asseverates that such constituted a specific denial when it further set forth the
substance of the matters upon which it relied to support its denial, respondent had no
evidence that it owed the balance of P1,534,291.68. We disagree with petitioner and
completely subscribe to the appellate court's ruling.
Indeed, petitioner admitted and failed to specifically deny the material averments in
respondent's complaint that respondent complied with its obligation under the
Purchase Orders for the complete amount of P6,024,306.00.
Section 10, Rule 8 of the Rules of Court on Manner of Making Allegations in
Pleading contemplates three (3) modes of specific denial: 1) by specifying each
material allegation of the fact in the complaint, the truth of which the defendant
does not admit, and whenever practicable, setting forth the substance of the
matters which he will rely upon to support his denial; (2) by specifying so much of
an averment in the complaint as is true and material and denying only the
remainder; (3) by stating that the defendant is without knowledge or information
sufficient to form a belief as to the truth of a material averment in the complaint,
which has the effect of a denial.
The purpose of requiring the defendant to make a specific denial is to make him
disclose the matters alleged in the complaint which he succinctly intends to
disprove at the trial, together with the matter which he relied upon to support the
denial. The parties are compelled to lay their cards on the table.6chanrobleslaw
Thus, the disingenuousness of petitioner becomes apparent to this Court.
First. Petitioner did not make a specific denial, but a general one to the effect that
it no longer has any remaining liability to respondent.
Respondent's averment in paragraph 4 of its complaint
reads:ChanRoblesVirtualawlibrary
4. Payment of the sum of P6,024,306.00 has long been overdue in that
[respondent] had long supplied, fabricated, delivered and erected the structural
steel requirements of [petitioners] but the latter has paid [respondent] the sum of
P4,490,014.32 only thereby leaving an unpaid balance of
Pl,534,291.68;7chanroblesvirtuallawlibrary
Petitioner denied this by stating, thus:ChanRoblesVirtualawlibrary
3. Similarly, [petitioner] also DENIES paragraphs 4 and 5 for being contrary to
the facts and circumstances surrounding the case;8chanroblesvirtuallawlibrary
However, petitioner did not state "the facts and circumstances surrounding the
case," the matters which it relies on to support its denial of its liability in the
amount of P1, 534,291.68. Petitioner only asserted that respondent failed to show
evidence of its supposed remaining liability. This is not an assertion of the truth
and substance of the matter. It is merely a statement that as far as petitioner is
concerned, respondent does not have evidence to prove its claim.
Notably, there were four (4) material averments in paragraph 4 of respondent's
complaint: (1) petitioner contracted with respondent to fabricate and
deliver the former's structural steel requirements in amount of P6,024,306.00;
(2) respondent completely performed agreement under the Purchase Orders;
(3) petitioner has only paid the amount of P4,490,014.32; and (4) thus, petitioner
had an unpaid balance to respondent in the amount of P1,534,291.68.
Petitioner should have, and could have easily, specifically denied each and every
averment under the foregoing paragraph as required by Section 10 of Rule 8 and
then asserted the substance of the matter which it relies on to support its denial.
Petitioner's last clause about respondent's allegations being "contrary to the facts
and circumstances surrounding the case" is hardly anything which petitioner can
rely on to support its case. The statement is not evidence for petitioner as
defendant.9 Petitioner's assertion of contrariety of the facts to respondent's
position is a conclusion that is made by the court after trial.
Petitioner is plainly splitting hairs. As a result of its failure to make a specific denial,
it was deemed to have admitted all the material averment in paragraph 4.10
Consequently, the judicial admission of petitioner's remaining liability need
not be proved.11chanrobleslaw
Second. The generality of the denial betrays the absence of specific facts that can
prove payment.12 If untrue, the falsity of the alleged remaining balance in the
amount of P1,534,291.68 is wholly within petitioner's knowledge which it should
have delineated in its Answer. Petitioner could have given specifics on why the
original contract price of P6,024,306.00 as evidenced by the Purchase Orders was
performed only, partially, thus prompting petitioner to pay only the amount of
P4,490,014.32.
Since respondent alleged its complete performance of its obligation under the
Purchase Orders, petitioner should have asserted respondent's partial and
incomplete performance, specifying the deliveries that were not made. In
particular, petitioner ought to have alleged in the Answer itself the structural steel
requirements that were not erected such that it rightfully only paid for the lesser
amount of P4,490,014.32. Yet, petitioner did not do so and only insisted that
respondent did not have evidence of completion and delivery.
We further note that petitioner did not even attempt to allege, via the third mode
of specific denial, that it had no knowledge or information sufficient to form a
belief as to the truth or falsity of respondent's averments because the knowledge or
information on the issue at hand was clearly known to it. Petitioner simply avoided a
direct answer to the allegations of respondent.
We fail to read or see an Affirmative Defense in the
following:ChanRoblesVirtualawlibrary
5. While [petitioner] does not deny having engaged services of [respondent] for
the supply and delivery of steel requirements, such
delivery had already been paid in the amount of Php4,490,014.32 as of March 2005;
6. [Respondent] failed to show evidence that indeed [petitioner] still owes the
balance of PI, 534,291.68 as alleged in the Complaint;
7. No demand whatsoever was made against herein [petitioner] for the alleged
balance complained of.13chanroblesvirtuallawlibrary
Section 5(b), Rule 5 of the Rules of Court reads:ChanRoblesVirtualawlibrary
(b) An affirmative defense is an allegation of a new matter which, while hypothetically
admitting the material allegations in the pleading of the claimant, would nevertheless
prevent or bar recovery by him. The affirmative defenses include fraud, statute of
limitations, release, payment, illegality, statute of frauds, estoppel, former recovery,
discharge in bankruptcy, and any other matter by way of confession and avoidance.
As previously discussed, petitioner did not set forth a new matter in its Answer because
respondent's Complaint already categorically stated in Paragraphs 2, 3 and 4 of the
Complaint that petitioner had only paid for the amount of P4,490,014.32 of a total
indebtedness of P6,024,306.00. Simply petitioner did not dispute the allegations as
regards the balance.
Lastly, we agree with the appellate court's imposition of legal interest of twelve percent
(12%) from the date of extra-judicial demand, 11 April 2005, the unpaid deliveries
being a forbearance of money and there being no stipulation between the parties on
the payment of interest. However, we divide the applicable legal interest into two
periods: (1) where the prevailing rate of interest on 11 April 2005 to 30 June 2013 is
twelve percent (12%) per annum before the advent of Bangko Sentral ng Pilipinas
Circular No. 799, Series of 2013 and (2) the reduced rate of interest of six percent (6%)
per annum from 1 July 2013 to date when this Decision becomes final and
executory.14chanrobleslaw
We also agree that respondent failed to present adequate proof of its entitlement to
attorney's fees in the amount of P150,000.00. While it is a sound policy not to set a
premium on the right to litigate,15 we, however, find that respondent is entitled to
reasonable attorney's fees for having been compelled to go to court in order to assert
his right. Thus, we affirm Court of Appeal's grant of P25,000.00 as attorney's fees.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R.
CV No. 92108 is AFFIRMED with MODIFICATION. Petitioner Frilou Construction, Inc. is
ordered to pay respondent Aegis Integrated Structure Corporation the following
amounts: (1) P1,534,291.00 plus legal interest of (a) twelve percent (12%)per annum
form 11 April 2005 to 30 June 2013 and (b) six percent (6%) per annum from 1 July
2013 to date when this Decision becomes final and executory; and (2) P25,000.00 as
attorney's fees. The foregoing shall likewise earn legal interest of six percent (6%) per
annum from the finality of this Decision until full satisfaction thereof.
SO ORDERED.chanRoblesvirtualLawlibrary
RULE 9
G.R. No. 173559 January 7, 2013
LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA DIONA, Petitioner,
vs.
ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE, and ESTEBAN
A. BALANGUE, JR., Respondents.
DECISION
DEL CASTILLO, J.:
The great of a relief neither sought by the party in whose favor it was given not
supported by the evidence presented violates the opposing party’s right to due process
and may be declared void ab initio in a proper proceeding.
This Petition for Review on Certiorari1 assails the November 24, 2005 Resolution2 of
the Court of Appeals (CA) issued in G.R. SP No. 85541 which granted the Petition for
Annulment of Judgment3 filed by the respondents seeking to nullify that portion
of the October 17, 2000 Decision4 of the Regional Trial Court (RTC), Branch 75,
Valenzuela City awarding petitioner 5% monthly interest rate for the principal
amount of the loan respondent obtained from her.
This Petition likewise assails the CA’s June 26, 2006 Resolution5 denying
petitioner’s Motion for Reconsideration.
Factual Antecedents
The facts of this case are simple and undisputed.
On March 2, 1991, respondents obtained a loan of ₱45,000.00 from petitioner
payable in six months and secured by a Real Estate Mortgage6 over their 202-
square meter property located in Marulas, Valenzuela and covered by Transfer
Certificate of Title (TCT) No. V-12296.7 When the debt became due, respondents
failed to pay notwithstanding demand. Thus, on September 17, 1999, petitioner
filed with the RTC a Complaint8 praying that respondents be ordered:
(a) To pay petitioner the principal obligation of ₱45,000.00, with interest thereon at
the rate of 12% per annum, from 02 March 1991 until the full obligation is paid.
(b) To pay petitioner actual damages as may be proven during the trial but shall in
no case be less than ₱10,000.00; ₱25,000.00 by way of attorney’s fee, plus
₱2,000.00 per hearing as appearance fee.
(c) To issue a decree of foreclosure for the sale at public auction of the
aforementioned parcel of land, and for the disposition of the proceeds thereof in
accordance with law, upon failure of the respondents to fully pay petitioner within
the period set by law the sums set forth in this complaint.
(d) Costs of this suit.
Other reliefs and remedies just and equitable under the premises are likewise
prayed for.9 (Emphasis supplied)
Respondents were served with summons thru respondent Sonny A. Balangue
(Sonny). On October 15, 1999, with the assistance of Atty. Arthur C. Coroza (Atty.
Coroza) of the Public Attorney’s Office, they filed a Motion to Extend Period to
Answer. Despite the requested extension, however, respondents failed to file any
responsive pleadings. Thus, upon motion of the petitioner, the RTC declared them
in default and allowed petitioner to present her evidence ex parte.10
Ruling of the RTC sought to be annulled.
In a Decision11 dated October 17, 2000, the RTC granted petitioner’s Complaint.
The dispositive portion of said Decision reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the
respondents to pay the petitioner as follows:
a) the sum of FORTY FIVE THOUSAND (₱45,000.00) PESOS, representing the
unpaid principal loan obligation plus interest at 5% per month [sic] reckoned from
March 2, 1991, until the same is fully paid;
b) ₱20,000.00 as attorney’s fees plus cost of suit;
c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order of
foreclosure shall be issued accordingly for the sale at public auction of the subject
property covered by Transfer Certificate of Title No. V-12296 and the
improvements thereon for the satisfaction of the petitioner’s claim.
SO ORDERED.12 (Emphasis supplied)
Subsequently, petitioner filed a Motion for Execution,13 alleging that respondents
did not interpose a timely appeal despite receipt by their former counsel of the
RTC’s Decision on November 13, 2000. Before it could be resolved, however,
respondents filed a Motion to Set Aside Judgment14 dated January 26, 2001,
claiming that not all of them were duly served with summons. According to the
other respondents, they had no knowledge of the case because their co-
respondent Sonny did not inform them about it. They prayed that the RTC’s
October 17, 2000 Decision be set aside and a new trial be conducted.
But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to
implement its October 17, 2000 Decision. However, since the writ could not be
satisfied, petitioner moved for the public auction of the mortgaged property,16 which
the RTC granted.17 In an auction sale conducted on November 7, 2001, petitioner was
the only bidder in the amount of ₱420,000.00. Thus, a Certificate of Sale18 was issued
in her favor and accordingly annotated at the back of TCT No. V-12296.
Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside
Execution Sale19 dated December 17, 2001, claiming that the parties did not agree in
writing on any rate of interest and that petitioner merely sought for a 12% per annum
interest in her Complaint. Surprisingly, the RTC awarded 5% monthly interest (or 60%
per annum) from March 2, 1991 until full payment. Resultantly, their indebtedness
inclusive of the exorbitant interest from March 2, 1991 to May 22, 2001 ballooned from
₱124,400.00 to ₱652,000.00.
In an Order20 dated May 7, 2002, the RTC granted respondents’ motion and
accordingly modified the interest rate awarded from 5% monthly to 12% per annum.
Then on August 2, 2002, respondents filed a Motion for Leave To Deposit/Consign
Judgment Obligation21 in the total amount of ₱126,650.00.22
Displeased with the RTC’s May 7, 2002 Order, petitioner elevated the matter to the CA
via a Petition for Certiorari23 under Rule 65 of the Rules of Court. On August 5, 2003,
the CA rendered a Decision24 declaring that the RTC exceeded its jurisdiction in
awarding the 5% monthly interest but at the same time pronouncing that the RTC
gravely abused its discretion in subsequently reducing the rate of interest to 12% per
annum. In so ruling, the CA ratiocinated:
Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted
5% monthly interest instead of the 12% per annum prayed for in the complaint.
However, the proper remedy is not to amend the judgment but to declare that portion
as a nullity. Void judgment for want of jurisdiction is no judgment at all. It cannot be
the source of any right nor the creator of any obligation (Leonor vs. CA, 256 SCRA 69).
No legal rights can emanate from a resolution that is null and void (Fortich vs. Corona,
312 SCRA 751).
From the foregoing, the remedy of the respondents is to have the Court declare the
portion of the judgment providing for a higher interest than that prayed for as null and
void for want of or in excess of jurisdiction. A void judgment never acquire[s] finality
and any action to declare its nullity does not prescribe (Heirs of Mayor Nemencio
Galvez vs. CA, 255 SCRA 672).
WHEREFORE, foregoing premises considered, the Petition having merit, is hereby
GIVEN DUE COURSE. Resultantly, the challenged May 7, 2002 and September 5, 2000
orders of Public Respondent Court are hereby ANNULLED and SET ASIDE for having
been issued with grave abuse of discretion amounting to lack or in excess of
jurisdiction. No costs.
SO ORDERED.25 (Emphases in the original; italics supplied.)
Proceedings before the Court of Appeals
Taking their cue from the Decision of the CA in the special civil action for certiorari,
respondents filed with the same court a Petition for Annulment of Judgment and
Execution Sale with Damages.26 They contended that the portion of the RTC Decision
granting petitioner 5% monthly interest rate is in gross violation of Section 3(d) of Rule
9 of the Rules of Court and of their right to due process. According to respondents, the
loan did not carry any interest as it was the verbal agreement of the parties that in lieu
thereof petitioner’s family can continue occupying respondents’ residential building
located in Marulas, Valenzuela for free until said loan is fully paid.
Ruling of the Court of Appeals
Initially, the CA denied due course to the Petition.27 Upon respondents’ motion,
however, it reinstated and granted the Petition. In setting aside portions of the RTC’s
October 17, 2000 Decision, the CA ruled that aside from being unconscionably
excessive, the monthly interest rate of 5% was not agreed upon by the parties and that
petitioner’s Complaint clearly sought only the legal rate of 12% per annum. Following
the mandate of Section 3(d) of Rule 9 of the Rules of Court, the CA concluded that the
awarded rate of interest is void for being in excess of the relief sought in the
Complaint. It ruled thus:
WHEREFORE, respondents’ motion for reconsideration is GRANTED and our resolution
dated October 13, 2004 is, accordingly, REVERSED and SET ASIDE. In lieu thereof,
another is entered ordering the ANNULMENT OF:
(a) public respondent’s impugned October 17, 2000 judgment, insofar as it awarded 5%
monthly interest in favor of petitioner; and
(b) all proceedings relative to the sale at public auction of the property titled in
respondents’ names under Transfer Certificate of Title No. V-12296 of the
Valenzuela registry.
The judgment debt adjudicated in public respondent’s impugned October 17,
2000 judgment is, likewise, ordered RECOMPUTED at the rate of 12% per annum
from March 2, 1991. No costs.
SO ORDERED.28 (Emphases in the original.)
Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006
Resolution.29
Issues
Hence, this Petition anchored on the following grounds:
I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS
ERROR OF LAW WHEN IT GRANTED RESPONDENTS’ PETITION FOR ANNULMENT
OF JUDGMENT AS A SUBSTITUTE OR ALTERNATIVE REMEDY OF A LOST APPEAL.
II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS
ERROR AND MISAPPREHENSION OF LAW AND THE FACTS WHEN IT GRANTED
RESPONDENTS’ PETITION FOR ANNULMENT OF JUDGMENT OF THE DECISION OF
THE REGIONAL TRIAL COURT OF VALENZUELA, BRANCH 75 DATED OCTOBER 17,
2000 IN CIVIL CASE NO. 241-V-99, DESPITE THE FACT THAT SAID DECISION HAS
BECOME FINAL AND ALREADY EXECUTED CONTRARY TO THE DOCTRINE OF
IMMUTABILITY OF JUDGMENT.30
Petitioner’s Arguments
Petitioner claims that the CA erred in partially annulling the RTC’s October 17,
2000 Decision. She contends that a Petition for Annulment of Judgment may be
availed of only when the ordinary remedies of new trial, appeal, petition for relief
or other appropriate remedies are no longer available through no fault of the
claimant. In the present case, however, respondents had all the opportunity to
question the October 17, 2000 Decision of the RTC, but because of their own
inaction or negligence they failed to avail of the remedies sanctioned by the rules.
Instead, they contented themselves with the filing of a Motion to Set Aside
Judgment and then a Motion to Correct/Amend Judgment and to Set Aside
Execution Sale.
Petitioner likewise argues that for a Rule 47 petition to prosper, the same must
either be based on extrinsic fraud or lack of jurisdiction. However, the allegations
in respondents’ Rule 47 petition do not constitute extrinsic fraud because they
simply pass the blame to the negligence of their former counsel. In addition, it is
too late for respondents to pass the buck to their erstwhile counsel considering
that when they filed their Motion to Correct/Amend Judgment and To Set Aside
Execution Sale they were already assisted by their new lawyer, Atty. Reynaldo A.
Ruiz, who did not also avail of the remedies of new trial, appeal, etc. As to the
ground of lack of jurisdiction, petitioner posits that there is no reason to doubt
that the RTC had jurisdiction over the subject matter of the case and over the
persons of the respondents.
While conceding that the RTC patently made a mistake in awarding 5% monthly
interest, petitioner nonetheless invokes the doctrine of immutability of final
judgment and contends that the RTC Decision can no longer be corrected or
modified since it had long become final and executory. She likewise points out
that respondents received a copy of said Decision on November 13, 2000 but did
nothing to correct the same. They did not even question the award of 5% monthly
interest when they filed their Motion to Set Aside Judgment which they anchored
on the sole ground of the RTC’s lack of jurisdiction over the persons of some of
the respondents.
Respondents’ Arguments
Respondents do not contest the existence of their obligation and the principal
amount thereof. They only seek quittance from the 5% monthly interest or 60%
per annum imposed by the RTC. Respondents contend that Section (3)d of Rule 9
of the Rules of Court is clear that when the defendant is declared in default, the
court cannot grant a relief more than what is being prayed for in the Complaint. A
judgment which transgresses said rule, according to the respondents, is void for
having been issued without jurisdiction and for being violative of due process of
law.
Respondents maintain that it was through no fault of their own, but through the gross
negligence of their former counsel, Atty. Coroza, that the remedies of new trial, appeal
or petition for relief from judgment were lost. They allege that after filing a Motion to
Extend Period to Answer, Atty. Coroza did not file any pleading resulting to their being
declared in default. While the said lawyer filed on their behalf a Motion to Set Aside
Judgment dated January 26, 2001, he however took no steps to appeal from the
Decision of the RTC, thereby allowing said judgment to lapse into finality. Citing
Legarda v. Court of Appeals,31 respondents aver that clients are not always bound by
the actions of their counsel, as in the present case where the clients are to lose their
property due to the gross negligence of their counsel.
With regard to petitioner’s invocation of immutability of judgment, respondents argue
that said doctrine applies only to valid and not to void judgments.
Our Ruling
The petition must fail.
We agree with respondents that the award of 5% monthly interest violated their right
to due process and, hence, the same may be set aside in a Petition for Annulment of
Judgment filed under Rule 47 of the Rules of Court.
Annulment of judgment under Rule 47; an exception to the final judgment rule;
grounds therefor.
A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy
granted only under exceptional circumstances where a party, without fault on his part,
has failed to avail of the ordinary remedies of new trial, appeal, petition for relief or
other appropriate remedies. Said rule explicitly provides that it is not available as a
substitute for a remedy which was lost due to the party’s own neglect in promptly
availing of the same. "The underlying reason is traceable to the notion that annulling
final judgments goes against the grain of finality of judgment. Litigation must end and
terminate sometime and somewhere, and it is essential to an effective administration of
justice that once a judgment has become final, the issue or cause involved therein
should be laid to rest."32
While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of
Judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction,
jurisprudence recognizes lack of due process as additional ground to annul a
judgment.34 In Arcelona v. Court of Appeals,35 this Court declared that a final and
executory judgment may still be set aside if, upon mere inspection thereof, its patent
nullity can be shown for having been issued without jurisdiction or for lack of due
process of law.
Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the
Complaint and smacks of violation of due process.
It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess
of what is being sought by the party. They cannot also grant a relief without first
ascertaining the evidence presented in support thereof. Due process considerations
require that judgments must conform to and be supported by the pleadings and
evidence presented in court. In Development Bank of the Philippines v. Teston,36 this
Court expounded that:
Due process considerations justify this requirement. It is improper to enter an order
which exceeds the scope of relief sought by the pleadings, absent notice which affords
the opposing party an opportunity to be heard with respect to the proposed relief. The
fundamental purpose of the requirement that allegations of a complaint must provide
the measure of recovery is to prevent surprise to the defendant.
Notably, the Rules is even more strict in safeguarding the right to due process of a
defendant who was declared in default than of a defendant who participated in trial.
For instance, amendment to conform to the evidence presented during trial is allowed
the parties under the Rules.37 But the same is not feasible when the defendant is
declared in default because Section 3(d), Rule 9 of the Rules of Court comes into play
and limits the relief that may be granted by the courts to what has been prayed for in
the Complaint. It provides:
(d) Extent of relief to be awarded. – A judgment rendered against a party in default
shall not exceed the amount or be different in kind from that prayed for nor award
unliquidated damages.
The raison d’être in limiting the extent of relief that may be granted is that it cannot be
presumed that the defendant would not file an Answer and allow himself to be
declared in default had he known that the plaintiff will be accorded a relief greater
than or different in kind from that sought in the Complaint.38 No doubt, the
reason behind Section 3(d), Rule 9 of the Rules of Court is to safeguard
defendant’s right to due process against unforeseen and arbitrarily issued
judgment. This, to the mind of this Court, is akin to the very essence of due
process. It embodies "the sporting idea of fair play"39 and forbids the grant of
relief on matters where the defendant was not given the opportunity to be heard
thereon.
In the case at bench, the award of 5% monthly interest rate is not supported both
by the allegations in the pleadings and the evidence on record. The Real Estate
Mortgage40 executed by the parties does not include any provision on interest.
When petitioner filed her Complaint before the RTC, she alleged that respondents
borrowed from her "the sum of FORTY-FIVE THOUSAND PESOS (₱45,000.00), with
interest thereon at the rate of 12% per annum"41 and sought payment thereof.
She did not allege or pray for the disputed 5% monthly interest. Neither did she
present evidence nor testified thereon. Clearly, the RTC’s award of 5% monthly
interest or 60% per annum lacks basis and disregards due process. It violated the
due process requirement because respondents were not informed of the
possibility that the RTC may award 5% monthly interest. They were deprived of
reasonable opportunity to refute and present controverting evidence as they were
made to believe that the complainant petitioner was seeking for what she merely
stated in her Complaint.
Neither can the grant of the 5% monthly interest be considered subsumed by
petitioner’s general prayer for "other reliefs and remedies just and equitable under
the premises x x x."42 To repeat, the court’s grant of relief is limited only to what
has been prayed for in the Complaint or related thereto, supported by evidence,
and covered by the party’s cause of action.43 Besides, even assuming that the
awarded 5% monthly or 60% per annum interest was properly alleged and proven
during trial, the same remains unconscionably excessive and ought to be equitably
reduced in accordance with applicable jurisprudence. In Bulos, Jr. v. Yasuma,44 this
Court held:
In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of
Appeals, Garcia v. Court of Appeals, Spouses Bautista v. Pilar Development
Corporation and the recent case of Spouses Solangon v. Salazar, this Court
considered the 3% interest per month or 36% interest per annum as excessive and
unconscionable. Thereby, the Court, in the said case, equitably reduced the rate of
interest to 1% interest per month or 12% interest per annum. (Citations omitted)
It is understandable for the respondents not to contest the default order for, as
alleged in their Comment, "it is not their intention to impugn or run away from
their just and valid obligation."45 Nonetheless, their waiver to present evidence
should never be construed as waiver to contest patently erroneous award which
already transgresses their right to due process, as well as applicable jurisprudence.
Respondents’ former counsel was grossly negligent in handling the case of his
clients; respondents did not lose ordinary remedies of new trial, petition for relief,
etc. through their own fault.
Ordinarily, the mistake, negligence or lack of competence of counsel binds the
client.1âwphi1 This is based on the rule that any act performed by a counsel within
the scope of his general or implied authority is regarded as an act of his client. A
recognized exception to the rule is when the lawyers were grossly negligent in
their duty to maintain their client’s cause and such amounted to a deprivation of
their client’s property without due process of law.46 In which case, the courts must
step in and accord relief to a client who suffered thereby.47
The manifest indifference of respondents’ former counsel in handling the cause of
his client was already present even from the beginning. It should be recalled that
after filing in behalf of his clients a Motion to Extend Period to Answer, said
counsel allowed the requested extension to pass without filing an Answer, which
resulted to respondents being declared in default. His negligence was aggravated
by the fact that he did not question the awarded 5% monthly interest despite
receipt of the RTC Decision on November 13, 2000.48 A simple reading of the
dispositive portion of the RTC Decision readily reveals that it awarded exorbitant
and unconscionable rate of interest. Its difference from what is being prayed for by
the petitioner in her Complaint is so blatant and very patent. It also defies
elementary jurisprudence on legal rate of interests. Had the counsel carefully read
the judgment it would have caught his attention and compelled him to take the
necessary steps to protect the interest of his client. But he did not. Instead, he filed
in behalf of his clients a Motion to Set Aside Judgment49 dated January 26, 2001
based on the sole ground of lack of jurisdiction, oblivious to the fact that the
erroneous award of 5% monthly interest would result to his clients’ deprivation of
property without due process of law. Worse, he even allowed the RTC Decision to
become final by not perfecting an appeal. Neither did he file a petition for relief
therefrom. It was only a year later that the patently erroneous award of 5% monthly
interest was brought to the attention of the RTC when respondents, thru their new
counsel, filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale.
Even the RTC candidly admitted that it "made a glaring mistake in directing the
defendants to pay interest on the principal loan at 5% per month which is very different
from what was prayed for by the plaintiff."50
"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the
maintenance and defense of his rights and the exertion of his utmost learning and
ability, to the end that nothing can be taken or withheld from his client except in
accordance with the law."51 Judging from how respondents’ former counsel handled
the cause of his clients, there is no doubt that he was grossly negligent in protecting
their rights, to the extent that they were deprived of their property without due process
of law.
In fine, respondents did not lose the remedies of new trial, appeal, petition for relief
and other remedies through their own fault. It can only be attributed to the gross
negligence of their erstwhile counsel which prevented them from pursuing such
remedies. We cannot also blame respondents for relying too much on their former
counsel. Clients have reasonable expectations that their lawyer would amply protect
their interest during the trial of the case.52 Here,
"respondents are plain and ordinary people x x x who are totally ignorant of the
intricacies and technicalities of law and legal procedures. Being so, they completely
relied upon and trusted their former counsel to appropriately act as their interest may
lawfully warrant and require."53
As a final word, it is worth noting that respondents’ principal obligation was only
₱45,000.00. Due to their former counsel’s gross negligence in handling their cause,
coupled with the RTC’s erroneous, baseless, and illegal award of 5% monthly interest,
they now stand to lose their property and still owe petitioner a large amount of money.
As aptly observed by the CA:
x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not
only end up losing their property but will additionally owe private respondent the sum
of ₱232,000.00 plus the legal interest said balance had, in the meantime, earned. As a
court of justice and equity, we cannot, in good conscience, allow this unconscionable
situation to prevail.54
Indeed, this Court is appalled by petitioner’s invocation of the doctrine of immutability
of judgment. Petitioner does not contest as she even admits that the RTC made a
glaring mistake in awarding 5% monthly interest.55 Amazingly, she wants to benefit
from such erroneous award. This Court cannot allow this injustice to happen.
WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24,
2005 and June 26, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 85541 are
AFFIRMED.
SO ORDERED.
G.R. No. 193494
LUI ENTERPRISES, INC., Petitioners,
vs.
ZUELLIG PHARMA CORPORATION and the PHILIPPINE BANK OF COMMUNICATIONS,
Respondents.
DECISION
LEONEN, J.:
There should be no inexplicable delay in the filing of a motion to set aside order of
default. Even when a motion is filed within the required period, excusable negligence
must be properly alleged and proven.
This is a petition for review on certiorari of the Court of Appeals' decision1 dated May
24, 2010 and resoluticm2 dated August 13, 2010 in CA- G.R. CV No. 88023. The Court
of Appeals affirmed in toto the Regional
Trial Court of Makati’s decision3 dated July 4, 2006.
The facts as established from the pleadings of the parties are as follows:
On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma Corporation entered
into a 10-year contract of lease4 over a parcel of land located in Barrio Tigatto,
Buhangin, Davao City. The parcel of land was covered by Transfer Certificate of
Title No. T-166476 and was registered under Eli L. Lui.5
On January 10, 2003, Zuellig Pharma received a letter6 from the Philippine Bank of
Communications. Claiming to be the new owner of the leased property, the bank
asked Zuellig Pharma to pay rent directly to it. Attached to the letter was a copy of
Transfer Certificate of Title No. 336962 under the name of the Philippine Bank of
Communications.7 Transfer Certificate ofTitle No. 336962 was derived
fromTransfer Certificate ofTitle No.T-166476.8
Zuellig Pharma promptly informed Lui Enterprises of the Philippine Bank of
Communications’ claim. On January 28, 2003, Lui Enterprises wrote to Zuellig
Pharma and insisted on its right to collect the leased property’srent.9
Due to the conflicting claims of Lui Enterprises and the Philippine Bank of
Communications over the rental payments, Zuellig Pharma filed a complaint10 for
interpleader with the Regional Trial Court of Makati. In its complaint, Zuellig
Pharma alleged that it already consigned in court P604,024.35 as rental payments.
Zuellig Pharma prayed that it be allowed to consign in court its succeeding
monthly rental payments and that Lui Enterprises and the Philippine Bank of
Communications be ordered to litigate their conflicting claims.11
The Philippine Bank of Communications filed its answer12 to the complaint. On the
other hand, Lui Enterprises filed a motion to dismiss13 on the ground that Zuellig
Pharma’s alleged representative did not have authority to file the complaint for
interpleader on behalf of the corporation. Under the secretary’s certificate14 dated
May 6, 2003 attached to the complaint, Atty. Ana L.A. Peralta was only authorized
to "initiate and represent [Zuellig Pharma] in the civil proceedings for consignation
of rental payments to be filed against Lui Enterprises, Inc. and/or [the Philippine
Bank of Communications]."15
According to Lui Enterprises, an earlier filed nullification of deed of dation in
payment case pending with the Regional Trial Court of Davao barred the filing of
the interpleader case.16 Lui Enterprises filed this nullification case against the
Philippine Bank of Communications with respect to several properties it dationed
to the bank in payment of its obligations. The property leased by Zuellig Pharma
was among those allegedly dationed to the Philippine Bank of Communications.17
In the nullification of deed of dation in payment case, Lui Enterprises raised the
issue of which corporation had the better right over the rental payments.18 Lui
Enterprises argued that the same issue was involved in the interpleader case. To
avoid possible conflicting decisions of the Davao trial court and the Makati trial
court on the same issue, Lui Enterprises argued that the subsequently filed
interpleader case be dismissed.
To support its argument, Lui Enterprises cited a writ of preliminary injunction19
dated July 2, 2003 issued by the Regional Trial Court of Davao, ordering Lui
Enterprises and the Philippine Bank of Communications "[to maintain] status
quo"20 with respect to the rent. By virtue of the writ of preliminary injunction, Lui
Enterprises argued that it should continue collecting the rental payments from its
lessees until the nullification of deed of dation in payment case was resolved. The
writ of preliminary injunction dated July 2, 2003 reads:
WHEREAS, on June 30, 2003, the Court issued an Order, a portion of which is
quoted:
WHEREFORE, PREMISES CONSIDERED, let a Writ of Preliminary Injunction issue,
restraining and enjoining [the Philippine Bank of Communications], its agents or
[representative], the Office of the Clerk of Court- Sheriff and all persons acting on
their behalf, from conducting auction sale on the properties of [Lui Enterprises] in
EJF-REM Case No. 6272-03 scheduled on July 3, 2003 at 10:00 a.m. at the Hall of
Justice, Ecoland, Davao City, until the final termination of the case, upon plaintiff
[sic] filing of a bond in the amount of P1,000,000.00 to answer for damages that
the enjoined parties may sustain by reason of the injunction if the Court should
finally decide that applicant is not entitled thereto.
WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly approved by this
Court.
IT IS HEREBY ORDERED by the undersigned Judge that, until further orders, [the
Philippine Bank of Communications] and all [its] attorneys, representatives, agents
and any other persons assisting [the bank], are directed to restrain from conducting
auction sale on the Properties of [Lui Enterprises] in EJF-REM Case No. 6272-03
scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice, Ecoland, Davao City, until
the final termination of the case.21
Zuellig Pharma filed its opposition22 to the motion to dismiss. It argued that the
motion to dismiss should be denied for having been filed late. Under Rule 16, Section 1
of the 1997 Rules of Civil Procedure, a motion to dismiss should be filed within the
required time given to file an answer to the complaint, which is 15 days from service of
summons on the defendant.23 Summons was served on Lui Enterprises on July 4, 2003.
It had until July 19, 2003 to file a motion to dismiss, but Lui Enterprises filed the motion
only on July23, 2003.24
As to Lui Enterprises’ claim that the interpleader case was filed without authority,
Zuellig Pharma argued that an action interpleader "is a necessary consequence of the
action for consignation."25 Zuellig Pharma consigned its rental payments because of
"the clearly conflicting claims of [Lui Enterprises] and [the Philippine Bank of
Communications]."26 Since Atty. Ana L.A. Peralta was authorized to file a consignation
case, this authority necessarily included an authority to file the interpleader case.
Nevertheless, Zuellig Pharma filed in court the secretary’s certificate dated August 28,
2003,27 which expressly stated that Atty. Ana L.A. Peralta was authorized to file a
consignation and interpleader case on behalf of Zuellig Pharma.28
With respect to the nullification of deed of dation in payment case, Zuellig Pharma
argued that its pendency did not bar the filing of the interpleader case. It was not a
party to the nullification case.29
As to the writ of preliminary injunction issued by the Regional Trial Court of Davao,
Zuellig Pharma argued that the writ only pertained to properties owned by Lui
Enterprises. Under the writ of preliminary injunction, the Regional Trial Court of Davao
enjoined the July 3, 2003 auction sale of Lui Enterprises’ properties, the proceeds of
which were supposed to satisfy its obligations to the Philippine Bank of
Communications. As early as April 21, 2001, however, the Philippine Bank of
Communications already owned the leased property as evidenced by Transfer
Certificate of Title No. 336962. Thus, the writ of preliminary injunction did not apply to
the leased property.30
Considering that Lui Enterprises filed its motion to dismiss beyond the 15-day period to
file an answer, Zuellig Pharma moved that Lui Enterprises be declared in default.31
In its compliance32 dated September 15, 2003, the Philippine Bank of Communications
"[joined Zuellig Pharma] in moving to declare [Lui Enterprises] in default, and in
[moving for] the denial of [Lui Enterprises’] motion to dismiss."33
The Regional Trial Court of Makati found that Lui Enterprises failed to file its motion to
dismiss within the reglementary period. Thus, in its order34 dated October 6, 2003, the
trial court denied Lui Enterprises’motion to dismiss and declared it in default.35
Lui Enterprises did not move for the reconsideration of the order dated October 6,
2003. Thus, the Makati trial court heard the interpleader case without Lui
Enterprises’participation.
Despite having been declared in default, Lui Enterprises filed the manifestation with
prayer36 dated April 15, 2004. It manifested that the Regional Trial Court of Davao
allegedly issued the order37 dated April 1, 2004, ordering all of Lui Enterprises’ lessees
to "observe status quo with regard to the rental payments"38 and continue remitting
their rental payments to Lui Enterprises while the nullification of deed of dation in
payment case was being resolved. The order dated April 1, 2004 of the Regional Trial
Court of Davao reads:
ORDER
Posed for Resolution is the Motion for Amendment of Order filed by [Lui Enterprises]
on September 23, 2003 seeking for the preservation of status quo on the
payment/remittance of rentals to [it] and the disposal/construction of the properties
subject matter of this case.
xxxx
As elsewhere stated, [the Philippine Bank of Communications] did not oppose the
instant motion up to the present. In fact, during the hearing held on March 15, 2004,
[the bank’s] counsel manifested in open court that except for the rentals due from
[Zuellig Pharma] which are the subject of a consignation suit before a Makati Court, the
other rental payments are continuously received by [Lui Enterprises].
There being no objection from [the Philippine Bank of Communications], and in
order to protect the right of [Lui Enterprises] respecting the subject of the action
during the pendency of this case, this Court, in the exercise of its discretion hereby
grants the motion.
Accordingly, consistent with the order of this Court dated June 30, 2003, the
parties are hereby directed to further observe status quo with regard to the rental
payments owing or due from the lessees of the properties subject of the first set of
deeds of dacion and that the defendants are enjoined from disposing of the
properties located at Green Heights Village, Davao City until the case is finally
resolved.
With the order dated April 1, 2004 issued by the Regional Trial Court of Davao as
basis, Lui Enterprises argued that Zuellig Pharma must remit its rental payments to
it and prayed that the interpleader case be dismissed.
The Regional Trial Court of Makati only noted the manifestation with prayer dated
April 15, 2004.39
It was only on October 21, 2004, or one year after the issuance of the order of
default, that Lui Enterprises filed a motion to set aside order of default40 in the
Makati trial court on the ground of excusable negligence. Lui Enterprises argued
that its failure to file a motion to dismiss on time "was caused by the negligence of
[Lui Enterprises’] former counsel."41 This negligence was allegedly excusable
because "[Lui Enterprises] was prejudiced and prevented from fairly presenting [its]
case."42
For its allegedly meritorious defense, Lui Enterprises argued that the earlier filed
nullification of deed of dation in payment case barred the filing of the interpleader
case. The two actions allegedly involved the same parties and the same issue of
which corporation had the better right over the rental payments. To prevent "the
possibility of two courts x x x rendering conflicting rulings [on the same issue],"43
Lui Enterprises argued that the subsequently filed interpleader case be dismissed.
Zuellig Pharma filed its opposition44 to the motion to set aside order of default. It
argued that a counsel’s failure to file a timely answer was inexcusable negligence
which bound his client.
Further, Zuellig Pharma argued that the pending case for nullification of deed of
dation in payment "[did] not preclude [Zuellig Pharma] from seeking the relief
prayed for in the [interpleader case]."45
While the motion to set aside order of default was still pending for resolution, Lui
Enterprises filed the manifestation and motion to dismiss46 dated April 21, 2005 in
the Makati trial court. It manifested that the Davao trial court issued another
order47 dated April 18, 2005 in the nullification of deed of dation in payment case.
In this order, the Davao trial court directed the Philippine Bank of Communications
to inform Zuellig Pharma to pay rent to Lui Enterprises while the Davao trial court’s
order dated April 1, 2004 was subsisting. The order datedApril 18, 2005 of the
Davao trial court reads:
ORDER
Plaintiffs move for execution or implementation of the Order dated September 14,
2004. In substance, [Lui Enterprises] seek[s] to compel the remittance in their favor
of the rentals from [Zuellig Pharma], one of the lessees alluded to in the
September 14, 2004 Order whose rental payments "must be remitted to and
collected by [Lui Enterprises]." [The Philippine Bank of Communications] did not
submit any opposition.
It appears from the records that sometime in February 2003, after being
threatened with a lawsuit coming from [the Philippine Bank of Communications],
[Zuellig Pharma] stopped remitting its rentals to [Lui Enterprises] and instead, has
reportedly deposited the monthly rentals before a Makati court for consignation.
As aptly raised by the plaintiffs, a possible impasse may insist should the Makati
Court’s ruling be contrary to or in conflict with the status quo order issued by this
Court. To preclude this spectacle, Zuellig Pharma should accordingly be advised
with the import of the Order dated September 14, 2004, the salient portion of
which is quoted:
x x x prior to the institution of the instant case and by agreement of the parties,
plaintiffs were given as they did exercise the right to collect, receive and enjoy
rental payments x x x.
Since the April 1, 2004 status quo order was a necessary implement of the writ of
preliminary injunction issued on June 30, 2003, it follows that plaintiff's right to collect
and receive rental payments which he enjoyed prior to the filing of this case, must be
respected and protected and maintained until the case is resolved. As such, all rentals
due from the above-enumerated lessees must be remitted to and collectedby the
Plaintiffs.
Status quo simply means the last actual peaceable uncontested status that preceded
the actual controversy. (Searth Commodities Corp. v. Court ofAppeals, 207 SCRA 622).
As such, the [Philippine Bank of Communications] [is] hereby directed to forthwith
inform [Zuellig Pharma] of the April 1, 2004 status quo order and the succeeding
September 14, 2004 Order, and consequently, for the said lessee to remit all rentals
due from February 23, 2003 and onwards to [Lui Enterprises] in the meanwhile that the
status quo order is subsisting.
In its manifestation and motion to dismiss, Lui Enterprises reiterated its prayer for the
dismissal of the interpleader case to prevent "the possibility of [the Regional Trial
Court, Branch 143, Makati City] and [the Regional Trial Court, Branch 16, Davao City]
rendering conflicting rulings [on the same issue of which corporation has the better
right to the rental payments]."48
Without resolving the motion to set aside order of default, the Makati trial court denied
the manifestation with motion to dismiss dated April 21, 2005 on the ground that Lui
Enterprises already lost its standing in court.49
Lui Enterprises did not file any motion for reconsideration of the denial of the
manifestation and motion to dismiss dated April 21, 2005.
In its decision50 dated July 4, 2006, the Regional Trial Court of Makati ruled that Lui
Enterprises "[was] barred from any claim in respect of the [rental payments]"51 since it
was declared in default. Thus, according to the trial court, there was no issue as to
which corporation had the better right over the rental payments.52 The trial court
awarded the total consigned amount of P6,681,327.30 to the Philippine Bank of
Communications and ordered Lui Enterprises to pay Zuellig Pharma P50,000.00 in
attorney’s fees.53
Lui Enterprises appealed to the Court of Appeals.54
The Court of Appeals found Lui Enterprises’ appellant’s brief insufficient. Under Rule 44,
Section 13 of the 1997 Rules of Civil Procedure, an appellant’s brief must contain a
subject index, page references to the record, table of cases, textbooks and statutes
cited, and the statement of issues, among others. However, Lui Enterprises’ appellant’s
brief did not contain these requirements.55
As to the denial of Lui Enterprises’ motion to dismiss, the Court of Appeals sustained
the trial court. The Court of Appeals found that Lui Enterprises filed its motion to
dismiss four days late.56
With respect to Lui Enterprises’ motion to set aside order of default, the Court
ofAppeals found that Lui Enterprises failed to show the excusable negligence that
prevented it from filing its motion to dismiss on time. On its allegedly meritorious
defense, the Court of Appeals ruled that the nullification of deed of dation in payment
case did not bar the filing of the interpleader case, with Zuellig Pharma not being a
party to the nullification case.57
On the award of attorney’s fees, the Court of Appeals sustained the trial court since
"Zuellig Pharma x x x was constrained to file the action for interpleader with
consignation inorder to protect its interests x x x."58
Thus, in its decision59 promulgated on May 24, 2010, the Court of Appeals dismissed
Lui Enterprises’appeal and affirmed in toto the Regional Trial Court of Makati’s
decision.
Lui Enterprises filed a motion for reconsideration.60
The Court of Appeals denied Lui Enterprises’ motion for reconsideration in its
resolution promulgated on August 13, 2010.61 Hence, this petition.
In this petition for review on certiorari,62 Lui Enterprises argued that the Court of
Appeals applied "the rules of procedure strictly"63 and dismissed its appeal on
technicalities. According to Lui Enterprises, the Court of Appeals should have taken a
liberal stance and allowed its appeal despite the lack of subject index, page references
to the record, table of cases, textbooks and statutes cited, and the statement of issues
in its appellant’s brief.64
Lui Enterprises also claimed that the trial court should have set aside the order of
default since its failure to file a motion to dismiss on time was due to excusable
negligence.65
For its allegedly meritorious defense, Lui Enterprises argued that the pending
nullification of deed of dation in payment case barred the filing of the interpleader
case.The nullification of deed of dation in payment case and the interpleader case
allegedly involved the same issue of which corporation had the better right to the
rent. To avoid conflicting rulings on the same issue, Lui Enterprises argued that the
subsequently filed interpleader case be dismissed.66
No attorney’s fees should have been awarded to Zuellig Pharma as argued by Lui
Enterprises. Zuellig Pharma filed the interpleader case despite its knowledge of the
nullification of deed of dation in payment case filed in the Davao trial court where
the same issue of which corporation had the better right over the rental payments
was being litigated. Thus, Zuellig Pharma filed the interpleader case in bad faith for
which it was not entitled to attorney’s fees.67
The Philippine Bank of Communications filed its comment68 on the petition for
review on certiorari. It argued that Lui Enterprises failed to raise any error of law
and prayed that we affirm in toto the Court of Appeals’ decision.
For Zuellig Pharma, it manifested that it was adopting the Philippine Bank of
Communications’arguments in its comment.69
The issues for our resolution are:
I. Whether the Court of Appeals erred in dismissing Lui Enterprises’ appeal for lack
of subject index, page references to the record, table of cases, textbooks and
statutes cited, and the statement of issues in Lui Enterprises’appellant’s brief;
II. Whether the Regional Trial Court of Makati erred in denying Lui
Enterprises’motion to set aside order of default;
III. Whether the annulment of deed of dation in payment pending in the Regional
Trial Court of Davao barred the subsequent filing of the interpleader case in the
Regional Trial Court of Makati; and
IV. Whether Zuellig Pharma was entitled to attorney’s fees.
Lui Enterprises’ petition for review on certiorari is without merit. However, we
delete the award of attorney’s fees.
I This court "[deviated] from a rigid enforcement of the rules"78 and ordered the Court
Lui Enterprises did not comply with the rules on the contents of the appellant’s
brief
Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil Procedure, the
Court of Appeals may, on its own motion or that of the appellee, dismiss an appeal
should the appellant’s brief lack specific requirements under Rule 44, Section 13,
paragraphs (a), (c), (d), and (f):
Section 1. Grounds for dismissal of appeal. – An appeal may be dismissed by the
Court of Appeals, on its own motion or on that of the appellee, on the following
grounds:
xxxx
(f) Absence of specific assignment of errors in the appellant’s brief, or of page
references to the record as required in Section 13, paragraphs (a), (c), (d), and (f) of
Rule 44.
These requirements are the subject index of the matter in brief, page references to
the record, and a table of cases alphabetically arranged and with textbooks and
statutes cited:
Section 13. Contents of the appellant’s brief. – The appellant’s brief shall contain,
in the order herein indicated, the following:
(a) A subject index of the matter in brief with a digest of the arguments and page
references, and a table of cases alphabetically arranged, textbooks and statutes
cited with references to the pages where they are cited;
xxxx
(c) Under the heading "Statement of the Case," a clear and concise statement of the
nature of the action, a summary of the proceedings, the appealed rulings and orders of
the court, the nature of the controversy, with page references to the record;
(d) Under the heading "Statement of Facts," a clear and concise statement in a narrative
form of the facts admitted by both parties and of those in controversy, together with
the substance of the proof relating thereto in sufficient detail to make it clearly
intelligible, with page references to the record;
xxxx
(f) Under the heading "Argument," the appellant’s arguments on each assignment of
error with page references to the record. The authorities relied upon shall be cited by
the page of the report at which the case begins and the page of the report on which
the citation isfound;
xxxx
Lui Enterprises’ appellant’s brief lacked a subject index, page references to the record,
and table of cases, textbooks and statutes cited. Under Rule 50, Section 1 of the 1997
Rules of Civil Procedure, the Court of Appeals correctly dismissed Lui Enterprises’
appeal.
Except for cases provided in the Constitution,70 appeal is a "purely statutory right."71
The right to appeal "must be exercised in the manner prescribed by law"72 and
requires strict compliance with the Rules of Court on appeals.73 Otherwise, the appeal
shall be dismissed, and its dismissal shall not be a deprivation of due process of law.
In Mendoza v. United Coconut Planters Bank, Inc.,74 this court sustained the Court of
Appeals’ dismissal of Mendoza’s appeal. Mendoza’s appellant’s brief lacked a subject
index, assignment of errors, and page references to the record. In De Liano v. Court of
Appeals,75 this court also sustained the dismissal of De Liano’s appeal. De Liano’s
appellant’s brief lacked a subject index, a table of cases and authorities, and page
references to the record.
There are exceptions to this rule. In Philippine Coconut Authority v. Corona
International, Inc.,76 the Philippine Coconut Authority’s appellant’s brief lacked a clear
and concise statement of the nature of the action, a summary of the proceedings, the
nature of the judgment, and page references to the record. However, this court found
that the Philippine Coconut Authority substantially complied with the Rules. Its
appellant’s brief "apprise[d] [the Court of Appeals] of the essential facts and nature of
the case as well as the issues raised and the laws necessary [to dispose of the case]."77
of Appeals to resolve the Philippine Coconut Authority’s appeal.
In Go v. Chaves,79 Go’s 17-page appellant’s brief lacked a subject index. However, Go
subsequently filed a subject index. This court excused Go’s procedural lapse since the
appellant’s brief "[consisted] only of 17 pages which [the Court of Appeals] may easily
peruse to apprise it of [the case] and of the relief sought."80 This court ordered the
Court of Appeals to resolve Go’s appeal "in the interest of justice."81
In Philippine Coconut Authority and Go, the appellants substantially complied with the
rules on the contents of the appellant’s brief. Thus, this court excused the
appellants’procedural lapses.
In this case, Lui Enterprises did not substantially comply with the rules on the contents
of the appellant’s brief. It admitted that its appellant’s brief lacked the required subject
index, page references to the record, and table of cases, textbooks, and statutes cited.
However, it did not even correct its admitted "technical omissions"82 by filing an
amended appellant’s brief with the required contents.83 Thus, this case does not allow
a relaxation of the rules. The Court of Appeals did not err in dismissing Lui Enterprises’
appeal.
Rules on appeal "are designed for the proper and prompt disposition of cases before
the Court ofAppeals."84 With respect to the appellant’s brief, its required contents are
designed "to minimize the [Court ofAppeals’] labor in [examining]the record
uponwhich the appeal is heard and determined."85
The subject index serves as the brief’s table of contents.86 Instead of "[thumbing]
through the [appellant’s brief]"87 every time the Court of Appeals Justice encounters
an argument or citation, the Justice deciding the case only has to refer to the subject
index for the argument or citation he or she needs.88 This saves the Court ofAppeals
time in reviewing the appealed case. Efficiency allows the justices of the appellate
court to substantially attend to this case as well as other cases.
Page references to the record guarantee that the facts stated in the appellant’s
brief are supported by the record.89 Astatement of fact without a page reference
to the record creates the presumption that it is unsupported by the record and,
thus, "may be stricken or disregarded altogether."90
As for the table of cases, textbooks, and statutes cited, this is required so that the
Court of Appeals can easily verify the authorities cited "for accuracy and
aptness."91
Lui Enterprises’ appellant’s brief lacked a subject index, page references to the
record, and a table of cases, textbooks, and statutes cited. These requirements
"were designed to assist the appellate court in the accomplishment of its tasks,
and, overall, to enhance the orderly administration of justice."92 This court will not
disregard rules on appeal "in the guise of liberal construction."93 For this court to
liberally construe the Rules, the party must substantially comply with the Rules and
correct its procedural lapses.94 Lui Enterprises failed to remedy these errors.
All told, the Court of Appeals did not err in dismissing Lui Enterprises’ appeal. It
failed to comply with Rule 44, Section 13, paragraphs (a), (c), (d), and (f) of the
1997 Rules of Civil Procedure on the required contents of the appellant’s brief.
II
Lui Enterprises failed to show that its failure to answer the complaint within the
required period was due to excusable negligence
When a defendant is served with summons and a copy of the complaint, he or she
is required to answer within 15 days from the day he or she was served with
summons.95 The defendant may also move to dismiss the complaint "[w]ithin the
time for but before filing the answer."96
Fifteen days is sufficient time for a defendant to answer with good defenses
against the plaintiff’s allegations in the complaint. Thus, a defendant who fails to
answer within 15 days from service of summons either presents no defenses
against the plaintiff’s allegations in the complaint or was prevented from filing his
or her answer within the required period due to fraud, accident, mistake or
excusable negligence.97
In either case, the court may declare the defendant in default on plaintiff’s motion
and notice to defendant.98 The court shall then try the case until judgment
without defendant’s participation99 and grant the plaintiff such relief as his or her
complaint may warrant.100
A defendant declared in default loses his or her standing in court.101 He or she is
"deprived of the right to take part in the trial and forfeits his [or her] rights as a
party litigant,"102 has no right "to present evidence [supporting his or her]
allegations,"103 and has no right to "control the proceedings [or] cross-examine
witnesses."104 Moreover, he or she "has no right to expect that [the court] would
[act] upon [his or her pleadings]"105 or that he or she "may [oppose]motions filed
against him [or her]."106
However, the defendant declared in default "does not [waive] all of [his or her]
rights."107 He or she still has the right to "receive notice of subsequent
proceedings."108 Also, the plaintiff must still present evidence supporting his or
her allegations "despite the default of [the defendant]."109
Default, therefore, is not meant to punish the defendant but to enforce the prompt
filing of the answer to the complaint. For a defendant without good defenses,
default saves him or her "the embarrassment of openly appearing to defend the
indefensible."110 As this court explained in Gochangco v. The Court of First
Instance of Negros Occidental, Branch
IV:111
It does make sense for a defendant without defenses, and who accepts the
correctness of the specific relief prayed for in the complaint, to forego the filing of
the answer or any sort of intervention in the action at all. For even if he did
intervene, the result would be the same: since he would be unable to establish any
good defense, having none in fact, judgment would inevitably go against him. And
this would be an acceptable result, if not being in his power to alter or prevent it,
provided that the judgment did not go beyond or differ from the specific relief
stated in the complaint. x x x.112 (Emphasis in the original)
On the other hand, for a defendant with good defenses, "it would be unnatural for him
[or her] not to set x x x up [his or her defenses] properly and timely."113 Thus, "it must
be presumed that some insuperable cause prevented him [or her] from [answering the
complaint]."114 In which case, his or her proper remedy depends on when he or she
discovered the default and whether the default judgment was already rendered by the
trial court.
After notice of the declaration of default but before the court renders the default
judgment, the defendant may file, under oath, a motion to set aside order of default.
The defendant must properly show that his or her failure to answer was due to fraud,
accident,115 mistake116 or excusable negligence.117 The defendant must also have a
meritorious defense. Rule 9, Section 3, paragraph (b) of the1997 Rules of Civil
Procedure provides:
Section 3. Default; declaration of. – x x x x
(b) Relief from order of default. – A party declared in default may at any time after
notice thereof and before judgment file a motion under oath to set aside the order of
default upon proper showing that his failure to answer was due to fraud, accident,
mistake or excusable negligence and that he has a meritorious defense. In such case,
the order of default may be set aside on such terms and conditions as the judge may
impose in the interest of justice.
If the defendant discovers his or her default after judgment but prior to the judgment
becoming final and executory, he or she may file a motion for new trial under Rule 37,
Section 1, paragraph (a) of the 1997 Rules of Civil Procedure.118 If he or she discovers
his or her default after the judgment has become final and executory, a petition for
relief from judgment under Rule 38, Section 1 of the 1997 Rules of Civil Procedure may
be filed.119
Appeal is also available to the defendant declared in default. He or she may appeal the
judgment for being contrary to the evidence or to the law under Rule 41, Section 2 of
the 1997 Rules of Civil Procedure.120 He or she may do so even if he or she did not file
a petition to set aside order of default.121
A petition for certiorari may also be filed if the trial court declared the defendant in
default with grave abuse of discretion.122
The remedies of the motion to set aside order of default, motion for new trial, and
petition for relief from judgment are mutually exclusive, not alternative or cumulative.
This is to compel defendants to remedy their default at the earliest possible
opportunity. Depending on when the default was discovered and whether a default
judgment was already rendered, a defendant declared in default may avail of onlyone
of the three remedies.
Thus, if a defendant discovers his or her default before the trial court renders
judgment, he or she shall file a motion to set aside order of default. If this motion to
set aside order of default is denied, the defendant declared in default cannot await the
rendition of judgment, and he or she cannot file a motion for new trial before the
judgment becomes final and executory, or a petition for relief from judgment after the
judgment becomes final and executory.
Also, the remedies against default become narrower and narrower as the trial nears
judgment. The defendant enjoys the most liberality from this court with a motion to set
aside order of default, as he or she has no default judgment to contend with, and he or
she has the whole period before judgment to remedy his or her default.
With a motion for new trial, the defendant must file the motion within the period for
taking an appeal123 or within 15 days from notice of the default judgment. Although a
default judgment has already been rendered, the filing of the motion for new trial tolls
the reglementary period of appeal, and the default judgment cannot be executed
against the defendant.
A petition for relief from judgment is filed after the default judgment has become final
and executory. Thus, the filing of the petition for relief from judgment does not stay the
execution of the default judgment unless a writ of preliminary injunction is issued
pending the petition’s resolution.124
Upon the grant of a motion to set aside order of default, motion for new trial, or a
petition for relief from judgment, the defendant is given the chance to present his or
her evidence against that of plaintiff’s. With an appeal, however, the defendant has no
right to present evidence on his or her behalf and can only appeal the judgment for
being contrary to plaintiff’s evidence or the law.
Similar to an appeal, a petition for certiorari does not allow the defendant to
present evidence on his or her behalf. The defendant can only argue that the trial
court committed grave abuse of discretion in declaring him or her in default.
Thus, should a defendant prefer to present evidence on his or her behalf, he or she
must file either a motion to set aside order of default, motion for new trial, or a
petition for relief from judgment.
In this case, Lui Enterprises had discovered its default before the Regional Trial
Court of Makati rendered judgment. Thus, it timely filed a motion to set aside
order of default, raising the ground of excusable negligence.
Excusable negligence is "one which ordinary diligence and prudence could not
have guarded against."125 The circumstances should be properly alleged and
proved. In this case, we find that Lui Enterprises’ failure to answer within the
required period is inexcusable.
Lui Enterprises’ counsel filed its motion to dismiss four days late. It did not
immediately take steps to remedy its default and took one year from discovery of
default to file a motion to set aside order of default. In its motion to set aside
order of default, Lui Enterprises only "conveniently blamed its x x x counsel [for the
late filing of the answer]"126 without offering any excuse for the late filing. This is
not excusable negligence under Rule 9, Section 3, paragraph (b)127 of the 1997
Rules of Civil Procedure. Thus, the Regional Trial Court of Makati did not err in
refusing to set aside the order of default.
Lui Enterprises argued that the Regional Trial Court of Makati should have been
liberal in setting aside its order of default. After it had been declared in default, Lui
Enterprises filed several manifestations informing the Makati trial court of the
earlier filed nullification of deed of dation in payment case which barred the filing
of the interpleader case. Lui Enterprises’ president, Eli L. Lui, and counsel even flew
in from Davao to Makati to "formally [manifest that] a [similar] action between [Lui
Enterprises] and [the Philippine Bank of Communications]"128 was already
pending in the Regional Trial Court of Davao. However, the trial court did not
recognize Lui Enterprises’standing incourt.
The general rule is that courts should proceed with deciding cases on the merits
and set aside orders of default as default judgments are "frowned upon."129 As
much as possible, cases should be decided with both parties "given every chance
to fight their case fairly and in the open, without resort to technicality."130
However, the basic requirements of Rule 9, Section 3, paragraph (b) of the 1997
Rules of Civil Procedure must first be complied with.131 The defendant’s motion to
set aside order of default must satisfy three conditions. First is the time element.
The defendant must challenge the default order before judgment. Second, the
defendant must have been prevented from filing his answer due to fraud, accident,
mistake or excusable negligence. Third, he must have a meritorious defense. As
this court held in SSS v. Hon. Chaves:132
Procedural rules are not to be disregarded or dismissed simply because their non-
observance may have resulted in prejudice to a party’s substantive rights. Like all
rules[,] they are to be followed, except only when for the most persuasive of
reasons they may be relaxed to relieve a litigant of an injustice not commensurate
with the degree of his thoughtlessness in not complying with the procedure
prescribed. x x x.133
As discussed, Lui Enterprises never explained why its counsel failed to file the
motion to dismiss on time. It just argued that courts should be liberal in setting
aside orders of default. Even assuming that it had a meritorious defense and that
its representative and counsel had to fly in from Davao to Makati to personally
appear and manifest in court its meritorious defense, Lui Enterprises must first
show that its failure to answer was due to fraud, accident, mistake or excusable
negligence. This Lui Enterprises did not do.
Lui Enterprises argued that Zuellig Pharma filed the interpleader case to compel
Lui Enterprises and the Philippine Bank of Communications to litigate their claims.
Thus, "[d]eclaring the other claimant in default would ironically defeat the very
purpose of the suit."134 The RegionalTrial Court of Makati should not have
declared Lui Enterprises in default.
Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a person may file a
special civil action for interpleader if conflicting claims are made against him or her
over a subject matter in which he or she has no interest. The action is brought
against the claimants to compel them to litigate their conflicting claims among
themselves. Rule 62, Section 1 of the 1997 Rules of Civil Procedure provides:
Section 1. When interpleader proper. – Whenever conflicting claims upon the same
subject matter are or may be made against a person who claims no interest whatever in
the subject matter, or an interest which in whole or in part is not disputed bythe
claimants, he may bring an action against the conflicting claimants to compel them to
interplead and litigate their several claims among themselves.
An interpleader complaint may be filed by a lessee against those who have conflicting
claims over the rent due for the property leased.135 This remedy is for the lessee to
protect him or her from "double vexation in respect of one liability."136 He or she may
file the interpleader case to extinguish his or her obligation to pay rent, remove him or
her from the adverse claimants’dispute, and compel the parties with conflicting claims
to litigate among themselves.
In this case, Zuellig Pharma filed the interpleader case to extinguish its obligation to
pay rent. Its purpose in filing the interpleader case "was not defeated"137 when the
Makati trial court declared Lui Enterprises in default.
At any rate, an adverse claimant in an interpleader case may be declared in default.
Under Rule 62, Section 5 of the 1997 Rules of Civil Procedure, a claimant who fails to
answer within the required period may, on motion, be declared in default. The
consequence of the default is that the court may "render judgment barring [the
defaulted claimant] from any claim in respect to the subject matter."138 The Rules
would not have allowed claimants in interpleader cases to be declared in default if it
would "ironically defeat the very purpose of the suit."139
The Regional Trial Court of Makati declared Lui Enterprises in default when it failed to
answer the complaint within the required period. Lui Enterprises filed a motion to set
aside order of default without an acceptable excuse why its counsel failed to answer
the complaint. It failed to prove the excusable negligence. Thus, the Makati trial court
did not err in refusing to set aside the order of default.
III
The nullification of deed in dation in payment case did not bar the filing of the
interpleader case. Litis pendentia is not present in this case.
Lui Enterprises allegedly filed for nullification of deed of dation in payment with the
Regional Trial Court of Davao. It sought to nullify the deed of dation in payment
through which the Philippine Bank of Communications acquired title over the leased
property. Lui Enterprises argued that this pending nullification case barred the Regional
Trial Court of Makati from hearing the interpleader case. Since the interpleader case
was filed subsequently to the nullification case, the interpleader case should be
dismissed.
Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil Procedure, a motion
to dismiss may be filed on the ground of litis pendentia:
Section 1. Grounds. – Within the time for but before filing the answer to the complaint
or pleading asserting a claim, a motion to dismiss may be made on any of the following
grounds:
xxxx
(e)That there is another action pending between the same parties for the same cause;
xxxx
Litis pendentia is Latin for "a pending suit."140 It exists when "another action is
pending between the same parties for the same cause of actionx x x."141 The
subsequent action is "unnecessary and vexatious"142 and is instituted to "harass the
respondent [in the subsequent action]."143
The requisites of litis pendentia are:
(1)Identity of parties or at least such as represent the same interest in both actions;
(2)Identity of rights asserted and reliefs prayed for, the reliefs being founded on the
same facts; and
(3)The identity in the two cases should be such that the judgment that may be
rendered in one would, regardless of which party is successful, amount to res judicata
in the other.144
All of the requisites must be present.145 Absent one requisite, there is no litis
pendentia.146
In this case, there is no litis pendentia since there is no identity of parties in the
nullification of deed of dation in payment case and the interpleader case. Zuellig
Pharma is not a party to the nullification case filed in the Davao trial court.
There is also no identity of rights asserted and reliefs prayed for. Lui Enterprises
filed the first case to nullify the deed of dation in payment it executed in favor of
the Philippine Bank of Communications. Zuellig Pharma subsequently filed the
interpleader case to consign in court the rental payments and extinguish its
obligation as lessee. The interpleader case was necessary and was not instituted to
harass either Lui Enterprises or the Philippine Bank of Communications.
Thus, the pending nullification case did not bar the filing of the interpleader case.
Lui Enterprises cited Progressive Development Corporation, Inc. v. Court of
Appeals147 as authority to set aside the subsequently filed interpleader case. In
this cited case, petitioner Progressive Development Corporation, Inc. entered into
a lease contract with Westin Seafood Market, Inc. The latter failed to pay rent.
Thus, Progressive Development Corporation, Inc. repossessed the leased premises,
inventoried the movable properties inside the leased premises, and scheduled the
public sale of the inventoried properties as they agreed upon in their lease
contract.
Westin Seafood Market, Inc. filed for forcible entry with damages against
Progressive Development Corporation, Inc. It subsequently filed an action for
damages against Progressive Development Corporation for its "forcible takeover
of the leased premises."148
This court ordered the subsequently filed action for damages dismissed as the
pending forcible entry with damages case barred the subsequently filed damages
case.
Progressive Development Corporation, Inc. does not apply in this case. The action
for forcible entry with damages and the subsequent action for damages were filed
by the same plaintiff against the same defendant. There is identity of parties in
both cases.
In this case, the nullification of deed of dation in payment case was filed by Lui
Enterprises against the Philippine Bank of Communications. The interpleader case
was filed by Zuellig Pharma against Lui Enterprises and the Philippine Bank of
Communications. A different plaintiff filed the interpleader case against Lui
Enterprises and the Philippine Bank of Communications. Thus, there is no identity
of parties, and the first requisite of litis pendentia is absent.
As discussed, Lui Enterprises filed the nullification of deed of dation in payment to
recover ownership of the leased premises. Zuellig Pharma filed the interpleader
case to extinguish its obligation to pay rent.There is no identity of reliefs prayed
for, and the second requisite of litis pendentia is absent.
Since two requisites of litis pendentia are absent, the nullification of deed of dation
in payment case did not bar the filing of the interpleader case.
Lui Enterprises alleged that the Regional Trial Court of Davao issued a writ of
preliminary injunction against the Regional Trial Court of Makati. The Regional
Trial Court of Davao allegedly enjoined the Regional Trial Court of Makati from
taking cognizance of the interpleader case. Lui Enterprises argued that the
Regional Trial Court of Makati "should have respected the orders issued by the
Regional Trial Court of Davao."149 Lui Enterprises cited Compania General de
Tabacos de Filipinas v. Court of Appeals150 where this court allegedly held:
x x x [T]he issuance of the said writ by the RTC ofAgoo, La Union not only seeks to
enjoin Branch 9 of the RTC of Manila from proceeding with the foreclosure case
but also has the effect of pre-empting the latter’s orders. x x x.151
Compania General de Tabacos de Filipinas is not an authority for the claim that a
court can issue a writ of preliminary injunction against a co- equal court.1âwphi1
The cited sentence was taken out of context. In Compania General de Tabacos de
Filipinas, this court held that the Regional Trial Court ofAgoo had no power to
issue a writ of preliminary injunction against the Regional Trial Court of Manila.152
Acourt cannot enjoin the proceedings of a co-equal court.
Thus, when this court said that the Regional Trial Court of Agoo’s writ of
preliminary injunction "not only seeks to enjoin x x x [the Regional Trial Court of
Manila] from proceeding with the foreclosure case but also has the effect of pre-
empting the latter’s orders,"153 this court followed with "[t]his we cannot
countenance."154
At any rate, the Regional Trial Court of Davao’s order datedApril 18, 2005 was not a writ
of preliminary injunction. It was a mere order directing the Philippine Bank of
Communications to inform Zuellig Pharma to pay rent to Lui Enterprises while the
status quo order between Lui Enterprises and the Philippine Bank of Communications
was subsisting. The Regional Trial Court of Davao did not enjoin the proceedings
before the Regional Trial Court of Makati.The order datedApril 18, 2005 provides:
As such, [the Philippine Bank of Communications] [is] hereby directed to forthwith
inform Zuellig Pharma Corp., of the April 1, 2004 status quo order and the succeeding
September 14, 2004 Order, and consequently, for the said lessee to remit all rentals
due from February 23, 2003 and onwards to plaintiff Lui Enterprises, Inc., in the
meanwhile that the status quo order is subsisting.155
Thus, the Regional Trial Court of Davao did not enjoin the Regional Trial Court of
Makati fromhearing the interpleader case.
All told, the trial court did not err in proceeding with the interpleader case. The
nullification of deed of dation in payment case pending with the Regional Trial Court of
Davao did not bar the filing of the interpleader case with the RegionalTrial Court of
Makati.
IV
The Court of Appeals erred in awarding attorney’s fees
In its ordinary sense, attorney’s fees "represent the reasonable compensation [a client
pays his or her lawyer] [for legal service rendered]."156 In its extraordinary sense,
attorney’s fees "[are] awarded x x x as indemnity for damages [the losing party pays the
prevailingparty]."157
The award of attorney’s fees is the exception rather than the rule.158 It is not awarded
to the prevailing party "as a matter of course."159 Under Article 2208 of the Civil Code,
attorney’s fees cannot be recovered in the absence of stipulation, except under specific
circumstances:
(1)When exemplary damages are awarded;
(2)When the defendant’s act or omission has compelled the plaintiff to litigate with
third persons or to incur expenses to protect his interest;
(3)In criminal cases of malicious prosecution against the plaintiff;
(4)In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5)Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff’s plainly valid, just and demandable claim;
(6)In actions for legal support;
(7)In actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8)In actions for indemnity under workmen’s compensation and employer’s liability
laws;
(9)In a separate civil action to recover civil liability arising froma crime;
(10)When at least double judicial costs are awarded;
(11)In any other case where the court deems it just and equitable that attorney's fees
and expenses of litigation should be recovered.160
Even if a party is "compelled to litigate with third persons or to incur expenses to
protect his [or her] rights,"161 attorney's fees will not be awarded if no bad faith "could
be reflected in a party's persistence in a case."162
To award attorney's fees, the court must have "factual, legal, [and] equitable
justification."163 The court must state the award's basis in its decision.164These rules
are based on the policy that "no premium should be placed.on the right to litigate."165
In this case, the Court of Appeals awarded attorney's fees as "[Zuellig Pharma] was
compelled to litigate with third persons or to incur expenses to protect [its]
interest[s]."166 This is not a compelling reason to award attorney's fees. That
Zuellig Pharma had to file an interpleader case to consign its rental payments did
not mean that Lui Enterprises was in bad faith in insisting that rental payments be
paid to it. Thus, the Court. of Appeals erred in awarding attorney's fees to Zuellig
Pharma.
All told, the Court of Appeals' award of P50,000.00 as attorney's fees must be
deleted.
WHEREFORE, in view of the foregoing, the petition for review on certiorari is
DENIED. The Court of Appeals' decision and resolution in CA- G.R. CV No. 88023
are AFFIRMED with MODIFICATION. The award of PS0,000.00 attorney's fees to
Zuellig Pharma Corporation is DELETED.
SO ORDERED.
G.R. No. 163109, January 22, 2014
MARICHU G. EJERA, Petitioner, v. BEAU HENRY L. MERTO AND ERWIN VERGARA,
Respondents.
DECISION
BERSAMIN, J.:
A public servant who has an issue against a directive for her re-assignment must
exhaust her available administrative remedies before resorting to judicial action.
The non-exhaustion of available administrative remedies is fatal to the resort to
judicial action.
This appeal by petition for review on certiorari assails the decision promulgated on
July 23, 2003,1 whereby the Court of Appeals (CA) affirmed the order issued on
October 22, 2001 by the Regional Trial Court, Branch 33, in Dumaguete City (RTC)
dismissing the petitioner’s suit for injunction and damages on the ground of non-
exhaustion of administrative remedies.2 She had commenced the suit to restrain
the respondents from investigating her refusal to comply with the office orders re-
assigning her to a station other than her current place of work.chanrobleslaw
Antecedents
The petitioner held the position of Agricultural Center Chief I in the Office of the
Provincial Agriculturist in Negros Oriental.3 Her position was equivalent to the
position of Senior Agriculturist, the next-in-rank to the position of Supervising
Agriculturist. Upon the retirement of the Supervising Agriculturist, she applied for
that position, but one Daisy Kirit was eventually appointed. She filed a protest
against the appointment of Kirit before the Civil Service Commission (CSC)
Regional Office in Cebu City,4 but that said office dismissed her protest on May 24,
2000.5 The Central CSC Office affirmed the dismissal on July 25, 2001 under its
Resolution No. 011253.6chanrobleslaw
Meanwhile, on September 11, 2000, respondent Provincial Agriculturist Beau
Henry L. Merto issued Office Order No. 008 (Amending Office Order No. 008,
Series of 2000, Re: Assignment/Re-assignment of BADC Area Coordinators and
Development Team Members)7 “[i]n the interest of the service and to provide
intensive agricultural extension services to residents of interior barangays under
the Barangay Agricultural Development Center (BADC) Program in the province,
which is aimed at achieving Food Security and Poverty Alleviation.” Provincial
Governor George P. Arnaiz of Negros Oriental was furnished a copy of Office
Order No. 008.
To take effect on October 2, 2000, Office Order No. 008
stated:chanRoblesvirtualLawlibrary
All Fishery Technologists presently assigned in the coastal areas, and in further
pursuant to Special Order No. 001, Series of 2000 approved by the Provincial
Governor, shall now radiate and devote 60% of their official time to their
respective assigned BADC sites to provide technical assistance to participants in
freshwater fish production. However, they shall maintain their present station as
their official duty station.
It has been an established policy of the present provincial administration to
provide regular and adequate agricultural extension services to residents of
remote interior barangays which are economically depressed but with potentials
for agricultural development. The deployment of Agricultural and Fishery Technologists
in the above mentioned barangays/sitios will improve farming activities of the residents
in the long term and eventually trigger other developments that will improve their
quality of life.8
The petitioner was one of the personnel re-assigned under Office Order No. 008. She
was designated therein as the team leader in Lake Balanan and Sandulot in the
Municipality of Siaton. When she refused to obey the office order, Merto ordered her
on March 12, 2001 to explain in writing within 72 hours why no administrative
disciplinary action should be taken against her.9 After she did not submit her
explanation, Merto and respondent Atty. Erwin B. Vergara, the Provincial Legal Officer,
summoned her to a conference. She and her counsel, Atty. Lenin R. Victoriano,
attended the conference, but later on walked out allegedly because Vergara refused to
record her objections to the questions she was being asked to answer.
On April 16, 2001,10 the petitioner filed in the RTC her complaint for “final injunction
with temporary restraining order and/or preliminary injunction, and damages,” averring
that Merto had issued Office Order No. 008 because he had so bitterly resented her
attacks against him before the CSC Regional Office; that her reassignment was a virtual
“banishment” because her position required her to stay in Dumaguete City; that the re-
assignment was a “gross and blatant violation of the ‘Omnibus Rules on Appointments
and Other Personnel Actions’” prohibiting whimsical and indiscriminate reassignments;
that on account of her refusal to obey Office Order No. 008, Merto had charged her
administratively; that Merto had no power to investigate, because the Provincial
Governor was the proper disciplining authority; that the letter of Merto requiring her to
explain violated Rule II, Section B of CSC Memorandum Circular No. 19, Series of 1999
requiring complaints to be under oath; that Merto connived with Vergara, who had
issued a “Notice of Conference” on March 30, 2001 setting the preliminary conference
on April 5, 2001; and that the conference could not be terminated when she and her
counsel walked out due to the refusal of Vergara to allow the recording of the
objections of her counsel.
The petitioner further averred that the RTC could rule on the basic ground that the
respondents had no power to banish her to the far-flung areas of Municipality of
Siaton through the “illegal, whimsical and malicious” Office Order No. 008; and that
they acted in bad faith and with malice in violation of Article 19 and Article 20 of the
Civil Code, thereby entitling her to damages. For reliefs, she
prayed:chanRoblesvirtualLawlibrary
WHEREFORE, it is respectfully prayed:chanroblesvirtuallawlibrary
(1) That, pending trial, a temporary restraining order and/or preliminary injunction be
immediately issued, ordering the defendants to cease and desist from investigating
plaintiff for refusal to obey Office Order No. 008, Series of 2000, issued by defendant
Beau Henry L. Merto, and to refrain from committing any and all acts which might
impair the efficacy of said temporary restraining order and/or preliminary injunction;
(2) That, after trial, judgment issue, declaring said Office Order No. 008, Series of 2000,
as a violation of the Administrative Code of 1987, as implemented by the “Omnibus
Rules on Appointments and Other Personnel Actions” issued by the Civil Service
Commission, therefore, null and void;
(3) That, after trial, the preliminary injunction be made permanent;
(4) That, likewise after trial, defendants be ordered jointly and severally to pay plaintiff
P500,000.00 moral damages, P200,000.00 exemplary damages, and P50,000.00
attorney’s fees and litigation expenses, plus the costs.
Plaintiff respectfully prays for such other relief just and equitable.11
At the hearing on the issuance of the temporary restraining order, the RTC proposed
the possible reconsideration of Office Order No. 008 especially because the petitioner
complained of ill-health. The respondents expressed willingness to consider the
proposal of the RTC, and promised to confer with the Provincial Governor. Later on,
however, they manifested that they had apprised the Provincial Governor about the
proposal but, with the Provincial Governor running for re-election, they could submit
an approved written proposal only after the elections.12 The RTC granted their prayer
for an extension of time to submit their written proposal for an amicable
settlement.13chanrobleslaw
Shortly after the elections, the petitioner filed a motion to declare the respondents in
default for failing to answer the complaint.14 The RTC held in abeyance the resolution
of the motion in view of the proposals and counterproposals regarding a
compromise.15 Later on, however, the respondents manifested that because the
possible compromise would involve an order for a transfer or detail of the petitioner to
another place, they and the Provincial Governor could not act because the
Omnibus Election Code prohibited the appointment, promotion, and transfer of
civil servants during the campaign period from January 2, 2001 to June 13, 2001
pursuant to COMELEC Resolution No. 3401.16 Accordingly, the RTC declared the
respondents in default.17chanrobleslaw
Prior to the ex parte hearing of the case on the merits, the petitioner moved for
the admission of a supplemental complaint in order to implead Gregorio P.
Paltinca, the Officer-in-Charge of the Office of the Provincial Agriculturist, for
issuing on June 29, 2001 Office Order No. 005, Series of 2001, to amend Office
Order No. 008.18 Office Order No. 005 was re-assigning her to Barangays Balanan,
Sandulot, and Jumalon in the Municipality of Siaton as her official duty
stations.19chanrobleslaw
The supplemental complaint stated that Office Order No. 005, to take effect on
July 2, 2001, had not been posted in the bulletin board of the Office of the
Provincial Agriculturist; that she had not been furnished a copy of the order; that
OIC Paltinca had acted with malice and evident bad faith by his failure to notify her
of the re-assignment, which was “worse than the original re-assignment” by Merto,
as it constituted her “banishment” from her office in Dumaguete City; that the re-
assignment had violated Book V, Section 12 (2) and (3) of the Administrative Code
of 1987 prohibiting re-assignments that were indiscriminately and whimsically
done; that although the appointing and disciplining authority was the Provincial
Governor, who had approved Office Order No. 005, Paltinca should be impleaded
because it was he who had thereby violated the Administrative Code of 1987; and
that she had refused to obey the two office orders for justifiable reasons because
both were null and void ab initio as far as she was concerned.20chanrobleslaw
Paltinca moved to dismiss the supplemental complaint on the ground that the
admission of the petitioner that the Provincial Governor, not he, was her
appointing and disciplining authority exposed her lack of cause of action; that the
non-inclusion of the Provincial Governor as the real party in interest was a fatal
error; and that the failure of the petitioner to exhaust administrative remedies
before going to court was also a ground for the dismissal of the
case.21chanrobleslaw
The petitioner opposed Paltinca’s motion to dismiss, contending that the
Provincial Governor was neither an indispensable nor a necessary party inasmuch
as Office Order No. 005 could be declared null and void without impleading the
Provincial Governor, who could always intervene if he so desired; that there was no
need for the exhaustion of administrative remedies because the issue was a purely
legal one, i.e., the nullity of the office orders in question; and that the motion to
dismiss was premature because the trial court had not yet admitted the
supplemental complaint.22chanrobleslaw
After the RTC deemed the motion to dismiss submitted for resolution,23 Vergara
filed a manifestation informing the RTC of the dismissal by the CSC Central Office
of the petitioner’s appeal (CSC Resolution No. 011253). Vergara argued that she
had utilized the pendency of the appeal as her legal excuse in disobeying Office
Order No. 008, which her affected co-employees had dutifully obeyed; and that
the dismissal of her appeal removed any valid reason or legal ground for her to
disobey the office orders that the Provincial Governor had issued “for the good of
the service and to promote our food security.”24chanrobleslaw
The petitioner responded to the manifestation of Vergara, stating that she had
moved for the reconsideration of CSC Resolution No. 011253, and that the
outcome of her appeal in the CSC did not affect the case because the issue
involved was the legality of her re-assignment.25chanrobleslaw
Ruling of the RTC
On October 22, 2001, the RTC dismissed the case, holding on the legality of Office
Order No. 008 and Office Order No. 005 as follows:chanRoblesvirtualLawlibrary
Section 7, Rule 1 of the Memorandum Circular No. 19, series of 1999 provides:
Heads of departments, agencies, provinces, cities, municipalities and other
instrumentalities shall have concurrent jurisdiction with the Commission, over their
respective officers and employees. In the case at bar, it is the Chief Executive who
has the power of disciplining over his subordinates. But issuance of Office Order
No. 008 is not a penalty. Section 5, paragraph 3, Rule VII of the Omnibus Rules
Implementing Book V of Executive Order No. 292, provides: Transfer shall not be
considered disciplinary when made in the interest of public service, in which case, the
employee concerned shall be informed of the reasons therefor. If the imployee (sic)
believes that there is no justification for the transfer, he may appeal his case to the
Commission.26
On the allegation of the petitioner that the “complaint” of Merto asking her to explain
why she should not be disciplined for her refusal to obey Office Order No. 008, the RTC
declared:chanRoblesvirtualLawlibrary
This Court agrees with the plaintiff that a complaint against a civil servant shall not be
given due course unless it is in writing and subscribed and sworn to by the
complainant. However, in cases initiated by the proper disciplining authority, the
complaint need not be under oath (Section 8, Rule 11, Memorandum Circular No. 19,
series of 1999). This is explained in Maloga v. Gella, 15 SCRA 370, which held that head
or chief of office of the bureau or office is deemed to be acting in his official capacity
and under his oath of office.
Lastly, the RTC opined that the petitioner should have first gone to the CSC to
challenge the legality of Office Order No. 008 and Office Order No. 005 prior to her
resort to the courts; and that, therefore, she had not exhausted all her administrative
remedies considering that her case did not fall under any of the exceptions to the
application of the doctrine on the exhaustion of administrative remedies.chanrobleslaw
Decision of the CA
Not satisfied, the petitioner appealed to the CA, contending
that:chanRoblesvirtualLawlibrary
I.
THE LOWER COURT ERRED IN DISMISSING THE CASE AGAINST DEFENDANTS-
APPELLEES BEAU HENRY L. MERTO AND ERWIN VERGARA FOR FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES WHEN SAID DEFENDANTS-APPELLEES HAVE BEEN
DECLARED IN DEFAULT. THUS, THEY NEVER RAISED THE ISSUE OF NON-EXHAUSTION
OF ADMINISTRATIVE REMEDIES AND ARE, THEREFORE, DEEMED TO HAVE WAIVED
SUCH DEFENSE;
II.
THE LOWER COURT ERRED IN DISMISSING THE CASE AS AGAINST DEFENDANT-
APPELLEE GREGORIO P. PALTINCA FOR FAILURE TO EXHAUST ADMINISTRATIVE
REMEDIES WHEN THE SAID COURT HAS NOT EVEN ACTED YET ON THE MOTION OF
THE PLAINTIFF-APPELLANT TO ADMIT THE SUPPLEMENTAL COMPLAINT AGAINST
HIM. THEREFORE, THE MOTION OF DEFENDANT-APPELLEEE GREGORIO P. PALTINCA
TO DISMISS THE CASE ON THE GROUND OF FAILURE TO EXHAUST ADMINISTRATIVE
REMEDIES IS PREMATURE. THE TRIAL COURT, FOR REASONS UNKNOWN, WAS TOO
PRECIPITATE IN DISMISSING THE CASE; AND
III.
IN ANY EVENT, THE LOWER COURT ERRED IN DISMISSING THE CASE FOR FAILURE TO
EXHAUST ADMINISTRATIVE REMEDIES BECAUSE THE ISSUE IS PURELY A LEGAL ONE
AND NOTHING OF AN ADMINISTRATIVE NATURE IS TO BE AND CAN BE DONE.
MOREOVER, THE CONTROVERTED ACT IS PATENTLY ILLEGAL.27
On July 23, 2003, the CA affirmed the RTC,28 ruling that the legality of Office Order No.
008 and Office Order No. 005 could not be denied because they were “intended for
public service.” It observed that:chanRoblesvirtualLawlibrary
x x x x. The impugned Office Orders were issued by defendants-appellees Merto and
Paltinca in their capacity as heads of the Office of the Provincial Agriculturist and were
duly approved by the Provincial
Governor. More importantly, these Office Orders do not single out plaintiff-appellee for
transfer to the interior localities of the province. They cannot therefore be considered
as her personal banishment as a consequence of the protest she initiated for the
appointment of Kirit.29
It pointed out that the petitioner should have appealed her transfer to the CSC
conformably with the Omnibus Rules Implementing Book V of the Administrative Code
of 1987 that mandated an administrative appeal or remedy before a resort to judicial
action instead of directly resorting to the court action.
On the petitioner’s contention that the RTC precipitately acted on Paltinca’s motion to
dismiss because it had yet to admit her supplemental complaint, the CA
observed:chanRoblesvirtualLawlibrary
Indeed, the trial court did not explicitly resolve to admit, in a separate order,
plaintiff-appellant’s Supplemental Complaint against defendant-appellee Paltinca
prior to the latter’s filing of a Motion to Dismiss the said supplemental complaint
against him. To Our mind, however, the procedural lapse did not prejudice
plaintiff-appellant’s substantive rights. First, it must be noted that by filing the
Supplemental Complaint against defendant-appellee Paltinca, plaintiff-appellant
had intended it all along to be admitted by the trial court. Second, when plaintiff-
appellant moved for the resolution of the Motion to Dismiss and her Opposition
thereto, she, in effect, impliedly conceded the admission of the Supplemental
Complaint subject of the pending incidents for, otherwise, what was there to
dismiss and to oppose the dismissal of. Third, the trial court in fact indirectly
admitted the Supplemental Complaint when it dismissed the case against all the
defendants. Fourth and more importantly, even had the trial court decided to deny
the Motion to Dismiss on the ground of prematurity, there was nothing to prevent
the newly impleaded defendant from raising anew the defense of non-exhaustion
of administrative remedies in his answer and the same would have been upheld
and ultimately resulted in the dismissal of the case not only as against him but
even as against the original defendants. Finally, jurisprudence dictates that
departures from procedure may be forgiven where they do not appear to have
impaired the substantive rights of the parties. As We have earlier noted, We
perceive no impairment of plaintiff-appellant’s substantive rights with the non-
issuance by the trial court of a separate order admitting the supplemental
complaint.30
As regards the petitioner’s position that the respondents waived the defense of
her non-exhaustion of administrative remedies by not filing their answer, the CA
pronounced:chanRoblesvirtualLawlibrary
Under paragraph c, Section 3, Rule 9 of the 1997 Revised Rules on Civil Procedure,
when a common cause of action is alleged against several defendants, some of
whom filed an answer and the others failed to do so, thus, were declared in
default, the court shall try the case against all defendants, defaulted and not
defaulted, upon the answer thus filed and render judgment upon the evidence
presented. Clearly, the answer of a non-defaulting defendant, such as that of the
additional defendant Paltinca, inures to the benefit of those defaulted, like the
original defendants Merto and Vergara, since they all share a common fate in the
action commenced by plaintiff-appellee. The trial court, therefore, did not err in
appreciating the defense of non-exhaustion of administrative remedies raised by
defendant-appellee Paltinca in favor of his co-defendants-appellees Merto and
Vergara who had been declared in default by the trial court.
The petitioner moved for reconsideration, but the CA denied her
motion.31chanrobleslaw
Hence, this appeal.chanrobleslaw
Issues
The petitioner submits that the CA erred in holding that: (a) her case did not
constitute an exception to the rule on the exhaustion of administrative remedies;
(b) a motion to dismiss could be acted upon even without an order admitting the
supplemental complaint; and (c) the respondents as defaulted defendants could
not benefit from the special defense of her non-exhaustion of administrative
remedies raised by Paltinca, the non-defaulting defendant.32chanrobleslaw
Ruling of the Court
The appeal lacks merit.
I
Petitioner’s non-exhaustion of her available
administrative remedies was fatal to her cause
The petitioner alleges that Office Order No. 008 and Office Order No. 005 were
illegal for violating the rule against indiscriminate and whimsical reassignment
enunciated in the Administrative Code of 1987; that the issuances were really
intended for her, who was based in Dumaguete City, “manifestly in the guise of
assigning/reassigning her to the Barangay Agricultural Development Project to the
far flung isolated mountainous areas in Sandulot and Jumalon, Siaton, Negros
Oriental;” that the respondents could not issue the office orders because “the
transfer of an employee without her consent is arbitrary for it is tantamount to
removal without cause and therefore invalid as it is violative of her security of
tenure;” that the transfer done without her consent amounted to her removal from
office; that the legal issue she raised could be threshed out only by a court of justice,
not by an administrative body; that her allegation that the office orders were “contrary
to law and jurisprudence on the matter” only meant that she was raising a question of
law, which ruled out administrative intervention; that in keeping with the broad
discretion of courts in urgent matters, she would suffer an irreparable damage or injury
unless there was judicial intervention; and that the fact that the office orders were
intended for public service did not shield them from judicial scrutiny.
The petitioner argues that the declaration of the respondents in default resulted in the
waiver of their defense of non-exhaustion of administrative remedies; and that the
court had then no legal justification to dismiss the case on that ground inasmuch as
the respondents did not file a motion to set aside the order of default.
In their comment, the respondents counter that the arguments of the petitioner had
been thoroughly discussed and passed upon by the CA; and that she did not show that
her appeal was one that the Court could take cognizance of.
In her reply, the petitioner insisted that the decision of the CA was rendered with grave
abuse of discretion because the rule on exhaustion of administrative remedies was not
absolute; that there were exceptions to the rule, such as when the question litigated
was a purely legal one, or when applying the rule would not provide plain, speedy and
adequate remedy, or when its application would cause great and irreparable damage;
that a ground for judicial review would exist when an administrative determination was
made without or in excess of authority; that Office Order No. 008 and Office Order No.
005 were issued without or in excess of authority; and that the CA overlooked that her
right to security of tenure and right to due process of law would be violated unless she
went to court.
We cannot uphold the position of the petitioner.
Firstly, Section 26, Chapter 5, Title I-A, Book V of the Administrative Code of 1987 lists
the personnel actions that may be taken in the government service, namely: (1)
appointment through certification; (2) promotion; (3) transfer; (4) reinstatement; (5)
reemployment; (6) detail; and (7) reassignment.
The subject of the assailed office orders was a reassignment, which is not to be
confused with a transfer. The office orders themselves indicated that the personnel
action involved was a reassignment, not a transfer, for, indeed, the petitioner was being
moved from the organizational unit of the Office of the Provincial Agriculturist in
Dumaguete City to that in the barangays of the Municipality of Siaton.
Section 26, Chapter 5, Title I-A, Book V of the Administrative Code of 1987 defines
transfer and reassignment thusly:chanRoblesvirtualLawlibrary
xxxx
(3) Transfer. A transfer is a movement from one position to another which is of
equivalent rank, level, or salary without break in service involving the issuance of an
appointment.
It shall not be considered disciplinary when made in the interest of public service, in
which case, the employee concerned shall be informed of the reasons therefor. If the
employee believes that there is no justification for the transfer, he may appeal his case
to the Commission.
The transfer may be from one department or agency to another or from one
organizational unit to another in the same department or agency: Provided, however,
That any movement from the non-career service to the career service shall not be
considered a transfer. (Emphasis supplied.)
xxxx
(7) Reassignment. An employee may be reassigned from one organizational unit to
another in the same agency: Provided, That such reassignment shall not involve a
reduction in rank, status or salary. (Emphasis supplied.)
xxxx
The foregoing definition of reassignment has been adopted by the CSC in Section 10 of
Rule VII (Other Personnel Action)33 of the Omnibus Rules Implementing Book V of the
Administrative Code of 1987 (Omnibus Rules), declaring that a reassignment “is the
movement of an employee from one organizational unit to another in the same
department or agency which does not involve a reduction in rank, status or salary and
does not require the issuance of an appointment.”34chanrobleslaw
Rule III of CSC Memorandum Circular No. 40, Series of 1998 (Revised Omnibus
Rules on Appointments and Other Personnel Actions) includes reassignment in the
enumeration of personnel movements that do not require the issuance of a new
appointment, to wit:chanRoblesvirtualLawlibrary
SEC. 6. Other Personnel Movements. The following personnel movements which
will not require issuance of an appointment shall nevertheless require an office
order by duly authorized official.
a. Reassignment – movement of an employee from one organizational unit to
another in the same department or agency which does not involve a reduction in
rank, status or salary. If reassignment is without the consent of the employee
being reassigned, it shall be allowed only for a maximum period of one year.
Reassignment is presumed to be regular and made in the interest of public service
unless proven otherwise or if it constitutes constructive dismissal.
Constructive dismissal exists when an employee quits his work because of the
agency head’s unreasonable, humiliating, or demeaning actuations which render
continued work impossible. Hence, the employee is deemed to have been illegally
dismissed. This may occur although there is no diminution or reduction of salary of
the employee. It may be a transfer from a position of dignity to a more servile or
menial job.
No reassignment shall be undertaken if done indiscriminately or whimsically
because the law is not intended as a convenient shield for the
appointing/disciplining authority to harass or oppress a subordinate on the pretext
of advancing and promoting public interest.
Reassignment of small salaried employees is not permissible if it causes significant
financial dislocation.
Sufficient reasons to warrant the continued reassignment of the employee and
performance of functions other than those attached to the position must be
established. (Emphasis in the original; bold italics supplied.)
That the reassignment was made without the petitioner’s consent can be deduced
from her refusal to report to the station of her new assignment. Nonetheless, there
is no record showing that she ever claimed that the reassignment involved a
reduction in rank, status or salary. In addition, she was but one of several
employees re-assigned pursuant to the questioned office orders. In view of these
circumstances, she could not decline the reassignment unless she would have a
valid personal reason to refuse to abide by the office orders. Yet, it was only during
the trial that she revealed that her refusal to accept the re-assignment had been
because of her poor health condition, i.e., due to her having had three caesarean
sections and a myoma extraction, her obstetrician had advised her to refrain from
extraneous activities including riding in the habal-habal (hired motorcycle) which
was the only means of transportation to the barangays of the Municipality of
Siaton.35 But she lost the opportunity to ventilate her reason for refusing the
reassignment by walking out of the conference instead of explaining her refusal to
follow Office Order No. 008.
Secondly, under the Administrative Code of 1987, the CSC has the power and
function to “[p]rescribe, amend and enforce rules and regulations for carrying into
effect the provisions of the Civil Service Law and other pertinent laws.”36 It also
has the complementing power to render opinions and rulings “on all personnel
and other Civil Service matters which shall be binding on all heads of departments,
offices and agencies and which may be brought to the Supreme Court (now Court
of Appeals) on certiorari.”37chanrobleslaw
Pursuant to its rule-making authority, the CSC promulgated the Omnibus Rules,
whose Rule XII, governing complaints and grievances, defines a complaint as “an
employee’s expressed (written or spoken) feelings of dissatisfaction with some
aspects of his working conditions, relationships or status which are outside his
control. This does not include those involving disciplinary actions which are
governed by separate rules.”38 The same rule characterizes grievance as “a
complaint in writing which has, in the first instance and in the employee’s opinion,
been ignored, overridden or dropped without due
consideration.”ChanRoblesVirtualawlibrary
The reassignment of the petitioner was a “personnel” and “Civil Service” matter to
be properly addressed in accordance with the rules and guidelines prescribed by
the CSC. Her resort to judicial intervention could not take the place of the
grievance procedure then available to her. Her having shrouded her complaint in
the RTC with language that presented a legal issue against the assailed office
order of Merto did not excuse her premature resort to judicial action.
For one, the petitioner was aware that Merto’s superior was the Provincial Governor, an
official who could competently redress her grievance. She could have then challenged
both the wisdom and the legality of Office Order No. 008, as well as the propriety of
her reassignment to a station outside of Dumaguete City, before the Provincial
Governor himself.39 For her to do so was appropriate because of the need to resolve a
local problem like her reassignment “within the local government.”40chanrobleslaw
The petitioner should also not ignore that Merto had issued Office Order No. 008 in his
capacity as Provincial Agriculturist in order to implement the policy of the Provincial
Government of Negros Oriental to provide regular and adequate agricultural extension
services to residents of remote interior barangays that were economically depressed
but with potentials for agricultural development. In that context, only the Provincial
Governor could competently determine the soundness of Office Order No. 008 or the
propriety of its implementation, for the Provincial Governor had the power to supervise
and control “programs, projects, services, and activities” of the province pursuant to
Section 465 of Republic Act No. 7160 (Local Government Code), which pertinently
states:chanRoblesvirtualLawlibrary
Section 465. The Chief Executive: Powers, Duties, Functions, and Compensation.
(a) x x x x.
(b) For efficient, effective and economical governance the purpose of which is the
general welfare of the province and its inhabitants pursuant to Section 16 of this
Code,41 the provincial governor shall:chanroblesvirtuallawlibrary
(1) Exercise general supervision and control over all programs, projects, services, and
activities of the provincial government, and in this connection, shall:
(i) Determine the guidelines of provincial policies and be responsible to the
Sangguniang Panlalawigan for the program of government;
(ii) Direct the formulation of the provincial development plan, with the assistance of the
provincial development council, and upon approval thereof by the Sangguniang
Panlalawigan, implement the same;
(iii) Present the program and propose policies and projects for the consideration of the
Sangguniang Panlalawigan at the opening of the regular session of the Sangguniang
Panlalawigan every calendar year and as often as may be deemed necessary as the
general welfare of the inhabitants and the needs of the provincial government may
require;
x x x x. (Bold emphasis supplied)
Thirdly, the rule requiring the exhaustion of administrative remedies rests on the
principle that the administrative agency, if afforded a complete chance to pass upon
the matter again, will decide the same correctly. There are both legal and practical
reasons for the rule. The administrative process is intended to provide less expensive
and speedier solutions to disputes. Where the enabling statute indicates a procedure
for administrative review and provides a system of administrative appeal or
reconsideration, therefore, the courts – for reasons of law, comity and convenience –
will not entertain a case unless the available administrative remedies have been
resorted to and the appropriate authorities have been given an opportunity to act and
correct the errors committed in the administrative forum. 42chanrobleslaw
The importance and value of the exhaustion of administrative remedies as a condition
before resorting to judicial action cannot be brushed aside. As the Court points out in
Universal Robina Corp. (Corn Division) v. Laguna Lake Development
Authority:43chanrobleslaw
The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial
system. The thrust of the rule is that courts must allow administrative agencies to carry
out their functions and discharge their responsibilities within the specialized areas of
their respective competence. The rationale for this doctrine is obvious. It entails lesser
expenses and provides for the speedier resolution of controversies. Comity and
convenience also impel courts of justice to shy away from a dispute until the system of
administrative redress has been completed.
The petitioner contends, however, that her case came under the exceptions to the
application of the rule for the exhaustion of administrative remedies considering that
her judicial challenge in the RTC related to the legality of Office Order No. 008 and
Office Order No. 005.
The contention is untenable.
It is true that the doctrine of exhaustion of administrative remedies is not an ironclad
rule, but recognizes exceptions, specifically: (a) where there is estoppel on the part
of the party invoking the doctrine; (b) where the challenged administrative act is
patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable
delay or official inaction that will irretrievably prejudice the complainant; (d) where
the amount involved is relatively so small as to make the rule impractical and
oppressive; (e) where the question involved is purely legal and will ultimately have
to be decided by the courts of justice; (f) where judicial intervention is urgent; (g)
where the application of the doctrines may cause great and irreparable damage;
(h) where the controversial acts violate due process; (i) where the issue of non-
exhaustion of administrative remedies has been rendered moot; (j) where strong
public interest is involved; and (l) in quo warranto proceedings.44chanrobleslaw
The exceptions did not cover the petitioner’s case. In her complaint, she assailed
Office Order No. 008 on three basic legal grounds, namely: (a) the re-assignment,
being “whimsical and indiscriminate,” violated the Omnibus Rules on
Appointments and Other Personnel Actions; (b) Merto had no power to investigate
her, considering that the Provincial Governor was the “proper disciplining
authority;” and (c) whether the letter of Merto requiring her to explain her refusal
to follow Office Order No. 008 should be under oath. Still, her immediate resort to
the RTC remained premature, because the legal issues she seemingly raised were
admittedly interlaced with factual issues, like whether or not Merto had issued
Office Order No. 008 because of her having attacked him in her protest against
Kirit as the appointee to the position of Supervising Agriculturist, and whether or
not her reassignment constituted banishment from her office in Dumaguete City.
She further averred that the reassignment had been whimsical and indiscriminate,
an averment that surely called for factual basis. It ought to be beyond question
that the factual issues could only be settled by a higher policy-determining
provincial official like the Provincial Governor by virtue of his authority, experience
and expertise to deal with the issues. The Provincial Governor should have been
given a very meaningful opportunity to resolve the matter and to exhaust all
opportunities for its resolution before bringing the action in court.45chanrobleslaw
The rule is that judicial intervention should only be availed of after all
administrative remedies had been exhausted. The Judiciary must not intervene
because Office Order No. 008 and Office Order No. 005 both concerned the
implementation of a provincial executive policy. According to Dimson (Manila), Inc.
v. Local Water Utilities Administration:46chanrobleslaw
x x x. The doctrine of exhaustion of administrative remedies is a judicial
recognition of certain matters that are peculiarly within the competence of the
administrative agency to address. It operates as a shield that prevents the
overarching use of judicial power and thus hinders courts from intervening in
matters of policy infused with administrative character. The Court has always
adhered to this precept, and it has no reason to depart from it now. (Bold
emphasis supplied.)
Moreover, the non-observance of the doctrine of exhaustion of administrative
remedies resulted in the complaint having no cause of action.47 Hence, the RTC
and the CA correctly dismissed the case.
Fourthly, the non-exhaustion by the petitioner had jurisdictional implications.
Verily, had the petitioner followed the grievance procedure under the CSC’s
Omnibus Rules, her next step would have been to elevate her case to the CSC
itself,48 the constitutional body charged with the exclusive jurisdiction not only
over disciplinary actions against government officials and employees but also over
cases involving personnel actions.
In Corsiga v. Judge Defensor,49 which concerned the reassignment of an engineer
in the National Irrigation Authority, the Court ruled:chanRoblesvirtualLawlibrary
Section 13 Rule VII of the Rules Implementing Book V of Executive Order No. 292
(the Adm. Code of 1987) provides how appeal can be taken from a decision of a
department or agency head. It states that such decision shall be brought to the
Merit System Protection Board (now the CSC En Banc per CSC Resolution No. 93-
2387 dated June 29, 1993). It is the intent of the Civil Service Law, in requiring the
establishment of a grievance procedure in Rule XII, Section 6 of the same rules,
that decisions of lower level officials be appealed to the agency head, then to the
Civil Service Commission. Decisions of the Civil Service Commission, in turn, may
be elevated to the Court of Appeals. Under this set up, the trial court does not
have jurisdiction over personnel actions and, thus, committed an error in taking
jurisdiction over Civil Case No. 22462. The trial court should have dismissed the
case on motion of petitioner and let private respondent question RMO No. 52
before the NIA Administrator, and then the Civil Service Commission. As held in
Mantala v. Salvador,50cases involving personnel actions, reassignment included,
affecting civil service employees, are within the exclusive jurisdiction of the Civil Service
Commission. (Emphasis supplied.)
II.
Paltinca’s motion to dismiss could be resolved
before the admission of the supplemental complaint
The petitioner insists that the RTC erroneously resolved Paltinca’s motion to dismiss
without first admitting her supplemental pleading.
The insistence is not correct. The petitioner filed her supplemental complaint to assail
Office Order No. 005, and thereby raised issues identical to those raised in her original
complaint involving Office Order No. 008. Hence, the RTC could already resolve
Paltinca’s motion to dismiss even without first admitting the supplemental complaint.
Unlike an amended complaint, her supplemental complaint could “exist side-by-side”
with the original complaint, because the supplemental complaint averred facts
supervening from the filing of the complaint.51 Rule 10 of the 1997 Rules of Civil
Procedure expressly provides:chanRoblesvirtualLawlibrary
Section 6. Supplemental pleadings. – Upon motion of a party the court may, upon
reasonable notice and upon such terms as are just, permit him to serve a supplemental
pleading setting forth transactions, occurrences or events which have happened since
the date of the pleading sought to be supplemented. The adverse party may plead
thereto within ten (10) days from notice of the order admitting the supplemental
pleading.
The defense of non-exhaustion of her administrative remedies raised by Paltinca as the
non-defaulting defendant inured to the benefit of the respondents who had been
declared in default. For one, there was a common cause of action against the
respondents and Paltinca.52 The non-exhaustion was fatal to such common cause of
action.53 Moreover, such benefit inuring to the respondents despite default was
predicated on Section 3, Rule 9 of the 1997 Rules of Civil Procedure, to
wit:chanRoblesvirtualLawlibrary
Section 3. Default; declaration of. – If the defending party fails to answer within the
time allowed therefore, the court shall, upon motion of the claiming party with notice
to the defending party, and proof of such failure, declare the defending party in
default. Thereupon, the court shall proceed to render judgment granting the claimant
such relief as his pleading may warrant, unless the court in its discretion requires the
claimant to submit evidence. Such reception of evidence may be delegated to the clerk
of court.cralawred
x x x x.
(c) Effect of partial default. – When a pleading asserting a claim states a common cause
of action against several defending parties, some of whom answer and the others fail
to do so, the court shall try the case against all upon the answers thus filed and render
judgment upon the evidence presented.cralawred
x x x x.
WHEREFORE, the Court DENIES the petition for review on certiorari for its lack of merit;
AFFIRMS the decision of the Court of Appeals promulgated on July 23, 2003; and
ORDERS the petitioner to pay the costs of suit.
SO ORDERED.cralawlawlibrary
G.R. No. 179789 June 17, 2015
PINEWOOD MARINE (PHILS.), INC., Petitioner,
vs.
EMCO PLYWOOD CORPORATION, EVER COMMERCIAL CO., LTD., DALIAN OCEAN
SHIPPING CO., and SHENZHEN GUANGDA SHIPPING CO., Respondents.
RESOLUTION
REYES, J.:
Before the Court is a petition for review on certiorari1 assailing the Decision2 dated
June 21, 2006 and Resolution3 dated August 8, 2007 of the Court of Appeals (CA) in
CA-G.R. CV No. 58909. The CA affirmed in toto the Decision4 rendered on May 14,
1997 by the Regional Trial Court (RTC) of Butuan City, Branch 4 in Civil Case No. 4374,
an action for replevin, attachment and damages. The dispositive portion of the RTC
decision is quoted below:
WHEREFORE, decision is rendered in favor of plaintiff [EMCO Plywood Corporation
(EMCO)] against defendant Ever Commercial Co., Ltd. [Ever] and [Ever] is ordered
to pay [EMCO]:
(a) the sum of Sixteen Million Six Hundred Eighty[-]Six Thousand Forty[-]Eight
Pesos and Forty[-]Six Centavos (₱16,686,048.46) representing damages plus Six
Percent (6%) interest on said amount from the filing of the Complaint until [Ever]
fully pays the same.
As to the cross[-]claim of defendant Ever, the Court finds defendants [Shenzhen
Guangda Shipping Co. (Shenzhen)] and/or charterer/owner of the vessel "TAO
HUA LING" and Pinewood Marine (Phils.)[,] [Inc. (Pinewood)] to be jointly and
severally liable to defendant Ever and are ordered to pay [Ever]:
(a) the amount of Sixteen Million Six Hundred Eighty[-]Six Thousand Forty[-]Eight
Pesos and Forty[-]Six Centavos (₱16,686,048.46), plus six percent (6%) interest
thereon from the filing of the complaint until full payment thereof, by way of
reimbursement and indemnification;
(b) the amount of Two Million Pesos (₱2,000,000.00) as damages, plus Six Percent
(6%) interest thereon; and
(c) attorney’s fees in the amount of One Hundred Seventy-Three Thousand [Six
Hundred] Pesos (₱173,600.00).5
SO ORDERED.6
Antecedents
The CA aptly summed up as follows the facts of the case leading to the rendition
of the RTC decision:
On December 11, 1995, [EMCO] filed a Complaint for "Replevin, Attachment and
Damages" impleading the following as defendants namely: [Shenzhen], Dalian
Ocean Shipping Company x x x, [Pinewood], the vessel MV Tao Hua Ling, and its
Unknown Owner and/or Demise Charterer and the Master of said vessel. In its
Amended Complaint, EMCO impleaded, additionally, [Ever as the vessel’s
charterer].
EMCO is primarily engaged in the business of manufacturing plywood and the
subject matter of its replevin action was its cargo of 2,638 pieces of PNG round
logs fresh cut from Papua New Guinea, with a total invoice value of US
$691,898.62. EMCO had entered into a contract with [Ever] for the loading,
transporting and unloading of the logs at Butuan City, Philippines. EMCO had paid
[Ever] the full freight of its cargo in the amount of US $ 241,223.04. [Ever] then
chartered the vessel MV Tao Hua Ling from Kanetomi (HK)Ltd., which, in turn,
chartered the said vessel from defendant [Shenzhen]. The local ship agent of the
latter, [Pinewood], represents it in the Philippines.
The subject cargo was loaded on board the said vessel. Sometime thereafter,
EMCO received a letter, dated December 5, 1995, from the law office of Sycip
Salazar Hernandez [Gatmaitan &] Associates informing EMCO that their client,
[Shenzhen], the "disponent owner" of the vessel Tao Hua Ling, was exercising its
lien over the cargo of logs for unpaid demurrage, detention and deviation. The
letter further advised EMCO that [Shenzhen] had instructed both the master of the
vessel and its ship agent, [Pinewood], to exercise the shipowner’s lien on the
cargo. A similar letter was also sent to the Collector of Customs, Port of Masao,
Butuan, Agusan del Norte, requesting the latter to withhold the discharge of the
cargo for the said reason. Whereupon, the Bureau of Customs District II, sub-port
of Nasipit, issued a memorandum directing the inspector of the vessel to withhold
delivery of the cargo to EMCO.
EMCO objected to the withholding of the cargo and assailed the lien as invalid.
EMCO nonetheless offered a compromise with defendants and even declared its
willingness to put up a bond in the amount of US $300,000.00 for the release of
the cargo. From [Ever], it demanded the immediate release of the logs. For its part,
[Ever] took the initiative to effect the release of the logs to the extent of
negotiating with the shipowner and other defendants. But all these were to no
avail.
The day following the filing of EMCO’s complaint, the [RTC] issued the writ of
replevin. Whereupon, the logs were released and delivered to EMCO.
In its Amended Complaint, EMCO had also sought the attachment of the vessel MV Tao
Hua Ling. Since the vessel had left [the] Philippine territory, EMCO did not pursue this
relief.
In addition to replevin and attachment, EMCO sought to recover damages for the
unwarranted refusal of defendants to release the cargo.
All the defendants, except [Ever], filed a motion to dismiss citing improper venue as
their sole ground. The [RTC] denied the motion. [Ever] filed its Answer with compulsory
counterclaim and cross-claim. The rest of the defendants failed to answer and, upon
motion, were declared in default pursuant to the [RTC’s] Order dated June 17, 1996.7
(Citations omitted and emphasis ours)
Ruling of the RTC
Pre-trial and trial on the merit sensued. On May 14, 1997, the RTC rendered its decision
directing Ever to pay EMCO damages and interests. The RTC also granted Ever’s cross-
claim against Shenzhen, Dalian Ocean Shipping Co. and Pinewood, who were ordered
to reimburse Ever for its liability to EMCO and additionally, to pay damages, interests
and attorney’s fees.8 The RTC explained that Section 1505 of the Customs and Tariff
Code exclusively enumerates the nature of the claims that give rise to a lien, to wit, (1)
freight, (2) lighter age, or (3) general average. Since a lien anchored on claims for
demurrage and detention is not included in the enumeration, the withholding of
EMCO’s cargo for delivery or release was unwarranted.9
The RTC further declared that EMCO is not privy to the charter party agreements
executed among Shenzhen, Kanetomi (HK) Ltd. (Kanetomi) and Ever.10
The RTC likewise took note of the fact that apart from Ever, the rest of the defendants
were declared in default and were unable to present evidence to prove their claims.
EMCO and Ever, on the other hand, had amply established that the claims for
demurrage, detention, and deviation were "baseless, excessive, unreasonable and
invalid" and that the presence of defective vessel winches was due to the defendants’
own fault and negligence.11
EMCO suffered damages by reason of the baseless withholding of delivery of the logs.
Mr. Max Alcantara (Alcantara), Vice President, and Nelva G. Mandap (Mandap), a senior
accounting staff, testified on the amount of damages suffered by EMCO.12
Alcantara testified that EMCO incurred operational losses at the rate of ₱1,500,000.00
per day due to the unavailability of the logs used as raw materials, which caused
production delay and prevented the company from complying with contracts already
entered into with buyers. Alcantara also stated that the value of the cargo depreciated
at the rate of $1 per cubic meter daily since the delay in the release of the logs affected
their moisture content and other attributes.13
Alcantara likewise expressed that EMCO incurred expenses of ₱500,000.00 for
attorney’s fees and ₱450,000.00 for bond premium and other legal costs.14
Mandap, on her part, testified that EMCO’s sales for the month of December in 1995
only amounted to ₱48,576,927.34, a 20% or about ₱17,000,000.00 drop from its
average monthly sales of ₱65,000,000.00. She also stated that EMCO registered a net
loss of ₱10,686,924.05 for the month of December in 1995. While EMCO earns an
average monthly income of ₱450,000.00, in the said month, a net loss was instead
registered.15
Mandap further testified that the delay in the delivery of the logs caused EMCO to
incur additional labor costs of ₱2,092,748.85 as its employees had to be paid their
salaries even if no work was done due to the lack of raw materials. The deterioration
cost of $1 per cu m per day due to the exposure of the logs to the elements during the
withholding of their delivery yielded the total sum of ₱2,956,372.56.16
Ever, having breached its contractual obligation to immediately deliver and cause the
discharge of the logs from the vessel, was thus ordered by the RTC to pay EMCO the
following:
Operational Losses (Net Loss) - - ₱10,686,924.05
Labor cost - - - - - - - - - - - - - - - - ₱2,092,748.85
Deterioration cost - - - - - - - - - - - ₱2,956,375.56
Attorney’s fees - - - - - - - - - - - - - ₱500,000.00
Miscellaneous Expenses - - - - - - -
(Bond Premium, legal costs) ₱450,000.00
Total - - - - - - - - - - - - - - - - - - - -
₱16,686,048.4617
However, the RTC found that Ever did not directly participate in the unjustified
withholding of the logs and even negotiated for the prompt release thereof. On
the other hand, Shenzhen and/or the charterer/owner of Tao Hua Ling, the vessel’s
master and the local ship agent, Pinewood, acted in bad faith in recklessly
withholding the logs causing Ever to breach its obligation to EMCO. Hence, Ever
has a right to seek for reimbursement and indemnification from Kanetomi.
Moreover, the incident also strained Ever’s business relationship with EMCO and
tarnished the former’s reputation.
Consequently, the RTC also directed Shenzhen and/or the charterer/owner of Tao
Hua Ling to pay Ever the amounts of (1) ₱2,000,000.00 as a reasonable estimate of
the profits Ever would be deprived of as a result of the incident, and (2)
₱173,600.00 as attorney’s fees. The RTC declared as well that under the Code of
Commerce, Pinewood is solidarily liable with Shenzhen and/or charterer/owner of
Tao Hua Ling in reimbursing and indemnifying Ever.18
The Proceedings After the Rendition of the RTC Decision
On June 28, 1997, V.E. Del Rosario & Partners (Del Rosario) entered its appearance
as counsel and filed a notice of appeal in behalf of Shenzhen, Pinewood and
Dalian.19
On January 18, 1999, Del Rosario manifested before the CA that since the law
office received no instructions from Shenzhen and Pinewood, the appeal
undertaken was solely in behalf of Dalian.20
On February 17, 2000, the CA issued a Resolution21 declaring the appeal of
Shenzhen and Pinewood as abandoned and dismissed due to nonpayment of
docket fees and non-filing of the appellants’ briefs.
The CA’s Disquisition
In resolving Dalian’s appeal,22 the CA affirmed in toto the RTC ruling and Dalian to
be solidarily liable with Shenzhen and Pinewood to pay Ever its cross-claim. The
CA explained that: [Dalian] may, however, be reminded that it had been declared
in default for its failure to file answer. x x x:
xxxx
It bears reiterating that the serious or adverse consequence of a default
declaration is that it paves the way for the rendition by the court of a judgment by
default, and such a judgment may be rendered even without any evidentiary
hearing and may grant plaintiff such relief as his pleading may warrant. This is in
consonance with the very nature of default: a defaulting party has failed to utilize
the opportunity under the Rules to deny the allegations in the complaint. x x x In
the case at bench, among the matters deemed admitted is that [Dalian] is the
registered owner of the vessel. x x x.
Moreover, [the CA] cannot turn a blind eye to the fact that this appeal is suffused
with admissions that[Dalian] is indeed the owner of the vessel MV Tao Hua Ling.
Principal among these are [Dalian’s] Notice of Appeal x x x, [Dalian’s] counsel’s
formal appearance x x x, and Manifestation x x x, all of which refer to [Dalian] as
"owner of the vessel ‘Tao Hua Ling’". Under the circumstances of the case, the
parenthetical phrase "as owner of the vessel ‘Tao Hua Ling’" was entirely
unnecessary to establish [Dalian’s] credentials as appellant. x x x.
x x x [T]he appeal was being undertaken x x x by [Dalian which], not being directly
mentioned in the corpus of the decision nor in its fallo, really did not need to
appeal. For if, indeed, [Dalian] was not the owner of the subject vessel, it had no
reason to be concerned about being held liable under the [RTC] decision. x x x If
[Dalian] were not the owner/charterer, its concern would be utterly baseless.
xxxx
Possession, command and navigational control are natural attributes of ownership
of a vessel. The complete and utter relinquishment of these attributes is not [to be]
presumed. In the absolute absence of any proof otherwise, the presumption that
must be indulged is that an owner has retained all or some of [its] attributes.
[Dalian’s] ownership of the vessel having been established, it was incumbent upon
it to raise and substantiate the defense that it was the demise owner of a vessel
under a bareboat charter and, therefore, not liable under the charter. But, having
been declared in default, [Dalian] has failed to allege and establish this defense. It
may not do so now on appeal.
xxxx
Professor Agbayani commented further on the primary liability of the shipowner, its
agents and employees:
x x x [I]t is a general principle, well established in maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain (Code of
Commerce, Article 586) and for the indemnities due [to] third persons (Article 587); so
that injured parties may immediately look for reimbursement to the owner of the ship,
it being universally recognized that the ship master or captain is primarily the
representative of the owner. This direct liability, moderated and limited by the owner’s
right of abandonment of the vessel and earned freight (Article 587), has been declared
to exist, not only in case of breached contracts, but also in cases of tortious
negligence.23 (Citations omitted and italics in the original)
Pinewood filed a Motion for Reconsideration24 dated July 18, 2006 to the foregoing.
Pinewood alleged that Del Rosario abandoned the appeal without the former’s
knowledge and consent. Pinewood likewise claimed that it was never impleaded by
Ever as a party defendant in the latter’s cross-claim. Pinewood further argued that
Articles 586 and 587 of the Code of Commerce find no application in the instant case
because the withholding of the cargo arose from the conduct of the shipowner and not
of the vessel’s captain.
On August 8, 2007, the CA issued the herein assailed Resolution25 denying Pinewood’s
Motion for Reconsideration citing the following as reasons:
The records show that on June 17, 1997[,] Pinewood received a copy of the [RTC’s]
Decision. The record is, however, bereft of any indication as to what Pinewood did
upon notice of the Decision which was adverse to it. Specifically, the record does not
show that Pinewood had engaged the services of [Del Rosario]. A scrutiny of
Pinewood’s "Motion for Reconsideration" and its "Reply to Verified Comment"
discloses no categorical statement that it had indeed engaged [Del Rosario] as counsel.
Likewise[,] the cited pleadings do not state when and how Pinewood supposedly
engaged the law firm to press its appeal. The [CA] notes that, in insisting that the law
firm had abandoned it, Pinewood relies entirely upon the earlier pleadings of Attys.
[Valeriano R.] Del Rosario [Atty. Del Rosario] and [AllanG.] Kato [Atty. Kato] before [the
CA] manifesting that they were appealing on Pinewood’s behalf.
Pinewood does not deny having been furnished copies of [Del Rosario’s] January 15,
1999 Manifestation that it was appealing on behalf of Dalian only or of the Appellant’s
Brief, simultaneously submitted by the said law firm, which stated that the firm was
acting in behalf of Dalian only. Despite notice of these pleadings, Pinewood failed to
act. In fact, it was only on July 20, 2006, or more than seven (7) years after notice of the
aforementioned pleadings, that Pinewood filed the present Motion for Reconsideration
praying for the reinstatement of its appeal. The [CA] entertains no doubt that Pinewood
is now estopped from contesting this Court’s dismissal of Pinewood’s appeal.
xxxx
The [CA] notes that Pinewood includes in its "Reply to Verified Comment" a prayer for
the disbarment [of Attys. Del Rosario and Kato], a prayer not found in the Motion for
Reconsideration. The [CA] denies this prayer for the reasons: first, that it is doubtful if
[the CA] has jurisdiction to hear and decide cases for disbarment[,] which Pinewood
insists upon as the appropriate sanction against the said lawyers; second, that no prima
facie case for disbarment is appreciated against the said attorneys as should be
obvious from the preceding disquisition; and third, that such proceedings against the
cited attorneys will unduly further delay the resolution of the case at bench.26
(Citations omitted and emphasis ours)
Issues
Undaunted, Pinewood now raises the issues of whether or not the CA erred in: (1) not
taking cognizance of or referring to the Integrated Bar of the Philippines (IBP) and this
Court of Pinewood’s Complaint for disbarment against Attys. Del Rosario and Kato; (2)
not reinstating Pinewood’s appeal despite Attys. Del Rosario and Kato’s treachery,
abandonment and negligence in handling the case; and (3) denying Pinewood’s Motion
for Reconsideration without resolving the other issues raised therein, to wit, (a) Ever’s
non-payment of the filing fees for its cross-claim, (b) award of unliquidated damages,
(c) failure of Ever to implead Pinewood in its cross-claim, and (d) lack of sufficient
evidence to prove the liability of Pinewood, a mere ship agent.27
In support of the instant petition, Pinewood alleges that the CA should have made a
referral, report or recommendation to the IBP or the Court as regards the complaints
for disbarment against Attys. Del Rosario and Kato.28 Under Section 26, Rule 138 of the
Rules of Court and Canon 22 of the Code of Professional Responsibility, a lawyer who
has accepted to handle a case may only withdraw therefrom when any of the following
circumstances is present: (1) the client’s written consent is secured and is
thereafter filed in court; (2) a good cause exists justifying the withdrawal; or (3) the
court, upon notice to the client and counsel and after hearing, determines that a
withdrawal is in order.29 In the instant petition, Del Rosario’s filing of its
Manifestation dated January15, 1999 should not be considered as adequate
compliance with the requirements before counsel can withdraw from a case.30
Pinewood also avers that it was only on July 7, 2006 when it learned that its appeal
was dismissed. Del Rosario did not give Pinewood any updates anent the status of
the appeal. Thus, by reason of Del Rosario’s treachery and negligence, it is just fair
to reinstate Pinewood’s appeal. Note that Pinewood is a mere ship agent and it
meagerly earned $400.00 in the transactions subject of the instant petition.
Pinewood would be left holding an empty bag if it would be made liable with the
other defendants for acts it did not participate in.31
Pinewood likewise emphasizes that since Ever paid no filing fees for its cross-claim,
the RTC had acquired no jurisdiction over the same.32 Further, Ever only
impleaded the shipowners and not the ship agent in its cross-claim.33 The RTC
also issued a default order against Shenzhen, Dalian and Pinewood as regards
EMCO’s amended complaint but not relative to Ever’s cross-claim. Hence, the
default judgment rendered by the RTC on the cross-claim is void.34 Besides, the
damages awarded by the RTC to Ever were unliquidated.35 Under Section 3(d),
Rule 9 of the Rules of Court, "a judgment rendered against a party in default shall
not exceed the amount or be different in kind from that prayed for nor award
unliquidated damages." Additionally, Article 2213 of the New Civil Code prohibits
the recovery of interest from unliquidated claims or damages save only when the
demand can be established with reasonable certainty. In the instant petition, Ever
made no demand upon Pinewood before the cross-claim was filed.36
In the Comment37 filed by Attys. Del Rosario and Kato, they allege that their law
office was never appointed as counsel to represent Pinewood in its appeal.
Pinewood’s corporate secretary, Luz Felix, communicated with the law office and
Del Rosario indulgingly entertained her queries. However, Pinewood took no steps
to secure the services of its own counsel.38 Ever also seeks the dismissal of the
instant petition. In its Comment,39 it argues that relative to Pinewood, the assailed
RTC decision had already become final and executory on February17, 2000 upon
the CA’s issuance of its resolution declaring the appeal of Pinewood and Shenzhen
as abandoned.40 Likewise in view of the dismissal of Pinewood’s appeal, the CA
had no more appellate jurisdiction to alter, modify, amend or reverse the RTC
decision. Hence, no error was committed by the CA when it did not resolve the
other issues belatedly raised by Pinewood in its Motion for Reconsideration.41
Ever contends as well that the same result would have been obtained even if the
other issues raised by Pinewood were resolved by the CA. First, Ever’s cross-claim
was filed in March of 1996 prior to the Court’s issuance of A.M. No. 04-2-04-SC,42
Section 7 of which requires payment of filing fees for cross-claim, a provision not
found in the old rules.43 Besides, even if A.M. No. 04-2-04-SC were to be applied
retroactively, the amount to be paid by Ever as filing fees for its cross-claim shall
constitute a lien on the award made in its favor.44 Second, Ever sought in its
prayer that it be paid by the other defendants (1) actual and moral damages which
may be proved during the trial, and (2) reimbursements of any amounts for which
it may be held liable to EMCO.45 Third, it is undisputed that Pinewood, Shenzhen
and Dalian were declared in default for failing to file answers to EMCO’s complaint
and Ever’s cross-claim. Consequently, Pinewood was deemed to have admitted
Ever’s allegations.46 Fourth, while Section 3(d), Rule 9 of the Rules of Court
proscribes the awarding of unliquidated damages in cases of default judgments,
the provision finds no application in the instant petition since the RTC did not rule
solely on the basis of the allegations in the complaint, but relied on preponderant
evidence adduced by Ever.47 Finally, Ever reiterates the doctrine that "fundamental
considerations of public policy and sound practice demand that at the risk of
occasional errors, the judgments of the courts must become final at some definite
date set by law." Pinewood, in having been declared in default by the RTC and in
abandoning its appeal before the CA, cannot now seek to reinstate an already lost
cause.48
Ruling of the Court
The instant petition is bereft of merit.
In essence, what are assailed herein are the CA’s (1) disregard of the complaint for
disbarment against Attys. Del Rosario and Kato, and (2) denial of Pinewood’s
motion for reconsideration. The CA is not conferred with the authority to take
cognizance of complaints for disbarment against lawyers.
Section 27, Rule 138 of the Rules of Court provides:
SEC. 27. Disbarment or suspension of attorneys by Supreme Court; grounds therefor. –
A member of the bar may be disbarred or suspended from his office as attorney by the
Supreme Court for any deceit, malpractice, or other gross misconduct in such office,
grossly immoral conduct, or by reason of his conviction of a crime involving moral
turpitude, or for any violation of the oath which he is required to take before admission
to practice, or for a wilful disobedience appearing as an attorney for a party to a case
without authority so to do. The practice of soliciting cases at law for the purpose of
gain, either personally or through paid agents or brokers, constitutes malpractice.
(Underscoring ours)
On the other hand, Section 13 of Rule 139-B reads:
SEC. 13. Supreme Court Investigators. – In proceedings initiated motu proprio by the
Supreme Court or in other proceedings when the interest of justice so requires, the
Supreme Court may refer the case for investigation to the Solicitor General or to any
officer of the Supreme Court or judge of a lower court, in which case, the investigation
shall proceed in the same manner provided in Sections 6 to 11 hereof, save that the
review report of the investigation shall be conducted directly by the Supreme Court.
(Underscoring ours)
In the instant petition, Pinewood asserts that the CA erroneously made the omission of
not referring the complaint for disbarment against Attys. Del Rosario and Kato to the
Court or the IBP.
While the CA is not precluded by law from making such referral, neither is the appellate
court conferred the jurisdiction to take cognizance of complaints for disbarment
against lawyers. Section 27, Rule 138 of the Rules of Court clearly states that the
authority to disbar a lawyer is exercised by the Court. Pursuant to Section 13, Rule 139-
B, the Court may refer disbarment complaints for investigation to the Solicitor General
or a judge of the lower court.
The CA did not err in denying
Pinewood’s Motion for
Reconsideration seeking for the
reinstatement of the latter’s appeal.
The Decision of the RTC, dated
May 14, 1997, had long become
final as far as Pinewood is
concerned.
In PCI Leasing and Finance, Inc. v. Milan, et al.,49 the Court reiterates the principle that:
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 be come 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.1âwphi1 The rights and obligations of every
litigant must not hang in suspense for an indefinite period of time.50 The rule on the
finality of judgments, however, admits of exceptions, to wit:
[T]his 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.51
Before the exception to the general rule can be applied though, it is indispensable to
prove that a party litigant did not (1) wantonly fail to observe the mandatory
requirements of the rules, and (2) exhibit "negligent, irresponsible, contumacious, or
dilatory" conduct as to provide substantial grounds for an appeal’s dismissal.52
The circumstances obtaining in the instant petition do not call for the exercise of the
Court’s equity jurisdiction and the application of the exception to the rule on
finality of judgments. Pinewood had waived all the chances to defend itself against
the allegations hurled by EMCO and Ever. Pinewood failed to file an Answer to
EMCO’s complaint and Ever’s cross-claim, thus, it was declared in default by the
RTC. Further, after receipt of a copy of the RTC judgment, Pinewood likewise did
not secure the services of its own counsel to pursue an appeal therefrom.53
Pinewood vehemently denied knowledge of the dismissal of its appeal and
conveniently faulted Attys. Del Rosario and Kato for allegedly keeping it in the
dark as regards the status of the case. Records, however, belie Pinewood’s claims.
As aptly observed by the CA, Pinewood does not deny having been furnished
copies of Del Rosario’s January 15, 1999 Manifestation that it was appealing on
behalf of Dalian only or of the Appellant’s Brief, simultaneously submitted by the
said law firm, which stated that the firm was acting in behalf of Dalian only.54
Pinewood has long slept for years on its rights. It has no one but itself to blame as
the judgment adverse to it is rendered and has lapsed into finality.
No grounds exist compelling this
Court to resolve the substantive
issues and sub-issues raised by
Pinewood.
The rule is settled that points of law, theories, issues and arguments not brought
to the attention of the trial court will not be and ought not to be considered by a
reviewing court, as these cannot be raised for the first time on appeal. Basic
consideration of due process impels this rule.55 Hence, while this Court notes that
the bases for some of the damages awarded by the RTC in favor of EMCO and Ever
appear to be unclear, it is too late in the day for Pinewood to assail the same.
EMCO’s Amended Complaint56 dated December 15, 1995 and Ever’s Answer with
Compulsory Counterclaim and Cross-claim57 dated February 14, 1996 were
received by the RTC. The RTC rendered its Decision on May 14, 1997.58 The CA
dismissed Pinewood’s appeal on February 17, 2000.59 All through the
proceedings, Pinewood kept silent, only to make its belated presence felt through
the Motion for Reconsideration, dated July 18, 2006, which was filed to assail the
CA Decision dated June 21, 2006. After more or less 10 years of negligently
attending to its concerns, Pinewood now wants the Court to reverse and/or modify
the RTC and CA’s disquisitions. This Court finds no ample justifications for
Pinewood’s omissions.
A modification of the interests
imposed on the damages awarded
by the RTC and the CA is, however,
in order pursuant to recent
jurisprudence.
In Unknown Owner of the Vessel M/V China Joy, Samsun Shipping Ltd., and Inter-
Asia Marine Transport, Inc. v. Asian Terminals, Inc.,60 the Court discusses the rates
of interests imposable upon different kinds of obligations, viz:
In Nacar v. Gallery Frames, the Court declared:
To recapitulate and for future guidance, the guidelines laid down in the case of
Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No.
799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on "Damages" of the Civil Code govern
in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is
imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages, except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the
claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty
cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The
actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged. 3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit. (Underscoring ours)
The CA affirmed in toto the RTC Decision dated May 14, 1997, which imposes interests
on the monetary awards payable to EMCO and Ever.1âwphi1 To conform, however, to
the declaration in Unknown Owner of the Vessel M/V China Joy,61 the Court deems it
proper to modify the reckoning period when interests payable to EMCO and Ever
should commence to run.
This Court finds it more in accord with law and jurisprudence to reckon the
computation of the interests imposed from the finality of this Resolution, during which
time the quantification of damages may be deemed to have been fully and reasonably
ascertained as far as all the parties are concerned.
WHEREFORE, the Decision dated June 21, 2006 and Resolution dated August 8, 2007 of
the Court of Appeals in CA-G.R. CV No. 58909 are AFFIRMED with the following
MODIFICATIONS: (1) Ever Commercial Co., Ltd. is directed to pay EMCO Plywood
Corporation the sum of Sixteen Million Six Hundred Eighty-Six Thousand, Forty-Eight
Pesos and Forty-Six Centavos (Pl6,686,048.46) representing damages, plus the interest
of six percent (6%) per annum computed from the finality of this Resolution until full
satisfaction thereof; and
(2) Shenzhen Guangda Shipping Co., Dalian Ocean Shipping Co. and Pinewood Marine
(Phils.), Inc. are held jointly and severally liable to pay Ever Commercial Co., Ltd. the
amounts of:
(a) Sixteen Million Six Hundred Eighty-Six Thousand, Forty-Eight Pesos and Forty-Six
Centavos (₱16,686,048.46) by way of reimbursement and indemnification;
(b) Two Million Pesos (₱2,000,000.00) as damages;
(c) Attorney's fees of One Hundred Seventy-Three Thousand Six Hundred Pesos
(₱173,600.00); and
(d) Interests of six percent (6%) per annum of the total monetary award computed from
the finality of this Resolution until full satisfaction thereof.
SO ORDERED.
G.R. No. 192477
MOMARCO IMPORT COMPANY, INC., Petitioner
vs.
FELICIDAD VILLAMENA, Respondent
DECISION
BERSAMIN, J.:
A default judgment is frowned upon because of the policy of the law to hear every
litigated case on the merits. But the default judgment will not be vacated unless the
defendant satisfactorily explains the failure to file the answer, and shows that it has a
meritorious defense.
The Case
Under challenge by the petitioner is the affirmance on January 14, 2010 by the Court of
Appeals (CA)1 of the trial court's default judgment rendered against it on August 23,
1999 in Civil Case No. C-18066 by the Regional Trial Court (RTC), Branch 126, in
Caloocan City.2 The defendant hereby prays that the default judgment be undone, and
that the case be remanded to the RTC for further proceedings, including the reception
of its evidence.3
Antecedents
Civil Case No. C-18066 is an action the respondent initiated against the petitioner
for the nullification of a deed of absolute sale involving registered real property
and its improvements situation in Caloocan City as well as of the transfer
certificate of title issued in favor of the latter by virtue of said deed of absolute sale
on the ground of falsification.
The following factual and procedural antecedents are summarized by the CA in its
assailed decision, to wit:
On September 23, 1997, plaintiff filed against defendant a complaint for
"Nullification of Deed of Sale and of the Title Issued" pursuant thereto alleging
that she is the owner of a parcel of land with improvements located in Caloocan
City and covered by Transfer Certificate of Title No. 204755. A letter from
defendant corporation dated June 12, 1997, informed plaintiff that TCT No. 204755
over aforesaid property had been cancelled and TCT No. C-319464 was issued in
lieu thereof in favor of defendant corporation on the strength of a purported
Special Power of Attorney executed by Dominador Villamena, her late husband,
appointing her, plaintiff Felicidad Villamena, as his attorney-infact and a deed of
absolute sale purportedly executed by her in favor of defendant corporation on
May 21, 1997, the same date as the Special Power of Attorney. The Special Power
of Attorney dated May 21, 1997 is a forgery. Her husband Dominador died on June
22, 1991. The deed of sale in favor of defendant corporation was falsified. What
plaintiff executed in favor of Mamarco was a deed of real estate mortgage to
secure a loan of P100,000.00 and not a deed of transfer/conveyance.
xxxx
On August 19, 1998, plaintiff filed a motion to declare defendant corporation in
default for failure of aforesaid defendant to file its answer as of said date despite
the filing of an Entry of Appearance by its counsel dated May 4, 1998.
On September 10, 1998 defendant corporation filed its Answer with Counterclaim
which denied the allegations in the complaint; alleged that plaintiff and her
daughter Lolita accompanied by a real estate agent approached the President of
Momarco for a loan of Pl00,000.00; offered their house and lot as collateral; and
presented a Special Power of Attorney from her husband. She was granted said
loan. Aforesaid loan was not repaid. Interests accumulated and were added to the
principal. Plaintiff offered to execute a deed of sale over the property on account
of her inability to pay. Plaintiff presented to defendant corporation a deed of sale
and her husband's Special of Power Attorney already signed and notarized.4
Under the order dated October 15, 1998, the petitioner was declared in default,
and its answer was ordered stricken from the records. Thereafter, the RTC allowed
the respondent to present her evidence ex parte.
On August 23, 1999, the RTC rendered the default judgment nullifying the assailed
deed of absolute sale and the transfer certificate of title issued pursuant thereto;
and ordering the Register of Deeds of Caloocan City to cancel the petitioner's
Transfer Certificate of Title No. C-319464, and to reinstate the respondent's
Transfer Certificate of Title No. 204755.5 It concluded that the act of the
petitioner's counsel of formally entering an appearance in the case had mooted
the issue of defective service of summons; and that the respondent had duly
established by preponderance of evidence that the purported special power of
attorney was a forgery.6
The petitioner appealed the default judgment to the CA, arguing that the RTC had
gravely erred in nullifying the questioned deed of absolute sale and in declaring it
in default.
On January 14, 2010, the CA promulgated the assailed decision affirming the
default judgment upon finding that the RTC did not commit any error in declaring
the petitioner in default and in rendering judgment in favor of the respondent who
had successfully established her claim of forgery by preponderance of evidence.7
On May 31, 2010, the CA denied the petitioner's motion for reconsideration.8
Hence, this appeal by the petitioner.
Issue
The petitioner raises the lone issue of whether or not the CA gravely erred in
upholding the default judgment of the RTC; in ordering its answer stricken off the
records; in allowing the respondent to adduce her evidence ex parte; and in
rendering the default judgment based on such evidence.9
Ruling of the Court
The appeal lacks merit.
The petitioner claims denial of its right to due process, insisting that the service of
summons and copy of the complaint was defective, as, in fact, there was no sheriff's
return filed; that the service of the alias summons on January 20, 1998 was also
defective; and that, accordingly, its reglementary period to file the answer did not start
to run.
The claim of the petitioner is unfounded. The filing of the formal entry of appearance
on May 5, 1998 indicated that it already became aware of the complaint filed against it
on September 23, 1997. Such act of counsel, because it was not for the purpose of
objecting to the jurisdiction of the trial court, constituted the petitioner's voluntary
appearance in the action, which was the equivalent of the service of summons.10
Jurisdiction over the person of the petitioner as the defendant became thereby vested
in the RTC, and cured any defect in the service of summons.11
Under Section 3,12 Rule 9 of the Rules of Court, the three requirements to be complied
with by the claiming party before the defending party can be declared in default are:
(1) that the claiming party must file a motion praying that the court declare the
defending party in default; (2) the defending party must be notified of the motion to
declare it in default; (3) the claiming party must prove that the defending party failed to
answer the complaint within the period provided by the rule.13 It is plain, therefore,
that the default of the defending party cannot be declared motu proprio.14
Although the respondent filed her motion to declare the petitioner in default with
notice to the petitioner only on August 19, 1998, all the requisites for properly
declaring the latter in default then existed. On October 15, 1998, therefore, the RTC
appropriately directed the answer filed to be stricken from the records and declared
the petitioner in default. It also received ex parte the respondent's evidence, pursuant
to the relevant rule.15
The petitioner's logical remedy was to have moved for the lifting of the declaration of
its default but despite notice it did not do the same before the RTC rendered the
default judgment on August 23, 1999. Its motion for that purpose should have been
under the oath of one who had knowledge of the facts, and should show that it had a
meritorious defense,16 and that its failure to file the answer had been due to fraud,
accident, mistake or excusable negligence. Its urgent purpose to move in the RTC is to
avert the rendition of the default judgment. Instead, it was content to insist in its
comment/opposition vis-a-vis the motion to declare it in default that: (1) it had already
filed its answer; (2) the order of default was generally frowned upon by the courts; (3)
technicalities should not be resorted to; and (4) it had a meritorious defense. It is
notable that it tendered no substantiation of what was its meritorious defense, and did
not specify the circumstances of fraud, accident, mistake, or excusable negligence that
prevented the filing of the answer before the order of default issued - the crucial
elements in asking the court to consider vacating its own order.
The policy of the law has been to have every litigated case tried on the merits. As a
consequence, the courts have generally looked upon a default judgment with disfavor
because it is in violation of the right of a defending party to be heard. As the Court has
said in Coombs v. Santos:17
A default judgment does not pretend to be based upon the merits of the controversy.
Its existence is justified on the ground that it is the one final expedient to induce
defendant to join issue upon the allegations tendered by the plaintiff, and to do so
without unnecessary delay. A judgment by default may amount to a positive and
considerable injustice to the defendant; and the possibility of such serious
consequences necessitates a careful examination of the grounds upon which the
defendant asks that it be set aside.
In implementation of the policy against defaults, the courts have admitted answers
filed beyond the reglementary periods but before the declaration of default.18
Considering that the petitioner was not yet declared in default when it filed the answer
on September 10, 1998, should not its answer have been admitted?
The petitioner raised this query in its motion for reconsideration in the CA, pointing out
that the RTC could no longer declare it in default and order its answer stricken from the
records after it had filed its answer before such declaration of default. However, the CA,
in denying the motion for reconsideration, negated the query, stating as follows:
Unfortunately, we find the foregoing arguments insufficient to reverse our earlier
ruling. These points do little to detract from the fact that Defendant-Appellant
filed its Answer only after a period of more than four months from when it entered
its voluntary appearance in the case a quo, and only after almost a month from
when Plaintiff-Appellee moved to have it declared in default.
Verily, Defendant-Appellant's temerity for delay is also betrayed (sic) by the fact
that it had waited for a judgment to be rendered by the court a quo before it
challenged the order declaring it in default. If it truly believed that it had a
"meritorious defense[,] which if properly ventilated could have yielded a different
conclusion [by the trial court],'' then it could very well have moved to set aside the
Order of Default immediately after notice thereof or anytime before judgment.
Under the circumstances, that would have been the most expeditious remedy.
Inauspiciously, Defendant-Appellant instead elected to wager on a favorable
judgment. Defeated, Defendant-Appellant would now have us set aside the Order
of Default on Appeal and remand the case for further proceedings. These we
cannot do.
While we are aware that we are vested with some discretion to condone
Defendant-Appellant's procedural errors, we do not find that doing so will serve
the best interests of justice. To remand this case to the court a quo on the
invocation that we must be liberal in setting aside orders of default, would be to
reward Defendant-Appellant with more delay. It bears stating that the Rules of
Procedure are liberally construed not to suit the convenience of a party, but "in
order to promote their objective of securing a just, speedy and inexpensive
disposition of everyaction and proceeding." To this end, it has been rightly written:
Procedural rules are not to be disregarded as mere technicalities that may be
ignored at will to suit the convenience of a party. x x x.
It cannot be overemphasized that procedural rules have their own wholesome
rationale in the orderly administration of justice. Justice has to be administered
according to the rules in order to obviate arbitrariness, caprice and whimsicality.19
We concur with the CA's justification. The RTC and the CA acted in accordance
with the Rules of Court and the pertinent jurisprudence.1âwphi1 The petitioner
was insincere in assailing the default judgment, and its insincerity became manifest
from its failure to move for the lifting of the order of default prior to the rendition
of the default judgment. The CA rightly observed that the petitioner had
apparently forsaken its "expeditious remedy" of moving soonest for the lifting of
the order of default in favor of "wager[ing]" on obtaining a favorable judgment.
The petitioner would not do so unless it intended to unduly cause delay to the
detriment and prejudice of the respondent.
The sincerity of the petitioner's actions cannot be presumed. Hence, it behooves it
to allege the suitable explanation for the failure or the delay to file the answer
through a motion to lift the order of default before the default judgment is
rendered. This duty to explain is called for by the philosophy underlying the
doctrine of default in civil procedure, which Justice Narvasa eruditely discoursed
on in Gochangco v. CFI Negros Occidental,20to wit:
The underlying philosophy of the doctrine of default is that the defendant's failure
to answer the complaint despite receiving copy thereof together with summons, is
attributable to one of two causes: either (a) to his realization that he has no
defenses to the plaintiff's cause and hence resolves not to oppose the complaint,
or, (b) having good defenses to the suit, to fraud, accident, mistake or excusable
negligence which prevented him from seasonably filing an answer setting forth
those defenses. It does make sense for a defendant without defenses, and who
accepts the correctness of the specific relief prayed for in the complaint, to forego
the filing of the answer or any sort of intervention in the action at all. For even if he
did intervene, the result would be the same: since he would be unable to establish
any good defense, having none in fact, judgment would inevitably go against him.
And this would be an acceptable result, if not being in his power to alter or
prevent it, provided that the judgment did not go beyond or differ from the
specific relief stated in the complaint. It would moreover spare him from the
embarrassment of openly appearing to defend the indefensible. On the other
hand, if he did have good defenses, it would be unnatural for him not to set them
up properly and timely, and if he did not in fact set them up, it must be presumed
that some insuperable cause prevented him from doing so: fraud, accident,
mistake, excusable negligence. In this event, the law will grant him relief; and the
law is in truth quite liberal in the reliefs made available to him: a motion to set
aside the order of default prior to judgment, a motion for new trial to set aside the
default judgment; an appeal from the judgment by default even if no motion to
set aside the order of default or motion for new trial had been previously
presented; a special civil action for certiorari impugning the court's jurisdiction.21
It is true that the RTC had the discretion to permit the filing of the answer even beyond
the reglementary period, or to refuse to set aside the default order where it finds no
justification for the delay in the filing of the answer.22 Conformably with the judicious
exercise of such discretion, the RTC could then have admitted the belated answer of
the petitioner and lifted the order of default instead of striking the answer from the
records. However, the RTC opted not to condone the inordinate delay taken by the
petitioner, and went on to render the default judgment on August 23, 1999. Such
actions were fully within its discretion.23 We uphold the default. While the courts
should avoid orders of default, and should be, as a rule, liberal in setting aside orders
of default,24 they could not ignore the abuse of procedural rules by litigants like the
petitioner, who only had themselves to blame.
WHEREFORE, the Court DENIES the petition for review on certiorari; AFFIRMS the
decision of the Court of Appeals promulgated on January 14, 2010; and ORDERS the
petitioner to pay the costs of suit.
SO ORDERED.
G.R. No. 225562
WILLIAM C. LOUH, JR. and IRENE L. LOUH,, Petitioners
vs
BANK OF THE PHILIPPINE ISLANDS, Respondent
RESOLUTION
REYES, J.:
Before the Court is the instant petition for review on certiorari1 filed by William C.
Louh, Jr. (William) and Irene L. Louh (Irene) (collectively, the Spouses Louh) to assail the
Decision2 and Resolution,3 dated August 11, 2015 and May 23, 2016, respectively, of
the Court of Appeals (CA) in CA-G.R. CV No. 100754.
Antecedents
The herein respondent, Bank of the Philippine Islands (BPI), issued a credit card in
William's name, with Irene as the extension card holder. Pursuant to the terms and
conditions of the cards' issuance, 3.5% finance charge and 6% late payment charge
shall be imposed monthly upon unpaid credit availments.4
The Spouses Louh made purchases from the use of the credit cards and paid regularly
based on the amounts indicated in the Statement of Accounts (SO As). However, they
were remiss in their obligations starting October 14, 2009.5 As of August 15, 2010, their
account was unsettled prompting BPI to send written demand letters dated August 7,
2010, January 25, 2011 and May 19, 2011. By September 14, 2010, they owed BPI the
total amount of ₱533,836.27. Despite repeated verbal and written demands, the
Spouses Louh failed to pay BPI.6
On August 4, 2011, BPI filed before the Regional Trial Court (RTC) of Makati City a
Complaint7 for Collection of a Sum of Money.
On February 21, 2012, William filed before the RTC a Motion for Extension of Time to
File an Answer or Responsive Pleading.8 In its Order9 dated February 27, 2012, the RTC
granted an extension of 15 days or up to March 4, 2012, but the Spouses Louh still
failed to comply within the prescribed period.10
On June 11, 2012, BPI filed a motion to declare the Spouses Louh in default.11 Before
the RTC can rule on BPI's motion, the Spouses Louh filed an Answer12 on July 20, 2012
or more than three months after the prescribed period, which ended on March 4, 2012.
On July 24, 2012, the RTC issued an Order13 declaring the Spouses Louh in default and
setting BPI's ex-parte presentation of evidence on August 7, 2012. The Branch Clerk of
Court thereafter submitted a Commissioner's Report14 dated September 7, 2012, and
the RTC considered the case submitted for decision on November 27, 2012.15
On November 29, 2012, the RTC rendered a Decision,16 the fallo of which ordered the
Spouses Louh to solidarily pay BPI (1) P533,836.27 plus 12% finance and 12% late
payment annual charges starting from August 7, 2010 until full payment, and (2) 25%
of the amount due as attorney's fees, plus ₱l,000.00 per court hearing and ₱8,064.00 as
filing or docket fees; and (3) costs of suit.17
The RTC explained that BPI had adduced preponderant evidence proving that the
Spouses Louh had in fact availed of credit accommodations from the use of the cards.
However, the RTC found the 3.5% finance and 6% late payment monthly
charges18 imposed by BPI as iniquitous and unconscionable. Hence, both charges
were reduced to 1 % monthly. Anent the award of attorney's fees equivalent to
25% of the amount due, the RTC found the same to be within the terms of the
parties' agreement.19
The Spouses Louh filed a Motion for Reconsideration,20 which the RTC denied in
the Order21 issued on April 8, 2013. The appeal22 they filed was likewise denied
by the CA in the herein assailed decision and resolution.
In affirming in toto the RTC's judgment, the CA explained that the Spouses Louh
were properly declared in default for their failure to file an answer within the
reglementary period. The Spouses Louh further filed no motion to set aside the
order of default. The CA also found that BPI had offered ample evidence, to wit: (1)
delivery receipts pertaining to the credit cards and the terms and conditions
governing the use thereof signed by the Spouses Louh; (2) computer-generated
authentic copies of the SOAs; and (3) demand letters sent by BPI, which the
Spouses Louh received but ignored. As to the award of attorney's fees, the CA
ruled that the terms governing the use of the cards explicitly stated that should
the account be referred to a collection agency, then 25% of the amount due shall
be charged as attorney's fees.23
In the herein assailed Resolution24 dated May 23, 2016, the CA denied the
Spouses Louh's Motion for Reconsideration.25
Issue
Aggrieved, the Spouses Louh are before the Court raising the sole issue of whether
or not the CA erred in sustaining BPI's complaint.26
The Spouses Louh pray for the dismissal of BPI's suit. They likewise seek a
relaxation of procedural rules claiming that their failure to file a timely Answer was
due to William's medical condition, which required him to undergo a heart by-pass
surgery.27 They further alleged that BPI failed to establish its case by
preponderance of evidence. Purportedly, BPI did not amply prove that the Spouses
Louh had in fact received and accepted the SO As, which were, however,
unilaterally prepared by the bank.28 They allege the same circumstance as to the
receipt of the demand letters. The computations likewise did not show the specific
amounts pertaining to the principal, interests and penalties. They point out that
since their credit limit was only ₱326,000.00, it is evident that the amount of
₱533,836.27 demanded by BPI included unconscionable charges.29
BPI failed to file a comment to the instant petition within the prescribed period,
which expired on September 23, 2016.
Ruling of the Court
The Court affirms the herein assailed decision and resolution, but modifies the
principal amount and attorney's fees awarded by the RTC and the CA.
The Spouses Louh reiterate that the RTC wrongly declared them in default since by
reason of William's sickness, they were entitled to a relaxation of the rules.
Moreover, BPI had failed to offer preponderant evidence relative to the actual
amount of the Spouses Louh's indebtedness.
The foregoing claims are untenable.
In Magsino v. De Ocampo,30 the Court instructs that:
Procedural rules are tools designed to facilitate the adjudication of cases. Courts
and litigants alike are thus enjoined to abide strictly by the rules. And while the
Court, in some instances, allows a relaxation in the application of the rules, this, we
stress, was never intended to forge a bastion for erring litigants to violate the rules
with impunity. The liberality in the interpretation and application of the rules
applies only in proper cases and under justifiable causes and circumstances. While
it is true that litigation is not a game of technicalities, it is equally true that every
case must be prosecuted in accordance with the prescribed procedure to insure an
orderly and speedy administration of justice.
Like all rules, procedural rules should be followed except only when, for the most
persuasive of reasons, they may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the
prescribed procedure.
The rules were instituted to be faithfully complied with, and allowing them to be
ignored or lightly dismissed to suit the convenience of a party like the petitioner
was impermissible. Such rules, often derided as merely technical, are to be relaxed only
in the furtherance of justice and to benefit the deserving. Their liberal construction in
exceptional situations should then rest on a showing of justifiable reasons and of at
least a reasonable attempt at compliance with them.xx x.31 (Citations omitted and
emphasis and italics ours)
In the case at bar, the CA aptly pointed out that the Spouses Louh filed their Answer
with the RTC only on July 20, 2012 or more than three months after the prescribed
period, which expired on March 4, 2012. When they were thereafter declared in default,
they filed no motion to set aside the RTC's order, a remedy which is allowed under Rule
9, Section 332 of the Rules of Civil Procedure. The Spouses Louh failed to show that
they exerted due diligence in timely pursuing their cause so as to entitle them to a
liberal construction of the rules, which can only be made in exceptional cases.
The Spouses Louh claim as well that BPI's evidence are insufficient to prove the
amounts of the former's obligation; hence, the complaint should be dismissed. The
Court, in Macalinao v. BPl,33 emphatically ruled that:
Considering the foregoing rule, respondent BPI should not be made to suffer for
petitioner Macalinao's failure to file an answer and concomitantly, to allow the latter to
submit additional evidence by dismissing or remanding the case for further reception
of evidence. Significantly, petitioner Macalinao herself admitted the existence of her
obligation to respondent BPI, albeit with reservation as to the principal amount. Thus, a
dismissal of the case would cause great injustice to respondent BPI. Similarly, a remand
of the case for further reception of evidence would unduly prolong the proceedings of
the instant case and render inutile the proceedings conducted before the lower
courts.34
BPI had offered as evidence the (1) testimony of Account Specialist Carlito M. Igos, who
executed a Judicial Affidavit in connection with the case, and (2) documentary exhibits,
which included the (a) delivery receipts pertaining to the credit cards and the terms and
conditions governing the use thereof signed by the Spouses Louh, (b) computer-
generated authentic copies of the SOAs,35 and (c) demand letters sent by BPI, which
the Spouses Louh received.36 The Clerk of Court subsequently prepared a
Commissioner's Report, from which the RTC based its judgment.
The Spouses Louh slept on their rights to refute BPI's evidence, including the receipt of
the SO As and demand letters. BPI cannot be made to pay for the Spouses Louh 's
negligence, omission or belated actions.
Be that as it may, the Court finds excessive the principal amount and attorneys fees
awarded by the RTC and CA. A modification of the reckoning date relative to the
computation of the charges is in order too.
In Macalinao,37 where BPI charged the credit cardholder of 3.25% interest and 6%
penalty per month,38 and 25% of the total amount due as attorney's fees, the Court
unequivocally declared that:
[T]his is not the first time that this Court has considered the interest rate of 36% per
annum as excessive and unconscionable. We held in Chua vs. Timan:
The stipulated interest rates of 7% and 5% per month imposed on respondents' loans
must be equitably reduced to 1% per month or 12% per annum. We need not unsettle·
the principle we had affirmed in a plethora of cases that stipulated interest rates of 3%
per month and higher are excessive, iniquitous, unconscionable and exorbitant. Such
stipulations are void for being contrary to morals, if not against the law. While C.B.
Circular No. 905-82, which took effect on January 1, 1983, effectively removed the
ceiling on interest rates for both secured and unsecured loans, regardless of maturity,
nothing in the said circular could possibly be read as granting carte blanche authority
to lenders to raise interest rates to levels which would either enslave their borrowers or
lead to a hemorrhaging of their assets. x x x
Since the stipulation on the interest rate is void, it is as if there was no express contract
thereon. Hence, courts may reduce the interest rate as reason and equity demand.
The same is true with respect to the penalty charge. x x x Pertinently, Article 1229 of the
Civil Code states:
Art. 1229. The judge shall equitably reduce the penalty when the principal obligation
has been partly or irregularly complied with by the debtor. Even if there has been no
performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable. x x xx
x x x [T]he stipulated penalty charge of 3% per month or 36% per annum, in addition to
regular interests, is indeed iniquitous and unconscionable.39 (Citations and emphasis in
the original omitted, and emphasis ours)
Thus, in Macalinao, the Court reduced both the interest and penalty charges to
12% each, and the attorney's fees to ₱l0,000.00.
In MCMP Construction Corp. v. Monark Equipment Corp.,40 the creditor
cumulatively charged the debtor 60% annually as interest, penalty and collection
fees, and 25% of the total amount due as attorney's fees. The Court similarly found
the rates as exorbitant and unconscionable; hence, directed the reduction of the
annual interest to 12%, penalty and collection charges to 6%, and attorney's fees
to 5%. The Court explained that attorney's fees are in the nature of liquidated
damages, which under Article 2227 of the New Civil Code, "shall be equitably
reduced if they are iniquitos or unconscionable."41
In the case at bench, BPI imposed a cumulative annual interest of 114%, plus 25%
of the amount due as attorney's fees. Inevitably, the RTC and the CA aptly reduced
the charges imposed by BPI upon the Spouses Louh. Note that incorporated in the
amount of ₱533,836.27 demanded by BPI as the Spouses Louh's obligation as of
August 7, 2010 were the higher rates of finance and late payment charges, which
the comis a quo had properly directed to be reduced.
In the SOA42 dated October 14, 2009, the principal amount indicated was
₱l13,756.83. In accordance with Macalinao, the finance and late payment charges
to be imposed on the principal amount of ₱l13,756.83 are reduced to 12% each
per annum, reckoned from October 14, 2009, the date when the Spouses Louh
became initially remiss in the payment of their obligation to BPI, until full payment.
Anent BPI's litigation expenses, the Court retains the RTC and CA' s disquisition
awarding ₱5,064.00 as filing or docket fees, and costs of suit.
However, the Court reduces the attorney's fees to five percent (5%) of the total
amount due from the Spouses Louh pursuant to MCMP43 and Article 2227 of the
New Civil Code.
WHEREFORE, the Decision and Resolution, dated August 11, 2015 and May 23,
2016, respectively, of the Court of Appeals in CA-G.R. CV No. 100754, finding the
Spouses William and Irene Louh liable to the Bank of the Philippine Islands for the
payment of their past credit availments, plus finance and late payment charges of
12% each per annum, ₱5,064.00 as filing or docket fees, and costs of suit, are
AFFIRMED. The principal amount due, reckoning period of the computation of
finance and late payment charges, and attorney's fees are, however, MODIFIED as
follows:
(1) the principal amount due is Pl 13,756.83 as indicated in the Statement of
Account dated October 14, 2009;
(2) finance and late payment charges of twelve percent (12%) each per annum
shall be computed from October 14, 2009 until full payment; and
(3) five percent (5%) of the total amount due is to be paid as attorney's fees.
SO ORDERED.
G.R. No. 220211
EDRON CONSTRUCTION CORPORATION and EDMER Y. LIM, Petitioners
vs
THE PROVINCIAL GOVERNMENT OF SURIGAO DEL SUR, represented by
GOVERNOR VICENTE T. PIMENTEL, JR., Respondent
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the Decision 2 dated
November 26, 2014 and the Resolution 3 dated September 8, 2015 of the Court of
Appeals (CA) in CA-G.R. CV No. 99539, which reversed and set aside the Decision 4
dated December 28, 2010 and the Order 5 dated September 16, 2011 of the
Regional Trial Court of Quezon City, Branch 77 (RTC) in Civil Case No. Q-08-63154,
and consequently, dismissed the complaint filed by petitioners Edron Construction
Corporation and Edmer Y. Lim (petitioners) against respondent the Provincial
Government of Surigao Del Sur, represented by Governor Vicente T. Pimentel, Jr.
(respondent).
The Facts
The instant petition stemmed from a Complaint 6 for specific performance and
damages filed by petitioners Edron Construction Corporation and Edmer Y. Lim (Lim;
collectively, petitioners) against respondent before the RTC. Petitioners alleged that
they entered into three (3) separate construction agreements 7 with respondent for the
construction of the Leaming Resource Center of Tandag, Tandag Bus/Jeepney Terminal,
and Tandag Public Market. Petitioners claimed that despite their completion and
respondent's consequent acceptance of the works as evidenced by Certificates of Final
Acceptance, 8 the latter had yet to pay them the aggregate amount of ₱8,870,729.67,
despite numerous oral and written demands. Thus, they filed the instant complaint to
claim the aforesaid amount, plus ₱500,000.00 as actual damages and ₱250,000.00 as
attorney's fees. 9
In its Answer with Counterclaim 10 dated January 6, 2009, respondent admitted the
existence of the aforesaid construction contracts. However, it nevertheless maintained,
inter alia, that: (a) there is no unpaid balance; (b) petitioners are in fact liable for
underruns and defective works; (c) petitioners had already waived or abandoned their
right to collect any amount on the ground of prescription; and (d) petitioners are guilty
of nonobservance of the specifications indicated in the construction contracts. 11
More than a year after the filing of its Answer, respondent filed a Motion to Dismiss 12
dated May 24, 2010 on the ground of failure to state a cause of action. It argued that
under Paragraph 4.3, Article IV of the construction agreements, final payment to
petitioners shall be made only after the submission of a sworn statement attesting to
the fact that all of the latter's obligations for labor and materials under the contracts
have been fully paid. In this regard, respondent contended that since petitioners have
yet to submit such sworn statement, then the latter do not have a cause of action
against it. 13 The motion was, however, denied in an Order14 dated August 11, 2010.
Meanwhile, during trial, Lim testified that: (a) petitioners referred the instant matter to a
Presidential Flagship Committee, which valued respondent's alleged arrears at
₱4,326,174.50, and that the former accepted such valuation and agreed to be paid such
reduced amount, but respondent still failed to pay the same; 15 and (b) petitioners no
longer executed a separate affidavit referred to in Paragraph 4.3, Article IV of the
construction agreements, maintaining that everything that was needed in claiming full
payment from respondent were already attached in the final billings they submitted to
the latter. 16 On the other hand, witnesses for respondent testified, among others, that
respondent accepted the projects subject of the construction agreements, free from
major defects and deficiencies, but nonetheless resisted making payments due to
discrepancies in the valuations arising from petitioners' alleged deviations from project
specifications. 17
The RTC Ruling
In a Decision 18 dated December 28, 2010, the RTC ruled in petitioners' favor, and
accordingly, ordered respondent to pay them: (a) ₱4,326,174.50 with interests of six
percent (6%) per annum computed from June 20, 2000, and thereafter, twelve percent
(12%) per annum from the filing of the complaint on August 5, 2008; (b) ₱50,000.00 as
attorney's fees; and (c) the costs of suit. 19 The R TC found that in light of respondent's
admission that the construction works were satisfactorily completed, free from major
defects, and that it has accepted the same, petitioners have amply proven their
entitlement to the payment of their claim in the reduced amount of ₱4,326,174.50
based on the Presidential Flagship Committee's valuation, which petitioners had
accepted. On the other hand, the RTC pointed out that respondent's witnesses had not
shown the alleged deviations, much less submitted the list of defects and deficiencies
on the projects subject of the construction agreements, on which respondent justified
its reason for nonpayment of petitioners' claims. 20
Respondent moved for reconsideration 21 which was denied in an Order 22 dated
September 16, 2011. Aggrieved, respondent appealed to the CA. 23
The CA Ruling
In a Decision 24 dated November 26, 2014, the CA reversed and set aside the RTC
ruling, and consequently, dismissed the complaint for lack of cause of action. 25 It held
that by the very terms of the construction agreements, specifically Paragraph 4.3,
Article IV thereof, the contractor's submission of the sworn statement attesting that all
its obligations for labor and materials under the contracts have been fully paid is a
condition sine qua non in demanding final payment from the owner. Hence, in view of
petitioners': (a) admission in open court that no such sworn statement was submitted;
and (b) failure to submit evidence showing that a sworn statement was submitted to
respondents, petitioners could not validly make a demand for final payment from
respondent. In other words, petitioners' cause of action against respondent h as not yet
accrued. 26
Undaunted, petitioners moved for reconsideration, 27 which was, however, denied
in a Resolution 28 dated September 8, 2015; hence, this petition.
The Issue Before the Court
The primordial issue for the Court's resolution is whether or not the CA correctly
reversed and set aside the RTC ruling, and consequently, dismissed petitioners'
complaint for lack of cause of action.
The Court's Ruling
The petition is meritorious.
At the outset, the Court notes that the CA's dismissal of petitioners' complaint is
heavily-grounded on the latter's alleged non-submission of the sworn statement
required in Paragraph 4.3, Article IV 29 of the construction agreements.
Such reliance is misplaced.
Section 1, Rule 9 of the Rules of Court reads:
Section1. Defenses and objections not pleaded. - Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived.
However, when it appears from the pleadings or the evidence on record that the
court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred
by a prior judgment or by statute of limitations, the court shall dismiss the claim.
It may be gleaned from the said provision that except for the defenses of: (a) lack
of jurisdiction over the subject matter of the case; (b) litis pendentia; (c) res
judicata; and/or (d) prescription, other defenses must be invoked when an answer
or a motion to dismiss is filed in order to prevent a waiver thereof. Otherwise
stated, if a defendant fails to raise a defense not specifically excepted in Section 1,
Rule 9 of the Rules of Court either in a motion to dismiss or in the answer, such
defense shall be deemed waived, and consequently, defendant is already estopped
from relying upon the same in further proceedings. 30
In the instant case, a judicious review of the records reveals that respondent's
Answer with Counterclaim 31 dated January 6, 2009 did not raise as an issue or as
a defense petitioners' non-execution of the sworn statement pertained to in
Paragraph 4.3, Article IV of the construction agreements. In fact, such matter was
only raised in its Motion to Dismiss 32 filed more than a year later after the
Answer, or on May 24, 2010, to support the ground relied upon in the said Motion,
which is failure to state a cause of action. However, it must be pointed out that the
Motion and the arguments supporting it can no longer be considered since it was
filed out of time as Section 1, Rule 16 of the Rules of Court explicitly provides that
motions to dismiss should be filed "[w]ithin the time for but before the filing the
answer to the complaint or pleading asserting a claim." More importantly, such
matter/ defense raised in the motion does not fall within the exceptions laid down
in Section 1, Rule 9 of the Rules of Court. As such, respondent was already
precluded from raising such issue/defense. Hence, the RTC cannot be faulted in: (a)
issuing an Order 33 dated August 11, 2010 denying the Motion to Dismiss; and (b)
not including a discussion of said issue/defense in its Decision 34 dated December
28, 2010 and Order 35 dated September 16, 2011.
In light of the foregoing, the CA erred in dismissing petitioners' complaint on a
ground belatedly and improperly raised by respondent.1âwphi1 Thus, the Court is
constrained to overturn said dismissal and in turn, uphold the RTC's finding of
liability on the part of respondents, especially considering that it issued Certificates
of Final Acceptance 36 essentially stating that the projects were satisfactorily
completed, free from major defects, and that it was formally accepting the same.
As a result, respondent is hereby adjudged to be liable to petitioners in the
amount of ₱4,326,174.50, which is the valuation of such liability according to the
Presidential Flagship Committee's valuation accepted by petitioners.
Finally and in line with prevailing jurisprudence, such amount shall earn legal
interest of twelve percent (12%) per annum, computed from FIRST Demand on
June 20, 2000 to June 30, 2013, and six percent (6%) per annum from July 1, 2013
until finality of the Decision. Said sum, as well as the other amounts awarded by
the RTC (i.e., ₱50,000.00 as attorney's fees and the costs of suit) shall then earn
legal interest of six percent (6%) per annum from finality of the Decision until fully paid.
37
WHEREFORE, the petition is GRANTED. The Decision dated November 26, 2014 and the
Resolution dated September 8, 2015 of the Court of Appeals in CA-G.R. CV No. 99539
are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated December 28,
2010 and the Order dated September 16, 2011 of the Regional Trial Court of Quezon
City, Branch 77 in Civil Case No. Q-08-63154 are hereby REINSTATED with
MODIFICATION, in that respondent the Provincial Government of Surigao Del Sur,
represented by Governor Vicente T. Pimentel, Jr., is liable to petitioners Edron
Construction Corporation and Edmer Y. Lim for the amounts of: (a) ₱4,326,174.50 plus
legal interest of twelve percent (12%) per annum, computed from FIRST Demand on
June 20, 2000 to June 30, 2013, and six percent (6%) per annum from July 1, 2013 until
finality of the Decision; (b) ₱50,000.00 as attorney's fees; and (c) the costs of suit.
Furthermore such amounts shall earn an additional six percent (6%) per annum from
finality of the Decision until fully paid.
SO ORDERED.
G.R. No. 224144
LOLITA BAS CAPABLANCA, Petitioner
vs.
HEIRS OF PEDRO BAS, represented by JOSEFINA BAS ESPINOSA and REGISTER OF
DEEDS OF THE PROVINCE OF CEBU, Respondents
DECISION
LEONEN, J.:
This resolves a Petition for Review1 assailing the Decision2 dated March 12, 2014 and
Resolution3 dated March 15, 2016 of the Court of Appeals, Nineteenth Division, Cebu
City. The Court of Appeals reversed the Decision 4 dated December 26, 2007 of Branch
8, Regional Trial Court, Cebu City and dismissed the petitioner's complaint.
The subject matter of this case is Lot 2535 of the Talisay-Minglanilla Friar Land's Estate
located in "Biasong, Dumlog, Talisay, Cebu"5 with an area of 6,120 square meters.6
Andres Bas (Andres) and Pedro Bas (Pedro) acquired Lot 2535, "and Patent No. 1724
was issued in their names on May 12, 1937."7
On November 28, 1939, Pedro sold to Faustina Manreal (Faustina), married to Juan
Balorio, his portion of Lot 2535 "with a seeding capacity of four (4) chupas of com."8
The sale was evidenced by a notarized Deed of Sale dated November 28, 1939.9
After the death of Faustina and her husband, their heirs executed a notarized Extra-
Judicial Declaration of Heirs and Deed of Absolute Sale dated March 13, 1963. Lot 2535
consisting of "1,000 square meters, more or less," was conveyed to one (1) of their
heirs, Alejandra Balorio (Alejandra). 10
Alejandra sold the land through a Deed of Absolute Sale dated June 13, 1967 to Edith
N. Deen, who in turn sold it to Atty. Eddy A. Deen (Atty. Deen) on March 21, 1968. 11
Upon Atty. Deen's death on December 18, 1978, an extra-judicial settlement of estate,
which did not include Lot 2535, was executed by his heirs. Later, or on March 30, 1988,
they executed an Additional Extra-Judicial Settlement with Absolute Deed of Sale,
which sold the land for ₱l0,000.00 to Norberto B. Bas (Norberto), who took possession
of and built a house on it. 12
On December 15, 1995, Norberto died without a will and was succeeded by his niece
and only heir, Lolita Bas Capablanca (Lolita). 13
Subsequently, Lolita learned that a Transfer Certificate of Title (TCT) No. T-96676 dated
June 6, 1996 was issued in the names of Andres and Pedro on the basis of a
reconstituted Deed of Conveyance No. 96-00004. 14
In October 1996, Josefina Bas Espinosa (Josefina) represented the Heirs of Pedro Bas to
file a complaint for Clarification of Ownership of Lot 2535 against Lolita before the
Lupong Tagapamayapa of Barangay Biasong, Talisay, Cebu. 15 The conflict between the
parties was not resolved and resulted to the issuance of a Certification to file Action. 16
On December 16, 1996, a notarized Partition Agreement of Real Property, Quitclaim
and Waiver of Rights was executed between the heirs of Andres and Lolita,
representing Norberto, whereby they partitioned Lot 2535 among themselves. 17
Lolita sought to register her portion in Lot 2535 but was denied by the Register of
Deeds of Cebu, citing the need for a court order. 18 Lolita then learned that TCT
No. T-96676 had been partially cancelled and TCT Nos. T-100181, T-100182, T-
100183, and T-100185 had been issued in the name of the Heirs of Pedro Bas,
represented by Josefina, on May 29, 1997. 19
On December 16, 1997, Lolita filed a complaint before the Regional Trial Court of
Cebu City for the cancellation of the titles with prayer for moral and exemplary
damages, attorney's fees, and litigation expenses.20
In their Answer, the Heirs of Pedro Bas claimed that "the sale between Pedro Bas
and Faustina Manreal [was] fake, spurious and invalid because [Pedro] who [was]
an illiterate never learned how to write his name so that the signature appearing
thereon could not have been made by Pedro Bas."21 They further claimed that the
cancellation of TCT No. T-96676 was made pursuant to a final judgment in Civil
Case No. 840 22 for Partition, Damages, and Attorney's Fees.23
After trial, Branch 8, Regional Trial Court, Cebu City rendered a Decision24 on
December 26, 2007, in favor of Lolita. The trial court held that there was
substantial evidence to prove that Lolita had been in long possession of the lot
under a claim of ownership as the heir of Norberto and that it was not necessary
for her to be first declared as his heir before filing the complaint. 25 It further ruled
that to dismiss the case on the ground that Lolita should first be declared an heir
would be too late as the Heirs of Pedro Bas did not raise the issue in a motion to
dismiss or as an affirmative defense in their complaint. 26
On the substantive issues, the trial court upheld the validity of the 1939 Deed of
Sale executed by Pedro in favor of Faustina. It found Josefina's uncorroborated
testimony of Pedro's illiteracy as self-serving and unconvincing to contradict the
regularity of the notarized deed. Moreover, her testimony was controverted by the
notarized Assignment of Sale Certificate 195, which bore the same signature of
Pedro, and by the Heirs of Pedro Bas' answers in Civil Case No. R-10602, another
case which contained allegations that Pedro sold his share in the lot to Faustina.27
The trial court further held that the object of the sale was determinate, i.e., Pedro's
share in Lot 2535 was specified by the boundaries indicated in the Deed of Sale.28
It concluded that Norberto acquired the entire share of Pedro in Lot 2535, which
was found only after survey in 1996,29 to actually consist of 3, 060 square meters
and not 1, 000 square meters as insisted by the Heirs of Pedro Bas. The trial court
gave credence to Lolita's testimony that before the survey, Pedro's portion was
estimated to be 1,000 square meters; hence, the area indicated in the successive
transfers of the lot from the heirs of Faustina down to Norberto was "1,000 square
meters, more or less."30 Consequently, with Pedro's sale of his share in Lot 2535,
his heirs acquired no portion by inheritance and their titles were null and void and
should be cancelled.31
Finally, the trial court affirmed that the Judgement of the Municipal Trial Court of
Talisay in Civil Case No. 840 for Partition, Damages and Attorney's fees was not
binding on Lolita, who was not a party to the case.32
The fallo of the Decision read:
WHEREFORE, premises considered, a judgment is hereby rendered in favor of the
plaintiff and against the defendants, declaring as null and void and ordering the
Register of Deeds of the Province of Cebu to cancel the following transfer
certificates of title:
1) Transfer Certificate of Title No. T-100181, of the Register of Deeds of the
Province of Cebu, in the name of Heirs of Pedro Bas, represented by Josefina Bas,
covering Lot 2535-J, Psd-07-037377, being a portion of Lot 2535, Flr-133, situated
in the Barrio of Dumlog, Mun. of Talisay, Prov. of Cebu, Island of Cebu, containing
an area of 304 square meters;
2) Transfer Certificate of Title No. T-100182, of the Register of Deeds of the
Province of Cebu, in the name of Heirs of Pedro Bas, represented by Josefina Bas,
covering Lot 2535-B, Psd-07-037377, being a portion of Lot 2535, Flr-133, situated
in the Barrio of Dumlog, Mun. of Talisay, Prov. of Cebu, Island of Cebu, containing
an area of 1,554 square meters;
3) Transfer Certificate of Title No. T-100183, of the Register of Deeds of the
Province of Cebu, in the name of Heirs of Pedro Bas, represented by Josefina Bas,
covering Lot 2535-A, Psd-07-037377, being a portion of Lot 2535, Flr-133, situated
in the Barrio of Dumlog, Mun. of Talisay, Prov. of Cebu, Island of Cebu, containing
an area of 965 square meters; and
4) Transfer Certificate of Title No. T-100185, of the Register of Deeds of the Province of
Cebu, in the name of Heirs of Pedro Bas, represented by Josefina Bas, covering Lot
2535-A Psd-07-037377, being a portion of Lot 2535, Flr-133, situated in the Barrio of
Dumlog, Mun. of Talisay, Prov. of Cebu, Island of Cebu, containing an area of 187
square meters.
Costs against the defendants. 33
The Regional Trial Court subsequently denied the Heirs of Pedro Bas’ motion for
reconsideration. 34
Hence, the Heirs of Pedro Bas appealed to the Court of Appeals, making the following
lone assignment of error:
The trial court seriously erred in not dismissing the case for plaintiffs lack of cause of
action pursuant to (the) doctrinal jurisprudential case of Guido and Isabel Yaptinchay
vs. Del Rosario (304 SCRA 18) considering that plaintiff in her complaint alleged, she is
the sole heir of Norberto Bas.35
The Court of Appeals reversed the Regional Trial Court Decision and dismissed the
complaint.36 According to the Court of Appeals, Lolita must first be declared as the
sole heir to the estate of Norberto in a proper special proceeding. Thus:
WHEREFORE, premises considered, the Decision dated December 26, 2007, of the
Regional Trial Court, 7th Judicial Region, Branch 8, Cebu City in Civil Case No. CEB-
21348 for Ownership, Nullity of Deeds, Cancellation of TCT Nos. T-100181, T-100182, T-
100183[,] and T-100185, covering portions of Lot No. 2535, damages, etc., ordering the
cancellation of Transfer Certificates of Title Nos. T-100181, T-100182, T-100183[,] and
T-100185 is hereby REVERSED and SET ASIDE.
The complaint of plaintiff-appellee is hereby DISMISSED, without prejudice to any
subsequent proceeding to determine the lawful heirs of the late Norberto Bas and the
rights concomitant therewith.37
Lolita sought reconsideration but was denied in the Court of Appeals Resolution dated
March 15, 2016.
Hence, Lolita filed this Petition principally contending that the Court of Appeals
committed a reversible error in reversing the Regional Trial Court Decision and
dismissing the complaint.
Petitioner argues that the 1999 case of the Heirs of Yaptinchay v. DelRosario38 cited in
the Court of Appeals Decision does not apply to this casebecause the factual
circumstances are different. 39 In that case, the claims of the opposing parties were
anchored on their alleged status as heirs of the original owner. 40 "Hence there may
have been the need for a previous judicial declaration of heirship in a special
proceeding."41 Here, petitioner does not claim to be an heir of Pedro, the original
owner. Rather, her interest over the property is derived from a series of transactions
starting from the sale executed by Pedro.42
Petitioner further contends that respondents neither raised the ground "lack of cause
of action" as an affirmative defense nor filed a motion to dismiss before the court a
quo. Instead, they allowed the trial to proceed with their full participation all
throughout. Petitioner asserts that respondents' action or inaction should be
constituted a waiver.43 Otherwise, respondents' "failure to properly act on its perceived
defect" in the complaint hampers the speedy disposition of the action "and would only
promote multiplicity of suits."44
In their two (2)-page Comment,45 respondents contend that the findings of the Court
of Appeals were duly supported by evidence and jurisprudence.
This Court grants the petition.
Contrary to the erroneous conclusion of the Court of Appeals, this Court finds no need
for a separate proceeding for a declaration of heirship in order to resolve petitioner's
action for cancellation of titles of the property.
The dispute in this case is not about the heirship of petitioner to Norberto but the
validity of the sale of the property in 1939 from Pedro to Faustina, from which followed
a series of transfer transactions that culminated in the sale of the property to Norberto.
For with Pedro's sale of the property in 1939, it follows that there would be no more
ownership or right to property that would have been transmitted to his heirs.
Petitioner's claim is anchored on a sale of the property to her predecessor-in-
interest and not on any filiation with the original owner. What petitioner is
pursuing is Norberto's right of ownership over the property which was passed to
her upon the latter's death.46
This Court has stated that no judicial declaration of heirship is necessary in order
that an heir may assert his or her right to the property of the deceased.47 In
Marabilles v. Quito:48
The right to assert a cause of action as an heir, although he has not been judicially
declared to be so, if duly proven, is well settled in this jurisdiction. This is upon the
theory that the property of a deceased person, both real and personal, becomes
the property of the heir by the mere fact of death of his predecessor in interest,
and as such he can deal with it in precisely the same way in which the deceased
could have dealt, subject only to the limitations which by law or by contract may
be imposed upon the deceased himself. Thus, it has been held that "[t]here is no
legal precept or established rule which imposes the necessity of a previous legal
declaration regarding their status as heirs to an intestate on those who, being of
age and with legal capacity, consider themselves the legal heirs of a person, in
order that they may maintain an action arising out of a right which belonged to
their ancestor" ... A recent case wherein this principle was maintained is Cabuyao
vs. [C]aagbay.49 (Emphasis supplied)
The Court of Appeals' reliance on the ruling in Heirs of Yaptinchay v.Del Rosario50
was misplaced. In that case, the motion to dismiss was filedimmediately after the
second Amended Complaint was filed. 51 The trial court granted the motion to
dismiss, holding that the Heirs of Y aptinchay "have not shown any proof or even a
semblance of it-except the allegations that they are the legal heirs of the above-
named Yaptinchays-that they have been declared the legal heirs of the deceased
couple."52
Here, respondents never raised their objection to petitioner's capacity to sue either
as an affirmative defense or in a motion to dismiss.53 Rule 9, Section 1 of the
Rules of Court states, "[ d]efenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived." Thus, it was erroneous for the Court
of Appeals to dismiss the complaint on the ground that there was no prior judicial
declaration of petitioner's heirship to Norberto.54
Moreover, the pronouncement in the Heirs of Yaptinchay that a declaration of
heirship must be made only in a special proceeding and not in an ordinary civil
action for reconveyance of property was based on Litam, etc., et. al. v. Rivera55 and
Solivio v. Court of Appeals, 56 whichinvolved different factual milieus.
The facts of the case in Litam, etc., et. al. v. Rivera 57 show that during the
pendency of the special proceedings for the settlement of the intestate estate of
the deceased Rafael Litam, the plaintiffs-appellants filed a civil action. They
claimed that as the children of the deceased by a previous marriage to a Chinese
woman, they were entitled to inherit his one-half (1/2) share of the conjugal
properties acquired during his marriage to Marcosa Rivera (Marcosa).58 The trial
court in the civil case declared, among others, that the plaintiffs-appellants were
not children of the deceased and that Marcosa was his only heir.59 On appeal, this
Court ruled that such declaration-that Marcosa was the only heir of the decedent-
was improper because the determination of the issue was within the exclusive
competence of the court in the special proceedings. 60
In Solivio v. Court of Appeals,61 the deceased Esteban Javellana, Jr. was survived
by Celedonia Solivio (Celedonia), his maternal aunt, and Concordia Javellana-
Villanueva (Concordia), his paternal aunt.62 Celedonia filed the intestate
proceedings and had herself declared as sole heir and administratrix of the estate
of the decedent to facilitate the implementation of the latter's wish to place his
estate in a foundation named after his mother. 63 While the probate proceeding
was pending, Concordia filed a separate civil action where she sought to be
declared as co-heir and for partition of the estate.64 This Court held that the
"separate action was improperly filed for it is the probate court that has exclusive
jurisdiction to make a just and legal distribution of the estate."65 This Court further
held that "in the interest of orderly procedure and to avoid confusing and
conflicting dispositions of a decedent's estate, a court should not interfere with
probate proceedings pending in a co-equal court."66
In Litam and Solivio, the adverse parties were putative heirs to a decedent's estate
or parties to the special proceedings for an estate's settlement.1âwphi1 Hence, this
Court ruled that questions on the status and right of the contending parties must
be properly ventilated in the appropriate special proceeding, not in an ordinary
civil action.
Here, as stated, the main issue is the annulment of title to property, which ultimately
hinges on the validity of the sale from Pedro to Faustina. Petitioner does not claim any
filiation with Pedro or seek to establish her right as his heir as against the respondents.
Rather, petitioner seeks to enforce her right over the property which has been allegedly
violated by the fraudulent acts of respondents.
Furthermore, as found by the Regional Trial Court:
The plaintiff [Lolita] has sufficient interest to protect in the subject portion of Lot 2535.
She had been there for around thirty (30) years, and had been in possession thereof
under a claim of ownership as an alleged heir of Norberto Bas after the latter's death
on December 15, 1993, that is: long before the issuance of TCT Nos. T-100181, T-
100182, T-100183[,] and T-100185 in 1997, and even TCT No. T-96676 in 1996.
Moreover, it is annotated on TCT No. T-96676 (Exhibit "G") that she, together with the
heirs of Osmundo Bas, executed a declaration of heirs with partition, quitclaim, etc.,
dated December 16, 1996, registered on March 3, 1997 ... wherein they adjudicated
unto themselves and partitioned Lot No. 2535 .. . She also executed on June 14, 1997
an Affidavit of Adjudication by Sole Heir, declaring herself as the sole heir of Norberto
Bas and adjudicated unto herself the subject portion pursuant to Section 1, Rule 74 of
the 1997 Revised Rules of Civil Procedure.
The existence of the questioned certificates of title, and other related documents,
constitute clouds on said interest. There seems, therefore, to be no necessity that the
plaintiff should have been declared first as an heir of Norberto Bas as a prerequisite to
this action. Her possession of the subject lot under a claim of ownership is a sufficient
interest to entitle her to bring this suit. 67 (Citation omitted)
This case has gone a long way since the complaint was filed in 1997. A full-blown trial
had taken place and judgment was rendered by the Regional Trial Court where it
thoroughly discussed, evaluated, and weighed all the pieces of documentary evidence
and testimonies of the witnesses of both parties. At this point, to dismiss the case and
require petitioner to institute a special proceeding to determine her status as heir of
the late Norberto would hamper, instead of serve, justice.
In Portugal v. Portugal-Beltran,68 where the contending parties insisted to be the legal
heirs of the decedent, this Court dispensed with the need to institute a separate special
proceeding to determine their heirship since the parties had voluntarily submitted the
issue to the trial court and already presented their evidence. It held:
It appearing, however, that in the present case the only property of the intestate estate
of Portugal is the Caloocan parcel of land, to still subject it, under the circumstances of
the case, to a special proceeding which could be long, hence, not expeditious, just to
establish the status of petitioners as heirs is not only impractical; it is burdensome to
the estate with the costs and expenses of an administration proceeding. And it is
superfluous in light of the fact that the parties to the civil case - subject of the present
case, could and had already in fact presented evidence before the trial court which
assumed jurisdiction over the case upon the issues it defined during pre-trial.
In fine, under the circumstances of the present case, there being no compelling reason
to still subject Portugal's estate to administration proceedings since a determination of
petitioners' status as heirs could be achieved in the civil case filed by petitioners, the
trial court should proceed to evaluate the evidence presented by the parties during the
trial and render a decision thereon[.]69 (Citation omitted) In this case, there is no
necessity for a separate special proceeding and to require it would be superfluous
considering that petitioner had already presented evidence to establish her filiation and
heirship to Norberto, which respondents never disputed.
WHEREFORE, the Petition is GRANTED. The Court of AppealsDecision dated March 12,
2014 and Resolution dated March 15, 2016 are VACATED and SET ASIDE. The Decision
dated December 26, 2007 ofBranch 8, Regional Trial Court, Cebu City is REINSTATED.
SO ORDERED.
G.R. No. 208426, September 20, 2017
SAMUEL M. ALVARADO,, Petitioner, v. AYALA LAND, INC., AYALA HILLSIDE ESTATES
HOMEOWNERS' ASSOCIATION, INC., ALEXANDER P. AGUIRRE, HORACIO PAREDES,
RICARDO F. DE LEON, REYNATO Y. SAWIT, AGUSTIN N. PEREZ, GERONIMO M.
COLLADO, EMMANUEL C. CHING, MACABANGKIT LANTO, MANUEL DIZON, TARCISIO
CALILUNG, IRINEO AGUIRRE, ERNESTO ORTIZ LUIS, BERNARDO JAMBALOS III,
FRANCISCO ARCILLANA, LUIS S. TANJANGCO, AND PABLITO VILLEGAS, Respondents.
DECISION

LEONEN, J.:
Two (2) categories of motions to dismiss may be recognized under the 1997 Rules
of Civil Procedure: first, those that must be filed ahead of an answer, and second,
those that may be entertained even after an answer has been filed. Motions to
dismiss under the first category may plead any of the 10 grounds under Rule 16,
Section 1.1 Those under the second category may only plead four (4) of Rule 16,
Section 1 's 10 grounds: lack of jurisdiction over the subject matter, litis pendentia,
res judicata, and prescription. In addition to these four (4) grounds, motions to
dismiss under the second category may also plead lack of cause of action and
other grounds that may only be made known after the answer was filed.2
The prior filing of an answer, therefore, serves as a bar to the consideration of Rule
16, Section 1 's six (6) other grounds. However, the grounds stated in a belatedly
filed motion to dismiss may still be considered provided that they were pleaded as
affirmative defenses in an answer. There is then no waiver of the previously
pleaded defenses. The complaint may be dismissed even for reasons other than
lack of jurisdiction over the subject matter, litis pendentia, res judicata,
prescription, lack of cause of action, or delayed discovery of a ground for
dismissal. The belatedly filed motion to dismiss is not a useless superfluity. It is
effectively a motion for the court to hear the grounds for dismissal previously
pleaded as affirmative defenses in the answer, pursuant to Rule 16, Section 6.3
Still, the continuing availability of grounds does not guarantee a dismissal. An
allegation of non-compliance with a condition precedent may be belied by
antecedent facts; a claim of failure to state a cause of action may be negated by
sufficient allegations in the complaint.
This resolves a Petition for Review on Certiorari4 under Rule 45 of the 1997 Rules
of 1 Civil Procedure praying that the assailed April 17, 2013 Decision5 and August
2, 2013 Resolution6 of the Court of Appeals in CA G.R. SP No. 123929 be reversed
and set aside, and that the action assailing the validity of a tax sale initiated by
respondents against petitioner Samuel M. Alvarado (Alvarado) before the Quezon
City Regional Trial Court be dismissed.7
The assailed Court of Appeals April 17, 2013 Decision dismissed Alvarado's Petition
for Certiorari and found no grave abuse of discretion on the part of Presiding
Judge Tita Marilyn Payoyo-Villordon (Judge Payoyo-Villordon) of Branch 224,
Regional Trial Court, Quezon City in issuing her September 6, 2011 and January 6,
2012 Orders.8 The assailed Court of Appeals August 2, 2013 Resolution denied
petitioner's Motion for Reconsideration.9
Judge Payoyo-Villordon's September 6, 2011 Order10 denied petitioner's Motion
to Dismiss the action assailing the validity of a tax sale initiated by herein
respondents, Ayala Land, Inc., Ayala Hillside Estates Homeowners' Association, Inc.
(Ayala Hillside), Alexander P. Aguirre, Horacio Paredes, Ricardo F. De Leon, Reynato
Y. Sawit, Agustin N. Perez, Geronimo M. Collado, Emmanuel C. Ching, Macabangkit
Lanto, Manuel Dizon, Tarcisio; Calilung, Irineo Aguirre, Ernesto Ortiz Luis, Bernardo
Jambalos III, Francisco Arcillana, Luis S. Tanjangco, and Pablito Villegas. Her
January 6, 2012 Order11 denied petitioner's Motion for Reconsideration.
Capitol Hills Golf and Country Club, Inc. (Capitol) owned a 15,598-square-meter
parcel in Quezon City covered by Transfer Certificate of Title (TCT) No. N-
253850.12 As of the occurrence of the material incidents of this case, this parcel
was alleged to have had an assessed value of P17,547,750.00 and a zonal value of
P249,568,000.00.13
On November 16, 2007, this entire parcel was levied by the Quezon City Treasurer
on account of unpaid real estate taxes amounting to P1,857,136.89 plus penalties
of P668,569.28. On December 13, 2007, it was subjected to a tax delinquency sale.
Alvarado was noted to have been the highest bidder for the amount of
P2,600,000.00. Thereafter, a Certificate of Sale of Delinquent Property was issued in
Alvarado's favor.14
On December 7, 2010, respondents filed with the Quezon City Regional Trial Court
their Complaint 15 assailing the validity of the tax sale.16 Alvarado, the Quezon
City Treasurer, the Quezon City Register of Deeds, and several John and Jane Does
who allegedly participated in the conduct of the levy and sale were impleaded as
defendants.17
In their Complaint, individual respondents Alexander P. Aguirre, Horacio Paredes,
Ricardo F. De Leon, Reynato Y. Sawit, Agustin N. Perez, Geronimo M. Collado,
Emmanuel C. Ching, Macabangkit Lanto, Manuel Dizon, Tarcisio Calilung, Irineo
Aguirre, Ernesto Ortiz Luis, Bernardo Jambalos III, Francisco Arcillana, Luis S.
Tanjangco, and Pablito Villegas identified themselves as "members of Capitol Hills
Golf [and] Country Club, Inc., who were each issued their corresponding
Certificates of Shares of Stocks and/or Member's Identification (ID) Cards."18 Ayala
Hillside identified itself as "an association of lot owners residing in Ayala Hillside Estate
who set up their homes in such a location primarily because of the green environment
provided by the Capitol Golf Course." 19 Ayala Land, Inc. noted that it had an
"Agreement [with Capitol] for a joint development of the Capitol Golf Course since
[Ayala Land, Inc.]'s Ayala Hillside Estate . . . is located and situated inside the Capitol
Golf Course."20
The Complaint alleged several anomalies in the sale. It assailed the sale of the entire
parcel for P2,600,000.00, an amount that, as respondents alleged, equated to 14.41% of
its assessed value, 6.48% of its market value, and 1.01% of its zonal value.21 It asserted
that the sale of the entire parcel instead of merely a usable portion of it that sufficed to
cover the tax delinquency, net of penalties, of P2,528,992.48 violated Section 260 of the
Local Government Code22 and Chapter Two, Article 7, Section 14, paragraph 4 of the
Quezon City Revenue Code.23 It added that the Final Bill of Sale was issued to Alvarado
"palpably way ahead before the expiration of the redemption period"24 and that
neither a notice of sale nor a notice of tax delinquency was posted in publicly
accessible and conspicuous places,25 contrary to the requirements of Section 254 of
the Local Government Code.26
In response to respondents' Complaint, Alvarado filed his Answer with Compulsory
Counterclaim27 dated April 4, 2011. This Answer asserted that the Complaint was
"procedurally and fatally defective on its face"28 for the following reasons:
I.
APPLYING SECTION 1 (J), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE CASE SINCE A CONDITION
PRECEDENT FOR THE FILING OF THE CLAIM HAS NOT BEEN COMPLIED WITH I.E. THE
MANDATORY JUDICIAL DEPOSIT AS PROVIDED FOR UNDER SEC. 267 OF THE LOCAL
GOVERNMENT CODE.
II.
APPLYING SECTION 1 (G), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE,
[RESPONDENTS] FAILED TO STATE A CAUSE OF ACTION AGAINST THE [PETITIONER] —
[RESPONDENTS] NOT BEING THE REGISTERED OWNER OF THE AUCTIONED PROPERTY
AND NOT HAVING ANY AUTHORITY FROM THE REGISTERED OWNER OF THE
PROPERTY.
III.
APPLYING SECTION 1 (B), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE SUBJECT MATTER OF THE
CLAIM CONSIDERING THAT [RESPONDENTS] HAVE NOT SHOWN ANY REAL, ACTUAL,
MATERIAL OR SUBSTANTIAL LEGAL RIGHTS OR INTEREST ON THE AUCTIONED
PROPERTY. AS A MATTER OF FACT, [RESPONDENTS'] ALLEGED RIGHTS DO NOT
APPEAR IN THE TITLE ITSELF. Thus, Section 267 of the Local Government Code provides
that ''Neither shall any court declare a sale at public auction invalid by reason of
irregularities or informalities in the proceedings unless the substantive rights of the
delinquent owner of the real property or the person having legal interest therein have
been impaired."29
After filing his Answer, Alvarado filed his Motion to Dismiss30 dated April 14, 2011,
substantially reiterating the same procedural defects he noted in his Answer:
1. The instant complaint filed by the [respondents] should be dismissed on the
following grounds, as alleged in the special and affirmative defenses in the Answer with
Compulsory Counterclaim filed by herein [petitioner]:
GROUNDS
I.
APPLYING SECTION I (J), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE CASE SINCE A CONDITION
PRECEDENT FOR THE FILING OF THE CLAIM HAS NOT BEEN COMPLIED WITH I.E. THE
MANDATORY JUDICIAL DEPOSIT AS PROVIDED FOR UNDER SEC. 267 OF THE LOCAL
GOVERNMENT CODE.
II
APPLYING SECTION 1 (G), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE,
[RESPONDENTS] FAILED TO STATE A CAUSE OF ACTION AGAINST THE [PETITIONER] —
[RESPONDENTS] NOT BEING THE REGISTERED OWNER OF THE AUCTIONED
PROPERTY.
III.
APPLYING SECTION 1 (B), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE SUBJECT MATTER OF THE
CLAIM CONSIDERING THAT [RESPONDENTS] HAVE NOT SHOWN ANY REAL,
ACTUAL, MATERIAL OR SUBSTANTIAL LEGAL RIGHTS OR INTEREST ON THE
AUCTIONED PROPERTY. AS A MATTER OF FACT, [RESPONDENTS'] ALLEGED
RIGHTS DO NOT APPEAR IN THE TITLE ITSELF. Thus, Section 267 of the Local
Government Code provides that "Neither shall any court declare a sale at public
auction invalid by 1 reason of irregularities or informalities in the proceedings
unless the substantive rights of the delinquent owner of the real property or the
person having legal interest therein have been impaired."31
In her Order32 dated September 6, 2011, Judge Payoyo-Villordon denied
Alvarado's Motion to Dismiss. She noted that the Motion was filed out of time as
Alvarado already filed his Answer and that "Alvarado [was] considered [e]stopped
from filing the subject Motion to Dismiss."33 She conceded that the rule
preventing the consideration of motions to dismiss filed after the filing of answers
admitted exceptions34 but noted that the grounds pleaded by Alvarado still did
not warrant the dismissal of respondents' Complaint.35
In her Order36 dated January 6, 2012, Judge Payoyo-Villordon denied Alvarado's
Motion for Reconsideration.
Thereafter, Alvarado filed a Petition for Certiorari with the Court of Appeals.37
In its assailed April 17, 2013 Decision,38 the Court of Appeals found no grave
abuse of discretion on the part of Judge Payoyo-Villordon m issuing the
September 6, 2011 and January 6, 2012 Orders.
In its assailed August 2, 2013 Resolution,39 the Court of Appeals denied Alvarado's
Motion for Reconsideration.
Hence, Alvarado filed this Petition.
For resolution is the sole issue of whether or not the Court of Appeals erred in not
finding grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of Quezon City Regional Trial Court Presiding Judge Tita Marilyn Payoyo-
Villordon in issuing her September 6, 2011 and January 6, 2012 Orders.
Judge Payoyo-Villordon correctly observed that petitioner filed his Answer ahead
of his Motion to Dismiss. The filing of an answer precludes a motion to dismiss.
However, the grounds invoked by petitioner in his Motion to Dismiss had been
previously pleaded in his Answer. The consideration of these grounds was,
therefore, not forestalled by petitioner's belated filing of a motion to dismiss.
These grounds are still considered timely pleaded in his Answer and merely
reiterated in his Motion to Dismiss.
Ultimately, however, Judge Payoyo-Villordon correctly found petitioner's pleaded
grounds to be unavailing. Thus, this Court sustains her denial of petitioner's
Motion to Dismiss.
I
A civil action is initiated by filing a complaint in the appropriate court.40 Within 15
days after the service of summons or as directed by the court, the defendant must
file an answer.41 A defendant who fails to timely file an answer shall be held in
default: "Thereupon, the court shall proceed to render judgment granting the
claimant such relief as his pleading may warrant, unless the court in its discretion
requires the claimant to submit evidence."42
The filing of a complaint is not in all cases followed by the filing of an answer.
Upon any of the grounds recognized by Rule 16, Section 1 of the 1997 Rules of
Civil Procedure a defendant may instead seek the immediate dismissal of the
complaint. These grounds are:
(a)
That the court has no jurisdiction over the person of the defending party;
(b)
That the court has no jurisdiction over the subject matter of the claim;
(c)
That venue is improperly laid;
(d)
That the plaintiff has no legal capacity to sue;
(e)
That there is another action pending between the same parties for the same cause;
(f)
That the cause of action is barred by a prior judgment or by the statute of limitations;
(g)
That the pleading asserting the claim states no cause of action;
(h)
That the claim or demand set forth in the plaintiff's pleading has been paid, waived,
abandoned, or otherwise extinguished;
(i)
That the claim on which the action is founded is unenforceable under the provisions of
the statute of frauds;
(j)
That a condition precedent for filing the claim has not been complied with.
Rule 16, Section 1 is unequivocal: a motion to dismiss is filed "[w]ithin the time for but
before filing the answer."43 Rule 16, Section 4 states that if a motion to dismiss is
denied, the defendant shall then file an answer within the remaining period of the 15
days that he or she originally had to file it but in no case less than five (5) days.44
The 1997 Rules of Civil Procedure frame a procedure where only the merits of the
issues of a case are to be the subject of trial. The issues, however, will be joined only
after an answer is filed. In the answer, affirmative defenses, which take the form of
"confession and avoidance"45 may also be raised. After the answer, no new defenses
may be raised. As Rule 9, Section 1 stipulates "[d]efenses and objections not pleaded ...
in the answer are deemed waived."46
It is during trial where evidence to prove the parties' respective positions on the
substantive issues, as tendered in their pleadings, is received. Judgment on the
questions of fact, as well as law, on these substantive issues will then follow.
However, prior to trial, there may be defenses which may be granted without touching
on the merits of the case. Thus, Rule 16 provides for the vehicle called a Motion to
Dismiss. The grounds under Rule 16 partake of the nature of defenses which can be
considered with the hypothetical admission of the allegations in the complaint. For
instance, a claim that a complaint fails to state a cause of action asserts that even if the
complaint's allegations were true, the plaintiff is still in no position to proceed against
the defendant.
It is basic, then, that motions to dismiss are not to be entertained after an answer has
been filed.
This rule, however, admits of exceptions. While stating the general rule that "[d]efenses
and objections not pleaded . . . in the answer are deemed waived," Rule 9, Section 1
adds:
However, when it appears from the pleadings or the evidence on record that the court
has no jurisdiction over the subject matter, that there is another action pending
between the same parties for the same cause, or that the action is barred by a prior
judgment or by statute of limitations, the court shall dismiss the claim.
Out of Rule 16, Section 1 's 10 grounds, four (4) survive the anterior filing of an answer:
lack of jurisdiction over the subject matter, litis pendentia, res judicata, and
prescription. Thus, as Pacaña-Contreras v. Rovila Water Supply Inc.47 explained:
The first paragraph of Section 1, Rule 16 of the Rules of Court provides for the period
within which to file a motion to dismiss under the grounds enumerated. Specifically,
the motion should be filed within the time for, but before the filing of, the answer to
the complaint or pleading asserting a claim. Equally important to this provision is
Section 1, Rule 9 of the Rules of Court which states that defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived, except for
the following grounds: 1) the court has no jurisdiction over the subject matter; 2) litis
pendencia; 3) res judicata; and 4) prescription.
Therefore, the grounds not falling under these four exceptions may be considered as
waived in the event that they are not timely invoked.48
Common to all these four (4) grounds that survive the filing of an answer is that they
persist no matter the resolution of the merits of the case by the court. A judgment
issued by a court without jurisdiction is null and void. Judgments on a similar prior case
will be redundant. Thus, res judicata and litis pendencia can be raised even after an
answer has been filed. Prescription attaches regardless of the resolution of the case on
the merits.
Apart from the exceptions recognized in Rule 9, Section 1, jurisprudence has also
clarified that, despite the prior filing of an answer, an action may still be dismissed
on a ground which only became known subsequent to the filing of an answer.49
In Obando v. Figueras,50 respondent Eduardo Figueras (Eduardo) initially served as
the sole administrator of the joint estates of the deceased Jose and Alegria
Figueras (Alegria). Upon the filing of a petition for probate and presentation of
Alegria's alleged will, petitioner Felizardo Obando (Obando) was designated co-
administrator. It turned out, however, that the will was a forgery, and Obando was
indicted for and convicted of estafa through falsification of a public document. In
the meantime, Eduardo proceeded to sell two (2) estate properties to respondent
Amigo Realty Corporation (Amigo). This sale was made despite the probate court's
denial of Eduardo's prayer for authority to sell. The sale prompted Obando to sue
Eduardo and Amigo for the nullification of the sale. In the interim, the probate
court removed Obando from his office as co-administrator. His removal prompted
Eduardo and Amigo to file a motion to dismiss the nullification case, with them
asserting that by the cessation of Obando's engagement as co-administrator, he
lost legal standing to pursue the nullification case. The Regional Trial Court
granted respondents' motion and dismissed the nullification case. The Court of
Appeals affirmed the Regional Trial Court Decision. In sustaining the Court of
Appeals and the Regional Trial Court Decisions, this Court explained:
The Rules provide that a motion to dismiss may be submitted only before the
filing of a responsive pleading. Thus, petitioners complain that it was already too
late for Respondent Eduardo Figueras to file a Motion to Dismiss after Obando
had finished presenting his evidence.
This is not so. The period to file a motion to dismiss depends upon the
circumstances of the case. Section 1 of Rule 16 of the Rules of Court requires that,
in general, a motion to dismiss should be filed within the reglementary period for
filing a responsive pleading. Thus, a motion to dismiss alleging improper venue
cannot be entertained unless made within that period.
However, even after an answer has been filed, the Court has allowed a defendant
to file a motion to dismiss on the following grounds: (1) lack of jurisdiction, (2) litis
pendentia, (3) lack of cause of action, and (4) discovery during trial of evidence
that would constitute a ground for dismissal. Except for lack of cause of action or
lack of jurisdiction, the grounds under Section 1 of Rule 16 may be waived. If a
particular ground for dismissal is not raised or if no motion to dismiss is filed at all
within the reglementary period, it is generally considered waived under Section 1,
Rule 9 of the Rules.
Applying this principle to the case at bar, the respondents did not waive their right
to move for the dismissal of the civil case based on Petitioner Obando's lack of
legal capacity. It must be pointed out that it was only after he had been convicted
of estafa through falsification that the probate court divested him of his
representation of the Figueras estates. It was only then that this ground became
available to the respondents. Hence, it could not be said that they waived it by
raising it in a Motion to Dismiss filed after their Answer was submitted. Verily, if
the plaintiff loses his capacity to sue during the pendency of the case, as in the
present controversy, the defendant should be allowed to file a motion to dismiss,
even after the lapse of the reglementary period for filing a responsive pleading.51
(Emphasis supplied, citations omitted)
As Obando's listing of exception indicates, a ground for dismissal that is equally
availing, even after an answer has been filed, is a motion to dismiss on account of
lack of cause of action. Lack of cause of action must be distinguished from failure
to state a cause of action: while the lack of cause of action may be pleaded after
an answer has been filed, failure to state a cause of action cannot. Thus,
Failure to state a cause of action and lack of cause of action are distinct grounds to
dismiss a particular action. The former refers to the insufficiency of the allegations
in the pleading, while the latter to the insufficiency of the factual basis for the
action. Dismissal for failure to state a cause of action may be raised at the earliest
stages of the proceedings through a motion to dismiss under Rule 16 of the Rules
of Court, while dismissal for lack of cause of action may be raised any time after
the questions of fact have been resolved on the basis of stipulations, admissions or
evidence presented by the plaintiff.52 (Emphasis supplied)
II
It is error to assume that the grounds pleaded by petitioner in his Motion to
Dismiss deserved no consideration since it preceded his Answer.
Rule 9, Section 1 considers as waived only those "[d]efenses and objections not
pleaded ... in the answer."53 When defenses and objections are pleaded in an
answer and thereafter are restated in a motion to dismiss, the motion to dismiss' recital
of grounds may be repetitive or superfluous, but no waiver ensues. It is not so much
that the motion to dismiss is valid; rather, the answer is adequate. Pleading grounds for
dismissal in an answer suffice to effect a situation "as if a motion to dismiss had been
filed"54:
Section 6. Pleading grounds as affirmative defenses. — If no motion to dismiss has
been filed, any of the grounds for dismissal provided for in this Rule may be pleaded as
an affirmative defense in the answer and, in the discretion of the court, a preliminary
hearing may be had thereon as if a motion to dismiss had been filed.
The dismissal of the complaint under this section shall be without prejudice to the
prosecution in the same or separate action of a counterclaim pleaded in the answer.
While a belatedly filed motion to dismiss is not a valid independent plea for
terminating the action, it still serves practical purposes. It emphasizes and aims
attention at the need for immediately dismissing the complaint. It works as a reiterative
manifestation with an accompanying prayer for a court to consider the wisdom of
immediately dismissing the case. To this end, it should specifically be treated as a plea
for a court to hear the grounds for dismissal, just as it would have had a proper motion
to dismiss been filed.
In this case, with the exception of the Motion to Dismiss' deletion of the phrase "and
not having any authority from the registered owner of the property" in the second
ground for dismissal,55 petitioner's pleaded grounds in his Motion to Dismiss are a
restatement of previously pleaded grounds in his Answer:
Grounds in petitioner's Answer
Grounds in petitioner's Motion to Dismiss
I.
APPLYING SECTION 1 (J), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE CASE SINCE A CONDITION
PRECEDENT FOR THE FILING OF THE CLAIM HAS NOT BEEN COMPLIED WITH I.E. THE
MANDATORY JUDICIAL DEPOSIT AS PROVIDED FOR UNDER SEC. 267 OF THE LOCAL
GOVERNMENT CODE.
I.
APPLYING SECTION 1 (J), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE CASE SINCE A CONDITION
PRECEDENT FOR THE FILING OF THE CLAIM HAS NOT BEEN COMPLIED WITH I.E. THE
MANDATORY JUDICIAL DEPOSIT AS PROVIDED FOR UNDER SEC. 267 OF THE LOCAL
GOVERNMENT CODE.
II.
APPLYING SECTION 1 (G), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE,
[RESPONDENTS] FAILED TO STATE A CAUSE OF ACTION AGAINST THE [PETITIONER] -
[RESPONDENTS] NOT BEING THE REGISTERED OWNER OF THE AUCTIONED PROPERTY
AND NOT HAVING ANY AUTHORITY FROM THE REGISTERED OWNER OF THE
PROPERTY.
II.
APPLYING SECTION 1 (G), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE,
[RESPONDENTS] FAILED TO STATE A CAUSE OF ACTION AGAINST THE [PETITIONER] -
[RESPONDENTS) NOT BEING THE REGISTERED OWNER OF THE AUCTIONED
PROPERTY.
III.
APPLYING SECTION 1 (B), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE SUBJECT MATTER OF THE
CLAIM CONSIDERING THAT [RESPONDENTS] HAVE NOT SHOWN ANY REAL, ACTUAL,
MATERIAL OR SUBSTANTIAL LEGAL RIGHTS OR INTEREST ON THE AUCTIONED
PROPERTY. AS A MATTER OF FACT, [RESPONDENTS'] ALLEGED RIGHTS DO NOT
APPEAR IN THE TITLE ITSELF. Thus, Section 267 of the Local Government Code provides
that "Neither shall any court declare a sale at public auction invalid by reason of
irregularities or informalities in the proceedings unless the substantive rights of the
delinquent owner of the real property or the person having legal interest therein have
been impaired."56
III.
APPLYING SECTION 1 (B), RULE 16 OF THE 1997 RULES OF CIVIL PROCEDURE, THE
HONORABLE COURT HAS NO JURISDICTION OVER THE SUBJECT MATTER OF THE
CLAIM CONSIDERING THAT [RESPONDENTS] HAVE NOT SHOWN ANY REAL,
ACTUAL, MATERIAL OR SUBSTANTIAL LEGAL RIGHTS OR INTEREST ON THE
AUCTIONED PROPERTY. AS A MATTER OF FACT, [RESPONDENTS'] ALLEGED
RIGHTS DO NOT APPEAR IN THE TITLE ITSELF. Thus, Section 267 of the Local
Government Code provides that "Neither shall any court declare a sale at public
auction invalid by reason of irregularities or informalities in the proceedings unless
the substantive rights of the delinquent owner of the real property or the person
having legal interest therein have been impaired."57
Petitioner's pleaded grounds for dismissal in his Answer sufficed for the Regional
Trial Court to consider the propriety of dismissing the Complaint of the
respondents. Their reiteration in petitioner's Motion to Dismiss did not amount to
the negation of their prior expression. While nominally it was an independent
motion to dismiss, it was more appropriately a reiterative manifestation and a
prayer to hear grounds for dismissal which had previously been properly pleaded.
The consideration of the propriety of dismissing respondents' Complaint was, thus,
not limited to lack of jurisdiction over the subject matter, litis pendentia, res
judicata, prescription, lack of cause of action, or subsequent discovery of a ground
for dismissal.
III
Even as the resolution of petitioner's prayer to dismiss respondents' Complaint
could have still delved into the full range of grounds permitted by Rule 16, Section
1, this Court still finds no merit in the grounds actually pleaded by petitioner. Thus,
this Court sustains Judge Payoyo-Villordon's denial of petitioner's plea to dismiss
respondents' Complaint.
III. A
Petitioner first asserts that respondents failed to comply with the condition
precedent stipulated by Section 267 of the Local Government Code.58 Section 267
requires a plaintiff to deposit "the amount for which the real property was sold,
together with interest of 2% per month from the date of sale to the time of the
institution of the action," before instituting an action assailing the validity of a tax
sale.
Petitioner's assertion must crumble in light of the Regional Trial Court's definitive
statement that respondents made the requisite deposit:
The [respondents] have complied with the requirement of the Local Government
Code pertaining to the deposit of the bid amount including interest thereof. In
fact, the Court assessed the said amount and included the same in the payment of
docket fee[s]. The [respondents'] compliance to (sic) the requirement of judicial
deposit is further proven by the (sic) Official Receipts (sic) Nos. 0825495 and
0825496 duly attached in the records of the case.59
III. B
Petitioner's second and third grounds nominally plead different bases but are
anchored on the same premise that respondents' suit was not brought in the
name of the real party in interest. The second ground observes that respondents
are not the owner of the auctioned property and claims that they have
consequently failed to state a cause of action. The third ground claims that
"[respondents] have not shown any real, actual, material or substantial legal rights
or interest on the auctioned property"60 and proceeds to assert that this bars the
Regional Trial Court from exercising jurisdiction over the subject matter.
The logic of the third ground is seriously flawed. It is elementary that jurisdiction is
matter of substantive law. It is not contingent on the personal circumstances of the
parties:
[J]urisdiction is "the power to hear and determine cases of the general class to
which the proceedings in question belong." Jurisdiction is a matter of substantive
law. Thus, an action may be filed only with the court or tribunal where the
Constitution or a statute says it can be brought.61
Thus, it is inconsequential to subject matter jurisdiction that respondents are
allegedly bereft of "any real, actual, material or substantial legal rights or interest
on the auctioned property."62
Petitioner's third ground wrongly invokes lack of subject matter jurisdiction. It is a
mere reiteration of the second ground. It proceeds from and relies on the same
premises as the second ground: first, the factual anchor that respondents are not
the owners of the disputed property; and second, the assumption that only the
owner of a property subjected to a tax delinquency sale may bring an action assailing
the validity of its sale. Like the second ground, the third ground assumes that only the
owner of the property is entitled to the avails of a suit to annul the validity of a tax sale.
As with the second ground, it assumes that respondents are not real parties in
interest.63
Their common claim that none of the respondents is a real party in interest makes
them similar pleas for dismissal on account of failure to state a cause of action. As
Balagtas v. Court Appeals64 explained, "If the suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that
the complaint states no cause of action."65 Also, in Aguila, Jr. v. Court of Appeals:66
A real party in interest is one who would be benefited or injured by the judgment, or
who is entitled to the avails of the suit. This ruling is now embodied in Rule 3, Section 2
of the 1997 Revised Rules of Civil Procedure. Any decision rendered against a person
who is not a real party in interest in the case cannot be executed. Hence, a complaint
filed against such a person should be dismissed for failure to state a cause of action.67
Contrary to petitioner's assertions, however, respondents are real parties in interest,
who properly pleaded causes of action.
Petitioner's basic premise that only the owners of properties subjected to tax
delinquency sales may file actions assailing the validity of tax sales is misguided.
Section 267 of the Local Government Code constrains the invalidation of tax
delinquency sales in two (2) respects:
Section 267. Action Assailing Validity of Tax Sale. - No court shall entertain any action
assailing the validity of any sale at public auction of real property or rights therein
under this Title until the taxpayer shall have deposited with the court the amount for
which the real property was sold, together with interest of two percent (2%) per month
from the date of sale to the time of the institution of the action. The amount so
deposited shall be paid to the purchaser at the auction sale if the deed is declared
invalid but it shall be returned to the depositor if the action fails.
Neither shall any court declare a sale at public auction invalid by reason of irregularities
or informalities in the proceedings unless the substantive rights of the delinquent
owner of the real property or the person having legal interest therein have been
impaired.
The first paragraph pertains to the condition precedent of a deposit. The second
paragraph limits the invalidation of tax delinquency sales on the basis of "irregularities
or informalities in the proceedings." Section 267 permits such invalidations only when
"substantive rights . . . have been impaired." These substantive rights may pertain to
"the delinquent owner of the real property or the person having legal interest therein.''
Stated otherwise, a person having legal interest over such property, even a non-owner,
may bring an action under Section 267, for as long as his or her substantive rights have
been impaired. The right to file an action under Section 267 is not barred merely on
account of a plaintiff's not being the owner of the property sold.
Respondents have alleged substantive rights impaired by the sale of the subject
property to petitioner. They have each averred the requisite legal interest for bringing
an action under Section 267 of the Local Government Code.
Respondents represent different categories of plaintiffs, each with unique rights in
relation to the lot put up for a tax delinquency sale. Their respective rights equally
deserve protection and it is their Complaint's allegation that these rights were violated
by the actions of the persons they impleaded as defendants: the Quezon City Treasurer;
the Quezon City Register of Deeds; petitioner, the buyer; and other individuals who
effected the assailed sale.
Capitol is a juridical entity with its own, distinct personality. Consistent with Article 46
of the Civil Code,68 it may "acquire and possess property'' such as the lot put up for a
tax delinquency sale. As owner, it exclusively enjoyed the entire bundle of rights
associated with dominion over this parcel.69
Though having its own personality, as a golf and country club, Capitol primarily exists
for the utility and benefit of its members. While legal title in its properties is vested in
Capitol, beneficial use redounds to its membership. Apart from this, proprietary interest
in Capitol is secured through club shares.
As members and shareholders, individual respondents Alexander P. Aguirre, Horacio
Paredes, Ricardo F. De Leon, Reynato Y. Sawit, Agustin N. Perez, Geronimo M. Collado,
Emmanuel C. Ching, Macabangkit Lanto, Manuel Dizon, Tarcisio Calilung, Irineo
Aguirre, Ernesto Ortiz Luis, Bernardo Jambalos III, Francisco Arcillana, Luis S. Tanjangco,
and Pablito Villegas held the right to use and enjoy, as well as the limited right to
possess Capitol's premises and facilities. Any right of dominion that Capitol held
over the parcel was ultimately for their and other members' benefit.
It was in this capacity as members that they initiated the Complaint assailing the
validity of the tax delinquency sale. They did this because, by the transfer of
ownership to petitioner, they stood to be deprived of the capacity to use and
enjoy the entire 15,598-square-meter parcel which "covers the entire Hole No.5 of
the 18-Hole Capitol Golf Course and part of the road way called Mactan Road."70
Capitol's loss of legal title was tantamount to the loss of the quintessence of their
membership and holdings in Capitol. As they explained in their Complaint:
21] The removal of Hole No. 5 from the golf course of Capitol Golf Club will be a
dismemberment of the golf course and would render the latter as a d[y]sfunctional
if not a worthless golf course: it would be incomplete, no natural access to Hole
No. 6, and the right of way towards the other holes of the "front 9" would also be
lost.71
Also in accordance with Article 46 of the Civil Code, Capitol is capacitated to incur
obligations. This includes obligations voluntarily incurred through contracts, as
well as encumbrances assumed or imposed as easements. It is in keeping with a
contract entered into by Capitol and with easements in which Capitol was the
subservient estate that respondents Ayala Land, Inc. and Ayala Hillside initiated the
Complaint assailing the tax sale.
Respondents, Complaint made extensive allegations concerning the rights and
concomitant injuries averred by respondents Ayala Land, Inc. and Ayala Hillside.
With respect to Ayala Land, Inc., the allegations were not limited to its being a
dominant estate to an easement of right of way but even included a claim of
ownership to a smaller parcel that was alleged to have been previously
consolidated with the 15,598-square-meter parcel purchased by petitioner:
26] The residents of Ayala Hillside Estate will lose their right of way over portion of
Mactan Road that is part of TCT No. N-253850. Mactan Road is their principal or
direct access to the main road Tandang Sora/Katipunan Avenue. Worst, some
residents of Ayala Hillside Estate located in the Pinnacle area of the subdivision
and the "fairway lot" owners therein will have no access at all to the main road and
are practically landlocked inside since the access road is covered in and partof TCT
No. N-253850.
....
28] As adverted to above, [Ayala Land, Inc.] and CAPITOL were co developers of
[Ayala Hillside Estates] and the Capitol Hills Executive Course (an 18-hole golf
course of which, the subject auctioned lot is part of as Hole No. 5) and explicitly
agreed in a Memorandum of Agreement dated 18 September 2002 that in
projecting the [Ayala Hillside Estates] as high-end community, CAPITOL is bound
to maintain and operate the Executive Course as a complementary development to
[Ayala Hillside Estates], both [Ayala Hillside Estates] and the Executive Course
being part of an integrated whole, viz -
....
29] To provide a road right of way of access to and from Ayala Hillside Estates to
the main roads, [Ayala Land, Inc.] acquired from CAPITOL several parcels of land
through a Deed of Conveyance dated 21 November 1986, thus:
TCT No. 338521 consisting of 1,855 square meters;
TCT No. 338518 consisting of 6,930 square meters;
TCT No. 338517 consisting of 556 square meters;
TCT No. 338522 consisting of 8,834 square meters;
TCT No. 338526 consisting of 2,888 square meters; and
Four Thousand One Hundred Eight (4,108) square meters portion of TCT No.
338515 "which will serve as two (2) access roads to and from the properties therein
sold to AYALA.["]
....
30] Thereafter, portions of TCT No. 338515 and portions of TCT No. 338516-in the
name of CAPITOL were later consolidated and became TCT No. N-253850 (Hole
No. 5) still in the name of CAPITOL, consisting of 15,598 square meters.
31] Unknown to [respondent Ayala Hillside Estates Homeowners' Association, Inc.],
the consolidated TCT No. [N]-253850 still includes the 4,108 square meters portion
of TCT No. 338515 subject of the Deed of Conveyance as an access road and
which from the date of the Deed of Conveyance to this date is actually part of
Mactan Road that serves as an access road to [[Ayala Hillside Estates] subdivision
from Tandang Sora/Katipunan Avenue.
32] The said access road portion of TCT No. N-253850 was already acquired by [Ayala
Land, Inc.] and was already being used by [Ayala Land, Inc.], all the members of the
Homeowners' Association and the public as part of the road system long before the
auction sale of TCT No. N-253850 was held on December 13, 2007.
The Four Thousand One Hundred Eight (4,108) square meters of TCT No. 338515 was
already acquired by [Ayala Land, Inc.] for two (2) access roads to and from [Ayala
Hillside Estates] subdivision long before the subject auction sale. Hence, defendant City
Treasurer has no authority to auction this property and that defendant Alvarado has
not and cannot acquire this portion of the auctioned lot.72
Alongside Capitol's rights of dominion to the parcel were the rights alleged by
respondents in their respective capacities as members and shareholders, as co-
developers and dominant estates to easements, or the real owner of a portion. Their
rights made it so that they had an interest in seeing to the preservation of the integrity
of this parcel, in maintaining it in the condition it was in prior to the levy and sale. They,
however, stood to lose their rights as a consequence of Capitol's loss of ownership.
More particularly, respondents stood to lose their rights as a consequence of how the
sale was allegedly tainted with anomalies: effected in violation of the requirements in
the Local Government Code and the Quezon City Revenue Code, bypassed the
requisite redemption period, avoided the posting of requisite notices, and made for a
grossly inadequate price.
It was precisely respondents' contention that the sale's failure to adhere to legal
requisites deprived them of the opportunity to protect their rights. Posting and service
of requisite notices and observance of the proper duration for redemption could have
given them a fair opportunity to maintain the integrity of the lot, even as the sale
proceeded and Capitol's tax liability covered by its proceeds. So also, restricting the
portion for sale to what was only enough to cover the tax liability could have
minimized the consequences that respondents would have had to bear, enabling a
resolution that was less prejudicial to their rights.
Although petitioner is the only defendant appealing before this Court, it should not be
forgotten that respondents' action was brought not only against petitioner but also
against officers of the Quezon City local government. These officers were duty-bound
to ensure that the requisites for tax levies and delinquency sales were satisfied and
diligently heeded. Their failure to do so, whether deliberately or negligently, indicates
an actionable act or omission impelling respondents' action. Thus, respondents came
before the Regional Trial Court as real parties in interest, who satisfactorily alleged
causes of action.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed April 17,
2013 Decision and August 2, 2013 Resolution of the Court of Appeals in CA-G.R. SP No.
123929 are AFFIRMED.
SO ORDERED.
RULE 10
G.R. No. 173987 February 25, 2012
PADILLA MERCADO, ZULUETA MERCADO, BONIFACIA MERCADO, DAMIAN MERCADO
and EMMANUEL MERCADO BASCUG, Petitioners,
vs.
SPOUSES AGUEDO ESPINA and LOURDES ESPINA, Respondents.
DECISION
PERALTA, J.:
Assailed before the Court via a petiti_on for review on certiorari under Rule 45 of the
Rules of Court are the Decision1 and Resolution,2 dated April 27, 2005 and July 12,
2006, respectively, of the Court of Appeals (CA) in CA-G.R. SP No. 84537.
Subject of the instant controversy is a 338 square meter parcel of land located at the
Poblacion of the then Municipality of Maasin (now a city), in the Province of Southern
Leyte.
On May 8, 2000, herein petitioners filed with the Regional Trial Court (RTC) of Maasin,
Southern Leyte, a Complaint for Recovery of Property and Declaration of Nullity of
Deed of Sale, Certificate of Title and Damages. The case was docketed as Civil Case
No. R-3147.
Petitioners alleged in their Complaint that they are the heirs of the late spouses
Santiago and Sofronia Mercado, who were the owners of the subject parcel of
land; after the death of Santiago and Sofronia, petitioners inherited the disputed
lot, possessing the same as owners; sometime in 1996, herein respondents claimed
ownership over the subject parcel of land, alleging that they bought the same
from one Josefa Mercado Espina (Josefa) who, in turn, previously bought the same
in 1939 from a certain Genivera Mercado Kavanaugh; that Genivera supposedly
purchased the same property from one Escolastico Mercado in 1937 who, in turn,
allegedly bought it from Santiago Mercado. Petitioners further alleged that in
1962, Josefa, through fraudulent machinations, was able to obtain a title (Original
Certificate of Title No. 35) over the subject property in her name. Asserting that the
above-mentioned contracts of sale never happened, petitioners prayed for the
declaration of nullity of the deeds of sale between Santiago and Escolastico,
Escolastico and Genivera, and between Genivera and Josefa. They prayed that the
Transfer Certificate of Title (TCT) in the name of herein respondents be nullified
and that petitioners be declared as the owners of the disputed lot. They asked that
the court award them actual, moral and exemplary damages, and attorney's fees.
On June 29, 2000, respondents filed a Motion to Dismiss on grounds that the RTC
has no jurisdiction over the case due to the failure of the complainant to state the
assessed value of the property, that petitioners' cause of action is barred by
prescription, laches and indefeasibility of title, and that the complaint does not
state sufficient cause of action against respondents who are buyers in good faith.3
The RTC denied respondents' Motion to Dismiss. Respondents then filed a motion
for reconsideration, but the same was denied by the RTC.
Respondents then filed a special civil action for certiorari with the CA assailing the
above orders of the RTC.
In its Resolution4 dated March 13, 2001, the CA denied due course and dismissed
respondents' petition for certiorari. Respondents filed a motion for
reconsideration, but the same was denied by the CA in its Resolution dated
October 21, 2003.
Meanwhile, on August 17, 2000, petitioners, by leave of court, filed an Amended
Complaint to include the assessed value of the subject property.5
On November 21, 2003, respondents filed a Motion to Dismiss Amended
Complaint on grounds of prescription, laches, indefeasibility of title and lack of
cause of action.6
On February 18, 2004, the RTC issued an Order7 denying respondents' Motion to
Dismiss Amended Complaint. Respondents filed a motion for reconsideration, but
the RTC denied it in its Order dated April 19, 2004.8
Respondents filed a special civil action for certiorari with the CA praying that the
February 18, 2004 and April 19, 2004 Orders of the RTC be set aside and
petitioners' complaint dismissed.
On April 27, 2005, the CA promulgated its assailed Decision, the dispositive
portion of which reads as follows:
WHEREFORE, the petition is granted. The assailed orders of the Regional Trial
Court dated February 18, 2004 and April 19, 2004 must be as they are hereby, SET
ASIDE. The COMPLAINT in Civil Case No. R-3147 is DISMISSED. The Regional Trial
Court of Maasin City, Branch 25 is hereby enjoined from proceeding with the case.
No pronouncement as to costs.
SO ORDERED.9
The CA ruled that respondents' title has become indefeasible and incontrovertible
by lapse of time and that petitioners' action is already barred by prescription. The
CA also held that since petitioners did not allege that respondents were not buyers
in good faith, the latter are presumed to be purchasers in good faith and for value.
Petitioners filed a motion for reconsideration, but the CA denied it in its
Resolution10 dated July 12, 2006.
Hence, the instant petition for review on certiorari raising the following issues:
1) Procedurally, whether or not the Court of Appeals erred in giving due course to
respondents’ second motion to dismiss filed on November 21, 2003 on the amended
complaint filed on August 16, 2000;
2) Substantively, whether or not the Court of Appeals erred in ordering the Regional
Trial Court to dismiss the case and enjoining it from proceeding with the case on the
ground of indefeasibility of title, prescription and/or laches.11
On the first issue, petitioners contend that respondents' Motion to Dismiss Amended
Complaint was filed beyond the period allowed by the Rules of Court. Petitioners also
aver that the above Motion to Dismiss Amended Complaint is a circumvention of the
Rules of Court, because the matters raised therein are mere reiterations of their first
motion to dismiss, which was dismissed by the RTC and, on petition for certiorari, was
denied due course by the CA.
Anent the second issue, petitioners argue that respondents' ground of indefeasibility of
title in their Motion to Dismiss Amended Complaint is not an authorized ground under
Rule 16 of the Rules of Court. Petitioners also assert that the other grounds, i.e., good
faith, lack of cause of action and prescription, raised by respondents in their motion are
not supported by evidence.
The petition lacks merit.
As to the first issue, there is no dispute that the issue of timeliness of respondents'
Motion to Dismiss petitioners' Amended Complaint was not raised by petitioners
before the RTC. Neither was this issue raised in their Comment to respondents' petition
for certiorari filed with the CA. It was only in their Motion for Reconsideration of the CA
Decision that this matter was raised. It is well established that issues raised for the first
time on appeal and not raised in the proceedings in the lower court are barred by
estoppel.12 Points of law, theories, issues, and arguments not brought to the attention
of the trial court ought not to be considered by a reviewing court, as these cannot be
raised for the first time on appeal.13 Basic considerations of due process impel the
adoption of this rule.14
Moreover, respondent's filing of their Motion to Dismiss Amended Complaint may not
be considered as a circumvention of the rules of procedure. Under Section 8, Rule 10 of
the Rules of Court, an amended complaint supersedes an original one. As a
consequence, the original complaint is deemed withdrawn and no longer considered
part of the record.15 In the present case, the Amended Complaint is, thus, treated as an
entirely new complaint. As such, respondents had every right to move for the dismissal
of the said Amended Complaint. Were it not for the filing of the said Motion,
respondents would not have been able to file a petition for certiorari before the CA
which, in turn, rendered the presently assailed judgment in their favor.
With respect to the second issue, the CA correctly ruled that petitioners' Amended
Complaint failed to state a cause of action. The Court quotes with approval the
following disquisition of the appellate court, to wit:
xxxx
With particular reference to the petitioners [herein respondents], We observed that
there is no allegation at all in respondents' [herein petitioners'] complaint that they
[respondents] are buyers or transferees in bad faith or with notice of the alleged defect
in the title of their vendor/s with the result that the allegations of said pleading are not
sufficient to constitute a cause of action.
While private respondents [petitioners] accused Escolastico Mercado of fraudulent
conduct, due to the alleged dubious character of the document of sale which passed
the ownership of Santiago's property to him and that the signature of Santiago was not
authentic, there is no allegation whatsoever as to the fraudulent nature of the
succeeding transfers or of the succeeding transferee's knowledge about the irregularity
and defect of the first sale. Most importantly, the complaint contains no averment that
herein petitioners [respondents] had any knowledge, much less any participation,
voluntarily or otherwise, in the alleged irregularity or anomaly of the original sale
transaction between Santiago and Escolastico Mercado or in the acquisition/issuance
of the OCT No. 35. Neither was there any allegation in the complaint attributing
petitioners [respondents] with negligence. Petitioners [Respondents] cannot also be
presumed to be negligent. On the contrary, the revised rules of court provides a
disputable presumption in Petitioners’ [respondents'] favor to the effect "that a person
takes ordinary care of his concerns["] and that ["]private transactions have been fair and
regular.["] The allegations of the complaint would even lend a conclusion that there is
nothing questionable as to the way petitioners[respondents] obtained their title over
the property. This is where We denounce the court a quo's act of entertaining evidence
aliunde and supplying the missing facts which should have been alleged to constitute a
cause of action.
We have carefully perused the complaint and We find that it is devoid of the
following allegations: 1) that Josefa is the mother of petitioners [respondents]; 2)
that Genivera Mercado Kavanaugh is an American citizen, and 3) that, petitioners
[respondents] are not buyers in good faith. Hence, the court a quo clearly
committed grave abuse of discretion, when, in denying the motion to dismiss, he
made some findings "that petitioners [respondents] are not buyers in good faith
because all along they know or they ought to know that the land does not belong
to their mother Josefa Espina, and that their mother could not have legally
acquired the same from her sister Genivera Kavanaugh, an American citizen who
cannot acquire land except by way of hereditary succession." It has been held time
and again that "to determine the sufficiency of the cause of action, the respondent
court can only consider facts alleged in the complaint – which are deemed
hypothetically admitted by defendants – and no other allegations should be
considered."
Where the complaint for recovery of ownership and possession of a parcel of land
(such as the one at bar) alleges that some of the defendants bought said land from
their co-defendants who had a defective title thereto – but does not allege that
the purchasers were purchasers in bad faith or with notice of the defect in the title
of their vendors, it is held that the lower court correctly dismissed the complaint
against the purchasers for failure to state a cause of action against them.
x x x x16 (Emphasis supplied)
Failure to state a cause of action refers to the insufficiency of the pleading, and is a
ground for dismissal under Rule 16 of the Rules of Court.17
A complaint states a cause of action if it avers the existence of the three essential
elements of a cause of action, namely:
(a) The legal right of the plaintiff;
(b) The correlative obligation of the defendant; and
(c) The act or omission of the defendant in violation of said legal right.18
If the allegations in the complaint do not aver the concurrence of these elements,
the complaint becomes vulnerable to a motion to dismiss on the ground of failure
to state a cause of action.19 A perusal of the Amended Complaint in the present
case would show that there is, indeed, no allegation of any act or omission on the
part of respondents which supposedly violated the legal rights of petitioners. Thus,
the CA is correct in dismissing the complaint on the ground of failure to state a
cause of action.
Apropos to the foregoing, it bears to note at this stage that the Court likewise
agrees with the ruling of the CA that respondents are presumed purchasers in
good faith.1âwphi1 In holding thus, the CA relied on the settled principle that one
who deals with property registered under the Torrens System need not go beyond
the same, but only has to rely on the title.20 In the instant case, there is no dispute
that the subject property was already covered by a Torrens title when respondents
bought the same. There was no allegation in the Amended Complaint that
respondents were not buyers in good faith. More particularly, there was nothing in
the said complaint to indicate that respondents were aware of or were participants
in the alleged fraud supposedly committed against petitioners' predecessor-in-
interest, or that they have notice of any defect in the title of the seller. As the CA
correctly noted, from the time that petitioners' predecessor-in-interest was
supposedly deprived of ownership of the subject Jot through an alleged fraudulent
sale, the same had already been sold thrice. Moreover, since the subject property
was already covered by a Torrens title at the time that respondents bought the
same, the law does not require them to go beyond what appears on the face of
the title. The lot has, thus, passed to respondents, who are presumed innocent
purchasers for value, in the absence of any allegation to the contrary.
Paragraph 3, Section 53 ofPresidential Decree No. 1529 provides:
In all cases of registration procured by fraud, the owner may pursue all his legal
and equitable remedies against the parties to such fraud without prejudice,
however, to the rights of any i1moccnt holder for value of a certificate of title. x x x
Petitioners' cause of action should, therefore, be directed not against respondents,
who are innocent holders for value, but against those whom petitioners alleged to
have defrauded them.
Based on the above discussions, the Court no longer finds any need to resolve the
other issues raised in the instant petition.
WHEREFORE, the petition for review on certiorari is DENIED. The April 27, 2005
Decision and July 12, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 84537
are AFFIRMED.
SO ORDERED.
G.R. No. 183015 January 15, 2014
REPUBLIC OF THE PHILIPPINES, represented by THE SECRETARY OF THE DEPARTMENT
OF PUBLIC WORKS AND HIGHWAYS (DPWH), Petitioner,
vs.
TETRO ENTERPRISES, INCORPORATED, Respondent.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari and prohibition are the Decision1 dated
November 29, 2007 and the Resolution2 dated May 8 2008 of the Court of Appeals
(CA) in CA-G.R. SP No. 97784. The CA affirmed the Order3 dated September 22, 2006 of
the Regional Trial Court (RTC), Branch 41, San Fernando, Pampanga, granting
respondent s motion to admit amended complaint, and denied reconsideration
thereof.
The antecedent facts of this case are as follows:
On February 10, 1992, respondent Tetro Enterprises, Inc. filed with the RTC of San
Fernando, Pampanga a Complaint4 for recovery of possession and damages against
petitioner, the Republic of the Philippines, represented by the Regional Director of
Region III of the Department of Public Works and Highways (DPWH), docketed as Civil
Case No. 9179. In its complaint, respondent alleged that: it is the registered owner of a
piece of land consisting of 12,643 square meters (the subject lot), located in Barangay
San Jose, San Fernando, Pampanga, under Transfer Certificate of Title No. 283205-R
with a probable value of ₱252,869.00; that sometime in 1974, petitioner, without going
through the legal process of expropriation or negotiated sale, constructed a road on
the subject lot depriving it of possession without due process of law; and, despite its
repeated demands, petitioner refused to return the subject lot and to pay the rent for
the use of the same since 1974. Respondent prayed that petitioner be ordered to
return the subject lot in its original state before it was taken away and to close the road
constructed thereon; and to pay actual damages in the amount of ₱100,000.00, rentals
for the use of the land at ₱200.00 a month, in the total amount of ₱40,800.00, and
attorney's fees equivalent to 5% of any amount recoverable.
In its Answer, petitioner contended that respondent had no cause of action and that
the State has not given its consent to be sued; that the construction of the part of the
Olongapo-Gapan Road on the subject lot was with respondent's knowledge and
consent who, subsequently, entered into negotiations regarding the price of the lot;
that petitioner was willing to pay the fair market value of the lot at the time of taking,
plus interest.
As the return of the subject lot was no longer feasible, the RTC, with the parties'
conformity, converted the action for recovery of possession to eminent domain and
expropriation.
Upon agreement of the parties, the RTC issued an Order dated November 25, 1994,
creating a Board of Commissioners tasked to determine the actual value of the subject
lot which shall be the basis for an amicable settlement by the parties, or the decision to
be rendered by the Court as the case may be.5 On December 8, 1995, the Board
submitted its report recommending that the price for the subject lot be fixed between
₱4,000.00 and ₱6,000.00 per square meter, which is the just and reasonable price to be
paid to respondent.6
On March 29, 1996, the RTC, taking into consideration the report submitted by the
Board, rendered a decision fixing the price of the subject lot at ₱6,000.00 per square
meter, or the total amount of ₱75,858,000.00.7 Petitioner's motion for reconsideration
was denied in an Order dated October 3, 1996.8
On December 13, 1996, petitioner filed a Notice of Appeal, which the RTC denied in an
Order dated January 7, 1997, since the decision had become final and executory.
Petitioner filed a petition for certiorari with the CA which was dismissed in a Decision
dated June 9, 1997. A motion for reconsideration of the CA decision was also denied in
a Resolution dated August 6, 1997. Petitioner came to us in a petition for review
on certiorari, docketed as G.R. No. 130118, which we granted by reversing the CA
decision and ordered the RTC to approve petitioner's notice of appeal.9
Consequently, petitioner's appeal was taken up in the CA, docketed as CA-G.R. CV
No. 60492. On May 24, 2001, the CA rendered its decision,10 the dispositive
portion of which reads as follows:
WHEREFORE, the appealed decision dated March 29, 1996 is MODIFIED to the
effect that the Republic of the Philippines, represented by the defendant-
appellant, is held liable to pay the amount of Two Hundred Fifty-Two Thousand
Eight Hundred Sixty-Nine (₱252,869.00), plus six percent (6%) interest per annum
from 1974 until such time that the same shall have been fully paid; and, for further
determination of other damages that plaintiff-appellee had suffered for the loss of
the use and enjoyment of its property, let the original records of Civil Case No.
9179 be REMANDED to the Regional Trial Court of San Fernando, Pampanga,
Branch 41, for further proceedings.11
Respondent filed a petition for review with us, docketed as G.R. No. 151959, which
we denied in a Resolution dated October 2, 2002. Respondent's motion for
reconsideration was also denied. The case was then remanded to the RTC for the
computation of damages for the loss of the use and enjoyment of the subject lot.
The case was scheduled for mediation proceedings, which failed, thus, the case
was set for a pre-trial conference. At the pre-trial conference on March 21, 2006,
Presiding Judge Divina Luz P. Aquino-Simbulan called the attention of the parties
on the improper conduct committed by respondent's representative for
approaching her close relative and trying to influence the outcome of the case.
Thus, Presiding Judge Aquino-Simbulan voluntarily inhibited herself from
conducting the trial of the case,12 but proceeded with the scheduled pre-trial
conference of the case without objection from the parties.13 When petitioner
presented the proposed issue, to wit: "Assuming that plaintiff is entitled to
damages, can it legally claim an amount more than what is alleged and prayed in
its complaint," respondent moved for the amendment of its original complaint,
which the Presiding Judge granted and ordered respondent to file the required
motion within 30 days. Petitioner moved for reconsideration of such order, which
the RTC denied for being premature.14
Respondent filed a Motion to Admit Amended Complaint,15 attaching the
amended complaint16 therewith. In its Order dated September 22, 2006, the RTC
admitted the amended complaint. Petitioner's motion for reconsideration was
denied in an Order17 dated December 7, 2006. In its amended complaint,
respondent, citing the report of a professional licensed appraiser on the fair rental
value of the subject lot, sought payment in the amount of ₱57,631,680.00
representing damages it suffered since 1974 for the alleged undue deprivation of
the use and enjoyment of the subject lot.
Petitioner filed with the CA a petition for certiorari and prohibition with urgent
prayer for temporary restraining order alleging grave abuse of discretion
committed by the RTC in allowing substantial amendments of the complaint at the
very late stage of the proceedings, thus, increasing the claim for damages or
rentals from the original amount of ₱147,840.00 to a grossly excessive amount of
₱57,884,549.00. After the submission of the parties' respective pleadings, the CA
issued its assailed Decision dated November 29, 2007, which affirmed in toto the
RTC Order admitting the amended complaint.
In finding no grave abuse of discretion committed by the RTC in admitting the
amended complaint, the CA found that such allowance was made pursuant to the
Decision dated May 24, 2001 of its Former Third Division in CA-G.R. CV No. 60492,
which ruled that aside from the actual value of the subject lot, respondent was
likewise entitled to damages; and so remanded the case to the RTC for the
determination of the amount of damages respondent suffered since 1974 as the
lawful owner of the property unduly deprived of its use and enjoyment for 27
years. The CA also found that the amendment of the complaint was sanctioned by
Sections 2 and 3 of Rule 10 of the Rules of Court; and that the amendment
introduced did not alter respondent's cause of action for damages which is yet to
be determined by the RTC; that the grant or leave to file an amended complaint is
a matter peculiarly within the sound discretion of the RTC in the exercise of its
jurisdiction which normally should not be disturbed on appeal unless there is
evident abuse thereof which was not so in this case; and, that Section 2, Rule 18 of
the Rules of Court explicitly allows amendment during the course of the pre-trial
conference when it listed, among other things, that the RTC may consider in the
conduct thereof "the necessity or desirability of amendment of the pleadings."
Petitioner's motion for reconsideration was denied in the Resolution dated May 8,
2008.
Hence, this petition wherein petitioner raises the following errors committed by the CA,
thus:
I
RESPONDENT JUDGE COMMITTED REVERSIBLE ERROR WHEN SHE PEREMPTORILY,
OVER PETITIONER'S VEHEMENT OBJECTIONS, ALLOWED THE SUBSTANTIAL
AMENDMENT OF THE COMPLAINT FOURTEEN (14) YEARS AFTER IT WAS FILED.
II
RESPONDENT JUDGE COMMITTED REVERSIBLE ERROR DESPITE HER EARLIER
VOLUNTARY INHIBITION, WHEN SHE UNJUSTLY HELD ON TO THE CASE AND EVEN
ALLOWED THE SUBSTANTIAL AMENDMENT OF THE COMPLAINT IN PRIVATE
RESPONDENT'S FAVOR.
III
RESPONDENT JUDGE COMMITTED REVERSIBLE ERROR WHEN SHE WENT BEYOND THE
COURT OF APPEALS' DIRECTIVE FOR DETERMINATION OF DAMAGES BASED ON THE
ORIGINAL COMPLAINT. IV RESPONDENT JUDGE SHOWED MANIFEST PARTIALITY IN
FAVOR OF PRIVATE RESPONDENT.18
The main issue for resolution is whether the CA erred in finding that the RTC
committed no grave abuse of discretion amounting to lack of jurisdiction in admitting
the amended complaint.
We find merit in the petition.
The CA found that the amendment of the original complaint filed in 1992 is sanctioned
by Sections 2 and 3 of Rule 10 of the Rules on Civil Procedure, which provide:
Section 2. Amendments as a matter of right. — A party may amend his pleading once
as a matter of right at any time before a responsive pleading is served or, in the case of
a reply, at any time within ten (10) days after it is served.
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.
We are not persuaded.
To begin with, the original case which respondent filed in 1992 was for recovery of
possession, which the RTC, with the parties' conformity, converted into an
expropriation case as recovery of the subject lot was no longer possible. Thus, the pre-
trial of the case had long taken place in 1994. The expropriation case was then decided
by the RTC on March 29, 1996, fixing the value of the subject lot in the total amount of
₱75,858,000.00 as just compensation. Such decision was modified by the CA's Former
Third Division in a Decision dated May 24, 2001, docketed as CA-G.R. CV No. 60492,
reducing the amount of just compensation to ₱252,869.00 plus 6% interest from 1974
until full payment thereof and ordered the remand of the case to the RTC for further
determination of other damages respondent suffered for the loss of use and enjoyment
of its property. The CA decision was brought to us in a petition for review on certiorari
which, in a Resolution dated October 2, 2002, denied the same and affirmed the CA
decision. In ordering the remand of the case to the RTC, the CA then said:
x x x the Board of Commissioners did not consider the amount of damages that should
be given the plaintiff-appellee for the loss of the use and enjoyment of the property.
Understandably so because the Presiding Judge limited the function of the Board of
Commissioners, to wit:
x x x to determine the actual value of the property subject of this case which shall be
the basis for amicable settlement by the parties on the decision to be rendered by this
Court, as the case may be.
xxxx
x x x In addition to the actual value of the land at the time of the taking, plus legal
interest thereon, plaintiff-appellee is likewise entitled to damages. The subject property
used to be a sugar land earmarked for a subdivision, but no evidence was adduced
before the trial court. Any attempt on our part to award damages in the present
appeal would then be purely speculative. Thus, there is a need to remand this case
to the court of origin to determine the amount of damages that plaintiff-appellee
suffered since 1974 as the lawful owner of the property unduly deprived of its use
and enjoyment for twenty-seven years.
Clearly, the only thing the RTC was asked to do when the case was remanded to it
by the CA was to determine the damages respondent is entitled to for the loss of
the use and enjoyment of the property when the property was taken from it in
1974. Thus, when the case was remanded to the RTC for the purpose of computing
the damages, the case was not considered a new case where an amendment of the
complaint may still be allowed. Rather, it is merely a continuation of the trial of the
original complaint filed in 1992 only for the purpose of receiving the evidence of
the damages which respondent allegedly suffered as alleged in the original
complaint, since no evidence proving damages was received and passed upon
when the RTC issued its Order dated March 29, 1996. Therefore, the above-quoted
provisions on amendments of pleading find no applicability in this case.
Respondent's contention that amending the complaint to include reasonable
rental value for the deprivation of the use and enjoyment of the land is the logical
implication of the CA ruling is not persuasive. It cannot be clearly inferred from the
CA decision that when it remanded the case to the RTC for determination of
damages respondent suffered that the former referred to indemnity for rentals.
Assuming that the CA did refer to the rentals on the subject lot, it bears stressing
that when it modified the RTC's award of just compensation, it reckoned the value
of the land on the date of its actual taking, and quoted the rationale for the rule as
cited in Republic v. Lara,19 to wit:
x x x where property is taken ahead of the filing of the condemnation proceedings,
the value thereof may be enhanced by the public purpose for which it is taken; the
entry by the plaintiff upon the property may have depreciated its value thereby; or,
there may have been a natural increase in the value of the property from the time
it is taken to the time the complaint is filed, due to general economic conditions.
The owner of the private property should be compensated only for what he
actually loses; it is not intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his property at the time it is
taken. This is the only way that compensation to be paid can be truly just; i.e., "just
not only to the individual whose property is taken," "but to the public, which is to
pay for it."20
Consequently, as the CA computed the just compensation of the subject lot based
on its value at the time of taking, whatever indemnity for rental value of the
subject lot is, if to be awarded, must also be computed at the time of the taking.
This is so because it is as of that time that the true measure of respondent's loss
may be reasonably determined. We find that the RTC committed a grave abuse of
discretion amounting to lack of jurisdiction when it admitted respondent s
amended complaint which increased the amount claimed as back rentals.
Respondent pointed out that the reasons for amending its original complaint was
due to the devaluation of the Philippine peso in the interim as well as the
improvements in the conditions of the real property market, thus, the amount
solicited as relief in the original complaint is no longer realistic; and, that
consistent with the development abovementioned, the evidence now to be
submitted will establish a greater amount of damage.
We do not agree.
We find that it was not the CA s intention, when it remanded the case to the RTC
for the computation of damages, to award respondent beyond its loss or injury at
the time of the taking.1âwphi1 Hence, the factors which are not existing at the
time of the taking could not be considered. To reiterate, the CA then could not
award damages since no evidence yet was introduced at the RTC at that time;
otherwise, if there was already an evidence presented to establish the damages
prayed for in the original complaint, the CA could have already awarded damages
and the case is now closed and terminated. There is, therefore, no basis to
consider the devaluation of peso as a ground in allowing the amendment of the
complaint.
While we find that the RTC committed grave abuse of discretion in allowing the
amendment of the complaint filed in 1992, such finding does not necessarily
establish that Presiding Judge Simbulan had exhibited bias or partiality in favor of
respondent, as petitioner claims, in the absence of clear and convincing evidence.
WHEREFORE, the petition for review is GRANTED. The Decision dated November
29, 2007 and the Resolution dated May 8, 2008, of the Court of Appeals in CA-G.R.
SP No. 97784, are hereby REVERSED. The RTC Orders dated September 22, 2006 and
December 7, 2006 are NULLIFIED and SET ASIDE.
SO ORDERED.
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;
xxxx
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.
G.R. No. 195547, December 02, 2015
MA. CORAZON M. OLA, Petitioner, v. PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court seeking to set aside the Resolutions1 of the Court of Appeals (CA), dated
September 9, 2010,2 December 14, 2010,3 and February 14, 20114 in CA-GR. CR No.
32066.
The instant petition traces its origin to an Information filed with the Regional Trial
Court (RTC) of Las Piñas City, dated October 23, 2006, charging herein petitioner and a
certain Manuel Hurtada (Hurtada) and Aida Ricarse (Ricarse) with the crime of estafa as
defined and punished under Article 315, paragraph 2 of the Revised Penal Code. The
Information reads as follows:
That on or about the 27th day of September 2006, and prior thereto, in the City of Las
Piñas, Philippines and within the jurisdiction of this Honorable Court, the abovenamed
accused, conspiring and confederating together and all of them mutually helping and
aiding one another by means of deceit, false pretenses and fraudulent acts executed
prior to or simultaneously with the commission of fraud, did then and there wilfully,
unlawfully and feloniously defraud ELIZABETH T. LAUZON in the following manner to
wit: that accused by means of false pretenses and fraudulent representations which
they made to the complainant that they are authorized to sell, dispose or encumber a
parcel of land located at Las Piñas City covered by TCTNo. T-19987 issued by the
[Register] of Deeds of Las Piñas City and that they promised to transfer the Certificate
of Title in the name of the complainant, said accused fully knew that their manifestation
and representations were false and untrue, complainant was induced to part with her
money in the amount of P420,000.00, as she in fact gave the amount of P420,000.00
representing part of the purchase price of the said parcel of land and for which accused
received and acknowledge[d] the same, and after complainant conducted the
necessary verification with the Register of Deeds of Las Piñas City it turned out that the
registered owner of the said parcel of land is Marita F. Sanlay and mortgaged to
Household Development Bank then assigned to National Home Mortgage Finance
Corporation (NHMFC), and that accused are not authorized to sell, dispose or
encumber the parcel of land covered by TCT No. T-19987, to the damage and prejudice
of the complainant in the amount of P420,000.00.5ChanRoblesVirtualawlibrary
After trial, the RTC found petitioner and her co-accused guilty of other forms of
swindling under Article 316 of the Revised Penal Code. The dispositive portion of the
RTC Decision reads, thus:
WHEREFORE, as the crime was committed with abuse of confidence reposed on
Manuel Hurtada by Elizabeth Lauzon without any mitigating circumstance to offset, all
three accused, namely: 1) Manuel Hurtada, Jr. y Buhat; 2) Aida Ricarse y Villadelgado
and 3) Ma. Corazon Ola, are hereby found guilty beyond reasonable doubt of Estafa
under Article 316 of the Revised Penal Code and each sentenced to undergo
imprisonment of Six (6) months straight penalty and to indemnify, jointly and severally,
the complainant Elizabeth T. Lauzon in the amount of P320,000.00 and to pay a fine of
P1,000,000.00 and to pay the cost of the suit.
SO ORDERED.6ChanRoblesVirtualawlibrary
Petitioner and the other accused appealed the RTC Decision to the CA. Petitioner and
Ricarse jointly filed their Brief for Accused-Appellants7 dated June 10, 2009, while
Hurtada filed his Brief for the Accused-Appellant8 dated September 9, 2009.
A Brief for the Appellee,9 dated March 1, 2010, was subsequently filed.
On May 28, 2010, petitioner filed a Manifestation with Leave of Court praying that she
be granted a period of twenty (20) days within which to file an appropriate pleading.
On June 29, 2010, petitioner filed a Motion for Leave of Court to File Amended
Appellant's Brief.10
In its first assailed Resolution promulgated on September 9, 2010, the CA denied
petitioner's motion for having been filed out of time.
Petitioner filed a Motion for Reconsideration,11 but the CA denied it in its second
assailed Resolution dated December 14, 2010.
Undeterred, petitioner, on January 4, 2011, filed a Very Urgent Ex-Parte Motion for
[Extension of Time] to File for Vacation of Resolution or Appropriate Pleading.12
On February 14, 2011, the CA issued its third assailed Resolution denying petitioner's
motion, treating the same as a second motion for reconsideration, which is a
prohibited pleading.
Hence, the instant petition for review on certiorari based on the following grounds:
(a) whether or not the Honorable Court of Appeals (CA) by wholly adopting the
stance of the Honorable Office of the Solicitor General has overlooked the
evidence on record, from the pleadings and four affidavits of merits filed with the
CA, and in the process violated the due process of law of the petitioner as
enunciated in Ang Tibay v. CIR, and subsequent SC decisions thereto.
(b) whether or not the petitioner has made a second motion for reconsideration.
(c) whether or not the governing law or rule is Rule 10 on amendments of
pleading, and not Section 6, both of Rule 6 and 11, in relation to Section 9 of Rule
44 and Section 4 of Rule 124 on matter of reply, all of the Rules of Court; and
(d) whether or not the liberality rule for amendment of pleadings instead of the
general rule on liberality must be applied in favor of the
petitioner.13ChanRoblesVirtualawlibrary
At the outset, the Court notes that the instant case suffers from a procedural
infirmity which this Court cannot ignore as it is fatal to petitioner's cause.
What petitioner essentially assails in the present petition is the CA's denial of her
motion to file an amended appellant's brief. It is settled that the remedy of a party
against an adverse disposition of the CA would depend on whether the same is a
final order or merely an interlocutory order.14 If the Order or Resolution issued by
the CA is in the nature of a final order, the remedy of the aggrieved party would
be to file a petition for review on certiorari under Rule 45 of the Rules of Court.15
Otherwise, the appropriate remedy would be to file a petition for certiorari under
Rule 65.16
In Republic of the Phils., v. Sandigahbayan (Fourth Division), et al.,17 this Court laid
down the rules to determine whether a court's disposition is already a final order
or merely an interlocutory order and the respective remedies that may be availed
in each case, thus:
Case law has conveniently demarcated the line between a final judgment or order
and an interlocutory one on the basis of the disposition made. A judgment or
order is considered final if the order disposes of the action or proceeding
completely, or terminates a particular stage of the same action; in such case, the
remedy available to an aggrieved party is appeal. If the order or resolution,
however, merely resolves incidental matters and leaves something more to be
done to resolve the merits of the case, the order is interlocutory and the aggrieved
party's remedy is a petition for certiorari under Rule 65. Jurisprudence pointedly
holds that:
As distinguished from a final order which disposes of the subject matter in its
entirety or terminates a particular proceeding or action, leaving nothing else to be
done but to enforce by execution what has been determined by the court, an
interlocutory order does not dispose of a case completely, but leaves something
more to be adjudicated upon. The term final judgment or order signifies a
judgment or an order which disposes of the case as to all the parties, reserving no
further questions or directions for future determination.
On the other hand, a court order is merely interlocutory in character if it leaves
substantial proceedings yet to be had in connection with the controversy. It does
not end the task of the court in adjudicating the parties' contentions and
determining their rights and liabilities as against each other. In this sense, it is
basically provisional in its application.18ChanRoblesVirtualawlibrary
In the present case, the Court agrees with the contention of the Office of the
Solicitor General (OSG) that the assailed Resolutions of the CA are interlocutory
orders, as they do not dispose of the case completely but leave something to be
decided upon.19 What has been denied by the CA was a mere motion to amend
petitioner's appeal brief and the appellate court has yet to finally dispose of
petitioner's appeal by determining the main issue of whether or not she is indeed
guilty of estafa. As such, petitioner's resort to the present petition for review on
certiorari is erroneous.
Thus, on this ground alone, the instant petition is dismissible as the Court finds no
cogent reason not to apply the rule on dismissal of appeals under Section 5,20
Rule 56 of the Rules of Court.
The Court is neither persuaded by petitioner's argument that the CA Resolution which
denied her motion to amend her brief is appealable. Petitioner's reliance on the case of
Constantino, et al. v. Hon. Reyes, et al.,21 is misplaced. In the said case, petitioner
Constantino wanted to amend his complaint after the same was dismissed by the then
Court of First Instance (CFI) on the ground that the complaint stated no cause of action.
However, the trial court dismissed petitioner's motion to admit the amended
complaint. Petitioner sought to appeal the case but the trial court disapproved the
record on appeal on the ground that the appeal had been filed out of time. In granting
the petition for mandamus filed before this Court to compel the CFI judge to approve
the record on appeal, this Court held that "[e]ven after an order dismissing his
complaint is issued, an amendment may still be allowed. The motion to amend should
be filed before the order of dismissal becomes final and unappealable, because
thereafter there would be nothing to amend. If the amendment is denied, the order of
denial is appealable and the time within which to appeal is counted from the order of
denial — not from the order dismissing the original complaint."22
From the above factual and procedural antecedents, it is clear that petitioner has taken
the Court's ruling in Constantino out of context. In the said case, the complaint which
the petitioner therein sought to amend was already dismissed. The order which denied
petitioner's motion to amend the complaint is, therefore, final, and not interlocutory, as
there is nothing else to be done by the trial court after such denial other than to
execute the order of dismissal. Thus, the order denying the motion to amend the
complaint is appealable. On the other hand, what is sought to be amended in the
present case is not a complaint but an appeal brief which was not dismissed by the CA.
More importantly, the denial of petitioner's motion to amend her appeal brief does not
end the task of the CA in adjudicating the parties' contentions and determining their
rights and liabilities as against each other. Substantial proceedings are yet to be
conducted in connection with the controversy, thus barring resort to an appeal.
In any case, even if the Court will consider petitioner's contentions in the present
petition, the Court still finds that the CA did not commit any error in issuing the
assailed Resolutions.
The Court does not agree with petitioner's insistence that the questioned Resolutions
deprived her of her right to due process because the CA supposedly failed to inform
her of the issues involved in and of the reasons for rendering the said Resolutions.
It is true that under Section 14, Article VIII of the Constitution, no decision shall be
rendered by any court without expressing therein clearly and distinctly the facts and
the law on which it is based. However, petitioner must be reminded that what she
assails are interlocutory orders and it has already been ruled by this Court that the
above constitutional provision does not apply to interlocutory orders because it refers
only to decisions on the merits and not to orders of the court resolving incidental
matters.23
In any case, even a cursory reading of the September 9, 2010 Resolution of the CA
readily shows that the appellate court has laid down the factual and procedural
premises and discussed the reasons and the bases for denying petitioner's motion.
Petitioner, nonetheless, reiterates her argument that the principle on the liberal
interpretation of the Rules should be applied in the present case. She further contends
that instead of Section 4, paragraph 2, Rule 124 of the Rules of Court, it should be Rule
10 of the same Rules, referring to amendments of pleadings, which should govern the
instant case.
The Court is not persuaded.
The CA has correctly ruled that under Section 4, paragraph 2, Rule 2, of the Rules of
Court, petitioner had twenty (20) days from receipt of herein respondent's brief to file a
reply brief to discuss matters raised in respondent's brief which were not covered in her
brief. However, as found by the CA, petitioner's manifestation requesting an additional
period to file an appropriate pleading as well as her motion for leave of court to file an
amended appellant's brief was filed seventy-nine (79) days late and, as such, was
deemed "not acceptable or too long to ignore."24
Even if the court were to apply the rule on amendment of pleadings, it is clear under
Section 3, Rule 10 of the Rules of Court that after a responsive pleading has been
filed, as in the present case, substantial amendments may be made only by leave
of court. Moreover, such leave may be refused if it appears to the court that the
motion was made with intent to delay. In the instant case, the Court finds that the
CA did not commit any error in refusing to grant petitioner's motion to amend her
-brief on the ground that the delay in filing such motion is unjustified.
Finally, it bears to point out that the premise that underlies all appeals is that they
are merely rights which arise from statute; therefore, they must be exercised in the
manner prescribed by law.25 It is to this end that rules governing pleadings and
practice before appellate courts were imposed.26 These rules were designed to
assist the appellate court in the accomplishment of its tasks, and overall, to
enhance the orderly administration of justice.27 Failing in this respect, the instant
petition should be denied.
WHEREFORE, the instant petition is DENIED. The assailed Resolutions of the Court
of Appeals, dated September 9, 2010, December 14, 2010 and February 14, 2011,
in CA-GR. CR No. 32066, are AFFIRMED.
The Court of Appeals is DIRECTED to proceed with the resolution of the case on
the merits WITH DISPATCH.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 200042, July 07, 2016 - FELIZARDO T. GUNTALILIB, Petitioner, v. AURELIO
Y. DELA CRUZ AND SALOME V. DELA CRUZ, Respondents.
PHILIPPINE SUPREME COURT DECISIONS
SECOND DIVISION
G.R. No. 200042, July 07, 2016
FELIZARDO T. GUNTALILIB, Petitioner, v. AURELIO Y. DELA CRUZ AND SALOME V.
DELA CRUZ, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 seeks to set aside: 1) the August 10, 2011
Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 115963 dismissing the
Petition for Certiorari in said case and affirming the January 12, 20103 and June 21,
20104 Orders of the Regional Trial Court (RTC) of Bayombong, Nueva Vizcaya,
Branches 28 and 27, respectively, in Civil Case No. 6975; and 2) the CA's January 5,
2012 Resolution5 denying herein petitioner's Motion for Reconsideration.
Factual Antecedents
On July 14, 2009, respondents Aurelio and Salome dela Cruz filed a Complaint6 for
"Quieting Of Titles x x x; Annulment and Cancellation of Unnumbered
OCT/Damages," against petitioner Felizardo Guntalilib and other heirs of Bernardo
(or Bernardino) Tumaliuan. The case was docketed as Civil Case No. 6975 and
assigned to Branch 28 of the RTC of Bayombong, Nueva Vizcaya.
The subject property is Lot 421 located in Nueva Vizcaya consisting of 8,991
square meters and which, as respondents claimed in their Complaint, was
originally registered on August 7, 1916 as Original Certificate of Title (OCT) No.
213. Respondent Aurelio's grandfather, Juan dela Cruz, later acquired the property
in 1919, and Transfer Certificate of Title (TCT) No. R-3 was issued in his name;
when he passed away, the property was inherited by Aurelio's father, Leonor, and,
in lieu of TCT R-3, TCT 14202 was issued in Leonor's favor. Later on, Leonor
conveyed the property to Aurelio and his brother, Joseph, and TCT T-46087 was
then issued in their favor. In turn, Joseph waived ownership in favor of Aurelio by
deed of quitclaim dated December 31, 2001, in which case a new title, TCT T-
126545, was issued in Aurelio's name as sole owner.
Respondents claimed further that all this time, the dela Cruz family was in full
possession, occupation and enjoyment of the property, and petitioner and his co-
heirs have never set foot on the property; that later on, Lot 421 was subdivided and
new titles were issued in lieu of TCT T-126545; and that Aurelio sold portions thereof to
several individuals, but he remains the registered owner of the remaining portion.
Respondents likewise alleged that on February 20, 2008, petitioner filed in court a
petition, docketed as LRC Case No. 6544 and assigned to the Bayombong, Nueva
Vizcaya RTC, Branch 29, for reconstitution or issuance of a new certificate of title in lieu
of an allegedly lost unnumbered OCT which was issued on August 29, 1916 in the
name of petitioner's predecessor, Bernardo Tumaliuan, and covering the very same
property, or Lot 421, which they owned; that said petition was eventually granted, and
the Nueva Vizcaya Register of Deeds was ordered to issue another owner's duplicate
copy of their predecessor's supposed unnumbered OCT; and that said unnumbered
OCT constituted a cloud upon their titles that must necessarily be removed.
Petitioner and his co-defendants filed a Motion to Dismiss7 Civil Case No. 6975,
arguing that the Complaint stated no cause of action; that the case constituted a
collateral attack on their unnumbered OCT; that respondents failed to implead all the
heirs of Bernardo Tumaliuan, who are indispensable parties to the case; and that the
Complaint's verification and certification on non-forum shopping were defective.
Respondents filed a Motion for Admission of Amended Complaint,8 with attached
Amended Complaint9 for "Quieting Of Titles x x x; Cancellation of Unnumbered
OCT/Damages." Apart from incorporating the same allegations contained in their
original Complaint, respondents further alleged in said Amended Complaint that their
mother title, OCT 213 which was issued on August 7, 1916, should prevail over the
petitioner's unnumbered OCT which was issued only on August 29, 1916; that
petitioner and his co-heirs had prior knowledge of the dela Cruzes' previous and
existing titles, and were never in possession of Lot 421; and that through fraud, false
misrepresentations, and irregularities in the proceedings for reconstitution (LRC Case
No. 6544), petitioner was able to secure a copy of his predecessor's supposed
unnumbered OCT. Respondents prayed, thus:
WHEREFORE, premises considered, it is most respectfully prayed that after trial in this
case, this Honorable Court issue a judgment in favor of Plaintiffs and against,
defendants, as follows:
1. Quieting [of] title and ownership over Lot No. 421 and portions thereof, in favor of
Plaintiffe, particularly TCT No. 147078; TCT No. 142232; TCT No. 142233; TCT No.
142235; TCT No. 142236; TCT No. 142237; TCT No. 142239; and TCT Nos. 142241 thru
142245 and all such titles of individuals who acquired title to portions of Lot No. 421
from Plaintiffs;
2. An order directing the cancellation of the Unnumbered Original Certificate of Title to
Lot 421 in the name of Bernardo Tumaliuan;
3. An order directing defendants to pay plaintiffs moral damages in the amount of
P100,000.00;
4. Ordering defendants to reimburse plaintiffs for their attorney's fees, appearance fee
and costs of this suit.
5. Any such other relief as may be just and fair under the attendant
circumstances.10cralawred
Petitioner and his co-defendants opposed the Motion for Admission of Amended
Complaint, arguing in their Opposition (Ad Cautelam)11 that the motion was a mere
scrap of paper because it did not comply with Sections 4, 5 and 6 of Rule 15 of the
1997 Rules of Civil Procedure12 (1997 Rules), as no date of hearing was set and the
motion was addressed to the Clerk of Court alone; that the verification and certification
on non-forum shopping contained in the original Complaint, being defective, could not
be cured by the subsequent filing of the Amended Complaint; and that the Amended
Complaint was improper and prohibited, as it is essentially aimed at setting aside the
Decision in LRC Case No. 6544 issued by a court of concurrent jurisdiction.
On January 12, 2010, the trial court in Civil Case No. 6975 issued an Order13 admitting
respondents' Amended Complaint and denying petitioner's Motion to Dismiss. It held
that -
Assuming arguendo that this Court shall treat the Motion for Admission of Amended
Complaint as not filed, this Court is still duty bound to recognize the right of herein
plaintiff under Rule 10 Section 2 where plaintiffs are allowed as a matter of right to file
their amended complaint anytime before a responsive pleading is filed. Considering
that a Motion to Dismiss is not a responsive pleading, this Court has no other recourse
but to allow plaintiffs to submit their amended complaint.
With respect to the contention of the defendants that the complaint did not raise
any cause of action, this Court x x x is in the belief that the plaintiff may be entitled
to the relief sought for after exhaustively trying the case on the merits. On that
note, considering the quantum of documentary evidence adduced by the plaintiff
herein, this Court is inclined to try the case on the merits.
With respect to the contention of the defendants that the complaint failed to
include and implead all indispensable parties, this Court construes the cited case
of Teresita V. Orbeta vs. Paul B. Sendiong x x x that the High Court contemplated
"the absence of an indispensable party" and not the "absence of all indispensable
parties". As this Court is in the belief that plaintiff had impleaded some
indispensable parties, then a trial on the merits should proceed.
Defendants likewise had raised as an issue that a Decision rendered by Regional
Trial Court Branch 29, Bayombong, Nueva Vizcaya, particularly LRC Case No. 6544
x x x rendered on July 21, 2008 should bar any inquiry with regard to the issue of
the ownership of one of the parcels of land subject of this instant case.
Placing a parcel [of land] under the mantle of the Torrens System does not mean
that ownership thereof can no longer be disputed. Ownership is different from a
certificate of title x x x.
In LRC Case No. 6544, Regional Trial Court Branch 29 adjudicated on the issuance
of another Certificate of Title in favor of petitioner, now defendant in this case,
Felizardo T. Guntalilib. In this instant case, the issue of ownership is being brought
to the fore. This distinction should be heavily noted. Moreover, on closer inquiry,
this Court notes the point raised by the Registry of Deeds of Nueva Vizcaya in its
Motion for, Reconsideration to the Decision rendered in LRC Case No. 6544 xxx:
xxxx
To this Court, it would appear that the issue of ownership remains unsettled and
this instant case will squarely address this issue.
To make out an action to quiet title under the foregoing provision (Article 476 of
the Civil Code), the initiatory pleading has only to set forth allegations showing
that (1) the plaintiff has "title to real property or any interest therein" and (2) the
defendant claims an interest therein adverse to the plaintiffs arising from an
instrument, record, claim, encumbrance, or proceeding which is apparently valid or
effective but is in truth and in fact invalid, ineffective, voidable or unenforceable." x
xx
A perusal of the allegations of the initiatory pleadings reveals that an action to
quiet title is proper and this Court shall properly proceed to try this case on the
merits.
A reading of the Opposition by the defendants reveals alarming allegations and
imputations.
Defendants aver that Mr. Aristotle Mercado, Legal Researcher of this Branch, is
allegedly one of the buyers of the property subject of this instance case from
plaintiffs. Consequently, defendants doubt if the Motion filed by the plaintiffs on
September 17,2009 had been read by the undersigned Judge and as it appears
was "kept from the Honorable presiding Judge and the defendants so that the
matter can be submitted for the Court's consideration and approval immediately
upon receipt hereof."
Defendants likewise aver that plaintiffs deliberately absented themselves in the
proceedings of September 22,2009 for unknown reasons.
This Court would like to remind defendants to exercise restraint and caution in
imputing allegations which are unsubstantiated. A perusal of the records would
reveal that the plaintiffs had furnished defendants with a copy of plaintiffs' Motion
filed on September 17,2009 per Registry Receipt No. 234.
To impute on Mr. Mercado as a buyer of the plaintiffs and of allegedly executing
acts prejudicial to defendants' interest and of directly accusing plaintiffs of
deliberately absenting themselves from the proceedings of September 22, 2009
are reasons enough for this Court to warn defendants to exercise restraint in
accusing parties, be it adversary or court personnel.
WHEREFORE, premises considered, this Court hereby admits the Amended
Complaint filed by plaintiffs herein. The Motion to Dismiss filed by defendants is
DENIED.
SO ORDERED.14cralawred
Petitioner filed a Motion for Reconsideration;15 meanwhile, the case was re-raffled to
Branch 27 of the RTC of Bayombong, Nueva Vizcaya. On June 21, 2010, the trial court
issued an Order16 denying petitioner's Motion for Reconsideration and ordering the
defendants in the case to file their answer.
Ruling of the Court of Appeals
Petitioner filed an original Petition for Certiorari17 with prayer for injunctive relief
before the CA, which was docketed as CA-G.R. SP No. 115963. In seeking reversal of the
trial court's January 12, 2010 and June 21,2010 Orders, petitioner essentially reiterated
the arguments contained in his Motion to Dismiss, adding that the trial court should
not have admitted respondents' Amended Complaint since the original Complaint was
a mere scrap of paper as it was defective in form and substance; that since in the first
instance the Complaint was a mere scrap of paper, then there is no Complaint to be
amended; and that the assailed Orders were null and void.
On August 10, 2011, the CA issued the assailed Decision affirming the trial court's
assailed Orders, pronouncing thus:
The RTC found the allegations in the initiatory pleading proper in the action to quiet
title, thus, was "inclined to try the merits of the case". In a motion to dismiss for failure
to state a cause of action, the inquiry is into the sufficiency and not the veracity, of the
material allegations. If the allegations of the complaint are sufficient in form and
substance but their veracity and correctness are assailed, it is incumbent upon the
court to deny the motion to dismiss and require the defendant to answer and go to
trial to prove his defense. The veracity of the assertions of the parties can be
ascertained at the trial of the case on the merits. Further, Section 3 of Rule 16 of the
Rules of Court, the rule in point, provides:chanRoblesvirtualLawlibrary
"x x x x
Sec. 3. Resolution of motion. After the hearing, the court may dismiss the action, or
claim, deny the motion, or order the amendment of the pleading.
xxxx
As gleaned from the above-quoted provision, there are three (3) courses of action
which the trial court may take in resolving a motion to dismiss, i.e. to grant, to deny, or
to allow amendment of the pleading. We find no grave error on the part of the trial
court in denying the motion to dismiss as the allegations are sufficient to support a
cause of action for quieting of title.
Parenthetically, under Rule 65 of the Revised Rules of Civil Procedure, for a certiorari
proceeding to prosper, there should be a concurrence of the essential requisites, to wit:
(a) the tribunal, board or officer exercising judicial functions has acted without or in
excess of jurisdiction or with grave abuse of discretion amounting to lack or in excess
of jurisdiction, and (b) there is no appeal, nor any plain, speedy and adequate remedy
in the ordinary course of law for the purpose of annulling or modifying the proceeding.
Petitioner's claim that it had no other plain, speedy and adequate remedy is baseless.
He can still file an answer, proceed to trial and meet the issues head-on. An order
denying a motion to dismiss is an interlocutory order which neither terminates nor
finally disposes of a case, as it leaves something to be done by the court before the
case is finally decided on the merits. The general rule is that the denial of a motion to
dismiss cannot be questioned in a special civil action for certiorari which is not
intended to correct every controversial interlocutory ruling. Neither can a denial of a
motion to dismiss be the subject of an appeal unless and until a final judgment or
order is rendered.
Quite obviously, this petition filed by petitioner with us is not the proper remedy to
assail the trial court's denial of his motion to dismiss. We reiterate that the special civil
action of certiorari is a remedy designed to correct errors of jurisdiction including
commission of grave abuse of discretion amounting to lack or excess of jurisdiction
and not errors of judgment. The abuse of discretion must be grave, that is, the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility.
It must be so patent and gross as to amount to evasion of positive duty or to a virtual
refusal to perform the duty enjoined by or to act at all in contemplation of the law. To
justify the grant of such extraordinary remedy, the abuse of discretion must be grave
and patent, and it must be shown that discretion was exercised arbitrarily or
despotically. In this case, no such circumstances attended the denial of petitioner's
Motion to Dismiss.
Petitioner further alleged that the trial court committed a procedural infirmity
when it gave due course to the Motion for Admission of Amended Complaint
despite non-compliance with Sections 4,5 and 6 of the Rules of Court and
admitted private respondent's Amended Complaint.
Private respondent's amendment of the complaint was made pursuant to Section
2, Rule 10 of the Rules of Court. Under the said provision, formal and substantial
amendments to a pleading may be made at anytime before a responsive pleading
has been filed. Such amendment is a matter of right. This means that prior to the
filing of an answer, the plaintiff has the absolute right to amend the complaint.
xxxx
For obvious reasons, petitioner has not filed an answer to controvert the
allegations raised by private respondent. A motion to dismiss is not a responsive
pleading, thus, private respondent may amend its complaint. It cannot be said that
the petitioner's rights have been violated by changes made in the complaint if he
has yet to file an answer thereto. In such an event, petitioner has not presented
any defense that can be altered or affected by the amendment of the complaint in
accordance with Section 2 of Rule 10.
Case law dictates that the right granted to the plaintiff under procedural law to
amend the complaint before an answer has been served is not.precluded by the
filing of a motion to dismiss or any other proceeding contesting its sufficiency.
Were we to conclude otherwise, the right to amend a pleading under Section 2,
Rule 10 will be rendered nugatory and ineffectual, since all that a defendant has to
do to foreclose this remedial right is to challenge the adequacy of the complaint
before he files an answer. Moreover, amendment of pleadings is favored and
should be liberally allowed in the furtherance of justice in order to determine every
case as far as possible on its merits without regard to technicalities. This principle
is generally recognized to speed up trial and save party litigants from incurring
unnecessary expense, so that a full hearing on the merits of every case may be had
and multiplicity of suits avoided. Consequently, the amendment should be allowed
in this case as a matter of right in accordance with the rules.
As for petitioner's application for injunction, we find no compelling reason to pass
upon it as petitioner failed to convince us of the necessity of this relief.
WHEREFORE, premises considered, the petition under consideration is DISMISSED
and the assailed Order dated January 12, 2010 and the Order dated June 21, 2010
are hereby AFFIRMED.
SO ORDERED.18
Petitioner filed a Motion for Reconsideration,19 which the CA denied in its
subsequent January 5,2012 Resolution. Hence, the present Petition.
Meanwhile, on June 29,2012, the trial court issued an Order,20 stating thus:
In this continuation of pre-trial, Arty. Rosario and Atty. Manuel appeared. The
spouses plaintiffs and the representatives of the defendants, who are defendant
[sic] themselves namely, Felizardo and Mario Guntalilib were also around.
It is observed that in the previous proceedings, the court and the parties
encountered difficulty in knowing who are the registered owners in addition to the
plaintiff spouses Dela Cruz and also the identification of the defendant heirs. To
the mind of the court, it would be more convenient in proceeding with the pre-
trial with the complete identification of the present registered owners and also
those heirs so that complete relief would accordingly be given to the parties. The
court directed the plaintiffs to amend the complaint within 30 days from today to
identify the registered owners and for the defendants to make available the names
of the heirs. The counsels suggested that before further proceedings could be had,
the plaintiffs should identify the other registered owners of the property and the
defendants to identify the heirs.
SO ORDERED.21cralawred
Issues
In a March 31, 2014 Resolution,22 this Court resolved to give due course to the instant
Petition, which contains the following assignment of errors:
I. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN FAILING TO
DECLARE THE COURT A QUO'S ORDERS NULL AND VOID BASED ON THE FOLLOWING
GROUNDS:chanRoblesvirtualLawlibrary
(i) THE RELIEF SOUGHT BY RESPONDENTS IN THE PRESENT ACTION, WHICH IS, TO
ANNUL AND REVERSE THE DECISION OF RTC-BRANCH 29, THAT ORDERED THE
ISSUANCE OF OCT WITH DECREE NO. 54584 IN THE NAME OF BERNARDINO
TUMALrUAN, IS IMPROPER FOR AN ACTION TO QUIET TITLE, THUS, THE COMPLAINT
STATES NO CAUSE OF ACTION, WARRANTING THE PROMPT AND TIMELY DISMISSAL
OF THE CASE.
(ii) THE ORIGINAL, AS WELL AS THE AMENDED COMPLAINT OF RESPONDENTS FAILED
TO INCLUDE ALL INDISPENSABLE PARTIES, THUS, THE COURTS A QUO DO NOT HAVE
JURISDICTION OVER THE PERSON OF THESE OMITTED INDIVIDUALS, WARRANTING
THE PROMPT DISMISSAL OF THE CASE.
(iii) FOLLOWING THE DOCTRINE OF NONINTERFERENCE, THE COURTS A QUO HAVE
NO JURISDICTION TO INTERVENE WITH THE PROCEEDINGS OF A COURT OF EQUAL
JURISDICTION, MUCH LESS ANNUL THE FINAL JUDGMENT OF A COEQUAL BRANCH,
I.E. RTC BRANCH-29. THUS RESPONDENTS' COMPLAINT DESERVES OUTRIGHT
DISMISSAL.
II. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW WHEN IT
DECLARED THAT THERE IS A PLAIN, SPEEDY AND ADEQUATE REMEDY AVAILABLE TO
PETITIONER IN THIS PRESENT CASE.
III. RESPONDENTS' RIGHT TO AMEND THEIR COMPLAINT BY VIRTUE OF SECTION 2,
RULE 20 MUST YIELD TO THE CLEAR AND CATEGORICAL DIRECTIVE OF SECTION 5,
RULE 7 OF THE RULES OF COURT, WHICH STATES THAT "FAILURE TO COMPLY WITH
THE REQUIREMENTS ON VERIFICATION AND CERTIFICATION AGAINST FORUM-
SHOPPING SHALL NOT BE CURABLE BY MERE AMENDMENT OF THE COMPLAINT BUT
SHALL BE A CAUSE FOR THE DISMISSAL OF THE CASE WITHOUT PREJUDICE.
IV. THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW WHEN IT
DECLARED THAT AMENDMENT OF PLEADINGS IS FAVORED AND SHOULD BE
LIBERALLY ALLOWED IN CONTRAVENTION WITH THE CLEAR AND UNEQUIVOCAL
PROVISIONS OF THE RULES AND JURISPRUDENCE.23
Petitioner's Arguments
In his Petition and Counter-Manifestation24 seeking reversal of the assailed CA
dispositions and nullification of the January 12, 2010 and June 21, 2010 Orders in Civil
Case No. 6975, petitioner insists that respondents' Complaint for quieting of title
constitutes a prohibited collateral attack of the unnumbered OCT of Bernardo
Tumaliuan and an unjustified interference with and assault on the Decision of a co-
equal court in LRC Case No. 6544; that for failure to implead all indispensable parties,
namely, the heirs of Bernardo Tumaliuan and subsequent buyers of portions of the
subject property sold by respondents, respondents' case should be dismissed as all
proceedings taken therein are null and void, following the Court's ruling in Dr. Orbeta
v. Sendiong25 and Speed Distributing Corporation v. Court of Appeals26 to the effect
that the failure to implead all indispensable parties to a case renders all actions of the
court null and void; that Civil Case No. 6975 is in effect an attempt to annul the
Decision in LRC Case No. 6544; that contrary to the CA's declaration, a Petition for
Certiorari with the appellate court was the only speedy and adequate remedy available
to him, considering that the proceedings in Civil Case No. 6975 are fundamentally null
and void since the case is precisely being used to collaterally and illegally attack
Bernardo Tumaliuan's title and the Decision in LRC Case No. 6544; and that the rule of
procedure on verification and certification against forum-shopping should override the
rule on amendment; in other words, the trial court should not have admitted
respondents' Amended Complaint since the original Complaint on which it was based
was a mere scrap of paper as it contained a defective verification and certification
against forum-shopping, and being so, there is no valid complaint to speak, of which
required amendment.
Respondents' Arguments
In their Compliance with incorporated Comment27 and Memorandum,28 respondents
contend that the failure to implead all the heirs of Bernardo Tumaliuan was cured
by the trial court's June 29, 2012 Order which reflects the parties' agreement
arrived at during the pre-trial that respondents shall amend their complaint to
include all the heirs upon being furnished the names thereof by petitioner and his
co-defendants; directing respondents to further amend their complaint within 30
days in order to.include the registered owners of the subject property; and for the
defendants to disclose the names of all heirs of Bernardo Tumaliuan. They add that
an action by one party asserting his own title to and seeking nullification of
another title covering the same property is deemed to be one for quieting of
title,29 and the nullification of petitioner's title is merely an incidental result in
such action; that since petitioner has not filed his Answer, they were entitled to
amend their complaint as a matter of right, and no motion to admit their
Amended Complaint was even necessary;30 and that the CA committed no
reversible error in declaring that petitioner's resort to an original Petition for
Certiorari was unwarranted.
Our Ruling
The Court denies the Petition.
Petitioner's claim that respondents' Amended Complaint must be disallowed for
failure to implead all indispensable parties has been rendered moot by the parties'
agreement that respondents shall further amend their complaint after petitioner
and his co-defendants furnish them with the complete list of Bernardo Tumaliuan's
heirs. Pursuant to this agreement, the trial court issued its June 29,2012 Order,
which petitioner does not assail.
Next, petitioner's claim that the trial court should not have admitted respondents'
Amended Complaint since the original Complaint on which it was based is void for
being a mere scrap of paper as it contained a defective verification and
certification against forum-shopping, is fundamentally absurd. A party to a civil
case is precisely given the opportunity to amend his pleadings, under certain
conditions, in order to correct the mistakes found therein; if one were to follow
petitioner's reasoning, then the rule on amendment of pleadings might just as well
be scrapped, for then no pleading would be susceptible of amendment. In the
present case, respondents' Complaint was amended even before petitioner could
file any responsive pleading thereto; under the 1997 Rules, a party may amend his
pleading once as a matter of right at any time before a responsive pleading is
served.31 No motion to admit the same was required; as the amendment is
allowed as a matter of right, prior leave of court was unnecessary.32 Indeed, even
if such a motion was filed, no hearing was required therefor, because it is not a
contentious motion.
On the final procedural matter that must be tackled, suffice it to state, as the CA
did, that as a general rule, the denial of a motion to dismiss cannot be questioned
through a special civil action for certiorari.
An order denying a motion to dismiss is interlocutory and neither terminates nor
finally disposes of a case; it is interlocutory as it leaves something to be done by
the court before the case is finally decided on the merits.
The denial of a motion to dismiss generally cannot be questioned in a special civil
action for certiorari, as this remedy is designed to correct only errors of jurisdiction
and not errors of judgment. Neither can a denial of a motion to dismiss be the
subject of an appeal which is available only after a judgment or order on the
merits has been rendered. Only when the denial of the motion to dismiss is tainted
with grave abuse of discretion can the grant of the extraordinary remedy of
certiorari be justified.33
Such a rule applies especially when, as in this case, the petition is completely
lacking in merit.
Moving on to the substantive issues raised, the Court finds without merit
petitioner's claim that respondents' quieting of title case constitutes a prohibited
attack on his predecessor Bernardo Tumaliuan's unnumbered OCT as well as the
proceedings in LRC Case No. 6544. It is true that "the validity of a certificate of title
cannot be assailed in an action for quieting of title; an action for annulment of title
is the more appropriate remedy to seek the cancellation of a certificate of title."34
Indeed, it is settled that a certificate of title is not subject to collateral attack.
However, while respondents' action is denominated as one for quieting of title, it is
in reality an action to annul and cancel Bernardo Tumaliuan's unnumbered OCT.
The allegations and prayer in their Amended Complaint make out a case for annulment
and cancellation of title, and not merely quieting of title: they claim that their
predecessor's OCT 213, which was issued on August 7,1916, should prevail over
Bernardo Tumaliuan's unnumbered OCT which was issued only on August 29, 1916;
that petitioner and his co-defendants have knowledge of OCT 213 and their existing
titles; that through fraud, false misrepresentations, and irregularities in the proceedings
for reconstitution (LRC Case No. 6544), petitioner was able to secure a copy of his
predecessor's supposed unnumbered OCT; and for these reasons, Bernardo
Tumaliuan's unnumbered OCT should be cancelled. Besides, the case was denominated
as one for "Quieting Of Titles x x x; Cancellation of Unnumbered OCT/Damages."
It has been held that "[t]he underlying objectives or reliefs sought in both the quieting-
of-title and the annulment-of-title cases are essentially the same — adjudication of the
ownership of the disputed lot and nullification of one of the two certificates of title."35
Nonetheless, petitioner should not have been so simplistic as to think that Civil Case
No. 6975 is merely a quieting of title case. It is more appropriate to suppose that one
of the effects of cancelling Bernardo Tumaliuan's unnumbered OCT would be to quiet
title over Lot 421; in this sense, quieting of title is subsumed in the annulment of title
case.
WHEREFORE, the Petition is DENIED. The August 10, 2011 Decision and January 5, 2012
Resolution of the Court of Appeals in CA-G.R. SP No. 115963 are AFFIRMED.
SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 173399
CENTRAL BANK BOARD OF LIQUIDATORS, Petitioner
vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent
DECISION
SERENO, CJ.:
Our ruling in this case is confined to the resolution of procedural issues pertaining to
the propriety of the admission of a Second Amended/Supplemental Complaint. The
latter sought to hold the Bangko Sentral ng Pilipinas (BSP) and its Monetary Board (MB)
liable for causes of action that arose almost 10 years after the original Complaint was
filed against the now defunct Central Bank of the Philippines (CB).
THE CASE
The Petition for Review on Certiorari1 under Rule 45 of the 1997 Revised Rules of Civil
Procedure now before us was filed by the Central Bank Board of Liquidators (CB-BOL).
It seeks to annul the Decision2 of the Court of Appeals (CA), which affirmed the
Orders3 of the Regional Trial Court, National Capital Judicial Region, Makati City-
Branch 136 (RTC).
The assailed CA Decision affirmed the ruling of the RTC in consolidated Civil Case Nos.
8108, 9675, and 10183, which had admitted the Second Amended/Supplemental
Complaint filed by respondent Banco Filipino Savings and Mortgage Bank (Banco
Filipino, or respondent).4 The CB-BOL alleges that by admitting the complaint, the RTC
erroneously included the BSP and its MB as new parties to the consolidated civil cases
and raised new causes of action not alleged in the original Complaint.5
THE FACTS
The following are the pertinent facts of the case as gathered from its records.6
On 14 February 1963, the MB of the then CB issued MB Resolution No. 223 allowing
respondent Banco Filipino to operate as a savings bank. Respondent began formal
operations on 9 July 1964.7
However, on 27 July 1984, the CB issued MB Resolution No. 955 placing Banco Filipino
under conservatorship after granting the latter's loan applications worth billions of
pesos.8 Respondent bank filed with the RTC Makati a Complaint against the CB for the
annulment of MB Resolution No. 955.9 The case was docketed as Civil Case No. 8108
and raffled to Judge Ricardo Francisco of Branch 136.10
Thereafter, on 25 January 1985, the CB issued MB Resolution No. 75 ordering the
closure of Banco Filipino and placing the latter under receivership. The Resolution
stated that since respondent had been found to be insolvent, the latter was
forbidden to continue doing business to prevent further losses to its depositors
and creditors. The Resolution further provided for the takeover of the assets and
liabilities of Banco Filipino for the benefit of its depositors and creditors, as well as
for the termination of its conservatorship.11 On 2 February 1985, Banco Filipino
filed a Complaint with the RTC Makati against the MB, assailing the latter's act of
placing the bank under receivership.12 The case was docketed as Civil Case No.
9675 and raffled to Judge Zoilo Aguinaldo of Branch 143.13
Because of its impending closure,14 Banco Filipino filed with the CA a Petition for
Certiorari and Mandamus on 28 February 1985, seeking the annulment of MB
Resolution No. 75 on the ground of grave abuse of discretion in the issuance of
the Resolution.15 The Petition eventually reached the Supreme Court, where it was
docketed as G.R. No. 70054.
On 22 March 1985, the CB issued another Resolution placing Banco Filipino under
Jiquidation. Respondent then filed another Complaint with the RTC Makati to
question the propriety of the liquidation.16 The case was docketed as Civil Case
No. 10183 and raffled to Judge Fernando Agdamag of Branch 138.17
Meanwhile, this Court in G.R. No. 70054 promulgated on 29 August 1985 a
Resolution directing, among others, the consolidation in Branch 136 of the RTC
Makati of the following cases: (1) Civil Case No. 8108, the case for the annulment
of the conservatorship order; (2) Civil Case No. 9675, the case seeking to annul the
receivership order; and (3) Civil Case No. 10183, the case seeking to annul the
order for the liquidation of the bank.18
On 11 December 1991, this Court, in an En Banc Decision penned by Associate
Justice Leo D. Medialdea, nullified MB Resolution No. 75 and ordered the CB and
its MB to reorganize the bank and allow it to resume business.19
On 6 July 1993, during the pendency of the three consolidated cases, Republic Act
(R.A.) No. 7653, or the New Central Bank Act of 1993, took effect. Under the new
law, the CB was abolished and, in its stead, the BSP was created. The new law also
created the CB-BOL for the purpose of administering and liquidating the CB's
assets and liabilities,20 not all of which had been transferred to the BSP.21
Pursuant to the Decision of this Court in G.R. No. 70054, the BSP reopened Banco
Filipino and allowed it to resume business on 1 July 1994.22
On 29 May 1995, pursuant to the recent development, Banco Filipino filed a
Motion to Admit Attached Amended/Supplemental Complaint23 in the three
consolidated cases - Civil Case Nos. 8108, 9675, and 10183 - before the RTC. In its
Amended/Supplemental Complaint, respondent bank sought to substitute the CB-
BOL for the defunct CB and its MB. Respondent also aimed to recover at least ₱18
billion in actual damages, litigation expenses, attorney's fees, interests, and costs
of suit against petitioner and individuals who had allegedly acted with malice and
evident bad faith in placing the bank under conservatorship and eventually closing
it down in 1985.24
The trial court, through an Order dated 29 March 1996, granted the Motion to
Admit filed by Banco Filipino and accordingly admitted the latter's
Amended/Supplemental Complaint. Consequently, the CB-BOL was substituted for
the defunct CB in respondent's civil cases, which are still pending with the RTC.25
On 25 September 2003, or more than 10 years from the enactment of R.A. 7653,
Banco Filipino again filed a Motion to Admit Second Amended/Supplemental
Complaint26 in the consolidated civil cases before the RTC. In that Second
Amended/Supplemental Complaint,27 respondent sought to include the BSP and
its MB - "the purported successor-in-interest of the old CB"28 - as additional
defendants based on the latter's alleged acts or omissions as follows:
1. The BSP and the MB refused to grant Banco Filipino a universal banking license,
unless it complied with their stringent conditions intended to further deplete its
resources, contrary to the provisions of the Memorandum of Agreement the
parties entered into on 20 December 1999.29
2. The BSP and the MB engaged in a smear campaign against Banco Filipino
intended to undermine the trust and confidence of its depositors and the public in
general.30
3. With the objective of gaining control of respondent bank, the BSP disqualified a
member of the former' s board of directors.31
4. The BSP and its MB conspired with a group of minority stockholders of Banco
Filipino to institute a case against respondent and thereby place it under a state of
receivership or conservatorship or under a management committee.32
5. The demands of Banco Filipino for an out-of-court settlement of its damage claims
against the BSP have gone unheeded and have resulted in burgeoning litigation
expenses and other damages, for which respondent continues to suffer as a result of
prolonged litigation.33
Banco Filipino claimed that the BSP employed "coercive measures"34 that forced
respondent to enter into a Memorandum of Agreement (MOA) regarding the collection
of advances extended to the latter by the defunct CB. In addition, respondent also
alleged that its present dealings with the BSP and the MB have become increasingly
difficult, especially in obtaining favorable actions on its requests and other official
dealings.35
Banco Filipino's Motion to Admit its Second Amended/Supplemental Complaint was
opposed by the CB-BOL based on the following grounds:
1. Banco Filipino's Second Amended/Supplemental Complaint was not supported by a
board resolution that authorized it to file the amended or supplemental complaint.
2. The second supplemental complaint raised new and independent causes of action
against a new party- the BSP - which was not an original party.
3. The second supplemental complaint was violative of the rule on the joinder of causes
of action, because it alleged those that did not arise from the same contract,
transaction or relation between the parties - as opposed to those alleged in the
complaint sought to be amended or supplemented - and differed from the causes of
action cited in the original Complaint.
4. The admission of the second supplemental complaint would expand the scope of the
dispute in the consolidated civil cases to include new causes of action against new
parties like the BSP, resulting in a delay in the resolution of the cases.36
On 27 January 2004, the RTC, through an Order penned by Presiding Judge Rebecca R.
Mariano, granted the Motion to Admit Banco Filipino's Second
Amended/Supplemental Complaint.37 The CB-BOL moved for the reconsideration of
the trial court's Order,38 but the motion was denied in an Order dated 20 July 2004.39
On 1 October 2004, petitioner CB-BOL filed with the CA a Petition for Certiorari under
Rule 65, docketed as CA-G.R. SP No. 86697.40 It questioned the propriety of the RTC's
Order admitting Banco Filipino's Second Amended/Supplemental Complaint and
committing grave abuse of discretion in the process. Reiterating the grounds stated in
its Opposition to the Motion to Admit the Second Amended/Supplemental Complaint,
petitioner contended that the complaint consisted of, among others, an improper
joinder of parties and other issues that were entirely different from those raised in the
original complaint.41
On 27 January 2006, the CA dismissed the CB-BOL's Petition and affirmed in toto the
trial court's Order admitting the Second Amended/Supplemental Complaint.42
The appellate court ruled that the old CB continued to exist and remained a defendant
in the consolidated civil cases, albeit under a new name: CB-BOL.
It also ruled that, pursuant to R.A. 7653, the BSP was the successor-in-interest of the
old CB. Further, with the transfer of assets from the CB to the BSP during the pendency
of the subject civil cases, the latter now became a transferee pendente lite. Therefore,
the CA concluded that there were no new parties impleaded in the civil cases when the
Second Amended/Supplemental Complaint was admitted by the trial court.43
The CA further sustained the RTC's ruling that respondent Banco Filipino did not raise
new issues against petitioner CB-BOL or seek new reliefs or claim new damages from
the latter. Supposedly, respondent merely sought the addition of the BSP and its MB as
parties-defendants in the consolidated civil case, as they were the successors-in-
interest of the defunct CB and its MB.44
The assailed CA Decision also attributed to the CB-BOL the apparent delay in the
resolution of the current dispute, based on the number of certiorari cases the latter had
filed with the CA and the Supreme Court since the commencement of those cases.45
On 16 February 2006, petitioner filed a Motion for Reconsideration seeking the reversal
of the Decision dated 27 January 2006 in CA-G.R. SP No. 86697.46 On 27 June 2006,
the CA denied the Motion after finding no "plausible reason" to depart from its assailed
Decision.47
Petitioner CB-BOL now comes to this Court via a Petition for Review on Certiorari.
It assails the Decision of the appellate court in CA-G.R. SP No. 86697, which
affirmed in toto the trial court's Order admitting the Second
Amended/Supplemental Complaint of Banco Filipino. Specifically, petitioner raises
the following arguments:48
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S ORDER
ADMITTING RESPONDENT'S SECOND AMENDED/SUPPLEMENTAL COMPLAINT
AGAINST THE BSP, DESPITE THE FACT THAT THE PARTIES, SUBJECT MATTERAND
CAUSES OF ACTION ASSERTED THEREIN ARE DIFFERENT FROM AND TOTALLY
UNRELATED TO RESPONDENT'S CAUSES OF ACTION UNDER THE FIRST AMENDED
SUPPLEMENTAL COMPLAINT AGAINST THE DEFUNCT CB.
xxxx
II.
THE COURT OF APPEALS ERRED IN REDUCING THE ADMISSION OF THE SECOND
AMENDED/SUPPLEMENTAL COMPLAINT TO THE MERE AMENDMENT OF A
PLEADING "TO SUBSTITUTE OR JOIN A TRANSFEREE PENDENTE LITE" UNDER SEC.
19, RULE 3 OF THE REVISED RULES OF COURT x x x.
xxxx
III.
THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURT'S RULING
THAT THE OLD CB CONTINUES TO EXIST AS PETITIONER CB-BOL. PETITIONER IS A
SEPARATE, DISTINCT AND INDEPENDENT ENTITY FROM THE DEFUNCT CB WHICH
HAS BEEN ABOLISHED UPON THE ENACTMENT OF THE NEW CENTRAL BANK ACT.
IV.
PETITIONER'S PLEA AGAINST THE ADMISSION OF RESPONDENT'S SECOND
AMENDED/SUPPLEMENTAL COMPLAINT IS NOT A DILATORY TACTIC OR A MERE
RESORT TO TECHNICALITY; RATHER, IT IS AN EARNEST APPEAL FOR PETITIONER
TO BE FREE FROM A USELESS AND WASTEFUL LEGAL CONTEST WHICH SHOULD
BE THE SUBJECT OF A SEPARATE CASE SOLELY BETWEEN THE RESPONDENT AND
THE BSP. IT IS A PLEA BY PETITIONER TO SECURE A JUST, SPEEDY AND
INEXPENSIVE DETERMINATION OF RESPONDENT'S CASE AGAINST IT FOR ACTS
SUPPOSEDLY PERPETRATED BY THE OLD CB IN 1984-1985 FOR WHICH IT IS
SUPPOSEDLY THE SUCCESSOR-IN-INTEREST.
THE ISSUE
The crucial issue to be resolved here is whether the RTC erred in admitting Banco
Filipino's Second Amended/Supplemental Complaint in the consolidated civil cases
before it.
OUR RULING
The Petition of the CB-BOL is impressed with merit.
It must be noted at this point that the BSP and its MB are not yet required to
answer the RTC Complaint, as the issue of their addition as parties is yet to be
settled. Nevertheless, whether or not the BSP and its MB are transferees or
successors-in-interest of the CB and its MB, the former's addition or substitution as
parties to this case must comply with the correct procedure and form prescribed
by law.
The second amendment of the
Complaint was improper.
Rule 10 of the 1997 Revised Rules of Court allows the parties to amend their
pleadings (a) by adding or striking out an allegation or a party's name; or (b) by
correcting a mistake in the name of a party or rectifying a mistaken or an
inadequate allegation or description in the pleadings for the purpose of
determining the actual merits of the controversy in the most inexpensive and
expeditious manner.49
The prevailing rule on the amendment of pleadings is one of liberality,50 with the end
of obtaining substantial justice for the parties. However, the option of a party-litigant
to amend a pleading is not without limitation. If the purpose is to set up a cause of
action not existing at the time of the filing of the complaint, amendment is not allowed.
If no right existed at the time the action was commenced, the suit cannot be
maintained, even if the right of action may have accrued thereafter.51
In the instant case, the causes of action subject of the Second Amended/Supplemental
Complaint only arose in 1994 - well after those subject of the original Complaint. The
original Complaint was based on the alleged illegal closure of Banco Filipino effected in
1985 by the defunct CB and its MB.
On the other hand, the Second Amended/Supplemental Complaint stemmed from the
alleged oppressive and arbitrary acts committed by the BSP and its MB against Banco
Filipino after respondent bank was reopened in 1994. Since the acts or omissions
allegedly committed in violation of respondent's rights are different, they constitute
separate causes of action.52
In its Comment53 on the present Petition, Banco Filipino contends, as the RTC and the
CA similarly ruled, that the Second Amended/Supplemental Complaint does not alter
the substance of the original demand, change the cause of action against the original
defendants, or seek additional or new reliefs.54 Rather, respondent contends that the
only change sought is the addition of the BSP and its MB as parties-defendants.
Respondent further argues that what petitioner erroneously views as new causes of
action are merely demonstrations to show that the BSP has come to adopt the same
repressive and oppressive attitude of the latter's alleged predecessor-in-interest.55
This contention is, however, belied by a closer examination of the Second
Amended/Supplemental Complaint, in which respondent asks the Court to order the
defendants to pay, among others, actual damages of at least ₱18.8 billion "as a
consequence of the acts herein complained of."56
The "acts complained of'' cover not just the conservatorship, receivership, closure, and
liquidation of Banco Filipino in 1984 and 1985, but also the alleged acts of harassment
committed by the BSP and its MB after respondent bank was reopened in 1994. These
acts constituted a whole new cause of action. In effect, respondent raised new causes
of action and asserted a new relief in the Second Amended/Supplemental Complaint. If
it is admitted, the RTC would need to look into the propriety of two entirely different
causes of action. This is not countenanced by law, as explained in the preceding
paragraphs.
The second supplemental pleading
was improper.
Rule 10 of the 1997 Revised Rules of Court allows the parties to supplement their
pleadings by setting forth transactions, occurrences, or events that happened since the
date of the pleading sought to be supplemented.57
However, the option of a party-litigant to supplement a pleading is not without
limitation. A supplemental pleading only serves to bolster or add something to the
primary pleading. Its usual function is to set up new facts that justify, enlarge, or
change the kind of relief sought with respect to the same subject matter as that of the
original complaint.58
This Court ruled in Leobrera v. CA59 that a supplemental complaint must be founded
on the same cause of action as that raised in the original complaint. Although in
Planters Development Bank v. LZK Holdings & Development Corporation,60 the Court
clarified that the fact that a supplemental pleading technically states a new cause of
action should not be a bar to its allowance, still, the matter stated in the supplemental
complaint must have a relation to the cause of action set forth in the original pleading.
That is, the matter must be germane and intertwined with the cause of action stated in
the original complaint so that the principal and core issues raised by the parties in their
original pleadings remain the same.61
In the instant case, Banco Filipino, through the Second Amended/Supplemental
Complaint, attempted to raise new and different causes of action that arose only in
1994.1a\^/phi1 These causes of action had no relation whatsoever to the causes of
action in the original Complaint, as they involved different acts or omissions,
transactions, and parties. If the Court admits the Second Amended/Supplemental
Complaint under these circumstances, there will be no end to the process of amending
the Complaint. What indeed would prevent respondent from seeking further
amendments by alleging acts that may be committed in the future?
For these reasons, whether viewed as an amendment or a supplement to the original
Complaint, the Second Amended/Supplemental Complaint should not have been
admitted.

The amendment/supplement violates

the rules on joinder of parties and
causes of action.

Moreover, the admission of the Second Amended/Supplemental Complaint is

inappropriate because it violates the rule on joinder of parties and causes of
action. If its admission is upheld, the causes of action set forth therein would be
joined with those in the original Complaint. The joinder of causes of action is
indeed allowed under Section 5, Rule 2 of the 1997 Rules of Court;62 but if there
are multiple parties, the joinder is made subject to the rules on joinder of parties
under Section 6, Rule 3.63 Specifically, before causes of action and parties can be
joined in a complaint involving multiple parties, (1) the right to relief must arise
out of the same transaction or series of transactions and (2) there must be a
question of law or fact common to all the parties.64

In the instant case, Banco Filipino is seeking to join the BSP and its MB as parties
to the complaint. However, they have different legal personalities from those of
the defunct CB and its MB: firstly, because the CB was abolished by R.A. 7653, and
the BSP created in its stead; and secondly, because the members of each MB are
natural persons. These factors make the BSP and its MB different from the CB and
its MB. Since there are multiple parties involved, the two requirements mentioned
in the previous paragraph must be present before the causes of action and parties
can be joined. Neither of the two requirements for the joinder of causes of action
and parties was met.

First, the reliefs for damages prayed for by respondent did not arise from the same
transaction or series of transactions. While the damages prayed for in the first
Amended/Supplemental Complaint arose from the closure of Banco Filipino by the
defunct CB and its MB, the damages prayed for in the Second
Amended/Supplemental Complaint arose from the alleged acts of oppression
committed by the BSP and its MB against respondent.

Second, there is no common question of fact or law between the parties involved.
The acts attributed by Banco Filipino to the BSP and its MB pertain to events that
transpired after this Court ordered the respondent bank's reopening in 1994.
These acts bear no relation to those alleged in the original Complaint, which
related to the propriety of the closure and liquidation of respondent as a banking
institution way back in 1985.

The only common factor in all these allegations is respondent bank itself as the
alleged aggrieved party. Since the BSP and its MB cannot be joined as parties, then
neither can the causes of action against them be joined.

This ruling is confined to

procedural issues.

As mentioned at the outset, the Court will confine its ruling on this Petition to
procedural issues pertaining to the propriety of the admission of the Second
Amended/Supplemental Complaint. We will not address the issues raised by
petitioner with regard the findings of the trial and the appellate court that the BSP
is the successor-in-interest of the defunct CB65 and is considered a transferee
pendente lite66 in the civil cases. These findings relate to the BSP's potential
liability for the causes of action alleged in the original Complaint. At issue here is
Banco Filipino's attempt, through the Second Amended/Supplemental Complaint,
to hold the BSP and its MB liable for causes of action that arose in 1994.
Respondent is not without any relief. If the RTC finds that the BSP was indeed a
transferee pendente lite, the failure to implead it would not prevent the trial court
from holding the BSP liable, should liability now attach for acts alleged in the
original Complaint.67

WHEREFORE, the Petition of the CB-BOL is GRANTED, and the Decision of the
Court of Appeals dated 27 January 2006 and Resolution dated 27 June 2006 in CA-
G.R. SP No. 86697 are hereby REVERSED and SET ASIDE.

The RTC National Capital Judicial Region, Makati City, Branch 136 is hereby
DIRECTED to proceed with the trial of this case with utmost dispatch.

SO ORDERED.