G.R. No.

161739

May 4, 2006

ALFREDO BOKINGO, Petitioner,

vs.
THE HONORABLE COURT OF APPEALS, the HEIRS OF CELESTINO BUSA,
represented by FELICIDAD BUSA-PANAL and ERNESTO M. CAMPOS, Respondents.

"A parcel of land covered by Tax Declaration No. GR-10-002-0189-A, situated in

Buhangin, Butuan City, containing an area of 2.1600 HAS., more or less. Bounded
on the North Elisa Busa, South - Pastor Ago, East Ho. Miguel Bokingo and on
the West Baan River."
8. When plaintiffs knew of defendants application, plaintiffs filed a protest against
defendants application on February 5, 1996. Attached as Annex A is the Protest;

DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by Alfredo Bokingo seeking to
reverse and set aside the Decision1 dated December 17, 2003 of the Court of Appeals (CA) in
CA-G.R. SP No. 71510 which dismissed his petition for certiorari filed therewith.
The factual and procedural antecedents are as follows:
Petitioner Alfredo Bokingo is one of the defendants in the complaint for injunction and
damages filed by Ernesto Campos, the Heirs of Celestino Busa,2 the Heirs of Felicidad BusaPanal3 and the Heirs of Concordia Busa.4 The complaint was filed with the Regional Trial
Court (RTC) of Butuan City, Branch 3 thereof, and docketed as Civil Case No. 1003. The
complaint alleged as follows:
CAUSE OF ACTION
3. Plaintiffs [herein respondents] are co-owners of the land subject matter. By virtue
of the right of representation, the heirs of FELICIDAD BUSA-PANAL and
CONCORDIA S. BUSA and REYNALDO S. BUSA, respectively;
4. Defendants in this case are heirs of MIGUEL BOKINGO;
5. Defendants ALFREDO BOKINGO [herein petitioner], WENCESLAO B.
AMBRAY, JR., ROSA B. AMBRAY, CELIA A. ALMORA and JOSELITO B.
AMBRAY, filed an application for titling of a parcel of land before the Department
of Environment and Natural Resources, Office of the CENRO, Ochoa Avenue,
Butuan City;
6. The land subject matter of the application of defendants is a parcel of land located
at Baan (Buhangin), Butuan City, containing an area of 2.1600 hectares, more or
less;
7. The land subject matter of the application for titling of defendants is a parcel of
land inherited by plaintiffs from their father, the late CELESTINO BUSA. This
parcel of land is described particularly as:
TAX DECLARATION NO. GR.-10-002-0189-A

9. On November 24, 1998, the Provincial Environment and Natural Resources

Officer, HUGO I. BAOSIA, resolved the Protest in favor of Plaintiffs-the
protestant in the DENR case. Attached as Annex B is the order;
10. On January 6, 1999, the Provincial Environment and Natural Resources Officer,
HUGO T. BAOSIA, issued a certification stating that the order dated November
24, 1998 has become final and executory. Attached as Annex C is the machine copy
of the Certification;
11. On September 9, 1999, the same DENR Officer HUGO T. BAOSIA issued an
Order of Execution which states that:
In complying herewith, the Land Management Officer III concerned should be instructed to
set forth the whole proceeding in writing signed by the parties and witnesses, if possible,
submit and return to this Office within sixty (60) days from receipt hereof, to be used as
evidence should it be necessary to institute any action, criminal or otherwise, against any party
who may refuse to obey the same.
SO ORDERED, Butuan City, September 9, 1999.
12. Plaintiffs requested on June 23, 1999, for a Survey Authority to survey the land
subject matter of this case before the CENRO Office of Butuan City. Attached as
Annex D is the Survey Application;
13. On July 30, 1999, A Survey Authority was issued by the CENRO of Butuan
City, authorizing plaintiff ENGR. ERNESTO M. CAMPOS, JR., to survey the land
subject matter of the DENR case and the case at bar. Attached as Annex E is the
Survey Authority;
14. On November 18, 1999 at 11:00 A.M., FELICIDAD BUSA-PANAL,
MILAGROS BUSA SIMOGAN, TERESITA BUSA LINAO, JIMMY BUSAPANAL, son of Felicidad Busa-Panal, ALFREDO BUSA-PANAL, son-in-law of
Concordia S. Busa, personnel of the Butuan PNP and the personnel of ENGR.
ERNESTO M. CAMPOS went to the area subject matter of this case to survey the
land. Unfortunately, Defendant SPO3 FERDINAND B. DACILLO and Defendant
ALFREDO BOKINGO, representatives of defendants, told the survey group to stop
and not to enter the area subject matter of this case. Attached as Annex F is the
report of CENRO Officer who [was] present during the November 18, 1999 survey
which was stopped by SPO3 FERDINAND B. DACILLO and ALFREDO
BOKINGO;

15. Plaintiff[s] availed of the Barangay Justice System to resolve the controversy
regarding the survey but to no avail, defendants still refused to allow plaintiffs to
survey the area. Thus, a Certificate to File Action was issued by the Lupong
Tagapamayapa. Copy of the same is hereto attached as Annex G;
16. The defendants did not exercise honesty and good faith in their acts which is a
violation of Article 19 of the New Civil Code, and which entitles the plaintiffs for
damages;
17. The acts of defendants constrained the plaintiff[s] to litigate and to incur
attorneys fees in the amount of PhP10,000.00 plus litigation expenses estimated at
PhP10,000.00.
PRAYER
Wherefore, premises considered, it is respectfully prayed that after hearing, this Honorable
Court:
1) Enjoin permanently the illegal acts of defendants of preventing the survey of the
land subject matter of this case by ENGR. ERNESTO M. CAMPOS;
2) Order defendants to pay plaintiffs the sum of P10,000.00 as attorneys
fees, P10,000.00 as litigation expenses;
3) Order defendants to pay damages to plaintiff;
4) Such other reliefs just and reasonable under the circumstances.5
Petitioner Bokingo, as one of the defendants in the above complaint, filed with the court a quo
a motion to dismiss alleging that the latter has no jurisdiction over the subject matter of the
claim. Specifically, petitioner Bokingo contended that it could be gleaned from the complaint
that the issue between the parties involved the possession of the land. As such, the assessed
value of the land was crucial to determine the courts jurisdiction over the subject matter in
accordance with either Section 19(2)6 or Section 33(3)7 of Batasang Pambansa Blg. 1298 as
amended by Republic Act No. 7691. If the assessed value thereof is P20,000.00 or less, then
the Municipal Trial Court (MTC) has jurisdiction over the subject matter. Otherwise,
jurisdiction is with the RTC.
Petitioner Bokingo pointed out in his Motion to Dismiss that the assessed value of the land
subject matter of the complaint was not indicated. Nonetheless, he proffered that based on his
fathers tax declaration covering the subject land, its assessed value was only P14,410.00.
Consequently, it was allegedly clear that the court a quo, a Regional Trial Court, had no
jurisdiction over the subject matter of the complaint filed by the respondents. Rather, in view
of the assessed value of the subject land which was allegedly less than the P15,000.00,
jurisdiction properly belonged to the MTC.
Petitioner Bokingo thus urged the court a quo to dismiss the complaint filed by the
respondents for lack of jurisdiction over the subject matter thereof.

Acting thereon, the court a quo issued the Order dated March 13, 2002 denying the motion to
dismiss. It pointed out that the complaints allegation is that the respondents, as plaintiffs, are
entitled to have the subject land surveyed after petitioner Bokingos and his co-claimants
application for the titling of the subject land was dismissed by the Provincial Environment and
Natural Resources Officer (PENRO) and the respondents were declared to have a better right
to file a public land application covering the same. Further, the relief being sought in the
complaint is injunction in order that the respondents right to survey the subject land would
not be defeated.
Based on these allegations, the court a quo held that it had jurisdiction over the subject matter
of the claim under Section 2 of Rule 58 of the Rules of Court which provides in part that "[a]
preliminary injunction may be granted by the court where the action or proceeding is
pending." It accordingly denied petitioner Bokingos motion to dismiss the complaint for lack
of jurisdiction.1avvphil.net
Petitioner Bokingo forthwith filed with the Court of Appeals a petition for certiorari alleging
grave abuse of discretion on the part of the court a quo in denying his motion to dismiss.
On December 17, 2003, the CA rendered the assailed Decision dismissing the said petition for
lack of merit, in fact and in law. It ruled that the remedy of certiorari is unavailing to petitioner
Bokingo because "an order denying a motion to dismiss is interlocutory and cannot be the
subject of the extraordinary petition for certiorari or mandamus."9
It was noted that the records fail to disclose that petitioner Bokingo filed a motion for
reconsideration of the order of the court a quo. According to the CA, such omission warranted
the outright dismissal of the petition for certiorari. Finally, it was not shown or even alleged in
the petition that the court a quo, in issuing the assailed order, acted with grave abuse of
discretion amounting to lack of jurisdiction. The issue raised by petitioner Bokingo, the CA
held, was proper for an appeal but not a petition for certiorari.
Aggrieved, petitioner Bokingo now comes to the Court seeking the reversal of the said
decision of the CA which dismissed his petition for certiorari filed therewith. He insists that
the complaint filed by the respondents with the court a quo is a possessory action. To
determine which court, the RTC or MTC, has primary jurisdiction, petitioner Bokingo
theorizes that it is necessary that the assessed value of the land be alleged in the initiatory
complaint. Absent such allegation, the court where the case was filed should allegedly
preliminarily determine the assessed value of the subject property to determine whether or not
it has jurisdiction over the subject matter of the claim. In the present case, according to
petitioner Bokingo, the assessed value of the subject land is only P14,410.00; hence,
jurisdiction thereof properly belongs to the MTC in accordance with Section 19(2) or 33(3) of
BP Blg. 129 as amended by RA 7691.
The petition is bereft of merit.
Preliminarily, the Court finds no reversible error in the dismissal by the CA of petitioner
Bokingos petition for certiorari filed therewith. As correctly held by the CA, the mere fact
that he failed to move for the reconsideration of the court a quos order denying his motion to
dismiss was sufficient cause for the outright dismissal of the said petition. Certiorari as a
special civil action will not lie unless a motion for reconsideration is first filed before the

respondent court to allow it an opportunity to correct its errors, if any.10 Petitioner Bokingo
did not proffer any compelling reason to warrant deviation by the CA from this salutary rule.
As further observed by the CA, petitioner Bokingo failed to even allege grave abuse of
discretion on the part of the court a quo in rendering the order denying his motion to dismiss.

2) Order defendants to pay plaintiffs the sum of P10,000.00 as attorneys

fees, P10,000.00 as litigation expenses;

In any case, the present petition lacks substantive merit. It is axiomatic that the nature of the
action and which court has original and exclusive jurisdiction over the same is determined by
the material allegations of the complaint, the type of relief prayed for by the plaintiff, and the
law in effect when the action is filed, irrespective of whether the plaintiffs are entitled to some
or all of the claims asserted therein.11 The caption of the complaint is not determinative of the
nature of the action. Nor does the jurisdiction of the court depend upon the answer of the
defendant or agreement of the parties, or to the waiver or acquiescence of the parties. 12

4) Such other reliefs just and reasonable under the circumstances.14

A careful perusal of the respondents complaint, quoted earlier, shows that it alleges that per
the Order dated November 24, 1998 of PENRO of Butuan City, petitioner Bokingos and his
co-claimants application for titling of the subject land was rejected. On the other hand, in the
same order it was declared that the respondents, if qualified, may file an appropriate public
land application covering the same land. It was further alleged that the said order became final
and executory, and in connection therewith, the respondents were authorized by the City
Environment and Natural Resources Officer (CENRO) of Butuan City to conduct a survey on
the subject land. However, petitioner Bokingo, through his representatives, unjustly prevented
the conduct of the said survey. Even when the matter regarding the survey was submitted to
the Lupong Tagapamayapa, petitioner Bokingo still allegedly refused to allow the respondents
to survey the subject land. Hence, the Complaint for Injunction filed by the respondents where
the principal relief sought is to enjoin permanently the illegal acts of the defendants therein,
including petitioner Bokingo, of preventing the survey of the land subject matter of the case.
In this connection, it is well to note that the Court had the occasion to explain that "in
determining whether an action is one the subject matter of which is not capable of pecuniary
estimation, the nature of the principal action, or remedy sought must first be ascertained. If it
is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary
estimation, and jurisdiction over the action will depend on the amount of the claim. However,
where the basic issue is something other than the right to recover a sum of money, where the
money claim is purely incidental to, or a consequence of, the principal relief sought, the action
is one where the subject of litigation may not be estimated in terms of money, which is
cognizable exclusively by Regional Trial Courts."13
As gleaned from the complaint, the principal relief sought by the respondents in their
complaint is for the court a quo to issue an injunction against petitioner Bokingo and his
representatives to permanently enjoin them from preventing the survey of the subject land. For
clarity, the prayer of the complaint reads:
Wherefore, premises considered, it is respectfully prayed that after hearing, this Honorable
Court:
1) Enjoin permanently the illegal acts of defendants of preventing the survey of the
land subject matter of this case by ENGR. ERNESTO M. CAMPOS;

3) Order defendants to pay damages to plaintiff;

Contrary to the view posited by petitioner Bokingo, the cause of action of the respondents
complaint is not, as yet, to recover the possession of the subject land. There are three kinds of
actions to judicially recover possession of real property and these are distinguished in this
wise:
What really distinguishes an action for unlawful detainer from a possessory action (accion
publiciana) and from a reinvindicatory action (accion reinvindicatoria) is that the first is
limited to the question of possession de facto. An unlawful detainer suit (accion interdictal)
together with forcible entry are the two forms of an ejectment suit that may be filed to recover
possession of real property. Aside from the summary action of ejectment, accion publiciana or
the plenary action to recover the right of possession and accion reinvindicatoria or the action
to recover ownership which includes recovery of possession, make up the three kinds of
actions to judicially recover possession.15
Significantly, the respondents complaint has not sought to recover the possession or
ownership of the subject land. Rather, it is principally an action to enjoin petitioner Bokingo
and his representatives from committing acts that would tend to prevent the survey of the
subject land. It cannot be said therefore that it is one of a possessory action. The respondents,
as plaintiffs in the court a quo, to be entitled to the injunctive relief sought, need to establish
the following requirements: (1) the existence of a right to be protected; and (2) that the acts
against which the injunction is to be directed are violative of the said right. As such, the
subject matter of litigation is incapable of pecuniary estimation and properly cognizable
exclusively by the court a quo, a Regional Trial Court under Section 19 (1) of BP Blg. 129, as
amended by RA 7691:
SEC. 19. Jurisdiction in Civil Cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;
xxx
Hence, the court a quo did not err in denying petitioner Bokingos motion to dismiss.
WHEREFORE, premises considered, the petition is DENIED and the assailed Decision dated
December 17, 2003 of the Court of Appeals in CA-G.R. SP No. 71510 is AFFIRMED in toto.
SO ORDERED.

G.R. No. 183357

March 15, 2010

HONORIO BERNARDO, Petitioner,

vs.
HEIRS OF EUSEBIO VILLEGAS, Respondents.
DECISION
PEREZ, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to assail the
validity of the Decision1 dated 21 April 2008 of the Court of Appeals, which affirmed the
judgment of the Regional Trial Court (RTC) of Binangonan, Rizal in Civil Case No. R-00035.
This controversy stemmed from a Complaint dated 14 November 2000 for accion publiciana
filed by respondent Heirs of Eusebio Villegas against petitioner Honorio Bernardo, Romeo
Gaza (Gaza) and Monina Francisco (Francisco). Respondents had earlier filed an ejectment
case against the trio, docketed as Civil Case No. 99-065 with the Municipal Trial Court
(MTC) of Binangonan, Rizal, which case was dismissed on the ground of lack of jurisdiction
for having been filed beyond the one-year prescriptive period for filing a forcible entry case.2
Respondents alleged in the Complaint that their father, Eusebio Villegas, is the registered
owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 46891 with an
area of 18,369 square meters and situated in Barangay Pag-asa, Binangonan, Rizal; that
petitioner, by stealth and in the guise of merely grazing his cattle, surreptitiously entered into
possession of a portion of respondents land; that petitioner conspired and confederated with
Gaza and Francisco by illegally constructing their own houses on the subject land; that the
issue of possession was brought to the barangay for conciliation but no settlement was reached
by the parties; and that petitioner, Gaza and Francisco had forcibly, unlawfully and unjustly
possessed and continue to possess the subject property and had refused to vacate the same.
In his Answer, petitioner denied taking possession of any portion of the property of
respondents. He argued that the cause of action is barred by the judgment in the ejectment
case. He claimed that he had been in possession of his land since the early 1950s.3 As he did
before the MTC, petitioner also alleged lack of jurisdiction on the part of the RTC.
Gaza alleged that he has been occupying an abandoned river bed adjacent to the property
allegedly owned by respondents.4 Gaza averred that he entered into a written agreement with
petitioner, who claimed to own the land and allowed him to build a nipa hut thereon. 5
An ocular inspection was conducted by the trial court judge. On 5 March 2007, the trial court
rendered judgment in favor of respondents and ordered petitioner, Gaza and Francisco to
vacate the subject land covered by TCT No. 46891 and to pay jointly and severally
respondents the amount of P30,000.00 as attorneys fees and the cost of suit.6
The trial court held that the suit, being an accion publiciana, falls within its jurisdiction. It
found that the houses of petitioner and Gaza were inside the titled property of respondents. Its

findings were based on the testimony of one of the respondents, Estelito Villegas; the
relocation plan prepared by Engineer Rico J. Rasay; and the Technical Report on Verification
Survey submitted by Engineer Robert C. Pangyarihan, petitioners own witness.7 The trial
court noted that petitioner failed to present any title or tax declaration to prove ownership or
possessory right.8
On appeal, the Court of Appeals affirmed the ruling of the trial court.
In his appeal, petitioner questioned the jurisdiction of the trial court over the subject matter
and argued that in their complaint, the respondents failed to state the assessed value of the
property in dispute. The appellate court ruled that petitioner is estopped from raising the issue
of jurisdiction because he failed to file a motion to dismiss on such ground and, instead,
actively participated in the proceedings before the trial court.
With respect to the argument that being indispensable parties, all of the heirs of Eusebio
Villegas should have been impleaded as parties, the appellate court disagreed and invoked
Article 487 of the Civil Code, which provides that any one of the co-owners may bring an
action for ejectment. The appellate court construed said provision to cover all kinds of actions
for recovery of possession.9
The appellate court sustained the trial courts finding that the portions of the land occupied by
petitioner and Gaza are owned by respondents. The appellate court likewise ruled that
respondents could not be guilty of laches considering that Estelito Villegas, upon seeing for
the first time in 1996 that petitioner was already building his house on the premises, verbally
asked him to discontinue the construction.10
His motion for reconsideration having been denied, petitioner filed the instant petition.
Petitioner insists that the trial court had no jurisdiction over the subject matter of the action for
failure of respondents to allege the assessed value of the property involved in their complaint.
Petitioner belies the ruling of the appellate court that he failed to raise objections before the
trial court. Petitioner reiterates that he raised the defense of lack of jurisdiction as early as in
his Answer filed before the trial court. Moreover, he argues that even if he did not raise the
defense of lack of jurisdiction, the trial court should have dismissed the complaint motu
proprio. Petitioner disputes the application to him of the doctrine of estoppel by laches in
Tijam v. Sibonghanoy.11Petitioner avers that unlike in Tijam, he raised the issue of
jurisdiction, not only in his answer, but also in his appeal. 12
Respondents defend the ruling of the Court of Appeals and maintain that petitioner is estopped
from challenging the jurisdiction of the trial court.13
The issue presented before this Court is simple: Whether or not estoppel bars petitioner from
raising the issue of lack of jurisdiction.
Under Batas Pambansa Bilang 129, the plenary action of accion publiciana must be brought
before the regional trial courts. With the modifications introduced by Republic Act No.
769114 in 1994, the jurisdiction of the regional trial courts was limited to real actions where
the assessed value exceeds P20,000.00, and P50,000.00 where the action is filed in Metro
Manila, thus:

SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
xxxx
(2) In all civil actions which involve the title to, or possession of, real property, or any interest
therein, where the assessed value of the property involved exceeds Twenty thousand pesos
(P20,000.00) or, for civil actions in Metro Manila, where such value exceeds Fifty thousand
pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts.
Under the law as modified, jurisdiction is determined by the assessed value of the property.
A reading of the complaint shows that respondents failed to state the assessed value of the
disputed land. The averments read:
xxxx
3. EUSEBIO VILLEGAS, deceased father of hte plaintiffs, is the registered owner
of a parcel of land situated in Barangay Pag-asa (formerly Barangay Tayuman),
Binangonan, Rizal with a land area of 18,369 square meters. The same is covered by
and embraced in Transfer Certificate of Title No. 46891 of the Registry of Deeds for
the Province of Rizal. x x x.
4. Plaintiffs are the legal heirs of EUSEBIO VILLEGAS and succeeded to the
subject parcel of land by virtue of their inheritance rights as compulsory heirs of said
deceased Eusebio Villegas and upon his death, immediately took over and were
enjoying the peaceful possession of the said parcel of land and exercising said rights
of possession and ownership thereof;
5. That sometime in 1996, defendant Honorio Bernardo, by stealth and in guise of
merely grazing his cattle, without the consent of the plaintiffs, surreptitiously
entered into the possession of a portion of the subject parcel of land. Employing
threats and intimidations, he claimed later that the area he illegally occupied is
purportedly not part and parcel of the land owned by the plaintiffs predecessor,
Eusebio Villegas, and forcibly fenced and built his house on the portion of land he
illegally occupied;
6. Not being content with his own forcible and unlawful invasion, usurpation and
incursion into the plaintiffs parcel of land, and in furtherance of his desire to
forcibly exclude the plaintiffs of their lawful and for possession of the subject
portion of plaintiffs parcel of land, defendant Bernardo, conspired and confederated
with defendants Romeo Gaza and Monina Francisco by surreptitiously and illegally
constructing their own houses on the subject parcel of land through stealth and
intimidation;

7. That the issue of the possession of the subject parcel of land was brought under
the Barangay Justice System in 1996 for conciliation but, no settlement was reached
by the parties. Copies of the Certifications issued by the Barangay for that matter is
hereto attached and marked as Annex "B";
8. That the defendants have forcibly, unlawfully, and unjustly dispossessed and still
continues to forcibly, unlawfully, and unjustly dispossesses the plaintiffs of their
lawful rights of possession and ownership on a portion of the subject property since
1966 up to the present;
9. Because of the unjust refusal of the defendants to vacate the premises, plaintiffs
were constrained to engage the services of counsel to protect their interest on the
property for an agreed attorneys fee of P50,000.00, and have incurred litigation
expenses[;]
10. By reason of the unlawful and forcible invasion by the defendants of the
property of the plaintiffs which was accompanied by threats and intimidation, the
plaintiffs have suffered and continue to suffer anxiety and sleepless nights for which
the defendants should be made to indemnify by way of moral damages in the
amount of at least P100,000.00;
11. To serve as an example to others who might be minded to commit similar
wanton and unlawful acts, defendants should be held answerable for exemplary
damages of not less than P50,000.00.15
This fact was noted by the Court of Appeals in its Decision but it proceeded to rule in this
wise:
Records show that at the time plaintiffs-appellees filed their complaint below, R.A. No. 7691
which amended Batas Pambansa Blg. 129 was already in effect. However, the complaint failed
to allege the assessed value of the real property involved. Although appellant indeed raised the
issue of jurisdiction in his answer, he had not filed a motion to dismiss on this ground nor
reiterated the matter thereafter but actively participated in the proceedings after the denial of
his demurrer to evidence anchored on the failure of the plaintiffs to identify in their complaint
all the heirs of the registered owner and supposed lack of technical description of the property
in the certificate of title. Indeed, appellant is now estopped to question the trial courts
jurisdiction over the subject matter and nature of the case having actively pursued throughout
the trial, by filing various pleadings and presenting all relevant documentary and testimonial
evidence, his theory that the portion occupied by him is not covered by the torrens title of
Eusebio Villegas.16
We agree.
As already shown, nowhere in the complaint was the assessed value of the subject property
ever mentioned. There is no showing on the face of the complaint that the RTC has
jurisdiction exclusive of the MTC. Indeed, absent any allegation in the complaint of the
assessed value of the property, it cannot readily be determined which of the two trial courts
had original and exclusive jurisdiction over the case.17

The general rule is that the jurisdiction of a court may be questioned at any stage of the
proceedings.18 Lack of jurisdiction is one of those excepted grounds where the court may
dismiss a claim or a case at any time when it appears from the pleadings or the evidence on
record that any of those grounds exists, even if they were not raised in the answer or in a
motion to dismiss. 19 The reason is that jurisdiction is conferred by law, and lack of it affects
the very authority of the court to take cognizance of and to render judgment on the action. 20
However, estoppel sets in when a party participates in all stages of a case before challenging
the jurisdiction of the lower court. One cannot belatedly reject or repudiate its decision after
voluntarily submitting to its jurisdiction, just to secure affirmative relief against one's
opponent or after failing to obtain such relief. The Court has, time and again, frowned upon
the undesirable practice of a party submitting a case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of jurisdiction when adverse. 21
In Tijam, the Court held that it is iniquitous and unfair to void the trial courts decision for
lack of jurisdiction considering that it was raised only after fifteen (15) years of tedious
litigation, thus:
The facts of this case show that from the time the Surety became a quasi-party on July 31,
1948, it could have raised the question of the lack of jurisdiction of the Court of First Instance
of Cebu to take cognizance of the present action by reason of the sum of money involved
which, according to the law then in force, was within the original exclusive jurisdiction of
inferior courts. It failed to do so. Instead, at several stages of the proceedings in the court a
quo as well as in the Court of Appeals, it invoked the jurisdiction of said courts to obtain
affirmative relief and submitted its case for a final adjudication on the merits. It was only after
an adverse decision was rendered by the Court of Appeals that it finally woke up to raise the
question of jurisdiction. Were we to sanction such conduct on its part, We would in effect be
declaring as useless all the proceedings had in the present case since it was commenced on
July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The
inequity and unfairness of this is not only patent but revolting. 22

up with the argument that the decision is void because there was no allegation in the complaint
about the value of the property.
Clearly, petitioner is estopped from questioning the jurisdiction of the RTC.
We note that the decisions of the RTC and of the Court of Appeals discussed extensively the
merits of the case, which has been pending for nearly ten (10) years. It was handled by two (2)
judges and its records had to be reconstituted after the fire that gutted the courthouse. 24 If we
were to accede to petitioners prayer, all the effort, time and expenses of parties who
participated in the litigation would be wasted. Quite obviously, petitioner wants a repetition of
the process hoping for the possibility of a reversal of the decision. The Court will not
countenance such practice.
Significantly, the Technical Report on Verification Survey25 by Engineer Robert C.
Pangyarihan, which was attached to and formed part of the records, contained a tax
declaration26 indicating that the subject property has an assessed value of P110,220.00. It is
basic that the tax declaration indicating the assessed value of the property enjoys the
presumption of regularity as it has been issued by the proper government agency. 27 Under
Republic Act No. 7691, the RTC in fact has jurisdiction over the subject matter of the
action.1avvphi1>
Taking into consideration the decision of the MTC proclaiming that the case is one for accion
publiciana and the assessed value of the property as evidenced by the case records,
jurisdiction pertains, rightfully so, with the RTC. Perforce, the petition should be denied.
WHEREFORE, the decision of the Court of Appeals dated 21 April 2008, affirming the
judgment of the Regional Trial Court of Binangonan, Rizal dated 5 March 2007, is
AFFIRMED.
SO ORDERED.

The principle of justice and equity as espoused in Tijam should be applied in this case. The
MTC dismissed the ejectment case upon its ruling that the case is for accion publiciana. It did
not assert jurisdiction over the case even if it could have done so based on the assessed value
of the property subject of the accion publiciana. And there was no showing, indeed, not even
an allegation, that the MTC was not aware of its jurisdictional authority over an accion
publiciana involving property in the amount stated in the law. Moreover, petitioner did not
bring up the issue of jurisdictional amount that would have led the MTC to proceed with the
trial of the case. Petitioner obviously considered the dismissal to be in his favor. When, as a
result of such dismissal, respondents brought the case as accion publiciana before the RTC,
petitioner never brought up the issue of jurisdictional amount. What petitioner mentioned in
his Answer before the RTC was the generally phrased allegation that "the Honorable Court
has no jurisdiction over the subject matter and the nature of the action in the above-entitled
case."23
This general assertion, which lacks any basis, is not sufficient. Clearly, petitioner failed to
point out the omission of the assessed value in the complaint. Petitioner actively participated
during the trial by adducing evidence and filing numerous pleadings, none of which mentioned
any defect in the jurisdiction of the RTC. It was only on appeal before the Court of Appeals,
after he obtained an adverse judgment in the trial court, that petitioner, for the first time, came

G.R. No. 169793

a) ORDERING the defendant to vacate the portion of the parcels of land described
in Transfer Certificates of Title Nos. T-256650 and T-256651 he is now occupying
and surrender it to the plaintiff;

September 15, 2006

VICTORIANO M. ENCARNACION, petitioner,

vs.
NIEVES AMIGO, respondent.

b) ORDERING the defendant to pay the plaintiff the sum of FIVE THOUSAND
PESOS (P5,000) as attorney's fees, and

DECISION
YNARES-SANTIAGO, J.:

c) ORDERING the defendant to pay rentals equivalent [to] P500.00 per month from
February, 2001 until the portion of the land occupied by him is surrendered to the
plaintiff.

This petition for review assails the June 30, 2005 Decision 1 of the Court of Appeals in CAG.R. SP No. 73857, ordering the remand of Civil Case No. Br. 20-1194 to the Regional Trial
Court of Cauayan, Isabela, Branch 20, for further proceedings.

COSTS against the defendant.

SO ORDERED.8

The antecedent facts are as follows:

On appeal, the Regional Trial Court of Cauayan, Isabela, Branch 20, ruled as follows:
Petitioner Victoriano M. Encarnacion is the registered owner of Lot No. 2121-B-1, consisting
of 100 square meters and covered by TCT No. T-256650; and Lot No. 2121-B-2 consisting of
607 square meters with TCT No. T-256651, located at District 1, National Hi-way, Cauayan,
Isabela. Said two lots originally form part of Lot No. 2121, a single 707 square meter track of
land owned by Rogelio Valiente who sold the same to Nicasio Mallapitan on January 18,
1982. On March 21, 1985, Mallapitan sold the land to Victoriano Magpantay. After the death
of the latter in 1992, his widow, Anita N. Magpantay executed an Affidavit of Waiver 2 on
April 11, 1995 waving her right over the property in favor of her son-in-law, herein petitioner,
Victoriano Encarnacion. Thereafter, the latter caused the subdivision of the land into two
lots3 and the issuance of titles in his name on July 18, 1996.4
Respondent Nieves Amigo allegedly entered the premises and took possession of a portion of
the property sometime in 1985 without the permission of the then owner, Victoriano
Magpantay. Said occupation by respondent continued even after TCT Nos. T-256650 and T256651 were issue to petitioner.

WHEREFORE, judgment is hereby rendered dismissing the case on the ground that
as the Municipal Court had no jurisdiction over the case, this Court acquired no
appellate jurisdiction thereof. Costs against plaintiff-appellee.
SO ORDERED.9
Aggrieved, petitioner filed a petition for review10 under Rule 42 of the Rules of Court before
the Court of Appeals which promulgated the assailed Decision remanding the case to the
Regional Trial Court. The dispositive portion thereof reads:
WHEREFORE, premises considered, this case is hereby REMANDED to Branch
20, Regional Trial Court of Cauayan, Isabela for further proceedings.
No costs.

Consequently, petitioner, through his lawyer sent a letter dated Febuary 1, 2001 demanding
that the respondent vacate the subject property. As evidenced by the registry return receipt, the
demand letter was delivered by registered mail to the respondent on February 12, 2001.
Notwithstanding receipt of the demand letter, respondent still refused to vacate the subject
property. Thereafter, on March 2, 2001, petitioner filed a complaint 6 for ejectment, damages
with injunction and prayer for restraining order with the Municipal Trial Court in Cities of
Isabela which was docketed as CV-01-030. In his Answer, respondent alleged that he has been
in actual possession and occupation of a portion of the subject land since 1968 and that the
issuance of Free Patent and titles in the name of petitioner was tainted with irregularities. 7
On October 24, 2001, the Municipal Trial Court in Cities rendered judgment, which reads:
WHERE[FO]RE, there being a preponderance of evidence, a JUDGMENT is hereby
rendered in favor of the plaintiff VICTORIANO M. ENCARNACION and against
the defendant NIEVES AMIGOE (sic) as follows:

SO ORDERED.11
Hence the present petition raising the sole issue:
[WHETHER] THE COURT OF APPEALS ERRED IN HOLDING THAT THE
PROPER ACTION IN THIS CASE IS ACCION PUBLICIANA AND NOT
UNLAWFUL DETAINER AS DETERMINED BY THE ALLEGATIONS IN THE
COMPLAINT FILED BY PETITIONER.12
The petition lacks merit.
In this jurisdiction, the three kinds of actions for the recovery of possession of real property
are:

1. Accion interdictal, or an ejectment proceeding which may be either that for

forcible entry (detentacion) or unlawful detainer (desahucio), which is a summary
action for recovery of physical possession where the dispossession has not lasted for
more than one year, and should be brought in the proper inferior court;
2. Accion publiciana or the plenary action for the recovery of the real right of
possession, which should be brought in the proper Regional Trial Court when the
dispossession has lasted for more than one year; and
3. Accion reinvindicatoria or accion de reivindicacion, which is an action for the
recovery of ownership which must be brought in the proper Regional Trial Court. 13
Based on the foregoing distinctions, the material element that determines the proper action to
be filed for the recovery of the possession of the property in this case is the length of time of
dispossession. Under the Rules of Court, the remedies of forcible entry and unlawful detainer
are granted to a person deprived of the possession of any land or building by force,
intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession by virtue of any contract, express or implied, or the
legal representatives or assigns of any such lessor, vendor, vendee, or other person. These
remedies afford the person deprived of the possession to file at any time within one year after
such unlawful deprivation or withholding of possession, an action in the proper Municipal
Trial Court against the person or persons unlawfully withholding or depriving of possession,
or any person or persons claiming under them, for the restitution of such possession, together
with damages and costs.14 Thus, if the dispossession has not lasted for more than one year, an
ejectment proceeding is proper and the inferior court acquires jurisdiction. On the other hand,
if the dispossession lasted for more than one year, the proper action to be filed is an accion
publiciana which should be brought to the proper Regional Trial Court.
After a careful evaluation of the evidence on record of this case, we find that the Court of
Appeals committed no reversible error in holding that the proper action in this case is accion
publiciana; and in ordering the remand of the case to the Regional Trial Court of Cauayan,
Isabela, Branch 20, for further proceedings.
Well settled is the rule that jurisdiction of the court over the subject matter of the action is
determined by the allegations of the complaint at the time of its filing, irrespective of whether
or not the plaintiff is entitled to recover upon all or some of the claims asserted therein. What
determines the jurisdiction of the court is the nature of the action pleaded as appearing from
the allegations in the complaint. The averments therein and the character of the relief sought
are the ones to be consulted.15 On its face, the complaint must show enough ground for the
court to assume jurisdiction without resort to parol testimony.16
From the allegations in the complaint, it appears that the petitioner became the owner of the
property on April 11, 1995 by virtue of the waiver of rights executed by his mother-in-law. He
filed the complaint for ejectment on March 2, 2001 after his February 1, 2001 letter to the
respondent demanding that the latter vacate the premises remained unheeded. While it is true
that the demand letter was received by the respondent on February 12, 2001, thereby making
the filing of the complaint for ejectment fall within the requisite one year from last demand for
complaints for unlawful detainer, it is also equally true that petitioner became the owner of the
subject lot in 1995 and has been since that time deprived possession of a portion thereof. From

the date of the petitioner's dispossession in 1995 up to his filing of his complaint for ejectment
in 2001, almost 6 years have elapsed. The length of time that the petitioner was dispossessed
of his property made his cause of action beyond the ambit of an accion interdictal and
effectively made it one for accion publiciana. After the lapse of the one-year period, the suit
must be commenced in the Regional Trial Court via an accion publiciana which is a suit for
recovery of the right to possess. It is an ordinary civil proceeding to determine the better right
of possession of realty independently of title. It also refers to an ejectment suit filed after the
expiration of one year from the accrual of the cause of action or from the unlawful
withholding of possession of the realty.17
Previously, we have held that if the owner of the land knew that another person was occupying
his property way back in 1977 but the said owner only filed the complaint for ejectment in
1995, the proper action would be one foraccion publiciana and not one under the summary
procedure on ejectment. As explained by the Court:
We agree with the Court of Appeals that if petitioners are indeed the owners of the
subject lot and were unlawfully deprived of their right of possession, they should
present their claim before the regional trial court in an accion publiciana or
an accion reivindicatoria, and not before the metropolitan trial court in a summary
proceeding for unlawful detainer or forcible entry. For even if one is the owner of
the property, the possession thereof cannot be wrested from another who had been in
physical or material possession of the same for more than one year by resorting to a
summary action for ejectment.18
Hence, we agree with the Court of Appeals when it declared that:
The respondent's actual entry on the land of the petitioner was in 1985 but it was
only on March 2, 2001 or sixteen years after, when petitioner filed his ejectment
case. The respondent should have filed an accion publiciana case which is under the
jurisdiction of the RTC.
However, the RTC should have not dismissed the case.
Section 8, Rule 40 of the Rules of Court provides:
SECTION 8. Appeal from orders dismissing case without trial; lack of
jurisdiction. If an appeal is taken from an order of the lower court
dismissing the case without a trial on the merits, the Regional Trial Court
may affirm or reverse it, as the case may be. In case of affirmance and the
ground of dismissal is lack of jurisdiction over the subject matter, the
Regional Trial Court, if it has jurisdiction thereover, shall try the case on
the merits as if the case was originally filed with it. In case of reversal, the
case shall be remanded for further proceedings.
If the case was tried on the merits by the lower court without jurisdiction
over the subject matter, the Regional Trial Court on appeal shall not
dismiss the case if it has original jurisdiction thereof, but shall decide the
case in accordance with the preceding section, without prejudice to the

admission of amended pleadings and additional evidence in the interest of

justice.
The RTC should have taken cognizance of the case. If the case is tried on the
merits by the Municipal Court without jurisdiction over the subject matter, the
RTC on appeal may no longer dismiss the case if it has original jurisdiction
thereof. Moreover, the RTC shall no longer try the case on the merits, but shall
decide the case on the basis of the evidence presented in the lower court,
without prejudice to the admission of the amended pleadings and additional
evidence in the interest of justice.19
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated June
30, 2005 in CA-G.R. SP No. 73857 ordering the remand of Civil Case No. Br. 20-1194 to the
Regional Trial Court of Cauayan, Isabela, Branch 20, for further proceedings, is AFFIRMED.
No costs.
SO ORDERED.

G.R. No. 180321

March 20, 2013

EDITHA PADLAN, Petitioner,

vs.
ELENITA DINGLASAN and FELICISIMO DINGLASAN, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision1 dated June 29, 2007 of the
Court of Appeals (CA) in CA-G.R. CV No. 86983, and the Resolution2 dated October 23,
2007 denying petitioner's Motion for Reconsideration.3
The factual and procedural antecedents are as follows:
Elenita Dinglasan (Elenita) was the registered owner of a parcel of land designated as Lot No.
625 of the Limay Cadastre which is covered by Transfer Certificate of Title (TCT) No. T105602, with an aggregate area of 82,972 square meters. While on board a jeepney, Elenitas
mother, Lilia Baluyot (Lilia), had a conversation with one Maura Passion (Maura) regarding
the sale of the said property. Believing that Maura was a real estate agent, Lilia borrowed the
owners copy of the TCT from Elenita and gave it to Maura. Maura then subdivided the
property into several lots from Lot No. 625-A to Lot No. 625-O, under the name of Elenita
and her husband Felicisimo Dinglasan (Felicisimo).
Through a falsified deed of sale bearing the forged signature of Elenita and her husband
Felicisimo, Maura was able to sell the lots to different buyers. On April 26, 1990, Maura sold
Lot No. 625-K to one Lorna Ong (Lorna), who later caused the issuance of TCT No. 134932
for the subject property under her name. A few months later, or sometime in August 1990,
Lorna sold the lot to petitioner Editha Padlan for P4,000.00. Thus, TCT No. 134932 was
cancelled and TCT No. 137466 was issued in the name of petitioner.
After learning what had happened, respondents demanded petitioner to surrender possession of
Lot No. 625-K, but the latter refused. Respondents were then forced to file a case before the
Regional Trial Court (RTC) of Balanga, Bataan for the Cancellation of Transfer Certificate of
Title No. 137466, docketed as Civil Case No. 438-ML. Summons was, thereafter, served to
petitioner through her mother, Anita Padlan.
On December 13, 1999, respondents moved to declare petitioner in default and prayed that
they be allowed to present evidence ex parte.4
On January 17, 2000, petitioner, through counsel, filed an Opposition to Declare Defendant in
Default with Motion to Dismiss Case for Lack of Jurisdiction Over the Person of
Defendant.5 Petitioner claimed that the court did not acquire jurisdiction over her, because the
summons was not validly served upon her person, but only by means of substituted service
through her mother. Petitioner maintained that she has long been residing in Japan after she
married a Japanese national and only comes to the Philippines for a brief vacation once every
two years.

On April 5, 2001, Charlie Padlan, the brother of petitioner, testified that his sister is still in
Japan and submitted a copy of petitioners passport and an envelope of a letter that was
allegedly sent by his sister. Nevertheless, on April 5, 2001, the RTC issued an Order6 denying
petitioners motion to dismiss and declared her in default. Thereafter, trial ensued.
On July 1, 2005, the RTC rendered a Decision 7 finding petitioner to be a buyer in good faith
and, consequently, dismissed the complaint.
Not satisfied, respondents sought recourse before the CA, docketed as CA-G.R. No. CV No.
86983.
On June 29, 2007, the CA rendered a Decision 8 in favor of the respondent. Consequently, the
CA reversed and set aside the Decision of the RTC and ordered the cancellation of the TCT
issued in the name of Lorna and the petitioner, and the revival of respondents own title, to
wit:
WHEREFORE, in view of the foregoing, the Decision dated July
1, 2005 of the Regional Trial Court, Third Judicial Region, Branch 4, Mariveles, Bataan
(Stationed in Balanga, Bataan) in Civil Case No. 438-ML is hereby REVERSED and SET
ASIDE.
The Transfer Certificate of Title No. 134932 issued in the name of Lorna Ong and Transfer
Certificate of Title No. 137466 issued in the name of defendant-appellee Editha Padlan are
CANCELLED and Transfer Certificate of Title No. 134785 in the name of the plaintiffsappellants is REVIVED.
SO ORDERED.9
The CA found that petitioner purchased the property in bad faith from Lorna. The CA opined
that although a purchaser is not expected to go beyond the title, based on the circumstances
surrounding the sale, petitioner should have conducted further inquiry before buying the
disputed property. The fact that Lorna bought a 5,000-square-meter property for
only P4,000.00 and selling it after four months for the same amount should have put petitioner
on guard. With the submission of the Judgment in Criminal Case No. 4326 rendered by the
RTC, Branch 2, Balanga, Bataan, entitled People of the Philippines v. Maura Passion 10 and the
testimonies of respondents, the CA concluded that respondents sufficiently established that
TCT No. 134932 issued in the name of Lorna and TCT No. 137466 issued in the name of
petitioner were fraudulently issued and, therefore, null and void.
Aggrieved, petitioner filed a Motion for Reconsideration. Petitioner argued that not only did
the complaint lacks merit, the lower court failed to acquire jurisdiction over the subject matter
of the case and the person of the petitioner.
On October 23, 2007, the CA issued a Resolution11 denying the motion. The CA concluded
that the rationale for the exception made in the landmark case of Tijam v. Sibonghanoy12 was
present in the case. It reasoned that when the RTC denied petitioners motion to dismiss the
case for lack of jurisdiction, petitioner neither moved for a reconsideration of the order nor did

she avail of any remedy provided by the Rules. Instead, she kept silent and only became
interested in the case again when the CA rendered a decision adverse to her claim.

Section 1 of RA 7691, amending BP Blg. 129, provides that the RTC shall exercise exclusive
original jurisdiction on the following actions:

Hence, the petition assigning the following errors:

Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary
Reorganization Act of 1980," is hereby amended to read as follows:

I
WHETHER OR NOT THE HONORABLE COURT HAS JURISDICTION OVER THE
PERSON OF THE PETITIONER.

Sec. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;

II

(2) In all civil actions which involve the title to, or possession of, real property, or
any interest therein, where the assessed value of the property involved exceeds
Twenty Thousand Pesos (P20,000.00) or for civil actions in Metro Manila, where
such value exceeds Fifty Thousand Pesos (P50,000.00), except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts; x x x

WHETHER OR NOT THE HONORABLE COURT HAS JURISDICTION OVER THE

SUBJECT MATTER OF THE CASE.
III
WHETHER OR NOT PETITIONER IS A BUYER IN GOOD FAITH AND FOR VALUE.13
Petitioner maintains that the case of Tijam v. Sibonghanoy finds no application in the case at
bar, since the said case is not on all fours with the present case. Unlike in Tijam, wherein the
petitioner therein actively participated in the proceedings, petitioner herein asserts that she did
not participate in any proceedings before the RTC because she was declared in default.

Section 3 of RA 7691 expanded the exclusive original jurisdiction of the first level courts,
thus:

Petitioner insists that summons was not validly served upon her, considering that at the time
summons was served, she was residing in Japan. Petitioner contends that pursuant to Section
15, Rule 14 of the Rules of Civil Procedure, when the defendant does not reside in the
Philippines and the subject of the action is property within the Philippines of the defendant,
service may be effected out of the Philippines by personal service or by publication in a
newspaper of general circulation. In this case, summons was served only by substituted
service to her mother. Hence, the court did not acquire jurisdiction over her person.

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts shall exercise:

Also, petitioner posits that the court lacks jurisdiction of the subject matter, considering that
from the complaint, it can be inferred that the value of the property was only P4,000.00, which
was the amount alleged by respondents that the property was sold to petitioner by Lorna.
Finally, petitioner stresses that she was a buyer in good faith. It was Maura who defrauded the
respondents by selling the property to Lorna without their authority.
Respondents, on the other hand, argue that the CA was correct in ruling in their favor.

Section 3. Section 33 of the same law BP Blg. 129 is hereby amended to read as follows:

xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of,
real property, or any interest therein where the assessed value of the property or interest
therein does not exceed Twenty Thousand Pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty Thousand Pesos (P50,000.00)
exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and costs:
Provided, That in cases of land not declared for taxation purposes, the value of such property
shall be determined by the assessed value of the adjacent lots.
Respondents filed their Complaint with the RTC; hence, before proceeding any further with
any other issues raised by the petitioner, it is essential to ascertain whether the RTC has
jurisdiction over the subject matter of this case based on the above-quoted provisions.

The petition is meritorious.

Respondents filed the complaint in 1999, at the time Batas Pambansa Blg. (BP) 129, the
Judiciary Reorganization Act of 1980, was already amended by Republic Act (RA) No. 7691,
An Act Expanding the Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts,
and Municipal Circuit Trial Courts, amending for the purpose BP Blg. 129. 14

However, in order to determine which court has jurisdiction over the action, an examination of
the complaint is essential. Basic as a hornbook principle is that jurisdiction over the subject
matter of a case is conferred by law and determined by the allegations in the complaint which
comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action.
The nature of an action, as well as which court or body has jurisdiction over it, is determined

based on the allegations contained in the complaint of the plaintiff, irrespective of whether or
not the plaintiff is entitled to recover upon all or some of the claims asserted therein. The
averments in the complaint and the character of the relief sought are the ones to be consulted.
Once vested by the allegations in the complaint, jurisdiction also remains vested irrespective
of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein.15

subject property is the value alleged in the complaint that the lot was sold by Lorna to
petitioner in the amount of P4,000.00. No tax declaration was even presented that would show
the valuation of the subject property. In fact, in one of the hearings, respondents counsel
informed the court that they will present the tax declaration of the property in the next hearing
since they have not yet obtained a copy from the Provincial Assessors Office. 22 However,
they did not present such copy.

What determines the jurisdiction of the court is the nature of the action pleaded as appearing
from the allegations in the complaint. The averments therein and the character of the relief
sought are the ones to be consulted.16

To reiterate, where the ultimate objective of the plaintiffs is to obtain title to real property, it
should be filed in the proper court having jurisdiction over the assessed value of the property
subject thereof.23 Since the amount alleged in the Complaint by respondents for the disputed
lot is only P4,000.00, the MTC and not the RTC has jurisdiction over the action. Therefore, all
proceedings in the RTC are null and void.24

Respondents Complaint17 narrates that they are the duly registered owners of Lot No. 625 of
the Limay Cadastre which was covered by TCT No. T-105602. Without their knowledge and
consent, the land was divided into several lots under their names through the fraudulent
manipulations of Maura. One of the lots was Lot 625-K, which was covered by TCT No.
134785. On April 26, 1990, Maura sold the subject lot to Lorna. By virtue of the fictitious
sale, TCT No. 134785 was cancelled and TCT No. 134932 was issued in the name of Lorna.
Sometime in August 1990, Lorna sold the lot to petitioner for a consideration in the amount
of P4,000.00. TCT No. 134932 was later cancelled and TCT No. 137466 was issued in the
name of petitioner. Despite demands from the respondents, petitioner refused to surrender
possession of the subject property. Respondents were thus constrained to engage the services
of a lawyer and incur expenses for litigation. Respondents prayed for the RTC (a) to declare
TCT No. 137466 null and to revive TCT No. T-105602 which was originally issued and
registered in the name of the respondents; and (b) to order petitioner to pay attorneys fees in
the sum of P50,000.00 and litigation expenses ofP20,000.00, plus cost of suit.18
An action "involving title to real property" means that the plaintiff's cause of action is based
on a claim that he owns such property or that he has the legal rights to have exclusive control,
possession, enjoyment, or disposition of the same. Title is the "legal link between (1) a person
who owns property and (2) the property itself." "Title" is different from a "certificate of title"
which is the document of ownership under the Torrens system of registration issued by the
government through the Register of Deeds. While title is the claim, right or interest in real
property, a certificate of title is the evidence of such claim.19
In the present controversy, before the relief prayed for by the respondents in their complaint
can be granted, the issue of who between the two contending parties has the valid title to the
subject lot must first be determined before a determination of who between them is legally
entitled to the certificate of title covering the property in question.1wphi1
From the Complaint, the case filed by respondent is not simply a case for the cancellation of a
particular certificate of title and the revival of another. The determination of such issue merely
follows after a court of competent jurisdiction shall have first resolved the matter of who
between the conflicting parties is the lawful owner of the subject property and ultimately
entitled to its possession and enjoyment. The action is, therefore, about ascertaining which of
these parties is the lawful owner of the subject lot, jurisdiction over which is determined by
the assessed value of such lot.20
In no uncertain terms, the Court has already held that a complaint must allege the assessed
value of the real property subject of the complaint or the interest thereon to determine which
court has jurisdiction over the action.21 In the case at bar, the only basis of valuation of the

Consequently, the remaining issues raised by petitioner need not be discussed further.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R.
CV No. 86983, dated June 29, 2007, and its Resolution dated October 23, 2007, are
REVERSED and SET ASIDE. The Decision of the Regional Trial Court, dated July I, 2005, is
declared NULL and VOID. The complaint in Civil Case No. 438-ML is dismissed without
prejudice.
SO ORDERED.

G.R. No. 166006

March 14, 2008

PLANTERS PRODUCTS, INC., Petitioner,

vs.
FERTIPHIL CORPORATION, Respondent.
DECISION

Fertiphil filed a complaint for collection and damages8 against FPA and PPI with the RTC in
Makati. It questioned the constitutionality of LOI No. 1465 for being unjust, unreasonable,
oppressive, invalid and an unlawful imposition that amounted to a denial of due process of
law.9 Fertiphil alleged that the LOI solely favored PPI, a privately owned corporation, which
used the proceeds to maintain its monopoly of the fertilizer industry.
In its Answer,10 FPA, through the Solicitor General, countered that the issuance of LOI No.
1465 was a valid exercise of the police power of the State in ensuring the stability of the
fertilizer industry in the country. It also averred that Fertiphil did not sustain any damage from
the LOI because the burden imposed by the levy fell on the ultimate consumer, not the seller.

REYES, R.T., J.:

RTC Disposition

THE Regional Trial Courts (RTC) have the authority and jurisdiction to consider the
constitutionality of statutes, executive orders, presidential decrees and other issuances. The
Constitution vests that power not only in the Supreme Court but in all Regional Trial Courts.
The principle is relevant in this petition for review on certiorari of the Decision 1 of the Court
of Appeals (CA) affirming with modification that of the RTC in Makati City, 2 finding
petitioner Planters Products, Inc. (PPI) liable to private respondent Fertiphil Corporation
(Fertiphil) for the levies it paid under Letter of Instruction (LOI) No. 1465.
The Facts
Petitioner PPI and private respondent Fertiphil are private corporations incorporated under
Philippine laws.3 They are both engaged in the importation and distribution of fertilizers,
pesticides and agricultural chemicals.
On June 3, 1985, then President Ferdinand Marcos, exercising his legislative powers, issued
LOI No. 1465 which provided, among others, for the imposition of a capital recovery
component (CRC) on the domestic sale of all grades of fertilizers in the Philippines. 4 The LOI
provides:
3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to make PPI viable. Such capital
contribution shall be applied by FPA to all domestic sales of fertilizers in the
Philippines.5 (Underscoring supplied)
Pursuant to the LOI, Fertiphil paid P10 for every bag of fertilizer it sold in the domestic
market to the Fertilizer and Pesticide Authority (FPA). FPA then remitted the amount
collected to the Far East Bank and Trust Company, the depositary bank of PPI. Fertiphil
paid P6,689,144 to FPA from July 8, 1985 to January 24, 1986. 6
After the 1986 Edsa Revolution, FPA voluntarily stopped the imposition of the P10 levy. With
the return of democracy, Fertiphil demanded from PPI a refund of the amounts it paid under
LOI No. 1465, but PPI refused to accede to the demand.7

On November 20, 1991, the RTC rendered judgment in favor of Fertiphil, disposing as
follows:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the
plaintiff and against the defendant Planters Product, Inc., ordering the latter to pay the former:
1) the sum of P6,698,144.00 with interest at 12% from the time of judicial demand;
2) the sum of P100,000 as attorneys fees;
3) the cost of suit.
SO ORDERED.11
Ruling that the imposition of the P10 CRC was an exercise of the States inherent power of
taxation, the RTC invalidated the levy for violating the basic principle that taxes can only be
levied for public purpose, viz.:
It is apparent that the imposition of P10 per fertilizer bag sold in the country by LOI 1465 is
purportedly in the exercise of the power of taxation. It is a settled principle that the power of
taxation by the state is plenary. Comprehensive and supreme, the principal check upon its
abuse resting in the responsibility of the members of the legislature to their constituents.
However, there are two kinds of limitations on the power of taxation: the inherent limitations
and the constitutional limitations.
One of the inherent limitations is that a tax may be levied only for public purposes:
The power to tax can be resorted to only for a constitutionally valid public purpose. By the
same token, taxes may not be levied for purely private purposes, for building up of private
fortunes, or for the redress of private wrongs. They cannot be levied for the improvement of
private property, or for the benefit, and promotion of private enterprises, except where the aid
is incident to the public benefit. It is well-settled principle of constitutional law that no general
tax can be levied except for the purpose of raising money which is to be expended for public
use. Funds cannot be exacted under the guise of taxation to promote a purpose that is not of

public interest. Without such limitation, the power to tax could be exercised or employed as an
authority to destroy the economy of the people. A tax, however, is not held void on the ground
of want of public interest unless the want of such interest is clear. (71 Am. Jur. pp. 371-372)
In the case at bar, the plaintiff paid the amount of P6,698,144.00 to the Fertilizer and Pesticide
Authority pursuant to the P10 per bag of fertilizer sold imposition under LOI 1465 which, in
turn, remitted the amount to the defendant Planters Products, Inc. thru the latters depository
bank, Far East Bank and Trust Co. Thus, by virtue of LOI 1465 the plaintiff, Fertiphil
Corporation, which is a private domestic corporation, became poorer by the amount
ofP6,698,144.00 and the defendant, Planters Product, Inc., another private domestic
corporation, became richer by the amount of P6,698,144.00.
Tested by the standards of constitutionality as set forth in the afore-quoted jurisprudence, it is
quite evident that LOI 1465 insofar as it imposes the amount of P10 per fertilizer bag sold in
the country and orders that the said amount should go to the defendant Planters Product, Inc. is
unlawful because it violates the mandate that a tax can be levied only for a public purpose and
not to benefit, aid and promote a private enterprise such as Planters Product, Inc.12
PPI moved for reconsideration but its motion was denied.13 PPI then filed a notice of appeal
with the RTC but it failed to pay the requisite appeal docket fee. In a separate but related
proceeding, this Court14 allowed the appeal of PPI and remanded the case to the CA for proper
disposition.

opportunity; and lastly, the issue of constitutionality must be the very lis mota of the case
(Integrated Bar of the Philippines v. Zamora, 338 SCRA 81 [2000]).
Indisputably, the present case was primarily instituted for collection and damages. However, a
perusal of the complaint also reveals that the instant action is founded on the claim that the
levy imposed was an unlawful and unconstitutional special assessment. Consequently, the
requisite that the constitutionality of the law in question be the very lis mota of the case is
present, making it proper for the trial court to rule on the constitutionality of LOI 1465.16
The CA held that even on the assumption that LOI No. 1465 was issued under the police
power of the state, it is still unconstitutional because it did not promote public welfare. The
CA explained:
In declaring LOI 1465 unconstitutional, the trial court held that the levy imposed under the
said law was an invalid exercise of the States power of taxation inasmuch as it violated the
inherent and constitutional prescription that taxes be levied only for public purposes. It
reasoned out that the amount collected under the levy was remitted to the depository bank of
PPI, which the latter used to advance its private interest.
On the other hand, appellant submits that the subject statutes passage was a valid exercise of
police power. In addition, it disputes the court a quos findings arguing that the collections
under LOI 1465 was for the benefit of Planters Foundation, Incorporated (PFI), a foundation
created by law to hold in trust for millions of farmers, the stock ownership of PPI.

CA Decision
On November 28, 2003, the CA handed down its decision affirming with modification that of
the RTC, with the following fallo:
IN VIEW OF ALL THE FOREGOING, the decision appealed from is hereby AFFIRMED,
subject to the MODIFICATION that the award of attorneys fees is hereby DELETED. 15
In affirming the RTC decision, the CA ruled that the lis mota of the complaint for collection
was the constitutionality of LOI No. 1465, thus:
The question then is whether it was proper for the trial court to exercise its power to judicially
determine the constitutionality of the subject statute in the instant case.
As a rule, where the controversy can be settled on other grounds, the courts will not resolve
the constitutionality of a law (Lim v. Pacquing, 240 SCRA 649 [1995]). The policy of the
courts is to avoid ruling on constitutional questions and to presume that the acts of political
departments are valid, absent a clear and unmistakable showing to the contrary.
However, the courts are not precluded from exercising such power when the following
requisites are obtaining in a controversy before it: First, there must be before the court an
actual case calling for the exercise of judicial review. Second, the question must be ripe for
adjudication. Third, the person challenging the validity of the act must have standing to
challenge. Fourth, the question of constitutionality must have been raised at the earliest

Of the three fundamental powers of the State, the exercise of police power has been
characterized as the most essential, insistent and the least limitable of powers, extending as it
does to all the great public needs. It may be exercised as long as the activity or the property
sought to be regulated has some relevance to public welfare (Constitutional Law, by Isagani
A. Cruz, p. 38, 1995 Edition).
Vast as the power is, however, it must be exercised within the limits set by the Constitution,
which requires the concurrence of a lawful subject and a lawful method. Thus, our courts have
laid down the test to determine the validity of a police measure as follows: (1) the interests of
the public generally, as distinguished from those of a particular class, requires its exercise; and
(2) the means employed are reasonably necessary for the accomplishment of the purpose and
not unduly oppressive upon individuals (National Development Company v. Philippine
Veterans Bank, 192 SCRA 257 [1990]).
It is upon applying this established tests that We sustain the trial courts holding LOI 1465
unconstitutional. To be sure, ensuring the continued supply and distribution of fertilizer in the
country is an undertaking imbued with public interest. However, the method by which LOI
1465 sought to achieve this is by no means a measure that will promote the public welfare.
The governments commitment to support the successful rehabilitation and continued viability
of PPI, a private corporation, is an unmistakable attempt to mask the subject statutes
impartiality. There is no way to treat the self-interest of a favored entity, like PPI, as identical
with the general interest of the countrys farmers or even the Filipino people in general. Well
to stress, substantive due process exacts fairness and equal protection disallows distinction
where none is needed. When a statutes public purpose is spoiled by private interest, the use of
police power becomes a travesty which must be struck down for being an arbitrary exercise of

government power. To rule in favor of appellant would contravene the general principle that
revenues derived from taxes cannot be used for purely private purposes or for the exclusive
benefit of private individuals.17

PPI moved for reconsideration but its motion was denied.19 It then filed the present petition
with this Court.
Issues

The CA did not accept PPIs claim that the levy imposed under LOI No. 1465 was for the
benefit of Planters Foundation, Inc., a foundation created to hold in trust the stock ownership
of PPI. The CA stated:
Appellant next claims that the collections under LOI 1465 was for the benefit of Planters
Foundation, Incorporated (PFI), a foundation created by law to hold in trust for millions of
farmers, the stock ownership of PFI on the strength of Letter of Undertaking (LOU) issued by
then Prime Minister Cesar Virata on April 18, 1985 and affirmed by the Secretary of Justice in
an Opinion dated October 12, 1987, to wit:
"2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA to
include in its fertilizer pricing formula a capital recovery component, the proceeds of which
will be used initially for the purpose of funding the unpaid portion of the outstanding capital
stock of Planters presently held in trust by Planters Foundation, Inc. (Planters Foundation),
which unpaid capital is estimated at approximately P206 million (subject to validation by
Planters and Planters Foundation) (such unpaid portion of the outstanding capital stock of
Planters being hereafter referred to as the Unpaid Capital), and subsequently for such capital
increases as may be required for the continuing viability of Planters.
The capital recovery component shall be in the minimum amount of P10 per bag, which will
be added to the price of all domestic sales of fertilizer in the Philippines by any importer
and/or fertilizer mother company. In this connection, the Republic hereby acknowledges that
the advances by Planters to Planters Foundation which were applied to the payment of the
Planters shares now held in trust by Planters Foundation, have been assigned to, among others,
the Creditors. Accordingly, the Republic, through FPA, hereby agrees to deposit the proceeds
of the capital recovery component in the special trust account designated in the notice dated
April 2, 1985, addressed by counsel for the Creditors to Planters Foundation. Such proceeds
shall be deposited by FPA on or before the 15th day of each month.
The capital recovery component shall continue to be charged and collected until payment in
full of (a) the Unpaid Capital and/or (b) any shortfall in the payment of the Subsidy
Receivables, (c) any carrying cost accruing from the date hereof on the amounts which may be
outstanding from time to time of the Unpaid Capital and/or the Subsidy Receivables and (d)
the capital increases contemplated in paragraph 2 hereof. For the purpose of the foregoing
clause (c), the carrying cost shall be at such rate as will represent the full and reasonable cost
to Planters of servicing its debts, taking into account both its peso and foreign currencydenominated obligations." (Records, pp. 42-43)

Petitioner PPI raises four issues for Our consideration, viz.:

I
THE CONSTITUTIONALITY OF LOI 1465 CANNOT BE COLLATERALLY
ATTACKED AND BE DECREED VIA A DEFAULT JUDGMENT IN A CASE FILED FOR
COLLECTION AND DAMAGES WHERE THE ISSUE OF CONSTITUTIONALITY IS
NOT THE VERY LIS MOTA OF THE CASE. NEITHER CAN LOI 1465 BE
CHALLENGED BY ANY PERSON OR ENTITY WHICH HAS NO STANDING TO DO
SO.
II
LOI 1465, BEING A LAW IMPLEMENTED FOR THE PURPOSE OF ASSURING THE
FERTILIZER SUPPLY AND DISTRIBUTION IN THE COUNTRY, AND FOR
BENEFITING A FOUNDATION CREATED BY LAW TO HOLD IN TRUST FOR
MILLIONS OF FARMERS THEIR STOCK OWNERSHIP IN PPI CONSTITUTES A
VALID LEGISLATION PURSUANT TO THE EXERCISE OF TAXATION AND POLICE
POWER FOR PUBLIC PURPOSES.
III
THE AMOUNT COLLECTED UNDER THE CAPITAL RECOVERY COMPONENT WAS
REMITTED TO THE GOVERNMENT, AND BECAME GOVERNMENT FUNDS
PURSUANT TO AN EFFECTIVE AND VALIDLY ENACTED LAW WHICH IMPOSED
DUTIES AND CONFERRED RIGHTS BY VIRTUE OF THE PRINCIPLE OF
"OPERATIVE FACT" PRIOR TO ANY DECLARATION OF UNCONSTITUTIONALITY
OF LOI 1465.
IV
THE PRINCIPLE OF UNJUST VEXATION (SHOULD BE ENRICHMENT) FINDS NO
APPLICATION IN THE INSTANT CASE.20 (Underscoring supplied)
Our Ruling

Appellants proposition is open to question, to say the least. The LOU issued by then Prime
Minister Virata taken together with the Justice Secretarys Opinion does not preponderantly
demonstrate that the collections made were held in trust in favor of millions of farmers.
Unfortunately for appellant, in the absence of sufficient evidence to establish its claims, this
Court is constrained to rely on what is explicitly provided in LOI 1465 that one of the
primary aims in imposing the levy is to support the successful rehabilitation and continued
viability of PPI.18

We shall first tackle the procedural issues of locus standi and the jurisdiction of the RTC to
resolve constitutional issues.
Fertiphil has locus standi because it suffered direct injury; doctrine of standing is a mere
procedural technicality which may be waived.

PPI argues that Fertiphil has no locus standi to question the constitutionality of LOI No. 1465
because it does not have a "personal and substantial interest in the case or will sustain direct
injury as a result of its enforcement."21 It asserts that Fertiphil did not suffer any damage from
the CRC imposition because "incidence of the levy fell on the ultimate consumer or the
farmers themselves, not on the seller fertilizer company."22
We cannot agree. The doctrine of locus standi or the right of appearance in a court of justice
has been adequately discussed by this Court in a catena of cases. Succinctly put, the doctrine
requires a litigant to have a material interest in the outcome of a case. In private suits, locus
standi requires a litigant to be a "real party in interest," which is defined as "the party who
stands to be benefited or injured by the judgment in the suit or the party entitled to the avails
of the suit."23
In public suits, this Court recognizes the difficulty of applying the doctrine especially when
plaintiff asserts a public right on behalf of the general public because of conflicting public
policy issues. 24 On one end, there is the right of the ordinary citizen to petition the courts to
be freed from unlawful government intrusion and illegal official action. At the other end, there
is the public policy precluding excessive judicial interference in official acts, which may
unnecessarily hinder the delivery of basic public services.
In this jurisdiction, We have adopted the "direct injury test" to determine locus standi in public
suits. In People v. Vera,25 it was held that a person who impugns the validity of a statute must
have "a personal and substantial interest in the case such that he has sustained, or will sustain
direct injury as a result." The "direct injury test" in public suits is similar to the "real party in
interest" rule for private suits under Section 2, Rule 3 of the 1997 Rules of Civil Procedure. 26
Recognizing that a strict application of the "direct injury" test may hamper public interest, this
Court relaxed the requirement in cases of "transcendental importance" or with "far reaching
implications." Being a mere procedural technicality, it has also been held that locus standi may
be waived in the public interest.27
Whether or not the complaint for collection is characterized as a private or public suit,
Fertiphil has locus standi to file it. Fertiphil suffered a direct injury from the enforcement of
LOI No. 1465. It was required, and it did pay, theP10 levy imposed for every bag of fertilizer
sold on the domestic market. It may be true that Fertiphil has passed some or all of the levy to
the ultimate consumer, but that does not disqualify it from attacking the constitutionality of the
LOI or from seeking a refund. As seller, it bore the ultimate burden of paying the levy. It faced
the possibility of severe sanctions for failure to pay the levy. The fact of payment is sufficient
injury to Fertiphil.
Moreover, Fertiphil suffered harm from the enforcement of the LOI because it was compelled
to factor in its product the levy. The levy certainly rendered the fertilizer products of Fertiphil
and other domestic sellers much more expensive. The harm to their business consists not only
in fewer clients because of the increased price, but also in adopting alternative corporate
strategies to meet the demands of LOI No. 1465. Fertiphil and other fertilizer sellers may have
shouldered all or part of the levy just to be competitive in the market. The harm occasioned on
the business of Fertiphil is sufficient injury for purposes of locus standi.

Even assuming arguendo that there is no direct injury, We find that the liberal policy
consistently adopted by this Court on locus standi must apply. The issues raised by Fertiphil
are of paramount public importance. It involves not only the constitutionality of a tax law but,
more importantly, the use of taxes for public purpose. Former President Marcos issued LOI
No. 1465 with the intention of rehabilitating an ailing private company. This is clear from the
text of the LOI. PPI is expressly named in the LOI as the direct beneficiary of the levy. Worse,
the levy was made dependent and conditional upon PPI becoming financially viable. The LOI
provided that "the capital contribution shall be collected until adequate capital is raised to
make PPI viable."
The constitutionality of the levy is already in doubt on a plain reading of the statute. It is Our
constitutional duty to squarely resolve the issue as the final arbiter of all justiciable
controversies. The doctrine of standing, being a mere procedural technicality, should be
waived, if at all, to adequately thresh out an important constitutional issue.
RTC may resolve constitutional issues; the constitutional issue was adequately raised in the
complaint; it is the lis mota of the case.
PPI insists that the RTC and the CA erred in ruling on the constitutionality of the LOI. It
asserts that the constitutionality of the LOI cannot be collaterally attacked in a complaint for
collection.28 Alternatively, the resolution of the constitutional issue is not necessary for a
determination of the complaint for collection.29
Fertiphil counters that the constitutionality of the LOI was adequately pleaded in its complaint.
It claims that the constitutionality of LOI No. 1465 is the very lis mota of the case because the
trial court cannot determine its claim without resolving the issue. 30
It is settled that the RTC has jurisdiction to resolve the constitutionality of a statute,
presidential decree or an executive order. This is clear from Section 5, Article VIII of the 1987
Constitution, which provides:
SECTION 5. The Supreme Court shall have the following powers:
xxxx
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the Rules of
Court may provide,final judgments and orders of lower courts in:
(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation
is in question. (Underscoring supplied)
In Mirasol v. Court of Appeals,31 this Court recognized the power of the RTC to resolve
constitutional issues, thus:
On the first issue. It is settled that Regional Trial Courts have the authority and jurisdiction to
consider the constitutionality of a statute, presidential decree, or executive order. The
Constitution vests the power of judicial review or the power to declare a law, treaty,

international or executive agreement, presidential decree, order, instruction, ordinance, or

regulation not only in this Court, but in all Regional Trial Courts.32

fertilizer industry to the detriment of other distributors and importers. 38 (Underscoring

supplied)

In the recent case of Equi-Asia Placement, Inc. v. Department of Foreign Affairs,33 this Court
reiterated:

The constitutionality of LOI No. 1465 is also the very lis mota of the complaint for collection.
Fertiphil filed the complaint to compel PPI to refund the levies paid under the statute on the
ground that the law imposing the levy is unconstitutional. The thesis is that an unconstitutional
law is void. It has no legal effect. Being void, Fertiphil had no legal obligation to pay the levy.
Necessarily, all levies duly paid pursuant to an unconstitutional law should be refunded under
the civil code principle against unjust enrichment. The refund is a mere consequence of the
law being declared unconstitutional. The RTC surely cannot order PPI to refund Fertiphil if it
does not declare the LOI unconstitutional. It is the unconstitutionality of the LOI which
triggers the refund. The issue of constitutionality is the very lis mota of the complaint with the
RTC.

There is no denying that regular courts have jurisdiction over cases involving the validity or
constitutionality of a rule or regulation issued by administrative agencies. Such jurisdiction,
however, is not limited to the Court of Appeals or to this Court alone for even the regional
trial courts can take cognizance of actions assailing a specific rule or set of rules promulgated
by administrative bodies. Indeed, the Constitution vests the power of judicial review or the
power to declare a law, treaty, international or executive agreement, presidential decree, order,
instruction, ordinance, or regulation in the courts, including the regional trial courts. 34
Judicial review of official acts on the ground of unconstitutionality may be sought or availed
of through any of the actions cognizable by courts of justice, not necessarily in a suit for
declaratory relief. Such review may be had in criminal actions, as in People v.
Ferrer35 involving the constitutionality of the now defunct Anti-Subversion law, or in ordinary
actions, as in Krivenko v. Register of Deeds36 involving the constitutionality of laws
prohibiting aliens from acquiring public lands. The constitutional issue, however, (a) must be
properly raised and presented in the case, and (b) its resolution is necessary to a determination
of the case, i.e., the issue of constitutionality must be the very lis mota presented. 37
Contrary to PPIs claim, the constitutionality of LOI No. 1465 was properly and adequately
raised in the complaint for collection filed with the RTC. The pertinent portions of the
complaint allege:
6. The CRC of P10 per bag levied under LOI 1465 on domestic sales of all grades of fertilizer
in the Philippines, isunlawful, unjust, uncalled for, unreasonable, inequitable and
oppressive because:
xxxx
(c) It favors only one private domestic corporation, i.e., defendant PPPI, and imposed at the
expense and disadvantage of the other fertilizer importers/distributors who were themselves in
tight business situation and were then exerting all efforts and maximizing management and
marketing skills to remain viable;
xxxx
(e) It was a glaring example of crony capitalism, a forced program through which the PPI,
having been presumptuously masqueraded as "the" fertilizer industry itself, was the sole and
anointed beneficiary;
7. The CRC was an unlawful; and unconstitutional special assessment and its imposition is
tantamount to illegal exaction amounting to a denial of due process since the persons of
entities which had to bear the burden of paying the CRC derived no benefit therefrom; that on
the contrary it was used by PPI in trying to regain its former despicable monopoly of the

The P10 levy under LOI No. 1465 is an exercise of the power of taxation.
At any rate, the Court holds that the RTC and the CA did not err in ruling against the
constitutionality of the LOI.
PPI insists that LOI No. 1465 is a valid exercise either of the police power or the power of
taxation. It claims that the LOI was implemented for the purpose of assuring the fertilizer
supply and distribution in the country and for benefiting a foundation created by law to hold in
trust for millions of farmers their stock ownership in PPI.
Fertiphil counters that the LOI is unconstitutional because it was enacted to give benefit to a
private company. The levy was imposed to pay the corporate debt of PPI. Fertiphil also argues
that, even if the LOI is enacted under the police power, it is still unconstitutional because it did
not promote the general welfare of the people or public interest.
Police power and the power of taxation are inherent powers of the State. These powers are
distinct and have different tests for validity. Police power is the power of the State to enact
legislation that may interfere with personal liberty or property in order to promote the general
welfare,39 while the power of taxation is the power to levy taxes to be used for public purpose.
The main purpose of police power is the regulation of a behavior or conduct, while taxation is
revenue generation. The "lawful subjects" and "lawful means" tests are used to determine the
validity of a law enacted under the police power.40 The power of taxation, on the other hand, is
circumscribed by inherent and constitutional limitations.
We agree with the RTC that the imposition of the levy was an exercise by the State of its
taxation power. While it is true that the power of taxation can be used as an implement of
police power,41 the primary purpose of the levy is revenue generation. If the purpose is
primarily revenue, or if revenue is, at least, one of the real and substantial purposes, then the
exaction is properly called a tax.42
In Philippine Airlines, Inc. v. Edu,43 it was held that the imposition of a vehicle registration fee
is not an exercise by the State of its police power, but of its taxation power, thus:
It is clear from the provisions of Section 73 of Commonwealth Act 123 and Section 61 of the
Land Transportation and Traffic Code that the legislative intent and purpose behind the law

requiring owners of vehicles to pay for their registration is mainly to raise funds for the
construction and maintenance of highways and to a much lesser degree, pay for the operating
expenses of the administering agency. x x x Fees may be properly regarded as taxes even
though they also serve as an instrument of regulation.
Taxation may be made the implement of the state's police power (Lutz v. Araneta, 98 Phil.
148). If the purpose is primarily revenue, or if revenue is, at least, one of the real and
substantial purposes, then the exaction is properly called a tax. Such is the case of motor
vehicle registration fees. The same provision appears as Section 59(b) in the Land
Transportation Code. It is patent therefrom that the legislators had in mind a regulatory tax as
the law refers to the imposition on the registration, operation or ownership of a motor vehicle
as a "tax or fee." x x x Simply put, if the exaction under Rep. Act 4136 were merely a
regulatory fee, the imposition in Rep. Act 5448 need not be an "additional" tax. Rep. Act 4136
also speaks of other "fees" such as the special permit fees for certain types of motor vehicles
(Sec. 10) and additional fees for change of registration (Sec. 11). These are not to be
understood as taxes because such fees are very minimal to be revenue-raising. Thus, they are
not mentioned by Sec. 59(b) of the Code as taxes like the motor vehicle registration fee and
chauffeurs license fee. Such fees are to go into the expenditures of the Land Transportation
Commission as provided for in the last proviso of Sec. 61. 44(Underscoring supplied)
The P10 levy under LOI No. 1465 is too excessive to serve a mere regulatory purpose. The
levy, no doubt, was a big burden on the seller or the ultimate consumer. It increased the price
of a bag of fertilizer by as much as five percent.45 A plain reading of the LOI also supports the
conclusion that the levy was for revenue generation. The LOI expressly provided that the levy
was imposed "until adequate capital is raised to make PPI viable."
Taxes are exacted only for a public purpose. The P10 levy is unconstitutional because it was
not for a public purpose. The levy was imposed to give undue benefit to PPI.
An inherent limitation on the power of taxation is public purpose. Taxes are exacted only for a
public purpose. They cannot be used for purely private purposes or for the exclusive benefit of
private persons.46 The reason for this is simple. The power to tax exists for the general
welfare; hence, implicit in its power is the limitation that it should be used only for a public
purpose. It would be a robbery for the State to tax its citizens and use the funds generated for a
private purpose. As an old United States case bluntly put it: "To lay with one hand, the power
of the government on the property of the citizen, and with the other to bestow it upon favored
individuals to aid private enterprises and build up private fortunes, is nonetheless a robbery
because it is done under the forms of law and is called taxation."47
The term "public purpose" is not defined. It is an elastic concept that can be hammered to fit
modern standards. Jurisprudence states that "public purpose" should be given a broad
interpretation. It does not only pertain to those purposes which are traditionally viewed as
essentially government functions, such as building roads and delivery of basic services, but
also includes those purposes designed to promote social justice. Thus, public money may now
be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.
While the categories of what may constitute a public purpose are continually expanding in
light of the expansion of government functions, the inherent requirement that taxes can only
be exacted for a public purpose still stands. Public purpose is the heart of a tax law. When a
tax law is only a mask to exact funds from the public when its true intent is to give undue

benefit and advantage to a private enterprise, that law will not satisfy the requirement of
"public purpose."
The purpose of a law is evident from its text or inferable from other secondary sources. Here,
We agree with the RTC and that CA that the levy imposed under LOI No. 1465 was not for a
public purpose.
First, the LOI expressly provided that the levy be imposed to benefit PPI, a private company.
The purpose is explicit from Clause 3 of the law, thus:
3. The Administrator of the Fertilizer Pesticide Authority to include in its fertilizer pricing
formula a capital contribution component of not less than P10 per bag. This capital
contribution shall be collected until adequate capital is raised to make PPI viable. Such capital
contribution shall be applied by FPA to all domestic sales of fertilizers in the
Philippines.48 (Underscoring supplied)
It is a basic rule of statutory construction that the text of a statute should be given a literal
meaning. In this case, the text of the LOI is plain that the levy was imposed in order to raise
capital for PPI. The framers of the LOI did not even hide the insidious purpose of the law.
They were cavalier enough to name PPI as the ultimate beneficiary of the taxes levied under
the LOI. We find it utterly repulsive that a tax law would expressly name a private company as
the ultimate beneficiary of the taxes to be levied from the public. This is a clear case of crony
capitalism.
Second, the LOI provides that the imposition of the P10 levy was conditional and dependent
upon PPI becoming financially "viable." This suggests that the levy was actually imposed to
benefit PPI. The LOI notably does not fix a maximum amount when PPI is deemed financially
"viable." Worse, the liability of Fertiphil and other domestic sellers of fertilizer to pay the levy
is made indefinite. They are required to continuously pay the levy until adequate capital is
raised for PPI.
Third, the RTC and the CA held that the levies paid under the LOI were directly remitted and
deposited by FPA to Far East Bank and Trust Company, the depositary bank of PPI. 49 This
proves that PPI benefited from the LOI. It is also proves that the main purpose of the law was
to give undue benefit and advantage to PPI.
Fourth, the levy was used to pay the corporate debts of PPI. A reading of the Letter of
Understanding50 dated May 18, 1985 signed by then Prime Minister Cesar Virata reveals that
PPI was in deep financial problem because of its huge corporate debts. There were pending
petitions for rehabilitation against PPI before the Securities and Exchange Commission. The
government guaranteed payment of PPIs debts to its foreign creditors. To fund the payment,
President Marcos issued LOI No. 1465. The pertinent portions of the letter of understanding
read:
Republic of the Philippines
Office of the Prime Minister
Manila
LETTER OF UNDERTAKING

May 18, 1985

By:

TO: THE BANKING AND FINANCIAL INSTITUTIONS

LISTED IN ANNEX A HERETO WHICH ARE
CREDITORS (COLLECTIVELY, THE "CREDITORS")
OF PLANTERS PRODUCTS, INC. ("PLANTERS")

(signed)
CESAR E. A. VIRATA
Prime Minister and Minister of Finance51

Gentlemen:
This has reference to Planters which is the principal importer and distributor of fertilizer,
pesticides and agricultural chemicals in the Philippines. As regards Planters, the Philippine
Government confirms its awareness of the following: (1) that Planters has outstanding
obligations in foreign currency and/or pesos, to the Creditors, (2) that Planters is currently
experiencing financial difficulties, and (3) thatthere are presently pending with the Securities
and Exchange Commission of the Philippines a petition filed at Planters own behest for the
suspension of payment of all its obligations, and a separate petition filed by Manufacturers
Hanover Trust Company, Manila Offshore Branch for the appointment of a rehabilitation
receiver for Planters.
In connection with the foregoing, the Republic of the Philippines (the "Republic") confirms
that it considers and continues to consider Planters as a major fertilizer distributor.
Accordingly, for and in consideration of your expressed willingness to consider and
participate in the effort to rehabilitate Planters, the Republic hereby manifests its full and
unqualified support of the successful rehabilitation and continuing viability of Planters, and to
that end, hereby binds and obligates itself to the creditors and Planters, as follows:
xxxx
2. Upon the effective date of this Letter of Undertaking, the Republic shall cause FPA
to include in its fertilizer pricing formula a capital recovery component, the proceeds of which
will be used initially for the purpose of funding the unpaid portion of the outstanding capital
stock of Planters presently held in trust by Planters Foundation, Inc. ("Planters Foundation"),
which unpaid capital is estimated at approximately P206 million (subject to validation by
Planters and Planters Foundation) such unpaid portion of the outstanding capital stock of
Planters being hereafter referred to as the "Unpaid Capital"), and subsequently for such capital
increases as may be required for the continuing viability of Planters.
xxxx
The capital recovery component shall continue to be charged and collected until payment in
full of (a) the Unpaid Capital and/or (b) any shortfall in the payment of the Subsidy
Receivables, (c) any carrying cost accruing from the date hereof on the amounts which may be
outstanding from time to time of the Unpaid Capital and/or the Subsidy Receivables, and (d)
the capital increases contemplated in paragraph 2 hereof. For the purpose of the foregoing
clause (c), the "carrying cost" shall be at such rate as will represent the full and reasonable cost
to Planters of servicing its debts, taking into account both its peso and foreign currencydenominated obligations.
REPUBLIC OF THE PHILIPPINES

It is clear from the Letter of Understanding that the levy was imposed precisely to pay the
corporate debts of PPI. We cannot agree with PPI that the levy was imposed to ensure the
stability of the fertilizer industry in the country. The letter of understanding and the plain text
of the LOI clearly indicate that the levy was exacted for the benefit of a private corporation.
All told, the RTC and the CA did not err in holding that the levy imposed under LOI No. 1465
was not for a public purpose. LOI No. 1465 failed to comply with the public purpose
requirement for tax laws.
The LOI is still unconstitutional even if enacted under the police power; it did not promote
public interest.
Even if We consider LOI No. 1695 enacted under the police power of the State, it would still
be invalid for failing to comply with the test of "lawful subjects" and "lawful means."
Jurisprudence states the test as follows: (1) the interest of the public generally, as
distinguished from those of particular class, requires its exercise; and (2) the means employed
are reasonably necessary for the accomplishment of the purpose and not unduly oppressive
upon individuals.52
For the same reasons as discussed, LOI No. 1695 is invalid because it did not promote public
interest. The law was enacted to give undue advantage to a private corporation. We quote with
approval the CA ratiocination on this point, thus:
It is upon applying this established tests that We sustain the trial courts holding LOI 1465
unconstitutional.1awphil To be sure, ensuring the continued supply and distribution of
fertilizer in the country is an undertaking imbued with public interest. However, the method by
which LOI 1465 sought to achieve this is by no means a measure that will promote the public
welfare. The governments commitment to support the successful rehabilitation and continued
viability of PPI, a private corporation, is an unmistakable attempt to mask the subject statutes
impartiality. There is no way to treat the self-interest of a favored entity, like PPI, as identical
with the general interest of the countrys farmers or even the Filipino people in general. Well
to stress, substantive due process exacts fairness and equal protection disallows distinction
where none is needed. When a statutes public purpose is spoiled by private interest, the use of
police power becomes a travesty which must be struck down for being an arbitrary exercise of
government power. To rule in favor of appellant would contravene the general principle that
revenues derived from taxes cannot be used for purely private purposes or for the exclusive
benefit of private individuals. (Underscoring supplied)
The general rule is that an unconstitutional law is void; the doctrine of operative fact is
inapplicable.
PPI also argues that Fertiphil cannot seek a refund even if LOI No. 1465 is declared
unconstitutional. It banks on the doctrine of operative fact, which provides that an

unconstitutional law has an effect before being declared unconstitutional. PPI wants to retain
the levies paid under LOI No. 1465 even if it is subsequently declared to be unconstitutional.
We cannot agree. It is settled that no question, issue or argument will be entertained on appeal,
unless it has been raised in the court a quo.53 PPI did not raise the applicability of the doctrine
of operative fact with the RTC and the CA. It cannot belatedly raise the issue with Us in order
to extricate itself from the dire effects of an unconstitutional law.
At any rate, We find the doctrine inapplicable. The general rule is that an unconstitutional law
is void. It produces no rights, imposes no duties and affords no protection. It has no legal
effect. It is, in legal contemplation, inoperative as if it has not been passed. 54 Being void,
Fertiphil is not required to pay the levy. All levies paid should be refunded in accordance with
the general civil code principle against unjust enrichment. The general rule is supported by
Article 7 of the Civil Code, which provides:
ART. 7. Laws are repealed only by subsequent ones, and their violation or non-observance
shall not be excused by disuse or custom or practice to the contrary.
When the courts declare a law to be inconsistent with the Constitution, the former shall be
void and the latter shall govern.
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of
equity and fair play.55 It nullifies the effects of an unconstitutional law by recognizing that the
existence of a statute prior to a determination of unconstitutionality is an operative fact and
may have consequences which cannot always be ignored. The past cannot always be erased by
a new judicial declaration.56
The doctrine is applicable when a declaration of unconstitutionality will impose an undue
burden on those who have relied on the invalid law. Thus, it was applied to a criminal case
when a declaration of unconstitutionality would put the accused in double jeopardy57 or would
put in limbo the acts done by a municipality in reliance upon a law creating it. 58
Here, We do not find anything iniquitous in ordering PPI to refund the amounts paid by
Fertiphil under LOI No. 1465. It unduly benefited from the levy. It was proven during the trial
that the levies paid were remitted and deposited to its bank account. Quite the reverse, it would
be inequitable and unjust not to order a refund. To do so would unjustly enrich PPI at the
expense of Fertiphil. Article 22 of the Civil Code explicitly provides that "every person who,
through an act of performance by another comes into possession of something at the expense
of the latter without just or legal ground shall return the same to him." We cannot allow PPI to
profit from an unconstitutional law. Justice and equity dictate that PPI must refund the
amounts paid by Fertiphil.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated November 28,
2003 is AFFIRMED.
SO ORDERED.

G.R. No. 131903

June 26, 2008

OSCAR R. BADILLO, GIOVANNI C. ONG, EDGAR A. RAGASA represented by heirs

CYNTHIA G. RAGASA, and their children JOSEPH, CATHERINE and CHARMAINE
all surnamed RAGASA, ROLANDO SANCADA, and DIONISIO
UMBALIN, petitioners,
vs.
COURT OF APPEALS, REGISTER OF DEEDS OF QUEZON CITY, GOLDKEY
DEVELOPMENT CORPORATION, JOSEFA CONEJERO, IGNACIO D. SONORON,
PEDRO DEL ROSARIO, and DOWAL REALTY AND MANAGEMENT SYSTEM
COMPANY, respondents.
DECISION
CARPIO, J.:
The Case
This petition for certiorari1 assails the 17 September 1997 Decision2 of the Court of Appeals in
CA-G.R. CV No. 50035. The Court of Appeals dismissed the appeal filed by petitioners Oscar
R. Badillo, Giovanni C. Ong, Edgar A. Ragasa, Rolando Sancada, and Dionisio Umbalin
(petitioners) questioning the 5 June 1995 Order3 of Branch 222 of the Regional Trial Court of
Quezon City in Civil Case No. Q-91-10510 for Annulment of Documents with Prayer for
Issuance of Prohibitory and Mandatory Injunction and Damages.
The Facts
Petitioners alleged that they are the registered owners of several lots adjoining a road lot
known as Lot 369-A-29 or Apollo Street of subdivision plan Psd-37971 (road lot). The road
lot is a short access road which connects petitioners properties to the main road known as
Road 20. The road lot is covered by Transfer Certificate of Title (TCT) No. RT-20895 (22682)
and registered in the name of respondent Pedro del Rosario (del Rosario). Annotated at the
back of TCT No. RT-20895 is a court-ordered Entry No. 605/T-22655 which reads as follows:
"It is hereby made of record that as per order of the Court, the street lot covered by this title
shall not be closed or disposed of by the registered owner without previous approval of the
court."4
Petitioners alleged that in gross violation of the court order, del Rosario sold an unsegregated
portion of the road lot to his co-respondents Josefa Conejero (Conejero) and Ignacio Sonoron
(Sonoron) without obtaining prior court approval. Del Rosario, Conejero, and Sonoron then
entered into a partition agreement to divide the road lot into four lots which resulted in the
partial cancellation of TCT No. RT-20895 and the subsequent issuance of TCT Nos. 35899
and 35100 in the name of Conejero, TCT No. 35101 in the name of del Rosario, and TCT No.
35102 in the name of Sonoron.5
Petitioners stated that del Rosario sold TCT No. 35101 to Goldkey Development Corporation
(Goldkey).6

Petitioners alleged that the Register of Deeds violated the court order when it allowed the
registration of the sales and the subsequent issuance of new titles without first obtaining
judicial approval. Petitioners claimed that Goldkey had built cement fences on the lot, thus
blocking the ingress and egress of petitioners.7
Petitioners prayed that the sales made in favor of Conejero, Sonoron, and Goldkey and the
partition of the road lot be declared void.8
In its Comment, Goldkey alleged that the Housing and Land Use Regulatory Board (HLURB)
has exclusive jurisdiction over the cases mentioned in Section 1 of Presidential Decree No.
(PD) 1344.9 Goldkey argued that the Court of Appeals correctly dismissed petitioners appeal
because petitioners merely assigned an error involving a pure question of law. Goldkey added
that petitioners are using the present petition as a substitute for an already lost appeal since
petitioners counsel had received the decision on 17 October 1997 and the present petition was
posted only on 16 December 1997.10
In May 1991, petitioners filed an initial complaint with the Office of the Building Official
(building official) of Quezon City, docketed as Building Case No. R-10-91-006 entitled
Giovanni C. Ong, et al. v. Manuel Chua (building case). 11 Petitioners, who initiated the
building case when Goldkey started putting up fences in some portions of the property,
claimed that the parcel of land was a road lot.12
On 10 September 1991, the HLURB issued a Development Permit to Goldkey allowing it to
develop the land into residential townhouse units. The permit also mentioned that the project
is classified as "Residential Townhouse Subdivision" and, as evaluated, the same is "in
accordance with the Zoning Ordinance of Quezon City."13
On 4 November 1991,14 petitioners filed a case for Annulment of Title and Damages15 with
the Regional Trial Court of Quezon City.
Subsequently, the building official of Quezon City resolved the building case against
petitioners and this decision became final and executory.16 The ruling held that the property is
not a road lot but a residential lot.17
On 5 June 1995, Branch 222 of the Regional Trial Court (trial court) of Quezon City issued an
order dismissing the case for lack of jurisdiction over the subject matter.
The Ruling of the Trial Court
The trial court dismissed petitioners case for lack of jurisdiction over the subject matter. The
trial court pointed out that there was a decision rendered by the building official of Quezon
City declaring the disputed property a residential lot and not a road lot; hence, the building
official issued a building permit. The HLURB also issued a permit for the development of the
land into a townhouse project. Petitioners did not appeal both rulings. The trial court stated
that petitioners contention that the property is a road lot had been rendered moot by the
finding of the building official which made the contrary declaration. If petitioners had any
objection to the ruling, they should have appealed the same to the Secretary of Public Works
and Highways as provided in Section 307 of Executive Order No. (EO) 1096. The findings of

administrative agencies which have expertise are generally accorded not only respect but even
finality.
The trial court also stated that the property had been approved by the HLURB for
development into a townhouse project. The subject land was therefore removed from the
jurisdiction of the regular courts. The HLURBs decision was also not appealed to the Office
of the President as provided in Section 4 of PD 1344 which gave the HLURB quasi-judicial
powers.
The Ruling of the Appellate Court
On 17 September 1997, the Court of Appeals dismissed the appeal on the ground that it has no
jurisdiction to entertain the same. The appellate court stated that the original and amended
complaints filed by petitioners were both premised on the claim that the subject parcels of land
were subdivision road lots that were illegally converted into residential lots and thereafter
disposed by del Rosario, the subdivision developer. Therefore, petitioners complaints were
filed for the purpose of enforcing a contractual and statutory obligation of del Rosario to
preserve a subdivision road lot for street purposes. As such, the agency with jurisdiction is the
HLURB, pursuant to the provisions of PD 957, 1216, and 1344, EO 648 dated 7 February
1981 and EO 90 dated 17 December 1986.
Further, the appellate court ruled that the error assigned by petitioners involves the issue on
what law will apply to determine the jurisdiction of a tribunal over the subject matter of the
complaints. Petitioners assigned error involves a pure question of law; hence, petitioners
appealed to the wrong forum. Petitioners should have elevated their appeal to the Supreme
Court and not to the Court of Appeals by way of a simple appeal.

The HLURB is the sole regulatory body for housing and land development. 18 The extent to
which an administrative agency may exercise its powers depends on the provisions of the
statute creating such agency.19 Courts will not determine a controversy where the issues for
resolution demand the exercise of sound administrative discretion. 20
Jurisdiction Lies with the HLURB
PD 957,21 otherwise known as "The Subdivision and Condominium Buyers Protective
Decree," granted the National Housing Authority (NHA) the exclusive jurisdiction to regulate
the real estate business. The scope of the regulatory authority lodged in the NHA is indicated
in the second whereas clause which states:
"WHEREAS, numerous reports reveal that many real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage,
sewerage, water systems, lighting systems, and other similar basic requirements,
thus endangering the health and safety of home and lot buyers," (Emphasis supplied)
Thus, Section 22 of PD 957 provides:
Sec. 22. Alteration of Plans. No owner or developer shall change or alter the
roads, open spaces, infrastructures, facilities for public use and/or other form of
subdivision development as contained in the approved subdivision plan and/or
represented in its advertisements, without the permission of the Authority and the
written conformity or consent of the duly organized homeowners association, or
in the absence of the latter, by the majority of the lot buyers in the subdivision.
(Emphasis supplied)

Hence, this petition.

The Issues
Petitioners raise three issues in this petition:
1. Whether the appellate court acted without or in excess of jurisdiction or with
grave abuse of discretion by dismissing petitioners appeal on the ground that
jurisdiction does not lie with the regular courts but with the HLURB;

PD 134422 amended PD 957 by empowering the NHA to issue writs of execution in the
enforcement of its decisions. Section 1 of PD 1344 states:
Section 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing
Authority shall have exclusive jurisdiction to hear and decide cases of the following nature:
a. Unsound real estate business practices;

2. Whether the Court of Appeals acted without or in excess of jurisdiction or grave

abuse of discretion by dismissing petitioners appeal on the ground that petitioners
did not assign any error of fact; and

b. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and

3. Whether a petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure is the proper remedy for petitioners.

c. Cases involving specific performance of contractual and statutory obligations

filed by buyers of subdivision lot or condominium unit against the owner,
developer, dealer, broker or salesman. (Emphasis supplied)

The Ruling of the Court

The petition lacks merit.

Under EO 648,23 the NHAs functions were transferred to the Human Settlement Regulatory
Commission. Section 8 of EO 648 provides:

Section 8. Transfer of Functions. The regulatory functions of the National

Housing Authority pursuant to Presidential Decrees No. 957, 1216, 1344 and other
related laws are hereby transferred to the Commission, together with such applicable
personnel, appropriation, records, equipment and property necessary for the
enforcement and implementation of such functions. Among these regulatory
functions are: (1) Regulation of the real estate trade and business; (2) Registration of
subdivision lots and condominium projects; (3) Issuance of license to sell
subdivision lots and condominium units in the registered units; (4) Approval of
performance bond and the suspension of license to sell; (5) Registration of dealers,
brokers and salesmen engaged in the business of selling subdivision lots or
condominium units; (6) Revocation of registration of dealers, brokers and salesmen;
(7) Approval or mortgage on any subdivision lot or condominium unit made by the
owner or developer; (8) Granting of permits for the alteration of plans and the
extension of period for completion of subdivision or condominium projects;
(9) Approval of the conversion to other purposes of roads and open spaces
found within the project which have been donated to the city or municipality
concerned; (10) Regulation of the relationship between lessors and lessees; and
(11) Hear and decidecases on unsound real estate business practices; claims
involving refund filed against project owners, developers, dealers, brokers or
salesmen and cases of specific performance.(Emphasis supplied)
EO 9024 renamed the Human Settlement Regulatory Commission the Housing and Land Use
Regulatory Board. The HLURB retained the regulatory and adjudicatory functions of the
NHA.
Clearly, the scope and limitation of the HLURBs jurisdiction are well-defined. The HLURBs
jurisdiction to hear and decide cases is determined by the nature of the cause of action, the
subject matter or property involved, and the parties.25 In the present case, petitioners are the
registered owners of several lots adjoining a subdivision road lot connecting their properties to
the main road. Petitioners allege that the subdivision lot owners sold the road lot to a
developer who is now constructing cement fences, thus blocking the passageway from their
lots to the main road. In sum, petitioners are enforcing their statutory and contractual rights
against the subdivision owners. This is a specific performance case which falls under the
HLURBs exclusive jurisdiction.
In Osea v. Ambrosio,26 the Court held that the provisions of PD 957 were intended to
encompass all questions relating to subdivisions. This intention was aimed to provide for an
appropriate government agency, which is the HLURB, to which all parties aggrieved in the
implementation of provisions and the enforcement of contractual rights with respect to said
category of real estate may take recourse.
Petitioners claim that respondents violated the annotation at the back of TCT No. RT-20895
by selling an unsegregated portion of the lot without obtaining prior court approval. The date
of entry of this annotation is 18 August 1953. When PD 957, PD 1344, and EO 648 were
enacted in 1976, 1978, and 1981, respectively, this annotation was impliedly modified such
that the conversion of the road lot in the subdivision plan would fall under the HLURBs
jurisdiction pursuant to these laws.
Petitioners argue that they can file a specific performance case to compel respondents to
comply with their contractual and statutory obligation to maintain the road lot. However,

petitioners can only be granted complete relief if the subject sales are declared void and the
subsequent partition is declared illegal. Petitioners further contend that the HLURB, having
only the jurisdiction to hear and decide specific performance cases, can only compel
petitioners to file a case for annulment of title and prosecute the action. Petitioners insist that
in the final analysis, a case for annulment of title would still have to be filed with the ordinary
courts.27
In Pea v. GSIS,28 the Court ruled that when an administrative agency is conferred quasijudicial functions, all controversies relating to the subject matter pertaining to its
specialization are deemed to be included within its jurisdiction. Split jurisdiction is not
favored.
As observed in C.T. Torres Enterprises, Inc. v. Hibionada:29
The argument that only courts of justice can adjudicate claims resoluble under the
provisions of the Civil Code is out of step with the fast-changing times. There are
hundreds of administrative bodies now performing this function by virtue of a valid
authorization from the legislature. This quasi-judicial function, as it is called, is
exercised by them as an incident of the principal power entrusted to them of
regulating certain activities falling under their particular expertise.
In the Solid Homes case for example the Court affirmed the competence of the
Housing and Land Use Regulatory Board to award damages although this is an
essentially judicial power exercisable ordinarily only by the courts of justice. This
departure from the traditional allocation of governmental powers is justified by
expediency, or the need of the government to respond swiftly and competently to the
pressing problems of the modern world.
Finally, in Cristobal v. Court of Appeals,30 we held that "questions relating to non-compliance
with the requisites for conversion of subdivision lots are properly cognizable by the NHA,
now the HLURB, pursuant to Section 22 of PD 957 and not by the regular courts."
Appeal by Certiorari Involving Questions of Law
Section 2, Rule 41 of the Rules of Court states:
Sec. 2. Mode of appeal.
(a) Ordinary Appeal. The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its original jurisdiction shall be taken by
filing a notice of appeal with the court which rendered the judgment or final order
appealed from and serving a copy thereof upon the adverse party. No record on
appeal shall be required except in special proceedings and other cases of multiple or
separate appeals where the law or these Rules so require. In such cases, the record
on appeal shall be filed and served in like manner.

(b) Petition for Review. The appeal to the Court of Appeals in cases decided by
the Regional Trial Court in the exercise of its appellate jurisdiction shall be by
petition for review in accordance with Rule 42.
(c) Appeal by certiorari. In all cases where only questions of law are raised or
involved, the appeal shall be to the Supreme Court by petition for review on
certiorari in accordance with Rule 45. (Emphasis supplied)
In Sevilleno v. Carilo,31 citing Macawiwili Gold Mining and Development Co., Inc. v. Court of
Appeals, this Court summarized the rule on appeals:
(1) In all cases decided by the RTC in the exercise of its original jurisdiction, appeal
may be made to the Court of Appeals by mere notice of appeal where the appellant
raises questions of fact or mixed questions of fact and law;

As petitioners appeal solely involves a question of law, the appellate court did not err in
dismissing the appeal on the ground of lack of jurisdiction pursuant to Section 2, Rule 50 of
the Rules of Court which provides:
Sec. 2. Dismissal of improper appeal to the Court of Appeals. An appeal under
Rule 41 taken from the Regional Trial Court to the Court of Appeals raising
only questions of law shall be dismissed, issues purely of law not being reviewable
by said court. Similarly, an appeal by notice of appeal instead of by petition for
review from the appellate judgment of a Regional Trial Court shall be dismissed.
An appeal erroneously taken to the Court of Appeals shall not be transferred to the
appropriate court but shall be dismissed outright. (Emphasis supplied)
Rule 65 is not a remedy for lost appeal.

(2) In all cases decided by the RTC in the exercise of its original jurisdiction
where the appellant raises only questions of law, the appeal must be taken to
the Supreme Court on a petition for review on certiorari under Rule 45.

Petitioners should have directly taken their appeal to this Court by filing a petition for review
on certiorari under Rule 45 and not an ordinary appeal with the Court of Appeals under Rule
41 nor a petition for certiorari with this Court under Rule 65.

(3) All appeals from judgments rendered by the RTC in the exercise of its appellate
jurisdiction, regardless of whether the appellant raises questions of fact, questions of
law, or mixed questions of fact and law, shall be brought to the Court of Appeals by
filing a petition for review under Rule 42. (Emphasis supplied)

As held in Balayan v. Acorda,34 "the special civil action for certiorari is a limited form of
review and is a remedy of last recourse." It lies only where there is no appeal or plain, speedy,
and adequate remedy in the ordinary course of law.

In First Bancorp, Inc. v. Court of Appeals,32 this Court also explained the two modes of appeal
from a final order of the trial court in the exercise of its original jurisdiction:
(1) by writ of error under Section 2(a), Rule 41 of the Rules of Court if questions of
fact or questions of fact and law are raised or involved; or
(2) appeal by certiorari under Section 2(c), Rule 41, in relation to Rule 45,
where only questions of law are raised or involved. (Emphasis supplied)
In the present case, petitioners raised only one issue in their Appellants Brief whether "the
Honorable Trial Court a quo seriously erred in holding that it has no jurisdiction over the
subject matter of the case when in fact it has already acquired jurisdiction over the persons of
the defendants and the subject matter of the case."
The question on jurisdiction is undoubtedly one of law. We have held that "a question of law
exists when the doubt or controversy concerns the correct application of law or jurisprudence
to a certain set of facts; or when the issue does not call for an examination of the probative
value of the evidence presented, the truth or falsehood of facts being
admitted."33 Consequently, it is not disputed that the issue brought by petitioners to the Court
of Appeals involves solely the trial courts jurisdiction over the subject matter of the case. The
appellate court can determine the issue raised without reviewing or evaluating the evidence.

In the present case, petitioners chose the wrong mode of appeal. Hence, the instant petition
cannot prevail since a petition for certiorari is not a substitute for a lost appeal, especially if
the loss or lapse was an error in petitioners choice of remedy. We have held in David v.
Cordova35 that:
A petition for certiorari cannot be a substitute for an appeal from a lower court
decision. Where appeal is available to the aggrieved party, the action for certiorari
will not be entertained. The remedies of appeal (including petitions for review) and
certiorari are mutually exclusive, not alternate or successive. Hence, certiorari is
not and cannot be a substitute for an appeal, especially if ones own negligence
or error in ones choice of remedy occasioned such loss or lapse. One of the
requisites of certiorari is that there be no available appeal or any plain, speedy and
adequate remedy. Where an appeal is available, certiorari will not prosper, even if
the ground therefore is grave abuse of discretion. (Emphasis supplied)
There were instances when the Court has relaxed the rule on the special civil action
for certiorari as a substitute for failure to file a timely petition for review on certiorari under
Rule 45 such as where the application of this rule would result in a manifest failure or
miscarriage of justice.36 Although the Court has the discretion to treat a petition for certiorari
as having been filed under Rule 45, there is nothing in the present case to warrant a liberal
application of the rules.
WHEREFORE, we DISMISS the petition. We AFFIRM the 17 September 1997 Decision of
the Court of Appeals. Costs against petitioners. SO ORDERED.

G.R. No. 179628

January 16, 2013

THE MANILA INSURANCE COMPANY, INC., Petitioner,

vs.
SPOUSES ROBERTO and AIDA AMURAO, Respondents.
DECISION
DEL CASTILLO, J.:
The jurisdiction of the Construction Industry Arbitration Commission (CIAC) is conferred by
law. Section 41 of Executive Order (E.O.) No. I 008, otherwise known as the Construction
Industry Arbitration Law, "is broad enough to cover any dispute arising from, or connected
with construction contracts, whether these involve mere contractual money claims or
execution of the works."2
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the
Decision4 dated June 7, 2007 and the Resolution5 dated September 7, 2007 of the Court of
Appeals (CA) in CA-G.R. SP No. 96815.
Factual Antecedents
On March 7, 2000, respondent-spouses Roberto and Aida Amurao entered into a Construction
Contract Agreement (CCA)6 with Aegean Construction and Development Corporation
(Aegean) for the construction of a six-storey commercial building in Tomas Morato corner E.
Rodriguez Avenue, Quezon City.7 To guarantee its full and faithful compliance with the terms
and conditions of the CCA, Aegean posted performance bonds secured by petitioner The
Manila Insurance Company, Inc.8 (petitioner) and Intra Strata Assurance Corporation (Intra
Strata).9
On November 15, 2001, due to the failure of Aegean to complete the project, respondent
spouses filed with the Regional Trial Court (RTC) of Quezon City, Branch 217, a
Complaint,10 docketed as Civil Case No. Q-01-45573, against petitioner and Intra Strata to
collect on the performance bonds they issued in the amounts ofP2,760,000.00
and P4,440,000.00, respectively.11
12

Intra Strata, for its part, filed an Answer and later, a Motion to Admit Third Party
Complaint,13 with attached Third Party Complaint14 against Aegean, Ronald D. Nicdao, and
Arnel A. Mariano.
Petitioner, on the other hand, filed a Motion to Dismiss15 on the grounds that the Complaint
states no cause of action16 and that the filing of the Complaint is premature due to the failure
of respondent-spouses to implead the principal contractor, Aegean.17 The RTC, however,
denied the motion in an Order18 dated May 8, 2002. Thus, petitioner filed an Answer with
Counterclaim and Cross-claim,19 followed by a Third Party Complaint20 against Aegean and
spouses Ronald and Susana Nicdao.

During the pre-trial, petitioner and Intra Strata discovered that the CCA entered into by
respondent-spouses and Aegean contained an arbitration clause.21
Hence, they filed separate Motions to Dismiss22 on the grounds of lack of cause of action and
lack of jurisdiction.
Ruling of the Regional Trial Court
On May 5, 2006, the RTC denied both motions.23 Petitioner and Intra Strata separately moved
for reconsideration but their motions were denied by the RTC in its subsequent Order 24 dated
September 11, 2006.
Aggrieved, petitioner elevated the case to the CA by way of special civil action for certiorari.25
Ruling of the Court of Appeals
On June 7, 2007, the CA rendered a Decision26 dismissing the petition. The CA ruled that the
presence of an arbitration clause in the CCA does not merit a dismissal of the case because
under the CCA, it is only when there are differences in the interpretation of Article I of the
construction agreement that the parties can resort to arbitration. 27 The CA also found no grave
abuse of discretion on the part of the RTC when it disregarded the fact that the CCA was not
yet signed at the time petitioner issued the performance bond on February 29, 2000. 28 The CA
explained that the performance bond was intended to be coterminous with the construction of
the building.29 It pointed out that "if the delivery of the original contract is contemporaneous
with the delivery of the suretys obligation, each contract becomes completed at the same
time, and the consideration which supports the principal contract likewise supports the
subsidiary one."30 The CA likewise said that, although the contract of surety is only an
accessory to the principal contract, the suretys liability is direct, primary and absolute.31 Thus:
WHEREFORE, we resolve to DISMISS the petition as we find that no grave abuse of
discretion attended the issuance of the order of the public respondent denying the petitioners
motion to dismiss.
IT IS SO ORDERED.32
Petitioner moved for reconsideration but the CA denied the same in a Resolution 33 dated
September 7, 2007.
Issues
Hence, this petition raising the following issues:
A.
THE HONORABLE CA ERRED WHEN IT HELD THAT IT IS ONLY WHEN THERE
ARE DIFFERENCES IN THE INTERPRETATION OF ARTICLE I OF THE

CONSTRUCTION AGREEMENT THAT THE PARTIES MAY RESORT TO

ARBITRATION BY THE CIAC.

The petition has merit.

Nature of the liability of the surety

B.
THE HONORABLE CA ERRED IN TREATING PETITIONER AS A SOLIDARY
DEBTOR INSTEAD OF A SOLIDARY GUARANTOR.
C.
THE HONORABLE [CA] OVERLOOKED AND FAILED TO CONSIDER THE FACT
THAT THERE WAS NO ACTUAL AND EXISTING CONSTRUCTION AGREEMENT AT
THE TIME THE MANILA INSURANCE BOND NO. G (13) 2082 WAS ISSUED ON
FEBRUARY 29, 2000.34

A contract of suretyship is defined as "an agreement whereby a party, called the surety,
guarantees the performance by another party, called the principal or obligor, of an obligation
or undertaking in favor of a third party, called the obligee. It includes official recognizances,
stipulations, bonds or undertakings issued by any company by virtue of and under the
provisions of Act No. 536, as amended by Act No. 2206."50 We have consistently held that a
suretys liability is joint and several, limited to the amount of the bond, and determined strictly
by the terms of contract of suretyship in relation to the principal contract between the obligor
and the obligee.51 It bears stressing, however, that although the contract of suretyship is
secondary to the principal contract, the suretys liability to the obligee is nevertheless direct,
primary, and absolute.52

Petitioners Arguments

In this case, respondent-spouses (obligee) filed with the RTC a Complaint against petitioner
(surety) to collect on the performance bond it issued. Petitioner, however, seeks the dismissal
of the Complaint on the grounds of lack of cause of action and lack of jurisdiction.

Petitioner contends that the CA erred in ruling that the parties may resort to arbitration only
when there is difference in the interpretation of the contract documents stated in Article I of
the CCA.35 Petitioner insists that under Section 4 of E.O. No. 1008, it is the CIAC that has
original and exclusive jurisdiction over construction disputes, such as the instant case.36

The respondent-spouses have cause of action against the petitioner; the performance bond is
coterminous with the CCA

Petitioner likewise imputes error on the part of the CA in treating petitioner as a solidary
debtor instead of a solidary guarantor.37 Petitioner argues that while a surety is bound
solidarily with the obligor, this does not make the surety a solidary co-debtor.38 A surety or
guarantor is liable only if the debtor is himself liable.39 In this case, since respondent-spouses
and Aegean agreed to submit any dispute for arbitration before the CIAC, it is imperative that
the dispute between respondent-spouses and Aegean must first be referred to arbitration in
order to establish the liability of Aegean.40 In other words, unless the liability of Aegean is
determined, the filing of the instant case is premature.41
Finally, petitioner puts in issue the fact that the performance bond was issued prior to the
execution of the CCA.42Petitioner claims that since there was no existing contract at the time
the performance bond was executed, respondent-spouses have no cause of action against
petitioner.43 Thus, the complaint should be dismissed.44

Petitioner claims that respondent-spouses have no cause of action against it because at the time
it issued the performance bond, the CCA was not yet signed by respondent-spouses and
Aegean.
We do not agree.
A careful reading of the Performance Bond reveals that the "bond is coterminous with the final
acceptance of the project."53 Thus, the fact that it was issued prior to the execution of the CCA
does not affect its validity or effectivity.
But while there is a cause of action against petitioner, the complaint must still be dismissed for
lack of jurisdiction.
The CIAC has jurisdiction over the case

Respondent spouses Arguments

Section 4 of E.O. No. 1008 provides that:
Respondent-spouses, on the other hand, maintain that the CIAC has no jurisdiction over the
case because there is no ambiguity in the provisions of the CCA. 45 Besides, petitioner is not a
party to the CCA.46 Hence, it cannot invoke Article XVII of the CCA, which provides for
arbitration proceedings.47 Respondent-spouses also insist that petitioner as a surety is directly
and equally bound with the principal.48 The fact that the performance bond was issued prior to
the execution of the CCA also does not affect the latters validity because the performance
bond is coterminous with the construction of the building.49
Our Ruling

SEC. 4. Jurisdiction. The CIAC shall have original and exclusive jurisdiction over disputes
arising from, or connected with, contracts entered into by parties involved in construction in
the Philippines, whether the dispute arises before or after the completion of the contract, or
after the abandonment or breach thereof. These disputes may involve government or private
contracts. For the Board to acquire jurisdiction, the parties to a dispute must agree to submit
the same to voluntary arbitration.

The jurisdiction of the CIAC may include but is not limited to violation of specifications for
materials and workmanship, violation of the terms of agreement, interpretation and/or
application of contractual time and delays, maintenance and defects, payment, default of
employer or contractor, and changes in contract cost.
Excluded from the coverage of the law are disputes arising from employer-employee
relationships which shall continue to be covered by the Labor Code of the Philippines.
Based on the foregoing, in order for the CIAC to acquire jurisdiction two requisites must
concur: "first, the dispute must be somehow connected to a construction contract; and second,
the parties must have agreed to submit the dispute to arbitration proceedings."54
In this case, both requisites are present.
The parties agreed to submit to arbitration proceedings "any dispute arising in the course of
the execution and performance of the CCA by reason of difference in interpretation of the
Contract Documents x x x which the parties are unable to resolve amicably between
themselves."55 Article XVII of the CCA reads:
ARTICLE XVII ARBITRATION
17.1 Any dispute arising in the course of the execution and performance of this Agreement by
reason of difference in interpretation of the Contract Documents set forth in Article I which
the OWNER and the CONTRACTOR are unable to resolve amicably between themselves
shall be submitted by either party to a board of arbitrators composed of Three (3) members
chosen as follows: One (1) member shall be chosen by the CONTRACTOR AND One (1)
member shall be chosen by the OWNER. The said Two (2) members, in turn, shall select a
third member acceptable to both of them. The decision of the Board of Arbitrators shall be
rendered within Ten (10) days from the first meeting of the board, which decision when
reached through the affirmative vote of at least Two (2) members of the board shall be final
and binding upon the OWNER and CONTRACTOR.1wphi1
17.2 Matters not otherwise provided for in this Contract or by Special Agreement of the
parties shall be governed by the provisions of the Arbitration Law, Executive Order No.
1008.56
In William Golangco Construction Corporation v. Ray Burton Development Corporation,57 we
declared that monetary claims under a construction contract are disputes arising from
"differences in interpretation of the contract" because "the matter of ascertaining the duties
and obligations of the parties under their contract all involve interpretation of the provisions of
the contract."58 Following our reasoning in that case, we find that the issue of whether
respondent-spouses are entitled to collect on the performance bond issued by petitioner is a
"dispute arising in the course of the execution and performance of the CCA by reason of
difference in the interpretation of the contract documents."
The fact that petitioner is not a party to the CCA cannot remove the dispute from the
jurisdiction of the CIAC because the issue of whether respondent-spouses are entitled to
collect on the performance bond, as we have said, is a dispute arising from or connected to the
CCA.

In fact, in Prudential Guarantee and Assurance, Inc. v. Anscor Land, Inc., 59 we rejected the
argument that the jurisdiction of CIAC is limited to the construction industry, and thus, cannot
extend to surety contracts. In that case, we declared that "although not the construction
contract itself, the performance bond is deemed as an associate of the main construction
contract that it cannot be separated or severed from its principal. The Performance Bond is
significantly and substantially connected to the construction contract that there can be no
doubt it is the CIAC, under Section 4 of E.O. No. 1008, which has jurisdiction over any
dispute arising from or connected with it."60
In view of the foregoing, we agree with the petitioner that juriisdiction over the instant case
lies with the CIAC, and not with the RTC. Thus, the Complaint filed by respondent-spouses
with the RTC must be dismissed.
WHEREFORE, the petition is hereby GRANTED. The Decision dated June 7, 2007 and the
Resolution dated September 7, 2007 of the Court of Appeals in CA-G.R. SP No. 96815 are
hereby ANNULLED and SET ASIDE. The Presiding Judge of the Regional Trial Court of
Quezon City, Branch 217 1s DIRECTED to dismiss Civil Case No. Q-01-45573 for lack of
jurisdiction.
SO ORDERED.

G.R. No. 164631

June 26, 2009

LAND BANK OF THE PHILIPPINES, Petitioner,

vs.
RENE RALLA BELISTA, Respondent.
DECISION

Wherefore, the Decision dated July 7, 2003 is MODIFIED, fixing the valuation claim of
petitioner herein with respect to her due share in the above lots to the tune of Two Million
Five Hundred Forty Thousand, Two Hundred Eleven and 58/100 (P2,540,211.58) Pesos. Land
Bank Legaspi City is hereby ordered to pay herein petitioner said amount pursuant to existing
rules and guidelines, minus the sum already paid per Order dated January 2, 2003.
SO ORDERED.

PERALTA, J.:

Aggrieved, petitioner Bank, on 28 October 2003, filed an original Petition for Determination
of Just Compensation at the same sala of the RTC, docketed as Agrarian Case No. 03-06.

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed
by Land Bank of the Philippines (petitioner), seeking to annul and set aside the May 26, 2004
Decision1 and the July 28, 2004 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No.
81096.

The court a quo motu propio dismissed the case when it issued the herein first assailed Order
dated 12 November 2003 "for failure to exhaust administrative remedies and/or comply with
Sections 5, 6, and 7, Rule XIX, 2003 DARAB Rules of Procedure.

The antecedent facts and proceedings, as narrated by the CA, are as follows:
It appears that spouses Pablo Ralla and Carmen Munoz Ralla had donated their eight (8)
parcels of lot located in Ligao, Albay to their daughter, Rene Ralla Belista, the herein private
respondent.
The eight (8) parcels of lot were placed by the Department of Agrarian Reform (DAR, for
brevity) under the coverage of the Comprehensive Agrarian Reform Program (Presidential
Decree No. 27 and Executive Order No. 228). Consequently, private respondent claimed
payment of just compensation over said agricultural lands.
It further appears that the DAR's evaluation of the subject farms was only P227,582.58, while
petitioner Land Bank of the Philippines (LBP, for brevity) assessed the same at P317,259.31.
Believing that her lots were grossly underestimated, private respondent, on 11 November
2002, filed a Petition for Valuation and Payment of Just Compensation against petitioning
bank before the DARAB-Regional Adjudicator for Region V (RARAD-V) docketed as DCN
D-05-02-VC-005.
On 07 July 2003, the RARAD-V issued a Decision, in favor of herein private respondent, the
fallo of which reads:

Petitioner LBP lodged a Motion for Reconsideration arguing, inter alia, "that the DARAB
2003 Rules of Procedure does not apply to SAC nor its precursor DARAB Case and that the
ground for dismissal of the case is not among the instances when a court may dismiss a case
on its motion."
As the court a quo denied its Motion for Reconsideration in an Order dated 28 November
2003, petitioner LBP elevated the case before the Tribunal through the present Petition for
Review, theorizing:
I. WHETHER OR NOT THE SAC A QUO ERRED IN DISMISSING THE CASE MOTU
PROPIO ON THE GROUND OF PLAINTIFF'S FAILURE TO EXHAUST
ADMINISTRATIVE REMEDIES.
II. WHETHER OR NOT SECTIONS 5, 6, AND 7, RULE XIX OF THE DARAB 2003
RULES OF PROCEDURE APPLY TO CASES FILED AND PENDING BEFORE THE
DARAB OR ITS ADJUDICATORS PRIOR TO ITS EFFECTIVITY AND TO CASES
FILED AND PENDING WITH THE SPECIAL AGRARIAN COURTS.3
On May 26, 2004, the CA rendered its assailed Decision dismissing the petition.

SO ORDERED.

The CA ruled that under Section 5, Rule XIX of the 2003 DARAB Rules of Procedure, an
appeal from the adjudicator's resolution shall be filed before the DARAB and not before the
RTC; that petitioner's filing of the case before the RTC without first seeking the intervention
of the DARAB is violative of the doctrine of non-exhaustion of administrative remedies. The
CA found that petitioner's petition for determination of just compensation was filed in the
RTC on October 28, 2003 when the 2003 DARAB Rules of Procedure was already in effect,
i.e., on February 8, 2003, and under its transitory provision, it is provided that the 2003 Rules
shall govern all cases filed on or after its effectivity; and, since an appeal from the
adjudicator's resolution should first be filed with the DARAB, the RTC, sitting as a Special
Agrarian Court (SAC), did not err in dismissing petitioner's petition.

As both parties interposed their respective motions for reconsideration, the RARAD-V
eventually issued an Order dated 8 October 2003, the decretal portion of which reads:

Petitioner filed a motion for reconsideration, which was denied in a Resolution dated July 28,
2004.

Wherefore, just compensation for the subject areas is hereby preliminarily fixed at TWO
MILLION EIGHT HUNDRED NINETY-SIX THOUSAND and FOUR HUNDRED EIGHT
& 91/100 (P2,896,408.91) PESOS. Land Bank of the Philippines, Legaspi City, is hereby
ordered to pay herein petitioner said amount pursuant to existing rules and guidelines, minus
the sum already remitted per Order dated January 2, 2003.

Petitioner is now before the Court raising the following arguments:

1. THE COURT OF APPEALS ERRED IN LAW IN DISMISSING THE PETITION FOR
REVIEW CONSIDERING THAT THE LBP DID NOT VIOLATE THE "DOCTRINE OF
NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES" WHEN IT FILED THE
ORIGINAL PETITION FOR DETERMINATION OF JUST COMPENSATION BEFORE
THE COURT A QUO WITHOUT FIRST SEEKING THE INTERVENTION OF THE
DARAB.
2. THE COURT OF APPEALS ERRED IN DECLARING THAT THE APPLICABLE RULE
IS THE 2003 DARAB RULES OF PROCEDURE, DESPITE THE FACT THAT THE
PETITION (FOR VALUATION AND PAYMENT OF JUST COMPENSATION) WAS
FILED BEFORE THE RARAD ON NOVEMBER 11, 2002.4
Petitioner contends that the petition for valuation and payment of just compensation was filed
with the DARAB- Regional Adjudicator for Region V (RARAD) on November 11, 2002, long
before the effectivity of the 2003 Rules of Procedure; that under the transitory provision of the
2003 DARAB Rules, all cases pending with the Board and the adjudicators prior to the date of
the Rules' effectivity shall be governed by the DARAB Rules prevailing at the time of their
filing; that clear from the transitory provision that it is the proceeding of the DARAB which is
governed by the 2003 DARAB Rules of Procedure, thus, it is the date of filing of the petition
with the DARAB or any of its adjudicators which is the reckoning date of the applicability of
the 2003 DARAB Rules and not the date of filing with the SAC; that under the 1994 DARAB
Rules prevailing at the time of the filing of the respondent's claim for just compensation, the
Rules provided that the decision of the adjudicator on land valuation and preliminary
determination of just compensation shall not be appealable to the Board, but shall be brought
directly to the RTC; that it was in the observance of the 1994 DARAB Rules that petitioner
brought the adjudicator's decision to the RTC sitting as SAC.
In his Comment, respondent claims that petitioner's petition with the RTC is an original action
and, since the case was filed at a time when appeal to the DARAB Central Office was already
provided in the 2003 DARAB Rules before resorting to judicial action, the RTC correctly
dismissed the petition, which was correctly affirmed by the CA.
Petitioner filed a Reply reiterating its arguments in the petition.
The issue for resolution is whether it is necessary that in cases involving claims for just
compensation under Republic Act (RA) No. 6657 that the decision of the Adjudicator must
first be appealed to the DARAB before a party can resort to the RTC sitting as SAC.
The court rules in the negative.
Sections 50 and 57 of RA No. 6657 provide:
Section 50. Quasi-judicial Powers of the DAR. The DAR is hereby vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive
original jurisdiction over all matters involving the implementation of agrarian reform, except

those falling under the exclusive jurisdiction of the Department of Agriculture (DA) and the
Department of Environment and Natural Resources (DENR) x x x
Section 57. Special Jurisdiction. The Special Agrarian Court shall have original and
exclusive jurisdiction over all petitions for the determination of just compensation to
landowners, and the prosecution of all criminal offenses under this Act. x x x
The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction
within thirty (30) days from submission of the case for decision.
Clearly, under Section 50, DAR has primary jurisdiction to determine and adjudicate agrarian
reform matters and exclusive original jurisdiction over all matters involving the
implementation of agrarian reform, except those falling under the exclusive jurisdiction of the
DA and the DENR. Further exception to the DAR's original and exclusive jurisdiction are all
petitions for the determination of just compensation to landowners and the prosecution of all
criminal offenses under RA No. 6657, which are within the jurisdiction of the RTC sitting as a
Special Agrarian Court. Thus, jurisdiction on just compensation cases for the taking of lands
under RA No. 6657 is vested in the courts.
In Republic v. CA,5 the Court explained:
Thus, Special Agrarian Courts, which are Regional Trial Courts, are given original and
exclusive jurisdiction over two categories of cases, to wit: (1) "all petitions for the
determination of just compensation to landowners" and (2) "the prosecution of all criminal
offenses under [R.A. No. 6657]." The provisions of 50 must be construed in harmony with
this provision by considering cases involving the determination of just compensation and
criminal cases for violations of R.A. No. 6657 as excepted from the plenitude of power
conferred on the DAR. Indeed, there is a reason for this distinction. The DAR is an
administrative agency which cannot be granted jurisdiction over cases of eminent domain (for
such are takings under R.A. No. 6657) and over criminal cases. Thus, in EPZA v. Dulay and
Sumulong v. Guerrero - we held that the valuation of property in eminent domain is essentially
a judicial function which cannot be vested in administrative agencies, while in Scotys
Department Store v. Micaller, we struck down a law granting the then Court of Industrial
Relations jurisdiction to try criminal cases for violations of the Industrial Peace Act. 6
In a number of cases, the Court has upheld the original and exclusive jurisdiction of the RTC,
sitting as SAC, over all petitions for determination of just compensation to landowners in
accordance with Section 57 of RA No. 6657.
In Land Bank of the Philippines v. Wycoco,7 the Court upheld the RTC's jurisdiction over
Wycoco's petition for determination of just compensation even where no summary
administrative proceedings was held before the DARAB which has primary jurisdiction over
the determination of land valuation. The Court held:
In Land Bank of the Philippines v. Court of Appeals, the landowner filed an action for
determination of just compensation without waiting for the completion of DARABs reevaluation of the land. This, notwithstanding, the Court held that the trial court properly
acquired jurisdiction because of its exclusive and original jurisdiction over determination of
just compensation, thus

 It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has "original and
exclusive jurisdiction over all petitions for the determination of just compensation to
landowners." This "original and exclusive" jurisdiction of the RTC would be undermined if
the DAR would vest in administrative officials original jurisdiction in compensation cases and
make the RTC an appellate court for the review of administrative decisions. Thus, although
the new rules speak of directly appealing the decision of adjudicators to the RTCs sitting as
Special Agrarian Courts, it is clear from Sec. 57 that the original and exclusive jurisdiction to
determine such cases is in the RTCs. Any effort to transfer such jurisdiction to the adjudicators
and to convert the original jurisdiction of the RTCs into an appellate jurisdiction would be
contrary to Sec. 57 and, therefore, would be void. Thus, direct resort to the SAC [Special
Agrarian Court] by private respondent is valid.
In the case at bar, therefore, the trial court properly acquired jurisdiction over Wycocos
complaint for determination of just compensation. It must be stressed that although no
summary administrative proceeding was held before the DARAB, LBP was able to perform its
legal mandate of initially determining the value of Wycoco's land pursuant to Executive Order
No. 405, Series of 1990.8 x x x
In Land Bank of the Philippines v. Natividad,9 wherein Land Bank questioned the alleged
failure of private respondents to seek reconsideration of the DAR's valuation, but instead filed
a petition to fix just compensation with the RTC, the Court said:
At any rate, in Philippine Veterans Bank v. CA, we held that there is nothing contradictory
between the DARs primary jurisdiction to determine and adjudicate agrarian reform matters
and exclusive original jurisdiction over all matters involving the implementation of agrarian
reform, which includes the determination of questions of just compensation, and the original
and exclusive jurisdiction of regional trial courts over all petitions for the determination of just
compensation. The first refers to administrative proceedings, while the second refers to
judicial proceedings.1avvphi1
In accordance with settled principles of administrative law, primary jurisdiction is vested in
the DAR to determine in a preliminary manner the just compensation for the lands taken under
the agrarian reform program, but such determination is subject to challenge before the courts.
The resolution of just compensation cases for the taking of lands under agrarian reform is,
after all, essentially a judicial function.
Thus, the trial court did not err in taking cognizance of the case as the determination of just
compensation is a function addressed to the courts of justice.10
In Land Bank of the Philippines v. Celada,11 where the issue was whether the SAC erred in
assuming jurisdiction over respondent's petition for determination of just compensation
despite the pendency of the administrative proceedings before the DARAB, the Court stated
that:
It would be well to emphasize that the taking of property under RA No. 6657 is an exercise of
the power of eminent domain by the State. The valuation of property or determination of just
compensation in eminent domain proceedings is essentially a judicial function which is vested
with the courts and not with administrative agencies. Consequently, the SAC properly took
cognizance of respondent's petition for determination of just compensation. 12

The RTC dismissed petitioner's petition for determination of just compensation relying on
Sections 5, 6 and 7 of Article XIX of the 2003 DARAB Rules of Procedure, to wit:
Section 5. Appeal. A party who disagrees with the resolution of the Adjudicator may bring the
matter to the Board by filing with the Adjudicator concerned a Notice of Appeal within fifteen
(15) days from receipt of the resolution. The filing of a Motion for Reconsideration of said
resolution shall interrupt the period herein fixed. If the motion is denied, the aggrieved party
may file the appeal within the remaining period, but in no case shall it be less than five (5)
days.
Section 6. When Resolution Deemed Final. Failure on the part of the aggrieved party to
contest the resolution of the Adjudicator within the aforecited reglementary period provided
shall be deemed a concurrence by such party with the land valuation, hence said valuation
shall become final and executory.
Section 7. Filing of Original Action with the Special Agrarian Court for Final Determination.
The party who disagrees with the decision of the Board may contest the same by filing an
original action with the Special Agrarian Court (SAC) having jurisdiction over the subject
property within fifteen (15) days from his receipt of the Board's decision.
Notably, the above-mentioned provisions deviated from Section 11, Rule XIII of the 1994
DARAB Rules of Procedure which provides:
Section 11. Land Valuation and Preliminary Determination and Payment of Just
Compensation The decision of the Adjudicator on land valuation and preliminary
determination and payment of just compensation shall not be appealable to the Board, but
shall be brought directly to the Regional Trial Courts designated as Special Agrarian Courts
within fifteen (15) days from receipt of the notice thereof. Any party shall be entitled to only
one motion for reconsideration.
where DARAB acknowledges that the decision of just compensation cases for the taking of
lands under RA 6657 is a power vested in the courts.13 Although Section 5, Rule XIX of the
2003 DARAB Rules of Procedure provides that the land valuation cases decided by the
adjudicator are now appealable to the Board, such rule could not change the clear import of
Section 57 of RA No. 6657 that the original and exclusive jurisdiction to determine just
compensation is in the RTC. Thus, Section 57 authorizes direct resort to the SAC in cases
involving petitions for the determination of just compensation. 14 In accordance with the said
Section 57, petitioner properly filed the petition before the RTC and, hence, the RTC erred in
dismissing the case. Jurisdiction over the subject matter is conferred by law.15 Only a statute
can confer jurisdiction on courts and administrative agencies while rules of procedure
cannot.16
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated May
26, 2004 and the Resolution dated July 28, 2004, of the Court of Appeals in CA-G.R. SP No.
81096, are REVERSED and SET ASIDE. The Regional Trial Court, Branch 3, Legaspi City,
sitting as Special Agrarian Court, is directed to hear without delay petitioner's petition for the
determination of just compensation.
SO ORDERED.

G.R. No. 157714

judicially declare the territorial boundaries of Pateros based on supporting pieces of evidence,
and that it nullify Proclamation No. 2475.

June 16, 2009

MUNICIPALITY OF PATEROS, Petitioner,

vs.
THE HONORABLE COURT OF APPEALS, THE MUNICIPALITY OF MAKATI,
THE DIRECTOR OF LANDS, and THE DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES, Respondents.
DECISION
NACHURA, J.:
Before this Court is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Civil
Procedure, seeking the reversal of the Court of Appeals (CA) Decision 2 dated January 22,
2003, which denied the appeal of petitioner Municipality of Pateros (Pateros) for undertaking
a wrong mode of appeal. Subject of the appeal was the Order3 of the Regional Trial Court
(RTC) of Makati City, Branch 139, dated June 14, 1996, which dismissed petitioners
complaint for lack of jurisdiction.
The Facts
The property subject of this case consists of portions of then Fort William McKinley, now
known as Fort Bonifacio (subject property), currently comprising Barangays Cembo, South
Cembo, West Rembo, East Rembo, Comembo, Pembo, and Pitogo (entire property). The
subject property is allegedly situated within the territorial jurisdiction of respondent
Municipality (now City) of Makati (Makati) per Proclamation No. 2475 4 issued on January 7,
1986 (Proclamation No. 2475) by former President Ferdinand E. Marcos (President Marcos).
Subsequently, on January 31, 1990, former President Corazon C. Aquino (President Aquino)
issued Proclamation No. 518,5 amending Proclamation No. 2475. Parenthetically, it may be
noted that a similar boundary dispute over the entire property exists between the Municipality
(now City) of Taguig and Makati, docketed as Civil Case No. 63896 and pending before the
RTC of Pasig City, Branch 153.
As Proclamation Nos. 2475 and 518 respectively stated that the entire property is situated in
Makati, Pateros, on January 18, 1991, filed an action 6 for Judicial Declaration of the
Territorial Boundaries of Pateros against Makati before the RTC of Pasig City, Branch 154
(Pasig RTC). The case was, however, dismissed for lack of jurisdiction inasmuch as the
subject property is located in Makati and it should have been filed before the Makati
RTC.7Heeding the directive of the Pasig RTC, Pateros, on December 8, 1993, filed with the
RTC of Makati a Complaint8against Makati and co-respondents, Director of Lands and the
Department of Environment and Natural Resources (DENR), for the Judicial Declaration of
the Territorial Boundaries of Pateros with a prayer for the issuance of a writ of Preliminary
Injunction and Temporary Restraining Order (TRO). Pateros claimed that, based on historical
and official records, it had an original area of one thousand thirty-eight (1,038) hectares, more
or less. However, when a cadastral mapping was conducted by the Bureau of Lands in 1978,
Pateros was appalled to learn that its territorial boundaries had been substantially reduced to
merely one hundred sixty-six (166) hectares. Pateros opined that this disparity was brought
about by the issuance of Proclamation Nos. 2475 and 518. Thus, Pateros prayed that the RTC

Makati filed a Motion to Dismiss, 9 contending that the issue was not the nullification of
Proclamation No. 2475; that the RTC had no jurisdiction over the subject matter of the action
because original jurisdiction to resolve boundary disputes among municipalities situated in
Metro Manila is vested in the Metropolitan Manila Authority (MMA); that the RTC's
jurisdiction is merely appellate; that the complaint failed to state a cause of action as Pateros
failed to exhaust administrative remedies by failing to settle the dispute amicably; and that
Pateros' claims had already been barred by laches because Makati, throughout the years, had
already developed the subject property and had spent millions on such development.
Makati also filed a Motion to Suspend Proceedings,10 arguing that the bill converting Makati
into a city was pending approval before the Senate and portions of the subject property are
included in the proposed charter. Makati, thus, opined that the continuation of the RTC
proceedings would create a conflict between the judicial and the legislative branches. In its
Order11 dated October 21, 1994, the RTC granted Makatis Motion.
On July 19, 1994, Republic Act No. 785412 was enacted into law, converting Makati into a
highly urbanized city. Pateros then moved for the revival of the proceedings before the
RTC,13 which it granted in its Order14 dated March 17, 1995. However, due to the pending
Motion to Dismiss earlier filed by Makati, the RTC required the parties to submit their
respective Memoranda.
The RTC's Ruling
On June 14, 1996, the RTC issued an Order, dismissing the case on the ground of lack of
jurisdiction. The RTC held that Proclamation No. 2475 specifically declared that the subject
property is within the territorial jurisdiction of Makati and, inasmuch as the Proclamation was
not declared unconstitutional, the same is a valid and subsisting law. In the main, citing
Sections 1015 and 11,16 Article X of the 1987 Constitution, and pursuant to this Court's ruling
in Municipality of Sogod v. Rosal,17 the RTC held that the modification or substantial
alteration of boundaries of municipalities can be done only through a law enacted by Congress
which shall be subject to approval by a majority of the votes cast in a plebiscite in the political
units directly affected. Hence, the RTC opined that it is without jurisdiction to fix the
territorial boundaries of the parties. Pateros filed a Motion for Reconsideration 18 which was,
however, denied by the RTC in its Order19 dated August 30, 1996. Aggrieved, Pateros
appealed to the CA.20
The CA's Ruling
On January 22, 2003, the CA denied Pateros' appeal. The CA held that the RTC did not make
any findings of fact but merely applied various provisions of law and jurisprudence. Thus, the
case presented a pure question of law, which Pateros should have brought directly to the
Supreme Court, pursuant to Section 5(2),21 Article VIII of the 1987 Constitution and Section
2,22 Rule 41 of the Revised Rules of Civil Procedure. The CA also held that it would amount
to grave abuse of discretion amounting to lack of jurisdiction if the CA insisted on resolving
the issues raised therein. Thus, by undertaking a wrong mode of appeal and citing Section

2,23 Rule 50 of the Revised Rules of Civil Procedure, the CA denied Pateros' appeal. Pateros
filed a Motion for Reconsideration,24 which the CA denied in its Resolution25 dated March 27,
2003.
The Issue
Hence, this Petition based on the sole ground that the CA committed grave abuse of discretion
in dismissing the appeal for lack of jurisdiction.26
Pateros asseverates that the issues raised before the CA involved mixed questions of fact and
law, because Pateros sought the determination of its territorial boundaries and the nullification
of Proclamation No. 2475; that Pateros does not seek the alteration, modification, or creation
of another or a new local government unit (LGU), but is concerned only with its territorial
boundaries which, according to existing records, consisted of 1,038 hectares; that nonpresentation of evidence before the RTC does not make the appeal purely a question of law,
because the parties were prevented from presenting any evidence due to the RTC's erroneous
dismissal of the case based on lack of jurisdiction; that Proclamation Nos. 2475 and 518 suffer
from Constitutional infirmity; that the alteration or modification of the boundaries of
municipalities or cities can only be made by a law enacted by Congress and approved by the
majority of the votes cast in a plebiscite in the political units directly affected; that
Proclamation No. 2475, although issued by then President Marcos during the Marcos era, was
not a legislative enactment, pursuant to Section 6 of the 1976 Amendment to the Constitution;
and granting, without admitting, that Proclamation No. 2475 is a law, it should be subject to
approval by the majority of the votes cast in a plebiscite in the political units directly affected.
Thus, Pateros prays that the assailed CA Decision be reversed and set aside, and that the RTC
be directed to proceed with the trial of the instant case.27
On the other hand, Makati claims that the sole issue in Pateros' appeal before the CA is
jurisdiction and as the question of jurisdiction is a question of law and as the CA lacks
jurisdiction over pure questions of law, therefore, Pateros resorted to a wrong mode of appeal.
The issues raised by Pateros do not consist of questions of fact as the RTC rendered the
assailed Order based on Makati's Motion to Dismiss and no trial on the merits was ever
conducted. Makati points out that the CA quoted the decision of the RTC's discourse in order
to show that only a question of law was involved in Pateros' appeal. Thus, Makati posits that
Pateros defies the rules on trial, evidence, and jurisdiction in a desperate bid to extricate itself
from its mistake in taking a wrong mode of appeal,i.e., by notice of appeal to the CA rather
than a petition for review on certiorari under Rule 45 of the Revised Rules of Civil Procedure
filed before this Court. Makati submits that the dismissal of Pateros' appeal was proper, as
mandated by Section 2, Rule 50 of the said Rules. Due to the availment of the wrong mode of
appeal, the RTC's Order dismissing the case already attained finality. 28
The Director of Lands and the DENR, through the Office of the Solicitor General (OSG),
share the stand and arguments of Makati. The OSG stresses that the parties never presented
any evidence before the RTC which resolved the case based on the parties' undisputed factual
submissions and the application thereto of the pertinent laws, Rules of Civil Procedure, and
jurisprudence. Hence, the OSG concludes that the appeal before the CA involved a pure
question of law.29
Our Ruling

We agree that Pateros indeed committed a procedural infraction. It is clear that the issue raised
by Pateros to the CA involves the jurisdiction of the RTC over the subject matter of the case.
The jurisdiction of a court over the subject matter of the action is a matter of law; it is
conferred by the Constitution or by law. Consequently, issues which deal with the jurisdiction
of a court over the subject matter of a case are pure questions of law. As Pateros' appeal solely
involves a question of law, it should have directly taken its appeal to this Court by filing a
petition for review on certiorari under Rule 45, not an ordinary appeal with the CA under
Rule 41. The CA did not err in holding that Pateros pursued the wrong mode of appeal. 30
However, in the interest of justice and in order to write finis to this controversy, we opt to
relax the rules. Our ruling in Atty. Ernesto A. Tabujara III and Christine S. Dayrit v. People of
the Philippines and Daisy Afable31 provides us with ample justification, viz.:
While it is true that rules of procedure are intended to promote rather than frustrate the ends of
justice, and while the swift unclogging of the dockets of the courts is a laudable objective, it
nevertheless must not be met at the expense of substantial justice.
The Court has allowed some meritorious cases to proceed despite inherent procedural defects
and lapses. This is in keeping with the principle that rules of procedure are mere tools
designed to facilitate the attainment of justice, and that strict and rigid application of rules
which would result in technicalities that tend to frustrate rather than promote substantial
justice must always be avoided. It is a far better and more prudent cause of action for the court
to excuse a technical lapse and afford the parties a review of the case to attain the ends of
justice, rather than dispose of the case on technicality and cause grave injustice to the parties,
giving a false impression of speedy disposal of cases while actually resulting in more delay, if
not a miscarriage of justice.1avvphi1
In those rare cases to which we did not stringently apply the procedural rules, there always
existed a clear need to prevent the commission of a grave injustice. Our judicial system and
the courts have always tried to maintain a healthy balance between the strict enforcement of
procedural laws and the guarantee that every litigant is given the full opportunity for a just and
proper disposition of his cause.
The emerging trend in the rulings of this Court is to afford every party litigant the amplest
opportunity for the proper and just determination of his cause, free from the constraints of
technicalities. Time and again, we have consistently held that rules must not be applied so
rigidly as to override substantial justice.
Given the circumstances surrounding the instant case, we find sufficient reason to relax the
rules. Thus, we now resolve the sole issue of whether the RTC has jurisdiction to entertain the
boundary dispute between Pateros and Makati.
Apart from the doctrine that the jurisdiction of a tribunal over the subject matter of an action is
conferred by law, it is also the rule that the courts exercise of jurisdiction is determined by the
material allegations of the complaint or information and the law applicable at the time the
action was commenced. Lack of jurisdiction of the court over an action or the subject matter
of an action cannot be cured by the silence, by acquiescence, or even by express consent of the
parties. Thus, the jurisdiction of a court over the nature of the action and the subject matter
thereof cannot be made to depend upon the defenses set up in court or upon a motion to

dismiss for, otherwise, the question of jurisdiction would depend almost entirely on the
defendant. Once jurisdiction is vested, the same is retained up to the end of the litigation.32
It is worth stressing that, at the time the instant case was filed, the 1987 Constitution and the
Local Government Code (LGC) of 1991 were already in effect. Thus, the law in point is
Section 118 of the LGC, which provides:
Section. 118. Jurisdictional Responsibility for Settlement of Boundary Disputes. Boundary
disputes between and among local government units shall, as much as possible, be settled
amicably. To this end:
(a) Boundary disputes involving two (2) or more barangays in the same city or
municipality shall be referred for settlement to the sangguniang panlungsod or
sangguniang bayan concerned.
(b) Boundary disputes involving two (2) or more municipalities within the same
province shall be referred for settlement to the sangguniang panlalawigan
concerned.
(c) Boundary disputes involving municipalities or component cities of different
provinces shall be jointly referred for settlement to the sanggunians of the province
concerned.
(d) Boundary disputes involving a component city or municipality on the one
hand and a highly urbanized city on the other, or two (2) or more highly
urbanized cities, shall be jointly referred for settlement to the respective
sanggunians of the parties.
(e) In the event the sanggunian fails to effect an amicable settlement within sixty
(60) days from the date the dispute was referred thereto, it shall issue a certification
to that effect. Thereafter, the dispute shall be formally tried by the sanggunian
concerned which shall decide the issue within sixty (60) days from the date of the
certification referred to above.33
Notably, when Pateros filed its complaint with the RTC of Makati, Makati was still a
municipality. We take judicial notice of the fact that there was no Sangguniang
Panlalawigan that could take cognizance of the boundary dispute, as provided in Section
118(b) of the LGC. Neither was it feasible to apply Section 118(c) or Section 118(d), because
these two provisions clearly refer to situations different from that obtaining in this case. Also,
contrary to Makati's postulation, the former MMA did not also have the authority to take the
place of the Sangguniang Panlalawigan because the MMA's power was limited to the delivery
of basic urban services requiring coordination in Metropolitan Manila. The MMA's governing
body, the Metropolitan Manila Council, although composed of the mayors of the component
cities and municipalities, was merely given the power of: (1) formulation of policies on the
delivery of basic services requiring coordination and consolidation; and (2) promulgation of
resolutions and other issuances, approval of a code of basic services, and exercise of its rulemaking power.34Thus, there is no merit in Makatis argument that Pateros failed to exhaust
administrative remedies inasmuch as the LGC is silent as to the governing body in charge of
boundary disputes involving municipalities located in the Metropolitan Manila area.

However, now that Makati is already a highly urbanized city, the parties should follow Section
118(d) of the LGC and should opt to amicably settle this dispute by joint referral to the
respective sanggunians of the parties. This has become imperative because, after all, no
attempt had been made earlier to settle the dispute amicably under the aegis of the LGC. The
specific provision of the LGC, now made applicable because of the altered status of Makati,
must be complied with. In the event that no amicable settlement is reached, as envisioned
under Section 118(e) of the LGC, a certification shall be issued to that effect, and the dispute
shall be formally tried by the Sanggunian concerned within sixty (60) days from the date of
the aforementioned certification. In this regard, Rule III of the Rules and Regulations
Implementing the LGC shall govern.35
Only upon failure of these intermediary steps will resort to the RTC follow, as specifically
provided in Section 119 of the LGC:
Section 119. Appeal. Within the time and manner prescribed by the Rules of Court, any
party may elevate the decision of the sanggunian concerned to the proper Regional Trial Court
having jurisdiction over the area in dispute. The Regional Trial Court shall decide the appeal
within one (1) year from the filing thereof. Pending final resolution of the disputed area prior
to the dispute shall be maintained and continued for all legal purposes.
On this score, the jurisdiction of the RTC over boundary disputes among LGUs was settled
in National Housing Authority v. Commission on the Settlement of Land Problems, 36 where
this Court recognized the appellate jurisdiction of the proper RTC. The jurisdiction of the RTC
was clarified in Municipality of Kananga v. Judge Madrona,37 where this Court held that, even
in the absence of any specific provision of law, "RTCs have general jurisdiction to adjudicate
all controversies except those expressly withheld from their plenary powers. They have the
power not only to take judicial cognizance of a case instituted for judicial action for the first
time, but also to do so to the exclusion of all other courts at that stage. Indeed, the power is
not only original, but also exclusive."
Corollarily, we feel obliged to inform Congress of the need to pass a law specifically
delineating the metes and bounds of the disputing LGUs. In Mariano, Jr. v. COMELEC,38 we
held that the existence of a boundary dispute does not per se present an unsurmountable
difficulty which will prevent Congress from defining with reasonable certitude the territorial
jurisdiction of an LGU. Congress, by virtue of the powers vested in it by the Constitution,
could very well put an end to this dispute. We reiterate what we already said about the
importance and sanctity of the territorial jurisdiction of an LGU:
The importance of drawing with precise strokes the territorial boundaries of a local unit of
government cannot be overemphasized. The boundaries must be clear for they define the
limits of the territorial jurisdiction of a local government unit. It can legitimately exercise
powers of government only within the limits of its territorial jurisdiction. Beyond these limits,
its acts are ultra vires. Needless to state, any uncertainty in the boundaries of local
government units will sow costly conflicts in the exercise of governmental powers which
ultimately will prejudice the people's welfare. This is the evil sought to be avoided by the
Local Government Unit in requiring that the land area of a local government unit must be
spelled out in metes and bounds, with technical descriptions.39
WHEREFORE, the instant Petition is DENIED, having been mooted by the conversion of
respondent Municipality of Makati into a highly urbanized city. The parties are hereby

DIRECTED to comply with Section 118(d) and (e) of the Local Government Code, and Rule
III of the Rules and Regulations Implementing the Local Government Code of 1991 without
prejudice to judicial recourse, as provided in the Local Government Code. No costs.
SO ORDERED.

G.R. No. 165742

June 30, 2009

TRI-CORP LAND & DEVELOPMENT, INC., represented by SOLITA S. JIMENEZPAULINO, Petitioner,

vs.
COURT OF APPEALS and GREYSTONE CORPORATION, Respondents.

Order and Injunction.13 The case was docketed as LRC Case No. M-4086. Tri-Corp alleged in
its petition that Greystone used different descriptions of the condominium project in order to
circumvent existing laws, rules and regulations on registration of real estate projects, to wit:
[1] Thus, to obtain approval of the San Miguel Village Association Construction and
Permits Committee, it styled its project as a "2-Unit Duplex Residence, to
conform with association rules.

DECISION
QUISUMBING, J.:
This petition for certiorari under Rule 65 of the Rules of Court assails the Decision 1 dated June
9, 2004 and Resolution2 dated September 21, 2004 of the Court of Appeals in CA-G.R. CV
No. 71285. The Court of Appeals affirmed the Orders dated November 15, 2000 3 and June 11,
20014 of the Regional Trial Court (RTC) of Makati City, Branch 139 in LRC Case No. M4086 dismissing the complaint filed by petitioner Tri-Corp Land and Development, Inc. (TriCorp) against respondent Greystone Corporation (Greystone) for lack of jurisdiction.
The facts, culled from the records, are as follows:
On February 12, 1998, Greystone executed in favor of Tri-Corp a Contract to Sell5 whereby
Tri-Corp agreed to pay the purchase price, exclusive of interest, in the amount of P13,500,000
and payable in installments, of a unit of Casa Madeira, a residential condominium project
located at Fatima Street, San Miguel Village, Makati City. Said unit, covered by
Condominium Certificate of Title (CCT) No. 512326 was to be used as a family residence of
Tri-Corps officers and stockholders. However, when Tri-Corp applied for membership with
the San Miguel Village Homeowners Association (SMVHA), it was denied and not given
gate passes for its vehicles. The reason cited by SMVHA for Tri-Corps denial of application
was that the construction of the Casa Madeira condominium project was in violation of village
restrictions annotated as Entry No. 319767 and inscribed on October 9, 1961 at the back of
Transfer Certificates of Title Nos. 2058278 and 2058289 covering the lots on which the
condominium project was constructed. SMVHA filed a case against Greystone for this
violation and prayed for the cancellation of the CCTs of the Casa Madeira condominium
project before the Housing and Land Use Regulatory Board (HLURB). The case was docketed
as HLURB Case No. REM-10045. Upon learning of the pending case, Tri-Corp filed a
Complaint-in-Intervention10 in said case for suspension of payments until the issue of violation
of the village restriction and validity of the CCT to the condominium unit sold shall have been
resolved. Tri-Corp, likewise, filed a petition11dated September 28, 2000, against Greystone
before the HLURB for Suspension and Cancellation of Certificate of Registration and License
to Sell of Greystone.
Greystone, in turn, filed an ejectment suit against Tri-Corp before the Metropolitan Trial Court
of Makati City, for failure to pay under the Contract to Sell. The complaint was docketed as
Civil Case No. 63308. Tri-Corp was ejected by the Sheriff in the said case for its refusal to pay
the supersedeas bond. Civil Case No. 63308 is still pending on appeal.12
Tri-Corp also filed before the RTC of Makati City, sitting as a Land Registration Court, a
Petition for Correction of Error /Misrepresentation in the Master Deed entered as
Memorandum on TCTs Nos. 205827 and 205828 with prayer for Temporary Restraining

[2] To obtain approval of Barangay Poblacion, Makati City, and the issuance of
Certificate of Registration and Clearance No. 2758 on the same project, it dubbed
the same project as a "3-storey townhouse",to suit barangay guidelines.
[3] To obtain from the City of Makati Building Permit No. C1096-01259, it called
the same project a "4-unit Residential Bldg." "Two-storey duplex", to comply
with zoning ordinances.
[4] To obtain from the HLURB the Preliminary Approval of Condominium Plan, it
described Casa Madeira as a "Condominium Project", for the purpose of
complying with PD 957 and its implementing rules.
[5] To obtain from the HLURB the Final Approval, it called the project
a Condominium Plan/Subdivision Townhouse, for the same purpose.
[6] To obtain from the HLURB a development permit, it called the project
a condominium for the same purpose.
[7] To obtain from the HLURB a Certificate of Locational Viability for the same
project, it was designated as a "2 Storey with Attic Residential
Condominium", for the same purpose.
[8] To obtain from the Department of Environment and Natural Resources, National
Capital Region an Environmental Compliance Certificate (ECC) it designated the
project as "four units, two storey with attic townhouse project", to comply with
the requirement of law.
[9] To obtain from the HLURB Certificate of Registration No. 97-09-3003, it called
Casa Madeira a condominium project, for the purpose of complying with PD 957
and its implementing rules.
[10] These misrepresentations misled the petitioner as buyer and also mis[led] the
buying public as to the real nature of [the] project.14 [Emphasis supplied.]
During the hearing on Tri-Corps application for a Writ of Preliminary Injunction on
September 28, 2000, Greystone raised the issue of jurisdiction. Greystone contended in its
Memorandum15 that the RTC had no jurisdiction to try and decide the case because it involves
an unsound real estate practice within the jurisdiction of the HLURB, Tri-Corp is not a party
in interest, and same issues had been raised by Tri-Corp in the HLURB.

In an Order dated November 15, 2000, the RTC dismissed the case for lack of jurisdiction.
The dispositive portion of the order states:
IN VIEW OF THE FOREGOING PREMISES, based on law and jurisprudence,
the COURT hereby ORDERS that:
(a) The prayer for Temporary Restraining Order and/or Writ of Preliminary
Injunction is hereby DENIED for lack of merit.
(b) The Complaint dated 19 September 1990 (sic) is hereby DISMISSED, the same
being within theexclusive jurisdiction of [the] HLURB pursuant to PD[s] 987 and
1344.
SO ORDERED.

16

Tri-Corp filed a motion for reconsideration but it was denied by the RTC in an Order dated
June 11, 2001.
Tri-Corp appealed to the Court of Appeals. In a Decision promulgated on June 9, 2004, the
Court of Appeals affirmed the orders of the RTC. The dispositive portion of the decision
states:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the appealed orders dated
November 15, 2000 and June 11, 2001 must be, as they hereby, are AFFIRMED. Without
costs in this instance.
SO ORDERED.17
Tri-Corp filed a motion for reconsideration but it was denied by the Court of Appeals in a
Resolution promulgated on September 21, 2004 for being filed out of time and for being
without merit.
Alleging that the Court of Appeals committed grave abuse of discretion in affirming the orders
of the RTC, Tri-Corp filed this original action for certiorari under Rule 65.
Tri-Corp alleges that:

THE APPELLATE COURT COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF OR EXCESS OF JURISDICTION IN DECLARING THAT
HEREIN PETITIONER IS NOT A PARTY IN INTEREST.
III.
THE APPELLATE COURT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR EXCESS OF JURISDICTION WHEN IT RESOLVED
THE INSTANT CASE IN FAVOR OF RESPONDENT GREYSTONE WITHOUT DUE
REGARD TO THE PROTECTIVE MANTLE ENSHRINED UNDER PD 957 TOWARDS
BUYERS OF CONDOMINIUM UNITS.18
In sum, the issue is, did the Court of Appeals act with grave abuse of discretion in denying
Tri-Corps motion for reconsideration for being filed out of time, in declaring Tri-Corp as not
a party in interest, and in affirming the RTCs Order dismissing the case for lack of
jurisdiction?
In its Memorandum,19 Tri-Corp asserts that it disagrees with the findings of the appellate court
that its motion for reconsideration was filed out of time since it would be absurd to consider
receipt by its mailbox as receipt by Tri-Corp when its representative, Solita S. JimenezPaulino, was not physically present in the Philippines.20 Tri-Corp further argues that the
conclusion that Tri-Corp is not a party in interest is also absurd since Tri-Corp stands to lose
an enormous amount at the instance of Greystone who stands to gain without giving anything
of value.21 Tri-Corp also argues that the Court of Appeals overlooked the fact that the case is
one for cancellation of inscriptions and cancellation of the CCT, which is within the ambit of
the Register of Deeds to perform, and the case is not a simple buyer-seller of condominium
relationship but one which seeks the alteration of annotations and cancellation of titles with
the jurisdiction of the RTC sitting as a Land Registration Court.22
On the other hand, Greystone, in its Memorandum,23 argues that it is clear that since TriCorps mailbox, MBE Center, received a copy of the decision of the Court of Appeals on June
16, 2004, it had until July 1, 2004 within which to file a motion for reconsideration. Its motion
for reconsideration, which was filed only on July 13, 2004 24was clearly filed out of time.
As defined, grave abuse of discretion means such capricious and whimsical exercise of
judgment as is equivalent to lack or excess of jurisdiction or, where the power is exercised in
an arbitrary manner by reason of passion, prejudice, or personal hostility, and it must be so
patent or gross as to amount to an evasion of a positive duty or to a virtual refusal to perform
the duty enjoined or to act at all in contemplation of law.25

I.
THE APPELLATE COURT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DECLARED THE
MOTION FOR RECONSIDERATION AS HAVING BEEN FILED OUT OF TIME
DESPITE PROOFS OF TRAVEL.
II.

After review, we find that the Court of Appeals did not act with grave abuse of discretion
because of the following reasons:
First, the petitioner in this case is Tri-Corp and not Solita Jimenez-Paulino. The reckoning
time therefore to count the period to file Tri-Corps motion for reconsideration was the date
the decision was received by Tri-Corps mailbox and not the date when it was received by its
representative, Solita S. Jimenez-Paulino.1avvphi1

Second, the Court of Appeals, in ruling that Tri-Corp is not a party in interest, pointed out in
its decision that the contract to sell entered into by both parties contains a stipulation that in
case of default or non-payment of the stipulated amortizations and the rentals, Greystone has
the option to rescind the contract and forfeit all amounts paid as liquidated damages.
Greystone rescinded the contract.26 As the contract to sell has been rescinded, there is legal
basis to hold that Tri-Corp is no longer a party in interest.
Third, the Court of Appeals decision affirming the trial courts Orders dismissing Tri-Corps
petition on the ground that it does not have jurisdiction over the case, has legal basis.
Section 1 of Presidential Decree No. 134427 entitled "Empowering the National Housing
Authority to Issue Writ of Execution in the Enforcement of its Decisions under Presidential
Decree No. 957" provides:
SECTION 1. In the exercise of its functions to regulate the real estate trade and business and
in addition to its powers provided for in Presidential Decree No. 957, the National Housing
Authority shall have exclusive jurisdictionto hear and decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and
C. Cases involving specific performance of contractual and statutory obligations
filed by buyers of subdivision lot or condominium unit against the owner, developer,
dealer, or salesman. [Emphasis supplied.]
In this case, Tri-Corps chief quest is the cancellation of Entry No. 31976 from TCTs Nos.
205827 and 205828, and the cancellation of the CCT of the unit sold to it, and it alludes to
Greystones use of different descriptions of the condominium project in order to circumvent
existing laws, rules and regulations on registration of real estate projects in its petition. Under
these circumstances, Tri-Corp is alluding to steps allegedly taken by Greystone in
consummating an alleged unsound real estate business practice. The HLURB has the technical
expertise to resolve this technical issue. Jurisdiction therefore properly pertains to the
HLURB.
In view of the foregoing, it cannot be said that the Court of Appeals, in affirming the RTC
Orders dismissing the case for lack of jurisdiction, acted with grave abuse of discretion that
would warrant the filing of a petition for certiorari under Rule 65 against it.
WHEREFORE, the instant petition is DISMISSED for lack of merit. Costs against
petitioner.
SO ORDERED.

SO ORDERED.[10] Petitioner's motion for reconsideration was denied.[11]

[G.R. No. 157095 : January 15, 2010]

MA. LUISA G. DAZON, PETITIONER, VS. KENNETH Y. YAP AND PEOPLE OF
THE PHILIPPINES, RESPONDENTS.

Issue
Hence, the present Petition for Review on Certiorari raising the following issue: ''Whether or
not a regional trial court has jurisdiction over a criminal action arising from violation of PD
957".[12]

DECISION
DEL CASTILLO, J.:

Petitioner's Arguments
The primordial function of the Housing and Land Use Regulatory Board (HLURB) is
the regulation of the real estate trade and business. Though the agency's jurisdiction has been
expanded by law, it has not grown to the extent of encompassing the conviction and
punishment of criminals.
The present Petition for Review on Certiorari assails the Orders of the Regional Trial Court
(RTC) of Lapu-Lapu City, Branch 54 dated October 2, 2002 and January 13,2003, which
granted the Motion to Withdraw Information filed by the public prosecutor and denied the
motion for reconsideration filed by petitioner, respectively.
Factual Antecedents
Respondent Kenneth Y. Yap was the president of Primetown Property Group, Inc.,
(Primetown) the developer of Kiener Hills Mactan Condominium, a low-rise condominium
project. In November 1996, petitioner Ma. Luisa G. Dazon entered into a contract [1] with
Primetown for the purchase of Unit No. C-108 of the said condominium project. Petitioner
made a downpayment and several installment payments, totaling P1,114,274.30. [2] Primetown,
however, failed to finish the condominium project. Thus, on March 22, 1999, petitioner
demanded for the refund of her payments from Primetown, pursuant to Section 23 [3] of
Presidential Decree (PD) No. 957 (1976), otherwise known as "The Subdivision and
Condominium Buyers' Protective Decree". Primetown failed to refund petitioner's payments.
On October 26,2000,[4] petitioner filed a criminal complaint with the Office of the City
Prosecutor of Lapu-Lapu City against respondent as president of Primetown for violation of
Section 23 in relation to Section 39[5] of PD 957. Subsequently, after a finding of probable
cause, an Information[6] was filed with the RTC of Lapu-Lapu City docketed as Criminal Case
No. 015331-L.
Meanwhile, respondent, in connection with the resolution finding probable cause filed a
Petition for Review with the Department of Justice (DOJ). On June 14,2002, the DOJ
rendered a Resolution[8]ordering the trial prosecutor to cause the withdrawal of the
Information. Hence, the prosecutor filed a Motion to Withdraw Information[9] with the RTC.

Petitioner contends that jurisdiction is conferred by law and that there is no law expressly
vesting on the HLUKB exclusive jurisdiction over criminal actions arising from violations of
PD 957.
Respondent's Arguments
Respondent, on the other hand, contends that there is no error of law involved in this case and
that petitioner failed to give due regard to the hierarchy of courts by filing the present petition
directly with the Supreme Court instead of with the Court of Appeals. He further argues that
the real issue is not of jurisdiction but the existence of probable cause. The Secretary of
Justice, according to respondent, found no probable cause to warrant the filing of the
Information, hence its directive to cause the withdrawal of the Information.
Our Ruling
The petition has merit.
The DOJ Resolution dated June
14, 2002 which ordered the
withdrawal of the information
was based on the finding that
the HLURB, and not the regular
court, has jurisdiction over the case.
Both the respondent[13] and the OSG[14] agree with the petitioner that the regular courts and not
the HLURB have jurisdiction over the criminal aspect of PD 957. The parties, however,
disagree on the basis of the directive of the DOJ for the withdrawal of the Information. Was
it, as argued by petitioner, lack of jurisdiction of the RTC or was it, as argued by respondent,
lack of probable cause? We perused the DOJ Resolution dated June 14, 2002 and we find that
the basis of the resolution was, not that there was lack of probable cause but, the finding that it
is the HLURB that has jurisdiction over Hie case. Pertinent portions of the said DOJ
Resolution provide:

The RTC disposed of the matter as follows:

The petition is impressed with merit.
Wherefore, in view of the foregoing, the Motion to Withdraw Information filed by [the] public
prosecutor is hereby granted. Accordingly, the information' filed against the herein accused is
ordered withdrawn and to be transmitted back to the City Prosecutor's Office of Lapu-Lapu
City.

A perusal of the allegations in the complaint-affidavit would show complainant's grievance

against respondent was the failure of the latter's firm to refund the payments she made for one
of the units in the aborted Mactan condominium project in the total amount of P1,114,274.30.

Furnish copies of this order to Prosecutor Rubi, Attys. Valdez and Pangan.

As early as in the case of Solid Homes, Inc. vs. Payawal, 177 SCRA 72, the Supreme Court

had ruled that the Housing and Land Use Regulatory Board (HLURB) has exclusive
jurisdiction over cases involving real estate business and practices under PD 957. This ruling
is reiterated in several subsequent cases, to name a few of them, Union Bank of the
Philippines-versus-HLURB, G.R. No. 953364, June 29, 1992; C.T. Torres Enterprises vs.
Hilionada, 191 SCRA 286; Villaflor vs. Court of Appeals, 280 SCRA 297; Marina Properties
Coip. vs. Court of Appeals, 294 SCRA 273; and Raet vs. Court of Appeals, 295 SCRA 677.
Of significant relevance is the following pronouncement of the Supreme Court in Raet vs.
Court of Appeals (supra), as follows:
xxx The contention has merit. The decision in the ejectment suit is conclusive only on the
question of possession of the subject premises. It does not settle the principal question
involved in the present case, namely, whether there was perfected contract of sale between
petitioners and private respondent PVDHC involving the units in question. Under 8(100) of
E.O. No. 648 dated February 7, 1981, as amended by E.O. No. 90 dated December 17, 1986
this question is for the HLURB to decide. The said provision of law gives that agency the
power to
Hear and decide cases of unsound real estate business practices; claims involving refijnd filed
against project owners, developers, dealers, brokers, or salesmen; and cases of specific
performance.
This jurisdiction of the HLURB is exclusive. It has been held to extend to the determination
of the question whether there is a perfected contract of sale between condominium buyers and
[the] developer x x x.
In fine, the Rule of Law dictates that we should yield to this judicial declaration upholding the
jurisdiction of the HLURB over cases of this nature.
Hence, there is a need for the Court to make a definite ruling on a question of law - the matter
of jurisdiction over the criminal aspect of PD 957.
Jurisdiction over criminal actions
arising from violations of PD 957
is vested in the regular courts.
Jurisdiction is" conferred by law and determined by the material averments in the complaint as
well as the character of the relief sought.15 The scope and limitation of the jurisdiction of the
HLURB are well-defined.'6 Its precusor, the National Housing Authority (NHA),17 was
vested under PD 957 with exclusive jurisdiction to regulate the real estate trade and
business,18 specifically the registration of subdivision or condominium projects and dealers,
brokers and salesmen of subdivision lots or condominium units, issuance and suspension of
license to sell; and revocation of registration certificate and license to sell. Its jurisdiction was
later expanded under PD 1344 (1978) to include adjudication of certain cases, to wit:
Sec. 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing
Authority shall have the exclusive jurisdiction to hear and decide cases of the following
nature:

b) Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker or salesman; and
c) Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or
salesman. (Italics supplied)
It is a settled rule of statutory construction that the express mention of one thing in the law
means the exclusion of others not expressly mentioned. This rule is expressed in the familiar
maxim expressio unius est exclusio alterius[19]. Where a statute, by its terms, is expressly
limited to certain matters, it may not, by interpretation or construction, be extended to others.
The rule proceeds from the premise that the legislature would not have made specified
enumerations in a statute had the intention been not to restrict its meaning and to confine its
terms to statute had the intention been not to restrict its meaning and to confine its terms to
those expressly mentioned.[20] Noticeably, cases that are criminal in nature are not mentioned
in the enumeration quoted above. The primordial function of the HLURB, after all, is
the regulation of the real estate trade and business and not the conviction and punishment of
criminals. "It may be conceded that the legislature may confer on administrative boards or
bodies quasi-judicial powers involving the exercise of judgment and discretion, as incident to
the performance of administrative functions. But in so doing, the legislature must state its
intention in express terms that would leave no doubt, as even such quasi-judicial prerogatives
must be limited, if they are to be valid, only to those incidental to or in connection with the
performance of administrative duties, which do not amount to conferment of jurisdiction over
a matter exclusively vested in the courts".[21]
Administrative agencies being tribunals of limited jurisdiction can only wield such powers as
are specifically granted to them by their enabling statutes. PD 957 makes the following
specific grant of powers to the NHA (now HLURB) for the imposition of administrative fines,
and it also mentions penalties for criminal cases, to wit:
Sec. 38. Administrative Fines.- The Authority may prescribe and impose fines not exceeding
ten thousand pesos for violations of the provisions of this Decree or any rule or regulation
thereunder. Fines shall be payable to the Authority and enforceable through writs of execution
in accordance with the provisions of the Rules of Court (Italics supplied)
Sec. 39. Penalties.- Any person who shall violate any of the provisions of this Decree and/or
any rule or regulation that may be issued pursuant to this Decree shall, upon conviction, be
punished by a fine of not more than twenty thousand (P20,000.00) pesos and/or imprisonment
of not more than ten years: Provided, That in the case of corporations, partnership,
cooperatives, or associations, the President, Manager or Administrator or the person who has
charge of the administration of the business shall be criminally responsible for any violation of
this/Decree and/or the rules and regulations promulgated pursuant thereto,
Having limited, under Section 38 of PD 957, the grant of power to the former NHA, now
HLURB, over the imposition of fines to those which do not exceed ten thousand pesos, it is
clear that the power in relation to criminal liability mentioned in the immediately succeeding
provision, to impose, upon conviction, fines above ten thousand pesos and/or imprisonment,
was not conferred on it. Section 39, unlike Section 38, conspicuously does not state that it is
the MIA that may impose the punishment specified therein.

a) Unsound real estate business practices;

Not having been specifically conferred with power to hear and decide cases which are criminal
in nature, as well as to impose penalties therefor, we find that the HLURB has no jurisdiction

over criminal actions arising from violations of PD 957.

On the other hand, BP Big. 129 states:
Sec. 20. Jurisdiction in Criminal Cases. - Regional Trial Courts shall exercise exclusive
original jurisdiction in all criminal cases not within the exclusive jurisdiction of any court,
tribunal or body, except those now falling under the exclusive and concurrent jurisdiction of
the Sandiganbayan which shall hereafter be exclusively taken cognizance of by the latter.
Based on the above-quoted provision, it is the RTC that has jurisdiction over criminal cases
arising from violations of PD 957.
In the present case, the affidavit-complaint[23] alleges the violation of Section 23 oFTD 957
and asks for the institution of a criminal action against respondent Yap, as President of
Primetown. The Office of the City Prosecutor found probable cause for the filing of
an'Information for the subject offense. The DOJ made no reversal of such finding of probable
cause. Instead, it directed the withdrawal of the information on the erroneous premise that it is
the HLURB which has jurisdiction over the case. However, as above-discussed, and contrary
to the resolution of the Secretary of Justice, it is not the HLURB but the RTC that has
jurisdiction to hear the said criminal action.
WHEREFORE, the petition is GRANTED. The assailed October 2, 2002 and January 13,
2003 Orders of the Regional Trial Court of Lapu-Lapu City, Branch 54,
are REVERSED and SET ASIDE. The said Court is DIRECTED to proceed with the
arraignment of the respondent and to hear the case with dispatch.
SO ORDERED.

G.R. No. 155113

January 9, 2013

PHILIPPINE BANK OF COMMUNICATIONS, Petitioner,

vs.
PRIDISONS REALTY CORPORATION, ANTONIO GONZALES, BORMACHECO,
INC., NAZARIO F. SANTOS, TERESITA CHUA TEK, CHARITO ONG LEE, and
ERNESTO SIBAL, Respondents.
DECISION
BRION, J.:
The petitioner Philippine Bank of Communications (PBComm) seeks the reversal of the
decision1 dated April 26, 2002 and the resolution2 dated September 5, 2002 of the Court of
Appeals (CA) in CA-G.R. SP No. 62576 through a petition for review on certiorari 3 tiled
under Rule 45 of the Rules of Court.
THE ANTECEDENT FACTS
Respondent Pridisons Realty Corporation (Pridisons) is the owner of a 1,988-square meter
land located in New Manila, Quezon City, covered by Transfer Certificate of Title No.
(276613) RT-1160. On November 23, 1989, Pridisons executed in favor of PBComm a deed
of real estate mortgage over the land and the improvements existing or to be erected thereon to
secure the P7,000,000.00 loan it acquired from the bank. The deed of real estate mortgage was
registered and annotated on Pridisons title on the same day it was executed. 4 Pridisons
thereafter transferred all its rights over the land to its sister company, Ivory Crest Realty and
Development Corporation (Ivory Crest).5 Respondent Antonio Gonzales is the President of
both corporations.
Sometime in June 1990, Ivory Crest applied for permits and licenses to construct and sell
condominium units on the land with the Housing and Land Use Regulatory Board (HLURB).
The HLURB issued the certificate of registration and the license to sell on June 23, 1991.
Among the buyers of the condominium units were respondents Bormacheco, Inc., Nazario F.
Santos, Teresita Chua Tek, Charito Ong Lee, and Ernesto Sibal (collectively referred to as
respondent buyers).
When Pridisons defaulted in paying its loan obligations, PBComm extra judicially foreclosed
the mortgage. The public auction of the land, however, was forestalled by a preliminary
injunction issued by the HLURB in conjunction with the action for specific performance with
damages instituted by Bormacheco, Inc. against Pridisons and/or Ivory Crest and
PBComm.6 Bormacheco, Inc. demanded that Pridisons and/or Ivory Crest transfer in its favor
the titles of the condominium units already paid for in full, free from all liens and
encumbrances, including the mortgage in favor of PBComm. The other respondent buyers
followed suit, each filing an action against Pridisons and/or Ivory Crest and
PBComm.7 Answering the complaints, PBComm claimed that the mortgage in its favor was
superior to the claims of the respondent buyers, since it was executed long before their
purchase of the condominium units. PBComm also assailed the HLURBs jurisdiction over it,
contending that it was not engaged in the real estate business as to bring it under the HLURBs
jurisdiction.

No tribunal, however, found PBComms contentions meritorious, as all decisions from that
of the HLURB up to that of the CA were adverse to it. The HLURB en banc8 upheld its
jurisdiction over mortgagee banks when the subject matter involves a condominium or
subdivision project.9 It also ruled against the validity of the mortgage, pointing out that the
mortgage was executed without the approval of the HLURB as required under Section 18 of
Presidential Decree (PD) No. 957 or The Subdivision and Condominium Buyers' Protective
Decree. On appeal, the Office of the President (OP) agreed with the HLURBs ruling.10
THE ASSAILED CA RULING
PBComm elevated the case to the CA by filing a petition for review (under Rule 43 of the
Rules of Court) against the OP decision. In the assailed decision dated April 26, 2002, the CA
dismissed the petition and affirmed the ruling of the tribunals below.
The CA declared that the HLURBs power to regulate real estate trade is "broad enough to
include jurisdiction over complaints for specific performance of the sale, or annulment of the
mortgage, of a condominium unit, with damages."11 The CA also agreed with the finding that
the mortgage in favor of PBComm was executed without the approval of the HLURB.
Although the mortgage was executed before the condominium project was started, the
surrounding circumstances indicate that the "mortgagee PBComm was aware of the proposed
conversion of the property or the development plans of the owner Pridisons and/or Ivory
Crest. x x x We believe that the clearance requirement of Section 18 of PD No. 957 may be
imposed, even if what is being mortgaged is raw land."12 Section 18 of PD No. 957 provides
that
Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority.13 Such approval shall not be granted
unless it is shown that the proceeds of the mortgage loan shall be used for the development of
the condominium or subdivision project and effective measures have been provided to ensure
such utilization. The loan value of each lot or unit covered by the mortgage shall be
determined and the buyer thereof, if any, shall be notified before the release of the loan. The
buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who
shall apply the payments to the corresponding mortgage indebtedness secured by the particular
lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit
promptly after full payment thereto. [emphasis ours; italics supplied]
In light of the mandatory nature of the provision, the CA ruled that the failure to secure the
HLURBs approval resulted in the nullity of the mortgage. Despite the mortgages nullity, the
CA declared that it may be considered as a contract of indebtedness. 14
THE PARTIES ARGUMENTS
PBComm alleges that the CA erred in upholding the HLURBs jurisdiction and nullifying the
mortgage executed in its favor.
Section 1 of PD No. 134415 limits the scope of the HLURBs jurisdiction over the following
cases:

Section 1. In the exercise of its functions to regulate the real estate trade and business and in
addition to its powers provided for in Presidential Decree No. 957, the National Housing
Authority shall have exclusive jurisdiction to hear and decide cases of the following nature:

instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on
any subdivision lot or condominium unit as soon as the full purchase price for the same is paid
by the buyer. [emphasis ours; italics supplied]

(a) Unsound real estate business practices;

In fact, in a letter dated November 27, 1990, the HLURB notified Pridisons and/or Ivory Crest
of its deficiency in the requirements submitted, particularly, the affidavit of undertaking by
PBComm as compliance with the requirement of Section 4 of PD No. 957. Pridisons and/or
Ivory Crest, however, failed to submit or request one from PBComm. Notwithstanding
Pridisons and/or Ivory Crests failure, the HLURB granted the registration and issued a
license in June 1991. PBComm asserts that its rights as a mortgagee cannot be prejudiced by
the HLURBs error. It also claims that its rights are superior to those of the respondent buyers,
as its mortgage was even annotated on the master deed and the 12 condominium certificates of
title.

(b) Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker or salesman; and
(c) Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or
salesman.
PBComm argues that it is not engaged in the real estate business and may thus not be
considered as a "project owner, developer, dealer, broker, or salesman" of a condominium or
subdivision against whom cases may be filed with the HLURB. It had nothing to do with the
condominium project of Pridisons and/or Ivory Crest that would bring it under the HLURBs
authority.16
PBComm also claims that it was error for the CA to apply Section 18 of PD No. 957 to the
case. It argues that the requirement of Section 18 of the HLURBs approval of the mortgage
applies only if the mortgage covers an existing condominium or subdivision project, and does
not apply to raw lands. In this case, the mortgage was executed and registered on November
23, 1989 when the subject property was still a raw land unclothed of any improvements.
Pridisons and/or Ivory Crest applied for registration and license before the HLURB only in
June 1990, and these were issued in June 1991 more than a year after the mortgage was
executed.17

PBComm additionally alleges that it was erroneous to apply Section 18 of PD No. 957 on the
basis of the finding that "the mortgagee is aware of the proposed conversion of the
property";18 it claims that the finding is unsupported by the evidence on record.
The respondent buyers, on the other hand, consider PBComms petition unmeritorious. They
claim that all factual and legal issues raised in the petition have been authoritatively
considered and passed upon. The CA and the lower tribunals were consistent in upholding the
rights of the buyers, as the policy behind PD No. 957 is to protect innocent buyers from
scheming subdivision developers. They thus pray for the affirmance of the rulings below and
the denial of the petition.
The Courts Ruling
The Court does not find the petition meritorious.

PBComm alleges that the HLURB was fully aware of the existence of the mortgage, since it
was annotated on the title of the land. As there was already an existing mortgage on the land,
the HLURB should have applied Section 4 of PD No. 957, instead of Section 18 of the same
decree. Section 4 of PD No. 957 requires the mortgagee to release the mortgage on the
condominium unit as soon as the full purchase price is paid by the buyer:
Section 4. Registration of Projects. The registered owner of a parcel of land who wishes to
convert the same into a subdivision project shall submit his subdivision plan to the Authority
which shall act upon and approve the same, upon a finding that the plan complies with the
Subdivision Standards' and Regulations enforceable at the time the plan is submitted. The
same procedure shall be followed in the case of a plan for a condominium project x x x.
xxxx
The following documents shall be attached to the registration statement:
xxxx
(d) A title to the property which is free from all liens and encumbrances: Provided, however,
that in case any subdivision lot or condominium unit is mortgaged, it is sufficient if the

On the HLURBs jurisdiction over mortgagee banks

Section 1 of PD No. 957 limits the HLURBs jurisdiction to three kinds of cases:
(a) Unsound real estate business practices;
(b) Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyers against the project owner, developer, dealer, broker or salesman; and
(c) Cases involving specific performance of contractual and statutory obligations filed by
buyers of subdivision lots or condominium units against the owner, developer, dealer, broker
or salesman.
While paragraphs (b) and (c) limit the HLURB cases to those between the buyer and the
subdivision or condominium owner, developer, dealer, broker or salesman, paragraph (a) is
broad enough to include third parties to the sales contract. It appears that the complaints filed
before the HLURB were precisely for the unsound real estate business practices of Pridisons
and/or Ivory Crest, which not only failed to secure and submit an affidavit of undertaking by
PBComm, but also sold the same condominium units to more than one buyer. PBComm was

impleaded on the basis of the allegation that the mortgage failed to meet the requirements of
PD No. 957.
Jurisprudence consistently recognizes the rationale behind the enactment of PD No. 957 to
protect innocent lot buyers from scheming developers. For this reason, the Court has broadly
construed the jurisdiction of the HLURB to include complaints for annulment of mortgages of
condominium or subdivision units.19 Indeed, in Manila Banking Corporation v. Spouses
Rabina,20 even if the mortgagee bank was under receivership/liquidation, the Court declared
that the HLURB retains jurisdiction over an action for the annulment of the mortgage:
The jurisdiction of the HLURB to regulate the real estate trade is broad enough to include
jurisdiction over complaints for annulment of mortgage. To disassociate the issue of nullity of
mortgage and lodge it separately with the liquidation court would only cause inconvenience to
the parties and would not serve the ends of speedy and inexpensive administration of justice as
mandated by the laws vesting quasi-judicial powers in the agency. [citations omitted]
The Court thus upholds the HLURBs jurisdiction over the action to annul the mortgage
constituted in favor of PBComm.
On the validity of the mortgage in favor of PBComm
The Court, in general, agrees with PBComms allegation that Section 18 of PD No. 957
applies to mortgages constituted over existing condominium or subdivision projects, while
Section 4 of the same law applies to mortgages of raw lands that are to be developed as
condominium or subdivision projects. This conclusion can be inferred from a reading of both
provisions, which state that
Section 4. Registration of Projects. The registered owner of a parcel of land who wishes to
convert the same into a subdivision project shall submit his subdivision plan to the Authority
which shall act upon and approve the same, upon a finding that the plan complies with the
Subdivision Standards' and Regulations enforceable at the time the plan is submitted. The
same procedure shall be followed in the case of a plan for a condominium project x x x.

Section 18. Mortgages. No mortgage on any unit or lot shall be made by the owner or
developer without prior written approval of the Authority. Such approval shall not be granted
unless it is shown that the proceeds of the mortgage loan shall be used for the development of
the condominium or subdivision project and effective measures have been provided to ensure
such utilization. The loan value of each lot or unit covered by the mortgage shall be
determined and the buyer thereof, if any, shall be notified before the release of the loan. The
buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who
shall apply the payments to the corresponding mortgage indebtedness secured by the particular
lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit
promptly after full payment thereto. [emphases and italics ours]
Like the HLURB, the OP and the CA, however, the Court believes that the surrounding
circumstances show that PBComm was aware of the proposed conversion of the land into a
condominium project, thus, meriting the application of Section 18 of PD No. 957 to the case.
PBComm has not categorically denied prior knowledge of the condominium project and relies
mainly on the fact that the mortgage was executed seven months before Pridisons and/or Ivory
Crest applied for the registration and license to sell condominium units with the
HLURB.21 The prior execution of the mortgage alone, however, does not discount the
possibility that PBComm may have had "foreknowledge and possible complicity"22 in the
development plans of the condominium project; the factual findings of HLURB, as affirmed
by both the OP and the CA, indicate that this was indeed the case. As the HLURB declared,
the standard industry practice for banks is to require loan applicants to disclose the nature and
purpose of the loan, and present supporting documents such as project feasibility studies in
support thereof. With more reasons, we feel that the disclosure of loan purpose and
presentation of loan documents is expected in this case, considering that the applicant for loan
was a realty company. x x x banks are familiar with the nature of realty companies, and are
expected to anticipate them to apply for and use bank loans for developmental purposes. x x x.
x x x in the light of the principles or regularity in the performance of functions and of
observance of normal course of business transactions, we presume that the standard banking
and industry practice and procedures were observed prior to the execution of the mortgage
contract, and that there was due disclosure of loan purpose and submission of plans to the
bank.23 (emphases supplied)

xxxx
The following documents shall be attached to the registration statement:
xxxx
(d) A title to the property which is free from all liens and encumbrances: Provided, however,
that in case any subdivision lot or condominium unit is mortgaged, it is sufficient if the
instrument of mortgage contains a stipulation that the mortgagee shall release the mortgage on
any subdivision lot or condominium unit as soon as the full purchase price for the same is paid
by the buyer.
xxxx

Additionally, there was a finding of "several annotations and renewal notes concerning the
loans PBComm extended to Pridisons, during the period when the project was under
development, suggesting the existence of progressive releases for project development." 24 It is
also unlikely to have the master deed and 12 condominium certificates of title issued without
PBComm releasing the certificate of title over the land, which it held on account of the
mortgage. From these, the Court can reasonably conclude that PBComm had actual, not only
constructive, knowledge of the condominium project. The earlier execution of the mortgage
was more likely made in order to skirt the requirements of Section 18 of PD No. 957. On
account of the failure to comply with the mandatory requirement of the law, 25 the Court
affirms the nullification of the mortgage constituted in favor of PBComm and upholds the
rights and interests of the respondent buyers over the condominium units, as settled by the
courts below.

In so ruling, PBComm is not thereby made to bear the consequences of the combined errors
and mistakes of the other parties. As mentioned, PD No. 957 is a social justice measure
designed to protect innocent lot buyers:26
As between these small lot buyers and the gigantic financial institutions which the developers
deal with, it is obvious that the law as an instrument of social justice must favor the weak.
Indeed, the petitioner Bank had at its disposal vast resources with which it could adequately
protect its loan activities, and therefore is presumed to have conducted the usual "due
diligence" checking and ascertained x x x the actual status, condition, utilization and
occupancy of the property offered as collateral. x x x On the other hand, private respondents
obviously were powerless to discover the attempt of the land developer to hypothecate the
property being sold to them. It was precisely in order to deal with this kind of situation that
P.D. 957 was enacted, its very essence and intendment being to provide a protective mantle
over helpless citizens who may fall prey to the razzmatazz of what P.D. 957 termed
"unscrupulous subdivision and condominium sellers."27 (emphasis ours)
Also, as the CA declared, the mortgage although voided still stands as evidence of a
contract of indebtedness which PBComm may demand Also, as the CA declared, the mortgage
- although voided - still stands as evidence of a contract of indebtedness which PBComm may
demand payment for from Pridisons, subject to claims and defenses they have against each
other that have not been settled in this Decision.
WHEREFORE, we hereby DENY the petition and AFFIRM the decision dated April 26,
200228 and the resolution dated September 5, 200229 of the Court of Appeals in CA-G.R. SP
No. 62576. Costs against the petitioner.
SO ORDERED.

G.R. No. 171993

December 12, 2011

MARC II MARKETING, INC. and LUCILA V. JOSON, Petitioners,

vs.
ALFREDO M. JOSON, Respondent.
DECISION
PEREZ, J.:
In this Petition for Review on Certiorari under Rule 45 of the Rules of Court, herein
petitioners Marc II Marketing, Inc. and Lucila V. Joson assailed the Decision 1 dated 20 June
2005 of the Court of Appeals in CA-G.R. SP No. 76624 for reversing and setting aside the
Resolution2 of the National Labor Relations Commission (NLRC) dated 15 October 2002,
thereby affirming the Labor Arbiters Decision3 dated 1 October 2001 finding herein
respondent Alfredo M. Josons dismissal from employment as illegal. In the questioned
Decision, the Court of Appeals upheld the Labor Arbiters jurisdiction over the case on the
basis that respondent was not an officer but a mere employee of petitioner Marc II Marketing,
Inc., thus, totally disregarding the latters allegation of intra-corporate controversy.
Nonetheless, the Court of Appeals remanded the case to the NLRC for further proceedings to
determine the proper amount of monetary awards that should be given to respondent.
Assailed as well is the Court of Appeals Resolution4 dated 7 March 2006 denying their Motion
for Reconsideration.
Petitioner Marc II Marketing, Inc. (petitioner corporation) is a corporation duly organized and
existing under and by virtue of the laws of the Philippines. It is primarily engaged in buying,
marketing, selling and distributing in retail or wholesale for export or import household
appliances and products and other items.5 It took over the business operations of Marc
Marketing, Inc. which was made non-operational following its incorporation and registration
with the Securities and Exchange Commission (SEC). Petitioner Lucila V. Joson (Lucila) is
the President and majority stockholder of petitioner corporation. She was also the former
President and majority stockholder of the defunct Marc Marketing, Inc.
Respondent Alfredo M. Joson (Alfredo), on the other hand, was the General Manager,
incorporator, director and stockholder of petitioner corporation.
The controversy of this case arose from the following factual milieu:
Before petitioner corporation was officially incorporated,6 respondent has already been
engaged by petitioner Lucila, in her capacity as President of Marc Marketing, Inc., to work as
the General Manager of petitioner corporation. It was formalized through the execution of a
Management Contract7 dated 16 January 1994 under the letterhead of Marc Marketing,
Inc.8 as petitioner corporation is yet to be incorporated at the time of its execution. It was
explicitly provided therein that respondent shall be entitled to 30% of its net income for his
work as General Manager. Respondent will also be granted 30% of its net profit to compensate
for the possible loss of opportunity to work overseas.9

Pending incorporation of petitioner corporation, respondent was designated as the General

Manager of Marc Marketing, Inc., which was then in the process of winding up its business.
For occupying the said position, respondent was among its corporate officers by the express
provision of Section 1, Article IV10 of its by-laws.11
On 15 August 1994, petitioner corporation was officially incorporated and registered with the
SEC. Accordingly, Marc Marketing, Inc. was made non-operational. Respondent continued to
discharge his duties as General Manager but this time under petitioner corporation.
Pursuant to Section 1, Article IV12 of petitioner corporations by-laws,13 its corporate officers
are as follows: Chairman, President, one or more Vice-President(s), Treasurer and Secretary.
Its Board of Directors, however, may, from time to time, appoint such other officers as it may
determine to be necessary or proper.
Per an undated Secretarys Certificate,14 petitioner corporations Board of Directors conducted
a meeting on 29 August 1994 where respondent was appointed as one of its corporate officers
with the designation or title of General Manager to function as a managing director with other
duties and responsibilities that the Board of Directors may provide and authorized. 15
Nevertheless, on 30 June 1997, petitioner corporation decided to stop and cease its operations,
as evidenced by an Affidavit of Non-Operation16 dated 31 August 1998, due to poor sales
collection aggravated by the inefficient management of its affairs. On the same date, it
formally informed respondent of the cessation of its business operation. Concomitantly,
respondent was apprised of the termination of his services as General Manager since his
services as such would no longer be necessary for the winding up of its affairs.17
Feeling aggrieved, respondent filed a Complaint for Reinstatement and Money Claim against
petitioners before the Labor Arbiter which was docketed as NLRC NCR Case No. 00-0304102-99.
In his complaint, respondent averred that petitioner Lucila dismissed him from his
employment with petitioner corporation due to the feeling of hatred she harbored towards his
family. The same was rooted in the filing by petitioner Lucilas estranged husband, who
happened to be respondents brother, of a Petition for Declaration of Nullity of their
Marriage.18
For the parties failure to settle the case amicably, the Labor Arbiter required them to submit
their respective position papers. Respondent complied but petitioners opted to file a Motion to
Dismiss grounded on the Labor Arbiters lack of jurisdiction as the case involved an intracorporate controversy, which jurisdiction belongs to the SEC [now with the Regional Trial
Court (RTC)].19 Petitioners similarly raised therein the ground of prescription of respondents
monetary claim.
On 5 September 2000, the Labor Arbiter issued an Order20 deferring the resolution of
petitioners Motion to Dismiss until the final determination of the case. The Labor Arbiter also
reiterated his directive for petitioners to submit position paper. Still, petitioners did not
comply. Insisting that the Labor Arbiter has no jurisdiction over the case, they instead filed an
Urgent Motion to Resolve the Motion to Dismiss and the Motion to Suspend Filing of Position
Paper.

In an Order21 dated 15 February 2001, the Labor Arbiter denied both motions and declared
final the Order dated 5 September 2000. The Labor Arbiter then gave petitioners a period of
five days from receipt thereof within which to file position paper, otherwise, their Motion to
Dismiss will be treated as their position paper and the case will be considered submitted for
decision.
Petitioners, through counsel, moved for extension of time to submit position paper. Despite the
requested extension, petitioners still failed to submit the same. Accordingly, the case was
submitted for resolution.
On 1 October 2001, the Labor Arbiter rendered his Decision in favor of respondent. Its
decretal portion reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered declaring [respondents]
dismissal from employment illegal. Accordingly, [petitioners] are hereby ordered:
1. To reinstate [respondent] to his former or equivalent position without loss of
seniority rights, benefits, and privileges;
2. Jointly and severally liable to pay [respondents] unpaid wages in the amount
of P450,000.00 per month from [26 March 1996] up to time of dismissal in the total
amount of P6,300,000.00;
3. Jointly and severally liable to pay [respondents] full backwages in the amount
of P450,000.00 per month from date of dismissal until actual reinstatement which at
the time of promulgation amounted toP21,600,000.00;
4. Jointly and severally liable to pay moral damages in the amount of P100,000.00
and attorneys fees in the amount of 5% of the total monetary award.22 [Emphasis
supplied.]
In the aforesaid Decision, the Labor Arbiter initially resolved petitioners Motion to Dismiss
by finding the ground of lack of jurisdiction to be without merit. The Labor Arbiter elucidated
that petitioners failed to adduce evidence to prove that the present case involved an intracorporate controversy. Also, respondents money claim did not arise from his being a director
or stockholder of petitioner corporation but from his position as being its General Manager.
The Labor Arbiter likewise held that respondent was not a corporate officer under petitioner
corporations by-laws. As such, respondents complaint clearly arose from an employeremployee relationship, thus, subject to the Labor Arbiters jurisdiction.
The Labor Arbiter then declared respondents dismissal from employment as illegal.
Respondent, being a regular employee of petitioner corporation, may only be dismissed for a
valid cause and upon proper compliance with the requirements of due process. The records,
though, revealed that petitioners failed to present any evidence to justify respondents
dismissal.
Aggrieved, petitioners appealed the aforesaid Labor Arbiters Decision to the NLRC.

In its Resolution dated 15 October 2002, the NLRC ruled in favor of petitioners by giving
credence to the Secretarys Certificate, which evidenced petitioner corporations Board of
Directors meeting in which a resolution was approved appointing respondent as its corporate
officer with designation as General Manager. Therefrom, the NLRC reversed and set aside the
Labor Arbiters Decision dated 1 October 2001 and dismissed respondents Complaint for
want of jurisdiction.23
The NLRC enunciated that the validity of respondents appointment and termination from the
position of General Manager was made subject to the approval of petitioner corporations
Board of Directors. Had respondent been an ordinary employee, such board action would not
have been required. As such, it is clear that respondent was a corporate officer whose
dismissal involved a purely intra-corporate controversy. The NLRC went further by stating
that respondents claim for 30% of the net profit of the corporation can only emanate from his
right of ownership therein as stockholder, director and/or corporate officer. Dividends or
profits are paid only to stockholders or directors of a corporation and not to any ordinary
employee in the absence of any profit sharing scheme. In addition, the question of
remuneration of a person who is not a mere employee but a stockholder and officer of a
corporation is not a simple labor problem. Such matter comes within the ambit of corporate
affairs and management and is an intra-corporate controversy in contemplation of the
Corporation Code.24
When respondents Motion for Reconsideration was denied in another Resolution 25 dated 23
January 2003, he filed a Petition for Certiorari with the Court of Appeals ascribing grave
abuse of discretion on the part of the NLRC.
On 20 June 2005, the Court of Appeals rendered its now assailed Decision declaring that the
Labor Arbiter has jurisdiction over the present controversy. It upheld the finding of the Labor
Arbiter that respondent was a mere employee of petitioner corporation, who has been illegally
dismissed from employment without valid cause and without due process. Nevertheless, it
ordered the records of the case remanded to the NLRC for the determination of the appropriate
amount of monetary awards to be given to respondent. The Court of Appeals, thus, decreed:
WHEREFORE, the petition is by us PARTIALLY GRANTED. The Labor Arbiter is
DECLARED to have jurisdiction over the controversy. The records are REMANDED to the
NLRC for further proceedings to determine the appropriate amount of monetary awards to be
adjudged in favor of [respondent]. Costs against the [petitioners] in solidum. 26
Petitioners moved for its reconsideration but to no avail.27
Petitioners are now before this Court with the following assignment of errors:
THE COURT OF APPEALS ERRED AND COMMITTED GRAVE ABUSE OF
DISCRETION IN DECIDING THAT THE NLRC HAS THE JURISDICTION IN
RESOLVING A PURELY INTRA-CORPORATE MATTER WHICH IS
COGNIZABLE BY THE SECURITIES AND EXCHANGE
COMMISSION/REGIONAL TRIAL COURT.
ASSUMING, GRATIS ARGUENDO, THAT THE NLRC HAS JURISDICTION
OVER THE CASE, STILL THE COURT OF APPEALS SERIOUSLY ERRED IN

NOT RULING THAT THERE IS NO EMPLOYER-EMPLOYEE

RELATIONSHIP BETWEEN [RESPONDENT] ALFREDO M. JOSON AND
MARC II MARKETING, INC. [PETITIONER CORPORATION].
ASSUMING GRATIS ARGUENDO THAT THE NLRC HAS JURISDICTION
OVER THE CASE, THE COURT OF APPEALS ERRED IN NOT RULING THAT
THE LABOR ARBITER COMMITTED GRAVE ABUSE OF DISCRETION IN
AWARDING MULTI-MILLION PESOS IN COMPENSATION AND
BACKWAGES BASED ON THE PURPORTED GROSS INCOME OF
[PETITIONER CORPORATION].
THE COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED GRAVE
ABUSE OF DISCRETION IN NOT MAKING ANY FINDINGS AND RULING
THAT [PETITIONER LUCILA] SHOULD NOT BE HELD SOLIDARILY
LIABLE IN THE ABSENCE OF EVIDENCE OF MALICE AND BAD FAITH ON
HER PART.28
Petitioners fault the Court of Appeals for having sustained the Labor Arbiters finding that
respondent was not a corporate officer under petitioner corporations by-laws. They insist that
there is no need to amend the corporate by-laws to specify who its corporate officers are. The
resolution issued by petitioner corporations Board of Directors appointing respondent as
General Manager, coupled with his assumption of the said position, positively made him its
corporate officer. More so, respondents position, being a creation of petitioner corporations
Board of Directors pursuant to its by-laws, is a corporate office sanctioned by the Corporation
Code and the doctrines previously laid down by this Court. Thus, respondents removal as
petitioner corporations General Manager involved a purely intra-corporate controversy over
which the RTC has jurisdiction.
Petitioners further contend that respondents claim for 30% of the net profit of petitioner
corporation was anchored on the purported Management Contract dated 16 January 1994. It
should be noted, however, that said Management Contract was executed at the time petitioner
corporation was still nonexistent and had no juridical personality yet. Such being the case,
respondent cannot invoke any legal right therefrom as it has no legal and binding effect on
petitioner corporation. Moreover, it is clear from the Articles of Incorporation of petitioner
corporation that respondent was its director and stockholder. Indubitably, respondents claim
for his share in the profit of petitioner corporation was based on his capacity as such and not
by virtue of any employer-employee relationship.
Petitioners further avow that even if the present case does not pose an intra-corporate
controversy, still, the Labor Arbiters multi-million peso awards in favor of respondent were
erroneous. The same was merely based on the latters self-serving computations without any
supporting documents.
Finally, petitioners maintain that petitioner Lucila cannot be held solidarily liable with
petitioner corporation. There was neither allegation nor iota of evidence presented to show that
she acted with malice and bad faith in her dealings with respondent. Moreover, the Labor
Arbiter, in his Decision, simply concluded that petitioner Lucila was jointly and severally
liable with petitioner corporation without making any findings thereon. It was, therefore, an
error for the Court of Appeals to hold petitioner Lucila solidarily liable with petitioner
corporation.

From the foregoing arguments, the initial question is which between the Labor Arbiter or the
RTC, has jurisdiction over respondents dismissal as General Manager of petitioner
corporation. Its resolution necessarily entails the determination of whether respondent as
General Manager of petitioner corporation is a corporate officer or a mere employee of the
latter.
While Article 217(a)229 of the Labor Code, as amended, provides that it is the Labor Arbiter
who has the original and exclusive jurisdiction over cases involving termination or dismissal
of workers when the person dismissed or terminated is a corporate officer, the case
automatically falls within the province of the RTC. The dismissal of a corporate officer is
always regarded as a corporate act and/or an intra-corporate controversy.30
Under Section 531 of Presidential Decree No. 902-A, intra-corporate controversies are those
controversies arising out of intra-corporate or partnership relations, between and among
stockholders, members or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or associates, respectively;
and between such corporation, partnership or association and the State insofar as it concerns
their individual franchise or right to exist as such entity. It also includes controversies in the
election or appointments of directors, trustees, officers or managers of such
corporations, partnerships or associations.32
Accordingly, in determining whether the SEC (now the RTC) has jurisdiction over the
controversy, the status or relationship of the parties and the nature of the question that is the
subject of their controversy must be taken into consideration. 33
In Easycall Communications Phils., Inc. v. King, this Court held that in the context of
Presidential Decree No. 902-A, corporate officers are those officers of a corporation who are
given that character either by the Corporation Code or by the corporations by-laws. Section
2534 of the Corporation Code specifically enumerated who are these corporate officers, to wit:
(1) president; (2) secretary; (3) treasurer; and (4) such other officers as may be provided for in
the by-laws.35
The aforesaid Section 25 of the Corporation Code, particularly the phrase "such other officers
as may be provided for in the by-laws," has been clarified and elaborated in this Courts recent
pronouncement in Matling Industrial and Commercial Corporation v. Coros, where it held,
thus:
Conformably with Section 25, a position must be expressly mentioned in the [b]y-[l]aws in
order to be considered as a corporate office. Thus, the creation of an office pursuant to or
under a [b]y-[l]aw enabling provision is not enough to make a position a corporate office. [In]
Guerrea v. Lezama [citation omitted] the first ruling on the matter, held that the only officers
of a corporation were those given that character either by the Corporation Code or by the [b]y[l]aws; the rest of the corporate officers could be considered only as employees or subordinate
officials. Thus, it was held in Easycall Communications Phils., Inc. v. King [citation omitted]:
An "office" is created by the charter of the corporation and the officer is elected by the
directors or stockholders. On the other hand, an employee occupies no office and generally is
employed not by the action of the directors or stockholders but by the managing officer of the
corporation who also determines the compensation to be paid to such employee.

xxxx
This interpretation is the correct application of Section 25 of the Corporation Code, which
plainly states that the corporate officers are the President, Secretary, Treasurer and such other
officers as may be provided for in the [b]y-[l]aws. Accordingly, the corporate officers in the
context of PD No. 902-A are exclusively those who are given that character either by the
Corporation Code or by the corporations [b]y[l]aws.
A different interpretation can easily leave the way open for the Board of Directors to
circumvent the constitutionally guaranteed security of tenure of the employee by the expedient
inclusion in the [b]y-[l]aws of an enabling clause on the creation of just any corporate officer
position.
It is relevant to state in this connection that the SEC, the primary agency administering the
Corporation Code, adopted a similar interpretation of Section 25 of the Corporation Code in
its Opinion dated November 25, 1993 [citation omitted], to wit:
Thus, pursuant to the above provision (Section 25 of the Corporation Code), whoever are the
corporate officers enumerated in the by-laws are the exclusive Officers of the corporation and
the Board has no power to create other Offices without amending first the corporate [b]ylaws. However, the Board may create appointive positions other than the positions of
corporate Officers, but the persons occupying such positions are not considered as
corporate officers within the meaning of Section 25 of the Corporation Code and are not
empowered to exercise the functions of the corporate Officers, except those functions lawfully
delegated to them. Their functions and duties are to be determined by the Board of
Directors/Trustees.36 [Emphasis supplied.]

directors may create appointive positions other than the positions of corporate officers, the
persons occupying such positions cannot be viewed as corporate officers under Section 25 of
the Corporation Code.40 In view thereof, this Court holds that unless and until petitioner
corporations by-laws is amended for the inclusion of General Manager in the list of its
corporate officers, such position cannot be considered as a corporate office within the realm of
Section 25 of the Corporation Code.
This Court considers that the interpretation of Section 25 of the Corporation Code laid down
in Matling safeguards the constitutionally enshrined right of every employee to security of
tenure. To allow the creation of a corporate officer position by a simple inclusion in the
corporate by-laws of an enabling clause empowering the board of directors to do so can result
in the circumvention of that constitutionally well-protected right.41
It is also of no moment that respondent, being petitioner corporations General Manager, was
given the functions of a managing director by its Board of Directors. As held in Matling, the
only officers of a corporation are those given that character either by the Corporation Code or
by the corporate by-laws. It follows then that the corporate officers enumerated in the by-laws
are the exclusive officers of the corporation while the rest could only be regarded as mere
employees or subordinate officials.42 Respondent, in this case, though occupying a high
ranking and vital position in petitioner corporation but which position was not specifically
enumerated or mentioned in the latters by-laws, can only be regarded as its employee or
subordinate official. Noticeably, respondents compensation as petitioner corporations
General Manager was set, fixed and determined not by the latters Board of Directors but
simply by its President, petitioner Lucila. The same was not subject to the approval of
petitioner corporations Board of Directors. This is an indication that respondent was an
employee and not a corporate officer.

A careful perusal of petitioner corporations by-laws, particularly paragraph 1, Section 1,

Article IV,37 would explicitly reveal that its corporate officers are composed only of: (1)
Chairman; (2) President; (3) one or more Vice-President; (4) Treasurer; and (5)
Secretary.38 The position of General Manager was not among those enumerated.

To prove that respondent was petitioner corporations corporate officer, petitioners presented
before the NLRC an undated Secretarys Certificate showing that corporations Board of
Directors approved a resolution making respondents position of General Manager a corporate
office. The submission, however, of the said undated Secretarys Certificate will not change
the fact that respondent was an employee. The certification does not amount to an amendment
of the by-laws which is needed to make the position of General Manager a corporate office.

Paragraph 2, Section 1, Article IV of petitioner corporations by-laws, empowered its Board of

Directors to appoint such other officers as it may determine necessary or proper. 39 It is by
virtue of this enabling provision that petitioner corporations Board of Directors allegedly
approved a resolution to make the position of General Manager a corporate office, and,
thereafter, appointed respondent thereto making him one of its corporate officers. All of these
acts were done without first amending its by-laws so as to include the General Manager in its
roster of corporate officers.

Moreover, as has been aptly observed by the Court of Appeals, the board resolution mentioned
in that undated Secretarys Certificate and the latter itself were obvious fabrications, a mere
afterthought. Here we quote with conformity the Court of Appeals findings on this matter
stated in this wise:

With the given circumstances and in conformity with Matling Industrial and Commercial
Corporation v. Coros, this Court rules that respondent was not a corporate officer of petitioner
corporation because his position as General Manager was not specifically mentioned in the
roster of corporate officers in its corporate by-laws. The enabling clause in petitioner
corporations by-laws empowering its Board of Directors to create additional officers, i.e.,
General Manager, and the alleged subsequent passage of a board resolution to that effect
cannot make such position a corporate office. Matling clearly enunciated that the board of
directors has no power to create other corporate offices without first amending the corporate
by-laws so as to include therein the newly created corporate office. Though the board of

The board resolution is an obvious fabrication. Firstly, if it had been in existence since [29
August 1994], why did not [herein petitioners] attach it to their [M]otion to [D]ismiss filed on
[26 August 1999], when it could have been the best evidence that [herein respondent] was a
corporate officer? Secondly, why did they report the [respondent] instead as [herein petitioner
corporations] employee to the Social Security System [(SSS)] on [11 October 1994] or a later
date than their [29 August 1994] board resolution? Thirdly, why is there no indication that the
[respondent], the person concerned himself, and the [SEC] were furnished with copies of said
board resolution? And, lastly, why is the corporate [S]ecretarys [C]ertificate not notarized in
keeping with the customary procedure? That is why we called it manipulative evidence as it
was a shameless sham meant to be thrown in as a wild card to muddle up the [D]ecision of the
Labor Arbiter to the end that it be overturned as the latter had firmly pointed out that

[respondent] is not a corporate officer under [petitioner corporations by-laws]. Regrettably,

the [NLRC] swallowed the bait hook-line-and sinker. It failed to see through its nature as a
belatedly manufactured evidence. And even on the assumption that it were an authentic board
resolution, it did not make [respondent] a corporate officer as the board did not first and
properly create the position of a [G]eneral [M]anager by amending its by-laws.
(2) The scope of the term "officer" in the phrase "and such other officers as may be
provided for in the by-laws["] (Sec. 25, par. 1), would naturally depend much on the
provisions of the by-laws of the corporation. (SEC Opinion, [4 December 1991.]) If
the by-laws enumerate the officers to be elected by the board, the provision is
conclusive, and the board is without power to create new offices without amending
the by-laws. (SEC Opinion, [19 October 1971.])
(3) If, for example, the general manager of a corporation is not listed as an officer,
he is to be classified as an employee although he has always been considered as one
of the principal officers of a corporation [citing De Leon, H. S., The Corporation
Code of the Philippines Annotated, 1993 Ed., p. 215.]43 [Emphasis supplied.]
That respondent was also a director and a stockholder of petitioner corporation will not
automatically make the case fall within the ambit of intra-corporate controversy and be
subjected to RTCs jurisdiction. To reiterate, not all conflicts between the stockholders and the
corporation are classified as intra-corporate. Other factors such as the status or relationship of
the parties and the nature of the question that is the subject of the controversy44 must be
considered in determining whether the dispute involves corporate matters so as to regard them
as intra-corporate controversies.45 As previously discussed, respondent was not a corporate
officer of petitioner corporation but a mere employee thereof so there was no intra-corporate
relationship between them. With regard to the subject of the controversy or issue involved
herein, i.e., respondents dismissal as petitioner corporations General Manager, the same did
not present or relate to an intra-corporate dispute. To note, there was no evidence submitted to
show that respondents removal as petitioner corporations General Manager carried with it his
removal as its director and stockholder. Also, petitioners allegation that respondents claim of
30% share of petitioner corporations net profit was by reason of his being its director and
stockholder was without basis, thus, self-serving. Such an allegation was tantamount to a mere
speculation for petitioners failure to substantiate the same.
In addition, it was not shown by petitioners that the position of General Manager was offered
to respondent on account of his being petitioner corporations director and stockholder. Also,
in contrast to NLRCs findings, neither petitioner corporations by-laws nor the Management
Contract stated that respondents appointment and termination from the position of General
Manager was subject to the approval of petitioner corporations Board of Directors. If, indeed,
respondent was a corporate officer whose termination was subject to the approval of its Board
of Directors, why is it that his termination was effected only by petitioner Lucila, President of
petitioner corporation? The records are bereft of any evidence to show that respondents
dismissal was done with the conformity of petitioner corporations Board of Directors or that
the latter had a hand on respondents dismissal. No board resolution whatsoever was ever
presented to that effect.
With all the foregoing, this Court is fully convinced that, indeed, respondent, though
occupying the General Manager position, was not a corporate officer of petitioner corporation
rather he was merely its employee occupying a high-ranking position.

Accordingly, respondents dismissal as petitioner corporations General Manager did not

amount to an intra-corporate controversy. Jurisdiction therefor properly belongs with the
Labor Arbiter and not with the RTC.
Having established that respondent was not petitioner corporations corporate officer but
merely its employee, and that, consequently, jurisdiction belongs to the Labor Arbiter, this
Court will now determine if respondents dismissal from employment is illegal.
It was not disputed that respondent worked as petitioner corporations General Manager from
its incorporation on 15 August 1994 until he was dismissed on 30 June 1997. The cause of his
dismissal was petitioner corporations cessation of business operations due to poor sales
collection aggravated by the inefficient management of its affairs.
In termination cases, the burden of proving just and valid cause for dismissing an employee
from his employment rests upon the employer. The latter's failure to discharge that burden
would necessarily result in a finding that the dismissal is unjustified.46
Under Article 283 of the Labor Code, as amended, one of the authorized causes in terminating
the employment of an employee is the closing or cessation of operation of the establishment or
undertaking. Article 283 of the Labor Code, as amended, reads, thus:
ART. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving-devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. x x x In case
of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year. [Emphasis supplied.]
From the afore-quoted provision, the closure or cessation of operations of establishment or
undertaking may either be due to serious business losses or financial reverses or otherwise. If
the closure or cessation was due to serious business losses or financial reverses, it is
incumbent upon the employer to sufficiently and convincingly prove the same. If it is
otherwise, the employer can lawfully close shop anytime as long as it was bona fide in
character and not impelled by a motive to defeat or circumvent the tenurial rights of
employees and as long as the terminated employees were paid in the amount corresponding to
their length of service.47
Accordingly, under Article 283 of the Labor Code, as amended, there are three requisites for a
valid cessation of business operations: (a) service of a written notice to the employees and to
the Department of Labor and Employment (DOLE) at least one month before the intended
date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to
the employees of termination pay amounting to one month pay or at least one-half month pay
for every year of service, whichever is higher.

In this case, it is obvious that petitioner corporations cessation of business operations was not
due to serious business losses. Mere poor sales collection, coupled with mismanagement of its
affairs does not amount to serious business losses. Nonetheless, petitioner corporation can still
validly cease or close its business operations because such right is legally allowed, so long as
it was not done for the purpose of circumventing the provisions on termination of employment
embodied in the Labor Code.48 As has been stressed by this Court in Industrial Timber
Corporation v. Ababon, thus:
Just as no law forces anyone to go into business, no law can compel anybody to continue the
same. It would be stretching the intent and spirit of the law if a court interferes with
management's prerogative to close or cease its business operations just because the business is
not suffering from any loss or because of the desire to provide the workers continued
employment.49
A careful perusal of the records revealed that, indeed, petitioner corporation has stopped and
ceased business operations beginning 30 June 1997. This was evidenced by a notarized
Affidavit of Non-Operation dated 31 August 1998. There was also no showing that the
cessation of its business operations was done in bad faith or to circumvent the Labor Code.
Nevertheless, in doing so, petitioner corporation failed to comply with the one-month prior
written notice rule. The records disclosed that respondent, being petitioner corporations
employee, and the DOLE were not given a written notice at least one month before petitioner
corporation ceased its business operations. Moreover, the records clearly show that
respondents dismissal was effected on the same date that petitioner corporation decided to
stop and cease its operation. Similarly, respondent was not paid separation pay upon
termination of his employment.
As respondents dismissal was not due to serious business losses, respondent is entitled to
payment of separation pay equivalent to one month pay or at least one-half month pay for
every year of service, whichever is higher. The rationale for this was laid down in Reahs
Corporation v. National Labor Relations Commission,50 thus:
The grant of separation pay, as an incidence of termination of employment under Article 283,
is a statutory obligation on the part of the employer and a demandable right on the part of the
employee, except only where the closure or cessation of operations was due to serious
business losses or financial reverses and there is sufficient proof of this fact or condition. In
the absence of such proof of serious business losses or financial reverses, the employer closing
his business is obligated to pay his employees and workers their separation pay.
The rule, therefore, is that in all cases of business closure or cessation of operation or
undertaking of the employer, the affected employee is entitled to separation pay. This is
consistent with the state policy of treating labor as a primary social economic force, affording
full protection to its rights as well as its welfare. The exception is when the closure of business
or cessation of operations is due to serious business losses or financial reverses duly proved, in
which case, the right of affected employees to separation pay is lost for obvious
reasons.51[Emphasis supplied.]
As previously discussed, respondents dismissal was due to an authorized cause, however,
petitioner corporation failed to observe procedural due process in effecting such dismissal. In
Culili v. Eastern Telecommunications Philippines, Inc.,52 this Court made the following
pronouncements, thus:

x x x there are two aspects which characterize the concept of due process under the Labor
Code: one is substantive whether the termination of employment was based on the
provision of the Labor Code or in accordance with the prevailing jurisprudence; the other is
procedural the manner in which the dismissal was effected.
Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:
(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:
xxxx
For termination of employment as defined in Article 283 of the Labor Code, the requirement
of due process shall be deemed complied with upon service of a written notice to the employee
and the appropriate Regional Office of the Department of Labor and Employment at least
thirty days before effectivity of the termination, specifying the ground or grounds for
termination.
In Mayon Hotel & Restaurant v. Adana, [citation omitted] we observed:
The requirement of law mandating the giving of notices was intended not only to enable the
employees to look for another employment and therefore ease the impact of the loss of their
jobs and the corresponding income, but more importantly, to give the Department of Labor
and Employment (DOLE) the opportunity to ascertain the verity of the alleged authorized
cause of termination.53 [Emphasis supplied].
The records of this case disclosed that there was absolutely no written notice given by
petitioner corporation to the respondent and to the DOLE prior to the cessation of its business
operations. This is evident from the fact that petitioner corporation effected respondents
dismissal on the same date that it decided to stop and cease its business operations. The
necessary consequence of such failure to comply with the one-month prior written notice rule,
which constitutes a violation of an employees right to statutory due process, is the payment of
indemnity in the form of nominal damages.54 In Culili v. Eastern Telecommunications
Philippines, Inc., this Court further held:
In Serrano v. National Labor Relations Commission [citation omitted], we noted that "a job is
more than the salary that it carries." There is a psychological effect or a stigma in immediately
finding ones self laid off from work. This is exactly why our labor laws have provided for
mandating procedural due process clauses. Our laws, while recognizing the right of employers
to terminate employees it cannot sustain, also recognize the employees right to be properly
informed of the impending severance of his ties with the company he is working for. x x x.
x x x Over the years, this Court has had the opportunity to reexamine the sanctions imposed
upon employers who fail to comply with the procedural due process requirements in
terminating its employees. In Agabon v. National Labor Relations Commission [citation
omitted], this Court reverted back to the doctrine in Wenphil Corporation v. National Labor
Relations Commission [citation omitted] and held that where the dismissal is due to a just or
authorized cause, but without observance of the due process requirements, the dismissal may
be upheld but the employer must pay an indemnity to the employee. The sanctions to be

imposed however, must be stiffer than those imposed in Wenphil to achieve a result fair to
both the employers and the employees.
In Jaka Food Processing Corporation v. Pacot [citation omitted], this Court, taking a cue from
Agabon, held that since there is a clear-cut distinction between a dismissal due to a just cause
and a dismissal due to an authorized cause, the legal implications for employers who fail to
comply with the notice requirements must also be treated differently:
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article
282 but the employer failed to comply with the notice requirement, the sanction to be imposed
upon him should be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee; and (2) if the dismissal is based on an authorized cause under
Article 283 but the employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employer's exercise of his
management prerogative.55 [Emphasis supplied.]
Thus, in addition to separation pay, respondent is also entitled to an award of nominal
damages. In conformity with this Courts ruling in Culili v. Eastern Telecommunications
Philippines, Inc. and Shimizu Phils. Contractors, Inc. v. Callanta, both citing Jaka Food
Processing Corporation v. Pacot,56 this Court fixed the amount of nominal damages
to P50,000.00.
With respect to petitioners contention that the Management Contract executed between
respondent and petitioner Lucila has no binding effect on petitioner corporation for having
been executed way before its incorporation, this Court finds the same meritorious.
Section 19 of the Corporation Code expressly provides:
Sec. 19. Commencement of corporate existence. - A private corporation formed or organized
under this Code commences to have corporate existence and juridical personality and is
deemed incorporated from the date the Securities and Exchange Commission issues a
certificate of incorporation under its official seal; and thereupon the incorporators,
stockholders/members and their successors shall constitute a body politic and corporate under
the name stated in the articles of incorporation for the period of time mentioned therein, unless
said period is extended or the corporation is sooner dissolved in accordance with law.
[Emphasis supplied.]
Logically, there is no corporation to speak of prior to an entitys incorporation. And no
contract entered into before incorporation can bind the corporation.
As can be gleaned from the records, the Management Contract dated 16 January 1994 was
executed between respondent and petitioner Lucila months before petitioner corporations
incorporation on 15 August 1994. Similarly, it was done when petitioner Lucila was still the
President of Marc Marketing, Inc. Undeniably, it cannot have any binding and legal effect on
petitioner corporation. Also, there was no evidence presented to prove that petitioner
corporation adopted, ratified or confirmed the Management Contract. It is for the same reason
that petitioner corporation cannot be considered estopped from questioning its binding effect
now that respondent was invoking the same against it. In no way, then, can it be enforced
against petitioner corporation, much less, its provisions fixing respondents compensation as

General Manager to 30% of petitioner corporations net profit. Consequently, such percentage
cannot be the basis for the computation of respondents separation pay. This finding, however,
will not affect the undisputed fact that respondent was, indeed, the General Manager of
petitioner corporation from its incorporation up to the time of his dismissal.
Accordingly, this Court finds it necessary to still remand the present case to the Labor Arbiter
to conduct further proceedings for the sole purpose of determining the compensation that
respondent was actually receiving during the period that he was the General Manager of
petitioner corporation, this, for the proper computation of his separation pay.
As regards petitioner Lucilas solidary liability, this Court affirms the same.
As a rule, corporation has a personality separate and distinct from its officers, stockholders
and members such that corporate officers are not personally liable for their official acts unless
it is shown that they have exceeded their authority. However, this corporate veil can be
pierced when the notion of the legal entity is used as a means to perpetrate fraud, an illegal act,
as a vehicle for the evasion of an existing obligation, and to confuse legitimate issues. Under
the Labor Code, for instance, when a corporation violates a provision declared to be penal in
nature, the penalty shall be imposed upon the guilty officer or officers of the corporation. 57
Based on the prevailing circumstances in this case, petitioner Lucila, being the President of
petitioner corporation, acted in bad faith and with malice in effecting respondents dismissal
from employment. Although petitioner corporation has a valid cause for dismissing respondent
due to cessation of business operations, however, the latters dismissal therefrom was done
abruptly by its President, petitioner Lucila. Respondent was not given the required one-month
prior written notice that petitioner corporation will already cease its business operations. As
can be gleaned from the records, respondent was dismissed outright by petitioner Lucila on the
same day that petitioner corporation decided to stop and cease its business operations. Worse,
respondent was not given separation pay considering that petitioner corporations cessation of
business was not due to business losses or financial reverses.
WHEREFORE, premises considered, the Decision and Resolution dated 20 June 2005 and 7
March 2006, respectively, of the Court of Appeals in CA-G.R. SP No. 76624 are hereby
AFFIRMED with the MODIFICATION finding respondents dismissal from employment
legal but without proper observance of due process. Accordingly, petitioner corporation,
jointly and solidarily liable with petitioner Lucila, is hereby ordered to pay respondent the
following; (1) separation pay equivalent to one month pay or at least one-half month pay for
every year of service, whichever is higher, to be computed from the commencement of
employment until termination; and (2) nominal damages in the amount of P50,000.00.
This Court, however, finds it proper to still remand the records to the Labor Arbiter to conduct
further proceedings for the sole purpose of determining the compensation that respondent was
actually receiving during the period that he was the General Manager of petitioner corporation
for the proper computation of his separation pay.
Costs against petitioners.
SO ORDERED.

G.R. No. 159374

July 12, 2007

FELIPE N. MADRIAN, Petitioner,

vs.
FRANCISCA R. MADRIAN, Respondent.
DECISION
CORONA, J.:
When a family breaks up, the children are always the victims. The ensuing battle for custody
of the minor children is not only a thorny issue but also a highly sensitive and heart-rending
affair. Such is the case here. Even the usually technical subject of jurisdiction became
emotionally charged.

RA 8369 (otherwise known as the "Family Courts Act of 1997") family courts have exclusive
original jurisdiction to hear and decide the petition forhabeas corpus filed by respondent.3
For her part, respondent averred that she did not leave their home on May 18, 2002 but was
driven out by petitioner. She alleged that it was petitioner who was an alcoholic, gambler and
drug addict. Petitioners alcoholism and drug addiction impaired his mental faculties, causing
him to commit acts of violence against her and their children. The situation was aggravated by
the fact that their home was adjacent to that of her in-laws who frequently meddled in their
personal problems.4
On October 21, 2002, the Court of Appeals5 rendered a decision6 asserting its authority to take
cognizance of the petition and ruling that, under Article 213 of the Family Code, respondent
was entitled to the custody of Phillip and Francis Angelo who were at that time aged six and
four, respectively, subject to the visitation rights of petitioner. With respect to Ronnick who
was then eight years old, the court ruled that his custody should be determined by the proper
family court in a special proceeding on custody of minors under Rule 99 of the Rules of Court.

Petitioner Felipe N. Madrian and respondent Francisca R. Madrian were married on July 7,
1993 in Paraaque City. They resided in San Agustin Village, Brgy. Moonwalk, Paraaque
City.

Petitioner moved for reconsideration of the Court of Appeals decision but it was denied.
Hence, this recourse.

Their union was blessed with three sons and a daughter: Ronnick, born on January 30, 1994;
Phillip, born on November 19, 1996; Francis Angelo, born on May 12, 1998 and Krizia Ann,
born on December 12, 2000.

Petitioner challenges the jurisdiction of the Court of Appeals over the petition for habeas
corpus and insists that jurisdiction over the case is lodged in the family courts under RA 8369.
He invokes Section 5(b) of RA 8369:

After a bitter quarrel on May 18, 2002, petitioner allegedly left their conjugal abode and took
their three sons with him to Ligao City, Albay and subsequently to Sta. Rosa, Laguna.
Respondent sought the help of her parents and parents-in-law to patch things up between her
and petitioner to no avail. She then brought the matter to theLupong Tagapamayapa in their
barangay but this too proved futile.

Section 5. Jurisdiction of Family Courts. The Family Courts shall have exclusive original
jurisdiction to hear and decide the following cases:

Thus respondent filed a petition for habeas corpus of Ronnick, Phillip and Francis Angelo in
the Court of Appeals, alleging that petitioners act of leaving the conjugal dwelling and going
to Albay and then to Laguna disrupted the education of their children and deprived them of
their mothers care. She prayed that petitioner be ordered to appear and produce their sons
before the court and to explain why they should not be returned to her custody.

b) Petitions for guardianship, custody of children, habeas corpus in relation to the latter;

Petitioner and respondent appeared at the hearing on September 17, 2002. They initially
agreed that petitioner would return the custody of their three sons to respondent. Petitioner,
however, had a change of heart1 and decided to file a memorandum.

In Thornton v. Thornton,7 this Court resolved the issue of the Court of Appeals jurisdiction to
issue writs of habeas corpus in cases involving custody of minors in the light of the provision
in RA 8369 giving family courts exclusive original jurisdiction over such petitions:

On September 3, 2002, petitioner filed his memorandum2 alleging that respondent was unfit to
take custody of their three sons because she was habitually drunk, frequently went home late
at night or in the wee hours of the morning, spent much of her time at a beer house and
neglected her duties as a mother. He claimed that, after their squabble on May 18, 2002, it was
respondent who left, taking their daughter with her. It was only then that he went to Sta. Rosa,
Laguna where he worked as a tricycle driver. He submitted a certification from the principal of
the Dila Elementary School in Sta. Rosa, Laguna that Ronnick and Phillip were enrolled there.
He also questioned the jurisdiction of the Court of Appeals claiming that under Section 5(b) of

xxx

xxx

xxx

xxx

xxx

xxx

Petitioner is wrong.

The Court of Appeals should take cognizance of the case since there is nothing in RA
8369 that revoked its jurisdiction to issue writs of habeas corpus involving the custody of
minors.
xxx

xxx

xxx

We rule therefore that RA 8369 did not divest the Court of Appeals and the Supreme
Court of their jurisdiction over habeas corpus cases involving the custody of minors.

xxx

xxx

xxx

The provisions of RA 8369 reveal no manifest intent to revoke the jurisdiction of the Court of
Appeals and Supreme Court to issue writs of habeas corpus relating to the custody of minors.
Further, it cannot be said that the provisions of RA 8369, RA 7092 [An Act Expanding the
Jurisdiction of the Court of Appeals] and BP 129 [The Judiciary Reorganization Act of 1980]
are absolutely incompatible since RA 8369 does not prohibit the Court of Appeals and the
Supreme Court from issuing writs of habeas corpus in cases involving the custody of minors.
Thus, the provisions of RA 8369 must be read in harmony with RA 7029 and BP 129
that family courts have concurrent jurisdiction with the Court of Appeals and the
Supreme Court in petitions for habeas corpuswhere the custody of minors is at
issue.8 (emphases supplied)
The jurisdiction of the Court of Appeals over petitions for habeas corpus was further affirmed
by A.M. No. 03-03-04-SC (April 22, 2004) in Re: Rule on Custody of Minors and Writ
of Habeas Corpus in Relation to Custody of Minors:
In any case, whatever uncertainty there was has been settled with the adoption of A.M.
No. 03-03-04-SC Re: Rule on Custody of Minors and Writ of Habeas Corpus in Relation
to Custody of Minors. Section 20 of the rule provides that:
Section 20. Petition for writ of habeas corpus. A verified petition for a writ of habeas corpus
involving custody of minors shall be filed with the Family Court. The writ shall be enforceable
within its judicial region to which the Family Court belongs.
xxx

xxx

xxx

The petition may likewise be filed with the Supreme Court, Court of Appeals, or with any
of its membersand, if so granted, the writ shall be enforceable anywhere in the
Philippines. The writ may be made returnable to a Family Court or to any regular court within
the region where the petitioner resides or where the minor may be found for hearing and
decision on the merits.
From the foregoing, there is no doubt that the Court of Appeals and Supreme Court have
concurrent jurisdiction with family courts in habeas corpus cases where the custody of
minors is involved.9(emphases supplied)1avvphi1
We note that after petitioner moved out of their Paraaque residence on May 18, 2002, he
twice transferred his sons to provinces covered by different judicial regions. This situation is
what the Thornton interpretation of RA 8369s provision on jurisdiction precisely addressed:
[The reasoning that by giving family courts exclusive jurisdiction over habeas corpus cases,
the lawmakers intended them to be the sole courts which can issue writs of habeas corpus]
will result in an iniquitous situation, leaving individuals like [respondent] without legal
recourse in obtaining custody of their children. Individuals who do not know the whereabouts
of minors they are looking for would be helpless since they cannot seek redress from family
courts whose writs are enforceable only in their respective territorial jurisdictions. Thus, if a
minor is being transferred from one place to another, which seems to be the case here,
the petitioner in ahabeas corpus case will be left without legal remedy. This lack of

recourse could not have been the intention of the lawmakers when they passed [RA
8369].10
Moreover, a careful reading of Section 5(b) of RA 8369 reveals that family courts are vested
with original exclusive jurisdiction in custody cases, not in habeas corpus cases. Writs
of habeas corpus which may be issued exclusively by family courts under Section 5(b) of RA
8369 pertain to the ancillary remedy that may be availed of in conjunction with a petition for
custody of minors under Rule 99 of the Rules of Court. In other words, the issuance of the writ
is merely ancillary to the custody case pending before the family court. The writ must be
issued by the same court to avoid splitting of jurisdiction, conflicting decisions, interference
by a co-equal court and judicial instability.
The rule therefore is: when by law jurisdiction is conferred on a court or judicial officer, all
auxiliary writs, processes and other means necessary to carry it into effect may be employed
by such court or officer.11 Once a court acquires jurisdiction over the subject matter of a case,
it does so to the exclusion of all other courts, including related incidents and ancillary matters.
Accordingly, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.

G.R. No. 164915

March 10, 2006

ERIC JONATHAN YU, Petitioner,

vs.
CAROLINE T. YU, Respondent.
DECISION
CARPIO MORALES, J.:
On January 11, 2002, Eric Jonathan Yu (petitioner) filed a petition for habeas corpus before
the Court of Appeals alleging that his estranged wife Caroline Tanchay-Yu (respondent)
unlawfully withheld from him the custody of their minor child Bianca. The petition, which
included a prayer for the award to him of the sole custody of Bianca, was docketed as CAG.R. SP No. 68460.
Subsequently or on March 3, 2002, respondent filed a petition against petitioner before the
Pasig Regional Trial Court (RTC) for declaration of nullity of marriage and dissolution of the
absolute community of property. The petition included a prayer for the award to her of the sole
custody of Bianca and for the fixing of schedule of petitioners visiting rights "subject only to
the final and executory judgment of the Court of Appeals in CA-G.R. SP No. 68460."
In the meantime, the appellate court, by Resolution of March 21, 2002, awarded petitioner full
custody of Bianca during the pendency of the habeas corpus case, with full visitation rights of
respondent.
Petitioner and respondent later filed on April 5, 2002 before the appellate court a Joint Motion
to Approve Interim Visitation Agreement which was, by Resolution of April 24, 2002,
approved.
On April 18, 2002, respondent filed before the appellate court a Motion for the Modification
of her visiting rights under the Interim Visitation Agreement. To the Motion, petitioner filed
an Opposition with Motion to Cite Respondent for Contempt of Court in light of her filing of
the petition for declaration of nullity of marriage before the Pasig RTC which, so he
contended, constituted forum shopping.
By Resolution of July 5, 2002, the appellate court ordered respondent and her counsel to make
the necessary amendment in her petition for declaration of nullity of marriage before the Pasig
City RTC in so far as the custody aspect is concerned, under pain of contempt.
In compliance with the appellate courts Resolution of July 5, 2002, respondent filed a Motion
to Admit Amended Petition before the Pasig RTC. She, however, later filed in December 2002
a Motion to Dismiss her petition, without prejudice, on the ground that since she started
residing and conducting business at her new address at Pasay City, constraints on resources
and her very busy schedule rendered her unable to devote the necessary time and attention to
the petition. The Pasig RTC granted respondents motion and accordingly dismissed the
petition without prejudice, by Order of March 28, 2003.

On June 12, 2003, petitioner filed his own petition for declaration of nullity of marriage and
dissolution of the absolute community of property before the Pasig RTC, docketed as JDRC
Case No. 6190, with prayer for the award to him of the sole custody of Bianca, subject to the
final resolution by the appellate court of his petition for habeas corpus.
The appellate court eventually dismissed the habeas corpus petition, by Resolution of July 3,
2003, for having become moot and academic, "the restraint on the liberty of the person alleged
to be in restraint [having been] lifted."
In the meantime, respondent filed on July 24, 2003 before the Pasay RTC a petition for habeas
corpus, which she denominated as "Amended Petition," praying for, among other things, the
award of the sole custody to her of Bianca or, in the alternative, pending the hearing of the
petition, the issuance of an order "replicating and reiterating the enforceability of the Interim
Visiting Agreement" which was approved by the appellate court. The petition was docketed as
SP Proc. No. 03-0048.
Not to be outdone, petitioner filed on July 25, 2003 before the Pasig RTC in his petition for
declaration of nullity of marriage an urgent motion praying for the custody of Bianca for the
duration of the case.
Acting on respondents petition, Branch 113 of the Pasay RTC issued a Writ of Habeas
Corpus, a Hold Departure Order and Summons addressed to petitioner, drawing petitioner to
file a motion to dismiss the petition on the ground of lack of jurisdiction, failure to state a
cause of action, forum shopping and litis pendentia, he citing the pending petition for
declaration of nullity of marriage which he filed before the Pasig RTC.
The Pasay RTC, in the meantime, issued an Order of August 12, 2003 declaring that pending
the disposition of respondents petition, Bianca should stay with petitioner from Sunday
afternoon to Saturday morning and "with the company of her mother from Saturday 1:00 in
the afternoon up to Sunday 1:00 in the afternoon." To this Order, petitioner filed a Motion for
Reconsideration, arguing that the Pasay RTC did not have jurisdiction to issue the same. He
likewise filed a Manifestation of August 14, 2003 stating that he was constrained to submit to
the said courts order but with the reservation that he was not submitting the issue of custody
and himself to its jurisdiction.
Respondent soon filed her Answer with Counter-Petition on the nullity case before the Pasig
RTC wherein she also prayed for the award of the sole custody to her of Bianca, subject to the
final disposition of the habeas corpus petition which she filed before the Pasay RTC.
By Omnibus Order of October 30, 2003, the Pasig RTC asserted its jurisdiction over the
custody aspect of the petition filed by petitioner and directed the parties to comply with the
provisions of the Interim Visitation Agreement, unless they agreed to a new bilateral
agreement bearing the approval of the court; and granted custody of Bianca to petitioner for
the duration of the case.
The Pasay RTC in the meantime denied, by Order of November 27, 2003, petitioners motion
to dismiss. The court, citing Sombong v. Court of Appeals, 1 held that in custody cases
involving minors, the question of illegal and involuntary restraint of liberty is not the
underlying rationale for the availability of a writ of habeas corpus as a remedy; rather, a writ

of habeas corpus is prosecuted for the purpose of determining the right of custody over the
child.2 And it further held that the filing before it of the habeas corpus case by respondent,
who is a resident of Pasay, is well within the ambit of the provisions of A.M. No. 03-04-04SC.3
On the issue of forum shopping, the Pasay RTC held that it is petitioner, not respondent, who
committed forum shopping, he having filed (on June 12, 2003) the petition for declaration of
nullity of marriage before the Pasig RTC while his petition for habeas corpus before the Court
of Appeals was still pending.4
The Pasay RTC held that assuming arguendo that petitioners filing before the Pasig RTC of
the declaration of nullity of marriage case did not constitute forum shopping, it (the Pasay
RTC) acquired jurisdiction over the custody issue ahead of the Pasig RTC, petitioner not
having amended his petition before the Pasig RTC as soon as the Court of Appeals dismissed
his petition for habeas corpus5 (on July 3, 2003).
Finally, the Pasay RTC held that there was no litis pendentia because two elements thereof are
lacking, namely, 1) identity of the rights asserted and reliefs prayed for, the relief being
founded on the same facts, and 2) identity with respect to the two preceding particulars in the
two cases such that any judgment that may be rendered in the pending case, regardless of
which party is successful, would amount to res judicata in the other case.6
Petitioner thereupon assailed the Pasay RTCs denial of his Motion to Dismiss via Petition for
Certiorari, Prohibition and Mandamus before the appellate court wherein he raised the
following issues:
A. RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION
BY DENYING PETITIONERS MOTION TO DISMISS DESPITE THE
EVIDENT LACK OF JURISDICTION OVER THE SUBJECT MATTER OF
CUSTODY, LITIS PENDENTIA, AND DELIBERATE AND WILLFUL FORUMSHOPPING ON THE PART OF RESPONDENT CAROLINE T. YU.7
B. RESPONDENT JUDGE ACTED WHIMSICALLY, CAPRICIOUSLY AND
ARBITRARILY IN ISSUING THE AUGUST 12, 2003 ORDER GRANTING
RESPONDENT CAROLINE T. YU OVERNIGHT VISITATION RIGHTSOVER
THE MINOR CHILD BIANCA AND DENYING PETITIONERS URGENT
MOTION FOR RECONSIDERATION OF THE SAID ORDER.8 (Underscoring
supplied)
By Decision of August 10, 2004,9 the appellate court denied petitioners petition, it holding
that the assumption of jurisdiction by the Pasay RTC over the habeas corpus case does not
constitute grave abuse of discretion; the filing by respondent before the Pasay RTC of a
petition for habeas corpus could not be considered forum shopping in the strictest sense of the
word as before she filed it after petitioners petition for habeas corpus filed before the
appellate court was dismissed; and it was petitioner who committed forum shopping when he
filed the declaration of nullity of marriage case while his habeas corpus petition was still
pending before the appellate court.

In fine, the appellate court held that since respondent filed the petition for declaration of
nullity of marriage before the Pasig RTC during the pendency of the habeas corpus case he
filed before the appellate court, whereas respondent filed the habeas corpus petition before the
Pasay RTC on July 24, 2003 after the dismissal on July 3, 2003 by the appellate court of
petitioners habeas corpus case, jurisdiction over the issue custody of Bianca did not attach to
the Pasig RTC.
As for the questioned order of the Pasay RTC which modified the Interim Visiting Agreement,
the appellate court, noting that the proper remedy for the custody of Bianca was filed with the
Pasay RTC, held that said court had the authority to issue the same.
Hence, the present petition filed by petitioner faulting the appellate court for
I. . . . DECLARING THAT PETITIONER ERIC YU COMMITTED FORUM-SHOPPING IN
FILLING THE PETITION FOR DECLARATION OF NULLITY OF MARRIAGE WITH
PRAYER FOR CUSTODY BEFORE THE PASIG FAMILY COURT AND THAT THE
LATTER COURT WAS BARRED FROM ACQUIRING JURISDICTION OVER THE
CUSTODY ASPECT OF THE NULLITY CASE IN RECKLESS DISREGARD OF THE
PRINCIPLE THAT THE FILING OF A PETITION FOR NULLITY OF MARRIAGE
BEFORE THE FAMILY COURTS VESTS THE LATTER WITH EXCLUSIVE
JURISDICTION TO DETERMINE THE NECESSARY ISSUE OF CUSTODY.
II. . . . APPL[YING] THE LAW OF THE CASE DOCTRINE BY RULING THAT THE
PASIG FAMILY COURT HAS NO JURISDICTION OVER THE CUSTODY ASPECT OF
THE NULLITY CASE ON THE BASIS OF THE JULY 5, 2002 RESOLUTION OF THE
COURT OF APPEALS IN CA GR SP NO. 68460 WHEN THE SAID RESOLUTION
CLEARLY APPLIES ONLY TO THE NULLITY CASE FILED BY PRIVATE
RESPONDENT ON MARCH 7, 2002 DOCKETED AS JDRC CASE NO. 5745 AND NOT
TO HEREIN PETITIONERS JUNE 12, 2003 PETITION FOR NULLITY DOCKETED AS
JDRC CASE NO. 6190.
III. . . . DECLARING THAT THE PASIG FAMILY COURT MUST YIELD TO THE
JURISDICTION OF THE PASAY COURT INSOFAR AS THE ISSUE OF CUSTODY IS
CONCERNED IN GRAVE VIOLATION OF THE DOCTRINE OF JUDICIAL STABILITY
AND NON-INTERFERENCE.
IV. . . . RULING THAT PRIVATE RESPONDENT CAROLINE DID NOT COMMIT
FORUM-SHOPING IN FILING THE HABEAS CORPUS CASE WITH PRAYER FOR
CUSTODY BEFORE THE RESPONDENT PASAY COURT DESPITE THE FACT THAT
AN EARLIER FILED PETITION FOR DECLARATION OF NULLITY OF MARRIAGE
WITH PRAYER FOR CUSTODY IS STILL PENDING BEFORE THE PASIG FAMILY
COURT WHEN THE FORMER CASE WAS INSTITUTED.
V. . . . RULING THAT RESPONDENT CAROLINE YU DID NOT SUBMIT TO THE
JURISDICTION OF THE PASIG FAMILY COURT BASED ON AN ERRONEOUS
FACTUAL FINDING THAT SHE FILED ON AUGUST 25, 2003 AN OMNIBUS
OPPOSITION IN PETITIONERS ACTION FOR NULLITY BEFORE THE PASIG
COURT.10 (Underscoring supplied)

The petition is impressed with merit.

The main issue raised in the present petition is whether the question of custody over Bianca
should be litigated before the Pasay RTC or before the Pasig RTC.
Judgment on the issue of custody in the nullity of marriage case before the Pasig RTC,
regardless of which party would prevail, would constitute res judicata on the habeas corpus
case before the Pasay RTC since the former has jurisdiction over the parties and the subject
matter.
There is identity in the causes of action in Pasig and Pasay because there is identity in the facts
and evidence essential to the resolution of the identical issue raised in both actions11 whether
it would serve the best interest of Bianca to be in the custody of petitioner rather than
respondent or vice versa.
Since the ground invoked in the petition for declaration of nullity of marriage before the Pasig
RTC is respondents alleged psychological incapacity to perform her essential marital
obligations12 as provided in Article 36 of the Family Code, the evidence to support this cause
of action necessarily involves evidence of respondents fitness to take custody of Bianca.
Thus, the elements of litis pendentia, to wit: a) identity of parties, or at least such as
representing the same interest in both actions; b) identity of rights asserted and reliefs prayed
for, the relief being founded on the same facts; and c) the identity in the two cases should be
such that the judgment that may be rendered in the pending case would, regardless of which
party is successful, amount to res judicata in the other,13are present.
Respondent argues in her Comment to the petition at bar that the Pasig RTC never acquired
jurisdiction over the custody issue raised therein.
"[T]he subsequent dismissal of the habeas corpus petition by the Court of Appeals on 3 July
2003 could not have the effect of conferring jurisdiction over the issue on the Pasig court. For
the Pasig court to acquire jurisdiction over the custody issue after the dismissal of the habeas
corpus petition before the Court of Appeals, the rule is that petitioner must furnish the
occasion for the acquisition of jurisdiction by repleading his cause of action for custody and
invoking said cause anew."14 (Emphasis and underscoring supplied)
And respondent cites Caluag v. Pecson,15 wherein this Court held:
Jurisdiction of the subject matter of a particular case is something more than the general power
conferred by law upon a court to take cognizance of cases of the general class to which the
particular case belongs. It is not enough that a court has power in abstract to try and decide the
class litigations [sic] to which a case belongs; it is necessary that said power be properly
invoked, or called into activity, by the filing of a petition, or complaint or other appropriate
pleading. (Underscoring supplied by Caroline.)16
Specific provisions of law govern the case at bar, however. Thus Articles 49 and 50 of the
Family Code provide:

Art. 49. During the pendency of the action [for annulment or declaration of nullity of
marriage] and in the absence of adequate provisions in a written agreement between the
spouses, the Court shall provide for the support of the spouses and the custody and support
of their common children. x x x It shall also provide for appropriate visitation rights of
the other parent. (Emphasis and underscoring supplied)17
Art. 50. x x x x
The final judgment in such cases [for the annulment or declaration of nullity of marriage] shall
provide for the liquidation, partition and distribution of the properties of the
spouses, the custody and support of the common children, and the delivery of their
presumptive legitimes, unless such other matters had been adjudicated in previous judicial
proceedings." (Emphasis and underscoring added)
By petitioners filing of the case for declaration of nullity of marriage before the Pasig RTC he
automatically submitted the issue of the custody of Bianca as an incident thereof. After the
appellate court subsequently dismissed the habeas corpus case, there was no need for
petitioner to replead his prayer for custody for, as above-quoted provisions of the Family Code
provide, the custody issue in a declaration of nullity case is deemed pleaded. That that is so
gains light from Section 21 of the "Rule on Declaration Of Absolute Nullity Of Void
Marriages and Annulment of Voidable Marriages"18 which provides:
Sec. 21. Liquidation, partition and distribution, custody, support of common children and
delivery of their presumptive legitimes.Upon entry of the judgment granting the petition, or,
in case of appeal, upon receipt of the entry of judgment of the appellate court granting the
petition, the Family Court, on motion of either party, shall proceed with the liquidation,
partition and distribution of the properties of the spouses, including custody, support of
common children and delivery of their presumptive legitimes pursuant to Articles 50 and 51
of the Family Code unless such matters had been adjudicated in previous judicial proceedings.
(Emphasis and underscoring supplied)
Since this immediately-quoted provision directs the court taking jurisdiction over a petition for
declaration of nullity of marriage to resolve the custody of common children, by mere motion
of either party, it could only mean that the filing of a new action is not necessary for the court
to consider the issue of custody of a minor.19
The only explicit exception to the earlier-quoted second paragraph of Art. 50 of the Family
Code is when "such matters had been adjudicated in previous judicial proceedings," which is
not the case here.
The elements of litis pendentia having been established, the more appropriate action criterion
guides this Court in deciding which of the two pending actions to abate. 20
The petition filed by petitioner for the declaration of nullity of marriage before the Pasig RTC
is the more appropriate action to determine the issue of who between the parties should have
custody over Bianca in view of the express provision of the second paragraph of Article 50 of
the Family Code. This must be so in line with the policy of avoiding multiplicity of suits. 21

The appellate court thus erroneously applied the law of the case doctrine when it ruled that in
its July 5, 2002 Resolution that the pendency of the habeas corpus petition in CA-G.R. SP No.
68460 prevented the Pasig RTC from acquiring jurisdiction over the custody aspect of
petitioners petition for declaration of nullity. The factual circumstances of the case refelected
above do not justify the application of the law of the case doctrine which has been defined as
follows:
Law of the case has been defined as the opinion delivered on a former appeal. It is a term
applied to an established rule that when an appellate court passes on a question and
remands the case to the lower court for further proceedings, the question there settled
becomes the law of the case upon subsequent appeal. It means that whatever is once
irrevocably established as the controlling legal rule or decision between the same parties in
the same case continues to be the law of the case, whether correct on general principles or
not, so long as the facts on which such decision was predicated continue to be the facts of the
case before the court." (Emphasis and underscoring supplied, italics in the original) 22
WHEREFORE, the petition is GRANTED. The August 10, 2004 decision of the Court of
Appeals is REVERSEDand SET ASIDE,and another is entered DISMISSING Pasay City
Regional Trial Court Sp. Proc. No. 03-0048-CFM and ordering Branch 69 of Pasig City
Regional Trial Court to continue, with dispatch, the proceedings in JDRC No. 6190.
SO ORDERED.

G.R. No. 201199

October 16, 2013

STEEL CORPORATION OF THE PHILIPPINES, Petitioner,

vs.
MAPFRE INSULAR INSURANCECORPORATIQN, NEW INDIAASSURANCE
COMPANY LIMITED, PHILIPPINE CHARTER INSURANCECORPORATION,
MALAYAN INSURANCECO., INC., and ASIA INSURANCE CO., INC., and ASIA
INSURANCE PHIL. CORP., Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition1 for review on certiorari under _Rule 45 of the Rules of Court. Petitioner
Steel Corporation of the Philippines (SCP) challenges the 8 February 2012 Decision2 and 27
March 2012 Resolution3 of the Court of Appeals in CA-G.R. SP No. 1 19760. The Court of
Appeals declared void the 1 June 2011 Order4 of the Regional Trial Court (RTC), acting as
rehabilitation court, Fourth Judicial Region, Branch 3, Batangas City, in SP. PROC. No. 067993.
The facts
SCP is a domestic corporation engaged in the manufacture and distribution of cold-rolled and
galvanized steel sheets and coils. It obtained loans from several creditors and, as security,
mortgaged its assets in their favor. The creditors appointed Bank of the Philippine Islands
(BPI) as their trustee. On 17 December 1997, SCP and BPI entered into a Mortgage Trust
Indenture (MTI) requiring SCP to insure all of its assets until the loans are fully paid. Under
the MTI, the insurance policies were to be made payable to BPI.
During the course of its business, SCP suffered financial difficulties. On 11 September 2006,
one of the creditors, Equitable PCI Bank, Inc., now known as Banco de Oro-EPCI, Inc., filed
with the RTC a petition to have SCP placed under corporate rehabilitation. On 12 September
2006, the RTC issued a stay order to defer all claims against SCP and appointed Atty.
Santiago T. Gabionza, Jr. as rehabilitation receiver. On 3 December 2007, the RTC rendered a
Decision approving the modified rehabilitation plan.
Under Collective Master Policy No. UCPB Gem HOF075089, SCP insured against material
damage and business interruption its assets located in Barangay Munting Tubig, Balayan,
Batangas, for the period 19 August2007 to 19 August 2008. On 8 June 2008, a fire broke out
at SCPs plant damaging its machineries. Invoking its right under the MTI, BPI demanded and
received from the insurers $450,000 insurance proceeds.
On 13 October 2009, SCP filed with the RTC a motion to direct BPI to turn over the $450,000
insurance proceeds in order for SCP to repair and replace the damaged machineries. On 5
January 2010, the RTC issued an Order directing BPI to release the insurance proceeds
directly to the contractors and suppliers who will undertake the repairs and replacements of the

damaged machineries. BPI filed with the Court of Appeals a petition for certiorari under Rule
65 of the Rules of Court and, in its 28 September 2010Decision, 5 the Court of Appeals
affirmed the RTCs 5 January 2010 Order. However, in its 3 October 2012 Amended
Decision,6 the Court of Appeals reversed itself and set aside the RTCs 5 January 2010 Order.
SCP filed with the Court a petition for review on certiorari under Rule 45 and, in its 16
September 2013 Resolution,7 the Court denied the petition. The Court held that:
After a judicious review of the records, the Court resolves to DENY the instant petition and
AFFIRM the October 3, 2012 Amended Decision and July 2, 2013 Resolution of the Court of
Appeals (CA) in CA- G.R. SP No. 113078 for failure of Steel Corporation of the
Philippines(petitioner) to show that the CA committed any reversible error in holding Bank of
the Philippine Islands (respondent) entitled to receive and hold in trust the subject insurance
proceeds. Section 4.04, sub-paragraph (f) of the Mortgage Trust Indenture Agreement between
the parties expressly stipulated that respondent shall receive the insurance proceeds in case the
risk or risks covered by the said policy occur and it may be released, applied, and/or paid to
petitioner to procure replacement equipment and/or machinery only upon written notice to the
creditors, who shall issue a Deed of Undertaking. No such compliance was shown. It is
hornbook that a contract is the law between the parties and the obligation arising therefrom
should be complied with in good faith. Moreover, the rehabilitation proceedings were already
terminated by the CA (which decisions are immediately executory), hence, petitioners
justification for release of the insurance proceeds in its favor, i.e., to replace the burnt
machineries, is not feasible at this time.
Besides, the petition suffers from procedural defect in that it lacked copy of the Regional Trial
Court Order as well as relevant pleadings thereto, as required under Section 4(d), Rule 45 of
the Rules of Court.
SO ORDERED.8
Under Industrial All Risks Insurance Policy No. F-369430, SCP insured with respondents
Mapfre Insular Insurance Corporation, New India Assurance Company Limited, Philippine
Charter Insurance Corporation, Malayan Insurance Co., Inc., and Asia Insurance Phil. Corp.
(respondent insurers) against material damage and business interruption its assets located in
Barangay Munting Tubig for the period 19 August 2009 to 19 August 2010. On 7December
2009, a fire again broke out at SCPs plant damaging its cold rolling mill and other
machineries.
On 17 December 2010, SCP filed with the RTC a motion to direct respondent insurers to pay
insurance proceeds in the amounts of $28,000,000 property damage and $8,000,000 business
interruption.
During the 21 January 2011 hearing of SCPs 17 December 2010motion, respondent insurers
entered a special appearance solely for the purpose of questioning the RTCs jurisdiction over
the insurance claim. On7 February 2011, respondent insurers filed with the RTC an opposition
ad cautelam praying that SCPs 17 December 2010 motion be denied.
In a letter dated 22 March 2011, respondent insurers denied liability on SCPs insurance claim
because (1) SCP failed to comply with the terms of the policies; (2) SCP defrauded the
respondent insurers; (3) the gross over-insurance of the cold rolling mill constitutes prima

facie proof of arson;(4) SCP failed to show the actual damage sustained by its machineries;(5)
SCP failed to commence the repair and replacement of the damaged machineries within 12
months; (6) SCPs negligence caused the fire; and (7) since SCPs claim for property damage
is non-compensable, its claim for business interruption is also non-compensable. In their ad
cautelam opposition dated 24 March 2011, respondent insurers prayed that SCPs17 December
2010 motion be denied because (1) the amount of the claim for property damage was
increased from $28,000,000 to $30,000,000; (2) the RTC lacked jurisdiction; (3) the RTCs 5
January 2010 Order directing BPIto release the insurance proceeds directly to the contractors
and suppliers who will undertake the repairs and replacements of SCPs damaged machineries
did not apply; and (4) respondent insurers already denied SCPs insurance claim.
On 25 March and 8 April 2011, the RTC issued an Order directing (1) SCP to formally
manifest its amenability to the repair and replacement of the damaged machineries instead of
payment of insurance proceeds; (2) SCP and respondent insurers to file their memoranda; and
(3) the creditors to file their respective comments.
The RTCs Ruling
In its 1 June 2011 Order, the RTC granted SCPs 17 December 2010motion and directed
respondent insurers to pay SCP $33,882,393 property damage and $8,000,000 business
interruption. The RTC held that:
At the outset, this Court notes that SCPs manufacturing operations have suffered from two
separate fire incidents: one which damaged the ABB roll on June 8, 2008, and the other which
damaged the entire Cold Rolling Mill (CRM) on December 7, 2009. The claim for the first fire
incident was partially paid by the insurers but the proceeds were withheld by BPI as MTI
Trustee. Thus, feeling aggrieved, SCP was forced to file a Motion to Direct Trustee to Release
Insurance Proceeds to SCP which was granted by the previous judge, (over and above the
objections of BPI which argued that this Court had no jurisdiction over the matter) through his
Order dated January 5, 2010 x x x.
This Court, in resolving the instant motion, is inclined to agree with the previous judges order
and so upholds that it has jurisdiction over the insurance claims filed by SCP in these
rehabilitation proceedings.
x x x.
In a resolution dated September 28, 2010, the Court of Appeals (BPI vs. Hon. Albert A.
Kalalo, C.A.-G.R. SP No. 113078) confirmed this Courts authority and jurisdiction to take
cognizance of the insurance matter in the same rehabilitation proceedings. The appellate court
made it very clear that this courts jurisdiction includes the necessary and usual incidental
powers that are essential to effectuate SCPs rehabilitation. x x x.
The argument that this Court cannot possibly pass upon the insurance claim of SCP because it
is only acting as a rehabilitation court cannot hold water. The mere fact that this Court by
raffle has been designated as a rehabilitation court in view of the inhibition of RTC Branches 2
and 4 does not mean that it has lost its powers or authority as a court of general jurisdiction. x
x x.

xxxx
It is not true that the second panel of insurers are not "affected parties" and therefore cannot be
deemed covered by the in rem nature of the rehabilitation proceedings. It is apt to note that the
second panel of insurers unequivocably admitted, in par. 21 of their Opposition, that "the
panel of insurers are aware that any proceeding initiated under the Rules on Corporate
Rehabilitation shall be considered in rem and that jurisdiction over all persons affected by the
proceedings shall be considered acquired upon publication of the notice of the commencement
of the proceedings in any newspaper of general circulation in the Philippines as required by
the Rules."
The panel of insurers argument that they are not "affected parties" in the rehabilitation
proceedings because they do not hold any asset belonging to SCP ["]which should be reflected
in its audited financial statements" was sufficiently rebutted by SCP when the latter argued
that the insurers, holding as they do, sums of money, recovery of which is sought by SCP, as
the insured, are parts of the assets of its estate (Bank of the Philippine Islands vs. Posadas, 56
Phil. 215, 230). They are sums of money redounding to the benefit of its estate (i.e. assets) as
an insured (Heirs of Loreto Maramag vs. Heirs of Maramag, et al., 586 SCRA 774,787). Thus,
the fact that SCP, as insured, is claiming the proceeds of insurance policies issued to it, makes
the insurers affected parties covered by the instant rehabilitation proceedings.
The panel of insurers further contend, that the claim "may not be resolved summarily as the
same requires a full-blown trial" such that it may be considered a complaint and therefore this
Court did not acquire jurisdiction over the res because of the non-payment of docket fees.
Contrary to this line of reasoning however, it should be pointed out that the Interim Rules of
Procedure on Corporate Rehabilitation clearly recognizes the right of the parties affected by
the proceedings to file their opposition (Rule 3, Secs. 6, 10 and 20). The rehabilitation judge
can hold clarificatory hearings if there is a need to clarify certain questions arising from such
opposition. In short, the right to oppose (together with the corresponding right to be heard on
the opposition) does not necessarily mean that a "full-blown trial" should be conducted. The
instant proceedings does [sic] not automatically become "adversarial" (as compared to
"summary" proceedings) necessitating "full-blown trial" just because the insurers have
conveyed their intent to oppose (which they did) the claim.
As the insurers themselves admit in par. 37 of their Opposition adversarial proceedings simply
means that it is "one having opposing parties, contested as distinguished from an ex-parte
application, one of which the party seeking relief has given legal warning to the other party
and afforded the latter an opportunity to contest it" (Republic of the Philippines vs. Valencia,
141 SCRA 462[,] 1986). It is very clear that the insurers have all the opportunity in these
proceedings to oppose even without the necessity of a "full-blown hearing."
And since the subject motion for payment of the insurance claim does not necessarily entail
full-blown hearings despite it being an adversarial motion (i.e. contested), the argument of the
insurers that it is a complaint that must be resolved in an original, separate, full-blown
proceedings, independently of the instant case which is summary in nature, and necessarily
must comply with Sec. 141 of the Revised Rules of Court regarding the payment of filing fees
"upon filing of the pleading or other application which initiates an action or proceeding" does
not hold water and is fallacious.
xxxx

As to the corollary issue of the rightful payee of the insurance proceeds, this Court hereby
rules that contrary to the creditors argument that the proceeds of the insurance claims should
be given to the MTIT rustee pursuant to the MTI, it is appropriate for this Court to emphasize
what the appellate court in BPI vs. Hon. Kalalo, has said that although it is beyond dispute
that the provisions of the MTI continue to bind the parties, the MTIs binding effect should be
qualified. Pursuant to the provision of the Interim Rules and in deference to the purpose of
rehabilitation proceedings, "the Mortgage Trust Indenture would be binding only insofar as it
does not conflict with the provisions of the rehabilitation plan undertaken by the private
respondent as well as if it does not hinder the corporate rehabilitation of private respondent
itself". In deciding who has the better right to receive the disputed insurance proceeds, the
Court of Appeals said that "utmost regard must be had to the restoration of herein private
respondent to a position of successful operation and solvency."
xxxx
It is not true as contended by the second panel of insurers that there are distinctions between
the instant motion (for the second fire) from the first motion (for the first fire) which had
already been ruled in favor of SCP by the previous judge. The factual circumstances under the
first motion and the present one are similar or analogous even if not entirely identical. Both
motions refer to disputed insurance claims arising from losses covered by existing policies
issued to SCP. Both have been disputed or opposed either by the MTI Trustee or by the
insurers themselves. Thus, both motions should be resolved in the same manner in order to
maintain consistency and stability in this Courts judicial pronouncements.
This Court agrees with SCP when it argues that the creditors should realize that if they insist
on being paid the cash proceeds of the claim or if the proceeds are to be given to the MTI
trustee, the said act may not only constitute a violation of the Stay Order (since it is virtually a
satisfaction/enforcement/collection of their money claims) but it would also result in SCP not
being able to restart normal operations which would adversely affect its rehabilitation. Hence,
this Court mandates the second panel of insurers to pay the insurance claims of SCP or in lieu
thereof, replace or reinstate the CRM.
WHEREFORE, premised and predicated on the foregoing, the Court hereby orders the
following:
1. Grant SCPs unopposed Urgent Motion (to Withdraw Motion to Admit
Supplemental Motion dated December 2, 2009) dated September 9, 2010;
2. Order the second panel of insurers to already pay the additional business
interruption claim of US$8 million plus interest at the rate provided by Sec. 243 of
the Insurance Code (for the second fire); and
3. Order the second panel of insurers to pay to SCP the total sum of
US$33,882,393.00, plus interest at the rate provided by Sec. 243of the Insurance
Code inclusive of the value of its CRM or in lieu thereof, replace or reinstate the
CRM.
SO ORDERED.9

Respondent insurers filed with the Court of Appeals a petition 10 for certiorari under Rule 65 of
the Rules of Court raising mainly as issue that the RTC lacked jurisdiction over SCPs
insurance claim and over respondent insurers.
The Court of Appeals Ruling
In its 8 February 2012 Decision, the Court of Appeals declared void the RTCs 1 June 2011
Order. The Court of Appeals held that:
x x x The present petition for certiorari under Rule 65, 1997Rules of Civil Procedure is an
appropriate remedy, as it assails the very jurisdiction of the trial court in granting private
respondents insurance claims which were raised through a mere "Motion to Pay" in the
rehabilitation proceedings. It is basic that a special civil action for certiorari is intended for the
correction of errors of jurisdiction or grave abuse of discretion amounting to lack or excess of
jurisdiction. Its principal office is to keep the inferior court within the parameters of its
jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to
lack or excess of jurisdiction.
xxxx
Notably, even in the proceedings below, petitioners questioned the trial courts jurisdiction to
resolve private respondents "Motion to Pay. "As the trial court noted in its Order dated June
1, 2011, during the hearing on private respondents "Motion to Pay" on January 21, 2011,
petitioners entered a very special appearance solely for the purpose of questioning the trial
courts jurisdiction. Record also bears that petitioners assailed the trial courts jurisdiction
during the hearing on private respondents "Motion to Resolve Critical Pending Incidents,"
dated March 25, 2011, and in pleadings filed before the trial court, to wit: (i) "Insurers
Opposition Ad Cautelam
(To: Motion to Direct Insurers to Pay Insurance Proceeds to Insured Steel Corporation of the
Philippines dated December 17, 2010)"; (ii) "Comment Ad Cautelam (On Steel Corporation
of the Philippines Comment on the Opposition Ad Cautelam dated January 20,2011)"; (iii)
"Insurers Ad Cautelam Opposition versus Honorable Courts Assumption of Jurisdiction
and/or Summary Resolution of Motion in Movants Favor"; and (iv) "Insurers Memorandum
(on Issue of Jurisdiction)."
There is no denying that the subject matter of private respondents "Motion to Pay" comprised
of its insurance claims for (i) business interruption in the amount of US$8 million, and (ii)
property loss in the amount of US$28 million. Said insurance claims cannot be considered as
"claims" within the jurisdiction of the trial court functioning as a rehabilitation court.
Rehabilitation courts only have limited jurisdiction over the claims by creditors against the
distressed company, not on the claims of said distressed company against its debtors. The
interim rules define claim as referring to all claims or demands, of whatever nature or
character against a debtor or its property, whether for money or otherwise.
Even under the new Rules of Procedure on Corporate Rehabilitation, claim is defined under
Section 1, Rule 2 as "all claims or demands of whatever nature or character against a debtor or
its property, whether for money or otherwise." This is also the definition of a claim under
Republic Act No. 10142. Section 4(c) thereof reads:

"(c) Claim shall refer to all claims or demands of whatever nature or character against the
debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed, including, but not limited to[:] (1)
all claims of the government, whether national or local, including taxes, tariffs and customs
duties; and (2) claims against directors and officers of the debtor arising from the acts done in
the discharge of their functions falling within the scope of their authority: Provided, That, this
inclusion does not prohibit the creditors or third parties from filing cases against the directors
and officers acting in their personal capacities."
Contrary to the trial courts finding, petitioners cannot be considered as "affected parties"
within the purview of Section 1, Rule 3 of the Interim Rules on Corporate Rehabilitation. As
explained in
Metropolitan Waterworks and Sewerage System vs. Daway, the provision, being merely a
logical consequence of filing an in rem petition for rehabilitation, shall only cover the
distressed companys creditors and those other persons holding the assets belonging to the
debtor under rehabilitation that would be material to the rehabilitation proceedings. As the
Supreme Court explained in said case:
"The public respondent relied on Sec. 1, Rule 3 of the Interim Rules on Corporate
Rehabilitation to support its jurisdiction over the Irrevocable Standby Letter of Credit and the
banks that issued it. The section reads in part that jurisdiction over those affected by the
proceedings is considered acquired upon the publication of the notice of commencement of
proceedings in a newspaper of general circulation and goes further to define rehabilitation as
anin rem proceeding. This provision is a logical consequence of the in rem nature of the
proceedings, where jurisdiction is acquired by publication and where it is necessary that the
assets of the debtor come within the courts jurisdiction to secure the same for the benefit of
creditors. The reference to all those affected by the proceedings covers creditors or such
other persons or entities holding assets belonging to the debtor under rehabilitation which
should be reflected in its audited financial statements. The banks do not hold any assets of
respondent Maynilad that would be material to the rehabilitation proceedings nor is Maynilad
liable to the banks at this point."
In essence, private respondents "Motion to Pay" is a collection suit; hence, it must be filed in
a separate proceeding and the corresponding docket fees must be paid. Too basic to require
further elucidation is the settled doctrine that a court acquires jurisdiction over a case only
upon the payment of the prescribed fees. Here, the filing of the "Motion to Pay" in the
rehabilitation court was a circumvention of the basic and indispensable requirement of
payment of docket fees.
xxxx
There is also no gainsaying that the trial court had not validly acquired jurisdiction over the
persons of petitioners. Jurisdiction over the person of a party defendant is acquired upon the
service of summons in the manner required by law or, otherwise, by his voluntary appearance.
Petitioners were not served with summons. Their appearance before the trial court cannot be
considered as voluntary appearance since the same was done precisely to question the
jurisdiction of the trial court. It is well-settled that a party who makes a special appearance in
court challenging the jurisdiction of said court based on the ground of invalidity of summons,
among others, cannot be considered to have submitted himself to the jurisdiction of the court.

In fine, the Court finds that the trial court committed grave abuse of discretion amounting to
lack or excess of jurisdiction in issuing the Order dated June 1, 2011. Grave abuse of
discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack
of jurisdiction or, in other words, where the power is exercised in an arbitrary manner by
reason of passion, prejudice, or personal hostility, and it must be so patent or gross as to
amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or
to act at all in contemplation of law.
WHEREFORE, the trial courts Order dated June 1, 2011 is declared NULL and VOID.
Respondents and all persons acting on their behalf are PERMANENTLY ENJOINED from
implementing the said Order dated June 1, 2011 and all related issuances, if any, in SP Proc.
No.06-7993.
SO ORDERED.11
SCP filed a motion for reconsideration, which the Court of Appeals denied in its 27 March
2012 Resolution.1wphi1Hence, the present petition.
The Issues
SCP raises mainly as issues that the Court of Appeals erred when it entertained respondent
insurers petition for certiorari filed under Rule 65 of the Rules of Court, and when it held that
the RTC acted with grave abuse of discretion amounting to lack or excess of jurisdiction:
FIRST REASON
THE COURT OF APPEALS ERRED WHEN, AFTER EXPRESSLY SAYING THAT "IT IS
THE MANDATE OF THE COURTTO APPLY RELEVANT DECISIONS MATERIAL TO
THERE SOLUTION OF QUESTIONS BEFORE IT", NEVERTHELESS REFUSED TO
FOLLOW AND APPLY CHINA BANKING CORPORATION VS. CEBU PRINTING AND
PACKAGING CORPORATION x x x UPON THE RESPONDENTS AND, INSTEAD,
SUSTAINED A REMEDY WHICH WAS NOT ONLY WRONG BUTAL SO COULD NOT
HAVE BEEN VALIDLY AVAILED OF BY THE RESPONDENTS FOR THE REVERSAL
AND NULLIFICATION OF THE ORDER OF THE REHABILITATION COURT OF
BATANGAS DIRECTING THE RESPONDENTS TO PAY TO THE PETITIONER THE
PROCEEDS OF INSURANCE POLICIES ISSUED BY THEM AND/OR TO REPLACE
THE COLD ROLLING MILL OF THE PETITIONER WHICH WAS LOST AS A
CONSEQUENCE OF THERISK INSURED AGAINST.
SECOND REASON
THE COURT OF APPEALS ERRED WHEN IT DID NOT CONSIDER THE STATUS OF
THE PROCEEDINGS UNDER WHICH THE REHABILITATION COURT EXERCISED
ITS JURISDICTION AND, INSTEAD, FOUND THE SAID COURT AS
WITHOUTJURISDICTION TO DIRECT THE RESPONDENTS AS INSURERS TO PAY
THE INSURANCE PROCEEDS DUE FROM THEM AND/OR REPLACE THE COLD
ROLLING MILL OF THE PETITIONER SOTHAT IT COULD CONTINUE TO
REHABILITATE ITSELF IN A MANNER AS WOULD SERVE THE POLICIES ON

CORPORATE REHABILITATION AS MANDATED BY P.D. NO. 902-A AND THE IN

TERIM RULES OF PROCEDURE ON CORPORATE REHABILITATION.12
The Courts Ruling
The petition is unmeritorious.
SCP claims that respondent insurers availed of the improper remedy when they filed with the
Court of Appeals a petition for certiorari under Rule65 of the Rules of Court, instead of a
petition for review under Rule 43.Thus, the Court of Appeals erred when it did not dismiss
respondent insurers petition, applying China Banking Corporation v. Cebu Printingand
Packaging Corporation.13
The Court disagrees. A petition for certiorari under Rule 65 is the proper remedy when the
issue raised involves errors of jurisdiction. On the other hand, a petition for review under Rule
43 is the proper remedy when the issue raised involves errors of judgment. In ABS-CBN
Broadcasting Corp. v. World Interactive Network Systems Japan Co., Ltd., 14 the Court held
that:
Proper issues that may be raised in a petition for review under Rule43 pertain to errors of fact,
law or mixed questions of fact and law. While a petition for certiorari under Rule 65 should
only limit itself to errors of jurisdiction, that is, grave abuse of discretion amounting to a lack
or excess of jurisdiction.15
In Suyat, Jr. v. Torres,16 the Court held that:
In a petition for certiorari, the jurisdiction of the court is narrow in scope. It is limited to
resolving only errors of jurisdiction. x x x Certiorari will issue only to correct errors of
jurisdiction. It is not a remedy to correct errors of judgment. An error of judgment is one in
which the court may commit in the exercise of its jurisdiction, and which error is reversible
only by appeal. Error of jurisdiction is one where the act complained was issued by the court
without or in excess of jurisdiction and which error is correctible only by the extraordinary
writ of certiorari. Certiorari will not be issued to cure errors by the trial court or quasi- judicial
body in its appreciation of the evidence of the parties, and its conclusions anchored on the said
findings, and its conclusions of law. As long as the court acts within its jurisdiction, any
alleged errors committed in the exercise of its discretion will amount to nothing more than
mere errors of judgment, correctible by an appeal or a petition for review under Rule 43 of the
Rules of Court.17
China Banking Corporation is inapplicable because the issue in that case is different from the
issue raised by respondent insurers in CA-G.R. SP No. 119760. In China Banking
Corporation, the issue involved errors of judgment. In particular, Cebu Printing and Packaging
Corporation (CPPC) questioned the rehabilitation courts findings of fact and law in its 30
April 2002 Order denying due course to the petition for corporate rehabilitation. CPPC never
questioned the rehabilitation courts jurisdiction. Since the issue involved errors of judgment,
the proper remedy, as held in China Banking Corporation, was to file a petition for review
under Rule 43. In the present case, the issue raised by respondent insurers in CA-G.R. SP No.
119760 involved errors of jurisdiction. Respondent insurers questioned the RTCs jurisdiction
over the subject matter of SCPs insurance claim and over the persons of respondent insurers.

Since the issue involved errors of jurisdiction, the proper remedy was to file a petition for
certiorari under Rule 65.
SCP claims that the RTC has jurisdiction over the subject matter of the insurance claim. Thus,
the Court of Appeals erred when it held that the RTC acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the 1 June 2011 Order.
The Court disagrees. The RTC, acting as rehabilitation court, has no jurisdiction over the
subject matter of the insurance claim of SCP against respondent insurers. SCP must file a
separate action for collection where respondent insurers can properly thresh out their defenses.
SCP cannot simply file with the RTC a motion to direct respondent insurers to pay insurance
proceeds. Section 3 of Republic Act No. 1014218 states that rehabilitation proceedings are
"summary and non-adversarial" in nature. They do not include adjudication of claims that
require full trial on the merits, like SCPs insurance claim against respondent insurers. In
Advent Capital and Finance Corporation v. Alcantara,19 the Court held that:
Ultimately, the issue is what court has jurisdiction to hear and adjudicate the conflicting
claims of the parties over the dividends that Belson held in trust for their owners. Certainly,
not the rehabilitation court which has not been given the power to resolve ownership disputes
between Advent Capital and third parties. x x x.
Advent Capital must file a separate action for collection to recover the trust fees that it
allegedly earned and, with the trial courts authorization if warranted, put the money in escrow
for payment to whoever it belongs. Having failed to collect the trust fees at the end of each
calendar quarter as stated in the contract, all it had against the Alcantaras was a claim for
payment which is proper subject for an ordinary action for collection. It cannot enforce its
money claim by simply filing a motion in the rehabilitation case for delivery of money
belonging to the Alcantaras but in the possession of a third party.
Rehabilitation proceedings are summary and non-adversarial in nature, and do not contemplate
adjudication of claims that must be threshed out in ordinary court proceedings. Adversarial
proceedings similar to that in ordinary courts are inconsistent with the commercial nature of a
rehabilitation case. The latter must be resolved quickly and expeditiously for the sake of the
corporate debtor, its creditors and other interested parties. Thus, the Interim Rules "incorporate
the concept of prohibited pleadings, affidavit evidence in lieu of oral testimony, clarificatory
hearings instead of the traditional approach of receiving evidence, and the grant of authority to
the court to decide the case, or any incident, on the basis of affidavits and documentary
evidence."
Here,
Advent Capitals claim is disputed and requires a full trial on the merits. It must be resolved in
a separate action where the Alcantaras claim and defenses may also be presented and
heard.20 (Emphases supplied)
The Court agrees with the ruling of the Court of Appeals that the jurisdiction of the
rehabilitation courts is over claims against the debtor that is under rehabilitation, not over
claims by the debtor

against its own debtors or against third parties. In its 8 February 2012 Decision, the Court of
Appeals held that:
x x x Said insurance claims cannot be considered as "claims" within the jurisdiction of the trial
court functioning as a rehabilitation court. Rehabilitation courts only have limited jurisdiction
over the claims by creditors against the distressed company, not on the claims of said
distressed company against its debtors. The interim rules define claim as referring to all claims
or demands, of whatever nature or character against a debtor or its property, whether for
money or otherwise.
Even under the new Rules of Procedure on Corporate Rehabilitation, claim is defined under
Section 1, Rule 2 as "all claims or demands of whatever nature or character against a debtor or
its property, whether for money or otherwise." This is also the definition of a claim under
Republic Act No. 10142. Section 4(c) thereof reads:
"(c) Claim shall refer to all claims or demands of whatever nature or character against the
debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed, including, but not limited to: (1) all
claims of the government, whether national or local, including taxes, tariffs and customs
duties; and (2) claims against directors and officers of the debtor arising from the acts done in
the discharge of their functions falling within the scope of their authority: Provided, That, this
inclusion does not prohibit the creditors or third parties from filing cases against the directors
and officers acting in their personal capacities."21 (Emphasis supplied)
Respondent insurers are not claiming or demanding any money or property from SCP. In other
words, respondent insurers are not creditors of SCP. Respondent insurers are contingent
debtors of SCP because they may possibly be, subject to proof during trial, liable to SCP.
Thus, the RTC has no jurisdiction over the insurance claim of SCP against respondent
insurers. SCP must file a separate action against respondent insurers to recover whatever claim
it may have against them. WHEREFORE, the petition is DENIED. The Court AFFIRMS the8
February 2012 Decision and 27 March 2012 Resolution of the Court of Appeals in CA-G.R.
SP No.119760.
SO ORDERED.

SECOND DIVISION
To Vitaliano's knowledge, except for the death of Francisco Q. Bocobo and Alfredo Torres,
there has been no other change in the above listings.cralawlibrary

[G.R. No. 170770, January 09, 2013]

VITALIANO N. AGUIRRE II AND FIDEL N. AGUIRRE, Petitioners, v. FQB+7, INC.,
NATHANIEL D. BOCOBO, PRISCILA BOCOBO AND ANTONIO DE
VILLA, Respondents.

The Complaint further alleged that, sometime in April 2004, Vitaliano discovered a General
Information Sheet (GIS) of FQB+7, dated September 6, 2002, in the Securities and Exchange
Commission (SEC) records. This GIS was filed by Francisco Q. Bocobo's heirs, Nathaniel and
Priscila, as FQB+7's president and secretary/treasurer, respectively. It also stated FQB+7's
directors and subscribers, as follows:chanroblesvirtualawlibrary

DECISION
DEL CASTILLO, J.:
Pursuant to Section 145 of the Corporation Code, an existing intra-corporate dispute, which
does not constitute a continuation of corporate business, is not affected by the subsequent
dissolution of the corporation.cralawlibrary
Before the Court is a Petition for Review on Certiorari of the June 29, 2005
Decision1rl1 of the Court of Appeals (CA) in CA-G.R. SP No. 87293, which nullified the
trial court's writ of preliminary injunction and dismissed petitioner Vitaliano N. Aguirre's
(Vitaliano) Complaint before the Regional Trial Court (RTC) for lack of jurisdiction. The
dispositive portion of the assailed Decision reads:chanroblesvirtualawlibrary
WHEREFORE, the assailed October 15, 2004 Order, as well as the October 27, 2004 Writ of
Preliminary Injunction, are SET ASIDE. With FQB+7, Inc.'s dissolution on September 29,
2003 and Case No. 04111077's ceasing to become an intra-corporate dispute, said case is
hereby ordered DISMISSED for want of jurisdiction.cralawlibrary
SO ORDERED.2rl1
Likewise assailed in this Petition is the appellate court's December 16, 2005
Resolution,3rl1 which denied a reconsideration of the assailed Decision.cralawlibrary

Directors
1. Nathaniel D. Bocobo
2. Priscila D. Bocobo
3. Fidel N. Aguirre
4. Victoriano Santos
5. Victorino Santos
6. Consolacion Santos8rl1

Subscribers
1. Nathaniel D. Bocobo
2. Priscila D. Bocobo
3. Fidel N. Aguirre
4. Victorino7rl1 Santos
5. Victorino Santos
6. Consolacion Santos9rl1

Further, the GIS reported that FQB+7's stockholders held their annual meeting on September
3, 2002.10rl1
The substantive changes found in the GIS, respecting the composition of directors and
subscribers of FQB+7, prompted Vitaliano to write to the "real" Board of Directors (the
directors reflected in the Articles of Incorporation), represented by Fidel N. Aguirre (Fidel). In
this letter11rl1 dated April 29, 2004, Vitaliano questioned the validity and truthfulness of
the alleged stockholders meeting held on September 3, 2002. He asked the "real" Board to
rectify what he perceived as erroneous entries in the GIS, and to allow him to inspect the
corporate books and records. The "real" Board allegedly ignored Vitaliano's
request.cralawlibrary
On September 27, 2004, Nathaniel, in the exercise of his power as FQB+7's president,
appointed Antonio as the corporation's attorney-in-fact, with power of administration over the
corporation's farm in Quezon Province.12rl1 Pursuant thereto, Antonio attempted to take
over the farm, but was allegedly prevented by Fidel and his men.13rl1

Factual Antecedents
On October 5, 2004, Vitaliano filed, in his individual capacity and on behalf of FQB+7, Inc.
(FQB+7), a Complaint4rl1 for intra-corporate dispute, injunction, inspection of corporate
books and records, and damages, against respondents Nathaniel D. Bocobo (Nathaniel),
Priscila D. Bocobo (Priscila), and Antonio De Villa (Antonio). The Complaint alleged that
FQB+7 was established in 1985 with the following directors and subscribers, as reflected in its
Articles of Incorporation:chanroblesvirtualawlibrary
Directors
1. Francisco Q. Bocobo
2. Fidel N. Aguirre
3. Alfredo Torres
4. Victoriano Santos
5. Victorino Santos5rl1

Subscribers
1. Francisco Q. Bocobo
2. Fidel N. Aguirre
3. Alfredo Torres
4. Victoriano Santos
5. Victorino Santos
6. Vitaliano N. Aguirre II
7. Alberto Galang
8. Rolando B. Bechayda6rl1

Characterizing Nathaniel's, Priscila's, and Antonio's continuous representation of the

corporation as a usurpation of the management powers and prerogatives of the "real" Board of
Directors, the Complaint asked for an injunction against them and for the nullification of all
their previous actions as purported directors, including the GIS they had filed with the SEC.
The Complaint also sought damages for the plaintiffs and a declaration of Vitaliano's right to
inspect the corporate records.cralawlibrary
The case, docketed as SEC Case No. 04-111077, was assigned to Branch 24 of the RTC of
Manila (Manila RTC), which was a designated special commercial court, pursuant to A.M.
No. 03-03-03-SC.14rl1
The respondents failed, despite notice, to attend the hearing on Vitaliano's application for
preliminary injunction.15rl1 Thus, in an Order16rl1 dated October 15, 2004, the trial
court granted the application based only on Vitaliano's testimonial and documentary evidence,
consisting of the corporation's articles of incorporation, by-laws, the GIS, demand letter on the
"real" Board of Directors, and police blotter of the incident between Fidel's and Antonio's
groups. On October 27, 2004, the trial court issued the writ of preliminary

injunction17rl1 after Vitaliano filed an injunction bond.cralawlibrary

The respondents filed a motion for an extension of 10 days to file the "pleadings warranted in
response to the complaint," which they received on October 6, 2004. 18rl1 The trial court
denied this motion for being a prohibited pleading under Section 8, Rule 1 of the Interim
Rules of Procedure Governing Intra-corporate Controversies under Republic Act (R.A.) No.
8799.19rl1
The respondents filed a Petition for Certiorari and Prohibition,20rl1 docketed as CA-G.R.
SP No. 87293, before the CA. They later amended their Petition by impleading Fidel, who
allegedly shares Vitaliano's interest in keeping them out of the corporation, as a private
respondent therein.21rl1
The respondents sought, in their certiorari petition, the annulment of all the proceedings and
issuances in SEC Case No. 04-11107722rl1 on the ground that Branch 24 of the Manila
RTC has no jurisdiction over the subject matter, which they defined as being an agrarian
dispute.23rl1 They theorized that Vitaliano's real goal in filing the Complaint was to
maintain custody of the corporate farm in Quezon Province. Since this land is agricultural in
nature, they claimed that jurisdiction belongs to the Department of Agrarian Reform (DAR),
not to the Manila RTC.24rl1 They also raised the grounds of improper venue (alleging that
the real corporate address is different from that stated in the Articles of
Incorporation)25rl1 and forum-shopping26rl1 (there being a pending case between the
parties before the DAR regarding the inclusion of the corporate property in the agrarian reform
program).27rl1Respondents also raised their defenses to Vitaliano's suit, particularly the
alleged disloyalty and fraud committed by the "real" Board of Directors,28rl1 and
respondents' "preferential right to possess the corporate property" as the heirs of the majority
stockholder Francisco Q. Bocobo.29rl1
The respondents further informed the CA that the SEC had already revoked FQB+7's
Certificate of Registration on September 29, 2003 for its failure to comply with the SEC
reportorial requirements.30rl1 The CA determined that the corporation's dissolution was a
conclusive fact after petitioners Vitaliano and Fidel failed to dispute this factual
assertion.31rl1
Ruling of the Court of Appeals
The CA determined that the issues of the case are the following: (1) whether the trial court's
issuance of the writ of preliminary injunction, in its October 15, 2004 Order, was attended by
grave abuse of discretion amounting to lack of jurisdiction; and (2) whether the corporation's
dissolution affected the trial court's jurisdiction to hear the intracorporate dispute in SEC Case
No. 04-111077.32rl1
On the first issue, the CA determined that the trial court committed a grave abuse of discretion
when it issued the writ of preliminary injunction to remove the respondents from their
positions in the Board of Directors based only on Vitaliano's self-serving and empty
assertions. Such assertions cannot outweigh the entries in the GIS, which are documented facts
on record, which state that respondents are stockholders and were duly elected corporate
directors and officers of FQB+7, Inc. The CA held that Vitaliano only proved a future right in
case he wins the suit. Since an injunction is not a remedy to protect future, contingent or
abstract rights, then Vitaliano is not entitled to a writ.33rl1
Further, the CA disapproved the discrepancy between the trial court's October 15, 2004 Order,

which granted the application for preliminary injunction, and its writ dated October 27, 2004.
The Order enjoined all the respondents "from entering, occupying, or taking over possession
of the farm ownedby Atty. Vitaliano Aguirre II," while the writ states that the subject farm is
"owned by plaintiff corporation located in Mulanay, Quezon Province." The CA held that this
discrepancy imbued the October 15, 2004 Order with jurisdictional infirmity. 34rl1
On the second issue, the CA postulated that Section 122 of the Corporation Code allows a
dissolved corporation to continue as a body corporate for the limited purpose of liquidating the
corporate assets and distributing them to its creditors, stockholders, and others in interest. It
does not allow the dissolved corporation to continue its business. That being the state of the
law, the CA determined that Vitaliano's Complaint, being geared towards the continuation of
FQB+7, Inc.'s business, should be dismissed because the corporation has lost its juridical
personality.35rl1 Moreover, the CA held that the trial court does not have jurisdiction to
entertain an intra-corporate dispute when the corporation is already dissolved.36rl1
After dismissing the Complaint, the CA reminded the parties that they should proceed with the
liquidation of the dissolved corporation based on the existing GIS,
thus:chanroblesvirtualawlibrary
With SEC's revocation of its certificate of registration on September 29, 2004 [sic], FQB+7,
Inc. will be obligated to wind up its affairs. The Corporation will have to be liquidated within
the 3-year period mandated by Sec. 122 of the Corporation Code.cralawlibrary
Regardless of the method it will opt to liquidate itself, the Corporation will have to reckon
with the members of the board as duly listed in the General Information Sheet last filed with
SEC. Necessarily, and as admitted in the complaint below, the following as listed in the
Corporation's General Information Sheet dated September 6, 2002, will have to continue
acting as Members of the Board of FQB+7, Inc. viz:
x x x x37rl1
Herein petitioners filed a Motion for Reconsideration.38rl1 They argued that the CA erred
in ruling that the October 15, 2004 Order was inconsistent with the writ. They explained that
pages 2 and 3 of the said Order were interchanged in the CA's records, which then misled the
CA to its erroneous conclusion. They also posited that the original sentence in the correct
Order reads: "All defendants are further enjoined from entering, occupying or taking over
possession of the farm owned by plaintiff corporation located in Mulanay, Quezon." This
sentence is in accord with what is ordered in the writ, hence the CA erred in nullifying the
Order.cralawlibrary
On the second issue, herein petitioners maintained that the CA erred in characterizing the
reliefs they sought as a continuance of the dissolved corporation's business, which is
prohibited under Section 122 of the Corporation Code. Instead, they argued, the relief they
seek is only to determine the real Board of Directors that can represent the dissolved
corporation.cralawlibrary
The CA denied the Motion for Reconsideration in its December 16, 2005
Resolution.39rl1 It determined that the crucial issue is the trial court's jurisdiction over an
intra-corporate dispute involving a dissolved corporation.40rl1 Based on the prayers in the
Complaint, petitioners seek a determination of the real Board that can take over the
management of the corporation's farm, not to sit as a liquidation Board. Thus, contrary to

petitioners' claims, their Complaint is not geared towards liquidation but a continuance of the
corporation's business.cralawlibrary
Issues
1. Whether the CA erred in annulling the October 15, 2004 Order based on interchanged
pages.cralawlibrary
2. Whether the Complaint seeks to continue the dissolved corporation's business.cralawlibrary
3. Whether the RTC has jurisdiction over an intra-corporate dispute involving a dissolved
corporation.cralawlibrary
Our Ruling
The Petition is partly meritorious.cralawlibrary

xxxx
Upon learning of the corporation's dissolution by revocation of its corporate franchise, the CA
held that the intra-corporate Complaint, which aims to continue the corporation's business,
must now be dismissed under Section 122.cralawlibrary
Petitioners concede that a dissolved corporation can no longer continue its business. They
argue, however, that Section 122 allows a dissolved corporation to wind up its affairs within 3
years from its dissolution. Petitioners then maintain that the Complaint, which seeks only a
declaration that respondents are strangers to the corporation and have no right to sit in the
board or act as officers thereof, and a return of Vitaliano's stockholdings, intends only to
resolve remaining corporate issues. The resolution of these issues is allegedly part of corporate
winding up.cralawlibrary
Does the Complaint seek a continuation of business or is it a settlement of corporate affairs?
The answer lies in the prayers of the Complaint, which state:chanroblesvirtualawlibrary

On the nullification of the Order of

preliminary injunction.
Petitioners reiterate their argument that the CA was misled by the interchanged pages in the
October 15, 2004 Order. They posit that had the CA read the Order in its correct sequence, it
would not have nullified the Order on the ground that it was issued with grave abuse of
discretion amounting to lack of jurisdiction.41rl1

PRAYER
WHEREFORE, it is most respectfully prayed of this Honorable Court that judgment be
rendered in favor of the plaintiffs and against the defendants, in the following wise:
I.

Petitioners' argument fails to impress. The CA did not nullify the October 15, 2004 Order
merely because of the interchanged pages. Instead, the CA determined that the applicant,
Vitaliano, was not able to show that he had an actual and existing right that had to be protected
by a preliminary injunction. The most that Vitaliano was able to prove was a future right based
on his victory in the suit. Contrasting this future right of Vitaliano with respondents' existing
right under the GIS, the CA determined that the trial court should not have disturbed the status
quo. The CA's discussion regarding the interchanged pages was made only in addition to its
above ratiocination. Thus, whether the pages were interchanged or not will not affect the CA's
main finding that the trial court issued the Order despite the absence of a clear and existing
right in favor of the applicant, which is tantamount to grave abuse of discretion. We cannot
disturb the CA's finding on this score without any showing by petitioners of strong basis to
warrant the reversal.cralawlibrary
Is the Complaint a continuation of business?
Section 122 of the Corporation Code prohibits a dissolved corporation from continuing its
business, but allows it to continue with a limited personality in order to settle and close its
affairs, including its complete liquidation, thus:chanroblesvirtualawlibrary
Sec. 122. Corporate liquidation. - Every corporation whose charter expires by its own
limitation or is annulled by forfeiture or otherwise, or whose corporate existence for other
purposes is terminated in any other manner, shall nevertheless be continued as a body
corporate for three (3) years after the time when it would have been so dissolved, for the
purpose of prosecuting and defending suits by or against it and enabling it to settle and close
its affairs, to dispose of and convey its property and to distribute its assets, but not for the
purpose of continuing the business for which it was established.

II.

ON THE PRAYER OF TRO/STATUS QUO ORDER AND WRIT OF

PRELIMINARY INJUNCTION:
1.

Forthwith and pending the resolution of plaintiffs' prayer for issuance of

writ of preliminary injunction, in order to maintain the status quo, a status
quo order or temporary restraining order (TRO) be issued enjoining the
defendants, their officers, employees, and agents from exercising the
powers and authority as members of the Board of Directors of plaintiff
FQB as well as officers thereof and from misrepresenting and conducting
themselves as such, and enjoining defendant Antonio de Villa from taking
over the farm of the plaintiff FQB and from exercising any power and
authority by reason of his appointment emanating from his co-defendant
Bocobos.cralawlibrary

2.

After due notice and hearing and during the pendency of this action, to
issue writ of preliminary injunction prohibiting the defendants from
committing the acts complained of herein, more particularly those
enumerated in the immediately pr[e]ceeding paragraph, and making the
injunction permanent after trial on the merits.

ON THE MERITS
After trial, judgment be rendered in favor of the plaintiffs and against the
defendants, as follows:

1.

Declaring defendant Bocobos as without any power and authority to

represent or conduct themselves as members of the Board of Directors of
plaintiff FQB, or as officers thereof.cralawlibrary

2.

Declaring that Vitaliano N. Aguirre II is a stockholder of plaintiff FQB

owning fifty (50) shares of stock thereof.cralawlibrary

3.

Allowing Vitaliano N. Aguirre II to inspect books and records of the

company.cralawlibrary

4.

Annulling the GIS, Annex "C" of the Complaint as fraudulent and illegally
executed and filed.cralawlibrary

5.

Ordering the defendants to pay jointly and solidarily the sum of at least
P200,000.00 as moral damages; at least P100,000.00 as exemplary
damages; and at least P100,000.00 as and for attorney's fees and other
litigation expenses.

impaired either by the subsequent dissolution of said corporation or by any subsequent

amendment or repeal of this Code or of any part thereof. (Emphases supplied.)
On the dismissal of the Complaint for
lack of jurisdiction.
The CA held that the trial court does not have jurisdiction over an intra-corporate dispute
involving a dissolved corporation. It further held that due to the corporation's dissolution, the
qualifications of the respondents can no longer be questioned and that the dissolved
corporation must now commence liquidation proceedings with the respondents as its directors
and officers.cralawlibrary
The CA's ruling is founded on the assumptions that intra-corporate controversies continue
only in existing corporations; that when the corporation is dissolved, these controversies cease
to be intra-corporate and need no longer be resolved; and that the status quo in the corporation
at the time of its dissolution must be maintained. The Court finds no basis for the said
assumptions.cralawlibrary
Intra-corporate disputes remain even
when the corporation is dissolved.

Plaintiffs further pray for costs and such other relief just and equitable under the
premises.42rl1
The Court fails to find in the prayers above any intention to continue the corporate business of
FQB+7. The Complaint does not seek to enter into contracts, issue new stocks, acquire
properties, execute business transactions, etc. Its aim is not to continue the corporate business,
but to determine and vindicate an alleged stockholder's right to the return of his stockholdings
and to participate in the election of directors, and a corporation's right to remove usurpers and
strangers from its affairs. The Court fails to see how the resolution of these issues can be said
to continue the business of FQB+7.cralawlibrary

Jurisdiction over the subject matter is conferred by law. R.A. No. 879945rl1 conferred
jurisdiction over intra-corporate controversies on courts of general jurisdiction or
RTCs,46rl1 to be designated by the Supreme Court. Thus, as long as the nature of the
controversy is intra-corporate, the designated RTCs have the authority to exercise jurisdiction
over such cases.cralawlibrary
So what are intra-corporate controversies? R.A. No. 8799 refers to Section 5 of Presidential
Decree (P.D.) No. 902-A (or The SEC Reorganization Act) for a description of such
controversies:chanroblesvirtualawlibrary

Neither are these issues mooted by the dissolution of the corporation. A corporation's board of
directors is not rendered functus officio by its dissolution. Since Section 122 allows a
corporation to continue its existence for a limited purpose, necessarily there must be a board
that will continue acting for and on behalf of the dissolved corporation for that purpose. In
fact, Section 122 authorizes the dissolved corporation's board of directors to conduct its
liquidation within three years from its dissolution. Jurisprudence has even recognized the
board's authority to act as trustee for persons in interest beyond the said three-year
period.43rl1 Thus, the determination of which group is the bona fide or rightful board of
the dissolved corporation will still provide practical relief to the parties
involved.cralawlibrary

a) Devices or schemes employed by or any acts, of the board of directors, business

associates, its officers or partners, amounting to fraud and misrepresentation which may be
detrimental to the interest of the public and/or of the stockholder, partners, members of
associations or organizations registered with the Commission;

The same is true with regard to Vitaliano's shareholdings in the dissolved corporation. A
party's stockholdings in a corporation, whether existing or dissolved, is a property
right44rl1 which he may vindicate against another party who has deprived him thereof.
The corporation's dissolution does not extinguish such property right. Section 145 of the
Corporation Code ensures the protection of this right, thus:chanroblesvirtualawlibrary

c) Controversies in the election or appointments of directors, trustees, officers or managers of

such corporations, partnerships or associations.

Sec. 145. Amendment or repeal. No right or remedy in favor of or against any corporation,
its stockholders, members, directors, trustees, or officers, nor any liability incurred by any
such corporation, stockholders, members, directors, trustees, or officers, shall be removed or

SECTION 1. (a) Cases Covered These Rules shall govern the procedure to be observed in
civil cases involving the following:

b) Controversies arising out of intra-corporate or partnership relations, between and among

stockholders, members, or associates; between any or all of them and the corporation,
partnership or association of which they are stockholders, members or associates, respectively;
and between such corporation, partnership or association and the state insofar as it concerns
their individual franchise or right to exist as such entity;

The Court reproduced the above jurisdiction in Rule 1 of the Interim Rules of Procedure
Governing Intra-corporate Controversies under R.A. No. 8799:chanroblesvirtualawlibrary

(1) Devices or schemes employed by, or any act of, the board of directors, business associates,
officers or partners, amounting to fraud or misrepresentation which may be detrimental to the
interest of the public and/or of the stockholders, partners, or members of any corporation,
partnership, or association;
(2) Controversies arising out of intra-corporate, partnership, or association relations, between
and among stockholders, members, or associates; and between, any or all of them and the
corporation, partnership, or association of which they are stockholders, members, or
associates, respectively;
(3) Controversies in the election or appointment of directors, trustees, officers, or managers of
corporations, partnerships, or associations;
(4) Derivative suits; and
(5) Inspection of corporate books.
Meanwhile, jurisprudence has elaborated on the above definitions by providing tests in
determining whether a controversy is intra-corporate. Reyes v. Regional Trial Court of Makati,
Br. 14247rl1 contains a comprehensive discussion of these two tests,
thus:chanroblesvirtualawlibrary
A review of relevant jurisprudence shows a development in the Court's approach in classifying
what constitutes an intra-corporate controversy. Initially, the main consideration in
determining whether a dispute constitutes an intra-corporate controversy was limited to a
consideration of the intra-corporate relationship existing between or among the parties. The
types of relationships embraced under Section 5(b) x x x were as follows:
a) between the corporation, partnership, or association and the public;
b) between the corporation, partnership, or association and its stockholders, partners,
members, or officers;
c) between the corporation, partnership, or association and the State as far as its franchise,
permit or license to operate is concerned; and
d) among the stockholders, partners or associates themselves. xxx
The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction
to the SEC [now the RTC], regardless of the subject matter of the dispute. This came to be
known as the relationship test.cralawlibrary
However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc., the
Court introduced the nature of the controversy test. We declared in this case that it is not the
mere existence of an intra-corporate relationship that gives rise to an intra-corporate
controversy; to rely on the relationship test alone will divest the regular courts of their
jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or
stockholders. We saw that there is no legal sense in disregarding or minimizing the value of
the nature of the transactions which gives rise to the dispute.cralawlibrary
Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intra-

corporate. The controversy must not only be rooted in the existence of an intra-corporate
relationship, but must as well pertain to the enforcement of the parties' correlative rights
and obligations under the Corporation Code and the internal and intra-corporate
regulatory rules of the corporation. If the relationship and its incidents are merely incidental
to the controversy or if there will still be conflict even if the relationship does not exist, then
no intra-corporate controversy exists.cralawlibrary
The Court then combined the two tests and declared that jurisdiction should be
determined by considering not only the status or relationship of the parties, but also the
nature of the question under controversy. This two-tier test was adopted in the recent case
of Speed Distribution, Inc. v. Court of Appeals:chanroblesvirtualawlibrary
'To determine whether a case involves an intra-corporate controversy, and is to be heard and
decided by the branches of the RTC specifically designated by the Court to try and decide
such cases, two elements must concur: (a) the status or relationship of the parties, and [b]
the nature of the question that is the subject of their controversy.cralawlibrary
The first element requires that the controversy must arise out of intra-corporate or
partnership relations between any or all of the parties and the corporation, partnership, or
association of which they are stockholders, members or associates, between any or all of them
and the corporation, partnership or association of which they are stockholders, members or
associates, respectively; and between such corporation, partnership, or association and the
State insofar as it concerns the individual franchises. The second element requires that the
dispute among the parties be intrinsically connected with the regulation of the
corporation. If the nature of the controversy involves matters that are purely civil in
character, necessarily, the case does not involve an intra-corporate controversy.' (Citations and
some emphases omitted; emphases supplied.)
Thus, to be considered as an intra-corporate dispute, the case: (a) must arise out of intracorporate or partnership relations, and (b) the nature of the question subject of the controversy
must be such that it is intrinsically connected with the regulation of the corporation or the
enforcement of the parties' rights and obligations under the Corporation Code and the internal
regulatory rules of the corporation. So long as these two criteria are satisfied, the dispute is
intra-corporate and the RTC, acting as a special commercial court, has jurisdiction over
it.cralawlibrary
Examining the case before us in relation to these two criteria, the Court finds and so holds that
the case is essentially an intra-corporate dispute. It obviously arose from the intra-corporate
relations between the parties, and the questions involved pertain to their rights and obligations
under the Corporation Code and matters relating to the regulation of the corporation. We
further hold that the nature of the case as an intra-corporate dispute was not affected by the
subsequent dissolution of the corporation.cralawlibrary
It bears reiterating that Section 145 of the Corporation Code protects, among others, the rights
and remedies of corporate actors against other corporate actors. The statutory provision
assures an aggrieved party that the corporation's dissolution will not impair, much less
remove, his/her rights or remedies against the corporation, its stockholders, directors or
officers. It also states that corporate dissolution will not extinguish any liability already
incurred by the corporation, its stockholders, directors, or officers. In short, Section 145
preserves a corporate actor's cause of action and remedy against another corporate actor. In so
doing, Section 145 also preserves the nature of the controversy between the parties as an intracorporate dispute.cralawlibrary

The dissolution of the corporation simply prohibits it from continuing its business. However,
despite such dissolution, the parties involved in the litigation are still corporate actors. The
dissolution does not automatically convert the parties into total strangers or change their intracorporate relationships. Neither does it change or terminate existing causes of action, which
arose because of the corporate ties between the parties. Thus, a cause of action involving an
intra-corporate controversy remains and must be filed as an intra-corporate dispute despite the
subsequent dissolution of the corporation.cralawlibrary
WHEREFORE, premises considered, the Petition for Review on Certiorari is PARTIALLY
GRANTED. The assailed June 29, 2005 Decision of the Court of Appeals in CA-G.R. SP No.
87293, as well as its December 16, 2005 Resolution, are ANNULLED with respect to their
dismissal of SEC Case No. 04-111077 on the ground of lack of jurisdiction. The said case is
ordered REINSTATED before Branch 24 of the Regional Trial Court of Manila. The rest of
the assailed issuances are AFFIRMED.
SO ORDERED.

G.R. No. 165744

August 11, 2008

OSCAR C. REYES, petitioner,

vs.
HON. REGIONAL TRIAL COURT OF MAKATI, Branch 142, ZENITH INSURANCE
CORPORATION, and RODRIGO C. REYES, respondents.
DECISION
BRION, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside
the Decision of the Court of Appeals (CA)1 promulgated on May 26, 2004 in CA-G.R. SP No.
74970. The CA Decision affirmed the Order of the Regional Trial Court (RTC), Branch 142,
Makati City dated November 29, 20022 in Civil Case No. 00-1553 (entitled "Accounting of
All Corporate Funds and Assets, and Damages") which denied petitioner Oscar C. Reyes
(Oscar) Motion to Declare Complaint as Nuisance or Harassment Suit.
BACKGROUND FACTS
Oscar and private respondent Rodrigo C. Reyes (Rodrigo) are two of the four children of the
spouses Pedro and Anastacia Reyes. Pedro, Anastacia, Oscar, and Rodrigo each owned shares
of stock of Zenith Insurance Corporation (Zenith), a domestic corporation established by their
family. Pedro died in 1964, while Anastacia died in 1993. Although Pedros estate was
judicially partitioned among his heirs sometime in the 1970s, no similar settlement and
partition appear to have been made with Anastacias estate, which included her shareholdings
in Zenith. As of June 30, 1990, Anastacia owned 136,598 shares of Zenith; Oscar and Rodrigo
owned 8,715,637 and 4,250 shares, respectively.3
On May 9, 2000, Zenith and Rodrigo filed a complaint 4 with the Securities and Exchange
Commission (SEC) against Oscar, docketed as SEC Case No. 05-00-6615. The complaint
stated that it is "a derivative suit initiated and filed by the complainant Rodrigo C. Reyes to
obtain an accounting of the funds and assets of ZENITH INSURANCE
CORPORATION which are now or formerly in the control, custody, and/or possession of
respondent [herein petitioner Oscar] and to determine the shares of stock of deceased
spouses Pedro and Anastacia Reyes that were arbitrarily and fraudulently appropriated [by
Oscar] for himself [and] which were not collated and taken into account in the partition,
distribution, and/or settlement of the estate of the deceased spouses, for which he should be
ordered to account for all the income from the time he took these shares of stock, and should
now deliver to his brothers and sisters their just and respective shares."5 [Emphasis supplied.]
In his Answer with Counterclaim,6 Oscar denied the charge that he illegally acquired the
shares of Anastacia Reyes. He asserted, as a defense, that he purchased the subject shares with
his own funds from the unissued stocks of Zenith, and that the suit is not a bona fide derivative
suit because the requisites therefor have not been complied with. He thus questioned the
SECs jurisdiction to entertain the complaint because it pertains to the settlement of the estate
of Anastacia Reyes.

When Republic Act (R.A.) No. 87997 took effect, the SECs exclusive and original jurisdiction
over cases enumerated in Section 5 of Presidential Decree (P.D.) No. 902-A was transferred to
the RTC designated as a special commercial court.8 The records of Rodrigos SEC case were
thus turned over to the RTC, Branch 142, Makati, and docketed as Civil Case No. 00-1553.
On October 22, 2002, Oscar filed a Motion to Declare Complaint as Nuisance or Harassment
Suit.9 He claimed that the complaint is a mere nuisance or harassment suit and should,
according to the Interim Rules of Procedure for Intra-Corporate Controversies, be dismissed;
and that it is not a bona fidederivative suit as it partakes of the nature of a petition for the
settlement of estate of the deceased Anastacia that is outside the jurisdiction of a special
commercial court. The RTC, in its Order dated November 29, 2002 (RTC Order), denied the
motion in part and declared:
A close reading of the Complaint disclosed the presence of two (2) causes of action,
namely: a) a derivative suit for accounting of the funds and assets of the corporation
which are in the control, custody, and/or possession of the respondent [herein
petitioner Oscar] with prayer to appoint a management committee; and b) an action
for determination of the shares of stock of deceased spouses Pedro and Anastacia
Reyes allegedly taken by respondent, its accounting and the corresponding delivery
of these shares to the parties brothers and sisters. The latter is not a derivative suit
and should properly be threshed out in a petition for settlement of estate.
Accordingly, the motion is denied. However, only the derivative suit consisting of
the first cause of action will be taken cognizance of by this Court. 10
Oscar thereupon went to the CA on a petition for certiorari, prohibition, and mandamus11 and
prayed that the RTC Order be annulled and set aside and that the trial court be prohibited from
continuing with the proceedings. The appellate court affirmed the RTC Order and denied the
petition in its Decision dated May 26, 2004. It likewise denied Oscars motion for
reconsideration in a Resolution dated October 21, 2004.
Petitioner now comes before us on appeal through a petition for review on certiorari under
Rule 45 of the Rules of Court.
ASSIGNMENT OF ERRORS
Petitioner Oscar presents the following points as conclusions the CA should have made:
1. that the complaint is a mere nuisance or harassment suit that should be dismissed under the
Interim Rules of Procedure of Intra-Corporate Controversies; and
2. that the complaint is not a bona fide derivative suit but is in fact in the nature of a petition
for settlement of estate; hence, it is outside the jurisdiction of the RTC acting as a special
commercial court.
Accordingly, he prays for the setting aside and annulment of the CA decision and resolution,
and the dismissal of Rodrigos complaint before the RTC.

THE COURTS RULING

devices or schemes that amount to fraud or misrepresentation detrimental to the public and/or
to the stockholders.

We find the petition meritorious.

The core question for our determination is whether the trial court, sitting as a special
commercial court, has jurisdiction over the subject matter of Rodrigos complaint. To resolve
it, we rely on the judicial principle that "jurisdiction over the subject matter of a case is
conferred by law and is determined by the allegations of the complaint, irrespective of whether
the plaintiff is entitled to all or some of the claims asserted therein."12
JURISDICTION OF SPECIAL COMMERCIAL COURTS
P.D. No. 902-A enumerates the cases over which the SEC (now the RTC acting as a special
commercial court) exercises exclusive jurisdiction:
SECTION 5. In addition to the regulatory and adjudicative functions of the
Securities and Exchange Commission over corporations, partnership, and other
forms of associations registered with it as expressly granted under existing laws and
decrees, it shall have original and exclusive jurisdiction to hear and decide cases
involving:
a) Devices or schemes employed by or any acts of the board of directors,
business associates, its officers or partners, amounting to fraud and
misrepresentation which may be detrimental to the interest of the public
and/or of the stockholders, partners, members of associations or
organizations registered with the Commission.
b) Controversies arising out of intra-corporate or partnership relations,
between and among stockholders, members, or associates; between any or
all of them and the corporation, partnership or association of which they
are stockholders, members, or associates, respectively; and between such
corporation, partnership or association and the State insofar as it concerns
their individual franchise or right to exist as such entity; and
c) Controversies in the election or appointment of directors, trustees,
officers, or managers of such corporations, partnerships, or associations.
The allegations set forth in Rodrigos complaint principally invoke Section 5, paragraphs (a)
and (b) above as basis for the exercise of the RTCs special court jurisdiction. Our focus in
examining the allegations of the complaint shall therefore be on these two provisions.
Fraudulent Devices and Schemes
The rule is that a complaint must contain a plain, concise, and direct statement of the ultimate
facts constituting the plaintiffs cause of action and must specify the relief sought. 13 Section 5,
Rule 8 of the Revised Rules of Court provides that in all averments of fraud or mistake, the
circumstances constituting fraud or mistake must be stated with particularity.14 These
rules find specific application to Section 5(a) of P.D. No. 902-A which speaks of corporate

In an attempt to hold Oscar responsible for corporate fraud, Rodrigo alleged in the complaint
the following:
3. This is a complaintto determine the shares of stock of the deceased spouses
Pedro and Anastacia Reyes that were arbitrarily and fraudulently
appropriated for himself [herein petitioner Oscar] which were not collated and
taken into account in the partition, distribution, and/or settlement of the estate of the
deceased Spouses Pedro and Anastacia Reyes, for which he should be ordered to
account for all the income from the time he took these shares of stock, and should
now deliver to his brothers and sisters their just and respective shares with the
corresponding equivalent amount of P7,099,934.82 plus interest thereon from 1978
representing his obligations to the Associated Citizens Bank that was paid for his
account by his late mother, Anastacia C. Reyes. This amount was not collated or
taken into account in the partition or distribution of the estate of their late mother,
Anastacia C. Reyes.
3.1. Respondent Oscar C. Reyes, through other schemes of fraud including
misrepresentation, unilaterally, and for his own benefit, capriciously
transferred and took possession and control of the management of Zenith
Insurance Corporation which is considered as a family corporation, and other
properties and businesses belonging to Spouses Pedro and Anastacia Reyes.
xxxx
4.1. During the increase of capitalization of Zenith Insurance Corporation, sometime
in 1968, the property covered by TCT No. 225324 was illegally and fraudulently
used by respondent as a collateral.
xxxx
5. The complainant Rodrigo C. Reyes discovered that by some manipulative
scheme, the shareholdings of their deceased mother, Doa Anastacia C. Reyes,
shares of stocks and [sic] valued in the corporate books at P7,699,934.28, more
or less, excluding interest and/or dividends, had been transferred solely in the
name of respondent. By such fraudulent manipulations and misrepresentation, the
shareholdings of said respondent Oscar C. Reyes abruptly increased to
P8,715,637.00 [sic] and becomes [sic] the majority stockholder of Zenith Insurance
Corporation, which portion of said shares must be distributed equally amongst the
brothers and sisters of the respondent Oscar C. Reyes including the complainant
herein.
xxxx
9.1 The shareholdings of deceased Spouses Pedro Reyes and Anastacia C. Reyes
valued at P7,099,934.28 were illegally and fraudulently transferred solely to the
respondents [herein petitioner Oscar] name and installed himself as a majority

stockholder of Zenith Insurance Corporation [and] thereby deprived his brothers

and sisters of their respective equal shares thereof including complainant hereto.
xxxx
10.1 By refusal of the respondent to account of his [sic] shareholdings in the
company, he illegally and fraudulently transferred solely in his name wherein
[sic] the shares of stock of the deceased Anastacia C. Reyes [which] must be
properly collated and/or distributed equally amongst the children, including
the complainant Rodrigo C. Reyes herein, to their damage and prejudice.
xxxx
11.1 By continuous refusal of the respondent to account of his [sic] shareholding
with Zenith Insurance Corporation[,] particularly the number of shares of stocks
illegally and fraudulently transferred to him from their deceased parents Sps. Pedro
and Anastacia Reyes[,] which are all subject for collation and/or partition in equal
shares among their children. [Emphasis supplied.]
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are largely
conclusions of law that, without supporting statements of the facts to which the allegations of
fraud refer, do not sufficiently state an effective cause of action. 15 The late Justice Jose Feria, a
noted authority in Remedial Law, declared that fraud and mistake are required to be averred
with particularity in order to enable the opposing party to controvert the particular facts
allegedly constituting such fraud or mistake.16
Tested against these standards, we find that the charges of fraud against Oscar were not
properly supported by the required factual allegations. While the complaint contained
allegations of fraud purportedly committed by him, these allegations are not particular enough
to bring the controversy within the special commercial courts jurisdiction; they are not
statements of ultimate facts, but are mere conclusions of law: how and why the alleged
appropriation of shares can be characterized as "illegal and fraudulent" were not explained nor
elaborated on.
Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers
will bring the case within the special commercial courts jurisdiction. To fall within this
jurisdiction, there must be sufficient nexus showing that the corporations nature, structure, or
powers were used to facilitate the fraudulent device or scheme. Contrary to this concept, the
complaint presented a reverse situation. No corporate power or office was alleged to have
facilitated the transfer of the shares; rather, Oscar, as an individual and without reference to
his corporate personality, was alleged to have transferred the shares of Anastacia to his name,
allowing him to become the majority and controlling stockholder of Zenith, and eventually,
the corporations President. This is the essence of the complaint read as a whole and is
particularly demonstrated under the following allegations:
5. The complainant Rodrigo C. Reyes discovered that by some manipulative
scheme, the shareholdings of their deceased mother, Doa Anastacia C. Reyes,
shares of stocks and [sic] valued in the corporate books at P7,699,934.28, more or
less, excluding interest and/or dividends, had been transferred solely in the name of

respondent. By such fraudulent manipulations and misrepresentation, the

shareholdings of said respondent Oscar C. Reyes abruptly increased to
P8,715,637.00 [sic] and becomes [sic] the majority stockholder of Zenith
Insurance Corporation, which portion of said shares must be distributed equally
amongst the brothers and sisters of the respondent Oscar C. Reyes including the
complainant herein.
xxxx
9.1 The shareholdings of deceased Spouses Pedro Reyes and Anastacia C.
Reyes valued at P7,099,934.28 were illegally and fraudulently transferred solely
to the respondents [herein petitioner Oscar] name and installed himself as a
majority stockholder of Zenith Insurance Corporation [and] thereby deprived his
brothers and sisters of their respective equal shares thereof including complainant
hereto. [Emphasis supplied.]
In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a
ground for dismissal since such defect can be cured by a bill of particulars. In cases governed
by the Interim Rules of Procedure on Intra-Corporate Controversies, however, a bill of
particulars is a prohibited pleading.17 It is essential, therefore, for the complaint to show on its
face what are claimed to be the fraudulent corporate acts if the complainant wishes to invoke
the courts special commercial jurisdiction.
We note that twice in the course of this case, Rodrigo had been given the opportunity to study
the propriety of amending or withdrawing the complaint, but he consistently refused. The
courts function in resolving issues of jurisdiction is limited to the review of the allegations of
the complaint and, on the basis of these allegations, to the determination of whether they are of
such nature and subject that they fall within the terms of the law defining the courts
jurisdiction. Regretfully, we cannot read into the complaint any specifically alleged corporate
fraud that will call for the exercise of the courts special commercial jurisdiction. Thus, we
cannot affirm the RTCs assumption of jurisdiction over Rodrigos complaint on the basis of
Section 5(a) of P.D. No. 902-A.18
Intra-Corporate Controversy
A review of relevant jurisprudence shows a development in the Courts approach in
classifying what constitutes an intra-corporate controversy. Initially, the main consideration in
determining whether a dispute constitutes an intra-corporate controversy was limited to a
consideration of the intra-corporate relationship existing between or among the parties.19 The
types of relationships embraced under Section 5(b), as declared in the case of Union Glass &
Container Corp. v. SEC,20 were as follows:
a) between the corporation, partnership, or association and the public;
b) between the corporation, partnership, or association and its stockholders, partners,
members, or officers;
c) between the corporation, partnership, or association and the State as far as its
franchise, permit or license to operate is concerned; and

d) among the stockholders, partners, or associates themselves. [Emphasis

supplied.]
The existence of any of the above intra-corporate relations was sufficient to confer jurisdiction
to the SEC, regardless of the subject matter of the dispute. This came to be known as
the relationship test.

Application of the Relationship Test

Is there an intra-corporate relationship between the parties that would characterize the case as
an intra-corporate dispute?

However, in the 1984 case of DMRC Enterprises v. Esta del Sol Mountain Reserve, Inc.,21 the
Court introduced the nature of the controversy test. We declared in this case that it is not the
mere existence of an intra-corporate relationship that gives rise to an intra-corporate
controversy; to rely on the relationship test alone will divest the regular courts of their
jurisdiction for the sole reason that the dispute involves a corporation, its directors, officers, or
stockholders. We saw that there is no legal sense in disregarding or minimizing the value of
the nature of the transactions which gives rise to the dispute.

We point out at the outset that while Rodrigo holds shares of stock in Zenith, he holds them in
two capacities: in his own right with respect to the 4,250 shares registered in his name, and as
one of the heirs of Anastacia Reyes with respect to the 136,598 shares registered in her name.
What is material in resolving the issues of this case under the allegations of the complaint is
Rodrigos interest as an heirsince the subject matter of the present controversy centers on the
shares of stocks belonging to Anastacia, not on Rodrigos personally-owned shares nor on his
personality as shareholder owning these shares. In this light, all reference to shares of stocks in
this case shall pertain to the shareholdings of the deceased Anastacia and the parties interest
therein as her heirs.

Under the nature of the controversy test, the incidents of that relationship must also be
considered for the purpose of ascertaining whether the controversy itself is intracorporate.22 The controversy must not only be rooted in the existence of an intra-corporate
relationship, but must as well pertain to the enforcement of the parties correlative rights and
obligations under the Corporation Code and the internal and intra-corporate regulatory rules of
the corporation. If the relationship and its incidents are merely incidental to the controversy or
if there will still be conflict even if the relationship does not exist, then no intra-corporate
controversy exists.

Article 777 of the Civil Code declares that the successional rights are transmitted from the
moment of death of the decedent. Accordingly, upon Anastacias death, her children acquired
legal title to her estate (which title includes her shareholdings in Zenith), and they are, prior to
the estates partition, deemed co-owners thereof.25 This status as co-owners, however, does not
immediately and necessarily make them stockholders of the corporation. Unless and until
there is compliance with Section 63 of the Corporation Code on the manner of transferring
shares, the heirs do not become registered stockholders of the corporation. Section 63
provides:

The Court then combined the two tests and declared that jurisdiction should be determined by
considering not only the status or relationship of the parties, but also the nature of the question
under controversy.23 This two-tier test was adopted in the recent case of Speed Distribution,
Inc. v. Court of Appeals:24

Section 63. Certificate of stock and transfer of shares. The capital stock of stock
corporations shall be divided into shares for which certificates signed by the
president or vice-president, countersigned by the secretary or assistant secretary, and
sealed with the seal of the corporation shall be issued in accordance with the bylaws. Shares of stock so issued are personal property and may be transferred by
delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact
or other person legally authorized to make the transfer. No transfer, however, shall
be valid, except as between the parties, until the transfer is recorded in the
books of the corporation so as to show the names of the parties to the
transaction, the date of the transfer, the number of the certificate or
certificates, and the number of shares transferred. [Emphasis supplied.]

To determine whether a case involves an intra-corporate controversy, and is to be

heard and decided by the branches of the RTC specifically designated by the Court
to try and decide such cases, two elements must concur: (a) the status or relationship
of the parties; and (2) the nature of the question that is the subject of their
controversy.
The first element requires that the controversy must arise out of intra-corporate or
partnership relations between any or all of the parties and the corporation,
partnership, or association of which they are stockholders, members or associates;
between any or all of them and the corporation, partnership, or association of which
they are stockholders, members, or associates, respectively; and between such
corporation, partnership, or association and the State insofar as it concerns their
individual franchises. The second element requires that the dispute among the
parties be intrinsically connected with the regulation of the corporation. If the nature
of the controversy involves matters that are purely civil in character, necessarily, the
case does not involve an intra-corporate controversy.
Given these standards, we now tackle the question posed for our determination under the
specific circumstances of this case:

No shares of stock against which the corporation holds any unpaid claim shall be
transferable in the books of the corporation.
Simply stated, the transfer of title by means of succession, though effective and valid between
the parties involved (i.e., between the decedents estate and her heirs), does not bind the
corporation and third parties. The transfer must be registered in the books of the corporation to
make the transferee-heir a stockholder entitled to recognition as such both by the corporation
and by third parties.26
We note, in relation with the above statement, that in Abejo v. Dela Cruz27 and TCL Sales
Corporation v. Court of Appeals28 we did not require the registration of the transfer before
considering the transferee a stockholder of the corporation (in effect upholding the existence
of an intra-corporate relation between the parties and bringing the case within the jurisdiction

of the SEC as an intra-corporate controversy). A marked difference, however, exists between

these cases and the present one.
In Abejo and TCL Sales, the transferees held definite and uncontested titles to a specific
number of shares of the corporation; after the transferee had established prima
facie ownership over the shares of stocks in question, registration became a mere formality in
confirming their status as stockholders. In the present case, each of Anastacias heirs holds
only an undivided interest in the shares. This interest, at this point, is still inchoate and subject
to the outcome of a settlement proceeding; the right of the heirs to specific, distributive shares
of inheritance will not be determined until all the debts of the estate of the decedent are paid.
In short, the heirs are only entitled to what remains after payment of the decedents
debts;29 whether there will be residue remains to be seen. Justice Jurado aptly puts it as
follows:
No succession shall be declared unless and until a liquidation of the assets and debts
left by the decedent shall have been made and all his creditors are fully paid. Until a
final liquidation is made and all the debts are paid, the right of the heirs to inherit
remains inchoate. This is so because under our rules of procedure, liquidation is
necessary in order to determine whether or not the decedent has left any liquid
assets which may be transmitted to his heirs.30 [Emphasis supplied.]
Rodrigo must, therefore, hurdle two obstacles before he can be considered a stockholder of
Zenith with respect to the shareholdings originally belonging to Anastacia. First, he must
prove that there are shareholdings that will be left to him and his co-heirs, and this can be
determined only in a settlement of the decedents estate. No such proceeding has been
commenced to date. Second, he must register the transfer of the shares allotted to him to make
it binding against the corporation. He cannot demand that this be done unless and until he has
established his specific allotment (and prima facie ownership) of the shares. Without the
settlement of Anastacias estate, there can be no definite partition and distribution of the estate
to the heirs. Without the partition and distribution, there can be no registration of the transfer.
And without the registration, we cannot consider the transferee-heir a stockholder who may
invoke the existence of an intra-corporate relationship as premise for an intra-corporate
controversy within the jurisdiction of a special commercial court.
In sum, we find that insofar as the subject shares of stock (i.e., Anastacias shares) are
concerned Rodrigo cannot be considered a stockholder of Zenith. Consequently, we cannot
declare that an intra-corporate relationship exists that would serve as basis to bring this case
within the special commercial courts jurisdiction under Section 5(b) of PD 902-A, as
amended. Rodrigos complaint, therefore, fails the relationship test.
Application of the Nature of Controversy Test
The body rather than the title of the complaint determines the nature of an action. 31 Our
examination of the complaint yields the conclusion that, more than anything else, the
complaint is about the protection and enforcement of successional rights. The controversy it
presents is purely civil rather than corporate, although it is denominated as a "complaint for
accounting of all corporate funds and assets."

Contrary to the findings of both the trial and appellate courts, we read only one cause of action
alleged in the complaint. The "derivative suit for accounting of the funds and assets of the
corporation which are in the control, custody, and/or possession of the respondent [herein
petitioner Oscar]" does not constitute a separate cause of action but is, as correctly claimed by
Oscar, only an incident to the "action for determination of the shares of stock of deceased
spouses Pedro and Anastacia Reyes allegedly taken by respondent, its accounting and the
corresponding delivery of these shares to the parties brothers and sisters." There can be no
mistake of the relationship between the "accounting" mentioned in the complaint and the
objective of partition and distribution when Rodrigo claimed in paragraph 10.1 of the
complaint that:
10.1 By refusal of the respondent to account of [sic] his shareholdings in the
company, he illegally and fraudulently transferred solely in his name wherein [sic]
the shares of stock of the deceased Anastacia C. Reyes [which] must be properly
collated and/or distributed equally amongst the children including the complainant
Rodrigo C. Reyes herein to their damage and prejudice.
We particularly note that the complaint contained no sufficient allegation that justified the
need for an accounting other than to determine the extent of Anastacias shareholdings for
purposes of distribution.
Another significant indicator that points us to the real nature of the complaint are Rodrigos
repeated claims of illegal and fraudulent transfers of Anastacias shares by Oscar to the
prejudice of the other heirs of the decedent; he cited these allegedly fraudulent acts as basis for
his demand for the collation and distribution of Anastacias shares to the heirs. These claims
tell us unequivocally that the present controversy arose from the parties relationship as heirs
of Anastacia and not as shareholders of Zenith. Rodrigo, in filing the complaint, is enforcing
his rights as a co-heir and not as a stockholder of Zenith. The injury he seeks to remedy is one
suffered by an heir (for the impairment of his successional rights) and not by the corporation
nor by Rodrigo as a shareholder on record.
More than the matters of injury and redress, what Rodrigo clearly aims to accomplish through
his allegations of illegal acquisition by Oscar is the distribution of Anastacias shareholdings
without a prior settlement of her estate an objective that, by law and established
jurisprudence, cannot be done. The RTC of Makati, acting as a special commercial court, has
no jurisdiction to settle, partition, and distribute the estate of a deceased. A relevant provision
Section 2 of Rule 90 of the Revised Rules of Court that contemplates properties of the
decedent held by one of the heirs declares:
Questions as to advancement made or alleged to have been made by the deceased
to any heirmay be heard and determined by the court having jurisdiction of the
estate proceedings; and the final order of the court thereon shall be binding on the
person raising the questions and on the heir. [Emphasis supplied.]
Worth noting are this Courts statements in the case of Natcher v. Court of Appeals:32
Matters which involve settlement and distribution of the estate of the decedent
fall within the exclusive province of the probate court in the exercise of its
limited jurisdiction.

xxxx
It is clear that trial courts trying an ordinary action cannot resolve to perform
acts pertaining to a special proceeding because it is subject to specific prescribed
rules. [Emphasis supplied.]
That an accounting of the funds and assets of Zenith to determine the extent and value of
Anastacias shareholdings will be undertaken by a probate court and not by a special
commercial court is completely consistent with the probate courts limited jurisdiction. It has
the power to enforce an accounting as a necessary means to its authority to determine the
properties included in the inventory of the estate to be administered, divided up, and
distributed. Beyond this, the determination of title or ownership over the subject shares
(whether belonging to Anastacia or Oscar) may be conclusively settled by the probate court as
a question of collation or advancement. We had occasion to recognize the courts authority to
act on questions of title or ownership in a collation or advancement situation in Coca v.
Pangilinan33where we ruled:
It should be clarified that whether a particular matter should be resolved by the
Court of First Instance in the exercise of its general jurisdiction or of its limited
probate jurisdiction is in reality not a jurisdictional question. In essence, it is a
procedural question involving a mode of practice "which may be waived."
As a general rule, the question as to title to property should not be passed upon in
the testate or intestate proceeding. That question should be ventilated in a separate
action. That general rule has qualifications or exceptions justified by expediency and
convenience.

a. the party bringing suit should be a shareholder during the time of the act or
transaction complained of, the number of shares not being material;
b. the party has tried to exhaust intra-corporate remedies, i.e., has made a demand on
the board of directors for the appropriate relief, but the latter has failed or refused to
heed his plea; and
c. the cause of action actually devolves on the corporation; the wrongdoing or harm
having been or being caused to the corporation and not to the particular stockholder
bringing the suit.34
Based on these standards, we hold that the allegations of the present complaint do not amount
to a derivative suit.
First, as already discussed above, Rodrigo is not a shareholder with respect to the
shareholdings originally belonging to Anastacia; he only stands as a transferee-heir whose
rights to the share are inchoate and unrecorded. With respect to his own individually-held
shareholdings, Rodrigo has not alleged any individual cause or basis as a shareholder on
record to proceed against Oscar.
Second, in order that a stockholder may show a right to sue on behalf of the corporation, he
must allege with some particularity in his complaint that he has exhausted his remedies within
the corporation by making a sufficient demand upon the directors or other officers for
appropriate relief with the expressed intent to sue if relief is denied. 35 Paragraph 8 of the
complaint hardly satisfies this requirement since what the rule contemplates is the exhaustion
of remedies within the corporate setting:

Thus, the probate court may provisionally pass upon in an intestate or testate
proceeding the question of inclusion in, or exclusion from, the inventory of a piece
of property without prejudice to its final determination in a separate action.

8. As members of the same family, complainant Rodrigo C. Reyes has resorted [to]
and exhausted all legal means of resolving the dispute with the end view of amicably
settling the case, but the dispute between them ensued.

Although generally, a probate court may not decide a question of title or

ownership, yet ifthe interested parties are all heirs, or the question is one of
collation or advancement, or the parties consent to the assumption of jurisdiction
by the probate court and the rights of third parties are not impaired, the probate
court is competent to decide the question of ownership.[Citations omitted.
Emphasis supplied.]

Lastly, we find no injury, actual or threatened, alleged to have been done to the corporation
due to Oscars acts. If indeed he illegally and fraudulently transferred Anastacias shares in his
own name, then the damage is not to the corporation but to his co-heirs; the wrongful transfer
did not affect the capital stock or the assets of Zenith. As already mentioned, neither has
Rodrigo alleged any particular cause or wrongdoing against the corporation that he can
champion in his capacity as a shareholder on record.36

In sum, we hold that the nature of the present controversy is not one which may be classified
as an intra-corporate dispute and is beyond the jurisdiction of the special commercial court to
resolve. In short, Rodrigos complaint also fails the nature of the controversy test.
DERIVATIVE SUIT
Rodrigos bare claim that the complaint is a derivative suit will not suffice to confer
jurisdiction on the RTC (as a special commercial court) if he cannot comply with the
requisites for the existence of a derivative suit. These requisites are:

In summary, whether as an individual or as a derivative suit, the RTC sitting as special

commercial court has no jurisdiction to hear Rodrigos complaint since what is involved is
the determination and distribution of successional rights to the shareholdings of Anastacia
Reyes. Rodrigos proper remedy, under the circumstances, is to institute a special proceeding
for the settlement of the estate of the deceased Anastacia Reyes, a move that is not foreclosed
by the dismissal of his present complaint.
WHEREFORE, we hereby GRANT the petition and REVERSE the decision of the Court of
Appeals dated May 26, 2004 in CA-G.R. SP No. 74970. The complaint before the Regional
Trial Court, Branch 142, Makati, docketed as Civil Case No. 00-1553, is
ordered DISMISSED for lack of jurisdiction. SO ORDERED.

G.R. No. 204528

February 19, 2013

SECRETARY LEILA M. DE LIMA, DIRECTOR NONNATUS R. ROJAS and

DEPUTY DIRECTOR REYNALDO 0. ESMERALDA, Petitioners,
vs.
MAGTANGGOL B. GATDULA, Respondent.
RESOLUTION
LEONEN, J.:
Submitted for our resolution is a prayer for the issuance of a temporary restraining order
and/or writ of preliminary injunction to enjoin "the Regional Trial Court, Branch 26, in Manila
from implementing its Decision x x x in Civil Case No. 12-127405 granting respondent's
application for the issuance of inspection and production orders x x x."1 This is raised through
a Petition for Review on Certiorari under Rule 45 from the "Decision" rendered by the
Regional Trial Court dated 20 March 2012.
From the records, it appears that on 27 February 2012, respondent Magtanggol B. Gatdula
filed a Petition for the Issuance of a Writ of Amparo in the Regional Trial Court of
Manila.2 This case was docketed as In the Matter of the Petition for Issuance of Writ of
Amparo of Atty. Magtanggol B. Gatdula, SP No. 12-127405. It was raffled to the sala of Judge
Silvino T. Pampilo, Jr. on the same day.
The Amparo was directed against petitioners Justice Secretary Leila M. De Lima, Director
Nonnatus R. Rojas and Deputy Director Reynaldo O. Esmeralda of the National Bureau of
Investigation (DE LIMA, ET AL. for brevity). Gatdula wanted De Lima, et al. "to cease and
desist from framing up Petitioner [Gatdula] for the fake ambush incident by filing bogus
charges of Frustrated Murder against Petitioner [Gatdula] in relation to the alleged ambush
incident."3
Instead of deciding on whether to issue a Writ of Amparo, the judge issued summons and
ordered De Lima, et al. to file an Answer.4 He also set the case for hearing on 1 March 2012.
The hearing was held allegedly for determining whether a temporary protection order may be
issued. During that hearing, counsel for De Lima, et al. manifested that a Return, not an
Answer, is appropriate for Amparo cases.5
In an Order dated 2 March 2012,6 Judge Pampilo insisted that "[s]ince no writ has been
issued, return is not the required pleading but answer".7 The judge noted that the Rules of
Court apply suppletorily in Amparo cases.8 He opined that the Revised Rules of Summary
Procedure applied and thus required an Answer.9
Judge Pampilo proceeded to conduct a hearing on the main case on 7 March 2012. 10 Even
without a Return nor an Answer, he ordered the parties to file their respective memoranda
within five (5) working days after that hearing. Since the period to file an Answer had not yet
lapsed by then, the judge also decided that the memorandum of De Lima, et al. would be filed
in lieu of their Answer.11

On 20 March 2012, the RTC rendered a "Decision" granting the issuance of the Writ
of Amparo. The RTC also granted the interim reliefs prayed for, namely: temporary
protection, production and inspection orders. The production and inspection orders were in
relation to the evidence and reports involving an on-going investigation of the attempted
assassination of Deputy Director Esmeralda. It is not clear from the records how these pieces
of evidence may be related to the alleged threat to the life, liberty or security of the respondent
Gatdula.
In an Order dated 8 October 2012, the RTC denied the Motion for Reconsideration dated 23
March 2012 filed by De Lima, et al.
Petitioners Sec. De Lima, et al. thus came to this Court assailing the RTC "Decision" dated 20
March 2012 through a Petition for Review on Certiorari (With Very Urgent Application for the
Issuance of a Temporary Restraining Order/Writ of Preliminary Injunction) via Rule 45, as
enunciated in Section 19 of the Rule on the Writ of Amparo(A.M. No. 07-9- 12-SC, 25
September 2007), viz:
SEC. 19. Appeal. Any party may appeal from the final judgment or order to the Supreme
Court under Rule 45. The appeal may raise questions of fact or law or both. x x x (Emphasis
supplied).
It is the Courts view that the "Decision" dated 20 March 2012 granting the writ of Amparo is
not the judgment or final order contemplated under this rule. Hence, a Petition for Review
under Rule 45 may not yet be the proper remedy at this time.
The RTC and the Parties must understand the nature of the remedy of Amparo to put its
procedures in the proper context.
The remedy of the Writ of Amparo is an equitable and extraordinary remedy to safeguard the
right of the people to life, liberty12 and security13 as enshrined in the 1987 Constitution.14 The
Rule on the Writ of Amparo was issued as an exercise of the Supreme Court's power to
promulgate rules concerning the protection and enforcement of constitutional rights. 15 It aims
to address concerns such as, among others, extrajudicial killings and enforced
disappearances.16
Due to the delicate and urgent nature of these controversies, the procedure was devised to
afford swift but decisive relief.17 It is initiated through a petition18 to be filed in a Regional
Trial Court, Sandiganbayan, the Court of Appeals, or the Supreme Court. 19 The judge or
justice then makes an "immediate" evaluation20 of the facts as alleged in the petition and the
affidavits submitted "with the attendant circumstances detailed".21 After evaluation, the judge
has the option to issue the Writ of Amparo22 or immediately dismiss the case. Dismissal is
proper if the petition and the supporting affidavits do not show that the petitioner's right to life,
liberty or security is under threat or the acts complained of are not unlawful. On the other
hand, the issuance of the writ itself sets in motion presumptive judicial protection for the
petitioner. The court compels the respondents to appear before a court of law to show whether
the grounds for more permanent protection and interim reliefs are necessary.
The respondents are required to file a Return23 after the issuance of the writ through the clerk
of court. The Return serves as the responsive pleading to the petition. 24 Unlike an Answer, the

Return has other purposes aside from identifying the issues in the case. Respondents are also
required to detail the actions they had taken to determine the fate or whereabouts of the
aggrieved party.
If the respondents are public officials or employees, they are also required to state the actions
they had taken to: (i) verify the identity of the aggrieved party; (ii) recover and preserve
evidence related to the death or disappearance of the person identified in the petition; (iii)
identify witnesses and obtain statements concerning the death or disappearance; (iv) determine
the cause, manner, location, and time of death or disappearance as well as any pattern or
practice that may have brought about the death or disappearance; and (vi) bring the suspected
offenders before a competent court.25 Clearly these matters are important to the judge so that
s/he can calibrate the means and methods that will be required to further the protections, if
any, that will be due to the petitioner.
There will be a summary hearing26 only after the Return is filed to determine the merits of
the petition and whether interim reliefs are warranted. If the Return is not filed, the hearing
will be done ex parte.27 After the hearing, the court will render the judgment within ten (10)
days from the time the petition is submitted for decision.28
If the allegations are proven with substantial evidence, the court shall grant the privilege of the
writ and such reliefs as may be proper and appropriate.29 The judgment should contain
measures which the judge views as essential for the continued protection of the petitioner in
the Amparo case. These measures must be detailed enough so that the judge may be able to
verify and monitor the actions taken by the respondents. It is this judgment that could be
subject to appeal to the Supreme Court via Rule 45.30 After the measures have served their
purpose, the judgment will be satisfied. In Amparo cases, this is when the threats to the
petitioners life, liberty and security cease to exist as evaluated by the court that renders the
judgment. Parenthetically, the case may also be terminated through consolidation should a
subsequent case be filed either criminal or civil.31 Until the full satisfaction of the judgment,
the extraordinary remedy of Amparo allows vigilant judicial monitoring to ensure the
protection of constitutional rights.
The "Decision" dated 20 March 2012 assailed by the petitioners could not be the judgment or
final order that is appealable under Section 19 of the Rule on the Writ of Amparo. This is clear
from the tenor of the dispositive portion of the "Decision", to wit:

The confusion of the parties arose due to the procedural irregularities in the RTC.
First, the insistence on filing of an Answer was inappropriate. It is the Return that serves as the
responsive pleading for petitions for the issuance of Writs of Amparo. The requirement to file
an Answer is contrary to the intention of the Court to provide a speedy remedy to those whose
right to life, liberty and security are violated or are threatened to be violated. In utter disregard
of the Rule on the Writ of Amparo, Judge Pampilo insisted on issuing summons and requiring
an Answer.
Judge Pampilos basis for requiring an Answer was mentioned in his Order dated 2 March
2012:
Under Section 25 of the same rule [on the Writ of Amparo], the Rules of Court shall apply
suppletorily insofar as it is not inconsistent with the said rule.
Considering the summary nature of the petition, Section 5 of the Revised Rules of Summary
Procedure shall apply.
Section 5. Answer Within ten (10) days from service of summons, the defendant shall file
his Answer to the complaint and serve a copy thereof on the plaintiff. x x x
WHEREFORE, based on the foregoing, the respondents are required to file their Answer ten
(days) from receipt of this Order.33
The 1991 Revised Rules of Summary Procedure is a special rule that the Court has devised for
the following circumstances:
SECTION 1. Scope. This rule shall govern the summary procedure in the Metropolitan Trial
Courts, the Municipal Trial Courts in Cities, the Municipal Trial Courts, and the Municipal
Circuit Trial Courts in the following cases falling within their jurisdiction:
A. Civil Cases:
(1) All cases of forcible entry and unlawful detainer, x x x.

The Branch Clerk of Court of Court [sic] is hereby DIRECTED to issue the Writ of Amparo.
Likewise, the Branch Clerk of Court is hereby DIRECTED to effect the service of the Writ
of Amparo in an expeditious manner upon all concerned, and for this purpose may call upon
the assistance of any military or civilian agency of the government.
This "Decision" pertained to the issuance of the writ under Section 6 of the Rule on the Writ
of Amparo, not thejudgment under Section 18. The "Decision" is thus an interlocutory order,
as suggested by the fact that temporary protection, production and inspection orders were
given together with the decision. The temporary protection, production and inspection orders
are interim reliefs that may be granted by the court upon filing of the petition but before final
judgment is rendered.32

(2) All other cases, except probate proceedings, where the total amount of
the plaintiffs claim does not exceed x x x.
B. Criminal Cases:
(1) Violations of traffic laws, rules and regulations;
(2) Violations of the rental law;
(3) Violations of municipal or city ordinances;

(4) All other criminal cases where the penalty prescribed by law for the
offense charged is imprisonment not exceeding six months, or a fine not
exceeding one thousand pesos (P1,000.00), or both, x x x.
xxxx
It is clear from this rule that this type of summary procedure only applies to
MTC/MTCC/MCTCs. It is mind-boggling how this rule could possibly apply to proceedings
in an RTC. Aside from that, this Court limited the application of summary procedure to
certain civil and criminal cases. A writ of Amparo is a special proceeding. It is a remedy by
which a party seeks to establish a status, a right or particular fact. 34 It is not a civil nor a
criminal action, hence, the application of the Revised Rule on Summary Procedure is seriously
misplaced.
The second irregularity was the holding of a hearing on the main case prior to the issuance of
the writ and the filing of a Return. Without a Return, the issues could not have been properly
joined.
Worse, is the trial courts third irregularity: it required a memorandum in lieu of a responsive
pleading (Answer) of De Lima, et al.
The Return in Amparo cases allows the respondents to frame the issues subject to a hearing.
Hence, it should be done prior to the hearing, not after. A memorandum, on the other hand, is
a synthesis of the claims of the party litigants and is a final pleading usually required before
the case is submitted for decision. One cannot substitute for the other since these submissions
have different functions in facilitating the suit.
More importantly, a memorandum is a prohibited pleading under the Rule on the Writ
of Amparo.35
The fourth irregularity was in the "Decision" dated 20 March 2012 itself. In the body of its
decision, the RTC stated:
"Accordingly this court GRANTS the privilege of the writ and the interim reliefs prayed for
by the petitioner." (Emphasis supplied).
This gives the impression that the decision was the judgment since the phraseology is similar
to Section 18 of the Rule on the Writ of Amparo:
"SEC. 18. Judgment. The court shall render judgment within ten (10) days from the time
the petition is submitted for decision. If the allegations in the petition are proven by substantial
evidence, the court shall grant the privilege of the writ and such reliefs as may be proper
and appropriate; otherwise, the privilege shall be denied." (Emphasis supplied).
The privilege of the Writ of Amparo should be distinguished from the actual order called
the Writ of Amparo. The privilege includes availment of the entire procedure outlined in A.M.
No. 07-9-12-SC, the Rule on the Writ ofAmparo. After examining the petition and its attached
affidavits, the Return and the evidence presented in the summary hearing, the judgment should

detail the required acts from the respondents that will mitigate, if not totally eradicate, the
violation of or the threat to the petitioner's life, liberty or security.
A judgment which simply grants "the privilege of the writ" cannot be executed.1wphi1 It is
tantamount to a failure of the judge to intervene and grant judicial succor to the petitioner.
Petitions filed to avail of the privilege of the Writ ofAmparo arise out of very real and concrete
circumstances. Judicial responses cannot be as tragically symbolic or ritualistic as "granting
the privilege of the Writ of Amparo."
The procedural irregularities in the RTC affected the mode of appeal that petitioners used in
elevating the matter to this Court.
It is the responsibility of counsels for the parties to raise issues using the proper procedure at
the right time. Procedural rules are meant to assist the parties and courts efficiently deal with
the substantive issues pertaining to a case. When it is the judge himself who disregards the
rules of procedure, delay and confusion result.
The Petition for Review is not the proper remedy to assail the interlocutory order denominated
as "Decision" dated 20 March 2012. A Petition for Certiorari, on the other hand, is
prohibited.36 Simply dismissing the present petition, however, will cause grave injustice to the
parties involved. It undermines the salutary purposes for which the Rule on the Writ
of Amparo were promulgated.
In many instances, the Court adopted a policy of liberally construing its rules in order to
promote a just, speedy and inexpensive disposition of every action and proceeding. 37 The rules
can be suspended on the following grounds: (1) matters of life, liberty, honor or property, (2)
the existence of special or compelling circumstances, (3) the merits of the case, (4) a cause not
entirely attributable to the fault or negligence of the party favored by the suspension of the
rules, (5) a lack of any showing that the review sought is merely frivolous and dilatory, and (6)
the other party will not be unjustly prejudiced thereby.38
WHEREFORE, in the interest of justice, as a prophylactic to the irregularities committed by
the trial court judge, and by virtue of its powers under Article VIII, Section 5 (5) of the
Constitution, the Court RESOLVES to:
(1) NULLIFY all orders that are subject of this Resolution issued by Judge Silvino
T. Pampilo, Jr. after respondent Gatdula filed the Petition for the Issuance of a Writ
of Amparo;
(2) DIRECT Judge Pampilo to determine within forty-eight (48) hours from his
receipt of this Resolutionwhether the issuance of the Writ of Amparo is proper on
the basis of the petition and its attached affidavits.
The Clerk of Court is DIRECTED to cause the personal service of this Resolution on Judge
Silvino T. Pampilo, Jr. of Branch 26 of the Regional Trial Court of Manila for his proper
guidance together with a WARNING that further deviation or improvisation from the
procedure set in A.M. No. 07-9-12-SC shall be meted with severe consequences. SO
ORDERED.

G.R. No. 199199

August 27, 2013

MARICRIS D. DOLOT, CHAIRMAN OF THE BAGONG ALYANSANG

MAKABAYAN-SORSOGON, PETITIONER
vs.
HON. RAMON PAJE, IN HIS CAPACITY AS THE SECRETARY OF THE
DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES, REYNULFO
A. JUAN, REGIONAL DIRECTOR, MINES AND GEOSCIENCES BUREAU, DENR,
HON. RAUL R. LEE, GOVERNOR, PROVINCE OF SORSOGON, ANTONIO C.
OCAMPO, JR., VICTORIA A. AJERO, ALFREDO M. AGUILAR, AND JUAN M.
AGUILAR, ANTONES ENTERPRISES, GLOBAL SUMMIT MINES DEV'T CORP.,
AND TR ORE, RESPONDENTS.
DECISION

The case was referred by the Executive Judge to the RTC of Sorsogon, Branch 53 being the
designated environmental court.8 In the Order9 dated September 16, 2011, the case was
summarily dismissed for lack of jurisdiction.
The petitioners filed a motion for reconsideration but it was denied in the Resolution 10 dated
October 18, 2011. Aside from sustaining the dismissal of the case for lack of jurisdiction, the
RTC11 further ruled that: (1) there was no final court decree, order or decision yet that the
public officials allegedly failed to act on, which is a condition for the issuance of the writ of
continuing mandamus; (2) the case was prematurely filed as the petitioners therein failed to
exhaust their administrative remedies; and (3) they also failed to attach judicial affidavits and
furnish a copy of the complaint to the government or appropriate agency, as required by the
rules.12
Petitioner Dolot went straight to this Court on pure questions of law.
Issues

REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court assailing the
Order2 dated September 16, 2011 and Resolution3 dated October 18, 2011 issued by the
Regional Trial Court (RTC) of Sorsogon, Branch 53. The assailed issuances dismissed Civil
Case No. 2011-8338 for Continuing Mandamus, Damages and Attorneys Fees with Prayer for
the Issuance of a Temporary Environment Protection Order.

The main issue in this case is whether the RTC-Branch 53 has jurisdiction to resolve Civil
Case No. 2011-8338. The other issue is whether the petition is dismissible on the grounds that:
(1) there is no final court decree, order or decision that the public officials allegedly failed to
act on; (2) the case was prematurely filed for failure to exhaust administrative remedies; and
(3) the petitioners failed to attach judicial affidavits and furnish a copy of the complaint to the
government or appropriate agency.

Antecedent Facts
Ruling of the Court
On September 15, 2011, petitioner Maricris D. Dolot (Dolot), together with the parish priest of
the Holy Infant Jesus Parish and the officers of Alyansa Laban sa Mina sa Matnog
(petitioners), filed a petition for continuing mandamus, damages and attorneys fees with the
RTC of Sorsogon, docketed as Civil Case No. 2011-8338.4 The petition contained the
following pertinent allegations: (1) sometime in 2009, they protested the iron ore mining
operations being conducted by Antones Enterprises, Global Summit Mines Development
Corporation and TR Ore in Barangays Balocawe and Bon-ot Daco, located in the Municipality
of Matnog, to no avail; (2) Matnog is located in the southern tip of Luzon and there is a need
to protect, preserve and maintain the geological foundation of the municipality; (3) Matnog is
susceptible to flooding and landslides, and confronted with the environmental dangers of flood
hazard, liquefaction, ground settlement, ground subsidence and landslide hazard; (4) after
investigation, they learned that the mining operators did not have the required permit to
operate; (5) Sorsogon Governor Raul Lee and his predecessor Sally Lee issued to the operators
a small-scale mining permit, which they did not have authority to issue; (6) the representatives
of the Presidential Management Staff and the Department of Environment and Natural
Resources (DENR), despite knowledge, did not do anything to protect the interest of the
people of Matnog;5 and (7) the respondents violated Republic Act (R.A.) No. 7076 or the
Peoples Small-Scale Mining Act of 1991, R.A. No. 7942 or the Philippine Mining Act of
1995, and the Local Government Code.6 Thus, they prayed for the following reliefs: (1) the
issuance of a writ commanding the respondents to immediately stop the mining operations in
the Municipality of Matnog; (2) the issuance of a temporary environment protection order or
TEPO; (3) the creation of an inter-agency group to undertake the rehabilitation of the mining
site; (4) award of damages; and (5) return of the iron ore, among others.7

Jurisdiction and Venue

In dismissing the petition for lack of jurisdiction, the RTC, in its Order dated September 16,
2011, apparently relied on SC Administrative Order (A.O.) No. 7 defining the territorial areas
of the Regional Trial Courts in Regions 1 to 12, and Administrative Circular (Admin.
Circular) No. 23-2008,13 designating the environmental courts "to try and decide violations of
environmental laws x x x committed within their respective territorial jurisdictions."14 Thus, it
ruled that its territorial jurisdiction was limited within the boundaries of Sorsogon City and the
neighboring municipalities of Donsol, Pilar, Castilla, Casiguran and Juban and that it was
"bereft of jurisdiction to entertain, hear and decide [the] case, as such authority rests before
another co-equal court."15
Such reasoning is plainly erroneous. The RTC cannot solely rely on SC A.O. No. 7 and
Admin. Circular No. 23-2008 and confine itself within its four corners in determining whether
it had jurisdiction over the action filed by the petitioners.
None is more well-settled than the rule that jurisdiction, which is the power and authority of
the court to hear, try and decide a case, is conferred by law.16 It may either be over the nature
of the action, over the subject matter, over the person of the defendants or over the issues
framed in the pleadings.17 By virtue of Batas Pambansa (B.P.) Blg. 129 or the Judiciary
Reorganization Act of 1980, jurisdiction over special civil actions for certiorari, prohibition
and mandamus is vested in the RTC. Particularly, Section 21(1) thereof provides that the
RTCs shall exercise original jurisdiction

in the issuance of writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction which may be enforced in any part of their respective regions. (Emphasis ours)
A.O. No. 7 and Admin. Circular No. 23-2008 was issued pursuant to Section 18 of B.P. Blg.
129, which gave the Court authority to define the territory over which a branch of the RTC
shall exercise its authority. These administrative orders and circulars issued by the Court
merely provide for the venue where an action may be filed. The Court does not have the power
to confer jurisdiction on any court or tribunal as the allocation of jurisdiction is lodged solely
in Congress.18 It also cannot be delegated to another office or agency of the
Government.19Section 18 of B.P. Blg. 129, in fact, explicitly states that the territory thus
defined shall be deemed to be the territorial area of the branch concerned for purposes of
determining the venue of all suits, proceedings or actions. It was also clarified in Office of the
Court Administrator v. Judge Matas20 that
Administrative Order No. 3 [defining the territorial jurisdiction of the Regional Trial Courts in
the National Capital Judicial Region] and, in like manner, Circular Nos. 13 and 19, did not per
se confer jurisdiction on the covered regional trial courts or its branches, such that nonobservance thereof would nullify their judicial acts. The administrative order merely defines
the limits of the administrative area within which a branch of the court may exercise its
authority pursuant to the jurisdiction conferred by Batas Pambansa Blg. 129.21
The RTC need not be reminded that venue relates only to the place of trial or the geographical
location in which an action or proceeding should be brought and does not equate to the
jurisdiction of the court. It is intended to accord convenience to the parties, as it relates to the
place of trial, and does not restrict their access to the courts.22 Consequently, the RTCs motu
proprio dismissal of Civil Case No. 2011-8338 on the ground of lack of jurisdiction is patently
incorrect.
At most, the error committed by the petitioners in filing the case with the RTC of Sorsogon
was that of improper venue. A.M. No. 09-6-8-SC or the Rules of Procedure for Environmental
Cases (Rules) specifically states that a special civil action for continuing mandamus shall be
filed with the "[RTC] exercising jurisdiction over the territory where the actionable neglect or
omission occurred x x x."23 In this case, it appears that the alleged actionable neglect or
omission occurred in the Municipality of Matnog and as such, the petition should have been
filed in the RTC of Irosin.24 But even then, it does not warrant the outright dismissal of the
petition by the RTC as venue may be waived.25 Moreover, the action filed by the petitioners is
not criminal in nature where venue is an essential element of jurisdiction.26 In Gomez-Castillo
v. Commission on Elections,27 the Court even expressed that what the RTC should have done
under the circumstances was to transfer the case (an election protest) to the proper branch.
Similarly, it would serve the higher interest of justice28 if the Court orders the transfer of Civil
Case No. 2011 8338 to the RTC of Irosin for proper and speedy resolution, with the RTC
applying the Rules in its disposition of the case.
At this juncture, the Court affirms the continuing applicability of Admin. Circular No. 232008 constituting the different "green courts" in the country and setting the administrative
guidelines in the raffle and disposition of environmental cases. While the designation and
guidelines were made in 2008, the same should operate in conjunction with the Rules.
A.M. No. 09-6-8-SC: Rules of Procedure for Environmental Cases

In its Resolution dated October 18, 2011, which resolved the petitioners motion for
reconsideration of the order of dismissal, the RTC further ruled that the petition was
dismissible on the following grounds: (1) there is no final court decree, order or decision yet
that the public officials allegedly failed to act on; (2) the case was prematurely filed for failure
to exhaust administrative remedies; and (3) there was failure to attach judicial affidavits and
furnish a copy of the complaint to the government or appropriate agency. 29 The respondents,
and even the Office of the Solicitor General, in behalf of the public respondents, all concur
with the view of the RTC.
The concept of continuing mandamus was first introduced in Metropolitan Manila
Development Authority v. Concerned Residents of Manila Bay. 30 Now cast in stone under
Rule 8 of the Rules, the writ of continuing mandamus enjoys a distinct procedure than that of
ordinary civil actions for the enforcement/violation of environmental laws, which are covered
by Part II (Civil Procedure). Similar to the procedure under Rule 65 of the Rules of Court for
special civil actions for certiorari, prohibition and mandamus, Section 4, Rule 8 of the Rules
requires that the petition filed should be sufficient in form and substance before a court may
take further action; otherwise, the court may dismiss the petition outright. Courts must be
cautioned, however, that the determination to give due course to the petition or dismiss it
outright is an exercise of discretion that must be applied in a reasonable manner in consonance
with the spirit of the law and always with the view in mind of seeing to it that justice is
served.31
Sufficiency in form and substance refers to the contents of the petition filed under Rule 8,
Section 1:
When any agency or instrumentality of the government or officer thereof unlawfully neglects
the performance of an act which the law specifically enjoins as a duty resulting from an office,
trust or station in connection with the enforcement or violation of an environmental law rule or
regulation or a right therein, or unlawfully excludes another from the use or enjoyment of such
right and there is no other plain, speedy and adequate remedy in the ordinary course of law,
the person aggrieved thereby may file a verified petition in the proper court, alleging the facts
with certainty, attaching thereto supporting evidence, specifying that the petition concerns an
environmental law, rule or regulation, and praying that judgment be rendered commanding the
respondent to do an act or series of acts until the judgment is fully satisfied, and to pay
damages sustained by the petitioner by reason of the malicious neglect to perform the duties of
the respondent, under the law, rules or regulations. The petition shall also contain a sworn
certification of non-forum shopping.1wphi1
On matters of form, the petition must be verified and must contain supporting evidence as well
as a sworn certification of non-forum shopping. It is also necessary that the petitioner must be
one who is aggrieved by an act or omission of the government agency, instrumentality or its
officer concerned. Sufficiency of substance, on the other hand, necessitates that the petition
must contain substantive allegations specifically constituting an actionable neglect or omission
and must establish, at the very least, a prima facie basis for the issuance of the writ, viz: (1) an
agency or instrumentality of government or its officer unlawfully neglects the performance of
an act or unlawfully excludes another from the use or enjoyment of a right; (2) the act to be
performed by the government agency, instrumentality or its officer is specifically enjoined by
law as a duty; (3) such duty results from an office, trust or station in connection with the
enforcement or violation of an environmental law, rule or regulation or a right therein; and (4)
there is no other plain, speedy and adequate remedy in the course of law. 32

The writ of continuing mandamus is a special civil action that may be availed of "to compel
the performance of an act specifically enjoined by law."33 The petition should mainly involve
an environmental and other related law, rule or regulation or a right therein. The RTCs
mistaken notion on the need for a final judgment, decree or order is apparently based on the
definition of the writ of continuing mandamus under Section 4, Rule 1 of the Rules, to wit:
(c) Continuing mandamus is a writ issued by a court in an environmental case directing any
agency or instrumentality of the government or officer thereof to perform an act or series of
acts decreed by final judgment which shall remain effective until judgment is fully satisfied.
(Emphasis ours)
The final court decree, order or decision erroneously alluded to by the RTC actually pertains
to the judgment or decree that a court would eventually render in an environmental case for
continuing mandamus and which judgment or decree shall subsequently become final.
Under the Rules, after the court has rendered a judgment in conformity with Rule 8, Section 7
and such judgment has become final, the issuing court still retains jurisdiction over the case to
ensure that the government agency concerned is performing its tasks as mandated by law and
to monitor the effective performance of said tasks. It is only upon full satisfaction of the final
judgment, order or decision that a final return of the writ shall be made to the court and if the
court finds that the judgment has been fully implemented, the satisfaction of judgment shall be
entered in the court docket.34 A writ of continuing mandamus is, in essence, a command of
continuing compliance with a final judgment as it "permits the court to retain jurisdiction after
judgment in order to ensure the successful implementation of the reliefs mandated under the
courts decision."35
The Court, likewise, cannot sustain the argument that the petitioners should have first filed a
case with the Panel of Arbitrators (Panel), which has jurisdiction over mining disputes under
R.A. No. 7942.

laws and jurisprudence which is necessarily a judicial function.38 (Emphasis supplied in the
former and ours in the latter)
Consequently, resort to the Panel would be completely useless and unnecessary.
The Court also finds that the RTC erred in ruling that the petition is infirm for failure to attach
judicial affidavits. As previously stated, Rule 8 requires that the petition should be verified,
contain supporting evidence and must be accompanied by a sworn certification of non-forum
shopping. There is nothing in Rule 8 that compels the inclusion of judicial affidavits, albeit not
prohibited. It is only if the evidence of the petitioner would consist of testimony of witnesses
that it would be the time that judicial affidavits (affidavits of witnesses in the question and
answer form) must be attached to the petition/complaint.39
Finally, failure to furnish a copy of the petition to the respondents is not a fatal defect such
that the case should be dismissed. The RTC could have just required the petitioners to furnish
a copy of the petition to the respondents. It should be remembered that "courts are not
enslaved by technicalities, and they have the prerogative to relax compliance with procedural
rules of even the most mandatory character, mindful of the duty to reconcile both the need to
speedily put an end to litigation and the parties right to an opportunity to be heard."40
WHEREFORE, the petition is GRANTED. The Order dated September 16, 2011 and
Resolution dated October 18, 2011 issued by the Regional Trial Court of Sorsogon, Branch
53, dismissing Civil Case No. 2011-8338 are NULLIFIED AND SET ASIDE. The Executive
Judge of the Regional Trial Court of Sorsogon is DIRECTED to transfer the case to the
Regional Trial Court of Irosin, Branch 55, for further proceedings with dispatch. Petitioner
Maricris D. Dolot is also ORDERED to furnish the respondents with a copy of the petition and
its annexes within ten (10) days from receipt of this Decision and to submit its Compliance
with the RTC of Irosin.
SO ORDERED.

Indeed, as pointed out by the respondents, the Panel has jurisdiction over mining
disputes.36 But the petition filed below does not involve a mining dispute. What was being
protested are the alleged negative environmental impact of the small-scale mining operation
being conducted by Antones Enterprises, Global Summit Mines Development Corporation and
TR Ore in the Municipality of Matnog; the authority of the Governor of Sorsogon to issue
mining permits in favor of these entities; and the perceived indifference of the DENR and
local government officials over the issue. Resolution of these matters does not entail the
technical knowledge and expertise of the members of the Panel but requires an exercise of
judicial function. Thus, in Olympic Mines and Development Corp. v. Platinum Group Metals
Corporation,37 the Court stated
Arbitration before the Panel of Arbitrators is proper only when there is a disagreement
between the parties as to some provisions of the contract between them, which needs the
interpretation and the application of that particular knowledge and expertise possessed by
members of that Panel. It is not proper when one of the parties repudiates the existence or
validity of such contract or agreement on the ground of fraud or oppression as in this case. The
validity of the contract cannot be subject of arbitration proceedings. Allegations of fraud and
duress in the execution of a contract are matters within the jurisdiction of the ordinary courts
of law. These questions are legal in nature and require the application and interpretation of

G.R. No. 167891

January 15, 2010

SPOUSES JESUS FAJARDO and EMER FAJARDO, Petitioners,

vs.
ANITA R. FLORES, assisted by her husband, BIENVENIDO FLORES, Respondent.
DECISION
NACHURA, J.:
Before us is a petition for review of the Decision1 of the Court of Appeals (CA) dated October
28, 2004 and its Resolution dated April 19, 2005, denying the motion for reconsideration
thereof.
The facts are as follows:
Leopoldo delos Reyes owned a parcel of land, denominated as Lot No. 2351 (Cad. 320-D),
with an area of 25,513 square meters (sq m), located in Barangay Sumandig in Hacienda
Buenavista, San Ildefonso, Bulacan. In 1963, he allowed petitioner Jesus Fajardo to cultivate
said land. The net harvests were divided equally between the two until 1975 when the
relationship was converted to leasehold tenancy. Per Order2 from the Department of Agrarian
Reform (DAR), Regional Office, Region III, San Fernando, Pampanga, rent was provisionally
fixed at 27.42 cavans per year, which Jesus Fajardo religiously complied with. From the time
petitioner cultivated the land, he was allowed by Leopoldo delos Reyes to erect a house for his
family on the stony part of the land, which is the subject of controversy.
On January 26, 1988, Leopoldo delos Reyes died. His daughter and sole heir, herein
respondent Anita Flores, inherited the property. On June 28, 1991, Anita Flores and Jesus
Fajardo executed an agreement, denominated as "KASUNDUAN NG PAGHAHATI NG
LUPA AT PAGTATALAGA NG DAAN UKOL SA MAGKABILANG PANIG."3This was
followed by another agreement, "KASUNDUAN SA HATIAN SA LUPA," executed on July
10, 1991, wherein the parties agreed to deduct from Lot No. 2351 an area of 10,923 sq m,
allotting the same to petitioner. Apparently, there was a conflict of claims in the interpretation
of the Kasunduan between Anita Flores and Jesus Fajardo, which was referred to the DAR,
Provincial Agrarian Reform Office, Baliuag, Bulacan.4 In the Report and Recommendation
dated May 3, 2000, the Legal Officer advised the parties to ventilate their claims and
counterclaims with the Department of Agrarian Reform Adjudication Board (DARAB),
Malolos, Bulacan.5
On December 22, 2000, a complaint for ejectment was filed by herein respondent Anita
Flores, assisted by her husband Bienvenido Flores, against petitioners with the Municipal Trial
Court (MTC), San Ildefonso, Bulacan. In the complaint, she alleged that, as the sole heir of the
late Leopoldo delos Reyes, she inherited a parcel of land consisting of stony land, not devoted
to agriculture, and land suitable and devoted to agriculture located in Barangay Sumandig, San
Ildefonso, Bulacan; that, sometime in the 1960s, during the lifetime of Leopoldo delos Reyes,
Jesus Fajardo requested the former to allow him to work and cultivate that portion of land
devoted to agriculture; that Jesus Fajardo was then allowed to erect a house on the stony part
of the land, and that the use and occupation of the stony part of the land was by mere tolerance
only; and that the land, which was divided equally between the two parties, excluded the stony

portion. In February 1999, respondent approached petitioners and verbally informed them of
her intention to repossess the stony portion, but petitioners refused to heed the request.
Petitioners filed a Motion to Dismiss, alleging that Lot No. 2351, with an area of 25,513 sq m,
was agricultural land; that they had been continuously, uninterruptedly, and personally
cultivating the same since 1960 up to the present; that the MTC had no jurisdiction over the
case, considering that the dispute between the parties, regarding the Kasunduan, was referred
to the DARAB; and that the assumption by the DARAB of jurisdiction over the controversy
involving the lot in question therefore precluded the MTC from exercising jurisdiction over
the case.
Resolving the Motion to Dismiss, the MTC ruled that, while at first glance, the court did not
have jurisdiction over the case, considering that it was admitted that petitioner was allowed to
cultivate the land, a closer look at the Kasunduan, however, revealed that what was divided
was only the portion being tilled. By contrast, the subject matter of the complaint was the
stony portion where petitioners house was erected. Thus, the court ruled that it had
jurisdiction over the subject matter.6
On April 25, 2001, the MTC rendered judgment in favor of respondent. The dispositive
portion reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff
(respondent), ORDERING defendants (petitioners)
1) and all persons claiming rights under them to VACATE the subject premises
where they have erected their house, which is a portion of Lot No. 2351, Cad-320-D
situated [in] Barangay Sumandig, San Ildefonso, Bulacan;
2) to DEMOLISH their house on the subject premises;
3) to PAY plaintiff the sum of P400.00 a month by way of reasonable compensation
for their use and occupation of the subject premises starting [in] June 2000 and
every month thereafter until they finally vacate the same; and
4) to PAY attorneys fees of P10,000.00 and the cost of suit.7
On appeal, the Regional Trial Court (RTC), Branch 16, Third Judicial Region, Malolos,
Bulacan, affirmed the MTC Decision in toto upon a finding that no reversible error was
committed by the court a quo in its Decision8 dated August 29, 2002.
On motion for reconsideration, however, the RTC issued an Order on December 10, 2002,
reversing its decision dated August 29, 2002. The RTC found that the issue involved appeared
to be an agrarian dispute, which fell within the contemplation of Republic Act (R.A.) No.
6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988, and thus
ordered the dismissal of the case for lack of jurisdiction.
A petition for review was then filed by respondents with the CA to annul the Order of the RTC
dated December 10, 2002.

On October 28, 2004, the CA rendered the assailed decision, which reinstated the MTC
decision. It disagreed with the findings of the RTC and ruled that the part of Lot No. 2351
where petitioners house stood was stony and residential in nature, one that may not be made
to fall within the ambit of the operation of Philippine agrarian laws, owing to its nonagriculture character. The CA explained that, on the strength of the two instruments, the
parties made a partition and divided the agricultural portion of Lot No. 2351 equally among
themselves. By virtue of said division, the parties effectively severed and terminated the
agricultural leasehold/tenancy relationship between them; thus, there was no longer any
agrarian dispute to speak of. Fajardo had already acquired the benefits under the
Comprehensive Agrarian Reform Law when one-half of the agricultural portion of Lot No.
2351 was allotted to him. Petitioners cannot, therefore, be allowed to continue possession of a
part of the stony portion, which was not included in the land he was cultivating. 9 The
dispositive portion of the CA Decision reads as follows:
WHEREFORE, premises considered, finding that the court a quo seriously erred when it
reversed itself, its Order dated December 10, 2002 is REVERSED and SET ASIDE.
Accordingly, the Decision dated April 25, 2001 of the MTC of San Ildefonso, Bulacan is
hereby REINSTATED.10
The subsequent motion for reconsideration was denied; hence, this petition.
The issue in this case is whether it is MTC or the DARAB which has jurisdiction over the
case.
There is no dispute that, on June 28, 1991, the parties executed an agreement, denominated as
"KASUNDUAN NG PAGHAHATI NG LUPA AT PAGTATALAGA NG DAAN UKOL SA
MAGKABILANG PANIG." Therein, it was admitted that Jesus Fajardo was the tiller of the
land. This Kasunduan was subsequently followed by another agreement, "KASUNDUAN SA
HATIAN SA LUPA," whereby an area of 10,923 sq m of Lot No. 2351 was given to
petitioners. The portion of the land where petitioners house is erected is the subject of the
instant case for unlawful detainer. Respondent argues that this portion is not included in the
deed of partition, while petitioners insist that it is.
We agree with the RTC when it clearly pointed out in its Order dated December 10, 2002 that
the resolution of this case hinges on the correct interpretation of the contracts executed by the
parties. The issue of who has a better right of possession over the subject land cannot be
determined without resolving first the matter as to whom the subject property was allotted.
Thus, this is not simply a case for unlawful detainer, but one that is incapable of pecuniary
estimation, definitely beyond the competence of the MTC.11
More importantly, the controversy involves an agricultural land, which petitioners have
continuously and personally cultivated since the 1960s. In the Kasunduan, it was admitted that
Jesus Fajardo was the tiller of the land. Being agricultural lessees, petitioners have a right to a
home lot and a right to exclusive possession thereof by virtue of Section 24, R.A. No. 3844 of
the Agricultural Land Reform Code.12 Logically, therefore, the case involves an agrarian
dispute, which falls within the contemplation of R.A. No. 6657, or the Comprehensive
Agrarian Reform Law.

An agrarian dispute13 refers to any controversy relating to tenurial arrangements, whether

leasehold, tenancy, stewardship, or otherwise, over lands devoted to agriculture, including
disputes concerning farmworkers associations or representation of persons in negotiating,
fixing, maintaining, changing, or seeking to arrange terms or conditions of such tenurial
arrangements. It includes any controversy relating to compensation of lands acquired under
this Act and other terms and conditions of transfer of ownership from landowner to
farmworkers, tenants, and other agrarian reform beneficiaries, whether the disputants stand in
the proximate relation of farm operator and beneficiary, landowner and tenant, or lessor and
lessee. It relates to any controversy relating to, inter alia, tenancy over lands devoted to
agriculture.14
Undeniably, the instant case involves a controversy regarding tenurial arrangements. The
contention that the Kasunduans, which allegedly terminated the tenancy relationship between
the parties and, therefore, removed the case from the ambit of R.A. No. 6657, is untenable.
There still exists an agrarian dispute because the controversy involves the home lot of
petitioners, an incident arising from the landlord-tenant relationship.

Amurao v. Villalobos is quite instructive:

The instant case undeniably involves a controversy involving tenurial arrangements because
the Kasulatan will definitely modify, nay, terminate the same. Even assuming that the tenancy
relationship between the parties had ceased due to the Kasulatan, there still exists an agrarian
dispute because the action involves an incident arising from the landlord and tenant
relationship.
In Teresita S. David v. Agustin Rivera, this Court held that:
[I]t is safe to conclude that the existence of prior agricultural tenancy relationship, if true, will
divest the MCTC of its jurisdiction the previous juridical tie compels the characterization of
the controversy as an "agrarian dispute." x x x Even if the tenurial arrangement has been
severed, the action still involves an incident arising from the landlord and tenant relationship.
Where the case involves the dispossession by a former landlord of a former tenant of the land
claimed to have been given as compensation in consideration of the renunciation of the
tenurial rights, there clearly exists an agrarian dispute. On this point the Court has already
ruled:
"Indeed, section 21 of the Republic Act No. 1199, provides that all cases involving the
dispossession of a tenant by the landlord or by a third party and/or the settlement and
disposition of disputes arising from the relationship of landlord and tenant . . . shall be under
the original and exclusive jurisdiction of the Court of Agrarian Relations. This jurisdiction
does not require the continuance of the relationship of landlord and tenantat the time of the
dispute. The same may have arisen, and often times arises, precisely from the previous
termination of such relationship. If the same existed immediately, or shortly, before the
controversy and the subject-matter thereof is whether or not said relationship has been
lawfully terminated, or if the dispute springs or originates from the relationship of landlord
and tenant, the litigation is (then) cognizable by the Court of Agrarian Relations . . ."
In the case at bar, petitioners claim that the tenancy relationship has been terminated by the
Kasulatan is of no moment. As long as the subject matter of the dispute is the legality of the

termination of the relationship, or if the dispute originates from such relationship, the case is
cognizable by the DAR, through the DARAB. The severance of the tenurial arrangement will
not render the action beyond the ambit of an agrarian dispute. 15
Furthermore, the records disclose that the dispute between the parties, regarding the
interpretation of the Kasunduan, was, in fact, raised and referred to the DAR, which in turn
referred the case to the DARAB.16 In view of the foregoing, we reiterate Hilario v.
Prudente,17 that:
The doctrine of primary jurisdiction precludes the courts from resolving a controversy over
which jurisdiction has initially been lodged with an administrative body of special
competence. For agrarian reform cases, jurisdiction is vested in the Department of Agrarian
Reform (DAR); more specifically, in the Department of Agrarian Reform Adjudication Board
(DARAB).
WHEREFORE, the Decision dated October 28, 2004 of the Court of Appeals is REVERSED
and SET ASIDE. The Order of the Regional Trial Court dated December 10, 2002 is
REINSTATED.
SO ORDERED.

RNANDA GEONZON VDA. DE BARRERA AND

HNNY OCO, JR.,

G.R. No. 174346

Present:

ioners,
QUISUMBING, J., Chairperson,

sus CARPIO MORALES,

RS OF VICENTE LEGASPI, REPRESENTED BY

DRO LEGASPI,

TINGA,

pondents.

VELASCO, JR., and

BRION, JJ.
Promulgated:
September 12, 2008
x--------------------------------------------------x

Respondents, on the other hand, asserted that the land was occupied, possessed and cultivated
by their predecessor-in-interest Vicente Legaspi and his wife Lorenza since 1935;5 after a
subdivision survey was conducted in November 30, 1976, it was found out that the land
formed part of the titled property of Andrea Lacson;6 and despite this discovery, they never
filed any action to recover ownership thereof since they were left undisturbed in their
possession,7 until October 1, 1996 when petitioners forced their way into it.
Petitioners raised the issue of ownership as a special affirmative defense. 8 In their
Memorandum, however, they questioned the jurisdiction of the RTC over the subject matter of
the complaint, the assessed value of the land being only P11,160,9 as reflected in Tax
Declaration No. 7565.10
By Decision of November 27, 1998, the trial court found for respondents, disposing as
follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs [herein respondents] and
against the defendants [-herein petitioners]:
1. Ordering the latter to return the possession of the land in question to the plaintiffs and
2. Ordering the latter to desist from further depriving and disturbing plaintiffs peaceful
possession thereof, unless there be another court judgment to the contrary.

DECISION
SO ORDERED.
CARPIO MORALES, J.:
Under review before this Court is the July 31, 2006 Decision of the Court of Appeals, 1 which
affirmed that of the Regional Trial Court, Branch 16, of Tangub City in Civil Case No. TC-97001, ordering the defendants-petitioners herein, Fernanda Geonzon vda. de Barrera and
Johnny Oco. Jr. to return possession of the subject property to the plaintiffs-herein
respondents, Heirs of Vicente Legaspi.
On October 1, 1996, petitioner Johnny Oco Jr. (Oco), said to be a "peace officer connected
with the PNP," accompanied by "unidentified CAFGU members," forced his way into
respondents 0.9504-hectare irrigated farmland located at Liloan, Bonifacio, Misamis
Occidental. After dispossessing respondents of the property, Oco and company used a tractor
to destroy the planted crops, took possession of the land, and had since tended it. 2
Respondents thus filed on February 7, 1997 a complaint before the Regional Trial Court of
Tangub City for Reconveyance of Possession with Preliminary Mandatory Injunction and
Damages3 against petitioners.
In their Answer, petitioners claimed that the subject land forms part of a three-hectare property
described in OCT No. P-447 issued on February 10, 1956 in the name of Andrea Lacson who
sold a 2-hectare portion thereof to Eleuterio Geonzon who, in turn, sold 1.1148 thereof to his
sister petitioner Fernanda Geonzon vda. de Barrera (Fernanda).4

On the issue of jurisdiction over the subject matter, the trial court, maintaining that it had,
held:
The Court is not persuaded by [the defendants] arguments. What determines the nature of the
action as well as the jurisdiction of the [c]ourt are the facts alleged in the complaint and not
those alleged in the answer of the defendants.
xxxx
In [p]ar. 2 of plaintiffs complaint, the land in question was described as a riceland "situated at
Liloan, Bonifacio, Misamis Occ. and declared under [T]ax [D]eclaration No. 7564 in the name
of Vicente Legaspi and bounded on the north by a creek, on the east Sec. 12, on the south Lot
No. 007 and on the west also by Lot No. 007 which tax declaration cancels former [T]ax
[D]eclaration No. 12933 under the name of Lorenza Bacul Legaspi which likewise cancels
[T]ax [D]eclaration No. 5454 covering the bigger portion of the land under which the land
described under [T]ax [D]eclaration No. 7565 is part and parcel thereof [sic]; the present
estimated value being P50,000."11 (Emphasis and underscoring supplied)
Petitioners thereupon appealed to the Court of Appeals which affirmed the trial courts
disposition of the issue of jurisdiction over the subject matter.
On the merits, the appellate court affirmed too the trial courts decision, finding that "both

testimonial and documentary evidence on record established that appellees, through their
predecessors-in-interest, have been in peaceful, continuous, public and actual possession of the
property in dispute even before the year 1930."12

common exhibit of the parties. The bare claim of respondents that it has a value of P50,000
thus fails. The case, therefore, falls within the exclusive original jurisdiction of the municipal
trial court.

The appellate court emphasized that in an accion publiciana, the only issue involved is the
determination of possession de jure.13

It was error then for the RTC to take cognizance of the complaint based on the allegation that
"the present estimated value [of the land is] P50,000," which allegation is, oddly, handwritten
on the printed pleading. The estimated value, commonly referred to as fair market value, 17 is
entirely different from the assessed value of the property.

Hence, the present petition for review which raises the following issues:
I. . . . WHETHER OWNERSHIP AND TITLE CANNOT BE AN ISSUE TO DETERMINE
WHO HAS A BETTER RIGHT [TO] THE PORTION LITIGATED; AND
II. WHETHER . . . THE NATURE OF THE ACTION AS WELL AS THE JURISDICTION
OF THE COURT DEPEND ON THE FACTS AS ALLEGED IN THE COMPLAINT.14
For obvious reasons, the issue of lack of jurisdiction over the subject matter shall be first
considered.
Section 33 of Batas Pambansa Bilang 129, (the Judiciary Reorganization Act of 1980), as
amended by Republic Act No. 7691 provides for the jurisdiction of metropolitan trial courts,
municipal trial courts and municipal circuit trial courts, to wit:
xxxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of,
real property, or any interest therein where the assessed value of the property or interest
therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00)
exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs:
Provided, That in cases of land not declared for taxation purposes, the value of such property
shall be determined by the assessed value of the adjacent lots. (Emphasis, italics and
underscoring supplied)
Before the amendments introduced by Republic Act No. 7691, the plenary action of accion
publiciana was to be brought before the regional trial court.15 With the modifications
introduced by R.A. No. 7691 in 1994, the jurisdiction of the first level courts has been
expanded to include jurisdiction over other real actions where the assessed value does not
exceed P20,000, P50,000 where the action is filed in Metro Manila. The first level courts thus
have exclusive original jurisdiction over accion publiciana and accion reivindicatoria where
the assessed value of the real property does not exceed the aforestated amounts. Accordingly,
the jurisdictional element is the assessed value of the property.
Assessed value is understood to be "the worth or value of property established by taxing
authorities on the basis of which the tax rate is applied. Commonly, however, it does not
represent the true or market value of the property."16
The subject land has an assessed value of P11,160 as reflected in Tax Declaration No. 7565, a

Lack of jurisdiction is one of those excepted grounds where the court may dismiss a claim or a
case at any time when it appears from the pleadings or the evidence on record that any of those
grounds exists, even if they were not raised in the answer or in a motion to dismiss. 18 That the
issue of lack of jurisdiction was raised by petitioners only in their Memorandum filed before
the trial court did not thus render them in estoppel.
En passant, the Court notes that respondents cause of action accion publiciana is a wrong
mode. The dispossession took place on October 1, 1996 and the complaint was filed four
months thereafter or on February 7, 1997. Respondents exclusion from the property had thus
not lasted for more than one year to call for the remedy of accion publiciana.
In fine, since the RTC has no jurisdiction over the complaint filed by respondents, all the
proceedings therein as well as the Decision of November 27, 1998, are null and void. The
complaint should perforce be dismissed. This leaves it unnecessary to still dwell on the first
issue.
WHEREFORE, the petition is hereby GRANTED. The challenged July 31, 2006 Decision of
the Court of Appeals is SET ASIDE. The decision of Branch 16 of the Regional Trial Court of
Tangub City in Civil Case No. TC-97-001 is declared NULL and VOID for lack of
jurisdiction.
SO ORDERED.

G.R. No. 134230

July 17, 2002

JOVENAL OUANO, petitioner,

vs.
PGTT INTERNATIONAL INVESTMENT CORPORATION and HON. JUDGE
RAMON G. CODILLA, JR.,respondents.
SANDOVAL-GUTIERREZ, J.:
PGTT International Investment Corporation (PGTT), respondent, is a corporation duly
organized under existing laws, with address at YASCO Bldg., M. J. Cuenco Ave., Cebu City.
On December 11, 1997, PGTT filed with the Regional Trial Court (RTC), Branch 20, Cebu
City, a verified complaint against Jovenal Ouano, petitioner, docketed as Civil Case No. CEB21319, entitled "PGTT INTERNATIONAL INVESTMENT CORPORATION, Plaintiff, vs.
JUVENAL OUANO, Defendant," for "Recovery of Ownership and Possession of Real
Property and Damages."1 In its complaint, PGTT alleged that it is the owner of Lot Nos. 1-10,
Block 2 of the Sunnymeade Crescent Subdivision located at Pit-os, Talamban, Cebu City.
Sometime in October of 1996, PGTT found that Ouano uprooted the concrete monuments of
the said lots, plowed them and planted corn thereon. Despite PGTTs demand that he vacate
the lots and restore them to their original condition, Ouano refused, claiming he is the owner
and lawful possessor of the 380 square meters he occupied. Due to Ouanos wrongful act,
PGTT was deprived of the use of its property and suffered damages in the amount
ofP100,000.00 a year. Likewise, PGTT was constrained to file the subject action and hired the
services of his counsel for P100,000.00. PGTT prayed:
"WHEREFORE, in view of all the foregoing, it is most respectfully prayed that after
due notice and hearing, judgment be rendered ordering defendant (Jovenal Ouano)
to vacate the premises and restore the lots to their original condition; pay plaintiff
(PGTT) P100,000.00 as damages per year, beginning October, 1996 until he shall
have vacated the premises and restored the lots to their original condition;
pay P100,000.00 as attorney's fees; and pay P50,000.00 as expenses of litigation.
"Plaintiff prays for such other reliefs and remedies, just and equitable under the
premises."2
On February 5, 1998, Ouano filed a motion to dismiss the complaint on the ground that it is
the Municipal Trial Court (MTC), not the RTC, which has jurisdiction over it considering that
the assessed value of the lots involved is only P2,910, as indicated in the latest tax
declaration,3 citing Section 19 (paragraph 2) and Section 33 (paragraph 3) of Batas Pambansa
Bilang 129 (The Judiciary Reorganization Act of 1980), as amended by Republic Act No.
7691.4
In its opposition to Ouanos motion, PGTT contends that the RTC has jurisdiction since
the market value of the lots is P49,760.00.5 Besides, the complaint is not only an action for
recovery of ownership and possession of real property, but also for damages
exceeding P100,000.00, over which claim the RTC has exclusive original jurisdiction under
Section 19 (paragraph 8) of the same law.

On March 6, 1998, the RTC, presided by Judge Ramon G. Codilla, Jr., issued an Order
denying the motion to dismiss, holding that:
"This court believes that this court has jurisdiction to try this case considering that
the real properties consist of ten parcels of land in a subdivision and the court takes
note that there is a discrepancy somewhere by the Office of the City Assessor in the
Assessment of the parcels of land for only less thanP2,000.00 and that the
government is very much at a loss by these unrealistic valuation."6
Ouano filed a motion for reconsideration but was likewise denied by the RTC in its Order
dated May 27, 1998. The trial court ruled it has jurisdiction over the case because "(i)t is of
judicial knowledge that the real properties situated in Cebu City command a higher valuation
than those indicated in the tax declaration. The observation of plaintiffs (PGTTs) counsel as
to the issue on damages is likewise sustained considering that, being a corporation, it may
have incurred damages in the form of unrealized profits."7
Hence the present petition for certiorari filed by Ouano under Rule 65 of the 1997 Rules of
Civil Procedure, as amended, assailing the Orders of respondent judge dated March 6, 1998
and May 27, 1998 as having been issued with grave abuse of discretion amounting to lack or
excess of jurisdiction.
At the outset, it is necessary to stress that a direct recourse to this Court is highly improper, for
it violates the established policy of strict observance of the judicial hierarchy of courts. 8 We
need to reiterate, for the guidance of petitioner, that this Courts original jurisdiction to issue a
writ of certiorari (as well as prohibition, mandamus, quo warranto, habeas corpus and
injunction) is concurrent with the Court of Appeals (CA), as in the present case, and with the
RTCs in proper cases within their respective regions.9 However, this concurrence of
jurisdiction does not grant a party seeking any of the extraordinary writs the absolute freedom
to file his petition with the court of his choice. This Court is a court of last resort, and must so
remain if it is to satisfactorily perform the functions assigned to it by the Constitution and
immemorial tradition.10 The hierarchy of courts determines the appropriate forum for such
petitions. Thus, petitions for the issuance of such extraordinary writs against the first level
("inferior") courts should be filed with the RTC, and those against the latter, with the CA.11 A
direct invocation of this Courts original jurisdiction to issue these writs should be allowed
only when there are special and important reasons therefor, clearly and specifically set out in
the petition. This is the established policy. It is a policy that is necessary to prevent inordinate
demands upon this Courts time and attention which are better devoted to those matters within
its exclusive jurisdiction, and to prevent further over-crowding of its docket.12 Unfortunately,
the instant petition does not allege any special and compelling reason to justify a direct
recourse to this Court. However, we deem it more appropriate and practical to resolve the
controversy in order to avoid further delay, but only in this instance.
The lone issue for our resolution is whether the RTC has jurisdiction over Civil Case No.
CEB-21319.
The complaint seeks to recover from private respondent the ownership and possession of the
lots in question and the payment of damages. Since the action involves ownership and
possession of real property, the jurisdiction over the subject matter of the claim is determined
by the assessed value, not the market value, thereof, pursuant to Batas Pambansa Blg. 129,
as amended by R.A. 7691. Section 33 (paragraph 3) of the said law provides:

"Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:

"SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
xxx

x x x.
(3) Exclusive original jurisdiction in all civil actions which involve title to, or
possession of, real property, or any interest therein where the assessed value of
the property or interest therein does not exceed Twenty Thousand Pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value does
not exceed Fifty Thousand Pesos (P50,000.00) exclusive of interest, damages of
whatever kind, attorneys fees, litigation expenses and costs: Provided, That in
cases of land not declared for taxation purposes, the value of such property shall be
determined by the assessed value of the adjacent lots.
x x x." (Emphasis ours)
Likewise, Section 19 (paragraph 2) of the same law reads:
"Sec. 19. Jurisdiction in civil cases. - The Regional Trial Court shall
exercise exclusive originaljurisdiction:
x x x.
(2) In all civil actions, which involve the title to, or possession of, real property, or
any interest therein,where the assessed value of the property involved exceeds
Twenty Thousand Pesos (P20,000.00) or, for civil actions in Metro Manila, where
such value exceeds Fifty Thousand Pesos (P50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over
which is conferred upon the Metropolitan Trial Courts, Municipal Trial Courts, and
Municipal Circuit Trial Courts;

"(8) In all other cases in which the demand, exclusive of interest, damages of
whatever kind, attorneys fees, litigation expenses, and costs or the value of the
property in controversy exceeds One Hundred Thousand Pesos (P100,000.00) or, in
such other cases in Metro Manila, where the demand, exclusive of the above
mentioned items exceeds Two hundred thousand pesos (P200,000.00)." (Emphasis
ours)
The above provision does not apply to the instant case. It is applicable only to "all other
cases" other than an action involving title to, or possession of real property in which the
assessed value is the controlling factor in determining the courts jurisdiction. Besides, the
same provision explicitly excludes from the determination of the jurisdictional amount
the demand for "interest, damages of whatever kind, attorneys fees, litigation expenses,
and costs". The exclusion of such damages is reiterated in Section 33, paragraph 3 of the
sameBatas Pambansa Blg. 129, as amended, quoted earlier. The said damages are merely
incidental to, or a consequence of, the main cause of action for recovery of ownership and
possession of real property. In this connection, this Court issued Administrative Circular No.
09-94 setting the guidelines in the implementation of R.A. 7691. Paragraph 2 states:
"2. The exclusion of the term damages of whatever kind in determining the
jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129,
as amended by R.A. 7691, applies to cases where the damages are merely
incidental to or a consequence of the main cause of action. However, in cases
where the claim for damages is the main cause of action, or one of the causes of
action, the amount of such claim shall be considered in determining the jurisdiction
of the court." (Emphasis ours)
We thus find that in issuing the assailed orders denying petitioners motion to dismiss, thus
taking cognizance of the case, the RTC committed grave abuse of discretion.

x x x." (Emphasis ours)

It is undisputed that the assessed value of the property involved, as shown by the
corresponding tax declaration, is only P2,910.00. As such, the complaint is well within the
MTCs P20,000.00 jurisdictional limit.

WHEREFORE, the instant petition is GRANTED. The assailed Orders issued by respondent
RTC on March 6, 1998 and May 27, 1998 in Civil Case No. CEB-21319 are SET ASIDE.
Accordingly, the complaint is orderedDISMISSED.
SO ORDERED.

The finding of respondent judge that the value of the lots is higher than that indicated in the
tax declaration and that, therefore, the RTC has jurisdiction over the case is highly speculative.
It is elementary that the tax declaration indicating the assessed value of the property enjoys the
presumption of regularity as it has been issued by the proper government agency.
Respondent judge further held that since the complaint also seeks the recovery of damages
exceedingP100,000.00, then it is within the competence of the RTC pursuant to Section 19
(paragraph 8) of Batas Pambansa Blg. 129, as amended by R.A. 7691, which states:

Puno, Panganiban, and Carpio, JJ., concur.

G.R. No. 176405

August 20, 2008

LEO WEE, petitioner,

vs.
GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE CASTRO
and FELOMINA UBAN) and MARTINIANA DE CASTRO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules
of Court filed by petitioner Leo Wee, seeking the reversal and setting aside of the
Decision2 dated 19 September 2006 and the Resolution3 dated 25 January 2007 of the Court of
Appeals in CA-G.R. SP No. 90906. The appellate court, in its assailed Decision, reversed the
dismissal of Civil Case. No. 1990, an action for ejectment instituted by respondent George de
Castro, on his own behalf and on behalf of Annie de Castro, Felomina de Castro Uban and
Jesus de Castro4 against petitioner, by the Municipal Trial Court (MTC) of Alaminos City,
which was affirmed by the Regional Trial Court (RTC), Branch 54, Alaminos City,
Pangasinan; and, ruling in favor of the respondents, ordered the petitioner to vacate the subject
property. In its assailed Resolution dated 25 January 2007, the Court of Appeals refused to
reconsider its earlier Decision of 19 September 2006.
In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil
Case No. 1990, respondents alleged that they are the registered owners of the subject property,
a two-storey building erected on a parcel of land registered under Transfer Certificate of Title
(TCT) No. 16193 in the Registry of Deeds of Pangasinan, described and bounded as follows:
A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot 13033D, Psd-018529, LRC Rec. No. ____) situated in Pob., Alaminos City; bounded on
the NW. along line 1-2 by Lot 13035-D-1 of the subdivision plan; on the NE. along
line 2-3 by Vericiano St.; on the SE. along line 3-4 by Lot 13033-D-2 of the
subdivision plan; on the SW. along line 4-1 by Lot 575, Numeriano Rabago. It is
coverd by TCT No. 16193 of the Register of Deeds of Pangasinan (Alaminos City)
and declared for taxation purposes per T.D. No. 2075, and assessed in the sum
ofP93,400.00.6
Respondents rented out the subject property to petitioner on a month to month basis
for P9,000.00 per month.7 Both parties agreed that effective 1 October 2001, the rental
payment shall be increased fromP9,000.00 to P15,000.00. Petitioner, however, failed or
refused to pay the corresponding increase on rent when his rental obligation for the month of 1
October 2001 became due. The rental dispute was brought to the Lupon Tagapagpamayapa of
Poblacion, Alaminos, Pangasinan, in an attempt to amicably settle the matter but the parties
failed to reach an agreement, resulting in the issuance by theBarangay Lupon of a
Certification to file action in court on 18 January 2002. On 10 June 2002, respondent George
de Castro sent a letter to petitioner terminating their lease agreement and demanding that the
latter vacate and turn over the subject property to respondents. Since petitioner stubbornly
refused to comply with said demand letter, respondent George de Castro, together with his

siblings and co-respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro,
filed the Complaint for ejectment before the MTC.
It must be noted, at this point, that although the Complaint stated that it was being filed by all
of the respondents, the Verification and the Certificate of Non-Forum Shopping were signed
by respondent George de Castro alone. He would subsequently attach to his position paper
filed before the MTC on 28 October 2002 the Special Powers of Attorney (SPAs) executed by
his sisters Annie de Castro and Felomina de Castro Uban dated 7 February 2002 and 14 March
2002 respectively, authorizing him to institute the ejectment case against petitioner.
Petitioner, on the other hand, countered that there was no agreement between the parties to
increase the monthly rentals and respondents' demand for an increase was exorbitant. The
agreed monthly rental was only for the amount of P9,000.00 and he was religiously paying the
same every month. Petitioner then argued that respondents failed to comply with the
jurisdictional requirement of conciliation before theBarangay Lupon prior to the filing of Civil
Case. No. 1990, meriting the dismissal of their Complaint therein. The Certification to file
action issued by the Barangay Lupon appended to the respondents' Complaint merely referred
to the issue of rental increase and not the matter of ejectment. Petitioner asserted further that
the MTC lacked jurisdiction over the ejectment suit, since respondents' Complaint was devoid
of any allegation that there was an "unlawful withholding" of the subject property by the
petitioner.8
During the Pre-Trial Conference9 held before the MTC, the parties stipulated that in May
2002, petitioner tendered to respondents the sum of P9,000.00 as rental payment for the month
of January 2002; petitioner paid rentals for the months of October 2001 to January 2002 but
only in the amount ofP9,000.00 per month; respondents, thru counsel, sent a letter to petitioner
on 10 June 2002 terminating their lease agreement which petitioner ignored; and
the Barangay Lupon did issue a Certification to file action after the parties failed to reach an
agreement before it.
After the submission of the parties of their respective Position Papers, the MTC, on 21
November 2002, rendered a Decision10 dismissing respondents' Complaint in Civil Case No.
1990 for failure to comply with the prior conciliation requirement before the Barangay Lupon.
The decretal portion of the MTC Decision reads:
WHEREFORE, premised considered, judgment is hereby rendered ordering the
dismissal of this case. Costs against the [herein respondents].
On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54,
promulgated its Decision11 dated 27 June 2005 affirming the dismissal of respondents'
Complaint for ejectment after finding that the appealed MTC Decision was based on facts and
law on the matter. The RTC declared that since the original agreement entered into by the
parties was for petitioner to pay only the sum of P9.000.00 per month for the rent of the
subject property, and no concession was reached by the parties to increase such amount
to P15.000.00, petitioner cannot be faulted for paying only the originally agreed upon monthly
rentals. Adopting petitioner's position, the RTC declared that respondents' failure to refer the
matter to the Barangay court for conciliation process barred the ejectment case, conciliation
before the Lupon being a condition sine qua non in the filing of ejectment suits. The RTC
likewise agreed with petitioner in ruling that the allegation in the Complaint was flawed, since
respondents failed to allege that there was an "unlawful withholding" of possession of the

subject property, taking out Civil Case No. 1990 from the purview of an action for unlawful
detainer. Finally, the RTC decreed that respondents' Complaint failed to comply with the rule
that a co-owner could not maintain an action without joining all the other co-owners. Thus,
according to the dispositive portion of the RTC Decision:
WHEREFORE the appellate Court finds no cogent reason to disturb the findings of
the court a quo. The Decision dated November 21, 2002 appealed from is hereby
AFFIRMED IN TOTO.12
Undaunted, respondents filed a Petition for Review on Certiorari13 with the Court of Appeals
where it was docketed as CA-G.R. SP No. 90906. Respondents argued in their Petition that the
RTC gravely erred in ruling that their failure to comply with the conciliation process was fatal
to their Complaint, since it is only respondent George de Castro who resides in Alaminos City,
Pangasinan, while respondent Annie de Castro resides in Pennsylvania, United States of
America (USA); respondent Felomina de Castro Uban, in California, USA; and respondent
Jesus de Castro, now substituted by his wife, Martiniana, resides in Manila. Respondents
further claimed that the MTC was not divested of jurisdiction over their Complaint for
ejectment because of the mere absence therein of the term "unlawful withholding" of their
subject property, considering that they had sufficiently alleged the same in their Complaint,
albeit worded differently. Finally, respondents posited that the fact that only respondent
George de Castro signed the Verification and the Certificate of Non-Forum Shopping attached
to the Complaint was irrelevant since the other respondents already executed Special Powers
of Attorney (SPAs) authorizing him to act as their attorney-in-fact in the institution of the
ejectment suit against the petitioner.
On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents'
Petition and ordering petitioner to vacate the subject property and turn over the same to
respondents. The Court of Appeals decreed:
WHEREFORE, premises considered, the instant petition is GRANTED. The
assailed Decision dated June 27, 2005 issued by the RTC of Alaminos City,
Pangasinan, Branch 54, is REVERSED and SET ASIDE. A new one is hereby
rendered ordering [herein petitioner] Leo Wee to SURRENDER and VACATE the
leased premises in question as well as to pay the sum of P15,000.00 per month
reckoned from March, 2002 until he shall have actually turned over the possession
thereof to petitioners plus the rental arrearages of P30,000.00 representing unpaid
increase in rent for the period from October, 2001 to February, 2002, with legal
interest at 6% per annum to be computed from June 7, 2002 until finality of this
decision and 12% thereafter until full payment thereof. Respondent is likewise
hereby ordered to pay petitioners the amount ofP20,000.00 as and for attorney's fees
and the costs of suit.14
In a Resolution dated 25 January 2007, the appellate court denied the Motion for
Reconsideration interposed by petitioner for lack of merit.
Petitioner is now before this Court via the Petition at bar, making the following assignment of
errors:
I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING

THAT CONCILIATION PROCESS IS NOT A JURISDICTIONAL
REQUIREMENT THAT NON-COMPLIANCE THEREWITH DOES NOT
AFFECT THE JURISDICTION IN EJECTMENT CASE;
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
UPHOLDING THE SUFFICIENCY OF THE ALLEGATIONS IN THE
COMPLAINT FOR EJECTMENT DESPITE THE WANT OF ALLEGATION OF
"UNLAWFUL WITHOLDING PREMISES" (sic) QUESTIONED BY
PETITIONER;
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING
THAT THE FILING OF THE COMPLAINT OF RESPONDENT GEORGE DE
CASTRO WITHOUT JOINING ALL HIS OTHER CO-OWNERS OVER THE
SUBJECT PROPERTY IS PROPER;
IV.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT
APPLYING SUPREME COURT CIRCULAR NO. 10 WHICH DIRECTS A
PLEADER TO INDICATE IN HIS PLEADINGS HIS OFFICIAL RECEIPT OF
HIS PAYMENT OF HIS IBP DUES.15
Petitioner avers that respondents failed to go through the conciliation process before the
Barangay Lupon, a jurisdictional defect that bars the legal action for ejectment. The
Certification to file action dated 18 January 2002 issued by the Barangay Lupon, appended by
the respondents to their Complaint in Civil Case No. 1990, is of no moment, for it attested
only that there was confrontation between the parties on the matter of rental increase but not
on unlawful detainer of the subject property by the petitioner. If it was the intention of the
respondents from the very beginning to eject petitioner from the subject property, they should
have brought up the alleged unlawful stay of the petitioner on the subject property for
conciliation before the Barangay Lupon.
The barangay justice system was established primarily as a means of easing up the congestion
of cases in the judicial courts. This could be accomplished through a proceeding before
the barangay courts which, according to the one who conceived of the system, the late Chief
Justice Fred Ruiz Castro, is essentially arbitration in character; and to make it truly effective, it
should also be compulsory. With this primary objective of the barangay justice system in
mind, it would be wholly in keeping with the underlying philosophy of Presidential Decree
No. 1508 (Katarungang Pambarangay Law), which would be better served if an out-of-court
settlement of the case is reached voluntarily by the parties.16 To ensure this objective, Section
6 of Presidential Decree No. 1508 requires the parties to undergo a conciliation process before
the Lupon Chairman or the Pangkat ng Tagapagkasundo as a precondition to filing a
complaint in court subject to certain exceptions. The said section has been declared
compulsory in nature.17

Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The Local
Government Code), which took effect on 1 January 1992.
The pertinent provisions of the Local Government Code making conciliation a precondition to
the filing of complaints in court are reproduced below:
SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No
complaint, petition, action, or proceeding involving any matter within the authority
of the lupon shall be filed or instituted directly in court or any other government
office for adjudication, unless there has been a confrontation between the parties
before the lupon chairman or the pangkat, and that no conciliation or settlement has
been reached as certified by the lupon secretary or pangkat secretary as attested to
by the lupon or pangkat chairman or unless the settlement has been repudiated by
the parties thereto.
(b) Where parties may go directly to court. - The parties may go directly to court in
the following instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been deprived of personal liberty calling
for habeas corpus proceedings;
(3) Where actions are coupled with provisional remedies such as
preliminary injunction, attachment, delivery of personal property, and
support pendente lite; and

(e) Where the dispute involves real properties located in different cities or
municipalities unless the parties thereto agree to submit their differences to amicable
settlement by an appropriate lupon;
(f) Disputes involving parties who actually reside in barangays of different cities or
municipalities, except where such barangay units adjoin each other and the parties
thereto agree to submit their differences to amicable settlement by an appropriate
lupon;
(g) Such other classes of disputes which the President may determine in the interest
of justice or upon the recommendation of the Secretary of Justice.
There is no question that the parties to this case appeared before the Barangay Lupon for
conciliation proceedings. There is also no dispute that the only matter referred to the Barangay
Lupon for conciliation was the rental increase, and not the ejectment of petitioner from the
subject property. This is apparent from a perusal of the Certification to file action in court
issued by the Barangay Lupon on 18 January 2002, to wit:
CERTIFICATION TO FILE COMPLAINTS
This is to certify that:
1. There was personal confrontation between parties before the barangay
Lupon regarding rental increase of a commercial building but conciliation failed;
2. Therefore, the corresponding dispute of the above-entitled case may now be filed
in Court/Government Office.18 (Emphasis ours.)

(4) Where the action may otherwise be barred by the statute of limitations.
(c) Conciliation among members of indigenous cultural communities. - The customs
and traditions of indigenous cultural communities shall be applied in settling
disputes between members of the cultural communities.

The question now to be resolved by this Court is whether the Certification dated 18 January
2002 issued by the Barangay Lupon stating that no settlement was reached by the parties on
the matter of rental increase sufficient to comply with the prior conciliation requirement under
the Katarungang Pambarangay Law to authorize the respondents to institute the ejectment
suit against petitioner.

SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The lupon
of each barangay shall have authority to bring together the parties actually residing
in the same city or municipality for amicable settlement of all disputes except:

The Court rules affirmatively.

(a) Where one party is the government or any subdivision or instrumentality thereof;
(b) Where one party is a public officer or employee, and the dispute relates to the
performance of his official functions;
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding
Five thousand pesos (P5,000.00);
(d) Offenses where there is no private offended party;

While it is true that the Certification to file action dated 18 January 2002 of the Barangay
Lupon refers only to rental increase and not to the ejectment of petitioner from the subject
property, the submission of the same for conciliation before the Barangay Lupon constitutes
sufficient compliance with the provisions of the Katarungang Pambarangay Law. Given the
particular circumstances of the case at bar, the conciliation proceedings for the amount of
monthly rental should logically and reasonably include also the matter of the possession of the
property subject of the rental, the lease agreement, and the violation of the terms thereof.
We now proceed to discuss the meat of the controversy.

The contract of lease between the parties did not stipulate a fixed period. Hence, the parties
agreed to the payment of rentals on a monthly basis. On this score, Article 1687 of the Civil
Code provides:
Art. 1687. If the period for the lease has not been fixed, it is understood to be
from year to year,if the rent agreed upon is annual; from month to month, if it is
monthly; from week to week, if the rent is weekly; and from day to day, if the rent
is to be paid daily. However, even though a monthly rent is paid, and no period for
the lease has been set, the courts may fix a longer term for the lease after the lessee
has occupied the premises for over one year. If the rent is weekly, the courts may
likewise determine a longer period after the lessee has been in possession for over
six months. In case of daily rent, the courts may also fix a longer period after the
lessee has stayed in the place for over one month. (Emphasis supplied.)
The rentals being paid monthly, the period of such lease is deemed terminated at the end of
each month. Thus, respondents have every right to demand the ejectment of petitioners at the
end of each month, the contract having expired by operation of law. Without a lease contract,
petitioner has no right of possession to the subject property and must vacate the same.
Respondents, thus, should be allowed to resort to an action for ejectment before the MTC to
recover possession of the subject property from petitioner.
Corollarily, petitioner's ejectment, in this case, is only the reasonable consequence of his
unrelenting refusal to comply with the respondents' demand for the payment of rental increase
agreed upon by both parties. Verily, the lessor's right to rescind the contract of lease for nonpayment of the demanded increased rental was recognized by this Court in Chua v. Victorio19:

The right of rescission is statutorily recognized in reciprocal obligations, such as

contracts of lease. In addition to the general remedy of rescission granted under
Article 1191 of the Civil Code, there is an independent provision granting the
remedy of rescission for breach of any of the lessor or lessee's statutory obligations.
Under Article 1659 of the Civil Code, the aggrieved party may, at his option, ask for
(1) the rescission of the contract; (2) rescission and indemnification for damages; or
(3) only indemnification for damages, allowing the contract to remain in force.
Payment of the rent is one of a lessee's statutory obligations, and, upon nonpayment by petitioners of the increased rental in September 1994, the lessor
acquired the right to avail of any of the three remedies outlined
above. (Emphasis supplied.)
Petitioner next argues that respondent George de Castro cannot maintain an action for
ejectment against petitioner, without joining all his co-owners.
Article 487 of the New Civil Code is explicit on this point:
ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of action for the recovery of possession, i.e., forcible entry and
unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and
recovery of ownership (accion de reivindicacion). As explained by the renowned civilist,
Professor Arturo M. Tolentino20:

A co-owner may bring such an action, without the necessity of joining all the
other co-owners as co-plaintiffs, because the suit is deemed to be instituted for
the benefit of all. If the action is for the benefit of the plaintiff alone, such that he
claims possession for himself and not for the co-ownership, the action will not
prosper. (Emphasis added.)

In the more recent case of Carandang v. Heirs of De Guzman,21 this Court declared that a coowner is not even a necessary party to an action for ejectment, for complete relief can be
afforded even in his absence, thus:
In sum, in suits to recover properties, all co-owners are real parties in interest.
However, pursuant to Article 487 of the Civil Code and the relevant jurisprudence,
any one of them may bring an action, any kind of action for the recovery of coowned properties. Therefore, only one of the co-owners, namely the co-owner who
filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even
necessary parties, for a complete relief can be afforded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all coowners.
Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special
Power of Attorney, giving respondent George de Castro the authority to initiate Civil Case No.
1990.
A power of attorney is an instrument in writing by which one person, as principal, appoints
another as his agent and confers upon him the authority to perform certain specified acts or
kinds of acts on behalf of the principal. The written authorization itself is the power of
attorney, and this is clearly indicated by the fact that it has also been called a "letter of
attorney."22
Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in
any way affect the validity of the action for ejectment instituted by respondent George de
Castro. This also disposes of petitioner's contention that respondent George de Castro lacked
the authority to sign the Verification and the Certificate of Non-Forum Shopping. As the Court
ruled in Mendoza v. Coronel23:

We likewise hold that the execution of the certification against forum shopping
by the attorney-in-fact in the case at bar is not a violation of the requirement
that the parties must personally sign the same. The attorney-in-fact, who has
authority to file, and who actually filed the complaint as the representative of the
plaintiff co-owner, pursuant to a Special Power of Attorney, is a party to the
ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court includes the
representative of the owner in an ejectment suit as one of the parties authorized to
institute the proceedings. (Emphasis supplied.)
Failure by respondent George de Castro to attach the said SPAs to the Complaint is innocuous,
since it is undisputed that he was granted by his sisters the authority to file the action for
ejectment against petitioner prior to the institution of Civil Case No. 1990. The SPAs in his
favor were respectively executed by respondents Annie de Castro and Felomina de Castro
Uban on 7 February 2002 and 14 March 2002; while Civil Case No. 1990 was filed by
respondent George de Castro on his own behalf and on behalf of his siblings only on 1 July
2002, or way after he was given by his siblings the authority to file said action. The Court
quotes with approval the following disquisition of the Court of Appeals:
Moreover, records show that [herein respondent] George de Castro was indeed
authorized by his sisters Annie de Castro and Felomina de Castro Uban, to prosecute
the case in their behalf as shown by the Special Power of Attorney dated February 7,
2002 and March 14, 2002. That these documents were appended only to [respondent
George de Castro's] position paper is of no moment considering that the authority
conferred therein was given prior to the institution of the complaint in July, 2002. x
x x.24
Respondent deceased Jesus de Castro's failure to sign the Verification and Certificate of NonForum Shopping may be excused since he already executed an Affidavit 25 with respondent
George de Castro that he had personal knowledge of the filing of Civil Case No. 1990.
In Torres v. Specialized Packaging Development Corporation,26 the Court ruled that the
personal signing of the verification requirement was deemed substantially complied with
when, as in the instant case, two out of 25 real parties-in-interest, who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the petition, signed
the verification attached to it.
In the same vein, this Court is not persuaded by petitioner's assertion that respondents' failure
to allege the jurisdictional fact that there was "unlawful withholding" of the subject property
was fatal to their cause of action.
It is apodictic that what determines the nature of an action as well as which court has
jurisdiction over it are the allegations in the complaint and the character of the relief sought. In
an unlawful detainer case, the defendant's possession was originally lawful but ceased to be so
upon the expiration of his right to possess. Hence, the phrase "unlawful withholding" has been
held to imply possession on the part of defendant, which was legal in the beginning, having no
other source than a contract, express or implied, and which later expired as a right and is being
withheld by defendant.27
In Barba v. Court of Appeals,28 the Court held that although the phrase "unlawfully
withholding" was not actually used by therein petitioner in her complaint, the Court held that
her allegations, nonetheless, amounted to an unlawful withholding of the subject property by

therein private respondents, because they continuously refused to vacate the premises even
after notice and demand.
In the Petition at bar, respondents alleged in their Complaint that they are the registered
owners of the subject property; the subject property was being occupied by the petitioner
pursuant to a monthly lease contract; petitioner refused to accede to respondents' demand for
rental increase; the respondents sent petitioner a letter terminating the lease agreement and
demanding that petitioner vacate and turn over the possession of the subject property to
respondents; and despite such demand, petitioner failed to surrender the subject property to
respondents.29 The Complaint sufficiently alleges the unlawful withholding of the subject
property by petitioner, constitutive of unlawful detainer, although the exact words "unlawful
withholding" were not used. In an action for unlawful detainer, an allegation that the
defendant is unlawfully withholding possession from the plaintiff is deemed sufficient,
without necessarily employing the terminology of the law.30
Petitioner's averment that the Court of Appeals should have dismissed respondents' Petition in
light of the failure of their counsel to attach the Official Receipt of his updated payment of
Integrated Bar of the Philippines (IBP) dues is now moot and academic, since respondents'
counsel has already duly complied therewith. It must be stressed that judicial cases do not
come and go through the portals of a court of law by the mere mandate of
technicalities.31 Where a rigid application of the rules will result in a manifest failure or
miscarriage of justice, technicalities should be disregarded in order to resolve the case. 32
Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for the payment
of back rentals, attorney's fees and cost of the suit. Respondents must be duly indemnified for
the loss of income from the subject property on account of petitioner's refusal to vacate the
leased premises.
WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 19
September 2006 and Resolution dated 25 January 2007 of the Court of Appeals in CA-G.R.
SP No. 90906 are hereby AFFIRMED in toto. Costs against petitioner.
SO ORDERED.

G.R. No. 153567

February 18, 2008

LIBRADA M. AQUINO, petitioner,

vs.
ERNEST S. AURE1, respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari2 under Rule 45 of the Revised Rules
of Court filed by petitioner Librada M. Aquino (Aquino), seeking the reversal and the setting
aside of the Decision3 dated 17 October 2001 and the Resolution4 dated 8 May 2002 of the
Court of Appeals in CA-G.R. SP No. 63733. The appellate court, in its assailed Decision and
Resolution, reversed the Decision5 of the Regional Trial Court (RTC) of Quezon City, Branch
88, affirming the Decision6 of the Metropolitan Trial Court (MeTC) of Quezon City, Branch
32, which dismissed respondent Ernesto Aures (Aure) complaint for ejectment on the
ground, inter alia, of failure to comply with barangay conciliation proceedings.
The subject of the present controversy is a parcel of land situated in Roxas District, Quezon
City, with an area of 449 square meters and covered by Transfer Certificate of Title (TCT) No.
205447 registered with the Registry of Deeds of Quezon City (subject property). 7
Aure and E.S. Aure Lending Investors, Inc. (Aure Lending) filed a Complaint for ejectment
against Aquino before the MeTC docketed as Civil Case No. 17450. In their Complaint, Aure
and Aure Lending alleged that they acquired the subject property from Aquino and her
husband Manuel (spouses Aquino) by virtue of a Deed of Sale8executed on 4 June 1996. Aure
claimed that after the spouses Aquino received substantial consideration for the sale of the
subject property, they refused to vacate the same.9
In her Answer,10 Aquino countered that the Complaint in Civil Case No. 17450 lacks cause of
action for Aure and Aure Lending do not have any legal right over the subject property.
Aquino admitted that there was a sale but such was governed by the Memorandum of
Agreement11 (MOA) signed by Aure. As stated in the MOA, Aure shall secure a loan from a
bank or financial institution in his own name using the subject property as collateral and turn
over the proceeds thereof to the spouses Aquino. However, even after Aure successfully
secured a loan, the spouses Aquino did not receive the proceeds thereon or benefited
therefrom.
On 20 April 1999, the MeTC rendered a Decision in Civil Case No. 17450 in favor of Aquino
and dismissed the Complaint for ejectment of Aure and Aure Lending for non-compliance
with the barangay conciliation process, among other grounds. The MeTC observed that Aure
and Aquino are residents of the same barangay but there is no showing that any attempt has
been made to settle the case amicably at the barangay level. The MeTC further observed that
Aure Lending was improperly included as plaintiff in Civil Case No. 17450 for it did not stand
to be injured or benefited by the suit. Finally, the MeTC ruled that since the question of
ownership was put in issue, the action was converted from a mere detainer suit to one
"incapable of pecuniary estimation" which properly rests within the original exclusive
jurisdiction of the RTC. The dispositive portion of the MeTC Decision reads:

WHEREFORE, premises considered, let this case be, as it is, hereby ordered
DISMISSED. [Aquinos] counterclaim is likewise dismissed.12
On appeal, the RTC affirmed the dismissal of the Complaint on the same ground that the
dispute was not brought before the Barangay Council for conciliation before it was filed in
court. In a Decision dated 14 December 2000, the RTC stressed that the barangay conciliation
process is a conditio sine qua non for the filing of an ejectment complaint involving residents
of the same barangay, and failure to comply therewith constitutes sufficient cause for the
dismissal of the action. The RTC likewise validated the ruling of the MeTC that the main issue
involved in Civil Case No. 17450 is incapable of pecuniary estimation and cognizable by the
RTC. Hence, the RTC ruled:
WHEREFORE, finding no reversible error in the appealed judgment, it is hereby
affirmed in its entirety.13
Aures Motion for Reconsideration was denied by the RTC in an Order14 dated 27 February
2001.
Undaunted, Aure appealed the adverse RTC Decision with the Court of Appeals arguing that
the lower court erred in dismissing his Complaint for lack of cause of action. Aure asserted
that misjoinder of parties was not a proper ground for dismissal of his Complaint and that the
MeTC should have only ordered the exclusion of Aure Lending as plaintiff without prejudice
to the continuation of the proceedings in Civil Case No. 17450 until the final determination
thereof. Aure further asseverated that mere allegation of ownership should not divest the
MeTC of jurisdiction over the ejectment suit since jurisdiction over the subject matter is
conferred by law and should not depend on the defenses and objections raised by the parties.
Finally, Aure contended that the MeTC erred in dismissing his Complaint with prejudice on
the ground of non-compliance with barangay conciliation process. He was not given the
opportunity to rectify the procedural defect by going through the barangay mediation
proceedings and, thereafter, refile the Complaint.15
On 17 October 2001, the Court of Appeals rendered a Decision, reversing the MeTC and RTC
Decisions and remanding the case to the MeTC for further proceedings and final
determination of the substantive rights of the parties. The appellate court declared that the
failure of Aure to subject the matter to barangay conciliation is not a jurisdictional flaw and it
will not affect the sufficiency of Aures Complaint since Aquino failed to seasonably raise
such issue in her Answer. The Court of Appeals further ruled that mere allegation of
ownership does not deprive the MeTC of jurisdiction over the ejectment case for jurisdiction
over the subject matter is conferred by law and is determined by the allegations advanced by
the plaintiff in his complaint. Hence, mere assertion of ownership by the defendant in an
ejectment case will not oust the MeTC of its summary jurisdiction over the same. The decretal
part of the Court of Appeals Decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED - and the decisions of
the trial courts below REVERSED and SET ASIDE. Let the records be remanded back to the
court a quo for further proceedings for an eventual decision of the substantive rights of the
disputants.16

In a Resolution dated 8 May 2002, the Court of Appeals denied the Motion for
Reconsideration interposed by Aquino for it was merely a rehash of the arguments set forth in
her previous pleadings which were already considered and passed upon by the appellate court
in its assailed Decision.

by the lupon chairman or pangkat chairman or unless the settlement has been
repudiated by the parties thereto.
(b) Where parties may go directly to court. The parties may go directly to court in
the following instances:

Aquino is now before this Court via the Petition at bar raising the following issues:
(1) Where the accused is under detention;
I.
WHETHER OR NOT NON-COMPLIANCE WITH THE BARANGAY
CONCILIATION PROCEEDINGS IS A JURISDICTIONAL DEFECT THAT
WARRANTS THE DISMISSAL OF THE COMPLAINT.

(2) Where a person has otherwise been deprived of personal liberty calling
for habeas corpus proceedings;
(3) Where actions are coupled with provisional remedies such as preliminary
injunction, attachment, delivery of personal property, and support pendente lite; and

II.
(4) Where the action may otherwise be barred by the statute of limitations.
WHETHER OR NOT ALLEGATION OF OWNERSHIP OUSTS THE MeTC OF
ITS JURISDICTION OVER AN EJECTMENT CASE.
The barangay justice system was established primarily as a means of easing up the congestion
of cases in the judicial courts. This could be accomplished through a proceeding before
the barangay courts which, according to the conceptor of the system, the late Chief Justice
Fred Ruiz Castro, is essentially arbitration in character, and to make it truly effective, it should
also be compulsory. With this primary objective of the barangay justice system in mind, it
would be wholly in keeping with the underlying philosophy of Presidential Decree No. 1508,
otherwise known as the Katarungang Pambarangay Law, and the policy behind it would be
better served if an out-of-court settlement of the case is reached voluntarily by the parties.17

(c) Conciliation among members of indigenous cultural communities. The customs

and traditions of indigenous cultural communities shall be applied in settling
disputes between members of the cultural communities.
SEC. 408. Subject Matter for Amicable Settlement; Exception Therein. The lupon
of each barangay shall have authority to bring together the parties actually residing
in the same city or municipality for amicable settlement of all disputes except:
(a) Where one party is the government or any subdivision or instrumentality thereof;

The primordial objective of Presidential Decree No. 1508 is to reduce the number of court
litigations and prevent the deterioration of the quality of justice which has been brought by the
indiscriminate filing of cases in the courts.18 To ensure this objective, Section 6 of Presidential
Decree No. 150819 requires the parties to undergo a conciliation process before the Lupon
Chairman or the Pangkat ng Tagapagkasundo as a precondition to filing a complaint in court
subject to certain exceptions20 which are inapplicable to this case. The said section has been
declared compulsory in nature.21

(b) Where one party is a public officer or employee, and the dispute relates to the
performance of his official functions;

Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160, otherwise known
as The Local Government Code, which took effect on 1 January 1992.

(e) Where the dispute involves real properties located in different cities or
municipalities unless the parties thereto agree to submit their differences to amicable
settlement by an appropriate lupon;

The pertinent provisions of the Local Government Code making conciliation a precondition to
filing of complaints in court, read:
SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. No
complaint, petition, action, or proceeding involving any matter within the authority
of the lupon shall be filed or instituted directly in court or any other government
office for adjudication, unless there has been a confrontation between the parties
before the lupon chairman or the pangkat, and that no conciliation or settlement has
been reached as certified by the lupon secretary or pangkat secretary as attested to

(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding
Five thousand pesos (P5,000.00);
(d) Offenses where there is no private offended party;

(f) Disputes involving parties who actually reside in barangays of different cities or
municipalities, except where such barangay units adjoin each other and the parties
thereto agree to submit their differences to amicable settlement by an appropriate
lupon;
(g) Such other classes of disputes which the President may determine in the interest
of justice or upon the recommendation of the Secretary of Justice.

There is no dispute herein that the present case was never referred to the Barangay Lupon for
conciliation before Aure and Aure Lending instituted Civil Case No. 17450. In fact, no
allegation of such barangay conciliation proceedings was made in Aure and Aure Lendings
Complaint before the MeTC. The only issue to be resolved is whether non-recourse to
the barangay conciliation process is a jurisdictional flaw that warrants the dismissal of the
ejectment suit filed with the MeTC.
Aquino posits that failure to resort to barangay conciliation makes the action for ejectment
premature and, hence, dismissible. She likewise avers that this objection was timely raised
during the pre-trial and even subsequently in her Position Paper submitted to the MeTC.
We do not agree.
It is true that the precise technical effect of failure to comply with the requirement of Section
412 of the Local Government Code on barangay conciliation (previously contained in Section
5 of Presidential Decree No. 1508) is much the same effect produced by non-exhaustion of
administrative remedies -- the complaint becomes afflicted with the vice of pre-maturity; and
the controversy there alleged is not ripe for judicial determination. The complaint becomes
vulnerable to a motion to dismiss.22 Nevertheless, the conciliation process is not a
jurisdictional requirement, so that non-compliance therewith cannot affect the
jurisdiction which the court has otherwise acquired over the subject matter or over the
person of the defendant.23
As enunciated in the landmark case of Royales v. Intermediate Appellate Court24:
Ordinarily, non-compliance with the condition precedent prescribed by P.D. 1508
could affect the sufficiency of the plaintiff's cause of action and make his complaint
vulnerable to dismissal on ground of lack of cause of action or prematurity; but the
same would not prevent a court of competent jurisdiction from exercising its
power of adjudication over the case before it, where the defendants, as in this
case, failed to object to such exercise of jurisdiction in their answer and even
during the entire proceedings a quo.
While petitioners could have prevented the trial court from exercising jurisdiction
over the case by seasonably taking exception thereto, they instead invoked the very
same jurisdiction by filing an answer and seeking affirmative relief from it. What is
more, they participated in the trial of the case by cross-examining respondent
Planas. Upon this premise, petitioners cannot now be allowed belatedly to adopt
an inconsistent posture by attacking the jurisdiction of the court to which they
had submitted themselves voluntarily. x x x (Emphasis supplied.)
In the case at bar, we similarly find that Aquino cannot be allowed to attack the jurisdiction of
the MeTC over Civil Case No. 17450 after having submitted herself voluntarily thereto. We
have scrupulously examined Aquinos Answer before the MeTC in Civil Case No. 17450 and
there is utter lack of any objection on her part to any deficiency in the complaint which could
oust the MeTC of its jurisdcition.
We thus quote with approval the disquisition of the Court of Appeals:

Moreover, the Court takes note that the defendant [Aquino] herself did not raise in
defense the aforesaid lack of conciliation proceedings in her answer, which raises
the exclusive affirmative defense of simulation. By this acquiescence, defendant
[Aquino] is deemed to have waived such objection. As held in a case of similar
circumstances, the failure of a defendant [Aquino] in an ejectment suit to
specifically allege the fact that there was no compliance with the barangay
conciliation procedure constitutes a waiver of that defense. x x x. 25
By Aquinos failure to seasonably object to the deficiency in the Complaint, she is deemed to
have already acquiesced or waived any defect attendant thereto. Consequently, Aquino cannot
thereafter move for the dismissal of the ejectment suit for Aure and Aure Lendings failure to
resort to the barangay conciliation process, since she is already precluded from doing so. The
fact that Aquino raised such objection during the pre-trial and in her Position Paper is of no
moment, for the issue of non-recourse to barangay mediation proceedings should be
impleaded in her Answer.
As provided under Section 1, Rule 9 of the 1997 Rules of Civil Procedure:
Sec. 1. Defenses and objections not pleaded. Defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed
waived. However, when it appears from the pleadings or the evidence on record that
the court has no jurisdiction over the subject matter, that there is another action
pending between the same parties for the same cause, or that the action is barred by
a prior judgment or by statute of limitations, the court shall dismiss the claim.
(Emphasis supplied.)
While the aforequoted provision applies to a pleading (specifically, an Answer) or a motion to
dismiss, a similar or identical rule is provided for all other motions in Section 8 of Rule 15 of
the same Rule which states:
Sec. 8. Omnibus Motion. - Subject to the provisions of Section 1 of Rule 9, a motion
attacking a pleading, order, judgment, or proceeding shall include all objections then
available, and all objections not so included shall be deemed waived.
The spirit that surrounds the foregoing statutory norm is to require the party filing a pleading
or motion to raise all available exceptions for relief during the single opportunity so that single
or multiple objections may be avoided.26It is clear and categorical in Section 1, Rule 9 of the
Revised Rules of Court that failure to raise defenses and objections in a motion to dismiss or
in an answer is deemed a waiver thereof; and basic is the rule in statutory construction that
when the law is clear and free from any doubt or ambiguity, there is no room for construction
or interpretation.27 As has been our consistent ruling, where the law speaks in clear and
categorical language, there is no occasion for interpretation; there is only room for
application.28 Thus, although Aquinos defense of non-compliance with Presidential Decree
No. 1508 is meritorious, procedurally, such defense is no longer available for failure to plead
the same in the Answer as required by the omnibus motion rule.
Neither could the MeTC dismiss Civil Case No. 17450 motu proprio. The 1997 Rules of Civil
Procedure provide only three instances when the court may motu proprio dismiss the claim,
and that is when the pleadings or evidence on the record show that (1) the court has no

jurisdiction over the subject matter; (2) there is another cause of action pending between the
same parties for the same cause; or (3) where the action is barred by a prior judgment or by a
statute of limitations. Thus, it is clear that a court may not motu proprio dismiss a case on the
ground of failure to comply with the requirement for barangay conciliation, this ground not
being among those mentioned for the dismissal by the trial court of a case on its own initiative.
Aquino further argues that the issue of possession in the instant case cannot be resolved by the
MeTC without first adjudicating the question of ownership, since the Deed of Sale vesting
Aure with the legal right over the subject property is simulated.
Again, we do not agree. Jurisdiction in ejectment cases is determined by the allegations
pleaded in the complaint. As long as these allegations demonstrate a cause of action either for
forcible entry or for unlawful detainer, the court acquires jurisdiction over the subject matter.
This principle holds, even if the facts proved during the trial do not support the cause of action
thus alleged, in which instance the court -- after acquiring jurisdiction -- may resolve to
dismiss the action for insufficiency of evidence.
The necessary allegations in a Complaint for ejectment are set forth in Section 1, Rule 70 of
the Rules of Court, which reads:
SECTION 1. Who may institute proceedings, and when. Subject to the provisions
of the next succeeding section, a person deprived of the possession of any land or
building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied, or the legal representatives
or assigns of any such lessor, vendor, vendee, or other person may at any time
within one (1) year after such unlawful deprivation or withholding of possession,
bring an action in the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons
claiming under them, for the restitution of such possession, together with damages
and costs.
In the case at bar, the Complaint filed by Aure and Aure Lending on 2 April 1997, alleged as
follows:
2. [Aure and Aure Lending] became the owners of a house and lot located at No. 37
Salazar Street corner Encarnacion Street, B.F. Homes, Quezon City by virtue of a
deed of absolute sale executed by [the spouses Aquino] in favor of [Aure and Aure
Lending] although registered in the name of x x x Ernesto S. Aure; title to the said
property had already been issued in the name of [Aure] as shown by a transfer
Certificate of Title , a copy of which is hereto attached and made an integral part
hereof as Annex A;
3. However, despite the sale thus transferring ownership of the subject premises to
[Aure and Aure Lending] as above-stated and consequently terminating [Aquinos]
right of possession over the subject property, [Aquino] together with her family, is
continuously occupying the subject premises notwithstanding several demands made
by [Aure and Aure Lending] against [Aquino] and all persons claiming right under

her to vacate the subject premises and surrender possession thereof to [Aure and
Aure Lending] causing damage and prejudice to [Aure and Aure Lending] and
making [Aquinos] occupancy together with those actually occupying the subject
premises claiming right under her, illegal.29
It can be inferred from the foregoing that Aure, together with Aure Lending, sought the
possession of the subject property which was never surrendered by Aquino after the perfection
of the Deed of Sale, which gives rise to a cause of action for an ejectment suit cognizable by
the MeTC. Aures assertion of possession over the subject property is based on his ownership
thereof as evidenced by TCT No. 156802 bearing his name. That Aquino impugned the
validity of Aures title over the subject property and claimed that the Deed of Sale was
simulated should not divest the MeTC of jurisdiction over the ejectment case.30
As extensively discussed by the eminent jurist Florenz D. Regalado in Refugia v. Court of
Appeals31:
As the law on forcible entry and unlawful detainer cases now stands, even where the
defendant raises the question of ownership in his pleadings and the question of
possession cannot be resolved without deciding the issue of ownership, the
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts nevertheless have the undoubted competence to resolve the issue of
ownership albeit only to determine the issue of possession.
x x x. The law, as revised, now provides instead that when the question of
possession cannot be resolved without deciding the issue of ownership, the issue
of ownership shall be resolved only to determine the issue of possession. On its
face, the new Rule on Summary Procedure was extended to include within the
jurisdiction of the inferior courts ejectment cases which likewise involve the issue of
ownership. This does not mean, however, that blanket authority to adjudicate the
issue of ownership in ejectment suits has been thus conferred on the inferior courts.
At the outset, it must here be stressed that the resolution of this particular issue
concerns and applies only to forcible entry and unlawful detainer cases where the
issue of possession is intimately intertwined with the issue of ownership. It finds no
proper application where it is otherwise, that is, where ownership is not in issue, or
where the principal and main issue raised in the allegations of the complaint as well
as the relief prayed for make out not a case for ejectment but one for recovery of
ownership.
Apropos thereto, this Court ruled in Hilario v. Court of Appeals32:
Thus, an adjudication made therein regarding the issue of ownership should be
regarded as merely provisional and, therefore, would not bar or prejudice an action
between the same parties involving title to the land. The foregoing doctrine is a
necessary consequence of the nature of forcible entry and unlawful detainer cases
where the only issue to be settled is the physical or material possession over the real
property, that is, possession de facto and not possession de jure."

In other words, inferior courts are now "conditionally vested with adjudicatory power over the
issue of title or ownership raised by the parties in an ejectment suit." These courts shall resolve
the question of ownership raised as an incident in an ejectment case where a determination
thereof is necessary for a proper and complete adjudication of the issue of possession. 33
WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals
Decision dated 17 October 2001 and its Resolution dated 8 May 2002 in CA-G.R. SP No.
63733 are hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.

G.R. No. 141809

April 8, 2013

JOSEFINA F. INGLES, JOSE F. INGLES, JR., HECTOR F. INGLES, JOSEFINA I.

ESTRADA, and TERESITA I. BIRON, Petitioners,
vs.
HON. ESTRELLA T. ESTRADA, in her capacity as former EXECUTIVE JUDGE,
Regional Trial Court of QUEZON CITY, and CHARLES J. ESTEBAN, Respondents.

Jose D. Ingles, Sr. (Jose) and his wife, petitioner Josefina F. Ingles (Josefina), were the
registered owners of a 2,265 square meter parcel of land in Quezon City per Transfer
Certificate of Title (TCT) No. 125341 PR-17485.6TCT No. 125341 PR-17485 contains the
following technical description of the land of Jose and Josefina:7

G.R. No. 147186

A parcel of land (lot 13, block W-35 of the subd. plan Psd-7365-D, being a portion of Lot R.P.
3-D-2-B of Plan BSD-7365-D, G.L.R.O. Rec. No. 7681) situated in the District of Diliman,
Quezon City. Bounded on the NW., along line 1-2 by lot 14, block W-35; on the NE., along
line 2-3-4-5-6, by R-285; on the SE., along line 6-7-8-9, by R-283; on the SW., along line 910 by lot 13, block Q-35; and on the NW., along line 10-1 by lot 15 block W-35; all of the
subd. plan x x x x beginning, containing an area of TWO THOUSAND TWO HUNDRED
SIXTY FIVE (2,265) SQUARE METERS, more or less.

JOSEFINA F. INGLES, JOSE F. INGLES, JR., HECTOR F. INGLES, JOSEFINA I.

ESTRADA and TERESITA I. BIRON, Petitioners,
vs.
HON. ARSENIO J. MAGPALE, Judge, Presiding over Branch 225, Regional Trial
Court, QUEZON CITY, and CHARLES J. ESTEBAN, Respondents.

On 14 April 1993, Jose and Josefina obtained a loan in the amount of P6,200,000.00 from
respondent Charles J. Esteban (Charles). As collateral for such loan, Jose and Josefina
mortgaged their above-described land in favor of Charles. A Promissory Note8 and a Deed of
Real Estate Mortgage,9 evidencing both such loan and mortgage, were accordingly executed
between Jose, Josefina and Charles on the same day.

x-----------------------x

The Deed of Real Estate Mortgage, the mortgaged land was mistakenly referred to as being
covered by TCT No. 125141 PR- 17485 instead of TCT No. 125341 PR17485.10 Nevertheless, the deed identified the mortgaged land exactly in accordance with the
technical description of TCT No. 125341 PR-17485.11 The pertinent part of the Deed of Real
Estate Mortgage thus read:12

x-----------------------x

G.R. No. 173641

JOSEFINA F. INGLES, JOSE F. INGLES, JR., HECTOR INGLES, JOSEFINA I.
ESTRADA and TERESITA I. BIRON, Petitioners,
vs.
CHARLES J. ESTEBAN, Respondent.
DECISION
PEREZ, J.:
For decision are the following petitions for review on certiorari: 1
1. G.R. No. 141809, which assails the Resolutions2 dated 28 December 1999 and 28
January 2000 of the Court of Appeals in CA-G.R. SP. No. 56292; ,
2. G.R. No. 147186, which assails the Resolutions3 dated 29 November 2000 and 16
February 2001 of the Court of Appeals in CA-G.R. SP No. 58790; and
3. G.R. No. 173641, which assails the Decision 4 dated 31 March 2006 and
Resolution5 dated 19 July 2006 of the Court of Appeals in CA-G.R. SP No. 84738.
These petitions share the same facts:
The Land, Loan and Mortgage

For and in consideration of a loan in the amount of SIX MILLION TWO HUNDRED
THOUSAND PESOS (P6,200,000.00), Philippine Currency, in hand given by the
MORTGAGEE Charles to the MORTGAGOR/S Jose and Josefina, the receipt, of the said
amount is hereby acknowledged and confessed x x x, the MORTGAGOR/S Jose and Josefina
hereby cede, transfer and convey, BY WAY OF FIRST MORTGAGE, unto and favor of the
MORTGAGEE Charles, his heirs, successors and assigns, a parcel of land located at
____________, together with the residential house constructed on the said land, which is more
particularly described in Transfer Certificate of Title No. 125141 PR-17485, Registry of
Deeds of __________ as follows:
A parcel of land (lot 13, block W-35 of the subd. plan Psd-7365-D, being a portion of Lot R.P.
3-D-2-B of Plan Bsd-7365-D, G.L.R.O. Rec. No. 7681) situated in District of Diliman,
Quezon City. Bounded on the NW., along line 1-2 by lot 14, block W-35; on the NE., along
line 2-3-4-5-6, by R-285; on the SE., along line 6-7-8-9, by R-283; on the SW., along line 910 by lot 13, block W-35; and on the NW., along line 10-1 by lot 15, block W-35; all of the
subd. plan x x x x beginning, containing an area of TWO THOUSAND TWO HUNDRED
SIXTY FIVE (2,265) SQUARE METERS, more or less. (Emphasis and underscoring
supplied).
Moreover, the Deed of Real Estate Mortgage contained the following stipulation: "upon the
failure of the MORTGAGOR/S Jose and Josefina to pay their loan at maturity date x x x the
MORTGAGOR/S Jose and Josefina may elect or choose to foreclose the mortgage judicially
or extrajudicially x x x."13 The deed provided further that: "in the event of extrajudicial
foreclosure of themortgage x x x the MORTGAGOR/S Jose and Josefina name, constitute and
appoint the MORTGAGEE Charles as attorney-in-fact without further formality, with full

power and authority to dispose the mortgaged property in accordance with the provision of
Act 3135 as amended."14
On 26 April 1993, Jose and Josefina requested the Register of Deeds of Quezon City for the
division of their land into ten (10) lots.15 The request eventually led to the cancellation of TCT
No. 125341 PR-17485 and the issuance of separate Torrens titles for each of the 10 lots,
namely, TCT Nos. 85825-34.16

Ingleses claim that Jose and Josefina never actually consented to any mortgage on their land
and that their signatures in the Deed of Real Estate Mortgage were obtained thru Charles
deception.30 The Ingleses allege that Charles had deceived Jose and Josefina into signing blank
documents, one of which eventually becoming the Deed of Real Estate Mortgage and another
becoming the Promissory Note, on the pretense that such documents were required in a
business venture that they had.31 This complaint was docketed as Civil Case No. Q-983327732 and was raffled to Branch 225.

Upon maturity of their loan on 29 May 1993, Jose and Josefina issued to Charles a check
for P6,200,000.00 as payment. Unfortunately, that check bounced.17

On 24 July 1998, Charles registered his Certificate of Sale with the Register of Deeds of
Quezon City.33

On 30 October 1993, Jose died.18 He was survived by Josefina and herein petitioners Jose F.
Ingles, Jr., Hector Ingles, Josefina I. Estrada and Teresita Biron (collectively, the Ingleses).

On 15 September 1998, Charles filed an Ex-Parte Petition for Issuance of a Writ of

Possession34 before the Quezon City RTC,35 wherein he asked to immediately be placed in
possession of the ten (10) lots foreclosed in his favor in lieu of their current possessors, the

On 13 July 1994, Charles sent to Josefina a letter demanding for the payment of her and her
late husbands loan. Charles, in the same letter, also threatened to foreclose the mortgage in
his favor should Josefina fail to heed the demand for payment within ten (10) days from her
receipt of the letter.19 To these, Josefina responded with her own letter asking Charles for an
extension of time, i.e., until 30 October 1994, within which to pay for all of her
obligations.20 Despite the extension, however, Josefina still failed to pay. 21
The Extrajudicial Foreclosure
On 12 July 1997, Charles petitioned22 Executive Judge Estrella T. Estrada (Executive Judge
Estrada) of the Regional Trial Court (RTC) of Quezon City for the extrajudicial foreclosure of
the mortgage in his favor. Invoking the provisions of Act No. 313523 and the Deed of Real
Estate Mortgage, Charles sought for the sale at public auction of the ten (10) lots originally
subsumed in TCT No. 125341 PR-17485 but which are now separately covered by TCT Nos.
85825-34 in the names of Josefina and her late husband.
On 8 October 1997, Executive Judge Estrada issued an Order24 directing Atty. Mercedes
Gatmaytan (Atty. Gatmaytan), the Clerk of Court and Ex-Officio Sheriff of the Quezon City
RTC, to proceed with the extrajudicial sale of the ten (10) lots covered by TCT Nos. 8582534.25 Against such Order, the Ingleses filed a motion for reconsideration on 13 October 1997.
On 20 November 2007, however, Executive Judge Estrada issued an Order 26 denying such
motion for reconsideration.
On 1 December 1997, Atty. Gatmaytan issued a Notice of Sale27 setting the public auction on
6 January 1998.
At the public auction, Charles was declared the highest bidder for all of the ten (10) lots. On 7
January 1998, Atty. Gatmaytan issued to Charles a corresponding Certificate of Sale. 28
The Legal Challenges of the Ingleses and the Petition for the Issuance of Writ of Possession of
Charles
On 23 January 1998, the Ingleses filed with the Quezon City RTC a complaint for the
Annulment of the Deed of Real Estate Mortgage29 against Charles. In this complaint, the

Ingleses.36 This petition was docketed as LRC Case No. Q-10766 (98) and was raffled to
Branch 92.
On 23 February 1999, Branch 92 of the Quezon City RTC issued an Order 37 directing LRC
Case No. Q-10766 (98) to be consolidated with Civil Case No. Q-98-3327738 under Branch
225. As a consequence of the consolidation, the records of LRC Case No. Q-10766 (98) were
transferred to Branch 225.
On 17 December 1999, on the other hand, the Ingleses filed before the Court of Appeals a
petition for Annulment of Final Orders39 pursuant to Rule 47 of the Rules of Court. In it, the
Ingleses sought the nullification of the Orders dated 8 October 1997, 20 November 1997 and
27 July 199840 of Executive Judge Estrada, which allowed Charles to extrajudicially foreclose
the mortgage on the ten (10) lots as well as to register the resulting Certificate of Sale. The
Ingleses argue that Executive Judge Estrada was bereft of any jurisdiction to issue the assailed
Orders in light of the provisions in the Deed of Real Estate Mortgage: (a) referring to the
mortgaged property as being covered by TCT No. 125141 PR-17485 rather than TCT No.
125341 PR-17485, and (b) giving to Jose and Josefina, not to Charles, the right to choose
whether the mortgage may be extrajudicially foreclosed or not. 41 In issuing the assailed
Orders, therefore, the Ingleses accuse Executive Judge Estrada of "amending," "altering," and
"revising" the terms of the Deed of Real Estate Mortgage that could not be done in a mere
extrajudicial proceeding.42 This petition was docketed as CA-G.R. SP No. 56292.
CA-G.R. SP No. 56292: Annulment of Final Orders
On 28 December 1999, the Court of Appeals in CA-G.R. SP. No. 56292 issued a
Resolution43 dismissing the petition for Annulment of Final Orders on grounds of noncompliance with Section 4, Rule 4744 and Section 3, Rule 4645 of the Rules of Court. The
Ingleses filed a motion for reconsideration.
On 28 January 2000, the Court of Appeals issued a Resolution 46 denying the motion for
reconsideration. In this later Resolution, however, the Court of Appeals used a different, albeit
a more fundamental rationale to maintain its dismissal of the petition for Annulment of Final
Orders.

In the later Resolution, the Court of Appeals dismissed the petition for Annulment of Final
Orders on the ground of lack of jurisdiction. According to the Court of Appeals, it cannot take
original cognizance of the Ingleses petition as the same does not qualify either as an action
under Rule 47 or, for that matter, as any other case that would fall within its original
jurisdiction under Rule 46 of the Rules of Court.47 The Court of Appeals pointed out that the
petition for Annulment of Final Orders assails orders issued by an executive judge in a
proceeding merely for the extrajudicial foreclosure of a mortgage whereas the Rules of
Court48 clearly prescribes that only judgments, final orders and resolutions issued by a
"Regional Trial Court" in "civil actions" may be the subject of annulment under Rule
47.49 The Court of Appeals further added that, at any rate, the principle of hierarchy of courts
dictates that the Ingleses should have first challenged the validity of the Orders of Executive
Judge Estrada in an appropriate case before the RTC instead of resorting to a direct action
before it.50
Unconvinced, the Ingleses appealed51 both Resolutions of the Court of Appeals before this
Court in what would be the first of the three petitions consolidated herein. This appeal by
certiorari is currently G.R. No. 141809.
The Proceedings in Quezon City RTC, Branch 225
Meanwhile, as LRC Case No. Q-10766 (98) had already been consolidated with Civil Case
No. Q-98-33277, Charles filed a Motion for Issuance of a Writ of Possession52 before Branch
225 of the Quezon City RTC on 9 September 1999. Branch 225 was then presided by Judge
Arsenio J. Magpale (Judge Magpale).
In his Motion for Issuance of [a] Writ of Possession, Charles reiterated his plea to be put in
possession of the ten (10) lots.53 But in order to show all the more his entitlement to a writ of
possession, Charles also raised therein the fact that he now had consolidated title over the ten
(10) lots as a consequence of the failure of the Ingleses to exercise their right of redemption
within the period allowed by law.54
On 19 November 1999, the RTC denied for lack of merit Charles Motion for Issuance of a
Writ of Possession. Four days after, Charles filed a motion for reconsideration.
On 7 February 2000, the RTC issued a resolution 55 on granting Charles motion for
reconsideration. The dispositive portion of the resolution allowed Charles to present ex parte
evidence in support of his application for a writ of possession before the Branch Clerk of
Court, viz:
IN VIEW OF THE FOREGOING, petitioner Charles J. Estebans Motion for Reconsideration
is GRANTED. For this purpose, the petitioner is hereby directed to present evidence ex-parte
before Atty. Arlene V. Mancao, Branch Clerk of Court, the appointed commissioner within
five (5) days from receipt of this order and for the said commissioner to submit to the Court
her report as soon as the presentation of ex-parte evidence is through.56
On 29 February 2000, the Ingleses filed a motion for reconsideration against the 7 February
2000 resolution of the RTC.

On 1 March 2000, the Branch Clerk of Court received, in an ex-parte hearing, the testimony of
Charles in support of his application for a writ of possession. 57 After which, Charles submitted
a Formal Offer of Evidence58 for his documentary exhibits.
On 10 May 2000, the RTC denied the Ingleses motion for reconsideration.
Aggrieved, the Ingleses filed a certiorari petition59 before the Court of Appeals contesting the
7 February 2000 resolution and 10 May 2000 order of the RTC. In the said petition, the
Ingleses argue that the RTC gravely abused its discretion in allowing Charles to present exparte evidence on his application for a writ of possession despite the consolidation of LRC
Case No. Q-10766 (98) with Civil Case No. Q-98-33277.60 The Ingleses posit that the
consolidation of LRC Case No. Q-10766 (98) and Civil Case No. Q-98-33277 effectively tied
the resolution of Charles application for a writ of possession with the resolution of their
action for annulment of mortgage.61 For the Ingleses then, the RTC cannot simply allow
Charles to present ex-parte evidence on his application for a writ possession without first
laying to rest, in a judicial proceeding for that purpose, other related issues raised in Civil Case
No. Q-98-33277.62 This certiorari petition, which was accompanied by a prayer for a
temporary restraining order, was docketed before the Court of Appeals as CA-G.R. SP No.
58790.
On account of the pendency of CA-G.R. SP No. 58790, the RTC issued another
resolution63 on 10 July 2000 holding in abeyance any action and resolution on Charles
Motion for Issuance of a Writ of Possession.
Subsequently, however, Judge Magpale inhibited himself from further hearing LRC Case No.
Q-10766 (98) and Civil Case No. Q-98-33277.64 The two (2) consolidated cases were thus reraffled and were eventually assigned to Branch 97 of the Quezon City RTC, which was then
presided by Judge Oscar L. Leviste (Judge Leviste).65
CA-G.R. SP No. 58790: Certiorari Petition
In CA-G.R. SP No. 58790, on the other hand, the Court of Appeals issued a Resolution 66 on
29 November 2000 dismissing outright the certiorari petition of the Ingleses on the ground of
non-compliance with Section 1 of Rule 6567 in relation to Section 3 of Rule 4668 of the Rules
of Court. The Court of Appeals condemned the certiorari petition as its verification and
certificate against forum Shopping69 was signed by only two (2) out of its five (5) named
petitioners. As it turns out, only Josefina and Hector F. Ingles signed the verification and
certificate of non-forum shopping, while Jose F. Ingles, Jr., Josefina I. Estrada and Teresita
Biron did not.70
On 11 December 2000, the Ingleses filed before the Court of Appeals a motion for
reconsideration. On 16 February 2001, the Court of Appeals issued a Resolution 71 denying the
Ingleses motion for reconsideration.
The denial of their motion for reconsideration prompted the Ingleses to lodge an
appeal72 before this Court that, in turn, became the second of three petitions consolidated
herein. This appeal by certiorari is currently G.R. No. 147186.
The Proceedings in Quezon City RTC, Branch 97 and 98

Back in Branch 97 of the Quezon City RTC, proceedings in LRC Case No. Q-10766 (98) and
Civil Case No. Q-98-33277 continued. On 2 April 2001, the RTC issued an Order73 requiring
Charles to submit a memorandum in support of his application for a writ of possession. The
same order also required the Ingleses to file a comment on Charles memorandum.

As a response to the issuance of the above order, Charles filed a supplemental petition 91 to his
mandamus petition.

On 12 July 2001, after evaluating Charles memorandum and the Ingleses comment thereon,
the RTC issued an Order74 granting the Ex Parte Petition for Issuance of a Writ of Possession.
The order directed the issuance of a writ of possession in favor of Charles. 75

On 31 March 2006, the Court of Appeals rendered a Decision 92 granting Charles mandamus
petition. The Court of Appeals thus disposed:

On 19 July 2001, the Ingleses filed a Motion For Reconsideration 76 from the above order. The
Ingleses also submitted a Supplemental Motion For Reconsideration77 on 23 July 2001.

WHEREFORE, above premises all considered, the petition is hereby GRANTED. Public
respondent Judge [Judge Corpuz-Cabochan] is hereby DIRECTED to resolve with dispatch
the

On 24 July 2001, the RTC issued an Order78 directing Charles: (1) to submit an opposition to
the Ingleses Motion for Reconsideration and Supplemental Motion for Reconsideration
within ten (10) days from receipt of the order, and (2) should the Ingleses find it necessary to
file a reply in response to his opposition, to submit a rejoinder within ten (10) days from his
receipt of such reply.79
80

On 24 July 2001, Charles filed his Opposition to the Ingleses Motion For Reconsideration
and Supplemental Motion For Reconsideration. On 2 August 2001, the Ingleses filed their
Reply81 to Charles opposition.
On 26 September 2001, the Ingleses also filed a Motion To Dismiss 82 asking for the dismissal
of the Ex-Parte Petition for Issuance of a Writ of Possession. For his part, Charles filed an
Opposition83 to the Motion To Dismiss.
Unfortunately, at about that time, Judge Leviste retired without being able to resolve the
Ingleses Motion For Reconsideration, Supplemental Motion For Reconsideration and Motion
To Dismiss.84 The retirement of Judge Leviste eventually85 led to a re-raffle of LRC Case No.
Q-10766 (98) and Civil Case No. Q-98-33277 on 16 January 2003 that transferred the two (2)
consolidated cases to Branch 98presided by Judge Evelyn Corpuz-Cabochan (Judge
Corpuz-Cabochan).86

CA-G.R. SP No. 84738: Mandamus Petition

pending incidents in LRC Case No. Q-10766 (98), i.e. Motion for Reconsideration dated July
19, 2001, Supplemental Motion for Reconsideration dated July 23, 2001 and Motion to
Dismiss, dated September 21, 2001.93
In its Decision, the Court of Appeals found that the Ingleses Motion For Reconsideration,
Supplemental Motion For Reconsideration and Motion To Dismiss were already due to be
resolved pursuant to Section 15, Article VIII of the 1987 Constitution 94 and Supreme Court
Administrative Circular No. 01-28,95 which mandates trial courts to decide or resolve all cases
or matters pending before them within three (3) months from the time they were submitted for
decision or resolution.96
Moreover, the Court of Appeals held that no justifiable reason exists why the Ingleses Motion
For Reconsideration, Supplemental Motion For Reconsideration and Motion To Dismiss
should remain unresolved.97The Court of Appeals was not convinced that either the
consolidation of LRC Case No. Q-10766 (98) with Civil Case No. Q-98-33277 or the
pendency of G.R. Nos. 141809 and 147186 may be used as a valid excuse to delay resolution
of the subject motions.98
The Ingleses filed a motion for reconsideration, but the Court Appeals remained steadfast in
its Resolution99dated 19 July 2006.

On 23 June 2004, or more than a year after LRC Case No. Q-10766 (98) and Civil Case No.
Q-98-33277 were raffled to Branch 98, Charles filed a mandamus petition 87 before the Court
of Appeals. In it, Charles asked the Court of Appeals to compel Judge Corpuz-Cabochan to
rule on the Ingleses Motion For Reconsideration, Supplemental Motion For Reconsideration
and Motion To Dismiss that have remained unresolved well beyond the period prescribed for
its resolution under Supreme Court Administrative Circular No. 01-28.88 This petition was
docketed before the Court of Appeals as CA-G.R. SP No. 84738.

Feeling slighted, the Ingleses filed an appeal100 before this Courtthe third of three petitions
consolidated herein. This appeal by certiorari is currently G.R. No. 173641.

During the pendecy of CA-G.R. SP No. 84738, the RTC (thru an 18 June 2004 Order 89 signed
by Judge Corpuz-Cabochan) suspended the proceedings in LRC Case No. Q-10766 (98) and
Civil Case No. Q-98-33277. As rationale for the suspension, the RTC cited the pendency of
G.R. Nos. 141809 and 147186 before this Court, to wit:

G.R. No. 141809

WHEREFORE, premises considered, it is hereby ordered that the proceedings in these

consolidated cases are suspended until after the Honorable Supreme Court shall have resolved
the pending petitions before it, docketed as G.R. No. (sic) 141809 and 147186. 90

The Ingleses would have us answer in the affirmative; adamant that their petition for
Annulment of Final Orders is an action validly instituted under Rule 47 of the Rules of

OUR RULING
We deny all three petitions.

The sole issue presented in G.R. No. 141809 was whether the Court of Appeals erred in
dismissing the Ingleses petition for Annulment of Final Orders.101

Court.102 They argue that the Court of Appeals could have still taken cognizance of their
petition even though the orders assailed therein were issued merely by an executive judge in
an extrajudicial foreclosure proceeding.103 The Ingleses posit that the assailed Orders dated 8
October 1997, 20 November 1997 and 27 July 1998 of Executive Judge Estrada may, in view
of their peculiar nature, be treated as final orders issued in a "civil action" by a "Regional Trial
Court" itself.104
On that note, the Ingleses claim that the assailed Orders of Executive Judge Estrada are not the
usual orders issued in proceedings for extrajudicial foreclosure of mortgages. 105 According to
the Ingleses, Executive Judge Estrada had to practically assume and exercise powers otherwise
reserved only to an RTC judge presiding over a civil action when she issued the assailed
Orders.106 As the Ingleses further explain:
1. The assailed Orders allowed the extrajudicial foreclosure on their ten (10) lots
despite the express provision in the Deed of Real Estate Mortgage referring to the
mortgaged property as being covered by TCT No. 125141 PR-17485 and not by
TCT No. 125341 PR-17485 i.e., the mother title of the ten (10) lots.107 In issuing the
assailed Orders, therefore, Executive Judge Estrada acted as if she was a judge in an
action for Reformation of Contract by interpreting that what the Deed of Real Estate
Mortgage really meant was that the mortgaged property was covered by TCT No.
125341 PR-17485.108
2. The assailed Orders also allowed the extrajudicial foreclosure on their ten (10)
lots even though Jose and Josefina never exercised their prerogative under the Deed
of Real Estate Mortgage to have the mortgage on their property extrajudicially
foreclosed.109 In issuing the assailed Orders, therefore, Executive Judge Estrada
acted as if she was a judge in some justiciable case by essentially setting aside the
above prerogative of Jose and Josefina under the Deed of Real Estate Mortgage. 110
Hence, the Ingleses conclude, the assailed Orders of Executive Judge Estrada are basically as
good as a final orders issued in a "civil action" by a "Regional Trial Court."111
We disagree.
The Exclusive Original Jurisdiction
of the Court of Appeals and Rule 47
Section 9(2) of Batas Pambansa Blg. 129 or the Judiciary Reorganization Act of 1980, vests
the Court of Appeals with exclusive original jurisdiction over actions for "annulment of
judgments of Regional Trial Courts." The remedy by which such jurisdiction may be invoked
is provided under Rule 47 of the Rules of Court.
Conformably, Rule 47 sanctions the filing of a petition for the Annulment of Judgments, Final
Orders and Resolutions before the Court of Appeals. Section 1 of Rule 47, however, defines
the scope and nature of this petition:
RULE 47
ANNULMENT OF JUDGMENTS OR FINAL ORDERS AND RESOLUTIONS

SECTION 1. Coverage.This Rule shall govern the annulment by the Court of Appeals of
judgments or final orders and resolutions in civil actions of Regional Trial Courts for which
the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are
no longer available through no fault of the petitioner. (Emphasis supplied)
The above-quoted section sets forth in no unclear terms that only judgments, final orders and
resolutions in "civil actions" of "Regional Trial Courts" may be the subject of a petition for
annulment before the Court of Appeals. Against this premise, it becomes apparent why the
Ingleses petition for Annulment of Final Orders must fail. We substantiate:
Proceedings for the Extrajudicial
Foreclosure of Mortgages are not
Civil Actions
The subject of the Ingleses petition for Annulment of Final Orders are not the proper subjects
of a petition for annulment before the Court of Appeals. The assailed Orders dated 8 October
1997, 20 November 1997 and 27 July 1998 of Executive Judge Estrada are not the final orders
in "civil actions" of "Regional Trial Courts" that may be the subject of annulment by the Court
of Appeals under Rule 47. There is a clear-cut difference between issuances made in a "civil
action" on one hand and orders rendered in a proceeding for the extrajudicial foreclosure of a
mortgage on the other.
"Civil actions" are suits filed in court involving either the enforcement or protection of a right,
or the prevention or redress of a wrong.112 They are commenced by the filing of an original
complaint before an appropriate court113and their proceedings are governed by the provisions
of the Rules on Court on ordinary or special civil actions.114Civil actions are adversarial in
nature; presupposing the existence of disputes defined by the parties that are, in turn,
submitted before the court for disposition. Issuances made therein, including and most
especially judgments, final orders or resolutions, are therefore rendered by courts in the
exercise of their judicial function.
In contrast, proceedings for the extrajudicial foreclosure of mortgages, as the name already
suggests, are not suits filed in a court.115 They are commenced not by the filing of a complaint,
but by submitting an application before an executive judge116 who, in turn, receives the same
neither in a judicial capacity nor on behalf of the court.117 The conduct of such proceedings is
not governed by the rules on ordinary or special civil actions, but by Act No. 3135, as
amended, and by special administrative orders issued by this Court.118 Proceedings for the
extrajudicial foreclosure of mortgages are also not adversarial; as the executive judge merely
performs therein an administrative function to ensure that all requirements for the extrajudicial
foreclosure of a mortgage are satisfied before the clerk of court, as the ex-officio
sheriff,119 goes ahead with the public auction of the mortgaged property.120 Necessarily, the
orders of the executive judge in such proceedings, whether they be to allow or disallow the
extrajudicial foreclosure of the mortgage, are not issued in the exercise of a judicial function
but, in the words of First Marbella Condominium Association, Inc. v. Gatmaytan:
x x x issued by the RTC Executive Judge in the exercise of his administrative function to
supervise the ministerial duty of the Clerk of Court as Ex Officio Sheriff in the conduct of an
extrajudicial foreclsoure sale x x x.121(Emphasis supplied)

Verily, the Orders dated 8 October 1997, 20 November 1997 and 27 July 1998 of Executive
Judge Estrada cannot be the subject of a petition for annulment before the Court of Appeals.
Such orders, issued as they were by an executive judge in connection with a proceeding for the
extrajudicial foreclosure of a mortgage, evidently do not fall within the type of issuances so
carefully identified under Section 1 of Rule 47. The Court of Appeals was, therefore, correct
in postulating that the annulment of the assailed Orders is not within their exclusive original
jurisdiction per Section 9(2) of Batas Pambansa Blg. 129.
Allegation that the Assailed Orders
were Rendered Without Jurisdiction
is Immaterial, Baseless
The allegation of the Ingleses that Executive Judge Estrada overstepped her jurisdiction in
issuing the assailed Orders is immaterial to the issue of whether the Court of Appeals may
assume jurisdiction over their petition. Assuming arguendo that Executive Judge Estrada did
exceed her jurisdiction in issuing the assailed Orders, the nature of such orders and the
circumstances under which they were issued would still remain the same. The mere fact, nay,
the mere allegation, that the assailed Orders have been issued without jurisdiction do not make
them, even by the limits of either the strongest reasoning or the most colourful imagination,
final orders in a "civil action" by a "Regional Trial Court." Clearly, a petition under Rule 47
even then would still not be a viable remedy.
At any rate, this Court finds that Executive Judge Estrada did not actually "exceed" her
jurisdiction when she issued the assailed Orders. All that Executive Judge Estrada did was to
render an interpretation of the Deed of Real Estate Mortgage on its facewhich is something
that she is lawfully entitled, if not obliged, to do in an extrajudicial foreclosure proceeding.
After all, an executive judge has the administrative duty in such proceedings to ensure that all
the conditions of the law have been complied with before authorizing the public auction of any
mortgaged property122 and this duty, by necessity, includes facially examining the mortgage
agreement as to whether it adequately identified the land to be auctioned or whether it contains
sufficient authorization on the part of the mortgagee to push forth with an extrajudicial sale.
Of course, an executive judge may err in the exercise of such administrative function and, as a
result, may improvidently sanction an extrajudicial sale based on a faulty construction of a
mortgage agreementbut those are not errors of jurisdiction inasmuch as they relate only to
the exercise of jurisdiction.
In fine, therefore, We see no reversible error on the part of the Court of Appeals in dismissing
the Ingleses petition for Annulment of Final Orders.
G.R. No. 147186
At the core of G.R. No. 147186, on the other hand, is the solitary issue of whether the Court of
Appeals erred in dismissing the Ingleses certiorari petition.
The Ingleses submit that the Court of Appeals erred. They contend that the failure of some of
them to sign the subject verification and certification of non-forum shopping may be excused
given the fact that all of them are members of only one family and, as such, share but a
common interest in the cause of their petition.123

The Ingleses point out that the two (2) of them who were actually able to sign the verification
and certificate against forum shopping, i.e., Josefina and Hector F. Ingles, are mother and
brother, respectively, to the rest of them who were unable to sign. 124 Hence, the Ingleses
argue, the signatures of only two (2) of them in the verification and certification of non-forum
shopping ought to be enough to be considered as substantial compliance with the requirements
thereon per Section 1 of Rule 65 and Section 3 of Rule 46. 125
We find that the Court of Appeals did err in dismissing the Ingleses certiorari petition on the
ground of non-compliance with the requirements on verification and certification against
forum shopping. The Court of Appeals ought to have given due course to the certiorari petition
because there was, in this case, substantial compliance with the said requirements by the
Ingleses.
However, instead of remanding the Ingleses certiorari petition to the Court of Appeals, this
Court opted to exercise its sound discretion to herein resolve the merits of the same. This was
done for the sole purpose of finally putting an end to a pervading issue responsible for
delaying the proceedings in LRC Case No. Q-10766 (98) and Civil Case No. Q-98-33277, i.e.,
the effect of the consolidation of the two cases to Charles entitlement to a writ of possession.
On that end, We find that the Ingleses certiorari petition to be without merit. Ultimately, We
deny G.R. No. 147186.
I
We begin with the Court of Appeals erroneous dismissal based on techicality.
The Requirements of Verification
and Certification Against Forum
Shopping and the Altres126
Ruling
A certiorari petition under Rule 65 of the Rules of Court is one where the pleadings required
to be both verified and accompanied by a certification against forum shopping when filed
before a court.127
While both verification and certification against forum shopping are concurring requirements
in a certiorari petition, one requirement is distinct from the other in terms of nature and
purpose.
In the seminal case of Altres v. Empleo, this Court laid out guiding principles that synthesized
the various jurisprudential pronouncements regarding non-compliance with the requirements
on, or submission of a defective, verification and certification against forum shopping. We
quote them at length:
1) A distinction must be made between non-compliance with the requirement on or
submission of defective verification, and non-compliance with the requirement on or
submission of defective certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not

necessarily render the pleading fatally defective. The court may order its submission
or correction or act on the pleading if the attending circumstances are such that strict
compliance with the Rule may be dispensed with in order that the ends of justice
may be served thereby.128
3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition signs
the verification, and when matters alleged in the petition have been made in good
faith or are true and correct.129

Verily, the signatures of all of the Ingleses were not required to validly verify their certiorari
petition. It suffices, according to Altres, that the verification was signed by at least one of the
Ingleses who was competent to do so. In this case, the certiorari petition was verified by
Josefina and Hector F. Inglesboth of whom this Court finds competent to attest to the truth
of the allegations of their petition, considering that they are unquestionably principal partiesin-interest to their certiorari petition.137 Hence, their certiorari petition contains a substantially
valid verification.
The Ingleses Substantially Complied
with the Requirement of Certification
Against Forum Shopping

4) As to certification against forum shopping, non-compliance therewith or a defect

therein, unlike in verification, is generally not curable by its subsequent submission
or correction thereof, unless there is a need to relax the Rule on the ground of
"substantial compliance" or presence of "special circumstances or compelling
reasons."130

The Ingleses certiorari petition likewise contains a substantially complaint certificate against
forum shopping. Altres articulates the rule where a certification against forum shopping is
required to be attached in a petition or complaint that names several petitioners or plaintiffs, as
follows:

5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case;131otherwise, those who did not sign will be dropped as parties
to the case. Under reasonable or justifiable circumstances, however, as when all the
plaintiffs or petitioners share a common interest and invoke a common cause of
action or defense, the signature of only one of them in the certification against forum
shopping substantially complies with the Rule.132

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners
in a case;138otherwise, those who did not sign will be dropped as parties to the case. Under
reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners share
a common interest and invoke a common cause of action or defense, the signature of only one
of them in the certification against forum shopping substantially complies with the
Rule.139 (Emphasis and underscoring supplied).

6) Finally, the certification against forum shopping must be executed by the partypleader, not by his counsel.133 If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a Special Power of Attorney
[citation omitted] designating his counsel of record to sign on his
behalf.134 (Emphasis and underscoring supplied)

The rule exposes the fault of the Court of Appeals:

Guided by the Altres precedent, We find that the dismissal by the RTC of the Ingleses
certiorari petition on the ground of a defective verification and certification against forum
shopping to be incorrect. We substantiate:
The Ingleses Substantially Complied
with the Requirement of Verification
The Ingleses certiorari petition was properly verified even though not all of them were able to
sign the same. As related by Altres, the requirement of verification is deemed substantially
complied with if "one who has ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verification, and when matters alleged in the petition have been
made in good faith or are true and correct."
The pronouncement in Altres is based on the recognition that the purpose of verifying a
petition or complaint, i.e., to assure the court that such petition or complaint was filed in good
faith; and that the allegations therein are true and correct and not the product of the
imagination or a matter of speculation,135 can sufficiently be achieved even if only one of the
several petitioners or plaintiffs signs the verification.136 As long the signatory of the
verification is competent, there is already substantial compliance with the requirement.

First. To begin with, the mere fact that only some and not all of the Ingleses signed the
certification against forum shopping attached to their certiorari petitionis not a valid ground
for the outright dismissal of such petition as to all of the Ingleses. 140 As Altres elucidates, the
most that the Court of Appeals could have done in such a case is to dismiss the certiorari
petition only with respect to the Ingleses who were not able to sign.
Second. Nevertheless, the certiorari petition should be sustained as to all of the Ingleses since
substantial compliance with the requirement of a certification against forum shopping may be
appreciated in their favor. Jurisprudence clearly recognizes that "under reasonable or
justifiable circumstances x x x as when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense" the rule requiring all such petitioners or
plaintiffs to sign the certification against forum shopping may be relaxed.141
In this case, the "reasonable or justifiable circumstance" that would warrant a relaxation of the
rule on the certification against forum shopping consists in the undeniable fact that Ingleses
are immediate relatives of each other espousing but only one cause in their certiorari petition.
A circumstance similar to that of the Ingleses was already recognized as valid by this Court in
cases such as Traveno v. Bobongon Banana Growers Multi-Purpose Cooperative142 and in
Cavile v. Heirs of Cavile,143 just to name a few.
Given the above, no other conclusion can be had other than that the Court of Appeals erred in
dismissing the Ingleses certiorari petition based on technicality.

II
Rather than remanding the Ingleses certiorari petition to the Court of Appeals, however, this
Court chooses to herein resolve the merits of the same. This Court finds that a prompt
resolution of the issue raised in the Ingleses certiorari petition is necessary, for it will
ultimately determine the progress of the proceedings in LRC Case No. Q-10766 (98) and Civil
Case No. Q-98-33277. Hence, to avoid any further delay and to prevent the possibility of
conflicting decisions between the Court of Appeals and the RTC, We resolve the Ingleses
certiorari petition.
The pivotal issue in the Ingleses certiorari petition is whether the RTC, thru Judge Magpale,
committed grave abuse of discretion in allowing Charles to present ex-parte evidence in
support of his application for the issuance of a writ of possession despite the consolidation of
LRC Case No. Q-10766 (98) with Civil Case No. Q-98-33277.
The Ingleses submit an affirmative stance. The Ingleses posit that the consolidation of LRC
Case No. Q-10766 (98) and Civil Case No. Q-98-33277 effectively tied the resolution of
Charles application for a writ of possession with the resolution of their action for annulment
of mortgage.144 For the Ingleses then, the RTC cannot simply allow Charles to present ex-parte
evidence on his application for a writ possession without first laying to rest, in a judicial
proceeding for that purpose, other related issues raised in Civil Case No. Q-98-33277.145
We deny the petition. The entire stance of the Ingleses hinges on the propriety of the
consolidation of LRC Case No. Q-10766 (98) with Civil Case No. Q-98-33277. On that, this
Court does not agree.
Consolidation of a Petition for the
Issuance of a Writ of Possession
with an Ordinary Civil Action, the
Active Woods Doctrine and
Subsequent Cases
As a rule, a petition for the issuance of a writ possession may not be consolidated with any
other ordinary action. It is well-settled that a petition for the issuance of a writ of possession is
ex-parte, summary and non-litigious by nature; which nature would be rendered nugatory if
such petition was to be consolidated with any other ordinary civil action.146
The exception to the foregoing rule is the case of Active Wood Products, Co., Inc. vs. Court of
Appeals.147 In Active Wood, this Court allowed the consolidation of a petition for the issuance
of a writ of possession with an ordinary action for the annulment of mortgage. In doing so,
Active Wood justified such consolidation as follows:
It is true that a petition for a writ of possession is made ex-parte to facilitate proceedings,
being founded on a presumed right of ownership.1avvphi1 Be that as it may, when this
presumed right of ownership is contested and made the basis of another action, then the
proceedings for writ of possession would also become seemingly groundless. The entire case
must be litigated and if need be as in the case at bar, must be consolidated with a related case
so as to thresh out thoroughly all related issues. (Emphasis supplied).

The unbridled construction of Active Wood, however, led to a deplorable practice where
mortgagors aggrieved by the result of an extrajudicial foreclosure would prevent possession by
the successful purchaser by simply filing an action contesting the latters "presumed right of
ownership" either by an annulment of mortgage or of the extrajudicial sale, and then asking
the court for their consolidation with the petition for the issuance of a writ of possession.
Needless to state, this abusive practice have reached the attention of this Court that, in turn,
led to subsequent decisions refining the application of the Active Wood doctrine.
Hence, in Sps. De Vera v. Hon. Agloro,148 this Court held that the consolidation of an action
for the annulment of mortgage and extrajudicial sale with a petition for the issuance of a writ
of possession, is not mandatory but still rests within the discretion of the trial court to allow.
De Vera opined that "when the rights of a purchaser in an extrajudicial foreclosure sale would
be prejudiced x x x especially since the latter already adduced its evidence in support of his
application for a writ of possession" consolidation of the two cases may rightfully be
denied.149
Amplifying further on Sps. De Vera is the case of Philippine National Bank v. Gotesco Tyan
Ming Development, Inc.150 In Philippine National Bank, this Court held that consolidation of
an action for annulment of extrajudicial sale and a petition for the issuance of a writ of
possession should not be allowed when doing so would actually lead to more delay in the
proceedings and thus "defeat the very rationale of consolidation."151 In the same case, this
Court even ordered the separation of the then already consolidated action for the annulment of
extrajudicial sale and petition for the issuance of a writ of possession. 152
But perhaps the most crucial refinement of Active Wood was in the case of Espinoza v. United
Overseas Bank Phils.153 Espinoza declared that the mere fact that the purchasers "presumed
right of ownership is contested and made the basis of another action" does not mean that such
action ought to be consolidated with the petition for the issuance of a writ of possession. 154 For
Espinoza, the application of the Active Wood doctrine must be limited only to cases with the
same factual circumstances under which the latter was rendered.
Espinoza called attention to the fact that in Active Wood the petition for the issuance of a writ
of possession was "filed before the expiration of the one-year redemption period" and that "the
litigated property had not been consolidated in the name of the mortgagee."155
Hence, Espinoza invalidated the consolidation of an action for the annulment of the
extrajudicial sale with a petition for the issuance of a writ of possession after finding that the
latter petition was filed after the expiration of the one-year redemption period and after the
purchaser had already consolidated his title over the auctioned property. This must be,
Espinoza explained, because when:
x x x title to the litigated property had already been consolidated in the name of respondent, x
x x the issuance of a writ of possession becomes a matter of right. Consequently, the
consolidation of the petition for the issuance of a writ of possession with the proceedings for
nullification of foreclosure would be highly improper. Otherwise, not only will the very
purpose of consolidation (which is to avoid unnecessary delay) be defeated but the procedural
matter of consolidation will also adversely affect the substantive right of possession as an
incident of ownership.156 (Emphasis supplied).

Applying the foregoing judicial pronouncements to the case at bar, this Court discerns that the
consolidation of LRC Case No. Q-10766 (98) and Civil Case No. Q-98-33277 had already
ceased to become proper by the time the RTC allowed him to present ex-parte evidence in
support of his application for the issuance of a writ of possession. Separation of the two cases
is moreover warranted. We substantiate:
Charles Has Already Consolidated
His Title Over the Mortgaged Lots;
No Grave Abuse of Discretion in
Allowing Charles to Present ExParte Evidence
The ruling in Espinoza applies. It is uncontested that by the time he filed his Motion for
Issuance of a Writ of Possession, which was before the RTC allowed him to present ex-parte
evidence in support of his application for the issuance of a writ of possession, Charles had
already consolidated his title over the ten (10) lots.157 At that time, Charles was already the
absolute owner of the ten (10) lots and, as such, his right to possess the same becomes a matter
of right on his part.158 Charles claim of possession is no longer merely based on a "presumed
right of ownership" as the Ingleses have evidently failed to exercise their right of redemption
within the period provided by law. By then, the consolidation of Charles application for a writ
of possession with the Ingleses action for the annulment of mortgage had already lost its basis
and, therefore, ceased to become proper. Consequently, no grave abuse of discretion may be
imputed on the part of the RTC in allowing Charles to present ex-parte evidence in support of
his application for the issuance of a writ of possession.
Even though Charles filed his original Ex-Parte Petition for Issuance of a Writ Possession still
within the redemption period, Espinoza would nevertheless apply. Charles subsequent filing
of his Motion for Issuance of a Writ of Possession at a time that he was already absolute
owner of the auctioned lots supplemented his earlier Ex-Parte Petition for Issuance of a Writ
Possessionthus making his application for a writ of possession similar to that in the
Espinoza case.
All in all, the Ingleses certiorari petition must therefore be dismissed.
Consolidation of LRC Case No. Q-10766 (98)
and Civil Case No. Q-98-33277 Delayed Rather
Than Expedited Resolution of Both
Cases; Separation of Both Cases In
Order
In addition, this Court finds that the consolidation of LRC Case No. Q-10766 (98) and Civil
Case No. Q-98-33277 had actually been counter-productive for the resolution of the two cases.
It may not be amiss to point out that from the time LRC Case No. Q-10766 (98) and Civil
Case No. Q-98-33277 were consolidated159 up to time the RTC ordered a halt to their
proceedings on 18 July 2004, more than four (4) years have already lapsed. Yet in all those
years, the records were still silent as to whether presentation of the evidence on the Ingleses
annulment of the Deed of Real Estate Mortgage had already started. This circumstance alone
casts immense doubt as to just how effective the consolidation of LRC Case No. Q-10766 (98)
and Civil Case No. Q-98-33277 was, in terms of finding an expeditious resolution for both
cases. This Court cannot sanction such kind of procedure.

Considering that the consolidation of LRC Case No. Q-10766 (98) and Civil Case No. Q-9833277 serves no other useful purpose, this Court finds their separation to be in order.
G.R. No. 173641
We thus come to G.R. No. 173641, which poses the lone issue of whether the Court of
Appeals erred in granting Charles mandamus petition praying for the immediate resolution by
the RTC of the Ingleses Motion For Reconsideration,160 Supplemental Motion
ForReconsideration161 and Motion To Dismiss.162
The Ingleses argue in the affirmative and goes even further by saying that a suspension of the
entire proceedings in LRC Case No. Q-10766 (98) and Civil Case No. Q-98-33277 is called
for.163 The Ingleses stand behind the 18 July 2004 Order of the RTC, thru Judge CorpuzCabochan, which ordered the suspension of the proceedings in view of the pendency of G.R.
Nos. 141809 and 147186 before this Court.164
In view of our above discussions in G.R. Nos. 141809 and 147186, there is no longer any legal
reason on which the suspension of the proceedings before the RTC in LRC Case No. Q-10766
(98) and Civil Case No. Q-98-33277 may be anchored on. The two cases are ordered
deconsolidated. Civil Case No. Q-98-33277 should proceed and be resolved with dispatch. In
LRC Case No. Q-10766 (98), the Writ of Possession in favor of Charles J. Esteban should be
issued immediately. This is line with the order issued on 12 July 2001 by the Regional Trial
Court granting the Ex Parte Petition for Issuance of a Writ of Possession after evaluating
Charles Memorandum and the Ingleses comment thereon.
Hence, We deny this petition.
WHEREFORE, premises considered, the consolidated petitions are hereby DENIED.
Accordingly, We hereby render a Decision:
1. AFFIRMING the Resolutions dated 28 December 1999 and 28 January 2000 of
the Court of Appeals in CA-G.R. SP. No. 56292;
2. AFFIRMING the Resolutions dated 29 November 2000 and 16 February 2001 of
the Court of Appeals in CA-G.R. SP No. 58790, insofar as they effectively
dismissed the lngleses' certiorari petition;
3. AFFIRMING the Decision dated 31 March 2006 and Resolution dated 19 July
2006 of the Court of Appeals in CA-G.R. SP No. 84738; and
4. ORDERING the deconsolidation of Civil Case No. Q-98-33277 and LRC Case
No. Q-10766 (98); the resolution of Civil Case No. Q-98-33277 with dispatch; and
the issuance of the Writ of Possession in favor of private respondent Charles J.
Esteban in LRC Case No. Q-10766 (98).
Costs against petitioners. SO ORDERED.

G.R. No. 167403

August 6, 2008

MAKATI INSURANCE CO., INC., petitioner,

vs.
HON. WILFREDO D. REYES, as Presiding Judge of the Regional Trial Court of
Manila, Branch 36, RUBILLS INTERNATIONAL, INC., TONG WOON SHIPPING
PTE LTD, and ASIAN TERMINALS, INC., respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review under Rule 451 of the Revised Rules of Court are (1) the
Decision2dated 12 August 2004 of the Court of Appeals dismissing the petition filed in CAG.R. SP No. 74220 by herein petitioner Makati Insurance Co., Inc., and affirming the
Order3 dated 2 October 2002 of the Regional Trial Court (RTC) of Manila, Branch 36, in Civil
Case No. 97-84952, which dismissed petitioners Notice of Appeal for having been filed three
days beyond the reglementary period; and (2) the Resolution 4 dated 17 February 2005 of the
Court of Appeals in the same case denying petitioners Motion for Reconsideration of its
earlier Decision.
The generative facts of the present Petition are as follows.
Petitioner filed before the RTC a Complaint5 against private respondents Rubills International,
Inc., Tong Woon Shipping PTE., LTD., and Asian Terminals, Inc. for damages arising from
breach of contract of carriage. In its Complaint, petitioner alleged that:
3.1 [Herein private respondents] Rubills International, Inc. and Tong Woon
Shipping Pte. Ltd. [Rubills for brevity], were and are the owners, operators,
charterers, bailees, representatives, or agents of several ocean going vessels,
engaged in ocean carriage to and from Philippine ports in foreign trade, one of
which is the vessel M/V "Cherry" a common carrier, bound to observe extraordinary
diligence in the care and custody of goods while in its protective custody.
3.2 [Herein private respondent] Asian Terminals, Inc. [ATI] was and is the arrastre
operator at the port of Manila and as such was charged and obligated with the duty
of receiving cargoes discharged from the vessels docking at the port of Manila, of
safekeeping and taking good care of the same while in its protective custody, and
thereafter delivering the same to the respective consignees and/or consignees
representatives.
4.0 On or about August 11, 1996, the [private respondents] Rubills and Tong Woon
vessel M/V "CHERRY" arrived in Manila and docked at Pier 15 South Harbor,
Manila, and therein completely unloaded on September 9, 1996 a shipment of
120MT Red Beans and 153.00MT Cattle Meat Colloid covered by Bill of Lading
dated August 01, 1996, a photocopy of which is herewith attached as Annex "A" and
made an integral part hereof;

5.0 It was found out after the inspection of the subject shipment that eighty four (84)
ton bags of the shipment were in apparent damaged condition, partly to badly wet
and loose/torn on sides and/or ends with spillages/wettages to contents apparent. x x
x.
xxxx
6.0 The aforesaid losses and damages sustained by the subject shipment were
directly caused and brought about by the wanton fault, gross negligence, malevolent
mishandling and culpable disregard, recreance and/or breach of contractual
obligations of all or either of the [private respondents] as common carrier and
arrastre operator respectively, and as a result of which the owner/assured/consignee
Silver Allies Trading International sustained damages and losses in the total sum of
Four Hundred Twelve Thousand Two Hundred Fifty Three & 91/100 Pesos
(P412,253.91) for which [herein petitioner]-insurer paid the consignee-assured.
Thus, [petitioner] was subrogated into the rights and interests of the consigneeassured relative to the said losses and damages sustained by the subject shipment;
7.0 Demands were lodged against the [private respondents] for compensation of the
amount paid by the [petitioner] to the consignee-assured, but the [private
respondents] failed, ignored and refused to heed the same to the damage and
prejudice of the [petitioner];
8.0 [Private respondents] are guilty of wanton fault, gross negligence, malevolent
mishandling and culpable disregard of their contractual obligations in bringing about
and contumaciously causing the losses and damages to the said shipment x x x. 6
Petitioner prayed in its Complaint that:
J]udgment be rendered ordering the [herein private respondents], jointly and severally or whichever may be found liable, to
pay [herein petitioner]:

a. Actual damages in the amount of P412,253.91 with legal interest from

the date of the filing of the complaint until fully paid;
b. Exemplary damages in the sum of at least P20,000.00 or as may be
found proper by this Honorable Court;
c. Attorneys fees in the sum equivalent to twenty five percent (25%) of
the principal claim ofP103,063.47; and
d. Litigation expenses in the sum of at least P10,000.00 or as may be
proven, plus costs of suit.7
After the issues were joined, the case was set for pre-trial conference. For the failure of
petitioners counsel to appear at the scheduled pre-trial conference on 19 November 2001,
RTC Presiding Judge Wilfredo D. Reyes (Judge Reyes) dismissed the case without prejudice.
His Order of even date reads:

On third call of this case at 10:40 oclock this morning, only counsels for [herein
private respondents] Rubills International, Inc. and Asian Terminals, Inc. appeared.
There was no appearance for [herein petitioner] despite due notice.
Respective counsels of [private respondents] moved for the dismissal of the case on
the following grounds:
1. For failure of [petitioner] to properly appear for pre-trial conference on September
5, 2001 considering that its counsel and/or representative did not have the requisite
authority.
2. For failure of [petitioner] to appear at the pre-trial conference at the proper time
set on October 16, 2001 although [petitioner]s counsel came in after [private
respondents] counsel had left the court room and the case re-set for continuation of
pre-trial on November 19, 2001, and
3. For failure of [petitioner]s counsel to appear at todays pre-trial.
It appearing that [petitioner]s counsel has been given ample opportunity to appear
in the pre-trial conference of this case with the requisite authority for its counsel
and/or representative and that [petitioner]s counsel has failed to so appear for pretrial conference, and upon motion of [private respondents] counsel, this case is
dismissed without prejudice.

appeal period. The inadvertence was allegedly due to the fact that its Verified Motion for
Reconsideration was filed by registered mail, and the messenger who mailed it failed to attach
to the records of the case the postal receipt showing the date the said motion was
mailed.14 Petitioners counsel, therefore, was unable to determine correctly when petitioners
period to appeal was interrupted by the filing of its Verified Motion for Reconsideration and
how many more days were left in said period when its Motion was denied.
On 23 September 2002, petitioner filed a Motion to Admit Notice of Appeal,15 alleging it had
no intention to delay the resolution of the case; it had a meritorious case; and its Notice of
Appeal should be granted pursuant to the dictum that "courts should not place undue
importance on technicalities, when by so doing, substantial justice is sacrificed."
On 2 October 2002, Judge Reyes issued his Order16 dismissing petitioners Notice of Appeal
for being filed three days beyond the 15-day reglementary period. In so ruling, Judge Reyes
held that pursuant to Section 3, Rule 41 vis--vis Section 2, Rule 22 of the Revised Rules of
Court, the period to appeal is interrupted by a timely motion for reconsideration. Petitioner
filed its Verified Motion for Reconsideration five days after receiving the Order dismissing the
case without prejudice. Excluding the day the said motion was filed, petitioner had only 11
days left to file a notice of appeal. Petitioner received the Order of 17 June 2002 denying its
Verified Motion for Reconsideration on 3 July 2002. Accordingly, it had only until 14 July
2002 to file a Notice of Appeal. Petitioner, however, filed its Notice of Appeal on 17 July
2002.17 Judge Reyes, therefore, held:
WHEREFORE, plaintiffs notice of appeal is ordered dismissed as it was filed three
(3) days beyond the reglementary period.18

WHEREFORE, the case at bar is dismissed without prejudice. No costs.8

On 29 November 2001, petitioner received the Order dated 19 November 2001 dismissing its
case. On 4 December 2001, petitioner filed its Verified Motion for Reconsideration 9 alleging
that sickness prevented its counsel from attending the pre-trial conference. On 3 July 2002,
petitioner received Judge Reyess Order dated 17 June 2002 denying its Verified Motion for
Reconsideration.10

Petitioner then filed with the Court of Appeals a Petition for Certiorari under Rule 65 of the
Revised Rules of Court questioning the 2 October 2002 RTC Order dismissing its Notice of
Appeal. The Petition, however, was denied by the Court of Appeals based on the following
reasons:
F]rom an order dismissing an action without prejudice, the remedy of the aggrieved party is to file a petition for certiorari
under Rule 65, or to re-file the case. On this score, therefore, petitioners Notice of Appeal is clearly dismissible.

According to the 17 June 2002 RTC Order:

After a careful review of the grounds relied upon by [herein petitioner]s counsel in
his verified motion for reconsideration dated December 1, 2001, the Court has no
other recourse but to deny the same as the grounds of said motion for
reconsideration are not impressive so as to convince the Court to reverse its Order of
November 19, 2001,
WHEREFORE, [petitioner]s motion for reconsideration is DENIED.

11

Petitioner received notice of the afore-mentioned Order on 3 July 2002.

On 17 July 2002, petitioner filed a Notice of Appeal, 12 which was promptly opposed by
private respondents for having been filed out of time.13 Petitioner countered that its failure to
file the Notice of Appeal on time was due to its counsels inadvertence in computing the

Even assuming arguendo that appeal is petitioners proper remedy, it should still be
denied for having been filed out of time. x x x.19
The Court of Appeals held:
WHEREFORE, the instant petition is hereby DISMISSED, and the assailed Order
dated October 2, 2002 AFFIRMED.20
The Motion for Reconsideration filed by the petitioner was denied by the Court of Appeals in
a Resolution dated 17 February 2005.
In the Petition at bar, petitioner insists that:

EXTRAORDINARY CIRCUMSTANCES ATTENDANT TO THE CASE AT

BAR WARRANT THE LIBERAL APPLICATION OF THE RULES.21
We first hew our attention to the main issue for our resolution: whether the Notice of Appeal
filed by petitioner was filed out of time.
Rule 41, Section 3 of the 1997 Rules of Civil Procedure states:
SEC. 3. Period of ordinary appeal. The appeal shall be taken within fifteen (15)
days from notice of the judgment or final order appealed from. Where a record on
appeal is required, the appellant shall file a notice of appeal and a record on appeal
within thirty (30) days from notice of the judgment or final order.
The period of appeal shall be interrupted by a timely motion for new trial or
reconsideration. No motion for extension of time to file a motion for new trial or
reconsideration shall be allowed.
Based on the foregoing, an appeal should be taken within 15 days from the notice of judgment
or final order appealed from.22 A final judgment or order is one that finally disposes of a case,
leaving nothing more for the court to do with respect to it. It is an adjudication on the merits
which, considering the evidence presented at the trial, declares categorically what the rights
and obligations of the parties are; or it may be an order or judgment that dismisses an action. 23
Propitious to petitioner is Neypes v. Court of Appeals,24 promulgated on 14 September 2005
while the present Petition was already pending before us. In Neypes, we pronounced that:
To standardize the appeal periods provided in the Rules and to afford litigants fair
opportunity to appeal their cases, the Court deems it practical to allow a fresh
period of 15 days within which to file the notice of appeal in the Regional Trial
Court, counted from receipt of the order dismissing a motion for a new trial or
motion for reconsideration.
Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals
from the Municipal Trial Courts to the Regional Trial Courts; Rule 42 on petitions
for review from the Regional Trial Courts to the Court of Appeals; Rule 43 on
appeals from quasi-judicial agencies to the Court of Appeals and Rule 45 governing
appeals by certiorari to the Supreme Court. The new rule aims to regiment or make
the appeal period uniform, to be counted from receipt of the order denying the
motion for new trial, motion for reconsideration (whether full or partial) or any final
order or resolution. (Emphasis ours.)
Rules of Procedure are mere tools designed to facilitate the attainment of justice; their strict
and rigid application which would result in technicalities that tend to frustrate rather than
promote substantial justice must always be eschewed.25
We justified in Neypes that:

In setting aside technical infirmities and thereby giving due course to tardy appeals,
we have not been oblivious to or unmindful of the extraordinary situations that merit
liberal application of the Rules. In those situations where technicalities were
dispensed with, our decisions were not meant to undermine the force and effectivity
of the periods set by law. But we hasten to add that in those rare cases where
procedural rules were not stringently applied, there always existed a clear need to
prevent the commission of a grave injustice. Our judicial system and the courts have
always tried to maintain a healthy balance between the strict enforcement of
procedural laws and the guarantee that every litigant be given the full opportunity
for the just and proper disposition of his cause.
The Supreme Court may promulgate procedural rules in all courts. It has the sole
prerogative to amend, repeal or even establish new rules for a more simplified and
inexpensive process, and the speedy disposition of cases. In the rules governing
appeals to it and to the Court of Appeals, particularly Rules 42, 43 and 45, the Court
allows extensions of time, based on justifiable and compelling reasons, for parties to
file their appeals. These extensions may consist of 15 days or more. 26
Hence, in the interest of substantial justice, procedural rules of the most mandatory character
in terms of compliance may be relaxed.27
With the advent of the "fresh period rule," parties who availed themselves of the remedy of
motion for reconsideration are now allowed to file a notice of appeal within fifteen days from
the denial of that motion.28
The "fresh period rule" is not inconsistent with Rule 41, Section 3 of the Revised Rules of
Court which states that the appeal shall be taken "within fifteen (15) days from notice of
judgment or final order appealed from." The use of the disjunctive word "or" signifies
disassociation and independence of one thing from another. It should, as a rule, be construed
in the sense which it ordinarily implies.29 Hence, the use of "or" in the above provision
supposes that the notice of appeal may be filed within 15 days from the notice of judgment or
within 15 days from notice of the "final order," which, in this case is the 17 July 2002 RTC
Order denying petitioners Verified Motion for Reconsideration, received by petitioner on 3
July 2002.
Neither does the new rule run counter to the spirit of Section 39 of Batas Pambansa Blg. 129
which shortened the appeal period from 30 days to 15 days to hasten the disposition of cases.
The original period of appeal remains and the requirement for strict compliance still applies.
The fresh period of 15 days becomes significant only when a party opts to file a motion for
new trial or motion for reconsideration. In this manner, the trial court which rendered the
assailed decision is given another opportunity to review the case and, in the process, minimize
and/or rectify any error of judgment. While we aim to resolve cases with dispatch and to have
judgments of courts become final at some definite time, we likewise aspire to deliver justice
fairly.30
The "fresh period rule" finally eradicates the confusion as to when the 15-day appeal period
should be counted from receipt of notice of judgment or from receipt of notice of "final
order" appealed from.31

Taking our bearings from Neypes, in Sumaway v. Urban Bank, Inc.,32 we set aside the denial
of a notice of appeal which was purportedly filed five days late. With the fresh period rule, the
15-day period within which to file the notice of appeal was counted from notice of the denial
of the therein petitioners motion for reconsideration.
We followed suit in Elbia v. Ceniza,33 wherein we applied the principle granting a fresh
period of 15 days within which to file the notice of appeal, counted from receipt of the order
dismissing a motion for new trial or motion for reconsideration or any final order or
resolution.
Thereafter, in First Aqua Sugar Traders, Inc. v. Bank of the Philippine Islands,34 we held that
a party litigant may now file his notice of appeal either within fifteen days from receipt of the
original decision or within fifteen days from the receipt of the order denying the motion for
reconsideration.
In De los Santos v. Vda de Mangubat,35 we applied the same principle of "fresh period rule,"
expostulating that procedural law refers to the adjective law which prescribes rules and forms
of procedure in order that courts may be able to administer justice. Procedural laws do not
come within the legal conception of a retroactive law, or the general rule against the
retroactive operation of statutes. The "fresh period rule" is irrefragably procedural, prescribing
the manner in which the appropriate period for appeal is to be computed or determined and,
therefore, can be made applicable to actions pending upon its effectivity, such as the present
case, without danger of violating anyone elses rights.
We thus hold that when herein petitioner filed its notice of appeal on 17 July 2002, the same
was seasonably filed within the fresh period of 15 days, counted from 3 July 2002, the date it
received the denial of its Verified Motion for Reconsideration.
This fresh 15-day period within which to file notice of appeal counted from notice of the
denial of the motion for reconsideration may be applied to petitioners case inasmuch as rules
of procedure may be given retroactive effect on actions pending and undetermined at the time
of their passage. In Republic v. Court of Appeals,36 involving A.M. No. 00-2-03-SC, which
provided for the rule that the 60-day period within which to file a petition for certiorari shall
be reckoned from receipt of the order denying the motion for reconsideration, we stated that
rules of procedure "may be given retroactive effect to actions pending and undetermined at the
time of their passage and this will not violate any right of a person who may feel that he is
adversely affected, inasmuch as there is no vested rights in rules of procedure."
We also take note of an important declaration made by the Court of Appeals in its assailed
Decision that even if petitioners Notice of Appeal was considered filed on time, it was
dismissible for being the wrong remedy.
It bears repeating that the RTC dismissed Civil Case No. 97-84952 without prejudice. The
rules37provide:
Rule 41
APPEAL FROM THE REGIONAL
TRIAL COURTS

Section 1. x x x
No appeal may be taken from:
xxxx
(h) An order dismissing an action without prejudice.
Indeed, under the 1997 Rules of Civil Procedure, Rule 41, Section 1(h), thereof expressly
provides that no appeal may be taken from an order dismissing an action without prejudice. It
may be subject of a special civil action for certiorari under Rule 65 of the Rules of Court, as
amended by the said 1997 Rules of Civil Procedure. The Court of Appeals, therefore, acted
correctly in stating that the Notice of Appeal filed by the petitioner was dismissible.
Even if in the interest of substantial justice, we consider the Notice of Appeal as a Petition for
Certiorari under Rule 65 of the Rules of Court, still no grave abuse of discretion may be
attributed to the RTC in dismissing Civil Case No. 97-84952.
The Writ of Certiorari is an extraordinary remedy to correct errors of jurisdiction. An act of a
court or tribunal may only be considered as committed in grave abuse of discretion when the
same was performed in a capricious or whimsical exercise of judgment which is equivalent to
lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform a duty enjoined by law or to act at all
in contemplation of law, as where the power is exercised in an arbitrary and despotic manner
by reason of passion or personal hostility. Be that as it may, it must be emphasized that this
practice is applied only under certain exceptional circumstances to prevent unnecessary delay
in the administration of justice and so as not to unduly burden the courts.38
In the present case, Civil Case No. 97-84952 was initially scheduled for pre-trial conference
on 17 April 2000.39 By agreement of the parties, the pre-trial conference was re-set to 8 June
2000.40 Again, by agreement of the parties, the pre-trial conference was re-set to 6 July
2000,41 only to be re-set once more to 3 August 2000.42 On 3 August 2000, petitioner filed a
motion to re-set pre-trial conference to 11 September 2000.43 On 11 September 2000,
petitioners counsel was not present; thus, the pre-trial conference was cancelled and re-set to
17 October 2000.44 On 17 October 2000, the parties manifested that they might settle the case
amicably so the pre-trial conference on said date was cancelled.45 The pre-trial conference was
re-set to 28 November 200046 and again to 17 January 2001 upon motion of private respondent
Asian Terminals, Inc.47 Cancellation and re-setting of the pre-trial conference also occurred to
28 March 2001,48 19 April 2001,49 20 June 2001,50 31 July 2001.51 Then again on 5 September
2001,52 on the ground that petitioners counsel/representative did not have the requisite
authority, and on 15 October 2001 because petitioners counsel failed to arrive at the proper
time.53When petitioners counsel again failed to attend the pre-trial conference on 19
November 2001, the RTC finally ordered the dismissal of the case without prejudice.
All these postponements truly manifest a lack of interest to prosecute on the part of the
petitioner as found by the RTC. Section 3, Rule 17 of the Rules of Court states:
SEC. 3. Dismissal due to fault of plaintiff. If, for no justifiable cause, the plaintiff
fails to appear on the date of the presentation of his evidence in chief on the

complaint, or to prosecute his action for an unreasonable length of time, or to

comply with these Rules or any order of the court, the complaint may be dismissed
upon motion of the defendant or upon the courts own motion, without prejudice to
the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless
otherwise declared by the court.
We have always been steadfast in ruling that in every action, the plaintiff is duty-bound to
prosecute the same with utmost diligence and with reasonable dispatch to enable him to obtain
the relief prayed for and, at the same time, minimize the clogging of the court dockets. The
expeditious disposition of cases is as much the duty of the plaintiff as the court. It must be
remembered that a defendant in a case likewise has the right to the speedy disposition of the
action filed against him, considering that any delay in the proceedings entails prolonged
anxiety and valuable time wasted.54
In all, we find that while it is true that the petitioners Notice of Appeal was timely filed based
on our ruling in Neypes, said Notice of Appeal was the wrong remedy. Even if considered as a
Petition for Certiorariunder Rule 65 of the Rules of Court, the same has no merit as discussed
above.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals
dated 12 August 2004 and Resolution dated 17 February 2005 are AFFIRMED. Costs against
petitioner.
SO ORDERED.

G.R. No. 172590

January 7, 2013

MARY LOUISE R. ANDERSON, Petitioner,

vs.
ENRIQUE HO, Respondent.
DECISION
DEL CASTILLO, J.:
As her petition for review was dismissed by the Court of Appeals (CA) on a technical ground,
petitioner now invokes the liberal application of the rules of procedure.
Assailed in this Petition for Review on Certiorari1 is the July 14, 2005 Resolution2 of the CA
in CA-G.R. SP No. 89793 which dismissed the petition for review of petitioner Mary Louise
R. Anderson (Anderson) because the certification against forum shopping attached thereto was
signed by counsel on her behalf without the proper authority. Likewise assailed is the CAs
May 4, 2006 Resolution3 denying the motion for reconsideration thereof.
Factual Antecedents
On June 5, 2003, Anderson filed a Complaint4 for Ejectment against respondent Enrique Ho
(Ho) before the Metropolitan Trial Court (MeTC) of Quezon City. 5 She alleged that through
her mere tolerance, Ho is in possession of her parcel of land at Roosevelt Avenue, Quezon
City covered by Transfer Certificate of Title No. N-1933686 (Roosevelt property). As she was
already in need of the said property, Anderson served upon Ho a Demand Letter to Vacate but
despite receipt thereof, Ho refused. Because of this, Anderson prayed that the MeTC order Ho
to vacate the Roosevelt property and pay her damages and attorneys fees.
In his Answer with Compulsory Counterclaim,7 Ho denied that his occupation of the
Roosevelt property is through Andersons mere tolerance. He claimed that since Anderson is
an American citizen, he managed her affairs in the Philippines and administered her properties
in Quezon City and Cebu. When Anderson sought his assistance in ejecting her relatives from
the Roosevelt property and in demolishing the St. Anthony de Padua Church built thereon, Ho
(1) secured the services of a lawyer to file an ejectment case against the occupants of the
property; (2) dutifully appeared in court on Andersons behalf who was then in the United
States of America (U.S.A.); and (3) was able to secure a judgment from the court in favor of
Anderson. For all these, Anderson did not pay Ho a single centavo and instead executed a
written document dated January 14, 19998 which states that as partial payment for Hos
services, Anderson is authorizing him "to make use of the Roosevelt property as his residence
free of charge provided he vacates [it] if there is a buyer for the lot" and "that the balance of
Hos compensation shall consist of 10% of the proceeds of the sale of any or all of her
properties located in Roosevelt Avenue, M.H. del Pilar Street and Ana Maria Street, all in
Quezon City; Cebu City; and Cebu province". In view of this, Ho averred that he possesses the
property not through mere tolerance but as part of his compensation for services rendered to
Anderson. Hence, he is entitled to the continued possession thereof until such time that the
property is sold and he is paid the 10% of the proceeds of its sale.
Ruling of the Metropolitan Trial Court

On June 25, 2004, the MeTC rendered a Decision 9 dismissing the case for lack of cause of
action. It gave much weight to the written document executed by Anderson wherein she gave
her consent for Ho to occupy the Roosevelt property provided that the latter shall vacate the
same if there is already a buyer for the lot. There being no allegation that the said property
already has a buyer, she could not eject Ho therefrom.
Ruling of the Regional Trial Court
On appeal, the Regional Trial Court (RTC) in its Decision10 of January 21, 2005 ruled as
follows:
The evidence of the parties thus stands upon an equipoise. With the equiponderance of
evidence, the Court is inclined to consider the dismissal of the complaint as without prejudice
depending on the outcome of the determination in the proper forum whether or not the written
document dated January 14, 1999 x x x was falsified.
WHEREFORE, the Court modifies the Decision dated June 25, 2004 of the Metropolitan Trial
Court of Quezon City in Civil Case No. 30840 by dismissing the complaint without prejudice.
SO ORDERED.11
Anderson moved for reconsideration,12 but the same was denied by the RTC in an
Order13 dated April 1, 2005, a copy of which was received by her counsel on May 5, 2005. 14
Ruling of the Court of Appeals
Intending to file with the CA a Petition for Review under Rule 42 of the Rules of Court,
Andersons counsel, Atty. Rommel V. Oliva (Atty. Oliva), filed a Motion for Extension of
Time of 15 days from May 20, 2005 or until June 4, 2005 within which to file a
petition15 allegedly due to the revisions required in the initial draft and on account of heavy
pressure of work. This was granted by the CA in a Minute Resolution 16 dated May 31, 2005.
Subsequently, said counsel sought another extension of 15 days or until June 19, 2005, 17 this
time claiming that the petition had already been finalized and sent to Anderson in Hawaii,
U.S.A. for her to read as well as sign the certification and verification portion thereof.
However, as of the last day of the extended period on June 4, 2005, the petition has not yet
been sent back, hence, the additional extension being sought. In the interest of justice, the CA
once again granted the said motion for extension.18 On June 20, 2005,19 Atty. Oliva was
finally able to file the Petition for Review20 but the certification against forum shopping
attached thereto was signed by him on Andersons behalf without any accompanying authority
to do so. Hence, the CA issued a Resolution21 on July 14, 2005, viz:
The Court resolves to DISMISS herein Petition for Review as the certification against forum
shopping was executed not by the petitioner herself but by her counsel without attaching
therewith any special authority to sign on her behalf.
SO ORDERED.22

Anderson filed a Motion for Reconsideration.23 During its pendency, she also filed a
Manifestation24 to which was attached an Affidavit25 and a Special Power of Attorney
(SPA)26 authorizing her counsel to cause the preparation and filing of the Petition for Review
and to sign and execute the verification and certification against forum shopping on her behalf.
She explained in the Affidavit that at the time the petition was filed, her health condition
hindered her from going to the proper authority to execute the necessary SPA so she just
verbally instructed her lawyer to draft the petition and cause the filing of the same.
Nevertheless, upon learning of the dismissal of her case, she returned to the Philippines even
against her doctors advice and executed an SPA in favor of her counsel. She thus prayed that
the subsequently submitted documents be considered in resolving her pending Motion for
Reconsideration.
The CA, however, remained unswayed and denied the Motion for Reconsideration in a
Resolution27 dated May 4, 2006.
Hence, this Petition for Review on Certiorari.
The Parties Arguments
Anderson prays for the relaxation of the rules on certification against forum shopping and cites
a number of jurisprudence wherein the Court considered the subsequent submission or
correction of a certificate of non-forum shopping as substantial compliance. One in particular
is Donato v. Court of Appeals28 which she claims to be on all fours with the present case.
Moreover, Anderson stresses that the merits of the case should at all times prevail over the
rigid application of technical rules. She then proceeds to discuss her arguments relating to the
substantial merits of her petition.
On the other hand, Ho points out that despite the extensions granted by the CA within which
to file the Petition for Review, Anderson still failed to sign the certification against forum
shopping. This, he avers, demonstrates Andersons brazen disregard of technical rules. Anent
the argument of substantial compliance, Ho cites Mendigorin v. Cabantog29 where the Court
reiterated its earlier pronouncement that substantial compliance will not suffice in a matter
involving strict observance of the rule regarding a certificate of non-forum shopping.30 At any
rate, Ho insists that Anderson has no sufficient cause of action for ejectment and damages
against him.
Our Ruling
The petition has no merit.
No justifiable reason exists in this case
as to relax the rule on certification
against forum shopping.
The need to abide by the Rules of Court and the procedural requirements it imposes has been
constantly underscored by this Court. One of these procedural requirements is the certificate of

non-forum shopping which, time and again, has been declared as basic, necessary and
mandatory for procedural orderliness.31
In Vda. De Formoso v. Philippine National Bank,32 the Court reiterated the guidelines
respecting non-compliance with or submission of a defective certificate of non-forum
shopping, the relevant portions of which are as follows:
4) As to certification against forum shopping, non-compliance therewith or a defect therein, x
x x, is generally not curable by its subsequent submission or correction thereof, unless there is
a need to relax the Rule on the ground of substantial compliance or presence of special
circumstances or compelling reasons.
xxxx
6) Finally, the certification against forum shopping must be executed by the party-pleader, not
by his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to
sign, he must execute a Special Power of Attorney designating his counsel of record to sign on
his behalf.33 (Emphasis supplied)
The requirement that it is the petitioner, not her counsel, who should sign the certificate of
non-forum shopping is due to the fact that a "certification is a peculiar personal representation
on the part of the principal party, an assurance given to the court or other tribunal that there
are no other pending cases involving basically the same parties, issues and causes of
action."34 "Obviously, it is the petitioner, and not always the counsel whose professional
services have been retained for a particular case, who is in the best position to know whether
sheactually filed or caused the filing of a petition in that case."35 Per the above guidelines,
however, if a petitioner is unable to sign a certification for reasonable or justifiable reasons,
she must execute an SPA designating her counsel of record to sign on her behalf. "A
certification which had been signed by counsel without the proper authorization is defective
and constitutes a valid cause for the dismissal of the petition."36
In this light, the Court finds that the CA correctly dismissed Andersons Petition for Review
on the ground that the certificate of non-forum shopping attached thereto was signed by Atty.
Oliva on her behalf sans any authority to do so. While the Court notes that Anderson tried to
correct this error by later submitting an SPA and by explaining her failure to execute one prior
to the filing of the petition, this does not automatically denote substantial compliance. It must
be remembered that a defective certification is generally not curable by its subsequent
correction. And while it is true that in some cases the Court considered such a belated
submission as substantial compliance, it "did so only on sufficient and justifiable grounds that
compelled a liberal approach while avoiding the effective negation of the intent of the rule on
non-forum shopping."37
Unlike in Donato38 and the other cases cited by Anderson, no sufficient and justifiable grounds
exist in this case as to relax the rules on certification against forum shopping.
In Donato, the CA dismissed therein petitioners Petition for Review on the ground, among
others, that the certification against forum shopping was signed by his counsel. In filing a
motion for reconsideration, petitioner submitted a certification duly signed by himself.
However, the CA ruled that his subsequent compliance did not cure the defect of the instant

petition and denied his Motion for Reconsideration. When the case reached this Court, it was
held, viz:
The petition for review filed before the CA contains a certification against forum shopping but
said certification was signed by petitioners counsel. In submitting the certification of nonforum shopping duly signed by himself in his motion for reconsideration, petitioner has aptly
drawn the Courts attention to the physical impossibility of filing the petition for review within
the 15-day reglementary period to appeal considering that he is a resident of 1125 South
Jefferson Street, Roanoke, Virginia, U.S.A. where he needs to personally accomplish and sign
the verification.
We fully agree with petitioner that it was physically impossible for the petition to have been
prepared and sent to the petitioner in the United States, for him to travel from Virginia, U.S.A.
to the nearest Philippine Consulate in Washington, D.C., U.S.A. in order to sign the
certification before the Philippine Consul, and for him to send back the petition to the
Philippines within the 15-day reglementary period. Thus, we find that petitioner has
adequately explained his failure to personally sign the certification which justifies relaxation
of the rule.
We have stressed that the rules on forum shopping, which were precisely designed to promote
and facilitate the orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective which is simply to prohibit
and penalize the evils of forum-shopping. The subsequent filing of the certification duly
signed by the petitioner himself should thus be deemed substantial compliance, pro hac vice. 39
While at first blush Donato appears to be similar with the case at bench, a deeper and
meticulous comparison of the two cases reveals essential differences. In Donato, the Court
held that it was impossible for the petition to have been prepared and sent to the therein
petitioner in the USA; for him to travel from Virginia to the nearest Philippine Consulate in
Washington D.C.; and for the petition to be sent back to the Philippines within the 15-day
reglementary period. The same could not, however, be said in this case. It must be
remembered that on top of the 15-day reglementary period to file the petition, Atty. Oliva
sought and was granted a total extension of 30 days to file the same. Hence, Anderson had a
total of 45 days to comply with the requirements of a Petition for Review as against the 15
days afforded to the petitioner in Donato. To this Court, the said period is more than enough
time for Anderson to execute an SPA before the nearest Philippine Consulate, which again
unlike in Donato, was located in the same state where Anderson was (Hawaii), and thereafter
to send it to the Philippines. Anent her allegation that her health condition at that time
hindered her from going to the proper authorities to execute an SPA, the same deserves scant
consideration as no medical certificate was submitted to support this. "Indeed, the age-old but
familiar rule is that he who alleges must prove his allegations."40
Moreover, simultaneous with the filing of a Motion for Reconsideration, the proper certificate
of non-forum shopping was submitted by the petitioner in Donato. Notably in this case, the
SPA was submitted two months after the filing of Andersons Motion for Reconsideration. It
took that long because instead of executing an SPA before the proper authorities in Hawaii
and sending the same to the Philippines, Anderson still waited until she came back to the
country and only then did she execute one. It thus puzzles the Court why Anderson opted not
to immediately submit the SPA despite her awareness that the same should have been
submitted simultaneously with the Petition for Review. Hence, it cannot help but conclude that

the delay in the submission of the SPA is nothing but a product of Andersons sheer laxity and
indifference in complying with the rules. It is well to stress that "rules are laid down for the
benefit of all and should not be made dependent upon a suitors sweet time and own
bidding."41 They should be faithfully complied with42 and may not simply be ignored to suit
the convenience of a party.43 Although they are liberally construed in some situations, there
must, however, be a showing of justifiable reasons and at least a reasonable attempt at
compliance therewith,44 which unfortunately are not obtaining in this case.
In view of the foregoing, this Court affirms the CAs dismissal of Andersons Petition for
Review.1wphi1
As a final note, the Court reiterates that:
x x x procedural rules are designed to facilitate the adjudication of cases. Courts and litigants
alike are enjoined to abide strictly by the rules. While in certain instances, we allow a
relaxation in the application of the rules, we never intend to forge a weapon for erring litigants
to violate the rules with impunity. The liberal interpretation and application of rules apply only
in proper cases of demonstrable merit 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 ensure an orderly and speedy
administration of justice. Party litigants and their counsels are well advised to abide by rather
than flaunt, procedural rules for these rules illumine the path of the law and rationalize the
pursuit of justice.45
WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed Resolution
dated July 14, 2005 and May 4, 2006 of the Court of Appeals in CA-G.R. SP No. 89793 are
AFFIRMED.
SO ORDERED.

G.R. No. 181458

March 20, 2013

REPUBLIC OF THE PHILIPPINES, represented by the PRESIDENTIAL

COMMISSION ON GOOD GOVERNMENT (PCGG), Petitioner,
vs.
TRINIDAD DIAZ-ENRIQUEZ, LEANDRO ENRIQUEZ, ERLINDA ENRIQUEZPANLILIO, ALLAN E. PANLILIO, JOSE MARCEL E. PANLILIO, KATRINA E.
PANLILIO, NICOLE P. MORRIS, IMELDA R. MARCOS, MA. IMELDA MARCOSMANOTOC, FERDINAND R. MARCOS, JR., MA. VICTORIA IRENE MARCOSARANETA, EMILIA T. CRUZ, RAFAEL ROMAN T. CRUZ, MA. RONA ROMANA
T. CRUZ, ANA CRISTINA CRUZ GA YLO, GINO R. CRUZ, ISAIAH PAVIA CRUZ,
and DON M. FERRY. Respondents.
DECISION

After receiving the Answers, the Sandiganbayan scheduled pretrial dates for Civil Case No.
0014. However, the court failed to conduct pretrial hearings from 2002 to 2007. For five years,
it reset the hearings in view of the pending incidents, which included G.R. No. 154560, and
because the case "was not yet ripe for a pretrial conference."5
On 28 June 2007, Civil Case No. 0014 was called for the initial presentation of plaintiff's
evidence, but the proceedings did not push through. Finally, two decades after the inception of
the case, both parties moved to set the pretrial and trial hearings on 1, 2, 29, and 30 October
2007. The Sandiganbayan granted their motions in this wise:6
When this case was called for initial presentation of plaintiff's evidence, both parties moved
for postponement, and considering some issues still pending with the Supreme Court, but
considering also on the other hand, that this case has been pending for quite a long time, the
Court orders parties to submit Joint Stipulation of Facts, as well as substitution of parties, and
by the next hearing, the Court shall proceed to hear this case.

SERENO, CJ.:
Before this Court is the 11 March 2008 Petition for Review on Certiorari filed by petitioner
under Rule 45 of the Rules of Court, which assails the 1 October 2007 Order and 25 January
2008 Resolution of the Sandiganbayan (Second Division).1
The facts in this case are not disputed.
On 23 July 1987, the Republic of the Philippines (Republic), represented by the Presidential
Commission on Good Government (PCGG) and the Office of the Solicitor General (OSG),
filed a Complaint against respondents. Docketed as Civil Case No. 0014, this civil action
sought the recovery of ill-gotten wealth from respondents for the benefit of the Republic.
Allegedly, these properties were illegally obtained during the reign of former President
Ferdinand E. Marcos and, hence, were the subject of sequestration orders.
Thereafter, Civil Case No. 0014 went through a series of inclusions of individual defendants
and defendant corporations. As a result, respondents finished filing their separate Answers
eight years later, or in 1995.
In May 1996, some of the defendant corporations filed motions for dismissal. Six years
thereafter, the Sandiganbayan resolved the motions. It ruled in favor of defendant corporations
and lifted the sequestration orders against them.2

Accordingly, the hearing set for tomorrow is cancelled, and reset to October 1, 2, 29 & 30,
2007, all at 1:30 o'clock in the afternoon.
SO ORDERED.
Following this Resolution, the defendants moved for the extension of the submission of these
requirements. Nevertheless, none of them fully complied, except petitioner who submitted an
"unofficial proposal for stipulation, for defendants to comment on the same."7
In the interim, the contract of Falcon with the PCGG terminated on 1 July 2007. 8 Through a
letter dated 21 September 2007, she informed Puertollano that she was no longer connected
with the PCGG. She also turned over to him the records of Civil Case No. 0014. 9 However,
Puertollano belatedly received the letter on 8 October 2007. For all he knew, Falcon had
attended the hearings prior to that date, while he was pursuing G.R. No. 154560.
Thus, on 1 October 2007, no representative appeared on behalf of petitioner. Consequently,
the Sandiganbayan issued its 1 October 2007 Order dismissing the case without prejudice. The
court ruled thus:10

Aggrieved, the Republic filed a Petition for Certiorari3 before this

On motion of Atty. Nini Priscilla D. Sison-Ledesma for the dismissal of this case, since
plaintiff's counsel failed to appear despite due notice and there was no representative from the
plaintiff, this case is ordered DISMISSED without prejudice. The issue of whether the pending
incident before the Supreme Court would affect this case is off tangent.

Court on 23 August 2002. Docketed as G.R. No. 154560, 4 the Rule 65 petition questioned the
lifting of the sequestration orders against defendant corporations.

Accordingly, the hearings set tomorrow, October 2, 2007, and also on October 29 and 30,
2007 are cancelled.

With these two cases at bay, the counsels for the Republic divided their responsibilities as
follows: Special PCGG Counsel Maria Flora A. Falcon (Falcon) attended to Civil Case No.
0014, while OSG Senior State Solicitor Derek R. Puertollano (Puertollano) handled G.R. No.
154560.

SO ORDERED.
On 5 October 2007, Atty. Mary Charlene Hernandez took over the case from PCGG's previous
special counsel11and only after a while did she learn of the trial dates. She also knew nothing

about the dismissal of the case. Hence, she proceeded to file an Urgent Motion for
Postponement12 of the 30 October 2007 hearing.
The OSG came to know of the dismissal of Civil Case No. 0014 only when it received the
assailed Order on 15 November 2007. On 29 November 2007, it filed a Motion for
Reconsideration13 with a notice for hearing on 7 December 2007. This motion was served on
the Sandiganbayan and respondents on 29 November 2007 via registered
mail.14 Unfortunately, the court received the motion only on 10 December 2007.15
Considering the late receipt of the motion, the Sandiganbayan issued its 25 January 2008
Resolution denying it on the ground of failure to observe the three-day notice
requirement.16 In effect, it considered the motion as a worthless piece of paper. With this
instant dismissal, the Sandiganbayan no longer considered the reasons adduced by petitioner
to explain the latter's absence in court.
Specifically, petitioner brought to the Sandiganbayan's attention the fact that Falcon, who was
assigned to Civil Case No. 0014, had diligently attended to the civil action. But since she was
no longer connected to the PCGG, and given that the OSG only learned of this circumstance
seven days after the hearing on 1 October 2007, counsels for petitioner failed to appear during
the hearing.17
Hence, petitioner comes before this Court to seek the reinstatement of the 26-year-old case,
which has already reached the start of the trial stage.
Petitioner argues that its single incidence of absence after Falcon resigned on 1 October 2007
does not amount to failure to prosecute under Rule 17, Section 3 of the Rules of Court, which
states:
Sec. 3. Dismissal due to fault of plaintiff.
If, for no justifiable cause, the plaintiff fails to appear on the date of the presentation of his
evidence in chief on the complaint, or to prosecute his action for an unreasonable length of
time, or to comply with these Rules or any order of the court, the complaint may be dismissed
upon motion of the defendant or upon the court's own motion, without prejudice to the right of
the defendant to prosecute his counterclaim in the same or in a separate action. This dismissal
shall have the effect of an adjudication upon the merits, unless otherwise declared by the
court.
Petitioner further avers that the Motion for Reconsideration questioning the dismissal of Civil
Case No. 0014 should not have been denied for supposedly violating the three-day notice
requirement. Rule 15, Section 4 of the Rules of Court, reads:
Sec. 4. Hearing of motion.
Except for motions which the court may act upon without prejudicing the rights of the adverse
party, every written motion shall be set for hearing by the applicant.

Every written motion required to be heard and the notice of the hearing thereof shall be served
in such a manner as to ensure its receipt by the other party at least three (3) days before the
date of hearing, unless the court for good cause sets the hearing on shorter notice.
Therefore, this Court is tasked to resolve the two issues raised by petitioner as follows:
I. Whether the Sandiganbayan gravely erred in dismissing Civil Case No. 0014 for
the failure of petitioner to appear during the 1 October 2007 hearing.
II. Whether the Sandiganbayan committed reversible error in denying the Motion for
Reconsideration on the ground that it failed to comply with the three-day notice rule.
RULING OF THE COURT
Dismissal of Civil Case No. 0014 for Petitioner's Failure to Appear
Petitioner asserts that, save for the absence of Falcon due to the termination of her contract
with the PCGG, she was diligent in attending the hearings and in submitting the requirements
of the Sandiganbayan. Likewise, Puertollano was responsible in pursuing G.R. No. 154560.
Thus, their inability to send representatives for the Republic in the 1 October 2007 hearing can
only be appreciated as mere inadvertence and excusable negligence, which cannot amount to
failure to prosecute.
Petitioner also advances the argument that this Court disfavors judgments based on non-suits
and prefers those based on the merits - especially in Civil Case No. 0014, which contains
allegations of ill-gotten wealth. Moreover, petitioner claims that reasonable deferments may
be tolerated if they would not cause substantial prejudice to any party.
Lastly, petitioner manifests good reasons to expect the cancellation of the 1 October 2007
hearing, as in the past resetting. At that time, the same circumstances for postponement were
present: (1) G.R. No. 154560 was still pending before this Court; (2) several incidents18 were
also still pending; and (3) no pretrial order has yet been issued by the Sandiganbayan.
On the other hand, in their Comments,19 respondents stress the letter of the law. Indeed, Rule
17, Section 3 of the Rules of Court, provides that complaints may be dismissed if a petitioner
fails to be present on the date of presentation of its evidence in chief.
Additionally, respondents contend that no justifiable cause exists to warrant petitioner's
absence. To support their contention, they cite the following: (1) Falcon agreed to set the
hearing on 1 October 2007; and (2) Puertollano should have attended the pretrial even if
Falcon failed to appear considering that, as counsels for petitioner, both of them had been
notified of the orders and resolutions of the Sandiganbayan.
Respondents also highlight the fact that the PCGG and the OSG failed to monitor the
proceedings when they filed a Motion for Reconsideration only after 14 days from the OSG's
receipt of the assailed Order of dismissal. Worse, the counsels of the Republic did not even
inform the court beforehand of the reason for their absence. Because of these circumstances,

respondents posit that the Sandiganbayan did not gravely err in dismissing Civil Case No.
0014.
This Court rules in favor of the Republic.
As worded, Rule 17, Section 3 of the Rules of Court, provides that the court may dismiss a
complaint in case there are no justifiable reasons that explain the plaintiff's absence during the
presentation of the evidence in chief. Generally speaking, the use of "may" denotes its
directory nature,20 especially if used in remedial statutes that are known to be construed
liberally. Thus, the word "may" in Rule 17, Section 3 of the Rules of Court, operates to confer
on
the court the discretion21 to decide between the dismissal of the case on technicality vis--vis
the progressive prosecution thereof.
Given the connotation of this procedural rule, it would have been expected that the
Sandiganbayan would look into the body of cases that interpret the provision. From
jurisprudence, it is inevitable to see that the real test of the exercise of discretion is whether,
under the circumstances, the plaintiff is charged with want of due diligence in failing to
proceed with reasonable promptitude.22 In fact, we have ruled that there is an abuse of that
discretion when a judge dismisses a case without any showing that the party's conduct "is so
indifferent, irresponsible, contumacious or slothful."23
Here, the Sandiganbayan appears to have limited itself to a rigid application of technical rules
without applying the real test explained above. The 1 October 2007 Order was bereft of any
explanation alluding to the indifference and irresponsibility of petitioner. The Order was also
silent on any previous act of petitioner that can be characterized as contumacious or slothful.
Verily, the circumstances in Civil Case No. 0014 should have readily convinced the
Sandiganbayan that it would be farfetched to conclude that petitioner lacked interest in
prosecuting the latter's claims.
Firstly, based on the records, petitioner's counsels have actively participated in the case for
two decades. The Sandiganbayan has not made any remark regarding the attendance of
petitioner, save for this single instance. Secondly, after the latter received the assailed Order, it
duly filed a Motion for Reconsideration. These circumstances should have easily persuaded
the Sandiganbayan that the Republic intended to advance the ill-gotten wealth case.
More importantly, respondents' imputation of lack of interest to prosecute on the part of
petitioner becomes a hyperbole in the face of its explanation, albeit belated.
Respondents harp on the fact that since Falcon agreed to set the hearing on 1 October 2007
and Puertollano, being a counsel of record, may have also known of the schedule, petitioner
has no excuse to be absent. But even if we concede to respondents' arguments, the most that
they can say is that petitioner had an instance of absence without an excuse. Juxtaposing this
lapse against its long history of actively prosecuting the case, it would be the height of rigidity
to require from petitioner complete attendance, at all times.

Similarly, in Perez v. Perez, we held thus:24

The records show that every time the case was set for hearing, the plaintiffs and their counsel
had always been present; however, the scheduled hearings were either cancelled by the court
motu propio and/or postponed by agreement of the parties, until the case was eventually set for
trial on the merits on February 15, 1967. It was only at this hearing where the plaintiffs and
their counsel failed to appear, prompting the court to issue its controversial order of dismissal.
Considering that it was the first time that the plaintiffs failed to appear and the added fact that
the trial on the merits had not as yet commenced, We believe that it would have been more in
consonance with the essence of justice and fairness for the court to have postponed the hearing
on February 15, 1967.
We are not unmindful of the fact that the matter of adjournment and postponement of trials is
within the sound discretion of the court; but such discretion should always be predicated on
the consideration that more than the mere convenience of the courts or of the parties in the
case, the ends of justice and fairness should be served thereby. Postponements and
continuances are part and parcel of our procedural system of dispensing justice, and when - as
in the present case - no substantial rights are affected and the intention to delay is not manifest,
it is sound judicial discretion to allow them.
This Court further considers that based on the records, the contract of the handling lawyer,
Falcon, with the PCGG terminated without the knowledge of Puertollano. After Falcon's
resignation, it was only on 5 October 2007 that the case was transferred to the new lawyer.
These facts then explain the nonattendance of petitioner on 1 October 2007, and why it failed
to keep abreast with the succeeding 2, 29, and 30 October 2007 hearings.
Moreover, this Court understands the absence of Puertollano in Civil Case No. 0014. The
OSG has explained that he attends to G.R. 154560, as the main case has been delegated to the
PCGG. We find this arrangement sensible, given that case management is needed to tackle this
sensitive case involving a number of high-profile parties, sensitive issues and, of course,
numerous offshoots and incidents.
Respondents are correct in saying that courts have a right to dismiss a case for failure of the
plaintiff to prosecute. Still, we remind justices, judges and litigants alike that rules "should be
interpreted and applied not in a vacuum or in isolated abstraction, but in light of surrounding
circumstances and attendant facts in order to afford justice to all."25
We underscore that there are specific rules that are liberally construed, and among them is the
Rules of Court. In fact, no less than Rule 1, Section 6 of the Rules of Court echoes that the
rationale behind this construction is to promote the objective of securing a just, speedy and
inexpensive disposition of every action and proceeding. Surprisingly, the Sandiganbayan
obviated the speedy disposition of the case when it chose to dismiss the case spanning two
decades over a technicality and, in the same breath, rationalized its cavalier attitude by saying
that a complaint for ill-gotten wealth should be reinstituted all over again.
Here, we find it incongruous to tip the balance of the scale in favor of a technicality that would
result in a complete restart of the 26-year-old civil case back to square one. Surely, this Court
cannot waste the progress of the civil case from the institution of the complaint to the point of
reaching the trial stage. Not only would this stance dry up the resources of the government and

the private parties, but it would also compromise the preservation of the evidence needed by
them to move forward with their respective cases. Thus, to prevent a miscarriage of justice in
its truest sense, and considering the exceptional and special history of Civil Case No. 0014,
this Court applies a liberal construction of the Rules of Court.1wphi1
Every party-litigant must be afforded the amplest opportunity for the proper and just
determination of its cause.26"Adventitious resort to technicality resulting in the dismissal of
cases is disfavored because litigations must as much as possible be decided on the merits and
not on technicalities."27 Inconsiderate dismissals, even if without prejudice to its refiling as in
this case, merely postpone the ultimate reckoning between the parties. In the absence of a clear
intention to delay, justice is better served by a brief continuance, trial on the merits, and final
disposition of the case before the court.28
Denial of Petitioner's Motion for Reconsideration due to Petitioner's Failure to Observe the
Three-day Notice Rule
In its assailed 25 January 2008 Resolution, the Sandiganbayan held that petitioners failed to
comply with the three-day notice rule. It faulted petitioner for its belated receipt on 1 0
December 2007 of the Motion for Reconsideration set for hearing on 7 December 2007.
The Sandiganbayan is incorrect. By the very words of Rule 15, Section 4 of the Rules of
Court, the moving party is required to serve motions in such a manner as to ensure the receipt
thereof by the other party at least three days before the date of hearing. The purpose of the rule
is to prevent a surprise and to afford the adverse party a chance to be heard before the motion
is resolved by the trial court.29 Plainly, the rule does not require that the court receive the
notice three days prior to the hearing date.
Likewise, petitioner mailed the motion to the Sandiganbayan on 29 November 2007. Since
Rule 13, Section 3 of the Rules of Court, states that the date of the mailing of motions through
registered mail shall be considered the date of their filing in court, it follows that petitioner
filed the motion to the court 10 days in advance of the hearing date. In so doing, it observed
the 10-day requirement under Rule 15, Section 5 of the Rules of Court, which provides that
the time and date of the hearing must not be later than ten days after the filing of the motion.
Considering that the Motion for Reconsideration containing a timely notice of hearing was
duly served in compliance with Rule 15, Sections 4 and 5 of the Rules of Court, the fact that
the Sandiganbayan received the notice on 10 December 2007 becomes trivial. The court
cannot also blame petitioner for this belated receipt of the registered mail since it followed the
rules.
Therefore, the Sandiganbayan should have given due course to the Motion for Reconsideration
filed by petitioner. If it had done so, Civil Case No. 0014 would have progressed at the trial
court level.
IN VIEW THEREOF, the 11 March 2008 Petition for Review on Certiorari filed by petitioner
is GRANTED. The 1 October 2007 Order and 25 January 2008 Resolution of the
Sandiganbayan (Second Division) are REVERSED. Consequently, Civil Case No. 0014 is
hereby REINSTATED.

SO ORDERED.

G.R. No. 139539

February 5, 2002

CEROFERR REALTY CORPORATION, petitioner,

vs.
COURT OF APPEALS and ERNESTO D. SANTIAGO, respondents.
DECISION
PARDO, J.:

boundaries of Lot No. 90 of the Tala Estate Subdivision which is separate and distinct from
Lot No. 68, and that the two lots are separated by a concrete fence.
"Because of the competing claims of ownership of the parties over the vacant lot, it became
inevitable that the eye of the storm centered on the correctness of property boundaries which
would necessarily result in an inquiry as to the regularity and validity of the respective titles of
the parties. While both parties have been brandishing separate certificates of title, defendant
asserted a superior claim as against that of the plaintiff in that, according to defendant, his title
has been confirmed through judicial reconstitution proceedings, whereas plaintiffs title does
not carry any technical description of the property except only as it is designated in the title as
Lot No. 68 of the Tala Estate Subdivision.

The Case
This is an appeal via certiorari1 from the decision of the Court of Appeals2 dismissing
petitioners appeal from the order3 of the Regional Trial Court, Branch 93, Quezon City,
which dismissed petitioners complaint for damages and injunction with preliminary
injunction, as well as its resolution4 denying reconsideration.5

"It thus became clear, at least from the viewpoint of defendant, that the case would no longer
merely involve a simple case of collection of damages and injunction which was the main
objective of the complaint - but a review of the title of defendant vis--vis that of plaintiff. At
this point, defendant filed a motion to dismiss the complaint premised primarily on his
contention that the trial court cannot adjudicate the issue of damages without passing over the
conflicting claims of ownership of the parties over the disputed portion.

The Facts
6

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

"On March 16, 1994, plaintiff (Ceroferr Realty Corporation) filed with the Regional Trial
Court, Quezon City, Branch 93, a complaint7 against defendant Ernesto D. Santiago
(Santiago), for "damages and injunction, with preliminary injunction." In the complaint,
Ceroferr prayed that Santiago and his agents be enjoined from - claiming possession and
ownership over Lot No. 68 of the Tala Estate Subdivision, Quezon City, covered by TCT No.
RT-90200 (334555); that Santiago and his agents be prevented from making use of the vacant
lot as a jeepney terminal; that Santiago be ordered to pay Ceroferr P650.00 daily as lost
income for the use of the lot until possession is restored to the latter; and that Santiago be
directed to pay plaintiff Ceroferr moral, actual and exemplary damages and attorneys fees,
plus expenses of litigation.
"In his answer, defendant Santiago alleged that the vacant lot referred to in the complaint was
within Lot No. 90 of the Tala Estate Subdivision, covered by his TCT No. RT-78 110
(3538); that he was not claiming any portion of Lot No. 68 claimed by Ceroferr; that he had
the legal right to fence Lot No. 90 since this belonged to him, and he had a permit for the
purpose; that Ceroferr had no color of right over Lot No. 90 and, hence, was not entitled to an
injunction to prevent Santiago from exercising acts of ownership thereon; and that the
complaint did not state a cause of action.
"In the course of the proceedings, an important issue metamorphosed as a result of the
conflicting claims of the parties over the vacant lot actually used as a jeepney terminal the
exact identity and location thereof. There was a verification survey, followed by a relocation
survey, whereby it would appear that the vacant lot is inside Lot No. 68. The outcome of the
survey, however, was vigorously objected to by defendant who insisted that the area is inside
his lot. Defendant, in his manifestation dated November 2, 1994, adverted to the report of a
geodetic engineer. Mariano V. Flotildes, to the effect that the disputed portion is inside the

"On May 14, 1996, the trial court issued the order now subject of this appeal which, as earlier
pointed out, dismissed the case for lack of cause of action and lack of jurisdiction. The court
held that plaintiff was in effect impugning the title of defendant which could not be done in
the case for damages and injunction before it. The court cited the hoary rule that a Torens
certificate of title cannot be the subject of collateral attack but can only be challenged through
a direct proceeding. It concluded that it could not proceed to decide plaintiffs claim for
damages and injunction for lack of jurisdiction because its judgment would depend upon a
determination of the validity of defendants title and the identity of the land covered by it.
"From this ruling, plaintiff appealed to this court insisting that the complaint stated a valid
cause of action which was determinable from the face thereof, and that, in any event, the trial
court could proceed to try and decide the case before it since, under present law, there is now
no substantial distinction between the general jurisdiction vested in a regional trial court and
its limited jurisdiction when acting as a land registration court, citing Ignacio v. Court of
Appeals 246 SCRA 242 (1995)."
On March 26, 1999, the Court of Appeals promulgated a decision dismissing the appeal. 8 On
May 13, 1999, petitioner filed with the Court of Appeals a motion for reconsideration of the
decision.9 On July 29, 1999, the Court of Appeals denied petitioners motion for
reconsideration for lack of merit.10
Hence, this appeal.11
The Issues
The issues are: (1) whether Ceroferrs complaint states a sufficient cause of action and (2)
whether the trial court has jurisdiction to determine the identity and location of the vacant lot
involved in the case.
The Courts Ruling

We grant the petition.

The rules of procedure require that the complaint must state a concise statement of the
ultimate facts or the essential facts constituting the plaintiffs cause of action. A fact is
essential if it cannot be stricken out without leaving the statement of the cause of action
inadequate. A complaint states a cause of action only when it has its three indispensable
elements, namely: (1) a right in favor of the plaintiff by whatever means and under whatever
law it arises or is created; (2) an obligation on the part of the named defendant to respect or
not to violate such right; and (3) an act or omission on the part of such defendant violative of
the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for
which the latter may maintain an action for recovery of damages.12 If these elements are not
extant, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to
state a cause of action.13

asserted therein.16 The jurisdiction of a court over the subject matter is determined by the
allegations of the complaint and cannot be made to depend upon the defenses set up in the
answer or pleadings filed by the defendant.17
While the lack of jurisdiction of a court may be raised at any stage of an action, nevertheless,
the party raising such question may be estopped if he has actively taken part in the very
proceedings which he questions and he only objects to the courts jurisdiction because the
judgment or the order subsequently rendered is adverse to him. 18

These elements are present in the case at bar.

In this case, respondent Santiago may be considered estopped to question the jurisdiction of
the trial court for he took an active part in the case. In his answer, respondent Santiago did not
question the jurisdiction of the trial court to grant the reliefs prayed for in the complaint. His
geodetic engineers were present in the first and second surveys that the LRA conducted. It was
only when the second survey report showed results adverse to his case that he submitted a
motion to dismiss.

The complaint14 alleged that petitioner Ceroferr owned Lot 68 covered by TCT No. RT-90200
(334555). Petitioner Ceroferr used a portion of Lot 68 as a jeepney terminal.

Both parties in this case claim that the vacant lot is within their property.1wphi1 This is an
issue that can be best resolved by the trial court in the exercise of its general jurisdiction.

The complaint further alleged that respondent Santiago claimed the portion of Lot 68 used as a
jeepney terminal since he claimed that the jeepney terminal was within Lot 90 owned by him
and covered by TCT No. RT-781 10 (3538) issued in his name.

After the land has been originally registered, the Court of Land Registration ceases to have
jurisdiction over contests concerning the location of boundary lines. In such case, the action in
personam has to be instituted before an ordinary court of general jurisdiction. 19

Despite clarification from petitioner Ceroferr that the jeepney terminal was within Lot 68 and
not within Lot 90, respondent Santiago persisted in his plans to have the area fenced. He
applied for and was issued a fencing permit by the Building Official, Quezon City. It was even
alleged in the complaint that respondent- Santiago was preventing petitioner Ceroferr and its
agents from entering the property under threats of bodily harm and destroying existing
structures thereon.

The regional trial court has jurisdiction to determine the precise identity and location of the
vacant lot used as a jeepney terminal.

A defendant who moves to dismiss the complaint on the ground of lack of cause of action, as
in this case, hypothetically admits all the averments thereof. The test of sufficiency of the facts
found in a complaint as constituting a cause of action is whether or not admitting the facts
alleged the court can render a valid judgement upon the same in accordance with the prayer
thereof. The hypothetical admission extends to the relevant and material facts well pleaded in
the complaint and inferences fairly deducible therefrom. Hence, if the allegations in the
complaint furnish sufficient basis by which the complaint can be maintained, the same should
not be dismissed regardless of the defense that may be assessed by the defendants. 15
In this case, petitioner Ceroferrs cause of action has been sufficiently averred in the
complaint. If it were admitted that the right of ownership of petitioner Ceroferr to the peaceful
use and possession of Lot 68 was violated by respondent Santiagos act of encroachment and
fencing of the same, then petitioner Ceroferr would be entitled to damages.
On the issue of jurisdiction, we hold that the trial court has jurisdiction to determine the
identity and location of the vacant lot in question.
Jurisdiction over the subject matter is conferred by law and is determined by the allegations of
the complaint irrespective of whether the plaintiff is entitled to all or some of the claims

The Fallo
IN VIEW WHEREOF, we GRANT the petition. We REVERSE the decision of the Court of
Appeals20 and the order of the trial court21 dismissing the case. We remand the case to the
Regional Trial Court, Branch 93, Quezon City, for further proceedings.
No costs.
SO ORDERED.

COOPERATIVE, INC.,

"Disconnected w/light/illegal tapping."

Petitioner,

Petitioner alleged that respondent violated RA 78324 and required her to pay the differential
billing and penalty within 48 hours; otherwise, the electric service would be disconnected. A
conciliatory conference between the parties was held where petitioner presented respondent
with two options: deposit the differential billing of P3,367.00 to avoid disconnection during
the pendency of the criminal action to be filed by petitioner or pay the amount of the
differential billing and the penalty of P15,000.00, in which case the matter would be
considered closed and the filing of a criminal case dispensed with.

Present:
PUNO, C.J., Chairperson,
CARPIO,
- v e r s u s - CORONA,

Respondent refused to choose any of the options as she felt that to do so would be tantamount
to an admission of guilt. Consequently, her electrical service was permanently disconnected on
January 23, 2003.

AZCUNA and
LEONARDO-DE CASTRO, JJ.

Respondent filed a complaint for damages against petitioner in the Regional Trial Court
(RTC). She alleged that due to the disconnection of electrical services, her business operation
was interrupted causing her damages in the form of unrealized income, rentals paid for the
premises she was unable to use and renovation costs of the leased building.

EXPEDITA L. AQUINO,
Respondent.
Promulgated:
September 23, 2008

Petitioner filed an answer with affirmative defenses. It alleged, among others, that the
complaint failed to state a cause of action. According to petitioner, no contract to supply
electricity was entered into between them. Thus, respondents complaint had no basis and
should be dismissed.
Respondent subsequently amended her complaint. Petitioner still insisted on moving for its
dismissal, reiterating that the complaint stated no cause of action.

x---------------------------------------------------x
RESOLUTION
CORONA, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks to set aside the
January 5, 2005 decision1 and March 22, 2005 resolution2 of the Court of Appeals (CA) in
CA-G.R. CV No. 81666.
Respondent Expedita L. Aquino bought several personal computers and leased a commercial
building in Tigaon, Camarines Sur for purposes of establishing a computer gaming business.
She had the electrical service in the building restored because the former tenant, a certain Mrs.
Paglinawan,3 had it disconnected when she gave up the occupancy thereof. Respondent paid
the reconnection fee as well as the fee corresponding to the electric consumption covering the
period of April 17, 2002 to May 16, 2002 to petitioner Camarines Sur IV Electric Cooperative,
Inc. in Mrs. Paglinawans name. However, respondent failed to pay the electric bills in the
succeeding months.
Because of adverse reports, petitioner conducted an inspection of the electrical wiring of the
leased building, took pictures thereof and gave respondents overseer a report of pilferage of
electricity with the notation:

The trial court initially denied the motion to dismiss in an order dated July 10, 2003. It held
that, as respondent was in possession of the premises to which petitioner supplied electricity,
there was, in a way, a contract between the parties.
When petitioner moved for reconsideration, the court a quo, in its December 22, 2003 order,
made a turnaround and ruled in petitioners favor (second RTC order). 5 It stated that
respondents payment of the reconnection fee did not suffice to create a new contract between
the parties as the same was made in Mrs. Paglinawans name, whose contract with petitioner
was terminated upon the disconnection of the electrical service.
Respondent received a copy of the second RTC order on December 23, 2003 and moved for
reconsideration thereof on January 5, 2004. Respondent mailed a copy of her motion for
reconsideration (with notice of hearing) to petitioners counsel only on the same date. The
notice of hearing indicated that the hearing of the motion was set on January 9, 2004.
Petitioner filed an opposition thereto, alleging, among others, that the motion should be denied
as respondent did not comply with the 3-day rule (as provided in the Rules of Court).
On February 3, 2004, the trial court denied respondents motion for reconsideration for lack of
merit.6 However, it was silent on the motions non-compliance with the 3-day rule.

Respondent filed an appeal in the CA on February 5, 2004, insisting that the complaint
sufficiently stated a cause of action for damages. For its part, petitioner reiterated its stand on
the issue. It also called the CAs attention to the alleged flaw in respondents motion for
reconsideration in the
RTC. It argued that the motion was a pro forma motion (since it violated the 3-day rule) which
should have been dismissed outright by the trial court. Furthermore, it did not stop the running
of the 15-day period for respondent to appeal which should have been reckoned from her
receipt of the second RTC order on December 23, 2003. Consequently, her February 5, 2004
notice of appeal (which was filed 44 days after she received a copy of the second RTC order)
was filed late.
The appellate court held that the RTC erred in dismissing the complaint as indeed a cause of
action existed. The CA ruled that the matter of whether or not a contract, express or implied,
existed between the parties was a matter of defense that must be resolved in a trial on the
merits. It stated that such issue was not relevant in a motion to dismiss based on failure to state
a cause of action. However, it did not pass upon the issue relative to the timeliness of
respondents appeal.

have foreseen that the registered mail, which originated from Naga City, would not be able to
reach the law office of petitioners counsel in Manila at least 3 days before said date. As
expected, the mail did not reach petitioners counsel on time. In fact, he received it only on the
day of the hearing itself.11 Thus, respondents motion for reconsideration was fatally flawed
for failure to comply with the 3-day rule under Section 4, Rule 15 of the Rules of Court. It did
not toll the reglementary period for respondent to appeal the RTCs decision.
We note that respondents comment did not even touch on the issues of the perceived
deficiency in her motion for reconsideration and the timeliness of her appeal in the CA.
Although her memorandum briefly discussed these issues, the same was insufficient as it
merely reiterated the statement of facts in her appellants brief in the CA (specifically, as to
when she filed said motion in the RTC). No discussion was proffered regarding the date of
mailing of a copy of the assailed motion to petitioners counsel. Furthermore, as if admitting
her failure to comply with the mandatory rule on notice of hearing, respondent invoked the
much abused exhortation of losing litigants on the primacy of substantial justice over mere
technicalities.
Respondents arguments have no merit.

Petitioner filed a motion for reconsideration. It was denied. Hence, this petition.

Section 4, Rule 15 of the Rules of Court provides:

The issues before us are: (1) whether or not respondents complaint for damages stated a cause
of action against petitioner and (2) whether or not respondents appeal in the CA was filed on
time.

Sec. 4. Hearing of Motion. Except for motions which the court may act upon without
prejudicing the rights of the adverse party, every motion shall be set for hearing by the
applicant.

There is a cause of action when the following elements are present: (1) the legal right of the
plaintiff; (2) the correlative obligation of the defendant and (3) the act or omission of the
defendant in violation of said legal right.7 In determining the presence of these elements, only
the facts alleged in the complaint must be considered. The test is whether the court can render
a valid judgment on the complaint based on the facts alleged and the prayer asked for, 8 such
that the facts alleged in the complaint, if true, would justify the relief sought. Only ultimate
facts, not legal conclusions or evidentiary facts, are considered for purposes of applying the
test.9

Every written motion required to be heard and the notice of hearing thereof shall be
served in such a manner as to ensure its receipt by the other party at least three (3) days
before the date of hearing, unless the court for good cause sets the hearing on shorter notice.
(Emphasis supplied)

Based on the allegations in the amended complaint, we hold that respondent stated a cause of
action for damages. Respondent was in possession of the property supplied with electricity by
petitioner when the electric service was disconnected. This resulted in the alleged injury
complained of which can be threshed out in a trial on the merits. Whether one is a party or not
in a contract is not determinative of the existence of a cause of action. Participation in a
contract is not an element in considering whether or not a complaint states a cause of
action10 because even a third party outside the contract can have a cause of action against
either or both contracting parties.
Be that as it may, respondents appeal in the CA should have been denied outright for having
been filed out of time.
In its petition in this Court, petitioner insisted that respondent mailed a copy of her motion for
reconsideration (with notice of hearing) to its (petitioners) counsel only on January 5, 2004,
although the motion was already scheduled for hearing on January 9, 2004. Respondent should

Time and again, we have held that non-compliance with Section 4 of Rule 15 of the Rules of
Court is a fatal defect. A motion which fails to comply with said Rule is a mere scrap of paper.
If filed, such motion is not entitled to judicial cognizance. 12 The fact that the RTC took
cognizance of a defective motion, such as requiring the parties to set it for hearing and
denying the same for lack of merit, did not cure the defect of said motion. 13 It did not suspend
the running of the period to appeal.14
Based on the foregoing, respondents defective motion for reconsideration did not stop the
running of her period to appeal. Thus, the appeal in the CA should have been dismissed
outright as the decision of the RTC had by then already become final and executory.
WHEREFORE, the petition is hereby GRANTED. The January 5, 2005 decision and March
22, 2005 resolution of the Court of Appeals are REVERSED and SET ASIDE and CA-G.R.
CV No. 81666 is ordered DISMISSED.
SO ORDERED.

G.R. No. 141309

December 23, 2008

LIWAYWAY VINZONS-CHATO, petitioner,

vs.
FORTUNE TOBACCO CORPORATION, respondent.
RESOLUTION
NACHURA, J.:
It is a fundamental principle in the law of public officers that a duty owing to the public in
general cannot give rise to a liability in favor of particular individuals. 1 The failure to perform
a public duty can constitute an individual wrong only when a person can show that, in the
public duty, a duty to himself as an individual is also involved, and that he has suffered a
special and peculiar injury by reason of its improper performance or non-performance.2
By this token, the Court reconsiders its June 19, 2007 Decision 3 in this case.
As culled from the said decision, the facts, in brief, are as follows:
On June 10, 1993, the legislature enacted Republic Act No. 7654 (RA 7654), which
took effect on July 3, 1993. Prior to its effectivity, cigarette brands 'Champion,"
"Hope," and "More" were considered local brands subjected to an ad valorem tax at
the rate of 20-45%. However, on July 1, 1993, or two days before RA 7654 took
effect, petitioner issued RMC 37-93 reclassifying "Champion," "Hope," and "More"
as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad
valorem tax. RMC 37-93 in effect subjected "Hope," "More," and "Champion"
cigarettes to the provisions of RA 7654, specifically, to Sec. 142, (c)(1) on locally
manufactured cigarettes which are currently classified and taxed at 55%, and which
imposes an ad valorem tax of "55% provided that the minimum tax shall not be less
than Five Pesos (P5.00) per pack."
On July 2, 1993, at about 5:50 p.m., BIR Deputy Commissioner Victor A. Deoferio,
Jr. sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to
no one in particular. On July 15, 1993, Fortune Tobacco received, by ordinary mail,
a certified xerox copy of RMC 37-93. On July 20, 1993, respondent filed a motion
for reconsideration requesting the recall of RMC 37-93, but was denied in a letter
dated July 30, 1993. The same letter assessed respondent for ad valorem tax
deficiency amounting to P9,598,334.00 (computed on the basis of RMC 37-93) and
demanded payment within 10 days from receipt thereof. On August 3, 1993,
respondent filed a petition for review with the Court of Tax Appeals (CTA), which
on September 30, 1993, issued an injunction enjoining the implementation of RMC
37-93. In its decision dated August 10, 1994, the CTA ruled that RMC 37-93 is
defective, invalid, and unenforceable and further enjoined petitioner from collecting
the deficiency tax assessment issued pursuant to RMC No. 37-93. This ruling was
affirmed by the Court of Appeals, and finally by this Court in Commissioner of
Internal Revenue v. Court of Appeals. It was held, among others, that RMC 37-93,
has fallen short of the requirements for a valid administrative issuance.

On April 10, 1997, respondent filed before the RTC a complaint for damages against
petitioner in her private capacity. Respondent contended that the latter should be
held liable for damages under Article 32 of the Civil Code considering that the
issuance of RMC 37-93 violated its constitutional right against deprivation of
property without due process of law and the right to equal protection of the laws.
Petitioner filed a motion to dismiss contending that: (1) respondent has no cause of
action against her because she issued RMC 37-93 in the performance of her official
function and within the scope of her authority. She claimed that she acted merely as
an agent of the Republic and therefore the latter is the one responsible for her acts;
(2) the complaint states no cause of action for lack of allegation of malice or bad
faith; and (3) the certification against forum shopping was signed by respondent's
counsel in violation of the rule that it is the plaintiff or the principal party who
should sign the same.
On September 29, 1997, the RTC denied petitioner's motion to dismiss holding that
to rule on the allegations of petitioner would be to prematurely decide the merits of
the case without allowing the parties to present evidence. It further held that the
defect in the certification against forum shopping was cured by respondent's
submission of the corporate secretary's certificate authorizing its counsel to execute
the certification against forum shopping. x x x x
xxxx
The case was elevated to the Court of Appeals via a petition for certiorari under
Rule 65. However, same was dismissed on the ground that under Article 32 of the
Civil Code, liability may arise even if the defendant did not act with malice or bad
faith. The appellate court ratiocinated that Section 38, Book I of the Administrative
Code is the general law on the civil liability of public officers while Article 32 of the
Civil Code is the special law that governs the instant case. Consequently, malice or
bad faith need not be alleged in the complaint for damages. It also sustained the
ruling of the RTC that the defect of the certification against forum shopping was
cured by the submission of the corporate secretary's certificate giving authority to its
counsel to execute the same.4 [Citations and underscoring omitted.]
In the aforesaid June 19, 2007 Decision, we affirmed the disposition of the Court of Appeals
(CA) and directed the trial court to continue with the proceedings in Civil Case No. 97-341MK.5
Petitioner, on July 20, 2007, subsequently moved for the reconsideration of the said
decision.6 After respondent filed its comment, the Court, in its April 14, 2008
Resolution,7 denied with finality petitioner's motion for reconsideration.
Undaunted, petitioner filed, on April 29, 2008 her Motion to Refer [the case] to the Honorable
Court En Banc.8 She contends that the petition raises a legal question that is novel and is of
paramount importance. The earlier decision rendered by the Court will send a chilling effect to
public officers, and will adversely affect the performance of duties of superior public officers
in departments or agencies with rule-making and quasi-judicial powers. With the said
decision, the Commissioner of Internal Revenue will have reason to hesitate or refrain from

performing his/her official duties despite the due process safeguards in Section 228 of the
National Internal Revenue Code.9 Petitioner hence moves for the reconsideration of the June
19, 2007 Decision.10
In its June 25, 2008 Resolution,11 the Court referred the case to the En Banc. Respondent
consequently moved for the reconsideration of this resolution.
We now resolve both motions.
There are two kinds of duties exercised by public officers: the "duty owing to the public
collectively" (the body politic), and the "duty owing to particular individuals, thus:
1. Of Duties to the Public. - The first of these classes embraces those officers
whose duty is owing primarily to the public collectively --- to the body politic --and not to any particular individual; who act for the public at large, and who are
ordinarily paid out of the public treasury.
The officers whose duties fall wholly or partially within this class are numerous and
the distinction will be readily recognized. Thus, the governor owes a duty to the
public to see that the laws are properly executed, that fit and competent officials are
appointed by him, that unworthy and ill-considered acts of the legislature do not
receive his approval, but these, and many others of a like nature, are duties which he
owes to the public at large and no one individual could single himself out and assert
that they were duties owing to him alone. So, members of the legislature owe a duty
to the public to pass only wise and proper laws, but no one person could pretend that
the duty was owing to himself rather than to another. Highway commissioners owe a
duty that they will be governed only by considerations of the public good in
deciding upon the opening or closing of highways, but it is not a duty to any
particular individual of the community.
These illustrations might be greatly extended, but it is believed that they are
sufficient to define the general doctrine.
2. Of Duties to Individuals. - The second class above referred to includes those
who, while they owe to the public the general duty of a proper administration of
their respective offices, yet become, by reason of their employment by a particular
individual to do some act for him in an official capacity, under a special and
particular obligation to him as an individual. They serve individuals chiefly and
usually receive their compensation from fees paid by each individual who employs
them.
A sheriff or constable in serving civil process for a private suitor, a recorder of deeds
in recording the deed or mortgage of an individual, a clerk of court in entering up a
private judgment, a notary public in protesting negotiable paper, an inspector of
elections in passing upon the qualifications of an elector, each owes a general duty
of official good conduct to the public, but he is also under a special duty to the
particular individual concerned which gives the latter a peculiar interest in his due
performance.12

In determining whether a public officer is liable for an improper performance or nonperformance of a duty, it must first be determined which of the two classes of duties is
involved. For, indeed, as the eminent Floyd R. Mechem instructs, "[t]he liability of a public
officer to an individual or the public is based upon and is co-extensive with his duty to the
individual or the public. If to the one or the other he owes no duty, to that one he can incur no
liability."13
Stated differently, when what is involved is a "duty owing to the public in general", an
individual cannot have a cause of action for damages against the public officer, even though
he may have been injured by the action or inaction of the officer. In such a case, there is
damage to the individual but no wrong to him. In performing or failing to perform a public
duty, the officer has touched his interest to his prejudice; but the officer owes no duty to him
as an individual.14 The remedy in this case is not judicial but political.15
The exception to this rule occurs when the complaining individual suffers a particular or
special injury on account of the public officer's improper performance or non-performance of
his public duty. An individual can never be suffered to sue for an injury which, technically, is
one to the public only; he must show a wrong which he specially suffers, and damage alone
does not constitute a wrong.16 A contrary precept (that an individual, in the absence of a
special and peculiar injury, can still institute an action against a public officer on account of an
improper performance or non-performance of a duty owing to the public generally) will lead
to a deluge of suits, for if one man might have an action, all men might have the like-the
complaining individual has no better right than anybody else.17 If such were the case, no one
will serve a public office. Thus, the rule restated is that an individual cannot have a particular
action against a public officer without a particular injury, or a particular right, which are the
grounds upon which all actions are founded.18
Juxtaposed with Article 3219 of the Civil Code, the principle may now translate into the rule
that an individual can hold a public officer personally liable for damages on account of an act
or omission that violates a constitutional right only if it results in a particular wrong or injury
to the former. This is consistent with this Court's pronouncement in its June 19, 2007 Decision
(subject of petitioner's motion for reconsideration) that Article 32, in fact, allows a damage
suit for "tort for impairment of rights and liberties."20
It may be recalled that in tort law, for a plaintiff to maintain an action for damages for the
injuries of which he complains, he must establish that such injuries resulted from a breach of
duty which the defendant owed the plaintiff, meaning a concurrence of injury to the plaintiff
and legal responsibility by the person causing it. Indeed, central to an award of tort damages is
the premise that an individual was injured in contemplation of law. 21 Thus, in Lim v. Ponce de
Leon,22 we granted the petitioner's claim for damages because he, in fact, suffered the loss of
his motor launch due to the illegal seizure thereof. In Cojuangco, Jr. v. Court of Appeals,23 we
upheld the right of petitioner to the recovery of damages as there was an injury sustained by
him on account of the illegal withholding of his horserace prize winnings.
In the instant case, what is involved is a public officer's duty owing to the public in general.
The petitioner, as the then Commissioner of the Bureau of Internal Revenue, is being taken to
task for Revenue Memorandum Circular (RMC) No. 37-93 which she issued without the
requisite notice, hearing and publication, and which, inCommissioner of Internal Revenue v.
Court of Appeals,24 we declared as having "fallen short of a valid and effective administrative
issuance."25 A public officer, such as the petitioner, vested with quasi-legislative or rule-

making power, owes a duty to the public to promulgate rules which are compliant with the
requirements of valid administrative regulations. But it is a duty owed not to the respondent
alone, but to the entire body politic who would be affected, directly or indirectly, by the
administrative rule.
Furthermore, as discussed above, to have a cause of action for damages against the petitioner,
respondent must allege that it suffered a particular or special injury on account of the nonperformance by petitioner of the public duty. A careful reading of the complaint filed with the
trial court reveals that no particular injury is alleged to have been sustained by the respondent.
The phrase "financial and business difficulties"26 mentioned in the complaint is a vague
notion, ambiguous in concept, and cannot translate into a "particular injury." In contrast, the
facts of the case eloquently demonstrate that the petitioner took nothing from the respondent,
as the latter did not pay a single centavo on the tax assessment levied by the former by virtue
of RMC 37-93.
With no "particular injury" alleged in the complaint, there is, therefore, no delict or wrongful
act or omission attributable to the petitioner that would violate the primary rights of the
respondent. Without such delict or tortious act or omission, the complaint then fails to state a
cause of action, because a cause of action is the act or omission by which a party violates a
right of another.27
A cause of action exists if the following elements are present: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on
the part of the named defendant to respect or not to violate such right; and (3) an act or
omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of defendant to plaintiff for which the latter may maintain an action
for recovery of damages.28
The remedy of a party whenever the complaint does not allege a cause of action is to set up
this defense in a motion to dismiss, or in the answer. A motion to dismiss based on the failure
to state a cause of action in the complaint hypothetically admits the truth of the facts alleged
therein. However, the hypothetical admission is limited to the "relevant and material facts
well-pleaded in the complaint and inferences deducible therefrom. The admission does not
extend to conclusions or interpretations of law; nor does it cover allegations of fact the falsity
of which is subject to judicial notice."29
The complaint may also be dismissed for lack of cause of action if it is obvious from the
complaint and its annexes that the plaintiff is not entitled to any relief. 30
The June 19, 2007 Decision and the dissent herein reiterates that under Article 32 of the Civil
Code, the liability of the public officer may accrue even if he/she acted in good faith, as long
as there is a violation of constitutional rights, citing Cojuangco, Jr. v. Court of
Appeals,31 where we said:
Under the aforecited article, it is not necessary that the public officer acted with malice or bad
faith. To be liable, it is enough that there was a violation of the constitutional rights of
petitioners, even on the pretext of justifiable motives or good faith in the performance of
duties.32

The complaint in this case does not impute bad faith on the petitioner. Without any allegation
of bad faith, the cause of action in the respondent's complaint (specifically, paragraph 2.02
thereof) for damages under Article 32 of the Civil Code would be premised on the findings of
this Court in Commissioner of Internal Revenue v. Court of Appeals (CIR v. CA),33 where we
ruled that RMC No. 37-93, issued by petitioner in her capacity as Commissioner of Internal
Revenue, had "fallen short of a valid and effective administrative issuance." This is a logical
inference. Without the decision in CIR v. CA, the bare allegations in the complaint that
respondent's rights to due process of law and to equal protection of the laws were violated by
the petitioner's administrative issuance would be conclusions of law, hence not hypothetically
admitted by petitioner in her motion to dismiss.
But in CIR v. CA, this Court did not declare RMC 37-93 unconstitutional; certainly not from
either the due process of law or equal protection of the laws perspective. On due process, the
majority, after determining that RMC 37-93 was a legislative rule, cited an earlier Revenue
Memorandum Circular (RMC No. 10-86) requiring prior notice before RMC's could become
"operative." However, this Court did not make an express finding of violation of the right to
due process of law. On the aspect of equal protection, CIR v. CA said: "Not insignificantly,
RMC 37-93might have likewise infringed on uniformity of taxation;" a statement that does not
amount to a positive indictment of petitioner for violation of respondent's constitutional right.
Even if one were to ascribe a constitutional infringement by RMC 37-93 on the nonuniformity of tax provisions, the nature of the constitutional transgression falls under Section
28, Article VI-not Section 1, Article III-of the Constitution.
This Court's own summation in CIR v. CA: "All taken, the Court is convinced that the hastily
promulgated RMC 37-93 has fallen short of a valid and effective administrative issuance,"
does not lend itself to an interpretation that the RMC is unconstitutional. Thus, the complaint's
reliance on CIR v. CA-which is cited in, and a copy of which is annexed to, the complaint-as
suggestive of a violation of due process and equal protection, must fail.
Accordingly, from the foregoing discussion, it is obvious that paragraph 2.02 of respondent's
complaint loses the needed crutch to sustain a valid cause of action against the petitioner, for
what is left of the paragraph is merely the allegation that only respondent's "Champion",
"Hope" and "More" cigarettes were reclassified.
If we divest the complaint of its reliance on CIR v. CA, what remains of respondent's cause of
action for violation of constitutional rights would be paragraph 2.01, which reads:
2.01. On or about July 1, 1993, defendant issued Revenue Memorandum Circular
No. 37-93 (hereinafter referred to as RMC No. 37-93) reclassifying specifically
"Champion", "Hope" and "More" as locally manufactured cigarettes bearing a
foreign brand. A copy of the aforesaid circular is attached hereto and made an
integral part hereof as ANNEX "A". The issuance of a circular and its
implementation resulted in the "deprivation of property" of plaintiff. They were done
without due process of law and in violation of the right of plaintiff to the equal
protection of the laws. (Italics supplied.)
But, as intimated above, the bare allegations, "done without due process of law" and "in
violation of the right of plaintiff to the equal protection of the laws" are conclusions of law.
They are not hypothetically admitted in petitioner's motion to dismiss and, for purposes of the
motion to dismiss, are not deemed as facts.

In Fluor Daniel, Inc. Philippines v. EB. Villarosa & Partners Co., Ltd.,34 this Court declared
that the test of sufficiency of facts alleged in the complaint as constituting a cause of action is
whether or not, admitting the facts alleged, the court could render a valid verdict in accordance
with the prayer of the complaint. In the instant case, since what remains of the complaint
which is hypothetically admitted, is only the allegation on the reclassification of respondent's
cigarettes, there will not be enough facts for the court to render a valid judgment according to
the prayer in the complaint.
Furthermore, in an action for damages under Article 32 of the Civil Code premised on
violation of due process, it may be necessary to harmonize the Civil Code provision with
subsequent legislative enactments, particularly those related to taxation and tax collection.
Judicial notice may be taken of the provisions of the National Internal Revenue Code, as
amended, and of the law creating the Court of Tax Appeals. Both statutes provide ample
remedies to aggrieved taxpayers; remedies which, in fact, were availed of by the respondentwithout even having to pay the assessment under protest-as recounted by this Court in CIR v.
CA, viz.:
In a letter, dated 19 July 1993, addressed to the appellate division of the BIR,
Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-93.
The request was denied on 29 July 1993. The following day, or on 30 July 1993, the
CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting
to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. 35
The availability of the remedies against the assailed administrative action, the opportunity to
avail of the same, and actual recourse to these remedies, contradict the respondent's claim of
due process infringement.
At this point, a brief examination of relevant American jurisprudence may be instructive.
42 U.S. Code 1983, a provision incorporated into the Civil Rights Act of 1871, presents a
parallel to our own Article 32 of the Civil Code, as it states:
Every person who, under color of any statute, ordinance, regulation, custom, usage,
or any State or Territory, subjects, or causes to be subjected, any citizen of the
United States or other person within the jurisdiction thereof to the deprivation of any
rights, privileges or immunities secured by the Constitution and laws, shall be liable
to the party injured in an action at law, suit in equity or other proper proceeding for
redress.
This provision has been employed as the basis of tort suits by many petitioners intending to
win liability cases against government officials when they violate the constitutional rights of
citizens.
Webster Bivens v. Six Unknown Named Agents of Federal Bureau of Investigation,36 has
emerged as the leading case on the victim's entitlement to recover money damages for any
injuries suffered as a result of flagrant and unconstitutional abuses of administrative power. In
this case, federal narcotics officers broke into Bivens' home at 6:30 a.m. without a search

warrant and in the absence of probable cause. The agents handcuffed Bivens, searched his
premises, employed excessive force, threatened to arrest his family, subjected him to a visual
strip search in the federal court house, fingerprinted, photographed, interrogated and booked
him. When Bivens was brought before a United States Commissioner, however, charges
against him were dismissed. On the issue of whether violation of the Fourth Amendment "by a
federal agent acting under color of authority gives rise to a cause of action for damages
consequent upon his constitutional conduct," the U.S. Supreme Court held that Bivens is
entitled to recover damages for injuries he suffered as a result of the agents' violation of the
Fourth Amendment.
A number of subsequent decisions have upheld Bivens. For instance, in Scheuer v. Rhodes,37 a
liability suit for money damages was allowed against Ohio Governor James Rhodes by
petitioners who represented three students who had been killed by Ohio National Guard troops
at Kent State University as they protested against U.S. involvement in Vietnam. In Wood v.
Strickland,38 local school board members were sued by high school students who argued that
they had been deprived of constitutional due process rights when they were expelled from
school for having spiked a punch bowl at a school function without the benefit of a full
hearing. In Butz v. Economou,39 Economou, whose registration privilege as a commodities
futures trader was suspended, without prior warning, by Secretary of Agriculture Earl Butz,
sued on a Bivens action, alleging that the suspension was aimed at "chilling" his freedom of
expression right under the First Amendment. A number of other cases40 with virtually the
same conclusion followed.
However, it is extremely dubious whether a Bivens action against government tax officials and
employees may prosper, if we consider the pronouncement of the U.S. Supreme Court
in Schweiker v. Chilicky,41 that a Bivens remedy will not be allowed when other "meaningful
safeguards or remedies for the rights of persons situated as (is the plaintiff)" are available. It
has also been held that a Bivens action is not appropriate in the civil service system42 or in the
military justice system.43
In Frank Vennes v. An Unknown Number of Unidentified Agents of the United States of
America,44 petitioner Vennes instituted a Bivens action against agents of the Internal Revenue
Service (IRS) who alleged that he (Vennes) owed $250,000 in tax liability, instituted a
jeopardy assessment, confiscated Vennes' business, forced a total asset sale, and put Vennes
out of business, when in fact he owed not a dime. The U.S. Court of Appeals, Eighth Circuit,
ruled:
The district court dismissed these claims on the ground that a taxpayer's remedies
under the Internal Revenue Code preclude such a Bivens action. Vennes cites to us
no contrary authority, and we have found none. Though the Supreme Court has not
addressed this precise question, it has strongly suggested that the district court
correctly applied Bivens:
When the design of a Government program suggests that Congress has
provided what it considers adequate remedial mechanisms for
constitutional violations that may occur in the course of its administration,
we have not created additional Bivens remedies.
xxxx

Congress has provided specific and meaningful remedies for taxpayers who
challenge overzealous tax assessment and collection activities. A taxpayer may
challenge a jeopardy assessment both administratively and judicially, and may sue
the government for a tax refund, and have authorized taxpayer actions against the
United States to recover limited damages resulting from specific types of
misconduct by IRS employees. These carefully crafted legislative remedies confirm
that, in the politically sensitive realm of taxation, Congress's refusal to permit
unrestricted damage action by taxpayers has not been inadvertent. Thus, the district
court correctly dismissed Vennes's Bivens claims against IRS agents for their tax
assessment and collection activities.
In still another Bivens action, instituted by a taxpayer against IRS employees for alleged
violation of due process rights concerning a tax dispute, the U.S. District Court of Minnesota
said:
In addition, the (Tax) Code provides taxpayers with remedies, judicial and
otherwise, for correcting and redressing wrongful acts taken by IRS employees in
connection with any collection activities. Although these provisions do not provide
taxpayers with an all-encompassing remedy for wrongful acts of IRS personnel, the
rights established under the Code illustrate that it provides all sorts of rights against
the overzealous officialdom, including, most fundamentally, the right to sue the
government for a refund if forced to overpay taxes, and it would make the collection
of taxes chaotic if a taxpayer could bypass the remedies provided by Congress
simply by bringing a damage suit against IRS employees. 45
American jurisprudence obviously validates the contention of the petitioner.
Finally, we invite attention to Section 227, Republic Act No. 8424 (Tax Reform Act of 1997),
which provides:
Section 227. Satisfaction of Judgment Recovered Against any Internal Revenue
Officer. - When an action is brought against any Internal Revenue officer to recover
damages by reason of any act done in the performance of official duty, and the
Commissioner is notified of such action in time to make defense against the same,
through the Solicitor General, any judgment, damages or costs recovered in such
action shall be satisfied by the Commissioner, upon approval of the Secretary of
Finance, or if the same be paid by the person sued shall be repaid or reimbursed to
him.
No such judgment, damages or costs shall be paid or reimbursed in behalf of a
person who has acted negligently or in bad faith, or with willful oppression.
Because the respondent's complaint does not impute negligence or bad faith to the petitioner,
any money judgment by the trial court against her will have to be assumed by the Republic of
the Philippines. As such, the complaint is in the nature of a suit against the State. 46
WHEREFORE, premises considered, we GRANT petitioner's motion for reconsideration of
the June 19, 2007 Decision and DENY respondent's motion for reconsideration of the June 25,

2008 Resolution. Civil Case No. CV-97-341-MK, pending with the Regional Trial Court of
Marikina City, is DISMISSED.
SO ORDERED.

G.R. No. 167724

June 27, 2006

11.

02-052-961464

12 December 1996

240,000

12.

02-052-961498

19 December 1996

164,000

13.

02-052-961542

27 December 1996

200,000

14.

02-052-970018

3 January 1997

120,000

CALLEJO, SR., J.:

15.

02-052-970052

10 January 1997

185,000

Assailed before this Court is a Petition for Review under Rule 45 of the Rules of Court of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 69732 granting respondents
petition for certiorari, and its resolution denying petitioners motion for reconsideration.

16.

02-052-970078

15 January 1997

80,000

17.

02-052-970087

17 January 1997

170,000

The Antecedents

18.

02-052-970131

23 January 1997

180,000

Respondent Margarita Coscolluela and her husband Oscar Coscolluela obtained an agricultural
sugar crop loan from the Far East Bank & Trust Co. (FEBTC) Bacolod City Branch (later
merged with petitioner Bank of the Philippine Islands) for crop years 1997 and
1998.2 However, in the book of FEBTC, the loan account of the spouses was treated as a
single account,3 which amounted to P13,592,492.00 as evidenced by 67 Promissory
Notes4 executed on various dates, from August 29, 1996 to January 23, 1998, to wit:

19.

02-052-970163

31 January 1997

220,000

20.

02-052-970190

7 February 1997

110,000

21.

02-052-970215

13 February 1997

170,000

22.

02-052-970254

20 February 1997

140,000

23.

02-052-970293

28 February 1997

130,000

24.

02-052-970345

7 March 1997

90,000

25.

02-052-970367

13 March 1997

50,000

26.

02-052-970402

21 March 1997

160,000

27.

02-052-970422

26 March 1997

190,000

28.

02-052-970453

4 April 1997

82,000

29.

02-052-970478

11 April 1997

150,000

30.

02-052-970502

17 April 1997

80,000

31.

02-052-970539

25 April 1997

145,000

32.

02-052-970558

30 April 1997

135,000

33.

02-052-970589

8 May 1997

54,000

34.

02-052-970770

25 June 1997

646,492

BPI FAMILY SAVINGS BANK, INC., Petitioner,

vs.
MARGARITA VDA. DE COSCOLLUELA, Respondent.
DECISION

1avvphil.net
Promissory Note No.

Date

Amount
(in Phil. Peso)

1.

02-052-960971

29 August 1996

148,000

2.

02-052-961095

23 September 1996

1,200,000

3.

02-052-961122

27 September 1996

550,000

4.

02-052-961205

11 October 1996

180,000

5.

02-052-961231

18 October 1996

155,000

6.

02-052-961252

24 October 1996

190,000

7.

02-052-961274

30 October 1996

115,000

8.

02-052-961310

8 November 1996

90,000

9.

02-052-961373

21 November 1996

125,000

10.

02-052-961442

6 December 1996

650,000

35.

02-052-970781

27 June 1997

160,000

59.

02-052-971569

4 December 1997

140,000

36.

02-052-970819

4 July 1997

250,000

60.

02-052-971604

12 December 1997

220,000

37.

02-052-970852

11 July 1997

350,000

61.

02-052-971642

18 December 1997

185,000

38.

02-052-970926

1 August 1997

170,000

62.

02-052-971676

23 December 1997

117,000

39.

02-052-970949

5 August 1997

200,000

63.

02-052-971688

29 December 1997

100,000

40.

02-052-970975

8 August 1997

120,000

64.

02-052-980019

7 January 1998

195,000

41.

02-052-970999

15 August 1997

150,000

65.

02-052-980032

8 January 1998

170,000

42.

02-052-971028

22 August 1997

110,000

66.

02-052-980064

15 January 1998

225,000

43.

02-052-971053

29 August 1997

130,000

67.

02-052-980079

23 January 1998

176,000

44.

02-052-971073

4 September 1997

90,000

45.

02-052-971215

12 September 1997

160,000

46.

02-052-971253

19 September 1997

190,000

47.

02-052-971280

26 September 1997

140,000

48.

02-052-971317

2 October 1997

115,000

49.

02-052-971340

10 October 1997

115,000

50.

02-052-971351

15 October 1997

700,000

51.

02-052-971362

16 October 1997

90,000

52.

02-052-971394

24 October 1997

185,000

53.

02-052-971407

29 October 1997

170,000

54.

02-052-971449

6 November 1997

105,000

55.

02-052-971464

13 November 1997

170,000

56.

02-052-971501

20 November 1997

150,000

57.

02-052-971527

25 November 1997

620,000

58.

02-052-971538

28 November 1997

130,000

The promissory notes listed under Nos. 1 to 33 bear the maturity date of February 9, 1998,
with a 30-day extension of up to March 11, 1998, while those listed under Nos. 34 to 67 bear
December 28, 1998 as maturity date.
Meanwhile, on June 13, 1997, the spouses Coscolluela executed a real estate mortgage in
favor of FEBTC over their parcel of land located in Bacolod City covered by Transfer
Certificate of Title (TCT) No. T-109329 as security of loans on credit accommodation
obtained by the spouses from FEBTC and those that may be obtained by the mortgagees
which was fixed at P7,000,000.00, as well as those that may be extended by the mortgagor to
the mortgagees.5
Under the terms and conditions of the real estate mortgage, in the event of failure to pay the
mortgage obligation or any portion thereof when due, the entire principal, interest, penalties
and other charges then outstanding, shall become immediately due; upon such breach or
violation of the terms and conditions thereof, FEBTC may, at its absolute discretion foreclose
the same extrajudicially in accordance with the procedure prescribed by Act No. 3135, as
amended, and for the purpose appointed FEBTC as its attorney-in-fact with full power and
authority to enter the premises where the mortgaged property is located and to take actual
possession and control thereof without need of any order of any court, nor written permission
from the spouses, and with special power to sell the mortgaged property at a public or private
sale at the option of the mortgagee; and that the spouses expressly waived the term of 30 days
or any other terms granted by law as the period which must elapse before the mortgage
agreement may be foreclosed and, in any case, such period has already lapsed.
The mortgage was registered with the Registry of Deeds of Bacolod and was annotated in the
title of the land on June 20, 1997.6 Meantime, Oscar died intestate and was survived by his
widow, herein respondent.

For failure to settle the outstanding obligation on the maturity dates, FEBTC sent a final
demand letter7 to respondent on March 10, 1999 demanding payment, within five days from
notice, of the principal of the loan amounting to P13,481,498.68, with past due interests and
penalties or in the total amount of P19,482,168.31 as of March 9, 1999.8 Respondent failed to
settle her obligation.
On June 10, 1999, FEBTC filed a petition for the extrajudicial foreclosure of the mortgaged
property, significantly only for the total amount of P4,687,006.68 exclusive of balance,
interest and penalty, covered by promissory notes from 1 to 33, except nos. 2 and 10. 9
While the extrajudicial foreclosure proceeding was pending, petitioner FEBTC filed a
complaint10 with the Regional Trial Court (RTC) of Makati City, Branch 64, against
respondent for the collection of the principal amount ofP8,794,492.00 plus interest and
penalty, or the total amount of P12,672,000.31, representing the amounts indicated in the rest
of the promissory notes, specifically Promissory Note Nos. 34 to 67, as well as those dated
December 6, 1996 and September 23, 1996:
PN No.

Date

Amount

Annex

2-052-980079

January 02, 1998

176,000.00

2-052-980064

January 15, 1998

225,000.00

2-052-980032

January 08, 1998

170,000.00

2-052-980019

January 07, 1998

195,000.00

2-052-971688

December 29, 1997

100,000.00

2-052-971676

December 23, 1997

117,000.00

2-052-971642

December 18, 1997

185,000.00

2-052-971604

December 12, 1997

220,000.00

2-052-971569

December 04, 1997

140,000.00

2-052-971538

November 28, 1997

130,000.00

2-052-971527

November 25, 1997

620,000.00

2-052-971501

November 20, 1997

150,000.00

2-052-971464

November 13, 1997

170,000.00

2-052-971449

November 06, 1997

105,000.00

2-052-971407

October 29, 1997

170,000.00

2-052-971394

October 24, 1997

185,000.00

2-052-971362

October 16, 1997

90,000.00

2-052-971351

October 15, 1997

700,000.00

2-052-971340

October 15, 1997

115,000.00

2-052-971317

October 02, 1997

115,000.00

2-052-971280

September 26, 1997

140,000.00

2-052-971253

September 19, 1997

190,000.00

2-052-971215

September 12, 1997

160,000.00

2-052-971073

September 04, 1997

90,000.00

2-052-971053

August 29, 1997

130,000.00

2-052-971028

August 22, 1997

110,000.00

2-052-970999

August 15, 1997

150,000.00

AA

2-052-970975

August 08, 1997

120,000.00

BB

2-052-970949

August 05, 1997

200,000.00

CC

2-052-970926

August 01, 1997

170,000.00

DD

2-052-970852

July 11, 1997

350,000.00

EE

2-052-970819

July 04, 1997

250,000.00

FF

2-052-970781

June 27, 1997

160,000.00

GG

2-052-970770

June 25, 1997

646,492.00

HH

2-052-961442

December 06, 1996

650,000.00

II

2-052-961095

September 23, 1996

1,200,000.00

JJ11

Petitioner prayed that, after due proceedings, judgment be rendered in its favor, thus:

WHEREFORE, it is respectfully prayed that, after trial, judgment be rendered in its favor and
against defendants ordering them to pay the following:
a. The amount TWELVE MILLION SIX HUNDRED SEVENTY-TWO
THOUSAND PESOS and 31/100 (P12,672,000.31), with additional stipulated
interest and penalty equivalent to one (1%) percent of the amount due for every
thirty (30) days or fraction thereof, until fully paid;
b. Expense of litigation amounting to P50,000.00;
c. The amount of P500,000.00 as attorneys fees.
Other reliefs just and equitable in the premises are similarly prayed for. 12
In her answer, respondent alleged, by way of special and affirmative defense, that the
complaint was barred by litis pendentia, specifically, the pending petition for the extrajudicial
foreclosure of the real estate mortgage, thus:
8) That plaintiff is guilty of forum shopping, in that some of the promissory notes
attached to plaintiffs complaint are also the same promissory notes which were
made the basis of the plaintiff in their extrajudicial foreclosure of mortgage filed
against the defendant-spouses and also marked in evidence in support of their
opposition to the issuance of the preliminary injunction in Civil Case No. 99-10864;
9) That plaintiff-bank has not only charged but over charged the defendant-spouses
with excessive and exorbitant interest over and above those authorized by law. And
in order to add more injury to the defendants, plaintiff also included other charges
not legally collectible from the defendant-spouses;
10) That the act of the plaintiff-bank in seeking to collect twice on the same
promissory notes is not only unfair and unjust but also condemnable as plaintiff seek
to unjustly enrich itself at the expense of the defendants;
11) That there is another action pending between the same parties for the same
cause;
12) That the claim or demand set forth in the plaintiffs complaint has either been
waived, abandoned or otherwise extinguished.13
Petitioner presented Emmanuel Ganuelas, its loan officer in its Bacolod City Branch, as sole
witness. He testified that the spouses Coscolluela were granted an agricultural sugar loan
which is designed to finance the cultivation and plantation of sugar farms of the
borrowers.14 Borrowers were allowed to make successive drawdowns or availments against
the loan as their need arose. Each drawdown is covered by a promissory note with uniform
maturity dates.15 The witness also testified that the loan account of the spouses was a "single
loan account."16

After petitioner rested its case, respondent filed a demurrer to evidence17 contending, among
others, that, with Ganuelas admission, there is only one loan account secured by the real
estate mortgage, that the promissory notes were executed as evidence of the loans. Plaintiff
was thus barred from instituting a personal action for collection of the drawdowns evidenced
by Promissory Note Nos. 2, 10, and 34 to 67 after instituting a petition for extrajudicial
foreclosure of the real estate mortgage for the amount covered by Promissory Note Nos. 1, 3
to 9, and 11 to 33. Respondent insisted that by filing a complaint for a sum of money,
petitioner thereby split its cause of action against her; hence, the complaint must perforce be
dismissed on the ground of litis pendentia.
Petitioner opposed the demurrer arguing that while the loans were considered as a single
account, each promissory note executed by respondent constituted a separate contract. It
reiterated that its petition for the extrajudicial and foreclosure of the real estate mortgage
before the Ex-Oficio Provincial Sheriff involves obligations different and separate from those
in its action for a sum of money before the court. Thus, petitioner could avail of the personal
action for the collection of the amount evidenced by the 36 promissory notes not subject of its
petition for the extrajudicial foreclosure of the real estate mortgage. Petitioner insists that the
promissory notes subject of its collection suit should be treated separately from the other set of
obligations, that is, the 31 promissory notes subject of its extrajudicial foreclosure petition.18
In its Order19 dated January 10, 2002, the trial court denied the demurrer on the ground that
the promissory notes executed by respondent and her deceased husband contained different
amounts, and each note covered a loan distinct from the others. Thus, petitioner had the option
to file a petition for the extrajudicial foreclosure of the real estate mortgage covering 31 of the
promissory notes, and, as to the rest, to file an ordinary action for collection. Petitioner, thus,
merely opted to institute an action for collection of the debt on the 36 promissory notes, and
waived its action for the foreclosure of the security given on these notes.
Respondent filed a motion for reconsideration,20 which the trial court denied in its February
19, 2002 Order,21prompting her to file a certiorari petition22 under Rule 65 with the CA,
assailing the January 10, 2002 and February 19, 2002 Orders of the trial court. Respondent
alleged that:
1. PUBLIC RESPONDENT GRAVELY ABUSED HER DISCRETION
TANTAMOUNT TO LACK AND/OR EXCESS OF JURISDICTION IN
HOLDING THAT THE RESPONDENT BANK CAN FILE SIMULTANEOUS
ACTIONS FOR FORECLOSURE AND FOR COLLECTION.
Meanwhile, on January 6, 2003, the parcel of land subject of the aforementioned real estate
mortgage was sold at public auction where petitioner emerged as the highest bidder.23
On September 30, 2004, the CA rendered its Decision24 granting the petition, holding, under
prevailing jurisprudence, the remedies either a real action to foreclose the mortgage or a
personal action to collect the debt of a mortgage creditor are alternative and not cumulative.
Since respondent availed of the first one, it was deemed to have waived the second. Further,
the filing of both actions results in a splitting of a single cause of action. Thus, in denying her
Demurrer to Evidence, the RTC committed grave abuse of discretion as it overruled settled
judicial pronouncements. The dispositive part of the decision states:

WHEREFORE, the instant petition is GRANTED. The assailed Orders dated January 10, 2002
and February 19, 2002 are SET ASIDE.
SO ORDERED.
The CA cited the ruling of this Court in Bachrach Motor Co., Inc. v. Esteban Icaragal and
Oriental Commercial Co., Inc.25
Aggrieved, petitioner filed a motion for reconsideration26 on October 12, 2004. Respondent
filed her opposition27to the motion on October 26, 2004. The CA thereafter denied the motion
in a resolution promulgated on April 6, 2005.28
Petitioner filed the instant petition for review on certiorari, alleging that:
I.
THE COURT OF APPEALS ERRED IN GRANTING THE PETITION FOR CERTIORARI
OF RESPONDENT ON THE GROUND OF GRAVE ABUSE OF DISCRETION.
xxxx
The Trial Court did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction in denying the Demurrer to Evidence filed by the respondents. Petitioner, in
instituting a petition for the Extra Judicial Foreclosure of the Mortgage of respondents based
on 31 promissory notes executed by respondents and another action to collect on a separate set
of 36 promissory notes, did not split their cause of action.
xxxx
The trial court did not commit grave abuse of discretion amounting to lack or excess of
jurisdiction when it denied respondents Demurrer to Evidence. In this wise, the Petition for
Certiorari filed by respondents should not have been granted.29
During the pendency of this appeal, petitioner filed with this Court on December 2, 2005 a
manifestation and joint motion for substitution, informing the court that petitioner bank has
assigned to the Philippine Asset Investment, Inc. all its rights, title and interest over its nonperforming loan accounts pursuant to Republic Act No. 9182 entitled "The Special Purpose
Vehicle Act of 2002."
The issues raised in this case are (1) whether the petition for certiorari under Rule 65 of the
Rules of Court filed by respondent in the CA was the proper remedy to assail the January 10,
2002 Order of the trial court; (2) whether the appellate court issued its January 10, 2002 Order
with grave abuse of its discretion amounting to excess or lack of jurisdiction.
Petitioner avers that the January 10, 2002 Order of the RTC denying the Demurrer to Evidence
of respondent was interlocutory, and as such could not be the subject of a petition for
certiorari.30 The RTC did not commit a grave abuse of its discretion in issuing its January 10,

2002 Order. Petitioner maintains that respondent executed 67 separate loan obligations
evidenced by 67 separate promissory notes, with different amounts and maturity dates. It avers
that each of the loans, as evidenced by each of the promissory notes, may properly be the
subject of a separate action; thus, each promissory note is an actionable document. Moreover,
the real estate mortgage executed by the spouses secured an obligation only to a fixed amount
of P7,000,000.00 which is covered by Promissory Note Nos. 1 to 31, whereas the loans
secured by the spouses covered by the Promissory Note Nos. 32 to 67 for the total amount
of P12,672,000.31 were not secured by the real estate mortgage. Petitioner insists that it was
proper to file the petition for extrajudicial foreclosure of the real estate mortgage only for
respondents loan account covered by the 36 promissory notes for the amount
of P7,755,733.64. It was not barred from filing a separate action for the collection of
the P12,672,000.31 against respondent in the RTC for the drawdowns as evidenced by
Promissory Note Nos. 34 to 67. What should apply, petitioner asserts, is the ruling of this
Court in Caltex Philippines, Inc. v. Intermediate Appellate Court31 and Quiogue v.
Bautista,32 and not the ruling of this Court in Bachrach which involves only one promissory
note.
Petitioner insists that, although respondent and her husband had a joint account with it, they
had separate loan obligations as evidenced by the promissory notes; hence, it had separate
causes of action for each and every drawdown evidenced by a promissory note.
For her part, respondent admits having executed the promissory notes. However, as testified to
by Ganuelas, the witness for petitioner, she and her husband only have one loan account with
petitioner, hence, the latter had only one cause of action against her either for the collection of
the entire loan account or for the extrajudicial foreclosure of the real estate mortgage, also for
the entire amount of the loan. Petitioner cannot split her single loan account by filing a simple
collection suit and a petition for extrajudicial foreclosure of the real estate mortgage without
violating the rule against splitting a single cause of action.
Respondent asserts that the real estate mortgage executed by respondent and her deceased
husband was a security not only of their loan account in the amount of P7,000,000.00 but for
all other loans that may have been extended to them in excess of that amount.
The petition is unmeritorious.
On the first issue, we agree with petitioners contention that the general rule is that an order
denying a motion to dismiss or demurrer to evidence is interlocutory and is not appealable.
Consequently, defendant must go to trial and adduce its evidence, and appeal, in due course,
from an adverse decision of the trial court. However, the rule admits of exceptions. Where the
denial by the trial court of a motion to dismiss or demurrer to evidence is tainted with grave
abuse of discretion amounting to excess or lack of jurisdiction, the aggrieved party may assail
the order of dismissal on a petition for certiorari under Rule 65 of the Rules of Court. A wide
breadth of discretion is granted in certiorari proceedings in the interest of substantial justice
and to prevent a substantial wrong.33 As the Court held in Preferred Home Specialties, Inc. v.
Court of Appeals:34
It bears stressing that a writ of certiorari is of the highest utility and importance for curbing
excessive jurisdiction and correcting errors and most essential to the safety of the people and
the public welfare. Its scope has been broadened and extended, and is now one of the
recognized modes for the correction of errors by this Court. The cases in which it will lie

cannot be defined. To do so would be to destroy its comprehensiveness and limit its

usefulness.
The appropriate function of a certiorari writ is to relieve aggrieved parties from the injustice
arising from errors of law committed in proceedings affecting justiciable rights when no other
means for an adequate and speedy relief is open. It is founded upon a sense of justice, to
release against wrongs otherwise irreconcilable, wrongs which go unredressed because of
want of adequate remedy which would be a grave reproach to any system of jurisprudence. 35
The aggrieved party is entitled to a writ of certiorari where the trial court commits a grave
abuse of discretion amounting to excess or lack of jurisdiction in denying a motion to dismiss
a complaint on the ground of litis pendentia. An appeal while available eventually is
cumbersome and inadequate for it requires the parties to undergo a useless and timeconsuming and expensive trial. The second case constitutes a rude if not debilitating
imposition on the trial and the docket of the judiciary.36
In the present case, we agree with the ruling of the CA that the RTC acted with grave abuse of
discretion amounting to excess or lack of jurisdiction when it denied the Demurrer to Evidence
of respondent and, in the process, ignored applicable rulings of this Court. Although
respondent had the right to appeal the decision of the trial court against her after trial,
however, she, as defendant, need not use up funds and undergo the tribulations of a trial and
thereafter appeal from an adverse decision.
Section 3, Rule 2 of the 1997 Rules of Civil Procedure provides that a party may not institute
more than one suit for a single cause of action and, if two or more suits are instituted on the
basis of the same cause of action, the filing of one on a judgment upon the merits in any one is
available as ground for the dismissal of the other or others.37 A party will not be permitted to
split up a single cause of action and make it a basis for several suits. 38 A party seeking to
enforce a claim must present to the court by the pleadings or proofs or both, all the grounds
upon which he expects a judgment in his favor. He is not at liberty to split up his demands and
prosecute it by piecemeal, or present only a portion of the grounds upon which special relief is
sought, and leave the rest to be presented in a second suit if the first fails. 39 The law does not
permit the owner of a single or entire cause of action or an entire or indivisible demand to
divide and split the cause or demand so as to make it the subject of several actions. The whole
cause must be determined in one action.
Indeed, in Goldberg v. Eastern Brewing Co.,40 the New York Supreme Court emphasized that:
It was held in the case of Bendernagle v. Cocks, 19 Wend. 207 (32 Am.Dec. 448), that where
a party had several demands or existing causes of action growing out of the same contract or
resting in matter of account, which may be joined and sued for in the same action, they must
be joined; and if the demands or causes of action be split up, and a suit brought for part only,
and subsequently a second suit for the residue is brought, the first action may be pleaded in
abatement or in bar of the second action. x x x41
The rule against splitting causes of action is not altogether one of original legal right but is one
of interposition based upon principles of public policy and of equity to prevent the
inconvenience and hardship incident to repeated and unnecessary litigation. 42

It is not always easy to determine whether in a particular case under consideration, the cause
of action is single and entire or separate. The question must often be determined, not by the
general rules but by reference to the facts and circumstances of the particular case. Where
deeds arising out of contract are distinct and separate, they give rise to separate cause of action
for which separate action may be maintained; but it is also true that the same contract may
give rise to different causes of action either by reason of successive breaches thereof or by
reason of different stipulations or provisions of the contract. 43 The true rule which determines
whether a party has only a single and entire cause of action for all that is due him, and which
must be sued for in one action, or has a severable demand for which he may maintain separate
suits, is whether the entire amount arises from one and the same act or contract or the several
parts arise from distinct and different acts or contracts.44
Where there are entirely distinct and separate contracts, they give rise to separate causes of
action for which separate actions may be instituted and presented. When money is payable by
installments, a distinct cause of action assails upon the following due by each installment and
they may be recovered in successive action. On the other hand, where several claims payable
at different times arise out of the same transactions, separate actions may be brought as each
liability accounts. But where no action is brought until more than one is due, all that are due
must be included in one action; and that if an action is brought to recover upon one or more
that are due but not upon all that are due, a recovery in such action will be a bar to a several or
other actions brought to recover one or more claims of the other claims that were due at the
time the first action was brought.45
The weight of authority is that in the absence of special controlling circumstances, an open or
continuous running account between the same parties constitutes a single and indivisible
demand, the aggregate of all the items of the account constituting the amount due. But the rule
is otherwise where it affirmatively appears that the parties regarded the different items of the
account as separate transactions and not parts of an ordinary running account. And there may
also be, even between the same parties, distinct and separate actions upon which separate
actions may be maintained.46 In fine, what is decisive is that there be either an express
contract, or the circumstances must be such as to raise an implied contract embracing all the
items to make them, when they arise, at different times, a single or entire demand or cause of
action.47
Decisive of the principal issue is the ruling of this Court in Bachrach Motor Co., Inc. v.
Esteban Icaragal and Oriental Commercial Co., Inc.48 in which it ruled that on the
nonpayment of a note secured by a mortgage, the creditor has a single cause of action against
the debtor. The single cause of action consists in the recovery of the credit with execution of
the suit. In a mortgage credit transaction, the credit gives rise to a personal action for
collection of the money. The mortgage is the guarantee which gives rise to a mortgage
foreclosure suit to collect from the very property that secured the debt. 49
The action of the creditor is anchored on one and the same cause: the nonpayment by the
debtor of the debt to the creditor-mortgagee. Though the debt may be covered by a promissory
note or several promissory notes and is covered by a real estate mortgage, the latter is
subsidiary to the former and both refer to one and the same obligation.
A mortgage creditor may institute two alternative remedies against the mortgage debtor, either
a personal action for the collection of debt, or a real action to foreclose the mortgage, but not
both. Each remedy is complete by itself. As explained by this Court:

We hold, therefore, that, in the absence of express statutory provisions, a mortgage creditor
may institute against the mortgage debtor either a personal action for debt or a real action to
foreclose the mortgage. In other words, he may pursue either of the two remedies, but not
both. By such election, his cause of action can by no means be impaired, for each of the two
remedies is complete in itself. Thus, an election to bring a personal action will leave open to
him all the properties of the debtor for attachment and execution, even including the
mortgaged property itself. And, if he waives such personal action and pursues his remedy
against the mortgaged property, an unsatisfied judgment thereon would still give him the right
to sue for a deficiency judgment, in which case, all the properties of the defendant, other than
the mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages attendant
to the pursuit of one or the other remedy are purely accidental and are all under his right of
election. On the other hand, a rule that would authorize the plaintiff to bring a personal action
against the debtor and simultaneously or successively another action against the mortgaged
property, would result not only in multiplicity of suits so offensive to justice (Soriano v.
Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil. 404),
but also in subjecting the defendant to the vexation of being sued in the place of his residence
or of the residence of the plaintiff, and then again in the place where the property lies.50
If the mortgagee opts to foreclose the real estate mortgage, he thereby waives the action for
the collection of the debt and vice versa.51 If the creditor is allowed to file its separate
complaints simultaneously or successively, one to recover his credit and another to foreclose
his mortgage, he will, in effect, be authorized plural redress for a single breach of contract at
so much costs to the court and with so much vexation and oppressiveness to the debtor. 52
In the present case, petitioner opted to file a petition for extrajudicial foreclosure of the real
estate mortgage but only for the principal amount of P4,687,006.08 or in the total amount
of P7,755,733.64 covering only 31 of the 67 promissory notes. By resorting to the
extrajudicial foreclosure of the real estate mortgage, petitioner thereby waived its personal
action to recover the amount covered not only by said promissory notes but also of the rest of
the promissory notes. This is so because when petitioner filed its petition before the Ex-Oficio
Provincial Sheriff on June 10, 1999, the entirety of the loan account of respondent under the
67 promissory notes was already due. The obligation of respondent under Promissory Note
Nos. 1 to 33 became due on February 9, 1998 but was extended up to March 11, 1998,
whereas, those covered by Promissory Note Nos. 34 to 67 matured on December 28, 1998.
Petitioner should have caused the extrajudicial foreclosure of the real estate mortgage for the
recovery of the entire obligation of respondent, on all the promissory notes. By limiting the
account for which the real estate mortgage was being foreclosed to the principal amount
of P4,687,006.68, exclusive of interest and penalties, petitioner thereby waived recovery of the
rest of respondents agricultural loan account.
It must be stressed that the parties agreed in the Real Estate Mortgage that in the event that
respondent shall fail to pay the mortgage obligation "or any portion thereof when due, the
entire principal, interest, penalties and other charges then outstanding shall become
immediately due, payable and defaulted," thus:
3. The terms and conditions of the Mortgage have been violated when the
Mortgagors failed and/or refused to pay, notwithstanding repeated demands, the
installment and/or maturity amount of the Mortgage obligation which became due
and payable on the said date;

4. Under the terms and conditions of the Mortgage Agreement, in the event the
Mortgagors fail and/or refuse to pay the Mortgage obligation or any portion thereof
when due, the entire principal, interest, penalties and other charges then outstanding,
shall, without need for demand, notice, or any other act or deed, become
immediately due, payable and defaulted;
5. The Mortgage Agreement provides that upon such breach or violation of the terms
and conditions thereof, the Mortgagee may, at its absolute discretion foreclose the
same extrajudicially in accordance with the procedure prescribed by Act No. 3135,
as amended, and for the purpose appointed the Mortgagee as its attorney-in-fact with
full power and authority to enter the premises where the Mortgaged property is
located and to take actual possession and control thereof without need of any order
of any Court, nor written permission from the Mortgagors, and with special power to
sell the Mortgaged Property at a public or private sale at the option of the
Mortgagee.53
Petitioner cannot split the loan account of respondent by filing a petition for the extrajudicial
foreclosure of the real estate mortgage for the principal amount of P4,687,006.68 covered by
the first set of promissory notes, and a personal action for the collection of the principal
amount of P12,672,000.31 covered by the second set of promissory notes without violating the
proscription against splitting a single cause of action against respondent.
The contention of petitioner that respondents loan account that was secured by the real estate
mortgage was limited only to those covered by the Promissory Note Nos. 1 to 33 or for the
total amount of P7,000,000.00 is belied by the real estate mortgage and by its own evidence.
Under the deed, the mortgage was to secure the payment of a credit accommodation already
obtained by respondent, the principal of all of which was fixed at P7,000,000.00, as well as
any other obligation that may be extended to respondent, including interest and expenses, to
wit:
That for and in consideration of credit accommodation obtained from the MORTGAGEE, and
to secure the payment of the same and those that may hereafter be obtained, the principal of all
of which is hereby fixed at SEVEN MILLION PESOS ONLY (P7,000,000.00), Philippine
Currency, as well as those that the MORTGAGEE may extend to the MORTGAGOR,
including interest and expenses or any other obligation owing to the MORTGAGEE, whether
direct or indirect, principal or secondary, as appears in the accounts, books and records of the
MORTGAGEE, the MORTGAGOR does hereby transfer and convey by way of mortgage
unto the MORTGAGEE, its successors or assigns, the parcels of land which are described in
the list inserted on the back of this document and/or appended herein, together with all the
buildings and improvements now existing or which may hereafter be erected or constructed
thereon, of which the MORTGAGOR declares that he/it is the absolute owner free from all
liens and encumbrances. However, if the MORTGAGOR shall pay to the MORTGAGEE, its
successors or assigns, the obligation secured by this mortgage when due, together with
interest, and shall keep and perform all and singular the covenants and agreements herein
contained for the MORTGAGOR to keep and perform, then this mortgage shall be void,
otherwise, it shall remain in full force and effect.54 (Emphasis supplied)
The testimony of Ganuelas in the RTC relative to the real estate mortgage follows:

Q The real estate mortgage states: "That for and in consideration of credit accommodation
obtained from the mortgagee." This simply means, Mr. Witness, that this mortgage is offered
to secure loans already obtained by the mortgagor from the mortgagee Far East Bank and
Trust Company. I am referring only to that phrase, obtained from the mortgagee, is that
correct?
A Yes, Sir.
Q So from this phrase in the real estate mortgage, this mortgage was constituted to secure the
credit accommodation already obtained by the mortgagor, the defendant spouses, as of the
time of the execution of the real estate mortgage, is that correct?
A Yes, Sir.
Q Now since the loan secured by the defendants are evidenced by promissory notes, will you
agree with me, Mr. Witness, that this real estate mortgage was executed for promissory notes
already executed by the defendant spouses as of the time of the execution of the mortgage on
June 13, 1997, is that correct?
A Yes, Sir.
ATTY. MIRANO:
For purposes of identification, we respectfully request that this phrase: "that for and in
consideration of the credit accommodation obtained from the mortgagee" be bracketed and
mark as Exhibit 6-B. (Acting court interpreter marking said phrase as Exhibit 6-B.)
Q Now in accordance with the terms of this real estate mortgage, this real estate mortgage was
executed by the defendant spouses not only to secure the loan already obtained by the said
spouses as of the time of the execution of the mortgage on June 13, 1997 but also all other
loans that may be extended by Far East Bank and Trust Company to the defendant spouses
after the execution of the mortgage as stated in this portion of the real estate mortgage which
we quote: "to secure the payment as and those that may hereafter be obtained," is that correct?
A Yes, Sir.
Q So from your statement, Mr. Witness, this real estate mortgage was offered by the defendant
spouses as a security for the loans they already secured as of the time of the execution of the
mortgage but also for the loans that they will secure thereafter, is that correct?
A Yes, Sir.55 (Emphasis supplied)
As gleaned from the plain terms of the real estate mortgage, the real estate of respondent
served as continuing security liable for future advancements or obligations beyond the amount
of P7,000,000.00. The mortgage partakes of the nature of contract for future advancements. As
explained by this Court in the early case of Lim Julian v. Lutero: 56

The rule, of course, is well settled that an action to foreclose a mortgage must be limited to the
amount mentioned in the mortgage. The exact amount, however, for which the mortgage is
given need not always be specifically named. The amount for which the mortgage is given
may be stated in definite or general terms, as is frequently the case in mortgages to secure
future advancements. The amount named in the mortgage does not limit the amount for which
it may stand as security, if, from the four corners of the document, the intent to secure future
indebtedness or future advancements is apparent. Where the plain terms, of the mortgage,
evidence such an intent, they will control as against a contention of the mortgagor that it was
the understanding of the parties that the mortgage was security only for the specific amount
named. (Citizens Savings Bank v. Kock, 117 Mich. 225). In that case, the amount mentioned
in the mortgage was $7,000. The mortgage, however, contained a provision that "the
mortgagors agree to pay said mortgagee any sum of money which they may now or hereafter
owe said mortgagee." At the time the action of foreclosure was brought, the mortgagors owed
the mortgagee the sum of $21,522. The defendants contended that the amount to be recovered
in an action to foreclose should be limited to the amount named in the mortgage. The court
held that the amount named as consideration for the mortgage did not limit the amount for
which the mortgage stood as security, if, from the whole instrument the intent to secure future
indebtedness could be gathered. The court held that a mortgage to cover future advances is
valid. (Michigan Insurance Co. v. Brown, 11 Mich. 265; Jones on Mortgages, 1, sec. 373;
Keyes v. Bumps Administrator, 59 Vt. 391; Fisher v. Otis, 3 Pin. 78; Brown v. Kiefer, 71
N.Y. 610; Douglas v. Reynolds, 7 Peters [U.S.] 113; Shores v. Doherty, 65 Wis. 153)
Literal accuracy in describing the amount due, secured by a mortgage, is not required, but the
description of the debt must be correct and full enough to direct attention to the sources of
correct information in regard to it, and be such as not to mislead or deceive as to the amount of
it, by the language used. Reading the mortgage before us from its four corners, we find that the
description of the debt is full enough to give information concerning the amount due. The
mortgage recites that it is given to secure the sum of P12,000, interest, commissions, damages,
and all other amounts which may be found to be due at maturity. The terms of the contract are
sufficiently clear to put all parties who may have occasion to deal with the property mortgaged
upon inquiry. The parties themselves from the very terms of the mortgage could not be in
ignorance at any time of the amount of their obligation and the security held to guarantee the
payment.
When a mortgage is given for future advancements and the money is paid to the mortgagor
"little by little" and repayments are made from time to time, the advancements and the
repayments must be considered together for the purpose of ascertaining the amount due upon
the mortgage at maturity. Courts of equity will not permit the consideration of the repayments
only for the purpose of determining the balance due upon the mortgage. (Luengo & Martinez
v. Moreno, 26 Phil. 111) The mere fact that, in contract of advancements, the repayments at
any one time exceeds the specific amount mentioned in the mortgage will not have the effect
of discharging the mortgage when the advancements at that particular time are greatly in
excess of the repayments; especially is this true when the contract of advancement or
mortgage contains a specific provision that the mortgage shall cover all "such other amounts
as may be then due." Such a provision is added to the contract of advancements or mortgage
for the express purpose of covering advancements in excess of the amount mentioned in the
mortgage. (Luengo & Martinez v. Moreno, supra)
The sum found to be owing by the debtor at the termination of the contract of advancements
between him and the mortgagee, during continuing credit, is still secured by the mortgage on
the debtors property, and the mortgagee is entitled to bring the proper action for the collection

of the amounts still due and to request the sale of the property covered by the mortgage.
(Luengo & Martinez v. Moreno, supra; Russell v. Davey, 7 Grant Ch. 13; Patterson First
National Bank v. Byard, 26 N.J. Equity 225)
Under a mortgage to secure the payment of future advancements, the mere fact that the
repayments on a particular day equal the amount of the mortgage will not discharge the
mortgage before maturity so long as advancements may be demanded and are being received.
(Luengo & Martinez v. Moreno, supra)57
Moreover, the series of loan advancements herein cannot be likened to the credit line
discussed in Caltex Philippines, Inc. v. Intermediate Appellate Court,58 as petitioner posited in
its reply59 filed before this Court. In Caltex, unlike the instant case, the real estate mortgage
executed did not contain a "dragnet" clause60 that would subsume all past and future debts.
The mortgage therein specifically secured only the loans extended prior to the mortgage. Thus,
in the said case, the future debts were deemed as constituting a separate transaction from the
past debts secured by the mortgage.
The ruling of the Court in Quiogue v. Bautista61 is likewise inapplicable. In that case, the
Court deemed the loan transactions as separate, considering that those were two separate loans
secured by two separate mortgages. In this case, however, there is only one mortgage securing
all 67 drawdowns made by respondent.
In fine, for the failure of respondent to pay her loan obligation, petitioner had only one cause
of action arising from such non-payment. This single cause of action consists in the recovery
of the credit with execution of the security.62 Petitioner is proscribed from splitting its single
cause of action by filing an extrajudicial foreclosure proceedings on June 10, 1999 with
respect to the amounts in the 31 promissory notes, and, during the pendency thereof, file a
collection case on June 23, 1999, with respect to the amounts in the remaining 36 promissory
notes.
Considering, therefore, that, in the case at bar, petitioner had already instituted extrajudicial
foreclosure proceedings of the mortgaged property, it is now barred from availing itself of a
personal action for the collection of the indebtedness.
IN VIEW OF ALL THE FOREGOING, the instant petition is DISMISSED for lack of merit.
Costs against petitioner.
SO ORDERED.

G.R. No. 181485

February 15, 2012

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
GATEWAY PROPERTY HOLDINGS, INC., Respondent.
DECISION
LEONARDO DE CASTRO, J.:
Submitted for our consideration is a Petition for Review on Certiorari 1 under Rule 45 of the
Rules of Court, which seeks the reversal of the Decision 2 dated September 28, 2007 and the
Resolution3 dated January 24, 2008 of the Court of Appeals in CA-G.R. CV No. 75108. The
appellate courts decision set aside the Order4 dated December 20, 2001 of the Regional Trial
Court (RTC) of Trece Martires City, Branch 23, in Civil Case No. TM-1108; while the
appellate courts resolution denied the motion for reconsideration of said courts September
28, 2007 decision.
The antecedents of the case are as follows:

properties, up to a minimum of P112 million, to be applied towards the repayment of GECs

outstanding obligations with PNB. Furthermore, the letter stated that the real estate mortgage
"shall be registered with the Registry of Deeds in an event of default."10
In March 1998, LBP allegedly refused to abide by its undertaking to share the mortgaged
properties of GEC with the consortium of creditor banks. GEC, thus, filed a complaint for
specific performance against LBP, which was docketed as Civil Case No. 98-782.
On or about June 19, 2000, PNB purportedly demanded from GEC the full payment of the
latters obligations. Thereafter, GPHI learned of PNBs supposedly underhanded registration
of the real estate mortgage with intent to foreclose the same.
GPHI principally alleged in its complaint that "[t]he understanding between GEC and PNB is
that the GPHI properties would stand merely as a temporary security pending the outcome of
Civil Case No. 98-782 which was filed by GEC against LBP. The GPHI Property was never
contemplated at any time as a collateral for GECs loan obligations to PNB."11 Also, GPHI
argued that "[t]he execution of a Real Estate Mortgage in favor of [PNB] over the GPHI
Property did not reflect the true intention of the parties thereto, GEC and PNB. The documents
attached as Annexes to [the complaint] clearly show the interim or temporary nature of the
mortgage arrangement."12 GPHI contended that PNB had no legal right to effect the
foreclosure of the mortgaged properties.

Civil Case No. TM-1022 (Annulment of the Real Estate Mortgage)

On July 27, 2000, herein respondent Gateway Property Holdings, Inc. (GPHI) filed a
Complaint with Application for the Issuance of a Writ of Preliminary Injunction5 against
herein petitioner Philippine National Bank (PNB). The case was docketed as Civil Case No.
TM-1022 in the RTC of Trece Martires City, Branch 23.
According to the complaint, GPHI was a subsidiary company of Gateway Electronics
Company (GEC). In 1995 and 1996, GEC obtained long term loans from the Land Bank of the
Philippines (LBP) in the amount ofP600,000,000.00. The loans were secured by mortgages
executed by GEC over its various properties. Subsequently, LBP offered to provide additional
funds to GEC by inviting other banking institutions to lend money therefor. LBP allegedly
agreed to submit the properties mortgaged to it by GEC as part of the latters assets that will
be covered by a Mortgage Trust Indenture (MTI), ensuring that "all participating banks in the
loan syndicate will have equal security position."6 Before the formal execution of an MTI,
LBP and a consortium of banks entered into a Memorandum of Understanding (MOU),
whereby LBP agreed to release the mortgaged properties to the consortium of banks on the
basis of an MTI. Relying on the said undertaking, the participating banks released funds in
favor of GEC. PNB later became part of this consortium of creditor banks. 7
Thereafter, GEC allegedly encountered difficulties in paying its obligations to the banks,
including those owed to PNB. GEC then requested PNB to convert its long-term loans into a
Convertible Omnibus Credit Line. In a letter8dated August 13, 1997 addressed to Israel F.
Maducdoc, the Senior Vice President of GEC, PNB approved such a conversion subject to
certain conditions. As part of the requirements of PNB, GPHI was made a co-borrower in the
agreement and was obligated to execute in favor of PNB a real estate mortgage over two
parcels of land covered by Transfer Certificates of Title (TCT) Nos. T-636816 and T636817.9 The letter likewise provided that PNB shall hold physical possession of the said titles
until GPHI shall have made the assignment of the sales proceeds of the aforementioned real

GPHI, thus, prayed that upon receipt of the complaint by the trial court, a temporary
restraining order (TRO) be issued to enjoin PNB from foreclosing on the properties of GPHI
covered by TCT Nos. T-636816 and T-636817, as well as from registering the fact of
foreclosure or performing any act that would deprive GPHI of its ownership of the said
properties. GPHI likewise prayed that, after trial on the merits, judgment be issued declaring
that: (1) the real estate mortgage involving the properties of GPHI and executed in favor of
PNB is null and void; (2) PNB be enjoined from foreclosing on the aforementioned properties
of GPHI and from registering the same; and (3) PNB be ordered to pay to GPHI the amount
of P500,000.00 as attorneys fees and litigation expenses.13
It appears that the RTC did not issue a TRO in favor of GPHI in the above case such that, on
May 3, 2001, PNB initiated extrajudicial foreclosure proceedings on the properties covered by
TCT Nos. T-636816 and T-636817.14The properties were sold at a public auction on June 20,
2001. According to the Minutes of Public Auction Sale15executed by the RTC Deputy Sheriff
of Cavite, PNB was the sole bidder and it thereby acquired the properties for a sale bid price
of P168,000,000.00.
Civil Case No. TM-1108 (Annulment of the Foreclosure Sale)
On August 14, 2001, GPHI filed a Petition for Annulment of Foreclosure of Mortgage with
Application for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction.16 Docketed as Civil Case No. TM-1108, the petition was also raffled in Branch 23
of the RTC of Trece Martires City.
GPHI argued that, in conducting the foreclosure proceedings, the sheriff failed to observe the
requirement of Section 4 of Act No. 3135 that the "sale shall be made at public auction." The
entries in the minutes of the foreclosure sale allegedly did not indicate that a valid public

auction was carried out in keeping with the requirements of the law. More importantly, among
its causes of action, GPHI contended that:

On December 20, 2001, the RTC ordered the dismissal of Civil Case No. TM-1108. The trial
court elucidated thus:

17. [PNB] should not have proceeded in registering as well as in foreclosing [GPHIs]
mortgaged assets since the latter cannot yet be considered in default in accordance with the
Amendment to Credit Agreement executed by [GEC], petitioner GPHI and respondent PNB
on November 28, 1997. Moreover, [PNB] knows all along that the subject real properties was
never intended to be used as permanent collateral for GEC, but one which was simply used as
an unregistered security until [GPHI] incurs in default if sold and the proceeds of which
should be used in payment for the obligation of GEC.

Prior to the filing of the above-entitled case, [GPHI] filed against [PNB] an action for
annulment of Mortgage with Application for Temporary Restraining Order and Writ of
Preliminary Injunction docketed as Civil Case No. TM-1022. While the first action was filed
on July 27, 2001, above-entitled case was filed on August 14, 2001 because there was no
Temporary Restraining Order or Writ of Preliminary Injunction issued in the first case, the
foreclosure sale of the [mortgage] sought to be enjoined by [GPHI] as against [PNB] from this
Court, proceeded in the ordinary course of law and a certificate of sale was issued in favor of
the bank. Not obtaining the relief desired, [GPHI] endeavored the remedy of filing this case;
Annulment of Foreclosure of Mortgage with Application for the issuance of a Temporary
Restraining Order [and/or] writ of Preliminary Injunction thinking it to be the right resources
instead of pursuing to attack [PNB] in the first case thus filed.

Section 5.(5.01) of said Amendment to Credit Agreement states that:

"5.01. Undertaking to Sell and Assignment. The borrowers hereby undertake to sell the
Mortgaged Properties to third parties and apply the proceeds thereof to the payment of the
Seven-Year Term Loan up to the extent of PESOS: ONE HUNDRED TWELVE MILLION
(P112,000,000.00). Any shortfall in such amount shall be funded by GEC. For this purpose,
the Borrowers hereby assign, transfer and convey unto and in favor of the Bank the said
amount of P112,000,000.00 out of the proceeds of the sale of the Mortgaged Properties.
The Borrowers failure to remit to the Bank the amount of P112,000,000.00 within three (3)
banking days reckoned from the sale of the Mortgaged Properties shall be considered an Event
of Default (as such term is hereinafter defined) and shall be subject to the consequences herein
provided."
xxxx
19. Moreover, it was clearly provided in [PNBs] letter dated August 13, 1997 that the [real
estate mortgage] shall be unregistered and will be registered with the Registry of Deeds only
"in an event of default." It is also clear in the said letter that [PNB] shall only hold physical
possession of said TCT Nos. 636817 and 636816 x x x until the condition of assigning the
sales proceeds of the mentioned real properties up to a minimum of US$ equivalent of
PhP112,000,000.00 to [PNB] is complied with.17
GPHI, thereafter, sought for a judgment: (1) perpetually prohibiting PNB from divesting GPHI
of its possession and ownership of the mortgaged properties, as well as taking possession,
administration and ownership thereof; (2) declaring the foreclosure sale conducted on June 20,
2001 as null and void; (3) ordering PNB to pay GPHIP2,000,000.00 as moral
damages, P1,000,000.00 as exemplary damages, P500,000.00 as attorneys fees and costs of
suit.
On September 11, 2001, PNB filed a Motion to Dismiss18 the above petition, and contended
that there was another action pending between the same parties for the same cause of action.
Essentially, PNB argued that GPHI resorted to a splitting of a cause of action by first filing a
complaint for the annulment of the contract of real estate mortgage and then filing a petition
for the annulment of the subsequent foreclosure of the mortgage. PNB further alleged that the
subsequent petition of GPHI failed to state a cause of action.

Both cases, Civil Case No. TM-1022 and TM-1108 practically involved the same parties,
substantially identical causes of action and reliefs prayed for, the reliefs being founded
on the same facts. Ironically, these cases are now both filed in this Court.
Considering the foregoing circumstances where a single cause of action has been split and
pursuant to Rule 16, Section 1(e) of the 1997 Rules on Civil Procedure, the Motion to Dismiss
filed by [PNB] through counsel, on the ground that there is another action pending between
the same parties for the same cause, or [litis pendentia], is proper.
Suffice to state that the Court deemed no longer necessary to discuss the second ground relied
upon in [PNBs] pleading.
ACCORDINGLY, this case is DISMISSED. 19 (Emphasis ours.)
GPHI filed a Motion for Reconsideration20 of the above ruling, but the trial court denied the
motion in an Order21dated March 14, 2002. GPHI, thus, filed a Notice of Appeal, 22 which was
given due course by the trial court.23
In the interregnum, after the parties presented their respective evidence in Civil Case No. TM1022 (Annulment of the Real Estate Mortgage), GPHI filed a Motion for Leave to Amend
Complaint to Conform to the Evidence24 on November 24, 2006. In the Amended
Complaint25 attached therein, GPHI made mention of the foreclosure sale conducted on June
20, 2001 and the fact that the mortgaged properties were sold to PNB for P168 million. Since
GPHIs liability was allegedly limited only to P112 million in accordance with the letter of
PNB dated August 13, 1997 and the Amendment to the Credit Agreement between GEC,
GPHI and PNB, GPHI claimed that it should be refunded the amount of P56 million. GPHI
then prayed for a judgment declaring the real estate mortgage, the foreclosure and the sale of
the mortgaged properties null and void; or, alternatively, for a judgment ordering PNB to
return to GPHI the amount of P56 million, plus interest.26
The Judgment of the Court of Appeals
GPHIs appeal in Civil Case No. TM-1108 (Annulment of the Foreclosure Sale) was docketed
in the Court of Appeals as CA-G.R. CV No. 75108. GPHI primarily argued that the causes of

action in the two cases filed before the RTC were separate and distinct such that a decision in
one case would not necessarily be determinative of the issue in the other case.
On September 28, 2007, the Court of Appeals rendered the assailed decision granting the
appeal of GPHI. The relevant portions of the appellate courts ruling stated:
For litis pendentia to be a ground for the dismissal of an action, the following requisites must
concur: (a) identity of parties; (b) identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) 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 adjudicata to the other.
While it is true that there is an identity of parties and subject matter, the third requisite
of litis pendentia is not present. x x x x
The former suit is for the annulment of the real estate mortgage while the present case is one
for the annulment of the foreclosure of the mortgage. It may be conceded that if the final
judgment in the former action is for the annulment of the mortgage, such an adjudication will
deny the right of the bank to foreclose on the properties. Following the above doctrine, the
immediate question would thus be: Will a decree holding the mortgage contract valid prevent
a party from challenging the propriety of the foreclosure and the conduct of its proceedings?
Verily, an adjudication holding the real estate mortgage valid does not preclude an
action predicated on or involving an issue questioning the validity of the foreclosure. In
this respect, the test of identity fails. The answer being in the negative, the judgment in
Civil Case No. TM-1022 would not be a bar to the prosecution of the present action.
WHEREFORE, the appeal is GRANTED and the assailed order is
hereby REVERSED and SET ASIDE. The case is ordered REMANDED to the court a quo
for further proceedings.27 (Emphases ours.)

the foreclosure proceedings. Also, one of the reliefs prayed for in the amended complaint of
GPHI in Civil Case No. TM-1022 (Annulment of the Real Estate Mortgage) is for the
declaration of the nullity of the foreclosure sale. PNB insists that the validity of the foreclosure
sale was squarely put in issue during the trial of Civil Case No. TM-1022 (Annulment of the
Real Estate Mortgage) wherein GPHI prayed for the nullity of both the real estate mortgage
and the subsequent foreclosure sale and the certificate of sale issued in favor of PNB.
For its part, GPHI counters that the causes of action in the two cases filed before the court a
quo are not the same. GPHI explains that it filed Civil Case No. TM-1022 (Annulment of the
Real Estate Mortgage) inasmuch as the real estate mortgage executed in favor of PNB did not
reflect the true intention of the parties thereto. GPHI reiterates that the properties covered by
TCT Nos. T-636816 and T-636817 merely served as temporary securities for the loan of GEC
from PNB. On the other hand, GPHI maintains that it filed Civil Case No. TM-1108
(Annulment of the Foreclosure Sale) in view of the failure of the sheriff to comply with the
requirement of Section 4 of Act No. 3135 that foreclosure proceedings shall be conducted
through a public auction.
GPHI further elaborates that should the RTC grant the prayer in Civil Case No. TM-1022
(Annulment of the Real Estate Mortgage), it would follow that the subsequent foreclosure
proceedings involving the mortgaged properties will likewise be rendered null and void. Even
so, GPHI opines that if the trial court declares the validity of the real estate mortgage in Civil
Case No. TM-1022 (Annulment of the Real Estate Mortgage), the same will not automatically
render valid the ensuing foreclosure proceedings.
We grant the petition of PNB.
As a ground for a motion to dismiss a complaint or any other pleading asserting a claim, litis
pendentia is provided for under Section 1(e), Rule 16 of the Rules of Court, which reads:
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:

PNB moved for the reconsideration28 of the above decision but the Court of Appeals denied
the same in the assailed Resolution dated January 24, 2008.

xxxx

PNB, thus, instituted the instant petition.

(e) That there is another action pending between the same parties for the same cause.

The Ruling of the Court

In its Memorandum before this Court, PNB averred that "[t]he central issue in this case is
whether or not the requisites of litis pendentia exist to warrant the dismissal of Civil Case No.
TM-1108 [Annulment of the Foreclosure Sale]. Stated otherwise, the primary issue is whether
or not there is an identity of parties and causes of action in the two subject cases, such that
judgment that may be rendered in one would amount to res judicata to the other." 29
PNB asserts that the validity of the extra-judicial foreclosure proceedings and the incidents
thereto were primary issues tried in Civil Case No. TM-1022 (Annulment of the Real Estate
Mortgage). PNB points out that GPHI even filed a Motion for Leave to Amend Complaint to
Conform to the Evidence30 dated November 23, 2006 to incorporate the issue of the validity of

As we held in Dotmatrix Trading v. Legaspi,31 "[l]itis pendentia is a Latin term, which literally
means a pending suit and is variously referred to in some decisions as lis pendens and auter
action pendant. As a ground for the dismissal of a civil action, it refers to the situation where
two actions are pending between the same parties for the same cause of action, so that one of
them becomes unnecessary and vexatious."32
We further emphasized in Guevara v. BPI Securities Corporation 33 that "[t]here is litis
pendentia or another actionpendente lite if the following requisites are present: (a) identity of
parties, or at least such parties as represent the same interests in both actions; (b) identity of
rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the
identity of the two preceding particulars is such that any judgment rendered in the other action,
will, regardless of which party is successful, amount to res judicata in the action under
consideration."34

With respect to the first requirement of litis pendentia, the same is undisputedly present in this
case. GPHI is the plaintiff in both Civil Case Nos. TM-1022 and TM-1108, while PNB is the
party against whom GPHI is asserting a claim. That the Registry of Deeds for the Province of
Cavite was named as an additional respondent in Civil Case No. TM-1108 (Annulment of the
Foreclosure Sale) bears little significance. The Court has clarified in Villarica Pawnshop, Inc.
v. Gernale35 that "identity of parties does not mean total identity of parties in both cases. It is
enough that there is substantial identity of parties. The inclusion of new parties in the second
action does not remove the case from the operation of the rule of litis pendentia." 36
The crux of the controversy in the instant case is whether there is an identity of causes of
action in Civil Case Nos. TM-1022 and TM-1108.
Section 2, Rule 2 of the Rules of Court defines a cause of action as "the act or omission by
which a party violates a right of another." Section 3 of Rule 2 provides that "[a] party may not
institute more than one suit for a single cause of action." Anent the act of splitting a single
cause of action, Section 4 of Rule 2 explicitly states that "[i]f two or more suits are instituted
on the basis of the same cause of action, the filing of one or a judgment upon the merits in any
one is available as a ground for the dismissal of the others."
Apropos, Carlet v. Court of Appeals37 states that:
As regards identity of causes of action, the test often used in determining whether causes of
action are identical is to ascertain whether the same evidence which is necessary to sustain the
second action would have been sufficient to authorize a recovery in the first, even if the forms
or nature of the two actions be different. If the same facts or evidence would sustain both
actions, the two actions are considered the same within the rule that the judgment in the
former is a bar to the subsequent action; otherwise, it is not. 38
In the case at bar, a perusal of the allegations in Civil Case Nos. TM-1022 (Annulment of the
Real Estate Mortgage) and TM-1108 (Annulment of the Foreclosure Sale) reveal that the said
cases invoke the same fundamental issue, i.e., the temporary nature of the security that was to
be provided by the mortgaged properties of GPHI.
To repeat, in the original complaint in Civil Case No. TM-1022 (Annulment of the Real Estate
Mortgage), GPHIs main argument was that the agreement between GEC and PNB was that
the mortgaged properties of GPHI would merely stand as temporary securities pending the
outcome of Civil Case No. 98-782, the case filed by GEC against LBP. The mortgaged
properties were never contemplated to stand as bona fide collateral for the loan obligations of
GEC to PNB. Also, GPHI claimed that the execution of the real estate mortgage over the
properties of GPHI did not reflect the true intention of GEC and PNB. As such, GPHI
concluded that PNB had no legal right to pursue the remedy of foreclosure of the mortgaged
properties in light of the inability of GEC to pay its loan obligations to PNB.
On the other hand, in its petition in Civil Case No. TM-1108 (Annulment of the Foreclosure
Sale), GPHI asserted that PNB knew that the mortgaged properties were "never intended to be
used as permanent collateral for GEC, but one which was simply used as an unregistered
security until [GPHI] incurs in default if sold and the proceeds of which should be used in
payment for the obligation of GEC."39 In addition, GPHI argued that the letter of PNB dated
August 13, 1997 was clear in that the real estate mortgage was to remain unregistered until an

"event of default" occurs and PNB shall possess the titles covering the properties "until the
condition of assigning the sales proceeds of the mentioned real properties up to a minimum of
US$ equivalent of PhP112,000,000.00 to [PNB] is complied with."40
Therefore, in essence, the cause of action of GPHI in both cases is the alleged act of PNB of
reneging on a prior agreement or understanding with GEC and GPHI vis--vis the constitution,
purpose and consequences of the real estate mortgage over the properties of GPHI. While the
reliefs sought in Civil Case Nos. TM-1022 (Annulment of the Real Estate Mortgage) and TM1108 (Annulment of the Foreclosure Sale) are seemingly different, the ultimate question that
the trial court would have to resolve in both cases is whether the real estate mortgage over the
properties of GPHI was actually intended to secure the loan obligations of GEC to PNB so
much so that PNB can legally foreclose on the mortgaged properties should GEC fail to settle
its loan obligations. In this regard, GPHI made reference to the letter of PNB dated August 13,
1997 and the Amendment to the Credit Agreement between GEC, GPHI and PNB as the
primary documents upon which GPHI based its arguments regarding the supposed intention of
the parties in both Civil Case Nos. TM-1022 (Annulment of the Real Estate Mortgage) and
TM-1108 (Annulment of the Foreclosure Sale).41 Thus, the same documentary evidence would
necessarily sustain both cases.1wphi1
That GPHI put forward additional grounds in Civil Case No. TM-1108 (Annulment of the
Foreclosure Sale), i.e., that the auction sale was not conducted at a public place in
contravention of the requirement of Section 4 of Act No. 3135 and that the foreclosure was
prematurely resorted to given that GPHI cannot yet be considered in default, does not alter the
fact that there exists an identity of causes of action in the two cases. In Asia United Bank v.
Goodland Company, Inc.,42 the Court held that "[t]he well-entrenched rule is that a party
cannot, by varying the form of action, or adopting a different method of presenting his case,
escape the operation of the principle that one and the same cause of action shall not be twice
litigated."43
Be that as it may, while the appeal of the dismissal of Civil Case No. TM-1108 (Annulment of
the Foreclosure Sale) was still pending with the Court of Appeals, GPHI filed on November
23, 2006 a Motion for Leave to Amend Complaint to Conform to the Evidence in Civil Case
No. TM-1022 (Annulment of the Real Estate Mortgage). GPHI stated therein that after the
parties presented their evidence, the fact of foreclosure and the acquisition of the mortgaged
properties by PNB were duly established.44 In the accompanying Amended Complaint in Civil
Case No. TM-1022 (Annulment of the Real Estate Mortgage), GPHI prayed, inter alia, for the
declaration of the nullity of the foreclosure and auction sale of the mortgaged properties. As a
consequence of such an action, the two cases that GPHI filed before the court a quo henceforth
contained an identity of rights asserted and reliefs prayed for, the relief being founded on the
same factual allegations. Thus, any doubt as to the act of GPHI of splitting its cause of action
has since been removed.
WHEREFORE, the petition is GRANTED. The Decision dated September 28, 2007 and the
Resolution dated January 24, 2008 of the Court of Appeals in CA-G.R. CV No. 75108 are
hereby REVERSED and SET ASIDE. The Order dated December 20, 2001 of the Regional
Trial Court of Trece Martires City, Branch 23, in Civil Case No. TM-1108 is
hereby REINSTATED. No costs.
SO ORDERED.

G.R. No. 191388

March 9, 2011

ASIA UNITED BANK, CHRISTINE T. CHAN, and FLORANTE C. DEL

MUNDO, Petitioners,
vs.
GOODLAND COMPANY, INC., Respondent.
DECISION
DEL CASTILLO, J.:
The costly consequence of forum shopping should remind the parties to ever be mindful
against abusing court processes.
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court assailing the
Decision2 dated June 5, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 90114, as well
as its Resolution3 dated February 17, 2010, which denied a reconsideration of the assailed
Decision. The dispositive portion of the appellate courts Decision reads:
WHEREFORE, the appeal is GRANTED and the appealed Order dated March 15, 2007 is
REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the DENIAL of
appellee banks motion to dismiss and directing the REINSTATEMENT of appellants
complaint as well as the REMAND of the case to the trial court for further proceedings.
SO ORDERED.4
Factual Antecedents
Respondent Goodland Company, Inc. (Goodland) executed a Third Party Real Estate
Mortgage (REM) over two parcels of land located in the Municipality of Sta. Rosa, Laguna
and covered by Transfer Certificates of Title (TCT) Nos. 3216725 and 3216736 in favor of
petitioner Asia United Bank (AUB). The mortgage secured the obligation amounting to P250
million of Radiomarine Network, Inc. (RMNI), doing business as Smartnet Philippines, to
AUB. The REM was duly registered on March 8, 2001 in the Registry of Deeds of Calamba,
Laguna.7
Goodland then filed a Complaint8 docketed as Civil Case No. B-6242 before Branch 25 of the
Regional Trial Court (RTC) of Bian, Laguna for the annulment of the REM on the ground
that the same was falsified and done in contravention of the parties verbal agreement
(Annulment Case).
While the Annulment Case was pending, RMNI defaulted in the payment of its obligation to
AUB, prompting the latter to exercise its right under the REM to extrajudicially foreclose the
mortgage. It filed its Application for Extrajudicial Foreclosure of Real Estate Mortgage under
Act No. 3135, as amended with the Office of the Executive Judge of the RTC of Bian,
Laguna on October 19, 2006.9 The mortgaged properties were sold in public auction to AUB
as the highest bidder. It was issued a Certificate of Sale, which was registered with the
Registry of Deeds of Calamba on November 23, 2006.

Before AUB could consolidate its title, Goodland filed on November 28, 2006 another
Complaint10 docketed as Civil Case No. B-7110 before Branch 25 of the RTC of Bian,
Laguna, against AUB and its officers, petitioners Christine Chan and Florante del Mundo.
This Complaint sought to annul the foreclosure sale and to enjoin the consolidation of title in
favor of AUB (Injunction Case). Goodland asserted the alleged falsified nature of the REM as
basis for its prayer for injunction.
A few days later, AUB consolidated its ownership over the foreclosed properties and obtained
new titles, TCT Nos. T-65703111 and 657032,12in its name from the Registry of Deeds of
Calamba.
Petitioners then filed on December 11, 2006 a Motion to Dismiss with Opposition to a
Temporary Restraining Order in the Injunction Case.13 They brought to the trial courts
attention Goodlands forum shopping given the pendency of the Annulment Case. They
argued that the two cases both rely on the alleged falsification of the real estate mortgage as
basis for the reliefs sought.
Ruling of the Regional Trial Court (Injunction Case)
On March 15, 2007, the trial court acted favorably on petitioners motion and dismissed the
Injunction Case with prejudice on the grounds of forum shopping and litis pendentia.14 The
trial court explained that the Injunction Case and the Annulment Case are both founded on the
same transactions, same essential facts and circumstances, and raise substantially the same
issues. The addition of the application for a writ of preliminary injunction does not vary the
similarity between the two cases. The trial court further noted that Goodland could have
prayed for injunctive relief as ancillary remedy in the Annulment Case. Finally, the trial court
stated that any judgment in the Annulment Case regarding the validity of the REM would
constitute res judicata on the Injunction Case.
Ruling of the Court of Appeals15 (Injunction Case)
Goodland appealed16 the same to the CA.
Meanwhile, AUB filed an Ex-Parte Application for Writ of Possession on December 18, 2006,
which was granted on March 15, 2007. The writ was issued on March 26, 2007 and AUB
obtained possession of the foreclosed properties on April 2, 2007.
On June 5, 2009, the CA promulgated its assailed Decision, which ruled in favor of Goodland
and ordered the reinstatement of the Injunction Case in the trial court. 17
The CA rejected petitioners contention that Goodlands appeal raised pure questions of
law,18 which are within the jurisdiction of the Supreme Court under Rule 45. 19 Instead, it
found Goodlands Rule 41 appeal to be proper because it involved both questions of fact and
of law. The CA held that a question of fact existed because petitioners themselves questioned
in their Brief the veracity of Goodlands Certification of Non-Forum Shopping.20
The CA conceded that Goodlands Brief failed to comply with the formal requirements, which
are all grounds for the dismissal of the appeal,21 e.g., failure of the appellant to serve and file

the required number of copies of its brief on all appellees and absence of page references to
the record. However, it relaxed the rules so as to completely resolve the rights and obligations
of the parties. The CA, however, warned Goodland that its future lapses will be dealt with
more severely.22
The CA further ruled against petitioners argument that the delivery of the foreclosed
properties to AUBs possession has rendered Goodlands appeal moot. It explained that the
Injunction Appeal involving the annulment of extrajudicial foreclosure sale can proceed
independently of petitioners application for a writ of possession. 23
The CA then concluded that Goodland was not guilty of forum shopping when it initiated the
Annulment and Injunction Cases. The CA held that the reliefs sought in the two cases were
different. The Annulment Case sought the nullification of the real estate mortgage, while the
Injunction Case sought the nullification of the foreclosure proceedings as well as to enjoin the
consolidation of title in favor of petitioners.24 The CA further held that aside from the
difference in reliefs sought, the two cases were independent of each other because the facts or
evidence that supported their respective causes of action were different. The acts which gave
rise to the Injunction Case (i.e., the extrajudicial foreclosure proceedings) occurred long after
the filing of the Annulment Case.25
The appellate court also held that any decision in either case will not constitute res judicata on
the other. It explained that the validity of the real estate mortgage has no "automatic bearing"
on the validity of the extrajudicial foreclosure proceedings.26
Moreover, according to the CA, the fact that Goodland stated in its Certification of NonForum Shopping in the Injunction Case that the Annulment Case was pending belied the
existence of forum shopping.27
Petitioners filed a Motion for Reconsideration28 on July 2, 2009, which was denied in the
assailed Resolution of February 17, 2010.29
Hence, the instant petition.

(Annulment Case) and B-7110 (Injunction Case).lavvphil The Court ruled that Goodland
committed forum shopping because both cases asserted non-consent to the mortgage as the
only basis for seeking the nullification of the REM, as well as the injunction of the
foreclosure. When Goodland did not notify the trial court of the subsequent filing of the
injunction complaint, Goodland revealed its "furtive intent to conceal the filing of Civil Case
No. B-7110 for the purpose of securing a favorable judgment." Thus, the Court concluded that
the trial court was correct in dismissing the annulment case with prejudice. The dispositive
portion of the said Resolution reads as follows:
WHEREFORE, the petition is hereby GRANTED. The August 11, 2009 decision and
November 10, 2009 resolution of the Court of Appeals in CA-GR CV No. 9126[9] are
REVERSED and SET ASIDE. The August 16, 2007 and December 5, 2007 orders of the
Regional Trial Court of Bian, Laguna, Branch 25 in Civil Case No. B-6242 are
REINSTATED.35
Goodland filed a Motion for Reconsideration36 but the same was denied with finality in the
Courts Resolution dated January 19, 2011.
Issue37
The parties present several issues for the Courts resolution. Most of these address the
procedural infirmities that attended Goodlands appeal to the CA, making such appeal
improper and dismissible. The crux of the case, however, lies in the issue of whether the
successive filing of the Annulment and Injunction Cases constitute forum shopping.
Petitioners Arguments
Petitioners maintain that Goodland is guilty of forum shopping because it sought in the
Annulment Case to annul the REM on the ground that it was falsified and unlawfully filledout; while in the Injunction Case, Goodland wanted to nullify the foreclosure sale arising from
the same REM on the ground that the REM was falsified and unlawfully filled-out. Clearly,
Goodlands complaints rise and fall on the issue of whether the REM is valid. This requires
the presentation of the same evidence in the Annulment and Injunction Cases.38

Ruling in G.R. No. 190231 (Annulment Case)

Goodlands Arguments
Contemporaneously with the proceedings of the Injunction Case, the earlier Annulment Case
(Civil Case No. B-6242) was also dismissed by the trial court on the ground of forum
shopping on August 16, 2007.30
Goodland filed an appeal31 of the dismissal to the CA, which appeal was granted. The CA
ordered on August 11, 2009 the reinstatement of the Annulment Case in the trial court. 32

Goodland counters that it did not commit forum shopping because the causes of action for the
Injunction and Annulment Cases are different. The Annulment Case is for the annulment of
REM; while the Injunction Case is for the annulment of the extrajudicial foreclosure sale.
Goodland argues that any judgment in the Annulment Case, regardless of which party is
successful, would not amount to res judicata in the Injunction Case.39
Our Ruling

AUB then filed with this Court a Petition for Review,33 docketed as G.R. No. 190231 and
entitled Asia United Bank and Abraham Co v. Goodland Company, Inc.
We grant the petition.
On December 8, 2010, the Courts First Division reversed the CA ruling and resolved the
appeal in AUBs favor.34The sole issue resolved by the Court was whether Goodland
committed willful and deliberate forum shopping by filing Civil Case Nos. B-6242

There is forum shopping "when a party repetitively avails of several judicial remedies in
different courts, simultaneously or successively, all substantially founded on the same

transactions and the same essential facts and circumstances, and all raising substantially the
same issues either pending in or already resolved adversely by some other court."40 The
different ways by which forum shopping may be committed were explained in Chua v.
Metropolitan Bank & Trust Company:41

Goodland sought to establish in the Annulment Case. It is also this nullity of the REM which
Goodland asserted in the Injunction Case as basis for seeking to nullify the foreclosure and
enjoin the consolidation of title. Clearly, the trial court cannot decide the Injunction Case
without ruling on the validity of the mortgage, which issue is already within the jurisdiction of
the trial court in the Annulment Case.

Forum shopping can be committed in three ways: (1) filing multiple cases based on the same
cause of action and with the same prayer, the previous case not having been resolved yet
(where the ground for dismissal is litis pendentia); (2) filing multiple cases based on the same
cause of action and the same prayer, the previous case having been finally resolved (where the
ground for dismissal is res judicata); and (3) filing multiple cases based on the same cause of
action, but with different prayers (splitting causes of action, where the ground for dismissal is
also either litis pendentia or res judicata).

The recent development in Asia United Bank v. Goodland Company, Inc., 45 which involved
substantially the same parties and the same issue is another reason for Goodlands loss in the
instant case. The issue that Goodland committed deliberate forum shopping when it
successively filed the Annulment and Injunction Cases against AUB and its officers was
decided with finality therein. This ruling is conclusive on the petitioners and Goodland
considering that they are substantially the same parties in that earlier case.

Common in these types of forum shopping is the identity of the cause of action in the different
cases filed. Cause of action is defined as "the act or omission by which a party violates the
right of another."42

Given our ruling above that the Injunction Case ought to be dismissed for forum shopping,
there is no need to rule further on the procedural infirmities raised by petitioners against
Goodlands appeal.

The cause of action in the earlier Annulment Case is the alleged nullity of the REM (due to its
allegedly falsified or spurious nature) which is allegedly violative of Goodlands right to the
mortgaged property. It serves as the basis for the prayer for the nullification of the REM. The
Injunction Case involves the same cause of action, inasmuch as it also invokes the nullity of
the REM as the basis for the prayer for the nullification of the extrajudicial foreclosure and for
injunction against consolidation of title. While the main relief sought in the Annulment Case
(nullification of the REM) is ostensibly different from the main relief sought in the Injunction
Case (nullification of the extrajudicial foreclosure and injunction against consolidation of
title), the cause of action which serves as the basis for the said reliefs remains the same the
alleged nullity of the REM. Thus, what is involved here is the third way of committing forum
shopping, i.e., filing multiple cases based on the same cause of action, but with different
prayers. As previously held by the Court, there is still forum shopping even if the reliefs
prayed for in the two cases are different, so long as both cases raise substantially the same
issues.43

WHEREFORE, premises considered, the Petition is GRANTED. The June 5, 2009 Decision
of the Court of Appeals and its February 17, 2010 Resolution in CA-G.R. CV No. 90114 are
hereby REVERSED and SET ASIDE. The March 15, 2007 Order of Branch 25 of the
Regional Trial Court of Bian, Laguna DISMISSING Civil Case No. B-7110 is hereby
REINSTATED and AFFIRMED.

There can be no determination of the validity of the extrajudicial foreclosure and the propriety
of injunction in the Injunction Case without necessarily ruling on the validity of the REM,
which is already the subject of the Annulment Case. The identity of the causes of action in the
two cases entails that the validity of the mortgage will be ruled upon in both, and creates a
possibility that the two rulings will conflict with each other. This is precisely what is sought to
be avoided by the rule against forum shopping.
The substantial identity of the two cases remains even if the parties should add different
grounds or legal theories for the nullity of the REM or should alter the designation or form of
the action. The well-entrenched rule is that "a party cannot, by varying the form of action, or
adopting a different method of presenting his case, escape the operation of the principle that
one and the same cause of action shall not be twice litigated."44
The CA ruled that the two cases are different because the events that gave rise to them are
different. The CA rationalized that the Annulment Case was brought about by the execution of
a falsified document, while the Injunction Case arose from AUBs foreclosure based on a
falsified document. The distinction is illusory. The cause of action for both cases is the alleged
nullity of the REM due to its falsified or spurious nature. It is this nullity of the REM which

SO ORDERED.

G.R. No. 156117

May 26, 2005

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
JEREMIAS AND DAVID HERBIETO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari, under Rule 45 of the 1997 Rules of
Civil Procedure, seeking the reversal of the Decision of the Court of Appeals in CA-G.R. CV
No. 67625, dated 22 November 2002,1which affirmed the Judgment of the Municipal Trial
Court (MTC) of Consolacion, Cebu, dated 21 December 1999, 2granting the application for
land registration of the respondents.
Respondents in the present Petition are the Herbieto brothers, Jeremias and David, who filed
with the MTC, on 23 September 1998, a single application for registration of two parcels of
land, Lots No. 8422 and 8423, located in Cabangahan, Consolacion, Cebu (Subject Lots).
They claimed to be owners in fee simple of the Subject Lots, which they purchased from their
parents, spouses Gregorio Herbieto and Isabel Owatan, on 25 June 1976. 3Together with their
application for registration, respondents submitted the following set of documents:
(a) Advance Survey Plan of Lot No. 8422, in the name of respondent Jeremias; and
Advance Survey Plan of Lot No. 8423, in the name of respondent David; 4
(b) The technical descriptions of the Subject Lots;5
(c) Certifications by the Department of Environment and Natural Resources (DENR)
dispensing with the need for Surveyor's Certificates for the Subject Lots;6
(d) Certifications by the Register of Deeds of Cebu City on the absence of
certificates of title covering the Subject Lots;7
(e) Certifications by the Community Environment and Natural Resources Office
(CENRO) of the DENR on its finding that the Subject Lots are alienable and
disposable, by virtue of Forestry Administrative Order No. 4-1063, dated 25 June
1963;8
(f) Certified True Copies of Assessment of Real Property (ARP) No. 941800301831,
in the name of Jeremias, covering Lot No. 8422, issued in 1994; and ARP No.
941800301833, in the name of David, covering Lot No. 8423, also issued in
1994;9 and
(g) Deed of Definite Sale executed on 25 June 1976 by spouses Gregorio Herbieto
and Isabel Owatan selling the Subject Lots and the improvements thereon to their

sons and respondents herein, Jeremias and David, for P1,000. Lot No. 8422 was sold
to Jeremias, while Lot No. 8423 was sold to David.10
On 11 December 1998, the petitioner Republic of the Philippines (Republic) filed an
Opposition to the respondents' application for registration of the Subject Lots arguing that: (1)
Respondents failed to comply with the period of adverse possession of the Subject Lots
required by law; (2) Respondents' muniments of title were not genuine and did not constitute
competent and sufficient evidence of bona fide acquisition of the Subject Lots; and (3) The
Subject Lots were part of the public domain belonging to the Republic and were not subject to
private appropriation.11
The MTC set the initial hearing on 03 September 1999 at 8:30 a.m. 12 All owners of the land
adjoining the Subject Lots were sent copies of the Notice of Initial Hearing. 13 A copy of the
Notice was also posted on 27 July 1999 in a conspicuous place on the Subject Lots, as well as
on the bulletin board of the municipal building of Consolacion, Cebu, where the Subject Lots
were located.14 Finally, the Notice was also published in the Official Gazette on 02 August
199915 and The Freeman Banat News on 19 December 1999.16
During the initial hearing on 03 September 1999, the MTC issued an Order of Special
Default,17 with only petitioner Republic opposing the application for registration of the
Subject Lots. The respondents, through their counsel, proceeded to offer and mark
documentary evidence to prove jurisdictional facts. The MTC commissioned the Clerk of
Court to receive further evidence from the respondents and to submit a Report to the MTC
after 30 days.
On 21 December 1999, the MTC promulgated its Judgment ordering the registration and
confirmation of the title of respondent Jeremias over Lot No. 8422 and of respondent David
over Lot No. 8423. It subsequently issued an Order on 02 February 2000 declaring its
Judgment, dated 21 December 1999, final and executory, and directing the Administrator of
the Land Registration Authority (LRA) to issue a decree of registration for the Subject Lots.18
Petitioner Republic appealed the MTC Judgment, dated 21 December 1999, to the Court of
Appeals.19 The Court of Appeals, in its Decision, dated 22 November 2002, affirmed the
appealed MTC Judgment reasoning thus:
In the case at bar, there can be no question that the land sought to be registered has
been classified as within the alienable and disposable zone since June 25, 1963.
Article 1113 in relation to Article 1137 of the Civil Code, respectively provides that
"All things which are within the commerce of men are susceptible of prescription,
unless otherwise provided. Property of the State or any of its subdivisions of
patrimonial character shall not be the object of prescription" and that "Ownership
and other real rights over immovables also prescribe through uninterrupted adverse
possession thereof for thirty years, without need of title or of good faith."
As testified to by the appellees in the case at bench, their parents already acquired
the subject parcels of lands, subject matter of this application, since 1950 and that
they cultivated the same and planted it with jackfruits, bamboos, coconuts, and other
trees (Judgment dated December 21, 1999, p. 6). In short, it is undisputed that herein
appellees or their predecessors-in-interest had occupied and possessed the subject

land openly, continuously, exclusively, and adversely since 1950. Consequently,

even assuming arguendo that appellees' possession can be reckoned only from June
25, 1963 or from the time the subject lots had been classified as within the alienable
and disposable zone, still the argument of the appellant does not hold water.
As earlier stressed, the subject property, being alienable since 1963 as shown by
CENRO Report dated June 23, 1963, may now be the object of prescription, thus
susceptible of private ownership. By express provision of Article 1137, appellees
are, with much greater right, entitled to apply for its registration, as provided by
Section 14(4) of P.D. 1529 which allows individuals to own land in any manner
provided by law. Again, even considering that possession of appelless should only
be reckoned from 1963, the year when CENRO declared the subject lands alienable,
herein appellees have been possessing the subject parcels of land in open,
continuous, and in the concept of an owner, for 35 years already when they filed the
instant application for registration of title to the land in 1998. As such, this court
finds no reason to disturb the finding of the court a quo.20
The Republic filed the present Petition for the review and reversal of the Decision of the Court
of Appeals, dated 22 November 2002, on the basis of the following arguments:

Addressing first the issue of jurisdiction, this Court finds that the MTC had no jurisdiction to
proceed with and hear the application for registration filed by the respondents but for reasons
different from those presented by petitioner Republic.
A. The misjoinder of causes of action and parties does not affect the jurisdiction of the MTC to
hear and proceed with respondents' application for registration.
Respondents filed a single application for registration of the Subject Lots even though they
were not co-owners. Respondents Jeremias and David were actually seeking the individual
and separate registration of Lots No. 8422 and 8423, respectively.
Petitioner Republic believes that the procedural irregularity committed by the respondents was
fatal to their case, depriving the MTC of jurisdiction to proceed with and hear their application
for registration of the Subject Lots, based on this Court's pronouncement in Director of Lands
v. Court of Appeals,22 to wit:
. . . In view of these multiple omissions which constitute non-compliance with the
above-cited sections of the Act, We rule that said defects have not invested the
Court with the authority or jurisdiction to proceed with the case because the manner
or mode of obtaining jurisdiction as prescribed by the statute which is mandatory
has not been strictly followed, thereby rendering all proceedings utterly null and
void.

First, respondents failed to establish that they and their predecessors-in-interest had been in
open, continuous, and adverse possession of the Subject Lots in the concept of owners since
12 June 1945 or earlier. According to the petitioner Republic, possession of the Subject Lots
prior to 25 June 1963 cannot be considered in determining compliance with the periods of
possession required by law. The Subject Lots were classified as alienable and disposable only
on 25 June 1963, per CENRO's certification. It also alleges that the Court of Appeals, in
applying the 30-year acquisitive prescription period, had overlooked the ruling in Republic v.
Doldol,21 where this Court declared that Commonwealth Act No. 141, otherwise known as the
Public Land Act, as amended and as it is presently phrased, requires that possession of land of
the public domain must be from 12 June 1945 or earlier, for the same to be acquired through
judicial confirmation of imperfect title.

This Court, however, disagrees with petitioner Republic in this regard. This procedural lapse
committed by the respondents should not affect the jurisdiction of the MTC to proceed with
and hear their application for registration of the Subject Lots.

Second, the application for registration suffers from fatal infirmity as the subject of the
application consisted of two parcels of land individually and separately owned by two
applicants. Petitioner Republic contends that it is implicit in the provisions of Presidential
Decree No. 1529, otherwise known as the Property Registration Decree, as amended, that the
application for registration of title to land shall be filed by a single applicant; multiple
applicants may file a single application only in case they are co-owners. While an application
may cover two parcels of land, it is allowed only when the subject parcels of land belong to
the same applicant or applicants (in case the subject parcels of land are co-owned) and are
situated within the same province. Where the authority of the courts to proceed is conferred by
a statute and when the manner of obtaining jurisdiction is mandatory, it must be strictly
complied with or the proceedings will be utterly void. Since the respondents failed to comply
with the procedure for land registration under the Property Registration Decree, the
proceedings held before the MTC is void, as the latter did not acquire jurisdiction over it.

Since the Property Registration Decree failed to provide for such a situation, then this Court
refers to the Rules of Court to determine the proper course of action. Section 34 of the
Property Registration Decree itself provides that, "[t]he Rules of Court shall, insofar as not
inconsistent with the provisions of this Decree, be applicable to land registration and cadastral
cases by analogy or in a suppletory character and whenever practicable and convenient."

I
Jurisdiction

The Property Registration Decree23 recognizes and expressly allows the following situations:
(1) the filing of a single application by several applicants for as long as they are co-owners of
the parcel of land sought to be registered;24 and (2) the filing of a single application for
registration of several parcels of land provided that the same are located within the same
province.25 The Property Registration Decree is silent, however, as to the present situation
wherein two applicants filed a single application for two parcels of land, but are seeking the
separate and individual registration of the parcels of land in their respective names.

Considering every application for land registration filed in strict accordance with the Property
Registration Decree as a single cause of action, then the defect in the joint application for
registration filed by the respondents with the MTC constitutes a misjoinder of causes of action
and parties. Instead of a single or joint application for registration, respondents Jeremias and
David, more appropriately, should have filed separate applications for registration of Lots No.
8422 and 8423, respectively.

Misjoinder of causes of action and parties do not involve a question of jurisdiction of the court
to hear and proceed with the case.26 They are not even accepted grounds for dismissal
thereof.27 Instead, under the Rules of Court, the misjoinder of causes of action and parties
involve an implied admission of the court's jurisdiction. It acknowledges the power of the
court, acting upon the motion of a party to the case or on its own initiative, to order the
severance of the misjoined cause of action, to be proceeded with separately (in case of
misjoinder of causes of action); and/or the dropping of a party and the severance of any claim
against said misjoined party, also to be proceeded with separately (in case of misjoinder of
parties).
The misjoinder of causes of action and parties in the present Petition may have been corrected
by the MTC motu propio or on motion of the petitioner Republic. It is regrettable, however,
that the MTC failed to detect the misjoinder when the application for registration was still
pending before it; and more regrettable that the petitioner Republic did not call the attention of
the MTC to the fact by filing a motion for severance of the causes of action and parties, raising
the issue of misjoinder only before this Court.
B. Respondents, however, failed to comply with the publication requirements mandated by the
Property Registration Decree, thus, the MTC was not invested with jurisdiction as a land
registration court.
Although the misjoinder of causes of action and parties in the present Petition did not affect
the jurisdiction of the MTC over the land registration proceeding, this Court, nonetheless, has
discovered a defect in the publication of the Notice of Initial Hearing, which bars the MTC
from assuming jurisdiction to hear and proceed with respondents' application for registration.
A land registration case is a proceeding in rem,28 and jurisdiction in rem cannot be acquired
unless there be constructive seizure of the land through publication and service of notice.29
Section 23 of the Property Registration Decree requires that the public be given Notice of the
Initial Hearing of the application for land registration by means of (1) publication; (2) mailing;
and (3) posting. Publication of the Notice of Initial Hearing shall be made in the following
manner:
1. By publication.
Upon receipt of the order of the court setting the time for initial hearing, the
Commissioner of Land Registration shall cause a notice of initial hearing to be
published once in the Official Gazette and once in a newspaper of general
circulation in the Philippines: Provided, however, that the publication in the Official
Gazette shall be sufficient to confer jurisdiction upon the court. Said notice shall be
addressed to all persons appearing to have an interest in the land involved including
the adjoining owners so far as known, and "to all whom it may concern." Said notice
shall also require all persons concerned to appear in court at a certain date and time
to show cause why the prayer of said application shall not be granted.
Even as this Court concedes that the aforequoted Section 23(1) of the Property Registration
Decree expressly provides that publication in the Official Gazette shall be sufficient to confer
jurisdiction upon the land registration court, it still affirms its declaration in Director of Lands

v. Court of Appeals30 that publication in a newspaper of general circulation is mandatory for

the land registration court to validly confirm and register the title of the applicant or
applicants. That Section 23 of the Property Registration Decree enumerated and described in
detail the requirements of publication, mailing, and posting of the Notice of Initial Hearing,
then all such requirements, including publication of the Notice in a newspaper of general
circulation, is essential and imperative, and must be strictly complied with. In the same case,
this Court expounded on the reason behind the compulsory publication of the Notice of Initial
Hearing in a newspaper of general circulation, thus
It may be asked why publication in a newspaper of general circulation should be
deemed mandatory when the law already requires notice by publication in the
Official Gazette as well as by mailing and posting, all of which have already been
complied with in the case at hand. The reason is due process and the reality that the
Official Gazette is not as widely read and circulated as newspaper and is oftentimes
delayed in its circulation, such that the notices published therein may not reach the
interested parties on time, if at all. Additionally, such parties may not be owners of
neighboring properties, and may in fact not own any other real estate. In sum, the all
encompassing in rem nature of land registration cases, the consequences of default
orders issued against the whole world and the objective of disseminating the notice
in as wide a manner as possible demand a mandatory construction of the
requirements for publication, mailing and posting.31
In the instant Petition, the initial hearing was set by the MTC, and was in fact held, on 03
September 1999 at 8:30 a.m. While the Notice thereof was printed in the issue of the Official
Gazette, dated 02 August 1999, and officially released on 10 August 1999, it was published
in The Freeman Banat News, a daily newspaper printed in Cebu City and circulated in the
province and cities of Cebu and in the rest of Visayas and Mindanao, only on 19 December
1999, more than three months after the initial hearing.
Indubitably, such publication of the Notice, way after the date of the initial hearing, would
already be worthless and ineffective. Whoever read the Notice as it was published in The
Freeman Banat News and had a claim to the Subject Lots was deprived of due process for it
was already too late for him to appear before the MTC on the day of the initial hearing to
oppose respondents' application for registration, and to present his claim and evidence in
support of such claim. Worse, as the Notice itself states, should the claimant-oppositor fail to
appear before the MTC on the date of initial hearing, he would be in default and would forever
be barred from contesting respondents' application for registration and even the registration
decree that may be issued pursuant thereto. In fact, the MTC did issue an Order of Special
Default on 03 September 1999.
The late publication of the Notice of Initial Hearing in the newspaper of general circulation is
tantamount to no publication at all, having the same ultimate result. Owing to such defect in
the publication of the Notice, the MTC failed to constructively seize the Subject Lots and to
acquire jurisdiction over respondents' application for registration thereof. Therefore, the MTC
Judgment, dated 21 December 1999, ordering the registration and confirmation of the title of
respondents Jeremias and David over Lots No. 8422 and 8423, respectively; as well as the
MTC Order, dated 02 February 2000, declaring its Judgment of 21 December 1999 final and
executory, and directing the LRA Administrator to issue a decree of registration for the
Subject Lots, are both null and void for having been issued by the MTC without jurisdiction.

II
Period of Possession
Respondents failed to comply with the required period of possession of the Subject Lots for the
judicial confirmation or legalization of imperfect or incomplete title.
While this Court has already found that the MTC did not have jurisdiction to hear and proceed
with respondents' application for registration, this Court nevertheless deems it necessary to
resolve the legal issue on the required period of possession for acquiring title to public land.
Respondents' application filed with the MTC did not state the statutory basis for their title to
the Subject Lots. They only alleged therein that they obtained title to the Subject Lots by
purchase from their parents, spouses Gregorio Herbieto and Isabel Owatan, on 25 June 1976.
Respondent Jeremias, in his testimony, claimed that his parents had been in possession of the
Subject Lots in the concept of an owner since 1950.32
Yet, according to the DENR-CENRO Certification, submitted by respondents themselves, the
Subject Lots are "within Alienable and Disposable, Block I, Project No. 28 per LC Map No.
2545 of Consolacion, Cebu certified under Forestry Administrative Order No. 4-1063, dated
June 25, 1963. Likewise, it is outside Kotkot-Lusaran Mananga Watershed Forest Reservation
per Presidential Proclamation No. 932 dated June 29, 1992."33 The Subject Lots are thus
clearly part of the public domain, classified as alienable and disposable as of 25 June 1963.
As already well-settled in jurisprudence, no public land can be acquired by private persons
without any grant, express or implied, from the government; 34 and it is indispensable that the
person claiming title to public land should show that his title was acquired from the State or
any other mode of acquisition recognized by law.35
The Public Land Act, as amended, governs lands of the public domain, except timber and
mineral lands, friar lands, and privately-owned lands which reverted to the State.36 It explicitly
enumerates the means by which public lands may be disposed, as follows:
(1) For homestead settlement;
(2) By sale;
(3) By lease;
(4) By confirmation of imperfect or incomplete titles;
(a) By judicial legalization; or
(b) By administrative legalization (free patent).37
Each mode of disposition is appropriately covered by separate chapters of the Public Land Act
because there are specific requirements and application procedure for every mode. 38 Since

respondents herein filed their application before the MTC,39 then it can be reasonably inferred
that they are seeking the judicial confirmation or legalization of their imperfect or incomplete
title over the Subject Lots.
Judicial confirmation or legalization of imperfect or incomplete title to land, not exceeding
144 hectares,40 may be availed of by persons identified under Section 48 of the Public Land
Act, as amended by Presidential Decree No. 1073, which reads
Section 48. The following-described citizens of the Philippines, occupying lands of
the public domain or claiming to own any such lands or an interest therein, but
whose titles have not been perfected or completed, may apply to the Court of First
Instance of the province where the land is located for confirmation of their claims
and the issuance of a certificate of title thereafter, under the Land Registration Act,
to wit:
(a) [Repealed by Presidential Decree No. 1073].
(b) Those who by themselves or through their predecessors-in-interest
have been in open, continuous, exclusive, and notorious possession and
occupation of agricultural lands of the public domain, under a bona
fide claim of acquisition of ownership, since June 12, 1945, or earlier,
immediately preceding the filing of the applications for confirmation of
title, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a
Government grant and shall be entitled to a certificate of title under the
provisions of this chapter.
(c) Members of the national cultural minorities who by themselves or
through their predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of lands of the public
domain suitable to agriculture whether disposable or not, under a bona
fide claim of ownership since June 12, 1945 shall be entitled to the rights
granted in subsection (b) hereof.
Not being members of any national cultural minorities, respondents may only be entitled to
judicial confirmation or legalization of their imperfect or incomplete title under Section 48(b)
of the Public Land Act, as amended. Section 48(b), as amended, now requires adverse
possession of the land since 12 June 1945 or earlier. In the present Petition, the Subject Lots
became alienable and disposable only on 25 June 1963. Any period of possession prior to the
date when the Subject Lots were classified as alienable and disposable is inconsequential and
should be excluded from the computation of the period of possession; such possession can
never ripen into ownership and unless the land had been classified as alienable and disposable,
the rules on confirmation of imperfect title shall not apply thereto. 41 It is very apparent then
that respondents could not have complied with the period of possession required by Section
48(b) of the Public Land Act, as amended, to acquire imperfect or incomplete title to the
Subject Lots that may be judicially confirmed or legalized.
The confirmation of respondents' title by the Court of Appeals was based on the erroneous
supposition that respondents were claiming title to the Subject Lots under the Property

Registration Decree. According to the Decision of the Court of Appeals, dated 22 November
2002, Section 14(4) of the Property Registration Decree allows individuals to own land in any
other manner provided by law. It then ruled that the respondents, having possessed the Subject
Lots, by themselves and through their predecessors-in-interest, since 25 June 1963 to 23
September 1998, when they filed their application, have acquired title to the Subject Lots by
extraordinary prescription under Article 1113, in relation to Article 1137, both of the Civil
Code.42
The Court of Appeals overlooked the difference between the Property Registration Decree and
the Public Land Act. Under the Property Registration Decree, there already exists a title which
is confirmed by the court; while under the Public Land Act, the presumption always is that the
land applied for pertains to the State, and that the occupants and possessors only claim an
interest in the same by virtue of their imperfect title or continuous, open, and notorious
possession.43 As established by this Court in the preceding paragraphs, the Subject Lots
respondents wish to register are undoubtedly alienable and disposable lands of the public
domain and respondents may have acquired title thereto only under the provisions of the
Public Land Act.
However, it must be clarified herein that even though respondents may acquire imperfect or
incomplete title to the Subject Lots under the Public Land Act, their application for judicial
confirmation or legalization thereof must be in accordance with the Property Registration
Decree, for Section 50 of the Public Land Act reads
SEC. 50. Any person or persons, or their legal representatives or successors in right,
claiming any lands or interest in lands under the provisions of this chapter, must in
every case present an application to the proper Court of First Instance, praying that
the validity of the alleged title or claim be inquired into and that a certificate of title
be issued to them under the provisions of the Land Registration Act. 44
Hence, respondents' application for registration of the Subject Lots must have complied with
the substantial requirements under Section 48(b) of the Public Land Act and the procedural
requirements under the Property Registration Decree.
Moreover, provisions of the Civil Code on prescription of ownership and other real rights
apply in general to all types of land, while the Public Land Act specifically governs lands of
the public domain. Relative to one another, the Public Land Act may be considered a special
law45 that must take precedence over the Civil Code, a general law. It is an established rule of
statutory construction that between a general law and a special law, the special law prevails
Generalia specialibus non derogant.46
WHEREFORE, based on the foregoing, the instant Petition is GRANTED. The Decision of
the Court of Appeals in CA-G.R. CV No. 67625, dated 22 November 2002, is REVERSED.
The Judgment of the MTC of Consolacion, Cebu in LRC Case No. N-75, dated 21 December
1999, and its Order, dated 02 February 2000 are declared NULL AND VOID. Respondents'
application for registration is DISMISSED.
SO ORDERED.
G.R. No. 159912

August 17, 2007

UNITED COCONUT PLANTERS BANK, Petitioner,

vs.
SPOUSES SAMUEL and ODETTE BELUSO, Respondents.

97-00363-1

11 December 1997

28 February 1998

P 200,000

98-00002-4

2 January 1998

28 February 1998

P 150,000

DECISION

However, the spouses Beluso alleged that the amounts covered by these last two promissory
notes were never released or credited to their account and, thus, claimed that the principal
indebtedness was only P2 Million.

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, which seeks to
annul the Court of Appeals Decision1 dated 21 January 2003 and its Resolution2 dated 9
September 2003 in CA-G.R. CV No. 67318. The assailed Court of Appeals Decision and
Resolution affirmed in turn the Decision3 dated 23 March 2000 and Order4 dated 8 May 2000
of the Regional Trial Court (RTC), Branch 65 of Makati City, in Civil Case No. 99-314,
declaring void the interest rate provided in the promissory notes executed by the respondents
Spouses Samuel and Odette Beluso (spouses Beluso) in favor of petitioner United Coconut
Planters Bank (UCPB).
PN #
The procedural and factual antecedents of this case are as follows:
97-00363-1
97-00366-6
On 16 April 1996, UCPB granted the spouses Beluso a Promissory Notes Line under a Credit
Agreement whereby the latter could avail from the former credit of up to a maximum amount
of P1.2 Million pesos for a term ending on 30 April 1997. The spouses Beluso constituted,
other than their promissory notes, a real estate mortgage over parcels of land in Roxas City,97-00368-2
covered by Transfer Certificates of Title No. T-31539 and T-27828, as additional security for
the obligation. The Credit Agreement was subsequently amended to increase the amount of98-00002-4
the
Promissory Notes Line to a maximum of P2.35 Million pesos and to extend the term thereof to
28 February 1998.
The spouses Beluso availed themselves of the credit line under the following Promissory
Notes:

Date of PN

Maturity Date

Amount Secured

4-96-00083-3

29 April 1996

27 August 1996

P 700,000

4-96-00085-0

2 May 1996

30 August 1996

P 500,000

4-96-000292-2

20 November 1996

20 March 1997

P 800,000

The three promissory notes were renewed several times. On 30 April 1997, the payment of the
principal and interest of the latter two promissory notes were debited from the spouses
Belusos account with UCPB; yet, a consolidated loan for P1.3 Million was again released to
the spouses Beluso under one promissory note with a due date of 28 February 1998.
To completely avail themselves of the P2.35 Million credit line extended to them by UCPB,
the spouses Beluso executed two more promissory notes for a total of P350,000.00:
Date of PN

Maturity Date

Amount Secured

In any case, UCPB applied interest rates on the different promissory notes ranging from 18%
to 34%. From 1996 to February 1998 the spouses Beluso were able to pay the total sum
of P763,692.03.
From 28 February 1998 to 10 June 1998, UCPB continued to charge interest and penalty on
the obligations of the spouses Beluso, as follows:
Amount Secured

Interest

Penalty

Total

P 200,000

31%

36%

P 225,313.24

P 700,000

30.17%
(7 days)

32.786%
(102 days)

P 795,294.72

P 1,300,000

28%
(2 days)

30.41%
(102 days)

P 1,462,124.54

P 150,000

33%
(102 days)

36%

P 170,034.71

The spouses Beluso, however, failed to make any payment of the foregoing amounts.
On 2 September 1998, UCPB demanded that the spouses Beluso pay their total obligation
of P2,932,543.00 plus 25% attorneys fees, but the spouses Beluso failed to comply therewith.
On 28 December 1998, UCPB foreclosed the properties mortgaged by the spouses Beluso to
secure their credit line, which, by that time, already ballooned to P3,784,603.00.
On 9 February 1999, the spouses Beluso filed a Petition for Annulment, Accounting and
Damages against UCPB with the RTC of Makati City.
On 23 March 2000, the RTC ruled in favor of the spouses Beluso, disposing of the case as
follows:
PREMISES CONSIDERED, judgment is hereby rendered declaring the interest rate used by
[UCPB] void and the foreclosure and Sheriffs Certificate of Sale void. [UCPB] is hereby
ordered to return to [the spouses Beluso] the properties subject of the foreclosure; to pay [the
spouses Beluso] the amount of P50,000.00 by way of attorneys fees; and to pay the costs of
suit. [The spouses Beluso] are hereby ordered to pay [UCPB] the sum ofP1,560,308.00.5

On 8 May 2000, the RTC denied UCPBs Motion for Reconsideration, 6 prompting UCPB to
appeal the RTC Decision with the Court of Appeals. The Court of Appeals affirmed the RTC
Decision, to wit:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS

AND REVERSIBLE ERROR WHEN IT FAILED TO ORDER THE DISMISSAL OF THE
CASE BECAUSE THE RESPONDENTS ARE GUILTY OF FORUM SHOPPING8

WHEREFORE, premises considered, the decision dated March 23, 2000 of the Regional Trial
Court, Branch 65, Makati City in Civil Case No. 99-314 is hereby AFFIRMED subject to the
modification that defendant-appellant UCPB is not liable for attorneys fees or the costs of
suit.7

Validity of the Interest Rates

On 9 September 2003, the Court of Appeals denied UCPBs Motion for Reconsideration for
lack of merit. UCPB thus filed the present petition, submitting the following issues for our
resolution:
I
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL
COURT WHICH DECLARED VOID THE PROVISION ON INTEREST RATE AGREED
UPON BETWEEN PETITIONER AND RESPONDENTS
II
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
AND REVERSIBLE ERROR WHEN IT AFFIRMED THE COMPUTATION BY THE
TRIAL COURT OF RESPONDENTS INDEBTEDNESS AND ORDERED
RESPONDENTS TO PAY PETITIONER THE AMOUNT OF ONLY ONE MILLION FIVE
HUNDRED SIXTY THOUSAND THREE HUNDRED EIGHT PESOS (P1,560,308.00)
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL
COURT WHICH ANNULLED THE FORECLOSURE BY PETITIONER OF THE
SUBJECT PROPERTIES DUE TO AN ALLEGED "INCORRECT COMPUTATION" OF
RESPONDENTS INDEBTEDNESS
IV
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS
AND REVERSIBLE ERROR WHEN IT AFFIRMED THE DECISION OF THE TRIAL
COURT WHICH FOUND PETITIONER LIABLE FOR VIOLATION OF THE TRUTH IN
LENDING ACT
V

The Court of Appeals held that the imposition of interest in the following provision found in
the promissory notes of the spouses Beluso is void, as the interest rates and the bases therefor
were determined solely by petitioner UCPB:
FOR VALUE RECEIVED, I, and/or We, on or before due date, SPS. SAMUEL AND
ODETTE BELUSO (BORROWER), jointly and severally promise to pay to UNITED
COCONUT PLANTERS BANK (LENDER) or order at UCPB Bldg., Makati Avenue, Makati
City, Philippines, the sum of ______________ PESOS, (P_____), Philippine Currency, with
interest thereon at the rate indicative of DBD retail rate or as determined by the Branch Head. 9
UCPB asserts that this is a reversible error, and claims that while the interest rate was not
numerically quantified in the face of the promissory notes, it was nonetheless categorically
fixed, at the time of execution thereof, at the "rate indicative of the DBD retail rate." UCPB
contends that said provision must be read with another stipulation in the promissory notes
subjecting to review the interest rate as fixed:
The interest rate shall be subject to review and may be increased or decreased by the LENDER
considering among others the prevailing financial and monetary conditions; or the rate of
interest and charges which other banks or financial institutions charge or offer to charge for
similar accommodations; and/or the resulting profitability to the LENDER after due
consideration of all dealings with the BORROWER.10
In this regard, UCPB avers that these are valid reference rates akin to a "prevailing rate" or
"prime rate" allowed by this Court in Polotan v. Court of Appeals.11 Furthermore, UCPB
argues that even if the proviso "as determined by the branch head" is considered void, such a
declaration would not ipso facto render the connecting clause "indicative of DBD retail rate"
void in view of the separability clause of the Credit Agreement, which reads:
Section 9.08 Separability Clause. If any one or more of the provisions contained in this
AGREEMENT, or documents executed in connection herewith shall be declared invalid,
illegal or unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired. 12
According to UCPB, the imposition of the questioned interest rates did not infringe on the
principle of mutuality of contracts, because the spouses Beluso had the liberty to choose
whether or not to renew their credit line at the new interest rates pegged by petitioner. 13 UCPB
also claims that assuming there was any defect in the mutuality of the contract at the time of
its inception, such defect was cured by the subsequent conduct of the spouses Beluso in
availing themselves of the credit line from April 1996 to February 1998 without airing any
protest with respect to the interest rates imposed by UCPB. According to UCPB, therefore, the
spouses Beluso are in estoppel.14
We agree with the Court of Appeals, and find no merit in the contentions of UCPB.

Article 1308 of the Civil Code provides:

Art. 1308. The contract must bind both contracting parties; its validity or compliance cannot
be left to the will of one of them.
We applied this provision in Philippine National Bank v. Court of Appeals,15 where we held:
In order that obligations arising from contracts may have the force of law between the parties,
there must be mutuality between the parties based on their essential equality. A contract
containing a condition which makes its fulfillment dependent exclusively upon the
uncontrolled will of one of the contracting parties, is void (Garcia vs. Rita Legarda, Inc., 21
SCRA 555). Hence, even assuming that the P1.8 million loan agreement between the PNB and
the private respondent gave the PNB a license (although in fact there was none) to increase the
interest rate at will during the term of the loan, that license would have been null and void for
being violative of the principle of mutuality essential in contracts. It would have invested the
loan agreement with the character of a contract of adhesion, where the parties do not bargain
on equal footing, the weaker party's (the debtor) participation being reduced to the alternative
"to take it or leave it" (Qua vs. Law Union & Rock Insurance Co., 95 Phil. 85). Such a
contract is a veritable trap for the weaker party whom the courts of justice must protect against
abuse and imposition.

The interest rate shall be subject to review and may be increased or decreased by the LENDER
considering among others the prevailing financial and monetary conditions; or the rate of
interest and charges which other banks or financial institutions charge or offer to charge for
similar accommodations; and/or the resulting profitability to the LENDER after due
consideration of all dealings with the BORROWER.17
It should be pointed out that the authority to review the interest rate was given UCPB alone as
the lender. Moreover, UCPB may apply the considerations enumerated in this provision as it
wishes. As worded in the above provision, UCPB may give as much weight as it desires to
each of the following considerations: (1) the prevailing financial and monetary condition; (2)
the rate of interest and charges which other banks or financial institutions charge or offer to
charge for similar accommodations; and/or (3) the resulting profitability to the LENDER
(UCPB) after due consideration of all dealings with the BORROWER (the spouses Beluso).
Again, as in the case of the interest rate provision, there is no fixed margin above or below
these considerations.
In view of the foregoing, the Separability Clause cannot save either of the two options of
UCPB as to the interest to be imposed, as both options violate the principle of mutuality of
contracts.
UCPB likewise failed to convince us that the spouses Beluso were in estoppel.

The provision stating that the interest shall be at the "rate indicative of DBD retail rate or as
determined by the Branch Head" is indeed dependent solely on the will of petitioner UCPB.
Under such provision, petitioner UCPB has two choices on what the interest rate shall be: (1) a
rate indicative of the DBD retail rate; or (2) a rate as determined by the Branch Head. As
UCPB is given this choice, the rate should be categorically determinable in both choices. If
either of these two choices presents an opportunity for UCPB to fix the rate at will, the bank
can easily choose such an option, thus making the entire interest rate provision violative of the
principle of mutuality of contracts.
Not just one, but rather both, of these choices are dependent solely on the will of UCPB.
Clearly, a rate "as determined by the Branch Head" gives the latter unfettered discretion on
what the rate may be. The Branch Head may choose any rate he or she desires. As regards the
rate "indicative of the DBD retail rate," the same cannot be considered as valid for being akin
to a "prevailing rate" or "prime rate" allowed by this Court in Polotan. The interest rate in
Polotan reads:
The Cardholder agrees to pay interest per annum at 3% plus the prime rate of Security Bank
and Trust Company. x x x.16
In this provision in Polotan, there is a fixed margin over the reference rate: 3%. Thus, the
parties can easily determine the interest rate by applying simple arithmetic. On the other hand,
the provision in the case at bar does not specify any margin above or below the DBD retail
rate. UCPB can peg the interest at any percentage above or below the DBD retail rate, again
giving it unfettered discretion in determining the interest rate.
The stipulation in the promissory notes subjecting the interest rate to review does not render
the imposition by UCPB of interest rates on the obligations of the spouses Beluso valid.
According to said stipulation:

Estoppel cannot be predicated on an illegal act. As between the parties to a contract, validity
cannot be given to it by estoppel if it is prohibited by law or is against public policy. 18
The interest rate provisions in the case at bar are illegal not only because of the provisions of
the Civil Code on mutuality of contracts, but also, as shall be discussed later, because they
violate the Truth in Lending Act. Not disclosing the true finance charges in connection with
the extensions of credit is, furthermore, a form of deception which we cannot countenance. It
is against the policy of the State as stated in the Truth in Lending Act:
Sec. 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its
citizens from a lack of awareness of the true cost of credit to the user by assuring a full
disclosure of such cost with a view of preventing the uninformed use of credit to the detriment
of the national economy.19
Moreover, while the spouses Beluso indeed agreed to renew the credit line, the offending
provisions are found in the promissory notes themselves, not in the credit line. In fixing the
interest rates in the promissory notes to cover the renewed credit line, UCPB still reserved to
itself the same two options (1) a rate indicative of the DBD retail rate; or (2) a rate as
determined by the Branch Head.
Error in Computation
UCPB asserts that while both the RTC and the Court of Appeals voided the interest rates
imposed by UCPB, both failed to include in their computation of the outstanding obligation of
the spouses Beluso the legal rate of interest of 12% per annum. Furthermore, the penalty
charges were also deleted in the decisions of the RTC and the Court of Appeals. Section 2.04,
Article II on "Interest and other Bank Charges" of the subject Credit Agreement, provides:

Section 2.04 Penalty Charges. In addition to the interest provided for in Section 2.01 of this
ARTICLE, any principal obligation of the CLIENT hereunder which is not paid when due
shall be subject to a penalty charge of one percent (1%) of the amount of such obligation per
month computed from due date until the obligation is paid in full. If the bank accelerates teh
(sic) payment of availments hereunder pursuant to ARTICLE VIII hereof, the penalty charge
shall be used on the total principal amount outstanding and unpaid computed from the date of
acceleration until the obligation is paid in full.20

2. Front-end Fee, Origination Fee, Attorneys Fee and other expenses of collection;
3. Penalty charges;
4. Past due interest;
5. Principal amortization/Payment in arrears;

Paragraph 4 of the promissory notes also states:

6. Advance interest;
In case of non-payment of this Promissory Note (Note) at maturity, I/We, jointly and
severally, agree to pay an additional sum equivalent to twenty-five percent (25%) of the total
due on the Note as attorneys fee, aside from the expenses and costs of collection whether
actually incurred or not, and a penalty charge of one percent (1%) per month on the total
amount due and unpaid from date of default until fully paid. 21
Petitioner further claims that it is likewise entitled to attorneys fees, pursuant to Section 9.06
of the Credit Agreement, thus:
If the BANK shall require the services of counsel for the enforcement of its rights under this
AGREEMENT, the Note(s), the collaterals and other related documents, the BANK shall be
entitled to recover attorneys fees equivalent to not less than twenty-five percent (25%) of the
total amounts due and outstanding exclusive of costs and other expenses. 22
Another alleged computational error pointed out by UCPB is the negation of the
Compounding Interest agreed upon by the parties under Section 2.02 of the Credit Agreement:
Section 2.02 Compounding Interest. Interest not paid when due shall form part of the principal
and shall be subject to the same interest rate as herein stipulated. 23 and paragraph 3 of the
subject promissory notes:
Interest not paid when due shall be added to, and become part of the principal and shall
likewise bear interest at the same rate.24
UCPB lastly avers that the application of the spouses Belusos payments in the disputed
computation does not reflect the parties agreement.1avvphi1 The RTC deducted the payment
made by the spouses Beluso amounting toP763,693.00 from the principal of P2,350,000.00.
This was allegedly inconsistent with the Credit Agreement, as well as with the agreement of
the parties as to the facts of the case. In paragraph 7 of the spouses Belusos Manifestation and
Motion on Proposed Stipulation of Facts and Issues vis--vis UCPBs Manifestation, the
parties agreed that the amount of P763,693.00 was applied to the interest and not to the
principal, in accord with Section 3.03, Article II of the Credit Agreement on "Order of the
Application of Payments," which provides:
Section 3.03 Application of Payment. Payments made by the CLIENT shall be applied in
accordance with the following order of preference:
1. Accounts receivable and other out-of-pocket expenses

7. Outstanding balance; and

8. All other obligations of CLIENT to the BANK, if any. 25
Thus, according to UCPB, the interest charges, penalty charges, and attorneys fees had been
erroneously excluded by the RTC and the Court of Appeals from the computation of the total
amount due and demandable from spouses Beluso.
The spouses Belusos defense as to all these issues is that the demand made by UCPB is for a
considerably bigger amount and, therefore, the demand should be considered void. There
being no valid demand, according to the spouses Beluso, there would be no default, and
therefore the interests and penalties would not commence to run. As it was likewise improper
to foreclose the mortgaged properties or file a case against the spouses Beluso, attorneys fees
were not warranted.
We agree with UCPB on this score. Default commences upon judicial or extrajudicial
demand.26 The excess amount in such a demand does not nullify the demand itself, which is
valid with respect to the proper amount. A contrary ruling would put commercial transactions
in disarray, as validity of demands would be dependent on the exactness of the computations
thereof, which are too often contested.
There being a valid demand on the part of UCPB, albeit excessive, the spouses Beluso are
considered in default with respect to the proper amount and, therefore, the interests and the
penalties began to run at that point.
As regards the award of 12% legal interest in favor of petitioner, the RTC actually recognized
that said legal interest should be imposed, thus: "There being no valid stipulation as to interest,
the legal rate of interest shall be charged."27 It seems that the RTC inadvertently overlooked its
non-inclusion in its computation.
The spouses Beluso had even originally asked for the RTC to impose this legal rate of interest
in both the body and the prayer of its petition with the RTC:
12. Since the provision on the fixing of the rate of interest by the sole will of the respondent
Bank is null and void, only the legal rate of interest which is 12% per annum can be legally
charged and imposed by the bank, which would amount to only about P599,000.00 since 1996
up to August 31, 1998.

xxxx
WHEREFORE, in view of the foregoing, petiitoners pray for judgment or order:
xxxx
2. By way of example for the public good against the Banks taking unfair advantage of the
weaker party to their contract, declaring the legal rate of 12% per annum, as the imposable rate
of interest up to February 28, 1999 on the loan of 2.350 million. 28
All these show that the spouses Beluso had acknowledged before the RTC their obligation to
pay a 12% legal interest on their loans. When the RTC failed to include the 12% legal interest
in its computation, however, the spouses Beluso merely defended in the appellate courts this
non-inclusion, as the same was beneficial to them. We see, however, sufficient basis to impose
a 12% legal interest in favor of petitioner in the case at bar, as what we have voided is merely
the stipulated rate of interest and not the stipulation that the loan shall earn interest.
We must likewise uphold the contract stipulation providing the compounding of interest. The
provisions in the Credit Agreement and in the promissory notes providing for the
compounding of interest were neither nullified by the RTC or the Court of Appeals, nor
assailed by the spouses Beluso in their petition with the RTC. The compounding of interests
has furthermore been declared by this Court to be legal. We have held in Tan v. Court of
Appeals,29 that:
Without prejudice to the provisions of Article 2212, interest due and unpaid shall not earn
interest. However, the contracting parties may by stipulation capitalize the interest due and
unpaid, which as added principal, shall earn new interest.
As regards the imposition of penalties, however, although we are likewise upholding the
imposition thereof in the contract, we find the rate iniquitous. Like in the case of grossly
excessive interests, the penalty stipulated in the contract may also be reduced by the courts if it
is iniquitous or unconscionable.30
We find the penalty imposed by UCPB, ranging from 30.41% to 36%, to be iniquitous
considering the fact that this penalty is already over and above the compounded interest
likewise imposed in the contract. If a 36% interest in itself has been declared unconscionable
by this Court,31 what more a 30.41% to 36% penalty, over and above the payment of
compounded interest? UCPB itself must have realized this, as it gave us a sample computation
of the spouses Belusos obligation if both the interest and the penalty charge are reduced to
12%.
As regards the attorneys fees, the spouses Beluso can actually be liable therefor even if there
had been no demand. Filing a case in court is the judicial demand referred to in Article
116932 of the Civil Code, which would put the obligor in delay.
The RTC, however, also held UCPB liable for attorneys fees in this case, as the spouses
Beluso were forced to litigate the issue on the illegality of the interest rate provision of the
promissory notes. The award of attorneys fees, it must be recalled, falls under the sound

discretion of the court.33 Since both parties were forced to litigate to protect their respective
rights, and both are entitled to the award of attorneys fees from the other, practical reasons
dictate that we set off or compensate both parties liabilities for attorneys fees. Therefore,
instead of awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion
of the award of attorneys fees to the spouses Beluso.
In sum, we hold that spouses Beluso should still be held liable for a compounded legal interest
of 12% per annum and a penalty charge of 12% per annum. We also hold that, instead of
awarding attorneys fees in favor of petitioner, we shall merely affirm the deletion of the
award of attorneys fees to the spouses Beluso.
Annulment of the Foreclosure Sale
Properties of spouses Beluso had been foreclosed, titles to which had already been
consolidated on 19 February 2001 and 20 March 2001 in the name of UCPB, as the spouses
Beluso failed to exercise their right of redemption which expired on 25 March 2000. The
RTC, however, annulled the foreclosure of mortgage based on an alleged incorrect
computation of the spouses Belusos indebtedness.
UCPB alleges that none of the grounds for the annulment of a foreclosure sale are present in
the case at bar. Furthermore, the annulment of the foreclosure proceedings and the certificates
of sale were mooted by the subsequent issuance of new certificates of title in the name of said
bank. UCPB claims that the spouses Belusos action for annulment of foreclosure constitutes a
collateral attack on its certificates of title, an act proscribed by Section 48 of Presidential
Decree No. 1529, otherwise known as the Property Registration Decree, which provides:
Section 48. Certificate not subject to collateral attack. A certificate of title shall not be
subject to collateral attack. It cannot be altered, modified or cancelled except in a direct
proceeding in accordance with law.
The spouses Beluso retort that since they had the right to refuse payment of an excessive
demand on their account, they cannot be said to be in default for refusing to pay the same.
Consequently, according to the spouses Beluso, the "enforcement of such illegal and
overcharged demand through foreclosure of mortgage" should be voided.
We agree with UCPB and affirm the validity of the foreclosure proceedings. Since we already
found that a valid demand was made by UCPB upon the spouses Beluso, despite being
excessive, the spouses Beluso are considered in default with respect to the proper amount of
their obligation to UCPB and, thus, the property they mortgaged to secure such amounts may
be foreclosed. Consequently, proceeds of the foreclosure sale should be applied to the extent
of the amounts to which UCPB is rightfully entitled.
As argued by UCPB, none of the grounds for the annulment of a foreclosure sale are present in
this case. The grounds for the proper annulment of the foreclosure sale are the following: (1)
that there was fraud, collusion, accident, mutual mistake, breach of trust or misconduct by the
purchaser; (2) that the sale had not been fairly and regularly conducted; or (3) that the price
was inadequate and the inadequacy was so great as to shock the conscience of the court. 34
Liability for Violation of Truth in Lending Act

The RTC, affirmed by the Court of Appeals, imposed a fine of P26,000.00 for UCPBs alleged
violation of Republic Act No. 3765, otherwise known as the Truth in Lending Act.
UCPB challenges this imposition, on the argument that Section 6(a) of the Truth in Lending
Act which mandates the filing of an action to recover such penalty must be made under the
following circumstances:
Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to
any person any information in violation of this Act or any regulation issued thereunder shall
be liable to such person in the amount of P100 or in an amount equal to twice the finance
charge required by such creditor in connection with such transaction, whichever is greater,
except that such liability shall not exceed P2,000 on any credit transaction. Action to recover
such penalty may be brought by such person within one year from the date of the occurrence
of the violation, in any court of competent jurisdiction. x x x (Emphasis ours.)
According to UCPB, the Court of Appeals even stated that "[a]dmittedly the original
complaint did not explicitly allege a violation of the Truth in Lending Act and no action to
formally admit the amended petition [which expressly alleges violation of the Truth in
Lending Act] was made either by [respondents] spouses Beluso and the lower court. x x x." 35
UCPB further claims that the action to recover the penalty for the violation of the Truth in
Lending Act had been barred by the one-year prescriptive period provided for in the Act.
UCPB asserts that per the records of the case, the latest of the subject promissory notes had
been executed on 2 January 1998, but the original petition of the spouses Beluso was filed
before the RTC on 9 February 1999, which was after the expiration of the period to file the
same on 2 January 1999.
On the matter of allegation of the violation of the Truth in Lending Act, the Court of Appeals
ruled:
Admittedly the original complaint did not explicitly allege a violation of the Truth in Lending
Act and no action to formally admit the amended petition was made either by [respondents]
spouses Beluso and the lower court. In such transactions, the debtor and the lending
institutions do not deal on an equal footing and this law was intended to protect the public
from hidden or undisclosed charges on their loan obligations, requiring a full disclosure
thereof by the lender. We find that its infringement may be inferred or implied from
allegations that when [respondents] spouses Beluso executed the promissory notes, the interest
rate chargeable thereon were left blank. Thus, [petitioner] UCPB failed to discharge its duty to
disclose in full to [respondents] Spouses Beluso the charges applicable on their loans. 36
We agree with the Court of Appeals. The allegations in the complaint, much more than the
title thereof, are controlling. Other than that stated by the Court of Appeals, we find that the
allegation of violation of the Truth in Lending Act can also be inferred from the same
allegation in the complaint we discussed earlier:
b.) In unilaterally imposing an increased interest rates (sic) respondent bank has relied on the
provision of their promissory note granting respondent bank the power to unilaterally fix the
interest rates, which rate was not determined in the promissory note but was left solely to the
will of the Branch Head of the respondent Bank, x x x. 37

The allegation that the promissory notes grant UCPB the power to unilaterally fix the interest
rates certainly also means that the promissory notes do not contain a "clear statement in
writing" of "(6) the finance charge expressed in terms of pesos and centavos; and (7) the
percentage that the finance charge bears to the amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of the obligation."38 Furthermore, the spouses
Belusos prayer "for such other reliefs just and equitable in the premises" should be deemed to
include the civil penalty provided for in Section 6(a) of the Truth in Lending Act.
UCPBs contention that this action to recover the penalty for the violation of the Truth in
Lending Act has already prescribed is likewise without merit. The penalty for the violation of
the act is P100 or an amount equal to twice the finance charge required by such creditor in
connection with such transaction, whichever is greater, except that such liability shall not
exceed P2,000.00 on any credit transaction.39 As this penalty depends on the finance charge
required of the borrower, the borrowers cause of action would only accrue when such finance
charge is required. In the case at bar, the date of the demand for payment of the finance charge
is 2 September 1998, while the foreclosure was made on 28 December 1998. The filing of the
case on 9 February 1999 is therefore within the one-year prescriptive period.
UCPB argues that a violation of the Truth in Lending Act, being a criminal offense, cannot be
inferred nor implied from the allegations made in the complaint. 40 Pertinent provisions of the
Act read:
Sec. 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any
person any information in violation of this Act or any regulation issued thereunder shall be
liable to such person in the amount of P100 or in an amount equal to twice the finance charge
required by such creditor in connection with such transaction, whichever is the greater, except
that such liability shall not exceed P2,000 on any credit transaction. Action to recover such
penalty may be brought by such person within one year from the date of the occurrence of the
violation, in any court of competent jurisdiction. In any action under this subsection in which
any person is entitled to a recovery, the creditor shall be liable for reasonable attorneys fees
and court costs as determined by the court.
xxxx
(c) Any person who willfully violates any provision of this Act or any regulation issued
thereunder shall be fined by not less than P1,000 or more than P5,000 or imprisonment for not
less than 6 months, nor more than one year or both.
As can be gleaned from Section 6(a) and (c) of the Truth in Lending Act, the violation of the
said Act gives rise to both criminal and civil liabilities. Section 6(c) considers a criminal
offense the willful violation of the Act, imposing the penalty therefor of fine, imprisonment or
both. Section 6(a), on the other hand, clearly provides for a civil cause of action for failure to
disclose any information of the required information to any person in violation of the Act. The
penalty therefor is an amount of P100 or in an amount equal to twice the finance charge
required by the creditor in connection with such transaction, whichever is greater, except that
the liability shall not exceedP2,000.00 on any credit transaction. The action to recover such
penalty may be instituted by the aggrieved private person separately and independently from
the criminal case for the same offense.

In the case at bar, therefore, the civil action to recover the penalty under Section 6(a) of the
Truth in Lending Act had been jointly instituted with (1) the action to declare the interests in
the promissory notes void, and (2) the action to declare the foreclosure void. This joinder is
allowed under Rule 2, Section 5 of the Rules of Court, which provides:
SEC. 5. Joinder of causes of action.A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of
parties;
(b) The joinder shall not include special civil actions or actions governed by special
rules;
(c) Where the causes of action are between the same parties but pertain to different
venues or jurisdictions, the joinder may be allowed in the Regional Trial Court
provided one of the causes of action falls within the jurisdiction of said court and the
venue lies therein; and
(d) Where the claims in all the causes of action are principally for recovery of
money, the aggregate amount claimed shall be the test of jurisdiction.
In attacking the RTCs disposition on the violation of the Truth in Lending Act since the same
was not alleged in the complaint, UCPB is actually asserting a violation of due process.
Indeed, due process mandates that a defendant should be sufficiently apprised of the matters
he or she would be defending himself or herself against. However, in the 1 July 1999 pre-trial
brief filed by the spouses Beluso before the RTC, the claim for civil sanctions for violation of
the Truth in Lending Act was expressly alleged, thus:
Moreover, since from the start, respondent bank violated the Truth in Lending Act in not
informing the borrower in writing before the execution of the Promissory Notes of the interest
rate expressed as a percentage of the total loan, the respondent bank instead is liable to pay
petitioners double the amount the bank is charging petitioners by way of sanction for its
violation.41

action allegedly involved a single credit transaction as there was only one Promissory Note
Line.
We disagree. We have already ruled that the action to recover the penalty under Section 6(a)
of the Truth in Lending Act had been jointly instituted with (1) the action to declare the
interests in the promissory notes void, and (2) the action to declare the foreclosure void. There
had been no question that the above actions belong to the jurisdiction of the RTC. Subsection
(c) of the above-quoted Section 5 of the Rules of Court on Joinder of Causes of Action
provides:
(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the
causes of action falls within the jurisdiction of said court and the venue lies therein.
Furthermore, opening a credit line does not create a credit transaction of loan or mutuum,
since the former is merely a preparatory contract to the contract of loan or mutuum. Under
such credit line, the bank is merely obliged, for the considerations specified therefor, to lend to
the other party amounts not exceeding the limit provided. The credit transaction thus occurred
not when the credit line was opened, but rather when the credit line was availed of. In the case
at bar, the violation of the Truth in Lending Act allegedly occurred not when the parties
executed the Credit Agreement, where no interest rate was mentioned, but when the parties
executed the promissory notes, where the allegedly offending interest rate was stipulated.
UCPB further argues that since the spouses Beluso were duly given copies of the subject
promissory notes after their execution, then they were duly notified of the terms thereof, in
substantial compliance with the Truth in Lending Act.
Once more, we disagree. Section 4 of the Truth in Lending Act clearly provides that the
disclosure statement must be furnished prior to the consummation of the transaction:
SEC. 4. Any creditor shall furnish to each person to whom credit is extended, prior to the
consummation of the transaction, a clear statement in writing setting forth, to the extent
applicable and in accordance with rules and regulations prescribed by the Board, the following
information:
(1) the cash price or delivered price of the property or service to be acquired;

In the same pre-trial brief, the spouses Beluso also expressly raised the following issue:
(2) the amounts, if any, to be credited as down payment and/or trade-in;
b.) Does the expression indicative rate of DBD retail (sic) comply with the Truth in Lending
Act provision to express the interest rate as a simple annual percentage of the loan?42
These assertions are so clear and unequivocal that any attempt of UCPB to feign ignorance of
the assertion of this issue in this case as to prevent it from putting up a defense thereto is
plainly hogwash.

(3) the difference between the amounts set forth under clauses (1) and (2)
(4) the charges, individually itemized, which are paid or to be paid by such person in
connection with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;

Petitioner further posits that it is the Metropolitan Trial Court which has jurisdiction to try and
adjudicate the alleged violation of the Truth in Lending Act, considering that the present

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed
as a simple annual rate on the outstanding unpaid balance of the obligation.
The rationale of this provision is to protect users of credit from a lack of awareness of the true
cost thereof, proceeding from the experience that banks are able to conceal such true cost by
hidden charges, uncertainty of interest rates, deduction of interests from the loaned amount,
and the like. The law thereby seeks to protect debtors by permitting them to fully appreciate
the true cost of their loan, to enable them to give full consent to the contract, and to properly
evaluate their options in arriving at business decisions. Upholding UCPBs claim of
substantial compliance would defeat these purposes of the Truth in Lending Act. The belated
discovery of the true cost of credit will too often not be able to reverse the ill effects of an
already consummated business decision.
In addition, the promissory notes, the copies of which were presented to the spouses Beluso
after execution, are not sufficient notification from UCPB. As earlier discussed, the interest
rate provision therein does not sufficiently indicate with particularity the interest rate to be
applied to the loan covered by said promissory notes.

Rule 16, Section 5 bars the refiling of an action previously dismissed only in the following
instances:
SEC. 5. Effect of dismissal.Subject to the right of appeal, an order granting a motion to
dismiss based on paragraphs (f), (h) and (i) of section 1 hereof shall bar the refiling of the
same action or claim. (n)
Improper venue as a ground for the dismissal of an action is found in paragraph (c) of Section
1, not in paragraphs (f), (h) and (i):
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:
(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;

Forum Shopping

(c) That venue is improperly laid;

UCPB had earlier moved to dismiss the petition (originally Case No. 99-314 in RTC, Makati
City) on the ground that the spouses Beluso instituted another case (Civil Case No. V-7227)
before the RTC of Roxas City, involving the same parties and issues. UCPB claims that while
Civil Case No. V-7227 initially appears to be a different action, as it prayed for the issuance of
a temporary restraining order and/or injunction to stop foreclosure of spouses Belusos
properties, it poses issues which are similar to those of the present case.43 To prove its point,
UCPB cited the spouses Belusos Amended Petition in Civil Case No. V-7227, which contains
similar allegations as those in the present case. The RTC of Makati denied UCPBs Motion to
Dismiss Case No. 99-314 for lack of merit. Petitioner UCPB raised the same issue with the
Court of Appeals, and is raising the same issue with us now.

(d) That the plaintiff has no legal capacity to sue;

The spouses Beluso claim that the issue in Civil Case No. V-7227 before the RTC of Roxas
City, a Petition for Injunction Against Foreclosure, is the propriety of the foreclosure before
the true account of spouses Beluso is determined. On the other hand, the issue in Case No. 99314 before the RTC of Makati City is the validity of the interest rate provision. The spouses
Beluso claim that Civil Case No. V-7227 has become moot because, before the RTC of Roxas
City could act on the restraining order, UCPB proceeded with the foreclosure and auction sale.
As the act sought to be restrained by Civil Case No. V-7227 has already been accomplished,
the spouses Beluso had to file a different action, that of Annulment of the Foreclosure Sale,
Case No. 99-314 with the RTC, Makati City.
Even if we assume for the sake of argument, however, that only one cause of action is
involved in the two civil actions, namely, the violation of the right of the spouses Beluso not
to have their property foreclosed for an amount they do not owe, the Rules of Court
nevertheless allows the filing of the second action. Civil Case No. V-7227 was dismissed by
the RTC of Roxas City before the filing of Case No. 99-314 with the RTC of Makati City,
since the venue of litigation as provided for in the Credit Agreement is in Makati City.

(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 plaintiffs 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; and
(j) That a condition precedent for filing the claim has not been complied
with.44 (Emphases supplied.)
When an action is dismissed on the motion of the other party, it is only when the ground for
the dismissal of an action is found in paragraphs (f), (h) and (i) that the action cannot be
refiled. As regards all the other grounds, the complainant is allowed to file same action, but
should take care that, this time, it is filed with the proper court or after the accomplishment of
the erstwhile absent condition precedent, as the case may be.
UCPB, however, brings to the attention of this Court a Motion for Reconsideration filed by the
spouses Beluso on 15 January 1999 with the RTC of Roxas City, which Motion had not yet
been ruled upon when the spouses Beluso filed Civil Case No. 99-314 with the RTC of

Makati. Hence, there were allegedly two pending actions between the same parties on the
same issue at the time of the filing of Civil Case No. 99-314 on 9 February 1999 with the RTC
of Makati. This will still not change our findings. It is indeed the general rule that in cases
where there are two pending actions between the same parties on the same issue, it should be
the later case that should be dismissed. However, this rule is not absolute. According to this
Court in Allied Banking Corporation v. Court of Appeals45 :

b. Compounded legal interest of 12% per annum on the amount due47 from
date of demand;
2. The following amounts shall be deducted from the liability of the spouses Samuel
and Odette Beluso:
a. Payments made by the spouses in the amount of P763,692.00. These
payments shall be applied to the date of actual payment of the following in
the order that they are listed, to wit:

In these cases, it is evident that the first action was filed in anticipation of the filing of the later
action and the purpose is to preempt the later suit or provide a basis for seeking the dismissal
of the second action.

i. penalty charges due and demandable as of the time of

payment;

Even if this is not the purpose for the filing of the first action, it may nevertheless be dismissed
if the later action is the more appropriate vehicle for the ventilation of the issues between the
parties. Thus, in Ramos v. Peralta, it was held:

ii. interest due and demandable as of the time of payment;

[T]he rule on litis pendentia does not require that the later case should yield to the earlier case.
What is required merely is that there be another pending action, not a prior pending action.
Considering the broader scope of inquiry involved in Civil Case No. 4102 and the location of
the property involved, no error was committed by the lower court in deferring to the Bataan
court's jurisdiction.

iii. principal amortization/payment in arrears as of the time of

payment;
iv. outstanding balance.

Given, therefore, the pendency of two actions, the following are the relevant considerations in
determining which action should be dismissed: (1) the date of filing, with preference generally
given to the first action filed to be retained; (2) whether the action sought to be dismissed was
filed merely to preempt the later action or to anticipate its filing and lay the basis for its
dismissal; and (3) whether the action is the appropriate vehicle for litigating the issues
between the parties.
In the case at bar, Civil Case No. V-7227 before the RTC of Roxas City was an action for
injunction against a foreclosure sale that has already been held, while Civil Case No. 99-314
before the RTC of Makati City includes an action for the annulment of said foreclosure, an
action certainly more proper in view of the execution of the foreclosure sale. The former case
was improperly filed in Roxas City, while the latter was filed in Makati City, the proper venue
of the action as mandated by the Credit Agreement. It is evident, therefore, that Civil Case No.
99-314 is the more appropriate vehicle for litigating the issues between the parties, as
compared to Civil Case No. V-7227. Thus, we rule that the RTC of Makati City was not in
error in not dismissing Civil Case No. 99-314.
WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED with the
following MODIFICATIONS:
1. In addition to the sum of P2,350,000.00 as determined by the courts a quo,
respondent spouses Samuel and Odette Beluso are also liable for the following
amounts:
a. Penalty of 12% per annum on the amount due46 from the date of
demand; and

b. Penalty under Republic Act No. 3765 in the amount of P26,000.00. This
amount shall be deducted from the liability of the spouses Samuel and
Odette Beluso on 9 February 1999 to the following in the order that they
are listed, to wit:
i. penalty charges due and demandable as of time of payment;
ii. interest due and demandable as of the time of payment;
iii. principal amortization/payment in arrears as of the time of
payment;
iv. outstanding balance.
3. The foreclosure of mortgage is hereby declared VALID. Consequently, the
amounts which the Regional Trial Court and the Court of Appeals ordered
respondents to pay, as modified in this Decision, shall be deducted from the
proceeds of the foreclosure sale.
SO ORDERED.

G.R. No. 153829

August 17, 2011

ROMAN CATHOLIC ARCHBISHOP OF SAN FERNANDO, PAMPANGA represented

herein by the incumbent Archbishop, Petitioner,
vs.
EDUARDO SORIANO, JR., EDNA YALUN, EVANGELINA ABLAZA, FELICIDAD
Y. URBINA, FELIX SALENGA, REYNALDO I. MALLARI, MARCIANA B.
BARCOMA, BIENVENIDO PANGANIBAN, BRIGIDA NAVARRO, EUFRANCIA T.
FLORES, VICTORIA B. SUDSOD, EUFRONIO CAPARAS, CRISANTO
MANANSALA, LILY MASANGCAY, BENJAMIN GUINTO, JR., MARTHA G.
CASTRO and LINO TOLENTINO, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 160909
BENJAMIN GUINTO, JR.,1 Petitioner,
vs.
ROMAN CATHOLIC ARCHBISHOP OF SAN FERNANDO, PAMPANGA represented
herein by the incumbent Archbishop, Respondent.
DECISION
VILLARAMA, JR., J.:

Elizabeth and Benjamin Guinto, Felix Salenga, Eleno and Rosala Salenga, Luisa and Domingo
Sison, Francia Flores, Eduardo and Rosita Gutierrez, Zosima and Ener Basilio, Andy and
Loreto Bonifacio, Peter and Felicisima Villajuan.6
On the other hand, defendants countered that the RCA has no cause of action against them
because its title is spurious. They contended that the subject land belonged to the State, but
they have already acquired the same by acquisitive prescription as they and their predecessorsin-interest have been in continuous possession of the land for more than thirty (30) years.
After considering the pleadings submitted by the parties, the MCTC rendered decision on
September 28, 2001 in favor of the RCA. The trial court held that OCT No. 17629 in the name
of the RCA remains valid and binding against the whole world until it is declared void by a
court of competent jurisdiction. Thus, defendants were ordered to vacate the premises and to
pay reasonable monthly rentals from August 15, 2000 until they shall have finally vacated the
premises.7
Defendants appealed to the Regional Trial Court (RTC). However, the appeal was dismissed
because of their failure to file the appeal memorandum. When defendants elevated the case to
the CA, their petition for certiorari was not given due course for failure to file the same within
the extended period. Hence, the decision ejecting the defendants from the premises became
final.
Pursuant to Section 21,8 Rule 70 of the 1997 Rules of Civil Procedure, as amended, the RCA
filed an Urgent Motion for Immediate Issuance of a Writ of Execution, which the MCTC
granted in an Order9 dated February 10, 2003, as follows:

Before this Court are two petitions for resolution: the first, a Petition for Review on Certiorari
under Rule 45 of the1997 Rules of Civil Procedure, as amended, filed by the Roman Catholic
Archbishop (RCA) of San Fernando, Pampanga, assailing the March 18, 2002 Decision 2 and
the May 30, 2002 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 66974; and
the second, a Petition for Injunction under Rule 58, filed by Benjamin Guinto, Jr. (Guinto),
seeking to enjoin the implementation of the Writ of Execution 4 dated October 14, 2003, issued
by the Municipal Circuit Trial Court (MCTC) of Macabebe-Masantol, Pampanga in Civil Case
No. 2000(23).

WHEREFORE, on the basis of the rules and jurisprudence aforecited, the Motion for
Execution filed by plaintiff is hereby granted. Let a writ of execution be issued in connection
with this case which is a ministerial duty of the Court.

The facts follow:

Thereafter, the MCTC issued another Order dated October 6, 2003, the pertinent portion of
which states:

The RCA of San Fernando, Pampanga, represented by Most Rev. Paciano B. Aniceto, D.D.,
claimed that it is the owner of a vast tract of land located near the Catholic Church at
Poblacion, Macabebe, Pampanga and covered by Original Certificate of Title (OCT) No.
17629 issued by the Registry of Deeds of San Fernando on February 21, 1929. 5 The RCA
alleged that several individuals unlawfully occupied the subject land and refused to vacate
despite repeated demands. Having no other recourse, the RCA filed an ejectment case,
docketed as Civil Case No. 2000(23), before the MCTC of Macabebe-Masantol, Pampanga
against the alleged intruders, namely, Leocadio and Rufina Reyes, Jose Balagtas, Marcial and
Victoria Balagtas, Levita Naluz, Dionisio Barcoma, Felicidad Urbina, Justiniano Reyes,
Lawrence Muniz, Eduardo Soriano, Cosmer Vergara, Perlita Bustos, Brigida Navarro,
Leonoda Cruz, Leonida Manansala, Angelito Juliano, Eduardo Ibay, Edna Yalung, Reynaldo
Mallari, Lily Masangcay, Evangelina Ablaza, Crisanto Manansala, Feliza Esguerra, Gloria
Manansala, Bienvenido and Felicisima Panganiban, Ofroneo Caparas, Tino Enriquez,

Defendants Motion for Inhibition is denied for lack of merit.

SO ORDERED.10

Let a writ of execution be issued to implement the Decision dated September 28, 2001.
No further defendants motion to stay execution shall be entertained.
SO ORDERED.11
Accordingly, a writ of execution12 was issued commanding the sheriff or his deputies to
implement the MCTC Decision. Thus, Sheriff Edgar Joseph C. David sent the defendants a
Notice to Vacate13 dated December 8, 2003.

Seeking to enjoin the implementation of the writ of execution and the notice to vacate, Guinto
filed the instant Petition for Injunction with Prayer for Issuance of a Temporary Restraining
Order (TRO),14 docketed as G.R. No. 160909.
Meanwhile, during the pendency of the ejectment case at the MCTC, some of the defendants
therein, namely, Eduardo Soriano, Jr., Edna Yalun, Evangelina Ablaza, Felicidad Y. Urbina,
Felix Salenga, Reynaldo I. Mallari, Marciana B. Barcoma, Bienvenido Panganiban, Brigida
Navarro, Eufrancia T. Flores, Victoria B. Sodsod, Eufronio Caparas, Crisanto Manansala, Lily
Masangcay, Benjamin Guinto, Jr., Martha G. Castro and Lino Tolentino filed Civil Case No.
01-1046(M) against the RCA for Quieting of Title and Declaration of Nullity of Title before
the RTC of Macabebe, Pampanga.15 They claimed that they are in actual possession of the
land in the concept of owners and alleged that OCT No. 17629 in the name of RCA is spurious
and fake.
Before filing its Answer, the RCA moved to dismiss the case on grounds of noncompliance
with a condition precedent, laches, and for being a collateral attack on its title. The RCA
likewise later filed a supplement to its motion to dismiss.
In an Order16 dated June 4, 2001, the RTC denied the motion to dismiss reasoning that when
the rules speak of noncompliance with a condition precedent, it could refer only to the failure
of a party to secure the appropriate certificate to file action under the Local Government Code,
or the failure to exert earnest efforts towards an amicable settlement when the suit involves
members of the same family. The RTC also found that plaintiffs have a cause of action.
Furthermore, the trial court held that RCAs argument that the property cannot be acquired
by prescription because it has title over it is a matter of evidence which may be established
during the trial on the merits.
Aggrieved, the RCA filed a motion for reconsideration, which the trial court denied in an
Order17 dated July 24, 2001. Thereafter, the RCA filed with the CA a petition for certiorari
with prayer for preliminary injunction.18
On March 18, 2002, the CA promulgated the assailed Decision, 19 the dispositive portion of
which reads:
WHEREFORE, for lack of merit, the petition is hereby DISMISSED.
SO ORDERED.20
A motion for reconsideration21 of the Decision was filed by the RCA. However, in the
Resolution22 dated May 30, 2002, the CA denied the motion for lack of merit. Hence, the RCA
filed the present petition for review on certiorari,23 docketed as G.R. No. 153829, assailing the
Decision of the CA, as well as its Resolution denying the motion for reconsideration.
On January 14, 2004, we resolved to consolidate G.R. Nos. 160909 and
153829.24 Subsequently, the Court resolved to treat the petition for injunction with prayer for
the issuance of a TRO in G.R. No. 160909 as a motion for the issuance of a TRO and/or writ
of preliminary injunction in G.R. No. 153829.25

The RCA raises the following issues:

(A) WHETHER OR NOT CIVIL CASE NO. 01-1046(M) FOR QUIETING OF TITLE AND
DECLARATION OF NULLITY OF TITLE IS LEGALLY DISMISSIBLE FOR
VIOLATION OF THE VARIOUS PROVISIONS OF THE RULES OF COURT;
and
(B) WHETHER OR NOT THE CIVIL ACTION (THE ABOVE MENTIONED CIVIL CASE
NO. 01-1046[M]) FILED BY PRIVATE RESPONDENTS CONSTITUTES A
COLLATERAL ATTACK ON PETITIONER'S TITLE.26
Essentially, the issue before us is whether the CA erred in not holding that the RTC committed
grave abuse of discretion in denying the motion to dismiss filed by the RCA.
We affirm the ruling of the CA.
Well-entrenched in our jurisdiction is the rule that the trial courts denial of a motion to
dismiss cannot be questioned in a certiorari proceeding under Rule 65 of the 1997 Rules of
Civil Procedure, as amended. This is because a certiorari writ is a remedy designed to correct
errors of jurisdiction and not errors of judgment. The appropriate course of action of the
movant in such event is to file an answer and interpose as affirmative defenses the objections
raised in the motion to dismiss. If, later, the decision of the trial judge is adverse, the movant
may then elevate on appeal the same issues raised in the motion. 27
The only exception to this rule is when the trial court gravely abused its discretion in denying
the motion.28 This exception is, nevertheless, applied sparingly, and only in instances when
there is a clear showing that the trial court exercised its judicial power in an arbitrary or
despotic manner by reason of passion or personal hostility.29Further, the abuse of the court's
discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual
refusal to perform the duty enjoined by, or to act at all in contemplation of, law. 30
Here, in dismissing the petition for certiorari, the CA did not find grave abuse of discretion on
the part of the RTC. The appellate court was not convinced with the RCAs argument that
plaintiffs failed to comply with the condition precedent provided in Article 477 31 of the Civil
Code because they allegedly did not have legal or equitable title to, or interest in the real
property. The CA explained that the requirement stated in Article 477 is not a condition
precedent before one can file an action for quieting of title. Rather, it is a requisite for an
action to quiet title to prosper and the existence or nonexistence of the requisite should be
determined only after trial on the merits. The CA also agreed with the trial court in ruling that
the RCA cannot raise in a motion to dismiss the ground that the complaint is already barred by
laches for it still remains to be established during trial how long the plaintiffs have slept on
their rights, if such be the case. Evidently, the CA is correct in finding that the denial by the
RTC of the RCAs motion to dismiss is not tainted with grave abuse of discretion.
Next, the RCA submits that an action for quieting of title is a special civil action covered by
Rule 63, while an action for declaration of nullity of title is governed by ordinary rules. Thus,
it contends that these cases should have been dismissed for violation of the rule on joinder of
actions under Section 5, Rule 2 of the 1997 Rules of Civil Procedure, as amended, which

requires that the joinder shall not include special civil actions governed by special rules. Such
contention, however, is utterly bereft of merit and insufficient to show that the CA erred in
upholding the trial courts decision. Section 6 of Rule 2 explicitly provides that misjoinder of
causes of action is not a ground for dismissal of an action.
The RCA likewise asserts that the case for quieting of title is a collateral attack on its title
which is prohibited by law. However, we agree with the CA in holding that the complaint
against the RCA does not amount to a collateral attack because the action for the declaration
of nullity of OCT No. 17629 is a clear and direct attack on its title.
An action is deemed an attack on a title when its objective is to nullify the title, thereby
challenging the judgment pursuant to which the title was decreed. The attack is direct when
the objective is to annul or set aside such judgment, or enjoin its enforcement. On the other
hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack
on the judgment is nevertheless made as an incident thereof.32
The complaint filed with the RTC pertinently alleged that the claim of ownership by the RCA
is spurious as its title, denominated as OCT No. 17629, is fake for the following reasons: (1)
that the erasures are very apparent and the title itself is fake; (2) it was made to appear under
Memorandum of Encumbrance Entry No. 1007 that the title is a reconstituted title when in
truth, it is not; and (3) the verification reveals that there was no petition filed before any court
where an order was issued for the reconstitution and re-issuance of an owners duplicate
copy.33 It is thus clear from the foregoing that the case filed questioning the genuineness of
OCT No. 17629 is a direct attack on the title of the RCA.
As regards the petition docketed as G.R. No. 160909 which this Court treated as motion for
the issuance of a TRO and/or writ of preliminary injunction, Guinto insists that there is a need
to enjoin the sheriff from enforcing the writ of execution as it would cause grave and
irreparable damage to Guinto, while the RCA would not suffer any damage if it would later be
proved that indeed its title is genuine.
We disagree.
Section 3, Rule 58 of the 1997 Rules of Civil Procedure, as amended, enumerates the grounds
for the issuance of preliminary injunction, viz:
SEC. 3. Grounds for issuance of preliminary injunction. A preliminary injunction may be
granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the act or acts
complained of, or in requiring the performance of an act or acts, either for a limited
period or perpetually;
(b) That the commission, continuance or nonperformance of the act or acts
complained of during the litigation would probably work injustice to the applicant;
or

(c) That a party, court, agency or a person is doing, threatening, or is attempting to

do, or is procuring or suffering to be done, some act or acts probably in violation of
the rights of the applicant respecting the subject of the action or proceeding, and
tending to render the judgment ineffectual.
And as clearly explained in Ocampo v. Sison Vda. de Fernandez:34
To be entitled to the injunctive writ, the applicant must show that there exists a right to be
protected which is directly threatened by an act sought to be enjoined. Furthermore, there must
be a showing that the invasion of the right is material and substantial and that there is an
urgent and paramount necessity for the writ to prevent serious damage. The applicants right
must be clear and unmistakable. In the absence of a clear legal right, the issuance of the writ
constitutes grave abuse of discretion. Where the applicants right or title is doubtful or
disputed, injunction is not proper. The possibility of irreparable damage without proof of an
actual existing right is not a ground for injunction.
A clear and positive right especially calling for judicial protection must be
shown.1avvphi1 Injunction is not a remedy to protect or enforce contingent, abstract, or future
rights; it will not issue to protect a right not in esse and which may never arise, or to restrain
an act which does not give rise to a cause of action. There must exist an actual right. There
must be a patent showing by the applicant that there exists a right to be protected and that the
acts against which the writ is to be directed are violative of said right.
In this case, the defendants in the ejectment case possess no such legal rights that merit the
protection of the courts through the writ of preliminary injunction. The MCTC has already
rendered a decision in favor of the RCA and ordered the defendants therein to vacate the
premises. Their appeal to the RTC was dismissed and the decision has become final.
Evidently, their right to possess the property in question has already been declared inferior or
inexistent in relation to the right of the RCA in the MCTC decision which has already become
final and executory.35
WHEREFORE, the petition in G.R. No. 153829 is DENIED. The Decision dated March 18,
2002 and the Resolution dated May 30, 2002 of the Court of Appeals in CA-G.R. SP No.
66974 are AFFIRMED. The motion for the issuance of a TRO and/or writ of preliminary
injunction to enjoin the sheriff from enforcing the writ of execution in Civil Case No.
2000(23) is likewise DENIED for lack of merit.
No costs.
SO ORDERED.