H.

PARTS OF PLEADINGS

institutions, including thrift banks, or by financial intermediaries

authorized to engage in quasi-banking functions shall be
nineteen percent (19%) per annum.

[G.R. No. 129227. May 30, 2000]

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioners, vs. THE HON.
COURT OF APPEALS, and CALVIN & ELSA ARCILLA, respondents.

x x x
7. Except as provided in this Circular and Circular No. 493,
loans or renewals thereof shall continue to be governed by the
Usury Law, as amended. (idem, supra)

DECISION
GONZAGA_REYES, J.:
Before us is a Petition for Review on Certiorari of the Decision of the Court of
Appeals[1] in CA-G.R. CV No. 45891 entitled CALVIN S. ARCILLA and ELSA B.
ARCILLA vs. BANCO FILIPINO SAVINGS and MORTGAGE BANK, ET. AL. which
affirmed the decision of the Regional Trial Court (RTC), Branch 33, Manila ordering
BANCO FILIPINO to pay CALVIN and ELSA ARCILLA the amount of P126,139.00
with interest thereon at 12% per annum from the filing of the complaint.
The undisputed facts as found by the Court of Appeals are as follows:
"Elsa Arcilla and her husband, Calvin Arcilla, the Appellees in
the present recourse, secured, on three (3) occasions, loans
from the Banco Filipino Savings and Mortgage Bank, the
Appellant in the present recourse, in the total amount of
P107,946.00 as evidenced by "Promissory Note" executed by
the Appellees in favor of the Appellant. To secure the payment
of said loans, the Appellees executed "Real Estate Mortgages"
in favor of the Appellants over their parcels of land located in
BF-Paraaque, covered by Transfer Certificate of Title Nos.
444645, 450406, 450407 and 455410 of the Registry of Deeds
of Paraaque (Annexes "B" to "B-2", Amended Complaint).
Under said deeds, the Appellant may increase the rate of
interest, on said loans, within the limits allowed by law, as
Appellants Board of Directors may prescribe for its borrowers.
At that time, under the Usury Law, Act 2655, as amended, the
maximum rate of interest for loans secured by real estate
mortgages was 12% per annum. On January 10, 1975, the
Appellees and the Appellant executed a "Deed of
Consolidation and Amendment of Real Estate Mortgage"
whereby the aforementioned loans of the Appellees and the
"Real Estate Mortgage" executed by them as security for the
payment of said loans were consolidated (pages 33-35,
Record). Likewise, under said deed, the loan of the Appellees
from the Appellant was increased to P188,000.00. The
Appellees executed a "Promissory Note", dated January 15,
1975, whereby they bound and obliged themselves, jointly and
severally, to pay the Appellant the aforesaid amount of
P188,000.00 with interest at the rate of 12% per annum, in
nineteen (19) years from date thereof, in stated installments of
P2,096.93 a month (page 32, Records).
On January 2, 1976, the Central Bank of the Philippines issued Central Bank
Circular No. 494, quoted infra, as follows:
x x x
3. The maximum rate of interest, including commissions,
premiums, fees and other charges on loans with maturity of
more than seven hundred thirty (730) days, by banking

In the meantime, the Skyline Builders, Inc., through its President, Appellee Calvin
Arcilla, secured loans from the Bank of the Philippine Islands in the total amount of
P450,000.00. To insure payment of the aforesaid loan, the FGU Insurance
Corporation, issued PG Bond No. 1003 for the amount of P225,000.00 (pages 434436, Records) in favor of the Bank of the Philippine Islands. Skyline Buildings, Inc.,
and the Appellees executed an "Agreement of Counter-Guaranty with Mortgage" in
favor of the FGU Insurance Corporation covering the aforesaid parcels of land to
assure payment of any amount that the insurance company may pay on account of
said loans (pages 429-436, Records). The mortgage was annotated as Entry No.
58009 at the dorsal portion of Appellees titles.
After October 30, 1978, the Appellant prepared and issued a "Statement of Account"
to the Appellees on their loan account to the effect that, as of October 30, 1978, the
balance of their loan account, inclusive of interests, computed at 17% per
annum, amounted to 284,490.75 (page 555, Records). It turned out that the
Appellant unilaterally increased the rate of interest on the loan account of the
Appellees from 12% per annum, as covenanted in the "Real Estate Mortgage" and
"Deed of Consolidated and Amended Real Estate Mortgage" to 17% per annum on
the authority of the aforequoted Central Bank Circular.
The Appellees failed to pay their monthly amortizations to Appellant. The latter
forthwith filed, on April 3, 1979, a petition, with the Provincial Sheriff, for the
extrajudicial foreclosure of Appellees "Real Esate Mortgage" in favor of the Appellant
for the amount of P342,798.00 inclusive of the 17% per annum which purportedly
was the totality of Appellees account with the Appellant on their loans. The Appellant
was the purchaser of the property at public auction for the aforesaid amount of
P324,798.00. On May 25, 1979, the Sheriff executed a "Certificate of Sale" over the
aforesaid properties in favor of the Appellant for the aforesaid amount (pages 37-38,
Records).
The Appellant filed a "Petition for a Writ of Possession" with the Regional Trial Court
entitled "Banco Filipino Savings and Mortgage Bank vs. Elsa Arcilla, et al., LRC
Case No. P-7757-P". On February 28, 1980, the Court rendered a Decision granting
the Petition of the Appellant. The Appellees appealed to the Court of Appeals but the
latter Court, on June 29, 1985, promulgated a Decision affirming the Decision of the
Regional Trial Court (pages 190-198, Records).
In the meantime, the FGU Insurance Corporation, Inc., redeemed the aforesaid
properties from the Appellant by paying to the latter the amount of P389,289.41
inclusive of interest computed at 17% per annum. The Appellant and FGU Insurance
Corp., Inc., executed, on May 27, 1980, a "Deed of Redemption" (pages 126-129,
Records).
On September 2, 1985, the Appellees filed a complaint in the Court a quo for the
"Annulment of the Loan Contracts, Foreclose Sale with Prohibition and Injunction,
Etc." entitled "Calvin Arcilla, et al. vs. Banco Filipino Savings and Mortgage Bank, et
al." (pages 1-38, Records).

Page 1 of 51

The Appellees averred, in their complaint, inter alia, that the loan contracts and
mortgages between the Appellees and the Appellant were null and void because: (a)
the interests, charges, etc., were deducted in advance from the face value of the
"Promissory Notes" executed by the Appellees; and (b) the rate of interests charged
by the Appellant were usurious. The Appellees prayed that judgment be rendered in
their favor as follows:

authority for it to unilaterally increase the rate of interests on

loans secured by Real Estate Mortgages.
In the meantime, the FGU Insurance Corp., Inc., filed a
"Motion for Substitution" with the Regional Trial Court, in LRC
Case No. Pq-7757-P praying that it be substituted as the
Petitioner in said case (pages 354-356, Records). The
Appellees were served with a copy of said motion and filed
their Opposition thereto. However, on November 10, 1987, the
Regional Trial Court rendered a Decision granting the motion
of FGU Insurance Company (page 369, Records)

"x x x
WHEREFORE, it is respectfully prayed
a) Pending hearing on the prayer for the issuance of the Writ
of Preliminary Injunction, a restraining order be immediately
issued against the defendants or anyone acting in their behalf
from enforcing the writ of possession issued against the
plaintiffs;

On December 3, 1987, the Appellees filed a Motion, with the

Court a quo, for leave to file an "Amended Complaint" to
implead FGU Insurance Corporation as party defendant
(pages 83-129, Records). The Court granted said motion and
admitted Appellees Amended Complaint.

b) After notice and hearing, a writ of preliminary injunction be

issued against the defendants, particularly defendants FGU
Insurance Corporation and the City Sheriff of Pasay City, MM,
or any of his deputies or anyone acting in their behalf from
enforcing the writ of possession;

After the requisite pre-trial, the Court a quo issued a Pre-Trial

Order which defined, inter alia, Appellees action against the
Appellant, and the latters defenses, to wit:
"x x x

c) After trial
1) To make the injunction permanent;
2) Declare the loan contracts null and void;
3) Declare the extrajudicial foreclosure null and
void;
4) Ordering the defendants to pay the plaintiffs the
sums of P100,000.00 as moral damages;
P50,000.00 as attorney fees; and, costs of suit.

On the part of the defendants Banco Filipino

Savings to simplify the case, it seeks to declare as
null and void plaintiffs loan contract with Banco
Filipino obtained in May 1974, on the ground that
the interest agreed in the contract was usurious.
Plaintiffs also seek to declare as null and void the
foreclosure of their mortgage by Banco Filipino on
the ground that the loan with the said mortgagee
foreclosure maybe validly done.
DEFENSES
1. Prescription

PLAINTIFFS further pray for such other reliefs and

remedies just and equitable in the premises."
(pages 88-89, Records)
In its Answer to the Complaint, the Appellant averred that the
interests charged by it on Appellees loan accounts and that
the said loan contracts and mortgages were lawful. The
Appellant further averred that the Appellees action had
already prescribed.
In the interim, the Supreme Court promulgated its Decision in
the precedent - setting case of "Banco Filipino Savings and
Mortgage Bank vs. Hon. Miguel Navarro, et al., 152 SCRA
346" where it declared that Central Bank Circular No. 494 was
not the "law" envisaged in the mortgage deeds of borrowers of
the Bank; that the escalation clause incorporated in said
deeds giving authority to the Appellant to increase the rate of
interests without the corresponding deescalation clause
should not be given effect because of its one-sidedness in
favor of the Appellant; that the aforesaid Central Bank Circular
did not apply to loans secured by real estate mortgages, and
that, therefore, the Appellant cannot rely said Circular as

2. Laches
3. Estoppel" (page 496,
Records)
In the meantime, the Appellees and FGU Insurance
Corporation entered into and forged a "Compromise
Agreement." The Court a quo promulgated a Decision, dated
April 3, 1991, based on said "Compromise Agreement." Under
the "Compromise Agreement", the Appellees bound and
obliged themselves, jointly and severally, to pay to FGU
Insurance Corporation the amount of P1,964,117.00 in three
(3) equal installments and that:
"x x x
6. Upon faithful compliance by plaintiffs Calvin S.
Arcilla and Elsa B. Arcilla with their Agreement,
defendant FGU Insurance Corporation shall
renounce in their favor all its rights, interests and
claims to the four (4) parcels of land mentioned in

Page 2 of 51

paragraph No. 4 of this Compromise Agreement,

together with all the improvements thereon, and
plaintiffs Calvin S. Arcilla and Elsa B. Arcilla shall
be subrogated to all such rights, interests and
claims. In addition, defendant FGU Insurance
Corporation shall execute in favor of plaintiffs
Calvin S. Arcilla and Elsa B. Arcilla a deed of
cancellation of the real estate mortgage constituted
in its favor on the above-mentioned four (4) parcels
of land, together with all the improvements thereon.
All documentary stamps and expenses for
registration of the said deed of cancellation of
mortgage shall be for the account of plaintiffs
Calvin S. Arcilla and Elsa B. Arcilla.
7. Subject to the provisions of paragraph No. 4 of
this Compromise Agreement, the execution of this
Compromise Agreement shall be without prejudice
to the prosecution of the claims of plaintiffs Calvin
S. Arcilla and Elsa B. Arcilla. (pages 543-544,
Records)
Thereafter, the Appellees and the Appellant agreed, upon the
prodding of the Court a quo, that the only issue to be resolved
by the Court a quo was, whether or not the Appellees were
entitled to the refund, under the Decision of the Supreme
Court in "Banco Filipino Savings and Mortgage Bank vs. Hon.
Miguel Navarro, et al.," supra. On November 8, 1991, the
Appellees filed a "Motion for Summary Judgment" appending
thereto, inter alia, the Affidavit of Appellee Calvin S. Arcilla and
the appendages thereof (pages 550-555, Records). Appellant
filed its Opposition but did not append any affidavit to said
Opposition. On March 26, 1993, the Court a quo promulgated
a Decision, the decretal portion of which reads as follows:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiffs and
against defendant Banco Filipino ordering
defendant Banco Filipino to pay spouses Calvin S.
Arcilla and Elsa B. Arcilla the sum of P126,139.00
with interest thereon at 12% per annum reckoned
from the filing of the complaint.
SO ORDERED. (pages 584-585, Records)"[2]
Petitioner appealed to the Court of Appeals, which affirmed the decision of the RTC
the dispositive portion of which reads:
"IN THE LIGHT OF ALL THE FOREGOING, the assailed
Decision is AFFIRMED. Appellants appeal is DISMISSED.
With costs against the Appellant.
SO ORDERED."[3]
Their Motion for Reconsideration[4] was denied hence this petition where the
petitioner assigns the following errors:
"I. THE HONORABLE COURT OF APPEALS ERRED WHEN
IT HELD THAT THE CAUSE OF ACTION OF THE PRIVATE

RESPONDENTS ACCRUED ON OCTOBER 30, 1978, AND

THEREFORE THE FILING OF THEIR COMPLAINT FOR
ANNULMENT OF THEIR LOAN CONTRACTS WITH THE
PETITIONER IN 1985 WAS NOT YET BARRED BY
PRESCRIPTION.
II. THE HONORABLE COURT OF APPEALS ERRED WHEN
IT HELD THAT THE MATERIAL ALLEGATIONS OF THE
PRIVATE RESPONDENTS COMPLAINT WERE SUFFICIENT
TO WARRANT THE RELIEFS GRANTED TO THEM BY THE
LOWER COURT, PATICULARLY THE REFUND OF
P126,139.00 REPRESENTING ALLEGED EXCESS
INTEREST PAID ON THEIR LOAN.
III. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT THE PRIVATE RESPONDENTS WERE
ENTITLED TO THE SAID REFUND OF P126,139.00
CLAIMED BY THEM."[5]
The petitioner maintains that the complaint filed by herein private respondents was
an action for Annulment of Loan Contracts, foreclosure sale with prohibition and
injunction. It is contended that these causes of action accrued on the date of the
execution of the promissory note and deed of mortgage on January 15, 1975 and not
October 30, 1978 as found by the Court of Appeals. Thus, private respondents
cause of action has already prescribed inasmuch as the case was filed on
September 2, 1985 or more than ten years thereafter. Petitioner further contends
that private respondents cannot rely on the ruling in the case of Banco Filipino
Savings & Mortgage Bank vs. Navarro[6] considering that they were not parties to
said case. Petitioner also maintains that the order of the lower court, which was
affirmed by the Court of Appeals ordering the petitioner to refund the excess interest
paid by private respondents in the amount of P126,318.00 was without any legal
basis since private respondents never raised the issue of interest nor prayed for any
relief with respect thereto. Moreover, the private respondents never paid said
amount to the petitioner. While the amount was included in the bid price of the bank
when it bought the mortgaged properties during the public auction, said bid price did
not prejudice the private respondents because when the private respondents
repurchased the properties, the amount they paid was different and independent of
the redemption price of the bank. Besides, the agreement between the private
respondents and FGU Insurance Corporation was one of sale and not redemption.
Thus, any amount paid by the private respondents to FGU was voluntarily entered
into by them and was not a consequence of the foreclosure of the mortgage
properties.
Conversely, private respondents allege that their action has not prescribed
considering that prescription begins to run from the day the action may be brought;
the date their right of action accrued. It is their contention that the period of
prescription of their action should commence to run from October 30, 1978 when the
petitioner unilaterally increased the rate of interest on private respondents loan to
17% per annum. Thus, when private respondents filed their action against the
petitioner on September 2, 1985 or almost eight years thereafter, their action had not
yet prescribed. Moreover, private respondents aver that they are entitled to the
refund inasmuch as the escalation clause incorporated in the loan contracts do not
have a corresponding de-escalation clause and is therefore illegal.
The appeal is unmeritorious.
There are only two issues, which must be resolved in the present appeal. First, has
the action of the private respondents prescribed; and second, are the respondents
entitled to the refund of the alleged interest overpayments.

Page 3 of 51

Petitioners claim that the action of the private respondents has prescribed is bereft
of merit. Under Article 1150 of the Civil Code, the time for prescription of all kinds of
actions, when there is no special provision which ordains otherwise, shall be counted
from the day they may be brought. Thus, the period of prescription of any cause of
action is reckoned only from the date the cause of action accrued. [7] And a cause of
action arises when that which should have been done is not done, or that which
should not have been done is done. [8] The period should not be made to retroact to
the date of the execution of the contract on January 15, 1975 as claimed by the
petitioner for at that time, there would be no way for the respondents to know of the
violation of their rights.[9] The Court of Appeals therefore correctly found that
respondents cause of action accrued on October 30, 1978, the date they received
the statement of account showing the increased rate of interest, for it was only from
that moment that they discovered the petitioners unilateral increase thereof. We
quote with approval the pertinent portions of the Court of Appeals decision as
follows:
"It is the legal possibility of bringing the action that determines
the starting point for the computation of the period of
prescription (Constancia C. Telentino vs. Court of Appeals, et
al., 162 SCRA 66). In fine, the ten-year prescriptive period is to
be reckoned from the accrual of Appellees right of action, not
necessarily on the very date of the execution of the contracts
subject of the action (Naga Telepone Co. Inc. vs. Court of
Appeals, et al., 230 SCRA 351). A partys right of action
accrues only when the confluence of the following elements is
established:
"xxx: a) a right in favor of the plaintiff by whatever
means and under whatever law it arises or is
created; b) an obligation on the part of defendant to
respect such right; and c) an act or omission on the
part of such defendant violative of the right of the
plaintiff (Cole vs. Vda. de Gregorio, 116 SCRA 670
[1982]; Mathay vs. Consolidated Bank & Trust Co.,
58 SCRA 559 [1974]; Vda. de Enriquez vs. Dela
Cruz, 54 SCRA 1 [1973]. It is only when the last
element occurs or takes place that it can be said in
law that a cause of action has arisen (Cole vs. Vda.
De Gregorio, supra)" (Maria U. Espaol vs.
Chairman, etc., et al.,, 137 SCRA 314, page 318)
More, the aggrieved must have either actual or presumptive
knowledge of the violation, by the guilty party of his rights
either by an act or omission. The question that now comes to
the fore is when the Appellees became precisely aware of the
unilateral increase, by the Appellant, of the rate of interest on
their loan account to 17% per annum. As can be ascertained
from the records, the Appellees discovered or should have
discovered, for the first time, the unilateral increase by the
Appellant of the rate of interest to 17% per annum when they
received the "Statement of Account" of the Appellant as of
October 30, 1978. Hence, it was only then that the prescriptive
period for the Appellees to institute their action in the Court a
quo commenced. Since the Appellees filed their complaint in
the Court a quo on September 2, 1985, the same was
seasonably filed within the ten-year prescriptive period."[10]
Anent the second issue as to whether the respondents are entitled to recover the
alleged overpayments of interest, we find that they are despite the absence of any
prayer therefor. This Court has ruled that it is the material allegations of fact in the

complaint, not the legal conclusion made therein or the prayer that determines the
relief to which the plaintiff is entitled. [11] It is the allegations of the pleading which
determine the nature of the action and the Court shall grant relief warranted by the
allegations and the proof even if no such relief is prayed for. [12] Thus, even if the
complaint seeks the declaration of nullity of the contract, the Court of Appeals
correctly ruled that the factual allegations contained therein ultimately seek the
return of the excess interests paid.
The amended complaint[13] of herein private respondents specifically allege that the
contracts of loan entered into by them and the petitioner were contrary to and signed
in violation of the Usury Law [14] and consequentially pray that said contracts be
declared null and void. The amended complaint reads:
"6. The aforementioned loans granted by defendant Banco
Filipino to the plaintiffs as stated on the face of the promissory
note and real estate mortgage (Annexes "B" to "D", inclusive)
were not actually received by the plaintiffs because interests,
charges, etc. were deducted in advance from the face value of
the loans not in accordance with the contracts;
7. Even the loan contracts (Annexes "B" to "D", inclusive)
required by defendant Banco Filipino to be signed by the
plaintiffs were contrary to and in violation of the then Usury
Law, as amended;
8. Assuming arguendo that the loan contracts between
plaintiffs and defendant Banco Filipino are valid, the extrajudicial foreclosure of the properties of the plaintiffs on May 24,
1979 was null and void for having been conducted in clear
violation of the law (Act 3135), namely: a) lack of roper notice
to the plaintiffs; b) lack of proper publication and posting as
required by law; c) the alleged sale was conducted at the
place other than that prescribed by law, among others;
9. On May 27, 1990, defendant Banco Filipino purportedly
executed in favor of defendant FGU Insurance Corporation a
Deed of Redemption over the foreclosed properties of the
plaintiffs, again, without notice to the latter, as evidenced by
the said Deed of Redemption, copy of which is hereto
attached and marked as Annex "F".
10. The Deed of Redemption (Annex "F") is clearly null and
void for having been executed in violation of Rule 39, Rules of
Court, and other related provisions of the Rules of Court."[15]
The loan contracts with real estate mortgage entered into by and between the
petitioner and respondent stated that the petitioner may increase the interest on said
loans, within the limits allowed by law, as petitioners Board of Directors may
prescribe for its borrowers. At the time the contracts were entered into, said
escalation clause was valid.[16] It was only pursuant to P.D. No. 1684 which became
effective March 17, 1980 wherein to be valid, escalation clauses should provide: 1.)
that there can be an increase in interest if increased by law or by the Monetary
Board; and 2.) in order for such stipulation to be valid, it must include a provision for
the reduction of the stipulated interest in the event that the maximum rate of interest
is reduced by law or by the Monetary Board.[17]
Given the validity of the escalation clause, could the petitioner increase the
stipulated interest pursuant to the Central Bank Circular 494 from 12% to 17%.

Page 4 of 51

We rule that it may not.

The escalation clause in the loan contracts reads as follows:
"xxx g) The rate of interest charged on the obligation secured
by this mortgage, as well as the interest on the amount which
may have been advanced by the Mortgagee in accordance
with paragraph (b) and (d) hereof, shall be subject, during the
terms of this contract, to such an increase, within the limits
allowed by law, as the Board of Directors of the Mortgagee
may prescribe for its debtors; xxx" (emphasis supplied)[18]
In Banco Filipino Savings & Mortgage Bank vs. Navarro, [19] which involved a similar
escalation clause[20], we ruled that Central Bank Circular 494, although it has the
force and effect of law, is not a law and is not the law contemplated by the parties
which authorizes the petitioner to unilaterally raise the interest rate of the loan.
[21]
Consequently, the reliance by the petitioner on Central Bank Circular 494 to
unilaterally raise the interest rates on the loan in question was without any legal
basis.
Petitioners argument that the Banco Filipino case cannot be applied to the present
case since the respondents were not intervenors therein is flawed. Only the
judgment in said case cannot bind the respondents as they were not parties thereto,
however, the doctrine enunciated therein is a judicial decision and forms part of the
legal system of the land.[22] It forms a precedent, which must be adhered to under the
doctrine of stare decisis.[23] Thus, even if the respondents were not parties to the
above-mentioned case, the doctrine enunciated therein may be applied to the
present case.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 45891 is
AFFIRMED and the instant petition is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.

Page 5 of 51

[G.R. No. 146089. December 13, 2001]

VIRGINIA GOCHAN, LOUISE GOCHAN, LAPU-LAPU REAL ESTATE
CORPORATION, FELIX GOCHAN AND SONS REALTY CORPORATION,
MACTAN REALTY DEVELOPMENT CORPORATION, petitioners, vs.
MERCEDES GOCHAN, ALFREDO GOCHAN, ANGELINA GOCHAN-HERNAEZ,
MA. MERCED GOCHAN GOROSPE, CRISPO GOCHAN, JR., and MARLON
GOCHAN, respondents.

Accordingly, respondents claimed that they are entitled to the conveyance of

the aforementioned properties, in addition to the amount of P200,000,000.00, which
they acknowledge to have received from petitioners. Further, respondents prayed
for moral damages of P15,000,000.00, exemplary damages of P2,000,000.00,
attorneys fees of P14,000,000.00, and litigation expenses of P2,000,000.00.

YNARES-SANTIAGO, J.:

Petitioners filed their answer, raising the following affirmative defenses: (a)
lack of jurisdiction by the trial court for non-payment of the correct docket fees; (b)
unenforceability of the obligation to convey real properties due to lack of a written
memorandum thereof, pursuant to the Statute of Frauds; (c) extinguishment of the
obligation by payment; (d) waiver, abandonment and renunciation by respondent of
all their claims against petitioners; and (e) non-joinder of indispensable parties.

This is a petition for review seeking to set aside the decision of the Court of
Appeals dated September 10, 1999 in CA-G.R. SP No. 49084, [1] as well as its
Resolution[2] dated November 22, 2000, denying the Motion for Reconsideration.

On August 7, 1998, petitioners filed with the trial court a motion for a
preliminary hearing on the affirmative defenses. In an Order dated August 11, 1998,
the trial court denied the motion, ruling as follows:

Respondents were stockholders of the Felix Gochan and Sons Realty

Corporation and the Mactan Realty Development Corporation. Sometime in 1996,
respondents offered to sell their shares in the two corporations to the individual
petitioners, the heirs of the late Ambassador Esteban Gochan, for and in
consideration of the sum of P200,000,000.00. Petitioners accepted and paid the
said amount to respondents. Accordingly, respondents issued to petitioners the
necessary Receipts.[3] In addition, respondents executed their respective Release,
Waiver and Quitclaim,[4] wherein they undertook that they would not initiate any suit,
action or complaint against petitioners for whatever reason or purpose.

As the grant of said motion lies in the discretion of the court under Section 6 of Rule
16 of the 1997 Rules of Civil Procedure, this Court in the exercise of its discretion,
hereby denies the said motion because the matters sought to be preliminarily heard
do not appear to be tenable. For one, the statute of frauds does not apply in this
case because the contract which is the subject matter of this case is already an
executed contract. The statute of frauds applies only to executory
contracts. According to Dr. Arturo M. Tolentino, a leading authority in civil law, since
the statute of frauds was enacted for the purpose of preventing frauds, it should not
be made the instrument to further them. Thus, where one party has performed his
obligation under a contract, equity would agree that all evidence should be admitted
to prove the alleged agreement (PNB vs. Philippine Vegetable Oil Company, 49 Phil.
897). For another, the contention of the defendants that the claims of the plaintiffs
are already extinguished by full payment thereof does not appear to be indubitable
because the plaintiffs denied under oath the due execution and genuineness of the
receipts which are attached as Annexes 1-A, 1-B and 1-C of defendants
answer. This issue therefore has to be determined on the basis of preponderance of
evidence to be adduced by both parties. Then, still for another, the contention that
the complaint is defective because it allegedly has failed to implead indispensable
parties appears to be wanting in merit because the parties to the memorandum of
agreement adverted to in the complaint are all parties in this case. Then the matter
of payment of docketing and filing fees is not a fatal issue in this case because the
record shows that the plaintiffs had paid at least P165,000.00 plus in the form of
filing and docketing fees. Finally, regarding exerting earnest efforts toward a
compromise by the plaintiffs, the defendants cannot say that there is an absence of
an allegation to this effect in the complaint because paragraph 11 of the complaint
precisely states that before filing this case, earnest efforts toward a compromise
have been made.

DECISION

In turn, respondents, through Crispo Gochan, Jr., required individual

petitioners to execute a promissory note, [5] undertaking not to divulge the actual
consideration they paid for the shares of stock. For this purpose, Crispo Gochan, Jr.
drafted a document entitled promissory note in his own handwriting and had the
same signed by Felix Gochan, III, Louise Gochan and Esteban Gochan, Jr.
Unbeknown to petitioners, Crispo Gochan, Jr. inserted in the promissory
note a phrase that says, Said amount is in partial consideration of the sale.[6]
On April 3, 1998, respondents filed a complaint against petitioners for specific
performance and damages with the Regional Trial Court of Cebu City, Branch 11,
docketed as Civil Case No. CEB-21854. Respondents alleged that sometime in
November 1996, petitioner Louise Gochan, on behalf of all the petitioners, offered to
buy their shares of stock, consisting of 254 shares in the Felix Gochan and Sons
Realty Corporation and 1,624 shares of stock in the Mactan Realty Development
Corporation; and that they executed a Provisional Memorandum of Agreement,
wherein they enumerated the following as consideration for the sale:
1. Pesos: Two Hundred Million Pesos (P200M)
2. Two (2) hectares more or less of the fishpond in Gochan compound,
Mabolo, Lot 4F-2-B

Petitioners motion for reconsideration of the above Order was denied by the
trial court on September 11, 1998.

3. Lot 2, Block 9 with an area of 999 square meters in Gochan

Compound, Mabolo, Cebu

Petitioners thus filed a petition for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 49084. On September 10, 1999, the Court of Appeals
rendered the appealed decision dismissing the petition on the ground that
respondent court did not commit grave abuse of discretion, tantamount to lack or in
excess of jurisdiction in denying the motion to hear the affirmative defenses.[8]

4. Three Thousand (3,000) square meters of Villas Magallanes in

Mactan, Cebu

Again, petitioners filed a motion for reconsideration, but the same was denied
by the Court of Appeals in its assailed Resolution of November 22, 2000.[9]

5. Lot 423 New Gem Building with an area of 605 square meters.[7]

Page 6 of 51

Petitioners, thus, brought the present petition for review anchored on the
following grounds:

conveyance in their favor of the real properties enumerated in the provisional

memorandum of agreement. Under these circumstances, the case below was
actually a real action, affecting as it does title to or possession of real property.

I.
THE COURT OF APPEALS COMMITTED GRAVE AND PALPABLE ERROR IN
FINDING THAT THE CORRECT DOCKET FEES HAVE BEEN PAID.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN RULING THAT
THE PMOA WAS A PARTIALLY EXECUTED CONTRACT AND HENCE NOT
COVERED BY THE STATUTE OF FRAUDS.
III.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN DECIDING THAT
THE CLAIMS OF PRIVATE RESPONDENTS HAVE NOT BEEN EXTINGUISHED
BY PAYMENT OR FULL SETTLEMENT DESPITE THE PRESENCE OF RECEIPTS
SIGNED BY THE PRIVATE RESPONDENTS SHOWING THE CONTRARY.
IV.
THE COURT OF APPEALS COMMITTED GRAVE ERROR IN RESOLVING THAT
FELIX GOCHAN III AND ESTEBAN GOCHAN, JR. ARE NOT INDISPENSABLE
PARTIES AND THEREFORE NEED NOT BE IMPLEADED AS PARTIES.[10]
Respondents filed their Comment,[11] arguing, in fine, that petitioners are guilty
of forum-shopping when they filed two petitions for certiorari with the Court of
Appeals; and that the Court of Appeals did not err in dismissing the petition for
certiorari.
The instant petition has merit.
The rule is well-settled that the court acquires jurisdiction over any case only
upon the payment of the prescribed docket fees. In the case of Sun Insurance
Office, Ltd. (SIOL) v. Asuncion,[12] this Court held that it is not simply the filing of the
complaint or appropriate initiatory pleading, but the payment of the prescribed docket
fee that vests a trial court with jurisdiction over the subject matter or nature of the
action.
Respondents maintain that they paid the correct docket fees in the amount of
P165,000.00 when they filed the complaint with the trial court. Petitioners, on the
other hand, contend that the complaint is in the nature of a real action which affects
title to real properties; hence, respondents should have alleged therein the value of
the real properties which shall be the basis for the assessment of the correct docket
fees.
The Court of Appeals found that the complaint was one for specific
performance and incapable of pecuniary estimation. We do not agree.
It is necessary to determine the true nature of the complaint in order to
resolve the issue of whether or not respondents paid the correct amount of docket
fees therefor. In this jurisdiction, the dictum adhered to is that the nature of an action
is determined by the allegations in the body of the pleading or complaint itself, rather
than by its title or heading.[13] The caption of the complaint below was denominated
as one for specific performance and damages. The relief sought, however, is the
conveyance or transfer of real property, or ultimately, the execution of deeds of

In the case of Hernandez v. Rural Bank of Lucena, [14] this Court held that a
real action is one where the plaintiff seeks the recovery of real property or, as
indicated in section 2(a) of Rule 4 (now Section 1, Rule 4 of the 1997 Rules of Civil
Procedure), a real action is an action affecting title to or recovery of possession of
real property.
It has also been held that where a complaint is entitled as one for specific
performance but nonetheless prays for the issuance of a deed of sale for a parcel of
land, its primary objective and nature is one to recover the parcel of land itself and,
thus, is deemed a real action. In such a case, the action must be filed in the proper
court where the property is located:
In this Court, the appellant insists that her action is one for specific performance,
and, therefore, personal and transitory in nature.
This very issue was considered and decided by this Court in the case of Manuel B.
Ruiz vs. J.M. Tuason & Co., Inc. et al., L-18692, promulgated 31 January
1963. There the Court, by unanimous vote of all the Justices, held as follows:
This contention has no merit. Although appellants complaint is entitled to be one
for specific performance, yet the fact that he asked that a deed of sale of a parcel of
land situated in Quezon City be issued in his favor and that a transfer certificate of
title covering said parcel of land be issued to him shows that the primary objective
and nature of the action is to recover the parcel of land itself because to execute in
favor of appellant the conveyance requested there is need to make a finding that he
is the owner of the land which in the last analysis resolves itself into an issue of
ownership. Hence, the action must be commenced in the province where the
property is situated pursuant to Section 3, Rule 5, of the Rules of Court, which
provides that actions affecting title to or recovery of possession of real property shall
be commenced and tried in the province where the property or any part thereof
lies.[15]
In the case at bar, therefore, the complaint filed with the trial court was in the
nature of a real action, although ostensibly denominated as one for specific
performance. Consequently, the basis for determining the correct docket fees shall
be the assessed value of the property, or the estimated value thereof as alleged by
the claimant. Rule 141, Section 7, of the Rules of Court, as amended by A.M. No.
00-2-01-SC, provides:
Section 7. Clerks of Regional Trial Courts. - x x x
(b)

xxx

In a real action, the assessed value of the property, or if there is none, the estimated
value thereof shall be alleged by the claimant and shall be the basis in computing
the fees.
We are not unmindful of our pronouncement in the case of Sun Insurance,
to the effect that in case the filing of the initiatory pleading is not accompanied by
payment of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive period. However,
the liberal interpretation of the rules relating to the payment of docket fees as applied
in the case of Sun Insurance cannot apply to the instant case as respondents have
never demonstrated any willingness to abide by the rules and to pay the correct
docket fees. Instead, respondents have stubbornly insisted that the case they filed
[16]

Page 7 of 51

was one for specific performance and damages and that they actually paid the
correct docket fees therefor at the time of the filing of the complaint. Thus, it was
stated in the case of Sun Insurance:[17]
The principle in Manchester could very well be applied in the present case. The
pattern and the intent to defraud the government of the docket fee due it is obvious
not only in the filing of the original complaint but also in the filing of the second
amended complaint.
However, in Manchester, petitioner did not pay any additional docket fee until the
case was decided by this Court on May 7, 1987. Thus, in Manchester, due to the
fraud committed on the government, this Court held that the court a quo did not
acquire jurisdiction over the case and that the amended complaint could not have
been admitted inasmuch as the original complaint was null and void.
In the present case, a more liberal interpretation of the rules is called for considering
that, unlike Manchester, private respondent demonstrated his willingness to abide by
the rules by paying the additional docket fees as required. The promulgation of the
decision in Manchester must have had that sobering influence on private respondent
who thus paid the additional docket fee as ordered by the respondent court. It
triggered his change of stance by manifesting his willingness to pay such additional
docket fee as may be ordered.

an order enjoining public respondent Judge Dicdican from further trying the case and
to assign a new judge in his stead.
True, the trial court has the discretion to conduct a preliminary hearing on
affirmative defenses. In the case at bar, however, the trial court committed a grave
abuse of its discretion when it denied the motion for preliminary hearing. As we
have discussed above, some of these defenses, which petitioners invoked as
grounds for the dismissal of the action, appeared to be indubitable, contrary to the
pronouncement of the trial court. Indeed, the abuse of discretion it committed
amounted to an evasion of positive duty or virtual refusal to perform a duty enjoined
by law, or to act at all in contemplation of law, [19] which would have warranted the
extraordinary writ of certiorari. Hence, the Court of Appeals erred when it dismissed
the petition for certiorari filed by petitioners.
WHEREFORE, in view of the foregoing, the instant petition is
GRANTED. This case is REMANDED to the Regional Trial Court of Cebu City,
Branch 11, which is directed to forthwith conduct the preliminary hearing on the
affirmative defenses in Civil Case No. CEB-21854.
SO ORDERED.

Respondents accuse petitioners of forum-shopping when they filed two

petitions before the Court of Appeals. Petitioners, on the other hand, contend that
there was no forum-shopping as there was no identity of issues or identity of reliefs
sought in the two petitions.
We agree with petitioners that they are not guilty of forum-shopping. The
deplorable practice of forum-shopping is resorted to by litigants who, for the purpose
of obtaining the same relief, resort to two different fora to increase his or her
chances of obtaining a favorable judgment in either one. In the case of Golangco v.
Court of Appeals,[18] we laid down the following test to determine whether there is
forum-shopping:
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and the parties-litigant by a person
who asks different courts and/or administrative agencies to rule on the same or
related causes and/or grant the same or substantially the same reliefs, in the
process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issues.
In sum, two different orders were questioned, two distinct causes of action and
issues were raised, and two objectives were sought; thus, forum shopping cannot be
said to exist in the case at bar.
Likewise, we do not find that there is forum-shopping in the case at bar. The
first petition, docketed as CA-G.R. SP. No. 49084, which is now the subject of the
instant petition, involved the propriety of the affirmative defenses relied upon by
petitioners in Civil Case No. CEB-21854. The second petition, docketed as CA-G.R.
SP No. 54985, raised the issue of whether or not public respondent Judge Dicdican
was guilty of manifest partiality warranting his inhibition from further hearing Civil
Case No. CEB-21854.
More importantly, the two petitions did not seek the same relief from the Court
of Appeals. In CA-G.R. SP. No. 49084, petitioners prayed, among others, for the
annulment of the orders of the trial court denying their motion for preliminary hearing
on the affirmative defenses in Civil Case No. CEB-21854. No such reliefs are
involved in the second petition, where petitioners merely prayed for the issuance of

Page 8 of 51

G.R. No. 149576 August 8, 2006

authorized no one to sign in his behalf either. And he did not know who finally signed
it.

REPUBLIC OF THE PHILIPPINES, represented by the Land Registration

Authority, Petitioner,
vs.
KENRICK DEVELOPMENT CORPORATION, Respondent.
DECISION
CORONA, J.:
1

The Republic of the Philippines assails the May 31, 2001 decision and August 20,
2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948 in this petition for
review under Rule 45 of the Rules of Court.
This case stemmed from the construction by respondent Kenrick Development
Corporation of a concrete perimeter fence around some parcels of land located
behind the Civil Aviation Training Center of the Air Transportation Office (ATO) in
1996. As a result, the ATO was dispossessed of some 30,228 square meters of
prime land. Respondent justified its action with a claim of ownership over the
property. It presented Transfer Certificate of Title (TCT) Nos. 135604, 135605 and
135606 issued in its name and which allegedly originated from TCT No. 17508
registered in the name of one Alfonso Concepcion.
ATO verified the authenticity of respondents titles with the Land Registration
Authority (LRA). On May 17, 1996, Atty. Jose Loriega, head of the Land Title
Verification Task Force of the LRA, submitted his report. The Registrar of Deeds of
Pasay City had no record of TCT No. 17508 and its ascendant title, TCT No. 5450.
The land allegedly covered by respondents titles was also found to be within
Villamor Air Base (headquarters of the Philippine Air Force) in Pasay City.

With Atty. Garlitos revelation, the Republic promptly filed an urgent motion on
December 3, 1998 to declare respondent in default, 2 predicated on its failure to file a
valid answer. The Republic argued that, since the person who signed the answer
was neither authorized by Atty. Garlitos nor even known to him, the answer was
effectively an unsigned pleading. Pursuant to Section 3, Rule 7 of the Rules of
Court, 3 it was a mere scrap of paper and produced no legal effect.
On February 19, 1999, the trial court issued a resolution granting the Republics
motion. 4 It found respondents answer to be sham and false and intended to defeat
the purpose of the rules. The trial court ordered the answer stricken from the
records, declared respondent in default and allowed the Republic to present its
evidence ex parte.
The Republic presented its evidence ex parte, after which it rested its case and
formally offered its evidence.
Meanwhile, respondent sought reconsideration of the February 19, 1999 resolution
but the trial court denied it.
Aggrieved, respondent elevated the matter to the Court of Appeals via a petition for
certiorari 5 seeking to set aside the February 19, 1999 resolution of the trial court.
Respondent contended that the trial court erred in declaring it in default for failure to
file a valid and timely answer.

By virtue of the report, the Office of the Solicitor General (OSG), on September 3,
1996, filed a complaint for revocation, annulment and cancellation of certificates of
title in behalf of the Republic of the Philippines (as represented by the LRA) against
respondent and Alfonso Concepcion. It was raffled to Branch 114 of the Regional
Trial Court of Pasay City where it was docketed as Civil Case No. 96-1144.

On May 31, 2001, the Court of Appeals rendered the assailed decision. It found Atty.
Garlitos statements in the legislative hearing to be unreliable since they were not
subjected to cross-examination. The appellate court also scrutinized Atty. Garlitos
acts after the filing of the answer 6 and concluded that he assented to the signing of
the answer by somebody in his stead. This supposedly cured whatever defect the
answer may have had. Hence, the appellate court granted respondents petition for
certiorari. It directed the lifting of the order of default against respondent and ordered
the trial court to proceed to trial with dispatch. The Republic moved for
reconsideration but it was denied. Thus, this petition.

On December 5, 1996, respondent filed its answer which was purportedly signed by
Atty. Onofre Garlitos, Jr. as counsel for respondent.

Did the Court of Appeals err in reversing the trial courts order which declared
respondent in default for its failure to file a valid answer? Yes, it did.

Since Alfonso Concepcion could not be located and served with summons, the trial
court ordered the issuance of an alias summons by publication against him on
February 19, 1997.

A party may, by his words or conduct, voluntarily adopt or ratify anothers

statement. 7 Where it appears that a party clearly and unambiguously assented to or
adopted the statements of another, evidence of those statements is admissible
against him. 8 This is the essence of the principle of adoptive admission.

The case was thereafter punctuated by various incidents relative to modes of

discovery, pre-trial, postponements or continuances, motions to dismiss, motions to
declare defendants in default and other procedural matters.
During the pendency of the case, the Senate Blue Ribbon Committee and
Committee on Justice and Human Rights conducted a hearing in aid of legislation on
the matter of land registration and titling. In particular, the legislative investigation
looked into the issuance of fake titles and focused on how respondent was able to
acquire TCT Nos. 135604, 135605 and 135606.

An adoptive admission is a partys reaction to a statement or action by another

person when it is reasonable to treat the partys reaction as an admission of
something stated or implied by the other person. 9 By adoptive admission, a third
persons statement becomes the admission of the party embracing or espousing it.
Adoptive admission may occur when a party:
(a) expressly agrees to or concurs in an oral statement made by another; 10
(b) hears a statement and later on essentially repeats it; 11

During the congressional hearing held on November 26, 1998, one of those
summoned was Atty. Garlitos, respondents former counsel. He testified that he
prepared respondents answer and transmitted an unsigned draft to respondents
president, Mr. Victor Ong. The signature appearing above his name was not his. He

(c) utters an acceptance or builds upon the assertion of another; 12

Page 9 of 51

(d) replies by way of rebuttal to some specific points raised by another but ignores
further points which he or she has heard the other make 13 or

Rule 9.01 A lawyer shall not delegate to any unqualified person the performance
of any task which by law may only be performed by a member of the Bar in good
standing.

(e) reads and signs a written statement made by another. 14

Here, respondent accepted the pronouncements of Atty. Garlitos and built its case
on them. At no instance did it ever deny or contradict its former counsels
statements. It went to great lengths to explain Atty. Garlitos testimony as well as its
implications, as follows:
1. While Atty. Garlitos denied signing the answer, the fact was that the answer was
signed. Hence, the pleading could not be considered invalid for being an unsigned
pleading. The fact that the person who signed it was neither known to Atty. Garlitos
nor specifically authorized by him was immaterial. The important thing was that the
answer bore a signature.
2. While the Rules of Court requires that a pleading must be signed by the party or
his counsel, it does not prohibit a counsel from giving a general authority for any
person to sign the answer for him which was what Atty. Garlitos did. The person who
actually signed the pleading was of no moment as long as counsel knew that it
would be signed by another. This was similar to addressing an authorization letter "to
whom it may concern" such that any person could act on it even if he or she was not
known beforehand.
3. Atty. Garlitos testified that he prepared the answer; he never disowned its contents
and he resumed acting as counsel for respondent subsequent to its filing. These
circumstances show that Atty. Garlitos conformed to or ratified the signing of the
answer by another.
Respondent repeated these statements of Atty. Garlitos in its motion for
reconsideration of the trial courts February 19, 1999 resolution. And again in the
petition it filed in the Court of Appeals as well as in the comment 15 and memorandum
it submitted to this Court.
Evidently, respondent completely adopted Atty. Garlitos statements as its own.
Respondents adoptive admission constituted a judicial admission which was
conclusive on it.
Contrary to respondents position, a signed pleading is one that is signed either by
the party himself or his counsel. Section 3, Rule 7 is clear on this matter. It requires
that a pleading must be signed by the party or counsel representing him.
Therefore, only the signature of either the party himself or his counsel operates to
validly convert a pleading from one that is unsigned to one that is signed.
Counsels authority and duty to sign a pleading are personal to him. He may not
delegate it to just any person.
The signature of counsel constitutes an assurance by him that he has read the
pleading; that, to the best of his knowledge, information and belief, there is a good
ground to support it; and that it is not interposed for delay. 16Under the Rules of
Court, it is counsel alone, by affixing his signature, who can certify to these matters.
The preparation and signing of a pleading constitute legal work involving practice of
law which is reserved exclusively for the members of the legal profession. Counsel
may delegate the signing of a pleading to another lawyer 17 but cannot do so
in favor of one who is not. The Code of Professional Responsibility provides:

Moreover, a signature by agents of a lawyer amounts to signing by unqualified

persons, 18 something the law strongly proscribes.
Therefore, the blanket authority respondent claims Atty. Garlitos entrusted to just
anyone was void. Any act taken pursuant to that authority was likewise void. There
was no way it could have been cured or ratified by Atty. Garlitos subsequent acts.
Moreover, the transcript of the November 26, 1998 Senate hearing shows that Atty.
Garlitos consented to the signing of the answer by another "as long as it conformed
to his draft." We give no value whatsoever to such self-serving statement.
No doubt, Atty. Garlitos could not have validly given blanket authority for just anyone
to sign the answer. The trial court correctly ruled that respondents answer was
invalid and of no legal effect as it was an unsigned pleading. Respondent was
properly declared in default and the Republic was rightly allowed to present
evidence ex parte.
Respondent insists on the liberal application of the rules. It maintains that even if it
were true that its answer was supposedly an unsigned pleading, the defect was a
mere technicality that could be set aside.
Procedural requirements which have often been disparagingly labeled as mere
technicalities have their own validraison d etre in the orderly administration of
justice. To summarily brush them aside may result in arbitrariness and injustice. 19
The Courts pronouncement in Garbo v. Court of Appeals 20 is relevant:
Procedural rules are [tools] designed to facilitate the adjudication of cases. Courts
and litigants alike are thus [enjoined] to abide strictly by the rules. And while the
Court, in some instances, allows a relaxation in the application of the rules, this, we
stress, was never intended to forge a bastion for erring litigants to violate the rules
with impunity. The liberality in the interpretation and application of the rules applies
only in proper cases and under justifiable causes and circumstances. While it is true
that litigation is not a game of technicalities, it is equally true that every case must be
prosecuted in accordance with the prescribed procedure to insure an orderly and
speedy administration of justice.
Like all rules, procedural rules should be followed except only when, for the most
persuasive of reasons, they may be relaxed to relieve a litigant of an injustice not
commensurate with the degree of his thoughtlessness in not complying with the
prescribed procedure. 21 In this case, respondent failed to show any persuasive
reason why it should be exempted from strictly abiding by the rules.
As a final note, the Court cannot close its eyes to the acts committed by Atty.
Garlitos in violation of the ethics of the legal profession. Thus, he should be made to
account for his possible misconduct.
WHEREFORE, the petition is hereby GRANTED. The May 31, 2001 decision and
August 20, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948
are REVERSED and SET ASIDE and the February 19, 1999 resolution of the
Regional Trial Court of Pasay City, Branch 114 declaring respondent in default is
herebyREINSTATED.
Let a copy of this decision be furnished the Commission on Bar Discipline of the
Integrated Bar of the Philippines for the commencement of disbarment proceedings

Page 10 of 51

against Atty. Onofre Garlitos, Jr. for his possible unprofessional conduct not befitting
his position as an officer of the court.
SO ORDERED.

Page 11 of 51

ALLON-JOCSON
TUISING,
Petitioners,

versus -

EALS,
IO T. ONG, in his capacity as the acting Presiding Judge
al Trial Court of Roxas, Isabela, Branch 23, MARIA
TILIZER CORP., and MARCELO STEEL CORP.,
Respondents.

G.R. No. 162836

of Marcelo Steel Corporation for the full satisfaction of the judgment against private
respondents. A certificate of sale[6] was issued to petitioner Rodolfo Tuising (Tuising),
who was the highest bidder at the auction sale for P9.9 million.

Present:

On 28 February 2003, Jocson filed with the trial court a Very Urgent Ex-Parte
Motion for Issuance of a Break-Open Order and Petition for Contempt of Court.[7] On
PUNO, C.J., Chairperson,
3 March 2003, Marcelo Steel Corporation filed an Extremely Urgent Omnibus
CARPIO,
Motion,[8] praying for the annulment of the execution sale and for the issuance of an
CORONA,
order directing the Sheriffs not to deliver the properties sold to Tuising pending
LEONARDO-DE CASTRO, andresolution of Marcelo Steel Corporations motion. Marcelo Steel Corporation alleged
BERSAMIN, JJ.
that its obligation was merely joint with MCFC and that the total price of the
properties sold on execution was unconscionably inadequate.

Promulgated:
July 30, 2009
x-------------------------------------------------- x
DECISION
CARPIO, J.:

On 14 April 2003, the trial court issued an order, the dispositive portion of
which reads:
WHEREFORE, premises considered, the execution
sale of the properties of the defendant Marcelo Steel
Corporation, namely: Seven (7) dilapidated warehouses,
detachable metal structural steel with scattered machineries,
metal scraps, metal G.I. Pipes, wires and post, held on
February 21, 2003, is hereby declared null and void and the
Certificate of Sale dated February 21, 2003 issued pursuant
thereto is hereby set aside and cancelled.
The motion for the issuance of a break-open order is hereby denied for lack
of merit and basis.[9]

The Case
This is a petition for review [1] of the Decision[2] dated 16 January 2004 and the
Resolution dated 25 March 2004 of the Court of Appeals in CA-G.R. SP No. 79179.
The Court of Appeals affirmed the Order dated 14 April 2003 of the Regional Trial
Court of Roxas, Isabela, Branch 23 (trial court), in Civil Case No. Br. 23-377.
The Facts
On 10 August 1992, petitioner Ceferina Argallon-Jocson (Jocson) filed a
complaint for Reconveyance and Damages against Marcelo Steel Corporation and
Maria Cristina Fertilizer Corporation (MCFC), which were represented by Jose
Marcelo as president of both companies.
On 24 February 1999, the trial court rendered a decision, the dispositive
portion of which reads:
AS A CONSEQUENCE OF ALL THE FOREGOING,
judgment is hereby rendered in favor of the plaintiff [Jocson]
and against the defendants [Marcelo Steel Corporation and
MCFC]: (1) Ordering the defendants to pay the plaintiff the
balance of P2,004,810.42, with legal interest from 1976 up to
the present; (2) attorneys fees in the amount of P20,000.00;
and (3) to pay the costs.[3]
Marcelo Steel Corporation and MCFC (private respondents) appealed to the
Court of Appeals, which affirmed the trial courts decision. Private respondents did
not appeal the Court of Appeals decision, which became final and executory.
Jocson then filed a Motion for Issuance of a Writ of Execution. On 9 December
2002, the trial court issued an order for the issuance of a writ of execution in
accordance with the tenor of the decision.
On 20 December 2002, a Writ of Execution [4] (writ) was issued to the Sheriff of
the Office of the Clerk of Court of Manila, commanding the Sheriff to implement the
writ upon private respondents in accordance with the tenor of the decision. The writ
was indorsed to Sheriffs Levy Duka, Luis Alina, Andreil Garcia, and Nathaniel Abaya,
who levied upon the properties of Marcelo Steel Corporation in full satisfaction of
the judgment debt. The execution sale was then scheduled on 17 February 2003. On
14 February 2003, Midas International Development Corporation (Midas Corp.) filed
a third-party claim, alleging that some of the levied properties were previously
mortgaged to Midas Corp. The execution sale was postponed to 21 February 2003.
On 20 February 2003, Jocson posted a P36 million indemnity bond[5] so that the
levied properties would not be released to claimant Midas Corp. The Sheriffs then
proceeded with the execution sale on 21 February 2003 and sold the properties

Jocson moved for reconsideration of the trial courts order, claiming that the
nature of the obligation to pay the balance of the purchase price was
solidary. Tuising filed a Motion for Intervention with Leave of Court with Motion for
Reconsideration and Entry of Appearance. On the other hand, Marcelo Steel
Corporation filed, on 7 May 2003, a Manifestation and Motion on Satisfaction of
Judgment, depositing with the trial court a Managers Check in the amount
of P4,260,198.11 representing full satisfaction of Marcelo Steel Corporations
obligation to Jocson. On 14 July 2003, the trial court denied Jocsons motion for
reconsideration and Tuisings motion for intervention and reconsideration, and
granted Marcelo Steel Corporations prayer for entry of satisfaction of judgment on
its behalf.[10]
On 18 August 2003, Jocson filed with the trial court a Notice of Appeal, which
she later withdrew on 4 September 2003, and in lieu thereof, petitioners Jocson and
Tuising filed a Petition for Certiorari with the Court of Appeals.[11] The Court of
Appeals dismissed the petition for lack of merit. Jocson and Tuising filed a motion for
reconsideration,[12] which the Court of Appeals denied on 25 March 2004. Hence, this
petition.
Meanwhile, on 23 February 2004, Jocson filed with the trial court a Motion for
Issuance of Alias Writ of Execution to implement the decision as against MCFC,
stating that in view of the Court of Appeals decision, there is a need to execute the
decision as against the other defendant MCFC.[13]
The Trial Courts Ruling
In its Order dated 14 April 2003, the trial court ruled that the liability of Marcelo
Steel Corporation was limited to its proportional share in the entire money judgment.
Considering that the dispositive portion of the Decision dated 24 February 1999 in
this case did not state that the obligation of private respondents was solidary, then
their obligation was merely joint. Citing the case of PH Credit Corporation v. Court of
Appeals,[14] the trial court held that being made to pay for an obligation in its entirety
when ones liability is merely for a portion is a sufficient ground to contest an
execution sale. It would be the height of inequity if we allow judgment obligors to
shoulder entire monetary judgments when their legal liabilities are limited only to
their proportionate shares in the entire obligation.
The Court of Appeals Ruling

Page 12 of 51

The Court of Appeals held that in consonance with Section 1, Rule 65 of

the Rules of Civil Procedure, [15] certiorari is not a substitute for lost appeal.
Moreover, the Court of Appeals found that the assigned issues were factual
issues not proper in a petition for certiorari, which is limited to the issues of
jurisdiction and grave abuse of discretion.
The Court of Appeals found no grave abuse of discretion on the part of the
respondent judge. On the merits of the case, the Court of Appeals held that the
obligation of private respondents to Jocson was merely joint. The Court of Appeals
noted that the trial courts Decision dated 24 February 1999 was silent as to the
nature of the liability. Solidary obligations are not presumed in the absence of an
express determination thereof in the judgment. When the judgment does not provide
that the defendants are liable to pay jointly and severally a certain amount of money,
none of them may be compelled to satisfy in full said judgment.
The Court of Appeals found that the Sheriffs disregarded the trial courts 24
February 1999 Decision, and deviated from the trial courts Order dated 9 December
2002 and the writ of execution dated 20 December 2002, which directed them to
execute the writ in accordance with the tenor of the decision.
The Issues
Petitioners contend that:
1. THE HONORABLE COURT OF APPEALS
ERRED IN DECIDING THAT PETITIONERS
WITHDRAWAL OF THEIR NOTICE OF
APPEAL AND SUBSTITUTING IT BY
PETITION
FOR
CERTIORARI
IS
PROCEDURALLY IMPERMISSIBLE.

2. THE HONORABLE COURT OF APPEALS

ERRED IN NOT DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED
HIS DISCRETION WHEN HE DECLARED
THE OBLIGATION OF THE DEFENDANTS IN
CIVIL CASE NO. 23-377 AS JOINT AND NOT
SOLIDARY.

CONSIDERING
THE
PRO INTERESSE SUO.[16]

SAME

AS

The Ruling of the Court

We find the petition without merit.
At the outset, the Court notes that the petition supposedly filed by petitioners
Jocson and Tuising was not signed by Jocsons counsel. It was Tuisings counsel
who signed in behalf of Jocsons counsel. Tuisings counsel had no authority to sign
the petition in behalf of Jocson. The records are bereft of any proof that Jocson ever
authorized Tuisings counsel to be her counsel or to act in her behalf. Under Section
3, Rule 7 of the Rules of Civil Procedure, [17] every pleading must be signed by the
party or counsel representing him, otherwise the pleading produces no legal effect.
Furthermore, only Tuising signed the Verification and Certification for NonForum Shopping. Jocson did not sign the Verification and Certification. Section 1,
Rule 45 of the Rules of Civil Procedure requires the petition for review on certiorari
to be verified.[18] A pleading required to be verified which lacks proper verification
shall be treated as an unsigned pleading.[19] Although Tuising belatedly filed on 24
September 2004 a Special Power of Attorney allegedly signed by Jocson and
authorizing Tuising to file the petition for review and to verify and to certify the
petition, no explanation was given by Tuising why the Special Power of Attorney
was belatedly filed four months after the petition for review was filed on 12 May
2004. The lack of a certification against forum shopping or a defective certification is
generally not curable by its subsequent submission or correction, unless there is a
need to relax the rule under special circumstances or for compelling reasons.[20] We
find no compelling reason for a liberal application of the rules especially in this case
where the petitioner who did not sign the verification and certification for non-forum
shopping already filed with the trial court a Motion for Issuance of Alias Writ of
Execution. By filing the Motion for Issuance of Alias Writ of Execution, Jocson was
in effect abiding by the Court of Appeals Decision dated 16 January 2004.
In Athena Computers, Inc. v. Reyes,[21] the Court held that the appellate court
was correct in dismissing the petition where the verification and certification for nonforum shopping were signed by only one of the two petitioners. The Court held:
The verification of the petition and certification on nonforum shopping before the Court of Appeals were signed only
by Jimenez. There is no showing that he was authorized to
sign the same by Athena, his co-petitioner.

3. THE HONORABLE COURT OF APPEALS

ERRED IN [NOT] DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED
HIS DISCRETION IN DENYING THE
MOTION FOR A BREAK-OPEN AND
DECLARING THE EXECUTION SALE
CONDUCTED ON FEBRUARY 21, 2003
NULL AND VOID AND THE CERTIFICATE
OF SALE AWARDED TO PETITIONER
TUISING CANCELLED.

Section 4, Rule 7 of the Rules states that a pleading is verified by an affidavit

that the affiant has read the pleading and that the allegations therein are true and
correct to his knowledge and belief. Consequently, the verification should have been
signed not only by Jimenez but also by Athenas duly authorized representative.

4. THE HONORABLE COURT OF APPEALS

ERRED IN NOT DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED
HIS DISCRETION IN GRANTING THE
PRAYER
FOR
SATISFACTION
OF
JUDGMENT DESPITE RECEIPT OF
PETITIONER JOCSON OF THE PROCEEDS
OF THE SALE AS EVIDENCED BY THE
ACKNOWLEDGMENT RECEIPT.

[22]

5. THE HONORABLE COURT OF APPEALS

ERRED IN NOT DECIDING THAT THE
RESPONDENT JUDGE GRAVELY ABUSED
HIS DISCRETION IN DENYING THE
MOTION FOR INTERVENTION AND IN NOT

The certification of non-forum shopping is rooted in the principle that a partylitigant should not be allowed to pursue simultaneous remedies in different fora, such
act being detrimental to an orderly judicial procedure. [23] The petition, signed only by
Tuisings counsel, conveniently failed to mention the fact that on 23 February 2004,
prior to the filing of the petition, Jocson already filed with the trial court a Motion for
Issuance of Alias Writ of Execution which reads:

In Docena v. Lapesura, we ruled that the certificate of non-forum shopping

should be signed by all the petitioners or plaintiffs in a case, and that the signing by
only one of them is insufficient. The attestation on non-forum shopping
requires personal knowledge by the party executing the same, and the lone signing
petitioner cannot be presumed to have personal knowledge of the filing or non-filing
by his co-petitioners of any action or claim the same as similar to the current petition.

In this case, the flaw is fatal considering that Jocson, the co-petitioner who did
not sign the verification and certification of non-forum shopping and whose counsel
did not sign the petition, was the principal party in the original case. Jocson was the
plaintiff in the trial court who sought reconveyance of her properties while her copetitioner Tuising was not a party in the original case but was merely the highest
bidder in the execution sale which was declared void by the trial court.

Page 13 of 51

MOTION FOR ISSUANCE OF ALIAS WRIT OF EXECUTION

PLAINTIFF, by counsel, respectfully states:
1. The Court of Appeals had ruled finally that the DECISION can be implemented
only as against defendant Marcelo Steel Corporation and the RTC Sheriff of
Manila, in levying the properties of the two defendant corporations, violated the
dispositive portion of the decision because there is no showing that their liability
is solidary. (CA-G.R. SP-No. 79179);
2. There is need, therefore, to execute the decision as against the other
defendant MARIA CRISTINA FERTILIZER CORPORATION.
WHEREFORE, premises considered, it is respectfully
prayed that an ALIAS WRIT OF EXECUTION be issued to
implement the decision as against defendant MARIA
CRISTINA FERTILIZER CORPORATION.[24]
Clearly, such an action is incompatible with this petition for review. Even at the
appellate courts level, the Motion for Reconsideration [25] supposedly filed by
petitioners Jocson and Tuising on 3 February 2004 was also signed by Tuisings
counsel only.[26] Jocsons filing of a Motion for Issuance of Alias Writ of Execution to
implement the decision as against MCFC clearly indicates that she already acceded
to the Court of Appeals Decision dated 16 January 2004 and no longer intended to
move for its reconsideration, much less appeal to this Court. Besides, a party should
not be allowed to abuse and make a mockery of the judicial process by pursuing
simultaneous and incompatible remedies in different courts.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 16
January 2004 and the Resolution dated 25 March 2004 of the Court of Appeals in
CA-G.R. SP No. 79179.
SO ORDERED.

Page 14 of 51

[G.R. No. 157195. April 22, 2005]

VICAR

INTERNATIONAL CONSTRUCTION, INC., and CARMELITA V.

LIM, petitioners, vs. FEB LEASING AND FINANCE CORPORATION
(now BPI LEASING CORPORATION), respondent.

DECISION
PANGANIBAN, J.:
Once more, the Court stresses that procedural rules must be used to
promote, not obstruct, substantial justice. The failure to attach the Resolution
authorizing herein individual petitioner to represent herein corporate petitioner is,
under the circumstances, excusable. The immediate correction of the defect should
have been deemed sufficient compliance with the rules.
The Case
Before us is a Petition for Review on Certiorari[1] pursuant to Rule 45 of the
Rules of Court, seeking to reverse and set aside two Resolutions [2] of the Court of
Appeals (CA) dated October 23, 2002[3] and February 7, 2003,[4] in CA-GR SP No.
73117. The earlier Resolution reads:
The instant petition for certiorari is hereby DISMISSED for lack of proper verification
and certification against forum shopping as the same was executed by Carmelita V.
Lim, one of the petitioners, without showing any authority from petitioner corporation
to sign for and on its behalf.[5]
The second assailed Resolution denied petitioners Omnibus Motion for
Reconsideration and for Admission of the Attached Secretarys Certificate.

In the course of the second (replevin) case, the trial court issued several
Orders pertaining to the possession/custody of eight (8) units of the subject
equipment. In an Order dated August 2, 2002, the regional trial court (RTC)
quashed the property counterbond filed by Vicar and denied the latters Motion to
Dismiss the Complaint, which was grounded on forum shopping. In an Order dated
September 30, 2002, the RTC denied the corporations Motion for Reconsideration
and Motion for Voluntary Inhibition of the trial judge.
On October 3, 2002, Vicar filed a Petition for Certiorari before the Court of
Appeals, to stop the implementation of the Writ of Replevin issued against the
subject equipment.
Ruling of the Court of Appeals
The Petition was, however, instantly dismissed by the CA in its herein assailed
Resolution dated October 23, 2002, because the Verification and the Certification
against forum shopping had been executed by Petitioner Carmelita V. Lim without
any showing that she had the authority to sign for and on behalf of petitionercorporation.
On November 23, 2003, the day after receiving its copy of the Resolution,
Vicar filed an Omnibus Motion for Reconsideration and for Admission of the
Attached Secretarys Certificate. Nevertheless, the CA denied the Omnibus Motion
in this wise:
The belated filing by the petitioners of the Certification of their Corporate Secretary,
to the effect that petitioner Carmelita Lim has been duly authorized by petitioner
corporation to file the subject petition for certiorari, did not cure the defect of said
petition. Absent any compelling reason for petitioners failure to comply at the first
instance with the required certification, we cannot, therefore, accept their
subsequent compliance.[9]

The Facts
This controversy originated from a Complaint[6] for unjust enrichment and
damages, filed in the Regional Trial Court of Makati by herein petitioner, Vicar
International Construction, Inc. (Vicar), against Respondent FEB Leasing and
Finance Corporation (now BPI Leasing Corporation) and the Far East Bank and
Trust Company. In turn, FEB Leasing and Finance Corporation filed a
Complaint[7] against Vicar, Carmelita Chaneco Lim and one John Doe, for a sum of
money, damages and replevin.
These Complaints stemmed from loans obtained from FEB by Vicar, a
corporation engaged in the construction business, for the purchase of certain heavy
equipment. In obtaining the loans, Deeds of Absolute Sale with a lease-back
provision were executed by the parties. In those Deeds, Vicar appears to have sold
to FEB the equipment purchased with the loan proceeds and, at the same time,
leased them back.[8] For the total loan of P30,315,494, Vicar claims to have paid FEB
an aggregate amount of P19,042,908 in monthly amortizations.
Nevertheless, FEB maintains that Vicar still had an outstanding balance of
about P22,000,000, despite the extrajudicial foreclosure of sixty-three (63)
subdivision lots. These lots, comprising an aggregate area of 20,300 square meters
in Calamba, Laguna, were used by the corporation as additional collateral. As a
consequence, the auction sale produced P17,000,000 which, Vicar claims, should
have been applied to its loans.

Hence, this Petition.[10]

The Issues
Petitioners raise the following issues for our consideration:
A.
Whether compelling reasons exist which warrant the liberal construction of the
Petition for Certiorari.
B.
Whether petitioners subsequent submission of the secretarys certificate is a
sufficient compliance with the requirement of the law.
C.
Whether the policy of the law is to afford a party the fullest opportunity to establish
the merits of his case.[11]
In short, the principal issue is whether the Court of Appeals erred in summarily
dismissing the Petition for Certiorari.
The Courts Ruling

Page 15 of 51

The present Petition for Review is meritorious.

Main Issue:
Propriety of Summary Dismissal
Petitioners assert that Carmelita V. Lim was duly authorized to execute, for
and on behalf of Vicar, the Verification and Certification against forum shopping.
Attached to the Petition and signed by Petitioner Lim was the
Verification/Certification, in which was explicitly stated the authorization and
affirmation, as follows:
x x x. I am likewise duly authorized to execute this Verification/Certification in behalf
of petitioner Vicar International Construction, Inc. x x x.
This statement was supported by Vicars board of directors, who unanimously
approved a Resolution dated October 2, 2002, which reads thus:
NOW THEREFORE, BE IT RESOLVED, as it is hereby resolved, that the
Corporation be authorized to file a Petition for Certiorari before the Court of Appeals
for the purpose of annulling or setting aside the Orders dated 2 August 2002 and 30
September 2002 rendered by Branch 150 of the Regional Trial Court of Makati in
connection with Civil Case No. 02-357 entitled FEB Leasing & Finance Corporation,
Plaintiff vs. Vicar International Construction, Inc. et al., Defendants.
RESOLVED further, that the President/General Manager Carmelita V. Lim is hereby
authorized to execute and sign any and all documents necessary for filing of the
Petition for Certiorari, including the verification and certification against forum
shopping.[12]
Petitioners candidly admit that they inadvertently failed to attach the above
Resolution to their CA Petition. In preparing the Petition, their counsel supposedly
worked overnight without sleep. She wanted to file it immediately to avoid the trial
courts quashal of their counterbond and, thus, the immediate seizure of their
equipment -- their only means of livelihood.
Their counsel allegedly believed in good faith that the secretarys Certificate
was attached to the Petition. When they received a copy of the October 23, 2002
CA Resolution on November 11, 2002, they lost no time in filing the following day
their Omnibus Motion for Reconsideration and for Admission of the Attached
Secretarys Certificate.
Petitioners submit that the foregoing circumstances constitute compelling
reasons to justify setting aside the procedural defect, pursuant to Ramos v. Court of
Appeals.[13]
Further, citing Yap v. Baldado,[14] they contend that their posthaste submission
of the secretarys Certificate, albeit after the filing of their Petition, constitutes
substantial compliance with the requirements of the law. Finally, they aver that
pursuant to the policy of the law to afford parties the fullest opportunity to establish
the merits of their case, the CA should have given due course to their Petition.
On the other hand, Respondent FEB asserts that the CAs dismissal of the
Petition -- arising from petitioners failure to attach a duly executed verification and
certification against forum shopping -- is well within the appellate courts authority,
pursuant to Sections 3 and 5 of Rule 46 of the Revised Rules of Civil Procedure.
[15]
Respondent also claims that petitioners present action before this Court seeks to
correct a perceived erroneous application by the CA of a procedural rule that is not
correctible by certiorari.

Finally, respondent alleges that the instant Petition, being based on the
ground of excusable negligence, is actually a motion for new trial. As such, the
Petition must allegedly fail, because petitioners did not execute and attach an
affidavit of merits.
The issue before us is not novel; neither are the factual circumstances that
gave rise to it.
In Shipside Incorporated v. Court of Appeals,[16] the petitioner had not attached
any proof that its resident manager was authorized to sign the Verification and the
non-forum shopping Certification, as a consequence of which the Petition was
dismissed by the Court of Appeals. Subsequent to the dismissal, however, the
petitioner filed a motion for reconsideration, to which was already attached a
Certificate issued by its board secretary who stated that, prior to the filing of the
Petition, the resident manager had been authorized by the board of directors to file
the Petition.
Citing several cases[17] excusing noncompliance with the requirement of a
certificate of non-forum shopping, the Court held that with more reason should x x x
the instant petition [be allowed,] since petitioner herein did submit a certification on
non-forum shopping, failing only to show proof that the signatory was authorized to
do so. The Court further said that the subsequent submission of the Secretarys
Certificate, attesting that the signatory to the certification was authorized to file the
action on behalf of petitioner, mitigated the oversight.
Similarly, in General Milling Corporation v. NLRC,[18] the Court of Appeals
dismissed the Petition, which was not accompanied by any board resolution or
certification by the corporate secretary showing that the person who had signed the
Certification of Non-Forum Shopping was duly authorized to represent the petitionercorporation in the case. In the Motion for Reconsideration, however, the petitioner
attached a board Resolution stating that the signatory of the Certification had been
duly authorized to do so.
Under those circumstances, the Court held that there was at least substantial
compliance with, and that there was no attempt to ignore, the prescribed procedural
requirements, except that the petition was not accompanied by a board resolution
or a secretarys certificate that the person who signed it was duly authorized by
petitioner to represent it in the case.[19]
Also, in BA Savings Bank v. Sia,[20] the Court of Appeals denied due course to
a Petition for certiorari filed by BA Savings Bank. The CAs action was grounded on
the fact that the Certification on anti-forum shopping incorporated in the Petition had
been signed merely by the banks counsel, not by a duly authorized representative,
as required under Supreme Court Circular No. 28-91. Subsequently filed by the
petitioner was a Motion for Reconsideration, to which was attached a Certificate
issued by the corporate secretary. The Certificate showed that the Resolution
promulgated by the board of directors had authorized the lawyers of petitioner to
represent it in any action or proceeding before any court, tribunal or agency; and to
sign, execute and deliver the certificate of non-forum shopping, among others.
Nevertheless, the Court of Appeals denied the Motion on the ground that Supreme
Court Revised Circular No. 28-91 requires that it is the petitioner, not the counsel,
who must certify under oath to all of the facts and undertakings required therein.
The Court again reversed the appellate court and ruled thus:
Circular 28-91 was prescribed by the Supreme Court to prohibit and penalize the
evils of forum shopping. We see no circumvention of this rationale if the certificate
was signed by the corporations specifically authorized counsel, who had personal
knowledge of the matters required in the Circular. In Bernardo v. NLRC,[21] we

Page 16 of 51

explained that a literal interpretation of the Circular should be avoided if doing so

would subvert its very rationale. Said the Court:
x x x. Indeed, while the requirement as to certificate of non-forum shopping is
mandatory, nonetheless the requirements must not be interpreted too literally and
thus defeat the objective of preventing the undesirable practice of forumshopping.[22]
Guided by the above pronouncements, the Court deems it proper and
justifiable to grant the present Petition. Clearly, petitioners did not deliberately ignore
SC Circular 28-91. In fact, a Verification/Certification, stating the information
required under the Circular, was attached to the Petition for Certiorari filed before the
CA. In that Verification/Certification signed by Petitioner Lim, she attested as
follows:
1. x x x I am likewise duly authorized to execute this Verification/Certification in
behalf of petitioner Vicar International Construction, Inc.
2. In my personal capacity and as a duly authorized representative of Vicar
International Construction, Inc., I caused the preparation of the foregoing Petition
for Certiorari.
xxx

xxx

xxx

Petitioners merely missed attaching to their Petition a concrete proof of Lims

authority from Vicar to execute the said Verification/Certification on its behalf. The
latter, however, lost no time in submitting its corporate secretarys Certificate
attesting to the fact that, indeed, Petitioner Vicars board of directors had
unanimously approved a Resolution on October 2, 2002, authorizing its president
and general manager, Carmelita V. Lim, to file the Petition and to execute and sign
x x x the verification and certification against forum shopping.
The Certificate was submitted to the CA on the day right after it had denied
the Petition. Such swiftness of action indicates that the Resolution -- authorizing
Petitioner Lim to file the Petition and execute the Verification and the Certification
against forum shopping on behalf of Petitioner Vicar -- did exist at the time the
Petition was filed. Such fact also lends credence to the assertion of petitioners that it
was only due to inadvertence and oversight that they failed to attach the Secretarys
Certificate to their Petition for Certiorari.
In closing, the Court stresses once more that technical rules of procedure
should be used to promote, not frustrate, justice. While the swift unclogging of court
dockets is a laudable objective, the granting of substantial justice is an even more
urgent ideal.[23] Rules of procedure are but tools designed to facilitate, not obstruct,
the attainment of justice.
WHEREFORE, the Petition is GRANTED, and the appealed Resolutions
are REVERSED and SET ASIDE. The case is REMANDED to the Court of Appeals,
which is directed to continue the proceedings in CA-GR SP No. 73117 with
deliberate speed. No costs.
SO ORDERED.

Page 17 of 51

[5]

[G.R. No. 135042. September 23, 1999]

ROBERN DEVELOPMENT CORPORATION, petitioner, vs. JUDGE JESUS V.
QUITAIN, Regional Trial Court of Davao City, Br. 15; and NATIONAL
POWER CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
Expropriation proceedings are governed by revised Rule 67 of the 1997 Rules
of Civil Procedure which took effect on July 1, 1997. Previous doctrines inconsistent
with this Rule are deemed reversed or modified. Specifically, (1) an answer, not a
motion to dismiss, is the responsive pleading to a complaint in eminent domain; (2)
the trial court may issue a writ of possession once the plaintiff deposits an amount
equivalent to the assessed value of the property, pursuant to Section 2 of said Rule,
without need of a hearing to determine the provisional sum to be deposited; and (3)
a final order of expropriation may not be issued prior to a full hearing and resolution
of the objections and defenses of the property owner.
The Case

Before us is a Petition under Rule 45, challenging the Decision of the Court of
Appeals[1] promulgated February 27, 1998 and its Resolution promulgated July 23,
1998 in CA-GR SP-46002, which (1) dismissed the action for certiorari and
preliminary injunction filed by Robern Development Corporation ("Robern" for
brevity); and (2) effectively affirmed the Orders (dated August 13, 1997; September
11, 1997; and November 5, 1997) and the Writ of Possession (dated September 19,
1997), all issued by the Regional Trial Court of Davao City in Civil Case No. 2535697.

3. Before this Motion could be resolved, NPC filed a Motion for the Issuance
of Writ of Possession based on Presidential Decree No. 42. On July 9, 1997, NPC
deposited P6,121.20 at the Philippine National Bank, Davao Branch, as evidenced
by PNB Savings Account No. 385-560728-9.[6]
4. In its Order of August 13, 1997, the trial court denied the petitioner's Motion
to Dismiss in this wise:
This refers to the motion to dismiss. The issues raised are matters that should be
dealt with during the trial proper. Suffice it to say that [NPC] has the privilege as a
utility to use the power of eminent domain.
The motion is denied for lack of merit. The pre-trial conference shall be on August
27, 1997 at 2:30 P.M.[7]
5. On September 2, 1997, petitioner filed a Motion for Reconsideration,
pointing out that (a) the issues raised in the Motion to Dismiss could be resolved
without trial, as they could be readily appreciated on the face of the Complaint itself
vis--vis the applicable provisions of law on the matter; and (b) the grounds relied
upon for dismissing the Complaint did not require evidence aliunde.
6. On September 11, 1997, the trial court denied the Motion, as follows:
The xxx motion [of the petitioner] for reconsideration is denied for lack of
merit. Finding the xxx motion [of NPC] to be meritorious[,] let a writ of possession
issue.[8]

The assailed Decision disposed as follows:[2]

IN VIEW OF ALL THE FOREGOING, the
ordered DISMISSED. Costs against the petitioner.

alleging (a) that the Complaint suffered a jurisdictional defect for not showing that
the action bore the approval of the NPC board of directors; (b) that Nemesio S.
Caete, who signed the verification and certification in the Complaint, was not the
president, the general manager or an officer specifically authorized under the NPC
charter (RA 6395); (c) that the choice of property to be expropriated was improper,
as it had already been intended for use in a low-cost housing project, a public
purpose within the contemplation of law; and the choice was also arbitrary, as there
were similar properties available within the area.

instant

petition

is

In its assailed Resolution, the Court of Appeals denied reconsideration in this

manner:[3]
There being no compelling reason to modify, reverse or reconsider the Decision
rendered in the case dated February 27, 1998[;] the Motion for Reconsideration
posted by petitioner on March 23, 1998 is DENIED, it appearing further that the
arguments raised therein were already considered and passed upon in the aforesaid
Decision.

7. On September 22, 1997, petitioner filed a Motion for Reconsideration of

the Order of September 11, 1997, arguing among others that Section 15-A of RA
6395 was virtually amended when Caete was allowed to verify and sign the
certificate of non-forum shopping in regard to the Complaint for expropriation filed by
NPC.
8. Without awaiting the outcome of the Motion for Reconsideration, NPC filed
a Motion to Implement the Writ of Possession.
9. On September 19, 1997, in spite of petitioners opposition, the trial court
issued a Writ of Possession as follows:

The Facts

The following facts are undisputed.

1. Robern is the registered owner of a parcel of land with an area of about
17,746.50 square meters, which the National Power Corporation ("NPC" for brevity)
is seeking to expropriate. The property forms part of a proposed low-cost housing
project in Inawayan, Binugao, Toril, Davao City.
2. On June 6, 1997, NPC filed a Complaint for Eminent Domain against
Robern.[4] Instead of filing an answer, petitioner countered with a Motion to Dismiss,

WHEREAS, the applicant National Power Corporation in the above-titled case has
presented to this Court a petition praying for the issuance of a Writ of Possession of
the affected property of the xxx Robern Development Corporation, described
hereinbelow, as follows:
TCT No.

Total Area in
Square Meter

Area Affected in
Square Meter

T-251558

Page 18 of 51

(T-141754)

11,469.00

3,393.00

10,000.00

2,124.00

Third, the allegation in the Complaint that NPC sought to acquire an

easement of right-of-way through the disputed property did not preclude its
expropriation. Section 3-A of the NPC charter allowed the power company to
acquire an easement of right-of-way or even the land itself if the servitude would
injure the land.

T-251559
(T-141755)

Fourth, the issuance of the Writ of Possession was proper in view of NPCs
compliance with Section 2, Rule 67 of the 1997 Rules of Civil Procedure, by
depositing with the Philippine National Bank an amount equivalent to the assessed
value of the disputed property.

T-251556
(T-14152)

30,000.00

3,402.00

T-251555

45,000.00

8,827.50

TOTAL - -

97,371.00

Fifth, certiorari was not the proper remedy, as the Order sustaining the right to
expropriate the property was not final and could still be appealed by the aggrieved
party. The availability of appeal ruled out certiorari.

17,746.50 Total
affect

ed area

Hence, this Petition.[10]

The Issues

WHEREAS, on September 11, 1997 the court issued an Order granting the
issuance of a Writ of Possession in favor of the xxx National Power Corporation for
the immediate possession and control of the parcels of land owned by the [petitioner]
as aforestated for the construction of the Mantanao-New-Loon 138 KV Transmission
Line Project to be undertaken by the petitioner affecting 17,746.50 sq.m. of the
97,371.00 sq. meters as shown above.
NOW THEREFORE, you are hereby commanded to place [NPC] in possession and
control of the affected property consisting 17,746.50 [s]quare [m]eters of the total
area of 97,371.00 square meters described above and to eject therefrom all adverse
occupants, Robern Development Corporation and [all other] persons xxx claiming
under it.[9]

In their Memorandum,[11] petitioner raises the following issues:[12]

I WHETHER OR NOT THE QUESTIONED ORDER OF THE
RESPONDENT JUDGE DATED SEPTEMBER 11, 1997 DIRECTING THE
ISSUANCE OF A WRIT OF POSSESSION IS UNCONSTITUTIONAL,
HIGHLY IRREGULAR, ARBITRARY, AND DESPOTIC.
II WHETHER OR NOT THE COMPLAINT FILED IN THE INSTANT CASE IS
DISMISSIBLE ON ITS FACE FOR LACK OF JURISDICTION, BEING
FLAWED WITH PREMATURITY, AND VIOLATIVE OF RA 6395.

10.
On November 5, 1997, before counsel for the petitioner received
any order from the trial court directing the implementation of the Writ of Possession,
NPC occupied the disputed property.

III
WHETHER OR NOT THE COURT OF APPEALS MADE A FINDING
NOT BORNE OUT BY THE COMPLAINT, THUS IT EXCEEDED ITS
JURISDICTION AMOUNTING TO LACK OF JURISDICTION.

11.
In a Petition for Certiorari before the Court of Appeals (CA), Robern
assailed the Writ on the following grounds: (a) patent on the face of the complaint
were its jurisdictional defect, prematurity and noncompliance with RA 6395; and (b)
the issuance of the Writ of Possession was irregular, arbitrary and unconstitutional,
as the trial court had yet to fix the appropriate value for purposes of taking or
entering upon the property to be expropriated.

IV
WHETHER OR NOT THE CHOICE OF THE PROPERTY TO BE
EXPROPRIATED IS ARBITRARY.

Ruling of the Court of Appeals

Simply stated, the petition raises the following issues:

1. Were there valid grounds to dismiss the Complaint?
2. Was the Writ of Possession validly issued, considering that the trial
court had not conducted any hearing on the amount to be deposited?

The Court of Appeals upheld the trial court on the following grounds.
This Courts Ruling

First, the verification and certification of the Complaint by someone other than
the president or the general manager of NPC was not a fatal jurisdictional defect. It
was enough to allege that the expropriating body had the right of eminent
domain. The issues of whether the expropriation was properly authorized by the
board of directors and whether Caetes verification and certification of the
Complaint was likewise authorized were evidentiary and could be ruled upon only
after the reception of evidence.
Second, whether the disputed property could still be expropriated even if it
had already been intended to be used in a low-cost housing project and whether the
choice of that lot was arbitrary and erroneous, given the availability of similar
properties in the area, were factual issues that would entail presentation of evidence
by both parties.

The Court of Appeals was correct in its rulings, but in the interest of
substantial justice, the petitioner should be given an opportunity to file its answer.
First Issue:

Grounds for Dismissal

Jurisdiction

Petitioner contends that the trial court did not acquire jurisdiction over the
case because, first, Atty. Caete who signed the verification and certification of nonforum shopping was neither the president nor the general manager of NPC;

Page 19 of 51

and second, under Section 15-A of RA 6395, only the NPC chief legal counsel, under
the supervision of the Office of the Solicitor General is authorized to handle legal
matters affecting the government power corporation. On the other hand, NPC
argues that Caete, as its regional legal counsel in Mindanao, is authorized to
prepare the Complaint on its behalf.
We find the disputed verification and certification to be sufficient in
form. Verification is intended to assure that the allegations therein have been
prepared in good faith or are true and correct, not mere speculations. [13] Generally,
lack of verification is merely a formal defect that is neither jurisdictional nor fatal. Its
absence does not divest the trial court of jurisdiction. [14] The trial court may order the
correction of the pleading or act on the unverified pleading, if the attending
circumstances are such that strict compliance with the rule may be dispensed with in
order to serve the ends of justice.
The certificate of non-forum shopping directs the plaintiff or principal party to
attest under oath that (1) no action or claim involving the same issues have been
filed or commenced in any court, tribunal or quasi-judicial agency and that, to the
best of the plaintiff's knowledge, no such other action or claim is pending; (2) if there
is such other pending action or claim, a complete statement of its present status
shall be made; and (3) if it should be learned that the same or a similar action or
claim has been filed or is pending, the plaintiff shall report this fact to the court where
the complaint or initiatory pleading was filed. [15] This rule is rooted in the principle that
a party-litigant shall not be allowed to pursue simultaneous remedies in different
forums, as this practice is detrimental to orderly judicial procedure.[16] Administrative
Circular No. 04-94, which came before the 1997 Rules of Court, is deemed
mandatory but not jurisdictional, as jurisdiction over the subject or nature of the
action is conferred by law.[17]
In this case, the questioned verification stated that Atty. Caete was the acting
regional legal counsel of NPC at the Mindanao Regional Center in Iligan City. He
was not merely a retained lawyer, but an NPC in-house counsel and officer, whose
basic function was to prepare legal pleadings and to represent NPC-Mindanao in
legal cases. As regional legal counsel for the Mindanao area, he was the officer who
was in the best position to verify the truthfulness and the correctness of the
allegations in the Complaint for expropriation in Davao City. As internal legal
counsel, he was also in the best position to know and to certify if an action for
expropriation had already been filed and pending with the courts.
Besides, Atty. Caete was not the only signatory to the Complaint; he was
joined by Comie P. Doromal, OIC-assistant general counsel; and Catherine J. Pablo
-- both of the NPC Litigation & Land and Land Rights Department. They all signed
on behalf of the solicitor general in accordance with the NPC charter. [18] Their
signatures prove that the NPC general counsel and the solicitor general approved
the filing of the Complaint for expropriation. Clearly then, the CA did not err in
holding that the Complaint was not dismissible on its face, simply because the
person who had signed the verification and certification of non-forum shopping was
not the president or the general manager of NPC.
Legal Standing and Condition Precedent

Next, petitioner asserts that NPC had no legal standing to file the
expropriation case, because the Complaint did not allege that its board of directors
had authorized its filing. It added that under Section 6, RA 6395, only the board was
vested with the corporate power to sue and be sued.
The National Power Corporation explains that, like other corporate officers
and employees whose functions are defined by the board, Atty. Caete is authorized
to file the expropriation case. Even if he is not the general counsel, he has residual
authority to prepare, verify and certify the Complaint for expropriation.

We rule for the private respondent. Rule 67, Section 1 of the Rules of Court,
provides:
SECTION 1. The complaint.The right of eminent domain shall be exercised by
the filing of a verified complaint which shall state with certainty the right and purpose
of expropriation, describe the real or personal property sought to be expropriated,
and join as defendants all persons owning or claiming to own, or occupying, any part
thereof or interest therein, showing, so far as practicable, the separate interest of
each defendant. xxxx.
The foregoing Rule does not require that the Complaint be expressly
approved by the board of directors of a corporation. In any event, such authorization
is a factual issue that can be threshed out during the trial. As held by the appellate
court, the issue of whether or not the expropriation proceedings [were] authorized
by the Board of Directors or that those who signed the complaint [were] authorized
representatives are evidentiary in character determinable only in [the] trial proper.
Prematurity of the Complaint

The same ruling applies to the argument alleging prematurity of the

Complaint. Petitioner's insistence that NPC must secure the approval of the
provincial board and the municipal council is unfounded. Section 3(j), RA 6395,
merely requires that the Complaint be filed in the same manner as an expropriation
case of the national, the provincial or the municipal government. At bottom, all that
is needed is compliance with Rule 67 of the Rules of Court and
the prevailing jurisprudence on expropriation.
Defenses and Objections

Petitioner avers that the Complaint should be dismissed, because the subject
property was already committed to be used in a low-cost housing project. Besides,
there were other available properties in the area. Finally, the Complaint allegedly
sought only an easement of a right-of-way, not essentially an expropriation.
We disagree. Petitioner's argument in this case is premised on the old
rule. Before the 1997 amendment, Section 3 of Rule 67 allowed a defendant in lieu
of an answer, [to] present in a single motion to dismiss or for other appropriate relief,
all of his objections and defenses to the right of the plaintiff to take his property xxx.
A motion to dismiss was not governed by Rule 15 which covered ordinary
motions. Such motion was the required responsive pleading that took the place of
an answer and put in issue the plaintiff's right to expropriate the defendant's property.
[19]
Any relevant and material fact could be raised as a defense in a condemnation
proceeding, such as that which tended to show that (1) the exercise of the power to
condemn was unauthorized, or (2) there was cause for not taking defendants
property for the purpose alleged in the petition, or (3) the purpose for the taking was
not public in character.[20]
This old rule found basis in the constitutional provisions on the exercise of the
power of eminent domain, which were deemed to be for the protection of the
individual property owner against the aggressions of the government. [21] Under the
old rule, the hearing of the motion and the presentation of evidence followed.
However, Rule 67 of the 1997 Rules of Civil Procedure no longer requires
such extraordinary motion to dismiss. Instead, it provides:
SEC. 3. Defenses and objections. x x x x
If a defendant has any objection to the filing of or the allegations in the complaint, or
any objection or defense to the taking of his property, he shall serve his answer

Page 20 of 51

within the time stated in the summons. The answer shall specifically designate or
identify the property in which he claims to have an interest, state the nature and
extent of the interest claimed, and adduce all his objections and defenses to the
taking of his property. x x x x.
In his book on remedial law, Justice Florenz D. Regalado writes that the old
Rule was a bit confusing as the previous holdings under that former provision also
allowed the filing of another motion to dismiss, as that is understood in Rule 16, to
raise additionally the preliminary objections authorized by that Rule. Further, an
answer, which is now required, gives more leeway. First, even if it still applies the
omnibus motion rule, it allows amendments to be made within ten days from its filing.
[22]
Second, the failure to file an answer does not produce all the disastrous
consequences of default in ordinary civil actions, because the defendant may still
present evidence as to just compensation.[23]
When petitioner filed its Motion to Dismiss, the 1997 Rules of Civil Procedure
had already taken effect. Statutes regulating procedure in the courts are applicable
to actions pending and undetermined at the time those statutes were passed. [24] New
court rules apply to proceedings that take place after the date of their effectivity.
[25]
On April 8, 1997, the Court en banc issued a Resolution in Bar Matter No. 803,
declaring that the revisions in the Rules of Court were to become effective on July 1,
1997.
Accordingly, Rule 16, Section 1 of the Rules of Court, does not consider as
grounds for a motion to dismiss the allotment of the disputed land for another public
purpose or the petition for a mere easement of right-of-way in the complaint for
expropriation. The grounds for dismissal are exclusive to those specifically
mentioned in Section 1, Rule 16 of the Rules of Court, and an action can be
dismissed only on a ground authorized by this provision.[26]
To be exact, the issues raised by the petitioner are affirmative defenses that
should be alleged in an answer, since they require presentation of evidence aliunde.
[27]
Section 3 of Rule 67 provides that if a defendant has any objection to the filing of
or the allegations in the complaint, or any objection or defense to the taking of his
property, he should include them in his answer. Naturally, these issues will have to
be fully ventilated in a full-blown trial and hearing. It would be precipitate to dismiss
the Complaint on such grounds as claimed by the petitioner. Dismissal of an action
upon a motion to dismiss constitutes a denial of due process if, from a consideration
of the pleadings, it appears that there are issues that cannot be decided without a
trial of the case on the merits.[28]
Inasmuch as the 1997 Rules had just taken effect when this case arose, we
believe that in the interest of substantial justice, the petitioner should be given an
opportunity to file its answer to the Complaint for expropriation in accordance with
Section 3, Rule 67 of the 1997 Rules of Civil Procedure.
Order of Condemnation

The Court will now tackle the validity of the trial court's assailed Order of
August 13, 1997, which Respondent Court affirmed in this wise:
xxxx The denial of Roberns Motion to Dismiss [is tantamount] to a
confirmation or a determination of the authority of NPC to exercise the power
of eminent domain and the propriety of its exercise in the context of the facts
involved in the case. Under Section 4 of the present Rule 67, 1997
Rules, supra, an order sustaining the right to expropriate the property is a
final one and may be appealed by any aggrieved party (Municipality of Bian
v. Garcia, 180 SCRA 576 [1989]). xxxx.[29]

We clarify. Founded on common necessity and interest, eminent domain is

the inherent right of the state (and of those entities to which the power has been
lawfully delegated) to condemn private property to public use upon payment of just
compensation. It may appear to be harsh and encompassing, but judicial review
limits the exercise of eminent domain to the following areas of concern: (1) the
adequacy of the compensation, (2) the necessity of the taking, and (3) the public-use
character of the purpose of the taking.[30]
If there are objections and defenses that require the presentation of evidence
and the hearing of arguments, the trial court should not immediately issue an order
of expropriation. This is clearly implied in Section 4 of Rule 67, which mandates that
[i]f the objections to and the defenses against the right of the plaintiff to expropriate
the property are overruled, or when no party appears to defend as required by this
Rule, the court may issue an order of expropriation declaring that the plaintiff has a
lawful right to take the property sought to be expropriated, for the public use or
purpose described in the complaint x x x.
The Court of Appeals ruled that there were issues that required presentation
of evidence during the trial proper; namely, whether the expropriation proceeding
was authorized by the NPC board of directors, whether the property to be
expropriated was already devoted to public use, and whether the choice of the
property was arbitrary and erroneous in view of the other properties available in the
area. The necessity of the taking and the public character of the purpose of the
expropriation were still in issue and pending resolution by the trial court. To these
we add the issue of whether the taking of the disputed property would require only
an easement of right-of-way or would perpetually deprive Robern of its proprietary
rights. Therefore, the trial court should not have issued the assailed Order of
Expropriation which foreclosed any further objection to the NPCs right to expropriate
and to the public purpose of the expropriation, leaving the matter of just
compensation as the only remaining substantial issue.
The nullity of the Order was glaring. While the trial court correctly denied the
Motion to Dismiss, as the issues raised by the petitioner should be dealt with during
the trial proper, it nonetheless ruled that NPC had the privilege as a [public] utility to
use the power of eminent domain.
Second Issue

Requisites of a Writ of Possession

Petitioner objects to the issuance of the Writ of Possession for being highly
irregular, arbitrary and despotic, because the Motion to Dismiss was yet to be
resolved. It stresses that there was no hearing on the correct amount of just
compensation for the taking of the disputed property, as required in Panes v.
Visayas State College of Agriculture.[31] We cannot uphold this contention.
There is no prohibition against a procedure whereby immediate possession of
the land involved in expropriation proceedings may be taken, provided always that
due provision is made to secure the prompt adjudication and payment of just
compensation to the owners.[32] However, the requirements for authorizing immediate
entry in expropriation proceedings have changed.
To start with, in Manila Railroad Company v. Paredes,[33] the Court held that
the railway corporation had the right to enter and possess the land involved in
condemnation proceedings under Section 1, Act No. 1592,[34] immediately upon the
filing of a deposit fixed by order of the court.
The Rules of Court of 1964[35] sanctioned this procedure as follows:

Page 21 of 51

SEC. 2. Entry of plaintiff upon depositing value with National or Provincial

Treasurer.-- Upon the filing of the complaint or at any time thereafter the plaintiff shall
have the right to take or enter upon the possession of the real or personal property
involved if he deposits with the National or Provincial Treasurer its value, as
provisionally and promptly ascertained and fixed by the court having jurisdiction of
the proceedings, to be held by such treasurer subject to the orders and final
dispositon of the court. xxxx. (Underscoring ours.)
Subsequently, former President Ferdinand E. Marcos signed into law
Presidential Decree No. 42 and its companion decrees, which removed the court's
discretion in determining the amount of the provisional value of the land to be
expropriated and fixed the provisional deposit at its assessed value for taxation
purposes. Hearing was not required; only notice to the owner of the property sought
to be condemned.
On the issue of immediate possession, PD 42 (Authorizing The Plaintiff In
Eminent Domain Proceedings To Take Possession Of The Property Involved Upon
Depositing The Assessed Value, For Purposes of Taxation) provided:
WHEREAS, the existing procedure for the exercise of the right of eminent domain is
not expeditious enough to enable the plaintiff to take or enter upon the possession of
the real property involved as soon as possible, when needed for public purposes;
xxx

xxx

xxx

xxx [T]hat, upon filing in the proper court of the complaint in eminent domain
proceedings or at anytime thereafter, and after due notice to the defendant, plaintiff
shall have the right to take or enter upon the possession of the real property involved
if he deposits with the Philippine National Bank, xxx an amount equivalent to the
assessed value of the property for purposes of taxation, to be held by said bank
subject to the orders and final disposition of the court.
The provisions of Rule 67 of the Rules of Court and of any other existing law
contrary to or inconsistent herewith are hereby repealed.
Paragraph 3 of PD No. 1224 (Defining The Policy On The Expropriation Of
Private Property For Socialized Housing Upon Payment Of Just Compensation) also
authorized immediate takeover of the property in this manner:
3. Upon the filing of the petition for expropriation and the deposit of the amount of
just compensation as provided for herein, the Government, or its authorized agency
or entity, shall immediately have possession, control and disposition of the real
property and the improvements thereon even pending resolution of the issues that
may be raised whether before the Court of First Instance or the higher courts.
Where the taking was for socialized housing, Section 3, PD 1259
(Amending Paragraphs 1, 2, And 3 Of PD No. 1224 Further Defining The Policy On
The Expropriation Of Private Property For Socialized Housing Upon Payment Of
Just Compensation), amending the above-quoted paragraph, provided:
Upon the filing of the petition for expropriation and the deposit of the amount of the
just compensation provided for in Section 2 hereof, the Government, or its
authorized agency or entity, shall immediately have possession, control and
disposition of the real property and the improvements thereon even pending
resolution of the issues that may be raised whether before the Court of First
Instance, Court of Agrarian Relations or the higher courts.

Defining The Policy On The Expropriation Of Private Property For Socialized

Housing Upon Payment Of Just Compensation), amending paragraph 3 of PD 1224,
decreed:
Upon the filing of the petition for expropriation and the deposit in the Philippine
National Bank at its main office or any of its branches of the amount equivalent to
ten percent (10%) of the just compensation provided for in Section 2 of Presidential
Decree No. 1259, the government, or its authorized agency or entity, shall
immediately have possession, control and disposition of the real property and the
improvements thereon with the power of demolition, if necessary, even pending
resolution of the issues that may be raised whether before the Court of First
Instance, Court of Agrarian Relations, or the higher Courts.
In this connection, we also quote Section 7 of PD No. 1517 (Proclaiming
Urban Land Reform In The Philippines And Providing For The Implementing
Machinery Thereof), which reads:
x x x

xxx

xxx

Upon the filing of the petition for expropriation and the deposit in the Philippine
National Bank at its main office or any of its branches of the amount equivalent to
ten per cent (10%) of the declared assessment value in 1975, the Government, or its
authorized agency or entity shall immediately have possession, control and
disposition of the real property and the improvements thereon with the power of
demolition, if necessary, even pending resolution of the issues that may be raised
whether before the Court of First Instance, Court of Agrarian Relations, or the higher
Courts.
Finally, PD 1533 (Establishing A Uniform Basis For Determining Just
Compensation And The Amount Of Deposit For Immediate Possession Of The
Property Involved In Eminent Domain Proceedings) mandated the deposit of only ten
percent (10%) of the assessed value of the private property being sought to be
expropriated, after fixing the just compensation for it at a value not exceeding that
declared by the owner or determined by the assessor, whichever is lower. Section 2
thereof reads:
SEC. 2. Upon the filing of the petition for expropriation and the deposit in the
Philippine National Bank at its main office or any of its branches of an amount
equivalent to ten per cent (10%) of the amount of compensation provided in Section
1 hereof, the government or its authorized instrumentality agency or entity shall be
entitled to immediate possession, control and disposition of the real property and the
improvements thereon, including the power of demolition if necessary,
notwithstanding the pendency of the issues before the courts.
Accordingly, in San Diego v. Valdellon,[36] Municipality of Daet v. Court of
Appeals,[37] and Haguisan v. Emilia,[38] the Court reversed itself and ruled that Section
2, Rule 67 of the 1964 Rules, was repealed by Presidential Decree No. 42. The
judicial duty of ascertaining and fixing the provisional value of the property was done
away with, because the hearing on the matter had not been expeditious enough to
enable the plaintiff to take possession of the property involved as soon as possible,
when needed for public purpose.[39]
In Daet, the Court clarified that the provisional value of the land did not
necessarily represent the true and correct one but only tentatively served as the
basis for immediate occupancy by the condemnor. The just compensation for the
property continued to be based on its current and fair market value, not on its
assessed value which constituted only a percentage of its current fair market value.

Similarly, Section 1, PD No. 1313 (Further Amending Paragraph 3 Of

Presidential Decree No. 1224 As Amended By Presidential Decree No. 1259,

Page 22 of 51

However, these rulings were abandoned in Export Processing Zone Authority

v. Dulay,[40] because [t]he method of ascertaining just compensation under the
aforecited decrees constitute[d] impermissible encroachment on judicial
prerogatives. It tend[ed] to render this Court inutile in a matter which under the
Constitution [was] reserved to it for final determination. The Court added:
We return to older and more sound precedents. This Court has the duty to
formulate guiding and controlling constitutional principles, precepts, doctrines, or
rules. (See Salonga v. Cruz Pano, supra).

Rule 67 of the 1997 Rules of Civil Procedure, is the prevailing and governing law in
this case.[45]
With the revision of the Rules, the trial court's issuance of the Writ of
Possession becomes ministerial, once the provisional compensation mentioned in
the 1997 Rule is deposited. Thus, in the instant case the trial court did not commit
grave abuse of discretion when it granted the NPCs Motion for the issuance of the
Writ, despite the absence of hearing on the amount of the provisional deposit.
The Court nonetheless hastens to add that PD 1533 is not being revived.

The determination of just compensation in eminent domain cases is a judicial

function. The executive department or the legislature may make the initial
determinations but when a party claims a violation of the guarantee in the Bill of
Rights that private property may not be taken for public use without just
compensation, no statute, decree, or executive order can mandate that its own
determination shall prevail over the courts findings. Much less can the courts be
precluded from looking into the just-ness of the decreed compensation.
In Province of Camarines Sur v. Court of Appeals,[41] the Court reaffirmed the
unconstitutionality of the presidential decrees that fixed the just compensation in an
expropriation case at the value given to the condemned property either by the
owners or by the assessor, whichever was lower.
More precisely, Panes v. Visayas State College of Agriculture[42] ruled that the
judicial determination of just compensation included the determination of the
provisional deposit. In that case, the Court invalidated the Writ of Possession
because of lack of hearing on the provisional deposit, as required under then Section
2 of Rule 67, pre-1997 Rules. In the light of the declared unconstitutionality of PD
Nos. 76, 1533 and 42, insofar as they sanctioned executive determination of just
compensation, any right to immediate possession of the property must be firmly
grounded on valid compliance with Section 2 of Rule 67, pre-1997 Rules; that is, the
value of the subject property, as provisionally and promptly ascertained and fixed
by the court that has jurisdiction over the proceedings, must be deposited with the
national or the provincial treasurer.[43]
However, the 1997 Rules of Civil Procedure revised Section 2 of Rule 67 and
clearly reverted to the San Diego, Daet and Haguisan rulings. Section 2 now reads:
SEC. 2. Entry of plaintiff upon depositing value with authorized government
depositary.Upon the filing of the complaint or at any time thereafter and after due
notice to the defendant, the plaintiff shall have the right to take or enter upon the
possession of the real property involved if he deposits with the authorized
government depositary an amount equivalent to the assessed value of the property
for purposes of taxation to be held by such bank subject to the orders of the
court. xxxx
xxx

xxx

xxx

After such deposit is made the court shall order the sheriff or other proper officer to
forthwith place the plaintiff in possession of the property involved and promptly
submit a report thereof to the court with service of copies to the parties.
[Underscoring ours.]
In the present case, although the Complaint for expropriation was filed on
June 6, 1997, the Motion for the Issuance of the Writ of Possession was filed on July
28, 1997; thus, the issuance of the Writ is covered by the 1997 Rules. As earlier
stated, procedural rules are given immediate effect and are applicable to actions
pending and undetermined at the time they are passed; new court rules apply to
proceedings that take place after the date of their effectivity.[44] Therefore, Section 2,

Under Section 2, Rule 67 of the 1997 Rules, the provisional deposit should be
in an amount equivalent to the full assessed value of the property to be condemned,
not merely ten percent of it. Therefore, the provisional deposit of NPC is
insufficient. Since it seeks to expropriate portions, not the whole, of four parcels of
land owned by Robern, the provisional deposit should be computed on the basis of
the Tax Declarations of the property:[46]
TCT No. Total Area

Area Affected Assessed

in Sq. M.

in Sq. M.

Provisional

Value

Deposit

T-251558
(T-141754)

11,469.00

3,393.00

P4,250.00

P1,257.32

10,000.00

2,124.00

8,960.00

T-251559
(T-141755)

1,903.10

T-251556
(T-14152) 30,000.00

3,402.00

18,910.00

2,144.39

T-251555

8,827.50

18,450.00

3,619.28

TOTAL

45,000.00
97,371.00

17,746.50

P8,924.09

Hence, the amount of the provisional deposit should be increased, in order to

conform to the requirement that it should be equivalent to the assessed value of the
property. In the interest of justice, NPC should in the meantime pay Robern
reasonable rental, to be fixed by the trial court in its final decision, for the use and
occupation of the disputed property from the date of entry until the deposit of the full
assessed value of the property, as mandated by Rule 67.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals
in CA-GR SP-46002 are AFFIRMED with the following MODIFICATIONS: (1)
petitioner is granted a period of ten days from the finality of this Decision within
which to file its answer, in accordance with Rule 67 of the 1997 Rules of Court; (2)
NPC shall deposit, also within ten days from the finality if this Decision, the full
amount required under the aforecited Rule; and (3) the trial court shall, in its final
decision, fix the rental for the use and the occupation of the disputed property, from
the date of NPCs entry until its deposit of the full amount required under the 1997
Rules. No costs.
SO ORDERED.

Page 23 of 51

Page 24 of 51

G.R. NO. 103215 November 6, 1992

MARANAW HOTELS AND RESORTS CORPORATION (CENTURY PARK
SHERATON
MANILA), petitioner,
vs.
COURT OF APPEALS, HON. SANTIAGO O. TAADA (Voluntary Arbitrator) and
GREGORIO GALE,respondents.

BELLOSILLO, J.:
For blurting out offensive remarks 1 against his supervisors in their absence but
promptly reported to them, private respondent Gregorio Gale, a roomboy at the fivestar Century Park Sheraton Manila owned and operated by petitioner Maranaw
Hotels and Resorts Corporation, was dismissed for "discourtesy and use of
disrespectful and impolite language against a superior which constitutes gross
misconduct."
Gregorio Gale subsequently instituted a complaint for illegal dismissal which,
conformably with their collective bargaining agreement, was then submitted to retired
Judge Santiago O. Taada for voluntary arbitration.
On 13 December 1989, after hearing and the submission of the evidence, position
papers and memoranda of the parties, Voluntary Arbitrator Taada rendered a
decision pertinent portions of which read
After going over the evidence adduced by the parties, the
Arbitrator finds no evidence that there was fighting, nor
challenging to a fight, no assaulting nor intimidation of coemployees or supervisors within the hotel premises. What was
established as per evidence on record was more of
discourtesy, and use of disrespectful and impolite language
uttered by complainant which falls under Section 2, Rule VI of
the Rules of the Hotel and carries the penalty of 7 days of
suspension for first offense. The evidence shows it was a first
offense.
IN VIEW OF THE FOREGOING, the Arbitrator finds and so
holds that complainant Gregorio Gale has violated Section 2,
Rule VI of the Rules of the Hotel and orders his suspension for
a period of seven (7) days. However, as per admission of the
parties, Mr. Gale has already been dismissed. In case
complainant Mr. Gale has been out of his job as roomboy of
the Hotel for more than that period of 7 days, his immediate
reinstatement is hereby ordered with right to collect his share
in the service charge. 2
Its motion for reconsideration having been denied by the Voluntary Arbitrator,
petitioner filed before this Court a motion for extension of time to file a petition
for certiorari, which We referred to the Court of Appeals for resolution. On 24
October 1991, after taking cognizance of the case and thereafter receiving the
parties' respective memoranda, the appellate court 3 dismissed the petition for lack of
merit, 4 and on 4 December 1991 denied petitioner's motion for
reconsideration. 5 Hence, this petition for review alleging that respondent appellate
court erred in not imposing the penalty of dismissal upon private respondent
considering that he was found guilty of gross misconduct, and in allowing him to
collect his share in the service charge.

The petition should have been dismissed outright for We see no reason to reverse
the appellate court in its finding that there was no grave abuse of discretion on the
part of the Voluntary Arbitrator.
As in the case of a labor arbiter, the conclusions of a voluntary arbitrator, when they
are sufficiently corroborated by the evidence on record, should similarly be
respected by appellate tribunals since he is also in a vantage position to assess and
evaluate the credibility of the contending parties.
We have also emphasized the rule that decisions of voluntary arbitrators are final
and unappealable except when there is want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice, or erroneous
interpretation of the law. 6 None of the exceptions lie in the case before Us.
Indeed, the discharge of an employee who uttered unfelicitous remarks against his
supervisors, in general, for strictly enforcing company rules against union members,
but who thereafter apologized, is too harsh. We have held time and again that it is
cruel to unjust to mete out the drastic penalty of dismissal if it is not proximate to the
gravity of misdeed. 7 The reason as We concluded in Almira v. B.F. Goodrich
Philippines, Inc. 8 is that
(W)here a penalty less punitive would suffice, whatever
missteps may be committed by labor ought not to be visited
with a consequence so severe. It is not only because of the
law's concern for the workingman. There is, in addition, his
family to consider. Unemployment brings untold hardships and
sorrows on those dependent on the wage-earner. The misery
and pain attendant on the loss of jobs then could be avoided if
there be acceptance of the view that under all circumstances
of this case, petitioners should not be deprived of their means
of livelihood. Nor is this to condone what had been done by
them . . . From the strictly juridical standpoint, it cannot be too
strongly stressed, to follow Davis in his masterly work,
Discretionary Justice, that where a decision may be made to
rest on informed judgment rather than rigid rules, all the
equities of the case must be accorded their due weight.
Finally, labor law determinations, to quote from Bultmann,
should be not only secundum rationem but also secundum
caritatem.
Thus, in Foodmine, Incorporated v. NLRC 9 We ruled that granting that the
unsubstantiated claims of a co-employee that she was slapped on the cheek and
thereafter her left breast grabbed and pulled were true, the penalty of removal from
employment was not commensurate to the misconduct allegedly committed.
In Rubberworld (Phil.), Inc. v. NLRC 10 We said that assuming that private
respondent posted entries in the stock cards without counter-checking the actual
movement status of the items in the warehouse, thereby resulting in unmanageable
inaccuracies in the data posted in the stock cards, his dismissal was not justified as
he did not appear to be an incorrigible offender nor did his negligence cause serious
damage to the company.
Then in PT&T v. NLRC 11 We held that even considering that there may have been
valid grounds for private respondent's discharge, the imposition of such supreme
penalty would certainly be very harsh and disproportionate to the infraction
committed, specially since it was his first offense.
The case at bar is akin to the aforementioned cases.

Page 25 of 51

We do not agree with petitioner's submission that private respondent's reinstatement

will not conduce to industrial peace and harmony in the hotel due to strained
relations. Simply, the cases cited by petitioner are misplaced. We are not unmindful
of the "strained relations" brought about by the filing of the case and the underlying
causes. Indeed, relations may have become acrimonious and hostile. However, the
doctrine of strained relations cannot be applied with impunity lest We trifle with the
rights of wage earners by authorizing management to indiscriminately dismiss them
and thereafter provide the employer with the convenient and ready excuse not to
reinstate them. On the contrary, We have to exercise extreme caution in this regard.
As the Court reasoned inGlobe-Mackay Cable and Radio Corporation v. NLRC 12
Obviously, the principle of strained relations' cannot be applied
indiscriminately. Otherwise, reinstatement can never be
possible simply because some hostility is invariably
engendered between the parties as a result of litigation. That
is human nature.
Indeed, "strained relations" may be invoked only against employees whose positions
demand trust and confidence, or whose differences with their employer are of such
nature or degree as to preclude reinstatement. In the instant case, however, the
relationship between private respondent, a roomboy, and management was clearly
on an impersonal level. 13 Gale did not occupy such a sensitive position as would
require complete trust and confidence, where personal ill will would preclude his
reinstatement. Hence, in Panday v. NLRC 14 We ruled that "[i]f the respondent had
been a laborer, clerk or other rank-and-file employee, there would be no problem in
ordering her reinstatement with facility." Neither is the enmity of such degree as to
prevent private respondent's reinstatement. 15
We do not concur with petitioner that private respondent is not entitled to his share in
the service charge. As pointed out by the Court of Appeals, that private respondent
was entitled to his share in the service charge collected during the period he was
illegally dismissed finds support in the provisions of their collective bargaining
agreement. Hence, We will not disturb this factual finding.
Interestingly, however, petitioner alleges that private respondent continued to receive
his monthly salary from his dismissal on 4 December 1987 to 15 January 1992,
which amounted to a total of P76,598.46, conformably with their agreement
"concluded between the Hotel and the Union so that the Union may withdraw its
notice of strike from the Department of Labor and Employment and not to go on
strike," 16 notwithstanding the fact that shortly after his separation he joined the
Armed Forces of the Philippines from which he also received renumeration. This
allegation does not only remain unrefuted but is, in fact, implicitly admitted by private
respondent in his pleadings filed with respondent court. By his implied admission,
private respondent, thus, acknowledges that he received double compensation,
which may also explain why the Voluntary Arbitrator, after ordering the former's
reinstatement, did not rule on the payment of backwages. The matter of double
compensation cannot be countenanced not because We fault private respondent
for not remaining idle during the pendency of his case but because he should not
be allowed to unjustly enrich himself at the expense of petitioner who continues to
pay his salary despite his dismissal.
Thus, in PAL v. PALEA 17 We concluded that under the principle that no one should
be permitted to feather his nest to the disadvantage of another, and proceeding form
the law's traditional aversion to double payment, it is neither fair nor just that the
reinstated workers who have not rendered any service to the employer, who
apparently dismissed them in good faith, should receive relatively sizeable amounts
in backwages, and at the same time keep the salary and other monetary benefits
they had earned elsewhere during their layoff which they could not have obtained
had they remained in the employ of their employer.

In Itogon-Suyoc Mines, Inc. v. Sangilo-Itogon Worker's Union, 18 We restated these

guidelines
First. To be deducted from the back wages accruing to each of
the laborers to be reinstated is the total amount of earnings
obtained by him from other employment(s) from the date of
reinstatement. Should the laborer decide that it is preferable
not to return to work, the deduction should be made up to the
time judgment becomes final. And these, for the reason that
employees should not be permitted to enrich themselves at
the expense of their employer. Besides, there is the law's
abhorrence for double compensation.
Second. Likewise, in mitigation of the damages that the
dismissed respondents are entitled to, account should be
taken of whether in the exercise of due diligence respondents
might have obtained income from suitable remunerative
employment. We are prompted to give out this last reminder
because it is really unjust that a discharged employee should,
with folded arms, remain inactive in the expectation that a
windfall would come to him. A contrary view would breed
Idleness; it is conducive to lack of initiative on the part of a
laborer.
We reiterated the principle against unjust enrichment in East Asiatic Co.,
Ltd. v. CIR 19
In other words, the just and equitable rule regarding the point
under discussion is this: It is the obligation of the employer to
pay an illegally dismissed employee or worker the whole
amount of the salaries or wages, plus all other benefits and
bonuses and general increases, to which he would have been
normally entitled had he not been dismissed and had not
stopped working, but it is the right, on the other hand, of the
employer to deduct from the total of these, the amount
equivalent to the salaries or wages the employee or worker
would have earned in his old employment on the
corresponding days that he was actually gainfully employed
elsewhere with an equal or higher salary or wage, such that if
his salary or wage in his other employment was less, the
employer may deduct only what has been actually earned.
Although the principle that no one should be allowed to enrich himself at the
expense of another has thus far endured, We have, however, modified the rule. In
the course of time We have adopted the policy of fixing the amount of backwages at
a just and reasonable level without qualification or deduction so as to free the
employees from the burden of proving their earnings during their layoffs and the
employer from submitting counter proofs and thus obviate the twin evils of idleness
on the part of employees and attrition and delay by the employer in satisfying the
award. This practice has been hailed as a realistic, reasonable and mutually
beneficial solution. An award of backwages equivalent to three (3) years (where the
case is not terminated sooner) serves as the base figure, without qualification or
deduction. 20
This is not to overlook the passage of R.A. 6715, amending among others Art. 279 of
the Labor Code, which now provides
Art. 279. Security of Tenure. In cases of regular
employment, the employer shall not terminate the services of
an employee except for just cause or when authorized by this

Page 26 of 51

Title. An employee who is unjustly dismissed from work shall

be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of his actual reinstatement.
(Emphasis supplied).
But as We resolved in Sealand Service, Inc. v. NLRC 21
[I]t may be mentioned in passing that the amendatory
provision in R.A. 6715, which entitled an employee who is
unjustly dismissed from work to his full backwages inclusive of
allowance, and to his other benefits or their monetary
equivalent computed from the time his compensation was
withheld from him up to the time of actual reinstatement has
no application in the case at bar, said amendment having
taken effect on March 21, 1989, after the decision sought to be
enforced in the case had become final and executory. We
have ruled inLantion, et al. v. NLRC, et al., that said
amendment has no retroactive application.
Perforce, except for Balasbas vs. NLRC, 22 We have refrained from
awarding full backwages unless the unlawful dismissal occurred on 21
March 1989 or thereafter.
And while We have continued applying the rule in New Manila Candy Workers Union
(Naconwa-Paflu) v. CIR 23 in some cases, e.g., Panday v. NLRC 24 where five (5)
years' backwages were decreed on account of employer's unfair labor practice and
evident bad faith, the general rule remains: where the illegal dismissal transpired
before the effectivity of R.A. 6715, or before 21 March 1989, the award of
backwages in favor of the dismissed employee is limited to three (3) years without
deduction or qualification. 25
In the case before Us, since the illegal dismissal of private respondent occurred on 4
December 1987, or before R.A. 6715 took effect on 21 March 1989, he is entitled
only to three (3) years' backwages, inclusive of all allowances and other benefits,
without deducting any renumerations he may have received as member of the
Armed Forces of the Philippines, or from any other employment, and not to his full
wages from the time he was dismissed up to the present. Certainly, private
respondent cannot be allowed to receive salary from petitioner for the whole duration
that he was not working as roomboy by reason of his unjust dismissal, while at the
same time, draw compensation as member of the Armed Forces of the Philippines
which would not have been possible had he continued to work for petitioner; for that
would be unjust enrichment. Consequently, if private respondent already received
more than what he is entitled to in accordance herewith, he should reimburse
petitioner such amount in excess of what is due him; otherwise, petitioner should
make good the corresponding deficiency.
WHEREFORE, except as herein above modified, the Decision of 24 October 1991
and the Resolution of 4 December 1991 of respondent Court of Appeals are hereby
AFFIRMED. No costs.
SO ORDERED.

Page 27 of 51

G.R. No. 153785 August 3, 2006

VERONIQUE
T.
HUIBONHOA, Petitioner,
vs.
ANGEL D. CONCEPCION, and HON. RAYMUNDO Z. ANNANG, in his capacity
as Presiding Judge of the Regional Trial Court of Cabanatuan City, Branch
86, Respondents.
RESOLUTION
TINGA, J.:
This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure assailing the Decision of the Court of Appeals (CA) in CA-G.R. SP No.
65718 promulgated on March 12, 2002 and its Resolution dated May 27, 2002,
denying petitioners motion for reconsideration of said Decision. The CA Decision
denied the petition for certiorari filed by Veronique T. Huibonhoa, herein petitioner,
which assailed the Orders dated July 13, 2001 and July 17, 2001 issued by Judge
Raymundo Annang in his capacity as Acting Executive Judge of the Regional Trial
Court (RTC) of Cabanatuan City.
The instant petition stemmed from a complaint for accounting and damages filed by
respondent Angel D. Concepcion, Sr. against petitioner Veronique T. Huibonhoa. The
complaint was filed with the RTC of Cabanatuan City on July 13, 2001 and prayed
for the issuance of a preliminary injunction and preliminary mandatory injunction to
immediately restrain Huibonhoa from performing her job as manager of Poulex
Supermarket, among others. On the same day the complaint was filed, Judge
Annang issued a temporary restraining order (TRO) effective for seventy-two (72)
hours. The pertinent portion of the July 13, 2001 Order reads:
WHEREFORE, premises considered, temporary restraining order is hereby issued
effective for seventy two hours from this order restraining and prohibiting defendant
Veronique T. Huibonhoa from occupying and performing her position as Manager of
the Poulex Supermarket and from suppressing, concealing and falsifying the
records; and, further, said defendant is hereby ordered to submit formal turn-over of
all cash and other cash items and all management and accounting records accruing
for the business operation of the [sic] Poulex Supermarket for the period of, from
November, 2000 up to the present. Further, defendant Sphinx Security Agency is
hereby ordered to allow the plaintiff or his authorized representative/s to enter the
[sic] Poulex Supermarket as Director of the CHAS, Inc., among others, until further
order from this Court. Likewise, Sphinx Security Agency is hereby restrained from
interfering and/or preventing the implementation of the orders of Angel D.
Concepcion, Sr. in his capacity as Chairman-President of CHAS, Inc. 1
On July 16, 2001, Huibonhoa, along with fellow stockholders of CHAS, Inc., CHAS
Enterprise Corporation and CHAS Realty and Development Corporation, filed an
intra-corporate and derivative suit and complaint for injunction with a prayer for
temporary restraining order and/or writ of preliminary injunction to prevent
respondent Concepcion, Sr. and his agents from interfering with the management
and operations of the Poulex Supermarket. The complaint was docketed as Civil
Case No. 4068-AF.
On July 17, 2001, Huibonhoa filed an Urgent Manifestation and Motion Ex
Abundante Ad Cautelam, seeking the issuance of an order certifying the expiration of
the TRO. Thus, Judge Annang issued on the same day an order declaring the
expiration of the temporary restraining order but at the same time directing the
continuous closure of the supermarket. The July 17, 2001 Order reads in part:

For being meritorious, it is hereby declared that the seventy-two (72) hour TRO
effective for only seventy-two hours from its issuance has already expired on July
16, 2001 at 5:00 p.m.
Considering the fact that the [sic] Poulex Supermarket had already been padlocked
on July 16, 2001 after 5:00 P.M. according to the said motion and manifestation of
defendant Veronique T. Huibonhoa, the same should remain closed in the interest of
justice and in order not to create further confusion. Anyway, this case will be raffled
tomorrow, July 18, 2001 at 10:00 A.M. in accordance with the Rules. 2
On July 18, 2001, respondent Concepcions complaint for accounting and damages,
docketed as Civil Case No. 4065, was raffled to Branch 28 of the RTC-Cabanatuan
City, the branch designated to decide cases formerly cognizable by the Securities
and Exchange Commission.
On July 20, 2001, Huibonhoa filed a petition for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 65718. The petition sought to annul the July 13 and
July 17 Orders of Judge Annang for having been issued with grave abuse of
discretion amounting to lack and/or excess of jurisdiction. Huibonhoas prayer for the
issuance of a temporary restraining order was granted in a Resolution issued on July
23, 2001. The CA Resolution enjoined respondents from implementing and/or
enforcing the assailed orders of Judge Annang, including but not limited to the
prevention of the breaking of the padlock and reopening of Poulex Supermarket, and
interference by respondent Concepcion and his agents with the operations of the
supermarket.
On March 12, 2004, the Court of Appeals dismissed Huibonhoas petition for
certiorari assailing the twin orders of Judge Annang on the grounds of pre-maturity
and forum shopping. Huibonhoa moved for its reconsideration but in the Resolution
issued on May 27, 2002, the Court of Appeals denied her motion.
Hence, Huibonhoa filed the instant petition for review on certiorari imputing the
following errors to the Court of Appeals:
I.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DISMISSING
THE PETITION ON THE GROUNDS THAT: (A) PETITIONER FAILED TO MOVE
FOR THE DISSOLUTION OF THE TEMPORARY RESTRAINING ORDER WITH
THE TRIAL COURT UNDER SECTION 6, RULE 58 OF THE RULES OF COURT;
AND THAT (B) PETITIONER IS GUILTY OF FORUM SHOPPING, CONSIDERING
THAT:
A. SECTION 6, RULE 58 OF THE RULES OF COURT IS NOT APPLICABLE TO
THE CASE.
B. THE FILING OF THE COMPLAINT IN CIVIL CASE NO. 4068-AF COULD NOT,
AS IT DID NOT, CONSTITUTE FORUM SHOPPING.
C. THE FILING OF THE PETITION FOR CERTIORARI COULD NOT, AND DID NOT
CONSTITUTE FORUM SHOPPING.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT ISSUING THE WRIT OF
CERTIORARI TO ANNUL THE 13 JULY 2001 AND 17 JULY 2001 ORDERS OF THE
TRIAL COURT. 3

Page 28 of 51

After respondent Concepcion and petitioner Huibonhoa filed a Comment and a

Reply, respectively, the Court issued a Resolution on September 28, 2005, directing
the former to show cause why the instant petition should not be dismissed for having
become moot and academic. The resolution of the petition is ultimately hinged on
the propriety of the issuance of the 72-hour restraining order, which should have
expired ipso jure on the twentieth day, a judicial declaration to that effect not being
necessary. Thus, the filing of the instant petition almost a year after the issuance of
the TRO would be unnecessary.
Huibonhoa submitted a Compliance with Motion to Clarify dated October 25, 2005,
conveying the following: (1) Huibonhoa had proposed a settlement for the parties to
dismiss their respective claims against each other; (2) upon a Joint Motion to
Dismiss by both petitioner Huibonhoa and respondent Concepcion, the trial court
issued an order dismissing Civil Case No. 4065, the complaint for accounting and
damages filed by respondent Concepcion; (3) notwithstanding the dismissal of the
pending cases, the parties did not agree to cause the dismissal of the instant
petition; (4) petitioner Huibonhoa is still seeking the reversal of the CA Decision
insofar as it ruled that she was guilty of forum shopping and a clarification on
whether her counsel will be exposed to administrative liability should the instant
petition be dismissed. 4
In dismissing the petition for certiorari, the Court of Appeals found petitioner
Huibonhoa guilty of forum shopping when she filed Civil Case No. 4068-AF with the
trial court and, thereafter, a petition for certiorari, docketed as CA-G.R. SP No.
65718, with the Court of Appeals. The appellate court believed that the two actions
had the same object of nullifying the TRO issued by Judge Annang in Civil Case No.
4065. Petitioner Huibonhoa urges the Court to evaluate the Court of Appeals finding
that she engaged in forum shopping, especially that the appellate court
characterized said act as "deliberate." She stresses that said finding and the
accompanying characterization have exposed her and her counsel to sanctions. 5
In her defense, Huibonhoa insists that Civil Case No. 4068-AF was filed not for the
purpose of defeating the TRO issued by Judge Annang on July 13, 2001 but on
account of the acts of disturbance and attempted forcible take-over by respondent
Concepcion committed on July 6,7,12 and 13, 2001. She also asserts that Civil Case
No. 4068-AF, while filed on July 16, 2001, was signed and verified on July 13, 2001
or before a copy of the July 13, 2001 TRO was served on her counsel.
Furthermore, Huibonhoa contends that in contrast, the petition for certiorari was filed
with the Court of Appeals to enjoin or prohibit acts pursuant to the implementation of
the July 13 and 17 Orders of Judge Annang, although the TROs separately prayed
for in the complaint for injunction and in the petition for certiorari effectively sought to
address the interference in the operations of the supermarket by respondent
Concepcion.
There is forum shopping when, as a result of an adverse opinion in one forum, a
party seeks a favorable opinion, other than by appeal or certiorari in another. There
can also be forum shopping when a party institutes two or more suits in different
courts, either simultaneously or successively, in order to ask the courts to rule on the
same or related causes and/or to grant the same or substantially the same reliefs on
the supposition that one or the other court would make a favorable disposition or
increase a partys chances of obtaining a favorable decision or action. 6
The rationale against forum shopping is that a party should not be allowed to pursue
simultaneous remedies in two different fora. Filing multiple petitions or complaints
constitutes abuse of court processes, which tends to degrade the administration of
justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of
the heavily burdened dockets of the courts. Thus, the rule proscribing forum
shopping seeks to promote candor and transparency among lawyers and their
clients in the pursuit of their cases before the courts to promote the orderly

administration of justice, prevent undue inconvenience upon the other party, and
save the precious time of the courts. It also aims to prevent the embarrassing
situation of two or more courts or agencies rendering conflicting resolutions or
decisions upon the same issue. 7
To determine whether a party violated the rule against forum shopping, the most
important question to ask is whether the elements of litis pendentia are present or
whether a final judgment in one case will result to res judicata in another. Otherwise
stated, to determine forum shopping, the test is to see whether in the two or more
cases pending, there is identity of parties, rights or causes of action, and reliefs
sought. 8
A plain reading of the allegations in the complaint in Civil Case No. 4068-AF and
those in the petition for certiorari filed with the Court of Appeals would preclude the
Court from affirming the Court
of Appeals finding that Huibonhoa had engaged in forum shopping. Not all the
elements of litis pendentia concur. There is no identity of parties, rights or causes of
action between Civil Case No. 4068-AF and the petition for certiorari. Civil Case No.
4068-AF is a derivative suit and complaint for injunction instituted by the
stockholders of the aforementioned corporations while the petition for certiorari was
instituted by petitioner in her capacity as manager of Poulex Supermarket. The
complaint in Civil Case No. 4068-AF alleges different causes of action, including
those relating to interference by respondent Concepcion in the operations of the
supermarket and causing damages to the corporations and the stockholders arising
from such unlawful interference. The petition for certiorari aims to nullify the two
orders of Judge Annang on the ground that they were issued with grave abuse of
discretion since only the designated special commercial court has jurisdiction to hear
and decide intra-corporate controversies. A resolution on the merits of the petition for
certiorari would necessarily have to discuss the authority of respondent Judge
Annang to take cognizance of the case, which was allegedly an intra-corporate
matter, and the issuance of the mandatory injunction, which was allegedly not
sanctioned by any rule. These are the main issues raised in the petition for certiorari
but are not raised as issues in Civil Case No. 4068-F.
The reliefs sought in the two actions are also different. In Civil Case No. 4068-F,
aside from the main action for a permanent injunction, complainants therein also
claimed damages. In the petition for certiorari, Huibonhoa sought the prevention of
the implementation of the assailed orders of Judge Annang. The only common
thread
between the two actions is with respect to the TRO sought to prevent respondent
Concepcion from interfering with the operations of the supermarket, but said relief is
only incidental and does not constitute the main cause of action in both cases.
All the foregoing points favorable to petitioners cause notwithstanding, the Court
cannot take favorable action on her petition. In the light of the supervening events,
particularly the dismissal of Civil Case No. 4065, the instant petition has clearly
become moot and academic and, therefore, deserves to be dismissed. With the
termination of the case wherein the assailed orders were issued, it is no longer
necessary for this Court to resolve whether the Court of Appeals had correctly
upheld said orders. In addition, one of said orders directed the issuance of a TRO,
which, by sheer force of law, should have expired and did expire after 72 hours,
without need of a judicial declaration to that effect.
Likewise, with the settlement reached by the parties which culminated in the
dismissal of the cases filed by them against each other, petitioner and her counsel
have been liberated from any risk of sanction for their supposed forum shopping.

Page 29 of 51

Courts of justice constituted to pass upon substantial rights will not consider
questions where no actual interests are involved. Thus, the well-settled rule that
courts will not determine a moot question.
Where the issues have become moot and academic, there ceases to be any
justiciable controversy, thus rendering the resolution of the same of no practical
value. Courts will decline jurisdiction over moot cases because there is no
substantial relief to which petitioner will be entitled and which will anyway be negated
by the dismissal of the petition. This Court will therefore abstain from expressing its
opinion in a case where no legal relief is needed or called for. 9
WHEREFORE, the instant petition for review on certiorari is DENIED for being moot
and academic. No pronouncement as to costs.
SO ORDERED.

Page 30 of 51

[G.R. No. 149011. June 28, 2005]

SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY
J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D.
ARROLLADO, EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE
A. ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA, JOSE
JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO,
SONNY V. BERONDO, CHRISTOPHER D. BRIONES, MARLON D.
BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R.
CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD,
RUDERICK R. CALIXTON, RONILO C. CALVEZ, PANCHO CAETE,
JUNNY CASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILO
COBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ, JOHN D.
DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO
DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A.
DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY
DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG, RODERICK C.
DUQUEZA, ROMMEL ESTREBOR, RIC E. GALPO, MANSUETO
GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ, ROBERTLY Y.
HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN
T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO,
RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES,
LEONARD LEMONCHITO, JERRY LIM, JOSE COLLY S. LUCERO,
ROBERTO E. MARTIL, HERNANDO MATILLANO, VICENTE M.
MATILLANO, TANNY C. MENDOZA, WILLIAM P. NAVARRO, WILSON
P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C.
PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG,
BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA,
EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR
SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V. SAYAM, JOSEPH
S. SAYSON, RENE SUARNABA, ELMAR TABLIGAN, JERRY D.
TALITE, OSCAR TALITE, WINIFREDO TALITE, CAMILO N.
TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A.
TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C.
UNTAL, FELIX T. UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE
JOFER C. VIYO and the COURT OF APPEALS, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice
President and Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular,
and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the Chairman
of its Board of Directors Roy G. Asong, entered into a one-year Contract of
Services[1] commencing on January 1, 1993, to be renewed on a month to month
basis until terminated by either party. The pertinent provisions of the contract read:
1.
The cooperative agrees and undertakes to perform and/or provide for the
company, on a non-exclusive basis for a period of one year the following services for
the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage[2]

2.
To carry out the undertaking specified in the immediately preceding
paragraph, the cooperative shall employ the necessary personnel and provide
adequate equipment, materials, tools and apparatus, to efficiently, fully and speedily
accomplish the work and services undertaken by the cooperative. xxx
3.
In consideration of the above undertaking the company expressly agrees to
pay the cooperative the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand
Five Hundred Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per
person/activity whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every
meal time in case harvest duration exceeds
one meal.
This will be pre-set every harvest based on
harvest plan approved by the Senior Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth
and the other half, on the end of each month. The cooperative shall pay taxes, fees,
dues and other impositions that shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work
and services herein agreed upon. xxx
4.
There is no employer-employee relationship between the company and the
cooperative, or the cooperative and any of its members, or the company and any
members of the cooperative. The cooperative is an association of self-employed
members, an independent contractor, and an entrepreneur. It is subject to the
control and direction of the company only as to the result to be accomplished by the
work or services herein specified, and not as to the work herein contracted. The
cooperative and its members recognize that it is taking a business risk in accepting a
fixed service fee to provide the services contracted for and its realization of profit or
loss from its undertaking, in relation to all its other undertakings, will depend on how
efficiently it deploys and fields its members and how they perform the work and
manage its operations.
5.
The cooperative shall, whenever possible, maintain and keep under its control
the premises where the work under this contract shall be performed.
6.
The cooperative shall have exclusive discretion in the selection, engagement
and discharge of its member-workers or otherwise in the direction and control
thereof. The determination of the wages, salaries and compensation of the memberworkers of the cooperative shall be within its full control. It is further understood that
the cooperative is an independent contractor, and as such, the cooperative agrees to
comply with all the requirements of all pertinent laws and ordinances, rules and
regulations. Although it is understood and agreed between the parties hereto that
the cooperative, in the performance of its obligations, is subject to the control or
direction of the company merely as a (sic) result to be accomplished by the work or
services herein specified, and not as to the means and methods of accomplishing
such result, the cooperative hereby warrants that it will perform such work or

Page 31 of 51

services in such manner as will be consistent with the achievement of the result
herein contracted for.

of its aquaculture operations. Judicial notice has already been taken regarding the
general practice adopted in government and private institutions and industries of
hiring independent contractors to perform special services. xxx

xxx
xxx
8.
The cooperative undertakes to pay the wages or salaries of its memberworkers, as well as all benefits, premiums and protection in accordance with the
provisions of the labor code, cooperative code and other applicable laws and
decrees and the rules and regulations promulgated by competent authorities,
assuming all responsibility therefor.

Indeed, the law allows job contracting. Job contracting is permissible under the
Labor Code under specific conditions and we do not see how this activity could not
be legally undertaken by an independent service cooperative like the third-party
respondent herein.

The cooperative further undertakes to submit to the company within the first ten (10)
days of every month, a statement made, signed and sworn to by its duly authorized
representative before a notary public or other officer authorized by law to administer
oaths, to the effect that the cooperative has paid all wages or salaries due to its
employees or personnel for services rendered by them during the month
immediately preceding, including overtime, if any, and that such payments were all in
accordance with the requirements of law.

There is no basis to the demand for regularization simply on the theory that
complainants performed activities which are necessary and desirable in the business
of respondent. It has been held that the definition of regular employees as those
who perform activities which are necessary and desirable for the business of the
employer is not always determinative because any agreement may provide for one
(1) party to render services for and in behalf of another for a consideration even
without being hired as an employee.

xxx

The charge of the complainants that third-party respondent is a mere labor-only

contractor is a sweeping generalization and completely unsubstantiated. xxx In the
absence of clear and convincing evidence showing that third-party respondent acted
merely as a labor only contractor, we are firmly convinced of the legitimacy and the
integrity of its service contract with respondent SMC.

12. Unless sooner terminated for the reasons stated in paragraph 9 this contract
shall be for a period of one (1) year commencing on January 1, 1993. Thereafter,
this Contract will be deemed renewed on a month-to-month basis until terminated by
either party by sending a written notice to the other at least thirty (30) days prior to
the intended date of termination.
xxx[3] (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they
did, render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod
City. The contract was deemed renewed by the parties every month after its
expiration on January 1, 1994 and private respondents continued to perform their
tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional
Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees
of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank
and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended
Complaint[4] to include illegal dismissal as additional cause of action following SMCs
closure of its Bacolod Shrimp Processing Plant on September 15, 1995 [5] which
resulted in the termination of their services.

In the same vein, the closure of the Bacolod Shrimp Processing Plant was a
management decision purely dictated by economic factors which was (sic) mainly
serious business losses. The law recognizes the right of the employer to close his
business or cease his operations for bonafide reasons, as much as it recognizes the
right of the employer to terminate the employment of any employee due to closure or
cessation of business operations, unless the closing is for the purpose of
circumventing the provisions of the law on security of tenure. The decision of
respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious
business losses which has (sic) clearly been established, is a management
prerogative which could hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod
Processing Plant, who were accordingly terminated following the legal requisites
prescribed by law. The closure, however, in so far as the complainants are
concerned, resulted in the termination of SMCs service contract with their
cooperative xxx[9](Underscoring supplied)
Private respondents appealed to the NLRC.

SMC filed a Motion for Leave to File Attached Third Party Complaint dated
November 27, 1995 to implead Sunflower as Third Party Defendant which was, by
Order[7] of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.

By Decision of December 29, 1998, the NLRC dismissed the appeal for lack
of merit, it finding that third party respondent Sunflower was an independent
contractor in light of its observation that [i]n all the activities of private respondents,
they were under the actual direction, control and supervision of third party
respondent Sunflower, as well as the payment of wages, and power of dismissal.[10]

In the meantime, on September 30, 1996, SMC filed before the Regional
Office at Iloilo City of the Department of Labor and Employment (DOLE) a Notice of
Closure[8] of its aquaculture operations effective on even date, citing serious
business losses.

Private respondents Motion for Reconsideration[11] having been denied by the

NLRC for lack of merit by Resolution of September 10, 1999, they filed a petition for
certiorari[12] before the Court of Appeals (CA).

By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private

respondents complaint for lack of merit, ratiocinating as follows:

Before the CA, SMC filed a Motion to Dismiss [13] private respondents petition
for non-compliance with the Rules on Civil Procedure and failure to show grave
abuse of discretion on the part of the NLRC.

[6]

We sustain the stand of the respondent SMC that it could properly exercise
its management prerogative to contract out the preparation and processing aspects

SMC subsequently filed its Comment[14] to the petition on March 30, 2000.

Page 32 of 51

By Decision of February 7, 2001, the appellate court reversed the NLRC

decision and accordingly found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby
RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998
decision and 10 September 1999 resolution of the National Labor Relations
Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as
well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-0710316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT
petitioners: (a) separation pay in accordance with the computation given to the
regular SMC employees working at its Bacolod Shrimp Processing Plant with full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
from 11 September 1995, the time their actual compensation was withheld from
them, up to the time of the finality of this decision; (b) differentials pays (sic) effective
as of and from the time petitioners acquired regular employment status pursuant to
the disquisition mentioned above, and all such other and further benefits as provided
by applicable collective bargaining agreement(s) or other relations, or by law,
beginning such time up to their termination from employment on 11 September 1995;
and ORDERING private respondent SMC to PAY unto the
petitioners attorneys feesequivalent to ten (10%) percent of the total award.
No pronouncement as to costs.
SO ORDERED.[15] (Underscoring supplied)

a small office within the confines of a small carinderia or refreshment parlor owned
by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter
(rollo, pp. 525-525) and, the only assets it provided SMC were the bare bodies of its
members, the petitioners herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC,
were under the control and supervision of SMC both as to
the manner and method in discharging their functions and as to the results thereof.
Besides, it should be taken into account that the activities undertaken by the
petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and
handlers were directly related to the aquaculture business of SMC (See Guarin vs.
NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service
contract from January 1993 to September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a
considerable workforce and raises the suspicion that the non-exclusive service
contract between SMC and [Sunflower] was designed to evade the obligations
inherent in an employer-employee relationship (See Rhone-Poulenc Agrochemicals
Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of
[Sunflower] and its [Sunflower] retained counsel are both partners of the local
counsel of SMC (rollo, p. 9).

Justifying its reversal of the findings of the labor arbiter and the NLRC, the
appellate court reasoned:

xxx

Although the terms of the non-exclusive contract of service between SMC and
[Sunflower] showed a clear intent to abstain from establishing an employeremployee relationship between SMC and [Sunflower] or the latters members, the
extent to which the parties successfully realized this intent in the light of the
applicable law is the controlling factor in determining the real and actual
relationship between or among the parties.

With these observations, no other logical conclusion can be reached except

that [Sunflower] acted as an agent of SMC, facilitating the manpower requirements
of the latter, the real employer of the petitioners. We simply cannot allow these two
entities through the convenience of a non-exclusive service contract to stipulate on
the existence of employer-employee relation. Such existence is a question of law
which cannot be made the subject of agreement to the detriment of the petitioners
(Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).

xxx

xxx

With respect to the power to control petitioners conduct, it appears that petitioners
were under the direct control and supervision of SMC supervisors both as to the
manner they performed their functions and as to the end results thereof. It was only
after petitioners lodged a complaint to have their status declared as regular
employees of SMC that certain members of [Sunflower] began to countersign
petitioners daily time records to make it appear that they (petitioners) were under the
control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx

There being a finding of labor-only contracting, liability must be shouldered either

by SMC or [Sunflower] or shared by both (See Tabas vs. California Manufacturing,
Inc., supra, p. 502).
SMC however should be held solely liable for
[Sunflower] became non-existent with the closure of the aquaculture business
of SMC.

Even without these instances indicative of control by SMC over the petitioners, it is
safe to assume that SMC would never have allowed the petitioners to work within its
premises, using its own facilities, equipment and tools, alongside SMC employees
discharging similar or identical activities unless it exercised a substantial degree of
control and supervision over the petitioners not only as to the manner they
performed their functions but also as to the end results of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as
independent contractors. [Sunflower] and the petitioners did not have substantial
capital or investment in the form of tools, equipment, implements, work premises, et
cetera necessary to actually perform the service under their own account,
responsibility, and method. The only work premises maintained by [Sunflower] was

Furthermore, since the closure of the aquaculture operations of SMC appears to be

valid, reinstatement is no longer feasible. Consistent with the pronouncement
in Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners
are thus entitled to separation pay (in the computation similar to those given to
regular SMC employees at its Bacolod Shrimp Processing Plant) with full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
from the time their actual compensation was withheld from them up to the time of
the finality of this decision. This is without prejudice to differentials pays (sic)
effective as of and from the time petitioners acquired regular employment status
pursuant to the discussion mentioned above, and all such other and further benefits
as provided by applicable collective bargaining agreement(s) or other relations, or by
law, beginning such time up to their termination from employment on 11 September
1995.[16](Emphasis and underscoring supplied)

Page 33 of 51

SMCs Motion for Reconsideration[17] having been denied for lack of merit by
Resolution of July 11, 2001, it comes before this Court via the present petition for
review on certiorari assigning to the CA the following errors:

defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign
the certificate provided that xxx the plaintiffs share a common interest in the
subject matter of the case or filed the case as a collective, raising only one
common cause of action or defense.[24] (Emphasis and underscoring supplied)

I
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND
GRANTING RESPONDENTS PATENTLY DEFECTIVE PETITION FOR
CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE
RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR
ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE IN A
MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS
OF THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RESPONDENTS
ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT
RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF THE
BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS
LOSSES.[18] (Underscoring supplied)

Given the collective nature of the petition filed before the appellate court by
herein private respondents, raising one common cause of action against SMC, the
execution by private respondents Winifredo Talite, Renelito Deon and Jose
Temporosa in behalf of all the other private respondents of the certificate of nonforum shopping constitutes substantial compliance with the Rules. [25] That the three
indeed represented their co-petitioners before the appellate court is, as it correctly
found, subsequently proven to be true as shown by the signatures of the majority of
the petitioners appearing in their memorandum filed before Us.[26]
Additionally, the merits of the substantive aspects of the case may also be
deemed as special circumstance or compelling reason to take cognizance of a
petition although the certification against forum shopping was not executed and
signed by all of the petitioners.[27]
SMC goes on to argue that the petition filed before the CA is fatally defective
as it was not accompanied by copies of all pleadings and documents relevant and
pertinent thereto in contravention of Section 1, Rule 65 of the Rules of Court.[28]
This Court is not persuaded. The records show that private respondents
appended the following documents to their petition before the appellate court: the
September 23, 1997 Decision of the Labor Arbiter,[29] their Notice of Appeal with
Appeal Memorandum dated October 16, 1997 filed before the NLRC,[30] the
December 29, 1998 NLRC Decision,[31] their Motion for Reconsideration dated March
26, 1999 filed with the NLRC[32] and the September 10, 1999 NLRC Resolution.[33]

SMC bewails the failure of the appellate court to outrightly dismiss the petition
for certiorari as only three out of the ninety seven named petitioners signed the
verification and certification against forum-shopping.

It bears stressing at any rate that it is the appellate court which ultimately
determines if the supporting documents are sufficient to make out a prima
facie case.[34] It discerns whether on the basis of what have been submitted it could
already judiciously determine the merits of the petition. [35]In the case at bar, the CA
found that the petition was adequately supported by relevant and pertinent
documents.

While the general rule is that the certificate of non-forum shopping must be
signed by all the plaintiffs or petitioners in a case and the signature of only one of
them is insufficient,[19] this Court has stressed that the rules on forum shopping,
which were 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.[20] Strict compliance with the provisions regarding the
certificate of non-forum shopping merely underscores its mandatory nature in that
the certification cannot be altogether dispensed with or its requirements completely
disregarded.[21] It does not, however, thereby interdict substantial compliance with its
provisions under justifiable circumstances.[22]

At all events, this Court has allowed a liberal construction of the rule on the
accomplishment of a certificate of non-forum shopping in the following cases: (1)
where a rigid application will result in manifest failure or miscarriage of justice; (2)
where the interest of substantial justice will be served; (3) where the resolution of the
motion is addressed solely to the sound and judicious discretion of the court; and (4)
where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.[36]

Thus in the recent case of HLC Construction and Development Corporation v.

Emily Homes Subdivision Homeowners Association,[23] this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against
petitioners as a group, represented by their homeowners association president who
was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one
cause of action which was the breach of contractual obligations and payment of
damages. They shared a common interest in the subject matter of the case, being
the aggrieved residents of the poorly constructed and developed Emily Homes
Subdivision. Due to the collective nature of the case, there was no doubt that Mr.
Samaon M. Buat could validly sign the certificate of non-forum shopping in behalf of
all his co-plaintiffs. In cases therefore where it is highly impractical to require all the
plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to

Rules of procedure should indeed be viewed as mere tools designed to

facilitate the attainment of justice. Their strict and rigid application, which would
result in technicalities that tend to frustrate rather than promote substantial justice,
must always be eschewed.[37]
SMC further argues that the appellate court exceeded its jurisdiction in
reversing the decisions of the labor arbiter and the NLRC as findings of facts of
quasi-judicial bodies like the NLRC are accorded great respect and finality, and that
this principle acquires greater weight and application in the case at bar as the labor
arbiter and the NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative
agency which has acquired expertise in the particular field of its endeavor are
accorded great weight on appeal.[38] The rule is not absolute and admits of certain

Page 34 of 51

well-recognized exceptions, however. Thus, when the findings of fact of the labor
arbiter and the NLRC are not supported by substantial evidence or their judgment
was based on a misapprehension of facts, the appellate court may make an
independent evaluation of the facts of the case.[39]
SMC further faults the appellate court in giving due course to private
respondents petition despite the fact that the complaint filed before the labor arbiter
was signed and verified only by private respondent Winifredo Talite; that private
respondents position paper[40] was verified by only six[41] out of the ninety seven
complainants; and that their Joint-Affidavit[42] was executed only by twelve[43] of the
complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC
asserts that it should not have been considered by the appellate court in establishing
the claims of those who did not sign the same, citing this Courts ruling in Southern
Cotabato Development and Construction, Inc. v. NLRC.[44]
SMCs position does not lie.
A perusal of the complaint shows that the ninety seven complainants were
being represented by their counsel of choice. Thus the first sentence of their
complaint alleges: xxx complainants, by counsel and unto this Honorable Office
respectfully state xxx. And the complaint was signed by Atty. Jose Max S. Ortiz as
counsel for the complainants. Following Section 6, Rule III of the 1990 Rules of
Procedure of the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz
is presumed to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was
one of the complainants and was causing the preparation of the complaint with the
authority of my co-complainants indubitably shows that Talite was representing the
rest of his co-complainants in signing the verification in accordance with Section 7,
Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules,
which states:
Section 7. Authority to bind party. Attorneys and other representatives of
parties shall have authority to bind their clients in all matters of procedure; but they
cannot, without a special power of attorney or express consent, enter into a
compromise agreement with the opposing party in full or partial discharge of a
clients claim. (Underscoring supplied)

ascertain the facts of the controversy speedily, including ocular inspection and
examination of well-informed persons. (underscoring supplied)
As regards private respondents Joint-Affidavit which is being assailed in view
of the failure of some complainants to affix their signatures thereon, this Court
quotes with approval the appellate courts ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did
not quote the whole text of paragraph 5 on page 865 of 280 SCRA. The whole
paragraph reads:
Clearly then, as to those who opted to move for the dismissal of their complaints, or
did not submit their affidavits nor appear during trial and in whose favor no other
independent evidence was adduced, no award for back wages could have been
validly and properly made for want of factual basis. There is no showing at all that
any of the affidavits of the thirty-four (34) complainants were offered as evidence for
those who did not submit their affidavits, or that such affidavits had any bearing at all
on the rights and interest of the latter. In the same vein, private respondents
position paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered
as evidence for those who did not submit theirs, or the affidavits were material
and relevant to the rights and interest of the latter, such affidavits may be
sufficient to establish the claims of those who did not give their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97)
complainants (petitioners herein) would readily reveal that the affidavit was offered
as evidence not only for the signatories therein but for all of the complainants.
(These ninety-seven (97) individuals were previously identified during the mandatory
conference as the only complainants in the proceedings before the labor arbiter)
Moreover, the affidavit touched on the common interest of all of the complainants as
it supported their claim of the existence of an employer-employee relationship
between them and respondent SMC. Thus, the said affidavit was enough to prove
the claims of the rest of the complainants. [47] (Emphasis supplied, underscoring in the
original)
In any event, SMC is reminded that the rules of evidence prevailing in courts
of law or equity do not control proceedings before the Labor Arbiter. So Article 221
of the Labor Code enjoins:

As regards private respondents position paper which bore the signatures of

only six of them, appended to it was an Authority/Confirmation of Authority[45] signed
by the ninety one others conferring authority to their counsel to file RAB Case No.
06-07-10316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently
pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional
Arbitration Branch No. VI in Bacolod City and appointing him as their retained
counsel to represent them in the said case.

ART. 221. Technical rules not binding and prior resort to amicable settlement.
In any proceeding before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all
in the interest of due process. xxx

That there has been substantial compliance with the requirement on

verification of position papers under Section 3, Rule V of the 1990 NLRC Rules of
Procedure[46] is not difficult to appreciate in light of the provision of Section 7, Rule V
of the 1990 NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which
reads:

As such, their application may be relaxed to serve the demands of substantial

justice.[48]

Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be

non-litigious in nature. Subject to the requirements of due process, the technicalities
of law and procedure and the rules obtaining in the courts of law shall not strictly
apply thereto. The Labor Arbiter may avail himself of all reasonable means to

On the merits, the petition just the same fails.

SMC insists that private respondents are the employees of Sunflower, an
independent contractor. On the other hand, private respondents assert that
Sunflower is a labor-only contractor.
Article 106 of the Labor Code provides:

Page 35 of 51

ART. 106. Contractor or subcontracting. Whenever an employer enters into a

contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor, if any shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and severally
liable with his contractor or subcontractor to such employees to the extent of the
work performed under the contract, in the same manner and extent that he is liable
to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the
contracting out of labor to protect the rights of workers established under the Code.
In so prohibiting or restricting, he may make appropriate distinctions between laboronly contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be
considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly employed by
him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18, distinguishes between legitimate and laboronly contracting:
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate
contracting, there exists a trilateral relationship under which there is a contract for a
specific job, work or service between the principal and the contractor or
subcontractor, and a contract of employment between the contractor or
subcontractor and its workers. Hence, there are three parties involved in these
arrangements, the principal which decides to farm out a job or service to a contractor
or subcontractor, the contractor or subcontractor which has the capacity to
independently undertake the performance of the job, work or service, and the
contractual workers engaged by the contractor or subcontractor to accomplish the
job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis
hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies or
places workers to perform a job, work or service for a principal, and any of the
following elements are present:
i) The contractor or subcontractor does not have substantial capital
or investment which relates to the job, work or service to be
performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which
are directly related to the main business of the principal, or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.

The foregoing provisions shall be without prejudice to the application of Article 248
(c) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks and subscribed
capitalization in the case of corporations, tools, equipment, implements, machineries
and work premises, actually and directly used by the contractor or subcontractor in
the performance or completion of the job, work or service contracted out.
The right to control shall refer to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end to
be achieved, but also the manner and means to be used in reaching that end.
The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.[49]
In legitimate labor contracting, the law creates an employer-employee
relationship for a limited purpose, i.e., to ensure that the employees are paid their
wages. The principal employer becomes jointly and severally liable with the job
contractor, only for the payment of the employees wages whenever the contractor
fails to pay the same. Other than that, the principal employer is not responsible for
any claim made by the employees.[50]
In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal employer and the latter
is responsible to the employees of the labor-only contractor as if such employees
had been directly employed by the principal employer.[51]
The Contract of Services between SMC and Sunflower shows that the parties
clearly disavowed the existence of an employer-employee relationship between
SMC and private respondents. The language of a contract is not, however,
determinative of the parties relationship; rather it is the totality of the facts and
surrounding circumstances of the case.[52] A party cannot dictate, by the mere
expedient of a unilateral declaration in a contract, the character of its
business, i.e., whether as labor-only contractor or job contractor, it being crucial that
its character be measured in terms of and determined by the criteria set by statute. [53]
SMC argues that Sunflower could not have been issued a certificate of
registration as a cooperative if it had no substantial capital.[54]
While indeed Sunflower was issued Certificate of Registration No. IL0875[55] on February 10, 1992 by the Cooperative Development Authority, this merely
shows that it had at least P2,000.00 in paid-up share capital as mandated by Section
5 of Article 14[56] of Republic Act No. 6938, otherwise known as the Cooperative
Code, which amount cannot be considered substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or
investment in the form of tools, equipment, machineries, work premises and other
materials to qualify it as an independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all
other working tools utilized by private respondents in carrying out their tasks were
owned and provided by SMC. Consider the following uncontroverted allegations of
private respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did
not own a single machinery, equipment, or working tool used in the processing

Page 36 of 51

plant. Everything was owned and provided by respondent SMC. The lot, the
building, and working facilities are owned by respondent SMC. The machineries and
equipments (sic) like washer machine, oven or cooking machine, sizer machine,
freezer, storage, and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs
were all owned by respondent SMC. All the boxes, trays, molding pan used in the
processing are also owned by respondent SMC. The gloves and boots used by the
complainants were also owned by respondent SMC. Even the mops, electric floor
cleaners, brush, hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol
and the like used by the complainants assigned as cleaners were all owned and
provided by respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of
tools, machineries, or facilities used in said prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a small carinderia
or refreshment (sic) owned by the mother of the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a
typewriter. [57]
And from the job description provided by SMC itself, the work assigned to
private respondents was directly related to the aquaculture operations of SMC.
Undoubtedly, the nature of the work performed by private respondents in shrimp
harvesting, receiving and packing formed an integral part of the shrimp processing
operations of SMC. As for janitorial and messengerial services, that they are
considered directly related to the principal business of the employer [58] has been
jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business or
undertake the performance of its service contract according to its own manner and
method, free from the control and supervision of its principal, SMC, its apparent role
having been merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before
the labor arbiter that their daily time records were signed by SMC supervisors Ike
Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and
Stephen Palabrica, which fact shows that SMC exercised the power of control and
supervision over its employees.[59] And control of the premises in which private
respondents worked was by SMC. These tend to disprove the independence of the
contractor.[60]
More. Private respondents had been working in the aqua processing plant
inside the SMC compound alongside regular SMC shrimp processing workers
performing identical jobs under the same SMC supervisors. [61] This circumstance is
another indicium of the existence of a labor-only contractorship.[62]
And as private respondents alleged in their Joint Affidavit which did not
escape the observation of the CA, no showing to the contrary having been proffered
by SMC, Sunflower did not cater to clients other than SMC, [63] and with the closure of
SMCs Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This
Courts ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.[64] is
thus instructive.
xxx Nor do we believe MAERC to have an independent business. Not only was
it set up to specifically meet the pressing needs of SMC which was then having labor
problems in its segregation division, none of its workers was also ever assigned to
any other establishment, thus convincing us that it was created solely to service the

needs of SMC. Naturally, with the severance of relationship between MAERC and
SMC followed MAERCs cessation of operations, the loss of jobs for the whole
MAERC workforce and the resulting actions instituted by the workers.
[65]
(Underscoring supplied)
All the foregoing considerations affirm by more than substantial evidence the
existence of an employer-employee relationship between SMC and private
respondents.
Since private respondents who were engaged in shrimp processing performed
tasks usually necessary or desirable in the aquaculture business of SMC, they
should be deemed regular employees of the latter [66] and as such are entitled to all
the benefits and rights appurtenant to regular employment. [67] They should thus be
awarded differential pay corresponding to the difference between the wages and
benefits given them and those accorded SMCs other regular employees.
Respecting the private respondents who were tasked with janitorial and
messengerial duties, this Court quotes with approval the appellate courts ruling
thereon:
Those performing janitorial and messengerial services however acquired regular
status only after rendering one-year service pursuant to Article 280 of the Labor
Code. Although janitorial and messengerial services are considered directly related
to the aquaculture business of SMC, they are deemed unnecessary in the conduct of
its principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v.
NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v.
NLRC, supra, p. 359).[68]
The law of course provides for two kinds of regular employees, namely: (1)
those who are engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; and (2) those who have
rendered at least one year of service, whether continuous or broken, with respect to
the activity in which they are employed.[69]
As for those of private respondents who were engaged in janitorial and
messengerial tasks, they fall under the second category and are thus entitled to
differential pay and benefits extended to other SMC regular employees from the day
immediately following their first year of service.[70]
Regarding the closure of SMCs aquaculture operations and the consequent
termination of private respondents, Article 283 of the Labor Code provides:
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. In case of termination due to the installation of
labor saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. 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. (Underscoring supplied)

Page 37 of 51

In the case at bar, a particular department under the SMC group of companies
was closed allegedly due to serious business reverses. This constitutes
retrenchment by, and not closure of, the enterprise or the company itself as SMC
has not totally ceased operations but is still very much an on-going and highly viable
business concern.[71]
Retrenchment is a management prerogative consistently recognized and
affirmed by this Court. It is, however, subject to faithful compliance with the
substantive and procedural requirements laid down by law and jurisprudence.[72]
For retrenchment to be considered valid the following substantial
requirements must be met: (a) the losses expected should be substantial and not
merely de minimis in extent; (b) the substantial losses apprehended must be
reasonably imminent such as can be perceived objectively and in good faith by the
employer; (c) the retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; and (d) the alleged losses, if already
incurred, and the expected imminent losses sought to be forestalled, must be proved
by sufficient and convincing evidence.[73]
In the discharge of these requirements, it is the employer who has the onus,
being in the nature of an affirmative defense.[74]
Normally, the condition of business losses is shown by audited financial
documents like yearly balance sheets, profit and loss statements and annual income
tax returns. The financial statements must be prepared and signed by independent
auditors failing which they can be assailed as self-serving documents.[75]
In the case at bar, company losses were duly established by financial
documents audited by Joaquin Cunanan & Co. showing that the aquaculture
operations of SMCs Agribusiness Division accumulated losses amounting
to P145,848,172.00 in 1992 resulting in the closure of its Calatrava Aquaculture
Center in Negros Occidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994
which led to the closure of its San Fernando Shrimp Processing Plant in Pampanga
and the Bacolod Shrimp Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of
its employees.
For termination due to retrenchment to be valid, however, the law requires
that written notices of the intended retrenchment be served by the employer on the
worker and on the DOLE at least one (1) month before the actual date of the
retrenchment,[76] in order to give employees some time to prepare for the eventual
loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of
the alleged cause of termination.[77]
Private respondents, however, were merely verbally informed on September
10, 1995 by SMC Prawn Manager Ponciano Capay that effective the following day or
on September 11, 1995, they were no longer to report for work as SMC would be
closing its operations.[78]
Where the dismissal is based on an authorized cause under Article 283 of the
Labor Code but the employer failed to comply with the notice requirement, the
sanction should be stiff as the dismissal process was initiated by the employers
exercise of his management prerogative, as opposed to a dismissal based on a just
cause under Article 282 with the same procedural infirmity where the sanction to be
imposed upon the employer should be tempered as the dismissal process was, in
effect, initiated by an act imputable to the employee.[79]

In light of the factual circumstances of the case at bar, this Court

awards P50,000.00 to each private respondent as nominal damages.
The grant of separation pay as an incidence of termination of employment due
to retrenchment to prevent losses is a statutory obligation on the part of the
employer and a demandable right on the part of the employee. Private respondents
should thus be awarded separation pay equivalent to at least one (1) month pay or
to at least one-half month pay for every year of service, whichever is higher, as
mandated by Article 283 of the Labor Code or the separation pay awarded by SMC
to other regular SMC employees that were terminated as a result of the
retrenchment, depending on which is most beneficial to private respondents.
Considering that private respondents were not illegally dismissed, however,
no backwages need be awarded. It is well settled that backwages may be granted
only when there is a finding of illegal dismissal. [80] The appellate court thus erred in
awarding backwages to private respondents upon the authority of Bustamante v.
NLRC,[81] what was involved in that case being one of illegal dismissal.
With respect to attorneys fees, in actions for recovery of wages or where an
employee was forced to litigate and thus incurred expenses to protect his rights and
interests,[82] a maximum of ten percent (10%) of the total monetary award [83] by way
of attorneys fees is justifiable under Article 111 of the Labor Code, [84] Section 8, Rule
VIII, Book III of its Implementing Rules, [85] and paragraph 7, Article 2208 of the Civil
Code.[86] Although an express finding of facts and law is still necessary to prove the
merit of the award, there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly, as in this case.[87]
Absent any evidence showing that Sunflower has been dissolved in
accordance with law, pursuant to Rule VIII-A, Section 19[88] of the Omnibus Rules
Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the
rightful claims of private respondents.
WHEREFORE, the petition is DENIED. The assailed Decision dated
February 7, 2001 and Resolution dated July 11, 2001 of the Court of Appeals are
AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative
are hereby ORDERED to jointly and severally pay each private respondent
differential pay from the time they became regular employees up to the date of their
termination; separation pay equivalent to at least one (1) month pay or to at least
one-half month pay for every year of service, whichever is higher, as mandated by
Article 283 of the Labor Code or the separation pay awarded by SMC to other
regular SMC employees that were terminated as a result of the retrenchment,
depending on which is most beneficial to private respondents; and ten percent (10%)
attorneys fees based on the herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private
respondent the amount of P50,000.00, representing nominal damages for noncompliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.

Page 38 of 51

G.R. No. 134468

August 29, 2002

NATIONAL
STEEL
CORPORATION petitioner,
vs.
COURT OF APPEALS, FORMER FIFTH DIVISION, RENE OFRENEO, in his
capacity as Voluntary Arbitrator, and NSC-HDCTC MONTHLY-DAILY
EMPLOYEES ORGANIZATION-FFW, respondents.

the profit situation of the company since the company gave the incentive pay in 1989
and 1990 despite the latters admission of difficult financial operations.5
The company on the other hand contended that the matter of granting productivity
and quality bonus was discretionary on its part consistent with its exercise of
management prerogatives and assessment of production targets, while the
distribution of the Fiscal Year-End Incentive Award was dependent on corporate
performance.6

AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Resolution of the Court of Appeals dated November 25,
19971 which dismissed National Steel Corporations petition for review on the ground
that the verification and certification of non-forum shopping were signed not by the
petitioner but by its counsel of record, as well as the subsequent Resolution dated
July 2, 19982 which denied petitioners motion for reconsideration.

On July 19, 1996 public respondent Voluntary Arbitrator Ofreneo issued a decision
ruling as follows:
" 1. There is no merit in the demand of the Union for a productivity and
quality bonus in 1993.
" 2. The demand of the Union for the distribution of the year-end incentive
award is in order.

The antecedent facts of the case are as follows:

In December of 1993, a dispute arose between petitioner National Steel Corporation
(NSC) and respondent NSC-HDCTC Monthly/Daily Employees Organization-FFW
(union) regarding the grant of Productivity and Quality Bonus and the Fiscal YearEnd Incentive Award in the company. Both parties agreed to submit the case for
voluntary arbitration.
On April 3, 1995, representatives of NSC and the union appeared before Voluntary
Arbitrator Rene Ofreneo and defined the issues of their dispute thus:
"Whether or not there was a diminution of the 1993 Fiscal Year-End
Productivity and Quality Profit-Sharing Incentive Benefit annually granted
by the Company, per CBA, and if there was, whether or not there was just
cause for the diminution of this benefit by management, and if without just
cause, what should be the remedy."3
The union was of the position that the company violated Article XII, Section 3 of their
CBA when it stopped, since 1993, giving Productivity and Quality Bonus and Fiscal
Year-End Incentive Award. Said CBA provision provides:
"ARTICLE XII

" 3. The said incentive award shall be computed based on the Companys
past practice in the determination of such award.
"SO ORDERED."7
On August 2, 1996, the NSC filed a Partial Motion for Reconsideration 8 with respect
to the award of the year-end incentive which was denied by Arbitrator Ofreneo. 9 On
October 31, 1996, the NSC filed a petition for review with the Court of Appeals.10
On November 25, 1997, the Court of Appeals issued a Resolution dismissing the
companys petition for review on the ground that it failed to comply with the
requirements of Revised Circular No. 28-91 and Administrative Circular No. 04-94 on
forum shopping. The pertinent portions of the decision read:
"xxx We hold that Atty. Roberto C. Padilla, one of the counsels of record,
then, of the petitioner is not a real party in interest or 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 but a retained counsel with mere incidental
interest and therefore, not the petitioner or plaintiff, petitioner, applicant
or principal party seeking relief required by law to certify under oath to
the facts and/or undertakings stated in Revised Circular No. 28-91 and
Administrative Circular No. 04-94."

ECONOMIC ADJUSTMENTS
xxx

"Consequently, the Court hereby RESOLVES to GRANT the `Motion to

Dismiss Appellants Petition for Review.
"SO ORDERED."11

"SECTION 3. Productivity and Quality Bonus The COMPANY shall

grant productivity and quality bonus whenever, in the exclusive
determination of the COMPANY, the production and quality targets for the
immediately preceding period justify the granting of such bonus. The
amount of the bonus shall be left to the sole discretion of the COMPANY.

On December 17, 1997, NSC filed a Motion for Reconsideration 12 of the resolution.
But this was denied in a Resolution13 dated July 2, 1998 where the appellate court
found that:

"The productivity and quality bonus provided herein shall be separate

from and in addition to the 13thmonth pay provided by law and the fiscal
year-end incentive award traditionally granted by the COMPANY."4

"x x x absent any authority from the petitioner corporations board of

directors to sue in its behalf, the counsel of record is without personality
to sue x x x.

The union claimed that these benefits were demandable because the granting of
such benefits was not only provided for by the CBA but had also become the
practice in the firm from 1989 to 1993. Also, the incentive pay was not dependent on

"xxx

xxx

xxx

Page 39 of 51

"ACCORDINGLY, the Motion for Reconsideration filed by the petitioner

NATIONAL STEEL CORPORATION is DENIED.
"SO ORDERED."14
Hence this petition raising the following grounds:
"A. NSCS COUNSEL OF RECORD WAS DULY AUTHORIZED TO
REPRESENT NSC IN THE PREPARATION OF THE PETITION FOR
REVIEW FILED BEFORE THE COURT OF APPEALS.
"B. THE VERIFICATION CUM CERTIFICATION OF PETITIONERS
COUNSEL OF RECORD WAS TRUTHFUL IN ALL RESPECTS.
"C. THE DISMISSAL OF THE PETITION FOR REVIEW BEFORE THE
COURT OF APPEALS ON A PURELY TECHNICAL GROUND VIOLATES
PETITIONERS RIGHT TO DUE PROCESS AND OPPRESSIVELY
DEPRIVED THE LATTER OF SUBSTANTIVE JUSTICE."15
Simply stated, the pertinent issues of this case are as follows: (1) May the signature
of petitioners counsel be deemed sufficient for the purposes of Revised Circular No.
28-91 and Administrative Circular No. 04-94; and (2) granting that the petition a quo
should have been allowed, did the voluntary arbitrator commit any error in granting
the demand of the union for the distribution of the year-end incentive award?
We will first resolve the issue on the certification against forum shopping.
Circular No. 28-91 was put in place to deter the practice of some party-litigants of
simultaneously pursuing remedies in different forums for such practice works havoc
upon orderly judicial procedure.16
In the case at bar, the certification was signed by petitioners counsel. Petitioner
argues that contrary to the findings of the Court of Appeals, NSCs counsel of record
was duly authorized to represent them not only before the Voluntary Arbitrator but
also to prepare the petition for review filed before the Court of Appeals. To support
this claim, petitioner attached to its petition before this Court a Secretarys Certificate
dated December 16, 1997 which states that:
"x x x [B]ased on the records of the Corporation, Atty. Roberto C. Padilla,
with office address at the 2ndfloor, Chere Bldg., Del Pilar St., Iligan City is
the legal counsel of the Corporation on a general retainer and is duly
authorized to represent the latter and to act on its behalf in several cases,
including "National Steel Corporation v. Rene E. Ofreneo and NSCHDCTC Monthly-Daily Employees Organization-FFW", docketed as CAG.R. SP No. 42431 before the Fifth Division of the Court of Appeals."17
Counsel of petitioner, Atty. Padilla also submitted a Verification cum Certification
where he stated that he prepared the petition upon the explicit instructions of the VPMarketing & Resident Manager of petitioner corporation.18
Petitioner explains that powers of corporations organized under the Corporation
Code shall be exercised by the board of directors; that the exercise of such powers
may be done indirectly through delegation; that pursuant to the exercise of its
powers, the corporation through its Board of Directors, may employ such persons as
it may need to carry on the operations of the corporate business; that hence, with the
express authorization by NSCs board of directors, Atty. Padilla was conferred with
enough authority to sign the Verification cum Certification in the petition for review
filed before the Court of Appeals; 19 that assuming arguendo there is no express
authorization from NSC, still Atty. Padilla is impliedly authorized to file the petition for

review before the Court of Appeals in line with its obligation to take all steps or do all
acts necessary or incidental to the regular and orderly prosecution or management
of the suit; that respondent union never questioned the authority of Atty. Padilla to
represent NSC in the proceedings before the Voluntary Arbitrator; that the union is
therefore absolutely estopped from questioning Atty. Padillas authority to file the
petition for review before the Court of Appeals; 20 that the dismissal of the petition for
review on a purely technical ground violated petitioners right to due process and
oppressively deprived it of substantive justice as enunciated in Section 6, Rule 1, as
well as previous rulings of this Court which upheld the primacy of substantial justice
over technical rules of procedure.21
For its part, respondent union claims that petitioner violated Rule 13, Section 11 of
the Rules of Court anent the priorities in modes of service and filing; 22 that the Court
of Appeals did not err in dismissing NSCs petition for review because it was not duly
verified by the petitioner as required by the rules; that the petition filed before the
appellate court did not have a Secretarys Certificate stating the authority of Atty.
Padilla to represent petitioner corporation; and that it was only after the Court of
Appeals dismissed their petition in a Resolution dated November 25, 1997 that
petitioner attached said Certificate dated December 16, 1997.23
We rule in favor of petitioner and hold that the Court of Appeals erred in dismissing
the petition.
In the case of BA Savings Bank vs. Sia,24 this Court has ruled that the certificate of
non-forum shopping required by Supreme Court Circular No. 28-91 may be signed,
for and on behalf of a corporation, by a specifically authorized lawyer who has
personal knowledge of the facts required to be disclosed in such document.
The reason is that:
"Unlike natural persons, corporations may perform physical actions only
through properly delegated individuals; namely, its officers and/or agents.
"xxx

xxx

xxx

"The corporation, such as the petitioner, has no powers except those

expressly conferred on it by the Corporation Code and those that are
implied by or are incidental to its existence. In turn, a corporation
exercises said powers through its board of directors and / or its duly
authorized officers and agents. Physical acts, like the signing of
documents, can be performed only by natural persons duly authorized for
the purpose by corporate by-laws or by specific act of the board of
directors. `All acts within the powers of a corporation may be performed
by agents of its selection; and, except so far as limitations or restrictions
which may be imposed by special "charter, by-law, or statutory provisions,
the same general principles of law which govern the relation of agency for
a natural person govern the officer or agent of a corporation, of whatever
status or rank, in respect to his power to act for the corporation; and
agents once appointed, or members acting in their stead, are subject to
the same rules, liabilities and incapacities as are agents of individuals
and private persons.
"xxx

xxx

xxx

"x x x For who else knows of the circumstances required in the Certificate
but its own retained counsel. Its regular officers, like its board chairman
and president, may not even know the details required therein."25

Page 40 of 51

While it is admitted that the authorization of petitioners counsel was submitted to the
appellate court only after the issuance of its Resolution dismissing the petition based
on non-compliance with the aforesaid Circular, we hold that in view of the peculiar
circumstances of the present case and in the interest of substantial justice, the
procedural defect may be set aside, pro hac vice. As held by the Court: "Technical
rules of procedure should be used to promote, not frustrate, justice. While the swift
unclogging of court dockets is a laudable objective, the granting of substantial justice
is an even more urgent ideal."26 By recognizing the signature of the authorized
counsel in the certification, no circumvention of the rationale, that is to prevent the
ills of forum shopping, is committed.27 As we have held in many cases:

"x x x the Company gave the following benefits to the workers:

"1. Mid-Year Incentive Pay, which was usually given as an "advance" for
the Year-End Incentive Bonus. The Company announced the Mid-Year
Incentive Pay through memos issued on the following dates:
August 25, 1989,
August 1, 1990,
August 2, 1991,

"x x x Circular No. 28-91 was designed to serve as an instrument to

promote and facilitate the orderly administration of justice and should not
be so interpreted with such absolute literalness as to subvert its own
ultimate and legitimate objective or the goal of all rules of procedure
--which is to achieve substantial justice as expeditiously as possible.
"The fact that the Circular requires that it be strictly complied with merely
underscores its mandatory nature in that it cannot be dispensed with or
its requirements altogether disregarded, but it does not thereby interdict
substantial compliance with its provisions under justifiable
circumstances."28

August 24,1992, and

August 31, 1993."34
Yet, petitioner complains that despite the above findings that the Mid-year Incentive
Awards were given as advances to the Year-End Incentive Awards, the Voluntary
Arbitrator still ruled that the NSC was liable to pay respondent Union the Year-End
Incentive Pay, explaining that:
"xxx

xxx

xxx

We will now delve into the merits of the case.

Petitioner NSC assails the following portions of the award of the Voluntary Arbitrator:
"In view of the foregoing, therefore, the Voluntary Arbitrator rules as
follows:
"xxx

xxx

xxx

"2. The demand of the Union for the distribution of the year-end incentive
award is in order.
"3. The said incentive award shall be computed based on the Companys
past practice in the determination of such award.
"SO ORDERED."29
Petitioner claims that the Voluntary Arbitrator erred when he ordered petitioner to pay
private respondent the 1993 fiscal year-end incentive award despite his own findings
that the mid-year incentive pay already paid by the petitioner is an advance payment
of the fiscal year-end incentive award;30 that the "Mid-year Incentive Pay" granted to
private respondent is itself a bonus not demandable upon NSC as it is not provided
for in the CBA; that this notwithstanding, it has granted the Mid-year Incentive Pay to
members of respondent union every year in the years 1989, 1990, 1991, 1992, and
1993; that in every instance of the grant, petitioner expressly stated that the Mid-year
Incentive Pay is an advance against the Fiscal Year-end Incentive Pay; that
petitioners express reservation that the payment of the Mid-year Incentive Pay is an
advance payment of the fiscal year-end incentive award has been repeatedly
brought to the attention of the Voluntary Arbitrator;31 that the Voluntary Arbitrator
committed serious misapprehension of facts when he ruled that the grant of the
fiscal year-end incentive award has become traditional and has therefore ripened
into a demandable right of private respondent;32 and that for a period of four (4)
years i.e., from 1990 through 1993, the fiscal year-end incentive award has been
granted only twice -- in 1991 and in 1992.33
In his Award, the Voluntary Arbitrator established as a fact that:

"In the case of the fiscal year-end incentive award, the CBA provision has
a general proviso which reads: `The productivity and quality bonus
provided herein shall be separate from and in addition to the 13 thmonth
pay provided by law and the fiscal year-end incentive award traditionally
granted by the COMPANY. Thus, unlike in the productivity and quality
bonus, the CBA simply recognizes the fiscal year-end incentive award as
one of the benefits accorded to the workers, just like the 13 th month pay. It
even added the phrase `traditionally granted by the COMPANY. There
were no qualifications or conditions specified for the granting of this
benefit similar to those governing the granting of the productivity and
quality bonus. The Company argued that like the productivity and quality
bonus, the granting of year-end incentive award is a management
prerogative and is guided by the same conditions, e.g., actual
performance versus production targets, that it uses when it decides on
the granting of productivity and quality bonus. As "pointed out, the CBA is
silent on this. And if there are doubts on the interpretation of the manner
by which benefits like year-end incentive award shall be given, the Labor
Code has long ago decided that all such doubts shall be interpreted in
favor of Labor.
"Moreover, the capacity of the Company to grant this incentive pay is also
not at issue. A closer scrutiny of the Company loss for 1993 shows that
the net loss of P36 million registered for that year was due to the
deduction of `expenses paid in retained earnings amounting to P358
"million from the original P322 million net income. The audited data
gathered by the Union from the Commission on Audit also show that
while earnings and incomes declined from 1992 to 1993, the Company
still registered a healthy level of profitability."35
We rule in favor of petitioner.
This Court has stressed that voluntary arbitrators, by the nature of their functions, act
in quasi-judicial capacity. Hence, as a rule, findings of facts by quasi-judicial bodies
which have acquired expertise because their jurisdiction is confined to specific
matters, are accorded not only respect but even finality if they are supported by
substantial evidence, even if not overwhelming or preponderant. 36 However, in spite

Page 41 of 51

of statutory provisions making "final" the decisions of certain administrative

agencies, we have taken cognizance of petitions questioning such decisions where
want of jurisdiction, grave abuse of discretion, violation of due process, denial of
substantial justice, or erroneous interpretation of the law were brought to our
attention.37
In the present petition for review on certiorari, we find the award of the 1993 yearend incentive to be patently erroneous which amounts not only to grave abuse of
discretion but also to denial of substantial justice. The Voluntary Arbitrator himself
found that the mid-year incentive pay for 1993 was given by petitioner as an
advance payment of the fiscal year-end incentive award for the same year.
Indubitably, to require petitioner to pay again the same incentive pay at the year-end
of 1993 is obviously a great injustice that would be committed against petitioner.
WHEREFORE, we SET ASIDE the Resolutions dated November 25, 1997 and July
2, 1998 of the Court of Appeals.
The Award of Voluntary Arbitrator Ofreneo dated July 19, 1996 is modified to the
effect that the grant of the claim for the distribution of the 1993 year-end incentive
award is DELETED.
SO ORDERED.

Page 42 of 51

G.R. No. 175512

May 30, 2011

VALLACAR
TRANSIT,
vs.
JOCELYN CATUBIG, Respondent.

INC., Petitioner,

DECISION
LEONARDO-DE CASTRO, J.:
For review under Rule 45 of the Rules of Court is the Decision 1 dated November 17,
2005 and the Resolution2dated November 16, 2006 of the Court Appeals in CA-G.R.
CV No. 66815, which modified the Decision3 dated January 26, 2000 of the Regional
Trial Court (RTC), Branch 30 of Dumaguete City, in Civil Case No. 11360, an action
for recovery of damages based on Article 2180, in relation to Article 2176, of the Civil
Code, filed by respondent Jocelyn Catubig against petitioner Vallacar Transit, Inc.
While the RTC dismissed respondents claim for damages, the Court of Appeals
granted the same.
The undisputed facts are as follows:
Petitioner is engaged in the business of transportation and the franchise owner of a
Ceres Bulilit bus with Plate No. T-0604-1348. Quirino C. Cabanilla (Cabanilla) is
employed as a regular bus driver of petitioner.
On January 27, 1994, respondents husband, Quintin Catubig, Jr. (Catubig), was on
his way home from Dumaguete City riding in tandem on a motorcycle with his
employee, Teddy Emperado (Emperado). Catubig was the one driving the
motorcycle. While approaching a curve at kilometers 59 and 60, Catubig tried to
overtake a slow moving ten-wheeler cargo truck by crossing-over to the opposite
lane, which was then being traversed by the Ceres Bulilit bus driven by Cabanilla,
headed for the opposite direction. When the two vehicles collided, Catubig and
Emperado were thrown from the motorcycle. Catubig died on the spot where he was
thrown, while Emperado died while being rushed to the hospital.
On February 1, 1994, Cabanilla was charged with reckless imprudence resulting in
double homicide in Criminal Case No. M-15-94 before the Municipal Circuit Trial
Court (MCTC) of Manjuyod-Bindoy-Ayungon of the Province of Negros Oriental.
After preliminary investigation, the MCTC issued a Resolution on December 22,
1994, dismissing the criminal charge against Cabanilla. It found that Cabanilla was
not criminally liable for the deaths of Catubig and Emperado, because there was no
negligence, not even contributory, on Cabanillas part.
Thereafter, respondent filed before the RTC on July 19, 1995 a Complaint for
Damages against petitioner, seeking actual, moral, and exemplary damages, in the
total amount of P484,000.00, for the death of her husband, Catubig, based on Article
2180, in relation to Article 2176, of the Civil Code. Respondent alleged that petitioner
is civilly liable because the latters employee driver, Cabanilla, was reckless and
negligent in driving the bus which collided with Catubigs motorcycle.
Petitioner, in its Answer with Counterclaim, contended that the proximate cause of
the vehicular collision, which resulted in the deaths of Catubig and Emperado, was
the sole negligence of Catubig when he imprudently overtook another vehicle at a
curve and traversed the opposite lane of the road. As a special and affirmative
defense, petitioner asked for the dismissal of respondents complaint for not being
verified and/or for failure to state a cause of action, as there was no allegation that
petitioner was negligent in the selection or supervision of its employee driver.

In the Pre-Trial Order4 dated June 10, 1997, the parties stipulated that the primary
issue for trial was whether or not petitioner should be held liable for Catubigs death.
Trial then ensued.
Police Officer (PO) 2 Robert B. Elnas (Elnas), 5 Emilio Espiritu (Espiritu),6 Dr.
Norberto Baldado, Jr. (Dr. Baldado),7 Peter Cadimas (Cadimas),8 and
respondent9 herself testified in support of respondents complaint.
PO2 Elnas conducted an investigation of the collision incident. According to PO2
Elnas, the bus was running fast, at a speed of 100 kilometers per hour, when it
collided with the motorcycle which was trying to overtake a truck. The collision
occurred on the lane of the bus. Catubig was flung 21 meters away, and Emperado,
11 meters away, from the point of impact. The motorcycle was totaled; the chassis
broke into three parts, and the front wheel and the steering wheel with the shock
absorbers were found 26 meters and 38 meters, respectively, from the collision
point. In contrast, only the front bumper of the bus suffered damage.
Cadimas personally witnessed the collision of the bus and the motorcycle. He
recalled that he was then waiting for a ride to Dumaguete City and saw the Ceres
Bulilit bus making a turn at a curve. Cadimas signaled the said bus to halt but it was
running fast. Cadimas also recollected that there was a cargo truck running slow in
the opposite direction of the bus. Cadimas next heard a thud and saw that the bus
already collided with a motorcycle.
Espiritu was the photographer who took photographs of the scene of the accident.
He identified the five photographs which he had taken of Catubig lying on the
ground, bloodied; broken parts of the motorcycle; and the truck which Catubig tried
to overtake.
Dr. Baldado was the medico-legal doctor who conducted the post-mortem
examination of Catubigs body. He reported that Catubig suffered from the following
injuries: laceration and fracture of the right leg; laceration and fracture of the left
elbow; multiple abrasions in the abdominal area, left anterior chest wall, posterior
right arm, and at the back of the left scapular area; and contusion-hematoma just
above the neck. Dr. Baldado confirmed that Catubig was already dead when the
latter was brought to the hospital, and that the vehicular accident could have caused
Catubigs instantaneous death.
Respondent herself testified to substantiate the amount of damages she was trying
to recover from petitioner for Catubigs death, such as Catubigs earning capacity;
expenses incurred for the wake and burial of Catubig, as well as of Emperado; the
cost of the motorcycle; and the costs of the legal services and fees respondent had
incurred.
Respondents documentary exhibits consisted of her and Catubigs Marriage
Contract dated August 21, 1982, their two childrens Certificate of Live Births,
Catubigs College Diploma dated March 24, 1983, the list and receipts of the
expenses for Catubigs burial, the sketch of the collision site prepared by PO2 Elnas,
the excerpts from the police blotter, the photographs of the collision, 10 and the Post
Mortem Report11 on Catubigs cadaver prepared by Dr. Baldado.
In an Order12 dated October 6, 1998, the RTC admitted all of respondents
aforementioned evidence.
On the other hand, Rosie C. Amahit (Amahit) 13 and Nunally Maypa (Maypa)14 took
the witness stand for petitioner.

Page 43 of 51

Amahit was a Court Stenographer at the MCTC who took the transcript of
stenographic notes (TSN) in Criminal Case No. M-15-94 against Cabanilla. Amahit
verified that the document being presented by the defense in the present case was a
true and correct copy of the TSN of the preliminary investigation held in Criminal
Case No. M-15-94 on May 25, 1994, and another document was a duplicate original
of the MCTC Resolution dated December 22, 1994 dismissing Criminal Case No. M15-94.

After trial, the RTC concluded:

Maypa is the Administrative and Personnel Manager at the Dumaguete branch of

petitioner. He started working for petitioner on September 22, 1990 as a clerk at the
Human Resources Development Department at the Central Office of petitioner in
Bacolod City. Sometime in November 1993, he became an Administrative Assistant
at the Dumaguete branch of petitioner; and in August 1995, he was promoted to his
current position at the same branch.

Respondent appealed to the Court of Appeals. In its Decision dated November 17,
2005, the appellate court held that both Catubig and Cabanilla were negligent in
driving their respective vehicles. Catubig, on one hand, failed to use reasonable care
for his own safety and ignored the hazard when he tried to overtake a truck at a
curve. Cabanilla, on the other hand, was running his vehicle at a high speed of 100
kilometers per hour. The Court of Appeals also brushed aside the defense of
petitioner that it exercised the degree of diligence exacted by law in the conduct of
its business. Maypa was not in a position to testify on the procedures followed by
petitioner in hiring Cabanilla as an employee driver considering that Cabanilla was
hired a year before Maypa assumed his post at the Dumaguete branch of petitioner.

While he was still an Administrative Assistant, Maypa was responsible for the hiring
of personnel including drivers and conductors. Maypa explained that to be hired as a
driver, an applicant should be 35 to 45 years old, have at least five years experience
in driving big trucks, submit police, court, and medical clearances, and possess all
the necessary requirements for driving a motor vehicle of more than 4,500 kilograms
in gross weight such as a professional drivers license with a restriction code of 3.
The applicant should also pass the initial interview, the actual driving and
maintenance skills tests, and a written psychological examination involving defensive
driving techniques. Upon passing these examinations, the applicant still had to go
through a 15-day familiarization of the bus and road conditions before being
deployed for work. Maypa, however, admitted that at the time of his appointment as
Administrative Assistant at the Dumaguete branch, Cabanilla was already an
employee driver of petitioner.
Maypa further explained the investigation and grievance procedure followed by
petitioner in cases of vehicular accidents involving the latters employee drivers.
Maypa related that Cabanilla had been put on preventive suspension following the
vehicular accident on January 27, 1994 involving the bus Cabanilla was driving and
the motorcycle carrying Catubig and Emperado. Following an internal investigation
of said accident conducted by petitioner, Cabanilla was declared not guilty of causing
the same, for he had not been negligent.
Lastly, Maypa recounted the expenses petitioner incurred as a result of the present
litigation.
The documentary exhibits of petitioner consisted of the TSN of the preliminary
investigation in Criminal Case No. M-15-94 held on May 25, 1994 before the MCTC
of Manjuyod-Bindoy-Ayungon of the Province of Negros Oriental; Resolution dated
December 22, 1994 of the MCTC in the same case; and the Minutes dated February
17, 1994 of the Grievance Proceeding conducted by petitioner involving Cabanilla.15
The RTC, in its Order16 dated November 12, 1999, admitted all the evidence
presented by petitioner.
On January 26, 2000, the RTC promulgated its Decision favoring petitioner. Based
on the sketch prepared by PO2 Elnas, which showed that "the point of impact x x x
occurred beyond the center lane near a curve within the lane of the Ceres
bus[;]"17 plus, the testimonies of PO2 Elnas and Cadimas that the motorcycle
recklessly tried to overtake a truck near a curve and encroached the opposite lane of
the road, the RTC ruled that the proximate cause of the collision of the bus and
motorcycle was the negligence of the driver of the motorcycle, Catubig. The RTC,
moreover, was convinced through the testimony of Maypa, the Administrative and
Personnel Manager of the Dumaguete branch of petitioner, that petitioner had
exercised due diligence in the selection and supervision of its employee drivers,
including Cabanilla.

WHEREFORE, finding preponderance of evidence in favor of the [herein petitioner]

that the [herein respondents] husband is the reckless and negligent driver and not
the driver of the [petitioner], the above-entitled case is hereby ordered dismissed.
[Petitioners] counterclaim is also dismissed for lack of merit. 18

Thus, the Court of Appeals decreed:

WHEREFORE, based on the foregoing, the assailed decision of the trial court is
modified. We rule that [herein petitioner] is equally liable for the accident in question
which led to the deaths of Quintin Catubig, Jr. and Teddy Emperado and hereby
award to the heirs of Quintin Catubig, Jr. the amount [of] P250,000.00 as full
compensation for the death of the latter.19
The Court of Appeals denied the motion for reconsideration of petitioner in a
Resolution dated November 16, 2006.
Hence, the instant Petition for Review.
Petitioner asserts that respondents complaint for damages should be dismissed for
the latters failure to verify the same. The certification against forum shopping
attached to the complaint, signed by respondent, is not a valid substitute for
respondents verification that she "has read the pleading and that the allegations
therein are true and correct of her personal knowledge or based on authentic
records."20 Petitioner cited jurisprudence in which the Court ruled that a pleading
lacking proper verification is treated as an unsigned pleading, which produces no
legal effect under Section 3, Rule 7 of the Rules of Court.
Petitioner also denies any vicarious or imputed liability under Article 2180, in relation
to Article 2176, of the Civil Code. According to petitioner, respondent failed to prove
the culpability of Cabanilla, the employee driver of petitioner. There are already two
trial court decisions (i.e., the Resolution dated December 22, 1994 of the MCTC of
Manjuyod-Bindoy-Ayungon of the Province of Negros Oriental in Criminal Case No.
M-15-94 and the Decision dated January 26, 2000 of the RTC in the instant civil suit)
explicitly ruling that the proximate cause of the collision was Catubigs reckless and
negligent act. Thus, without the fault or negligence of its employee driver, no liability
at all could be imputed upon petitioner.
Petitioner additionally argues, without conceding any fault or liability, that the award
by the Court of Appeals in respondents favor of the lump sum amount
of P250,000.00 as total death indemnity lacks factual and legal basis. Respondents
evidence to prove actual or compensatory damages are all self-serving, which are
either inadmissible in evidence or devoid of probative value. The award of moral and
exemplary damages is likewise contrary to the ruling of the appellate court that
Catubig should be equally held liable for his own death.

Page 44 of 51

Respondent maintains that the Court of Appeals correctly adjudged petitioner to be

liable for Catubigs death and that the appellate court had already duly passed upon
all the issues raised in the petition at bar.
The petition is meritorious.
At the outset, we find no procedural defect that would have warranted the outright
dismissal of respondents complaint.
Respondent filed her complaint for damages against petitioner on July 19, 1995,
when the 1964 Rules of Court was still in effect. Rule 7, Section 6 of the 1964 Rules
of Court provided:
Sec. 6. Verification.A pleading is verified only by an affidavit stating that the person
verifying has read the pleading and that the allegations thereof are true of his own
knowledge.
Verifications based on "information and belief," or upon "knowledge, information and
belief," shall be deemed insufficient.
On July 1, 1997, the new rules on civil procedure took effect. The foregoing provision
was carried on, with a few amendments, as Rule 7, Section 4 of the 1997 Rules of
Court, viz:
SEC. 4. Verification. Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that
the allegations therein are true and correct of his knowledge and belief.
A pleading required to be verified which contains a verification based on "information
and belief," or upon "knowledge, information and belief," or lacks a proper
verification, shall be treated as an unsigned pleading."
The same provision was again amended by A.M. No. 00-2-10, which became
effective on May 1, 2000. It now reads:
SEC. 4. Verification. - Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that
the allegations therein are true and correct of his personal knowledge or based on
authentic records.
A pleading required to be verified which contains a verification based on "information
and belief" or upon "knowledge, information and belief," or lacks a proper
verification, shall be treated as an unsigned pleading.
The 1997 Rules of Court, even prior to its amendment by A.M. No. 00-2-10, clearly
provides that a pleading lacking proper verification is to be treated as an unsigned
pleading which produces no legal effect. However, it also just as clearly states that
"[e]xcept when otherwise specifically required by law or rule, pleadings need not be
under oath, verified or accompanied by affidavit." No such law or rule specifically
requires that respondents complaint for damages should have been verified.
Although parties would often submit a joint verification and certificate against forum
shopping, the two are different.

In Pajuyo v. Court of Appeals,21 we already pointed out that:

A partys failure to sign the certification against forum shopping is different from the
partys failure to sign personally the verification. The certificate of non-forum
shopping must be signed by the party, and not by counsel. The certification of
counsel renders the petition defective.
On the other hand, the requirement on verification of a pleading is a formal and not a
jurisdictional requisite. It is intended simply to secure an assurance that what are
alleged in the pleading are true and correct and not the product of the imagination or
a matter of speculation, and that the pleading is filed in good faith. The party need
not sign the verification. A partys representative, lawyer or any person who
personally knows the truth of the facts alleged in the pleading may sign the
verification.22
In the case before us, we stress that as a general rule, a pleading need not be
verified, unless there is a law or rule specifically requiring the same. Examples of
pleadings that require verification are: (1) all pleadings filed in civil cases under the
1991 Revised Rules on Summary Procedure; (2) petition for review from the
Regional Trial Court to the Supreme Court raising only questions of law under Rule
41, Section 2; (3) petition for review of the decision of the Regional Trial Court to the
Court of Appeals under Rule 42, Section 1; (4) petition for review from quasi-judicial
bodies to the Court of Appeals under Rule 43, Section 5; (5) petition for review
before the Supreme Court under Rule 45, Section 1; (6) petition for annulment of
judgments or final orders and resolutions under Rule 47, Section 4; (7) complaint for
injunction under Rule 58, Section 4; (8) application for preliminary injunction or
temporary restraining order under Rule 58, Section 4; (9) application for appointment
of a receiver under Rule 59, Section 1; (10) application for support pendente lite
under Rule 61, Section 1; (11) petition for certiorari against the judgments, final
orders or resolutions of constitutional commissions under Rule 64, Section 2; (12)
petition for certiorari, prohibition, and mandamus under Rule 65, Sections 1 to 3; (13)
petition for quo warranto under Rule 66, Section 1; (14) complaint for expropriation
under Rule 67, Section 1; (15) petition for indirect contempt under Rule 71, Section
4, all from the 1997 Rules of Court; (16) all complaints or petitions involving intracorporate controversies under the Interim Rules of Procedure on Intra-Corporate
Controversies; (17) complaint or petition for rehabilitation and suspension of
payment under the Interim Rules on Corporate Rehabilitation; and (18) petition for
declaration of absolute nullity of void marriages and annulment of voidable
marriages as well as petition for summary proceedings under the Family Code.
In contrast, all complaints, petitions, applications, and other initiatory pleadings must
be accompanied by a certificate against forum shopping, first prescribed by
Administrative Circular No. 04-94, which took effect on April 1, 1994, then later on by
Rule 7, Section 5 of the 1997 Rules of Court. It is not disputed herein that
respondents complaint for damages was accompanied by such a certificate.
In addition, verification, like in most cases required by the rules of procedure, is a
formal, not jurisdictional, requirement, and mainly intended to secure an assurance
that matters which are alleged are done in good faith or are true and correct and not
of mere speculation. When circumstances warrant, the court may simply order the
correction of unverified pleadings or act on it and waive strict compliance with the
rules in order that the ends of justice may thereby be served.23
We agree with petitioner, nonetheless, that respondent was unable to prove
imputable negligence on the part of petitioner.
Prefatorily, we restate the time honored principle that in a petition for review under
Rule 45, only questions of law may be raised. It is not our function to analyze or
weigh all over again evidence already considered in the proceedings below, our
jurisdiction is limited to reviewing only errors of law that may have been committed

Page 45 of 51

by the lower court. The resolution of factual issues is the function of lower courts,
whose findings on these matters are received with respect. A question of law which
we may pass upon must not involve an examination of the probative value of the
evidence presented by the litigants.24
The above rule, however, admits of certain exceptions. The findings of fact of the
Court of Appeals are generally conclusive but may be reviewed when: (1) the factual
findings of the Court of Appeals and the trial court are contradictory; (2) the findings
are grounded entirely on speculation, surmises or conjectures; (3) the inference
made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd
or impossible; (4) there is grave abuse of discretion in the appreciation of facts; (5)
the appellate court, in making its findings, goes beyond the issues of the case and
such findings are contrary to the admissions of both appellant and appellee; (6) the
judgment of the Court of Appeals is premised on a misapprehension of facts; (7) the
Court of Appeals fails to notice certain relevant facts which, if properly considered,
will justify a different conclusion; and (8) the findings of fact of the Court of Appeals
are contrary to those of the trial court or are mere conclusions without citation of
specific evidence, or where the facts set forth by the petitioner are not disputed by
respondent, or where the findings of fact of the Court of Appeals are premised on the
absence of evidence but are contradicted by the evidence on record.25
The issue of negligence is basically factual.26 Evidently, in this case, the RTC and the
Court of Appeals have contradictory factual findings: the former found that Catubig
alone was negligent, while the latter adjudged that both Catubig and petitioner were
negligent.
Respondent based her claim for damages on Article 2180, in relation to Article 2176,
of the Civil Code, which read:
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this Chapter.
Art. 2180. The obligation imposed by Article 2176 is demandable not only for ones
own acts or omissions, but also for those persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though the
former are not engaged in any business or industry.
xxxx
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage.
There is merit in the argument of the petitioner that Article 2180 of the Civil Code
imputing fault or negligence on the part of the employer for the fault or negligence of
its employee does not apply to petitioner since the fault or negligence of its
employee driver, Cabanilla, which would have made the latter liable for quasi-delict
under Article 2176 of the Civil Code, has never been established by respondent. To
the contrary, the totality of the evidence presented during trial shows that the
proximate cause of the collision of the bus and motorcycle is attributable solely to the
negligence of the driver of the motorcycle, Catubig.

Proximate cause is defined as that cause, which, in natural and continuous

sequence, unbroken by any efficient intervening cause, produces the injury, and
without which the result would not have occurred. And more comprehensively, the
proximate legal cause is that acting first and producing the injury, either immediately
or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the
final event in the chain immediately effecting the injury as a natural and probable
result of the cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary prudent and intelligent person,
have reasonable ground to expect at the moment of his act or default that an injury
to some person might probably result therefrom.27
The RTC concisely articulated and aptly concluded that Catubigs overtaking of a
slow-moving truck ahead of him, while approaching a curve on the highway, was the
immediate and proximate cause of the collision which led to his own death, to wit:
Based on the evidence on record, it is crystal clear that the immediate and proximate
cause of the collision is the reckless and negligent act of Quintin Catubig, Jr. and not
because the Ceres Bus was running very fast. Even if the Ceres Bus is running very
fast on its lane, it could not have caused the collision if not for the fact that Quintin
Catubig, Jr. tried to overtake a cargo truck and encroached on the lane traversed by
the Ceres Bus while approaching a curve. As the driver of the motorcycle, Quintin
Catubig, Jr. has not observed reasonable care and caution in driving his motorcycle
which an ordinary prudent driver would have done under the circumstances.
Recklessness on the part of Quintin Catubig, Jr. is evident when he tried to overtake
a cargo truck while approaching a curve in Barangay Donggo-an, Bolisong,
Manjuyod, Negros Oriental. Overtaking is not allowed while approaching a curve in
the highway (Section 41(b), Republic Act [No.] 4136, as amended). Passing another
vehicle proceeding on the same direction should only be resorted to by a driver if the
highway is free from incoming vehicle to permit such overtaking to be made in safety
(Section 41(a), Republic Act [No.] 4136). The collision happened because of the
recklessness and carelessness of [herein respondents] husband who was
overtaking a cargo truck while approaching a curve. Overtaking another vehicle
while approaching a curve constitute reckless driving penalized not only under
Section 48 of Republic Act [No.] 4136 but also under Article 365 of the Revised
Penal Code.
The Court commiserate with the [respondent] for the untimely death of her
husband.1avvphi1 However, the Court as dispenser of justice has to apply the law
based on the facts of the case. Not having proved by preponderance of evidence
that the proximate cause of the collision is the negligence of the driver of the Ceres
bus, this Court has no other option but to dismiss this case.28 (Emphases supplied.)
The testimonies of prosecution witnesses Cadimas and PO2 Elnas that Cabanilla
was driving the bus at a reckless speed when the collision occurred lack probative
value.
We are unable to establish the actual speed of the bus from Cadimass testimony for
he merely stated that the bus did not stop when he tried to flag it down because it
was "running very fast."29
PO2 Elnas, on the other hand, made inconsistent statements as to the actual speed
of the bus at the time of the collision. During the preliminary investigation in Criminal
Case No. M-15-94 before the MCTC, PO2 Elnas refused to give testimony as to the
speed of either the bus or the motorcycle at the time of the collision and an opinion
as to who was at fault. 30 But during the trial of the present case before the RTC, PO2
Elnas claimed that he was told by Cabanilla that the latter was driving the bus at the
speed of around 100 kilometers per hour.31

Page 46 of 51

As the RTC noted, Cadimas and PO2 Elnas both pointed out that the motorcycle
encroached the lane of the bus when it tried to overtake, while nearing a curve, a
truck ahead of it, consistent with the fact that the point of impact actually happened
within the lane traversed by the bus. It would be more reasonable to assume then
that it was Catubig who was driving his motorcycle at high speed because to
overtake the truck ahead of him, he necessarily had to drive faster than the truck.
Catubig should have also avoided overtaking the vehicle ahead of him as the
curvature on the road could have obstructed his vision of the oncoming vehicles from
the opposite lane.
The evidence shows that the driver of the bus, Cabanilla, was driving his vehicle
along the proper lane, while the driver of the motorcycle, Catubig, had overtaken a
vehicle ahead of him as he was approaching a curvature on the road, in disregard of
the provision of the law on reckless driving, at the risk of his life and that of his
employee, Emperado.
The presumption that employers are negligent under Article 2180 of the Civil Code
flows from the negligence of their employees.32 Having adjudged that the immediate
and proximate cause of the collision resulting in Catubigs death was his own
negligence, and there was no fault or negligence on Cabanillas part, then such
presumption of fault or negligence on the part of petitioner, as Cabanillas employer,
does not even arise. Thus, it is not even necessary to delve into the defense of
petitioner that it exercised due diligence in the selection and supervision of Cabanilla
as its employee driver.
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated
November 17, 2005 and Resolution dated November 16, 2006 of the Court Appeals
in CA-G.R. CV No. 66815 are SET ASIDE and the Decision dated January 26, 2000
of the Regional Trial Court, Branch 30 of Dumaguete City, dismissing Civil Case No.
11360 is REINSTATED.
SO ORDERED.

Page 47 of 51

NELLIE VDA. DE FORMOSO and her

children, namely, MA. THERESA
FORMOSO-PESCADOR,
ROGER
FORMOSO, MARY JANE FORMOSO,
BERNARD FORMOSO and PRIMITIVO
MALCABA,
Petitioners,
- versus -

G.R. No. 154704

Present:
CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

PNB filed a motion for reconsideration but it was denied for failure to comply
with Rule 15, Section 5 of the 1997 Rules of Civil Procedure. PNB then filed a
Notice of Appeal but it was dismissed for being filed out of time.
The petitioners received their copy of the decision on November 26,
1999, and on January 25, 2001, they filed their Petition for Relief from
Judgment[4] questioning the RTC decision that there was no testimonial evidence
presented to warrant the award for moral and exemplary damages. They reasoned
out that they could not then file a motion for reconsideration because they could not
get hold of a copy of the transcripts of stenographic notes. In its August 6,
2001 Order, the RTC denied the petition for lack of merit.[5]
On September 7, 2001, the petitioners moved for reconsideration but it was
denied by the RTC in its Omnibus Order of September 26, 2001.[6]

PHILIPPINE
NATIONAL
BANK,
FRANCISCO ARCE, ATTY. BENJAMIN
BARBERO, and ROBERTO NAVARRO,
Respondents.

Before the Court of Appeals

Promulgated:

On November 29, 2001, the petitioners filed a petition for certiorari before the
CA challenging the RTC Order of August 6, 2001 and its Omnibus Order
dated September 26, 2001.

June 1, 2011
x -----------------------------------------------------------------------------------------------------x
DECISION
MENDOZA, J.:
Assailed in this petition are the January 25, 2002 Resolution[1] and the
August 8, 2002 Resolution[2] of the Court of Appeals (CA) which dismissed the
petition for certiorari filed by the petitioners on the ground that the verification and
certification of non-forum shopping was signed by only one of the petitioners in CA
G.R. SP No. 67183, entitled Nellie P. Vda. De Formoso, et al. v. Philippine National
Bank, et al.
The Factual and
Procedural Antecedents
Records show that on October 14, 1989, Nellie Panelo Vda. De
Formoso (Nellie) and her children namely: Ma. Theresa Formoso-Pescador, Roger
Formoso, Mary Jane Formoso, Bernard Formoso, and Benjamin Formoso, executed
a special power of attorney in favor of Primitivo Malcaba (Malcaba) authorizing him,
among others, to secure all papers and documents including the owners copies of
the titles of real properties pertaining to the loan with real estate mortgage originally
secured by Nellie and her late husband, Benjamin S. Formoso, from Philippine
National Bank, Vigan Branch (PNB) on September 4, 1980.
On April 20, 1990, the Formosos sold the subject mortgaged real
properties to Malcaba through a Deed of Absolute Sale. Subsequently, on March 22,
1994, Malcaba and his lawyer went to PNB to fully pay the loan obligation including
interests in the amount of 2,461,024.74.
PNB, however, allegedly refused to accept Malcabas tender of payment
and to release the mortgage or surrender the titles of the subject mortgaged real
properties.
On March 24, 1994, the petitioners filed a Complaint for Specific
Performance against PNB before the Regional Trial Court of Vigan, Ilocos
Sur (RTC) praying, among others, that PNB be ordered to accept the amount of
2,461,024.74 as full settlement of the loan obligation of the Formosos.

After an exchange of several pleadings, the RTC finally rendered its

decision[3] on October 27, 1999 favoring the petitioners. The petitioners prayer for
exemplary or corrective damages, attorneys fees, and annual interest and daily
interest, however, were denied for lack of evidence.

In its January 25, 2002 Resolution, the CA dismissed the petition stating
that:
The verification and certification of non-forum
shopping was signed by only one (Mr. Primitivo Macalba) of
the many petitioners. In Loquias v. Office of the Ombudsman,
G.R. No. 139396, August 15, 2000, it was ruled that all
petitioners must be signatories to the certification of non-forum
shopping unless the one who signed it is authorized by the
other petitioners. In the case at bar, there was no showing that
the one who signed was empowered to act for the rest.
Therefore, it cannot be presumed that the one who signed
knew to the best of his knowledge whether his co-petitioners
had the same or similar claims or actions filed or pending. The
ruling in Loquias further declared that substantial compliance
will not suffice in the matter involving strict observance of the
Rules. Likewise, the certification of non-forum shopping
requires personal knowledge of the party who executed the
same and that petitioners must show reasonable cause for
failure to personally sign the certification. Utter disregard of the
Rules cannot just be rationalized by harping on the policy of
liberal construction.
Aggrieved, after the denial of their motion for reconsideration, the petitioners
filed this petition for review anchored on the following
GROUNDS
THE COURT OF APPEALS PATENTLY ERRED IN RULING
THAT ALL THE PETITIONERS MUST SIGN THE
VERIFICATION AND CERTIFICATION OF NON-FORUM
SHOPPING IN A PETITION FOR CERTIORARI WHEREIN
ONLY QUESTIONS OF LAW ARE INVOLVED.
ALTERNATIVELY, THE COURT OF APPEALS PATENTLY
ERRED IN DISMISSING THE WHOLE PETITION WHEN AT
THE VERY LEAST THE PETITION INSOFAR AS
PETITIONER MALCABA IS CONCERNED BEING THE
SIGNATORY THEREOF SHOULD HAVE BEEN GIVEN DUE
COURSE.
THE COURT OF APPEALS PATENTLY ERRED IN GIVING
MORE WEIGHT ON TECHNICALITIES WHEN THE
PETITION BEFORE IT WAS CLEARLY MERITORIOUS.[7]

Page 48 of 51

The petitioners basically argue that they have substantially complied with
the requirements provided under the 1997 Rules of Civil Procedure on Verification
and Certification of Non-Forum Shopping. The petitioners are of the view that the
rule on Verification and Certification of Non-Forum Shopping that all petitioners must
sign should be liberally construed, since only questions of law are raised in a petition
for certiorari and no factual issues that require personal knowledge of the petitioners.
The petitioners further claim that they have a meritorious petition because
contrary to the ruling of the RTC, their Petition for Relief clearly showed that, based
on the transcript of stenographic notes, there was enough testimonial evidence for
the RTC to grant them damages and attorneys fees as prayed for.
On the other hand, PNB counters that the mandatory rule on the
certification against forum shopping requires that all of the six (6) petitioners must
sign, namely: Nellie Vda. De Formoso and her children Ma. Theresa FormosoPescador, Roger Formoso, Mary Jane Formoso, and Bernard Formoso, and
Primitivo Malcaba. Therefore, the signature alone of Malcaba on the certification is
insufficient.
PNB further argues that Malcaba was not even a party or signatory to the
contract of loan entered into by his co-petitioners. Neither was there evidence that
Malcaba is a relative or a co-owner of the subject properties. It likewise argues that,
contrary to the stance of the petitioners, the issue raised before the CA, as to
whether or not the petitioners were entitled to moral and exemplary damages as well
as attorneys fees, is a factual one.
Finally, PNB asserts that the body of the complaint filed by the petitioners
failed to show any allegation that Macalba alone suffered damages for which he
alone was entitled to reliefs as prayed for. PNB claims that the wordings of the
complaint were clear that all the petitioners were asking for moral and exemplary
damages and attorneys fees.
OUR RULING
The petition lacks merit.
Certiorari is an extraordinary, prerogative remedy and is never issued as
a matter of right. Accordingly, the party who seeks to avail of it must strictly observe
the rules laid down by law.[8] Section 1, Rule 65 of the 1997 Rules of Civil
Procedure provides:
SECTION 1. Petition for certiorari.- When any
tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction, and there is no appeal, or any
plain, speedy, and adequate remedy in the ordinary course of
law, a person aggrieved thereby may file a verified petition in
the proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified

true copy of the judgment, order or resolution subject thereof,
copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum
shopping as provided in the third paragraph of Section 3,
Rule 46. [Emphasis supplied]

SECTION 3. Contents and filing of petition; effect

of non-compliance with requirements. The petition shall
contain the full names and actual addresses of all the
petitioners and respondents, a concise statement of the
matters involved, the factual background of the case, and the
grounds relied upon for the relief prayed for.
In actions filed under Rule 65, the petition shall
further indicate the material dates showing when notice of the
judgment or final order or resolution subject thereof was
received, when a motion for new trial or reconsideration, if any,
was filed and when notice of the denial thereof was received.
It shall be filed in seven (7) clearly legible copies
together with proof of service thereof on the respondent with
the original copy intended for the court indicated as such by
the petitioner, and shall be accompanied by a clearly legible
duplicate original or certified true copy of the judgment, order,
resolution, or ruling subject thereof, such material portions of
the record as are referred to therein, and other documents
relevant or pertinent thereto. The certification shall be
accomplished by the proper clerk of court or his duly
authorized representative, or by the proper officer of the court,
tribunal, agency or office involved or by his duly authorized
representative. The other requisite number of copies of the
petition shall be accompanied by clearly legible plain copies of
all documents attached to the original.
The petitioner shall also submit together with
the petition a sworn certification that he has not theretofore
commenced any other action involving the same issues in the
Supreme Court, the Court of Appeals or different divisions
thereof, or any other tribunal or agency; if there is such other
action or proceeding, he must state the status of the same;
and if he should thereafter learn that a similar action or
proceeding has been filed or is pending before the Supreme
Court, the Court of Appeals, or different divisions thereof, or
any other tribunal or agency, he undertakes to promptly inform
the aforesaid courts and other tribunal or agency thereof within
five (5) days therefrom.
The petitioner shall pay the corresponding docket
and other lawful fees to the clerk of court and deposit the
amount of P500.00 for costs at the time of the filing of the
petition.
The failure of the petitioner to comply with any
of the foregoing requirements shall be sufficient ground
for the dismissal of the petition. [Emphases supplied]
The acceptance of a petition for certiorari as well as the grant of due
course thereto is, in general, addressed to the sound discretion of the
court. Although the Court has absolute discretion to reject and dismiss a petition
for certiorari, it does so only (1) when the petition fails to demonstrate grave abuse of
discretion by any court, agency, or branch of the government; or (2) when there are
procedural errors, like violations of the Rules of Court or Supreme Court
Circulars.[9] [Emphasis supplied]
In the case at bench, the petitioners claim that the petition for certiorari
that they filed before the CA substantially complied with the requirements provided
for under the 1997 Rules of Civil Procedure on Verification and Certification of NonForum Shopping.
The Court disagrees.

Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil

Procedure, as amended, petitions for certiorari must be verified and accompanied by
a sworn certification of non-forum shopping.

Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil Procedure provide:

SEC. 4. Verification. Except when otherwise
specifically required by law or rule, pleadings need not be
under oath, verified or accompanied by affidavit.

Page 49 of 51

A pleading is verified by an affidavit that the affiant

has read the pleadings and that the allegations therein are
true and correct of his personal knowledge or based on
authentic records.
A pleading required to be verified which contains a
verification based on information and belief or upon
knowledge, information and belief or lacks a proper
verification, shall be treated as an unsigned pleading.
SEC.
5.
Certification
against
forum
shopping. The plaintiff or principal party shall certify under
oath in the complaint or other initiatory pleading asserting a
claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore
commenced any action or filed any claim involving the same
issues in any court, tribunal or quasi-judicial agency and, to
the best of his knowledge, no such other action or claim is
pending therein; (b) if there is such other pending action or
claim, a complete statement of the present status thereof; and
(c) if he should thereafter learn that the same or similar action
or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements

shall not be curable by mere amendment of the complaint or
other initiatory pleading but shall be cause for the dismissal of
the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without
prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute
willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall
constitute direct contempt, as well as a cause for
administrative sanctions. x x x.
In this regard, the case of Oldarico S. Traveno v. Bobongon Banana Growers
Multi-Purpose Cooperative,[10] is enlightening:
Respecting the appellate courts dismissal of
petitioners appeal due to the failure of some of them to sign
the therein accompanying verification and certification against
forum-shopping, the Courts guidelines for the bench and bar
in Altres v. Empleo, which were culled from jurisprudential
pronouncements, are instructive:
For the guidance of the bench and bar, the Court
restates in capsule form the jurisprudential pronouncements
already reflected above respecting non-compliance with the
requirements on, or submission of defective, verification and
certification against forum shopping:
1)
A distinction must be made between noncompliance 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.
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.

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.
5)
The certification against forum shopping
must be signed by all the plaintiffs or petitioners in a case;
otherwise, 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.
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.
The petition for certiorari filed with the CA stated the following names as
petitioners: Nellie Panelo Vda. De Formoso, Ma. Theresa Formoso-Pescador, Roger
Formoso, Mary Jane Formoso, Bernard Formoso, Benjamin Formoso, and Primitivo
Malcaba.
Admittedly, among the seven (7) petitioners mentioned, only Malcaba
signed the verification and certification of non-forum shopping in the subject petition.
There was no proof that Malcaba was authorized by his co-petitioners to sign for
them. There was no special power of attorney shown by the Formosos authorizing
Malcaba as their attorney-in-fact in filing a petition for review on certiorari. Neither
could the petitioners give at least a reasonable explanation as to why only he signed
the verification and certification of non-forum shopping. In Athena Computers, Inc.
and Joselito R. Jimenez v. Wesnu A. Reyes, the Court explained that:
The verification of the petition and certification on
non-forum shopping before the Court of Appeals were signed
only by Jimenez. There is no showing that he was authorized
to sign the same by Athena, his co-petitioner.
Section 4, Rule 7 of the Rules states that a
pleading is verified by an affidavit that the affiant has read the
pleading and that the allegations therein are true and correct
of his knowledge and belief. Consequently, the verification
should have been signed not only by Jimenez but also by
Athenas duly authorized representative.
In Docena
v.
Lapesura, we
ruled
that
the certificate of non-forum shopping should be signed by
all the petitioners or plaintiffs in a case, and that the
signing by only one of them is insufficient. The
attestation on non-forum shopping requires personal
knowledge by the party executing the same, and the lone
signing petitioner cannot be presumed to have personal
knowledge of the filing or non-filing by his co-petitioners
of any action or claim the same as similar to the current
petition.
The certification against forum shopping in CAG.R. SP No. 72284 is fatally defective, not having been
duly signed by both petitioners and thus warrants the

Page 50 of 51

dismissal of the petition for certiorari. We have

consistently held that the certification against forum shopping
must be signed by the principal parties. With respect to a
corporation, the certification against forum shopping may be
signed for and on its behalf, by a specifically authorized lawyer
who has personal knowledge of the facts required to be
disclosed in such document.
While the Rules of Court may be relaxed for
persuasive and weighty reasons to relieve a litigant from an
injustice commensurate with his failure to comply with the
prescribed procedures, nevertheless they must be faithfully
followed. In the instant case, petitioners have not shown any
reason which justifies relaxation of the Rules. We have held
that procedural rules are not to be belittled or dismissed simply
because their non-observance may have prejudiced a partys
substantive rights. Like all rules, they are required to be
followed except for the most persuasive of reasons when they
may be relaxed. Not one of these persuasive reasons is
present here.
In fine, we hold that the Court of Appeals did not err
in dismissing the petition for certiorari in view of the procedural
lapses committed by petitioners.[11] [Emphases supplied]

be reconveyed and a common cause of action raising the

same arguments in support thereof. There was sufficient
basis, therefore, for Domingo Hernandez, Jr. to speak for and
in behalf of his co-petitioners when he certified that they had
not filed any action or claim in another court or tribunal
involving the same issues. Thus, the Verification/Certification
that Hernandez, Jr. executed constitutes substantial
compliance under the Rules. [Emphasis supplied]
The same leniency was accorded to the petitioner in the case of Oldarico
S. Traveno v. Bobongon Banana Growers Multi-Purpose Cooperative,[15] where it
was stated:

Furthermore, the petitioners argue that the CA should not have dismissed
the whole petition but should have given it due course insofar as Malcaba is
concerned because he signed the certification. The petitioners also contend that the
CA should have been liberal in the application of the Rules because they have a
meritorious case against PNB.

At any rate, the Court cannot accommodate the petitioners request to reexamine the testimony of Malcaba in the transcript of stenographic notes of the April
25, 1999 hearing concerning his alleged testimonial proof of damages for obvious
reasons.

The Court, however, is not persuaded.

The petitioners were given a chance by the CA to comply with the Rules
when they filed their motion for reconsideration, but they refused to do so. Despite
the opportunity given to them to make all of them sign the verification and
certification of non-forum shopping, they still failed to comply. Thus, the CA was
constrained to deny their motion and affirm the earlier resolution.[12]
Indeed, liberality and leniency were accorded in some cases. [13] In these
cases, however, those who did not sign were relatives of the lone signatory, so
unlike in this case, where Malcaba is not a relative who is similarly situated with the
other petitioners and who cannot speak for them. In the case of Heirs of Domingo
Hernandez, Sr. v. Plaridel Mingoa, Sr.,[14] it was written:
In the instant case, petitioners share a common
interest and defense inasmuch as they collectively claim a
right not to be dispossessed of the subject lot by virtue of their
and their deceased parents construction of a family home and
occupation thereof for more than 10 years. The commonality
of their stance to defend their alleged right over the
controverted lot thus gave petitioners xxx authority to inform
the Court of Appeals in behalf of the other petitioners that they
have not commenced any action or claim involving the same
issues in another court or tribunal, and that there is no other
pending action or claim in another court or tribunal involving
the same issues.

The same leniency was applied by the Court

in Cavile v. Heirs of Cavile, because the lone petitioner who
executed the certification of non-forum shopping was a
relative and co-owner of the other petitioners with whom he
shares a common interest.
x x x[16]
Considering the above circumstances, the Court does not see any
similarity at all in the case at bench to compel itself to relax the requirement of strict
compliance with the rule regarding the certification against forum shopping.

Primarily, Section 1, Rule 45 of the Rules of Court categorically states

that the petition filed shall raise only questions of law, which must be distinctly set
forth. A question of law arises when there is doubt as to what the law is on a certain
state of facts, while there is a question of fact when the doubt arises as to the truth
or falsity of the alleged facts. For a question to be one of law, the same must not
involve an examination of the probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must rest solely on what the law
provides on the given set of circumstances. Once it is clear that the issue invites a
review of the evidence presented, the question posed is one of fact.[17]
In this case, the petition clearly raises a factual issue. As correctly argued
by PNB, the substantive issue of whether or not the petitioners are entitled to moral
and exemplary damages as well as attorneys fees is a factual issue which is beyond
the province of a petition for review on certiorari.
Secondly, even if the Court glosses over the technical defects, the
petition for relief cannot be granted. A perusal of the Petition for Relief of Judgment
discloses that there is no fact constituting fraud, accident, mistake or excusable
negligence which are the grounds therefor. From the petition itself, it appears that
the petitioners counsel had a copy of the transcript of stenographic notes which was
in his cabinet all along and only discovered it when he was disposing old and
terminated cases.[18] If he was only attentive to his records, he could have filed a
motion for reconsideration or a notice of appeal in behalf of the petitioners.
WHEREFORE, the petition is DENIED.
SO ORDERED.

Here, all the petitioners are immediate

relatives who share a common interest in the land sought to

Page 51 of 51