G.R. No.

91436 May 24, 1993

METROPOLITAN BANK & TRUST COMPANY, petitioner, vs. QUILTS & ALL, INC., respondent.
MELO, J.:
The petition for review before us was filed under Rule 45 of the Revised Rules of Court and seeks to set
aside the decision of the Court of Appeals in CA-G.R. SP No. 18666 (Annex "L", pp. 98-104, Rollo) dated
November 27, 1989, which disposed:
WHEREFORE, judgment is hereby rendered giving due course to the petition and
declaring that the honorable respondent court is without jurisdiction to pass upon the
issue against defendants Senen B. Dizon and Relita P. de los Santos anent the authority
of Senen B. Dizon to enter into a mortgage contract as this falls within the original and
exclusive jurisdiction of the Securities and Exchange Commission, and ordering the
suspension of further proceedings in Civil Case No. 5570 until said issue shall have
been resolved by the Securities and Exchange Commission. Without pronouncement as
to costs. (p. 103, Rollo)
On April 7, 1987, Relita P. de los Santos (de los Santos) then Corporate Secretary then issued a
Secretary's Certificate (Annex "A", p. 31, Rollo) which certified that in a special meeting of the Board of
Directors of Quilts and All, Inc. (Quilts) its President, Mr. Senen B. Dizon (Dizon) was authorized and
empowered to mortgage in favor of Metrobank, an property belonging to Quilts.
On the basis of this Secretary's Certificate, Metrobank restructured Dizon's existing personal loan in
the amount of P700,000.00 (Comment, p. 121, Rollo), secured by his house and lot at Angeles City and
the property owned by Quilts covered by Transfer Certificate of Title No. 74172 (Annex "B", p.
32, Rollo). Aside from the mortgage lien, the secretary's Certificate was likewise annotated on TCT No.
74172 on April 10, 1977.
On July 7, 1988, more than a year later, Metrobank received a letter from Atty. Cesar Villanueva, Quilt's
counsel (Annex "D", p. 35, Rollo) offering the amount of P200,000.00 for the cancellation of the
mortgage on the property owned by Quilts because, allegedly, "Mr. & Mrs. Senen Dizon had left the
Philippines, leaving several creditors." Metrobank refused the offer since the amount offered did not
approximate the appraised value of the mortgaged property. (Petition, p. 10, Rollo)
On October 4, 1988, Atty. Ranel L. Trinidad, Quilt's new counsel wrote Metrobank. (Annex "C", p.
33, Rollo), reiterating the mortgage cancellation. In addition, counsel claimed that the alleged April 7,
1987 special meeting could not have taken place for lack of the requisite number of directors present
to constitute a quorum since the Chairman and 2 other members of the Board of Directors were aboard
on that date.
On October 20, 1988, Quilts filed a complaint against Metrobank, Dizon and de los Santos for
annulment and cancellation of mortgage (CC 5570, RTC-Br. 58, Angeles City) (Annex "E", p. 37, Rollo).
On December 12, 1988, Metrobank moved to dismiss the complaint based on 1) lack of jurisdiction and
2) failure to state a cause of action. Judge Reynaldo B. Daway, granted the motion on February 9,
1989. (Annex "G", p. 51, Rollo).
However, on August 4, 1989, upon Quilt's motion, Judge Daway issued an Order (Annex "J", p.
73, Rollo) reconsidering and setting aside the dismissal order because the grounds relied upon by
Metrobank "did not appear to be indubitable", and deferred the determination of the motion until the
trial.
Metrobank filed an original petition for certiorari, prohibition or mandamus, contesting the
reinstatement of the complaint and in the process reiterating as grounds lack of jurisdiction on the part
of the trial court and failure of Quilt's complaint to state a cause of action. The Court of Appeals upheld
the jurisdiction of the lower Court only with respect to Metrobank. It dismissed the case against Dizon
and de los Santos, since the issue of whether or not these two persons had committed ultra vires acts

is an intra-corporate matter which falls within the original and exclusive jurisdiction of the Securities
and Exchange commission (SEC) pursuant to section 5 of Presidential Decree 902-A, as amended.
Pending the outcome of the case that would be filed in the SEC, however, the Court of Appeals directed
the suspension of the proceedings against Metrobank. The appellate court also stated that paragraph
10 of Quilt's complaint was sufficient basis for Quilt's case against Metrobank.
Hence, the instant petition in which the central and key issue is whether or not Quilt's complaint
sufficiently states a cause of action against Metrobank.
Pertinent allegations of Quilt's complaint are quoted below:
4. That sometime on 7 April 1987, defendant Relita P. Delos Santos issued and signed a
secretary's certificate certifying that she was the incumbent corporate secretary of
plaintiff corporation and that a special meeting of the Board of Directors thereof was
held on the same date at its principal office and that a resolution was passed and
approved authorizing and empowering Senen B. Dizon, the then president of plaintiff
corporation as the latter's attorney-in-fact, to mortgage in favor of defendant
Metropolitan bank & Trust Company-Dau Branch the plaintiff's corporation's real
property located at the Riverside Subd., Angeles City, covered by Transfer Certificate of
Title No. 74172, Registry of Deeds of Angeles City, containing an area of 823 square
meters, as security of the loan of SEVEN HUNDRED THOUSAND (P700,000.00)
Philippine Pesos obtained by Mr. Senen B. Dizon in his personal capacity from the said
bank, with full power and authority for Mr. Senen B. Dizon to sign, execute,
acknowledge and deliver, for and in behalf of the plaintiff corporation relating to the
said loan. A machine copy of the said secretary's certificate is hereto attached as
Annex "B" hereof;
5. That verifications made later by the stockholders and some members of the Board
of Directors of the plaintiff corporation with the Registry of Deeds of Angeles City
revealed that the parcel of land owned by the plaintiff corporation covered by TCT No.
74172 was mortgaged in favor of the defendant Metropolitan bank & Trust Company to
guaranty the personal obligation of defendant Senen B. Dizon in the principal amount
of P700,000.00 (see Annex "A-2" hereof);
6. That on 7 April 1987, plaintiff corporation had for its Board of Directors five (5)
members namely: Romeo V. Rosas, Arcadio R. Sarmiento, Jr., Romeo N. Pangilinan,
Senen B. Dizon, and Relita P. Delos Santos, and for a quorum to be had, for purposes of
holding a valid meeting of the Board of Directors, at least three (3) members thereof
should be present thereat;
7. That on 7 April 1987, Mr. Romeo V. Rosas was in the United States of America while
Mr. Arcadio R. Sarmiento, Jr. was then in New Zealand. Mr. Romeo N. Pangilinan,
although in the country on the said date, was never informed and never attended a
meeting of the plaintiff corporation's Board of Directors. With the absence of three (3)
of plaintiff corporation's five (5) member Board of Directors, no valid meeting could
have been held;
8. That a perusal of the Amended Articles of Incorporation of the plaintiff corporation,
particularly under the primary and secondary purposes for which it was created, will
reveal that the corporation can not hypothecate any of its properties to secure the
personal obligations of any of its shareholders, directors or officers. A machine copy of
the plaintiff's corporation Amended Articles of Incorporation is hereto attached as
Annexes "C" to "C-8" for pages 1 to 9, respectively, hereof;
9. That a letter demanding for the immediate cancellation of the real estate mortgage
constituted upon TCT No. 74172 in favor of defendant Metropolitan Bank & Trust
Company have been sent to the latter through its Dau branch Manager and Legal
Department but the said bank failed and refused to comply with the valid demand of

the plaintiff corporation. A copy of the said letter is hereto attached as Annexes "D"
and "D-1" for pages 1 and 2, respectively, hereof;
10. That plaintiff corporation suffered and continue to suffer actual damages as a result
of the illegal acts of defendants for which the former should be compensated in an
amount to be proved during the trial of the instant cases. (pp. 38-40, Rollo).
An examination of the complaint shows that the allegations therein pertain mostly to the alleged ultra
vires acts of Dizon and de los Santos. Paragraph 10 of the complaint, upon which both the trial court
and the Court of Appeals premised a case against Metrobank, merely expresses legal conclusions, and
is not an averment or allegation of ultimate facts. In the case of Alzua and Armalot vs. Johnson, (21
Phil. 308 [1912]), we stated :
. . . neither legal conclusions, nor conclusions or inferences of facts from facts not
stated, nor incorrect inferences or conclusions from facts stated, being admitted by a
demurrer to a complaint, conclusions of this nature is no wise aid the pleading. The
ultimate facts upon which such conclusions rest must be alleged, though merely
probative or evidential facts may be and should be omitted. (at p. 381.)
We agree with Metrobank that the complaint does not contain allegations that Metrobank had prior
knowledge of, or could have known with the exercise of due diligence, that the recitals in the
Secretary's Certificate were false. The complaint does not even allege specific overt acts which show
that Metrobank acted in conspiracy with its co-defendants to defraud Quilts. In the case of BacolodMurcia Milling Co., Inc. vs. First Farmers Milling Co., Inc.[103 SCRA 436 (1981)] we stated:
. . . Granting, for the sake of argument, that, indeed, assistance in the "illegal" act was
rendered, the same, however, is not supported by well-pleaded averments of facts.
Nowhere is it alleged that defendants-appellees had notice, information or knowledge
of any flaw, much less any illegality, in their co-defendants' actuations, assuming that
there was such flaw or illegality. This absence is fatal and buoys up instead the PNBNIDC's position of lack of cause of action. . . . (at pp. 441-442.)
Although it is averred that the defendant's acts were done in bad faith, the Complaint
does not contain any averment of facts showing that the acts were done in the manner
alleged. Such a bare statement neither establishes any right or cause of action on the
part of the plaintiff-appellant. It is a mere conclusion of law not sustained by
declarations of facts, much less admitted by defendants-appellees. It does not,
therefore, aid in any wise the complaint in setting forth a cause of action. . . . (pp. 441442.)
On the other hand, Metrobank cannot be faulted for relying on the Secretary's Certificate. It did so in
good faith, unaware of any flaw and on the presumption that the ordinary course of business had been
followed (Sec. 5-q, Rule 131, Revised Rules of Court) and that the Corporate Secretary had regularly
performed her duties.
WHEREFORE, premises considered, the herein petition is GRANTED. The Resolution of the Court of
Appeals in CA-G.R. SP No. 18666, dated November 27, 1989 is MODIFIED in that Civil Case No. 5570
against Metrobank is hereby DISMISSED.
No special pronouncement is made as to costs. SO ORDERED.
2. G.R. No. 89114 December 2, 1991
FRANCISCO S. TANTUICO, JR., petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, MATEO A. T.
CAPARAS, AND THE SANDIGANBAYAN, respondents.

PADILLA, J.:p
In this petition for certiorari, mandamus and prohibition with a prayer for the issuance of a writ of
preliminary injunction and/or restraining order, the petitioner seeks to annul and set aside the
resolution of the Sandiganbayan, dated 21 April 1989, denying his motion for a bill of particulars as
well as its resolution, dated 29 May 1989, which denied his motion for reconsideration; to compel the
respondent PCGG to prepare and file a bill of particulars, or that said respondent be ordered to exclude
petitioner as defendant in Civil Case No. 0035 should they fail to submit the said bill of particulars; and
to enjoin the respondent Sandiganbayan from further proceeding against petitioner until the bill of
particulars is submitted, claiming that the respondent Sandiganbayan acted with grave abuse of
discretion amounting to lack of jurisdiction in promulgating the aforesaid resolutions and that there is
no appeal, nor any plain, speedy and adequate remedy for him in the ordinary course of law other than
the present petition.
As prayed for, this Court issued on 1 August 1989 a temporary restraining order "effective immediately
and continuing until further orders from this Court, ordering the respondent Sandiganbayan to CEASE
and DESIST from further proceeding in Civil Case No. 0035 (PCGG 35), entitled "Republic of the
Philippines vs. Benjamin (Kokoy) Romualdez, et al." pending before it. 1
The antecedents are as follows:
On 31 July 1987, the Republic of the Philippines, represented by the PCGG, and assisted by the Office
of the Solicitor General, filed with the Sandiganbayan Civil Case No. 0035, entitled "Republic of the
Philippines vs. Benjamin (Kokoy) Romualdez, et al." for reconveyance, reversion, accounting, restitution
and damages. 2
The principal defendants in the said Civil Case No. 0035 are Benjamin (Kokoy) Romualdez, Ferdinand E.
Marcos and Imelda R. Marcos.
Petitioner Francisco S. Tantuico, Jr. was included as defendant in Civil Case No. 0035 on the theory that:
(1) he acted in unlawful concert with the principal defendants in the misappropriation and theft of
public funds, plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement and other
acts of corruption, betrayal of public trust and brazen abuse of power; 3 (2) he acted as dummy,
nominee or agent, by allowing himself to be incorporator, director, board member and/or stockholder
of corporations beneficially held and/or controlled by the principal defendants; 4 (3) he acted singly or
collectively, and/or in unlawful concert with one another, in flagrant breach of public trust and of their
fiduciary obligations as public officers, with gross and scandalous abuse of right and power and in
brazen violation of the Constitution and laws of the Philippines, embarked upon a systematic plan to
accumulate ill-gotten wealth ; 5 (4) he (petitioner) taking undue advantage of his position as Chairman
of the Commission on Audit and with grave failure to perform his constitutional duties as such
Chairman, acting in concert with defendants Ferdinand E. Marcos and Imelda R. Marcos, facilitated and
made possible the withdrawals, disbursements and questionable use of government funds; 6 and (5)
he acted as dummy, nominee and/or agent by allowing himself to be used as instrument in
accumulating ill-gotten wealth through government concessions, orders and/or policies prejudicial to
plaintiff, or to be incorporator, director, or member of corporations beneficially held and/or controlled
by defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) Romualdez and Juliette Gomez
Romualdez in order to conceal and prevent recovery of assets illegally obtained. 7
On 11 April 1988, after his motion for production and inspection of documents 8 was denied by
respondent court in its resolution 9 dated 9 March 1988, petitioner filed a Motion for a Bill of
Particulars, 10 alleging inter alia that he is sued for acts allegedly committed by him as (a) a public
officer-Chairman of the Commission on Audit, (b) as a private individual, and (c) in both capacities, in a
complaint couched in too general terms and shorn of particulars that would inform him of the factual
and legal basis thereof, and that to enable him to understand and know with certainty the particular
acts allegedly committed by him and which he is now charged with culpability, it is necessary that
plaintiff furnish him the particulars sought therein relative to the averments in paragraphs 2, 9(a), 15,
7 and 17 of the Second Amended Complaint so that he can intelligently prepare his responsive
pleading and prepare for trial. The particulars sought for in the said motion are as follows:

a. Relative to the averments in paragraphs 2, 9(a) and l5 of the Second Amended

Complaint:
i) What are the dates of the resolutions (if on appeal) or the acts (if
otherwise) issued or performed by herein defendant which allowed the
facilitation of, and made possible the, withdrawals, disbursements and
questionable use of government funds;
ii) What ministries or Departments, offices or agencies of the
government were involved in these questionable use of government
funds;
iii) What are the names of the auditors who had the original audit
jurisdiction over the said withdrawals, disbursements and questionable
use of government funds;
iv) How much government funds were involved in these questionabledisbursements, individually and in totally?
v) Were the disbursements brought to herein defendant for action on
pre-audit, post-audit or otherwise or where they initiated and/or
allowed release by herein defendant alone, without them undergoing
usual governmental audit procedures, or in violation thereof.?
vi) What were herein defendant's other acts or omission or
participation in the matter of allowing such disbursements and
questionable use of government funds, if any?
b. Relative to paragraphs 7 and 17 of the Second Amended Complaint:
i) In what particular contract, dealing, transaction and/or relationship of
any nature of Ferdinand E. Marcos, Imelda R. Marcos, Juliette Gomez
Romualdez or Benjamin T. Romualdez did herein defendant act as
dummy, nominee or agent? Please specify the dealings, the dates, the
corporations or entities involved, the government offices involved and
the private and public documents, if any, showing herein defendant's
complicity, since he is not aware of any such instance. More basically,
please specify whether the defendant is a dummy or nominee or agent
and of which corporation or transaction?
ii) What particular government concession, order and/or policy
obtained by Ferdinand E. Marcos, or Imelda R. Marcos, or Juliette
Gomez Romualdez and/or Benjamin T. Romualdez allowed them either
singly or jointly to accumulate ill-gotten wealth by using herein
defendant as instrument for their accomplishment. Likewise please
identify the nature of the transactions, the dates and the document
showing complicity on the part of herein defendant; he is not aware of
any such instance.
iii) Please specify the name or denominate the particular government
concession, order and/or policy prejudicial to the interest of the
government which was obtained by either of the above-named four
defendants through the participation of herein defendant as a dummy,
nominee or agent of herein defendant. Please likewise identify the
government office involved, the dates and other particulars, likewise
defendant is not aware of any such instance.

iv) Please name and specify the corporation whether stock or nonstock, whether government or private, beneficially held and/or
controlled by either of the four above defendants, where herein
defendant is an incorporator, director or member and where his
inclusion as such incorporator, director or member of the corporation
was made in order to conceal and prevent recovery of assets illegally
obtained by the aforementioned four defendants, how many shares are
involved and what are their values, how and when have they been
acquired.
The Solicitor General, for and in behalf of respondents (except the respondent Sandiganbayan),
opposed the motion.11 After the petitioner had filed his reply 12 thereto, the respondent
Sandiganbayan promulgated on 21 April 1990 a resolution 13 denying the petitioner's motion for a bill
of particulars on the ground that the particulars sought by petitioner are evidentiary in nature, the
pertinent part of which resolution reads, as follows:
We are of the considered opinion that the allegations in the Expanded Complaint are
quite clear and sufficient enough for defendant-movant to know the nature and scope
of the causes of action upon which plaintiff seeks relief. They provide the factual
scenario which, coupled with other allegations set forth in the "Common Averments"
and further specified in the "Specific Averments" of herein defendant-movant and his
co-defendants' illegal acts which are within defendant-movant's peculiar and intimate
knowledge as a government official and corporate executive, will enable him to make
the proper admission, denials or qualifications, set out affirmative and/or special
defenses and thereafter prepare for trial. Evidentiary facts or matters are not essential
in the pleading of the cause of action, nor to details or probative value or particulars of
evidence by which these material evidence are to be established (Remitere vs. Yulu, 6
SCRA 251). The matters which he seeks are evidentiary in nature and, being within his
intimate or personal knowledge, may be denied or admitted by him or if deemed
necessary, be the subject of other forms of discovery. 14
Petitioner moved for reconsideration 15 but this was denied by respondent Sandiganbayan in its
resolution 16 dated 29 May 1990.
Hence, petitioner filed the present petition.
The principal issue to be resolved in the case at bar is whether or not the respondent Sandiganbayan
acted with grave abuse of discretion in issuing the disputed resolutions.
Petitioner argues that the allegations of the Second Amended Complaint in Civil Case No. 0035 (PCGG
35) pertaining to him state only conclusions of fact and law, inferences of facts from facts not pleaded
and mere presumptions, not ultimate facts as required by the Rules of Court.
On the other hand, the respondent Sandiganbayan, by and through the Solicitor General, contends
that the essential elements of an action for recovery of ill-gotten wealth are: (1) an accumulation of
assets, properties and other possessions; (2) of former President Ferdinand E. Marcos, Mrs. Imelda
Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or
nominees; and (3) whose value is out of proportion to their known lawful income, and that the ultimate
facts establishing these three (3) essential elements of an action for recovery of ill-gotten wealth are
sufficiently alleged in the complaint. Hence, petitioner is not entitled to a bill of particulars.
A complaint is defined as a concise statement of the ultimate facts constituting the plaintiff's cause or
causes of action.17 Like all other pleadings allowed by the Rules of Court, 18 the complaint shall
contain in a methodical and logical form a plain, concise and direct statement of the ultimate facts on
which the plaintiff relies for his claim, omitting the statement of mere evidentiary
facts. 19 Its office, purpose or function is to inform the defendant clearly and definitely of the claims
made against him so that he may be prepared to meet the issues at the trial. The complaint should
inform the defendant of all the material facts on which the plaintiff relies to support his demand; it
should state the theory of a cause of action which forms the bases of the plaintiff's claim of liability. 20

The rules on pleading speak of two (2) kinds of facts: the first, the "ultimate facts", and the second, the
"evidentiary facts." In Remitere vs. Vda. de Yulo, 21 the term "ultimate facts" was defined and
explained as follows:
The term "ultimate facts" as used in Sec. 3, Rule 3 of the Rules of Court, means the
essential facts constituting the plaintiffs cause of action. A fact is essential if it cannot
be stricken out without leaving the statement of the cause of action insufficient. . . .
(Moran, Rules of Court, Vol. 1, 1963 ed., p. 213).
Ultimate facts are important and substantial facts which either directly form the basis
of the primary right and duty, or which directly make up the wrongful acts or omissions
of the defendant. The term does not refer to the details of probative matter or
particulars of evidence by which these material elements are to be established. It
refers to principal, determinate, constitutive facts, upon the existence of which, the
entire cause of action rests.
while the term "evidentiary fact" has been defined in the following tenor:
Those facts which are necessary for determination of the ultimate facts; they are the
premises upon which conclusions of ultimate facts are based. Womack
v. Industrial Comm., 168 Colo. 364,451 P. 2d 761, 764. Facts which furnish evidence of
existence of some other fact. 22
Where the complaint states ultimate facts that constitute the three (3) essential elements of a cause of
action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right, the complaint states a cause of
action, otherwise, the complaint must succumb to a motion to dismiss on that ground of failure to state
a cause of action. 23 However, where the allegations of the complaint are vague, indefinite, or in the
form of conclusions, the proper recourse would be, not a motion to dismiss, but a motion for a bill of
particulars. 24 Thus, Section 1, Rule 12 of the Rules of Court provides:
Before responding to a pleading or, if no responsive pleading is permitted by these
rules, within ten (10) days after service of the pleading upon him, a party may move
for a more definite statement or for a bill of particulars of any matter which is not
averred with sufficient definiteness or particularity to enable him properly to prepare
his responsive pleading or to prepare for trial. Such motion shall point out the defects
complained of and the details desired.
In this connection, the following allegations have been held as mere conclusions of law, inferences
from facts not alleged or opinion of the pleader: (a) the allegations that defendants appellees were
"actuated by ulterior motives, contrary to law and morals, with abuse of their advantageous position
as employers, in gross and evident bad faith and without giving plaintiff . . . his due, wilfully,
maliciously, unlawfully, and in summary and arbitrary manner", are conclusions of law, inferences from
facts not alleged and expressions of opinion unsupported by factual premises; 25 (b) an allegation of
duty in terms unaccompanied by a statement of facts showing the existence of the duty, is a mere
conclusion of law, unless there is a relation set forth from which the law raises the duty; 26 (c) an
averment . . . that an act was "unlawful" or "wrongful" is a mere legal conclusion or opinion of the
pleader; 27 (d) the allegation that there was a violation of trust was plainly a conclusion of law, for "a
mere allegation that it was the duty of a party to do this or that, or that he was guilty of a breach of
duty, is a statement of a conclusion, not of a fact;" 28 (e) an allegation that a contract is valid or void,
is a mere conclusion of law; 29 (f) the averment in the complaint that "defendant usurped the office of
Senator of the Philippines" is a conclusion of law not a statement of fact inasmuch as the
particular facts on which the alleged usurpation is predicated are not set forth therein; 30 and (g) the
averment that "with intent of circumventing the constitutional prohibition that 'no officer or employee
in the civil service shall be removed or suspended except for cause as provided by law', respondents
maliciously and illegally for the purpose of political persecution and political vengeance, reverted the
fund of the salary item . . . and furthermore eliminated or abolished the said position effective 1 July
1960" is a mere conclusion of law unsupported by factual premises. 31

Bearing in mind the foregoing rules on pleading and case law, let us now examine the allegations of
the Second Amended Complaint against the petitioner to determine whether or no they were averred
with sufficient definiteness or particularity to enable him properly to prepare his responsive pleading or
to prepare for trial. If the allegations of the said complaint are vague, indefinite or in the form of
conclusions, then petitioner is entitled to a bill of particulars.
The allegations in the complaint pertaining to the alleged culpable and unlawful acts of herein
petitioner are quoted hereunder as follows:
GENERAL AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
9. (a) From the early years of his presidency, Defendant Ferdinand E. Marcos took
undue advantage of his powers as President. All throughout the period from September
21, 1972 to February 25, 1986, he gravely abused his powers under martial law and
ruled as Dictator under the 1973 Marcos-promulgated Constitution. Defendant
Ferdinand E. Marcos, together with other Defendants, acting singly or collectively,
and/or in unlawful concert with one another, in flagrant breach of public trust and of
their fiduciary obligations as public officers, with gross and scandalous abuse of right
and power and in brazen violation of the Constitution and laws of the Philippines,
embarked upon a systematic plan to accumulate ill-gotten wealth;
(b) Upon his unfettered discretion, and sole authority, for the purpose of implementing
the plan referred to above, Defendant Ferdinand E. Marcos ordered and caused, among
others:
(b-i) the massive and unlawful withdrawal of funds, securities, reserves
and other assets and property from the National Treasury, the Central
Bank, the other financial institutions and depositories of Plaintiff;
(b-ii) the transfer of such funds, securities, reserves and other assets
and property to payees or transferees of his choice and whether and in
what manner such transactions should be recorded in the books and
records of these institutions and other depositories of Plaintiff;
10. Among others, in furtherance of the plan and acting in the manner referred to
above, in unlawful concerted with one another and with gross abuse of power and
authority, Defendants Ferdinand E. Marcos and Imelda R. Marcos;
b. Converted government-owned and controlled corporations into
private enterprises and appropriated them and/or their assets for their
own benefit and enrichment;
c. Awarded contracts with the Government to their relatives, business
associates, dummies, nominees, agents or persons who were beholden
to said Defendants, under terms and conditions grossly and manifestly
disadvantageous to the Government;
d. Misappropriated, embezzled and/or converted to their own use funds
of Government financial institutions, particularly those allocated to the
Office of the President and other ministries and agencies of the
Government including, those conveniently denominated as intelligence
or counter-insurgency funds, as well as funds provided to Plaintiff by

foreign countries, multinationals, public and private financial

institutions;
e. Raided Government financial and banking institutions of billions of
pesos in loans, guarantees and other types of financial
accommodations to finance dubious and/or overpriced projects of
favored corporations or individuals and misused and/or converted to
their own use and benefit deposits found therein to the financial ruin of
Plaintiff and the Filipino people;
h. Sold, conveyed and/or transferred Government property, real and/or
personal, to corporations beneficially held and/ or controlled by them
or through third persons, under such terms and conditions grossly and
manifestly disadvantageous to the Government;
i. Engaged in other illegal and improper acts and practices designed to
defraud Plaintiff and the Filipino people, or otherwise misappropriated
and converted to their own use, benefit and enrichment the lawful
patrimony and revenues of Plaintiff and the Filipino people.
11. Among the assets acquired by Defendants in the manner above-described and
discovered by the Commission in the exercise of its official responsibilities are funds
and other property listed in Annex "A" hereof and made an integral part of this
Complaint.
12. Defendants, acting singly or collectively, and/or in unlawful concert with one
another, for the purpose of preventing disclosure and avoiding discovery of their
unmitigated plunder of the National Treasury and of their other illegal acts, and
employing the services of prominent lawyers, accountants, financial experts,
businessmen and other persons, deposited, kept and invested funds, securities and
other assets estimated at billions of US dollars in various banks, financial institutions,
trust or investment companies and with persons here and abroad.
V
SPECIFIC AVERMENTS
OF
DEFENDANTS' ILLEGAL ACTS
xxx xxx xxx
14. Defendants Benjamin (Kokoy) Romualdez and Juliette Gomez Romualdez, acting by
themselves and/or in unlawful concert with Defendants Ferdinand E. Marcos and
Imelda R. Marcos, and taking undue advantage of their relationship, influence and
connection with the latter Defendant spouses, engaged in devices, schemes and
strategems to unjustly enrich themselves at the expense of Plaintiff and the Filipino
people, among others:
(a) obtained, with the active collaboration of Defendants Senen J. Gabaldon, Mario D.
Camacho, Mamerto Nepomuceno, Carlos J. Valdes, Delia Tantuico, Jovencio F. Cinco,
Cesar C. Zalamea andFrancisco Tantuico, control of some of the biggest business
enterprises in the Philippines, such as, the Manila Electric Company (MERALCO),
Benguet Consolidated Mining Corporation (BENGUET) and the Pilipinas Shell
Corporation, by employing devious financial schemes and techniques calculated to
require the massive infusion and hemmorrhage of government funds with minimum or

negligible "cashout" from Defendant Benjamin Romualdez. The following are the
general features of a classic take-over bid by Defendant Benjamin Romualdez:
xxx xxx xxx
(ii) The shares were held in the name of corporations which were
organized soldely (sic) for the purpose of holding title to them. These
corporations did not have any operating history nor any financial track
record. Projected cash flow consisted almost solely of future and
contingent dividends on the shares held. In spite of these limitations,
these companies enjoyed excellent credit lines from banks and other
financial institutions, as evidenced by the millions of pesos in loan and
guarantees outstanding in their books;
(iii) The "seed money" used to wrest control came from government
and taxpayers' money in the form of millions of pesos in loans,
guarantees and standby L/C's from government financial institutions,
notably the DBP and PNB, which were in turn rediscounted with the
Central Bank;
(iv) Additional funding was provided from the related interests; and
(v) This intricate (sic) skein of inter-corporate dealings was controlled
and administered by an exclusive and closely knit group of interlocking
directorate and officership
xxx xxx xxx
(g) Secured, in a veiled attempt to justify MERALCO's anomalous acquisition of the
electric cooperatives, with the active collaborations of Defendants Cesar E. A. Virata,
Juanita R. Remulla, Isidro Rodriguez, Jose C. Hernandez, Pedro Dumol, Ricardo C.
Galing, Francisco C. Gatmaitan, Mario D. Camacho and the rest of the Defendants, the
approval by Defendant Ferdinand E. Marcos and his cabinet of the so-called "Three-Year
Program for the Extension of MERALCO's Services to Areas Within The 60-kilometer
Radius of Manila", which required government capital investment amounting to
millions of pesos;
xxx xxx xxx
(1) Caused the National Investment and Development Corporation (NIDC) to dispose of
its interest in the oil plants located in Tanauan, Leyte, which were owned and operated
by its subsidiary, the NIDC Oil Mills, Inc., in favor of the SOLO II, Inc., a corporation
beneficially held and controlled by Defendant Benjamin Romualdez, with the active
collaboration of Defendants Jose Sandejas,Francisco Tantuico and Dominador G. Ingco,
under terms and conditions grossly disadvantageous to NIDC, to the grave and
irreparable damage of Plaintiff and the Filipino people.
(2) Defendant Francisco Tantuico, taking undue advantage of his position as Chairman
of the Commission on Audit and with grave failure to perform his constitutional duties
as such Chairman, acting in concert with Defendants Ferdinand E. Marcos and Imelda
R. Marcos, facilitated and made possible the withdrawals, disbursements and
questionable use of government funds as stated in the foregoing paragraphs to the
grave and irreparable damage and injury of Plaintiff and the entire Filipino people.
xxx xxx xxx

10

17. The following Defendants acted as dummies, nominees and/ or agents by allowing
themselves (i) to be used as instruments in accumulating ill-gotten wealth through
government concessions, orders and/or policies prejudicial to Plaintiff, or (ii) to be
incorporators, directors, or members of corporations held and/or controlled by
Defendants Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) Romualdez, and
Juliette Gomez Romualdez in order conceal (sic) and prevent recovery of assets
illegally obtained: Francisco Tantuico . . .
17.a. THE NAMES OF SOME OF THE CORPORATIONS BENEFICALLY HELD AND/OR
CONTROLLED BY THE DEFENDANTS BENJAMIN (KOKOY) ROMUALDEZ, FERDINAND E.
MARCOS AND IMELDA R. MARCOS WHERE THE POSITIONS/PARTICIPATIONS AND/OR
INVOLVEMENTS OF SOME OF THE DEFENDANTS AS DUMMIES, NOMINEES AND/OR
AGENTS ARE INDICATED ARE LISTED IN ANNEX "B" HEREOF AND MADE AN INTEGRAL
PART OF THIS COMPLAINT.
xxx xxx xxx
18. The acts of Defendants, singly or collectively, and/or in unlawful concert with one
another, constitute gross abuse of official position and authority, flagrant breach of
public trust and fiduciary obligations, acquisition of unexplained wealth, brazen abuse
of official position and authority, flagrant breach of public trust and fiduciary
obligations, acquisition of unexplained wealth, brazen abuse of right and power, unjust
enrichment, violation of the Constitution and laws of the Republic of the Philippines, to
the grave and irreparable damage of Plaintiff and the Filipino people. (Emphasis
supplied)
Let us now analyze and discuss the allegations of the complaint in relation to which the petitioner
pleads for a bill of particulars.
As quoted above, paragraph 9(a) of the complaint alleges that "Defendant Ferdinand E. Marcos,
together with other Defendants, acting singly or collectively, and/or in unlawful concert with one
another, in flagrant breach of public trust and of their fiduciary obligations as public officers, with gross
and scandalous abuse of right and power and in brazen violation of the Constitution and laws of the
Philippines, embarked upon a systematic plan to accumulate ill-gotten wealth." In the light of the rules
on pleading and case law cited above, the allegations that defendant Ferdinand E. Marcos, together
with the other defendants "embarked upon a systematic plan to accumulate ill-gotten wealth" and that
said defendants acted "in flagrant breach of public trust and of their fiduciary obligations as public
officers, with gross and scandalous abuse of right and in brazen violation of the Constitution and laws
of the Philippines", are conclusions of law unsupported by factual premises.
Nothing is said in the complaint about the petitioner's acts in execution of the alleged "systematic plan
to accumulate ill-gotten wealth", or which are supposed to constitute "flagrant breach of public trust",
"gross and scandalous abuse of right and power", and "violations of the Constitution and laws of the
Philippines". The complaint does not even allege what duties the petitioner failed to perform, or the
particular rights he abused.
Likewise, paragraph 15 avers that "defendant Francisco Tantuico, taking undue advantage of his
position as Chairman of the Commission on Audit and with grave failure to perform his constitutional
duties as such Chairman, acting in concert with Defendants Ferdinand E. Marcos and Imelda R. Marcos
facilitated and made possible the withdrawals, disbursements and questionable use of government
funds as stated in the foregoing paragraphs to the grave and irreparable damage and injury of Plaintiff
and the entire Filipino people." In like manner, the allegation that petitioner "took undue advantage of
his position as Chairman of the Commission on Audit," that he "failed to perform his constitutional
duties as such Chairman," and acting in concert with Ferdinand E. Marcos and Imelda R. Marcos,
"facilitated and made possible the withdrawals, disbursements, and questionable use of government
funds as stated in the foregoing paragraphs, to the grave and irreparable damage and injury of plaintiff
and the entire Filipino people", are mere conclusions of law. Nowhere in the complaint is there any
allegation as to how such duty came about, or what petitioner's duties were, with respect to the
alleged withdrawals and disbursements or how petitioner facilitated the alleged withdrawals,

11

disbursements, or conversion of public funds and properties, nor an allegation from where the
withdrawals and disbursements came from, except for a general allegation that they came from the
national treasury. On top of that, the complaint does not even contain any factual allegation which
would show that whatever withdrawals, disbursements, or conversions were made, were indeed
subject to audit by the COA.
In this connection, it may well be stated that the Commission on Audit (COA) is an independent,
constitutional commission, which has no power or authority to withdraw, disburse, or use funds and
property pertaining to other government offices or agencies. This is done by the agency or office itself,
the chief or head of which is primarily and directly responsible for the funds and property pertaining to
such office or agency. 32 The COA is merely authorized to audit, examine and settle accounts of the
various government offices or agencies, and this task is performed not by the Chairman of the COA but
by the COA auditors assigned to the government office or agency subject to COA audit.
Thus, in each agency of the government, there is an auditing unit headed by an auditor, whose duty is
to audit and settle the accounts, funds, financial transactions, and resources of the agency under his
audit jurisdiction. 33The decision of the auditor is appealable to the Regional Director, 34 whose
decision, is in turn, appealable to the COA Manager. 35 Any party dissatisfied with the decision of the
COA Manager may bring the matter on appeal to the Commission proper, a collegiate body exercising
quasi-judicial functions, composed of three (3) COA Commissioners, with the COA Chairman as
presiding officer. 36 It is only at this stage that the COA Chairman would come to know of the matter
and be called upon to act on the same, and only if an aggrieved party brings the matter on appeal.
In other words, the Chairman of the COA does not participate or personally audit all disbursements and
withdrawals of government funds, as well as transactions involving government property. The
averments in the particular paragraph of the complaint merely assume that petitioner participated in
or personally audited alldisbursements and withdrawals of government funds, and all transactions
involving government property. Hence, the alleged withdrawals, disbursements and questionable use
of government funds could not have been, as held by respondent Sandiganbayan, "within the peculiar
and intimate knowledge of petitioner as Chairman of the COA."
The complaint further avers in paragraph 17 that "(t)he following Defendants acted as dummies,
nominees and/or agents by allowing themselves (i) to be instruments in accumulating ill-gotten wealth
through government concessions, order and/or policies prejudicial to Plaintiff, or (ii) to be
incorporators, directors, or members of corporations beneficially held and/or controlled by Defendant
Ferdinand E. Marcos, Imelda R. Marcos, Benjamin (Kokoy) T. Romualdez and Juliette Gomez Romualdez
in order to conceal and prevent recovery of assets illegally obtained: Francisco Tantuico . . ." 37 Again,
the allegation that petitioner acted as dummy, nominee, or agent by allowing himself "to be used as
instrument in accumulating ill-gotten wealth through government concessions, orders and/or policies
prejudicial to Plaintiff" or "to be (an) incorporator, director, or member of corporations beneficially held
and/or controlled" by the Marcoses and Romualdezes, is a conclusion of law without factual basis.
The complaint does not contain any allegation as to how petitioner became, or why he is perceived to
be, a dummy, nominee or agent. Besides, there is no averment in the complaint how petitioner allowed
himself to be used as instrument in the accumulation of ill-gotten wealth, what the concessions, orders
and/or policies prejudicial to plaintiff are, why they are prejudicial, and what petitioner had to do with
the granting, issuance, and or formulation of such concessions, orders, and/or policies. Moreover,
Annex "A" of the complaint lists down sixty-one (61) corporations which are supposed to be
beneficially owned or controlled by the Marcoses and Romualdezes. However, the complaint does not
state which corporations petitioner is supposed to be a stockholder, director, member, dummy,
nominee and/or agent. More significantly, the petitioner's name does not even appear in Annex "B" of
the complaint, which is a listing of the alleged "Positions and Participations of Some Defendants".
The allegations in the complaint, above-referred to, pertaining to petitioner are, therefore, deficient in
that they merely articulate conclusions of law and presumptions unsupported by factual premises.
Hence, without the particulars prayed for in petitioner's motion for a bill of particulars, it can be said
the petitioner can not intelligently prepare his responsive pleading and for trial.

12

Furthermore, the particulars prayed for, such as, names of persons, names of corporations, dates,
amounts involved, specification of property for identification purposes, the particular transactions
involving withdrawals and disbursements, and a statement of other material facts as would support
the conclusions and inferences in the complaint, are not evidentiary in nature. On the contrary, those
particulars are material facts that should be clearly and definitely averred in the complaint in order
that the defendant may, in fairness, be informed of the claims made against him to the end that he
may be prepared to meet the issues at the trial.
Thus, it has been held that the purpose or object of a bill of particulars is
. . . to amplify or limit a pleading, specify more minutely and particularly a claim or
defense set up and pleaded in general terms, give information, not contained in the
pleading, to the opposite party and the court as to the precise nature, character,
scope, and extent of the cause of action or defense relied on by the pleader, and
apprise the opposite party of the case which he has to meet, to the end that the proof
at the trial may be limited to the matters specified, and in order that surprise at, and
needless preparation for, the trial may be avoided, and that the opposite party may be
aided in framing his answering pleading and preparing for trial. It has also been stated
that it is the function or purpose of a bill of particulars to define, clarify, particularize,
and limit or circumscribe the issues in the case, to expedite the trial, and assist the
court. A general function or purpose of a bill of particulars is to prevent injustice or do
justice in the case when that cannot be accomplished without the aid of such a bill. 38
Anent the contention of the Solicitor General that the petitioner is not entitled to a bill of particulars
because the ultimate facts constituting the three (3) essential elements of a cause of action for
recovery of ill-gotten wealth have been sufficiently alleged in the complaint, it would suffice to state
that in a motion for a bill of particulars, the only question to be resolved is whether or not the
allegations of the complaint are averred with sufficient definiteness or particularity to enable the
movant properly to prepare his responsive pleading and to prepare for trial. As already discussed, the
allegations of the complaint pertaining to the herein petitioner are deficient because the averments
therein are mere conclusions of law or presumptions, unsupported by factual premises.
In the light of the foregoing, the respondent Sandiganbayan acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in promulgating the questioned resolutions.
WHEREFORE, the petition is GRANTED and the resolutions dated 21 April 1989 and 29 May 1989 are
hereby ANNULLED and SET ASIDE. The respondents are hereby ordered to PREPARE and FILE a Bill of
Particulars containing the facts prayed for by petitioner within TWENTY (20) DAYS from notice, and
should they fail to submit the said Bill of Particulars, respondent Sandiganbayan is ordered TO
EXCLUDE the herein petitioner as defendant in Civil Case No. 0035.SO ORDERED.
3. G.R. No. L-41114 June 21, 1988
ROBERTO V. JUSTINIANI, and VICENTE ALACAPA, petitioners,
vs.
B. JOSE CASTILLO, in his capacity as Provincial Fiscal of the Province of Rizal, respondent.
FERNAN, J.:
This is a petition for Prohibition with Preliminary Injunction seeking to permanently enjoin respondent
Jose Castillo, Provincial Fiscal of Pasig, Rizal from conducting a preliminary investigation of the criminal
complaint for libel filed on July 15, 1975 by Brig. Gen. Montoya against the petitioners, Roberto
Justiniani and Vicente Alacapa.
A complaint for damages for physical injuries was filed by the petitioners against Brig. Gen. Montoya
before the then CFI of Negros Occidental, docketed as Civil Case No. 11926. Brig. Gen. Montoya in a
criminal complaint for Libel filed before the Office of the Provincial Fiscal [I.S. No. 75-7624] alleged that
the aforesaid complaint for damages caused the publication of derogatory, scurrilous and highly

13

libelous statements which tended to cause dishonor, discredit, public contempt and ridicule to his
personal worth, integrity, honor and position.
The Respondent Fiscal, upon assuming jurisdiction over the aforesaid criminal complaint for libel,
issued a subpoena and scheduled the preliminary investigation on August 4, 1975 at 3:00 o'clock in
the afternoon.
Alleging that they were not furnished copies of the criminal complaint and the supporting affidavits,
petitioners on August 1, 1975 requested copies thereof from the respondent Fiscal. They further
alleged that petitioner Justiniani was "bedridden," and could not, therefore, appear at the preliminary
investigation.
Petitioners were furnished copies of the complaint and supporting affidavits, and were required to
submit counter-affidavits and to personally appear before the respondent Fiscal within ten (10) days
from receipt of the above-mentioned pleadings. Petitioners instead filed a petition before this Court to
enjoin the respondent Fiscal from proceeding with the preliminary investigation on the ground that the
allegations in the complaint for damages are "privileged," which can not, therefore, be libelous.
On August 11, 1975, We resolved to issue a temporary restraining order and to require respondent to
answer.
The sole issue posed for our determination is whether or not the respondent Fiscal may be restrained
from conducting a preliminary investigation on a complaint for libel instituted on the basis of
statements embodied in a separate complaint.
Respondent Fiscal, in his memorandum, contended that certain allegations in the complaint for
damages are not pertinent and relevant to the action for damages for physical injuries and are thus
not privileged, to wit:
IV ... but General Montoya and his group, losing all decency expected of officers and
soldiers of the Armed Forces of the Philippines barbarically and continuously physically
assaulted plaintiff who was helpless in defending himself considering their superior
strength and number, and were it not for the timely pleas of his employer, Mrs. Enaida
Vda. de Montilla, plaintiff could have lost his remaining breath due to the merciless
beating he was ignominously subjected to which is reminiscenced of the Kempetai and
Gestapo technique of subjugation.
VThat the indescribable humiliation and physical injuries suffered by plaintiff could
have been worse were it not for the intercession of one of his companion by the name
of Sgt. Heracleo Severino who pacified the ruthless attackers of plaintiff by Identifying
himself as a constabulary man but instead of listening to the request for sobriety, the
latter was also manhandled, the sudden shift of attack by defendants enabled plaintiff
herein to stand up and seek refuge inside the counter while defendants were busy
assaulting Sgt. Severino who later on succeeded in pacifying them but not for long
since defendants thirst for cruelty had not yet been quenched. ...
VIThat Vicente Alacapa mustered enough courage to plead to defendants to desist
from further infliction of physical harm to his co-plaintiff who was all the time innocent
of their shallow and fabricated charges, but Gen. Montoya who had gone berserk
boxed. .... [Emphasis supplied]
VIIIThat the other quests and spectators who personally witnessed the inhuman
atrocitiescommitted against a helpless and innocent civilian were all one in voluntarily
condemning said acts of defendants ... abhorring
said animalistic and jungle law exemplified by defendants.
AS SECOND CAUSE OF ACTION

14

IThat the despicable conduct demonstrated by defendants is an affront not only to

plaintiffs but to the tenets of the New Society, and the fact that they are high ranking
military officers aggravate their contempt for law and order, such lack of human
compassion and the illegal and arrogant display of power on a helpless and innocent
civilian ... [emphasis supplied]. (pp. 99-100, Rollo)
The prevailing jurisprudence in this jurisprudence, particularly in the case of Sison vs. David [G.R. No.
L-11268, Jan. 28, 1961 ] is that statements made in a pleading in a civil action are absolutely
privileged and no action for libel may be founded thereon provided such statements are pertinent and
relevant to the subject under inquiry, however false and malicious they may be. In People vs.
Aquino [L-23908, October 29, 1966, 18 SCRA 555, 558] We held that the person who freely articulated
himself while exercising his duty under the express authority of law, may he be the judge, lawyer or
witness, does not expose himself to the risk of criminal prosecution or of an action for damages.
If the rule were otherwise, the courts would be flooded with libel suits from irate litigants who will be
suing each other on the basis of each and every pleading. Such a rule will breed endless vexatious
litigations contrary to public policy and the orderly administration of justice.
The statements complained of pass the test of relevancy and materiality. Although the language used
was harsh and antagonistic, they were merely descriptive of the manner by which the alleged injuries
were inflicted upon the petitioners. Furthermore, the words were used to emphasize petitioners'
allegation that the defendant in Civil Case No. 11926, a public official took advantage of his position;
and to prove his capacity to commit the alleged wrong. Certainly, if proven to be true, the allegations
would carry much weight in determining the award of moral damages that may be awarded to
petitioners. They are, in this manner, relevant and material to the subject of inquiry. Consequently,
these allegations are privileged and, therefore, not actionable.
On the issue of whether the Provincial Fiscal may be perpetually enjoined from conducting a
preliminary investigation, We have ruled in various cases ** that generally, injunction or prohibition
does not lie to restrain a criminal prosecution. But as is usually the case, certain exceptions to this rule
obtain. The case of Hernandez vs. Albano, et al., 19 SCRA 95 states thus:
Extreme cases may, and actually do, exist where relief in equity may be availed of to
stop a purported enforcement of a criminal law where it is necessary (a) for the orderly
administration of justice; (b) to prevent the use of the strong arm of the law in an
oppressive and vindictive manner; (c) to avoid multiplicity of actions; (d) to afford
adequate protection of constitutional rights; and (e) in proper cases, because the
statutes relied upon is unconstitutional, or was 'held invalid'.
Having ruled that the statements subject matter of the criminal complaint for libel are privileged, and
therefore not actionable, We find that the speedy, orderly and efficient administration of justice would
be subserved by enjoining respondent Fiscal from further proceeding with the questioned preliminary
investigation. Indeed, it would be a futile endeavor to conduct an investigation where no crime has
been committed.
WHEREFORE, the petition for prohibition is hereby granted. Respondent Fiscal is permanently enjoined
from conducting a preliminary investigation in I.S. No. 75-7624, which is hereby DISMISSED. No
pronouncement as to costs.
SO ORDERED.
4. G.R. No. 70909 January 5, 1994
CONCHITA T. VDA. DE CHUA, THELMA CHUA, assisted by her husband, CHARLIE DY, CHARLITO CHUA,
REYNALDO CHUA, SUSAN CHUA, ALEX CHUA, EDDIE CHUA, SIMON CHUA, AND ERNESTO
CHUA,petitioners,
vs.
THE INTERMEDIATE APPELLATE COURT, VICENTE GO, VICTORIA T. GO, AND HERMINIGILDA
HERRERA,respondents.

15

QUIASON, J.:
This is an appeal by certiorari under Rule 45 of the Revised Rules of Court from the decision of the
Court of Appeals in AC-G.R. CV No. 67692 entitled "Conchita Vda. de Chua, et al. v. Herminigilda
Herrera, et al.," affirming with modification the decision of the Court of First Instance of Cebu in Civil
Case No. R-16589.
The facts as found by the Court of Appeals, are summarized as follows:
Sometime in 1950, defendant Herminigilda Herrera executed a Contract of Lease (Exh.
"A") in favor of Tian On (sic) (or Sy Tian On) whereby the former leased to the latter
Lots. Nos. 620 and 7549 containing an area of 151 square meters, located at Manalili
Street (now V. Gullas Street) Cebu City, for a term of ten (10) years, renewable for
another five (5) years. The contract of lease (Exh. "A") contains a stipulation giving the
lessee an option to buy the leased property (Exh. A-2) and that the lessor guarantees
to leave the possession of said property to the lessee for a period of ten (10) years or
as long as the lessee faithfully fulfills the terms and conditions of their contract (Exh. A5).
In accordance with the said contract of lease, the lessee, Tian On, erected a residential
house on the leased premises.
On February 2, 1954, or within four (4) years from the execution of the said contract of
lease (Exh. "A"), the lessee, Sy Tian On, executed a Deed of Absolute Sale of Building
(Exh. "B") in favor of Chua Bok, the predecessor-in-interest of the plaintiffs herein,
whereby the former sold to the latter the aforesaid residential house for and in
consideration of the sum of P8,000.00. Pertinent provisions of this deed of sale (Exh.
"B") read as follows:
. . . That with the sale of the said house and as a legal consequence, I
hereby assign all my rights and privileges as a lessee of the lot on
which the said building is constructed together with its corresponding
obligations as contained and expressly stipulated in the Contract of
Lease executed in 1950 between myself and the lot owner,
Herminigilda Herrera, to the said vendee, Chua Bok who hereby
accepts the said assignment of the said lease and hereby promises and
bind himself to abide by all the terms and conditions thereof, a copy of
the Lease Contract is hereby attached as
Appendix "A" and made a part hereof.
That the present sale is made with the knowledge and express consent
of the lot-owner and lessor, Herminigilda Herrera who is represented
herein by her attorney-in-fact, Vicenta R. de Reynes who hereby also
honors the annulment of the lease made by Sy Tian On in favor of
Chua Bok, and hereby promises and binds herself to respect and abide
by all the terms and conditions of the lease contract which is now
assigned to the said Chua Bok.
After the said sale transaction, Chua Bok and his family
(plaintiffs herein) resided in the said residential building and they faithfully and
religiously paid the rentals thereof.
When the Original Contract of Lease expired in 1960, Chua Bok and defendant
Herminigilda Herrera, through her alleged attorney-in-fact executed the following
CONTRACT OF LEASE.

16

THIS CONTRACT OF LEASE made and entered into

this ___ day of August, 1960, in the City of Cebu, Philippines, by and
between:
HERMINIGILDA HERRERA, of legal age, single, Filipino
and a resident of Cebu City, Philippines, hereinafter
known as Party of the First Part;
and
CHUA BOK of legal age, married and a resident of Cebu
City, Philippines, hereinafter known as the Party of the
Second Part.
WITNESSETH:
That the Party of the First Part who is the owner of a parcel of land
located at Manalili Street, Cebu City containing of an area of about 151
(One Hundred Fifty-One) square meters, more or less, known as Lot.
No. ________ of the Cadastral Survey of Cebu, hereby lets and leases
unto the Party of the Second Part who hereby accepts in lease the
abovementioned lot under the following terms and conditions:
1. That the term of this contract shall be for a period of FIVE (5) years
from August 1, 1960 to August 1, 1965, at a monthly rental of SIXTY
PESOS (P60.00) Philippine Currency;
2. That the rental of P60.00 will be paid within the first 10 days of
every month, to the Party of the First Part without express demand and
in advance;
xxx xxx xxx
4. That the Party of the Second Part is given an option to buy the said
leased premises if he is qualified and when the Party of the First Part
decides to sell the same and that the Party of the second Part is also
given the option to renew the Contract of Lease upon terms and
conditions to be agreed by both parties;
xxx xxx xxx
6. That it is hereby expressly reserved that should the property leased
be sold by the Party of the First part to any other party, the terms and
conditions of this Contract shall be valid and will continue for the
duration of this contract. The Third party shall be expressed (sic) bound
to respect the terms of this Contract of Lease;
xxx xxx xxx
That the parties herein, do hereby mutually and reciprocally stipulate
that they will comply with the terms and conditions herein before set
forth. That the Party of the First Part hereby (sic) these presents
guarantees that she will leave the property in the possession of the
Party of the Second Part for five (5) years or as long as the Party of the
second Part faithfully fulfills with the terms and conditions herein set
forth.

17

IN WITNESS WHEREOF, we have hereunto affixed our signatures on this

9th day of September, 1960, in the City of Cebu, Philippines.
(Sgd.) CHUA BOK
Party of the Second Part
HERMINIGILDA HERRERA
By: Party of the First Part
(Sgd.) VICENTA R. DE REYNES
Attorney-in-Fact
SIGNED IN THE PRESENCE OF:
(Sgd.) ILLEGIBLE
(Sgd.) B.E. SUN
After the expiration of the contract of lease in question (Exh. "C") the plaintiffs herein,
who are the successors-in-interest of Chua Bok (who had meanwhile died) continued
possession of the premises up to
April 1978, with adjusted rental rate of P1,000.00 (Exh. "D"); later readjusted to
P2,000.00.
On July 26, 1977, defendant Herrera through her attorney-in-fact, Mrs. Luz Tormis, who
was authorized with a special power of attorney, sold the lots in question to
defendants-spouses, Vicente and Victoria Go. The defendants-spouses were able to
have aforesaid sale registered with the Register of Deeds of the City of Cebu and the
titles of the two parcels of land were transferred in their names (Exhs. "5-Herrera", or
"5-Go" and
"6-Herrera" or "6-Go").
Thereafter, or on November 18, 1977, plaintiffs filed the instant case seeking the
annulment of the said sale between Herminigilda Herrera and spouses Vicente and
Victoria Go, alleging that the conveyance was in violation of the plaintiffs' right of
option to buy the leased premises as provided in the Contract of Lease (Exh. "C") and
that the defendants-spouses acted in bad faith in purchasing the said lots knowing fully
well that the said plaintiffs have the option to buy those lots.
After due trial, the lower court rendered judgment, the dispositive portion of which
reads as follows:
WHEREFORE, in view of the foregoing, this Court ORDERS:
1) The DISMISSAL of plaintiffs' complaint, as against defendant spouses
GO;
2) The plaintiffs to VACATE Lot No. 620 and
Lot No. 7549, ownership over by which defendants Vicente and Victoria
Go being found valid and legitimate, and to peacefully turn over the
same to said spouses, and to REMOVE the building thereon at plaintiffs'
own expense, or such removal may be done by the declared landowners, likewise at plaintiffs' expense.
3) Defendant Herrera to pay the spouses Go, the sum of P15,000.00 as
reimbursement to them for what they already paid to their lawyer;

18

4) Defendant Herrera to pay plaintiffs the sum of P50,000.00 (later

reduced to P20,000.00, on motion of defendant Herrera, which the
court a quo granted) in concept of moral damages suffered by the
latter; and
5) Defendant Herrera to pay the costs of the proceedings (Record on
Appeal, pp. 229-230) (Rollo, pp. 63-68).
Plaintiffs and defendant Herrera appealed from the decision of the trial court to the Court of Appeals.
In said court, plaintiffs-appellants claimed that the trial court erred: (a) in dismissing their complaint as
against defendants-spouses Go, (b) in ordering them to vacate the lots in question and to remove the
improvements they had introduced in the premises, and (c) in ordering the execution of the judgment
pending appeal. Defendant-appellant Herrera, on her part, claimed that the trial court erred in ordering
her to pay P15,000.00 as attorney's fees to defendants-spouses Go and P50,000.00 as moral damages
to plaintiffs-appellants.
The Court of Appeals affirmed with modification the decision of the trial court, thus:
WHEREFORE, premises considered the appealed decision is hereby MODIFIED by
eliminating the award of P20,000.00 moral damages in favor of the plaintiffsappellants, the award of P15,000.00 attorney's fees in favor of defendants-appellees
(Go spouses) and the costs of the proceedings. In all other respects the appealed
decision is hereby AFFIRMED (Rollo, p. 78).
In their petition filed with us, petitioners (plaintiffs-appellants in AC-G.R. No. 67692) gave up their
demand for the nullification of the sale of the lots in question to respondent-spouses Go and limited
their appeal to questioning the affirmance by the Court of Appeals of the decision of the trial court,
ordering their ejectment from the premises in question and the demolition of the improvements
introduced thereon.
In support of their right to possess the premises in question, petitioners rely on the contract of lease
(Exh. "C") entered into by and between Chua Bok and Vicenta R. de Reynes, as attorney-in-fact of
respondent Herrera, as well as on the tacit renewal thereof by respondent Herrera (Rollo, pp. 35-48).
In declaring the contract of lease (Exh. "C") void, the Court of Appeals noted that Vicenta R. de Reynes
was not armed with a special power of attorney to enter into a lease contract for a period of more than
one year.
We agree with the Court of Appeals.
The lease contract (Exh. "C"), the linchpin of petitioners' cause of action, involves the lease of real
property for a period of more than one year. The contract was entered into by the agent of the lessor
and not the lessor herself. In such a case, the law requires that the agent be armed with a special
power of attorney to lease the premises.
Article 1878 of the New Civil Code, in pertinent part, provides:
Special Power of Attorney are necessary in the following cases:
(8) To lease any real property to another person for more than one year.
It is true that respondent Herrera allowed petitioners to occupy the leased premises after the
expiration of the lease contract (Exh. "C") and under
Article 1670 of the Civil Code of the Philippines, a tacit renewal of the lease (tacita reconduccion) is
deemed to have taken place. However, as held in Bernardo M. Dizon v. Ambrosio Magsaysay, 57 SCRA
250 (1974), a tacit renewal is limited only to the terms of the contract which are germane to the

19

lessee's right of continued enjoyment of the property and does not extend to alien matters, like the
option to buy the leased premises.
In said case, Magsaysay leased to Dizon a parcel of land for a term of two years, expiring on April 1,
1951. Under the lease contract, Dizon was given the preferential right to purchase the land under the
same conditions as those offered to other buyers. After the lease contract expired, Dizon continued to
occupy the leased premises and to pay the monthly rentals, which Magsaysay accepted. On March 24,
1954, Dizon learned that Magsaysay had sold the property to a third party without giving him the
opportunity to exercise the preferential right to purchase given him under the lease contract. Dizon
then filed an action against Magsaysay and the buyer to annul the sale of the property or in the
alternative, to recover damages from Magsaysay. The trial court dismissed the action and the Court of
Appeals affirmed the dismissal. In the Supreme Court, Dizon claimed that a new lease contract was
impliedly created when Magsaysay allowed him to continue to occupy the premises after the expiration
of the original lease contract and that the other terms of the said contract, including the lessee's
preferential right to purchase, were deemed revived. Dizon invoked Article 1670 of the Civil Code of
the Philippines, which provides:
Art. 1670. If at the end of the contract the lessee should continue enjoying the thing
leased for fifteen days with the acquiescence of the lessor, and unless a notice to the
contrary by either party has previously been given, it is understood that there is an
implied new lease, not for the period of the original contract, but for the time
established in Articles 1682 and 1687. The other terms of the original contract shall be
revived (Emphasis supplied).
We dismissed Dizon's appeal and sustained the interpretation of the Court of Appeals that "the other
terms of the original contract" mentioned in Article 1670, are only those terms which are germane to
the lessee's right of continued enjoyment of the property leased. We held:
This is a reasonable construction of the provision, which is based on the presumption
that when the lessor allows the lessee to continue enjoying possession of the property
for fifteen days after the expiration of the contract he is willing that such enjoyment
shall be for the entire period corresponding to the rent which is customarily paid in
this case up to the end of the month because the rent was paid monthly. Necessarily, if
the presumed will of the parties refers to the enjoyment of possession, the
presumption covers the other terms of the contract related to such possession, such as
the amount of the rental, the date when it must be paid, the care of the property, the
responsibility of repairs, etc. But no such presumption may be indulged in with respect
to special agreements which by nature are foreign to the right of occupancy or
enjoyment inherent in a contract of lease.
Petitioners also question the jurisdiction of the trial court in Civil Case No. R-16589 in ordering their
ejectment from the leased premises and the removal of the improvements introduced thereon by
them. They claim that the action in Civil Case No. R-16589 was for the annulment of the sale of the
property by defendant Herrera to defendants-spouses Go, and not an appropriate case for an
ejectment. The right of possession of petitioners of the leased premises was squarely put in issue by
defendants-spouse Go in their counterclaim to petitioner's complaint, where they asked that ". . . the
plaintiff should vacate their premises as soon as feasible or as the Honorable Court may direct"
(Record on Appeal, CA-G.R. No. 67692-R; p. 45).
The said counterclaim in effect was an accion publiciana for the recovery of the possession of the
leased premises.
Clearly the Court of First Instance had jurisdiction over actions which involve the possession of real
property or any interest therein, except forcible entry and detainer actions (Section 44[b], Judiciary Act
of 1948; Concepcion v. Presiding Judge, Br. V, CFI Bulacan, 119 SCRA 222 [1982]).
A counterclaim is considered a complaint, only this time, it is the original defendant who becomes the
plaintiff (Valisno v. Plan, 143 SCRA 502 [1986]). It stands on the same footing and is to be tested by the
same rules as if it were an independent action. Hence, the same rules on jurisdiction in an independent

20

action apply to a counterclaim (Vivar v. Vivar, 8 SCRA 847 [1963]; Calo v. Ajax International, Inc. v. 22
SCRA 996 [1968]; Javier v. Intermediate Appellate Court, 171 SCRA 605 [1989]; Quiason, Philippine
Courts and Their Jurisdictions, 1993 ed., p. 203).
Finally, petitioners claim that the Court of Appeals erred in eliminating the award of moral damages in
the amount of P20,000.00 given to them by the trial court (Rollo, pp. 48-52). The elimination of said
award is a logical consequence of the finding that petitioners had no right of option to purchase the
leased premises that can be enforced against respondent Herrera.
WHEREFORE, the petition is DENIED.
5. G.R. No. 117051

SO ORDERED.

January 22, 1996

FRANCEL REALTY CORPORATION, petitioner,

vs.
COURT OF APPEALS and FRANCISCO T. SYCIP, respondents.
MENDOZA, J.:
Petitioner Francel Realty Corporation filed a complaint for unlawful detainer against private respondent
Francisco T. Sycip. The case was filed in the Municipal Trial Court (MTC) of Bacoor, Cavite.
In its complaint, petitioner alleged that it had executed a Contract to Sell to private respondent Lot 16,
Building No. 14 of the Francel Townhomes, at 22 Real Street, Maliksi, Bacoor, Cavite, for P451,000.00.
The Contract to Sell provides inter alia that in case of default in the payment of two or more
installments, the whole obligation will become due and demandable and the seller will then be entitled
to rescind the contract and take possession of the property; the buyer will vacate the premises without
the necessity of any court action and the downpayment will be treated as earnest money or as rental
for the use of the premises. Petitioner alleged that private respondent failed to pay the monthly
amortization of P9,303.00 since October 30, 1990 despite demands to update his payments and to
vacate the premises, the latest of which was the demand made in the letter dated September 26,
1992, and that because of private respondent's unjust refusal to vacate, petitioner was constrained to
engage the services of counsel. Petitioner prayed that private respondent be ordered to vacate the
premises and pay a monthly rental of P9,303.00 beginning October 30, 1990 until he shall have
vacated the premises, and P25,000.00 as attorney's fees plus appearance fee of P1,000.00 per hearing
and expenses of litigation.
On November 9, 1992, private respondent moved to dismiss the complaint but his motion was denied
by the MTC. On January 20, 1993 he filed his answer, 1 in which he alleged that he had stopped paying
the monthly amortizations because the townhouse unit sold to him by petitioner was of defective
construction. He alleged that he had in fact filed a complaint for "unsound real estate business
practice" in the Housing and Land Use Regulatory Board (HLURB Case No. REM-07-9004-80) against
petitioner. Private respondent prayed that petitioner be ordered to pay P500,000.00 as moral
damages, P500,000.00 as exemplary damages, P75,000.00 as attorney's fees and that he be given "all
other remedies just and equitable."
In its resolution dated February 24, 1993, the MTC ruled that the answer was filed out of time on the
ground that it was filed more than ten days after the service of summons. 2 On March 17, 1993,
however, it dismissed the complaint for lack of jurisdiction. The MTC held that the case was cognizable
by the HLURB. But it also ordered petitioner to pay private respondent P10,000.00 as moral damages,
P10,000.00 as exemplary damages, P3,000.00 as attorney's fees, and to pay costs.
On appeal the Regional Trial Court affirmed the decision of the MTC. It held that the case was
exclusively cognizable by the HLURB which had jurisdiction not only over complaints of buyers against
subdivision developers but also over actions filed by developers for the unpaid price of the lots or
units.
Petitioner filed a petition for review in the Court of Appeals, alleging that:

21

(a) The amounts of damages prayed for by the private respondent in his Answer are enormous
and way beyond the jurisdiction of the inferior court; and
(b) Since the inferior court and the respondent court ruled that it has no jurisdiction over this
case, then it has no reason, much more jurisdiction to award damages in excess of the
P20,000.00 jurisdiction of the inferior court. 3
The appellate court dismissed the petition, holding that the MTC had jurisdiction over cases of forcible
entry and unlawful detainer, regardless of the amount of damages on unpaid rentals sought to be
recovered in view of 1A(1) of the Revised Rule on Summary Procedure. 4
Petitioner moved for reconsideration. It contended that since the MTC had ruled that it had no
jurisdiction over this case, then it had no jurisdiction either to grant the counterclaim for damages in
the total sum of P23,000.00. Its motion was, however, denied for lack of any "cogent reason" to
reverse the appellate court's resolution of June 15, 1994. 5
Hence this petition for review on certiorari.
It is important to first determine whether the MTC has jurisdiction over petitioner's complaint. For if it
has no jurisdiction, then the award of damages made by it in its decision is indeed without any basis. It
is only if the MTC has jurisdiction of the subject matter of the action that it is necessary to determine
the correctness of the award of damages, including attorney's fees.
Petitioner's complaint is for unlawful detainer. While generally speaking such action falls within the
original and exclusive jurisdiction of the MTC, the determination of the ground for ejectment requires a
consideration of the rights of a buyer on installment basis of real property. Indeed private respondent
claims that he has a right under P.D. No. 957, 23 to stop paying monthly amortizations after giving
due notice to the owner or developer of his decision to do so because of petitioner's alleged failure to
develop the subdivision or condominium project according to the approved plans and within the time
for complying with the same. The case thus involves a determination of the rights and obligations of
parties in a sale of real estate under P.D. No. 957, Private respondent has in fact filed a complaint
against petitioner for unsound real estate business practice with the HLURB.
This is, therefore, not a simple case for unlawful detainer arising from the failure of the lessee to pay
the rents, comply with the conditions of a lease agreement or vacate the premises after the expiration
of the lease. Since the determinative question is exclusively cognizable by the HLURB, the question of
the right of petitioner must be determined by the agency.
Petitioner's cause of action against private respondent should instead be filed as a counterclaim in
HLURB Case No. REM-07-9004-80 in accordance with Rule 6, 6 of the Rules of Court which is of
suppletory application to the 1987 HLURB Rules of Procedure per 3 of the same. In the case of Estate
Developers and Investors Corporation v. Antonio Sarte and Erlinda Sarte6 the developer filed a
complaint to collect the balance of the price of a lot bought on installment basis, but its complaint was
dismissed by the Regional Trial Court for lack of jurisdiction. It appealed the order to this Court. In
dismissing the appeal, we held:
The action here is not a simple action to collect on a promissory note; it is a complaint to
collect amortization payments arising from or in connection with a sale of a subdivision lot
under PD Nos. 957 and 1344, and accordingly falls within the exclusive original jurisdiction of
the HLURB to regulate the real estate trade and industry, and to hear and decide cases of
unsound real estate business practices. Although the case involving Antonio Sarte is still
pending resolution before the HLURB Arbiter, and there is as yet no order from the HLURB
authorizing suspension of payments on account of the failure of plaintiff developer to make
good its warranties, there is no question to our mind that the matter of collecting amortizations
for the sale of the subdivision lot is necessarily tied up to the complaint against the plaintiff
and it affects the rights and correlative duties of the buyer of a subdivision lot as regulated by
NHA pursuant to PD 957 as amended. It must accordingly fall within the exclusive original

22

jurisdiction of the said Board, and We find that the motion to dismiss was properly granted on
the ground that the regular court has no jurisdiction to take cognizance of the complaint.
Accordingly, we hold that the MTC correctly held itself to be without jurisdiction over petitioner's
complaint. But it was error for the MTC to grant private respondent's counterclaim for damages for
expenses incurred and inconveniences allegedly suffered by him as a result of the filing of the
ejectment case.7
Pursuant to Rule 6, 8 a party may file a counterclaim only if the court has jurisdiction to entertain the
claim. Otherwise the counterclaim cannot be filed. 8
Even assuming that the MTC had jurisdiction, however the award of damages to private respondent
must be disallowed for the following reasons:
(1) The MTC decision itself stated that the answer with its counterclaim was filed out of time or more
than 10 days from private respondent's receipt of summons. In effect, therefore, private respondent
did not make any counterclaim.
(2) Moreover, a reading of the MTC decision showed no justification for the award of moral and
exemplary damages and attorney's fees. As held in Buan v. Camaganacan,9 an award of attorney's
fees without justification is a "conclusion without a premise, its basis being improperly left to
speculation and conjecture." It should accordingly be stricken out. With respect to the award of moral
and exemplary damages, the record is bereft of any proof that petitioner acted maliciously or in bad
faith in filing the present action which would warrant such an award. 10
WHEREFORE, the decision of the Court of Appeals is REVERSED and the complaint against private
respondent is DISMISSED. The private respondent's counterclaim is likewise DISMISSED.
SO
ORDERED.
6. G.R. No. 95631 October 28, 1991
METALS ENGINEERING RESOURCES CORPORATION, petitioner,
vs.
COURT OF APPEALS and PLARIDEL JOSE, respondents.
REGALADO, J.:p
Impugned in this petition for review on certiorari is the decision of respondent Court of Appeals, dated
August 9, 1990, 1 dismissing the special civil action for certiorari and prohibition filed therein by
petitioner corporation.
The appeal herein arose from Civil Case No. 55560 filed by petitioner corporation against private
respondent Plaridel Jose, for the annulment of an agreement to buy and sell executed between the
parties, before the Regional Trial Court of Pasig, Branch 160, the complaint 2 alleging, inter alia, that:
2. On October 31, 1987, plaintiff and defendant executed a document which was
denominated as an "Agreement to Buy and Sell" in which plaintiff offered to sell to the
defendant and the latter in turn agreed to buy several parcels of land with an
aggregate area of 6,135 sq. m. . . .
4. The "Agreement to Buy and Sell", oil its face, is patently and plainly imperfect and
incomplete as there was and could have been no meeting of the minds of the parties in
regard to the manner, period and terms of payment of the purchase price or
consideration which is undeniably an essential element of the contract. Consequently,
the subject "Agreement", not having been perfected and completed, did not
contemplate nor did it result to a binding and enforceable contract to sell. In fact, as
stipulated in paragraphs 3 and 4 of said "agreement", the terms of sale, including the

23

payment of the purchase price, are uncertain and imperfect as they are subject to the
following:
a) Defendant's obligation to pay one half (1/2) of the total
consideration is conditioned and depends exclusively on the ability of
the plaintiff to "look for a place to transfer its offices and plants from
the land subject hereof within One hundred twenty days" but should
plaintiff "fail to locate a place to transfer its offices and plants from the
land subject hereof within the said one hundred and twenty days "the
agreement is merely subject to an "extension" upon terms and
conditions to be determined and agreed upon separately and
subsequently; and
b) The payment of the remaining fifty percent (50%) thereof SHALL BE
THE SUBJECT OF A (ANOTHER) SEPARATE AGREEMENT to be made
between the parties together with the execution of a Deed of Absolute
Sale.
5. Despite the fact that the subject "agreement" had not yet been perfected and
completed, defendant prematurely caused the preparation of a subdivision plan of the
lands into several sub-lots and offered the same for sale to the public through an
advertisement published in the issue of the "Manila Bulletin" on November 25,
1987 . . .
6. Thus, on December 24, 1987, plaintiff wrote a letter to defendant rescinding and/or
withdrawing from the uncompleted and imperfect "Agreement" and tendered a check
for the amount of P50,000.00 representing full refund of the earnest money previously
delivered by defendant pursuant to paragraph 2 of said agreement but defendant
refused to accept the same.
8. The refusal of defendant to acnowledge the imperfection and non-completion of the
"Agreement" and to accept the refund P50.000.00 as well as his acts of offering the
land for sale to third person and his annotation of adverse claims in the title covering
the lands are unjustifiable and great damage and prejudice to plaintiff.
Private respondent filed his Answer with Counterclaim 3 alleging a compulsory counterclaim on the
following operative facts:
12. Defendant had already spent a considerable amount for the subdivision of the
subject properties into smaller parcels of land for resale to a group of buyers, for the
advertisements and promotion necessary thereto, and other related expenses;
13. One of the pertinent provisions of the AGREEMENT (Annex "A") is the schedule of
payments to be paid by the defendant which provides as follows:
3. Within one hundred and twenty (120) days from the execution of this
agreement, the VENDOR shall look for a place to transfer its offices and
plant from the land subject hereof. And once a place to transfer is
found, the VENDOR shall inform the VENDEE of the same. Within fifteen
(15) days from such notice of the VENDOR to the VENDEE, the latter
shall immediately pay, without need of demand and further notice, to
the former one-half (1/2) of the total purchase price of the land . . .
Due to the adamant and unreasonable posture of the plaintiff, defendant's timetable to
generate funds and profits was severely stalled and placed at a standstill to the
damage and prejudice of his investment and financial projection, which can only be
rectified or compensated by way of tacking into, and thus extending the agreed period
to pay the said-one-half (1/2) of the purchase price, the length of time from plaintiffs

24

notice to rescind (Annex "1") until defendant complies with its part of the AGREEMENT
(Annex "A") whether voluntarily, by compromise, or by judicial compulsion;
14. Defendant suffered further due to the fact that his reputation has been tarnished at
the very least considering that he could not pursue his legal and business commitment
with those who have already transacted with him over the subject parcels of land;
15. By reason of the present unfounded and malicious action filed by the plaintiff,
defendant suffered sleepless nights, serious anxieties, embarrassment and similar
injuries due to the indefensible and destructive posture of the plaintiff for which he
should be awarded P300,000.00 at least in moral damages;
16. Due to the patent, wanton and gross bad faith displayed by the plaintiff in its
dealings with the defendant, the latter should be awarded at least P100,000.00 in
exemplary damages likewise to be assessed against the plaintiff;
17. By reason of the present suit, defendant was furthermore forced to hire the
services of counsel to protect his rights and interest under the premises, in the amount
of P100,000.00 as and for attorney's fees aside from the expenses and cost of litigation
which shall be proved at the trial hereof.
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of the
defendant dismissing the Complaint and declaring the AGREEMENT (Annex "AComplaint") with the defendant valid for all legal intents and purposes and ordering
the plaintiff to honor its provisions except the term or period of payment of the first
one-half (1/2) of the purchase price, which should be extended by tacking into the 15day period the length of time mentioned under paragraph 13 hereof; and for the
damages, plaintiff be ordered to pay defendant the following:
a) P300,000.00 in moral damages for the bersmirched reputation, embarrassment,
anguish, anxieties, sleepless nights, and similar injuries suffered by the defendant due
to the gross and wanton bad faith of the plaintiff;
b) P100,000.00 in exemplary damages so that others who similarly inclined to do as
what the plaintiff did against the defendant, should properly be forewarned and
deterred therefrom;
c) P100,000.00 as and for attorney's fees plus the expenses of litigation proved at the
trial; and
d) Costs."
Before the case could be heard on pre-trial, private respondent filed a Motion to Expunge the
Complaint on the ground that the same did not specify the amount of damages sought either in the
body or in the prayer of the complaint, citing in support thereof the then ruling case of Manchester
Development Corporation, et al. vs. Court of Appeals, et al. 4 and Administrative Circular No. 7 issued
by this Court on March 4, 1988.
In an Order dated December 15, 1988, the trial court required petitioner to amend its complaint by
specifying the amount of damages prayed for, otherwise the original complaint shall be dismissed. In
compliance therewith, petitioner filed its Amended Complaint specifying the amount of damages it
seeks to recover from private respondent.
However, private respondent moved for the reconsideration of the trial court's aforesaid order with
respect to the portion allowing petitioner to file an amended complaint, stating that the court did not
acquire jurisdiction when the wrong docket fee was paid, hence the amendment of the complaint did

25

not vest jurisdiction upon the court; and that for all legal intents and purposes, no original complaint
was filed which could be the subject of an amendment.
Acting thereon, on April 12, 1989, the trial court issued an Order 5 granting the motion for
reconsideration and ordering that the complaint be expunged from the record on the ground that it did
not acquire jurisdiction over the case.
Private respondent then filed a Motion to Set Case for Presentation of Evidence in support of his
counterclaim. In its Opposition, petitioner averred that since private respondent's counterclaim is
compulsory in nature because it is necessarily connected with and arose out of the same transaction
subject of the complaint, with the dismissal of petitioner's complaint the compulsory counterclaim can
no longer remain pending for independent adjudication; and considering further that since petitioner
had re-filed its complaint against private respondent on May 3, 1989 before the Regional Trial Court of
Pasig, Branch 168, docketed therein as Civil Case No. 58126, then private respondent could easily set
up the same compulsory counterclaim in said later case.
Thereafter, the court a quo issued an Order, 6 dated June 20, 1989, granting private respondent's
motion to present evidence and holding that "a) compulsory counterclaim is a complaint in itself; that
it is a complaint against the plaintiff; that it is independent in character. It has to be set up in the
answer otherwise it will be waived or barred and it cannot be invoked in another case, for it would be
splitting a cause of action which is not allowed under the rules." It added that herein private
respondent "correctly insisted that the compulsory counterclaim should be prosecuted now, otherwise
he cannot invoke his claim in a separate proceeding because he will be "barred by the dismissal" of the
instant case."
Petitioner filed a Motion for Reconsideration of said order alleging that a compulsory counterclaim is
essentially ancillary to the main controversy and that, assuming that private respondent's
counterclaim can remain pending for independent trial, the same would nevertheless be dismissed for
non-payment of any docket fees on the total amount of the counterclaim. Private respondent filed his
Opposition at the same time attaching thereto a receipt for the payment of docket fees. In reply,
petitioner contended that the belated payment of the docket fees for the counterclaim does not have
the effect of vesting the trial court with jurisdiction over the counterclaim. The motion for
reconsideration was denied by the trial court in its Order 7 dated September 29, 1989.
From said order, petitioner filed a special civil action for and certiorari prohibition with prayer for
preliminary injunction and/or temporary restraining order with respondent Court of Appeals. Its
contentions for the allowance thereof may be capsulized as follows:
1. Respondent court acted without or in excess of its jurisdiction and gravely abused
his discretion in granting respondent Jose's motion to present evidence on his
compulsory counterclaim:
a. The dismissal of the complaint carries with it the dismissal of the compulsory
counterclaim.
b. Even assuming that respondent Jose's counterclaim may remain pending for
adjudication independently of the principal complaint, it should still be dismissed for
failure on the part of respondent to pay docket fees thereon.
2. Great or irreparable injury and injustice would result to petitioner if respondent Jose
should be allowed to present evidence ex parte on his counterclaim pursuant to
respondent court's order September 29, 1989. 8
Respondent court, in its questioned decision, dismissed the special civil action for certiorari, stating
that since the order is merely interlocutory in nature and that at most it is merely an error of judgment,
it cannot be corrected bycertiorari, thus:

26

It is obvious that no jurisdictional error is involved in this case. If to allow the

respondent to present evidence in support of his counterclaim is a mistake, it is at
most an error of judgment that is not correctible by certiorari or prohibition. Such an
error can be corrected in an appeal which may be taken from the judgment to be
rendered on the counterclaim (Fernando vs. Vasquez, 31 SCRA 288).
Time and again, it has been said that the function of certiorari and prohibition is to
keep an inferior court within the limits of its jurisdiction (Enriquez vs. Rivera, 90 SCRA
641). These two extraordinary writs are not intended to correct every error which may
be committed in the course of a trial.
Finally, the order sought to be annulled is interlocutory in nature which again cannot
be corrected bycertiorari (Perez vs. Moneta Board, 20 SCRA 592; Layag vs. Gerardo, 10
SCRA 837). 9
Its motion for reconsideration having been denied, petitioner filed the instant petition.
Petitioner avers that respondent Court of Appeals gravely erred (1) in finding that no jurisdictional
defect was committed by the trial court in issuing the order date June 20, 1989 allowing respondent
Jose to present evidence in support of his compulsory counterclaim despite the dismissal of the
complaint; and (2) in holding that the order of June 20, 1989 cannot be the basis of a petition
for certiorari and prohibition. 10
We find for petitioner.
Private respondent's asseveration that a compulsory counterclaim is not deemed dismissed just
because the main complaint is dismissed by the court, and that the same has to be pursued otherwise
it will forever be barred on the ground of res judicata, is at most specious and should be struck down
for lack of merit.
There is no dispute that private respondent's counterclaim is compulsory in nature since (1) it arises
out of, or is necessarily connected with the transaction or occurrence that is the subject matter of the
opposing party's claim; 2) it does not require for its adjudication the presence of third parties over
whom the court cannot acquire jurisdiction; and 3) the court has jurisdiction to entertain the claim. And
the rule is that a compulsory counterclaim not set up shall be barred 11 if not raised on time and the
party in error is precluded from setting it up in a subsequent litigation on the ground ofres judicata, the
theory being that what are barred by prior judgment are not only the matters actually raised and
litigated upon, but also such matters as could have been raised but were not. 12 In other words, a
compulsory counterclaim cannot be made the subject of a separate action but should be asserted in
the same suit involving the same transaction or occurrence giving rise to it. Where the counterclaim is
made the subject of a separate suit, it may be abated upon a plea of auter action pendant or litis
pendentia, and/or dismissed on the ground of res judicata.13
However, such is not the situation obtaining in the present action. In the petition before us, private
respondent, in his responsive pleading which is aptly titled "Answer with Counterclaim," has properly
raised a counterclaim against herein petitioner's claim that the agreement to buy and sell is imperfect
and incomplete. Ironically, the insistence of private respondent in proceeding with the trial of the case
is premised on the very existence of his counterclaim. Hence, there can be no res judicata to speak of
because a counterclaim was correctly invoked against herein petitioner's complaint. In fine, what
private respondent is in effect saying is that his counterclaim should be allowed to proceed
independently of the main action.
For all intents and purposes, such proposition runs counter to the nature of a compulsory counterclaim
in that it cannot remain pending for independent adjudication by the court. 14 This is because a
compulsory counterclaim is auxiliary to the proceeding in the original suit 15 and derives its
jurisdictional support therefrom, 16 inasmuch as it arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the complaint. It follows that if the court does
not have jurisdiction to entertain the main action of the case and dismisses the same, then the

27

compulsory counterclaim, being ancillary to the principal controversy, must likewise be

dismissed 17 since no jurisdiction remained for any grant of relief under the counterclaim. 18
The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is to
avoid and prevent circuity of action by allowing the entire controversy between the parties to be
litigated and finally determined in one action, wherever this can be done with entire justice to all
parties before the court. 19 The philosophy of the rule is to discourage multiplicity of suits. 20 It will be
observed that the order of the trial court allowing herein private respondent to proceed wit the
presentation of his evidence in support of the latter's counterclaim is repugnant to the very purpose
and intent of the rule on counterclaims.
Furthermore, it has been held that a counterclaim presupposes the existence of a claim against the
party filing the counterclaim. Where there is no claim against the counterclaimant, then the
counterclaim is improper and should be dismissed. 21 The complaint filed by herein petitioner was
dismissed on the ground of lack of jurisdiction for non-payment of docket fees. By reason of said
dismissal, it is as if no claim was filed against herein private respondent, hence the counterclaim has
no leg to stand on. In addition, it was at the instance of private respondent that the complaint was
dismissed. In the words of Justice Abad Santos, "(private respondent) does not object to the dismissal
of the civil case but nonetheless wants (his) counterclaim therein to subsist. Impossible. A person
cannot eat his cake and have it at the same time. If the civil case is dismissed, so also is the
counterclaim filed therein." 22
American jurisprudence similarly rules that in an action where defendant's answer set up a
counterclaim, the court was without authority to sever the causes of action by dismissing the
complaint and submitting the counterclaim to the jury, although the order of dismissal purported to be
without prejudice to the merits of plaintiff's cause of action upon another trial. 23 This is so because a
severance for trial of a claim or counterclaim may increase the possibility of inconsistent verdicts and
decrease the ability of the court to resolve such inconsistencies without granting a re-trial in one or
both causes. 24
In the case before us, severing herein private respondent's counterclaim to compel petitioner to honor
the purchase agreement executed between them, from petitioner's action to declare null and void the
same contract, may result in the following outcomes:
1) If the same judgment would be rendered in Civil Case No. 55560 (on the counterclaim) and Civil
Case No. 58126 (on the main action which was re-filed) either for the validity or nullification of the
contract, then there would plausibly be no problem.
2) However, should different and conflicting decisions be handed down in the two cases, which is not
an impossibility, then this will only serve to complicate the issues that will arise and the remedies that
may be necessitated.
Verily, practical considerations of consistency and economy likewise command a trial of the
counterclaim jointly and concurrently with the principal controversy. At any rate, considering that
petitioner has re-filed its complaint involving the same cause of action which is now pending before
another branch of the court, there is nothing to prevent private respondent from raising the same
counterclaim for adjudication in the subsequent action.
It is the submission of herein petitioner that assuming arguendo that the counterclaim can proceed
independently of the main action, the court did not acquire jurisdiction thereover for failure of private
respondent to pay the corresponding docket fees. Petitioner maintains that the ruling
in Manchester should likewise apply to compulsory counterclaims. The argument is incorrect. The rules
regarding payment of docket fees have been summarized in a subsequent case 25 as follows:
1. 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. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the fee

28

within a reasonable time but in no case beyond the applicable prescriptive or

reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. . . .
The rule, therefore is made to apply specifically to permissive counterclaims only, thereby excluding
compulsory counterclaims from its purview. 26 This is because there is no need to pay docketing fees
for a compulsory counterclaim. 27
Finally, we do not ascribe to respondent court's declaration that the order of dismissal issued by the
trial court is merely interlocutory and, at most, an error of judgment which is not correctible
by certiorari and prohibition. As earlier stated, the trial court acted without jurisdiction in proceeding
with the hearing on the counterclaim after it had dismissed the complaint to which the counterclaim
attached. It is precisely to correct the lower court when in the course of proceedings it acts without
jurisdiction or in excess thereof or if the trial judge otherwise acted with grave abuse of discretion that
the extraordinary writ of certiorari or prohibition is afforded to parties as a relief. Such a relief is
available even in respect to interlocutory orders. 28
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE, and judgment is hereby
rendered DISMISSING the compulsory counterclaim of private respondent in Civil Case No. 55560,
without prejudice to the setting up of the same in Civil Case No. 58126, both of the Regional Trial Court
of Pasig, Metro Manila. SO ORDERED
7. G.R. No. 115088. June 20, 1996
INTESTATE ESTATE OF AMADO B. DALISAY, represented by Special Administratrix PRECIOSA D. TIROL,
petitioner, vs. HON. ROMEO D. MARASIGAN and LOURDES OPPUS, respondents.
FRANCISCO, J.:
The petitioner Intestate Estate of Amado B. Dalisay, represented by Special Administratrix Preciosa D.
Tirol filed a complaint for unlawful detainer, docketed as Civil Case No. 768-F-93, before Branch 3 of
the Municipal Trial Court in Cities (MTCC), Davao City against private respondent Lourdes Oppus. The
said complaint alleged, among others, the following:
Private respondent leased, on a monthly basis, a portion of lot located at C.M. Recto Avenue, Davao
City belonging to petitioner.[1] On March 1, 1993, petitioner gave private respondent one (1) month
advanced notice of the termination of the lease on April 1, 1993, and demanded that the latter vacate
the leased premises on or before the said date.[2] Notwithstanding the said notice, private respondent
continued in possession of the said premises, thereby prompting petitioner to institute the
abovementioned case for unlawful detainer.[3]
In refuting petitioner's allegations, private respondent claimed, among others, that she had not
received a single letter of demand to vacate from the petitioner, and that the latter had in fact
continued to collect rentals from her up to March 10,1993.[4] Thus, private respondent raised as one of
her affirmative defenses, the lack of jurisdiction of the MTCC to take cognizance of the case for failure
of the petitioner to comply with the condition precedent of furnishing the lessee with a prior demand to
vacate.[5] By way of counterclaim, private respondent invoked her right as a builder in good faith with
respect to the improvements that she had introduced on the said leased premises, and likewise
claimed moral damages in the sum of P10,000.00 and attorney's fees also in the same amount.[6]
During pre-trial, both parties stipulated that the petitioner, through its counsel, notified private
respondent of the termination of the contract of lease and demanded that the latter vacate the leased
premises. The said notice was sent via registered mail on March 11,1993 but was not effectively
delivered to nor received by the private respondent. Hence, one of the legal issues delineated by the
MTCC for resolution was:

29

"2. Whether or not the failure of the defendant to receive the notice to terminate the lease contract
and the demand to vacate the leased premises contained in that letter sent through the mails under
Registered Letter No. 027, dated March 11,1993, is a jurisdictional defect in connection with the filing
of this complaint in court thereby divesting this court (sic) the jurisdiction to try, hear and decide this
case";[7]
Resolving the aforementioned issue in the affirmative, the MTCC dismissed the said case for lack of
jurisdiction, and awarded in favor of the private respondent the amounts of P5,000.00 as moral
damages and P5,000.00 as attorney's fees.[8] Aggrieved, the petitioner appealed to the Regional Trial
Court (RTC) which affirmed the dismissal of the case below holding that in a lease on a "month to
month" basis, a notice of termination of the lease is a condition precedent for the filling of an unlawful
detainer case and non-compliance therewith divests the trial court of jurisdiction over the said case.
The RTC sustained the award of attorney's fees in favor of the private respondent but deleted the
award of moral damages ruling that the same cannot be granted in the absence of bad faith in the
filing of a case.[9]
Petitioner comes before us through the instant petition for certiorari raising a sole question of law, that
is, whether or not the RTC had jurisdiction to award attorney's fees after affirming the dismissal of the
case by the MTCC for lack of jurisdiction to try, hear and decide the case. Petitioner asseverates that as
the MTCC and the RTC had no jurisdiction over the principal action for unlawful detainer, then it had no
jurisdiction over the compulsory counterclaim of attorney's fees either.[10] The petition is meritorious.
A counterclaim is compulsory where: (1) it arises out of, or is necessarily connected with, the
transaction or occurrence that is the subject matter of the opposing party's claim; (2) it does not
require the presence of third parties of whom the court cannot acquire jurisdiction; and, (3) the trial
court has jurisdiction to entertain the claim.[11] Tested by these requirements, private respondent's
claim for attorney's fees is indubitably in the nature of a compulsory counterclaim.[12]
And We have consistently held that a compulsory counterclaim cannot remain pending for independent
adjudication by the court.[13] In the case of Metals Engineering Resources Corp. v. Court of Appeals,
[14] we elaborated in this wise:
"x x x a compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its
jurisdictional support therefrom, inasmuch as it arises out of or is necessarily connected with the
transaction or occurrence that is the subject matter of the complaint. It follows that if the court does
not have jurisdiction to entertain the main action of the case and dismisses the same, then the
compulsory counterclaim, being ancilliary to the main action, must likewise be dismissed since no
jurisdiction remained for any grant of relief under the counterclaim.[15]
"The aforementioned doctrine is in consonance with the primary objective of a counterclaim which is to
avoid and prevent circuity of action by allowing the entire controversy between the parties to be
litigated and finally determined in one action, wherever this can be done with justice to all parties
concerned."[16]
Furthermore, there is no denying the fact that it was private respondent herself who caused the
dismissal of her counterclaim for not only did she fail to object to, but she actually moved for the
dismissal of the complaint.[17] In the words of Justice Abad Santos,
"x x x The petitioner (private respondent in this case) does not object to the dismissal of the civil case
but nonetheless wants her counterclaim therein to subsist. Impossible. A person cannot eat his cake
and have it at the same time. If the civil case is dismissed, so also is the counterclaim filed
therein."[18]
ACCORDINGLY, the instant petition for certiorari is granted and the assailed decision of the RTC dated
March 8,1994 is modified to exclude the award of attorney's fees in favor of private respondent.
SO ORDERED.

30

8. G.R. No. 101566 March 26, 1993

HON. FLORENCIO A. RUIZ, JR., SENT OF GOD FOUNDATION, INC., S OF G FOUNDATION, INC., RAUL G.
FORES, SENEN P. VALERO and FATHER ODON DE CASTRO, petitioners,
vs.
THE HON. COURT OF APPEALS, SPS. OLEGARIO ORBETA and SUSANA ROSARIO S. ORBETA,respondents.
GRIO-AQUINO, J.:
The private respondents, spouses Olegario Orbeta and Susana Rosario S. Orbeta, have filed a motion
for reconsideration of the decision dated August 17, 1992 of this Court which reversed the decision of
the Court of Appeals 1 granting the petition for certiorari in CA-G.R. SP No. 17013, "Spouses Olegario
Orbeta and Susana Rosario S. Orbeta, petitioners vs. Hon. Florencio A. Ruiz, Jr., et al." and upholding on
procedural grounds, the orders of the Regional Trial Court of Ilocos Sur, dismissing the Crisologos'
complaint and the Orbetas' answer with cross claim, in Civil Case No. 313-KC, entitled "Carmeling P.
Crisologo, et al., vs. Sent of God Foundation Inc., et al."
This is a splinter case arising from the complaint filed on July 29, 1988 by Carmeling P. Crisologo and
her children for revocation of two (2) deeds of donation: (a) the first was a donation made on
September 17, 1976, of a
100-hectare island in Cabugao, Ilocos Sur; and (b) the second was a donation of two (2) lots in Guimod,
San Juan, Ilocos Sur, to the Sent of God Foundation, Inc., which was represented in both transactions
by Carmeling's niece, Susana Rosario Orbeta, and her husband, Olegario Orbeta, who were members
of the Sent of God Foundation, Inc., otherwise known as the Caryana Movement, a religious cult
headed by a Benedictine monk, Father Odon de Castro, as the group's spiritual director. The donations
were subject to three (3) conditions imposed by the donors, to wit:
(1) that the donated land shall be used exclusively to provide a monastic life and
experience according to the rules of St. Benedict, and for such other religious and
charitable purposes as may be determined by the donee;
(2) that the donee shall not sell, lease or allow the use of the parcels of land donated
or any part thereof for any other purposes; and
(3) that in the remote event that the donee no longer needs the property for its
religious and charitable purposes, the same shall revert to the donors or their heirs.
Ten years later, on November 7, 1986, the Sent of God Foundation, Inc., represented by its chairman of
the board of trustees, Dr. Raul Fores, with the consent of the donors, transferred the Puro-Salomague
Island (renamed St. Benedict Island by Fr. Odon de Castro) to the S of G Foundation, Inc., represented
by Senen P. Valero, subject to the same conditions as the original donation.
Unfortunately, the Caryana Movement was denied canonical recognition and its spiritual director was
himself expelled from the Benedictine order and stripped of his priestly functions by the Archbishop of
Manila, Jaime Cardinal Sin.
Disturbed by these developments, for one of the conditions of her donation to the Movement was that
the Island would be used "to provide a monastic life and experience according to the rules of St.
Benedict," Mrs. Crisologo wrote a letter on February 8, 1988 to Dr. Fores, asking for the return of her
island. Dr. Fores assured her that the papers would be prepared for that purpose. On February 23,
1988, she wrote another letter to Dr. Fores reminding him of his promise to return the Island and
offering to reimburse the Foundation for its improvements on the island. Dr. Fores asked for a
conference with Mrs. Crisologo to hasten the return of the island to her. But shortly thereafter, in the
same month of February, 1988 and continuing up to March, the Sent of God Foundation, Inc. and S of G
Foundation, Inc., abandoned Puro-Salomague Island. Their agents destroyed and demolished almost all
the improvements thereon.

31

A third letter dated March 9, 1988 was written by Mrs. Crisologo, addressed to Mrs. Concepcion (Chit)
Feria, a member of the Sent of God Foundation, Inc., reiterating her request for the return of the island,
but nothing happened.
On July 29, 1988, Mrs. Crisologo and her children filed a complaint (Civil Case No. 313-KC, Regional Trial
Court, Branch 24, of Cabugao, Ilocos Sur) against the Sent of God Foundation, Inc., the S of G
Foundation, Inc., Raul G. Fores, Senen P. Valero, Fr. Odon de Castro and Spouses Olegario and Susana
Rosario S. Orbeta for the revocation of the donation and the return of the island to the donors.
In their answer dated August 30, 1988, the defendants (except the Orbetas) admitted the donations
but denied that they had violated the conditions thereof. They further alleged that the Crisologos had
no basis for revoking the donations because canonical recognition is not required for a lay community
to live a Christian life in accordance with the rules of St. Benedict; that the expulsion of Fr. Odon de
Castro from his Order is pending review by the authorities in Rome; and that the circular of the
Archdiocese of Manila disallowing him to perform priestly functions was already known to the
Crisologos when they gave their consent to the donation of the island to the S of G Foundation, Inc., to
which the island was transferred because the S of G Foundation is a qualified tax-exempt donee. They
alleged that they did not destroy, but only "dismantled," their improvements on the island preparatory
to the transfer of the group to Sabang in order to avoid harassment by Susana Orbeta who had been
expelled by the Sent of God Foundation, Inc., allegedly for violating the rule of poverty of St. Benedict.
They admitted Dr. Fores' promise to return the island to the Crisologos but gave reasons for the delay
in effecting the reconveyance, among which was the legal problem allegedly raised by dispossessed
farmers. They denied that they abandoned the island for they merely transferred from the upper
portion thereof to the lower portion where the rule of poverty may be more properly observed. Their
answer contained a counterclaim for attorney's fees and expenses of litigation. They prayed that the
complaint be dismissed, or, in the alternative, that the Crisologos and the Department of Agrarian
Reform be compelled to interplead their claims to the island.
Plaintiffs filed an answer to the counterclaim on September 22, 1988.
The Orbetas filed a separate Answer with Cross-claim on September 30, 1988, making common cause
with the plaintiffs. They alleged that in January 1976, Fr. Odon de Castro instructed Mrs. Orbeta to look
for an ideal place in Ilocos Sur to house the monastery of the Caryana Movement, so she thought of
approaching her aunt, Mrs. Crisologo, who is a devout Catholic and devotee of St. Benedict, and who is
considered one of the biggest landowners in Ilocos Sur. Even if she had not met Fr. Odon, Dr. Fores, and
Senen Valero, pillars of the Sent of God Foundation, Inc., Mrs. Crisologo was persuaded by Mrs. Orbeta
to give her Puro-Salomague Island for the use of the Caryana Movement. Upon inspection by Fr. Odon,
the island was found suitable for the purposes of the movement, but since the Sent of God Foundation,
Inc., did not have money to buy it, Mrs. Orbeta persuaded her aunt to donate it to the Foundation
subject to certain conditions already mentioned in the complaint. The Orbetas confirmed that the
Foundation violated the conditions of the donation when it was denied canonical permission to teach
the monastic life according to the rules of St. Benedict. The Orbetas joined the plaintiffs' demand for
the reversion of the island to the donors. The Orbetas further alleged that because of the
"misrepresentation, deceptions, questionable practices and heretical teachings of defendant Fr. Odon
de Castro, they (Orbetas) disassociated themselves from the Caryana Movement; that as the denial of
church recognition for the Caryana Movement and the dismissal of Fr. Odon de Castro, as a Catholic
monk of the Benedictine Order, violated the conditions of the donations, the Orbetas alleged that they
have a legal obligation to return the island to the plaintiffs; and that the alleged protest of the farmers
is a concoction of the Foundations to delay the return of the island to the Crisologos for the tenancy
case between some farmers and Mrs. Crisologo had been settled in 1980 yet, by an Order dated May
28, 1980 of the Minister of Agrarian Reform.
The Orbetas asserted a cross claim against their co-defendants for moral and exemplary damages and
expenses of litigation because the refusal of the Foundations to reconvey the island to the Crisologos
caused the Orbetas to be dragged into this case, and has put them (Orbetas) "in a bad perspective"
(p. 148, Rollo). They prayed that judgment be rendered for the plaintiffs and that the Foundations and
their co-defendants be ordered to pay damages.

32

On November 24, 1988, the Foundations, etc. filed a "Motion to Dismiss Crossclaim (of the Orbetas)
and to Strike Out."
On December 5, 1988, the Foundations, etc. (except the Orbetas) filed a "Motion to Dismiss and to
Drop Defendants," alleging that: (1) the complaint states no cause of action against the Foundations
because they did not violate the conditions of the donation; and (2) the individual defendants (Fores,
Valero and Fr. De Castro) are not real parties in interest for they merely acted for the Foundations
which have legal personalities separate from their officers. Furthermore, the original deeds of donation
in favor of the Sent of God Foundation, Inc. have already been cancelled by the execution of a third
deed of donation by the Sent of God Foundation, Inc. in favor of the S of G Foundation, Inc., with the
consent of the plaintiffs. The motion was set for hearing on December 16, 1988 at 2:00 p.m.
A copy of the motion to dismiss was received by the Secretary of plaintiffs' counsel, Attorney Eduardo
Alcantara, on December 14, 1988, or one day short of the reglementary 3-day notice. On January 2,
1989, Attorney Alcantara, who was in Manila when the motion was received in his office in Vigan, filed
an "Explanation and Vigorous Opposition to the Motion to Dismiss and Drop Defendants." However, on
the same date, Judge Florencio A. Ruiz, Jr. issued an Order overruling the Opposition for "having been
filed out of time" and dismissing the complaint because "the grounds alleged in support thereof (are)
meritorious, even as no timely opposition to defendants' motion to dismiss had been filed by any of the
adverse parties on or before the scheduled date and time of hearing thereon . . ." The Orbetas' cross
claim was also dismissed because it had "no more leg to stand on." (p. 160, Rollo.)
On January 12, 1989, the plaintiffs filed a motion for reconsideration, which was adopted by the
Orbetas in an urgent ex parte manifestation dated February 7, 1989. This motion was denied on
February 8, 1989. The Crisologos then sought a review of the order of dismissal by the Court of
Appeals through a petition for certiorariunder Rule 65 of the Rules of Court, alleging grave abuse of
discretion on the part of the trial court. Docketed as CA-G.R. No. SP-16837, it was dismissed on May 2,
1989, 2 on the ground that the proper remedy was an ordinary appeal. The appellate court ruled that
"since the petitioner did not appeal the questioned order of January 2, 1989, of respondent court
dismissing the complaint, said order had become final and executory." (p. 42, Rollo.)
The Orbetas who had not joined the Crisologos in CA-G.R. No.
SP-16837, filed their own petition for certiorari in the Court of Appeals where it was docketed as CAG.R. SP No. 17013. Their petition prospered. On September 28, 1990, the Court of Appeals 3 annulled
Judge Ruiz's order of dismissal and reinstated the complaint. Reconsideration of this decision was
denied on August 27, 1991. The Foundations, etc. appealed to this Court which, as previously stated,
reversed the Court of Appeals.
The Orbetas filed a motion for reconsideration of our decision. The Court denied it by resolution dated
October 21, 1992. However, the Orbetas filed a timely Motion to Recall that resolution. They invited the
court's attention to the fact that the resolution denying their motion for reconsideration did not carry
the necessary votes of three (3) justices for only Justices Cruz and Aquino voted on it as Justice
Bellosillo took no part and Justice Medialdea was on sick leave of absence, when the motion for
reconsideration was deliberated upon. 4 Consequently, the Division decided to refer the case to the
Court En Banc which recalled the resolution for lack of the necessary votes and constituted a Special
First Division 5 to deliberate on the Orbetas' motion for reconsideration.
After a careful review and study of the records, the Court finds merit in the motion for reconsideration.
The Court of Appeals did not commit a reversible error in setting aside the orders of Judge Florencio A.
Ruiz, Jr. granting the motion to dismiss the complaint in Civil Case No. 313-KC because:
(1) Judge Ruiz gravely abused his discretion in proceeding to hear and grant the motion to dismiss of
the defendants (except the Orbetas) without the requisite 3-day notice to the plaintiffs; and
(2) The Orbetas are proper parties-in-interest to seek a review on certiorari of the trial court's order
dismissing the complaint in Civil Case No. 313-KC.

33

The trial court gravely abused its discretion in issuing the order of dismissal because the plaintiffs were
given only two (2) days' notice (the Orbetas none at all) of the hearing of the motion to dismiss. The
notice was received in the office of the plaintiffs' counsel (not by counsel himself) on December 14,
1988. The motion was heard on December 16, 1988.
The motion to dismiss was filed after the defendants had already answered the complaint. Having
already filed their answer, the Foundations were estopped from filing a motion to dismiss the
complaint, for a motion to dismiss should be filed "within the time for pleading," i.e., within the time to
answer (Sec. 1, Rule 16, Rules of Court).
The allegation of the defendants (except the Orbetas) that the complaint did not state a cause of
action was not a proper ground to dismiss it for said defendants could not have joined issue upon the
material allegations of the complaint if the same did not state a sufficient cause of action against
them. A careful perusal of the complaint of the Crisologos, and the Orbetas' "answer," shows that the
elements of a cause of action are pleaded therein.
While the Orbetas were impleaded as defendants in the action, together with the Foundations, Fr. Odon
de Castro, Dr. Raul G. Fores, and Senen Valero, they filed a separate answer making common cause
with the plaintiffs. Their answer included a cross claim for damages against their co-defendants. Their
answer with cross-claim was, in effect, a complaint against the Sent of God Foundation, Inc. and the
other defendants. This peculiarity of their pleading could not have been missed by the trial court, for
the other defendants in fact accused them of collusion with the plaintiffs. In view of that circumstance,
the trial court should have looked beyond the form, to the substance, of their pleading. In the interest
of justice and orderly procedure, the trial court should have treated their answer as a complaint and
should have ordered them to disassociate themselves from the other defendants and be joined as
additional plaintiffs in the case, for that is the side with which they have aligned themselves.
The Orbetas had an interest in the subject matter of the Crisologos' suit for they were the
conduit, through whom the Crisologos effected the donation of their island to the Sent of God
Foundation, Inc. They were signatories of the deed of donation of Puro-Salomague Island. Being
instrumental in obtaining the donations from the Crisologos, they are de facto plaintiffs with an actual
interest in the enforcement of the conditions of the donation and in the recovery of the donated
property on account of the donee's violations of the conditions of the donation.
Being de facto plaintiffs, the Orbetas could file in the Court of Appeals a separate petition for review
on certiorariof the trial court's order dismissing their demand for the reversion of the island to the
donors.
The finality of the trial court's order dismissing the Crisologos' complaint was not an obstacle to the
plaintiffs' and the Orbetas' recourse to the Court of Appeals by a petition for certiorari under Rule 65 of
the Rules of Court for such a petition may be filed "within a reasonable time," not within the time to
appeal (Great Pacific Life Assurance Corporation vs. NLRC, 188 SCRA 139; Andaya vs. NLRC, 188 SCRA
253).
Even if appeal should have been the proper remedy against an oppressive and arbitrary order or
decision of a lower court, the aggrieved party may avail of the special civil action of certiorari when
appeal would not be a speedy and adequate remedy. In this case, appeal would have been neither
speedy nor adequate for the plaintiffs and the Orbetas had not been given a chance to prove their
causes of action, hence, there was no evidence in the records upon which to anchor a judgment by the
Appellate Court in their favor.
. . . the Appellate Court can legally entertain the special civil action of certiorari in CAG.R. No. 14821-SP considering the broader and primordial interests of justice which
compel an occasional departure from the general rule that the extraordinary writ
of certiorari cannot substitute for a lost appeal, the order of March 15, 1979 having
become final upon the lapse of the reglementary period of appeal. (Pachoco vs.
Tumangday and Fernando, etc., 108 Phil. 239; Co Chuan Seng vs. CA, 128 SCRA 308;
Destileria Limtuaco & Co. vs. IAC, 157 SCRA 706; Del Pozo, et al. vs. Judge Penaco, 167

34

SCRA 577; Fernando Pelagio, et al. vs. The Hon. Court of Appeals, et al., G.R. No.
63188, June 13, 1990; Emphasis supplied.)
Certiorari is one such remedy. Considered extraordinary, it is made available only when
there is no appeal, nor any plain, speedy or adequate remedy in the ordinary course of
the law (Rule 65, Rules of Court, Section 1). The long line of decisions denying the
petition for certiorari, either before appeal was availed of or specially in instances
where the appeal period has lapsed, far outnumbers the instances when certiorari was
given due course. The few significant exceptions were: when public welfare and the
advancement of public policy dictate: or when the broader interests of justice so
require, or when the writs issued are null (Yu Tirona vs. Nanawa, No. L-22107,
September 30, 1967, 21 SCRA 395, 400; Director of Lands vs. Santamaria, 44 Phil. 594,
596, cited in 3 Moran, Comments on the Rules of Court, 170-172 (1980), or when the
questioned order amounts to an oppressive exercise of judicial authority. (Acain vs.
IAC, 155 SCRA 100; Sunbeam Convenience Foods Inc., et al. vs. Hon. Court of Appeals,
et al., 181 SCRA 443; Emphasis supplied.)
IN VIEW OF ALL THE FOREGOING, we GRANT the motion for reconsideration and AFFIRM the decision
dated September 28, 1990 of the Court of Appeals in CA-G.R. SP No. 17013. The orders dated January
2, 1989 andFebruary 8, 1989 of herein petitioner, Judge Florencio A. Ruiz, Jr., in Civil Case No. 313-KC
are hereby ANNULLED AND SET ASIDE. Said civil case should proceed to trial on the merits with all
reasonable dispatch. Costs against the petitioners.
SO ORDERED.

9. G.R. No. 95573 October 25, 1995

GSIS vs NFA
PUNO, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals affirming the decision
of the Regional Trial Court in Quezon City, Branch 86 which, among others, ordered petitioner
Government Service Insurance System (GSIS) and private respondent Alberto L. Fajardo to pay jointly
and severally respondent National Food Authority (NFA) the amount of P56,666.67 plus twelve percent
(12%) interest thereon per annumfrom the date of filing of the complaint until fully paid and dismissed
petitioner's cross-claim.
On July 1, 1983, the NFA entered into a Contract of Palay Milling with Fajardo under which the former
engaged the services of the latter to mill NFA palay into good regular milled rice.
The deliveries of palay were received by Bernabe Rice Mill I and II. Both rice mills are owned by
Rosalina Bernabe. Bernabe Rice Mill I was operated by Rosalina Bernabe, mother-in-law of Fajardo;
while Bernabe Rice Mill II was operated by Adriano Golingan.
The NFA required Fajardo to post bond. Fajardo secured from GSIS G (21) GIF Bond No. 00392 in the
amount of P56,666.67 or which corresponds to thirty-three and one-half percent (33 1/2%) of the
current market value of the 2,000 bags of palay to be received for milling. Fajardo in turn, executed an
indemnity agreement in favor of GSIS.
In the course of milling operation, covering the period from June to November 1983, Fajardo incurred a
total shortage of 67,824.01 kilos of milled rice valued at P297,069.16. Likewise, Fajardo incurred a
shortage in empty jute sacks amounting to P31,638.46.

35

The NFA sent a letter to Fajardo dated July 4, 1984, demanding payment in the amount of P292,040.42
representing rice shortage. The NFA also made a demand dated August 3, 1984 upon GSIS on the bond
issued by the latter.
Another letter of demand dated April 2, 1985 was sent to Fajardo in connection with the milled rice and
empty jute sack shortage. Fajardo made no response.
The NFA filed a complaint for sum of money and damages against GSIS and Fajardo.
In his Answer, Fajardo denied liability for the shortage and attributed it to Rosalina Bernabe and
Adriano Golingan.
The GSIS also filed an answer with cross-claim against Fajardo based on the Indemnity Agreement.
After trial, the RTC rendered a Decision whose dispositive portion states:
WHEREFORE, judgement is hereby rendered ordering:
1. defendant Alberto L. Fajardo and the GSIS, jointly and severally, to pay plaintiff NFA,
the amount of P56,666.67 plus 12% interest thereon per annum from date of filing of
complaint until fully paid;
2. defendant Alberto L. Fajardo to pay plaintiff the sum of P234,128.45 plus 12%
interest thereon per annum from date of filing of complaint until fully paid;
3. defendant Alberto L. Fajardo to pay plaintiff the sum of P31,638.46 plus 12% interest
thereon from date of filing of complaint until fully paid;
4. defendant Alberto L. Fajardo to pay plaintiff NFA the sum of P20,000.00, as
exemplary damages;
5. defendant Alberto L. Fajardo to pay plaintiff NFA the sum of P5,000.00 as and for
attorney's fees, plus costs of the suit.
All other claims and counterclaims are hereby dismissed.
SO ORDERED.
The Decision of the trial court was affirmed by the respondent Court of Appeals on June 29, 1990.
In this petition, petitioner urges the following:
IV REASONS FOR THE ALLOWANCE OF THIS PETITION
1. THE RESPONDENT COURT OF APPEALS HAS DECIDED THE CASE NOT IN ACCORD
WITH THE APPLICABLE JURISPRUDENCE, SUCH THAT:
(A) It affirmed the decision of the Trial Court's finding that petitioner is liable under the
Surety Bond despite the fact that fraud and misrepresentation were duly proven to
have been employed by obligor defendant Alberto L. Fajardo in securing and/or
obtaining the Surety Bond;
(B) It affirmed the decision of the Trial Court dismissing "all other claims and
counterclaims" despite the fact that the cross-claim of petitioner herein against
defendant Alberto L. Fajardo had been pleaded and had been duly proven.

36

2. THE RESPONDENT COURT OF APPEALS ERRED WHEN IT UPHELD THE DECISION OF

THE TRIAL COURT DISMISSING ALL OTHER CLAIMS AND COUNTERCLAIMS DESPITE ITS
OWN PRONOUNCEMENT THAT THE INDEMNITY AGREEMENT OF FAJARDO WITH THE
GSIS IS VALID.
We find no merit in the first contention of petitioner. The liability of petitioner to the NFA pursuant to
the bond it issued in favor of Fajardo is clear. The alleged fraud and misrepresentation perpetrated by
Fajardo cannot be used by petitioner to avoid its undertaking with the NFA. Likewise, allegations of
fraud and misrepresentation pose factual questions which this Court, as a rule, does not review in a
petition for review on certiorari. The oft repeated rule is that petitions for review on certiorari can only
raise errors of jurisdiction.
We, however, sustain petitioner's contention that respondent court erred in dismissing its cross-claim
against Fajardo. Respondent court itself found that the Indemnity Agreement between the petitioner
and Fajardo is valid. The obligation of Fajardo to the petitioner under this Agreement is clearly spelled
out, viz.:
(b) INDEMNITY. To indemnify the GSIS at its principal offices for any damages,
prejudice, losses, costs, payments, advances and expenses of whatever kind and
nature, including counsel for attorney's fees, which the GSIS may at any time sustain
or incur, as a consequence of having executed the above-mentioned Bond, its
renewals, extensions or substitution and said attorney's fees shall not be less than
fifteen (15%) percent of the amount claimed by the GSIS in each action, the same to
be due and payable, irrespective of whether the case is settled judicially or extrajudicially.
Fajardo did not assail the existence and due execution of this Indemnity Agreement. He is
bound to comply with its term.
IN VIEW WHEREOF, the Decision dated June 29, 1990 of the respondent court is modified. Private
respondent Alberto L. Fajardo is hereby ordered to pay petitioner GSIS whatever amount the latter has
been adjudged to pay NFA in Civil Case No. Q-44772. No costs. SO ORDERED.

10. G.R. No. 107356 March 31, 1995

SINGAPORE AIRLINES LIMITED, petitioner,
vs.
THE COURT OF APPEALS and PHILIPPINE AIRLINES, respondents.
ROMERO, J.:
Sancho Rayos was an overseas contract worker who had a renewed contract with the Arabian
American Oil Company (Aramco) for the period covering April 16, 1980, to April 15, 1981. As part of
Aramco's policy, its employees returning to Dhahran, Saudi Arabia from Manila are allowed to claim
reimbursement for amounts paid for excess baggage of up to 50 kilograms, as long as it is properly
supported by receipt. On April 1980, Rayos took a Singapore Airlines (SIA) flight to report for his new
assignment, with a 50-kilogram excess baggage for which he paid P4,147.50. Aramco reimbursed said.
amount upon presentation of the excess baggage ticket.
In December 1980, Rayos learned that he was one of several employees being investigated by Aramco
for fraudulent claims. He immediately asked his wife Beatriz in Manila to seek a written confirmation
from SIA that he indeed paid for an excess baggage of 50 kilograms. On December 10, 1980, SIA's
manager, Johnny Khoo, notified Beatriz of their inability to issue the certification requested because
their records showed that only three kilograms were entered as excess and accordingly charged. SIA
issued the certification requested by the spouses Rayos only on April 8, 1981, after its investigation of
the anomaly and after Beatriz, assisted by a lawyer, threatened it with a lawsuit. On April 14, 1981,

37

Aramco gave Rayos his travel documents without a return visa. His employment contract was not
renewed.
On August 5, 1981, the spouses Rayos, convinced that SIA was responsible for the non-renewal of
Rayos' employment contract with Aramco, sued it for damages. SIA claimed that it was not liable to
the Rayoses because the tampering was committed by its handling agent, Philippine Airlines (PAL). It
then filed a third-party complaint against PAL. PAL, in turn, countered that its personnel did not collect
any charges for excess baggage; that it had no participation in the tampering of any excess baggage
ticket; and that if any tampering was made, it was done by SIA's personnel.
Judge Jesus O. Ibay of the Regional Trial Court of Manila, Branch 30, rendered judgment on September
9, 1988, in favor of the plaintiffs, the dispositive portion of which reads thus:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant Singapore Airlines Limited, sentencing the latter to pay the former the
following:
1. The sum of Four Hundred Thirty Thousand Nine Hundred Pesos and Eighty Centavos
(P430,900.80) as actual damages, with interest at the legal rate from the date of the
filing of the complaint until fully paid.
2. The sum of Four Thousand One Hundred Forty-Seven Pesos and Fifty Centavos
(P4,147.50) as reimbursement for the amount deducted from Mr. Rayos' salary, also
with legal rate of interest from the filing of the complaint until paid in full;
3. The sum of Fifty Thousand Pesos (P50,000.00) as moral damages;
4. The sum equivalent to ten Per Cent (10th) of the total amount due as and for
attorney's fees; and
5. The cost of suit.
The defendant's counterclaim is hereby dismissed.
ON THE THIRD PARTY COMPLAINT, the third-party defendant PAL is ordered to pay
defendant and third-party plaintiff SIA whatever the latter has paid the plaintiffs.
SO ORDERED.
In so ruling, the court a quo concluded that the excess baggage ticket of Rayos was tampered with by
the employees of PAL and that the fraud was the direct and proximate cause of the non-renewal of
Rayos' contract with Aramco.
All parties appealed to the Court of Appeals. SIA's appeal was dismissed for non-payment of docket
fees, which dismissal was eventually sustained by this Court. The Rayos spouses withdrew their appeal
when SIA satisfied the judgment totaling P802,435.34.
In its appeal, PAL claimed that the spouses Rayos had no valid claim against SIA because it was the
inefficiency of Rayos which led to the non-renewal of his contract with Aramco, and not the alleged
tampering of his excess bagged ticket On the other hand, SIA argued that the only issue in the said
appeal is whether or not it was entitled to reimbursement from PAL, citing
the case of Firestone Tire and Rubber Company of the Philippines v. Tempongko. 1
The appellate court disagreed with SIA's contention that PAL could no longer raise the issue of SIA's
liability to the Rayoses and opined "that SIA's answer to the complaint should inure to the benefit of
PAL, and the latter may challenge the lower court's findings against SIA in favor of plaintiffs-appellees

38

(the Rayos spouses) for the purpose of defeating SIA's claim against it, and not for the purpose of
altering in any way the executed judgment against SIA." In its answer to the main complaint, SIA set
up the defense that the excess baggage ticket was indeed tampered with but it was committed by
PAL's personnel. On September 21, 1992, the appellate court granted PAL's appeal and absolved it
from any liability to SIA.
In this petition for review, SIA argues that PAL cannot validly assail for the first time on appeal the trial
court's decision sustaining the validity of plaintiff's complaint against SIA if PAL did not raise this issue
in the lower court. It added that the appellate court should have restricted its ruling on the right of SIA
to seek reimbursement from PAL, as this was the only issue raised by SIA in its third-party complaint
against PAL.
The instant appeal is impressed with merit.
The petitioner correctly pointed out that the case of Firestone squarely applies to the case at bench. In
said case, the Court expounded on the nature of a third-party complaint and the effect of a judgment
in favor of the plaintiff against the defendant and in favor of such defendant as third-party plaintiff
against, ultimately, the third-party defendant. Speaking through then Justice and later Chief Justice
Claudio Teehankee, the Court stated:
The third-party complaint is, therefore, a procedural device whereby a "third party"
who is neither a party nor privy to the act or deed complained of by the plaintiff, may
be brought into the case with leave of court, by the defendant, who acts as third-party
plaintiff to enforce against such third-party defendant a right for contribution,
indemnity, subrogation or any other relief, in respect of the plaintiff's claim. The thirdparty complaint is actually independent of and separate and distinct from the plaintiff's
complaint. . . . When leave to file the third-party complaint is properly granted, the
Court renders in effect two judgments in the same case, one on the plaintiff's
complaint and the other on the third-party complaint. When he finds favorably on both
complaints, as in this case, he renders judgment on the principal complaint in favor of
plaintiff against defendant and renders another judgment on the third-party complaint
in favor of defendant as third-party plaintiff, ordering the third-party defendant to
reimburse the defendant whatever amount said defendant is ordered to pay plaintiff in
the case. Failure of any of said parties in such a case to appeal the judgment as
against him makes such judgment final and executory. By the same token, an appeal
by one party from such judgment does not inure to the benefit of the other party who
has not appealed nor can it be deemed to be an appeal of such other party from the
judgment against him.
It must be noted that in the proceedings below, PAL disclaimed any liability to the Rayoses and
imputed the alleged tampering to SIA's personnel. On appeal, however, PAL changed its theory and
averred that the spouses Rayos had no valid claim against SIA on the around that the non-renewal of
Sancho's contract with Aramco was his unsatisfactory performance rather than the alleged tampering
of his excess baggage ticket. In response to PAL's appeal, SIA argued that it was improper for PAL to
question SIA's liability to the plaintiff, since this was no longer an issue on account of the finality and,
in fact, satisfaction of the judgment.
Surprisingly, the appellate court ignored the Court's pronouncements in Firestone and declared:
[T]here is nothing in the citation which would suggest that the appellant cannot avail of
the defenses which would have been available to the non-appealing party against the
prevailing party which would be beneficial to the appellant. After all, PAL's liability here
is premised on the liability of SIA to plaintiffs-appellees, In its own defense, it should
have the right to avail of defenses of SIA against plaintiffs-appellees which would
redound to its benefit. This is especially true here where SIA lost the capability to
defend itself on the technicality of failure to pay docket fee, rather than on the merits
of its appeal. To hold otherwise would be to open the door to a possible collusion
between the plaintiff and defendant which would leave the third-party defendant
holding the bag.

39

There is no question that a third-party defendant is allowed to set up in his answer the defenses which
the third-party plaintiff (original defendant) has or may have to the plaintiff's claim. There are,
however, special circumstances present in this case which preclude third-party defendant PAL from
benefiting from the said principle.
One of the defenses available to SIA was that the plaintiffs had no cause of action, that is, it had no
valid claim against SIA. SIA investigated the matter and discovered that tampering was, indeed,
committed, not by its personnel but by PAL's. This became its defense as well as its main cause of
action in the third-party complaint it filed against PAL. For its part, PAL could have used the defense
that the plaintiffs had no valid claim against it or against SIA. This could be done indirectly by adopting
such a defense in its answer to the third-party complaint if only SIA had raised the same in its answer
to the main complaint, or directly by so stating in unequivocal terms in its answer to SIA's complaint
that SIA and PAL were both blameless. Yet, PAL opted to deny any liability which it imputed to SIA's
personnel. It was only on appeal in a complete turn around of theory that PAL raised the issue of
no valid claim by the plaintiff against SIA. This simply cannot be allowed.
While the third-party defendant; would benefit from a victory by the third-party plaintiff against the
plaintiff, this is true only when the third-party plaintiff and third-party defendant have noncontradictory defenses. Here, the defendant and third-party defendant had no common defense
against the plaintiffs' complaint, and they were even blaming each other for the fiasco.
Fear of collusion between the third-party plaintiff and the plaintiffs aired by the appellate court is
misplaced if not totally unfounded. The stand of SIA as against the plaintiffs' claim was transparent
from the beginning. PAL was aware of SIA's defense, and if it was convinced that SIA should have
raised the defense of no valid claim by the plaintiffs, it should have so stated in its answer as one of its
defenses, instead of waiting for an adverse judgment and raising it for the first time on appeal.
The judgment, therefore, as far as the Rayoses and SIA are concerned, has already gained finality.
What remains to be resolved, as correctly pointed out by petitioner, is whether it is entitled to
reimbursement from PAL, considering that PAL appealed that part of the decision to the appellate
court. This is where the rule laid down inFirestone becomes applicable.
The trial court's decision, although adverse to SIA as defendant, made PAL ultimately answerable for
the judgment by ordering the latter to reimburse the former for the entire monetary award. On appeal,
PAL tried to exonerate itself by arguing that the Rayoses had no valid claim against SIA. From PAL's
viewpoint, this seemed to be the only way to extricate itself from a mess which the court a
quo ascribed to it. This cannot, however, be allowed because it was neither raised by SIA in its answer
to the main complaint nor by PAL in its answer to the third-party complaint. The prudent thing that PAL
should have done was to state in its answer to the third-party complaint filed by SIA against it
everything that it may conceivably interpose by way of its defense, including specific denials of
allegations in the main complaint which implicated it along with SIA.
The appellate court was in error when it opined that SIA's answer inured to the benefit of PAL for the
simple reason that the complaint and the third-party complaint are actually two separate cases
involving the same set of facts which is allowed by the court to be resolved in a single proceeding only
to avoid a multiplicity of actions. Such a proceeding obviates the need of trying two cases, receiving
the same or similar evidence for both, and enforcing separate judgments therefor. This situation is not,
as claimed by the appellate court, analogous to a case where there are several defendants against
whom a complaint is filed stating a common cause of action, where the answer of some of the
defendants inures to the benefit of those who did not file an answer. While such a complaint speaks of
a single suit, a third-party complaint involves an action separate and distinct from, although related to
the main complaint. A third-party defendant who feels aggrieved by some allegations in the main
complaint should, aside from answering the third-party complaint, also answer the main complaint.
We do not, however, agree with the petitioner that PAL is solely liable for the satisfaction of the
judgment. While the trial court found, and this has not been adequately rebutted by PAL, that the
proximate cause of the non-renewal of Rayos' employment contract with Aramco was the tampering of
his excess baggage ticket by PAL's personnel, it failed to consider that the immediate cause of such

40

non-renewal was SIA's delayed transmittal of the certification needed by Rayos to prove his innocence
to his employer.
SIA was informed of the anomaly in December 1980 but only issued the certification four months later
or, more specifically, on April 8, 1981, a few days before the expiration of Rayos' contract. Surely, the
investigation conducted by SIA could not have lasted for four months as the information needed by the
Rayoses could easily be verified by comparing the duplicate excess baggage tickets which they and
their handling agent, PAL, kept the record purposes. The fact that the Rayos spouses had to be
assisted by counsel who threatened to file a damage suit against SIA if the certification they urgently
needed was not immediately issued only strengthens the suspicion that SIA was not dealing with them
in utmost good faith. The effect of SIA's mishandling of Beatriz Rayos' request became instantly
apparent when her husband's contract was not renewed in spite of his performance which was
constantly "highly regarded" by the manager of Aramco's equipment services department.
Former Chief Justice and noted remedial law expert Manuel V. Moran opined that "in an action upon a
tort, the defendant may file a third-party complaint against a joint tort-feasor for contribution." 2
The non-renewal of Rayos employment contract was the natural and probable consequence of the
separate tortious acts of SIA and PAL. Under mandate of Article 2176 of the Civil Code, Rayos is
entitled to be compensated for such damages. Inasmuch as the responsibility of two or more persons,
or tort-feasors, liable for a quasi-delict is joint and several, 3 and the sharing as between such solidary
debtors is pro-rata, 4 it is but logical, fair, and equitable to require PAL to contribute to the amount
awarded to the Rayos spouses and already paid by SIA, instead of totally indemnifying the latter.
WHEREFORE, the decision of the respondent Court of Appeals in CA-G.R. CV No. 20488 dated
September 21, 1992, is hereby REVERSED and a new one is entered ordering private respondent
Philippine Airlines to pay, by way of contribution, petitioner Singapore Airlines one-half (1/2) of the
amount it actually paid to Sancho and Beatriz Rayos in satisfaction of the judgment in Civil Case No.
142252, dated September 9, 1988.
SO ORDERED.
11. G.R. No. L-85868 October 13, 1989
ALLIED BANKING CORPORATION, petitioner,
vs.
COURT OF APPEALS AND JOSELITO Z. YUJUICO, respondents.
GANCAYCO, J.:
What started as a simple collection suit and which developed into an intricate question of procedure is
the focus of this petition for review on certiorari.
The present petition seeks the reversal of the decision of the Court of Appeals in CA-G.R. SP No. 14759
dated September 5, 1988 entitled "Joselito Z. Yujuico vs. Hon. Domingo D. Panis, RTC Judge of Manila
Branch LXI and Allied Banking Corp. 1 and the resolution dated November 9,1988 denying petitioner's
motion for reconsideration of the said decision. 2
The antecedent facts of the case are as follows:
On April 1, 1976, private respondent Joselito Z. Yujuico obtained a loan from the General Bank and
Trust Company (GENBANK) in the amount of Five Hundred Thousand pesos (P500,000.00), payable on
or before April 1, 1977. As evidence thereof, private respondent issued a corresponding promissory
note in favor of GENBANK. At the time private respondent incurred the obligation, he was then a
ranking officer of GENBANK and a member of the family owning the controlling interest in the said
bank.

41

On March 25,1977, the Monetary Board of the Central Bank issued Resolution No. 675 forbidding
GENBANK from doing business in the Philippines. This was followed by Resolution No. 677 issued by
the Monetary Board on March 29, 1977 ordering the liquidation of GENBANK.
It appears that in a Memorandum of Agreement dated May 9, 1977 executed by and between Allied
Banking Corporation (ALLIED) and Arnulfo Aurellano as Liquidator of GENBANK, ALLIED acquired all the
assets and assumed the liabilities of GENBANK, which includes the receivable due from private
respondent under the promissory note.
Upon failing to comply with the obligation under the promissory note, petitioner ALLIED, on February 7,
1979, filed a complaint against private respondent for the collection of a sum of money. This case was
docketed as Civil Case No. 121474 before the then Court of First Instance of Manila (now Regional Trial
Court).
Sometime in 1987 and in the course of the proceedings in the court below, private respondent, then
defendant in the court below, filed a Motion to Admit Amended/Supplemental Answer and Third-Party
Complaint. Private respondent sought to implead the Central Bank and Arnulfo Aurellano as third-party
defendants. It was alleged in the third-party complaint that by reason of the tortious interference by
the Central Bank with the affairs of GENBANK, private respondent was prevented from performing his
obligation under the loan such that he should not now be held liable thereon.
Acting on the motion and on the opposition filed thereto, the Regional Trial Court through the Hon.
Judge Felix B. Mintu issued an order dated August 13,1987 denying the admission of the third- party
complaint but admitting private respondent's amended/supplemental answer.
When the case was re-raffled to Branch 61 of the Regional Trial Court of Manila, presiding Judge
Domingo D. Panis, on February 29, 1 988, reiterated the order denying the admission of private
respondent's third-party complaint and admitting the amended/supplemental answer. When both
parties filed their respective motions for partial reconsideration, the Hon. Judge Panis issued an order
dated April 18, 1988 denying both motions.
Thereupon, private respondent filed with the Court of Appeals a petition for certiorari 3 on June 1, 1988
questioning the orders of Hon. Judge Panis dated February 29, 1988 denying private respondent's
motion to admit third-party complaint, and April 18, 1988 denying private respondent's motion for
partial reconsideration of the February 29,1988 order.
On September 5, 1988, the Court of Appeals rendered the assailed decision, the dispositive portion of
which reads:
WHEREFORE, finding grave abuse of discretion on the part of the respondent Judge,
the Order of February 29, 1988 as well as that of April 18, 1988 insofar as it denies
petitioner's motion to admit his third party complaint, is hereby declared null and void.
Respondent judge is hereby ordered to admit the proposed third-party complaint. Cost
de oficio.
SO ORDERED. 4
A motion for reconsideration thereof filed by petitioner was denied in a resolution dated November 9,
1988. Petitioner assigns the following errors:
I
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT HON. JUDGE PANIS COMMITTED
GRAVE ABUSE OF DISCRETION IN DENYING ADMISSION TO PRIVATE RESPONDENTS THIRD-PARTY
COMPLAINT, CONSIDERING THAT:

42

A. PRIVATE RESPONDENT'S PROPOSED THIRD-PARTY COMPLAINT DOES

NOT STATE A CAUSE OF ACTION IN RESPECT OF PETITIONERS CLAIM.
B. THE ALLEGED CAUSE OF ACTION SET FORTH IN PRIVATE
RESPONDENTS PROPOSED THIRD-PARTY COMPLAINT HAS ALREADY
PRESCRIBED.
C. THE ADMISSION OF PRIVATE RESPONDENT'S PROPOSED THIRDPARTY COMPLAINT WILL ONLY CAUSE FURTHER UNNECESSARY DELAY
IN THE DISPOSITION OF THE CASE OF PETITIONER AGAINST PRIVATE
RESPONDENT.
II
CONTRARY TO THE RULING OF RESPONDENT COURT OF APPEALS, THE RULE PRESCRIBING THAT
DEFENSES NOT RAISED IN THE COURT BELOW CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL IS
NOT APPLICABLE TO SPECIAL CIVIL ACTIONS OF CERTIORARI.5
From the foregoing assignment of errors, petitioner would like Us to resolve the following issues: (a) Is
there a proper ground to admit the third-party complaint?; and (b) assuming that there is, has the
cause of action under the third-party complaint prescribed?
A third-party complaint is a procedural device whereby a "third-party who is neither a party nor privy
to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by
the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiff s claim . 6 The third
party complaint is actually independent of, separate and distinct from the plaintiffs complaint. Such
that, were it not for this provision of the Rules of Court, it would have to be filed separately from the
original complaint by the defendant against the third-party. 7
After going through the records of this case, this Court finds that the third-party plaintiffs claim is
premised not only on what was alleged as the tortious interference by the third-party defendants with
the affairs of GENBANK. More importantly, attention should have been focused on the fact that this
allegation is wedded to a decision rendered by the Court of Appeals in CA-G.R. CV No. 03642 which
affirmed the decision of the Regional Trial Court in Special Proceedings No. 107812. 8 We quote the
pertinent portion of the affirmed decision, to wit:
Based on the foregoing facts, the Court finds the liquidation of GBTC as embodied in
Annex "A" and Annex "B" of the petition, which merely adopted the bid of the Lucio Tan
group as the liquidation plan of GBTC as plainly arbitrary and made in bad faith and
therefore the same must be annulled and set aside. ... 9 (Italics supplied).
This decision, which declared as null and void the liquidation of GENBANK, prompted private
respondent herein to file a third-party complaint against the Central Bank and Arnulfo Aurellano on the
theory that he has a right to proceed against them in respect of ALLIED's claim. In the words of private
respondent, he "[s]eeks to transfer liability for the default imputed against him by the petitioner to the
proposed third-party defendants because of their tortious acts which prevented him from performing
his obligations. 10 Thus, if at the outset the issue appeared to be a simple maker's liability on a
promissory note, it became complex by the rendition of the aforestated decision.
As early as Capayas vs. Court of First Instance of Albay, 11 this Court had already outlined the tests to
determine whether the claim for indemnity in a third-party claim is "in respect of plaintiff's claim."
They are: (a) whether it arises out of the same transaction on which the plaintiffs claim is based, or
whether the third-party's claim, although arising out of another or different contract or transaction, is
connected with the plaintiffs claim; (b) whether the third-party defendant would be liable to the
plaintiff or to the defendant for all or part of the plaintiffs claim against the original defendant,
although the third-party defendant's liability arises out of another transaction; or (c) whether the third-

43

party defendant may assert any defense which the third-party plaintiff has, or may have against
plaintiff s claim. 12
While the claim of third-party plaintiff, private respondent herein, does not fall under test (c), there is
no doubt that such claim can be accommodated under tests (a) and (b) above-mentioned. Whether or
not this Court agrees with the petitioner's assertion that the claim does not "arise out of the same
transaction on which the plaintiff s claim is based," it cannot be denied that the third-party's claim
(although arising out of another or different contract or transaction) is connected with plaintiffs claim.
The judgement of the Court of Appeals in CA-G.R. CV No. 03642 is the substantive basis of private
respondent's proposed third-party complaint. Put differently, there is merit in private respondent's
position that if held liable on the promissory note, they are seeking, by means of the third-party
complaint, to transfer unto the third-party defendants liability on the note by reason of the illegal
liquidation of GENBANK which, in the first place, was the basis for the assignment of the promissory
note. If there was any confusion at all on the ground/s alleged in the third-party complaint, it was the
claim of third-party plaintiff for other damages in addition to any amount which he may be called upon
to pay under the original complaint. 13While these allegations in the proposed third-party complaint
may cause delay in the disposition of the main suit, it cannot, however, be outrightly asserted that it
would not serve any purpose.
It is one thing to say that a third-party defendant may be held liable to indemnify or reimburse the
third-party plaintiff "in respect of plaintiffs claim," but it is quite another to state that a third-party
defendant may be held liable to a third-party plaintiff. The second instance may not carry with it the
necessary connection to the main cause of action and, therefore, is not allowed by the Rules for it
introduces a controversy that is entirely foreign to and distinct from the main cause. The first instance
is allowable and should be allowed if it will help in clarifying in a single proceeding the multifarious
issues involved arising from a single transaction.
It is this Court's pronouncement that the first instance is applicable in the present situation.
As to the issue of prescription, it is the position of petitioner that the cause of action alleged in the
third-party complaint has already prescribed. 14 Being founded on what was termed as tortious
interference," petitioner asserts that under the applicable provisions of the Civil Code on quasidelict 15 the action against third-party defendants should have been filed within four (4) years from the
date the cause of action accrued. On the theory that the cause of action accrued on March 25, 1977,
the date when the Monetary Board ordered GENBANK to desist from doing business in the Philippines,
petitioner maintains that the claim should have been filed at the latest on March 25, 1981. 16 On the
other hand, private respondent relies on the "Doctrine of Relations" or "Relations Back Doctrine" 17 to
support his claim that the cause of action as against the proposed third-party defendant accrued only
on December 12,1986 when the decision in CA-G.R. CV No. 03642 became final and executory. Thus, it
is contended that while the third party complaint was filed only on June 17,1987, it must be deemed to
have been instituted on February 7, 1979 when the complaint in the case was filed.
There can be no question in this case that the action for damages instituted by private respondent
arising from the quasi-delict or alleged tortious interference" should be filed within four (4) years from
the day the cause of action accrued. 18
In the case of Espaol vs. Chairman, Philippine Veterans Administration, 19 this Court ruled that it is
from the date of the act or omission violative of the right of a party when the cause of action arises
and it is from this date that the prescriptive period must be reckoned.
Thus, while technically the third party complaint in this case may be admitted as above discussed,
however, since the cause of action accrued on March 25, 1980 when the Monetary Board ordered the
General Bank to desist from doing business in the Philippines while the third party complaint was filed
only on June 17, 1987, consequently, the action has prescribed. The third party complaint should not
be admitted.
WHEREFORE, the petition is GRANTED. The decision of the respondent Court of Appeals dated
September 5, 1988 and its resolution dated November 9, 1988 denying the motion for reconsideration
filed by petitioner are hereby reversed and set aside and declared null and void, and another judgment

44

is hereby rendered sustaining the orders of the trial court of February 29,1988 and April 18,1988,
denying the admission of the third party complaint. No pronouncement as to costs.
SO ORDERED.
12. G.R. No. 124724 December 22, 1997
RENE UY GOLANGCO, petitioner,
vs.
THE COURT OF APPEALS, HON. CANDIDO VILLANUEVA, PRESIDING JUDGE OF THE REGIONAL TRIAL
COURT, BRANCH 144, MAKATI CITY AND LUCIA GOLANGCO, respondents.
ROMERO, J.:
This is a petition for review on certiorari which seeks to annul and set aside the resolution of the Court
of Appeals dated January 10, 1996 in CA-G.R. SP No. 38866, 1 dismissing the petition for violation of
Supreme Court Circular No. 28-91 on forum-shopping.

The facts of the case are as follows:

A petition for annulment of marriage was filed by private respondent Lucia Carlos Golangco against
petitioner Rene Uy Golangco before the Regional Trial Court of Makati, Branch 144. 2 The couple had
two children, Justin Rene and Stefan Rafael. During the proceedings of the case, a hearing for
custody pendente lite of the two children was held. In an order dated July 21, 1994, 3 the trial court
awarded the two children to Lucia while Rene was given visitation rights of at least one week in a
month. Thereafter Rene questioned the order dated July 21, 1994 with the Court of Appeals. The Court
of Appeals, however, dismissed the petition and instead affirmed the order of the trial court. Not
contended, Rene appealed the resolution of the Court of Appeals affirming the order dated July 21,
1994 before this Court, and the case was docketed as G.R. No. 120831. On July 17, 1995, the Court
resolved to dismiss the petition for failure of petitioner Rene to show that grave abuse of discretion had
been committed by the appellate court.
On August 15, 1995, Lucia filed with the trial court a motion for reconsideration with prayer for the
issuance of a writ of preliminary injunction. 4 She sought redress due to an alleged incident on July 5,
1995, in which her estranged husband physically abused their son Justin. On said date, he allegedly
went to the art class of Justin at 2167 Paraiso Street, Dasmarinas Village, Makati. When they met, he
asked his son to kiss him, but Justin refused. Irked by his son's reaction, Rene hit with which produced
contusions. 5
Due to the incident, a criminal complaint for slight physical injuries was filed on July 1995 against Rene
by his son Justin with the Metropolitan Trial Court of Makati on the basis of Justin's complaint-affidavit.
On August 16, 1995, the trial court issued a temporary restraining order 6 against him and set the
hearing of the motion. The spouses thereafter presented their respective evidence and witnesses. In
an order dated October 4, 1995, 7 the trial court granted the writ of preliminary injunction restraining
Rene from seeing his children.
Aggrieved, Rene filed a petition for certiorari under Rule 65 of the Revised Rules of Court before the
Court of Appeals (docketed as CA-G.R. SP. No. 38866), alleging grave abuse of discretion on the part of
the trial court in issuing the October 4, 1995 order.
In a resolution dated January 10, 1996, the Court of Appeals dismissed the petition for violation of
Circular No. 28-91 on non-forum shopping. 8 Hence, this petition.

45

The issue before us is whether or not petitioner violated the rule on non-forum shopping.
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a
favorable opinion (other than by appeal or certiorari) from another. 9
In this case, the Court of Appeals dismissed the petition questioning the order dated October 4, 1995,
on the ground that there was a petition for review filed before this Court (G.R. No. 120381) questioning
the order dated July 21, 1994 regarding the award of custody of the two children to Lucia. 10
We should first distinguish between what is being questioned in G.R. No. 120381, that is the order
dated July 21, 1994 and in CA-G.R. SP. No. 38866, the order dated October 4, 1995.
The latter case questioned the October 4, 1995 order of the trial court granting the writ of preliminary
injunction prayed for by Lucia, which enjoined her husband from seeing their children. On the other
hand, G.R. No. 120381 questioned the order dated July 21, 1994, affirmed by the Court of Appeals,
which granted custody pendente liteof the children to their mother.
In the case at bar, the Court of Appeals ruled that there was forum-shopping since the two petitions,
(G.R. No. 120381 an CA-G.R. SP. No. 38866) dealt with the same question or issue, that is, whether
Rene should be prohibited from seeing his children. 11
We disagree.
In assailing the October 4, 1995 order, petitioner was actually questioned the propriety of the issuance
of the writ of injunction. He alleged therein that the trial court acted with grave abuse of discretion in
issuing the order since it disregarded his right to procedural due process. Moreover the said order
restrained him from seeing his children. He, therefore, sought the reinstatement of the July 21, 1994
order wherein he was given visitation rights of at least one week in a month.
On the other hand, in the order dated July 21, 1994, petitioner specifically questioned the award of
custody of the children to his wife and prayed for more time to spend with his children.
Thus, it is clear from the foregoing that the issues raised in the two petitions, that is, first questioning
the order dated July 21, 1994 and second, the order dated October 4, 1995 are distinct and different
from one another.
In First Philippine International Bank v. Court of Appeals, 12 this Court had the occasion to lay down the
test to determine whether there is a violation of the rule on forum-shopping.
Consequently, where a litigant (or one representing the same interest or person) sues
the same party against whom another action or actions for alleged violation of the
same right and the enforcement of the same relief is/are still pending, the defense
of litis pendentia in one case is a bar to the others; and, a final judgment in one would
constitute res judicata and thus would cause the dismissal of the rest. . . .
xxx xxx xxx
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and parties-litigant by a party 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.

46

As to the issue of the propriety of the writ of injunction, this Court finds the necessity of ruling on the
same to expedite the case in the interest of justice and to prevent further delay.
In the case of Heirs of Crisanta Y Gabriel-Almoradie v. Court of Appeals,

13

this Court ruled:

It is a rule of procedure for the Supreme Court to strive to settle the entire controversy
in a single proceeding leaving no root or branch to bear the seeds of future litigation.
No useful purpose will be served if a case or the determination of an issue in a case is
remanded to the trial court only to have its decision raised again to the Court of
Appeals and from there to the Supreme Court (citing Board of Commissioners vs. Judge
Joselito de la Rosa and Judge Capulong, G.R. No. 95122-23)
We have laid down the rule that the remand of the case or of an issue to the lower
court for further reception of evidence is not necessary where the Court is in position
to resolve the dispute based on the records before it and particularly where the ends of
justice would not be subserved by the remand thereof. (Escudero vs. Dulay, 158 SCRA
69) Moreover, the Supreme Court is clothed with ample authority to review matters,
even those not raised on appeal if it finds that their consideration is necessary in
arriving at a just disposition of the case.
In this case, to remand the case to the Court of Appeals would, in all probability, only cause further
delay since the decision would again be appealed to this Court. Thus, for the expeditious
administration of justice, this Court shall resolved the propriety of the issuance of the writ of injunction
by the trial court.
Preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment
or final order, requiring a party or a court, agency or a person to refrain from a particular act or
acts. 14 The rules provide that no preliminary injunction shall be granted without hearing and prior
notice to the party or person sought to be enjoined.15
In this case, petitioner assailed the issuance of the writ of preliminary injunction by the trial court on
the ground that he was denied procedural due process when he was not allowed to present evidence
to oppose the motion filed by his wife.
The trial court granted the writ of injunction after a hearing was conducted thereon. Based on the
records, the temporary restraining order was issued on August 16, 1995, after the motion for
reconsideration was filed by private respondent. During the hearing on the motion, Lucia presented as
witnesses her sons Justin and Stefan Carlos Golangco, Dr. Pedro Solis and Dra. Llamanzares.
Justin, testified on the incident of July 5, 1995, wherein his father allegedly hit him causing his head to
bump against the wall resulting in injuries to his upper eyelid, temporal area of the head and
neck. 16 This was corroborated by Dr. Pedro Solis, Medico-Legal consultant of the Makati Medical Center
Hospital.
Petitioner, on the other hand, presented three witnesses, namely, Sylvia Cancio Lim, Martha Oroza Uy
and Patria Judith Gonzales. Lim and Uy testified that Rene was a loving and caring father to his sons.
After the presentation of evidence, the trial court granted the writ of preliminary injunction, stating
that petitioner failed to present any controverting evidence to warrant the denial of the motion. 17
In the case of Bataclan v. Court of Appeals,

18

this Court held:

A writ of preliminary injunction, as an ancillary or preventive remedy, many only be

resorted to by a litigant to protect or preserve his rights or interests and for no other
purpose during the pendency of the principal action. In the issuance thereof, the courts
are given sufficient discretion to determine the necessity for the grant of the relief
prayed for as it affects the respective rights of the parties, with the caveat that

47

extreme caution be observed in the exercise of such discretion. Quintessentially, it is

with an equal degree of care and caution that courts ought to proceed in the denial of
the writ. It should not just summarily issue an order of denial without an adequate
hearing and judicious evaluation of the merits of the application. A perfunctory and
improvident action in this regard would be denial of procedural due process and could
result in irreparable prejudice to a party. (Emphasis supplied; citations omitted)
In the case at bar, the trial court gave both parties the opportunity to present their respective evidence
and witnesses. An adequate hearing was conducted and, based on the evidence, the trial court
deemed it proper to grant the writ of preliminary injunction.
The assessment and evaluation of evidence in the issuance of the writ of preliminary injunction
involves findings of facts ordinarily left to the trial court for its conclusive determination.
It is a fundamental and settled rule that conclusions and findings of fact by the trial court are entitled
to great weight and should not be disturbed on appeal, unless strong and cogent reasons dictate
otherwise. This is because the trial court is in a better position to examine the real evidence, as well as
to observe the demeanor of the witnesses while testifying in the case. 19
This Court, therefore, finds no justifiable reason or exception 20 sufficient to cause the reversal of the
trial court's declaration in granting the writ of preliminary injunction against petitioner.
WHEREFORE, the instant petition is hereby PARTIALLY GRANTED. The decision of the Court of Appeals
in C.A.-G.R. No. 38866 dated January 10, 1996, is SET ASIDE. The order dated October 4, 1995, issued
by the court a quo is hereby AFFIRMED in toto.
Costs against petitioner.

SO ORDERED.

13. G.R. No. 73592 March 15, 1996

JOSE CUENCO BORROMEO, PETRA BORROMEO and VITALIANA BORROMEO, petitioners,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. FRANCISCO P. BURGOS, RICARDO V. REYES, DOMINGO
ANTIGUA and NUMERIANO G. ESTENZO, respondents.
PANGANIBAN, J.:p
What constitutes "forum-shopping" under the Interim Rules of Court? This is the question presented in
this petition for review on certiorari of the Decision 1 in AC-G.R. SP No. 03409 of the then Intermediate
Appellate Court 2dismissing petitioners' appeal from an order of the then Court of First Instance of Cebu
regarding an incident in Special Proceedings No. 916-R for the settlement of the estate of the deceased
Vito Borromeo.
By resolution dated November 13, 1995, the First Division of this Court transferred this case, along
with several others, to the Third. After due deliberation and consultation on the petition and other
submissions of the parties, the Court assigned the writing of this Decision to the undersigned ponente.
The Facts
On August 15, 1969, the Court of First Instance of Cebu, then presided by Judge Alfredo G. Laya, issued
an order approving the project of partition and the distribution of the estate of Vito Borromeo to his
heirs.
While Judge Alfredo G. Laya was implementing the order of August 15, 1969, herein private respondent
Numeriano G. Estenzo, in his capacity as counsel for the oppositors, filed before this Court a petition
(L-32876) praying, among other things, that the probate court be restrained from implementing the
order of August 15, 1969 and from distributing the estate among the heirs.

48

On March 15, 1971, this Court resolved the petition in a Resolution which reads in pertinent part:
1. The Court thus refused to restrain respondent Judge from making a distribution of
the estate, for the following reasons: (a) The heirs themselves do not object to a
distribution; indeed, they have already submitted a project of partition; (b) Sp. Proc.
No. 916-R has been pending for eighteen (18) years, during which nine (9) heirs have
been waiting to receive their respective shares; (c) Of the eleven (11) lawyers who
have rendered professional services in the case, only petitioner has registered any
objection, the ten (10) others must be now anxious to have their fees adjudicated; (a)
The case has passed through the hands of five (5) other Judges prior to respondent
Judge Laya, and the records thereof have piled up to almost forty (40) volumes, hence
if the case is assigned to another Judge, he will have to study the same for the first
time. . . .
Accordingly, Jesus Gaboya, then administrator of the estate, continued with the implementation of the
order of August 15, 1969. Consequently, in 1970 and 1971, transfer certificates of title were issued in
the names of the heirs by the Register of Deeds of the City and the Province of Cebu.
On January 12, 1979, the probate court, then presided by respondent Judge Francisco P. Burgos, issued
two orders: (1) evaluating the estate at P15,000,000.00 and segregating 40% thereof or P6,000,000.00
for the payment of the claims for attorney's fees; and (2) directing the Register of Deeds to annotate
the claims for attorney's fees in an amount corresponding to 40% of the market value of the estate.
On September 13, 1978, Atty. Domingo L. Antigua filed a motion praying for the surrender of the
certificates of title in the names of the heirs or distributees in order that prospective buyers of the
whole estate could inspect them. The probate court, through Judge Burgos, granted the motion. One of
the administrators of the estate, Ricardo V. Reyes, filed a motion for the reconsideration of said order,
claiming that he could not surrender the titles without the consent of the heirs in whose names the
titles sought to be surrendered had been issued by the Register of Deeds of the City and Province of
Cebu.
However, four years later or on August 31, 1982, Reyes made a turn around and himself filed a motion
for the surrender of the certificates of title involved in the proceedings for the reversion back to the
estate of the distributed lands. This motion was followed by another one jointly filed by Reyes, Atty.
Antigua (as counsel for the heirs of Fortunato Borromeo) and Atty. Estenzo as lawyer-claimant and
counsel for one of the administrators.
Before these two motions could be resolved by the probate court, herein petitioners, who are among
the nine (9) heirs of Vito Borromeo, filed a motion for the disqualification of Judge Burgos on the
grounds of bias and partiality. Petitioners claimed that the sister of Atty. Antigua was married to a
brother of Judge Burgos. Respondent Judge denied the motion for inhibition. Hence, petitioners
appealed the denial to the then Intermediate Appellate Court which, in its Decision dated March 1,
1983, reversed the probate court and disqualified Judge Burgos from taking cognizance of Special
Proceedings No. 916-R. Said decision was appealed to this Court in G.R. No. 63818, with Judge Burgos
joining the petitioners.
Notwithstanding his disqualification by the appellate court, Judge Burgos continued to take cognizance
of Special Proceedings No. 916-R. Petitioners thus manifested their refusal to recognize any further
acts of Judge Burgos and subsequently filed before this Court a petition (G.R. No. 65995) to stop Judge
Burgos from further hearing the case.
On February 23, 1984, Judge Burgos issued an order cancelling the certificates of title involved and
reverting the parcels of land to the estate.
Petitioners sought the reconsideration of this order to no avail. Hence, they filed a petition before the
Intermediate Appellate Court (AC-G.R. SP No. 03409) raising the following issues for resolution: (a) the
validity of the order of February 23, 1984 which was issued after Judge Burgos had been disqualified
from hearing the case; (b) the jurisdiction of the probate court to order the cancellation of certificates

49

of title which had been issued ten years earlier and the reversion of the property back to the estate;
and (c) the validity of a collateral attack on titles to property in an intestate proceedings.
On September 23, 1985, the appellate court dismissed the petition on the ground that its filing violated
Section 17 of the Interim Rules of Court which proscribes forum-shopping.
The Issue
It should be noted that there were three (3) cases which the respondent Court considered in declaring
the petitioners guilty of forum-shopping, viz.:
1) G.R. No. 63818 where the petitioners asked the Supreme Court to affirm the IAC's
decision disqualifying respondent Judge from taking cognizance of the probate
proceedings (916-R);
2) G.R. No. 65995 where petitioners sought to restrain and to invalidate all acts of
respondent Judge after he was disqualified by the IAC;
3) AC-G.R. SP No. 03409 the origin of the instant petition in this Court, in which
petitioners prayed that the respondent Court enjoin respondent Judge from further
taking cognizance of the probate proceedings (916-R).
The issue therefore may be re-stated thus: By their filing of the third case, did petitioners engage in
forum-shopping as defined by Section 17 of the Interim Rules?
The Court's Ruling
We concur with the respondent Court's affirmative ruling on said question, which is quoted verbatim,
as follows:
Since G.R. No. L-65995 (Petra Borromeo, et al. vs. Hon. Francisco P. Burgos, etc., et al.),
seeks to invalidate any and all proceedings and acts taken by the respondent Court
subsequent to March 1, 1983, it clearly covers and includes the surrender to, and the
cancellation by, the respondent Court, of the above enumerated certificates of title,
which is an act by the respondent judge subsequent to March 1, 1983. The order (was)
issued February 23, 1984.
Specifically, the questioned order of February 23, 1984, listed among the incidents
pending at the time the said Supreme Court petition was filed, in December, 1983, the
following:
10. Motion for the surrender and subsequent cancellation of all the
titles transferred in the names of the heirs at the instance of Jose
Borromeo. (p. 25, rollo; emphasis supplied)
Should the Supreme Court act affirmatively on G.R. No. L-65995, its judgment would
nullify the respondent Judge's order of February 23, 1984 precisely because it is
covered by the aforesaid petition in G.R. No. L-65995. Incidentally, when this petition
was filed, the petitioners (that, included the present petitioner, Jose Cuenco Borromeo)
asked the Court to issue a restraining order, which the Supreme Court however,
did not grant. This enabled the respondent judge to act on the pending motion to
require the surrender and the cancellation of the subject certificates of title (which
were allegedly illegally transferred in the names of the heirs, at the instance of Jose
Cuenco Borromeo, Petra Borromeo and Vitaliana Borromeo). The order of February 23,
1984 thus granted the motion for surrender and cancellation of titles pending when the
petition in G.R. No. L-65995 was filed.

50

The conclusion is, therefore, inevitable, that this petition is not only similar to, but is
truly, and actually covered by the petition in G.R. No. L-65995, Section 17 of the
Interim Rules of Court reads, as follows:
17. Petitions for writs of certiorari, etc. No petition
for certiorari, mandamus, prohibition, habeas corpus or quo
warranto may be filed in the Intermediate Appellate Court if another
similar petition has been filed or is still pending in the Supreme Court.
Nor may such petition be filed in the Supreme Court if a similar petition
has been filed or is still pending in the Intermediate Appellate Court,
unless it be to review the action taken by the Intermediate Appellate
Court on the petition filed with it. A violation of this rule shall constitute
contempt of court and shall be a cause for the summary dismissal of
both petitions. Without prejudice to the taking of appropriate action
against the counsel or party concerned.
Since this petition is not only similar to, but clearly an integral part of the pending
petition in G.R. No. L-65995, Section 17 of the Interim Rules of Court has been violated.
The penalty for violating the said Section 17 of the said Interim Rules, is "summary
dismissal." It violates the rule against multiplicity of suits. The petitioners should have
awaited the termination of his petition in G.R. No. L-65995 by the Supreme Court; or,
he could have submitted a supplemental pleading therein alleging the matters in the
instant petition. 3
The appellate court also noted that the issues raised by petitioners are clearly premature for if the
disqualification of Judge Burgos be affirmed in G.R. No. 63818, then it would certainly follow that all the
acts taken by the said judge shall be invalidated for lack of legal authority.
Petitioners claim that Section 17 of the Interim Rules prohibits and penalizes only the filing of a special
action in the Supreme Court when there is pending a special civil action for the same cause of action in
the Court of Appeals. They argue that what they filed in the Supreme Court was a special civil action
while the case they brought before the Court of Appeals was an ordinary appeal from an order of the
probate court in a special proceedings where multiple appeals are allowed. 4 This argument is flawed.
What petitioners filed before the Court of Appeals in AC-G.R. SP No. 03409 was not an appeal under
Rule 41 of the Revised Rules of Court but a special civil action for certiorari under Rule 65 of the
Revised Rules of Court and docketed as such action. The petition prayed as follows:
WHEREFORE, it is most respectfully prayed this Petition be given due course and a
restraining order be immediately issued commanding the respondents to cease and
desist from implementing the questioned orders (Annexes C and D) and from taking
further cognizance of Sp. Proc. No. 916-R pending termination of this case and, after
due deliberation a decision be rendered
a) declaring the said two orders null and void and without force and
effect.
b) ordering the respondent Judge to cease and desist from further
taking cognizance of Sp. Proc. No. 916-R, and
c) directing the respondents to respect the Rule of Law.
Petitioners further pray for such other relief and remedy consistent in the premises. 5
Acting on the petition in G.R. No. 63818, this Court considered the issue of the disqualification of Judge
Burgos as having been rendered moot and academic by the retirement of Judge Burgos from the
judiciary in 1986. However, in G.R. No. 65995, the Court granted the petition which sought to restrain
the respondents from further acting on any and all incidents in Special Proceedings No. 916-R during

51

the pendency of G.R. No. 63818 and G.R. No. 65995; and, which (petition) also prayed that "all acts of
the respondents related to the said special proceedings after March 1, 1983 when the respondent
Judge was disqualified by the appellate court be declared null and void and without force and effect
whatsoever."
Consequently, petitioners' goal of invalidating the probate court's order of February 23, 1984 had been
attained, since necessarily, all acts of the probate court subsequent to March 1, 1983 (the date when
the then Intermediate Appellate Court disqualified Judge Burgos from taking cognizance of the case),
have been rendered null and void by such disqualification. Thus, by filing a petition before the
appellate court even after they had filed G.R. No. 65995, petitioners engaged in forum-shopping as
they deliberately split appeals, "in the hope that even as one case in which a particular remedy is
sought is dismissed, another case (offering a similar remedy) would still be open" thereby needlessly
clogging the already heavily burdened dockets of the courts. In this regard, the Court unequivocally
said in a similar case: 6
Section 17 of the Interim Rules and Guidelines issued by the Court on 11 January 1983,
relative to the implementation of section 9 of BP 129, granting the Intermediate
Appellate Court (now the Court of Appeals) equal original jurisdiction to issue the
extraordinary writs of certiorari, prohibition, etc., whether or not in aid of its appellate
jurisdiction, provides that if such a petition is filed before the Court of Appeals and is
still pending therein, a similar petition cannot be filed in the Supreme Court. A violation
of this rule has also been considered a clear case of forum shopping, an act of
malpractice proscribed as trifling with the courts and abusing their processes. The Rule
itself provides that a violation thereof constitutes: (1) cause for the summary dismissal
of both petitions; and (2) contempt of court for which the party or counsel concerned
may be held accountable. (citing Resolution of July 31, 1986, in G.R. No. 75197, E.
Razon, Inc., et al. vs. Philippine Ports Authority, et al.; reiterated in Buan vs. Lopez, Jr.,
145 SCRA 34, 38-39 [October 13, 1986], and in Alonto, Jr. vs. Memoracion [En Banc],
185 SCRA 73, 78-79 [May 7, 1990], and likewise in Benguet Electric Cooperative, Inc.
vs. National Electrification Administration, 193 SCRA 250, 255-256 [January 23, 1991])
Forum shopping as "the filing of repetitious suits in different courts" has been condemned by Justice
Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval
Hughes, et al., "as a reprehensible manipulation of court processes and proceedings . . . 7 Indeed,
forum shopping is reprehensible; it unduly burdens courts as it needlessly delays proceedings. In
condemning it, the Court said in a recent case: 8
Ultimately, what is truly important to consider in determining whether forum-shopping
exists or not is the vexation caused the courts and parties-litigant by a party who asks
different courts to rule on the same or related causes and/or to 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 issue.
WHEREFORE, the instant petition for review on certiorari is DENIED and the questioned decision of the
Intermediate Appellate Court is AFFIRMED. Counsel for petitioners, Basilio E. Duaban of Jose S.
Amadora and Associates, is ADMONISHED and WARNED that similar acts of forum shopping shall be
dealt with more severely. A copy of this Decision shall be attached to the records of Atty. Duaban in the
Office of the Bar Confidant.
SO ORDERED.

52

14. G.R. No. 92067

March 22, 1991

PHILIPPINE BANK OF COMMUNICATIONS, petitioner,

vs.
COURT OF APPEALS, JOSEPH L.G. CHUA and JALECO DEVELOPMENT, INC., respondents.
GUTIERREZ, JR., J.:
This petition seeks the reversal of the Court of Appeals' decision affirming the earlier decision of the
Regional Trial Court of Makati, Branch 150 in Civil Case No. 7889 dismissing petitioner Philippine Bank
of Communications' (PBCOM) complaint for annulment of a Deed of Exchange executed by respondent
Joseph L.G. Chua in favor of Jaleco Development, Inc. (JALECO). The deed of exchange was alleged to
be in fraud of PBCOM as creditor of Chua who previously signed as one of the sureties in three (3)
Surety Agreements executed in favor of PBCOM. It involved a transfer by Chua of his real property in
exchange for shares of stocks of JALECO.
The facts of the case as summarized by the appellate court are not in dispute, to wit:
On April 14, 1976, Fortune Motors (Phils.), Inc. executed a Surety Agreement in favor of
Philippine Bank of Communications (PBCOM for short) with defendant-appellee Joseph L.G.
Chua, as one of the sureties (Exh. "A"). Again, on October 1, 1981, Fortune Motors (Phils.), Inc.
executed another Surety Agreement in favor of PBCOM with Chua likewise acting as one of the
sureties (Exh. "A-1").
From March 7, 1983 to May 3, 1983 Fortune Motors, (Phils.) thru its authorized officers and/or
representatives executed several trust receipts (Exhibits "B", "B-1", "B-2", "B-3", "B-4", "B-5"
and "B-6") in favor of PBCOM, the total principal amount of which was P2,492,543.00.
On March 6, 1981, Forte Merchant Finance, Inc., executed a Surety Agreement in favor of
PBCOM with Joseph L.G. Chua as one of the sureties (Exh. "A-2").
On May 13, 1983 to March 16, 1984, Forte Merchant Finance, Inc. obtained credit
accommodations from PBCOM in the form of trust receipt (Exh. "B-7") and loans represented
by promissory notes (Exhibits "C", "C-1", "C-2", and "C-3") in the total amount of
P2,609,862.00.
On October 24, 1983 Chua executed a Deed of Exchange (Exh. "F") transferring a parcel of
land with improvements thereon covered by TCT No. S-52808 (343721) to JALECO
Development, Inc., in exchange for 12,000 shares of said Corporation with a par value of
P1,200,000.00. As a result, TCT No. 126573 of the Register of Deeds of Rizal covering the
aforementioned parcel of land was issued in the name of JALECO Development, Inc., on
November 24, 1983.
On November 2, 1983, Chua sold 6,000 shares of JALECO Development, Inc., to Mr. Chua Tiong
King for P600,000.00 (Exh. "10"-Chua; Exh. "3"-JALECO) and another 6,000 shares of JALECO
Development, Inc. to Guillermo Jose, Jr. also for P600,000.00 (Exh. "5"-JALECO) and Caw Le Ja
Chua, wife of Chua sold the 6,000 share of JALECO Development, Inc., to Chua Tiong King for
P200,000.00 (Exh. "11"-Chua).
In the meanwhile, for failure of both Fortune Motors (Phils.), Inc. and Forte Merchant Finance,
Inc. to meet their respective financial obligations with PBCOM, the latter filed Civil Case No. 8425159 against Fortune Motors (Phils.), Inc., Joseph L. G. Chua, George D. Tan, Edgar L.
Rodriguez and Jose C. Alcantara and Civil Case No. 84-25160 against Forte Merchant Finance,
Inc., Joseph L. G. Chua, George O. Tan and Edgar L. Rodriguez with the Regional Trial Court of
Manila, both for Sum of Money with Writ of Preliminary Attachment where PBCOM was able to
obtain a notice of levy on the properties of Fortune Motors (Phils.) covered by TCT No. S-41915
(Makati, MM IV) and S-54185 to 86 (Province of Rizal). When plaintiff was able to locate Chua's
former property situated in Dasmarias, Makati, Metro Manila, covered by TCT No. S-52808

53

containing an area of 1,541 square meters which was already transferred to JALECO
Development, Inc., under TCT No. 126573 by virtue of the Deed of Exchange dated October 24,
1983, PBCOM filed Civil Case No. 7889 for annulment of Deed of Exchange with the Regional
Trial Court of Makati, Metro Manila.
In due course, a decision was rendered on September 18, 1986 dismissing said case. (Rollo,
pp. 37-39)
In affirming the dismissal of the complaint, the appellate court stated: The Deed of Exchange was
neither submitted nor offered as evidence rendering the petitioner's cause of action untenable.
Furthermore, the appellate court stated that the case for annulment of the deed of exchange was filed
at a time when two (2) other cases for sums of money were filed against the respondent as one of the
sureties of Fortune Motors (Phils.), Inc. (Civil Case No. 84-25159) and of Forte Merchant Finance, Inc.
(Civil Case No. 84-25160) which are both pending. Hence, the annulment case which was filed in the
hope of receiving favorable judgments in the two (2) other cases in the future is premature. Finally, the
appellate court stated that the petitioner's interests in the meantime are sufficiently protected by a
writ of preliminary attachment on several properties of one of the principal debtors.
The petition is impressed with merit.
The records reveal the following:
In its petition filed with the lower court, the petitioner alleged among others:
xxx

xxx

xxx

12. That plaintiff was able to locate a parcel of land with buildings and improvements thereon
situated in Dasmarias Village, Makati, Metro Manila, with T.C.T. No. S-52808, containing an
area of 1,514 square meters, but the said property was transferred to the name of a
corporation named Jaleco Development Inc., pursuant to the Deed of Exchange executed
between Defendant Joseph L. G. Chua and Jaleco Development, Inc., dated October 24, 1983,
photocopy of T.C.T. No. S-52808, the Deed of Exchange, and T.C.T. No. 126573 are hereto
attached as Annexes E, F, and G; and made integral part hereof; (Rollo, pp. 95-96)
xxx

xxx

xxx

xxx

xxx

xxx

In his answer, respondent Chua stated:

That paragraph 12, is admitted; the said Deed of Exchange (Annex "F") was done in good faith,
was done in accordance with law and same is valid; (Rollo, p. 44)
xxx

xxx

xxx

Chua's admission of the existence of the Deed of Exchange, attached to the "Petition as Annex "F" falls
squarely within the scope of Judicial Admissions under Section 4, Rule 129 of the Rules of Court. The
rule provides:
Judicial Admissions. An admission, verbal or written, made by a party in the course of the
proceeding in the same case, does not require proof. The admission may be contradicted only
by showing that it was made through palpable mistake or that no such admission was made.
As early as 1925 in the case of Asia Banking Corporation v. Walter E. Olsen & Co. (48 Phil. 529), we
have ruled that documents attached to the complaint are considered a part thereof and may be
considered as evidence although they were not introduced as such. We said:

54

Another error assigned by the appellant is the fact that the lower court took into consideration
the documents attached to the complaint as a part thereof, without having been expressly
introduced in evidence, This was no error. In the answer of the defendants, there was no denial
under oath of the authenticity of these documents. Under section 103 of the Code of Civil
Procedure, the authenticity and due execution of these documents must, in that case, be
deemed admitted. The effect of this is to relieve the plaintiff from the duty of expressly
presenting such documents as evidence. The court, for the proper decision of the case, may
and should consider, without the introduction of evidence, the facts admitted by the parties.
(at p. 532)
We reiterated this principle in the later case of Bravo Jr. v. Borja (134 SCRA 466 [1985]). In that case
we said:
But respondent judge claims that petitioner has not proved his minority. This is inaccurate. In
the motion for bail, petitioner alleged that he was a minor of 16 and this averment was never
challenged by the prosecution. Subsequently, in his memorandum in support of the motion for
bail, petitioner attached a copy of his birth certificate. And finally, after respondent Judge had
denied the motion for bail, petitioner filed a motion for reconsideration, attaching thereto a
certified true copy of his birth certificate. Respondent Judge however refused to take
cognizance of petitioner's unchallenged minority allegedly because the certificate of birth was
not offered in evidence. This was error because evidence of petitioner's minority was already a
part of the record of the case. It was properly filed in support of a motion. It would be a
needless formality to offer it in evidence. Respondent Judge therefore acted with grave abuse
of discretion in disregarding it.
For its part, JALECO stated in its Answer:
xxx

xxx

xxx

2. That it has no knowledge or information sufficient to form a belief as to the truth of the
allegation contained in pars. 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the Petitioner; (Emphasis
supplied)
Paragraph 12 refers to the deed of exchange in the petition.
The Deed of Exchange was attached to the petition. Necessarily, JALECO's contention that it has no
knowledge or information sufficient to form a belief as to the truth of the deed of exchange becomes
an invalid or ineffective denial pursuant to the Rules of Court. Under the circumstances, the petitioner
could have easily asserted whether or not it executed the deed of exchange. The ruling in Capitol
Motors Corporations vs. Yabut (32 SCRA 1 [1970]) applies:
We agree with defendant-appellant that one of the modes of specific denial contemplated in
Section 10, Rule 8, is a denial by stating that the defendant is without knowledge or
information sufficient to form a belief as to the truth of a material averment in the complaint.
The question, however, is whether paragraph 2 of the defendant-appellant's answer
constitutes a specific denial under the said rule. We do not think so. In Warner Barnes & Co.,
Ltd. vs. Reyes, et al. G.R. No. L-9531, May 14, 1958 (103 Phil. 662), this Court said that the rule
authorizing an answer to the effect that the defendant has no knowledge or information
sufficient to form a belief as to the truth of an averment and giving such answer the effect of a
denial, does not apply where the fact as to which want of knowledge is asserted, is so plainly
and necessarily within the defendant's knowledge that his averment of ignorance must be
palpably untrue. In said case, the suit was one for foreclosure of mortgage, and a copy of the
deed of mortgage was attached to the complaint thus; according to this Court, it would have
been easy for the defendants to specifically allege in their answer whether or not they had
executed the alleged mortgage. The same thing can be said in the present case, where a copy
of the promissory note sued upon was attached to the complaint. . . .

55

Considering the admission by Chua and the non-denial by JALECO of the document forming part of the
petition, the appellate court committed reversible error in not admitting the deed of exchange as
evidence.
Furthermore, we find as not well-taken the appellate court's ruling that the pendency of two (2) other
cases for collection of money against respondent Chua, among others as surety of Fortune Motors
(Phils.), Inc. and Forte Merchant Finance, Inc., renders the petition for annulment of deed of exchange
premature.
For failure of both Fortune Motors (Phils), Inc. and Forte Merchant Finance, Inc. to pay their obligations
with the petitioner, the latter filed the two civil cases against Fortune Motors (Phils.), Inc. and Forte
Merchant Finance, Inc. and respondent Chua, among others with the Regional Trial Court of Manila. The
petitioner was granted a writ of attachment as a result of which properties belonging to Fortune Motors
(Phils.) were attached. It turned out, however, that the attached properties of Fortune Motors (Phils.),
Inc. were already previously attached/mortgaged to prior lien holders in the amount of about
P70,000,000.00. As regards Forte Merchant Finance, Inc., it appears that it has no property to satisfy
the debts it incurred with PBCOM. The record further shows that as regards Chua, the property subject
of the Deed of Exchange between him and JALECO was his only property.
Under these circumstances, the petitioner's petition for annulment of the deed of exchange on the
ground that the deed was executed in fraud of creditors, despite the pendency of the two (2) other civil
cases is well-taken.
As surety for the financial obligations of Fortune Motors (Phils.), Inc. and the Forte Merchant Finance,
Inc., with the petitioner, respondent Chua bound himself solidarily liable with the two (2) principal
debtors. (Article 2047, Civil Code) The petitioner may therefore demand payment of the whole financial
obligations of Fortune Motors (Phils.), Inc. and Forte Finance, Inc., from Chua, if the petitioner chooses
to go directly after him. Hence, since the only property of Chua was sold to JALECO after the debts
became due, the petitioner has the right to file an annulment of the deed of exchange between Chua
and JALECO wherein Chua sold his only property to JALECO to protect his interests and so as not to
make the judgments in the two (2) cases illusory:
Rescission requires the existence of creditors at the time of the fraudulent alienation, and this
must be proved as one of the bases of the judicial pronouncement setting aside the contract;
without prior existing debts, there can be neither injury nor fraud. The credit must be existing
at the time of the fraudulent alienation, even if it is not yet due. But at the time the accion
pauliana is brought, the credit must already be due. Therefore, credits with suspensive term or
condition are excluded, because the accion paulianapresupposes a judgment and unsatisfied
execution, which cannot exist when the debt is not demandable at the time the rescissory
action is brought. Rescission is a subsidiary action, which presupposes that the creditor has
exhausted the property of the debtor, which is impossible in credits which cannot be enforced
because of the term or condition.
While it is necessary that the credit of the plaintiff in the accion pauliana must be prior to the
fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment
be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date
when the credit was constituted. . . . (Emphasis Supplied) (Tolentino, Civil Code of the
Philippines, Vol. IV Ed. pp. 578-579)
Parenthetically, the appellate court's observation that the petitioner's interests are sufficiently
protected by a writ of attachment on the properties of Fortune Finance (Phils.), Inc. has neither legal
nor factual basis.
One other point.
The trial court disregarded the ex-parte evidence adduced by the petitioner against JALECO when the
latter was declared in default on the ground that the ex-parte proceedings were conducted by the
Deputy Clerk of Court which is not allowed in accordance with the ruling in the case of Lim Tanhu

56

vs. Ramolete (66 SCRA 425 [1975]). That ruling has already been overruled in the later case
of Gochangco vs. CFI of Negros Occidental (157 SCRA 40 [1988]), wherein we said:
The respondent Court also declared null and void "the reception of evidence ex parte before . .
(the) deputy clerk of court." It invoked what it termed the doctrinal rule laid down in the recent
case of Lim Tan Hu vs.Ramolete, 66 SCRA 430, promulgated on August 29, 1975 (inter
alia declaring that) a Clerk of Court is not legally authorized to receive evidence ex-parte.
Now, that declaration does not reflect long observed and established judicial practice with
respect to default cases. It is not quite consistent, too, with the several explicitly authorized
instances under the Rules where the function of receiving evidence and even of making
recommendatory findings of facts on the basis thereof may be delegated to commissioners,
inclusive of the Clerk of Court. These instances are set out in Rule 33, treating of presentation
of evidence before commissioners, etc., in particular situations, such as when the trial of an
issue of fact requires the examination of a long account, or when the taking of an account is
necessary for the information of the court, or when issues of fact arise otherwise than upon the
pleadings or while carrying a judgment or order into effect; Rules 67 and 69, dealing with
submission of evidence also before commissioners in special civil actions of eminent domain
and partition, respectively; Rule 86 regarding trials of contested claims in judicial proceedings
for the settlement of a decedent's estate; Rule 136 empowering the clerk of court, directed by
the judge inter alia to receive evidence relating to the accounts of executors, administrators,
guardians, trustees and receivers, or relative to the settlement of the estates of deceased
persons, or to guardianships, trusteeships, or receiverships. In all these instances, the
competence of the clerk of court is assumed. Indeed, there would seem, to be sure, nothing
intrinsically wrong in allowing presentation of evidence ex parte before a Clerk of Court. Such a
procedure certainly does not foreclose relief to the party adversely affected who, for valid
cause and upon appropriate and seasonable application, may bring about the undoing thereof
or the elimination of prejudice thereby caused to him; and it is, after all, the Court itself which
is duty bound and has the ultimate responsibility to pass upon the evidence received in this
manner, discarding in the process such proofs as are incompetent and then declare what facts
have thereby been established. In considering and analyzing the evidence preparatory to
rendition of judgment on the merits, it may not unreasonably be assumed that any serious
error in the ex parte presentation of evidence, prejudicial to any absent party, will be detected
and duly remedied by the Court, and/or may always, in any event be drawn to its attention by
any interested party. . . .
Consequently, there is no legal impediment to the admissibility of the evidence presented by the
petitioner against JALECO.
These findings pave the way to the resolution of the case on its merits.
Respondent Chua admitted his liability under the various Surety Agreements executed on several
dates by Fortune Motors (Phils.), Inc. and Forte Merchants Finance, Inc. as principal debtors,
respondent Chua, among others, as surety and the petitioner as creditor. He also admitted in the PreTrial Order that he has no other properties sufficient to cover the claims of the petitioner except for the
Dasmarias property, subject matter of the Deed of Exchange.
During the above-mentioned proceedings, the petitioner established the following:
After the petitioner attached the properties of Fortune Motors (Phils.), Inc. by virtue of the writ of
attachment filed in the two (2) civil cases, it found out the same properties were previously mortgaged
and/or attached in the amount of about P70,000,000.00. Thereafter, the petitioner was able to locate a
property in the name of respondent Chua. This property was, however already sold to JALECO on
November 24, 1983 pursuant to a Deed of Exchange and the Register of Deeds of Makati had already
issued T.C.T. No. 126573 covering the property in the name of JALECO.
Upon investigation with the Securities and Exchange Commission (SEC), the petitioner gathered the
following facts based on the SEC records: a) JALECO was organized on November 2, 1982 with a capital
stock of P5,000,000.00; b) the stockholders of said corporation were mostly members of the

57

immediate family of Joseph L. G. Chua; c) on April 4, 1983, a Board Resolution was passed authorizing
the issuance of 12,000 shares of stocks worth Pl,200,000.00 to a new subscriber and non-stockholder
Joseph L. G. Chua; and d) prior to the acquisition by the corporation of the property located at
Dasmarias Village, Makati, the percentage of the shareholding of the members of the family of Joseph
L. G. Chua was 88% while after the acquisition of the property and the issuance of the shares to Chua,
they owned 94% of the corporation.
The evidence on record also shows that despite the "sale" of the Dasmarias property, respondent
Chua continued to stay in the said property.
The well-settled principle is that a corporation "is invested by law with a separate personality, separate
and distinct from that of the person composing it as well as from any other legal entity to which it may
be related." (Tan Boon Been & Co., Inc. vs. Jarencio, 163 SCRA 205 [1988] citing Yutivo and Sons
Hardware Company vs. Court of Tax Appeals, 1 SCRA 160 [1961]; Emilio Cano Enterprises, Inc. vs.
Court of Industrial Relations, 13 SCRA 290 [1965]; and Western Agro Industrial Corporation and Antonio
Rodriguez vs. Court of Appeals, and Sia's Automotive and Diesel Parts, Inc., G.R. No. 82558, August 20,
1990) However, the separate personality of the corporation may be disregarded, or the veil of
corporate fiction pierced when the corporation is used "as a cloak or cover for fraud or illegality, or to
work an injustice, or where necessary to achieve equity or when necessary for the protection of
creditors." (Sulo ng Bayan, Inc. vs. Araneta, Inc., 72 SCRA 347 [1976] cited in Tan Boon Bee & Co., Inc.
vs. Jarencio, supra; Western Agro Industrial Corporation, et al. vs. Court of Appeals, supra.)
In the instant case, the evidence clearly shows that Chua and his immediate family control JALECO. The
Deed of Exchange executed by Chua and JALECO had for its subject matter the sale of the only
property of Chua at the time when Chua's financial obligations became due and demandable. The
records also show that despite the "sale", respondent Chua continued to stay in the property, subject
matter of the Deed of Exchange.
These circumstances tend to show that the Deed of Exchange was not what it purports to
be.1wphi1 Instead, they tend to show that the Deed of Exchange was executed with the sole intention
to defraud Chua's creditorthe petitioner. It was not a bona fide transaction between JALECO and
Chua. Chua entered a sham or simulated transaction with JALECO for the sole purpose of transferring
the title of the property to JALECO without really divesting himself of the title and control of the said
property.
Hence, JALECO's separate personality should be disregarded and the corporation veil pierced. In this
regard, the transaction leading to the execution of the Deed of Exchange between Chua and JALECO
must be considered a transaction between Chua and himself and not between Chua and JALECO.
Indeed, Chua took advantage of his control over JALECO to execute the Deed of Exchange to defraud
his creditor, the petitioner herein. JALECO was but a mere alter ego of Chua. (See Tan Boon Bee & Co.,
Inc. vs. Jarencio, supra)
WHEREFORE, the instant petition is GRANTED, The questioned decision dated February 8, 1990 of the
Court of Appeals is REVERSED and SET ASIDE. The Deed of Exchange executed by and between Joseph
L. G. Chua and JALECO Development, Inc., and the title issued in the name of JALECO on the basis
thereof are declared NULL and VOID. Costs against the private respondents.
SO ORDERED.
15. G.R. No. 91003

May 23, 1991

JESUS MORALES, petitioner,

vs.
COURT OF APPEALS and LAZARO CALDERON, respondents.
DAVIDE, JR., J.:
This is an appeal by certiorari under Rule 45 of the Revised Rules of Court for the review of the
Decision of 27 March 1989 and the Resolution of 7 November 1989 of the Court of Appeals in C.A.-G.R.
CV No. 12087 which, respectively, affirmed in toto the decision of the Regional Trial Court of Makati,

58

Branch 136, in Civil Case No. 5459 and denied petitioner's motion to reconsider said 27 March 1989
decision.
The following facts are not disputed:
On 19 October 1983, Lazaro Calderon filed with the Regional Trial Court of Makati, Metro Manila, a
complaint against Angelita Asuncion and one John Doe for the recovery of personal property. He
alleges therein that he is the owner of a rebuilt jeepney with Motor No. C221-316228, Serial No. CMCI86296, Plate No. NVS-832, which he caused to be rebuilt by "3" Aces Motorworks at Malibay, Pasay City
at a total cost of P40,000.00, including labor; it was thereafter registered with the Land Transportation
Commission in the name of defendant Angelita Asuncion pursuant to an agreement with her to the
effect that the vehicle be registered in her name for the purpose only of having it operated as a public
utility vehicle since she is a franchise holder; defendant Asuncion acknowledged the ownership of
plaintiff by signing an Acknowledgement (Annex "A" of the Complaint), and although it was registered
in her name, plaintiff was in possession thereof; sometime in April of 1983 Asuncion requested from
plaintiff that she be allowed to use the vehicle for one day; plaintiff readily acceded to the request;
however, said defendant failed and refused to return the vehicle; in August of 1983, due to plaintiffs
incessant request, Asuncion revealed that she entrusted the physical custody of the vehicle to Jesus
Morales who owns a compound at 93 Quirino Ave., Caloocan City; when asked by plaintiff and his
mother how he came to be in possession of the vehicle, Mr. Morales merely said that it was a matter
between him and Asuncion; and up to the filing of the complaint the defendant failed and refused to
return the vehicle to plaintiff. Plaintiff further alleges that by reason of the failure and refusal of
defendant to return the vehicle, he was deprived of a net income of not less than P3,000.00 a month
for the operation of the vehicle and a daily income of at least P40.00 as driver thereof since he
personally operated the vehicle; he had been deprived of the income since April 1983; in filing the
complaint he was constrained to hire the services of counsel to whom he bound himself to pay
attorney's fees of P5,000.00 in the first instance and P10,000.00 should the case reach the appellate
court. 1
Upon the filing of a replevin bond executed by the Sanpiro Insurance Corp., a writ of replevin was
issued by the trial court; the vehicle was found in the possession of and was seized by Deputy Sheriff
Rodolfo Tarmida, pursuant to the writ, from one Bernabe Caguioa on 20 December 1983, who filed on
the following day a so-called notice of Third-Party claim with the Deputy Sheriff.
Petitioner filed with the trial court an Answer In Intervention with Counterclaim and Crossclaim, dated
28 February 1984, wherein he alleges that he is the owner of the vehicle in question having purchased
it from defendant Asuncion on 15 February 1983 (the purchase price was allegedly P17,000.00); before
he purchased it he took the necessary precaution to examine the title and/or right over the vehicle of
Asuncion, the registered owner; he is, therefore, a buyer in good faith. He further claims that plaintiff is
not the true owner of the vehicle because he even admitted in his complaint that he agreed to register
the vehicle in the name of defendant with the LTC, an act which placed plaintiff in estoppel to further
claim ownership of said vehicle; Asuncion always asserted her absolute right to the vehicle and she
never mentioned the name of plaintiff; if ever a deed of acknowledgement, dated 2 September 1982,
was signed by Asuncion acknowledging that plaintiff is the owner of the vehicle, he is not privy to it
and the same is designed to defraud, deceive and fool him so as to deprive him of the ownership and
possession of the vehicle for which he already spent P70,000.00; the possibility of conspiracy or
connivance between plaintiff and defendant Asuncion is very apparent and patent and the filing of the
malicious complaint is an unholy scheme between the plaintiff and defendant; by reason of the filing of
the community complaint he suffered actual damages in the sum of P70,000.00, and he was compelled
to hire the services of counsel to whom he bound himself to pay P20,000.00 as attorney's fees plus
P400.00 per appearance. He prays for judgment dismissing the complaint and ordering plaintiff and
defendant, solidarily, to pay him P70,000.00 as actual damages, P20,000.00 as exemplary damages,
and P20,000.00 as attorney's fees plus P400.00 for every appearance of his counsel. 2
Defendant Asuncion did not file any Answer; so she was declared in default.
On 8 May 1984 the spouses Bernabe and Cornelia Caguioa filed a so-called Third-Party Claim wherein
they claim that they bought the vehicle in question on 19 October 1983 from Jesus Morales for
P70,000.00, subject to the following conditions, among others:

59

a) P20,000.00 shall be paid as down-payment, the balance of P50,000.00, which shall earn
interest at 2% per month until fully paid, shall be paid on installment at the rate of P500,00 per
week commencing 19 November 1983;
b) The possession and use of the vehicle shall be delivered to vendee upon execution of the
deed of sale; however, ownership thereof shall remain with the vendor until the full purchase
price plus interest and all charges shall have been paid;
c) In the event Vendee fails to pay three consecutive daily installments, all prior payments
made by vendee shall be forfeited in favor of vendor as liquidated damages.
they introduced improvements on the vehicle worth P30,000.00 and they spent P4,000.00 as
cooperative fees and expenses to make the vehicle run as a passenger jeepney and P3,600.00 for
insurance premiums; by reason of the unlawful seizure of the vehicle they suffered actual damages in
the amounts of P3,120.00 a month representing the jeepney's monthly income, and P1,300.00 a
month as Bernabe's monthly income as driver thereof at the rate of P50.00 per day for 26 days a
month; they were not able to pay the weekly amortization of P500.00 beginning 19 November 1983;
and they were not aware of any flaw or defect in the certificate of registration of the vehicle in the
name of Morales, hence they were buyers in good faith. They ask for an award for moral damages due
to the sleepless nights and embarrassments they suffered by reason of the seizure of the vehicle,
exemplary damages, and attorney's fees in the sum of P15,000.00. 3
The Caguioas abandoned, however, their Third-Party Claim, and, upon motion of their counsel, the
Court dismissed it. 4
After trial, the Regional Trial Court, upon the following findings and conclusion:
Since the subject vehicle unquestionably belonged to plaintiff when defendant unauthorizedly
executed the deed of sale Exhibit 4 in favor of intervenor, the transaction is void insofar as
plaintiff is concernedunless he is barred by estoppel from questioning its binding effect on
him.
The first issue, then, is whether facts or circumstances obtain which operate to estop plaintiff
from questioning the transaction's validity and efficacy against him. The Court holds the
affirmative view. Plaintiff and defendant, in causing, pursuant to their agreement contained in
the notarial acknowledgment Exhibit G, the registration of the subject vehicle in the latter's
name as owner, represented to the whole world that defendant owned the vehicle, with the
concomittant right to perform acts of strict dominion with respect to it, such as selling or
mortgaging it. Intervenor, for his part, avows in his testimony that before he bought the
vehicle from defendant, he checked the records thereof in the Land Transportation
Commission. No evidence exists to show that he knew that the vehicle did not belong to
defendant but to plaintiff. The situation thus falls within the purview of the below-quoted
provisions of the Civil Code:
Art. 1431. Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon.
Plaintiff contends that intervenor "cannot be considered as buyer in good faith for value",
inviting the Court "to take judicial notice that P17,000.00 could not be the value of the jeepney
that has just been rebuilt for P41,000.00". However, the rule where the pace of the sale is
grossly inadequate is as stated in the following Codal precept:
Art. 1470. Gross inadequacy of price does not affect a contract of sale, except as it
may indicate a defect in the consent, or that the parties really intended a donation or
some other act or contract.

60

The above provision of the Code leads us to the next issue; whether the purported deed of sale
executed by defendant in favor of intervenor (Exh. 4) is in reality a mortgage.
The admission was made by defendant that the vehicle was mortgaged by her to intervenor.
This however, is an extrajudicial declaration, not a testimony given in court in this case and,
hence, is not admissible against intervenor. But the Code accords significance to the gross
inadequacy of the price of the purported sale to such extent as to create therefrom the
presumption that the transaction is an equitable mortgage (Arts. 1602 (2) in relation to Article
1604). This presumption is reinforced by these undisputed facts: defendant is indebted to
intervenor; and the latter allowed seven months to elapsepresumably the period given
defendant to pay off her debtbefore he finally registered the vehicle in his name.
Consequently, the Court holds that the purported sale must be treated as an equitable
mortgage, which constituted a security for defendant's obligation of P17,000.00 stated as the
price of the purported deed of sale.
The obligation secured must be held to have been extinguished though: the income earned by
the jeepney while in the possession of intervenor from February 13, 1983, the date of the deed
of sale Exhibit 4, up to December 20, 1983, when plaintiff got back the jeepney through
replevin was P3,000.00 a month, based on the uncontradicted testimony of plaintiff that the
operation of the jeepney earns that much; this gives a total of around P31,500.00; out of this,
an amount equal to the obligation of P17,000.00 shall be applied to the payment thereof,
pursuant to Article 2102 in relation to Article 2141 of the Code. There results an excess of
P14,500.00. to which plaintiff, as owner of the jeepney, is entitled to.
Plaintiff is entitled to recover from defendant the same amount of P31,500.00 as unrealized
income, minus the above-mentioned P14,500.00 which intervenor is required to pay to
plaintiff. Defendant must also answer for the unrealized income of plaintiff as driver of the
vehicle, which he showed, through his testimony as P1,000.00 a month. Moreover, it is but just
and fair, under the circumstances, that defendant be sentenced to pay plaintiff attorney's fees
in the amount of P5,000.00
On the issue of whether intervenor did spend P53,000.00 for repairs and improvement done on
the vehicle, the Court is unable to sustain his claim, absent a single receipt to substantiate it.
Withal, the Court finds intervenor's claim improbable, considering the undisputed fact that the
jeepney was newly rebuilt in January, 1982, or barely a year before he got possession of it.
decreed as follows:
WHEREFORE, judgment is hereby rendered:
1) Declaring that
the ownership and possession of the subject motor vehicle pertain to plaintiff,
the purported deed of sale Exhibit 4 is an equitable mortgage securing an obligation of
defendant to intervenor in the amount of P17,000.00 which is, however, to be deemed
extinguished by the application of payment out of the income of the vehicle while operated by
intervenor;
2) Ordering intervenor to pay to plaintiff the amount of P14,500.00, representing the balance
of the income of the vehicle after deducting the payment for defendant's obligation; and
3) Ordering defendant to pay plaintiff the following amounts
P17,000.00 representing, together with the aforesaid amount of P14,500.00 which
intervenor is required to pay plaintiff. unrealized income of 'the vehicle during the period that
he was deprived of it;

61

 P10,500.00 representing unrealized income as driver of the jeep during the same period;
and
P5,000.00 for attorney's fees, with costs.
SO ORDERED.

Not satisfied with the decision, petitioner appealed therefrom to the Court of Appeals. The appeal was
docketed as C.A.-G.R. CV No. 12087.
In the Brief

he submitted in said case petitioner assigned the following errors:

I

THE COURT A QUO ERRED IN FINDING THAT THE OWNERSHIP AND POSSESSION OF THE
SUBJECT VEHICLE PERTAINS TO THE PLAINTIFF.
II
THE COURT A QUO ERRED THAT THE PURPORTED DEED OF SALE IS AN EQUITABLE MORTGAGE
SECURING AN OBLIGATION OF DEFENDANT TO INTERVENOR IN THE AMOUNT OF P17,000.00
WHICH IS, HOWEVER, TO BE DEEMED EXTINGUISHED BY THE APPLICATION OF PAYMENT OUT
OF THE INCOME OF THE VEHICLE WHILE OPERATED BY INTERVENOR.
III
THE COURT A QUO ERRED IN ORDERING THE INTERVENOR TO PAY TO PLAINTIFF THE AMOUNT
OF P14,500.00, REPRESENTING THE BALANCE OF THE INCOME OF THE VEHICLE AFTER
DEDUCTING THE PAYMENT FOR DEFENDANT'S OBLIGATION.
IV
THE COURT A QUO ERRED IN NOT GIVING ATTORNEY'S FEES AND DAMAGES TO THE
INTERVENOR-APPELLANT TO BE PAID BY PLAINTIFF-APPELLEE.
The Court of Appeals found the assigned errors to be without merit, and in its decision of 27 March
1989 7 it affirmed in toto the decision of the Regional Trial Court. His motion to reconsider the same
having been denied in the resolution of the Court of Appeals of 7 November 1989, 8 petitioner
instituted this present petition wherein, as admitted by him, he assigns "same errors raised in C.A., but
differently stated:
1. Both the C.A. and the RTC, after correctly finding and concluding that the plaintiff Lazaro
Calderon (respondent herein) is estopped from assailing the validity of the sale of the motor
vehicle in question to intervenor Jesus Morales (petitioner), erred in executing in the same
breath a turn-about by "declaring that the ownership and possession of the subject motor
vehicle pertains to the plaintiffs' (respondent herein) as against the intervenor Jesus Morales
(petitioner).
2. Both the C.A. and the RTC erred in declaring respondent Lazaro Calderon as the owner and
rightful possessor of the subject motor vehicle although there is no evidence on record to
support the finding, thereby committing a grave abuse of discussion (sic) amounting to lack of
jurisdiction.
3. The C.A. and the RTC erred in ordering intervenor Jesus Morales to pay damages to the
respondent Lazaro Calderon to compensate the alleged loss of earning of the latter.

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4. The C.A. and the RTC erred in declaring that the deed of sale of the motor vehicle in
question executed by defendant Angelita Asuncion in favor of the petitioner Jesus Morales is an
equitable mortgage.
5. The C.A. and the RTC erred in applying Articles 2102 and 2141 of the Civil Code.
6. The RTC and the C.A. erred in not making the respondent Lazaro Calderon and Sanpiro
Insurance Corporation jointly and severally liable for the wrongful issuance of the writ of
replevin.
7. The C.A. and the RTC erred in not awarding in favor of the petitioner Jesus Morales attorney's
fees and other damages. 9
We find no compelling reason to reverse the subject decision of the Court of Appeals.
The issues raised principally involve questions of fact. The rule is well stated that findings of facts of
the Court of Appeals are conclusive upon this Court. In Paciano Remalante vs. Cornelia Tibe and Court
of Appeals, 158 SCRA 138, 144-146, We said:
The rule in this jurisdiction is that only questions of law may be raised in a petition
for certiorari under Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court
in cases brought to it from the Court of Appeals is limited to reviewing and revising the errors
of law imputed to it, its findings of fact being conclusive" (Chan v. Court. of Appeals, G.R. No. L27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions). This Court has
emphatically declared that "it is not the function of the Supreme Court to analyze or weigh
such evidence all over again, its jurisdiction being limited to reviewing errors of law that might
have been committed by the lower court" (Tiongco v. De la Merced G.R. No. L-24426, July 25,
1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. 62482, April 28, 1983, 121 SCRA 865;
Baniqued v. Court of Appeals, G.R. No. L-47531, February 20, 1984, 127 SCRA 596). "Barring,
therefore, a showing that the findings complained of are totally devoid of support in the record,
or that they are so glaringly erroneous as to constitute serious abuse of discretion, such
findings must stand, for this Court is not expected or required to examine or contrast the oral
and documentary evidence submitted by the parties" (Santa Ana, Jr. v. Hernandez, G.R. No. L16394, December 17, 1966, 18 SCRA 973).
In several decisions of recent vintage (Rizal Cement Co., Inc. v. Villareal, G.R. No. L-30272,
February 28, 1985, 135 SCRA 15; Ramos v. Court of Appeals, G.R. No. L-25463, April 4, 1975,
63 SCRA 331; Garcia v. Court of Appeals, G.R. No. L-26490, June 30, 1970, 33 SCRA 623; Ramos
v. Pepsi-Cola Bottling Co., G.R. No. L-22533, February 9, 1967, 19 SCRA 289), the Court
summarized and enumerated the exceptional circumstances that would compel the Supreme
Court to review findings of fact of the Court of Appeals, to wit:
(1) when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures (Joaquin v. Navarro, 93 Phil. 257 (1953));
(2) when the inference made is manifestly absurd, mistaken or impossible (Luna v.
Linatoc, 74 Phil. 15 (1942));
(3) when there is grave abuse of discretion in the appreciation of facts (Buyco v.
People, 95 Phil. 253 (1954));
(4) when the judgment is premised on a misapprehension of facts (De la Cruz v.
Sosing, 94 Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September
29, 1983, 124 SCRA 808);
(5) when the findings of fact are conflicting (Casica v. Villaseca, 101 Phil. 1205 (1957));
and

63

(6) when the Court of Appeals, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellant and appellee
(Evangelista V. Alto Surety & Ins. Co., Inc., 103 Phil. 401 (1958)). *
However, in Garcia, supra, the Court considered exception Nos. 7, 8 and 9 as circumstances
that, taken together, compelled it to go into the record of the case in order to find out whether
or not it fell within any of the six established exceptions.
On the other hand, exception No. 10 may be considered as an illustration of the fourth
exceptionthat the judgment is based on a misapprehension of facts.
Petitioner miserably failed to show that this case falls under any of the foregoing exceptions.
The first assigned error is based on a wrong premise and is the result of a deliberate misreading or
misapprehension of what the courts below stated. It assumes that the "sale" in favor of petitioner was
in fact a "sale". Both courts, however, ruled that it was merely an equitable mortgage, which also binds
the plaintiff. Therefore, it did not transfer ownership of the vehicle to petitioner.
The disquisition of the Court of Appeals on this point is so clear and unequivocal as to leave no room
for a possible misapprehension:
. . . As between plaintiff and Asuncion, plaintiff remains the owner. He is only estopped from
repudiating transactions that were entered into by Asuncion in relation to the property (Article
1431, N.C.C.). If Asuncion actually sold the property to the appellant then plaintiff is estopped
from questioning the validity of the sale. But if as found by the court a quo, the real
transaction between defendant Asuncion and appellant is a mere equitable mortgage, then
plaintiff as real owner may validly exercise whatever rights Asuncion may have as ostensible
owner and redeem the property if in fact it was merely a mortgage before it is foreclosed in
accordance with law. Intervenor cannot acquire more than what Asuncion as ostensible owner
of the vehicle actually gave him. 10
The lament then of petitioner that he is deprived of ownership and possession although he is an
innocent purchaser for value, and therefore punished, while plaintiff and defendant Asuncion are
"handsomely rewarded" is baseless.
In the first place, both courts made no express finding that petitioner was a purchaser for value in
good faith. Having found and concluded that the so-called deed of sale in favor of petitioner was
merely an equitable mortgage, it was no longer necessary to belabor the point. This conclusion also
renders unnecessary petitioner's peregrinations into the law and jurisdiction prudence on estoppel.
In the second place, if indeed the deed of sale reflected the true and real intention of the parties, We
find it rather surprising why petitioner did not present Asuncion as a witness. Instead, in his brief in
C.A.-G.R. CV No. 12087, it was the plaintiff whom he faulted for not presenting Asuncion to testify on
the so-called Acknowledgement she signed. 11 We find it also surprising why, although the so-called
deed of sale was executed on 15 February 1983 yet, it was registered only in September 1983. A new
certificate of registration, C.R. No. 0911304, was issued to petitioner only on 9 September 1983. 12
Finally, it is apparent that as early as August of 1983 intervenor already knew that plaintiff claimed
ownership of the vehicle. Plaintiff specifically alleged in his complaint that:
9. Sometime in August 1983, due to plaintiffs incessant request, defendant revealed that she
had entrusted the physical custody of the vehicle to one Mr. Jesus Morales who owns the
compound at 93 Quirino Avenue, Caloocan City, Metro Manila;
10. That when pressed why she could not return the vehicle and why Mr. Morales came in
possession and custody of the same, defendant was evasive and non-committal but simply
fails and refuses to return the same to its rightful owner the plaintiff herein;

64

11. That plaintiff and his mother inquired from Mr. Morales how he came in possession of the
vehicle in question, but Mr. Morales said that it was a matter between him and Angelita
Asuncion, the defendant. 13
Yet, despite the specific allegation as against him, petitioner, in his Answer in Intervention with
Counterclaim and Crossclaim, answered the aforesaid paragraph 11, and other paragraphs, merely by
saying that "he has no knowledge or information sufficient to form a belief as to its truth." While it may
be true that under the Rules one could avail of this statement as a means of a specific denial,
nevertheless, if an allegation directly and specifically charges a party to have done, performed or
committed a particular act but the latter had not in fact done, performed or committed it, a categorical
and express denial must be made. In such a case, the occurrence or non-occurrence of the facts
alleged may be said to be within the party's knowledge. In short, the petitioner herein could have
simply expressly and in no uncertain terms denied the allegation if it were untrue. It has been held that
when the matters of which a defendant alleges of having no knowledge or information sufficient to
form a belief, are plainly and necessarily within his knowledge, his alleged ignorance or lack of
information will not be considered as specific denial. 14 His denial lacks the element of sincerity and
good faith, hence insufficient. 15Worse, on the very day that the complaint was filed by plaintiff Lazaro
Calderon in the Regional Trial Court, i.e., 19 October 1983, he "sold" the vehicle to Third-Party claimant
Bernabe Caguioa under a so-called conditional sale for P70,000.00, of which P20,000.00 was paid as
downpayment and the balance of P50,000.00, which shall earn interest at 2% per month, was to be
paid in installments at the rate of P500.00 weekly, beginning 19 November 1983. Possession and use
of vehicle were transferred to vendee upon the execution of the sale; however, ownership was to
remain with petitioner until full payment of the purchase price. 16 The vehicle was in fact seized from
Caguioa on 20 December 1983. Surprisingly, despite the fact that he had already allegedly paid the
downpayment of P20,000.00, and had interposed in his Third-Party Claim claims against plaintiff, the
deputy sheriff and the insurance firm (Sanpiro Insurance Corp.) for the refund of P20,000.00 which he
allegedly paid to herein petitioner, P30,000.00 for alleged major improvements he introduced on the
vehicle, and P7,600.00 which he paid to the Cooperative Fees and for insurance premiums, and for
payment of P4,420.00 a month as expected income, as well as for moral and exemplary damages,
costs, and attorney's fees of P15,000.00, Caguioa, as stated earlier, abandoned the Third Party Claim;
it was dismissed on 16 September 1985, upon motion of his lawyer. We are unable to understand why,
if indeed Caguioa also acted in good faith in entering into the contract of conditional sale over the
vehicle, he would not pursue his Third-Party Claim, and why he did not even bother to file any claim
against his vendor, herein petitioner. Moreover, petitioner deliberately failed to disclose in his Answer
in Intervention With Counterclaim and Crossclaim that the vehicle was the subject of a conditional sale
in favor of Caguioa and that he (petitioner) was not in possession of the vehicle. On the contrary, he
stoutly maintained that the filing of the complaint "is an unholy scheme designed to deprived (sic)
defendant-intervenor of his ownership and possession of the said jeep, done in concert and conspiracy,
designed to deprive possessionand ownership of defendant-intervenor of said motor vehicle. 17
Finally, although he captioned his Answer in Intervention as one with Counterclaim and Crossclaim,
petitioner did not make any specific allegations against defendant Asuncion; he only expressed
suspicion of possible connivance and conspiracy between plaintiff and Asuncion.
The foregoing negate petitioner's pretensions of good faith.
Under the second assigned error petitioner maintains that there is no evidence on record to support
the finding of the courts below that plaintiff Lazaro Calderon is the owner of the vehicle in question. He
stressed two vital points, namely, (1) all the receipts of payment for the rebuilding of the vehicle
marked in evidence show that all payments were made by plaintiff's father, Guillermo Calderon, and
(2) on 6 September 1982 plaintiff sold the vehicle to defendant Asuncion per a Deed of Sale of Motor
Vehicle duly acknowledged before a notary public (Exh. "2"Morales, Annex "P" of Petition; Rollo, 93).
The courts below took into account these pieces of evidence together with the other exhibits offered
by plaintiff and his testimony as well as the testimony of his witness, Mr. Pimentel, owner of the motor
shop contracted to rebuild the vehicle. Petitioner even supplied the best evidence of plaintiffs
ownership, the so-called Deed of Sale executed by Lazaro in favor of Asuncion. 18
However, as against plaintiff, Exh. "2"Morales would not improve the position of petitioner. It was
evidently executed in connection with the agreement to have the vehicle registered in the name of the
franchisee, defendant Asuncion.

65

The third, fourth, fifth and seventh assigned errors are as equally baseless as the first and second
assigned errors. Respondent Court of Appeals correctly held:
In his second assignment of error, appellant has not dealt in the vital issue of gross inadequacy
of the price which led the court a quo to the conclusion that his transaction with defendant
Asuncion is a mere equitable mortgage. He has confined himself to insisting that the
transaction is one of sale and that he is a buyer in good faith.
Plaintiff's claim that the jeep was rebuilt on January 1982 at a total cost of P41,000.00 is
corroborated by the testimony of Cresencio Pimentel, owner of the motor shop who rebuilt the
jeepney and finds added support in the receipts, Exhibit A to E, indicating payment of some
P39,000.00 for the assembly of a passenger type jeepney. The real value of the jeep may be
gleaned from the sale thereof purportedly executed by appellant to Caguioa in the sum of
P70,000.00 from which the court a quo drew the conclusion that the price of P17,000.00 in the
purported sale between defendant and appellant is grossly inadequate thereby giving rise to
the presumption that the contract between them is an equitable mortgage (Article 1602,
N.C.C.). This belief of the court a quo is reinforced by its observations that Intervenor is
indebted to defendant and allowed seven months to elapsepresumably the period given
defendant to pay off his debtbefore he finally registered the vehicle in his name (p. 3,
Decision).
Except for the statement that "defendant is indebted to the intervenor" is an undisputed fact,
as there is no adequate evidence to support such statement, which we do not however find to
be decisive, We find no error in the trial court's finding that the price is grossly inadequate.
The rule is now well-settled that a contract appearing on its face to be a definite sale like the
contract in question, may be interpreted as an equitable mortgage if any of the circumstances
mentioned in Article 1602 of the Civil Code such as gross or inadequacy of the price is present
(Article 1604, N.C.C.).
The transaction having been correctly found by the court a quo as an equitable mortgage and
appellant not having questioned in this appeal, the finding that the income earned by the
jeepney while in the possession of Intervenor from February 13, 1983 to the date of the deed
of sale, Exhibit 4, up to December 20, 1983 when plaintiff got back the vehicle or a total
amount of P31,500.00, no error was committed by the court a quo in ordering Intervenor to
pay plaintiff P14,500.00 representing the balance of the income of the vehicle after deducting
the payment of defendant's obligation.
Parenthetically, the record discloses that in selling the vehicle to Bernabe Caguioa, appellant
was paid P20,000.00 as down payment which is P3,000.00 more than his initial investment. In
addition, he was paid P500.00 weekly from November 19, 1983 to December 19, 1983 or for
four (4) weeks or a total of P2,000.00 plus P1,000.00 representing interest p[.] 8 [,] Appellee's
Brief).
No error was likewise committed in ordering defendant to pay plaintiff the sum of P17,000.00
which was deducted from the income of the vehicle that would have accrued to plaintiff but
was applied instead to the satisfaction of defendant's mortgage obligation to the Intervenor.
Plaintiff having in effect paid defendant's obligation the latter should in turn reimburse the
plaintiff for such payment.1wphi1
Having found the first three assignment of errors to be unmeritorious, the fourth assignment of
error which is merely dependent on the success of the preceding errors must necessarily fail.
It may, however, be pointed out that in the opening statement under the fourth assignment of
error, appellant claims to have spent P53,000.00 in improving the jeep, consisting of
replacement of injection pump, repairs of transmission, engine overhaul, changing the four
tires to new ones, battery, decoration painting of the vehicle. These are substantially the same
items which Caguioa claims to have introduced in the same vehicle. The pretense of appellant

66

was totally disbelieved by the court a quo absent a single receipt to substantiate it. "Withal,
the court finds intervenor's claim improbable, considering the undisputed fact that the jeepney
was newly rebuilt in January 1982, or barely a year before he got possession of it[.] (page 4[,]
Decision).
No effort was made by appellant to dispute the foregoing findings of the court a quo which has
in its favor the presumption of correctness. As aptly put in Corliss v. Manila Railroad
Company "In the more traditional terminology, the lower court's judgment has in its favor the
presumption of correctness. It is entitled to great respect. After all, the lower court had the
opportunity of weighing carefully what was testified to and apparently did not neglect it. There
is no affront to justice then if its finding be accorded acceptance, subject of course to the
contingency of ultimate reversal if error or errors, substantial in character, be shown in the
conclusion thus arrived at. It is a fair statement of the governing principle to say that the
appellate function is exhausted when there is found to be a rational basis for the result
reached by the trial court. (27 SCRA 674, Supra).
The sixth assigned error does not merit the slightest consideration. The vehicle in question was seized
pursuant to the writ of replevin from Bernabe Caguioa supported by the replevin bond executed by
Sanpiro Insurance Corp. Caguioa was in possession of the vehicle by virtue of the so-called conditional
sale in his favor executed by petitioner. The latter, therefore, had no cause of action against plaintiff
and Sanpiro. As a matter of fact, petitioner did not file any claim against Sanpiro. It was Caguioa who
did in his Third-Party Claim.
IN THE LIGHT OF THE FOREGOING, the instant petition is hereby DISMISSED for lack of meat, with costs
against petitioner.
SO ORDERED.
16. G.R. No. 74766 December 21, 1987
DOMINGO VERGARA, SR., petitioner,
vs.
HON. JOSE T. SUELTO Presiding Judge of the Municipal Trial Court in Davao City, Branch IV, MANOLITO
GUINOO ROMEO MONTEBON and PORFERIO CABASE respondents.
NARVASA, J.:
Two issues are involved in the instant special civil action of mandamus. The first is whether or not the
appropriateness of a summary judgment may ever be so self-evident in a case as to make it well nigh
a duty on the part of the Trial Judge to grant the plaintiff's motion therefor. The second relates to the
propriety of the filing directly with this Court an application for a writ of mandamus against a municipal
trial court, considering that jurisdiction to issue this extraordinary writ is also possessed by the Court of
Appeals as well as the Regional Trial Court of the district.
To resolve the first issue it will be necessary to deal with the facts in some detail.
Petitioner Vergara commenced in the Municipal Trial Court of Davao City an action for illegal detainer
against the private respondents. 1 His complaint 2 alleged in essence that
1) he is the owner of a commercial building consisting of three (3) sections, each of
which is separately occupied by the defendants (private respondents herein) as
lessees;
2) the defendants' lease contracts, two of which were written, were all on "a month to
month basis," and originally prescribed a monthly rental of P350.00, later increase to
P450.00;
3) because the defendants all defaulted in the payment of their rentals for many
months, Vergara's lawyer sent each of them a letter "(1) demanding payment of their

67

unpaid rentals, (2) terminating their lease contracts effective at the end of December
1985 on two grounds: non- payment of rentals and plaintiff's need of the property for
some other purpose, and (3) demanding that defendants vacate the leased premises
not later than the end of said month of December 1985; "
4) the defendants sent Vergara a joint reply pertinently reading as follows:
This is to confirm our verbal commitment with you to leave the said
premises as soon as you need it. However due to mainly economic
reason, we request for an extension of three months (3) to enable us to
find new space wherein we can continue our sole livelihood;
in addition, defendant Montebon also paid a part of his arrearage;
5) later however, the defendants wrote Vergara another letter; this time, while
acknowledging the latter's ownership of the building and their status as lessees thereof
they announced their refusal to vacate the premises on the ground that the lot on
which the building stands, though titled in Vergara's name, was part of a tract of land
Identified as Lot 508 which had been ordered reverted to the public domain by the
Regional Trial Court (Branch XIV) in a decision rendered in Civil Case No. 16192 for
"Cancellation of Titles and Reversion" entitled "Republic of the Philippines vs. Kwong
Tai Lung y Cia et al. ;
6) Vergara wrote back to them, pointing out the error of the position thus taken by
them, and reiterating his demand to vacate; his reply having gone unheeded, he
initiated the requisite proceedings before the Office of the Barangay Captain; and
when the controversy was not settled by conciliation, he instituted the ejectment suit
at bar.
In their answer to the complaint,

defendants Guinoo, Montebon and Cabase

1) denied the averments of the complaint relative to their and the plaintiff's personal
circumstances;
2) denied Vergara's ownership of the building and the fact that it consisted of three
sections separately leased by him:
3) claimed that their lease contract with Vergara were null and void;
4) denied having initially paid rentals but thereafter defaulting and incurring
arrearages in the amounts specified in the complaint, claiming that they had been
"occupying the premises in the concept of an owner;"
5) denied knowledge and hence professed inability to form a belief regarding either
their joint letter to Vergara (copy of which was attached to the complaint) or of the
reply thereto by Vergara's lawyer;
6) denied liability to Vergara for damages because as member(s) of good standing of (a
group calling itself) Salandanan et al Landless Association Inc., ... (they were)
occupying the land as owners;" and
7) claimed that in virtue of the judgment of the Regional Trial Court in Civil Case No.
16192 declaring null and void the title issued over "lot 508"- of which Vergara's was
formerly a part they were claiming Vergara's land "as their share as member
of Salandanan et al Landless Association," which was "a recognized intervenor" in the
case.

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Vergara presented a reply to the defendants' answer, chiefly making the point that neither he nor any
of the defendants was a party to Civil Case No. 16192 and hence could not be bound by whatever
judgment or orders might be rendered therein; that his title to the land was not void nor had it ever
been subject of any action for annulment; and that in any event Civil Case No. 16192 had no relevance
to the "case for ejectment against defendants for non- payment of rents on x x (his) commercial
building. 4
Under date of March 7, 1986 Vergara filed a Motion for Summary Judgment. 5 The motion was verified
and had 8 supporting documents annexed to it. 6 It asserted and sought to substantiate the following
propositions, to wit:
1. The 3 defendants were lessees of Vergara's commercial building, their status as
such being established bya) the 2 written contracts of lease of Guinoo and Cabase, copies of
which were attached to the verified complaint as Annexes A and B.
b) the demand letters sent by Vergara's lawyer to each of the 3
defendants, copies of which were attached to the motion for summary
judgment as Annexes A, B, and C thereof;
c) the payment by Montebon on December 20, 1985 of back rentals for
November and December 1984, evidenced by Official Receipt No.
2300, a copy of which was appended to the motion as Annex D;
d) the joint letter dated December 6, 1985 confirming their "verbal
commitment to leave the ... "premises" as soon as needed and asking
for an "extension of three (3 months to enable ... (them) to find new
space, " a copy of was attached to the verified complaint as Annex C
thereof.
2. Neither he (Vergara) nor the defendants were parties in Civil Case No. 16192 and
consequently could not be bound by any judgment or order therein promulgated, a
proposition confirmed by the Order of the Court in that action dated February 24, 1986,
a copy of which he attached to his motion as Annex E.
3. Civil Case No. 16192, involving "parcels of land, " was relevant to the ejectment
case at bar involving ejectment from Vergara's "commercial building;" and defendants
had acknowledged in their joint letter dated January 7, 1976 that the building belongs
to Vergara, a copy of the letter being attached to the motion as Annex F.
4. In view of their acknowledgment of Vergara's ownership of the building, the
defendants' claim of ownership of the land on which it stands is "false and absurd."
"Moreover, defendants as lessees are estopped from asserting any adverse claim or
title against plaintiff (Art. 1436 of the Civil Code). "
5. The defendants' answer is patently defective. It flatly denies their own personal
circumstances, and professes lack of knowledge sufficient to form a belief about the
exchange of letters between them and Vergara's lawyer-matters about which they
could not but have direct, personal awareness and about which they could not
therefore claim ignorance. 7
Against this motion defendants filed an "Opposition to Motion for Summary Judgment and Motion to
Dismiss." 8They argued that
1. A genuine issue exists which "cannot be resolved by mere resort to summary
judgment," that issue having arisen from defendants' controversion of Vergara's claim

69

"of possession and ownership over the commercial building and the land on which the
same is constructed, "
2. Their answer "tendered a genuine issue and does not only consist of a mere general
denial" since in the main "it specifically denied the material averment of facts in the
complaint setting forth the substance of the matters in support of their denial;" and as
regards their declared ignorance of some of the facts alleged in the complaint, an
averment of lack of knowledge was under the Rules equivalent to a specific denial.
3. The Court had no jurisdiction over the case because "the real issue involved ... is
title and/or ownership of the property and not physical possession," and "this case
should not be by accion interdictal but accion de reivendicacion (sic). "
Vergara submitted a reply dated April 9, 1986, adverting to the distinction between a summary
judgment under Rule 34 and a judgment on the pleadings under Rule 19, and reiterating and
amplifying the propositions and arguments set out in his motion for summary judgment. 9
The incidents were resolved by the respondent Judge in two separate orders promulgated on the same
day, April 15, 1986. The first order denied the defendants' motion to dismiss. 10 The Judge ruled that... Ownership by the plaintiff of this building has not been seriously denied by
defendants who instead insist that their claim to ownership of the land be a ground for
a dismissal of this case for the court's lack of jurisdiction. But the court believes that
this case properly is an Unlawful Detainer action as it assesses the respective claims of
the parties and it (the court), in accordance with the provisions of Section 33 of Batas
Pambansa Blg. 129 is not without authority to resolve the issue of ownership if only to
determine the issue of possession. 11
The second order 12 denied Vergara's motion for summary judgment. The denial was grounded on the
following observations of the respondent Judge:
... Of course, the (plaintiff's) discussion seeks to convince the court that there is no
more need of a trial because conclusively it is claimed that no genuine issue on a
material fact was raised. But it appears from the answer that the material allegations
of facts in the complaint constituting plaintiff's cause of action are specifically
denied and in addition thereto, defendants have put up affirmative defenses in
avoidance of plaintiff's claims. ... .
The rule gives the court limited authority to enter summary judgment. Upon a motion
for summary judgment, the court's sole function is to determine whether there is an
issue of fact to be tried. It does not vest the court with authority to try the issues on
depositions, pleadings, letters or affidavits. ... (I)f there is a controversy upon any
question of fact, there should be a trial of the case upon its merits. 13
His Honor's observations expose no little confusion about the fundamental nature of a summary
judgment. The confusion is further bared by his statement that the "only issue in this motion (for
summary judgment) is whether, in this Unlawful Detainer action the material averments of facts
constituting plaintiff's cause of action have been specifically denied in accordance with Section 10,
Rule 8 of the Rules of Court." He seems to think it is the same as a judgment on the pleadings which,
of course, it is not.
The confusion is shared by the defendants (private respondents), this being revealed by their
argument that in view of their denial of plaintiff's assertion of ownership over the premises in question,
and their controversion of "the material facts of the adverse party," their answer did not only consist of
a mere "general denial" but "definitely tendered a genuine issue" "which cannot be resolved by resort
to mere summary judgment." 14 Indeed, they point out that in their answer they have dealt with each
paragraph of the complaint; and "considering therefore the totality of the allegations of ... (said)
answer vis-a-vis the allegations of the complaint, ... the answer tendered a valid issue. 15

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The essential question however is not whether the answer does controvert the material allegations of
the complaint but whether that controversion is bona fides. The fundamental issue is not whether the
answer does tender valid issues as by setting forth specific denials and/or affirmative defenses but
whether the issues thus tendered are genuine, or fictitious, sham, characterized by bad faith.
Section 1, Rule 19 of the Rules of Court provides that where an answer "fails to tender an issue, or
otherwise admits the material allegation of the adverse party's pleading, the court may, on motion of
that party, directjudgment on such pleading." 16 The answer would fail to tender an issue, of course, if
it does not comply with the requirements for a specific denial set out in Section 10 (or Section 8) of
Rule 8; and it would admit the material allegations of the adverse party's pleadings not only where it
expressly confesses the truthfulness thereof but also if it omits to deal with them at all. 17
Now, if an answer does in fact specifically deny the material averments of the complaint in the manner
indicated by said Section 10 of Rule 8, and/or asserts affirmative defenses (allegations of new matter
which, while admitting the material allegations of the complaint expressly or impliedly, would
nevertheless prevent or bar recovery by the plaintiff) in accordance with Sections 4 and 5 of Rule 6, a
judgment on the pleadings would naturally not be proper.
But even if the answer does tender issues and therefore a judgment on the pleadings is not propera summary judgment may still be rendered on the plaintiff's motion if he can show to the Court's
satisfaction that "except as to the amount of damages, there is no genuine issue as to any material
fact," 18 that is to say, the issues thus tendered are not genuine, are in other words sham, fictitious,
contrived, set up in bad faith, patently unsubstantial. 19 The determination may be made by the Court
on the basis of the pleadings, and the depositions, admissions and affidavits that the movant may
submit, as well as those which the defendant may present in his turn. 20
In this case, the defendants' answer appears on its face to tender issues. It purports to deal with each
of the material allegations of the complaint, and either specifically denies, or professes lack of
knowledge or information to form a belief as to them. It also sets up affirmative defenses. But the
issues thus tendered are sham, not genuine, as the slightest reflection and analysis win readily
demonstrate.
1. To begin with, the defendants' denial of their own personal circumstances, as these are stated in the
complaint, is obviously sham. The accuracy of those stated circumstances is quite evident. They are in
truth all residents of Davao City, doing business at Cabaguio Avenue, where the plaintiff's building is
located, and in which they have rented space and where they have been maintaining their commercial
establishments under one trade name or another. As fictitious is their denial of plaintiff's own personal
circumstances. They could not but know that those circumstances had been correctly set down in the
complaint, having been dealing with the plaintiff for years, and he being the owner of the building
occupied by them.
2. Their disavowal of the plaintiff's ownership of the building occupied by them, and also that the
building is composed of three (3) sections, also cannot be genuine. They had each been occupying
those three (3) sections for years and been paying rentals therefor to the plaintiff. Their answer
contains their admission that the plaintiff has title over the land on which the building stands. 21 There
are two (2) written contracts showing the lease by two of them of the building from the plaintiff, and a
receipt evidencing payment by another of rentals to the plaintiff, documents which they have made no
serious or effective effort to controvert but which, on the contrary, they have impliedly admitted. There
is, too, their own letter to the plaintiff dated December 6, 1985, acknowledging receipt of the
communication of the latter's lawyer (demanding their vacation of the premises and payment of
rentals in arrears), and confirming their "verbal commitment to you to leave the said premises as soon
as you need it. 22 There is, finally, another letter of their dated January 7, 1986 referring to Vergara's
demand for the payment of their "rental in arrears" and for them "to vacate the building rented by
us." 23
3. Also patently sham is their professed ignorance of the joint letter sent by them to the plaintiff under
date of December 6, 1985, just referred to. It should be noted that they have not denied writing or
sending the letter. What they say is that "they have no knowledge or information sufficient to form a
belief" as to it. This is ridiculous. Either they wrote the letter or they did not. Either way, they cannot

71

but have knowledge of it. To say that they are ignorant of it is palpable dishonesty. In any event we
have already pronounced such a profession of ignorance about a fact which is patently and necessarily
within the pleader's knowledge, or means of knowing as ineffectual, as no denial at all. 24
4. So, too, their denial of ever having paid rents to the plaintiff is fictitious. The facts on record, to
which the plaintiff has drawn attention, inclusive of the official receipt issued to defendant Montebon,
prove they're beyond cavil.
5. Finally, their affirmative defense, in which they assert title in themselves over the land on which the
plaintiff's building stands, is also sham, even an absurdity. They base their claim on a judgment
rendered by the Regional Trial Court in an entirely separate action in which title over a large tract of
land of which the plaintiff's once formed a part had been annulled, and the land ordered reverted to
the public domain. But neither the plaintiff nor the defendants are parties to this action. The judgment
has moreover been appealed. And the defendants' connection with the case rests on nothing more
substantial than their alleged membership in an association at whose relation the reversion suit had
supposedly been instituted by the Republic, and which association would presumably have preferential
rights to occupy or acquire the land once finally reverted to the public domain. It is apparent that
defendants' claim of title to the particular lot of the plaintiff is so tenuous and conjectural as to be
practically inexistent. In any event, the claim is utterly irrelevant to the ejectment suit at bar, which
involves merely the question of whether or not their possession of the plaintiff's premises had become
illegal in virtue of their extended failure to pay rentals and their refusal to vacate the premises and pay
those arrears despite due demand. They are moreover estopped to dispute the plaintiff's title. "The
tenant is not permitted to deny the title of his landlord at the time of the commencement of the
relation of landlord and tenant between them." 25
Under the circumstances herein set forth at some length, the fitness and propriety of a summary
judgment cannot be disputed. The failure of the respondent Judge to render such a judgment was due
solely to his unfortunate unfamiliarity with the concept of a summary judgment. It is a failure which we
have it in our power to remedy. No genuine issue having been tendered by the defendants, judgment
should be directed as a matter of right in the plaintiff's favor. To yet require a trial notwithstanding the
pertinent allegations of the pleadings and the other facts indubitably appearing on record would be a
waste of time, and an injustice to the plaintiff whose obtention of the relief to which he is plainly and
patently entitled would be further delayed. As it is, the delay has already been considerable.
The remedy properly available to the petitioner in the premises, however, is not the writ of mandamus.
Well known is the rule that mandamus issues only to compel performance of a mandatory, ministerial
duty. 26 The determination that under the facts and circumstances obtaining in a case a summary
judgment is proper, and the motion therefor should be granted and summary judgment consequently
rendered, rests in the sound discretion of a trial court and can not be regarded as a duty of ministerial
function compellable by the extraordinary writ of mandamus. In this case, the respondent Judge had
discretion to make that determination. What happened was that His Honor made that determination
with grave abuse of discretion. Despite the plain and patent propriety of a summary judgment, he
declined to render such a verdict. The writ of certiorari will lie to correct that grave abuse of
discretion. 27
We turn now to the second question posed in the opening paragraph of this opinion, as to the propriety
of a direct resort to this Court for the remedy of mandamus or other extraordinary writ against a
municipal court, instead of an attempt to initially obtain that relief from the Regional Trial Court of the
district or the Court of Appeals, both of which tribunals share this Court's jurisdiction to issue the writ.
As a matter of policy such a direct recourse to this Court should not be allowed. The Supreme Court is
a court of last resort, and must so remain if it is to satisfactorily perform the functions assigned to it by
the fundamental charter and immemorial tradition. It cannot and should not be burdened with the task
of dealing with causes in the first instance. Its original jurisdiction to issue the so-called extraordinary
writs should be exercised only where absolutely necessary or where serious and important reasons
exist therefor. Hence, that jurisdiction should generally be exercised relative to actions or proceedings
before the Court of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts
for some reason or another, are not controllable by the Court of Appeals. Where the issuance of an
extraordinary writ is also within the competence of the Court of Appeals or a Regional Trial Court, it is
in either of these courts that the specific action for the writ's procurement must be presented. This is

72

and should continue to be the policy in this regard, a policy that courts and lawyers must strictly
observe.
In the case at bar, however, to apply the policy by referring the action to the Regional Trial Court of the
district would serve no useful purpose. It would on the contrary work injustice to the petitioner to
whom the relief rightly due has already been withheld for many years. The case having been filed
before this Court as early as 1986, and having already been subject of an extensive exchange of
pleadings, it should and will now be decided without further delay.
WHEREFORE, the Order of the respondent Judge dated April 15, 1986 denying the petitioner's
(plaintiff's) motion for summary judgment, and that dated April 30, 1986 declining to reconsider the
same, are hereby annulled and set aside. Said respondent Judge is hereby commanded forthwith to
render a summary judgment in favor of the petitioner (plaintiff) against the private respondents
(defendants), namely: Manolito Guinoo, Romeo Montebon and Porferio Cabase, in accordance with the
prayer of the former's motion for summary judgment dated March 7, 1986. The appropriateness and
correctness of a summary judgment in the premises having already been adjudged by this Court, His
Honor is further commanded to direct execution of the judgment immediately upon its rendition. This
decision is immediately executory and no motion for extension of time to file a motion for
reconsideration shall be entertained. Costs against private respondents.
17. G.R. No. 89132 February 26, 1990
Bacalayon vs CA
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals dated April 28, 1989
ordering the trial court, in a hearing supplementary to execution, to receive private respondents'
evidence to prove that they are builders in good faith of the improvements and the value of said
improvements, and its resolution dated June 20, 1989 denying the motion for reconsideration.
The antecedent facts are as follows:
On May 7, 1969, petitioners Leoncia, Martin, Policarpio, Hilarion, Ireneo, Juliana and Tomas, all
surnamed Baclayon; Rosendo, Felicidad and Silvestra, all surnamed Abanes; and Tomasa, Leoncia,
Anacleto, Monica, Guillerma and Gertrudes all surnamed Abellare filed with the then CFI-Cebu Branch
2, in Civil Case No. R-11185, a complaint for recovery of ownership and possession, and damages,
against spouses Marciano Bacalso and Gregoria Sabandeja of Lot No. 5528 of the Cebu Cadastre. The
latter filed their answer thereto on July 15, 1969.
On December 20, 1982, the trial court rendered a decision in favor of the Bacalso spouses, declaring
them owners of the subject lot, which decision was appealed by the petitioners to the respondent
Court of Appeals. The case was docketed as AC-G.R. CV No. 04948.
On July 29, 1986, the respondent court rendered a decision reversing the trial court, the dispositive
portion of which reads as follows (p. 15, Rollo):
WHEREFORE, the decision a quo is hereby reversed and set aside and another one is
rendered declaring plaintiffs-appellants as heirs of the late Matias Baclayon the owners
of Lot No. 5528 of the Cebu Cadastre covered by Original Certificate of Title No. 2726
(O-NA) of the Registry of Deeds of Cebu (Exh. I) and ordering defendants to vacate the
lot and surrender the same to plaintiffs. No costs.
SO ORDERED.
The private respondents then elevated the case to this Court by filing a petition for review which was,
however, denied in the Resolution dated May 27, 1987.

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The decision in favor of the petitioners having become final and executory, they filed a motion for
execution of judgment and possession which was opposed by the private respondents. The opposition
was based on the pronouncement of the respondent court in its decision dated July 29, 1986, to wit (p.
16, Rollo):
No fraud or bad faith could be imputed on the part of the Bacalso spouses. They
believed the lot they bought from Segundo Baclayon was the land they occupied.
The private respondents argued that since they were found by the respondent court as builders and/or
planters in good faith and Article 546 of the Civil Code ordains that the necessary and useful expenses
for the improvements must be paid to the builders/planters in good faith with right of retention, a
reception of evidence to determine the correct value of the necessary and useful improvements must
be done first before ordering the execution.
The RTC-Branch 15, Cebu City, presided by Judge German G. Lee, Jr., in its order, dated March 8, 1988,
granted the motion for execution of judgment and possession, to wit (p. 16, Rollo):
ORDER
This is finally, acting on the Motion for Execution of Judgment and Possession filed by
Atty. Garcillano in this case and the rejoinder of Atty. Nacua and the plaintiffs' rejoinder
dated February 11 and the manifestation of Atty. Garcillano of February 26, 1988.
It appearing that the dispositive portion of the decision of the Court of Appeals which is
now being enforced categorically declares plaintiffs/appellants as heirs of the late
Matias Baclayon, the owner of Lot No. 5526 (sic) of the Cebu Cadastre, covered by
Original Certificate of Title No. 2728 (sic) (0-NA) of the Registry of Deeds of Cebu (Exh.
1) and ordering the defendants to vacate the lot and surrender the same to the
plaintiffs, this Court is not in a position to entertain any further claims by any parties in
connection with said case.
However, if the clients of Atty. Nacua believe that they can prove their claims, then
they should file a separate civil case to recover the same as this Court cannot pass
judgment anew on certain claims that should have been interposed as counter-claims
in this case.
Wherefore, the Opposition to the issuance of the Writ of execution is hereby DENIED,
as the Clerk of Court is hereby ordered to issue a writ of Execution in this case. SO
ORDERED.
The private respondents appealed the said order of March 8, 1988 by filing a notice of appeal dated
March 30, 1988 which appeal was, however, dismissed by Judge Lee in the order dated April 15, 1988.
On April 29, 1988, the petitioners filed a motion for writ of possession and demolition to which motion
the private respondents filed their opposition reiterating the ground in the opposition to the motion for
execution and possession.
Judge Lee, thereafter, issued the order dated August 19, 1988, to wit (p. 17, Rollo):
ORDER
An examination of the records of this case reveals that until now, there is yet no action
by the Court of Appeals on the Clarificatory motion filed by the losing party.
The Court has allowed this excuse to defer its issuance of an order of demolition after
the prevailing party has prayed the Court to issue one.

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With the long passage of time, since the judgment in this case has become final, this
Court cannot allow any further delay in the enforcement of its judgment.
WHEREFORE, it is finally ordered that the losing party in this case be given fifteen (15)
days from today within which to effect a voluntary removal of any improvements that
they have introduced in the premises, considering that the prevailing party refused to
reimburse the losing party therefor, and if they do not demolish it after the expiration
of this 15 days, this Court will be constrained to order its demolition as prayed for.
IT IS SO ORDERED.
On September 19, 1988, the private respondents filed a petition for certiorari, mandamus and
prohibition with the respondent court concerning the orders dated March 8, 1988 and August 19, 1988.
On April 28, 1989, the respondent court granted the petition, the dispositive portion of which reads as
follows (p. 21, Rollo):
WHEREFORE, the orders of March 8,1988 and August 19, 1988 issued in Civil Case No.
R-11185 by the RTC-Cebu City, Branch 15, are hereby SET ASIDE and ANNULLED. In a
hearing supplementary to execution, the said court is hereby ordered to receive
petitioners' evidence to prove that they are builders in good faith of the improvements
and the value of the said improvements introduced by them in the subject Lot 5528.
IT IS SO ORDERED.
The motion for reconsideration was denied. Hence, the present petition.
The only issue is whether or not the private respondents should be allowed, in a hearing
supplementary to execution, to present evidence to prove that they are builders in good faith of the
improvements and the value of said improvements.
Petitioners allege that the orders dated March 8, 1988 and August 19, 1988 are legitimate having been
issued by a judge presiding a court of competent jurisdiction, pursuant to his duties which are
ministerial in nature, to enforce a decision which is already final and executory.
In ordering the trial court to receive private respondent's evidence to prove that they are builders in
good faith of the improvements and the value of said improvements, reliance was placed by the
respondent court in the cases of Naga Development Corporation v. Court of Appeals, et al., G.R. No. L28173, September 30, 1971, 41 SCRA 105 and Vda. de Chi v. Tanada, etc., et al., G.R. No. L-27274,
January 30, 1982, 111 SCRA 190.
We shall narrate the facts in these two cases in a nutshell:
1) In the former case, Pacific Merchandising Corporation (Pacific) filed a complaint
against Naga Development Corporation (Naga) for the balance of its indebtedness in
the amount of P143,282.76. For failure to file an answer within the period, Naga was
declared in default. In its affidavit of merit attached to the motion to set aside the
order of default, Naga asserted that it had made certain payments to Pacific which
should be deducted from the amount of the claim. The motion was denied. A judgment
by default was rendered ordering Naga to pay said balance of indebtedness. The
decision was affirmed by the Court of Appeals and also by this Court, with the
qualification that Naga was allowed to prove, during the process of execution of the
judgment, whatever payments it had made to Pacific, either before or after the filing of
the complaint, which constitute a proper deduction from the principal sum ordered to
be paid. Thus, We rationalized (41 SCRA 115-116):
Bearing in mind the nature of the instant suit and considering that the Court of
Appeals' concurrence in the trial court's assessment of the amount of P143,282.76 is in

75

the nature of a factual finding, this Court cannot now pass upon its correctness. The
two courts below had before them the sales agreement between the parties, and to
what extent the parties complied with their respective prestations thereunder was
purely a matter of evidence.
However, although we cannot pass upon the correctness of the said assessment, it is
quite obvious that in the execution of its judgment as affirmed by the Court of Appeals,
the trial court cannot compel the Naga to pay more than what it actually owes the
Pacific under the terms of their covenant. Deeply imbedded in our legal system are the
principles that no man may unjustly enrich himself at the expense of another, and that
every person must, in the exercise of his rights, act with justice, give everyone his due,
and observe honesty and good faith. ... .
2) In the latter case, an action for recovery of damages as a result of a vehicular
accident was filed by Rosita Yap Vda. de Chi against Alfonso Corominas, Jr., the owner
of the bus, and Simplicio Lawas, the driver. Since the vehicle was insured, a third-party
complaint was filed against the surety company. The trial court rendered judgment
against Corominas, Jr. and Lawas by ordering them jointly and severally to pay
P40,302.31 to Vda. de Chi. In turn, the surety company was ordered to indemnify
Corominas, Jr. by the same amount. A writ of execution was issued against the
defendants and the surety company. The decision was only partially satisfied because
P6,700.00 has remained unpaid. Later, upon motion of the Southern Islands Hospital,
the trial court ordered the surety company to pay directly to the hospital the amount of
P686.35 out of the residue of the unpaid judgment; upon motion of the Chong Hua
Hospital, the trial court issued another order requiring Corominas, Jr. and the surety
company to pay the hospital the amount of P4,238.56. These two orders were
questioned before this Court by Vda. de Chi. We set aside said orders and ordered the
trial court to conduct a hearing, after proper notice to the parties, to determine
whether or not the hospital bills incurred by Vda. de Chi have been paid, and
thereafter, to render a decision accordingly. Thus, We explained (111 SCRA 196-197):
Technically it was error for the respondent Court to order the defendants and the
surety company to pay the respondents Southern Islands Hospital and Chong Hua
Hospital the amounts of P686.35 and P4,238.56, respectively, from the balance of the
judgment yet to be paid to the herein petitioner by the defendants and the surety
company since the said respondents are not parties in the case. The judgment sought
to be executed specifically ordered the defendants Alfonso Corominas, Jr. and Simplicio
Lawas to pay, jointly and severally, the plaintiff Rosita Yap Vda. de Chi, the amount of
P40,302.31, plus costs; and for the surety company to indemnify the defendant Alfonso
Corominas, Jr. the amount of P40,302.31, which the said defendant is ordered to pay
the plaintiff. Consequently, to order the payment of certain portions thereof to the
herein respondent hospitals, Southern Islands Hospital and Chong Hua Hospital, would
be to modify, alter, or vary the terms of the judgment. While the said respondents may
have an interest over the said amounts claimed by them, their remedy was not to file a
mere ex-parte motion before the court, but to file separate and independent actions
before courts of competent jurisdiction, since the judgment rendered in the case had
already become final and almost executed and the law allows no intervention after the
trial has been terminated.
On the other hand, it cannot also be denied that the sums of money in question have
been awarded to the herein petitioner as expenses for her hospitalization in the
respondent hospitals and are based upon petitioner's own evidence. To order the filing
of a separate and independent action to recover a claim where the respondent
hospitals concerned will have to prove exactly a claim which had already been tried,
litigated and adjudged would unduly result in multiplicity of suits. Considering that the
herein respondents claim that the herein petitioner has not yet paid the amounts she
incurred for hospitalization, the interests of justice will be best served if a hearing be
conducted to determine whether or not the hospital bills have been paid, instead of
requiring the respondent hospitals to file separate actions to recover their respective
claims.

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The aforementioned reliance on these two cases was misplaced. The common denominator between
these two cases is the existence of a defense/claim which has been raised/tried before the trial court.
In the Naga case, the defense of payments made to Pacific which are properly deductible from the
principal sum ordered to be paid by Naga to Pacific was part of the issues which Naga was not allowed
to prove, being already in default. In the Vda. de Chi case, her claim of hospitalization expenses
incurred in the respondent hospital has been litigated and adjudged. The respondent court failed to
appreciate that this shared denominator does not obtain in the present case. The defense of builders in
good faith of the improvements and evidence of the value of said improvements were not raised/
presented before the trial court.
More importantly, in the recent case of First Integrated Bonding and Insurance Co., Inc., et al. v. Isnani,
etc., et al., G.R. 70246, July 31, 1989, which involved a similar issue, We ruled:
Significantly, the decision of September 30, 1971 in Naga Development Corporation
vs. Court of Appeals, on which total reliance has been placed by the petitioners, does
not appear to have been reaffirmed by this Court in subsequent cases. It is Justice
Antonio Barredo's dissent (quoted below) that appears to have been firmed up in later
decisions of this Court:
"... I believe that since Naga has been declared in default, and no
grave abuse of discretion having been found by the Court in that
respect, the judgment by default must stand and be executed, as
is. Whether or not Naga has partially paid was part of the issue before
the court before judgment was rendered, Naga through its own fault
was not allowed to prove any such partial payment by the trial court;
surely, that issue cannot be reopened during the execution because
that would tend to vary the terms of the judgment. The matters of
equity which can be raised in an execution proceeding, cannot to my
mind, refer to those which the court could have passed upon before
judgment. Otherwise, there will be no end to litigation, since
conceivably the proof of partial payments could be so seriously
controversial as to need another full blown trial, decision and appeal. It
is my view that under the circumstances, Naga can do no more than
address itself to the benignity or conscience of the private respondent.
(Emphasis supplied; 41 SCRA 105, 119.)"
The rule is well established that once a decision has become final and executory the only jurisdiction
left with the trial court is to order its execution. To require now the trial court in a hearing
supplementary to execution, to receive private respondents' evidence to prove that they are builders
in good faith of the improvements and the value of said Improvements, is to disturb a final executory
decision; which may even cause its substantial amendment. It appears that the private respondent's
opposition to the motion for the execution of the judgment, possession and demolition is their last
straw to prevent the satisfaction of the judgment. Sad to say, We have to cut this straw.
We disagree with the respondent court that any counterclaim for reimbursement of the value of the
improvements thereon by reason of private respondents' being builders in good faith, which
presupposes that they are not the owners of the land, would run counter to the defense of ownership
and therefore could not have been set up before the trial court. It should be emphasized that Rule 8,
Section 2 of the Rules of Court allows a party to set forth two or more statements of a claim or defense
alternatively or hypothetically, either in one cause of action or defense or in separate causes of action
or defenses. This Court, in Castle Bros., Wolf and Sons v. Go-Juno, 7 Phil. 144, even held that
inconsistent defenses may be pleaded alternatively or hypothetically provided that each defense is
consistent with itself. Mention must also be made of the case of Camara, et al. v. Aguilar, et al., 94 Phil.
527, where We ruled:
The contention that a counterclaim for expenses incurred in clearing and cultivating
the parcel of land and planting coconut and other fruit-bearing trees therein could not
have been set up in the former case because that would have been inconsistent with
or would have weakened the claim that they were entitled to the parcel of land, is

77

without merit, because 'A party may set forth two or more statements of a claim or
defense alternatively or hypothetically, either in one cause of action or defense or in
separate causes of action or defenses.' Hence, the plaintiffs herein and intervenors in
the former case could have set up the claim that they were entitled to the parcel of
land and alternatively that assuming (hypothetically) that they were not entitled to the
parcel of land at least they were entitled as possessors in good faith to the coconut
and other fruit-bearing trees planted by them in the parcel of land and their fruits or
their value. (Emphasis supplied)
A corollary question that We might as well resolve now (although not raised as an issue in the present
petition, but conformably with Gayos, et al. v. Gayos, et al., G.R. No. L-27812, September 26, 1975, 67
SCRA 146, that it is a cherished rule of procedure that a court should always strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation) is
whether or not the private respondents can still file a separate complaint against the petitioners on the
ground that they are builders in good faith and consequently, recover the value of the impr vements
introduced by them on the subject lot. The case ofHeirs of Laureano Marquez v. Valencia, 99 Phil. 740,
provides the answer:
If, aside from relying solely on the deed of sale with a right to repurchase and failure
on the part of the vendors to purchase it within the period stipulated therein, the
defendant had set up an alternative though inconsistent defense that he had inherited
the parcel of land from his late maternal grandfather and presented evidence in
support of both defenses, the overruling of the first would not bar the determination by
the court of the second. The defendant having failed to set up such alternative
defenses and chosen or elected to rely on one only, the overruling thereof was a
complete determination of the controversy between the parties which bats a
subsequent action based upon an unpleaded defense, or any other cause of action,
except that of failure of the complaint to state a cause of action and of lack of
jurisdiction of the Court. The determination of the issue joined by the parties
constitutes res judicata. (Emphasis supplied)
Although the alternative defense of being builders in good faith is only permissive, the counterclaim for
reimbursement of the value of the improvements is in the nature of a compulsory counterclaim. Thus,
the failure by the private respondents to set it up bars their right to raise it in a subsequent litigation
(Rule 9, Section 4 of the Rules of Court). We realize the plight of the private respondents, the rule on
comlpulsory counterclaim is designed to enable the disposition of the whole controversy at one time
and in one action. The philosophy of the rule is to discourage multiplicity of suits.
ACCORDINGLY, the petition is hereby GRANTED. The decision of the Court of Appeals dated April 28,
1989 and its resolution dated June 20, 1989 are SET ASIDE and the orders dated March 8, 1988 and
August 19, 1988 of the Regional Trial Court of Cebu City, Branch 15 are REINSTATED.
SO ORDERED.
18. G.R. No. 75502 November 12, 1987
KALILID WOOD INDUSTRIES CORPORATION, ALFREDO SALONGA and JOAQUIN MIGUEL DE
JESUS,petitioners,
vs.
IAC
FELICIANO, J.:
On 17 November 1976, Joaquin Miguel de Jesus and Alfredo T. Salonga, President-General Manager and
Comptroller, respectively, of P.B. De Jesus and Company, Inc., executed a promissory note (PBC No.
1202-76) in favor of respondent Philippine Banking Corporation in the amount of P600,000.00, the
obligation maturing on 29 December 1976. Similarly, on 2 December 1976, a second promissory note
(PBC No. 1255-76) was executed this time in the amount of P300,000.00, payable on or before 3
January 1977. These two instruments were executed to document or reflect loans secured from
respondent Bank and were signed by Messrs. de Jesus and Salonga in the following manner:

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A. Promissory Note PBC No. 1202-76-for P600,000.00:

Due December 29,1976 No. 1202-76
For value received, I/we jointly and severally promise to pay to the Philippine Banking
Corporation at its office at Ayala Avenue, Makati, Metro Manila the sum of SIX
HUNDRED THOUSAND ONLY ... pesos (P600,000.00) with interest at the rate of
FOURTEEN percent 14% per annum, from TODAY until paid. In case this note is not paid
at maturity the interest rate shall automatically be increased to per annum.
xxx xxx xxx
Executed at Makati, Philippines on November 17,1976.
P.B. DE JESUS & CO., INC.
(Sgd.) Alfredo Salonga (Sgd.) Miguel de Jesus
IN OUR PERSONAL CAPACITY
(Sgd.) Alfredo Salonga (Sgd.) Miguel de Jesus
B. Promissory Note PBC No. 1255-76-for P300,000.00:
Due January 3, 1977 No. 1255-76
For valued received, I/we jointly and severally promise to pay to the Philippine Banking
Corporation at its office at Ayala Avenue, Makati, Metro Manila the sum of THREE
HUNDRED THOUSAND ONLY ... pesos (P300,000.00), with interest at the rate of
FOURTEEN per cent (14%) per annum, from TODAY until paid. In case this note is not
paid at maturity the interest rate shall automatically be increased to _______ (______%)
per annum.
xxx xxx xxx
Executed at Makati, Philippines on December 2,1976.
P.B. DE JESUS & CO., INC.
(Sgd.) Alfredo Salonga (Sgd.) Miguel de Jesus
IN OUR PERSONAL CAPACITIES
(Sgd,) Alfredo Salonga (Sgd.) Miguel de Jesus
On 5 March 1978, P.D. De Jesus and Company, Inc., by vote of its stockholders, changed its corporate
name to Kalilid Wood Industries Corporation (hereafter "Kalilid"), an act subsequently validated by the
Securities and Exchange Commission. Thereafter, respondent Bank served several letters of demand
upon petitioner Kalilid for payment by the latter of the obligations contracted under promissory notes
PBC No. 1202-76 and PBC No. 1255-76 which had apparently remained unsettled. Petitioner Kalilid,
however, disowned its alleged indebtedness under both promissory notes.
On 15 May 1981, respondent Bank filed a Complaint for collection (docketed as Civil Case No. 41268)
against petitioner Kalilid and Messrs. de Jesus and Salonga with Branch 23 of the then Court of First
Instance of Rizal (Seventh Judicial District). 1 In its complaint, respondent Bank alleged that petitioner

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Kalilid, as principal, should be held solidarily liable under promissory notes PBC No. 1202-76 and PBC
No. 125576 together with Messrs. de Jesus and Salonga, both of whom had signed said promissory
notes for and in behalf of the petitioners company, as well as in their own personal capacities.
Respondent Bank further alleged that, as of 30 April 1981, the total amount of the indebtedness of the
obligors under the two promissory notes had risen to Pl,780,253.08i.e., PI 18649696 with respect to
promissory note PBC No. 120276, and P593,756.12 with respect to promissory note PBC No. 125176
The Bank submitted in substantiation of these claimed amounts two separate Statements of Account
(one for each promissory note), which had been prepared by respondent Bank and attached to the
complaint as Annexes "C" and "D" thereof. 2 Promissory notes PBC No. 1202-76 and IBC No. 1255-76
were likewise attached to the complaint as its Annexes "A" and "B", respectively. 3
In its Answer dated 10 July 198l, 4 petitioner Kalilid alleged that it "ha[d] no knowledge or information
sufficient to form a belief as to the truth of [the material allegations in the complaint]. 5 As its
affirmative defense, petitioner Kalilid asserted that the authority to borrow money or contract loans on
its behalf had not been granted to Messrs. de Jesus and Salonga who, it was further asserted, should
be held solely liable under the two promissory notes. The answer of petitioner Kalilid, however, was not
verified.
The complaint was dismissed, though without prejudice, with respect to Messrs. de Jesus and Salonga
whose whereabouts could not then be ascertained.
The parties were unable to arrive at an amicable settlement between themselves at the pre-trial stage
of the litigation. Subsequently, a motion for summary judgment was filed by respondent Bank to which
petitioner Kalilid raised neither objection nor opposition.
In a three-page Decision dated 12 October 1983, the trial court found petitioner Kalilid liable to
respondent Bank for the obligations contracted under promissory notes PBC No. 1202-76 and PBC No.
1255-76 . the dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Philippine Banking
Corporation and against defendant Kalilid Wood Industries Corporation who is ordered
to pay plaintiff:
1. The amount of P1,780,253.08 plus legal interest from April 9, 1981 until the amount
is fully paid;
2. the amount equivalent to 10% of the total amount due as attorney's fees; and
3. the costs of suit.
SO ORDERED.
The trial Judge based his decision primarily on two factors: (1) the failure of petitioner Kalilid to verify
its answer, which failure the trial Judge considered as amounting to an admission by petitioner Kalilid
of the genuineness and due execution of promissory notes PBC No. 1202-76 and PBC No. 1255-76,
which were annexed to respondent Bank's complaint; and (2) the fact that the two disputed promissory
notes were signed by Messrs. de Jesus and Salonga both for and in behalf of the former P.B. de Jesus
and Company, Inc. (now petitioner Kalilid) and in their own personal capacities.
The judgment of the lower court was affirmed in toto on appeal. In its disputed Decision dated 8
November 1985, the then Intermediate Appellate Court (Third Civil Cases Division) held:
Defendant-appellant faults the lower court in holding it liable to pay the amount of
Pl,780,253.08 inasmuch as the promissory notes covered only P900,000.00 claiming
that plaintiff-appellee failed to adduce evidence as to how said amounts increased to
the amount of Pl,780,253.08. Defendant-appellant argument is really flimsy, because it
overlooked the fact that the promissory notes in question which were due and

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demandable since December 29, 1976 and January 3, 1977 bear interest at the rate of
14% and further stipulates for the payment of attorney's fees of 10% of the amount
due including interest in case of collection of the promissory notes is done through a
lawyer.
Moreover, the statements of account Annexes A and B are also attached to the same
complaint as integral part thereof. Annex A pertains to the promissory note No. 120276 with the principal of P600,000.00 while Annex B pertains to the promissory note No.
125576 with the principal of P300,000.00. Explained in said statements of account are
the charges for past due interest and penalty charges and the total of said obligation
as of April 30, 1981 showed a total of principal, interest and penalty charges of
P1,780,253.08. The genuineness and due execution of said promissory notes and
statements of account are deemed admitted by the failure to deny under oath said
documents. ... 6
Petitioner Kalilid's Motion for Reconsideration was denied by the Third Civil Cases Division on 29 July
1986.
In the present Petition for Review, petitioner Kalilid no longer denies its liabilities and obligations under
the two promissory notes executed in favor of respondent Bank. It would, however, contest the
correctness of the aggregate amount of its indebtedness, as claimed by respondent Bank. In this
respect, petitioner Kalilid contends that although it may have impliedly admitted the genuineness and
due execution of promissory notes PBC No. 1202-76 and PBC No. 125576Annexes "A" and "B" of the
Complaintas a result of its failure to deny specifically and under oath the material allegations in
respondent Bank's complaint, such admission cannot be made to extend and apply to the two
aforementioned Statements of AccountAnnexes "C" and "D" of the Complaint-since none of
petitioner Kalilid's duly authorized representatives had participated in the preparation thereof.
Furthermore, in the computations appearing therein, amounts corresponding to service charges,
penalty charges, and interest charges on past due interest were included which, petitioner Kalilid
claims, are not part of its undertakings under either promissory note.
We agree with the ruling of the trial Judge and the respondent appellate court that petitioner Kalilid,
due to its failure to verify its answer, is deemed to have admitted by implication the authenticity and
due execution of promissory notes PBC No. 1202-76 and PBC No. 1255-76, which were both annexed to
and made the basis for respondent Bank's complaint. 7 Consequently, defenses relating to the
genuineness and due execution of the notes, such as that the instruments are spurious counterfeit, or
of different import on their faces from the ones executed by the parties; or that the signatures
appearing therein are forgeries; or that said signatures were unauthorized as in the case of an agent
signing for his principal or one signing in behalf of a partnership or corporation; or that the corporation
was not authorized under its charter to sign the instruments; or that the party charged signed the
instruments in some capacity other than that set out in the instruments; or that the instruments were
never delivered, are effectively cut off, 8 placing petitioner Kalilid in estoppel from disclaiming liability
under those promissory notes. No genuine issue having been raised in the trial court by petitioner
Kalilid regarding the existence and validity of its liabilities under promissory notes PBC No. 1202-76
and PBC No. 1255-76, summary judgment was properly and appropriately rendered in the case at bar. 9
In respect, however, of the amount of petitioner Kalilid's total indebtedness to respondent Bank under
the two promissory notes, it was error for the appellate court (as for the trial Judge) to have expanded
the scope of petitioner Kalilid's implied admission of genuineness and due execution so as to include
the two Statements of Account annexed to the complaint. On this point, Rule 8, Section 8 of the
Revised Rules of Court is quite specific.
Section 8. How to contest genuineness of such documents.When an action or
defense is founded upon a written instrument, copied in or attached to the
corresponding pleading as provided in the preceding section, the genuineness and due
execution of the instrument shall be deemed admitted unless the adverse party, under
oath, specifically denies them, and sets forth what he claims to be the facts; but this
provision does not apply when the adverse party does not appear to be a party to the

81

instrument or when compliance with an order for an inspection of the original

instrument is refused. (Emphasis supplied.)
An examination of the two disputed Statements of Account reveals that both documents (1) were
printed under the official letterhead of respondent Bank, (2) were prepared by the Loans and
Discounting Department of respondent Bank, and (3) bore the signature of approval of respondent
Bank's authorized officer. No other signature appears on the face of either document. In other words,
both Statements of Account were preparedexclusively by respondent Bank. It follows that petitioner
Kalilid, not having been privy thereto, did not admit the genuineness and due execution of the
Statements in spite of its failure to verify its answer to the complaint, and that petitioner is not
conclusively bound by the charges nor by the computations of amounts set out therein. 10
The aggregate amount of petitioner Kalilid's monetary obligations to respondent Bank is determinable
from the common stipulations and conditions contained in promissory notes PBC No. 1202-76 and PBC
No. 1255-76, under which petitioner Kalilid bound itself to pay respondent Bank, aside from the
principal loan totalling P900,000.00: (1) interest at the rate of fourteen percent (14%) per annum,
payable monthly and compounded monthly if unpaid, 11 and (2) attorney's fees equivalent to ten
percent (10%) of the entire amount due, including interest. 12 it does not, however, appear from the
face of either promissory note that petitioner Kalilid agreed to pay service charges and penalty
charges in case of late payment of its obligations to respondent Bank. Since an undertaking to pay
service charges and penalty charges on top of interest and interest on past due interest cannot be
presumed, it is necessary that evidence be adduced by both parties to prove or disprove their
respective claims regarding the basis and propriety of including such charges and in such amounts as
part of petitioner Kalilid's liabilities under the two promissory notes. Evidence relating to the
computation of interest on past due interest, that is due and payable may also be submitted.
WHEREFORE, the decision of Branch 23 of the then Court of First Instance of Rizal (Seventh Judicial
District) in Civil Case No. 41268 and the decision of the then Intermediate Appellate Court dated 8
November 1985 are AFFIRMED to the extent that they refer to the principal amounts and stipulated
interest due under Promissory Notes PBC No. 1202-76 and PBC No. 1255-76 and to attorney's fees
equivalent to ten percent (10%) of the entire amount due. This case is REMANDED to the trial court for
determination of whether or not service charges and penalty charges in case of late payment are due
from petitioner Kalilid to respondent Bank, and if so, the amount thereof, as well as for determination
of the amount of interest on past due interest, due and payable by petitioner Kalilid to respondent
Bank. No pronouncement as to costs. SO ORDERED.

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