ON JURISDICTION OF MTC

SPOUSES ROMEO PAJARES and IDA T. PAJARES, Petitioners

vs.
REMARKABLE LAUNDRY AND DRY CLEANING, represented by ARCHEMEDES G. SOLIS, Respondent

DECISION

DEL CASTILLO, J.:

Breach of contract may give rise to an action for specific performance or rescission of contract.1 It may also be the
cause of action in a complaint for damages filed pursuant to Art. 1170 of the Civil Code.2 In the specific performance
and rescission of contract cases, the subject matter is incapable of pecuniary estimation, hence jurisdiction belongs
to the Regional Trial Court (RTC). In the case for damages, however, the court that has jurisdiction depends upon
the total amount of the damages claimed.

Assailed in this Petition for Review on Certiorari3 is the December 11, 2013 Decision4 of the Court of Appeals (CA) in
CA-G.R. CEB SP No. 07711 that set aside the February 19, 2013 Order5 of the RTC, Branch 17, Cebu City
dismissing Civil Case No. CEB-39025 for lack of jurisdiction.

Factual Antecedents

On September 3, 2012, Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint denominated as
"Breach of Contract and Damages"6 against spouses Romeo and Ida Pajares (petitioners) before the RTC of Cebu
City, which was docketed as Civil Case No. CEB-39025 and assigned to Branch 17 of said court. Respondent
alleged that it entered into a Remarkable Dealer Outlet Contract7 with petitioners whereby the latter, acting as a
dealer outlet, shall accept and receive items or materials for laundry which are then picked up and processed by the
former in its main plant or laundry outlet; that petitioners violated Article IV (Standard Required Quota & Penalties)
of said contract, which required them to produce at least 200 kilos of laundry items each week, when, on April 30,
2012, they ceased dealer outlet operations on account of lack of personnel; that respondent made written demands
upon petitioners for the payment of penalties imposed and provided for in the contract, but the latter failed to pay;
and, that petitioners' violation constitutes breach of contract. Respondent thus prayed, as fol1ows:

WHEREFORE, premises considered, by reason of the above-mentioned breach of the subject dealer contract
agreement made by the defendant, it is most respectfully prayed of the Honorable Court to order the said defendant
to pay the following incidental and consequential damages to the plaintiff, to wit:

a) TWO HUNDRED THOUSAND PESOS (PHP200,000.00) plus legal interest as incidental and consequential [sic]
for violating Articles IV and XVI of the Remarkable Laundry Dealer Contract dated 08 September 2011.

b) Thirty Thousand Pesos (₱30,000.00) as legal expenses.

c) Thirty Thousand Pesos (₱30,000.00) as exemplary damages.

d) Twenty Thousand Pesos (₱20,000.00) as cost of suit.

e) Such other reliefs that the Honorable Court deems as just and equitable.8 (Italics in the original)

Petitioners submitted their Answer,9 to which respondent filed its Reply.10

During pre-trial, the issue of jurisdiction was raised, and the parties were required to submit their respective position
papers.

Ruling of the Regional Trial Court

On February 19, 2013, the RTC issued an Order dismissing Civil Case No. CEB-39025 for lack of jurisdiction,
stating:

In the instant case, the plaintiffs complaint is for the recovery of damages for the alleged breach of contract. The
complaint sought the award of ₱200,000.00 as incidental and consequential damages; the amount of ₱30,000.00 as
legal expenses; the amount of ₱30,000.00 as exemplary damages; and the amount of ₱20,000.00 as cost of the
suit, or for the total amount of ₱280,000.00 as damages.

Under the provisions of Batas Pambansa Blg. 129 as amended by Republic Act No. 7691, the amount of demand or
claim in the complaint for the Regional Trial Courts (RTCs) to exercise exclusive original jurisdiction shall exceed
₱300,000.00; otherwise, the action shall fall under the jurisdiction of the Municipal Trial Courts. In this case, the total
amount of demand in the complaint is only ₱280,000.00, which is less than the jurisdictional amount of the RTCs.
Hence, this Court (RTC) has no jurisdiction over the instant case. 1âwphi1

WHEREFORE, premises considered, the instant case is hereby DISMISSED for lack of jurisdiction.

Notify the counsels.

SO ORDERED.11 (Emphasis in the original)

Respondent filed its Motion for Reconsideration,12 arguing that as Civil Case No. CEB-39025 is for breach of
contract, or one whose subject is incapable of pecuniary estimation, jurisdiction thus falls with the RTC. However, in
an April 29, 2013 Order,13 the RTC held its ground.

Ruling of the Court of Appeals

Respondent filed CA-G.R. CEB SP No. 07711, a Petition for Certiorari14 seeking to nullify the RTC's February 19,
2013 and April 29, 2013 Orders. It argued that the RTC acted with grave abuse of discretion in dismissing Civil Case
No. CEB-39025. According to respondent, said case is one whose subject matter is incapable of pecuniary
estimation and that the damages prayed for therein are merely incidental thereto. Hence, Civil Case No. CEB-39025
falls within the jurisdiction of the RTC pursuant to Section 19 of Batas Pambansa Blg. 129, as amended (BP 129).

On December 11, 2013, the CA rendered the assailed Decision setting aside the February 19, 2013 Order of the
RTC and remanding the case to the court a quo for further proceedings. It held as follows:

In determining the jurisdiction of an action whose subject is incapable of pecuniary estimation, the nature of the
principal action or remedy sought must first be ascertained. If it is primarily for the recovery of a sum of money, the
claim is considered capable of pecuniary estimation and the jurisdiction of the court depends on the amount of the
claim. But, where the primary issue is something other than the right to recover a sum of money, where the money
claim is purely incidental to, or a consequence of the principal relief sought, such are actions whose subjects are
incapable of pecuniary estimation, hence cognizable by the RTCs.15

x x xx

Verily, what determines the nature of the action and which court has jurisdiction over it are the allegations of the
complaint and the character of the relief sought.16

In our considered view, the complaint, is one incapable of pecuniary estimation; thus, one within the RTC's
jurisdiction. x x x

x x xx

A case for breach of contract [sic] is a cause of action either for specific performance or rescission of contracts. An
action for rescission of contract, as a counterpart of an action for specific performance, is incapable of pecuniary
estimation, and therefore falls under the jurisdiction of the RTC.17
Thus, the totality of damages principle finds no application in the instant case since the same applies only when
damages is principally and primarily demanded in accordance with the specification in Administrative Circular No.
09-94 which reads: 'in cases where the claim for damages is the main cause of action ... the amount of such claim
shall be considered in determining the jurisdiction of the court.'

Thus, the court a quo should not have dismissed the instant case.

WHEREFORE, in view of the foregoing, the Order dated February 19, 2013 of the Regional Trial Court, 7th Judicial
Region, Branch 17, Cebu City in Civil Case No. CEB-39025 for Breach of Contract and Damages is hereby
REVERSED and SET ASCDE. This case is hereby REMANDED to the RTC which is ORDERED to PROCEED with
the trial on the merits with dispatch.

SO ORDERED.18

Petitioners sought to reconsider, but were denied. Hence, the present Petition.

Issue

In a June 29, 2015 Resolution,19 this Court resolved to give due course to the Petition, which claims that the CA
erred in declaring that the RTC had jurisdiction over respondent's Complaint which, although denominated as one
for breach of contract, is essentially one for simple payment of damages.

Petitioners' Arguments

In praying that the assailed CA dispositions be set aside and that the RTC's February 19, 2013 Order dismissing
Civil Case No. CEB-39025 be reinstated, petitioners in their Petition and Reply20 espouse the original findings of the
RTC that Civil Case No. CEB-39025 is for the recovery of a sum of money in the form of damages. They asserted
that in determining jurisdiction over the subject matter, the allegations in the Complaint and the principal relief in the
prayer thereof must be considered; that since respondent merely prayed for the payment of damages in its
Complaint and not a judgment on the claim of breach of contract, then jurisdiction should be determined based
solely on the total amount of the claim or demand as alleged in the prayer; that while breach of contract may involve
a claim for specific performance or rescission, neither relief was sought in respondent's Complaint; and, that
respondent "chose to focus his [sic] primary relief on the payment of damages,"21 which is "the true, actual, and
principal relief sought, and is not merely incidental to or a consequence of the alleged breach of
contract."22Petitioners conclude that, applying the totality of claims rule, respondent's Complaint should be dismissed
as the claim stated therein is below the jurisdictional amount of the RTC.

Respondent's Arguments

Respondent, on the other hand, counters in its Comment23 that the CA is correct in declaring that Civil Case No.
CEB-39025 is primarily based on breach of contract, and the damages prayed for are merely incidental to the
principal action; that the Complaint itself made reference to the Remarkable Dealer Outlet Contract and the breach
committed by petitioners, which gave rise to a cause of action against the latter; and, that with the filing of the case,
the trial court was thus called upon to determine whether petitioners violated the dealer outlet contract, and if so, the
amount of damages that may be adjudged in respondent's favor.

Our Ruling

The Court grants the Petition. The RTC was correct in categorizing Civil Case No. CEB-39025 as an action for
damages seeking to recover an amount below its jurisdictional limit.

Respondent's complaint denominated

as one for "'Breach of Contract &
Damages" is neither an action for
specific performance nor a complaint
for rescission of contract.
In ruling that respondent's Complaint is incapable of pecuniary estimation and that the RTC has jurisdiction, the CA
comported itself with the following ratiocination:

A case for breach of contract [sic] is a cause of action either for specific performance or rescission of contracts. An
action for rescission of contract, as a counterpart of an action for specific performance, is incapable of pecuniary
estimation, and therefore falls under the jurisdiction of the RTC.24

without, however, determining whether, from the four corners of the Complaint, respondent actually intended to
initiate an action for specific performance or an action for rescission of contract. Specific performance is ''[t]he
remedy of requiring exact performance of a contract in the specific form in which it was made, or according to the
precise terms agreed upon. [It is t]he actual accomplishment of a contract by a party bound to fulfill it."25 Rescission
of contract under Article 1191 of the Civil Code, on the other hand, is a remedy available to the obligee when the
obligor cannot comply with what is incumbent upon him.26 It is predicated on a breach of faith by the other party who
violates the reciprocity between them. Rescission may also refer to a remedy granted by law to the contracting
parties and sometimes even to third persons in order to secure reparation of damages caused them by a valid
contract; by means of restoration of things to their condition in which they were prior to the celebration of the
contract.27

In a line of cases, this Court held that –

In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court
has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for
the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is
in the municipal trial courts or in the courts of first instance would depend on the amount of the claim. However,
where the basic issue is something other than the right to recover a sum of money, where the money claim is purely
incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases
where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts
1of first instance (now Regional Trial Courts).28

To write finis to this controversy, therefore, it is imperative that we first determine the real nature of respondent's
principal action, as well as the relief sought in its Complaint, which we 1quote in haec verba:

REPUBLIC OF THE PHILIPPNES

REGIONAL TRIAL COURT
BRANCH ______
CEBU CITY

Remarkable Laundry and Dry Cleaning herein Civil Case No. ______
represented by Archemedes G. Solis, Plaintiff, For: Breach of Contract
& Damages

vs.

Spouses Romeo Pajares and Ida T. Pajares,

Defendants.

----------------------------------------------------------------------------------------------------------

COMPLAINT

Plaintiff, by counsels, to the Honorable Court most respectfully states THAT:

1. Plaintiff Remarkable Laundry and Dry Cleaning Services, is a sole proprietorship business owned by Archemedes
Solis with principal office address at PREDECO CMPD AS-Ostechi Bldg. Banilad, Heman Cortes St., Mandaue City.
2. Defendant Ida Pajares is of legal age, Filipino, married with address at Hermag Village, Basak Mandaue City
where she can be served with summons and other processes of the Honorable Court.

3. On 08 SEP 2011, parties entered and signed a Remarkable Laundry Dealer Outlet Contract for the processing of
laundry materials, plaintiff being the owner of Remarkable Laundry and the defendant being the authorized dealer of
the said business. (Attached and marked as Annex "A" is a copy of the Remarkable Laundry Dealer Outlet
Contract.)

CAUSES OF ACTION:

4. Sometime on [sic] the second (2nd) quarter of 2012, defendant failed to follow the required standard purchase
quota mentioned in article IV of the subject dealership agreement.

5. Defendant through a letter dated April 24, 2012 said it [sic] would CEASE OPERATION. It [sic] further stated that
they [sic] would just notify or advise the office when they are [sic] ready for the business again making the whole
business endeavor totally dependent upon their [sic] whims and caprices. (Attached and marked as Annex "B'' is a
copy of letter of the defendant dated April 24, 2012.)

6. The aforementioned act of unilateral cessation of operation by the defendant constitutes a serious breach to [sic]
the contract because it totally, whimsically and grossly disregarded the Remarkable Laundry Dealer Outlet Contract,
which resulted to [sic] failure on its part in obtaining the minimum purchase or delivery of 200 kilos per week for the
entire duration of its cessation of operations.

7. Under the aforementioned Dealer Contract, specifically in Article XV of the same are classified as BREACH BY
THE OUTLETS:

'The parties agree that the happening of any of the stipulation and events by the dealer outlet is otherwise [sic] in
default of any of its obligations or violate any of the terms and condition under this agreement.

Any violation of the above-mentioned provisions shall result in the immediate termination of this agreement, without
prejudice to any of the RL Main Operators rights or remedies granted to it by law.

THE DEALER OUTLET SHALL ALSO BE LIABLE TO PAY A FINE OF TWENTY FIVE THOUSAND PESOS,
(₱25,000), FOR EVERY VIOLATION AND PHP 50,000 IF PRE-TERMINATION BY THE RL MAIN OPERATOR
DUE TO BREACH OF THIS AGREEMENT.'

8. Likewise it is provided in the said contract that:

' ... The DEALER OUTLET must have a minimum 200 kilos on a six-day or per week pick-up for the entire duration
of the contract to free the dealer outlet from being charge[d] Php 200/week on falling below required minimum kilos
per week of laundry materials. Automatic charging shall become part of the billing on the services of the dealer
outlet on cases where the minimum requirements on required kilos are not met.[']

9. The cessation of operation by the defendant, which is tantamount to gross infraction to [sic] the subject contract,
resulted to [sic] incidental damages amounting to Two Hundred Thousand Pesos (PHP200,000.00). Defendant
should have opted to comply with the Pre-termination clause in the subject contract other than its [sic] unilateral and
whimsical cessation of operations.

10. The plaintiff formally reminded the defendant of her obligations under the subject contract through demand
letters, but to no avail. The defendant purposely ignored the letters by [sic] the plaintiff. (Attached and marked as
Annex "C" to "C-2" are the Demand Letters dated May 2, 2012, June 2, 2012 and June 19, 2012 respectively.)

11. To reiterate, the defendant temporarily stopped its business operation prior to the two-year contract duration had
elapsed to the prejudice of the plaintiff, which is a clear disregard of its two-year obligation to operate the business
unless a pre-termination is called.

12. Under Article 1159 of the Civil Code of the Philippines provides [sic]:
'Obligations arising .from contracts have the force of law between the contracting parties and should be complied
with in good faith. '

13. Likewise, Article 1170 of the Civil Code of the Philippines [provides] that:

'Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any
manner contravene the tenor thereof are liable for damages. '

14. That the above-mentioned violations by the defendant to the Remarkable Laundry Dealer Contract, specifically
Articles IV and XVI thereof constitute gross breach of contract which are unlawful and malicious under the Civil
Code of the Philippines, which caused the plaintiff to incur incidental and consequential damages as found in the
subject dealer contract in the total amount of Two Hundred Thousand Pesos (PHP200,000.00) and incidental legal
expenses to protect its rights in the amount of ₱30,000.00.

PRAYER:

WHEREFORE, premises considered, by reason of the above-mentioned breach of the subject dealer contract
agreement made by the defendant, it is most respectfully prayed of the Honorable Court to order the said defendant
to pay the following incidental and consequential damages to the plaintiff, to wit:

a) TWO HUNDRED THOUSAND PESOS (PHP200,000.00) plus legal interest as incidental and
consequential [damages] for violating Articles IV and XVI of the Remarkable Laundry Dealer Contract dated 08 SEP
2011;

b) Thirty Thousand Pesos (₱30,000.00) as legal expenses;

c) Thirty Thousand Pesos (₱30,000.00) as exemplary damages;

d) Twenty Thousand Pesos (₱20,000.00) as cost of suit;

e) Such other reliefs that the Honorable Court deems as just and equitable.

August 31, 2012, Cebu City, Philippines.29

An analysis of the factual and material allegations in the Complaint shows that there is nothing therein which would
support a conclusion that respondent's Complaint is one for specific performance or rescission of contract. It should
be recalled that the principal obligation of petitioners under the Remarkable Laundry Dealership Contract is to act as
respondent's dealer outlet. Respondent, however, neither asked the RTC to compel petitioners to perfom1 such
obligation as contemplated in said contract nor sought the rescission thereof. The Complaint's body, heading, and
relief are bereft of such allegation. In fact, neither phrase appeared on or was used in the Complaint when, for
purposes of clarity, respondent's counsels, who are presumed to be learned in law, could and should have used any
of those phrases to indicate the proper designation of the Complaint. To the contrary, respondent's counsels
designated the Complaint as one for "Breach of Contract & Damages," which is a misnomer and inaccurate. This
erroneous notion was reiterated in respondent's Memorandum30 wherein it was stated that "the main action of CEB
39025 is one for a breach of contract."31 There is no such thing as an "action for breach of contract." Rather,
"[b]reach of contract is a cause of action,32 but not the action or relief itself"33 Breach of contract may be the cause of
action in a complaint for specific performance or rescission of contract, both of which are incapable of pecuniary
estimation and, therefore, cognizable by the RTC. However, as will be discussed below, breach of contract may also
be the cause of action in a complaint for damages.

A complaint primarily seeking to

enforce the accessory obligation
contained in the penal clause is actually
an action for damages capable of
pecuniary estimation.
Neither can we sustain respondent's contention that its Complaint is incapable of pecuniary estimation since it
primarily seeks to enforce the penal clause contained in Article IV of the Remarkable Dealer Outlet Contract, which
reads:

Article IV: STANDARD REQUIRED QUOTA & PENALTIES

In consideration [sic] for such renewal of franchise-dealership rights, the dealer outlet must have a minimum 200
kilos on a six-day or per week pick-up for the entire duration of the contract to FREE the dealer outlet from being
charge [sic] Php200/week on falling below required minimum kilos per week of laundry materials. Automatic
charging shall become part of the billing on the services of the dealer outlet on cases where the minimum
requirements on required kilos are not met.

The RL Main Operator has the option to cancel, terminate this dealership outlet contract, at its option should [sic] in
the event that there are unpaid services equivalent to a two-week minimum required number of kilos of laundry
materials but not ₱8,000 worth of collectibles, for services performed by the RL Main Operator or its assigned
Franchise Outlet, unpaid bills on ordered and delivered support products, falling below required monthly minimum
number of kilos.

Ten [percent] (10%) interest charge per month will be collected on all unpaid obligations but should not be more
than 45 days or an additional 10% on top of uncollected amount shall be imposed and shall earn additional 10% on
the next succeeding months if it still remains unpaid. However, if the cause of default is due to issuance of a
bouncing check the amount of such check shall earn same penalty charge with additional 5% for the first two weeks
and 10% for the next two weeks and its succeeding two weeks thereafter from the date of dishonor until fully paid
without prejudice to the filling of appropriate cases before the courts of justice. Violation of this provision if remained
unsettled for two months shall be considered as violation [wherein] Article XV of this agreement shall be applied.34

To Our mind, petitioners' responsibility under the above penal clause involves the payment of liquidated damages
because under Article 222635 of the Civil Code the amount the parties stipulated to pay in case of breach are
liquidated damages. "It is attached to an obligation in order to ensure performance and has a double function: (1) to
provide for liquidated damages, and (2) to strengthen the coercive force of the obligation by the threat of greater
responsibility in the event of breach."36

Concomitantly, what respondent primarily seeks in its Complaint is to recover aforesaid liquidated damages (which it
termed as "incidental and consequential damages") premised on the alleged breach of contract committed by the
petitioners when they unilaterally ceased business operations. Breach of contract may also be the cause of action in
a complaint for damages filed pursuant to Article 1170 of the Civil Code. It provides:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who
in any manner contravene the tenor thereof; are liable for damages. (Emphasis supplied)

In Pacmac, Inc. v. Intermediate Appellate Court,37 this Court held that the party who unilaterally terminated the
exclusive distributorship contract without any legal justification can be held liable for damages by reason of the
breach committed pursuant to Article 1170.

In sum, after juxtaposing Article IV of the Remarkable Dealer Outlet Contract vis-a-vis the prayer sought in
respondent's Complaint, this Court is convinced that said Complaint is one for damages. True, breach of contract
may give rise to a complaint for specific performance or rescission of contract. In which case, the subject matter is
incapable of pecuniary estimation and, therefore, jurisdiction is lodged with the RTC. However, breach of contract
may also be the cause of action in a complaint for damages. Thus, it is not correct to immediately conclude, as the
CA erroneously did, that since the cause of action is breach of contract, the case would only either be specific
pe1formance or rescission of contract because it may happen, as in this case, that the complaint is one for
damages.

In an action for damages, the court

which has jurisdiction is determined by
the total amount of damages claimed.
Having thus determined the nature of respondent's principal action, the next question brought to fore is whether it is
the RTC which has jurisdiction over the subject matter of Civil Case No. CEB-39025.

Paragraph 8, Section 1938 of BP 129, as amended by Republic Act No. 7691,39 provides that where the amount of the
demand exceeds ₱100,000.00, exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses,
and costs, exclusive jurisdiction is lodged with the RTC. Otherwise, jurisdiction belongs to the Municipal Trial Court.40

The above jurisdictional amount had been increased to ₱200,000.00 on March 20, 1999 and further raised to
₱300,000.00 on February 22, 2004 pursuant to Section 5 of RA 7691.41

Then in Administrative Circular No. 09-9442 this Court declared that "where the claim for damages is the main cause
of action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction
of the court." In other words, where the complaint primarily seeks to recover damages, all claims for damages
should be considered in determining which court has jurisdiction over the subject matter of the case regardless of
whether they arose from a single cause of action or several causes of action. 1âwphi1

Since the total amount of the damages claimed by the respondent in its Complaint filed with the RTC on September
3, 2012 amounted only to ₱280,000.00, said court was correct in refusing to take cognizance of the case.

WHEREFORE, the Petition is GRANTED and the December 11, 2013 Decision and March 19, 2014 Resolution of
the Court of Appeals in CA-G.R. CEB SP No. 07711 are REVERSED and SET ASIDE. The February 19, 2013
Order of the Regional Trial Court, Branch 17, Cebu City dismissing Civil Case No. CEB-39025 for lack of jurisdiction
is REINSTATED.

SO ORDERED.

ON JURISDICTION OF RTC

G.R. No. 203678

CONCORDE CONDOMINIUM, INC., by itself and comprising the Unit Owners of Concorde Condominium
Building, Petitioner,
vs.
AUGUSTO H. BACULIO; NEW PPI CORPORATION; ASIAN SECURITY and INVESTIGATION AGENCY and its
security guards; ENGR. NELSON B. MORALES, in his capacity as Building Official of the Makati City
Engineering Department; SUPT. RICARDO C. PERDIGON, in his capacity as City Fire Marshal of the Makati
City Fire Station; F/C SUPT. SANTIAGO E. LAGUNA, in his capacity as Regionaf Director of the Bureau of
Fire Protection-NCR, and any and all persons acting with or under them, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to reverse and set
aside the Order dated June 28, 2012 and Resolution dated September 20, 2012 of the Regional Trial Court (RTC) of
Makati City, Branch 149,1 which dismissed Civil Case No. 12-309 for Injunction with Damages for lack of jurisdiction.

The antecedent facts are as follows:

On April 16, 2012, petitioner Concorde Condominium, Inc., by itself and comprising the Unit Owners of Concorde
Condominium Building, (petitioner) filed with the Regional Trial Court (RTC) of Makati City a Petition for Injunction
[with Damages with prayer for the issuance of a Temporary Restraining Order (TRO), Writ of Preliminary
(Prohibitory) Injunction, and Writ of Preliminary Mandatory Injunction] against respondents New PPI Corporation and
its President Augusto H. Baculio; Asian Security and Investigation Agency and its security guards, Engr. Nelson B.
Morales in his capacity as Building Official of the Makati City Engineering Department; Supt. Ricardo C. Perdigon in
his capacity as City Fire Marshal of the Makati City Fire Station; F/C Supt. Santiago E. Laguna, in his capacity as
Regional Director of the Bureau of Fire Protection - NCR, and any and all persons acting with or under
them (respondents).

Petitioner seeks (1) to enjoin respondents Baculio and New PPI Corporation from misrepresenting to the public, as
well as to private and government offices/agencies, that they are the owners of the disputed lots and Concorde
Condominium Building, and from pushing for the demolition of the building which they do not even own; (2) to
prevent respondent Asian Security and Investigation Agency from deploying its security guards within the perimeter
of the said building; and (3) to restrain respondents Engr. Morales, Supt. Perdigon and F/C Supt. Laguna from
responding to and acting upon the letters being sent by Baculio, who is a mere impostor and has no legal
personality with regard to matters concerning the revocation or building and occupancy permits, and the fire safety
issues of the same building. It also prays to hold respondents solidarily liable for actual damages, moral damages,
exemplary damages, attorney's fees, litigation expenses and costs of suit.

The case was docketed as Civil Case No. No. 12-309 and raffled to the Makati RTC, Branch 149, which was
designated as a Special Commercial Court.2

On April 24, 2012, the RTC called the case for hearing to determine the propriety of issuing a TRO, during which
one Mary Jane Prieto testified and identified some documents. While she was undergoing crossexamination by a
counsel from the Office of the Solicitor General (OSG) relative to the fire deficiencies of petitioner's building, the
RTC interrupted her testimony to find a better solution to the problem, and issued an Order which reads:

Wherefore, this court ordered Supt. Ricardo C. Perdigon, Fire Marshal of Makati City, to conduct an inspection of
Concorde Condominium Building. He is hereby ordered to submit a report on his investigation not later than 5:00
o'clock in the afternoon tomorrow.

In the same manner, the Building Official of Makati City, being represented by Atty. Fabio is also hereby ordered to
conduct an investigation on the status of the said building to ascertain whether it [isl still structurally sound to stand.
Such report shall be submitted to this court not later than 5:00 o'clock in the afternoon tomorrow.

If the report of the Building Official is negative, the unit owners of the condominium will be given the opportunity to
be heard on whether to condemn the building or not.

In the same manner, the alleged owner of the land, who should have transferred it to the condominium corporation
once the latter was created, and it appears that it was not complied with, they are also given the opportunity to get
their own structural engineer to ascertain the structural soundness of the building. Afterwhich, the court will issue the
necessary order whether to condemn or not the building and the President of the condominium corporation has
acceded to such undertaking because that's the only way how to give them fair play and be heard on their right as
condominium owner of Concorde Building located at 200 Benavidez corner Salcedo Streets, Legaspi Village, Makati
City.

The President of the condominium corporation is hereby given, if there is still a chance to repair, four (4) months
from April 30, 2012 or up to August 30, 2012 to r.emedy all those problems and/or deficiencies of the building.

The other parties are hereby enjoined not to threaten, interfere or molest the condominium unit owners of said
building. Any other party, including the herein parties, who will obstruct the smooth implementation of this Order, is
already considered to have committed a direct contempt of the order of the court.

Let the continuation of the testimony of Ms. Mary Jane Prieto be set on September 17, 2012 at 8:30 in the morning.

SO ORDERED.3

Meanwhile, respondents Bactllio and New PPI Corporation filed an Urgent Motion to Re-Raffle dated April 25, 2012,
claiming that it is a regular court, not a Special Commercial Court, which has jurisdiction over the case.

In an Order dated April 26, 2012, the RTC denied the motion to rcraffle on the ground of failure to comply with
Sections 44 and 55 of Rule 15 of the Rules of Court.
In their Motion to Vacate Order and Motion to Dismiss dated May 8, 2012, respondents Baculio and New PPI
Corporation assailed the RTC Order dated April 24, 2012, stating that the case is beyond its jurisdiction as a Special
Commercial Court. Respondents claimed that the petition seeks to restrain or compel certain individuals and
government officials to stop doing or performing patiicular acts, and that there is no showing that the case involves a
matter embraced in Section 5 of Presidential Decree (P.D.) No. 902-A, which enumerates the cases over which the
SEC [now the RTC acting as Special Commercial Court pursuant to Republic Act (R.A.) No. 8799] exercises
exclusive jurisdiction. They added that petitioner failed to exhaust administrative remedies, which is a condition
precedent before filing the said petition.

In an Order dated June 28, 2012, the RTC dismissed the case for lack of jurisdiction. It noted that by petitioner's
own allegations and admissions, respondents Bactllio and New PPI Corporation are not owners of the two subject
lots and the building. Due to the absence of intra-corporate relations between the parties, it ruled that the case docs
not involve an intra-corporate controversy cognizable by it sitting as a Special Commercial Court. It also held that
there is no more necessity to discuss the other issues raised in the motion to dismiss, as well as the motion to
vacate order, for lack or jurisdiction over the case.

Petitioner filed a motion for reconsideration of the Order dated June 28, 2012, which the RTC denied for lack of
merit.6 Hence, this petition for review on certiorari.

Petitioner raises a sole question of law in support of its petition:

A.

THE REGIONAL TRIAL COURT COMMITTED A MANIFEST ERROR OF LAW AND ACTED IN A MANNER
CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE IN DISMISSING THE PETITION ON THE
GROUND OF LACK OF JURISDICTION.7

Petitioner contends that its petition for injunction with damages is an ordinary civil case correctly filed with the RTC
which has jurisdiction over actions where the subject matter is incapable of pecuniary estimation. However,
petitioner claims that through no fault on its part, the petition was raffled to Branch 149 of the Makati RTC, a
designated Special Commercial Court tasked to hear intra-corporate disputes.

Petitioner notes that R.A. 8799 merely transferred the Securities and Exchange Commission's jurisdiction over
cases enumerated under Section 5 of P.D. No. 902-A to the courts of general jurisdiction or the appropriate
Regional Trial Court, and that there is nothing in R.A. 8799 or in A.M. No. 00-11-03-SC which would limit or diminish
the jurisdiction of those RTCs designated as Special Commercial Comis. Petitioner stresses that such courts shall
continue to participate in the raffle of other cases, pursuant to OCA Circular No. 82-2003 on Consolidation of
Intellectual Property Courts with Commercial Court. It insists that for purposes of determining the jurisdiction of the
RTC, the different branches thereof (in case of a multiple sala court) should not be taken as a separate or
compartmentalized unit. It, thus, concludes that the designation by the Supreme Court of Branch 149 as a Special
Commercial Court did not divest it of its power as a court of general jurisdiction.

Petitioner also submits that prior to the issuance of the Order setting the case for hearing on April 24, 2012, the
Presiding Judge of Branch 149 had already determined from the averments in the petition that it is an ordinary civil
action and not an intra-corporate matter; thus, he should have referred it back to the Executive Judge or the Office
of the Clerk of Court for re-raffle to other branches of the RTC, instead of calendaring it for hearing or dismissing it.

For public respondents Superintendent Ricardo C. Pedrigon and Fire Chief Superintendent Santiago E. Laguna, the
OSG avers that the petition for review on certiorari should be denied for lack of merit. It points out that petitioner
failed to exhaust administrative remedies, i.e., appeal the revocation of the building and occupancy permits with the
Department of Public Works and Highways (DPWfI) Secretary, pursuant to Section 307 of the National Building
Code (Presidential Decree No. 1096); hence, the filing of a petition for injunction with damages is premature and
immediately dismissible for lack of cause of action.

The OSG further argues that even if the case is remanded back to the RTC, the same will not prosper due to
procedural and substantive defects, and will only further clog the trial court's dockets, for the following reasons: (1)
petitioner failed to imp lead an indispensable party, namely, the DPWH Secretary to whom the power to reinstate
the building permit and the occupancy permit is lodged; (2) with regard to the occupancy permit and the "water
sprinkler" clearance, they cannot be issued without a building permit; and (3) the said clearance cannot also be
issued due to lack of certification from either the Building Official or Tandem, the structural engineers personally
hired by petition, that the structural integrity of Concorde Condominium Building can withstand the necessary
damage and load that would be caused by the installation of the water sprinkler system.

For their part, respondents Baculio and New PPI Corporation aver that the petition filed before the RTC should be
dismissed for lack of proper verification. They likewise assert that Branch 149 has no jurisdiction over the same
petition because (l) such case is not an intra-corporate controversy; (2) petitioner failed to exhaust administrative
remedies which is a condition precedent before filing such case; (3) the subject building is a threat to the safety of
members of petitioner themselves and of the public in general; (4) the two lots allegedly owned by petitioner are
both registered in the name of New PPI Corporation; and (5) the engineering firm hired by petitioner could not even
guarantee the building's structural capacity.

Meanwhile, respondent Asian Security & Investigation Agency claims that petitioner's allegations against it are
already moot and academic because it had already terminated its security contract with respondents New PPI
Corporation and Baculio, and pulled out its guards from petitioner's premises. At any rate, it manifests that it is
adopting as part of its Comment the said respondents' Comment/Opposition to the petition for review on certiorari.

Respondent Office of the Building Official of Makati City, represented by Engineer Mario V. Badillo, likewise
contends that the petition for review on certiorari should be dismissed for these reasons: (1) that petitioner failed to
exhaust administrative remedies which is a mandatory requirement before filing the case with the RTC of Makati
City; (2) that Branch l 49, as a Special Commercial Court, has jurisdiction over the said case because it is not an
intra-corporate controversy; and (3) petitioner's building is old and dilapidated, and ocular inspections conducted
show that several violations of the National Building Code were not corrected, despite several demands and
extensions made by the Building Official.

The petition is impressed with merit.

In resolving the issue of whether Branch 149 of the Makati RTC, a designated Special Commercial Court, erred in
dismissing the petition for injunction with damages for lack of jurisdiction over the subject matter, the CoUii is guided
by the rule "that jurisdiction over the subject matter of a case is conferred by law and determined by the allegations
in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action.
The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the
allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to recover
upon all or some of the claims asserted therein. The averments in the complaint and the character of the relief
sought are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also remains
vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted
therein."8

As a rule, actions for injunction and damages lie within the jurisdiction of the RTC, pursuant to Section 19 of Batas
Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, as amended by R.A. 7691:9

Sec. 19 . .Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of the litigations is incapable of pecuniary estimation;

xxxx

(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising x x x judicial or
quasi-judicial functions;

xxxx

(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs or the value of the property in controversy exceeds Three hundred thousand pesos
(P300,000.00) or, in such other cases in Metro Manila, where the demand exclusive of the above-mentioned items
exceeds Four hundred thousand pesos (P400,000.00).
Meanwhile, Section 6 (a) of P.D. No. 902-A empowered the SEC to issue preliminary or permanent injunctions,
whether prohibitory or mandatory, in all cases in which it exercises original and exclusive jurisdiction,10 to wit :

(a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or
partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or
of the stockholder, partners, members of associations or organizations registered with the Commission;

(b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members
or associates; between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and between such corporation, partnership or association and
the state insofar as it concerns their individual franchise or right to exist as such entity; and

(c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations,
partnerships or associations.11

However, jurisdiction of the SEC over intra-corporate cases was transferred to Courts of general jurisdiction or the
appropriate Regional Trial Court when R.A. No. 8799 took effect on August 8, 2000. Section 5.2 of R.A. No. 8799
provides:

SEC. 5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-
A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that
the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall
exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-
corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of
this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed
as of 30 June 2000 until rinally disposed.

In GD Express rVorldwide N. V, et al. v. Court of Appeals (4th Div.) et al.,12 the Comi stressed that Special
Commercial Courts are still considered courts of general jurisdiction which have the power to hear and decide cases
of all nature, whether civil, criminal or special proceedings, thus:

x x x Section 5.2 of R.A. No. 8799 directs merely the Supreme Court's designation of RTC branches that shall
exercise jurisdiction over intra-corporate disputes. Nothing in the language of the law suggests the diminution of
jurisdiction of those R TCs to be designated as SCCs. The assignment of intra-corporate disputes to secs is only for
the purpose of streamlining the workload of the R TCs so that certain branches thereof like the secs can focus only
on a particular subject matter.

The designation of certain RTC branches to handle specific cases is nothing new. For instance, pursuant to the
provisions of R.A. No. 6657 or the Comprehensive Agrarian Reform Law, the Supreme Court has assigned certain
RTC branches to hear and decide cases under Sections 56 and 57 of R.A. No. 6657.

The RTC exercising jurisdiction over an intra-corporate dispute can be likened to an RTC exercising its probate
jurisdiction or sitting as a special agrarian court. The designation of the SCCs as such has not in any way limited
their jurisdiction to hear and decide cases of all nature, whether civil, criminal or special proceedings.13

In Manuel Luis C. Gonzales and Francis Alfartin D. Gonzales v. GJH Land, Inc. (formerly known as SJ Land Inc.),
Chang Hwan Jang a.k.a. Steve Jang, Sang Rak Kim, Mariechu N. Yap and Atty. Roberto P. Mallari II,14 the Court en
bane, voting 12-1, 15 explained why transfer of jurisdiction over cases enumerated in Section 5 of P.D. 902-A was
made to the RTCs in general, and not only in favor of particular RTC branches (Special Commercial Courts), to wit:

As a basic premise, let it be emphasized that a court's acquisition of jurisdiction over a particular case's subject
matter is different from incidents pertaining to the exercise of its jurisdiction. Jurisdiction over the subject matter of a
case is conferred by law, whereas a court's exercise of jurisdiction, unless provided by the law itself is governed
by the Rules of Court or by the orders issued from time to time by the Court. In Lozada v. Bracewell, it was recently
held that the matter of whether the RTC resolves an issue in the exercise of its general jurisdiction or of its
limited jurisdiction as a special court is only a matter of procedure and has nothing to do with the question
of jurisdiction.
Pertinent to this case is RA 8799 which took effect on August 8, 2000. By virtue of said Jaw, jurisdiction over cases
enumerated in Section 5 of Presidential Decree No. 902-A was transferred from the Securities and Exchange
Commission (SEC) to the RTCs, being courts of general jurisdiction. Item 5.2, Section 5 of RA 8799 provides:

SEC. 5. Powers and Functions <~lthe Commission. -

xxxx

5.2 The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No.
902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial
Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial
Court branches that shall exercise ,jurisdiction over the cases. The Commission shall retain jurisdiction over
pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one
(1) year from the enactment of this code. The Commission shall retain jurisdiction over pending suspension of
payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. (Emphasis supplied)

The legal attribution of Regional Trial Court as courts of general Jurisdiction sterns from Section 19 (6) Chapter
II or Batas Pambansa Bilang (BP) 129, known as "The Judiciary Reorganization Act of 1980:"

Section 19. Jurisdiction in civil cases. ~ Regional Trial Courts shall exercise exclusive original jurisdiction:

xxxx

(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising judicial or
quasijudicial functions: ....

As enunciated in Durisol Philippines, Inc. v. CA:

The regional trial court, formerly the court of first instance, is a court of general jurisdiction. All cases, the jurisdiction
over which is not specifically provided for by law to be within the jurisdiction of any other court, fall under the
jurisdiction of the regional trial court.

To clarify, the word "or" in Item 5.2, Section 5 of RA 8799 was intentionally used by the legislature to particularize
the fact that the phrase "the Courts of general jurisdiction" is equivalent to the phrase "the appropriate Regional Trial
Court." In other words, the jurisdiction of the SEC over the cases enumerated under Section 5 PD 902-A was
transferred to the courts of general jurisdiction, that is to say (or, otherwise known as), the proper Regional Trial
Courts. This interpretation is supported by San Miguel Corp. v. Municipal Council, wherein the Court held that:

[T]he word "or" may be used as the equivalent of "that is to say" and gives that which precedes it the same
significance as that which follows it. It is not always disjunctive and is sometimes interpretative or expository of the
preceding word.

Further, as may be gleaned from the following excerpt of the Congressional deliberations:

Senator [Raul S.] Roco:

x x x x The first major departure is as regards the Securities and Exchange Commission. The Securities and
Exchange Commission has been authorized under this proposal to reorganize itself. As an administrative agency,
we strengthened it and at the same time we take away the quasi-judicial functions. The quasi-judicial functions
are not given back to the court of general jurisdiction – The Regional Trial Court, except for two categories of
cases.

In the case of corporate disputes, only those that are now submitted for final determination of the SEC will remain
with the SEC. So, all those cases, both memos of the plaintiff and the defendant, that have been submitted for
resolution will continue. At the same time cases involving rehabilitation, bankruptcy, suspension of payments and
receiverships that were filed before June 30, 2000 will continue with the SEC. In other words, we are avoiding the
possibility, upon approval of this bill, of people filing cases with the SEC, in manner of speaking, to select their court.
x x x (Emphasis supplied)

Therefore, one must be disabused of the notion that the transfer of jurisdiction was made only in favor of particular
RTC branches, and not the RTCs in general.

Having clearly settled that as courts of general jurisdiction, the designated Special Commercial Courts and the
regular RTCs are both conferred by law the power to hear and decide civil cases in which the subject of the litigation
is incapable of pecuniary estimation, such as an action for injunction, the Court will now examine the material
allegations in the petition for injunction with damages, in order to determine whether Branch 149 of the Makati RTC
has jurisdiction over the subject matter of the case.

In its petition for injunction with damages, Concorde Condominium, Inc. (CCI), by itself and comprising the unit
owners of Concorde Condominium Building, alleged that:

8. CCI is the duly constituted Corporation or Association which owns the common areas in the project that
comprises: (a) Lot 1 where the condominium stands and Lot 2 which serves as the parking lot for the
benefit of the unit owners; and (b) Concorde Condominium Building ("the building") that was developed by
Pulp and Paper Distributors, Inc. (now, allegedly [as claimed by respondent Baculio], the "New PPI Corp.").

8.1 Petitioner's ownership of both the two (2) lots and the building (except only the units specifically owned by unit
owners) is undisputable, as can be clearly gleaned in the following provisions of the Master Deed with Declaration of
Restrictions ("Master Deed"), as well as the Amended By-laws of petitioner Concorde Condominium, Inc.

xxxx

8.4 At any rate, considering that the condominium corporation (herein petitioner) had already been established or
incorporated many years ago, and that the Developer (or any subsequent transferor) had already sold the units in
the building to the present unit owners/members, it therefore follows that Developer had thereby lost its beneficial
ownership over Lots 1 and 2 in favor of herein petitioner.

9. Unfortunately, PPI, as developer and engaging in unsound real estate business practice, altered the
condominium plan to segregate a lot (Lot 2) from the common areas and fraudulently cause the issuance of
a separate title thereof in the name of PPI.

10. CCI has questioned said fraudulent act of PPI in Housing and Land Use Regulatory Board (HLURB) Case No.
REM-050500-10982 entitled "Concorde Condominium, [ncorporated vs. Pulp and Paper, Inc. ct al." The same case
was elevated on appeal to the HLURB Board of Commissioners in a case entitled "Concorde Condominium,
Incorporated, complainant vs. Pulp and Paper, Inc., ct al., respondents, vs. Landmark Philippines Incorporated, et
al., Intervenors." In both cases, the HLURB ruled in favor of CCI.

11. PPI did not anymore appeal the aforementioned decision of the HLURB Board of Commissioners to the Office of
the President, hence. the decision as against PPI is already final and executory.

xxxx

12. Although HLURB has already decided that CCI or all the unit owners have vested rights over the subject lots,
recent events have compelled petitioner to urgently seek from this Honorable Court the reliefs prayed for in the
instant case, such as the immediate issuance of a temporary restraining order (TRO) and/or writ of preliminary
injunction against respondents.

xxxx

14. At present, a certain Augusto H. Baculio (respondent herein}, by himself and on behalf of New PPI Corp.,
deliberately, actively and with patent bad faith misrepresents and misleads the public and certain
government offices/agencies that the lot where the building stands and the lot which serves as parking area
arc owned by New PPI Corp.
 xxxx

14.1 In a letter dated 31 January 2011, respondent Augusto Baculio, on behalf of New PPI Corp., representing
themselves as owners of the above-mentioned lots, requested from the Makati Fire Station that the building be
subjected to ocular inspection, x x x.

xxxx

14.3 On 12 August 2011, respondent Augusto H. Baculio, with the same misrepresentation, sent another letter to
respondent Supt. Ricardo C. Perdigon, City Fire Marshal of Makati requesting for verification or inspection of
Concorde, x x x.

xxxx

14.4 Worth noting in the aforementioned letter of respondent Baculio dated 12 August 2011 x x x is that, not only did
he misrepresent that he or New PPI Corp. owns the two lots, but he likewise openly misrepresented that he owns
the building, x x x and even requested "xxx to address its 'demolition' as the Concorde is already 40 years old."

xxxx

14.7 In a letter dated 07 September 2011, respondent Supt. Ricardo C. Perdigon forwarded or elevated to
respondent F/C Supt. Santiago E. Laguna, Regional Director of the Bureau of Fire Protection – NCR the matter
about Concorde Condominium Building.

xxxx

14.8 On 21 October 2011, CCI sent a letter to respondent F/C Supt. Santiago E. Laguna, informing the latter of the
misrepresentations of respondents Augusto Baculio and New PPI Corp.

xxxx

14.9 The misrepresentation of respondents Baculio and New PPJ Corp. did not stop there. On 17 November 2011,
Mr. Baculio requested from Meralco for the cutting off of electricity in Concorde Condominium Building, apparently
with the misrepresentation that he

owns the building.

xxxx

14.14 Moreover, on 7 March 2012, one of the unit owners in the building, Sister Lioba Tiamson, OSB, sought the
assistance and intervention of Honorable Mayor Jejomar Erwin S. Binay, Jr. when Concorde received a letter dated
17 February 2012 from respondent Engr. Nelson B. Morales informing Concorde of the revocation of the building
and occupancy permits even if the period of sixty (60) days to comply has not yet lapsed.

xxxx

16. Moreover, sometime in November 2011, petitioner and its unit owners noted that security guards from
Asian Security and Investigation Agency have stationed themselves on rotation basis 7 days a week/24
hours a day, within the perimeter of the building. Upon inquiry of one of the administration personnel, it was
discovered that they were hired by respondent August H. Baculio/New PPl Corp.

xxxx

16.5 The presence of respondent security agency and its security guards within the perimeter of the building poses
threat to and sows serious fear and anxiety to the unit owners. Thus, they should be ordered to leave the premises.
17. Respondent Baculio and New PPI Corp.'s misleading, false, baseless and unauthorized acts of claiming
ownership over the subject lots and building arc clear violation of the rights of petitioner and its unit
owners to maintain their undisturbed ownership, possession and peaceful enjoyment of their property.
Hence, should be immediately estopped, restrained and permanently en.joined.

18. Moreover, respondents Baculio and New PPI Corp., by deceit and misrepresentation, are surreptitiously
attempting to dispossess petitioner of Concorde building to the extent of using the instrumentality of the
government to achieve this purpose.

19. Worse, respondent Baculio and New PPI Corp. by writing letters to Makati City Engineering Department, are
pushing for the demolition of the building which they do not even own.

20. Surprisingly, respondent Engr. Nelson B. Morales has been responding to and acting upon the above-
mentioned letters being sent by respondent Baculio despite the latter being a mere impostor and has no
legal personality whatsoever with regard to the matters concerning the lots and Concorde Condominium
Building.

xxxx

20.9 It is therefore necessary that respondent Engr. Nelson Morales be enjoined frorr1 entertaining and
acting upon the letters of respondent Baculio. 1âwp hi1

20.10 Respondent En gr. Morales should he immediately restrained from implementing the revocation of
petitioner's building and occupancy permit.

20.11 Respondent Engr. Morales should also be immediately restrained from ordering the possible
demolition of the building, as the building is structurally sound and stable, and docs not pose any safety
risks to occupants and passers-by.

xxxx

21. Respondents Supt. Ricardo C. Perdigon and F/C Supt. Santiago E. Laguna have likewise been
responding to and acting upon the above-mentioned letters being sent by respondent Baculio despite the
latter being a mere impostor and has no legal personality whatsoever with regard to matters concerning the
building.

22. Moreover, respondents Supt. Ricardo C. Pcnligon and F/C Supt. Santiago E. Laguna unjustifiably
refused, and continuously refuses to issue the necessary permit for the contractor xxx engaged by
petitioner to be able to commence with the installation of a fire sprinkler system and to correct other fire
safety deficiencies in the building.

22. l Thus, it is certainly ironic that the Bureau of Fire Protection headed by said respondents x x x issued
compliance order on petitioner to correct fire safety deficiencies, and yet, they refused to issue the necessary work
permit to the contractor hired by petitioner.

22.2 Hence, respondents Supt. Perdigon and F/C Supt. Laguna should be directed to issue the necessary
permit to the contractor engaged by petitioner.16

The concept of an action for injunction, as an ordinary civil action, was discussed in BPI v. Hong, et al.7as follows:

An action for injunction is a suit which has for its purpose the enjoinment of the defendant, perpetually or for a
particular time, from the commission or continuance of a specific act, or his compulsion to continue performance of a
particular act. It has an independent existence, and is distinct from the ancillary remedy of preliminary injunction
which cannot exist except only as a part or an incident of an independent action or proceeding. In an action for
injunction, the auxiliary remedy of preliminary iajunction, prohibitory or mandatory, may issue.
There is no doubt that the petition filed before the RTC is an action for injunction, as can be gleaned from the
allegations made and reliefs sought by petitioner, namely: (1) to enjoin respondents Baculio and New PPI
Corporation from misrepresenting to the public, as well as to private and government offices/agencies, that they are
the owners of the disputed lots and Concorde Condominium Building, and from pushing for the demolition of the
building which they do not even own; (2) to prevent respondent Asian Security and Investigation Agency from
deploying its security guards within the perimeter of the said building; and (3) to restrain respondents Engr. Morales,
Supt. Perdigon and F/C Supt. Laguna from responding to and acting upon the letters being sent by Bactllio, who is a
mere impostor and has no legal personality with regard to matters concerning the revocation of building and
occupancy permits, and the fire safety issues of the same building.

Applying the relationship test18and the nature of the controversy test19in determining whether a dispute constitutes an
intra-corporate controversy, as enunciated in Medical Plaza Makati Condominium Corporation v. Cullen,20the Court
agrees with Branch 149 that Civil Case No. 12-309 for injunction with damages is an ordinary civil case, and not an
intra-corporate controversy.

A careful review of the allegations in the petition for injunction with damages indicates no intra-corporate relations
exists between the opposing parties, namely (1) petitioner condominium corporation, by itself and comprising all its
unit owners, on the one hand, and (2) respondent New PPI Corporation which BaCLllio claims to be the owner of
the subject properties, together with the respondents Building Official and City Fire Marshal of Makati City, the
Regional Director of the Bureau of Fire Protection, and the private security agency, on the other hand. Moreover, the
petition deals with the conflicting claims of ownership over the lots where Concorde Condominium Building stands
and the parking lot for unit owners, which were developed by Pulp and Paper Distributors, Inc. (now claimed by
respondent Baculio as the New PPI Corporation), as well as the purported violations of the National Building Code
which resulted in the revocation or the building and occupancy permits by the Building Official of Makati City.
Clearly, as the suit between petitioner and respondents neither arises from an intra-corporate relationship nor does
it pertain to the enforcement of their correlative rights and obligations under the Corporation Code, and the internal
and intra-corporate regulatory rules of the corporation, Branch 149 correctly found that the subject matter of the
petition is in the nature or an ordinary civil action.

The Court is mindful of the recent guideline laid down in the recent case of Manuel Luis C. Gonzales and Francis
Martin D. Gonzales v. GJH Land, Inc. (formerly known as SJ land Inc.), Chang flwan Jang a.k.a. Steve Jang, Sang
Rak Kim, Mariechu N Yap and Atty. Roberto P. Mallari II,21 to wit:

For further guidance, the Court finds it apt to point out that the same principles apply to the inverse situation of
ordinary civil cases filed before the proper RTCs but wrongly rafiled to its branches designated as Special
Commercial Courts. In such a scenario, the ordinary civil case should then be referred to the Executive Judge for re-
docketing as an ordinary civil case; thereafter, the Executive Judge should then order the raffling of the case to all
branches of the same RTC, subject to limitations under existing internal rules, and the payment of the correct docket
fees in case of any difference. Unlike the limited assignment/raffling of a commercial case only to branches
designated as Special Commercial Courts in the scenarios stated above, the re-raffling of an ordinary civil case in
this instance to all courts is permissible due to the fact that a particular branch which has been designated as a
Special Commercial Court does not shed the RTC's general jurisdiction over ordinary civil cases under the
imprimatur of statutory law, i.e., Batas Pambansa Bilang (BP 129). To restate, the designation of Special
Commercial Court was merely intended as a procedural tool to expedite the resolution of commercial cases in line
with the court's exercise of jurisdiction. This designation was not made by statute but only by an internal Supreme
Court rule under its authority to promulgate rules governing matters of procedure and its constitutional mandate to
supervise the administration of all courts and the personnel thereof Certainly, an internal rule promulgated by the
Court cannot go beyond the commanding statute. But as a more fundamental reason, the designation of Special
Commercial Courts is, to stress, merely an incident related to the court's exercise of jurisdiction, which, as first
discussed, is distinct from the concept of jurisdiction over the subject matter. The RTC's general jurisdiction over
ordinary civil cases is therefore not abdicated by an internal rule streamlining court procedure.22

It is apt to note, however, that the foregoing guideline applies only in a situation where the ordinary civil case filed
before the proper RTCs was "wrongly raffled" to its branches designated as Special Commercial Courts, which
situation does not obtain in this case. Here, no clear and convincing evidence is shown to overturn the legal
presumption that official duty has been regularly performed when the Clerk of Court of the Makati RTC docketed the
petition for injunction with damages as an ordinary civil case - not as a commercial case - and, consequently, raffled
it among all branches of the same RTC, and eventually assigned it to Branch 149. To recall, the designation of the
said branch as a Special Commercial Court by no means diminished its power as a court of general jurisdiction to
hear and decide cases of all nature, whether civil, criminal or special proceedings. There is no question, therefore,
that the Makati RTC, Branch 149 erred in dismissing the petition for injunction with damages, which is clearly an
ordinary civil case. As a court of general jurisdiction, it still has jurisdiction over the subject matter thereof.

In view of the above discussion, the Court finds no necessity to delve into the other contentions raised by the
parties, as they should be properly addressed by the Makati RTC, Branch 149 which has jurisdiction over the
subject matter of the petition for injunction with damages.

WHEREFORE, the petition for review on certiorari is GRANTED. The Order dated June 28, 2012 and Resolution
dated September 20, 2012 issued by the Regional Trial Court ofMakati City, Branch 149, in Civil Case No. 12-309,
are hereby REVERSED and SET ASIDE. Civil Case No. l 2-309 is REINSTATED in the docket of the same branch
which is further ORDERED to resolve the case with reasonable dispatch.

This Decision is immediately executory.

SO ORDERED.

ARACELI J. CABRERA and ARNEL CABRERA and in behalf of the heirs of SEVERINO
CABRERA,Petitioners,
vs.
ANGELA G. FRANCISCO, FELIPE C. GELLA, VICTOR C. CELLA, ELENA LEILANI G. REYES, MA. RIZALINA
G.ILIGAN and DIANA ROSE GELLA, Respondents.

DECISION

DEL CASTILLO, J.:

"The nature of an action, as well as which court or body has jurisdiction over it, is determined based on the
allegations contained in the Complaint of the plaintiffs x x x. The averments in the Complaint and the character of
the relief sought arc the ones to be consulted. x x x"1

This Petition for Review on Certiorari2 assails the July 6, 2005 Decision3 of the Court of Appeals (CA) in CA-G.R. CV
No. 75126 which dismissed the appeal filed by petitioners Arceli J. Cabrera (Arceli) and Arnel Cabrera (Arnel), in
their own behalf and in behalf of the heirs of Severino Cabrera (petitioners), and affirmed the Order4 dated May 2,
2002 of the Regional Trial Court (RTC), Branch 12, San Jose, Antique in Civil Case No. 2001-9-3267. The said RTC
Order granted the Motion to Dismiss5 of respondents Angela G. Francisco, Felipe C. Gella, Victor C. Gella, Elena
Leilani G. Reyes, Ma. Rizalina G. Iligan and Diana Rose Gella (respondents) and dismissed petitioners’
Complaint6denominated as Collection of Agents’ Compensation, Commission and Damages. Likewise assailed is
the CA Resolution7 dated April 5, 2006 which denied petitioners’ Motion for Reconsideration.8

Factual Antecedents

On October 25, 1976, respondents’ father, Atty. Lorenzo C. Gella (Atty. Gella), executed a private document
confirming that he has appointed Severino Cabrera (Severino), husband of Araceli and father of Arnel as
administrator of all his real properties located in San Jose, Antique9 consisting of about 24 hectares of land
described as Lot No. 1782-B and covered by Transfer Certificate of Title No. T-16987.10

When Severino died in 1991, Araceli and Arnel, with the consent of respondents, took over the administration of the
properties. Respondents likewise instructed them to look for buyers of the properties, allegedly promising them "a
commission of five percent of the total purchase price of the said properties as compensation for their long and
continued administration"11 thereof.

Accordingly, petitioners introduced real estate broker and President of ESV Marketing and Development
Corporation, Erlinda Veñegas (Erlinda), to the respondents who agreed to have the said properties developed by
Erlinda’s company. However, a conflict arose when respondents appointed Erlinda as the new administratrix of the
properties and terminated Araceli’s and Arnel’s services.
Petitioners, through counsel, wrote respondents and demanded for their five percent commission and compensation
to no avail. Hence, on September 3, 2001, they filed a Complaint for Collection of Agent’s Compensation,
Commission and Damages12 against respondents before the RTC. Attached to their Complaint is a copy of the tax
declaration for Lot No. 1782-B.13

Ruling of the Regional Trial Court

Petitioners prayed that they be paid (1) commission and compensation in the form of real property equivalent to five
percent of the 24-hectare Lot No. 1782-B, (2) moral damages of ₱100,000.00, and (3) attorney’s fees and litigation
expenses of ₱100,000.00.

Respondents filed a Motion to Dismiss14 based on the following grounds: (1) lack of jurisdiction, (2) failure to state a
cause of action, and (3) lack of legal capacity of Araceli and Arnel to sue in behalf of the other heirs of Severino.

Respondents argued that for RTCs outside of Metro Manila to take cognizance of a civil suit, the jurisdictional
amount must exceed ₱200,000.00 pursuant to Section 5 of Republic Act (RA) No. 7691 which amended Section 19
of Batas Pambansa Blg. (BP) 129. And since the total market value of Lot No. 1782-B is ₱3,550,072,15 five percent
thereof is only ₱177,506.60 or less than the said jurisdictional amount, then the RTC has no jurisdiction over
petitioners’ Complaint. Respondents also posited that the Complaint states no cause of action since petitioners’
supposed right to any commission remained inchoate as Lot No. 1782-B has not yet been sold; in fact, the
Complaint merely alleged that petitioners introduced a real estate broker to respondents. Lastly, respondents
averred that petitioners have no legal capacity to sue on behalf of Severino’s other heirs and that the verification and
certification of non-forum shopping attached to the Complaint only mentioned Araceli and Arnel as plaintiffs.

Finding respondents’ arguments to be well-taken, the RTC, in an Order16 dated May 2, 2002 ruled:

WHEREFORE, premises considered, the respondents’ Motion to Dismiss is granted. Consequently, this case is
hereby DISMISSED. Costs against the petitioners.

SO ORDERED.17

Petitioners filed a Notice of Appeal,18 hence, the elevation of the records of the case to the CA.

Ruling of the Court of Appeals

Petitioners averred that their claim is one which is incapable of pecuniary estimation or one involving interest in real
property the assessed value of which exceeds ₱200,000.00. Hence, it falls under the exclusive original jurisdiction
of the RTC. Moreover, they asserted that they are not only claiming for commission but also for compensation for
the services rendered by Severino as well as by Araceli and Arnel for the administration of respondents’ properties.
Citing Section 3, Rule 319 of the Rules of Court, petitioners justified the inclusion of Severino’s other heirs as
plaintiffs in the Complaint.

In the Decision20 dated July 6, 2005, the CA concluded that the Complaint is mainly for collection of sum of money
and not one which is incapable of pecuniary estimation since petitioners are claiming five percent of the total
purchase price of Lot No. 1782-B. Neither does it involve an interest over a property since petitioners are merely
claiming payment for their services. The appellate court also ruled that the Complaint did not state a cause of action
since it failed to show the existence of petitioners’ right that was allegedly violated by respondents. Moreover, it
found no evidence of Araceli’s and Arnel’s authority to file the Complaint for and in behalf of Severino’s other heirs.
In sum, the CA found no error on the part of the RTC in granting respondents’ Motion to Dismiss. Thus:

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the appeal filed
in this case and AFFIRMING the Order rendered by the lower court in Civil Case No. 2001-9-3267 with double costs
against petitioners.

SO ORDERED.21
Petitioners filed a Motion for Reconsideration22 questioning solely the CA’s affirmance of the RTC’s finding on lack of
jurisdiction. This was, however, also denied in a Resolution23 dated April 5, 2006.

Hence, the present Petition for Review on Certiorari.

Issues

Whether the CA erred in affirming the RTC’s findings that it has no jurisdiction over the subject matter of the case;
that the Complaint states no cause of action; and that petitioners Araceli and Arnel have no legal capacity to sue in
behalf of the other heirs of Severino.

The Parties’ Arguments

At the outset, petitioners claim that the RTC did not make its own independent assessment of the merits of
respondents’ Motion to Dismiss but only blindly adopted the arguments raised therein. This, to them, violates the
Court’s pronouncement in Atty. Osumo v. Judge Serrano24 enjoining judges to be faithful to the law and to maintain
professional competence.

As to the substantial issues, petitioners reiterate the arguments they raised before the CA. They insist that their
Complaint is one which is incapable of pecuniary estimation or involves interest in real property the assessed value
of which exceeds ₱200,000.00 and falls within the RTC’s jurisdiction. At any rate, they emphasize that they likewise
seek to recover damages, the amount of which should have been considered by the RTC in determining jurisdiction.
Moreover, they have a cause of action against the respondents because an agency under the Civil Code is
presumed to be for a compensation.25 And what they are claiming in their Complaint is such compensation for the
services rendered not only by Severino but also by Araceli and Arnel as administrators/agents of respondents’
properties. Lastly, they allege that pursuant to Section 3, Rule 3 of the Rules of Court, the joining of Severino’s other
heirs as plaintiffs in the Complaint, is proper.

On the other hand, respondents assert that petitioners’ Complaint, as correctly found by the CA, is for a specific sum
of money seeking to recover the amount of ₱177,503.60,26 which is below the jurisdictional amount for RTCs outside
of Metro Manila. As to petitioners’ claim for damages, the same is only incidental to the principal claim for agent’s
compensation and therefore should not be included in computing the total amount of the claim for purposes of
determining jurisdiction. Respondents likewise point out that the CA’s affirmance of the RTC’s findings that the
Complaint states no cause of action and that Araceli and Arnel have no capacity to sue in behalf of the other heirs
can no longer be questioned before this Court as they are already final and executory since petitioners failed to
assail them in their Motion for Reconsideration with the CA. Be that as it may, no error can be imputed to the CA for
affirming the said findings as they are in accordance with law.

Our Ruling

The Petition lacks merit.

Contrary to petitioners’ claim, the RTC
made an independent assessment of the
merits of respondents’ Motion to
Dismiss.

It cannot be gainsaid that "it is the Court’s bounden duty to assess independently the merits of a motion x x x."27 In
this case, the RTC complied with this duty by making its own independent assessment of the merits of respondents’
Motion to Dismiss. A reading of the RTC’s Order will show that in resolving said motion, it judiciously examined the
Complaint and the documents attached thereto as well as the other pleadings filed in connection with the said
motion.28 Based on these, it made an extensive discussion of its observations and conclusions. This is apparent
from the following portions of the said Order, to wit:

x x x In the instant case, the plaintiffs’ complaint does not even mention specifically the amount of their demand
outside of their claim for damages and attorney’s fees. They are only demanding the payment of their alleged
commission/compensation and that of the late Severino Cabrera which they fixed at 5% of Lot No. 1782-B allegedly
with an area of 24 hectares. They did not also state the total monetary value of Lot 1782-B neither did they mention
the monetary equivalent of 5% of Lot No. 1782-B. In short, the complaint fails to establish that this Court has
jurisdiction over the subject matter of the claim.

As the tax declaration covering Lot No. 1782-B has been attached to the complaint as Annex "C" and made an
integral part thereof, the court, in its desire to determine whether it has jurisdiction over the subject matter of
plaintiff’s claim computed the total market value of Lot No. 1782-B, including the value of the trees and the plants
standing thereon, as appearing in said Annex "C". The computation shows the amount of ₱3,508,370.00. Five
percent thereof is ₱175,418.50. It is way below the jurisdictional amount for the Regional Trial Court outside Metro
Manila which is pegged at more than ₱200,000. Clearly, therefore, this Court has no jurisdiction over the subject
matter of the plaintiff’s complaint as correctly contended by the defendants.29

xxxx

A careful scrutiny of the complaint in this case reveals that it is bereft of any allegation that Lot No. 1782-B or any
portion thereof has already been sold thru the plaintiffs’ efforts prior to the alleged dismissal as agents or brokers of
the defendants. As they failed to sell Lot No. 1782-B or any portion thereof, then they are not entitled to any
commission, assuming in gratia argumenti that they were promised 5% commission by defendants should they be
able to sell Lot No. 1782-B or any part or parcel of the said lot.

Besides, the court notices that the appointment of the plaintiffs’ father (Annex "A"-Complaint) does not state in any
manner that he is entitled to a compensation or commission when it is supposed to be the repository of what had
been agreed upon between him and Atty. Lorenzo C. Gella, relative to his designation as administrator of Atty.
Gella. As such, the plaintiffs cannot claim now that Severino Cabrera is entitled to any compensation or commission
as Annex "A" does not so provide.30

xxxx

An examination of the records of this case reveals that there is nothing in plaintiffs’ complaint showing that they
were empowered by the other heirs of the late Severino Cabrera to take this action on their behalf. x x x31

Clearly, petitioners’ claim that the RTC merely adopted the arguments of respondents in their Motion to Dismiss
when it resolved the same is belied by the above-quoted disquisition of the RTC on the matter and therefore
deserves no credence.

Petitioners’ Complaint is neither one

which is incapable of pecuniary
estimation nor involves interest in a real
property.

Section 19(1) and (2) of BP 12932 as amended by RA 769133 read:

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;

(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, where
the assessed value of the property involved exceeds twenty thousand pesos (₱20,000.00) or for civil actions
in Metro Manila, where such value exceeds Fifty thousand pesos (₱50,000.00) except actions for forcible
entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon the
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts;

xxxx

Insisting that the RTC has jurisdiction over their Complaint, petitioners contend that the same is one which is
incapable of pecuniary estimation or involves interest in a real property the assessed value of which exceeds
₱200,000.00.
The Court does not agree. To ascertain the correctness of petitioner’s contention, the averments in the Complaint
and the character of the relief sought in the said Complaint must be consulted.34 This is because the jurisdiction of
the court is determined by the nature of the action pleaded as appearing from the allegations in the
Complaint.35Hence, the pertinent portions of petitioners’ Complaint are hereunder reproduced:

xxxx

2. That on October 25, 1976 the defendants’ father the late Atty. Lorenzo Gella, x x x designated x x x
Severino Cabrera as agent or administrator of all his real properties located in San Jose, Antique x x x.

3. That said Severino Cabrera immediately assumed his duties and responsibilities faithfully as agent or
administrator until his death in 1991 of the properties of Lorenzo Gella in San Jose, Antique consisting of
about 24 hectares x x x which later became Lot No. 1782-B in the name of the defendants, covered by
T.C.T. No. T-16987, Register of Deeds of Antique x x x.

4. That after the death of said Severino Cabrera in 1991, with the consent of the defendants, his wife took
over his duties and responsibilities as agent or administratrix of the above-named properties of the
defendants in San Jose, Antique with the help of her son, Arnel Cabrera as ‘encargado’ and the plaintiffs
were also instructed by the defendants to look for buyers of their properties and plaintiffs were promised by
defendants a commission of five percent of the total purchase price of the said properties as compensation
for their long and continued administration of all the said properties.

5. That sometime in 1994 plaintiffs approached the real estate broker Erlinda Veñegas to sell the above-
described Lot No. 1782-B and the plaintiffs gave her the addresses of the defendants who at all times live in
Metro Manila. Thereafter defendants agreed to have the said property developed by ESV Marketing &
Development Corporation represented by its President, said Erlinda Veñegas and defendants also
designated said Erlinda Veñegas as administratrix of said property and at the same time defendants
dismissed plaintiffs as agents or administrators thereof;

6. That on August 1, 2001 plaintiffs, through counsel wrote defendants demanding payment of their five
percent of twenty four hectares properties under their administration for twenty five years in the form of real
estate in the subdivision of Lot 1782-B as their compensation or commission, but defendants refused and
failed to pay plaintiffs in cash or in kind of what is due them;

7. That in view of the aforesaid failure and refusal of defendants to pay their compensation or commission
and instead they were dismissed and replaced by the said Erlinda Veñegas they themselves recommended
to defendants, the plaintiffs have suffered public humiliation, mental anguish, and serious anxiety for which
plaintiffs should be adjudged and entitled to moral damages in the sum of not less than Php100,000.00
each.

8. That defendants’ ingratitude and unjustified refusal to pay plaintiffs x x x their compensation or
commission for twenty five years service as administrators and had successfully found a developer of
defendants’ property but only to be dismissed, plaintiffs were compelled to institute this action and incur
expenses as well as attorney’s fees in the sum of Php100,000.00.

PRAYER

WHEREFORE, it is respectfully prayed that after due hearing, judgment be rendered against defendants jointly and
severally in favor of the plaintiffs, as follows:

a. To pay plaintiffs their compensation or commission in the form of real estate from Lot No. 1782-B
subdivision equivalent to five percent of twenty four hectares properties under their administration;

b. To pay plaintiffs moral damages in the amount of not less than Php100,000.00 each;

c. Attorney’s fee and litigation expenses in the amount of not less than Php100,000.00 each and pay the
costs of suit
 x x x x36 (Italics and Emphases supplied)

The Court in Ungria v. Court of Appeals37 restated the criterion laid down in Singson v. Isabela Sawmill38 to ascertain
if an action is capable or not of pecuniary estimation, viz:

In determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court
has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for
the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is
in the municipal courts or in the Courts of First Instance would depend on the amount of the claim. However, where
the basic issue is something other than the right to recover a sum of money, where the money claim is purely
incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases
where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by Courts
of First Instance (now Regional Trial Courts).

It can be readily seen from the allegations in the Complaint that petitioners’ main purpose in filing the same is to
collect the commission allegedly promised them by respondents should they be able to sell Lot No. 1782-B, as well
as the compensation for the services rendered by Severino, Araceli and Arnel for the administration of respondents’
properties. Captioned as a Complaint for Collection of Agent’s Compensation, Commission and Damages, it is
principally for the collection of a sum of money representing such compensation and commission. Indeed, the
payment of such money claim is the principal relief sought and not merely incidental to, or a consequence of another
action where the subject of litigation may not be estimated in terms of money. In fact, petitioners in this case
estimated their claim to be equivalent to five percent of the purchase price of Lot No. 1782-B. Therefore, the CA did
not err when it ruled that petitioners’ Complaint is not incapable of pecuniary estimation.

The Court cannot also give credence to petitioners’ contention that their action involves interest in a real property.
The October 25, 1976 letter39 of Atty. Gella confirming Severino’s appointment as administrator of his properties
does not provide that the latter’s services would be compensated in the form of real estate or, at the very least, that
it was for a compensation. Neither was it alleged in the Complaint that the five percent commission promised to
Araceli and Arnel would be equivalent to such portion of Lot No. 1782-B. What is clear from paragraph 4 thereof is
that respondents instructed petitioners to look for buyers of their properties and "were promised by respondents a
commission of five percent of the total purchase price of the said properties as compensation for their long and
continued administration of all the said properties." Also, petitioners’ allegation in paragraph 6 that respondents
failed to pay them "in cash or in kind" of what is due them negates any agreement between the parties that they
should be paid in the form of real estate. Clearly, the allegations in their Complaint failed to sufficiently show that
they have interest of whatever kind over the properties of respondents. Given these, petitioners’ claim that their
action involves interest over a real property is unavailing. Thus, the Court quotes with approval the CA’s
ratiocination with respect to the same:

As to their weak claim of interest over the property, it is apparent that their only interest is to be compensated for
their long-term administration of the properties. They do not claim an interest in the properties themselves but
merely payment for their services, such payment they compute to be equivalent to five (5%) percent of the value of
the properties. Under Section 1, Rule 4 of the Rules of Court, a real action is an action affecting title to or
possession of real property, or interest therein. These include partition or condemnation of, or foreclosure of
mortgage on, real property. Plaintiffs-appellants’ interest is obviously not the one contemplated under the rules on
jurisdiction.40

Petitioners’ demand is below the

jurisdictional amount required for RTCs
outside of Metro Manila, hence, the RTC
concerned in this case has no
jurisdiction over petitioners’ Complaint.

To determine whether the RTC in this case has jurisdiction over petitioners’ Complaint, respondents correctly
argued that the same be considered vis-à-vis Section 19(8) of BP 129, which provides:

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:

xxxx
(8) In all other cases in which the demand, exclusive of interests, damages of whatever kind, attorney’s fees,
litigation expenses, and costs or the value of the property exceeds One hundred thousand pesos (₱100,000.00) or,
in such other cases in Metro Manila, where the demand, exclusive of the abovementioned items exceeds Two
hundred thousand pesos (₱200,000.00).

This jurisdictional amount of exceeding ₱100,000.00 for RTC’s outside of Metro Manila was adjusted to
₱200,000.00 effective March 20, 1999 in pursuance to Section 5 of RA 769141 which further provides:

SEC. 5. After five (5) years from the effectivity of this Act, the jurisdictional amounts mentioned in Sec. 19(3), (4),
and (8); and Sec. 33(1) of Batas Pambansa Blg. 129 as amended by this Act, shall be adjusted to Two hundred
thousand pesos (₱200,000.00). Five (5) years thereafter, such jurisdictional amounts shall be adjusted further to
Three hundred thousand pesos (₱300,000.00): Provided, however, That in the case of Metro Manila, the
abovementioned jurisdictional amounts shall be adjusted after five (5) years from the effectivity of this Act to Four
hundred thousand pesos (₱400,000.00).

Hence, when petitioners filed their Complaint on September 3, 2001, the said increased jurisdictional amount was
already effective. The demand in their Complaint must therefore exceed ₱200,000.00 in order for it to fall under the
jurisdiction of the RTC.

Petitioners prayed that they be paid five percent of the total purchase price of Lot No. 1782-B. However, since the
Complaint did not allege that the said property has already been sold, as in fact it has not yet been sold as
respondents contend, there is no purchase price which can be used as basis for computing the five percent that
petitioners are claiming. Nevertheless and as mentioned, petitioners were able to attach to their Complaint a copy of
the tax declaration for Lot No. 1782-B showing a total market value of ₱3,550,072.00.42 And since "the fair market
value is the price at which a property may be sold by a seller, who is not compelled to sell, and bought by a buyer,
who is not compelled to buy,"43 the RTC correctly computed the amount of petitioners’ claim based on the property’s
market value. And since five percent of ₱3,550,072.00 is only ₱177,503.60 or below the jurisdictional amount of
exceeding ₱200,000.00 set for RTCs outside of Metro Manila, the RTC in this case has no jurisdiction over
petitioners’ claim.

There is no merit to petitioners’ averment that their demand for moral damages should be included in the
computation of their total claims. Paragraph 8, Section 19 of BP 129 expressly speaks of demand which is exclusive
of damages of whatever kind. This exclusion was later explained by the Court in Administrative Circular No. 09-94
dated June 14, 1994 as follows:

2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional amount under Section 19
(8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where the damages are
merely incidental to or a consequence of the main cause of action. However, in cases where the claim for damages
is the main cause of action, or one of the causes of action, the amount of such claim shall be considered in
determining the jurisdiction of the court. 1âw phi1

Here, the moral damages being claimed by petitioners are merely the consequence of respondents’ alleged non-
payment of commission and compensation the collection of which is petitioners’ main cause of action. Thus, the said
claim for moral damages cannot be included in determining the jurisdictional amount.

In view of the foregoing, the CA did not err in affirming the RTC’s conclusion that it has no jurisdiction over
petitioners’ claim.

The CA’s affirmance of the RTC’s

findings that the Complaint states no
cause of action and that Araceli and
Arnel have no authority to sue in behalf
of Severino’s other heirs cannot be
raised in this Petition.

As pointed out by respondents, petitioners tailed to question in their Motion for Reconsideration before the CA its
affirmance of the RTC's findings that the Complaint states no cause of action and that Araceli and Arne! have no
authority to sue in behalf of the other heirs of Severino. Suffice it to say that ''prior to raising these arguments before
this Court, they should have raised the matter in their Motion for Reconsideration in order to give the appellate court
an opportunity to correct its ruling. For them to raise these issues be tore this Court now would be improper, since
they failed to do so be tore the CA."44

WHEREFORE, the Petition for Review on Certiorari is DENIED and the assailed Decision dated July 6, 2005 and
the Resolution dated April 5, 2006 of the Court of Appeals in CA-G.R. CV No. 75126 are AFFIRMED.

SO ORDERED.

ON JURISDICTION OVER THE DEFENDANT

PRUDENTIAL BANK (now Bank of the Philippine Islands) as the duly appointed ADMINISTRATOR OF THE
ESTATE OF JULIANA DIEZ VDA. DE GABRIEL,Petitioner,
vs.
AMADOR A. MAGDAMIT, JR., on his behalf and as substituted heir (son) of AMADOR MAGDAMIT, SR., and
AMELIA F. MAGDAMIT, as substituted heir (Widow) of AMADOR MAGDAMIT, SR., Respondents.

DECISION

PEREZ, J.:

Before us is a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure assailing the Decision 1 and
Resolution2 of the Court of Appeals (CA) dated 3 September 2007 and 18 July 2008, respectively, in CA-G.R. SP
No. 93368, affirming the Decision of the Regional Trial Court (RTC),3 dated 18 January 2006, in Civil Case No. 05-
112499, which reversed the ruling of the Metropolitan Trial Court (MeTC) on the ground that the MeTC did not
acquire jurisdiction over the person of the respondents due to invalid service of summons.

The facts as culled from the records are as follows:

This is a case of unlawful detainer filed by petitioner Prudential Bank, now Bank of the Philippine Islands (petitioner),
in its capacity as administrator of the Estate of Juliana Diez Vda. De Gabriel (Estate). It is based on the ground of
respondents’ failure to pay rentals and refusal to vacate the subject property, which is allegedly part of the Estate
located at 1164 Interior, Julio Nakpil St., Paco, Manila, covered by Transfer Certificate of Title No. 118317 of the
Registry of Deeds of Manila.

In the Original Complaint4 filed before the MeTC, Branch 15 of Manila, petitioner impleaded Amador A. Magdamit,
Jr. (Magdamit, Jr.), as respondent.

Instead of filing an Answer, Magdamit, Jr. filed a Notice of Special Appearance with Motion to Dismiss. Among
others, Magdamit, Jr. argued that (1) petitioner was not duly authorized through a Board Resolution to institute the
complaint, (2) he was not the occupant of the subject property but instead, his parents, as grantees or awardees of
Juliana Diez Vda. De Gabriel, and (3) the MeTC did not acquire jurisdiction over his person because the summons
was served at his former address at 1164 Interior Julio Nakpil St., Paco, Manila. On 30 April 2003, petitioner filed a
Motion to Strike Out this pleading on the ground that it is prohibited. Petitioner then filed an Amended Complaint,
this time, impleading both Magdamit, Jr. and Amador Magdamit, Sr. (Magdamit, Sr.).

In an Order5 dated 26 June 2003, the MeTC granted petitioner’s Motion to Strike Out Magdamit, Jr.’s Notice of
Special Appearance with Motion to Dismiss and ordered Magdamit,Jr. to file an Answer. The Order reads:

After due consideration of the matter and arguments stated therein, the Court resolves to DENY the defendant’s
Motion to dismiss, it appearing that the summons issued in this case was served, albeit substituted nevertheless
valid. It is of no consequence that defendant is also presently residing in Bacoor, Cavite. Suffice it to say that
summons was served upon him (although substituted) on the leased premises which plaintiff is justified in assuming
that he is also residing there at. Moreover, it appears that he knew the person on whom summons was served
(together with a copy of the complaint) as a certain Dara Cabug only that he claims that the latter is not of "suitable
age and discretion" to receive the summons. Simply put, the requirement of due process has been satisfied. Be that
as it may, it would not unduly prejudice the rights of the plaintiff if defendant is given additional period of five (5) days
from notice hereof within which to file his Answer.6

In response to the Amended Complaint, both Magdamit, Jr. and Magdamit, Sr. filed their Answers separately. On 9
July 2003, Magdamit, Jr., filed his Answerwith Counterclaim7 (In a Special Appearance Capacity). On the other
hand, Magdamit, Sr. filed his Answer8 on 13 November 2003. Magdamit, Sr. argued that the MeTC did not acquire
jurisdiction over his person because the summons was not properly served as the summons was received by Madel
Magalona, who is not authorized to receive summons being a mere housemaid of Magdamit, Sr.’s daughter, Arleen
Marie Cabug. Also, Magdamit, Sr. argued that in the 1960s, the Spouses Francisco and Juliana Gabriel assigned
the subject property to him free of charge as a reward and in recompense for the long, faithful, and devoted services
he rendered to them. Since then, he had been continuously exercising acts of ownership over the subject property,
including payment of real estate taxes. Magdamit, Sr. further argued that amendment of the Complaint in order to
implead him is improper. According to Magdamit, Sr., amendment cannot be allowed so as to confer jurisdiction
upon a court that never acquired it in the first place, and the ejectment case cannot be instituted against Magdamit,
Jr. because an action to recover possession cannot be maintained against one who is not in actual or legal
possession thereof.9

Pending litigation of the case, Magdamit, Jr., who was made an original defendant in the MeTC, substituted his
deceased father, Magdamit, Sr.

Ruling of the MeTC

After trial, the MeTC ruled in favor of petitioner. According to the MeTC, "[t]he fact that the person who received the
summons was a 13-year old girl does not make the service of summons invalid. That she was of sufficient age and
discretion is shown by the fact that she was intelligent enough to immediately bring to the attention of defendant
Atty. Amador Magdamit, Jr. the summons and copy of the complaint she received."10 The MeTC went on further,
stating that Magdamit Sr.’s claim of ownership is beyond its jurisdiction because the onlyissue in an ejectment case
is "possession de facto". The dispositive portion of the MeTC Decision dated 21 March 2005 reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against defendants Amador Magdamit, Sr.:

1. ordering said defendant and all persons claiming right under him to vacate the subject three (3) lots
covered by TCT No. 118317 of the Registry of Deeds of Manila, located at and also known as 1164 Interior
J. Nakpil St., Paco, Manila and to peacefully surrender possession thereof to plaintiff;

2. ordering said defendant to pay plaintiff the sum of ₱180,000.00 representing rentals or reasonable
compensation for the use of the property due from August 2003 up to February 2005 and ₱10,000.00 per
month thereafter until defendants fully vacate the subject property;

3. ordering said defendant to pay plaintiff the sum of ₱20,000.00 as attorney’s fees; and

4. to pay the costs. The complaint is dismissed as against defendant Amador Magdamit, Jr. and the latter’s
counterclaim is likewise dismissed.

SO ORDERED.11

Ruling of the RTC

On appeal, the RTC set aside the decision of the MeTC and dismissed the case for lack of jurisdiction over the
person of the respondents.12 According to the RTC, amending the original complaint to implead Magdamit, Sr. to
cure a defect in the complaint and introduce a non-existing cause of action, which petitioner did not possess at the
outset, and to confer

jurisdiction upon the court that never acquired jurisdiction in the first place renders the complaint dismissible. The
RTC further stated that because the Return did not clearly indicate the impossibility of service of summons within a
reasonable time upon the respondents, the process server’s resort to substituted service of summons was
unjustified. The decision of the RTC reads:
WHEREFORE, this Court finds merit on the appeal and consequently, the decision on appeal is hereby set aside,
and this case is accordingly dismissed for lack of jurisdiction over the persons of the defendants.13

Ruling of the CA

Aggrieved, petitioner filed an appeal via a petition for review under Rule 42 of the Rules of Court beforethe CA. The
petitioner argued that the RTC erred in ruling thatthe MeTC did not acquire jurisdiction over the person of the
respondents due to improper service of summons considering that the respondents participated in the proceedings
in the MeTC by filing a Notice of Appearance with Motion to Dismiss, Answer with Counterclaim, entering into pre-
trial, submitting position papers, and presenting evidence, which militate against the alleged improper service of
summons. On 3 September 2007, the CA denied the petition and affirmed the decision of the RTC.

According to the CA, the Return, with only a general statement and without specifying the details of the attendant
circumstances or of the efforts exerted to serve the summons, will notsuffice for purposes of complying with the
rules of substituted service of summons. The CA also rejected petitioner’s contention that respondents’ voluntary
submission to the jurisdiction of the court cured any defect in the substituted service of summons when as early as
during the infancy of the proceedings in the MeTC, Magdamit, Jr. seasonably raised the ground of lack of jurisdiction
over his person by filing a Notice of Appearance with Motion to Dismiss, which the respondents incessantly
reiterated in their pleadings even when the case was elevated to the RTC, then to the CA. The dispositive portion of
the decision of the CA reads:

Having found that the MeTC did notacquire jurisdiction over the persons (sic) of respondents, it would be futile on
Our part to still pass upon the other errors assigned by petitioner. WHEREFORE, premises considered, the petition
is DENIED. Costs against petitioner.

SO ORDERED.14

The motion for reconsideration was likewise denied for lack of merit.

Hence, this Petition, raising the following assignment of errors:

"I. Whether or not the Court of Appeals erred in dismissing the Petition for Review of the Decision of the
Regional Trial Court of Manila dated January 18,2006; and disposing of only the issue of lack of jurisdiction
over the person of respondents for alleged improper service of summons;

II. Whether or not the Court of Appeals erred in not ruling on the material and substantial issues in the case;
and

III. Whether or not the Court of Appeals erred in affirming the decision of the Metropolitan Trial Court of
Manila dismissing of the Complaint against Magdamit, Jr., based on the ground that he was no longer
residing at the subject property prior to, and at the time of the filing of the ejectment complaint."15

The pivotal issue is whether or not the MeTC acquired jurisdiction over the person of the respondents.

The petition is bereft of merit.

Both respondents, Magdamit, Jr. and Magdamit, Sr. argued that the MeTC did not acquire jurisdiction overtheir
persons due to defective or improper service of summons. Magdamit,Sr. argued that the MeTC could not have
acquired jurisdiction over his person due to improper/defective service of summons because it was served upon an
incompetent person, the housemaid of his daughter. Magdamit Sr. also argued that the MeTC did not acquire
jurisdiction over him because he was impleaded asa respondent only after the inherently invalid original complaint
was amended. According to Magdamit, Sr., the original complaint was inherently invalid because it was instituted
against Magdamit, Jr., against whom an action to recover possession cannot be maintained, because he is not in
actual or legal possession thereof. Thus, the amendment of the inherently invalid original complaint for the purpose
of curing a defect to confer jurisdiction was invalid as the MeTC never acquired jurisdiction in the first
place.16Pertinent to the position of Magdamit, Sr. is the Sheriff’s Return dated 24 October 2003 on the service of
summons on Magdamit, Jr. which reads:
 1. That, on October 22, 2003, he proceeded to the place of defendant Amador Magdamit, Sr. at No. 1164
Int. Julio Nakpil St., Paco, Manila, for the purpose of serving the Summons issued in the above-entitled
case, but no service was effected because he was not around;

2. That, on October 23, 2003, undersigned repaired (sic) anew to the said place but for the second time, he
failed to reached (sic) said defendant. Thus, he elected (sic) substituted service by serving the said
summons together with the copy of the complaint and annexes attached thereat (sic) to Ms. Madel
Magalona, a person of sufficient age and living thereat who however refused to acknowledge(d) receipt
thereof;

3. That, undersigned explained to (this)Ms. Magalona the contents of the said process in a language she
fully understood and adviced (sic) her to gave (sic) the same to her employer as soon as he arrives.17

On the other hand, Magdamit, Jr. argued that the MeTC did not acquire jurisdiction over his person because the
summons was not served at his residence but at the house of Magdamit, Sr., and on a person not authorized to
receive summons. The Sheriff’s Return dated 25 March 2003 reads:

This is to certify, that on the 24th day of March, 2003, xxx served copy of the Summons together with the copy of the
Complaint and its attachment, upon defendant/s Amador A. Magdamit, Jr. at 1164 Int., J. Nakpil St., Paco, Manila,
by tendering the copy to Dara Cabug (grand daughter), a person of sufficient age, discretion and residing therein
who however refused to acknowledged (sic) receipt thereof.

That on several occasions despite deligent (sic) efforts exerted to serve the said processes personally to
defendant/s herein the same proved futile. Thus, substituted service was effected in accordance with the provision
of Sec. 8, Rule 14, Rules of Court.

In view of the foregoing, the original summons is now respectfully returned to the Honorable Court, DULY
SERVED.18

Fundamental is the rule that jurisdiction over a defendant in a civil case is acquired either through service of
summons or through voluntary appearance in court and submission to its authority. In the absence or when the
service of summons upon the person of the defendant isdefective, the court acquires no jurisdiction over his person,
and a judgment rendered against him is null and void.19

In actionsin personamsuch as ejectment, the court acquires jurisdiction over the person of the defendant through
personal or substituted service of summons. However, because substituted service is in derogation of the usual
method of service and personal service of summons is preferred over substituted service, parties do not have
unbridled right to resort to substituted service of summons.20 Before substituted service of summons is resorted to,
the parties must: (a) indicate the impossibility of personal service of summons within a reasonable time; (b) specify
the efforts exerted to locate the defendant; and (c) state that the summons was served upon a person of sufficient
age and discretion who is residing in the address, or who is in charge of the office or regular place of business of the
defendant.21

In Manotoc v. Court of Appeals,22 we have succinctly discussed a valid resort to substituted service of summons:

We can break down this section into the following requirements to effect a valid substituted service:

(1) Impossibility of Prompt Personal Service

The party relying on substituted service or the sheriff must show that defendant cannot be served promptly or there
is impossibility of prompt service. Section 8, Rule 14 provides that the plaintiff or the sheriff is given a "reasonable
time" to serve the summons to the defendant in person, but no specific time frame is mentioned. "Reasonable time"
is defined as "so much time as is necessary under the circumstances for a reasonably prudent and diligent man to
do, conveniently, what the contract or duty requires that should be done, having a regard for the rights and
possibility of loss, if any, to the other party." Under the Rules, the service of summons has no set period.
However, when the court, clerk of court,or the plaintiff asks the sheriff to make the return of the summons and the
latter submits the return of summons, then the validity of the summons lapses. The plaintiff may then ask for an alias
summons if the service of summons has failed. What then is a reasonable time for the sheriff to effect a personal
service in order to demonstrate impossibility of prompt service? To the plaintiff, "reasonable time" means no more
than seven (7) days since an expeditious processing of a complaint is what a plaintiff wants. To the sheriff,
"reasonable time" means 15 to 30 days because at the end of the month, it is a practice for the branch clerk of court
to require the sheriff to submit a return of the summons assigned to the sheriff for service. The Sheriff’s Return
provides data to the Clerk of Court, which the clerk uses in the Monthly Report of Cases to be submitted to the
Office of the Court Administrator within the first ten (10) days of the succeeding month. Thus, one month from the
issuance of summons can be considered "reasonable time" with regard to personal service on the defendant.

Sheriffs are asked to discharge their duties on the service of summons with due care, utmost diligence, and
reasonable promptness and speed so as not to prejudice the expeditious dispensation of justice. Thus, they are
enjoined to try their best efforts to accomplish personal service on defendant. On the other hand, since the
defendant is expected to try to avoid and evade service of summons, the sheriff must be resourceful, persevering,
canny, and diligent in serving the process on the defendant. For substituted service of summons to be available,
there must be several attempts by the sheriff to personally serve the summons within a reasonable period [of one
month] which eventually resulted in failure to prove impossibility of prompt service. "Several attempts" means at
least three (3) tries, preferably on at least two different dates. In addition, the sheriff must cite why such efforts were
unsuccessful. It is only then that impossibility of service can be confirmed or accepted.

(2) Specific Details in the Return

The sheriff must describe in the Return of Summons the facts and circumstances surrounding the attempted
personal service. The efforts made to find the defendant and the reasons behind the failure must be clearly narrated
in detail in the Return.The date and time of the attempts on personal service, the inquiries made to locate the
defendant, the name/s of the occupants of the alleged residence or house of defendant and all other acts done,
though futile, to serve the summons on defendant must be specified in the Return to justify substituted service. The
form on Sheriff’s Return of Summons on Substituted Service prescribed in the Handbook for Sheriffs published by
the Philippine Judicial Academy requires a narration of the efforts made to find the defendant personally and the fact
of failure. Supreme Court Administrative Circular No. 5 dated November 9, 1989 requires that "impossibility of
prompt service should be shown by stating the efforts made to find the defendant personallyand the failure of such
efforts," which should be made in the proof of service.

(3) A Person of Suitable Age and Discretion

If the substituted service will be effected at defendant’s house or residence, it should be left with a person of
"suitable age and discretion then residing therein." A person of suitable age and discretion is one who has attained
the age of full legal capacity (18 years old) and is considered to have enough discernment to understand the
importance of a summons. "Discretion" isdefined as "the ability to make decisions which represent a responsible
choice and for which an understanding of what is lawful, right or wise may be presupposed". Thus, to be of sufficient
discretion, suchperson must know how to read and understand English to comprehend the import of the summons,
and fully realize the need to deliver the summonsand complaint to the defendant at the earliest possible time for the
person to take appropriate action. Thus, the person must have the "relation of confidence" to the defendant,
ensuring that the latter would receive orat least be notified of the receipt of the summons. The sheriff must therefore
determine if the person found in the alleged dwelling or residence of defendant is of legal age, what the recipient’s
relationship with the defendant is, and whether said person comprehends the significance of the receipt of the
summons and his duty to immediately deliver it to the defendant or at least notify the defendant of said receipt of
summons. These matters must be clearly and specifically described in the Return of Summons.

(4) A Competent Person in Charge

If the substituted service will be done at defendant’s office or regular place of business, then it should be served on
a competent person in charge of the place. Thus, the person on whom the substituted service will be made must be
the one managing the office or business of defendant, such as the president or manager; and such individual must
have sufficient knowledge tounderstand the obligation of the defendant in the summons, its importance, and the
prejudicial effects arising from inaction on the summons. Again, these details must be contained in the
Return.23(Emphasis and underscoring supplied; citations omitted)
The service of summons on Magdamit, Sr. failed to comply with the rule laid down in Manotoc. The resort to
substituted service after just two (2) attempts to personally serve the summons on Magdamit, Sr., is premature
under our pronouncement that:

What then is a reasonable time for the sheriff to effect a personal service in order to demonstrate impossibility of
prompt service? To the plaintiff, "reasonable time"means no more than seven (7) days since an expeditious
processing of a complaint is what a plaintiff wants. To the sheriff, "reasonable time" means 15 to 30 days because at
the end of the month, it is a practice for the branch clerk of court to require the sheriff to submit a return of the
summons assigned to the sheriff for service. The Sheriff’s Return provides data to the Clerk of Court, which the clerk
uses in the Monthly Report of Cases to be submitted to the Office of the Court Administrator within the first ten (10)
days of the succeeding month. Thus, one month from the issuance of summons can be considered "reasonable
time" with regard to personal service on the defendant.24

Then too, the proof of service failed to specify the details of the attendant circumstances. The Return merely
expressed a general statement that because the Sheriff failed to reachMagdamit, Sr., he elected substituted service
of summons. The Return failed to state the impossibility to serve summons within a reasonable time. And the further
defect in the service was that the summons was served on a person not of sufficient discretion, an incompetent
person, Madel Magalona, a housemaid of Magdamit Sr.’s daughter, Arleen Marie Cabug.

Similar to the case of Magdamit, Sr., the service of summons on Magdamit, Jr. also failed to complywith the rules
laid down in Manotoc. The summons was served at 1163 Int., J. Nakpil St., Paco, Manila, Magdamit, Jr.’s former
residence when at the time, Magdamit, Jr. was residing at 0369 Jupiter St., Progressive Village 20 and 21, Molino I,
Bacoor, Cavite. In Keister v. Navarro,25 we have defined "dwelling house" or "residence" to refer to a place where the
person named in the summons is living at the time when the service is made, even though he may be temporarily
out of the country at the time to the time of service. Therefore, it is not sufficient for the Sheriff "to leave the copy at
defendant's former dwelling house, residence, or place ofabode, as the case may be, after his removal therefrom".26

Worse, the Return did not make mention of any attempt to serve the summons at the actual residence of Magdamit,
Jr. The Return merely expressed a general statement that the sheriff exerted efforts to serve the summons and that
the same was futile, "[t]hat on several occasions despite deligent (sic) efforts exerted to serve the said processes
personally to defendant/s herein the same proved futile," without any statement on the impossibility of service of
summons within a reasonable time. Further, the summons was served on a certain DaraCabug, a person not of
suitable age and discretion, who is unauthorized to receive the same.

Notably, the requirement additionally is that

Thus, to be of sufficient discretion, such person must know how to read and understand English to comprehend the
import of the summons, and fully realize the need to deliver the summons and complaint to the defendant at the
earliest possible timefor the person to take appropriate action. Thus, the person must have the "relation of
confidence" to the defendant, ensuring that the latter would receive or at least be notified of the receipt of the
summons. The sheriff must therefore determine if the person found in the alleged dwelling or residence of defendant
is of legal age, what the recipient’s relationship with the defendant is, and whether said person comprehends the
significance of the receipt of the summons and his duty to immediately deliver it tothe defendant or at least notify the
defendant of said receipt of summons. These matters must be clearly and specifically described in the Return of
Summons.27

The readily acceptable conclusion inthis case is that the process server at once resorted to substituted service of
summons without exerting enough effort to personally serve summons on respondents. In Sps. Jose v. Sps.
Boyon,28 we discussed the effect of failure to specify the details of the effort exerted by the process serverto
personally serve summons upon the defendants:

The Return of Summons shows no effort was actually exerted and no positive step taken by either the process
server or petitioners to locate and serve the summons personally on respondents. At best, the Return merely states
the alleged whereabouts of respondents without indicating that such information was verified from a person who had
knowledge thereof. Certainly, without specifying the details of the attendant circumstances or of the efforts exerted
to serve the summons, a general statement that such efforts were made will not suffice for purposes of complying
withthe rules of substituted service of summons.29 (Emphasis and underscoring supplied)
In the case at bar, the Returns contained mere general statements that efforts at personal service were made. Not
having specified the details of the attendant circumstances or of the efforts exerted to serve the summons,30 there
was a failure to comply strictly with all the requirements of substituted service, and as a result the service of
summons is rendered ineffective.31

Filing an Answer does not amount to voluntary appearance

The petitioner asserted that assuming arguendo that the service of summons was defective, respondents’ filing of
their respective Answers and participation in the proceedings in the MeTC, such as attending the pre-trial and
presenting evidence, amount to voluntary appearance which vested the MeTC jurisdiction over their persons.

Indeed, despite lack of valid service of summons, the court can still acquire jurisdiction over the person of the
defendant by virtue of the latter’s voluntary appearance. Section 20, Rule14 of the Rules of Court clearly states:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service
of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person
shall not be deemed a voluntary appearance.

However, such is not the case atbar. Contrary to petitioner’s contention, respondents are not deemed to have
voluntarily submitted to the court’s jurisdiction by virtue of filing an Answer or other appropriate responsive pleadings
and by participating in the case.

The mandate under the Rules on Summary Proceedings that govern ejectment cases, is expeditious administration
of justice such that the filing of an Answer is mandatory. To give effect to the mandatory character and speedy
disposition of cases, the defendant is required to file an answer within ten (10) days from service of summons,
otherwise, the court, motu proprio, or upon motion of the plaintiff, shall render judgment as may be warranted by the
facts alleged in the complaint, limited to the relief prayed for by the petitioner.32 Through this rule, the parties are
precluded from resorting to dilatory maneuvers.

Compliantly, respondents filed their respective Answers. In the MeTC, at first, Magdamit, Jr. filed a Notice of Special
Appearance with Motion to Dismiss, where he seasonably raised the issue of lack of jurisdiction, which the MeTC
later ordered to be stricken out. In lieu thereof, Magdamit, Jr. filed an Answer with Counterclaim (In a Special
Appearance Capacity). Again, Magdamit, Jr. reiterated the lack of jurisdiction over his person and the subject
matter. On the other hand, Magdamit, Sr. filed an Answer with an allegation by special defense that the original
complaint

should be dismissed outright because the MeTC did not acquire jurisdiction over his person and the subject
matter. In sum, both respondents filed their Answers via special appearance.
1âwphi1

In Philippine Commercial International Bank v. Spouses Wilson Dy Hong Pi and Lolita Dy,33 we held that filing of an
answer in a special appearance cannot be construed as voluntary appearance or submission to the court’s
jurisdiction:

Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power of legal
processes exerted over his person, or his voluntary appearance in court. As a general proposition, one who seeks
an affirmative relief is deemed to have submitted to the jurisdiction of the court. It is by reason of this rule that we
have had occasion to declare that the filing of motions to admit answer, for additional time to file answer, for
reconsideration of a default judgment, and to lift order of default with motion for reconsideration, is considered
voluntary submission to the court’s jurisdiction. This, however, is tempered by the concept of conditional
appearance, such that a party who makes a special appearance to challenge, among others, the court’s jurisdiction
over his person cannot be considered to have submitted to its authority.

Prescinding from the foregoing, it is thus clear that:

(1) Special appearance operates as an exception to the general rule on voluntary appearance;
 (2) Accordingly, objections to the jurisdiction of the court over the person of the defendantmust be explicitly
made, i.e., set forth in an unequivocal manner; and

(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially in
instanceswhere a pleading or motion seeking affirmative relief is filed and submitted to the court for
resolution.34 (Emphasis supplied and underscoring supplied)

Parallel to our ruling in Philippine Commercial International Bank, the respondents’ act of filing their respective
Answers with express reservation should not be construed as a waiver of the lack of jurisdiction of the MeTC over
their person because of non-service/defective/improper service of summons and for lack of jurisdiction over the
subject matter. Hence, sans voluntary submission to the court’s jurisdiction, filing an answer in compliance with the
rules on summary procedure in lieu of obtaining an adverse summary judgment does not amount to voluntary
submission. As we already held, a party who makes a special appearance in court, challenging the jurisdiction of
said court, is not deemed to have submitted himself to the jurisdiction of the court.35 It should not be construed as
voluntary submission to the jurisdiction of the court.

In view of the foregoing, the petition is DENIED. The Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 93368, which upheld the ruling of the Regional Trial Court
that the Metropolitan Trial Court in Civil Case No. 174798 did not acquire jurisdiction over the person of the
respondents due to invalid service of summons, are AFFIRMED.

SO ORDERED.

ON VENUE TO FILE ACTION

LEY CONSTRUCTION AND DEVELOPMENT CORPORATION, represented by its President, JANET C.

LEY,Petitioner,
vs.
MARVIN MEDEL SEDANO, doing business under the name and style "LOLA TABA LOLO PATO PALENGKE
AT PALUTO SA SEASIDE,", Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Orders dated June 15, 20152 and January 27, 20163 of the
Regional Trial Court (RTC) of Valenzuela City, Branch 75 (Valenzuela-RTC) in Civil Case No. 40-V-12, which
dismissed petitioner Ley Construction and Development Corporation's (as represented by its President, Janet C.
Ley; petitioner) complaint for collection of sum of money and damages, without prejudice, on the ground of improper
venue.

The Facts

On March 13, 2012, petitioner filed a Complaint for Collection of Sum of Money and Damages4 against respondent
Marvin Medel Sedano (respondent), doing business under the name and style "Lola Taha Lalo Pata Palengke at
Paluto sa Seaside," before the Valenzuela-RTC, docketed as Civil Case No. 40-V-12. In its complaint, petitioner
alleged that on January 14, 2005, it leased5 a 50,000-square meter (sq.m.) parcel of land located at Financial Center
Area, Pasay City (now, Lot 5-A Diosdado Macapagal Boulevard, Pasay City) from respondent third-party defendant,
the Philippine National Construction Corporation (PNCC).6 On September 11, 2006, petitioner subleased7 the
14,659.80-sq.m. portion thereof to respondent for a term often (10) years beginning November 15, 2005, for a
monthly rent of ₱1,174,780.00, subject to a ten percent (10%) increase beginning on the third year and every year
thereafter (lease contract).8 Respondent allegedly failed to pay the rent due for the period August 2011 to December
2011, amounting to a total of P8,828,025.46, and despite demands,9 refused to settle his obligations;10hence, the
complaint.
In his Answer with Third-Party Complaint,11 respondent countered that he religiously paid rent to petitioner until
PNCC demanded12 that the rent be paid directly to it, in view of the petitioner's eviction from the subject property by
virtue of a court order.13 Thus, during the period from August 2011 until December 2011, he remitted the rentals to
PNCC.14 Should he be found liable to petitioner, respondent maintained that the RTC should hold PNCC liable to
reimburse to him the amounts he paid as rentals; hence, the third-party complaint.15

Respondent likewise pointed out that the venue was improperly laid since Section 2116 of the lease contract provides
that "[a]ll actions or case[s] filed in connection with this case shall be filed with the Regional Trial Court of Pasay
City, exclusive of all others."17 Hence, the complaint should be dismissed on the ground of improper venue.

Finally, respondent argued that he paid petitioner the amounts of ₱3,518,352.00 as deposit and advance rentals
under the lease contract, and that he made a ₱400,000.00 overpayment, all of which amounts were not liquidated or
credited to respondent during the subsistence of the lease contract. Thus, respondent interposed a counterclaim,
seeking petitioner to reimburse the said amounts to him, and to pay him moral and exemplary damages, including
litigation expenses, in view of petitioner's filing of such baseless suit.18

In its Comment/Opposition19 to respondent's affirmative defense of improper venue, petitioner argued that Section 21
of the lease contract is not a stipulation as to venue, but a stipulation on jurisdiction which is void.20 This is because
such stipulation deprives other courts, i.e., the Municipal Trial Courts, of jurisdiction over cases which, under the
law, are within its exclusive original jurisdiction, such as an action for unlawful detainer.21 Petitioner further posited
that respondent had already submitted himself to the jurisdiction of the Valenzuela-RTC and had waived any
objections on venue, since he sought affirmative reliefs from the said court when he asked several times for
additional time to file his responsive pleading, set-up counterclaims against petitioner, and impleaded PNCC as a
third-party defendant.22

Meanwhile, in its Answer to Third Party Complaint with Counterclaim,23 PNCC contended that respondent has no
cause of action against it, since he acknowledged PNCC’s right to receive rent, as evidenced by his direct payment
thereof to PNCC.24 Respondent also entered into a contract of lease with PNCC after learning that petitioner had
been evicted from the premises by virtue of a court ruling.25

The Valenzuela-RTC Ruling

In an Order26 dated June 15, 2015, the Valenzuela-RTC granted respondent's motion and dismissed the complaint
on the ground of improper venue. It held that Section 21 of the lease contract between petitioner and respondent is
void insofar as it limits the filing of cases with the R TC of Pasay City, even when the subject matter jurisdiction over
the case is with the Metropolitan Trial Courts.27 However, with respect to the filing of cases cognizable by the RTCs,
the stipulation validly limits the venue to the RTC of Pasay City.28 Since petitioner's complaint is one for collection of
sum of money in an amount that is within the jurisdiction of the R TC, petitioner should have filed the case with the
RTC of Pasay City.29

The Valenzuela-RTC also found no merit in petitioner's claim that respondent waived his right to question the venue
when he filed several motions for extension of time to file his answer. It pointed out that improper venue was among
the defenses raised in respondent's Answer. As such, it was timely raised and, therefore, not waived.30

Aggrieved, petitioner moved for reconsideration31 which was, however, denied by the Valenzuela-RTC in its
Order32dated January 27, 2016; hence, the present petition.

The Issue Before the Court

The sole issue for the Court's resolution is whether or not the Valenzuela-RTC erred in ruling that venue was
improperly laid.

The Court's Ruling

The petition has no merit.

 Rule 4
VENUE OF ACTIONS

Section 1. Venue of real actions. - Actions affecting title to or possession of real property, or interest therein, shall be
commenced and tried in the proper court which has jurisdiction over the area wherein the

real property involved, or a portion thereof, is situated.

Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the municipality or
city wherein the real property involved, or a portion thereof, is situated.

Section 2. Venue of personal actions. -All other actions may be commenced and tried where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or
in the case of a non-resident defendant where he may be found, at the election of the plaintiff.

Section 3. Venue of actions against nonresidents. - If any of the defendants does not reside and is not found in the
Philippines, and the action affects the personal status of the plaintiff, or any property of said defendant located in the
Philippines, the action may be commenced and tried in the court of the place where the plaintiff resides, or where
the property or any portion thereof is situated or found.

Section 4. When Rule not applicable. - This Rule shall not apply -

(a) In those cases where a specific rule or law provides otherwise; or

(b) Where the parties have validly agreed in writing before the filing of the action on the exclusive venue
thereof. (Emphases supplied)

Based on these provisions, the venue for personal actions shall - as a general rule - lie with the court which has
jurisdiction where the plaintiff or the defendant resides, at the election of the plaintiff.33 As an exception, parties may,
through a written instrument, restrict the filing of said actions in a certain exclusive venue.34 In Briones v. Court of
Appeals,35 the Court explained:

Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in the place agreed
upon, or merely permissive in that the parties may file their suit not only in the place agreed upon but also in the
places fixed by law. As in any other agreement, what is essential is the ascertainment of the intention of the parties
respecting the matter.

As regards restrictive stipulations on venue, jurisprudence instructs that it must be shown that such stipulation is
exclusive. In the absence of qualifying or restrictive words, such as "exclusively," "waiving for this purpose any other
venue," "shall only" preceding the designation of venue, "to the exclusion of the other courts," or words of similar
import, the stipulation should be deemed as merely an agreement on an additional forum, not as limiting venue to
the specified place.36

In Pilipino Telephone Corporation v. Tecson,37 the Court held that an exclusive venue stipulation is valid and binding,
provided that: (a) the stipulation on the chosen venue is exclusive in nature or in intent; (b) it is expressed in writing
by the parties thereto; and (c) it is entered into before the filing of the suit.38

After a thorough study of the case, the Court is convinced that all these elements are present and that the
questioned stipulation in the lease contract, i.e., Section 21 thereof, is a valid venue stipulation that limits the venue
of the cases to the courts of Pasay City. It states:

21. Should any of the party (sic) renege or violate any terms and conditions of this lease contract, it shall be
liable for damages. All actions or case[s] filed in connection with this lease shall be filed with the Regional
1âwphi 1

Trial Court of Pasay City, exclusive of all others.39 (Emphases and underscoring supplied)

The above provision clearly shows the parties' intention to limit the place where actions or cases arising from a
violation of the terms and conditions of the contract of lease may be instituted. This is evident from the use of
the phrase "exclusive of all others" and the specification of the locality of Pasay City as the place where such cases
may be filed.

Notably, the fact that this stipulation generalizes that all actions or cases of the aforementioned kind shall be filed
with the RTC of Pasay City, to the exclusion of all other courts, does not mean that the same is a stipulation which
attempts to curtail the jurisdiction of all other courts. It is fundamental that jurisdiction is conferred by law and not
subject to stipulation of the parties.40 Hence, following the rule that the law is deemed written into every contract,41the
said stipulation should not be construed as a stipulation on jurisdiction but rather, one which merely limits venue.
Moreover, "[t]he parties are charged with knowledge of the existing law at the time they enter into the contract and
at the time it is to become operative."42 Thus, without any clear showing in the contract that the parties intended
otherwise, the questioned stipulation should be considered as a stipulation on venue (and not on jurisdiction),
consistent with the basic principles of procedural law.

In this case, it is undisputed that petitioner's action was one for collection of sum of money in an amount43 that falls
within the exclusive jurisdiction of the RTC.44 Since the lease contract already provided that all actions or cases
involving the breach thereof should be filed with the RTC of Pasay City, and that petitioner’s complaint purporting
the said breach fell within the RTC's exclusive original jurisdiction, the latter should have then followed the
contractual stipulation and filed its complaint before the RTC of Pasay City. However, it is undeniable that petitioner
filed its complaint with the Valenzuela-RTC; hence, the same is clearly dismissible on the ground of improper venue,
without prejudice, however, to its refiling in the proper court.

That respondent had filed several motions for extension of time to file a responsive pleading, or that he interposed a
counterclaim or third-party complaint in his answer does not necessarily mean that he waived the affirmative
defense of improper venue. The prevailing rule on objections to improper venue is that the same must be raised at
the earliest opportunity, as in an answer or a motion to dismiss; otherwise, it is deemed waived.45 Here, respondent
timely raised the ground of improper venue since it was one of the affirmative defenses raised in his Answer with
Third-Party Complaint.46 As such, it cannot be said that he had waived the same.

Further, it should be pointed out that the case of Pangasinan Transportation Co., Inc. v. Yatco (Pantranco) 47 cited in
the instant petition48 should not apply to this case, considering that the invocation of the ground of improper venue
therein was not based on a contractual stipulation, but rather on respondent Elpidio O. Dizon's alleged violation of
the Rules of Court, as he filed his case for damages before the Court of First Instance of Rizal, Branch IV (Quezon
City), despite testifying that he was actually a resident of Dagupan City. In that case, the Court ruled that the filing of
a counterclaim and third party-complaint, and additionally, the introduction of evidence of petitioner Pantranco
(respondent in the case for damages) after the denial of its motion to dismiss on the ground of improper venue,
"necessarily implied a submission to the jurisdiction of [the trial court therein], and, accordingly, a waiver of such
right as Pantranco may have had to object to the venue, upon the ground that it had been improperly laid."49 The
rationale for the Pantranco ruling is that a party cannot invoke a violation of a rule on venue against his counter-
party, when he himself is bound by the same rule, but nonetheless, seeks his own relief and in so doing, violates it.

In contrast, the counterclaim of respondent was alleged to be a compulsory counterclaim,50 which he was prompted
to file only because of petitioner's complaint for collection of sum of money, else the same would be barred.51 In fact,
his counterclaim only sought reimbursement of his overpayment to petitioner in the amount of ₱400,000.00, as well
as damages for the filing of a purported baseless suit. Thus, his counterclaim is not covered by the venue
stipulation, since he is not asserting a violation of the terms and conditions of the lease contract, but rather an
independent right which arose only because of the complaint. The same goes for his third-party complaint, whereby
he only pleaded that the rental payments remitted to PNCC for the period August 2011 to December 2011 be
reimbursed to him in the event that petitioner's complaint is found to be meritorious. Since his counterclaim and
third-party complaint are not covered by the venue stipulation, respondent had, therefore, every right to invoke the
same whilst raising the ground of improper venue against petitioner's complaint, which action was, on the contrary,
covered by the stipulation. Thus, there is no inconsistency in respondent's posturing, which perforce precludes the
application of the Pantranco ruling, as well as negates the supposition that he had waived the defense of improper
venue.

WHEREFORE, the petition is DENIED. Accordingly, the Orders dated June 15, 2015 and January 27, 2016 of the
Regional Trial Court of Valenzuela City, Branch 75 in Civil Case No. 40-V-12 are hereby AFFIRMED.

SO ORDERED.
AUCTION IN MALINTA, INC., Petitioner,
vs.
WARREN EMBES LUYABEN, Respondent.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court is the May 31, 2005 Decision1 of the Court of
Appeals in CA-G.R. CV No. 78456, which held that venue was properly laid before the Regional Trial Court of
Bulanao, Tabuk, Kalinga (Kalinga RTC), and reversed the trial court’s September 3, 2002 Resolution2 dismissing the
complaint of respondent Warren Embes Lubayen in Civil Case No. 511, on the ground of improper venue.

The facts show that on October 24, 2001, respondent, a resident of Magsaysay, Tabuk, Kalinga, filed with the
Kalinga RTC a complaint3 for damages against petitioner Auction in Malinta, Inc., a corporation with business
address at Malinta, Valenzuela City, and engaged in public auction of heavy equipments, trucks, and assorted
machineries. Respondent alleged that in an auction conducted by petitioner on May 29, 2001, he was declared the
highest bidder for a wheel loader T.C.M. 75B, series no. 3309. On June 7, 2001, respondent tendered the payment
for the said item but petitioner could no longer produce the loader. It offered a replacement but failed to deliver the
same up to the filing of the complaint. Hence, respondent instituted this case to recover actual, moral, and
exemplary damages plus attorney’s fees.

Petitioner filed a motion to dismiss on the ground of improper venue. It argued that the correct venue is the RTC of
Valenzuela City pursuant to the stipulation in the Bidders Application and Registration Bidding Agreement which
states that:

All Court litigation procedures shall be conducted in the appropriate Courts of Valenzuela City, Metro Manila.4

In a Resolution dated September 3, 2002, the Kalinga RTC held that the clear intention of the parties was to limit the
venue to the proper court of Valenzuela City and thus dismissed respondent’s complaint on the ground of improper
venue.5

Aggrieved, respondent appealed to the Court of Appeals which reversed the Resolution of the Kalinga RTC and
reinstated the complaint. The dispositive portion thereof, reads:

WHEREFORE, the Resolution appealed from is hereby REVERSED and SET ASIDE. The case is remanded to the
RTC which is ordered to reinstate plaintiff’s complaint for damages.

SO ORDERED.6

Petitioner’s motion for reconsideration was denied; hence, the instant petition.

The sole issue is whether the stipulation in the parties’ Bidders Application and Registration Bidding Agreement
effectively limited the venue of the instant case exclusively to the proper court of Valenzuela City.

The Court rules in the negative.

The general rule on the venue of personal actions, as in the instant case for damages7 filed by respondent, is
embodied in Section 2, Rule 4 of the Rules of Court. It provides:

Sec. 2. Venue of personal actions. – All other actions may be commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a
nonresident defendant, where he may be found, at the election of the plaintiff.

The aforequoted rule, however, finds no application where the parties, before the filing of the action, have validly
agreed in writing on an exclusive venue.8 But the mere stipulation on the venue of an action is not enough to
preclude parties from bringing a case in other venues. It must be shown that such stipulation is exclusive. In the
absence of qualifying or restrictive words, such as "exclusively" and "waiving for this purpose any other
venue,"9"shall only" preceding the designation of venue,10 "to the exclusion of the other courts,"11 or words of similar
import, the stipulation should be deemed as merely an agreement on an additional forum, not as limiting venue to
the specified place.12

This has been the rule since the 1969 case of Polytrade Corporation v. Blanco.13 It was held therein that the clause
– "[t]he parties agree to sue and be sued in the Courts of Manila," does not preclude the filing of suits in the court
which has jurisdiction over the place of residence of the plaintiff or the defendant. The plain meaning of the said
provision is that the parties merely consented to be sued in Manila considering that there are no qualifying or
restrictive words which would indicate that Manila, and Manila alone, is the agreed venue. It simply is permissive
and the parties did not waive their right to pursue remedy in the courts specifically mentioned in Section 2 of Rule 4
of the Rules of Court.14

The Polytrade doctrine was further applied in the case of Unimasters Conglomeration, Inc. v. Court of
Appeals,15which analyzed the various jurisprudence rendered after the Polytrade case. In Unimasters, we held that
a stipulation stating that "[a]ll suits arising out of this Agreement shall be filed with/in the proper Courts of Quezon
City,"16 is only permissive and does not limit the venue to the Quezon City courts. As explained in the said case:

In other words, unless the parties make very clear, by employing categorical and suitably limiting language, that they
wish the venue of actions between them to be laid only and exclusively at a definite place, and to disregard the
prescriptions of Rule 4, agreements on venue are not to be regarded as mandatory or restrictive, but merely
permissive, or complementary of said rule. The fact that in their agreement the parties specify only one of the
venues mentioned in Rule 4, or fix a place for their actions different from those specified by said rule, does not,
without more, suffice to characterize the agreement as a restrictive one. There must, to repeat, be accompanying
language clearly and categorically expressing their purpose and design that actions between them be litigated only
at the place named by them, regardless of the general precepts of Rule 4; and any doubt or uncertainty as to the
parties’ intentions must be resolved against giving their agreement a restrictive or mandatory aspect. Any other rule
would permit of individual, subjective judicial interpretations without stable standards, which could well result in
precedents in hopeless inconsistency.17

The rule enunciated in Unimasters and Polytrade was reiterated in subsequent cases where the following
agreements on venue were likewise declared to be merely permissive and do not limit the venue to the place
specified therein, to wit:

1. "If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of the
principal amount will be charged. The agreed venue for such action is Makati, Metro Manila, Philippines."18

2. "In case of litigation hereunder, venue shall be in the City Court or Court of First Instance of Manila as the
case may be for determination of any and all questions arising thereunder."19

Then too, the doctrine that absent qualifying or restrictive words, the venue shall either be that stated in the law or
rule governing the action or the one agreed in the contract, was applied to an extra-judicial foreclosure sale under
Act No. 3135.20 In Langkaan Realty Development, Inc. v. United Coconut Planters Bank ,21 where the provision on
1awphi1.net

the venue employed the word "shall" to refer to the place where the foreclosure will be held, the Court ruled that said
provision "lack(s) qualifying or restrictive words to indicate the exclusivity of the agreed forum," and therefore "the
stipulated place is considered only as an additional, not a limiting venue."22 The said stipulation reads:

It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, as amended, and Presidential
Decree No. 385, the auction sale shall be held at the capital of the province, if the property is within the territorial
jurisdiction of the province concerned, or shall be held in the city, if the property is within the territorial jurisdiction of
the city concerned.23

In the instant case, the stipulation in the parties’ agreement, i.e., "all Court litigation procedures shall be conducted
in the appropriate Courts of Valenzuela City, Metro Manila," evidently lacks the restrictive and qualifying words that
will limit venue exclusively to the RTC of Valenzuela City. Hence, the Valenzuela courts should only be considered
as an additional choice of venue to those mentioned under Section 2, Rule 4 of the Rules of Court. Accordingly, the
present case for damages may be filed with the (a) RTC of Valenzuela City as stipulated in the bidding agreement;
(b) RTC of Bulanao, Tabuk, Kalinga which has jurisdiction over the residence of respondent (plaintiff); or with the (c)
RTC of Valenzuela City which has jurisdiction over the business address of petitioner (defendant). The filing of the
complaint in the RTC of Bulanao, Tabuk, Kalinga, is therefore proper, respondent being a resident of Tabuk,
Kalinga.

The case of Hoechst Philippines, Inc. v. Torres,24 promulgated in 1978, and invoked by petitioner in its motion to
dismiss, had already been superseded by current decisions on venue. In the said case, the Court construed the
proviso: "[i]n case of any litigation arising out of this agreement, the venue of action shall be in the competent courts
of the Province of Rizal,"25 as sufficient to limit the venue to the proper court of Rizal. However, in Supena v. De la
Rosa,26 we ruled that Hoechst had been rendered obsolete by recent jurisprudence applying the doctrine enunciated
in Polytrade.

In sum, we find that the Court of Appeals correctly declared that venue in the instant case was properly laid with the
RTC of Bulanao, Tabuk, Kalinga. 1awphi 1.net

WHEREFORE, the petition is DENIED. The May 31, 2005 Decision of the Court of Appeals in CA-G.R. CV No.
78456 which reversed the September 3, 2002 Resolution of the Regional Trial Court of Bulanao, Tabuk, Kalinga;
reinstated the complaint in Civil Case No. 511; and remanded the case to the said court, is AFFIRMED.

Costs against petitioner.

SO ORDERED.

ON ACTION QUASI IN REM

ROBERT SAN PEDRO, petitioner,

vs.
WILLY ONG and NORMITA CABALLES, respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by
petitioner Robert San Pedro (San Pedro), seeking to reverse and set aside the Decision1 of the Court of Appeals
dated 29 December 2006 and its Resolution2 dated 13 April 2007 in CA-G.R. CV No. 79399. In its assailed
Decision, the Court of Appeals reversed the Decision3 dated 21 February 2003 of the Regional Trial Court (RTC) of
Malolos, Bulacan, Branch 19, in Civil Case No. 515-M-99, declaring, inter alia, that the deeds of real estate
mortgage constituted on the subject properties are null and void; while, in its assailed Resolution, the appellate court
denied San Pedro’s Motion for Reconsideration.

The factual and procedural antecedents of this case are as follows:

On 3 April 1996, San Pedro purchased from the spouses Guillermo Narciso and Brigida Santiago (spouses Narciso)
two parcels of land (subject properties) covered by Transfer Certificates of Title TCTs No. T-82381 and No. T-82382
of the Registry of Deeds of Bulacan, with areas of about 200 square meters and 150 square meters, respectively.
San Pedro bought the subject properties for ₱35,000.00, as evidenced by Deeds of Sale executed in his favor by
the spouses Narciso on 8 April 1996.4

In order to transfer in his name the TCTs covering the subject properties, and upon the spouses Narciso’s
recommendation, San Pedro hired the services of Adora Dela Peña (Dela Peña) who is known to be very familiar
with the intricacies of real property transfers.5

After sometime, San Pedro inquired with the Registry of Deeds of Bulacan as to the status of his application for the
issuance in his name of new TCTs for the subject properties. He was surprised to find out, however, that the subject
properties were still registered in the names of the Narciso spouses and were mortgaged to Willy Ong (Ong).6
According to the annotation stamped at the back of TCTs No. T-82381 and No. T-82382, the spouses Narciso, on
23 July 1998, executed Special Powers of Attorney (SPAs) authorizing Dela Peña to mortgage the subject
properties to Ong. The SPAs were procured by Dela Peña from the spouses Narciso with the help of one Rufino
Landayan, a tricycle driver who accompanied Dela Peña to the spouses Narciso’s residence. San Pedro found out
that it was Normita Caballes (Caballes), Ong’s agent, who caused the registration of the mortgages with the
Registry of Deeds of Bulacan and the annotation thereof on the TCTs of the spouses Narciso.7

In order to free the subject properties from the said encumbrances, San Pedro filed with the RTC on 7 May 1999 a
Petition for Nullification of Mortgage with Damages against the spouses Narciso, Dela Peña, Landayan, Ong, and
Caballes, docketed as Civil Case No. 515-M-99.

On 14 May 1991, the RTC issued summons to spouses Narciso, Dela Peña, Landayan, Ong, and Caballes,
directing them to file their Answers to San Pedro’s Petition in Civil Case No. 515-M-99. On the same day, the Sheriff
served the summons on all concerned as evidenced by the Sheriff’s Return,8 which reads:

SERVICE RETURN

THIS IS TO CERTIFY that on 14th day of May 1999, the undersigned served a copies (sic) of Summons in
connection in (sic) the above-entitled case accompanying (sic) by the Complaints with annexes attached thereto
upon defendants, at their given address, to wit:

Spouses Brigida Santiago & thru their son Jaime Narciso/

Guillermo Narciso
-

Received & sign

Adora Dela Peña thru her sister-in-law/

-
Received but refused to sign

Rufino Landayan thru his son Christopher

-
Landayan/received & sign

Normita Caballes & thru Paul Caballes son of

Willy Ong - Normita Caballes/received
& sign

The original copy of Summons is, therefore, respectfully returned DULY SERVED.

While the spouses Narciso, Landayan, Ong, and Caballes separately filed their Answers in accordance with the
summons, thereby voluntarily submitting themselves to the jurisdiction of the RTC, Dela Peña failed to do so and
she was, thus, declared by the RTC to be in default.

In their Answer,9 the spouses Narciso admitted to selling the subject properties to San Pedro, and denied
authorizing the mortgage of the same to Ong. Their signatures on the SPAs were fraudulently secured by Dela Peña
who misrepresented to them that such document was necessary to facilitate the transfer of the TCTs of the subject
properties to San Pedro. The spouses Narciso denied that they participated in or benefited from the loan obligation
obtained by Dela Peña from Ong.

For their part, Caballes and Ong raised in their Joint Answer10 the defense of mortgagee-in-good-faith. They claimed
that they both relied in good faith on the SPAs granting Dela Peña the authority to mortgage the subject properties
since there was nothing on the face thereof which would have raised their suspicion as to the authenticity of the
document. Ong alleged that the subject properties were used by Dela Peña as collateral for the loan, amounting to
₱170,000.00, which she obtained from Ong. Since the said loan obligation already became due and demandable,
Ong sought the foreclosure of the subject properties. During the auction sale, Ong emerged as the highest bidder
but the TCTs of the subject properties were not yet transferred to his name.
Landayan, in his Answer,11 denied any participation in the procurement of the SPAs or in the mortgage of the
subject properties, except that he was hired by Dela Peña to bring her to the spouses Narciso’s residence at the
time the alleged SPAs were fraudulently procured.

After the Pre-Trial Conference, trial on the merits ensued.

During the trial, San Pedro presented Landayan to testify in his favor. According to Landayan, he came to know
Dela Peña when the latter hired his tricycle. Landayan took Dela Peña and a woman, whom he identified as
Caballes’ sister, to the residence of the spouses Narciso to secure Guillermo Narciso’s signature on a certain
document. While Dela Peña and Caballes’ sister were inside the spouses Narciso’s house, Caballes was waiting for
them outside in a white car. After a few minutes, Dela Peña and Caballes’ sister came out, and together with
Caballes, they visited and inspected the subject properties; after which, Dela Peña and Caballes’ sister proceeded
to a restaurant to try and secure Brigida Santiago’s signature on the document they carried. After somebody signed
the document for Brigida Santiago, Dela Peña asked Landayan to sign the same as witness, to which he obliged.12

San Pedro himself took the witness stand. He testified that he bought the subject properties from the spouses
Narciso for ₱35,000.00. After the execution of the Deeds of Sale and payment of the purchase price to the spouses
Narciso, possession of the subject properties were turned over to him. San Pedro started to build his dream house
on the subject properties, spending about ₱2,000,000.00 thereon, only to find out later on that the subject properties
on which his house was built was encumbered by Dela Peña to Ong on the strength of the SPAs executed by the
spouses Narciso in Dela Peña’s favor. When San Pedro confronted the spouses Narciso about the mortgages, they
denied authorizing the same.13

San Pedro’s sister, Luz San Pedro Tominago (Tominago), narrated before the RTC that on 31 March 1991, she filed
a complaint against Dela Peña before the Philippine National Police (PNP) Station in Balagtas, Bulacan for the
latter’s failure to effect the transfer of the TCTs of the subject properties in San Pedro’s name, as she was obliged to
do. Tominago filed the complaint on behalf of San Pedro, who was working abroad.14

Finally, a document examiner and handwriting expert from the National Bureau of Investigation (NBI) was also
presented as a witness for San Pedro. He confirmed that the signature of Guillermo Narciso on one of the SPAs
was forged, while the signatures of his wife Brigida Santiago on both SPAs were spurious.15

After San Pedro presented his evidence, Ong and Caballes filed a demurrer to evidence, questioning the lack of
jurisdiction of the RTC over the person of Dela Peña. Since Dela Peña was an indispensable party in the case, they
claimed that no final determination of the same could be arrived at without the said court acquiring jurisdiction over
Dela Peña.16

In an Order dated 24 August 2001, the RTC denied the demurrer to evidence filed by Ong and Caballes. Hence, trial
proceeded with the presentation of evidence by the defense.

Ong testified for the defense that Caballes informed him that she knew of two parcels of land in Bulacan that were
being offered as collaterals for a loan. When Ong expressed interest in the subject properties, Caballes showed him
copies of the SPA executed by the spouses Narciso in favor of Dela Peña. Ong then instructed Caballes to verify
with the Registry of Deeds whether the spouses Narciso were the real owners of the subject properties and whether
their TCTs were clean. Caballes returned with certified true copies of the TCTs which were in the names of the
spouses Narciso and bore no encumbrances. Satisfied with the documents, Ong agreed to release the amount of
₱170,000.00 as loan, secured by the subject properties. Ong admitted that he was not able to personally talk to
Dela Peña or to the spouses Narciso. All negotiations pertaining to the loan and mortgages were transacted through
Caballes.17

Caballes also offered her testimony, in which she stated that she came to know Dela Peña because the latter was
looking for someone who can grant her a loan with the subject properties as collateral. Dela Peña was armed with
the SPAs from the spouses Narciso authorizing her to mortgage the subject properties. After Caballes examined the
documents, she proceeded to the Registry of Deeds of Bulacan to verify the status and ownership of the subject
properties. After she found out that the TCTs were in the name of the spouses Narciso and were clean, Caballes
went to Ong who released the money for the loan. Dela Peña issued nine post-dated checks to Ong as payment for
her loan obligation. All nine checks were dishonored by the drawee bank when presented for payment because Dela
Peña’s account was already closed. Ong, thus, instituted before the Municipal Trial Court (MTC) of Balagtas,
Bulacan, a case against Dela Peña for violation of Batas Pambansa Blg. 22.18

On 21 February 2003, the RTC rendered a Decision in Civil Case No. 515-M-99, declaring null and void the
mortgages constituted over the subject properties in Ong’s favor. According to the court a quo, Ong and Caballes
failed to exercise reasonable degree of diligence before they entered into mortgage contracts with Dela Peña, who
was not the registered owner of the properties being mortgaged and was only purportedly authorized by the
registered owners thereof. The RTC, thus, ruled:

WHEREFORE, judgment is hereby rendered as follows:

1. Declaring [San Pedro] the legal and rightful owner of the two (2) parcels of land subject of this litigation, covered
by TCT No. T-82381 and TCT No. 82382 presently in the name of [the spouses Narciso].

2. Adjudging the sale by [the spouses Narciso] to [San Pedro], legal, valid, subsisting and in all respect enforceable.

3. Resolving to declare the Special Power[s] of Attorney constituted in favor of [Dela Peña] null and void.

4. Declaring the Deeds of Mortgage purportedly executed by [Dela Peña] as Attorney-in-fact of [the spouses
Narciso], in favor of [Ong] constituted in [sic] TCT No. T-82381 and TCT No. 82382 void ab initio.

5. Ordering the Registry of Deeds for the Province of Bulacan to cancel the recordings of mortgages in favor of Ong
constituted in [sic] TCT No. 82381 and TCT No. 82382 as well as any annotation of foreclosure proceedings if there
are any by [Ong].

6. Ordering [Ong] to return to [San Pedro] the owner’s duplicate copy of TCT No. 82381 and TCT No. 82382 which
are presently in his possession.

7. Ordering [Dela Peña] to pay [Ong] the sum of P245,000.00 plus legal interest from September, 1998 until the
whole obligation is fully extinguished.

All other claims, counterclaims and cross claims are ordered denied for lack of merit.19

Without filing any Motion for Reconsideration before the RTC, Ong and Caballes appealed the adverse RTC
Decision to the Court of Appeals, assigning as error the lack of jurisdiction of the RTC over the person of Dela Peña
which rendered all the proceedings held before said court fatally defective. Their appeal was docketed as CA-G.R.
CV No. 79399.

In a Decision20 dated 29 December 2006, the Court of Appeals granted the appeal of Ong and Caballes, and
accordingly reversed the RTC Decision dated 21 February 2003. The appellate court justified its reversal of the
ruling of the RTC on its finding that the service of summons on Dela Peña was invalid; thus, the RTC did not acquire
jurisdiction over her person. The substituted service of summons employed by the Sheriff was ineffective for failure
to comply with the statutory requirements before such mode of service could be resorted to. The Sheriff in the
present case used substituted service without even showing that Dela Peña could not be served personally with the
summons within reasonable time. Since Dela Peña was an indispensable party to the controversy, without her no
final determination of the case can be had. Thus, the dispositive portion of the assailed Court of Appeals Decision
reads:

WHEREFORE, all the above premises considered, the Decision, dated February 21, 2003, of the Regional Trial
Court of Malolos, Bulacan, Branch 19, is hereby set aside for want of jurisdiction. The instant case is hereby
remanded to the court a quo for appropriate proceedings. No costs.21

The Motion for Reconsideration filed by San Pedro was denied by the Court of Appeals in its Resolution22 dated 13
April 2007 for the issues raised therein were already sufficiently threshed out in its Decision.

San Pedro is now before this Court assailing the adverse decision rendered by the Court of Appeals.23 For the
resolution of this Court are the following issues:
 I.

WHETHER OR NOT THE RTC HAS JURISDICTION TO HEAR AND DECIDE THE CASE FILED BY SAN PEDRO.

II.

WHETHER OR NOT DE LA PEÑA IS AN INDISPENSABLE PARTY TO THE CASE.

III.

WHETHER OR NOT ONG WAS MORTGAGEE-IN-GOOD FAITH.

Vital to the resolution of the present controversy are the questions on whether there was a valid service of summons
upon Dela Peña; and if there was none, whether the improper service of summons on Dela Peña invalidates the
entire proceedings before the court a quo.

Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the
means by which the court may acquire jurisdiction over his person. Any judgment without such service in the
absence of a valid waiver is null and void.24

To provide perspective, it is crucial to determine first whether the action is in personam, in rem, or quasi in
rembecause the rules on service of summons under Rule 14 of the Revised Rules of Court apply according to the
nature of the action.25

In the case at bar, Civil Case No. 515-M-99, instituted by San Pedro, is anchored on his claim that he is the real and
rightful owner of the subject properties, thus, no one else has the right to mortgage them. The real estate mortgages
constituted on the subject properties in favor of Ong, annotated on their TCTs, are encumbrances on said
properties, which may be considered a cloud on San Pedro’s title thereto.

Such cloud may be removed or San Pedro’s title quieted under Article 476 of the Civil Code, which reads:

Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument,
record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such
cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.
(Emphasis ours.)

San Pedro alleged in his Petition in Civil Case No. 515-M-99 that the mortgages in favor of Ong may, at first, appear
valid and effective, but are actually invalid or voidable for having been made without the knowledge and authority of
the spouses Narciso, the registered owners of the subject properties and San Pedro’s predecessors-in-interest. In
asking the cancellation of the mortgages on the TCTs of the subject properties, San Pedro was ultimately asking the
RTC to remove a cloud on his title to the same. It is, thus, irrefragable that Civil Case No. 515-M-99 is an action for
quieting of title.

Significantly, suits to quiet title are characterized as proceedings quasi in rem. Technically, they are neither in
remnor in personam. In an action quasi in rem, an individual is named as defendant. However, unlike suits in rem,
a quasi in rem judgment is conclusive only between the parties. A proceeding quasi in rem is one brought against
persons seeking to subject the property of such persons to the discharge of the claims assailed. 26

In an action quasi in rem, an individual is named as defendant and the purpose of the proceeding is to subject his
interests therein to the obligation or loan burdening the property. Actions quasi in rem deal with the status,
ownership or liability of a particular property but which are intended to operate on these questions only as between
the particular parties to the proceedings and not to ascertain or cut off the rights or interests of all possible
claimants. The judgments therein are binding only upon the parties who joined in the action.27
According to Section 6, Rule 14 of the Revised Rules of Court, summons on the defendant in actions in
personammust be served by handing a copy thereof to the defendant in person, or, if he refuses to receive it, by
tendering it to him.28 Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant is not
a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res, although
summons must be served upon the defendant in order to satisfy the due process requirements.29

In Alba v. Court of Appeals, 30 the Court further elucidated that:

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and
decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a
prerequisite to confer jurisdiction on the court, provided that the latter has jurisdiction over the res. Jurisdiction
over the res is acquired either (a) by the seizure of the property under legal process, whereby it is brought into
actual custody of the law; or (b) as a result of the institution of legal proceedings, in which the power of the
court is recognized and made effective. The service of summons or notice to the defendant is not for the purpose
of vesting the court with jurisdiction but merely for satisfying the due process requirements. (Emphasis supplied.)

Given that Civil Case No. 515-M-99 is a an action for quieting of title, settled to be quasi in rem, the RTC was not
required to acquire jurisdiction over the persons of the defendants, it being sufficient for the said court to acquire
jurisdiction over the subject matter of the case. By San Pedro’s institution of Civil Case No. 515-M-99, the RTC
already acquired jurisdiction over the subject properties – the res. Therefore, the service of summons to the
defendants in said case, including Dela Peña, did not affect the jurisdiction of the RTC to hear and decide Civil Case
No. 515-M-99, and did not invalidate the proceedings held therein on the basis of jurisdiction.

Admittedly, there was a defect in the service of the summons on Dela Peña. The Sheriff immediately resorted to
substituted service of summons on Dela Peña without attempting first to effect personal service within reasonable
time. The Sheriff’s Return31 merely stated that he served a copy of the summons on Dela Peña’s sister-in-law who
refused to sign the same.

Personal service of summons is preferred to substitute service. Only if the former cannot be made promptly can the
process server resort to the latter. Moreover, the proof of service of summons must (a) indicate the impossibility of
service of summons within a reasonable time; (b) specify the efforts exerted to locate the defendant; and (c) state
that the summons was served upon a person of sufficient age and discretion who is residing in the address, or who
is in charge of the office or regular place of business, of the defendant. It is likewise required that the pertinent facts
proving these circumstances be stated in the proof of service or in the officer’s return. The failure to comply
faithfully, strictly and fully with all the foregoing requirements of substituted service renders the service of summons
ineffective.32 Indisputably, the Sheriff did not comply with any of the foregoing requirements, thus, rendering his
service of summons on Dela Peña invalid.

Nonetheless, the improper service of summons on Dela Peña did not void the proceedings conducted by the RTC in
Civil Case No. 515-M-99, for lack of jurisdiction. As the Court has underscored herein, in quasi in rem proceedings,
the court need not acquire jurisdiction over the persons of the defendants, for as long as it has acquired jurisdiction
over the res. The defect in the service of summons merely infringed Dela Peña’s right to due process that precluded
the RTC from rendering a valid judgment with respect to her personal liability. And since Dela Peña’s right to due
process is personal and pertains to her alone, it could not be invoked by her other co-defendants in Civil Case No.
515-M-99 so as to escape the judgment of liability against them.

Contrary to the pronouncement of the Court of Appeals, Dela Peña was not an indispensable party to this case,
without whom, no final conclusion of the case can be arrived at.

The Court defined indispensable party in Philippine National Bank v. Heirs of Estanislao Militar and Deogracias
Militar, 33 as follows:

An indispensable party is one whose interest will be affected by the court's action in the litigation, and
without whom no final determination of the case can be had. The party's interest in the subject matter of the suit
and in the relief sought are so inextricably intertwined with the other parties' (sic) that his legal presence as a party
to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of the parties
before the court which is effective, complete, or equitable.
Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and
divisible from the interest of the other parties and will not necessarily be prejudiced by a judgment which does
complete justice to the parties in court. He is not indispensable if his presence would merely permit complete relief
between him and those already parties to the action or will simply avoid multiple litigation. (Emphasis supplied.)

Evidently, Dela Peña does not fall within the definition of an indispensable party. As the Court has explained, Civil
Case No. 515-M-99 is an action for quieting of title, intended to remove any cloud upon San Pedro’s title to the
subject properties. The real estate mortgages in favor of Ong annotated on the TCTs of the subject properties
constitute the cloud to be removed. Thus, the crux of the controversy is the title of San Pedro to the subject
properties vis-à-vis that of Ong, for the determination of which, Dela Peña’s participation is not an absolute
necessity. The judgment of the RTC upholding San Pedro’s title to the subject properties over Ong’s, or even if it
were the other way around, would not have affected Dela Peña, because Dela Peña never claimed title to the
subject properties; she only misrepresented that she had authority to mortgage the same on behalf of the registered
owners, namely, the spouses Narciso. After she successfully, albeit, fraudulently, obtained the loan using the
subject properties as mortgage, her interest in the same had ended. She may have perpetrated fraud for which she
may be held liable but, clearly, these may be established in a separate and subsequent case. Her presence in the
proceedings before the RTC would have only permitted complete relief since the said court could have already
determined therein her liability for the damages she had caused to any of the parties, but it does not make her
presence indispensable.

San Pedro’s title proved to be superior to that of Ong’s. The subject properties were sold to him prior to the
mortgage of the same to Ong. The spouses Narciso, registered owners of the subject properties, admitted the sale
thereof to San Pedro and denied giving any authority to Dela Peña to mortgage the said properties. An expert
witness affirmed that the signature of Guillermo Narciso on one of the purported SPAs in favor of Dela Peña was
forged, while the signatures of his wife Brigida Santiago on both SPAs were spurious. Ong and Caballes cannot
even point out any defect in San Pedro’s title to the subject properties. Ong can only assert better right to the same
as allegedly a mortgagee in good faith.

However, the well-entrenched legal principle in our jurisprudence requires a higher degree of diligence to be
exercised by the mortgagee when he is not directly dealing with the registered owner of real property. As the Court
enunciated in Abad v. Guimba34:

While one who buys from the registered owner does not need to look behind the certificate of title, one who buys
from one who is not the registered owner is expected to examine not only the certificate of title but all factual
circumstances necessary for [one] to determine if there are any flaws in the title of the transferor, or in [the] capacity
to transfer the land. Although the instant case does not involve a sale but only a mortgage, the same rule applies
inasmuch as the law itself includes a mortgagee in the term "purchaser."

The Court has stressed time and again that every person dealing with an agent is put upon inquiry, and must
discover upon his peril the authority of the agent, and this is especially true where the act of the agent is of unusual
nature. If a person makes no inquiry, he is chargeable with knowledge of the agent’s authority, and his ignorance of
that authority will not be any excuse.35

In the more recent case of Bank of Commerce v. San Pablo, Jr.,36 the Court elucidated:

The Bank of Commerce clearly failed to observe the required degree of caution in ascertaining the genuineness and
extent of the authority of Santos to mortgage the subject property. It should not have simply relied on the face of the
documents submitted by Santos, as its undertaking to lend a considerable amount of money required of it a greater
degree of diligence. That the person applying for the loan is other than the registered owner of the real
property being mortgaged should have already raised a red flag and which should have induced the Bank of
Commerce to make inquiries into and confirm Santos’ authority to mortgage the Spouses San Pablo’s
property. A person who deliberately ignores a significant fact that could create suspicion in an otherwise
reasonable person is not an innocent purchaser for value (Emphasis ours.)

Considering Ong’s undue haste in granting the loan without inquiring into the ownership of the subject properties
being mortgaged, as well as the authority of the supposed agent to constitute the mortgages on behalf of the
owners, he cannot be considered a mortgagee-in-good-faith. Ong’s averment that he exercised prudence in the
loan-mortgage transaction is debunked by his own admission that he merely relied on Caballes’ representations
thereon, without personally meeting or speaking with Dela Peña, the supposed agent, or the spouses Narciso, the
registered owners of the subject properties. Although he instructed Caballes to check the TCTs of the subject
properties, he did not bother to personally meet Dela Peña and ascertain the genuineness and authenticity of the
latter’s authority to mortgage the same on behalf of the spouses Narciso especially considering that the one
mortgaging the property is not the registered owner.

The real estate mortgages constituted on the subject properties based on false and fraudulent SPAs are void ab
initio. In Veloso and Rosales v. La Urbana,37 the Court ruled that forged powers of attorney are without force and
effect and, thus, nullified the mortgage constituted on the strength thereof:

In view of the forgoing facts, the court held that pursuant to Article 1714 of the Civil Code and under the Torrens Act
in force in this jurisdiction, the forged powers of attorney prepared by Del Mar were without force and effect and that
the registration of the mortgages constituted by virtue thereof were likewise null and void and without force and
effect, and that they could not in any way prejudice the rights of the plaintiff as the registered owner of her
participations in the properties in question.

Consequently, the foreclosure proceedings on the mortgaged properties are likewise void ab initio. Since Ong
cannot be deemed a mortgagee-in-good-faith nor an innocent purchaser for value of the subject properties at the
auction sale thereof, his claim to the said properties cannot prevail over that of San Pedro. The Court’s ruling,
however, is without prejudice to the right of Ong to proceed against those who perpetrated the fraud to his prejudice.

WHEREFORE, in view of the foregoing, the instant Petition is GRANTED. The Decision dated 29 December 2006
rendered by the Court of Appeals in CA-G.R. CV No. 79399 is REVERSED and SET ASIDE. The Decision dated 21
February 2003 of the Regional Trial Court of Malolos, Bulacan, Branch 19, in Civil Case No. 515-M-99, is
herebyREINSTATED with the modification that the portion ordering Adora Dela Peña to pay Willy G. Ong the sum of
₱245,000.00 plus legal interest, is DELETED.

SO ORDERED.

G.R. No. 156759 June 5, 2013

ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY REYES, JANET BAY, JESUS R.
GALANG, AND RANDY HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.

DECISION

BERSAMIN, J.:

To warrant the substituted service of the summons and copy of the complaint, the serving officer must first attempt
to effect the same upon the defendant in person. Only after the attempt at personal service has become futile or
impossible within a reasonable time may the officer resort to substituted service.

The Case

Petitioners – defendants in a suit for libel brought by respondent – appeal the decision promulgated on March 8,
20021 and the resolution promulgated on January 13, 2003,2 whereby the Court of Appeals (CA) respectively
dismissed their petition for certiorari, prohibition and mandamus and denied their motion for reconsideration.
Thereby, the CA upheld the order the Regional Trial Court (RTC), Branch 51, in Manila had issued on March 12,
2001 denying their motion to dismiss because the substituted service of the summons and copies of the complaint
on each of them had been valid and effective.3

Antecedents

On July 3, 2000, respondent, a retired police officer assigned at the Western Police District in Manila, sued Abante
Tonite, a daily tabloid of general circulation; its Publisher Allen A. Macasaet; its Managing Director Nicolas V.
Quijano; its Circulation Manager Isaias Albano; its Editors Janet Bay, Jesus R. Galang and Randy Hagos; and its
Columnist/Reporter Lily Reyes (petitioners), claiming damages because of an allegedly libelous article petitioners
published in the June 6, 2000 issue of Abante Tonite. The suit, docketed as Civil Case No. 00-97907, was raffled to
Branch 51 of the RTC, which in due course issued summons to be served on each defendant, including Abante
Tonite, at their business address at Monica Publishing Corporation, 301-305 3rd Floor, BF Condominium Building,
Solana Street corner A. Soriano Street, Intramuros, Manila.4

In the morning of September 18, 2000, RTC Sheriff Raul Medina proceeded to the stated address to effect the
personal service of the summons on the defendants. But his efforts to personally serve each defendant in the
address were futile because the defendants were then out of the office and unavailable. He returned in the
afternoon of that day to make a second attempt at serving the summons, but he was informed that petitioners were
still out of the office. He decided to resort to substituted service of the summons, and explained why in his sheriff’s
return dated September 22, 2005,5 to wit:

SHERIFF’S RETURN

This is to certify that on September 18, 2000, I caused the service of summons together with copies of complaint
and its annexes attached thereto, upon the following:

1. Defendant Allen A. Macasaet, President/Publisher of defendant AbanteTonite, at Monica Publishing

Corporation, Rooms 301-305 3rd Floor, BF Condominium Building, Solana corner A. Soriano Streets,
Intramuros, Manila, thru his secretary Lu-Ann Quijano, a person of sufficient age and discretion working
therein, who signed to acknowledge receipt thereof. That effort (sic) to serve the said summons personally
upon said defendant were made, but the same were ineffectual and unavailing on the ground that per
information of Ms. Quijano said defendant is always out and not available, thus, substituted service was
applied;

2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-Ann Quijano, who signed to
acknowledge receipt thereof. That effort (sic) to serve the said summons personally upon said defendant
were made, but the same were ineffectual and unavailing on the ground that per information of (sic) his wife
said defendant is always out and not available, thus, substituted service was applied;

3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos and Lily Reyes, at the same
address, thru Rene Esleta, Editorial Assistant of defendant AbanteTonite, a person of sufficient age and
discretion working therein who signed to acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendants were made, but the same were ineffectual and unavailing on the
ground that per information of (sic) Mr. Esleta said defendants is (sic) always roving outside and gathering
news, thus, substituted service was applied.

Original copy of summons is therefore, respectfully returned duly served.

Manila, September 22, 2000.

On October 3, 2000, petitioners moved for the dismissal of the complaint through counsel’s special appearance in
their behalf, alleging lack of jurisdiction over their persons because of the invalid and ineffectual substituted service
of summons. They contended that the sheriff had made no prior attempt to serve the summons personally on each
of them in accordance with Section 6 and Section 7, Rule 14 of the Rules of Court. They further moved to drop
Abante Tonite as a defendant by virtue of its being neither a natural nor a juridical person that could be impleaded
as a party in a civil action.

At the hearing of petitioners’ motion to dismiss, Medina testified that he had gone to the office address of petitioners
in the morning of September 18, 2000 to personally serve the summons on each defendant; that petitioners were
out of the office at the time; that he had returned in the afternoon of the same day to again attempt to serve on each
defendant personally but his attempt had still proved futile because all of petitioners were still out of the office; that
some competent persons working in petitioners’ office had informed him that Macasaet and Quijano were always
out and unavailable, and that Albano, Bay, Galang, Hagos and Reyes were always out roving to gather news; and
that he had then resorted to substituted service upon realizing the impossibility of his finding petitioners in person
within a reasonable time.
On March 12, 2001, the RTC denied the motion to dismiss, and directed petitioners to file their answers to the
complaint within the remaining period allowed by the Rules of Court,6 relevantly stating:

Records show that the summonses were served upon Allen A. Macasaet, President/Publisher of defendant
AbanteTonite, through LuAnn Quijano; upon defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos
and Lily Reyes, through Rene Esleta, Editorial Assistant of defendant Abante Tonite (p. 12, records). It is apparent
in the Sheriff’s Return that on several occasions, efforts to served (sic) the summons personally upon all the
defendants were ineffectual as they were always out and unavailable, so the Sheriff served the summons by
substituted service.

Considering that summonses cannot be served within a reasonable time to the persons of all the defendants, hence
substituted service of summonses was validly applied. Secretary of the President who is duly authorized to receive
such document, the wife of the defendant and the Editorial Assistant of the defendant, were considered competent
persons with sufficient discretion to realize the importance of the legal papers served upon them and to relay the
same to the defendants named therein (Sec. 7, Rule 14, 1997 Rules of Civil Procedure).

WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby DENIED for lack of merit..

Accordingly, defendants are directed to file their Answers to the complaint within the period still open to them,
pursuant to the rules.

SO ORDERED.

Petitioners filed a motion for reconsideration, asserting that the sheriff had immediately resorted to substituted
service of the summons upon being informed that they were not around to personally receive the summons, and
that Abante Tonite, being neither a natural nor a juridical person, could not be made a party in the action.

On June 29, 2001, the RTC denied petitioners’ motion for reconsideration.7 It stated in respect of the service of
summons, as follows:

The allegations of the defendants that the Sheriff immediately resorted to substituted service of summons upon
them when he was informed that they were not around to personally receive the same is untenable. During the
hearing of the herein motion, Sheriff Raul Medina of this Branch of the Court testified that on September 18, 2000 in
the morning, he went to the office address of the defendants to personally serve summons upon them but they were
out. So he went back to serve said summons upon the defendants in the afternoon of the same day, but then again
he was informed that the defendants were out and unavailable, and that they were always out because they were
roving around to gather news. Because of that information and because of the nature of the work of the defendants
that they are always on field, so the sheriff resorted to substituted service of summons. There was substantial
compliance with the rules, considering the difficulty to serve the summons personally to them because of the nature
of their job which compels them to be always out and unavailable. Additional matters regarding the service of
summons upon defendants were sufficiently discussed in the Order of this Court dated March 12, 2001.

Regarding the impleading of Abante Tonite as defendant, the RTC held, viz:

"Abante Tonite" is a daily tabloid of general circulation. People all over the country could buy a copy of "Abante
Tonite" and read it, hence, it is for public consumption. The persons who organized said publication obviously
derived profit from it. The information written on the said newspaper will affect the person, natural as well as
juridical, who was stated or implicated in the news. All of these facts imply that "Abante Tonite" falls within the
provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that "Abante Tonite" is not registered with the
Securities and Exchange Commission, it is deemed a corporation by estoppels considering that it possesses
attributes of a juridical person, otherwise it cannot be held liable for damages and injuries it may inflict to other
persons.

Undaunted, petitioners brought a petition for certiorari, prohibition, mandamusin the CA to nullify the orders of the
RTC dated March 12, 2001 and June 29, 2001.

Ruling of the CA
On March 8, 2002, the CA promulgated its questioned decision,8 dismissing the petition for certiorari, prohibition,
mandamus, to wit:

We find petitioners’ argument without merit. The rule is that certiorari will prosper only if there is a showing of grave
abuse of discretion or an act without or in excess of jurisdiction committed by the respondent Judge. A judicious
reading of the questioned orders of respondent Judge would show that the same were not issued in a capricious or
whimsical exercise of judgment. There are factual bases and legal justification for the assailed orders. From the
Return, the sheriff certified that "effort to serve the summons personally xxx were made, but the same were
ineffectual and unavailing xxx.

and upholding the trial court’s finding that there was a substantial compliance with the rules that allowed the
substituted service.

Furthermore, the CA ruled:

Anent the issue raised by petitioners that "Abante Tonite is neither a natural or juridical person who may be a party
in a civil case," and therefore the case against it must be dismissed and/or dropped, is untenable.

The respondent Judge, in denying petitioners’ motion for reconsideration, held that:

xxxx

Abante Tonite’s newspapers are circulated nationwide, showing ostensibly its being a corporate entity, thus the
doctrine of corporation by estoppel may appropriately apply.

An unincorporated association, which represents itself to be a corporation, will be estopped from denying its
corporate capacity in a suit against it by a third person who relies in good faith on such representation.

There being no grave abuse of discretion committed by the respondent Judge in the exercise of his jurisdiction, the
relief of prohibition is also unavailable.

WHEREFORE, the instant petition is DENIED. The assailed Orders of respondent Judge are AFFIRMED.

SO ORDERED.9

On January 13, 2003, the CA denied petitioners’ motion for reconsideration.10

Issues

Petitioners hereby submit that:

1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING THAT THE TRIAL COURT
ACQUIRED JURISDICTION OVER HEREIN PETITIONERS.

2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BY SUSTAINING THE INCLUSION OF

ABANTE TONITE AS PARTY IN THE INSTANT CASE.11

Ruling

The petition for review lacks merit.

Jurisdiction over the person, or jurisdiction in personam –the power of the court to render a personal judgment or to
subject the parties in a particular action to the judgment and other rulings rendered in the action – is an element of
due process that is essential in all actions, civil as well as criminal, except in actions in rem or quasi in rem.
Jurisdiction over the defendantin an action in rem or quasi in rem is not required, and the court acquires jurisdiction
over an actionas long as it acquires jurisdiction over the resthat is thesubject matter of the action. The purpose of
summons in such action is not the acquisition of jurisdiction over the defendant but mainly to satisfy the
constitutional requirement of due process.12

The distinctions that need to be perceived between an action in personam, on the one hand, and an action inrem or
quasi in rem, on the other hand, are aptly delineated in Domagas v. Jensen,13 thusly:

The settled rule is that the aim and object of an action determine its character. Whether a proceeding is in rem, or in
personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these only. A proceeding
in personam is a proceeding to enforce personal rights and obligations brought against the person and is based on
the jurisdiction of the person, although it may involve his right to, or the exercise of ownership of, specific property,
or seek to compel him to control or dispose of it in accordance with the mandate of the court. The purpose of a
proceeding in personam is to impose, through the judgment of a court, some responsibility or liability directly upon
the person of the defendant. Of this character are suits to compel a defendant to specifically perform some act or
actions to fasten a pecuniary liability on him. An action in personam is said to be one which has for its object a
judgment against the person, as distinguished from a judgment against the property to determine its state. It has
been held that an action in personam is a proceeding to enforce personal rights or obligations; such action is
brought against the person. As far as suits for injunctive relief are concerned, it is well-settled that it is an injunctive
act in personam. In Combs v. Combs, the appellate court held that proceedings to enforce personal rights and
obligations and in which personal judgments are rendered adjusting the rights and obligations between the affected
parties is in personam. Actions for recovery of real property are in personam.

On the other hand, a proceeding quasi in rem is one brought against persons seeking to subject the property of
such persons to the discharge of the claims assailed. In an action quasi in rem, an individual is named as defendant
and the purpose of the proceeding is to subject his interests therein to the obligation or loan burdening the property.
Actions quasi in rem deal with the status, ownership or liability of a particular property but which are intended to
operate on these questions only as between the particular parties to the proceedings and not to ascertain or cut off
the rights or interests of all possible claimants. The judgments therein are binding only upon the parties who joined
in the action.

As a rule, Philippine courts cannot try any case against a defendant who does not reside and is not found in the
Philippines because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in
court; but when the case is an action in rem or quasi in rem enumerated in Section 15, Rule 14 of the Rules of
Court, Philippine courts have jurisdiction to hear and decide the case because they have jurisdiction over the res,
and jurisdiction over the person of the non-resident defendant is not essential. In the latter instance, extraterritorial
service of summons can be made upon the defendant, and such extraterritorial service of summons is not for the
purpose of vesting the court with jurisdiction, but for the purpose of complying with the requirements of fair play or
due process, so that the defendant will be informed of the pendency of the action against him and the possibility that
property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor
of the plaintiff, and he can thereby take steps to protect his interest if he is so minded. On the other hand, when the
defendant in an action in personam does not reside and is not found in the Philippines, our courts cannot try the
case against him because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears
in court.14

As the initiating party, the plaintiff in a civil action voluntarily submits himself to the jurisdiction of the court by the act
of filing the initiatory pleading. As to the defendant, the court acquires jurisdiction over his person either by the
proper service of the summons, or by a voluntary appearance in the action.15

Upon the filing of the complaint and the payment of the requisite legal fees, the clerk of court forthwith issues the
corresponding summons to the defendant.16 The summons is directed to the defendant and signed by the clerk of
court under seal. It contains the name of the court and the names of the parties to the action; a direction that the
defendant answers within the time fixed by the Rules of Court; and a notice that unless the defendant so answers,
the plaintiff will take judgment by default and may be granted the relief applied for.17 To be attached to the original
copy of the summons and all copies thereof is a copy of the complaint (and its attachments, if any) and the order, if
any, for the appointment of a guardian ad litem.18

The significance of the proper service of the summons on the defendant in an action in personam cannot be
overemphasized. The service of the summons fulfills two fundamental objectives, namely: (a) to vest in the court
jurisdiction over the person of the defendant; and (b) to afford to the defendant the opportunity to be heard on the
claim brought against him.19 As to the former, when jurisdiction in personam is not acquired in a civil action through
the proper service of the summons or upon a valid waiver of such proper service, the ensuing trial and judgment are
void.20 If the defendant knowingly does an act inconsistent with the right to object to the lack of personal jurisdiction
as to him, like voluntarily appearing in the action, he is deemed to have submitted himself to the jurisdiction of the
court.21 As to the latter, the essence of due process lies in the reasonable opportunity to be heard and to submit any
evidence the defendant may have in support of his defense. With the proper service of the summons being intended
to afford to him the opportunity to be heard on the claim against him, he may also waive the process.21 In other
words, compliance with the rules regarding the service of the summons is as much an issue of due process as it is
of jurisdiction.23

Under the Rules of Court, the service of the summons should firstly be effected on the defendant himself whenever
practicable. Such personal service consists either in handing a copy of the summons to the defendant in person, or,
if the defendant refuses to receive and sign for it, in tendering it to him.24 The rule on personal service is to be rigidly
enforced in order to ensure the realization of the two fundamental objectives earlier mentioned. If, for justifiable
reasons, the defendant cannot be served in person within a reasonable time, the service of the summons may then
be effected either (a) by leaving a copy of the summons at his residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copy at his office or regular place of business with some
competent person in charge thereof.25 The latter mode of service is known as substituted service because the
service of the summons on the defendant is made through his substitute.

It is no longer debatable that the statutory requirements of substituted service must be followed strictly, faithfully and
fully, and any substituted service other than that authorized by statute is considered ineffective.26 This is because
substituted service, being in derogation of the usual method of service, is extraordinary in character and may be
used only as prescribed and in the circumstances authorized by statute.27 Only when the defendant cannot be
served personally within a reasonable time may substituted service be resorted to. Hence, the impossibility of
prompt personal service should be shown by stating the efforts made to find the defendant himself and the fact that
such efforts failed, which statement should be found in the proof of service or sheriff’s return.28 Nonetheless, the
requisite showing of the impossibility of prompt personal service as basis for resorting to substituted service may be
waived by the defendant either expressly or impliedly.29

There is no question that Sheriff Medina twice attempted to serve the summons upon each of petitioners in person
at their office address, the first in the morning of September 18, 2000 and the second in the afternoon of the same
date. Each attempt failed because Macasaet and Quijano were "always out and not available" and the other
petitioners were "always roving outside and gathering news." After Medina learned from those present in the office
address on his second attempt that there was no likelihood of any of petitioners going to the office during the
business hours of that or any other day, he concluded that further attempts to serve them in person within a
reasonable time would be futile. The circumstances fully warranted his conclusion. He was not expected or required
as the serving officer to effect personal service by all means and at all times, considering that he was expressly
authorized to resort to substituted service should he be unable to effect the personal service within a reasonable
time. In that regard, what was a reasonable time was dependent on the circumstances obtaining. While we are strict
in insisting on personal service on the defendant, we do not cling to such strictness should the circumstances
already justify substituted service instead. It is the spirit of the procedural rules, not their letter, that governs.30

In reality, petitioners’ insistence on personal service by the serving officer was demonstrably superfluous. They had
actually received the summonses served through their substitutes, as borne out by their filing of several pleadings in
the RTC, including an answer with compulsory counterclaim ad cautelam and a pre-trial brief ad cautelam. They had
also availed themselves of the modes of discovery available under the Rules of Court. Such acts evinced their
voluntary appearance in the action.

Nor can we sustain petitioners’ contention that Abante Tonite could not be sued as a defendant due to its not being
either a natural or a juridical person. In rejecting their contention, the CA categorized Abante Tonite as a corporation
by estoppel as the result of its having represented itself to the reading public as a corporation despite its not being
incorporated. Thereby, the CA concluded that the RTC did not gravely abuse its discretion in holding that the non-
incorporation of Abante Tonite with the Securities and Exchange Commission was of no consequence, for,
otherwise, whoever of the public who would suffer any damage from the publication of articles in the pages of its
tabloids would be left without recourse. We cannot disagree with the CA, considering that the editorial box of the
daily tabloid disclosed that basis, nothing in the box indicated that Monica Publishing Corporation had owned
Abante Tonite.
WHEREFORE, the Court AFFIRMS the decision promulgated on March 8, 2002; and ORDERS petitioners to pay
the costs of suit.

SO ORDERED.

BOSTON EQUITY RESOURCES, INC., Petitioner,

vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.

DECISION

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to reverse and set aside: (1) the Decision,1 dated 28
February 2006 and (2) the Resolution,2 dated 1 August 2006 of the Court of Appeals in CA-G.R. SP No. 88586. The
challenged decision granted herein respondent's petition for certiorari upon a finding that the trial court committed
grave abuse of discretion in denying respondent's motion to dismiss the complaint against her.3 Based on this
finding, the Court of Appeals reversed and set aside the Orders, dated 8 November 20044 and 22 December
2004,5respectively, of the Regional Trial Court (RTC) of Manila, Branch 24.

The Facts

On 24 December 1997, petitioner filed a complaint for sum of money with a prayer for the issuance of a writ of
preliminary attachment against the spouses Manuel and Lolita Toledo.6 Herein respondent filed an Answer dated 19
March 1998 but on 7 May 1998, she filed a Motion for Leave to Admit Amended Answer7 in which she alleged,
among others, that her husband and co-defendant, Manuel Toledo (Manuel), is already dead.8 The death
certificate9 of Manuel states "13 July 1995" as the date of death. As a result, petitioner filed a motion, dated 5
August 1999, to require respondent to disclose the heirs of Manuel.10 In compliance with the verbal order of the
court during the 11 October 1999 hearing of the case, respondent submitted the required names and addresses of
the heirs.11 Petitioner then filed a Motion for Substitution,12 dated 18 January 2000, praying that Manuel be
substituted by his children as party-defendants. It appears that this motion was granted by the trial court in an Order
dated 9 October 2000.13

Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its pre-trial order containing, among others, the
dates of hearing of the case.14

The trial of the case then proceeded. Herein petitioner, as plaintiff, presented its evidence and its exhibits were
thereafter admitted.

On 26 May 2004, the reception of evidence for herein respondent was cancelled upon agreement of the parties. On
24 September 2004, counsel for herein respondent was given a period of fifteen days within which to file a demurrer
to evidence.15 However, on 7 October 2004, respondent instead filed a motion to dismiss the complaint, citing the
following as grounds: (1) that the complaint failed to implead an indispensable party or a real party in interest;
hence, the case must be dismissed for failure to state a cause of action; (2) that the trial court did not acquire
jurisdiction over the person of Manuel pursuant to Section 5, Rule 86 of the Revised Rules of Court; (3) that the trial
court erred in ordering the substitution of the deceased Manuel by his heirs; and (4) that the court must also dismiss
the case against Lolita Toledo in accordance with Section 6, Rule 86 of the Rules of Court.16

The trial court, in an Order dated 8 November 2004, denied the motion to dismiss for having been filed out of time,
citing Section 1, Rule 16 of the 1997 Rules of Court which states that: "Within the time for but before filing the
answer to the complaint or pleading asserting a claim, a motion to dismiss may be made x x x."17 Respondent’s
motion for reconsideration of the order of denial was likewise denied on the ground that "defendants’ attack on the
jurisdiction of this Court is now barred by estoppel by laches" since respondent failed to raise the issue despite
several chances to do so.18
Aggrieved, respondent filed a petition for certiorari with the Court of Appeals alleging that the trial court seriously
erred and gravely abused its discretion in denying her motion to dismiss despite discovery, during the trial of the
case, of evidence that would constitute a ground for dismissal of the case.19

The Court of Appeals granted the petition based on the following grounds:

It is elementary that courts acquire jurisdiction over the person of the defendant x x x only when the latter voluntarily
appeared or submitted to the court or by coercive process issued by the court to him, x x x. In this case, it is
undisputed that when petitioner Boston filed the complaint on December 24, 1997, defendant Manuel S. Toledo was
already dead, x x x. Such being the case, the court a quo could not have acquired jurisdiction over the person of
defendant Manuel S. Toledo.

x x x the court a quo’s denial of respondent’s motion to dismiss was based on its finding that respondent’s attack on
the jurisdiction of the court was already barred by laches as respondent failed to raise the said ground in its [sic]
amended answer and during the pre-trial, despite her active participation in the proceedings.

However, x x x it is well-settled that issue on jurisdiction may be raised at any stage of the proceeding, even for the
first time on appeal. By timely raising the issue on jurisdiction in her motion to dismiss x x x respondent is not
estopped from raising the question on jurisdiction.

Moreover, when issue on jurisdiction was raised by respondent, the court a quo had not yet decided the case,
hence, there is no basis for the court a quo to invoke estoppel to justify its denial of the motion for reconsideration;

It should be stressed that when the complaint was filed, defendant Manuel S. Toledo was already dead. The
complaint should have impleaded the estate of Manuel S. Toledo as defendant, not only the wife, considering that
the estate of Manuel S. Toledo is an indispensable party, which stands to be benefited or be injured in the outcome
of the case. x x x

xxxx

Respondent’s motion to dismiss the complaint should have been granted by public respondent judge as the same
was in order. Considering that the obligation of Manuel S. Toledo is solidary with another debtor, x x x, the claim x x
x should be filed against the estate of Manuel S. Toledo, in conformity with the provision of Section 6, Rule 86 of the
Rules of Court, x x x.20

The Court of Appeals denied petitioner’s motion for reconsideration. Hence, this petition.

The Issues

Petitioner claims that the Court of Appeals erred in not holding that:

1. Respondent is already estopped from questioning the trial court’s jurisdiction;

2. Petitioner never failed to implead an indispensable party as the estate of Manuel is not an indispensable
party;

3. The inclusion of Manuel as party-defendant is a mere misjoinder of party not warranting the dismissal of
the case before the lower court; and

4. Since the estate of Manuel is not an indispensable party, it is not necessary that petitioner file its claim
against the estate of Manuel.

In essence, what is at issue here is the correctness of the trial court’s orders denying respondent’s motion to
dismiss.

The Ruling of the Court

We find merit in the petition.

Motion to dismiss filed out of time

To begin with, the Court of Appeals erred in granting the writ of certiorari in favor of respondent. Well settled is the
rule that the special civil action for certiorari is not the proper remedy to assail the denial by the trial court of a
motion to dismiss. The order of the trial court denying a motion to dismiss is merely interlocutory, as it neither
terminates nor finally disposes of a case and still leaves something to be done by the court before a case is finally
decided on the merits.21 Therefore, "the proper remedy in such a case is to appeal after a decision has been
rendered."22

As the Supreme Court held in Indiana Aerospace University v. Comm. on Higher Education:23

A writ of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted only to correct a
grave abuse of discretion or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its function is limited
to keeping an inferior court within its jurisdiction and to relieve persons from arbitrary acts – acts which courts or
judges have no power or authority in law to perform. It is not designed to correct erroneous findings and conclusions
made by the courts. (Emphasis supplied)

Even assuming that certiorari is the proper remedy, the trial court did not commit grave abuse of discretion in
denying respondent’s motion to dismiss. It, in fact, acted correctly when it issued the questioned orders as
respondent’s motion to dismiss was filed SIX YEARS AND FIVE MONTHS AFTER SHE FILED HER AMENDED
ANSWER. This circumstance alone already warranted the outright dismissal of the motion for having been filed in
clear contravention of the express mandate of Section 1, Rule 16, of the Revised Rules of Court. Under this
provision, a motion to dismiss shall be filed within the time for but before the filing of an answer to the complaint or
pleading asserting a claim.24

More importantly, respondent’s motion to dismiss was filed after petitioner has completed the presentation of its
evidence in the trial court, giving credence to petitioner’s and the trial court’s conclusion that the filing of the motion
to dismiss was a mere ploy on the part of respondent to delay the prompt resolution of the case against her.

Also worth mentioning is the fact that respondent’s motion to dismiss under consideration herein is not the first
motion to dismiss she filed in the trial court. It appears that she had filed an earlier motion to dismiss26 on the sole
ground of the unenforceability of petitioner’s claim under the Statute of Frauds, which motion was denied by the trial
court. More telling is the following narration of the trial court in its Order denying respondent’s motion for
reconsideration of the denial of her motion to dismiss:

As can be gleaned from the records, with the admission of plaintiff’s exhibits, reception of defendants’ evidence was
set on March 31, and April 23, 2004 x x x . On motion of the defendants, the hearing on March 31, 2004 was
cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad testificandum and duces tecum to one Gina M.
Madulid, to appear and testify for the defendants on April 23, 2004. Reception of defendants’ evidence was again
deferred to May 26, June 2 and June 30, 2004, x x x.

On May 13, 2004, defendants sought again the issuance of a subpoena duces tecum and ad testificandum to the
said Gina Madulid. On May 26, 2004, reception of defendants [sic] evidence was cancelled upon the agreement of
the parties. On July 28, 2004, in the absence of defendants’ witness, hearing was reset to September 24 and
October 8, 2004 x x x.

On September 24, 2004, counsel for defendants was given a period of fifteen (15) days to file a demurrer to
evidence. On October 7, 2004, defendants filed instead a Motion to Dismiss x x x.27

Respondent’s act of filing multiple motions, such as the first and earlier motion to dismiss and then the motion to
dismiss at issue here, as well as several motions for postponement, lends credibility to the position taken by
petitioner, which is shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the second motion to dismiss was, therefore,
"not only improper but also dilatory."28 Thus, the trial court, "far from deviating or straying off course from established
jurisprudence on the matter, x x x had in fact faithfully observed the law and legal precedents in this case."29 The
Court of Appeals, therefore, erred not only in entertaining respondent’s petition for certiorari, it likewise erred in
ruling that the trial court committed grave abuse of discretion when it denied respondent’s motion to dismiss.

On whether or not respondent is estopped from

questioning the jurisdiction of the trial court

At the outset, it must be here stated that, as the succeeding discussions will demonstrate, jurisdiction over the
person of Manuel should not be an issue in this case. A protracted discourse on jurisdiction is, nevertheless,
demanded by the fact that jurisdiction has been raised as an issue from the lower court, to the Court of Appeals and,
finally, before this Court. For the sake of clarity, and in order to finally settle the controversy and fully dispose of all
the issues in this case, it was deemed imperative to resolve the issue of jurisdiction.

1. Aspects of Jurisdiction

Petitioner calls attention to the fact that respondent’s motion to dismiss questioning the trial court’s jurisdiction was
filed more than six years after her amended answer was filed. According to petitioner, respondent had several
opportunities, at various stages of the proceedings, to assail the trial court’s jurisdiction but never did so for six
straight years. Citing the doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et al.30 petitioner claimed that
respondent’s failure to raise the question of jurisdiction at an earlier stage bars her from later questioning it,
especially since she actively participated in the proceedings conducted by the trial court.

Petitioner’s argument is misplaced, in that, it failed to consider that the concept of jurisdiction has several aspects,
namely: (1) jurisdiction over the subject matter; (2) jurisdiction over the parties; (3) jurisdiction over the issues of the
case; and (4) in cases involving property, jurisdiction over the res or the thing which is the subject of the litigation.31

The aspect of jurisdiction which may be barred from being assailed as a result of estoppel by laches is jurisdiction
over the subject matter. Thus, in Tijam, the case relied upon by petitioner, the issue involved was the authority of the
then Court of First Instance to hear a case for the collection of a sum of money in the amount of ₱1,908.00 which
amount was, at that time, within the exclusive original jurisdiction of the municipal courts.

In subsequent cases citing the ruling of the Court in Tijam, what was likewise at issue was the jurisdiction of the trial
court over the subject matter of the case. Accordingly, in Spouses Gonzaga v. Court of Appeals,32 the issue for
consideration was the authority of the regional trial court to hear and decide an action for reformation of contract and
damages involving a subdivision lot, it being argued therein that jurisdiction is vested in the Housing and Land Use
Regulatory Board pursuant to PD 957 (The Subdivision and Condominium Buyers Protective Decree). In Lee v.
Presiding Judge, MTC, Legaspi City,33 petitioners argued that the respondent municipal trial court had no jurisdiction
over the complaint for ejectment because the issue of ownership was raised in the pleadings. Finally, in People v.
Casuga,34 accused-appellant claimed that the crime of grave slander, of which she was charged, falls within the
concurrent jurisdiction of municipal courts or city courts and the then courts of first instance, and that the judgment
of the court of first instance, to which she had appealed the municipal court's conviction, should be deemed null and
void for want of jurisdiction as her appeal should have been filed with the Court of Appeals or the Supreme Court.

In all of these cases, the Supreme Court barred the attack on the jurisdiction of the respective courts concerned
over the subject matter of the case based on estoppel by laches, declaring that parties cannot be allowed to
belatedly adopt an inconsistent posture by attacking the jurisdiction of a court to which they submitted their cause
voluntarily.35

Here, what respondent was questioning in her motion to dismiss before the trial court was that court’s jurisdiction
over the person of defendant Manuel. Thus, the principle of estoppel by laches finds no application in this case.
Instead, the principles relating to jurisdiction over the person of the parties are pertinent herein.

The Rules of Court provide:

 RULE 9
EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. – Defenses and objections not pleaded either in a motion to
dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on
record that the court has no jurisdiction over the subject matter, that there is another action pending between the
same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the
court shall dismiss the claim.

RULE 15
MOTIONS

Sec. 8. Omnibus motion. – Subject to the provisions of Section 1 of Rule 9, a motion attacking a pleading, order,
judgment, or proceeding shall include all objections then available, and all objections not so included shall be
deemed waived.

Based on the foregoing provisions, the "objection on jurisdictional grounds which is not waived even if not alleged in
a motion to dismiss or the answer is lack of jurisdiction over the subject matter. x x x Lack of jurisdiction over the
subject matter can always be raised anytime, even for the first time on appeal, since jurisdictional issues cannot be
waived x x x subject, however, to the principle of estoppel by laches."36

Since the defense of lack of jurisdiction over the person of a party to a case is not one of those defenses which are
not deemed waived under Section 1 of Rule 9, such defense must be invoked when an answer or a motion to
dismiss is filed in order to prevent a waiver of the defense.37 If the objection is not raised either in a motion to
dismiss or in the answer, the objection to the jurisdiction over the person of the plaintiff or the defendant is deemed
waived by virtue of the first sentence of the above-quoted Section 1 of Rule 9 of the Rules of Court.38

The Court of Appeals, therefore, erred when it made a sweeping pronouncement in its questioned decision, stating
that "issue on jurisdiction may be raised at any stage of the proceeding, even for the first time on appeal" and that,
therefore, respondent timely raised the issue in her motion to dismiss and is, consequently, not estopped from
raising the question of jurisdiction. As the question of jurisdiction involved here is that over the person of the
defendant Manuel, the same is deemed waived if not raised in the answer or a motion to dismiss. In any case,
respondent cannot claim the defense since "lack of jurisdiction over the person, being subject to waiver, is a
personal defense which can only be asserted by the party who can thereby waive it by silence."39

2. Jurisdiction over the person of a defendant is acquired through a valid service of summons; trial court did not
acquire jurisdiction over the person of Manuel Toledo

In the first place, jurisdiction over the person of Manuel was never acquired by the trial court. A defendant is
informed of a case against him when he receives summons. "Summons is a writ by which the defendant is notified
of the action brought against him. Service of such writ is the means by which the court acquires jurisdiction over his
person."40

In the case at bar, the trial court did not acquire jurisdiction over the person of Manuel since there was no valid
service of summons upon him, precisely because he was already dead even before the complaint against him and
his wife was filed in the trial court. The issues presented in this case are similar to those in the case of Sarsaba v.
Vda. de Te.41

In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno was illegally dismissed from employment
and ordering the payment of his monetary claims. To satisfy the claim, a truck in the possession of Sereno’s
employer was levied upon by a sheriff of the NLRC, accompanied by Sereno and his lawyer, Rogelio Sarsaba, the
petitioner in that case. A complaint for recovery of motor vehicle and damages, with prayer for the delivery of the
truck pendente lite was eventually filed against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the registered
owner of the truck. After his motion to dismiss was denied by the trial court, petitioner Sarsaba filed his answer.
Later on, however, he filed an omnibus motion to dismiss citing, as one of the grounds, lack of jurisdiction over one
of the principal defendants, in view of the fact that Sereno was already dead when the complaint for recovery of
possession was filed.
Although the factual milieu of the present case is not exactly similar to that of Sarsaba, one of the issues submitted
for resolution in both cases is similar: whether or not a case, where one of the named defendants was already dead
at the time of its filing, should be dismissed so that the claim may be pursued instead in the proceedings for the
settlement of the estate of the deceased defendant. The petitioner in the Sarsaba Case claimed, as did respondent
herein, that since one of the defendants died before summons was served on him, the trial court should have
dismissed the complaint against all the defendants and the claim should be filed against the estate of the deceased
defendant. The petitioner in Sarsaba, therefore, prayed that the complaint be dismissed, not only against Sereno,
but as to all the defendants, considering that the RTC did not acquire jurisdiction over the person of Sereno.42 This is
exactly the same prayer made by respondent herein in her motion to dismiss.

The Court, in the Sarsaba Case, resolved the issue in this wise:

x x x We cannot countenance petitioner’s argument that the complaint against the other defendants should have
been dismissed, considering that the RTC never acquired jurisdiction over the person of Sereno. The court’s failure
to acquire jurisdiction over one’s person is a defense which is personal to the person claiming it. Obviously, it is now
impossible for Sereno to invoke the same in view of his death. Neither can petitioner invoke such ground, on behalf
of Sereno, so as to reap the benefit of having the case dismissed against all of the defendants. Failure to serve
summons on Sereno’s person will not be a cause for the dismissal of the complaint against the other defendants,
considering that they have been served with copies of the summons and complaints and have long submitted their
respective responsive pleadings. In fact, the other defendants in the complaint were given the chance to raise all
possible defenses and objections personal to them in their respective motions to dismiss and their subsequent
answers.43 (Emphasis supplied.)

Hence, the Supreme Court affirmed the dismissal by the trial court of the complaint against Sereno only.

Based on the foregoing pronouncements, there is no basis for dismissing the complaint against respondent herein.
Thus, as already emphasized above, the trial court correctly denied her motion to dismiss.

On whether or not the estate of Manuel

Toledo is an indispensable party

Rule 3, Section 7 of the 1997 Rules of Court states:

SEC. 7. Compulsory joinder of indispensable parties. – Parties-in-interest without whom no final determination can
be had of an action shall be joined either as plaintiffs or defendants.

An indispensable party is one who has such an interest in the controversy or subject matter of a case that a final
adjudication cannot be made in his or her absence, without injuring or affecting that interest. He or she is a party
who has not only an interest in the subject matter of the controversy, but "an interest of such nature that a final
decree cannot be made without affecting that interest or leaving the controversy in such a condition that its final
determination may be wholly inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination between the parties already
before the court which is effective, complete or equitable." Further, an indispensable party is one who must be
included in an action before it may properly proceed.44

On the other hand, a "person is not an indispensable party if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them. Also, a person is not an indispensable party if his presence
would merely permit complete relief between him or her and those already parties to the action, or if he or she has
no interest in the subject matter of the action." It is not a sufficient reason to declare a person to be an indispensable
party simply because his or her presence will avoid multiple litigations.45

Applying the foregoing pronouncements to the case at bar, it is clear that the estate of Manuel is not an
indispensable party to the collection case, for the simple reason that the obligation of Manuel and his wife,
respondent herein, is solidary.
The contract between petitioner, on the one hand and respondent and respondent’s husband, on the other, states:

FOR VALUE RECEIVED, I/We jointly and severally46 (in solemn) promise to pay BOSTON EQUITY RESOURCES,
INC. x x x the sum of PESOS: [ONE MILLION FOUR HUNDRED (₱1,400,000.00)] x x x.47

The provisions and stipulations of the contract were then followed by the respective signatures of respondent as
"MAKER" and her husband as "CO-MAKER."48 Thus, pursuant to Article 1216 of the Civil Code, petitioner may
collect the entire amount of the obligation from respondent only. The aforementioned provision states: "The creditor
may proceed against any one of the solidary debtors or some or all of them simultaneously. The demand made
against one of them shall not be an obstacle to those which may subsequently be directed against the others, so
long as the debt has not been fully collected."

In other words, the collection case can proceed and the demands of petitioner can be satisfied by respondent only,
even without impleading the estate of Manuel. Consequently, the estate of Manuel is not an indispensable party to
petitioner’s complaint for sum of money.

However, the Court of Appeals, agreeing with the contention of respondent, held that the claim of petitioner should
have been filed against the estate of Manuel in accordance with Sections 5 and 6 of Rule 86 of the Rules of Court.
The aforementioned provisions provide:

SEC. 5. Claims which must be filed under the notice. If not filed, barred; exceptions. All claims for money against the
decedent, arising from contract, express or implied, whether the same be due, not due, or contingent, all claims for
funeral expenses and judgment for money against the decedent, must be filed within the time limited in the notice;
otherwise, they are barred forever, except that they may be set forth as counterclaims in any action that the
executor or administrator may bring against the claimants. x x x.

SEC. 6. Solidary obligation of decedent. Where the obligation of the decedent is solidary with another debtor, the
claim shall be filed against the decedent as if he were the only debtor, without prejudice to the right of the estate to
recover contribution from the other debtor. x x x.

The Court of Appeals erred in its interpretation of the above-quoted provisions.

In construing Section 6, Rule 87 of the old Rules of Court, the precursor of Section 6, Rule 86 of the Revised Rules
of Court, which latter provision has been retained in the present Rules of Court without any revisions, the Supreme
Court, in the case of Manila Surety & Fidelity Co., Inc. v. Villarama, et. al.,49 held:50

Construing Section 698 of the Code of Civil Procedure from whence [Section 6, Rule 87] was taken, this Court held
that where two persons are bound in solidum for the same debt and one of them dies, the whole indebtedness can
be proved against the estate of the latter, the decedent’s liability being absolute and primary; x x x. It is evident from
the foregoing that Section 6 of Rule 87 provides the procedure should the creditor desire to go against the deceased
debtor, but there is certainly nothing in the said provision making compliance with such procedure a condition
precedent before an ordinary action against the surviving solidary debtors, should the creditor choose to demand
payment from the latter, could be entertained to the extent that failure to observe the same would deprive the court
jurisdiction to take cognizance of the action against the surviving debtors. Upon the other hand, the Civil Code
expressly allows the creditor to proceed against any one of the solidary debtors or some or all of them
simultaneously. There is, therefore, nothing improper in the creditor’s filing of an action against the surviving solidary
debtors alone, instead of instituting a proceeding for the settlement of the estate of the deceased debtor wherein his
claim could be filed.

The foregoing ruling was reiterated and expounded in the later case of Philippine National Bank v. Asuncion51where
the Supreme Court pronounced:

A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court reveals that nothing therein prevents a
creditor from proceeding against the surviving solidary debtors. Said provision merely sets up the procedure in
enforcing collection in case a creditor chooses to pursue his claim against the estate of the deceased solidary
debtor. The rule has been set forth that a creditor (in a solidary obligation) has the option whether to file or not to file
a claim against the estate of the solidary debtor. x x x
 xxxx

It is crystal clear that Article 1216 of the New Civil Code is the applicable provision in this matter. Said provision
gives the creditor the right to "proceed against anyone of the solidary debtors or some or all of them
simultaneously." The choice is undoubtedly left to the solidary creditor to determine against whom he will enforce
collection. In case of the death of one of the solidary debtors, he (the creditor) may, if he so chooses, proceed
against the surviving solidary debtors without necessity of filing a claim in the estate of the deceased debtors. It is
not mandatory for him to have the case dismissed as against the surviving debtors and file its claim against the
estate of the deceased solidary debtor, x x x. For to require the creditor to proceed against the estate, making it a
condition precedent for any collection action against the surviving debtors to prosper, would deprive him of his
substantive rightsprovided by Article 1216 of the New Civil Code. (Emphasis supplied.)

As correctly argued by petitioner, if Section 6, Rule 86 of the Revised Rules of Court were applied literally, Article
1216 of the New Civil Code would, in effect, be repealed since under the Rules of Court, petitioner has no choice
but to proceed against the estate of [the deceased debtor] only. Obviously, this provision diminishes the [creditor’s]
right under the New Civil Code to proceed against any one, some or all of the solidary debtors. Such a construction
is not sanctioned by principle, which is too well settled to require citation, that a substantive law cannot be amended
by a procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules of Court cannot be made to prevail
over Article 1216 of the New Civil Code, the former being merely procedural, while the latter, substantive.

Based on the foregoing, the estate of Manuel is not an indispensable party and the case can proceed as against
respondent only. That petitioner opted to collect from respondent and not from the estate of Manuel is evidenced by
its opposition to respondent’s motion to dismiss asserting that the case, as against her, should be dismissed so that
petitioner can proceed against the estate of Manuel.

On whether or not the inclusion of Manuel as

party defendant is a misjoinder of party

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder nor non-joinder of parties is ground for
dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own
initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be
severed and proceeded with separately."

Based on the last sentence of the afore-quoted provision of law, a misjoined party must have the capacity to sue or
be sued in the event that the claim by or against the misjoined party is pursued in a separate case. In this case,
therefore, the inclusion of Manuel in the complaint cannot be considered a misjoinder, as in fact, the action would
have proceeded against him had he been alive at the time the collection case was filed by petitioner. This being the
case, the remedy provided by Section 11 of Rule 3 does not obtain here. The name of Manuel as party-defendant
cannot simply be dropped from the case. Instead, the procedure taken by the Court in Sarsaba v. Vda. de
Te,52whose facts, as mentioned earlier, resemble those of this case, should be followed herein. There, the Supreme
Court agreed with the trial court when it resolved the issue of jurisdiction over the person of the deceased Sereno in
this wise:

As correctly pointed by defendants, the Honorable Court has not acquired jurisdiction over the person of Patricio
Sereno since there was indeed no valid service of summons insofar as Patricio Sereno is concerned. Patricio
Sereno died before the summons, together with a copy of the complaint and its annexes, could be served upon him.

However, the failure to effect service of summons unto Patricio Sereno, one of the defendants herein, does not
render the action DISMISSIBLE, considering that the three (3) other defendants, x x x, were validly served with
summons and the case with respect to the answering defendants may still proceed independently. Be it recalled that
the three (3) answering defendants have previously filed a Motion to Dismiss the Complaint which was denied by
the Court.

Hence, only the case against Patricio Sereno will be DISMISSED and the same may be filed as a claim against the
estate of Patricio Sereno, but the case with respect to the three (3) other accused [sic] will proceed. (Emphasis
supplied.)53

As a result, the case, as against Manuel, must be dismissed.

In addition, the dismissal of the case against Manuel is further warranted by Section 1 of Rule 3 of the Rules of
Court, which states that: only natural or juridical persons, or entities authorized by law may be parties in a civil
action." Applying this provision of law, the Court, in the case of Ventura v. Militante,54 held:

Parties may be either plaintiffs or defendants. x x x. In order to maintain an action in a court of justice, the plaintiff
must have an actual legal existence, that is, he, she or it must be a person in law and possessed of a legal entity as
either a natural or an artificial person, and no suit can be lawfully prosecuted save in the name of such a person.

The rule is no different as regards party defendants. It is incumbent upon a plaintiff, when he institutes a judicial
proceeding, to name the proper party defendant to his cause of action. In a suit or proceeding in personam of an
adversary character, the court can acquire no jurisdiction for the purpose of trial or judgment until a party defendant
who actually or legally exists and is legally capable of being sued, is brought before it. It has even been held that the
question of the legal personality of a party defendant is a question of substance going to the jurisdiction of the court
and not one of procedure.

The original complaint of petitioner named the "estate of Carlos Ngo as represented by surviving spouse Ms.
Sulpicia Ventura" as the defendant. Petitioner moved to dismiss the same on the ground that the defendant as
1âw phi 1

named in the complaint had no legal personality. We agree.

x x x. Considering that capacity to be sued is a correlative of the capacity to sue, to the same extent, a decedent
does not have the capacity to be sued and may not be named a party defendant in a court action. (Emphases
supplied.)

Indeed, where the defendant is neither a natural nor a juridical person or an entity authorized by law, the complaint
may be dismissed on the ground that the pleading asserting the claim states no cause of action or for failure to state
a cause of action pursuant to Section 1(g) of Rule 16 of the Rules of Court, because a complaint cannot possibly
state a cause of action against one who cannot be a party to a civil action.55

Since the proper course of action against the wrongful inclusion of Manuel as party-defendant is the dismissal of the
case as against him, thus did the trial court err when it ordered the substitution of Manuel by his heirs. Substitution is
proper only where the party to be substituted died during the pendency of the case, as expressly provided for by
Section 16, Rule 3 of the Rules of Court, which states:

Death of party;duty of counsel. – Whenever a party to a pending action dies, and the claim is not thereby
extinguished, it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact
thereof, and to give the name and address of his legal representative or representatives. x x x

The heirs of the deceased may be allowed to be substituted for the deceased, without requiring the appointment of
an executor or administrator x x x.

The court shall forthwith order said legal representative or representatives to appear and be substituted within a
period of thirty (30) days from notice. (Emphasis supplied.)

Here, since Manuel was already dead at the time of the filing of the complaint, the court never acquired jurisdiction
over his person and, in effect, there was no party to be substituted.

WHEREFORE, the petition is GRANTED. The Decision dated 28 February 2006 and the Resolution dated 1 August
2006 of the Court of Appeals in CA-G.R. SP No. 88586 are REVERSED and SET ASIDE. The Orders of the
Regional Trial Court dated 8 November 2004 and 22 December 2004, respectively, in Civil Case No. 97-86672, are
REINSTATED. The Regional Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the trial of Civil
Case No. 97-86672 against respondent Lolita G. Toledo only, in accordance with the above pronouncements of the
Court, and to decide the case with dispatch.

SO ORDERED.

LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge Philippines, Inc.), LUZON CONTINENTAL LAND
CORPORATION, CONTINENTAL OPERATING CORPORATION and PHILIP ROSEBERG, petitioners,
vs.
CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and ANTHONY A. MARIANO, respondents.

DECISION

PANGANIBAN, J.:

May defendants in civil cases implead in their counterclaims persons who were not parties to the original
complaints? This is the main question to be answered in this controversy.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to nullify the May 22, 20022 and the
September 3, 2002 Orders3 of the Regional Trial Court (RTC) of Quezon City (Branch 80) in Civil Case No. Q-00-
41103. The decretal portion of the first assailed Order reads:

"WHEREFORE, in the light of the foregoing as earlier stated, the plaintiff's motion to dismiss claims is
granted. Accordingly, the defendants' claims against Mr. Lim and Mr. Mariano captioned as their
counterclaims are dismissed."4

The second challenged Order denied petitioners' Motion for Reconsideration.

The Facts

Briefly, the origins of the present controversy can be traced to the Letter of Intent (LOI) executed by both parties on
August 11, 1998, whereby Petitioner Lafarge Cement Philippines, Inc. (Lafarge) -- on behalf of its affiliates and other
qualified entities, including Petitioner Luzon Continental Land Corporation (LCLC) -- agreed to purchase the cement
business of Respondent Continental Cement Corporation (CCC). On October 21, 1998, both parties entered into a
Sale and Purchase Agreement (SPA). At the time of the foregoing transactions, petitioners were well aware that
CCC had a case pending with the Supreme Court. The case was docketed as GR No. 119712, entitled Asset
Privatization Trust (APT) v. Court of Appeals and Continental Cement Corporation.

In anticipation of the liability that the High Tribunal might adjudge against CCC, the parties, under Clause 2 (c) of the
SPA, allegedly agreed to retain from the purchase price a portion of the contract price in the amount of
P117,020,846.84 -- the equivalent of US$2,799,140. This amount was to be deposited in an interest-bearing
account in the First National City Bank of New York (Citibank) for payment to APT, the petitioner in GR No. 119712.

However, petitioners allegedly refused to apply the sum to the payment to APT, despite the subsequent finality of
the Decision in GR No. 119712 in favor of the latter and the repeated instructions of Respondent CCC. Fearful that
nonpayment to APT would result in the foreclosure, not just of its properties covered by the SPA with Lafarge but of
several other properties as well, CCC filed before the Regional Trial Court of Quezon City on June 20, 2000, a
"Complaint with Application for Preliminary Attachment" against petitioners. Docketed as Civil Case No. Q-00-
41103, the Complaint prayed, among others, that petitioners be directed to pay the "APT Retained Amount" referred
to in Clause 2 (c) of the SPA.

Petitioners moved to dismiss the Complaint on the ground that it violated the prohibition on forum-shopping.
Respondent CCC had allegedly made the same claim it was raising in Civil Case No. Q-00-41103 in another action,
which involved the same parties and which was filed earlier before the International Chamber of Commerce. After
the trial court denied the Motion to Dismiss in its November 14, 2000 Order, petitioners elevated the matter before
the Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the outcome of their appeal, petitioners filed their
Answer and Compulsory Counterclaims ad Cautelam before the trial court in Civil Case No. Q-00-41103. In their
Answer, they denied the allegations in the Complaint. They prayed -- by way of compulsory counterclaims against
Respondent CCC, its majority stockholder and president Gregory T. Lim, and its corporate secretary Anthony A.
Mariano -- for the sums of (a) P2,700,000 each as actual damages, (b) P100,000,000 each as exemplary damages,
(c) P100,000,000 each as moral damages, and (d) P5,000,000 each as attorney's fees plus costs of suit.

Petitioners alleged that CCC, through Lim and Mariano, had filed the "baseless" Complaint in Civil Case No. Q-00-
41103 and procured the Writ of Attachment in bad faith. Relying on this Court's pronouncement in Sapugay v.
CA,5petitioners prayed that both Lim and Mariano be held "jointly and solidarily" liable with Respondent CCC.

On behalf of Lim and Mariano who had yet to file any responsive pleading, CCC moved to dismiss petitioners'
compulsory counterclaims on grounds that essentially constituted the very issues for resolution in the instant
Petition.

Ruling of the Trial Court

On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80) dismissed petitioners' counterclaims for
several reasons, among which were the following: a) the counterclaims against Respondents Lim and Mariano were
not compulsory; b) the ruling in Sapugay was not applicable; and c) petitioners' Answer with Counterclaims violated
procedural rules on the proper joinder of causes of action.6

Acting on the Motion for Reconsideration filed by petitioners, the trial court -- in an Amended Order dated
September 3, 20027 -- admitted some errors in its May 22, 2002 Order, particularly in its pronouncement that their
counterclaim had been pleaded against Lim and Mariano only. However, the RTC clarified that it was dismissing the
counterclaim insofar as it impleaded Respondents Lim and Mariano, even if it included CCC.

Hence this Petition.8

Issues

In their Memorandum, petitioners raise the following issues for our consideration:

"[a] Whether or not the RTC gravely erred in refusing to rule that Respondent CCC has no personality to
move to dismiss petitioners' compulsory counterclaims on Respondents Lim and Mariano's behalf.

"[b] Whether or not the RTC gravely erred in ruling that (i) petitioners' counterclaims against Respondents
Lim and Mariano are not compulsory; (ii) Sapugay v. Court of Appeals is inapplicable here; and (iii)
petitioners violated the rule on joinder of causes of action."9

For clarity and coherence, the Court will resolve the foregoing in reverse order.

The Court's Ruling

The Petition is meritorious.

First Issue:

Counterclaims and Joinder of Causes of Action.

Petitioners' Counterclaims Compulsory

Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil Procedure as "any claim which a defending
party may have against an opposing party." They are generally allowed in order to avoid a multiplicity of suits and to
facilitate the disposition of the whole controversy in a single action, such that the defendant's demand may be
adjudged by a counterclaim rather than by an independent suit. The only limitations to this principle are (1) that the
court should have jurisdiction over the subject matter of the counterclaim, and (2) that it could acquire jurisdiction
over third parties whose presence is essential for its adjudication.10

A counterclaim may either be permissive or compulsory. It is permissive "if it does not arise out of or is not
necessarily connected with the subject matter of the opposing party's claim."11 A permissive counterclaim is
essentially an independent claim that may be filed separately in another case.

A counterclaim is compulsory when its object "arises out of or is necessarily connected with the transaction or
occurrence constituting the subject matter of the opposing party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction."12

Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action; otherwise, they
would be barred forever. NAMARCO v. Federation of United Namarco Distributors13 laid down the following criteria to
determine whether a counterclaim is compulsory or permissive: 1) Are issues of fact and law raised by the claim and
by the counterclaim largely the same? 2) Would res judicata bar a subsequent suit on defendant's claim, absent the
compulsory counterclaim rule? 3) Will substantially the same evidence support or refute plaintiff's claim as well as
defendant's counterclaim? 4) Is there any logical relation between the claim and the counterclaim? A positive
answer to all four questions would indicate that the counterclaim is compulsory.

Adopted in Quintanilla v. CA14 and reiterated in Alday v. FGU Insurance Corporation,15 the "compelling test of
compulsoriness" characterizes a counterclaim as compulsory if there should exist a "logical relationship" between
the main claim and the counterclaim. There exists such a relationship when conducting separate trials of the
respective claims of the parties would entail substantial duplication of time and effort by the parties and the court;
when the multiple claims involve the same factual and legal issues; or when the claims are offshoots of the same
basic controversy between the parties.

We shall now examine the nature of petitioners' counterclaims against respondents with the use of the foregoing
parameters.

Petitioners base their counterclaim on the following allegations:

"Gregory T. Lim and Anthony A. Mariano were the persons responsible for making the bad faith decisions
for, and causing plaintiff to file this baseless suit and to procure an unwarranted writ of attachment,
notwithstanding their knowledge that plaintiff has no right to bring it or to secure the writ. In taking such bad
faith actions, Gregory T. Lim was motivated by his personal interests as one of the owners of plaintiff while
Anthony A. Mariano was motivated by his sense of personal loyalty to Gregory T. Lim, for which reason he
disregarded the fact that plaintiff is without any valid cause.

"Consequently, both Gregory T. Lim and Anthony A. Mariano are the plaintiff's co-joint tortfeasors in the
commission of the acts complained of in this answer and in the compulsory counterclaims pleaded below.
As such they should be held jointly and solidarily liable as plaintiff's co-defendants to those compulsory
counterclaims pursuant to the Supreme Court's decision in Sapugay v. Mobil.

xxx xxx xxx

"The plaintiff's, Gregory T. Lim and Anthony A. Mariano's bad faith filing of this baseless case has compelled
the defendants to engage the services of counsel for a fee and to incur costs of litigation, in amounts to be
proved at trial, but in no case less than P5 million for each of them and for which plaintiff Gregory T. Lim and
Anthony A. Mariano should be held jointly and solidarily liable.

"The plaintiff's, Gregory T. Lim's and Anthony A. Mariano's actions have damaged the reputations of the
defendants and they should be held jointly and solidarily liable to them for moral damages of P100 million
each.

"In order to serve as an example for the public good and to deter similar baseless, bad faith litigation, the
plaintiff, Gregory T. Lim and Anthony A. Mariano should be held jointly and solidarily liable to the defendants
for exemplary damages of P100 million each." 16
The above allegations show that petitioners' counterclaims for damages were the result of respondents' (Lim and
Mariano) act of filing the Complaint and securing the Writ of Attachment in bad faith. Tiu Po v. Bautista17 involved the
issue of whether the counterclaim that sought moral, actual and exemplary damages and attorney's fees against
respondents on account of their "malicious and unfounded" complaint was compulsory. In that case, we held as
follows:

"Petitioners' counterclaim for damages fulfills the necessary requisites of a compulsory counterclaim. They
are damages claimed to have been suffered by petitioners as a consequence of the action filed against
them. They have to be pleaded in the same action; otherwise, petitioners would be precluded by the
judgment from invoking the same in an independent action. The pronouncement in Papa vs. Banaag (17
SCRA 1081) (1966) is in point:

"Compensatory, moral and exemplary damages, allegedly suffered by the creditor in consequence of the
debtor's action, are also compulsory counterclaim barred by the dismissal of the debtor's action. They
cannot be claimed in a subsequent action by the creditor against the debtor."

"Aside from the fact that petitioners' counterclaim for damages cannot be the subject of an independent
action, it is the same evidence that sustains petitioners' counterclaim that will refute private respondent's
own claim for damages. This is an additional factor that characterizes petitioners' counterclaim as
compulsory."18

Moreover, using the "compelling test of compulsoriness," we find that, clearly, the recovery of petitioners'
counterclaims is contingent upon the case filed by respondents; thus, conducting separate trials thereon will result in
a substantial duplication of the time and effort of the court and the parties.

Since the counterclaim for damages is compulsory, it must be set up in the same action; otherwise, it would be
barred forever. If it is filed concurrently with the main action but in a different proceeding, it would be abated on the
ground of litis pendentia; if filed subsequently, it would meet the same fate on the ground of res judicata.19

Sapugay v. Court of Appeals Applicable to the Case at Bar

Sapugay v. Court of Appeals finds application in the present case. In Sapugay, Respondent Mobil Philippines filed
before the trial court of Pasig an action for replevin against Spouses Marino and Lina Joel Sapugay. The Complaint
arose from the supposed failure of the couple to keep their end of their Dealership Agreement. In their Answer with
Counterclaim, petitioners alleged that after incurring expenses in anticipation of the Dealership Agreement, they
requested the plaintiff to allow them to get gas, but that it had refused. It claimed that they still had to post a surety
bond which, initially fixed at P200,000, was later raised to P700,000.

The spouses exerted all efforts to secure a bond, but the bonding companies required a copy of the Dealership
Agreement, which respondent continued to withhold from them. Later, petitioners discovered that respondent and its
manager, Ricardo P. Cardenas, had intended all along to award the dealership to Island Air Product Corporation.

In their Answer, petitioners impleaded in the counterclaim Mobil Philippines and its manager -- Ricardo P. Cardenas
-- as defendants. They prayed that judgment be rendered, holding both jointly and severally liable for pre-operation
expenses, rental, storage, guarding fees, and unrealized profit including damages. After both Mobil and Cardenas
failed to respond to their Answer to the Counterclaim, petitioners filed a "Motion to Declare Plaintiff and its Manager
Ricardo P. Cardenas in Default on Defendant's Counterclaim."

Among the issues raised in Sapugay was whether Cardenas, who was not a party to the original action, might
nevertheless be impleaded in the counterclaim. We disposed of this issue as follows:

"A counterclaim is defined as any claim for money or other relief which a defending party may have against
an opposing party. However, the general rule that a defendant cannot by a counterclaim bring into the action
any claim against persons other than the plaintiff admits of an exception under Section 14, Rule 6 which
provides that 'when the presence of parties other than those to the original action is required for the granting
of complete relief in the determination of a counterclaim or cross-claim, the court shall order them to be
 brought in as defendants, if jurisdiction over them can be obtained.' The inclusion, therefore, of Cardenas in
petitioners' counterclaim is sanctioned by the rules."20

The prerogative of bringing in new parties to the action at any stage before judgment is intended to accord complete
relief to all of them in a single action and to avert a duplicity and even a multiplicity of suits thereby.

In insisting on the inapplicability of Sapugay, respondents argue that new parties cannot be included in a
counterclaim, except when no complete relief can be had. They add that "[i]n the present case, Messrs. Lim and
Mariano are not necessary for petitioners to obtain complete relief from Respondent CCC as plaintiff in the lower
court. This is because Respondent CCC as a corporation with a separate [legal personality] has the juridical
capacity to indemnify petitioners even without Messrs. Lim and Mariano."21

We disagree. The inclusion of a corporate officer or stockholder -- Cardenas in Sapugay or Lim and Mariano in the
instant case -- is not premised on the assumption that the plaintiff corporation does not have the financial ability to
answer for damages, such that it has to share its liability with individual defendants. Rather, such inclusion is based
on the allegations of fraud and bad faith on the part of the corporate officer or stockholder. These allegations may
warrant the piercing of the veil of corporate fiction, so that the said individual may not seek refuge therein, but may
be held individually and personally liable for his or her actions.

In Tramat Mercantile v. Court of Appeals,22 the Court held that generally, it should only be the corporation that could
properly be held liable. However, circumstances may warrant the inclusion of the personal liability of a corporate
director, trustee, or officer, if the said individual is found guilty of bad faith or gross negligence in directing corporate
affairs.

Remo Jr. v. IAC23 has stressed that while a corporation is an entity separate and distinct from its stockholders, the
corporate fiction may be disregarded if "used to defeat public convenience, justify a wrong, protect fraud, or defend
crime." In these instances, "the law will regard the corporation as an association of persons, or in case of two
corporations, will merge them into one." Thus, there is no debate on whether, in alleging bad faith on the part of Lim
and Mariano the counterclaims had in effect made them "indispensable parties" thereto; based on the alleged facts,
both are clearly parties in interest to the counterclaim.24

Respondents further assert that "Messrs. Lim and Mariano cannot be held personally liable [because their assailed
acts] are within the powers granted to them by the proper board resolutions; therefore, it is not a personal decision
but rather that of the corporation as represented by its board of directors."25 The foregoing assertion, however, is a
matter of defense that should be threshed out during the trial; whether or not "fraud" is extant under the
circumstances is an issue that must be established by convincing evidence.26

Suability and liability are two distinct matters. While the Court does rule that the counterclaims against Respondent
CCC's president and manager may be properly filed, the determination of whether both can in fact be held jointly
and severally liable with respondent corporation is entirely another issue that should be ruled upon by the trial court.

However, while a compulsory counterclaim may implead persons not parties to the original complaint, the general
rule -- a defendant in a compulsory counterclaim need not file any responsive pleading, as it is deemed to have
adopted the allegations in the complaint as its answer -- does not apply. The filing of a responsive pleading is
deemed a voluntary submission to the jurisdiction of the court; a new party impleaded by the plaintiff in a
compulsory counterclaim cannot be considered to have automatically and unknowingly submitted to the jurisdiction
of the court. A contrary ruling would result in mischievous consequences whereby a party may be indiscriminately
impleaded as a defendant in a compulsory counterclaim; and judgment rendered against it without its knowledge,
much less participation in the proceedings, in blatant disregard of rudimentary due process requirements.

The correct procedure in instances such as this is for the trial court, per Section 12 of Rule 6 of the Rules of Court,
to "order [such impleaded parties] to be brought in as defendants, if jurisdiction over them can be obtained," by
directing that summons be served on them. In this manner, they can be properly appraised of and answer the
charges against them. Only upon service of summons can the trial court obtain jurisdiction over them.

In Sapugay, Cardenas was furnished a copy of the Answer with Counterclaim, but he did not file any responsive
pleading to the counterclaim leveled against him. Nevertheless, the Court gave due consideration to certain factual
circumstances, particularly the trial court's treatment of the Complaint as the Answer of Cardenas to the compulsory
counterclaim and of his seeming acquiescence thereto, as evidenced by his failure to make any objection despite
his active participation in the proceedings. It was held thus:

"It is noteworthy that Cardenas did not file a motion to dismiss the counterclaim against him on the ground of
lack of jurisdiction. While it is a settled rule that the issue of jurisdiction may be raised even for the first time
on appeal, this does not obtain in the instant case. Although it was only Mobil which filed an opposition to
the motion to declare in default, the fact that the trial court denied said motion, both as to Mobil and
Cardenas on the ground that Mobil's complaint should be considered as the answer to petitioners'
compulsory counterclaim, leads us to the inescapable conclusion that the trial court treated the opposition as
having been filed in behalf of both Mobil and Cardenas and that the latter had adopted as his answer the
allegations raised in the complaint of Mobil. Obviously, it was this ratiocination which led the trial court to
deny the motion to declare Mobil and Cardenas in default. Furthermore, Cardenas was not unaware of said
incidents and the proceedings therein as he testified and was present during trial, not to speak of the fact
that as manager of Mobil he would necessarily be interested in the case and could readily have access to
the records and the pleadings filed therein.

"By adopting as his answer the allegations in the complaint which seeks affirmative relief, Cardenas is
deemed to have recognized the jurisdiction of the trial court over his person and submitted thereto. He may
not now be heard to repudiate or question that jurisdiction."27

Such factual circumstances are unavailing in the instant case. The records do not show that Respondents
Lim and Mariano are either aware of the counterclaims filed against them, or that they have actively
participated in the proceedings involving them. Further, in dismissing the counterclaims against the
individual respondents, the court a quo -- unlike in Sapugay -- cannot be said to have treated Respondent
CCC's Motion to Dismiss as having been filed on their behalf.

Rules on Permissive Joinder of Causes

of Action or Parties Not Applicable

Respondent CCC contends that petitioners' counterclaims violated the rule on joinder of causes of action. It argues
that while the original Complaint was a suit for specific performance based on a contract, the counterclaim for
damages was based on the tortuous acts of respondents.28 In its Motion to Dismiss, CCC cites Section 5 of Rule 2
and Section 6 of Rule 3 of the Rules of Civil Procedure, which we quote:

"Section 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or otherwise,
as many causes of action as he may have against an opposing party, subject to the following conditions:

(a) The party joining the causes of action shall comply with the rules on joinder of parties; x x x"

Section 6. Permissive joinder of parties. – All persons in whom or against whom any right to relief in respect
to or arising out of the same transaction or series of transactions is alleged to exist whether jointly, severally,
or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs or be joined as
defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such
defendants may arise in the action; but the court may make such orders as may be just to prevent any
plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which
he may have no interest."

The foregoing procedural rules are founded on practicality and convenience. They are meant to discourage duplicity
and multiplicity of suits. This objective is negated by insisting -- as the court a quo has done -- that the compulsory
counterclaim for damages be dismissed, only to have it possibly re-filed in a separate proceeding. More important,
as we have stated earlier, Respondents Lim and Mariano are real parties in interest to the compulsory counterclaim;
it is imperative that they be joined therein. Section 7 of Rule 3 provides:

"Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination can be had
of an action shall be joined either as plaintiffs or defendants."
Moreover, in joining Lim and Mariano in the compulsory counterclaim, petitioners are being consistent with the
solidary nature of the liability alleged therein.

Second Issue:

CCC's Personality to Move to Dismiss the Compulsory Counterclaims

Characterizing their counterclaim for damages against Respondents CCC, Lim and Mariano as "joint and solidary,"
petitioners prayed:

"WHEREFORE, it is respectfully prayed that after trial judgment be rendered:

"1. Dismissing the complaint in its entirety;

"2. Ordering the plaintiff, Gregory T. Lim and Anthony A. Mariano jointly and solidarily to pay defendant
actual damages in the sum of at least P2,700,000.00;

"3. Ordering the plaintiff, Gregory T. Lim and Anthony A, Mariano jointly and solidarily to pay the defendants
LPI, LCLC, COC and Roseberg:

"a. Exemplary damages of P100 million each;

"b. Moral damages of P100 million each; and

"c. Attorney's fees and costs of suit of at least P5 million each.

Other reliefs just and equitable are likewise prayed for."29

Obligations may be classified as either joint or solidary. "Joint" or "jointly" or "conjoint" means mancum or
mancomunada or pro rata obligation; on the other hand, "solidary obligations" may be used interchangeably with
"joint and several" or "several." Thus, petitioners' usage of the term "joint and solidary" is confusing and ambiguous.

The ambiguity in petitioners' counterclaims notwithstanding, respondents' liability, if proven, is solidary. This
characterization finds basis in Article 1207 of the Civil Code, which provides that obligations are generally
considered joint, except when otherwise expressly stated or when the law or the nature of the obligation requires
solidarity. However, obligations arising from tort are, by their nature, always solidary. We have assiduously
maintained this legal principle as early as 1912 in Worcester v. Ocampo,30 in which we held:

"x x x The difficulty in the contention of the appellants is that they fail to recognize that the basis of the
present action is tort. They fail to recognize the universal doctrine that each joint tort feasor is not only
individually liable for the tort in which he participates, but is also jointly liable with his tort feasors. x x x

"It may be stated as a general rule that joint tort feasors are all the persons who command, instigate,
promote, encourage, advise, countenance, cooperate in, aid or abet the commission of a tort, or who
approve of it after it is done, if done for their benefit. They are each liable as principals, to the same extent
and in the same manner as if they had performed the wrongful act themselves. x x x

"Joint tort feasors are jointly and severally liable for the tort which they commit. The persons injured may sue
all of them or any number less than all. Each is liable for the whole damages caused by all, and all together
are jointly liable for the whole damage. It is no defense for one sued alone, that the others who participated
in the wrongful act are not joined with him as defendants; nor is it any excuse for him that his participation in
the tort was insignificant as compared to that of the others. x x x

"Joint tort feasors are not liable pro rata. The damages can not be apportioned among them, except among
themselves. They cannot insist upon an apportionment, for the purpose of each paying an aliquot part. They
are jointly and severally liable for the whole amount. x x x
 "A payment in full for the damage done, by one of the joint tort feasors, of course satisfies any claim which
might exist against the others. There can be but satisfaction. The release of one of the joint tort feasors by
agreement generally operates to discharge all. x x x

"Of course the court during trial may find that some of the alleged tort feasors are liable and that others are
not liable. The courts may release some for lack of evidence while condemning others of the alleged tort
feasors. And this is true even though they are charged jointly and severally."

In a "joint" obligation, each obligor answers only for a part of the whole liability; in a "solidary" or "joint and several"
obligation, the relationship between the active and the passive subjects is so close that each of them must comply
with or demand the fulfillment of the whole obligation.31 The fact that the liability sought against the CCC is for
specific performance and tort, while that sought against the individual respondents is based solely on tort does not
negate the solidary nature of their liability for tortuous acts alleged in the counterclaims. Article 1211 of the Civil
Code is explicit on this point:

"Solidarity may exist although the creditors and the debtors may not be bound in the same manner and by
the same periods and conditions."

The solidary character of respondents' alleged liability is precisely why credence cannot be given to petitioners'
assertion. According to such assertion, Respondent CCC cannot move to dismiss the counterclaims on grounds that
pertain solely to its individual co-debtors.32 In cases filed by the creditor, a solidary debtor may invoke defenses
arising from the nature of the obligation, from circumstances personal to it, or even from those personal to its co-
debtors. Article 1222 of the Civil Code provides:

"A solidary debtor may, in actions filed by the creditor, avail itself of all defenses which are derived from the
nature of the obligation and of those which are personal to him, or pertain to his own share. With respect to
those which personally belong to the others, he may avail himself thereof only as regards that part of the
debt for which the latter are responsible." (Emphasis supplied).

The act of Respondent CCC as a solidary debtor -- that of filing a motion to dismiss the counterclaim on grounds
that pertain only to its individual co-debtors -- is therefore allowed.

However, a perusal of its Motion to Dismiss the counterclaims shows that Respondent CCC filed it on behalf of Co-
respondents Lim and Mariano; it did not pray that the counterclaim against it be dismissed. Be that as it may,
Respondent CCC cannot be declared in default. Jurisprudence teaches that if the issues raised in the compulsory
counterclaim are so intertwined with the allegations in the complaint, such issues are deemed automatically
joined.33Counterclaims that are only for damages and attorney's fees and that arise from the filing of the complaint
shall be considered as special defenses and need not be answered.34

CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim and Mariano Not Allowed

While Respondent CCC can move to dismiss the counterclaims against it by raising grounds that pertain to
individual defendants Lim and Mariano, it cannot file the same Motion on their behalf for the simple reason that it
lacks the requisite authority to do so. A corporation has a legal personality entirely separate and distinct from that of
its officers and cannot act for and on their behalf, without being so authorized. Thus, unless expressly adopted by
Lim and Mariano, the Motion to Dismiss the compulsory counterclaim filed by Respondent CCC has no force and
effect as to them.

In summary, we make the following pronouncements:

1. The counterclaims against Respondents CCC, Gregory T. Lim and Anthony A. Mariano are compulsory.

2. The counterclaims may properly implead Respondents Gregory T. Lim and Anthony A. Mariano, even if
both were not parties in the original Complaint.
 3. Respondent CCC or any of the three solidary debtors (CCC, Lim or Mariano) may include, in a Motion to
Dismiss, defenses available to their co-defendants; nevertheless, the same Motion cannot be deemed to
have been filed on behalf of the said co-defendants.

4. Summons must be served on Respondents Lim and Mariano before the trial court can obtain jurisdiction
over them.

WHEREFORE, the Petition is GRANTED and the assailed Orders REVERSED. The court of origin is hereby
ORDERED to take cognizance of the counterclaims pleaded in petitioners' Answer with Compulsory Counterclaims
and to cause the service of summons on Respondents Gregory T. Lim and Anthony A. Mariano. No costs.

SO ORDERED.

ON PLEADINGS

RULE 6

GRACE PARK* INTERNATIONAL CORPORATION and WOODLINK REALTY CORPORATION, Petitioners

vs.
EASTWEST BANKING CORPORATION, SECURITY BANKING CORPORATION, represented by the Trustee
and Attorney-in-Fact of EASTWEST BANKING CORPORATION TRUST DIVISION, EMMANUEL L. ORTEGA, in
his capacity as the Ex-Officio Sheriff of the Regional Trial Court, Malolos City, Bulacan, EDRIC C. ESTRADA,
in his capacity as Sheriff IV of the Regional Trial Court, Malolos City, Bulacan, Respondents

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1are the Decision2 dated May 22, 2013 and the Resolution3 dated
December 27, 2013 of the Court of Appeals (CA) in CA-G.R. CV No. 98880, which affirmed the Order4 dated April
25, 2012 of the Regional Trial Court (RTC) of Malolos City, Bulacan, Branch 15 (RTC-Malolos) dismissing Civil
Case No. 543-M-2010 on the ground of forum shopping and/or litis pendentia.

The Facts

The instant case arose from an Amended Complaint for Injunction and Annulment of Foreclosure Sale5 filed by
petitioners Grace Park International Corporation (Gracepark) and Woodlink Realty Corporation (Woodlink;
collectively, petitioners) against respondents Eastwest Banking Corporation (EBC), Allied Banking Corporation
(Allied), and Security Banking Corporation (Security), EBC Trust Division, Sheriff Emmanuel L. Ortega, and Sheriff
Edric C. Estrada before the RTC-Malolos, docketed as Civil Case No. 543-M-2010. In their complaint, petitioners
alleged that: (a) they entered into a Mortgage Trust Indenture6 (MTI) with EBC, Allied, Security, and Banco De Oro
Unibank (BDO), with EBC acting as trustee, in the aggregate amounts of ₱162,314,499.00 and
US$797,176.47;7 (b) under the MTI, BDO was the majority creditor with 58.04% ownership of the credit, with EBC,
Allied, and Security having 18.33%, 12.58%, and 11.05% ownership, respectively;8 (c) as collaterals, petitioners
mortgaged eight (8) parcels of land, as well as the improvements found thereon, covered by Transfer Certificate of
Title Nos. 439068, 439069, 439070, 439071, 439072, 439073, 439074, and 439075 (collaterals);9 (d) under the MTI,
EBC, as trustee, cannot commence foreclosure proceedings on any or all parts of the collaterals without the written
instructions from the majority creditors;10 (e) during the pendency of the MTI, BDO's majority share in the MTI was
effectively paid for by Sherwyn Yao, Jeremy Jerome Sy, and Leveric Ng (Sherwyn, et al.);11 (f) Sherwyn, et
al. should have been subrogated to BDO's majority interest in the MTI; (g) EBC refused to honor the subrogation,
causing Sherwyn, et al. to file an action for subrogation and injunction12 before the RTC of Makati City (RTC-Makati),
docketed as Civil Case No. 10-323; and (h) EBC commenced foreclosure proceedings without written instructions
from the majority creditors under the MTI, which by virtue of subrogation, should be Sherwyn, et al.13

In their Answer14 and Motion to Dismiss,15 EBC, Allied, and Security contended that the complaint before the RTC-
Malolos should be dismissed on the grounds of forum shopping and litis pendentia. They claimed that the action for
subrogation pending before the RTC-Makati basically involved the same parties, reliefs, and causes of action with
the action pending before the RTC-Malolos in that: (a) the individual plaintiffs in the RTC-Makati
case, i.e., Sherwyn, et al., represent the same interests as the corporation plaintiffs, i.e., petitioners, in the RTC-
Malolos case, since they are the respective owners of petitioner corporations; (b) there were glaring similarities in
the complaints filed before the RTC-Makati and the RTC-Malolos; and (c) both complaints essentially sought the
injunction of the foreclosure sale, as well as the inclusion of the claims of Sherwyn, et al. in the said foreclosure.16

In opposition to the Motion to Dismiss,17 petitioners insisted that the forum shopping and/or litis pendentia are not
attendant between Civil Case No. 543-M-2010 and Civil Case No. 10-323, considering that there is no identity of
parties and causes of action in both cases.18 Petitioners likewise averred that the judgment in Civil Case No. 10-323
pending in the RTC-Makati will not amount to res judicata in Civil Case No. 543-M-2010 pending in the RTC-Malolos
because such judgment can only be uged as evidence in the latter case to prove that the requirements of the MTI
for the foreclosure of the collaterals were not complied with.19

The RTC-Malolos Ruling

In an Order20 dated April 25, 2012, the RTC-Malolos dismissed Civil Case No. 543-M-2010 on the ground of forum
shopping. It found that several similarities existed between the complaint filed before it and that in Civil Case No. 10-
323 pending in the RTC-Makati, i.e., (a) both complaints dealt with the same collaterals under the MTI, and (b) both
cases involved substantially the same parties as the individual plaintiffs in Civil Case No. 10-323 (herein Sherwyn, et
al.) and the corporation plaintiffs in Civil Case No. 543-M-2010 (herein petitioners) represented a common interest
adverse to EBC, Allied, and Security.21 In this light, the RTC-Malolos concluded that the determination of the validity
of foreclosure would necessarily be intertwined with the issue of whether or not Sherwyn, et al. should be
subrogated to the rights of BDO under the MTI - an issue already pending before the RTC-Makati.22

Aggrieved, petitioners appealed to the CA.23

The CA Ruling

In a Decision24 dated May 22, 2013, the CA upheld the RTC-Malolos's dismissal of Civil Case No. 543-M-2010 on
the ground of forum shopping. It held that the elements of litis pendentia are attendant in the said case, considering
that: (a) there is a community of interests between the parties in the cases pending before the RTC-Malolos and the
RTC-Makati, in that the aforesaid cases were instituted to protect the alleged respective rights of the individual and
corporation plaintiffs over the collaterals and both sought the identical relief of enjoining the foreclosure
thereof;25 (b) although both cases differ in form or nature, they alleged the same facts and the same evidence would
be required to substantiate the parties' claim, considering that the resolution of both cases would be based on the
right of Sherwyn, et al. to be subrogated to BDO's rights under the MTI;26 and (c) the resolution of said issue in one
case would amount to res judicata in the other.27

Undaunted, petitioners moved for reconsideration,28 which was, however, denied in a Resolution29 dated December
27, 2013; hence, this petition.

The Issue Before the Court

The core issue in this case is whether or not the CA correctly upheld the dismissal of Civil Case No. 543-M-2010
pending before the RTC-Malolos on the ground of forum shopping in the concept of litis pendentia.

The Court's Ruling

The petition is meritorious.

At the outset, it must be emphasized that "[forum shopping] is the act of a litigant who repetitively availed of several
judicial remedies in different courts, simultaneously or successively, all substantially founded on the same
transactions and the same essential facts and circumstances, and all raising substantially the same issues, either
pending in or already resolved adversely by some other court, to increase his chances of obtaining a favorable
decision if not in one court, then in another. What is important in determining whether [forum shopping) exists
is the vexation caused the courts and parties-litigants by a partv 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
for a upon the same issues."30

In Heirs of Sotto v. Palicte,31 the Court held that "[t]he test to determine the existence of forum shopping is whether
the elements of litis pendentia are present, or whether a final judgment in one case amounts to res judicata in the
other. Thus, there is forum shopping when the following elements are present, namely: (a) identity of
parties, or at least such parties as represent the same interests in both actions; (b) identity of rights
asserted and reliefs prayed for, the relief being founded on the same facts; and (c) the identity of the two
preceding particulars, such that any judgment rendered in the other action will, regardless of which party is
successful, amounts to res judicata in the action under consideration."32

In reference to the foregoing, litis pendentia is a Latin term, which literally means "a pending suit" and is variously
referred to in some decisions as lis pendens and auter action pendant. As a ground for the dismissal of a civil action,
it refers to the situation where two actions are pending between the same parties for the same cause of action, so
that one of them becomes unnecessary and vexatious. It is based on the policy against multiplicity of suits.33

Anent the first requisite of forum shopping, "[t]here is identity of parties where the parties in both actions are the
same, or there is privity between them, or they are successors-in-interest by title subsequent to the commencement
of the action, litigating for the same thing and under the same title and in the same capacity. Absolute identity of
parties is not required, shared identity of interest is sufficient to invoke the coverage of this principle. Thus, it is
enough that there is a community of interest between a party in the first case and a party in the second case even if
the latter was not impleaded in the first case."34

With respect to the second and third requisites of forum shopping, "[h]ornbook is the rule that identity of causes of
action does not mean absolute identity; otherwise, a party could easily escape the operation of res judicata by
changing the form of the action or the relief sought. The test to determine whether the causes of action are identical
is to ascertain whether the same evidence will sustain both actions, or whether there is an identity in the facts
essential to the maintenance of the two actions. If the same facts or evidence would sustain both, the two actions
are considered the same, and a judgment in the first case is a bar to the subsequent action. Hence, a party cannot,
by varying the form of action or adopting a different method of presenting his case, escape the operation of the
principle that one and the same cause of action shall not be twice litigated between the same parties or their privies.
Among the several tests resorted to in ascertaining whether two suits relate to a single or common cause of action
are: (1) whether the same evidence would support and sustain both the first and second causes of action; and (2)
whether the defenses in one case may be used to substantiate the complaint in the other. Also fundamental is the
test of determining whether the cause of action in the second case existed at the time of the filing of the first
complaint."35

Here, it cannot be said that there is an identity of parties between Civil Case No. 10-323 pending before RTC-Makati
and Civil Case No. 543-M-2010 pending before RTC-Malolos because the plaintiffs in the former, herein
Sherwyn, et al., represent substantially different interests from the plaintiffs in the latter, herein petitioners. This is
because in Civil Case No. 10-323, Sherwyn, et al.'s interest is to be subrogated into the shoes of BDO as one of the
creditors under the MTI; on the other hand, petitioners' interest in Civil Case No. 543-M-2010 is the enforcement of
their rights as debtors to the MTI, i.e., ensuring that the foreclosure proceedings were in accord with the foreclosure
provisions of the MTI.

Secondly, the underlying circumstances surrounding the causes of action in both cases are likewise substantially
different in that: (a) in Civil Case No. 10-323, the cause of action arose from EBC's alleged unjust refusal to
subrogate Sherwyn, et al. to the rights of BDO; while (b) in Civil Case No. 543-M-2010, the cause of action stemmed
from EBC's purported breach of Section 6.0536 of the MTI which provides that it should first secure a written
instruction from the Majority Creditors37 before commencing foreclosure proceedings against the collaterals.

Finally, a judgment in Civil Case No. 10-323 will not necessarily result in res judicata in Civil Case No. 543-M-2010.
Being principally a subrogation case which is an action in personam,38 a judgment in Civil Case No. 10-323 will not
bind any non-parties to it, such as the corporation plaintiffs and the other defendants (aside from EBC) in Civil Case
No. 543-M-2010 that represent interests separate and distinct from the parties in Civil Case No. 10-323.39 At the
most, a judgment in Civil Case No. 10-323 may only constitute the factum probans (or evidentiary facts) by which
the factum probandum (or the ultimate fact) sought to be proven by petitioners in Civil Case No. 543-M-
2010, i.e., EBC's non-compliance with the foreclosure provisions of the MTI, could be established.
In sum, both the RTC-Malolos and the CA erred in dismissing Civil Case No. 543-M-2010 on the ground of forum
shopping and/or litis pendentia. Hence, Civil Case No. 543-M-2010 stands to be reinstated and remanded to the
1âwphi1

court a quo for further proceedings.

WHEREFORE, the petition is GRANTED. The Decision dated May 22, 2013 and the Resolution dated December
27, 2013 of the Court of Appeals in CA-G.R. CV No. 98880 are hereby REVERSED and SET ASIDE. Civil Case No.
543-M-2010 is REINSTATED and REMANDED to the Regional Trial Court of Malolos City, Bulacan, Branch 15 for
further proceedings.

SO ORDERED.

YOLANDA VILLANUEVA-ONG, Petitioner

vs.
JUAN PONCE ENRILE, Respondent

DECISION

TIJAM, J.:

Before Us is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court, assailing the Decision2 dated
March 4, 2014 and Resolution3 dated June 9, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 132034.

The Facts

On December 4, 2012, Juan Ponce Enrile (respondent) filed a civil Complaint4 for damages against Yolanda
Villanueva-Ong (petitioner) for libel before the Regional Trial Court (RTC) of Pasay City, Branch 118, in Civil Case
No. R-PSY-12-12031-CV. The pertinent portions of the complaint are as follows:

2.1 On 16 October 2012, a libelous article entitled "Like father like son?" was published in page 16, Opinion Section
of the Philippine 'Star. The article was authored by [petitioner]. x x x

2.2 The article characterizes [respondent] as a liar, fraud, and manipulator. It accuses [respondent] of attempting to
"revise history" with a devious purpose of enticing the electorate to support his only son, Juan Castañer Ponce
Emile, Jr., (popularly known as Jack Emile), an incumbent Congressman in the province of Cagayan and a
candidate in the upcoming senatorial elections. [Petitioner], instead of giving fair comments on [respondent] as
public official, deliberately focuses on attacking his character with false and defamatory accusations and intrigues
affecting his family and personal life.

2.3 The pertinent portions of the libelous article that characterizes [respondent] as a liar, fraud, and manipulator are
as follows:

"Just when we were about to forgive-and-forget [respondent's] checkered past, he himself reminded us of what a
wily, shifty chameleon he truly and naturally is.

xxx

In Juan Ponce Enrile: A Memoir, and bio-documentary 'Johnny' that aired in ABS-CBN-he recants his previous
recantation of the assasination attempt on him, which Marcos used as one more reason to justify Martial Law. x x x
Did he expect national amnesia to afflict Filipinos who know the truth?"

xxx

"In his attempt to leave an acceptable legacy for posterity and bequeath a Senate seat for junior, the nonagenarian
is sanitizing his recollections instead of asking for absolution. Stem cell therapy can deter dementia but it cannot
regenerate an innocent man."
 xxx

"We are being wooed to perpetuate the 40-yearsrunning Enrile saga. Every night we should pray: Dear God, Make
all who want our vote, be the men we want them to be."

2.4 The libelous article's opening sentence alone - "Just when we were about to forgive-and-forget [respondent's]
checkered past, he himself reminded us of what a wily, shifty chameleon he truly and naturally is" - already indicates
[petitioner's] malicious objective: to discredit the integrity of [respondent] and degrade his accomplishments and
success as an elected public official. Read with the succeeding paragraphs cited above, the libelous article clearly
depicts [respondent] as a liar and a hoax who deceives the public to believe that he is an honorable and respectable
public figure.

2.5 Worse, the libelous article insinuates that [respondent] is a criminal who committed the crime of smuggling of
cars. Thus:

"Another misdeed associated with father-and-son is the alleged rampant car smuggling in Port Irene. In 1995, the
Cagayan Export Zone Authority (CEZA) was established through Republic Act 7922, authored by Cagayan native
[respondent]. x x x Despite E0156 issued in 2008, which prohibited such importations, smuggling continued. Enrile
countered that CEZA is not covered by the prohibition because the importers pay the correct duties and taxes. Ford
reportedly pulled out its manufacturing business to protest the nefarious activities in CEZA."

2.6 These statements clearly tend to cause dishonor, discredit, disrespect, and contempt of [respondent] by
characterizing him as a liar, fraud, manipulator, criminal and smuggler of cars.

2. 7 At the time of publication of the libelous article, [respondent] is a public officer holding office in Pasay
City."5 (Underlining omitted and italics in the original)

On January 17, 2013, petitioner filed an Answer with Compulsory Counterclaims,6 the pertinent portion of which,
states:

COMPULSORY COUNTERCLAIMS

First Compulsory Counterclaim

2.4 [Petitioner] reiterates and incorporates by reference each and every allegation made in each and every
preceding paragraph and subparagraph of this Answer.

25. In filing this lawsuit, [respondent] did not implead the editor, publisher, and newspaper that published
(petitioner's] column (The Philippine Star), but only [petitioner].

26. [Respondent's] unfounded prosecution of [petitioner], coupled with the singling out of [petitioner], constitutes
harassment, malice and evident bad faith. It is meant to intimidate and silence (petitioner], and to place a chilling
effect on her rights (and the rights of other journalists) to express themselves and write freely about [respondent's]
public conduct on matters of public concern.

27. In filing the Complaint, under the facts and circumstances set out above, [respondent] acted with malice, evident
bad faith, and in a wanton, reckless, offensive and malevolent manner, and has caused [petitioner] damages
consisting of x x x:

xxxx

Second Compulsory Counterclaim

30. [Petitioner], as a Filipino citizen and journalist, has a constitutional right to speak out, write and express her
opinion and make fair comments on matters of public interest, including those involving the public conduct of
[respondent] as a public officer and public figure and his fitness for public office.
31. In singling out [petitioner] and suing her alone for libel, [respondent] acted with malice and evident bad faith. In
so doing, [respondent] is using the strong arm of the law to intimidate, cow and silence [petitioner] and other
journalists, and to neutralize and place a chilling effect on their ability to speak and write freely about [respondent's]
public conduct on matters of public concern.

32. Under Article 32 of the Civil Code, a public officer who directly indirectly obstructs, defeats, violates or in any
manner impedes or impairs a person's freedom of speech and freedom to write for the press is liable in actual,
moral and exemplary damages, as well as attorney's fees and costs.7 (Emphasis ours)

The respondent filed a Motion to Dismiss8 (Re: Defendant's permissive counterclaims) which argued that petitioner's
counterclaims are actually permissive, and hence should have complied with the requirements of an initiatory
pleading, specifically the payment of docket fees and certification against forum shopping. Respondent prayed for
dismissal of petitioner's counterclaims for her failure to comply with such requirements.

Meanwhile, petitioner opposed respondent's motion arguing that her counterclaims are both compulsory in nature,
since both counterclaims arose from the filing of respondent's complaint.9

Ruling of the RTC

The RTC, in its Order10 dated April 26, 2013, gave petitioner 15 days from receipt of the said order, to pay the
appropriate docket fees, otherwise, such counterclaims shall be dismissed. Despite petitioner's motion for
reconsideration,11 the RTC stood its ground, and affirmed its ruling in the Order12 dated July 22, 2013.

Dissatisfied, petitioner filed a petition for certiorari with the CA.

Ruling of the CA

On March 4, 2014, the CA issued the assailed Decision,13 the dispositive portion of which states:

WHEREFORE, premises considered, the Petition is DENIED. No pronouncement as to costs.

SO ORDERED.14

Hence this petition where petitioner argues that the CA erred in ruling that her counterclaims are permissive in
nature. She contends that the same are compulsory, having arisen from respondent's filing of complaint in the
court a quo.

In his Comment,15 respondent maintains that petitioner's counterclaims are permissive in nature since they are
based on different sources of obligations: petitioner's counterclaims are based on quasi-delict, while respondent's
claim is based on delict.

Issue

Are petitioner's counterclaims compulsory or permissive in nature?

Ruling of the Court

The nature and kinds of counterclaims are well-explained m jurisprudence. In Alba, Jr. v. Malapajo,16 the Court
explained:

[C]ounterclaim is any claim which a defending party may have against an opposing party. A compulsory
counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the
transaction or occurrence constituting the subject matter of the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must
be within the jurisdiction of the court both as to the amount and the nature thereof, except that in an original action
before the Regional Trial Court, necessarily connected with the subject matter of the opposing party's claim or even
where there is such a connection, the Court has no jurisdiction to entertain the claim or it requires for adjudication
the presence of third persons over whom the court acquire jurisdiction. A compulsory counterclaim is barred if not
set up in the same action.17

"A counterclaim is permissive if it does not arise out of or is not necessarily connected with the subject matter of the
opposing party's claim. It is essentially an independent claim that may be filed separately in another case."18

Determination of the nature of counterclaim is relevant for purposes of compliance to the requirements of initiatory
pleadings. In order for the court to acquire jurisdiction, permissive counterclaims require payment of docket fees,
while compulsory counterclaims do not.19

Jurisprudence has laid down tests in order to determine the nature of a counterclaim, to wit:

(a) Are the issues of fact and law raised by the claim and the counterclaim largely the same? (b) Would res
judicata bar a subsequent suit on defendants' claims, absent the compulsory counterclaim rule? (c) Will substantially
the same evidence support or refute plaintiffs' claim as well as the defendants' counterclaim? and (d) Is there any
logical relation between the claim and the counterclaim[?] x x x [A positive answer to all four questions would
indicate that the counterclaim is compulsory].20

In this case, the complaint filed by respondent for damages arose from the alleged malicious publication written by
petitioner, hence central to the resolution of the case is petitioner's malice, or specifically that the libelous statement
must be shown to have been written or published with the knowledge that they are false or in reckless disregard of
whether they are false or not.21

Meanwhile, petitioner's counterclaim presupposes bad faith or malice on the part of respondent in instituting the
complaint for damages. In the allegations supporting her counterclaims, it was alleged that respondent's complaint
was filed merely to harass or humiliate her.

Such allegations are founded on the theory of malicious prosecution.

Traditionally, the term malicious prosecution has been associated with unfounded criminal actions, jurisprudence
has also recognized malicious prosecution to include baseless civil suits intended to vex and humiliate the
defendant despite the absence of a cause of action or probable cause.22

In this case, while it can be conceded that petitioner can validly interpose a claim based on malicious prosecution,
the question still remains as to the nature of her counterclaim, and the consequent obligation to comply with the
requirements of initiatory pleadings.

We find that petitioners claims are compulsory, and hence should be resolved along with the civil complaint filed by
respondent, without the necessity of complying with the requirements for initiatory pleadings.

Indeed, a perfunctory reading of respondent's allegations in support of her counterclaims refers to incidental facts or
issues related to her counterclaim against petitioner. She alleges that respondent unduly singled her out, and is
actually violating her legal and constitutional rights.

However, stripped of the aforesaid niceties, it is at once apparent that petitioner essentially argues that respondent's
suit is unfounded and is merely instituted to harass and vex her.

A counterclaim purely for damages and attorneys fees by reason of the unfounded suit filed by the respondent, has
long been settled as falling under the classification of compulsory counterclaim and it must be pleaded in the same
action, otherwise, it is barred.23 In Lafarge Cement Phil. Inc. v. Continental Cement Corp.,24 citing Tiu Po, et al. v.
Hon. Bautista, et al.,25 this Court ruled that counterclaims seeking moral, actual and exemplary damages and
attorneys fees against the respondent on account of their malicious and unfounded complaint was compulsory.26

In this case, the counterclaims, set up by petitioner arises from the filing of respondent's complaint. "'The
1aw p++i1

counterclaim is so intertwined with the main case that it is incapable of proceeding independently."27 We find that the
evidence supporting respondent's cause that malice attended in the publication of the article would necessarily
negate petitioner's counterclaim for damages premised on the malicious and baseless suit filed by respondent.

Bungcayao, Sr. v. Fort llocandia Property Holdings and Development Corp.28 cited by respondent, is starkly different
from the factual circumstances obtaining at the case at bar. In that case, petitioner Manuel C. Bungcayao, Sr.
sought the annulment of a Deed of Assignment, Release, Waiver and Quitclaim, on the ground of the lack of
authority of petitioner's son to represent him thereon. For their part, respondent prayed, as counterclaims to the
complaint, that petitioner be required to: 1) return the amount of ₱400,000 from respondent, 2) to vacate the portion
of the respondent's property he (petitioner) was occupying, and 3) to pay damages because his (petitioner)
continued refusal to vacate the property caused tremendous delay in the planned implementation of Fort Ilocandias
expansion projects. In that case, We ruled that the recovery of possession of the property is a permissive
counterclaim, while being an offshoot of the basic transaction between the parties, will not be barred if not set up in
the answer to the complaint in the same case. This is because the title of respondent to the disputed property
therein was actually recognized by the administrative authorities. Necessarily, respondent will not be precluded from
asserting its right of ownership over the land occupied by petitioner in a separate proceeding. In other words,
respondent's right therein can be enforced separately and is distinct from the legal consequences of the Deed of
Assignment, Release, Waiver and Quitclaim executed between the parties therein.

The same, however, does not obtain in the instant case. Petitioner's counterclaims refer to the consequences
brought about by respondent's act of filing the complaint for damages.

Petitioner's allegation citing Article 32 of the Civil Code do not dilute the compulsory nature of her counterclaims.
In Alday v. FGU Insurance Corporation,29 this Court found the following allegation in therein defendant's
counterclaim to be permissive, despite mention of the civil code provision on abuse of rights, to wit:

(b) the minimum amount of ₱500,000.00 plus the maximum allowable interest representing defendant's
accumulated premium reserve for 1985 and previous years, which FGU has unjustifiably failed to remit to defendant
despite repeated demands in gross violation of their Special Agent's Contract and in contravention of the principle of
law that ''every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith."30 (Emphasis ours)

Considering the foregoing, petitioner's counterclaims should not be prejudiced for non-compliance with the
procedural requirements governing initiatory pleadings.

Neither should her counterclaims be dismissed pursuant to this Court's ruling in Korea Technologies Co. Ltd. v.
Hon. Lerma, et al.,31 which held that "effective August 16, 2004 under Section 7, Rule 141, as amended by A.M. No.
04-2-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims. "32 Note must be
taken of OCA Circular No. 96-2009 entitled "Docket Fees For Compulsory Counterclaims," dated August 13, 2009,
where it was clarified that the rule on imposition of filing fees on compulsory counterclaims has been suspended.
Such suspension remains in force up to this day.

WHEREFORE, premises considered, We resolve to GRANT the petition. The Decision dated March 4, 2014 and
Resolution dated June 9, 2014 of the Court of Appeals in CA-G.R. SP No. 132034 are hereby REVERSED and SET
ASIDE.

SO ORDERED.

NORBERTO ALTRES, EVITA BULINGAN, EVANGELINE SASTINE, FELIPE SASA, LILIBETH SILLAR,
RAMONITO JAYSON, JELO TUCALO, JUAN BUCA, JR., JUE CHRISTINE CALAMBA, ROMEO PACQUINGAN,
JR., CLEO JEAN ANGARA, LOVENA OYAO, RODOLFO TRINIDAD, LEONILA SARA, SORINA BELDAD, MA.
LINDA NINAL, LILIA PONCE, JOSEFINA ONGCOY, ADELYN BUCTUAN, ALMA ORBE, MYLENE SOLIVA,
NAZARENE LLOREN, ELIZABETH MANSERAS, DIAMOND MOHAMAD, MARYDELL CADAVOS, ELENA
DADIOS, ALVIN CASTRO, LILIBETH RAZO, NORMA CEPRIA, PINIDO BELEY, JULIUS HAGANAS, ARTHUR
CABIGON, CERILA BALABA, LIEZEL SIMAN, JUSTINA YUMOL, NERLITA CALI, JANETH BICOY, HENRY
LACIDA, CESARIO ADVINCULA, JR., MERLYN RAMOS, VIRGIE TABADA, BERNARDITA CANGKE, LYNIE
GUMALO, ISABEL ADANZA, ERNESTO LOBATON, RENE ARIMAS, FE SALVACION ORBE, JULIE QUIJANO,
JUDITHO LANIT, GILBERTO ELIMIA, MANUEL PADAYOGDOG, HENRY BESIN, ROMULO PASILANG,
BARTOLOME TAPOYAO, JR., RUWENA GORRES, MARIBETH RONDEZ, FERDINAND CAORONG,
TEODOMERO CORONEL, ELIZABETH SAGPANG, and JUANITA ALVIOLA, petitioners,
vs.
CAMILO G. EMPLEO, FRANKLIN MAATA, LIVEY VILLAREN, RAIDES CAGA, FRANCO BADELLES,
ERNESTO BALAT, GRACE SAQUILABON, MARINA JUMALON and GEORGE DACUP, respondents.

DECISION

CARPIO MORALES, J.:

Assailed via petition for review on certiorari are the Decision dated February 2, 20071 and Order dated October 22,
20072 of Branch 3 of the Regional Trial Court (RTC) of Iligan City, which denied petitioners’ petition for mandamus
praying for a writ commanding the city accountant of Iligan, Camilo G. Empleo (Empleo), or his successor in office,
to issue a certification of availability of funds in connection with their appointments, issued by then Iligan City Mayor
Franklin M. Quijano (Mayor Quijano), which were pending approval by the Civil Service Commission (CSC).

Sometime in July 2003, Mayor Quijano sent notices of numerous vacant career positions in the city government to
the CSC. The city government and the CSC thereupon proceeded to publicly announce the existence of the vacant
positions. Petitioners and other applicants submitted their applications for the different positions where they felt
qualified.

Toward the end of his term or on May 27, June 1, and June 24, 2004, Mayor Quijano issued appointments to
petitioners.

In the meantime, the Sangguniang Panglungsod issued Resolution No. 04-2423 addressed to the CSC Iligan City
Field Office requesting a suspension of action on the processing of appointments to all vacant positions in the
plantilla of the city government as of March 19, 2004 until the enactment of a new budget.

The Sangguniang Panglungsod subsequently issued Resolution No. 04-2664 which, in view of its stated policy
against "midnight appointments," directed the officers of the City Human Resource Management Office to hold in
abeyance the transmission of all appointments signed or to be signed by the incumbent mayor in order to ascertain
whether these had been hurriedly prepared or carefully considered and whether the matters of promotion and/or
qualifications had been properly addressed. The same Resolution enjoined all officers of the said Office to put off
the transmission of all appointments to the CSC, therein making it clear that non-compliance therewith would be met
with administrative action.

Respondent city accountant Empleo did not thus issue a certification as to availability of funds for the payment of
salaries and wages of petitioners, as required by Section 1(e)(ii), Rule V of CSC Memorandum Circular No. 40,
Series of 1998 reading:

xxxx

e. LGU Appointment. Appointment in local government units for submission to the Commission shall
be accompanied, in addition to the common requirements, by the following:

xxxx

ii. Certification by the Municipal/City Provincial Accountant/Budget Officer that funds are available.
(Emphasis and underscoring supplied)

And the other respondents did not sign petitioners’ position description forms.

The CSC Field Office for Lanao del Norte and Iligan City disapproved the appointments issued to petitioners
invariably due to lack of certification of availability of funds.

On appeal by Mayor Quijano, CSC Regional Office No. XII in Cotabato City, by Decision of July 30, 2004,5dismissed
the appeal, it explaining that its function in approving appointments is only ministerial, hence, if an appointment
lacks a requirement prescribed by the civil service law, rules and regulations, it would disapprove it without delving
into the reasons why the requirement was not complied with.

Petitioners thus filed with the RTC of Iligan City the above-stated petition for mandamus against respondent Empleo
or his successor in office for him to issue a certification of availability of funds for the payment of the salaries and
wages of petitioners, and for his co-respondents or their successors in office to sign the position description forms.

As stated early on, Branch 3 of the Iligan RTC denied petitioners’ petition for mandamus. It held that, among other
things, while it is the ministerial duty of the city accountant to certify as to the availability of budgetary allotment to
which expenses and obligations may properly be charged under Section 474(b)(4) of Republic Act No.
7160,6otherwise known as the Local Government Code of 1991, the city accountant cannot be compelled to issue a
certification as to availability of funds for the payment of salaries and wages of petitioners as this ministerial function
pertains to the city treasurer. In so holding, the trial court relied on Section 344 of the Local Government Code of
1991 the pertinent portion of which provides:

Sec. 344. Certification and Approval of Vouchers. – No money shall be disbursed unless the local budget
officer certifies to the existence of appropriation that has been legally made for the purpose, the local
accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds for
the purpose. x x x x (Underscoring supplied)

Petitioners filed a motion for reconsideration7 in which they maintained only their prayer for a writ of mandamus for
respondent Empleo or his successor in office to issue a certification of availability of funds for the payment of their
salaries and wages. The trial court denied the motion by Order of October 22, 2007,8 hence, the present petition.

By Resolution of January 22, 2008,9 this Court, without giving due course to the petition, required respondents to
comment thereon within ten (10) days from notice, and at the same time required petitioners to comply, within the
same period, with the relevant provisions of the 1997 Rules of Civil Procedure.

Petitioners filed a Compliance Report dated February 18, 200810 to which they attached 18 copies of (a) a
verification and certification, (b) an affidavit of service, and (c) photocopies of counsel’s Integrated Bar of the
Philippines (IBP) official receipt for the year 2008 and his privilege tax receipt for the same year.

Respondents duly filed their Comment,11 alleging technical flaws in petitioners’ petition, to which Comment
petitioners filed their Reply12 in compliance with the Court’s Resolution dated April 1, 2008.13

The lone issue in the present petition is whether it is Section 474(b)(4) or Section 344 of the Local Government
Code of 1991 which applies to the requirement of certification of availability of funds under Section 1(e)(ii), Rule V of
CSC Memorandum Circular Number 40, Series of 1998. As earlier stated, the trial court ruled that it is Section 344.
Petitioners posit, however, that it is Section 474(b)(4) under which it is the ministerial duty of the city accountant to
issue the certification, and not Section 344 which pertains to the ministerial function of the city treasurer to issue the
therein stated certification.

A discussion first of the technical matters questioned by respondents is in order.

Respondents assail as defective the verification and certification against forum shopping attached to the petition as
it bears the signature of only 11 out of the 59 petitioners, and no competent evidence of identity was presented by
the signing petitioners. They thus move for the dismissal of the petition, citing Section 5, Rule 714 vis a vis Section 5,
Rule 4515 of the 1997 Rules of Civil Procedure and Docena v. Lapesura16 which held that the certification against
forum shopping should be signed by all the petitioners or plaintiffs in a case and that the signing by only one of them
is insufficient as the attestation requires personal knowledge by the party executing the same.17

Petitioners, on the other hand, argue that they have a justifiable cause for their inability to obtain the signatures of
the other petitioners as they could no longer be contacted or are no longer interested in pursuing the
case.18Petitioners plead substantial compliance, citing Huntington Steel Products, Inc., et al. v. NLRC19 which held,
among other things, that while the rule is mandatory in nature, substantial compliance under justifiable
circumstances is enough.
Petitioners’ position is more in accord with recent decisions of this Court.

In Iglesia ni Cristo v. Ponferrada,20 the Court held:

The substantial compliance rule has been applied by this Court in a number of cases: Cavile v. Heirs of
Cavile, where the Court sustained the validity of the certification signed by only one of petitioners because
he is a relative of the other petitioners and co-owner of the properties in dispute; Heirs of Agapito T. Olarte v.
Office of the President of the Philippines, where the Court allowed a certification signed by only two
petitioners because the case involved a family home in which all the petitioners shared a common
interest; Gudoy v. Guadalquiver, where the Court considered as valid the certification signed by only four of
the nine petitioners because all petitioners filed as co-owners pro indiviso a complaint against respondents
for quieting of title and damages, as such, they all have joint interest in the undivided whole; and DAR v.
Alonzo-Legasto, where the Court sustained the certification signed by only one of the spouses as they were
sued jointly involving a property in which they had a common interest.21 (Italics in the original, underscoring
supplied)

Very recently, in Tan, et al. v. Ballena, et al.,22 the verification and certification against forum shopping attached to
the original petition for certiorari filed with the Court of Appeals was signed by only two out of over 100 petitioners
and the same was filed one day beyond the period allowed by the Rules. The appellate court initially resolved to
dismiss the original petition precisely for these reasons, but on the therein petitioners’ motion for reconsideration,
the appellate court ordered the filing of an amended petition in order to include all the original complainants
numbering about 240. An amended petition was then filed in compliance with the said order, but only 180 of the 240
original complainants signed the verification and certification against forum shopping. The Court of Appeals granted
the motion for reconsideration and resolved to reinstate the petition.

In sustaining the Court of Appeals in Tan, the Court held that it is a far better and more prudent course of action to
excuse a technical lapse and afford the parties a review of the case to attain the ends of justice, rather than dispose
of the case on technicality and cause grave injustice to the parties, giving a false impression of speedy disposal of
cases while actually resulting in more delay, if not a miscarriage of justice.

The Court further discoursed in Tan:

Under justifiable circumstances, we have already allowed the relaxation of the requirements of verification
and certification so that the ends of justice may be better served. Verification is simply intended to secure an
assurance that the allegations in the pleading are true and correct and not the product of the imagination or
a matter of speculation, and that the pleading is filed in good faith; while the purpose of the aforesaid
certification is to prohibit and penalize the evils of forum shopping.

In Torres v. Specialized Packaging Development Corporation, we ruled that the verification requirement had
been substantially complied with despite the fact that only two (2) out of the twenty-five (25) petitioners have
signed the petition for review and the verification. In that case, we held that the two signatories were
unquestionably real parties-in-interest, who undoubtedly had sufficient knowledge and belief to swear to the
truth of the allegations in the Petition.

In Ateneo de Naga University v. Manalo, we also ruled that there was substantial compliance with the
requirement of verification when only one of the petitioners, the President of the University, signed for and
on behalf of the institution and its officers.

Similarly, in Bases Conversion and Development Authority v. Uy, we allowed the signature of only one of the
principal parties in the case despite the absence of a Board Resolution which conferred upon him the
authority to represent the petitioner BCDA.

In the present case, the circumstances squarely involve a verification that was not signed by all the
petitioners therein. Thus, we see no reason why we should not uphold the ruling of the Court of Appeals in
reinstating the petition despite the said formal defect.
 On the requirement of a certification of non-forum shopping, the well-settled rule is that all the petitioners
must sign the certification of non-forum shopping. The reason for this is that the persons who have signed
the certification cannot be presumed to have the personal knowledge of the other non-signing petitioners
with respect to the filing or non-filing of any action or claim the same as or similar to the current petition. The
rule, however, admits of an exception and that is when the petitioners show reasonable cause for failure to
personally sign the certification. The petitioners must be able to convince the court that the outright dismissal
of the petition would defeat the administration of justice.

In the case at bar, counsel for the respondents disclosed that most of the respondents who were the original
complainants have since sought employment in the neighboring towns of Bulacan, Pampanga and Angeles
City. Only the one hundred eighty (180) signatories were then available to sign the amended Petition for
Certiorari and the accompanying verification and certification of non-forum shopping.23

In the present case, the signing of the verification by only 11 out of the 59 petitioners already sufficiently assures the
Court that the allegations in the pleading are true and correct and not the product of the imagination or a matter of
speculation; that the pleading is filed in good faith; and that the signatories are unquestionably real parties-in-
interest who undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the petition.

With respect to petitioners’ certification against forum shopping, the failure of the other petitioners to sign as they
could no longer be contacted or are no longer interested in pursuing the case need not merit the outright dismissal
of the petition without defeating the administration of justice. The non-signing petitioners are, however, dropped
as parties to the case.

In fact, even Docena24 cited by respondents sustains petitioners’ position. In that case, the certification against
forum shopping was signed by only one of the petitioning spouses. The Court held that the certification against
forum shopping should be deemed to constitute substantial compliance with the Rules considering, among other
things, that the petitioners were husband and wife, and that the subject property was their residence which was
alleged in their verified petition to be conjugal.25

With respect to petitioners’ non-presentation of any identification before the notary public at the time they swore to
their verification and certification attached to the petition, suffice it to state that this was cured by petitioners’
compliance26 with the Court’s Resolution of January 22, 200827 wherein they submitted a notarized verification and
certification bearing the details of their community tax certificates. This, too, is substantial compliance. The Court
need not belabor its discretion to authorize subsequent compliance with the Rules.

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements
already reflected above respecting non-compliance with the requirements on, or submission of defective, verification
and certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of defective
verification, and non-compliance with the requirement on or submission of defective certification against forum
shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally
defective. The court may order its submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be served
thereby.28

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of
the allegations in the complaint or petition signs the verification, and when matters alleged in the petition have been
made in good faith or are true and correct.29

4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification, is
generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the Rule on
the ground of "substantial compliance" or presence of "special circumstances or compelling reasons."30
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case;31 otherwise,
those who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances,
however, as when all the plaintiffs or petitioners share a common interest and invoke a common cause of action or
defense, the signature of only one of them in the certification against forum shopping substantially complies with the
Rule.32

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel.33 If,
however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special Power
of Attorney34 designating his counsel of record to sign on his behalf.

And now, on respondents’ argument that petitioners raise questions of fact which are not proper in a petition for
review on certiorari as the same must raise only questions of law. They entertain doubt on whether petitioners seek
the payment of their salaries, and assert that the question of whether the city accountant can be compelled to issue
a certification of availability of funds under the circumstances herein obtaining is a factual issue.35

The Court holds that indeed petitioners are raising a question of law.

The Court had repeatedly clarified the distinction between a question of law and a question of fact. A question of law
exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of
facts; or when the issue does not call for an examination of the probative value of the evidence presented, the truth
or falsehood of facts being admitted.36 A question of fact, on the other hand, exists when the doubt or difference
arises as to the truth or falsehood of facts or when the query invites calibration of the whole evidence considering
mainly the credibility of the witnesses, the existence and relevance of specific surrounding circumstances, as well as
their relation to each other and to the whole, and the probability of the situation.37 When there is no dispute as to
fact, the question of whether the conclusion drawn therefrom is correct is a question of law.38

In the case at bar, the issue posed for resolution does not call for the reevaluation of the probative value of the
evidence presented, but rather the determination of which of the provisions of the Local Government Code of 1991
applies to the Civil Service Memorandum Circular requiring a certificate of availability of funds relative to the
approval of petitioners’ appointments.

At all events, respondents contend that the case has become moot and academic as the appointments of petitioners
had already been disapproved by the CSC. Petitioners maintain otherwise, arguing that the act of respondent
Empleo in not issuing the required certification of availability of funds unduly interfered with the power of
appointment of then Mayor Quijano; that the Sangguniang Panglungsod Resolutions relied upon by respondent
Empleo constituted legislative intervention in the mayor’s power to appoint; and that the prohibition against midnight
appointments applies only to presidential appointments as affirmed in De Rama v. Court of Appeals.39

The Court finds that, indeed, the case had been rendered moot and academic by the final disapproval of
petitioners’ appointments by the CSC.

The mootness of the case notwithstanding, the Court resolved to rule on its merits in order to settle the
issue once and for all, given that the contested action is one capable of repetition40 or susceptible of
recurrence.

The pertinent portions of Sections 474(b)(4) and 344 of the Local Government Code of 1991 provide:

Section 474. Qualifications, Powers and Duties. –

xxxx

(b) The accountant shall take charge of both the accounting and internal audit services of the local
government unit concerned and shall:

xxxx
 (4) certify to the availability of budgetary allotment to which expenditures and obligations may be properly
charged. (Emphasis and underscoring supplied)

xxxx

Sec. 344. Certification and Approval of Vouchers. – No money shall be disbursed unless the local budget
officer certifies to the existence of appropriation that has been legally made for the purpose, the local
accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds for
the purpose. x x x (Emphasis and underscoring supplied)

Petitioners propound the following distinctions between Sections 474(b)(4) and 344 of the Local Government Code
of 1991:

(1) Section 474(b)(4) speaks of certification of availability of budgetary allotment, while Section 344 speaks
of certification of availability of funds for disbursement;

(2) Under Section 474(b)(4), before a certification is issued, there must be an appropriation, while under
Section 344, before a certification is issued, two requisites must concur: (a) there must be an appropriation
legally made for the purpose, and (b) the local accountant has obligated said appropriation;

(3) Under Section 474(b)(4), there is no actual payment involved because the certification is for the purpose
of obligating a portion of the appropriation; while under Section 344, the certification is for the purpose of
payment after the local accountant had obligated a portion of the appropriation;

(4) Under Section 474(b)(4), the certification is issued if there is an appropriation, let us say, for the salaries
of appointees; while under Section 344, the certification is issued if there is an appropriation and the same is
obligated, let us say, for the payment of salaries of employees.41

Respondents do not squarely address the issue in their Comment.

Section 344 speaks of actual disbursements of money from the local treasury in payment of due and demandable
obligations of the local government unit. The disbursements are to be made through the issuance, certification, and
approval of vouchers. The full text of Section 344 provides:

Sec. 344. Certification and Approval of Vouchers. – No money shall be disbursed unless the local budget
officer certifies to the existence of appropriation that has been legally made for the purpose, the local
accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds for
the purpose. Vouchers and payrolls shall be certified to and approved by the head of the department or
office who has administrative control of the fund concerned, as to validity, propriety, and legality of the claim
involved. Except in cases of disbursements involving regularly recurring administrative expenses such as
payrolls for regular or permanent employees, expenses for light, water, telephone and telegraph services,
remittances to government creditor agencies such as GSIS, SSS, LDP, DBP, National Printing Office,
Procurement Service of the DBM and others, approval of the disbursement voucher by the local chief
executive himself shall be required whenever local funds are disbursed.

In cases of special or trust funds, disbursements shall be approved by the administrator of the fund.

In case of temporary absence or incapacity of the department head or chief of office, the officer next-in-rank
shall automatically perform his function and he shall be fully responsible therefor. (Italics and underscoring
supplied)

"Voucher," in its ordinary meaning, is a document which shows that services have been performed or expenses
incurred.42 When used in connection with disbursement of money, it implies the existence of an instrument that
shows on what account or by what authority a particular payment has been made, or that services have been
performed which entitle the party to whom it is issued to payment.43
Section 344 of the Local Government Code of 1991 thus applies only when there is already an obligation to pay on
the part of the local government unit, precisely because vouchers are issued only when services have been
performed or expenses incurred.

The requirement of certification of availability of funds from the city treasurer under Section 344 of the Local
Government Code of 1991 is for the purpose of facilitating the approval of vouchers issued for the payment of
services already rendered to, and expenses incurred by, the local government unit.

The trial court thus erred in relying on Section 344 of the Local Government Code of 1991 in ruling that the
ministerial function to issue a certification as to availability of funds for the payment of the wages and salaries of
petitioners pertains to the city treasurer. For at the time material to the required issuance of the certification, the
appointments issued to petitioners were not yet approved by the CSC, hence, there were yet no services performed
to speak of. In other words, there was yet no due and demandable obligation of the local government to petitioners.

Section 474, subparagraph (b)(4) of the Local Government Code of 1991, on the other hand, requires the
city accountant to "certify to the availability of budgetary allotment to which expenditures and obligations may be
properly charged."44 By necessary implication, it includes the duty to certify to the availability of funds for the
payment of salaries and wages of appointees to positions in the plantilla of the local government unit, as required
under Section 1(e)(ii), Rule V of CSC Memorandum Circular Number 40, Series of 1998, a requirement before the
CSC considers the approval of the appointments.

In fine, whenever a certification as to availability of funds is required for purposes other than actual payment of an
obligation which requires disbursement of money, Section 474(b)(4) of the Local Government Code of 1991 applies,
and it is the ministerial duty of the city accountant to issue the certification.

WHEREFORE, the Court declares that it is Section 474(b)(4), not Section 344, of the Local Government Code of
1991, which applies to the requirement of certification of availability of funds under Section 1(e)(ii), Rule V of Civil
Service Commission Memorandum Circular Number 40, Series of 1998.

SO ORDERED.

BIBIANA FARMS & MILLS, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (5th Division) and ROGELIO MAJASOL, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Assailed in the herein Petition for Certiorari under Rule 65 of the Rules of Court is the Resolution dated June 11,
2002, rendered by the Court of Appeals1 (CA) in CA-G.R. SP No. 69403, which denied petitioner’s motion for
reconsideration of its Resolution dated September 19, 2001 denying the petition of private respondent for failure to
pay docket fees, and directing private respondent to file his reply to petitioner’s Comment.

Petitioner is a corporation engaged in hog and cattle raising, and corn milling, while Rogelio Majasol (private
respondent) was employed therein as assistant to the head of the feeds mixing department.

On June 5, 1998, petitioner’s security guards caught private respondent, as he was about to go out, with a
tupperware-full of feeds. When confronted about it, he told the guards that he was going to feed it to his chicks. The
matter was reported to the management and an inquiry was conducted. Private respondent was not allowed to
report for work anymore in the afternoon of June 5.

On June 15, 1998, a conference was held before the Department of Labor and Employment (DOLE) where attempts
at an amicable settlement were made.2 However, before the case could be settled, a show-cause memorandum was
issued to private respondent on June 17, 1998.3 In a reply dated June 19, 1998, private respondent denied the
incident. Private respondent also stated that even if it was true, given the length of his service with petitioner, he
does not deserve to be terminated.4

On June 22, 1998, petitioner wrote private respondent informing him of their decision to separate him from
employment. The notice of termination stated that petitioner was constrained to evaluate his case based on the
affidavits of the security guards since he failed to submit his explanation within three days from service of the show-
cause memo.5

On June 23, 1998, private respondent lodged a complaint for illegal dismissal, non-payment of allowance and
service incentive leave pay.6 The complaint was later amended to include vacation leave, unpaid wages, damages
and attorney’s fees.7

In a Decision dated May 31, 1999, Labor Arbiter (LA) Noel Augusto S. Magbanua dismissed the complaint for illegal
dismissal and ordered the payment of unpaid wages and proportionate 13th month pay in favor of private
respondent.8

The LA’s decision was initially reversed and set aside by the National Labor Relations Commission (NLRC) in its
Decision dated April 28, 2000.9 It was the NLRC’s finding that petitioner’s evidence does not support their claim that
private respondent violated the trust and confidence reposed on him by virtue of his position.10 The NLRC also found
that private respondent was not accorded due process, and his termination was not commensurate to his violation.11

On motion for reconsideration, the NLRC, in its Resolution dated July 31, 2000, revised its decision and ruled that
private respondent’s dismissal is legal and with regard to due process. The NLRC set aside its order to reinstate
private respondent, deleted all awards for money claims and reinstated the LA’s award for unpaid wages and
proportionate 13th month pay.12

Private respondent filed a motion for reconsideration of the NLRC’s Resolution, but this was denied per Resolution
dated May 31, 2001.13

Private respondent then filed a special civil action for certiorari with the CA, which, in a Resolution dated September
19, 2001, dismissed the petition on the ground of failure to pay docket fees.14 On private respondent’s motion for
reconsideration, the CA granted the same per Resolution dated February 4, 2002.15 Petitioner then filed a motion for
reconsideration of said Resolution but the CA denied this in the assailed Resolution dated June 11, 2002.16

Hence, the present petition based on the sole ground that:

THE RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION WHEN IT REVERSED THE RESOLUTION DATED 19
SEPTEMBER 2001 DISMISSING THE PETITION FOR FAILURE TO PAY THE NECESSARY DOCKET
FEES.17

The thrust of petitioner’s argument is that private respondent’s failure to pay the docket fees is a case of negligence.
According to petitioner, respondent had until September 4, 2001, within which to pay the docket fees; instead, he
waited until October 15, 2001, or until after the CA first dismissed his petition that he paid the same. Petitioner also
argues that private respondent’s claim that payment of docket fees in the form of cash was originally enclosed in the
petition should not be accepted; and given the mandatory nature of the payment of docket fees within the
reglementary period, the CA should not have reconsidered its previous dismissal of the petition.

The Court denies the petition, as the CA did not commit any grave abuse of discretion in admitting private
respondent’s belated payment of docket fees and reinstating his petition.
Section 3, Rule 46 of the 1997 Rules of Civil Procedure, provides:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. - The petition shall
contain the full names and actual addresses of all the petitioners and respondents, a concise statement of
the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed
for.

In actions filed under Rule 65, the petition shall further indicate the material dates showing when notice of
the judgment or final order or resolution subject thereof was received, when a motion for new trial or
reconsideration, if any, was filed and when notice of the denial thereof was received.

xxxx

The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and deposit the
amount of P500.00 for costs at the time of the filing of the petition.

The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient
ground for the dismissal of the petition. (Emphasis supplied)

Under the foregoing rule, non-compliance with any of the requirements shall be a sufficient ground for the dismissal
of the petition. Corollarily, the rule is that a court cannot acquire jurisdiction over the subject matter of a case, unless
the docket fees are paid. And where the filing of the initiatory pleading is not accompanied by payment of the docket
fees, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable
prescriptive or reglementary period.18

In several cases, however, the Court entertained certain exceptions due to the peculiar circumstances attendant in
these cases, which warrant a relaxation of the rules on payment of docket fees. It was held in La Salette College v.
Pilotin,19 that the strict application of the rule may be qualified by the following: first, failure to pay those fees
within the reglementary period allows only discretionary, not automatic, dismissal; second, such power
should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of
justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances.20

Thus, in Villamor v. Court of Appeals,21 the Court sustained the decision of the CA to reinstate the private
respondents’ appeal despite having paid the docket fees almost one year after the notice of appeal was filed, finding
that there is no showing that the private respondents deliberately refused to pay the requisite fee within the
reglementary period and abandon their appeal. The Court also found that it was imperative for the CA to review the
ruling of the trial court to avoid a miscarriage of justice. Thus, the Court concluded, "Under the circumstances
obtaining in the case at bar, we see no cogent reason to reverse the resolutions of the respondent court. It is the
policy of the court to encourage hearing of appeals on their merits. To resort to technicalities which the petitioner
capitalizes on in the instant petition would only tend to frustrate rather than promote substantial justice."22

In the present case, the CA, in the exercise of its discretionary power, accepted private respondent’s explanation
that the money for the payment of docket fees was originally enclosed in the petition for certiorari but was
misplaced, and reinstated the petition. The CA may have abused its discretion when it ignored the rule on payment
of docket fees, but the Court finds that such abuse was not tainted with any capricious, despotic, oppressive or
whimsical exercise of judgment.

The term grave abuse of discretion, in its juridical sense, connotes capricious, despotic, oppressive or whimsical
exercise of judgment as is equivalent to lack of jurisdiction. The abuse must be of such degree as to amount to an
evasion of positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an
arbitrary and capricious manner by reason of passion and hostility. The word "capricious", usually used in tandem
with the term "arbitrary", conveys the notion of willful and unreasoning action. Thus, when seeking the corrective
hand of certiorari, a clear showing of caprice and arbitrariness in the exercise of discretion is imperative.23

It should be noted that it was only after the CA dismissed his petition that private respondent learned that the
payment for the docket fees did not reach the CA. Consequently, he filed a motion for reconsideration and enclosed
postal money orders as payment. While private respondent may have taken the unnecessary risk in initially
enclosing cash in his petition, nevertheless, it was clearly not a dilatory tactic nor intended to circumvent the Rules
of Court. In fact, private respondent subsequently paid the docket fees even before the CA had passed upon their
motion for reconsideration, which is indicative of his good faith and willingness to comply with the Rules.24

More importantly, the Court notes that there are two divergent rulings with regard to the propriety of private
respondent’s dismissal. The Labor Arbiter, in its Decision dated May 31, 1999, held that private respondent’s
dismissal was valid. On the other hand, the NLRC, in its Decision dated April 28, 2000, made its own factual finding
that private respondent’s dismissal was tainted with illegality. The NLRC may have reconsidered its ruling per its
Resolution dated July 31, 2000, still, the Court finds it more judicious to have this issue fully threshed out and
properly resolved on appeal to the CA.

Clearly, the CA’s exercise of its discretionary power was not made with any grave abuse, but in recognition of the
need to ensure that every party litigant is given the amplest opportunity for the proper and just disposition of his
cause freed from the constraints of technicalities.25

Rules of procedures are intended to promote, not to defeat, substantial justice and, therefore, they should
not be applied in a very rigid and technical sense. The exception is that, while the Rules are liberally
construed, the provisions with respect to the rules on the manner and periods for perfecting appeals are
strictly applied. As an exception to the exception, these rules have sometimes been relaxed on equitable
considerations. Also, in some cases the Supreme Court has given due course to an appeal perfected out of
time where a stringent application of the rules would have denied it, but only when to do so would serve the
demands of substantial justice and in the exercise of equity jurisdiction of the Supreme Court.

The underlying consideration in this petition is that the act of dismissing the notice of appeal, if done in
excess of the trial court’s jurisdiction, amounts to an undue denial of the petitioners’ right to appeal. The
importance and real purpose of the remedy of appeal has been emphasized in Castro v. Court of
Appeals where this Court ruled that an appeal is an essential part of our judicial system and trial courts are
advised to proceed with caution so as not to deprive a party of the right to appeal and instructed that every
party-litigant should be afforded the amplest opportunity for the proper and just disposition of his cause,
freed from the constraints of technicalities.26

The Court could have resolved this case on its merits considering that the records have already been elevated. It
appears, however, that the present petition involved only the issue of whether or not the CA gravely abused its
discretion in accepting private respondent’s belated payment of docket fees. It was on this issue that the parties
focused their arguments, and it would be a deprivation of their respective rights to due process if the Court were to
resolve the merits of this case, without giving them the opportunity to present their respective stances.
Consequently, the Court remands this case to the CA for the continuation of the proceedings before it.

WHEREFORE, the petition is DISMISSED. This case is remanded to the Court of Appeals for further proceedings.

No costs.

SO ORDERED.

LA SALETTE COLLEGE, Represented by Its President, FR. ROMEO GONZALES, MS; and JESUS T.
BAYAUA, Dean of Student Services, petitioners,
vs.
VICTOR C. PILOTIN, respondent

DECISION

PANGANIBAN, J.:

An appeal is not perfected by the mere filing of a Notice of Appeal that has been served on the adverse party. The
docket fees must likewise be paid within the reglementary period. Petitioners have failed to show why they merit an
exception to these stringent rules.
 The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the November 16,
20002 and the June 22, 2001 Resolutions3 of the Court of Appeals (CA) in CA-GR CV UDK No. 0236C. The
November 16, 2000 Resolution disposed as follows:

"In view of the foregoing, Appellee’s ‘Motion for Reconsideration’ is GRANTED. The Resolution, dated March 14,
2000, is hereby RECALLED and SET ASIDE and the appeal is hereby DISMISSED."4

The June 22, 2001 Resolution denied reconsideration.

The Facts

The facts of the case are narrated by the trial court5 as follows:

"[Respondent] is a bonafide student of [petitioner] College dating back [to] the school year 1988-1989 taking up the
degree of Bachelor of Science in Commerce. In the enrollment period for the second semester held on October 22
to November 5, 1993, [respondent] was denied re-enrollment, despite repeated pleas by x x x himself and by other
interested parties and his lawyer.

"On November 16, 1993, he filed his complaint and asked for the issuance of a writ of preliminary mandatory
injunction to compel [petitioner college to] re-admit him. On December 28, 1993, an order was issued directing
[petitioner college] to admit [respondent] for the second semester but still [petitioner college] refused to re-admit
[respondent], despite implementation of said order and the pleas of [respondent] thru his counsel so that he could
catch up with the bulk of the school days of the semester and could graduate.

"Because of the adamant refusal of [respondent] school in re-admitting him and his defiance to the order and
because the period of the second semester [was] already about to close, [respondent] amended his complaint and
concentrate[d] on damages, hence, this case.

"On the other hand, the [petitioner college] alleged that it opened its enrollment period for the second semester of
school year 1993-1994 on 11 October 1993 up to 22 October, 1993 to 05 November, 1993. However, classes for
the second semester of that school year commenced on 25 October, 1993. During these periods for enrolment,
[respondent] never enrolled with the x x x College and neither did he accomplish the basic requirements for
enrolment. However, on 05 November, 1993, the x x x College was in receipt of a letter from Atty. Quirino L. Pilotin
dated on that same date requesting for a reconsideration of an alleged decision denying enrolment to the
[respondent]. Upon receipt of the said letter, it was endorsed to [Respondent] Bayaua who in turn wrote Atty. Pilotin
explaining among others that was not denied enrolment but rather [the] latter did not enroll with the said College.
Considering, however, that the x x x College started its regular classes on 25 October, 1993, in the event
[respondent] was able to enroll on 6 November, 1993, he would have then exceeded the required absences for his
supposed enrolled subjects.

"Since plaintiff failed to enrol on the last day for enrolment, there is no reason why the x x x College should relax its
rules to accommodate [respondent]. The x x x College merely imposed its disciplining authority when it sets dates
for the period to enrol and the matter of admission of students is within the ambit of academic freedom and beyond
the province of the Courts to decide."6

On November 17, 1998, the trial court rendered judgment in favor of respondent.7 Petitioners received the Decision
on November 26, 1998. On the same date, they filed a Notice of Appeal, which the RTC approved on December 2,
1998.

Respondent moved for a reconsideration thereof on the ground of petitioners’ failure to pay the docket fees within
the reglementary period. The trial court, however, denied the Motion in its April 23, 1999 Order.8

Ruling of the Court of Appeals

In its November 29, 1999 Resolution, the CA dismissed the appeal of petitioners for their failure to pay "the required
docketing fee within the period for filing an appeal."9 But, upon their motion, the CA granted, in a Resolution dated
March 14, 2000, reconsideration of their appeal, which it reinstated "in the interest of substantial justice and
considering that [petitioners] already paid the docket fees."10 Respondent moved for a reconsideration on March 29,
2000.

After reexamining the records of the case, the CA, in the challenged November 16, 2000 Resolution, dismissed the
appeal filed by petitioners, because "the docket fees were only paid after one (1) year and eleven (11) months from
the filing of the notice of appeal."11 It deemed it imperative to reverse the March 14, 2000 Resolution "to conform with
the law and long settled jurisprudence"12 on the matter. Thus, in the June 22, 2001 Resolution, it denied their Motion
for Reconsideration.

Hence, this Petition.13

Issues

Petitioners submit the following issues for our consideration:

"1. Whether or not the appeal was seasonably filed;

"2. With all due respect, the Court of Appeals did not have the authority to dismiss the appeal."14

In the main, the case revolves around the timeliness of the payment of the docket fees.

The Court’s Ruling

The Petition has no merit.

Sole Issue:

Timeliness of Payment of
Appellate Court Docket Fees

The payment of docket fees is not a trivial matter. These fees are necessary to defray court expenses in the
handling of cases.15 For this reason, and to secure a just and speedy disposition of every action and proceeding,16the
Rules on Civil Procedure17 mandates the payment of docket and other lawful fees within the prescribed
period. Otherwise, the jurisdiction of the proper court to handle a case is adversely affected.18
1awp++i 1

The above rule applies squarely to this case, in which the judgment issued by the RTC, in the exercise of its original
jurisdiction, was elevated to the CA for review. Rule 41 of the Rules on Civil Procedure provides the essential
requirements for making such an appeal, as follows:

"SEC. 2. Modes of appeal.—

"(a) Ordinary appeal.— The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the
exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which rendered the
judgment or final order appealed from and serving a copy thereof upon the adverse party. x x x.

"x x x xxx xxx

"SEC. 3. Period of ordinary appeal. – The appeal shall be taken within fifteen (15) days from notice of the judgment
or final order appealed from. x x x.

"SEC. 4. Appellate court docket and other lawful fees. – Within the period for taking an appeal, the appellant shall
pay to the clerk of court which rendered the judgment or final order appealed from, the full amount of the appellate
court docket and other lawful fees. Proof of payment of said fees shall be transmitted to the appellate court together
with the original record or the record on appeal.

"SEC. 9. Perfection of appeal; effect thereof. — A party’s appeal by notice of appeal is deemed perfected as to him
upon the filing of the notice of appeal in due time.

"x x x x x x x x x.

"In appeals by notice of appeal, the court loses jurisdiction over the case upon the perfection of the appeals filed in
due time and the expiration of the time to appeal of the other parties.

"x x x x x x x x x."

Accordingly, in order to perfect an appeal from a decision rendered by the RTC in the exercise of its original
jurisdiction, the following requirements must be complied with. First, within 15 days, a notice of appeal must be filed
with the court that rendered the judgment or final order sought to be appealed; second, such notice must be served
on the adverse party; and third, within the same 15-day period, the full amount of appellate court docket and other
legal fees must be paid to the clerk of the court that rendered the judgment or final order.

It should be noted that full payment of the appellate docket fees within the prescribed period is mandatory,19 even
jurisdictional,20 for the perfection of the appeal. Otherwise, the appellate court would not be able to act on the subject
matter of the action,21 and the decision or final order sought to be appealed from would become final and executory.22

In the present case, petitioners insist that they seasonably paid the docket fees. After resolving thrice the timeliness
of the payment of the docket fees, the CA finally found that these had been paid one (1) year and 11 days from the
filing of their notice of appeal.

To recapitulate, on November 26, 1998, petitioners received the November 17, 1998 RTC Decision. Consequently,
they had 15 days to file their Notice of Appeal. They did so on November 26, 1998, but failed to pay the docket fees.
A review of the records shows that they paid these only on July 8, 1999,23 or after almost seven (7) months from the
mandated last day for payment, which was December 11, 1998. Clearly, the November 17, 1998 RTC Decision,
which petitioners sought to appeal, had long become final and executory.

Relaxation of the Rule on

Nonpayment of Docket Fees

Notwithstanding the mandatory nature of the requirement of payment of appellate docket fees, we also recognize
that its strict application is qualified by the following: first, failure to pay those fees within the reglementary period
allows only discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction
with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great
deal of circumspection in consideration of all attendant circumstances.24

In Mactan Cebu International Airport Authority v. Mangubat,25 the payment of the docket fees was delayed by six (6)
days, but the late payment was accepted, because the party showed willingness to abide by the Rules by
immediately paying those fees. Yambao v. Court of Appeals26 saw us again relaxing the Rules when we declared
therein that "the appellate court may extend the time for the payment of the docket fees if appellant is able to show
that there is a justifiable reason for x x x the failure to pay the correct amount of docket fees within the prescribed
period, like fraud, accident, mistake, excusable negligence, or a similar supervening casualty, without fault on the
part of the appellant."27

In the present case, petitioners have not shown any satisfactory reason to warrant the relaxation of the Rules. In
fact, the manner in which they presented their case before us leaves too much to be desired. Indeed, we are almost
tempted to say that they tried to mislead -- nay, deceive -- this Court as well as the appellate court.

The present case calls for the adjudication of whether petitioners paid the docket fees on time. Hence, it is essential
that they specify the exact dates when they filed their notice of appeal and paid the corresponding docket fees. But
nowhere in their pleadings did they do so. All they said was that the appeal had been seasonably filed.
In accordance with the requisites for the perfection of an appeal as enumerated earlier, petitioners should have (1)
filed a notice of appeal with the RTC of Santiago, Isabela, within 15 days from the issuance of the trial court
Decision being appealed; (2) paid the docket fees within the same period; and (3) served the notice to the adverse
party.

True, petitioners filed their Notice of Appeal within the prescribed period, but they paid the docket fees only seven
(7) months thereafter. They adamantly insisted on page 6 of their Petition28 that "the appeal was seasonably filed,"
but later said that the "the appeal fee was paid immediately after 23 April 1999 when the court a quo denied the
respondent’s motion for reconsideration and approved the appeal. x x x. With the foregoing therefore, the notice of
appeal was seasonably filed with the payment of docket fees on time."29

They admitted, though, that because of the "excusable negligence or mistake" of their counsel, the official receipts
for the Notice of Appeal had not been attached. They reasoned that they had failed to transmit the proof of payment
of the docket fees to the CA, because such "provision of civil procedure was relatively new x x x at that time."30 At
any event, respondent denies being served such notice.31

Assuming arguendo that the period of appeal was interrupted by respondent’s motion for reconsideration of the
RTC’s approval of petitioners’ notice of appeal, the required docket fees for the latter were still not paid on time.
From November 23, 1998, when petitioners filed their Notice of Appeal, until April 23, 1999, when the trial court
approved it with finality, they made no effort to pay those fees. It took them more than two (2) months to
"immediately pay" the docket fees after being informed of the April 23, 1999 Order denying respondent’s motion for
reconsideration of the RTC Order approving petitioners’ Notice of Appeal. This lapse of time hardly reflected sincere
willingness to abide by the Rules, especially when respondent had raised the very issue of nonpayment of docket
fees as early as December 28, 1998.

On this point, petitioners’ counsel is reminded of the role that lawyers play in the dispensation of justice. Bayas v.
Sandiganbayan32 held thus:

"Lawyers are not merely representatives of the parties but, first and foremost, officers of the court. As such, one of
their duties -- assisting in the speedy and efficient administration of justice -- is more significant than that of [the
cause of] their client, rightly or wrongly. x x x. We stress that candor in all dealings is the very essence of
membership in the legal profession. Lawyers are obliged to observe rules of procedure in good faith, not to misuse
them to defeat the ends of justice."33

We stress that the payment of docket fees is not a mere technicality of law or procedure, but an essential
requirement for the perfection of an appeal.34 Without such payment, the appellate court does not acquire jurisdiction
over the subject matter of the action, and the decision or final order sought to be appealed from becomes final and
executory.35 As laid down in Barangay 24 of Legazpi City v. Imperial:36

"The right to appeal is not a natural right or a part of due process. It is purely a statutory privilege, and may be
exercised only in the manner and in accordance with the provisions of the law. Well-rooted is the principle that
perfection of an appeal within the statutory or reglementary period is not only mandatory but also jurisdictional and
failure to do so renders the questioned decision final and executory, and deprives the appellate court of jurisdiction
to alter the final judgment much less to entertain the appeal."37

WHEREFORE, the Petition is hereby DENIED and the assailed Resolutions AFFIRMED. Costs against petitioners.

SO ORDERED.

ON RULE 8

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, Petitioner,

vs.
SANNAEDLE CO., LTD., Respondent.

DECISION
PERALTA, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision1 and Resolution,2 dated April 25, 2006 and February 6, 2008, respectively, of the Court of Appeals (CA)
in CA-G.R. CV No. 71916.

The facts follow.

This case stemmed from a Complaint3 for Sum of Money filed by respondent against petitioner. The complaint
alleged that petitioner and respondent executed a Memorandum of Agreement wherein respondent was engaged to
supply and erect insulated panel systems at various pavilions at the Philippine Centennial Exposition Theme Park,
specifically for the Phase I Project, for an agreed amount of US$3,745,287.94.

Pursuant to the Memorandum of Agreement, petitioner made various payments amounting to US$3,129,667.32
leaving a balance of US$615,620.33. Respondent claims that it made several written demands for petitioner to pay
the said balance, but the latter continuously refused to heed its plea.

Thereafter, petitioner filed its Answer with Counterclaim.4

Respondent then moved for judgment on the pleadings on the ground that the Answer admitted all material
allegations of the Complaint and, therefore, failed to tender an issue. Thus, respondent deems that petitioner’s
Answer, in effect, admitted the existence of the Memorandum of Agreement and its failure to pay the balance
despite repeated demands.

In a Judgment5 dated October 6, 2000, the Regional Trial Court (RTC) of Makati City rendered judgment in favor of
respondent. Pertinent portions of said decision read:

In claiming that the Answer of the [petitioner] failed to tender an issue, [respondent] argued that the present action is
for collection of the amount of US$615,620.33 with interest at the rate of 12% per annum, which amount represents
the balance of the payment under the Memorandum of Agreement, Annex B of the Complaint entered into between
[respondent] and [petitioner] which was not denied in the Answer. [Respondent] further claimed that in a letter dated
February 2, 2000, Annex C of the Complaint, it demanded payment of the said amount of US$615,620.33 and in
reply thereto, [petitioner] stated in part –

"We refer to your letter dated February 2, 2000 regarding the US$2,635,333.00 balance unpaid claim of
SANNAEDLE.

xxx xxx xxx

2. Phase I Contract

While we recognize being obligated to this amount, we do not have at the moment the capability to pay it. This is
because our financial position has been severely affected by the freezing of the government of all our collectibles on
EXPO projects including the ₱80M (approx. US$2.0M) from DPWH intended to pay the cost increment of reverting
back the use of Sannaedle in Phase I.

xxx xxx xxx

The partial amount of about US$1.4M paid by ASIAKONSTRUKT to Sannaedle in excess of its allocated budget of
US$1.745M actually came from its own source and initiatives. This effort made by ASIAKONSTRUKT significantly
reduced the balance due Sannaedle to only US$615,620.33.

xxx xxx xxx

The Court notes that in the Answer with Counterclaim of the [petitioner], the execution of the Memorandum of
Agreement, Annex B of the Complaint was admitted (paragraph 13, Answer). Further, it did not deny specifically the
claim of the [respondent] of being entitled to collect the said amount of US$615,620.33.6
 xxxx

WHEREFORE, judgment is rendered in favor [of] the [respondent] and [petitioner] is ordered to pay [respondent] the
amount of US $615,620.33 with interest thereon at the rate of 12% per annum from February 2, 2000 until fully paid.

No pronouncement as to costs.

SO ORDERED.7

Petitioner filed a motion for reconsideration against said decision. However, the same was denied in an Order8dated
December 13, 2000.

Thus, petitioner filed an appeal before the CA.

On April 25, 2006, the CA rendered its assailed Decision which disposed as follows:

WHEREFORE, the instant appeal is DISMISSED. The judgment of the Regional Trial Court of Makati City, Branch
138, dated October 6, 2000, is hereby AFFIRMED.

Costs against the [petitioner].

SO ORDERED.9

Petitioner filed a motion for reconsideration, but the CA denied it in a Resolution dated February 6, 2008.

Hence, the present petition wherein petitioner raises this sole issue for our resolution: whether or not judgment on
the pleadings is proper.

Petitioner contends that the judgment on the pleadings is not proper, because it raised special and affirmative
defenses in its Answer. It asserts that with this specific denial, a genuine issue of fact had been joined to the extent
that a judgment on the pleadings could not be made.

For its part, respondent counters that petitioner’s Answer admitted the material allegations of its complaint regarding
the cause of action, which is collection of sum of money. Respondent emphasizes that assuming petitioner’s
defense of respondent’s lack of capacity to sue has a leg to stand on, still, the same cannot prevent respondent
from seeking the collection of petitioner’s unpaid balance.

The Court finds the petition bereft of merit.

Judgment on the pleadings is governed by Section 1, Rule 34 of the 1997 Rules of Civil Procedure which reads:

Sec. 1. Judgment on the pleadings. – Where an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party’s pleading, the court may, on motion of that party, direct judgment on such pleading.
However, in actions for declaration of nullity or annulment of marriage or for legal separation, the material facts
alleged in the complaint shall always be proved.10

Judgment on the pleadings is proper when an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party’s pleading. An answer fails to tender an issue if it does not comply with the
requirements of a specific denial as set out in Sections 811 and 10,12 Rule 8 of the 1997 Rules of Civil Procedure,
resulting in the admission of the material allegations of the adverse party’s pleadings.13

This rule is supported by the Court’s ruling in Mongao v. Pryce Properties Corporation14 wherein it was held that
"judgment on the pleadings is governed by Section 1,Rule 34 of the 1997 Rules of Civil Procedure, essentially a
restatement of Section 1, Rule 19 of the 1964 Rules of Court then applicable to the proceedings before the trial
court. Section 1, Rule 19 of the Rules of Court provides that where an answer fails to tender an issue, or otherwise
admits the material allegations of the adverse party’s pleading, the court may, on motion of that party, direct
judgment on such pleading. 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."15

Further, in First Leverage and Services Group, Inc. v. Solid Builders, Inc.,16 this Court held that where a motion for
judgment on the pleadings is filed, the essential question is whether there are issues generated by the pleadings. In
a proper case for judgment on the pleadings, there is no ostensible issue at all because of the failure of the
defending party’s answer to raise an issue. The answer would fail to tender an issue, of course, if it does not deny
the material allegations in the complaint or admits said material allegations of the adverse party’s pleadings by
confessing the truthfulness thereof and/or omitting to deal with them at all.17

Here, it is irrefutable that petitioner acknowledged having entered into a Memorandum of Agreement with
respondent and that it still has an unpaid balance of US$615,620.33.

We note that respondent’s complaint for a sum of money is based mainly on the alleged failure of petitioner to pay
the balance of US$615,620.33 under the Memorandum of Agreement. Quoting petitioner’s Answer, it is obvious that
it admitted the foregoing material allegations in paragraphs 3, 4 and 5 of the complaint, which states as follows:

3. The [Petitioner] ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION ("ASIAKONSTRUKT"

for brevity), is a corporation duly incorporated under the laws of the Philippines, with capacity to sue and be
sued, and with business address at the Second Floor, Union Ajinomoto Building, Sen. Gil Puyat Avenue,
Makati City, and within the jurisdiction of this Honorable Court; and where it may be served with summons
and other court processes of this Honorable Court,

4. That the [respondent] and the [petitioner] entered into a Memorandum of Agreement in Makati City, within
the jurisdiction of this Honorable Court, dated February 17, 1998, wherein the [Petitioner] corporation agreed
with and ordered the herein [Respondent], as Contractor, to design and install INSUPANEL SYSTEMS at
various pavilions, etc. at expo projects site; and specifically for the Phase I project at an agreed amount of
US$3,745,287.94(Par. 2.1). A xerox copy of this Memorandum of Agreement dated February 17, 1998
between [Respondent] and [Petitioner] consisting of six (6) pages, is attached hereto as Annex B and made
an integral part hereof.

5. That pursuant to this Memorandum of Agreement (Exhibit B)and contract price of US$3,745,287.94,
various payments have been made by [Petitioner] Corporation on this Phase I project totaling
US$3,129,667.32, thus leaving a balance of US$615,620.33.18

While petitioner allegedly raised affirmative defenses, i.e., defect in the certification of non-forum shopping, no legal
capacity to sue and fortuitous event, the same cannot still bar respondent from seeking the collection of the unpaid
balance. Other than these affirmative defenses, petitioner’s denial neither made a specific denial that a
Memorandum of Agreement was perfected nor did it contest the genuineness and due execution of said agreement.

We, therefore, sustain the CA and quote with approval the well-reasoned findings and conclusions of the appellate
court contained in its Decision, to wit:

The [respondent’s] cause of action for collection of Sum of Money is founded mainly on the Memorandum of
Agreement validly executed by both parties.

First, the allegations in the [petitioner’s] Answer do not make out a specific denial that a Memorandum of Agreement
was perfected between the parties. Second, the [respondent] does not contest the due execution and/or
genuineness of said Memorandum of Agreement. In fact, paragraph 13 of the Answer categorically admits
paragraphs 4 and 5 of the Complaint.

In its Answer, the [petitioner] offered the following defenses, to wit:

19. The complaint should be dismissed on the ground that [respondent's J certification of non-forum
shopping is defective. Rule 7, Section 5 of the 1997 Revised Rules of Civil Procedure ... xxx xxx xxx
1âwphi 1
 22. [Respondent] has no legal capacity to sue, as it is a foreign corporation doing business in the Philippines
without a valid license. xxx xxx xxx

27. The unexpected default of FCCC on its obligations to [petitioner} on account of the Senate Blue Ribbon
Committee investigation was a fortuitous event which suspended, if not extinguished [petitioner's} obligation
to FCCC.

In essence, the [petitioner] justifies its refusal to tender payment of the balance of US$615,620.33 to the
[respondent], to the failure of the First Centennial Clark Corporation (FCCC) to comply with its obligations to
ASIAKONSTRUKT which [it] characterizes as a fortuitous event.

The defenses raised by [petitioner] cannot prevent the [respondent] from seeking the collection of the amount of
US$615,620.33. The express terms of the Memorandum of Agreement, the genuineness and due execution of
which are not denied by the [petitioner]. It cannot assert the said defenses in order to resist the [respondent's] claim
for the aforesaid sum of money, especially where it has been sufficiently shown by the allegations of the Complaint
and the Answer that the [petitioner] is clearly liable for the payment thereof.19

WHEREFORE, the instant petition is DENIED. The Decision dated April 25, 2006 and Resolution dated February 6,
2008 of the Court of Appeals are hereby AFFIRMED.

SO ORDERED.

FERNANDO MEDICAL ENTERPRISES, INC., Petitioner,

vs.
WESLEYAN UNIVERSITY PHILIPPINES, INC., Respondent.

DECISION

BERSAMIN, J.:

The trial court may render a judgment on the pleadings upon motion of the claiming party when the defending
party's answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading.
For that purpose, only the pleadings of the parties in the action are considered. It is error for the trial court to deny
the motion for judgment on the pleadings because the defending party's pleading in another case supposedly
tendered an issue of fact.

The Case

The petitioner appeals the decision promulgated on July 2, 2013,1 whereby the Court of Appeals (CA) affirmed the
order issued on November 23, 2011 by the Regional Trial Court (RTC), Branch 1, in Manila, denying its motion for
judgment on the pleadings in Civil Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan
University-Philippines.2

Antecedents

From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation dealing with medical equipment
and supplies, delivered to and installed medical equipment and supplies at the respondent’s hospital under the
following contracts:

a. Memorandum of Agreement dated January 9, 2006 for the supply of medical equipment in the total
amount of P18,625,000.00;3

b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas pipeline system valued at
P8,500,000.00;4
 c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of Diamond Select Slice CT and one
unit of Diamond Select CV-P costing P65,000,000.00;5 and

d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings and equipment worth
P32,926,650.00.6

According to the petitioner, the respondent paid only P67,357,683.23 of its total obligation of P123,901,650.00,
leaving unpaid the sum of P54,654,195.54.7 However, on February 11, 2009, the petitioner and the respondent,
respectively represented by Rafael P. Fernando and Guillermo T. Maglaya, Sr., entered into an
agreement,8 whereby the former agreed to reduce its claim to only P50,400,000.00, and allowed the latter to pay the
adjusted obligation on installment basis within 36 months.9

In the letter dated May 27, 2009,10 the respondent notified the petitioner that its new administration had reviewed
their contracts and had found the contracts defective and rescissible due to economic prejudice or lesion; and that it
was consequently declining to recognize the February 11, 2009 agreement because of the lack of approval by its
Board of Trustees and for having been signed by Maglaya whose term of office had expired.

On June 24, 2009, the petitioner sent a demand letter to the respondent.11

Due to the respondent’s failure to pay as demanded, the petitioner filed its complaint for sum of money in the
RTC,12averring as follows:

xxxx

2. On January 9, 2006, plaintiff supplied defendant with hospital medical equipment for an in consideration
of P18,625,000.00 payable in the following manner: (2.1) For nos. 1 to 9 of items to be sourced from
Fernando Medical Equipment, Inc. (FMEI) – 30% down payment of P17,475,000 or P5,242,500 with the
balance of P12,232,500 or 70% payable in 24 equal monthly instalments of P509,687.50 and (2.2.) cash
transaction amounting to P1,150,000.00 (2.3) or an initial cash payment of P6,392,500.00 with the remaining
balance payable in 24 equal monthly installments every 20th day of each month until paid, as stated in the
Memorandum of Agreement, copy of which is hereto attached as Annex "A";

3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the latter’s hospital building
complex for and in consideration of P8,500,000.00 payable upon installation thereof under a Deed of
Undertaking, copy of which is hereto attached as Annex "B";

4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice CT and one (1) unit
Diamond Select CV-9 for and in consideration of P65,000,000.00 thirty percent (30%) of which shall be paid
as down payment and the balance in 30 equal monthly instalments as provided in that Deed of Undertaking,
copy of which is hereto attached as Annex "C";

5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and equipment for an in
consideration of P32,926,650.00 twenty percent (20%) of which was to be paid as downpayment and the
balance in 30 months under a Deed of Undertaking, copy of which is hereto attached as Annex "D";

6. Defendant’s total obligation to plaintiff was P123,901,650.00 as of February 15, 2009, but defendant was
able to pay plaintiff the sum of P67,357,683.23 thus leaving a balance P54,654,195.54 which has become
overdue and demandable;

7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and extended its
payment for 36 months provided defendants shall pay the same within 36 months and to issue 36 postdated
checks therefor in the amount of P1,400,000.00 each to which defendant agreed under an Agreement, copy
of which is hereto attached as Annex "E";

8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the [a]mount of
P1,400,000.00 but after four (4) of the said checks in the sum of P5,600,000.00 were honored defendant
 stopped their payment thus making the entire obligation of defendant due and demandable under the
February 11, 2009 agreement;

9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4) agreements may be
rescissible and one of them is unenforceable while the Agreement dated February 11, 2009 was without the
requisite board approval as it was signed by an agent whose term of office already expired, copy of which
letter is hereto attached as Annex "F";

10. Consequently, plaintiff told defendant that if it does not want to honor the February 11, 2009 contract
then plaintiff will insists [sic] on its original claim which is P54,654,195.54 and made a demand for the
payment thereof within 10 days from receipt of its letter copy of which is hereto attached as Annex "G";

11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid plaintiff any amount,
either in the first four contracts nor in the February 11, 2009 agreement, hence, the latter was constrained to
institute the instant suit and thus incurred attorney’s fee equivalent to 10% of the overdue account but only
after endeavouring to resolve the dispute amicable and in a spirit of friendship[;]

12. Under the February 11, 2009 agreement the parties agreed to bring all actions or proceedings
thereunder or characterized therewith in the City of Manila to the exclusion of other courts and for defendant
to pay plaintiff 3% per months of delay without need of demand;13

xxxx

The respondent moved to dismiss the complaint upon the following grounds,14 namely: (a) lack of jurisdiction over
the person of the defendant; (b) improper venue; (c) litis pendentia; and (d) forum shopping. In support of the ground
of litis pendentia, it stated that it had earlier filed a complaint for the rescission of the four contracts and of the
February 11, 2009 agreement in the RTC in Cabanatuan City; and that the resolution of that case would be
determinative of the petitioner’s action for collection.15

After the RTC denied the motion to dismiss on July 19, 2009,16 the respondent filed its answer (ad
cautelam),17averring thusly:

xxxx

2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED subject to the special
and affirmative defenses hereafter pleaded;

3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack of knowledge or
information sufficient to form a belief as to the truth or falsity thereof, inasmuch as the alleged transactions
were undertaken during the term of office of the past officers of defendant Wesleyan University-Philippines.
At any rate, these allegations are subject to the special and affirmative defenses hereafter pleaded;

4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject to the special and
affirmative defenses hereafter pleaded;

5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being conclusions of law.18

xxxx

The petitioner filed its reply to the answer.19

On September 28, 2011, the petitioner filed its Motion for Judgment Based on the Pleadings,20 stating that the
respondent had admitted the material allegations of its complaint and thus did not tender any issue as to such
allegations.

The respondent opposed the Motion for Judgment Based on the Pleadings, arguing that it had specifically denied
the material allegations in the complaint, particularly paragraphs 6, 7, 8, 11 and 12.21
On November 23, 2011, the RTC issued the order denying the Motion for Judgment Based on the Pleadings of the
petitioner, to wit:

At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the plaintiff thru counsel, Atty. Jose
Mañacop on September 28, 2011, the court issued an Order dated October 27, 2011 which read in part as follows:

xxxx

Considering that the allegations stated on the Motion for Judgment Based on the Pleadings, are evidentiary in
nature, the Court, instead of acting on the same, hereby sets this case for pre-trial, considering that with the Answer
and the Reply, issues have been joined.

xxxx

In view therefore of the Order of the Court dated October 27, 2011, let the Motion for Judgment Based on the
Pleadings be hereby ordered DENIED on reasons as abovestated and hereto reiterated.

xxxx

SO ORDERED.22

The petitioner moved for reconsideration,23 but its motion was denied on December 29, 2011.24

The petitioner assailed the denial in the CA on certiorari.25

Judgment of the CA

On July 2, 2013, the CA promulgated its decision. Although observing that the respondent had admitted the
contracts as well as the February 11, 2009 agreement, viz.:

It must be remembered that Private Respondent admitted the existence of the subject contracts, including
Petitioner’s fulfilment of its obligations under the same, but subjected the said admission to the "special and
affirmative defenses" earlier raised in its Motion to Dismiss.

xxxx

Obviously, Private Respondent’s special and affirmative defenses are not of such character as to avoid Petitioner’s
claim. The same special and affirmative defenses have been passed upon by the RTC in its Order dated July 19,
2010 when it denied Private Respondent’s Motion to Dismiss. As correctly found by the RTC, Private Respondent’s
special and affirmative defences of lack of jurisdiction over its person, improper venue, litis pendentia and wilful and
deliberate forum shopping are not meritorious and cannot operate to dismiss Petitioner’s Complaint. Hence, when
Private Respondent subjected its admission to the said defenses, it is as though it raised no defense at all.

Not even is Private Respondent’s contention that the rescission case must take precedence over Petitioner’s
Complaint for Sum of Money tenable. To begin with, Private Respondent had not yet proven that the subject
1avvphi1

contracts are rescissible. And even if the subject contracts are indeed rescissible, it is well-settled that rescissible
contracts are valid contracts until they are rescinded. Since the subject contracts have not yet been rescinded, they
are deemed valid contracts which may be enforced in legal contemplation.

In effect, Private Respondent admitted that it entered into the subject contracts and that Petitioner had performed its
obligations under the same.

As regards Private Respondent’s denial by disavowal of knowledge of the Agreement dated February 11, 2009, We
agree with Petitioner that such denial was made in bad faith because such allegations are plainly and necessarily
within its knowledge.
In its letter dated May 27, 2009, Private Respondent made reference to the Agreement dated February 11,
2009, viz.:

"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of the University without the
requisite authority from the Board of Trustees, and executed when said agent’s term of office had already expired.
Consequently, such contract is, being an unenforceable contract."

Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it attached to its Motion to
Dismiss, that:

"13. On 6 February 2009, when the terms of office of plaintiff’s Board of Trustess chaired by Dominador Cabasal, as
well as of Atty. Guillermo C. Maglaya as President, had already expired, thereby rendering them on a hold-over
capacity, the said Board once again authorized Atty. Maglaya to enter into another contract with defendant FMEI,
whereby the plaintiff was obligated to pay and deliver to defendant FMEI the amount of Fifty Million Four Hundred
Thousand Pesos (Php50,400,000.00) in thirty five (35) monthly instalments of One Million Four Hundred Thousand
Pesos (Php1,400,000.00), representing the balance of the payment for the medical equipment supplied under the
afore-cited rescissible contracts. This side agreement, executed five (5) days later, or on 11 February 2009, and
denominated as "AGREEMENT", had no object as a contract, but was entered into solely for the purpose of getting
the plaintiff locked-in to the payment of the balance price under the rescissible contracts; x x x"

From the above averments, Private Respondent cannot deny knowledge of the Agreement dated February 11,
2009. In one case, it was held that when a respondent makes a "specific denial" of a material allegation of the
petition without setting forth the substance of the matters relied upon to support its general denial, when such
matters where plainly within its knowledge and the defendant could not logically pretend ignorance as to the
same, said defendant fails to properly tender an issue.26

the CA ruled that a judgment on the pleadings would be improper because the outstanding balance due to the
petitioner remained to be an issue in the face of the allegations of the respondent in its complaint for rescission in
the RTC in Cabanatuan City, to wit:

However, Private Respondent’s disavowal of knowledge of its outstanding balance is well-taken. Paragraph 6 of
Petitioner’s Complaint states that Private Respondent was able to pay only the amount of P67,357,683.23. Taken
together with paragraph 8, which states that Private Respondent was only able to make good four (4) check
payments worth P1,400,000.00 or a total of P5,600,000.00, Private Respondent’s total payments would be, in
Petitioner’s view, P72,957,683.23. However, in its Complaint for Rescission, attached to its Motion to Dismiss
Petitioner’s Complaint for Sum of Money, Private Respondent alleged that:

"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million Four Hundred One Thousand
Six Hundred Fifty Pesos (P78,401,650.00)"

It is apparent that Private Respondent’s computation and Petitioner’s computation of the total payments made by
Private Respondent are different. Thus, Private Respondent tendered an issue as to the amount of the balance due
to Petitioner under the subject contracts.27

Hence, this appeal.

Issue

The petitioner posits that the CA erred in going outside of the respondent’s answer by relying on the allegations
contained in the latter’s complaint for rescission; and insists that the CA should have confined itself to the
respondent’s answer in the action in order to resolve the petitioner’s motion for judgment based on the pleadings. 1âwphi1

In contrast, the respondent contends that it had specifically denied the material allegations of the petitioner’s
complaint, including the amount claimed; and that the CA only affirmed the previous ruling of the RTC that the
pleadings submitted by the parties tendered an issue as to the balance owing to the petitioner.
Did the CA commit reversible error in affirming the RTC’s denial of the petitioner’s motion for judgment on the
pleadings?

Ruling of the Court

The appeal is meritorious.

The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of Court, which provides thus:

Section 1. Judgment on the pleadings. – Where an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party’s pleading, the court may, on motion of that party, direct judgment on such pleading.
xxx

The essential query in resolving a motion for judgment on the pleadings is whether or not there are issues of fact
generated by the pleadings.28 Whether issues of fact exist in a case or not depends on how the defending party’s
answer has dealt with the ultimate facts alleged in the complaint. The defending party’s answer either admits or
denies the allegations of ultimate facts in the complaint or other initiatory pleading. The allegations of ultimate facts
the answer admit, being undisputed, will not require evidence to establish the truth of such facts, but the allegations
of ultimate facts the answer properly denies, being disputed, will require evidence.

The answer admits the material allegations of ultimate facts of the adverse party’s pleadings not only when it
expressly confesses the truth of such allegations but also when it omits to deal with them at all.29 The controversion
of the ultimate facts must only be by specific denial. Section 10, Rule 8 of the Rules of Court recognizes only three
modes by which the denial in the answer raises an issue of fact. The first is by the defending party specifying each
material allegation of fact the truth of which he does not admit and, whenever practicable, setting forth the
substance of the matters upon which he relies to support his denial. The second applies to the defending party who
desires to deny only a part of an averment, and the denial is done by the defending party specifying so much of the
material allegation of ultimate facts as is true and material and denying only the remainder. The third is done by the
defending party who is without knowledge or information sufficient to form a belief as to the truth of a material
averment made in the complaint by stating so in the answer. Any material averment in the complaint not so
specifically denied are deemed admitted except an averment of the amount of unliquidated damages.30

In the case of a written instrument or document upon which an action or defense is based, which is also known as
the actionable document, the pleader of such document is required either to set forth the substance of such
instrument or document in the pleading, and to attach the original or a copy thereof to the pleading as an exhibit,
which shall then be deemed to be a part of the pleading, or to set forth a copy in the pleading.31 The adverse party is
deemed to admit the genuineness and due execution of the actionable document unless he specifically denies them
under oath, and sets forth what he claims to be the facts, but the requirement of an oath does not apply when the
adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of
the original instrument is refused.32

In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2, 3, 4, 5, 9 and 10 of the
complaint. The admission related to the petitioner’s allegations on: (a) the four transactions for the delivery and
installation of various hospital equipment; (b) the total liability of the respondent; (c) the payments made by the
respondents; (d) the balance still due to the petitioner; and (e) the execution of the February 11, 2009 agreement.
The admission of the various agreements, especially the February 11, 2009 agreement, significantly admitted the
petitioner’s complaint. To recall, the petitioner’s cause of action was based on the February 11, 2009 agreement,
which was the actionable document in the case. The complaint properly alleged the substance of the February 11,
2009 agreement, and contained a copy thereof as an annex. Upon the express admission of the genuineness and
due execution of the February 11, 2009 agreement, judgment on the pleadings became proper.33 As held in Santos
v. Alcazar:34

There is no need for proof of execution and authenticity with respect to documents the genuineness and due
execution of which are admitted by the adverse party. With the consequent admission engendered by petitioners’
failure to properly deny the Acknowledgment in their Answer, coupled with its proper authentication, identification
and offer by the respondent, not to mention petitioners’ admissions in paragraphs 4 to 6 of their Answer that they
are indeed indebted to respondent, the Court believes that judgment may be had solely on the document, and there
is no need to present receipts and other documents to prove the claimed indebtedness. The Acknowledgment, just
as an ordinary acknowledgment receipt, is valid and binding between the parties who executed it, as a document
evidencing the loan agreement they had entered into. The absence of rebutting evidence occasioned by petitioners’
waiver of their right to present evidence renders the Acknowledgment as the best evidence of the transactions
between the parties and the consequential indebtedness incurred. Indeed, the effect of the admission is such that
a prima facie case is made for the plaintiff which dispenses with the necessity of evidence on his part and entitled
him to a judgment on the pleadings unless a special defense of new matter, such as payment, is interposed by the
defendant.35 (citations omitted)

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of knowledge or information sufficient to
form a belief as to the truth or falsity thereof, inasmuch as the alleged transactions were undertaken during the term
of office of the past officers of defendant Wesleyan University-Philippines." Was the manner of denial effective as a
specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the respondent’s total obligation as of February
15, 2009 was P123,901,650.00, but its balance thereafter became only P54,654,195.54 because it had since then
paid P67,357,683.23 to the petitioner. Paragraph no. 7 stated that the petitioner had agreed with the respondent on
February 11, 2009 to reduce the balance to only P50,400,000.00, which the respondent would pay in 36 months
through 36 postdated checks of P1,400,000.00 each, which the respondent then issued for the purpose. Paragraph
no. 8 averred that after four of the checks totalling P5,600,000.00 were paid the respondent stopped payment of the
rest, rendering the entire obligation due and demandable pursuant to the February 11, 2009 agreement.
Considering that paragraphs no. 6, 7 and 8 of the complaint averred matters that the respondent ought to know or
could have easily known, the answer did not specifically deny such material averments. It is settled that denials
based on lack of knowledge or information of matters clearly known to the pleader, or ought to be known to it, or
could have easily been known by it are insufficient, and constitute ineffective36 or sham denials.37

That the respondent qualified its admissions and denials by subjecting them to its special and affirmative defenses
of lack of jurisdiction over its person, improper venue, litis pendentia and forum shopping was of no consequence
because the affirmative defenses, by their nature, involved matters extrinsic to the merits of the petitioner’s claim,
and thus did not negate the material averments of the complaint.

Lastly, we should emphasize that in order to resolve the petitioner’s Motion for Judgment Based on the Pleadings,
the trial court could rely only on the answer of the respondent filed in Civil Case No. 09-122116. Under Section 1,
Rule 34 of the Rules of Court, the answer was the sole basis for ascertaining whether the complaint’s material
allegations were admitted or properly denied. As such, the respondent’s averment of payment of the total of
P78,401,650.00 to the petitioner made in its complaint for rescission had no relevance to the resolution of
the Motion for Judgment Based on the Pleadings. The CA thus wrongly held that a factual issue on the total liability
of the respondent remained to be settled through trial on the merits. It should have openly wondered why the
respondent's answer in Civil Case No. 09-122116 did not allege the supposed payment of the P78,401,650.00, if the
payment was true, if only to buttress the specific denial of its alleged liability. The omission exposed the
respondent's denial of liability as insincere.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on July 2, 2013; DIRECTS the
Regional Trial Court, Branch 1, in Manila to resume its proceedings in Civil Case No. 09-122116 entitled Fernando
Medical Enterprises, Inc. v. Wesleyan University-Philippines, and to forthwith act on and grant the Motion for
Judgment Based on the Pleadings by rendering the proper judgment on the pleadings; and ORDERS the
respondent to pay the costs of suit.

SO ORDERED.

ON SUMMONS

FORTUNATO GOMEZ and AURORA GOMEZ, petitioners,

vs.
COURT OF APPEALS, ADOLFO TROCINO and MARIANO TROCINO, respondents.

DECISION
AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision1 of
the Court of Appeals dated September 30, 1996, in CA-G.R. SP No. 40067, nullifying the decision and orders of the
Regional Trial Court of Cebu City (Branch 10) in Civil Case No. CEB-11103, for want of jurisdiction.

Civil Case No. CEB-11103 is an action for specific performance and/or rescission filed by herein petitioners,
spouses Fortunato and Aurora Gomez, against the heirs of Jesus J. Trocino, Sr., which include herein respondents
and their mother Caridad Trocino.2

Filed on December 16, 1991, the complaint alleges: Some time in 1975, the spouses Jesus and Caridad Trocino
mortgaged two parcels of land covered by TCT Nos. 10616 and 31856 to Dr. Clarence Yujuico. The mortgage was
subsequently foreclosed and the properties sold at public auction on July 11, 1988, and before the expiry of the
redemption period, the spouses Trocino sold the property to petitioners on December 12, 1989, who in turn,
redeemed the same from Dr. Yujuico. The spouses Trocino, however, refused to convey ownership of the properties
to petitioners, hence, the complaint.

On January 10, 1992, the trial court’s Process Server served summons on respondents, in the manner described in
his "Return of Service," to wit:

Respectfully returned to the Branch Clerk of Court, Regional Trial Court of Cebu, Branch 10, the herein attached
original summons issued in the above-entitled case with the information that on January 8, 1992 summons and
copies of the complaint were served to the defendants Jacob, Jesus Jr., Adolfo, Mariano, Consolacion, Alice,
Racheal thru defendant Caridad Trocino at their given address at Maria Cristina Extension (besides Sacred Heart
School for Girls), Cebu City, evidence by her signature found at the lower portion of the original summons.3

WHEREFORE I, respectfully return the original summons duly served to the court of origin.

Cebu City, Philippines, January 10, 1992.

(signed)

DELFIN D. BARNIDO
RTC Process Server

On January 27, 1992, the defendants, through their counsel Atty. Expedito P. Bugarin, filed their Answer. Defendant
Caridad A. Trocino, respondents’ mother, verified said pleading.4

After trial on the merits, the RTC rendered its decision on March 1993, with the following disposition:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the
defendants.

The latter are hereby ordered to jointly and severally execute a Deed of Sale in favor of the plaintiffs and to deliver
the owner’s duplicate copies of TCT Nos. 10616 and 31856, covering the properties sold, to the plaintiffs within ten
(10) days from the finality of the judgment, after which plaintiffs shall pay in turn to the defendants the balance of
₱2,000,000.00. Otherwise, the sale is rescinded and revoked and the defendants are directed to return to the
plaintiffs the amount of ₱500,000.00, with interest of 12% per annum computed from December 6, 1989, until the full
amount is paid.

In addition thereto, defendants are to pay jointly and severally to the plaintiffs, the amount of ₱50,000.00 as moral
damages; ₱20,000.00 as exemplary damages; ₱40,000.00 by way of attorney’s fees; and ₱10,000.00 as litigation
expenses.

SO ORDERED.5
Due to the defendants’ failure to deliver the owner’s duplicate of TCT Nos. 10616 and 31856, the RTC issued an
order on August 29, 1995 declaring said titles null and void, and ordering the Register of Deeds of Cebu City to
issue new titles in the name of herein petitioners.6

Thereafter, or on March 13, 1996, respondents Adolfo and Mariano Trocino filed with the Court of Appeals, a
petition for the annulment of the judgment rendered by the RTC-Cebu (Branch 10) in Civil Case No. CEB-11103.
Private respondents alleged that the trial court’s decision is null and void on the ground that it did not acquire
jurisdiction over their persons as they were not validly served with a copy of the summons and the complaint.
According to them, at the time summons was served on them, Adolfo Trocino was already in Ohio, U.S.A., and has
been residing there for 25 years, while Mariano Trocino was in Talibon, Bohol, and has been residing there since
1986. They also refuted the receipt of the summons by Caridad A. Trocino, and the representation made by Atty.
Bugarin in their behalf. Respondents also contended that they have a meritorious defense.7 Petitioners filed their
Comment/Answer to the petition.8

On September 30, 1996, the Court of Appeals issued the assailed Decision granting the petition and annulling the
decision of the RTC-Cebu (Branch 10). The decretal portion of the decision reads:

WHEREFORE, the decision of the Regional Trial Court of Cebu City, Branch 10, in Civil Case No. CEB-11103 as
well as all Orders issued to implement the same are hereby ANNULLED AND SET ASIDE. The Register of Deeds
of Cebu City is hereby ENJOINED from cancelling Transfer Certificates of Title Nos. 10616 and 31856. No
pronouncement as to costs.

SO ORDERED.9

Their motion for reconsideration having been denied by the Court of Appeals, petitioners filed the present petition,
setting forth the following assignment of errors:

I. THE COURT OF APPEALS ERRED IN FINDING LACK OF PRIOR KNOWLEDGE ON THE PART OF
RESPONDENTS TROCINO, REGARDING THE PROCEEDINGS BEFORE THE RTC OF CEBU CITY AND IN NOT
DISMISSING THE PETITION FOR VIOLATION OF SUPREME COURT CIRCULAR 04-94.

II. THE COURT OF APPEALS ERRED IN DECLARING THE NEED FOR PERSONAL AND/OR
EXTRATERRITORIAL SERVICE OF SUMMONS, DESPITE THE NATURE OF THE CAUSE OF ACTION BEING
ONE IN REM.

III. THE COURT OF APPEALS ERRED IN ANNULLING THE JUDGMENT, CAUSING FURTHER USELESS
LITIGATION AND UNNECESSARY EXPENSE ON PETITIONERS AND RESPONDENTS, ESPECIALLY SINCE
RESPONDENTS HAVE NOT SHOWN ANY VALID DEFENSE AS GROUND FOR REVERSAL OF JUDGMENT OF
THE RTC.

IV. THE COURT OF APPEALS ERRED IN RULING THAT ITS JUDGMENT IS APPLICABLE IN FAVOR OF
CARIDAD TROCINO.10

Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the
means by which the court acquires jurisdiction over his person.11 Any judgment without such service in the absence
of a valid waiver is null and void.12

The resolution of the present petition hinges on the issue of whether or not summons was effectively served on
respondents. If in the affirmative, the trial court had validly acquired jurisdiction over their persons and therefore its
judgment is valid.

To resolve whether there was valid service of summons on respondents, the nature of the action filed against them
must first be determined. As the Court explained in Asiavest Limited vs. Court of Appeals, it will be helpful to
determine first whether the action is in personam, in rem, or quasi in rem because the rules on service of summons
under Rule 14 of the Rules of Court of the Philippines apply according to the nature of the action.13
In actions in personam, summons on the defendant must be served by handing a copy thereof to the defendant in
person, or, if he refuses to receive it, by tendering it to him. This is specifically provided in Section 7, Rule 14 of the
Rules of Court,14 which states:

SEC. 7. Personal service of summons.-- The summons shall be served by handing a copy thereof to the defendant
in person or, if he refuses to receive it, by tendering it to him.

If efforts to find defendant personally makes prompt service impossible, substituted service may be effected by
leaving copies of the summons at the defendant's dwelling house or residence with some person of suitable age
and discretion then residing therein, or by leaving the copies at the defendant's office or regular place of business
with some competent person in charge thereof.15 In substituted service, it is mandated that the fact of impossibility of
personal service should be explained in the proof of service.16

When the defendant in an action in personam is a non-resident who does not voluntarily submit himself to the
authority of the court, personal service of summons within the State is essential to the acquisition of jurisdiction over
his person. This cannot be done if the defendant is not physically present in the country, and thus, the court cannot
acquire jurisdiction over his person and therefore cannot validly try and decide the case against him.17 An exception
was accorded in Gemperle vs. Schenker wherein service of summons through the non-resident’s wife, who was a
resident of the Philippines, was held valid, as the latter was his representative and attorney-in-fact in a prior civil
case filed by the non-resident, and the second case was merely an offshoot of the first case.18

Meanwhile, in actions in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to
confer jurisdiction on the court provided that the court acquires jurisdiction over the res, although summons must be
served upon the defendant in order to satisfy the due process requirements.19 Thus, where the defendant is a non-
resident who is not found in the Philippines, and (1) the action affects the personal status of the plaintiff; (2) the
action relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a
lien or interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the
Philippines; or (4) the property of the defendant has been attached in the Philippines, summons may be served
extraterritorially by (a) personal service out of the country, with leave of court; (b) publication, also with leave of
court; or (c) any other manner the court may deem sufficient.20

In the present case, petitioners’ cause of action in Civil Case No. CEB-11103 is anchored on the claim that the
spouses Jesus and Caridad Trocino reneged on their obligation to convey ownership of the two parcels of land
subject of their sale. Thus, petitioners pray in their complaint that the spouses Trocino be ordered to execute the
appropriate deed of sale and that the titles be delivered to them (petitioners); or in the alternative, that the sale be
revoked and rescinded; and spouses Trocino ordered to return to petitioners their down payment in the amount of
P500,000.00 plus interests. The action instituted by petitioners affect the parties alone, not the whole world. Hence,
it is an action in personam, i.e., any judgment therein is binding only upon the parties properly impleaded.21

Contrary to petitioners’ belief, the complaint they filed for specific performance and/or rescission is not an action in
rem. While it is a real action because it affects title to or possession of the two parcels of land covered by TCT Nos.
10616 and 31856, it does not automatically follow that the action is already one in rem. In Hernandez vs. Rural Bank
of Lucena, Inc., the Court made the following distinction:

In a personal action, the plaintiff seeks the recovery of personal property, the enforcement of a contract or the
recovery of damages. In a real action, the plaintiff seeks the recovery of real property, or, as indicated in section 2(a)
of Rule 4, a real action is an action affecting title to real property or for the recovery of possession, or for partition or
condemnation of, or foreclosure of a mortgage on, real property.

An action in personam is an action against a person on the basis of his personal liability, while an action in rem is an
action against the thing itself, instead of against the person. Hence, a real action may at the same time be an action
in personam and not necessarily an action in rem.22

The objective sought in petitioners’ complaint was to establish a claim against respondents for their alleged refusal
to convey to them the title to the two parcels of land that they inherited from their father, Jesus Trocino, who was
one of the sellers of the properties to petitioners. Hence, to repeat, Civil Case No. CEB-11103 is an action in
personam because it is an action against persons, namely, herein respondents, on the basis of their personal
liability. As such, personal service of summons upon the defendants is essential in order for the court to
acquire of jurisdiction over their persons.23

A distinction, however, must be made with regard to service of summons on respondents Adolfo Trocino and
Mariano Trocino. Adolfo Trocino, as records show, is already a resident of Ohio, U.S.A. for 25 years. Being a non-
resident, the court cannot acquire jurisdiction over his person and validly try and decide the case against him.

On the other hand, Mariano Trocino has been in Talibon, Bohol since 1986. To validly acquire jurisdiction over his
person, summons must be served on him personally, or through substituted service, upon showing of impossibility
of personal service. Such impossibility, and why efforts exerted towards personal service failed, should be explained
in the proof of service. The pertinent facts and circumstances attendant to the service of summons must be stated in
the proof of service or Officer’s Return. Failure to do so would invalidate all subsequent proceedings on jurisdictional
grounds.24

In the present case, the process server served the summons and copies of the complaint on respondents Jacob,
Jesus, Jr., Adolfo, Mariano, Consolacion, Alice and Racheal,25 through their mother, Caridad Trocino.26 The return
did not contain any particulars as to the impossibility of personal service on Mariano Trocino within a reasonable
time. Such improper service renders the same ineffective.

Due process of law requires personal service to support a personal judgment, and, when the proceeding is strictly in
personam brought to determine the personal rights and obligations of the parties, personal service within the state
or a voluntary appearance in the case is essential to the acquisition of jurisdiction so as to constitute compliance
with the constitutional requirement of due process.27

Moreover, inasmuch as the sheriff’s return failed to state the facts and circumstances showing the impossibility of
personal service of summons upon respondents within a reasonable time, petitioners should have sought the
issuance of an alias summons. Under Section 5, Rule 14 of the Rules of Court, alias summons may be issued when
the original summons is returned without being served on any or all of the defendants.28 Petitioners, however, did
not do so, and they should now bear the consequences of their lack of diligence.

The fact that Atty. Expedito Bugarin represented all the respondents without any exception does not transform the
ineffective service of summons into a valid one. It does not constitute a valid waiver or even a voluntary submission
to the trial court’s jurisdiction. There was not even the slightest proof showing that respondents authorized Atty.
Bugarin’s appearance for and in their behalf. As found by the Court of Appeals:

While Caridad Trocino may have engaged the services of Atty. Bugarin, it did not necessarily mean that Atty.
Bugarin also had the authority to represent the defendant heirs. The records show that in all the pleadings which
required verification, only Caridad Trocino signed the same. There was never a single instance where defendant
heirs signed the pleading. The fact that a pleading is signed by one defendant does not necessarily mean that it is
binding on a co-defendant. Furthermore, Caridad Trocino represented herself as the principal defendant in her
Motion to Withdraw Appeal. (Rollo, p. 80)

Since the defendant heirs are co-defendants, the trial court should have verified the extent of Atty. Bugarin’s
authority when petitioners failed to appear as early as the pre-trial stage, where the parties are required to appear.
The absence of the defendant heirs should have prompted the trial court to inquire from the lawyer whether he was
also representing the other petitioners. As co-defendant and co-heirs over the disputed properties, the defendant
heirs had every right to be present during the trial. Only Caridad Trocino appeared and testified on her own behalf.
All the defenses raised were her own, not the defendant heirs.29

Consequently, the judgment sought to be executed against respondents were rendered without jurisdiction as there
was neither a proper service of summons nor was there any waiver or voluntary submission to the trial court’s
jurisdiction. Hence, the same is void, with regard to private respondents except Caridad Trocino.

It must be pointed out that while it was the spouses Jesus and Caridad Trocino who sold the properties to
petitioners, their right to proceed against Jesus Trocino when he died was passed on to his heirs, which includes
respondents and Caridad Trocino. Such transmission of right occurred by operation of law, more particularly by
succession, which is a mode of acquisition by virtue of which the property, rights and obligations to the extent of the
value of the inheritance of a person are transmitted.30 When the process server personally served the summons on
Caridad Trocino, the trial court validly acquired jurisdiction over her person alone. Hence, the trial court’s decision is
valid and binding with regard to her, but only in proportion to Caridad Trocino’s share. As aptly stated by the Court of
Appeals:

This Court’s decision is therefore applicable to all the defendant heirs with the exception of defendant Caridad
Trocino considering that it was the latter who entered into the alleged sale without the consent of her husband. She
is therefore estopped from questioning her own authority to enter into the questioned sale. Moreover, Caridad
Trocino was validly served with summons and was accorded due process.31

WHEREFORE, the petition for review is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 40067 is
AFFIRMED.

Costs against petitioners.

SO ORDERED

PARAMOUNT INSURANCE CORP., petitioner,

vs.
A.C. ORDOÑEZ CORPORATION and FRANKLIN SUSPINE, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari seeks to annul and set aside the July 17, 2006 Decision 1 of the Court of Appeals in
CA-G.R. SP No. 93073, which reversed and set aside the September 21, 2005 Decision of the Regional Trial Court of
Makati City, Branch 582 and reinstated the August 25, 2000 and September 26, 2000 Orders of the Metropolitan Trial
Court of Makati City, Branch 66,3 which admitted respondent’s Answer and set the case for pre-trial, as well as its October
12, 2006 Resolution4 denying the Motion for Reconsideration.

Petitioner Paramount Insurance Corp. is the subrogee of Maximo Mata, the registered owner of a Honda City sedan
involved in a vehicular accident with a truck mixer owned by respondent corporation and driven by respondent Franklin A.
Suspine on September 10, 1997, at Brgy. Panungyanan, Gen. Trias, Cavite.

On February 22, 2000, petitioner filed before the Metropolitan Trial Court of Makati City, a complaint for damages against
respondents. Based on the Sheriff’s Return of Service, summons remained unserved on respondent Suspine,5 while it
was served on respondent corporation and received by Samuel D. Marcoleta of its Receiving Section on April 3, 2000. 6

On May 19, 2000, petitioner filed a Motion to Declare Defendants in Default; however, on June 28, 2000, respondent
corporation filed an Omnibus Motion (And Opposition to Plaintiff’s Motion to Declare Defendant in Default) alleging that
summons was improperly served upon it because it was made to a secretarial staff who was unfamiliar with court
processes; and that the summons was received by Mr. Armando C. Ordoñez, President and General Manager of
respondent corporation only on June 24, 2000. Respondent corporation asked for an extension of 15 days within which to
file an Answer.

Pending resolution of its first motion to declare respondents in default, petitioner filed on June 30, 2000 a Second Motion
to Declare Defendants in Default.

On July 26, 2000, respondent corporation filed a Motion to Admit Answer alleging honest mistake and business reverses
that prevented them from hiring a lawyer until July 10, 2000, as well as justice and equity. The Answer with Counterclaim
specifically denied liability, averred competency on the part of respondent Suspine, and due selection and supervision of
employees on the part of respondent corporation, and argued that it was Maximo Mata who was at fault.

On August 25, 2000, the Metropolitan Trial Court of Makati City, Branch 66, issued an Order admitting the answer and
setting the case for pre-trial, thus:

When this case was called for the hearing of Motion, the Court’s attention was brought to the Answer filed by the
defendant.
 WHEREFORE, in order to afford the defendants a day in Court, defendant’s answer is admitted and the pre-trial
is set for October 17, 2000 at 8:30 in the morning.

SO ORDERED.

Petitioner moved for reconsideration but it was denied. Thus, it filed a petition for certiorari and mandamus with prayer for
preliminary injunction and temporary restraining order before the Regional Trial Court of Makati City. Petitioner claimed
that the Metropolitan Trial Court gravely abused its discretion in admitting the answer which did not contain a notice of
hearing, contrary to Sections 4 and 5, Rule 15 of the Rules of Court. It also assailed respondent corporation’s Omnibus
Motion for being violative of Section 9, Rule 15 because while it sought leave to file an answer, it did not attach said
answer but only asked for a 15-day extension to file the same. Petitioner also averred that assuming the Omnibus Motion
was granted, the Motion to Admit Answer and the Answer with Counterclaim were filed 26 days beyond the extension
period it requested.

On October 16, 2000, the Regional Trial Court of Makati City, Branch 58 issued a temporary restraining order, and on
May 22, 2001, issued a writ of preliminary injunction. On September 21, 2005, the Regional Trial Court rendered a
Decision7granting the petition, thus:

WHEREFORE, premises considered, the petition for certiorari and mandamus is hereby GRANTED. The Orders
of public respondent dated August 25, 2000 and September 26, 2000 are hereby SET ASIDE. The writ of
preliminary injunction issued by this Court on May 22, 2001 is hereby made permanent.

The case is hereby remanded to the court a quo to act on petitioner’s (plaintiff’s) "Second motion to declare
defendants in Default" dated June 29, 2000.

SO ORDERED.

Respondent corporation moved for reconsideration but it was denied; hence, it appealed to the Court of Appeals which
rendered the assailed Decision dated July 17, 2006, thus:

By and large, We find no abuse of discretion committed by the first level court in the contested orders.

IN VIEW OF ALL THE FOREGOING, the instant appeal is hereby GRANTED, the challenged RTC Decision
dated September 21, 2005 is hereby REVERSED and SET ASIDE, and a new one entered REINSTATING the
Orders dated August 25, 2000 and September 26, 2000 of the Metropolitan Trial Court of Makati City. No
pronouncement as to cost.

SO ORDERED.

Petitioner’s motion for reconsideration was denied. Hence, the instant petition raising the following issues:

I. WHETHER THERE WAS VALID SERVICE OF SUMMONS ON DEFENDANT AC ORDONEZ

CONSTRUCTION CORPORATION.

II. WHETHER A PARTY WITHOUT CORPORATE EXISTENCE MAY FILE AN APPEAL.

III. WHETHER THIS COURT ERRED IN NOT CALLING THE PARTIES INTO MEDIATION.

IV. WHETHER THERE WAS FRAUD COMMITTED BY THE PETITIONER IN ITS PLEADINGS.

The petition lacks merit.

Section 11, Rule 14 of the Rules of Court provides:

SEC. 11. Service upon domestic private juridical entity. – When the defendant is a corporation, partnership or
association organized under the laws of the Philippines with a juridical personality, service may be made on the
president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel.
Section 11, Rule 14 sets out an exclusive enumeration of the officers who can receive summons on behalf of a
corporation. Service of summons to someone other than the corporation’s president, managing partner, general manager,
corporate secretary, treasurer, and in-house counsel, is not valid.

The designation of persons or officers who are authorized to receive summons for a domestic corporation or partnership
is limited and more clearly specified in the new rule. The phrase ‘agent, or any of its directors’ has been conspicuously
deleted.8 Moreover, the argument of substantial compliance is no longer compelling. We have ruled that the new rule, as
opposed to Section 13, Rule 14 of the 1964 Rules of Court, is restricted, limited and exclusive, following the rule in
statutory construction that expressio unios est exclusio alterius. Had the Rules of Court Revision Committee intended to
liberalize the rule on service of summons, it could have done so in clear and concise language. Absent a manifest intent
to liberalize the rule, strict compliance with Section 11, Rule 14 of the 1997 Rules of Civil Procedure is required. 9

Thus, the service of summons to respondent corporation’s Receiving Section through Samuel D. Marcoleta is defective
and not binding to said corporation.

Moreover, petitioner was served with a copy of the Sheriff’s Return which states:

3. MANNER OF SERVICE: DULY SERVED thru SAMUEL D. MARCOLETA (receiving section-A.C. Ordonez
Construction Corp.,) and who was authorized by A. C. Ordonez Construction Corp., management to receive such
court processes.

On its face, the return shows that the summons was received by an employee who is not among the responsible officers
enumerated by law. Such being invalid, petitioner should have sought the issuance and proper service of new summons
instead of moving for a declaration of default.

Consequently, the motions for declaration of default filed on May 19, 2000 and June 30, 2000 were both premature.

Thus, there was no grave abuse of discretion when the Metropolitan Trial Court admitted respondent corporation’s
Answer. Although it was filed beyond the extension period requested by respondent corporation, however, Sec. 11, Rule
11 grants discretion to the trial court to allow an answer or other pleading to be filed after the reglementary period, upon
motion and on such terms as may be just. An answer should be admitted where it had been filed before the defendant
was declared in default and no prejudice is caused to plaintiff. The hornbook rule is that default judgments are generally
disfavored.10

There is likewise no merit in petitioner’s claim that respondent corporation lacks legal personality to file an appeal.
Although the cancellation of a corporation’s certificate of registration puts an end to its juridical personality, Sec. 122 of the
Corporation Code, however provides that a corporation whose corporate existence is terminated in any manner continues
to be a body corporate for three years after its dissolution for purposes of prosecuting and defending suits by and against
it and to enable it to settle and close its affairs.11 Moreover, the rights of a corporation, which is dissolved pending
litigation, are accorded protection by law pursuant to Sec. 145 of the Corporation Code, to wit:

Section 145. Amendment or repeal. No right or remedy in favor of or against any corporation, its
stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation,
stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent
dissolution of said corporation or by any subsequent amendment or repeal of this Code or of any part thereof.
(Emphasis ours)

Dissolution or even the expiration of the three-year liquidation period should not be a bar to a corporation’s enforcement of
its rights as a corporation.12

Finally, the decision to refer a case to mediation involves judicial discretion. Although Sec. 9 B, Rule 141 of the Rules of
Court, as amended by A. M. No. 04-2-04-SC, requires the payment of P1,000.00 as mediation fee upon the filing of a
mediatable case, petition, special civil action, comment/answer to the petition or action, and the appellee’s brief, the final
decision to refer a case to mediation still belongs to the ponente, subject to the concurrence of the other members of the
division.

As clarified by A. M. No. 04-3-15 (Revised Guidelines for the Implementation of Mediation in the Court of Appeals) dated
March 23, 2004:
II. SELECTION OF CASES

Division Clerks of Court, with the assistance of the Philippine Mediation Center (PMC), shall identify the pending
cases to be referred to mediation for the approval either of the Ponente for completion of records, or,
the Ponente for decision. Henceforth, the petitioner or appellant shall specify – by writing or by stamping on the
right side of the caption of the initial pleading (under the case number) that the case is mediatable.

Any party who is interested to have the appealed case mediated may also submit a written request in any
formto the Court of Appeals. If the case is eligible for mediation, the Ponente, with the concurrence of the other
members of the Division, shall refer the case to the PMC. (Emphasis ours)

Thus, for cases pending at the time the said guidelines were issued, the Division Clerks of Court, with the assistance of
the Philippine Mediation Center, shall identify the cases to be referred to mediation. Thereafter, the petitioner or appellant
shall specify, by writing or by stamping on the right side of the caption of the initial pleading (under the case number), that
the case is mediatable. Further, any party who is interested to have the appealed case mediated may also submit a
"written request in any form to the Court of Appeals." In the instant case, petitioner failed to write or stamp the notation
"mediatable" on its Memorandum of Appeal. Moreover, it failed to submit any written request for mediation.

WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated July 17, 2006 reinstating the
August 25, 2000 and September 26, 2000 Orders of the Metropolitan Trial Court of Makati City, Branch 66 which admitted
respondent corporation’s Answer and set the case for pre-trial, as well as the Resolution dated October 12, 2006 denying
the motion for reconsideration, are AFFIRMED.

SO ORDERED.

ON MOTION

LETICIA NAGUIT AQUINO, MELVIN NAGUIT, ROMMEL NAGUIT, ELMA NAGUIT TAYAG, YSSEL L. NAGUIT,
ROSALINA NAGUIT AUMENTADO, RIZEL NAGUIT CUNANAN, CARIDAD NAGUIT PARAJAS, MILLIE NAGUIT
FLORENDO, MARNEL NAGUIT, EDUARDO NAGUIT, JOSE NAGUIT, ZOILO NAGUIT, AND AMELIA NAGUIT
DIZON, represented by YSSEL L. NAGUIT, Petitioners,
vs.
CESAR B. QUIAZON, AMANDA QUIAZON, JOSE B. QUIAZON AND REYNALDO B. QUIAZON, represented by
JAIME B. QUIAZON, Respondents.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the March 13,
2012 Decision1 of the Court of Appeals (CA), in CA-G.R. CV No. 92887, which affirmed the Orders2 of the Regional
Trial Court (RTC), Angeles City, Branch 59, in SP Civil Case No. 05-076, dismissing the complaint for quieting of
title filed by the petitioners.

The Facts

On December 16, 2005, a complaint3 for Annulment and Quieting of Title was filed before the RTC-Branch59 by the
petitioners, namely, Leticia Naguit Aquino, Melvin Naguit, Rommel Naguit, Elma Naguit Tayag, Yssel L. Naguit,
Rosalina Naguit Aumentado, Rizel Naguit Cunanan, Caridad Naguit Parajas, Millie Naguit Florendo, Marnel Naguit,
Eduardo Naguit, Jose Naguit, Zoilo Naguit, and AmeliaNaguit Dizon, represented by Yssel L. Naguit (petitioners).
They alleged that they were the heirs of the late Epifanio Makam and Severina Bautista, who acquired a house and
lot situated in Magalang, Pampanga, consisting of 557 square meters, by virtue of a Deed of Sale, dated April 20,
1894; that since then, they and their predecessors-in-interest had been in open, continuous, adverse, and notorious
possession for more than a hundred years, constructing houses and paying real estate taxes on the property;that
sometime in June 2005, they received various demand letters from the respondents, namely, Cesar B. Quiazon,
Amanda Quiazon, Jose B. Quiazon, and Reynaldo B. Quiazon, represented by Jaime B. Quiazon (respondents),
claiming ownership over the subject property and demanding that they vacate the same; that upon inquiry with the
Register of Deeds of San Fernando, Pampanga, they confirmed that the property had been titled in the name of
respondents under Transfer Certificate of Title (TCT) No. 213777-R; that the said title was invalid, ineffective,
voidable or unenforceable; and that they were the true owners of the property.

Hence, they prayed that the title be cancelled and a new title be issued in their favor.

In their Answer,4 respondents asserted that they were the absolute owners of the subject land as per TCT No.
213777-R; that they had inherited the same from their predecessor-in-interest, Fausta Baluyut, one of the registered
owners under Original Certificate of Title (OCT) No. RO-1138 (11376), as per the Project of Partition and Deed of
Agreement, dated January 2, 1974; and that petitioners had been occupying the property by mere tolerance. They
denied the allegations in the complaint and proffered affirmative defenses with counterclaims.

They argued that: First, the petitioners "have no valid, legal and sufficient cause of action"5 against them, because
their deed of sale was spurious and could not prevail over Land Registration Decree No. 122511 issued on June 28,
1919 in Land Registration Case No. 5, LRC Records No. 128, by the Court of First Instance of Pampanga, in favor
of their predecessor-in-interest. The predecessors-in-interest of petitioners were among the oppositors in the land
registration proceeding but, nevertheless, after the trial, the subject lot was awarded, decreed and titled in favor of
respondents’ predecessor-in-interest, as per OCT No. RO-1138 (11376) of the Registry of Deeds of Pampanga.
Second, the action was barred by prescription and that petitioners were guilty of laches in asserting their interest
over the subject lot, considering that Land Registration Decree No. 122511 was issued on June 28, 1919 and OCT
No. RO-1138 (11376) was issued on May 12, 1922. Hence, it was much too late for petitioners to institute the action
after more than 80 years. They also raised the settled rule that a title registered under the Torrens system could not
be defeated by adverse, open and notorious possession, or by prescription. Third, the action was also barred by res
judicata and violated the prohibition against forum shopping, considering that petitioners had earlier filed a similar
case for quieting of title against respondents, docketed as Civil Case No. 5487, which the RTC-Br. 56 dismissed.
Petitioners filed their Comment to Defendant’s Affirmative Defenses.6 Anent the alleged lack of cause of action due
to the spurious deed of sale, petitioners argued that this contention was a matter of evidence which might only be
resolved in a full-blown trial. They insisted that the deed of sale was genuine and authentic and was issued and
certified by the Deputy Clerk of Court of the RTC. They added that the settled rule was that to determine the
sufficiency of the cause of action, only the facts alleged in the complaint should be considered, and that the
allegations in their complaint sufficiently stated a cause of action.

As regards the allegation of prescription, the petitioners countered that an action to quiet title did not prescribe if the
plaintiffs were in possession of the property in question. They argued that they were neither guilty of laches nor were
they in possession of the property by mere tolerance, their possession being in the concept of owner for more than a
hundred years.

Lastly, regarding the argument on res judicata, petitioners explained that they were not the same plaintiffs in Civil
Case No. 5487 and that the case was dismissed without prejudice.

The RTC set a preliminary hearing on the affirmative defenses.

Respondents presented Atty. Charlemagne Tiqui Calilung, RTC Clerk of Court of San Fernando, Pampanga, who
presented the record of Cadastral Case No. 5, dated June 28, 1919, as well as Decree No. 122511. They also
presented Luis Samuel Ragodon, the Registration Examiner of the Registry of Deeds of San Fernando, Pampanga,
who presented the original copy of OCT No. 11376, reconstituted as RO-1138, and testified that the title was
derived from Decree No. 122511. He further testified that the original title had been cancelled pursuant to a project
of partition, which was registered on December 17, 1984, and in lieu thereof, TCT Nos. 213775, 213776, 213777,
213778, 213779, 213780, and 213781 were issued. He presented the original copy of TCT No. 213777-R issued in
the names of respondents.

Henry Y. Bituin, the court interpreter who translated the June 28, 1919 decision of the Court of First Instance of
Pampanga in Land Registration Case No. 5 from Spanish to English, also testified.

Petitioners manifested that they were opting to submit the incident for resolution without presenting evidence, relying
on their position that only the facts alleged in the complaint should be considered.

In their formal offer of evidence,7 respondents offered the following documents: (1) the June 28, 1919 Decision and
its English translation; (2) Transmittal Letter, dated May 6, 1922; (3) Decree No. 122511; (4) OCT No. RO-1138; (5)
TCT No. 213777-R; (6) the petition, dated July 29, 1988, and its annexes in Civil Case No. 5487;(7) the September
7, 1990 Order dismissing Civil Case No. 5487, without prejudice; and (8) the July 29, 1916 Decision in Expediente
No. 132, G.L.R.O. Record No. 11958 and its English translation.

In their comment/opposition8 to the formal offer of evidence, petitioners argued (1) that the claims of Epifanio Makam
and Severina Bautista, their predecessors-in-interest, were not adjudicated in the June 28, 1919 decision and, thus,
res judicata was inapplicable; (2) that Civil Case No. 5487 was dismissed without prejudice and that they were not
the plaintiffs therein; (3) that the allegedly spurious nature of the deed of sale and the supposed in defeasibility of
respondents’ title were matters of evidence to be resolved in a full-blown trial and the trial court was only confined to
the allegations in the complaint; (4) that their action was not barred by prescription because an action toquiet title did
not prescribe if the plaintiffs were in possession of the subject property and that they had been in possession in the
concept of owner for more than 100 years; and (5) that respondents were guilty of laches having taken more than 80
years to attempt to enforce their claimed title to the property.

Ruling of the RTC

On July 14, 2008, the RTC-Br. 59 issued the Order dismissing petitioners’ complaint. It found that based on the
decision, dated June 28, 1919, in Cadastral Case No. 5, the Baluyut siblings, respondents’ predecessors-in-interest,
were declared the absolute owners of the subject property, over the claim of Jose Makam, the predecessor-in-
interest of petitioners, who was one of the oppositors in the said case. From this decision, OCT No. RO-1138
(11376) was derived, which later became the subject of a project of partition and deed of agreement among the
Baluyut siblings, dated January 2, 1972, which, in turn, was annotated on the OCT as Entry No. 8132. TCT No.
213777-R, covering the subject lot, was later derived from the partition. The RTC-Br. 59 also noted that it was stated
in the said decision that in 1907, a warehouse was constructed on the subject lot by virtue of an agreement between
the Chairman of Magalang and Enrique Baluyut, with no objection from the Makams. It was further noted that the
deed of sale being asserted by petitioners was not mentioned in the 1919 decision despite the claim of their
predecessors-in-interest.

The RTC-Br. 59, thus, ruled that the deed of sale had become invalid by virtue of the June 28, 1919 decision. It held
that although the deed of sale dated, April 20, 1894, was never challenged, it was nevertheless unenforceable by
virtue of the June 28, 1919 decision. It found that petitioners had lost whatever right they had on the property from
the moment the said decision was rendered and an OCT was issued. Finding that petitioners were not holders of
any legal title over the property and were bereft of any equitable claim thereon, the RTC-Branch 59 stated that the
first requisite of an action to quiet title was miserably wanting. It also found the second requisite to be wanting
because respondents had proved that the TCT registered in their names was valid.

Anent petitioners’ argument that only the complaint may be considered in determining the sufficiency of the cause of
action, the RTC Br. 59 ruled that under Section 2 in relation to Section 6, Rule 16 of the Rules of Court, a
preliminary hearing on the affirmative defense in the answer might be had at the discretion of the court, during which
the parties could present their arguments and their evidence.

On December 22, 2008, the RTC-Br. 59 denied petitioners’ motion for reconsideration. It stated that the court may
consider evidence presented in hearings related to the case, which was an exception to the general rule that only
the complaint should be taken into consideration. It stated that petitioners were without legal or equitable title to the
subject property, thus, lacking the legal personality to file an action for quieting of title and, therefore, "the complaint
was properly dismissed for failing to state a cause of action."9

Ruling of the CA

In the assailed Decision, dated March 13, 2012, the CA dismissed petitioners’ appeal. It explained that under
Section 6, Rule 16 of the Rules of Court, a court is allowed to conduct a preliminary hearing, motu proprio, on the
defendant’s affirmative defenses, including the ground of "lack of cause of action or failure to state a cause of
action."10 It gave the reason that because the rule spoke in general terms, its manifest intention was to apply it to all
grounds for a motion to dismiss under the rules which were pleaded as affirmative defenses in the responsive
pleading. Thus, it held that the trial court might consider other evidence aside from the averments in the complaint in
determining the sufficiency of the cause of action. The CA explained:
But as shown in the foregoing rule, the holding of a preliminary hearing on any of the grounds for a motion to
dismiss which is pleaded as an affirmative defense is within the full discretion of the trial court. The rule speaks of
affirmative defenses that are grounds for a motion to dismiss. Indubitably, lack of cause of action or failure to state a
cause of action, being one of the grounds for a motion to dismiss, is included thereby.

Since the rule allows the trial court to conduct a preliminary hearing on this kind of an affirmative defense, it follows
then that evidence could be submitted and received during the proceedings which the court may consider in forming
its decision. It would be plain absurdity if the evidence already presented therein would not be allowed to be
considered in resolving whether the case should be dismissed or not. To rule otherwise would render nugatory the
provision of Section 6, Rule 16 and would make the holding of a preliminary hearing a plain exercise in futility. No
well-meaning judge would hold a preliminary hearing and receive evidence only to disregard later the evidence
gathered in the course thereof. If the intention of the rule is for the trial court to confine itself to the allegations in the
complaint in determining the sufficiency of the cause of action, as the plaintiffs-appellants would want to impress
upon this Court, then it should have been so expressly stated by barring the court from conducting a preliminary
hearing based on the said ground. The fact, however, that the said rule speaks in general terms, it is its manifest
intention to apply it in all grounds for a motion to dismiss under the rules which are pleaded as an affirmative
defense in the responsive pleading. Thus, we find that that trial court did not err in considering the evidence already
presented and in not confining itself to the allegations in the plaintiffs-appeallants’ complaint.11

The CA gave credence to the evidence presented by respondents and noted that, except for petitioners’ bare
allegation that respondents’ title was invalid, there was nothing more to support the same. It further noted that the
deed of sale was written in a local dialect without the translation and with no ascertainable reference to the area of
the property being conveyed. The CA, therefore, found that petitioners did not have the title required to avail of the
remedy of quieting of title, while respondents had sufficiently proven the validity of their Torrens title. Hence, the
subject petition.

ISSUE

Whether the CA erred in affirming the dismissal of

petitioners’ complaint on the ground of lack of cause of

action or failure to state a cause of action.

Petitioners argue that the CA gravely erred in considering external factors beyond the allegations in the petition.
They aver that it is a settled rule that to determine the sufficiency of a cause of action, only facts alleged in the
complaint shall be considered, and it is error for the court to take cognizance of external facts or hold a preliminary
hearing to determine their existence. Respondents, on the other hand, echo the ruling of the CA that it was within
the disrection of the trial court to conduct a preliminary hearing on the affirmative defense of lack of cause of action
or failure to state a cause of action, where both parties were given the chance to submit arguments and evidence for
or against the dismissal of the complaint. Furthermore, they argue that the Court has previously upheld cases where
the court took into account external factors in the dismissal of the complaint on the ground of lack of cause of action.
They assert that since petitioners were given reasonable opportunity to present evidence to prove their cause of
action, they are now estopped from invoking the rule that only allegations in the complaint should be considered.12

Petitioners reiterate that they have been in possession of the property in the concept of owner for more than 119
years, where they built their houses, reared their families, and paid realty taxes thereon. They point out that their
possession was never disputed by respondents, and that respondents had only attempted to enforce their supposed
rights over the property in 2005, or 86 years after the purported decree awarding the property to them. Petitioners
argue that respondents had abandoned their right to the subject property which, thus, rendered invalid whatever title
they might have had. They argue that it has been held that a registered owner’s right to recover possession and title
to property may be converted into a stale demand by virtue of laches. They also claim that the allegations contained
in their complaint sufficiently state a cause of action, and that it was an error for the trial court to declare it
unenforceable considering that the deed of sale should be considered hypothetically admitted when determining
whether the complaint sufficiently states a cause of action.13

Ruling of the Court

Preliminary matters

The Court notes that respondents raised the affirmative defense in their Answer that petitioners "have no valid, legal
and sufficient cause of action," raising factual matters,14 which is effectively the ground of "lack of cause of action."
Respondents’ arguments made no assertion that the complaint failed to state a cause of action. The ground of "lack
of cause of action" has been frequently confused with the ground of "failure to state a cause of action," and this is
the situation prevailing in the present case. The terms were, in fact, used interchangeably by both the respondents
and the lower courts.

The distinction between the grounds of "failure to state a cause of action" and "lack of cause of action" was aptly
discussed in Dabuco vs. Court of Appeals, to wit:

As a preliminary matter, we wish to stress the distinction between the two grounds for dismissal of an action: failure
to state a cause of action, on the one hand, and lack of cause of action, on the other hand. The former refers to the
insufficiency of allegation in the pleading, the latter to the insufficiency of factual basis for the action. Failure to state
a cause may be raised in a Motion to Dismiss under Rule 16, while lack of cause may be raised any time. Dismissal
for failure to state a cause can be made at the earliest stages of an action. Dismissal for lack of cause is usually
made after questions of fact have been resolved on the basis of stipulations, admissions or evidence presented.15

Although the two grounds were used interchangeably, it can be gleaned from the decisions of both the trial court
and the CA that respondents’ defense of "lack of cause of action" was actually treated as a "failure to state a cause
of action," which is a ground for a motion to dismiss under Rule 16. This is apparent from their reliance on Section 6
of Rule 16, which pertains to grounds of a motion to dismiss raised as affirmative defenses; as well as the doctrines
cited in resolving the case. The CA even referred to both as one and the same ground for a motion to dismiss when
it stated that: "Indubitably, lack of cause of action or failure to state a cause of action, being one of the grounds for a
motion to dismiss, is included thereby."16

Also confused, respondents, on their part, asserted that "it is within the discretion of the Court a quo to conduct a
preliminary hearing on the affirmative defense of lack of cause of action or failure to state a cause of action,"17 the
very basis of their argument being hinged on the application of Section 6. They also insisted on the applicability of
the exceptions to the general rule that only averments in the complaint must be considered, which pertains to the
ground of "failure to state a cause of action."

The trial court held a preliminary hearing resolving the ground of "lack of cause of action" pursuant to Section 6 of
Rule 16, which allows the court to hold a preliminary hearing on grounds for dismissal provided in the same rule that
have been raised as an affirmative defense in the answer.18 The ground of "lack of cause of action," as already
explained, however, is not one of the grounds for a motion to dismiss under Rule 16, and hence, not proper for
resolution during a preliminary hearing held pursuant to Section 6. On this point alone, the trial court clearly erred in
receiving evidence on the ground of "lack of cause of action" during the preliminary hearing. The factual matters
raised by respondents in their affirmative defense arguing the non-existence of a cause of action, should have been
duly resolved during a trial on the merits of the case.

In any case, even if the Court were to treat respondents’ argument as a "failure to state a cause of action," their
defense would still fail. Court limited to averments in the complaint

Rule 16 of the Rules of Court enumerates the grounds for a motion to dismiss. The pertinent ground is found under
Section 1(g), which reads as follows:

xxxx

(g) That the pleading asserting the claim states no cause of action; xxxx (Emphasis supplied) The test for
determining the existence of a cause of action was amply discussed in Insular Investment and Trust Corporation v.
Capital One Equities Corporation,19 citing Perpetual Savings Bank v. Fajardo,20 to wit:

The familiar test for determining whether a complaint did or did not state a cause of action against the defendants is
whether or not, admitting hypothetically the truth of the allegations of fact made in the complaint, a judge may validly
grant the relief demanded in the complaint. In Rava Development Corporation v. Court of Appeals, the Court
elaborated on this established standard in the following manner:

"The rule is that a defendant moving to dismiss a complaint on the ground of lack of cause of action is regarded as
having hypothetically admitted all the averments thereof. The test of the sufficiency of the facts found in a petition as
constituting a cause of action is whether or not, admitting the facts alleged, the court can render a valid judgment
upon the same in accordance with the prayer thereof (Consolidated Bank and Trust Corp. v. Court of Appeals, 197
SCRA 663 [1991]).

In determining the existence of a cause of action, only the statements in the complaint may properly be considered.
It is error for the court to take cognizance of external facts or hold preliminary hearings to determine their existence.
If the allegation in a complaint furnish sufficient basis by which the complaint may be maintained, the same should
not be dismissed regardless of the defenses that may be assessed by the defendants (supra).21

Thus, in determining the existence of a cause of action, only the allegations in the complaint may properly be
considered. For the court to do otherwise would be a procedural error and a denial of the plaintiff’s right to due
process.22

In the case at bench, petitioners’ cause of action relates to an action to quiet title under Article 476 of the Civil Code,
which provides:

Article 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument,
record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid,
ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such
cloud or to quiet title.

An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.

A "cloud on title" is an outstanding instrument, record, claim, encumbrance or proceeding which is actually invalid or
inoperative, but which may nevertheless impair or affect injuriously the title to property. The matter complained of
must have a prima facie appearance of validity or legal efficacy. The cloud on title is a semblance of title which
appears in some legal form but which is in fact unfounded. The invalidity or in operativeness of the instrument is not
apparent on the face of such instrument, and it has to be proved by extrinsic evidence.23

In order that an action for quieting of title may prosper, two requisites must concur: (1) the plaintiff or complainant
has a legal or equitable title or interest in the real property subject of the action; and (2) the deed, claim,
encumbrance, or proceeding claimed to be casting cloud on his title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or legal efficacy.24

Turning then to petitioners’ complaint, the relevant allegations as to the cause of action for quieting of title read as
follows:

3. Plaintiffs are the heirs of the late Epifanio Makam and Severina Bautista who acquired a house and lot on
20 April 1894 situated in Magalang, Pampanga, consisting of Five Hundred Seventy Seven (577) square
meters more or less, by virtue of a Deed of Sale, hereby quoted for ready reference:

xxx

4. From 1894 and up to the present, plaintiffs and through their predecessors-in-interest have been in open,
continuous, adverse and notorious possession for more than a hundred years of the piece of property
mentioned above, constructed their houses thereon and dutifully and faithfully paid the real estate taxes on
the said property;

5. That sometime in June 2005, plaintiffs received various demand letters from defendants demanding
plaintiffs to vacate the premises, claiming ownership of the subject property;
 6. That when plaintiffs inquired from the Office of the Register of Deeds of San Fernando, Pampanga, they
were able to confirm that their property had been titled in the name of herein defendants under TCT No.
213777-R;

7. That the said title is in fact invalid, ineffective, voidable or unenforceable, the existence of which is pre-
judicial to the ownership and possession of plaintiffs who are the true owners and actual possessors of the
above described real property;

8. That equity demands that the said title be surrendered by defendants and cancelled as it is a cloud upon
the legal or equitable title to or interest of plaintiffs over the subject property.25

It is readily apparent from the complaint that petitioners alleged that (1) they had an interest over the subject
property by virtue of a Deed of Sale, dated April 20, 1894; and that (2) the title of respondents under TCT No.
213777-R was invalid, ineffective, voidable or unenforceable. Hypothetically admitting these allegations as true, as
is required in determining whether a complaint fails to state a cause of action, petitioners may be granted their claim.
Clearly, the complaint sufficiently stated a cause of action. In resolving whether or not the complaint stated a cause
of action, the trial court should have limited itself to examining the sufficiency of the allegations in the complaint. It
was proscribed from inquiring into the truth of the allegations in the complaint or the authenticity of any of the
documents referred or attached to the complaint, as these were deemed hypothetically admitted by the
respondents.26

Evangelista v. Santiago elucidates:

The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss based on the
same ground, requires a hypothetical admission of the facts alleged in the Complaint. In the case of Garcon v.
Redemptorist Fathers, this Court laid down the rules as far as this ground for dismissal of an action or affirmative
defense is concerned:

It is already well-settled that in a motion to dismiss a complaint based on lack of cause of action, the question
submitted to the court for determination is the sufficiency of the allegations of fact made in the complaint to
constitute a cause of action, and not on whether these allegations of fact are true, for said motion must
hypothetically admit the truth of the facts alleged in the complaint; that the test of the sufficiency of the facts alleged
in the complaint is whether or not, admitting the facts alleged, the court could render a valid judgment upon the
same in accordance with the prayer of said complaint. Stated otherwise, the insufficiency of the cause of action
1âwphi1

must appear in the face of the complaint in order to sustain a dismissal on this ground, for in the determination of
whether or not a complaint states a cause of action, only the facts alleged therein and no other matter may be
considered, and the court may not inquire into the truth of the allegations, and find them to be false before a hearing
is had on the merits of the case; and it is improper to inject in the allegations of the complaint facts not alleged or
proved, and use these as basis for said motion.27 (Emphasis and underscoring supplied)

Exceptions and Section 6 of Rule 16 not applicable

The Court does not discount, however, that there are exceptions to the general rule that allegations are
hypothetically admitted as true and inquiry is confined to the face of the complaint. First, there is no hypothetical
admission of (a) the veracity of allegations if their falsity is subject to judicial notice; (b) allegations that are legally
impossible; (c) facts inadmissible in evidence; and (d) facts which appear, by record or document included in the
pleadings, to be unfounded.28 Second, inquiry is not confined to the complaint if culled (a) from annexes and other
pleadings submitted by the parties;29 (b) from documentary evidence admitted by stipulation which disclose facts
sufficient to defeat the claim; or (c) from evidence admitted in the course of hearings related to the case.30

Pointing to the exception that inquiry was not confined to the complaint if evidence had been presented in the
course of hearings related to the case, the CA ruled that it was within the trial court’s discretion to receive and
consider other evidence aside from the allegations in the complaint in resolving a party’s affirmative defense. It held
that this discretion was recognized under Section 6 of Rule 16 of the Rules of Court, which allowed the court to
conduct a preliminary hearing, motu proprio, on the defendant’s affirmative defense if no corresponding motion to
dismiss was filed. This section reads in part:
Section 6. Pleading grounds as affirmative defenses. – If no motion to dismiss has been filed, any of the grounds for
dismissal provided for in this Rule may be pleaded as an affirmative defense in the answer and, in the discretion of
the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed.

In their answer, respondents raised the affirmative defenses of "lack of cause of action, prescription, and res
judicata,"31 stated in the following manner:

xxxx

6. Plaintiffs have no valid, legal and sufficient cause of action against the defendants. The alleged "deed of sale"
(Annex "B" – Amended Complaint) is spurious and the same cannot prevail over the Land Registration Decree No.
122511 issued on June 28, 1919 in Land Registration Case No. 5, LRC Record No. 128, by the Court of First
Instance of Pampanga, in favor of defendants’ predecessor-in-interest. In fact, plaintiffs’ predecessors-in-interest
were among the oppositors in that land registration proceeding but after trial the lot in question was awarded,
decreed and titled in favor and in the names of defendants’ predecessors-in-interest, as per Original Certificate of
Title No. RO-1138 (11376) of the Registry of Deeds of Pampanga;

7. The instant action, which is actually an action of reconveyance, is already barred by prescription. Moreover,
plaintiffs are guilty of laches in asserting their alleged title or interest over the subject lot. Said Land Registration
Decree No. 122511 was issued on June 28, 1919 and OCT No. RO 1138 (11376) was issued on May 12, 1922.
Clearly, it is much too late for the plaintiffs, after more than eighty (80) long years to institute this action against the
defendants;

xxxx

9. The present action is also barred by res judicata and violates the prohibition against forum shopping. There was
already a prior similar case for quieting of title filed by plaintiffs’ predecessor-in-interest against defendant Jaime
Quiazon and his co-owners, before Branch 56 of this Honorable Court, docketed as Civil Case No. 5487, which was
dismissed;32 x x x x (Emphases supplied)

A review of the first ground under paragraph 6 of the answer reveals that respondents alleged that "[p]laintiffs have
no valid, legal and sufficient cause of action against the defendants." It is at this point that it must again be
emphasized that it is not "lack or absence of cause of action" that is a ground for dismissal of the complaint under
Rule 16, but rather, that "the complaint states no cause of action."33 The issue submitted to the court was, therefore,
the determination of the sufficiency of the allegations in the complaint to constitute a cause of action and not
whether those allegations of fact were true, as there was a hypothetical admission of facts alleged in the
complaint.34 An affirmative defense, raising the ground that there is no cause of action as against the defendants
poses a question of fact that should be resolved after the conduct of the trial on the merits.35 A reading of
respondents’ arguments in support of this ground readily reveals that the arguments relate not to the failure to state
a cause of action, but to the existence of the cause of action, which goes into the very crux of the controversy and is
a matter of evidence for resolution after a full-blown hearing.

The trial court may indeed elect to hold a preliminary hearing on affirmative defenses as raised in the answer under
Section 6 of Rules 16 of the Rules of Court. It has been held, however, that such a hearing is not necessary when
the affirmative defense is failure to state a cause of action,36 and that it is, in fact, error for the court to hold a
preliminary hearing to determine the existence of external facts outside the complaint.37 The reception and the
consideration of evidence on the ground that the complaint fails to state a cause of action, has been held to be
improper and impermissible.38 Thus, in a preliminary hearing on a motion to dismiss or on the affirmative defenses
raised in an answer, the parties are allowed to present evidence except when the motion is based on the ground of
insufficiency of the statement of the cause of action which must be determined on the basis only of the facts alleged
in the complaint and no other.39 Section 6, therefore, does not apply to the ground that the complaint fails to state a
cause of action. The trial court, thus, erred in receiving and considering evidence in connection with this ground.

The lower courts also relied on the exception that external evidence may be considered when received "in the
course of hearings related to the case," which is rooted in the case of Tan v. Director of Forestry (Tan).40 In said
case, a hearing was conducted on the prayer for preliminary injunction where evidence was submitted by the
parties. In the meantime, a motion to dismiss was filed by the defendant, citing as one of the grounds that the
petition did not state a cause of action. The trial court resolved the prayer for the issuance of a writ of preliminary
injunction simultaneously with the motion to dismiss. It dismissed the petition for failure to state a cause of action on
the basis of the evidence presented during the hearing for preliminary injuction. On appeal, this Court ruled that the
trial court was correct in considering the evidence already presented and in not confining itself to the allegations in
the petition.

Tan, however, is not on all fours with the present case. First, the trial court therein considered evidence presented
during a preliminary hearing on an injunction and not during a hearing on a motion to dismiss. As discussed, a
preliminary hearing on a motion to dismiss is proscribed when the ground is failure to state a cause of action. The
exception of "hearings related to the case," therefore, pertains to hearings other than the hearing on a motion to
dismiss on the ground of failure to state a cause of action. To reiterate, the ground that the complaint fails to state a
cause of action should be tested only on the allegations of facts contained in the complaint, and no other. If the
allegations show a cause of action, or furnish sufficient basis by which the complaint can be maintained, the
complaint should not be dismissed regardless of the defenses averred by the defendants.41 The trial court may not
inquire into the truth of the allegations, and find them to be false before a hearing is conducted on the merits of the
case.42 If the court finds the allegations to be sufficient but doubts their veracity, the veracity of the assertions could
be asserted during the trial on the merits.43

Second, Tan noted that the plaintiff had readily availed of his opportunity to introduce evidence during the hearing
and, as a result, was estopped from arguing that the court is limited to the allegations in the complaint.44 This is in
contrast to the present case, where petitioners steadfastly argued from the beginning that the trial court was limited
to the allegations in the complaint. Petitioners maintained their stance during the preliminary hearing on the
affirmative defenses, opting not to file rebuttal evidence and opposing respondents’ formal offer of evidence on the
same ground. Having been consistent in their position from the start, petitioners cannot be estopped from arguing
that the trial court was precluded from considering external evidence in resolving the motion to dismiss.

Third, it was noted in Tan that the documentary evidence given credence by the trial court had effectively been
admitted by stipulation during the hearing,45 and another had been an annex to the complaint,46 both of which are
exceptions to the general rule that external facts cannot be considered. Neither of the said exceptions is availing in
the present case. The Court notes that only the OCT of respondents was attached as an annex to their answer. The
June 28, 1919 Decision in the Cadastral case, which was given considerable weight by the trial court, was not
attached and was only presented during the preliminary hearing.

Fourth, Tanruled that the rigid application of the rules could not be countenanced considering the overriding public
interest involved, namely, the welfare of the inhabitants of the province whose lives and properties would be directly
and immediately imperilled by forest denudation.47 There appears to be no overriding public interest in the present
case to justify a similar relaxation of the rules.

It is of note that although the trial court might not have erred in holding a preliminary hearing on the affirmative
defenses of prescription and res judicata, it is readily apparent from the decisions of the lower courts that no
disquisition whatsoever was made on these grounds. It cannot be denied that evidence in support of the ground of
"lack of cause of action" was received and given great weight by the trial court. In fact, all the evidence given
credence by the trial court were only in support of the ground of "lack of cause of action." This all the more highlights
that the trial court erred in receiving evidence to determine whether the complaint failed to state a cause of action.

Although neither the RTC or the CA ruled on the affirmative defenses of prescription and res judicata, it appears that
this case could not have been dismissed on these grounds. First, an action to quiet title is imprescriptible if the
plaintiffs are in possession of the property,48 which is the situation prevailing in the present case. Second, there
appears to be no res judicata nor a violation of the prohibition against forum shopping considering that Civil Case
No. 5487 had been dismissed, without prejudice, years before petitioners initiated their complaint for quieting of title.

In sum, the trial court erred in dismissing the complaint on the ground of failure to state a cause of action. Evidence
should have been received not during a preliminary hearing under Section 6 of Rule 16, but should have been
presented during the course of the trial. The case should, thus, be remanded to the RTC-Br. 59 for trial on the
merits.

WHEREFORE, the petition is GRANTED. The March 13, 2012 Decision of the Court of Appeals, in CA-G.R. CV No.
92887 is REVERSED and SET ASIDE. The case is ordered REMANDED to the Regional Trial Court for trial on the
merits of the case.
SO ORDERED.

ON PRE TRIAL

ABSOLUTE MANAGEMENT CORPORATION, Petitioner,

vs.
METROPOLITAN BANK AND TRUST COMPANY, Respondent.

DECISION

VILLARAMA, JR., J.:

At bar is a Petition for Review on Certiorari with Application for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction, of the Decision1 and Resolution2 of the Court of Appeals (CA) in CA-G.R. SP
No. 101568 dated August 13, 2009 and November 13, 2009, respectively, reversing the Orders dated May 2,
20073and September 3, 20074 of the Regional Trial Court (RTC) of Quezon City, Branch 80, and requiring the court
a quo to allow respondent to participate in the proceedings of Civil Case No. Q-00-42105.

The following undisputed facts are stated m the op1mon of the appellate court:

On October 5, 2000, Sherwood Holdings Corporation and Spouses Sandy Ang and Arlene Ang filed a case for sum
of money against private respondent Absolute Management Corporation before the Regional Trial Court of Quezon
City, Branch 80 and docketed as Civil Case No. Q-00-42105. Private respondent filed its answer and incorporated a
third-party complaint against petitioner Metropolitan Bank and Trust Company.

In an Order dated January 30, 2004, the trial court set the case for pre-trial on February 7, 2004, but the same was
cancelled on account of the filing by petitioner ofa motion to admit fourth-party-complaint against the Estate of Jose
L. Chua.

On September 5, 2005, the trial court issued an Order directing petitioner to produce and allow private respondent
to copy, microfilm copies of several checks and the bank ledgers of Current Account Nos. 00719-250162-4 and
00700-250691-9. On November 20, 2006, the trial court set the case for pre-trial. When the counsels of the parties
were asked by the trial court to produce their respective authorizations to appear at the said hearing, [counsel for
petitioner] manifested that [her] authority to appear for petitioner was submitted by them at the first pre-trial hearing
way back [in] 2004.

Petitioner’s counsel was given the chance to go over the records to look for [the] Secretary’s Certificate she
allegedly submitted in 2004. Petitioner’s counsel, however, failed to show any written authority. As a result thereof,
the trial court, upon motion of the private respondent, declared petitioner in default. Accordingly, the trial court
allowed private respondent to present evidence ex-parte.

Without waiting for the written order of default, petitioner, on December 5, 2006, filed a Motion to Lift Order of
Default seeking reconsideration of the Order dated November 20, 2006, attaching thereto an Affidavit of Merit
together with the required Secretary’s Certificate dated July 16, 2006 and Special Power of Attorney dated
December 5, 2006.

On May 2, 2007, the trial court issued an Order denying petitioner’s motion to lift the order of default, which reads:

xxxx

Petitioner filed a motion for reconsideration of the above-quoted Order but the same was denied by the trial court in
its Order dated September 3, 2007.5

Respondent filed a petition for certiorariwith the CA alleging that the RTC committed grave abuse of discretion in
issuing the aforestated Orders dated May 2 and September 3, 2007.
In its assailed decision, the CA reversed the trial court’s ruling that respondent’s counsel cannot validly represent
respondent due to "the failure on the part of the representative of[respondent] to present a Secretary’s Certificate
and Special Power of Attorney authorizing her to represent [respondent] during the pre-trial stage."6 The CA ruled
that the RTC’s determination holding that respondent’s counsel cannot validly represent respondent due to lack of
authorization lacks merit, viz.:

The presumption in favor of the counsel’s authority to appear in behalf of a client is a strong one. A lawyer is not
even required to present a written authorization from the client. In fact, the absence of a formal notice of entry of
appearance will not invalidate the acts performed by the counsel in his client’s name. However, the court,on its own
initiative or on motion of the other party[,] [may] require a lawyer to adduce authorization from the client.

xxxx

It is evident therefore that the trial court gravely abused its discretion in denying [respondent’s] counsel to represent
it. In the same vein, it is a clear disregard of the oft repeated principle that courts should not resort to a rigid
application of the rules where the end result would frustrate the just, speedy and inexpensive determination of the
controversy.7

Petitioner’s motion for reconsideration was denied in a Resolution dated November 13, 2009. Hence, this petition
raising the following assignment of errors:

I. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT A SPECIAL
POWER OF ATTORNEY NEED NOT BE PRESENTED IN COURT DURING PRE-TRIAL HEARINGS
SINCE THE AUTHORITY OF A LAWYER TO APPEAR IN BEHALF OF HIS CLIENT IS PRESUMED.

A) THE NON-APPEARANCE OF A PARTY IN PRE-TRIAL MAY BE EXCUSED ONLY IF A VALID

CAUSE IS SHOWN THEREFORE OR IF A REPRESENTATIVE SHALL APPEAR IN HIS BEHALF
FULLY [AUTHORIZED] IN WRITING.

B) THE CASES CITED BY THE HONORABLE COURT OF APPEALS, NAMELY: (1) LANDBANK
OF THE PHILIPPINES VS. [PAMINTUAN], CO.AND (2) CEBU STEVEDORING VS. RAMOLETE,
TO SUPPORT ITS RULING THAT THE AUTHORITY OF [A] LAWYER TO APPEAR IN BEHALF OF
THE CLIENT IS PRESUMED, ARE INAPPLICABLE TO THE INSTANT CASE.

II. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THERE WAS
GRAVE ABUSE OF DISCRETION ON THE PART OF THE LOWER COURT, WHEN IN FACT THE
LOWER COURT ONLY PROPERLY APPLIED THE PROVISIONS OF THE LAW REQUIRING THE
PRESENTATION OF A SPECIAL POWER OF ATTORNEY DURING PRE-TRIAL.

III. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT HELD THAT THE LIBERAL
APPLICATION OF THE RULES SHOULD BE APPLIED IN THE CASE OF RESPONDENT.

IV. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT ORDERED RESPONDENT
TO PARTICIPATE IN THE TRIAL OF THE COLLECTION CASE FILED WITH THE REGIONAL TRIAL
COURT.

A) RESPONDENT’S PARTICIPATION IN THE TRIAL WOULD ONLY CAUSE THE DELAY IN THE
RESOLUTION OF THE CASE, CONSIDERING THAT IN ITS ANSWER, THEY FAILED TO
PRESENT A VALID DEFENSE.8

We grant the petition.

A petition for certiorari may be filed if the trial court declared the defendant in default with grave abuse of
discretion.9However, an act of a court or tribunal can only be consideredto be tainted with grave abuse of discretion
when such act is done in a capricious or whimsical exercise of judgment as is equivalent to lack of jurisdiction.10
The court a quodid not commit such grave abuse of discretion in the case at bar. The Order given by the RTC in
open court dated November 20, 2006 stated, viz.:

When this case was called for pre-trial conference, co-plaintiff Sandy Ang failed to appear despite notice, thus, this
case is hereby dismissed, insofar as he is concerned. Accordingly, defendant Absolute Management Corp. may now
adduce evidence ex partein support of its counterclaim against co-plaintiff Sandy Ang.

With respect to the third-party complaint of Absolute Management Corp., against third-party defendant Metropolitan
Bank and Trust Company whose counsel failed to present a Secretary’s Certificate and Special Power ofAttorney
authorizing her to represent said bank in today’s pre-trial, said third-party plaintiff is hereby allowed to present
evidence ex partepursuant to the provisions of Sec. 5, Rule 18 of the 1997 Rules of Civil Procedure.

Meanwhile, let this case be referred to the Philippine Mediation Center for mediation proceedings on December 6,
2006 at 10:00 in the morning. Let the pre-trial conference between the remaining plaintiffs and defendant Absolute
Management Corp. be set on January 29, 2007 at 1:30 in the afternoon.

SO ORDERED.

Given in Open Court on November 20, 200611

When respondent tendered its explanation in a Motion to Lift Order of Default dated December 4, 2006, respondent
clarified that:

2. The failure of the undersigned counsel to present the above-mentioned authorization at the said occasion
was due to their impression that the same was already submitted by them during the initial pre-trial hearing
of the case that was held on February 27, 2004. Because of such impression, undersigned counsel did not
bring anymore the required authorization from [respondent]. Upon inspection of the records of the case after
the said pre-trial hearing, undersigned counsel, however, discovered and realized that no such authorization
was submitted by them at the said first pre-trial hearing.

3. The records of the instant case will show that the undersigned counsel has been representing
[respondent] in all the proceedings of the present case from the very start, including the cases before the
Court of Appeals (CA G.R. SP No. 86336) and the Supreme Court (SC G.R. SP No. 170498), involving the
issue of whether ornot the former has the right to file a fourth-party complaint against the Estate of Jose
Chua.

4. Indubitably, the undersigned counsel’s inability to provide the Honorable Court the proper authority to
represent [respondent] at the pretrial hearing on November 20, 2006 was not willful and deliberate, but
simply due to their excusable negligence. Nevertheless, undersigned counsel[s] are attaching herewith the
Secretary’s Certificate and the Special Power of Attorney, Annexes "A" and "B" hereof respectively,
evidencing their authority to represent [respondent] in the instant case.12

Despite the explanation, the trial court denied the foregoing Motion to Lift Order of Default for lack of merit in its
Order dated May 2, 2007.13 It likewise found no compelling reason to grant reconsideration as stated in its Order
dated September 3, 2007.14

We agree with petitioner that the court a quomerely applied the law in this case when it declared that respondent’s
counsel did not have the authority to act on behalf of respondent as its representativeduring the pretrial on
November 20, 2006. The applicable provision under Rule 18 of the 1997 Rules of Civil Procedure, as amended,
states, viz.:

SEC. 4. Appearance of parties. - It shall be the duty of the parties and their counsel to appear at the pre-trial. The
non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear
in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and of documents.15
SEC. 5. Effect of failure to appear. - The failure of the plaintiff to appear when so required pursuant to the next
preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise
ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his
evidence ex parteand the court to render judgment on the basis thereof.

This Court has incisively explained the ratiocination of the foregoing rule on pre-trial in the case of Development
Bank of the Philippines v. Court of Appeals16:

Everyone knows that a pre-trial incivil actions is mandatory, and has been so since January 1, 1964. Yet tothis day
its place in the scheme of things is not fully appreciated, and it receives but perfunctory treatment in many courts.
Some courts considerit a mere technicality, serving no useful purpose save perhaps, occasionally to furnish ground
for nonsuiting the plaintiff, or declaring a defendant in default, or, wistfully, to bring about a compromise. The pre-
trial device is not thus put to full use. Hence it has failed in the main to accomplish the chief objective for it: the
simplification, abbreviation and expedition of the trial, if not indeed its dispensation. This is a great pity, because the
objective is attainable, and with not much difficulty, if the device were more intelligently and extensively handled.

xxxx

What needs stressing is that the parties as well as the Trial Court must realize that at the pre-trial, the parties are
obligednot only to make formal identification and specification ofthe issues and of their proofs, as above described –
indeed, there is noreason why the Court may not oblige the parties to set these matters down in separate writings
and submit them to the Court prior to the pre-trial, and then to discuss, refine and embody the matters agreed upon
in a single document at or shortly after the pretrial – but also and equally as peremptorily, to directly address and
discusswith sincerity and candor and in entire good faith each of the other subjects enumerated in Section 1, Rule
20, i.e., the "possibility of an amicable settlement or of a submission to arbitration," the "advisability of a preliminary
reference of issues to a commissioner," and "such other matters as may aid in the prompt disposition of the action,"
inclusive of a resort to the modes of discovery.

Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the parties as
well to appear for this purpose before the Court, and when a party "fails to appear at a pre-trial conference (he) may
be non-suited or considered as indefault." The obligation "to appear" denotes not simply the personal appearance,
or the mere physical presentation by a party of one’s self, but connotes as importantly, preparedness to go into the
different subject assigned by law to a pre-trial. And in those instances where a party may not himself be present at
the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as an attorney but
in substitution of the client’s person, it is imperative for that representative of the lawyer to have "special authority" to
make such substantive agreements as only the client otherwise has capacity to make. That "special authority"
shouldordinarily be in writing or at the very least be "duly established by evidence other than the selfserving
assertion of counsel (or the proclaimed representative) himself." Without that special authority, the lawyer or
representative cannot be deemed capacitated to appear in place of the party; hence, it will be considered that the
latter has failed to put in an appearance at all, and he [must] therefore "be non-suited or considered as in default,"
notwithstanding his lawyer’s or delegate’s presence.17

Petitioner was correct when it pointed out that:

x x x Atty. Raquel Buendia appeared on behalf of Respondent as both its counsel and representative in the pre-trial.
Atty. Buendia’s authority to appear as counsel on behalf of Respondent is not being questioned. In that regard, the
Court of Appeals correctly ruled that the authority of a counsel to appear in behalf of his client is presumed.
However, it should be noted that Atty. Buendia also appeared as a representative of Respondent in the pre-trial
hearing. In this regard, Section 4, Rule 18 of the Rules of Court specifically mandates that such representative must
be armed with a written authority from the partylitigant. Unfortunately, she was not able to present one.18

It behooves the Court that respondent did not refute the contention of petitioner that the ground for the trial court in
declaring respondent in default was the absence of a Special Power of Attorney (SPA) authorizing its counsel to act
on its behalf as "representative" in the pre-trial conference. All that respondent relentlessly invoked was the liberal
application of the rules in order not to defeat the right of the respondent to be heard and to present evidence in its
defense – citing that default orders are frowned upon and that all parties should be given the opportunity to litigate
their claims. Nonetheless, even respondent itself iswell aware of the weakness of its plea for a liberal application
ofthe rules when it stated, viz.:
x x x Citing this Honorable Court’s rulings in the cases of Land Bank of the Philippines vs. Pamintuan Development
Co.x x x and Cebu Stevedoring Co. vs. Ramoletex x x[,] the CA highlighted the established principles that a lawyer
is not required to present a written authorization from a client such that even the absence of a formal notice of entry
of appearance will not even invalidate the acts performed by counsel in the client’s name. Although not in all fours
with the circumstances of the present case, the above cases nonetheless demonstrate the firmly held general
principles on client representation which were properly and justly applied by the CA in the questioned Decision.19

The facts in the case at bar do not warrant a liberal construction of the rules. To be sure, the only explanation
1âwphi1

proffered by respondent’s counsel for not having the proper authorization to represent respondent at pre-trial was
her manifestation in open court that the written authority was submitted to the court a quoduring the first pre-trial
hearing way back in 2004. When respondent’s counsel was given the chance to go over the records of the court a
quoto look for the Secretary’s Certificate and the SPA that she allegedly submitted in 2004,these documents could
not be found from the records of the case. Nonetheless, in its Motion to Lift Order of Default submitted to the trial
court, respondent argued, viz.:

Indubitably, the undersigned counsel’s (sic) inability to provide the Honorable Court the proper authority to represent
Third-Party Defendant at the pre-trial hearing on November 20, 2006 was not willful and deliberate, but simply due
to their excusable negligence. Nevertheless, undersigned counsel[s] are attaching herewith the Secretary’s
Certificate and the Special Power of Attorney, Annexes "A" and "B" hereof respectively, evidencing their authority to
represent Third-Party Defendant in the instant case.20

We disagree with respondent that its omission is excusable. Respondent had failed to substantiate its sole excuse
for its representative’s apparent lack of authority to be its representative, in addition to being its counsel, during the
pre-trial conference. Tobe sure, if indeed there was such an authority previously executed by respondent in favor of
its counsel as early as the pre-trial conferences that respondent alleges tohave taken place on February 27, 2004
and April 16, 2004, this fact would have been easily proven by respondent. Such document conveying authority –
having originated from and issued by respondentitself – would have been produced with relative facility.
Respondent, however, failed to produce this document before the court a quo, the appellate court and thisCourt. As
fairly observed by petitioner, the SPA later submitted by respondent’s counsel is dated December 5, 2006 or "after"
the pre-trial conference on November 20, 2006. Thus, petitioner asserts:

87. Moreover, a closer perusal of the SPA and the Secretary’s Certificate, which Respondent allegedly thought were
submitted during the 27 February 2004 scheduled pre-trial,would show that the same were dated only on 05
December 2006 and 16 July 2006, respectively.

88. If it was true that Respondent mistakenly thought that the said SPA and Secretary’s Certificate werepresented in
2004, said documents would have been dated 2004 and not 2006. Moreover, it bears stressing that the SPA was
executed after the 20 November 2006 pre-trial hearing.21

Finally, a cursory reading of the assailed decision of the appellate court shows that when it reversed the decision of
the court a quo, it did so on the ground that respondent’s counsel’s filing of a notice of entry of appearance has
given rise to the presumption that she (respondent’s counsel) had the authority to represent respondent. As stated
by the CA:

x x x When her authority was challenged, she manifested that her authority for the [respondent] was submitted and
were attached to the records of the case. The doubt entertained by the trial court is of no consequence in view of
[respondent’s] vigorous assertion that it authorized said lawyer to represent it. Indeed, even an unauthorized
appearance of an attorney may be ratified by the client either expressly. Ratification retroacts to the date of the
lawyer’s first appearance and validates the action taken by him.22

Indubitably, the appellate court ruled on the capacity of respondent’s counsel to represent it as its lawyer, or as its
attorney, in the court a quo. Perforce, it ruled that the RTC committed grave abuse of discretion when it declared
that respondent's counsel did not have the authority to represent it. We are constrained to disagree with this ruling.
The crux of this controversy is whether respondent's counsel had the authority to represent respondent in her
capacity as its representative during the subject pre-trial, and not in her capacity as its counsel. Prescinding from the
foregoing disquisitions, we agree with the court a quo that respondent's counsel did not have the proper authority.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 101568 dated August 13, 2009 and November 13, 2009, respectively, are REVERSED.
The Orders dated May 2, 2007 and September 3, 2007 of the Regional Trial Court of Quezon City, Branch 80, in
Civil Case No. Q-00-42105 are hereby REINSTATED and UPHELD.

No pronouncement as to costs.

SO ORDERED.

ON DEMURRER TO EVIDENCE

CASENT REALTY DEVELOPMENT CORP., petitioner,

vs.
PHILBANKING CORPORATION, respondent.

DECISION

VELASCO, JR., J.:

On appeal to this Court through Rule 45 of the Rules of Court is the March 29, 2001 Decision1 and November 7,
2001 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 63979 entitled Philbanking Corporation v. Casent
Realty Development Corporation. The CA reversed the May 12, 1999 Order3 of the Makati City Regional Trial Court
(RTC), Branch 145 in Civil Case No. 93-2612, which granted petitioner’s demurrer to evidence and dismissed the
complaint filed by respondent.

The Facts

The facts according to the appellate court are as follows:

In 1984, petitioner Casent Realty Development Corporation executed two promissory notes in favor of Rare Realty
Corporation (Rare Realty) involving the amounts of PhP 300,000 (PN No. 84-04) and PhP 681,500 (PN No. 84-05).
It was agreed in PN No. 84-04 that the loan it covered would earn an interest of 36% per annum and a penalty of
12% in case of non-payment by June 27, 1985, while the loan covered by PN No. 84-05 would earn an interest of
18% per annum and 12% penalty if not paid by June 25, 1985.4 On August 8, 1986, these promissory notes were
assigned to respondent Philbanking Corporation through a Deed of Assignment.5

Respondent alleged that despite demands, petitioner failed to pay the promissory notes upon maturity such that its
obligation already amounted to PhP 5,673,303.90 as of July 15, 1993. Respondent filed on July 20, 1993 a
complaint before the Makati City RTC for the collection of said amount. In its Answer,6 petitioner raised the following
as special/affirmative defenses:

1. The complaint stated no cause of action or if there was any, the same was barred by estoppel, statute of
frauds, statute of limitations, laches, prescription, payment, and/or release;

2. On August 27, 1986, the parties executed a Dacion en Pago7 (Dacion) which ceded and conveyed
petitioner’s property in Iloilo City to respondent, with the intention of totally extinguishing petitioner’s
outstanding accounts with respondent. Petitioner presented a Confirmation Statement8 dated April 3, 1989
issued by respondent stating that petitioner had no loans with the bank as of December 31, 1988.

3. Petitioner complied with the condition in the Dacion regarding the repurchase of the property since the
obligation was fully paid. Respondent sent confirmation statements in the latter months of 1989, which
showed that petitioner had no more outstanding loan; and

4. Assuming that petitioner still owed respondent, the latter was already estopped since in October 1988, it
reduced its authorized capital stock by 50% to wipe out a deficit of PhP 41,265,325.12.9
Thus, petitioner, by way of compulsory counterclaim, alleged that it made an overpayment of approximately PhP 4
million inclusive of interest based on Central Bank Reference Lending Rates on dates of overpayment. Petitioner
further claimed moral and exemplary damages and attorney’s fee, amounting to PhP 4.5 million plus the costs of
suit as a consequence of respondent’s insistence on collecting.10

The parties failed to reach an amicable settlement during the pre-trial conference. Thereafter, respondent presented
its evidence and formally offered its exhibits. Petitioner then filed a Motion for Judgment on Demurrer to the
Evidence,11 pointing out that the plaintiff’s failure to file a Reply to the Answer which raised the Dacion and
Confirmation Statement constituted an admission of the genuineness and execution of said documents; and that
since the Dacion obliterated petitioner’s obligation covered by the promissory notes, the bank had no right to collect
anymore.

Respondent subsequently filed an Opposition12 which alleged that: (1) the grounds relied upon by petitioner in its
demurrer involved its defense and not insufficiency of evidence; (2) the Dacion and Confirmation Statement had yet
to be offered in evidence and evaluated; and (3) since respondent failed to file a Reply, then all the new matters
alleged in the Answer were deemed controverted.13

The trial court ruled in favor of petitioner and dismissed the complaint through the May 12, 1999 Order, the
dispositive portion of which reads:

WHEREFORE, premises considered[,] finding defendant’s Motion For Judgment On Demurrer To The
Evidence to be meritorious[,] the same is hereby GRANTED. Consequently, considering that the obligation
of the defendant to the plaintiff having been extinguish[ed] by a Dacion en Pago duly executed by said
parties, the instant complaint is hereby DISMISSED, with prejudice. Without Cost.14

The Ruling of the Court of Appeals

On appeal, respondent alleged that the trial court gravely erred because the promissory notes were not covered by
the Dacion, and that respondent was able to prove its causes of action and right to relief by overwhelming
preponderance of evidence. It explained that at the time of execution of the Dacion, the subject of the promissory
notes was the indebtedness of petitioner to Rare Realty and not to the "Bank"––the party to the Dacion. It was only
in 1989 after Rare Realty defaulted in its obligation to respondent when the latter enforced the security provided
under the Deed of Assignment by trying to collect from petitioner, because it was only then that petitioner became
directly liable to respondent. It was also for this reason that the April 3, 1989 Confirmation Statement stated that
petitioner had no obligations to repondent as of December 31, 1988. On the other hand, petitioner claimed that the
Deed of Assignment provided that Rare Realty lost its rights, title, and interest to directly proceed against petitioner
on the promissory notes since these were transferred to respondent. Petitioner reiterated that the Dacion covered all
conceivable amounts including the promissory notes.15

The appellate court ruled that under the Rules of Civil Procedure, the only issue to be resolved in a demurrer is
whether the plaintiff has shown any right to relief under the facts presented and the law. Thus, it held that the trial
court erred when it considered the Answer which alleged the Dacion, and that its genuineness and due execution
were not at issue. It added that the court a quo should have resolved whether the two promissory notes were
covered by the Dacion, and that since petitioner’s demurrer was granted, it had already lost its right to present its
evidence.16

The CA found that under the Deed of Assignment, respondent clearly had the right to proceed against the
promissory notes assigned by Rare Realty. Thus, the CA ruled, as follows:

WHEREFORE, premises considered, the Order dated May 12, 1999 of the Regional Trial Court, National
Capital Judicial Region, Branch 145, Makati City is hereby REVERSED and SET ASIDE.

Judgment is hereby entered ORDERING [petitioner] Casent Realty [Development] Corporation to:

1. pay [respondent] Philbanking Corporation the amount of P300,000.00 with an interest of 36% per
annum and a penalty of 12% for failure to pay the same on its maturity date, June 27, 1985 as
stipulated in Promissory Note No. 84-04;
 2. pay [respondent] Philbanking Corporation the amount of P681,500.00 with an interest of 18% per
annum and a penalty of 12% for failure to pay the same on its maturity date, June 25, 1985 as
stipulated in Promissory Note No. 84-05; and

3. pay [respondent] Philbanking Corporation, the amount representing 25% of total amount due as
attorney’s fee as stipulated in the promissory notes.

SO ORDERED.17

Petitioner filed a Motion for Reconsideration18 which was denied by the CA in its November 7, 2001 Resolution.19

The Issues

WHETHER OR NOT THE COURT OF APPEALS ERRED IN EXCLUDING THE PETITIONER’S

AFFIRMATIVE DEFENSES IN ITS ANSWER IN RESOLVING A DEMURRER TO EVIDENCE; AND

WHETHER OR NOT PETITIONER IS LIABLE TO PAY THE RESPONDENT

In other words, the questions posed by this case are:

1. Does respondent’s failure to file a Reply and deny the Dacion and Confirmation Statement under oath
constitute a judicial admission of the genuineness and due execution of these documents?

2. Should judicial admissions be considered in resolving a demurrer to evidence? If yes, are the judicial
admissions in this case sufficient to warrant the dismissal of the complaint?

Petitioner asserts that its obligation to pay under the promissory notes was already extinguished as evidenced by
the Dacion and Confirmation Statement. Petitioner submits that when it presented these documents in its Answer,
respondent should have denied the same under oath. Since respondent failed to file a Reply, the genuineness and
due execution of said documents were deemed admitted, thus also admitting that the loan was already paid. On the
other hand, respondent states that while it failed to file a Reply, all the new matters were deemed controverted
pursuant to Section 10, Rule 6 of the Rules of Court. Also, the loan which was covered by the Dacion refers to
another loan of petitioner amounting to PhP 3,921,750 which was obtained directly from the respondent as of
August 1986.20 Furthermore, petitioner argued that assuming respondent admitted the genuineness and due
execution of the Dacion and Confirmation Statement, said admission was not all-encompassing as to include the
allegations and defenses pleaded in petitioner’s Answer.

The Court’s Ruling

The petition is partly meritorious.

Rule 33, Section 1 of the 1997 Rules of Civil Procedure provides:

Section 1. Demurrer to evidence.––After the plaintiff has completed the presentation of his evidence, the
defendant may move for dismissal on the ground that upon the facts and the law the plaintiff has shown no
right to relief. If his motion is denied, he shall have the right to present evidence. If the motion is granted but
on appeal the order of dismissal is reversed he shall be deemed to have waived the right to present
evidence.

In Gutib v. Court of Appeals, we defined a demurrer to evidence as "an objection by one of the parties in an action,
to the effect that the evidence which his adversary produced is insufficient in point of law, whether true or not, to
make out a case or sustain the issue."21

What should be resolved in a motion to dismiss based on a demurrer to evidence is whether the plaintiff is entitled to
the relief based on the facts and the law. The evidence contemplated by the rule on demurrer is that which
pertains to the merits of the case, excluding technical aspects such as capacity to sue.22 However, the plaintiff’s
evidence should not be the only basis in resolving a demurrer to evidence. The "facts" referred to in Section 8
should include all the means sanctioned by the Rules of Court in ascertaining matters in judicial proceedings. These
include judicial admissions, matters of judicial notice, stipulations made during the pre-trial and trial, admissions, and
presumptions, the only exclusion being the defendant’s evidence.

Petitioner points out that the defense of Dacion and Confirmation Statement, which were submitted in the Answer,
should have been specifically denied under oath by respondent in accordance with Rule 8, Section 8 of the Rules of
Court:

Section 8. How to contest such documents.––When an action or defense is founded upon a written
instrument, copied in or attached to the corresponding pleading as provided in the preceding section, the
genuineness and due execution of the instrument shall be deemed admitted unless the adverse party, under
oath, specifically denies them, and sets forth, what he claims to be the facts; but the requirement of an oath
does not apply when the adverse party does not appear to be a party to the instrument or when compliance
with an order for an inspection of the original instrument is refused.

Since respondent failed to file a Reply, in effect, respondent admitted the genuineness and due execution of said
documents. This judicial admission should have been considered by the appellate court in resolving the demurrer to
evidence. Rule 129, Section 4 of the Rules of Court provides:

Section 4. 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.

On appeal to the CA, respondent claimed that even though it failed to file a Reply, all the new matters alleged in the
Answer are deemed controverted anyway, pursuant to Rule 6, Section 10:

Section 10. Reply.––A reply is a pleading, the office or function of which is to deny, or allege facts in denial
or avoidance of new matters alleged by way of defense in the answer and thereby join or make issue as to
such new matters. If a party does not file such reply, all the new matters alleged in the answer are deemed
controverted.

We agree with petitioner. Rule 8, Section 8 specifically applies to actions or defenses founded upon a written
instrument and provides the manner of denying it. It is more controlling than Rule 6, Section 10 which merely
provides the effect of failure to file a Reply. Thus, where the defense in the Answer is based on an actionable
document, a Reply specifically denying it under oath must be made; otherwise, the genuineness and due execution
of the document will be deemed admitted.23 Since respondent failed to deny the genuineness and due execution of
the Dacion and Confirmation Statement under oath, then these are deemed admitted and must be considered by
the court in resolving the demurrer to evidence. We held in Philippine American General Insurance Co., Inc. v.
Sweet Lines, Inc. that "[w]hen the due execution and genuineness of an instrument are deemed admitted because
of the adverse party’s failure to make a specific verified denial thereof, the instrument need not be presented
formally in evidence for it may be considered an admitted fact."24

In any case, the CA found that:

From the facts of the case, the genuineness and due execution of the Dacion en Pago were never put to
issue. Genuineness merely refers to the fact that the signatures were not falsified and/or whether there was
no substantial alteration to the document. While due execution refers to whether the document was signed
by one with authority.25

The more important issue now is whether the Dacion and Confirmation Statement sufficiently prove that petitioner’s
liability was extinguished. Respondent asserts that the admission of the genuineness and due execution of the
documents in question is not all encompassing as to include admission of the allegations and defenses pleaded in
petitioner’s Answer. In executing the Dacion, the intention of the parties was to settle only the loans of petitioner with
respondent, not the obligation of petitioner arising from the promissory notes that were assigned by Rare Realty to
respondent.

We AGREE.
Admission of the genuineness and due execution of the Dacion and Confirmation Statement does not prevent the
introduction of evidence showing that the Dacion excludes the promissory notes. Petitioner, by way of defense,
should have presented evidence to show that the Dacion includes the promissory notes.

The promissory notes matured in June 1985, and Rare Realty assigned these promissory notes to respondent
through a Deed of Assignment dated August 8, 1986. The Deed of Assignment provides, thus:

Rare Realty Corporation, a corporation duly organized and existing in accordance with law, with office at 8th
Floor Philbanking Building, Ayala Ave., Makati, Metro Manila (herein called Assignor) in consideration of the
sum of THREE MILLION SEVEN HUNDRED NINETY THOUSAND & 00/100 pesos [PhP 3,790,000.00] and
as security fee or in the payment of the sum, obtained or to be obtained as loan or credit accommodation of
whatever form or nature from the [PHILBANKING] CORPORATION, with office at Ayala Ave., Makati, Metro
Manila (herein called Assignee), including renewals or extensions of such loan or credit accommodation,
now existing or hereinafter incurred, due or to become due, whether absolute or contingent, direct or
indirect, and whether incurred by the Assignor as principal, guarantor, surety, co-maker, or in any other
capacity, including interest, charges, penalties, fees, liquidated damage, collection expenses and attorney’s
fee, the Assignor hereby assigns, transfers and conveys to Assignee all its rights, title and interest in and to:
(a) contracts under which monies are or will be due to Assignor, (b) moneys due or to be due thereunder, or
(c) letters of credit and/or proceeds or moneys arising from negotiations under such credits, all which are
herein called moneys or receivables assigned or assigned moneys or receivables, and are attached, or
listed and described in the Attached Annex A (for contracts) or Annex B (for letters of credit).26

It is clear from the foregoing deed that the promissory notes were given as security for the loan granted by
respondent to Rare Realty. Through the Deed of Assignment, respondent stepped into the shoes of Rare Realty as
petitioner’s creditor.

Respondent alleged that petitioner obtained a separate loan of PhP 3,921,750. Thus, when petitioner and
respondent executed the Dacion on August 27, 1986, what was then covered was petitioner’s loan from the bank.
The Dacion provides, thus:

NOW, THEREFORE, in consideration of the foregoing premises, the DEBTOR hereby transfers and
conveys in favor of the BANK by way of Dacion en Pago, the above-described property in full
satisfaction of its outstanding indebtedness in the amount of P3,921,750.00 to the BANK, subject to x x x
terms and conditions.27 (Emphasis supplied.)

The language of the Dacion is unequivocal––the property serves in full satisfaction of petitioner’s own indebtedness
to respondent, referring to the loan of PhP 3,921,750. For this reason, the bank issued a Confirmation Statement
saying that petitioner has no unpaid obligations with the bank as of December 31, 1988.

In 1989, however, Rare Realty defaulted in its payment to respondent. Thus, respondent proceeded against the
security assigned to it, that is, the promissory notes issued by the petitioner. Under these promissory notes,
petitioner is liable for the amount of PhP 300,000 with an interest of 36% per annum and a penalty of 12% for failure
to pay on the maturity date, June 27, 1985; and for the amount of PhP 681,500 with an interest of 18% per annum
and a penalty of 12% for failure to pay on the maturity date, June 25, 1985.

WHEREFORE, the March 29, 2001 Decision and November 7, 2001 Resolution of the CA are AFFIRMED. Costs
against petitioner.

SO ORDERED.

ON JUDGMENT ON THE PLEADINGS

FERNANDO MEDICAL ENTERPRISES, INC., Petitioner,

vs.
WESLEYAN UNIVERSITY PHILIPPINES, INC., Respondent.

DECISION
BERSAMIN, J.:

The trial court may render a judgment on the pleadings upon motion of the claiming party when the defending
party's answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading.
For that purpose, only the pleadings of the parties in the action are considered. It is error for the trial court to deny
the motion for judgment on the pleadings because the defending party's pleading in another case supposedly
tendered an issue of fact.

The Case

The petitioner appeals the decision promulgated on July 2, 2013,1 whereby the Court of Appeals (CA) affirmed the
order issued on November 23, 2011 by the Regional Trial Court (RTC), Branch 1, in Manila, denying its motion for
judgment on the pleadings in Civil Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan
University-Philippines.2

Antecedents

From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation dealing with medical equipment
and supplies, delivered to and installed medical equipment and supplies at the respondent’s hospital under the
following contracts:

a. Memorandum of Agreement dated January 9, 2006 for the supply of medical equipment in the total
amount of P18,625,000.00;3

b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas pipeline system valued at
P8,500,000.00;4

c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of Diamond Select Slice CT and one
unit of Diamond Select CV-P costing P65,000,000.00;5 and

d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings and equipment worth
P32,926,650.00.6

According to the petitioner, the respondent paid only P67,357,683.23 of its total obligation of P123,901,650.00,
leaving unpaid the sum of P54,654,195.54.7 However, on February 11, 2009, the petitioner and the respondent,
respectively represented by Rafael P. Fernando and Guillermo T. Maglaya, Sr., entered into an
agreement,8 whereby the former agreed to reduce its claim to only P50,400,000.00, and allowed the latter to pay the
adjusted obligation on installment basis within 36 months.9

In the letter dated May 27, 2009,10 the respondent notified the petitioner that its new administration had reviewed
their contracts and had found the contracts defective and rescissible due to economic prejudice or lesion; and that it
was consequently declining to recognize the February 11, 2009 agreement because of the lack of approval by its
Board of Trustees and for having been signed by Maglaya whose term of office had expired.

On June 24, 2009, the petitioner sent a demand letter to the respondent.11

Due to the respondent’s failure to pay as demanded, the petitioner filed its complaint for sum of money in the
RTC,12averring as follows:

xxxx

2. On January 9, 2006, plaintiff supplied defendant with hospital medical equipment for an in consideration
of P18,625,000.00 payable in the following manner: (2.1) For nos. 1 to 9 of items to be sourced from
Fernando Medical Equipment, Inc. (FMEI) – 30% down payment of P17,475,000 or P5,242,500 with the
balance of P12,232,500 or 70% payable in 24 equal monthly instalments of P509,687.50 and (2.2.) cash
transaction amounting to P1,150,000.00 (2.3) or an initial cash payment of P6,392,500.00 with the remaining
 balance payable in 24 equal monthly installments every 20th day of each month until paid, as stated in the
Memorandum of Agreement, copy of which is hereto attached as Annex "A";

3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the latter’s hospital building
complex for and in consideration of P8,500,000.00 payable upon installation thereof under a Deed of
Undertaking, copy of which is hereto attached as Annex "B";

4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice CT and one (1) unit
Diamond Select CV-9 for and in consideration of P65,000,000.00 thirty percent (30%) of which shall be paid
as down payment and the balance in 30 equal monthly instalments as provided in that Deed of Undertaking,
copy of which is hereto attached as Annex "C";

5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and equipment for an in
consideration of P32,926,650.00 twenty percent (20%) of which was to be paid as downpayment and the
balance in 30 months under a Deed of Undertaking, copy of which is hereto attached as Annex "D";

6. Defendant’s total obligation to plaintiff was P123,901,650.00 as of February 15, 2009, but defendant was
able to pay plaintiff the sum of P67,357,683.23 thus leaving a balance P54,654,195.54 which has become
overdue and demandable;

7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and extended its
payment for 36 months provided defendants shall pay the same within 36 months and to issue 36 postdated
checks therefor in the amount of P1,400,000.00 each to which defendant agreed under an Agreement, copy
of which is hereto attached as Annex "E";

8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the [a]mount of
P1,400,000.00 but after four (4) of the said checks in the sum of P5,600,000.00 were honored defendant
stopped their payment thus making the entire obligation of defendant due and demandable under the
February 11, 2009 agreement;

9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4) agreements may be
rescissible and one of them is unenforceable while the Agreement dated February 11, 2009 was without the
requisite board approval as it was signed by an agent whose term of office already expired, copy of which
letter is hereto attached as Annex "F";

10. Consequently, plaintiff told defendant that if it does not want to honor the February 11, 2009 contract
then plaintiff will insists [sic] on its original claim which is P54,654,195.54 and made a demand for the
payment thereof within 10 days from receipt of its letter copy of which is hereto attached as Annex "G";

11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid plaintiff any amount,
either in the first four contracts nor in the February 11, 2009 agreement, hence, the latter was constrained to
institute the instant suit and thus incurred attorney’s fee equivalent to 10% of the overdue account but only
after endeavouring to resolve the dispute amicable and in a spirit of friendship[;]

12. Under the February 11, 2009 agreement the parties agreed to bring all actions or proceedings
thereunder or characterized therewith in the City of Manila to the exclusion of other courts and for defendant
to pay plaintiff 3% per months of delay without need of demand;13

xxxx

The respondent moved to dismiss the complaint upon the following grounds,14 namely: (a) lack of jurisdiction over
the person of the defendant; (b) improper venue; (c) litis pendentia; and (d) forum shopping. In support of the ground
of litis pendentia, it stated that it had earlier filed a complaint for the rescission of the four contracts and of the
February 11, 2009 agreement in the RTC in Cabanatuan City; and that the resolution of that case would be
determinative of the petitioner’s action for collection.15
After the RTC denied the motion to dismiss on July 19, 2009,16 the respondent filed its answer (ad
cautelam),17averring thusly:

xxxx

2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED subject to the special
and affirmative defenses hereafter pleaded;

3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack of knowledge or
information sufficient to form a belief as to the truth or falsity thereof, inasmuch as the alleged transactions
were undertaken during the term of office of the past officers of defendant Wesleyan University-Philippines.
At any rate, these allegations are subject to the special and affirmative defenses hereafter pleaded;

4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject to the special and
affirmative defenses hereafter pleaded;

5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being conclusions of law.18

xxxx

The petitioner filed its reply to the answer.19

On September 28, 2011, the petitioner filed its Motion for Judgment Based on the Pleadings,20 stating that the
respondent had admitted the material allegations of its complaint and thus did not tender any issue as to such
allegations.

The respondent opposed the Motion for Judgment Based on the Pleadings, arguing that it had specifically denied
the material allegations in the complaint, particularly paragraphs 6, 7, 8, 11 and 12.21

On November 23, 2011, the RTC issued the order denying the Motion for Judgment Based on the Pleadings of the
petitioner, to wit:

At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the plaintiff thru counsel, Atty. Jose
Mañacop on September 28, 2011, the court issued an Order dated October 27, 2011 which read in part as follows:

xxxx

Considering that the allegations stated on the Motion for Judgment Based on the Pleadings, are evidentiary in
nature, the Court, instead of acting on the same, hereby sets this case for pre-trial, considering that with the Answer
and the Reply, issues have been joined.

xxxx

In view therefore of the Order of the Court dated October 27, 2011, let the Motion for Judgment Based on the
Pleadings be hereby ordered DENIED on reasons as abovestated and hereto reiterated.

xxxx

SO ORDERED.22

The petitioner moved for reconsideration,23 but its motion was denied on December 29, 2011.24

The petitioner assailed the denial in the CA on certiorari.25

Judgment of the CA
On July 2, 2013, the CA promulgated its decision. Although observing that the respondent had admitted the
contracts as well as the February 11, 2009 agreement, viz.:

It must be remembered that Private Respondent admitted the existence of the subject contracts, including
Petitioner’s fulfilment of its obligations under the same, but subjected the said admission to the "special and
affirmative defenses" earlier raised in its Motion to Dismiss.

xxxx

Obviously, Private Respondent’s special and affirmative defenses are not of such character as to avoid Petitioner’s
claim. The same special and affirmative defenses have been passed upon by the RTC in its Order dated July 19,
2010 when it denied Private Respondent’s Motion to Dismiss. As correctly found by the RTC, Private Respondent’s
special and affirmative defences of lack of jurisdiction over its person, improper venue, litis pendentia and wilful and
deliberate forum shopping are not meritorious and cannot operate to dismiss Petitioner’s Complaint. Hence, when
Private Respondent subjected its admission to the said defenses, it is as though it raised no defense at all.

Not even is Private Respondent’s contention that the rescission case must take precedence over Petitioner’s
Complaint for Sum of Money tenable. To begin with, Private Respondent had not yet proven that the subject
1avvphi1

contracts are rescissible. And even if the subject contracts are indeed rescissible, it is well-settled that rescissible
contracts are valid contracts until they are rescinded. Since the subject contracts have not yet been rescinded, they
are deemed valid contracts which may be enforced in legal contemplation.

In effect, Private Respondent admitted that it entered into the subject contracts and that Petitioner had performed its
obligations under the same.

As regards Private Respondent’s denial by disavowal of knowledge of the Agreement dated February 11, 2009, We
agree with Petitioner that such denial was made in bad faith because such allegations are plainly and necessarily
within its knowledge.

In its letter dated May 27, 2009, Private Respondent made reference to the Agreement dated February 11,
2009, viz.:

"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of the University without the
requisite authority from the Board of Trustees, and executed when said agent’s term of office had already expired.
Consequently, such contract is, being an unenforceable contract."

Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it attached to its Motion to
Dismiss, that:

"13. On 6 February 2009, when the terms of office of plaintiff’s Board of Trustess chaired by Dominador Cabasal, as
well as of Atty. Guillermo C. Maglaya as President, had already expired, thereby rendering them on a hold-over
capacity, the said Board once again authorized Atty. Maglaya to enter into another contract with defendant FMEI,
whereby the plaintiff was obligated to pay and deliver to defendant FMEI the amount of Fifty Million Four Hundred
Thousand Pesos (Php50,400,000.00) in thirty five (35) monthly instalments of One Million Four Hundred Thousand
Pesos (Php1,400,000.00), representing the balance of the payment for the medical equipment supplied under the
afore-cited rescissible contracts. This side agreement, executed five (5) days later, or on 11 February 2009, and
denominated as "AGREEMENT", had no object as a contract, but was entered into solely for the purpose of getting
the plaintiff locked-in to the payment of the balance price under the rescissible contracts; x x x"

From the above averments, Private Respondent cannot deny knowledge of the Agreement dated February 11,
2009. In one case, it was held that when a respondent makes a "specific denial" of a material allegation of the
petition without setting forth the substance of the matters relied upon to support its general denial, when such
matters where plainly within its knowledge and the defendant could not logically pretend ignorance as to the
same, said defendant fails to properly tender an issue.26
the CA ruled that a judgment on the pleadings would be improper because the outstanding balance due to the
petitioner remained to be an issue in the face of the allegations of the respondent in its complaint for rescission in
the RTC in Cabanatuan City, to wit:

However, Private Respondent’s disavowal of knowledge of its outstanding balance is well-taken. Paragraph 6 of
Petitioner’s Complaint states that Private Respondent was able to pay only the amount of P67,357,683.23. Taken
together with paragraph 8, which states that Private Respondent was only able to make good four (4) check
payments worth P1,400,000.00 or a total of P5,600,000.00, Private Respondent’s total payments would be, in
Petitioner’s view, P72,957,683.23. However, in its Complaint for Rescission, attached to its Motion to Dismiss
Petitioner’s Complaint for Sum of Money, Private Respondent alleged that:

"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million Four Hundred One Thousand
Six Hundred Fifty Pesos (P78,401,650.00)"

It is apparent that Private Respondent’s computation and Petitioner’s computation of the total payments made by
Private Respondent are different. Thus, Private Respondent tendered an issue as to the amount of the balance due
to Petitioner under the subject contracts.27

Hence, this appeal.

Issue

The petitioner posits that the CA erred in going outside of the respondent’s answer by relying on the allegations
contained in the latter’s complaint for rescission; and insists that the CA should have confined itself to the
respondent’s answer in the action in order to resolve the petitioner’s motion for judgment based on the pleadings. 1âwphi1

In contrast, the respondent contends that it had specifically denied the material allegations of the petitioner’s
complaint, including the amount claimed; and that the CA only affirmed the previous ruling of the RTC that the
pleadings submitted by the parties tendered an issue as to the balance owing to the petitioner.

Did the CA commit reversible error in affirming the RTC’s denial of the petitioner’s motion for judgment on the
pleadings?

Ruling of the Court

The appeal is meritorious.

The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of Court, which provides thus:

Section 1. Judgment on the pleadings. – Where an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party’s pleading, the court may, on motion of that party, direct judgment on such pleading.
xxx

The essential query in resolving a motion for judgment on the pleadings is whether or not there are issues of fact
generated by the pleadings.28 Whether issues of fact exist in a case or not depends on how the defending party’s
answer has dealt with the ultimate facts alleged in the complaint. The defending party’s answer either admits or
denies the allegations of ultimate facts in the complaint or other initiatory pleading. The allegations of ultimate facts
the answer admit, being undisputed, will not require evidence to establish the truth of such facts, but the allegations
of ultimate facts the answer properly denies, being disputed, will require evidence.

The answer admits the material allegations of ultimate facts of the adverse party’s pleadings not only when it
expressly confesses the truth of such allegations but also when it omits to deal with them at all.29 The controversion
of the ultimate facts must only be by specific denial. Section 10, Rule 8 of the Rules of Court recognizes only three
modes by which the denial in the answer raises an issue of fact. The first is by the defending party specifying each
material allegation of fact the truth of which he does not admit and, whenever practicable, setting forth the
substance of the matters upon which he relies to support his denial. The second applies to the defending party who
desires to deny only a part of an averment, and the denial is done by the defending party specifying so much of the
material allegation of ultimate facts as is true and material and denying only the remainder. The third is done by the
defending party who is without knowledge or information sufficient to form a belief as to the truth of a material
averment made in the complaint by stating so in the answer. Any material averment in the complaint not so
specifically denied are deemed admitted except an averment of the amount of unliquidated damages.30

In the case of a written instrument or document upon which an action or defense is based, which is also known as
the actionable document, the pleader of such document is required either to set forth the substance of such
instrument or document in the pleading, and to attach the original or a copy thereof to the pleading as an exhibit,
which shall then be deemed to be a part of the pleading, or to set forth a copy in the pleading.31 The adverse party is
deemed to admit the genuineness and due execution of the actionable document unless he specifically denies them
under oath, and sets forth what he claims to be the facts, but the requirement of an oath does not apply when the
adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of
the original instrument is refused.32

In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2, 3, 4, 5, 9 and 10 of the
complaint. The admission related to the petitioner’s allegations on: (a) the four transactions for the delivery and
installation of various hospital equipment; (b) the total liability of the respondent; (c) the payments made by the
respondents; (d) the balance still due to the petitioner; and (e) the execution of the February 11, 2009 agreement.
The admission of the various agreements, especially the February 11, 2009 agreement, significantly admitted the
petitioner’s complaint. To recall, the petitioner’s cause of action was based on the February 11, 2009 agreement,
which was the actionable document in the case. The complaint properly alleged the substance of the February 11,
2009 agreement, and contained a copy thereof as an annex. Upon the express admission of the genuineness and
due execution of the February 11, 2009 agreement, judgment on the pleadings became proper.33 As held in Santos
v. Alcazar:34

There is no need for proof of execution and authenticity with respect to documents the genuineness and due
execution of which are admitted by the adverse party. With the consequent admission engendered by petitioners’
failure to properly deny the Acknowledgment in their Answer, coupled with its proper authentication, identification
and offer by the respondent, not to mention petitioners’ admissions in paragraphs 4 to 6 of their Answer that they
are indeed indebted to respondent, the Court believes that judgment may be had solely on the document, and there
is no need to present receipts and other documents to prove the claimed indebtedness. The Acknowledgment, just
as an ordinary acknowledgment receipt, is valid and binding between the parties who executed it, as a document
evidencing the loan agreement they had entered into. The absence of rebutting evidence occasioned by petitioners’
waiver of their right to present evidence renders the Acknowledgment as the best evidence of the transactions
between the parties and the consequential indebtedness incurred. Indeed, the effect of the admission is such that
a prima facie case is made for the plaintiff which dispenses with the necessity of evidence on his part and entitled
him to a judgment on the pleadings unless a special defense of new matter, such as payment, is interposed by the
defendant.35 (citations omitted)

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of knowledge or information sufficient to
form a belief as to the truth or falsity thereof, inasmuch as the alleged transactions were undertaken during the term
of office of the past officers of defendant Wesleyan University-Philippines." Was the manner of denial effective as a
specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the respondent’s total obligation as of February
15, 2009 was P123,901,650.00, but its balance thereafter became only P54,654,195.54 because it had since then
paid P67,357,683.23 to the petitioner. Paragraph no. 7 stated that the petitioner had agreed with the respondent on
February 11, 2009 to reduce the balance to only P50,400,000.00, which the respondent would pay in 36 months
through 36 postdated checks of P1,400,000.00 each, which the respondent then issued for the purpose. Paragraph
no. 8 averred that after four of the checks totalling P5,600,000.00 were paid the respondent stopped payment of the
rest, rendering the entire obligation due and demandable pursuant to the February 11, 2009 agreement.
Considering that paragraphs no. 6, 7 and 8 of the complaint averred matters that the respondent ought to know or
could have easily known, the answer did not specifically deny such material averments. It is settled that denials
based on lack of knowledge or information of matters clearly known to the pleader, or ought to be known to it, or
could have easily been known by it are insufficient, and constitute ineffective36 or sham denials.37

That the respondent qualified its admissions and denials by subjecting them to its special and affirmative defenses
of lack of jurisdiction over its person, improper venue, litis pendentia and forum shopping was of no consequence
because the affirmative defenses, by their nature, involved matters extrinsic to the merits of the petitioner’s claim,
and thus did not negate the material averments of the complaint.

Lastly, we should emphasize that in order to resolve the petitioner’s Motion for Judgment Based on the Pleadings,
the trial court could rely only on the answer of the respondent filed in Civil Case No. 09-122116. Under Section 1,
Rule 34 of the Rules of Court, the answer was the sole basis for ascertaining whether the complaint’s material
allegations were admitted or properly denied. As such, the respondent’s averment of payment of the total of
P78,401,650.00 to the petitioner made in its complaint for rescission had no relevance to the resolution of
the Motion for Judgment Based on the Pleadings. The CA thus wrongly held that a factual issue on the total liability
of the respondent remained to be settled through trial on the merits. It should have openly wondered why the
respondent's answer in Civil Case No. 09-122116 did not allege the supposed payment of the P78,401,650.00, if the
payment was true, if only to buttress the specific denial of its alleged liability. The omission exposed the
respondent's denial of liability as insincere.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on July 2, 2013; DIRECTS the
Regional Trial Court, Branch 1, in Manila to resume its proceedings in Civil Case No. 09-122116 entitled Fernando
Medical Enterprises, Inc. v. Wesleyan University-Philippines, and to forthwith act on and grant the Motion for
Judgment Based on the Pleadings by rendering the proper judgment on the pleadings; and ORDERS the
respondent to pay the costs of suit.

SO ORDERED.

ON SUMMARY JUDGMENT

SPOUSES SERGIO C. PASCUAL and EMMA SERVILLION PASCUAL, Petitioners

vs.
FIRST CONSOLIDATED RURAL BANK (BOHOL), INC., ROBINSONS LAND CORPORATION and ATTY.
ANTONIO P. ESPINOSA, Register of Deeds, Butuan City, Respondents

DECISION

BERSAMIN, J.:

On February 14, 2011, the petitioners filed a petition for annulment of judgment in the Court of Appeals (CA) in order
to nullify and set aside the decision rendered in Special Proceedings Case No. 4577 by the Regional Trial Court in
Butuan City (RTC) ordering the cancellation of their notice of lis pendens recorded in Transfer Certificate of Title No.
RT-42190 of the Register of Deeds of Butuan City.1

After the responsive pleadings to the petition were filed, the CA scheduled the preliminary conference on October 4,
2011, and ordered the parties to file their respective pre-trial briefs.2 Instead of filing their pre-trial brief, the
petitioners filed a Motion for Summary Judgment and a Motion to Hold Pre-Trial in Abeyance.3 At the scheduled
preliminary conference, the petitioners and their counsel did not appear.4

On November 16, 2011, the CA promulgated the first assailed resolution dismissing the petition for annulment of
judgment,5 stating:

Section 4 through 6 of Rule 18 of the Rules of Court provide, viz:

Sec. 4. Appearance of parties. - It shall be the duty of the parties and their counsel to appear at the pre-trial. The
non-appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear
in his behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admission of facts and of documents.

Sec. 5. Effect of failure to appear.- The failure of the plaintiff to appear when so required pursuant to the next
preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise
ordered by the court. A similar failure on the part of the defendant shall be cause to allow the plaintiff to present his
evidence ex parte and the court to render judgment on the basis thereof.
Sec. 6. Pre-trial brief - x x x

Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.

Petitioners, instead of complying with our order, filed the twin motions, averring that it behooves us to rule first on
their motions before pre-trial could be conducted, "especially with the incompatibility of a pending Motion for
Summary Judgment vis-a-vis the conduct of pre-trial conference."

Considering that a Petition for Annulment of Judgment is an original action before the Court of Appeals, pre-trial is
mandatory, per Section 6 of Rule 47 of the Rules of Court, whereby the failure of the plaintiff to appear would mean
dismissal of the action with prejudice. The filing of a pre-trial brief has the same import.

In fact, contrary to petitioners' assertion, it is only at the pre-trial that the rules allow the courts to render judgment on
the pleadings and summary judgment, as provided by Section 2 (g) of Rule 18 of the Rules of Court, viz:

Sec. 2. Nature and purpose. - The pre-trial is mandatory. The court shall consider:

x x xx

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of dismissing the action should a
valid ground therefor be found to exist.

Moreover, in an Order dated October 20, 2011, we noted petitioners and counsel's special appearance via a new
counsel, but failed to accept the same as the latter was not armed with the appropriate documents to appear as
such. Therefore, it was as if petitioners did not appear during the Preliminary Conference.

It is not for the petitioners to arrogate whether or not pre-trial may be suspended or dispensed with, or that their
motions be resolved first, as the same are discretionary upon the court taking cognizance of the petition.
Furthermore, their failure to furnish private respondent Robinsons Land Corporation a copy of their Motion for
Reconsideration of our denial of their TRO and/or WPI, and to submit proof of service thereof to this court is
tantamount to failure to obey lawful orders of the court. 1âw phi 1

This we cannot countenance. Strict compliance with the Rules is indispensable for the prevention of needless
delays and the promotion of orderly and expeditious dispatch of judicial business. Hence, petitioners' failure to
comply with our directives merits dismissal of their petition. We find support in the provision of Section 1 of Rule 50
of the Rules of Court, viz:

Sec. 1. Grounds for dismissal of appeal.

x x xx

(h) Failure of the appellant to appear at the preliminary conference under Rule 48, or to comply with orders,
circulars, or directives of the court without justifiable cause ...

The Supreme Court has invariably ruled that while "litigation is not a game of technicalities," it is equally important
that every case must be prosecuted in accordance with the procedure to insure an orderly and speedy
administration of justice.6

Aggrieved, the petitioners filed their Motion for Reconsideration (on the Resolution dated 16 November 2011),7which
the CA denied on January 9, 2012 for being filed out of time.8 Unrelenting, they presented a Respectful Motion for
Reconsideration (on the Resolution dated 9 January 2012), which the CA also denied on June 20, 2012.9

Hence, this appeal by petition for review on certiorari.

Ruling of the Court

We deny the petition for review for its lack of merit.

1.

Motions and other papers sent to the CA

by private messengerial services arc deemed
filed on the date of the CA's actual receipt

The petitioners received the assailed resolution of November 16, 2011 on November 24, 2011.10 Under Section l,
Rule 52 of the Rules of Court,11 they had 15 days from receipt (or until December 9, 2011) within which to move for
its reconsideration or to appeal to the Supreme Court. They dispatched the Motion for Reconsideration (on the
Resolution dated 16 November 2011) on December 9, 2011 through private courier (LBC). The CA actually received
the motion on December 12, 2011.12 Considering that Section 1 (d) of Rule III of the 2009 Internal Rules of the Court
of Appeals provided that motions sent through private messengerial services are deemed filed on the date of the
CA's actual receipt of the same,13 the motion was already filed out of time by December 12, 2011.

Needless to remind, the running of the period of appeal of the final resolution promulgated on November 16, 2011
was not stopped, rendering the assailed resolution final and executory by operation of law.14

2.

Although motions for summary judgment

can be filed before the pre-trial, their
non-resolution prior to the pre-trial should
not prevent the holding of the pre-trial

The petitioners contend that their Motion for Summary Judgment and Motion to Hold Pre-Trial in Abeyance needed
to be first resolved before the pre-trial could proceed; that the CA erred in declaring that "it is only at the pre-trial that
the rules allow the courts to render judgment on the pleadings and summary judgment, as provided by Section 2(g)
of Rule 18 of the Rules of Court;" and that the CA overlooked their submission in their Opposition with
Explanation to the effect that Section 2(g), Rule 18 of the Rules of Court was superseded by Administrative Circular
No. 3-99 dated January 15, 1999 and A.M. No. 03-1-09-SC dated August 16, 2004.

The petitioners' contentions have no merit.

We consider it erroneous on the part of the CA to declare that "it is only at the pre-trial that the rules allow the courts
to render judgment on the pleadings and summary judgment, as provided by Section 2(g) of Rule 18 of the Rules of
Court." The filing of the motion for summary judgment may be done prior to the pre-trial. Section 1, Rule 3 5 of
the Rules of Court permits a party seeking to recover upon a claim, counterclaim, or cross-claim or seeking
declaratory relief to file the motion for a summary judgment upon all or any part thereof in his favor (and its
supporting affidavits, depositions or admissions) "at any time after the pleading in answer thereto has been
served;" while Section 2 of Rule 35 instructs that a party against whom a claim, counterclaim, or cross-claim is
asserted or a declaratory relief is sought may file the motion for summary judgment (and its supporting affidavits,
depositions or admissions) upon all or any part thereof "at any time." As such, the petitioners properly filed their
motion for summary judgment prior to the pre-trial (assuming that they thereby complied with the requirement of
supporting affidavits, depositions or admissions).

We remind that the summary judgment is a procedural technique that is proper under Section 3, Rule 35 of
the Rules of Court only if there is no genuine issue as to the existence of a material fact, and that the moving party
is entitled to a judgment as a matter of law.15 It is a method intended to expedite or promptly dispose of cases where
the facts appear undisputed and certain from the pleadings, depositions, admissions, and affidavits on record.16 The
term genuine issue is defined as an issue of fact that calls for the presentation of evidence as distinguished from an
issue that is sham, fictitious, contrived, set up in bad faith and patently unsubstantial so as not to constitute a
genuine issue for trial. The court can determine this on the basis of the pleadings, admissions, documents,
affidavits, and/or counter-affidavits submitted by the parties to the court. Where the facts pleaded by the parties are
disputed or contested, proceedings for a summary judgment cannot take the place of a trial.17 The party moving for
the summary judgment has the burden of clearly demonstrating the absence of any genuine issue of fact.18 Upon the
plaintiff rests the burden to prove the cause of action, and to show that the defense is interposed solely for the
purpose of delay. After the plaintiffs burden has been discharged, the defendant has the burden to show facts
sufficient to entitle him to defend.19

The CA could have misconceived the text of Section 2(g), Rule 18 of the Rules of Court, to wit:

Section 2. Nature and purpose. - The pre-trial is mandatory. The court shall consider:

x x xx

(g) The propriety of rendering judgment on the pleadings, or summary judgment, or of dismissing the action should a
valid ground therefor be found to exist;

x x xx

To be clear, the rule only spells out that unless the motion for such judgment has earlier been filed the pre-trial may
be the occasion in which the court considers the propriety of rendering judgment on the pleadings or summary
judgment. If no such motion was earlier filed, the pre-trial judge may then indicate to the proper party to initiate the
rendition of such judgment by filing the necessary motion. Indeed, such motion is required by either Rule
3420(Judgment on the Pleadings) or Rule 3521 (Summary Judgment) of the Rules of Court. The pre-trial judge
cannot motu proprio render the judgment on the pleadings or summary judgment. In the case of the motion for
summary judgment, the adverse party is entitled to counter the motion.

Even so, the petitioners cannot validly insist that the CA should have first resolved their Motion for Summary
Judgment before holding the pretrial. They could not use the inaction on their motion to justify their nonappearance
1âwphi1

with their counsel at the pre-trial, as well as their inability to file their pre-trial brief. In that regard, their appearance at
the pre-trial with their counsel was mandatory.

The petitioners argue that their non-appearance was not mandatory, positing that Section 2(g), Rule 18 of the Rules
of Court had been amended by Administrative Circular No. 3-99 and A.M. No. 03-1-09-SC issued on July 13, 2004
but effective on August 16, 2004.

The petitioners' argument was unwarranted.

Administrative Circular No. 3-99 dated January 15, 1999 still affirmed the mandatory character of the pre-trial, to wit:

x x xx

V. The mandatory continuous trial system in civil cases contemplated in Administrative Circular No. 4, dated 22
September 1988, and the guidelines provided for in Circular No. 1-89, dated 19 January 1989, must be effectively
implemented. For expediency, these guidelines in civil cases are hereunder restated with modifications, taking into
account the relevant provisions of the 1997 Rules of Civil Procedure:

A. Pre-Trial

x x xx

6. Failure of the plaintiff to appear at the pre-trial shall be a cause for dismissal of the action. A similar failure of the
defendant shall be a cause to allow the plaintiff to present his evidence ex-parte and the court to render judgment on
the basis thereof. (Underlining supplied for emphasis)

A.M. No. 03-1-09-SC (Guidelines to be Observed by Trial Court Judges and Clerks of Court in the Conduct of Pre-
Trial and Use of Deposition-Discovery Measures) - adopted for the purpose of abbreviating court proceedings,
ensuring the prompt disposition of cases, decongesting court dockets, and further implementing the pre-trial
guidelines laid down in Administrative Circular No. 3-99 - similarly underscored the mandatory character of the pre-
trial, and reiterated under its heading Pre-Trial in civil cases that, among others, the trial court could then determine
"the propriety of rendering a summary judgment dismissing the case based on the disclosures made at the pre-trial
or a judgment based on the pleadings, evidence identified and admissions made during pre-trial."22 As such, they
could have urged the trial court to resolve their pending Motion for Summary Judgment during the pre-trial..

WHEREFORE, the Court AFFIRMS the assailed resolutions of the Court of Appeals promulgated in CA-G.R. SP
No. 04020-MIN; and ORDERS the petitioners to pay the costs of suit.

SO ORDERED.

ON NEW TRIAL

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
RAMON G. ASUNCION, PEDRO ASUNCION, CANDIDA ASUNCION-SANTOS, LEONORA ASUNCION-
HENSON, ARISTON ASUNCION and ANABELLE* ASUNCION-PERLAS, respondents.

DECISION

QUISUMBING, J.:

This petition for review seeks to set aside the Decision1 dated April 30, 2003 of the Court of Appeals in CA-G.R. SP
No. 70607 and its Resolution2 dated August 15, 2003, denying the motion for reconsideration. Before the Court of
Appeals, the Solicitor General, in behalf of petitioner, sought to annul: (1) the Order3 dated February 26, 2002 of the
Regional Trial Court of Malolos, Bulacan, Branch 21, insofar as it declared petitioner's motion for
reconsideration pro forma; and (2) said trial court's subsequent Order4 dated April 26, 2002, dismissing petitioner's
notice of appeal on the ground that it was filed out of time.

The facts of the case are as follows:

On December 29, 1976, Paciencia Gonzales Asuncion and the Heirs of Felipe F. Asuncion5 applied for the
registration of the titles of nine (9) parcels of land, all located at Bambang, Bulacan, Bulacan, with the then Court of
First Instance (now Regional Trial Court) of Bulacan. The application was docketed as LRC Case No. 3681-M. The
applicants alleged that they have registerable titles over the subject lands which they acquired by inheritance,
accretion and through open, continuous, exclusive and notorious possession under color of title for at least thirty
(30) years.6

Petitioner, represented by the Solicitor General, opposed the application on the ground that the subject lands are
inalienable forest lands of the public domain, within the unclassified area of Bulacan, Bulacan.7 Other persons8 also
opposed the application.

On November 7, 1986, the applicants' motion to admit an amended application for eleven (11) parcels of land was
granted by the trial court.9 On August 30, 1996, the applicants and the other oppositors entered into a compromise
agreement.10

Despite the Solicitor General's opposition that the State was not bound by the compromise agreement since the
subject lands were not susceptible of private appropriation,11 the trial court on March 22, 1999, approved the
compromise agreement and excluded four (4) parcels of land from the application.12 The trial court also dismissed
the application over two (2) other parcels, Psu-133934 & Psu-138316.13

Due to the applicants' voluminous formal offer of evidence,14 the Solicitor General asked for additional time, until
July 30, 2001, to file his comment on the applicants' formal offer of evidence.15

Meanwhile, on June 29, 2001, the trial court had considered the case submitted for decision16 and on July 10, 2001,
rendered its decision ordering the registration of five (5) parcels of land, denominated as Psu-115369, Psu-115615,
Psu-115616, Psu-118984, and Psu-121255 (amended).17
On July 27, 2001, the Solicitor General received his copy of the decision.18 Five days later, on August 2, 2001, the
Solicitor General filed a motion for reconsideration of the trial court's decision dated July 10, 2001, but it was denied
on February 26, 2002.19 The trial court ruled that the Solicitor General was in effect seeking a new trial and that the
motion for reconsideration was pro forma since it lacked an affidavit of merit required by the second paragraph of
Section 2,20 Rule 37 of the Rules of Court.

The Solicitor General received the Order of denial on March 13, 2002, and filed a notice of appeal on March 20,
2002. On April 26, 2002, the trial court dismissed the notice of appeal for being filed out of time.21

The Solicitor General filed a petition for certiorari with the Court of Appeals seeking the annulment of the Orders
dated February 26, 2002 and April 26, 2002.22 The appellate court dismissed the petition for lack of merit.23

The appellate court considered the Solicitor General's motion for reconsideration as a motion for new trial and held
that the case cannot be re-opened because the motion was filed after judgment. The appellate court also held that
the motion for reconsideration was fatally defective without an affidavit of merit. Further, the motion was pro
formasince it merely reiterated the Solicitor General's previous arguments. Thus, the motion for reconsideration did
not toll the reglementary period to appeal. The appellate court concluded that the trial court did not abuse its
discretion in rejecting the Solicitor General's prayer to present evidence and to file an appeal.

The dispositive portion of the appellate court's decision stated, as follows:

WHEREFORE, there being no showing that grave abuse of discretion had been committed by respondents
Judge D. Roy A. Masadao, Jr. and Judge Rogelio C. Gonzales in denying petitioner's Motion for
Reconsideration and Notice of Appeal, respectively, whose findings are supported by substantial evidence,
the instant petition is hereby DISMISSED for lack of merit.

The prayer for preliminary injunction or temporary restraining order is correspondingly denied for lack of
legal basis.

SO ORDERED.24

After the Court of Appeals denied the motion for reconsideration, the Solicitor General filed the instant petition
assigning the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF FACT IN

MISAPPREHENDING PETITIONER'S MOTION FOR RECONSIDERATION DATED AUGUST 1, 2001 IN
LRC CASE NO. 3681-M AS A PRO FORMA MOTION FOR NEW TRIAL.

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN

HOLDING THAT PETITIONER'S MOTION FOR RECONSIDERATION DATED AUGUST 1, 2001 IN LRC
CASE NO. 3681-M WAS A PRO FORMA MOTION FOR RECONSIDERATION.

III.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN

HOLDING THAT AN ERRONEOUS CHARACTERIZATION OF A MOTION FOR RECONSIDERATION
AS PRO FORMA IS A MERE ERROR OF JUDGMENT WHICH IS NOT CORRECTIBLE BY THE
EXTRAORDINARY WRIT OF CERTIORARI.

IV.
 WHETHER OR NOT THIS HONORABLE COURT MAY SUSPEND ITS RULES OF PROCEDURE IN THIS
CASE IN VIEW OF THE SPECIAL AND COMPELLING CIRCUMSTANCES OBTAINING IN ORDER TO
REVIEW THE LEGAL MERITS OF THE DECISION DATED JULY 10, 2001 IN LRC CASE NO. 3681-M.

V.

WHETHER OR NOT THE LAND REGISTRATION COURT COMMITTED REVERSIBLE ERROR OF LAW
IN CONCLUDING THAT THE LAND SUBJECT OF THE APPLICATION IS PRIVATE LAND UNDER
ARTICLE 457 OF THE CIVIL CODE.

VI.

WHETHER OR NOT THE LAND REGISTRATION COURT COMMITTED REVERSIBLE ERROR OF LAW
IN ALTERNATIVELY CONCLUDING THAT THE LAND SUBJECT OF THE APPLICATION IS PRIVATE
LAND UNDER ARTICLE 4 OF THE SPANISH LAW OF WATERS OF 1866.

VII.

WHETHER OR NOT THE LAND REGISTRATION COURT COMMITTED REVERSIBLE ERROR OF LAW
IN CONCLUDING THAT THE LAND SUBJECT OF THE APPLICATION BELONGS TO THE STATE. 25

The basic issues for resolution are: Did the Court of Appeals err in sustaining the dismissal of the Solicitor General's
motion for reconsideration on the ground that the motion was in effect one for a new trial and was pro forma? May
this Court now review, as if also on appeal, the trial court's July 10, 2001 decision in LRC Case No. 3681-M?

On the first issue, a motion for reconsideration is equivalent to a motion for new trial if based on a ground for new
trial.26 Section 1, Rule 37 of the Rules of Court provides that a motion for new trial must be based on the following
causes: (a) fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded
against and by reason of which such aggrieved party has probably been impaired in his rights; or (b) newly
discovered evidence, which he could not, with reasonable diligence, have discovered and produced at the trial, and
which if presented would probably alter the result.

Here, the Solicitor General's motion for reconsideration did not aver grounds for new trial. The motion was not
based on fraud, accident, mistake or excusable negligence that would need affidavits of merit, nor is the motion
based on newly discovered evidence as to require affidavits of witnesses.27

The two main arguments raised by the Solicitor General in the motion for reconsideration were: (1) that the trial
court deprived petitioner of its right to present evidence; and, (2) that the decision was tainted with serious errors of
law and fact.28 Both are not the valid causes for new trial per Section 1, Rule 37. Hence, we are unable to agree with
the trial and appellate courts that the motion for reconsideration was actually a motion for new trial.

Is the motion for reconsideration pro forma because of alleged reiteration of previous arguments?

Mere reiteration of issues already passed upon by the court does not automatically make a motion for
reconsideration pro forma. What is essential is compliance with the requisites of the Rules.29

In his motion for reconsideration, the Solicitor General argued that:

xxxx

11. Applicants failed to rebut the presumption that the land subject of their application belongs to the State.
Applicants' Exhibits "L" and "L-1" show, on their faces, that they requested in 1977 for release of areas
subject of their application and falling within the unclassified region of Bulacan, Bulacan, per LC Map No.
637 dated March 1, 1927. And that field personnel of the Bureau of Forest Development gave favorable
recommendations in support of the applicants' requests. However, these documents do not prove that the
Director of the then Bureau of Forest Development, or the Secretary of the DENR, or the President,
 had approved the recommendations contained therein and had certified the forest areas concerned as
alienable and disposable.

12. This Honorable Court, with due respect, misapplied the concept of accretion as a mode of acquiring
ownership in this case. Said mode was mistakenly applied to the boundary of applicants' estate which was
roughly perpendicular (instead of parallel) to the bank of the Wawang-Dapdap River.

13. The 1953 CFI Decision in Civil Case No. 766, that applicants are the owners of the land by virtue of
accretion and a superior right to possess the same, does not amount to res judicata as against the Republic
because the then CFI was not a court of competent jurisdiction to adjudicate inalienable forest land of the
public domain in favor of private persons. Such power is vested exclusively, by delegated legislation, to the
President or his alter ego, the DENR Secretary.30

These allegations stress that the findings or conclusions of the trial court were allegedly not supported by the
evidence or were contrary to law.31 Particular reference is made to documentary evidence in paragraph 11. In
paragraph 12, the error alleged was misapplication of the concept of accretion. In paragraph 13, the Solicitor
General alleged that the trial court had erred in considering the 1953 decision of the Court of First Instance in Civil
Case No. 766 as res judicata relative to LRC Case No. 3681-M. Patently, herein petitioner's motion for
reconsideration was not pro forma.

However, our ruling that the motion for reconsideration was not pro forma does not in any way mean that it is
meritorious. As this Court held in Marikina Valley Dev't. Corp. v. Hon. Flojo,32 public policy would be better served by
according the appellate court an effective opportunity to review the decision of the trial court on the merits, rather
than by aborting the right to appeal by a literal application of the procedural rule relating to pro forma motions for
reconsideration.

Since the Solicitor General filed his notice of appeal on March 20, 2002 or seven days after he received the denial of
the motion, the notice of appeal was filed within the "fresh period" of 15 days to file the notice of appeal.33 Thus, the
notice of appeal deserves to be given due course.

Lastly, we find now that the Solicitor General improperly appeals before this Court the trial court's decision in LRC
Case No. 3681-M. We note that he had already appealed said decision, by way of an ordinary appeal, when he filed
the notice of appeal with the trial court.34 In Marikina Valley Dev't. Corp. v. Hon. Flojo, it should be pointed out, this
Court directed the trial court to give due course to the notice of appeal.35

WHEREFORE, we SET ASIDE (a) the trial court's Orders dated February 26, 2002 and April 26, 2002; and (b) the
Court of Appeals' Decision and Resolution dated April 30, 2003 and August 15, 2003, respectively, and
we REMAND the case to the Regional Trial Court of Malolos, Bulacan, Branch 21. The trial court
is DIRECTED to GIVE DUE COURSE to the Solicitor General's notice of appeal with deliberate dispatch.

SO ORDERED.

ON PEITION FOR REVIEW ON CERTIORARI

MAHARLIKA A. CUEVAS, Petitioner

vs.
ATTY. MYRNA v. MACATANGAY, in her capacity as Director IV of the Civil Service Commission and
MEMBERS OF THE BOARD OF THE NATIONAL MUSEUM, namely; VIRGILIO ALMARIO, CORAZON ALVINA,
SEN. EDGARDO ANGARA, JEREMY BARNS, FELIPE DE LEON, CONG. SALVADOR ESCUDERO III,
MARINELLA K. FABELLA, FR. RENE PIO B. JAVELLANA, MARIA ISABEL G. ONGPIN, FELICE P. STA.
MARIA and BENITO S. VERGARA, Respondents

DECISION

PERALTA, J.:
For this Court's resolution is the Petition for Review on Certiorari under Rule 45 With Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction dated September 18, 2013 of petitioner Maharlika
A. Cuevas that seeks to reverse and set aside the Decision1 dated August 7, 2013 of the Court Appeals (CA),
affirming Civil Service Commission (CSC) Resolution No. 10-14382 invalidating petitioner's appointment as Director
III of the National Museum.

The facts follow.

Petitioner Maharlika Cuevas was one of the employees of the National Museum vying for the vacant position of
Director III, and on October 23, 2008, Board Resolution No. 03-2008 was issued by the National Museum Board of
Trustees, recommending for appointment Mr. Cecilio Salcedo and petitioner for the said position.

The then National Museum Board of Trustees Chairman, Antonio O. Cojuangco, appointed petitioner as Director III
under a temporary status on November 24, 2008.

Unsatisfied, Elenita D.V. Alba, another applicant for the same position, filed a protest with the CSC, the latter
referring the matter to the National Museum for resolution. In a letter to the CSC, dated August 14, 2009 by Director
IV Corazon S. Alvina, the National Museum dismissed the protest and informed the CSC that the decision on
petitioner's appointment is final.

Thereafter, on November 24, 2009, the then National Museum Board of Trustees Chairman, Antonio O. Cojuangco,
appointed petitioner as Director III on a permanent status.

Still aggrieved, Elenita D.V. Alba appealed the dismissal of her protest to the CSC insisting that she is the most
qualified for the contested position, and on July 27, 2010, the CSC issued Resolution No. 10-1438 finding no merit
on Alba's claim. The CSC, however, found that the issuance of petitioner's appointment was not in accordance with
Section 11 of Republic Act (R.A.) No. 8492, or the National Museum Act of 1998, which states that it is the Board of
Trustees that shall appoint the Assistant Director or Director III and not the Chairman of the National Museum, thus:

Sec. 11. Director of the National Museum; duties, programs and studies; annual report to Congress. - The Board of
Trustees shall appoint the Director of the Museum and two (2) Assistant Directors. The Director shall be in charge of
the over-all operations of the Museum and implement the policies set by the Board of Trustees and programs
approved by it. The Director shall have a proven track record of competent administration and shall be
knowledgeable about museum management. The Director, assisted by two (2) Assistant Directors, shall be in
charge of the expanded archeological sites and the Regional Museum Division of the Museum.

The CSC further stated that there is nothing under the National Museum Act of 1998 that expressly authorizes the
Board of Trustees to delegate any of its powers to the Chairman of the National Museum or to any official of the
National Museum, thus:

In the case at hand, the Board of Trustees (BOT), which is the policy-making body and appointing authority of the
National Museum under R.A. No. 8492, was relegated to function as the Personnel Selection Board (PSB) which
subsequently recommended to then Chairman Cojuangco the appointment of Cuevas for the position of Director III.
As such, the BOT abdicated to then Chairman Cojuangco its discretionary power to appoint the Director position. x x
x

xxxx

Unlike the Higher Education Modernization Act of 1997 (R.A. No. 8292) which expressly allows Boards of State
Universities and Colleges (SUCS) to delegate its powers, there is nothing under the National Museum Act of 1998
that expressly authorizes the BOT to delegate any of its powers to the Chairman of the National museum or to any
official of the National Museum. Thus, in absence of statutory authority, the National Museum Board of Trustees
may not alienate or surrender its discretional power. In short, the exercise by then Chairman Cojuangco of the
appointing power is not valid and the approval of Cuevas' temporary appointment should be recalled.

xxxx
In fine, considering that the exercise by then Chairman Cojuangco of the appointing power is not valid, the approval
of Cuevas' temporary appointment should be recalled.

WHEREFORE, the appeal of Elenita D.V. Alba, Curator II, National Museum (NM) is GRANTED. Accordingly, the
dismissal of her protest by NM Chairman Antonio O. Cojuangco against the promotional appointment of Maharlika
A. Cuevas as Director III under temporary status is REVERSED AND SET ASIDE. The approval of Cuevas'
temporary appointment as Director III by the Civil Service Commission, National Capital Region is RECALLED.3

Due to the above Resolution, Director Jocelyn Patrice L. Deco, Director II of the CSC Field Office-National Museum,
sent a letter dated October 14, 2010 to Director Jeremy Barns, Director IV of the National Museum, forwarding the
invalidated permanent appointment of petitioner as Director III contained in CSC Resolution No. 10-1438 dated July
27, 2010.4

On October 21, 2010, Director Jeremy Barns wrote the CSC asking for a clarification and reconsideration of the
October 14, 2010 letter. The CSC replied in a letter dated June 27, 2011 declaring that its resolution is final and
executory because the proper party - the appointing authority or the appointee, the petitioner, in this case, failed to
appeal the resolution as provided by the CSC Rules. According to the CSC, the records showed that the National
Museum duly received the October 14, 2010 letter, copy of which was furnished the petitioner and the appeal from
CSC Resolution No. 10-1438 should have been made on or before October 29, 2010.5

On August 2, 2011, petitioner moved for the reconsideration of the June 27, 2010 letter. He claimed that he received
the letter dated June 27, 2010 on July 18, 2011, and it was the first time that he learned of the matter regarding his
appointment. He also argued that his appointment was procedurally sound.6

The National Museum then posted a bulletin of vacant posit10ns, including that of petitioner's, on August 12, 2011.
Petitioner, thereafter, wrote a letter to the National Museum clarifying that a motion for reconsideration had been
filed before the CSC and it was pending resolution and as such, his position cannot be considered as vacant.7

On October 12, 2011, petitioner received a copy of the CSC's letter dated September 26, 2011 denying his motion,
thus:

Please be informed that said letter to Director Barns is not the main action recalling and invalidating your
appointment as Director III but a mere clarification on the effects thereof, hence, it is not the proper subject of a
motion for reconsideration or appeal.

xxxx

Moreover, records of this Office clearly show that the invalidation of said appointments was duly received by the
National Museum on October 14, 2010 and you were furnished a copy thereof. x x x

Thus, your claim that you did not receive any information relative to the recall and invalidation of your appointments
has no basis.8

Petitioner then elevated the case to the CA through a petition for certiorari under Rule 65 of the Rules of Court
alleging that the CSC gravely abused its discretion when it sent its letter-responses dated June 27, 2011 and
September 26, 2011 to the National Museum. On August 7, 2013, the CA denied the petition and ruled that CSC
Resolution No. 10-1438 invalidating petitioner's appointment stands, thus:

WHEREFORE, the petition is DENIED. CSC Resolution No. 10- 1438 invalidating petitioner's
appointment STANDS.

SO ORDERED.9

The CA ruled that the assailed orders of the CSC are only letter-responses and not the orders contemplated by the
Rules which can be assailed in a petition for certiorari. According to the CA, petitioner should have sought
reconsideration of CSC Resolution No. 10-1438 which invalidated his appointment and which was communicated to
the National Museum, copy furnished the petitioner, on October 14, 2010; and an appeal should have been filed
instead of a letter of clarification and reconsideration.

Hence, the present petition with the following issues presented:

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS AND GRAVE ERROR IN DECLARING
THAT THE REMEDY OF CERTIORARI UNDER RULE 65 WAS NOT THE PROPER REMEDY UNDER THE
CIRCUMSTANCES

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND GRAVE ERROR IN
RULING THAT THE RESPONDENT CIVIL SERVICE COMMISSION DID NOT COMMIT GRAVE ABUSE OF
DISCRETION10

Citing National Development Company v. The Collector of Customs,11petitioner argues that even letter-responses
can be subjects of a petition for certiorari if acted with grave abuse of discretion. Petitioner further asserts that he
was appointed by the proper appointing authority or the National Museum Board of Trustees, based on the Minutes
of the special meeting of the same Board held on October 21, 2008.

In their Comment dated February 11, 2014, the respondents, as represented by the Office of the Solicitor General
(OSG), insist that the CA correctly ruled that the communications between the National Museum and the CSC are
not the proper subjects of a petition for certiorari. The OSG also argues that petitioner's appointment was not issued
by the proper appointing authority because the resolution of the National Museum Board of Trustees takes
precedence over the minutes of the board meeting.

On January 21, 2015, this Court dismissed the present petition for failure of petitioner to obey a lawful order of the
Court pursuant to Section 5(e), Rule 56 of the 1997 Rules of Civil Procedure. However, upon Motion for
Reconsideration12 of petitioner, this Court set aside its earlier resolution and reinstated the petition on June 22,
2015.13

After a careful review of the arguments presented, this Court finds the petition unmeritorious.

As a general rule, only questions of law raised via a petition for review under Rule 45 of the Rules of Court14 are
reviewable by this Court.15 Factual findings of administrative or quasi-judicial bodies, including labor tribunals, are
accorded much respect by this Court as they are specialized to rule on matters falling within their jurisdiction
especially when these are supported by substantial evidence.16 However, a relaxation of this rule is made
permissible by this Court whenever any of the following circumstances is present:

1. [W]hen the findings are grounded entirely on speculations, surmises or conjectures;

2. when the inference made is manifestly mistaken, absurd or impossible;

3. when there is grave abuse of discretion;

4. when the judgment is based on a misapprehension of facts;

5. when the findings of fact are conflicting;

6. when in making its findings[,] the Court of Appeals went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee;

7. when the findings are contrary to that of the trial court;

8. when the findings are conclusions without citation of specific evidence on which they are based;

9. when the facts set forth in the petition[,] as well as in the petitioner's main and reply briefs[,] are not disputed by
the respondent;

10. when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence
on record; [and]

11. when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.17

The question as to whether the assailed orders of the CSC are mere letter-responses or the orders contemplated by
the Rules that can be assailed in a petition for certiorari under Rule 65 is factual and is not within the ambit of a
petition under Rule 45. Nevertheless, even if this Court relaxes such procedural infirmity, the present petition must
still fail.

Section 1, Rule 65 of the Rules of Court reads:

Section 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying
that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting
such incidental reliefs as law and justice may require.

The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof,
copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum
shopping as provided in the third paragraph of Section 3, Rule 46.

According to petitioner, a letter-response can be the subject of a petition for certiorari as already ruled by this Court
in National Development Company v. Collector of Customs wherein a letter-response for the Collector of Customs
was struck down for having been committed with grave abuse of discretion. However, as correctly observed by the
OSG, the case cited by petitioner is misapplied. In National Development Company v. Collector of Customs, the
subject letter was, in fact, a resolution or decision that found therein petitioners guilty of a violation of the Tariff and
Customs Code, while in the present petition, the letter-responses of the CSC did not decide the issue on the validity
or invalidity of petitioner's appointment. Thus, as aptly observed by the OSG:

35. In the NDC case, the letter issued by the Collector of Customs, in fact, constituted a resolution or decision
finding a violation apparently committed by the petitioner therein under Section 2521 of the Tariff and Customs
Code, thereby imposing a fine of ₱5,000.00. Said resolution was issued without giving the owner or operator a
chance to controvert the alleged violation. Hence, the resolution was deemed to have been issued in deprivation of
therein petitioner's right to due process.

36. In the instant case, the June 27, 2011 communication of the CSC addressed to NM merely answered the
clarifications requested by NM Director IV Jeremy Barns in a letter dated October 21, 2011, regarding the
invalidation of petitioner's appointment. The same can also be said of the September 26, 2011 letter of the CSC
to petitioner, addressing the latter's Motion for Reconsideration in a letter dated August 1, 2011. The June 27, 2011
and September 26, 2011 CSC letters did not decide the issue pertaining to the validity or the invalidity of
petitioner's appointment which, precisely, was the subject of CSC Resolution No. 10-1438. The letter merely
stated the procedural rules ought to be followed by parties who wish to appeal decisions of the CSC, which
procedure, both the appointing authority, the NM BOT, and petitioner, failed to avail of within the
reglementary period.18

It is, therefore, CSC Resolution No. 10-1438 that should have been the subject of an appeal as it contained the
decision of the said Commission as to the invalidity of petitioner's appointment as Director III of the National
Museum. On point is the finding of the CA, thus:
We perused the assailed orders and find that they are only letter-responses of the CSC and not the orders
contemplated by the Rules which can be assailed in a petition on certiorari. As aptly explained by the CSC,
petitioner should have sought reconsideration of CSC Resolution No. 10- 1438 which invalidated his appointment
and which was communicated to the National Museum, copy furnished the petitioner, on October 14, 2010; and an
appeal should have been filed instead of a letter seeking clarification and reconsideration as was done by Director
Barns on October 21, 2010. Since what was filed is a letter of clarification and reconsideration, it was acted upon in
the same manner by the CSC in its letter-reply dated June 27, 2011, explaining that the recall and invalidation of
petitioner's appointment can only be reconsidered through an appeal to the CSC, by the appointing authority or the
appointee, within fifteen days from receipt of the decision, pursuant to CSC Memorandum Circular 20, s. 1998 as
held in Francisco Abella, Jr. v. CSC; the CSC claimed that per records, the notice was properly served and received
by the addressees such that the period to appeal had already prescribed. It is this letter-reply that petitioner filed a
reconsideration on, claiming that he did not receive notice of the invalidation of his appointment. However,
petitioner's denial is belied by the statement in his Petition, properly pointed out by the CSC, that:

On 21 October 2010, Dir. Barns wrote Dir. Deco of the CSC Field Office requesting clarification and reconsideration
of the invalidation by the CSC of the said appointment. It is stressed that Dir. Barns did not officially inform herein
1âw phi1

petitioner of said invalidation, and seemingly Dir. Barns took it upon himself to "handle" the said matter of
invalidation. In fact, Director Barns verbally explained to petitioner that he (Barns) will take care of the whole thing
and will not let anything happen to petitioner's position as long as he was the NM director.19

Thus, this is a classic case of resorting to the filing of a petition for certiorari when the remedy of an ordinary appeal
can no longer be availed of. Jurisprudence is replete with the pronouncement that where appeal is available to the
aggrieved party, the special civil action of certiorari will not be entertained - remedies of appeal and certiorari are
mutually exclusive, not alternative or successive.20 The proper remedy to obtain a reversal of judgment on the
merits, final order or resolution is appeal. This holds true even if the error ascribed to the court rendering the
judgment is its lack of jurisdiction over the subject matter, or the exercise of power in excess thereof, or grave abuse
of discretion in the findings of fact or of law set out in the decision, order or resolution. The existence and availability
of the right of appeal prohibits the resort to certiorari because one of the requirements for the latter remedy is the
unavailability of appeal.21 Clearly, petitioner should have moved for the reconsideration of CSC Resolution No. 10-
1438 containing the Commission's resolution as to the invalidity of his appointment and, thereafter, should have filed
an appeal. Sadly, failing to do so, petitioner utilized the special civil action of certiorari. And to make matters worse,
petitioner questioned, not the proper resolution of the CSC, but the mere letter-responses of the same Commission.

Notwithstanding the above disquisitions, petitioner's claim that his appointment is valid because he was in fact
appointed by the Board and not the Chairman as shown in the Minutes of the meeting still does not gain him any
merit. In order for the Court to refer to the minutes of a meeting or a proceeding, the subject Board resolution must
at least be ambiguous or obscure; otherwise, if it is clear on its face, there is no need to resort to such action
because a Board resolution takes precedence over the minutes of a meeting.22 As correctly ruled by the CA:

Petitioner argues that the CSC erred when it held that his appointment was invalid because it was made by the
wrong appointing authority; although it would appear that the Resolution on his appointment of the National Museum
shows that he was appointed by the Chairman and not the Board, the Minutes of the meeting regarding the matter
shows otherwise; and, because of the ambiguity of the resolutions, resort to the Minutes is indispensable. We
reviewed the pe1iinent resolutions and find no ambiguity or obscurity on its face; hence, there is no need to resort to
the Minutes, for a board resolution takes precedence over the minutes of the meeting.23

The same reasoning is also aptly asserted by the OSG, thus:

xxxx

75. Petitioner argues that resort to the Minutes of the meeting is necessary in the presence of vagueness and
confusion regarding the provisions of the Resolutions. If such is the case, then no res01i to the minutes is necessary
because Board Resolution Nos. 02-2008 and 03-2008

issued by the BOT are from being ambiguous.

76. In both resolutions, the Chairman was categorically deemed as the appointing authority and not the BOT. This
grant of authority is in violation of the clear provisions of R.A. No. 8492, particularly Section 11 thereof, which states:
Section 11. Director of the National Museum; duties; programs and studies; annual report to Congress. - The Board
of Trustees shall appoint the Director of the Museum and two (2) Assistant Directors. The Director shall be in charge
of the over-all operations of the Museum and implement the policies set by the Board of Trustees and programs
approved by it. The Director shall have a proven track record of competent administration and shall be
knowledgeable about Museum management.24

Anent petitioner's Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction,
such is no longer necessary due to the above resolution and discussion of this Court.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 With Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction dated September 18, 2013 of petitioner Maharlika A. Cuevas
is DENIED for lack of merit. Consequently, the Decision dated August 7, 2013 of the Court Appeals is AFFIRMED.

SO ORDERED.

DOMINGO NEYPES, LUZ FAUSTINO, ROGELIO FAUSTINO, LOLITO VICTORIANO, JACOB OBANIA AND
DOMINGO CABACUNGAN, Petitioners,
vs.
HON. COURT OF APPEALS, HEIRS OF BERNARDO DEL MUNDO, namely: FE, CORAZON, JOSEFA,
SALVADOR and CARMEN, all surnamed DEL MUNDO, LAND BANK OF THE PHILIPPINES AND HON.
ANTONIO N. ROSALES, Presiding Judge, Branch 43, Regional Trial Court, Roxas, Oriental
Mindoro,Respondent.

DECISION

CORONA, J.:

Petitioners Domingo Neypes, Luz Faustino, Rogelio Faustino, Lolito Victoriano, Jacob Obania and Domingo
Cabacungan filed an action for annulment of judgment and titles of land and/or reconveyance and/or reversion with
preliminary injunction before the Regional Trial Court, Branch 43, of Roxas, Oriental Mindoro, against the Bureau of
Forest Development, Bureau of Lands, Land Bank of the Philippines and the heirs of Bernardo del Mundo, namely,
Fe, Corazon, Josefa, Salvador and Carmen.

In the course of the proceedings, the parties (both petitioners and respondents) filed various motions with the trial
court. Among these were: (1) the motion filed by petitioners to declare the respondent heirs, the Bureau of Lands
and the Bureau of Forest Development in default and (2) the motions to dismiss filed by the respondent heirs and
the Land Bank of the Philippines, respectively.

In an order dated May 16, 1997, the trial court, presided by public respondent Judge Antonio N. Rosales, resolved
the foregoing motions as follows: (1) the petitioners’ motion to declare respondents Bureau of Lands and Bureau of
Forest Development in default was granted for their failure to file an answer, but denied as against the respondent
heirs of del Mundo because the substituted service of summons on them was improper; (2) the Land Bank’s motion
to dismiss for lack of cause of action was denied because there were hypothetical admissions and matters that
could be determined only after trial, and (3) the motion to dismiss filed by respondent heirs of del Mundo, based on
prescription, was also denied because there were factual matters that could be determined only after trial.1

The respondent heirs filed a motion for reconsideration of the order denying their motion to dismiss on the ground
that the trial court could very well resolve the issue of prescription from the bare allegations of the complaint itself
without waiting for the trial proper.

In an order2 dated February 12, 1998, the trial court dismissed petitioners’ complaint on the ground that the action
had already prescribed. Petitioners allegedly received a copy of the order of dismissal on March 3, 1998 and, on the
15th day thereafter or on March 18, 1998, filed a motion for reconsideration. On July 1, 1998, the trial court issued
another order dismissing the motion for reconsideration3 which petitioners received on July 22, 1998. Five days
later, on July 27, 1998, petitioners filed a notice of appeal4 and paid the appeal fees on August 3, 1998.
On August 4, 1998, the court a quo denied the notice of appeal, holding that it was filed eight days late.5 This was
received by petitioners on July 31, 1998. Petitioners filed a motion for reconsideration but this too was denied in an
order dated September 3, 1998.6

Via a petition for certiorari and mandamus under Rule 65 of the 1997 Rules of Civil Procedure, petitioners assailed
the dismissal of the notice of appeal before the Court of Appeals.

In the appellate court, petitioners claimed that they had seasonably filed their notice of appeal. They argued that the
15-day reglementary period to appeal started to run only on July 22, 1998 since this was the day they received the
final order of the trial court denying their motion for reconsideration. When they filed their notice of appeal on July
27, 1998, only five days had elapsed and they were well within the reglementary period for appeal.7

On September 16, 1999, the Court of Appeals (CA) dismissed the petition. It ruled that the 15-day period to appeal
should have been reckoned from March 3, 1998 or the day they received the February 12, 1998 order dismissing
their complaint. According to the appellate court, the order was the "final order" appealable under the Rules. It held
further:

Perforce the petitioners’ tardy appeal was correctly dismissed for the (P)erfection of an appeal within the
reglementary period and in the manner prescribed by law is jurisdictional and non-compliance with such legal
requirement is fatal and effectively renders the judgment final and executory.8

Petitioners filed a motion for reconsideration of the aforementioned decision. This was denied by the Court of
Appeals on January 6, 2000.

In this present petition for review under Rule 45 of the Rules, petitioners ascribe the following errors allegedly
committed by the appellate court:

THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONERS’ PETITION FOR
CERTIORARI AND MANDAMUS AND IN AFFIRMING THE ORDER OF THE HON. JUDGE ANTONIO N.
ROSALES WHICH DISMISSED THE PETITIONERS’ APPEAL IN CIVIL CASE NO. C-36 OF THE REGIONAL
TRIAL COURT, BRANCH 43, ROXAS, ORIENTAL MINDORO, EVEN AFTER THE PETITIONERS HAD PAID THE
APPEAL DOCKET FEES.

II

THE HONORABLE COURT OF APPEALS LIKEWISE ERRED IN RULING AND AFFIRMING THE DECISION OR
ORDER OF THE RESPONDENT HON. ANTONIO M. ROSALES THAT PETITIONERS’ APPEAL WAS FILED OUT
OF TIME WHEN PETITIONERS RECEIVED THE LAST OR FINAL ORDER OF THE COURT ON JULY 22, 1998
AND FILED THEIR NOTICE OF APPEAL ON JULY 27, 1998 AND PAID THE APPEAL DOCKET FEE ON AUGUST
3, 1998.

III

THE HONORABLE COURT OF APPEALS FURTHER ERRED IN RULING THAT THE WORDS "FINAL ORDER" IN
SECTION 3, RULE 41, OF THE 1997 RULES OF CIVIL PROCEDURE WILL REFER TO THE [FIRST] ORDER OF
RESPONDENT JUDGE HON. ANTONIO M. MORALES DATED FEBRUARY 12, 1998 INSTEAD OF THE LAST
AND FINAL ORDER DATED JULY 1, 1998 COPY OF WHICH WAS RECEIVED BY PETITIONERS THROUGH
COUNSEL ON JULY 22, 1998.

IV.

THE HONORABLE COURT OF APPEALS FINALLY ERRED IN FINDING THAT THE DECISION IN THE CASE OF
DENSO, INC. V. IAC, 148 SCRA 280, IS APPLICABLE IN THE INSTANT CASE THEREBY IGNORING THE
PECULIAR FACTS AND CIRCUMSTANCES OF THIS CASE AND THE FACT THAT THE SAID DECISION WAS
RENDERED PRIOR TO THE ENACTMENT OF THE 1997 RULES OF CIVIL PROCEDURE.9
 The foregoing issues essentially revolve around the period within which petitioners should have filed their notice of
appeal.

First and foremost, the right to appeal is neither a natural right nor a part of due process. It is merely a statutory
privilege and may be exercised only in the manner and in accordance with the provisions of law. Thus, one who
seeks to avail of the right to appeal must comply with the requirements of the Rules. Failure to do so often leads to
the loss of the right to appeal.10 The period to appeal is fixed by both statute and procedural rules. BP 129,11 as
amended, provides:

Sec. 39. Appeals. – The period for appeal from final orders, resolutions, awards, judgments, or decisions of any
court in all these cases shall be fifteen (15) days counted from the notice of the final order, resolution, award,
judgment, or decision appealed from. Provided, however, that in habeas corpus cases, the period for appeal shall
be (48) forty-eight hours from the notice of judgment appealed from. x x x

Rule 41, Section 3 of the 1997 Rules of Civil Procedure states:

SEC. 3. Period of ordinary appeal. ― The appeal shall be taken within fifteen (15) days from the notice of the
judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of
appeal and a record on appeal within thirty (30) days from the notice of judgment or final order.

The period to appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension
of time to file a motion for new trial or reconsideration shall be allowed. (emphasis supplied)

Based on the foregoing, an appeal should be taken within 15 days from the notice of judgment or final order
appealed from. A final judgment or order is one that finally disposes of a case, leaving nothing more for the court to
do with respect to it. It is an adjudication on the merits which, considering the evidence presented at the trial,
declares categorically what the rights and obligations of the parties are; or it may be an order or judgment that
dismisses an action.12

As already mentioned, petitioners argue that the order of July 1, 1998 denying their motion for reconsideration
should be construed as the "final order," not the February 12, 1998 order which dismissed their complaint. Since
they received their copy of the denial of their motion for reconsideration only on July 22, 1998, the 15-day
reglementary period to appeal had not yet lapsed when they filed their notice of appeal on July 27, 1998.

What therefore should be deemed as the "final order," receipt of which triggers the start of the 15-day reglementary
period to appeal ¾ the February 12, 1998 order dismissing the complaint or the July 1, 1998 order dismissing the
MR?

In the recent case of Quelnan v. VHF Philippines, Inc.,13 the trial court declared petitioner Quelnan non-suited and
accordingly dismissed his complaint. Upon receipt of the order of dismissal, he filed an omnibus motion to set it
aside. When the omnibus motion was filed, 12 days of the 15-day period to appeal the order had lapsed. He later on
received another order, this time dismissing his omnibus motion. He then filed his notice of appeal. But this was
likewise dismissed ― for having been filed out of time.

The court a quo ruled that petitioner should have appealed within 15 days after the dismissal of his complaint since
this was the final order that was appealable under the Rules. We reversed the trial court and declared that it was
the denial of the motion for reconsideration of an order of dismissal of a complaint which constituted the final
order as it was what ended the issues raised there.

This pronouncement was reiterated in the more recent case of Apuyan v. Haldeman et al.14 where we again
considered the order denying petitioner Apuyan’s motion for reconsideration as the final order which finally disposed
of the issues involved in the case.

Based on the aforementioned cases, we sustain petitioners’ view that the order dated July 1, 1998 denying their
motion for reconsideration was the final order contemplated in the Rules.
We now come to the next question: if July 1, 1998 was the start of the 15-day reglementary period to appeal, did
petitioners in fact file their notice of appeal on time?

Under Rule 41, Section 3, petitioners had 15 days from notice of judgment or final order to appeal the decision of
the trial court. On the 15th day of the original appeal period (March 18, 1998), petitioners did not file a notice of
appeal but instead opted to file a motion for reconsideration. According to the trial court, the MR only interrupted the
running of the 15-day appeal period.15 It ruled that petitioners, having filed their MR on the last day of the 15-day
reglementary period to appeal, had only one (1) day left to file the notice of appeal upon receipt of the notice of
denial of their MR. Petitioners, however, argue that they were entitled under the Rules to a fresh period of 15 days
from receipt of the "final order" or the order dismissing their motion for reconsideration.

In Quelnan and Apuyan, both petitioners filed a motion for reconsideration of the decision of the trial court. We ruled
there that they only had the remaining time of the 15-day appeal period to file the notice of appeal. We consistently
applied this rule in similar cases,16 premised on the long-settled doctrine that the perfection of an appeal in the
manner and within the period permitted by law is not only mandatory but also jurisdictional.17 The rule is also
founded on deep-seated considerations of public policy and sound practice that, at risk of occasional error, the
judgments and awards of courts must become final at some definite time fixed by law.18

Prior to the passage of BP 129, Rule 41, Section 3 of the 1964 Revised Rules of Court read:

Sec. 3. How appeal is taken. — Appeal maybe taken by serving upon the adverse party and filing with the trial
court within thirty (30) days from notice of order or judgment, a notice of appeal, an appeal bond, and a
record on appeal. The time during which a motion to set aside the judgment or order or for new trial has been
pending shall be deducted, unless such motion fails to satisfy the requirements of Rule 37.

But where such motion has been filed during office hours of the last day of the period herein provided, the appeal
must be perfected within the day following that in which the party appealing received notice of the denial of said
motion.19 (emphasis supplied)

According to the foregoing provision, the appeal period previously consisted of 30 days. BP 129, however, reduced
this appeal period to 15 days. In the deliberations of the Committee on Judicial Reorganization20 that drafted BP
129, the raison d’ etre behind the amendment was to shorten the period of appeal21 and enhance the efficiency and
dispensation of justice. We have since required strict observance of this reglementary period of appeal. Seldom
have we condoned late filing of notices of appeal,22 and only in very exceptional instances to better serve the ends
of justice.

In National Waterworks and Sewerage Authority and Authority v. Municipality of Libmanan,23 however, we declared
that appeal is an essential part of our judicial system and the rules of procedure should not be applied rigidly. This
Court has on occasion advised the lower courts to be cautious about not depriving a party of the right to appeal and
that every party litigant should be afforded the amplest opportunity for the proper and just disposition of his cause,
free from the constraint of technicalities.

In de la Rosa v. Court of Appeals,24 we stated that, as a rule, periods which require litigants to do certain acts must
be followed unless, under exceptional circumstances, a delay in the filing of an appeal may be excused on grounds
of substantial justice. There, we condoned the delay incurred by the appealing party due to strong considerations of
fairness and justice.

In setting aside technical infirmities and thereby giving due course to tardy appeals, we have not been oblivious to or
unmindful of the extraordinary situations that merit liberal application of the Rules. In those situations where
technicalities were dispensed with, our decisions were not meant to undermine the force and effectivity of the
periods set by law. But we hasten to add that in those rare cases where procedural rules were not stringently
applied, there always existed a clear need to prevent the commission of a grave injustice. Our judicial system and
the courts have always tried to maintain a healthy balance between the strict enforcement of procedural laws and
the guarantee that every litigant be given the full opportunity for the just and proper disposition of his cause.25

The Supreme Court may promulgate procedural rules in all courts.26 It has the sole prerogative to amend, repeal or
even establish new rules for a more simplified and inexpensive process, and the speedy disposition of cases. In the
rules governing appeals to it and to the Court of Appeals, particularly Rules 42,27 4328 and 45,29 the Court allows
extensions of time, based on justifiable and compelling reasons, for parties to file their appeals. These extensions
may consist of 15 days or more.

To standardize the appeal periods provided in the Rules and to afford litigants fair opportunity to appeal their cases,
the Court deems it practical to allow a fresh period of 15 days within which to file the notice of appeal in the Regional
Trial Court, counted from receipt of the order dismissing a motion for a new trial or motion for reconsideration. 30

Henceforth, this "fresh period rule" shall also apply to Rule 40 governing appeals from the Municipal Trial Courts to
the Regional Trial Courts; Rule 42 on petitions for review from the Regional Trial Courts to the Court of Appeals;
Rule 43 on appeals from quasi-judicial agencies31 to the Court of Appeals and Rule 45 governing appeals
by certiorari to the Supreme Court.32 The new rule aims to regiment or make the appeal period uniform, to be
counted from receipt of the order denying the motion for new trial, motion for reconsideration (whether full or partial)
or any final order or resolution.

We thus hold that petitioners seasonably filed their notice of appeal within the fresh period of 15 days, counted from
July 22, 1998 (the date of receipt of notice denying their motion for reconsideration). This pronouncement is not
inconsistent with Rule 41, Section 3 of the Rules which states that the appeal shall be taken within 15 days from
notice of judgment or final order appealed from. The use of the disjunctive word "or" signifies disassociation and
independence of one thing from another. It should, as a rule, be construed in the sense in which it ordinarily
implies.33 Hence, the use of "or" in the above provision supposes that the notice of appeal may be filed within 15
days from the notice of judgment or within 15 days from notice of the "final order," which we already determined to
refer to the July 1, 1998 order denying the motion for a new trial or reconsideration.

Neither does this new rule run counter to the spirit of Section 39 of BP 129 which shortened the appeal period from
30 days to 15 days to hasten the disposition of cases. The original period of appeal (in this case March 3-18, 1998)
remains and the requirement for strict compliance still applies. The fresh period of 15 days becomes significant only
when a party opts to file a motion for new trial or motion for reconsideration. In this manner, the trial court which
rendered the assailed decision is given another opportunity to review the case and, in the process, minimize and/or
rectify any error of judgment. While we aim to resolve cases with dispatch and to have judgments of courts become
final at some definite time, we likewise aspire to deliver justice fairly.

In this case, the new period of 15 days eradicates the confusion as to when the 15-day appeal period should be
counted – from receipt of notice of judgment (March 3, 1998) or from receipt of notice of "final order" appealed from
(July 22, 1998).

To recapitulate, a party litigant may either file his notice of appeal within 15 days from receipt of the Regional Trial
Court’s decision or file it within 15 days from receipt of the order (the "final order") denying his motion for new trial or
motion for reconsideration. Obviously, the new 15-day period may be availed of only if either motion is filed;
otherwise, the decision becomes final and executory after the lapse of the original appeal period provided in Rule
41, Section 3.

Petitioners here filed their notice of appeal on July 27, 1998 or five days from receipt of the order denying their
motion for reconsideration on July 22, 1998. Hence, the notice of appeal was well within the fresh appeal period of
15 days, as already discussed.34

We deem it unnecessary to discuss the applicability of Denso (Philippines), Inc. v. IAC35 since the Court of Appeals
never even referred to it in its assailed decision.

WHEREFORE, the petition is hereby GRANTED and the assailed decision of the Court of
Appeals REVERSED and SET ASIDE. Accordingly, let the records of this case be remanded to the Court of
Appeals for further proceedings.

No costs.

SO ORDERED.
ON PETITION FOR CERTIORARI

RENE VILLAMAR-SANDOVAL, Petitioner,

vs.
JOSE CAILIPAN, MARIA OFELIA M. GONZALES, LAURA J. CAYABYAB, ROGELIO COSTALES, and
FERNANDO V. AUSTRIA, Respondents.

RESOLUTION

PERLAS-BERNABE, J.:

Assailed in this Petition for Review on Certiorari1 is the September 30, 2011 Decision2 and February 1, 2012
Resolution3 of the Court of Appeals (CA) of Cagayan de Oro City -in CA-G.R. SP No. 03976-MIN which set aside
the October 20, 201 0 and November 10, 201 0 Orders of the Regional Trial Court (RTC) of Koronadal City, Branch
24 declaring respondents in default.

The Facts

Petitioner Irene Villamar-Sandoval (petitioner) instituted a complaint for damages before the RTC, claiming that she
was prejudiced by the false, baseless and malicious libel case filed against her by respondent Jose Cailipan
(Cailipan) which was supported by affidavits executed by the other respondents herein.4 The said libel case circled
around certain declarations purportedly made by petitioner during a homeowner’s association meeting about
Cailipan’s criminal records for murder, slight physical injuries and estafa. These allegations were supposedly made
by petitioner in order to tarnish Cailipan’s reputation and facilitate his ouster as President of the said homeowner’s
association.5

During the course of the proceedings, respondents belatedly filed their answer (albeit by one day), prompting
petitioner to move to declare respondents in default. Consequently, the RTC issued an Order dated September 27,
2010 denying the said motion and admitting the answer of respondents.6

Subsequently, the case was set for pre-trial, during which respondents’ counsel, Atty. Sardido, failed to appear as
well as file a pre-trial brief despite due notice, while petitioner and her counsel appeared and made such
submission. In view of these lapses, petitioner prayed that respondents be declared in default which was granted by
the RTC in its October 20, 2010 Order.7

Aggrieved, Atty. Sardido filed an Entry of Appearance with Motion for Reconsideration on October 29, 2010, seeking
the reversal of the October 20, 2010 Order. He proffered the excuse that on the day of the pre-trial conference, he
had to attend an urgent hearing in Cotabato City involving an election protest but that he immediately went back to
Koronadal City to attend the mediation proceeding for the main case scheduled at 2:00 in the afternoon of the same
day. Petitioner opposed the motion.8

Ruling of the RTC

On November 10, 2010, the RTC issued an Order denying respondents’ motion for reconsideration, sustaining the
declaration of default due to their counsel’s failure to: (1) attend the scheduled pre-trial conference on October 20,
2010 and; (2) file a pre-trial brief despite due notice.9 Notably, it observed that respondents were already accorded
consideration when their answer was admitted despite its belated filing. It also found that "their newly retained
counsel miserably failed to attach a pre-trial brief or submit/attach an affidavit of merit" in the said motion for
reconsideration.10 Pursuant thereto, petitioner proceeded with the presentation of her evidence ex parte. Upon
submission of her formal offer of evidence, the case was submitted for resolution.11

On January 11, 2011, respondents filed before the CA a petition for certiorari under Rule 65 of the Rules of Court,
asserting that the RTC gravely abused its discretion in issuing the October 20, 2010 and November 10, 2010 Orders
and in not dismissing the case for improper venue.12

On even date, the RTC rendered a Decision in favor of petitioner, a copy of which was received by respondents on
January 24, 2011.13
On January 22, 2011, respondents filed a Notice of Appeal with the CA, while its initially filed certiorari petition was
still pending resolution before the same appellate court.14 In this relation, they subsequently filed on February 2,
2011 an Amended Notice of Appeal Ad Cautelam and a Joint Notice of Appeal Ad Cautelam (Amended Notices of
Appeal), clarifying therein that they were not abandoning their petition for certiorari.15

Ruling of the CA

In its Decision dated September 30, 2011,16 the CA, through its Twenty-First Division, denied respondents’
contention that the venue was improperly laid17 but nevertheless, granted their petition grounded on the impropriety
of the order of default. It applied the principle of substantial justice and deemed that "it would be most unfair" to
declare respondents in default for their lawyer’s failure to attend the pre-trial conference.18 With respect to the failure
of respondents’ counsel to file a pre-trial brief on time, the CA held that the RTC’s Order "barring respondents from
presenting evidence had been too precipitate and was not commensurate with the level of non-compliance by
[respondents’] counsel with the said order."19 Thus, for these reasons, the CA set aside the RTC’s October 20, 2010
and

November 10, 2010 Orders and directed the remand of the case to the RTC to allow the respondents to present
their evidence.20

Dissatisfied, petitioner filed a Partial Motion for Reconsideration,21 arguing that: (1) since the main case had already
been decided by the RTC through its January 11, 2011 Decision and respondents have availed of the remedy of
appeal, the latter’s petition for certiorari filed with the CA on January 11, 2011 was already moot and academic; and
(2) the RTC did not commit grave abuse of discretion when it declared respondents in default.

The foregoing motion was denied by the CA in its February 1, 2012 Resolution, holding that petitioner "failed to raise
substantial issues that would warrant reconsideration."22 In sustaining the invalidity of the RTC’s October 20, 2010
and November 10, 2010 Orders, it ratiocinated that "it is a far better and more prudent cause of action for the court
to excuse a technical lapse" and afford the respondents the right to be heard.23

Separately, the CA noted that, per the January 27, 2012 Verification issued by its Judicial Records Division, the
case records have yet to be forwarded to it, despite petitioner’s allegations that the RTC had already promulgated a
decision and that the respondents filed a Notice of Appeal.24 In this regard, it modified its initial September 30, 2011
Decision and thus deleted the portion which directed that the records of the case be remanded to the court a quo.25

Issues Before The Court

Essentially, the following issues are presented for the Court’s resolution: (1) whether respondents’ petition for
certiorari was an improper remedy and/or had been rendered moot and academic by virtue of the RTC’s January 11,
2011 Decision; and (2) whether the CA erred in setting aside the October 20, 2010 and November 10, 2010 RTC
Orders.

The Court’s Ruling

The petition is meritorious

It is well-settled that the remedies of appeal and certiorari are mutually exclusive and not alternative or
successive.26 The simultaneous filing of a petition for certiorari under Rule 65 and an ordinary appeal under Rule 41
of the Revised Rules of Civil Procedure cannot be allowed since one remedy would necessarily cancel out the other.
The existence and availability of the right of appeal proscribes resort to certiorari because one of the requirements
for availment of the latter is precisely that there should be no appeal.27

Corollary thereto, an appeal renders a pending petition for certiorari superfluous and mandates its dismissal. As held
in Enriquez v. Rivera:28

The general rule is that certiorari will not lie as a substitute for an appeal, for relief through a special action like
certiorari may only be established when no remedy by appeal lies. The exception to this rule is conceded only
"where public welfare and the advancement of public policy so dictate, and the broader interests of justice so
require, or where the orders complained of were found to be completely null and void, or that appeal was not
considered the appropriate remedy, such as in appeals from orders of preliminary attachment or appointments of
receiver." (Fernando v. Vasquez, L- 26417, 30 January 1970; 31 SCRA 288). For example, certiorari maybe
available where appeal is inadequate and ineffectual (Romero Sr. v. Court of Appeals, L-29659, 30 July 1971; 40
SCRA 172). 1âw phi 1

None of the exceptional circumstances have been shown to be present in this case; hence the general rule applies
in its entirety. Appeal renders superfluous a pending petition for certiorari, and mandates its dismissal. In the light of
the clear language of Rule 65 (1), this is the only reasonable reconciliation that can be effected between the two
concurrent actions: the appeal has to be prosecuted, but at the cost of the petition for certiorari, for the petition has
lost its raison d'etre. To persevere in the pursuit of the writ would be to engage in an enterprise which is
unnecessary, tautological and frowned upon by the law. (Emphasis and underscoring supplied.)

Applying the foregoing principles to the case at bar, it is clear that respondents’ January 11, 2011 petition for
certiorari was rendered superfluous by their January 22, 2011 appeal.

Although respondents did not err in filing the certiorari petition with the CA on January 11, 2011 – as they only
received the RTC’s Decision three days after the said date and therefore could not have availed of the remedy of an
appeal at that time29 – the Court observes that respondents should have (a) withdrawn their certiorari petition and
instead raised the jurisdictional errors stated therein in their appeal30 or (b) at the very least, informed the CA’s
Twenty-First Division31 of the Decision rendered on the main case and the filing of their Notice of Appeal on January
22, 2011. Prudence should have guided them to pursue either course of action considering the well-entrenched
conflict between the remedies of an appeal and a petition for certiorari, of which they should have been well aware
of.

Unfortunately, their omission resulted in the CA’s issuance of the September 30, 2011 Decision and February 1,
2012 Resolution in the certiorari case which set aside the assailed interlocutory orders, notwithstanding the
supervening rendition of a decision on the main case, thus creating an evident procedural impasse. 1âwphi 1

It should be noted that respondents’ petition for certiorari had long become moot by the RTC’s January 11, 2011
Decision. In particular, the grant of the petition for certiorari on mere incidental matters of the proceedings would not
accord any practical relief to respondents because a decision had already been rendered on the main case and
therefore, may be elevated on appeal. Lest it be misunderstood, a case becomes moot when no useful purpose can
be served in passing upon its merits. As a rule, courts will not determine a moot question in a case in which no
practical relief can be granted.32

In view of the above-discussed considerations and considering the fact that respondents’ petition for certiorari
cannot anymore be dismissed, the Court is constrained to set aside the September 30, 2011 Decision and February
1, 2012 Resolution of the CA. Consequently, this course of action will allow the CA Division where the appeal of the
main case is pending to appropriately pass upon the merits of the RTC’s January 11, 2011 Decision including all
assailed irregularities in the proceedings such as the validity of the default orders. To rule otherwise would only
serve to perpetuate the procedural errors already committed in this case.

Given the foregoing pronouncement, there exists no cogent reason to further dwell on the issue regarding the RTC’s
grave abuse of discretion in issuing the October 20, 2010 and November 10, 2010 default orders. As earlier
mentioned, that matter may be properly ventilated on appeal.

WHEREFORE, the petition is GRANTED. The September 30, 2011 Decision and February 1, 2012 Resolution of
the Court of Appeals in CA-G.R. SP No. 03976-MIN are hereby SET ASIDE.

SO ORDERED.

REPUBLIC OF THE PHILIPPINES, represented by ABUSAMA M. ALID, Officer-in-Charge, DEPARTMENT OF

AGRICULTURE - REGIONAL FIELD UNIT XII (DA-RFU XII), Petitioner,
vs.
ABDULWAHAB A. BAYAO, OSMEÑA I. MONTAÑER, RAKMA B. BUISAN, HELEN M. ALVAREZ, NEILA P.
LIMBA, ELIZABETH B. PUSTA, ANNA MAE A. SIDENO, UDTOG B. TABONG, JOHN S. KAMENZA, DELIA R.
SUBALDO, DAYANG W. MACMOD, FLORENCE S. TAYUAN, in their own behalf and in behalf of the other
officials and employees of DA-RFU XII, Respondents.

DECISION

LEONEN, J.:

Before us is a Petition for Review on Certiorari filed under Rule 45. This Petition prays for the reversal and setting
aside of the Court of Appeals’ (1) Resolution dated March 21, 2007 that dismissed the Petition for Certiorari under
Rule 65 filed by petitioner for failure to resort to a Motion for Reconsideration of the assailed trial court Order dated
October 9, 2006 and (2) Resolution dated August 16, 2007 denying petitioner’s Motion for Reconsideration.

Petitioner Department of Agriculture–Regional Field Unit XII (DARFU XII) is a government office mandated to
implement the laws, policies, plans, programs, rules, and regulations of the Department of Agriculture in its regional
area, while respondents are officials and employees of DA-RFU XII.1

On March 30, 2004, Executive Order (E.O.) No. 304 was passed designating Koronadal City as the regional center
and seat of SOCCSKSARGEN Region.2 It provides that all departments, bureaus, and offices of the national
government in the SOCCSKSARGEN Region shall transfer their regional seat of operations to Koronadal City.3

In an April 1, 2005 Memorandum, the Department of Agriculture (DA) Undersecretary for Operations Edmund J.
Sana directed Officer-inCharge (OIC) and Regional Executive Director of DA-RFU XII Abusama M. Alid as follows:

In compliance with Executive Order No. 304 of which Section 2 states "Transfer of Regional Offices. All
departments, bureaus and offices of the National Government on the SOCCSKSARGEN Region shall transfer their
regional seat of operations to Koronadal City," you are hereby directed to immediately effect the transfer of the
administrative, finance and operations base of RFU XII from Cotabato City to Koronadal City. On the interim, part of
the staff can temporarily hold office at either or both the ATI building in Tantangan and Tupi Seed Farm, but the
main office shall be within Koronadal City.

The action plan for transfer should be submitted to my office not later than 6 April 2005 so that appropriate funding
can be processed soonest. Further, execution of the plan should commence by 16 April 2005 or earlier so that
concerned personnel can benefit from the summer break to make personal arrangements for the transfer of their
work base.

For strict compliance.4

In a Memorandum dated April 22, 2005 addressed to DA Secretary Arthur Yap, private respondents opposed the
implementation of the April 1, 2005 Memorandum.5

They alleged that in 2004, former President Gloria Macapagal-Arroyo made a pronouncement during one of her
visits in Cotabato City that the regional seat of Region 12 shall remain in Cotabato City.6 Only three departments
were not covered by the suspension of E.O. No. 304, namely, the Department of Trade and Industry (DTI),
Department of Tourism (DOT), and Department of Labor and Employment (DOLE).7

Respondents alleged further in their Memorandum to the DA Secretary that on March 7, 2005, they appealed to the
Secretary of Agriculture that the implementation of E.O. No. 304 be held in abeyance. A copy of the Petition was
attached to the Memorandum. It cited reasons such as the huge costs the physical transfer will entail and the plight
of employees who have already settled and established their homes in Cotabato City.8

On March 8, 2005, their Petition was endorsed by Department of Agriculture Employees Association-12 (DAEAS-
12) President Osmeña I. Motañer to then President Macapagal-Arroyo, and on April 12, 2005, this was referred to
DA Secretary Yap for his information and appropriate action.9 Respondents justified their appeal saying that a
building was constructed in Cotabato City that can accommodate the whole staff of DARFU XII. On the other hand,
there is no building yet in Koronadal City where rent is very expensive.10 Moreover, if the regional office remains in
Cotabato City, the government need not spend over ₱7,200,000.00 as dislocation pay as well as other expenses for
equipment hauling and construction.11 Finally, respondents alleged that the proposed third floor of the ATI Building
in Tantangan has a sub-standard foundation and will not be issued a certificate of occupancy by the City
Engineering Office of Koronadal City as per information from an auditor.12

On May 17, 2005, OIC Abusama M. Alid held a meeting and ordered the transfer of the regional office to ATI
Building in Tantangan and Tupi Seed Farm in Tupi, both located in South Cotabato and Uptown, Koronadal City, to
be carried out on May 21, 2005.13

This prompted respondents to file on May 18, 2005 a Complaint for Injunction with Prayer for Issuance of Writ of
Preliminary Injunction and/or Temporary Restraining Order with the Regional Trial Court, Branch 14 of Cotabato
City.14

By Order dated October 9, 2006, the trial court granted respondents' Prayer for a Writ of Preliminary Injunction.15

In a petition dated December 17, 2006,16 petitioner went to the Court of Appeals via Rule 65 on the ground that the
assailed Order of the trial court is contrary to the pronouncement of this Court in DENR v. DENR Region 12
Employees.

Through the March 21, 2007 Resolution, the Court of Appeals dismissed the Petition for Certiorari for failure of
petitioner to resort to a Motion for Reconsideration of the assailed trial court Order.17

Hence, the present Petition under Rule 45.

Petitioner argues that (1) this case falls under the exceptions for filing a Motion for Reconsideration prior to filing a
Petition under Rule 65; (2) the trial court Order enjoining the transfer is contrary to DENR v. DENR Region 12
Employees18 that upheld the separation of powers between the executive and judiciary on the wisdom of transfer of
regional offices; (3) the trial court interfered into this wisdom of the executive in the management of its affairs; and
(4) the trial court disregarded basic rules on amendment and revocation of administrative issuances and the
propriety of injunction as a remedy.19

In their Comment, respondents counter that a Petition via Rule 45 is not the proper remedy to assail the disputed
Resolutions.20 They allege that the assailed Court of Appeals Resolution dismissing the Petition for Certiorari for
failure of the petitioners to file a Motion for Reconsideration is not a "final order or resolution" contemplated by Rule
45.21 It is not an adjudication on the merits.22 In fact, the Court of Appeals did not even attempt to resolve the
propriety of the issuance of the assailed trial court Order.23 In any case, respondents argue that petitioner’s failure to
file a Motion for Reconsideration is fatal. They contend that this is a condition sine qua non for a Petition under Rule
65, and none of the exceptions are present in this case.24

Based on both parties’ contentions, the issues involved in this case may be summarized as follows:

I. Whether a Petition via Rule 45 is the proper remedy to assail the disputed Resolutions

II. Whether the present case falls within the exceptions on the requisite for filing a Motion for
Reconsideration prior to filing a Petition for Certiorari under Rule 65

III. Whether petitioner can raise other issues not addressed in the assailed Resolutions

IV. Whether the issuance by the RTC of a preliminary injunction against the transfer of the DA Regional
Office to Koronadal City violates the separation of powers between the executive department and the
judiciary as to the wisdom behind the transfer

First, we discuss the procedural issues.

Respondents contend that a Petition via Rule 45 is not the proper remedy to assail the disputed Resolutions.25 They
allege that the assailedCourt of Appeals Resolution dismissing the Petition for Certiorari for failure of the petitioners
to file a Motion for Reconsideration is not a "final order or resolution" contemplated by Rule 45.26
On the other hand, petitioner argues that if the assailed Resolutions are not elevated via Rule 45, they would attain
finality and consequently, the trial court Order dated October 9, 2006 would become unassailable as well.27

A dismissal by the Court of Appeals of a Petition via Rule 65 for failure to file a Motion for Reconsideration may be
assailed via Rule 45.

Unlike a Petition via Rule 45 that is a continuation of the appellate process over the original case, a special civil
action for certiorari under Rule 65 is an original or independent action.28 Consequently, the March 21, 2007
Resolution of the Court of Appeals dismissing the Petition via Rule 65 as well as its August 16, 2007 Resolution
denying reconsideration are the final Resolutions contemplated under Rule 45. As correctly pointed out by
petitioner, these Resolutions would attain finality if these are not elevated on appeal via Rule 45. As a result, the trial
court Order dated October 9, 2006 would also become unassailable.29 1âwphi1

Respondents also argue that petitioner’s failure to file a Motion for Reconsideration of the assailed Regional Trial
Court Order dated October 9, 2006 is fatal.30 They contend that the reasons raised by petitioner do not justify
dispensing with the prerequisite of filing a Motion for Reconsideration.31

For its part, petitioner argues that its Petition for Certiorari filed before the Court of Appeals falls under the
exceptions to the necessity of filing a Motion for Reconsideration.32 In its Petition with the Court of Appeals,
petitioners explained its reasons for no longer filing a Motion for Reconsideration of the assailed order in that (a) the
questions to be raised in the motion have already been duly raised and passed upon by the lower court33 and (b)
there is urgent necessity for the resolution of the questions or issues raised.34 Petitioners allege that the trial court
presiding judge was not acting on the disposition of the case with dispatch and that any further delay would unduly
prejudice the interests of the government in pursuing its economic development strategies in the region.35

The settled rule is that a Motion for Reconsideration is a condition sine qua non for the filing of a Petition for
Certiorari.36 Its purpose is to grant an opportunity for the court to correct any actual or perceived error attributed to it
by re-examination of the legal and factual circumstances of the case.37

This rule admits well-defined exceptions as follows:

Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for the filing of a petition
for certiorari.

Its purpose is to grant an opportunity for the court to correct any actual or perceived error attributed to it by the re-
examination of the legal and factual circumstances of the case. The rule is, however, circumscribed by well-defined
exceptions, such as (a) where the order is a patent nullity, as where the court a quo has no jurisdiction; (b) where
the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower court, or are
the same as those raised and passed upon in the lower court; (c) where there is an urgent necessity for the
resolution of the question and any further delay would prejudice the interests of the Government or of the petitioner
or the subject matter of the action is perishable; (d) where, under the circumstances, a motion for reconsideration
would be useless; (e) where petitioner was deprived of due process and there is extreme urgency for relief; (f)
where, in a criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial court is
improbable; (g) where the proceedings in the lower court are a nullity for lack of due process; (h) where the
proceeding were ex parte or in which the petitioner had no opportunity to object; and (i) where the issue raised is
one purely of law or where public interest is involved.38 (Emphasis provided)

The second exception is present in this case.

In Siok Ping Tang v. Subic Bay Distribution, Inc.,39 this Court found that the non-filing of a Motion for
Reconsideration in the case was not fatal since the questions raised in the certiorari proceedings have already been
duly raised and passed upon by the lower court, viz:

Respondent explained their omission of filing a motion for reconsideration before resorting to a petition for certiorari
based on exceptions (b), (c) and (i). The CA brushed aside the filing of the motion for reconsideration based on the
ground that the questions raised in the certiorari proceedings have been duly raised and passed upon by the lower
court, or are the same as those raised and passed upon in the lower court. We agree.
Respondent had filed its position paper in the RTC stating the reasons why the injunction prayed for by petitioner
should not be granted. However, the RTC granted the injunction. Respondent filed a petition for certiorari with the
CA and presented the same arguments which were already passed upon by the RTC. The RTC already had the
opportunity to consider and rule on the question of the propriety or impropriety of the issuance of the injunction. We
found no reversible error committed by the CA for relaxing the rule since respondent's case falls within the
exceptions.40

Similarly, the various issues raised in the Petition with the Court of Appeals have already been raised by petitioner
on several occasions through its pleadings with the trial court. The lower court, therefore, passed upon them prior to
its issuance of its Order dated October 9, 2006. Specifically, the table below summarizes the issues and arguments
raised by petitioner before the trial court vis a vis those raised in the Petition for Certiorari filed with the Court of
Appeals:

COURT OF
TRIAL COURT
APPEALS

Motion to Dismiss41 Memorandum42 Manifestation and Petition for Certiorari44

Reply43
dated June 27, 2005 dated September 1, dated December 17,
2006 dated September 5, 2006 2006
The Honorable The instant complaint To reiterate, the Respondent judge
Supreme Court had filed by plaintiffs for Supreme Court has held committed grave abuse
already ruled that the injunction is an indirect in the applicable case of of discretion to lack or
propriety or wisdom of way of preventing the DENR v. DENR Region excess of jurisdiction
the transfer of transfer of the regional 12 Employees (409 when he enjoined
government agencies seat of DARFU XII SCRA 359 [2003]) that petitioner from
or offices from which has been upheld respondent DENR transferring DA-RFU XII
Cotabato City to by the Supreme Court in employees "cannot, by from Cotabato City to
Koronadal, South DENR v. DENR Region means of an injunction, South Cotabato and
Cotabato is beyond 12 Employees (409 force the DENR XII Koronadal City. The
judicial inquiry.45 SCRA 359 [2003]). If Regional Offices to assailed order of the
this Honorable Court remain in Cotabato City, lower court enjoining
cannot countermand the as the exercise of the petitioner from
Supreme Court’s ruling authority to transfer the transferring the seat of
directly, it cannot do so same is executive in the DA-RFU XII office to
indirectly.46 nature." The Supreme Koronadal City in South
Court further stated in Cotabato is contrary to
said case that "the the pronouncement of
judiciary cannot inquire the Supreme Court in
into the wisdom or DENR v. DENR Region
expediency of the acts of 12 Employees (409
the executive or the SCRA 359 [2003]).48
legislative department."47
Corollary to the above,
the Order dated May 31,
2005 of this Honorable
Court enjoining
defendants from
transferring the seat of
the DA-RFU XII office to
Koronadal City in South
Cotabato is contrary to
the above
pronouncement of the
Supreme Court.
Perforce, the Order
 must be set aside
accordingly.49
The allegation under Executive orders are Respondent judge acted
Paragraph 4 of the amended, modified or arbitrarily, whimsically
Complaint that her revoked by subsequent and in a very biased
Excellency, President ones. The alleged public manner when he
Gloria Macapagal- pronouncement of the concluded that the
Arroyo only made a President suspending President of the
public pronouncement the implementation of Republic has suspended
that the effect of E.O. Executive Order No. the implementation of
No. 304 is suspended 304 is contrary to the Executive Order No.
is hearsay and ordinance power of the 304.52
contrary to the President as provided
procedure on the under the Administrative
repeal, amendment or Code of 1987.51
modification of rules
and regulations.50
By the nature of their Respondent judge
appointment as committed grave abuse
Regional Officials and of discretion when he
Employees, plaintiffs concluded that the
can be reassigned transfer of DA-RFU XII
anywhere within to Koronadal City will
Region XII in the affect seriously the
exigency of the studies of respondents’
service.53 children and that there
will be no buildings to
house respondents.54
The allegation of If the plight and
possible injury to conditions of the families
plaintiffs and their of the DENR employees
families as a are worth considering,
consequence of the like the dislocation of
planned transfer of the schooling of their
regional seat of DA-RFU children, which without
XII to Koronadal City doubt has more adverse
had been ruled upon by impact than the
the Supreme Court in supposed absence of
DENR v. DENR Region allowances for the
12 Employees (409 transfer, the Supreme
SCRA 359 [2003]) to be Court should have
beyond judicial inquiry granted the injunction
because it involves prayed for by said DENR
concerns that are more employees. Apparently,
on the propriety or the Supreme Court did
wisdom of the transfer not find it compelling to
rather than on its grant the injunction over
legality.55 and above the wisdom of
the transfer.56
The families of the
employees can still stay
in Cotabato City in as
much as they have
established residences
in the area. It must be
emphasized that the
 employees derive
salaries and benefits
from their government
work, from which they
support their families.
The movement of
employees thus would
not cause much
financial dislocation as
long as the employees
received their salaries
and benefits.57
The Honorable Court Respondent judge
must further realize that committed grave abuse
the employees are being of discretion when he
paid their salaries. In the concluded that the
given order of things, transfer of DA-RFU XII
such salaries are enough would stretch out the
to provide for their basic meager salaries of
necessities. The respondents and that it
Regional Office can would cause them
simply provide for economic
transportation to strangulation.59
effectuate the minimum
required for the transfer
to Koronadal City and
expect the employees to
live on their salaries. Any
allowances due and
owing the employees
connected with the
transfer can be given to
them later as back
payments. This is not to
forget that the Regional
Office has provided
temporary housing for
said employees to
alleviate any
inconvenience that they
may suffer.58
There is absolutely no The issues on the Respondent judge
technical malversation alleged illegal committed grave abuse
in the realignment of realignment of funds, of discretion when he
budgetary allocation unauthorized ssuance of ordered the issuance of
for the intended memorandum and the a writ of preliminary
transfer of DA-RFU XII alleged unjust transfer injunction based on the
to Koronadal City.60 of employees of DA- absence of appropriation
RFU XII are acts that for the transfer to
are executive in nature x Koronadal City in the
x x.61 amount of
₱9,250,000.00.62
x x x the funds needed
for the transfer can be
sourced and met by the
DA from sources such
as the discretionary
 administrative fund of
the Office of the
Secretary.
Respondent’s
computation of the
amount required for the
transfer in the amount of
₱9,222,000.00 is
bloated or
exaggerated.63
Respondents who are Respondent judge
accountable officers committed grave abuse
cannot be coerced to of discretion when he
transfer funds that are concluded that
deemed illegal or respondents would
improper. Hence, no suffer irreparable
personal liability or damage if the transfer of
irreparable injury would DARFU XII from
be caused upon them. Cotabato City to
On the other hand, the Koronadal City is not
rest of respondents who enjoined.65
are ordinary employees
would not suffer any
irreparable injury. This
1âw phi1

is due to the fact that

they have no privity to
the alleged illegal
transfer of funds.64

Thus, the present case falls under the second exception in that a Motion for Reconsideration need not be filed
where questions raised in the certiorari proceedings are the same as those raised and passed upon in the lower
court.

In any case, this Court disregards the presence of procedural flaws when there is necessity to address the issues
because of the demands of public interest, including the need for stability in the public service and the serious
implications the case may cause on the effective administration of the executive department.66

The instant Petition involves the effective administration of the executive department and would similarly warrant
relaxation of procedural rules if need be. Specifically, the fourth clause of E.O. No. 304 states as follows:
"WHEREAS, the political and socio-economic conditions in SOCCSKSARGEN Region point to the need for
designating the regional center and seat of the region to improve government operations and services."67

Respondents’ final contention is that the disputed Resolutions issued by the Court of Appeals dwell solely on the
indispensability of the filing of a Motion for Reconsideration with the trial court before filing a Petition via Rule 65;
thus, the other grounds in the present Petition need not be addressed.68

Considering that the Petition has overcome the procedural issues as discussed above, we can now proceed to
discuss the substantive issues raised by petitioner.

Petitioner argues that the assailed Order of the trial court enjoining it from transferring the seat of the DA-RFU XII
Regional Office to Koronadal City is contrary to this Court’s pronouncement in DENR v. DENR Region 12
Employees upholding the separation of powers of the executive department and the judiciary when it comes to the
wisdom of transfer of regional offices.69

This Court has held that while the power to merge administrative regions is not provided for expressly in the
Constitution, it is a power which has traditionally been lodged with the President to facilitate the exercise of the
power of general supervision over local governments.70 This power of supervision is found in the Constitution71 as
well as in the Local Government Code of 1991, as follows:

Section 25 – National Supervision over Local Government Units –

(a) Consistent with the basic policy on local autonomy, the President shall exercise general supervision over local
government units to ensure that their acts are within the scope of their prescribed powers and functions.

The President shall exercise supervisory authority directly over provinces, highly urbanized cities, and independent
component cities; through the province with respect to component cities and municipalities; and through the city and
municipality with respect to barangays.72

In Chiongbian v. Orbos, we held further that the power of the President to reorganize administrative regions carries
with it the power to determine the regional center.73

The case of DENR v. DENR Region 12 Employees is in point. This Court held that the DENR Secretary can
reorganize validly the DENR by ordering the transfer of the DENR XII Regional Offices from Cotabato City to
Koronadal, South Cotabato. We also found as follows:74

It may be true that the transfer of the offices may not be timely considering that: (1) there are no buildings yet to
house the regional offices in Koronadal, (2) the transfer falls on the month of Ramadan, (3) the children of the
affected employees are already enrolled in schools in Cotabato City, (4) the Regional Development Council was not
consulted, and (5) the Sangguniang Panglungsod, through a resolution, requested the DENR Secretary to
reconsider the orders. However, these concern issues addressed to the wisdom of the transfer rather than to its
legality. It is basic in our form of government that the judiciary cannot inquire into the wisdom or expediency of the
acts of the executive or the legislative department, for each department is supreme and independent of the others,
and each is devoid of authority not only to encroach upon the powers or field of action assigned to any of the other
department, but also to inquire into or pass upon the advisability or wisdom of the acts performed, measures taken
or decisions made by the other departments.75 (Emphasis provided)

The transfer of the regional center of the SOCCSKSARGEN region to Koronadal City is an executive function.

Similar to DENR v. DENR Region 12 Employees, the issues in the present case are addressed to the wisdom of the
transfer rather than to its legality. Some of these concerns are the lack of a proper and suitable building in
Koronadal to house the DA regional office, the inconvenience of the transfer considering that the children of
respondent-employees are already enrolled in Cotabato City schools, and other similar reasons.

The judiciary cannot inquire into the wisdom or expediency of the acts of the executive.76 When the trial court issued
its October 9, 2006 Order granting preliminary injunction on the transfer of the regional center to Koronadal City
when such transfer was mandated by E.O. No. 304, the lower court did precisely that.

The principle of separation of powers ordains that each of the three great government branches has exclusive
cognizance of and is supreme in concerns falling within its own constitutionally allocated sphere.77 The judiciary as
Justice Laurel emphatically asserted "will neither direct nor restrain executive or legislative action x x x. "78

Finally, a verbal pronouncement to the effect that E.O. No. 304 is suspended should not have been given weight. An
executive order is valid when it is not contrary to the law or Constitution.79

WHEREFORE, the Petition is GRANTED. The Resolutions of the Court of Appeals dated March 21, 2007 and
August 16, 2007 in CA-G.R. SP No. 0 1457-MIN, as well as the Decision dated October 9, 2006 of the Regional
Trial Court, Branch 14 of Cotabato City are REVERSED and SET ASIDE.

SO ORDERED.

ON ANNULMENT OF JUDGMENT
BACLARAN MARKETING CORPORATION, Petitioner,
vs.
FERNANDO C. NIEVA and MAMERTO SIBULO, JR., Respondents

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 of the August 26, 20092 and October 9, 20093 Resolutions of the Court of
Appeals (CA) in CA-G.R. SP No. 108033. The CA denied due course and dismissed Baclaran Marketing
Corporation's (BMC) Petition for Annulment of Judgment on the ground that it is not a remedy available to BMC.

Petitioner BMC is a domestic corporation engaged in the business of distribution, marketing and delivery of
cement. 4 It is one of the defendants in Civil Case No. 1218-A, entitled "Mamerto Sibulo, Jr. v. Ricardo Mendoza and
Baclaran Marketing, Inc." pending with the Regional Trial Court of Antipolo, Branch 74 (Antipolo Court).5 The case is
one for damages arising from a vehicular collision in Taytay, Rizal between a 10-wheeler truck owned by BMC and
driven by its employee Ricardo Mendoza (Mendoza), and a car owned and driven by Mamerto Sibulo, Jr. (Sibulo).
The Anti polo Court, in its Decision6 dated November 21, 1990 (1990 Decision), ruled in favor of BMC and Mendoza
and dismissed Sibulo's complaint. 7 It found that the damages suffered by Sibulo were the result of his own reckless
and imprudent driving.8

On appeal, the CA, in its Decision9 dated May 9, 2005 reversed the Antipolo Court and held that Mendoza's
negligence caused the collision. It awarded Sibulo damages in the total amount of ₱765,159.55. 10 In the absence of
a motion for reconsideration, the Decision became final and executory on June 12, 2005. 11 The Antipolo Court
subsequently issued a Writ of Execution12 on January 16, 2006. Then, in an Order13 dated February 23, 2006, it
directed the Deputy Sheriff, upon motion of Sibulo, to implement the Writ of Execution against the real properties
owned by BMC, as it appears that BMC has no personal properties. The sheriff of the Antipolo Court levied upon
BMC's real property in Parafiaque City covered by Transfer Certificate of Title (TCT) No. 34587 (property). He sold
the property and its improvements through public auction on April 17, 2006. Respondent Fernando C. Nieva (Nieva)
emerged as the highest bidder paying the total price of ₱800,000.00. 14

For BMC's failure to redeem the property within one year from the sale, Nieva consolidated ownership over it. He
filed a Petition for Cancellation of Transfer Certificate Title No. 34587 and Issuance of New [Title] in the Regional
Trial Court of Parañaque City, Branch 257 (Parañaque Court) pursuant to Section 107 of Presidential Decree No.
1529.15 The case was docketed as LRC Case No. 07-0119.16 The Parañaque Court granted the petition in its
Decision 17 dated March 26, 2008 and ordered BMC to surrender to Nieva, within 15 days from receipt of the
Decision, its owner's duplicate certificate of title over the property. Failing such, the Parañaque Court ordered the
Register of Deeds to annul TCT No. 34587 and issue a new title in Nieva's name. The Decision of the Parañaque
Court became final on May 8, 2008.18 Consequently, Nieva filed a Petition for Issuance of a Writ of Possession over
the property in the Parañaque Court. The case was docketed as LRC Case No. 08-0077. The Parañaque Court
granted the petition in its Decision19 dated January 26, 2009 and issued a Writ of Possession and Notice to Vacate
against BMC dated March 12, 2009 and March 22, 2009, respective1y. 20

In view of the Writ of Possession and Notice to Vacate issued against it, BMC filed a Petition for Annulment of
Judgment 21 before the CA. BMC prayed for the annulment of the following orders and decisions:

(a) Writ of Execution dated January 16, 2006 issued by the Antipolo Court in Civil Case No. 1218-A;

(b) Order dated February 23, 2006 of the Antipolo Court in Civil Case No. 1218-A ordering the implementation of the
writ of execution over the real properties of BMC;

(c) Auction Sale dated April 17, 2006;

(d) Decision dated March 26, 2008 of the Parañaque Court in LRC Case No. 07-0119 canceling TCT No. 34587;
and
(e) Decision dated January 26, 2009 of the Parañaque Court in LRC Case No. 08-0077, ordering the issuance of a
Writ of Possession. 22

BMC alleged that its counsel, Atty. lsagani B. Rizon (Atty. Rizon), committed acts of gross and inexcusable
negligence constituting "extrinsic fraud," which deprived it of due process and an opportunity to present its side.23 It
discovered the fraud only in December 2008 when its representatives tried to pay the real estate tax on the property,
only to learn that the title to it had already been transferred to Nieva.24 BMC averred that it did not know that Sibulo
appealed the 1990 Decision of the Antipolo Court to the CA. It claimed that Atty. Rizon assured BMC that the 1990
Decision ended the controversy.25 Had BMC la1own of the appeal, it could have opposed the proceedings or
engaged the services of new counsel.

BMC claimed that it immediately called Atty. Rizon in his office upon discovering that the property was levied upon
and sold at public auction. However, BMC was informed that Atty. Rizon died on January 30, 2009. It also learned
that Atty. Rizon ran for public office and won as Mayor of Baroy, Lanao Del Norte in the 1995, 2001, 2004 and 2007
elections.26 BMC alleged that based on court records, notices relative to the case against BMC were sent to Atty.
Rizon but, for some reason unknown to BMC, Atty. Rizon never informed it of the court documents/processes.27

BMC emphasized that the Antipolo Court ruled in its favor in Civil Case No. 1218-A and that it was only when BMC
failed to participate in the appeal that an adverse decision was rendered against it. 28 It maintains that if the orders of
the Antipolo and Parañaque Courts were allowed to stand, BMC will be deprived of its substantial property rights
over the property: when the property was sold to Nieva at the public auction for a bid price of P800,000.00, its
market value29 was already P19,890,000.00.30

The CA, in its Resolution dated August 26, 2009, denied BMC's petition. It ruled that the remedy of annulment of
judgment is not available to BMC because:

(a) Extrinsic fraud refers to a fraud perpetrated by the prevailing party, not by the unsuccessful party's own counsel.31

(b) BMC is bound by the negligence of Atty. Rizon because it was negligent for not checking on the status of the
case. It did not also inform the Antipolo Court of its change of address. Thus, BMC cannot claim that it was denied
due process. 32

(c) A writ of execution or auction sale are not in the nature of a final judgment, order, or resolution, hence, they
cannot be the subject of an action to annul judgment.33

BMC moved for reconsideration; this, however, was denied. Hence, this petition,34 which raises the sole issue of
whether the CA erred in dismissing BMC's petition for annulment of judgment.

We deny the petition.

Rule 47 of the Rules of Court governs actions for the annulment of final judgments, orders, or resolutions of regional
trial courts in civil actions. It is a recourse equitable in character, allowed only in exceptional cases where there is no
available or other adequate remedy.35 Its objective is to set aside a final and executory judgment, which is not void
upon its face, but is entirely regular in form, and whose alleged defect is not apparent upon its face or from the
recitals contained in the judgment.36 Since it disregards the time-honored rule of immutability and unalterability of
final judgments, the Rules of Court impose stringent requirements before a litigant may avail of it. In Pinausukan
Seafood House v. Far East Bank & Trust Company,37 we held that "[g]iven the extraordinary nature and the objective
of the remedy of annulment of judgment or final order,"38 a petitioner must comply with the statutory requirements as
set forth under Rule 47. These are:

(1) The remedy is available only when the petitioner can no longer resort to the ordinary remedies of new trial,
appeal, petition for relief or other appropriate remedies through no fault of the petitioner; (2) The grounds for the
action of annulment of judgment are limited to either extrinsic fraud or lack of jurisdiction; (3) The action must be
filed within four years from the discovery of the extrinsic fraud; and if based on lack of jurisdiction, must be brought
before it is barred by laches or estoppel; and (4) The petition must be verified, and should allege with particularity
the facts and the law relied upon for annulment, as well as those supporting the petitioner's good and substantial
cause of action or defense, as the case may be.39

BMC's petition for annulment of judgment fails to meet the first and second requisites.

II

Rule 47, Section 1 limits the applicability of the remedy of annulment of judgment to final judgments, orders or
resolutions.40 A final judgment or order is one that finally disposes of a case, leaving nothing more for the com1 to do
in respect thereto. This may be an adjudication on the merits which, on the basis of the evidence presented at the
trial, declares categorically what the rights and obligations of the parties are and which party is in the right, or a
judgment or order that dismisses an action on the ground of res judicata or prescription.41 In contrast, an
interlocutory order does not dispose of a case completely but leaves something to be done upon its merits.42

We find that the CA correctly denied BMC's petition.

In Guiang v. Co,43 we declared that an auction sale and a writ of execution are not final orders. Thus, they cannot be
nullified through an action for annulment of judgment, to wit:

It bears stressing that Rule 47 of the Rules of Civil Procedure applies only to a petition to annul a judgment or final
order and resolution in civil actions, on the ground of extrinsic fraud or lack of jurisdiction or due process. A final
order or resolution is one which is issued by a court which disposes of the subject matter in its entirety or terminates
a particular proceeding or action, leaving nothing else to be done but to enforce by execution what has been
determined by the court. The rule does not apply to an action to annul the levy and sale at public auction of
petitioner's properties or the certificate of sale executed by the deputy sheriff over said properties. Neither
does it apply to an action to nullify a writ of execution because a writ of execution is not a final order or
resolution, but is issued to carry out the mandate of the court in the enforcement of a final order or of a
judgment. It is a judicial process to enforce a final order or judgment against the losing party.44 (Citations
omitted, emphasis supplied.)

Corollarily, an order implementing a writ of execution issued over certain real properties is also not a final order as it
merely enforces a judicial process over an identified object. It does not involve an adjudication on the merits or
determination of the rights of the parties.

Closely related to a writ of execution is a writ of possession. In LZK Holdings and Development Corp. v. Planters
Development Bank,45 we explained that a writ of possession is a writ of execution employed to enforce a judgment to
recover the possession of land. It commands the sheriff to enter the land and give its possession to the person
entitled under the judgment.46 Thus, similar to a writ of execution, a writ of possession is not a final order which may
be annulled under Rule 47. It is merely a judicial process to enforce a final order against the losing party. For this
reason the Decision of the Antipolo Court ordering the issuance of writ of possession is also not amenable to an
action for annulment of judgment.

In fine, only the Decision of the Parafiaque Court ordering the cancellation ofBMC's title over the property qualifies
as a final judgment. It is a judgment on the merits declaring who between Nieva and BMC has the right over the title
to the property. Therefore, it may be the subject of an action for annulment of judgment. Be that as it may, BMC
failed to prove that any of the grounds for annulment are present in this case.

III

Rule 47, Section 2 provides extrinsic fraud and lack of jurisdiction as the exclusive grounds for the remedy of
annulment of judgment.47 Case law, however, recognizes a third ground--denial of due process of law. Arcelona v.
Court of Appeals48 teaches that a decision which is patently void may be set aside on grounds of want of jurisdiction
or "non-compliance with due process of law. "49

Here, BMC invokes extrinsic fraud and lack of due process as grounds for its petition for annulment of judgment. It
claims that Atty. Rizon's gross negligence in handling the case constitutes extrinsic fraud and deprived it of due
process of law.
We are not persuaded. Extrinsic fraud refers to a fraud committed to the unsuccessful party by his opponent
preventing him from fully exhibiting his case by keeping him away from court, a false promise of a compromise; or
where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or when an
attorney fraudulently or without authority connives at his defeat. 50

In Pinausukan, 51 we held that a lawyer's neglect in keeping track of the case and his failure to apprise his client of
the developments of the case do not constitute extrinsic fraud. Fraud is not extrinsic if the alleged fraudulent act was
committed by petitioner's own counsel. The fraud must emanate from the act of the adverse party and must be of
such nature as to deprive petitioner of its day in court. 52 Thus, in many cases, we have held that a lawyer's mistake
or gross negligence does not amount to extrinsic fraud that would grant a petition for annulment of judgment. 53

In this case, the CA correctly found that BMC neither alleged nor proved that the gross negligence of its former
counsel was done in connivance with Nieva or Sibulo. 54 Therefore, it is not the extrinsic fraud contemplated under
Rule 47, Section 2.

BMC maintains that it was denied due process of law because it was not able to participate in the proceedings
subsequent to the 1990 Decision of the Antipolo Court. It alleges that Atty. Rizon did not inform it of Sibulo's appeal
and of the orders and processes issued by the courts. 55 BMC pleads that Atty. Rizon's gross negligence in handling
the case is tantamount to abandonment of the same. 56 Thus, it should not be bound by the negligence of its
counsel.

Nieva and Sibulo, on the other hand, assert that BMC was not deprived of due process. They aver that the records
of the CA show that BMC was furnished with a copy of the decision of the CA and a copy of the entry of judgment.57

BMC' s contentions have no leg to stand on. It is well-settled that the negligence of the counsel binds the client,
except in cases where the gross negligence of the lawyer deprived his client of due process of law. However, mere
allegation of gross negligence does not suffice. In the recent case of Ong Lay Hin v. Court of Appeals,58 we held that
for the exception to apply, the client must prove by clear and convincing evidence that he was maliciously deprived
of information that he could not have acted to protect his interests. The error of his counsel must have been both
palpable and maliciously exercised that it could viably be the basis for a disciplinary action.59 Pertinently, malice is
never presumed but must be proved as a fact. The record is bereft of showing that BMC alleged and proved that
Atty. Rizon was motivated by malice in failing to infonn it of Sibulo' s appeal.

Moreover, the gross negligence of the counsel must not be accompanied by the client's own
negligence. In Bejarasco, Jr. v. People,60 we ruled that for his failure to keep himself up-to-date on the status of his
1âw phi 1

case, the client should suffer whatever adverse judgment is rendered against him. A litigant bears the responsibility
of monitoring the developments of his case for no prudent party leaves the fate of his case entirely in the hands of
his lawyer.61

In this light, BMC cannot pass all the blame to Atty. Rizon. It admitted in its petition before us that after obtaining a
favorable decision from the Anti polo Court, it did not bother to check the status of the case. 62 While it might be true
that Atty. Rizon assured it that the case has already ended with the 1990 Decision, the prudent thing would have
been for BMC to ask for evidence or proof that the decision was already final. This, BMC failed to do.

Since Sibulo's claim for damages involves a considerable amount of money, BMC is expected to protect its own
interest and not merely to rely on its counsel. It is the duty of. BMC to be in touch with its counsel regarding the
progress of the case. It cannot just sit back, relax, and wait for the outcome of the case.63 Since the alleged negligent
act of its counsel was accompanied by BMC's own negligence, the latter shall be bound by the fonner's negligence.

We commiserate with the plight of BMC, assuming that it was indeed unaware of the proceedings subsequent to the
1990 Decision. Nevertheless, we cannot simply disregard the statutory requirements of an action for annulment of
judgment, lest we open the gates for possible abuse of litigants who seek to delay the enforcement of final and
executory judgments of the courts.

WHEREFORE, the petition is DENIED for lack of merit. The August 26, 2009 and October 9, 2009 Resolutions of
the Court of Appeals in CA-G.R. SP No. 108033 are hereby AFFIRMED.
SO ORDERED.

CYNTHIA C. ALABAN, FRANCIS COLLADO, JOSE P. COLLADO, JUDITH PROVIDO, CLARITA PROVIDO,
ALFREDO PROVIDO, MANUEL PROVIDO, JR., LORNA DINA E. PROVIDO, SEVERO ARENGA, JR., SERGIO
ARENGA, EDUARDO ARENGA, CAROL ARENGA, RUTH BABASA, NORMA HIJASTRO, DOLORES M.
FLORES, ANTONIO MARIN, JR., JOSE MARIN, SR., and MATHILDE MARIN, Petitioners,
vs.
COURT OF APPEALS and FRANCISCO H. PROVIDO, Respondent.

DECISION

Tinga, J.:

This is a petition for review of the Resolutions1 of the

Court of Appeals (CA) in CA-G.R. SP No. 69221,2 dismissing petitioners’ petition for annulment of judgment.

On 8 November 2000, respondent Francisco Provido (respondent) filed a petition, docketed as SP Proc. No. 00-
135, for the probate of the Last Will and Testament3 of the late Soledad Provido Elevencionado ("decedent"), who
died on 26 October 2000 in Janiuay, Iloilo.4 Respondent alleged that he was the heir of the decedent and the
executor of her will. On 30 May 2001, the Regional Trial Court (RTC), Branch 68, in P.D. Monfort North, Dumangas,
Iloilo, rendered its Decision,5 allowing the probate of the will of the decedent and directing the issuance of letters
testamentary to respondent.6

More than four (4) months later, or on 4 October 2001, herein petitioners filed a motion for the reopening of the
probate proceedings.7 Likewise, they filed an opposition to the allowance of the will of the decedent, as well as the
issuance of letters testamentary to respondent,8 claiming that they are the intestate heirs of the decedent.
Petitioners claimed that the RTC did not acquire jurisdiction over the petition due to non-payment of the correct
docket fees, defective publication, and lack of notice to the other heirs. Moreover, they alleged that the will could not
have been probated because: (1) the signature of the decedent was forged; (2) the will was not executed in
accordance with law, that is, the witnesses failed to sign below the attestation clause; (3) the decedent lacked
testamentary capacity to execute and publish a will; (4) the will was executed by force and under duress and
improper pressure; (5) the decedent had no intention to make a will at the time of affixing of her signature; and (6)
she did not know the properties to be disposed of, having included in the will properties which no longer belonged to
her. Petitioners prayed that the letters testamentary issued to respondent be withdrawn and the estate of the
decedent disposed of under intestate succession.9

On 11 January 2002, the RTC issued an Order10 denying petitioners’ motion for being unmeritorious. Resolving the
issue of jurisdiction, the RTC held that petitioners were deemed notified of the hearing by publication and that the
deficiency in the payment of docket fees is not a ground for the outright dismissal of the petition. It merely required
respondent to pay the deficiency.11 Moreover, the RTC’s Decision was already final and executory even before
petitioners’ filing of the motion to reopen.12

Petitioners thereafter filed a petition13 with an application for preliminary injunction with the CA, seeking the
annulment of the RTC’s Decision dated 30 May 2001 and Order dated 11 January 2002. They claimed that after the
death of the decedent, petitioners, together with respondent, held several conferences to discuss the matter of
dividing the estate of the decedent, with respondent agreeing to a one-sixth (1/6) portion as his share. Petitioners
allegedly drafted a compromise agreement to implement the division of the estate. Despite receipt of the agreement,
respondent refused to sign and return the same. Petitioners opined that respondent feigned interest in participating
in the compromise agreement so that they would not suspect his intention to secure the probate of the will.14 They
claimed that they learnt of the probate proceedings only in July of 2001, as a result of which they filed their motion to
reopen the proceedings and admit their opposition to the probate of the will only on 4 October 2001. They argued
that the RTC Decision should be annulled and set aside on the ground of extrinsic fraud and lack of jurisdiction on
the part of the RTC.15

In its Resolution16 promulgated on 28 February 2002, the CA dismissed the petition. It found that there was no
showing that petitioners failed to avail of or resort to the ordinary remedies of new trial, appeal, petition for relief from
judgment, or other appropriate remedies through no fault of their own.17 Moreover, the CA declared as baseless
petitioners’ claim that the proceedings in the RTC was attended by extrinsic fraud. Neither was there any showing
that they availed of this ground in a motion for new trial or petition for relief from judgment in the RTC, the CA
added.18 Petitioners sought reconsideration of the Resolution, but the same was denied by the CA for lack of merit.19

Petitioners now come to this Court, asserting that the CA committed grave abuse of discretion amounting to lack of
jurisdiction when it dismissed their petition for the alleged failure to show that they have not availed of or resorted to
the remedies of new trial, appeal, petition for relief from judgment or other remedies through no fault of their own,
and held that petitioners were not denied their day in court during the proceedings before the RTC.20 In addition,
they assert that this Court has yet to decide a case involving Rule 47 of the Rules of Court and, therefore, the
instant petition should be given due course for the guidance of the bench and bar.21

For his part, respondent claims that petitioners were in a position to avail of the remedies provided in Rules 37 and
38, as they in fact did when they filed a motion for new trial.22 Moreover, they could have resorted to a petition for
relief from judgment since they learned of the RTC’s judgment only three and a half months after its
promulgation.23Respondent likewise maintains that no extrinsic fraud exists to warrant the annulment of the
RTC’s Decision, since there was no showing that they were denied their day in court. Petitioners were not made
parties to the probate proceedings because the decedent did not institute them as her heirs.24 Besides,
assuming arguendo that petitioners are heirs of the decedent, lack of notice to them is not a fatal defect since
personal notice upon the heirs is a matter of procedural convenience and not a jurisdictional requisite.25 Finally,
respondent charges petitioners of forum–shopping, since the latter have a pending suit involving the same issues as
those in SP No. 00-135, that is SP No. 118126 filed before Branch 23, RTC of General Santos City and subsequently
pending on appeal before the CA in CA-G.R. No.74924.27

It appears that one of the petitioners herein, Dolores M. Flores ("Flores"), who is a niece of the decedent, filed a
petition for letters of administration with the RTC of General Santos City, claiming that the decedent died intestate
without any issue, survived by five groups of collateral heirs. Flores, armed with a Special Power of Attorney from
most of the other petitioners, prayed for her appointment as administratrix of the estate of the decedent. The RTC
dismissed the petition on the ground of lack of jurisdiction, stating that the probate court in Janiuay, Iloilo has
jurisdiction since the venue for a petition for the settlement of the estate of a decedent is the place where the
decedent died. This is also in accordance with the rule that the first court acquiring jurisdiction shall continue hearing
the case to the exclusion of other courts, the RTC added.28 On 9 January 2002, Flores filed a Notice of Appeal 29and
on 28 January 2002, the case was ordered forwarded to the CA.30

Petitioners maintain that they were not made parties to the case in which the decision sought to be annulled was
rendered and, thus, they could not have availed of the ordinary remedies of new trial, appeal, petition for relief from
judgment and other appropriate remedies, contrary to the ruling of the CA. They aver that respondent’s offer of a
false compromise and his failure to notify them of the probate of the will constitute extrinsic fraud that necessitates
the annulment of the RTC’s judgment.31

The petition is devoid of merit.

Section 37 of the Rules of Court allows an aggrieved party to file a motion for new trial on the ground of fraud,
accident, mistake, or excusable negligence. The same

Rule permits the filing of a motion for reconsideration on the grounds of excessive award of damages, insufficiency
of evidence to justify the decision or final order, or that the decision or final order is contrary to law.32 Both motions
should be filed within the period for taking an appeal, or fifteen (15) days from notice of the judgment or final order.

Meanwhile, a petition for relief from judgment under Section 3 of Rule 38 is resorted to when a judgment or final
order is entered, or any other proceeding is thereafter taken, against a party in any court through fraud, accident,
mistake, or excusable negligence. Said party may file a petition in the same court and in the same case to set aside
the judgment, order or proceeding. It must be filed within sixty (60) days after the petitioner learns of the judgment
and within six (6) months after entry thereof.33

A motion for new trial or reconsideration and a petition for relief from judgment are remedies available only to parties
in the proceedings where the assailed
judgment is rendered.34 In fact, it has been held that a person who was never a party to the case, or even
summoned to appear therein, cannot avail of a petition for relief from judgment.35

However, petitioners in this case are mistaken in asserting that they are not or have not become parties to the
probate proceedings.

Under the Rules of Court, any executor, devisee, or legatee named in a will, or any other person interested in the
estate may, at any time after the death of the testator, petition the court having jurisdiction to have the will
allowed.36Notice of the time and place for proving the will must be published for three (3) consecutive weeks, in a
newspaper of general circulation in the province,37 as well as furnished to the designated or other known heirs,
legatees, and devisees of the testator.38 Thus, it has been held that a proceeding for the probate of a will is one in
rem, such that with the corresponding publication of the petition the court's jurisdiction extends to all persons
interested in said will or in the settlement of the estate of the decedent.39

Publication is notice to the whole world that the proceeding has for its object to bar indefinitely all who might be
minded to make an objection of any sort against the right sought to be established. It is the publication of such
notice that brings in the whole world as a party in the case and vests the court with jurisdiction to hear and decide
it.40 Thus, even though petitioners were not mentioned in the petition for probate, they eventually became parties
thereto as a consequence of the publication of the notice of hearing.

As parties to the probate proceedings, petitioners could have validly availed of the remedies of motion for new trial
or reconsideration and petition for relief from judgment. In fact, petitioners filed a motion to reopen, which is
essentially a motion for new trial, with petitioners praying for the reopening of the case and the setting of further
proceedings. However, the motion was denied for having been filed out of time, long after the Decision became final
and executory.

Conceding that petitioners became aware of the Decision after it had become final, they could have still filed a
petition for relief from judgment after the denial of their motion to reopen. Petitioners claim that they learned of
the Decision only on 4 October 2001, or almost four (4) months from the time the Decision had attained finality. But
they failed to avail of the remedy.

For failure to make use without sufficient justification of the said remedies available to them, petitioners could no
longer resort to a petition for annulment of judgment; otherwise, they would benefit from their own inaction or
negligence.41

Even casting aside the procedural requisite, the petition for annulment of judgment must still fail for failure to comply
with the substantive requisites, as the appellate court ruled.

An action for annulment of judgment is a remedy in law independent of the case where the judgment sought to be
annulled was rendered.42 The purpose of such action is to have the final and executory judgment set aside so that
there will be a renewal of litigation. It is resorted to in cases where the ordinary remedies of new trial, appeal,
petition for relief from judgment, or other appropriate remedies are no longer available through no fault of the
petitioner,43 and is based on only two grounds: extrinsic fraud, and lack of jurisdiction or denial of due process.44 A
person need not be a party to the judgment sought to be annulled, and it is only essential that he can prove his
allegation that the judgment was obtained by the use of fraud and collusion and he would be adversely affected
thereby.45

An action to annul a final judgment on the ground of fraud lies only if the fraud is extrinsic or collateral in
character.46Fraud is regarded as extrinsic where it prevents a party from having a trial or from presenting his entire
case to the court, or where it operates upon matters pertaining not to the judgment itself but to the manner in which
it is procured. The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the
prevailing litigant prevented a party from having his day in court.47

To sustain their allegation of extrinsic fraud, petitioners assert that as a result of respondent’s deliberate omission or
concealment of their names, ages and residences as the other heirs of the decedent in his petition for allowance of
the will, they were not notified of the proceedings, and thus they were denied their day in court. In addition, they
claim that respondent’s offer of a false compromise even before the filing of the petition prevented them from
appearing and opposing the petition for probate.
The Court is not convinced.

According to the Rules, notice is required to be personally given to known heirs, legatees, and devisees of the
testator.48 A perusal of the will shows that respondent was instituted as the sole heir of the decedent. Petitioners, as
nephews and nieces of the decedent, are neither compulsory nor testate heirs49 who are entitled to be notified of the
probate proceedings under the Rules. Respondent had no legal obligation to mention petitioners in the petition for
probate, or to personally notify them of the same.

Besides, assuming arguendo that petitioners are entitled to be so notified, the purported infirmity is cured by the
publication of the notice. After all, personal notice upon the heirs is a matter of procedural convenience and not a
jurisdictional requisite.50

The non-inclusion of petitioners’ names in the petition and the alleged failure to personally notify them of the
proceedings do not constitute extrinsic fraud. Petitioners were not denied their day in court, as they were not
prevented from participating in the proceedings and presenting their case before the probate court.

One other vital point is the issue of forum-shopping against petitioners. Forum-shopping consists of filing multiple
suits in different courts, either simultaneously or successively, involving the same parties, to ask the courts to rule
on the same or related causes and/or to grant the same or substantially same reliefs,51 on the supposition that one
or the other court would make a favorable disposition.52 Obviously, the parties in the instant case, as well as in the
appealed case before the CA, are the same. Both cases deal with the existence and validity of the alleged will of the
decedent, with petitioners anchoring their cause on the state of intestacy. In the probate proceedings, petitioners’
position has always been that the decedent left no will and if she did, the will does not comply with the requisites of
a valid will. Indeed, that position is the bedrock of their present petition. Of course, respondent maintains the
contrary stance. On the other hand, in the petition for letters of administration, petitioner Flores prayed for her
appointment as administratrix of the

estate on the theory that the decedent died intestate. The petition was dismissed on the ground of lack of
jurisdiction, and it is this order of dismissal which is the subject of review in CA-G.R. No. 74924. Clearly, therefore,
there is forum-shopping.

Moreover, petitioners failed to inform the Court of the said pending case in their certification against forum-
shopping. Neither have they done so at any time thereafter. The Court notes that even in the petition for annulment
of judgment, petitioners failed to inform the CA of the pendency of their appeal in CA-G.R. No. 74924, even though
the notice of appeal was filed way before the petition for annulment of judgment was instituted.

WHEREFORE, the petition is DENIED. Costs against petitioners.

SO ORDERED.