Rules 6-10.REMLAWREV G.R. No. 136051 June 8, 2006 ALFREDO P. ROSETE, OSCAR P. MAPALO and CHITO P.

ROSETE, Petitioners, vs. JULIANO LIM and LILIA LIM, Respondents. DECISION CHICO-NAZARIO, J.: Before Us is a petition for review on certiorari which seeks to set aside the Decision1 of the Court of Appeals in CA-G.R. SP No. 45400 dated 24 August 1998 which upheld the Orders of Branch 77 of the Regional Trial Court (RTC) of Quezon City in Civil Case No. Q-95-25803 dated 22 July 19972 and 27 August 1997,3 allowing the taking of deposition upon oral examination of petitioners Oscar P. Mapalo and Chito P. Rosete, and its Resolution4 dated 19 October 1998 denying petitioners Motion for Reconsideration. Relevant to the petition are the following antecedents: On 5 December 1995, respondents Juliano Lim and Lilia Lim filed before Branch 77 of the RTC of Quezon City a Complaint for Annulment, Specific Performance with Damages against AFP Retirement and Separation Benefits System (AFP-RSBS), Espreme Realty and Development Corporation (Espreme Realty), Alfredo P. Rosete, Maj. Oscar Mapalo, Chito P. Rosete, Bank of the Philippine Islands (BPI), and Register of Deeds of the Province of Mindoro Occidental, docketed as Civil Case No. Q-9525803.5 It asked, among other things, that the Deed of Sale executed by AFP-RSBS covering certain parcels of lands in favor of Espreme Realty and the titles thereof under the name of the latter be annulled; and that the AFP-RSBS and Espreme Realty be ordered to execute the necessary documents to restore ownership and title of said lands to respondents, and that the Register of Deeds be ordered to cancel the titles of said land under the name of Espreme Realty and to transfer the same in the names of respondents. On 18 January 1996, petitioners filed a Motion to Dismiss on the grounds that the court has no jurisdiction over the subject matter of the action or suit and that venue has been improperly laid.6 A Supplemental Motion to Dismiss was filed by petitioner Alfredo P. Rosete on 23 January 1996.7 Respondents opposed the Motion to Dismiss filed by petitioners8 to which petitioners filed their Reply.9 Respondents filed a Comment on the Reply.10 AFP-RSBS,11 Espreme Realty,12 and, BPI13 filed their respective Motions to Dismiss which respondents opposed. In an Order dated 12 March 1996, the Motions to Dismiss filed by all the defendants were denied.14 The Motions for Reconsideration filed by petitioners15 and BPI,16 which respondents opposed,17 were also denied in an Order dated 24 May 1996.18 On 6 June 1996, BPI filed its Answer with Compulsory Counterclaim and Crossclaim19 to which respondents filed their Reply and Answer to Counterclaim.20 Respondents also filed a Motion21 to Serve Supplemental Allegation against BPI and petitioner Chito Rosete which the trial court granted in an order dated 28 July 1996.22 On 7 June 1996, petitioners manifested that on 5 June 1996, they filed a Petition23 for Certiorari and Prohibition in the Court of Appeals, docketed as CA-G.R. SP No. 40837, challenging the trial courts Orders dated 12 March 1996 and 24 May 1996 that denied their Motions to Dismiss and Reconsideration, respectively.24 They likewise informed the trial court that on 6 June 1996, they filed an Ex-Parte Motion25 to Admit Answers Ex Abudanti Cautela.26lavvphi1.net On 7 August 1996, petitioner Chito Rosete filed a motion asking that the order granting the Motion to Serve Supplemental Allegation against BPI and him be reconsidered and set aside, and that respondents be ordered to reduce their supplemental allegations in the form and manner required by the Rules of Court.27 Same was denied in an order dated 12 August 1996.28 This denial was appealed to the Court of Appeals on 26 August 1996, which was docketed as CA-G.R. SP No. 41821.29 Petitioner Chito Rosete filed his Supplemental Answer (Ex Abudanti Cautela) on 9 September 1996.30 On 28 May 1997, respondents filed a Notice to Take Deposition Upon Oral Examination giving notice that on June 18 and 20, 1997 at 9:00 a.m., they will cause the deposition of petitioners Oscar Mapalo and Chito Rosete.31 On 13 June 1997, petitioners filed an Urgent Ex-Parte Motion and Objection to Take Deposition Upon Oral Examination.32 They argued that the deposition may not be taken without leave of court as no answer has yet been served and the issues have not yet been joined since their Answer was filed ex abudanti cautela, pending resolution of the Petition for Certiorari challenging the orders dated 12 March 1996 and 24 May 1996 that denied their Motions to Dismiss and for Reconsideration, respectively. This is in addition to the fact that they challenged via a Petition for Certiorari before the Court of Appeals the lower courts Orders dated 23 July 1996 and 12 August 1996 which, respectively, granted respondents Motion to Serve Supplemental Allegation Against Defendants BPI and Chito Rosete, and for the latter to plead thereto, and denied Chito Rosetes Motion for Reconsideration of the order dated 23 July 1996. Moreover, they contend that since there are two criminal cases pending before the City Prosecutors of Mandaluyong City and Pasig City involving the same set of facts as in the present case wherein respondent Juliano Lim is the private complainant and petitioners are the respondents, to permit the taking of the deposition would be violative of their right against self-incrimination because by means of the oral deposition, respondents would seek to establish the allegations of fact in the complaint which are also the allegations of fact in the complaint-affidavits in the said criminal cases. Respondents filed their Comment on the Objection to Deposition Taking33 to which petitioners filed their Reply.34 In an Order dated 22 July 1997, the lower court denied petitioners motion and objection to take deposition upon oral examination, and scheduled the taking thereof.35 On 7 August 1997, petitioners filed a Motion for Reconsideration.36 They filed a Supplemental Motion for Reconsideration on 11 August 1997.37 On 13 August 1997, petitioners filed an Urgent Ex-parte Motion to Cancel or Suspend the Taking of the Deposition Upon Oral Examination.38 In an Order dated 27 August 1997, the lower court denied petitioners Motion for Reconsideration and Supplemental Motion for Reconsideration, and scheduled the taking of the Deposition Upon Oral Examination.39 On 22 September1997, respondents filed an Omnibus Motion: (1) To Strike Out Answer of Defendants Mapalo and Chito Rosete; (2) to Declare Defendants Mapalo and Chito Rosete In Default; and (3) For Reception of Plaintiffs Evidence Ex-parte,40 which petitioners opposed.41 On 29 September 1997, petitioners filed with the Court of Appeals a Petition for Certiorari and Prohibition (CA-G.R. SP No. 45400) assailing the Orders of the lower court dated 22 July 1997 and 27 August 1997.42 In an Order dated 29 October 1997, the lower court: (1) ordered the striking out from the record of the Answer ex abudanti cautela filed by petitioners Mapalo and Chito Rosete for their continued unjustified refusal to be sworn pursuant to Rule 29 of the 1997 Rules of Civil Procedure; (2) declared defendants Mapalo and Chito Rosete in default; and I allowed plaintiffs to present their evidence ex-parte as regards the latter.43 On 25 November 1997, petitioners filed an Urgent Ex-parte

Rules 6-10.REMLAWREV Omnibus Motion (1) For Reconsideration; (2) To Lift Order of Default; and (3) To Hold In Abeyance Presentation of Plaintiffs Evidence Ex-parte.44 The day after, petitioners filed an Amended Omnibus Motion.45 On 28 November 1997, respondents filed a Motion to Set Case for Ex-parte Presentation of Evidence46 which the lower court set for 11 December 1997.47 In an Order dated 11 December 1997, the lower court denied petitioners urgent exparte omnibus motion.48 On even date, the ex-parte presentation of evidence against petitioners Mapalo and Chito Rosete was terminated.49 On 10 February 1998, petitioners filed a Petition50 for Certiorari and Prohibition before the Court of Appeals (CA-G.R. SP No. 46774) questioning the lower courts Orders dated 29 October 1997 and 11 December 1997.51 On 24 August 1998, the Court of Appeals dismissed the Petition for Certiorari and Prohibition, and upheld the Orders of the lower court dated 22 July 1997 and 27 August 1997 (CA-G.R. SP No. 45400).52 The Motion for Reconsideration53 which was opposed54 by respondents was denied on 19 October 1998.55 Petitioners assail the ruling of the Court of Appeals via a Petition for Review on Certiorari. They anchor their petition on the following grounds: I. THE TRIAL COURT ERRED AND ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN DECLARING IN ITS ORDER DATED AUGUST 27, 1997 THAT THE CONSTITUTIONAL RIGHT AGAINST SELF INCRIMINATION OF OSCAR MAPALO AND CHITO ROSETE WOULD NOT BE VIOLATED BY THE TAKING OF THEIR DEPOSITION IN THE CIVIL CASE FILED IN THE LOWER COURT ALTHOUGH THEY ARE ALSO RESPONDENTS OR DEFENDANTS IN THE AFOREMENTIONED CRIMINAL CASES FILED BY HEREIN PRIVATE RESPONDENT JULIANO LIM INVOLVING THE SAME OR IDENTICAL SET OF FACTS; AND II. THE TRIAL COURT ERRED AND ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN DECLARING IN ITS ORDER DATED JULY 22, 1997 THAT (A) THE NOTICE TO TAKE DEPOSITION UPON ORAL EXAMINATION NEED NOT BE WITH LEAVE OF COURT BECAUSE AN ANSWER EX ABUDANTE CAUTELA HAS BEEN FILED; AND (B) JOINDER OF ISSUES IS NOT REQUIRED IN ORDER THAT THE SECTION 1, RULE 2356 OF THE RULES OF CIVIL PROCEDURE MAY BE AVAILED OF. Petitioners argue that the Court of Appeals gravely erred when it found that the trial court did not abuse its discretion when it refused to recognize petitioners Oscar Mapalo and Chito Rosetes constitutional right against self-incrimination when, through its Orders dated 22 July 1997 and 27 August 1997, it allowed and scheduled the taking of their depositions by way of oral examination. They explain they refuse to give their depositions due to the pendency of two criminal cases against them, namely, Batasan Pambansa Blg. 22 and Estafa, because their answers would expose them to criminal action or liability since they would be furnishing evidence against themselves in said criminal cases. They allege there can be no doubt that the questions to be asked during the taking of the deposition would revolve around the allegations in the complaint in the civil case which are identical to the allegations in the complaint-affidavits in the two criminal cases, thus, there is a tendency to incriminate both Oscar Mapalo and Chito Rosete. Moreover, they explain that while an ordinary witness may be compelled to take the witness stand and claim the privilege against self-incrimination as each question requiring an incriminating answer is shot at him, an accused may altogether refuse to answer any and all questions because the right against self-incrimination includes the right to refuse to testify. In short, petitioners Mapalo and Chito Rosete refuse to have their depositions taken in the civil case because they allegedly would be incriminating themselves in the criminal cases because the testimony that would be elicited from them may be used in the criminal cases. As defendants in the civil case, it is their claim that to allow their depositions to be taken would violate their constitutional right against selfincrimination because said right includes the right to refuse to take the witness stand. In order to resolve this issue, we must determine the extent of a persons right against self-incrimination. A persons right against self-incrimination is enshrined in Section 17, Article III of the 1987 Constitution which reads: "No person shall be compelled to be a witness against himself." The right against self-incrimination is accorded to every person who gives evidence, whether voluntary or under compulsion of subpoena, in any civil, criminal or administrative proceeding. The right is not to be compelled to be a witness against himself. It secures to a witness, whether he be a party or not, the right to refuse to answer any particular incriminatory question, i.e., one the answer to which has a tendency to incriminate him for some crime. However, the right can be claimed only when the specific question, incriminatory in character, is actually put to the witness. It cannot be claimed at any other time. It does not give a witness the right to disregard a subpoena, decline to appear before the court at the time appointed, or to refuse to testify altogether. The witness receiving a subpoena must obey it, appear as required, take the stand, be sworn and answer questions. It is only when a particular question is addressed to which may incriminate himself for some offense that he may refuse to answer on the strength of the constitutional guaranty.57 As to an accused in a criminal case, it is settled that he can refuse outright to take the stand as a witness. In People v. Ayson,58 this Court clarified the rights of an accused in the matter of giving testimony or refusing to do so. We said: An accused "occupies a different tier of protection from an ordinary witness." Under the Rules of Court, in all criminal prosecutions the defendant is entitled among others 1) to be exempt from being a witness against himself, and 2) to testify as witness in his own behalf; but if he offers himself as a witness he may be cross-examined as any other witness; however, his neglect or refusal to be a witness shall not in any manner prejudice or be used against him. The right of the defendant in a criminal case "to be exempt from being a witness against himself" signifies that he cannot be compelled to testify or produce evidence in the criminal case in which he is the accused, or one of the accused. He cannot be compelled to do so even by subpoena or other process or order of the Court. He cannot be required to be a witness either for the prosecution, or for a co-accused, or even for himself. In other words unlike an ordinary witness (or a party in a civil action) who may be compelled to testify by subpoena, having only the right to refuse to answer a particular incriminatory question at the time it is put to him the defendant in a criminal action can refuse to testify altogether. He can refuse to take the witness stand, be sworn, answer any question. X x x (Underscoring supplied.) It is clear, therefore, that only an accused in a criminal case can refuse to take the witness stand. The right to refuse to take the stand does not generally apply to parties in administrative cases or proceedings. The parties thereto can only refuse to answer if incriminating questions are propounded. This Court applied the exception a party who is not an accused in a criminal case is allowed not to take the witness stand in administrative cases/proceedings that partook of the nature of a criminal proceeding or analogous to a criminal proceeding.59 It is likewise the opinion of the Court that said exception applies to parties in civil actions which are

Rules 6-10.REMLAWREV criminal in nature. As long as the suit is criminal in nature, the party thereto can altogether decline to take the witness stand. It is not the character of the suit involved but the nature of the proceedings that controls.60 In the Ayson case, it is evident that the Court treats a party in a civil case as an ordinary witness, who can invoke the right against self-incrimination only when the incriminating question is propounded. Thus, for a party in a civil case to possess the right to refuse to take the witness stand, the civil case must also partake of the nature of a criminal proceeding. In the present controversy, the case is civil it being a suit for Annulment, Specific Performance with Damages. In order for petitioners to exercise the right to refuse to take the witness stand and to give their depositions, the case must partake of the nature of a criminal proceeding. The case on hand certainly cannot be categorized as such. The fact that there are two criminal cases pending which are allegedly based on the same set of facts as that of the civil case will not give them the right to refuse to take the witness stand and to give their depositions. They are not facing criminal charges in the civil case. Like an ordinary witness, they can invoke the right against self-incrimination only when the incriminating question is actually asked of them. Only if and when incriminating questions are thrown their way can they refuse to answer on the ground of their right against self-incrimination. On the second assigned error, petitioners contend that the taking of their oral depositions should not be allowed without leave of court as no answer has yet been served and the issues have not yet been joined because their answers were filed ex abudanti cautela pending final resolution of the petition for certiorari challenging the trial courts Orders dated 12 March 1996 and 24 May 1996 that denied their motions to dismiss and for reconsideration, respectively. Section 1 of Rule 2461 of the Revised Rules of Court reads: Section 1. Depositions pending action, when may be taken. By leave of court after jurisdiction has been obtained over any defendant or over property which is the subject of the action, or without such leave after an answer has been served, the testimony of any person, whether a party or not, may be taken, at the instance of any party, by deposition upon oral examination or written interrogatories. The attendance of witnesses may be compelled by the use of a subpoena as provided in Rule 23. Depositions shall be taken only in accordance with these rules. The deposition of a person confined in prison may be taken only by leave of court on such terms as the court prescribes. From the quoted section, it is evident that once an answer has been served, the testimony of a person, whether a party or not, may be taken by deposition upon oral examination or written interrogatories. In the case before us, petitioners contend they have not yet served an answer to respondents because the answers that they have filed with the trial court were made ex abudanti cautela. In other words, they do not consider the answers they filed in court and served on respondents as answers contemplated by the Rules of Court on the ground that same were filed ex abudanti cautela. We find petitioners contention to be untenable. Ex abudanti cautela means "out of abundant caution" or "to be on the safe side."62 An answer ex abudanti cautela does not make their answer less of an answer. A cursory look at the answers filed by petitioners shows that they contain their respective defenses. An answer is a pleading in which a defending party sets forth his defenses63 and the failure to file one within the time allowed herefore may cause a defending party to be declared in default.64 Thus, petitioners, knowing fully well the effect of the non-filing of an answer, filed their answers despite the pendency of their appeal with the Court of Appeals on the denial of their motion to dismiss. Petitioners argument that the issues of the case have not yet been joined must necessarily fail in light of our ruling that petitioners have filed their answers although the same were made ex abudanti cautela. Issues are joined when all the parties have pleaded their respective theories and the terms of the dispute are plain before the court.65 In the present case, the issues have, indeed, been joined when petitioners, as well as the other defendants, filed their answers. The respective claims and defenses of the parties have been defined and the issues to be decided by the trial court have been laid down. We cannot also sustain petitioners contention that the lower court erred when it said that the joinder of issues is not required in order that Section 1, Rule 23 of the 1997 Rules of Civil Procedure may be availed of. Under said section, a deposition pending action may be availed of: (1) with leave of court when an answer has not yet been filed but after jurisdiction has been obtained over any defendant or property subject of the action, or (2) without leave of court after an answer to the complaint has been served. In the instant case, the taking of the deposition may be availed of even without leave of court because petitioners have already served their answers to the complaint. WHEREFORE, all the foregoing considered, the instant petition is dismissed for lack of merit. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice WE CONCUR: ARTEMIO V. PANGANIBAN Chief Justice Chairperson ON LEAVE MA. ALICIA AUSTRIA-MARTINEZ* CONSUELO YNARES-SANTIAGO Asscociate Justice Associate Justice ROMEO J. CALLEJO, SR. Associate Justice SECOND DIVISION [G.R. No. 133119. August 17, 2000] FINANCIAL BUILDING CORPORATION, ASSOCIATION, INC., respondent. DECISION DE LEON, JR., J.: chanroblesvirtualawlibrary Before us is petition for review on certiorari of the Decision[1] dated March 20, 1998 of the Court of Appeals[2] in CA-GR CV No. 48194 entitled Forbes Park Association, Inc. vs. Financial Building Corporation, finding Financial Building Corporation (hereafter, Financial Building) liable for damages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for violating the latters deed of restrictions on the construction of buildings within the Forbes Park Village, Makati. chanroblesvirtualawlibrary The pertinent facts are as follows: chanroblesvirtualawlibrary Petitioner, vs. FORBES PARK

Rules 6-10.REMLAWREV WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against the defendant: chanroblesvirtualawlibrary (1) Ordering the defendant to remove/demolish the illegal structures within three (3) months from the time this judgment becomes final and executory, and in case of failure of the defendant to do so, the plaintiff is authorized to demolish/remove the structures at the expense of the defendant; chanroblesvirtualawlibrary (2) Ordering the defendant to pay damages, to wit: chanroblesvirtualawlibrary (a) P3,000,000.00 as actual chanroblesvirtualawlibrary damages by way of demolition expenses;

The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square meter residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On December 2, 1985, the USSR engaged the services of Financial Building for the construction of a multi-level office and staff apartment building at the said lot, which would be used by the Trade Representative of the USSR.[3] Due to the USSRs representation that it would be building a residence for its Trade Representative, Forbes Park authorized its construction and work began shortly thereafter. chanroblesvirtualawlibrary On June 30, 1986, Forbes Park reminded the USSR of existing regulations[4] authorizing only the construction of a single-family residential building in each lot within the village. It also elicited a reassurance from the USSR that such restriction has been complied with.[5] Promptly, the USSR gave its assurance that it has been complying with all regulations of Forbes Park.[6] Despite this, Financial Building submitted to the Makati City Government a second building plan for the construction of a multi-level apartment building, which was different from the first plan for the construction of a residential building submitted to Forbes Park. chanroblesvirtualawlibrary Forbes Park discovered the second plan and subsequent ocular inspection of the USSRs subject lot confirmed the violation of the deed of restrictions. Thus, it enjoined further construction work. On March 27, 1987, Forbes Park suspended all permits of entry for the personnel and materials of Financial Building in the said construction site. The parties attempted to meet to settle their differences but it did not push through. chanroblesvirtualawlibrary Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro Manila, a Complaint[7] for Injunction and Damages with a prayer for Preliminary Injunction against Forbes Park docketed as Civil Case No. 16540. The latter, in turn, filed a Motion to Dismiss on the ground that Financial Building had no cause of action because it was not the real party-in-interest. chanroblesvirtualawlibrary On April 28, 1987, the trial court issued a writ of preliminary injunction against Forbes Park but the Court of Appeals nullified it and dismissed the complaint in Civil Case No. 16540 altogether. We affirmed the said dismissal in our Resolution,[8] promulgated on April 6, 1988, in G.R. No. 79319 entitled Financial Building Corporation, et al. vs. Forbes Park Association, et al. chanroblesvirtualawlibrary After Financial Buildings case, G.R. No. 79319, was terminated with finality, Forbes Park sought to vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of Makati a Complaint[9] for Damages, against Financial Building, docketed as Civil Case No. 89-5522, arising from the violation of its rules and regulations. The damages claimed are in the following amounts: (a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages; (c) P1,000,000.00 as exemplary damages; and (d) P1,000,000.00 as attorneys fees.[10] On September 26, 1994, the trial court rendered its Decision[11] in Civil Case No. 89-5522 in favor of Forbes Park and against Financial Building, the dispositive portion of which reads, to wit: chanroblesvirtualawlibrary

(b) P1,000,000.00 as exemplary damages; chanroblesvirtualawlibrary (c) P500,000.00 as attorneys fees; chanroblesvirtualawlibrary (d) the costs of suit. chanroblesvirtualawlibrary SO ORDERED. chanroblesvirtualawlibrary Financial Building appealed the said Decision of the trial court in Civil Case No. 895522 by way of a petition for review on certiorari[12] entitled Financial Building Corporation vs. Forbes Park Association, Inc. to the Court of Appeals and docketed therein as CA-GR CV No. 48194. However, the Court of Appeals affirmed it in its Decision[13] dated March 20, 1998, the dispositive portion of which reads: chanroblesvirtualawlibrary WHEREFORE, the Decision dated September 26, 1994 of the Regional Trial Court of Makati is AFFIRMED with the modification that the award of exemplary damages, as well as attorneys fees, is reduced to fifty thousand pesos (P50,000.00) each. chanroblesvirtualawlibrary Hence, this petition, wherein Financial Building assigns the following errors: chanroblesvirtualawlibrary I. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED BY RESPONDENT FPA DESPITE THE FACT THAT ITS ALLEGED CLAIMS AND CAUSES OF ACTION THEREIN ARE BARRED BY PRIOR JUDGMENT AND/OR ARE DEEMED WAIVED FOR ITS FAILURE TO INTERPOSE THE SAME AS COMPULSORY COUNTERCLAIMS IN CIVIL CASE NO. 16540; chanroblesvirtualawlibrary II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE RESPONDENT FPA HAS NO CAUSE OF ACTION AGAINST PETITIONER FBC; chanroblesvirtualawlibrary III. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN FAVOR OF RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF THE EVIDENCE ON RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO AND PETITIONER FBC IS NOT LIABLE THEREFOR; chanroblesvirtualawlibrary

Rules 6-10.REMLAWREV IV. THE COURT OF APPEALS ERRED IN ORDERING THE DEMOLITION OF THE ILLEGAL STRUCTURES LOCATED AT NO. 10 NARRA PLACE, FORBES PARK, MAKATI CITY, CONSIDERING THAT THE SAME ARE LOCATED ON DIPLOMATIC PREMISES[14] chanroblesvirtualawlibrary We grant the petition. chanroblesvirtualawlibrary First. The instant case is barred due to Forbes Parks failure to set it up as a compulsory counterclaim in Civil Case No. 16540, the prior injunction suit initiated by Financial Building against Forbes Park. chanroblesvirtualawlibrary A compulsory counterclaim is one which arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing partys claim.[15] If it is within the jurisdiction of the court and it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred if it is not set up in the action filed by the opposing party.[16] chanroblesvirtualawlibrary Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead be asserted in the same suit involving the same transaction or occurrence, which gave rise to it.[17] To determine whether a counterclaim is compulsory or not, we have devised the following tests: (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same? (2) Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule? (3) Will substantially the same evidence support or refute plaintiffs claim as well as the defendants counterclaim? and (4) Is there any logical relation between the claim and the counterclaim? Affirmative answers to the above queries indicate the existence of a compulsory counterclaim.[18] chanroblesvirtualawlibrary Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same occurrence the construction work done by Financial Building on the USSRs lot in Forbes Park Village. The issues of fact and law in both cases are identical. The factual issue is whether the structures erected by Financial Building violate Forbes Parks rules and regulations, whereas the legal issue is whether Financial Building, as an independent contractor working for the USSR, could be enjoined from continuing with the construction and be held liable for damages if it is found to have violated Forbes Parks rules. chanroblesvirtualawlibrary As a result of the controversy, Financial Building seized the initiative by filing the prior injunction case, which was anchored on the contention that Forbes Parks prohibition on the construction work in the subject premises was improper. The instant case on the other hand was initiated by Forbes Park to compel Financial Building to remove the same structures it has erected in the same premises involved in the prior case and to claim damages for undertaking the said construction. Thus, the logical relation between the two cases is patent and it is obvious that substantially the same evidence is involved in the said cases. chanroblesvirtualawlibrary Moreover, the two cases involve the same parties. The aggregate amount of the claims in the instant case is within the jurisdiction of the regional trial court, had it been set up as a counterclaim in Civil Case No. 16540. Therefore, Forbes Parks claims in the instant case should have been filed as a counterclaim in Civil Case No. 16540. chanroblesvirtualawlibrary Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory counterclaim at that time is now barred. chanroblesvirtualawlibrary A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its jurisdictional support therefrom.[19] A counterclaim presupposes the existence of a claim against the party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the counterclaim is improper and it must dismissed, more so where the complaint is dismissed at the instance of the counterclaimant.[20] In other words, if the dismissal of the main action results in the dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in the dismissal of the counterclaim. chanroblesvirtualawlibrary Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are incompatible remedies. In the event that a defending party has a ground for dismissal and a compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file a motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his compulsory counterclaim, he may still plead his ground for dismissal as an affirmative defense in his answer.[21] The latter option is obviously more favorable to the defendant although such fact was lost on Forbes Park. chanroblesvirtualawlibrary The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of action. There was no need to plead such ground in a motion to dismiss or in the answer since the same was not deemed waived if it was not pleaded.[22] Nonetheless, Forbes Park still filed a motion to dismiss and thus exercised bad judgment in its choice of remedies. Thus, it has no one to blame but itself for the consequent loss of its counterclaim as a result of such choice. chanroblesvirtualawlibrary Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes Park to interpose the same under the rule on compulsory counterclaims, there is no need to discuss the other issues raised by the herein petitioner. chanroblesvirtualawlibrary WHEREFORE , the instant petition is hereby GRANTED and the Decision dated March 20, 1998 of the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE. chanroblesvirtualawlibrary Costs against respondent Forbes Park Association, Inc. . chanroblesvirtualawlibrary SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing and Buena, JJ., concur.

Rules 6-10.REMLAWREV G.R. No. 166393 June 18, 2009

CRISTINA F. REILLO, LEONOR F. PUSO, ADELIA F. ROCAMORA, SOFRONIO S.J. FERNANDO, EFREN S.J. FERNANDO, ZOSIMO S.J. FERNANDO, JR., and MA. TERESA F. PION, Petitioners, vs. GALICANO E.S. SAN JOSE, represented by his Attorneys-in-Fact, ANNALISA S.J. RUIZ and RODELIO S. SAN JOSE, VICTORIA S.J. REDONGO, CATALINA S.J. DEL ROSARIO and MARIBETH S.J. CORTEZ, collectively known as the HEIRS OF QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO, Respondents. DECISION PERALTA, J.: Assailed in this petition for review on certiorari is the Decision1 dated August 31, 2004 of the Court of Appeals (CA) in CA-G.R. CV No. 69261 which affirmed the Order dated May 9, 2000 of the Regional Trial Court (RTC) of Morong, Rizal, Branch 78, granting the motion for judgment on the pleadings and the motion to dismiss counter petition for partition filed by respondents in Civil Case No. 99-1148-M. Also questioned is the CA Resolution2 dated December 14, 2004 denying petitioners motion for reconsideration. Spouses Quiterio San Jose (Quiterio) and Antonina Espiritu Santo (Antonina) were the original registered owners of a parcel of land located in E. Rodriguez Sr. Avenue, Teresa, Rizal covered by Transfer Certificate of Title (TCT) No. 458396 of the Register of Deeds of Rizal. The said parcel of land is now registered in the name of Ma. Teresa F. Pion (Teresa) under TCT No. M-94400. Quiterio and Antonina had five children, namely, Virginia, Virgilio, Galicano, Victoria and Catalina. Antonina died on July 1, 1970, while Quiterio died on October 19, 1976. Virginia and Virgilio are also now deceased. Virginia was survived by her husband Zosimo Fernando, Sr. (Zosimo Sr.) and their seven children, while Virgilio was survived by his wife Julita Gonzales and children, among whom is Maribeth S.J. Cortez (Maribeth). On October 26, 1999, Galicano, represented by his children and attorneys-in-fact, Annalisa S.J. Ruiz and Rodegelio San Jose, Victoria, Catalina, and Maribeth (respondents) filed with the RTC a Complaint3 for annulment of title, annulment of deed of extra-judicial settlement, partition and damages against Zosimo Sr. and his children Cristina F. Reillo, Leonor F. Puso, Adelia F. Rocamora, Sofronio S.J. Fernando, Efren S.J. Fernando, Zosimo S.J. Fernando, Jr. and Ma. Teresa (petitioners) and the Register of Deeds of Morong, Rizal. The complaint alleged among other things: 6. Under date of January 23, 1998, defendants FERNANDO et al, without the knowledge and consent of all the other surviving heirs of the deceased spouses QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO, including herein plaintiffs, executed a Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights making it appear therein that they are the "legitimate descendants and sole heirs of QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO"; and adjudicating among themselves, the subject parcel of land.

6.1 In the same document, defendants ZOSIMO SR., CRISTINA, LEONOR, ADELIA, SOFRONIO, EFREN and ZOSIMO JR., waived all their rights, participation and interests over the subject parcel of land in favor of their co-defendant MA. TERESA F. PION (a.k.a MA. TERESA S.J. FERNANDO). xxxx 7. On the strength of the said falsified Deed of Extrajudicial Settlement of Estate, defendant MA. TERESA PION (a.k.a MA. TERESA S.J. FERNANDO) succeeded in causing the cancellation of TCT No. 458396 in the name of SPS. QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO and the issuance of a new Transfer Certificate of Title in her name only, to the extreme prejudice of all the other heirs of the deceased SPS. QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO, specifically, the herein plaintiffs who were deprived of their lawful participation over the subject parcel of land. 7.1 Thus, on July 6, 1999, Transfer Certificate of Title No. M-94400 was issued in the name of defendant MA. TERESA S.J. FERNANDO. xxxx 8. As a result, the herein plaintiffs and the other surviving heirs of the deceased spouses QUITERIO SAN JOSE and ANTONINA ESPIRITU SANTO, who are legally entitled to inherit from the latters respective estates, in accordance with the laws of intestate succession, have been duly deprived of their respective rights, interests and participation over the subject parcel of land. 8.1 Thus, there is sufficient ground to annul the subject Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights dated January 23, 1998, and all other documents issued on the strength thereof, particularly Transfer Certificate of Title No. M-94400.4 It was also alleged that respondents filed a complaint before the Lupong Tagapamayapa of their Barangay which issued the required certification to file action for failure of the parties to settle the matter amicably. Petitioners filed their Answer with Counter-Petition and with Compulsory Counterclaim5 denying that the Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights which was the basis of the issuance of TCT No. M-94400, was falsified and that the settlement was made and implemented in accordance with law. They admitted that the deceased spouses Quiterio and Antonina had five children; that the subject property was not the only property of spouses Quiterio and Antonina and submitted in their counter-petition for partition the list of the other 12 parcels of land of the deceased spouses Quiterio and Antonina that petitioners alleged are in respondents possession and control. On January 18, 2000, respondents filed a Motion for Judgment on the Pleadings6 alleging that: (1) the denials made by petitioners in their answer were in the form of negative pregnant; (2) petitioners failed to state the basis that the questioned document was not falsified; (3) they failed to specifically deny the allegations in the complaint that petitioners committed misrepresentations by stating that they are

Rules 6-10.REMLAWREV the sole heirs and legitimate descendants of Quiterio and Antonina; and (4) by making reference to their allegations in their counter-petition for partition to support their denials, petitioners impliedly admitted that they are not the sole heirs of Quiterio and Antonina. Respondents filed a Reply to Answer with Compulsory Counterclaim7 with a motion to dismiss the counter-petition for partition on the ground that petitioners failed to pay the required docket fees for their counter-petition for partition. Petitioners filed their Rejoinder8 without tackling the issue of non-payment of docket fees. On February 4, 2000, petitioners filed their Comment9 to respondents motion for judgment on the pleading and prayed that the instant action be decided on the basis of the pleadings with the exception of respondents unverified Reply. Petitioners also filed an Opposition to the motion to dismiss the counter-petition for partition. On May 9, 2000, the RTC rendered its Order,10 the dispositive portion of which reads: 1. The Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights, dated January 23, 1998 and Transfer Certificate of Title No. M-94400 in the name of Ma. Teresa S.J. Fernando are declared null and void; 2. The Register of Deeds of Rizal, Morong Branch, is directed to cancel TCT No. 94400; and 3. The Heirs of Quiterio San Jose and Antonina Espiritu Santo is (sic) directed to partition the subject parcel of land covered by TCT No. M-458396 in accordance with the law of intestate succession.11 SO ORDERED. The RTC found that, based on the allegations contained in the pleadings filed by the parties, petitioners misrepresented themselves when they alleged in the Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights that they are the sole heirs of the deceased spouses Quiterio and Antonina; that petitioners prayed for a counter-petition for partition involving several parcels of land left by the deceased spouses Quiterio and Antonina which bolstered respondents claim that petitioners falsified the Extrajudicial Settlement which became the basis for the issuance of TCT No. M-94400 in Ma. Teresas name; thus, a ground to annul the Deed of Extrajudicial Settlement and the title.1awphi1 The RTC did not consider as filed petitioners Counter-Petition for Partition since they did not pay the corresponding docket fees. Petitioners filed their Motion for Reconsideration, which the RTC denied in an Order12 dated August 29, 2000. Dissatisfied, petitioners filed an appeal with the CA. After the parties filed their respective briefs, the case was submitted for decision. On August 31, 2004, the CA rendered its assailed Decision affirming the May 9, 2000 Order of the RTC. The CA found that, while the subject matter of respondents complaint was the nullity of the Deed of Extrajudicial Settlement of Estate among Heirs with Waiver of Rights that resulted in the issuance of TCT No. M-94400 in Ma. Teresas name, petitioners included in their Answer a Counter-Petition for Partition involving 12 other parcels of land of spouses Quiterio and Antonina which was in the nature of a permissive counterclaim; that petitioners, being the plaintiffs in the counter-petition for partition, must pay the docket fees otherwise the court will not acquire jurisdiction over the case. The CA ruled that petitioners cannot pass the blame to the RTC for their omission to pay the docket fees. The CA affirmed the RTCs judgment on the pleadings since petitioners admitted that the deceased spouses Quiterio and Antonina had five children which included herein plaintiffs; thus, petitioners misrepresented themselves when they stated in the Deed of Extrajudicial Settlement that they are the legitimate descendants and sole heirs of the deceased spouses Quiterio and Antonina; that the deed is null and void on such ground since respondents were deprived of their rightful share in the subject property and petitioners cannot transfer the property in favor of Ma. Teresa without respondents consent; that TCT No. M-94400 must be cancelled for lack of basis. The CA affirmed the RTCs Order of partition of the subject property in accordance with the rules on intestate succession in the absence of a will. Petitioners filed the instant petition for review on certiorari raising the following assignment of errors, to wit: THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE APPEAL OF THE DEFENDANTS (HEREIN PETITIONERS) AND IN EVENTUALLY UPHOLDING THE DECISION OF THE COURT OF ORIGIN, CONSIDERING THAT SUCH RULING WILL RESULT TO MULTIPLICITY OF SUITS BETWEEN THE SAME PARTIES AND IN VIOLATION OF THE CONSTITUTIONAL GUARANTY OF DUE PROCESS OF LAW & PROPERTY AND PROPERTY RIGHTS. THE COURT OF APPEALS ERRED IN NOT VACATING THE ORDER OF THE TRIAL COURT IN PARTITIONING THE ESTATE WITHOUT PUBLICATION AS REQUIRED BY RULE 74 AND 76 OF THE 1997 RULES OF CIVIL PROCEDURE. 13 Petitioners contend that in their Comment to respondents motion for judgment on the pleadings, they stated that they will not oppose the same provided that their Answer with Counter-Petition for Partition and Rejoinder will be taken into consideration in deciding the case; however, the RTC decided the case on the basis alone of respondents complaint; that the Answer stated that the deed was not a falsified document and was made and implemented in accordance with law, thus, it was sufficient enough to tender an issue and was very far from admitting the material allegations of respondents complaint. Petitioners also fault the RTC for disregarding their claim for partition of the other parcels of land owned by the deceased spouses Quiterio and Antonina for their failure to pay the court docket fees when the RTC could have simply directed petitioners to pay the same; and that this error if not corrected will result to multiplicity of suits. Petitioners argue that the RTC erred in ordering the partition of the subject property as it violates the basic law on intestate succession that the heirs should be named

Rules 6-10.REMLAWREV and qualified through a formal petition for intestate succession whereby blood relationship should be established first by the claiming heirs before they shall be entitled to receive from the estate of the deceased; that the order of partition was rendered without jurisdiction for lack of publication as required under Rules 74 and 76 of the Rules of Civil Procedure for testate or intestate succession. We find no merit in the petition. The CA committed no reversible error in affirming the judgment on the pleadings rendered by the RTC. Section 1, Rule 34 of the Rules of Court, states: SECTION 1. Judgment on the pleadings. Where an answer fails to tender an issue, or otherwise admits the material allegations of the adverse partys pleading, the court may, on motion of that party, direct judgment on such pleading. x x x. 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 partys answer to raise an issue.14 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 partys pleadings by confessing the truthfulness thereof and/or omitting to deal with them at all.15 In this case, respondents principal action was for the annulment of the Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights executed by petitioners and annulment of title on the ground that petitioners stated in the said Deed that they are the legitimate descendants and sole heirs of the spouses Quiterio and Antonina. Although petitioners denied in their Answer that the Deed was falsified, they, however, admitted respondents allegation that spouses Quiterio and Antonina had 5 children, thus, supporting respondents claim that petitioners are not the sole heirs of the deceased spouses. Petitioners denial/admission in his Answer to the complaint should be considered in its entirety and not truncated parts. Considering that petitioners already admitted that respondents Galicano, Victoria, Catalina and Maribeth are the children and grandchild, respectively, of the spouses Quiterio and Antonina, who were the original registered owners of the subject property, and thus excluding respondents from the deed of settlement of the subject property, there is no more genuine issue between the parties generated by the pleadings, thus, the RTC committed no reversible error in rendering the judgment on the pleadings. A deed of extrajudicial partition executed without including some of the heirs, who had no knowledge of and consent to the same, is fraudulent and vicious.16 The deed of settlement made by petitioners was invalid because it excluded respondents who were entitled to equal shares in the subject property. Under the rule, no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof.17 Thus, the RTC correctly annulled the Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights dated January 23, 1998 and TCT No. M-94400 in the name of Ma. Teresa S.J. Fernando issued pursuant to such deed. Petitioners claim that had there been a trial, they could have presented testamentary and documentary evidence that the subject land is the inheritance of their deceased mother from her deceased parents, deserves scant consideration. A perusal of petitioners Answer, as well as their Rejoinder, never raised such a defense. In fact, nowhere in the Deed of Extrajudicial Settlement Among Heirs with Waiver of Rights executed by petitioners was there a statement that the subject property was inherited by petitioners mother Virginia from her deceased parents Quiterio and Antonina. Notably, petitioners never opposed respondents motion for judgment on the pleadings. We also find no merit in petitioners contention that the Counter-Petition for Partition in their Answer was in the nature of a compulsory counterclaim which does not require the payment of docket fees. A counterclaim is any claim which a defending party may have against an opposing party.18 It 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 partys claim.19 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 partys claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.20 Unlike permissive counterclaims, compulsory counterclaims should be set up in the same action; otherwise, they would be barred forever. Respondents action was for the annulment of the Deed of Extrajudicial Settlement, title and partition of the property subject of the Deed. On the other hand, in the Counter-Petition filed by petitioners in their Answer to respondents complaint, they were asking for the partition and accounting of the other 12 parcels of land of the deceased spouses Quiterio and Antonina, which are entirely different from the subject matter of the respondents action. Petitioners claim does not arise out of or is necessarily connected with the action for the Annulment of the Deed of Extrajudicial Settlement of the property covered by TCT No. 458396. Thus, payment of docket fees is necessary before the RTC could acquire jurisdiction over petitioners petition for partition.1avvphi1 Petitioners, however, argue that the RTC could have simply issued a directive ordering them to pay the docket fees, for its non-payment should not result in the automatic dismissal of the case. We find apropos the disquisition of the CA on this matter, thus: The rule regarding the payment of docket fees upon the filing of the initiatory pleading is not without exception. It has been held that if the filing of the initiatory pleading is not accompanied by payment of docket fees, the court may allow payment of the fee within reasonable time but in no case beyond the applicable prescriptive or reglementary period. It is apparent from the arguments of the defendants-appellants that they are blaming the trial court for their omission to pay the docket fees. It is, however, our

Rules 6-10.REMLAWREV opinion that the defendants-appellants cannot pass on to the trial court the performance of a positive duty imposed upon them by the law. It should be noted that their omission to file the docket fees was raised as one of the grounds to dismiss the counter petition for partition. The defendants-appellants opposed the said motion without, however, offering an answer to the said ground raised by the plaintiffs-appellees. In fact, during the period the motion was being heard by the trial court, the defendantsappellants never paid the docket fees for their petition so that it could have at least brought to the attention of the trial court their payment of the docket fees although belatedly done. They did not even ask the trial court for time within which to pay the docket fees for their petition. When the trial court ruled to dismiss the petition of the defendants-appellants, the latter did not, in their motion for reconsideration, ask the trial court to reconsider the dismissal of their petition by paying the required docket fees, neither did they ask for time within which to pay their docket fees. In other words, the trial court could have issued an order allowing the defendants-appellants a period to pay the docket fees for their petition if the defendants-appellants made such manifestation. What is apparent from the factual circumstances of the case is that the defendants-appellants have been neglectful in complying with this positive duty imposed upon them by law as plaintiffs of the counter petition for partition. Because of their omission to comply with their duty, no grave error was committed by the trial court in dismissing the defendants-appellants counter petition for partition. 21 Petitioners argue that with the dismissal of their Counter-Petition for Partition, the partition of the other parcels of land owned by the deceased spouses Quiterio and Antonina will result to multiplicity of suits. We are not persuaded. Significantly, in petitioners Answer with Counter-Petition for Partition, they enumerated 12 other parcels of land owned by the deceased spouses Quiterio and Antonina. They alleged that some of these properties had already been disposed of by respondents and some are still generating income under the control and administration of respondents, and these properties should be collated back by respondents to be partitioned by all the heirs of the deceased spouses. It bears stressing that the action filed by respondents in the RTC was an ordinary civil action for annulment of title, annulment of the deed of extrajudicial settlement and partition of a parcel of land now covered by TCT No. M-94400; hence, the authority of the court is limited to the property described in the pleading. The RTC cannot order the collation and partition of the other properties which were not included in the partition that was the subject matter of the respondents action for annulment. Thus, a separate proceeding is indeed proper for the partition of the estate of the deceased spouses Quiterio and Antonina. Finally, petitioners contend that the RTC erred when it ordered the heirs of Quiterio and Antonina to partition the subject parcel of land covered by TCT No. 458396 in accordance with the laws of intestate succession; that the RTC violated the requirement of publication under Sections 1 and 2 of Rule 74 and Section 3 of Rule 76 of the Rules of Court. We do not agree. We find the ruling of the CA on the matter of the RTCs order of partition of land subject of the annulled deed of extrajudicial settlement worth quoting, thus: Considering that the subject document and the corresponding title were canceled, the logical consequence is that the property in dispute, which was the subject of the extrajudicial settlement, reverted back to the estate of its original owners, the deceased spouses Quiterio and Antonina San Jose. Since, it was admitted that all the parties to the instant suit are legal heirs of the deceased spouses, they owned the subject property in common. It is a basic rule that any act which is intended to put an end to indivision among co-heirs or co-owners is deemed to be a partition. Therefore, there was no reversible error committed by the trial court in ordering the partition of the subject property. We find nothing wrong with such ruling considering that the trial court ordered the partition of the subject property in accordance with the rules on intestate succession. The trial court found the property to be originally owned by the deceased spouses Quiterio and Antonina San Jose and, in the absence of a will left by the deceased spouses, it must be partitioned in accordance with the rules on intestate succession.22 As the RTC nullified the Deed of Extrajudicial Settlement of Estate Among Heirs with Waiver of Rights executed by petitioners and the title issued in accordance therewith, the order of partition of the land subject of the settlement in accordance with the laws on intestate succession is proper as respondents action filed in the RTC and respondents prayer in their complaint asked for the partition of the subject property in accordance with intestate succession. The applicable law is Section 1, Rule 69 of the Rules of Court, which deals with action for partition, to wit: SECTION 1. Complaint in action for partition of real estate. A person having the right to compel the partition of real estate may do so as provided in this Rule, setting forth in his complaint the nature and extent of his title and an adequate description of the real estate of which partition is demanded and joining as defendants all other persons interested in the property. And, under this law, there is no requirement for publication. WHEREFORE, the instant petition is DENIED. The Decision dated August 31, 2004 and the Resolution dated December 14, 2004, of the Court of Appeals in CA-G.R. CV No. 69261, are AFFIRMED. SO ORDERED. DIOSDADO M. PERALTA Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MINITA V. CHICO-NAZARIO Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice

Rules 6-10.REMLAWREV ANTONIO EDUARDO B. NACHURA Associate Justice G.R. No. 160242 May 17, 2005 obligation in connection with the leased equipment used by defendant to comply with its contracted services; 6. The equipment covered by the lease were all used in the construction project of Becthel in Mauban, Quezon, and Expo in Pampanga and defendant was not yet paid of its services that resulted to the non-payment of rentals on the leased equipment.3 And by way of third-party complaint against Becthel as third-party defendant, ACDC alleged that: 7. Third-party plaintiff repleads the foregoing allegations in the preceding paragraphs as may be material and pertinent hereto; 8. Third-party BECTHEL OVERSEAS CORPORATION (herein called "Becthel") is a corporation duly organized and existing under the laws of the United States of America but may be served with summons at Barangay Cagsiay I, Mauban, Quezon 4330, Philippines; 9. Third-party defendant Becthel contracted the services of third-party plaintiff to do construction work at its Mauban, Quezon project using the leased equipment of plaintiff Monark; 10. With the contracted work, third-party plaintiff rented the equipment of the plaintiff Monark; 11. Third-party plaintiff rendered and complied with its contracted works with thirdparty defendant using plaintiffs (Monark) rented equipment. But, third-party defendant BECTHEL did not pay for the services of third-party plaintiff ASIAKONSTRUKT that resulted to the non-payment of plaintiff Monarks claim; 12. Despite repeated demands, third-party defendant failed and refused to pay its overdue obligation to third-party plaintiff ASIAKONSTRUKT, and third-party defendant needs to be impleaded in this case for contribution, indemnity, subrogation or other reliefs to off-set or to pay the amount of money claim of plaintiff Monark on the leased equipment used in the Mauban, Quezon project in the total amount of P456,666.67; 13. By reason thereof, third-party plaintiff was compelled to prosecute its claim against third-party defendant and hired the services of undersigned counsel for an attorneys fees of P500,000.00.4 ACDC prayed that judgment be rendered in its favor dismissing the complaint and ordering the third-party defendant (Becthel) to pay P456,666.67 plus interest thereon and attorneys fees.5 MEC opposed the motion of ACDC to file a third-party complaint against Becthel on the ground that the defendant had already admitted its principal obligation to MEC in the amount of P5,071,335.86; the transaction between it and ACDC, on the one hand, and between ACDC and Becthel, on the other, were independent transactions. Furthermore, the allowance of the third-party complaint would result in undue delays in the disposition of the case.6

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS and MONARK EQUIPMENT CORPORATION, respondents. DECISION CALLEJO, SR., J.: On March 13, 2001, Monark Equipment Corporation (MEC) filed a Complaint1 for a sum of money with damages against the Asian Construction and Development Corporation (ACDC) with the Regional Trial Court (RTC) of Quezon City. The complaint alleged the following: ACDC leased Caterpillar generator sets and Amida mobile floodlighting systems from MEC during the period of March 13 to July 15, 1998 but failed, despite demands, to pay the rentals therefor in the total amount of P4,313,935.00; from July 14 to August 25, 1998, various equipments from MEC were, likewise, leased by ACDC for the latters power plant in Mauban, Quezon, and that there was still a balance of P456,666.67; and ACDC also purchased and took custody of various equipment parts from MEC for the agreed price of P237,336.20 which, despite demands, ACDC failed to pay. MEC prayed that judgment be rendered in its favor, thus: 1. Ordering defendant to pay the plaintiff the total amount of FIVE MILLION SEVENTY-ONE THOUSAND THREE HUNDRED THIRTY-FIVE [PESOS] & 86/100 (P5,071,335.86); 2. Ordering defendant to pay the plaintiff legal interest of 12% per annum on the principal obligations in the total amount of FIVE MILLION SEVENTY-ONE THOUSAND THREE HUNDRED THIRTY-FIVE [PESOS] & 86/100 (P5,071,335.86) computed from the date the obligations became due until fully paid; 3. Ordering defendant to pay attorneys fees in the amount equivalent to 15% of the amount of claim; 4. Ordering defendant to pay all costs of litigation. Plaintiff prays for such other reliefs as may be just and equitable under the premises.2 ACDC filed a motion to file and admit answer with third-party complaint against Becthel Overseas Corporation (Becthel). In its answer, ACDC admitted its indebtedness to MEC in the amount of P5,071,335.86 but alleged the following special and affirmative defenses: 5. Defendant has incurred an obligation with plaintiff, in the amount of P5,071,335.86. But third-party defendant fails and refuses to pay its overdue

10

Rules 6-10.REMLAWREV I. WHETHER OR NOT A THIRD-PARTY COMPLAINT IS PROPER; AND II. WHETHER OR NOT JUDGMENT ON THE PLEADINGS IS PROPER.11 Citing the rulings of this Court in Allied Banking Corporation v. Court of Appeals12 and British Airways v. Court of Appeals,13 the petitioner avers that the CA erred in ruling that in denying its motion for leave to file a third-party complaint, the RTC acted in accordance with the Rules of Court and case law. The petitioner maintains that it raised genuine issues in its answer; hence, it was improper for the trial court to render judgment on the pleadings: With due respect, the judgment on the pleadings affirmed by the Court of Appeals is not, likewise, proper considering that the Answer with Third-Party Complaint, although it admitted the obligation to respondent, tendered an issue of whether the respondents claim is connected with the third-party claim. As alleged in the Answer with Third-Party Complaint, it is admitted then by respondent, for purposes of judgment on the pleadings, that failure to pay respondent was in connection of Becthel Overseas Corporations failure to pay its obligation to petitioner and that the equipment leased was used in connection with the Becthel Overseas Corporation project. This tendered issue could not just be disregarded in the light of the third-party complaint filed by herein petitioner and third-party plaintiff which, as argued in the first discussion/argument, is proper and should have been given due course.14 The petition is denied for lack of merit. Section 11, Rule 6 of the Rules of Court provides: Sec. 11. Third (fourth, etc.)-party complaint. A third (fourth, etc.) party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third (fourth, etc.) party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim. Furthermore, Section 1, Rule 34 of the Rules of Court provides that the Court may render judgment on the pleadings, as follows: Section 1. Judgment on the pleadings. Where an answer fails to tender an issue, or, otherwise, admits the material allegations of the adverse partys 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. The purpose of Section 11, Rule 6 of the Rules of Court is to permit a defendant to assert an independent claim against a third-party which he, otherwise, would assert in another action, thus preventing multiplicity of suits. All the rights of the parties concerned would then be adjudicated in one proceeding. This is a rule of procedure and does not create a substantial right. Neither does it abridge, enlarge, or nullify the substantial rights of any litigant.15 This right to file a third-party complaint against a third-party rests in the discretion of the trial court. The third-party complaint is actually independent of, separate and distinct from the plaintiffs

MEC then filed a motion for summary judgment, alleging therein that there was no genuine issue as to the obligation of ACDC to MEC in the total amount of P5,071,335.86, the only issue for the trial courts resolution being the amount of attorneys fees and costs of litigation.7 ACDC opposed the motion for summary judgment, alleging that there was a genuine issue with respect to the amount of P5,071,335.86 being claimed by MEC, and that it had a third-party complaint against Becthel in connection with the reliefs sought against it which had to be litigated.8 In its reply, MEC alleged that the demand of ACDC in its special and affirmative defenses partook of the nature of a negative pregnant, and that there was a need for a hearing on its claim for damages. On August 2, 2001, the trial court issued a Resolution denying the motion of ACDC for leave to file a third-party complaint and granting the motion of MEC, which the trial court considered as a motion for a judgment on the pleadings. The fallo of the resolution reads: ACCORDINGLY, this Court finds defendant Asian Construction and Development Corporation liable to pay plaintiff Monark Equipment Corporation and is hereby ordered to pay plaintiff the amount of FIVE MILLION SEVENTY-ONE THOUSAND AND THREE HUNDRED THIRTY-FIVE & 86/100 PESOS (P5,071,335.86) plus 12% interest from the filing of the complaint until fully paid. SO ORDERED.9 ACDC appealed the resolution to the Court of Appeals (CA), alleging that I. THE LOWER COURT ERRED IN DENYING THE MOTION TO FILE AND ADMIT ANSWER WITH THIRD-PARTY COMPLAINT; II. THE LOWER COURT ERRED IN GRANTING THE MOTION FOR SUMMARY JUDGMENT; III. THE LOWER COURT ERRED WHEN IT DENIED THE THIRD-PARTY COMPLAINT AND ORDERED DEFENDANT TO PAY THE AMOUNT OF P5,071,335.86 PLUS INTEREST OF 12% PER ANNUM.10 On July 18, 2001, the CA rendered judgment dismissing the appeal and affirming the assailed decision. The appellate court ruled that since MEC had prayed for judgment on the pleadings, it thereby waived its claim for damages other than the amount of P5,071,335.86; hence, there was no longer a genuine issue to be resolved by the court which necessitated trial. The appellate court sustained the disallowance of the third-party complaint of ACDC against Becthel on the ground that the transaction between the said parties did not arise out of the same transaction on which MECs claim was based. Its motion for reconsideration of the decision having been denied, ACDC, now the petitioner, filed the present petition for review on certiorari, and raises the following issues:

11

Rules 6-10.REMLAWREV complaint, such that were it not for the rule, it would have to be filed separately from the original complaint.16 A prerequisite to the exercise of such right is that some substantive basis for a thirdparty claim be found to exist, whether the basis be one of indemnity, subrogation, contribution or other substantive right.17 The bringing of a third-party defendant is proper if he would be liable to the plaintiff or to the defendant or both for all or part of the plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another transaction.18 The defendant may implead another as third-party defendant (a) on an allegation of liability of the latter to the defendant for contribution, indemnity, subrogation or any other relief; (b) on the ground of direct liability of the third-party defendant to the plaintiff; or (c) the liability of the third-party defendant to both the plaintiff and the defendant.19 There must be a causal connection between the claim of the plaintiff in his complaint and a claim for contribution, indemnity or other relief of the defendant against the thirdparty defendant. In Capayas v. Court of First Instance,20 the Court made out the following tests: (1) whether it arises out of the same transaction on which the plaintiffs claim is based; or whether the third-party claim, although arising out of another or different contract or transaction, is connected with the plaintiffs claim; (2) whether the third-party defendant would be liable to the plaintiff or to the defendant for all or part of the plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another transaction; and (3) whether the third-party defendant may assert any defenses which the third-party plaintiff has or may have to the plaintiffs claim. The third-party complaint does not have to show with certainty that there will be recovery against the third-party defendant, and it is sufficient that pleadings show possibility of recovery.21 In determining the sufficiency of the third-party complaint, the allegations in the original complaint and the third-party complaint must be examined.22 A third-party complaint must allege facts which prima facie show that the defendant is entitled to contribution, indemnity, subrogation or other relief from the third-party defendant.23 It bears stressing that common liability is the very essence for contribution. Contribution is a payment made by each, or by any of several having a common liability of his share in the damage suffered or in the money necessarily paid by one of the parties in behalf of the other or others.24 The rule on common liability is fundamental in the action for contribution.25 The test to determine whether the claim for indemnity in a third-party complaint is, whether it arises out of the same transaction on which the plaintiffs claim is based, or the third-party plaintiffs claim, although arising out of another or different contract or transaction, is connected with the plaintiffs claim.26 In this case, the claims of the respondent, as plaintiff in the RTC, against the petitioner as defendant therein, arose out of the contracts of lease and sale; such transactions are different and separate from those between Becthel and the petitioner as third-party plaintiff for the construction of the latters project in Mauban, Quezon, where the equipment leased from the respondent was used by the petitioner. The controversy between the respondent and the petitioner, on one hand, and that between the petitioner and Becthel, on the other, are thus entirely distinct from each other. There is no showing in the proposed third-party complaint that the respondent knew or approved the use of the leased equipment by the petitioner for the said project in Quezon. Becthel cannot invoke any defense the petitioner had or may have against the claims of the respondent in its complaint, because the petitioner admitted its liabilities to the respondent for the amount of P5,075,335.86. The barefaced fact that the petitioner used the equipment it leased from the respondent in connection with its project with Becthel does not provide a substantive basis for the filing of a third-party complaint against the latter. There is no causal connection between the claim of the respondent for the rental and the balance of the purchase price of the equipment and parts sold and leased to the petitioner, and the failure of Becthel to pay the balance of its account to the petitioner after the completion of the project in Quezon.27 We note that in its third-party complaint, the petitioner alleged that Becthel should be ordered to pay the balance of its account of P456,666.67, so that the petitioner could pay the same to the respondent. However, contrary to its earlier plea for the admission of its third-party complaint against Becthel, the petitioner also sought the dismissal of the respondents complaint. The amount of P456,666.67 it sought to collect from Becthel would not be remitted to the respondent after all. The rulings of this Court in Allied Banking Corporation and British Airways are not applicable in this case since the factual backdrops in the said cases are different. In Allied Banking Corporation, Joselito Yujuico obtained a loan from General Bank and Trust Company. The Central Bank of the Philippines ordered the liquidation of the Bank. In a Memorandum Agreement between the liquidation of the Bank and Allied Banking Corporation, the latter acquired the receivables from Yujuico. Allied Banking Corporation then sued Yujuico for the collection of his loan, and the latter filed a third-party complaint against the Central Bank, alleging that by reason of its tortious interference with the affairs of the General Bank and Trust Company, he was prevented from performing his obligation under the loan. This Court allowed the third-party complaint based on the claim of the defendant therein, thus: In the words of private respondent, he "[s]eeks to transfer liability for the default imputed against him by the petitioner to the proposed third-party defendants because of their tortious acts which prevented him from performing his obligations." Thus, if at the outset the issue appeared to be a simple makers liability on a promissory note, it became complex by the rendition of the aforestated decision.28 In British Airways, the Court allowed the third-party complaint of British Airways against its agent, the Philippine Airlines, on the plaintiffs complaint regarding his luggage, considering that a contract of carriage was involved. The Court ruled, thus: Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other words, BA and PAL are blaming each other for the incident. In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the formers journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the "Conditions of Contracts" of the ticket issued by BA to

12

Rules 6-10.REMLAWREV Mahtani confirms that the contract was one of continuous air transportation from Manila to Bombay. "4. xxx carriage to be performed hereunder by several successive carriers is regarded as a single operation." Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong acted as the agent of BA. Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any negligence in the performance of its function and is liable for damages which the principal may suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or sub-contractor. Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters pertaining to their relationship. Therefore, in the instant case, the contractual relationship between BA and PAL is one of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the agent.29 It goes without saying that the denial of the petitioners motion with leave to file a third-party complaint against Becthel is without prejudice to its right to file a separate complaint against the latter. Considering that the petitioner admitted its liability for the principal claim of the respondent in its Answer with Third-Party Complaint, the trial court did not err in rendering judgment on the pleadings against it. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioner. SO ORDERED. Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur. G.R. No. 174168 March 30, 2009

DECISION TINGA, J.: These consolidated petitions involving the same parties. although related, dwell on different issues. G.R. No. 174168. This is a petition for review1 assailing the decision and resolution of the Court of Appeals dated 31 May 2006 and 8 August 2006, respectively, in CA-G.R. SP No. 91416.2 On 30 May 2003, four criminal complaints were filed by Sy Chim and Felicidad Chan Sy (Spouses Sy) against Sy Tiong Shiou, Juanita Tan Sy, Jolie Ross Tan, Romer Tan, Charlie Tan and Jessie James Tan (Sy Tiong Shiou, et al.) before the City Prosecutors Office of Manila. The cases were later consolidated. Two of the complaints, I.S. Nos. 03E-15285 and 03E-15286,3 were for alleged violation of Section 74 in relation to Section 144 of the Corporation Code. In these complaints, the Spouses Sy averred that they are stockholders and directors of Sy Siy Ho & Sons, Inc. (the corporation) who asked Sy Tiong Shiou, et al., officers of the corporation, to allow them to inspect the books and records of the business on three occasions to no avail. In a letter4 dated 21 May 2003, Sy Tiong Shiou, et al. denied the request, citing civil and intracorporate cases pending in court.5 In the two other complaints, I.S. No. 03E-15287 and 03E-15288,6 Sy Tiong Shiou was charged with falsification under Article 172, in relation to Article 171 of the Revised Penal Code (RPC), and perjury under Article 183 of the RPC. According to the Spouses Sy, Sy Tiong Shiou executed under oath the 2003 General Information Sheet (GIS) wherein he falsely stated that the shareholdings of the Spouses Sy had decreased despite the fact that they had not executed any conveyance of their shares.7 Sy Tiong Shiou, et al. argued before the prosecutor that the issues involved in the civil case for accounting and damages pending before the RTC of Manila were intimately related to the two criminal complaints filed by the Spouses Sy against them, and thus constituted a prejudicial question that should require the suspension of the criminal complaints. They also argued that the Spouses Sys request for inspection was premature as the latters concern may be properly addressed once an answer is filed in the civil case. Sy Tiong Shiou, on the other hand, denied the accusations against him, alleging that before the 2003 GIS was submitted to the Securities and Exchange Commission (SEC), the same was shown to respondents, who at that time were the President/Chairman of the Board and Assistant Treasurer of the corporation, and that they did not object to the entries in the GIS. Sy Tiong Shiou also argued that the issues raised in the pending civil case for accounting presented a prejudicial question that necessitated the suspension of criminal proceedings. On 29 December 2003, the investigating prosecutor issued a resolution recommending the suspension of the criminal complaints for violation of the Corporation Code and the dismissal of the criminal complaints for falsification and

SY TIONG SHIOU, JUANITA TAN SY, JOLIE ROSS TAN, ROMER TAN, CHARLIE TAN, and JESSIE JAMES TAN, Petitioners, vs. SY CHIM and FELICIDAD CHAN SY, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 179438 March 30, 2009

SY CHIM and FELICIDAD CHAN SY, Petitioners, vs. SY TIONG SHIOU and JUANITA TAN, Respondents.

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Rules 6-10.REMLAWREV perjury against Sy Tiong Shiou.8 The reviewing prosecutor approved the resolution. The Spouses Sy moved for the reconsideration of the resolution, but their motion was denied on 14 June 2004.9 The Spouses Sy thereupon filed a petition for review with the Department of Justice (DOJ), which the latter denied in a resolution issued on 02 September 2004.10 Their subsequent motion for reconsideration was likewise denied in the resolution of 20 July 2005.11 The Spouses Sy elevated the DOJs resolutions to the Court of Appeals through a petition for certiorari, imputing grave abuse of discretion on the part of the DOJ. The appellate court granted the petition12 and directed the City Prosecutors Office to file the appropriate informations against Sy Tiong Shiou, et al. for violation of Section 74, in relation to Section 144 of the Corporation Code and of Articles 172 and 183 of the RPC. The appellate court ruled that the civil case for accounting and damages cannot be deemed prejudicial to the maintenance or prosecution of a criminal action for violation of Section 74 in relation to Section 144 of the Corporation Code since a finding in the civil case that respondents mishandled or misappropriated the funds would not be determinative of their guilt or innocence in the criminal complaint. In the same manner, the criminal complaints for falsification and/or perjury should not have been dismissed on the ground of prejudicial question because the accounting case is unrelated and not necessarily determinative of the success or failure of the falsification or perjury charges. Furthermore, the Court of Appeals held that there was probable cause that Sy Tiong Shiou had committed falsification and that the City of Manila where the 2003 GIS was executed is the proper venue for the institution of the perjury charges. Sy Tiong Shiou, et al. sought reconsideration of the Court of Appeals decision but their motion was denied.13 On 2 April 2008, the Court ordered the consolidation of G.R. No. 179438 with G.R. No. 174168.14 Sy Tiong Shiou, et al. argue that findings of the DOJ in affirming, modifying or reversing the recommendations of the public prosecutor cannot be the subject of certiorari or review of the Court of Appeals because the DOJ is not a quasi-judicial body within the purview of Section 1, Rule 65 of the Rules of Court. Petitioners rely on the separate opinion of former Chief Justice Andres R. Narvasa in Roberts, Jr. v. Court of Appeals,15 wherein he wrote that this Court should not be called upon to determine the existence of probable cause, as there is no provision of law authorizing an aggrieved party to petition for such a determination.16 In any event, they argue, assuming without admitting that the findings of the DOJ may be subject to judicial review under Section 1, Rule 65 of the Rules of Court, the DOJ has not committed any grave abuse of discretion in affirming the findings of the City Prosecutor of Manila. They claim that the Spouses Sys request for inspection was not made in good faith and that their motives were tainted with the intention to harass and to intimidate Sy Tiong Shiou, et al. from pursuing the criminal and civil cases pending before the prosecutors office and the Regional Trial Court (RTC) of Manila, Branch 46. Thus, to accede to the Spouses Sys request would pose serious threats to the existence of the corporation.17 Sy Tiong Shiou, et al. aver that the RTC had already denied the motion for production and inspection and instead ordered petitioners to make the corporate records available to the appointed independent auditor. Hence, the DOJ did not commit any grave abuse of discretion in affirming the recommendation of the City Prosecutor of Manila.18 They further argue that adherence to the Court of Appeals ruling that the accounting case is unrelated to, and not necessarily determinative of the success of, the criminal complaint for falsification and/or perjury would unnecessarily indict petitioner Sy Tiong Shiou for the said offenses he may not have committed but only because of an outcome unfavorable to him in the civil action.19 Indeed, a preliminary proceeding is not a quasi-judicial function and that the DOJ is not a quasi-judicial agency exercising a quasi-judicial function when it reviews the findings of a public prosecutor regarding the presence of probable cause.20 Moreover, it is settled that the preliminary investigation proper, i.e., the determination of whether there is reasonable ground to believe that the accused is guilty of the offense charged and should be subjected to the expense, rigors and embarrassment of trial, is the function of the prosecution.21 This Court has adopted a policy of non-interference in the conduct of preliminary investigations and leaves to the investigating prosecutor sufficient latitude of discretion in the determination of what constitutes sufficient evidence as will establish probable cause for the filing of information against the supposed offender.22 As in every rule, however, there are settled exceptions. Hence, the principle of noninterference does not apply when there is grave abuse of discretion which would authorize the aggrieved person to file a petition for certiorari and prohibition under Rule 65, 1997 Rules of Civil Procedure.23 As correctly found by the Court of Appeals, the DOJ gravely abused its discretion when it suspended the hearing of the charges for violation of the Corporation Code on the ground of prejudicial question and when it dismissed the criminal complaints. A prejudicial question comes into play generally in a situation where a civil action and a criminal action are both pending and there exists in the former an issue which must be preemptively resolved before the criminal action may proceed since howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. The reason behind the principle of prejudicial question is to avoid two conflicting decisions. It has two essential elements: (a) the civil action involves an issue similar or intimately related to the issue raised in the criminal action; and (b) the resolution of such issue determines whether or not the criminal action may proceed.24 The civil action and the criminal cases do not involve any prejudicial question. The civil action for accounting and damages, Civil Case No. 03-106456 pending before the RTC Manila, Branch 46, seeks the issuance of an order compelling the Spouses Sy to render a full, complete and true accounting of all the amounts, proceeds and fund paid to, received and earned by the corporation since 1993 and to restitute it such amounts, proceeds and funds which the Spouses Sy have misappropriated. The criminal cases, on the other hand, charge that the Spouses Sy were illegally prevented from getting inside company premises and from inspecting company records, and that Sy Tiong Shiou falsified the entries in the GIS, specifically the Spouses Sys shares in the corporation. Surely, the civil case presents no prejudicial question to the criminal cases since a finding that the Spouses Sy mishandled the funds will have no effect on the determination of guilt in the complaint for violation of Section 74 in relation to Section 144 of the Corporation Code; the civil case concerns the validity of Sy Tiong Shious refusal to allow inspection of the records, while in the falsification and perjury cases, what is material is the veracity of the entries made by Sy Tiong Shiou in the sworn GIS.

14

Rules 6-10.REMLAWREV responsible for said violation: Provided, further, That nothing in this section shall be construed to repeal the other causes for dissolution of a corporation provided in this Code. In the recent case of Ang-Abaya, et al. v. Ang, et al.,27 the Court had the occasion to enumerate the requisites before the penal provision under Section 144 of the Corporation Code may be applied in a case of violation of a stockholder or members right to inspect the corporate books/records as provided for under Section 74 of the Corporation Code. The elements of the offense, as laid down in the case, are: First. A director, trustee, stockholder or member has made a prior demand in writing for a copy of excerpts from the corporations records or minutes; Second. Any officer or agent of the concerned corporation shall refuse to allow the said director, trustee, stockholder or member of the corporation to examine and copy said excerpts; Third. If such refusal is made pursuant to a resolution or order of the board of directors or trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal; and, Fourth. Where the officer or agent of the corporation sets up the defense that the person demanding to examine and copy excerpts from the corporations records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand, the contrary must be shown or proved.28 Thus, in a criminal complaint for violation of Section 74 of the Corporation Code, the defense of improper use or motive is in the nature of a justifying circumstance that would exonerate those who raise and are able to prove the same. Accordingly, where the corporation denies inspection on the ground of improper motive or purpose, the burden of proof is taken from the shareholder and placed on the corporation.29 However, where no such improper motive or purpose is alleged, and even though so alleged, it is not proved by the corporation, then there is no valid reason to deny the requested inspection. In the instant case, however, the Court finds that the denial of inspection was predicated on the pending civil case against the Spouses Sy. This is evident from the 21 May 2003 letter of Sy Tiong Shiou, et al.s counsel30 to the Spouses Sy,31 which reads: Gentlemen: We write in behalf of our clients, SY SIY HO, INC. ( Guan Yiac Hardware); SY TIONG SHIOU, JUANITA TAN SY; JOLIE ROSS TAN; CHARLIE TAN; ROMER TAN; and JESSE JAMES TAN, relative to your letter dated 16 May 2003. Please be informed that a case for Accounting and Damages had already been filed against your clients, Sy Chim and Felicidad Chan Sy before the Regional Trial Court of Manila, Branch 46, denominated as Civil Case No. 03-106456.

Anent the issue of probable cause, the Court also finds that there is enough probable cause to warrant the institution of the criminal cases. The term probable cause does not mean actual and positive cause nor does it import absolute certainty. It is merely based on opinion and reasonable belief. Thus a finding of probable cause does not require an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or omission complained of constitutes the offense charged. Precisely, there is a trial for the reception of evidence of the prosecution in support of the charge.25 In order that probable cause to file a criminal case may be arrived at, or in order to engender the well-founded belief that a crime has been committed, the elements of the crime charged should be present. This is based on the principle that every crime is defined by its elements, without which there should beat the mostno criminal offense.26 Section 74 of the Corporation Code reads in part: xxx The records of all business transactions of the corporation and the minutes of any meeting shall be open to inspection by any director, trustee, stockholder or member of the corporation at reasonable hours on business days and he may demand, in writing, for a copy of excerpts from said records or minutes, at his expense. Any officer or agent of the corporation who shall refuse to allow any director, trustee, stockholder or member of the corporation to examine and copy excerpts from its records or minutes, in accordance with the provisions of this Code, shall be liable to such director, trustee, stockholder or member for damages, and in addition, shall be guilty of an offense which shall be punishable under Section 144 of this Code: Provided, That if such refusal is made pursuant to a resolution or order of the Board of Directors or Trustees, the liability under this section for such action shall be imposed upon the directors or trustees who voted for such refusal: and Provided, further, That it shall be a defense to any action under this section that the person demanding to examine and copy excerpts from the corporation's records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand. Meanwhile, Section 144 of the same Code provides: Sec. 144. Violations of the Code.Violations of any of the provisions of this Code or its amendments not otherwise specifically penalized therein shall be punished by a fine of not less than one thousand (P1,000.00) pesos but not more than ten thousand (P10,000.00) pesos or by imprisonment for not less than thirty (30) days but not more than five (5) years, or both, in the discretion of the court. If the violation is committed by a corporation, the same may, after notice and hearing, be dissolved in appropriate proceedings before the Securities and Exchange Commission: Provided, That such dissolution shall not preclude the institution of appropriate action against the director, trustee or officer of the corporation

15

Rules 6-10.REMLAWREV We fully understand your desire for our clients to respond to your demands, however, under the prevailing circumstance this would not be advisable. The concerns that you raised in your letter can later on be addressed after your clients shall have filed their responsive pleading in the abovesaid case. We trust that this response will at the moment be enough.32 Even in their Joint Counter-Affidavit dated 23 September 2003,33 Sy Tiong Shiou, et al. did not make any allegation that "the person demanding to examine and copy excerpts from the corporations records and minutes has improperly used any information secured through any prior examination of the records or minutes of such corporation or of any other corporation, or was not acting in good faith or for a legitimate purpose in making his demand." Instead, they merely reiterated the pendency of the civil case. There being no allegation of improper motive, and it being undisputed that Sy Tiong Shiou, et al. denied Sy Chim and Felicidad Chan Sys request for inspection, the Court rules and so holds that the DOJ erred in dismissing the criminal charge for violation of Section 74 in relation to Section 144 of the Corporation Code. Now on the existence of probable cause for the falsification and/or perjury charges. The Spouses Sy charge Sy Tiong Shiou with the offense of falsification of public documents under Article 171, paragraph 4; and/or perjury under Article 183 of the Revised Penal Code (RPC). The elements of falsification of public documents through an untruthful narration of facts are: (a) the offender makes in a document untruthful statements in a narration of facts; (b) the offender has a legal obligation to disclose the truth of the facts narrated;34 (c) the facts narrated by the offender are absolutely false; and (d) the perversion of truth in the narration of facts was made with the wrongful intent to injure a third person.35 On the other hand, the elements of perjury are: (a) that the accused made a statement under oath or executed an affidavit upon a material matter; (b) that the statement or affidavit was made before a competent officer, authorized to receive and administer oath; (c) that in that statement or affidavit, the accused made a willful and deliberate assertion of a falsehood; and, (d) that the sworn statement or affidavit containing the falsity is required by law or made for a legal purpose. A General Information Sheet (GIS) is required to be filed within thirty (30) days following the date of the annual or a special meeting, and must be certified and sworn to by the corporate secretary, or by the president, or any duly authorized officer of the corporation.36 From the records, the 2003 GIS submitted to the SEC on 8 April 2003 was executed under oath by Sy Tiong Shiou in Manila, in his capacity as Vice President and General Manager.37 By executing the document under oath, he, in effect, attested to the veracity38 of its contents. The Spouses Sy claim that the entries in the GIS pertaining to them do not reflect the true number of shares that they own in the company. They attached to their complaint the 2002 GIS of the company, also executed by Sy Tiong Shiou, and compared the entries therein vis-avis the ones in the 2003 GIS. The Spouses Sy noted the marked decrease in their shareholdings, averring that at no time after the execution of the 2002 GIS, up to the time of the filing of their criminal complaints did they execute or authorize the execution of any document or deed transferring, conveying or disposing their shares or any portion thereof; and thus there is absolutely no basis for the figures reflected in the 2003 GIS.39 The Spouses Sy claim that the false statements were made by Sy Tiong Shiou with the wrongful intent of injuring them. All the elements of both offenses are sufficiently averred in the complaint-affidavits. The Court agrees with the Court of Appeals holding, citing the case of Fabia v. Court of Appeals, that the doctrine of primary jurisdiction no longer precludes the simultaneous filing of the criminal case with the corporate/civil case.40 Moreover, the Court finds that the City of Manila is the proper venue for the perjury charges, the GIS having been subscribed and sworn to in the said place. Under Section 10(a), Rule 110 of the Revised Rules of Court, the criminal action shall be instituted and tried in the court of the municipality or territory where the offense was committed or where any of its essential ingredients occurred.41 In Villanueva v. Secretary of Justice,42 the Court held that the felony is consummated when the false statement is made.43 Thus in this case, it was alleged that the perjury was committed when Sy Tiong Shiou subscribed and sworn to the GIS in the City of Manila, thus, following Section 10(a), Rule 110 of the Revised Rules of Court, the City of Manila is the proper venue for the offense. G. R. No. 179438. This petition assails the decision44 and resolution45 of the Court of Appeals dated 26 May 2004 and 29 August 2007, respectively, in CA-G.R. SP No. 81897. On 3 February 2003, Juanita Tan, corporate treasurer of Sy Siy Ho & Sons, Inc. (the corporation), a family corporation doing business under the name and style Guan Yiac Hardware, submitted a letter46 to the corporations Board of Directors (Board) stating that the control, supervision and administration of all corporate funds were exercised by Sy Chim and Felicidad Chan Sy (Spouses Sy), corporate president and assistant treasurer, respectively. In the same letter, Juanita Tan disclosed that Felicidad Chan Sy did not make cash deposits to any of the corporations banks from 1 November 2001 to 31 January 2003, thus the total bank remittances for the past years were less than reflected in the corporate financial statements, accounting books and records. Finally, Juanita Tan sought to be free from any responsibility over all corporate funds. The Board granted Juanita Tans request and authorized the employment of an external auditor to render a complete audit of all the corporate accounting books and records.47 Consequently, the Board hired the accounting firm Banaria, Banaria & Company. In its Report48 dated 5 April 2003, the accounting firm attributed to the Spouses Sy P67,117,230.30 as unaccounted receipts and disbursements from 1994 to 2002.49 A demand letter50 was subsequently served on the Spouses Sy on 15 April 2003. On the same date, the children of the Spouses Sy allegedly stole from the corporation cash, postdated checks and other important documents. After the incident, the Spouses Sy allegedly transferred residence and ceased reporting to the corporation. Thereupon, the corporation filed a criminal complaint for robbery against the Spouses Sy before the City Prosecutors Office of Manila.51 A search warrant was subsequently issued by the Regional Trial Court.52 On 26 April 2003, Sy Tiong Shiou, corporate Vice President and General Manager, called a special meeting to be held on 6 May 2003 to fill up the positions vacated by the Spouses Sy. Sy Tiong Shiou was subsequently elected as the new president and

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Rules 6-10.REMLAWREV his wife, Juanita Tan, the new Vice President.53 Despite these developments, Sy Chim still caused the issuance of a Notice of Stockholders meeting dated 11 June 2003 in his capacity as the alleged corporate president.54 Meanwhile, on 1 July 2003, the corporation, through Romer S. Tan, filed its Amended Complaint for Accounting and Damages55 against the Spouses Sy before the RTC Manila, praying for a complete and true accounting of all the amounts paid to, received and earned by the company since 1993 and for the restitution of the said amount.56 The complaint also prayed for a temporary restraining order (TRO) and or preliminary injunction to restrain Sy Chim from calling a stockholders meeting on the ground of lack of authority. By way of Answer,57 the Spouses Sy averred that Sy Chim was a mere figurehead and Felicidad Chan Sy merely performed clerical functions, as it was Sy Tiong Shiou and his spouse, Juanita Tan, who have been authorized by the corporations by-laws to supervise, control and administer corporate funds, and as such were the ones responsible for the unaccounted funds. They assailed the meetings called by Sy Tiong Shiou on the grounds that the same were held without notice to them and without their participation, in violation of the by-laws. The Spouses Sy also pursued their counter-claim for moral and exemplary damages and attorneys fees. On 9 September 2003, the Spouses Sy filed their Motion for Leave to File Third-Party Complaint,58 praying that their attached Third Party Complaint59 be allowed and admitted against Sy Tiong Shiou and his spouse. In the said third-party complaint, the Spouses Sy accused Sy Tiong Shiou and Juanita Tan as directly liable for the corporations claim for misappropriating corporate funds. On 8 October 2003, the trial court granted the motion for leave to file the third-party complaint, and forthwith directed the issuance of summons against Sy Tiong Shiou and Juanita Tan.60 On 16 January 2004, their counsel allegedly discovered that Sy Tiong Shiou and Juanita Tan were not furnished with the copies of several pleadings, as well as a court order, which resulted in their having been declared in default for failure to file their answer to the third-party complaint; thus, they opted not to file a motion for reconsideration anymore and instead filed a petition for certiorari before the Court of Appeals. In its Decision dated 26 May 2004, the Court of Appeals granted the petition of Sy Tiong Shiou and Juanita Tan.61 The appellate court declared that a third-party complaint is not allowed under the Interim Rules of Procedure Governing IntraCorporate Controversies Under R.A. No. 8799 (Interim Rules), it not being included in the exclusive enumeration of allowed pleadings under Section 2, Rule 2 thereof. Moreover, even if such a pleading were allowed, the admission of the third-party complaint against Sy Tiong Shiou and Juanita Tan still would have no basis from the facts or the law and jurisprudence.62 The Court of Appeals also ruled that the respondent judge committed a manifest error amounting to lack of jurisdiction in admitting the third-party complaint and in summarily declaring Sy Tiong Shiou and Juanita Tan in default for failure to file their answer within the purported reglementary period. The Court of Appeals set aside the trial courts 8 October 2003 Order admitting the third-party complaint, as well as the 19 December 2003 Order, declaring Sy Tiong Shiou and Juanita Tan in default for failure to file their answer. The trial court was further ordered to dismiss the third-party complaint without prejudice to any action that the corporation may separately file against Sy Tiong Shiou and Juanita Tan.63 The Spouses Sy filed a motion for reconsideration, but their motion was denied on 29 August 2007.64 Sy Chim and Felicidad Chan Sy argue before this Court that a third-party complaint is not excluded or prohibited by the Interim Rules, and that the Court of Appeals erred in ruling that their third- party complaint is not actionable because their action is not in respect of the corporations claims. They add that the disallowance of the third-party complaint will result in multiplicity of suits. The third-party complaint should be allowed. The conflicting provisions of the Interim Rules of Procedure for Inter-Corporate Controversies read: Rule 1, Sec. 8. Prohibited pleadings.The following pleadings are prohibited: (1) Motion to dismiss; (2) Motion for a bill of particulars; (3) Motion for new trial, or for reconsideration of judgment or order, or for reopening of trial; (4) Motion for extension of time to file pleadings, affidavits or any other paper, except those filed due to clearly compelling reasons. Such motion must be verified and under oath; and (5) Motion for postponement and other motions of similar intent, except those filed due to clearly compelling reasons. Such motion must be verified and under oath. Rule 2, Sec.2. Pleadings allowed.The only pleadings allowed to be filed under these Rules are the complaint, answer, compulsory counterclaims or cross-claims pleaded in the answer, and the answer to the counterclaims or cross-claims.65 There is a conflict, for while a third-party complaint is not included in the allowed pleadings, neither is it among the prohibited ones. Nevertheless, this conflict may be resolved by following the well-entrenched rule in statutory construction, that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.66 Statutes, including rules, should be construed in the light of the object to be achieved and the evil or mischief to be suppressed and they should be given such construction as will advance the object, suppress the mischief and secure the benefits intended. A statute should therefore be read with reference to its leading idea, and its general purpose and intention should be gathered from the whole act, and this predominant purpose will prevail over the literal import of particular terms or clauses, if plainly apparent, operating as a limitation upon some and as a reason for expanding the signification of others, so that the interpretation may accord with the spirit of the entire act, and so that the policy and object of the statute as a whole may be made

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Rules 6-10.REMLAWREV effectual and operative to the widest possible extent.67 Otherwise stated, the spirit, rather than the letter of a law determines its construction; hence, a statute, as in the rules in this case, must be read according to its spirit and intent.68 This spirit and intent can be gleaned from Sec. 3, Rule 1 of the Interim Rules, which reads: Sec. 3. Construction.These Rules shall be liberally construed in order to promote their objective of securing a just, summary, speedy and inexpensive determination of every action or proceeding.69 Now, a third-party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim. It is actually a complaint independent of, and separate and distinct from the plaintiffs complaint. In fact, were it not for Rule 6, Section 11 of the Rules of Court, such third-party complaint would have to be filed independently and separately from the original complaint by the defendant against the third-party defendant. Jurisprudence is consistent in declaring that the purpose of a third-party complaint is to avoid circuitry of action and unnecessary proliferation of law suits and of disposing expeditiously in one litigation all the matters arising from one particular set of facts.70 It thus appears that the summary nature of the proceedings governed by the Interim Rules, and the allowance of the filing of third-party complaints is premised on one objectivethe expeditious disposition of cases. Moreover, following the rule of liberal interpretation found in the Interim Rules, and taking into consideration the suppletory application of the Rules of Court under Rule 1, Sec. 271 of the Interim Rules, the Court finds that a third-party complaint is not, and should not be prohibited in controversies governed by the Interim Rules. The logic and justness of this conclusion are rendered beyond question when it is considered that Sy Tiong Shiou and Juanita Tan are not complete strangers to the litigation as in fact they are the moving spirit behind the filing of the principal complaint for accounting and damages against the Spouses Sy.1avvphi1 The Court also rules that the third-party complaint of the Spouses Sy should be admitted. A prerequisite to the exercise of such right is that some substantive basis for a thirdparty claim be found to exist, whether the basis be one of indemnity, subrogation, contribution or other substantive right. The bringing of a third-party defendant is proper if he would be liable to the plaintiff or to the defendant or both for all or part of the plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another transaction. The defendant may implead another as third-party defendant: (a) on an allegation of liability of the latter to the defendant for contribution, indemnity, subrogation or any other relief; (b) on the ground of direct liability of the third-party defendant to the plaintiff; or (c) the liability of the thirdparty defendant to both the plaintiff and the defendant.72 In determining the sufficiency of the third-party complaint, the allegations in the original complaint and the third-party complaint must be examined. A third-party complaint must allege facts which prima facie show that the defendant is entitled to contribution, indemnity, subrogation or other relief from the third-party defendant.73 The complaint alleges that the Spouses Sy, as officers of the corporation, have acted illegally in raiding its corporate funds, hence they are duty bound to render a full, complete and true accounting of all the amounts, proceeds and funds paid to, received and earned by the corporation since 1993 and to restitute to the corporation all such amounts, proceeds, and funds which they took and misappropriated for their own use and benefit, to the damage and prejudice of the plaintiff and its stockholders.74 On the other hand, in the third-party complaint, the Spouses Sy claim that it is Sy Tiong Shiou and Juanita Tan who had full and complete control of the day-to day operations and complete control and custody of the funds of the corporation, and hence they are the ones liable for any shortfall or unaccounted difference of the corporations cash account. Thus, Sy Tiong Shiou and Juanita Tan should render a full, complete and true accounting of all the amounts, proceeds, funds paid to, received and earned by the corporation since 1993, including the amount attributed to the Spouses Sy in the complaint for accounting and damages. In their prayer, the Spouses Sy moved that Sy Tiong Shiou and Juanita Tan be declared as directly and solely liable in respect of the corporations claim for accounting and damages, and that in the event that they, the Spouses Sy, are adjudged liable to the corporation, Sy Tiong Shiou and Juanita Tan be ordered to pay all amounts necessary to discharge their liability to the corporation by way of indemnity or reimbursement. The allegations in the third-party complaint impute direct liability on the part of Sy Tiong Shiou and Juanita Tan to the corporation for the very same claims which the corporation interposed against the Spouses Sy. It is clear therefore that the Spouses Sys third-party complaint is in respect of the plaintiff corporations claims,75 and thus the allowance of the third-party complaint is warranted. WHEREFORE, these cases are resolved as follows: G.R. No. 174168 The petition for review is DENIED. The Decision and Resolution of the Court of Appeals dated 31 May 2006 and 8 August 2006, respectively, in CA-G.R. SP No. 91416 are AFFIRMED. Costs against the petitioners. G.R. No. 179438 The petition is GRANTED. The decision and resolution of the Court of Appeals dated 26 May 2004 and 29 August 2007, respectively, in CA-G.R. SP No. 81897 are SET ASIDE and the Orders of the Regional Trial Court of Manila Branch 46 dated 8 October 2003 and 19 December 2003 are REINSTATED.

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Rules 6-10.REMLAWREV SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: LEONARDO A. QUISUMBING Associate Justice Chairperson CONCHITA CARPIO MORALES Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice ANTONIO EDUARDO B. NACHURA* Associate Justice G.R. No. 167181 December 23, 2008

1. Tag Card No. 77-02830-03 issued by then Pasay City Mayor Pablo Cuneta and then NHA General Manager Gaudencio Tobias; 2. Application and Contract for Water Services No. 295319 in the name of Bulado but the same was signed by petitioner Winnie; 3. Tax Declaration No. B-007-27566 over the land issued by the Assessors Office of Pasay City in the name of defendant recognizing its beneficial use in favor of petitioners; 4. Tax Declaration No. B-007-27667 over the residential structure erected on the land and issued by the Assessors Office of Pasay City in the names of petitioners; 5. Pagpapatunay dated September 5, 1989 signed by neighbors and acquaintances of petitioners attesting to their long time residence in the property; 6. Deposit Receipt No. 286444 dated September 27, 1989 issued by the Manila Electric Company attesting to the installation of electric service in the name of petitioner Winnie on the property.4 On September 14, 1989, petitioners completed the payments of the amortizations due on the property. Reflected on the left side portion of the official receipt evidencing full payment is the annotation "full payment." Consequently, petitioners demanded that respondent NHA issue in their favor a deed of sale and a title over the property. Respondent, however, refused. On January 28, 2003, petitioners, by counsel, sent respondent a letter to issue a deed of sale and title. Despite receipt, respondent did not issue the requested documents. On March 6, 2003, respondent wrote petitioners informing them that petitioner Winnies name does not appear as beneficiary. Petitioners replied that Winnie was representing her mother, the late Lourdes Bulado. Respondent did not respond to the reply. Left with no recourse, petitioners instituted a complaint for mandamus before the court a quo. RTC Order On April 22, 2003, the RTC dismissed the complaint for mandamus, disposing thus: Considering that the petition is insufficient in form and substance, there being no reference to any law which the respondent by reason of its office, trust or station is especially enjoined as a duty to perform or any allegation that respondent is unlawfully excluding petitioners from using or enjoying any right or office which said petitioners are entitled to, the above-entitled petition is hereby DISMISSED, pursuant to Section 3 Rule 65 of the 1997 Rules of Civil Procedure. SO ORDERED.5 Petitioners moved for reconsideration but they did not succeed. Thus, petitioners seasonably appealed to the CA.

SPS. CARLOS MUNSALUD and WINNIE MUNSALUD, petitioners, vs. NATIONAL HOUSING AUTHORITY, respondent. DECISION REYES, R.T., J.: INSUFFICIENCY in form and substance, as a ground for dismissal of the complaint, should not be based on the title or caption, especially when the allegations of the pleading support an action. In pursuit of a reversal of the Decision1 of the Court of Appeals (CA) affirming the order of dismissal2 of the Regional Trial Court (RTC) in a complaint for mandamus,3 petitioners-spouses Carlos Munsalud and Winnie Munsalud lodged before this Court a petition for review on certiorari. The Facts Laid bare from the records are the following facts: Petitioner Winnie Munsalud is the daughter and one of the compulsory heirs of the late Lourdes Bulado (Bulado) who died on December 8, 1985. During the lifetime of Bulado, respondent National Housing Authority (NHA) awarded her a lot located at 942 R. Higgins St., CAA Compound, Bgy. 185, Pasay City. The award was made pursuant to the "Land for the Landless" program of respondent. She resided at the said property until her death. When Bulado died, petitioner Winnie assumed the obligation to pay the monthly amortizations. Respondent NHA recognized petitioner spouses assumption of obligations as their names were reflected in the receipts. They were allowed to occupy the lot up to the present. To prove their occupancy over the lot, petitioners offered as evidence the following documents, viz.:

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Rules 6-10.REMLAWREV Poring over the arguments presented, the focal issue is whether in giving due course to an action, the court is fenced within the parameters of the title given by plaintiff to the case without regard to the averments of the pleading. Elsewise stated, does the trial court have absolute discretion to dismiss an action on the ground that it is insufficient in form and substance based alone on its designation when, from the body and the relief prayed for, it could stand as an action sufficient in form and substance? Our Ruling Petitioners action designated as mandamus was dismissed by the trial court on the ground that it is insufficient in form and substance. This begs the question: when is an action sufficient in form and when is it sufficient in substance? To begin with, form is the methodology used to express rules of practice and procedure.8 It is the order or method of legal proceedings.9 It relates to technical details.10 It is ordinarily the antithesis of substance.11 It is an established method of expression or practice. It is a fixed or formal way of proceeding.12 A pleading is sufficient in form when it contains the following: 1. A Caption, setting forth the name of the court, the title of the action indicating the names of the parties, and the docket number which is usually left in blank, as the Clerk of Court has to assign yet a docket number; 2. The Body, reflecting the designation, the allegations of the partys claims or defenses, the relief prayed for, and the date of the pleading; 3. The Signature and Address of the party or counsel;13 4. Verification. This is required to secure an assurance that the allegations have been made in good faith, or are true and correct and not merely speculative;14 5. A Certificate of Non-forum Shopping, which although not jurisdictional, the same is obligatory;15 6. An Explanation in case the pleading is not filed personally to the Court. Likewise, for pleading subsequent to the complaint, if the same is not served personally to the parties affected, there must also be an explanation why service was not done personally.16 Likewise, for all other pleadings, not initiatory in nature, there must be: A Proof of Service, which consists in the written admission of the party served, or the official return of the server, or the affidavit of the party serving, containing a full statement of the date, place and manner of service. If the service is by ordinary mail, proof thereof shall consist of an affidavit of the person mailing. If service is by registered mail, proof shall be made by such affidavit and the registry receipt issued by the mailing office.17

CA Disposition On August 23, 2004, the CA affirmed the RTC dismissal of the mandamus petition. WHEREFORE, the instant appeal is hereby DISMISSED. Accordingly, the assailed Order of Dismissal is AFFIRMED. SO ORDERED.6 In agreeing with the court a quo, the appellate court rationalized as follows: It is essential to the issuance of the writ of mandamus that the petitioner should have a clear legal right to the thing demanded and it must be the imperative duty of the respondent to perform the act required. It is a command to exercise a power already possessed and to perform a duty already imposed. It well settled that the legal right of petitioner to the performance of the particular act which is sought to be compelled must be clear and complete. A clear legal right within the meaning of the rule means a right which is clearly founded in, or granted by law; a right which is inferable as a matter of law. Likewise, mandamus refers only to acts enjoined by law to be done. The duties to be enforced must be such as are clearly peremptorily enjoined by law or by reason of official station. However, appellants failed to point out in their petition the specific law by which defendant is duty bound to perform the act sought to be performed, as well as the law which would grant them the clear legal right to the issuance of the writ of mandamus. Foregoing discussed, we find no error on the part of the court a quo in dismissing the petition for mandamus filed by plaintiffs-appellants. On September 20, 2004, petitioners moved for reconsideration but it was denied by the CA on February 22, 2005. Hence, the present recourse. Issues I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE ORDERS OF THE HONORABLE REGIONAL TRIAL COURT OF QUEZON CITY DATED APRIL 22, 2003 AND SEPTEMBER 25, 2003 WHERE THE LATTER COURT RELYING UPON THE APPELLATION AND/OR LABEL THAT PETITIONERS GAVE THEIR COMPLAINT (I.E., MANDAMUS) IN CIVIL CASE NO. Q-03-492 DISMISSED THE COMPLAINT THEREIN PURPORTEDLY BECAUSE THE SAID COMPLAINT FAILED TO COMPLY WITH SECTION 3, RULE 65 OF THE 1997 RULES OF CIVIL PROCEDURE. II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DENYING PETITIONERS MOTION FOR RECONSIDERATION OF ITS DECISION DATED AUGUST 23, 2004.7 (Underscoring supplied)

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Rules 6-10.REMLAWREV In case a party is represented by counsel de parte, additional requirements that go into the form of the pleading should be incorporated, viz.: 1. The Roll of Attorneys Number; 2. The Current Professional Tax Receipt Number; and 3. The IBP Official Receipt No. or IBP Lifetime Membership Number.18 4. MCLE Compliance or Exemption Certificate Number and Date of Issue (effective January 1, 2009).19 In the case at bench, a naked perusal of the complaint docketed as Civil Case No. Q03- 49278 designated by petitioners as mandamus reveals that it is sufficient in form. It has the caption with the name of the court, the name of the parties, and the docket number. The complaint contains allegations of petitioners claims. It has a prayer and the date when it was prepared. The signature page shows the signature and name of petitioners counsel, the counsels IBP, PTR and Roll of Attorneys Numbers. The complaint was also verified and accompanied by a certificate of nonforum shopping and signed by petitioners as plaintiffs. It was filed personally with the office of the clerk of court. Now, is the petition insufficient in substance? Substance is that which is essential and is used in opposition to form.20 It is the most important element in any existence, the characteristic and essential components of anything, the main part, the essential import, and the purport.21 It means not merely subject of act, but an intelligible abstract or synopsis of its material and substantial elements, though it may be stated without recital of any details.22 It goes into matters which do not sufficiently appear or prejudicially affect the substantial rights of parties who may be interested therein and not to mere informalities.23 As used in reference to substance of common-law actions, substance comprehends all of the essential or material elements necessary to sufficiently state a good cause of action invulnerable to attack by general demurrer.24 Substance is one which relates to the material allegations in the pleading. It is determinative of whether or not a cause of action exists. It is the central piece, the core, and the heart constituting the controversy addressed to the court for its consideration. It is the embodiment of the essential facts necessary to confer jurisdiction upon the court. The court a quo anchored the dismissal of petitioners complaint on the basis of Rule 65, Section 325 of the 1997 Rules of Civil Procedure. It found that there was no reference to any law which respondent NHA, by reason of its office, trust or station, is specifically enjoined as a duty to perform. It declared that there was no allegation in the petition below that respondent is unlawfully excluding petitioners from using or enjoying any right or office which said petitioners are entitled to. Although the complaint was captioned as Mandamus, petitioners averments, as well as the relief sought, called for an action for specific performance. Pertinent portions of the complaint for mandamus provide: 3. Plaintiff Winnie Munsalud is the daughter of the late Lourdes Bulado, and as such is one of Bulados compulsory heirs. x x x; 4. During the lifetime of Bulado, she was awarded a parcel of land at a "land for the landless" program of the defendant; xxxx 6. When Bulado died in 1985, Plaintiffs assumed her obligations over the aforesaid property, particularly the payment of the amortizations therein; 7. Defendant recognized this assumption of Bulados obligations by the Plaintiffs considering that in the receipts covering the amortizations, the names of the Plaintiffs as the ones paying the Defendant were indicated therein; 8. In fact, Defendant also allowed Plaintiffs to move into, and occupy, as they continue to occupy up to now, the above described premises; xxxx 10. On September 14, 1989, Plaintiffs completed the payment of the amortizations due over the property in question, and this is evidenced by an official receipt, numbered 19492, which Defendants cashier, Yasmin D. Aquino, issued to the Plaintiffs themselves, although the official name of the payor indicated therein was still that of the deceased Lourdes Bulado; xxxx 12. Significantly, that receipt contained the annotation appearing on the left side thereof, that the amount paid thereon constituted "full payment"; 13. Since then, Plaintiffs have been demanding from the Defendant the issuance of the deed of sale and the title over the property in question, but, inexplicably, and without any legal justification whatsoever, Defendant has refused to issue that deed of sale and title; 14. On January 28, 2003, Plaintiffs, through counsel, sent a letter to the Defendant seeking the issuance of that deed of sale and title but, despite receipt thereof, Defendant again refused and failed [to] act favorably thereon; xxxx 20. At this point that the lot in question had already been fully paid for by the Plaintiffs, there is now a need to compel the Defendant to comply with its duty to issue a deed of sale in favor of the heirs of the deceased Lourdes Bulado, particularly Plaintiffs Carlos and Winnie Munsalud, as well to issue a title over the same property in favor of the same heirs.

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Rules 6-10.REMLAWREV WHEREFORE, it is most respectfully prayed that judgment be rendered commanding the Defendant, after due notice and hearing, to issue a deed of sale and/or a title, in favor of the heirs of the deceased Lourdes Bulado, particularly Plaintiffs Carlos and Winnie Munsalud, over the property subject of this action.26 (Underscoring supplied) A plain reading of the allegations of the complaint reveals that petitioner Winnie Munsalud assumed the obligations of her deceased mother, the original awardee of respondents "Land for the Landless Program." One of the obligations of an awardee is to pay the monthly amortizations. Petitioners complied with said obligation and religiously paid the amortizations until these were fully paid. Indeed, petitioners have complied with what is incumbent upon them under the program. Hence, it is now the turn of respondent to comply with what is incumbent upon it. In a letter dated February 21, 2003,27 respondent informed petitioners counsel that per its records, the name of petitioner Winnie Munsalud does not appear as a beneficiary. For the guidance of respondent, Winnie Munsalud is not actually a beneficiary. The beneficiary of its program is Lourdes Bulado, her deceased mother. This fact was made known to respondent when another letter dated March 6, 200328 was sent by the counsel of the heirs of Lourdes Bulado. In the same letter, respondent was informed that petitioner Winnie is representing her deceased mother, Lourdes Bulado, viz.: In view of the contents of that letter, we would like to notify you that Ms. Munsalud is actually representing her deceased mother, Lourdes Bulado, who, on September 14, 1989 completed her payment for Lot 12, Block 79 of the Maricaban Estate. A copy of the receipt evidencing that completed is attached hereto as Annex B for your easy reference. In view thereof, may we reiterate our request for the issuance of the title over the aforesaid property in the name of Lourdes Bulado.29 (Underscoring supplied) The letter was received by respondent on March 12, 2003. On account of this second letter, respondent could have easily verified if the name of Lourdes Bulado appears as a beneficiary and awardee of its "Land for the Landless Program." However, respondent never responded to the second letter. This left petitioners with no recourse but to bring the action to the trial court. Evidently, the action commenced by petitioners before the trial court, although designated as mandamus, is in reality an action to perform a specific act. The averments of the complaint are clear. The essential facts are sufficiently alleged as to apprise the court of the nature of the case. The relief sought to be obtained aims to compel respondent to issue a deed of sale and the corresponding title over the property awarded to Bulado. Thus, the Court finds the complaint sufficient in substance. The designation or caption is not controlling, more than the allegations in the complaint, for it is not even an indispensable part of the complaint. Instead of focusing on what an action for mandamus should contain, the court a quo should have proceeded to examine the essential facts alleged in petitioners complaint. For what determines the nature of the action and which court has jurisdiction over it are the allegations in the complaint and the character of the relief sought.30 The cause of action in a complaint is not determined by the designation given to it by the parties. The allegations in the body of the complaint define or describe it. The designation or caption is not controlling more than the allegations in the complaint. It is not even an indispensable part of the complaint.31 There is no need to make reference to any law which respondent by reason of its office is enjoined as a duty to perform. Respondents duty arose from its contractual obligation under the "Land for the Landless Program." The trial court is reminded that the caption of the complaint is not determinative of the nature of the action.32 The caption of the pleading should not be the governing factor, but rather the allegations in it should determine the nature of the action, because even without the prayer for a specific remedy, the courts may nevertheless grant the proper relief as may be warranted by the facts alleged in the complaint and the evidence introduced.33 All told, whether or not petitioner Winnie, in her capacity as a compulsory heir of the awardee, becomes a beneficiary of the program is a question best ventilated during trial on the merits. The conditions, terms, and provisions of the program in case an awardee dies are evidentiary and should be presented for determination of the court. Even the effect and the consequence of the assumption of obligation of the awardee as well as the presence of other compulsory heirs are issues that should be addressed for the courts evaluation on the basis of the evidence to be laid down before its eyes. WHEREFORE, the appealed Decision is REVERSED AND SET ASIDE. The case is REMANDED to the Regional Trial Court which is ORDERED to reinstate the case and to conduct trial on the merits with dispatch. No costs. SO ORDERED. RUBEN T. REYES Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ Associate Justice MINITA V. CHICO-NAZARIO Associate Justice

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Rules 6-10.REMLAWREV During the pendency of the case, the Senate Blue Ribbon Committee and Committee on Justice and Human Rights conducted a hearing in aid of legislation on the matter of land registration and titling. In particular, the legislative investigation looked into the issuance of fake titles and focused on how respondent was able to acquire TCT Nos. 135604, 135605 and 135606. During the congressional hearing held on November 26, 1998, one of those summoned was Atty. Garlitos, respondents former counsel. He testified that he prepared respondents answer and transmitted an unsigned draft to respondents president, Mr. Victor Ong. The signature appearing above his name was not his. He authorized no one to sign in his behalf either. And he did not know who finally signed it. With Atty. Garlitos revelation, the Republic promptly filed an urgent motion on December 3, 1998 to declare respondent in default, 2 predicated on its failure to file a valid answer. The Republic argued that, since the person who signed the answer was neither authorized by Atty. Garlitos nor even known to him, the answer was effectively an unsigned pleading. Pursuant to Section 3, Rule 7 of the Rules of Court, 3 it was a mere scrap of paper and produced no legal effect. On February 19, 1999, the trial court issued a resolution granting the Republics motion. 4 It found respondents answer to be sham and false and intended to defeat the purpose of the rules. The trial court ordered the answer stricken from the records, declared respondent in default and allowed the Republic to present its evidence ex parte. The Republic presented its evidence ex parte, after which it rested its case and formally offered its evidence. Meanwhile, respondent sought reconsideration of the February 19, 1999 resolution but the trial court denied it. Aggrieved, respondent elevated the matter to the Court of Appeals via a petition for certiorari 5 seeking to set aside the February 19, 1999 resolution of the trial court. Respondent contended that the trial court erred in declaring it in default for failure to file a valid and timely answer. On May 31, 2001, the Court of Appeals rendered the assailed decision. It found Atty. Garlitos statements in the legislative hearing to be unreliable since they were not subjected to cross-examination. The appellate court also scrutinized Atty. Garlitos acts after the filing of the answer 6 and concluded that he assented to the signing of the answer by somebody in his stead. This supposedly cured whatever defect the answer may have had. Hence, the appellate court granted respondents petition for certiorari. It directed the lifting of the order of default against respondent and ordered the trial court to proceed to trial with dispatch. The Republic moved for reconsideration but it was denied. Thus, this petition. Did the Court of Appeals err in reversing the trial courts order which declared respondent in default for its failure to file a valid answer? Yes, it did. A party may, by his words or conduct, voluntarily adopt or ratify anothers statement. 7 Where it appears that a party clearly and unambiguously assented to

ANTONIO EDUARDO B. NACHURA Associate Justice G.R. No. 149576 August 8, 2006 REPUBLIC OF THE PHILIPPINES, represented by the Land Registration Authority, Petitioner, vs. KENRICK DEVELOPMENT CORPORATION, Respondent. DECISION CORONA, J.: The Republic of the Philippines assails the May 31, 2001 decision 1 and August 20, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948 in this petition for review under Rule 45 of the Rules of Court. This case stemmed from the construction by respondent Kenrick Development Corporation of a concrete perimeter fence around some parcels of land located behind the Civil Aviation Training Center of the Air Transportation Office (ATO) in 1996. As a result, the ATO was dispossessed of some 30,228 square meters of prime land. Respondent justified its action with a claim of ownership over the property. It presented Transfer Certificate of Title (TCT) Nos. 135604, 135605 and 135606 issued in its name and which allegedly originated from TCT No. 17508 registered in the name of one Alfonso Concepcion. ATO verified the authenticity of respondents titles with the Land Registration Authority (LRA). On May 17, 1996, Atty. Jose Loriega, head of the Land Title Verification Task Force of the LRA, submitted his report. The Registrar of Deeds of Pasay City had no record of TCT No. 17508 and its ascendant title, TCT No. 5450. The land allegedly covered by respondents titles was also found to be within Villamor Air Base (headquarters of the Philippine Air Force) in Pasay City. By virtue of the report, the Office of the Solicitor General (OSG), on September 3, 1996, filed a complaint for revocation, annulment and cancellation of certificates of title in behalf of the Republic of the Philippines (as represented by the LRA) against respondent and Alfonso Concepcion. It was raffled to Branch 114 of the Regional Trial Court of Pasay City where it was docketed as Civil Case No. 96-1144. On December 5, 1996, respondent filed its answer which was purportedly signed by Atty. Onofre Garlitos, Jr. as counsel for respondent. Since Alfonso Concepcion could not be located and served with summons, the trial court ordered the issuance of an alias summons by publication against him on February 19, 1997. The case was thereafter punctuated by various incidents relative to modes of discovery, pre-trial, postponements or continuances, motions to dismiss, motions to declare defendants in default and other procedural matters.

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Rules 6-10.REMLAWREV or adopted the statements of another, evidence of those statements is admissible against him. 8 This is the essence of the principle of adoptive admission. An adoptive admission is a partys reaction to a statement or action by another person when it is reasonable to treat the partys reaction as an admission of something stated or implied by the other person. 9 By adoptive admission, a third persons statement becomes the admission of the party embracing or espousing it. Adoptive admission may occur when a party: (a) expressly agrees to or concurs in an oral statement made by another; 10 (b) hears a statement and later on essentially repeats it; 11 (c) utters an acceptance or builds upon the assertion of another; 12 (d) replies by way of rebuttal to some specific points raised by another but ignores further points which he or she has heard the other make 13 or (e) reads and signs a written statement made by another. 14 Here, respondent accepted the pronouncements of Atty. Garlitos and built its case on them. At no instance did it ever deny or contradict its former counsels statements. It went to great lengths to explain Atty. Garlitos testimony as well as its implications, as follows: 1. While Atty. Garlitos denied signing the answer, the fact was that the answer was signed. Hence, the pleading could not be considered invalid for being an unsigned pleading. The fact that the person who signed it was neither known to Atty. Garlitos nor specifically authorized by him was immaterial. The important thing was that the answer bore a signature. 2. While the Rules of Court requires that a pleading must be signed by the party or his counsel, it does not prohibit a counsel from giving a general authority for any person to sign the answer for him which was what Atty. Garlitos did. The person who actually signed the pleading was of no moment as long as counsel knew that it would be signed by another. This was similar to addressing an authorization letter "to whom it may concern" such that any person could act on it even if he or she was not known beforehand. 3. Atty. Garlitos testified that he prepared the answer; he never disowned its contents and he resumed acting as counsel for respondent subsequent to its filing. These circumstances show that Atty. Garlitos conformed to or ratified the signing of the answer by another. Respondent repeated these statements of Atty. Garlitos in its motion for reconsideration of the trial courts February 19, 1999 resolution. And again in the petition it filed in the Court of Appeals as well as in the comment 15 and memorandum it submitted to this Court. Evidently, respondent completely adopted Atty. Garlitos statements as its own. Respondents adoptive admission constituted a judicial admission which was conclusive on it.

Contrary to respondents position, a signed pleading is one that is signed either by the party himself or his counsel. Section 3, Rule 7 is clear on this matter. It requires that a pleading must be signed by the party or counsel representing him. Therefore, only the signature of either the party himself or his counsel operates to validly convert a pleading from one that is unsigned to one that is signed. Counsels authority and duty to sign a pleading are personal to him. He may not delegate it to just any person. The signature of counsel constitutes an assurance by him that he has read the pleading; that, to the best of his knowledge, information and belief, there is a good ground to support it; and that it is not interposed for delay. 16 Under the Rules of Court, it is counsel alone, by affixing his signature, who can certify to these matters. The preparation and signing of a pleading constitute legal work involving practice of law which is reserved exclusively for the members of the legal profession. Counsel may delegate the signing of a pleading to another lawyer 17 but cannot do so in favor of one who is not. The Code of Professional Responsibility provides: Rule 9.01 A lawyer shall not delegate to any unqualified person the performance of any task which by law may only be performed by a member of the Bar in good standing. Moreover, a signature by agents of a lawyer amounts to signing by unqualified persons, 18 something the law strongly proscribes. Therefore, the blanket authority respondent claims Atty. Garlitos entrusted to just anyone was void. Any act taken pursuant to that authority was likewise void. There was no way it could have been cured or ratified by Atty. Garlitos subsequent acts. Moreover, the transcript of the November 26, 1998 Senate hearing shows that Atty. Garlitos consented to the signing of the answer by another "as long as it conformed to his draft." We give no value whatsoever to such self-serving statement. No doubt, Atty. Garlitos could not have validly given blanket authority for just anyone to sign the answer. The trial court correctly ruled that respondents answer was invalid and of no legal effect as it was an unsigned pleading. Respondent was properly declared in default and the Republic was rightly allowed to present evidence ex parte. Respondent insists on the liberal application of the rules. It maintains that even if it were true that its answer was supposedly an unsigned pleading, the defect was a mere technicality that could be set aside. Procedural requirements which have often been disparagingly labeled as mere technicalities have their own valid raison d etre in the orderly administration of justice. To summarily brush them aside may result in arbitrariness and injustice. 19 The Courts pronouncement in Garbo v. Court of Appeals 20 is relevant:

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Rules 6-10.REMLAWREV

Procedural rules are [tools] designed to facilitate the adjudication of cases. Courts and litigants alike are thus [enjoined] to abide strictly by the rules. And while the Court, in some instances, allows a relaxation in the application of the rules, this, we stress, was never intended to forge a bastion for erring litigants to violate the rules with impunity. The liberality in the interpretation and application of the rules applies only in proper cases and under justifiable causes and circumstances. While it is true that litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to insure an orderly and speedy administration of justice. Like all rules, procedural rules should be followed except only when, for the most persuasive of reasons, they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the prescribed procedure. 21 In this case, respondent failed to show any persuasive reason why it should be exempted from strictly abiding by the rules. As a final note, the Court cannot close its eyes to the acts committed by Atty. Garlitos in violation of the ethics of the legal profession. Thus, he should be made to account for his possible misconduct. WHEREFORE, the petition is hereby GRANTED. The May 31, 2001 decision and August 20, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948 are REVERSED and SET ASIDE and the February 19, 1999 resolution of the Regional Trial Court of Pasay City, Branch 114 declaring respondent in default is hereby REINSTATED. Let a copy of this decision be furnished the Commission on Bar Discipline of the Integrated Bar of the Philippines for the commencement of disbarment proceedings against Atty. Onofre Garlitos, Jr. for his possible unprofessional conduct not befitting his position as an officer of the court. SO ORDERED. RENATO C. CORONA Associate Justice WE CONCUR: REYNATO S. PUNO Associate Justice Chairperson ANGELINA SANDOVAL-GUTIERREZ ADOLFO S. AZCUNA Associate Justice Associate Justice CANCIO C. GARCIA Associate Justice [G.R. No. 172449, August 20, 2008]

LAZARO MADARA, ALFREDO D. ROA III, AND JOAQUIN T. VENUS, PETITIONERS, VS. HON. NORMA C. PERELLO, PRESIDING JUDGE OF BRANCH 276, REGIONAL TRIAL COURT, MUNTINLUPA CITY, FELIX M. FALCOTELO, SHERIFF-IN-CHARGE MUNTINLUPA CITY, PHILIPPINE AMUSEMENT AND GAMING CORPORATION, AND PROVIDENT INTERNATIONAL RESOURCES CORPORATION, REPRESENTED BY EDWARD T. MARCELO, CONSTANCIO D. FRANCISCO, ANNA MELINDA MARCELO-REVILLA, LYDIA J. CHUANICO, DANIEL T. PASCUAL, LINDA J. MARCELO, JOHN J. MARCELO, CELIA C. CABURNAY, CELEDONIO P. ESCANO, JR., AND THE REGISTER OF DEEDS OF MUNTINLUPA CITY, RESPONDENTS. DECISION BRION, J.: Submitted for our decision is the Amended Petition for Review on Certiorari[1] of the Decision of the Court of Appeals dated 20 December 2005[2] and its Resolution dated 24 April 2006[3] in CA-G.R. SP No. 90821,[4] filed by the petitioners Lazaro Madara (Madara), Alfredo D. Roa III (Roa), and Joaquin T. Venus (Venus) [collectively, the petitioners]. THE ANTECEDENTS The amended petition originated from two (2) separate amended complaints purportedly filed by Provident International Resources Corporation as plaintiff (plaintiff PIRC) with the Regional Trial Court of Muntinlupa City. [As the narration below will show, two groups claim to represent the PIRC; to distinguish between them when necessary, one is herein named the plaintiff PIRC while the other is the real PIRC.] The first amended complaint, filed on 15 October 2002 and entitled Provident International Resources Corporation v. Philippine Amusement and Gaming Corp. (PAGCOR), Mr. Efraim Genuino, as Chairman, Mr. Rafael Francisco, as President, JOHN DOES AND JANE DOES, was docketed as Civil Case No. 02-228.[5] The amended complaint states, among others, that: (1) the petitioners Madara, Roa and Venus, as well as Jose Ma. Carlos Zumel and Luis A. Asistio, were elected plaintiff PIRC's directors for the year 2002-2003 and that some of them, as well as a certain Santiago Alvarez (Alvarez) who was elected General Manager, were subsequently elected corporate officers; (2) despite information to PAGCOR (the lessee of one of the PIRC properties) of the election of the new set of directors and corporate officers, PAGCOR continued to remit its lease rentals to PIRC's former corporate officers. The amended complaint asks: (1) that PAGCOR be ordered to pay its monthly lease rentals to Roa and/or Alvarez, and/or any of their authorized representatives and no other; and (2) for the issuance of a temporary restraining order and a writ of preliminary mandatory injunction. Roa, as the President of plaintiff PIRC, verified the complaint while Venus, in his capacity as plaintiff PIRC's Corporate Secretary, signed the Secretary's Certificate attesting to Roa's authority to institute the action. An Answer in Intervention[6] was filed also in the name of PIRC (real PIRC) and the herein private respondents Constancio D. Francisco (Francisco), Edward T. Marcelo

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Rules 6-10.REMLAWREV (Edward Marcelo), Lydia J. Chuanico (Chuanico), Daniel T. Pascual (Pascual) and Anna Melinda Marcelo-Revilla (Marcelo-Revilla). The pleading essentially states that the private respondents, rather than the petitioners, are the bona fide directors and officers of PIRC and that the petitioners, Zumel, Asistio and Valdez are not even stockholders of PIRC - they are mere pretenders who intended to grab power and control of PIRC. The private respondents asked for: (1) the denial of the injunctive reliefs asked in the amended complaint; (2) the dismissal of the complaint; and (3) damages and attorney's fees. The second amended complaint, filed on 5 December 2002, was docketed as Civil Case No. 02-238 and entitled Provident International Resources Corporation v. Edward T. Marcelo, Constancio D. Francisco, Anna Melinda Marcelo-Revilla, Linda J. Marcelo, John J. Marcelo, Celia C. Caburnay and Celedonio P. Escao, Jr.[7] The complaint essentially alleges that: (1) the original incorporators of PIRC - Chuanico, Franciso, Jose A. Lazaro, Edward Marcelo and Pascual - merely held the initial paidup stockholdings in trust for the real stockholders - the petitioners, Zumel and Asistio; thus, the incorporators at the time of PIRC's incorporation in 1979 executed Deeds of Assignment in blank, Deeds of Transfer in blank, waiver of pre-emptive rights and endorsement in blank of their stock certificates; (2) on 7 August 2002, the blank deeds and transfer documents were completed to effect the transfer to the petitioners, Zumel and Asistio; (3) at a stockholder's meeting, it was agreed that the PIRC directors who have not voluntarily resigned shall be considered removed and an election of new directors conducted; at this election, the petitioners, Zumel and Asistio were elected new directors and following an organizational meeting, the new board elected a new set of PIRC officers; (4) despite the election of the new set of PIRC officers, the named defendants continue to unlawfully exercise possession of the PIRC office, misrepresent themselves as directors and officers of PIRC and unlawfully exercise acts on behalf of PIRC; all these malicious acts caused PIRC damage and prejudice. The second complaint asks for the issuance of a temporary restraining order and a writ of preliminary injunction and/or preliminary mandatory injunction and also a permanent injunction to enjoin the named defendants from acting as directors and officers of PIRC and from taking custody of corporate records. As in the first amended complaint, the complaint was verified by Roa and the Secretary's Certificate attesting to Roa's authority was signed by Venus. In their Answer to the Amended Complaint in Civil Case No. 02-238 (i.e., to the second complaint), with (1) Motion to Implead the Real PIRC and the Fraudulent Interlopers as Indispensable Parties (2) Motion for Preliminary Hearing on Affirmative Defenses and (3) Compulsory Counterclaims,[8] the named defendants (except PAGCOR and its officers) in both Civil Case No. 02-228 and Civil Case No. 02-238 maintained that they are the genuine directors and officers of PIRC. The named defendants asked for: (1) the addition of the petitioners, Zumel and Asistio as parties-plaintiffs and the real PIRC as party-defendant; (2) the dismissal of the complaint in Civil Case No. 02-238 after hearing on the affirmative defenses; (3) the issuance of a writ of permanent injunction against the petitioners, Zumel and Asistio; and (4) that they be ordered to solidarily pay the named defendants and real PIRC moral, exemplary, actual and nominal damages, attorney's fees, litigation expenses and treble costs. The two amended complaints were consolidated and were raffled to Branch 256 of the RTC Muntinlupa City which issued a 20-day temporary restraining order. PAGCOR complied with the temporary restraining order by remitting the rental to Alvarez. Thereafter, the Presiding Judge of Branch 256 inhibited himself from the case. The case was thereafter assigned to Branch 276 of the RTC Muntinlupa City (RTC) which, in turn, issued the preliminary prohibitory injunction that the private respondents prayed for.[9] After trial and submission of all relevant evidence in the consolidated cases, the RTC ruled in favor of the intervenors-defendants (the private respondents herein), finding them to be the true and duly constituted members of the board of directors and the duly elected officers of PIRC. The RTC found as well that the petitioners were nonPIRC stockholders and therefore were not qualified for election either as directors or corporate officers. Having therefore no right to receive the lease rentals due from PAGCOR, the RTC ordered the petitioners to jointly return to the real PIRC the rental payments for the period covering October 19 to November 18, 2002. The petitioners, as well as Zumel and Asistio, were also ordered to pay the private respondents damages in the amount of P5,000,000.00, attorney's fees of P500,000,00 and the actual cost of litigation. The dispositive part of the RTC decision reads: PRESCINDING, the PETITION FOR MANDATORY INJUNCTION is never denied (sic). But the Preliminary Prohibitory Injunction, issued for the INTERVENORS/DEFENDANTS is made permanent, and the Group of plaintiffs directed to permanently desists (sic) and stop from disturbing the operation of the Corporation by the same INTERVENOR/DEFENDANTS, who are found to be the true and duly constituted Officers of the Corporation, legally voted as such Officers and as Members of the Board of Directors. The Civil Complaint against them, Civil Case Nos. 02-238 is hereby dismissed. It has been shown that the Group of Plaintiffs, JOSE MA. CARLOS L. ZUMEL, ALFREDO D. ROA III, LAZARO L. MADARA, JOAQUIN T. VENUS and SANTIAGO ALVAREZ, JR. never had any right to receive rental from defendant PHILIPPINE AMUSEMENT AND GAMING CORPORATION. This Group of Plaintiffs, JOSE MA. CARLOS L. ZUMEL, ALFREDO D. ROA III, LAZARO L. MADARA, JOAQUIN T. VENUS and SANTIAGO ALVAREZ, JR. are therefore directed to jointly and unilaterally return to the Corporation the rental payments for the month of October 19 to November 18, 20002, which they collectively receive, without any right to collect and receive such rental. Since by reason of this suit it has been shown that the Intervenors/Defendants, being EDWARD T. MARCELO, CONSTANCIO D. FRANCISCO, ANNA MELINDA MARCELO-REVILLA, LINDA J. MARCELO, JOHN J. MARCELO, CELIA C. CABURNAY and CELEDONIO P. ESCAO, sustained injuries and damages not only to the reputation of the corporation but also personally as officers and members of the Corporation Board, damages is tolled against the Plaintiffs, JOSE MA. CARLOS L. ZUMEL, ALFREDO D. ROA III, LAZARO L. MADARA, JOAQUIN T. VENUS and SANTIAGO ALVAREZ, JR. which they must pay jointly and unilaterally to the Intervenors/Defendants, being EDWARD T. MARCELO, CONSTANCIO D. FRANCISCO, ANNA MELINDA MARCELO-REVILLA, LINDA J. MARCELO, JOHN J. MARCELO, CELIA C. CABURNAY and CELEDONIO P. ESCAO, JR. in the sum of FIVE MILLION PESOS (P5,000,000.00).

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Rules 6-10.REMLAWREV The RTC denied in its Order dated 1 July 2005 the petition for relief from judgment for deficiency in form and substance.[21] Meanwhile, in a Resolution promulgated on 19 July 2005, the Court of Appeals granted the petitioners' Ex-Parte Manifestation and Motion in CA-G.R. SP No. 90147, resulting in the withdrawal of the Petition for Review. On July 19, 2005, the plaintiff ROA group filed a Very Urgent Motion [To Quash or Recall Writ of Execution].[22] The petitioners then filed a Motion for Reconsideration dated 26 July 2005 of the RTC Order of July 1, 2005.[23] These RTC incidents were still pending resolution when the petitioners filed on August 10, 2005, a Petition for Certiorari[24] under Rule 65 of the Revised Rules of Court with the Court of Appeals, assailing on the ground of grave abuse of discretion the following orders issued by the RTC and the various notices issued by the sheriff a. Decision dated 23 April 2005 b. Order dated 30 June 2005 c. Writ of Execution dated 5 July 2005 d. Order dated 1 July 2005 e. Notice to Pay dated 7 July 2005 f. Notice of Levy on Execution dated 14 July 2005 g. Notice of Sale on Execution of Real Property dated 14 July 2005 h. Notice to Parties of Sheriff's Auction Sale dated 17 July 2005 The petition was docketed as CA-G.R. SP No. 90821. The petition essentially imputed grave abuse of discretion on the public respondents for issuing the assailed orders and notices which were commonly directed towards the enforcement of the RTC decision against the petitioners. The petitioners posited that the enforcement of the RTC decision and of the court's orders and notices against them would violate their right to due process as they were not parties to the case; even assuming that they were parties, they were never notified of the proceedings from beginning to end so that the decision is void as against them. The private respondents filed an Urgent Manifestation Ex Abudanti Ad Cautelam and a Comment on the petition in CA-G.R. SP No. 90821. In their Manifestation, the private respondents alleged that the petitioners committed forum shopping.[25] While CA-G.R. SP No. 90821 was pending, the RTC denied in an Order dated 31 August 2005[26] (1) the petitioners' motion for reconsideration of the 1 July 2005 Order and (2) the plaintiff Roa group's Urgent Motion to Quash or Recall Writ of Execution. On 7 November 2005, the petitioners in their own and individual capacities[27] filed another Petition for Certiorari with the Court of Appeals assailing the interrelated 1

Since Intervenors/Defendants EDWARD T. MARCELO, CONSTANCIO D. FRANCISCO, ANNA MELINDA MARCELO-REVILLA, LINDA J. MARCELO, JOHN J. MARCELO, CELIA C. CABURNAY and CELEDONIO P. ESCAO, JR. were forced to litigate and defend themselves thru counsel, attorney's fees in the sum of FIVE HUNDRED THOUSAND PESOS (P 500,000.00) JOSE MA. CARLOS L. ZUMEL, ALFREDO D. ROA III, LAZARO L. MADARA, JOAQUIN T. VENUS and SANTIAGO ALVAREZ, JR. which they must pay jointly and unilaterally. The actual cost of this litigation is also tolled against the Group of plaintiffs. SO ORDERED.[10] The plaintiff PIRC filed a Notice of Appeal on 16 May 2005.[11] The private respondents opposed on the ground that the petitioners had taken a wrong mode of review; under the Interim Rules and Procedures governing intra-corporate controversies, as amended by Resolution En Banc, A.M. No. 04-9-07, the party aggrieved by the decision of a commercial/corporate court has fifteen (15) days from receipt of the decision within which to file a Petition for Review under Rule 43 with the Court of Appeals, not a Notice of Appeal.[12] The private respondents also filed a Motion to Disregard Notice of Appeal and For Entry of Judgment[13] and a Motion for Immediate Issuance of Writ of Execution.[14] The plaintiff PIRC's response was a Manifestation, In lieu of Opposition asking that the RTC consider its Notice of Appeal as withdrawn.[15] Roa, Madara, Venus and Alvarez, then filed a Motion to Admit Petition for Reviewwith the attached Petition for Review dated June 13, 2005[16] with the Court of Appeals. The petition was filed by the petitioners and Santiago Alvarez[17] and was docketed CA-G.R. SP No. 90147. Via an Ex-Parte Manifestation and Motion dated 20 June 2005, [18] they asked the Court of Appeals to consider their petition for review as withdrawn. The petitioners then filed before the trial court a Petition for Relief from Judgment dated 28 June 2005,[19] alleging that: (1) they were prevented from (a) presenting rebuttal evidence, or at the very least, taking an appeal from the supposed denial of their motion to present rebuttal evidence, (b) filing a memorandum and (c) sufficiently proving their case through fraud, mistake or excusable negligence; and (2) they have good and substantial causes of action. They asked: (1) for the issuance of a temporary restraining order and/or preliminary injunction; (2) the setting aside of the RTC decision dated 23 April 2005; and (3) a permanent injunction enjoining the private respondents from acting as directors and officers of PIRC. In an Order dated 30 June 2005[20] that resolved the incidents pending before it (namely, the Notice of Appeal, the Opposition thereto, and private respondents' motion for the immediate issuance of the writ of execution), the RTC ruled that its decision had become final and executory and entry of judgment was in order. The RTC cited as basis the procedural errors the plaintiff PIRC committed in filing a notice of appeal instead of a petition for review, and in later filing a belated petition for review. The RTC also granted the private respondents' motion for the issuance of a writ of execution.

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Rules 6-10.REMLAWREV July 2005 and 31 August 2005 orders. This petition was docketed CA-G.R. SP No. 91950.[28] Significantly, the petitioner never disclosed - in the present petition before this Court - all these material developments, including the filing of the petition in CA-G.R. SP No. 91950. Only the private respondents informed us of these developments in their Comment on the petition. The petitioners never denied that they filed CA-G.R. SP No. 91950 with the Court of Appeals. Meanwhile, the Court of Appeals dismissed - via the decision assailed in the present petition - the petition in CA-G.R. SP No. 90821 for lack of merit and forum shopping. The Court of Appeals found that even if PIRC had been named as plaintiff in the Civil Cases No. 02-228 and 02-238, the petitioners were the ones actually interested in the lease rentals due from PAGCOR in view of their claim that they were the newly elected directors and officers of PIRC; the petitioners could not deny that they were parties to the consolidated civil cases because they claimed in their subsequent pleadings with the RTC that they were the plaintiffs who had commenced the consolidated civil cases; thus, they voluntarily submitted themselves to the RTC's jurisdiction and could not claim denial of due process. The forum shopping conclusion, on the other hand, was based on the appellate court's observation that the petition filed before it was the petitioners' fourth attempt to question the RTC decision, and that the petitioners had filed the petition without waiting for the resolution of the motion for reconsideration of the Order dated 1 July 2005 and the urgent motion to quash/recall writ of execution the petitioners had filed with the RTC. The petitioners moved to reconsider the Decision,[29] but the Court of Appeals denied the motion in the second order assailed in this petition. Thereupon, the petitioners filed the present petition, asking us to rule on the following ISSUES 1. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE RESPONDENT JUDGE ACTED WITH GRAVE ABUSE OF DISCRETION OR WITHOUT JURISDICTION IN HOLDING PETITIONERS PERSONALLY LIABLE DESPITE THEIR NOT BEING PARTIES TO THE CASE. 2. WHETHER THE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF FORUM SHOPPING. The petitioners argue that they were not parties to the consolidated civil cases and cannot therefore be bound by the decision; their properties cannot likewise be levied on execution. This argument is anchored on the positions that: (1) the titles of the consolidated cases do not include them as they were neither plaintiffs nor defendants in these cases; if they were defendants they should have been served with summons; (2) they never took part in the pre-trial proceedings or in the trial proper; only the PIRC and the private respondents offered their evidence; (3) the records will show that nobody ever came forward and appeared as counsel for any of the petitioners; and (4) they had no participation in the case except to cause the filing of the consolidated civil cases, which they did as mere representatives. Additionally, the petitioners argue that the pleadings cited by the Court of Appeals purportedly showing that the petitioners were parties to the consolidated cases were filed after the RTC rendered judgment; this is the natural reaction of persons who, while not parties to the case, were being held liable under the RTC decision. Thus, the filing of these post-judgment pleadings cannot mean that they were parties; a mere claim in a post-judgment pleading that they are parties, which is however negated by the records of the case, is an inconsequential oversight and should not be considered as voluntary submission to the jurisdiction of the court. They also claim denial of due process for being denied the opportunity to be heard - they were not given the chance to file a complaint or answer, to participate in the pre-trial conference and in the trial by submitting evidence. In sum, they claim that the judgment as against them is void.[30] On forum shopping, the petitioners claim that their motion for reconsideration of the 1 July 2005 Order had been rendered functus officio by the successive issuances the Writ of Execution, Notice to Pay, Notice of Levy on Execution, Notice of Sale on Execution of Real Property, the Notice to Parties of Sheriff's Auction Sale, the Auction Sale and Certificate of Sale - which left them with no recourse but to consider their motion denied for purposes of seeking immediate and adequate reliefs from the Court of Appeals; that, in fact, even after the filing of their petition with the Court of Appeals, the execution of the RTC decision proceeded. All these allegedly show that, to all intents and purposes, there was no more pending motion for reconsideration at the time they sought relief from the Court of Appeals; the denial too of the motion for reconsideration on 31 August 2005 was nothing but a mere formality.[31] OUR RULING We see no merit in the petition as the appellate court's dismissal of the petition in CA-GR SP No. 90821 on the ground of the petitioners' forum shopping is correct. Separately from the forum shopping violation before the Court of Appeals in CA-GR SP No. 90821, the petitioners also committed forum shopping and violated their forum shopping certification in seeking relief from this Court. Lastly, on the merits, we see no reversible error in the Court of Appeals' finding that the petitioners were parties to Civil Cases Nos. 02-228 and 02-238 who can be held liable for the RTC's decision in these cases. Forum shopping is the institution of two or more actions or proceedings involving the same parties for the same cause of action, either simultaneously or successively, on the expectation that one or the other court would render a favorable disposition. It is the losing party's attempt, other than by appeal or by the special civil action of certiorari, to seek a favorable judgment in another forum. By its nature, it is a reprehensible practice that manipulates the court system and abuses its processes; it degrades the administration of justice; and it wastes valuable court resources that can otherwise be used in other priority areas in the dispensation of justice.[32] It is particularly pernicious when it introduces the possibility - because the losing party is asking different courts to rule on the same or related causes and to grant the same or substantially the same reliefs - of conflicting decisions being rendered by different fora on the same issues.[33] To determine whether a party violated the rule against forum shopping, the most important factor to ask is whether the elements of litis pendentia are present, or

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Rules 6-10.REMLAWREV whether a final judgment in one case will amount to res judicata in another. Otherwise stated, the test is whether the two (or more) pending cases have identity of parties, of rights or causes of action, and of the reliefs sought.[34] Willful and deliberate violation of the rule against it is a ground for summary dismissal of the case; it may also constitute direct contempt."[35] Forum Shopping at the Court of Appeals We agree with the Court of Appeals that the petitioners indulged in a clear case of forum shopping before it. One of the assailed orders in CA - GR SP No. 90821 was the RTC's 1 July 2005 Order. At the time the petition was filed with the appellate court, the RTC had yet to resolve the motion for reconsideration of the 1 July 2005 Order. This is a clear case of forum shopping, as the petitioners sought, at the same time, two separate remedies with two different judicial venues (the RTC and the Court of Appeals), to obtain one and the same relief - the nullification of the RTC decision in Civil Case Nos. 02-228 and 02-238 and its non-enforcement against the individual petitioners. We so conclude despite the fact that what the petitioners filed was a petition for certiorari, a recourse that - in the usual course and because of its nature and purpose - is not covered by the rule on forum shopping. The exception from the forum shopping rule, however, is true only where a petition for certiorari is properly or regularly invoked in the usual course; the exception does not apply when the relief sought, through a petition for certiorari, is still pending with or has as yet to be decided by the respondent court, tribunal or body exercising judicial or quasi-judicial body, e.g., a motion for reconsideration of the order assailed via a petition for certiorari under Rule 65, as in the present case. This conclusion is supported and strengthened by Section 1, Rule 65 of the Revised Rules of Court which provides that the availability of a remedy in the ordinary course of law precludes the filing of a petition for certiorari; under this rule, the petition's dismissal is the necessary consequence if recourse to Rule 65 is prematurely taken. To be sure, the simultaneous remedies the petitioners sought could result in possible conflicting rulings, or at the very least, to complicated situations, between the RTC and the Court of Appeals. An extreme possible result is for the appellate court to confirm that the RTC decision is meritorious, yet the RTC may at the same time reconsider its ruling and recall its order of dismissal. In this eventuality, the result is the affirmation of the decision that the court a quo has backtracked on. Other permutations depending on the rulings of the two courts and the timing of these rulings are possible. In every case, our justice system suffers as this kind of sharp practice opens the system to the possibility of manipulation; to uncertainties when conflict of rulings arise; and at least to vexation for complications other than conflict of rulings. Thus, it matters not that ultimately the Court of Appeals may completely agree with the RTC; what the rule on forum shopping addresses are the possibility and the actuality of its harmful effects on our judicial system. We find no merit too in petitioners' excuse, offered in the present petition, that there was no pending motion for reconsideration to speak of at the time they sought relief from the Court of Appeals, as their motion had been impliedly but effectively denied by the RTC. This explanation or excuse is significantly weakened by the petitioners' subsequent filing of yet another petition for certiorari assailing for the second time the 1 July 2005 Order and for the first time the related 31 August 2005 Order. While the petitioners claimed effective implied denial of their motion for reconsideration before the RTC to justify their premature petition in CA-G.R. SP No. 90821 and to escape a forum shopping charge, they wasted no time at all in filing another petition in CA-G.R. SP No. 91950 to assail the formal denial of their motion for reconsideration. These varying stances indicate to us that the real standard the petitioners follow is their convenience, not the procedural orderliness that the Rules of Court wish to foster; they disregard the Rules as their convenience dictates. As a result, there were two pending petitions before the Court of Appeals between 7 November 2005 (the date the subsequent CA-G.R. SP No. 91950 was filed) and 20 December 2005 (the date CA-G.R. SP No. 90821 was promulgated) questioning the 1 July 2005 RTC Order and asking for the same reliefs - the nullity of the RTC decision of 23 April 2005 and its non-enforcement against the individual petitioners. Forum Shopping With this Court The records before us do not disclose whether the petitioners ever informed the Division of the Court of Appeals handling CA-G.R. SP No. 90821 of the filing of the petition in CA-G.R. SP No. 91950, in light of the requirement that the petitioners in a Rule 65 petition are committed to inform the court of the filing of a similar action or proceeding within 5 days from knowledge of such filing. The petitioners' filing of the second petition before the Court of Appeals is however replete with significance in relation with the present petition before this Court. In the required sworn certification attached to the petition for review filed with us, the petitioners stated under oath that they have not commenced any other action or proceeding involving the same issues in the Supreme Court, Court of Appeals or any other tribunal or agency, or that any such action or proceeding is pending with us, the Court of Appeals, or any other tribunal agency. Additionally, they undertook to report to this Court the filing of any similar action or proceedings within 5 days from knowledge of such filing. Despite this certification and undertaking, the petitioners never disclosed to this Court the pendency of CA-GR SP No. 91950 or any of its material developments; thus, we are left in the dark, up to now, on the status and fate of CA-GR SP No. 91950. As far as we know, there are two pending cases dealing with the issues before us - CA-G.R. SP No. 91950 and the present petition. Clearly, therefore, the petitioners forum-shopped when it filed the present petition. They also filed with this Court a false certification of non-forum shopping and blatantly violated as well their undertaking in their sworn certification. If only for these reasons, the present petition for review must be summarily dismissed. In light of these reasons, we see no need to discuss at length the other issues the petitioners raised except to say that we see no reversible error, under the unique fact situation of this case, with the Court of Appeals' decision holding the petitioners individually liable under the RTC decision. (a) The individual petitioners pursued their interests, not that of the PIRC, in filing the consolidated complaints, although they formally did so under the cover and in the name of the PIRC. Their interests were not only implied from the recitals of the complaints but were expressed as well in the various pleadings they filed, as narrated in the assailed Court of Appeals decision. No genuine issue of due process arises after the petitioners had the opportunity to be heard on their individual

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Rules 6-10.REMLAWREV interests and after they admitted in their various pleadings that they were the complainants who had initiated the consolidated cases. [36] (b) We additionally note that the petitioners actually misrepresented themselves as stockholders, directors and officers of PIRC - an existing corporation with duly elected directors and officers - and under their assumed capacities as officers of the PIRC filed the amended complaints with the RTC purportedly on PIRC's behalf. To our mind, this clearly indicates the petitioners' design to use the PIRC's separate corporate personality as a shield against any possible or potential personal liability. Interestingly enough, after shielding their individual selves behind the PIRC through misrepresentation, the petitioners now seek refuge from the various provisions of the Rules of Court on the required issuance of summons and notices (precondition to acquisition of jurisdiction over persons and for persons to be considered parties to a case), with the corresponding right to be heard on their cause. We are not persuaded by the petitioners' claim for protection as their active misrepresentation militates against it; the petitioners cannot now use their own active misrepresentations to shield them from individual liability. The petitioners are now effectively claiming, given their peculiar situation, not a right but an undeserved privilege. (c) We recognized in our ruling in the very recent case of Provident International Resources Corporation v. Venus (G.R. No. 167041) promulgated last June 17, 2008, the merits of the RTC decision on the issue of which - between the registered stock and transfer book (STB) of the plaintiff PIRC and the real PIRC's 1979 registered STB - is valid. We note that this recently-decided case is practically between the same parties litigating on opposite sides in the present case. We said in G.R. No. 167041 that the RTC decision effectively upheld the validity of the 1979-registered STB. We similarly recognize - in the context of the present case - the finding in the RTC decision that the members of the real PIRC, and not that of the plaintiff PIRC, are the bona fide stockholders and officers of PIRC. This finding, coupled with other factual and legal findings stated in the RTC decision and in this Decision, constitutes sufficient basis to hold the petitioners personally and individually liable for the return of PAGCOR's wrongfully remitted lease rentals to, and payment of damages to the members of, the real PIRC. WHEREFORE, premises considered, we hereby DISMISS the petition for forum shopping and for lack of merit. Costs against the petitioners. SO ORDERED. Quisumbing, (Chairperson), Carpio Morales, Tinga, and Chico-Nazario, JJ., concur. G.R. No. 154974 February 4, 2008 From the Court of Appeals' decision reversing that of the trial court which dismissed respondent's complaint, petitioners come to this Court. Respondent Loreta Uy (Loreta) filed on September 12, 1988 before the Regional Trial Court (RTC) of Dagupan City a complaint,1 docketed as Civil Case No. D-9136, for annulment of real estate mortgage and related documents plus damages against petitioners Kaunlaran Lending Investors, Inc. (KLII) and Lelia Chua Sy (Lelia), along with Wilfredo Chua (Wilfredo) and Magno Zareno (Magno). In Loreta's complaint, she alleged as follows: Sometime in 1987, her son Jose U. Sim (Jose), her nephew Virgilio Sim (Virgilio), and Wilfredo agreed to establish a business of buy and sell of second-hand motor vehicles in which Virgilio would be the manager, Wilfredo would scout for a financier, and Jose would provide the security for any loan. Through the efforts of Wilfredo, Lelia, then a Branch Manager of the Far East Bank and Trust Co., Inc. (FEBTC) in Dagupan City who was alleged to be the owner of the controlling interest in KLII, agreed to arrange for the grant of a loan. Wilfredo thus asked Jose in whose favor his mother Loreta issued a Special Power of Attorney reading: That I, LORETA Q. UY, of legal age, Filipino, widow and a resident of Dagupan City, by these presents, do hereby NAME, CONSTITUTE and APPOINT my son JOSE U. SIM, likewise of legal age, Filipino, married and a resident of Dagupan City, to be my true and lawful attorney-in-fact, for me in my name, place and stead, to do the following acts, to wit: 1. To obtain a loan from any bank, financial institutions [sic] or person in such amount as may be extended, and to secure the payment thereof by constituting in favor of the creditor a real estate mortgage on the herein-below described parcels of land and all improvements thereon, to wit: TCT NO. 78622 xxxx TCT NO. 78623 2. To receive the check and/or cash proceeds of the loan; and, 3. To sign such documents, papers and other papers [sic] relative thereto.2 (Underscoring supplied), to turn over the land titles of two parcels of land located in Quezon City,3 covered by Transfer Certificates of Title Nos. 78622 and 78623 in the name of his (Jose's) mother Loreta, to serve as security for the loan. Jose thus entrusted his mother's land titles and related documents to Wilfredo who in turn delivered them to Lelia. Lelia thereafter sent Jose to Manila, together with a certain Ed and a certain Doc of KLII, to have the lands appraised at the main office of FEBTC.

KAUNLARAN LENDING INVESTORS, INC. AND LELIA CHUA SY, petitioners, vs. LORETA UY, respondent. DECISION CARPIO MORALES, J.:

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Rules 6-10.REMLAWREV

Wilfredo subsequently brought to Loreta's residence loan forms consisting of a promissory note he had pre-signed as co-maker, a real estate mortgage, and a loan disclosure for Loreta's signature. After Jose examined the forms, Loreta signed them. Soon Jose and Virgilio went to Manila to canvass prices of second-hand motor vehicles. While the two were in Manila, Magno, then the manager of KLII, brought to Loreta's residence the loan forms she had earlier signed and another set of loan forms, together with a blank Solidbank check drawn from the account of KLII and a check voucher. Magno explained to Loreta, in the presence of her daughter-in-law Arlene A. Sim (Arlene)-wife of Jose, that the new set of loan forms would be sent to Manila and that the proceeds of the loan would be promptly delivered to her residence once she affixes her signature on the said check and voucher. When Jose returned home and learned about what transpired during his absence, he confronted Magno at the KLII office and was told that the documents bearing on the loan application were already sent to Lelia and that Loreta's signatures on the blank Solidbank check and the check voucher were procured on Lelia's instructions. Virgilio and Jose later tried to withdraw the loan application and the titles to Loreta's properties but Lelia told them that it was no longer possible. In a subsequent conference among Lelia, Jose, Virgilio, and Wilfredo, Lelia admitted having applied the loan proceeds amounting to P800,000 to Wilfredo's personal debt to her. Continuing, Loreta alleged: A verification from the Register of Deeds of Quezon City4 revealed that the real estate mortgage in favor of KLII to secure a P800,000 loan was annotated on Loreta's titles. The copy of the document on file at the office of the Register of Deeds bore only Loreta's signature and it was notarized in the absence of Loreta. Loreta and Jose thus sent telegrams to KLII and to the Register of Deeds of Quezon City requesting the setting aside of the transaction and the denial of registration of the mortgage, respectively, but to no avail. Concluding that the real estate mortgage, promissory note, Solidbank check and "the other documents related thereto" were absolute nullities due to the absence of consideration and vitiated consent, Loreta prayed for their annulment5 and for damages.6 In a related move, Loreta instituted a criminal complaint for estafa against Lelia, Wilfredo, and Magno, docketed as I.S. No. 88-498 at the Office of the City Fiscal of Dagupan City.7 An Information for Estafa against the three was subsequently filed before the Dagupan City RTC, which was raffled to Branch 41 thereof and docketed as Criminal Case No. D-9840.8 In her Answer with Counterclaim,9 Lelia denied being the owner of the controlling interest of KLII, claiming that she was only the lessor of the building which housed KLII's office. And she denied knowledge of the P800,000 loan of Loreta from KLII, she claiming that

The instant complaint is baseless and false, and was maliciously instigated by Jose U. Sim, using his mother as the complainant, purposely to harass and embarrass the herein defendant for having been slighted when the lat[t]er rejected his loan application and his request to intercede in his behalf in influencing the Kaunlaran Lending Investors to agree in the restructure of his alleged overdue account with it.10 Lelia thus prayed for the award of actual, moral and exemplary damages, attorney's fees, litigation expenses, and the costs of the suit.11 In his Answer with Compulsory Counterclaim,12 Wilfredo claimed that his only participation in the transaction was to introduce Jose to Lelia and to sign as comaker of the loan application. While he admitted that he had already signed the loan documents when they were brought to Loreta's residence for her signature, he claimed that it was Jose, not he, who brought them to Loreta. In their joint Answer with Counterclaim,13 KLII and Magno gave the following version: After the application for loan was approved, Wilfredo and Loreta signed the promissory note and Loreta signed the real estate mortgage in the presence of Magno, Gonzales, Atty. Teofilo Guadiz III (Atty. Guadiz) who notarized the same, and other employees. Atty. Guadiz and Rolando Tan, president and treasurer of KLII, respectively, thereupon signed and issued Solid Bank Check No. 0232250 for the amount of P800,000 in favor of Loreta who immediately endorsed it to KLII which changed it with cash. After Wilfredo and Loreta received the cash proceeds of the check, Loreta signed a discount statement and the check as proof of the receipt. In the meantime, Jose, who had a pending long overdue loan with KLII, requested Magno for a restructuring of his loan account, but Magno informed him that the request could not be granted without Jose paying at least 50% of the principal amount and the interests and penalties in full. It appears that Jose could not comply with the condition; hence, his request was denied. KLII later filed a petition to extra-judicially foreclose the mortgage executed by Jose. The three defendants surmised that Loreta filed Civil Case No. D-9136 upon the "malicious instigation"14 of Jose. They thus counterclaimed for actual, moral and exemplary damages, attorney's fees, litigation expenses, and the costs of the suit.15 Magno and KLII corroborated Lelia's denial of being the owner of the controlling interest in the company, she being merely the lessor of the building where KLII holds office.

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Rules 6-10.REMLAWREV On joint motion16 of the prosecution and Loreta, Branch 41 of the Dagupan City RTC, by Order dated March 12, 1991, consolidated Criminal Case No. D-9840 with Civil Case No. D-9136.17 By Decision of March 3, 1994, the trial court dismissed the civil case18 in light of the following findings: 1. That defendant Lelia Chua Sy is a part owner of Kaunlaran Lending Investors, Inc. is negated by the fact that the KLI[I] Board of Directors, were: Atty. Teofilo Guadiz III, Helen Siquiat, Joseph Lee, Rolando Tan, Adson Chua and Jose Sy. Kaunlaran Lending Investors, Inc. is a lessee of [Lelia Chua Sy's] property. x x x 2. That Kaunlaran Lending Investors, Inc. had no money for the loan of P800,000.00 is negated by the fact that on January 28, 1988, KLI[I] financier Salome Cenidoza extended a loan to KLI[I] in the same amount of P800,000.00; and the books of Kaunlaran Lending Investors, Inc. indicated that KLI[I] had P1,700,288.10 cash on hand, as testified by Aurelia Lambino, KLI[I] book keeper. Before January 28, 1988, KLI[I] had granted loans of P1.5 million to Susan Go; P800,000.00 to Maramba; and P300,000.00 to Jose Sim. 3. That the check in question was not actually funded; was never encashed to the Solid bank and not a bonafide check; is negated by the fact that said check was encashed with the drawer KLI[I], which is a normal practice[,] and the discount disclosure xxx showing that she received P800,000.00 cash. The evidence is clear that on January 28, 1988, Loreta Uy and Wilfredo Chua received P800,00.00 cash from Kaunlaran Lending Investors, Inc. What happened to the money after that[,] has not been clarified. Granting arguendo, that Loreta Uy did not benefit with the amount of P800,000.00, then where is the money? Since defendant Wilfredo Chua was with Loreta Uy when the latter received the loan proceeds, the disputable presumption is that he appropriated the amount for his own benefit. Thus defraud[ing] Loreta Uy in said amount. But Wilfredo Chua did not testify to refute or dispute the presumption; thus, he can be held [liable] for damages. xxxx There is no iota of evidence to show that defendant Lelia Chua Sy ever conspired with defendant Wilfredo Chua, so she cannot be liable for damages.19 (Emphasis and underscoring supplied) Thus the trial court disposed: WHEREFORE, judgment is hereby rendered: 1. Dismissing the complaint as against defendants Kaunlaran Lending Investors, Inc., Lelia Chua Sy and Magno F. Zareno; 2. Declaring the Real Estate Mortgage, Promissory Note and related documents in question valid and legal; 3. Ordering the plaintiff to pay to defendant Kaunlaran Lending Investors, Inc. the principal amount of P800,000.00, plus interest at 48% per annum starting March 28, 1988 until fully paid; 4. Ordering defendant Wilfredo Chua to pay to plaintiff: a. the amount of P800,000.00, plus interest at 12% per annum starting March 28, 1988, until fully paid; b. P100,000.00, as moral damages; c. P50,000.00, as exemplary damages; d. P20,000.00, as attorney's fees; and e. P3,000.00, as litigation expenses. SO ORDERED.20 (Underscoring supplied) Parenthetically, the records of the case before this Court do not show how the trial court decided the criminal case. All parties, except Magno who died on October 7, 1991,21 appealed22 including Lelia. KLII's appeal was only with respect to the non-award to it of damages, litigation expenses, and attorney's fees. The Court of Appeals, by Decision23 of April 11, 2002, reversed the trial court's decision, declaring the real estate mortgage and promissory note null and void. Thus it disposed: WHEREFORE, the appealed decision is REVERSED and SET ASIDE, and another is rendered declaring null and void the promissory note and deed of real estate mortgage in dispute, and ordering the defendants-appellants to pay, jointly and severally, the plaintiff the amount of P100,000.00 for and as attorney's fees, inclusive of expenses of litigation. Costs against the appellants. SO ORDERED.24 (Underscoring supplied) Lelia, Wilfredo, and KLII moved for reconsideration25 which was denied,26 prompting KLII and Lelia to file before this Court the present petition which faults the appellate court to have 1. gravely abused its discretion and evidently misappreciated the testimony of Magno Zareno by giving it credence, contrary to the findings of [the trial court] which heard and saw him testify; 2. erred in giving more credence to the witnesses for the private respondent, in direct contrast to the findings of [the trial court] which heard the witnesses and observed their demeanor[;]

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Rules 6-10.REMLAWREV 3. erred in awarding attorney's fees of P100,000.00, when the award of moral and exemplary damages are not awarded. Moreover, the reason for the award was not explained in the decision. In her Comment,27 Loreta moves for the dismissal of the petition due to defective verification and certificate of non-forum shopping, adding that the petition raises factual issues. Meanwhile, Loreta died on September 29, 200228 and has been substituted by her heirs Jose and her daughter Rosalia Sim Reate.29 For failure of KLII to present proof that its president, Rolando Tan, was authorized to sign the verification and certificate of non-forum shopping on its behalf, the petition must be denied. Petitioners' argument that the certification was made by the President, who is given general supervision and control as chief executive officer from which [it] is to be inferred that contracts or acts done by the President in the ordinary course of business are presumed to be duly authorized, unless the contrary appears. In fact the by-laws of the Petitioner KLI[I] xxx gives him that authority.30 fails in light of this Court's ruling that In case of a corporation, it has long been settled that the certificate [of non-forum shopping] must be signed for and on its behalf by a specifically authorized officer or agent who has personal knowledge of the facts required to be disclosed. xxxx Consequently, without the needed proof from the board of directors, the certificate would be considered defective. Thus, xxx even the regular officers of a corporation, like the chairman and president, may not even know the details required in a certificate of non-forum shopping; they must therefore be authorized by the board of directors just like any other officer or agent.31 (Italics in the original) The merits of the petition, however, justify the relaxation of the rule on verification and certificate of non-forum shopping, for from a review of the records Loreta has not proven by preponderance of evidence that she was deceived into signing the documents required for the release of the proceeds of the loan. In overturning the finding of the trial court, the Court of Appeals credited the testimony of Magno, who testified as a hostile witness for Loreta, that Lelia sent him to Loreta's house to secure her signature on the loan documents in blank, and that Loreta did not receive any proceeds of the loan.32 The Court of Appeals did not proffer any reason, however, for deviating from the trial court's assessment of Magno's credibility,33 despite the oft-repeated doctrine that "findings of fact of the trial court carry great weight and are entitled to respect on appeal absent any strong and cogent reason to the contrary, since, it is in a better position to decide the question of credibility of witnesses."34 Furthermore, Magno's testimony should be received with caution because it contradicts the earlier statements he had made under oath, such as the Counter-Affidavit35 and Rejoinder36 he filed in I.S. No. 88498 and his verification of the joint Answer with Counterclaim he and KLII filed in Civil Case No. D-9136.37 x x x [C]ourts do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercy of unscrupulous witnesses. A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution.38 x x x The mere fact that a witness says that what he had declared is false and what he now says is true, is not sufficient ground for concluding that the previous testimony is false. No such reasoning has ever crystallized into a rule of credulity. The rule is that a witness may be impeached by a previous contradictory statement (Section 13, Rule 132, Rules of Court): not that a previous testimony is presumed to be false merely because a witness now says that the same is false.39 (Underscoring supplied) The Court of Appeals credited too the testimony of Jacobo Malicdem, a bookkeeper of Solidbank against which the P800,000.00 KLII check payable to Loreta was drawn, that KLII did not have the said amount in the bank as of January and February 1988.40 Gratuitously assuming that to have been the case, it is irrelevant given the factual finding of the trial court that the check was converted to cash by the drawerKLII itself,41 which cash was received by Loreta as proven by her signature on the check and on the discount statement acknowledging receipt thereof.42 WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated April 11, 2002 is SET ASIDE, and the decision of Branch 41 of the Regional Trial Court of Dagupan City in Civil Case No. D-9136 dated March 3, 1994 is REINSTATED. SO ORDERED. Quisumbing,Chairperson, Carpio, Tinga, Velasco, Jr., JJ., concur.

[G.R. No. 168667, July 23, 2008] SPOUSES ALFREDO D. VALMONTE AND MARIA LOURDES A. VALMONTE, PETITIONERS, VS. CLARITA ALCALA, JOHN DOE OR JANE DOE, RESPONDENTS. DECISION BRION, J.: This Petition for Review on Certiorari[1] asks us to set aside two Court of Appeals (CA) resolutions issued in CA-G.R. No. 88918: the first, issued on April 8, 2005,[2] dismissed the Petition for Review filed by the spouses Alfredo Valmonte and Maria Lourdes Valmonte (the petitioners); and the second, issued on June 20, 2005,[3] denied the petitioners' motion for reconsideration.

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Rules 6-10.REMLAWREV BACKGROUND FACTS The present controversy traces its roots to the ejectment suit filed by the petitioners against Clarita Alcala (the respondent) before the Metropolitan Trial Court (MTC), Branch 4, in Manila. The petitioners alleged that they are the unregistered owners of Apartment No. 1411 located at Echabelita Street, Paco, Manila, as the petitioner Maria Lourdes is one of the heirs and successors-in-interests of Cornelio Arreola and Antonina Pascua, the registered owners of the property.[4] Since the petitioners were migrating to the United States, they offered Apartment No. 1411 for lease to the respondent at the rate of P1,500.00 per month beginning January 1980; the latter accepted the offer. The lease contract, initially verbal, was consummated by the respondent's payment of two (2) months' rental fees and the petitioners' delivery to the respondent of the keys to Apartment No.1411.[5] Due to the respondent's subsequent failure to pay the agreed rentals despite written demand, the petitioners filed a complaint for unlawful detainer against her on April 26, 2002 before the MTC.[6] As the petitioners were already US residents at that time, they signed the required Verification/Certification of Non-Forum Shopping[7] of their complaint before a notary public in the state of Washington on March 18, 2002, and had this Verification/Certification authenticated by the Philippine Consulate General in San Francisco on March 27, 2002.[8] The respondent contended in her defense that the petitioners had no cause of action against her; she was already the rightful owner of Apartment No. 1411 by virtue of a sale between her and petitioners,[9] as evidenced by the Memorandum of Agreement dated August 8, 1987.[10] On April 25, 2003, the MTC ruled in the petitioners' favor.[11] The respondent appealed the MTC decision to the Regional Trial Court (RTC), Branch 50, Manila, which reversed the MTC ruling in its decision dated November 3, 2004.[12] The petitioners responded to the reversal by filing a Petition for Review[13] (CA Petition) with the CA on March 31, 2005. On the same date, they also formally manifested[14] with the CA that - to comply with the verification and certification requirements under Sections 1 and 2 of Rule 42 of the Rules of Court - they were in the meantime submitting a photostatic copy of the Verification/Certification (executed and notarized in the State of Washington on March 17, 2005) as the original was still in the Philippine Consulate in San Francisco for authentication. They promised to submit the original document as soon as the consulate completed the authentication process. Indeed, on April 8, 2005, petitioners submitted to the CA the original authenticated Verification/Certification and moved that the appellate court consider the submission as full compliance with the verification requirements of the Rules.[15] Meanwhile, the CA issued a Resolution dated April 8, 2005 (April 8 Resolution) dismissing the petition due to the petitioners' failure to attach the complaint, the answer, the position papers filed with the MTC, the memorandum filed with the RTC, and other material portions of the record supporting the allegations of the petition. The petitioners received a copy of this April 8 Resolution on April 15, 2005.

On April 28, 2005, the petitioners moved for the reconsideration[16] of the April 8 Resolution, attaching thereto the missing pleadings. The CA denied the motion in its Resolution dated June 20, 2005[17] reasoning that: Notwithstanding the petitioners' superficial explanation for their failure to attach the pertinent portions of the record, this Court could have granted the motion since petitioners attached, nonetheless, other relevant documents to the Motion, if not for the observation that while the verification/certification was purportedly executed on March 17, 2005, the petition is dated March 31, 2005. Petitioners could not have actually read and understood the petition or attested to the truth of the contents thereof because at the time they executed the verification/certification, the petition was still inexistent. WHEREFORE, in view of the foregoing, the petitioners' Motion for Reconsideration is hereby DENIED for lack of merit. [Emphasis supplied] The petitioners now come before this Court on the claim that the dismissal of their petition by the CA is a reversible error that we should rectify. ASSIGNMENT OF ERROR The petitioners assert that the CA's conclusion, drawn from the variance between the dates of the Verification/Certification they executed abroad and the CA Petition, is erroneous; the variance does not mean that they did not actually read the petition before this was filed in court. THE COURT'S RULING We find the petition meritorious. The CA's conclusion results from an overly technical reading of the verification requirements, and from a failure to appreciate the circumstances of parties litigating in Philippine courts while they are overseas. Generally, a pleading is not required to be verified unless required by law or by the Rules of Court.[18] One such requirement is found in Section 1 of Rule 42 which requires a party appealing from a decision of the RTC rendered in the exercise of its appellate jurisdiction to file a verified petition for review with the CA. Verification, when required, is intended to secure an assurance that the allegations of a pleading are true and correct; are not speculative or merely imagined; and have been made in good faith.[19] To achieve this purpose, the verification of a pleading is made through an affidavit or sworn statement confirming that the affiant has read the pleading whose allegations are true and correct of the affiant's personal knowledge or based on authentic records.[20] Apparently, the CA concluded that no real verification, as above required, had been undertaken since the CA Petition was dated March 31, 2005 while the Verification/Certification carried an earlier date - March 17, 2005; the petition "was still inexistent" when the Verification/Certification was executed. We find this conclusion erroneous for the following reasons:

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Rules 6-10.REMLAWREV First, the variance in dates does not necessarily contradict the categorical declaration made by petitioners in their affidavit that they read and understood the contents of the pleading. The petitioners' claim in this regard is that they read a copy of the CA Petition through an electronic mail (e-mail) sent to them by their lawyers.[21] We find this claim, under the circumstances more fully discussed below, to be a reasonable explanation of why a variance in dates existed. We should not lose sight of the reality that pleadings are prepared and signed by the counsel at the instructions of the client; the latter merely provides the supporting facts of the pleading and, as needed, verifies that the allegations are true and correct. In short, the pleading and the verification are prepared separately and a variance in their dates is a matter that may satisfactorily be explained. To demand the litigants to read the very same document that is to be filed before the courts is too rigorous a requirement; what the Rules require is for a party to read the contents of a pleading without any specific requirement on the form or manner in which the reading is to be done. That a client may read the contents of a pleading without seeing the same pleading to be actually filed with the court is, in these days of e-mails and other technological advances in communication, not an explanation that is hard to believe. Apparently in this case, counsel sent a copy of the draft petition by e-mail and finalized it as soon as it was approved by the petitioners. The latter, on the other hand, complied with their end not only by approving the terms of the petition, but also by sending a copy of their sworn statement (as yet unauthenticated) in order to file the petition soonest, thereby complying with the required timeliness for the filing of the petition. To our mind, beyond the manner of these exchanges, what is important is that efforts were made to satisfy the objective of the Rule - to ensure good faith and veracity in the allegations of a pleading thereby allowing the courts to act on the case with reasonable certainty that the petitioners' real positions have been pleaded.[22] Second, the "circumstances" we mentioned above refer to the petitioners' unique situation as parties residing overseas who are litigating locally through their local counsel. While these overseas litigants are not excused from complying with our Rules such as the strict observance of the periods for appeal and the verification requirement, we must take into account the attendant realities brought into play because they are suing from overseas or via long distance communications with their counsel. In the verification requirement, there are added formalities required for the acceptance in the Philippines of statements sworn overseas before foreign notaries; we require their authentication by our consulates.[23] This is a process whose completion time may vary depending, among others, on various factors such as the location of the requesting party from the consulate; the peculiarities of foreign laws on notaries; the volume of transactions in a consulate, noting particularly the time of year when the authentication is requested; and the mode of sending the authenticated documents to the Philippines. Apparently compelled by one or a combination of these reasons, the petitioners in fact manifested when they filed their petition (on March 31, 2005) that they were submitting a photostatic copy of the Verification/Certification executed in Washington on March 17, 2005 since the original was still with the Philippine Consulate in San Francisco for authentication. [24] We take judicial notice that the petitioners' request for authentication coincided with the observance of the Holy Week - a traditional period of prayer and holidays in the Philippines, for the Philippines' foreign embassies and consulates, and even for Filipinos overseas.[25] We find it significant that, conformably with their Manifestation, the petitioners' counsel filed on April 8, 2005 the duly sworn and authenticated Verification as soon as counsel received it. Under these circumstances, there is every reason for an equitable and relaxed application of the rules to the petitioners' situation. Third, we discern utmost good faith on the part of the petitioners when they filed their Manifestation about their problem, intent, and plan of compliance with the verification requirement. They in fact stated early on through this Manifestation that their verification had been executed on March 17, 2005 in Washington, that is, at a date much earlier than the filing of their petition and manifestation. Unfortunately, the CA failed to note the variance in dates at the earliest opportunity; thus, the CA dismissed the petition on some other ground,[26] only to hark back later on to the variance in dates in their reconsideration of the earlier dismissal. Given this good faith and the early disclosure, it was basically unfair for the CA - who had earlier overlooked the variance in dates - to subsequently make this ground the basis of yet another dismissal of the petition. The CA - after overlooking the variance in dates at the first opportunity - should have at least asked for the petitioners' explanation on why the variance should not be an additional ground for the dismissal of the petition, instead of reflecting in their order on reconsideration that it could have granted the motion for reconsideration based on attachments already made, but there existed another reason - the variance in dates - for maintaining the dismissal of the petition. Fourth, we note that most of the material allegations set forth by petitioners in their CA Petition are already in their complaint for unlawful detainer filed before the MTC on April 26, 2002. Attached to the complaint was a Verification/Certification[27] dated March 18, 2002 (authenticated by the Philippine Consulate in San Francisco on March 27, 2002) in which petitioners declared under oath that they had caused the preparation of the complaint through their lawyers and had read and understood the allegations of the complaint. The material facts alleged in the CA Petition are likewise stated in the records of the case, as part of the findings of facts made by the MTC and the RTC. Verification as to the truth of these facts in the petition for review before the CA was, therefore, strictly a redundancy; its filing remained a necessity only because the Rules on the filing of a petition for review before the CA require it. This consideration could have led to a more equitable treatment of the petitioners' failure to strictly comply with the Rules, additionally justified by the fact that the failure to comply with the rules on verification is a formal rather than a jurisdictional defect.[28] In sum, we find sufficient justification to rule - under the circumstances of this case that the CA committed a reversible error when it dismissed the petition for failure to strictly follow the verification requirements. Stated otherwise, we do not consider the variance between the dates as fatal to the petitioners' case because the variance did not necessarily lead to the conclusion that no verification was made, or that the verification was false. More importantly, the variance totally lost significance after the petitioners sent from the US and submitted to the CA the required Verification/Certification in compliance with their previously manifested intent. As this Court noted in a case where compliance with a certificate of nonforum shopping was at issue, the fact that the Rules require strict compliance merely underscores its mandatory nature; it cannot be dispensed with or its requirements altogether disregarded, but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances, as we find in this case.[29]

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Rules 6-10.REMLAWREV WHEREFORE, we hereby GRANT the Petition. The CA Resolutions dated April 8, 2005 and June 20, 2005 in CA G.R. No. 88918 are REVERSED and SET ASIDE. The case is REMANDED to the CA for appropriate proceedings under CA-GR No. 88918. SO ORDERED. Quisumbing, (Chairperson), Carpio-Morales, Tinga, and Velasco, Jr., JJ., concur. G.R. No. 162924 February 4, 2010

Consequently, on August 22, 2001, petitioner filed Civil Case No. 8788 for unlawful detainer against herein respondents, raffled to the Municipal Trial Court (MTC), Pasig City, Branch 70. Simultaneously, petitioner filed a supplemental motion to dismiss Civil Case No. 68213, on the ground of litis pendentia. Petitioners motion to dismiss was denied. The denial was questioned and eventually elevated to the Supreme Court.3 Meantime, on April 29, 2002, the MTC rendered judgment in the unlawful detainer (ejectment) case. In the main, the trial court ruled that the issue did not involve material or physical possession, but rather, whether or not ECRM had the right to exercise an option to renew its lease contract. The MTC stated that, considering that this issue was incapable of pecuniary estimation, jurisdiction over the case was vested in the RTC. The trial court, therefore, disposed, as follows: WHEREFORE, judgment is hereby rendered DISMISSING the complaint for lack of merit. In the meantime, the plaintiff is hereby ordered to pay the defendants attorneys fees and expenses of litigation in the amount of TWENTY THOUSAND PESOS (P20,000.00).4 On appeal, the RTC, Pasig City, Branch 160, affirmed in toto. In its decision dated July 10, 2003, the RTC ruled that: Relative to the issue raised by the appellant that the lower court erred in finding it had no jurisdiction over the subject matter of this case as the question of whether or not ECRM under the provisions of the lease agreement (pars. 3 and 13) has the right to exercise an option to renew its lease contract is one incapable of pecuniary estimation and therefore jurisdiction is vested in the Regional Trial Court. Republic Act No. 7691 grants Metropolitan Trial Courts the exclusive jurisdiction over cases of forcible entry and unlawful detainer. Since it has been sufficiently established under the facts obtaining that the contract of lease has been renewed before the expiration of the lease period, and the appellant has consented to the renewal and assignment of the lease, it necessarily follows that the issue on whether the lower court erred in finding that it did not have jurisdiction over the subject matter raised by the appellant, deserves scant consideration and this court need not delve into it anymore.5 A petition for certiorari was consequently filed with the CA. In the assailed resolution dated November 20, 2003, the CA resolved to dismiss the petition on the following grounds: 1) The verification and certification against non-forum shopping was signed by a certain Antonio A. Merelos as General Manager of the petitioner-corporation without attaching therewith a Corporate Secretarys certificate or board resolution that he is authorized to sign for and on behalf of the petitioner; and 2) Lack of pertinent and necessary documents which are material portions of the record as required by Section 2, Rule 42 of the Rules of Civil Procedure.6 The motion for reconsideration was denied;7 hence, the instant petition assigning the following errors:

MID-PASIG LAND DEVELOPMENT CORPORATION, Petitioner, vs. MARIO TABLANTE, doing business under the name and style ECRM ENTERPRISES; ROCKLAND CONSTRUCTION COMPANY; LAURIE LITAM; and MC HOME DEPOT, INC., Respondents. DECISION NACHURA, J.: Assailed in the instant petition are the two (2) Resolutions1 of the Court of Appeals (CA) dated November 20, 2003 and March 22, 2004, dismissing the petition for certiorari before it on technical grounds and denying the motion for reconsideration thereof, respectively. The background facts are as follows: Petitioner is the registered owner of a piece of land situated in Pasig City, bounded by Meralco Avenue, Ortigas Avenue, Doa Julia Vargas Avenue, and Valle Verde Subdivision. On December 6, 1999, petitioner, represented by its Chairman and President, Ronaldo Salonga, and ECRM Enterprises, represented by its proprietor, Mario P. Tablante, executed an agreement whereby the former would lease to the latter an area, approximately one (1) hectare, of the aforesaid land, for a period of three (3) months, to be used as the staging area for the Home and Garden Exhibition Fair. On March 6, 2000, the date of the expiration of the Lease Agreement, Tablante assigned all his rights and interests under the said agreement to respondents Laurie M. Litam and/or Rockland Construction Company, Inc. (Rockland) under a Deed of Assignment of the same date. Petitioner eventually learned that respondent Tablante had executed a Contract of Lease with respondent MC Home Depot, Inc. on November 26, 1999 over the same parcel of land. Thereafter, respondent MC Home Depot, Inc. constructed improvements on the land and subdivided the area into fifty-nine (59) commercial stalls, which it leased to various entities. Upon the expiration of the lease on March 6, 2000, petitioner demanded that respondents vacate the land. A final demand was made in a letter dated December 20, 2000.2 In order to forestall ejectment from the premises, respondent Rockland filed a case for Specific Performance with the Regional Trial Court (RTC), Branch 266, Pasig City, on January 11, 2001, compelling petitioner to execute a new lease contract for another three (3) years, commencing in July 2000. This was docketed as Civil Case No. 68213. Petitioner moved to dismiss the complaint on the ground that it was anticipatory in nature.

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Rules 6-10.REMLAWREV

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT THE VERIFICATION AND CERTIFICATION AGAINST FORUM-SHOPPING IN THE PETITION FAILED TO ATTACH THE BOARD RESOLUTION SHOWING THE AUTHORITY OF THE AFFIANT. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT THE PETITION LACKED THE PERTINENT AND NECESSARY DOCUMENTS REQUIRED BY THE RULES. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN DISMISSING THE PETITION THUS EFFECTIVELY UPHOLDING THE DECISION OF THE REGIONAL TRIAL COURT, TO WIT: (a) THAT THE LEASE AGREEMENT WAS UNILATERALLY RENEWED AND THAT PETITIONER IS ESTOPPED FROM DENYING SUCH UNILATERAL RENEWAL; (b) THAT RESPONDENTS TABLANTE/ECRM, ROCKLAND AND MC HOME DEPOT COULD VALIDLY OCCUPY THE PROPERTY IN THE ABSENCE OF ANY VALID LEASE AGREEMENT CONSENTED TO BY PETITIONER; (c) PETITIONER [IS] LIABLE FOR ATTORNEYS FEES AND COSTS OF SUIT.8 The petition is granted. In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,9 the Court had occasion to explain that: It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that all corporate powers are exercised, all business conducted, and all properties controlled by the board of directors. A corporation has a separate and distinct personality from its directors and officers and can only exercise its corporate powers through the board of directors. Thus, it is clear that an individual corporate officer cannot solely exercise any corporate power pertaining to the corporation without authority from the board of directors. This has been our constant holding in cases instituted by a corporation. In a slew of cases, however, we have recognized the authority of some corporate officers to sign the verification and certification against forum shopping. In MactanCebu International Airport Authority v. CA, we recognized the authority of a general manager or acting general manager to sign the verification and certificate against forum shopping; x x x. In sum, we have held that the following officials or employees of the company can sign the verification and certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case.1avvphi1 While the above cases do not provide a complete listing of authorized signatories to the verification and certification required by the rules, the determination of the sufficiency of the authority was done on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping, being "in a position to verify the truthfulness and correctness of the allegations in the petition."10

From the foregoing, it is thus clear that the failure to attach the Secretarys Certificate, attesting to General Manager Antonio Mereloss authority to sign the Verification and Certification of Non-Forum Shopping, should not be considered fatal to the filing of the petition. Nonetheless, the requisite board resolution was subsequently submitted to the CA, together with the pertinent documents.11 Considering that petitioner substantially complied with the rules, the dismissal of the petition was, therefore, unwarranted. Time and again, we have emphasized that dismissal of an appeal on a purely technical ground is frowned upon especially if it will result in unfairness. The rules of procedure ought not to be applied in a very rigid, technical sense for they have been adopted to help secure, not override, substantial justice. For this reason, courts must proceed with caution so as not to deprive a party of statutory appeal; rather, they must ensure that all litigants are granted the amplest opportunity for the proper and just ventilation of their causes, free from the constraint of technicalities.12 After a finding that the CA erred in dismissing the petition before it, a remand of the case is in order. However, a perusal of the records reveals that this is no longer necessary in light of relevant developments obtaining in the case at bar. Petitioner, in its Memorandum dated October 28, 2005, alleged that respondents possessory claims had lapsed and, therefore, had become moot and academic. Respondent Rockland prayed that a three-year lease period be granted to it in order that it would be able to plan its activities more efficiently. Since the claimed "lease contract" had already expired as of July or August 2003, there appears no reason why respondents should continue to have any claim to further possession of the property.13 Respondent Rockland also stated in its Memorandum dated March 16, 2006 that it was no longer in possession of the subject property considering that: 50. In a Resolution dated 17 September 2004, in the case of "Rockland Construction Company, Inc. vs. Mid-Pasig Land Development Corporation, et al.," docketed as SCA No. 2673, and the Omnibus Order dated 12 November 2004, affirming the aforesaid Resolution, Branch 67 Pasig City Regional Trial Court Presiding Judge Mariano M. Singzon awarded possession (albeit erroneously) of subject property to Pasig Printing Corporation, an intervenor in the SCA case. 51. At present, petitioner does not have a cause of action against herein respondent Rockland. Respondent is not unlawfully withholding possession of the property in question as in fact respondent is not in possession of the subject property. The issue of possession in this ejectment case has therefore been rendered moot and academic.14 This allegation was confirmed by respondent MC Home Depot, Inc. in its Comment/Memorandum dated May 22, 2007 submitted to the Court. It stated therein that "the passage of time has rendered the issue of possession moot and academic with respect to respondent Rockland, as the three-year period has long been expired in 2003."15 Furthermore, respondent MC Home Depot, Inc. asserts that it is in rightful possession of the land on the strength of a Memorandum of Agreement dated November 22, 2004 between the latter and Pasig Printing Corporation. By petitioners admission that while it remains the registered owner of

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Rules 6-10.REMLAWREV the land, possession of the same had been adjudicated in favor of Pasig Printing Corporation, another entity without any contractual relationship with petitioner, on the strength of an Order from the RTC of Pasig City. Considering that Pasig Printing Corporation has the jus possessionis over the subject property, it granted the MC Home Depot, Inc. actual occupation and possession of the subject property for a period of four (4) years, renewable for another four (4) years upon mutual agreement of the parties.16 WHEREFORE, the petition is GRANTED. The assailed Resolutions of the Court of Appeals are REVERSED and SET ASIDE. However, in view of the developments which have rendered the issue of the right of possession over the subject property moot and academic, the main case is hereby considered CLOSED AND TERMINATED. No pronouncement as to costs. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice WE CONCUR: ANTONIO T. CARPIO* Associate Justice RENATO C. CORONA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice DIOSDADO M. PERALTA Associate Justice G.R. No. 94093 August 10, 1993 FAR EAST MARBLE (PHILS.), INC., LUIS R. TABUENA, JR. and RAMON A. TABUENA, petitioners, vs. HONORABLE COURT OF APPEALS and BANK OF PHILIPPINE ISLANDS, respondents. Minerva C. genevea for petitioners. Sabino B. Padilla IV for Bank of the Philippines Islands. MELO, J.: This has reference to a petition for review by certiorari seeking the reversal of the decision of the Court of Appeals dated June 26, 1990, in CA-G.R. CV No. 14404 (Bellosillo (P), Marigomen, Sempio-Diy, JJ.) which set aside the order of the Regional Trial Court of the National Capital Judicial Region (Manila, Branch XIV), dated June 1, 1987 and remanded the case to the court a quo for further proceedings on the grounds that the complaint for foreclosure of chattel mortgage with replevin had not prescribed and that, there being a cause of action, further proceedings, including the resolution of the motion for summary judgment may be pursued. The antecedent facts of the case may be chronicled as follows: On February 5, 1987, herein respondent Bank of the Philippines Islands (BPI) filed a complaint for foreclosure of chattel mortgage with replevin against petitioner Far East Marble (Phils.), Inc. (Far East), Ramon A. Tabuena and Luis R. Tabuena, Jr. which was docketed as Civil Case No. 87-39345 of Branch XIV of the Regional Trial Court of the National Capital Judicial Region stationed in Manila. The complaint pertinently alleged: FIRST CAUSE OF ACTION AGAINST FAR EAST 2. That on various dates and for valuable consideration, the defendant Far East received from Commercial Bank and Trust Company . . . now merged with and into the plaintiff bank . . . several loans evidenced by promissory notes executed by said Far East, photo copies of which are attached hereto and made integral parts hereof as Annexes A, B and C. 3. That said promissory notes . . . .have long matured but despite repeated requests and demands for payment thereof with interests and related charges due, Far East has failed and refused to pay. The account due on said promissory notes with interests and related charges as of 10 September 1986 is P4,471,854.32 itemized in a statement of account, copy of which is attached hereto and made a part hereof as Annex D 4. That because of Far East's failure and refusal in bad faith to pay its long past due obligations under the promissory notes above alleged, plaintiff was constrained to file this suit . . . SECOND CAUSE OF ACTION AGAINST FAR EAST 6. That on various dates and for valuable consideration, the defendant Far East received from and was extended by . . . plaintiff Bank . . . credit facilities in the form of Trust Receipts, photo copies of which are hereto attached and made integral parts hereof as Annexes E, F, G, H, I and J. 7. That said Trust Receipts . . . have long matured and despite repeated requests and demands for payment thereof with interests and related charges due Far East has failed and refused to pay. The amount due on said Trust Receipts with interests and related charges as of 10 September 1986 is P2,170,476.62 as itemized in a statement of account, copy of which is attached hereto and made an integral part hereof as Annex K. 8. That because of far East's failure and refusal to pay its long past due obligations under the Trust Receipts above alleged, plaintiff was constrained to file this suit . . . xxx xxx xxx

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Rules 6-10.REMLAWREV 10. That in September 1976 Far East executed in favor of . . . plaintiff Bank . . . a Chattel Mortgage, photocopy of which is attached hereto and made an integral part hereof as Annex L, to secure the payment of its loan obligations including interests and related charges. . . xxx xxx xxx CAUSE OF ACTION AGAINST INDIVIDUAL DEFENDANTS RAMON A. TABUENA AND LUIS R. TABUENA, JR. 13. That in September 1976, defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. executed in favor of . . . plaintiff Bank . . . a "continuing guaranty" photocopy of which is attached hereto and made a part hereof as Annex M, whereby they bind themselves, jointly and severally, to answer for the loan obligations to the Bank of defendant Far East. 14. That despite requests and demands for their payment of Far East's long past due accounts, said defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. have failed and refused to pay said Far East accounts and have already defaulted in their solidary obligation under said "continuing Guaranty." 15. That because of the failure and refusal of defendants Ramon A. Tabuena and Luis R. Tabuena, Jr. in bad faith to pay Far East's past due accounts under their solidary obligation stipulated in said "Continuing Guaranty,". . . plaintiff has been constrained to file suit against them . . . (pp. 32-36, Rollo.) On March 10, 1987, Far East filed an answer with compulsory counterclaim admitting the genuineness and due execution of the promissory notes attached as Annexes A, B, and C to the complaint, but alleging further that said notes became due and demandable on November 19, 1976, respectively. On the basis of the maturity dates of the notes, Far East thereupon raised the affirmative defenses of prescription and lack of cause of action as it denied the allegation of the complaint that BPI had made previous repeated requests and demands for payment. Far East claimed that during the more than 10 years which elapsed from the dates of maturity of said obligations up to the time the action for foreclosure of the chattel mortgage securing said obligations was filed, it had not received from BPI or its predecessor any demand for payment and thus, it had "labored under the belief that they [the obligations] have already been written off" in the books of BPI. Moreover, Far East denied the genuineness and due execution of the trust receipts and of the Statement of Account (pp. 78-79, Rollo). A motion to hear affirmative defenses was attached to the answer. On March 16, 1987, BPI filed an opposition to the motion to hear affirmative defenses, alleging that its cause of action against Far East have not prescribed, since within 10 years from the time its cause of action accrued, various written extrajudicial demands (attached thereto as Annexes "A" and "A-1") were sent by BPI and received by Far East. Moreover, BPI offered several written documents whereby Far East supposedly acknowledged its debt to BPI (Annexes "B" to "B-6). Withal, BPI maintained, the ten-years prescriptive period to enforce its written contract had not only been interrupted, but was renewed. On the same date, BPI filed a motion for summary judgment on the ground that since Far East had admitted the genuineness and due execution of the promissory notes and the deed of chattel mortgage annexed to its complaint, there was no genuine issue as to any material fact, thus entitling BPI to a favorable judgment as a matter of law in regard to its causes of action and on its right to foreclose the chattel mortgage. On June 1, 1987, the trial court issued an order to the following effect: WHEREFORE, the Court issues this Order: 1 Dismissing the complaint against the defendant Far East Marble (Phils.) Inc. for lack of cause of action and on grounds of pre[s]cription: 2 Denying for lack of merit the Motion for Summary Judgment and the Supplemental Motion for Summary Judgment; 3 Striking off from the records the order of March 6, 1987 and recalling the writ of replevin issued by this Court, and dismissing all the contempt charges; 4 Ordering the Sheriff to desist permanently from enforcing the writ of seizure and to return all the property seized by him under the Writ of Replevin, to the defendant Far East Marble (Phils.) Inc. immediately from receipt of a copy of this order, and in case of his failure to do so, the value thereof shall be charged against the replevin bond. (pp. 89-90, Rollo.) An appeal therefrom was forthwith interposed by BPI, assailing the findings of the trial court with respect to its finding that BPI's cause of action has prescribed and the consequent denial of the motion for summary judgment. On June 26, 1990, the Court of Appeals rendered a decision setting aside the June 1, 1987 order of the court of origin and remanding the case to said court for further proceedings, "including the resolution anew of plaintiff's motion for summary judgment . . ., reception of the evidence of the parties and, thereafter, to decide the case as the facts may warrant." (pp. 98-99, Rollo.) Hence, the instant petition for review on certiorari filed by Far East, anchored on the following assigned errors: I THE COURT OF APPEALS ERRED WHEN IT DISREGARDED THE FINDINGS OF THE TRIAL COURT THAT PRESCRIPTION HAS SET IN OBLIVIOUS OF THE FACT THAT THIS FINDING WAS REACHED AFTER DUE HEARING. II THE COURT OF APPEALS GRAVELY ERRED IN RULING FOR A REOPENING OF THE TRIAL FOR THE RECEPTION OF EVIDENCE ON BOTH ISSUES OF PRESCRIPTION AND SUMMARY JUDGMENT WHEN THESE WERE ALREADY TRIED AND WEIGHED BY THE TRIAL COURT.

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Rules 6-10.REMLAWREV III THE COURT OF APPEALS ERRED IN ASSUMING JURISDICTION OVER THE CASE CONSIDERING THAT THE ISSUES RAISED THEREIN INVOLVE PURE QUESTIONS OF LAW. (p. 14, Rollo.) The issue of jurisdiction being basis, we shall endeavor to dispose of it ahead of the other topics raised by petitioners Petitioner Far East maintains the position that the Court of Appeals stepped beyond the limits of its authority when it assumed jurisdiction over the appeal filed by BPI inasmuch as said appeal raised only the pure questions of law or whether or not the trial court erred: (1) in dismissing BPI's complaint for lack of cause of action; (2) in finding that BPI's cause of action had prescribed; and (3) in ruling that BPI is not entitled to summary judgment on its causes of action against Far East. Consequently, Far East contends, BPI should have taken its case directly to this Court. There is no dispute with respect to the fact that when an appeal raises only pure questions of law, it is only this Court which has jurisdiction to entertain the same (Article VIII, Section 5 (2) (e), 1987 Constitution; Rule 45, Rules of Court; see also Santos, Jr. vs. Court of Appeals, 152 SCRA 378 [1987]). On the other hand, appeals involving both questions of law and fact fall within the exclusive appellate jurisdiction of the Court of Appeals. At this point, there seems to be a need to distinguish a question of law from a question of fact. It has been held in a number of cases (Medina vs. Asistio, Jr., 191 SCRA 218 [1990]; Gan vs. Licup Design Group, Inc., G.R. NO. 94264, July 24, 1990, En Banc, Minute Resolution; Pilar Development Corp. vs. Intermediate Appellate Court, et al., 146 SCRA 215 [1986]; Ramos vs. Pepsi-Cola Bottling Co., 19 SCRA 289 [1967]; Consolidated Mines, Inc. vs. Court of Tax Appeals, et al., 58 SCRA 618 [1974]), that there is a "question of law" when there is doubt or difference of opinion as to what the law is on certain state of facts and which does not call for an examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a "question of fact" when the doubt or controversy arises as to the truth or falsity of the alleged facts. Simply put, when there is no dispute as to fact, the question of whether or not the conclusion drawn therefrom is correct is a question of law. In the case at bar, BPI alleged in its complaint (Rollo, p. 42) that on various dates and for valuable consideration, it extended to Far East several loans, evidenced by promissory notes, and credit facilities in the form of trust receipts, and that despite repeated requests and demands for payment thereof, Far East had failed and refused to pay. Thus BPI sought foreclosure of the chattel mortgage securing such indebtedness. In its answer (Rollo, p. 78), Far East admitted the genuineness and due execution of the promissory notes involved in the case, but denied BPI's allegation that repeated demands for payment were made by BPI on it. Far East then raised the affirmative defenses of prescription and lack of cause of action, arguing that since the promissory notes matured in 1976 while BPI filed its action to foreclose the chattel mortgage only in 1987 (or more than 10 years from the time its cause of action accrued), and there being no demand for payment which would interrupt the period of prescription for instituting said action, BPI's claims have prescribed. BPI, however, countered that its allegation of repeated demands on Far East for payment sufficiently stated a cause of action; that within ten years from the time its cause of action accrued in 1976, it sent written extrajudicial demands on Far East requesting payment of its due and outstanding obligations; that within that 10-years period, it received written acknowledgments of debt from Far East; and, that these demands for payment and acknowledgments of debt effectively interrupted and renewed the prescriptive period. Worth noting is the fact that the acknowledgment of debt and the demands for payment, including the affidavits of BPI's counsel who prepared the demand letter and that of BPI's messenger who allegedly personally delivered said letters to Far East were duly annexed to BPI's pleadings. From the foregoing exchange of pleading, the conflicting allegations of fact by the contending parties sprung forth. It is thus quite obvious that the controversy centered on, and the doubt arose with respect to, the very existence of previous demands for payment allegedly made by BPI on petitioner Far East, receipt of which was denied by the latter. This dispute or controversy inevitably raised a question of fact. Such being the case, the appeal taken by BPI to the Court of Appeals was proper. We now come to petitioner's first two assigned errors. The trial court's finding that BPI's claims due to prescription, can no longer prosper, is inextricably connected with, and underpinned by, its other conclusion that BPI's allegation that it made "repeated requests and demands for payment" is not sufficient to state a cause of action. Moreover, in its questioned Order (Rollo, p. 88) dated June 1, 1987, the trial court held that: Apart from the fact that the complaint failed to allege that the period of prescription was interrupted, the phrase "repeated requests and demands for payment" is vague and incomplete as to establish in the minds of the defendant, or to enable the Court to draw a conclusion, that demands or acknowledgment [of debt] were made that could have interrupted the period of prescription. (p. 88, Rollo.). Seemingly, therefore, the trial court believed that the interruption of the prescriptive period to institute an action is an ULTIMATE FACT which had to be expressly and indispensably pleaded by BPI in its complaint, and that failure to so alleged such circumstance is fatal to BPI's cause of action. We believe and hold otherwise. Section 3 of Rule 6 state that a "complaint is a concise statement of the ultimate facts constituting the plaintiff's cause or causes of action." Further elaborating thereon, Section 1 of Rule 8 declares that every pleading, including, of course, a complaint, "shall contain in a methodical and logical form, a plain, concise and direct statement of the ultimate facts . . . omitting the statement of mere evidentiary facts." "Ultimate facts" are the essential and substantial facts which either form the basis of the primary right and duty or which directly make up the wrongful acts or omissions of the defendant (Tantuico, Jr. vs. Republic of the Phil., et al., 204 SCRA

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Rules 6-10.REMLAWREV 428 [1991]), while "evidentiary facts" are those which tend to prove or establish said ultimate facts. What then are the ultimate facts which BPI had to allege in its complaint so as to sufficiently establish its cause of action? Basically, a cause of action consists of three elements, namely: (1) the legal right of the plaintiff; (2) the correlative obligation of the defendant; and (3) the act or omission of the defendant in violation of said legal right (Nabus vs. Court of Appeals, et al., 193 SCRA 732 [1991]); Rebollido vs. Court of Appeals et al., 170 SCRA 800 [1989]). These elements are manifest in BPI's complaint, particularly when it was therein alleged that: (1) for valuable consideration, BPI granted several loans, evidenced by promissory notes, and extended credit facilities in the form of trust receipts to Far East (photocopies of said notes and receipts were duly attached to the Complaint); (2) said promissory notes and trust receipts had matured; and (3) despite repeated requests and demands for payment thereof, Far East had failed and refused to pay. Clearly then, the general allegation of BPI that "despite repeated requests and demands for payment, Far East has failed to pay" is sufficient to establish BPI's cause of action. Besides, prescription is not a cause of action; it is a defense which, having been raised, should, as correctly ruled by the Court of Appeals (DBP vs. Ozarraga, 15 SCRA 48 [1965]), be supported by competent evidence. But even as Far East raised the defense of prescription, BPI countered to the effect that the prescriptive period was interrupted and renewed by written extrajudicial demands for payment and acknowledgment by Far East of the debt. A complaint is sufficient if it contains sufficient notice of the cause of action even though the allegation may be vague or indefinite, for in such case, the recourse of the defendant would be to file a motion for a bill of particulars (Ramos vs. Condez, 20 SCRA 1146 [1967]). It is indeed the better rule that, pleadings, as well as remedial laws, should be liberally construed so that the litigants may have ample opportunity to prove their respective claims so as to avoid possible denial of substantial justice due to legal technicalities (Adamo, et al. vs. Intermediate Appellate Court, et al., 191 SCRA 195 [1990]). In the case at bar, the circumstances of BPI extending loans and credits to Far East and the failure of the latter to pay and discharge the same upon maturity are the only ultimate facts which have to be pleaded, although the facts necessary to make the mortgage valid enforceable must be proven during the trial (Ortiz v. Garcia, 15 Phil. 192 [1910]). In fine, the finding of the trial court that prescription has set in is primarily premised on a misappreciation of the sufficiency of BPI's allegation as above discussed. The records will show that the hearing conducted by the trial court was merely pro forma and the trial judge did not sufficiently address the issue of whether or not a demand for payment in fact made by BPI and duly received by herein petitioner Far East. WHEREFORE, the instant petition is hereby DENIED and the decision of the Court of Appeals hereby AFFIRMED. No special pronouncement is made as to costs. SO ORDERED.

Feliciano, Bidin, Romero and Vitug, JJ., concur. SECOND DIVISION [G.R. No. 119800. November 12, 2003] FILIPINAS TEXTILE MILLS, INC. and BERNARDINO VILLANUEVA, petitioners, vs. COURT OF APPEALS and STATE INVESTMENT HOUSE, INC. respondents. DECISION Tinga, J.:chanroblesvirtuallawlibrary Before this Court is a Petition for Review on Certiorari assailing the Decision[1] and Resolution[2] of the Court of Appeals dated June 16, 1994 and April 19, 1995, respectively, affirming the Decision[3] of the Regional Trial Court dated July 23, 1990 which found the petitioners Filipinas Textile Mills, Inc. (Filtex) and Bernardino Villanueva (Villanueva) jointly and severally liable to respondent State Investment House, Inc. (SIHI) for the amount of P7,868,881.11.chanroblesvirtuallawlibrary The antecedent facts are as follows:chanroblesvirtuallawlibrary On December 6, 1985, SIHI instituted a Complaint[4] for the collection of the sum of P3,118,949.75, with interest, penalties, exemplary damages, attorneys fees and costs of suit against herein petitioners Filtex and Villanueva. chanroblesvirtuallawlibrary In its Complaint, SIHI alleged that sometime in 1983, Filtex applied for domestic letters of credit to finance the purchase of various raw materials for its textile business. Finding the application to be in order, SIHI issued on various dates domestic letters of credit[5] authorizing Indo-Philippine Textile Mills, Inc. (Indo-Phil), Texfiber Corporation (Texfiber), and Philippine Polyamide Industrial Corporation (Polyamide) to value on SIHI such drafts as may be drawn by said corporations against Filtex for an aggregate amount not exceeding P3,737,988.05. chanroblesvirtuallawlibrary Filtex used these domestic letters of credit to cover its purchase of various textile materials from Indo-Phil, Texfiber and Polyamide. Upon the sale and delivery of the merchandise, Indo-Phil, Texfiber and Polyamide issued several sight drafts[6] on various dates with an aggregate value of P3,736,276.71 payable to the order of SIHI, which were duly accepted by Filtex. Subsequently, the sight drafts were negotiated to and acquired in due course by SIHI which paid the value thereof to Indo-Phil, Texfiber and Polyamide for the account of Filtex. chanroblesvirtuallawlibrary Allegedly by way of inducement upon SIHI to issue the aforesaid domestic letters of credit and to value the sight drafts issued by Indo-Phil, Texfiber and Polyamide, Villanueva executed a comprehensive surety agreement[7] on November 9, 1982, whereby he guaranteed, jointly and severally with Filtex, the full and punctual payment at maturity to SIHI of all the indebtedness of Filtex. The essence of the comprehensive surety agreement was that it shall be a continuing surety until such

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Rules 6-10.REMLAWREV time that the total outstanding obligation of Filtex to SIHI had been fully settled.chanroblesvirtuallawlibrary In order to ensure the payment of the sight drafts aforementioned, Filtex executed and issued to SIHI several trust receipts[8] of various dates, which were later extended with the issuance of replacement trust receipts all dated June 22, 1984, covering the merchandise sold. Under the trust receipts, Filtex agreed to hold the merchandise in trust for SIHI, with liberty to sell the same for SIHIs account but without authority to make any other disposition of the said goods. Filtex likewise agreed to hand the proceeds, as soon as received, to SIHI to apply against any indebtedness of the former to the latter. Filtex also agreed to pay SIHI interest at the rate of 25% per annum from the time of release of the amount to Indo-Phil, Texfiber and Polyamide until the same is fully paid, subject to SIHIs option to reduce the interest rate. Furthermore, in case of delay in the payment at maturity of the aggregate amount of the sight drafts negotiated to SIHI, said amount shall be subject to two percent (2%) per month penalty charge payable from the date of default until the amount is fully paid.chanroblesvirtuallawlibrary Because of Filtexs failure to pay its outstanding obligation despite demand, SIHI filed a Complaint on December 6, 1985 praying that the petitioners be ordered to pay, jointly and severally, the principal amount of P3,118,949.75, plus interest and penalties, attorneys fees, exemplary damages, costs of suit and other litigation expenses.chanroblesvirtuallawlibrary In its Answer with Counterclaim,[9] Filtex interposed special and affirmative defenses, i.e., the provisions of the trust receipts, as well as the comprehensive surety agreement, do not reflect the true will and intention of the parties, full payment of the obligation, and lack of cause of action. For his part, Villanueva interposed the same special and affirmative defenses and added that the comprehensive surety agreement is null and void and damages and attorneys fees are not legally demandable.[10] The petitioners, however, failed to specifically deny under oath the genuineness and due execution of the actionable documents upon which the Complaint was based.chanroblesvirtuallawlibrary On July 23, 1990, the Regional Trial Court of Manila rendered judgment[11] holding Filtex and Villanueva jointly and severally liable to SIHI. Dissatisfied, Filtex and Villanueva filed an Appeal,[12] primarily contending that they have fully paid their indebtedness to SIHI and asserting that the letters of credit, sight drafts, trust receipts and comprehensive surety agreement upon which the Complaint is based are inadmissible in evidence supposedly because of non-payment of documentary stamp taxes as required by the Internal Revenue Code. [13]chanroblesvirtuallawlibrary In its assailed Decision, the Court of Appeals debunked the petitioners contention that the letters of credit, sight drafts, trust receipts and comprehensive surety agreement are inadmissible in evidence ruling that the petitioners had in effect, admitted the genuineness and due execution of said documents because of their failure to have their answers placed under oath, the complaint being based on actionable documents in line with Section 7, Rule 8 of the Rules of Court.[14] The appellate court also ruled that there remained an unpaid balance as of January 31, 1989 of P868,881.11 for which Filtex and Villanueva are solidarily liable. [15]chanroblesvirtuallawlibrary

The appellate court denied the petitioners Motion for Reconsideration[16] in its Resolution,[17] ruling that the petitioners failed to raise new and substantial matters that would warrant the reversal of its Decision. However, due to certain typographical oversights, the Court of Appeals modified its Decision and stated that the correct unpaid balance as of January 31, 1989 was actually P7,868,881.11, excluding litigation and other miscellaneous expenses and filing fees. [18]chanroblesvirtuallawlibrary In asking this Court to reverse and set aside the aforementioned Decision and Resolution of the Court of Appeals, the petitioners argued that the appellate court should not have admitted in evidence the letters of credit, sight drafts, trust receipts and comprehensive surety agreement for lack of the requisite documentary stamps thereon. They hypothesized that their implied admission of the genuineness and due execution of these documents for failure to specifically deny the same under oath should not be equated with an admission in evidence of the documents and an admission of their obligation. They also maintained that they have fully paid the obligation and, in fact, have made an excess payment in the amount of P415,722.53. In addition, Villanueva asserted that the comprehensive surety agreement which he executed is null and void, inadmissible in evidence and contains material alterations. Thus, he claimed that he should not be held solidarily liable with Filtex. chanroblesvirtuallawlibrary Traversing the allegations in the instant petition, SIHI stated in its Comment[19] that in their respective answers to the complaint, the petitioners expressly admitted the due execution of the letters of credit, sight drafts and trust receipts and their obligation arising from these documents. Having done so, they could no longer question the admissibility of these documents. Moreover, their allegation of inadmissibility of these documents is inconsistent with their defense of full payment. SIHI also reasoned that the documentary stamps, assuming they are required, are for the sole account of Filtex not only because the letters of credit were issued at its instance and application but also because it was the issuer and acceptor of the trust receipts and sight drafts, respectively. As regards the petitioners allegation of full payment, SIHI stressed that the appellate court had already resolved this issue in its favor by ruling that there remained an unpaid balance of P7,868,881.11 as of January 31, 1989 for which the petitioners were held solidarily liable. Besides, by quoting substantial portions of their appellants Brief in the instant petition, the petitioners merely repeated the issues that have already been passed upon by the appellate court. Finally, SIHI asserted the validity and admissibility of the comprehensive surety agreement.chanroblesvirtuallawlibrary The threshold issue in this case is whether or not the letters of credit, sight drafts, trust receipts and comprehensive surety agreement are admissible in evidence despite the absence of documentary stamps thereon as required by the Internal Revenue Code.[20]chanroblesvirtuallawlibrary We rule in the affirmative. As correctly noted by the respondent, the Answer with Counterclaim[21] and Answer,[22] of Filtex and Villanueva, respectively, did not contain any specific denial under oath of the letters of credit, sight drafts, trust receipts and comprehensive surety agreement upon which SIHIs Complaint[23] was based, thus giving rise to the implied admission of the genuineness and due execution of these documents. Under Sec. 8, Rule 8 of the Rules of Court, when an

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Rules 6-10.REMLAWREV 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. chanroblesvirtuallawlibrary In Benguet Exploration, Inc. vs. Court of Appeals,[24] this Court ruled that the admission of the genuineness and due execution of a document means that the party whose signature it bears admits that he voluntarily signed the document or it was signed by another for him and with his authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of the party relying upon it; that the document was delivered; and that any formalities required by law, such as a seal, an acknowledgment, or revenue stamp, which it lacks, are waived by him. chanroblesvirtuallawlibrary Moreover, under Section 173 of the Internal Revenue Code the liability for payment of the stamp taxes is imposed on the person making, signing, issuing, accepting, or transferring the document. As correctly pointed out by SIHI, Filtex was the issuer and acceptor of the trust receipts and sight drafts, respectively, while the letters of credit were issued upon its application. On the other hand, Villanueva signed the comprehensive surety agreement. Thus, being among the parties obliged to pay the documentary stamp taxes, the petitioners are estopped from claiming that the documents are inadmissible in evidence for non-payment thereof. chanroblesvirtuallawlibrary Interestingly, the petitioners questioned the admissibility of these documents rather belatedly, at the appeal stage even. Their respective answers[25] to SIHIs Complaint were silent on this point. The rule is well-settled that points of law, theories, issues and arguments not adequately brought to the attention of the trial court need not, and ordinarily will not, be considered by a reviewing court as they cannot be raised for the first time on appeal because this would be offensive to the basic rules of fair play, justice and due process.[26]chanroblesvirtuallawlibrary Hence, the petitioners can no longer dispute the admissibility of the letters of credit, sight drafts, trust receipts and comprehensive surety agreement. However, this does not preclude the petitioners from impugning these documents by evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel and want of consideration.[27]chanroblesvirtuallawlibrary This brings us to the petitioners contention that they have already fully paid their obligation to SIHI and have, in fact, overpaid by P415,722.53. This matter is purely a factual issue. In Fortune Motors (Phils.) Corporation vs. Court of Appeals,[28] it was held that the jurisdiction of this Court in cases brought before it from the Court of Appeals under Rule 45 of the Rules of Court is limited to reviewing or revising errors of law. It is not the function of this Court to analyze or weigh evidence all over again unless there is a showing that the findings of the lower court are totally devoid of support or are glaringly erroneous as to constitute serious abuse of discretion. Factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when said court affirms the factual findings of the trial court. [29]chanroblesvirtuallawlibrary It should be noted that the issue of overpayment as well as the proof presented by the petitioners on this point merely rehash those submitted before the Court of Appeals. The appellate court affirmed the trial court and passed upon this issue by exhaustively detailing the amounts paid as guaranty deposit, the payments made and the balance due for every trust receipt. This Court shall not depart from the findings of the trial court and the appellate court, supported by the preponderance of evidence and unsatisfactorily refuted by the petitioners, as they are.chanroblesvirtuallawlibrary As a final issue, Villanueva contended that the comprehensive surety agreement is null and void for lack of consent of Filtex and SIHI. He also alleged that SIHI materially altered the terms and conditions of the comprehensive surety agreement by granting Filtex an extension of the period for payment thereby releasing him from his obligation as surety. We find these contentions specious.chanroblesvirtuallawlibrary In the first place, the consent of Filtex to the surety may be assumed from the fact that Villanueva was the signatory to the sight drafts and trust receipts on behalf of Filtex.[30] Moreover, in its Answer with Counterclaim,[31] Filtex admitted the execution of the comprehensive surety agreement with the only qualification that it was not a means to induce SIHI to issue the domestic letters of credit. Clearly, had Filtex not consented to the comprehensive surety agreement, it could have easily objected to its validity and specifically denied the same. SIHIs consent to the surety is also understood from the fact that it demanded payment from both Filtex and Villanueva.chanroblesvirtuallawlibrary As regards the purported material alteration of the terms and conditions of the comprehensive surety agreement, we rule that the extension of time granted to Filtex to pay its obligation did not release Villanueva from his liability. As this Court held in Palmares vs. Court of Appeals:[32]chanroblesvirtuallawlibrary The neglect of the creditor to sue the principal at the time the debt falls due does not discharge the surety, even if such delay continues until the principal becomes insolventchanroblesvirtuallawlibrary The raison detre for the rule is that there is nothing to prevent the creditor from proceeding against the principal at any time. At any rate, if the surety is dissatisfied with the degree of activity displayed by the creditor in the pursuit of his principal, he may pay the debt himself and become subrogated to all the rights and remedies of the creditor.chanroblesvirtuallawlibrary It may not be amiss to add that leniency shown to a debtor in default, by delay permitted by the creditor without change in the time when the debt might be demanded, does not constitute an extension of the time of payment, which would release the surety. In order to constitute an extension discharging the surety, it should appear that the extension was for a definite period, pursuant to an enforceable agreement between the principal and the creditor, and that it was made without the consent of the surety or with a reservation of rights with respect to him. The contract must be one which precludes the creditor from, or at least hinders him in, enforcing the principal contract within the period during which he could otherwise have enforced it, and precludes the surety from paying the debt. [33]chanroblesvirtuallawlibrary

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Rules 6-10.REMLAWREV RAMON J. LIM and AGNES J. LIM, respondents. SANDOVAL-GUTIERREZ, J.: The present petition for review on certiorari1 seeks to set aside the Decision dated April 29, 1995 and the Resolution dated October 10, 1996 of the Court of Appeals2 in CA-G.R. SP No. 36997 reversing the Decision of the Regional Trial Court, Branch 63, Calauag, Quezon in Civil Case No. C-1031 for forcible entry. The factual milieu of this case is as follows: On February 20, 1961, Napoleon Gaza purchased a parcel of land with an area of 5,270 square meters located in Barangay Sta. Maria, Calauag, Quezon, from Angeles Vda. de Urrutia. The Register of Deeds of Lucena City then cancelled the latter's title and issued Transfer Certificate of Title (TCT) No. T-47263 in the name of Napoleon Gaza. Thereafter, Napoleon Gaza and his wife Evelyn engaged in the lumber and copra business. They constructed a huge lumber shed on the property and installed engines, machinery and tools for a lumber mill. They also utilized a portion of the property as storage for copra. In 1975, they ceased engaging in business. They padlocked the gates of the property, leaving it to the care of Numeriano Ernesto. When he died in 1991, spouses Gaza designated Renato Petil as the new caretaker of the land. On the other hand, Ramon and Agnes Lim, both half-siblings of Napoleon Gaza, claimed that they have used the same lot for their lumber and copra business since 1975, as shown by Lumber Certificate of Registration No. 2490, PCA Copra Business Registration No. 6265/76 and Mayor's Permit dated December 31, 1976. Sometime in November 1993, they designated Emilio Herrera as caretaker of the property. On November 28, 1993, the padlock of the main gate was destroyed. According to Napoleon Gaza, the siblings Ramon and Agnes Lim and Emilio Herrera, entered the property by breaking the lock of the main gate. Thereafter, they occupied a room on the second floor of the warehouse without the consent of Renato Petil who was then outside the premises. For their part, Ramon and Agnes Lim maintain that on November 28, 1993, spouses Gaza detained Emilio Herrera and his daughter inside the compound and destroyed the padlocks of the gates. Thereafter, said spouses forcibly opened Agnes Lim's quarters at the second floor of the warehouse and occupied it. On December 13, 1993, Ramon and Agnes Lim filed with the Municipal Trial Court (MTC) of Calauag, Quezon an action for forcible entry against spouses Napoleon and Evelyn Gaza, docketed as Special Civil Action No. 845. On December 21, 1993, spouses Gaza filed with the same court their answer with compulsory counterclaim. On June 1, 1994, the MTC dismissed the complaint and counterclaim.

Lastly, with regard to Villanuevas assertion that the 25% annual interest to be paid by Filtex in case it failed to pay the amount released to suppliers was inserted by SIHI without his consent, suffice it to say that the trust receipts bearing the alleged insertion of the 25% annual fee are countersigned by him. His pretension of lack of knowledge and consent thereto is obviously contrived.chanroblesvirtuallawlibrary In view of the foregoing, merit.chanroblesvirtuallawlibrary we find the instant petition bereft of

WHEREFORE, premises considered, the petition is DENIED and the assailed Decision and Resolution of the Court of Appeals concurring with the decision of the trial court are hereby AFFIRMED. Costs against the petitioners.chanroblesvirtuallawlibrary SO ORDERED.chanroblesvirtuallawlibrary Bellosillo, (Chairman), Quisumbing, Austria-Martinez and Callejo, Sr., JJ., concur. ***no original case boo...wait In Warner Barnes & Co. Ltd. vs. Reyes, et al., G.R. No. L-9531, May 14, 1958 (103 Phil., 662), this Court said that the rule authorizing an answer to the effect that the defendant has no knowledge or information sufficient to form a belief as to the truth of an averment and giving such answer the effect of a denial, does not apply where the fact as to which want of knowledge is asserted, is so plainly and necessarily within the defendant's knowledge that his averment of ignorance must be palpably untrue. In said case the suit was one for foreclosure of mortgage, and a copy of the deed of mortgage was attached to the complaint; thus, according to this Court, it would have been easy for the defendants to specifically allege in their answer whether or not they had executed the alleged mortgage. The same thing can be said in the present case, where a copy of the promissory note sued upon was attached to the complaint. The doctrine in Warner Barnes & Co., Ltd. was reiterated in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc. G.R. No. L-25137, July 28, 1969 (28 SCRA 807). And in Sy-quia vs. Marsman, G.R. No. L-23426, March 1, 1968 (22 SCRA 927), this Court said: 'With regard to the plea of lack of knowledge or information set up in paragraph 3 of the answer, this Court's decision in Warner Barnes vs. Reyes, 103 Phil. 662, 665, is authority for the proposition that this form of denial must be availed of with sincerity and good faith, not for the purpose of confusing the other party, nor for purposes of delay. Yet, so lacking in sincerity and good faith is this part of the answer that defendants-appellants go to the limit of denying knowledge or information as to whether they (defendants) were in the premises (Marsman Bldg.) on January 4, 1961, as averred in paragraph 4 of the complaint. Yet whether such a fact was or was not true could not be unknown to these defendants. *** G.R. No. 126863 January 16, 2003 SPOUSES NAPOLEON L. GAZA and EVELYN GAZA, SPOUSES RENATO PETIL and MELY PETIL, BRGY. SEC. VICTORIO A. CONDUCTO and BRGY. TANOD ARTURO ALAON, petitioners, vs.

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Rules 6-10.REMLAWREV On appeal, the Regional Trial Court (RTC), Branch 63, Calauag, Quezon, affirmed the MTC Decision with modification, thus: "WHEREFORE, in the light of the foregoing considerations the judgment of the lower court is hereby AFFIRMED and the appeal is DENIED with the modification that the plaintiffs are ordered to pay the amount of P5,000.00 as moral damages and P5,000.00 by way of exemplary damages to the defendants spouses Napoleon Gaza and Evelyn Gaza. "SO ORDERED."3 On April 29, 1995, Ramon and Agnes Lim filed with the Court of Appeals a petition for review, docketed therein as CA-G.R. SP No. 36997. In its Decision, the Court of Appeals4 reversed and set aside the Decision of the RTC, thus: "WHEREFORE, premises considered, the petition is hereby GIVEN DUE COURSE. The decision of the Regional Trial Court of Calauag, Quezon, Branch 63, affirming the decision of the Municipal Trial Court, is hereby REVERSED and SET ASIDE and a new one is rendered ordering the private respondents and all persons claiming rights under them to vacate the premises in question and surrender its possession to the petitioners. "SO ORDERED." Spouses Gaza filed a motion for reconsideration but was denied. Hence, they filed with this Court the present petition for review on certiorari ascribing to the Court of Appeals the following errors: "I. THE COURT OF APPEALS ERRED IN FAILING TO RULE THAT THERE WAS NO IMPLIED ADMISSION ON THE PART OF PETITIONERS THAT PRIVATE RESPONDENTS HAD BEEN IN PRIOR AND ACTUAL PHYSICAL POSSESSION OF SUBJECT PROPERTY SINCE 1975. "II. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN RESOLVING THE INSTANT CASE ON MERE TECHNICALITIES AND IN APPLYING THE RULES OF PROCEDURE IN A VERY RIGID MANNER, THEREBY DENYING PETITIONERS SUBSTANTIAL JUSTICE. "III. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN IGNORING THE VOLUMINOUS EVIDENCE ADDUCED BY THE PETITIONERS IN SUBSTANTIATING THEIR PRIORITY IN POSSESSION OF SUBJECT PROPERTY, SAID ERROR BECOMING EVEN MORE MANIFEST IN THE LIGHT OF THE GLARING PAUCITY OF EVIDENCE OF PRIVATE RESPONDENTS TO SUPPORT THEIR ALLEGED POSSESSION. "IV. THE COURT OF APPEALS ERRED IN FAILING TO TAKE INTO ACCOUNT THE FINAL AND EXECUTORY JUDGMENT OF CONVICTION OF RESPONDENT AGNES LIM FOR TRESPASSING INTO SUBJECT PROPERTY, CLEARLY EVIDENCING PETITIONERS' PRIOR AND ACTUAL MATERIAL POSSESSION AND PRIVATE RESPONDENTS' PREDISPOSITION FOR FALSEHOOD, THE TRUTH OF THE MATTER BEING OF SAID PROPERTY AND THAT IT IS PRIVATE RESPONDENTS WHO HAVE FORCIBLY ENTERED THE PROPERTY IN DISPUTE. "V. THE COURT OF APPEALS ERRED IN RESOLVING THE ISSUE OF IMPLIED ADMISSION, NOT BEING ONE OF THE ISSUES DELIMITED IN THE PRE-TRIAL ORDER OF 17 FEBRUARY 1994."5 We resolve the issues jointly. Section 11, Rule 8 of the 1997 Rules of Civil Procedure, as amended, provides that material averments in the complaint, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied. Section 10 of the same Rule provides the manner in which specific denial must be made: "Section 10. Specific Denial. A defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny only the remainder. Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall have the effect of a denial." Three (3) modes of specific denial are contemplated by the above provisions, namely: 1) by specifying each material allegation of the fact in the complaint, the truth of which the defendant does not admit, and whenever practicable, setting forth the substance of the matters which he will rely upon to support his denial; (2) by specifying so much of an averment in the complaint as is true and material and denying only the remainder; (3) by stating that the defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment in the complaint, which has the effect of a denial.6 The Court of Appeals held that spouses Gaza, petitioners, failed to deny specifically, in their answer, paragraphs 2, 3 and 5 of the complaint for forcible entry quoted as follows: "xxx xxx xxx

"2. That plaintiffs are the actual and joint occupants and in prior continuous physical possession since 1975 up to Nov. 28, 1993 of a certain commercial compound described as follows: "A certain parcel of land situated in Bo. Sta. Maria, Calauag, Quezon. Bounded on the N., & E., by Julian de Claro; on the W., by Luis Urrutia. Containing an area of 5,270 square meters, more or less. Declared under Ramon J. Lim's Tax Dec. No. 4576 with an Ass. Value of P26,100.00 "3. That plaintiffs have been using the premises mentioned for combined lumber and copra business. Copies of plaintiffs' Lumber Certificate of Registration No. 2490 and PCA Copra Business Registration No. 6265/76 are hereto attached as Annexes "A" and "B" respectively; the Mayor's unnumbered copra dealer's permit dated Dec. 31, 1976 hereto attached as Annex "C"; "xxx xxx xxx

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Rules 6-10.REMLAWREV "6. That considering that the above-entitled case is an ejectment case, and considering further that the complaint did not state or there is no showing that the matter was referred to a Lupon for conciliation under the provisions of P.D. No. 1508, the Revised Rule on Summary Procedure of 1991, particularly Section 18 thereof provides that such a failure is jurisdictional, hence subject to dismissal; "7. That the Honorable Court has no jurisdiction over the subject of the action or suit; "The complaint is for forcible entry and the plaintiffs were praying for indemnification in the sum of P350,000.00 for those copra, lumber, tools, and machinery listed in par. 4 of the complaint and P100,000.00 for unrealized income in the use of the establishment, considering the foregoing amounts not to be rentals, Section 1 A (1) and (2) of the Revised Rule on Summary Procedure prohibits recovery of the same, hence, the Honorable Court can not acquire jurisdiction over the same. Besides, the defendants Napoleon Gaza and Evelyn Gaza being the owners of those properties cited in par. 4 of the complaint except for those copra and two (2) live carabaos outside of the subject premises, plaintiffs have no rights whatsoever in claiming damages that it may suffer, as and by way of proof of ownership of said properties cited in paragraph 4 of the complaint attached herewith are bunched of documents to form an integral part hereof; "8. That plaintiffs' allegation that Emilio Herrera was illegally detained together with his daughter was not true and in support thereof, attached herewith is a copy of said Herrera's statement and marked as Annex "C-Gaza." xxx xxx xxx."9

"5. That defendants' invasion of plaintiffs' premises was accomplished illegally by detaining plaintiffs' caretaker Emilio Herrera and his daughter inside the compound, then proceeded to saw the chain that held plaintiffs' padlock on the main gate of the compound and then busted or destroyed the padlock that closes the backyard gate or exit. Later, they forcibly opened the lock in the upstairs room of plaintiff Agnes J. Lim's quarters and defendants immediately filled it with other occupants now. Copy of the caretaker's (Emilio Herrera) statement describing in detail is hereto attached as Annex "D"; "xxx xxx xxx."7

The Court of Appeals then concluded that since petitioners did not deny specifically in their answer the above-quoted allegations in the complaint, they judicially admitted that Ramon and Agnes Lim, respondents, "were in prior physical possession of the subject property, and the action for forcible entry which they filed against private respondents (spouses Gaza) must be decided in their favor. The defense of private respondents that they are the registered owners of the subject property is unavailing." We observe that the Court of Appeals failed to consider paragraph 2 of petitioners' answer quoted as follows: "2. That defendants specifically deny the allegations in paragraph 2 and 3 of the complaint for want of knowledge or information sufficient to form a belief as to the truth thereof, the truth of the matter being those alleged in the special and affirmative defenses of the defendants;"8 Clearly, petitioners specifically denied the allegations contained in paragraphs 2 and 3 of the complaint that respondents have prior and continuous possession of the disputed property which they used for their lumber and copra business. Petitioners did not merely allege they have no knowledge or information sufficient to form a belief as to truth of those allegations in the complaint, but added the following: "SPECIAL AND AFFIRMATIVE DEFENSES "That defendants hereby reiterate, incorporate and restate the foregoing and further allege: "5. That the complaint states no cause of action; "From the allegations of plaintiffs, it appears that their possession of the subject property was not supported by any concrete title or right, nowhere in the complaint that they alleged either as an owner or lessee, hence, the alleged possession of plaintiffs is questionable from all aspects. Defendants Sps. Napoleon Gaza and Evelyn Gaza being the registered owner of the subject property has all the right to enjoy the same, to use it, as an owner and in support thereof, a copy of the transfer certificate of title No. T-47263 is hereto attached and marked as Annex "A-Gaza" and a copy of the Declaration of Real Property is likewise attached and marked as Annex "B-Gaza" to form an integral part hereof;

The above-quoted paragraph 2 and Special and Affirmative Defenses contained in petitioners' answer glaringly show that petitioners did not admit impliedly that respondents have been in prior and actual physical possession of the property. Actually, petitioners are repudiating vehemently respondents' possession, stressing that they (petitioners) are the registered owners and lawful occupants thereof. Respondents' reliance on Warner Barnes and Co., Ltd. vs. Reyes10 in maintaining that petitioners made an implied admission in their answer is misplaced. In the cited case, the defendants' answer merely alleged that they were "without knowledge or information sufficient to form a belief as to the truth of the material averments of the remainder of the complaint" and "that they hereby reserve the right to present an amended answer with special defenses and counterclaim."11 In the instant case, petitioners enumerated their special and affirmative defenses in their answer. They also specified therein each allegation in the complaint being denied by them. They particularly alleged they are the registered owners and lawful possessors of the land and denied having wrested possession of the premises from the respondents through force, intimidation, threat, strategy and stealth. They asserted that respondents' purported possession is "questionable from all aspects." They also averred that they own all the personal properties enumerated in respondents' complaint, except the two carabaos. Indeed, nowhere in the answer can we discern an implied admission of the allegations of the complaint, specifically the allegation that petitioners have priority of possession.

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Rules 6-10.REMLAWREV Thus, the Court of Appeals erred in declaring that herein petitioners impliedly admitted respondents' allegation that they have prior and continuous possession of the property. We now resolve the basic substantial issue. In an action for forcible entry, the plaintiff must prove that he was in prior possession of the land or building and that he was deprived thereof by means of force, intimidation threat, strategy or stealth.12 It must be stressed, though, that he cannot succeed where it appears that, as between himself and the defendant, the latter had a possession antedating his own.13 To ascertain this, it is proper to look at the situation as it existed before the first act of spoliation occurred.14 Such determination in this case requires a review of factual evidence, generally proscribed in a petition like this.15 Considering, however, the conflicting factual findings of the MTC and RTC on one hand, and Court of Appeals on the other, this Court takes exception to the general rule in order to resolve the factual issues raised by the parties. Petitioners' possession of the property has been sufficiently established by evidence. The title to the property (TCT No. T-47263) is in the name of petitioner Napoleon Gaza. On record is a deed of sale showing that he bought the land in 1961 from Angeles Vda. de Urrutia. Petitioner also presented receipts of payment of realty taxes. A disinterested witness, Barangay Secretary Victorio Conducto of Sta. Maria, Calauag, Quezon, in his Affidavit attached to the instant petition,16 stated that since 1968, spouses Gaza have been in possession of the property and that respondents never occupied the property even for business purposes. Upon the closure of their business, petitioners designated Numeriano Ernesto and Renato Petil as caretakers of the lot. Upon the other hand, respondents' allegation of prior possession of the premises is anchored on spurious documents. The Lumber Certificate of Registration of Business Name No. 78-2490, for one, does not specifically refer to the disputed property. It was issued to them at a different address. Tax Declaration No. 35-81220 in the name of R. J. Lim is not a certified true copy of the original.17 Also, respondents' purported PCA Certificate of Registration No. 6265/76 as copra dealer18 and the Mayor's Permit19 are expired documents. Not even their supposed caretaker, Emilio Herrera, submitted an affidavit confirming that they are the lawful possessors of the property. Furthermore, respondent Agnes Lim was later convicted by the MTC of Calauag, Quezon in Criminal Case No. 7405 for trespassing into the subject property.20 The MTC Decision confirms the falsity of respondents' claim of prior possession. It bears emphasis that the MTC Decision was affirmed in toto by the RTC of Calauag, Quezon, Branch 63 in Criminal Case No. 2725-C. 21 Where a dispute over possession arises between two persons, the person first having actual possession is the one who is entitled to maintain the action granted by law; otherwise, a mere usurper without any right whatever, might enter upon the property of another and, by allowing himself to be ordered off, could acquire the right to maintain the action of forcible entry and detainer, however momentary his intrusion might have been.22 In this case, evidence clearly shows that petitioners are the true owners and, therefore, the lawful possessors of the land. Verily, respondents' allegation of actual possession and that petitioners deprived them of such possession by means of force, intimidation and threat are clearly untenable. WHEREFORE, the petition is GRANTED and the assailed Decision of the Court of Appeals in CA-G.R. SP No. 36997 dated March 12, 1996 is REVERSED and SET ASIDE. The Decision of the RTC, Branch 63, Calauag, Quezon in Civil Case No. C-1031 affirming the MTC Decision dismissing respondents' complaint is REINSTATED, with modification in the sense that the award of moral and exemplary damages in favor of petitioners is deleted. SO ORDERED. Puno, Panganiban, Corona, and Carpio Morales, JJ ., concur. G.R. No. 150731 September 14, 2007

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 petitioners 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:

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Rules 6-10.REMLAWREV 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 petitioners property in Iloilo City to respondent, with the intention of totally extinguishing petitioners 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 attorneys fee, amounting to PhP 4.5 million plus the costs of suit as a consequence of respondents 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 plaintiffs 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 petitioners 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 defendants 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 petitioners 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 attorneys 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

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Rules 6-10.REMLAWREV The Issues WHETHER OR NOT THE COURT OF APPEALS ERRED IN EXCLUDING THE PETITIONERS 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 respondents 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 petitioners Answer. The Courts 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 plaintiffs 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 defendants 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

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Rules 6-10.REMLAWREV 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 partys 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 petitioners 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 petitioners 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, comaker, or in any other capacity, including interest, charges, penalties, fees, liquidated damage, collection expenses and attorneys 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 petitioners 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 petitioners 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 abovedescribed 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 unequivocalthe property serves in full satisfaction of petitioners 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. Quisumbing,Chairperson Carpio, Carpio-Morales, Velasco, Jr., JJ., concur. G.R. No. 172156 MALAYAN INSURANCE CO., INC.,Petitioner, Vs. REGIS BROKERAGE CORP.,Respondent. Promulgated: November 23, 2007 x ------------------------------------------------------------------------------------x DECISION Tinga, J.: We consider whether an insurer, in an action for recoupment instituted in its capacity as the subrogee of the insured, may be conferred favorable relief even if it

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Rules 6-10.REMLAWREV failed to introduce in evidence the insurance contract or policy, or even allege the existence nay recite the substance and attach a copy of such document in the complaint. The answer is as self-evident as meets the eye. cralawThis Petition for Review under Rule 45 was filed by petitioner Malayan Insurance Co., Inc. (Malayan),[2] assailing the Decision[3] dated 23 December 2005 of the Court of Appeals in C.A. G.R. SP No. 90505, as well as its Resolution[4] dated 5 April 2006 denying petitioners motion for reconsideration. cralawThe facts require little elaboration. Around 1 February 1995, Fasco Motors Group loaded 120 pieces of motors on board China Airlines Flight 621 bound for Manila from the United States. The cargo was to be delivered to consignee ABB Koppel, Inc. (ABB Koppel).[5] When the cargo arrived at the Ninoy Aquino International Airport, it was discharged without exception and forwarded to Peoples Aircargo & Warehousing Corp.s (Paircargos) warehouse for temporary storage pending release by the Bureau of Customs. Paircargo remained in possession of the cargo until 7 March 1995, at which point respondent Regis Brokerage Corp. (Regis) withdrew the cargo and delivered the same to ABB Koppel at its warehouse.[6] When the shipment arrived at ABB Koppels warehouse, it was discovered that only 65 of the 120 pieces of motors were actually delivered and that the remaining 55 motors, valued at US$2,374.35, could not be accounted for.[7] The shipment was purportedly insured with Malayan by ABB Koppel. Demand was first made upon Regis and Paircargo for payment of the value of the missing motors, but both refused to pay.[8] Thus, Malayan paid ABB Koppel the amount of P156,549.55 apparently pursuant to its insurance agreement, and Malayan was on that basissubrogated to the rights of ABB Koppel against Regis and Paircargo.[9] On 24 June 1996, Malayan filed a complaint for damages against Regis and Paircargo with the Metropolitan Trial Court (MeTC) of Manila, Branch 9. In the course of trial, Malayan presented Marine Risk Note No. RN-0001-19832 (Marine Risk Note) dated 21 March 1995 as proof that the cargo was insured by Malayan.[10] due execution and authenticity of the subrogation receipt presented before the trial court by Malayan were not duly proven since the signatories thereto were not presented by Malayan before the trial court to identify their signatures thereon, and neither was evidence presented to establish the genuineness of such signatures.[15] Malayan filed a motion for reconsideration with the Court of Appeals where it contended that the Marine Risk Note is an open policy per Marine Open Cargo Policy No. OPEN POLICY-0001-00410 issued before February 1, 1995.[16] The motion was denied by the appellate court,[17] which pointed out that Malayan did not present the aforecited marine open cargo policy as would indicate the date of its issuance.[18] cralawHence, the present petition instituted by Malayan. According to Malayan, the lost cargo was insured not only by the Marine Risk Note but by the anteceding Marine Insurance Policy No. M/OP/95/0001-410 (Marine Insurance Policy) which it issued in favor of ABB Koppel on 20 January 1995, or many days before the motors were transported to Manila. A copy of the Marine Insurance Policy was attached to the present petition, but it is clear and no pretense was made that said policy had not been presented at the trial. The key arguments raised before us by Malayan flow from the existence of the Marine Insurance Policy. Pains are taken to establish that there existed as between Malayan and ABB Koppel an open policy under Section 60 of the Insurance Code, wherein the value of the thing insured is not agreed upon but left to be ascertained in case of loss, and that the Marine Risk Note was nothing but a determination of the value of the thing insured pursuant to the open policy as established by the Marine Insurance Policy. Unfortunately for Malayan, the Court could not attribute any evidentiary weight to the Marine Insurance Policy. It is elementary that this Court is not a trier of facts. We generally refer to the trial court and the Court of Appeals on matters relating to the admission and evaluation of the evidence. In this case, while the trial courts and the Court of Appeals arrived at differing conclusions, we essentially agree with the Court of Appeals analysis of Malayans cause of action, and its ordained result. It appeared that at the very instance the Marine Risk Note was offered in evidence, Regis already posed its objection to the admission of said document on the ground that such was immaterial, impertinent and irrelevant to this case because the same was issued on March 21, 1995 which is after the occurrence of the loss on February 1, 1995.[19] Because the trial courts failed to duly consider whether the Marine Risk Note sufficiently established a valid insurance covering the subject motors, the Court of Appeals acted correctly in the exercise of its appellate jurisdiction in setting aside the appealed decisions. Tellingly, Malayans argument before this Court is not that the Court of Appeals erred in its evaluation of the Marine Risk Note following that documents terms alone, but that the appellate court could not consider the import of the purported Marine Insurance Policy. Indeed, since no insurance policy was presented at the trial by Malayan, or even before the Court of Appeals,[20] there certainly is no basis for this Court to admit or consider the same, notwithstanding Malayans attempt to submit such document to us along with its present petition. As we recently held:

The MeTC rendered a Decision[11] dated 25 May 2001 adjudging Regis alone liable to Malayan in the amount of P156,549.00 as actual damages, P15,000.00 as attorneys fees, and costs of suits. With the exception of the award of attorneys fees, the MeTC decision was affirmed on appeal to the Regional Trial Court (RTC) of Manila, through a Decision dated 28 February 2005.[12] cralawRegis filed a petition for review with the Court of Appeals seeking the reversal of the MeTC and RTC decisions. On 23 December 2005, the Court of Appeals promulgated its decision vacating the RTC judgment and ordering the dismissal of Malayans complaint. The central finding that formed the Court of Appeals decision was that the Marine Risk Note presented as proof that the cargo was insured was invalid.[13] It was observed that the Marine Risk Note was procured from Malayan only on 21 March 1995, when in fact the insured, ABB Koppel, had learned of the partial loss of the motors as early as 7 March 1995.[14] The appellate court noted that under Section 3 of the Insurance Code, the past event which may be insured against must be unknown to the parties and so for that reason the insurance contract in this case violated Section 3. The Court of Appeals further ruled that the

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Rules 6-10.REMLAWREV Similarly, petitioner in this case cannot "enervate" the COMELEC's findings by introducing new evidence before this Court, which in any case is not a trier of facts, and then ask it to substitute its own judgment and discretion for that of the COMELEC. The rule in appellate procedure is that a factual question may not be raised for the first time on appeal, and documents forming no part of the proofs before the appellate court will not be considered in disposing of the issues of an action. This is true whether the decision elevated for review originated from a regular court or an administrative agency or quasi-judicial body, and whether it was rendered in a civil case, a special proceeding, or a criminal case. Piecemeal presentation of evidence is simply not in accord with orderly justice.[21]chanroblesvirtuallawlibrary cralawSince the Marine Insurance Policy was never presented in evidence before the trial court or the Court of Appeals even, there is no legal basis to consider such document in the resolution of this case, reflective as that document may have been of the pre-existence of an insurance contract between Malayan and ABB Koppel even prior to the loss of the motors. In fact, it appears quite plain that Malayans theory of the case it pursued before the trial court was that the perfected insurance contract which it relied upon as basis for its right to subrogation was not the Marine Insurance Policy but the Marine Risk Note which, unlike the former, was actually presented at the trial and offered in evidence. The Claims Processor of Malayan who testified in court in behalf of his employer actually acknowledged that the proof that ABB Koppel insured the [shipment] to [Malayan] was the Marine Risk Note, and not the Marine Insurance Policy.[22] Even the very complaint filed by Malayan before the MeTC stated that [t]he subject shipment was insured by [Malayan] under Risk Note No. 0001-19832,[23] and not by the Marine Insurance Policy, which was not adverted to at all in the complaint.[24] cralawThus, we can only consider the Marine Risk Note in determining whether there existed a contract of insurance between ABB Koppel and Malayan at the time of the loss of the motors. However, the very terms of the Marine Risk Note itself are quite damning. It is dated 21 March 1995, or after the occurrence of the loss, and specifically states that Malayan ha[d] this day noted the above-mentioned risk in your favor and hereby guarantee[s] that this document has all the force and effect of the terms and conditions in the Corporations printed form of the standard Marine Cargo Policy and the Companys Marine Open Policy. It specifies that at risk are the 120 pieces of motors which unfortunately had already been compromised as of the date of the Marine Risk Note itself.[25] cralawCertainly it would be obtuse for us to even entertain the idea that the insurance contract between Malayan and ABB Koppel was actually constituted by the Marine Risk Note alone. We find guidance on this point in Aboitiz Shipping Corporation v. Philippine American General Insurance, Co.,[26] where a trial court had relied on the contents of a marine risk note, not the insurance policy itself, in dismissing a complaint. For this act, the Court faulted the trial court in [obviously mistaking] said Marine Risk Note as an insurance policy when it is not.[27] The Court proceeded to characterize the marine risk note therein as an acknowledgment or declaration of the private respondent confirming the specific shipment covered by its Marine Open Policy, the evaluation of the cargo, and the chargeable premium, [28] a description that is reflective as well of the present Marine Risk Note, if not of marine risk notes in this country in general.

Malayan correctly points out that the Marine Risk Note itself adverts to Marine Cargo Policy Number Open Policy-0001-00410 as well as to the standard Marine Cargo Policy and the Companys Marine Open Policy. What the Marine Risk Note bears, as a matter of evidence, is that it is not apparently the contract of insurance by itself, but merely a complementary or supplementary document to the contract of insurance that may have existed as between Malayan and ABB Koppel. And while this observation may deviate from the tenor of the assailed Court of Appeals Decision, it does not presage any ruling in favor of petitioner. Fundamentally, since Malayan failed to introduce in evidence the Marine Insurance Policy itself as the main insurance contract, or even advert to said document in the complaint, ultimately then it failed to establish its cause of action for restitution as a subrogee of ABB Koppel. cralawMalayans right of recovery as a subrogee of ABB Koppel cannot be predicated alone on the liability of the respondent to ABB Koppel, even though such liability will necessarily have to be established at the trial for Malayan to recover. Because Malayans right to recovery derives from contractual subrogation as an incident to an insurance relationship, and not from any proximate injury to it inflicted by the respondents, it is critical that Malayan establish the legal basis of such right to subrogation by presenting the contract constitutive of the insurance relationship between it and ABB Koppel. Without such legal basis, its cause of action cannot survive. Our procedural rules make plain how easily Malayan could have adduced the Marine Insurance Policy. Ideally, this should have been accomplished from the moment it filed the complaint. Since the Marine Insurance Policy was constitutive of the insurer-insured relationshipfrom which Malayan draws its right to subrogation, such document should have been attached to the complaint itself, as provided for in Section 7, Rule 9 of the 1997 Rules of Civil Procedure: cralawSECTION 7.cralawAction or defense based on document.Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading. cralawThus, in an action to enforce or rescind a written contract of lease, the lease contract is the basis of the action and therefore a copy of the same must either be set forth in the complaint or its substance recited therein, attaching either the original or a copy to the complaint.[29]The rule has been held to be imperative, mandatory and not merely directory, though must be given a reasonable construction and not be extended in its scope so as to work injustice.[30] It was incumbent on Malayan, whose right of subrogation derived from the Marine Insurance Policy, to set forth the substance of such contract in its complaint and to attach an original or a copy of such contract in the complaint as an exhibit. Its failure to do so harbingers a more terminal defect than merely excluding the Marine Insurance Policy as relevant evidence, as the failure actually casts an irremissible cloud on the substance of Malayans very cause of action. Since Malayan alluded to an actionable document, the contract of insurance between it and ABB Koppel, as

52

Rules 6-10.REMLAWREV integral to its cause of action against Regis and Paircargo, the contract of insurance should have been attached to the complaint. cralawIt may be that there is no specific provision in the Rules of Court which prohibits the admission in evidence of an actionable document in the event a party fails to comply with the requirement of the rule on actionable documents under Section 7, Rule 9.[31] Yet such qualification does not provide safe harbor for Malayan as it did not even present the Marine Insurance Policy at the trial, relying instead on the Marine Risk Note only and by its lonesome to constitute the insurerinsured relationship between it and ABB Koppel, or more precisely as stated in its Formal Offer of Evidence, to prove that the shipment subject of this case was covered by an insurance policy with the plaintiffs.[32]Before the MeTC, Regis objected to the admission of the Marine Risk Note on the ground of immateriality and irrelevance because it was issued on March 21, 1995 which is after the occurrence of the loss on February 1, 1995.[33] The Court of Appeals upheld this objection of Regis as basis for the dismissal of the complaint. In our view, Malayan may have not been of the precise belief that the Marine Risk Note is the insurance contract itself as even the purpose stated in its Formal Offer may admit to an interpretation that alludes to an insurance policy with the plaintiffs that may stand independent of the Marine Risk Note. Yet if that were so, it remains incomprehensible and inexcusable why Malayan neglected to attach it to its complaint as required by Section 7, Rule 9, or even offer it in the Marine Insurance Policy which constitutes the insurance contract as evidence before the trial court. It cannot be denied from the only established facts that Malayan and ABB Koppel comported as if there was an insurance relationship between them and documents exist that evince the presence of such legal relationship. But under these premises, the very insurance contract emerges as the white elephant in the room an obdurate presence which everybody reacts to, yet legally invisible as a matter of evidence since no attempt had been made to prove its corporeal existence in the court of law. It may seem commonsensical to conclude anyway that there was a contract of insurance between Malayan and ABB Koppel since they obviously behaved in a manner that indicates such relationship, yet the same conclusion could be had even if, for example, those parties staged an elaborate charade to impress on the world the existence of an insurance contract when there actually was none. While there is absolutely no indication of any bad faith of such import by Malayan or ABB Koppel, the fact that the commonsensical conclusion can be drawn even if there was bad faith that convinces us to reject such line of thinking. The Court further recognizes the danger as precedent should we sustain Malayans position, and not only because such a ruling would formally violate the rule on actionable documents. Malayan would have us effectuate an insurance contract without having to consider its particular terms and conditions, and on a blind leap of faith that such contract is indeed valid and subsisting. The conclusion further works to the utter prejudice of defendants such as Regis or Paircargo since they would be deprived the opportunity to examine the document that gives rise to the plaintiffs right to recover against them, or to raise arguments or objections against the validity or admissibility of such document. If a legal claim is irrefragably sourced from an actionable document, the defendants cannot be deprived of the right to examine or utilize such document in order to intelligently raise a defense. The inability or refusal of the plaintiff to submit such document into evidence constitutes an effective denial of that right of the defendant which is ultimately rooted in due process of law, to say nothing on how such failure fatally diminishes the plaintiffs substantiation of its own cause of action. Indeed, in the absence of any evidentiary consideration of the actual Marine Insurance Policy, the substance of Malayans right to recovery as the subrogee of ABB Koppel is not duly confirmed. There can be no consideration of the particular terms and conditions in the insurance contract that specifically give rise to Malayans right to be subrogated to ABB Koppel, or to such terms that may have absolved Malayan from the duty to pay the insurance proceeds to that consignee. The particular date as to when such insurance contract was constituted cannot be established with certainty without the contract itself, and that point is crucial since there can be no insurance on a risk that had already occurred by the time the contract was executed. Since the documents in evidence and testimonies allude to marine insurance or marine risk note, it also is a legitimate question whether the particular marine insurance relationship between Malayan and ABB Koppel also covers cargo delivered not by ships at sea but by airplane flights, as had occurred in this case. Only the actual policy itself could definitively settle such a question. We can even note legitimate questions concerning the integrity or viability of the Marine Insurance Policy as belatedly presented before this court. For one, Regis observes that the Marine Cargo Policy Number as denominated in the Risk Note reads: Open Policy-0001-00410, while the copy of the Marine Insurance Policy submitted before us is numbered M/OP/95001-410. The variance may ultimately be explainable, yet the non-presentation of the Marine Insurance Policy before the trial court precludes the due evaluation of the reason for the difference in numbering. All told, we hold that Malayan was not able to establish its cause of action as stated in its complaint, based as it was on its right to be subrogated to ABB Koppel under the insurance contract which it failed to present as an actionable document, or as evidence before the trial court. The result reached by the Court of Appeals the dismissal of the instant complaint is thus correct. As such, there is no need to consider the other issues raised in the petition. cralawWHEREFORE, the petition is DENIED. Costs against petitioner. [G.R. No. 170943, September 23, 2008] PEDRO T. SANTOS, JR., CORPORATION, RESPONDENT. DECISION CORONA, J.: This is a petition for review[1] of the September 22, 2005 decision[2] and December 29, 2005 resolution[3] of the Court of Appeals in CA-G.R. SP No. 82482. On December 23, 2002, respondent PNOC Exploration Corporation filed a complaint for a sum of money against petitioner Pedro T. Santos, Jr. in the Regional Trial Court of Pasig City, Branch 167. The complaint, docketed as Civil Case No. 69262, sought to collect the amount of P698,502.10 representing petitioner's unpaid balance of the PETITIONER, VS. PNOC EXPLORATION

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Rules 6-10.REMLAWREV car loan[4] advanced to him by respondent when he was still a member of its board of directors. Personal service of summons to petitioner failed because he could not be located in his last known address despite earnest efforts to do so. Subsequently, on respondent's motion, the trial court allowed service of summons by publication. Respondent caused the publication of the summons in Remate, a newspaper of general circulation in the Philippines, on May 20, 2003. Thereafter, respondent submitted the affidavit of publication of the advertising manager of Remate[5] and an affidavit of service of respondent's employee[6] to the effect that he sent a copy of the summons by registered mail to petitioner's last known address. When petitioner failed to file his answer within the prescribed period, respondent moved that the case be set for the reception of its evidence ex parte. The trial court granted the motion in an order dated September 11, 2003. Respondent proceeded with the ex parte presentation and formal offer of its evidence. Thereafter, the case was deemed submitted for decision on October 15, 2003. On October 28, 2003, petitioner filed an "Omnibus Motion for Reconsideration and to Admit Attached Answer." He sought reconsideration of the September 11, 2003 order, alleging that the affidavit of service submitted by respondent failed to comply with Section 19, Rule 14 of the Rules of Court as it was not executed by the clerk of court. He also claimed that he was denied due process as he was not notified of the September 11, 2003 order. He prayed that respondent's evidence ex parte be stricken off the records and that his answer be admitted. Respondent naturally opposed the motion. It insisted that it complied with the rules on service by publication. Moreover, pursuant to the September 11, 2003 order, petitioner was already deemed in default for failure to file an answer within the prescribed period. In an order dated February 6, 2004, the trial court denied petitioner's motion for reconsideration of the September 11, 2003 order. It held that the rules did not require the affidavit of complementary service by registered mail to be executed by the clerk of court. It also ruled that due process was observed as a copy of the September 11, 2003 order was actually mailed to petitioner at his last known address. It also denied the motion to admit petitioner's answer because the same was filed way beyond the reglementary period. Aggrieved, petitioner assailed the September 11, 2003 and February 6, 2004 orders of the trial court in the Court of Appeals via a petition for certiorari. He contended that the orders were issued with grave abuse of discretion. He imputed the following errors to the trial court: taking cognizance of the case despite lack of jurisdiction due to improper service of summons; failing to furnish him with copies of its orders and processes, particularly the September 11, 2003 order, and upholding technicality over equity and justice. During the pendency of the petition in the Court of Appeals, the trial court rendered its decision in Civil Case No. 69262. It ordered petitioner to pay P698,502.10 plus legal interest and costs of suit.[7] Meanwhile, on September 22, 2005, the Court of Appeals rendered its decision[8] sustaining the September 11, 2003 and February 6, 2004 orders of the trial court and dismissing the petition. It denied reconsideration.[9] Thus, this petition. Petitioner essentially reiterates the grounds he raised in the Court of Appeals, namely, lack of jurisdiction over his person due to improper service of summons, failure of the trial court to furnish him with copies of its orders and processes including the September 11, 2003 order and preference for technicality rather than justice and equity. In particular, he claims that the rule on service by publication under Section 14, Rule 14 of the Rules of Court applies only to actions in rem, not actions in personam like a complaint for a sum of money. He also contends that the affidavit of service of a copy of the summons should have been prepared by the clerk of court, not respondent's messenger. The petition lacks merit. ProprietyOf Service By Publication Section 14, Rule 14 (on Summons) of the Rules of Court provides: SEC. 14. Service upon defendant whose identity or whereabouts are unknown. - In any action where the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of court, be effected upon him by publication in a newspaper of general circulation and in such places and for such times as the court may order. (emphasis supplied) Since petitioner could not be personally served with summons despite diligent efforts to locate his whereabouts, respondent sought and was granted leave of court to effect service of summons upon him by publication in a newspaper of general circulation. Thus, petitioner was properly served with summons by publication. Petitioner invokes the distinction between an action in rem and an action in personam and claims that substituted service may be availed of only in an action in rem. Petitioner is wrong. The in rem/in personam distinction was significant under the old rule because it was silent as to the kind of action to which the rule was applicable.[10] Because of this silence, the Court limited the application of the old rule to in rem actions only.[11] This has been changed. The present rule expressly states that it applies "[i]n any action where the defendant is designated as an unknown owner, or the like, or whenever his whereabouts are unknown and cannot be ascertained by diligent inquiry." Thus, it now applies to any action, whether in personam, in rem or quasi in rem.[12] Regarding the matter of the affidavit of service, the relevant portion of Section 19, [13] Rule 14 of the Rules of Court simply speaks of the following:

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Rules 6-10.REMLAWREV

... an affidavit showing the deposit of a copy of the summons and order for publication in the post office, postage prepaid, directed to the defendant by registered mail to his last known address. Service of summons by publication is proved by the affidavit of the printer, his foreman or principal clerk, or of the editor, business or advertising manager of the newspaper which published the summons. The service of summons by publication is complemented by service of summons by registered mail to the defendant's last known address. This complementary service is evidenced by an affidavit "showing the deposit of a copy of the summons and order for publication in the post office, postage prepaid, directed to the defendant by registered mail to his last known address." The rules, however, do not require that the affidavit of complementary service be executed by the clerk of court. While the trial court ordinarily does the mailing of copies of its orders and processes, the duty to make the complementary service by registered mail is imposed on the party who resorts to service by publication. Moreover, even assuming that the service of summons was defective, the trial court acquired jurisdiction over the person of petitioner by his own voluntary appearance in the action against him. In this connection, Section 20, Rule 14 of the Rules of Court 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 of the defendant shall not be deemed a voluntary appearance. (emphasis supplied) Petitioner voluntarily appeared in the action when he filed the "Omnibus Motion for Reconsideration and to Admit Attached Answer."[14] This was equivalent to service of summons and vested the trial court with jurisdiction over the person of petitioner. EntitlementTo Notice Of Proceedings The trial court allowed respondent to present its evidence ex parte on account of petitioner's failure to file his answer within the prescribed period. Petitioner assails this action on the part of the trial court as well as the said court's failure to furnish him with copies of orders and processes issued in the course of the proceedings. The effects of a defendant's failure to file an answer within the time allowed therefor are governed by Sections 3 and 4, Rule 9 (on Effect of Failure to Plead) of the Rules of Court: SEC. 3. Default; declaration of. - If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court.

SEC. 4. Effect of order of default. - A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial. (emphasis supplied) If the defendant fails to file his answer on time, he may be declared in default upon motion of the plaintiff with notice to the said defendant. In case he is declared in default, the court shall proceed to render judgment granting the plaintiff such relief as his pleading may warrant, unless the court in its discretion requires the plaintiff to submit evidence. The defaulting defendant may not take part in the trial but shall be entitled to notice of subsequent proceedings. In this case, even petitioner himself does not dispute that he failed to file his answer on time. That was in fact why he had to file an "Omnibus Motion for Reconsideration and to Admit Attached Answer." But respondent moved only for the ex parte presentation of evidence, not for the declaration of petitioner in default. In its February 6, 2004 order, the trial court stated: The disputed Order of September 11, 2003 allowing the presentation of evidence ex-parte precisely ordered that "despite and notwithstanding service of summons by publication, no answer has been filed with the Court within the required period and/or forthcoming.["] Effectively[,] that was a finding that the defendant [that is, herein petitioner] was in default for failure to file an answer or any responsive pleading within the period fixed in the publication as precisely the defendant [could not] be found and for which reason, service of summons by publication was ordered. It is simply illogical to notify the defendant of the Order of September 11, 2003 simply on account of the reality that he was no longer residing and/or found on his last known address and his whereabouts unknown - thus the publication of the summons. In other words, it was reasonable to expect that the defendant will not receive any notice or order in his last known address. Hence, [it was] impractical to send any notice or order to him. Nonetheless, the record[s] will bear out that a copy of the order of September 11, 2003 was mailed to the defendant at his last known address but it was not claimed. (emphasis supplied) As is readily apparent, the September 11, 2003 order did not limit itself to permitting respondent to present its evidence ex parte but in effect issued an order of default. But the trial court could not validly do that as an order of default can be made only upon motion of the claiming party.[15] Since no motion to declare petitioner in default was filed, no default order should have been issued. To pursue the matter to its logical conclusion, if a party declared in default is entitled to notice of subsequent proceedings, all the more should a party who has not been declared in default be entitled to such notice. But what happens if the residence or whereabouts of the defending party is not known or he cannot be located? In such a case, there is obviously no way notice can be sent to him and the notice requirement cannot apply to him. The law does not require that the impossible be done.[16] Nemo tenetur ad impossibile. The law obliges no one to perform an impossibility.[17] Laws and rules must be interpreted in a way that they are in accordance with logic, common sense, reason and practicality.[18] Hence, even if petitioner was not validly declared in default, he could not reasonably demand that copies of orders and processes be furnished him. Be that as it may, a

55

Rules 6-10.REMLAWREV copy of the September 11, 2003 order was nonetheless still mailed to petitioner at his last known address but it was unclaimed. CorrectnessOf Non-Admission Of Answer Petitioner failed to file his answer within the required period. Indeed, he would not have moved for the admission of his answer had he filed it on time. Considering that the answer was belatedly filed, the trial court did not abuse its discretion in denying its admission. Petitioner's plea for equity must fail in the face of the clear and express language of the rules of procedure and of the September 11, 2003 order regarding the period for filing the answer. Equity is available only in the absence of law, not as its replacement.[19] Equity may be applied only in the absence of rules of procedure, never in contravention thereof. WHEREFORE, the petition is hereby DENIED. Costs against petitioner. SO ORDERED Puno, C.J., (Chairperson), Carpio, Azcuna and Leonardo-De Castro, JJ., concur. TERESITA MONZON, cralaw Petitioner, - versus SPS. JAMES & MARIA ROSA NIEVES RELOVA and SPS. BIENVENIDO & EUFRACIA PEREZ, Respondents. versus ADDIO PROPERTIES, INC., Intervenor. G.R. No. 171827 Promulgated: September 17, 2008 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals dated 27 September 2005 and its Resolution dated 7 March 2006 in CA-G.R. CV No. 83507 affirming the Decision of the Regional Trial Court (RTC) of Tagaytay City, Branch 18. The factual and procedural antecedents of this case are as follows: On 18 October 2000, the spouses James and Maria Rosa Nieves Relova and the spouses Bienvenido and Eufracia Perez, respondents before this Court, filed against Atty. Ana Liza Luna, Clerk of Court of Branch 18 of the RTC of Tagaytay City, and herein petitioner Teresita Monzon an initiatory pleading captioned as a Petition for Injunction. The case, which was filed before the same Branch 18 of the RTC of Tagaytay City, was docketed as Civil Case No. TG-2069. In their Petition for Injunction, respondents alleged that on 28 December 1998, Monzon executed a promissory note in favor of the spouses Perez for the amount of P600,000.00, with interest of five percent per month, payable on or before 28 December 1999. This was secured by a 300-square meter lot in Barangay Kaybagal, Tagaytay City. Denominated as Lot No. 2A, this lot is a portion of Psu-232001, covered by Tax Declaration No. 98-008-1793. On 31 December 1998, Monzon executed a Deed of Absolute Sale over the said parcel of land in favor of the spouses Perez. Respondents also claim in their Petition for Injunction that on 29 March 1999, Monzon executed another promissory note, this time in favor of the spouses Relova for the amount of P200,000.00 with interest of five percent per month payable on or before 31 December 1999. This loan was secured by a 200 square meter lot, denominated as Lot No. 2B, another portion of the aforementioned Psu-232001 covered by Tax Declaration No. 98-008-1793. On 27 December 1999, Monzon executed a Deed of Conditional Sale over said parcel of land in favor of the spouses Relova. On 23 October 1999, the Coastal Lending Corporation extrajudicially foreclosed the entire 9,967-square meter property covered by Psu-232001, including the portions mortgaged and subsequently sold to respondents. According to the Petition for Injunction, Monzon was indebted to the Coastal Lending Corporation in the total amount of P3,398,832.35. The winning bidder in the extrajudicial foreclosure, Addio Properties Inc., paid the amount of P5,001,127.00, thus leaving a P1,602,393.65 residue. According to respondents, this residue amount, which is in the custody of Atty. Luna as Branch Clerk of Court, should be turned over to them pursuant to Section 4, Rule 68 of the Revised Rules of Civil Procedure. Thus, respondents pray in their Petition for Injunction for a judgment (1) finding Monzon liable to the spouses Perez in the amount of P1,215,000.00 and to the spouses Relova in the amount of P385,000.00; (2) ordering Atty. Luna to deliver said amounts to respondents; and (3) restraining Atty. Luna from delivering any amount to Monzon pending such delivery in number (2). Monzon, in her Answer, claimed that the Petition for Injunction should be dismissed for failure to state a cause of action. Monzon likewise claimed that respondents could no longer ask for the enforcement of the two promissory notes because she had already performed her obligation to them by dacion en pago as evidenced by the Deed of Conditional Sale and the Deed of Absolute Sale. She claimed that petitioners could still claim the portions sold to them if they would only file the proper civil cases. As regards the fund in the custody of Atty. Luna, respondents cannot acquire the same without a writ of preliminary

56

Rules 6-10.REMLAWREV attachment or a writ of garnishment in accordance with the provisions of Rule 57 and Section 9(c), Rule 39 of the Revised Rules of Civil Procedure. On 5 December 2001, the RTC, citing the absence of petitioner and her counsel on said hearing date despite due notice, granted an oral Motion by the respondents by issuing an Order allowing the ex parte presentation of evidence by respondents.[2] On 1 April 2002, the RTC rendered a Decision in favor of respondents. The pertinent portions of the Decision are as follows: That [petitioner] Teresita Monzon owes [herein respondents] certain sums of money is indisputable. Even [Monzon] have admitted to this in her Answer. [Respondents] therefore are given every right to get back and collect whatever amount they gave [Monzon] together with the stipulated rate of interest. Likewise, it has been established that [petitioner] Teresita Monzon has the amount of P1,602,393.65 in the possession of the Clerk of Court, Atty. Ana Liza M. Luna. This amount, as is heretofore stated, represented the balance of the foreclosure sale of [Monzons] properties. By way of this petition, [respondents] would want to get said amount so that the same can be applied as full payment of [petitioners] obligation. That the amount should be divided between the [respondents] in the amount they have agreed between themselves; [respondent] spouses Relova to receive the amount of P400.00.00, while the spouses Perez shall get the rest. WHEREFORE, judgment is hereby rendered ordering the x x x Clerk of Court, Atty. Ana Liza M. Luna, to deliver unto [herein respondents] the amount of P1,602,393.65 plus whatever interest she may received if and when the said amount has been deposited in any banking institution.[3] The Decision also mentioned that the Order allowing the ex parte presentation of evidence by respondents was due to the continuous and incessant absences of petitioner and counsel.[4] On 25 April 2002, Monzon filed a Notice of Appeal, which was approved by the trial court. Monzon claims that the RTC gravely erred in rendering its Decision immediately after respondents presented their evidence ex parte without giving her a chance to present her evidence, thereby violating her right to due process of law. On 14 June 2002, Addio Properties, Inc. filed before the trial court a Motion for Intervention, which was granted by the same court on 12 July 2002. On 27 September 2005, the Court of Appeals rendered the assailed Decision dismissing the appeal. According to the Court of Appeals, Monzon showed tepid interest in having the case resolved with dispatch. She, thus, cannot now complain that she was denied due process when she was given ample opportunity to defend and assert her interests in the case. The Court of Appeals reminded Monzon that the essence of due process is reasonable opportunity to be heard and submit evidence in support of ones defense. What the law proscribes is lack of opportunity to be heard. Monzons Motion for Reconsideration was denied in a Resolution dated 7 March 2006. On 27 March 2006, Monzon filed the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court. Monzon claims anew that it was a violation of her right to due process of law for the RTC to render its Decision immediately after respondents presented their evidence ex parte without giving her a chance to present her evidence. Monzon stresses that she was never declared in default by the trial court. The trial court should have, thus, set the case for hearing for the reception of the evidence of the defense. She claims that she never waived her right to present evidence. Monzon argues that had she been given the opportunity to present her evidence, she would have proven that (1) respondents Exhibit A (mortgage of land to the spouses Relova) had been novated by respondents Exhibit B (sale of the mortgage land to the spouses Relova); (2) respondents Exhibit C (mortgage of land to the spouses Perez) had been novated by respondents Exhibit B (sale of the mortgage land to the spouses Perez); and (3) having executed Exhibits B and D, Monzon no longer had any obligation towards respondents. The Order by the trial court which allowed respondents to present their evidence ex parte states: In view of the absence of [Monzon] as well as her counsel despite due notice, as prayed for by counsel for by [respondents herein], let the reception of [respondents] evidence in this case be held ex-parte before a commissioner who is the clerk of court of this Court, with orders upon her to submit her report immediately upon completion thereof.[5] It can be seen that despite the fact that Monzon was not declared in default by the RTC, the RTC nevertheless applied the effects of a default order upon petitioner under Section 3, Rule 9 of the Rules of Court: SEC. 3. Default; declaration of.If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court. (a) Effect of order of default.A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial. In his book on remedial law, former Justice Florenz D. Regalado writes that failure to appear in hearings is not a ground for the declaration of a defendant in default: Failure to file a responsive pleading within the reglementary period, and not failure to appear at the hearing, is the sole ground for an order of default (Rosario, et al. vs. Alonzo, et al., L-17320, June 29, 1963), except the failure to appear at a pre-trial conference wherein the effects of a default on the part of the defendant are followed, that is, the plaintiff shall be allowed to present evidence ex parte and a judgment based thereon may be rendered against the defendant (Section 5, Rule

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Rules 6-10.REMLAWREV 18).[6] Also, a default judgment may be rendered, even if the defendant had filed his answer, under the circumstance in Sec. 3(c), Rule 29.[7] Hence, according to Justice Regalado, the effects of default are followed only in three instances: (1) when there is an actual default for failure to file a responsive pleading; (2) failure to appear in the pre-trial conference; and (3) refusal to comply with modes of discovery under the circumstance in Sec. 3(c), Rule 29. In Philippine National Bank v. De Leon,[8] we held: We have in the past admonished trial judges against issuing precipitate orders of default as these have the effect of denying a litigant the chance to be heard, and increase the burden of needless litigations in the appellate courts where time is needed for more important or complicated cases. While there are instances when a party may be properly defaulted, these should be the exception rather than the rule, and should be allowed only in clear cases of obstinate refusal or inordinate neglect to comply with the orders of the court (Leyte vs. Cusi, Jr., 152 SCRA 496; Tropical Homes, Inc. vs. Hon. Villaluz, et al., G.R. No. L-40628, February 24, 1989). It is even worse when the court issues an order not denominated as an order of default, but provides for the application of effects of default. Such amounts to the circumvention of the rigid requirements of a default order, to wit: (1) the court must have validly acquired jurisdiction over the person of the defendant either by service of summons or voluntary appearance; (2) the defendant failed to file his answer within the time allowed therefor; and (3) there must be a motion to declare the defendant in default with notice to the latter.[9] In the case at bar, petitioner had not failed to file her answer. Neither was notice sent to petitioner that she would be defaulted, or that the effects of default shall be imposed upon her. Mere nonappearance of defendants at an ordinary hearing and to adduce evidence does not constitute default, when they have already filed their answer to the complaint within the reglementary period. It is error to default a defendant after the answer had already been filed. It should be borne in mind that the policy of the law is to have every litigants case tried on the merits as much as possible; it is for this reason that judgments by default are frowned upon.[10] Does this mean that defendants can get away with failing to attend hearings despite due notice? No, it will not. We agree with petitioner that such failure to attend, when committed during hearing dates for the presentation of the complainants evidence, would amount to the waiver of such defendants right to object to the evidence presented during such hearing, and to cross-examine the witnesses presented therein. However, it would not amount to a waiver of the defendants right to present evidence during the trial dates scheduled for the reception of evidence for the defense. It would be an entirely different issue if the failure to attend of the defendant was on a hearing date set for the presentation of the evidence of the defense, but such did not occur in the case at bar. In view of the foregoing, we are, therefore, inclined to remand the case to the trial court for reception of evidence for the defense. Before we do so, however, we need to point out that the trial court had committed another error which we should address to put the remand in its proper perspective. We refer to Monzons argument as early as the Answer stage that respondents Petition for Injunction had failed to state a cause of action.

Section 4, Rule 68 of the Rules of Court, which is the basis of respondents alleged cause of action entitling them to the residue of the amount paid in the foreclosure sale, provides as follows: SEC. 4. Disposition of proceeds of sale.The amount realized from the foreclosure sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it. However, Rule 68 governs the judicial foreclosure of mortgages. Extra-judicial foreclosure of mortgages, which was what transpired in the case at bar, is governed by Act No. 3135,[11] as amended by Act No. 4118,[12] Section 6 of Republic Act No. 7353, Section 18 of Republic Act No. 7906, and Section 47 of Republic Act No. 8791. A.M. No. 99-10-05-0, issued on 14 December 1999, provides for the procedure to be observed in the conduct of an extrajudicial foreclosure sale. Thus, we clarified the different types of sales in Supena v. Dela Rosa, [13] to wit:

Any judge, worthy of the robe he dons, or any lawyer, for that matter, worth his salt, ought to know that different laws apply to different kinds of sales under our jurisdiction. We have three different types of sales, namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court on Execution, Satisfaction and Effect of Judgments. Rule 68 of the Rules, captioned Foreclosure of Mortgage, governs judicial foreclosure sales. On the other hand, Act No. 3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages," applies in cases of extrajudicial foreclosure sales of real estate mortgages. Unlike Rule 68, which governs judicial foreclosure sales, neither Act No. 3135 as amended, nor A.M. No. 99-10-05-0 grants to junior encumbrancers the right to receive the balance of the purchase price. The only right given to second mortgagees in said issuances is the right to redeem the foreclosed property pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118, which provides: Sec. 6. Redemption. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty- six,[14] inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with this Act.

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Rules 6-10.REMLAWREV Even if, for the sake of argument, Rule 68 is to be applied to extrajudicial foreclosure of mortgages, such right can only be given to second mortgagees who are made parties to the (judicial) foreclosure. While a second mortgagee is a proper and in a sense even a necessary party to a proceeding to foreclose a first mortgage on real property, he is not an indispensable party, because a valid decree may be made, as between the mortgagor and the first mortgagee, without regard to the second mortgage; but the consequence of a failure to make the second mortgagee a party to the proceeding is that the lien of the second mortgagee on the equity of redemption is not affected by the decree of foreclosure.[15] A cause of action is the act or omission by which a party violates the right of another.[16] A cause of action exists if the following elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate such right; and (3) an act or omission on the part of such defendant violative of the right of plaintiff or constituting a breach of the obligation of defendant to the plaintiff for which the latter may maintain an action for recovery of damages.[17] In view of the foregoing discussions, we find that respondents do not have a cause of action against Atty. Ana Liza Luna for the delivery of the subject amounts on the basis of Section 4, Rule 68 of the Rules of Court, for the reason that the foregoing Rule does not apply to extrajudicial foreclosure of mortgages. In Katon v. Palanca, Jr.,[18] we held that where prescription, lack of jurisdiction or failure to state a cause of action clearly appears from the complaint filed with the trial court, the action may be dismissed motu proprio, even if the case has been elevated for review on different grounds. However, while the case should indeed be dismissed insofar as Atty. Luna is concerned, the same is not necessarily true with respect to Monzon. Other than respondents prayer that the amount due to respondents be delivered by Atty. Luna to them, they also pray for a judgment declaring Monzon liable for such amounts. Said prayer, as argued by Monzon herself, may constitute a cause of action for collection of sum of money against Monzon. The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an ordinary action to recover the indebtedness with the right to execute a judgment thereon on all the properties of the debtor including the subject matter of the mortgage, subject to the qualification that if he fails in the remedy elected by him, he cannot pursue further the remedy he has waived.[19] However, due to the fact that construing respondents Petition for Injunction to be one for a collection of sum of money would entail a waiver by the respondents of the mortgage executed over the subject properties, we should proceed with caution before making such construction. We, therefore, resolve that upon the remand of this case to the trial court, respondents should be ordered to manifest whether the Petition for Injunction should be treated as a complaint for the collection of a sum of money. If respondents answer in the affirmative, then the case shall proceed with the presentation of the evidence for the defense. If Monzon would be successful in proving her defense of dacion en pago, there would, in effect, be a double sale of the mortgaged properties: the same properties were sold to both respondents and to herein intervenor Addio Properties, Inc. If, pursuant to the rules on double sales, respondents are entitled to the properties, their remedy is to file the proper action to recover possession. If, pursuant to said rules, Addio Properties, Inc. is entitled to the properties, respondents remedy is to file an action for damages against Monzon. If respondents answer in the negative, the case shall be dismissed, without prejudice to the exercise of respondents rights as mortgage creditors. If respondents mortgage contract was executed before the execution of the mortgage contract with Addio Properties, Inc., respondents would be the first mortgagors. Pursuant to Article 2126[20] of the Civil Code, they would be entitled to foreclose the property as against any subsequent possessor thereof. If respondents mortgage contract was executed after the execution of the mortgage contract with Addio Properties, Inc., respondents would be the second mortgagors. As such, they are entitled to a right of redemption pursuant to Section 6 of Act No. 3135, as amended by Act No. 4118. WHEREFORE, the Decision of the Court of Appeals dated 27 September 2005 and its Resolution dated 7 March 2006 are REVERSED and SET ASIDE. The Petition for Injunction in Civil Case No. TG-2069 is hereby ordered DISMISSED insofar as Atty. Ana Liza Luna is concerned. The Petition for Injunction in Civil Case No. TG-2069, insofar as petitioner Teresita Monzon is concerned, is ordered REMANDED to the Regional Trial Court of Tagaytay City for further proceedings. Upon such remand, the Regional Trial Court of Tagaytay City shall issue an Order to respondents, the spouses James and Maria Rosa Nieves Relova and the spouses Bienvenido and Eufracia Perez, to manifest whether the Petition for Injunction should be treated as a complaint for the collection of a sum of money. If respondents answer in the affirmative, the Regional Trial Court shall set the case for hearing for the presentation of the evidence for the defense. If respondents answer in the negative, the case shall be dismissed, without prejudice to the exercise of respondents rights as mortgage creditors. No costs. SO ORDERED. [G.R. No. 174414, March 14, 2008] ELMER F. GOMEZ, Petitioner, vs. MA. LITA A. MONTALBAN, Respondent. DECISION CHICO-NAZARIO, J.: This Petition for Review on Certiorari seeks to reverse (1) the Order[1] dated 20 June 2006 of the Regional Trial Court (RTC) of Davao City, Branch 13, which granted herein respondent Ma. Lita A. Montalban's Petition for Relief from Judgment and dismissed Civil Case No. 29,717-03 for lack of jurisdiction; and (2) the Order[2] dated 2 August 2006 denying herein petitioner Elmer F. Gomez's Motion for Reconsideration thereof . On 30 May 2003, petitioner filed a Complaint[3] with the RTC for a sum of money, damages and payment of attorney's fees against respondent, docketed as Civil Case No. 29,717-03. The Complaint alleged, among other things, that: on or about 26 August 1998, respondent obtained a loan from petitioner in the sum of P40,000.00 with a voluntary proposal on her part to pay 15% interest per month; upon receipt of the proceeds of the loan, respondent issued in favor of petitioner, as security,

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Rules 6-10.REMLAWREV Capitol Bank Check No. 0215632, postdated 26 October 1998, in the sum of P46,000.00, covering the P40,000.00 principal loan amount and P6,000.00 interest charges for one month; when the check became due, respondent failed to pay the loan despite several demands; thus, petitioner filed the Complaint praying for the payment of P238,000.00, representing the principal loan and interest charges, plus 25% of the amount to be awarded as attorney's fees, as well as the cost of suit. Summons was served, but despite her receipt thereof, respondent failed to file her Answer. Consequently, she was declared[4] in default and upon motion, petitioner was allowed to present evidence ex parte. After considering the evidence presented by petitioner, the RTC rendered a Decision[5] on 4 May 2004 in his favor, the fallo of which reads: WHEREFORE, IN VIEW OF THE FOREGOING, the Court hereby decides this case in favor of [herein petitioner] and against [herein respondent], ordering [respondent] to pay [petitioner] the following amounts: 1. P40,000.00 representing the principal amount of the loan; 2. P57,600.00 representing interest at the rate of 24% per annum reckoned from August 26, 1998 until the present; and 3. P15,000.00 representing attorney's fees. On 28 May 2004, respondent filed a Petition for Relief from Judgment[6] alleging that there was no effective service of summons upon her since there was no personal service of the same. The summons was received by one Mrs. Alicia dela Torre, who was not authorized to receive summons or other legal pleadings or documents on respondent's behalf. Respondent attributes her failure to file an Answer to fraud, accident, mistake or excusable negligence. She claimed that she had good and valid defenses against petitioner and that the RTC had no jurisdiction as the principal amount being claimed by petitioner was only P40,000.00, an amount falling within the jurisdiction of the Municipal Trial Court (MTC). After petitioner filed his Answer[7] to the Petition for Relief from Judgment and respondent her Reply,[8] the said Petition was set for hearing. After several dates were set and called for hearing, respondent, thru counsel, failed to appear despite being duly notified; hence, her Petition for Relief was dismissed[9] for her apparent lack of interest to pursue the petition. Respondent filed a Motion for Reconsideration[10] of the dismissal of her Petition for Relief, stating that her counsel's failure to appear was not intentional, but due to human shortcomings or frailties, constituting honest mistake or excusable negligence. On 18 November 2005, reconsideration, to wit: the RTC granted[11] respondent's motion for interest of justice, shall give [respondent] one more chance to present the merits of her position in a hearing. The dismissal of the petition is therefore reconsidered and set aside. On 20 June 2006, the RTC granted respondent's Petition for Relief from Judgment and set aside its Decision dated 4 May 2004 on the ground of lack of jurisdiction. The fallo of the assailed RTC Order reads: WHEREFORE, the petition for relief is hereby GRANTED. The decision of this court dated May 4, 2004 is RECONSIDERED and set aside for lack of jurisdiction on the part of the court, without prejudice to the case being refiled in the proper Municipal Trial Courts.[12] Petitioner filed a motion for reconsideration of the afore-quoted Order, but the same was denied by the RTC in another Order[13] dated 2 August 2006. Hence, the present Petition filed directly before this Court. In his Memorandum,[14] petitioner raises the following issues for the Court's consideration: 1. Whether or not the Regional Trial Court has jurisdiction over this case for sum of money, damages and attorney's fees where the principal amount of the obligation is P40,000.00 but the amount of the demand per allegation of the complaint is P238,000.00; 2. Whether or not respondent's relief from judgment is proper during the period for filing a motion for reconsideration and appeal. Before the Court dwells on the principal issues, a few procedural matters must first be resolved. Section 2(c), Rule 41 of the Rules of Court categorically provides that in all cases where only questions of law are raised, the appeal from a decision or order of the RTC shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45.[15] The distinction between questions of law and questions of fact has long been settled. 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 probative value of the evidence presented, the truth or falsehood of facts being admitted. A question of fact 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 witnesses, the existence and relevancy of specific surrounding circumstances, as well as their relation to each other and to the whole, and the probability of the situation.[16] Simple as it may seem, determining the true nature and extent of the distinction is sometimes complicated. In a case involving a "question of law," the resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. If the query requires a re-evaluation of the credibility

In regard to the motion for reconsideration file by [herein respondent] of the order of the court dismissing her petition for relief from judgment, the court, in the

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Rules 6-10.REMLAWREV of witnesses, or the existence or relevance of surrounding circumstances and their relation to each other, the issue in that query is factual.[17] The first issue raised in the present petition is one of jurisdiction of the court over the subject matter - meaning, the nature of the cause of action and of the relief sought. Jurisdiction is the right to act or the power and authority to hear and determine a cause. It is a question of law.[18] The second issue refers to the aptness of the grant of a Petition for Relief from Judgment. These questions are undoubtedly one of law, as they concern the correct interpretation or application of relevant laws and rules, without the need for review of the evidences presented before the court a quo. Thus, with only questions of law raised in this Petition, direct resort to this Court is proper.[19] The Court shall now discuss whether the RTC has jurisdiction over Civil Case No. 29,717-03. Petitioner's Complaint before the RTC reads: 3. On or about August 26, 1998, [herein respondent] obtained from the [herein petitioner] a loan for the principal sum of FORTY THOUSAND PESOS (P40,000.00) with a voluntary proposal on her part to pay as much as 15% interest per month. Machine copy of Cash Voucher dated August 26, 1998 is herewith attached as Annex "A". 4. Upon receipt of the proceeds of the said loan, [respondent] issued in favor of the Plaintiff Capitol Bank Check with check nos. 0215632 postdated on October 26, 1998 for the sum of Forty Six Thousand Pesos (P46,000.00) as security on the loan with P6,000.00 as the first month of interest charges. When the check became due, [respondent] defaulted to pay her loan despite several allowances of time and repeated verbal demands from the [petitioner]. The said check was later on dishonored for the reason: "Account Closed". Machine copy of Capitol Bank Check wit nos. 0215632 is herewith attached as Annex "B". 5. On July 4, 2002, [petitioner] engaged the services of the undersigned counsel to collect the account of the [respondent]; thus, on the same day, a demand letter was sent to and received by her on July 9, 2002. And despite receipt thereof, she failed and continues to evade the payment of her obligations to the damage and prejudice of the [petitioner]. Thus, as of July 4, 2002, [respondent]'s loan obligation stood at TWO HUNDRED THIRTY EIGHT THOUSAND PESOS (P 239,000.00), inclusive of interest charges for 32 months. Machine copy of Demand Letter and its registry receipt and return card is herewith attached as Annexes "C"; "C-1" and C-2", respectively. 6. In view of [respondent]'s refusal to pay her loan, [petitioner] is constrained to engage the services of counsel to initiate the instant action for a fee of 25% for whatever amounts is collected as flat attorney's fee. [Petitioner] will likewise incur damages in the form of docket fees. PRAYER WHERFORE, it is respectfully prayed of the Honorable Court that Decision be rendered ordering the [respondent] to pay [petitioner] as follows: 1. The amount of P238,000.00 with interest charges at the sound discretion of the Honorable Court starting on July 4, 2002 until paid in full; 2. The sum equivalent to 25 % of the amount awarded as attorney's fee; 3. Cost of suit; 4. Other relief that the Honorable Court may find just and equitable under the premises are likewise prayed for.[20] [Emphasis ours.] The Court gleans from the foregoing that petitioner's cause of action is the respondent's violation of their loan agreement.[21] In that loan agreement, respondent expressly agreed to pay the principal amount of the loan, plus 15% monthly interest. Consequently, petitioner is claiming and praying for in his Complaint the total amount of P238,000.00, already inclusive of the interest on the loan which had accrued from 1998. Since the interest on the loan is a primary and inseparable component of the cause of action, not merely incidental thereto, and already determinable at the time of filing of the Complaint, it must be included in the determination of which court has the jurisdiction over petitioner's case. Using as basis the P238,000.00 amount being claimed by petitioner from respondent for payment of the principal loan and interest, this Court finds that it is well within the jurisdictional amount fixed by law for RTCs. [22] There can be no doubt that the RTC in this case has jurisdiction to entertain, try, and decide the petitioner's Complaint. To this Court, it is irrelevant that during the course of the trial, it was proven that respondent is only liable to petitioner for the amount of P40,000.00 representing the principal amount of the loan; P57,000.00 as interest thereon at the rate of 24% per annum reckoned from 26 August 1998 until the present; and P15,000.00 as attorney's fees. Contrary to respondent's contention, jurisdiction can neither be made to depend on the amount ultimately substantiated in the course of the trial or proceedings nor be affected by proof showing that the claimant is entitled to recover a sum in excess of the jurisdictional amount fixed by law. Jurisdiction is determined by the cause of action as alleged in the complaint and not by the amount ultimately substantiated and awarded.[23] Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and determined by the allegations in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff's cause of action. [24] 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.[25] The averments in the complaint and the character of the relief sought are the ones to be consulted.[26] 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.[27]

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Rules 6-10.REMLAWREV On the propriety of the granting by the RTC of respondent's Petition for Relief from Judgment, the Court finds and so declares that the RTC did indeed commit an error in doing so. First of all, a petition for relief under Rule 38 of the Rules of Court is only available against a final and executory judgment.[28] Since respondent allegedly[29] received a copy of the Decision dated 4 May 2004 on 14 May 2004, and she filed the Petition for Relief from Judgment on 28 May 2004, judgment had not attained finality. The 15-day period to file a motion for reconsideration or appeal had not yet lapsed. Hence, resort by respondent to a petition for relief from judgment under Rule 38 of the Rules of Court was premature and inappropriate. Second, based on respondent's allegations in her Petition for Relief before the RTC, she had no cause of action for relief from judgment. Section 1 of Rule 38 provides: SECTION 1. Petition for relief from judgment, order, or other proceedings. - 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, he may file a petition in such court and in the same case praying that the judgment, order or proceeding be set aside. Under Section 1, Rule 38 of the Rules of Court, the court may grant relief from judgment only "[w]hen a judgment or final order is entered, or any other proceeding is taken against a party in any court through fraud, accident, mistake, or excusable negligence x x x." In her Petition for Relief from Judgment before the RTC, respondent contended that judgment was entered against her through "mistake or fraud," because she was not duly served with summons as it was received by a Mrs. Alicia dela Torre who was not authorized to receive summons or other legal processes on her behalf. As used in Section 1, Rule 38 of the Rules of Court, "mistake" refers to mistake of fact, not of law, which relates to the case.[30] The word "mistake," which grants relief from judgment, does not apply and was never intended to apply to a judicial error which the court might have committed in the trial. Such errors may be corrected by means of an appeal.[31]This does not exist in the case at bar, because respondent has in no wise been prevented from interposing an appeal. "Fraud," on the other hand, must be extrinsic or collateral, that is, the kind which prevented the aggrieved party from having a trial or presenting his case to the court,[32]or was used to procure the judgment without fair submission of the controversy.[33]This is not present in the case at hand as respondent was not prevented from securing a fair trial and was given the opportunity to present her case. Negligence to be excusable must be one which ordinary diligence and prudence could not have guarded against.[34] Under Section 1, the "negligence" must be excusable and generally imputable to the party because if it is imputable to the counsel, it is binding on the client.[35] To follow a contrary rule and allow a party to disown his counsel's conduct would render proceedings indefinite, tentative, and subject to reopening by the mere subterfuge of replacing counsel. What the aggrieved litigant should do is seek administrative sanctions against the erring counsel and not ask for the reversal of the court's ruling.[36] Third, the certificate of service of the process server of the court a quo is prima facie evidence of the facts as set out therein.[37] According to the Sheriff's Return of Service,[38] summons was issued and served on respondent thru one Mrs. Alicia dela Torre, thus: "THIS IS TO CERTIFY that on June 25, 2003 at around 1:45 p.m. the undersigned sheriff caused the service of summons issued in the above-entitled case together with attached complaints and annexes for and in behalf of defendant [respondent] thru a certain Mrs. Alicia Dela Torre inside their compound at the given address who acknowledged receipt by signature and notation of said dela Torre appearing thereof. Wherefore, this summons is respectfully returned to the Honorable Regional Trial Court, Branch 13, Davao City, duly SERVED for its records and information." Finally, even assuming arguendo that the RTC had no jurisdiction over respondent on account of the non-service upon her of the summons and complaint, the remedy of the respondent was to file a motion for the reconsideration of the 4 May 2004 Decision by default or a motion for new trial within 15 days from receipt of notice thereof. This is also without prejudice to respondent's right to file a petition for certiorari under Rule 65 of the Rules of Court for the nullification of the order of default of the court a quo and the proceedings thereafter held including the decision, the writ of execution, and the writ of garnishment issued by the RTC, on the ground that it acted without jurisdiction.[39] Unfortunately, however, respondent opted to file a Petition for Relief from the Judgment of the RTC, which, as the Court earlier determined, was the wrong remedy. In Tuason v. Court of Appeals,[40] the Court explained the nature of a petition for relief from judgment: A petition for relief from judgment is an equitable remedy that is allowed only in exceptional cases where there is no other available or adequate remedy. When a party has another remedy available to him, which may be either a motion for new trial or appeal from an adverse decision of the trial court, and he was not prevented by fraud, accident, mistake or excusable negligence from filing such motion or taking such appeal, he cannot avail himself of this petition. Indeed, relief will not be granted to a party who seeks avoidance from the effects of the judgment when the loss of the remedy at law was due to his own negligence; otherwise the petition for relief can be used to revive the right to appeal which had been lost thru inexcusable negligence.[ (Emphasis and underscoring supplied; citations omitted) In the case at bar, there being no fraud, accident, mistake, or excusable negligence that would have prevented petitioner from filing either a motion for reconsideration or a petition for review on certiorari of the 4 May 2004 Decision of the RTC, her resort to a Petition for Relief from Judgment was unwarranted. This Court also notes that when respondent was declared in default for her failure to file an Answer to the Complaint, she did not immediately avail herself of any of the

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Rules 6-10.REMLAWREV remedies provided by law. Lina v. Court of Appeals [41] enumerates the remedies available to a party declared in default: a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion, under oath, to set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake or excusable negligence, and that he has a meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]); b) If the judgment has already been rendered when the defendant discovered the default, but before the same has become final and executory, he may file a motion for new trial under Section 1 (a) of Rule 37; c) If the defendant discovered the default after the judgment has become final and executory, he may file a petition for relief under Section 2 [now Section 1] of Rule 38; and d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). (Emphasis added) In addition, and as this Court earlier mentioned, a petition for certiorari to declare the nullity of a judgment by default is also available if the trial court improperly declared a party in default, or even if the trial court properly declared a party in default, if grave abuse of discretion attended such declaration.[42] If respondent is really vigilant in protecting her rights, she should have exhausted all the legal remedies above-mentioned to nullify and set aside the order of default against her, and should no longer have waited for the judgment to be rendered. Respondent does not deny that she did receive the summons, although she alleges that it was not properly served upon her, yet she chose to sit on her rights and did not act immediately. For respondent's failure to act with prudence and diligence in protecting her rights, she cannot now elicit this Court's sympathy. Respondent's petition for relief from judgment is clearly without merit and should not have been granted by the RTC. WHEREFORE, the instant petition is hereby GRANTED. Consequently, the Decision dated 4 May 2006 of the Regional Trial Court of Davao, Branch 13, in Civil Case No. 29,717-03 is hereby REINSTATED and the Order dated 20 June 2006 granting the petition for relief from judgment is hereby SET ASIDE. SO ORDERED. Ynares-Santiago, (Chairperson), Austria-Martinez, Nachura, and Reyes, JJ., concur. G.R. No. 151098 March 21, 2006 ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA GAJUDO, BALTAZAR GAJUDO and DANILO ARAHAN CHUA, Petitioners, vs. TRADERS ROYAL BANK,1Respondent. DECISION PANGANIBAN, CJ: The mere fact that a defendant is declared in default does not automatically result in the grant of the prayers of the plaintiff. To win, the latter must still present the same quantum of evidence that would be required if the defendant were still present. A party that defaults is not deprived of its rights, except the right to be heard and to present evidence to the trial court. If the evidence presented does not support a judgment for the plaintiff, the complaint should be dismissed, even if the defendant may not have been heard or allowed to present any countervailing evidence. The Case Before us is a Petition for Review2 under Rule 45 of the Rules of Court, assailing the June 29, 2001 Decision3 and December 6, 2001 Resolution4 of the Court of Appeals (CA) in CA-GR CV No. 43889. The CA disposed as follows: "UPON THE VIEW WE TAKE OF THIS CASE, THUS, the partial judgment appealed from, must be, as it hereby is, VACATED and SET ASIDE, and another one entered DISMISSING the complaint at bench. Without costs."5 The assailed Resolution denied petitioners Motion for Reconsideration6 for lack of merit. The Facts The CA narrated the facts as follows: "[Petitioners] filed a complaint before the Regional Trial Court of Quezon City, Branch 90, against [respondent] Traders Royal Bank, the City Sheriff of Quezon City and the Register of Deeds of Quezon City. Docketed thereat as Civil Case No. Q41203, the complaint sought the annulment of the extra-judicial foreclosure and auction sale made by [the] city sheriff of Quezon City of a parcel of land covered by TCT No. 16711 of the Register of Deeds of Quezon City, the conventional redemption thereof, and prayed for damages and the issuance of a writ of preliminary injunction. "The complaint alleged that in mid 1977[, Petitioner] Danilo Chua obtained a loan from [respondent] bank in the amount of P75,000.00 secured by a real estate mortgage over a parcel of land covered by TCT No. 16711, and owned in common by the [petitioners]; that when the loan was not paid, [respondent] bank commenced extra-judicial foreclosure proceedings on the property; that the auction sale of the property was set on 10 June 1981, but was reset to 31 August 1981, on [Petitioner Chuas] request, which, however, was made without the knowledge and conformity of the other [petitioners]; that on the re-scheduled auction sale, [the] Sheriff of Quezon City sold the property to the [respondent] bank, the highest bidder

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Rules 6-10.REMLAWREV therein, for the sum of P24,911.30; that the auction sale was tainted with irregularity because, amongst others, the bid price was shockingly or unconscionably, low; that the other [petitioners] failed to redeem the property due to their lack of knowledge of their right of redemption, and want of sufficient education; that, although the period of redemption had long expired, [Petitioner] Chua offered to buy back, and [respondent] bank also agreed to sell back, the foreclosed property, on the understanding that Chua would pay [respondent] bank the amount of P40,135.53, representing the sum that the bank paid at the auction sale, plus interest; that [Petitioner] Chua made an initial payment thereon in the amount of P4,000.00, covered by Interbank Check No. 09173938, dated 16 February 1984, duly receipted by [respondent] bank; that, in a sudden change of position, [respondent] bank wrote Chua, on 20 February 1984, asking that he could repurchase the property, but based on the current market value thereof; and that sometime later, or on 22 March 1984, [respondent] bank wrote Chua anew, requiring him to tender a new offer to counter the offer made thereon by another buyer. "Traversing [petitioners] complaint, [respondent] bank, upon 05 July 1984, filed its answer with counterclaim, thereunder asserting that the foreclosure sale of the mortgaged property was done in accordance with law; and that the bid price was neither unconscionable, nor shockingly low; that [petitioners] slept on their rights when they failed to redeem the property within the one year statutory period; and that [respondent] bank, in offering to sell the property to [Petitioner] Chua on the basis of its current market price, was acting conformably with law, and with legitimate banking practice and regulations. "Pre-trial having been concluded, the parties entered upon trial, which dragged/lengthened to several months due to postponements. Upon 11 June 1988, however, a big conflagration hit the City Hall of Quezon City, which destroyed, amongst other things, the records of the case. After the records were reconstituted, [petitioners] discovered that the foreclosed property was sold by [respondent] bank to the Ceroferr Realty Corporation, and that the notice of lis pendens annotated on the certificate of title of the foreclosed property, had already been cancelled. Accordingly, [petitioners], with leave of court, amended their complaint, but the Trial Court dismissed the case without prejudice due to [petitioners] failure to pay additional filing fees. "So, upon 11 June 1990, [petitioners] re-filed the complaint with the same Court, whereat it was docketed as Civil Case No. 90-5749, and assigned to Branch 98: the amended complaint substantially reproduced the allegations of the original complaint. But [petitioners] this time impleaded as additional defendants the Ceroferr Realty Corporation and/or Cesar Roque, and Lorna Roque, and included an additional cause of action, to wit: that said new defendants conspired with [respondent] bank in [canceling] the notice of lis pendens by falsifying a letter sent to and filed with the office of the Register of Deeds of Quezon City, purportedly for the cancellation of said notice. "Summons was served on [respondent] bank on 26 September 1990, per Sheriffs Return dated 08 October 1990. Supposing that all the defendants had filed their answer, [petitioners] filed, on 23 October 1991, a motion to set case for pre-trial, which motion was, however, denied by the Trial Court in its Order of 25 October 1991, on the ground that [respondent] bank has not yet filed its answer. On 13 November 1991[, petitioners] filed a motion for reconsideration, thereunder alleging that they received by registered mail, on 19 October 1990, a copy of [respondent] banks answer with counterclaim, dated 04 October 1990, which copy was attached to the motion. In its Order of 14 November 1991, the trial Court denied for lack of merit, the motion for reconsideration, therein holding that the answer with counterclaim filed by [respondent] bank referred to another civil case pending before Branch 90 of the same Court. "For this reason, [petitioners] filed on 02 December 1991 a motion to declare [respondent] bank in default, thereunder alleging that no answer has been filed despite the service of summons on it on 26 September 1990. "On 13 December 1991, the Trial Court declared the motion submitted for resolution upon submission by [petitioners] of proof of service of the motion on [respondent] bank. "Thus, on 16 January 1992, upon proof that [petitioners] had indeed served [respondent] bank with a copy of said motion, the Trial Court issued an Order of default against [respondent] bank. "Upon 01 December 1992, on [petitioners] motion, they were by the Court allowed to present evidence ex parte on 07 January 1993, insofar as [respondent] bank was concerned. "Thereafter, or on 08 February 1993, the Trial Court rendered the new questioned partial decision.7 "Aggrieved, [respondent] bank filed a motion to set aside [the] partial decision by default against Traders Royal Bank and admit [respondent] Traders Royal Banks x x x Answer with counterclaim: thereunder it averred, amongst others, that the erroneous filing of said answer was due to an honest mistake of the typist and inadvertence of its counsel. "The [trial court] thumbed down the motion in its Order of 26 July 1993."8 Respondent bank appealed the Partial Decision9 to the CA. During the pendency of that appeal, Ceroferr Realty Corporation and/or Cesar and/or Lorna Roque filed a Manifestation with Motion10 asking the CA to discharge them as parties, because the case against them had already been dismissed on the basis of their Compromise Agreement11 with petitioners. On May 14, 1996, the CA issued a Resolution12 granting Ceroferr et al.s Manifestation with Motion to discharge movants as parties to the appeal. The Court, though, deferred resolution of the matters raised in the Comment13 of respondent bank. The latter contended that the Partial Decision had been novated by the Compromise Agreement, whose effect of res judicata had rendered that Decision functus officio. Ruling of the Court of Appeals The CA ruled in favor of respondent bank. Deemed, however, to have rested on shaky ground was the latters "Motion to Set Aside Partial Decision by Default Against Traders Royal Bank and Admit Defendant Traders Royal Banks Answer."14 The reasons offered by the bank for failing to file an answer were considered by the appellate court to be "at once specious, shallow and sophistical and can hardly be

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Rules 6-10.REMLAWREV dignified as a mistake or excusable negligence, which ordinary prudence could not have guarded against."15 In particular, the CA ruled that the erroneous docket number placed on the Answer filed before the trial court was not an excusable negligence by the banks counsel. The latter had a bounden duty to be scrupulously careful in reviewing pleadings. Also, there were several opportunities to discover and rectify the mistake, but these were not taken. Moreover, the banks Motion to Set Aside the Partial Decision and to Admit [the] Answer was not accompanied by an affidavit of merit. These mistakes and the inexcusable negligence committed by respondents lawyer were binding on the bank. On the issue of whether petitioners had convincingly established their right to relief, the appellate court held that there was no ground to invalidate the foreclosure sale of the mortgaged property. First, under Section 3 of Act No. 3135, an extrajudicial foreclosure sale did not require personal notice to the mortgagor. Second, there was no allegation or proof of noncompliance with the publication requirement and the public posting of the notice of sale, provided under Act No. 3135, as amended. Third, there was no showing of inadequacy of price as no competent evidence was presented to show the real market value of the land sold or the readiness of another buyer to offer a price higher than that at which the property had been sold. Moreover, petitioners failed to prove that the bank had agreed to sell the property back to them. After pointing out that the redemption period had long expired, respondents written communications to Petitioner Chua only showed, at most, that the former had made a proposal for the latter to buy back the property at the current market price; and that Petitioner Chua was requested to make an offer to repurchase the property, because another buyer had already made an offer to buy it. On the other hand, respondent noted that the Interbank check for P4,000 was for "deposit only." Thus, there was no showing that the check had been issued to cover part of the repurchase price. The appellate court also held that the Compromise Agreement had not resulted in the novation of the Partial Decision, because the two were not incompatible. In fact, the bank was not even a party to the Agreement. Petitioners recognition of Ceroferrs title to the mortgaged property was intended to preclude future litigation against it. Hence this Petition.16 Issues In their Memorandum, petitioners raise the following issues: "1. Whether or not the Respondent Court of Appeals erred in failing to apply the provisions of Section 3, Rule 9 of the 1997 Rules of Civil Procedure [and in applying instead] the rule on preponderance of evidence under Section 1, Rule 133 of the Rules of Court. "2. Whether or not the respondent appellate court failed to apply the conventional redemption rule provided for under Article 1601 of the New Civil Code. "3. Whether or not this Honorable Court can exercise its judicial prerogative to evaluate the findings of facts."17 The first issue is one of law and may be taken up by the Court without hindrance, pursuant to Section 1 of Rule 45 of the Rules of Court.18 The second and the third issues, however, would entail an evaluation of the factual findings of the appellate court, a function ordinarily not assumed by this Court, unless in some excepted cases. The Court will thus rule on the first issue before addressing the second and the third issues jointly. The Courts Ruling The Petition has no merit. First Issue: Quantum of Proof Petitioners challenge the CA Decision for applying Section 3 of Rule 9 of the Rules of Court, rather than Section 1 of Rule 133 of the same Rules. In essence, petitioners argue that the quantum of evidence for judgments flowing from a default order under Section 3 of Rule 9 is not the same as that provided for in Section 1 of Rule 133. For ease of discussion, these two rules will be reproduced below, starting with Section 3 of Rule 9 of the Rules of Court: "Sec. 3. Default; declaration of. If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judgment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit evidence. Such reception of evidence may be delegated to the clerk of court. "(a) Effect of order of default. A party in default shall be entitled to notice of subsequent proceedings but not to take part in the trial. "(b) Relief from order of default. A party declared in default may at any time after notice thereof and before judgment file a motion under oath to set aside the order of default upon proper showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and that he has a meritorious defense. In such case, the order of default may be set aside on such terms and conditions as the judge may impose in the interest of justice. "(c) Effect of partial default. When a pleading asserting a claim states a common cause of action against several defending parties, some of whom answer and the others fail to do so, the court shall try the case against all upon the answers thus filed and render judgment upon the evidence presented. "(d) Extent of relief to be awarded. A judgment rendered against a party in default shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages.

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Rules 6-10.REMLAWREV "Unequivocal, in the literal sense, as these provisions [referring to the subject of default then under Rule 18 of the old Rules of Civil Procedure] are, they do not readily convey the full import of what they contemplate. To begin with, contrary to the immediate notion that can be drawn from their language, these provisions are not to be understood as meaning that default or the failure of the defendant to answer should be interpreted as an admission by the said defendant that the plaintiffs cause of action find support in the law or that plaintiff is entitled to the relief prayed for. x x x. xxxxxxxxx "Being declared in default does not constitute a waiver of rights except that of being heard and of presenting evidence in the trial court. x x x. "In other words, a defaulted defendant is not actually thrown out of court. While in a sense it may be said that by defaulting he leaves himself at the mercy of the court, the rules see to it that any judgment against him must be in accordance with law. The evidence to support the plaintiffs cause is, of course, presented in his absence, but the court is not supposed to admit that which is basically incompetent. Although the defendant would not be in a position to object, elementary justice requires that only legal evidence should be considered against him. If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the complaint must be dismissed. And if an unfavorable judgment should be justifiable, it cannot exceed in amount or be different in kind from what is prayed for in the complaint."25 In sum, while petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they were not excused from establishing their claims for damages by the required quantum of proof under Section 1 of Rule 133. Stated differently, any advantage they may have gained from the ex parte presentation of evidence does not lower the degree of proof required. Clearly then, there is no incompatibility between the two rules. Second and Third Issues: Review of the Evidence Petitioners urge this Court to depart from the general rule that the lower courts findings of fact are not reviewable in a petition for review.26 In support of their plea, they cite the conflicting findings of the trial and the appellate courts, as well as the alleged conjectures and surmises made by the CA in arriving at its Decision. Indeed, the differences between the findings of the two courts a quo, leading to entirely disparate dispositions, is reason enough for this Court to review the evidence in this case.27 Whether the CA indulged in surmises and conjectures when it issued the assailed Decision will thus be determined. At the outset, it behooves this Court to clarify the CAs impression that no evidence was presented in the case which might have contributed to petitioners challenge to its Decision. The appellate courts observation was based on the notation by the lower courts clerk of court that there were no separate folders for exhibits and transcripts, because "there was no actual hearing conducted in this case."28

"(e) Where no defaults allowed. If the defending party in an action for annulment or declaration of nullity of marriage or for legal separation fails to answer, the court shall order the prosecuting attorney to investigate whether or nor a collusion between the parties exists, and if there is no collusion, to intervene for the State in order to see to it that the evidence submitted is not fabricated." We now quote Section 1 of Rule 133: "SECTION 1. Preponderance of evidence, how determined. In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. In determining where the preponderance or superior weight of evidence on the issues involved lies, the court may consider all the facts and circumstances of the case, the witnesses manner of testifying, their intelligence, their means and opportunity of knowing the facts to which they are testifying, the nature of the facts to which they testify, the probability or improbability of their testimony, their interest or want of interest, and also their personal credibility so far as the same may legitimately appear upon the trial. The court may also consider the number of witnesses, though the preponderance is not necessarily with the greater number." Between the two rules, there is no incompatibility that would preclude the application of either one of them. To begin with, Section 3 of Rule 9 governs the procedure which the trial court is directed to take when a defendant fails to file an answer. According to this provision, the court "shall proceed to render judgment granting the claimant such relief as his pleading may warrant," subject to the courts discretion on whether to require the presentation of evidence ex parte. The same provision also sets down guidelines on the nature and extent of the relief that may be granted. In particular, the courts judgment "shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages." As in other civil cases, basic is the rule that the party making allegations has the burden of proving them by a preponderance of evidence.19 Moreover, parties must rely on the strength of their own evidence, not upon the weakness of the defense offered by their opponent.20 This principle holds true, especially when the latter has had no opportunity to present evidence because of a default order. Needless to say, the extent of the relief that may be granted can only be as much as has been alleged and proved21 with preponderant evidence required under Section 1 of Rule 133. Regarding judgments by default, it was explained in Pascua v. Florendo22 that complainants are not automatically entitled to the relief prayed for, once the defendants are declared in default. Favorable relief can be granted only after the court has ascertained that the relief is warranted by the evidence offered and the facts proven by the presenting party. In Pascua, this Court ruled that "x x x it would be meaningless to require presentation of evidence if every time the other party is declared in default, a decision would automatically be rendered in favor of the nondefaulting party and exactly according to the tenor of his prayer. This is not contemplated by the Rules nor is it sanctioned by the due process clause."23 The import of a judgment by default was further clarified in Lim Tanhu v. Ramolete.24 The following disquisition is most instructive:

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Rules 6-10.REMLAWREV True, there was no hearing conducted between petitioners and respondent, precisely because the latter had been declared in default, and petitioners had therefore been ordered to present their evidence ex parte. But the absence of a hearing did not mean that no evidence was presented. The Partial Decision dated February 8, 1993, in fact clearly enumerated the pieces of evidence adduced by petitioners during the ex parte presentation on January 7, 1993. The documentary evidence they presented consisted of the following: 1. A copy of respondent banks Petition for the extrajudicial foreclosure and auction sale of the mortgaged parcel of land29 2. The Certificate of Sale that was a consequence of the foreclosure sale30 3. A Statement of Account dated February 15, 1984, showing Petitioner Chuas outstanding debt in the amount of P40,135.5331 4. A copy of the Interbank check dated February 16, 1984, in the amount of P4,00032 5. The Official Receipt issued by the bank acknowledging the check33 6. The banks letter dated February 20, 1984, advising Petitioner Chua of the sale of the property at an extrajudicial public auction; the lapse of the period of redemption; and an invitation to purchase the property at its current market price34 7. Another letter from the bank dated March 22, 1984, inviting Petitioner Chua to submit, within five days, an offer to buy the same property, which another buyer had offered to buy35 8. A copy of the Notice of Lis Pendens, the filing of which was done after that of the Amended Complaint36 9. A copy of the title showing the inscription of the Notice of Lis Pendens37 10. A copy of the Absolute Deed of Sale to Cerrofer38 11. A copy of a letter dated August 29, 1986, made and signed by petitioners counsel, requesting the cancellation of the Notice of Lis Pendens39 12. A copy of a page of the Memorandum of Encumbrance from TCT No. (314341) 7778/T-3940 Having clarified this matter, we proceed to review the facts. Petitioners do not deny that the one-year period for legal redemption had already lapsed when respondent bank supposedly offered to sell the property in question. The records clearly show that the Certificate of Sale following the extrajudicial public auction of the property was registered on June 21, 1982, the date from which the legal redemption period was to be reckoned.41 Petitioners insist, though, that they had the right to repurchase the property through conventional redemption, as provided under Article 1601 of the Civil Code, worded as follows: "ART. 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon." It is true that the one-year period of redemption provided in Act No. 3135, as amended -- the law under which the property here was sold in a foreclosure sale -- is only directory and, as such can be extended by agreement of the parties.42 However, it has also been held that for legal redemption to be converted into conventional redemption, two requisites must be established: 1) voluntary agreement of the parties to extend the redemption period; and 2) the debtors commitment to pay the redemption price on a fixed date.43 Thus, assuming that an offer was made to Petitioner Chua to buy back the property after the lapse of the period of legal redemption, petitioners needed to show that the parties had agreed to extend the period, and that Petitioner Chua had committed to pay the redemption price on a fixed date. The letters sent by the bank to Petitioner Chua on February 20 and March 22, 1984, do not convincingly show that the parties arrived at a firm agreement for the repurchase of the property. What can be gleaned from the February 20 letter is that Petitioner Chua proposed to pay the redemption price for the property, but that the bank refused to accede to his request, because the one-year redemption period had already lapsed.44 The bank, though, had offered to sell back the property to him at the current market value. Indeed, an examination of his earlier letter of February 17, 1984, readily reveals that he expressed willingness to settle his account with the bank, but that his "present financial situation precludes [him] from effecting an immediate settlement x x x."45 On the other hand, the letter dated March 22, 1984, clearly states that "x x x the Bank rejected [his] request to redeem said property due to [the] lapse of [the] one (1) year legal redemption period."46 Nonetheless, he was "[invited] to submit an offer to buy the same property in five (5) days from receipt [of the letter]."47 Petitioner Chua was also informed that the bank had received an offer to purchase the foreclosed property. As to the P4,000 check enclosed in his proposal dated February 17, 1984, as a token of his good faith, he was advised that the amount was still outstanding in the books of the bank and could be claimed by him if he thought the invitation was not feasible. More important, there was no showing that petitioners had committed to pay the redemption price on a fixed date. True, Petitioner Chua had attempted to establish a previous agreement to repurchase the property for less than its fair market value. He had submitted in evidence a Statement of Account48 dated February 15, 1984, showing a balance of P40,135.53; the Interbank check dated February 16, 1984 , for P4,000, which was deposited to the account of respondent bank;49 and the Official Receipt for the check.50 Granting that these documents evinced an agreement, petitioners were still unable to establish a firm commitment on their part to pay the redemption price on a fixed date. On the contrary, the February 17 letter of Petitioner Chua to the bank clearly manifested that he was not capable of paying the account immediately. For this reason, he proposed to pay in "three or four installments" without a specification of dates for the payments, but with a plea for a reduction of the interest charges. That proposal was rejected.

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Rules 6-10.REMLAWREV the notice of sale, as required by ct No. 3135. Neither has there been competent evidence to show that the price paid at the foreclosure sale was inadequate.54 To be sure, there was no ground to invalidate the sale. Second, as previously stated, petitioners have not convincingly established their right to damages on the basis of the purported agreement to repurchase. Without reiterating our prior discussion on this point, we stress that entitlement to actual and compensatory damages must be proved even under Section 3 of Rule 9 of the Rules of Court. The same is true with regard to awards for moral damages and attorneys fees, which were also granted by the trial court. In sum, petitioners have failed to convince this Court of the cogency of their position, notwithstanding the advantage they enjoyed in presenting their evidence ex parte. Not in every case of default by the defendant is the complainant entitled to win automatically. WHEREFORE, this Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED. G.R. No. 158401 January 28, 2008

Indeed, other than the Interbank check marked "for deposit" by respondent bank, no other evidence was presented to establish that petitioners had offered to pay the alleged redemption price of P40,135.53 on a fixed date. For that matter, petitioners have not shown that they tendered payment of the balance and/or consigned the payment to the court, in order to fulfill their part of the purported agreement. These remedies are available to an aggrieved debtor under Article 1256 of the Civil Code,51 when the creditor unjustly refuses to accept the payment of an obligation. The next question that presents itself for resolution is the propriety of the CAs ruling vacating the Partial Decision of the regional trial court (RTC) and dismissing the case. To recall, the RTC had resolved to withhold a ruling on petitioners right to redeem conventionally and/or order the reconveyance of the property in question, pending a determination of the validity of the sale to Cerrofer Realty Corporation and Spouses Cesar and Lorna Roque. The trial court, however, granted the prayer for damages against respondent bank. The RTC ruled as follows: "The evidence presented by [petitioners] in so far as the cause of action against [respondent] Traders Royal Bank is concerned are preponderant to support the claims of the [petitioners]. However, in view of the fact that the property subject matter of this case has already been conveyed to defendant Cerrofer Realty Corporation thus the issue as to whether or not the said conveyance or sale is valid is sill pending between the [petitioners] and [respondents] Cerrofer Realty Corporation and Cesar Roque and Lorna Roque. Hence, this Court resolves to grant the prayer for damages against Traders Royal Bank. "The claims of the [petitioners] as against [respondent] Traders Royal Bank having been established and proved by evidence, judgment is hereby rendered ordering [respondent] Traders Royal Bank to pay [petitioners] actual damage or the market value of the land in question in the sum of P500,000.00; the sum of P70,000.00 as compensatory damages; the sum of P200,000.00 to the heirs of [petitioner] Danilo Chua; and attorneys fees in the sum of P30,000.00."52 In the light of the pending issue as to the validity of the sale of the property to the third parties (Cerrofer Realty Corporation and Spouses Roque), the trial court properly withheld judgment on the matter and thus left the prayer for damages as the sole issue for resolution. To adjudge damages, paragraph (d) of Section 3 of Rule 9 of the Rules of Court provides that a judgment against a party in default "shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages." The proscription against the award of unliquidated damages is significant, because it means that the damages to be awarded must be proved convincingly, in accordance with the quantum of evidence required in civil cases. Unfortunately for petitioners, the grant of damages was not sufficiently supported by the evidence for the following reasons. First, petitioners were not deprived of their property without cause. As correctly pointed out by the CA, Act No. 3135, as amended, does not require personal notice to the mortgagor.53 In the present case, there has been no allegation -- much less, proof -- of noncompliance with the requirement of publication and public posting of

PHILIPPINE PORTS AUTHORITY, petitioner, vs. WILLIAM GOTHONG & ABOITIZ (WG&A), INC., respondent. DECISION AUSTRIA-MARTINEZ, J.: This resolves the Petition for Review on Certiorari filed by the Philippine Ports Authority (petitioner) seeking the reversal of the Decision1 of the Court of Appeals (CA) promulgated on October 24, 2002 and its Resolution dated May 15, 2003. The antecedent facts are accurately narrated by the CA as follows: Petitioner William Gothong & Aboitiz, Inc. (WG&A for brevity), is a duly organized domestic corporation engaged in the shipping industry. Respondent Philippine Ports Authority (PPA for brevity), upon the other hand, is a government-owned and controlled company created and existing by virtue of the provisions of P.D. No. 87 and mandated under its charter to operate and administer the country's sea port and port facilities. After the expiration of the lease contract of Veterans Shipping Corporation over the Marine Slip Way in the North Harbor on December 31, 2000, petitioner WG&A requested respondent PPA for it to be allowed to lease and operate the said facility. Thereafter, then President Estrada issued a memorandum dated December 18, 2000 addressed to the Secretary of the Department of Transportation and Communication (DOTC) and the General Manager of PPA, stating to the effect that in its meeting held on December 13, 2000, the Economic Coordinating Council (ECC) has approved the request of petitioner WG&A to lease the Marine Slip Way from January 1 to June

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Rules 6-10.REMLAWREV 30, 2001 or until such time that respondent PPA turns over its operations to the winning bidder for the North Harbor Modernization Project. Pursuant to the said Memorandum, a Contract of Lease was prepared by respondent PPA containing the following terms: 1. The lease of the area shall take effect on January 1 to June 30, 2001 or until such time that PPA turns over its operation to the winning bidder for the North Harbor modernization; 2. You shall pay a monthly rental rate of P12.15 per square meter or an aggregate monthly rental amount of P886,950.00; 3. All structures/improvements introduced in the leased premises shall be turned over to PPA; 4. Water, electricity, telephone and other utility expenses shall be for the account of William, Gothong & Aboitiz, Inc.; 5. Real Estate tax/insurance and other government dues and charges shall be borne by WG&A. The said contract was eventually conformed to and signed by the petitioner company, through its President/Chief Executive Officer Endika Aboitiz, Jr. Thereafter, in accordance with the stipulations made in the lease agreement, PPA surrendered possession of the Marine Slip Way in favor of the petitioner. However, believing that the said lease already expired on June 30, 2001, respondent PPA subsequently sent a letter to petitioner WG&A dated November 12, 2001 directing the latter to vacate the contested premises not later than November 30, 2001 and to turnover the improvements made therein pursuant to the terms and conditions agreed upon in the contract. In response, petitioner WG&A wrote PPA on November 27, 2001 urging the latter to reconsider its decision to eject the former. Said request was denied by the PPA via a letter dated November 29, 2001. On November 28, 2001, petitioner WG&A commenced an Injunction suit before the Regional Trial Court of Manila. Petitioner claims that the PPA unjustly, illegally and prematurely terminated the lease contract. It likewise prayed for the issuance of a temporary restraining order to arrest the evacuation. In its complaint, petitioner also sought recovery of damages for breach of contract and attorney's fees. On December 11, 2001, petitioner WG&A amended its complaint for the first time. The complaint was still denominated as one for Injunction with prayer for TRO. In the said amended pleading, the petitioner incorporated statements to the effect that PPA is already estopped from denying that the correct period of lease is "until such time that the North Harbor Modernization Project has been bidded out to and operations turned over to the winning bidder. It likewise included, as its third cause of action, the additional relief in its prayer, that should the petitioner be forced to vacate the said facility, it should be deemed as entitled to be refunded of the value of the improvements it introduced in the leased property.

Following the first amendment in the petitioner's complaint, respondent PPA submitted its answer on January 23, 2002. Meanwhile, the TRO sought by the former was denied by the trial court by way of an order dated January 16, 2002. Petitioner later moved for the reconsideration of the said Order on February 11, 2002. Shortly thereafter, petitioner filed a Motion to Admit Attached Second Amended Complaint. This time, however, the complaint was already captioned as one for Injunction with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction and damages and/or for Reformation of Contract. Also, it included as its fourth cause of action and additional relief in its prayer, the reformation of the contract as it failed to express or embody the true intent of the contracting parties. The admission of the second amended complaint met strong opposition from the respondent PPA. It postulated that the reformation sought for by the petitioner constituted substantial amendment, which if granted, will substantially alter the latter's cause of action and theory of the case. On March 22, 2002, the respondent judge issued an Order denying the Admission of the Second Amended Complaint. Petitioner filed a motion for reconsideration of the aforesaid order but the same was again denied in an order dated April 26, 2002.2 Herein respondent WG&A then filed a petition for certiorari with the CA seeking the nullification of the aforementioned RTC orders. In its Decision dated October 24, 2002, the CA granted respondent's petition, thereby setting aside the RTC orders and directing the RTC to admit respondent's second amended complaint pursuant to Section 3, Rule 10 of the 1997 Rules of Civil Procedure. Petitioner moved for reconsideration but the same was denied per Resolution dated May 15, 2003. Hence, the present petition where the only issue raised is whether the CA erred in ruling that the RTC committed grave abuse of discretion when it denied the admission of the second amended complaint. The Court finds the petition without merit. The CA did not err in finding that the RTC committed grave abuse of discretion in issuing the Order dated March 22, 2002 denying the admission of respondent's second amended complaint. The RTC applied the old Section 3, Rule 10 of the Rules of Court: Section 3. Amendments by leave of court. after the case is set for hearing, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay the action or that the cause of action or defense is substantially altered. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

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Rules 6-10.REMLAWREV instead of the provisions of the 1997 Rules of Civil Procedure, amending Section 3, Rule 10, to wit: SECTION 3. Amendments by leave of court. Except as provided in the next preceding section, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard. The Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela v. Court of Appeals,3 thus: Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that the phrase "or that the cause of action or defense is substantially altered" was stricken-off and not retained in the new rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of action or defense." This should only be true, however, when despite a substantial change or alteration in the cause of action or defense, the amendments sought to be made shall serve the higher interests of substantial justice, and prevent delay and equally promote the laudable objective of the rules which is to secure a "just, speedy and inexpensive disposition of every action and proceeding."4 The application of the old Rules by the RTC almost five years after its amendment by the 1997 Rules of Civil Procedure patently constitutes grave abuse of discretion. WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Appeals promulgated on October 24, 2002 and its Resolution dated May 15, 2003 are hereby AFFIRMED in toto. SO ORDERED. Footnotes * In lieu of Justice Minita V. Chico-Nazario, per Special Order No. 484 dated January 11, 2008. 1 Penned by CA Associate Justice Bienvenido L. Reyes, with then Associate Justice, now COMELEC Commissioner Romeo A. Brawner and CA Associate Justice Mario L. Guaria III, concurring; p. 34, rollo. 2 Rollo, pp. 35-37. 3 416 Phil. 289 (2001). 4 Id. at 297. G.R. No. 148120 October 24, 2003

DECISION PUNO, J.: The issue in this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court is whether Branch 21 of the Regional Trial Court of Mambusao, Capiz should admit the amended answer of petitioners. Respondents Lydia Quirao and Leopoldo Quirao, Jr. filed before the trial court a complaint for recovery of possession, ownership and damages against petitioners Rodrigo Quirao, Monica Quirao, Roberto Quirao, Edilberto Quirao, Gerardo Quirao, Jesus Gole, Lamberto Valdez, Federico Quirao and Avelino Ngitngit.1 Respondents claimed that the late Leopoldo Quirao was the owner of the sugarland, subject matter of the controversy. Respondent Lydia is his widow, while Leopoldo, Jr. is his legitimate son and compulsory heir. They alleged that in 1988, petitioners forcibly took possession of the sugarland and appropriated for themselves its income. They prayed for the issuance of a writ of Preliminary Mandatory Injunction for petitioners to vacate the property.2 In their Answer, petitioners claimed that the subject property was owned by their grandfather, Segundo Clarito; that petitioner Rodrigo Quirao had been in possession of the land even before the Second World War; and that Leopoldo Quirao never possessed it. They further alleged that petitioners Jesus Gole, Avelino Ngitngit and Lamberto Valdez were recipients of Emancipation Patents issued by the government.3 A few months after their Answer, petitioners filed a Motion to Dismiss the complaint citing a Deed of Extra-Judicial Partition with Sale of the subject property purportedly executed by respondents in favor of a certain Carlito de Juan ("de Juan"). Petitioners contended that since respondents no longer own the property, they lack the standing to file the complaint.4 They further alleged that it was only after they filed their Answer that they learned of the existence of the deed. The trial court denied the motion to dismiss for lack of merit.5 The case underwent pre-trial. Petitioners' second counsel, who took over the case, filed an amended pre-trial brief which reiterated the allegation that respondents were not the real parties in interest as they had sold the property to de Juan. Trial ensued and after respondents rested their case, petitioners filed a "Motion for Leave of Court to Admit Attached Amended Answer."6 They sought the amendment of their Answer by adding the alternative defense that even if respondents were the owners of the property by inheritance from Leopoldo Quirao, they (respondents) executed a Deed of Extra-Judicial Partition of Property with Sale in favor of de Juan. They further claimed that in turn, de Juan sold part of the property to them.7 The second sale appears to be evidenced by a Deed of Sale8 involving part of the subject property executed by de Juan and petitioners. It also appears that Rodrigo made a partial payment of P50,000.00, evidenced by the receipt signed by de Juan.9 Respondents opposed the motion on the grounds that: (1) it is dilatory and (2) the amendments are substantial and cannot be allowed as the parties have already undergone a pre-trial conference.10

RODRIGO QUIRAO, MONICA QUIRAO, ROBERTO QUIRAO, EDILBERTO QUIRAO, JESUS GOLE, GERARDO QUIRAO, LAMBERTO VALDEZ & FEDERICO QUIRAO, petitioners, vs. LYDIA QUIRAO & LEOPOLDO QUIRAO, JR., respondents.

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Rules 6-10.REMLAWREV The motion was again denied by the trial court. It ratiocinated that the amendments will prejudice the respondents since they had already rested their case and the alleged facts were already existing and known to the petitioners when they filed their answer.11 Petitioners' motion for reconsideration12 was likewise denied.131awphi1.nt Petitioners repaired to the Court of Appeals which also dismissed their petition for lack of merit. The appellate court ruled that the amendments are basically the same issues raised in their motion to dismiss and are substantial ones which may properly be refused. It cited Batara vs. Court of Appeals,14 where we held that the negligence and ignorance of petitioners' previous counsels cannot qualify as "transcendental matters" which can outweigh technicalities.15 Petitioners filed a motion for reconsideration16 but their efforts were in vain.17 Thus, this petition based on the following grounds: A. THE OMISSION AND INACTION SEPARATELY AND INDIVIDUALLY COMMITTED BY EACH OF PETITIONERS' THREE PREVIOUS LAWYERS CONSTITUTE MERELY SIMPLE NEGLIGENCE WHICH, AS A GENERAL RULE, SHOULD BIND THEM. HOWEVER, WHEN PUT AND CONSIDERED TOGETHER, SUCH OMISSION AND INACTION ARE TRANSFORMED INTO AND COULD BE RIGHTFULLY CONSIDERED AS GROSS AND RECKLESS AND, HENCE, SHOULD NOT AND COULD NEVER BIND THEM. IT IS HUMBLY SUBMITTED THAT EVEN AT THIS LATE STAGE OF THE PROCEEDING, THE AMENDMENTS SOUGHT TO BE INTRODUCED IN THE ORIGINAL ANSWER MAY STILL BE LAWFULLY ALLOWED; OTHERWISE, PETITIONERS WOULD BE DEPRIVED OF THEIR PROPERTY WITHOUT DUE PROCESS OF LAW; B. IN THE HIGHER INTEREST OF SUBSTANTIAL JUSTICE, THE AMENDMENTS SOUGHT TO BE INTRODUCED IN THE ORIGINAL ANSWER SHOULD HAVE BEEN LIBERALLY ALLOWED SINCE THIS COURSE OF ACTION WOULD RESULT IN THE RESOLUTION OF THE CASE BELOW BASED ON PURE MERITS, RATHER THAN ON PURE TECHNICALITY. MOREOVER, THE RIGHTS OF RESPONDENTS COULD BE AMPLY PROTECTED, AND WHATEVER DELAY HAS ALREADY BEEN INCURRED IS NEVER SOLELY ATTRIBUTABLE TO PETITIONERS; C. THE COURT A QUO HAS LIBERALLY CONSTRUED THE RULES IN FAVOR OF RESPONDENTS AND STRICTLY CONSTRUED THEM AGAINST PETITIONERS; and D. IN ITS DECISION, THE COURT OF APPEALS COMMITTED THE FOLLOWING ERRORS: 1) IT RULED THAT THE MATTER SOUGHT TO BE INTRODUCED IN THE ORIGINAL ANSWER IS THE SAME ISSUE ALLEGED IN PETITIONERS' MOTION TO DISMISS WHICH WAS DENIED BY THE COURT A QUO; 2) IT FAILED TO DISCUSS THE THIRD GROUND EVEN AS THIS WAS EXPLICITLY RAISED BEFORE IT; AND 3) IT APPLIED THE JURISPRUDENCE LAID IN (sic) DOWN IN THE BATARA CASE.18 The Rules of Court allow amendments of pleadings as a matter of right before a responsive pleading is served;19 otherwise, leave of court must first be obtained.20 Our case law teaches us that amendments to pleadings are favored and should be liberally allowed in furtherance of justice. This liberality is greatest in the early stages of a lawsuit, decreases as it progresses, and changes at times to a strictness amounting to a prohibition. Amendments are likewise subject to the limitation that they are not dilatory.21 Thus, trial courts are given the discretion to grant leave of court to file amended pleadings, and their exercise of this discretion will normally not be disturbed on appeal, unless there is evident abuse thereof.22 In the case at bar, petitioners filed their motion for leave of court to admit amended answer only after respondents have rested their case. Petitioners argue that the error was due to the oversight of the three previous counsels. Petitioners' fourth counsel also claims that he learned of the alternative defense late as his clients (petitioners herein) did not inform him of the Deed of Sale.23 Allegedly, they relied on the advice of their previous counsels that the said deed of sale "was a mere scrap of paper because it was not signed by Carlito de Juan."24 Respondents contend that petitioners' motion is too late in the day. Petitioners' motion for admission of amended answer may be a little tardy but this by itself is not a cause for its denial. Their amended answer alleges that respondents no longer own the subject property having sold the same to de Juan who, in turn, sold the property to petitioners. These allegations, if correct, are vital to the disposition of the case at bar. The interest of justice and equity demand that they be considered to avoid a result that is iniquitous.1vvphi1.nt Truth cannot be barred by technical rules. For this reason, our ruling case law holds that amendments to pleadings are generally favored and should be liberally allowed in furtherance of justice so that every case may so far as possible be determined on its real facts and in order to prevent the circuity of action.25 We should always bear in mind that rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application especially on technical matters, which tends to frustrate rather than promote substantial justice, must be avoided. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from the courts.26 IN VIEW WHEREOF, the petition is GRANTED. Branch 21 of the Regional Trial Court of Mambusao, Capiz is directed to admit the amended answer. SO ORDERED. Panganiban, Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur. RAFAEL BAUTISTA and LIGAYA ROSEL,Petitioners, - versus MAYA-MAYA COTTAGES, INC.,Respondent. G.R. No. 148361 November 29, 2005 x------------------------------------------------------------------------------------------------x RESOLUTION SANDOVAL GUTIERREZ, J.: For our resolution is the instant petition for review on certiorari assailing the Decision[1] and Resolution of the Court of Appeals, dated November 24, 2000 and May 30, 2001, respectively, in CA-G.R. SP No. 43574. The facts are:

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Rules 6-10.REMLAWREV Spouses Rafael and Ligaya Bautista, petitioners herein, are the registered owners of a 3,856-square meter lot located at Natipuan, Nasugbu, Batangas, as evidenced by Original Certificate of Title (OCT) No. P-1436 issued in their names on January 15, 1989 by the Register of Deeds, same province. On May 13, 1996, Maya-Maya Cottages, Inc. (MMCI), respondent, filed with the Regional Trial Court (RTC) of Nasugbu, Batangas a complaint for cancellation of petitioners' title and damages, with application for a preliminary injunction, docketed as Civil Case No. 371. Respondent alleged inter alia that without any color of right and through dubious means, petitioners were able to obtain OCT No. P-1436 in their names. On May 29, 1996, petitioners filed a motion to dismiss the complaint on the ground that it does not state a cause of action. They averred that respondent is a private corporation, hence, disqualified under the Constitution[2] from acquiring public alienable lands except by lease. Respondent cannot thus be considered a real party in interest. In its Order dated August 30, 1996, the trial court granted the motion to dismiss, holding that since the property is an alienable public land, respondent is not qualified to acquire it except by lease. Thus, it has no cause of action. Respondent then filed a motion for reconsideration with motion for leave to file an amended complaint for quieting of title. Respondent alleged that the technical description in petitioners' title does not cover the disputed lot. Thereupon, petitioners filed their opposition, contending that the amended complaint does not also state a cause of action and if admitted, respondent's theory of the case is substantially modified. On November 18, 1996, the trial court issued an Order denying petitioners' motion to dismiss, thus, reversing its Order of August 30, 1996 dismissing the complaint in Civil Case No. 371. Petitioners then filed with the Court of Appeals a special civil action for certiorari and prohibition, docketed as CA-G.R. SP No. 43574. They alleged that the amended complaint does not cure the defect in the original complaint which does not state a cause of action. Clearly, in admitting respondent's amended complaint, the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction. On November 24, 2000, the Court of Appeals rendered a Decision dismissing the petition for certiorari and prohibition. Petitioners filed a motion for reconsideration but was denied by the Appellate Court in its Resolution of May 30, 2001. Hence, the instant petitioner for review on certiorari. The sole issue for our resolution is whether the Court of Appeals erred in holding that the trial court did not commit grave abuse of discretion amounting to lack or excess of jurisdiction in admitting respondent's amended complaint.

Section 2, Rule 10 of the 1997 Rules of Civil Procedure, as amended, provides: 'SEC. 2. Amendments as a matter of right. ' A party may amend his pleading once as a matter of right at any time before a responsive pleading is served or, in the case of a reply, at any time within ten (10) days after it is served. The above provision clearly shows that before the filing of any responsive pleading, a party has the absolute right to amend his pleading, regardless of whether a new cause of action or change in theory is introduced. It is settled that a motion to dismiss is not the responsive pleading contemplated by the Rule.[3] Records show that petitioners had not yet filed a responsive pleading to the original complaint in Civil Case No. 371. What they filed was a motion to dismiss. It follows that respondent, as a plaintiff, may file an amended complaint even after the original complaint was ordered dismissed, provided that the order of dismissal is not yet final,[4] as in this case. Verily, the Court of Appeals correctly held that in issuing the assailed Order admitting the amended complaint, the trial court did not gravely abuse its discretion. Hence, neither certiorari nor prohibition would lie. As to petitioners' contention that respondent corporation is barred from acquiring the subject lot, suffice it to say that this is a matter of defense which can only be properly determined during the full-blown trial of the instant case. WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 43574 are AFFIRMED IN TOTO. Costs against petitioners. SO ORDERED. Irene Marcos-Araneta v. CA GR 154096 Aug 22, 2008, supra LAPRECIOSISIMA CAGUNGUN, REMEDIOS L. CAGUNGUN, JESUS L. CAGUNGUN, VICENTE L. CAGUNGUN, JR., RICARDO L. CAGUNGUN, EDUARDO L. CAGUNGUN, ROWENA L. CAGUNGUN, ALVIN L. CAGUNGUN and ALMA L. CAGUNGUN, P e t i t i o n e r s, - versus PLANTERS DEVELOPMENT BANK, R e s p o n d e n t. Promulgated: October 17, 2005 X--------------------------------------------------X DECISION CHICO-NAZARIO, J.: Assailed in a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure are the decision[1] of the Court of Appeals dated 25 March 2002 that

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Rules 6-10.REMLAWREV modified the decision of the Regional Trial Court (RTC) of Olongapo City, Branch 74, in Civil Case No. 245-0-83, dated 26 June 1997, deleting the awards of moral and exemplary damages and finding that the mortgaged loan was deemed paid and enjoining foreclosure, as well as reducing the awards for litigation fees and expenses, and its Resolution[2] dated 06 June 2003 denying petitioners Lapreciosisima Cagungun, et al.s' motion for reconsideration. The antecedents are summarized by the Court of Appeals in its decision as follows: On September 1, 1987, the spouses Vicente Cagungun and Lapreciosisima Cagungun (or the Cagungun spouses) filed suit with the Regional Trial Court of Olongapo City against the Country Development Bank (or COUNTRY), and which was docketed as Civil Case No. 245-083 and assigned to Branch 74. Vicente Cagungun has since died and was substituted as plaintiff on August 8, 1984 by their children. On the other hand COUNTRY has entered into a merger and reflective of this the party defendant has been changed to Planters Development Bank (or PLANTERS) on September 1, 1987. COUNTRY had opened an extension office in Olongapo City, and among their first customers were the Cagungun spouses who had diverse business interests in the locality. They opened some accounts, and for two (2) of which they were issued Savings Passbook No. 12241-16 in the name of Puring's Dry Goods and Savings Passbook No. 38470-29 in the names of V/L Cagungun. It was claimed by the Cagungun spouses and testified to by them and their daughter-in-law Sarah Cagungun, that because of the exigencies of their businesses that required daily deposits of the proceeds and of the trust that they have reposed with COUNTRY and its personnel, they entrusted and left with them their said savings pass books. At least once a day the Branch manager Ruperto Reyes or a certain Bong and Ding would come to get their funds and with the agreement that these would be rounded off and deposited to their account while the odd remainder would be applied to their loan. The arrangement apparently went well, until March 1981 when the Cagungun spouses received a letter from COUNTRY telling them that their loan is past due and payment was demanded . . . or else. This prompted them to investigate, but this was tedious and difficult because of lack of cooperation and even resistance from COUNTRY. But with the help of friends in high places the Cagungun spouses were able to access and pry information that in the year 1979 on the dates of October 8, 18, 20 and 31 and November 15, and December 4 and 8, with the use of withdrawal slips a total of P220,000.00 was withdrawn from their Savings Passbook No. 12241-16. These withdrawals were invalid for no such withdrawal was authorized, made or received by the depositors, and the signatures of Vicente Cagungun on the slips were forgeries. This was confirmed by Arcadio Ramos, Chief of the Questioned Documents Division of the NBI when these were subjected to examination. The side of PLANTERS was explicated by its employees, Internal Auditor Lilia Tactay, Branch Manager Lolita Mendoza and Cashier Bella Lumanog. It was explained that the withdrawal of P20,000.00 made on October 8, 1979 from Savings Account No. 12241-16 and the withdrawals of a total of P30,000.00 from several of the other accounts of the spouses, were placed on time deposits on the same date by Vicente Cagungun in five (5) accounts held with their children. The other said withdrawals from Savings Account No. 12241-16 were made by Vicente Cagungun in exchange for Manager's Checks made in the names of payees Santiago Lee, Rosita Saldana, Benito Yap and Joaquin Aganda.[3] The lower court ruled, among other things, that the withdrawals from Savings Account No. 12241-16 through seven (7) withdrawal slips[4] amounting to P220,000.00 were not made by petitioners as the alleged signatures of Vicente Cagungun, Jr. appearing therein were falsified as confirmed by the National Bureau of Investigation Handwriting Expert Arcadio Ramos. It likewise considered petitioners to have paid their mortgage loan in the amount of P58,297.16 in view of their instruction to respondent to apply their funds in Savings Account No. 38470-29 thereto which were adequate for this purpose. For not applying the savings of petitioners in Savings Account No. 38470-29 as payment to their loan, thereby causing the threatened foreclosure of the real estate mortgage over their house and lot, and for allowing the unauthorized withdrawals from Savings Account No. 12241-16 through falsified withdrawal slips, the lower court held respondent liable to pay moral damages. For ignoring the two (2) demand letters of petitioners, the demand letter of petitioners' counsel and the representations made by Pampanga Gov. Estelito Mendoza and Central Bank Governor Jaime Laya, and for the attempt to cover up the misdeeds of its employees constituting malice and bad faith, respondent was also ordered to pay exemplary damages as an example to others. On account of these acts, respondent was also ordered to pay attorney's fees and the cost of suit. In its decision[5] dated 26 June 1997, the lower court disposed of the case in this wise: WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant as follows: 1.) Enjoining the defendant from foreclosing the mortgage of plaintiffs property located at No. 88 Gordon Avenue, Pag-asa, Olongapo City; 2.) Ordering the defendant to pay plaintiffs the amount of P220,000.00 actual damages representing the total amount withdrawn from their accounts plus twelve (12%) per cent interest per annum from the date of the filing of the complaint until it shall have been fully paid; 3.) Considering plaintiffs mortgaged account in the amount of P58,297.16 to have been paid; 4.) Ordering the defendant to pay plaintiffs the amount of P300,000.00 moral damages; 5.) Ordering the defendant to pay plaintiffs the amount of P300,000.00 exemplary damages; and 6.) Ordering defendant to pay plaintiffs the amount of P50,000.00 litigation expense, P50,000.00 attorney's fee plus the cost of suit.[6] Aggrieved, respondent appealed to the Court of Appeals. The Court of Appeals agreed that money was withdrawn from the deposits of petitioners without their authority or knowledge, and that this was done by one or some of the personnel of respondent. However, it held that petitioners are not free from the obligation to pay the admitted loan (P58,297.16) for though the same was not paid for failure of respondent to comply with the instruction to apply the remainder of the sums deposited to their loan, it remained admittedly an unpaid

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Rules 6-10.REMLAWREV obligation. It removed the awards for moral and exemplary damages and reduced the awards for attorney's fees and litigation expenses. The Court of Appeals promulgated its decision on 25 March 2002, the dispositive portion of which reads: WHEREFORE, the appealed decision is AFFIRMED, but with these MODIFICATONS (a) the dispositions in Par. 1 and Par. 3 of the fallo deeming the mortgaged loan paid and enjoining foreclosure, are DELETED; (b) the disposition in Par. 4 and Par. 5 of the fallo awarding moral and exemplary damages, are DELETED; and (c) the awards of litigation fees and expenses are REDUCED to a combined P30,000.00.[7] The motion for reconsideration filed by petitioners was denied in a resolution dated 06 June 2003.[8] Petitioners are now before us assailing the Decision and Resolution of the Court of Appeals when the latter: (A) DELETED THE PORTION OF THE RTC DECISION DECLARING THE MORTGAGED LOAN PAID AND ENJOINING FORECLOSURE; (B) DELETED THE AWARD OF MORAL AND EXEMPLARY DAMAGES; AND (C) REDUCED THE LITIGATION FEES AND EXPENSES.[9] Respondent filed a Comment[10] on 04 September 2003 to which petitioners filed their Reply[11] dated 06 February 2004. On 06 December 2004, the Court gave due course to the petition and required the parties to submit their respective memoranda within thirty (30) days from notice. [12] Both parties complied.[13] We first discuss the deletion made by the Court of Appeals of the awards of moral damages and exemplary damages. Petitioners maintain that the Court of Appeals erred in removing the award of moral damages considering that it is settled jurisprudence that the same should be awarded when the injured party suffers mental anguish and serious anxiety. They contend that the Court of Appeals failed to appreciate the torment they suffered from the time they noticed their deposits were not properly recorded until the receipt of respondent's letter threatening the foreclosure of their residential house and lot for a loan of P58,000.00. They narrated that respondent bank refused to give them copies of the ledgers of their deposits as well as copies of the withdrawal slips. Despite the intercession of Pampanga Governor Estelito Mendoza and Central Bank Governor Jaime Laya, respondent did not give them copies of the ledgers and withdrawal slips. It was only after the Chief of the Criminal Investigation Service (CIS) of the Philippine Constabulary sent two of his investigators, whom they authorized to look into the records of their deposits, that they received copies thereof. They discovered therein that the sum of P220,000.00 was withdrawn from their accounts by respondent bank through its employees by falsifying the signatures of Vicente Cagungun, Jr. in seven withdrawal slips. Despite the forgeries, they refused to acknowledge its liability. Thus, on 07 September 1983, in order to protect their rights, petitioners were forced to file the instant case with prayer for issuance of a temporary restraining order and/or writ of preliminary injunction to enjoin the foreclosure of their property. Petitioners insist that respondent, in allowing withdrawals in their savings account without their authority or knowledge, is guilty of gross negligence to which it is liable for moral damages. On the other hand, respondent maintains that the Court of Appeals was correct in deleting the award of moral damages. Respondent argues that it should not be faulted if petitioners had to experience inconveniences in acquiring copies of ledgers of their deposits as well as copies of the withdrawal slips since certain banking procedures must be observed. It likewise faults petitioners for not strictly observing security rules of financial institutions in the care and custody of their passbooks, as well as in the standard operating procedure for deposits and withdrawals which led to the alleged improper recording of deposits and the alleged losses they incurred. It stresses that passbooks should be securely kept by the owner but, in the case of petitioners, they openly entrusted their passbooks to other people leaving them totally unable to monitor their transactions. It added that there was absence of any actual injury on the part of the petitioners. It asserts that it neither acted in bad faith nor took advantage of petitioners' deposit for its use and benefit. It claims that petitioners failed to establish fraud on the part of respondent bank as to make it liable for the alleged improper recording of deposits. It claims that petitioners failed to present in court the persons (Bong or Ding) to whom they entrusted their money for deposit and to prove that Ruperto Reyes, then Officer-In-Charge (O-I-C) of the Extension Office of Country Development Bank, defrauded them by facilitating withdrawals for the benefit of the bank. No proof was adduced to show that they verified if the persons to whom they delegated to make the deposits faithfully performed the tasks in accordance with their intentions. Respondent insists that it is the negligence of petitioners, not fraud on its part, which was the reason that petitioners' deposits were not applied in accordance with their intentions resulting to the (threatened) foreclosure of their mortgaged property. From the foregoing reasons advanced by respondent bank, it is apparent that it is trying to pass all the blame on petitioners for the unauthorized withdrawals amounting to P220,000.00 and the non-applications of deposits to their loan. This cannot be. The fact that petitioners left the custody of their passbooks to respondent, through its employee O-I-C Ruperto Reyes, and that they entrusted to Bong or Ding their deposits will not excuse respondent from being liable. Petitioners did these things because they trusted and depended on respondent to take care of their accounts with it. If respondent bank was really strict in enforcing the banking rule that the passbook must be kept by the depositor, why did it not do so? For its failure, any anomaly or damage that might result therefrom should be borne by it. We, likewise, find untenable respondent's contention that petitioners should have presented O-I-C Ruperto Reyes, Bong or Ding as witnesses to clear the air. On the contrary, it should have been respondent's duty to present these persons they being their employees. It should have presented these people, especially O-I-C Ruperto Reyes, who had custody of the passbooks, to explain why unauthorized withdrawals were made and why the instruction to apply petitioners' deposit to their loan was not complied with.

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Rules 6-10.REMLAWREV The bank was indeed grossly negligent when it allowed the sum of P220,000.00 to be withdrawn through falsified withdrawal slips without petitioners' authority and knowledge and its failure to comply with petitioners' instruction to apply their deposits on their loan. In so doing, respondent bank breached the trust that petitioners reposed on it. We agree in the findings of the two courts below that the unauthorized transactions were committed by one or some of the employees of respondent bank for which it should be liable. The evidence showed that respondent did not exercise the degree of diligence it ought to have exercised in dealing with its clients -- diligence higher than that of a good father of a family. If only respondent exercised such diligence, no anomaly or irregularity would have happened. In the case of Philippine National Bank v. Pike,[14] we discussed the degree of diligence imposed on banks as follows: With banks, the degree of diligence required, contrary to the position of petitioner PNB, is more than that of a good father of a family considering that the business of banking is imbued with public interest due to the nature of their functions. The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. Thus, the law imposes on banks a high degree of obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of banking. Section 2 of Republic Act No. 8791, which took effect on 13 June 2000, makes a categorical declaration that the State recognizes the 'fiduciary nature of banking that requires high standards of integrity and performance. Though passed long after the unauthorized withdrawals in this case, the aforequoted provision is a statutory affirmation of Supreme Court decisions already in esse at the time of such withdrawals. We elucidated in the 1990 case of Simex International, Inc. v. Court of Appeals that 'the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. Likewise, in the case of The Consolidated Bank and Trust Corporation v. Court of Appeals, we clarified that said fiduciary relationship means that the bank's obligation to observe 'highest standards of integrity and performance is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the New Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a family. In every case, the depositor expects the bank to treat his account with utmost fidelity, whether such accounts consists only of a few hundred pesos or of millions of pesos. Settled is the rule that gross negligence of a bank in the handling of its client's deposit amounts to bad faith that calls for an award of moral damages. Moral damages are meant to compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injuries unjustly caused.[15] In the case at bar, the failure of the bank to prevent seven unauthorized withdrawals from the deposits of petitioners and its non-compliance with petitioners' instructions regarding the loan payments constitute gross negligence which justifies the award of moral damages. As employer, respondent is liable for the negligence or misdeed of its employees which caused petitioners to have sleepless nights thinking about the threatened foreclosure of their house and lot. In addition, the way respondent gave petitioners a hard time in securing copies of their withdrawal slips and ledgers of their deposits is an indication of bad faith. Respondent could have easily cooperated with petitioners by immediately furnishing the latter with documents they wanted. This was not to be. Written communications from petitioners' lawyers and from the Central Bank Governor were not sufficient in order that respondent will provide petitioners with the documents they needed. It was only after two agents of the CIS of the Philippine Constabulary went to the bank that respondent was obliged to give petitioners what they were asking for. In culpa contractual or breach of contract, as in the case[16] before us, moral damages are recoverable only if the defendant has acted fraudulently or in bad faith,[17] or is found guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligations.[18] In fine, the requisites on award of moral damages would require, firstly, evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicated on any of 'the instances expressed or envisioned by Article 2219[19] and Article 2220 of the Civil Code.[20] All these elements are present in the instant case. There is no hard-and-fast rule in the determination of what would be a fair amount of moral damages since each case must be governed by its own peculiar facts. The yardstick should be that it is not palpably and scandalously excessive.[21] We find the sum of P300,000.00 awarded by the lower courts excessive. In our view, the award of P100,000.00 as moral damages is reasonable and is in accord with our rulings in similar cases involving banks' negligence with regard to the accounts of their depositors.[22] Anent the removal by the Court of Appeals of the award of exemplary damages, we find the same to be not in order. The law allows the grant of exemplary damages to set an example for the public good.[23] The banking system has become an indispensable institution in the modern world and plays a vital role in the economic life of every civilized society. Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business and commerce, banks have attained a ubiquitous presence among the people, who have come to regard them with respect and even gratitude and most of all, confidence.[24] For this reason, banks should guard against injury attributable to negligence or bad faith on its part.[25] The award of exemplary damages is warranted by the failure of respondent bank to prevent the unauthorized withdrawals from petitioners' deposits and its failure to properly apply

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Rules 6-10.REMLAWREV the latter's deposits to their loan. We, however, find the P300,000.00 awarded by the lower court to be excessive and should accordingly be reduced to P50,000.00. On the matter of attorney's fees and expenses of litigation, it is settled that reasons or grounds for the award thereof must be set forth in the decision of court.[26] An award of attorney's fees, being an exception from the policy of putting a premium or a penalty on the right to litigate, has since been limited to grounds specified by law.[27] Article 2208[28] of the Civil Code enumerates instances where attorney's fees and expenses of litigation can be recovered. the the not the the that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence. It is thus clear that when there is an objection on the evidence presented because it is not within the issues made by the pleadings, an amendment must be made before accepting such evidence. If no amendment is made, the evidence objected to cannot be considered. In the case before us, the trial court, there being an objection on the evidence being presented by respondent, failed to order the amendment of the complaint. Thus, we are constrained not to consider evidence regarding the P30,000.00 and P118,000.00 allegedly withdrawn from their accounts. With this ruling, it follows that the outstanding loan of petitioners in the amount of P58,297.16 remains unpaid. As regards respondent's right to exercise its right to foreclosure of the real estate mortgage on petitioners' property, we rule that respondent cannot exercise such right under the circumstances obtaining. It will be the height of inequity if we allow such a thing. The evidence is clear that the sum of P220,000.00 was withdrawn from petitioners' deposits without their knowledge and authority. This amount is more than sufficient to pay for the loan had it not been illegally withdrawn. Neither should petitioners be held liable for any interest on the remaining balance of the loan considering that they could have easily settled their obligation with respondent if they were not embroiled in the anomaly caused by respondent's employees. Finally, payment for the remaining balance of the loan amounting to P58,297.16 should be deducted from the actual damages awarded by the court. WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The 25 March 2002 decision of the Court of Appeals modifying the decision of the Regional Trial Court of Olongapo City is AFFIRMED with MODIFICATIONS. As modified, respondent Planters Development Bank is ordered to pay petitioners the following: (1) P220,000.00 as actual damages representing the total amount withdrawn from petitioners' accounts plus interest of 6% per annum to be computed from the date of the filing of the complaint which interest rate shall become 12% per annum from the time of finality of this judgment until actual payment; (2) P100,000.00 as moral damages; (3) P50,000.00 as exemplary damages; and (4) P25,000.00 as attorney's fees and P25,000.00 for litigation expenses. Respondent is enjoined from foreclosing the real estate mortgage on petitioners' property located at No. 88 Gordon Avenue, Pag-asa, Olongapo City. Payment for the outstanding loan of petitioners in the amount of P58,297.16 shall be deducted from the damages awarded by the Court. SO ORDERED.

In the case at bar, the RTC clearly stated in its decision that petitioners are entitled to attorney's fees and litigation expenses because they were compelled to litigate in order to protect their interest. We agree. Moreover, there being an award for exemplary damages, it follows that there should be an award of attorney's fees and litigation expenses. However, the awards of P50,000.00 for attorney's fees and P50,000.00 for litigation expenses by the RTC are too much, while the award of P30,000.00 of the Court of Appeals for both is too small. In as much as this case has been pending for more than twenty (20) years, the award of P25,000.00 for each will be sufficient. Petitioners claim that the Court of Appeals erred in deleting the portions of the RTC decision declaring their mortgage loan paid and enjoining foreclosure. They insist that they were able to prove that the amounts of P30,000.00 and P118,000.00 were respectively withdrawn from their accounts' (SA No. 38470-29 and No. 12241-16) and that same were not applied as payment for their loan. They maintain that by adding together said amounts, the sum thereof is sufficient to pay their loan and to consider the real estate mortgage as discharged. Looking at the complaint filed by petitioners, there is no allegation that said amounts were withdrawn from their accounts and that same were not applied as payments for their loan. Petitioners likewise did not ask in their prayer that said amounts be returned to them or that they be used to off-set their indebtedness to respondent. Moreover, when petitioners tried to prove this allegation, counsel for respondent objected[29] and attempted to have the testimony thereon stricken off the record on the ground of allegata et probata.[30] Under Section 5, Rule 10 of the Revised Rules of Court,[31] if evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the Court may allow the pleadings to be amended freely when the presentation of the merits of the action will be subserved thereby and the admission of such evidence would not prejudice the objecting party in maintaining his action or defense upon the merit. Said section reads: Sec. 5. Amendment to conform to or authorize presentation of evidence. ' When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court

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