Professional Documents
Culture Documents
GANCAYCO, J.:
This petition for review on certiorari seeks the reversal of the
decision of the Insurance Commission in IC Case
#367 1dismissing the complaint 2 for recovery of the alleged unpaid
balance of the proceeds of the Fire Insurance Policies issued by
herein respondent insurance company in favor of petitionerintervenor.
The facts of the case as found by respondent Insurance
Commission are as follows:
Complainants acquired from a certain Rolando
Gonzales a parcel of land and a building located
at San Rafael Village, Davao City. Complainants
assumed the mortgage of the building in favor of
S.S.S., which building was insured with
respondent S.S.S. Accredited Group of Insurers
for P25,000.00.
On April 19, 1975, Azucena Palomo obtained a
loan from Tai Tong Chuache Inc. in the amount of
P100,000.00. To secure the payment of the loan,
a mortgage was executed over the land and the
building in favor of Tai Tong Chuache & Co.
(Exhibit "1" and "1-A"). On April 25, 1975, Arsenio
Chua, representative of Thai Tong Chuache &
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The following facts are not disputed. They were culled from
official documents, the parties pleadings, as well as from
admissions during the Oral Argument on October 7, 2003.
The Facts
hand, the second envelope would be the Bid Envelope itself. The
RFP outlines the bidding procedures as follows:
"25. Determination of Eligibility of Prospective Bidders
"25.1 The eligibility envelopes of prospective
Bidders shall be opened first to determine their
eligibility. In case any of the requirements
specified in Clause 20 is missing from the first bid
envelope, the BAC shall declare said prospective
Bidder as ineligible to bid. Bid envelopes of
ineligible Bidders shall be immediately returned
unopened.
"25.2 The eligibility of prospective Bidders shall be
determined using simple pass/fail criteria and
shall be determined as either eligible or ineligible.
If the prospective Bidder is rated passed for all
the legal, technical and financial requirements, he
shall be considered eligible. If the prospective
Bidder is rated failed in any of the requirements,
he shall be considered ineligible.
"26. Bid Examination/Evaluation
"26.1 The BAC will examine the Bids to determine
whether they are complete, whether any
computational errors have been made, whether
required securities have been furnished, whether
the documents have been properly signed, and
whether the Bids are generally in order.
"26.2 The BAC shall check the submitted
documents of each Bidder against the required
documents enumerated under Clause 20, to
ascertain if they are all present in the Second bid
envelope (Technical Envelope). In case one (1) or
In a letter-reply dated June 6, 2003,15 the Comelec chairman -speaking through Atty. Jaime Paz, his head executive assistant -rejected the protest and declared that the award "would stand up
to the strictest scrutiny."
Hence, the present Petition.16
The Issues
In their Memorandum, petitioners raise the following issues for
our consideration:
"1. The COMELEC awarded and contracted with a noneligible entity; x x x
"2. Private respondents failed to pass the Technical Test
as required in the RFP. Notwithstanding, such failure was
ignored. In effect, the COMELEC changed the rules after
the bidding in effect changing the nature of the contract
bidded upon.
"3. Petitioners have locus standi.
"4. Instant Petition is not premature. Direct resort to the
Supreme Court is justified."17
In the main, the substantive issue is whether the Commission on
Elections, the agency vested with the exclusive constitutional
mandate to oversee elections, gravely abused its discretion
when, in the exercise of its administrative functions, it awarded to
MPC the contract for the second phase of the comprehensive
Automated Election System.
Before discussing the validity of the award to MPC, however, we
deem it proper to first pass upon the procedural issues: the legal
standing of petitioners and the alleged prematurity of the Petition.
approved the award to MPC on the same day, following which the
recommendation was subsequently reduced into writing on April
21, 2003. While not entirely outside the realm of the possible, this
interesting and unique spiel does not speak well of the process
that Comelec supposedly went through in making a critical
decision with respect to a multi-billion-peso contract.
We can imagine that anyone else standing in the shoes of the
Honorable Commissioners would have been extremely conscious
of the overarching need for utter transparency. They would have
scrupulously avoided the slightest hint of impropriety, preferring to
maintain an exacting regularity in the performance of their duties,
instead of trying to break a speed record in the award of multibillion-peso contracts. After all, between April 15 and April 21
were a mere six (6) days. Could Comelec not have waited out six
more days for the written report of the BAC, instead of rushing
pell-mell into the arms of MPC? Certainly, respondents never
cared to explain the nature of the Commissions dire need to act
immediately without awaiting the formal, written BAC Report.
In short, the Court finds it difficult to reconcile the uncommon
dispatch with which Comelec acted to approve the multi-billionpeso deal, with its claim of having been impelled by only the
purest and most noble of motives.
At any rate, as will be discussed later on, several other factors
combine to lend negative credence to Comelecs tale.
Second, without necessarily ascribing any premature malice or
premeditation on the part of the Comelec officials involved, it
should nevertheless be conceded that this cart-before-the-horse
maneuver (awarding of the Contract ahead of the BACs written
report) would definitely serve as a clever and effective way of
averting and frustrating any impending protest under Section 55.
Having made the foregoing observations, we now go back to the
question of exhausting administrative remedies. Respondents
may not have realized it, but the letter addressed to Chairman
Benjamin Abalos Sr. dated May 29, 200328 serves to eliminate the
prematurity issue as it was an actual written protest against the
decision of the poll body to award the Contract. The letter was
signed by/for, inter alia, two of herein petitioners: the Information
Technology Foundation of the Philippines, represented by its
president, Alfredo M. Torres; and Ma. Corazon Akol.
And even without that May 29, 2003 letter-protest, the Court still
holds that petitioners need not exhaust administrative remedies in
the light of Paat v. Court of Appeals.29 Paat enumerates the
instances when the rule on exhaustion of administrative remedies
may be disregarded, as follows:
"(1) when there is a violation of due process,
(2) when the issue involved is purely a legal question,
(3) when the administrative action is patently illegal
amounting to lack or excess of jurisdiction,
(4) when there is estoppel on the part of the
administrative agency concerned,
(5) when there is irreparable injury,
(6) when the respondent is a department secretary whose
acts as an alter ego of the President bears the implied
and assumed approval of the latter,
(7) when to require exhaustion of administrative remedies
would be unreasonable,
7, 2003, there was not even any indication that MPEI was the
lead company duly authorized to act on behalf of the others.
So, it necessarily follows that, during the bidding process,
Comelec had no basis at all for determining that the alleged
consortium really existed and was eligible and qualified; and that
the arrangements among the members were satisfactory and
sufficient to ensure delivery on the Contract and to protect the
governments interest.
Notwithstanding such deficiencies, Comelec still deemed the
"consortium" eligible to participate in the bidding, proceeded to
open its Second Envelope, and eventually awarded the bid to it,
even though -- per the Comelecs own RFP -- the BAC should
have declared the MPC ineligible to bid and returned the Second
(Bid) Envelope unopened.
Inasmuch as Comelec should not have considered MPEI et al. as
comprising a consortium or joint venture, it should not have
allowed them to avail themselves of the provision in Section 5.4
(b) (i) of the IRR for RA 6957 (the Build-Operate-Transfer Law),
as amended by RA 7718. This provision states in part that a joint
venture/consortium proponent shall be evaluated based on the
individual or collective experience of the member-firms of the joint
venture or consortium and of the contractor(s) that it has engaged
for the project. Parenthetically, respondents have uniformly
argued that the said IRR of RA 6957, as amended, have
suppletory application to the instant case.
Hence, had the proponent MPEI been evaluated based solely on
its own experience, financial and operational track record or lack
thereof, it would surely not have qualified and would have been
immediately considered ineligible to bid, as respondents readily
admit.
At any rate, it is clear that Comelec gravely abused its discretion
in arbitrarily failing to observe its own rules, policies and
The Court does not see, however, how this conclusion was
arrived at. In the first place, the contractual provision being relied
upon by respondents is Article 14, "Independent Contractors,"
which states: "Nothing contained herein shall be construed as
establishing or creating between the COMELEC and MEGA the
relationship of employee and employer or principal and agent, it
being understood that the position of MEGA and of anyone
performing the Services contemplated under this Contract, is that
of an independent contractor."
Obviously, the intent behind the provision was simply to avoid the
creation of an employer-employee or a principal-agent
relationship and the complications that it would produce. Hence,
the Article states that the role or position of MPEI, or anyone else
performing on its behalf, is that of an independent contractor. It is
obvious to the Court that respondents are stretching matters too
far when they claim that, because of this provision, the Contract
in effect confirms the solidary undertaking of the lead company
and the consortium member concerned for the particular phase of
the project. This assertion is an absolute non sequitur.
Enforcement of Liabilities Under the Civil Code Not Possible
In any event, it is claimed that Comelec may still enforce the
liability of the "consortium" members under the Civil Code
provisions on partnership, reasoning that MPEI et al. represented
themselves as partners and members of MPC for purposes of
bidding for the Project. They are, therefore, liable to the Comelec
to the extent that the latter relied upon such representation. Their
liability as partners is solidary with respect to everything
chargeable to the partnership under certain conditions.
The Court has two points to make with respect to this argument.
First, it must be recalled that SK C&C, WeSolv, Election.com and
ePLDT never represented themselves as partners and members
of MPC, whether for purposes of bidding or for something else. It
was MPEI alone that represented them to be members of a
members of the "consortium" could meet the criteria set out in the
RFP.
Thus, according to respondents, the collective nature of the
undertaking of the members of MPC, their contribution of assets
and sharing of risks, and the community of their interest in the
performance of the Contract lead to these reasonable
conclusions: (1) that their collective qualifications should be the
basis for evaluating their eligibility; (2) that the sheer enormity of
the project renders it improbable to expect any single entity to be
able to comply with all the eligibility requirements and undertake
the project by itself; and (3) that, as argued by the OSG, the RFP
allows bids from manufacturers, suppliers and/or distributors that
have formed themselves into a joint venture, in recognition of the
virtual impossibility of a single entitys ability to respond to the
Invitation to Bid.
Additionally, argues the Comelec, the Implementing Rules and
Regulations of RA 6957 (the Build-Operate-Transfer Law) as
amended by RA 7718 would be applicable, as proponents of BOT
projects usually form joint ventures or consortiums. Under the
IRR, a joint venture/consortium proponent shall be evaluated
based on the individual or the collective experience of the
member-firms of the joint venture/consortium and of the
contractors the proponent has engaged for the project.
Unfortunately, this argument seems to assume that the
"collective" nature of the undertaking of the members of MPC,
their contribution of assets and sharing of risks, and the
"community" of their interest in the performance of the Contract
entitle MPC to be treated as a joint venture or consortium; and to
be evaluated accordingly on the basis of the members collective
qualifications when, in fact, the evidence before the Court
suggest otherwise.
This Court in Kilosbayan v. Guingona46 defined joint venture as
"an association of persons or companies jointly undertaking some
commercial enterprise; generally, all contribute assets and share
"4. Each party shall bear its own costs and expenses
relative to this agreement unless otherwise agreed upon
by the parties.
"5. The parties undertake to do all acts and such other
things incidental to, necessary or desirable or the
attainment of the objectives and purposes of this
Agreement.
"6. In the event that the parties fail to agree on the terms
and conditions of the supply of the products and services
including but not limited to the scope of the products and
services to be supplied and payment terms, WeSolv shall
cease to be bound by its obligations stated in the
aforementioned paragraphs.
"7. Any dispute arising from this Agreement shall be
settled amicably by the parties whenever possible. Should
the parties be unable to do so, the parties hereby agree to
settle their dispute through arbitration in accordance with
the existing laws of the Republic of the Philippines."
(Underscoring supplied.)
Even shorter is the Memorandum of Agreement between MPEI
and SK C&C Co. Ltd., dated March 9, 2003, the body of which
consists of only six (6) paragraphs, which we quote:
"1. All parties agree to cooperate in achieving the
Consortiums objective of successfully implementing the
Project in the substance and form as may be most
beneficial to the Consortium members and in accordance
w/ the demand of the RFP.
"2. Mega Pacific shall have full powers and authority to
represent the Consortium with the Comelec, and to enter
and sign, for and in behalf of its members any and all
to agree on the scope, the terms and the conditions for the supply
of the products and services under the Agreement. In that
situation, by virtue of paragraph 6 of its MOA, WeSolv would
perforce cease to be bound by its obligations -- including its joint
and solidary liability with MPEI under the MOA -- and could
forthwith disengage from the project. Effectively, WeSolv could at
any time unilaterally exit from its MOA with MPEI by simply failing
to agree. Where would that outcome leave MPEI and Comelec?
To the Court, this strange and beguiling arrangement of MPEI
with the other companies does not qualify them to be treated as a
consortium or joint venture, at least of the type that government
agencies like the Comelec should be dealing with. With more
reason is it unable to agree to the proposal to evaluate the
members of MPC on a collective basis.
In any event, the MPC members claim to be a joint
venture/consortium; and respondents have consistently been
arguing that the IRR for RA 6957, as amended, should be applied
to the instant case in order to allow a collective evaluation of
consortium members. Surprisingly, considering these facts,
respondents have not deemed it necessary for MPC members to
comply with Section 5.4 (a) (iii) of the IRR for RA 6957 as
amended.
According to the aforementioned provision, if the project
proponent is a joint venture or consortium, the members or
participants thereof are required to submit a sworn statement
that, if awarded the contract, they shall bind themselves to be
jointly, severally and solidarily liable for the project proponents
obligations thereunder. This provision was supposed to mirror
Section 5 of RA 6957, as amended, which states: "In all cases, a
consortium that participates in a bid must present proof that the
members of the consortium have bound themselves jointly and
severally to assume responsibility for any project. The withdrawal
of any member of the consortium prior to the implementation of
the project could be a ground for the cancellation of the contract."
The Court has certainly not seen any joint and several
Note: This
particular
requirement
needs further
verification
KEY REQUIREMENTS
QUESTIONS
YES
1. Does the machine have an accuracy
NO
Note: This
particular
Hard copy
Soft copy
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requirement
needs further
verification
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requirement
needs further
verification
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verification
Note: This
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requirement
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verification
Note: This
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needs further
verification
Note: This
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requirement
needs further
verification
Note: This
particular
requirement
needs further
verification
Note: This
particular
requirement
needs further
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Note: This
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requirement
needs further
verification
Note: This
particular
requirement
needs further
verification
25. Is the Program able to detect previously
downloaded precinct results and prevent
Audit Trail
Note: This
particular
requirement "The BAC further noted that both Mega-Pacific and TIM
needs further obtained some failed marks in the technical evaluation.
verification
In general, the failed marks of Total Information
Management as enumerated above affect the counting
machine itself which are material in nature, constituting
non-compliance to the RFP. On the other hand, the failed
marks of Mega-Pacific are mere formalities on certain
documentary requirements which the BAC may waive as
Note: This
clearly indicated in the Invitation to Bid.
particular
requirement
needs further "In the DOST test, TIM obtained 12 failed marks and
mostly attributed to the counting machine itself as stated
verification
earlier. These are requirements of the RFP and therefore
the BAC cannot disregard the same.
"Mega-Pacific failed in 8 items however these are mostly
on the software which can be corrected by
The first of the key requirements was that the counting machines
were to have an accuracy rating of at least 99.9995 percent.
The BAC Report indicates that both Mega Pacific and TIM failed
to meet this standard.
The key requirement of accuracy rating happens to be part and
parcel of the Comelecs Request for Proposal (RFP). The RFP, on
page 26, even states that the ballot counting machines and ballot
counting software "must have an accuracy rating of
99.9995% (not merely 99.995%) or better as certified by a
reliable independent testing agency."
When questioned on this matter during the Oral Argument,
Commissioner Borra tried to wash his hands by claiming that the
required accuracy rating of 99.9995 percent had been set by a
private sector group in tandem with Comelec. He added that the
Commission had merely adopted the accuracy rating as part of
the groups recommended bid requirements, which it had not
bothered to amend even after being advised by DOST that such
standard was unachievable. This excuse, however, does not in
any way lessen Comelecs responsibility to adhere to its own
published bidding rules, as well as to see to it that the consortium
indeed meets the accuracy standard.Whichever accuracy rating
is the right standard -- whether 99.995 or 99.9995 percent -- the
fact remains that the machines of the so-called "consortium"
failed to even reach the lesser of the two. On this basis alone, it
ought to have been disqualified and its bid rejected outright.
At this point, the Court stresses that the essence of public bidding
is violated by the practice of requiring very high standards or
unrealistic specifications that cannot be met -- like the 99.9995
percent accuracy rating in this case -- only to water them down
after the bid has been award. Such scheme, which discourages
the entry of prospective bona fide bidders, is in fact a sure
indication of fraud in the bidding, designed to eliminate fair
competition. Certainly, if no bidder meets the mandatory
requirements, standards or specifications, then no award should
be made and a failed bidding declared.
But that grim prospect is not all. The BAC Report, on pages 6 and
7, indicate that the ACMs of both bidders wereunable to print
the audit trail without any loss of data. In the case of MPC, the
audit trail system was "not yet incorporated" into its ACMs.
This particular deficiency is significant, not only to this bidding but
to the cause of free and credible elections. The purpose of
requiring audit trails is to enable Comelec to trace and verify the
identities of the ACM operators responsible for data entry and
downloading, as well as the times when the various data were
downloaded into the canvassing system, in order to forestall fraud
and to identify the perpetrators.
Thus, the RFP on page 27 states that the ballot counting
machines and ballot counting software must print an audit trail of
all machine operations for documentation and verification
purposes. Furthermore, the audit trail must be stored on the
internal storage device and be available on demand for future
printing and verifying. On pages 30-31, the RFP also requires that
the city/municipal canvassing system software be able to print an
audit trail of the canvassing operations, including therein such
data as the date and time the canvassing program was started,
the log-in of the authorized users (the identity of the machine
operators), the date and time the canvass data were downloaded
into the canvassing system, and so on and so forth. On page 33
of the RFP, we find the same audit trail requirement with respect
to the provincial/district canvassing system software; and again
on pages 35-36 thereof, the same audit trail requirement with
respect to the national canvassing system software.
That this requirement for printing audit trails is not to be lightly
brushed aside by the BAC or Comelec itself as a mere formality
or technicality can be readily gleaned from the provisions of
Section 7 of RA 8436, which authorizes the Commission to use
an automated system for elections.
The said provision which respondents have quoted several times,
provides that ACMs are to possess certain features divided into
two classes: those that the statute itself considers mandatory and
other features or capabilities that the law deems optional. Among
those considered mandatory are "provisions for audit trails"!
Section 7 reads as follows: "The System shall contain the
following features: (a) use of appropriate ballots; (b) stand-alone
machine which can count votes and an automated system which
can consolidate the results immediately; (c) with provisions for
audit trails; (d) minimum human intervention; and (e) adequate
safeguard/security measures." (Italics and emphases supplied.)
In brief, respondents cannot deny that the provision requiring
audit trails is indeed mandatory, considering the wording of
Section 7 of RA 8436. Neither can Respondent Comelec deny
that it has relied on the BAC Report, which indicates that the
machines or the software was deficient in that respect. And yet,
the Commission simply disregarded this shortcoming and
awarded the Contract to private respondent, thereby violating the
very law it was supposed to implement.
C.
Inadequacy of Post Facto Remedial Measures
Respondents argue that the deficiencies relating to the detection
of previously downloaded data, as well as provisions for audit
trails, are mere shortcomings or minor deficiencies in software or
programming, which can be rectified. Perhaps Comelec simply
relied upon the BAC Report, which states on page 8 thereof that
"Mega Pacific failed in 8 items[;] however these are mostly on the
software which can be corrected by re-programming x x x and
therefore can be readily corrected."
The undersigned ponentes questions, some of which were
addressed to Commissioner Borra during the Oral Argument,
remain unanswered to this day. First of all, who made the
determination that the eight "fail" marks of Mega Pacific were on
account of the software -- was it DOST or TWG? How can we be
sure these failures were not the results of machine defects? How
was it determined that the software could actually be reprogrammed and thereby rectified? Did a qualified technical
expert read and analyze the source code49 for the programs and
conclude that these could be saved and remedied? (Such
determination cannot be done by any other means save by the
examination and analysis of the source code.)
Who was this qualified technical expert? When did he carry out
the study? Did he prepare a written report on his findings? Or did
the Comelec just make a wild guess? It does not follow that all
defects in software programs can be rectified, and the programs
saved. In the information technology sector, it is common
knowledge that there are many badly written programs, with
significant programming errors written into them; hence it does
not make economic sense to try to correct the programs; instead,
programmers simply abandon them and just start from scratch.
Theres no telling if any of these programs is unrectifiable, unless
a qualified programmer reads the source code.
And if indeed a qualified expert reviewed the source code, did he
also determine how much work would be needed to rectify the
programs? And how much time and money would be spent for
that effort? Who would carry out the work? After the rectification
process, who would ascertain and how would it be ascertained
that the programs have indeed been properly rectified, and that
they would work properly thereafter? And of course, the most
important question to ask: could the rectification be done in time
for the elections in 2004?
Clearly, none of the respondents bothered to think the matter
through. Comelec simply took the word of the BAC as gospel
truth, without even bothering to inquire from DOST whether it was
true that the deficiencies noted could possibly be remedied by reprogramming the software. Apparently, Comelec did not care
about the software, but focused only on purchasing the machines.
But there is still another gut-level reason why the approach taken
by Comelec is reprehensible. It rides on the perilous assumption
that nothing would go wrong; and that, come election day, the
Commission and the supplier would have developed, adjusted
and "re-programmed" the software to the point where the
automated system could function as envisioned. But what if such
optimistic projection does not materialize? What if, despite all
their herculean efforts, the software now being hurriedly
developed and tested for the automated system performs
dismally and inaccurately or, worse, is hacked and/or
manipulated?54 What then will we do with all the machines and
defective software already paid for in the amount of P849 million
of our tax money? Even more important,what will happen to our
country in case of failure of the automation?
The Court cannot grant the plea of Comelec that it be given until
February 16, 2004 to be able to submit a "certification relative to
the additional elements of the software that will be customized,"
NOCON, J.:
This is a petition for review on certiorari filed by petitioner Mobil Oil
Philippines, Inc. questioning (1) the Order of respondent Court of First
Instance, Branch VI, Pasig, Rizal, promulgated on November 20, 1974
declaring its earlier Decision dated July 25, 1974 as null and void insofar as
it concerned private respondents Geminiano F. Yabut and Agueda EnriquezYabut, and (2) the Order promulgated on February 20, 1975 and denying
petitioner's Motion for the Issuance of a Writ of Execution and Appointment
of Special Sheriff.
The facts of the case are as follows:
On November 8, 1972, petitioner filed a complaint 1 in the Court of First
In the Order of November 20, 1974, 8 respondent court declared the decision dated
July 25, 1974 null and void for the following reason:
to present evidence in court on the part of the defendants on one hand, and
waiver of interest in the amount of P150,000.00 and the stipulated attorney's
fees of 25% of the principal amount on the part of the plaintiff, except a
nominal one.
The counsels of the parties in this case had the implied authority to do all
acts necessary or incidental to the prosecution and management of the suit
in behalf of their clients of their clients who were all present and never
objected to the disputed order of the respondent court. They have the
exclusive management of the procedural aspect of the litigation including the
enforcement of the rights and remedies of their client. Thus, when the case
was submitted for decision on the evidence so far presented, the counsel for
private respondents acted within the scope of his authority as agent and
lawyer in negotiating for favorable terms for his clients. It may be that in
waiving the presentation of defendants' evidence, counsel believed that
petitioner's evidence was insufficient to prove its cause of action or knowing
the futility of resisting the claim, defendants opted to waive their right to
present evidence in exchange for the condonation of past interest in the
amount of around P150,000.00 and the award of a nominal attorney's fees
instead of the 25% stipulated in the Sales Agreement and Invoices. In fact,
when counsel secured a waiver of the accumulated interest of P150,000.00
and the 25% stipulated attorney's fees, the defendants were certainly
benefited.
Parties are bound by the acts and mistakes of their counsel in procedural
matters. Mistakes of counsel as to the relevancy or irrelevancy of certain
evidence or mistakes in the proper defense, in the introduction of certain
evidence, or in argumentation are, among others all mistakes of procedure,
and they bind the clients, as in the instant case. 11
Having obtained what defendants bargained for and having wrongly
appreciated the sufficiency or insufficiency of petitioner's evidence, private
respondents are now estopped from assailing the decision dated July 25,
1974.
Records would show that private respondents have not submitted any
evidence or pleading to contest the authority of their counsel to waive as he
did waive presentation of their evidence in exchange for and in consideration
of petitioner's waiver of past interest and the stipulated 25% of attorney'
fees.
although written evidence thereof is not signed. It has been said that
the elements necessary to a valid agreement of compromise are the
reality of the claim made and the bona fides of the compromise. 13
The validity of a judgment or order of a court cannot be assailed collaterally
unless the ground of attack is lack of jurisdiction or irregularity in their entry
apparent on the face of the record or because it is vitiated by fraud. If the
purported nullity of the judgment lies on the party's lack of consent to the
compromise agreement, the remedy of the aggrieved party is to have it
reconsidered, and if denied, to appeal from such judgment, or if final to apply
for relief under rule 38. 14 It is well settled that a judgment on
Footnotes
1 Annex "A," Petition, Rollo, pp. 11-15.
2 Annex "B," Petition, Rollo, pp. 23-29.
3 The dispositive portion of which reads, as follows:
WHEREFORE, judgment is hereby rendered in favor of
the plaintiff and against the defendants ordering the
defendant La Mallorca Partnership to pay the plaintiff the
sum of P337,393.94; on the second cause of action,
ordering La Mallorca Partnership to pay the plaintiff the
sum of P401,129.00 with legal interest at the legal rate
from the date of the filing of the complaint until fully paid,
but in default of such payment, ordering all the defendant's
partners to pay the plaintiff, jointly and subsidiarily, all the
said amount, on the third cause of action, ordering La
Mallorca Partnership to pay the plaintiff by way of
attorney's fees a sum equivalent to 10% of all the amounts
under the first and second cause of action, and in default
of such payment, ordering the defendant's partners to pay
the plaintiff, jointly and subsidiarily the said amount, and to
pay the costs.
The Compulsory Counterclaim interposed by defendants
La Mallorca, et. al., represented by Atty. Felipe C. Magat,
is hereby dismissed for lack of merit.
SO ORDERED.
PANGANIBAN, J.:
A partnership may be deemed to exist among parties who agree
to borrow money to pursue a business and to divide the profits or
losses that may arise therefrom, even if it is shown that they have
not contributed any capital of their own to a "common fund." Their
contribution may be in the form of credit or industry, not
necessarily cash or fixed assets. Being partner, they are all liable
for debts incurred by or on behalf of the partnership. The liability
for a contract entered into on behalf of an unincorporated
association or ostensible corporation may lie in a person who
may not have directly transacted on its behalf, but reaped
benefits from that contract.
The Case
In the Petition for Review on Certiorari before us, Lim Tong Lim
assails the November 26, 1998 Decision of the Court of Appeals
in CA-GR CV
41477, 1 which disposed as follows:
WHEREFORE, [there being] no reversible error in
the appealed decision, the same is hereby
affirmed. 2
The decretal portion of the Quezon City Regional Trial Court
(RTC) ruling, which was affirmed by the CA, reads as follows:
WHEREFORE, the Court rules:
1. That plaintiff is entitled to the writ of preliminary
attachment issued by this Court on September 20,
1990;
2. That defendants are jointly liable to plaintiff for
the following amounts, subject to the
modifications as hereinafter made by reason of
the special and unique facts and circumstances
and the proceedings that transpired during the
trial of this case;
a. P532,045.00 representing [the]
unpaid purchase price of the
fishing nets covered by the
Agreement plus P68,000.00
representing the unpaid price of
the floats not covered by said
Agreement;
14
money or property of a third person and misapplies it; and (3) where
the partnership in the course of its business receives money or
property of a third person and the money or property so received is
misapplied by any partner while it is in the custody of the
partnership 3 consistently with the rules on the nature of civil
liability in delicts and quasi-delicts.
VITUG, J.:
H-24) showed that the signatures in the two receipts were indeed
the signatures of the petitioner.
Furthermore, the private respondent received from the petitioner
the amount of P12,000.00 covered by the latter's Equitable
Banking Corporation Check No. 13389470-B from the profits of
the operation of the restaurant for the year 1974. Witness Teodulo
Diaz, Chief of the Savings Department of the China Banking
Corporation testified that said check (Exhibit B) was deposited by
and duly credited to the private respondents savings account with
the bank after it was cleared by the drawee bank, the Equitable
Banking Corporation. Another witness Elvira Rana of the
Equitable Banking Corporation testified that the check in question
was in fact and in truth drawn by the petitioner and debited
against his own account in said bank. This fact was clearly shown
and indicated in the petitioner's statement of account after the
check (Exhibit B) was duly cleared. Rana further testified that
upon clearance of the check and pursuant to normal banking
procedure, said check was returned to the petitioner as the maker
thereof.
The petitioner denied having received from the private
respondent the amount of P4,000.00. He contested and
impugned the genuineness of the receipt (Exhibit D). His
evidence is summarized as follows:
The petitioner did not receive any contribution at the time he
started the Sun Wah Panciteria. He used his savings from his
salaries as an employee at Camp Stotsenberg in Clark Field and
later as waiter at the Toho Restaurant amounting to a little more
than P2,000.00 as capital in establishing Sun Wah Panciteria. To
bolster his contention that he was the sole owner of the
restaurant, the petitioner presented various government licenses
and permits showing the Sun Wah Panciteria was and still is a
single proprietorship solely owned and operated by himself alone.
Fue Leung also flatly denied having issued to the private
The appellate court did not err in declaring that the main issue in
the instant case was whether or not the private respondent is a
partner of the petitioner in the establishment of Sun Wah
Panciteria.
The petitioner also contends that the respondent court gravely
erred in giving probative value to the PC Crime Laboratory Report
(Exhibit "J") on the ground that the alleged standards or
specimens used by the PC Crime Laboratory in arriving at the
conclusion were never testified to by any witness nor has any
witness identified the handwriting in the standards or specimens
belonging to the petitioner. The supposed standards or
specimens of handwriting were marked as Exhibits "H" "H-1" to
"H-24" and admitted as evidence for the private respondent over
the vigorous objection of the petitioner's counsel.
The records show that the PC Crime Laboratory upon orders of
the lower court examined the signatures in the two receipts
issued separately by the petitioner to the private respondent and
So Sia (Exhibits "A" and "D") and compared the signatures on
them with the signatures of the petitioner on the various pay
envelopes (Exhibits "H", "H-1" to 'H-24") of Antonio Ah Heng and
Maria Wong, employees of the restaurant. After the usual
examination conducted on the questioned documents, the PC
Crime Laboratory submitted its findings (Exhibit J) attesting that
the signatures appearing in both receipts (Exhibits "A" and "D")
were the signatures of the petitioner.
The records also show that when the pay envelopes (Exhibits
"H", "H-1" to "H-24") were presented by the private respondent for
marking as exhibits, the petitioner did not interpose any objection.
Neither did the petitioner file an opposition to the motion of the
private respondent to have these exhibits together with the two
receipts examined by the PC Crime Laboratory despite due
notice to him. Likewise, no explanation has been offered for his
silence nor was any hint of objection registered for that purpose.
A Yes.
Q Now, after 11:30 (P.M.) which is
the closing time as you said, what
do you do with the money?
COURT:
Any cross?
No cross-examination, Your
Honor. (T.S.N. p. 65, November
15, 1978). (Rollo, pp. 127-128)
The statements of the cashier were not rebutted. Not only did the
petitioner's counsel waive the cross-examination on the matter of
income but he failed to comply with his promise to produce
pertinent records. When a subpoena duces tecum was issued to
the petitioner for the production of their records of sale, his
counsel voluntarily offered to bring them to court. He asked for
sufficient time prompting the court to cancel all hearings for
January, 1981 and reset them to the later part of the following
month. The petitioner's counsel never produced any books,
prompting the trial court to state:
Counsel for the defendant admitted that the sales
of Sun Wah were registered or recorded in the
daily sales book. ledgers, journals and for this
purpose, employed a bookkeeper. This inspired
the Court to ask counsel for the defendant to bring
said records and counsel for the defendant
promised to bring those that were available.
Seemingly, that was the reason why this case
dragged for quite sometime. To bemuddle the
issue, defendant instead of presenting the books
where the same, etc. were recorded, presented
witnesses who claimed to have supplied chicken,
II.
Parcel of land subject of the case pending before
the trial court is outside the said court's territorial
jurisdiction;
III. Lack of capacity to sue on the part of plaintiff heirs
of Vicente Tabanao; and
IV.
corresponding docket fees in order that the trial court may acquire
jurisdiction over the action.15
Nevertheless, unlike in the case of Manchester Development
Corp. v. Court of Appeals,16 where there was clearly an effort to
defraud the government in avoiding to pay the correct docket
fees, we see no attempt to cheat the courts on the part of
respondents. In fact, the lower courts have noted their expressed
desire to remit to the court "any payable balance or lien on
whatever award which the Honorable Court may grant them in
this case should there be any deficiency in the payment of the
docket fees to be computed by the Clerk of Court."17 There is
evident willingness to pay, and the fact that the docket fee paid so
far is inadequate is not an indication that they are trying to avoid
paying the required amount, but may simply be due to an inability
to pay at the time of filing. This consideration may have moved
the trial court and the Court of Appeals to declare that the unpaid
docket fees shall be considered a lien on the judgment award.
Petitioner, however, argues that the trial court and the Court of
Appeals erred in condoning the non-payment of the proper legal
fees and in allowing the same to become a lien on the monetary
or property judgment that may be rendered in favor of
respondents. There is merit in petitioner's assertion. The third
paragraph of Section 16, Rule 141 of the Rules of Court states
that:
The legal fees shall be a lien on the monetary or property
judgment in favor of the pauper-litigant.
Respondents cannot invoke the above provision in their favor
because it specifically applies to pauper-litigants. Nowhere in the
records does it appear that respondents are litigating as paupers,
and as such are exempted from the payment of court fees.18
The rule applicable to the case at bar is Section 5(a) of Rule 141
of the Rules of Court, which defines the two kinds of claims as:
(1) those which are immediately ascertainable; and (2) those
which cannot be immediately ascertained as to the exact amount.
This second class of claims, where the exact amount still has to
be finally determined by the courts based on evidence presented,
falls squarely under the third paragraph of said Section 5(a),
which provides:
In case the value of the property or estate or the sum
claimed is less or more in accordance with the appraisal
of the court, the difference of fee shall be refunded or paid
as the case may be. (Underscoring ours)
In Pilipinas Shell Petroleum Corporation v. Court of Appeals,19 this
Court pronounced that the above-quoted provision "clearly
contemplates an Initial payment of the filing fees corresponding to
the estimated amount of the claim subject to adjustment as to
what later may be proved."20 Moreover, we reiterated therein the
principle that the payment of filing fees cannot be made
contingent or dependent on the result of the case. Thus, an initial
payment of the docket fees based on an estimated amount must
be paid simultaneous with the filing of the complaint. Otherwise,
the court would stand to lose the filing fees should the judgment
later turn out to be adverse to any claim of the respondent heirs.
The matter of payment of docket fees is not a mere triviality.
These fees are necessary to defray court expenses in the
handling of cases. Consequently, in order to avoid tremendous
losses to the judiciary, and to the government as well, the
payment of docket fees cannot be made dependent on the
outcome of the case, except when the claimant is a pauperlitigant.
Applied to the instant case, respondents have a specific claim 1/3 of the value of all the partnership assets - but they did not
Accordingly, the trial court in the case at bar should determine the
proper docket fee based on the estimated amount that
respondents seek to collect from petitioner, and direct them to
pay the same within a reasonable time, provided the applicable
prescriptive or reglementary period has not yet expired, Failure to
comply therewith, and upon motion by petitioner, the immediate
dismissal of the complaint shall issue on jurisdictional grounds.
On the matter of improper venue, we find no error on the part of
the trial court and the Court of Appeals in holding that the case
below is a personal action which, under the Rules, may be
commenced and tried where the defendant resides or may be
found, or where the plaintiffs reside, at the election of the latter.26
Petitioner, however, insists that venue was improperly laid since
the action is a real action involving a parcel of land that is located
outside the territorial jurisdiction of the court a quo. This
contention is not well-taken. The records indubitably show that
respondents are asking that the assets of the partnership be
accounted for, sold and distributed according to the agreement of
the partners. The fact that two of the assets of the partnership are
parcels of land does not materially change the nature of the
action. It is an action in personam because it is an action against
a person, namely, petitioner, on the basis of his personal liability.
It is not an action in rem where the action is against the thing
itself instead of against the person.27 Furthermore, there is no
showing that the parcels of land involved in this case are being
disputed. In fact, it is only incidental that part of the assets of the
partnership under liquidation happen to be parcels of land.
The time-tested case of Claridades v. Mercader, et al.,28 settled
this issue thus:
The fact that plaintiff prays for the sale of the assets of the
partnership, including the fishpond in question, did not
change the nature or character of the action, such sale
1wphi1.nt
SO ORDERED.
In fine, the trial court neither erred nor abused its discretion when
it denied petitioner's motions to dismiss. Likewise, the Court of