G.R. No.
196795 (1) Only the stable house, the gun powder room and two (2)
INTRAMUROS ADMINISTRATION, Petitioner
vs.
OFFSHORE CONSTRUCTION DEVELOPMENT
COMPANY, Respondent
DECISION
LEONEN, J.:
The sole issue in ejectment proceedings is determining which of
the parties has the better right to physical possession of a piece of
property. The defendant's claims and allegations in its answer or
motion to dismiss do not oust a trial court's jurisdiction to resolve
this issue.
This is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court, assailing the April 14, 2011 Decision2 of Branch
173, Regional Trial Court, Manila in Civil Case No. 10-124740.
The Regional Trial Court affirmed in toto the October 19, 2010
Order3 of Branch 24, Metropolitan Trial Court, Manila in Civil
Case No. 186955-CV, dismissing Intramuros Administration's
(Intramuros) Complaint for Ejectment against Offshore
Construction and Development Company (Offshore Construction)
on the grounds 6f forum shopping and lack of jurisdiction.X
In 1998, Intramuros leased certain real properties of the national
government, which it administered to Offshore Construction. Three
(3) properties were subjects of Contracts of Lease: Baluarte De San
Andres, with an area of 2, 793 sq. m.;4 Baluarte De San Francisco
De Dilao, with an area of 1,880 sq. m.;5 and Revellin De Recoletos,
with an area of 1,036 sq. m.6 All three (3) properties were leased
for five (5) years, from September 1, 1998 to August 31, 2003. All
their lease contracts also made reference to an August 20, 1998
memorandum of stipulations, which included a provision for lease
renewals every five (5) years upon the parties' mutual agreement. 7X
Offshore Construction occupied and introduced improvements in
the leased premises. However, Intramuros and the Department of
Tourism halted the projects due to Offshore Construction's non-
conformity with Presidential Decree No. 1616, which required 16th
to 19th centuries' Philippine-Spanish architecture in the
area.8 Consequently, Offshore Construction filed a complaint with
prayer for preliminary injunction and temporary restraining order
against Intramuros and the Department of Tourism before the
Manila Regional Trial Court,9 which was docketed as Civil Case
No. 98-91587.10X
Eventually, the parties executed a Compromise Agreement on July
26, 1999,11 which the Manila Regional Trial Court approved on
February 8, 2000.12 In the Compromise Agreement, the parties
affirmed the validity of the two (2) lease contracts but terminated
the one over Revellin de Recoletos.13 The Compromise Agreement
retained the five (5)-year period of the existing lease contracts and
stated the areas that may be occupied by Offshore Construction: X
FROM:
(1) Baluarte de San Andres
TO:
1
Chambers with comfort rooms, will be utilized for restaurants. All
other structures built and introduced including trellises shall be
transferred/relocated to:
(a) Two (2) restaurants as Asean Garden. Each will have an
aggregate area of two hundred square meters (200 sq. mtrs.);
b) One (1) kiosk at Puerta Isabel Garden fronting Terraza de la
Reyna with an aggregate area of twenty (20) square meters;
(c) Three (3) restaurants at the chambers of Puerta Isabel II with an
aggregate area of 1,180.5 sq.m.;
(d) One (1) restaurant at Fort Santiago American Barracks. Subject
to IA Guidelines, the maximum floor area will be the perimeter
walls of the old existing building;
FROM:
(2) Baluarte De San Francisco Dilao
TO:
(2) All seven (7) structures including the [Offshore Construction]
Administration Building and Trellises shall be transferred [t]o
Cuartel de Sta. Lucia, [O]therwise known as the PC Barracks[.] 14X
During the lease period, Offshore Construction failed to pay its
utility bills and rental fees, despite several demand
letters.15 Intramuros tolerated the continuing occupation, hoping
that Offshore Construction would pay its arrears. As of July 31,
2004, these arrears allegedly totaled P6,762,153.70.16X
To settle its arrears, Offshore Construction proposed to pay the
Department of Tourism's monthly operational expenses for lights
and sound equipment, electricity, and performers at the Baluarte
Plano Luneta de Sta. Isabel. Intramuros and the Department of
Tourism accepted the offer, and the parties executed a
Memorandum of Agreement covering the period of August 15,
2004 to August 25, 2005.17X
However, Offshore Construction continued to fail to pay its arrears,
which amounted to ₱13,448,867.45 as of December 31, 2009. On
March 26, 2010, Offshore Construction received Intramuros' latest
demand letter.18X
Intramuros filed a Complaint for Ejectment before the Manila
Metropolitan Trial Court on April 28, 2010.19 Offshore
Construction filed its Answer with Special and Affirmative
Defenses and Compulsory Counterclaim.20X
On July 12, 2010, Offshore Construction filed a Very Urgent
Motion,21 praying that Intramuros' complaint be dismissed on the
grounds of violation of the rule on non-forum shopping, lack of
jurisdiction over the case, and litis pendentia. First, it claimed that
Intramuros failed to inform the Metropolitan Trial Court that there
were two (2) pending cases with the Manila Regional Trial Court
over Puerta de Isabel II.22 Second, it argued that the Metropolitan
Trial Court did not acquire jurisdiction over the case since the
relationship between the parties was not one of lessor-lessee but
governed by a concession agreement.23 Finally, it contended that
Intramuros' cause of action was barred by litis pendentia, since the
pending Regional Trial Court cases were over the same rights,
claims, and interests of the parties.24X
In its October 19, 2010 Order,25 the Metropolitan Trial Court
granted the motion and dismissed the case. Preliminarily, it found
that while a motion to dismiss is a prohibited pleading under the
Rule on Summary Procedure, Offshore Construction's motion was
grounded on the lack of jurisdiction over the subject matter. 26X
The Metropolitan Trial Court found that Intramuros committed
forum shopping and that it had no jurisdiction over the case. 27X
First, it pointed out that there were two (2) pending cases at the
time Intramuros filed its complaint: Civil Case No. 08-119138 for
specific performance filed by Offshore Construction against
Intramuros, and SP CA No. 10-123257 for interpleader against
Offshore Construction and Intramuros filed by 4H Intramuros, Inc.
(4H Intramuros),28 which claimed to be a group of respondent's
tenants.29X
The Metropolitan Trial Court found that the specific performance
case was anchored on Offshore Construction's rights under the
Compromise Agreement. In that case, Offshore Construction
claimed that it complied with its undertakings, but Intramuros
failed to perform its obligations when it refused to offset Offshore
Construction's expenses with the alleged unpaid rentals. The
interpleader case, on the other hand, dealt with Offshore
Construction's threats to evict the tenants of Puerta de Isabel II. 4H
Intramuros prayed that the Regional Trial Court determine which
between Offshore Construction and Intramuros was the rightful
lessor of Puerta de Isabel II.30X
The Metropolitan Trial Court found that the cause of action in
Intramuros' complaint was similar with those in the specific
performance and intetj)leader cases. Any judgment in any of those
cases would affect the resolution or outcome in the ejectment case,
since they would involve Offshore Construction's right to have its
expenses offset from the rentals it owed Intramuros, and the
determination of the rightful lessor of Puerta de Isabel II. The
Metropolitan Trial Court pointed to the arrears in rentals that
Intramuros prayed for as part of its complaint. Further, Intramuros
failed to disclose the specific performance and interpleader cases in
its certification against forum shopping.31X
Second, the Metropolitan Trial Court held that it had no
jurisdiction over the complaint. While there were lease contracts
between the parties, the existence of the other contracts between
them made Intramuros and Offshore Construction's relationship as
one of concession. Under this concession agreement, Offshore
Construction undertook to develop several areas of the Intramuros
District, for which it incurred expenses. The trial court found that
the issues could not be mere possession and rentals only. 32X
Intramuros appealed the October 19, 2010 Order with the Regional
Trial Court. On April 14, 2011, the Regional Trial Court affirmed
the Municipal Trial Court October 19, 2010 Order in toto.33X
On May 25, 2011, Intramuros, through the Office of the Solicitor
General, filed a Motion for Extension of Time to File Petition for
Review on Certiorari (Motion for Extension) before this Court. It
2
prayed for an additional 30 days, or until June 16, 2011, within
which to file its petition for review on solely on questions of
law.34X
On June 16, 2011, Intramuros filed its Petition for Review
on Certiorari,35 assailing the April 14, 2011 Decision of the
Regional Trial Court.X
In its Petition for Review, Intramuros argues that the Regional Trial
Court erred in upholding the Metropolitan Trial Court findings that
it had no jurisdiction over Intramuros' ejectment complaint 36 and
that it committed forum shopping.37X
First, Intramuros argues that Offshore Construction's Very Urgent
Motion should not have been entertained by the Metropolitan Trial
Court as it was a motion to dismiss, which was prohibited under
the Rule on Summary Procedure.38 It claims that the Metropolitan
Trial Court could have determined the issue of jurisdiction based
on the allegations in its complaint. It points out that "jurisdiction
over the subject matter is determined by the allegations [in] the
complaint" and that the trial court's jurisdiction is not lost "just
because the defendant makes a contrary allegation" in its
defense.39 In ejectment cases, courts do not lose jurisdiction by a
defendant's mere allegation that it has ownership over the litigated
property. It holds that the Metropolitan Trial Court did not lose
jurisdiction when Offshore Construction alleged that its
relationship with Intramuros is one of concession, that the cause of
action accrued in 2003, and that there was litis pendentia and
forum shopping. It contends that the sole issue in an ejectment suit
is the summary restoration of possession of a piece of land or
building to the party that was deprived of it.40 Thus, the
Metropolitan Trial Court gravely erred in granting Offshore
Construction's motion to dismiss despite having jurisdiction over
the subject matter of Intramuros' complaint.41X
Second, Intramuros avers that it did not commit forum shopping as
to warrant the dismissal of its complaint. It claims that while there
were pending specific performance and interpleader cases related
to the ejectment case, Intramuros was not guilty of forum shopping
since it instituted neither action and did not seek a favorable ruling
as a result of an earlier adverse opinion in these cases. 42 Intramuros
points out that it was Offshore Construction and 4H Intramuros
which filed the specific performance and interpleader cases,
respectively.43 In both cases, Intramuros was the defendant and did
not seek fossession of Puerta de Isabel II as a relief in its answers
to the complaints.44 Moreover, the issues raised in these earlier
cases were different from the issue of possession in the ejectment
case. The issue in the specific performance case was whether or not
Intramuros should offset the rentals in arrears from Offshore
Construction's expenses in continuing the WOW Philippines
Project.45 Meanwhile, the issue in the interpleader case was to
determine which between Intramuros and Offshore Construction
was the rightful lessor of Puerta de Isabel II.46X
Finally, Intramuros maintains that there is no concession agreement
between the parties, only lease contracts that have already expired
and are not renewed. It argues that there is no basis for alleging the
existence of a concession agreement. It points out that in the
Contracts of Lease and Memorandum of Agreement entered into by
Intramuros and Offshore Construction, the expiry of the leases
would be on August 31, 2003. Afterwards, Intramuros tolerated
Offshore Construction's continued occupation of its properties in
hopes that it would pay its arrears in due course. 47
X Construction claims that there is now novation of the Contracts of
On July 20, 2011, this Court issued its Resolution48 granting the
Motion for Extension and requiring Offshore Construction to
comment on the Petition for Review.X
On October 10, 2011, Offshore Construction filed its Coniment49 to
the Petition for Review. In its Comment, Offshore Construction
argues that the Petition for Review should be dismissed because it
violates the principle of hierarchy of courts and raises questions of
fact.50 It points out that Intramuros did not move for the
reconsideration of the Regional Trial Court April 14, 2011
Decision. Instead of directly filing with this Court, Intramuros
should have filed a Petition for Review with the Court of Appeals,
in accordance with Rule 42 of the Rules of Court. 51 It claims that
Intramuros raises questions of fact in its Petition for Review,
namely, the expiration of the Contracts of Lease and the business
concession in favor of Offshore Construction.52X
In its November 21, 2011 Resolution, this Court noted the
Comment and required Intramuros to file its Reply. 53X
On March 12, 2012, Intramuros filed its Reply54 to the Comment. It
argues that direct resort to this Court is proper because the issues it
raises in its Petition for Review do not require review of evidence
to resolve, and the facts of the case are undisputed. 55 It claims that
the nature of Intramuros and Offshore Construction's relationship is
never an issue because all the documents referenced and relied
upon by the parties were lease agreements. 56X
On August 23, 2012, this Court gave due course to the Petition for
Review and ordered both parties to submit their memoranda. 57X
On January 7, 2013, Intramuros filed its Memorandum, while 58
Offshore Construction filed its Memorandum59 on August 16,
2013.X
In its Memorandum, Offshore Construction claims that it occupies
Puerta de Isabel II by virtue of a legal concession based not only on
the parties' contracts but also on the contemporaneous and
subsequent acts of Intramuros and Offshore Construction. It argues
that under the Contracts of Lease, Offshore Construction was
required to invest around ₱20,000,000.00 worth of investments in
the leased properties and that it lost its initial investments, which
were demolished due to adverse criticism by then Intramuros
Administrator Anna Maria L. Harper. Under the Compromise
Agreement, Offshore Construction was again required to make new
developments, again worth millions of pesos. Offshore
Construction claims that these conditions make their relationship
not one of mere lessor and lessee.60X
Further, it attests that Intramuros committed illegal and inhuman
acts, and injustice against it and its sublessees, allegedly because
the Contracts of Lease had expired.61 Moreover, it points out that
Intramuros only filed the ejectment complaint in 2010, even though
the Contracts of Lease expired on August 31, 2003. It argues that
Intramuros was guilty of estoppel in pais, since it continued to
accept rental payments as late as July 10, 2009. 62Assuming that the
lease contracts had expired, these contracts were impliedly
renewed by the mutual and voluntary acts of the parties, in
3
accordance with Article 1670 of the Civil Code. 63 Offshore
Lease, and the courts may fix a period for them,64 pursuant to
Article 1687 of the Civil Code.65 It reiterates its prayer that the
Petition for Review be dismissed, due to questions of fact more
properly cognizable by the Court of Appeals.66X
The issues to be resolved by this Court are:
First, whether or not direct resort to this Court is proper;
Second, whether or not the Metropolitan Trial Court had
jurisdiction over the ejectment complaint filed by Intramuros
Administration;
Third, whether or not Intramuros Administration committed forum
shopping when it filed its ejectment complaint despite the pending
cases for specific performance and interpleader; and
Finally, whether or not Intramuros Administration is entitled to
possess the leased premises and to collect unpaid rentals.
I
At the outset, petitioner should have filed a petition for review
under Rule 42 of the Rules of Court to assail the Regional Trial
Court's ruling upholding the Metropolitan Trial Court October 19,
2010 Order instead of filing a petition for review
on certiorari under Rule 45 with this Court.
Under Rule 42, Section 1 of the Rules of Court, the remedy from
an adverse decision rendered by a Regional Trial Court exercising
its appellate jurisdiction is to file a verified petition for review with
the Court of Appeals:
Section 1. How appeal taken; time for filing. -A party desiring to
appeal from a decision of the Regional Trial Court rendered in the
exercise of its appellate jurisdiction may file a verified petition for
review with the Court of Appeals, paying at the same time to the
clerk of said court the corresponding docket and other lawful fees,
depositing the amount of ₱500.00 for costs, and furnishing the
Regional Trial Court and the adverse party with a copy of the
petition. The petition shall be filed and served within fifteen (15)
days from notice of the decision sought to be reviewed or of the
denial of petitioner's motion for new trial or reconsideration filed in
due time after judgment. Upon proper motion and the payment of
the full amount of the docket and other lawful fees and the deposit
for costs before the expiration of the reglementary period, the
Court of Appeals may grant an additional period of fifteen (15)
days only within which to file the petition for review. No further
extension shall be granted except for the most compelling reason
and in no case to exceed fifteen (15) days.
Petitioner puts in issue before this Court the findings of the
Metropolitan Trial Court that it has no jurisdiction over the
ejectment complaint and that petitioner committed forum shopping
when it failed to disclose two (2) pending cases, one filed by
respondent Offshore Construction and the other filed by
respondent's group of tenants, 4H Intramuros. Both of these cases
raise questions of law, which are cognizable by the Court of
Appeals in a petition for review under Rule 42.
"A question of law exists when the law applicable to a particular
set of facts is not settled, whereas a question of fact arises when the
truth or falsehood of alleged facts is in doubt."67 This Court has
ruled that the jurisdiction of a court over the subject matter of a
complaint68 and the existence of forum shopping69 are questions of
law.X
A petition for review under Rule 42 may include questions of fact,
of law, or mixed questions of fact and law.70 This Court has
recognized that the power to hear cases on appeal in which only
questions of law are raised is not vested exclusively in this
Court.71 As provided in Rule 42, Section 2, errors of fact or law, or
both, allegedly committed by the Regional Trial Court in its
decision must be specified in the petition for review:X
Section 2. Form and Contents. - The petition shall be filed in seven
(7) legible copies, with the original copy intended for the court
being indicated as such by the petitioner, and shall (a) state the full
names of the parties to the case, without impleading the lower
courts or judges thereof either as petitioners or respondents; (b)
indicate the specific material dates showing that it was filed on
time; (c) set forth concisely a statement of the matters involved, the
issues raised, the specification of errors of fact or law, or both,
allegedly committed by the Regional Trial Court, and the reasons
or arguments relied upon for the allowance of the appeal; (d) be
accompanied by clearly legible duplicate originals or true copies of
the judgments or final orders of both lower courts, certified correct
by the clerk of court of the Regional Trial Court, the requisite
number of plain copies thereof and of the pleadings and other
material portions of the record as would support the allegations of
the petition.
The petitioner shall also submit together with the petition a
certification under oath that he has not theretofore commenced any
other action involving the same issues in the Supreme Court, the
Court of Appeals or different divisions thereof, or any other
tribunal or agency; if there is such other action or proceeding, he
must state the status of the same; and if he should thereafter learn
that a similar action or proceeding has been filed or is pending
before the Supreme Court, the Court of Appeals, or different
divisions thereof, or any other tribunal or agency, he undertakes to
promptly inform the aforesaid courts and other tribunal or agency
thereof within five (5) days therefrom. (Emphasis supplied)
Petitioner's direct resort to this Court, instead of to the Court of
Appeals for intermediate review as sanctioned by the rules, violates
the principle of hierarchy of courts.72 In Diocese of
Bacolod v. Commission onElections:73X
The doctrine that requires respect for the hierarchy of courts was
created by this court to ensure that every level of the judiciary
performs its designated roles in an effective and efficient manner.
Trial courts do not only determine the facts from the evaluation of
the evidence presented before them. They are likewise competent
to determine issues of law which may include the validity of an
ordinance, statute, or even an executive issuance in relation to the
Constitution. To effectively perform these functions, they are
territorially organized into regions and then into branches. Their
writs generally reach within those territorial boundaries.
Necessarily, they mostly perform the all-important task of inferring
the facts from the evidence as these are physically presented before
them. In many instances, the facts occur within their territorial
4
jurisdiction, which properly present the 'actual case' that makes ripe
a determination of the constitutionality of such action. The
consequences, of course, would be national in scope. There are,
however, some cases where resort to courts at their level would not
be practical considering their decisions could still be appealed
before the higher courts, such as the Court of Appeals. 74 (Citation
omitted)X
Nonetheless, the doctrine of hierarchy of courts is not inviolable,
and this Court has provided several exceptions to the
doctrine.75 One of these exceptions is the exigency of the situation
being litigated.76 Here, the controversy between the parties has
been dragging on since 2010, which should not be the case when
the initial dispute-an ejectment case-is, by nature and design, a
summary procedure and should have been resolved with
expediency.X
Moreover, this Court's rules of procedure permit the direct resort to
this Court from a decision of the Regional Trial Court upon
questions of law, such as those which petitioner raises in this case.
In Barcenas v. Spouses Tomas and Caliboso: 77X
Nonetheless, a direct recourse to this Court can be taken for a
review of the decisions, final orders or resolutions of the RTC, but
only on questions of law. Under Section 5 of Article VIII of the
Constitution, the Supreme Court has the power to
(2) Review, revise, reverse, modify, or affirm on appeal
or certiorari as the law or the Rules of Court may provide, final
judgments and orders of lower courts in:
....
(e) All cases in which only an error or question of law is involved.
This kind of direct appeal to this Court of RTC judgments, final
orders or resolutions is provided for in Section 2(c) of Rule 41,
which reads:
SEC. 2. Modes of appeal. -
....
(c) Appeal by certiorari. - In all cases where only questions of law
are raised or involved, the appeal shall be to the Supreme Court by
petition for review on certiorari in accordance with Rule 45.
Procedurally then, petitioners could have appealed the RTC
Decision affirming the MTC (1) to this Court on questions of law
only; or (2) if there are factual questions involved, to the CA - as
they in fact did.78X
Thus, petitioner's resort to this Court is proper and warranted under
the circumstances.
II
In dismissing the complaint, the Metropolitan Trial Court found
that "[t]he issues . . . between the parties cannot be limited to a
simple determination of who has the better right of possession of
the subject premises or whether or not [petitioner] is entitled [to]
rentals in arrears."79 It held that the relationship between the parties
was a "more complicated situation where jurisdiction is better
lodged with the regional trial court,"80 upon a finding that there was
a concession, rather than a lease relationship between the
parties.81X
It is settled that the only issue that must be settled in an ejectment
proceeding is physical possession of the property
involved.82 Specifically, action for unlawful detainer is brought
against a possessor who unlawfully withholds possession after the
termination and expiration of the right to hold possession. 83X
To determine the nature of the action and the jurisdiction of the
court, the allegations in the complaint must be examined. The
jurisdictional facts must be evident on the face of the
complaint.84 There is a case for unlawful detainer if the complaint
states the following:X
(1) initially, possession of property by the defendant was by
contract with or by tolerance of the plaintiff;
(2) eventually, such possession became illegal upon notice by
plaintiff to defendant of the termination of the latter's right of
possession;
(3) thereafter, the defendant remained in possession of the property
and deprived the plaintiff of the enjoyment thereof; and
(4) within one year from the last demand on defendant to vacate
the property, the plaintiff instituted the complaint for
ejectment.85 (Citation omitted)X
A review of petitioner's Complaint for Ejectment shows that all of
these allegations were made.
First, petitioner alleges that respondent is its lessee by virtue of
three (3) Contracts of Lease. The validity of these contracts was
later affirmed in a Compromise Agreement, which modified certain
provisions of the previous leases but retained the original lease
period. Respondent does not dispute these contracts' existence or
their validity.
Second, following respondent's failure to pay rentals, petitioner
alleges that it has demanded that respondent vacate the leased
premises.
Third, respondent continues to occupy and possess the leased
premises despite petitioner's demand. This is admitted by
respondent, which seeks to retain possession and use of the
properties to "recoup its multimillion pesos worth of
investment."86X
Fourth, petitioner filed its Complaint for Ejectment on April 28,
2010,87 within one (1) year of its last written demand to respondent,
made on March 18, 2010 and received by respondent on March 26,
2010.88 Contrary to respondent's claim, the one (1)-year period to
file the complaint must be reckoned from the date of last demand,
in instances when there has been more than one (1) demand to
vacate.89X
The Metropolitan Trial Court seriously erred in finding that it did
not have jurisdiction over petitioner's complaint because the
parties' situation has allegedly become "more complicated" 90 than
one of lease. Respondent's defense that its relationship with
5
petitioner is one of concession rather than lease does not determine
whether or not the Metropolitan Trial Court has jurisdiction over
petitioner’s complaint. The pleas or theories set up by a defendant
in its answer or motion to dismiss do not affect the court’s
jurisdiction.91 In Morta v. Occidental:92X
It is axiomatic that what determines the nature of an action as well
as which court has jurisdiction over it, are the allegations in the
complaint and the character of the relief sought. "Jurisdiction over
the subject matter is determined upon the allegations made in the
complaint, irrespective of whether the plaintiff is entitled to
recover upon a claim asserted therein - a matter resolved only after
and as a result of the trial. Neither can the jurisdiction of the court
be made to depend upon the defenses made by the defendant in his
answer or motion to dismiss. If such were the rule, the question of
jurisdiction would depend almost entirely upon the
defendant."93 (Citations omitted)X
Not even the claim that there is an implied new lease or tacita
reconduccion will remove the Metropolitan Trial Court's
jurisdiction over the complaint.94 To emphasize, physical
possession, or de facto possession, is the sole issue to be resolved
in ejectment proceedings. Regardless of the claims or defenses
raised by a defendant, a Metropolitan Trial Court has jurisdiction
over an ejectment complaint once it has been shown that the
requisite jurisdictional facts have been alleged, such as in this case.
Courts are reminded not to abdicate their jurisdiction to resolve the
issue of physical possession, as there is a public need to prevent a
breach of the peace by requiring parties to resort to legal means to
recover possession of real property.95X
III
In its October 19, 2010 Order, the Metropolitan Trial Court found
that petitioner committed forum shopping when it failed to disclose
that there were two (2) pending cases in other trial courts
concerning the same parties and similar causes of action. These
two (2) cases were Civil Case No. 08- 119138 for specific
performance filed by respondent against petitioner; and SP CA
Case No. 10-123257 for interpleader filed by 4H Intramuros. Both
cases were pending with the Manila Regional Trial Court. The
Metropolitan Trial Court found that if it decides petitioner's
Complaint for Ejectment, its ruling would conflict with any
resolution in the specific performance and interpleader cases, since
the same contracts were involved in all three (3) cases. It found that
the parties were the same and the reliefs prayed for were the same.
Forum shopping is the practice of resorting to multiple fora for the
same relief, to increase the chances of obtaining a favorable
judgment.96 In Spouses Reyes v. Spouses Chung:97X
It has been jurisprudentially established that forum shopping exists
when a party avails himself of several judicial remedies in different
courts, simultaneously or successively, all substantially founded on
the same transactions and the same essential facts and
circumstances, and all raising substantially the same issues either
pending in or already resolved adversely by some other courts.
The test to determine whether a party violated the rule against
forum shopping is whether the elements of litis pendentia are
present, or whether a final judgment in one case will amount to res
judicata in another. Simply put, when litis pendentia or res
judicata does not exist, neither can forum shopping exist.
The requisites of litis pendentia are: (a) the identity of parties, or at
least such as representing the same interests in both actions; (b) the
identity of rights asserted and relief prayed for, the relief being
founded on the same facts; and (c) the identity of the two cases
such that judgment in one, regardless of which party is successful,
would amount to res judicata in the other. On the other hand, the
elements of res judicata, also known as bar by prior judgment, are:
(a) the former judgment must be final; (b) the court which rendered
it had jurisdiction over the subject matter and the parties; (c) it
must be a judgment on the merits; and (d) there must be, between
the first and second actions, identity of parties, subject matter, and
causes of action.98 (Citation omitted)X
As observed by the Metropolitan Trial Court, there is an identity of
parties in the specific performance and interpleader cases, and the
Complaint for Ejectment. However, there is no identity of asserted
rights or reliefs prayed for, and a judgment in any of the three (3)
cases will not amount to res judicata in the two others.
In respondent’s amended complaint for specific performance, it
prays that petitioner be compelled to offset respondent's unpaid
rentals, with the expenses that respondent supposedly incurred due
to the Department of Tourism's WOW Philippines
project,99 pursuant to a July 27, 2004 Memorandum of Agreement.
Concededly, one of respondent's reliefs prayed for is for petitioner
to respect respondent's lease over Puerta de Isabel II, Asean Garden
and Revellin de Recoletos:X
2. Order [Department of Tourism], [Intramuros Administration]
and [Anna Maria L. Harper] to perform their obligation under the
"Memorandum of Agreement" dated 27 July 2004 by
OFFSETTING the rentals in arrears from the expenses incurred by
Offshore in the continuance of the Department of Tourism's WOW
Philippines Project and to allow Offshore to recover their
investment at Intramuros by respecting their lease over Puerta
Isabel II, Asean Garden and Revellin de Recoletos[.]100X
Nevertheless, the Memorandum of Agreement expressly stated that
its purpose was for respondent to pay petitioner and the
Department of Tourism rentals in arrears as of July 31, 2004:
WHEREAS, [respondent] has been indebted to [petitioner] in the
form of rental and utility consumption arrears for the occupancy of
Puerta Isabel Chambers, Asean Gardens and Baluarte de San
Andres (Stable House) in the amount of Six Million Seven
Hundred Sixty[-]Two Thousand One Hundred Fifty[-]Three and
70/100 (P6,762,153.70) as of July 31, 2004 and as a way of settling
said arrears, [respondent] had proposed to pay its obligations with
[petitioner] as shown in the breakdown in "Annex A" hereof
through [respondent's] assumption of [Department of Tourism's]
monthly operational expenses for lights and sound equipment,
electricity, and performers at the Baluarte Plano Luneta de Sta.
Isabel in Intramuros, Manila[.]101X
This was affirmed in petitioner's May 29, 2005 letter to respondent,
in which petitioner stated:
During our meeting last May 5, 2005 with Mr. Rico Cordova, it
was reiterated that the subject of the [Memorandum of Agreement]
6
for the lights and sound at Plano Luneta de Sta. Isabel was your
accumulated account as of July 2004. Subsequent rentals have to
be remitted to [Intramuros] as they become due and demandable.
We have emphasized this concern in our letter of November 12,
2004.102X
A final judgment in the specific performance case will not affect
the outcome of the ejectment case. As pointed out by petitioner,
respondent's right to possess the leased premises is founded
initially on the Contracts of Lease and, upon their expiration, on
petitioner's tolerance in hopes of payment of outstanding arrears.
The July 27, 2004 Memorandum of Agreement subject of the
specific performance case cannot be the source of respondent's
continuing right of possession, as it expressly stated there that the
offsetting was only for respondent's outstanding arrears as of July
31, 2004. Any favorable judgment compelling petitioner to comply
with its obligation under this agreement will not give new life to
the expired Contracts of Lease, such as would repel petitioner's
unlawful detainer complaint.
In its Amended Answer in the specific performance case, petitioner
sets up the counterclaim that "[respondent] be ordered to pay its
arrears of (₱13,448,867.45) as of December 31, 2009 plus such
rent and surcharges as may be incurred until [respondent] has
completely vacated the [leased] premises." 103 This counterclaim is
exactly the same as one of petitioner's prayers in its ejectment
complaint:X
WHEREFORE, premises considered, it is most respectfully prayed
that JUDGMENT be rendered ORDERING:
....
(2) DEFENDANT [OFFSHORE CONSTRUCTION] TO PAY ITS
ARREARS OF THIRTEEN MILLION FOUR HUNDRED
FORTYEIGHT THOUSAND, EIGHT HUNDRED SIXTY-
SEVEN PESOS AND FORTY-FIVE CENTAVOS
(₱13,448,867.45), PLUS INTEREST OF 1% PER MONTH AS
STIPULATED IN THE LEASE CONTRACTS[.]104X
A compulsory counterclaim is a defendant's claim for money or
other relief which arises out of, or is necessarily connected with,
the subject matter of the complaint. In Spouses Ponciano v. Hon.
Parentela, Jr.:105X
A compulsory counterclaim is any claim for money or other relief
which a defending party may have against an opposing party,
which at the time of suit arises out of, or is necessarily connected
with, the same transaction or occurrence that is the subject matter
of plaintiff's complaint.
It is compulsory in the sense that if it is within the jurisdiction of
the court, and does not require for its adjudication the presence of
third parties over whom the court cannot acquire jurisdiction, it
must be set up therein, and will be barred in the future if not set
up.106 (Citation omitted)X
In its complaint for specific performance, respondent claimed that
petitioner should offset its outstanding rentals and that it was
petitioner which had an outstanding debt to respondent:
16. In compliance with the Memorandum of Agreement, Offshore
incurred expenses amounting to Seven Million Eight Hundred
Twenty[] Five Thousand Pesos (P7,825,000.00) by way of
Expenses for Rentals of Lights & Sound System, Electrical Bill
and Performers Fees. This amount is excluding the expenses
incurred during the period Offshore supplied the Light & Sound
System, as well as Performers, aforementioned started in October
2004. A copy of the Statement of Account is hereto appended as
ANNEX "H" to "H-4";
17. Based on Offshore's records, upon re-computation of Actual
Area used during all these period[s] from July 2001 to March 30,
2008, copy of Statement of Accounts has been sent to Intramuros
Administration for reconciliation, Offshore’s total obligation by
way of back and current rentals up to March 30, 2008 is only in the
amount of Six Million Four Hundred Three Thousand Three
Hundred Sixty[-]Four Pesos (P6,403,364.00);
18. Obviously, when both accounts are offset, it will clearly show
that [Intramuros] still owes Offshore the amount of One Million
Four Hundred Twenty[-]One Thousand Six Hundred Thirty[-]Six
Pesos (P1,421,636.00) as of March 2008;
19. Unfortunately, despite this glaring fact that [Intramuros] owes
Offshore, Defendant [Anna Maria L.] Harper (who has already
showed sour and adverse treatment of Offshore in the past), being
the new Administrator of Intramuros Administration, sent a Letter
dated 09 April 2008 demanding from Offshore to pay [Intramuros]
alleged rentals in arrears in the amount of P12,478[,]461.74, within
seven (7) days from receipt. A copy of the Letter is hereto attached
and marked as Annex "I" to "1-1";
20. It can be deduced from the attachment to the aforementioned
letter that [Intramuros] did not honor the obligations imposed in the
Memorandum of Agreement because the monthly expenses
incurred by Offshore for the payment of the Lights and Sound
System, Electricity and Performers Fees for the continuance of the
Department of Tourism WOW Project at Baluarte Plano, Luneta de
Sta. Isabel which were duly furnished [Intramuros] in the amount
of Seven Million Eight Hundred Twenty[-]Five Thousand Pesos
(P7,825,000.00) as expressly agreed by [Department of Tourism],
[Intramuros] and Offshore in the Memorandum of Agreement were
NOT deducted from the rentals due[.]107X
Petitioner's counterclaim in its Amended Answer was set up to
defend itself against such a claim:
26. [Offshore Construction] has not established its right, or the
reality is, [Offshore Constructioin] has been delinquent in the
payment of its financial obligations which are specifically provided
in its contract with defendant [Intramuros], such as rental fees.
27. [Offshore Construction] has to pay rent for being still in
possession of Puerta Isabel II and Asean Garden. Moreover,
plaintiff has enjoyed the fruits of subleasing these premises for
years and yet it has continuously failed to remit all rental fees and
surcharges despite repeated demands from defendants. It bears
stressing that as of December 31, 2009, [Offshore Construction's]
arrears has already ballooned to thirteen million four hundred and
forty[-]eight thousand eight hundred and sixty[] seven pesos and
forty[-]five centavos (PB,448,867.45).
7
28. Glaringly, [Offshore Construction] has been remiss in
performing its obligations stated in the Lease Contracts (Annexes A
to A- 15; B to B-14 and C to C-14 of the Complaint), Compromise
Agreement (Annexes E to E-17 of the Complaint) and
Memorandum of Agreement (Annexes F to F-16 of the Complaint).
[Intramuros and Anna Maria L. Harper] are therefore constrained
to demand payment from [Offshore Construction] for the latter's
failure or refusal to honor its just and valid obligations.
Necessarily, [Intramuros and Anna Maria L. Harper] will not
hesitate to seek legal remedies if [Offshore Construction] continues
to be delinquent.
29. Essentially, [Offshore Construction] is protesting the
computation of its arrears (P12,478,461.74) in the demand letter
sent by Administrator [Anna Maria L.] Harper on April 9, 2008.
[Offshore Construction] also asserts that it only owes defendant
[Intramuros] six million four hundred three thousand and three
hundred sixty[-]four pesos (P6,403,364.00).
30. [Offshore Construction] is misguided. The [Memorandum of
Agreement] dated July 27, 2004 was executed because [Offshore
Construction], at that time, had been indebted to defendant
[Intramuros] in the form of rental and utility consumption arrears
for the occupancy of Puerta Isabel Chambers, Asean Gardens and
Baluarte de San Andres in the amount of six million seven hundred
sixty[-]two thousand one hundred fifty[-]three and seventy
centavos (P6, 762, 153. 70) ....
....
32. Even after July 27, 2004, and up to this time, [Offshore
Construction] remained in possession of, used and/or subleased the
subject premises. As such, [Offshore Construction] still has to pay
rental fees, aside from the aforesaid arrears. The rental fees
continued to pile up and triggered the imposition of surcharges as
[Offshore Construction] again failed to remit payments thereon.
This explains the demandable amount of P13,448,867.45 (Annex I
to 11 of Complaint). [Offshore Construction] is therefore mistaken
in believing that it only owes defendant [Intramuros] the arrears
subject of the [Memorandum of Agreement] of July 27, 2004 and
nothing more.108X
Clearly, petitioner's counterclaim is compulsory, arising as it did
out of, and being necessarily connected with, the parties' respective
obligations under the July 27, 2004 Memorandum of Agreement.
Petitioner cannot be faulted for raising the issue of unpaid rentals
in the specific performance case or for raising the same issue in the
present ejectment case, since it appears that respondent's alleged
failure to pay the rent led to the nonrenewal of the Contracts of
Lease. However, it must be emphasized that any recovery made by
petitioner of unpaid rentals in either its ejectment case or in the
specific performance case must bar recovery in the other, pursuant
to the principle of unjust enrichment.109X
A judgment in the Complaint for Interpleader will likewise not
be res judicata against the ejectment complaint. The plaintiff in the
interpleader case, 4H Intramuros, allegedly representing the tenants
occupying Puerta de Isabel II, does not expressly disclose in its
Complaint110 for Interpleader the source of its right to occupy those
premises. However, it can be determined from petitioner's
Answer111 and from respondent's Memorandum112 that the members
of 4H Intramuros are respondent's sublessees.X
A sublessee cannot invoke a superior right over that of the
sublessor.113 A judgment of eviction against respondent will affect
its sublessees since the latter's right of possession depends entirely
on that of the former.114 A complaint for interpleader by sublessees
cannot bar the recovery by the rightful possessor of physical
possession of the leased premises.X
Since neither the specific performance case nor the interpleader
case constituted forum shopping by petitioner, the Metropolitan
Trial Court erred in dismissing its Complaint for Ejectment.
IV
Ordinarily, this case would now be remanded to the Metropolitan
Trial Court for the determination of the rightful possessor of the
leased premises. However, this would cause needless delay
inconsistent with the summary nature of ejectment
proceedings.115 Given that there appears sufficient evidence on
record to make this determination, judicial economy dictates that
this Court now resolve the issue of possession.116X
It is undisputed that respondent's occupation and use of Baluarte de
San Andres, Baluarte de San Francisco de Dilao, and Revellin de
Recoletos started on September 1, 1998 by virtue of Contracts of
Lease all dated August 20, 1998.117 The Contracts of Lease were
modified through Addendums to the Contracts likewise dated
August 20, 1998.118X
Then, to amicably settle Civil Case No. 98-91587 entitled Offshore
Construction and Development Company v. Hon. Gemma Cruz-
Araneta and Hon. Dominador Ferrer, Jr., then pending before
Branch 47, Regional Trial Court, Manila,119 the parties and the
Department of Tourism entered into a July 26, 1999 Compromise
Agreement. In the Compromise Agreement, the parties affirmed
the validity of the lease contracts, but agreed to transfer the areas to
be occupied and used by respondent in Baluarte de San Andres and
Baluarte de San Francisco de Dilao due to improvements that it had
introduced to the leased premises.120 The lease over Revellin de
Recoletos was terminated.121 It appears that under this Compromise
Agreement, the original five (5)-year period of the Contracts of
Lease were retained,122 such that the leases would expire on August
31, 2003, and renewable for another five (5) years upon the parties'
mutual agreement.123X
Thereafter, the Contracts of Lease expired. Respondent does not
concede this, but there is no proof that there has been any contract
mutually agreed upon by the parties for any extensions of the
leases. Respondent can only argue that petitioner's continuing
tolerance of respondent's possession and acceptance of
respondent's rental payments impliedly renewed the Contracts of
Lease.124X
But petitioner's tolerance of respondent's occupation and use of the
leased premises after the end of the lease contracts does not give
the latter a permanent and indefeasible right of possession in its
favor. When a demand to vacate has been made, as what petitioner
had done, respondent’s possession became illegal and it should
have left the leased premises.1âwphi1 In Caniza v. Court of
Appeals:125X
8
The Estradas’ first proffered defense derives from a literal
construction of Section 1, Rule 70 of the Rules of Court
which inter alia authorizes the institution of an unlawful detainer
suit when "the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to hold
possession, by virtue of any contract, express or implied." They
contend that since they did not acquire possession of the property
in question "by virtue of any contract, express or implied" - they
having been, to repeat, "allowed to live temporarily ... (therein) for
free, out of ... (Cañiza’s) kindness" - in no sense could there be a4n
"expiration or termination of . . . (their) right to hold possession, by
virtue of any contract, express or implied." Nor would an action for
forcible entry lie against them, since there is no claim that they had
"deprived (Cañiza) of the possession of ... (her property) by force,
intimidation, threat, strategy, or stealth."
The argument is arrant sophistry. Cañiza’s act of allowing the
Estradas to occupy her house, rent-free, did not create a permanent
and indefeasible right of possession in the latter's favor. Common
sense, and the most rudimentary sense of fairness clearly require
that act of liberality be implicitly, but no less certainly,
accompanied by the necessary burden on the Estradas of returning
the house to Cañiza upon her demand. More than once has this
Court adjudged that a person who occupies the land of another at
the latter's tolerance or permission without any contract between
them is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment
is the proper remedy against him. The situation is not much
different from that of a tenant whose lease expires but who
continues in occupancy by tolerance of the owner, in which case
there is deemed to be an unlawful deprivation or withholding of
possession as of the date of the demand to vacate. In other words,
one whose stay is merely tolerated becomes a deforciant illegally
occupying the land or property the moment he is required to
leave. Thus, in Asset Privatization Trust vs. Court of
Appeals,where a company, having lawfully obtained possession of
a plant upon its undertaking to buy the same, refused to return it
after failing to fulfill its promise of payment despite demands, this
Court held that "(a)fter demand and its repudiation, ... (its)
continuing possession ... became illegal and the complaint for
unlawful detainer filed by the ... (plant’s owner) was its proper
remedy."126 (Emphasis supplied, citations omitted)X
The existence of an alleged concession agreement between
petitioner and respondent is unsupported by the evidence on
record. The Metropolitan Trial Court found that a concession
agreement existed due to the agreements entered into by the
parties:
This Court agrees with the defendant. The various contracts of
lease between the parties notwithstanding, the existence of the
other agreements involved herein cannot escape the scrutiny of this
Court. Although couched in such words as "contracts of lease", the
relationship between the parties has evolved into another kind -
that of a concession agreement whereby defendant [Offshore
Construction] undertook to develop several areas of the Intramuros
District, defendant [Offshore Construction] actually commenced
the development of the subject premises and incurred expenses for
the said development, effectively making the relationship more
than an ordinary lessor-lessee but one governed by concession
whereby both parties undertook other obligations in addition to
their basic obligations under the contracts of lease. Consensus facit
legem (The parties make their own law by their agreement). It
behooves this Court to respect the parties' contracts, including the
memoranda of agreement that ensued after it. ... 127X
Respondent claims that the parties’ agreement was for it to operate
the leased premises to recover its investments and to make
profits.1âwphi1 However, a review of the Contracts of Lease show
that they are lease contracts, as defined in Article 1643 of the Civil
Code:
Article 1643. In the lease of things, one of the parties binds himself
to give to another the enjoyment or use of a thing for a price
certain, and for a period which may be definite or indefinite.
However, no lease for more than ninety-nine years shall be valid.
The restrictions and limitations on respondent's use of the leased
premises are consistent with petitioner’s right as lessor to stipulate
the use of the properties being leased.128 Neither the Contracts of
Lease nor their respective Addendums to the Contract contain any
stipulation that respondent may occupy and use the leased premises
until it recovers the expenses it incurred for improvements it
introduced there. Instead, the lease period was fixed at five (5)
years, renewable for another five (5) years upon mutual
agreement:X
3. CONTRACT TERM. (Leased Period) This lease shall be for a
period of FIVE YEARS (5 YRS) commencing from September 1,
1998 to August 31, 2003, renewable for another period of FIVE
YEARS (5 YRS) under such terms and condition that may be
mutually agreed upon in writing by the parties[.]129X
The subsequent contracts, namely, the July 26, 1999 Compromise
Agreement and the July 27, 2004 Memorandum of Agreement, also
do not point to any creation of a "concession" in favor of
respondent. The Compromise Agreement affirms the validity of the
lease contracts, while the Memorandum of Agreement was for the
payment of respondent's arrears until July 2004.
However, this Court cannot award unpaid rentals to petitioner
pursuant to the ejectment proceeding, since the issue of rentals in
Civil Case No. 08-119138 is currently pending with Branch 37,
Regional Trial Court, Manila, by virtue of petitioner's
counterclaim. As the parties dispute the amounts to be offset under
the July 27, 2004 Memorandum of Agreement and respondent’s
actual back and current rentals due,130 the resolution of that case is
better left to the Regional Trial Court for trial on the merits. X
WHEREFORE, the Petition for Review
on Certiorari is GRANTED. The April 14, 2011 Decision of
Branch 173, Regional Trial Court, Manila in Civil Case No. 10-
124740 is REVERSED AND SET ASIDE, and a new decision is
hereby rendered ordering respondent Offshore Construction and
Development Company and any and all its sublessees and
successors-in-interest to vacate the leased premises immediately.
Branch 37, Regional Trial Court, Manila is DIRECTED to resolve
Civil Case No. 08-119138 with dispatch.
SO ORDERED.
G.R. No. 185894, August 30, 2017
BELO MEDICAL GROUP, INC., Petitioner, v. JOSE L.
SANTOS AND VICTORIA G. BELO,Respondents.
9
DECISION
LEONEN, J.:
A conflict between two (2) stockholders of a corporation does not
automatically render their dispute as intra-corporate. The nature of
the controversy must also be examined.1
In this Petition for Review on Certiorari2 under Rule 45 of the
Rules of Court, Belo Medical Group, Inc. (Belo Medical Group)
assails the Regional Trial Court December 8, 2008 Joint Resolution
in Civil Case No. 08-397.3 This Joint Resolution granted
respondent Jose L. Santos' (Santos) Motion to Dismiss and Belo
Medical Group's Complaint for interpleader and Supplemental
Complaint for Declaratory Relief against Santos and Victoria G.
Belo (Belo), and declared all other pending incidents as moot. 4
The controversy began on May 5, 20085 when Belo Medical Group
received a request from Santos for the inspection of corporate
records.6 Santos claimed that he was a registered shareholder and a
co-owner of Belo's shares, as these were acquired while they
cohabited as husband and wife.7 Santos sought advice on his
probable removal as director of the corporation considering that he
was not notified of meetings where he could have been removed.
He also inquired on the election of Alfredo Henares (Henares) as
Corporate Secretary in 2007 when Santos had not been notified of
a meeting for Henares' possible election. Finally, he sought
explanation on the corporation's failure to inform him of the 2007
annual meeting and the holding of an annual meeting in
2008.8 Santos' concern over the corporate operations arose from the
alleged death of a patient in one (1) of its clinics. 9
Santos was unsuccessful in inspecting the corporate books as
Henares, the officer-in-charge of corporate records, was travelling.
Belo Medical Group asked for time in order for Henares to
accommodate Santos' request.10
After the first attempt to inspect, Belo wrote Belo Medical Group
on May 14, 2007 to repudiate Santos' co-ownership of her shares
and his interest in the corporation. She claimed that Santos held the
25 shares in his name merely in trust for her, as she, and not
Santos, paid for these shares. She informed Belo Medical Group
that Santos already had a pending petition with the Regional Trial
Court to be declared as co-owner of her properties. She asserted
that unless a decision was rendered in Santos' favor, he could not
exercise ownership rights over her properties.11
Belo also informed Belo Medical Group that Santos had a business
in direct competition with it. She suspected that Santos' request to
inspect the records of Belo Medical Group was a means to obtain a
competitor's business information, and was, therefore, in bad
faith.12
A second inspection was attempted through a written demand by
Santos on May 15, 2008.13 Again, he was unsuccessful.
Belo wrote to Belo Medical Group on May 20, 2008 to reiterate her
objections to Santos' attempts at inspecting corporate books and his
inquiry regarding a patient. Belo further manifested that she was
exercising her right as a shareholder to inspect the books herself to
establish that the 25 shares were not owned by Santos, and that he
did not pay for these shares.14
Thus, Belo Medical Group filed a Complaint for Interpleader 15 with
Branch 149, Regional Trial Court, Makati City on May 21, 2008.
Belo Medical Group alleged that while Santos appeared to be a
registered stockholder, there was nothing on the record to show
that he had paid for the shares under his name. The Complaint was
filed "to protect its interest and compel [Belo and Santos] to
interplead and litigate their conflicting claims of ownership of, as
well as the corresponding right of inspection arising from, the
twenty-five (25) [Belo Medical Group] shares between themselves
pursuant to Rule 62 of the 1997 Rules of Civil
Procedure . . ."16 The following reliefs were prayed for:
(i) issue an Order summoning and requiring defendants Santos and
Belo to interplead with each other to resolve their conflicting
claims of ownership of the 25 shares of stock of [Belo Medical
Group], including their opposing claims of exclusive entitlement to
inspect [Belo Medical Group] corporate records;
(ii) after due proceedings render judgment in favor of the proper
defendant; and
(iii) allow plaintiff [Belo Medical Group] to recover attorney's fees
and litigation expenses in the amount of at least Php1,000,000.00
jointly and solidarity against both defendants and for them to pay
the costs of suit.17
On the same day, Henares wrote Belo's and Santos' respective
counsels to inform them of the Complaint.18 Despite receipt,
Santos' counsel still proceeded to Belo Medical Group's Makati
office on May 22, 2008, where, again, they were unsuccessful in
inspecting the corporate books.19
Santos, for the third time, sent a letter on May 22, 2008 to schedule
an inspection of the corporate books and warned that continued
rejection of his request exposed the corporation to criminal
liability.20 Nothing came out of this last attempt as well.
Bela and Bela Medical Group wrote to Santos on May 27, 2008 to
inform him that he was barred from accessing corporate records
because doing so would be inimical to Belo Medical Group's
interests.21Through another letter on May 28, 2008, Santos was
reminded of his majority share in The Obagi Skin Health, Inc. the
owner and operator of the House of Obagi (House of Obagi)
clinics. He was likewise reminded of the service of a notice of the
2007 special meeting of stockholders to his address at Valero
Street, Makati City, contrary to his claim. 22
On May 29, 2008, Belo Medical Group filed a Supplemental
Complaint23 for declaratory relief under Rule 63 of the Rules of
Court. In its Supplemental Complaint, Belo Medical Group relied
on Section 7424 of the Corporation Code to deny Santos' request for
inspection. It prayed that Santos be perpetually barred from
inspecting its books due to his business interest in a
competitor.25 Should the ruling for interpleader be in favor of
Santos, Belo Medical Group prayed that the trial court:
a. exercise its power under Rule 63 of the Revised Rules of Civil
Procedure and give a proper construction of Sections 74 and 75 of
the Corporation Code in relation to the facts presented above, and
declare that plaintiff can rightfully decline defendant Santos's
request for inspection under those sections and related provisions
and jurisprudence; and
b. allow plaintiff to recover attorney's fees and litigation expenses
from defendant Santos in the amount of at least PHP1,000,000.00
and the costs of suit.26
Belo Medical Group's Complaint and Supplemental Complaint
were raffled to Branch 149 of the Regional Trial Court of Makati, a
special commercial court,27 thus classifying them as intra-
corporate.28
Belo filed her Answer Ad Cautelam with Cross-Claim to put on
record her defenses that Santos had no right to inspect the books as
he was not the owner of the 25 shares of stock in his name and that
he was acting in bad faith because he was a majority owner of
House of Obagi.29
Belo further argued that the proceedings should not have been
classified as intra-corporate because while their right of inspection
as shareholders may be considered intra-corporate, "it ceases to be
that and becomes a full-blown civil law question if competing
rights of ownership are asserted as the basis for the right of
inspection."30
10
Meanwhile, on several dates, the trial court sheriff attempted to
personally serve Santos with summons.31 After unsuccessful
attempts,32 the sheriff resorted to substituted service in Santos'
Makati office condominium unit.33
On July 4, 2008, Belo Medical Group filed an Omnibus Motion for
Clarificatory Hearing and for Leave to File Consolidated
Reply,34 praying that the case be tried as a civil case and not as an
intra-corporate controversy. It argued that the Interim Rules of
Procedure Governing Intra-Corporate Controversies35 did not
include special civil actions for interpleader and declaratory relief
found under the Rules of Court. Belo Medical Group clarified that
the issue on ownership of the shares of stock must first be resolved
before the issue on inspection could even be considered ripe for
determination.36
Belo Medical Group later on moved that Santos be declared in
default.37 Instead of filing an answer Santos filed a Motion to
Dismiss.38
Apart from procedural infirmities, Santos argued that Belo Medical
Group's Complaint and Supplemental Complaint must be
dismissed "for its failure to state, and ultimately, lack of, a cause of
action."39 No ultimate facts were given to establish the act or
omission of Santos and Belo that violated Belo Medical Group's
rights. There was simply no conflict on the ownership of the 25
shares of stock under Santos' name. Based on the corporation's
2007 Articles of Incorporation and General Information Sheet,
Santos was reflected as a stockholder and owner of the 25 shares of
stock. No documentary evidence was submitted to prove that Belo
owned these shares and merely transferred them to Santos as
nominal shares.40
Santos further argued that the filing of the complaints was an
afterthought to take attention away from Belo Medical Group's
criminal liability when it refused Santos' demand to inspect the
records of the corporation. For years, neither Belo Medica1 Group
nor Belo questioned Santos' standing in the corporation. No change
in ownership from Santos to another person was reflected in the
company's General Information Sheet.41
Santos also invoked the doctrine of piercing the corporate veil as
Belo owned 90% of Belo Medical Group. Her claim over the 25
shares was a ploy to defeat Santos' right to inspect corporate
records. He asserts that the Complaint for interpleader was an
anticipatory move by the company to evade criminal liability upon
its denial of Santos' requests.42
In addition, Santos argued that a prerequisite to filing these cases is
that the plaintiff has not yet incurred liability to any of the parties.
Since Belo Medical Group had already incurred criminal liability,
it could no longer file a complaint for interpleader or declaratory
relief.43
Santos denied any conflict of interest because Belo Medical
Group's products and services differed from House of
Obagi's44 Belo Medical Group's primary purpose was the
management and operation of skin clinics45 while the House of
Obagi's main purpose was the sale and distribution of high-end
facial products.46
On October 29, 2008, Belo Medical Group filed its
Opposition47 and argued that the Motion to Dismiss was a
prohibited pleading under Section 8 of the Interim Rules of
Procedure Governing Intra-Corporate Controversies.
Belo Medical Group reiterated that Belo and Santos must litigate
against each other to determine who rightfully owned the 25
shares. An accommodation of one of them, absent a resolution to
this issue, would make Belo Medical Group liable to the other. 48

On its supposed criminal liability when it refused Santos access to
corporate records, Belo Medical Group explained that the
independent liability necessary to defeat complaints for
interpleader arose from a final judgment and not merely a cause of
action that has accrued.49
Finally, Belo Medical Group averred that substantiation must be
done during trial. The dismissal of the case would be premature. 50
Belo's Opposition dated October 29, 2008 raised the same
arguments of Belo Medical Group.51
Santos filed his Reply to the Oppositions on November 18,
2008.52 He agreed that the controversy was not intra-corporate but
civil in nature, as it involved ownership.53 However, he stood firm
on his arguments that the case should be dismissed due to the
Complaints' failure to state a cause of action54and the trial court's
failure to acquire jurisdiction over his person.55
On December 8, 2008, the assailed Joint Resolution56 was issued
by the trial court resolving the following incidents: Belo Medical
Group's Omnibus Motion for Clarificatory Hearing and for Leave
to File Consolidated Reply and Motion to Declare Santos in
Default, and Santos' Motion to Dismiss. The trial court declared the
case as an intra-corporate controversy but dismissed the
Complaints.57
The trial court characterized the dispute as "intrinsically connected
with the regulation of the corporation as it involves the right of
inspection of corporate records."58 Included in Santos and Belo's
conflict was a shareholder's exclusive right to inspect corporate
records. In addition, the issue on the ownership of shares requires
the application of laws and principles regarding corporations. 59
However, the Complaint could not flourish as Belo Medical Group
"failed to sufficiently allege conflicting claims of ownership over
the subject shares."60 In justifying failure to state a cause of action,
the trial court reasoned:
Plaintiff clearly admits in the complaint that defendant Santos is
the registered stockholder of the subject shares albeit no records
show that he made any payments thereof. Also, notwithstanding
defendant Belo's claim that she is the true owner thereof, there was
no allegation that defendant Santos is no longer the holder on
record of the same or that it is now defendant Belo who is the
registered stockholder thereof. In fact, the complaint even alleges
that defendant Santos holds the 25 BMGI shares merely as nominal
qualifying shares in trust for defendant Belo. Thus, the complaint
failed to state a cause of action that would warrant the resort to an
action for interpleader.61
Though a motion to dismiss is a prohibited pleading under the
Interim Rules of Procedure Governing Intra-Corporate
Controversies, the trial court ruled that Section 2, Rule 1 of these
rules allowed for the Rules of Court to apply suppletorily.
According to the Rules of Court, motions to dismiss are allowed in
interpleader cases.62
Finally, the Complaint for Declaratory Relief was struck down as
improper because it sought an initial determination on whether
Santos was in bad faith and if he should be barred from inspecting
the books of the corporation. Only after resolving these issues can
the trial court determine his rights under Sections 74 and 75 of the
Corporation Code. The act of resolving these issues is not within
the province of the special civil action as declaratory relief is
limited to the construction and declaration of actual rights and does
not include the determination of issues.63
From the Joint Resolution, Belo and Belo Medical Group pursued
different remedies.
Belo filed her Petition for Review before the Court of Appeals
11
docketed as CA G.R. No. 08-397.64
Belo Medical Group, on the other hand, directly filed its Petition
for Review with this Court, alleging that purely questions of law
are at issue.
Belo Medical Group argues that it is enough that there are two (2)
people who have adverse claims against each other and who are in
positions to make effective claims for interpleader to be given due
course.65 Belo Medical Group cites Lim v. Continental
Development Corporation,66 which allowed a complaint for
interpleader to continue because two (2) parties claimed ownership
over the same shares of stock.67
On January 30, 2009, Belo Medical Group filed a
Manifestation/Disclosure68 informing this Court that on January 28,
2009, it received Belo's Petition for Review filed before the Court
of Appeals. On February 4, 2009, this Court also received Belo's
Manifestation69 that she filed a Petition for Review before the
Court of Appeals, assailing the Joint Resolution primarily because
it dismissed her counterclaims. She also furnished this Court a
copy of her Manifestation filed with the Court of Appeals to inform
it of Belo Medical Group's Petition for Review before this Court. 70
On April 15, 2009, Belo filed her Comment71 and manifested that
she agrees with the arguments raised by Belo Medical Group.
On April 28, 2009, Santos filed his Comment.72 He argues that the
Petition filed by Belo Medical Group should be dismissed as the
wrong mode of appeal. It should have filed an appeal under Rule
43, pursuant to the Interim Rules on Intra-Corporate Disputes. 73 He
alleges that Belo Medical Group committed forum shopping. It
filed the present Petition for Review after Belo had already filed an
appeal under Rule 43 before the Court of Appeals. He asserts that
Belo and Belo Medical Group have the san1e interest. Belo, owner
of 90% of the shares of stock of the corporation, dictates Belo
Medical Group's actions, which were ultimately for Belo's benefit
and interests.74
Meanwhile, on July 31, 2009, the Court of Appeals dismissed
Belo's Petition for Review and ruled that the pending case before
this Court was the more appropriate vehicle to determine the
issues.75
The issues for this Court's resolution are as follows:
First, whether or not Belo Medical Group, Inc. committed forum
shopping;
Second, whether or not the present controversy is intra-corporate;
Third, whether or not Belo Medical Group, Inc. came to this Court
using the correct mode of appeal; and
Finally, whether or not the trial court had basis in dismissing Belo
Medica] Group, Inc.'s Complaint for Declaratory Relief.
I
Neither Belo nor the Belo Medical Group is guilty of forum
shopping.
Forum shopping exists when parties seek multiple judicial
remedies simultaneously or successively, involving the same
causes of action, facts, circumstances, and transactions, in the
hopes of obtaining a favorable decision.76 It may be accomplished
by a party defeated in one forum, in an attempt to obtain a
favorable outcome in another, "other than by appeal or a special
civil action for certiorari."77
Forum shopping trivializes rulings of courts, abuses their
processes, cheapens the administration of justice, and clogs court
dockets.78 In Top Rate Construction & General Services, Inc. v.
Paxton Development Corporation:79
What is critical is the vexation brought upon the courts and the
litigants by a party who asks different courts to rule on the same or
related causes and grant the same or substantially the same reliefs
and in the process creates the possibility of conflicting decisions
being rendered by the different fora upon the same issues. 80
Rule 7, Section 5 of the Rules of Court contains the rule against
forum shopping:
Section 5. Certification against forum shopping. - The plaintiff or
principal party shall certify under oath in the complaint or other
initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith:
(a) that he has not theretofore commenced any action or filed any
claim involving the same issues in any court, tribunal or quasi-
judicial agency and, to the best of his knowledge, no such other
action or claim is pending therein; (b) if there is such other per ding
action or claim, a complete statement of the present status thereof;
and (c) if he should thereafter learn that the same or similar action
or claim has been filed or is pending, he shall report that fact
within five (5) days therefrom to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be
curable by mere amendment of the complaint or other initiatory
pleading but shall be cause for the dismissal of the case without
prejudice; unless otherwise provided, upon motion and after
hearing. The submission of a false certification or non-compliance
with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding
administrative and criminal actions. If the acts of the party or his
counsel clearly constitute willful and deliberate forum shopping,
the same shall be ground for summary dismissal with prejudice and
shall constitute direct contempt, as well as a cause for
administrative sanctions.
When willful and deliberate violation is clearly shown, it can be a
ground for all pending cases' summary dismissal with
prejudice81 and direct contempt 82
Belo Medical Group filed its Petition for Review on Certiorari
under Rule 45 before this Court to appeal against the Joint
Resolution of the trial court. It did not file any other petition
related to the case, as indicated in it verification and certification
against forum shopping. It was Belo, a defendant in Belo Medical
Groups Complaint, who filed a separate appeal under Rule 43 with
the Court of Appeals primarily to protect her counterclaims. Belo
and Belo Medical Group both filed their respective Petitions for
Review on January 28, 2009, the lat day within the period allowed
to do so.83 The Court of Appeals already ruled that litis
pendencia was present when Belo and Belo Medical Group filed
their respective petitions on the same date before different fora.
The two petitions involved the same parties, rights and reliefs
sought, and causes of action.84 This is a decision this Court can no
longer disturb.
Neither Belo Medical Group nor Belo can be faulted for willful and
deliberate violation of the rule against forum shopping. Their
prompt compliance of the certification against forum shopping
appended to their Petitions negates willful and deliberate intent.
Belo Medical Group was not remiss in its duty to inform this Court
of a similar action or proceeding related to its Petition. It promptly
manifested before this Court its receipt of Belo's Petition before the
Court of Appeals. Belo Medical Group and Belo manifested before
this Court that Belo filed a Rule 43 petition to protect her
counterclaims and to question the same Joint Resolution issued by
the trial court. Both did so within five (5) days from discovery, as
they undertook in their respective certificates against forum�
shopping.
The issue of forum shopping has become moot. The appeal under
12
Rule 43 filed by Belo has been dismissed by the Court of Appeals
on the ground of litis pendencia.85 The purpose of proscribing
forum shopping is the proliferation of contradictory decisions on
the same controversy.86 This possibility no longer exists in this
case.
II
Belo Medical Group filed a case for interpleader, the proceedings
of which are covered by the Rules of Court. At its core, however, it
is an intra�-corporate controversy.
A.M. No. 01-2-04-SC, or the Interim Rules of Procedure
Governing Intra-Corporate Controversies, enumerates the cases
where the rules will apply:
Section 1. (a) Cases Covered - These Rules shall govern the
procedure to be observed in civil cases involving the following:
1. Devices or schemes employed by, or any act of, the
board of directors, business associates, officers or
partners, amounting to fraud or misrepresentation which
may be detrimental to the interest of the public and/or of
the stockholders, partners, or members of any
corporation, partnership, or association;
2. Controversies arising out of intra-corporate, partnership,
or association relations, between and among
stockholders, members, or associates; and between, any
or all of them and the corporation, partnership, or
association of which they are stockholders, members, or
associates, respectively;
3. Controversies in the election or appointment of directors,
trustees, officers, or managers of corporations,
partnerships, or associations;
4. Derivative suits; and
5. Inspection of corporate books.87
The same rules prohibit the filing of a motion to dismiss:
Section 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 re�opening 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.
To determine whether an intra-corporate dispute exists and whether
this case requires the application of these rules of procedure, this
Court evaluated the relationship of the parties. The types of intra-
corporate relationships were reviewed in Union Glass & Container
Corporation v. Securities and Exchange Commission:88
[a] between the corporation, partnership or association and the
public; [b] between the corporation, partnership or association and
its stockholders, partners, members, or officers; [c] between the
corporation, partnership or association and the state in so far as its
franchise, permit or license to operate is concerned; and [d] among
the stockholders, partners or associates themselves. 89
For as long as any of these intra-corporate relationships exist
between the parties, the controversy would be characterized as
intra-corporate.90 This is known as the "relationship test."
DMRC Enterprises v. Este del Sol Mountain Reserve,
Inc.91 employed what would later be called as the "nature of
controversy test." It became another means to determine if the
dispute should be considered as intra�-corporate.
In DMRC Enterprises, Este del Sol leased equipment from DMRC
Enterprises. Part of Este del Sol's payment was shares of stock in
the company. When Este del Sol defaulted, DMRC Enterprises
filed a collection case before the Regional Trial Court. Este del Sol
argued that it should have been filed before the Securities and
Exchange Commission as it involved an intra-corporate dispute
where a corporation was being compelled to issue its shares of
stock to subscribers. This Court held that it was not just the
relationship of the parties that mattered but also the conflict
between them:
The purpose and the wording of the law escapes the respondent.
Nowhere in said decree do we find even so much as an
intimidation that absolute jurisdiction and control is vested in the
Securities and Exchange Commission in all matters affecting
corporations. To uphold the respondent's argument would remove
without legal imprimatur from the regular courts all conflicts over
matters involving or affecting corporations, regardless of the nature
of the transactions which give rise to such disputes. The courts
would then be divested of jurisdiction not by reason of the nature
of the dispute submitted to them for adjudication, but solely for the
reason that the dispute involves a corporation. This cannot be done.
To do so would not only be to encroach on the legislative
prerogative to grant and revoke jurisdiction of the courts but such a
sweeping interpretation may suffer constitutional infirmity. Neither
can we reduce jurisdiction of the courts by judicial fiat (Article X,
Section 1, The Constitution).92
This Court now uses both the relationship test and the nature of the
controversy test to determine if an intra-corporate controversy is
present.93
Applying the relationship test, this Court notes that both Belo and
Santos are named shareholders in Belo Medical Group's Articles of
Incorporation94 and General Information Sheet for 2007.95 The
conflict is clearly intra-corporate as it involves two (2)
shareholders although the ownership of stocks of one stockholder
is questioned. Unless Santos is adjudged as a stranger to the
corporation because he holds his shares only in trust for Belo, then
both he and Belo, based on official records, are stockholders of the
corporation. Belo Medical Group argues that the case should not
have been characterized as intra-corporate because it is not
between two shareholders as only Santos or Belo can be the
rightful stockholder of the 25 shares of stock. This may be true.
But this finding can only be made after trial where ownership of
the shares of stock is decided.
The trial court cannot classify the case based on potentialities. The
two defendants in that case are both stockholders on record. They
continue to be stockholders until a decision is rendered on the true
ownership of the 25 shares of stock in Santos' name. If Santos'
subscription is declared fictitious and he still insists on inspecting
corporate books and exercising rights incidental to being a
stockholder, then, and only then, shall the case cease to be intra-
corporate.
Applying the nature of the controversy test, this is still an intra-
�corporate dispute. The Complaint for interpleader seeks a
determination of the true owner of the shares of stock registered in
Santos' name. Ultimately, however, the goal is to stop Santos from
inspecting corporate books. This goal is so apparent that, even if
Santos is declared the true owner of the shares of stock upon
completion of the interpleader case, Belo Medical Group still seeks
his disqualification from inspecting the corporate books based on
bad faith. Therefore, the controversy shifts from a mere question of
ownership over movable property to the exercise of a registered
stockholder's proprietary right to inspect corporate books.
Belo Medical Group argues that to include inspection of corporate
books to the controversy is premature considering that there is still
no determination as to who, between Belo and Santos, is the
rightful owner of the 25 shares of stock. Its actions belie its
arguments. Belo Medical Group wants the trial court not to
prematurely characterize the dispute as intra-corporate when, in the
same breath, it prospectively seeks Santos' perpetual
13
disqualification from inspecting its books. This case was never
about putting into light the ownership of the shares of stock in
Santos' name. If that was a concern at all, it was merely secondary.
The primary aim of Belo and Belo Medical Group was to defeat his
right to inspect the corporate books, as can be seen by the filing of
a Supplemental Complaint for declaratory relief.
The circumstances of the case and the aims of the parties must not
be taken in isolation from one another. The totality of the
controversy must be taken into account to improve upon the
existing tests. This Court notes that Belo Medical Group used its
Complaint for interpleader as a subterfuge in order to stop Santos,
a registered stockholder, from exercising his right to inspect
corporate books.
Belo made no claims to Santos' shares before he attempted to
inspect corporate books, and inquired about the Henares' election
as corporate secretary and the conduct of stockholders' meetings.
Even as she claimed Santos' shares as hers, Belo proffered no
initial proof that she had paid for these shares. She failed to
produce any document except her bare allegation that she had done
so. Even her Answer Ad Cautelam with Cross-Claim96 contained
bare allegations of ownership.
According to its Complaint, although Belo Medical Group's
records reflect Santos as the registered stockholder of the 25
shares, they did not show that Santos had made payments to Belo
Medical Group for these shares, "consistent with Bela's claim of
ownership over them."97 The absence of any document to establish
that Santos had paid for his shares does not bolster Belo's claim of
ownership of the same shares. Santos remains a stockholder on
record until the contrary is shown.
Belo Medical Group cites Lim v. Continental Development
Corporation98 as its basis for filing its Complaint for interpleader.
In Lim, Benito Gervasio Tan (Tan) appeared as a stockholder of
Continental Development Corporation. He repeatedly requested the
corporation to issue certificates of shares of stock in his name but
Continental Development Corporation could not do this due to the
claims of Zoila Co Lim (Lim). Lim alleged that her mother, So Bi,
was the actual owner of the shares that were already registered in
the corporate books as Lim's, and she delivered these in trust to
Lim before she died. Lim wanted to have the certificates of shares
cancelled and new ones re-issued in his name. This Court ruled that
Continental Development Corporation was correct in filing a case
for interpleader:
Since there is an active conflict of interests between the two
defendants, now herein respondent Benito Gervasio Tan and
petitioner Zoila Co Lim, over the disputed shares of stock, the trial
court gravely abused its discretion in dismissing the complaint for
interpleader, which practically decided ownership of the shares of
stock in favor of defendant Benito Gervasio Tan. The two
defendants, now respondents in G.R. No. L-41831, should be given
full opportunity to litigate their respective claims.
Rule 63, Section 1 of the New Rules of Court tells us when a cause
of action exists to support a complaint in interpleader:
Whenever conflicting claims upon the same subject matter are or
may be made against a person, who claims no interest whatever in
the subject matter, or an interest which in whole or in part is not
disputed by the claimants, he may bring an action against the
conflicting claimants to compel them to interplead and litigate their
several claims among themselves . . .
This provision only requires as an indispensable requisite:
that conflicting claims upon the same subject matter are or may be
made against the plaintiff-in-interpleader who claims no interest
whatever in the subject matter or an interest which in whole or in
part is not disputed by the claimants (Beltran vs. People's Homesite
and Housing Corporation, No. L-25138, 29 SCRA 145).
This ruling, penned by Mr. Justice Teehankee, reiterated the
principle in Alvarez vs. Commonwealth (65 Phil. 302), that
The action of interpleader, under section 120, is a remedy whereby
a person who has personal property in his possession. or an
obligation to render wholly or partially, without claiming any right
in both comes to court and asks that the persons who claim the said
personal property or who consider themselves entitled to demand
compliance with the obligation. be required to litigate among
themselves, in order to determine finally who is entitled to one or
the other thing. The remedy is afforded not to protect a person
against a double liability but to protect him against a double
vexation in respect of one liability.
An interpleader merely demands as a sine qua non element
. . . that there be two or more claimants to the fund or thing in
dispute through separate and different interests. The claims must be
adverse before relief can be granted and the parties sought to be
interpleaded must be in a position to make effective claims (33 C.J.
430).
Additionally, the fund thing, or duty over which the parties assert
adverse claims must be one and the same and derived from the
same source (33 C.J., 328; Martin, Rules of Court, 1969 ed., Vol. 3,
133-134; Moran, Rules of Court, 1970 ed., Vol. 3, 134-136).
Indeed, petitioner corporation is placed in the same situation as a
lessee who does not know the person to whom he will pay the
rentals due to the conflicting claims over t[h]e property leased, or a
sheriff who finds himself puzzled by conflicting claims to a
property seized by him. In these examples, the lessee
(Pangkalinawan vs. Rodas, 80 Phil. 28) and the sheriff (Sy-Quia
vs. Sheriff, 46 Phil. 400) were each allowed to file a complaint in
interpleader to determine the respective rights of the claimants. 99
In Lim, the corporation was presented certificates of shares of stock
in So Bi's name. This proof was sufficient for Continental
Development Corporation to reasonably conclude that controversy
on ownership of the shares of stock existed.
Furthermore, the controversy in Lim was between a registered
stockholder in the books of the corporation and a stranger who
claimed to be the rightful transferee of the shares of stock of her
mother. The relationship of the parties and the circumstances of the
case establish the civil nature of the controversy, which was
plainly, ownership of shares of stock. Interpleader was not filed to
evade or defeat a registered stockholder's right to inspect corporate
books. It was borne by the sincere desire of a corporation, not
interested in the certificates of stock to be issued to either claimant,
to eliminate its liability should it favor one over the other.
On the other hand, based on the facts of this case and applying the
relationship and nature of the controversy tests, it was
understandable how the trial court could classify the interpleader
case as intra-corporate and dismiss it. There was no ostensible
debate on the ownership of the shares that called for an interpleader
case. The issues and remedies sought have been muddled when,
ultimately, at the front and center of the controversy is a registered
stockholder's right to inspect corporate books.
As an intra-corporate dispute, Santos should not have been allowed
to file a Motion to Dismiss.100 The trial court should have
continued on with the case as an intra-corporate dispute
considering that it called for the judgments on the relationship
between a corporation and its two warring stockholders and the
relationship of these two stockholders with each other.
III
Rule 45 is the wrong mode of appeal.
A.M. No. 04-9-07-SC promulgated by this Court En Banc on
September 14, 2004 laid down the rules on modes of appeal m
cases formerly cognizable by the Securities and Exchange
Commission:
1. All decisions and final orders in cases falling under the Interim
Rules of Corporate Rehabilitation and the Interim Rules of
Procedure Governing Intra-Corporate Controversies under
14
Republic Act No. 8799 shall be appealable to the Court of Appeals
through a petition for review under Rule 43 of the Rules of Court.
2. The petition for review shall be taken within fifteen (15) days
from notice of the decision or final order of the Regional Trial
Court. Upon proper motion and the payment of the full amount of
the legal fee prescribed in Rule 141 as amended before the
expiration of the reglementary period, the Court of Appeals may
grant an additional period of fifteen (15) days within which to file
the petition for review. No further extension shall be granted except
for the most compelling reasons and in no case to exceed fifteen
(15) days.
On the other hand, Rule 43 of the Rules of Court allows for appeals
to the Court of Appeals to raise questions of fact, of law, or a mix
of both. Hence, a party assailing a decision or a final order of the
trial court acting as a special commercial court, purely on questions
of law, must raise these issues before the Court of Appeals through
a petition for review.101 A.M. No. 04-9-07-SC mandates it. Rule 43
allows it.
Belo Medical Group argues that since it raises only questions of
law, the proper mode of appeal is Rule 45 filed directly to this
Court. This is correct assuming there were no rules specific to
intra-corporate disputes. Considering that the controversy was still
classified as intra-corporate upon filing of appeal, special rules,
over general ones, must apply.
Based on the policy of judicial economy and for practical
considerations,102 this Court will not dismiss the case despite the
wrong mode of appeal utilized. For one, it would be taxing in time
and resources not just for Belo Medical Group but also for Santos
and Belo to dismiss this case and have them refile their petitions
for review before the Court of Appeals. There would be no benefit
to any of the parties to dismiss the case especially since the issues
can already be resolved based n the records before this Court. Also,
the Court of Appeals already referred the matter to this Court when
it dismissed Belo's Petition for Review. Remanding this case to the
Court of Appeals would not only be unprecedented, it would
further delay its resolution.
IV
At the outset, this Court notes that two cases were filed by Belo
Medical Group: the Complaint for interpleader and the
Supplemental Complaint for Declaratory Relief. Under Rule 2,
Section 5 of the Rules of Court, a joinder of cause of action is
allowed, provided that it follows the conditions enumerated below:
Section 5. Joinder of Causes of Action. A party may in one
pleading assert, in the alternative or otherwise, as many causes of
action as he may have against an opposing party, subject to the
following conditions:
(a) The party joining the causes of action shall comply with the
rules on joinder of parties;
(b) The joinder shall not include special civil actions or actions
governed by special rules;
(c) Where the causes of action are between the same parties but
pertain to different venues or jurisdictions, the joinder may be
allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of said court and the venue lies
therein; and
(d) Where the claims in all the causes of action are principally for
recovery of money, the aggregate amount claimed shall be the test
of jurisdiction. (Emphasis supplied)
Assuming this case continues on as an interpleader, it cannot be
joined with the Supplemental Complaint for declaratory relief as
both are special civil actions. However, as the case was classified
and will continue as an intra-corporate dispute, the simultaneous
complaint for declaratory relief becomes superfluous. The right of
Santos to inspect the books of Belo Medical Group and the
appreciation for his motives to do so will necessarily be determined
by the trial court together with determining the ownership of the
shares of stock under Santos' name.
The trial court may make a declaration first on who owns the
shares of stock and suspend its ruling on whether Santos should be
allowed to inspect corporate records. Or, it may rule on whether
Santos has the right to inspect corporate books in the meantime
while there has yet to be a resolution on the ownership of shares.
Remedies are available to Belo Medical Group and Belo at any
stage of the proceeding, should they carry on in prohibiting Santos
from inspecting the corporate books.
WHEREFORE, the Petition for Review of Belo Medical Group,
Inc. is PARTIALLY GRANTED. The December 8, 2008 Joint
Resolution of Branch 149, Regional Trial Court, Makati City in
Civil Case No. 08-397 is REVERSED regarding its dismissal of
the intra-corporate case. Let this case be REMANDED to the
commercial court of origin for further proceedings.
SO ORDERED.
G.R. No. 213233, August 05, 2015
BLISS DEVELOPMENT CORP./HOME GUARANTY
CORPORATION, Petitioner, v. MONTANO DIAZ, DOMINGO
TAPAY, AND EDGAR H. ARREZA, Respondents.
DECISION
VELASCO JR., J.:
The Case
This is a Petition for Review on Certiorari assailing the
Decision1 of the Court of Appeals (CA), promulgated on January
21, 2014, and its subsequent Resolution dated June 27, 2014, both
in CA-G.R. CV No. 99179. The assailed Decision reversed and set
aside the Decision of the Regional Trial Court (RTC), Makati City,
Branch 59, dated November 21, 2011, in Civil Case No. 96-1372.
The assailed Resolution, meanwhile, denied petitioner�s Motion
for Reconsideration.
The Facts
Petitioner Bliss Development Corporation (BDC) (subsequently
reorganized as Home Guaranty Corporation) is the registered
owner of Lot No. 27, Block 30, New Capitol Estates I, Brgy.
Matandang Balara, Diliman, Quezon City, and covered by Transfer
Certificate of Title (TCT) No. 331582. On October 19, 1984, it
entered into and executed a Deed of Sale over the said property in
favor of Spouses Emiliano and Leonila Melgazo (Sps. Melgazo),
both of whom are now deceased.2redarclaw
On May 7, 1991, a certain Rodolfo Nacua (Nacua) sent a letter to
BDC, saying that Sps. Melgazo transferred to him their rights over
the property. He further expressed willingness to pay the
outstanding obligations of Sps. Melgazo to BDC. Before the
property was fully paid, however, Nacua sold his rights to Olivia
Garcia (Garcia), through a Deed of Transfer of Rights. Later,
Garcia transferred her rights to Elizabeth Reyes (Reyes). Reyes
then transferred her rights to Domingo Tapay (Tapay), who then
later sold his rights to herein respondent Montano Diaz (Diaz) for
Six Hundred Thousand Pesos (P600,000.00). Diaz then paid BDC
the amortizations due on the property, amounting to P406,915.15,
and BDC issued a permit to occupy the property in favor of Diaz.
Diaz then introduced improvements on the property, amounting to
P700,000.00.
On April 14, 1992, BDC executed a Contract to Sell in favor of
Diaz.3 On April 15, 1994, however, BDC informed Diaz that
respondent Edgar Arreza (Arreza) was claiming that the heirs of
Sps. Melgazo sold to him the rights over the property.4 BDC then
placed Diaz�s account in �inactive status.� To resolve the
conflicting claims of Arreza and Diaz, BDC filed a complaint for
Interpleader against them, before the RTC, Makati City, Branch
15
146. On March 27, 1996, the Makati City RTC Branch 146 ruled
that the signatures of Sps. Melgazo transferring their rights to
Nacua were mere forgeries. Thus, it ruled that Arreza had a better
right over the property. This decision became final and
executory.5redarclaw
On August 27, 1996, Diaz filed the present complaint for sum of
money against BDC before the RTC, Makati City, Branch 59. 6 This
was later amended to include Arreza and Tapay as defendants. Diaz
argued that BDC and Tapay�s representations led him to believe
that he had a good title over the property, but due to the court�s
ruling in the interpleader case, he was constrained to transfer the
property to Arreza. Thus, he prayed for the
following:LawlibraryofCRAlaw
(1) For BDC and Arreza to pay him P1,106,915.58, plus interest,
representing the amount he paid for the assumption of Tapay�s
rights;
(2) For Tapay to pay him P600,000.00, plus interests, representing
the amount he paid Tapay;
(3) For BDC and Tapay to pay him P500,000.00 as moral damages;
(4) For BDC to pay him P500,000 as exemplary damages; and
(5) For BDC, Tapay, and Arreza to pay him P100,000 as
attorney�s fees and costs of suit.7
Both BDC and Tapay argued that their respective acts were lawful
and done in good faith.Arreza filed a Motion to Dismiss, citing res
judicata, arguing that the claim of Diaz is a compulsory
counterclaim that should have been pleaded in the Interpleader
case. The RTC denied the Motion to Dismiss, which the CA, on
certiorari, affirmed. When the issue reached this Court in G.R. No.
133113,8 this Court ruled that the claim as against Arreza is barred
by res judicata. The Court upheld the argument that the claim is in
the nature of a compulsory counterclaim. Thus, the case against
Arreza was dismissed.
The Decision of the RTC
After trial, the RTC rendered its Decision on November 21, 2011,
finding that Diaz failed to prove that he is an assignee in good
faith, and thus dismissed the complaint for lack of merit in this
wise:LawlibraryofCRAlaw
Plaintiff must show that he inquired not only into the title of the
assignor but also into the assignor�s capacity to convey. The
failure of plaintiff to diligently inquire as such, indicated that he is
not an assignee in good faith. Plaintiff Diaz downplays the need to
extend his examination to intervening transferor farther than
Domingo Tapay from whom he acquired the subject property. Such
attitude, however, is not in accord with what a reasonably prudent
person would do under the circumstances.
xxxx
WHEREFORE, premises considered, plaintiff�s Complaint is
hereby DISMISSED for lack of merit. Defendant Domingo
Tapay�s [counterclaim] is likewise dismissed. No costs. 9
Aggrieved, Diaz appealed to the CA.
The Decision of the CA
In its presently assailed Decision promulgated on January 21,
2014, the CA reversed the ruling of the RTC and, instead,ruled that
Diaz is entitled to be paid reimbursement and damages. The CA
anchored its ruling on its finding that Diaz is both a buyer in good
faith and a builder in good faith, thus:LawlibraryofCRAlaw
A careful examination of the records convinces Us that Diaz is both
a buyer and builder in good faith. We note that while Bliss
executed a Deed of Sale with Mortgage in favor of the spouses
Emiliano and Leonila Melgazo, title over the property was in
Bliss� name. The title remained in Bliss� name when Tapay
offered to transfer his rights over the property to Diaz. Considering
that the property involved is registered land, Diaz need not go
beyond the title to be considered a buyer in good faith. Indeed,
after Diaz accepted Tapay�s offer, he dealt directly with Bliss
which received the monthly amortizations due on the property. For
almost three years, from 1991 to 1994, Bliss accepted Diaz�s
payment without informing Diaz of Arreza�s conflicting claim
over the property. Bliss even issued Diaz a permit to occupy the
property in 1992; thus, allowing Diaz to introduce improvements
on the property. In other words, at the time when Diaz purchased
the property from Tapay and when he introduced the
improvements, he had no notice that some other person has a right
over the property. He also had a well-founded belief that the
property he was building on was his. Accordingly, Diaz is a buyer
and builder in good faith.10
In ruling that Diaz is a buyer in good faith, the CA noted that Diaz
need not go beyond the title to be considered a buyer in good faith,
because what is involved is a registered land.
With regard to the liability of BDC, the CA ruled that the provision
in the Contract to Sell excusing it from reimbursing the monthly
amortizations to Diaz cannot exempt it from liability, because it
acted in bad faith. The CA said:LawlibraryofCRAlaw
Next, Bliss� argument that the Additional Provision in the
Contract to Sell excuses it from reimbursing the monthly
amortizations paid by Diaz cannot be given credence. Any
stipulation exempting the vendor from the obligation to answer for
eviction shall be void, if he acted in bad faith. The vendor�s bad
faith consists in his knowledge beforehand at the time of the sale,
of the presence of the fact giving rise to eviction, and its possible
consequence. It is undisputed that Bliss knew about Arreza�s
claim in 1991. It even received amortization payments from
Arreza. Yet, Bliss is aware that should Arreza pursue his claim in
court, Diaz may be evicted from the property. Yet, Bliss only
informed Diaz about Arreza�s claim in 1994 when Arreza
followed up his claim. Indubitably, Bliss acted in bad faith in
dealing with Diaz and should not be absolved from liability by the
Additional Provision in the Contract to Sell.11
Thus, the CA dispositively held:LawlibraryofCRAlaw
FOR THESE REASONS, the November 21, 2011 Decision of the
Regional Trial Court of Makati City, Branch 59, is SET ASIDE.
The Court hereby DIRECTS: (1) Defendant-appellee Bliss
Development Corporation/Home Guaranty Corporation
to PAY plaintiff-apellant Montano Diaz P1,106,915.58 for the
amortizations paid and amount spent on improvements on the
property, P100,000.00 as moral damages, P50,000.00 as exemplary
damages, and P25,000.00 as attorney�s fee; and (2) defendant-
appellee Domingo Tapay to PAY plaintiff-appellant Montano M.
Diaz P600,000.00, the amount he paid for the transfer of rights.
Petitioner BDC moved for reconsideration, insisting that Diaz
cannot be declared a buyer in good faith, in light of the March 27,
1996 Decision of the Makati City RTC, Branch 146 in the
Interpleader case, which had long been final and executory. Tapay
also moved for reconsideration, arguing that he was not aware of
the defect in the title sold to Diaz, and, hence, he should not be
made liable for the P600,000.00 that Diaz paid to him. In the
CA�s assailed Resolution dated June 27, 2014,12 the CA denied
both motions for reconsideration.
Hence, the present Petition for Review on Certiorari filed by BDC,
raising the following issues:LawlibraryofCRAlaw
I.
WHETHER THE CA ERREDIN NOT DISMISSING THE
APPEAL, IN VIEW OF THE APPLICATION OF THE
DOCTRINE OF IMMUTABILITY OF JUDGMENT IN THE
DECISION OF THE COURT IN G.R. NO. 133113
16
II.
WHETHER THE CA ERRED IN DECLARING BDC IN BAD
FAITH
III.
WHETHER THE CA ERRED IN DECLARING THAT THERE
WAS UNJUST ENRICHMENT ON THE PART OF BDC
IV.
WHETHER DIAZ CAN STILL CLAIM REIMBURSEMENT
EVEN IF UNDER THE CONTRACT, HIS POSSESSION IS IN
THE NATURE OF A LESSOR
V.
WHETHER BDC IS LIABLE TO REIMBURSE DIAZ OF THE
AMOUNT OF P1,106,915.58
In fine, petitioner argues that it is not liable to respondent Diaz,
both for the amortizations that Diaz paid to it, and the value of the
improvements that Diaz introduced to the property.
Meanwhile, Tapay failed to elevate before this Court the CA�s
ruling against him.
The Court�s Ruling
The petition is partially granted. The CA committed reversible
error in ruling that Diaz was a buyer in good faith and for value.
Nevertheless, BDC is liable to Diaz because it acted in bad faith, as
discussed below.
The claim is not barred by the
doctrine of immutability of judgment
First, We dispose of the issue of the applicability of the doctrine of
immutability of judgment, in view of the ruling of this Court in
G.R. No. 133113. We find that the present claim is not barred by
the court�s ruling in G.R. No. 133113��to the effect that Diaz
can no longer claim reimbursement from Arrezabecause of res
judicata��for his failure to allege the claim in the interpleader
case between them.
In G.R. No. 133113, We ruled that the claim against Arreza is
barred by res judicata, because of a prior Interpleader case between
Arreza and Diaz. We ruled that the claim for reimbursement should
have been alleged and proved in the prior case, and failure to do so
bars any future action on such claims. We reiterated the rule on res
judicata, thus:LawlibraryofCRAlaw
In cases involving res adjudicata, the parties and the causes of
action are identical or substantially the same in the prior as well as
the subsequent action. The judgment in the first action is
conclusive as to every matter offered and received therein and as to
any other matter admissible therein and which might have been
offered for that purpose, hence said judgment is an absolute bar to
a subsequent action for the same cause.The bar extends to
questions necessarily involved in an issue, and necessarily
adjudicated, or necessarily implied in the final judgment, although
no specific finding may have been made in reference thereto, and
although such matters were directly referred to in the pleadings and
were not actually or formally presented. Said prior judgment is
conclusive in a subsequent suit between the same parties on the
same subject matter, and on the same cause of action, not only
as to matters which were decided in the first action, but also as to
every other matter which the parties could have properly set up in
the prior suit.13 (emphasis added)
In the case at bar, We find that the essential elements of res
judicata are not present. First, the interpleader case was between
Arreza and Diaz. While it was BDC that initiated the interpleader
case, the opposing parties in that prior case is, in fact, Arreza and
Diaz. Second, the issues resolved in the interpleader case revolved
around the conflicting claims of Arreza and Diaz, and not whatever
claim either of them may have against BDC. Thus, there is no
identity of parties, nor identity of subject matter, between the
interpleader case and the one at bar.
Petitioner BDC acted in bad faith
in dealing with respondent Diaz
On the second issue, We find that the CA committed no reversible
error in finding that BDC acted in bad faith, when it allowed Diaz
to take over the payment of the amortizations over the subject
property. As the CA correctly noted, �It is undisputed that Bliss
knew about Arreza�s claim in 1991. It even received amortization
payments from Arreza. Yet, Bliss acknowledged the transfer to
Diaz and received the monthly amortizations paid by Diaz. Also,
Bliss is aware that should Arreza pursue his claim in court, Diaz
may be evicted from the property.�14redarclaw
BDC anchors its claim of good faith on the fact that it did not act as
seller to Diaz. Rather, BDC claims, it was Diaz who came forward
and presented himself to BDC as the lawful successor-in-interest of
Emiliano and Leonila Melgazo, by virtue of the several deeds of
transfer of rights, all of which he presented to BDC. It was on the
basis of this claim that BDC allowed Diaz to occupy the property
and pay amortizations accruing over the property. 15redarclaw
Nevertheless, BDC does not dispute that as early as 1991, even
before respondent came forward presenting the deeds of transfer to
BDC, BDC was already aware of the claim of Arreza. In fact, it
even received amortizations from Arreza. Despite this, BDC also
later acknowledged the transfer to Diaz, and also accepted
amortizations from him.16 This uncontroverted sequence of events
led the CA to correctly rule that BDC, indeed, acted in bad faith.
When Diaz came forward and presented the deeds of transfer,
including the deed of transfer executed by Tapay in his favor, BDC
was already well aware of a conflicting claim by Arreza. Instead of
waiting for the resolution on the matter, BDC immediately
accepted the deed of transfer presented by Diaz, as well as the
amortizations he paid over the property. It was only in 1994 that
BDC filed the Interpleader case to resolve the conflicting case.
This is nothing short of evident bad faith.
Respondent Diaz is not a purchaser
for value and in good faith
We,however, fail to find sufficient basis for the CA�s ruling that
Diaz is a purchaser for value and in good faith. In a long line of
cases, this Court had ruled that a purchaser in good faith and for
value is one who buys property of another without notice that some
other person has a right to, or interest in, such property and pays
full and fair price for the same at the time of such purchase or
before he or she has notice of the claim or interest of some other
person in the property.17For one to be considered a purchaser in
good faith, the following requisites must concur: (1) that the
purchaser buys the property of another without notice that some
other person has a right to or interest in such property; and (2) that
the purchaser pays a full and fair price for the property at the time
of such purchase or before he or she has notice of the claim of
another.18 We find that in the case at bar, the first element is
lacking.
The CA, in disposing the issue of Diaz�s good faith, merely said
that �considering that the property involved is registered land,
Diaz need not go beyond the title to be considered a buyer in good
faith.�19We find this to be a serious and reversible error on the
part of the CA. In the first place, while it is true that the subject lot
is registered lot, the doctrine of not going beyond the face of the
title does not apply in the case here, because what was subjected to
a series of sales was not the lot itself but the right to purchase the
lot from BDC. The CA itself observed: �while [BDC] executed a
17
Deed of Sale with Mortgage in favor of the spouses Emiliano and
Leonila Melgazo, title over the property was in [BDC�s] name.
The title remained in [BDC�s] name when Tapay offered to
transfer his rights over the property to Diaz.�20Notably, the several
transfers themselves did not purport to be Deeds of Absolute Sale,
but merely deeds of assignment of rights. The subject of those
deeds of assignment was never the real right over the subject
property, but merely the personal right to purchase it. Therefore,
the mirror doctrine finds no application in the case at bar.
A careful review of the records of this case reveals that Diaz, in
fact, failed to diligently inquire into the title of his predecessor
before entering into the contract of sale. As such, he cannot be
considered a buyer in good faith. There is no issue that despite the
several transfers of rights from Nacua to Garcia to Reyes to Tapay
to Diaz, title over the property remained in BDC�s name.When
Diaz transacted with Tapay, it was also clear that what was being
transferred was merely rights to purchase the property, and not title
over the lot itself; if it were, the sale would have been void because
Tapay never had ownership over the subject property. As the buyer
in such a transaction, it was incumbent upon Diaz not only to
inquire as to the right of Tapay to transfer his rights, but also to
trace the source of that right to purchase the property. Had he
discharged this duty diligently, he would have found out that
Nacua�s right was without basis, because it was founded on a
forged deed. For his failure to inquire diligently and trace the
source of the right to purchase the property, Diaz cannot claim to
be a purchaser in good faith and for value.
Petitioner BDC is liable to return the
amortizations paid by respondent Diaz,
under the doctrine of unjust enrichment
Notwithstanding the fact that Diaz is not an innocent purchaser in
good faith and for value, BDC is nevertheless liable to return to
him the amortizations which he already paid on the property,
applying the rule on unjust enrichment.
Unjust enrichment exists when a person unjustly retains a benefit
to the loss of another, or when a person retains money or property
of another against the fundamental principles of justice, equity and
good conscience. Under Article 22 of the Civil Code, 21 there is
unjust enrichment when (1) a person is unjustly benefited and (2)
such benefit is derived at the expense of or with damages to
another.22redarclaw
Allowing BDC to keep the amortizations paid by Diaz is
tantamount to unjust enrichment. It would result in BDC receiving
amortizations twice the amount it should have received, that is, the
amortizations paid by Diaz and Arreza. While BDC claims that it
did not receive amortizations from both Diaz and Arreza covering
the same period, such a claim is self-serving, and is not amply
supported by any documentary evidence.
Even if BDC can prove that there was no overlap between the
payments made by Diaz and those made by Arreza, allowing it to
keep the amortizations paid by Diaz still amounts to unjust
enrichment. As a direct result of the final and executory ruling that
Arreza is the rightful buyer of the subject property, the buyer-seller
relationship between Diaz and BDC is rendered null and void.
Consequently, there remains no valid consideration whatsoever for
the payments made by Diaz to BDC. There being no indication of
intent to donate, because such payments were made under the
impression that Diaz is the rightful buyer of the property, it is only
but just that Diaz be allowed to claim back what he has paid. This
is only a natural consequence of the final and executory ruling that
Diaz is not the rightful buyer of the subject property. Allowing
BDC to keep such payments, at the expense of and to the damage
of Diaz, still amounts to unjust enrichment.
Both parties being in bad faith,
BDC is liable to Diaz for the value
of the improvements he introduced
on the subject property
Next, We resolve the issue of whether BDC is liable to Diaz for the
value of the improvements that Diaz introduced to the property.
Arts. 448, 453, 546, and 548 of the Civil Code are material in
resolving the issue:LawlibraryofCRAlaw
Art. 448. The owner of the land on which anything has been built,
sown or planted in good faith, shall have the right to appropriate as
his own the works, sowing or planting, after payment of the
indemnity provided for in Articles 546 and 548, or to oblige the
one who built or planted to pay the price of the land, and the one
who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than
that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
Art. 453. If there was bad faith, not only on the part of the person
who built, planted or sowed on the land of another, but also on the
part of the owner of such land, the rights of one and the other shall
be the same as though both had acted in good faith.
It is understood that there is bad faith on the part of the landowner
whenever the act was done with his knowledge and without
opposition on his part.
Art. 546. Necessary expenses shall be refunded to every possessor;
but only the possessor in good faith may retain the thing until he
has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good
faith with the same right of retention, the person who has defeated
him in the possession having the option of refunding the amount of
the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.
Art. 548. Expenses for pure luxury or mere pleasure shall not be
refunded to the possessor in good faith; but he may remove the
ornaments with which he has embellished the principal thing if it
suffers no injury thereby, and if his successor in the possession
does not prefer to refund the amount expended.
The CA may have made the erroneous conclusion that Diaz acted
in good faith, but because BDC equally acted in bad faith, Art. 453
of the Civil Code commands that the rights of one and the other
shall be the same as though both had acted in good faith. The CA
made the correct observation then, when it
said:LawlibraryofCRAlaw
Under Article 448, the landowner is given the option, either to
appropriate the improvement as his own upon payment of the
proper amount of indemnity or to sell the land to the possessor in
good faith. Relatedly Article 546 provides that a builder in good
faith is entitled to full reimbursement for all the necessary and
useful expenses incurred. In this case, however, the option of
selling the land to the builder in good faith is no longer viable in
light of the ruling in the interpleader case. Hence, there is only one
thing left for [BDC] to do: indemnify Diaz for the improvements
introduced on the property.23
Nevertheless, because the law treats both parties as if they acted in
good faith, the CA committed reversible error in awarding moral
and exemplary damages, there being no basis therefor. We find it
proper to delete the award of P100,000.00 as moral damages,
P50,000.00 as exemplary damages, and P25,000.00 as attorney�s
fees.
In sum, the CA correctly reversed the ruling of the RTC, and
18
ordered BDC to pay Diaz the amount he paid as amortizations, as
well as the value of the improvements that he introduced on the
subject property. However, because both parties acted in bad faith,
there is no basis for the award of moral and exemplary damages, as
well as attorney�s fees.
WHEREFORE, in view of the foregoing, the January 21, 2014
Decision of the Court of Appeals in CA-G.R. CV No. 99179 is
hereby MODIFIED to read as follows: (1) petitioner Bliss
Development Corporation/Home Guaranty Corporation is ordered
topay respondent Montano M. Diaz the amount of P1,106,915.58
for the amortizations paid and the amount spent on improvements
on the property; and (2) Domingo Tapay is ordered to pay
respondent Montano M. Diaz the amount of P600,000.00, the
amount he paid for the transfer of rights.
SO ORDERED.
G.R. No. 181723 August 11, 2014
ELIZABETH DEL CARMEN, Petitioner,
vs.
SPOUSES RESTITUTO SABORDO and MIMA MAHILUM-
SABORDO, Respondents.
DECISION
PERALTA, J.:
This treats of the petition for review on certiorari assailing the
Decision1 and Resolution2 of the Court of Appeals (CA), dated
May 25, 2007 and January 24, 2008, respectively, in CA-G.R. CV
No. 75013.
The factual and procedural antecedents of the case are as follows:
Sometime in 1961, the spouses Toribio and Eufrocina Suico (Suico
spouses), along with several business partners, entered into a
business venture by establishing a rice and com mill at Mandaue
City, Cebu. As part of their capital, they obtained a loan from the
Development Bank of the Philippines (DBP), and to secure the said
loan, four parcels of land owned by the Suico spouses,
denominated as Lots 506, 512, 513 and 514, and another lot owned
by their business partner, Juliana Del Rosario, were mortgaged.
Subsequently, the Suico spouses and their business partners failed
to pay their loan obligations forcing DBP to foreclose the
mortgage. After the Suico spouses and their partners failed to
redeem the foreclosed properties, DBP consolidated its ownership
over the same. Nonetheless, DBP later allowed the Suico spouses
and Reginald and Beatriz Flores (Flores spouses), as substitutes for
Juliana Del Rosario, to repurchase the subject lots by way of a
conditional sale for the sum of ₱240,571.00. The Suico and Flores
spouses were able to pay the downpayment and the first monthly
amortization, but no monthly installments were made thereafter.
Threatened with the cancellation of the conditional sale, the Suico
and Flores spouses sold their rights over the said properties to
herein respondents Restituto and Mima Sabordo, subject to the
condition that the latter shall pay the balance of the sale price. On
September 3, 1974, respondents and the Suico and Flores spouses
executed a supplemental agreement whereby they affirmed that
what was actually sold to respondents were Lots 512 and 513,
while Lots 506 and 514 were given to them as usufructuaries. DBP
approved the sale of rights of the Suico and Flores spouses in favor
of herein respondents. Subsequently, respondents were able to
repurchase the foreclosed properties of the Suico and Flores
spouses.
On September 13, 1976, respondent Restituto Sabordo (Restituto)
filed with the then Court of First Instance of Negros Occidental an
original action for declaratory relief with damages and prayer for a
writ of preliminary injunction raising the issue of whether or not
the Suico spouses have the right to recover from respondents Lots
506 and 514.
In its Decision dated December 17, 1986, the Regional Trial Court
(RTC) of San Carlos City, Negros Occidental, ruled in favor of the
Suico spouses directing that the latter have until August 31, 1987
within which to redeem or buy back from respondents Lots 506
and 514.
On appeal, the CA, in its Decision3 in CA-G.R. CV No. 13785,
dated April 24, 1990, modified the RTC decision by giving the
Suico spouses until October 31, 1990 within which to exercise
their option to purchase or redeem the subject lots from
respondents by paying the sum of ₱127,500.00. The dispositive
portion of the CADecision reads as follows:
xxxx
For reasons given, judgment is hereby rendered modifying the
dispositive portion of [the] decision of the lower court to read:
1) The defendants-appellees are granted up to October
31, 1990 within which toexercise their option to purchase
from the plaintiff-appellant Restituto Sabordo and Mima
Mahilum Lot No. 506, covered by Transfer Certificate of
Title No. T-102598 and Lot No. 514, covered by Transfer
Certificate of Title No. T-102599, both of Escalante
Cadastre, Negros Occidental by reimbursing or paying to
the plaintiff the sum of ONE HUNDRED TWENTY-
SEVEN THOUSAND FIVE HUNDRED PESOS
(₱127,500.00);
2) Within said period, the defendants-appellees shall
continue to have usufructuary rights on the coconut trees
on Lots Nos. 506 and 514, Escalante Cadastre, Negros
Occidental;
3) The Writ of Preliminary Injunction dated August 12,
1977 shall be effective untildefendants-appellees shall
have exercised their option to purchase within said
period by paying or reimbursing to the plaintiff-appellant
the aforesaid amount.
No pronouncement as to costs.
SO ORDERED.4
In a Resolution5 dated February 13, 1991, the CA granted the Suico
spouses an additional period of 90 days from notice within which
to exercise their option to purchase or redeem the disputed lots.
In the meantime, Toribio Suico (Toribio) died leaving his widow,
Eufrocina, and several others, includingherein petitioner, as legal
heirs. Later, they discovered that respondents mortgaged Lots 506
and 514 with Republic Planters Bank (RPB) as security for a loan
which, subsequently, became delinquent.
Thereafter, claiming that theyare ready with the payment of
₱127,500.00, but alleging that they cannot determine as to whom
such payment shall be made, petitioner and her co-heirs filed a
Complaint6 with the RTC of San Carlos City, Negros Occidental
seeking to compel herein respondents and RPB to interplead and
litigate between themselves their respective interests on the
abovementioned sum of money.1âwphi1 The Complaint also
prayed that respondents be directed to substitute Lots 506 and 514
with other real estate properties as collateral for their outstanding
obligation with RPB and that the latter be ordered toaccept the
substitute collateral and release the mortgage on Lots 506 and 514.
Upon filing of their complaint, the heirs of Toribio deposited the
amount of ₱127,500.00 with the RTC of San Carlos City, Branch
59.
Respondents filed their Answer7 with Counterclaim praying for the
dismissal of the above Complaint on the grounds that (1) the action
for interpleader was improper since RPB isnot laying any claim on
the sum of ₱127,500.00; (2) that the period withinwhich the
complainants are allowed to purchase Lots 506 and 514 had
already expired; (3) that there was no valid consignation, and (4)
that the case is barred by litis pendenciaor res judicata.
On the other hand, RPB filed a Motion to Dismiss the subject
Complaint on the ground that petitioner and her co-heirs had no
valid cause of action and that they have no primary legal right
which is enforceable and binding against RPB.
On December 5, 2001, the RTC rendered judgment, dismissing the
Complaint of petitioner and her co-heirs for lack of
merit.8 Respondents' Counterclaim was likewise dismissed.
Petitioner and her co-heirs filed an appeal with the CA contending
that the judicial deposit or consignation of the amount of
₱127,500.00 was valid and binding and produced the effect of
payment of the purchase price of the subject lots.
19
In its assailed Decision, the CA denied the above appeal for lack of
merit and affirmed the disputed RTC Decision.
Petitioner and her co-heirs filed a Motion for Reconsideration, 9 but
it was likewise denied by the CA.
Hence, the present petition for review on certiorariwith a lone
Assignment of Error, to wit:
THE COURT OF APPEALS ERRED IN AFFIRMING THE
DECISION OF THE LOWER COURT WHICH HELD THAT
THE JUDICIAL DEPOSIT OF ₱127,500.00 MADE BY THE
SUICOS WITH THE CLERK OF COURT OF THE RTC, SAN
CARLOS CITY, IN COMPLIANCE WITH THE FINAL AND
EXECUTORY DECISION OF THE COURT OF APPEALS IN
CA-G.R. CV-13785 WAS NOT VALID.10
Petitioner's main contention is that the consignation which she and
her co-heirs made was a judicial deposit based on a final judgment
and, as such, does not require compliance with the requirements of
Articles 125611 and 125712of the Civil Code.
The petition lacks merit. At the outset, the Court quotes
withapproval the discussion of the CA regarding the definition and
nature of consignation, to wit: … consignation [is] the act of
depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment,
and it generally requires a prior tender of payment. It should be
distinguished from tender of payment which is the manifestation
by the debtor to the creditor of his desire to comply with his
obligation, with the offer of immediate performance.Tender is the
antecedent of consignation, thatis, an act preparatory to the
consignation, which is the principal, and from which are derived
the immediate consequences which the debtor desires or seeks to
obtain. Tender of payment may be extrajudicial, while consignation
is necessarily judicial, and the priority of the first is the attempt to
make a private settlement before proceeding to the solemnities of
consignation. Tender and consignation, where validly made,
produces the effect of payment and extinguishes the obligation. 13
In the case of Arzaga v. Rumbaoa,14 which was cited by petitioner
in support of his contention, this Court ruled that the deposit made
with the court by the plaintiff-appellee in the saidcase is considered
a valid payment of the amount adjudged, even without a prior
tender of payment thereof to the defendants-appellants,because the
plaintiff-appellee, upon making such deposit, expressly petitioned
the court that the defendants-appellees be notified to receive the
tender of payment.This Court held that while "[t]he deposit, by
itself alone, may not have been sufficient, but with the express
terms of the petition, there was full and complete offer of payment
made directly to defendants-appellants."15 In the instant case,
however, petitioner and her co-heirs, upon making the deposit with
the RTC, did not ask the trial court that respondents be notified to
receive the amount that they have deposited. In fact, there was no
tender of payment. Instead, what petitioner and her co-heirs prayed
for is thatrespondents and RPB be directed to interplead with one
another to determine their alleged respective rights over the
consigned amount; that respondents be likewise directed to
substitute the subject lots with other real properties as collateral for
their loan with RPB and that RPB be also directed to accept the
substitute real properties as collateral for the said loan.
Nonetheless,the trial court correctly ruled that interpleader is not
the proper remedy because RPB did notmake any claim whatsoever
over the amount consigned by petitioner and her co-heirs with the
court.
In the cases of Del Rosario v. Sandico16 and Salvante v.
Cruz,17 likewise cited as authority by petitioner, this Court held
that, for a consignation or deposit with the court of an amount due
on a judgment to be considered as payment, there must beprior
tender to the judgment creditor who refuses to accept it. The same
principle was reiterated in the later case of Pabugais v.
Sahijwani.18 As stated above, tender of payment involves a positive
and unconditional act by the obligor of offering legal tender
currency as payment to the obligee for the former’s obligation and
demanding that the latter accept the same. 19 In the instant case, the
Court finds no cogent reason to depart from the findings of the CA
and the RTC that petitioner and her co-heirs failed to make a prior
valid tender of payment to respondents.
It is settled that compliance with the requisites of a valid
consignation is mandatory.20 Failure to comply strictly with any of
the requisites will render the consignation void. One of these
requisites is a valid prior tender of payment.21
Under Article 1256, the only instances where prior tender of
payment is excused are: (1) when the creditor is absent or
unknown, or does not appear at the place of payment; (2) when the
creditor is incapacitated to receive the payment at the time it is due;
(3) when, without just cause, the creditor refuses to give a receipt;
(4) when two or more persons claim the same right to collect; and
(5) when the title of the obligation has been lost. None of these
instances are present in the instant case. Hence, the fact that the
subject lots are in danger of being foreclosed does not excuse
petitioner and her co-heirs from tendering payment to respondents,
as directed by the court.
WHEREFORE, the instant petition is DENIED. The Decision of
the Court of Appeals, dated May 25, 2007, and its Resolution dated
January 24, 2008, both in CA-G.R. CV No. 75013, are
AFFIRMED.
SO ORDERED.
G.R. No. 193494, March 07, 2014
LUI ENTERPRISES, INC., Petitioner, v. ZUELLIG PHARMA
CORPORATION AND THE PHILIPPINE BANK OF
COMMUNICATIONS, Respondents.
DECISION
LEONEN, J.:
There should be no inexplicable delay in the filing of a motion to
set aside order of default. Even when a motion is filed within the
required period, excusable negligence must be properly alleged and
proven.
This is a petition for review on certiorari of the Court of
Appeals� decision1 dated May 24, 2010 and resolution2 dated
August 13, 2010 in CA�G.R. CV No. 88023. The Court of
Appeals affirmed in toto the Regional Trial Court of Makati�s
decision3 dated July 4, 2006.
The facts as established from the pleadings of the parties are as
follows:chanRoblesvirtualLawlibrary
On March 9, 1995, Lui Enterprises, Inc. and Zuellig Pharma
Corporation entered into a 10�year contract of lease4 over a parcel
of land located in Barrio Tigatto, Buhangin, Davao City. The parcel
of land was covered by Transfer Certificate of Title No. T�166476
and was registered under Eli L. Lui.5
On January 10, 2003, Zuellig Pharma received a letter6 from the
Philippine Bank of Communications. Claiming to be the new
owner of the leased property, the bank asked Zuellig Pharma to pay
rent directly to it. Attached to the letter was a copy of Transfer
Certificate of Title No. 336962 under the name of the Philippine
Bank of Communications.7 Transfer Certificate of Title No. 336962
was derived from Transfer Certificate of Title No. T�166476.8
Zuellig Pharma promptly informed Lui Enterprises of the
Philippine Bank of Communications� claim. On January 28,
2003, Lui Enterprises wrote to Zuellig Pharma and insisted on its
right to collect the leased property�s rent.9
Due to the conflicting claims of Lui Enterprises and the Philippine
Bank of Communications over the rental payments, Zuellig
Pharma filed a complaint10 for interpleader with the Regional Trial
Court of Makati. In its complaint, Zuellig Pharma alleged that it
already consigned in court P604,024.35 as rental payments. Zuellig
Pharma prayed that it be allowed to consign in court its succeeding
monthly rental payments and that Lui Enterprises and the
Philippine Bank of Communications be ordered to litigate their
conflicting claims.11
20
The Philippine Bank of Communications filed its answer12 to the
complaint. On the other hand, Lui Enterprises filed a motion to
dismiss13 on the ground that Zuellig Pharma�s alleged
representative did not have authority to file the complaint for
interpleader on behalf of the corporation. Under the secretary�s
certificate14 dated May 6, 2003 attached to the complaint, Atty. Ana
L.A. Peralta was only authorized to �initiate and represent
[Zuellig Pharma] in the civil proceedings for consignation of rental
payments to be filed against Lui Enterprises, Inc. and/or [the
Philippine Bank of Communications].�15
According to Lui Enterprises, an earlier filed nullification of deed
of dation in payment case pending with the Regional Trial Court of
Davao barred the filing of the interpleader case. 16 Lui Enterprises
filed this nullification case against the Philippine Bank of
Communications with respect to several properties it dationed to
the bank in payment of its obligations. The property leased by
Zuellig Pharma was among those allegedly dationed to the
Philippine Bank of Communications.17
In the nullification of deed of dation in payment case, Lui
Enterprises raised the issue of which corporation had the better
right over the rental payments.18 Lui Enterprises argued that the
same issue was involved in the interpleader case. To avoid possible
conflicting decisions of the Davao trial court and the Makati trial
court on the same issue, Lui Enterprises argued that the
subsequently filed interpleader case be dismissed.
To support its argument, Lui Enterprises cited a writ of preliminary
injunction19 dated July 2, 2003 issued by the Regional Trial Court
of Davao, ordering Lui Enterprises and the Philippine Bank of
Communications �[to maintain] status quo�20 with respect to the
rent. By virtue of the writ of preliminary injunction, Lui
Enterprises argued that it should continue collecting the rental
payments from its lessees until the nullification of deed of dation in
payment case was resolved. The writ of preliminary injunction
dated July 2, 2003 reads:chanRoblesvirtualLawlibrary
WHEREAS, on June 30, 2003, the Court issued an Order, a portion
of which is quoted:
WHEREFORE, PREMISES CONSIDERED, let a Writ of
Preliminary Injunction issue, restraining and enjoining [the
Philippine Bank of Communications], its agents or
[representative], the Office of the Clerk of Court�Sheriff and all
persons acting on their behalf, from conducting auction sale on the
properties of [Lui Enterprises] in EJF�REM Case No. 6272�03
scheduled on July 3, 2003 at 10:00 a.m. at the Hall of Justice,
Ecoland, Davao City, until the final termination of the case, upon
plaintiff [sic] filing of a bond in the amount of P1,000,000.00 to
answer for damages that the enjoined parties may sustain by reason
of the injunction if the Court should finally decide that applicant is
not entitled thereto.
WHEREAS, that plaintiff posted a bond of P1,000,000.00 duly
approved by this Court.
IT IS HEREBY ORDERED by the undersigned Judge that, until
further orders, [the Philippine Bank of Communications] and all
[its] attorneys, representatives, agents and any other persons
assisting [the bank], are directed to restrain from conducting
auction sale on the Properties of [Lui Enterprises] in EJF�REM
Case No. 6272�03 scheduled on July 3, 2003 at 10:00 a.m. at the
Hall of Justice, Ecoland, Davao City, until the final termination of
the case.21
Zuellig Pharma filed its opposition22 to the motion to dismiss. It
argued that the motion to dismiss should be denied for having been
filed late. Under Rule 16, Section 1 of the 1997 Rules of Civil
Procedure, a motion to dismiss should be filed within the required
time given to file an answer to the complaint, which is 15 days
from service of summons on the defendant.23 Summons was served
on Lui Enterprises on July 4, 2003. It had until July 19, 2003 to file
a motion to dismiss, but Lui Enterprises filed the motion only on
July 23, 2003.24
As to Lui Enterprises� claim that the interpleader case was filed
without authority, Zuellig Pharma argued that an action
interpleader �is a necessary consequence of the action for
consignation.�25 Zuellig Pharma consigned its rental payments
because of �the clearly conflicting claims of [Lui Enterprises] and
[the Philippine Bank of Communications].�26 Since Atty. Ana
L.A. Peralta was authorized to file a consignation case, this
authority necessarily included an authority to file the interpleader
case.
Nevertheless, Zuellig Pharma filed in court the secretary�s
certificate dated August 28, 2003,27 which expressly stated that
Atty. Ana L.A. Peralta was authorized to file a consignation and
interpleader case on behalf of Zuellig Pharma. 28
With respect to the nullification of deed of dation in payment case,
Zuellig Pharma argued that its pendency did not bar the filing of
the interpleader case. It was not a party to the nullification case. 29
As to the writ of preliminary injunction issued by the Regional
Trial Court of Davao, Zuellig Pharma argued that the writ only
pertained to properties owned by Lui Enterprises. Under the writ of
preliminary injunction, the Regional Trial Court of Davao enjoined
the July 3, 2003 auction sale of Lui Enterprises� properties, the
proceeds of which were supposed to satisfy its obligations to the
Philippine Bank of Communications. As early as April 21, 2001,
however, the Philippine Bank of Communications already owned
the leased property as evidenced by Transfer Certificate of Title
No. 336962. Thus, the writ of preliminary injunction did not apply
to the leased property.30
Considering that Lui Enterprises filed its motion to dismiss beyond
the 15�day period to file an answer, Zuellig Pharma moved that
Lui Enterprises be declared in default.31
In its compliance32 dated September 15, 2003, the Philippine Bank
of Communications �[joined Zuellig Pharma] in moving to
declare [Lui Enterprises] in default, and in [moving for] the denial
of [Lui Enterprises�] motion to dismiss.�33
The Regional Trial Court of Makati found that Lui Enterprises
failed to file its motion to dismiss within the reglementary period.
Thus, in its order34 dated October 6, 2003, the trial court denied Lui
Enterprises� motion to dismiss and declared it in default. 35
Lui Enterprises did not move for the reconsideration of the order
dated October 6, 2003. Thus, the Makati trial court heard the
interpleader case without Lui Enterprises� participation.
Despite having been declared in default, Lui Enterprises filed the
manifestation with prayer36 dated April 15, 2004. It manifested that
the Regional Trial Court of Davao allegedly issued the
order37 dated April 1, 2004, ordering all of Lui Enterprises�
lessees to �observe status quo with regard to the rental
payments�38 and continue remitting their rental payments to Lui
Enterprises while the nullification of deed of dation in payment
case was being resolved. The order dated April 1, 2004 of the
Regional Trial Court of Davao reads:chanRoblesvirtualLawlibrary
ORDER
Posed for Resolution is the Motion for Amendment of Order filed
by [Lui Enterprises] on September 23, 2003 seeking for the
preservation of status quo on the payment/remittance of rentals to
[it] and the disposal/construction of the properties subject matter of
this case.
xxxx
21
As elsewhere stated, [the Philippine Bank of Communications] did
not oppose the instant motion up to the present. In fact, during the
hearing held on March 15, 2004, [the bank�s] counsel manifested
in open court that except for the rentals due from [Zuellig Pharma]
which are the subject of a consignation suit before a Makati Court,
the other rental payments are continuously received by [Lui
Enterprises].
There being no objection from [the Philippine Bank of
Communications], and in order to protect the right of [Lui
Enterprises] respecting the subject of the action during the
pendency of this case, this Court, in the exercise of its discretion
hereby grants the motion.
Accordingly, consistent with the order of this Court dated June 30,
2003, the parties are hereby directed to further observe status quo
with regard to the rental payments owing or due from the lessees of
the properties subject of the first set of deeds of dacion and that the
defendants are enjoined from disposing of the properties located at
Green Heights Village, Davao City until the case is finally
resolved.
With the order dated April 1, 2004 issued by the Regional Trial
Court of Davao as basis, Lui Enterprises argued that Zuellig
Pharma must remit its rental payments to it and prayed that the
interpleader case be dismissed.
The Regional Trial Court of Makati only noted the manifestation
with prayer dated April 15, 2004.39
It was only on October 21, 2004, or one year after the issuance of
the order of default, that Lui Enterprises filed a motion to set aside
order of default40 in the Makati trial court on the ground of
excusable negligence. Lui Enterprises argued that its failure to file
a motion to dismiss on time �was caused by the negligence of
[Lui Enterprises�] former counsel.�41 This negligence was
allegedly excusable because �[Lui Enterprises] was prejudiced
and prevented from fairly presenting [its] case.�42
For its allegedly meritorious defense, Lui Enterprises argued that
the earlier filed nullification of deed of dation in payment case
barred the filing of the interpleader case. The two actions allegedly
involved the same parties and the same issue of which corporation
had the better right over the rental payments. To prevent �the
possibility of two courts x x x rendering conflicting rulings [on the
same issue],�43 Lui Enterprises argued that the subsequently filed
interpleader case be dismissed.
Zuellig Pharma filed its opposition44 to the motion to set aside
order of default. It argued that a counsel�s failure to file a timely
answer was inexcusable negligence which bound his client.
Further, Zuellig Pharma argued that the pending case for
nullification of deed of dation in payment �[did] not preclude
[Zuellig Pharma] from seeking the relief prayed for in the
[interpleader case].�45
While the motion to set aside order of default was still pending for
resolution, Lui Enterprises filed the manifestation and motion to
dismiss46 dated April 21, 2005 in the Makati trial court. It
manifested that the Davao trial court issued another order 47 dated
April 18, 2005 in the nullification of deed of dation in payment
case. In this order, the Davao trial court directed the Philippine
Bank of Communications to inform Zuellig Pharma to pay rent to
Lui Enterprises while the Davao trial court�s order dated April 1,
2004 was subsisting. The order dated April 18, 2005 of the Davao
trial court reads:chanRoblesvirtualLawlibrary
ORDER
Plaintiffs move for execution or implementation of the Order dated
September 14, 2004. In substance, [Lui Enterprises] seek[s] to
compel the remittance in their favor of the rentals from [Zuellig
Pharma], one of the lessees alluded to in the September 14, 2004
Order whose rental payments �must be remitted to and collected
by [Lui Enterprises].� [The Philippine Bank of Communications]
did not submit any opposition.
It appears from the records that sometime in February 2003, after
being threatened with a lawsuit coming from [the Philippine Bank
of Communications], [Zuellig Pharma] stopped remitting its rentals
to [Lui Enterprises] and instead, has reportedly deposited the
monthly rentals before a Makati court for consignation.
As aptly raised by the plaintiffs, a possible impasse may insist
should the Makati Court�s ruling be contrary to or in conflict with
the status quo order issued by this Court. To preclude this
spectacle, Zuellig Pharma should accordingly be advised with the
import of the Order dated September 14, 2004, the salient portion
of which is quoted:
x x x prior to the institution of the instant case and by agreement of
the parties, plaintiffs were given as they did exercise the right to
collect, receive and enjoy rental payments x x x.
Since the April 1, 2004 status quo order was a necessary implement
of the writ of preliminary injunction issued on June 30, 2003, it
follows that plaintiff�s right to collect and receive rental
payments which he enjoyed prior to the filing of this case, must be
respected and protected and maintained until the case is resolved.
As such, all rentals due from the above�enumerated lessees must
be remitted to and collected by the Plaintiffs.
Status quo simply means the last actual peaceable uncontested
status that preceded the actual controversy. (Searth Commodities
Corp. v. Court of Appeals, 207 SCRA 622).
As such, the [Philippine Bank of Communications] [is] hereby
directed to forthwith inform [Zuellig Pharma] of the April 1, 2004
status quo order and the succeeding September 14, 2004 Order, and
consequently, for the said lessee to remit all rentals due from
February 23, 2003 and onwards to [Lui Enterprises] in the
meanwhile that the status quo order is subsisting.
In its manifestation and motion to dismiss, Lui Enterprises
reiterated its prayer for the dismissal of the interpleader case to
prevent �the possibility of [the Regional Trial Court, Branch 143,
Makati City] and [the Regional Trial Court, Branch 16, Davao
City] rendering conflicting rulings [on the same issue of which
corporation has the better right to the rental payments].�48
Without resolving the motion to set aside order of default, the
Makati trial court denied the manifestation with motion to dismiss
dated April 21, 2005 on the ground that Lui Enterprises already lost
its standing in court.49
Lui Enterprises did not file any motion for reconsideration of the
denial of the manifestation and motion to dismiss dated April 21,
2005.
In its decision50 dated July 4, 2006, the Regional Trial Court of
Makati ruled that Lui Enterprises �[was] barred from any claim in
respect of the [rental payments]�51 since it was declared in default.
Thus, according to the trial court, there was no issue as to which
corporation had the better right over the rental payments. 52 The trial
court awarded the total consigned amount of P6,681,327.30 to the
Philippine Bank of Communications and ordered Lui Enterprises to
pay Zuellig Pharma P50,000.00 in attorney�s fees.53
Lui Enterprises appealed to the Court of Appeals. 54
The Court of Appeals found Lui Enterprises� appellant�s brief
insufficient. Under Rule 44, Section 13 of the 1997 Rules of Civil
Procedure, an appellant�s brief must contain a subject index, page
references to the record, table of cases, textbooks and statutes cited,
22
and the statement of issues, among others. However, Lui
Enterprises� appellant�s brief did not contain these
requirements.55
As to the denial of Lui Enterprises� motion to dismiss, the Court
of Appeals sustained the trial court. The Court of Appeals found
that Lui Enterprises filed its motion to dismiss four days late. 56
With respect to Lui Enterprises� motion to set aside order of
default, the Court of Appeals found that Lui Enterprises failed to
show the excusable negligence that prevented it from filing its
motion to dismiss on time. On its allegedly meritorious defense,
the Court of Appeals ruled that the nullification of deed of dation in
payment case did not bar the filing of the interpleader case, with
Zuellig Pharma not being a party to the nullification case. 57
On the award of attorney�s fees, the Court of Appeals sustained
the trial court since �Zuellig Pharma x x x was constrained to file
the action for interpleader with consignation in order to protect its
interests x x x.�58
Thus, in its decision59 promulgated on May 24, 2010, the Court of
Appeals dismissed Lui Enterprises� appeal and affirmed in toto
the Regional Trial Court of Makati�s decision.
Lui Enterprises filed a motion for reconsideration. 60
The Court of Appeals denied Lui Enterprises� motion for
reconsideration in its resolution promulgated on August 13,
2010.61 Hence, this petition.
In this petition for review on certiorari ,62 Lui Enterprises argued
that the Court of Appeals applied �the rules of procedure
strictly�63 and dismissed its appeal on technicalities. According to
Lui Enterprises, the Court of Appeals should have taken a liberal
stance and allowed its appeal despite the lack of subject index,
page references to the record, table of cases, textbooks and statutes
cited, and the statement of issues in its appellant�s brief.64
Lui Enterprises also claimed that the trial court should have set
aside the order of default since its failure to file a motion to dismiss
on time was due to excusable negligence.65
For its allegedly meritorious defense, Lui Enterprises argued that
the pending nullification of deed of dation in payment case barred
the filing of the interpleader case. The nullification of deed of
dation in payment case and the interpleader case allegedly involved
the same issue of which corporation had the better right to the rent.
To avoid conflicting rulings on the same issue, Lui Enterprises
argued that the subsequently filed interpleader case be dismissed. 66
No attorney�s fees should have been awarded to Zuellig Pharma
as argued by Lui Enterprises. Zuellig Pharma filed the interpleader
case despite its knowledge of the nullification of deed of dation in
payment case filed in the Davao trial court where the same issue of
which corporation had the better right over the rental payments was
being litigated. Thus, Zuellig Pharma filed the interpleader case in
bad faith for which it was not entitled to attorney�s fees.67
The Philippine Bank of Communications filed its comment68 on the
petition for review on certiorari . It argued that Lui Enterprises
failed to raise any error of law and prayed that we affirm in toto the
Court of Appeals� decision.
For Zuellig Pharma, it manifested that it was adopting the
Philippine Bank of Communications� arguments in its comment.69
The issues for our resolution are:chanRoblesvirtualLawlibrary
I. Whether the Court of Appeals erred in dismissing Lui
Enterprises� appeal for lack of subject index, page references to
the record, table of cases, textbooks and statutes cited, and the
statement of issues in Lui Enterprises� appellant�s brief;
II.� Whether the Regional Trial Court of Makati erred in denying
Lui Enterprises� motion to set aside order of default;
III. Whether the annulment of deed of dation in payment pending
in the Regional Trial Court of Davao barred the subsequent filing
of the interpleader case in the Regional Trial Court of Makati; and
IV. Whether Zuellig Pharma was entitled to attorney�s fees.
Lui Enterprises� petition for review on certiorari is without merit.
However, we delete the award of attorney�s fees.
I deprivation of due process of law.
Lui Enterprises did not comply with the
rules on the contents of the appellant�s
brief
Under Rule 50, Section 1, paragraph (f) of the 1997 Rules of Civil
Procedure, the Court of Appeals may, on its own motion or that of
the appellee, dismiss an appeal should the appellant�s brief lack
specific requirements under Rule 44, Section 13, paragraphs (a),
(c), (d), and (f):chanRoblesvirtualLawlibrary
Section 1. Grounds for dismissal of appeal. � An appeal may be
dismissed by the Court of Appeals, on its own motion or on that of
the appellee, on the following
grounds:chanRoblesvirtualLawlibrary
xxxx
(f) Absence of specific assignment of errors in the appellant�s
brief, or of page references to the record as required in Section 13,
paragraphs (a), (c), (d), and (f) of Rule 44.
These requirements are the subject index of the matter in brief,
page references to the record, and a table of cases alphabetically
arranged and with textbooks and statutes
cited:chanRoblesvirtualLawlibrary
Section 13. Contents of the appellant�s brief. � The appellant�s
brief shall contain, in the order herein indicated, the
following:chanRoblesvirtualLawlibrary
(a)� A subject index of the matter in brief with a digest of the
arguments and page references, and a table of cases alphabetically
arranged, textbooks and statutes cited with references to the pages
where they are cited;
xxxx
(c)� Under the heading �Statement of the Case,� a clear and
concise statement of the nature of the action, a summary of the
proceedings, the appealed rulings and orders of the court, the
nature of the controversy, with page references to the record;
(d) Under the heading �Statement of Facts,� a clear and concise
statement in a narrative form of the facts admitted by both parties
and of those in controversy, together with the substance of the
proof relating thereto in sufficient detail to make it clearly
intelligible, with page references to the record;
xxxx
(f)� Under the heading �Argument,� the appellant�s
arguments on each assignment of error with page references to the
record. The authorities relied upon shall be cited by the page of the
report at which the case begins and the page of the report on which
the citation is found;
23
xxxx
Lui Enterprises� appellant�s brief lacked a subject index, page
references to the record, and table of cases, textbooks and statutes
cited. Under Rule 50, Section 1 of the 1997 Rules of Civil
Procedure, the Court of Appeals correctly dismissed Lui
Enterprises� appeal.
Except for cases provided in the Constitution,70 appeal is a
�purely statutory right.�71 The right to appeal �must be
exercised in the manner prescribed by law�72 and requires strict
compliance with the Rules of Court on appeals.73 Otherwise, the
appeal shall be dismissed, and its dismissal shall not be a
In Mendoza v. United Coconut Planters Bank, Inc.,74 this court
sustained the Court of Appeals� dismissal of Mendoza�s appeal.
Mendoza�s appellant�s brief lacked a subject index, assignment
of errors, and page references to the record. In De Liano v. Court of
Appeals,75 this court also sustained the dismissal of De Liano�s
appeal. De Liano�s appellant�s brief lacked a subject index, a
table of cases and authorities, and page references to the record.
There are exceptions to this rule. In Philippine Coconut Authority
v. Corona International, Inc.,76 the Philippine Coconut
Authority�s appellant�s brief lacked a clear and concise
statement of the nature of the action, a summary of the
proceedings, the nature of the judgment, and page references to the
record. However, this court found that the Philippine Coconut
Authority substantially complied with the Rules. Its appellant�s
brief �apprise[d] [the Court of Appeals] of the essential facts and
nature of the case as well as the issues raised and the laws
necessary [to dispose of the case].�77 This court �[deviated] from
a rigid enforcement of the rules�78 and ordered the Court of
Appeals to resolve the Philippine Coconut Authority�s appeal.
In Go v. Chaves,79 Go�s 17�page appellant�s brief lacked a
subject index. However, Go subsequently filed a subject index.
This court excused Go�s procedural lapse since the appellant�s
brief �[consisted] only of 17 pages which [the Court of Appeals]
may easily peruse to apprise it of [the case] and of the relief
sought.�80 This court ordered the Court of Appeals to resolve
Go�s appeal �in the interest of justice.�81
In Philippine Coconut Authority and Go, the appellants
substantially complied with the rules on the contents of the
appellant�s brief. Thus, this court excused the appellants�
procedural lapses.
In this case, Lui Enterprises did not substantially comply with the
rules on the contents of the appellant�s brief. It admitted that its
appellant�s brief lacked the required subject index, page
references to the record, and table of cases, textbooks, and statutes
cited. However, it did not even correct its admitted �technical
omissions�82 by filing an amended appellant�s brief with the
required contents.83 Thus, this case does not allow a relaxation of
the rules. The Court of Appeals did not err in dismissing Lui
Enterprises� appeal.
Rules on appeal �are designed for the proper and prompt
disposition of cases before the Court of Appeals.�84 With respect
to the appellant�s brief, its required contents are designed �to
minimize the [Court of Appeals�] labor in [examining] the record
upon which the appeal is heard and determined.�85
The subject index serves as the brief�s table of contents.86 Instead
of �[thumbing] through the [appellant�s brief]�87 every time the
Court of Appeals Justice encounters an argument or citation, the
Justice deciding the case only has to refer to the subject index for
the argument or citation he or she needs.88 This saves the Court of
Appeals time in reviewing the appealed case. Efficiency allows the
justices of the appellate court to substantially attend to this case as
well as other cases.
Page references to the record guarantee that the facts stated in the
appellant�s brief are supported by the record.89 A statement of fact
without a page reference to the record creates the presumption that
it is unsupported by the record and, thus, �may be stricken or
disregarded altogether.�90
As for the table of cases, textbooks, and statutes cited, this is
required so that the Court of Appeals can easily verify the
authorities cited �for accuracy and aptness.�91
Lui Enterprises� appellant�s brief lacked a subject index, page
references to the record, and a table of cases, textbooks, and
statutes cited. These requirements �were designed to assist the
appellate court in the accomplishment of its tasks, and, overall, to
enhance the orderly administration of justice.�92 This court will
not disregard rules on appeal �in the guise of liberal
construction.�93 For this court to liberally construe the Rules, the
party must substantially comply with the Rules and correct its
procedural lapses.94 Lui Enterprises failed to remedy these errors.
All told, the Court of Appeals did not err in dismissing Lui
Enterprises� appeal. It failed to comply with Rule 44, Section 13,
paragraphs (a), (c), (d), and (f) of the 1997 Rules of Civil
Procedure on the required contents of the appellant�s brief.
II
Lui Enterprises failed to show that its
failure to answer the complaint within
the required period was due to excusable
negligence
When a defendant is served with summons and a copy of the
complaint, he or she is required to answer within 15 days from the
day he or she was served with summons.95 The defendant may also
move to dismiss the complaint �[w]ithin the time for but before
filing the answer.�96
Fifteen days is sufficient time for a defendant to answer with good
defenses against the plaintiff�s allegations in the complaint. Thus,
a defendant who fails to answer within 15 days from service of
summons either presents no defenses against the plaintiff�s
allegations in the complaint or was prevented from filing his or her
answer within the required period due to fraud, accident, mistake
or excusable negligence.97
In either case, the court may declare the defendant in default on
plaintiff�s motion and notice to defendant.98 The court shall then
try the case until judgment without defendant�s
participation99 and grant the plaintiff such relief as his or her
complaint may warrant.100
A defendant declared in default loses his or her standing in
court.101 He or she is �deprived of the right to take part in the trial
and forfeits his [or her] rights as a party litigant,�102 has no right
�to present evidence [supporting his or her] allegations,�103 and
has no right to �control the proceedings [or] cross�examine
witnesses.�104 Moreover, he or she �has no right to expect that
[the court] would [act] upon [his or her pleadings]�105 or that he or
she �may [oppose] motions filed against him [or her].�106
However, the defendant declared in default �does not [waive] all
of [his or her] rights.�107 He or she still has the right to �receive
notice of subsequent proceedings.�108 Also, the plaintiff must still
24
present evidence supporting his or her allegations �despite the
default of [the defendant].�109
Default, therefore, is not meant to punish the defendant but to
enforce the prompt filing of the answer to the complaint. For a
defendant without good defenses, default saves him or her �the
embarrassment of openly appearing to defend the
indefensible.�110 As this court explained in Gochangco v. The
Court of First Instance of Negros Occidental, Branch IV:111
It does make sense for a defendant without defenses, and who
accepts the correctness of the specific relief prayed for in the
complaint, to forego the filing of the answer or any sort of
intervention in the action at all. For even if he did intervene, the
result would be the same: since he would be unable to establish any
good defense, having none in fact, judgment would inevitably go
against him. And this would be an acceptable result, if not being in
his power to alter or prevent it, provided that the judgment did not
go beyond or differ from the specific relief stated in the complaint.
x x x.112 (Emphasis in the original)
On the other hand, for a defendant with good defenses, �it would
be unnatural for him [or her] not to set x x x up [his or her
defenses] properly and timely.�113 Thus, �it must be presumed
that some insuperable cause prevented him [or her] from
[answering the complaint].�114 In which case, his or her proper
remedy depends on when he or she discovered the default and
whether the default judgment was already rendered by the trial
court.
After notice of the declaration of default but before the court
renders the default judgment, the defendant may file, under oath, a
motion to set aside order of default. The defendant must properly
show that his or her failure to answer was due to fraud,
accident,115 mistake116 or excusable negligence.117 The defendant
must also have a meritorious defense. Rule 9, Section 3, paragraph
(b) of the 1997 Rules of Civil Procedure
provides:chanRoblesvirtualLawlibrary
Section 3. Default; declaration of. � x x x x
(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.
If the defendant discovers his or her default after judgment but
prior to the judgment becoming final and executory, he or she may
file a motion for new trial under Rule 37, Section 1, paragraph (a)
of the 1997 Rules of Civil Procedure.118 If he or she discovers his
or her default after the judgment has become final and executory, a
petition for relief from judgment under Rule 38, Section 1 of the
1997 Rules of Civil Procedure may be filed.119
Appeal is also available to the defendant declared in default. He or
she may appeal the judgment for being contrary to the evidence or
to the law under Rule 41, Section 2 of the 1997 Rules of Civil
Procedure.120 He or she may do so even if he or she did not file a
petition to set aside order of default.121
A petition for certiorari may also be filed if the trial court declared
the defendant in default with grave abuse of discretion. 122
The remedies of the motion to set aside order of default, motion for
new trial, and petition for relief from judgment are mutually
exclusive, not alternative or cumulative. This is to compel
defendants to remedy their default at the earliest possible
opportunity. Depending on when the default was discovered and
whether a default judgment was already rendered, a defendant
declared in default may avail of only one of the three remedies.

Thus, if a defendant discovers his or her default before the trial
court renders judgment, he or she shall file a motion to set aside
order of default. If this motion to set aside order of default is
denied, the defendant declared in default cannot await the rendition
of judgment, and he or she cannot file a motion for new trial before
the judgment becomes final and executory, or a petition for relief
from judgment after the judgment becomes final and executory.
Also, the remedies against default become narrower and narrower
as the trial nears judgment. The defendant enjoys the most
liberality from this court with a motion to set aside order of default,
as he or she has no default judgment to contend with, and he or she
has the whole period before judgment to remedy his or her default.
With a motion for new trial, the defendant must file the motion
within the period for taking an appeal123or within 15 days from
notice of the default judgment. Although a default judgment has
already been rendered, the filing of the motion for new trial tolls
the reglementary period of appeal, and the default judgment cannot
be executed against the defendant.
A petition for relief from judgment is filed after the default
judgment has become final and executory. Thus, the filing of the
petition for relief from judgment does not stay the execution of the
default judgment unless a writ of preliminary injunction is issued
pending the petition�s resolution.124
Upon the grant of a motion to set aside order of default, motion for
new trial, or a petition for relief from judgment, the defendant is
given the chance to present his or her evidence against that of
plaintiff�s. With an appeal, however, the defendant has no right to
present evidence on his or her behalf and can only appeal the
judgment for being contrary to plaintiff�s evidence or the law.
Similar to an appeal, a petition for certiorari does not allow the
defendant to present evidence on his or her behalf. The defendant
can only argue that the trial court committed grave abuse of
discretion in declaring him or her in default.
Thus, should a defendant prefer to present evidence on his or her
behalf, he or she must file either a motion to set aside order of
default, motion for new trial, or a petition for relief from judgment.
In this case, Lui Enterprises had discovered its default before the
Regional Trial Court of Makati rendered judgment. Thus, it timely
filed a motion to set aside order of default, raising the ground of
excusable negligence.
Excusable negligence is �one which ordinary diligence and
prudence could not have guarded against.�125 The circumstances
should be properly alleged and proved. In this case, we find that
Lui Enterprises� failure to answer within the required period is
inexcusable.
Lui Enterprises� counsel filed its motion to dismiss four days late.
It did not immediately take steps to remedy its default and took one
year from discovery of default to file a motion to set aside order of
default. In its motion to set aside order of default, Lui Enterprises
only �conveniently blamed its x x x counsel [for the late filing of
the answer]�126 without offering any excuse for the late filing.
This is not excusable negligence under Rule 9, Section 3,
paragraph (b)127 of the 1997 Rules of Civil Procedure. Thus, the
Regional Trial Court of Makati did not err in refusing to set aside
the order of default.
Lui Enterprises argued that the Regional Trial Court of Makati
should have been liberal in setting aside its order of default. After it
had been declared in default, Lui Enterprises filed several
manifestations informing the Makati trial court of the earlier filed
nullification of deed of dation in payment case which barred the
25
filing of the interpleader case. Lui Enterprises� president, Eli L.
Lui, and counsel even flew in from Davao to Makati to �formally
[manifest that] a [similar] action between [Lui Enterprises] and [the
Philippine Bank of Communications]�128 was already pending in
the Regional Trial Court of Davao. However, the trial court did not
recognize Lui Enterprises� standing in court.
The general rule is that courts should proceed with deciding cases
on the merits and set aside orders of default as default judgments
are �frowned upon.�129 As much as possible, cases should be
decided with both parties �given every chance to fight their case
fairly and in the open, without resort to technicality.�130
However, the basic requirements of Rule 9, Section 3, paragraph
(b) of the 1997 Rules of Civil Procedure must first be complied
with.131 The defendant�s motion to set aside order of default must
satisfy three conditions. First is the time element. The defendant
must challenge the default order before judgment. Second, the
defendant must have been prevented from filing his answer due to
fraud, accident, mistake or excusable negligence. Third, he must
have a meritorious defense. As this court held in SSS v. Hon.
Chaves:132
Procedural rules are not to be disregarded or dismissed simply
because their non�observance may have resulted in prejudice to a
party�s substantive rights. Like all rules[,] they are to 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 procedure prescribed. x x x.133
As discussed, Lui Enterprises never explained why its counsel
failed to file the motion to dismiss on time. It just argued that
courts should be liberal in setting aside orders of default. Even
assuming that it had a meritorious defense and that its
representative and counsel had to fly in from Davao to Makati to
personally appear and manifest in court its meritorious defense, Lui
Enterprises must first show that its failure to answer was due to
fraud, accident, mistake or excusable negligence. This Lui
Enterprises did not do.
Lui Enterprises argued that Zuellig Pharma filed the interpleader
case to compel Lui Enterprises and the Philippine Bank of
Communications to litigate their claims. Thus, �[d]eclaring the
other claimant in default would ironically defeat the very purpose
of the suit.�134 The Regional Trial Court of Makati should not
have declared Lui Enterprises in default.
Under Rule 62, Section 1 of the 1997 Rules of Civil Procedure, a
person may file a special civil action for interpleader if conflicting
claims are made against him or her over a subject matter in which
he or she has no interest. The action is brought against the
claimants to compel them to litigate their conflicting claims among
themselves. Rule 62, Section 1 of the 1997 Rules of Civil
Procedure provides:chanRoblesvirtualLawlibrary
Section 1. When interpleader proper. � Whenever conflicting
claims upon the same subject matter are or may be made against a
person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed by the claimants,
he may bring an action against the conflicting claimants to compel
them to interplead and litigate their several claims among
themselves.
An interpleader complaint may be filed by a lessee against those
who have conflicting claims over the rent due for the property
leased.135 This remedy is for the lessee to protect him or her from
�double vexation in respect of one liability.�136 He or she may
file the interpleader case to extinguish his or her obligation to pay
rent, remove him or her from the adverse claimants� dispute, and
compel the parties with conflicting claims to litigate among
themselves.
In this case, Zuellig Pharma filed the interpleader case to
extinguish its obligation to pay rent. Its purpose in filing the
interpleader case �was not defeated�137 when the Makati trial
court declared Lui Enterprises in default.
At any rate, an adverse claimant in an interpleader case may be
declared in default. Under Rule 62, Section 5 of the 1997 Rules of
Civil Procedure, a claimant who fails to answer within the required
period may, on motion, be declared in default. The consequence of
the default is that the court may �render judgment barring [the
defaulted claimant] from any claim in respect to the subject
matter.�138 The Rules would not have allowed claimants in
interpleader cases to be declared in default if it would �ironically
defeat the very purpose of the suit.�139
The Regional Trial Court of Makati declared Lui Enterprises in
default when it failed to answer the complaint within the required
period. Lui Enterprises filed a motion to set aside order of default
without an acceptable excuse why its counsel failed to answer the
complaint. It failed to prove the excusable negligence. Thus, the
Makati trial court did not err in refusing to set aside the order of
default.
III
The nullification of deed in dation in
payment case did not bar the filing of
the interpleader case. Litis pendentia
is not present in this case.
Lui Enterprises allegedly filed for nullification of deed of dation in
payment with the Regional Trial Court of Davao. It sought to
nullify the deed of dation in payment through which the Philippine
Bank of Communications acquired title over the leased property.
Lui Enterprises argued that this pending nullification case barred
the Regional Trial Court of Makati from hearing the interpleader
case. Since the interpleader case was filed subsequently to the
nullification case, the interpleader case should be dismissed.
Under Rule 16, Section 1, paragraph (e) of the 1997 Rules of Civil
Procedure, a motion to dismiss may be filed on the ground of litis
pendentia:chanRoblesvirtualLawlibrary
Section 1. Grounds. � Within the time for but before filing the
answer to the complaint or pleading asserting a claim, a motion to
dismiss may be made on any of the following
grounds:chanRoblesvirtualLawlibrary
xxxx
(e)� That there is another action pending between the same parties
for the same cause;
xxxx
Litis pendentia is Latin for �a pending suit.�140 It exists when
�another action is pending between the same parties for the same
cause of action x x x.�141 The subsequent action is �unnecessary
and vexatious�142 and is instituted to �harass the respondent [in
the subsequent action].�143
The requisites of litis pendentia are:chanRoblesvirtualLawlibrary
(1) Identity of parties or at least such as represent the same interest
in both actions;
(2) Identity of rights asserted and reliefs prayed for, the reliefs
being founded on the same facts; and
(3) The identity in the two cases should be such that the judgment
that may be rendered in one would, regardless of which party
is successful, amount to res judicata in the other.144
26
All of the requisites must be present.145 Absent one requisite, there
is no litis pendentia.146
In this case, there is no litis pendentia since there is no identity of
parties in the nullification of deed of dation in payment case and
the interpleader case. Zuellig Pharma is not a party to the
nullification case filed in the Davao trial court.
There is also no identity of rights asserted and reliefs prayed for.
Lui Enterprises filed the first case to nullify the deed of dation in
payment it executed in favor of the Philippine Bank of
Communications. Zuellig Pharma subsequently filed the
interpleader case to consign in court the rental payments and
extinguish its obligation as lessee. The interpleader case was
necessary and was not instituted to harass either Lui Enterprises or
the Philippine Bank of Communications.
Thus, the pending nullification case did not bar the filing of the
interpleader case.
Lui Enterprises cited Progressive Development Corporation, Inc. v.
Court of Appeals147 as authority to set aside the subsequently filed
interpleader case. In this cited case, petitioner Progressive
Development Corporation, Inc. entered into a lease contract with
Westin Seafood Market, Inc. The latter failed to pay rent. Thus,
Progressive Development Corporation, Inc. repossessed the leased
premises, inventoried the movable properties inside the leased
premises, and scheduled the public sale of the inventoried
properties as they agreed upon in their lease contract.
Westin Seafood Market, Inc. filed for forcible entry with damages
against Progressive Development Corporation, Inc. It subsequently
filed an action for damages against Progressive Development
Corporation for its �forcible takeover of the leased premises.�148
This court ordered the subsequently filed action for damages
dismissed as the pending forcible entry with damages case barred
the subsequently filed damages case.
Progressive Development Corporation, Inc. does not apply in this
case. The action for forcible entry with damages and the
subsequent action for damages were filed by the same plaintiff
against the same defendant. There is identity of parties in both
cases.
In this case, the nullification of deed of dation in payment case was
filed by Lui Enterprises against the Philippine Bank of
Communications. The interpleader case was filed by Zuellig
Pharma against Lui Enterprises and the Philippine Bank of
Communications. A different plaintiff filed the interpleader case
against Lui Enterprises and the Philippine Bank of
Communications. Thus, there is no identity of parties, and the first
requisite of litis pendentia is absent.
As discussed, Lui Enterprises filed the nullification of deed of
dation in payment to recover ownership of the leased premises.
Zuellig Pharma filed the interpleader case to extinguish its
obligation to pay rent. There is no identity of reliefs prayed for, and
the second requisite of litis pendentia is absent.
Since two requisites of litis pendentia are absent, the nullification
of deed of dation in payment case did not bar the filing of the
interpleader case.
Lui Enterprises alleged that the Regional Trial Court of Davao
issued a writ of preliminary injunction against the Regional Trial
Court of Makati. The Regional Trial Court of Davao allegedly
enjoined the Regional Trial Court of Makati from taking
cognizance of the interpleader case. Lui Enterprises argued that the
Regional Trial Court of Makati �should have respected the orders
issued by the Regional Trial Court of Davao.�149 Lui Enterprises
cited Compania General de Tabacos de Filipinas v. Court of
Appeals150 where this court allegedly
held:chanRoblesvirtualLawlibrary
x x x [T]he issuance of the said writ by the RTC of Agoo, La Union
not only seeks to enjoin Branch 9 of the RTC of Manila from
proceedingwith the foreclosure case but also has the effect of
pre�empting the latter�s order. x x x.151
Compania General de Tabacos de Filipinas is not an authority for
the claim that a court can issue a writ of preliminary injunction
against a co�equal court. The cited sentence was taken out of
context. In Compania General de Tabacos de Filipinas, this court
held that the Regional Trial Court of Agoo had no power to issue a
writ of preliminary injunction against the Regional Trial Court of
Manila.152 A court cannot enjoin the proceedings of a co�equal
court.
Thus, when this court said that the Regional Trial Court of
Agoo�s writ of preliminary injunction �not only seeks to enjoin
x x x [the Regional Trial Court of Manila] from proceeding with
the foreclosure case but also has the effect of pre�empting the
latter�s orders,�153 this court followed with �[t]his we cannot
countenance.�154
At any rate, the Regional Trial Court of Davao�s order dated
April 18, 2005 was not a writ of preliminary injunction. It was a
mere order directing the Philippine Bank of Communications to
inform Zuellig Pharma to pay rent to Lui Enterprises while the
status quo order between Lui Enterprises and the Philippine Bank
of Communications was subsisting. The Regional Trial Court of
Davao did not enjoin the proceedings before the Regional Trial
Court of Makati. The order dated April 18, 2005
provides:chanRoblesvirtualLawlibrary
As such, [the Philippine Bank of Communications] [is] hereby
directed to forthwith inform Zuellig Pharma Corp., of the April 1,
2004 status quo order and the succeeding September 14, 2004
Order, and consequently, for the said lessee to remit all rentals due
from February 23, 2003 and onwards to plaintiff Lui Enterprises,
Inc., in the meanwhile that the status quo order is subsisting. 155
Thus, the Regional Trial Court of Davao did not enjoin the
Regional Trial Court of Makati from hearing the interpleader case.
All told, the trial court did not err in proceeding with the
interpleader case. The nullification of deed of dation in payment
case pending with the Regional Trial Court of Davao did not bar
the filing of the interpleader case with the Regional Trial Court of
Makati.
IV
The Court of Appeals erred in awarding attorney�s fees
In its ordinary sense, attorney�s fees �represent the reasonable
compensation [a client pays his or her lawyer] [for legal service
rendered].�156 In its extraordinary sense, attorney�s fees �[are]
awarded x x x as indemnity for damages [the losing party pays the
prevailing party].�157
The award of attorney�s fees is the exception rather than the
rule.158 It is not awarded to the prevailing party �as a matter of
course.�159 Under Article 2208 of the Civil Code, attorney�s fees
cannot be recovered in the absence of stipulation, except under
specific circumstances:chanRoblesvirtualLawlibrary
(1) When exemplary damages are awarded;
(2) When the defendant�s act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the
plaintiff;
27
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff�s plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers,
laborers and skilled workers;
(8) In actions for indemnity under workmen�s compensation
and employer�s liability laws;
(9) In a separate civil action to recover civil liability arising from
a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable
that attorney�s fees and expenses of litigation should be
recovered.160
Even if a party is �compelled to litigate with third persons or to
incur expenses to protect his [or her] rights,�161 attorney�s fees
will not be awarded if no bad faith �could be reflected in a
party�s persistence in a case.�162
To award attorney�s fees, the court must have �factual, legal,
[and] equitable justification.�163 The court must state the award�s
basis in its decision.164 These rules are based on the policy that
�no premium should be placed on the right to litigate.�165
In this case, the Court of Appeals awarded attorney�s fees as
�[Zuellig Pharma] was compelled to litigate with third persons or
to incur expenses to protect [its] interest[s].�166 This is not a
compelling reason to award attorney�s fees. That Zuellig Pharma
had to file an interpleader case to consign its rental payments did
not mean that Lui Enterprises was in bad faith in insisting that
rental payments be paid to it. Thus, the Court of Appeals erred in
awarding attorney�s fees to Zuellig Pharma.
All told, the Court of Appeals� award of P50,000.00 as
attorney�s fees must be deleted.
WHEREFORE, in view of the foregoing, the petition for review
on certiorari is DENIED. The Court of Appeals� decision and
resolution in CA�G.R. CV No. 88023
are AFFIRMED with MODIFICATION. The award of
P50,000.00 attorney�s fees to Zuellig Pharma Corporation
is DELETED.
SO ORDERED.
G.R. Nos. 154470-71 September 24, 2012
BANK OF COMMERCE, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK and BANGKO
SENTRAL NG PILIPINAS, Respondent.
x-----------------------x
G.R. Nos. 154589-90
BANGKO SENTRAL NG PILIPINAS, Petitioner,
vs.
PLANTERS DEVELOPMENT BANK, Respondent.
DECISION
BRION, J.:
Before the Court are two consolidated petitions for review
on certiorari under Rule 45,1 on pure questions of law, filed by the
petitioners Bank of Commerce (BOC) and the Bangko Sentral ng
Pilipinas (BSP). They assail the January 10, 2002 and July 23,
2002 Orders (assailed orders) of the Regional Trial Court (RTC) of
Makati City, Branch 143, in Civil Case Nos. 94-3233 and 94-3254.
These orders dismissed (i) the petition filed by the Planters
Development Bank (PDB), (ii) the "counterclaim" filed by the
BOC, and (iii) the counter-complaint/cross-claim for interpleader
filed bythe BSP; and denied the BOC’s and the BSP’s motions for
reconsideration.
THE ANTECEDENTS
The Central Bank bills
I. First set of CB bills
The Rizal Commercial Banking Corporation (RCBC) was the
registered owner of seven Central Bank (CB) bills with a total face
value of ₱ 70 million, issued on January 2, 1994 and would mature
on January 2, 1995.2 As evidenced by a "Detached Assignment"
dated April 8, 1994,3 the RCBC sold these CB bills to the BOC.4 As
evidenced by another "Detached Assignment"5 of even date, the
BOC, in turn, sold these CB bills to the PDB.6 The BOC delivered
the Detached Assignments to the PDB.7
On April 15, 1994 (April 15 transaction), the PDB, in turn, sold to
the BOC Treasury Bills worth ₱ 70 million, with maturity date of
June 29, 1994, as evidenced by a Trading Order8 and a
Confirmation of Sale.9 However, instead of delivering the Treasury
Bills, the PDB delivered the seven CB bills to the BOC, as
evidenced by a PDB Security Delivery Receipt, bearing a
"note: ** substitution in lieu of 06-29-94" – referring to the
Treasury Bills.10 Nevertheless, the PDB retained possession of the
Detached Assignments. It is basically the nature of this April 15
transaction that the PDB and the BOC cannot agree on.
The transfer of the first set of seven CB bills
i. CB bill nos. 45351-53
On April 20, 1994, according to the BOC, it "sold back"11 to the
PDB three of the seven CB bills. In turn, the PDB transferred these
three CB bills to Bancapital Development Corporation (Bancap).
On April 25, 1994, the BOC bought the three CB bills from Bancap
– so, ultimately, the BOC reacquired these three CB
bills,12 particularly described as follows:
Serial No.: 2BB XM 045351
2BB XM 045352
2BB XM 045353
Quantity: Three (3)
Denomination: Php 10 million
Total Face Value: Php 30 million
ii. CB bill nos. 45347-50
On April 20, 1994, the BOC sold the remaining four (4) CB bills to
Capital One Equities Corporation13 which transferred them to All-
Asia Capital and Trust Corporation (All Asia). On September 30,
1994, All Asia further transferred the four CB bills back to the
RCBC.14
On November 16, 1994, the RCBC sold back to All Asia one of
these 4 CB bills. When the BSP refused to release the amount of
this CB bill on maturity, the BOC purchased from All Asia this
lone CB bill,15 particularly described as follows:16
Serial No.: 2BB XM 045348
Quantity: One (1)
Denomination: Php 10 million
Total Face Value: Php 10 million
As the registered owner of the remaining three CB bills, the RCBC
sold them to IVI Capital and Insular Savings Bank. Again, when
the BSP refused to release the amount of this CB bill on maturity,
the RCBC paid back its transferees, reacquired these three CB bills
and sold them to the BOC – ultimately, the BOC acquired these
three CB bills.
All in all, the BOC acquired the first set of seven CB bills.
II. Second set of CB bills
On April 19, 1994, the RCBC, as registered owner, (i) sold two CB
bills with a total face value of ₱ 20 million to the PDB and (ii)
delivered to the PDB the corresponding Detached
Assignment.17 The two CB bills were particularly described as
follows:
Serial No.: BB XM 045373
28
BB XM 045374
Issue date: January 3, 1994
Maturity date: January 2, 1995
Denomination: Php 10 million
Total Face value: Php 20 million
On even date, the PDB delivered to Bancap the two CB
bills18 (April 19 transaction). In turn, Bancap sold the CB bills to
Al-Amanah Islamic Investment Bank of the Philippines, which in
turn sold it to the BOC.19
PDB’s move against the transfer of
the first and second sets of CB bills
On June 30, 1994, upon learning of the transfers involving the CB
bills, the PDB informed20 the Officer-in-Charge of the BSP’s
Government Securities Department,21 Lagrimas Nuqui, of the
PDB’s claim over these CB bills, based on the Detached
Assignments in its possession. The PDB requested the BSP22 to
record its claim in the BSP’s books, explaining that its non-
possession of the CB bills is "on account of imperfect negotiations
thereof and/or subsequent setoff or transfer."23
Nuqui denied the request, invoking Section 8 of CB Circular No.
28 (Regulations Governing Open Market Operations, Stabilization
of the Securities Market, Issue, Servicing and Redemption of the
Public Debt)24 which requires the presentation of the bond before a
registered bond may be transferred on the books of the BSP. 25
In a July 25, 1994 letter, the PDB clarified to Nuqui that it was not
"asking for the transfer of the CB Bills…. rather it intends to put
the BSP on formal notice that whoever is in possession of said bills
is not a holder in due course," and, therefore the BSP should not
make payment upon the presentation of the CB bills on
maturity.26 Nuqui responded that the BSP was "not in a position at
that point in time to determine who is and who is not the holder in
due course since it is not privy to all acts and time involving the
transfers or negotiation" of the CB bills. Nuqui added that the
BSP’s action shall be governed by CB Circular No. 28, as
amended.27
On November 17, 1994, the PDB also asked BSP Deputy Governor
Edgardo Zialcita that (i) a notation in the BSP’s books be made
against the transfer, exchange, or payment of the bonds and the
payment of interest thereon; and (ii) the presenter of the bonds
upon maturity be required to submit proof as a holder in due course
(of the first set of CB bills). The PDB relied on Section 10 (d) 4 of
CB Circular No. 28.28 This provision reads:
(4) Assignments effected by fraud – Where the assignment of a
registered bond is secured by fraudulent representations, the
Central Bank can grant no relief if the assignment has been
honored without notice of fraud. Otherwise, the Central Bank,
upon receipt of notice that the assignment is claimed to have been
secured by fraudulent representations, or payment of the bond the
payment of interest thereon, and when the bond is presented, will
call upon the owner and the person presenting the bond to
substantiate their respective claims.If it then appears that the
person presenting the bond stands in the position of bonafide
holder for value, the Central Bank, after giving the owner an
opportunity to assert his claim, will pass the bond for transfer,
exchange or payments, as the case may be, without further
question.
In a December 29, 1994 letter, Nuqui again denied the request,
reiterating the BSP’s previous stand.
In light of these BSP responses and the impending maturity of the
CB bills, the PDB filed29 with the RTC two separate petitions for
Mandamus, Prohibition and Injunction with prayer for Preliminary
Injunction and Temporary Restraining Order, docketed as Civil
Case No. 94-3233 (covering the first set of CB bills) and Civil
Case 94-3254 (covering the second set of CB bills) against Nuqui,
the BSP and the RCBC.30
The PDB essentially claims that in both the April 15 transaction
(involving the first set of CB bills) and the April 19 transaction
(involving the second set of CB bills), there was no intent on its
part to transfer title of the CB bills, as shown by its non-issuance of
a detached assignment in favor of the BOC and Bancap,
respectively. The PDB particularly alleges that it merely
"warehoused"31 the first set of CB bills with the BOC, as security
collateral.
On December 28, 1994, the RTC temporarily enjoined Nuqui and
the BSP from paying the face value of the CB bills on
maturity.32 On January 10, 1995, the PDB filed an Amended
Petition, additionally impleading the BOC and All Asia. 33 In a
January 13, 1995 Order, the cases were consolidated. 34 On January
17, 1995, the RTC granted the PDB’s application for a writ of
preliminary prohibitory injunction.35 In both petitions, the PDB
identically prayed:
WHEREFORE, it is respectfully prayed x x x that, after due notice
and hearing, the Writs of Mandamus, Prohibition and Injunction,
be issued; (i) commanding the BSP and Nuqui, or whoever may
take her place -
(a) to record forthwith in the books of BSP the claim of x x x PDB
on the [two sets of] CB Bills in accordance with Section 10 (d) (4)
of revised C.B. Circular No. 28; and
(b) also pursuant thereto, when the bills are presented on maturity
date for payment, to call (i) x x x PDB, (ii) x x x RCBC x x x, (iii)
x x x BOC x x x, and (iv) x x x ALL-ASIA x x x; or whoever will
present the [first and second sets of] CB Bills for payment, to
submit proof as to who stands as the holder in due course of said
bills, and, thereafter, act accordingly;
and (ii) ordering the BSP and Nuqui to pay jointly and severally to
x x x PDB the following:
(a) the sum of ₱ 100,000.00, as and for exemplary damages;
(b) the sum of at least ₱ 500,000.00, or such amount as shall be
proved at the trial, as and for attorney’s fees;
(c) the legal rate of interest from the filing of this Petition until full
payment of the sums mentioned in this Petition; and
(d) the costs of suit.36
After the petitions were filed, the BOC acquired/reacquired all the
nine CB bills – the first and second sets of CB bills (collectively,
subject CB bills).
Defenses of the BSP and of the BOC37
The BOC filed its Answer, praying for the dismissal of the petition.
It argued that the PDB has no cause of action against it since the
PDB is no longer the owner of the CB bills. Contrary to the PDB’s
"warehousing theory,"38 the BOC asserted that the (i) April 15
transaction and the (ii) April 19 transaction – covering both sets of
CB bills - were valid contracts of sale, followed by a transfer of
title (i) to the BOC (in the April 15 transaction) upon the PDB’s
delivery of the 1st set of CB bills in substitution of the Treasury
Bills the PDB originally intended to sell, and (ii) to Bancap (in the
April 19 transaction) upon the PDB’s delivery of the 2nd set of CB
bills to Bancap, likewise by way of substitution.
The BOC adds that Section 10 (d) 4 of CB Circular No. 28 cannot
apply to the PDB’s case because (i) the PDB is not in possession of
the CB bills and (ii) the BOC acquired these bills from the PDB, as
to the 1st set of CB bills, and from Bancap, as to the 2nd set of CB
bills, in good faith and for value. The BOC also asserted a
compulsory counterclaim for damages and attorney’s fees.
On the other hand, the BSP countered that the PDB cannot invoke
Section 10 (d) 4 of CB Circular No. 28 because this section applies
only to an "owner" and a "person presenting the bond," of which
the PDB is neither. The PDB has not presented to the BSP any
assignment of the subject CB bills, duly recorded in the BSP’s
books, in its favor to clothe it with the status of an
"owner."39 According to the BSP –
Section 10 d. (4) applies only to a registered bond which is
assigned. And the issuance of CB Bills x x x are required to be
recorded/registered in BSP’s books. In this regard, Section 4 a. (1)
of CB Circular 28 provides that registered bonds "may be
transferred only by an assignment thereon duly executed by the
registered owner or his duly authorized representative x x x and
duly recorded on the books of the Central Bank."
xxxx
29
The alleged assignment of subject CB Bills in PDB’s favor is not
recorded/registered in BSP’s books.40(underscoring supplied)
Consequently, when Nuqui and the BSP refused the PDB’s request
(to record its claim), they were merely performing their duties in
accordance with CB Circular No. 28.
Alternatively, the BSP asked that an interpleader suit be allowed
between and among the claimants to the subject CB bills on the
position that while it is able and willing to pay the subject CB bills’
face value, it is duty bound to ensure that payment is made to the
rightful owner. The BSP prayed that judgment be rendered:
a. Ordering the dismissal of the PDB’s petition for lack of merit;
b. Determining which between/among [PDB] and the other
claimants is/are lawfully entitled to the ownership of the subject
CB bills and the proceeds thereof;
c. x x x;
d. Ordering PDB to pay BSP and Nuqui such actual/compensatory
and exemplary damages… as the RTC may deem warranted; and
e. Ordering PDB to pay Nuqui moral damages… and to pay the
costs of the suit.41
Subsequent events
The PDB agreed with the BSP’s alternative response for an
interpleader –
4. PDB agrees that the various claimants should now interplead and
substantiate their respective claims on the subject CB bills.
However, the total face value of the subject CB bills should be
deposited in escrow with a private bank to be disposed of only
upon order of the RTC.42
Accordingly, on June 9, 199543 and August 4, 1995,44 the BOC and
the PDB entered into two separate Escrow Agreements. 45 The first
agreement covered the first set of CB bills, while the second
agreement covered the second set of CB bills. The parties agreed to
jointly collect from the BSP the maturity proceeds of these CB bills
and to deposit said amount in escrow, "pending final determination
by Court judgment, or amicable settlement as to who shall be
eventually entitled thereto."46 The BOC and the PDB filed a Joint
Motion,47 submitting these Escrow Agreements for court approval.
The RTC gave its approval to the parties’ Joint
Motion.48 Accordingly, the BSP released the maturity proceeds of
the CB bills by crediting the Demand Deposit Account of the PDB
and of the BOC with 50% each of the maturity proceeds of the
amount in escrow.49
In view of the BOC’s acquisition of all the CB bills, All
Asia50 moved to be dropped as a respondent (with the PDB’s
conformity51 ), which the RTC granted.52 The RCBC subsequently
followed suit.53
In light of the developments, on May 4, 1998, the RTC required the
parties to manifest their intention regarding the case and to inform
the court of any amicable settlement; "otherwise, th[e] case shall be
dismissed for lack of interest."54 Complying with the RTC’s order,
the BOC moved (i) that the case be set for pre-trial and (ii) for
further proceeding to resolve the remaining issues between the
BOC and the PDB, particularly on "who has a better right over the
subject CB bills."55 The PDB joined the BOC in its motion.56
On September 28, 2000, the RTC granted the BSP’s motion to
interplead and, accordingly, required the BOC to amend its Answer
and for the conflicting claimants to comment thereon. 57 In October
2000, the BOC filed its Amended Consolidated Answer with
Compulsory Counterclaim, reiterating its earlier arguments
asserting ownership over the subject CB bills.58
In the alternative, the BOC added that even assuming that there
was no effective transfer of the nine CB bills ultimately to the
BOC, the PDB remains obligated to deliver to the BOC, as buyer
in the April 15 transaction and ultimate successor-in-interest of the
buyer (Bancap) in the April 19 transaction, either the original
subjects of the sales or the value thereof, plus whatever income that
may have been earned during the pendency of the case. 59
That BOC prayed:
1. To declare BOC as the rightful owner of the nine (9) CB bills
and as the party entitled to the proceeds thereof as well as all
income earned pursuant to the two (2) Escrow Agreements entered
into by BOC and PDB.
2. In the alternative, ordering PDB to deliver the original subject of
the sales transactions or the value thereof and whatever income
earned by way of interest at prevailing rate.
Without any opposition or objection from the PDB, on February
23, 2001, the RTC admitted60 the BOC’s Amended Consolidated
Answer with Compulsory Counterclaims.
In May 2001, the PDB filed an Omnibus Motion,61 questioning the
RTC’s jurisdiction over the BOC’s "additional counterclaims." The
PDB argues that its petitions pray for the BSP (not the RTC) to
determine who among the conflicting claimants to the CB bills
stands in the position of the bona fide holder for value. The RTC
cannot entertain the BOC’s counterclaim, regardless of its nature,
because it is the BSP which has jurisdiction to determine who is
entitled to receive the proceeds of the CB bills.
The BOC opposed62 the PDB’s Omnibus Motion. The PDB filed its
Reply.63
In a January 10, 2002 Order, the RTC dismissed the PDB’s
petition, the BOC’s counterclaim and the BSP’s counter-
complaint/cross-claim for interpleader, holding that under CB
Circular No. 28, it has no jurisdiction (i) over the BOC’s
"counterclaims" and (ii) to resolve the issue of ownership of the
CB bills.64 With the denial of their separate motions for
Reconsideration,65 the BOC and the BSP separately filed the
present petitions for review on certiorari.66
THE BOC’S and THE BSP’S PETITIONS
The BOC argues that the present cases do not fall within the
limited provision of Section 10 (d) 4 of CB Circular No. 28, which
contemplates only of three situations: first, where the fraudulent
assignment is not coupled with a notice to the BSP, it can grant no
relief; second, where the fraudulent assignment is coupled with a
notice of fraud to the BSP, it will make a notation against the
assignment and require the owner and the holder to substantiate
their claims; and third, where the case does not fall on either of the
first two situations, the BSP will have to await action on the
assignment pending settlement of the case, whether by agreement
or by court order.
The PDB’s case cannot fall under the first two situations. With
particular regard to the second situation, CB Circular No. 28
requires that the conflict must be between an "owner" and a
"holder," for the BSP to exercise its limited jurisdiction to resolve
conflicting claims; and the word "owner" here refers to the
registered owner giving notice of the fraud to the BSP. The PDB,
however, is not the registered owner nor is it in possession (holder)
of the CB bills.67Consequently, the PDB’s case can only falls under
the third situation which leaves the RTC, as a court of general
jurisdiction, with the authority to resolve the issue of ownership of
a registered bond (the CB bills) not falling in either of the first two
situations.
The BOC asserts that the policy consideration supportive of its
interpretation of CB Circular No. 28 is to have a reliable system to
protect the registered owner; should he file a notice with the BSP
about a fraudulent assignment of certain CB bills, the BSP simply
has to look at its books to determine who is the owner of the CB
bills fraudulently assigned. Since it is only the registered owner
who complied with the BSP’s requirement of recording an
assignment in the BSP’s books, then "the protective mantle of
administrative proceedings" should necessarily benefit him only,
without extending the same benefit to those who chose to ignore
the Circular’s requirement, like the PDB.68
Assuming arguendo that the PDB’s case falls under the second
situation – i.e., the BSP has jurisdiction to resolve the issue of
ownership of the CB bills – the more recent CB Circular No. 769-
80 (Rules and Regulations Governing Central Bank Certificates of
Indebtedness) already superseded CB Circular No. 28, and, in
particular, effectively amended Section 10 (d) 4 of CB Circular No.
28. The pertinent provisions of CB Circular No. 769-80 read:
Assignment Affected by Fraud. – Any assignment for transfer of
ownership of registered certificate obtained through fraudulent
representation if honored by the Central Bank or any of its
authorized service agencies shall not make the Central Bank or
agency liable therefore unless it has previous formal notice of the
30
fraud. The Central Bank, upon notice under oath that the
assignment was secured through fraudulent means, shall
immediately issue and circularize a "stop order" against the
transfer, exchange, redemption of the Certificate including the
payment of interest coupons. The Central Bank or service agency
concerned shall continue to withhold action on the certificate until
such time that the conflicting claims have been finally settled either
by amicable settlement between the parties or by order of the
Court.
Unlike CB Circular No. 28, CB Circular No. 769-80 limited the
BSP’s authority to the mere issuance and circularization of a "stop
order" against the transfer, exchange and redemption upon sworn
notice of a fraudulent assignment. Under this Circular, the BSP
shall only continue to withhold action until the dispute is ended by
an amicable settlement or by judicial determination. Given the
more passive stance of the BSP – the very agency tasked to enforce
the circulars involved - under CB Circular No. 769-80, the RTC’s
dismissal of the BOC’s counterclaims is palpably erroneous.
Lastly, since Nuqui’s office (Government Securities Department)
had already been abolished,69 it can no longer adjudicate the dispute
under the second situation covered by CB Circular No. 28. The
abolition of Nuqui’s office is not only consistent with the BSP’s
Charter but, more importantly, with CB Circular No. 769-80, which
removed the BSP’s adjudicative authority over fraudulent
assignments.
THE PDB’S COMMENT
The PDB claims that jurisdiction is determined by the allegations
in the complaint/petition and not by the defenses set up in the
answer.70 In filing the petition with the RTC, the PDB merely seeks
to compel the BSP to determine, pursuant to CB Circular No. 28,
the party legally entitled to the proceeds of the subject CB bills,
which, as the PDB alleged, have been transferred through
fraudulent representations – an allegation which properly
recognized the BSP’s jurisdiction to resolve conflicting claims of
ownership over the CB bills.
The PDB adds that under the doctrine of primary jurisdiction,
courts should refrain from determining a controversy involving a
question whose resolution demands the exercise of sound
administrative discretion. In the present case, the BSP’s special
knowledge and experience in resolving disputes on securities,
whose assignment and trading are governed by the BSP’s rules,
should be upheld.
The PDB counters that the BOC’s tri-fold interpretation of Section
10 (d) 4 of CB Circular No. 28 sanctions split jurisdiction which is
not favored;but even this tri-fold interpretation which, in the
second situation, limits the meaning of the "owner" to the
registered owner is flawed. Section 10 (d) 4 aims to protect not just
the registered owner but anyone who has been deprived of his bond
by fraudulent representation in order to deter fraud in the
secondary trading of government securities.
The PDB asserts that the existence of CB Circular No. 769-80 or
the abolition of Nuqui’s office does not result in depriving the BSP
of its jurisdiction: first, CB Circular No. 769-80 expressly provides
that CB Circular No. 28 shall have suppletory application to CB
Circular No. 769-80; and second, the BSP can always designate an
office to resolve the PDB’s claim over the CB bills.
Lastly, the PDB argues that even assuming that the RTC has
jurisdiction to resolve the issue of ownership of the CB bills, the
RTC has not acquired jurisdiction over the BOC’s so-called
"compulsory" counterclaims (which in truth is merely
"permissive") because of the BOC’s failure to pay the appropriate
docket fees. These counterclaims should, therefore, be dismissed
and expunged from the record.
THE COURT’S RULING
We grant the petitions.
At the outset, we note that the parties have not raised the validity of
either CB Circular No. 28 or CB Circular No. 769-80 as an issue.
What the parties largely contest is the applicable circular in case of
an allegedly fraudulently assigned CB bill. The applicable circular,
in turn, is determinative of the proper remedy available to the PDB
and/or the BOC as claimants to the proceeds of the subject CB
bills.
Indisputably, at the time the PDB supposedly invoked the
jurisdiction of the BSP in 1994 (by requesting for the annotation of
its claim over the subject CB bills in the BSP’s books), CB
Circular No. 769-80 has long been in effect. Therefore, the parties’
respective interpretations of the provision of Section 10 (d) 4 of
CB Circular No. 28 do not have any significance unless it is first
established that that Circular governs the resolution of their
conflicting claims of ownership. This conclusion is important,
given the supposed repeal or modification of Section 10 (d) 4 of
CB Circular No. 28 by the following provisions of CB Circular No.
769-80:
ARTICLE XI
SUPPLEMENTAL RULES
Section 1. Central Bank Circular No. 28 – The provisions of
Central Bank Circular No. 28 shall have suppletory application to
matters not specially covered by these Rules.
ARTICLE XII
EFFECTIVITY
Effectivity – The rules and regulations herein prescribed shall take
effect upon approval by the Monetary Board, Central Bank of the
Philippines, and all circulars, memoranda, or office orders
inconsistent herewith are revoked or modified accordingly.
(Emphases added)
We agree with the PDB that in view of CB Circular No. 28’s
suppletory application, an attempt to harmonize the apparently
conflicting provisions is a prerequisite before one may possibly
conclude that an amendment or a repeal exists. 71 Interestingly,
however, even the PDB itself failed to submit an interpretation
based on its own position of harmonization.
The repealing clause of CB Circular No. 769-80 obviously did not
expressly repeal CB Circular No. 28; in fact, it even provided for
the suppletory application of CB Circular No. 28 on "matters not
specially covered by" CB Circular No. 769-80. While no express
repeal exists, the intent of CB Circular No. 769-80 to operate as an
implied repeal,72or at least to amend earlier CB circulars, is
supported by its text "revoking" or "modif[ying" "all circulars"
which are inconsistent with its terms.
At the outset, we stress that none of the parties disputes that the
subject CB bills fall within the category of a certificate or evidence
of indebtedness and that these were issued by the Central Bank,
now the BSP. Thus, even without resorting to statutory construction
aids, matters involving the subject CB bills should necessarily be
governed by CB Circular No. 769-80. Even granting, however, that
reliance on CB Circular No. 769-80 alone is not enough, we find
that CB Circular No. 769-80 impliedly repeals CB Circular No. 28.
An implied repeal transpires when a substantial conflict exists
between the new and the prior laws. In the absence of an express
repeal, a subsequent law cannot be construed as repealing a prior
law unless an irreconcilable inconsistency and repugnancy exist in
the terms of the new and the old laws.73 Repeal by implication is
not favored, unless manifestly intended by the legislature, or unless
it is convincingly and unambiguously demonstrated, that the laws
or orders are clearly repugnant and patently inconsistent with one
another so that they cannot co-exist; the legislature is presumed to
know the existing law and would express a repeal if one is
intended.74
There are two instances of implied repeal. One takes place when
the provisions in the two acts on the same subject matter are
irreconcilably contradictory, in which case, the later act, to the
extent of the conflict, constitutes an implied repeal of the earlier
one. The other occurs when the later act covers the whole subject
of the earlier one and is clearly intended as a substitute; thus, it will
operate to repeal the earlier law. 75
A general reading of the two circulars shows that the second
instance of implied repeal is present in this case. CB Circular No.
28, entitled "Regulations Governing Open Market Operations,
Stabilization of Securities Market, Issue, Servicing and
Redemption of Public Debt," is a regulation governing the
servicing and redemption of public debt, including the issue,
31
inscription, registration, transfer, payment and replacement of
bonds and securities representing the public debt.76 On the other
hand, CB Circular No. 769-80, entitled "Rules and Regulations
Governing Central Bank Certificate of Indebtedness," is the
governing regulation on matters77 (i) involving certificate of
indebtedness78issued by the Central Bank itself and (ii) which are
similarly covered by CB Circular No. 28.
The CB Monetary Board issued CB Circular No. 28 to regulate the
servicing and redemption of public debt, pursuant to Section 124
(now Section 119 of Republic Act R.A. No. 7653) of the old
Central Bank law79 which provides that "the servicing and
redemption of the public debt shall also be effected through the
Bangko Sentral." However, even as R.A. No. 7653 continued to
recognize this role by the BSP, the law required a phase-out of all
fiscal agency functions by the BSP, including Section 119 of R.A.
No. 7653.
In other words, even if CB Circular No. 28 applies broadly to both
government-issued bonds and securities and Central Bank-issued
evidence of indebtedness, given the present state of law, CB
Circular No. 28 and CB Circular No. 769-80 now operate on the
same subject – Central Bank-issued evidence of indebtedness.
Under Section 1, Article XI of CB Circular No. 769-80, the
continued relevance and application of CB Circular No. 28 would
depend on the need to supplement any deficiency or silence in CB
Circular No. 769-80 on a particular matter.
In the present case, both CB Circular No. 28 and CB Circular No.
769-80 provide the BSP with a course of action in case of an
allegedly fraudulently assigned certificate of indebtedness. Under
CB Circular No. 28, in case of fraudulent assignments, the BSP
would have to "call upon the owner and the person presenting the
bond to substantiate their respective claims" and, from there,
determine who has a better right over the registered bond. On the
other hand, under CB Circular No. 769-80, the BSP shall merely
"issue and circularize a ‘stop order’ against the transfer, exchange,
redemption of the [registered] certificate" without any adjudicative
function (which is the precise root of the present controversy). As
the two circulars stand, the patent irreconcilability of these two
provisions does not require elaboration. Section 5, Article V of CB
Circular No. 769-80 inescapably repealed Section 10 (d) 4 of CB
Circular No. 28.
The issue of BSP’s jurisdiction, lay hidden
On that note, the Court could have written finis to the present
controversy by simply sustaining the BSP’s hands-off approach to
the PDB’s problem under CB Circular No. 769-80. However, the
jurisdictional provision of CB Circular No. 769-80 itself, in
relation to CB Circular No. 28, on the matter of fraudulent
assignment, has given rise to a question of jurisdiction - the core
question of law involved in these petitions - which the Court
cannot just treat sub-silencio.
Broadly speaking, jurisdiction is the legal power or authority to
hear and determine a cause.80 In the exercise of judicial or quasi-
judicial power, it refers to the authority of a court to hear and
decide a case.81 In the context of these petitions, we hark back to
the basic principles governing the question of jurisdiction over the
subject matter.
First, jurisdiction over the subject matter is determined only by the
Constitution and by law.82 As a matter of substantive law,
procedural rules alone can confer no jurisdiction to courts or
administrative agencies.83 In fact, an administrative agency, acting
in its quasi-judicial capacity, is a tribunal of limited jurisdiction
and, as such, could wield only such powers that are specifically
granted to it by the enabling statutes. In contrast, an RTC is a court
of general jurisdiction, i.e., it has jurisdiction over cases whose
subject matter does not fall within the exclusive original
jurisdiction of any court, tribunal or body exercising judicial or
quasi-judicial functions.84
Second, jurisdiction over the subject matter is determined not by
the pleas set up by the defendant in his answer85but by the
allegations in the complaint,86 irrespective of whether the plaintiff
is entitled to favorable judgment on the basis of his
assertions.87 The reason is that the complaint is supposed to contain
a concise statement of the ultimate facts constituting the plaintiff's
causes of action.88
Third, jurisdiction is determined by the law in force at the time of
the filing of the complaint.89
Parenthetically, the Court observes that none of the parties ever
raised the issue of whether the BSP can simply disown its
jurisdiction, assuming it has, by the simple expedient of
promulgating a new circular (specially applicable to a certificate of
indebtedness issued by the BSP itself), inconsistent with an old
circular, assertive of its limited jurisdiction over ownership issues
arising from fraudulent assignments of a certificate of
indebtedness. The PDB, in particular, relied solely and heavily on
CB Circular No. 28.
In light of the above principles pointing to jurisdiction as a matter
of substantive law, the provisions of the law itself that gave CB
Circular 769-80 its life and jurisdiction must be examined.
The Philippine Central Bank
On January 3, 1949, Congress created the Central Bank of the
Philippines (Central Bank) as a corporate body with the primary
objective of (i) maintaining the internal and external monetary
stability in the Philippines; and (ii) preserving the international
value and the convertibility of the peso.90 In line with these broad
objectives, the Central Bank was empowered to issue rules and
regulations "necessary for the effective discharge of the
responsibilities and exercise of the powers assigned to the
Monetary Board and to the Central Bank."91 Specifically, the
Central Bank is authorized to organize (other) departments for the
efficient conduct of its business and whose powers and duties
"shall be determined by the Monetary Board, within the authority
granted to the Board and the Central Bank"92 under its original
charter.
With the 1973 Constitution, the then Central Bank was
constitutionally made as the country’s central monetary authority
until such time that Congress93 shall have established a central
bank. The 1987 Constitution continued to recognize this function
of the then Central Bank until Congress, pursuant to the
Constitution, created a new central monetary authority which later
came to be known as the Bangko Sentral ng Pilipinas.
Under the New Central Bank Act (R.A. No. 7653),94 the BSP is
given the responsibility of providing policy directions in the areas
of money, banking and credit; it is given, too, the primary objective
of maintaining price stability, conducive to a balanced and
sustainable growth of the economy, and of promoting and
maintaining monetary stability and convertibility of the peso. 95
The Constitution expressly grants the BSP, as the country’s central
monetary authority, the power of supervision over the operation of
banks, while leaving with Congress the authority to define the
BSP’s regulatory powers over the operations of finance companies
and other institutions performing similar functions. Under R.A. No.
7653, the BSP’s powers and functions include (i) supervision over
the operation of banks; (ii) regulation of operations of finance
companies and non-bank financial institutions performing quasi
banking functions; (iii) sole power and authority to issue currency
within the Philippine territory; (iv) engaging in foreign exchange
transactions; (v) making rediscounts, discounts, loans and advances
to banking and other financial institutions to influence the volume
of credit consistent with the objective of achieving price stability;
(vi) engaging in open market operations; and (vii) acting as banker
and financial advisor of the government.1âwphi1
On the BSP’s power of supervision over the operation of banks,
Section 4 of R.A. No. 8791 (The General Banking Law of 2000)
elaborates as follows:
CHAPTER II
AUTHORITY OF THE BANGKO SENTRAL
SECTION 4. Supervisory Powers. — The operations and activities
of banks shall be subject to supervision of the Bangko Sentral.
"Supervision" shall include the following:
4.1. The issuance of rules of conduct or the establishment of
standards of operation for uniform application to all institutions or
functions covered, taking into consideration the distinctive
character of the operations of institutions and the substantive
32
similarities of specific functions to which such rules, modes or
standards are to be applied;
4.2. The conduct of examination to determine compliance with
laws and regulations if the circumstances so warrant as determined
by the Monetary Board;
4.3. Overseeing to ascertain that laws and regulations are complied
with;
4.4. Regular investigation which shall not be oftener than once a
year from the last date of examination to determine whether an
institution is conducting its business on a safe or sound basis:
Provided, That the deficiencies/irregularities found by or
discovered by an audit shall be immediately addressed;
4.5. Inquiring into the solvency and liquidity of the institution (2-
D); or
4.6. Enforcing prompt corrective action. (n)
The Bangko Sentral shall also have supervision over the operations
of and exercise regulatory powers over quasi-banks, trust entities
and other financial institutions which under special laws are subject
to Bangko Sentral supervision. (2-Ca)
For the purposes of this Act, "quasi-banks" shall refer to entities
engaged in the borrowing of funds through the issuance,
endorsement or assignment with recourse or acceptance of deposit
substitutes as defined in Section 95 of Republic Act No. 7653
(hereafter the "New Central Bank Act") for purposes of relending
or purchasing of receivables and other obligations. [emphasis ours]
While this provision empowers the BSP to oversee the operations
and activities of banks to "ascertain that laws and regulations are
complied with," the existence of the BSP’s jurisdiction in the
present dispute cannot rely on this provision. The fact remains that
the BSP already made known to the PDB its unfavorable position
on the latter’s claim of fraudulent assignment due to the latter’s
own failure to comply96 with existing regulations:
In this connection, Section 10 (b) 2 also requires that a "Detached
assignment will be recognized or accepted only upon previous
notice to the Central Bank x x x." In fact, in a memo dated
September 23, 1991 xxx then CB Governor Jose L. Cuisia advised
all banks (including PDB) xxx as follows:
In view recurring incidents ostensibly disregarding certain
provisions of CB circular No. 28 (as amended) covering
assignments of registered bonds, all banks and all concerned are
enjoined to observe strictly the pertinent provisions of said CB
Circular as hereunder quoted:
xxxx
Under Section 10.b. (2)
x x x Detached assignment will be recognized or accepted only
upon previous notice to the Central Bank and its use is authorized
only under the following circumstances:
(a) x x x
(b) x x x
(c) assignments of treasury notes and certificates of indebtedness in
registered form which are not provided at the back thereof with
assignment form.
(d) Assignment of securities which have changed ownership
several times.
(e) x x x
Non-compliance herewith will constitute a basis for non-action or
withholding of action on redemption/payment of interest
coupons/transfer transactions or denominational exchange that may
be directly affected thereby. [Boldfacing supplied]
Again, the books of the BSP do not show that the supposed
assignment of subject CB Bills was ever recorded in the BSP’s
books. [Boldfacing supplied]
However, the PDB faults the BSP for not recording the assignment
of the CB bills in the PDB’s favor despite the fact that the PDB
already requested the BSP to record its assignment in the BSP’s
books as early as June 30, 1994.97
The PDB’s claim is not accurate. What the PDB requested the BSP
on that date was not the recording of the assignment of the CB bills
in its favor but the annotation of its claim over the CB bills at the
time when (i) it was no longer in possession of the CB bills, having
been transferred from one entity to another and (ii) all it has are the
detached assignments, which the PDB has not shown to be
compliant with Section 10 (b) 2 above-quoted. Obviously, the PDB
cannot insist that the BSP take cognizance of its plaint when the
basis of the BSP’s refusal under existing regulation, which the
PDB is bound to observe, is the PDB’s own failure to comply
therewith.
True, the BSP exercises supervisory powers (and regulatory
powers) over banks (and quasi banks). The issue presented before
the Court, however, does not concern the BSP’s supervisory power
over banks as this power is understood under the General Banking
Law. In fact, there is nothing in the PDB’s petition (even including
the letters it sent to the BSP) that would support the BSP’s
jurisdiction outside of CB Circular No. 28, under its power of
supervision, over conflicting claims to the proceeds of the CB bills.
BSP has quasi-judicial powers over a
class of cases which does not include
the adjudication of ownership of the
CB bills in question
In United Coconut Planters Bank v. E. Ganzon, Inc.,98 the Court
considered the BSP as an administrative agency, 99exercising quasi-
judicial functions through its Monetary Board. It held:
A quasi-judicial agency or body is an organ of government other
than a court and other than a legislature, which affects the rights of
private parties through either adjudication or rule-making. The very
definition of an administrative agency includes its being vested
with quasi-judicial powers. The ever increasing variety of powers
and functions given to administrative agencies recognizes the need
for the active intervention of administrative agencies in matters
calling for technical knowledge and speed in countless
controversies which cannot possibly be handled by regular courts.
A "quasi-judicial function" is a term which applies to the action,
discretion, etc., of public administrative officers or bodies, who are
required to investigate facts, or ascertain the existence of facts,
hold hearings, and draw conclusions from them, as a basis for their
official action and to exercise discretion of a judicial nature.
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency
exercising quasi-judicial powers or functions. As aptly observed by
the Court of Appeals, the BSP Monetary Board is an independent
central monetary authority and a body corporate with fiscal and
administrative autonomy, mandated to provide policy directions in
the areas of money, banking and credit. It has power to issue
subpoena, to sue for contempt those refusing to obey the subpoena
without justifiable reason, to administer oaths and compel
presentation of books, records and others, needed in its
examination, to impose fines and other sanctions and to issue cease
and desist order. Section 37 of Republic Act No. 7653, in
particular, explicitly provides that the BSP Monetary Board shall
exercise its discretion in determining whether administrative
sanctions should be imposed on banks and quasi-banks, which
necessarily implies that the BSP Monetary Board must conduct
some form of investigation or hearing regarding the same.
[citations omitted]
The BSP is not simply a corporate entity but qualifies as an
administrative agency created, pursuant to constitutional
mandate,100 to carry out a particular governmental function. 101 To be
able to perform its role as central monetary authority, the
Constitution granted it fiscal and administrative autonomy. In
general, administrative agencies exercise powers and/or functions
which may be characterized as administrative, investigatory,
regulatory, quasi-legislative, or quasi-judicial, or a mix of these
five, as may be conferred by the Constitution or by statute. 102
While the very nature of an administrative agency and the raison
d'être for its creation103 and proliferation dictate a grant of quasi-
judicial power to it, the matters over which it may exercise this
power must find sufficient anchorage on its enabling law, either by
express provision or by necessary implication. Once found, the
quasi-judicial power partakes of the nature of a limited and special
jurisdiction, that is, to hear and determine a class of cases within its
peculiar competence and expertise. In other words, the provisions
of the enabling statute are the yardsticks by which the Court would
measure the quantum of quasi-judicial powers an administrative
33
agency may exercise, as defined in the enabling act of such
agency.104
Scattered provisions in R.A. No. 7653 and R.A. No. 8791, inter
alia, exist, conferring jurisdiction on the BSP on certain
matters.105 For instance, under the situations contemplated under
Section 36, par. 2106 (where a bank or quasi bank persists in
carrying on its business in an unlawful or unsafe manner) and
Section 37107 (where the bank or its officers willfully violate the
bank’s charter or by-laws, or the rules and regulations issued by the
Monetary Board) of R.A. No. 7653, the BSP may place an entity
under receivership and/or liquidation or impose administrative
sanctions upon the entity or its officers or directors.
Among its several functions under R.A. No. 7653, the BSP is
authorized to engage in open market operations and thereby "issue,
place, buy and sell freely negotiable evidences of indebtedness of
the Bangko Sentral" in the following manner.
SEC. 90. Principles of Open Market Operations. – The open
market purchases and sales of securities by the Bangko Sentral
shall be made exclusively in accordance with its primary objective
of achieving price stability.
xxxx
SEC. 92. Issue and Negotiation of Bangko Sentral Obligations. –
In order to provide the Bangko Sentral with effective instruments
for open market operations, the Bangko Sentral may, subject to
such rules and regulations as the Monetary Board may prescribe
and in accordance with the principles stated in Section 90 of this
Act, issue, place, buy and sell freely negotiable evidences of
indebtedness of the Bangko Sentral: Provided, That issuance of
such certificates of indebtedness shall be made only in cases of
extraordinary movement in price levels. Said evidences of
indebtedness may be issued directly against the international
reserve of the Bangko Sentral or against the securities which it has
acquired under the provisions of Section 91 of this Act, or may be
issued without relation to specific types of assets of the Bangko
Sentral.
The Monetary Board shall determine the interest rates, maturities
and other characteristics of said obligations of the Bangko Sentral,
and may, if it deems it advisable, denominate the obligations in
gold or foreign currencies.
Subject to the principles stated in Section 90 of this Act, the
evidences of indebtedness of the Bangko Sentral to which this
section refers may be acquired by the Bangko Sentral before their
maturity, either through purchases in the open market or through
redemptions at par and by lot if the Bangko Sentral has reserved
the right to make such redemptions. The evidences of indebtedness
acquired or redeemed by the Bangko Sentral shall not be included
among its assets, and shall be immediately retired and
cancelled.108 (italics supplied; emphases ours)
The primary objective of the BSP is to maintain price
stability.109 The BSP has a number of monetary policy instruments
at its disposal to promote price stability. To increase or reduce
liquidity in the financial system, the BSP uses open market
operations, among others.110 Open market operation is a monetary
tool where the BSP publicly buys or sells government
securities111 from (or to) banks and financial institutions in order to
expand or contract the supply of money. By controlling the money
supply, the BSP is able to exert some influence on the prices of
goods and services and achieve its inflation objectives. 112
Once the issue and/or sale of a security is made, the BSP would
necessarily make a determination, in accordance with its own rules,
of the entity entitled to receive the proceeds of the security upon its
maturity. This determination by the BSP is an exercise of its
administrative powers113 under the law as an incident to its power to
prescribe rules and regulations governing open market operations
to achieve the "primary objective of achieving price stability." 114As
a matter of necessity, too, the same rules and regulations facilitate
transaction with the BSP by providing for an orderly manner of,
among others, issuing, transferring, exchanging and paying
securities representing public debt.
Significantly, when competing claims of ownership over the
proceeds of the securities it has issued are brought before it, the
law has not given the BSP the quasi-judicial power to resolve these
competing claims as part of its power to engage in open market
operations. Nothing in the BSP’s charter confers on the BSP the
jurisdiction or authority to determine this kind of claims, arising
out of a subsequent transfer or assignment of evidence of
indebtedness – a matter that appropriately falls within the
competence of courts of general jurisdiction. That the statute
withholds this power from the BSP is only consistent with the
fundamental reasons for the creation of a Philippine central bank,
that is, to lay down stable monetary policy and exercise bank
supervisory functions. Thus, the BSP’s assumption of jurisdiction
over competing claims cannot find even a stretched-out
justification under its corporate powers "to do and perform any and
all things that may be necessary or proper to carry out the
purposes" of R.A. No. 7653. 115
To reiterate, open market operation is a monetary policy instrument
that the BSP employs, among others, to regulate the supply of
money in the economy to influence the timing, cost and availability
of money and credit, as well as other financial factors, for the
purpose of stabilizing the price level.116 What the law grants the
BSP is a continuing role to shape and carry out the country’s
monetary policy – not the authority to adjudicate competing claims
of ownership over the securities it has issued – since this authority
would not fall under the BSP’s purposes under its charter.
While R.A. No. 7653117 empowers the BSP to conduct
administrative hearings and render judgment for or against an
entity under its supervisory and regulatory powers and even
authorizes the BSP Governor to "render decisions, or rulings x x x
on matters regarding application or enforcement of laws pertaining
to institutions supervised by the BSP and laws pertaining to quasi-
banks, as well as regulations, policies or instructions issued by the
Monetary Board," it is precisely the text of the BSP’s own
regulation (whose validity is not here raised as an issue) that points
to the BSP’s limited role in case of an allegedly fraudulent
assignment to simply (i) issuing and circularizing a ‘"stop order"
against the transfer, exchange, redemption of the certificate of
indebtedness, including the payment of interest coupons, and (ii)
withholding action on the certificate.
A similar conclusion can be drawn from the BSP’s administrative
adjudicatory power in cases of "willful failure or refusal to comply
with, or violation of, any banking law or any order, instruction or
regulation issued by the Monetary Board, or any order, instruction
or ruling by the Governor."118 The non-compliance with the
pertinent requirements under CB Circular No. 28, as amended,
deprives a party from any right to demand payment from the BSP.
In other words, the grant of quasi-judicial authority to the BSP
cannot possibly extend to situations which do not call for the
exercise by the BSP of its supervisory or regulatory functions over
entities within its jurisdiction.119
The fact alone that the parties involved are banking institutions
does not necessarily call for the exercise by the BSP of its quasi-
judicial powers under the law.120
The doctrine of primary jurisdiction
argues against BSP’s purported
authority to adjudicate ownership
issues over the disputed CB bills
Given the preceding discussions, even the PDB’s invocation of the
doctrine of primary jurisdiction is misplaced.
In the exercise of its plenary legislative power, Congress may
create administrative agencies endowed with quasi-legislative and
quasi-judicial powers. Necessarily, Congress likewise defines the
limits of an agency’s jurisdiction in the same manner as it defines
the jurisdiction of courts.121 As a result, it may happen that either a
court or an administrative agency has exclusive jurisdiction over a
specific matter or both have concurrent jurisdiction on the same. It
may happen, too, that courts and agencies may willingly relinquish
adjudicatory power that is rightfully theirs in favor of the other.
One of the instances when a court may properly defer to the
adjudicatory authority of an agency is the applicability of the
doctrine of primary jurisdiction.122
34
As early as 1954, the Court applied the doctrine of primary
jurisdiction under the following terms:
6. In the fifties, the Court taking cognizance of the move to vest
jurisdiction in administrative commissions and boards the power to
resolve specialized disputes xxx ruled that Congress in requiring
the Industrial Court's intervention in the resolution of labor-
management controversies xxx meant such jurisdiction to be
exclusive, although it did not so expressly state in the law. The
Court held that under the "sense-making and expeditious doctrine
of primary jurisdiction ... the courts cannot or will not determine a
controversy involving a question which is within the jurisdiction of
an administrative tribunal, where the question demands the
exercise of sound administrative discretion requiring the special
knowledge, experience, and services of the administrative tribunal
to determine technical and intricate matters of fact, and a
uniformity of ruling is essential to comply with the purposes of the
regulatory statute administered."123 (emphasis ours)
In Industrial Enterprises, Inc. v. Court of Appeals,124 the Court ruled
that while an action for rescission of a contract between coal
developers appears to be an action cognizable by regular courts, the
trial court remains to be without jurisdiction to entertain the suit
since the contract sought to be rescinded is "inextricably tied up
with the right to develop coal-bearing lands and the determination
of whether or not the reversion of the coal operating contract over
the subject coal blocks to [the plaintiff] would be in line with the
country’s national program and objective on coal-development and
over-all coal-supply-demand balance." It then applied the doctrine
of primary jurisdiction –
In recent years, it has been the jurisprudential trend to apply the
doctrine of primary jurisdiction in many cases involving matters
that demand the special competence of administrative agencies. It
may occur that the Court has jurisdiction to take cognizance of a
particular case, which means that the matter involved is also
judicial in character. However, if the case is such that its
determination requires the expertise, specialized skills and
knowledge of the proper administrative bodies because technical
matters or intricate questions of facts are involved, then relief must
first be obtained in an administrative proceeding before a remedy
will be supplied by the courts even though the matter is within the
proper jurisdiction of a court. This is the doctrine of primary
jurisdiction. It applies "where a claim is originally cognizable in
the courts, and comes into play whenever enforcement of the claim
requires the resolution of issues which, under a regulatory scheme,
have been placed within the special competence of an
administrative body."
Clearly, the doctrine of primary jurisdiction finds application in
this case since the question of what coal areas should be exploited
and developed and which entity should be granted coal operating
contracts over said areas involves a technical determination by the
Bureau of Energy Development as the administrative agency in
possession of the specialized expertise to act on the matter. The
Trial Court does not have the competence to decide matters
concerning activities relative to the exploration, exploitation,
development and extraction of mineral resources like coal. These
issues preclude an initial judicial determination. [emphases ours]
The absence of any express or implied statutory power to
adjudicate conflicting claims of ownership or entitlement to the
proceeds of its certificates of indebtedness finds complement in the
similar absence of any technical matter that would call for the
BSP’s special expertise or competence.125 In fact, what the PDB’s
petitions bear out is essentially the nature of the transaction it had
with the subsequent transferees of the subject CB bills (BOC and
Bancap) and not any matter more appropriate for special
determination by the BSP or any administrative agency.
In a similar vein, it is well-settled that the interpretation given to a
rule or regulation by those charged with its execution is entitled to
the greatest weight by the courts construing such rule or
regulation.126 While there are exceptions127 to this rule, the PDB has
not convinced us that a departure is warranted in this case. Given
the non-applicability of the doctrine of primary jurisdiction, the
BSP’s own position, in light of Circular No. 769-80, deserves
respect from the Court.
Ordinarily, cases involving the application of doctrine of primary
jurisdiction are initiated by an action invoking the jurisdiction of a
court or administrative agency to resolve the substantive legal
conflict between the parties. In this sense, the present case is quite
unique since the court’s jurisdiction was, originally, invoked to
compel an administrative agency (the BSP) to resolve the legal
conflict of ownership over the CB bills - instead of obtaining a
judicial determination of the same dispute.
The remedy of interpleader
Based on the unique factual premise of the present case, the RTC
acted correctly in initially assuming jurisdiction over the PDB’s
petition for mandamus, prohibition and injunction.128 While the
RTC agreed (albeit erroneously) with the PDB’s view (that the BSP
has jurisdiction), it, however, dismissed not only the BOC’s/the
BSP’s counterclaims but the PDB’s petition itself as well, on the
ground that it lacks jurisdiction.
This is plain error.
Not only the parties themselves, but more so the courts, are bound
by the rule on non-waiver of jurisdiction.129believes that
jurisdiction over the BOC’s counterclaims and the BSP’s
counterclaim/crossclaim for interpleader calls for the application of
the doctrine of primary jurisdiction, the allowance of the PDB’s
petition even becomes imperative because courts may raise the
issue of primary jurisdiction sua sponte.130
Of the three possible options available to the RTC, the adoption of
either of these two would lead the trial court into serious legal
error: first, if it granted the PDB’s petition, its decision would have
to be set aside on appeal because the BSP has no jurisdiction as
previously discussed; and second when it dismissed the PDB’s
petitions and the BOC’s counterclaims on the ground that it lacks
jurisdiction, the trial court seriously erred because precisely, the
resolution of the conflicting claims over the CB bills falls within its
general jurisdiction.
Without emasculating its jurisdiction, the RTC could have properly
dismissed the PDB’s petition but on the ground that mandamus
does not lie against the BSP; but even this correct alternative is no
longer plausible since the BSP, as a respondent below, already
properly brought before the RTC the remaining conflicting claims
over the subject CB bills by way of a counterclaim/crossclaim for
interpleader. Section 1, Rule 62 of the Rules of Court provides
when an interpleader is proper:
SECTION 1. When interpleader proper. – Whenever conflicting
claims upon the same subject matter are or may be made against a
person who claims no interest whatever in the subject matter, or an
interest which in whole or in part is not disputed by the claimants,
he may bring an action against the conflicting claimants to compel
them to interplead and litigate their several claims among
themselves.
The remedy of an action of interpleader131 is designed to protect a
person against double vexation in respect of a single liability. 7 It
requires, as an indispensable requisite, that conflicting claims upon
the same subject matter are or may be made against the stakeholder
(the possessor of the subject matter) who claims no interest
whatever in the subject matter or an interest which in whole or in
part is not disputed by the claimants.132
Through this remedy, the stakeholder can join all competing
claimants in a single proceeding to determine conflicting claims
without exposing the stakeholder to the possibility of having to pay
more than once on a single liability.133
When the court orders that the claimants litigate among
themselves, in reality a new action arises, 134 where the claims of the
interpleaders themselves are brought to the fore, the stakeholder as
plaintiff is relegated merely to the role of initiating the suit. In
short, the remedy of interpleader, when proper, merely provides an
avenue for the conflicting claims on the same subject matter to be
threshed out in an action. Section 2 of Rule 62 provides:
SEC. 2. Order. – Upon the filing of the complaint, the court shall
issue an order requiring the conflicting claimants to interplead with
one another. If the interests of justice so require, the court may
35
direct in such order that the subject matter be paid or delivered to
the court.
This is precisely what the RTC did by granting the BSP’s motion to
interplead. The PDB itself "agreed that the various claimants
should now interplead." Thus, the PDB and the BOC subsequently
entered into two separate escrow agreements, covering the CB
bills, and submitted them to the RTC for approval.
In granting the BSP’s motion, the RTC acted on the correct premise
that it has jurisdiction to resolve the parties’ conflicting claims over
the CB bills - consistent with the rules and the parties’ conduct -
and accordingly required the BOC to amend its answer and for the
PDB to comment thereon. Suddenly, however, the PDB made an
about-face and questioned the jurisdiction of the RTC. Swayed by
the PDB’s argument, the RTC dismissed even the PDB’s petition -
which means that it did not actually compel the BSP to resolve the
BOC’s and the PDB’s claims.
Without the motion to interplead and the order granting it, the RTC
could only dismiss the PDB’s petition since it is the RTC which has
jurisdiction to resolve the parties’ conflicting claims – not the BSP.
Given that the motion to interplead has been actually filed, the
RTC could not have really granted the relief originally sought in
the PDB’s petition since the RTC’s order granting the BSP’s
motion to interplead - to which the PDB in fact acquiesced into -
effectively resulted in the dismissal of the PDB’s petition. This is
not altered by the fact that the PDB additionally prayed in its
petition for damages, attorney’s fees and costs of suit "against the
public respondents" because the grant of the order to interplead
effectively sustained the propriety of the BSP’s resort to this
procedural device.
Interpleader
1. as a special civil action
What is quite unique in this case is that the BSP did not initiate the
interpleader suit through an original complaint but through its
Answer. This circumstance becomes understandable if it is
considered that insofar as the BSP is concerned, the PDB does not
possess any right to have its claim recorded in the BSP’s books;
consequently, the PDB cannot properly be considered even as a
potential claimant to the proceeds of the CB bills upon maturity.
Thus, the interpleader was only an alternative position, made only
in the BSP’s Answer.135
The remedy of interpleader, as a special civil action, is primarily
governed by the specific provisions in Rule 62 of the Rules of
Court and secondarily by the provisions applicable to ordinary civil
actions.136 Indeed, Rule 62 does not expressly authorize the filing of
a complaint-in-interpleader as part of, although separate and
independent from, the answer. Similarly, Section 5, Rule 6, in
relation to Section 1, Rule 9 of the Rules of Court137 does not
include a complaint-in-interpleader as a claim, 138 a form of
defense,139 or as an objection that a defendant may be allowed to
put up in his answer or in a motion to dismiss. This does not mean,
however, that the BSP’s "counter-complaint/cross-claim for
interpleader" runs counter to general procedures.
Apart from a pleading,140 the rules141 allow a party to seek an
affirmative relief from the court through the procedural device of a
motion. While captioned "Answer with counter complaint/cross-
claim for interpleader," the RTC understood this as in the nature of
a motion,142 seeking relief which essentially consists in an order for
the conflicting claimants to litigate with each other so that
"payment is made to the rightful or legitimate owner" 143 of the
subject CB bills.
The rules define a "civil action" as "one by which a party sues
another for the enforcement or protection of a right, or the
prevention or redress of a wrong." Interpleader may be considered
as a stakeholder’s remedy to prevent a wrong, that is, from making
payment to one not entitled to it, thereby rendering itself vulnerable
to lawsuit/s from those legally entitled to payment.
Interpleader is a civil action made special by the existence of
particular rules to govern the uniqueness of its application and
operation. Under Section 2, Rule 6 of the Rules of Court,
governing ordinary civil actions, a party’s claim is asserted "in a
complaint, counterclaim, cross-claim, third (fourth, etc.)-party
complaint, or complaint-in-intervention." In an interpleader suit,
however, a claim is not required to be contained in any of these
pleadings but in the answer-(of the conflicting claimants)-in-
interpleader. This claim is different from the counter-claim (or
cross-claim, third party-complaint) which is separately allowed
under Section 5, par. 2 of Rule 62.
2. the payment of docket fees covering BOC’s counterclaim
The PDB argues that, even assuming that the RTC has jurisdiction
over the issue of ownership of the CB bills, the BOC’s failure to
pay the appropriate docket fees prevents the RTC from acquiring
jurisdiction over the BOC’s "counterclaims."
We disagree with the PDB.
To reiterate and recall, the order granting the "PDB’s motion to
interplead," already resulted in the dismissal of the PDB’s petition.
The same order required the BOC to amend its answer and for the
conflicting claimants to comment, presumably to conform to the
nature of an answer-in interpleader. Perhaps, by reason of the
BOC’s denomination of its claim as a "compulsory counterclaim"
and the PDB’s failure to fully appreciate the RTC’s order granting
the "BSP’s motion for interpleader" (with the PDB’s conformity),
the PDB mistakenly treated the BOC’s claim as a "permissive
counterclaim" which necessitates the payment of docket fees.
As the preceding discussions would show, however, the BOC’s
"claim" - i.e., its assertion of ownership over the CB bills – is in
reality just that, a "claim" against the stakeholder and not as a
"counterclaim,"144 whether compulsory145or permissive. It is only
the BOC’s alternative prayer (for the PDB to deliver to the BOC,
as the buyer in the April 15 transaction and the ultimate successor-
in-interest of the buyer in the April 19 transaction, either the
original subjects of the sales or the value thereof plus whatever
income that may have been earned pendente lite) and its prayer for
damages that are obviously compulsory counterclaims against the
PDB and, therefore, does not require payment of docket fees. 146
The PDB takes a contrary position through its insistence that a
compulsory counterclaim should be one where the presence of
third parties, of whom the court cannot acquire jurisdiction, is not
required. It reasons out that since the RCBC and All Asia (the
intervening holders of the CB bills) have already been dropped
from the case, then the BOC’s counterclaim must only be
permissive in nature and the BOC should have paid the correct
docket fees.
We see no reason to belabor this claim. Even if we gloss over the
PDB’s own conformity to the dropping of these entities as parties,
the BOC correctly argues that a remedy is provided under the
Rules. Section 12, Rule 6 of the Rules of Court reads:
SEC. 12. Bringing new parties. – When the presence of parties
other than those to the original action is required for the granting of
complete relief in the determination of a counterclaim or cross-
claim, the court shall order them to be brought in as defendants, if
jurisdiction over them can be obtained.
Even then, the strict characterization of the BOC’s counterclaim is
no longer material in disposing of the PDB’s argument based on
non-payment of docket fees.
When an action is filed in court, the complaint must be
accompanied by the payment of the requisite docket and filing fees
by the party seeking affirmative relief from the court. It is the filing
of the complaint or appropriate initiatory pleading, accompanied by
the payment of the prescribed docket fee, that vests a trial court
with jurisdiction over the claim or the nature of the
action.147 However, the non-payment of the docket fee at the time of
filing does not automatically cause the dismissal of the case, so
long as the fee is paid within the applicable prescriptive or
reglementary period, especially when the claimant demonstrates a
willingness to abide by the rules prescribing such payment. 148
In the present case, considering the lack of a clear guideline on the
payment of docket fee by the claimants in an interpleader suit,
compounded by the unusual manner in which the interpleader suit
was initiated and the circumstances surrounding it, we surely
cannot deduce from the BOC’s mere failure to specify in its prayer
the total amount of the CB bills it lays claim to (or the value of the
subjects of the sales in the April 15 and April 19 transactions, in its
36
alternative prayer) an intention to defraud the government that
would warrant the dismissal of its claim.149
At any rate, regardless of the nature of the BOC’s "counterclaims,"
for purposes of payment of filing fees, both the BOC and the PDB,
properly as defendants-in-interpleader, must be assessed the
payment of the correct docket fee arising from their respective
claims. The seminal case of Sun Insurance Office, Ltd. v. Judge
Asuncion150 provides us guidance in the payment of docket fees, to
wit:
1. x x x Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow
payment of the fee within a reasonable time but in no case beyond
the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party
claims and similar pleadings, which shall not be considered filed
until and unless the filing fee prescribed therefor is paid. The court
may also allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary
period. [underscoring ours]
This must be the rule considering that Section 7, Rule 62 of which
reads:
SEC. 7. Docket and other lawful fees, costs and litigation expenses
as liens. – The docket and other lawful fees paid by the party who
filed a complaint under this Rule, as well as the costs and litigation
expenses, shall constitute a lien or charge upon the subject matter
of the action, unless the court shall order otherwise.
only pertain to the docket and lawful fees to be paid by the one
who initiated the interpleader suit, and who, under the Rules,
actually "claims no interest whatever in the subject matter." By
constituting a lien on the subject matter of the action, Section 7 in
effect only aims to actually compensate the complainant-in-
interpleader, who happens to be the stakeholder unfortunate
enough to get caught in a legal crossfire between two or more
conflicting claimants, for the faultless trouble it found itself into.
Since the defendants-in-interpleader are actually the ones who
make a claim - only that it was extraordinarily done through the
procedural device of interpleader - then to them devolves the duty
to pay the docket fees prescribed under Rule 141 of the Rules of
Court, as amended.151
The importance of paying the correct amount of docket fee cannot
be overemphasized:
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 pauper-litigant.152
WHEREFORE, premises considered the consolidated PETITIONS
are GRANTED. The Planters Development Bank is hereby
REQUIRED to file with the Regional Trial Court its comment or
answer-in-interpleader to Bank of Commerce’s Amended
Consolidated Answer with Compulsory Counterclaim, as
previously ordered by the Regional Trial Court. The Regional Trial
Court of Makati City, Branch 143, is hereby ORDERED to assess
the docket fees due from Planters Development Bank and Bank of
Commerce and order their payment, and to resolve with
DELIBERATE DISPATCH the parties’ conflicting claims of
ownership over the proceeds of the Central Bank bills.
The Clerk of Court of the Regional Trial Court of Makati City,
Branch 143, or his duly authorized representative is hereby
ORDERED to assess and collect the appropriate amount of docket
fees separately due the Bank of Commerce and Planters
Development Bank as conflicting claimants in Bangko Sentral ng
Pilipinas’ interpleader suit, in accordance with this decision.
SO ORDERED.
SUBHASH C. PASRICHA and G.R. No. 136409
JOSEPHINE A. PASRICHA,
Petitioners, Present:
YNARES-
SANTIAGO, J.,
 - versus - Chairperson, Effective when tenants vacate said
QUISUMBING,* premises P10,000.00 with an increment of 10%
AUSTRIA- every two years.[7]
MARTINEZ,
CHICO-NAZARIO, Petitioners were, likewise, required to pay for the cost of electric
DON LUIS DISON REALTY, INC., and consumption, water bills and the use of telephone cables. [8]
Respondent. NACHURA, JJ.
. The lease of Rooms 36, 37 and 38 did not materialize leaving only
Rooms 22, 24, 32, 33, 34 and 35 as subjects of the lease contracts.
[9]
Promulgated: While the contracts were in effect, petitioners dealt with Francis
Pacheco (Pacheco), then General Manager of private
March 14, 2008 respondent. Thereafter, Pacheco was replaced by Roswinda
Bautista (Ms. Bautista).[10] Petitioners religiously paid the monthly
x------------------------------------------------------------------------------------x rentals until May 1992.[11] After that, however, despite repeated
demands, petitioners continuously refused to pay the stipulated
rent. Consequently, respondent was constrained to refer the matter
DECISION to its lawyer who, in turn, made a final demand on petitioners for
the payment of the accrued rentals amounting to P916,585.58.
[12]
NACHURA, J.: Because petitioners still refused to comply, a complaint for
ejectment was filed by private respondent through its
This is a petition for review on certiorari under Rule 45 representative, Ms. Bautista, before the Metropolitan Trial Court
of the Rules of Court seeking the reversal of the Decision [1] of the (MeTC) of Manila.[13] The case was raffled to Branch XIX and was
Court of Appeals (CA) dated May 26, 1998 and its docketed as Civil Case No. 143058-CV.
Resolution[2] dated December 10, 1998in CA-G.R. SP No. 37739
dismissing the petition filed by petitioners Josephine and Subhash Petitioners admitted their failure to pay the stipulated rent for the
Pasricha. leased premises starting July until November 1992, but claimed
that such refusal was justified because of the internal squabble in
The facts of the case, as culled from the records, are as respondent company as to the person authorized to receive
follows: payment.[14] To further justify their non-payment of rent, petitioners
Respondent Don Luis Dison Realty, Inc. and petitioners alleged that they were prevented from using the units (rooms)
executed two Contracts of Lease [3] whereby the former, as lessor, subject matter of the lease contract, except Room 35.Petitioners
agreed to lease to the latter Units 22, 24, 32, 33, 34, 35, 36, 37 and eventually paid their monthly rent for December 1992 in the
38 of the San Luis Building, located at 1006 M.Y. Orosa cor. T.M. amount of P30,000.00, and claimed that respondent waived its
Kalaw Streets, Ermita, Manila. Petitioners, in turn, agreed to pay right to collect the rents for the months of July to November 1992
monthly rentals, as follows: since petitioners were prevented from using Rooms 22, 24, 32, 33,
and 34.[15] However, they again withheld payment of rents starting
For Rooms 32/35: January 1993 because of respondents refusal to turn over Rooms
36, 37 and 38.[16] To show good faith and willingness to pay the
From March 1, 1991 to August 31, rents, petitioners alleged that they prepared the check vouchers for
1991 P5,000.00/P10,000.00 their monthly rentals from January 1993 to January 1994.
[17]
From September 1, 1991 to February 29, Petitioners further averred in their Amended Answer [18] that the
1992 P5,500.00/P11,000.00 complaint for ejectment was prematurely filed, as the controversy
From March 1, 1992 to February 28, was not referred to the barangay for conciliation.
1993 P6,050.00/P12,100.00
From March 1, 1993 to February 28, For failure of the parties to reach an amicable settlement, the pre-
1994 P6,655.00/P13,310.00 trial conference was terminated. Thereafter, they submitted their
From March 1, 1994 to February 28, respective position papers.
1995 P7,320.50/P14,641.00
From March 1, 1995 to February 28, On November 24, 1994, the MeTC rendered a Decision dismissing
1996 P8,052.55/P16,105.10 the complaint for ejectment.[19] It considered petitioners non-
From March 1, 1996 to February 29, payment of rentals as unjustified. The court held that mere
1997 P8,857.81/P17,715.61 willingness to pay the rent did not amount to payment of the
From March 1, 1997 to February 28, obligation; petitioners should have deposited their payment in the
1998 P9,743.59/P19,487.17 name of respondent company. On the matter of possession of the
From March 1, 1998 to February 28, subject premises, the court did not give credence to petitioners
1999 P10,717.95/P21,435.89 claim that private respondent failed to turn over possession of the
From March 1, 1999 to February 28, premises. The court, however, dismissed the complaint because of
2000 P11,789.75/P23,579.48[4] Ms. Bautistas alleged lack of authority to sue on behalf of the
corporation.
For Rooms 22 and 24:
Deciding the case on appeal, the Regional Trial Court (RTC)
Effective July 1, 1992 P10,000.00 with an of Manila, Branch 1, in Civil Case No. 94-72515, reversed and set
increment of 10% every two years.[5] aside the MeTC Decision in this wise:

For Rooms 33 and 34: WHEREFORE, the appealed decision is

hereby reversed and set aside and another one
Effective April 1, 1992 P5,000.00 with an is rendered ordering defendants-appellees and
increment of 10% every two years.[6] all persons claiming rights under them, as
follows:
For Rooms 36, 37 and 38:

37
 (1) to vacate the leased premised
(sic) and restore possession
thereof to plaintiff-appellant;
(2) to pay plaintiff-appellant the
sum of P967,915.80
representing the accrued rents
in arrears as of November
1993, and the rents on the
leased premises for the
succeeding months in the
amounts stated in paragraph 5
of the complaint until fully
paid; and
(3) to pay an additional sum
equivalent to 25% of the rent
accounts as and for attorneys
fees plus the costs of this suit.
SO ORDERED.[20]
The court adopted the MeTCs finding on petitioners unjustified
refusal to pay the rent, which is a valid ground for ejectment. It,
however, faulted the MeTC in dismissing the case on the ground of
lack of capacity to sue.Instead, it upheld Ms. Bautistas authority to
represent respondent notwithstanding the absence of a board
resolution to that effect, since her authority was implied from her
power as a general manager/treasurer of the company. [21]
Aggrieved, petitioners elevated the matter to the Court of Appeals
in a petition for review on certiorari.[22] On March 18, 1998,
petitioners filed an Omnibus Motion [23] to cite Ms. Bautista for
contempt; to strike down the MeTC and RTC Decisions as legal
nullities; and to conduct hearings and ocular inspections or
delegate the reception of evidence. Without resolving the aforesaid
motion, on May 26, 1998, the CA affirmed [24] the RTC Decision but
deleted the award of attorneys fees.[25]
Petitioners moved for the reconsideration of the aforesaid
decision.[26] Thereafter, they filed several motions asking the
Honorable Justice Ruben T. Reyes to inhibit from further
proceeding with the case allegedly because of his close association
with Ms. Bautistas uncle-in-law.[27]
In a Resolution[28] dated December 10, 1998, the CA denied the
motions for lack of merit. The appellate court considered said
motions as repetitive of their previous arguments, irrelevant and
obviously dilatory.[29] As to the motion for inhibition of the
Honorable Justice Reyes, the same was denied, as the appellate
court justice stressed that the decision and the resolution were not
affected by extraneous matters.[30] Lastly, the appellate court
granted respondents motion for execution and directed the RTC to
issue a new writ of execution of its decision, with the exception of
the award of attorneys fees which the CA deleted. [31]
Petitioners now come before this Court in this petition for review
on certiorari raising the following issues:
I.
Whether this ejectment suit should
be dismissed and whether petitioners are
entitled to damages for the unauthorized and
malicious filing by Rosario (sic) Bautista of
this ejectment case, it being clear that
[Roswinda] whether as general manager or by
virtue of her subsequent designation by the
Board of Directors as the corporations
attorney-in-fact had no legal capacity to
institute the ejectment suit, independently of
whether Director Pacanas Order setting aside
38
the SEC revocation Order is a mere scrap of
paper.
II.
Whether the RTCs and the Honorable Court of
Appeals failure and refusal to resolve the most
fundamental factual issues in the instant
ejectment case render said decisions void on
their face by reason of the complete
abdication by the RTC and the Honorable
Justice Ruben Reyes of their constitutional
duty not only to clearly and distinctly state the
facts and the law on which a decision is
based but also to resolve the decisive factual
issues in any given case.
III.
Whether the (1) failure and refusal of
Honorable Justice Ruben Reyes to inhibit
himself, despite his admission by reason of his
silence of petitioners accusation that the said
Justice enjoyed a $7,000.00 scholarship grant
courtesy of the uncle-in-law of respondent
corporations purported general manager and
(2), worse, his act of ruling against the
petitioners and in favor of the respondent
corporation constitute an unconstitutional
deprivation of petitioners property without due
process of law.[32]
In addition to Ms. Bautistas lack of capacity to sue, petitioners
insist that respondent company has no standing to sue as a juridical
person in view of the suspension and eventual revocation of its
certificate of registration.[33] They likewise question the factual
findings of the court on the bases of their ejectment from the
subject premises. Specifically, they fault the appellate court for not
finding that: 1) their non-payment of rentals was justified; 2) they
were deprived of possession of all the units subject of the lease
contract except Room 35; and 3) respondent violated the terms of
the contract by its continued refusal to turn over possession of
Rooms 36, 37 and 38. Petitioners further prayed that a Temporary
Restraining Order (TRO) be issued enjoining the CA from
enforcing its Resolution directing the issuance of a Writ of
Execution. Thus, in a Resolution[34] dated January 18, 1999, this
Court directed the parties to maintain the status quo effective
immediately until further orders.
The petition lacks merit.
We uphold the capacity of respondent company to institute the
ejectment case. Although the Securities and Exchange Commission
(SEC) suspended and eventually revoked respondents certificate of
registration on February 16, 1995, records show that it instituted
the action for ejectment on December 15, 1993. Accordingly, when
the case was commenced, its registration was not yet revoked.
[35]
Besides, as correctly held by the appellate court, the SEC later
set aside its earlier orders of suspension and revocation of
respondents certificate, rendering the issue moot and academic. [36]
We likewise affirm Ms. Bautistas capacity to sue on behalf of the
company despite lack of proof of authority to so represent it. A
corporation has no powers except those expressly conferred on it
by the Corporation Code and those that are implied from or are
incidental to its existence. In turn, a corporation exercises said
powers through its board of directors and/or its duly authorized
officers and agents. Physical acts, like the signing of documents,
can be performed only by natural persons duly authorized for the
purpose by corporate by-laws or by a specific act of the board of
directors.[37] Thus, any person suing on behalf of the corporation
should present proof of such authority. Although Ms. Bautista
initially failed to show that she had the capacity to sign the
verification and institute the ejectment case on behalf of the
company, when confronted with such question, she immediately
presented the Secretarys Certificate[38] confirming her authority to
represent the company.
There is ample jurisprudence holding that subsequent
and substantial compliance may call for the relaxation of the rules
of procedure in the interest of justice. [39] In Novelty Phils., Inc. v.
Court of Appeals,[40] the Court faulted the appellate court for
dismissing a petition solely on petitioners failure to timely submit
proof of authority to sue on behalf of the corporation. In Pfizer,
Inc. v. Galan,[41] we upheld the sufficiency of a petition verified by
an employment specialist despite the total absence of a board
resolution authorizing her to act for and on behalf of the
corporation. Lastly, in China Banking Corporation v. Mondragon
International Philippines, Inc,[42] we relaxed the rules of procedure
because the corporation ratified the managers status as an
authorized signatory. In all of the above cases, we brushed aside
technicalities in the interest of justice. This is not to say that we
disregard the requirement of prior authority to act in the name of a
corporation. The relaxation of the rules applies only to highly
meritorious cases, and when there is substantial compliance. While
it is true that rules of procedure are intended to promote rather than
frustrate the ends of justice, and while the swift unclogging of
court dockets is a laudable objective, we should not insist on strict
adherence to the rules at the expense of substantial justice.
[43]
Technical and procedural rules are intended to help secure, not
suppress, the cause of justice; and a deviation from the rigid
enforcement of the rules may be allowed to attain that prime
objective, for, after all, the dispensation of justice is the core reason
for the existence of courts.[44]
As to the denial of the motion to inhibit Justice Reyes, we find the
same to be in order. First, the motion to inhibit came after the
appellate court rendered the assailed decision, that is, after Justice
Reyes had already rendered his opinion on the merits of the case. It
is settled that a motion to inhibit shall be denied if filed after a
member of the court had already given an opinion on the merits of
the case, the rationale being that a litigant cannot be permitted to
speculate on the action of the court x x x (only to) raise an
objection of this sort after the decision has been rendered.
[45]
Second, it is settled that mere suspicion that a judge is partial to
one of the parties is not enough; there should be evidence to
substantiate the suspicion. Bias and prejudice cannot be presumed,
especially when weighed against a judges sacred pledge under his
oath of office to administer justice without regard for any person
and to do right equally to the poor and the rich. There must be a
showing of bias and prejudice stemming from an extrajudicial
source, resulting in an opinion on the merits based on something
other than what the judge learned from his participation in the case.
[46]
We would like to reiterate, at this point, the policy of the Court
not to tolerate acts of litigants who, for just about any conceivable
reason, seek to disqualify a judge (or justice) for their own
purpose, under a plea of bias, hostility, prejudice or prejudgment. [47]
We now come to the more substantive issue of whether or not the
petitioners may be validly ejected from the leased premises.
Unlawful detainer cases are summary in nature. In such cases, the
elements to be proved and resolved are the fact of lease and the
expiration or violation of its terms. [48] Specifically, the essential
requisites of unlawful detainer are: 1) the fact of lease by virtue of
a contract, express or implied; 2) the expiration or termination of
the possessors right to hold possession; 3) withholding by the
lessee of possession of the land or building after the expiration or
termination of the right to possess; 4) letter of demand upon lessee
to pay the rental or comply with the terms of the lease and vacate
39
the premises; and 5) the filing of the action within one year from
the date of the last demand received by the defendant. [49]
It is undisputed that petitioners and respondent entered into two
separate contracts of lease involving nine (9) rooms of
the San Luis Building. Records, likewise, show that respondent
repeatedly demanded that petitioners vacate the premises, but the
latter refused to heed the demand; thus, they remained in
possession of the premises. The only contentious issue is whether
there was indeed a violation of the terms of the contract: on the part
of petitioners, whether they failed to pay the stipulated rent without
justifiable cause; while on the part of respondent, whether it
prevented petitioners from occupying the leased premises except
Room 35.
This issue involves questions of fact, the resolution of which
requires the evaluation of the evidence presented. The MeTC, the
RTC and the CA all found that petitioners failed to perform their
obligation to pay the stipulated rent. It is settled doctrine that in a
civil case, the conclusions of fact of the trial court, especially when
affirmed by the Court of Appeals, are final and conclusive, and
cannot be reviewed on appeal by the Supreme Court. [50]Albeit the
rule admits of exceptions, not one of them obtains in this case. [51]
To settle this issue once and for all, we deem it proper to assess the
array of factual findings supporting the courts conclusion.
The evidence of petitioners non-payment of the
stipulated rent is overwhelming. Petitioners, however, claim that
such non-payment is justified by the following: 1) the refusal of
respondent to allow petitioners to use the leased properties, except
room 35; 2) respondents refusal to turn over Rooms 36, 37 and 38;
and 3) respondents refusal to accept payment tendered by
petitioners.
Petitioners justifications are belied by the evidence on record. As
correctly held by the CA, petitioners communications to
respondent prior to the filing of the complaint never mentioned
their alleged inability to use the rooms. [52] What they pointed out in
their letters is that they did not know to whom payment should be
made, whether to Ms. Bautista or to Pacheco. [53] In their July 26
and October 30, 1993 letters, petitioners only questioned the
method of computing their electric billings without, however,
raising a complaint about their failure to use the rooms.
[54]
Although petitioners stated in their December 30, 1993 letter
that respondent failed to fulfill its part of the contract, [55] nowhere
did they specifically refer to their inability to use the leased
rooms. Besides, at that time, they were already in default on their
rentals for more than a year.
If it were true that they were allowed to use only one of
the nine (9) rooms subject of the contract of lease, and considering
that the rooms were intended for a business purpose, we cannot
understand why they did not specifically assert their right. If we
believe petitioners contention that they had been prevented from
using the rooms for more than a year before the complaint for
ejectment was filed, they should have demanded specific
performance from the lessor and commenced an action in
court. With the execution of the contract, petitioners were already
in a position to exercise their right to the use and enjoyment of the
property according to the terms of the lease contract. [56] As borne
out by the records, the fact is that respondent turned over to
petitioners the keys to the leased premises and petitioners, in fact,
renovated the rooms. Thus, they were placed in possession of the
premises and they had the right to the use and enjoyment of the
same. They, likewise, had the right to resist any act of intrusion
into their peaceful possession of the property, even as against the
lessor itself. Yet, they did not lift a finger to protect their right if,
indeed, there was a violation of the contract by the lessor.
What was, instead, clearly established by the evidence
was petitioners non-payment of rentals because ostensibly they did
not know to whom payment should be made. However, this did not
justify their failure to pay, because if such were the case, they were
not without any remedy. They should have availed of the
provisions of the Civil Code of the Philippines on the consignation
of payment and of the Rules of Court on interpleader.
Article 1256 of the Civil Code provides:
Article 1256. If the creditor to whom
tender of payment has been made refuses
without just cause to accept it, the debtor shall
be released from responsibility by the
consignation of the thing or sum due.
Consignation alone shall produce the
same effect in the following cases:
xxxx
(4) When two or more persons claim
the same right to collect;
x x x x.
Consignation shall be made by depositing the things due at the
disposal of a judicial authority, before whom the tender of payment
shall be proved in a proper case, and the announcement of the
consignation in other cases.[57]
In the instant case, consignation alone would have
produced the effect of payment of the rentals. The rationale for
consignation is to avoid the performance of an obligation becoming
more onerous to the debtor by reason of causes not imputable to
him.[58] Petitioners claim that they made a written tender of
payment and actually prepared vouchers for their monthly
rentals. But that was insufficient to constitute a valid tender of
payment. Even assuming that it was valid tender, still, it would not
constitute payment for want of consignation of the amount. Well-
settled is the rule that tender of payment must be accompanied by
consignation in order that the effects of payment may be produced.
[59]
Moreover, Section 1, Rule 62 of the Rules of Court provides:
Section 1. When interpleader proper.
Whenever conflicting claims upon the same
subject matter are or may be made against a
person who claims no interest whatever in the
subject matter, or an interest which in whole or
in part is not disputed by the claimants, he may
bring an action against the conflicting
claimants to compel them to interplead and
litigate their several claims among themselves.
Otherwise stated, an action for interpleader is proper when the
lessee does not know to whom payment of rentals should be made
due to conflicting claims on the property (or on the right to
collect).[60] The remedy is afforded not to protect a person against
double liability but to protect him against double vexation in
respect of one liability.[61]
Notably, instead of availing of the above remedies,
petitioners opted to refrain from making payments.
Neither can petitioners validly invoke the non-delivery of Rooms
36, 37 and 38 as a justification for non-payment of
rentals. Although the two contracts embraced the lease of nine (9)
rooms, the terms of the contracts - with their particular reference to
specific rooms and the monthly rental for each - easily raise the
40
inference that the parties intended the lease of each room separate
from that of the others. There is nothing in the contract which
would lead to the conclusion that the lease of one or more rooms
was to be made dependent upon the lease of all the nine (9)
rooms. Accordingly, the use of each room by the lessee gave rise to
the corresponding obligation to pay the monthly rental for the
same. Notably, respondent demanded payment of rentals only for
the rooms actually delivered to, and used by, petitioners.
It may also be mentioned that the contract specifically provides
that the lease of Rooms 36, 37 and 38 was to take effect only when
the tenants thereof would vacate the premises. Absent a clear
showing that the previous tenants had vacated the premises,
respondent had no obligation to deliver possession of the subject
rooms to petitioners. Thus, petitioners cannot use the non-delivery
of Rooms 36, 37 and 38 as an excuse for their failure to pay the
rentals due on the other rooms they occupied.
In light of the foregoing disquisition, respondent has every right to
exercise his right to eject the erring lessees. The parties contracts of
lease contain identical provisions, to wit:
In case of default by the LESSEE in the
payment of rental on the fifth (5 th) day of each
month, the amount owing shall as penalty bear
interest at the rate of FOUR percent (4%) per
month, to be paid, without prejudice to the
right of the LESSOR to terminate his contract,
enter the premises, and/or eject the LESSEE as
hereinafter set forth;[62]
Moreover, Article 1673[63] of the Civil Code gives the lessor the
right to judicially eject the lessees in case of non-payment of the
monthly rentals. A contract of lease is a consensual, bilateral,
onerous and commutative contract by which the owner temporarily
grants the use of his property to another, who undertakes to pay the
rent therefor.[64] For failure to pay the rent, petitioners have no right
to remain in the leased premises.
WHEREFORE, premises considered, the petition is DENIED and
the Status Quo Order dated January 18, 1999 is
hereby LIFTED. The Decision of the Court of Appeals dated May
26, 1998 and its Resolution dated December 10, 1998 in CA-G.R.
SP No. 37739 are AFFIRMED.
SO ORDERED.
URSULA MAGLENTE, CONSOLACION G.R. No. 148182
BERJA, MERCEDITA FERRER,
THELMA ABELLA and ANTONIO NGO,
Petitioners, Present:
PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA* and
GARCIA, JJ.
HON. PRISCILLA BALTAZAR-
PADILLA, in her capacity as the
Presiding Judge of the RTC, Manila
Branch 38, VISITACION GABELO,
ERLINDA ABELLA, PETRA PEREZ,
ERLINDA TRAQUENA, BEN CARDINAL,
EDUARDO TRAQUENA, LEOPOLDO
TRAQUENA, MARIFE TUBALAS,
ULYSIS MATEO, JOCELYN FERNANDEZ,
ALFONSO PLACIDO, LEONARDO
TRAQUENA, SUSAN RENDON and
MATEO TRINIDAD,
Respondents. Promulgated:
March 7, 2007
x---------------------------------------------
- - - - -x
DECISION
CORONA, J.:
At bar is a special civil action for certiorari under Rule 65 of the
Rules of Court assailing the order[1] of the Regional Trial Court
(RTC) of Manila, Branch 38, dated April 20, 2001, denying
petitioners motion for the issuance of a writ of possession in their
favor.
The antecedent facts follow.
On January 15, 1985, Philippine Realty Corporation (PRC), owner
of a 687.80-square meter parcel of land at 400 Solana
St., Intramuros, Manila, entered into a contract of lease for three
years with one of the petitioners, Ursula Maglente. In the contract,
it was stated that, if PRC were to sell the leased
property, Maglente would be given the first priority (right of first
refusal) to buy it. Both parties likewise agreed that the lessee was
prohibited from subleasing any portion of the property without the
consent of the lessor. However, after the execution of the lease
contract, petitioner Maglente subleased portions of the property to
respondents.
On March 9, 1987, when the lease contract was about to expire,
PRC sent a written offer to sell the leased property to Maglente. In
response, the latter intimated that she would exercise her right of
first refusal to purchase the property with co-petitioners as her co-
buyers. In February 1989, PRC received a letter from respondents
expressing their desire to purchase the same property.
On February 23, 1989, PRC filed a complaint for interpleader[2] in
the RTC against both petitioners and respondents so they could
litigate among themselves on who had the right to purchase the
property.[3] On March 11, 1991, the trial court ruled in favor of
petitioners and declared them as the rightful parties to
purchase PRCs property. The dispositive portion of the decision
read:
WHEREFORE, premises considered, judgment is hereby rendered
as follows:
1. Declaring [petitioners]
Ursula Maglente, Consolacion Berja, Mercedita Ferrer,
Thelma Abella and Antonio Ngo as the rightful [parties] to
purchase the land in controversy; and
2. Ordering[PRC] to execute the corresponding contract of
sale/contract to sell in favor of [petitioners] aforementioned in
accordance with this Decision within 30 days from notice hereof. [4]
Dissatisfied with the above decision, respondents appealed to the
Court of Appeals (CA) which affirmed the judgment of the trial
court.
Undaunted, respondents found their way to this Court, assigning as
sole error the ruling of the CA upholding the right of petitioners.
The case was docketed as G.R. No. 111743.
On October 8, 1999, we affirmed the decision of the CA and
denied respondents petition for lack of merit.[5] We declared:
In the case under consideration, the contract of sale was already
perfected PRC offered the subject lot for sale to
[petitioners] Maglente and her group Respondent Maglente and her
group accepted such offermanifesting their intention to purchase
41
the property as provided for under the lease contract. Thus, there
was already an offer and acceptance giving rise to a valid contract.
As a matter of fact, [petitioners] have already completed payment
of their downpayment of P100,000. Therefore, as borne by
evidence on record, the requisites under Article 1318 of the Civil
Code for a perfected contract have been met.
On April 11, 2000,[6] we ordered entry of judgment.
On motion of petitioners, a writ of execution was later issued by
the RTC directing PRC to execute the contract of sale/contract to
sell in favor of petitioners.
As ordered, PRC executed a deed of sale in favor of petitioners.
The latter then filed a motion for the issuance of a writ of
possession but respondents (who were occupying the property)
objected on the ground that the trial courts decision on
the interpleader case merely resolved petitioners right to purchase
the leased property but did not declare them as the owners entitled
to possession. The trial court sustained respondents argument and
denied petitioners motion.[7]
Petitioners are now before us via this special civil action for
certiorari raising this sole query: whether or not they are entitled to
a writ of possession after being adjudged (in the interpleader case)
as the proper parties to buy the subject property, considering that a
deed of sale has already been executed in their favor. [8]
In this petition for certiorari under Rule 65, petitioners assail the
Manila RTCs denial of their motion for the issuance of the writ of
possession. However, they do not allege that the trial court was
without jurisdiction or exceeded its jurisdiction, or that it
committed grave abuse of discretion in denying said motion, as
required in all Rule 65 petitions.
The remedy of certiorari is limited to acts of any tribunal or board
exercising judicial functions without or in excess of jurisdiction or
with grave abuse of discretion.[9] It must be based on jurisdictional
grounds like want of jurisdiction or grave abuse of discretion;
otherwise, any error committed by it will amount to nothing more
than an error of judgment which may be questioned only on
ordinary appeal.[10]
Considering, however, that a question of law[11] is involved, that is,
whether a writ of possession should be granted to a party with the
right of first refusal in an interpleader case, we give due course to
this petition.
Indeed, should petitioners be granted the writ of possession they
seek? We rule in the negative.
A writ of possession shall issue only in the following instances: (1)
land registration proceedings; (2) extrajudicial foreclosure of
mortgage of real property; (3) judicial foreclosure of property
provided that the mortgagor has possession and no third party has
intervened, and (4) execution sales.[12] Here, petitioners seek the
writ as a consequence of the trial courts decision ordering the
execution of a contract of sale/contract to sell in their favor. The
writ does not lie in such a case.
Furthermore, the trial courts decision in the interpleader case
(affirmed by both the CA and the SC) merely resolved the question
of who, between petitioners and respondents, had the right to
purchase PRCs property. The directive was only for PRC to
execute the necessary contract in favor of petitioners as the
winning parties, nothing else. The trial courts writ of execution
read:
NOW THEREFORE, [PRC] is hereby ordered to execute a
contract of sale/contract to sell in favor of [petitioners] within
thirty (30) days from the date of execution hereof. The Branch
Sheriff shall return this Writ to the Court within thirty (30) days
from the date of receipt until the judgment is satisfied in full or
its effectivity expires. The returns of periodic reports shall set forth
the whole of the proceedings taken and shall be filed with the
Court and copies thereof promptly furnished the
parties[13] (emphasis supplied)
It was clear that, at that point, petitioners were not yet the owners
of the property. The execution of the deed of sale in their favor was
only preliminary to their eventual acquisition of the property.
[14]
Likewise, although we stated in G.R. No. 111743[15] that the
contract of sale between petitioners and PRC had already been
perfected, we refrained from declaring them the owners since,
pending the execution of the deed of sale or delivery of the
property, ownership had yet to transfer to them at that time. [16]
Thus, petitioners argument that the trial courts writ of
execution[17] in the interpleader case carried with it the corollary
right to a writ of possession is without merit. A writ of possession
complements the writ of execution only when the right of
possession or ownership has been validly determined in a case
directly relating to either.[18] The interpleader case obviously did
not delve into that issue.
Furthermore, the rule is that the enforcement of a judgment may
not vary or alter the tenor of the judgment but must strictly
conform to it.[19] It should be in harmony with the judgment that
gives it life and not exceed it.[20] We thus cannot fault the trial court
for refusing to issue a writ of possession to petitioners as its
issuance would not be in conformity with the trial courts judgment
in the interpleader case.
Finally, petitioners cannot recover possession of the property via a
mere motion. They must file the appropriate action in court against
respondents to recover possession. While this remedy can delay
their recovery, this Court cannot permit an abbreviated method
without subverting the rules and processes established for the
orderly administration of justice.
WHEREFORE, the assailed order of the Regional Trial Court of
Manila, Branch 38, is hereby AFFIRMED. Accordingly, the
petition is DISMISSED.
Costs against petitioners.
SO ORDERED.
[G.R. No. 133113. August 30, 2001]
EDGAR H. ARREZA, petitioner, vs. MONTANO M. DIAZ,
JR., respondent.
DECISION
QUISUMBING, J.:
This petition assails the decision[1] promulgated on December 24,
1997, and the resolution[2] dated March 6, 1998, by the Court of
Appeals in CA-G.R. SP No. 43895. That decision dismissed the
petition for certiorari questioning the order[3] dated February 4,
1997 of the Regional Trial Court of Makati City, Branch 59, in
Civil Case No. 96-1372, which had denied petitioners motion to
dismiss the complaint filed against him on grounds of res
adjudicata.
The factual antecedents of the present petition are culled from the
findings of the Court of Appeals.
Bliss Development Corporation is the owner of a housing unit
located at Lot 27, Block 30, New Capitol Estates I, Barangay
Matandang Balara, Quezon City. In the course of a case involving a
conflict of ownership between petitioner Edgar H. Arreza and
respondent Montano M. Diaz, Jr.,[4] docketed as Civil Case No. 94-
2086 before the Regional Trial Court of Makati, Branch 146, Bliss
Development Corporation filed a complaint for interpleader.
In a decision dated March 27, 1996, the trial court resolved the
conflict by decreeing as follows:
WHEREFORE, premises considered, the herein interpleader is
resolved in favor of defendant Edgar H. Arreza, and plaintiff Bliss
42
Development is granted cognizance of the May 6, 1991 transfer of
rights by Emiliano and Leonila Melgazo thru Manuel Melgazo, to
said defendant Edgar Arreza. The case is dismissed as against
defendant Montano M. Diaz, Jr.
The third-party complaint is likewise dismissed.
SO ORDERED.
The decision became final and was duly executed with Bliss
executing a Contract to Sell the aforementioned property to
petitioner Arreza. Respondent Diaz was constrained to deliver the
property with all its improvements to petitioner.
Thereafter respondent Diaz filed a complaint against Bliss
Development Corporation, Edgar H. Arreza, and Domingo Tapay
in the Regional Trial Court of Makati, Branch 59, docketed as Civil
Case No. 96-1372. He sought to hold Bliss Development
Corporation and petitioner Arreza liable for reimbursement to him
of P1,706,915.58 representing the cost of his acquisition and
improvements on the subject property with interest at 8% per
annum.
Petitioner Arreza filed a Motion to Dismiss the case, citing as
grounds res adjudicata or conclusiveness of the judgment in the
interpleader case as well as lack of cause of action.
In an Order dated February 4, 1997, the motion was denied for lack
of merit.
A Motion for Reconsideration filed by Arreza was likewise denied
on March 20, 1997.
On April 16, 1997, Arreza filed a petition for certiorari before the
Court of Appeals alleging that the Orders dated February 4 and
March 20, 1997, were issued against clear provisions of pertinent
laws, the Rules of Court, and established jurisprudence such that
respondent court acted without or in excess of jurisdiction, or grave
abuse of discretion amounting to lack or excess of jurisdiction.
The petition was dismissed for lack of merit. The Court of Appeals
said:
The decision invoked by the petitioner as res adjudicata resolved
only the issue of who between Edgar H. Arreza and Montano Diaz
has the better right over the property under litigation. It did not
resolve the rights and obligations of the parties.
The action filed by Montano M. Diaz against Bliss Development
Corporation, et al. seeks principally the collection of damages in
the form of the payments Diaz made to the defendant and the value
of the improvements he introduced on the property matters that
were not adjudicated upon in the previous case for interpleader.
xxx
WHEREFORE, this petition is hereby DISMISSED with costs
against the petitioner.
SO ORDERED.[5]
Petitioners motion to reconsider the decision of the Court of
Appeals was denied.[6] Hence, the present petition, where petitioner
raises the following grounds for review:
I
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC
CASE PERTAINING TO MR. DIAZS CLAIMS FOR
REIMBURSEMENT OF AMOUNTS WHICH HE ALLEGEDLY
PAID TO BLISS BY WAY OF PREMIUM OR INSTALLMENT
PAYMENTS FOR THE ACQUISITION OF THE PROPERTY
WAS ERRONEOUSLY BROUGHT AGAINST MR.
ARREZA. ALSO, SAID CLAIMS ARE BARRED BY RES
ADJUDICATA OR CONCLUSIVENESS OF A PRIOR
JUDGMENT IN THE PRIOR RTC CASE WHICH WAS
ULTIMATELY AFFIRMED BY THIS HONORABLE COURT IN
G.R. NO. 128726.
II.
THE CAUSE OF ACTION EMBODIED IN THE PRESENT RTC
CASE PERTAINING TO MR. DIAZS CLAIMS FOR
REIMBURSEMENT OF THE COST OF IMPROVEMENTS HE
ALLEGEDLY INTRODUCED TO THE PROPERTY IS
LIKEWISE BARRED BY RES ADJUDICATA OR
CONCLUSIVENESS OF A PRIOR JUDGMENT IN THE PRIOR
RTC CASE WHICH WAS ULTIMATELY AFFIRMED BY THIS
HONORABLE COURT IN G.R. NO. 128726.
III.
THE RULING IN THE PRIOR CA PETITION (CA-G.R. SP. NO.
41974) WHICH WAS ULTIMATELY AFFIRMED BY THIS
HONORABLE COURT IN G.R. NO. 128726 THAT THE
DECISION IN THE PRIOR RTC CASE SETTLED ALL CLAIMS
WHICH MESSRS. DIAZ AND ARREZA HAD AGAINST EACH
OTHER CONSTITUTES THE LAW OF THE CASE BETWEEN
THEM AND SERVES AS BAR TO THE FILING OF THE
PRESENT RTC CASE INVOLVING THE SAME CLAIMS.
IV.
IN ITS ENTIRETY, THE AMENDED COMPLAINT IN THE
PRESENT RTC CASE IS DISMISSIBLE ON THE GROUND OF
LACK OF CAUSE OF ACTION.[7]
The issue for our resolution now is whether respondent Diazs
claims for reimbursement against petitioner Arreza are barred
by res adjudicata.
The elements of res adjudicata are: (a) that the former judgment
must be final; (b) the court which rendered judgment had
jurisdiction over the parties and the subject matter; (c) it must be a
judgment on the merits; and (d) there must be between the first and
second causes of action identity of parties, subject matter, and
cause of action.[8]
Worthy of note, the prior case for interpleader filed with Branch
146 of the Regional Trial Court of Makati, Civil Case No. 94-2086,
was settled with finality with this Courts resolution in G.R. No.
128726.[9] The judgment therein is now final.
When the Regional Trial Court of Makati (Branch 146) rendered
judgment, it had priorly acquired jurisdiction over the parties and
the subject matter. Respondent, however, contends that the trial
court did not acquire jurisdiction over the property subject of the
action, as the action was instituted in Makati City while the subject
unit is situated in Quezon City.
We find, however, that in his answer to the complaint dated
October 3, 1994, respondent alleged:
20. That should the said additional provision be declared valid and
in the remote possibility that the alleged conflicting claimant is
adjudged to possess better right herein answering defendant is
asserting his right as a buyer for value and in good faith against all
persons/parties concerned.[10] (Italics supplied)
Respondent in his answer also prayed that:
D. Should the said additional provision be found valid and in the
event his co-defendant is found to possess better rights, to adjudge
him (Diaz) entitled to rights as a buyer in good faith and for value.
[11]
By asserting his right as a buyer for value and in good faith of the
subject property, and asking for relief arising therefrom, respondent
invoked the jurisdiction of the trial court. Having invoked the
jurisdiction of the Regional Trial Court of Makati (Branch 146) by
filing his answer to secure affirmative relief against petitioner,
respondent is now estopped from challenging the jurisdiction of
said court after it had decided the case against him. Surely we
cannot condone here the undesirable practice of a party submitting
his case for decision and then accepting the judgment only if
favorable, but attacking it on grounds of jurisdiction when adverse.
[12]
Respondent also claims that there is no identity of causes of action
between Civil Case No. 94-2086, the prior case, and Civil Case No.
96-1372, the present case subject of this petition, as the former
involved a complaint for interpleader while the latter now involves
an action for a sum of money and damages. He avers that a
complaint for interpleader is nothing more than the determination
of rights over the subject matter involved.
In its assailed decision, respondent Court of Appeals pointed out
that the 1997 Rules of Civil Procedure provide that in a case for
interpleader, the court shall determine the respective rights and
obligations of the parties and adjudicate their respective claims.
[13]
The appellate court noted, however, that the defendants in that
interpleader case, namely Diaz and Arreza, did not pursue the issue
of damages and reimbursement although the answer of respondent
Diaz did pray for affirmative relief arising out of the rights of a
buyer in good faith.[14]
43
Following the same tack, respondent Diaz now alleges that the
issues in the prior case, Civil Case No. 94-2086, were delimited by
the pre-trial order which did not include matters of damages and
reimbursement as an issue. He faults petitioner for not raising such
issues in the prior case, with the result that the trial court did not
resolve the rights and obligations of the parties. There being no
such resolution, no similar cause of action exists between the prior
case and the present case, according to respondent Diaz.
Respondent in effect argues that it was incumbent upon petitioner
as a party in Civil Case No. 94-2086 to put in issue respondents
demands for reimbursement. However, it was not petitioners duty
to do the lawyering for respondent. As stated by the Court of
Appeals, the court in a complaint for interpleader shall determine
the rights and obligations of the parties and adjudicate their
respective claims. Such rights, obligations and claims could only
be adjudicated if put forward by the aggrieved party in assertion of
his rights. That party in this case referred to respondent Diaz. The
second paragraph of Section 5 of Rule 62 of the 1997 Rules of
Civil Procedure provides that the parties in an interpleader action
may file counterclaims, cross-claims, third party complaints and
responsive pleadings thereto, as provided by these Rules. The
second paragraph was added to Section 5 to expressly authorize the
additional pleadings and claims enumerated therein, in the interest
of a complete adjudication of the controversy and its incidents.[15]
Pursuant to said Rules, respondent should have filed his claims
against petitioner Arreza in the interpleader action. Having asserted
his rights as a buyer in good faith in his answer, and praying relief
therefor, respondent Diaz should have crystallized his demand into
specific claims for reimbursement by petitioner Arreza. This he
failed to do. Such failure gains significance in light of our ruling
in Baclayon vs. Court of Appeals, 182 SCRA 761, 771-772 (1990),
where this Court said:
A corollary question that We might as well resolve now (although
not raised as an issue in the present petition, but conformably with
Gayos, et al. v. Gayos, et al., G.R. No. L-27812, September 26,
1975, 67 SCRA 146, that it is a cherished rule of procedure that a
court should always strive to settle the entire controversy in a
single proceeding leaving no root or branch to bear the seeds in
future litigation) is whether or not the private respondents can still
file a separate complaint against the petitioners on the ground that
they are builders in good faith and consequently, recover the value
of the improvements introduced by them on the subject lot. The
case of Heirs of Laureano Marquez v. Valencia, 99 Phil. 740,
provides the answer:
If, aside from relying solely on the deed of sale with a right to
repurchase and failure on the part of the vendors to purchase it
within the period stipulated therein, the defendant had set up an
alternative though inconsistent defense that he had inherited the
parcel of land from his late maternal grandfather and presented
evidence in support of both defenses, the overruling of the first
would not bar the determination by the court of the second. The
defendant having failed to set up such alternative defenses and
chosen or elected to rely on one only, the overruling thereof was a
complete determination of the controversy between the parties
which bars a subsequent action based upon an unpleaded defense,
or any other cause of action, except that of failure of the complaint
to state a cause of action and of lack of jurisdiction of the
Court. The determination of the issue joined by the parties
constitutes res judicata. (italics supplied)
Although the alternative defense of being builders in good faith is
only permissive, the counterclaim for reimbursement of the value
of the improvements is in the nature of a compulsory counterclaim.
Thus, the failure by the private respondents to set it up bars their
right to raise it in a subsequent litigation (Rule 9, Section 4 of the
Rules of Court). While We realize the plight of the private
respondents, the rule on compulsory counterclaim is designed to
enable the disposition of the whole controversy at one time and in
one action. The philosophy of the rule is to discourage multiplicity
of suits. (Italics supplied)
Having failed to set up his claim for reimbursement, said claim of
respondent Diaz being in the nature of a compulsory counterclaim
is now barred.[16]
In cases involving res adjudicata, the parties and the causes of
action are identical or substantially the same in the prior as well as
the subsequent action. The judgment in the first action is
conclusive as to every matter offered and received therein and as
to any other matter admissible therein and which might have been
offered for that purpose, hence said judgment is an absolute bar to
a subsequent action for the same cause.[17] The bar extends to
questions necessarily involved in an issue, and necessarily
adjudicated, or necessarily implied in the final judgment, although
no specific finding may have been made in reference thereto, and
although such matters were directly referred to in the pleadings and
were not actually or formally presented.[18] Said prior judgment is
conclusive in a subsequent suit between the same parties on the
same subject matter, and on the same cause of action, not only as to
matters which were decided in the first action, but also as to every
other matter which the parties could have properly set up in the
prior suit.[19]
In the present case, we find there is an identity of causes of action
between Civil Case No. 94-2086 and Civil Case No. 96-
1372. Respondent Diazs cause of action in the prior case, now the
crux of his present complaint against petitioner, was in the nature
of an unpleaded compulsory counterclaim, which is now
barred. There being a former final judgment on the merits in the
prior case, rendered in Civil Case No. 94-2086 by Branch 146 of
the Regional Trial Court of Makati, which acquired jurisdiction
over the same parties, the same subject property, and the same
cause of action, the present complaint of respondent herein (Diaz)
against petitioner Arreza docketed as Civil Case No. 96-1372
before the Regional Trial of Makati, Branch 59 should be
dismissed on the ground of res adjudicata.
WHEREFORE, the instant petition is GRANTED. The decision
dated December 24, 1997 and the resolution dated March 6, 1998
of the Court of Appeals in CA-G.R. SP No. 43895 are REVERSED
and SET ASIDE. Civil Case No. 96-1372 before the Regional Trial
Court of Makati City, Branch 59, is hereby ordered DISMISSED as
against herein petitioner Edgar H. Arreza. Costs against
respondent.
SO ORDERED.
G.R. No. 97547 July 29, 1994
ROLANDO T. DIWA, BLESIDA G. DIWA, petitioners,
vs.
ARNOLD L. DONATO, NAPOLEON L.
DONATO, respondents.
Jezarene C. Aquino for petitioners.
Luis B. Donato for Napoleon L. Donato.
Pedro I. Rodriguez for Arnold L. Donato.
PUNO, J.:
This is a petition for certiorari under Rule 45 of the Revised Rules
of Court from two Orders of the RTC of Tuguegarao, Cagayan, Br.
1. 1 The first, dated January 8, 1990, dismissed Civil Case No.
4117-(Tug '90) on the ground of res judicata; ;and the second,
dated January 31, 1991, denied petitioners' motion for
reconsideration of the earlier Order.
Petitioners first filed a Complaint for Interpleader And Execution
Of Registerable Deed Of Sale With Damages against respondents
docketed as Civil Case No. 3892, and raffled to Branch 4 of the
RTC of Tuguegarao, Cagayan. 2 The Complaint alleged:
1. Plaintiffs (petitioners herein) are spouses, of legal age, Filipinos
and residents of Tuguegarao, Cagayan;
2. Defendants (respondents herein) who are brothers are of legal
age; Arnold L. Donato is however a Filipino and a resident of and
with postal address at 10 Masbate Street, Quezon City while
Napoleon L. Donato is an American citizen and resident of
Tuguegarao, Cagayan;
3. DONATO ENTERPRISES COMPANY, LIMITED was a duly
constituted and registered partnership composed of only three (3)
partners, the brothers and sister, Arnold L. Donato, Napoleon L.
44
Donato and Adoracion Donato, who had equal contributions and
shares or interests therein.
4. DONATO ENTERPRISES COMPANY, LIMITED was the
registered owner per Transfer Certificate of Title No. T-16000 of a
residential-commercial lot situated in Centro, Tuguegarao,
Cagayan more particularly bounded and described as follows:
xxx xxx xxx
5. Partner Adoracion L. Donato who died single on
October 20, 1985 with neither ascendant nor descendant was
survived by the (respondents) who were her brothers;
6. The death of partner Adoracion L. Donato ipso jure dissolved the
DONATO ENTERPRISES COMPANY, LIMITED so that her one-
third (1/3) share and interest in the above-described lot devolved
upon her heir or heirs;
7. Sometime in November 1986 (respondents) jointly sold the
above-described lot to the (petitioners) for P504,000.00 Philippine
currency and accordingly delivered to the latter the said lot;
8. (Petitioners) forthwith took exclusive possession of said lot and
have been possessing it since then continuously up to the present;
9. Of the total consideration of P504,000.00 (respondent) Arnold L.
Donato already received from (petitioners) P168,000.00 on
November 19, 1986 as per xerox copy of a Receipt which he
signed and (respondent) Napoleon L. Donato also already received
from (petitioners) on June 10, 1988 the same amount of
P168,000.00 per xerox copy of a Receipt which he likewise signed,
both of which are hereto attached . . .;
10. Since November 1986 when the sale of said lot was made by
(respondents) to the (petitioners) the latter had been tendering the
payment of the balance of P168,000.00 to (respondents); the
(respondent) Arnold L. Donato wanted to get and receive the whole
balance asserting that his late sister Adoracion L. Donato inter
alia conveyed her share and interest in said lot to him which was
however denied by (respondent) Napoleon L. Donato who claimed
that being one of the two intestate heirs of deceased Adoracion L.
Donato, he is entitled to one-half of said balance which is
P84,000.00;
11. In the light of the conflicting claims of the (respondents) over
the balance of P168,000.00 and in order to finally relieve
(petitioners) of further obligation vis a vis said lot, the latter hereby
deliver and deposit said amount of money with this Honorable
Court which will determine who is/are entitled to receive it and to
dispose of it accordingly;
12. Despite the consummation of the sale of the said lot to the
(petitioners) the (respondents) have not yet executed a registerable
deed of sale to evidence the same, hence (petitioners) have a legal
right to demand the execution of the said documents;
13. In fact since June 1988, (petitioners) had been demanding of
(respondents) to execute the said registerable deed of sale with a
proposal to deposit the balance of P168,000.00 in escrow in a
commercial bank in favor of whoever would finally be judicially
declared entitled to it but although (respondent) Napoleon L.
Donato is willing, (respondent) Arnold L. Donato without just
cause refussed;
14. Since the sale of the lot to the (petitioners) in November 1986,
they intended to build a commercial building thereon with the
proceeds of a loan which they planned to secure from a banking
institution with the lot as their collateral;
15. The delay in the execution of the registerable deed of sale
necessarily delayed the issuance of a title over said lot in the names
of the (petitioners) which resulted in the delay in securing the loan
and ultimately in the construction of the said building;
16. The delay mentioned in the preceding paragraph is directly
attributable to the intransigence of (respondent) Arnold L. Donato
which caused (petitioners) to suffer damages consisting of the big
increase in the prices of construction materials and cost of labor
from their index in November 1986 and the present index which is
reasonably estimated to be P200,000.00;
17. (Petitioners) were constrained to engage the services of the
undersigned counsel for an agreed fee of P20,000.00; 3
Petitioners prayed for judgment: (1) declaring them the owners of
the lot in question; (2) ordering respondents to execute in their
favor a registerable deed of sale over the lot; (3) declaring who
is/are entitled to the P168,000.00 balance; and (4) condemning
respondent Arnold L. Donato to pay damages, attorney's fees and
costs.
The Complaint was dismissed on December 29, 1988 on the
ground that interpleader is not the proper remedy for breach of
contract. This court 4 affirmed the dismissal in a Resolution, dated
September 20, 1989.
Accordingly, on February 13, 1990, petitioners filed Civil Case No.
4117-(Tug '90) for Specific Performance (Execution of
Registerable Deed of Sale and Delivery of Certificate of Title)
With Damages. The Complaint contains basically the same
allegations and prayers as the Complaint in the interpleader case,
except for the following added allegation, viz:
That even if the transaction between (petitioners) and (respondents)
constitutes only a contract to sell the said land, still (petitioners)
who have partially complied with their obligation and are willing
to fully comply with it have the right to compel (respondents) to
perform their obligation to sell the land to them; 5
and the prayer, which reads as follows:
WHEREFORE, (petitioners) pray this Honorable Court to render
judgment:
1. Declaring (petitioners) to be the owners of the lot described
above or compelling the (respondents) to sell the lot to the former
and ordering (respondent) Arnold L. Donato to execute with his co-
(respondent) Napoleon L. Donato the registerable deed of sale over
said lot in favor of (petitioners) and to deliver to the latter the
owner's duplicate copy of Transfer Certificate of Title No. T-16000;
2. Applying the deposited amount of P168,000.00 in payment of
the balance upon the price of said land;
3. Condemning (respondent) Arnold L. Donato to pay the
(petitioners) a damage of P100,000.00 and attorney's fees of
P20,000.00 and cost of this suit;
4. Granting other proper reliefs. 6
Private respondents filed separate Answers to the second
Complaint. Their Affirmative Defenses constituting grounds for
dismissal were heard by the trial court.
On January 8, 1990, the trial court issued the first impugned Order.
It dismissed with prejudice the Complaint for specific performance.
It held, inter alia:
There is no dispute that the first case entitled Interpleader and
Execution of Registerable Deed of Sale with Damages, Civil Case
No. 3892 was upon review by the Supreme Court denied for lack
of merit.
It was held in the case of Leonor Magdangal, et al. vs. City of
Olongapo, et al., . . . "that a party cannot by varying the form of
action or adopting a different method of presenting the case, escape
the application of the rule of res judicata." This was reiterated in
the case of Filipinas Investment, et al. vs. Intermediate Appellate
Court, et al., . . . (Citations omitted.) 7
In its Order of January 31, 1991 denying petitioners' motion for
reconsideration, the same court held:
This Court made a comparison between the first civil case No.
3892 between the same parties is entitled Interpleader and
Execution of Registerable Deed of Sale with Damages while the
instant case is for specific performance (execution of registerable
deed of sale and delivery of certificate of title with damages).
Basically, the two complaints are the same as they involve the
same parties, the same cause of action and the subject matter. The
only difference is in the caption.
Granting for the sake of argument that there is no res judicata and
that the present case is for specific performance, will the latter
remedy lie?
Specific performance is not an absolute right, but one which rests
entirely in judicial discretion; exercised according to the settled
principles of equity and with reference to the facts of the particular
case, and not arbitrarily or capriciously . . . .
One of the requisites for the specific performance of the agreement
is that there must be contract and the contract must be in writing
(Statute of Frauds).
45
The contract must be clearly and unequivocally proved and its
subject matter, consideration and all other essentials must be
specific and unambiguous . . . .
Definitely the receipts by Arnold Donato and Napoleon Donato are
not contracts for the following reasons:
(1) They are not in the prescribed form as provided by law;
(2) They are not specific as indicated by the wording of last
paragraph of Annex "A",
However, should the circumstances occur whereby the transaction
will not push through, then this amount will be refundable to Mr.
Rolando T. Diwa.
(3) It is doubted whether the Supreme Court made a
pronouncement that there was a contract to sell considering that the
petition for review was denied for lack of merit for failure of
counsel to comply with certain requirements with regards to his
petition. 8 (Citation omitted.)
In this petition, petitioners contend:
The errors of the lower court are the following:
1. It erroneously applied res judicata to dismiss with prejudice
Civil Case No. 4117 (90-Tug).
2. It mistakenly ruled that there was no contract between the
petitioners and respondents.
3. It incorrectly held that specific performance was not the proper
remedy.
4. It blundered when it impliedly applied the Statute of Frauds to
the agreement between the parties.
5. It goofed when it dismissed Civil Case No. 4117 (90-Tug) with
prejudice. 9
The petition is meritorious.
The elements of res judicata are: (1) the previous judgment has
become final; (2) the prior judgment was rendered by a court
having jurisdiction over the subject matter and the parties; (3) the
first judgment was made on the merits; and (4) there was
substantial identity of parties, subject matter and causes of action,
as between the prior and subsequent actions.
We hold that the trial court erred in considering our September 20,
1989 Resolution in the interpleader case as an adjudication on the
merits. Said Resolution held:
xxx xxx xxx
After a careful review of the Petition, its Annexes and the
Comment thereto, the Court finds that no reversible error was
committed by the RTC in dismissing petitioners' complaint. The
RTC correctly applied the doctrine laid down by this Court in the
case of Beltran vs. PHHC, G.R. No. L-25138, August 28, 1969, 29
SCRA 145, that if the conflicting claims of the two defendants are
only between themselves and are not against the plaintiff-in-
interpleader nor do they involve or affect him, the special civil
action of interpleader will not lie.
xxx xxx xxx
While it is true that petitioners have a cause of action to compel
private respondents to execute a registrable deed of sale pursuant to
their contract, the proper remedy should be an ordinary civil action
for breach of contract or an action for specific performance and not
an action for interpleader. 10
A judgment on the merits is one rendered after argument and
investigation, and when there is determination which party is right,
as distinguished from a judgment rendered upon some preliminary
or formal or merely technical point, or by default and without
trial. 11 By not stretch of the imagination can our Resolution of
September 20, 1989 be considered a judgment on the merits. All it
resolved is the issue of the proper action that petitioners should file
in light of the allegations of their Complaint. We ruled that they
should file an action for specific performance and not an action for
interpleader. Only after the filing of the proper action can the
substantive rights of the parties be adjudicated. Needless to state,
we did not adjudicate the substantive rights of the parties in our
Resolution of September 20, 1989.
The trial court also erred when it further held that specific
performance does not lie against respondent, by applying the
Statute of Frauds. Under said Statute, agreements for the sale of
real property "shall be unenforceable by action, unless the same, or
some note or memorandum thereof, be in writing, and subscribed
by the party charged, or by his agent; evidence, therefore, of the
agreement cannot be received without the writing, or a secondary
evidence of its contents." 12 Non-compliance with this provision,
while not invalidating the contract which is not in writing, makes
ineffective the action for specific performance. 13
It is settled, however, that the Statute of Frauds applies only to
executory and not to completed, executed, or partially executed
contracts. 14 Thus, as early as 1925, we held that where the land has
been delivered under the oral contract of sale, and the vendees have
already paid part of the purchase price, the heirs of the vendor
cannot invoke the statute of frauds in a proceeding where the
vendees seek to have the land registered in their names. 15
In the case at bench, the agreement to sell the lot in question was
already partially executed when the present action was
commenced. No specific denial was made by their respondent that
petitioners have paid a part of the contract price, and that
possession of the land has been delivered to them. Respondent
Arnold L. Donato's argument in his Memorandum filed on July 2,
1991 that petitioners' act of refunding the amount of P168,000.00
covered by a receipt dated November 19, 1986, and consigning it
with the trial court effectively revoked the contract to sell over the
property does not persuade us. In the first place, the alleged
refunding is not supported by evidence; and in the second place,
even assuming it did occur, there is still the P168,000.00 partial
payment made by petitioners to respondent Napoleon L. Donato
that makes for the partial execution of the contract to sell.
Finally, we do not see how the trial court could have doubted our
finding as to the existence of a contract to sell. We clearly stated in
our Resolution in the interpleader case that:
In the present case, the two private respondents do not dispute the
existence of the contract to sell the commercial land in question to
petitioners nor do they demand adverse claims against petitioners.
In fact, private respondents did not object when the petitioners
deposited in court the balance of the purchase price. The
conflicting claims of the two private respondents over the sharing
of the balance of the purchase price cannot be the subject of an
interpleader case since they are exclusively between the private
respondents and are not against the petitioners. Neither do they
involve or affect the petitioners' interest in the commercial land.
xxx xxx xxx
While it is true that petitioners have a cause of action to compel
private respondents to execute a registrable deed of sale pursuant
to their contract, the proper remedy should be an ordinary civil
action for breach of contract or an action for specific performance
and not an action for interpleader. 16(Emphasis supplied.)
IN VIEW WHEREOF, the instant Petition is GRANTED. The
Orders, dated January 8, 1990 and January 31, 1991 in Civil Case
No. 4117 (90-Tug) are REVERSED AND SET ASIDE. The RTC
of Tuguegarao, Cagayan, Branch 1, is hereby ordered to hear the
reinstated case on its merits. No Costs.
SO ORDERED.
[G.R. No. 197311 : August 23, 2011]
STRADCOM CORPORATION, REPRESENTED BY ITS
PRESIDENT CEZAR T. QUIAMBAO, PETITIONER,
VERSUS HON. EDGAR DALMACIO-SANTOS, AS
PRESIDING JUDGE OF THE RTC-QUEZON CITY,
BRANCH 222, REPUBLIC OF THE PHILIPPINES,
THROUGH THE LAND TRANSPORTATION OFFICE
REPRESENTED BY ASSISTANT SECRETARY VIRGINIA
TORRES AND BONIFACIO C. SUMBILLA,
REPRESENTING HIMSELF TO BE THE
REPRESENTATIVE OF STRADCOM CORPORATION,
RESPONDENTS.
Sirs/Mesdames:
Please take notice that the Court en banc issued a Resolution
dated August 23, 2011, which reads as follows:
46
G.R. No. 197311 — STRADCOM CORPORATION,
represented by its President CEZAR T.
QUIAMBAO, petitioner, versus HON. EDGAR DALMACIO-
SANTOS, as Presiding Judge of the RTC-Quezon City, Branch
222, REPUBLIC OF THE PHILIPPINES, through the LAND
TRANSPORTATION OFFICE represented by ASSISTANT
SECRETARY VIRGINIA TORRES and BONIFACIO C.
SUMBILLA, representing himself to be the representative of
Stradcom Corporation, respondents.
RESOLUTION
Before us is a petition for certiorari under Rule 65 of the
1997 Rules of Civil Procedure, as amended, seeking to annul the
Order dated June 21, 201 1 of the Regional Trial Court (RTC)r
Branch 222, of Quezon City in Civil Case No. Q-11-68723,
entitled "Republic of the Philippines, through the Land
Transportation Office, represented by Assistant Secretary Virginia
Torres, versus STRADCOM Corporation and Bonifacio C
Sumbilla. "
The facts follow:
On March 26, 1998, the Republic of the Philippines, through the
Department of Transportation and Communication (DOTC)
entered into the Land Transportation Office Information
Technology Project (LTO-IT Project) Build-Own-Operate
Agreement (BOO Agreement) with petitioner Stradcom
Corporation, represented by its President Cezar T. Quiambao.
Under the BOO Agreement, Stradcom shall construct, own, operate
and maintain the IT facilities at no cost to the government, while
the LTO continues to handle the processing of all transactions. In
return, Stradcom shall be entitled to transaction fees from the end-
users and/or beneficiaries of the IT-based services which the
DOTC and the LTO shall be obligated to collect and pay to
Stradcom. The parties together with the Land Bank of the
Philippines (LBP) entered into an Escrow Agreement to facilitate
the transmittal of payments to Stradcom. Per the Escrow
Agreement, it is the LTO Chief's duty to issue a written order to
LBP to release and pay Stradcom the said fees. Moreover, pursuant
to the BOO Agreement, Stradcom constructed a building inside the
LTO main compound in Quezon City, housing the IT facilities
which Stradcom exclusively owns and operates. Included in the IT
system are the following: (1) Motor Vehicle Registration System;
(2) Driver's License System; (3) Law Enforcement and Traffic
Adjudication System; (4) Revenue Collection System; and (5)
Financial Administrative System. Stradcom averred that for the
past years it never encountered any problem with the DOTC and
the LTO.
However, since November of 2010 until the present date, the LTO
under respondent Assistant Secretary Virginia Torres (Asec. Torres)
has not approved any payment due to Stradcom, save on April 15,
2011 but only for the income tax due to it. Things allegedly got
worse thereafter.
On December 2, 2010, at around 5:00 a.m., a large group of
individuals led by respondent Bonifacio Sumbilla (Sumbilla group)
arrived at the LTO Compound and attempted to enter Stradcom's
office under a claim that they are the new corporate officers of
Stradcom. They were prevented by Stradcom's security guards so
the Sumbilla group allegedly retreated to Asec. Torres' office.
Stradcom then sought police protection which was accorded by the
Quezon City police. However, on December 8, 2010, without any
notice to Stradcom, the police force was pulled out from the
premises. Subsequently, on December 9, 2010, after the policemen
disarmed the security guards of Stradcom, the Sumbilla group,
together with armed security guards, entered the Stradcom office.
Despite orders from the DOTC to drive the Sumbilla group away
from the Stradcom office, Asec. Torres allegedly accompanied the
said group inside. Moreover, Asec. Torres allegedly invited DOTC
Secretary De Jesus to come to her office and talk to Assistant
Solicitor General Renan Ramos (ASG Ramos) who, in turn,
vouched to Sec. De Jesus that the Sumbilla group's title to
Stradcom was in order. Notwithstanding, Sec. De Jesus ordered the
eviction of the said group after a six-hour takeover.
On December 12, 2010, Asec. Torres sought an opinion from the
Office of the Solicitor General (OSG), which in its reply dated
December 22, 2010 opined that there is an intra-corporate dispute
within Stradcom. On the other hand, Stradcom claims that the
"intra-corporate dispute" was merely concocted by Asec. Torres
and ASG Ramos so that LTO would have an excuse in refusing
payment even for obligations due to it prior to the takeover
incident.
Thus, in a letter dated January 18, 2011, Stradcom as represented
by its President Cezar T. Quiambao (Quiambao) demanded from
LTO the payment of the outstanding receivable amounting to
P662,345,610.47. Instead of acceding to Stradcom's demand, the
LTO, through the OSG, filed a Complaint for Interpleader with the
RTC of Quezon City (Interpleader case). The said complaint did
not dispute the outstanding obligation due to Stradcom nor did it
deny that Stradcom is the rightful payee. The complaint, however,
alleged that there is an intra-corporate dispute within Stradcom and
that its legitimate representatives should first be determined.
Meanwhile, the LTO prayed that it be allowed to manage,
supervise, operate and maintain the IT facilities. Initially, the case
was raffled off to the RTC, Branch 95, Quezon City. On March 1,
2011, Stradcom filed a Motion to Dismiss, claiming that the
Interpleader case was merely simulated by Asec. Torres, ASG
Ramos and the Sumbilla group in order to unjustly evade payment.
Sensing bias, Stradcom filed a motion to re-raffle and a motion for
inhibition which were granted. Thus, on May 12, 2011, the
Interpleader case was re-raffled off to the sala of respondent Judge
Edgar Dalmacio-Santos (Judge Santos) of RTC, Branch 222,
Quezon City. Subsequently, Stradcom filed its Supplemental
Motion to Dismiss, showing to the RTC that Asec. Torres already
recognized Quiambao as the true representative of Stradcom in her
letter dated April 4, 2011.
In its Order dated June 21, 2011, RTC Judge Santos denied
Stradcom's motion to dismiss and directed the LTO to deposit to
the RTC the subject current amount of LTO's contractual
obligations to Stradcom. The dispositive portion of the assailed
order reads:
WHEREFORE, to recapitulate, the ruling of this Court on the
Motion to Dismiss, are as follows:
a. On the ground that the LTO has neither the
capacity to sue nor authority to sue on behalf
of the Republic of the Philippines is hereby
DENIED. When Undersecretary Virginia
Torres, representing the Land Transportation
Office filed this instant special action for
interpleader, she is exercising her proprietary
functions incidental to its primarily
governmental functions. Any counterclaim that
maybe asserted by defendants by claiming that
the state waived its immunity, need a full
blown trial considering that official acts of the
Government, including those performed by
governmental agencies are clothed with the
presumption of regularity in the performance
of official duty;
b. On the ground that the complaint fails to state a
cause of action for failure to attach or allege its
actionable document in the pleading is hereby
DENIED for lack of merit. This Court finds
that the BOO Agreement is not the actionable
documents in this Interpleader case;
c. On the ground that venue is improperly laid is
hereby DENIED. This case is not an intra-
corporate case;
d. On the grounds of litis pendentia and forum
shopping, the same are hereby DENIED
considering that the cause of action in Civil
Case No. Q-11-68518 is entirely different and
47
distinct in this case and the plaintiff did not
conceal the existence of Civil Case No. Q-11-
68518:
e. On the ground that the claim or demand set in
the pleading has been abandoned or otherwise
extinguished is hereby DENIED as the alleged
letter dated April 5, 2011 is not a conclusive
proof of payment;
f. On the ground that the present action is not
proper for interpleader inasmuch as the
plaintiff has claimed interest in this case is
hereby DENIED considering that the
manifestation of the plaintiff to deposit the
subject matter and to abandon its injunctive
relief prove otherwise.
Likewise, in view of the "Urgent Manifestation and Motion" filed
on February 18, 2011, manifesting [of] its withdrawal of the prayer
for the issuance of a temporary restraining order and writ of
preliminary injunction, this Court hereby orders the plaintiff TO
AMEND its complaint by striking out the allegations for the
issuance of a temporary restraining order and writ of preliminary
injunction and reliefs as prayed under No. 1 and 2, within ten (10)
days from receipt of this Order.
Further, as provided for under Section 2, Rule 62 of the 1997 Rules
of Civil Procedure and pursuant to the ruling of the Supreme Court
in the case of Eternal Gardens Memorial Park Corp. vs. CA, G.R.
No. 124554, December 9, 1997, citing the derivative case G.R. No.
73794, September 19, 1988, and in the interest of justice, the
plaintiff is hereby ordered TO DEPOSIT to the Court the subject
current amount of its contractual obligations to the STRADCOM
Corporation simultaneously with the filing of the Amended
Complaint.
Furthermore, the defendant(s) STRADCOM Corporation as
represented by Cezar T. Quiambao and defendant STRADCOM
Corporation as represented by Bonifacio C. Sumbilla are hereby
ordered TO INTERPLEAD with each other and TO FILE their
respective Answers within fifteen (15) days from receipt of the
Amended Complaint serving a copy thereof upon each other.
SO ORDERED.
Aggrieved, petitioner filed the instant petition for certiorari.
Petitioner argues that Judge Santos committed grave abuse of
discretion when he:
1. Directed the LTO to deposit to the RTC the subject
current amount of LTO's contractual obligations to
Stradcom, which has the effect of enjoining the
operations of the LTO IT project in violation of R.A. No.
8975 which prohibits lower courts from issuing TROs
and Injunctions against national government projects;
2. With manifest bias and partiality, motu proprio ordered
the LTO to amend its own complaint and to remove all
allegations and grounds for the issuance of injunctive
relief, which defects could have been constituted as
grounds for the dismissal of the Interpleader case; and
3. Arbitrarily disregarded various grounds that would have
warranted the dismissal of the Interpleader case such as
the LTO's lack of capacity and authority to sue; failure to
attach the BOO Agreement to the complaint as an
actionable document; improperly laid venue; the LTO's
subsequent recognition of Quiambao's authority; and
LTO's liability for forum shopping.
Aware of the doctrine of the hierarchy of courts, Stradcom justifies
its direct resort before this Court on account of special and
compelling reasons of public interest. Stradcom claims that if it
would be forced to shut down due to lack of funds, serious
problems would arise, affecting not only Stradcom and the
government but the general public as well.
Petitioner alleges that it has not been paid by the LTO since
December of 2010 and the continuation of respondents' actions
would work injustice and grave and irreparable injury on its part,
the government and the general public. Thus, Stradcom submits
that the status quo ante in this case, prevailing prior to December
2, 2010 when the Sumbilla group tried to takeover Stradcom,
where all the parties respected the BOO Agreement and the Escrow
Agreement, should be restored. Furthermore, Stradcom prays that a
TRO be issued enjoining (i) Judge Santos from implementing its
assailed Order and from conducting further proceedings in the
Interpleader case; and (ii) the Republic through the LTO from
complying with the RTC Order. Stradcom also prays that the LTO
be directed to comply with the procedure outlined in the Escrow
Agreement.
In its Opposition Ad Cautelam, respondent Republic through the
OSG counters that Stradcom failed to file a motion for
reconsideration of the RTC Order which is the plain, speedy and
adequate remedy available in the ordinary course of law, rendering
the present recourse legally unavailing; that Stradcom did not
follow the Hierarchy of Courts as its petition for certiorari should
have been filed before the Court of Appeals; that Stradcom failed
to justify its direct resort before this Court; and that this Court is
not a trier of facts. The OSG submits that factual issues are
involved in this case which are the proper subjects of the
Interpleader case before the RTC. The OSG manifests that the
Republic is in a quandary as to which group should be recognized
as having legal control over Stradcom. The OSG insists that an
intra-corporate dispute still exists in Stradcom. The question as to
who between the Quiambao group and the Sumbilla group is the
true representative of Stradcom, must first be resolved. The OSG
opines that what Stradcom really seeks is payment; hence,
Stardcom is asking not for a TRO but a preliminary mandatory
injunction.
In its Verified Opposition with Motion to Dismiss, the Sumbilla
group asserts that Quiambao's authority to represent Stradcom is in
controversy. Hence, he has no personality or legal standing to file
this petition or ask for a TRO. Quiambao's prayer for a TRO is
actually a disguised prayer for the issuance of a preliminary
mandatory injunction and that he failed to show that he will suffer
grave and irreparable injury if no injunction is issued.
On July 12, 2011, the OSG likewise filed an Opposition ad
Cautelam while petitioner filed a Reply with Opposition to
respondent Sumbilla's Verified Opposition with Motion to Dismiss
and a Reply to the OSG?s Opposition ad Cautelam. On August 16,
2011, the OSG filed a Rejoinder to petitioner's Reply.
The Court has carefully studied the parties' submissions and find
that it is clear that what the Republic through the OSG filed before
the RTC is an Interpleader case. However, it is likewise clear that
both the Quiambao group and the Sumbilla group lay claim as
valid representatives of Stradcom. Necessarily, there is a need to
resolve the underlying intra-corporate dispute between the two
claimants. As the branch of the RTC to which the case was raffled
off is not a designated special commercial court, this Court deems
it more appropriate that the interpleader case be raffled off to any
of the designated special commercial courts in Quezon City RTC
for resolution of the underlying intra-corporate dispute.
WHEREFORE, Judge Edgar Dalmacio Santos, Presiding Judge
of the Regional Trial Court of Quezon City, Branch 222, is
hereby DIRECTED to forward with dispatch the entire records of
Civil Case No. Q-11-68723 to the Office of the Executive Judge of
the Regional Trial Court of Quezon City for a re-raffle to a
designated Special Commercial Court therein."

48