Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-25407 August 29, 1969

PILAR M. NORMANDY, in her own behalf and of others similarly situated, as well as of the
World War II Veterans Enterprises, Inc., & LORENZO B. CAMINS, plaintiffs-appellees,
vs.
CALIXTO DUQUE, CLARO P. LIZARDO, FLORENCIO SELGA, ALBERTO RAMOS, MANUEL
BUENAFE & FILIPINAS MERCHANDISING CORPORATION, defendants-appellees,

JOSE COCHINGYAN, SR. and SUSANA COCHINGYAN, intervenors-appellees,

vs.
RAMON E. SAURA, former first receiver-appellant.

Lino M. Patajo for defendants-appellees.

Encarnacion, Jr. and Clapano, Jr. for intervenors-appellees.
Saura, Magno and Associates for former first-receiver-appellant.

BARREDO, J.:

Appeal from the order of the Court of First Instance of Manila (Branch I), dated March 5, 1965,
denying the motion of Ramon E. Saura, former First Receiver of the World War II Veterans
Enterprises, inc. (hereinafter referred to merely as WARVETS), asking for reimbursement of the sum
of P5,236.00, representing the amount which he allegedly paid in advance as compensation to a
clerk whose services he availed himself of while he was still a receiver.

On September 6, 1960, appellant was appointed receiver of the WARVETS by the lower court in
Civil Case No. 34998 1 "generally to do and perform such acts respecting the property, assets and
transactions" of the organization "as the court may authorize." Upon filing a bond in the sum of fifty
thousand (P50,000.00) pesos, he entered upon the discharge of his functions.

During his term, appellant went to Japan by authority of the lower court's order dated October 12,
1960 for the purpose of checking on the reported undervaluation of goods shipped to the WARVETS
and of preparing the shipment of the goods which had not yet been committed. For expenses
incurred by him during this trip, which amounted to P9,431.48, he was ordered reimbursed by the
lower court on June 5, 1963. 2 The order authorizing reimbursement stated, thus:

... . The order permits the claim for reimbursement as part of the receiver's compensation as
such receiver. It dues not prohibit the reimbursement of the expenses before the payment of
the receiver's compensation, and it is only fair and just that at least the expenses which the
receiver advanced, if found reasonable and necessary, be reimbursed as soon as the funds
of the WARVETS permit.

Except for this reimbursed amount, appellant received no other fee or compensation from the
WARVETS. In fact, for a continuous period of three (3) years, he performed his duties as receiver
without receiving any compensation as such. Hence, on October 9, 1963, he filed a motion in the
lower court to fix not only his compensation but also that of his co-receiver, Macario Ofilada. 3 In his
motion, he prayed further for such amounts as attorney's fees and stenographer's fees as the court
may allow. After an opposition thereto had been duly interposed, the lower court issued an "Omnibus
Order" on January 22, 1964, the second paragraph of which denied the motion of appellant. A
reconsideration of the order of denial was immediately sought by appellant.

Without awaiting action on his motion for reconsideration, appellant filed another motion, on May 28,
1964, resigning from his post as receiver and praying that the lower court accept it and at the same
time fix the amount of his fees and compensation as receiver.

On June 5, 1964, appellant was discharged as receiver and his compensation was fixed at
P10,000.00. The order of the lower court approving his discharge reads as follows:

Ramon E. Saura, first receiver, filed in his own behalf on May 28, 1964, his motion to
withdraw as first receiver and for fixing of his compensation. There being no objection to this
withdrawal, the same is hereby granted. Respecting his compensation, neither is there
objection thereto. In fact, per joint motion filed on May 28, by defendants, except Filipinas
Merchandising, which has been granted, they asked the withdrawal of their joint motion
dated March 31, 1961, for the removal of Saura as receiver; and per manifestation of said
defendants except Filipinas Merchandising dated May 28, they recommend P10,000.00 as
Saura's fee, which Jose and Susana Cochingyan are willing to advance for the account of
WARVETS.

WHEREFORE, Ramon E. Saura's withdrawal as receiver in this case is hereby approved,

and his fee as such is hereby fixed at P10,000.00, which Jose and Susana Cochingyan shall
advance for the account of WARVETS.

Subsequently, one Atty. Anacleto Magno, on his own behalf, presented before the lower court a
motion dated August 18, 1964, for the payment of attorney's fees to him in the amount of P10,000.00
for his alleged services as legal counsel for the appellant when he was still a receiver. Appellant,
himself, filed another motion for the payment and cancellation of his receiver's bond and for the
reimbursement to him of the sum of P2,030.00 which he paid out of his personal funds as premium
for said bond from September 9, 1960 to September 9, 1964. On September 24, 1964, the lower
court disposed of both motions in one order by allowing compensation to Atty. Magno in the reduced
amount of P1,000.00 and granting reimbursement to appellant in the whole sum prayed for by him
as premium on his bond. In granting fee to the counsel of appellant, the lower court said:

The motion, to the mind of the Court, is not well taken, because Ramon E. Saura is himself a
lawyer and he did not have to retain legal counsel. If he did, the matter should be for his own
account, particularly because it was a unilateral act on Saura's part to get Magno as his
lawyer in the receivership.

Nevertheless, the Court is not unaware that Atty. Magno did in fact work for Saura, for the
former appeared in Court and signed pleadings for Saura as receiver.

Wherefore, in fairness to Atty. Magno, it is hereby ordered that he be paid P1,000.00 from
the funds under receivership. If he is not satisfied with this amount, he can go after Saura.

Barely two months after the issuance of the last-mentioned order, or on November 18, 1964,
appellant filed another motion for reimbursement, this time for the amount he allegedly paid as
compensation of a clerk whom he employed when he was still a receiver for the period September 9,
1960 to May 28, 1964, inclusive, at the rate of P120.00 a month, or the total sum of P5,236.00.
Appellant alleged that in view of the voluminous paper and legal work which he had to attend to as
receiver, it was necessary for him to engage the service of a typist-stenographer, one Melchor C.
Ordoño, who doubled as messenger, filing clerk, utility clerk and records clerk.

On March 5, 1965, although no party registered any objection to appellant's last motion for
reimbursement, the lower court denied it in the appealed order, reasoning thus:

The record shows that the Court had previously ordered the payment of P10,000.00 as
compensation for Ramon E. Saura for his services as first receiver in this case. Therefore,
whatever amount he now seeks in addition thereto would be improper. Moreover, he is now
estopped from claiming any further amount as compensation for alleged clerical services
employed by him as such receiver without prior approval or authority of this Court.

The lone contention of appellant in this appeal is that the lower court committed an error in holding
that he is not entitled to reimbursement of the salaries paid by him to his clerk as receiver of the
WARVETS. None of the other parties filed any brief.

A receiver is a representative of the court appointed for the purpose of preserving and conserving
the property in litigation and prevent its possible destruction or dissipation if it were left in the
possession of any of the parties. The receiver is not the representative of any of the parties but of all
of them to the end that their interests may be equally protected with the least possible inconvenience
and expense. It is inherent in the office of a receiver not only that he should act at all times with the
diligence and prudence of a good father of a family but should also not incur any obligation or
expenditure without leave of the court and it is the responsibility of the court to supervise the receiver
and see to it that he adheres to the above standard of his trust and limits the expenses of the
receivership to the minimum. For these reasons, it is generally the receivership court that is in a
better position to determine whether a particular expenditure is reasonable and satisfied or not and
its ruling thereon may not be disturbed by this Court.

It is true that in the case at bar, the motion in question of the receiver was not opposed by any of the
parties. It is to be observed, however, that the records show that the court a quo had previously
allowed or approved reimbursements to the receiver of expenditures made by him in connection with
the performance of his duties, more particularly, for a trip made to Japan and for the fees of a lawyer
who had allegedly assisted him, notwithstanding he is a lawyer himself. Besides, the court a quo
fixed the total compensation to the appellant receiver at P10,000.00 for his services as such and
said amount, from all appearances, is agreeable to everyone, including appellant.

The receivership court's reasons for withholding approval of the reimbursement in question are
precisely because "whatever amount he (the receiver) now seeks in addition thereto (P10,000)
would be improper. Moreover, he is now estopped from claiming any further amount as
compensation for alleged clerical services employed by him as such receiver without prior approval
or authority of this Court." We find these reasons to be cogent enough in the premises, specially
because appellant's alleged employment of a clerk was made without prior leave of court. In these
circumstances, it cannot be said that the court a quo abused its discretion, much less gravely.

WHEREFORE, the order appealed from is affirmed, with costs against appellant. 1äwphï1.ñët

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro and Capistrano, JJ., concur.
Fernando and Teehankee, JJ., took no part.
Reyes, J.B.L., J., is on leave.

Footnotes
1This is a case filed on January 23, 1958 by Pilar Normandy, in her own behalf and of others
similarly situated as well as of the WARVETS against the defendants Calixto Duque, Claro
P. Lizardo, Florencio Selga, Alberto Ramos, Manuel Buenafe and the Filipinas
Merchandising Corporation, to set aside the contracts of October 22 and November 25, 1957
entered into between the latter corporation and the WARVETS. Allowed as intervenor were
the spouses Susana and Jose Cochingyan, Sr. Lorenzo B. Camins, who was later joined in
as party-plaintiff, petitioned for the appointment of a receiver, which petition was granted by
the lower court after finding facts sufficient to warrant said appointment, to wit:

"From an examination of the records, it appears that at its meeting in August 1957, the
Cabinet approved the proposal of the World War II Veterans Enterprises, Inc. to undertake
the procurement and sale of specific items of reparation goods from Japan, valued at
$8,000,000.00, in order to generate trust funds for the benefit of veterans, war widows and
orphans as contemplated in the Reparations Agreement between the Philippines and Japan
and as provided for in Republic Act No. 1789. Thus, on November 4, 1957, the World War II
Veterans Enterprises, Inc. entered into a Joint Account Agreement (Annex D) with the
spouses Susana and Jose Cochingyan, Sr., doing business under the name and style of the
Catholic Church Mart, whereby the latter was given the right to dispose of the reparation
goods aforementioned of the total value of $8,000,000.00, with marginal profits of 40% on
non-unclassified goods and 60% on unclassified items in favor of the former.

"Likewise, and at almost the same time, that is, on October 22, and November 25, 1957, the
aforementioned World War II Veterans Enterprises, Inc. entered into the two contracts in
question (Annexes E and F) with the Filipinas Merchandising Corporation whereby the latter
was allowed to negotiate the sale and distribution of the same reparation goods valued at
$2,000,000.00 and $6,000,000.00 with marginal profits of 15% and 20%, respectively, in
favor of the former.

"By reason of these overlapping contracts, Susana and Jose Cochingyan, Sr. filed a specific
performance suit against the World War II Veterans Enterprises, Inc. being Civil Case No.
34392 of this Court, with damages. However, this case was subsequently dismissed after the
World War II Veterans Enterprises, Inc., the Filipinas Merchandising Corporation, and
Susana and Jose Cochingyan, Sr. executed on February 2, 1959, a Memorandum of
Settlement and Deed of Assignment whereby the Filipinas Merchandising Corporation, for a
consideration, assigned to and relinquished in favor of the Cochingyans all its rights and
privileges under its two contracts aforestated (Annexes E and F), and whereby the World
War II Veterans Enterprises, Inc. agreed to receive greatly reduced marginal profits, from the
Cochingyans, of 20% and 25% on non-unclassified and unclassified items, respectively.
Thus, as a result of the confusion that resulted in the execution of these various contracts,
the ultimate beneficiaries, namely, the veterans, war widows and orphans would suffer
losses equivalent to a decrease or reduction in expected profits, from 40% and 60%,
assigned under the contract with the Cochingyans of November 4, 1957 (Annex D) to 20%
and 25%, under the Memorandum of Settlement dated February 2, 1959, or roughly
P3,400,000.00 to P6,600,000.00.

"It cannot be said that the original profits of 40% and 60% assigned under the contract with
the Cochingyans of November 4, 1957 (Annex D), would be hard to realize, for it is common
knowledge that imported goods command very high prices much above their procurement
costs, and because the Cochingyans would not have sacrificed time, energy and expenses
in filing their performance suit, Civil Case No. 34392 of this Court, against the World War II
Veterans Enterprises, Inc. had they not been sure that they could easily obtain those
percentage gains and at the same time make a safe margin of profits for themselves. As
things now stand, the interest of the beneficiaries cannot be amply protected by the World
War II Veterans Enterprises, Inc. which naturally feels bound to support its commitment
under the Memorandum of Settlement aforementioned.

"For the above reasons, the Court considers the petition for the appointment of a receiver to
be well founded, and the same is, therefore, hereby granted. .

2 The order authorizing appellant's trip provides:

"If the receiver shall undertake the said trip, it shall be at his own expense without prejudice
to his claiming reimbursement of such expenses as may be found necessary and reasonable
by the Court as part of his compensation as such receiver. (See p. 10, Record on Appeal.)

3Macario Ofilada was appointed as Second Receiver of the WARVETS by this Court on April
29, 1961, in G.R. No. L-18359 entitled "Calixto Duque, et al. vs. Court of First Instance, et
al."; See p. 8, Record on Appeal.
 SECOND DIVISION

[G.R. No. 125008. June 19, 1997]

COMMODITIES STORAGE & ICE PLANT CORPORATION, SPOUSES

VICTOR & JOHANNAH TRINIDAD, petitioners, vs. COURT OF
APPEALS, JUSTICE PEDRO A. RAMIREZ, CHAIRMAN and FAR
EAST BANK & TRUST COMPANY, respondents.

DECISION
PUNO, J.:

In this petition for certiorari, petitioner seeks to annul and set aside the decision and
resolution of the Court of Appeals[1] in CA-G.R. SP No. 36032 dismissing the complaint
in Civil Case No. 94-72076 before the Regional Trial Court, Branch 9, Manila.
The facts show that in 1990, petitioner spouses Victor and Johannah Trinidad
obtained a loan of P31,000,000.00 from respondent Far East Bank & Trust Company to
finance the purchase of the Sta. Maria Ice Plant & Cold Storage in Sta. Maria,
Bulacan. The loan was secured by a mortgage over the ice plant and the land on which
the ice plant stands. Petitioner spouses failed to pay their loan. The bank extrajudicially
foreclosed the mortgage and the ice plant was sold by public bidding on March 22,
1993. Respondent bank was the highest bidder. It registered the certificate of sale on
September 22, 1993 and later took possession of the property.
On November 22, 1993, petitioner spouses filed Civil Case No. 956-M-93 against
respondent bank before the Regional Trial Court, Malolos, Bulacan for reformation of
the loan agreement, annulment of the foreclosure sale and damages. [2] The trial court
dismissed the complaint for petitioners' failure to pay the docket fees. The dismissal was
without prejudice to refiling of the complaint.[3]
On October 28, 1994, petitioners filed Civil Case No. 94-72076 against respondent
bank before the Regional Trial Court, Branch 9, Manila for damages, accounting and
fixing of redemption period.[4] As a provisional remedy, petitioners filed on November 16,
1994 an "Urgent Petition for Receivership." They alleged that respondent bank took
possession of the ice plant forcibly and without notice to them; that their occupation
resulted in the destruction of petitioners' financial and accounting records making it
impossible for them to pay their employees and creditors; the bank has failed to take
care of the ice plant with due diligence such that the plant has started emitting ammonia
and other toxic refrigerant chemicals into the atmosphere and was posing a hazard to
the health of the people in the community; the spouses' attention had been called by
several people in the barangay who threatened to inform the Department of
Environment and Natural Resources should they fail to take action. Petitioners thus
prayed for the appointment of a receiver to save the ice plant, conduct its affairs and
safeguard its records during the pendency of the case.[5]
Instead of an answer, respondent bank filed on November 25, 1994 a "Motion to
Dismiss and Opposition to Plaintiff's Petition for Receivership." It alleged that the
complaint states no cause of action and that venue had been improperly laid. It also
alleged that petitioners failed to pay the proper docket fees and violated the rule on
forum-shopping.[6]
In an order dated December 13, 1994, the trial court granted the petition for
receivership and appointed petitioners' nominee, Ricardo Pesquera, as receiver. The
order disposed as follows:

"WHEREFORE, premises considered the Urgent Petition for Receivership is

GRANTED and Mr. Ricardo Pesquera to whose appointment no opposition was
raised by the defendant and who is an ice plant contractor, maintainer and installer is
appointed receiver. Accordingly, upon the filing and approval of the bond of TWO
MILLION (P2,000,000.00) pesos which shall answer for all damages defendant may
sustain by reason of the receivership, said Ricardo Pesquera is authorized to assume
the powers of a receiver as well as the obligation as provided for in Rule 59 of the
Rules of Court after taking his oath as such receiver.

SO ORDERED." [7]

Respondent bank assailed this order before the Court of Appeals on a petition
for certiorari. On January 11, 1996, the Court of Appeals annulled the order for
receivership and dismissed petitioners' complaint for improper venue and lack of cause
of action. The dispositive portion of the decision reads:

"WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the assailed

order dated December 13, 1994 (Annex A, petition) is ANNULLED and SET ASIDE
and respondent's complaint in Civil Case No. 94-72076 in the respondent court
(Annexes F, petition; 4, comment), is DISMISSED. Costs against respondents except
the court.

SO ORDERED."

Reconsideration was denied on May 23, 1996.[8] Hence, this petition.

Section 1 of Rule 59 of the Revised Rules of Court provides that:

"Sec. 1. When and by whom receiver appointed.-- One or more receivers of the
property, real or personal, which is the subject of the action, may be appointed by the
judge of the Court of First Instance in which the action is pending, or by a Justice of
the Court of Appeals or of the Supreme Court, in the following cases:
(a) When the corporation has been dissolved, or is insolvent, or is in imminent danger
of insolvency, or has forfeited its corporate rights;

(b) When it appears from the complaint or answer, and such other proof as the judge
may require, that the party applying for the appointment of receiver has an interest in
the property or fund which is the subject of the action, and that such property or fund
is in danger of being lost, removed or materially injured unless a receiver be
appointed to guard and preserve it;

(c) When it appears in an action by the mortgagee for the foreclosure of a mortgage
that the property is in danger of being wasted or materially injured, and that its value
is probably insufficient to discharge the mortgage debt, or that the parties have so
stipulated in the contract of mortgage;

(d) After judgment, to preserve the property during the pendency of the appeal, or to
dispose of it according to the judgment, or to aid execution when the execution has
been returned unsatisfied or the judgment debtor refuses to apply his property in
satisfaction of the judgment, or otherwise carry the judgment into effect;

(e) Whenever in other cases it appears that the appointment of a receiver is the most
convenient and feasible means of preserving, administering, or disposing of the
property in litigation."

A receiver of real or personal property, which is the subject of the action, may be
appointed by the court when it appears from the pleadings or such other proof as the
judge may require, that the party applying for such appointment has (1) an actual
interest in it; and (2) that (a) such property is in danger of being lost, removed or
materially injured; or (b) whenever it appears to be the most convenient and feasible
means of preserving or administering the property in litigation.[9]
A receiver is a person appointed by the court in behalf of all the parties to the action
for the purpose of preserving and conserving the property in litigation and prevent its
possible destruction or dissipation, if it were left in the possession of any of the
parties.[10] The appointment of a receiver is not a matter of absolute right. It depends
upon the sound discretion of the court[11] and is based on facts and circumstances of
each particular case.[12]
Petitioners claim that the appointment of a receiver is justified under Section 1 (b) of
Rule 59. They argue that the ice plant which is the subject of the action was in danger of
being lost, removed and materially injured because of the following "imminent perils":

"6.1 Danger to the lives, health and peace of mind of the inhabitants living near the
Sta. Maria Ice Plant;
6.2 Drastic action or sanctions that could be brought against the plaintiff by affected
third persons, including workers who have claims against the plaintiff but could not be
paid due to the numbing manner by which the defendant took the Sta. Maria Ice Plant;

6.3 The rapid reduction of the Ice Plant into a scrap heap because of evident
incompetence, neglect and vandalism." [13]

A petition for receivership under Section 1 (b) of Rule 59 requires that the property
or fund which is the subject of the action must be in danger of loss, removal or material
injury which necessitates protection or preservation. The guiding principle is the
prevention of imminent danger to the property. If an action by its nature, does not
require such protection or preservation, said remedy cannot be applied for and
granted.[14]
In the instant case, we do not find the necessity for the appointment of a
receiver. Petitioners have not sufficiently shown that the Sta. Maria Ice Plant is in
danger of disappearing or being wasted and reduced to a "scrap heap." Neither have
they proven that the property has been materially injured which necessitates its
protection and preservation.[15] In fact, at the hearing on respondent bank's motion to
dismiss, respondent bank, through counsel, manifested in open court that the leak in the
ice plant had already been remedied and that no other leakages had been reported
since.[16] This statement has not been disputed by petitioners.
At the time the trial court issued the order for receivership of the property, the
problem had been remedied and there was no imminent danger of another
leakage. Whatever danger there was to the community and the environment had
already been contained.
The "drastic sanctions" that may be brought against petitioners due to their inability
to pay their employees and creditors as a result of "the numbing manner by which
[respondent bank] took the ice plant" does not concern the ice plant itself. These claims
are the personal liabilities of petitioners themselves. They do not constitute "material
injury" to the ice plant.
Moreover, the receiver appointed by the court appears to be a representative of
petitioners. Respondent bank alleges that it was not aware that petitioners nominated
one Mr. Pesquera as receiver.[17] The general rule is that neither party to a litigation
should be appointed as receiver without the consent of the other because a receiver
should be a person indifferent to the parties and should be impartial and
disinterested.[18] The receiver is not the representative of any of the parties but of all of
them to the end that their interests may be equally protected with the least possible
inconvenience and expense.[19]
The power to appoint a receiver must be exercised with extreme caution. There
must be a clear showing of necessity therefor in order to save the plaintiff from grave
and irremediable loss or damage.[20] It is only when the circumstances so demand, either
because there is imminent danger that the property sought to be placed in the hands of
a receiver be lost or because they run the risk of being impaired, endeavouring to avoid
that the injury thereby caused be greater than the one sought to be avoided. [21]
The Court of Appeals correctly found that the trial court gravely abused its discretion
in issuing the order for receivership. The respondent court, however, went further and
took cognizance of respondent bank's motion to dismiss. And finding merit in the
motion, it dismissed the complaint. Petitioners now claim that the respondent court
should have refrained from ruling on the motion to dismiss because the motion itself
was not before it.[22]
Again, we reject petitioners' contention. The motion to dismiss is anchored on
improper venue, lack of cause of action and forum-shopping. We agree with the
respondent court that the question of venue relates to the principal action and
is prejudicial to the ancillary issue of receivership. Although the grounds for dismissal
were not specifically raised before the appellate court, the said court may consider the
same since the petition for receivership depends upon a determination thereof.[23]
In their complaint, petitioners prayed for the following:

"WHEREFORE, in view of the foregoing, it is respectfully prayed that after trial on

the merits judgment be rendered:

1. Ordering the Defendant to pay COMMODITIES actual and compensatory damages

in the amount of PESOS: TWO MILLION FIVE HUNDRED THOUSAND and
00/100 (P2,500,000.00);

2. Ordering the Defendant to pay Plaintiffs moral damages in the amount of

PESOS: TWO MILLION and 00/100 (P2,000,000.00) to compensate the Plaintiffs for
the anxiety and besmirched reputation caused by the unjust actuations of the
Defendant;

3. Ordering the Defendant to pay Plaintiffs nominal and exemplary damages in the
amount of PESOS: FIVE HUNDRED THOUSAND and 00/100 (P500,000.00) to
deter the repetition of such unjust and malicious actuations of the Defendant;

4. In order to restore the legal right of the Plaintiff COMMODITIES to redeem

its foreclosed property, a right which COMMODITIES has been unjustly
deprived of by the malicious and bad faith machinations of the Defendant,
compelling the Defendant to produce the correct, lawful, official and honest
statements of account and application of payment. Concomitantly, ordering the
Defendant to accept the redemption of the foreclosed properties pursuant to Rule
39 of the Revised Rules of Court in conjunction with Act 3135, within the
prescribed period for redemption, said period to commence from the date of
receipt by the Plaintiff COMMODITIES of the correct, lawful, official and
honest statements of account and application of payments;
5. Ordering the Defendant to pay attorney's fees in the amount of PESOS: THREE
HUNDRED THOUSAND (P300,000.00); and costs of litigation.

Other reliefs and remedies just and equitable under the circumstances are likewise
prayed for."[24]

Petitioners pray for two remedies: damages and redemption. The prayer for damages is
based on respondent bank's forcible occupation of the ice plant and its malicious failure
to furnish them their statements of account and application of payments which
prevented them from making a timely redemption.[25] Petitioners also pray that
respondent bank be compelled to furnish them said documents, and upon receipt
thereof, allow redemption of the property. They ultimately seek redemption of the
mortgaged property. This is explicit in paragraph 4 of their prayer.
An action to redeem by the mortgage debtor affects his title to the foreclosed
property. If the action is seasonably made, it seeks to erase from the title of the
judgment or mortgage debtor the lien created by registration of the mortgage and
sale.[26] If not made seasonably, it may seek to recover ownership to the land since the
purchaser's inchoate title to the property becomes consolidated after expiration of the
redemption period.[27] Either way, redemption involves the title to the foreclosed
property. It is a real action.
Section 2 of Rule 4 of the Revised Rules of Court provides:

"Sec. 2. Venue in Courts of First Instance.-- (a) Real actions.-- Actions affecting title
to, or for recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property, shall be commenced and tried in the province where the
property or any part thereof lies."[28]

Where the action affects title to the property, it should be instituted in the Regional Trial
Court where the property is situated. The Sta. Maria Ice Plant & Cold Storage is located
in Sta. Maria, Bulacan. The venue in Civil Case No. 94-72076 was therefore laid
improperly.
Finally, there is no merit in petitioners' claim that the respondent bank is no longer
the real party in interest after selling the ice plant to a third person during the pendency
of the case. Section 20 of Rule 3 of the Revised Rules of Court provides that in a
transfer of interest pending litigation, the action may be continued by or against the
original party, unless the court, upon motion, directs the transferee to be substituted in
the action or joined with the original party. The court has not ordered the substitution of
respondent bank.
IN VIEW WHEREOF, the decision dated January 11, 1996 and resolution dated
May 23, 1996 of the Court of Appeals in CA-G.R. SP No. 36032 are affirmed. Costs
against petitioners.
SO ORDERED.
 Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.

[1]
Penned by Associate Justice Pedro A. Ramirez and concurred in by Associate Justices Quirino D.
Abad-Santos, Jr. and Eugenio S. Labitoria.
[2]
Annex 2 to Comment, Rollo, pp. 191-209.
[3]
Annex 3 to Comment, Rollo, pp. 214-217.
[4]
Annex 4 to Comment, Rollo, pp. 218-228.
[5]
Annex 5 to Comment, Rollo, pp. 235-240.
[6]
Annex 6 to Comment, Rollo, pp. 244-257.
[7]
Annex D to the Petition, Rollo, p. 63.
[8]
Annex L to the Petition, Rollo, p. 142.
[9]
Ralla vs. Hon. Alcasid, 116 Phil. 622, 625 [1962].
[10]
Normandy v. Duque, 29 SCRA 385, 391 [1969]; Cia. General de Tabacos v. Gauzon, 20 Phil. 261,
267-268 [1911].
[11]
Calo and San Jose v. Roldan, 76 Phil. 445, 453 [1946]; Mendoza v. Arellano, 36 Phil. 59, 63-64 [1917].
[12]
Duque v. CFI of Manila, 13 SCRA 420, 423 [1965]; Ralla v. Alcasid, supra, at 625; Lama v. Apacible,
79 Phil. 68, 73-74 [1947].
[13]
Id., Urgent Petition for Receivership, pp. 2-3, Rollo, pp. 237-238.
[14]
Calo and San Jose v. Roldan, supra, at 453; Ysasi v. Fernandez, 23 SCRA 1079
[1968]; Cochingyan v. Cloribel, 76 SCRA 394, 397 [1977]; Ylarde v. Enriquez, 78 Phil. 527, 531
[1947].
[15]
National Investment and Development Corporation v. Judge Aquino; Philippine National Bank v. Judge
Aquino, 163 SCRA 153, 174 [1988].
[16]
Comment, pp. 7, 14, Rollo, pp. 171, 178.
[17]
Comment, p. 8, Rollo, p. 172.
[18]
Alcantara vs. Abbas, 9 SCRA 54, 58 [1963]; Cia. General de Tabacos vs. Gauzon, supra, at 267-
268; Teal Motor Co. vs Court of First Instance of Manila, 51 Phil. 549, 563, 567 [1928].
[19]
Normandy vs. Duque, supra, at 391.
[20]
Mendoza v. Arellano, supra, at 64.
[21]
Diaz vs. Hon. Nietes, 110 Phil. 606, 610 [1960]; Ylarde v. Enriquez, supra, at 530.
[22]
Petition, pp. 6-9, Rollo, pp. 9-11.
[23]
The appellate court may consider an unassigned error if it is closely related to an error properly
assigned, or upon which a determination of the error properly assigned is dependent. (Garrido v.
Court of Appeals, 236 SCRA 450 [1994]; Medida v. Court of Appeals, 208 SCRA 886, 893
[1992]; Roman Catholic Archbishop of Manila v. Court of Appeals, 198 SCRA 300, 311
[1991]; Philippine Commercial and Industrial Bank v. Court of Appeals, 159 SCRA 24, 31 [1988]).
[24]
Annex "4" to Comment, Complaint, pp. 10-11, Rollo, pp. 227-228; Emphasis supplied.
[25]
Annex "4" to Comment, Complaint, pp. 7-10, Rollo, pp. 224-227.
[26]
The judgment or mortgage debtor remains the owner of the mortgaged property during the redemption
period (Medida v. Court of Appeals, 208 SCRA 886, 897 [1992]).
[27]
Id., Joven v. Court of Appeals, 212 SCRA 700, 709 [1992]; De Castro v. Intermediate Appellate Court,
165 SCRA 654, 662 [1988].

Rule 4 has since been amended by Administrative Circular No. 13-95 which took effect on June 20,
[28]

1995. Section 1 reads:

"Sec. 1. Venue of real actions. -- Actions affecting title to or possession of real property, or interest therein
shall be commenced and tried in the proper court which has jurisdiction over the area wherein the
real property involved, or a portion thereof, is situated."
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-13832 March 29, 1960

GERONIMO DE LOS REYES, petitioner,

vs.
HON. FROILAN BAYONA, ETC., ET AL., respondents.

Bausa, Ampil and Suarez for petitioner.

Tansinsin, Delgado, Flores and Macapagal for respondents.

MONTEMAYOR, J.:

This is a petition for certiorari with preliminary injunction filed by Geronimo de los Reyes against
respondent Hon. Bayona, as Presiding Judge, Branch I, Court of First Instance of Manila, Maria B.
Castro and Arsenio Tenchavez, to annul the order of respondent Judge, dated April 30, 1958, in Civil
Case No. 3910, appointing Tenchavez receiver of the property in question on the filing of a bond in
the sum of P50,000.

In our resolution of May 14, 1958, giving due course to the petition, we granted the petition for
preliminary injunction upon the filing of a surety bond in the amount of P2,000.

The following may serve as background for a better understanding of this case. On August 31, 1943,
Geronimo de los Reyes, later referred to as Reyes, obtained a loan of P120,000 in Japanese military
war notes from Maria B. Castro, later referred to as Castro, with interest at the rate of 6% per year,
said interest for the first two years to be paid in advance. To guarantee the payment of the loan,
Reyes executed in favor of Castro a document purporting to be a deed of sale with right of
repurchase, over two parcels of land in Calisunga, Calauan, Laguna, one parcel containing
168.9909 hectares, and the other 77.2798 hectares, covered by certificates of title Nos. 8254 and
8255 of the Register of Deeds of Laguna. On the same day, Castro as vendee, allegedly leased the
two parcels to Reyes for an annual rental equivalent to the interest on the loan for a year. Claiming
that the deed of sale with right to repurchase did not express the true intention of the parties, but that
was merely a mortgage to secure the payment of the loan, Reyes, in October 1947, filed Civil Case
No. 3910 with the Court of First Instance of Manila against Castro and her husband Espinosa,
alleging in his complaint that since December 1944 up to January 1945, he (Reyes) had repeatedly
tendered to Castro the payment of the principal of the loan, but that she refused to accept it, and so
he filed Civil Case No. 3134 in the Court of First Instance of Manila, at the same time consigning in
court in her favor the sum of P120,000, evidenced by an official receipt issued by the Clerk of Court;
that despite the pendency of said Civil Case No. 3134, Castro executed an affidavit of consolidation
of ownership of the two parcels of land, all without his knowledge and consent, as a result of which,
the Register of Deeds of Laguna cancelled transfer certificates of title Nos. 8254 and 8255 in his
name and issued in lieu thereof, transfer certificates of title Nos. 953 and 954 in Castro's name.
Upon discovery of the consolidation of ownership made by Castro he (Reyes) took steps toward the
reconstitution of the records of Civil Case No. 3134, whose original records presumably were
destroyed during the war, particularly the battle for the liberation of Manila, but his efforts were
frustrated by the denial by the trial court on the ground that the period for reconstitution had already
expired. So, as already said, Reyes filed Civil Case No. 3910 in the Court of First Instance of Manila.
In the meantime, on the theory that the two parcels in question had really been sold to her by Reyes
and that she had thereafter leased the same to him and that he failed to pay the annual rentals,
Castro on October 24, 1947 filed a complaint for unlawful detainer against Reyes in the Justice of
the Peace Court of Calauan, Laguna. Despite the answer filed by him setting up the defense that the
two parcels had not really been sold by him to Castro, but only mortgages to secure the payment on
the loan of 120,000 in Japanese military notes; that during the Japanese occupation, he had
repeatedly tendered payment of the loan to her, but that she refused to accept payment, as a result
of which he consigned the amount in court and filed Civil Case No. 3134 of the Court of First
Instance of Manila to compel her to accept the payment of the loan, whose sum had been consigned
in court; that because he failed to reconstitute the records of Civil Case No. 3134 on time, he had to
file Civil Case No. 3910 in the same Court and that said case was then pending, the Justice of the
Peace Court on October 12,1949, rendered judgment in favor of Castro. Pending appeal of the
unlawful detainer case in the Court of First Instance of Laguna (Civil Case No. 9858), the said court
over his objection issued a writ of execution of the judgment of the Justice of the Peace Court.
Failing to secure a reconsideration of the order of execution, Reyes filed a petition
for certiorari before this Tribunal to annuls aid order of execution, G. R. No. L-8960. * On January
31, 1957, we promulgated a decision in the said certiorari case, holding that the order of execution
was improvidently issued, inasmuch as more than five years had elapsed since the judgment of the
Justice of the Peace Court was rendered; that there was reason to believe that the deed conveying
the two parcels of land to Castro was one of mortgage, rather than of sale, and that furthermore,
even assuming that it were a sale, Castro not being the original owner and possessor of the parcels
but only a vendee a retro, the vendor, Reyes had the right to continue in his possession until the
case between them was finally determined. As a result, the order of execution was set aside and the
writ of preliminary injunction issued was made permanent.

It would appear, however, that as a result of the writ of execution issued by the Court of First
Instance of Laguna in Civil Case No. 9858, which as already stated was brought to this Court
on certiorari in g. R. No. L-8960, Castro was placed in possession of the property in question from
March 16, 1955 to July 30, 1957, she evidently giving up possession in favor of Reyes, only as a
result of our decision in G. R. No. L-8960. This explanation of Castro's possession of the property for
over two years, will help us understand the later decision of the trial court, ordering her to return
possession of the land to Reyes and to account for the income she received therefrom. The
dispositive part of said decision reads:

WHEREFORE, judgment is hereby rendered dismissing the case for lack of appellate
jurisdiction over the subject matter of the action and the plaintiff is ordered to return to the
defendant the possession of the two parcels of land now covered by Transfers Certificates of
Title Nos. T-954 and to account to the latter for the income she received therefrom during the
period she was in possession thereof. The plaintiff is further ordered to pay the costs in both
instances.

Castro filed a petition for certiorari in the Court of Appeals to set aside the above-mentioned
judgmnent. The Court of Appeals citing and reproducing our decision in G. R. No. L-8960,
aforementioned, on November 7, 1957, denied the petition for certiorari, saying:

The circumstances of the case have not changed from the time of the promulgation of the
decision of the Supreme Court referred to and, therefore, the instant petition
for certiorari should be, as it is hereby Denied, for lack of merit. With costs against the
petitioner.

According to the present petition for certiorari before us (G. R. No. L-13832), in Civil Case No. 3910
of The Court of First Instance of Manila, on August 29, 1957, petitioner Reyes was notified of the
hearing of the Urgent Petition for Receivership" filed by Castro; that Reyes opposed the petition on
October 28, 1957; and that respondent Judge Bayona issued an order denying the petition for
appointment of a receiver, thus:

After going over the arguments of the parties, this Court is of the opinion and so holds that
the appointments of a receiver at this time is inappropriate except until after the termination
of the trial of this case. The trial of this case has been set for several days in accordance with
the calendar, and this Court as well as the parties are bent in terminating this case as soon
as possible.

In view of the foregoing, this Court is of the opinion and so holds that the appointment of a
receiver in this case should behold in abeyance until after the decision of this Court shall
have been rendered.

However, on May 7, 1958, Reyes was served a copy of the order of respondent Judge, dated April
30, 1958, appointing respondent Arsenio Tenchavez receiver of the properties in question. This
order based on an ex-parte petition reiterating the request for appointment of a receiver, which
request had previously been denied.

It should not be difficult to gather from out decision in G. R. No. L-8960 and the decision of the Court
of Appeals in CA-G.R. No. 19833-R that the courts, in justice to the parties, particularly, Reyes,
considered possession in him instead of Castro as more reasonable and just. It is, therefore, to be
expected that we cannot look with favor on any judicial order or arrangement whereby this
possession of Reyes should be transferred to a receiver, because by so doing, Castro would be
obtaining indirectly what she could not obtain directly, namely, deprive Reyes of the possession of
the property until the controversy between them is finally settled.

Petition for certiorari is hereby granted; the order of April 30, 1958 appointing Arsenio Tenchavez
receiver, is set aside and the writ of preliminary injunction is made permanent. Respondent Maria B.
Castro will pay the costs.

Paras, C. J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Gutierrez
David, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-34192 June 30, 1988

NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION, EUSEBIO VILLATUYA MARIO

Y. CONSING and ROBERTO S. BENEDICTO, petitioners,
vs.
HON. BENJAMIN AQUINO, in his official capacity as Presiding Judge of Branch VIII of the
Court of First Instance of Rizal, BATJAK INC., GRACIANO A. GARCIA and MARCELINO
CALINAWAN JR., respondents.

G.R. No. L-34213 June 30, 1988

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HON. BENJAMIN H. AQUINO, in his capacity as Presiding Judge of the Court of First Instance
of Rizal, Branch VIII and BATJAK INCORPORATED, respondents.

Cruz, Palafox, Alfonso and Associates for petitioner NIDC in G.R. No. 34192.

The Chief Legal Counsel for petitioner PNB in G.R. No. 34213.

Reyes and Sundiam Law Office for respondent Batjak, Inc.

Duran, Chuanico Oebanda, Benemerito & Associates for private respondents in G.R. Nos. 34192 &
34213.

Tolentino, Garcia, Cruz & Reyes for movant in G.R. No. L-34192.

PADILLA, J.:

These two (2) separate petitions for certiorari and prohibition, with preliminary injunction, seek to annul and set aside the orders of
respondent judge, dated 16 August 1971 and 30 September 1971, in Civil Case No. 14452 of the Court of First Instance of Rizal, entitled
Batjak Inc. vs. NIDC et al." The order of 16 August 1971 1 granted the alternative petition of private respondent Batjak, Inc. Batjak for short)
for the appointment of receiver and denied petitioners' motion to dismiss the complaint of said private respondent. The order dated 30
September 1971 2 denied petitioners' motion for reconsideration of the order dated 16 August 1971.

The herein petitions likewise seek to prohibit the respondent judge from hearing and/or conducting
any further proceedings in Civil Case No. 14452 of said court.

Batjak, (Basic Agricultural Traders Jointly Administered Kasamahan) is a Filipino-American

corporation organized under the laws of the Philippines, primarily engaged in the manufacture of
coconut oil and copra cake for export. In 1965, Batjak's financial condition deteriorated to the point of
bankruptcy. As of that year, Batjak's indebtedness to some private banks and to the Philippine
National Bank (PNB) amounted to P11,915,000.00, shown as follows:
 Republic Bank P 2,324,000.00

Philippine Commercial and

Industrial Bank 1,346,000.00

Manila Banking Corporation 2,000,000.00

Manufacturers Bank 440,000.00

Hongkong and Shanghai

Banking Corporation 250,000.00

Foreign Export Advances

(against immediate shipment) 555,000.00

PNB export advance line

(against immediate shipment) 5,000,000.00

TOTAL 11,915,000.00

As security for the payment of its obligations and advances against shipments, Batjak mortgaged its
three (3) coco-processing oil mills in Sasa, Davao City, Jimenez, Misamis Occidental and Tanauan,
Leyte to Manila Banking Corporation (Manila Bank), Republic Bank (RB), and Philippine Commercial
and Industrial Bank (PCIB), respectively. In need for additional operating capital to place the three
(3) coco-processing mills at their optimum capacity and maximum efficiency and to settle, pay or
otherwise liquidate pending financial obligations with the different private banks, Batjak applied to
PNB for additional financial assistance. On 5 October 1965, a Financial Agreement was submitted
by PNB to Batjak for acceptance. The Financial Agreement reads:

PHILIPPINE NATIONAL BANK

Manila, Philippines

International Department

O
c
t
o
b
e
r

5
,

1
 9
6
5

BATJAK, INCORPORATED

3rd Floor, G. Puyat Bldg.

Escolta, Manila

Attn.: Mr. CIRIACO B. MENDOZA

Vice-President & General Manager

Gentlemen:

We are pleased to advise that our Board of Directors approved for

you the following:

1) That NIDC shall invest P6,722,500.00 in the form of preferred shares of stocks at
9% cumulative, participating and convertible within 5 years at par into common
stocks to liquidate your accounts with the Republic Bank, Manufacturers Bank &
Trust Company and the PCIB which, however, shall be applied to the latter three (3)
banks accounts with the Loans & Discounts Dept. NIDC shall match your P 10 million
subscription by an additional investment of P3,277,500 within a period of one to two
years at NIDC's option;

2) That NIDC will guaranty for five (5) years your account with the Manila Banking
Corporation;

3) That the above banks (Republic Bank, PCIB, MBTC and Manila Banking Corp.)
shall release in favor of PNB the first and any mortgage they hold on your properties;

4) That you shall exercise (execute) a first mortgage on all your properties located at
Sasa, Davao City; Jimenez, Misamis Occidental; and Tanauan, Leyte and assign
leasehold rights on the property on which your plant at Sasa, Davao City is erected in
favor of PNB;

5) That a voting trust agreement for five (5) years over 60% of the oustanding paid
up and subscribed shares shall be executed by your stockholders in favor of NIDC;

6) That this accomodation shall be secured by the joint and several signatures of
officers and directors;

7) That the number of the Board of Directors shall be increased to seven (7), three
(3) from your firm and the other four (4) from the PNB-NIDC;

8) That a comptroller, at your expense, shall be appointed by PNB-NIDC to supervise

the financial management of your firm;
9) That the past due accounts of P 5 million with the International Department of the
PNB shall be transferred to the Loans & Discount Department and to be treated as a
Demand Loan;

10) That any excess of NIDC investment as required in Condition 1 after payment of
the obligations to three (3) Banks (RB, MBTC, & PCIB) shall be applied to reduce the
above Demand Loan of P 5 million;

11) That we shall grant you an export advance of P3 million to be used for copra
purchases, subject to the following conditions:

a) That the line shall expire on September 30, 1966 but revocable at
the Bank(s) option;

b) That drawings against the line shall be allowed only when an

irrevocable export L/C for coconut products has been established or
assigned in your favor and you shall assign to us all proceeds of
negotiations to be received from your letters of credit;

c) That drawings against the line be limited to 60% of the peso value
of the export letters of credit computed at P3.50 per $1.00 but total
drawings shall not in any event exceed P3,000,000.00;

d) That release or releases against the line shall be covered by

promissory note or notes for 90 days but not beyond the expiry dates
of the coveting L/C and proceeds of said L/C shall first be applied to
the correspondent drawings on the line;

e) That drawings against the line shall be charged interest at the rate
of 9% per annum and subject to 1/2% penalty charge on all drawings
not paid or extended on maturity date; and

f) That within 90 days from date of release against the line, you shall
negotiate with us on equivalent amount in export bills, otherwise, the
line shag be temporarily suspended until the outstanding export
advance is fully liquidated.

We are writing the National Investment & Development Corporation, the Republic
Bank, the Philippine Commercial & Industrial Bank and the Manufacturers Bank &
Trust Company and the Manila Banking Corporation regarding the above.

In connection with the above, kindly submit to us two (2) copies of your board
resolution certified to under oath by your corporate secretary accepting the
conditions enumerated above authorizing the above transactions and the officer or
officers to sign on behalf of the corporation.

Thank you.

Very
truly
yours,
 (SGD.)
JOSE
B.
SAMS
ON 3

The terms and conditions of the Financial Agreement were duly accepted by Batjak. Under said
Agreement, NIDC would, as it actually did, invest P6,722,500.00 in Batjak in the form of preferred
shares of stock convertible within five (5) years at par into common stock, to liquidate Batjak's
obligations to Republic Bank (RB), Manufacturers Bank and Trust Company (MBTC) and Philippine
Commercial & Industrial Bank (PCIB), and the balance of the investment was to be applied to
Batjak's past due account of P 5 million with the PNB.

Upon receiving payment, RB, PCIB, and MBTC released in favor of PNB the first and any mortgages
they held on the properties of Batjak.

As agreed, PNB also granted Batjak an export-advance line of P 3 million, later increased to P
5million, and a standby letter of credit facility in the amount of P5,850,000.00. As of 29 September
1966, the financial accomodation that had been extended by PNB to Batjak amounted to a total of P
14,207,859.51.

As likewise agreed, Batjak executed a first mortgage in favor of PNB on all its properties located at
Jimenez, Misamis Occidental and Tanauan, Leyte. Batjak's plant in Sasa, Davao City was
mortgaged to the Manila Bank which, in 1967, instituted foreclosure proceedings against the same
but which were aborted by the payment by Batjak of the sum of P2,400,000.00 to Manila Bank, and
which amount was advanced to Batjak by NIDC, a wholly-owned subsidiary of PNB. To secure the
advance, Batjak mortgaged the oil mill in Sasa, Davao City to NIDC. 4

Next, a Voting Trust Agreement was executed on 26 October 1965 in favor of NIDC by the
stockholders representing 60% of the outstanding paid-up and subscribed shares of Batjak. This
agreement was for a period of five (5) years and, upon its expiration, was to be subject to negotiation
between the parties. The voting Trust Agreement reads:

VOTING TRUST AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

This AGREEMENT made and executed by the undersigned stockholders of BATJAK,

INC., a corporation duly organized and existing under the laws of the Philippines,
whose names are hereinbelow subscribed hereinafter caged the SUBSCRIBERS,
and the NATIONAL INVESTMENT AND DEVELOPMENT CORPORATION,
hereinafter referred to as the trustee.

WITNESSETH:

WHEREAS, the SUBSCRIBERS are owners respectively of the capital stock of the
BATJAK, INC. (hereinafter called the CORPORATION) in the amounts represented
by the number of shares set fort opposite their respective names hereunder;

AND WHEREAS, with a view or establishing a safe and competent management to

operate the corporation for the best interest of all the stockholders thereof, and as
mutually agreed between the SUBSCRIBERS and the TRUSTEE, this Voting Trust
Agreement has been executed under the following terms and conditions.

NOW THEREFORE, the undersigned stockholders, in consideration of

the premises and of the mutual covenants and agreements herein contained and to
carry out the foregoing purposes in order to vest in the TRUSTEE the voting rights of
the shares of stock held by the undersigned in the CORPORATION as hereinafter
stated it is mutually agreed as follows:

1. PERIOD OF DESIGNATION — For a period of five (5) years from and after date
hereof, without power of revocation on the part of the SUBSCRIBERS, the
TRUSTEE designated in the manner herein provided is hereby made, constituted
and appointed as a VOTING TRUSTEE to act for and in the name of the
SUBSCRIBERS, it being understood, however, that this Voting Trust Agreement
shall, upon its expiration be subject to a re-negotiation between the parties, as may
be warranted by the balance and attending circumstance of the loan investment of
the TRUSTEE or otherwise in the CORPORATION.

2. ASSIGNMENT OF STOCK CERTIFICATES UPON ISSUANCE — The

undersigned stockholders hereby transfer and assign their common shares to the
capital stock of the CORPORATION to the extent shown hereunder:

JAMES A. KEISTER 21,500 shares

JOHNNY LIEUSON 20,300 shares

CBM FINANCE & INVESTMENT

CORP. (C.B. Mendoza, Pres.) 5,000 shares

ALEJANDRO G. BELTRAN 4,000 shares

ESPERANZA A. ZAMORA 3,000 shares

CIRIACO B. MENDOZA 2,000 shares

FIDELA DE GUZMAN 2,000 shares

LLOYD D. COMBS 2,000 shares

RENATO B. BEJAR 200 shares

TOTAL 60,000 shares

to the TRUSTEE by virtue of the provisions hereof and do hereby authorize the
Secretary of the CORPORATION to issue the corresponding certificate directly in the
name of the TRUSTEE and on which certificates it shall appear that they have been
issued pursuant to this Voting Trust Agreement and the said TRUSTEE shall hold in
escrow all such certificates during the term of the Agreement. In turn, the TRUSTEE
shall deliver to the undersigned stockholders the corresponding Voting Trust
certificates provided for in Sec. 36 of Act No. 1459.
3. VOTING POWER OF TRUSTEE — The TRUSTEE and its successors in trust, if
anym shall have the power and it shall be its duty to vote the shares of the
undersigned subject hereof and covered by this Agreement at all annual, adjourned
and special meetings of the CORPORATION on all questions, motions, resolutions
and matters including the election of directors and such matters on which the
stockholders, by virtue of the by-laws of the CORPORATION and of the existing
legislations are entitled to vote, which may be voted upon at any and all said
meetings and shall also have the power to execute and acknowledge any
agreements or documents that may be necessary in its opinion to express the
consent or assent of all or any of the stockholders of the CORPORATION with
respect to any matter or thing to which any consent or assent of the stockholders
may be necessary, proper or convenient.

4. FILING of AGREEMENT — An executed copy of this Agreement shall be filed with

the CORPORATION at its office in the City of Manila wherever it may be transfered
therefrom and shall constitute irrevocable authority and absolute direction of the
officers of the CORPORATION whose duty is to sign and deliver stock certificates to
make delivery only to said voting trustee of the shares and certificates of stock
subject to the provisions of this Agreement as aforesaid. Such copy of this
Agreement shall at all times be open to inspection by any stockholder, as provided
by law.

5. DIVIDEND — the full and absolute beneficial interest in the shares subject of this
Agreement shall remain with the stockholders executing the same and any all
dividends which may be declared by the CORPORATION shall belong and be paid to
them exclusively in accordance with their stockholdings after deducting therefrom or
applying the same to whatever liabilities the stockholders may have in favor of the
TRUSTEE by virtue of any Agreement or Contract that may have been or will be
executed by and between the TRUSTEE and the CORPORATION or between the
former and the undersigned stockholders.

6 COMPENSATION; IMMUNITY — The TRUSTEE or its successor in trust shall not

receive any compensation for its serviceexcept perhaps that which the
CORPORATION may grant to the TRUSTEE's authorized representative, if any.
Expenses costs, champs, and other liabilities incurred in the carrying out of the but
herein established or by reason thereof, shall be paid for with the funds of the
CORPORATION. The TRUSTEE or any of its duly authorized representative shall
incur no liability by reason of any error of law or of any matter or thing done or
omitted under this Agreement, except for his own individual malfeasance.

7. REPRESENTATION — The TRUSTEE, being a corporation and a juridical person

shall accomplish the foregoing objectives and perform its functions under this
Agreement as well as enjoy and exercise the powers, privileges, rights and interests
herein established through its duly authorized and accredited re resentatives . p with
full authority under the specific appointment or designation or Proxy.

8. IRREVOCABILITY — This Agreement shall during its 5-year term or any extension
thereof be binding upon and inure to the benefit of the undersigned stockholders and
their respective legal representatives, pledges, transferees, and/or assigns and shall
be irrevocable during the said terms and/or its extension pursuant to the provisions of
paragraph 1 hereof. It is hereby understood and the undersigned stockholders have
bound as they hereby bind themselves to make a condition of every pledge, transfer
of assignment of their interests in the CORPORATION that the interests and
participation so pledged, transferred or assigned is evidenced by annotations in the
certificates of stocks or in the books of the corporation, shall be subject to this
Agreement and the same shall be binding upon the pledgees, transferees and
assigns while the trust herein created still subsists.

9. TERMINATION — Upon termination of this Agreement as heretofore provided, the

certificates delivered to the TRUSTEE by virtue hereof shall be returned and
delivered to the undersigned stockholders as the absolute owners thereof, upon
surrender of their respective voting trust certificates, and the duties of the TRUSTEE
shall cease and terminate.

10. ACCEPTANCE OF TRUST — The TRUSTEE hereby accepts the trust created
by this Agreement under the signature of its duly authorized representative affixed
hereinbelow and agrees to perform the same in accordance with the term/s hereof.

IN WITNTESS HEREOF, the undersigned stockholders and the TRUSTEE by its

representatives, have hereunto affixed their signatures this 26 day of October, 1965
in the City of Manila, Philippines.

(SGD) JAMES A. KEISER (SGD) JOHNNY LIEUSON

Stockholder Stockholder

CBM FINANCE & INVESTMENT CORPORATION

By: (SGD) C.B. MENDOZA

President

ESPERANZA A. ZAMORA (SGD) ALEJANDRO G. BELTRAN

By: (SGD) MARIANO ZAMORA Stockholder

ESPERANZA A. ZAMORA

(SGD) FIDELA DE GUZMAN (SGD) CIRIACO B. MENDOZA

Stockholder Stockholder

(SGD) RENATO B. BEJAR (SGD) LLOYD D. COMBS

Stockholder Stockholder

NATIONAL
INVESTMENT AND

DEVELOPMENT
CORPORATION
 By:

(SGD) IGNACIO
DEBUQUE JR.

Vice-
Preside
nt 5

In July 1967, forced by the insolvency of Batjak, PNB instituted extrajudicial foreclosure proceedings
against the oil mills of Batjak located in Tanauan, Leyte and Jimenez, Misamis Occidental. The
properties were sold to PNB as the highest bidder. One year thereafter, or in September 1968, final
Certificates of Sale were issued by the provincial sheriffs of Leyte 6 and Misamis Occidental 7 for the
two (2) oil mills in Tanauan and Jimenez in favor of PNB, after Batjak failed to exercise its right to
redeem the foreclosed properties within the allowable one year period of redemption. Subsequently,
PNB transferred the ownership of the two (2) oil mills to NIDC which, as aforestated, was a wholly-
owned PNB subsidiary.

As regards the oil mill located at Sasa, Davao City, the same was similarly foreclosed extrajudicial
by NIDC. It was sold to NIDC as the highest bidder. After Batjak failed to redeem the property, NIDC
consolidated its ownership of the oil mill. 8

Three (3) years thereafter, or on 31 August 1970, Batjak represented by majority stockholders,
through Atty. Amado Duran, legal counsel of private respondent Batjak, wrote a letter to NIDC
inquiring if the latter was still interested in negotiating the renewal of the Voting Trust
Agreement. 9 On 22 September 1970, legal counsel of Batjak wrote another letter to NIDC informing
the latter that Batjak would now safely assume that NIDC was no longer interested in the renewal of
said Voting Trust Agreement and, in view thereof, requested for the turn-over and transfer of all
Batjak assets, properties, management and operations. 10

On 23 September 1970, legal counsel of Batjak sent stin another letter to NIDC, this time asking for
a complete accounting of the assets, properties, management and operation of Batjak, preparatory
to their turn-over and transfer to the stockholders of Batjak. 11

NIDC replied, confirming the fact that it had no intention whatsoever to comply with the demands of
Batjak. 12

On 24 February 1971, Batjak filed before the Court of First Instance of Rizal a special civil action for
mandamus with preliminary injunction against herein petitioners docketed as Civil Case No. 14452. 13

On 14 April 1971, in said Civil Case No. 14452, Batjak filed an urgent ex parte motion for the
issuance of a writ of preliminary prohibitory and mandatory injunction. 14 On the same day,
respondent judge issued a restraining order "prohibiting defendants (herein petitioners) from
removing any record, books, commercial papers or cash, and leasing, renting out, disposing of or
otherwise transferring any or all of the properties, machineries, raw materials and finished products
and/or by-products thereof now in the factory sites of the three (3) modem coco milling plants
situated in Jimenez, Misamis Occidental, Sasa, Davao City, and Tanauan, Leyte." 15

The order of 14 April 1971 was subsequently amended by respondent judge upon an ex
parte motion of private respondent Batjak so as to include the premises of NIDC in Makati and those
of PNB in Manila, as among the premises which private respondent Batjak was authorized to enter
in order to conduct an inventory.
On 24 April 1971, NIDC and PNB filed an opposition to the ex parte application for the issuance of a
writ of preliminary prohibitory and mandatory injunction and a motion to set aside restraining order.

Before the court could act on the said motion, private respondent Batjak filed on 3 May 1971 a
petition for receivership as alternative to writ of preliminary prohibitory and mandatory
injunction. 16 This was opposed by PNB and NIDC . 17

On 8 May 1971., NIDC and PNB filed a motion to dismiss Batjak's complaints. 18

On 16 August 1971, respondent judge issued the now assailed order denying petitioners' motion to
dismiss and appointing a set of three (3) receivers. 19 NIDC moved for reconsideration of the
aforesaid order. 20 On 30 September 1971, respondent judge denied the motion for reconsideration. 21

Hence, these two (2) petitions, which have been consolidated, as they involve a resolution of the
same issues. In their manifestation with motion for early decision, dated 25 August 1986, private
respondent, Batjak contends that the NIDC has already been abolished or scrapped by its parent
company, the PNB.

After a careful study and examination of the records of the case, the Court finds and holds for the
petitioners.

1. On the denial of petitioners' motion to dismiss.

As a general rule, an order denying a motion to quash or to dismiss is interlocutory and cannot be
the subject of a petition for certiorari. The remedy of the aggrieved party in a denied motion to
dismiss is to file an answer and interpose, as defense or defenses, the objection or objections raised
by him in said motion to dismiss, then proceed to trial and, in case of adverse decision, to elevate
the entire case by appeal in due course. However, under certain situations, recourse to the
extraordinary legal remedies of certiorari, prohibition and mandamus to question the denial of a
motion to dismiss or quash is considered proper, in the interest of more enlightened and substantial
justice. As the court said in Pineda and Ampil Manufacturing Co. vs. Bartolome, 95 Phil. 930,938

For analogous reasons it may be said that the petition for certiorari interposed by the
accused against the order of the court a quo denying the motion to quash may be
entertained, not only because it was rendered in a criminal case, but because it was
rendered, as claimed, with grave abuse of discretion, as found by the Court of
Appeals. ..

and reiterated in Mead v. Argel 22 citing Yap v. Lutero (105 Phil. 1307):

However, were we to require adherence to this pretense, the case at bar would have
to be dismissed and petitioner required to go through the inconvenience, not to say
the mental agony and torture, of submitting himself to trial on the merits in Case No.
166443, apart from the expenses incidental thereto, despite the fact that his trial and
conviction therein would violate one of this [sic] constitutional rights, and that, an
appeal to this Court, we would, therefore, have to set aside the judgment of
conviction of the lower court. This would, obviously, be most unfair and unjust. Under
the circumstances obtaining the present case, the flaw in the procedure followed by
petitioner herein may be overlooked, in the interest of a more enlightened and
substantial justice.
Thus, where there is patent grave abuse of discretion, in denying the motion to dismiss, as in the
present case, this Court may entertain the petition for certiorari interposed by the party against
whom the said order is issued.

In their motion to dismiss Batjaks complaint, in Civil Case No. 14452, NIDC and PNB raised
common grounds for its allowance, to wit:

1. This Honorable Court (the trial court) has no jurisdiction over the subject of the
action or suit;

2. The venue is improperly laid; and

3. Plaintiff has no legal capacity to sue.

In addition, PNB contended that the complaint states no cause of action (Rule 16, Sec. 1, Par. a, c, d
& g, Rules of Court).

Anent the first ground, it is a well-settled rule that the jurisdiction of a Court of First Instance to issue
a writ of preliminary or permanent injunction is confined within the boundaries of the province where
the land in controversy is situated. 23 The petition for mandamus of Batjak prayed that NIDC and PNB
be ordered to surrender, relinquish and turnover to Batjak the assets, management and operation of
Batjak particularly the three (3) oil mills located in Sasa, Davao City, Jimenez, Misamis Occidental
and Tanauan, Leyte.

Clearly, what Batjak asked of respondent court was the exercise of power or authority outside its
jurisdiction.

On the matter of proper venue, Batjak's complaint should have been filed in the provinces where
said oil mills are located. Under Rule 4, Sec. 2, paragraph A of the Rules of Court, "actions affecting
title to, or for recovery of possession, or for partition or condemnation of, or foreclosure of mortgage
on, real property, shall be commenced and tried in the province where the property or any part
thereof lies."

In support of the third ground of their motion to dismiss, PNB and NIDC contend that Batjak's
complaint for mandamus is based on its claim or right to recovery of possession of the three (3) oil
mills, on the ground of an alleged breach of fiduciary relationship. Noteworthy is the fact that, in the
Voting Trust Agreement, the parties thereto were NIDC and certain stockholders of Batjak. Batjak
itself was not a signatory thereto. Under Sec. 2, Rule 3 of the Rules of Court, every action must be
prosecuted and defended in the name of the real party in interest. Applying the rule in the present
case, the action should have been filed by the stockholders of Batjak, who executed the Voting Trust
Agreement with NIDC, and not by Batjak itself which is not a party to said agreement, and therefore,
not the real party in interest in the suit to enforce the same.

In addition, PNB claims that Batjak has no cause of action and prays that the petition for mandamus
be dismissed. A careful reading of the Voting Trust Agreement shows that PNB was really not a
party thereto. Hence, mandamus will not lie against PNB.

Moreover, the action instituted by Batjak before the respondent court was a special civil action for
mandamus with prayer for preliminary mandatory injunction. Generally, mandamus is not a writ of
right and its allowance or refusal is a matter of discretion to be exercised on equitable principles and
in accordance with well-settled rules of law, and that it should never be used to effectuate an
injustice, but only to prevent a failure of justice. 24 The writ does not issue as a matter of course. It will
issue only where there is a clear legal right sought to be enforced. It will not issue to enforce a
doubtful right. A clear legal right within the meaning of Sec. 3, Rule 65 of the Rules of Court means a
right clearly founded in or granted by law, a right which is enforceable as a matter of law.

Applying the above-cited principles of law in the present case, the Court finds no clear right in Batjak
to be entitled to the writ prayed for. It should be noted that the petition for mandamus filed by it
prayed that NIDC and PNB be ordered to surrender, relinquish and turn-over to Batjak the assets,
management, and operation of Batjak particularly the three (3) oil mills and to make the order
permanent, after trial, and ordering NIDC and PNB to submit a complete accounting of the assets,
management and operation of Batjak from 1965. In effect, what Batjak seeks to recover is title to, or
possession of, real property (the three (3) oil mills which really made up the assets of Batjak) but
which the records show already belong to NIDC. It is not disputed that the mortgages on the three
(3) oil mills were foreclosed by PNB and NIDC and acquired by them as the highest bidder in the
appropriate foreclosure sales. Ownership thereto was subsequently consolidated by PNB and NIDC,
after Batjak failed to exercise its right of redemption. The three (3) oil mills are now titled in the name
of NIDC. From the foregoing, it is evident that Batjak had no clear right to be entitled to the writ
prayed for. In Lamb vs. Philippines (22 Phil. 456) citing the case of Gonzales V. Salazar vs. The
Board of Pharmacy, 20 Phil. 367, the Court said that the writ of mandamus will not issue to give to
the applicant anything to which he is not entitled by law.

2. On the appointment of receiver.

A receiver of real or personal property, which is the subject of the action, may be appointed by the
court when it appears from the pleadings that the party applying for the appointment of receiver has
an interest in said property. 25 The right, interest, or claim in property, to entitle one to a receiver over
it, must be present and existing.

As borne out by the records of the case, PNB acquired ownership of two (2) of the three (3) oil mills
by virtue of mortgage foreclosure sales. NIDC acquired ownership of the third oil mill also under a
mortgage foreclosure sale. Certificates of title were issued to PNB and NIDC after the lapse of the
one (1) year redemption period. Subsequently, PNB transferred the ownership of the two (2) oil mills
to NIDC. There can be no doubt, therefore, that NIDC not only has possession of, but also title to the
three (3) oil mills formerly owned by Batjak. The interest of Batjak over the three (3) oil mills ceased
upon the issuance of the certificates of title to PNB and NIDC confirming their ownership over the
said properties. More so, where Batjak does not impugn the validity of the foreclosure proceedings.
Neither Batjak nor its stockholders have instituted any legal proceedings to annul the mortgage
foreclosure aforementioned.

Batjak premises its right to the possession of the three (3) off mills on the Voting Trust Agreement,
claiming that under said agreement, NIDC was constituted as trustee of the assets, management
and operations of Batjak, that due to the expiration of the Voting Trust Agreement, on 26 October
1970, NIDC should tum over the assets of the three (3) oil mills to Batjak. The relevant provisions of
the Voting Trust Agreement, particularly paragraph 4 & No. 1 thereof, are hereby reproduced:

NOW THEREFORE, the undersigned stockholders, in consideration of the premises

and of the mutual covenants and agreements herein contained and to carry out the
foregoing purposes in order to vest in the TRUSTEE the voting right.8 of the shares
of stock held by the undersigned in the CORPORATION as hereinafter stated it is
mutually agreed as follows:
 1. PERIOD OF DESIGNATION — For a period of five (5) years from and after date
hereof, without power of revocation on the part of the SUBSCRIBERS, the
TRUSTEE designated in the manner herein provided is hereby made, constituted
and appointed as a VOTING TRUSTEE to act for and in the name of the
SUBSCRIBERS, it being understood, however, that this Voting Trust Agreement
shall, upon its expiration be subject to a re-negotiation between the parties, as may
be warranted by the balance and attending circumstance of the loan investment of
the TRUSTEE or otherwise in the CORPORATION.

and No. 3 thereof reads:

3. VOTING POWER OF TRUSTEE — The TRUSTEE and its successors in trust, if

any, shall have the power and it shall be its duty to vote the shares of the
undersigned subject hereof and covered by this Agreement at all annual, adjourned
and special meetings of the CORPORATION on all questions, motions, resolutions
and matters including the election of directors and all such matters on which the
stockholders, by virtue of the by-laws of the CORPORATION and of the existing
legislations are entitled to vote, which may be voted upon at any and all said
meetings and shall also have the power to execute and acknowledge any
agreements or documents that may be necessary in its opinion to express the
consent or assent of all or any of the stockholders of the CORPORATION with
respect to any matter or thing to which any consent or assent of the stockholders
may be necessary, proper or convenient.

From the foregoing provisions, it is clear that what was assigned to NIDC was the power to vote the
shares of stock of the stockholders of Batjak, representing 60% of Batjak's outstanding shares, and
who are the signatories to the agreement. The power entrusted to NIDC also included the authority
to execute any agreement or document that may be necessary to express the consent or assent to
any matter, by the stockholders. Nowhere in the said provisions or in any other part of the Voting
Trust Agreement is mention made of any transfer or assignment to NIDC of Batjak's assets,
operations, and management. NIDC was constituted as trustee only of the voting rights of 60% of
the paid-up and outstanding shares of stock in Batjak. This is confirmed by paragraph No. 9 of the
Voting Trust Agreement, thus:

9. TERMINATION — Upon termination of this Agreement as heretofore provided, the

certificates delivered to the TRUSTEE by virtue hereof shall be returned and
delivered to the undersigned stockholders as the absolute owners thereof, upon
surrender of their respective voting trust certificates, and the duties of the TRUSTEE
shall cease and terminate.-

Under the aforecited provision, what was to be returned by NIDC as trustee to Batjak's stockholders,
upon the termination of the agreement, are the certificates of shares of stock belonging to Batjak's
stockholders, not the properties or assets of Batjak itself which were never delivered, in the first
place to NIDC, under the terms of said Voting Trust Agreement.

In any event, a voting trust transfers only voting or other rights pertaining to the shares subject of the
agreement or control over the stock. The law on the matter is Section 59, Paragraph 1 of the
Corporation Code (BP 68) which provides:

Sec. 59. Voting Trusts — One or more stockholders of a stock corporation may
create a voting trust for the purpose of confering upon a trustee or trusties the right to
 vote and other rights pertaining to the shares for a period not exceeding five (5)
years at any one time: ... 26

The acquisition by PNB-NIDC of the properties in question was not made or effected under the
capacity of a trustee but as a foreclosing creditor for the purpose of recovering on a just and valid
obligation of Batjak.

Moreover, the prevention of imminent danger to property is the guiding principle that governs courts
in the matter of appointing receivers. Under Sec. 1 (b), Rule 59 of the Rules of Court, it is necessary
in granting the relief of receivership that the property or fired be in danger of loss, removal or
material injury.

In the case at bar, Batjak in its petition for receivership, or in its amended petition therefor, failed to
present any evidence, to establish the requisite condition that the property is in danger of being lost,
removed or materially injured unless a receiver is appointed to guard and preserve it.

WHEREFORE, the petitions are GRANTED. The orders of the respondent judge, dated 16 August
1971 and 30 September 1971, are hereby ANNULLED and SET ASIDE. The respondent judge
and/or his successors are ordered to desist from hearing and/or conducting any further proceedings
in Civil Case No. 14452, except to dismiss the same. With costs against private respondents.

SO ORDERED.

Yap, C.J., Melencio-Herrera, Paras and Sarmiento, JJ., concur.

Footnotes

1 Annex B, p. 114, Rollo of G.R. No. 34192.

2 Annex C, p. 136, Rollo of G.R. No. 34192.

3 Annex E, p. 152, Rollo of G.R. No. 34192.

4 Annex G, p. 155, Rollo of G.R. No. 34192.

5 Annex 2, p. 469, Rollo of G.R. No. 34213.

6 Annex M, p. 177, Rollo of G.R. No. 34192.

7 Annex N, p. 195, Rollo of G.R. No. 34192.

8 Annex O, p. 265, Rollo of G.R. No. 34192.

9 Annex Q, p. 226, Rollo of G.R. No. 34192.

10 Annex R, p. 228, Rollo of G.R. No. 34192.

11 Annex S, p. 230, Rollo of G.R. No. 34192.

12 Annex T, p. 232, Rollo of G.R. No. 34192.

13 Annex P, p. 206, Rollo of G.R. No. 34192.

14 Annex Z, p. 264, Rollo of G.R. No. 34192.

15 Annex AA, p. 273, Rollo of G.R. No. 34192.

16 Annex H, p. 138, Rollo of G.R. No. 34213.

17 Annex FF, p. 323, Rollo of G.R. No. 34192 for PNB.

18 Annex GG, p. 331, Rollo of G.R. No. 34192 for NIDC; Annex J, p 178, Rollo of
G.R. No. 34213 for PNB.

19 Annex B, p. 114, Rollo of G.R. No. 34192

20 Annex LL, p. 416, Rollo of G.R. No. 34192.

21 Annex C, p. 136, Rollo of G.R. No. 34192.

22 G.R. No. L-41958, July 20, 1982, 115 SCRA 256,262.

23 Acosta vs. Alvendia, G.R. No. L-14598, Oct. 31, 1960; Central Bank of the
Philippines vs. Cajigal G.R. No. L-19278, Dec. 29, 1962, 6 SCRA 1072, 1076.

23a (NOTE: Dagupan Electric vs. Pano, 95 SCRA 693, cannot be applied since the
principal offices of PNB and NIDC are in Manila)

24 Marcelo Steel Corporation vs. Import Central Board, 87 Phil. 375.

25 Sec. 1(b), Rule 59 of the Rules of Court.

26 Formerly Sec. 36 of the Corporation Law or Act. No. 1459.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-27631 April 30, 1971

CIRILO D. DOLAR and LUIS B. TUPAS petitioners,

vs.
CARLOS L. SUNDIAM, GREGORIO LIRA and REMEGIO LUMAMPAO, respondents.

Gaudencio D. Demaisip for petitioners.

Lopez Vito for respondents.

CASTRO, J.:

This is an original action for certiorari and prohibition to set aside an order of the Court of First
Instance of Iloilo dated December 1, 1966, in Special Proceeding 472, granting the petition of the
herein respondent Remigio Lumampao for the appointment of a receiver over two (2) parcels of land
subject of a motion, filed by the said respondent Lumampao, to set aside the sale thereof made by
the herein petitioner Luis Tupas, in his capacity as judicial administrator of the testate estate of one
Generoso Tupas, Sr., in favor of his herein co-petitioner Cirilo Dolar.

On June 25, 1948, one Generoso Tupas, Jr. filed a petition with the Court of First Instance of Iloilo
(docketed as Special Proceeding 472) for the allowance of his father's will and the appointment of an
administrator for the deceased's estate. The deceased was survived by his spouse, his son
Generoso Tupas, Jr., and his other children by a first marriage.

After the probate of the will and the appointment of the deceased's widow (later replaced by Luis
Tupas) as judicial administrator of the testate estate, Generoso Tupas, Jr., on December 5, 1953,
sold to the herein respondent Lumampao, for the price of P40,000, two (2) parcels of land
bequeathed to him by his father. On August 9, 1955, Lumampao, by virtue of this purchase, asked
the surrogate court to be allowed to intervene in the proceedings. The court granted his motion.

On, July 9, 1956, a project of partition of the testate estate, comprising at least two hundred twenty-
three (223) hectares, was submitted to the probate court for approval, by the herein petitioner Luis
Tupas, as judicial administrator thereof. The two parcels of land of the testate estate previously sold
to Lumampao, with an area of ninety-two (92) hectares, more or less, were thereunder expressly
assigned to Generoso Tupas, Jr. This project of partition was approved by the probate court on July
16, 1956.

On February 18, 1957, however, a complaint for the recovery of the said two parcels of land was
filed by Lumampao against Generoso Tupas, Jr. and Luis Tupas with the Court of First Instance of
Iloilo (docketed as civil case 4276), on the ground that the defendants therein, by use of force,
threats, stealth, strategy and intimidation, deprived him of the possession of the said properties and
gathered all the products therefrom. The validity of the sale to him of these properties, which was
brought in issue in the, said case, was upheld by the court a quo on May 15, 1959.

This decision, in turn, was affirmed on appeal, by the Court of Appeals in CA-G.R. 26507-R on April
2, 1964. The dispositive portion of the appellate court's decision reads as follows:

WHEREFORE, the judgment appealed from [declaring Lumampao the owner of said
parcels of real estate] is AFFIRMED, with the modification that Generoso Tupas, Jr.
pay plaintiff P437.20 and that defendants pay plaintiff P4,000.00 for the bodega and
sugar mill and P6,000.00 annually from the crop year 1954-55 up to the delivery of
the land to plaintiff against defendants.

The foregoing decision was appealed to this Court in L-23134, but in a minute resolution dated
December 15, 1964 we dismissed the appeal.

Prior to the final adjudication on the aforementioned complaint of Lumampao, however, Luis Tupas
filed with the probate court, on February 9, 1960, a motion for authority to sell four (4) parcels of land
of the testate estate for the payment of taxes due to the Government in the amount of P1,701.68,
attorney's fees and other obligations. The said motion included the two parcels of land previously
sold to Lumampao. The motion was approved by the probate court on February 13, 1960 with Judge
Wenceslao Fernan, presiding, subject to the condition that "before executing the sale, the price must
first be referred [to] and approved by his Court."

For some unexplained reason, Luis Tupas did not take any action relative to the foregoing authority,
for, on May 14, 1963, or more than three (3) years later, another motion for authority to sell the same
parcels of land mentioned in his motion of February 9, 1960 was filed by him with the probate court,
again for the payment of municipal taxes in the same amount of P1,701.68 and P10,000 for
counsel's services. This motion, however, unlike the first motion, bore the signed conformity of the
heirs of the deceased, except Generoso Tupas, Jr. The said motion was approved on May 31, 1963
by the probate court, with Judge Jesus Rodriguez, presiding, subject to the condition that the real
properties mentioned therein shall be said, as per prayer of Luis Tupas, for not less than P15,000.

On June 4, 1963, Luis Tupas sold to his herein co-petitioner Cirilo Dolar for the price of P15,000 the
four (4) parcels of land specified in the motion, comprising an aggregate area of 143 hectares, more
or less, inclusive of the 92 hectares previously sold to Lumampao by Generoso Tupas, Jr. for
P40,000. It will be noted that at this time, the validity of the sale to Lumampao was still pending
adjudication in the Court of Appeals.

On January 24, 1964, the probate court, through Judge Imperial Reyes, who temporarily took over
the functions of the court a quo in the absence of its presiding judge who was then in Manila, affixed
his signature at the foot of the deed of sale executed by Luis Tupas to his co-petitioner Cirilo Dolar,
indicating his conformity therewith.

On November 6, 1965, Lumampao, in his capacity as intervenor in the settlement proceedings, filed
with the surrogate court an amended motion to set aside the order of the said court dated May 31,
1963 insofar as it authorized the sale of the two (2) parcels of land conveyed to him by Generoso
Tupas, Jr. Among the grounds adduced by Lumampao in his motion are (a) that the said parcels of
land belong to him by virtue of a final and executory decision of the Court of Appeals; (b) that
contrary to section 7 (b), Rule 89 (formerly Rule 90) of the New Rules of Court no notice was given
to him and to some of the heirs of the deceased of both motions of Luis Tupas for authority to sell
said properties; (c) that the probate court's approvals of the said motions were all made without his
knowledge; (d) that the approval of the conveyance to Cirilo Dolar of the said parcels was made
without any corresponding motion therefor; and (e) that the testate estate has other properties with
which to pay its obligations.

On October 22, 1966, pending decision on his motion to set aside, Lumampao filed with the probate
court a petition for the appointment of a receiver over the two parcels of land conveyed and
adjudicated to him.

On December 1, 1966, the probate court, with Judge Carlos Sundiam presiding, granted
Lumampao's petition, and, on February 8, 1967, appointed the herein respondent Gregorio Lira
receiver over the said parcels of land.

On June 7, 1967, Tupas and Dolar filed with this Court the instant petition to set aside the
receivership order of the court a quo. On June 16, 1967, we issued a writ of preliminary injunction
against the herein respondents Judge Sundiam, Lumampao and Lira.

The principal object of the ancillary relief of receivership is to secure and preserve the property or
thing in controversy pending litigation in order that, as far as practicable, a judicial tribunal, in aid of
its jurisdiction, may be able to effectively bestow to the parties litigant the rights to which they are
entitled, or exact from them the obligations to which they are subject, under the law. Ordinarily,
therefore, this remedy will not lie where the property involved is already in custody of law, such as
that in the hands of an executor or administrator. In these cases, the practical and equitable
purposes to be accomplished under a receivership are then virtually available.

The fact remains, however, that relief by way of receivership is essentially equitable in nature, and
consequently, must be controlled by, and administered on, equitable principles, in the absence of
statutory principles specifically defining or laying out the dimension of its coverage, scope or
application. Thus, the Corpus Juris
Secundum,1 in a brief resume of the decisions of several learned American tribunals, says:

Ordinarily, a receiver cannot be put on property which is already in custody of the law
under process from another court of competent jurisdiction; and there cannot be
more than one receiver over the same property ... A court of equity has power to
appoint a receiver of property which is already in the hands of an executor or
administrator, but such power should be exercised with caution, and a receiver
should not be appointed to take assets out of the hands of legally appointed
representatives except in cases of manifest danger of loss or destruction of, or
material injury to, assets. ...

... Also, a receiver will be appointed when the executor or administrator has been
guilty of misconduct, waste, or misuse of assets, and there is real danger of loss; and
conversely, a receiver will not be appointed to take assets from the custody of an
executor or administrator unless there is manifest danger of loss or destruction of, or
material injury to, the assets and a receivership is clearly necessary to protect and
preserve the property.

In appreciating the foregoing principles, it must be borne in mind that, thus far, we have proceeded
upon the assumption that the estate upon which receivership is prayed for is under the custody of
law. Apparently, the two parcels of land in dispute cannot be said to be within this category, judged
from the records of this case. The said two parcels of real estate were, by virtue of a final and
executory judgment, adjudicated in favor of Lumampao. Consequently, they can no longer be said to
form part of the, testate estate of the late Generoso Tupas, Sr. over which the probate court can
validly exercise jurisdiction in connection with the distribution and liquidation of the said estate.
The Probate court's order authorizing the sale of the said parcels of land was issued and their
subsequent sale to Cirilo Dolar was consummated prior to the rendition of the judgment of the Court
of Appeals upholding the validity of the sale to Lumampao. Consequently, at the time of the sale of
these two parcels to Cirilo Dolar, the status of such parcels as belonging to the testate estate or to
Lumampao was then still fairly controversial. But the inevitable time-lag that goes with the disposal
of court cases cannot, in the present controversy, alter the fact that the Court of Appeals' decision on
the merits of the controversy below was based upon the validity of the deed of sale of the said
parcels to Lumampao, and, thus, in law, said properties belonged to him even before the authority to
sell them was issued by the probate court to Luis Tupas. Hence, although the appellate court's
decision on the ownership question came later, it nevertheless had merely the effect of erasing once
and for all any doubt or uncertainty about the real ownership of the said parcels. Appellate courts,
beset as they are by heaps of cases, cannot be expected naturally to act on the hour on every
litigation brought to them. A court exercising original jurisdiction over a suit ought, by constant
exposure to his exacting job of unraveling what is true and just, to comprehend the quantum of
caution required for the avoidance of simple problems that may in the future hamper the closure of a
dispute before it. There appears, for instance no plausible reason why the sale of the two parcels in
dispute was authorized by the probate court considering that the testate estate was still quite
enormous, and considering further that the court a quo itself had, only a short time before that,
upheld the validity of their sale to Lumampao.

Moreover, it is essentially the duty of every person dealing at arms' length with the administrator of
an estate subject to settlement and liquidation to inquire about the existence of claims against, or of
persons having interests in, the estate subject of probate and settlement proceedings, for such
proceedings are, by their nature and purpose, open notice to all and sundry once put into motion.
Every diligent person ought to know that such proceedings require not just the collection,
identification, division and distribution of assets; they not infrequently involve matters more
complicated than these.

The foregoing opinion notwithstanding, we find it essential for the purpose of disposing of the
specific issue raised in the instant petition — that the respondent court has no jurisdiction to grant
receivership over the said parcels of land in dispute — to allow the respondent court the benefit of
the doubt, that when it authorized Luis Tupas to sell the real properties in dispute and approved their
sale in favor of Cirilo Dolar, it was acting under an honestlymistaken impression that the questioned
properties still formed part of the inventoriable estate of the late Generoso Tupas, Sr.

In our opinion, where, as in this case, a piece of property which originally is a part of the estate of a
deceased person is sold by an heir of the deceased having a valid claim thereto, and said piece of
property is, by mistake, subsequently inventoried or considered part of the deceased's estate subject
to settlement, and, thereafter, with the authority and approval of the probate court, is sold once more
to another person, a receiver of the property so sold may, during the pendency of a motion to set
aside the second sale, be appointed by the court when in its sound judgment the grant of such
temporary relief is reasonably necessary to secure and protest the rights of its real owner against
any danger of loss or material injury to him arising from the use and enjoyment thereof by another
who manifestly cannot acquire any right of dominion thereon because the approving surrogate court
had already lost jurisdiction to authorize the further sale of such property to another person.

Under the particular facts of the instant dispute, we find no compelling reason for disturbing the
respondent court's order granting the petition of Lumampao for the appointment of a receiver over
the parcels of land in question.
ACCORDINGLY, the order of the court a quo dated December 1, 1966 is hereby affirmed. The said
court is, however, enjoined to act in consonance with the tenor and intendment of this decision. No
costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo,
Villamor and Makasiar, JJ., concur.

Footnotes

1 See 75 C.J.S., Secs. 14 and 24.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-66321 October 31 1984

TRADERS ROYAL BANK, petitioner,

vs.
THE HON INTERMEDIATE APPELATE COURT, HON., JESUS R. DE VEGA, AS PRESIDING
JUDGE OF THE RETIONAL TRIA COURT, THIRD JUDICIAL REGION, BRANCH IX, MALOLOS,
Bulacan, LA TONDEÑA, INC., VICTORINO P. EVANGELISTA IN HIS CAPACITY AS Ex-Officio
Provincial Sheriff of Bulacan, and/or any and all his deputies, respondents.

ESCOLIN, J.: ñé+.£ª wph!1

The issue posed for resolution in this petition involves the authority of a Regional Trial Court to
issue, at the instance of a third-party claimant, an injunction enjoining the sale of property previously
levied upon by the sheriff pursuant to a writ of attachment issued by another Regional Trial Court.

The antecedent facts, undisputed by the parties, are set forth in the decision of the respondent
Intermediate Appellate Court thus: têñ.£îhqwâ£

Sometime on March 18, 1983 herein petitioner Traders Royal Bank instituted a suit
against the Remco Alcohol Distillery, Inc. REMCO before the Regional Trial Court,
Branch CX, Pasay City, in Civil Case No. 9894-P, for the recovery of the sum of Two
Million Three Hundred Eighty Two Thousand Two Hundred Fifty Eight & 71/100
Pesos (P2,382,258.71) obtaining therein a writ of pre attachment directed against the
assets and properties of Remco Alcohol Distillery, Inc.

Pursuant to said writ of attachment issued in Civil Case No. 9894-P, Deputy Sheriff
Edilberto Santiago levied among others about 4,600 barrels of aged or rectified
alcohol found within the premises of said Remco Distillery Inc. A third party claim
was filed with the Deputy Sheriff by herein respondent La Tondeña, Inc. on April 1,
1982 claiming ownership over said attached property (Complaint, p. 17, Rollo).

On May 12, 1982, private respondent La Tondeña, Inc. filed a complaint-in-

intervention in said Civil Case No. 9894, alleging among others, that 'it had made
advances to Remco Distillery Inc. which totalled P3M and which remains outstanding
as of date' and that the 'attached properties are owned by La Tondeña, Inc.' (Annex
'3' to petitioner's Motion to Dismiss dated July 27, 1983 — Annex "C" to the petition).

Subsequently, private respondent La Tondeña, Inc., without the foregoing complaint-

in- intervention having been passed upon by the Regional Trial Court, Branch CX,
(Pasay City), filed in Civil Case No. 9894-P a "Motion to Withdraw" dated October 8,
1983, praying that it be allowed to withdraw alcohol and molasses from the Remco
Distillery Plant (Annex 4 to Petitioner's Motion to Dismiss-Annex C, Petition) and
which motion was granted per order of the Pasay Court dated January 27, 1983,
authorizing respondent La Tondeña, Inc. to withdraw alcohol and molasses from the
Remco Distillery Plant at Calumpit, Bulacan (Annex "I" to Reply to Plaintiff's
Opposition dated August 2, 1983 — Annex E to the Petition).

The foregoing order dated January 27, 1983 was however reconsidered by the
Pasay Court by virtue of its order dated February 18, 1983 (Annex A — Petition, p.
15) declaring that the alcohol "which has not been withdrawn remains in the
ownership of defendant Remco Alcohol Distillery Corporation" and which order
likewise denied La Tondeña's motion to intervene.

A motion for reconsideration of the foregoing order of February 18, 1983 was filed by
respondent La Tondeña, Inc., on March 8, 1983 reiterating its request for leave to
withdraw alcohol from the Remco Distillery Plant, and praying further that the "portion
of the order dated February 18, 1983" declaring Remco to be the owner of subject
alcohol, "be reconsidered and striken off said order". This motion has not been
resolved (p. 4, Petition) up to July 18, 1983 when a manifestation that it was
withdrawing its motion for reconsideration was filed by respondent La Tondeña Inc.

On July 19, 1983, private respondent La Tondeña Inc. instituted before the Regional
Trial Court, Branch IX, Malolos, Bulacan presided over by Respondent Judge, Civil
Case No. 7003-M, in which it asserted its claim of ownership over the properties
attached in Civil Case No. 9894-P, and likewise prayed for the issuance of a writ of
Preliminary Mandatory and Prohibitory Injunction (Annex B,id ).

A Motion to Dismiss and/or Opposition to the application for a writ of Preliminary

Injunction by herein respondent La Tondeña Inc. was filed by petitioner on July 27,
1983 (Annex C, p. 42, Id.)

This was followed by respondent La Tondeña's opposition to petitioner's Motion to

Dismiss on August 1, 1983 (Annex D, p. 67, Id.).

A reply on the part of petitioner was made on the foregoing opposition on August 3,
1983 (p. 92, Id.).

Hearings were held on respondent La Tondeña's application for injunctive relief and
on petitioner's motion to dismiss on August 8, 19 & 23, 1983 (p. 5, Id.).

Thereafter, the parties filed their respective memoranda (Annex F, p. 104; Annex G,
p. 113, Rollo).

Subsequently, the questioned order dated September 28, 1983 was issued by the
respondent Judge declaring respondent La Tondeña Inc. to be the owner of the
disputed alcohol, and granting the latter's application for injunctive relief (Annex H-
1, Id.).

On October 6, 1983, respondent Sheriff Victorino Evangelista issued on Edilberto A.

Santiago Deputy Sheriff of Pasay City the corresponding writ of preliminary injunction
(Annex N, p. 127, Id.).

This was followed by an order issued by the Pasay Court dated October 11, 1983 in
Civil Case No. 9894-P requiring Deputy Sheriff Edilberto A. Santiago to enforce the
 writ of preliminary attachment previously issued by said court, by preventing
respondent sheriff and respondent La Tondeña, Inc. from withdrawing or removing
the disputed alcohol from the Remco ageing warehouse at Calumpit, Bulacan, and
requiring the aforenamed respondents to explain and show cause why they should
not be cited for contempt for withdrawing or removing said attached alcohol
belonging to Remco, from the latter's ageing warehouse at Calumpit, Bulacan (Annex
F, p. 141, Petition).

Thereafter, petitioner Traders Royal Bank filed with the Intermediate Appellate Court a petition for
certiorari and prohibition, with application for a writ of preliminary injunction, to annul and set aside
the Order dated September 28, 1983 of the respondent Regional Trial Court of Malolos, Bulacan,
Branch IX, issued in Civil Case No. 7003-M; to dissolve the writ of preliminary injunction dated
October 6, 1983 issued pursuant to said order; to prohibit respondent Judge from taking cognizance
of and assuming jurisdiction over Civil Case No. 7003-M, and to compel private respondent La
Tondeña, Inc., and Ex- Oficio Provincial Sheriff of Bulacan to return the disputed alcohol to their
original location at Remco's ageing warehouse at Calumpit, Bulacan.

In its decision, the Intermediate Appellate Court dismissed the petition for lack of legal and factual
basis, holding that the respondent Judge did not abuse his discretion in issuing the Order of
September 28, 1983 and the writ of preliminary injunction dated October 3, 1983. citing the decision
in Detective and Protective Bureau vs. Cloribel (26 SCRA 255). Petitioner moved for
reconsideration, but the respondent court denied the same in its resolution dated February 2, 1984.

Hence, this petition.

Petitioner contends that respondent Judge of the Regional T- trial Court of Bulacan acted without
jurisdiction in entertaining Civil Case No. 7003-M, in authorizing the issuance of a writ of preliminary
mandatory and prohibitory injunction, which enjoined the sheriff of Pasay City from interferring with
La Tondeña's right to enter and withdraw the barrels of alcohol and molasses from Remco's ageing
warehouse and from conducting the sale thereof, said merchandise having been previously levied
upon pursuant to the attachment writ issued by the Regional Trial Court of Pasay City in Civil Case
No. 9894-P. It is submitted that such order of the Bulacan Court constitutes undue and illegal
interference with the exercise by the Pasay Court of its coordinate and co-equal authority on matters
properly brought before it.

We find the petition devoid of merit.

There is no question that the action filed by private respondent La Tondeña, Inc., as third-party
claimant, before the Regional Trial Court of Bulacan in Civil Case No. 7003-M wherein it claimed
ownership over the property levied upon by Pasay City Deputy Sheriff Edilberto Santiago is
sanctioned by Section 14, Rule 57 of the Rules of Court. Thus — têñ.£îhqw â£

If property taken be claimed by any person other than the party against whom
attachment had been issued or his agent, and such person makes an affidavit of his
title thereto or right to the possession thereof, stating the grounds of such right or
title, and serves such affidavit upon the officer while the latter has possession of the
property, and a copy thereof upon the attaching creditor, the officer shall not be
bound to keep the property under the attachment, unless the attaching creditor or his
agent, on demand of said officer, secures aim against such claim by a bond in a sum
not greater than the value of the property attached. In case of disagreement as to
such value, the same shall be decided by the court issuing the writ of attachment.
The officer shall not be liable for damages, for the taking or keeping of such property,
 to any such third-party claimant, unless such a claim is so made and the action upon
the bond brought within one hundred and twenty (120) days from the date of the filing
of said bond. But nothing herein contained shall prevent such third person from
vindicating his claim to the property by proper action ...

The foregoing rule explicitly sets forth the remedy that may be availed of by a person who claims to
be the owner of property levied upon by attachment, viz: to lodge a third- party claim with the sheriff,
and if the attaching creditor posts an indemnity bond in favor of the sheriff, to file a separate and
independent action to vindicate his claim (Abiera vs. Court of Appeals, 45 SCRA 314). And this
precisely was the remedy resorted to by private respondent La Tondeña when it filed the vindicatory
action before the Bulacan Court.

The case before us does not really present an issue of first impression. In Manila Herald Publishing
Co., Inc. vs. Ramos, 1 this Court resolved a similar question in this wise:
têñ.£îhqw â£

The objection that at once suggests itself to entertaining in Case No. 12263 the
motion to discharge the preliminary attachment levied in Case No. 11531 is that by
so doing one judge would interfere with another judge's actuations. The objection is
superficial and will not bear analysis.

It has been seen that a separate action by the third party who claims to be the owner
of the property attached is appropriate. If this is so, it must be admitted that the judge
trying such action may render judgment ordering the sheriff of whoever has in
possession the attached property to deliver it to the plaintiff-claimant or desist from
seizing it. It follows further that the court may make an interlocutory order, upon the
filing of such bond as may be necessary, to release the property pending final
adjudication of the title. Jurisdiction over an action includes jurisdiction over an
interlocutory matter incidental to the cause and deemed necessary to preserve the
subject matter of the suit or protect the parties' interests. This is self-evident.

xxx xxx xxx

It is true of course that property in custody of the law can not be interfered without
the permission of the proper court, and property legally attached is property in
custodia legis. But for the reason just stated, this rule is confined to cases where the
property belongs to the defendant or one in which the defendant has proprietary
interest. When the sheriff acting beyond the bounds of his office seizes a stranger's
property, the rule does not apply and interference with his custody is not interference
with another court's order of attachment.

It may be argued that the third-party claim may be unfounded; but so may it be
meritorious, for that matter. Speculations are however beside the point. The title is
the very issue in the case for the recovery of property or the dissolution of the
attachment, and pending final decision, the court may enter any interlocutory order
calculated to preserve the property in litigation and protect the parties' rights and
interests.

Generally, the rule that no court has the power to interfere by injunction with the judgments or
decrees of a concurrent or coordinate jurisdiction having equal power to grant the injunctive relief
sought by injunction, is applied in cases where no third-party claimant is involved, in order to prevent
one court from nullifying the judgment or process of another court of the same rank or category, a
power which devolves upon the proper appellate court . 2 The purpose of the rule is to avoid conflict
of power between different courts of coordinate jurisdiction and to bring about a harmonious and
smooth functioning of their proceedings.

It is further argued that since private respondent La Tondeña, Inc., had voluntarily submitted itself to
the jurisdiction of the Pasay Court by filing a motion to intervene in Civil Case No. 9894-P, the denial
or dismissal thereof constitutes a bar to the present action filed before the Bulacan Court.

We cannot sustain the petitioner's view. Suffice it to state that intervention as a means of protecting
the third-party claimant's right in an attachment proceeding is not exclusive but cumulative and
suppletory to the right to bring an independent suit. 3 The denial or dismissal of a third-party claim to
property levied upon cannot operate to bar a subsequent independent action by the claimant to
establish his right to the property even if he failed to appeal from the order denying his original third-
party claim.4

WHEREFORE, the instant petition is hereby dismissed and the decision of the Intermediate
Appellate Court in AC-G.R. No. SP-01860 is affirmed, with costs against petitioner Traders Royal
Bank.

SO ORDERED. 1äw phï1.ñët

Aquino, Concepcion, Jr., Guerrero and Cuevas, JJ., concur.

Makasiar and Abad Santos, JJ., reserves their vote

Footnotes têñ.£îhqwâ£

1 88 Phil. 94.

2 Arabay, Inc. v. Salvador, 82 SCRA 138.

3 Manila Herald Publishing Co., Inc. v. Ramos, supra; Zulueta, et al. v. Munoz, et al.,
17 SCRA 979: Bayer Phil., Inc. v. Agana, 63 SCRA 365.

Potenciano v. Dineros, 97 Phil. 196, 200.

4 Potenciano v. Dineros, 97 Phil. 196. 200.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 93397 March 3, 1997

TRADERS ROYAL BANK, petitioner,

vs.
COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE CORPORATION and CENTRAL
BANK of the PHILIPPINES, respondents.

TORRES, JR., J.:

Assailed in this Petition for Review on Certiorari is the Decision of the respondent Court of Appeals
dated January 29, 1990,1 affirming the nullity of the transfer of Central Bank Certificate of
Indebtedness (CBCI) No. D891,2 with a face value of P500,000.00, from the Philippine Underwriters
Finance Corporation (Philfinance) to the petitioner Trader's Royal Bank (TRB), under a Repurchase
Agreement3 dated February 4, 1981, and a Detached Assignment4 dated April 27, 1981.

Docketed as Civil Case No. 83-17966 in the Regional Trial Court of Manila, Branch 32, the action
was originally filed as a Petition for Mandamus5 under Rule 65 of the Rules of Court, to compel the
Central Bank of the Philippines to register the transfer of the subject CBCI to petitioner Traders
Royal Bank (TRB).

In the said petition, TRB stated that:

3. On November 27, 1979, Filriters Guaranty Assurance Corporation (Filriters)

executed a "Detached Assignment" . . ., whereby Filriters, as registered owner, sold,
transferred, assigned and delivered unto Philippine Underwriters Finance
Corporation (Philfinance) all its rights and title to Central Bank Certificates of
Indebtedness of PESOS: FIVE HUNDRED THOUSAND (P500,000) and having an
aggregate value of PESOS: THREE MILLION FIVE HUNDRED THOUSAND
(P3,500,000.00);

4. The aforesaid Detached Assignment (Annex "A") contains an express

authorization executed by the transferor intended to complete the assignment
through the registration of the transfer in the name of PhilFinance, which
authorization is specifically phrased as follows: '(Filriters) hereby irrevocably
authorized the said issuer (Central Bank) to transfer the said bond/certificates on the
books of its fiscal agent;

5. On February 4, 1981, petitioner entered into a Repurchase Agreement with

PhilFinance . . ., whereby, for and in consideration of the sum of PESOS: FIVE
HUNDRED THOUSAND (P500,000.00), PhilFinance sold, transferred and delivered
to petitioner CBCI 4-year, 8th series, Serial No. D891 with a face value of
 P500,000.00 . . ., which CBCI was among those previously acquired by PhilFinance
from Filriters as averred in paragraph 3 of the Petition;

6. Pursuant to the aforesaid Repurchase Agreement (Annex "B"), Philfinance agreed

to repurchase CBCI Serial No. D891 (Annex "C"), at the stipulated price of PESOS:
FIVE HUNDRED NINETEEN THOUSAND THREE HUNDRED SIXTY-ONE & 11/100
(P519,361.11) on April 27, 1981;

7. PhilFinance failed to repurchase the CBCI on the agreed date of maturity, April 27,
1981, when the checks it issued in favor of petitioner were dishonored for insufficient
funds;

8. Owing to the default of PhilFinance, it executed a Detached Assignment in favor of

the Petitioner to enable the latter to have its title completed and registered in the
books of the respondent. And by means of said Detachment, Philfinance transferred
and assigned all, its rights and title in the said CBCI (Annex "C") to petitioner and,
furthermore, it did thereby "irrevocably authorize the said issuer (respondent herein)
to transfer the said bond/certificate on the books of its fiscal agent." . . .

9. Petitioner presented the CBCI (Annex "C"), together with the two (2)
aforementioned Detached Assignments (Annexes "B" and "D"), to the Securities
Servicing Department of the respondent, and requested the latter to effect the
transfer of the CBCI on its books and to issue a new certificate in the name of
petitioner as absolute owner thereof;

10. Respondent failed and refused to register the transfer as requested, and
continues to do so notwithstanding petitioner's valid and just title over the same and
despite repeated demands in writing, the latest of which is hereto attached as Annex
"E" and made an integral part hereof;

11. The express provisions governing the transfer of the CBCI were substantially
complied with the petitioner's request for registration, to wit:

"No transfer thereof shall be valid unless made at said office (where
the Certificate has been registered) by the registered owner hereof, in
person or by his attorney duly authorized in writing, and similarly
noted hereon, and upon payment of a nominal transfer fee which may
be required, a new Certificate shall be issued to the transferee of the
registered holder thereof."

and, without a doubt, the Detached Assignments presented to respondent were

sufficient authorizations in writing executed by the registered owner, Filriters, and its
transferee, PhilFinance, as required by the above-quoted provision;

12. Upon such compliance with the aforesaid requirements, the ministerial duties of
registering a transfer of ownership over the CBCI and issuing a new certificate to the
transferee devolves upon the respondent;

Upon these assertions, TRB prayed for the registration by the Central Bank of the subject CBCI in its
name.
On December 4, 1984, the Regional Trial Court the case took cognizance of the defendant Central
Bank of the Philippines' Motion for Admission of Amended Answer with Counter Claim for
Interpleader6 thereby calling to fore the respondent Filriters Guaranty Assurance Corporation
(Filriters), the registered owner of the subject CBCI as respondent.

For its part, Filriters interjected as Special Defenses the following:

11. Respondent is the registered owner of CBCI No. 891;

12. The CBCI constitutes part of the reserve investment against liabilities required of
respondent as an insurance company under the Insurance Code;

13. Without any consideration or benefit whatsoever to Filriters, in violation of law

and the trust fund doctrine and to the prejudice of policyholders and to all who have
present or future claim against policies issued by Filriters, Alfredo Banaria, then
Senior Vice-President-Treasury of Filriters, without any board resolution, knowledge
or consent of the board of directors of Filriters, and without any clearance or
authorization from the Insurance Commissioner, executed a detached assignment
purportedly assigning CBCI No. 891 to Philfinance;

xxx xxx xxx

14. Subsequently, Alberto Fabella, Senior Vice-President-Comptroller are Pilar

Jacobe, Vice-President-Treasury of Filriters (both of whom were holding the same
positions in Philfinance), without any consideration or benefit redounding to Filriters
and to the grave prejudice of Filriters, its policy holders and all who have present or
future claims against its policies, executed similar detached assignment forms
transferring the CBCI to plaintiff;

xxx xxx xxx

15. The detached assignment is patently void and inoperative because the
assignment is without the knowledge and consent of directors of Filriters, and not
duly authorized in writing by the Board, as requiring by Article V, Section 3 of CB
Circular No. 769;

16. The assignment of the CBCI to Philfinance is a personal act of Alfredo Banaria
and not the corporate act of Filriters and such null and void;

a) The assignment was executed without consideration and for that reason, the
assignment is void from the beginning (Article 1409, Civil Code);

b) The assignment was executed without any knowledge and consent of the board of
directors of Filriters;

c) The CBCI constitutes reserve investment of Filriters against liabilities, which is a

requirement under the Insurance Code for its existence as an insurance company
and the pursuit of its business operations. The assignment of the CBCI is illegal act
in the sense of malum in se or malum prohibitum, for anyone to make, either as
corporate or personal act;
 d) The transfer of dimunition of reserve investments of Filriters is expressly prohibited
by law, is immoral and against public policy;

e) The assignment of the CBCI has resulted in the capital impairment and in the
solvency deficiency of Filriters (and has in fact helped in placing Filriters under
conservatorship), an inevitable result known to the officer who executed assignment.

17. Plaintiff had acted in bad faith and with knowledge of the illegality and invalidity of
the assignment.

a) The CBCI No. 891 is not a negotiable instrument and as a certificate of

indebtedness is not payable to bearer but is a registered in the name of Filriters;

b) The provision on transfer of the CBCIs provides that the Central Bank shall
treat the registered owner as the absolute owner and that the value of the registered
certificates shall be payable only to the registered owner; a sufficient notice to
plaintiff that the assignments do not give them the registered owner's right as
absolute owner of the CBCI's;

c) CB Circular 769, Series of 1980 (Rules and Regulations Governing CBCIs)

provides that the registered certificates are payable only to the registered owner
(Article II, Section 1).

18. Plaintiff knew full well that the assignment by Philfinance of CBCI No. 891 by
Filriters is not a regular transaction made in the usual of ordinary course of business;

a) The CBCI constitutes part of the reserve investments of Filriters against liabilities
requires by the Insurance Code and its assignment or transfer is expressly prohibited
by law. There was no attempt to get any clearance or authorization from the
Insurance Commissioner;

b) The assignment by Filriters of the CBCI is clearly not a transaction in the usual or
regular course of its business;

c) The CBCI involved substantial amount and its assignment clearly constitutes
disposition of "all or substantially all" of the assets of Filriters, which requires the
affirmative action of the stockholders (Section 40, Corporation [sic] Code.7

In its Decision8 dated April 29, 1988, the Regional Trial Court of Manila, Branch XXXIII found the
assignment of CBCI No. D891 in favor of Philfinance, and the subsequent assignment of the same
CBCI by Philfinance in favor of Traders Royal Bank null and void and of no force and effect. The
dispositive portion of the decision reads:

ACCORDINGLY, judgment is hereby rendered in favor of the respondent Filriters

Guaranty Assurance Corporation and against the plaintiff Traders Royal Bank:

(a) Declaring the assignment of CBCI No. 891 in favor of PhilFinance, and the
subsequent assignment of CBCI by PhilFinance in favor of the plaintiff Traders Royal
Bank as null and void and of no force and effect;
 (b) Ordering the respondent Central Bank of the Philippines to disregard the said
assignment and to pay the value of the proceeds of the CBCI No. D891 to the
Filriters Guaranty Assurance Corporation;

(c) Ordering the plaintiff Traders Royal Bank to pay respondent Filriters Guaranty
Assurance Corp. The sum of P10,000 as attorney's fees; and

(d) to pay the costs.

SO ORDERED.9

The petitioner assailed the decision of the trial court in the Court of Appeals 10, but their appeals
likewise failed. The findings of the fact of the said court are hereby reproduced:

The records reveal that defendant Filriters is the registered owner of CBCI No. D891.
Under a deed of assignment dated November 27, 1971, Filriters transferred CBCI
No. D891 to Philippine Underwriters Finance Corporation (Philfinance).
Subsequently, Philfinance transferred CBCI No. D891, which was still registered in
the name of Filriters, to appellant Traders Royal Bank (TRB). The transfer was made
under a repurchase agreement dated February 4, 1981, granting Philfinance the right
to repurchase the instrument on or before April 27, 1981. When Philfinance failed to
buy back the note on maturity date, it executed a deed of assignment, dated April 27,
1981, conveying to appellant TRB all its right and the title to CBCI No. D891.

Armed with the deed of assignment, TRB then sought the transfer and registration of
CBCI No. D891 in its name before the Security and Servicing Department of the
Central Bank (CB). Central Bank, however, refused to effect the transfer and
registration in view of an adverse claim filed by defendant Filriters.

Left with no other recourse, TRB filed a special civil action for mandamus against the
Central Bank in the Regional Trial Court of Manila. The suit, however, was
subsequently treated by the lower court as a case of interpleader when CB prayed in
its amended answer that Filriters be impleaded as a respondent and the court
adjudge which of them is entitled to the ownership of CBCI No. D891. Failing to get a
favorable judgment. TRB now comes to this Court on appeal. 11

In the appellate court, petitioner argued that the subject CBCI was a negotiable instrument, and
having acquired the said certificate from Philfinance as a holder in due course, its possession of the
same is thus free fro any defect of title of prior parties and from any defense available to prior parties
among themselves, and it may thus, enforce payment of the instrument for the full amount thereof
against all parties liable thereon. 12

In ignoring said argument, the appellate court that the CBCI is not a negotiable instrument, since the
instrument clearly stated that it was payable to Filriters, the registered owner, whose name was
inscribed thereon, and that the certificate lacked the words of negotiability which serve as an
expression of consent that the instrument may be transferred by negotiation.

Obviously, the assignment of the certificate from Filriters to Philfinance was fictitious, having made
without consideration, and did not conform to Central Bank Circular No. 769, series of 1980, better
known as the "Rules and Regulations Governing Central Bank Certificates of Indebtedness", which
provided that any "assignment of registered certificates shall not be valid unless made . . . by the
registered owner thereof in person or by his representative duly authorized in writing."
Petitioner's claimed interest has no basis, since it was derived from Philfinance whose interest was
inexistent, having acquired the certificate through simulation. What happened was Philfinance
merely borrowed CBCI No. D891 from Filriters, a sister corporation, to guarantee its financing
operations.

Said the Court:

In the case at bar, Alfredo O. Banaria, who signed the deed of assignment
purportedly for and on behalf of Filriters, did not have the necessary written
authorization from the Board of Directors of Filriters to act for the latter. For lack of
such authority, the assignment did not therefore bind Filriters and violated as the
same time Central Bank Circular No. 769 which has the force and effect of a law,
resulting in the nullity of the transfer (People v. Que Po Lay, 94 Phil. 640; 3M
Philippines, Inc. vs. Commissioner of Internal Revenue, 165 SCRA 778).

In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could
assign or transfer to Traders Royal Bank and which the latter can register with the
Central Bank.

WHEREFORE, the judgment appealed from is AFFIRMED, with costs against

plaintiff-appellant.

SO ORDERED. 13

Petitioner's present position rests solely on the argument that Philfinance owns 90% of Filriters
equity and the two corporations have identical corporate officers, thus demanding the application of
the doctrine or piercing the veil of corporate fiction, as to give validity to the transfer of the CBCI from
registered owner to petitioner TRB. 14 This renders the payment by TRB to Philfinance of CBCI, as
actual payment to Filriters. Thus, there is no merit to the lower court's ruling that the transfer of the
CBCI from Filriters to Philfinance was null and void for lack of consideration.

Admittedly, the subject CBCI is not a negotiable instrument in the absence of words of negotiability
within the meaning of the negotiable instruments law (Act 2031).

The pertinent portions of the subject CBCI read:

xxx xxx xxx

The Central Bank of the Philippines (the Bank) for value received, hereby promises
to pay bearer, of if this Certificate of indebtedness be registered, to FILRITERS
GUARANTY ASSURANCE CORPORATION, the registered owner hereof, the
principal sum of FIVE HUNDRED THOUSAND PESOS.

xxx xxx xxx

Properly understood, a certificate of indebtedness pertains to certificates for the creation and
maintenance of a permanent improvement revolving fund, is similar to a "bond," (82 Minn. 202).
Being equivalent to a bond, it is properly understood as acknowledgment of an obligation to pay a
fixed sum of money. It is usually used for the purpose of long term loans.

The appellate court ruled that the subject CBCI is not a negotiable instrument, stating that:
 As worded, the instrument provides a promise "to pay Filriters Guaranty Assurance
Corporation, the registered owner hereof." Very clearly, the instrument is payable
only to Filriters, the registered owner, whose name is inscribed thereon. It lacks the
words of negotiability which should have served as an expression of consent that the
instrument may be transferred by negotiation.15

A reading of the subject CBCI indicates that the same is payable to FILRITERS GUARANTY
ASSURANCE CORPORATION, and to no one else, thus, discounting the petitioner's submission
that the same is a negotiable instrument, and that it is a holder in due course of the certificate.

The language of negotiability which characterize a negotiable paper as a credit instrument is its
freedom to circulate as a substitute for money. Hence, freedom of negotiability is the touchtone
relating to the protection of holders in due course, and the freedom of negotiability is the foundation
for the protection which the law throws around a holder in due course (11 Am. Jur. 2d, 32). This
freedom in negotiability is totally absent in a certificate indebtedness as it merely to pay a sum of
money to a specified person or entity for a period of time.

As held in Caltex (Philippines), Inc. v. Court of Appeals, 16:

The accepted rule is that the negotiability or non-negotiability of an instrument is

determined from the writing, that is, from the face of the instrument itself. In the
construction of a bill or note, the intention of the parties is to control, if it can be
legally ascertained. While the writing may be read in the light of surrounding
circumstance in order to more perfectly understand the intent and meaning of the
parties, yet as they have constituted the writing to be the only outward and visible
expression of their meaning, no other words are to be added to it or substituted in its
stead. The duty of the court in such case is to ascertain, not what the parties may
have secretly intended as contradistinguished from what their words express, but
what is the meaning of the words they have used. What the parties meant must be
determined by what they said.

Thus, the transfer of the instrument from Philfinance to TRB was merely an assignment, and is not
governed by the negotiable instruments law. The pertinent question then is, was the transfer of the
CBCI from Filriters to Philfinance and subsequently from Philfinance to TRB, in accord with existing
law, so as to entitle TRB to have the CBCI registered in its name with the Central Bank?

The following are the appellate court's pronouncements on the matter:

Clearly shown in the record is the fact that Philfinance's title over CBCI No. D891 is
defective since it acquired the instrument from Filriters fictitiously. Although the deed
of assignment stated that the transfer was for "value received", there was really no
consideration involved. What happened was Philfinance merely borrowed CBCI No.
D891 from Filriters, a sister corporation. Thus, for lack of any consideration, the
assignment made is a complete nullity.

What is more, We find that the transfer made by Filriters to Philfinance did not
conform to Central Bank Circular No. 769, series of 1980, otherwise known as the
"Rules and Regulations Governing Central Bank Certificates of Indebtedness", under
which the note was issued. Published in the Official Gazette on November 19, 1980,
Section 3 thereof provides that any assignment of registered certificates shall not be
valid unless made . . . by the registered owner thereof in person or by his
representative duly authorized in writing.
 In the case at bar, Alfredo O. Banaria, who signed the deed of assignment
purportedly for and on behalf of Filriters, did not have the necessary written
authorization from the Board of Directors of Filriters to act for the latter. For lack of
such authority, the assignment did not therefore bind Filriters and violated at the
same time Central Bank Circular No. 769 which has the force and effect of a law,
resulting in the nullity of the transfer (People vs. Que Po Lay, 94 Phil. 640; 3M
Philippines, Inc. vs. Commissioner of Internal Revenue, 165 SCRA 778).

In sum, Philfinance acquired no title or rights under CBCI No. D891 which it could
assign or transfer to Traders Royal Bank and which the latter can register with the
Central Bank

Petitioner now argues that the transfer of the subject CBCI to TRB must upheld, as the respondent
Filriters and Philfinance, though separate corporate entities on paper, have used their corporate
fiction to defraud TRB into purchasing the subject CBCI, which purchase now is refused registration
by the Central Bank.

Says the petitioner;

Since Philfinance own about 90% of Filriters and the two companies have the same
corporate officers, if the principle of piercing the veil of corporate entity were to be
applied in this case, then TRB's payment to Philfinance for the CBCI purchased by it
could just as well be considered a payment to Filriters, the registered owner of the
CBCI as to bar the latter from claiming, as it has, that it never received any payment
for that CBCI sold and that said CBCI was sold without its authority.

xxx xxx xxx

We respectfully submit that, considering that the Court of Appeals has held that the
CBCI was merely borrowed by Philfinance from Filriters, a sister corporation, to
guarantee its (Philfinance's) financing operations, if it were to be consistent therewith,
on the issued raised by TRB that there was a piercing a veil of corporate entity, the
Court of Appeals should have ruled that such veil of corporate entity was, in fact,
pierced, and the payment by TRB to Philfinance should be construed as payment to
Filriters. 17

We disagree with Petitioner.

Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this merely an
equitable remedy, and may be awarded only in cases when the corporate fiction is used to defeat
public convenience, justify wrong, protect fraud or defend crime or where a corporation is a mere
alter ego or business conduit of a person. 18

Peiercing the veil of corporate entity requires the court to see through the protective shroud which
exempts its stockholders from liabilities that ordinarily, they could be subject to, or distinguished one
corporation from a seemingly separate one, were it not for the existing corporate fiction. But to do
this, the court must be sure that the corporate fiction was misused, to such an extent that injustice,
fraud, or crime was committed upon another, disregarding, thus, his, her, or its rights. It is the
protection of the interests of innocent third persons dealing with the corporate entity which the law
aims to protect by this doctrine.
The corporate separateness between Filriters and Philfinance remains, despite the petitioners
insistence on the contrary. For one, other than the allegation that Filriters is 90% owned by
Philfinance, and the identity of one shall be maintained as to the other, there is nothing else which
could lead the court under circumstance to disregard their corporate personalities.

Though it is true that when valid reasons exist, the legal fiction that a corporation is an entity with a
juridical personality separate from its stockholders and from other corporations may be
disregarded, 19 in the absence of such grounds, the general rule must upheld. The fact that Filfinance
owns majority shares in Filriters is not by itself a ground to disregard the independent corporate
status of Filriters. In Liddel & Co., Inc. vs. Collector of Internal Revenue, 20 the mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is
not of itself a sufficient reason for disregarding the fiction of separate corporate personalities.

In the case at bar, there is sufficient showing that the petitioner was not defrauded at all when it
acquired the subject certificate of indebtedness from Philfinance.

On its face the subject certificates states that it is registered in the name of Filriters. This should
have put the petitioner on notice, and prompted it to inquire from Filriters as to Philfinance's title over
the same or its authority to assign the certificate. As it is, there is no showing to the effect that
petitioner had any dealings whatsoever with Filriters, nor did it make inquiries as to the ownership of
the certificate.

The terms of the CBCI No. D891 contain a provision on its TRANSFER. Thus:

TRANSFER. This Certificate shall pass by delivery unless it is registered in the

owner's name at any office of the Bank or any agency duly authorized by the Bank,
and such registration is noted hereon. After such registration no transfer thereof shall
be valid unless made at said office (where the Certificates has been registered) by
the registered owner hereof, in person, or by his attorney, duly authorized in writing
and similarly noted hereon and upon payment of a nominal transfer fee which may
be required, a new Certificate shall be issued to the transferee of the registered
owner thereof. The bank or any agency duly authorized by the Bank may deem and
treat the bearer of this Certificate, or if this Certificate is registered as herein
authorized, the person in whose name the same is registered as the absolute owner
of this Certificate, for the purpose of receiving payment hereof, or on account hereof,
and for all other purpose whether or not this Certificate shall be overdue.

This is notice to petitioner to secure from Filriters a written authorization for the transfer or to require
Philfinance to submit such an authorization from Filriters.

Petitioner knew that Philfinance is not registered owner of the CBCI No. D891. The fact that a non-
owner was disposing of the registered CBCI owned by another entity was a good reason for
petitioner to verify of inquire as to the title Philfinance to dispose to the CBCI.

Moreover, CBCI No. D891 is governed by CB Circular No. 769, series of 1990 21, known as the Rules
and Regulations Governing Central Bank Certificates of Indebtedness, Section 3, Article V of which
provides that:

Sec. 3. Assignment of Registered Certificates. — Assignment of registered

certificates shall not be valid unless made at the office where the same have been
issued and registered or at the Securities Servicing Department, Central Bank of the
Philippines, and by the registered owner thereof, in person or by his representative,
 duly authorized in writing. For this purpose, the transferee may be designated as the
representative of the registered owner.

Petitioner, being a commercial bank, cannot feign ignorance of Central Bank Circular 769, and its
requirements. An entity which deals with corporate agents within circumstances showing that the
agents are acting in excess of corporate authority, may not hold the corporation liable. 22 This is only
fair, as everyone must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith. 23

The transfer made by Filriters to Philfinance did not conform to the said. Central Bank Circular,
which for all intents, is considered part of the law. As found by the courts a quo, Alfredo O. Banaria,
who had signed the deed of assignment from Filriters to Philfinance, purportedly for and in favor of
Filriters, did not have the necessary written authorization from the Board of Directors of Filriters to
act for the latter. As it is, the sale from Filriters to Philfinance was fictitious, and therefore void and
inexistent, as there was no consideration for the same. This is fatal to the petitioner's cause, for then,
Philfinance had no title over the subject certificate to convey the Traders Royal Bank. Nemo potest
nisi quod de jure potest — no man can do anything except what he can do lawfully.

Concededly, the subject CBCI was acquired by Filriters to form part of its legal and capital reserves,
which are required by law 24 to be maintained at a mandated level. This was pointed out by Elias
Garcia, Manager-in-Charge of respondent Filriters, in his testimony given before the court on May
30, 1986.

Q Do you know this Central Bank Certificate of Indebtedness, in

short, CBCI No. D891 in the face value of P5000,000.00 subject of
this case?

A Yes, sir.

Q Why do you know this?

A Well, this was CBCI of the company sought to be examined by the

Insurance Commission sometime in early 1981 and this CBCI No.
891 was among the CBCI's that were found to be missing.

Q Let me take you back further before 1981. Did you have the
knowledge of this CBCI No. 891 before 1981?

A Yes, sir. This CBCI is an investment of Filriters required by the

Insurance Commission as legal reserve of the company.

Q Legal reserve for the purpose of what?

A Well, you see, the Insurance companies are required to put up

legal reserves under Section 213 of the Insurance Code equivalent to
40 percent of the premiums receipt and further, the Insurance
Commission requires this reserve to be invested preferably in
government securities or government binds. This is how this CBCI
came to be purchased by the company.
It cannot, therefore, be taken out of the said funds, without violating the requirements of the law.
Thus, the anauthorized use or distribution of the same by a corporate officer of Filriters cannot bind
the said corporation, not without the approval of its Board of Directors, and the maintenance of the
required reserve fund.

Consequently, the title of Filriters over the subject certificate of indebtedness must be upheld over
the claimed interest of Traders Royal Bank.

ACCORDINGLY, the petition is DISMISSED and the decision appealed from dated January 29,
1990 is hereby AFFIRMED.

SO ORDERED.

Regalado, Romero and Mendoza, JJ., concur.

Puno, J., took no part.

Footnotes

1 Justice Ricardo L. Pronove, Jr., ponente; concurred in by Justices Alfredo L.

Benipayo and Serafain V.C. Guingona, p. 18, Rollo.

2 P. 143, Record.

3 Ibid. at p. 146.

4 Ibid., at p. 148.

5 P. 1, Record.

6 P. 75, Record.

7 Answer, p. 97, Record.

8 P. 315, Record.

9 Pp. 16-17, RTC Decision, p. 330, Rollo.

10 Annex "A". Petition, supra.

11 Court of Appeals Decision, pp. 18-19, Rollo.

12 Section 57. Negotiable Instruments Law.

13 Petition, Annex "A", pp. 21-22, Rollo.

14 Ibid.

15 Campos and Campos, Negotiable Instruments Law, p. 38, 1971 ed.

16 G.R. No. 97753, August 10, 1992, 212 SCRA 448.

17 Petition

18 Yu vs. National Labor Relations Commission 245 SCRA 134.

19 Guatson International Travel and Tours, Inc. vs. National Labor Relations
Commission, 230 SCRA 815.

20 2 SCRA 632.

21 Official Gazette 9370.

22 See Article 1883, Civil Code.

23 See Article 19, Civil Code.

24 Sec. 213 Every insurance company, other than life, shall maintain a reserve fro
unearned premiums on its policies in force, which shall be charged as a liability in
any determination of its financial condition. Such reserve shall be equal to forty per
centum of the gross permiums, less returns and cancellations, received on policies or
risks having more than a year to run; Provided That for marine cargo risks, the
reserve shall be equal to forty per centum of the premiums written in the policies
upon yearly risks, and the full amount of premiums written during the last two months
of the calendar year upon all other marine risks not terminated. Presidential Decree
No. 612 (The Insurance Code of the Philippines).
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 73317 August 31, 1989

THOMAS YANG, petitioner,

vs.
THE HONORABLE MARCELINO R. VALDEZ, Presiding Judge, Regional Trial Court, 11th
Judicial Region, Branch XXII, General Santos City, SPS. RICARDO MORANTE and MILAGROS
MORANTE, respondents.

Francis M. Zosa for petitioner.

Bayani L. Calonzo for private respondents.

FELICIANO, J.:

The present Petition for Certiorari 1 seeks to annul and set aside the orders dated 7 January 1985,
18 January 1985 and 28 February 1985, of Judge Marcelino R. Valdez of the Regional Trial Court of
General Santos City, Branch 22. The assailed orders, respectively, had approved a replevin bond
posted by respondents, denied the counter-replevin bond filed by Manuel Yaphockun, and rejected
petitioner Thomas Yang's counter replevin bond.

On 4 January 1985, respondent spouses Ricardo and Milagros Morante brought an action in the
Regional Trial Court of General Santos City against petitioner Thomas Yang and Manuel
Yaphockun, to recover possession of two (2) Isuzu-cargo trucks. In their complaint, the Morante
spouses alleged that they had actual use and possession of the two (2) cargo trucks, having
acquired them during the period from 1982 to 1984. The trucks were, however, registered in the
name of petitioner Thomas Yang who was the Treasurer in the Morante spouses' business of buying
and selling corn. The Morante spouses further alleged that they were deprived of possession of the
vehicles in the morning of 3 January 1985, when petitioner Yang had the vehicles taken from where
they were parked in front of the Coca-Cola Plant in General Santos City, to the warehouse of Manuel
Yaphockun and there they were thereafter held. Despite repeated demands, the complaint alleged,
petitioner Yang refused to release the trucks to respondent spouses.

To obtain immediate possession of the Isuzu trucks, respondent spouses applied for a writ of
replevin and put up a replevin bond of P560,000.00 executed by respondent Milagros Morante and
Atty. Bayani Calonzo (counsel for respondent spouses). lâwphî1.ñèt

On 7 January 1985, the respondent judge issued an order of seizure directing the Provincial Sheriff
of South Cotabato to take immediate possession and custody of the vehicles involved. The Sheriff
carried out the order.

On 10 January 1985, defendant Manuel Yaphockun filed a motion seeking repossession of the
cargo trucks, and posted a replevin counter-bond of P560,000.00 executed by himself and one
Narciso Mirabueno. The respondent judge promptly required the respondent spouses to comment
on the counter-bond proffered.

The respondent spouses reacted by amending their complaint on 13 January 1985 by excluding
Manuel Yaphockun as party-defendant. The following day, i.e., 14 January 1985, the respondents
submitted an opposition to Yaphockun's counter-bond, contending that since Manuel Yaphockun
was merely a nominal defendant, he had no standing to demand the return of the cargo trucks. By
an order dated 18 January 1985, the respondent judge disapproved the counter-bond filed by
Manuel Yaphockun, since the latter had been dropped as party-defendant and accordingly no longer
had any personality to litigate in the replevin suit. The trial court also ordered the immediate release
and delivery of the cargo trucks to respondent spouses.

For his part, petitioner Yang moved, on 21 January 1985, for an extension of fifteen (15) days within
which to file an answer to the complaint for replevin. Four days later, on 25 January 1985, petitioner
put up a counter-bond in the amount of P560,000.00 which counter-bond was, however, rejected by
the respondent judge for having been filed out of time.

Petitioner Yang now argues before us that, firstly, respondent judge had committed a grave abuse of
discretion amounting to lack or excess of jurisdiction in approving the replevin bond of respondent
spouses. It is contended by petitioner that replevin bond was merely an undertaking of the
bondsmen Milagros Morante and Atty. Calonzo to pay the sum of P560,000.00, that no tangible
security, such as "cash, property or surety," was placed thereby at the disposal and custody of the
court. It is argued, secondly, that the replevin bond was defective considering that it had been filed
by only one of the two (2) private respondents and that the bondsmen thereon had failed by its terms
to undertake to return the cargo trucks to petitioner should he (the petitioner) be adjudged lawful
owner thereof.

We are not persuaded by petitioner's arguments.

A bond that is required to be given by law is commonly understood to refer to an obligation or

undertaking in writing that is sufficiently secured. 2 It is not indispensably necessary, however, that
the obligation of the bond be secured or supported by cash or personal property or real property or
the obligation of a surety other than the person giving the bond. Most generally understood, a "bond"
is an obligation reduced to writing binding the obligor to pay a sum of money to the obligee under
specified conditions. 3 At common law, a bond was merely a written obligation under seal. 4 A bond is
often, as a commercial matter, secured by a mortgage on real property; the mortgagee may be the
obligee, although the mortgagee may also be a third party surety whose personal credit is added to
that of the principal obligor under the bond.

The sufficiency of a bond is a matter that is addressed to the sound discretion of the court which
must approve the bond. In the case at bar, the replevin bond given by the respondent Morante
spouses was properly secured by the sureties themselves who declared their solvency and capacity
to answer for the undertaking assumed, through an Affidavit of Justification which read as follows:

We, MILAGROS MORANTE and BAYANI L. CALONZO, both of legal age, Filipinos,
married and residents of Maltana, Tampakan, South Cotabato, and General Santos
City, respectively, after having been duly sworn to in accordance with law do hereby
depose and say:

1. That each of them is a resident householder or free-holder within

the Philippines;
 2. That each of them is worth the amount specified in the under-
taking assumed by them in the above bond over and above all debts,
obligations and property exempt from execution.

IN WITNESS WHEREOF, we have hereunto set our hands, this 4th day of January,
1985, at General Santos City, Philippines.

The above sworn declaration of solvency which was submitted to the judge together with the bond,
in effect secured the replevin bond. We note also that the sureties or bondsmen under the bond
included not only Milagros Morante who was party-plaintiff below, but also a third person, Atty.
Bayani L. Calonzo who was not a party-litigant. Petitioner Yang never put in issue the financial
capability of these two (2) sureties. It follows that the approval of the replevin bond by respondent
judge, before whom it was presented and who was in a better position than this Court to appreciate
the financial standing of the sureties, can scarely be questioned as a grave abuse of discretion.

The other objections to the replevin bond are equally lacking in merit. The fact that the other
respondent, Ricardo Morante, did not act as surety on the same bond as his wife did, does not affect
the validity or the sufficiency of that bond. It would appear to the benefit of petitioner that Atty.
Bayani L. Calonzo signed up as the other or second surety or bondsman on that bond, since
petitioner thereby acquired a right of recourse not only against the respondent spouses but also
against a third person, not a party to the replevin suit. Further, the failure of the replevin bond to
state expressly that it was "conditioned for the return of the property to the defendant, if the return
thereof be adjudged," 5 is not fatal to the validity of the replevin bond. The replevin bond put up by
Milagros Morante and Bayani L. Calonzo stated that it was given "under the condition that [they] will
pay all the costs, which may be adjudged to the said defendants and all damages which said
defendants may sustain by reason of the order of replevin, if the court shall finally adjudge that the
plaintiffs were not entitled thereto." 6 We believe that the condition of the bond given in this case
substantially complied with the requirement of Section 2, Rule 60. Moreover, the provisions of Rule
60, Section 2 of the Revised Rules of Court under which the replevin bond was given may be
regarded as having become part of the bond as having been imported thereunto. All the particular
conditions prescribed in Section 2, Rule 60, although not written in the bond in printer's ink, will be
read into the bond in determining the scope and content of the liability of the sureties or bondsmen
under that bond. 7

Petitioner also contends that since the respondent spouses are not the registered owners of the
cargo trucks involved, the writ of replevin should not have been issued. We do not think so. The
provisional remedy of replevin is in the nature of a possessory action and the applicant who seeks
immediate possession of the property involved need not be holder of the legal title to the property. It
suffices, if at the time he applies for a writ of replevin, he is, in the words of Section 2, Rule 60,
"entitled to the possession thereof."

Petitioner further urges that the dropping of Manuel Yaphockun as party-defendant in the amended
complaint was fraudulently intended to deprive him (Yaphockun) of the right to demand the return of
the vehicles in dispute. The difficulty with this argument is that it is merely question-begging. A
person in actual or constructive possession of the goods sought to be replevied, should of course be
made a party-defendant. At the same time, however, the respondent spouses, as complainants in
the suit for replevin, were entitled, for their own convenience and at their own peril, to exclude or
strike out the name of a party previously impleaded from the complaint. In excluding Manuel
Yaphockun as party-defendant from the complaint, the respondent spouses were well within their
rights; no leave of court was needed, no responsive pleading having been previously filed. 8
Petitioner would finally challenge the order of respondent judge dated 28 February 1985 rejecting his
counter-replevin bond for having been filed out of time. Petitioner received summons on the
amended complaint on 25 January 1985 and on the same day, filed his counterbond. It is his
contention that his redelivery bond was not filed out of time, since he was served with summons only
on 25 January 1985.

A defendant in a replevin suit may demand return of possession of the property replevied by filing a
redelivery bond within the periods specified in Sections 5 and 6 of Rule 60, which provide:

Sec. 5. Return of property. — If the defendant objects to the sufficiency of the

plaintiffs bond, or of the surety or sureties thereon, he cannot require the return of the
property as in this section provided; but if he does not so object, he may, at any time
before the delivery of the property to the plaintiff, require the return thereof by filing
with the clerk or judge of the court a bond executed to the plaintiff, in double the
value of the property stated in the plaintiff's affidavit, for the delivery of the property to
the plaintiff, if such delivery be adjudged, and for the payment of such sum to him as
may be recovered against the defendant, and by serving a copy of such bond on the
plaintiff or his attorney;

Sec. 6. Disposition of property by officer. — If within five (5) days after the taking of
the property by the officer, the defendant does not object to the sufficiency of the
bond, or of the surety or sureties thereon, or require the return of the property as
provided in the last preceding section; or if the defendant so objects and the plaintiffs
first or new bond is approved; or if the defendant so requires, and his bond is
objected to and found insufficient and does not forthwith file an approved bond, the
property shall be delivered to the plaintiff. If for any reason the property is not
delivered to the plaintiff, the officer must return it to the defendant. (Emphasis
supplied)

Under Section 5, petitioner may "at any time before the delivery of the property to the plaintiff"
require the return of the property; in Section 6, he may do so, "within five (5) days after the taking of
the property by the officer." Both these periods are mandatory in character. 9 Thus, a lower court
which approves a counter-bond filed beyond the statutory periods, acts in excess of its jurisdiction.
In the instant case, the cargo trucks were taken into custody by the Sheriff on 7 January 1985.
Petitioner Yang's counter-replevin bond was filed on 25 January 1985. The matter was treated at
length in the trial court's order of 28 February 1985:

... It is also borne by the record that defendant, thru counsel, was served with copy 6f
the amended complaint dropping defendant Manuel Yap from the complaint on
January 14, 1985 and hence, said receipt of the amended complaint was tantamount
to a summons issued to the defendant Thomas Yang. It is a truism that the primary
purpose of summons is to acquire jurisdiction over the person of the parties, and
jurisdiction can be acquired by the voluntary submission of the defendant to the
jurisdiction of the Court. Hence, after defendant had been duly represented by
counsel even at the inception of the service of summons and a copy of the order of
replevin on January 7, 1985, defendant Thomas Yang had already been duly served,
especially so, when counsel manifested in their comment to the opposition filed by
plaintiffs that Manuel Yap has been duly authorized to represent Thomas Yang. From
then on defendant should have been on guard as to the provision of Section 6, Rule
60 of the Rules of Court — re — the five (5) days period within which to file the
counter-replevin for the approval of the court, counted from the actual taking of the
property by the officer or the sheriff on January 7, 1985. It is honestly believed that
 the five-day period spoken of by the Rule begins from the taking of the property by
the sheriff and not from the service of summons to the defendant, for even if
summons was already duly served to the defendant but the property has not yet
been taken by the sheriff, the provision above cited does not apply. Hence, it is clear
that the prescriptive period for filing a counter-replevin bond must be counted from
the actual taking of the property by the sheriff, subject of the replevin bond and in this
particular case on January 7, 1985. True indeed, that defendant Manuel Yap filed the
counter-replevin bond on January 10, 1985, which was denied by this court, that was
three (3) days after the property was taken on January 7, 1985 but when the said
defendant was dropped from the complaint on January 14, 1985, defendant Thomas
Yang should have immediately filed the proper counter-replevin bond after Manuel
Yap has been dropped from the complaint on January 14, 1985 considering that the
counter-replevin bond filed on January 10, 1985 by Manuel Yap has become
obsolete on this date, January 14, 1985. The service of summons to Thomas Yang
on January 25, 1985, has become an academic formality because on January 21,
1985, counsel has already filed a motion for extension of time of fifteen (15) days
within which to file their responsive pleading counted from January 31, 1985, for the
original period of fifteen (15) days for filing the corresponding answer lapsed on
January 31, 1985, which this court readily granted. Hence, irrespective of the order of
this court dated January 18,1985, denying the counter-replevin bond filed, defendant
Thomas Yang should and must have filed his counter replevin bond within two (2)
days from service of the amended complaint, the same must have been)'filed on
January 18, 1985, to conform with liberal interpretation of the rules and not on
January 25, 1985, for then the counter replevin bond had been filed beyond the
period provided by the Rules. The decisional principle on the filing of counter replevin
bond to entitle the defendant to the redelivery or retaining possession of the property,
is compliance with all the conditions precedent pursuant to the rules, and failure to
comply therewith entitles plaintiff to possession, and the initial steps in obtaining
redelivery must be taken within the time limit provided thereto . . . 10 (Emphasis
supplied)

We agree with the conclusion of respondent judge that petitioner's right to file a counterbond had
already prescribed.

We consider, accordingly, that respondent judge did not commit any grave abuse of discretion
amounting to lack or excess of jurisdiction in issuing the orders here assailed.

WHEREFORE, the Resolution of the Court dated 8 February 1988 granting due course to the
Petition is hereby WITHDRAWN and the "Petition for Review on Appeal by Certiorari" is DENIED for
lack of merit and the orders of respondent Judge Marcelino R. Valdez dated 7 January 1985, 18
January 1985 and 28 February 1985 are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Footnotes

1 The petition was erroneously captioned "petition for review on certiorari" and was
initially denied due course in a resolution dated 14 April 1986, for having been filed
out of time. The petition was, on reconsideration, given due course, the Court
treating the petition as a petition for certiorari under Rule 65 of the Revised Rules of
Court, as only interlocutory orders are involved.

2 Commissioner of Customs v. Alikpala, 36 SCRA 208 (1970).

3 Lockton v. Lockton, 157 Fed. Supp. 181 (1957); Gural v. Engle, 25 A. 2nd 257, 260
(1942).

4 Covington Virginia v. Woods, 29 S.E. 2nd 406, 408 (1944).

5 Section 2, last paragraph, Rule 60, Revised Rules of Court

6 Rollo, p. 21.

7 Bartley v. Bartley, et al. 171 Kan. 465, 233 P. 2d. 735 (1951); Paulsell v. Peters, et
al., 115 P. 2d 708 (1941); State v. Anderson, et al., 87 S.E. 2d 249 (1955).

8 Section 2, Rule 10, Revised Rules of Court.

9 Bachrach Motor Co., Inc. v. Albert, 60 Phil. 308 (1934).

10 Rollo, pp. 120-122.

 FIRST DIVISION

[G.R. No. 115902. September 27, 1995.]

FILINVEST CREDIT CORPORATION, Petitioner, v. HON. COURT OF APPEALS and SPOUSES

EDILBERTO and MARCIANA TADIAMAN, Respondents.

Labaguis, Loyola, Atienza, Felipe, Santos & Associates for Petitioner.

Napoleon R. Sta. Romana for Private Respondents.

SYLLABUS

1. REMEDIAL LAW; PROVISIONAL REMEDIES; REPLEVIN; RULE IN CARRYING OUT THE WRIT. — The Court
of Appeals correctly ruled that Filinvest is liable for damages not because it commenced an action for
replevin to recover possession of the truck prior to its foreclosure, but because of the manner it carried out
the seizure of the vehicle. Sections 3 and 4, Rule 60 of the Rules of Court are very clear and direct as to the
procedure for the seizure of property under a writ of replevin. In the instant case, it was not the sheriff or
any other proper officer of the trial court who implement the writ of replevin. Because it was aware that no
other person can implement the writ, Filinvest asked the trial court to appoint a special sheriff. Yet, it used
its own employees who misrepresented themselves as deputy sheriff to seize the truck without having been
authorized by the court to do so. Filinvest justified its seizure by citing a statement in Bachrach Motor Co. v.
Summers (42 Phil. 3 [1921]), to wit, "the only restriction on the mode by which the mortgagee shall secure
possession of the mortgaged property after breach of condition is that he must act in an orderly manner and
without creating a breach of the peace, subjecting himself to an action for trespass." This justification is
misplaced and misleading for Bachrach itself had ruled that if a mortgagee cannot obtain possession of a
mortgaged property for its sale on foreclosure, it must bring a civil action either to recover such possession
as a preliminary step to the sale or to obtain judicial foreclosure.
chan roble svirtuallaw lib rary

2. ID.; ID.; ID.; UPON THE DEFAULT OF THE MORTGAGOR OF HIS OBLIGATION, MORTGAGEE IS ENTITLED
TO INSTITUTE THEREOF. — Replevin is, of course, the appropriate action to recover possession preliminary,
to the extrajudicial foreclosure of a chattel mortgage. Filinvest did in fact instituted such an action and
obtained a writ of replevin. And, by filing it, Filinvest admitted that it cannot acquire possession of the
mortgaged vehicle in an orderly or peaceful manner. Accordingly, it should have left the enforcement of the
writ in accordance with Rule 60 of the Rules of Court which it had voluntarily invoked. Parenthetically, it
must be observed that the trial court erred in holding that the action for replevin was "not in order as
[Filinvest] is not the owner of the property (Sec. 2 par. (a) Rule 60)." It is not only the owner who can
institute a replevin suit. A person "entitled to the possession" of the property also can, as provided in the
same paragraph cited by the trial court. Upon the default by the mortgagor in his obligations, Filinvest, as a
mortgagee, had the right to the possession of the property mortgaged preparatory to its sale in a public
auction.

3. CIVIL LAW; HUMAN RELATIONS; �GOOD FAITH�; DEFINED. — In common usage, good faith is
ordinarily used to describe that state of mind denoting honesty of purpose, freedom from intention to
defraud, and, generally speaking, means being faithful to one’s duty or obligation. It consists of the honest
intention to abstain from taking an unconscionable and unscrupulous advantage of another.

4. ID.; DAMAGES; MORAL DAMAGES; MAY BE RECOVERED IN CASES INVOLVING ACTS REFERRED TO IN
ARTICLE 21 OF THE CIVIL CODE. — Anent the moral damages, the trial court ruled that the acts of the
petitioner were in total disregard of Articles 19, 20, and 21 of the Civil Code. It added that the petitioner had
not only caused actual damages in lost earnings, but had also caused the private respondents to suffer
indignities at the hands of the petitioner’s personnel in hiding the truck in question, misleading them, and
making them work for the release of the truck for about two weeks, thereby justifying the award of moral
damages along with the exemplary and other damages in favor of the private respondents. We agree with
this finding of the trial court. The petitioner’s acts clearly fall within the contemplation of Articles 19 and 21
of the Civil Code. The acts of fraudulently taking the truck, hiding it from the private respondents, and
removing its spare parts show nothing but a willful intention to cause loss to the private respondents that is
punctuated with bad faith and is obviously contrary to good customs. Thus, the private respondents are
entitled to the moral damages they prayed for, for under Article 2219 of the Civil Code, moral damages may
be recovered in cases involving acts referred to in Article 21 of the same Code. chanrob lesvi rtual|awl ibra ry
5. ID.; ID.; EXEMPLARY DAMAGES; DETERMINATION THEREOF ADDRESSED TO THE SOUND DISCRETION
OF THE COURT UPON PROOF OF PLAINTIFF’S ENTITLEMENT THERETO. — The award of exemplary damages
is in order in view of the wanton, fraudulent, and oppressive manner by which the petitioner sought to
enforce its right to the possession of the mortgaged vehicle. Article 2232 of the Civil Code provides: In
contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner. Of course, a plaintiff need not prove the actual
extent of exemplary damages, for its determination is addressed to the sound discretion of the court upon
proof of the plaintiff’s entitlement to moral, temperate, or actual or compensatory damages.

6. LEGAL ETHICS; ATTORNEY’S FEES; AWARD THEREOF, NOT PROPER IN THE ABSENCE OF BAD FAITH IN
FILING THE COMPLAINT. — The award for attorney’s fees must, however, be set aside. There is no question
that the petitioner filed in good faith its complaint for replevin and damages to protect its rights under the
promissory note and the chattel mortgage. That the private respondents had defaulted in its obligation
under the promissory note thereby authorizing the petitioner to seek enforcement of its claim thereunder
and proceed against the mortgage of the vehicle was duly recognized by the trial court by its judgment
against the private respondents incorporated in the first part of the dispositive portion. The private
respondents did not appeal therefrom. There would then be no basis for awarding attorney’s fees in favor of
the private respondents for whatever physical suffering, mental anguish, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, or any other similar injury they had suffered,
even if proven, were only such as are usually caused to parties haled into court as a defendant and which
are not compensable, for the law could not have meant to impose a penalty on the right to litigate.

DECISION

DAVID, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals in CA-G.R. CV
No. 30231 1 affirming in toto the decision of the Regional Trial Court (RTC) of San Fernando (Pampanga),
Branch 46, in Civil Case No. 6599. 2 chanro blesvi rtua llawli bra ry

The antecedent facts are summarized by the Court of Appeals as follows: chan rob1e s virtual 1aw lib rary

Defendants-appellees, spouses Edilberto and Marciana Tadiaman, residents of Cabanatuan City, purchased a
10-wheeler Isuzu cargo truck from Jordan Enterprises, Inc., in Quezon City, in installments. Said spouses
executed a promissory note for P196,680.00 payable in 24 monthly installments in favor of Jordan
Enterprises, Inc., and a Chattel Mortgage over the motor vehicle purchased to secure the payment of the
promissory note. Jordan Enterprises, Inc. assigned its rights and interest over the said instruments to
Filinvest Finance and Leasing Corporation, which in turn assigned them to plaintiff-appellant Filinvest Credit
Corporation.

Subsequently, the spouses Tadiaman defaulted in the payment of the installments due on the promissory
note, and plaintiff-appellant filed an action for replevin and damages against them with the court below.
Upon motion of the plaintiff-appellant, a writ of replevin was issued, and the truck was seized in the
province of Isabela, by persons who represented themselves to be special sheriffs of the court, but who
turned out to be employees of the plaintiff-appellant. The truck was brought by such persons all the way
back to Metro Manila.chanroble s.com : vi rtua l lawlib rary

Thereafter, defendant spouses filed a counterbond, and the lower court ordered the return of the truck. This
was not immediately implemented because the defendant spouses were met with delaying tactics of the
plaintiff-appellant, and when they finally recovered the truck, they found the same to be "cannibalized." This
was graphically recounted in the report (Exhibit "3") of Deputy Sheriff Anastacio Dizon, who assisted the
spouses in recovering the vehicle, excerpts of which are as follows: jgc:chan roble s.com.p h

"On February 14, 1983, the undersigned contacted Mr. Villanueva, Branch Manager of the FILINVEST at Bo.
Dolores, San Fernando, Pampanga and he gave the information that the said Isuzu Cargo Truck, subject of
the aforesaid Court Order, was already delivered to their main garage at Bo. Talon, Las Piñas, Metro Manila.
Mr. Villanueva further told the undersigned that in order to effectively enforce the aforementioned Court
Order, the undersigned should discuss the matter with Mr. Telesforo (Jun) Isidro, Collection in-charge, and
Mr. Gaspar Antonio delos Santos, Vice President for Branch Administration of the FILINVEST main office at
Makati, Metro Manila.

On February 18, 1983, defendant Marciana Tadiaman, Atty. Benites and the undersigned contacted Messrs.
Gaspar Antonio delos Santos and Telesforo (Jun) Isidro at the main office, FILINVEST at Paseo de Roxas,
Makati, Metro Manila and we discussed the smooth retaking of possession by the defendants of the 10-
wheeler Isuzu Cargo Truck with motor No. E 120-22041, Serial No. SPM 710164864. Messrs. Delos Santos
and Isidro alternatively argued that the Traveler’s Insurance Company is one of the black listed Insurance
firm, so much so, it is only the company’s lawyer who can direct the delivery of the above-cited Cargo Truck
to us. They told us to wait for the arrival of their lawyer at 5:40 p.m., and we agreed that in the meantime
that their lawyer is not around, the said vehicle would not be transferred to any other place.

Came 5:30 P.M., but the company’s Lawyer never arrived and we were told to go back February 21, 1983.
Mr. delos Santos finally told us that the company will not deliver to us the said Cargo Truck until and after
their Company Lawyer would say so.

On February 19, 1983, Mr. Felicisimo Hogaldo, Atty. Benites, defendant Marciana Tadiaman, three policemen
of Las Piñas, Metro Manila, and the undersigned went directly to the FILINVEST garage at Bo. Talon, Las
Piñas, Metro Manila and there contracted Mr. Ismael Pascual Custodian of all repossessed vehicles of the
said company, and Mr. Pedro Gervacio, Security Guard of the company assigned by the Allied Investigation
Bureau at 6th Floor, Ramon Santos Bldg. They told us that the 10-wheeler Cargo Truck subject of the
above-cited court order is not one of the vehicles listed in their in-coming and out-going Ledger books and
they told us to examine their books.

Defendant Marciana Tadiaman told Messrs. Pedro Gervacio and Ismael Pascual that she saw the above-
mentioned Cargo-Truck Last February 14, 1983 at the end corner of the garage. And for that purpose she
requested us, including Mr. Pascual and the Security Guard, to inspect the site where the said truck was
supposed to have been placed when she for the first time saw it on February 14, 1983. chanro blesvi rtua llawli bra ry

Unexpectedly, she saw and pointed to us on the site oil leaks on the ground which she believed came from
the vehicle we were looking for. We also saw skid marks of tires of a truck starting from the site where the
cargo truck was previously placed as pointed to by defendant Marciana Tadiaman up to around 20 meters
before reaching the gate of the compound. The other skid marks of tires of a truck was also seen on a
portion of a road leading to a compound owned by other person.

Mr. Gervacio and Pascual strongly insisted that they do not know the whereabouts of the said Cargo Truck.
The undersigned requested the Policemen of Las Piñas, Metro Manila, Atty. Benites and defendant Marciana
Tadiaman to see for ourselves the road leading to a compound owned by another firm, about 1/3 of the
length of which road is completely blocked by a big and tall building. It was at this portion where the subject
Cargo Truck was placed.

Mr. Ismael Pascual called their main office, FILINVEST, by telephone about the discovery of the whereabouts
of said cargo truck by the undersigned Defendant Marciana Tadiaman to Mr. Pascual that there were missing
parts and that other parts of the truck were completely changed with worn-out spare parts. Mr. Pascual told
the undersigned that he will only affix his signature on the acknowledgment receipt, below the line "GIVEN
BY", if the missing parts and replaced parts were not mentioned in said receipt. c han roblesv irt ual|awlib ra ry

It was because of the said actuations of the plaintiff-appellant that the defendants-appellee [sic] filed a
counterclaim for damages. . . ." 3

After trial, the trial court rendered a decision the dispositive portion of which reads as follow: cha nrob 1es vi rtua l 1aw lib rary

WHEREFORE, judgment is hereby rendered on the main action, in favor of plaintiff and against defendants,
ordering the latter, jointly and severally, to pay the plaintiff the following sums: chan roble svi rtual lawlib rary

(a) The sum of P88,333.32 which is the balance of the promissory note as of September 26, 1982, with
interest thereon at 14% per annum from said date.

(b) The sum equivalent to 25% of the amount sued upon, as and for attorney’s fees, that is P88,333.32 plus
the stipulated interest; and
(c) The cost of suit. chanrobles.com : virtual lawlibrary

On the Counterclaim: chan rob1es v irt ual 1aw l ibra ry

Plaintiff not having successfully rebutted the defendants’ evidence respecting damages caused to them by
virtue of the illegal seizure of the property, and hiding the truck in some other place not their garage,
feigning knowledge that the same had been recorded in their incoming ledger books, the "cannibalizing"
done while the truck was in the custody of plaintiff’s garage, the frustrations which the defendants had to
undergo for two weeks before the truck was finally placed in the hands of Sheriff Dizon, all point to the
liability of plaintiff for its failure intentionally or otherwise "to observe certain norms that spring from the
fountain of good conscience and guide human conduct to the end that law may approach its supreme ideal,
which is the sway and dominance of justice." cralaw virtua1aw lib rary

WHEREFORE, judgment is rendered in favor of counter-claimants defendants and against plaintiff, ordering
the latter to pay to the defendants the following sums: chanrob 1es v irtua l 1aw lib ra ry

(1) Actual damages representing lost spare parts while in the custody of plaintiff in its garage being hidden
from defendants, in the sum of P50,000.00;

(2) P50,000.00 as moral damages;

(3) P20,000.00 exemplary damages; chanroble svirtual lawlib rary

(4) P2,000.00 as attorneys fee; and

(5) Proportionate part of the costs adjudged against plaintiff." cralaw virt ua1aw lib rary

SO ORDERED. 4 chanroblesvi rtua l|awlib rary

Petitioner Filinvest Credit Corporation (hereinafter Filinvest) appealed that portion of the judgment on the
counterclaim to the Court of Appeals (CA-G.R. CV No. 30231) and assigned the following errors of the lower
court:chanrob1es vi rt ual 1aw li bra ry

THE TRIAL COURT ERRED IN AWARDING DAMAGES; ACTUAL, MORAL, EXEMPLARY AND ATTORNEY’S FEES
AND PROPORTIONATE PART OF THE COSTS IN FAVOR OF THE DEFENDANTS IN THEIR COUNTER-CLAIMS IN
THE ABSENCE OF ANY ACTIONABLE LOSS SUSTAINED BY THEM FOR IT WAS THE DEFENDANTS WHO
VIOLATED THEIR PROMISSORY NOTE AND CHATTEL MORTGAGE WITH THE PLAINTIFF.

II

THE TRIAL COURT ERRED IN HOLDING THAT THE PLAINTIFF OR ANY OF ITS REPRESENTATIVES HAD NO
RIGHT TO TAKE THE MORTGAGED PROPERTY AFTER THE BREACH OF THE CONDITIONS IN THE
PROMISSORY NOTE AND CHATTEL MORTGAGE BY THE DEFENDANTS. 5 chanroblesv irt uallawl ibra ry

In its decision of 26 May 1994, the Court of Appeals affirmed in toto the decision of the trial court. It found
no merit in the appeal. Thus: chan rob1es v irt ual 1aw l ibra ry

The plaintiff-appellant argues that it had the right to seize the truck from the moment that the defendants-
appellees defaulted in the payment of the monthly installments, and to institute an action for replevin
preliminary to effecting a foreclosure of the property mortgaged extrajudicially. The plaintiff-appellant
misses the point entirely. In the first place, it has not been held liable for filing an action for replevin in order
to recover possession of the truck prior to its foreclosure, but for the manner in which it carried out the
seizure of the vehicle. It is ironic that, in spite of plaintiff-appellant’s apparent recognition of the necessity of
legal means for the recovery of the truck, in the end, it utilized illegal means in the actual seizure of the
vehicle by having its employees pose as special agents of the court in effecting the same. Plaintiff-appellant
even went to the extent of asking the appointment of a special sheriff to enforce the order of seizure, but
still had the truck seized by its own people instead. It is as if the plaintiff-appellant utilized the court only to
clothe its employees with apparent authority to seize the vehicle concerned.
In the second place, plaintiff-appellant was held liable for hiding the truck and making it difficult for the
defendants-appellees to recover the same. Defendants-appell[ees] were able to have the writ of seizure
quashed on the basis of a counterbond. Plaintiff-appellant should have been the first to obey the order for
the return of the seized truck, considering its avowed adherence to law and order. And yet, is made it
difficult for the defendants-appellees to actually recover the vehicle, as reported by the deputy sheriff
above. chanrob les.com : vi rtua l lawlib ra ry

In the third place, there is unrebutted evidence that the truck was "cannibalized" while in the custody of the
plaintiff-appellant. The latter argues that such evidence is not credible, because, if the truck was stripped of
vital parts, it could not have been driven by the defendants-appellees all the way back to Cabanatuan City.
Plaintiff-appellant conveniently overlooks the testimony of defendant-appellee Mrs. Tadiaman that they had
to buy the missing parts in order to make the truck run (t.s.n., p. 40, October 2, 1986, Exhibits "9", "10"
and "11"). 6

Filinvest now comes to us alleging that the Court of Appeals

(a) . . . DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT WHEN IT REVERSED THE DECISION OF THE REGIONAL TRIAL
COURT OF MANILA, BRANCH 9;

(b) . . . .ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT
SUSTAINED THE ERRONEOUS DECISION OF THE HONORABLE REGIONAL TRIAL COURT BRANCH 46 OF SAN
FERNANDO, PAMPANGA;

(c) . . . . ACTED WITH GRAVE ABUSE OF DISCRETION AND CONTRARY TO EXISTING LAW AND
JURISPRUDENCE WHEN [IT] SUSTAINED THE SPECULATIVE FINDING OF THE RTC THAT THE PETITIONER
"CANNIBALIZED" THE MORTGAGED VEHICLE;

(d) . . . ERRED GRIEVOUSLY WHEN IT EXONERATED PRIVATE RESPONDENTS FROM PAYING THE
PETITIONER ON THE LATTER’S LEGITIMATE CLAIMS UNDER THE COMPLAINT PARTICULARLY ON THE
UNPAID PROMISSORY NOTE MADE BY THE PRIVATE RESPONDENTS; chanroblesv irt uallawl ibra ry

(e) . . . ACTED CONTRARY TO LAW WHEN IT IGNORED THE PLAIN ADMISSIONS IN THE ANSWER (AT
PARAGRAPH 2, & 3, PAGE 1) OF THE DEFENDANTS (PRIVATE RESPONDENTS) THAT THEY HAVE DULY
EXECUTED A PROMISSORY NOTE SECURED BY A DEED OF CHATTEL MORTGAGE AND THAT THE PRIVATE
RESPONDENTS VIOLATED THE TERMS OF THE PROMISSORY NOTE IN FAILING TO PAY THE INSTALLMENTS
DUE THEREON FOR NOV. 15, 1981 AND THE SUBSEQUENT 9 INSTALLMENTS OR UP TO AUGUST 15, 1982;

(f) . . . ERRED IN REFUSING TO APPLY THE TERMS AND CONDITIONS OF THE PROMISSORY NOTE AND THE
DEED OF CHATTEL MORTGAGE SIGNED BY THE PONCES "AS THE LAW BETWEEN THE PARTIES" TO THE
CONTRACT SUBJECT OF THE SUIT IN THE RTC. 7

Additionally, Filinvest maintains that: chanroblesv irt uallawl ibra ry

(g) THERE IS NO PROOF TO SUSTAIN THE AWARD OF MORAL DAMAGES FOR P50,000.00 ACCORDINGLY
THERE IS NO BASIS FOR THE AWARD OF EXEMPLARY DAMAGES. 8

We gave due course to the petition and required the parties to submit their respective memoranda after the
filing of the comment to the petition by the private respondents and of the reply thereto by Filinvest. The
parties subsequently filed their memoranda which merely reiterated the arguments in their respective
initiatory pleadings.

The only relevant issue in this petition is whether or not the Court of Appeals committed reversible error in
dismissing Filinvest’s appeal from the decision of the trial court on the private respondents’ counterclaim and
in affirming in toto the said decision. The first ground raised herein by Filinvest is baseless since the
discussions or arguments in Filinvest’s petition and memorandum fail to disclose what the decision of Branch
9 of the RTC of Manila is all about. So is the fourth ground, for, the unappealed portion of the trial court’s
decision did in fact order the private respondents to pay Filinvest the unpaid balance of the promissory note,
with interest and attorney’s fees. All the other grounds are deemed waived for not having been raised in the
appeal to the Court of Appeals. In any event, Filinvest’s disquisitions on such irrelevant issues are
confounded. chanrob lesvi rtual|awl ibra ry
As to the sole issue defined above, the Court of Appeals correctly ruled that Filinvest is liable for damages
not because it commenced an action for replevin to recover possession of the truck prior to its foreclosure,
but because of the manner it carried out the seizure of the vehicle. Sections 3 and 4, Rule 60 of the Rules of
Court are very clear and direct as to the procedure for the seizure of property under a writ of replevin,
thus: chanrob 1es vi rtua l 1aw lib rary

SECTION 3. Order. — Upon the filing of such affidavit and bond with the clerk or judge of the court in which
the action is pending, the judge of such court shall issue an order describing the personal property alleged
to be wrongfully detained, and requiring the sheriff or other proper officer of the court forthwith to take such
property into his custody.

SECTION 4. Duty of the officer. — Upon receiving such order the officer must serve a copy thereof on the
defendant together with a copy of the application, affidavit and bond, and must forthwith take the property,
if it be in the possession of the defendant or his agent, and retain it in his custody . . . (Emphasis supplied)
: virtual lawlib rary
chan rob les.com

In the instant case, it was not the sheriff or any other proper officer of the trial court who implemented the
writ of replevin. Because it was aware that no other person can implement the writ, Filinvest asked the trial
court to appoint a special sheriff. Yet, it used its own employees who misrepresented themselves as deputy
sheriff to seize the truck without having been authorized by the court to do so. Filinvest justified its seizure
by citing a statement in Bachrach Motor Co. v. Summers, 9 to wit, "the only restriction on the mode by
which the mortgagee shall secure possession of the mortgaged property after breach of condition is that he
must act in an orderly manner and without creating a breach of the peace, subjecting himself to an action
for trespass." cralaw virtua 1aw lib rary

This justification is misplaced and misleading for Bachrach itself had ruled that if a mortgagee cannot obtain
possession of a mortgaged property for its sale on foreclosure, it must bring a civil action either to recover
such possession as a preliminary step to the sale or to obtain judicial foreclosure. Pertinent portions of
Bachrach read as follows: chanrob1e s virtual 1aw li brary

Where, however, debtor refuses to yield up the property, the creditor must institute an action, either to
effect a judicial foreclosure directly, or to secure possession as a preliminary to the sale contemplated in the
provision above quoted. He cannot lawfully take the property by force against the will of the debtor. Upon
this point the American authorities are even more harmonious than they are upon the point that the creditor
is entitled to possession. As was said many years ago by the writer of this opinion in a monographic article
contributed to an encyclopedic legal treatise, "if possession cannot be peaceably obtained the mortgagee
must bring an action." (Trust Deeds and Power of Sale Mortgages, 28 Am. & Eng. Encyc. of Law, 2d ed.,
783.) In the Article of Chattel Mortgages, in Corpus Juris, we find the following statement of the law on the
same point: "The only restriction on the mode by which the mortgagee shall secure possession of the
mortgaged property after breach of condition is that he must act in an orderly manner and without creating
a breach of the peace, subjecting himself to an action to trespass." (11 C.J., 560; see also 5 R.C.L., 462.)

The reason why the law does not allow the creditor to possess himself of the mortgaged property with
violence and against the will of the debtor is to be found in the fact that the creditor’s right of possession is
conditioned upon the fact of default, and the existence of this fact my naturally be the subject of
controversy. The debtor, for instance, may claim good faith, and rightly or wrongly, that the debt is paid, or
that for some other reason the alleged default is nonexistent. His possession in this situation is as fully
entitled to protection as that of any other person, and in the language of article 446 of the Civil Code he
must be respected therein. To allow the creditor to seize the property against the will of the debtor would
make the former to a certain extent both judge and executioner in his own cause — a thing which is
inadmissible in the absence of unequivocal agreement in the contract itself or express provision to that
effect in the statute.

It will be observed that the law places the responsibility of conducting the sale upon "a public officer;" and it
might be supposed that an officer, such as the sheriff, can seize the property where the creditor could not.
This suggestion is, we think, without force, as it is manifest that the sheriff or other officer proceeding under
the authority of the language already quoted from section 14 of the Chattel Mortgage Law, becomes pro hac
vice the mere agent of the creditor. There is nothing in this provision which creates a specific duty on the
part of the officer to seize the mortgaged property; and no intention on the part of the law-making body to
impose such a duty can be implied. The conclusion is clear that for the recovery of possession, where the
right is disputed, the creditor must proceed along the usual channels by action in court. Whether the sheriff,
upon being indemnified by the creditor, could safely proceed to take the property from the debtor, is a point
upon which we express no opinion. . . .

But whatever conclusion may be drawn in the premises with respect to the true nature of a chattel
mortgage, the result must in this case be the same; for whether the mortgagee becomes the real owner of
the mortgaged property — as some suppose — or acquires only certain rights therein, it is none the less
clear that he has after default the right of possession; though it cannot be admitted that he may take the
law into his own hands and wrest the property violently from the possession of the mortgagor. Neither can
he do through the medium of a public officer that which he cannot directly do himself. The consequence is
that in such case the creditor must either resort to a civil action to recover possession as a preliminary to a
sale, or preferably he may bring an action to obtain a judicial foreclosure in conformity, so far as practicable,
with the provisions of the Chattel Mortgage Law. 10 chanroblesv irtuallaw lib rary

Replevin is, of course, the appropriate action to recover possession preliminary, to the extrajudicial
foreclosure of a chattel mortgage. Filinvest did in fact instituted such an action and obtained a writ of
replevin. And, by filing it, Filinvest admitted that it cannot acquire possession of the mortgaged vehicle in an
orderly or peaceful manner. Accordingly, it should have left the enforcement of the writ in accordance with
Rule 60 of the Rules of Court which it had voluntarily invoked.

Parenthetically, it must be observed that the trial court erred in holding that the action for replevin was "not
in order as [Filinvest] is not the owner of the property (Sec. 2 par. (a) Rule 60)." 11 It is not only the owner
who can institute a replevin suit. A person "entitled to the possession" of the property also can, as provided
in the same paragraph cited by the trial court, which reads: chan rob1e s virtual 1aw l ibra ry

SECTION 2. Affidavit and bond. — Upon applying for such order the plaintiff must show . . . chanroblesv irt ual|awlib rary

(a) That the plaintiff is the owner of the property claimed particularly describing it, or is entitled to the
possession thereof; . . . (Emphasis supplied)

Upon the default by the mortgagor in his obligations, Filinvest, as a mortgagee, had the right to the
possession of the property mortgaged preparatory to its sale in a public auction. 12 However, for employing
subterfuge in seizing the truck by misrepresenting its employees as deputy sheriffs and then hiding and
cannibalizing it, Filinvest committed bad faith in violation of Article 19 of the Civil Code which provides: chan rob1e s virtual 1aw l ibra ry

Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith. chanroble svi rtu allawlib rary

In common usage, good faith is ordinarily used to describe that state of mind denoting honesty of purpose,
freedom from intention to defraud, and, generally speaking, means being faithful to one’s duty or obligation.
13 It consists of the honest intention to abstain from taking an unconscionable and unscrupulous advantage
of another. 14

This leaves us to the issue of damages and attorney’s fees.

In their answer with counterclaim, the private respondents asked for (a) actual damages of P50,000.00 for
the spare parts found missing after their recovery of the truck and another P50,000.00 for unearned profits
due to the failure to use the truck in their ricemill business; (b) moral damages of P50,000.00 for "the
mental anguish, serious anxiety, physical suffering, wounded feelings, social humiliation, moral shock,
sleepless nights and other similar injury" which they suffered as a "proximate result of the [petitioner’s]
illegal, wrongful and unlawful acts" ; (c) nominal damages of P30,000.00; (d) exemplary damages of
P20,000.00; and (e) attorney’s fees of ,P20,000.00 which they incurred "as a direct result of [petitioner’s]
illegal and unwarranted actuations and in connection with the defense of this action." 15 chanroble svi rtual|awl ibra ry

As to actual damages, the petitioner admits that per Exhibits "1," "9," and "10" of the private respondents,
only the sum of P33,22.00 — and not P50,000.00 — was "supposedly spent for the alleged lost spare parts."
16 The petitioner may thus be held liable only for such amount for actual or compensatory damages.

Anent the moral damages, the trial court ruled that the acts of the petitioner were in total disregard of
Articles 19, 20, and 21 of the Civil Code. 17 It added that the petitioner had not only caused actual damages
in lost earnings, but had also caused the private respondents to suffer indignities at the hands of the
petitioner’s personnel in hiding the truck in question, misleading them, and making them work for the
release of the truck for about two weeks, thereby justifying the award of moral damages along with the
exemplary and other damages in favor of the private respondents. 18
We agree with this finding of the trial court. The petitioner’s acts clearly fall within the contemplation of
Articles 19 and 21 of the Civil Code. 19 The acts of fraudulently taking the truck, hiding it from the private
respondents, and removing its spare parts show nothing but a willful intention to cause loss to the private
respondents that is punctuated with bad faith and is obviously contrary to good customs. Thus, the private
respondents are entitled to the moral damages they prayed for, for under Article 2219 of the Civil Code,
moral damages may be recovered in cases involving acts referred to in Article 21 of the same Code. chanroblesvi rt uallawl ibra ry

The private respondents prayed for nominal damages of P30,000.00 which the trial court did not award
them. Having failed to appeal this omission by the trial court, we cannot make anymore such award at this
point.

The award of exemplary damages is in order in view of the wanton, fraudulent, and oppressive manner by
which the petitioner sought to enforce its right to the possession of the mortgaged vehicle. Article 2232 of
the Civil Code provides:chan rob1e s virtual 1aw l ibra ry

In contracts and quasi-contracts, the court may award exemplary damages if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent manner. chanroble s.com : vi rtual lawlib rary

Of course, a plaintiff need not prove the actual extent of exemplary damages, for its determination is
addressed to the sound discretion of the court upon proof of the plaintiff’s entitlement to moral, temperate,
or actual or compensatory damages. Article 2234 of the Civil Code thus provides in part as follows: chanrob 1es vi rtua l 1aw lib rary

While the amount of the exemplary damages need not be proved, the plaintiff must show that he is entitled
to moral, temperate or compensatory damages before the court may consider the question of whether or
not exemplary damages should be awarded. . . .

The award for attorney’s fees must, however, be set aside. There is no question that the petitioner filed in
good faith its complaint for replevin and damages to protect its rights under the promissory note and the
chattel mortgage. That the private respondents had defaulted in its obligation under the promissory note
thereby authorizing the petitioner to seek enforcement of its claim thereunder and proceed against the
mortgage of the vehicle was duly recognized by the trial court by its judgment against the private
respondents incorporated in the first part of the dispositive portion. The private respondents did not appeal
therefrom. There would then be no basis for awarding attorney’s fees in favor of the private respondents for
whatever physical suffering, mental anguish, serious anxiety, besmirched reputation, wounded feelings,
moral shock, social humiliation, or any other similar injury they had suffered, even if proven, were only such
as are usually caused to parties haled into court as a defendant and which are not compensable, for the law
could not have meant to impose a penalty on the right to litigate. 20

WHEREFORE, the assailed judgment of the Court of Appeals in CA-G.R. CV No. 30231 as well as that of the
Regional Trial Court of San Fernando, Pampanga, Branch 46 in Civil Case No. 6599 on the counterclaim is
AFFIRMED, subject to the modifications abovestated. As so modified, the petitioner is hereby ordered to pay
the private respondents only the following: c hanro b1es vi rt ual 1aw li bra ry

(a) actual damages in the reduced amount of P33,222.00;

(b) moral damages in the amount of P50.000.00; and chanroble s.com : virtua l lawlib ra ry

(c) exemplary damages in the amount of P20,000.00.

No pronouncement as to costs.

SO ORDERED.

Padilla, Bellosillo and Kapunan, JJ., concur. chanroble svirtual lawlib rary

Hermosisima, Jr., J., is on leave.

Endnotes:
1. Rollo, 44-50. Per Hofileña, H., J., Ramirez, P., and Garcia, C., JJ., concurring.

2. Id., 51-56. Per Judge Norberto C. Ponce.

3. Rollo, 45-48. chan rob lesvi rtua llawlib ra ry

4. Rollo, 55-56.

5. Rollo, 48-49.

6. Rollo, 49-50.

7. Rollo, 13-14.

8. Id., 22. chanroblesvi rt uallawl ibra ry

9. 42 Phil. 3 [1921].

10. Supra, at pages 6-7, 9-10. See BPI Credit Corp. v. Court of Appeals, 204 601 [1991].

11. Rollo, 54.

12. See Bachrach Motor Co. v. Summers, supra note 9; BPI Credit Corp. v. Court of Appeals, note 10.

13. Black’s Law Dictionary 693 (6th ed. 1990). chanro blesvi rt uallawl ibra ry

14. Abando v. Lozado, 178 SCRA 509 [1989]; Farolan v. Solmac Marketing Corp., 195 SCRA 168 [1991].

15. Rollo, 76-77.

16. Petition, 24; Id., 33; Memorandum, 19; Id., 121.

17. RTC Decision, 3-4; Rollo, 53-54.

18. Id.; Id. chanroble svirtuallaw lib rary

19. Article 20 does not apply in this case for it refers to acts that are contrary to Law, but there is no
allegation, proof, or finding that the petitioner’s actions were contrary to any provision of the Law.

20. Espiritu v. Court of Appeals, 137 SCRA 50 [1985]; PNB v. Court of Appeals, 159 SCRA 433 [1988];
Ilocos Norte Electric Co. v. Court of Appeals, 179 SCRA 5 [1989]; Castillo v. Court of Appeals, 205 SCRA 529
[1992].
 FIRST DIVISION

[A.M. No. P-05-1942. January 17, 2005]

ALIBSAR ADOMA, complainant, vs. ROMEO GATCHECO, Sheriff III,

and EUGENIO TAGUBA, Process Server, of Branches 1 and 2,
respectively, of the Municipal Trial Court in Cities of Santiago
City, respondents.

DECISION
YNARES-SANTIAGO, J.:

The instant administrative complaint filed against respondents for violation of

Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) and conduct unbecoming
a court employee, arose from the execution of a writ of replevin in Adoma v. Spouses
Edmundo Andres and Luzviminda Andres, docketed as Civil Case No. 1404-1-669, for
recovery of possession of motor vehicle with prayer for the issuance of a writ of replevin
before Branch 1 of the Municipal Trial Court in Cities (MTCC) of Santiago City, presided
by Judge Ruben Plata.
Complainant Alibsar Adoma claimed that on August 16, 2003 a writ of replevin [1] for
the recovery of an L-300 van was issued in his favor. On the same day, respondent
sheriff Romeo Gatcheco implemented the writ. He was accompanied by respondent
Eugenio Taguba, a process server of Branch 2 of MTCC, Santiago City, who
volunteered to assist respondent sheriff. After the two respondents seized the vehicle,
they demanded payment of P8,000.00, allegedly promised by complainant but the latter
was able to give only P1,000.00 and another P1,000.00 the following day. [2]
The writ of replevin stated that the vehicle will be delivered to complainant after 5
days from the implementation thereof. With the vehicle still undelivered on the 7th day,
complainant threatened to file an administrative case against respondent sheriff. Finally,
on August 29, 2003, the latter was forced to release the vehicle to complainant.
Respondents, however, continued to demand P6,000.00, hence complainant filed the
instant administrative case.[3]
Respondents, on the other hand, denied soliciting and receiving any amount from
the complainant. Respondent sheriff admitted, however, that complainant promised to
give him P10,000.00 if the vehicle will be sold.[4]
On September 10, 2003, the Court referred the instant administrative complaint to
Judge Fe Albano Madrid, Executive Judge, Regional Trial Court, Santiago City, Isabela,
for investigation, report and recommendation.[5]
 In her investigation report, Judge Madrid found the testimony of complainant which
was corroborated by two witnesses, to be more credible. She refused to believe the
claim of respondent sheriff that he did not release the vehicle to complainant after 5
days from the implementation of the writ on August 16, 2003, because he was awaiting
instructions from Judge Plata. However, she found that respondent sheriff did not
actually demand money for the implementation of the writ because it was complainant
who promised to give money in exchange for the implementation of the writ of replevin.
Nevertheless, she concluded that respondent sheriff is guilty of misconduct considering
that he accepted partial payment and insisted on its full payment.
As to respondent Taguba, Judge Madrid recommended that he be reprimanded for
trying to abet the misconduct of respondent sheriff.
Upon receipt of the report of Judge Madrid, the Court referred the case to the Office
of the Court Administrator (OCA) for evaluation, report and recommendation.[6]
In its Memorandum dated June 4, 2004, the OCA affirmed the investigating Judges
report. It recommended that respondent sheriff be fined in the amount of P5,000.00 for
conduct unbecoming a court employee and that respondent Taguba be reprimanded for
trying to abet the misconduct of a fellow employee of another court.
On July 5, 2004, the Court required the parties to manifest whether they are willing
to submit the case for resolution based on the pleadings filed. However, to date, the
parties have yet to file their manifestation. Hence, we are constrained to dispense the
filing of such manifestation.
The Court agrees with the findings of the investigating Judge and the OCA that
respondents received the amount of P2,000.00 and that they demanded the payment of
an additional P6,000.00 from complainant. The testimony of complainant before the
investigating Judge is worthy of belief because the same was not only candid and direct
but also corroborated by two witnesses who attested to the veracity of complainants
accusations. The writ of replevin has been implemented and the vehicle is now in
complainants possession.
Under Section 9, Rule 141 of the Rules of Court, the procedure for the execution of
writs and other processes are: first, the sheriff must make an estimate of the expenses
to be incurred by him; second, he must obtain court approval for such estimated
expenses; third, the approved estimated expenses shall be deposited by the interested
party with the Clerk of Court and ex-oficio sheriff; fourth, the Clerk of Court shall
disburse the amount to the executing sheriff; and fifth, the executing sheriff shall
liquidate his expenses within the same period for rendering a return on the writ. Any
amount received by the sheriff in excess of the lawful fees allowed by the Rules of Court
is an unlawful exaction which renders him liable for grave misconduct and gross
dishonesty.[7]
In the instant case, respondent sheriff totally disregarded the aforecited procedure.
He failed to make and submit estimate of the sheriffs expenses. The amounts received
and demanded by him are therefore unauthorized fees. His acts of accepting and
soliciting said monetary considerations make him liable not only for conduct
unbecoming a court employee but also for grave misconduct and dishonesty.
 As correctly found by the OCA, respondent sheriff deliberately failed to place
complainant in possession of the vehicle after five days from the implementation of the
writ because the latter failed to give the whole amount he promised. Since the adverse
party did not object to the complainants bond nor posted a redelivery bond to recover
possession of the vehicle taken under the writ of replevin, respondent sheriff is under
obligation to deliver the van to complainant. However, it took respondent sheriff 13 days
before he released the vehicle to complainant, a clear violation of Section 6, Rule 60 of
the 1997 Revised Rules of Civil Procedure which provides

SEC. 6. Disposition of property by sheriff.If within five (5) days after the taking of
the property by the sheriff, the adverse party does not object to the sufficiency of the
bond, or of the surety or sureties thereon; or if the adverse party so objects and the
court affirms its approval of the applicants bond or approves a new bond, or if the
adverse party requires the return of the property but his bond is objected to and found
insufficient and he does not forthwith file an approved bond, the property shall be
delivered to the applicant. If for any reason the property is not delivered to the
applicant, the sheriff must return it to the adverse party. (6a)

In Apuyan, Jr. v. Sta Isabel,[8] citing Alvarez, Jr. v. Martin,[9] a sheriff was similarly
found guilty of grave misconduct, dishonesty and conduct grossly prejudicial to the best
interest of the service for receiving and soliciting money from the complainant and for
deliberately ignoring the rules for the implementation of a writ of attachment, thus

Furthermore, respondents act of demanding money and receiving P1,500.00 from the
complainant for the lunch and merienda of the policemen who will accompany him in
executing the decision of the Court is a clear violation of section 9, Rule 141. The
Rules require the sheriff to estimate his expenses in the execution of the decision. The
prevailing party will then deposit the said amount to the Clerk of Court who will
disburse the amount to the sheriff, subject to liquidation. Any unspent amount will
have to be returned to the prevailing party. In this case, no estimate of sheriffs
expenses was submitted to the court by respondent. In fact, the money which
respondent deputy sheriff had demanded and received from complainant was not
among those prescribed and authorized by the Rules of Court. This Court has ruled
that any amount received by the sheriff in excess of the lawful fees allowed by the
Rules of Court is an unlawful exaction and renders him liable for grave misconduct
and gross dishonesty.

Finally, the procedure for execution of a final judgment is the same as that in carrying
out a writ of preliminary attachment, as set forth in Rule 141 of the Rules of Court

Clearly, in this case, respondent not only utterly failed to live up to the high ethical
standards required of a sheriff, but also, he totally ignored Section 9, Rule 141 of the
Rules of Court. Respondent failed to demonstrate that he followed the procedure laid
down by Rule 141.

The OCAs recommendation that respondent be found guilty of grave misconduct,

dishonesty and conduct grossly prejudicial to the best interest of the service is firmly
supported by the records of this case.

Section 52, Rule IV of the Uniform Rules on Administrative Cases in the Civil
Service (Resolution No. 991936, effective September 27, 1999), provides

Section 52. Classification of Offenses. - Administrative offenses with corresponding

penalties are classified into grave, less grave or light, depending on their gravity or
depravity and effects on the government service.

A. The following are grave offenses with their corresponding penalties:

1. Dishonesty
1st Offense Dismissal

3. Grave Misconduct
1st Offense Dismissal

20. Conduct prejudicial to the best interest of the service

1st offense Suspension (6 mos. 1 day to 1 year)

2nd offense Dismissal

The imposable penalty for commission of the first offense of grave misconduct and
dishonesty is dismissal. In the cases of Apuyan, Jr. v. Sta Isabel,[10] and Albello v.
Galvez,[11] however, the fact that the respondent sheriffs were first time offenders was
considered a mitigating circumstance, hence they were meted the penalty of 1 year
suspension instead of dismissal. Accordingly, since this is respondent sheriffs first
offense, the penalty of 1 year suspension will suffice.
With respect to respondent Taguba, we find the sanction of reprimand too light a
penalty for his transgression. Although it was not him who deliberately delayed the
delivery of the vehicle to force complainant to yield to the sheriffs demand, and that
complainant did not point to him as the one who received the amount of P2,000.00,
respondent Taguba assisted respondent sheriff in soliciting money from complainant.
Note that respondent Taguba is a process server of another branch of the MTCC of
Santiago City but he volunteered to aid respondent sheriff in the implementation of the
writ. He not only demanded P8,000.00 from complainant after the implementation of the
writ but also tagged along with respondent sheriff when the latter tried to exact
P6,000.00 from complainant before the vehicle was released to the latter. Furthermore,
respondent Taguba had been previously suspended for 1 month in Albano-Madrid v.
Apolonio,[12] for simple misconduct in playing cards with other court personnel inside the
Judges chambers during office hours. Indeed, reprimand is not commensurate to his
incorrigible conduct. Under the circumstances, the penalty of 6 months suspension is
appropriate.
At the grassroots of our judicial machinery, sheriffs are indispensably in close
contact with the litigants, hence, their conduct should be geared towards maintaining
the prestige and integrity of the court, for the image of a court of justice is necessarily
mirrored in the conduct, official or otherwise, of the men and women who work thereat,
from the judge to the least and lowest of its personnel; hence, it becomes the imperative
sacred duty of each and everyone in the court to maintain its good name and standing
as a temple of justice.[13]
WHEREFORE, in view of all the foregoing, respondent Romeo Gatcheco, Sheriff III,
Municipal Trial Court in Cities, Branch 1, Santiago City is found GUILTY of Grave
Misconduct, Dishonesty and Conduct Grossly Prejudicial to the Best Interest of the
Service and is SUSPENDED for one (1) year, without pay. Respondent Eugenio
Taguba, Process Server, Municipal Trial Court in Cities, Branch 2, Santiago City is
found GUILTY of Conduct Prejudicial to the Best Interest of the Service and is
SUSPENDED for six (6) months without pay.
Respondents are warned that a repetition of the same or any other act of infraction
in the future shall be dealt with most severely.
SO ORDERED.
Davide, Jr., C.J. (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

[1] Rollo, p. 016.

[2] TSN, Testimony of Alibsar Adoma, 7 November 2003, pp. 11-13.
[3] Id., pp. 14-23.
[4] TSN, Testimony of Romeo Gatcheco, 21 November 2003, p. 12.
[5] Rollo, p. 025.
[6] Resolution dated February 4, 2004.
[7] Abalde v. Roque, Jr., A.M. No. P-02-1643, 1 April 2003, 400 SCRA 210, 214.
[8] A.M. No. P-01-1497, 28 May 2004.
[9] A.M. No. P-03-1724, 18 September 2003, 411 SCRA 248.
[10] Supra, note 8.
[11] A.M. No. P-01-1476, 16 January 2003, 395 SCRA 251, 255.
[12] A.M. No. P-01-1517, 7 February 2003, 397 SCRA 120.
[13] Imperial v. Santiago, Jr., A.M. No. P-01-1449, 24 February 2003, 398 SCRA 75, 86.
 SECOND DIVISION

[G.R. No. 111107. January 10, 1997]

LEONARDO A. PAAT, in his capacity as Officer-in-Charge (OIC),

Regional Executive Director (RED), Region 2 and JOVITO
LAYUGAN, JR., in his capacity as Community Environment and
Natural Resources Officer (CENRO), both of the Department of
Environment and Natural Resources (DENR), petitioners, vs.
COURT OF APPEALS, HON. RICARDO A. BACULI in his capacity
as Presiding Judge of Branch 2, Regional Trial Court at
Tuguegarao, Cagayan, and SPOUSES BIENVENIDO and
VICTORIA DE GUZMAN, respondents.

DECISION
TORRES, JR., J.:

Without violating the principle of exhaustion of administrative remedies, may an

action for replevin prosper to recover a movable property which is the subject matter of
an administrative forfeiture proceeding in the Department of Environment and Natural
Resources pursuant to Section 68-A of P. D. 705, as amended, entitled The Revised
Forestry Code of the Philippines?
Are the Secretary of DENR and his representatives empowered to confiscate and
forfeit conveyances used in transporting illegal forest products in favor of the
government?
These are two fundamental questions presented before us for our resolution.
The controversy on hand had its incipiency on May 19, 1989 when the truck of
private respondent Victoria de Guzman while on its way to Bulacan from San Jose,
Baggao, Cagayan, was seized by the Department of Environment and Natural
Resources (DENR, for brevity) personnel in Aritao, Nueva Vizcaya because the driver
could not produce the required documents for the forest products found concealed in
the truck. Petitioner Jovito Layugan, the Community Environment and Natural
Resources Officer (CENRO) in Aritao, Cagayan, issued on May 23, 1989 an order of
confiscation of the truck and gave the owner thereof fifteen (15) days within which to
submit an explanation why the truck should not be forfeited. Private respondents,
however, failed to submit the required explanation. On June 22, 1989,[1] Regional
Executive Director Rogelio Baggayan of DENR sustained petitioner Layugans action of
confiscation and ordered the forfeiture of the truck invoking Section 68-A of Presidential
Decree No. 705 as amended by Executive Order No. 277. Private respondents filed a
letter of reconsideration dated June 28, 1989 of the June 22, 1989 order of Executive
Director Baggayan, which was, however, denied in a subsequent order of July 12,
1989.[2] Subsequently, the case was brought by the petitioners to the Secretary of DENR
pursuant to private respondents statement in their letter dated June 28, 1989 that in
case their letter for reconsideration would be denied then this letter should be
considered as an appeal to the Secretary.[3] Pending resolution however of the appeal, a
suit for replevin, docketed as Civil Case 4031, was filed by the private respondents
against petitioner Layugan and Executive Director Baggayan [4] with the Regional Trial
Court, Branch 2 of Cagayan,[5] which issued a writ ordering the return of the truck to
private respondents.[6] Petitioner Layugan and Executive Director Baggayan filed a
motion to dismiss with the trial court contending, inter alia, that private respondents had
no cause of action for their failure to exhaust administrative remedies. The trial court
denied the motion to dismiss in an order dated December 28, 1989. [7] Their motion for
reconsideration having been likewise denied, a petition for certiorari was filed by the
petitioners with the respondent Court of Appeals which sustained the trial courts order
ruling that the question involved is purely a legal question.[8] Hence, this present
petition,[9] with prayer for temporary restraining order and/or preliminary injunction,
seeking to reverse the decision of the respondent Court of Appeals was filed by the
petitioners on September 9, 1993. By virtue of the Resolution dated September 27,
1993,[10] the prayer for the issuance of temporary restraining order of petitioners was
granted by this Court.
Invoking the doctrine of exhaustion of administrative remedies, petitioners aver that
the trial court could not legally entertain the suit for replevin because the truck was
under administrative seizure proceedings pursuant to Section 68-A of P.D. 705, as
amended by E.O. 277. Private respondents, on the other hand, would seek to avoid the
operation of this principle asserting that the instant case falls within the exception of the
doctrine upon the justification that (1) due process was violated because they were not
given the chance to be heard, and (2) the seizure and forfeiture was unlawful on the
grounds: (a) that the Secretary of DENR and his representatives have no authority to
confiscate and forfeit conveyances utilized in transporting illegal forest products, and (b)
that the truck as admitted by petitioners was not used in the commission of the crime.
Upon a thorough and delicate scrutiny of the records and relevant jurisprudence on
the matter, we are of the opinion that the plea of petitioners for reversal is in order.
This Court in a long line of cases has consistently held that before a party is allowed
to seek the intervention of the court, it is a pre-condition that he should have availed of
all the means of administrative processes afforded him. Hence, if a remedy within the
administrative machinery can still be resorted to by giving the administrative officer
concerned every opportunity to decide on a matter that comes within his jurisdiction
then such remedy should be exhausted first before courts judicial power can be sought.
The premature invocation of courts intervention is fatal to ones cause of
action.[11] Accordingly, absent any finding of waiver or estoppel the case is susceptible of
dismissal for lack of cause of action.[12] This doctrine of exhaustion of administrative
remedies was not without its practical and legal reasons, for one thing, availment of
administrative remedy entails lesser expenses and provides for a speedier disposition of
controversies. It is no less true to state that the courts of justice for reasons of comity
and convenience will shy away from a dispute until the system of administrative redress
has been completed and complied with so as to give the administrative agency
concerned every opportunity to correct its error and to dispose of the case. However,
we are not amiss to reiterate that the principle of exhaustion of administrative remedies
as tested by a battery of cases is not an ironclad rule. This doctrine is a relative one and
its flexibility is called upon by the peculiarity and uniqueness of the factual and
circumstantial settings of a case. Hence, it is disregarded (1) when there is a violation of
due process,[13] (2) when the issue involved is purely a legal question,[14] (3) when the
administrative action is patently illegal amounting to lack or excess of jurisdiction, [15] (4)
when there is estoppel on the part of the administrative agency concerned, [16] (5) when
there is irreparable injury,[17] (6) when the respondent is a department secretary whose
acts as an alter ego of the President bears the implied and assumed approval of the
latter,[18] (7) when to require exhaustion of administrative remedies would be
unreasonable,[19] (8) when it would amount to a nullification of a claim, [20] (9) when the
subject matter is a private land in land case proceedings,[21] (10) when the rule does not
provide a plain, speedy and adequate remedy, and (11) when there are circumstances
indicating the urgency of judicial intervention.[22]
In the case at bar, there is no question that the controversy was pending before the
Secretary of DENR when it was forwarded to him following the denial by the petitioners
of the motion for reconsideration of private respondents through the order of July 12,
1989. In their letter of reconsideration dated June 28, 1989,[23] private respondents
clearly recognize the presence of an administrative forum to which they seek to avail, as
they did avail, in the resolution of their case. The letter, reads, thus:

xxx

If this motion for reconsideration does not merit your favorable action, then this letter
should be considered as an appeal to the Secretary. [24]

It was easy to perceive then that the private respondents looked up to the Secretary
for the review and disposition of their case. By appealing to him, they acknowledged the
existence of an adequate and plain remedy still available and open to them in the
ordinary course of the law. Thus, they cannot now, without violating the principle of
exhaustion of administrative remedies, seek courts intervention by filing an action for
replevin for the grant of their relief during the pendency of an administrative
proceedings.
Moreover, it is important to point out that the enforcement of forestry laws, rules and
regulations and the protection, development and management of forest lands fall within
the primary and special responsibilities of the Department of Environment and Natural
Resources. By the very nature of its function, the DENR should be given a free hand
unperturbed by judicial intrusion to determine a controversy which is well within its
jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by
private respondents constitutes an unjustified encroachment into the domain of the
administrative agencys prerogative. The doctrine of primary jurisdiction does not
warrant a court to arrogate unto itself the authority to resolve a controversy the
jurisdiction over which is initially lodged with an administrative body of special
competence.[25] In Felipe Ismael, Jr. and Co. vs. Deputy Executive Secretary,[26] which
was reiterated in the recent case of Concerned Officials of MWSS vs. Vasquez, [27] this
Court held:

Thus, while the administration grapples with the complex and multifarious problems
caused by unbriddled exploitation of these resources, the judiciary will stand clear. A
long line of cases establish the basic rule that the courts will not interfere in matters
which are addressed to the sound discretion of government agencies entrusted with the
regulation of activities coming under the special technical knowledge and training of
such agencies.

To sustain the claim of private respondents would in effect bring the instant
controversy beyond the pale of the principle of exhaustion of administrative remedies
and fall within the ambit of excepted cases heretofore stated. However, considering the
circumstances prevailing in this case, we can not but rule out these assertions of private
respondents to be without merit. First, they argued that there was violation of due
process because they did not receive the May 23, 1989 order of confiscation of
petitioner Layugan. This contention has no leg to stand on. Due process does not
necessarily mean or require a hearing, but simply an opportunity or right to be
heard.[28] One may be heard , not solely by verbal presentation but also, and perhaps
many times more creditably and practicable than oral argument, through pleadings. [29] In
administrative proceedings moreover, technical rules of procedure and evidence are not
strictly applied; administrative process cannot be fully equated with due process in its
strict judicial sense.[30] Indeed, deprivation of due process cannot be successfully
invoked where a party was given the chance to be heard on his motion for
reconsideration,[31] as in the instant case, when private respondents were undisputedly
given the opportunity to present their side when they filed a letter of reconsideration
dated June 28, 1989 which was, however, denied in an order of July 12, 1989 of
Executive Director Baggayan. In Navarro III vs. Damasco,[32] we ruled that :

The essence of due process is simply an opportunity to be heard, or as applied to

administrative proceedings, an opportunity to explain ones side or an opportunity to
seek a reconsideration of the action or ruling complained of. A formal or trial type
hearing is not at all times and in all instances essential. The requirements are satisfied
when the parties are afforded fair and reasonable opportunity to explain their side of
the controversy at hand. What is frowned upon is the absolute lack of notice or
hearing.

Second, private respondents imputed the patent illegality of seizure and forfeiture of
the truck because the administrative officers of the DENR allegedly have no power to
perform these acts under the law. They insisted that only the court is authorized to
confiscate and forfeit conveyances used in transporting illegal forest products as can be
gleaned from the second paragraph of Section 68 of P.D. 705, as amended by E.O.
277. The pertinent provision reads as follows:
SECTION 68. xxx

xxx

The court shall further order the confiscation in favor of the government of the timber
or any forest products cut, gathered, collected, removed, or possessed, as well as
the machinery, equipments, implements and toolsillegaly [sic] used in the area where
the timber or forest products are found. (Underline ours)

A reading, however, of the law persuades us not to go along with private

respondents thinking not only because the aforequoted provision apparently does not
mention nor include conveyances that can be the subject of confiscation by the courts,
but to a large extent, due to the fact that private respondents interpretation of the
subject provision unduly restricts the clear intention of the law and inevitably reduces
the other provision of Section 68-A , which is quoted herein below:

SECTION 68-A. Administrative Authority of the Department or His Duly Authorized

Representative To Order Confiscation. In all cases of violation of this Code or other
forest laws, rules and regulations, theDepartment Head or his duly authorized
representative, may order the confiscation of any forest products illegally cut,
gathered, removed, or possessed or abandoned, and all conveyances used either by
land, water or air in the commission of the offense and to dispose of the same in
accordance with pertinent laws, regulations and policies on the matter. (Underline
ours)

It is, thus, clear from the foregoing provision that the Secretary and his duly
authorized representatives are given the authority to confiscate and forfeit
any conveyances utilized in violating the Code or other forest laws, rules and
regulations. The phrase to dispose of the same is broad enough to cover the act of
forfeiting conveyances in favor of the government. The only limitation is that it should be
made in accordance with pertinent laws, regulations or policies on the matter. In the
construction of statutes, it must be read in such a way as to give effect to the purpose
projected in the statute.[33] Statutes should be construed in the light of the object to be
achieved and the evil or mischief to be suppressed, and they should be given such
construction as will advance the object, suppress the mischief, and secure the benefits
intended.[34] In this wise, the observation of the Solicitor General is significant, thus:

But precisely because of the need to make forestry laws more responsive to present
situations and realities and in view of the urgency to conserve the remaining resources
of the country, that the government opted to add Section 68-A. This amendatory
provision is an administrative remedy totally separate and distinct from criminal
proceedings. More than anything else, it is intended to supplant the inadequacies that
characterize enforcement of forestry laws through criminal actions. The preamble of
EO 277-the law that added Section 68-A to PD 705-is most revealing:
WHEREAS, there is an urgency to conserve the remaining forest resources of the
country for the benefit and welfare of the present and future generations of Filipinos;

WHEREAS, our forest resources may be effectively conserved and protected through
the vigilant enforcement and implementation of our forestry laws, rules and
regulations;

WHEREAS, the implementation of our forestry laws suffers from technical

difficulties, due to certain inadequacies in the penal provisions of the Revised Forestry
Code of the Philippines; and

WHEREAS, to overcome this difficulties, there is a need to penalize certain acts more
responsive to present situations and realities;

It is interesting to note that Section 68-A is a new provision authorizing the DENR to
confiscate, not only conveyances, but forest products as well. On the other
hand, confiscation of forest products by the court in a criminal action has long been
provided for in Section 68. If as private respondents insist, the power on confiscation
cannot be exercised except only through the court under Section 68, then Section 68-
A would have no purpose at all. Simply put, Section 68-A would not have provided
any solution to the problem perceived in EO 277, supra. [35]

Private respondents, likewise, contend that the seizure was illegal because the
petitioners themselves admitted in the Order dated July 12, 1989 of Executive Director
Baggayan that the truck of private respondents was not used in the commission of the
crime. This order, a copy of which was given to and received by the counsel of private
respondents, reads in part , viz. :

xxx while it is true that the truck of your client was not used by her in the commission
of the crime, we uphold your claim that the truck owner is not liable for the crime and
in no case could a criminal case be filed against her as provided under Article 309 and
310 of the Revised Penal Code. xxx [36]

We observed that private respondents misread the content of the aforestated order
and obviously misinterpreted the intention of petitioners. What is contemplated by the
petitioners when they stated that the truck "was not used in the commission of the
crime" is that it was not used in the commission of the crime of theft, hence, in no case
can a criminal action be filed against the owner thereof for violation of Article 309 and
310 of the Revised Penal Code. Petitioners did not eliminate the possibility that the
truck was being used in the commission of another crime, that is, the breach of Section
68 of P.D.705 as amended by E.O. 277. In the same order of July 12, 1989, petitioners
pointed out:
xxx However, under Section 68 of P.D.705 as amended and further amended by
Executive Order No.277 specifically provides for the confiscation of the conveyance
used in the transport of forest products not covered by the required legal documents.
She may not have been involved in the cutting and gathering of the product in
question but the fact that she accepted the goods for a fee or fare the same is therefor
liable. xxx
[37]

Private respondents, however, contended that there is no crime defined and

punishable under Section 68 other than qualified theft, so that, when petitioners
admitted in the July 12, 1989 order that private respondents could not be charged for
theft as provided for under Articles 309 and 310 of the Revised Penal Code, then
necessarily private respondents could not have committed an act constituting a crime
under Section 68. We disagree. For clarity, the provision of Section 68 of P.D. 705
before its amendment by E.O. 277 and the provision of Section 1 of E.O. No.277
amending the aforementioned Section 68 are reproduced herein, thus:

SECTION 68. Cutting, gathering and/or collecting timber or other products without
license. - Any person who shall cut , gather , collect , or remove timber or other forest
products from any forest land, or timber from alienable and disposable public lands,
or from private lands, without any authority under a license agreement, lease, license
or permit, shall be guilty of qualified theft as defined and punished under Articles 309
and 310 of the Revised Penal Code xxx. (Underscoring ours; Section 68, P.D.705
before its amendment by E.O.277 )

SECTION 1. Section 68 of Presidential Decree No.705, as amended, is hereby

amended to read as follows:

Section 68. Cutting, gathering and/or collecting timber or other forest products
without license. -Any person who shall cut, gather, collect, remove timber or other
forest products from any forest land, or timber from alienable or disposable public
land, or from private land, without any authority, or possess timber or other forest
products without the legal documents as required under existing forest laws and
regulations, shall be punished with the penalties imposed under Articles 309 and 310
of the Revised Penal Code xxx." (Underscoring ours; Section 1, E.O No. 277
amending Section 68, P.D. 705 as amended)

With the introduction of Executive Order No. 277 amending Section 68 of P.D. 705,
the act of cutting, gathering, collecting, removing, or possessing forest products without
authority constitutes a distinct offense independent now from the crime of theft under
Articles 309 and 310 of the Revised Penal Code, but the penalty to be imposed is that
provided for under Article 309 and 310 of the Revised Penal Code. This is clear from
the language of Executive Order No. 277 when it eliminated the phrase shall be guilty of
qualified theft as defined and punished under Articles 309 and 310 of the Revised Penal
Code and inserted the words shall be punished with the penalties imposed under Article
309 and 310 of the Revised Penal Code . When the statute is clear and explicit, there is
hardly room for any extended court ratiocination or rationalization of the law. [38]
From the foregoing disquisition, it is clear that a suit for replevin can not be
sustained against the petitioners for the subject truck taken and retained by them for
administrative forfeiture proceedings in pursuant to Section 68-A of the P. D. 705, as
amended. Dismissal of the replevin suit for lack of cause of action in view of the private
respondents failure to exhaust administrative remedies should have been the proper
course of action by the lower court instead of assuming jurisdiction over the case and
consequently issuing the writ ordering the return of the truck. Exhaustion of the
remedies in the administrative forum, being a condition precedent prior to ones recourse
to the courts and more importantly, being an element of private respondents right of
action, is too significant to be waylaid by the lower court.
It is worth stressing at this point, that a suit for replevin is founded solely on the
claim that the defendant wrongfully withholds the property sought to be recovered. It lies
to recover possession of personal chattels that are unlawfully detained. [39] To detain is
defined as to mean to hold or keep in custody, [40] and it has been held that there is
tortuous taking whenever there is an unlawful meddling with the property, or an exercise
or claim of dominion over it, without any pretense of authority or right; this, without
manual seizing of the property is sufficient.[41] Under the Rules of Court, it is
indispensable in replevin proceedings, that the plaintiff must show by his own affidavit
that he is entitled to the possession of property, that the property is wrongfully detained
by the defendant, alleging the cause of detention, that the same has not been taken for
tax assessment, or seized under execution, or attachment, or if so seized, that it is
exempt from such seizure, and the actual value of the property. [42] Private respondents
miserably failed to convince this Court that a wrongful detention of the subject truck
obtains in the instant case. It should be noted that the truck was seized by the
petitioners because it was transporting forest products with out the required permit of
the DENR in manifest contravention of Section 68 of P.D. 705 as amended by E.O
277. Section 68-A of P.D. 705, as amended, unquestionably warrants the confiscation
as well as the disposition by the Secretary of DENR or his duly authorized
representatives of the conveyances used in violating the provision of forestry laws.
Evidently, the continued possession or detention of the truck by the petitioners for
administrative forfeiture proceeding is legally permissible, hence , no wrongful detention
exists in the case at bar.
Moreover, the suit for replevin is never intended as a procedural tool to question the
orders of confiscation and forfeiture issued by the DENR in pursuance to the authority
given under P.D.705, as amended. Section 8 of the said law is explicit that actions
taken by the Director of the Bureau of Forest Development concerning the enforcement
of the provisions of the said law are subject to review by the Secretary of DENR and
that courts may not review the decisions of the Secretary except through a special civil
action for certiorari or prohibition. It reads :

SECTION 8 . REVIEW - All actions and decisions of the Director are subject to
review, motu propio or upon appeal of any person aggrieved thereby, by the
Department Head whose decision shall be final and executory after the lapse of thirty
(30) days from the receipt of the aggrieved party of said decision, unless appealed to
the President in accordance with Executive Order No. 19, Series of 1966. The
Decision of the Department Head may not be reviewed by the courts except through a
special civil action for certiorari or prohibition.

WHEREFORE, the Petition is GRANTED; the Decision of the respondent Court of

Appeals dated October 16, 1991 and its Resolution dated July 14, 1992 are hereby SET
ASIDE AND REVERSED; the Restraining Order promulgated on September 27, 1993 is
hereby made permanent; and the Secretary of DENR is directed to resolve the
controversy with utmost dispatch.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Mendoza, JJ., concur.

[1]
Rollo p. 235.
[2]
Rollo pp. 241-242.
[3]
Rollo p. 239.
[4]
Baggayan died during the pendency of Civil Case 4031, he was succeeded in office by Petitioner
Leonardo Paat.
[5]
Presided by Judge Ricardo A. Baculi.
[6]
Rollo pp. 251-252.
[7]
Rollo pp. 274-275.
[8]
Rollo pp. 36-46 penned by Justice Serafin V.C. Guingona, concurred by Justices Luis A. Javellana and
Jorge S. Imperial.
[9]
Rollo pp. 14-35.
[10]
Rollo pp. 117-119.
[11]
National Development Company v. Hervilla, L-65718, June 30, 1987; Atlas Consolidated Mining
Company vs. Mendoza, G.R. No. L -15809, August 30, 1961; Aboitiz v. Collector of Customs,
G.R. No. L-29466, May 18, 1978;Pestenas v. Dyogi, G.R. No. L-25786, February 27, 1978.
[12]
Soto v. Jareno, G.R. No. 38962, September 15, 1986; Hodges v. Mun. Board, L-18276, January 12,
1967; Abe-Abe v. Manta, L-4827, May 31, 1979; Gone v. District Engineer, L-22782, August 29,
1975.
[13]
Quisumbing v. Judge Gumban, G.R. No. 85156, February 5, 1991.
[14]
Eastern Shipping Lines v. POEA, L-76633, October 18, 1988.
[15]
Industrial Power Sales, Inc. V. Sinsuat, L-29171, April 15, 1988.
[16]
Vda. De Tan v. Veterans Backpay Commission, L-12944, March 30, 1959.
[17]
De Lara v. Cloribel, G.R. No. L-21653, May 31, 1965.
[18]
Demaisip v. Court of Appeals, G.R. No. 13000, September 25, 1959; Bartulata v. Peralta, G.R. No.
23155, September 9, 1974.
[19]
Cipriano v. Marcelino, G.R. No. L-27793, February 28, 1972.
[20]
Alzate v. Aldana, G.R. No. 14407, February 29, 1960.
[21]
Soto v. Jareno, supra.
[22]
Quisumbing v. Judge Gumban, supra.
[23]
Rollo pp. 236-240.
[24]
Rollo p. 239.
[25]
Vidad v. RTC, G.R. No. 98084, October 18, 1993.
[26]
G.R. No. 79538, October 18, 1990.
[27]
G.R. No. 109113, January 25, 1995.
[28]
Pepsi Cola Distributors of the Phil. V. NLRC, G.R. No. 100686, August 15, 1995.
[29]
Concerned Officials of MWSS vs. Vasquez, supra.
[30]
Ibid.
[31]
Rodriguez v. Project 6 Market Service Cooperative, G.R. No. 79968, August 23, 1995.
[32]
G.R. No. 101875, July 14, 1995.
[33]
Lopez, Jr. v. Court of Appeals, G.R. No. 104158, November 6, 1992.
[34]
De Guia v. Commission on Elections, G.R. No. 104712, May 6, 1992.
[35]
Rollo pp. 170-171; Memorandum pp. 12-13.
[36]
Rollo p. 242.
[37]
Ibid.
[38]
Libanan v. Sandiganbayan, G.R. No. 112386, June 14, 1994.
[39]
American Jurisprudence, Second Edition, Volume 66, p.850, footnote 57; I. Tanenbaum Son and
Company vs. C. Ludwig Baumann and Company, 261 NY 85, 184 NE 503, 86 ALR 102.
[40]
Ibid., footnote 59; Anderson vs. Hapler, 34 Ill 436; Wails vs. Farrington, 27 Okla 754, 116 P 428.
[41]
Id., footnote 60 ; Haythorn vs. Rushforth, 19 NJL 160.
[42]
Section 2, Rule 60 of the Rules of Court.
 THIRD DIVISION

[G.R. No. 61508. March 17, 1999]

Citibank, N.A. (Formerly First National City Bank), petitioner, vs. The
Honorable Court of Appeals and Douglas F. Anama, respondents.

DECISION
PURISIMA, J.:

At bar is a special civil action for certiorari with prayer for a temporary restraining order
faulting the Court of Appeals[1] with grave abuse of discretion for nullifying the lower courts
order of seizure of mortgaged properties subject of a case for sum of money and replevin.
The facts leading to the institution of the case are as follows:
In consideration for a loan obtained from Citibank, N.A. (formerly First National City
Bank), the defendant (private respondent herein) Douglas Anama executed a promissory note,
dated November 10, 1972,[2]to pay the plaintiff bank the sum of P418,000.00 in sixty (60) equal
successive monthly installments of P8,722.25, starting on the 10 day of December 1972 and on
th

the 10 of every month thereafter. The said Promissory Note stipulated further that:
th

(a) the loan is subject to interest at the rate of twelve percent (12%) per annum;

(b) the promissory note and the entire amount therein stated shall become immediately
due and payable without notice or demand upon -

(aa) default in the payment of any installment of principal or interest at the time when
the same is due;

(bb) the occurrence of any change in the condition and affairs of the defendant, which
in the opinion of the plaintiff shall increase its credit risk;

(c) the defendant agrees to pay all costs, expenses, handling and insurance charges
incurred in the granting of the loan;

(d) in case the services of a lawyer is made necessary for collection, defendant shall
be liable for attorneys fees of at least ten percent (10%) of the total amount due.[3]
 To secure payment of the loan, private respondent Anama also constituted a Chattel
Mortgage of even date in favor of petitioner, on various machineries and equipment located at
No. 1302 Epifanio delos Santos Avenue, Quezon City, under the following terms and conditions:

(a) The machineries and equipment, subject of the mortgage, stand as security for
defendants account.

(b) All replacements, substitutions, additions, increases and accretions to the

properties mortgaged shall also be subject to the mortgage.

(c) The defendant appoints the plaintiff as his attorney-in-fact with authority to enter
the premises of the defendant and take actual possession of the mortgaged chattels
without any court order, to sell said property to any party.

(d) All expenses in carrying into effect the stipulations therein shall be for the account
of the defendant and shall form part of the amount of the obligation secured by the
mortgage.

(e) In case the plaintiff institutes proceedings for the foreclosure of the mortgage, the
plaintiff shall be entitled to the appointment of a receiver without a bond.

(f) In case of default, the defendant shall be liable for attorneys fees and cost of
collection in the sum equal to twenty-five percent (25%) of the total amount of the
indebtedness outstanding and unpaid.[4]

On November 25, 1974, for failure and refusal of the private respondent to pay the monthly
installments due under the said promissory note since January 1974, despite repeated demands,
petitioner filed a verified complaint against private respondent Anama for the collection of his
unpaid balance of P405,820.52 on the said promissory note, for the delivery and possession of
the chattels covered by the Chattel Mortgage preparatory to the foreclosure thereof as provided
under Section 14 of the Chattel Mortgage Law, docketed as Civil Case No. 95991 before the then
Court of First Instance of Manila.
On February 20, 1975, the defendant Anama submitted his Answer with Counterclaim,
denying the material averments of the complaint, and averring, inter alia (1) that the remedy of
replevin was improper and the writ of seizure should be vacated; (2) that he signed the
promissory note for P418,000.00 without receiving from plaintiff Citibank any amount, and was
even required to pay the first installment on the supposed loan in December 1974; (3) that the
understanding between him and the Citibank was for the latter to release to him the entire loan
applied for prior to and during the execution of his promissory note, but Citibank did not do so
and, instead, delayed the release of any amount on the loan even after the execution of the
promissory note thereby disrupting his timetable of plans and causing him damages; (4) that the
amount released by Citibank to him up to the present was not the amount stated in the
promissory note, and his alleged default in paying the installments on the loan was due to
the delay in releasing the full amount of the loan as agreed upon; (5) that the machineries and
equipment described in the chattel mortgage executed by him are really worth more
than P1,000,000.00 but he merely acceded to the valuation thereof by Citibank in said document
because of the latters representation that the same was necessary to speed up the granting of the
loan applied for by him; (6) that the properties covered by said chattel mortgage are real
properties installed in a more or less permanent nature at his (defendants) premises in Quezon
City, as admitted by Citibank in said mortgage document; (7) that the mortgage contract itself
stipulated that the manner and procedure for effecting the sale or redemption of the mortgaged
properties, if made extrajudicially, shall be governed by Act No. 1508 and other pertinent laws
which all pertain to real properties; and (8) that because of the filing of this complaint without
valid grounds therefor, he suffered damages and incurred attorneys fees; the defendant, now
private respondent, averred.
On December 2, 1974, the trial court, upon proof of default of the private respondent in the
payment of the said loan, issued an Order of Replevin over the machineries and equipment
covered by the Chattel Mortgage.
However, despite the issuance of the said order of seizure of subject chattels, actual delivery
of possession thereof to petitioner did not take place because negotiations for an amicable
settlement between the parties were encouraged by the trial court.
On March 24, 1975, a pre-trial conference was held and the lower court issued an order for
joint management by the petitioner and the private respondent of the latters business for
ten (10) days, after which the former would be appointed receiver for the said business.
On April 1, 1975, the petitioner took over private respondents business as receiver. When
further proposals to settle the case amicably failed, the lower court proceeded to try the case on
the merits.
On January 29, 1977, petitioner presented a Motion for the Issuance of an Alias Writ of
Seizure, ordering the sheriff to seize the properties involved and dispose of them in accordance
with the Revised Rules of Court.The lower court then gave private respondent five (5) days to
oppose the said motion and on February 22, 1977, he sent in his opposition thereto on the
grounds: (1) that Citibanks P400,000 replevin bond to answer for damages was grossly
inadequate because the market value of the properties involved is P1,710,000 and their
replacement cost is P2,342,300.00 per the appraisal report of the Appraisal and Research Corp.;
(2) that he was never in default to justify the seizure; (3) that the Civil Case No. 18071 of the
Court of First Instance, entitled Hernandes vs. Anama, et al., which, according to Citibank,
supposedly increased its credit risk in the alleged obligation, had already been dismissed as
against him and the case terminated with the dismissal of the complaint against the remaining
defendant, First National City Bank, by the Court in its orders of January 12, 1977 and February
7, 1977; (4) that his (defendants) supposed obligations with Citibank were fully secured and his
mortgaged properties are more than sufficient to secure payment thereof; and (5) that the writ of
seizure if issued would stop his business operations and contracts and expose him to lawsuits
from customers, and also dislocate his employees and their families entirely dependent thereon
for their livelihood.
On February 28, 1977, acting on the said Motion and private respondents opposition, the
trial court issued an Order granting the Motion for Alias Writ of Seizure, ruling thus:
WHEREFORE , the motion for alias writ of seizure is hereby granted. At any rate,
this Order gives another opportunity for defendant and the intervenor who claims to
be a part owner to file a counterbond under Sec. 60 of Rules of Court.[5]

Private respondent moved for reconsideration of the aforesaid order but the same was denied
by the Resolution of March 18, 1977, to wit:

In view of the foregoing, the motion for reconsideration is hereby denied.

At any rate, as already stated, the defendant has still a remedy available which is to
file a bond executed to the plaintiff in double the value of the properties as stated in
the plaintiffs affidavit. The Court at this instance therefore has no authority to stop or
suspend the writ of seizure already ordered.[6]

Accordingly, by virtue of the Alias Writ of Seizure, petitioner took possession of the
mortgaged chattels of private respondent. As a consequence, the sheriff seized subject properties,
dismantled and removed them from the premises where they were installed, delivered them to
petitioners possession on March 17, 18 and 19, 1977 and advertised them for sale at public
auction scheduled on March 22, 1977.
On March 21, 1977, private respondent filed with the Court of Appeals a Petition for Certiorari
and Prohibition[7] with Injunction to set aside and annul the questioned resolutions of the trial
court on the ground that they were issued in excess of jurisdiction and with grave abuse of
discretion because of the lack of evidence and clear cut right to possession of First National City
Bank (herein petitioner) to the machineries subject of the Chattel Mortgage.
On July 30, 1982, finding that the trial court acted with grave abuse of discretion amounting
to excess or lack of jurisdiction in issuing the assailed resolutions, the Court of Appeals granted
the petition, holding that the provisions of the Rules of Court on Replevin and Receivership have
not been complied with, in that (1) there was no Affidavit of Merit accompanying the Complaint
for Replevin; (2) the bond posted by Citibank was insufficient; and (3) there was non-compliance
with the requirement of a receivers bond and oath of office. The decretal portion of the assailed
decision of the Court of Appeals, reads :

WHEREFORE, the petition is granted. The questioned resolutions issued by the

respondent judge in Civil Case No. 95991, dated February 28, 1977 and March 18,
1977, together with the writs and processes emanating or deriving therefrom, are
hereby declared null and void ab initio.

The respondent ex-officio sheriff of Quezon City and the respondent First National
City Bank are hereby ordered to return all the machineries and equipment with their
accessories seized, dismantled and hauled, to their original and respective places and
positions in the shop flooring of the petitioners premises where these articles were,
before they were dismantled, seized and hauled at their own expense. The said
respondents are further ordered to cause the repair of the concrete foundations
destroyed by them including the repair of the electrical wiring and facilities affected
during the seizure, dismantling and hauling.

The writ of preliminary injunction heretofore in effect is hereby made

permanent. Costs against the private respondents.

SO ORDERED[8]

Therefrom, Citibank came to this Court via its present petition for certiorari, ascribing grave
abuse of discretion to the Court of Appeals and assigning as errors, that:
I

THE RESPONDENT COURT ERRED IN PRACTICALLY AND IN EFFECT

RENDERING JUDGMENT ON THE MERITS AGAINST THE HEREIN
PETITIONER BY ORDERING THE RETURN OF THE MACHINERIES AND
EQUIPMENT AND ITS ACCESSORIES TO THEIR ORIGINAL AND
RESPECTIVE PLACES AND POSITIONS.
II

THE RESPONDENT COURT ERRED IN FINDING THAT THE COMPLAINT OF

THE PETITIONER DID NOT COMPLY WITH THE PROVISIONS OF SEC. 2,
RULE 60 OF THE RULES OF COURT.
III

THAT THE RESPONDENT COURT ERRED IN FINDING THAT THE BOND

POSTED BY THE PETITIONER IS QUESTIONABLE AND/OR INSUFFICIENT.
IV

THE RESPONDENT COURT ERRED IN FINDING THAT THE PETITIONER

DID NOT COMPLY WITH THE PROVISIONS OF SEC. 5, RULE 59 BY FAILING
TO POST A RECEIVERS BOND.
V

THE RESPONDENT ERRED IN FINDING THAT THE HON. JORGE R. COQUIA

ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO EXCESS
OR LACK OF JURISDICTION IN DEALING WITH THE SITUATION.
I

Anent the first assigned error, petitioner contends that the Court of Appeals, by nullifying
the writ of seizure issued below, in effect, rendered judgment on the merits and adjudged private
respondent Anama as the person lawfully entitled to the possession of the properties subject of
the replevin suit. It is theorized that the same cannot be done, as the case before the court below
was yet at trial stage and the lower court still had to determine whether or not private respondent
was in fact in default in the payment of his obligation to petitioner Citibank, which default would
warrant the seizure of subject machineries and equipment.
The contention is untenable. A judgment is on the merits when it determines the rights and
liabilities of the parties on the basis of the disclosed facts, irrespective of formal, technical or
dilatory objections, and it is not necessary that there should have been a trial.[9] The assailed
decision of the Court of Appeals did not make any adjudication on the rights and liabilities
between Citibank and Douglas Anama. There was no finding yet of the fact of default. The
decision only ruled on the propriety of the issuance of the writ of seizure by the trial court. As
worded by the respondent court itself, the main issues to be resolved are whether there was lack
or excess of jurisdiction, or grave abuse of discretion, in the issuance of the orders in question,
and there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of
law.[10]
In resolving the issue posed by the petition, the Court of Appeals limited its disposition to a
determination of whether or not the assailed order of seizure was issued in accordance with law,
that is, whether the provisions of the Rules of Court on delivery of personal property or replevin
as a provisional remedy were followed. The Court of Appeals relied on Rule 60 of the Rules of
Court, which prescribes the procedure for the recovery of possession of personal property, which
Rule, provides:

Sec. 2. Affidavit and Bond. - Upon applying or such order the plaintiff must show by
his own affidavit or that of some other person who personally knows the facts:

(a) That the plaintiff is the owner of the property claimed particularly describing it, or
is entitled to the possession thereof;

(b) That the property is wrongfully detained by the defendant, alleging the cause of
detention thereof according to his best of knowledge, information and belief;

(c) That it has not been taken for a tax assessment or fine pursuant to law, or seized
under an execution, or an attachment against the property of the plaintiff, or is so
seized, that is exempt from such seizure; and

(d) The actual value of the property.

The plaintiff must also give a bond, executed to the defendant in double of the value
of the property as stated in the affidavit aforementioned, for the return of the property
to the defendant of such sum as he may recover from the plaintiff in the action.

The Court of Appeals did not pass upon the issue of who, as between Douglas Anama and
Citibank, is entitled to the possession of subject machineries, as asserted by the latter. When it
ordered the restoration of the said machineries to Douglas Anama (now the private respondent),
it merely brought the parties to a status quo, by restoring the defendant to the possession of his
properties, since there was a finding that the issuance of the writ was not in accordance with the
specific rules of the Rules of Court.
II

In its second assignment of errors, petitioner theorizes that the Court of Appeals erred in
finding that it did not comply with Section 2, Rule 60 of the Rules of Court requiring the
replevin plaintiff to attach an affidavit of merit to the complaint.
Petitioner maintains that although there was no affidavit of merit accompanying its
complaint, there was nonetheless substantial compliance with the said rule as all that is required
to be alleged in the affidavit of merit was set forth in its verified complaint. Petitioner argues
further that assuming arguendo that there was non-compliance with the affidavit of merit
requirement, such defense can no longer be availed of by private respondent Anama as it was not
alleged in his Answer and was only belatedly interposed in his Reply to the Petitioners Comment
on the Petition for Certiorari before the Court of Appeals.
Petitioner is correct insofar as it contends that substantial compliance with the affidavit
requirement may be permissible. There is substantial compliance with the rule requiring that an
affidavit of merit to support the complaint for replevin if the complaint itself contains a statement
of every fact required to be stated in the affidavit of merit and the complaint is verified like an
affidavit. On the matter of replevin, Justice Vicente Franciscos Comment on the Rules of Court,
states:

Although the better practice is to keep the affidavit and pleading separate, if plaintiffs
pleading contains a statement of every fact which the statute requires to be shown in
the affidavit, and the pleading is verified by affidavit covering every statement
therein, this will be sufficient without a separate affidavit; but in no event can the
pleading supply the absence of the affidavit unless all that the affidavit is required to
contain is embodied in the pleading, and the pleading is verified in the form required
in the case of a separate affidavit. (77 CJS 65 cited in Francisco, Rules of Court of the
Philippines, Vol. IV-A, p. 383)

And similarly, in the case of an attachment which likewise requires an affidavit of merit, the
Court held that the absence of an affidavit of merit is not fatal where the petition itself, which is
under oath, recites the circumstances or facts constitutive of the grounds for the petition.[11]
The facts that must be set forth in the affidavit of merit are (1) that plaintiff owns the
property particularly describing the same, or that he is entitled to its possession; (2) wrongful
detention by defendant of said property; (3) that the property is not taken by virtue of a tax
assessment or fine pursuant to law or seized under execution or attachment or, if it is so seized,
that it is exempt from such seizure; and the (4) the actual value of the property.[12]
But, as correctly taken note of by the Court of Appeals, petitioners complaint does not allege
all the facts that should be set forth in an affidavit of merit. Although the complaint alleges that
petitioner is entitled to the possession of subject properties by virtue of the chattel mortgage
executed by the private respondent, upon the latters default on its obligation, and the defendants
alleged wrongful detention of the same, the said complaint does not state that subject properties
were not taken by virtue of a tax assessment or fine imposed pursuant to law or seized under
execution or attachment or, if they were so seized, that they are exempt from such seizure.
Then too, petitioner stated the value of subject properties at a probable value of P200,000.00,
more or less. Pertinent rules require that the affidavit of merit should state the actual value of the
property subject of a replevin suit and not just its probable value. Actual value (or actual market
value) means the price which an article would command in the ordinary course of business, that
is to say, when offered for sale by one willing to sell, but not under compulsion to sell, and
purchased by another who is willing to buy, but under no obligation to purchase it. [13] Petitioner
alleged that the machineries and equipment involved are valued at P200,000.00 while respondent
denies the same, claiming that per the appraisal report, the market value of the said properties
is P1,710,000.00 and their replacement cost is P2,342,300.00. Petitioners assertion is belied by
the fact that upon taking possession of the aforesaid properties, it insured the same
for P610,593.74 and P450,000.00, separately. It bears stressing that the actual value of the
properties subject of a replevin is required to be stated in the affidavit because such actual value
will be the basis of the replevin bond required to be posted by the plaintiff. Therefore, when the
petitioner failed to declare the actual value of the machineries and equipment subject of the
replevin suit, there was non-compliance with Section 2, Rule 60 of the Revised Rules of Court.
It should be noted, however, that the private respondent interposed the defense of lack of
affidavit of merit only in his Reply to the Comment of Citibank on the Petition for Certiorari
which respondent filed with the Court of Appeals. Section 2, Rule 9 of the Revised Rules of
Court, provides:

SEC. 2. Defenses and objections not pleaded deemed waived - Defenses and
objections not pleaded either in a motion to dismiss or in the answer are deemed
waived; except the failure to state a cause of action which may be alleged in a later
pleading, x x x.

This Rule has been revised and amended, as follows:

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

Thus, although respondents defense of lack of affidavit of merit is meritorious, procedurally,

such a defense is no longer available for failure to plead the same in the Answer as required by
the omnibus motion rule.
III

Petitioner also faults the Court of Appeals for finding that the bond posted by the petitioner
is questionable and/or insufficient. It is averred that, in compliance with Section 2, Rule 60
requiring the replevin plaintiff to post a bond in double the value of the properties involved, it
filed a bond in the amount of P400,000.00 which is twice the amount of P200,000.00 declared in
its complaint.
The Court reiterates its findings on the second assignment of errors, particularly on the issue
of the actual value of subject properties as against their probable value. Private respondent, at the
onset, has put into issue the value of the said properties. In the Special Defenses contained in his
Answer, private respondent averred:

That while defendant admits that he executed a Chattel Mortgage in favor of plaintiff,
he vigorously denies that the machineries covered therein are only
worth P200,000.00. The fact is that plaintiff knew fully well that said chattels are
worth no less than P1,000,000.00, said defendant having acceded to said valuation
upon plaintiffs representation that it would be necessary to speed up the granting of
the loan.

As there was a disagreement on the valuation of the properties in the first place, proper
determination of the value of the bond to be posted by the plaintiff cannot be sufficiently arrived
at. Though the rules specifically require that the needed bond be double the value of the
properties, since plaintiff merely denominated a probable value of P200,000.00 and failed to aver
the properties actual value, which is claimed to be much greater than that declared by plaintiff,
the amount of P400,000.00 would indeed be insufficient as found by the Court of Appeals. The
Rules of Court requires the plaintiff to give a bond, executed to the defendant in double the value
of the property as stated in the affidavit x x x . Hence, the bond should be double the actual value
of the properties involved. In this case, what was posted was merely an amount which was
double the probable value as declared by the plaintiff and, therefore, inadequate should there be a
finding that the actual value is actually far greater than P200,000.00. Since the valuation made by
the petitioner has been disputed by the respondent, the lower court should have determined first
the actual value of the properties. It was thus an error for the said court to approve the bond,
which was based merely on the probable value of the properties.
It should be noted that a replevin bond is intended to indemnify the defendant against any
loss that he may suffer by reason of its being compelled to surrender the possession of the
disputed property pending trial of the action.[14] The same may also be answerable for damages if
any when judgment is rendered in favor of the defendant or the party against whom a writ of
replevin was issued and such judgment includes the return of the property to him.[15] Thus, the
requirement that the bond be double the actual value of the properties litigated upon. Such is the
case because the bond will answer for the actual loss to the plaintiff, which corresponds to the
value of the properties sought to be recovered and for damages, if any.
Petitioner also maintains that, assuming for the sake of argument that its replevin bond was
grossly inadequate or insufficient, the recourse of the respondent should be to post a counterbond
or a redelivery bond as provided under Section 5 of Rule 60.
Sections 5 and 6, Rule 60 of the Rules of Court, read:
SEC. 5. Return of property. - If the defendant objects to the sufficiency of the
plaintiffs bond, or of the surety or sureties thereon, he cannot require the return of the
property as in this section provided; but if he does not so object, he may, at any time
before the delivery of the property to the plaintiff, if such delivery be adjudged, and
for the payment of such sum to him as may be recovered against the defendant, and by
serving a copy of such bond on the plaintiff or his attorney.

SEC. 6. Disposition of property by officer. - If within five (5) days after the taking of
the property by the officer, the defendant does not object to the sufficiency of the
bond, or of the surety or sureties thereon, or require the return of the property as
provided in the last preceding section; or if the defendant so objects, and the plaintiffs
first or new bond is approved; or if the defendant so requires, and his bond is objected
to and found insufficient and he does not forthwith file an approved bond, the
property shall be delivered to the plaintiff, the officer must return it to the defendant.

The Court held in a prior case[16] that the remedies provided under Section 5, Rule 60, are
alternative remedies. xxx If a defendant in a replevin action wishes to have the property taken by
the sheriff restored to him, he should, within five days from such taking, (1) post a counter-bond
in double the value of said property, and (2) serve plaintiff with a copy thereof, both
requirements as well as compliance therewith within the five-day period mentioned being
mandatory.[17] This course of action is available to the defendant for as long as he does not object
to the sufficiency of the plaintiffs bond.
Conformably, a defendant in a replevin suit may demand the return of possession of the
property replevined by filing a redelivery bond executed to the plaintiff in double the value of the
property as stated in the plaintiffs affidavit within the period specified in Sections 5 and 6.
Alternatively, the defendant may object to the sufficiency of the plaintiffs bond, or of the
surety or sureties thereon; but if he does so, he cannot require the return of the property by
posting a counter-bond pursuant to Sections 5 and 6.[18]
In the case under consideration, the private respondent did not opt to cause redelivery of the
properties to him by filing a counter-bond precisely because he objected to the sufficiency of the
bond posted by plaintiff.Therefore, he need not file a counter-bond or redelivery bond. When
such objection was not given due course in the court below - when, instead of requiring the
plaintiff to post a new bond, the court approved the bond in the amount of P400,000.00, claimed
by respondent to be insufficient, and ordered the seizure of the properties - recourse to a petition
for certiorari before the Court of Appeals assailing such order is proper under the circumstances.
IV

As its fourth assignment of errors, petitioner contends that the Court of Appeals made an
error of judgment in finding that the petitioner did not comply with the provisions of Section 5,
Rule 59 by failing to post a receivers bond. Petitioner contends that although it is in agreement
with the Court of Appeals that a receivers bond is separate and distinct from a replevin bond,
under the circumstances it was not required to file a receivers bond because it did not assume
receivership over the properties. It is further argued that assuming that it did assume
receivership, the Chattel Mortgage expressly provides, that:

In case the MORTGAGEE institutes proceedings, judicially or otherwise, for the

foreclosure of this Chattel Mortgage, or to enforce any of its rights hereunder, the
MORTGAGEE shall be entitled as a matter of right to the appointment of a receiver,
without bond, of the mortgaged properties and of such other properties, real or
personal, claims and rights of the MORTGAGOR as shall be necessary or proper to
enable the said receiver to properly control and dispose of the mortgaged properties.[19]

The order of the trial court dated March 24, 1975 provided, among others, that the properties
shall be under joint management for a period of ten days, after which period the bank, by virtue
of the stipulations under the chattel mortgage, becomes the Receiver to perform all the
obligations as such Receiver and in the event that the bank decides not to take over the
receivership, the joint management continues.[20]
From the evidence on record, it is palpably clear that petitioner Citibank did, in fact, assume
receivership. A letter[21] dated April 1, 1975 sent by petitioner to the private respondent, reads:

April 1, 1975

Anama Engineering Service Group

114 R. Lagmay Street
San Juan, Rizal

Attention: Mr. Douglas Anama

Gentlemen:

Pursuant to the Court order, we have decided to take over your machine shop as
Receiver.

We are hereby appointing Mr. Artemio T. Gonzales as our representative.

Very truly yours,

FIRST NATIONAL CITY BANK
By:

P.R. REAL, JR.

Assistant Manager

Petitioner cannot therefore deny that nine days after the trial court issued the order of
receivership, it informed the private respondent that it would, as it did, assume receivership.
 The Court of Appeals found that the requirements of Section 5, Rule 59 on receivership
were not complied with by the petitioner, particularly the filing or posting of a bond and the
taking of an oath.
It should be noted that under the old Rules of Court which was in effect at the time this case
was still at trial stage, a bond for the appointment of a receiver was not generally required of the
applicant, except when the application was made ex parte.[22] Therefore, petitioner was not
absolutely required to file a bond. Besides, as stipulated in the chattel mortgage contract between
the parties, petitioner, as the mortgagee, is entitled to the appointment of a receiver without a
bond.
However, the Court of Appeals was right in finding a defect in such assumption of
receivership in that the requirement of taking an oath has not been complied with. Section 5,
Rule 59, states:

SEC. 5 Oath and bond of receiver - Before entering upon his duties, the receiver must
be sworn to perform them faithfully, and must file a bond, executed to such person
and in such sum as the court or judge may direct, to the effect that he will faithfully
discharge the duties of receiver in the action and obey the orders of the court therein.

Consequently, the trial court erred in allowing the petitioner to assume receivership over the
machine shop of private respondent without requiring the appointed receiver to take an oath.
V

In light of the foregoing, the answer to the fifth assignment of errors is in the negative. For
erroneously issuing the alias writ of seizure without inquiring into the sufficiency of the replevin
bond and for allowing petitioner to assume receivership without the requisite oath, the Court of
Appeals aptly held that the trial court acted with grave abuse of discretion in dealing with the
situation.
Under the Revised Rules of Court, the property seized under a writ of replevin is not to be
delivered immediately to the plaintiff.[23] This is because a possessor has every right to be
respected in its possession and may not be deprived of it without due process.[24]
As enunciated by this Court in the case of Filinvest Credit Corporation vs. Court of
Appeals,[25]

The reason why the law does not allow the creditor to possess himself of the
mortgaged property with violence and against the will of the debtor is to be found in
the fact that the creditors right of possession is conditioned upon the fact of default,
and the existence of this fact may naturally be the subject of controversy. The debtor,
for instance, may claim in good faith, and rightly or wrongly, that the debt is paid, or
that for some other reason the alleged default is nonexistent. His possession in this
situation is as fully entitled to protection as that of any other person, and in the
language of Article 446 of the Civil Code, he must be respected therein. To allow the
creditor to seize the property against the will of the debtor would make the former to a
certain extent both judge and executioner in his own cause - a thing which is
inadmissible in the absence of unequivocal agreement in the contract itself or express
provision to the effect in the statute.

WHEREFORE, for lack of merit, the petition is hereby DISMISSED. No pronouncement

as to costs.
SO ORDERED.
Romero (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

[1]
Former Third Division with Associate Justice Mama Busran, ponente; Associate Justice Jose Melo and Associate
Justice Serafin Cuevas, members.
[2]
Annex B, Rollo, p. 32.
[3]
Rollo, p. 27.
[4]
Rollo, pp. 28-29.
[5]
Annex E, Rollo, p. 49.
[6]
Annex F, Rollo, p. 51.
[7]
Annex G, Rollo, pp. 52-61.
[8]
Ca Decision, p. 10; Rollo, p. 171.
[9]
Mendiola vs. Court of Appeals, 258 SCRA 492.
[10]
CA decision, p. 7; Rollo, p. 417.
[11]
Bayog, et al. Vs. Natino, et al. 258 SCRA 378, 400.
[12]
Section 2, Rule 60, Revised Rules of Court; Normal Holdings and Development Corporation vs. Court of
Appeals, 194 SCRA 383
[13]
Moreno, Federico, Philippine Law Dictionary, (Vera-Reyes Inc., Quezon City), 1972, p.17.
[14]
Alim vs. Court of Appeals, 200 SCRA 450, 458; Sapugay, et al. vs. Court of Appeals, et al., G.R. No. 86792,
March 21, 1990.
[15]
Stronghold Insurance Co., vs. Court of Appeals, 179 SCRA 117
[16]
La Tondea Distillers, Inc. vs. Court of Appeals, 209 SCRA 553.
[17]
La Tondea, id.; Ong vs. Intermediate Appellate Court, 201 SCRA 543; Chan vs. Villanueva, etc., et al., April 30,
1952; Case and Nantz vs. Jugo, et al., 77 Phil. 517; Bachrach Motor Co., Inc. vs. Albert, 60 Phil. 308.
[18]
La Tondea, supra.
[19]
Annex B, Rollo, p. 35.
[20]
Rollo, p. 22.
[21]
Annex 4, Rollo, p. 142.
[22]
Regalado, Florenz, Remedial Law Compendium, Volume I, pp. 663-664 (Under the new rules, a bond shall
always be required from the applicant.)
[23]
Sebastian vs. Valino, 224 SCRA 256
[24]
Viloria vs. Puno, etc., et al., 95 Phil. 802; Rodriguez vs. Tio, 16 Phil. 301; Maglasang vs. Maceren et al., 46 O.G.
No. 11, 90.
[25]
248 SCRA 549.
 THIRD DIVISION

[G.R. No. 131283. October 7, 1999]

OSCAR C. FERNANDEZ and NENITA P. FERNANDEZ, petitioners, vs.

THE INTERNATIONAL CORPORATE BANK, now UNION BANK
OF THE PHILIPPINES; and PREMIERE INSURANCE & SURETY
CORP., respondents.

DECISION
PANGANIBAN, J.:

A writ of replevin issued by the Metropolitan Trial Court of Pasay City may be served and
enforced anywhere in the Philippines. Moreover, the jurisdiction of a court is determined by the
amount of the claim alleged in the complaint, not by the value of the chattel seized in ancillary
proceedings.

The Case

Spouses Oscar C. Fernandez and Nenita P. Fernandez challenge, via the instant Petition for
Review on Certiorari[1] under Rule 45 of the Rules of Court, the September 4, 1997
Decision[2] and the November 14, 1997 Resolution,[3] both issued by the Court of Appeals[4] in
CA-GR SP No. 44409.
The assailed Decision dismissed petitioners suit for certiorari and prohibition praying for
the redelivery of the vehicle seized from them and for the declaration of nullity of the Writ of
Replevin, which had been issued by Judge Estelita M. Paas[5] of the Metropolitan Trial Court of
Pasay City,[6] and all other Orders subsequent thereto. The challenged Resolution, on the other
hand, denied reconsideration.

The Facts

In its assailed Decision, the Court of Appeals summarized the facts as follows:

xxx [O]n or about October 26, 1993, [petitioners] purchased a Nissan Sentra Sedan
through a financing scheme of the private respondent, the International Corporate
Bank, now Union Bank of the Philippines, and the chattel mortgage was executed in
favor of the financing institution on November 10, 1993. As borne out by the
Disclosure Statement in the credit transaction, the cash purchase price was
P492,000.00, minus the downpayment of P147,500.00, leaving the amount of
P344,[5]00.00 to be financed. The total amount to be paid for 48 monthly installments
would amount to P553,944.00.

Petitioner added that due to the respondent banks greedy desire to unjustly enrich
itself at the expense of the petitioners, the former filed an unfounded complaint for a
sum of money with replevin (Case No. 983-96) before the Metropolitan Trial Court,
Branch 44, Pasay City.

Considering that the principal amount involved was P553,944.00, petitioners filed an
Answer mentioning in the special and affirmative defenses a Motion to Dismiss, for
lack of jurisdiction, but this was denied on February 10, 1997 and was received on
February 20, 1997. A Motion for Reconsideration was then submitted on April 2,
1997.

Aside from that, petitioners contested the venue considering that the principal office
of the respondent bank [was] in Makati, while their residence [was] in Quezon City.

The Motion for Reconsideration was denied on May 9, 1997 and received by them on
May 29, 1997.

When the respondent bank filed its complaint with prayer for the issuance of a Writ of
Replevin on November 28, 1997, the monthly installments were almost fully paid;
[they] would have been fully paid on November 26, 1997. Furthermore, the cars
mileage at the time of illegal seizure was only 28,464 kilometers. They could not have
been considered in default at the time the complaint was filed, considering that: (a)
they attempted many times to pay the bank their installments for the months of
August, September, October, 1996, and up to the time of the filing of the case, they
ha[d] not received any statement of delinquency as mandated by R.A. No. 3165,
otherwise known as the Truth in Lending Act.

If at all, petitioners added, the baseless filing of the case was deliberately done to
enrich the bank at the expense of the petitioners which [was] tantamount to simple
robbery. They even tried consigning the P69,168.00 through a Managers Check dated
January 7, 1997 for the months of August to February, 1997, or beyond the four
months installment in advance but were similarly refused by the court for no valid
reason.

Their petition for the outright dismissal of the complaint, as well as the lifting of the
Writ of Replevin was denied even if the amount of P553,344.00 representing the
value of the chattel was beyond the jurisdiction of the court.
To be precise, the February 10, 1997 Order (Rollo, p. 17) states:

For consideration before this court is the Urgent Motion to Re-deliver the Chattel and
the Motion to Dismiss by way of Special and Affirmative Defenses the following:

that this Honorable Court has no jurisdiction to try the case and to issue the Writ of
Replevin, for the reason that the plaintiffs office is in Makati and defendants residence
is in Quezon City and that the amount involved is P553,344.00 which is beyond the
jurisdiction of this Honorable Court.

xxxxxxxxx

This Court has carefully reviewed the records of this case as well as the Sheriffs
Return which [show] that the subject value covered by the Writ of Replevin was
seized on January 7, 1997 by the branch sheriff of this court and thereafter turned over
to the plaintiff in this case.

Under the Rules of Court, the defendant has a period of 5 days from January 7, 1997
to post a re-delivery bond, in order to secure the return of the subject vehicle and to
post a counter bond double the amount of the chattel.

In this respect, defendants failed to exercise his right.

As to the question of jurisdiction the complaint [shows] that the amount plaintiff seeks
to recover is P190,635.00, which is well within the jurisdiction of this Honorable
Court. Likewise the attached Promissory Note in the Complaint also contains
stipulation as to the venue agreed upon by the parties in case an action is filed in
court, in which case this court has jurisdiction.

WHEREFORE, finding the Motion to Re-deliver chattel filed by the defendant to be

untenable, the same is hereby denied for lack of merit.

The Motion to Dismiss on ground of lack of jurisdiction is likewise denied for being
unmeritorious.

SO ORDERED.[7]

Ruling of the Court of Appeals

The Court of Appeals ruled that the Metropolitan Trial Court (MTC) of Pasay City had
jurisdiction over civil cases in which the amount of the demand did not exceed P200,000
exclusive of interest, damages and attorneys fees. The basic claim in the present case
was P190,635.90; hence, the MTC had jurisdiction.
The appellate court further held that the objection to the impropriety of the venue should
have been raised in a motion to dismiss before the filing of a responsive pleading. The said issue,
however, was raised for the first time only in petitioners Answer.
Lastly, the Court of Appeals agreed with the MTC that the Writ of Replevin could be validly
executed anywhere in Metro Manila because Section 27, Chapter III of B.P. 129, authorized the
establishment of the Metropolitan Trial Court of Metro Manila with eighty-two (82)
branches. Therefore, any branch in this case, Branch 44 which was stationed in Pasay -- could
issue writs and processes that could validly be served and executed anywhere within Metro
Manila.
Aggrieved, petitioners now seek the reversal of the foregoing rulings through this recourse.[8]

Issues

In their Memorandum, petitioners present the following issues:

1. The jurisdiction of the Metropolitan Trial Court of Pasay City is strictly limited
within the confines of the boundary limits of Pasay City, B.P. 129, Sec. 28.

2. The Metropolitan Trial Courts jurisdiction is limited to not more than two hundred
thousand pesos.

3. Assuming that the Metropolitan Trial Court of Pasay City has jurisdiction to try and
decide the case and to issue the ancillary writ of replevin, the Court of Appeals
grievously erred in sanctioning the order of [the] Metropolitan Trial Court of Pasay
City in denying Petitioners[] Motion for Redelivery of the vehicle which was filed
within five days after such seizure, which in essence [was] an outright departure from
the express provision of the law and the settled jurisprudence on the matter.

4. The banks Memorandum dated July 5, 1999 should be stricken off and ordered
expunged from the records for being fatally defective in form and substance. No
Annexes to said Memorandum were attached to petitioners copy, thereby making said
memorandum fatally defective because the annexes [were] integral part[s] of the
memorandum itself. Up to this late date, respondent Premiere Insurance and Surety
Corporation has not submitted its memorandum and may now therefore be deemed to
have admitted the entire text of the Petition to be true, valid and binding against it.

To resolve this case, this Court shall dispose of the following questions: (1) May the Writ of
Replevin issued by the MTC of Pasay City be enforced outside the city? (2) Did the MTC have
jurisdiction over the Complaint? (3) Were petitioners entitled to the redelivery of the subject
vehicle?

This Courts Ruling

The Petition has no merit.

First Issue: Territorial Enforcement of the Writ of Replevin

Petitioners argue that the Writ of Replevin issued by the Metropolitan Trial Court of Pasay
could be enforced only within the confines of Pasay City. In support, they cite Section 28 of
Batas Pambansa (BP) 129, which states:

SEC. 28. Other Metropolitan Trial Courts. --- The Supreme Court shall constitute
Metropolitan Trial Courts in such other metropolitan areas as may be established by
law whose territorial jurisdiction shall be co-extensive with the cities and
municipalities comprising the metropolitan area.

Every Metropolitan Trial Judge shall be appointed to a metropolitan area which shall
be his permanent station and his appointment shall state the branch of the court and
the seat thereof to which he shall be originally assigned. A Metropolitan Trial Judge
may be assigned by the Supreme Court to any branch within said metropolitan area as
the interest of justice may require, and such assignment shall not be deemed an
assignment to another station within the meaning of this section.[9]

We are not convinced. Under the Resolution of the Supreme Court en banc, dated January
11, 1983, providing for the interim rules and guidelines relative to the implementation of BP 129,
a writ of replevin like the one issued in the present case may be served anywhere in the
Philippines. Specifically, the said Resolution states:

3. Writs and processes. ---

(a) Writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction issued by a regional trial court may be enforced in any part of the region.

(b) All other processes, whether issued by a regional trial court or a metropolitan trial
court, municipal trial court or municipal circuit trial court may be served anywhere in
the Philippines, and, in the last three cases, without a certification by the judge of the
regional trial court.[10]
 Thus, the Writ of Replevin issued by Judge Paas, which obviously does not fall under item a
of the above-cited Rule, may be validly enforced anywhere in the Philippines. Petitioners
confused the jurisdiction of a court to hear and decide a case on the one hand with, on the other,
its power to issue writs and processes pursuant to and in the exercise of said
jurisdiction. Applying the said Rule, Malaloan v. Court of Appeals[11] reiterated the foregoing
distinction between the jurisdiction of the trial court and the administrative area in which it could
enforce its orders and processes pursuant to the jurisdiction conferred on it:

We feel that the foregoing provision is too clear to be further belabored or enmeshed
in unwarranted polemics. The rule enumerates the writs and processes which, even if
issued by a regional trial court, are enforceable only within its judicial region. In
contrast, it unqualifiedly provides that all other writs and processes, regardless of
which court issued the same, shall be enforceable anywhere in the Philippines. No
legal provision, statutory or reglementary, expressly or impliedly provides a
jurisdictional or territorial limit [to] its area of enforceability. On the contrary, the
above-quoted provision of the interim Rules expressly authorizes its enforcement
anywhere in the country, since it is not among the processes specified in paragraph (a)
and there is no distinction or exception made regarding the processes contemplated in
paragraph (b).

Objection to Venue Too Late

Petitioners object to the filing of the Complaint in Pasay City, pointing out that their
residence is in Quezon City, while private respondents principal place of business is in
Makati. Again, we are not persuaded. Under the Rules of Court before the 1997
amendments,[12] an objection to an improper venue must be made before a responsive pleading is
filed. Otherwise, it will be deemed waived. In Diaz v. Adiong,[13] the Court explained such
requirement in this wise:

xxx. Indeed, the laying of venue is procedural rather than substantive, relating as it
does to jurisdiction of the court over the person rather than the subject matter. Venue
relates to trial and not to jurisdiction.

Finally, Sec. 1 of Rule 16 provides that objections to improper venue must be made in
a motion to dismiss before any responsive pleading is filed. Responsive pleadings are
those which seek affirmative relief and set up defenses. Consequently, having already
submitted his person to the jurisdiction of the trial court, petitioner may no longer
object to the venue which, although mandatory in the instant case, is nevertheless
waivable. As such, improper venue must be seasonably raised, otherwise, it may be
deemed waived.[14]
 In the present case, petitioners objection to the venue of the case was raised for the first time
in the Answer itself. Not having been raised on time, their objection is therefore deemed waived.
In any event, petitioners had agreed to a stipulation in the Promissory Note that a suit arising
from their transaction may be filed in the proper court anywhere in Metro Manila, at the sole
option of respondent bank.[15]Necessarily, Pasay City is deemed included in the said stipulation.

Second Issue: MTCs Jurisdiction Over the Complaint

Petitioners argue that the value of the property seized is in excess of P200,000 and thus
outside the jurisdiction of the Metropolitan Trial Court. This argument has no legal and factual
basis. The fundamental claim in the main action against petitioners, as shown in respondent
banks Complaint, is the collection of the sum of P190,635.90, an amount that is clearly within
the jurisdiction of the MTC. Although the value of the vehicle seized pursuant to the Writ of
Replevin may have exceeded P200,000, that fact does not deprive the trial court of its
jurisdiction over the case. After all, the vehicle was merely the subject of a chattel mortgage that
had been used to secure petitioners loan. In any case, private respondents are entitled only to the
amount owed them. Under Section 14 of the Chattel Mortgage Law, the proceeds of the sale of
the mortgaged property shall be used primarily to pay the costs of the sale, the obligation that has
been secured and other subsequent obligations; and the balance will be turned over to the
mortgagors, herein petitioners.

Third Issue: Redelivery of Subject Vehicle

Petitioners assail the MTCs refusal to release the seized vehicle despite a Managers Check
in the amount of P69,168 they issued for the redelivery of the vehicle within five days from its
seizure.
This argument is devoid of merit. As observed by the trial court, petitioners failed to comply
with the requisites for the redelivery of the vehicle seized:

Under the Rules of Court, the defendant has a period of 5 days from January 7, 1997
to post a re-delivery bond, in order to secure the return of the subject vehicle and to
post a counter bond double the amount of the chattel. In this respect[,] defendants
failed to exercise his right.[16]

Indeed, a careful perusal of the records shows that petitioners failed to comply with the
requirements prescribed by Rule 60 of the Rules of Court in effect at the time:[17]

SEC. 5. Return of Property. --- If the defendant objects to the sufficiency of the
plaintiffs bond, or of the surety or sureties thereon, he cannot require the return of the
property as in this section provided; but if he does not so object, he may, at any time
before the delivery of the property to the plaintiff, require the return thereof, by filing
with the clerk or judge of the court a bond executed to the plaintiff, in double the
value of the property as stated in the plaintiffs affidavit, for the delivery of the
property to the plaintiff, if such delivery be adjudged, and for the payment of such
sum to him as may be recovered against the defendant, and by serving a copy of such
bond on the plaintiff or his attorney.

SEC. 6. Disposition of property by officer. --- If within five (5) days after the taking of
the property by the officer, the defendant does not object to the sufficiency of the
bond, or of the surety or sureties thereon; or require the return of the property as
provided in the last preceding section; or if the defendant so objects, and the plaintiffs
first or new bond is approved; or if the defendant so requires, and his bond is objected
to and found insufficient and he does not forthwith file an approved bond, the
property shall be delivered to the plaintiff. If for any reason the property is not
delivered to the plaintiff, the officer must return it to the defendant.

In their Petition for Review, petitioners plainly admit that they issued a check for
only P69,168 for the purpose of covering the advance payments plus the redelivery
bond. Clearly, that amount was insufficient to cover even just the required redelivery bond alone,
which should be in an amount double that of the chattel. Hence, the MTCs refusal to grant
petitioners Motion for redelivery was correct, and the Court of Appeals did not err in upholding
it.
WHEREFORE, the Petition is hereby DENIED and the assailed
Decision AFFIRMED. Costs against petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, and Gonzaga-Reyes, JJ., concur.
Purisima, J., no part.

[1]
Rollo, pp. 8-22.
[2]
Rollo, pp. 36-41.
[3]
Rollo, p. 34.
[4]
Seventeenth Division composed of Justice Bernardo LL. Salas, ponente; with Justice Angelina Sandoval-
Gutierrez (Division chairperson) and Justice Omar U. Amin (member), both concurring.
[5]
In Civil Case No. 983-96.
[6]
Branch 44.
[7]
CA Decision, pp. 1-4; rollo, pp. 35-38.
[8]
This case was deemed submitted for resolution on August 16, 1999, when Petitioners Memorandum was received
by this Court. Respondents respective Memoranda were filed earlier.
[9]
Sec. 28 of BP 129.
[10]
No. 3, General Provisions of the Interim Rules relative to the implementation of BP 129.
[11]
232 SCRA 249, 264, May 6, 1994, per Regalado, J.
[12]
Rule 14, Section 4 of the pre-1997 Rules of Court, provided that [w]hen improper venue is not objected to in a
motion to dismiss, it is deemed waived. Petitioners Answer invoking improper venue was filed on January 9, 1997,
and the MTC denied it its February 20, 1997 Order.
[13]
219 SCRA 631, March 5, 1993.
[14]
Ibid., pp. 637-638, per Bellosillo, J.
[15]
Respondent banks Memorandum, p. 5; rollo, p. 83.
[16]
CA Decision, p. 4, citing MTC Order dated February 10, 1997; rollo, p. 38.
[17]
These provisions were substantially reproduced in the 1997 Rules of Civil Procedure.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-48219 February 28, 1979

MANUEL J. C. REYES, petitioner,

vs.
HON. LEONOR INES-LUCIANO, as Judge of the Juvenile & Domestic Relations Court, Quezon
City, COURT OF APPEALS and CELIA ILUSTRE-REYES, respondents.

Eriberto D. Ignacio for petitioner.

Gonzalo D. David for private respondent.

FERNANDEZ, J.:

This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 06928-
SP entitled "Manuel J. C. Reyes, petitioner, versus, The Hon. Leonor Ines-Luciano as Judge of the
Juvenile & Domestic Relations Court (Quezon City) and Celia Ilustre-Reyes, Respondents",
dismissing the petition to annul the order of the respondent Judge directing the petitioner to give
support pendente lite to his wife, Celia Ilustre-Reyes, private respondent herein, in the amount of
P40,000.00 a month.1

The private petitioner, Celia Ilustre-Reyes, filed in the Juvenile and Domestic Relations Court of
Quezon City a complaint dated June 3, 1976 against her husband, Manuel J. C. Reyes, for legal
separation on the ground that the defendant had attempted to kill plaintiff. The pertinent allegations
of the complaint are:

6.8 On March 10, 1976, defendant went to V. Ilustre and attacked plaintiff. He
pummeled her with fist blows that floored her, then held her head and, with intent to
kill, bumped it several times against the cement floor. When she ran upstairs to her
father for protection, he pushed her at the stairway of 13 flights and she fell sliding to
the ground floor. Determined to finish her off, he again gave her a strong swing at her
abdomen which floored her half unconscious. Were it not for plaintiff's father, he
would have succeeded killing her;

6.9. On May 26, 1976, although on May 11 previous she ceased holding office with
defendant at Bel-Air Apartments elsewhere adverted to, she went thereto to get her
overnight bag. Upon seeing her, defendant yelled at her to get out of the office.
When he did not mind him, he suddenly doused her with a glass of grape juice,
kicked her several times that landed at her back and nape, and was going to hit her
with a steel tray as her driver, Ricardo Mancera, came due to her screams for help.
For fear of further injury and for life, she rushed to Precinct 5 at united Nations
Avenue, Manila Metropolitan Police, for assistance and protection;2
The plaintiff asked for support pendente lite for her and her three children. The defendant, petitioner
herein, opposed the application for support pendente lite on the ground that his wife had committed
adultery with her physician.

The application for support pendente lite was set for hearing and submitted for resolution on the
basis of the pleadings and the documents attached thereto by the parties.

The respondent Judge issued an order dated March 15, 1977 granting plaintiff's prayer for
alimony pendente lite in the amount of P5,000.00 a month commencing from June 1976.3

The petitioner filed a motion for reconsideration reiterating that his wife is not entitled to support
during the pendency of the case, and, alleging that even if she entitled, the amount awarded was
excessive. The respondent Judge reduced the amount from P5,000.00 to P44,00.00 a month in an
order dated June 17, 1977.4

Manuel J. C. Reyes filed a petition for certiorari in the Court of Appeals dated July 25, 1977 asking
that the order granting support pendente lite to private respondent. Celia Ilustre-Reyes, be annulled
on the ground that the respondent Judge, Leonor Ines-Luciano, had committed a grave abuse of
discretion or that said order be modified inasmuch as the amount awarded as support pendente
lite is excessive.

The Court of Appeals dismissed the petition because:

Considering the plight of the wife during the pendency of the case for legal
separation and that the husband appears to be financially capable of giving the
support, We believe that the petitioner has not presented a clear case of grave abuse
of discretion on the part of the respondent in issuing the questioned orders. We see
no compelling reason to give it due course.5

The petitioner contends that the Court of Appeal committed the following error:

THE HON. COURT OF APPEALS GRIEVOUSLY ERRED IN A MANNER

AMOUNTING IT CAN ERROR OF LAW AND A DEPARTURE FROM THE
ACCEPTED NORMS LAID DOWN BY THIS HON. COURT IN THE CASES WE
SHALL LATER ON DISCUSS, IN REFUSING TO GIVE DUE COURSE TO THE
ORIGINAL PETITION FOR certiorari HEREIN AGAINST RESPONDENTS-
APPELLEES, AND IN AFFIRMING THE ORDERS FOR SUPPORT PENDENTE
LITE ANNEXES "F" AND "H" OF THIS PETITION WHEN HELD THAT
RESPONDENT-APPELLEE JUDGE DID NOT COMMIT ANY ABUSE OF
DISCRETION IN ISSUING SAID ORDERS, FOR THE REASONS THAT:

A. IN ACTIONS FOR LEGAL SEPARATION THE WIFE IS ENTITLED TO

SUPPORT FROM THE HUSBAND DESPITE THE FACT THAT A CASE FOR
ADULTERY HAD BEEN FILED BY THE HUSBAND AGAINST HER; AND

B. IN DETERMINING THE AMOUNT OF SUPPORT PENDENTE LITE, IT IS

ENOUGH THAT THE COURT ASCERTAIN THE KIND AND AMOUNT OF
EVIDENCE EVEN BY AFFIDAVITS ONLY OR OTHER DOCUMENTARY
EVIDENCE APPEARING IN THE RECORDS.6
It is true that the adultery of the wife is a defense in an action for support however, the alleged
adultery of wife must be established by competent evidence. The allegation that the wife has
committed adultery will not bar her from the right receive support pendente lite. Adultery is a good
defense and if properly proved and sustained wig defeat the action.7

In the instant case, at the hearing of the application for support pendente lite before the Juvenile and
Domestic Relations Court presided by the respondent Judge, Hon. Leonor Ines-Luciano the
petitioner did not present any evidence to prove the allegation that his wife, private respondent Celia
Ilustre-Reyes, had committed adultery with any person.

The petitioner has still the opportunity to adduce evidence on the alleged adultery of his wife when
the action for legal separation is heard on the merits before the Juvenile and Domestic Relations
Court of Quezon City. It is to be noted however, that as pointed out by the respondents in their
comment, the "private respondent was not asking support to be taken from petitioner's personal
funds or wherewithal, but from the conjugal property—which, was her documentary evidence ...". 8 It
is, therefore, doubtful whether adultery will affect her right to alimony pendente lite. In Quintana vs.
Lerma,9 the action for support was based on the obligation of the husband to support his wife.

The contention of the petitioner that the order of the respondent Judge granting the private
respondent support pendente lite in the amount of P4,000.00 a month is not supported by the
allegations of the complaint for legal separation and by competent evidence has no merit.

The complaint or legal separation contains allegations showing that on at least two occasions the
defendant, petitioner herein, had made attempts to kill the private respondent. Thus it is alleged that
on March 10, 1976, the defendant attacked plaintiff, pummeled her with fist blows that floored her,
held her head and with intent to kill, bumped it several times against the cement floor and when she
ran upstairs to her father for protection, the petitioner pushed her at the stairway of thirteen (13)
flights and she fell sliding to the ground floor and defendant gave her a strong swing at her abdomen
which floored her half unconscious and were it not for plaintiff's father, defendant would have
succeeded in killing her. 10 It is also alleged that on May 26, 1976, the defendant doused Celia
Ilustre-Reyes with a glass of grape juice, kicked her several times at her back and nape and was
going to hit her with a steel tray if it were not for her driver who came due to her creams for help." 11

In fixing the amount of monthly support pendente lite of P4,000,00, the respondent judge did not act
capriciously and whimsically. When she originally fixed the amount of P5,000.00 a month, the
respondent Judge considered the following:

On record for plaintiff's cause are the following: that she and defendant were married
on January 18, 1958; that she is presently unemployed and without funds, thus, she
is being supported by her father with whom she resides: that defendant had been
maltreating her and Cried to kill her; that all their conjugal properties are in the
possession of defendant who is also president, Manager and Treasurer of their
corporation namely:

1. Standard Mineral Products, which was incorporated on February 9, 1959:

presently with paid-in capital of P295,670.00; assets and liabilities of P757,108.52;
Retained Earnings of P85,654.61: and majority stockholder is defendant;

2. Development and Technology Consultant Inc. incorporated on July 12, 1971, with
paid-in capital of P200,000.00; Assets and liabilities of P831,669.34; defendant owns
99% of the stocks; and last Retained Earnings is P98,879.84.
 3. The Contra-Prop Marine Philippines, Inc. which was incorporated on October 3,
1975, with paid-in capital of P100,000 defendant owns 99% of the stocks.

To secure some of the of said Agreement of Counter-Guaranty Mortgage with Real

Estate, and Real Estate Mortgage were undertaken by plaintiff of their properties
outside of other accommodations; and that she needs of P5,000.00 a month for her
support in accordance with their station in life. 12

The amount of support pendente lite was reduced to P4,000.00 inasmuch as the children are in the
custody of the petitioner and are being supported by him.

It is thus seen that the respondent judge acted with due deliberation before fixing the amount of
support pendente lite in the amount of P4,000.00 a month.

In determining the amount to be awarded as support pendente lite it is not necessary to go fully into
the merits of the case, it being sufficient that the court ascertain the kind and amount of evidence
which it may deem sufficient to enable it to justly resolve the application, one way or the other, in
view of the merely provisional character of the resolution to be entered. Mere affidavits may satisfy
the court to pass upon the application for support pendente lite. 13 It is enough the the facts be
established by affidavits or other documentary evidence appearing in the record. 14

The private respondent has submitted documents showing that the corporations controlled by the
petitioner have entered into multi-million contracts in projects of the Ministry of Public Highways.

Considering the high cost of living due to inflation and the financial ability of the petitioner as shown
by the documents of record, We find that the amount of P4,000.00 a month granted by the
respondent Judge as alimony pendente lite to the private respondent is not excessive. There is no
showing that the respondent Judge has committed a grave abuse of discretion in granting said
support.

In a resolution dated July 31, 1978, this Court issued a temporary restraining order effective
immediately against the enforcement of the lower court's order giving support pendente lite to private
respondent in the sum of P4,000.00 monthly commencing June 1976 and in lieu thereof to allow
such support only to the extent of P1,000.00 a month. 15

Later the petitioner was required to pay the support at the rate of P1,000.00 a month which had
accumulated since June 1976 within ten (10) days from notice of the resolution:16

The private respondent acknowledged on November 20, 1978 having received from the petitioner,
through his counsel a check in the amount of P30,000.00 as payment of support for the period from
June 1976 to November 1978 or thirty (30) months at P1,000.00 a month in compliance with the
resolution of this Court dated October 9, 1978.

In view of the foregoing, the support of P4,000.00 should be made to commence or, March 1, 1979.

WHEREFORE, the petition for certiorari is hereby denied and the decision of the Council of Appeals
sought to be reviewed is affirmed with the modification that the support pendente lite at the rate of
Four Thousand Pesos (P4.000.00) a month should commence from March 1, 1979 without
pronouncement as to costs.

SO ORDERED.
Teehankee (Chairman), Makasiar, Guerrero, De Castro and Melencio-Herrera, JJ., concur.

#Footnotes

1 Annex "K" to Petition, Rollo pp. 74-77, Decision written by Mr. Justice B. S. de la
Fuente and concurred in by Mr. Justice Ramon G. Gaviola, Jr. and Mr. Justice
Porfirio V. Sison.

2 Paragraphs 6.8 and 6.9 of the Complaint, Rollo, p. 28.

3 Annex "F", Rollo, pp. 46-49.

4 Annex "H", Rollo, pp. 55.

5 Decision, Rollo, P. 77.

6 Petition, Rollo, pp. 16-17.

7 Quintana vs. Lerma, 24 Phil. 285-286.

8 Annex "J", Rollo, pp. 67, 70.

9 24 Phil. 285-286.

10 Paragraph 6.8, Rollo. p. 28.

11 Paragraph 6.9, Rollo. p. 28.

12 Annex "F ", Rollo, p. 46.

13 Sanchez vs. Zulueta, et al., 68 Phil. 110, 112.

14 Salazar vs. Salazar G.R. No. L-5823, April 29, 1953, 82 Phil. 1084.

15 Rollo, p. 121-f.

16 Resolution of October 9, 1978, Rollo, p. 496.

 SECOND DIVISION

G.R. No. 131286 March 18, 2004

JOSE LAM, petitioner,

vs.
ADRIANA CHUA, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for review on certiorari assailing the Decision1 dated June 11, 1997 and
the Resolution dated October 27, 1997 of the Court of Appeals in CA-G.R. CV. No. 51107, entitled,
"Adriana Chua, Petitioner-Appellee vs. Jose Lam, Respondent-Appellant."

The case commenced on March 11, 1994 upon the filing of a petition for declaration of nullity of
marriage by Adriana Chua against Jose Lam in the Regional Trial Court of Pasay City (Branch 109).
Adriana alleged in the petition that: she and Jose were married on January 13, 1984; out of said
marriage, they begot one son, John Paul Chua Lam; Jose was psychologically incapacitated to
comply with the essential marital obligations of marriage but said incapacity was not then apparent;
such psychological incapacity of Jose became manifest only after the celebration of the marriage
when he frequently failed to go home, indulged in womanizing and irresponsible activities, such as,
mismanaging the conjugal partnership of gains; in order to save what was left of the conjugal
properties, she was forced to agree with Jose on the dissolution of their conjugal partnership of
gains and the separation of present and future properties; said agreement was approved by the
Regional Trial Court of Makati City (Branch 149) in a Decision dated February 28, 1994; they had
long been separated in bed and board; they have agreed that the custody of their child will be with
her, subject to visitation rights of Jose. Adriana prayed that the marriage between her and Jose be
declared null and void but she failed to claim and pray for the support of their child, John Paul.

Summons was duly served on Jose Lam on March 22, 1994. Despite the lapse of fifteen days after
service of summons, no responsive pleading was filed by him. Hence, the trial court issued an Order
dated April 13, 1994, directing Asst. City Prosecutor Bonifacio Barrera to conduct an investigation for
determination whether or not there was collusion between the parties and to submit his report
thereon. On April 28, 1994, Asst. City Prosecutor Barrera filed his Report stating that "there seems
to be no collusion between the parties".2

The trial court then set the case for hearing. The lone witness was Adriana herself. She testified that
her marriage with Jose was arranged by her parents in the traditional Chinese way; that her married
life was abnormal because Jose very seldom came home, never worked for a living and instead kept
asking for money from her to buy his sports cars; that she was also the one spending for all the
expenses of their only child, John Paul.3 After her testimony, counsel for Adriana formally offered the
documentary evidence. No evidence was presented regarding the amount of support needed by
John Paul or the capacity of Jose to give support.

On June 23, 1994, Adriana filed an Urgent Motion to Re-Open4 on the ground that she was able to
secure additional new evidence which were significant, material and indispensable. On July 6, 1994,
the trial court granted the motion to re-open the case and held a hearing for the reception of
additional evidence. The Pasay RTC admitted into evidence the Marriage Contract dated May 25,
1977 between Jose and one Celia Santiago, and another Marriage Contract dated May 6, 1982
between Jose and one Evan Lock,5 showing that Jose had been married twice before he married
Adriana in 1984.

On August 4, 1994, the Pasay RTC rendered its Decision6 the dispositive portion of which reads as
follows:

IN VIEW OF ALL THE FOREGOING, the Court hereby declares the marriage between petitioner
Adriana Chua and respondent Jose Lam null and void for being bigamous by nature. The Local Civil
Registrar of Quezon City and the Office of the Civil Registrar General are hereby ordered to cancel
the marriage between Adriana Chua and Jose Lam celebrated on January 13, 1984 by Hon.
Guillermo L. Loja of the Metropolitan Trial Court, Quezon City.

Likewise, respondent Jose Lam is hereby ordered to give a monthly support to his son John Paul
Chua Lam in the amount of ₱20,000.00.

SO ORDERED.7

On November 3, 1994, Jose filed a Motion for Reconsideration8 thereof but only insofar as the
decision awarded monthly support to his son in the amount of ₱20,000.00. He argued that there was
already a provision for support of the child as embodied in the decision9 dated February 28, 1994 of
the Makati RTC wherein he and Adriana agreed to contribute ₱250,000.00 each to a common fund
for the benefit of the child, to wit:

8. Nothing herein shall diminish the rights and obligations of both parties with respect to their son. In
the best interest of the child, the Second Party shall retain care and custody, subject to visitation
rights by the First Party to be exercised through mutual arrangements.

9. It is hereby agreed by the First Party and the Second Party that the First Party and the Second
Party shall initially contribute ₱250,000.00 each to a common fund, to be increased as required, to
be used solely and exclusively for the benefit of their son. Said common fund shall be managed and
administered by the Second Party, subject to periodic accounting, until the son reaches majority
age.10

Jose further alleged in his motion that his contribution to the common fund had even amounted to
₱500,000.00.

On August 22, 1995, the Pasay RTC issued an Order denying Jose Lam’s motion for
reconsideration ruling that the compromise agreement entered into by the parties and approved by
the Makati RTC before the marriage was declared null and void ab initio by the Pasay RTC, is of no
moment and cannot limit and/or affect the support ordered by the latter court.

Jose then appealed the Pasay RTC’s decision to the Court of Appeals, assigning only a single error
of the trial court:

THE LOWER COURT SERIOUSLY ERRED IN ORDERING APPELLANT TO GIVE A MONTHLY

SUPPORT OF ₱20,000.00 TO HIS SON BECAUSE THIS WOULD, IN EFFECT, REQUIRE
APPELLANT TO PAY TWICE THE MONTHLY SUPPORT FOR HIS CHILD. BESIDES, THE
LOWER COURT HAS DULY ADMITTED THE FACT THAT THERE WAS A DECISION ISSUED BY
ANOTHER COURT REQUIRING APPELLANT TO CONTRIBUTE THE AMOUNT OF ₱250,000.00
AS THE LATTER’S SHARE IN THE COMMON FUND FOR SUPPORT OF THE CHILD, SUBJECT
TO PERIODIC ACCOUNTING AND TO BE MANAGED BY APPELLEE.11
On June 11, 1997, the Court of Appeals promulgated its decision affirming the Pasay RTC’s decision
in all respects. Jose filed a motion for reconsideration of the Decision but in a Resolution dated
October 27, 1997, the Court of Appeals denied the same.

Hence, Jose filed the present petition for review on certiorari under Rule 45 of the Rules of Court,
likewise raising a single error of the appellate court, to wit:

THE HONORABLE COURT OF APPEALS ERRED IN DECIDING LEGAL QUESTIONS OF

SUBSTANCE NOT IN ACCORDANCE WITH LAW AND JURISPRUDENCE IN FINDING THAT THE
TRIAL COURT’S RULING THAT THE COMPROMISE AGREEMENT BETWEEN PETITIONER AND
RESPONDENT WHERE THEY BOUND THEMSELVES TO CONTRIBUTE THE AMOUNT OF TWO
HUNDRED FIFTY THOUSAND PESOS (₱250,000.00) TO A COMMON FUND FOR THE BENEFIT
OF THEIR CHILD DOES NOT BAR THE TRIAL COURT IN ANNULMENT CASE TO AGAIN
AWARD SUPPORT IN FAVOR OF THE CHILD.

The Pasay RTC and the Court of Appeals are both correct insofar as they ruled that the amount of
support is by no means permanent. In Advincula vs. Advincula,12 we held that another action for
support could be filed again by the same plaintiff notwithstanding the fact that the previous case for
support filed against the same defendant was dismissed. We further held in said case that:

. . . Judgment for support does not become final. The right to support is of such nature that its
allowance is essentially provisional; for during the entire period that a needy party is entitled to
support, his or her alimony may be modified or altered, in accordance with his increased or
decreased needs, and with the means of the giver. It cannot be regarded as subject to final
determination.13

Thus, there is no merit to the claim of Jose that the compromise agreement between him and
Adriana, as approved by the Makati RTC and embodied in its decision dated February 28, 1994 in
the case for voluntary dissolution of conjugal partnership of gains, is a bar to any further award of
support in favor of their child John Paul. The provision for a common fund for the benefit of their child
John Paul, as embodied in the compromise agreement between herein parties which had been
approved by the Makati RTC, cannot be considered final and res judicata since any judgment for
support is always subject to modification, depending upon the needs of the child and the capabilities
of the parents to give support.

Having settled the issue on the authority of the trial court to award support for the child in an action
for declaration of nullity of marriage of the child’s parents, this Court will now discuss the propriety of
the proceedings conducted by the Pasay RTC and the decision it rendered, as affirmed by the Court
of Appeals.

The Court notes four circumstances that taint the regularity of the proceedings and the decision
rendered by the trial court.

First, the only ground alleged in the petition for declaration of nullity of marriage filed by Adriana with
the Pasay RTC is the psychological incapacity of Jose without any prayer for the support of her
child. Adriana presented, formally offered her evidence in support of the petition and submitted the
case for decision as of May 12, 1994.14But on a motion to re-open filed by her on June 23, 1994, the
trial court set the case for reception of evidence on July 6, 1994 and subsequently allowed Adriana
to present evidence of two previous marriages contracted by Jose with other women to prove that
the marriage between Adriana and Jose was null and void for being bigamous. It is only at the July
6, 1994 hearing that respondent Adriana first claimed support for John Paul when she testified in
open court.
The petition of Adriana was, in effect, substantially changed by the admission of the additional
evidence. The ground relied on for nullity of the marriage was changed from the psychological
incapacity of Jose to that of existence of previous marriages of Jose with two different women with
an additional claim for support of the child. Such substantial changes were not reflected in the
petition filed with the trial court, as no formal amendment was ever made by Adriana except the
insertion of the handwritten phrase "And for respondent to support the child of petitioner in an
amount this Honorable Court may deem just and reasonable"15 found at the ultimate paragraph of
the petition, as allowed by the Pasay RTC. There is nothing on record to show that petitioner Jose
was notified of the substantial changes in the petition of Adriana.

Second, the Pasay RTC did not give Jose an opportunity to be present on July 6, 1994 for the
presentation of evidence by Adriana and to refute the same. Although copy of the motion filed on
June 23, 1994 with a notice of hearing on June 27, 1994 was sent to Jose, the record does not show
that he received the notice in due time; neither does the record show that he was notified of the
subsequent hearing held on July 6, 1994 where Adriana presented the marriage certificates and
claimed for the support of their child sans the presence of Jose.

Third, the records do not show that petitioner was sent a copy of the Order dated July 6, 1994
wherein the trial court granted the Urgent Motion to Re-Open of respondent Adriana and forthwith
allowed her to present her evidence to prove that petitioner herein contracted previous marriages
with different women.

Fourth, the evidence presented by respondent regarding her claim for support for John Paul is
glaringly insufficient and cannot be made a valid basis upon which the Pasay RTC could have
determined the monthly amount of ₱20,000.00 for the support to be given to John Paul by petitioner
Jose.

A party who has been declared in default is entitled to service of substantially amended or
supplemental pleadings.16 Considering that in cases of declaration of nullity of marriage or
annulment of marriage, there can be no default pursuant to Section 6, Rule 18 of the Revised Rules
of Court17 in relation to Article 48 of the Family Code,18 it is with more reason that petitioner should
likewise be entitled to notice of all proceedings.

Furthermore, the lower courts are reminded of the ruling of the Court in Asian Transmission
Corporation vs. Canlubang Sugar Estates,19 to wit:

It is also a general principle of law that a court cannot set itself in motion, nor has it power to decide
questions except as presented by the parties in their pleadings. Anything that is decided beyond
them is coram non-judice and void. Therefore where a court enters a judgment or awards relief
beyond the prayer of the complaint or the scope of its allegations the excessive relief is not
merely irregular but is void for want of jurisdiction, and is open to collateral attack.

The appellate court also ruled that a judgment of a court upon a subject within its general
jurisdiction, but which is not brought before it by any statement or claim of the parties, and is foreign
to the issues submitted for its determination, is a nullity. (Emphasis supplied)

Pursuant to the foregoing principle, it is a serious error for the trial court to have rendered judgment
on issues not presented in the pleadings as it was beyond its jurisdiction to do so. The amendment
of the petition to reflect the new issues and claims against Jose was, therefore, indispensable so as
to authorize the court to act on the issue of whether the marriage of Jose and Adriana was bigamous
and the determination of the amount that should have been awarded for the support of John Paul.
When the trial court rendered judgment beyond the allegations contained in the copy of the petition
served upon Jose, the Pasay RTC had acted in excess of its jurisdiction and deprived petitioner Lam
of due process.

Insofar as the declaration of nullity of the marriage between Adriana and Jose for being bigamous is
concerned, the decision rendered by the Pasay RTC could be declared as invalid for having been
issued beyond its jurisdiction. Nonetheless, considering that Jose, did not assail the declaration of
nullity of his marriage with Adriana in his motion for reconsideration which he filed with the Pasay
RTC. In the petitions he filed in the Court of Appeals and with us, he likewise did not raise the issue
of jurisdiction of the Pasay RTC to receive evidence and render judgment on his previous marriages
with other woman which were not alleged in the petition filed by Adriana. Petitioner Jose is estopped
from questioning the declaration of nullity of his marriage with Adriana and therefore, the Court will
not undo the judgment of the Pasay RTC declaring the marriage of Adriana and Jose null and void
for being bigamous. It is an axiomatic rule that while a jurisdictional question may be raised at any
time, this, however, admits of an exception where estoppel has supervened.20

Consequently, the Court will only resolve the lone issue raised by Jose in the present petition for
review on certiorari which is the award of support for his child, John Paul.

The Pasay RTC should have been aware that in determining the amount of support to be awarded,
such amount should be in proportion to the resources or means of the giver and the necessities of
the recipient, pursuant to Articles 194, 201 and 202 of the Family Code, to wit:

Art. 194. Support comprises everything indispensable for sustenance, dwelling, clothing, medical
attendance, education and transportation, in keeping with the financial capacity of the family.

The education of the person entitled to be supported referred to in the preceding paragraph shall
include his schooling or training for some profession, trade or vocation, even beyond the age of
majority. Transportation shall include expenses in going to and from school, or to and from place of
work.

Art. 201. The amount of support, in the cases referred to in Articles 19521 and 196,22 shall be in
proportion to the resources or means of the giver and to the necessities of the recipient.

Art. 202. Support in the cases referred to in the preceding article shall be reduced or increased
proportionately, according to the reduction or increase of the necessities of the recipient and the
resources or means of the person obliged to furnish the same.

It is incumbent upon the trial court to base its award of support on the evidence presented before it.
The evidence must prove the capacity or resources of both parents who are jointly obliged to support
their children as provided for under Article 195 of the Family Code; and the monthly expenses
incurred for the sustenance, dwelling, clothing, medical attendance, education and transportation of
the child.

In this case, the only evidence presented by respondent Adriana regarding her claim for support of
the child is her testimony, which is quoted below in verbatim:

Atty. Lorbes:

Q - After discovering that your husband had contracted two valid marriages prior to your
marriage, how do you feel about it?
 A - I felt it is unfair to my life.

Q - Considering the bigamous marriage contract by your husband with you, what do you
want to request to the Honorable Court?

A - I want to request the Court that the respondent be ordered to support my little boy.

Court:

Q - How much support do you want?

A - ₱20,000.00 to ₱25,000.00

Q - Is there a prayer for support?

Atty. Lorbes:

A - None, Your Honor.

Court:

Get the original copy of the complaint, add and sign it for the support of the boy.

A - Yes, Your Honor.23

Evidently, such testimony does not establish the amount needed by the child nor the amount that the
parents are reasonably able to give.

We take note of the Compromise Agreement, approved by and embodied in the decision of the
Makati RTC, portions of which read as follows:

8. Nothing herein shall diminish the rights and obligations of both parties with respect to their son. In
the best interest of the child, the Second Party shall retain care and custody, subject to visitation
rights by the First Party to be exercised through mutual arrangements.

9. It is hereby agreed by the First Party and the Second Party that the First Party and the Second
Party shall initially contribute ₱250,000.00 each to a common fund, to be increased as required, to
be used solely and exclusively for the benefit of their son. Said common fund shall be managed and
administered by the Second Party, subject to periodic accounting, until the son reaches majority age.

WHEREFORE, finding the aforequoted agreement to be in order, and not being contrary to law,
morals or public policy, the same is hereby APPROVED. Accordingly, the conjugal partnership of
gains existing between the said spouses is dissolved and a decree of complete separation is
established in accordance with the provisions of Chapter 6 of the Family Code of the Philippines.
The parties are hereby enjoined to faithfully comply with the conditions of their Agreement as
embodied in this petition and the same shall, as between the parties, be deemed to be a decision
and/or award in the matters treated in the aforesaid settlement.
Let a copy of this petition as well as the foregoing Decision be recorded in the proper local civil
registries and registries of property at the expense of the herein petitioners pursuant to Article 139 of
the Family Code.

SO ORDERED.

GIVEN this 28th day of February, 1994 at Makati, Metro Manila.24

The matter of support is a question that may be raised and threshed out before the Makati RTC as it
was the court that approved the Compromise Agreement, or before the Pasay RTC where the
petition for declaration of nullity or annulment of marriage is filed. In the interest of orderly
administration of justice, the Court deems it proper that the issue on support should be resolved by
the Pasay RTC where the claim for support of the child was initiated by Adriana.

The trial court’s action of merely ordering in open court during the July 6, 1994 hearing that a prayer
for support be written and inserted in the petition filed by respondent Adriana does not constitute
proper amendment and notice upon petitioner Jose. Consequently, herein petitioner Jose was
deprived of due process when the trial court proceeded to hear the case on a motion to re-open and
render judgment without giving Jose the requisite notice and the opportunity to refute the new claim
against him.

Verily, the manner by which the trial court arrived at the amount of support awarded to John Paul
was whimsical, arbitrary and without any basis.

Such being the case, the Court has no other recourse but to reverse the decision of the Court of
Appeals and Pasay RTC insofar as the award of support is concerned and order the remand of the
case to Pasay RTC for further proceedings as to the issue regarding support.

WHEREFORE, the petition for review on certiorari is GRANTED. The Decision and Resolution of the
Court of Appeals in CA-G.R. CV. No. 51107, dated June 11, 1997 and October 27,
1997, dismissing the appeal and denying the motion for reconsideration, respectively, are hereby
SET ASIDE but only insofar as the award of support in favor of John Paul Chua Lam is
concerned. The Decision dated August 4, 1994 and the Order of the Regional Trial Court of Pasay
City (Branch 109), dated August 22, 1995, are REVERSED and SET ASIDE for being null and void,
likewise only insofar as the matter on support is concerned.

Let the records of Civil Case No. 94-0331 be remanded to the Regional Trial Court of Pasay City
(Branch 109) which is DIRECTED to reopen the trial of Civil Case No. 94-0331 with respect to the
claim of Adriana Chua against Jose Lam for the support of John Paul Chua Lam and conduct
hearings for further reception of evidence for the proper determination of the proper amount of
support to be awarded to the child John Paul Chua Lam.

SO ORDERED.

Quisumbing, (Acting Chairman), Callejo, Sr., and Tinga, JJ., concur.

Puno, J., (Chairman), on leave.

Footnotes
1Penned by Justice Eugenio S. Labitoria and concurred in by Justices Salome A. Montoya
and Omar U. Amin.

2 Records, p. 9.

3 TSN, May 12, 1994, pp. 5-14.

4 Record, p. 52.

5 Order dated July 6, 1994, Record, pp. 70-71.

6 Penned by Judge Lilia C. Lopez, Record, pp. 93-97.

7 Id. at p. 97.

8 Records, p. 101.

9Penned by Judge Josefina Guevara Salonga (now Associate Justice of the Court of
Appeals) in SP. Proc. No. M-3699, entitled, "In the matter of the Voluntary Dissolution of the
Conjugal Partnership of Gains and Separation of Properties, Jose Lam and Adriana
Chua, Petitioners;" Records, p. 105.

10 Id. at p. 109.

11 Appellant’s Brief, CA Rollo, pp. 13-14.

12 10 SCRA 189 (1964)

13 Id. at p. 191

14 TSN, May 12, 1994, p. 15; Records, p. 68.

15 Record, p. 3.

16 Section 9, Rule 13, Revised Rules of Court, which provides:

Sec. 9. Service upon party in default. - No service of papers other than substantially
amended or supplemental pleadings and final orders or judgments shall be
necessary on a party in default unless he files a motion to set aside the order of
default, in which event he shall be entitled to notice of all further proceedings
regardless of whether the order of default is set aside or not.

17Section 6, Rule 18 of the Revised Rules of Court, the rules then applicable to the present
case, provides thus:

Sec. 6. No defaults in actions for annulment of marriage or legal separation. – If the

defendant in an action for annulment of marriage or for legal separation fails to
answer, the court shall order the prosecuting attorney to investigate whether or not
collusion between the parties exists, and if there is no collusion, to intervene for the
State in order to see to it that the evidence submitted is not fabricated.
18 Article 48 of the Family Code provides thus:

Article 48. In all cases of annulment or declaration of nullity of marriage, the court
shall order the prosecuting attorney or fiscal assigned to it to appear on behalf of the
State to take steps to prevent collusion between the parties and to take care that
evidence is not fabricated or suppressed.

In all cases referred to in the preceding paragraph, no judgment shall be based upon
a stipulation of facts or confession of judgment.

G.R. No. 142383. August 29, 2003, citing Branz v. Hylton, 265 N.W. 16 (1936) and Lincoln
19

National Bank vs. Virgin, 55 N.W. 218 (1893).

20
TGL Sales Corporation vs. Court of Appeals, 349 SCRA 35 (2001).

21Art. 195. Subject to the provisions of the succeeding articles, the following are obliged to
support each other to the whole extent set forth in the preceding article:

(1) The spouses;

(2) Legitimate ascendants and descendants;

(3) Parents and their legitimate children and the legitimate and illegitimate children of
the latter;

(4) Parents and their illegitimate children and the legitimate and illegitimate children
of the latter; and

(5) Legitimate brothers and sisters, whether of full or half-blood.

22 Art. 196. Brothers and sisters not legitimately related, whether of the full or half-blood, are
likewise bound to support each other to the full extent set forth in Article 194, except only
when the need for support of the brother or sister, being of age, is due to a cause imputable
to the claimant’s fault or negligence.

23 TSN, July 6, 1994, pp. 5-6.

24 Records, pp. 11-12.

 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 185595 January 9, 2013

MA. CARMINIA C. CALDERON represented by her Attorney-In-Fact, Marycris V.

Baldevia, Petitioner,
vs.
JOSE ANTONIO F. ROXAS and COURT OF APPEALS, Respondents.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 assailing the Decision1 dated September
9, 2008 and Resolution2 dated December 15, 2008 of the Court of Appeals (CA) in CA-G.R. CV No.
85384. The CA affirmed the Orders dated March 7, 2005 and May 4, 2005 of the Regional Trial
Court (RTC) of Parañaque City, Branch 260 in Civil Case No. 97-0608.

Petitioner Ma. Carminia C. Calderon and private respondent Jose Antonio F. Roxas, were married
on December 4, 1985 and their union produced four children. On January 16, 1998, petitioner filed
an Amended Complaint3 for the declaration of nullity of their marriage on the ground of psychological
incapacity under Art. 36 of the Family Code of the Philippines.

On May 19, 1998, the trial court issued an Order4 granting petitioner’s application for support
pendente lite. Said order states in part:

…Accordingly, the defendant is hereby ordered to contribute to the support of the above-named
minors, (aside from 50% of their school tuition fees which the defendant has agreed to defray, plus
expenses for books and other school supplies), the sum of P42,292.50 per month, effective May 1,
1998, as his share in the monthly support of the children, until further orders from this Court. The first
monthly contribution, i.e., for the month of May 1998, shall be given by the defendant to the plaintiff
within five (5) days from receipt of a copy of this Order. The succeeding monthly contributions of
P42,292.50 shall be directly given by the defendant to the plaintiff without need of any demand,
within the first five (5) days of each month beginning June 1998. All expenses for books and other
school supplies shall be shouldered by the plaintiff and the defendant, share and share alike. Finally,
it is understood that any claim for support-in-arrears prior to May 1, 1998, may be taken up later in
the course of the proceedings proper.

xxxx

SO ORDERED.5

The aforesaid order and subsequent orders for support pendente lite were the subject of G.R. No.
139337 entitled "Ma. Carminia C. Roxas v. Court of Appeals and Jose Antonio F. Roxas" decided by
this Court on August 15, 2001.6 The Decision in said case declared that "the proceedings and orders
issued by the trial court in the application for support pendente lite (and the main complaint for
annulment of marriage) in the re-filed case, that is, in Civil Case No. 97-0608 were not rendered null
and void by the omission of a statement in the certificate of non-forum shopping regarding the prior
filing and dismissal without prejudice of Civil Case No. 97-0523 which involves the same parties."
The assailed orders for support pendente lite were thus reinstated and the trial court resumed
hearing the main case.

On motion of petitioner’s counsel, the trial court issued an Order dated October 11, 2002 directing
private respondent to give support in the amount of P42,292.50 per month starting April 1, 1999
pursuant to the May 19, 1998 Order.7

On February 11, 2003, private respondent filed a Motion to Reduce Support citing, among other
grounds, that the P42,292.50 monthly support for the children as fixed by the court was even higher
than his then P20,800.00 monthly salary as city councilor.8

After hearing, the trial court issued an Order9 dated March 7, 2005 granting the motion to reduce
support and denying petitioner’s motion for spousal support, increase of the children’s monthly
support pendente lite and support-in-arrears. The trial court considered the following circumstances
well-supported by documentary and testimonial evidence: (1) the spouses’ eldest child, Jose
Antonio, Jr. is a Sangguniang Kabataan Chairman and is already earning a monthly salary; (2) all
the children stay with private respondent on weekends in their house in Pasay City; (3) private
respondent has no source of income except his salary and benefits as City Councilor; (4) the
voluminous documents consisting of official receipts in payment of various billings including school
tuition fees, private tutorials and purchases of children’s school supplies, personal checks issued by
private respondent, as well as his own testimony in court, all of which substantiated his claim that he
is fulfilling his obligation of supporting his minor children during the pendency of the action; (5) there
is no proof presented by petitioner that she is not gainfully employed, the spouses being both
medical doctors; (6) the unrebutted allegation of private respondent that petitioner is already in the
United States; and (7) the alleged arrearages of private respondent was not substantiated by
petitioner with any evidence while private respondent had duly complied with his obligation as
ordered by the court through his overpayments in other aspects such as the children’s school tuition
fees, real estate taxes and other necessities.

Petitioner’s motion for partial reconsideration of the March 7, 2005 Order was denied on May 4,
2005.10

On May 16, 2005, the trial court rendered its Decision11 in Civil Case No. 97-0608 decreeing thus:

WHEREFORE, judgment is hereby rendered declaring (sic):

1. Declaring null and void the marriage between plaintiff Ma.Carmina C. Roxas and defendant Jose
Antonio Roxas solemnized on December 4, 1985 at San Agustin Convent, in Manila. The Local Civil
Registrar of Manila is hereby ordered to cancel the marriage contract of the parties as appearing in
the Registry of Marriage as the same is void;

2. Awarding the custody of the parties’ minor children Maria Antoinette Roxas, Julian Roxas and
Richard Roxas to their mother herein petitioner, with the respondent hereby given his visitorial and
or custodial rights at [sic] the express conformity of petitioner.

3. Ordering the respondent Jose Antonio Roxas to provide support to the children in the amount of
P30,000.00 a month, which support shall be given directly to petitioner whenever the children are in
her custody, otherwise, if the children are in the provisional custody of respondent, said amount of
support shall be recorded properly as the amounts are being spent. For that purpose the respondent
shall then render a periodic report to petitioner and to the Court to show compliance and for
monitoring. In addition, the respondent is ordered to support the proper schooling of the children
providing for the payment of the tuition fees and other school fees and charges including
transportation expenses and allowances needed by the children for their studies.

4. Dissolving the community property or conjugal partnership property of the parties as the case may
be, in accordance with law.

Let copies of this decision be furnished the Office of the Solicitor General, the Office of the City
Prosecutor, Paranaque City, and the City Civil Registrar of Paranaque City and Manila.

SO ORDERED.12

On June 14, 2005, petitioner through counsel filed a Notice of Appeal from the Orders dated March
7, 2005 and May 4, 2005.

In her appeal brief, petitioner emphasized that she is not appealing the Decision dated May 16, 2005
which had become final as no appeal therefrom had been brought by the parties or the City
Prosecutor or the Solicitor General. Petitioner pointed out that her appeal is "from the RTC Order
dated March 7, 2005, issued prior to the rendition of the decision in the main case", as well as the
May 4, 2005 Order denying her motion for partial reconsideration.13

By Decision dated September 9, 2008, the CA dismissed the appeal on the ground that granting the
appeal would disturb the RTC Decision of May 16, 2005 which had long become final and executory.
The CA further noted that petitioner failed to avail of the proper remedy to question an interlocutory
order.

Petitioner’s motion for reconsideration was likewise denied by the CA.

Hence, this petition raising the following issues:

A. DID THE CA COMMIT A GRAVE ABUSE OF DISCRETION and/or REVERSIBLE

ERROR WHEN IT RULED THAT THE RTC ORDERS DATED MARCH 7, 2005 AND MAY 4,
2005 ARE MERELY INTERLOCUTORY?

B. DID THE CA COMMIT A GRAVE ABUSE OF DISCRETION and/or REVERSIBLE

ERROR WHEN IT DISMISSED OUTRIGHT THE APPEAL FROM SAID RTC ORDERS,
WHEN IT SHOULD HAVE DECIDED THE APPEAL ON THE MERITS?14

The core issue presented is whether the March 7, 2005 and May 4, 2005 Orders on the matter of
support pendente lite are interlocutory or final.

This Court has laid down the distinction between interlocutory and final orders, as follows:

x x x A "final" judgment or order is one that finally disposes of a case, leaving nothing more to be
done by the Court in respect thereto, e.g., an adjudication on the merits which, on the basis of the
evidence presented at the trial, declares categorically what the rights and obligations of the parties
are and which party is in the right; or a judgment or order that dismisses an action on the ground, for
instance, of res judicata or prescription. Once rendered, the task of the Court is ended, as far as
deciding the controversy or determining the rights and liabilities of the litigants is concerned. Nothing
more remains to be done by the Court except to await the parties’ next move (which among others,
may consist of the filing of a motion for new trial or reconsideration, or the taking of an appeal) and
ultimately, of course, to cause the execution of the judgment once it becomes "final" or, to use the
established and more distinctive term, "final and executory."

xxxx

Conversely, an order that does not finally dispose of the case, and does not end the Court’s task of
adjudicating the parties’ contentions and determining their rights and liabilities as regards each
other, but obviously indicates that other things remain to be done by the Court, is "interlocutory" e.g.,
an order denying a motion to dismiss under Rule 16 of the Rules, or granting a motion for extension
of time to file a pleading, or authorizing amendment thereof, or granting or denying applications for
postponement, or production or inspection of documents or things, etc. Unlike a "final" judgment or
order, which is appealable, as above pointed out, an "interlocutory" order may not be questioned on
appeal except only as part of an appeal that may eventually be taken from the final judgment
rendered in the case.15 [Emphasis supplied]

The assailed orders relative to the incident of support pendente lite and support in arrears, as the
term suggests, were issued pending the rendition of the decision on the main action for declaration
of nullity of marriage, and are therefore interlocutory. They did not finally dispose of the case nor did
they consist of a final adjudication of the merits of petitioner’s claims as to the ground of
psychological incapacity and other incidents as child custody, support and conjugal assets.

The Rules of Court provide for the provisional remedy of support pendente lite which may be availed
of at the commencement of the proper action or proceeding, or at any time prior to the judgment or
final order.16 On March 4, 2003, this Court promulgated the Rule on Provisional Orders17 which shall
govern the issuance of provisional orders during the pendency of cases for the declaration of nullity
of marriage, annulment of voidable marriage and legal separation. These include orders for spousal
support, child support, child custody, visitation rights, hold departure, protection and administration
of common property.

Petitioner contends that the CA failed to recognize that the interlocutory aspect of the assailed
orders pertains only to private respondent’s motion to reduce support which was granted, and to her
own motion to increase support, which was denied. Petitioner points out that the ruling on support in
arrears which have remained unpaid, as well as her prayer for reimbursement/payment under the
May 19, 1998 Order and related orders were in the nature of final orders assailable by ordinary
appeal considering that the orders referred to under Sections 1 and 4 of Rule 61 of the Rules of
Court can apply only prospectively. Thus, from the moment the accrued amounts became due and
demandable, the orders under which the amounts were made payable by private respondent have
ceased to be provisional and have become final.

We disagree.

The word interlocutory refers to something intervening between the commencement and the end of
the suit which decides some point or matter but is not a final decision of the whole controversy.18 An
interlocutory order merely resolves incidental matters and leaves something more to be done to
resolve the merits of the case. In contrast, a judgment or order is considered final if the order
disposes of the action or proceeding completely, or terminates a particular stage of the same
action.19 Clearly, whether an order or resolution is final or interlocutory is not dependent on
compliance or non-compliance by a party to its directive, as what petitioner suggests. It is also
important to emphasize the temporary or provisional nature of the assailed orders.

Provisional remedies are writs and processes available during the pendency of the action which may
be resorted to by a litigant to preserve and protect certain rights and interests therein pending
rendition, and for purposes of the ultimate effects, of a final judgment in the case. They are
provisional because they constitute temporary measures availed of during the pendency of the
action, and they are ancillary because they are mere incidents in and are dependent upon the result
of the main action.20 The subject orders on the matter of support pendente lite are but an incident to
the main action for declaration of nullity of marriage.

Moreover, private respondent’s obligation to give monthly support in the amount fixed by the RTC in
the assailed orders may be enforced by the court itself, as what transpired in the early stage of the
proceedings when the court cited the private respondent in contempt of court and ordered him
arrested for his refusal/failure to comply with the order granting support pendente lite.21 A few years
later, private respondent filed a motion to reduce support while petitioner filed her own motion to
increase the same, and in addition sought spousal support and support in arrears. This fact
underscores the provisional character of the order granting support pendente lite. Petitioner’s theory
that the assailed orders have ceased to be provisional due to the arrearages incurred by private
respondent is therefore untenable. 1âwphi1

Under Section 1, Rule 41 of the 1997 Revised Rules of Civil Procedure, as amended, appeal from
interlocutory orders is not allowed. Said provision reads:

SECTION 1. Subject of appeal. - An appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by these Rules to
be appealable.

No appeal may be taken from:

(a) An order denying a motion for new trial or reconsideration;

(b) An order denying a petition for relief or any similar motion seeking relief from judgment;

(c) An interlocutory order;

(d) An order disallowing or dismissing an appeal;

(e) An order denying a motion to set aside a judgment by consent, confession or

compromise on the ground of fraud, mistake or duress, or any other ground vitiating consent;

(f) An order of execution;

(g) A judgment or final order for or against one or more of several parties or in separate
claims, counterclaims, cross-claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom; and

(h) An order dismissing an action without prejudice;

In all the above instances where the judgment or final order is not appealable, the aggrieved party
may file an appropriate special civil action under Rule 65. (Emphasis supplied.)

The remedy against an interlocutory order not subject of an appeal is an appropriate special civil
action under Rule 65 provided that the interlocutory order is rendered without or in excess of
jurisdiction or with grave abuse of discretion. Having chosen the wrong remedy in questioning the
subject interlocutory orders of the RTC, petitioner's appeal was correctly dismissed by the CA.
WHEREFORE, the petition for review on certiorari is DENIED, for lack of merit. The Decision dated
September 9, 2008 and Resolution dated December 15, 2008 of the Court of Appeals in CA-G.R.
CV No. 85384 are AFFIRMED.

With costs against the petitioner.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice
Chairperson

TERESITA.J. LEONARDO-DE CASTRO LUCAS P. BERSAMIN

Associate Justice Associate Justice

BIENVENIDO L. REYES

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice

Footnotes

1Rollo. pp. 40-47. Penned by Associate Justice Marlene Gonzales-Sison and concurred in
by Associate Justices Juan Q. Enriquez, Jr. and Isaias P. Dicdican.

2Id. at 49-50. Penned by Associate Justice Marlene Gonzales-Sison and concurred in by

Associate Justices Juan Q. Enriquez, Jr. and Isaias P. Dicdican.

3 Records, pp. 30-38.

4 Rollo, pp. 85-87. Penned by Judge Helen Bautista-Ricafort.

5 Id. at 87.

6 Roxas v. Court of Appeals, G.R. No. 139337, August 15, 2001, 363 SCRA 207, 211.
7 Records, p. 10058.

8 Id. at 10075-10084.

9 Id. at 1582-1586.

Id. at 1593-1639. See RTC Order dated June 23, 2005 noting the typographical error in the
10

Order dated "May 4, 2004", and correcting the year as 2005. Id. at 1664.

11 Rollo, pp. 89-100. Penned by Judge Fortunito L. Madrona.

12 Id. at 99-100.

13 CA rollo, pp. 126-127.

14 Rollo, p. 572.

15Investments, Inc. v. Court of Appeals, G.R. No. L-60036, January 27, 1987, 147 SCRA
334, 339-341.

16 Rule 61, 1997 Rules of Civil Procedure, as amended.

17 A.M. No. 02-11-12-SC which took effect on March 15, 2003.

18United Overseas Bank (formerly Westmont Bank) v. Ros, G.R. No. 171532, August 7,
2007, 529 SCRA 334, 343-344, citing Ramiscal, Jr. v. Sandiganbayan, G.R. Nos. 140576-
99, December 13, 2004, 446 SCRA 166, 177.

Republic v. Sandiganbayan, (Fourth Division), G.R. No. 152375, December 13, 2011, 662
19

SCRA 152, 177.

20 Florenz D. Regalado, REMEDIAL LAW COMPENDIUM, Vol. I, 2005 Ed. p. 671.

21 Records, pp. 439-440.