G.R. No. 148305 November 28, 2003SPS. ROGELIO & CONCHITA JALIQUE, represented by their attorney-in-fact, ROGELIO JALIQUE, JR.,petitioners, vs.SPS. EPIFANIO & JULIETA DANDAN, SPS. RODOLFO & BABY DESTURA, SPS. PAENG & JESSIE MANALO, SPS. REYNALDO & NIDA DELA CRUZ, SPS. ALBERTO & ANITA EMPLEO, SPS. FELIX & SOLEDAD BORLAGDATAN, SPS. RODOLFO & ADELINA CAGUJAS, SPS. SIMPLICIO & NORA ANOVER, SPS. GREGORIO & LUZ ARCOS, SPS. VERMIN & JOSEPHINE BOMBITA, VENANCIA VDA. DE NUESTRO, MARINA VDA. DE GERONIMO, CULASA VDA. DE HERNANDEZ and FILOMENA VDA. DE DACASIN and THE HONORABLE COURT OF APPEALS, respondents.R E S O L U T I O NQUISUMBING, J.:For review on certiorari is the Decision,1 dated December 27, 2000, of the Court of Appeals in CA-G.R. SP No. 49978, annulling the Decision,2 dated November 23, 1998, of the Regional Trial Court (RTC) of Pasig City, Branch 70, in SCA Case No. 1527. The RTC had affirmed in toto the Decision3 of the Metropolitan Trial Court (MeTC) of Pasig City, Branch 70, in Civil Case No. 6303, an unlawful detainer case. The MeTC had rendered a judgment in favor of petitioners for respondents’ failure to file an Answer. The Court of Appeals ordered the remand of the case to the MeTC for a trial on the merits. Petitioners also assail the appellate court’s Resolution,4dated May 22, 2001, denying their motion for reconsideration.The facts, as culled from records, are as follows:On August 13, 1997, the spouses Rogelio and Conchita Jalique, represented by their attorney-in-fact Rogelio S. Jalique, Jr., filed a Complaint for unlawful detainer against respondents before the MeTC of Pasig City, docketed as Civil Case No. 6303. The Jaliques alleged that they are the registered owners of a 1655 sq. meter lot and its improvements situated at Palatiw, Pasig City and covered by TCT No. PT-93442. The respondents herein are the tenants or lessees of a portion of said property, having been in possession of the same for quite some time, pursuant to month-to-month verbal agreements. Petitioners averred that the respondents had arrogantly refused their offer to formalize their lease agreement. The petitioners had sought the intercession of the Lupong Tagapa-mayapa, but to no avail, thus giving them no choice but to terminate the lease agreement with the respondents. The latter, however, remained in possession and refused to vacate despite demands made by the petitioners.Respondents did not file an Answer to the complaint, but filed a Joint Counter Affidavit5 on September 12, 1997, stating that: (a) petitioners were not the owners of the disputed property; (b) some of them were not residing or occupying any portion of said land; (c) petitioners should pay some of them for the improvements made on the realty in question; and (d) petitioners had

no right to oust respondents as they had been paying the rentals, albeit without the corresponding receipts from petitioners.On September 25, 1997, petitioners filed a Motion for Judgment on the Complaint.On October 31, 1997, the MeTC decided Civil Case No. 6303 as follows:

IN VIEW OF ALL THE ABOVE, judgment is hereby rendered in favor of the plaintiffs and against the defendants, ordering the latter and all persons claiming rights under them or acting in their authority, to:1) immediately vacate their respective portions of the premises in question and turn over peaceful possession thereof to plaintiffs;2) pay the plaintiffs the following amounts:

(a) unpaid rentals in arrears and/or for actual use of the premises in question, to be reckoned from October 13, 1997 in the amount of P1,000.00 for each defendant, computed monthly, until the premises is actually vacated and turned over to plaintiffs;(b) P15,000.00 as and by way of attorney’s fees; and(c) costs of suit.

SO ORDERED.6

The MeTC found that the respondents herein had failed to file their Answer and rendered judgment on the Complaint, pursuant to Section 67 of the Revised Rule on Summary Procedure. In other words, the petitioners had preponderantly established their cause of action, while the respondents, given their failure to file an Answer, had failed to present any evidence to the contrary.Respondents appealed to the RTC of Pasig City. The appeal, docketed as SCA Case No. 1527, raised new issues such as the absence of proof on the petitioners’ capacity as lessor and the classification of the subject land for residential purposes.On November 23, 1998, the RTC rendered judgment in SCA Case No. 1527 in this wise:

WHEREFORE, finding no reversible error, the appealed decision is hereby AFFIRMED in toto.SO ORDERED.8

In affirming the MeTC decision lock, stock, and barrel, the RTC ruled that petitioners had preponderantly established their cause of action as respondents failed to file their Answer.Respondents then elevated the matter to the Court of Appeals in CA-G.R. SP No. 49978 on the following grounds:

1. The Public Respondents committed reversible error in not considering that the Private Respondents are not the proper party in this case, are not the owners or lessors of the land occupied by the Petitioners.9

2. The Public Respondents committed reversible error in treating this case ordinary (sic) Unlawful Detainer Case considering that the

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Petitioners have practically become the co-owners of the property they are occupying.10

The Court of Appeals annulled the RTC decision and decreed that the case be remanded to the MeTC for hearing on the merits, thus:

WHEREFORE, premises considered, the decision dated October 31, 1997 of the MeTC and the decision dated November 23, 1998 of the RTC is hereby ANNULLED AND SET ASIDE, and this case is remanded to the MeTC so that the same may be heard on the merits and with immediate dispatch. No costs.SO ORDERED.11

The appellate court held that both the MeTC and the RTC erred in ignoring respondents’ Joint Counter Affidavit filed within the 10-day reglementary period to file an Answer under Section 512 of the 1991 Revised Rule on Summary Procedure. The appellate court pointed out that while the Joint Counter Affidavit was poorly crafted, nevertheless, it should have been considered as petitioners’ Answer as it sets forth petitioners’ defenses and raises issues and counterclaims, which should be considered if justice is to be served. Otherwise put, both the MeTC and RTC erred in giving premium to matters of form.Petitioners then moved for reconsideration, but the appellate court denied the motion.Hence, this petition submitting for our resolution, the sole issue of:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN ANNULLING AND SETTING ASIDE THE DECISIONS OF THE METROPOLITAN TRIAL COURT AND THE REGIONAL TRIAL COURT AND ORDERING THAT THIS CASE BE REMANDED TO THE MeTC FOR HEARING ON THE MERITS.13

Petitioners contend that the court a quo erred in reversing and annulling the RTC decision, for in affirming the MeTC, the RTC was merely applying the pertinent provisions of the 1991 Revised Rule on Summary Procedure. The rules on Summary Procedure were promulgated to achieve an expeditious and inexpensive determination of cases especially in unlawful detainer cases because they involve possession of property posing a threat to the peace of our society. Thus, a remand of the case to the MeTC, as decreed by the appellate court, would prejudice them and run contrary to the summary nature of the proceeding.The respondents counter that the remand of the case is not prejudicial to the petitioners, as it will give them all the chances to prove their cause of action against respondents. It would likewise allow respondents to enjoy their right to be heard in their defense.We find that the situation obtaining in this case calls for a liberal, not a technical and rigid, interpretation of the rules on Summary Procedure in the light of the presence rather than a total absence of a responsive pleading. Our perusal of the respondents’ Joint Counter Affidavit shows that it disputed the material allegations of the Complaint and presented valid issues for the lower court’s resolution, such as the ownership of the subject lot, the period

of lease, right of reimbursement for improvements and the right to eject respondents. As correctly observed by the Court of Appeals:

A perusal of the Joint Counter Affidavit will reveal that although the same is unsatisfactorily crafted, it sets forth the petitioners’ defenses. It also raises issues and counterclaims which require proper consideration if justice is to be served, i.e., petitioners’ claim on the improvements made upon the thing leased; if the requisites of Article 1678 of the New Civil Code are complied with, the lessees (herein petitioners) will have the right to reimbursement or if payment is refused by the lessor, the right of removal. Thus, the requirements of the Rules that the Answer shall set forth the defenses and the objections of the defendants including the compulsory counterclaim or cross-claim (Section 4, Rule 6; Sections 1 and 2, Rule 9 of the 1997 Rules of Civil Procedure) specifically denying the material allegation of fact the truth of which he does not admit (Section 10, Rule 8, 1997 Rules of Civil Procedure) were substantially complied with by the counter affidavit filed by the petitioners on time. This counter affidavit should have been considered as petitioners’ Answer without giving premium on matters of form thereby serving the interest of substantial justice....14

The Court of Appeals, thus, committed no reversible error in reversing the RTC and ordering the remand of the case to the MeTC. Not all lawyers are gifted with the skill to craft pleadings that fully meet the requirements as to substance and form. But what matters is the substance and not the form. Thus, while a pleading may be deficient in craftsmanship and can be criticized with respect to incidental particulars, it must be deemed sufficient if it fairly apprises the adverse party of the claims or contentions therein stated and does not mislead him to his surprise or injury or when from the allegations therein, taken together, the matters required to be averred may be gathered. In the words of Chief Justice Moran, "Rules of pleadings are intended to secure a method by which the issues may be properly laid before the court. When those issues are already clear before the court, the deficiency in the observance of the rules should not be given undue importance. What is important is that the case be decided upon the merits and that it should not be allowed to go off on procedural points."15

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals in CA-G.R. SP. No. 49978 is AFFIRMED. No pronouncement as to costs.SO ORDERED.

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G.R. No. 149576 August 8, 2006REPUBLIC OF THE PHILIPPINES, represented by the Land Registration Authority, Petitioner,vs.KENRICK DEVELOPMENT CORPORATION, Respondent.D E C I S I O NCORONA, J.:The Republic of the Philippines assails the May 31, 2001 decision 1 and August 20, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 52948 in this petition for review under Rule 45 of the Rules of Court.This case stemmed from the construction by respondent Kenrick Development Corporation of a concrete perimeter fence around some parcels of land located behind the Civil Aviation Training Center of the Air Transportation Office (ATO) in 1996. As a result, the ATO was dispossessed of some 30,228 square meters of prime land. Respondent justified its action with a claim of ownership over the property. It presented Transfer Certificate of Title (TCT) Nos. 135604, 135605 and 135606 issued in its name and which allegedly originated from TCT No. 17508 registered in the name of one Alfonso Concepcion.ATO verified the authenticity of respondent’s titles with the Land Registration Authority (LRA). On May 17, 1996, Atty. Jose Loriega, head of the Land Title Verification Task Force of the LRA, submitted his report. The Registrar of Deeds of Pasay City had no record of TCT No. 17508 and its ascendant title, TCT No. 5450. The land allegedly covered by respondent’s titles was also found to be within Villamor Air Base (headquarters of the Philippine AirForce) in Pasay City.By virtue of the report, the Office of the Solicitor General (OSG), on September 3, 1996, filed a complaint for revocation, annulment and cancellation of certificates of title in behalf of the Republic of the Philippines (as represented by the LRA) against respondent and Alfonso Concepcion. It was raffled to Branch 114 of the Regional Trial Court of Pasay City where it was docketed as Civil Case No. 96-1144.On December 5, 1996, respondent filed its answer which was purportedly signed by Atty. Onofre Garlitos, Jr. as counsel for respondent.Since Alfonso Concepcion could not be located and served with summons, the trial court ordered the issuance of an alias summons by publication against him on February 19, 1997.The case was thereafter punctuated by various incidents relative to modes of discovery, pre-trial, postponements or continuances, motions to dismiss, motions to declare defendants in default and other procedural matters.During the pendency of the case, the Senate Blue Ribbon Committee and Committee on Justice and Human Rights conducted a hearing in aid of legislation on the matter of land registration and titling. In particular, the legislative investigation looked into the issuance of fake titles and focused on how respondent was able to acquire TCT Nos. 135604, 135605 and 135606.During the congressional hearing held on November 26, 1998, one of those summoned was Atty. Garlitos, respondent’s former counsel. He testified that he prepared respondent’s answer and transmitted an unsigned draft to respondent’s president, Mr. Victor Ong. The signature appearing above his name was not his. He authorized no one to sign in his behalf either. And he did not know who finally signed it.

With Atty. Garlitos’ revelation, the Republic promptly filed an urgent motion on December 3, 1998 to declare respondent in default, 2 predicated on its failure to file a valid answer. The Republic argued that, since the person who signed the answer was neither authorized by Atty. Garlitos nor even known to him, the answer was effectively an unsigned pleading. Pursuant to Section 3, Rule 7 of the Rules of Court, 3 it was a mere scrap of paper and produced no legal effect.On February 19, 1999, the trial court issued a resolution granting the Republic’s motion. 4 It found respondent’s answer to be sham and false and intended to defeat the purpose of the rules. The trial court ordered the answer stricken from the records, declared respondent in default and allowed the Republic to present its evidence ex parte.The Republic presented its evidence ex parte, after which it rested its case and formally offered its evidence.Meanwhile, respondent sought reconsideration of the February 19, 1999 resolution but the trial court denied it.Aggrieved, respondent elevated the matter to the Court of Appeals via a petition for certiorari 5 seeking to set aside the February 19, 1999 resolution of the trial court. Respondent contended that the trial court erred in declaring it in default for failure to file a valid and timely answer.On May 31, 2001, the Court of Appeals rendered the assailed decision. It found Atty. Garlitos’ statements in the legislative hearing to be unreliable since they were not subjected to cross-examination. The appellate court also scrutinized Atty. Garlitos’ acts after the filing of the answer 6 and concluded that he assented to the signing of the answer by somebody in his stead. This supposedly cured whatever defect the answer may have had. Hence, the appellate court granted respondent’s petition for certiorari. It directed the lifting of the order of default against respondent and ordered the trial court to proceed to trial with dispatch. The Republic moved for reconsideration but it was denied. Thus, this petition.Did the Court of Appeals err in reversing the trial court’s order which declared respondent in default for its failure to file a valid answer? Yes, it did.A party may, by his words or conduct, voluntarily adopt or ratify another’s statement. 7 Where it appears that a party clearly and unambiguously assented to or adopted the statements of another, evidence of those statements is admissible against him. 8 This is the essence of the principle of adoptive admission.An adoptive admission is a party’s reaction to a statement or action by another person when it is reasonable to treat the party’s reaction as an admission of something stated or implied by the other person. 9 By adoptive admission, a third person’s statement becomes the admission of the party embracing or espousing it. Adoptive admission may occur when a party:(a) expressly agrees to or concurs in an oral statement made by another; 10

(b) hears a statement and later on essentially repeats it; 11

(c) utters an acceptance or builds upon the assertion of another; 12

(d) replies by way of rebuttal to some specific points raised by another but ignores further points which he or she has heard the other make 13 or(e) reads and signs a written statement made by another. 14

Here, respondent accepted the pronouncements of Atty. Garlitos and built its case on them. At no instance did it ever deny or contradict its former counsel’s

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statements. It went to great lengths to explain Atty. Garlitos’ testimony as well as its implications, as follows:1. While Atty. Garlitos denied signing the answer, the fact was that the answer was signed. Hence, the pleading could not be considered invalid for being an unsigned pleading. The fact that the person who signed it was neither known to Atty. Garlitos nor specifically authorized by him was immaterial. The important thing was that the answer bore a signature.2. While the Rules of Court requires that a pleading must be signed by the party or his counsel, it does not prohibit a counsel from giving a general authority for any person to sign the answer for him which was what Atty. Garlitos did. The person who actually signed the pleading was of no moment as long as counsel knew that it would be signed by another. This was similar to addressing an authorization letter "to whom it may concern" such that any person could act on it even if he or she was not known beforehand.3. Atty. Garlitos testified that he prepared the answer; he never disowned its contents and he resumed acting as counsel for respondent subsequent to its filing. These circumstances show that Atty. Garlitos conformed to or ratified the signing of the answer by another.Respondent repeated these statements of Atty. Garlitos in its motion for reconsideration of the trial court’s February 19, 1999 resolution. And again in the petition it filed in the Court of Appeals as well as in the comment 15and memorandum it submitted to this Court.Evidently, respondent completely adopted Atty. Garlitos’ statements as its own. Respondent’s adoptive admission constituted a judicial admission which was conclusive on it.Contrary to respondent’s position, a signed pleading is one that is signed either by the party himself or his counsel. Section 3, Rule 7 is clear on this matter. It requires that a pleading must be signed by the party or counsel representing him.Therefore, only the signature of either the party himself or his counsel operates to validly convert a pleading from one that is unsigned to one that is signed.Counsel’s authority and duty to sign a pleading are personal to him. He may not delegate it to just any person.The signature of counsel constitutes an assurance by him that he has read the pleading; that, to the best of his knowledge, information and belief, there is a good ground to support it; and that it is not interposed for delay. 16Under the Rules of Court, it is counsel alone, by affixing his signature, who can certify to these matters.The preparation and signing of a pleading constitute legal work involving practice of law which is reserved exclusively for the members of the legal profession. Counsel may delegate the signing of a pleading to another lawyer 17 but cannot do soin favor of one who is not. The Code of Professional Responsibility provides:Rule 9.01 ― A lawyer shall not delegate to any unqualified person the performance of any task which by law may only be performed by a member of the Bar in good standing.Moreover, a signature by agents of a lawyer amounts to signing by unqualified persons, 18 something the law strongly proscribes.Therefore, the blanket authority respondent claims Atty. Garlitos entrusted to just anyone was void. Any act taken pursuant to that authority was likewise void.

There was no way it could have been cured or ratified by Atty. Garlitos’ subsequent acts.Moreover, the transcript of the November 26, 1998 Senate hearing shows that Atty. Garlitos consented to the signing of the answer by another "as long as it conformed to his draft." We give no value whatsoever to such self-serving statement.No doubt, Atty. Garlitos could not have validly given blanket authority for just anyone to sign the answer. The trial court correctly ruled that respondent’s answer was invalid and of no legal effect as it was an unsigned pleading. Respondent was properly declared in default and the Republic was rightly allowed to present evidence ex parte.Respondent insists on the liberal application of the rules. It maintains that even if it were true that its answer was supposedly an unsigned pleading, the defect was a mere technicality that could be set aside.Procedural requirements which have often been disparagingly labeled as mere technicalities have their own validraison d’ etre in the orderly administration of justice. To summarily brush them aside may result in arbitrariness and injustice. 19

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

G.R. No. L-19751 February 28, 1966

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ALFREDO REMITERE, ET AL., plaintiff-appellants, vs.REMEDIOS MONTINOLA VDA. DE YULO, ET AL., defendants-appellees.E.M. Almario for the plaintiffs-appellants.Eduardo Arboleda for the defendants-appellees.ZALDIVAR, J.:This is an appeal from the order of the Court of First Instance of Negros Occidental dismissing the complaint in its Civil Case No. 6377.On December 6, 1961 the plaintiffs-appellants, Alfredo Remitere, et al., filed a complaint against the defendants-appellees, Remedies Montinola Viuda de Yulo and the Register of Deeds of Negros Occidental, the pertinent allegations of which complaint, for the purposes of this decision, are as follows:

2. In Cadastral Decrees Nos. 69518 and 69515 issued by the Court of First Instance of Negros Occidental on August 21, 1918, copies of which are herewith attached as Annexes "A" and "B" and made an integral part of this complaint, Gregorio Remitere was declared and registered owner of Lots Nos. 35 and 52 of the Cadastral Survey of Isabela, with areas of 4.4731 and 29.7398 hectares, respectively. These lots were issued the corresponding Original Certificates of Title under the Land Registration Act, being 10894 and 10898.3. Upon the demise of Gregorio Remitere on January 1, 1914, the Court of First Instance of Negros Occidental, in Civil Case No. 1661, Re-Application for Letters of Administration, appointed his wife as administratrix of his estate, among which are the two lots in question.During this period, the provincial sheriff of Negros Occidental conducted a public auction sale over the said parcels of land, and on the same day, September 23, 1918, he issued thereof a deed of sale in favor of Mariano Yulo of Binalbagan, Negros Occidental, for the total consideration of P20,000.00. Copy of the deed of sale is herewith attached as Annex "C" and formed part of this complaint.4. As a result, series of cancellations to the Original Certificates of Title mentioned in paragraph 2 hereof had followed.

First, they were cancelled by Transfer Certificates of Title Nos. 2819 and 2820, registered in the name of Mariano C. Yulo by virtue of the Certificates of Sale issued by the provincial sheriff of Negros Occidental. They were in turn cancelled by R-T 602 and R-T 4706, by virtue of reconstitution of titles. Then these were cancelled by T-532 and T-2979, by virtue of deeds of sales registered in the name of Remedios Montinola Vda. de Yulo, the defendant herein..

5. The public sale mentioned in Article 3 of this complaint, however, was and still is absolutely a void sale, and certainly did not pass titles and ownership of said lots, starting from its primitive owner, now being represented by the plaintiffs herein, as surviving heirs thereto, until it reaches the possession by the defendant.

That by reason of its invalidity, all and every benefits that the transferees, including the defendant herein, had acquired from the parcels of land in question, should be indemnified to the plaintiffs.And that, in order to justify their rights and interests pursuant to the mandates prescribed by law over said lots and discontinue the irreparable losses and damages that they are still sustaining, on account of the perversed transfer of September 23, 1918, the same should be reverted to their immediate possessions and titles.

The complaint prayed that the defendants be ordered to reconvey the two lots in question to the plaintiffs; that the defendant Register of Deeds be ordered to cancel the certificates of title in the name of the defendant Remedios Montinola Viuda de Yulo and to issue new ones in the names of the plaintiffs; and that the defendants pay the costs.The defendants-appellees filed a motion to dismiss the complaint on the grounds (1) that the complaint does not state a cause of action, and (2) that even assuming that a cause of action exists, the same has already prescribed.The lower court dismissed the complaint precisely on the grounds relied upon by the defendants-appellees. Hence this appeal.In this appeal, the plaintiffs-appellants contend that the trial court erred: (1) in declaring that the complaint contains no narration of facts; (2) in holding that complaint states no cause of action; and (3) in holding that the plaintiffs' cause of action, if any, has already prescribed.We find that the lower court had correctly dismissed the complaint.1äwphï1.ñëtThe lack of a cause of action as a ground for dismissal must appear on the face of the complaint, and to determine whether the complaint states a cause of action only the facts alleged therein, and no other, should be considered. A reading of the complaint in this case will readily impress one that no ultimate facts which may constitute the basis of plaintiffs-appellants rights which had been violated are alleged. Neither are there allegations of ultimate facts showing acts or omissions on the part of the defendants-appellees which constitute a violation of the rights of plaintiffs-appellants. Apparently, the plaintiffs-appellants rely on the allegations of paragraphs 3 and 5 of the complaint for their cause of action. Paragraph 3 states:

3. Upon the demise of Gregorio Remitere on January 1, 1914 the Court of First Instance of Negros Occidental, in Civil Case No. 1661, Re-Application for Letters of Administration, appointed his wife as administratrix of his estate, among which the two lots in question.During this period, the provincial sheriff of Negros Occidental, conducted a public auction sale over the said parcels of land, and on the same day, September 23, 1918, he issued thereof a deed of sale in favor of Mariano Yulo of Binalbagan, Negros Occidental, for the total consideration of P20,000.00. . . . .

The allegations embodied in the above quoted paragraph are mere averments or recitals of facts that do not establish any right or claim on the

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part of the plaintiffs. The allegations do not state any connection that the plaintiffs have with the deceased Gregorio Remitere, nor do they state what connection or claim the plaintiffs have on the properties left by the deceased Gregorio Remitere. The allegation about the sale at public auction does not state in what way the rights or interests of the plaintiffs had been affected, nay prejudiced, by that sale. Again, paragraph 5 of the complaint states:

5. The public sale mentioned in paragraph 3 of this complaint, however, was and still is absolutely a void sale, and certainly did not pass titles and ownership of said lots, starting from its primitive owner, now being represented by the plaintiffs herein, as surviving heirs thereto, until it reaches the possession by the defendants.That by reason of its invalidity, all and every benefits that the transferees, including the defendant herein, had acquired from the parcels of land in question, should be indemnified to the plaintiffs.

It is not stated anywhere in the complaint why the sale at public auction was absolutely void, nor were there stated any particular facts or circumstances upon which the alleged nullity of the sale or transaction is predicated. The averment that "the public sale . . . was and still is absolutely a void sale, and certainly did not pass titles and ownerships of said lots, starting from its primitive owner, now being represented by the plaintiffs herein, as surviving heirs thereto, until it reaches the possession by the defendants. . ." is a conclusion of law or an inference from facts not stated in the pleading. A pleading should state the ultimate facts essential to the rights of action or defense asserted, as distinguished from mere conclusion of fact, or conclusion of law. An allegation that a contract is valid, or void, as in the instant case, is a mere conclusion of law.

General allegations that a contract is valid or legal, or is just, fair and reasonable, are mere conclusion of law. Likewise, allegations that a contract is void, voidable, invalid, illegal, ultra vires, or against public policy, without stating facts showing its invalidity, are mere conclusions of law; as are allegations that a contract is in conformity with, or in violation of a constitutional or statutory provision. . . . . (71 C.J.S. pp. 44-45.) (Emphasis supplied.)

Not being statements of ultimate facts which constitute the basis of a right of the plaintiffs-appellants, nor are they statements of ultimate facts which constitute the wrongful acts or omissions of the defendants-appellees that violated the right of the plaintiffs-appellants the allegations of the complaint in the present case have not fulfilled the requirements of Section 3, Rule 6 of the Revised Rules of Court (Sec. 1, Rule 6 of the former Rules of Court) that the complaint should contain a "concise statement of the ultimate facts constituting the plaintiff's cause or causes of action."This Court has defined the term "cause of action" as follows:

A cause of action has been defined by the Supreme Court as an act or omission of one party in violation of the legal right or rights of the other; and its essential elements are legal right of the plaintiff, correlative obligations of the defendant, and act or omission of the

defendant in violation of said legal right. (Ma-ao Sugar Central Co., Inc. vs. Barrios, et al., L-1539, Dec. 30, 1947)

The term "ultimate facts" has been defined or explained as follows:Ultimate facts defined.—The term "ultimate facts" as used in Sec. 3, Rule 3 of the Rules of Court, means the essential facts constituting the plaintiff's cause of action. A fact is essential if it cannot be stricken out without leaving the statement of the cause of action insufficient. . . . . (Moran, Rules of Court, Vol. I, 1963 ed., p. 213)Ultimate facts are important and substantial facts which either directly form the basis of the primary right and duty, or which directly make up the wrongful acts or omissions of the defendant. The term does not refer to the details of probative matter or particulars of evidence by which these material elements are to be established. It refers to principal determinate, constitutive facts, upon the existence of which, the entire cause of action rests. (Montemayor vs. Raborar, et al., 53 O.G. No. 19, p. 6596, citing Pomeroy, Code Remedies, 5th Ed., sec. 420).

We, therefore, hold that the lower court had correctly ruled that the complaint in the present case does not narrate facts that constitute a cause of action.Having arrived at the foregoing conclusion, We deem it not necessary to discuss whether the lower court had correctly ruled that the plaintiffs' cause of action, if any, had prescribed or not.Wherefore, the order of dismissal appealed from is affirmed, with costs against the plaintiffs-appellants.

G.R. No. 180595 March 5, 2010

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ARTHUR DEL ROSARIO and ALEXANDER DEL ROSARIO, Petitioners, vs.HELLENOR D. DONATO, JR. and RAFAEL V. GONZAGA, Respondents.D E C I S I O NABAD, J.:This case is about the need for plaintiff to state the facts constituting his cause of action and the correct forum for actions for damages arising from alleged wrongful procurement and enforcement of a search warrant issued in connection with an alleged criminal violation of the intellectual property law.The Facts and the CaseOn January 23, 2002 Philip Morris Products, Inc. (Philip Morris) wrote the National Bureau of Investigation (NBI), requesting assistance in curtailing the proliferation of fake Marlboro cigarettes in Angeles City, Pampanga. After doing surveillance work in that city, respondent Hellenor Donato, Jr., the NBI agent assigned to the case, succeeded in confirming the storage and sale of such fake cigarettes at the house at 51 New York Street, Villasol Subdivision, Angeles City, that belonged to petitioner Alexander del Rosario.On March 5, 2002 respondent Donato applied for a search warrant with Branch 57 of the Regional Trial Court (RTC) of Angeles City to search the subject premises. But it took a week later or on March 12, 2002 for the RTC to hear the application and issue the search warrant. Although Donato felt that the delayed hearing compromised the operation, the NBI agents led by respondent Rafael V. Gonzaga proceeded to implement the warrant. Their search yielded no fake Marlboro cigarettes.Subsequently, petitioners Alexander and Arthur del Rosario (the Del Rosarios) filed a complaint for P50 million in damages against respondents NBI agents Donato and Gonzaga and two others before the RTC of Angeles City, Branch 62, in Civil Case 10584. On August 6, 2003 respondents NBI agents answered the complaint with a motion to dismiss on the grounds of: a) the failure of the complaint to state a cause of action; b) forum shopping; and c) the NBI agents’ immunity from suit, they being sued as such agents. The RTC denied the motion on March 25, 2003. The NBI agents filed a motion for reconsideration but the RTC denied the same on June 27, 2003.Dissatisfied, respondents NBI agents filed a special civil action of certiorari before the Court of Appeals (CA) in CA-G.R. SP 79496. On June 29, 2007 the latter court granted the petition and annulled the RTC’s orders, first, in alleging merely that the NBI agents unlawfully procured the search warrant without stating the facts that made the procurement unlawful, the complaint failed to state a cause of action; and second, the Del Rosarios were guilty of forum shopping in that they should have filed their claim for damages against the NBI agents through a motion for compensation with the court that issued the search warrant.The Del Rosarios sought reconsideration of the decision but the CA denied it on November 19, 2007, prompting them to file this petition for review.The Issues PresentedThe petition presents two issues:

1. Whether or not the CA correctly ruled that the complaint of the Del Rosarios did not state a cause of action; and2. Whether or not the CA correctly ruled that the Del Rosarios were guilty of forum shopping.

The Court’s RulingsOne. The CA held that the Del Rosarios’ complaint before the RTC failed to state a cause of action against respondents NBI agents. Such complaint said that the NBI

agents unlawfully procured and enforced the search warrant issued against the Del Rosarios but it failed to state the ultimate facts from which they drew such conclusion.The test of sufficiency of a complaint is whether or not, assuming the truth of the facts that plaintiff alleges in it, the court can render judgment granting him the judicial assistance he seeks.1 And judgment would be right only if the facts he alleges constitute a cause of action that consists of three elements: (1) the plaintiff’s legal right in the matter; (2) the defendant’s corresponding obligation to honor or respect such right; and (3) the defendant’s subsequent violation of the right. Absent any of these, the complaint would have failed to state a cause of action.2

According to the Del Rosarios, the following allegations in their complaint state a cause or causes of action against respondents NBI agents:

2.4 On 12 March 2002, elements of the [NBI] x x x led by Defendant Rafael I. Gonzaga x x x entered by force the premises belonging to Plaintiff Alexander del Rosario situated at No. 51 New York Street, Villasol Subdivision, Angeles City, pursuant to a Search Warrant unlawfully obtained from the [RTC] of Angeles City, Branch 57 x x x.x x x x2.6 Contrary to the sworn statements given before the court by defendants Hellenor D. Donato Jr. x x x and contrary to the allegation in Search Warrant No. 02-09A, no ‘fake Marlboro cigarettes and their packaging’ were found at No. 51 New York Street, Villasol Subdivision, Angeles City x x x.2.7 The inclusion of Plaintiff Arthur del Rosario in Search Warrant No. 02-09 had no factual basis considering that the premises searched is the property solely of Plaintiff Alexander del Rosario.2.8 Worse the enforcement of Searched [sic] Warrant No. 02-09 was just part of the series of raids and searches that was conducted in Angeles City and Pampanga, which was done with much publicity in the community and had tended to include the Plaintiffs in the same category as other persons and entities who were in fact found to be dealing with fake Marlboro cigarettes.x x x x3.2 The baseless sworn allegations that Plaintiffs had under their control and possession counterfeit Marlboro cigarettes and packaging to obtain a search warrant, and the malicious service of the such warrant at the residential premises of Plaintiff Alexander del Rosario in full and plain view of members of the community, as part of the series of raids and operations conducted within Angeles City and Pampanga during that period, has tainted irreversibly the good names which Plaintiffs have painstakingly built and maintained over the years.x x x x3.4 Plaintiffs were subjected to so much humiliation and embarrassment by the raid conducted on the subject residential premises, and subjected them to much unwarranted speculation of engaging in the sale of fake merchandise.

Essentially, however, all that the Del Rosarios allege is that respondents NBI agents used an unlawfully obtained search warrant against them, evidenced by the fact that, contrary to the sworn statements used to get such warrant, the NBI agents found no fake Marlboro cigarettes in petitioner Alexander del Rosario’s premises.But a judicially ordered search that fails to yield the described illicit article does not of itself render the court’s order "unlawful." The Del Rosarios did not allege that respondents NBI agents violated their right by fabricating testimonies to convince the RTC of Angeles City to issue the search warrant. Their allegation that the NBI agents

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used an unlawfully obtained search warrant is a mere conclusion of law. While a motion to dismiss assumes as true the facts alleged in the complaint, such admission does not extend to conclusions of law.3 Statements of mere conclusions of law expose the complaint to a motion to dismiss on ground of failure to state a cause of action.4

Further, the allegation that the search warrant in this case was served in a malicious manner is also not sufficient. Allegations of bad faith, malice, and other related words without ultimate facts to support the same are mere conclusions of law.5

The Del Rosarios’ broad assertion in their complaint that the search was conducted "in full and plain view of members of the community" does not likewise support their claim that such search was maliciously enforced. There is nothing inherently wrong with search warrants being enforced in full view of neighbors. In fact, when the respondent or his representative is not present during the search, the rules require that it be done in the presence of two residents of the same locality. These safeguards exist to protect persons from possible abuses that may occur if searches were done surreptitiously or clandestinely.Two. Invoking Section 21 of this Court’s Administrative Matter (A.M.) 02-1-06-SC (not A.O. 01-1-06-SC as cited), the CA held that, rather than file a separate action for damages, the Del Rosarios should have filed their claim for compensation in the same proceeding and with the same court that issued the writ of search and seizure. The Del Rosarios were thus guilty of forum shopping.A.M. 02-1-06-SC, the Rule on Search and Seizure in Civil Actions for Infringement of Intellectual Property Rights, provides:SEC. 21. Claim for damages. – Where the writ [of search and seizure] is discharged on any of the grounds provided in this Rule, or where it is found after trial that there has been no infringement or threat of infringement of an intellectual property right, the court, upon motion of the alleged infringing defendant or expected adverse party and after due hearing, shall order the applicant to compensate the defendant or expected adverse party upon the cash bond, surety bond or other equivalent security for any injury or damage the latter suffered by the issuance and enforcement of the writ. Should the damages exceed the amount of the bond, the applicant shall be liable for the payment of the excess.When a complaint is already filed in court, the motion shall be filed with the same court during the trial or before appeal is perfected or before judgment becomes executory, with due notice to the applicant, setting forth the facts showing the defendant’s right to damages and the amount thereof. The award of damages shall be included in the judgment in the main case.Where no complaint is filed against the expected adverse party, the motion shall be filed with the court which issued the writ. In such a case, the court shall set the motion for summary hearing and immediately determine the expected adverse party’s right to damages.A judgment in favor of the applicant in its principal claim should not necessarily bar the alleged infringing defendant from recovering damages where he suffered losses by reason of the wrongful issuance or enforcement of the writ.The damages provided for in this section shall be independent from the damages claimed by the defendant in his counterclaim.But the subject search warrant was not issued under A.M. 02-1-06-SC, which governed the issuance of a writ of search and seizure in a civil action for infringement filed by an intellectual property right owner against the supposed infringer of his trademark or name. Philip Morris, the manufacturer of Marlboro cigarettes, did not go by this route. Philip Morris did not file a civil action for infringement of its trademark against the Del Rosarios before the RTC of Angeles City.

Instead, Philip Morris sought assistance from the NBI for the apprehension and criminal prosecution of those reportedly appropriating its trademark and selling fake Marlboro cigarettes. In turn, the NBI instituted a police action that included applying for a search and seizure warrant under Sections 3, 4, 5 and 6 of Rule 126 of the Rules of Criminal Procedure (not under the provisions of A.M. 02-1-06-SC) against the Del Rosarios upon the belief that they were storing and selling fake Marlboro cigarettes in violation of the penal provisions of the intellectual property law.The proceeding under Rule 126, a limited criminal one, does not provide for the filing of counterclaims for damages against those who may have improperly sought the issuance of the search warrant. Consequently, the Del Rosarios had the right to seek damages, if the circumstances warranted, by separate civil action for the wrong inflicted on them by an improperly obtained or enforced search warrant. Unfortunately, their complaint, as worded, failed to state a proper cause of action.1avvphi1Petitioner Arthur del Rosario claims that respondents NBI agents wrongfully included him as respondent in their application for a search warrant since he neither owned the house at 51 New York Street nor resided in it. But the rules do not require respondents in search warrant proceedings to be residents of the premises to be searched. If this were the case, criminals in possession of illegal articles could simply use other people’s residence for storing such articles to avoid being raided and searched.The Del Rosarios raise a number of procedural issues: a) the supposed failure of respondents NBI agents to file their motion for reconsideration of the RTC order denying their motion to dismiss within 15 days of receipt of the order; b) their resort to a special civil action of certiorari to challenge the RTC’s denial of their motion to dismiss; c) the propriety of their inclusion of a motion to dismiss in their answer; d) the CA’s grant to them in 2003 of a 15-day extension to file a petition for certiorari after the lapse of 60 days when the Court did not yet come out with a ruling that barred such extension; and e) their being represented by private counsel rather than by the Office of the Solicitor General.With the Court’s rulings in the principal issues raised in this case, it finds no sufficient reason to further dwell on the lesser issues that the Del Rosarios raise above. Besides, the Court finds no error in the CA’s disposition of the same.WHEREFORE, the Court DENIES the petition and AFFIRMS the Decision of the Court of Appeals in CA-G.R. SP 79496 dated June 29, 2007 and its Resolution dated November 19, 2007 for the reasons stated in this Decision, with the MODIFICATION that Civil Case 10584 is DISMISSED without prejudice.SO ORDERED.

G.R. No. 182779 August 23, 2010

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VICTORINA (VICTORIA) ALICE LIM LAZARO, Petitioner, vs.BREWMASTER INTERNATIONAL, INC., Respondent.R E S O L U T I O NNACHURA, J.:Before the Court is a petition for review on certiorari of the Court of Appeals (CA) Decision1 dated September 4, 2007 and Resolution dated January 31, 2008, which awarded the amount sought by respondent in its Complaint. As held by the CA, to grant the relief prayed for by respondent is, in the words of Section 6 of the Revised Rule on Summary Procedure, the judgment "warranted by the facts alleged in the complaint."Respondent, Brewmaster International, Inc., is a marketing company engaged in selling and distributing beer and other products of Asia Brewery, Inc. On November 9, 2005, it filed a Complaint for Sum of Money against Prescillo G. Lazaro (Prescillo) and petitioner, Victorina (also known as Victoria) Alice Lazaro, with the Metropolitan Trial Court (MeTC) of Makati City. The complaint alleged as follows:

6. During the period from February 2002 to May 2002, defendants obtained on credit from plaintiff beer and other products in the total amount of ONE HUNDRED THIRTY EIGHT THOUSAND FIVE HUNDRED TWO PESOS AND NINETY TWO CENTAVOS (Php 138,502.92), evidenced by sales invoices photocopies of which are hereto attached as Annexes "A," "A-1" to "A-11,"7. Despite repeated demands, defendants have failed and refused, and up to now, still fail and refuse to pay their aforesaid obligation to plaintiff in the amount of ONE HUNDRED THIRTY EIGHT THOUSAND FIVE HUNDRED TWO PESOS AND NINETY TWO CENTAVOS (Php 138,502.92) as evidenced by the demand letters dated 21 April 2003, 12 May 2003, 5 August 2003 and 17 August 2005, photocopies of which are hereto attached as Annexes "B," "C," "C-1," "D," "D-1," "D-2," and "E," "E-1,"8. Under the terms of the sales invoices, defendants agreed that in case of litigation, the venue shall only be at the proper courts of Makati City and to pay 24% interest on all overdue accounts.

WHEREFORE, it is respectfully prayed that judgment be rendered in favor of plaintiff and against the defendants, ordering the latter to pay the sum of Php138,502.92 representing plaintiff’s claim and the sum of Php33,240.00 as interest.Plaintiff prays for such other or further relief and remedies that are just and equitable in the premises.2

Annexes A, A-1 to A-11 are photocopies of sales invoices3 indicating the amount of the goods purchased and showing that they were sold to "TOTAL" and received by a certain Daniel Limuco.Prescillo filed an answer with counterclaim, denying any knowledge of the obligation sued upon. According to Prescillo, he and petitioner had lived separately since January 15, 2002 and he never authorized petitioner to purchase anything from respondent. He pointed out that the purchaser of the items, as borne out by the sales invoices attached to the complaint, was Total, which should have been the one sued by respondent.4

Petitioner, in her own answer with counterclaims, likewise denied having transacted with respondent, and averred that the documents attached to the complaint showed that it was Total which purchased goods from respondent.5

On June 14, 2006, during the scheduled preliminary conference, petitioner and her co-defendant did not appear. Hence, the MeTC declared the case submitted for decision.6

On August 22, 2006, the MeTC dismissed the complaint, ratiocinating that respondent, as plaintiff, failed to meet the burden of proof required to establish its claim by preponderance of evidence. The court a quo noted that the sales invoices attached to the complaint showed that the beer and the other products were sold to Total and were received by a certain Daniel Limuco; they did not indicate, in any way, that the goods were received by petitioner or her husband.7

Respondent elevated the case to the Regional Trial Court (RTC) through a notice of appeal. Attached to its Memorandum was additional evidence, showing that it transacted with petitioner and her husband, who were then the operators and franchisees of the Total gasoline station and convenience store where the subject goods were delivered, and that Daniel Limuco was their employee.8

Unmoved, the RTC found no reversible error in the assailed decision. It agreed with the MeTC that respondent failed to submit any evidence proving that petitioner and her husband were liable for the obligation. The RTC disregarded the documents attached to the memorandum on the ground that admission of such additional evidence would be offensive to the basic rule of fair play and would violate the other party’s right to due process. Thus, the RTC affirmed the assailed decision in toto.9

Respondent then went to the CA through a petition for review. There, it succeeded in obtaining a judgment in its favor. Applying Section 710 of the Revised Rule on Summary Procedure, in conjunction with Section 611 thereof, the CA held that judgment should have been rendered "as may be warranted by the facts alleged in the complaint" considering that both defendants failed to appear during the preliminary conference. The appellate court said that "by instead referring to the sales invoices and bypassing [the] ultimate facts [alleged in the complaint], the MeTC contravened the evident purposes of the [Revised] Rule on Summary Procedure directing that the judgment be based on the allegations of the complaint, which were, firstly, to avoid delay and, secondly, to consider the non-appearance at the preliminary conference as an admission of the ultimate facts." The CA judiciously pronounced that:In fact, evidentiary matters (like the sales invoices attached to the complaint) were not yet to be considered as of that early stage of the proceedings known under the Rule on Summary Procedure as the preliminary conference. The evidentiary matters and facts are to be required only upon the termination of the preliminary conference and only if further proceedings become necessary to establish factual issues defined in the order issued by the court. (citing Section 9, Rule on Summary Procedure)Thus, finding the amount claimed to be warranted by the allegations in the complaint, the CA, in its September 4, 2007 Decision, reversed the trial court’s decision and ordered petitioner and her husband to pay the said amount plus interests, thus:WHEREFORE, the DECISION DATED MARCH 12, 2007 is REVERSED AND SET ASIDE.

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The respondents are ORDERED to pay, jointly and severally, to the petitioner the amount of P138,502.92, plus interest of 6% per annum from the filing of the complaint until this judgment becomes final and executory, and 12% per annum upon finality of this judgment until full payment.The respondents are also ORDERED to pay the costs of suit.SO ORDERED.12

Petitioner filed a motion for reconsideration of the said Decision but the same was denied by the CA in its January 31, 2008 Resolution.13

Petitioner submits the following issues to this Court for resolution:Petitioner respectfully submits that the Honorable Court of Appeals erred in the interpretation of Section 6 of the Revised Rules of Summary Procedure when it reversed the Decision of the RTC, Branch 162 of Makati in Civil Case [N]o. 06-944.Petitioner further submits that the Court of Appeals erred in giving relief to the private respondent despite the lack of cause of action in its complaint against the petitioner herein.14

Petitioner contends that the Revised Rule on Summary Procedure does not warrant the automatic grant of relief in favor of the plaintiff when the complaint fails to state a cause of action. She avers that respondent’s complaint fails to state a cause of action; hence, no relief can be given to respondent. Petitioner points out that the sales invoices formed part of the complaint and should be considered in determining whether respondent has a cause of action against her. Consideration of the said sales invoices, she avers, would show that there is no contractual relationship between her and respondent; the invoices did not indicate in any way that petitioner was liable for the amount stated therein.Petitioner is correct in saying that no relief can be awarded to respondent if its complaint does not state a cause of action. Indeed, if the complaint does not state a cause of action, then no relief can be granted to the plaintiff and it would necessarily follow that the allegations in the complaint would not warrant a judgment favorable to the plaintiff.The basic requirement under the rules of procedure is that a complaint must make a plain, concise, and direct statement of the ultimate facts on which the plaintiff relies for his claim.15 Ultimate facts mean the important and substantial facts which either directly form the basis of the plaintiff’s primary right and duty or directly make up the wrongful acts or omissions of the defendant.16 They refer to the principal, determinative, constitutive facts upon the existence of which the cause of action rests. The term does not refer to details of probative matter or particulars of evidence which establish the material elements.17

The test of sufficiency of the facts alleged in a complaint to constitute a cause of action is whether, admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of the petition or complaint.18 To determine whether the complaint states a cause of action, all documents attached thereto may, in fact, be considered, particularly when referred to in the complaint.19 We emphasize, however, that the inquiry is into the sufficiency, not the veracity of the material allegations in the complaint.20 Thus, consideration of the annexed documents should only be taken in the context of ascertaining the sufficiency of the allegations in the complaint.Petitioner argues that the complaint fails to state a cause of action since reference to the sales invoices attached to and cited in paragraph six of the

Complaint shows that it was not her who purchased and received the goods from respondent.Contrary to petitioner’s stance, we find that the Complaint sufficiently states a cause of action.1âwphi1 The following allegations in the complaint adequately make up a cause of action for collection of sum of money against petitioner: (1) that petitioner and her husband obtained beer and other products worth a total of P138,502.92 on credit from respondent; and (2) that they refused to pay the said amount despite demand.As correctly held by the CA, the sales invoices are not actionable documents. They were not the bases of respondent’s action for sum of money but were attached to the Complaint only to provide details on the alleged transactions. They were evidentiary in nature and not even necessary to be stated or cited in the Complaint.At any rate, consideration of the attached sales invoices would not change our conclusion. The sales invoices, naming Total as the purchaser of the goods, do not absolutely foreclose the probability of petitioner being liable for the amounts reflected thereon. An invoice is nothing more than a detailed statement of the nature, quantity, and cost of the thing sold and has been considered not a bill of sale.21 Had the case proceeded further, respondent could have presented evidence linking these sales invoices to petitioner.In Peña v. Court of Appeals,22 petitioners therein likewise argued that the sales invoices did not show that they had any involvement in the transactions covered by the same. What the Court said in reply to this argument bolsters our view in this petition:Although it appears in the other sales invoices that the petitioners were the salespersons who brokered the sales of the products covered by the said sales invoices to the vendees therein named, the said entries are not conclusive of the extent and the nature of the involvement of the petitioners in the sales of the products under the said sales invoices which are not absolutely binding. They may be explained and put to silence by all the facts and circumstances characterizing the true import of the dealings to which they refer. The facts contained in the said sales invoices may be contradicted by oral testimony.23

WHEREFORE, premises considered, the Court of Appeals Decision dated September 4, 2007 and Resolution dated January 31, 2008 are AFFIRMED.SO ORDERED.

G.R. No. 154704 June 1, 2011NELLIE VDA. DE FORMOSO and her children, namely, MA. THERESA FORMOSO-PESCADOR, ROGER FORMOSO, MARY JANE FORMOSO, BERNARD FORMOSO and

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PRIMITIVO MALCABA, Petitioners, vs.PHILIPPINE NATIONAL BANK, FRANCISCO ARCE, ATTY. BENJAMIN BARBERO, and ROBERTO NAVARRO,Respondents.D E C I S I O NMENDOZA, J.:Assailed in this petition are the January 25, 2002 Resolution1 and the August 8, 2002 Resolution2 of the Court of Appeals (CA) which dismissed the petition for certiorari filed by the petitioners on the ground that the verification and certification of non-forum shopping was signed by only one of the petitioners in CA G.R. SP No. 67183, entitled "Nellie P. Vda. De Formoso, et al. v. Philippine National Bank, et al."The Factual andProcedural AntecedentsRecords show that on October 14, 1989, Nellie Panelo Vda. De Formoso (Nellie) and her children namely: Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane Formoso, Bernard Formoso, and Benjamin Formoso, executed a special power of attorney in favor of Primitivo Malcaba (Malcaba) authorizing him, among others, to secure all papers and documents including the owner’s copies of the titles of real properties pertaining to the loan with real estate mortgage originally secured by Nellie and her late husband, Benjamin S. Formoso, from Philippine National Bank, Vigan Branch (PNB) on September 4, 1980.On April 20, 1990, the Formosos sold the subject mortgaged real properties to Malcaba through a Deed of Absolute Sale. Subsequently, on March 22, 1994, Malcaba and his lawyer went to PNB to fully pay the loan obligation including interests in the amount of 2,461,024.74.₱PNB, however, allegedly refused to accept Malcaba’s tender of payment and to release the mortgage or surrender the titles of the subject mortgaged real properties.On March 24, 1994, the petitioners filed a Complaint for Specific Performance against PNB before the Regional Trial Court of Vigan, Ilocos Sur (RTC) praying, among others, that PNB be ordered to accept the amount of 2,461,024.74 as full settlement of the loan obligation of the₱ Formosos.After an exchange of several pleadings, the RTC finally rendered its decision3 on October 27, 1999 favoring the petitioners. The petitioners’ prayer for exemplary or corrective damages, attorney’s fees, and annual interest and daily interest, however, were denied for lack of evidence.PNB filed a motion for reconsideration but it was denied for failure to comply with Rule 15, Section 5 of the 1997 Rules of Civil Procedure. PNB then filed a Notice of Appeal but it was dismissed for being filed out of time.The petitioners received their copy of the decision on November 26, 1999, and on January 25, 2001, they filed their Petition for Relief from Judgment4 questioning the RTC decision that there was no testimonial evidence presented to warrant the award for moral and exemplary damages. They reasoned out that they could not then file a motion for reconsideration because they could not get hold of a copy of the transcripts of stenographic notes. In its August 6, 2001 Order, the RTC denied the petition for lack of merit.5

On September 7, 2001, the petitioners moved for reconsideration but it was denied by the RTC in its Omnibus Order of September 26, 2001.6

Before the Court of AppealsOn November 29, 2001, the petitioners filed a petition for certiorari before the CA challenging the RTC Order of August 6, 2001 and its Omnibus Order dated September 26, 2001.In its January 25, 2002 Resolution, the CA dismissed the petition stating that:The verification and certification of non-forum shopping was signed by only one (Mr. Primitivo Macalba) of the many petitioners. In Loquias v. Office of the Ombudsman, G.R. No. 139396, August 15, 2000, it was ruled that all petitioners must be signatories to the certification of non-forum shopping unless the one who signed it is authorized by the other petitioners. In the case at bar, there was no showing that the one who signed was empowered to act for the rest. Therefore, it cannot be presumed that the one who signed knew to the best of his knowledge whether his co-petitioners had the same or similar claims or actions filed or pending. The ruling in Loquias further declared that substantial compliance will not suffice in the matter involving strict observance of the Rules. Likewise, the certification of non-forum shopping requires personal knowledge of the party who executed the same and that petitioners must show

reasonable cause for failure to personally sign the certification. Utter disregard of the Rules cannot just be rationalized by harping on the policy of liberal construction.Aggrieved, after the denial of their motion for reconsideration, the petitioners filed this petition for review anchored on the followingGROUNDSTHE COURT OF APPEALS PATENTLY ERRED IN RULING THAT ALL THE PETITIONERS MUST SIGN THE VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING IN A PETITION FOR CERTIORARI WHEREIN ONLY QUESTIONS OF LAW ARE INVOLVED.ALTERNATIVELY, THE COURT OF APPEALS PATENTLY ERRED IN DISMISSING THE WHOLE PETITION WHEN AT THE VERY LEAST THE PETITION INSOFAR AS PETITIONER MALCABA IS CONCERNED BEING THE SIGNATORY THEREOF SHOULD HAVE BEEN GIVEN DUE COURSE.THE COURT OF APPEALS PATENTLY ERRED IN GIVING MORE WEIGHT ON TECHNICALITIES WHEN THE PETITION BEFORE IT WAS CLEARLY MERITORIOUS.7

The petitioners basically argue that they have substantially complied with the requirements provided under the 1997 Rules of Civil Procedure on Verification and Certification of Non-Forum Shopping. The petitioners are of the view that the rule on Verification and Certification of Non-Forum Shopping that all petitioners must sign should be liberally construed, since only questions of law are raised in a petition for certiorari and no factual issues that require personal knowledge of the petitioners.The petitioners further claim that they have a meritorious petition because contrary to the ruling of the RTC, their Petition for Relief clearly showed that, based on the transcript of stenographic notes, there was enough testimonial evidence for the RTC to grant them damages and attorney’s fees as prayed for.On the other hand, PNB counters that the mandatory rule on the certification against forum shopping requires that all of the six (6) petitioners must sign, namely: Nellie Vda. De Formoso and her children Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane Formoso, and Bernard Formoso, and Primitivo Malcaba. Therefore, the signature alone of Malcaba on the certification is insufficient.PNB further argues that Malcaba was not even a party or signatory to the contract of loan entered into by his co-petitioners. Neither was there evidence that Malcaba is a relative or a co-owner of the subject properties. It likewise argues that, contrary to the stance of the petitioners, the issue raised before the CA, as to whether or not the petitioners were entitled to moral and exemplary damages as well as attorney’s fees, is a factual one.Finally, PNB asserts that the body of the complaint filed by the petitioners failed to show any allegation that Macalba alone suffered damages for which he alone was entitled to reliefs as prayed for. PNB claims that the wordings of the complaint were clear that all the petitioners were asking for moral and exemplary damages and attorney’s fees.OUR RULINGThe petition lacks merit.Certiorari is an extraordinary, prerogative remedy and is never issued as a matter of right. Accordingly, the party who seeks to avail of it must strictly observe the rules laid down by law.8 Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:SECTION 1. Petition for certiorari.- When any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as law and justice may require.The petition shall be accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as provided in the third paragraph of Section 3, Rule 46. [Emphasis supplied]Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as amended, petitions for certiorari must be verified and accompanied by a sworn certification of non-forum shopping.

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SECTION 3. Contents and filing of petition; effect of non-compliance with requirements. – The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case, and the grounds relied upon for the relief prayed for.In actions filed under Rule 65, the petition shall further indicate the material dates showing when notice of the judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the denial thereof was received.It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein, and other documents relevant or pertinent thereto. The certification shall be accomplished by the proper clerk of court or his duly authorized representative, or by the proper officer of the court, tribunal, agency or office involved or by his duly authorized representative. The other requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all documents attached to the original.The petitioner shall also submit together with the petition a sworn certification that he has not theretofore commenced any other action involving the same issues in the Supreme Court, the Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, he must state the status of the same; and if he should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and deposit the amount of P500.00 for costs at the time of the filing of the petition.The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition. [Emphases supplied]The acceptance of a petition for certiorari as well as the grant of due course thereto is, in general, addressed to the sound discretion of the court. Although the Court has absolute discretion to reject and dismiss a petition for certiorari, it does so only (1) when the petition fails to demonstrate grave abuse of discretion by any court, agency, or branch of the government; or (2) when there are procedural errors, like violations of the Rules of Court or Supreme Court Circulars.9 [Emphasis supplied]In the case at bench, the petitioners claim that the petition for certiorari that they filed before the CA substantially complied with the requirements provided for under the 1997 Rules of Civil Procedure on Verification and Certification of Non-Forum Shopping.The Court disagrees.Sections 4 and 5 of Rule 7 of the 1997 Rules of Civil Procedure provide:SEC. 4. Verification. – Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit.A pleading is verified by an affidavit that the affiant has read the pleadings and that the allegations therein are true and correct of his personal knowledge or based on authentic records.A pleading required to be verified which contains a verification based on "information and belief" or upon "knowledge, information and belief" or lacks a proper verification, shall be treated as an unsigned pleading.SEC. 5. Certification against forum shopping. – The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. x x x.In this regard, the case of Oldarico S. Traveno v. Bobongon Banana Growers Multi-Purpose Cooperative,10 is enlightening:Respecting the appellate court’s dismissal of petitioners’ appeal due to the failure of some of them to sign the therein accompanying verification and certification against forum-shopping, the Court’s guidelines for the bench and bar in Altres v. Empleo, which were culled "from jurisprudential pronouncements," are instructive:For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements already reflected above respecting non-compliance with the requirements on, or submission of defective, verification and certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of defective verification, and non-compliance with the requirement on or submission of defective certification against forum shopping.2) As to verification, non-compliance therewith or a defect therein does not necessarily render the pleading fatally defective. The Court may order its submission or correction or act on the pleading if the attending circumstances are such that strict compliance with the Rule may be dispensed with in order that the ends of justice may be served thereby.3) Verification is deemed substantially complied with when one who has ample knowledge to swear to the truth of the allegations in the complaint or petition signs the verification, and when matters alleged in the petition have been made in good faith or are true and correct.4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in verification, is generally not curable by its subsequent submission or correction thereof, unless there is a need to relax the Rule on the ground of "substantial compliance" or presence of "special circumstances or compelling reasons."5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in the certification against forum shopping substantially complies with the Rule.6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must execute a Special Power of Attorney designating his counsel of record to sign on his behalf.

The petition for certiorari filed with the CA stated the following names as petitioners: Nellie Panelo Vda. De Formoso, Ma. Theresa Formoso-Pescador, Roger Formoso, Mary Jane Formoso, Bernard Formoso, Benjamin Formoso, and Primitivo Malcaba.Admittedly, among the seven (7) petitioners mentioned, only Malcaba signed the verification and certification of non-forum shopping in the subject petition. There was no proof that Malcaba was authorized by his co-petitioners to sign for them. There was no special power of attorney shown by the Formosos authorizing Malcaba as their attorney-in-fact in filing a petition for review on certiorari. Neither could the petitioners give at least a reasonable explanation as to why only he signed the verification and certification of non-forum shopping. In Athena Computers, Inc. and Joselito R. Jimenez v. Wesnu A. Reyes, the Court explained that:The verification of the petition and certification on non-forum shopping before the Court of Appeals were signed only by Jimenez. There is no showing that he was authorized to sign the same by Athena, his co-petitioner.

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Section 4, Rule 7 of the Rules states that a pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his knowledge and belief. Consequently, the verification should have been signed not only by Jimenez but also by Athena’s duly authorized representative.In Docena v. Lapesura, we ruled that the certificate of non-forum shopping should be signed by all the petitioners or plaintiffs in a case, and that the signing by only one of them is insufficient. The attestation on non-forum shopping requires personal knowledge by the party executing the same, and the lone signing petitioner cannot be presumed to have personal knowledge of the filing or non-filing by his co-petitioners of any action or claim the same as similar to the current petition.The certification against forum shopping in CA-G.R. SP No. 72284 is fatally defective, not having been duly signed by both petitioners and thus warrants the dismissal of the petition for certiorari. We have consistently held that the certification against forum shopping must be signed by the principal parties. With respect to a corporation, the certification against forum shopping may be signed for and on its behalf, by a specifically authorized lawyer who has personal knowledge of the facts required to be disclosed in such document.While the Rules of Court may be relaxed for persuasive and weighty reasons to relieve a litigant from an injustice commensurate with his failure to comply with the prescribed procedures, nevertheless they must be faithfully followed. In the instant case, petitioners have not shown any reason which justifies relaxation of the Rules. We have held that procedural rules are not to be belittled or dismissed simply because their non-observance may have prejudiced a party’s substantive rights. Like all rules, they are required to be followed except for the most persuasive of reasons when they may be relaxed. Not one of these persuasive reasons is present here.In fine, we hold that the Court of Appeals did not err in dismissing the petition for certiorari in view of the procedural lapses committed by petitioners.11 [Emphases supplied]Furthermore, the petitioners argue that the CA should not have dismissed the whole petition but should have given it due course insofar as Malcaba is concerned because he signed the certification. The petitioners also contend that the CA should have been liberal in the application of the Rules because they have a meritorious case against PNB.The Court, however, is not persuaded.The petitioners were given a chance by the CA to comply with the Rules when they filed their motion for reconsideration, but they refused to do so. Despite the opportunity given to them to make all of them sign the verification and certification of non-forum shopping, they still failed to comply. Thus, the CA was constrained to deny their motion and affirm the earlier resolution.12

Indeed, liberality and leniency were accorded in some cases.13 In these cases, however, those who did not sign were relatives of the lone signatory, so unlike in this case, where Malcaba is not a relative who is similarly situated with the other petitioners and who cannot speak for them. In the case of Heirs of Domingo Hernandez, Sr. v. Plaridel Mingoa, Sr.,14 it was written:In the instant case, petitioners share a common interest and defense inasmuch as they collectively claim a right not to be dispossessed of the subject lot by virtue of their and their deceased parents’ construction of a family home and occupation thereof for more than 10 years. The commonality of their stance to defend their alleged right over the controverted lot thus gave petitioners xxx authority to inform the Court of Appeals in behalf of the other petitioners that they have not commenced any action or claim involving the same issues in another court or tribunal, and that there is no other pending action or claim in another court or tribunal involving the same issues.Here, all the petitioners are immediate relatives who share a common interest in the land sought to be reconveyed and a common cause of action raising the same arguments in support thereof. There was sufficient basis, therefore, for Domingo Hernandez, Jr. to speak for and in behalf of his co-petitioners when he certified that they had not filed any action or claim in another court or tribunal involving the same issues. Thus, the Verification/Certification that Hernandez, Jr. executed constitutes substantial compliance under the Rules. [Emphasis supplied]The same leniency was accorded to the petitioner in the case of Oldarico S. Traveno v. Bobongon Banana Growers Multi-Purpose Cooperative,15 where it was stated:The same leniency was applied by the Court in Cavile v. Heirs of Cavile, because the lone petitioner who executed the certification of non-forum shopping was a relative and co-owner of the other petitioners with whom he shares a common interest. x x x16

Considering the above circumstances, the Court does not see any similarity at all in the case at bench to compel itself to relax the requirement of strict compliance with the rule regarding the certification against forum shopping.At any rate, the Court cannot accommodate the petitioners’ request to re-examine the testimony of Malcaba in the transcript of stenographic notes of the April 25, 1999 hearing concerning his alleged testimonial proof of damages for obvious reasons.Primarily, Section 1, Rule 45 of the Rules of Court categorically states that the petition filed shall raise only questions of law, which must be distinctly set forth. A question of law arises when there is doubt as to what the law is on a certain state of facts, while there is a question of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of law, the same must not involve an examination of the probative value of the evidence presented by the litigants or any of them. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact.17

In this case, the petition clearly raises a factual issue.1avvphil As correctly argued by PNB, the substantive issue of whether or not the petitioners are entitled to moral and exemplary damages as well as attorney’s fees is a factual issue which is beyond the province of a petition for review on certiorari.Secondly, even if the Court glosses over the technical defects, the petition for relief cannot be granted. A perusal of the Petition for Relief of Judgment discloses that there is no fact constituting fraud, accident, mistake or excusable negligence which are the grounds therefor. From the petition itself, it appears that the petitioners’ counsel had a copy of the transcript of stenographic notes which was in his cabinet all along and only discovered it when he was disposing old and terminated cases.18 If he was only attentive to his records, he could have filed a motion for reconsideration or a notice of appeal in behalf of the petitioners.WHEREFORE, the petition is DENIED.SO ORDERED.

G.R. No. 91391 January 24, 1991FRANCISCO I. CHAVEZ, in his capacity as Solicitor General, petitionervs.

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THE HON. SANDIGANBAYAN (First Division) and JUAN PONCE ENRILE, respondents.Ponce Enrile, Cayetano Reyes & Manalastas for private respondent. GUTIERREZ, JR., J.:pThe petitioner challenges the resolutions dated June 8, 1989 and November 2, 1989 of the Sandiganbayan issued in Civil Case No. 0033 which granted the motion of private respondent Juan Ponce Enrile, one of the defendants in the civil case, to implead the petitioner as additional party defendant in Enrile's counterclaim in the same civil case and denied the petitioner's motion for reconsideration.On July 31, 1987, the Republic of the Philippines, through the Presidential Commission on Good Government(PCGG) with the assistance of Solicitor General Francisco Chavez filed with the respondent Sandiganbayan a complaint docketed as Civil Case No. 0033 against Eduardo Cojuangco, Jr. and Juan Ponce Enrile, among others, for reconveyance, reversion and accounting, restitution and damages.After the denial of his motion to dismiss, respondent Enrile filed his answer with compulsory counterclaim and cross-claim with damages.The Republic filed its reply to the answer and motion to dismiss the counterclaim. The motion was opposed by respondent Enrile.On January 30, 1989, respondent Sandiganbayan issued a resolution, to wit:

The resolution of the Motion to Dismiss the Counterclaim against the Plaintiff government is deferred until after trial, the grounds relied upon not appearing to be indubitable.On the matter of the additional parties (Solicitor General Chavez, Ex-PCGG Chairman Diaz, former Commissioners Doromal, Rodrigo, Romero and Bautista), the propriety of impleading them either under Sec. 14, Rule 6 or even under Sec. 12 as third-party defendant requires leave of Court to determine the propriety thereof. No such leave has been sought. Consideration thereof cannot be entertained at this time nor may therefore, the Motion to Dismiss the same be considered. (Rollo, p. 329; Annex "H", Petition)

Respondent Enrile then requested leave from the Sandiganbayan to implead the petitioner and the PCGG officials as party defendants for lodging this alleged "harassment suit" against him.The motion was granted in a resolution dated June 8, 1989, to wit:

In respect to defendant Juan Ponce Enrile's Manifestation and Motion dated February 23, 1989, praying for leave to implead additional parties to his counterclaim, the Court, finding reason in the aforesaid Manifestation and Motion, grants leave to implead the defendants named in the counterclaim and admits defendant Juan Ponce Enrile's answer with counterclaim.This is without prejudice to the defenses which said defendants may put forth individually or in common, in their personal capacities or otherwise. (Rollo, p. 27)

In a later resolution dated November 2, 1989, respondent Sandiganbayan denied a motion to reconsider the June 8, 1989 resolution. The dispositive portion of the resolution states:

WHEREFORE, the Motions for Reconsideration of the Solicitor General and former PCGG officials Ramon Diaz, Quintin Doromal, Orlando Romero, Ramon Rodrigo and Mary Concepcion Bautista are denied, but, considering these motions as in the nature of motions to dismiss counterclaim/answers, resolution of these motions is held in abeyance pending trial on the merits. (Rollo, p. 31)

Thereafter, all the PCGG officials filed their answer to the counterclaims invoking their immunity from suits as provided in Section 4 of Executive Order No. 1. Instead of filing an

answer, the petitioner comes to this Court assailing the resolutions as rendered with grave abuse of discretion amounting to lack of jurisdiction.The lone issue in this petition is the propriety of impleading the petitioner as additional party defendant in the counterclaim filed by respondent Enrile in Civil Case No. 0033.It may be noted that the private respondent did not limit himself to general averments of malice, recklessness, and bad faith but filed specific charges that then PCGG Chairman Jovito Salonga had already cleared the respondent and yet, knowing the allegations to be false, the petitioner still filed the complaint. This can be gleaned from excerpts found in respondent Enrile's Answer with Compulsory Counterclaim and Cross-Claim:

xxx xxx xxxDefendant-in-counterclaim Francisco Chavez was the Solicitor General who assisted the PCGG in filing and maintaining the instant Complaint against Defendant. As the incumbent Solicitor General, he continues to assist the PCGG in prosecuting this case.He is sued in his personal and official capacities.On or about October 1986, the PCGG, speaking through the then Chairman, now Senate President, Hon. Jovito R. Salonga, found and declared that "not one of the documents left by then President and Mrs. Ferdinand E. Marcos including the 2,300-page evidence turned over to the PCGG by the US State Department implicates Enrile." Chairman Salonga stressed that in view of the PCGG's findings, he refused to yield to the "pressure" exerted on him to prosecute Defendant.xxx xxx xxxNotwithstanding the findings of the PCGG that there was absolutely no evidence linking Defendant to the illegal activities of former President and Mrs. Ferdinand E. Marcos, the PCGG, this time composed of Chairman Ramon Diaz, the Commissioners Quintin Doromal, Ramon Rodrigo, Orlando Romero and Mary Concepcion Bautista, filed the Complaint against Defendant, among others, on or about 22 July 1987.Defendant has reasons to believe, and so alleges that Chairman Diaz, and Commissioners Doromal, Rodrigo, Romero and Bautista ordered, authorized, allowed or tolerated the filing of the utterly baseless complaint against Defendant.Solicitor General Francisco Chavez assisted or cooperated in, or induced or instigated, the filing of this harassment suit against Defendant.In so ordering, authorizing, allowing and tolerating the institution of the action against Defendant, all the aforenamed officers, with malice and in evident bad faith, and with grave abuse of power and in excess of their duty and authority, unjustly and unlawfully obstructed, defeated, violated, impeded or impaired the constitutional rights and liberties of Defendant. . . . (Rollo, pp. 260-262)

On the other hand, the petitioner submits that no counter-claim can be filed against him in his capacity as Solicitor General since he is only acting as counsel for the Republic. He cites the case of Borja v. Borja, 101 Phil. 911 [1957] wherein we ruled:

. . . The appearance of a lawyer as counsel for a party and his participation in a case as such counsel does not make him a party to the action. The fact that he represents the interests of his client or that he acts in their behalf will not hold him liable for or make him entitled to any award that the Court may adjudicate to the parties, other than his professional fees. The principle that a counterclaim cannot be filed against persons who are acting in representation of another — such as trustees — in their individual capacities (Chambers v. Cameron, 2 Fed. Rules Service, p. 155; 29 F. Supp. 742) could be applied with more

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force and effect in the case of a counsel whose participation in the action is merely confined to the preparation of the defense of his client. Appellant, however, asserted that he filed the counterclaim against said lawyer not in his individual capacity but as counsel for the heirs of Quintin de Borja. But as we have already stated that the existence of a lawyer-client relationship does not make the former a party to the action, even this allegation of appellant will not alter the result We have arrived at (at pp. 924-925)

Thus, the petitioner argues that since he is simply the lawyer in the case, exercising his duty under the law to assist the Government in the filing and prosecution of all cases pursuant to Section 1, Executive Order No. 14, he cannot be sued in a counterclaim in the same case.Presiding Justice Francis Garchitorena correctly observed that there is no general immunity arising solely from occupying a public office.The general rule is that public officials can be held personally accountable for acts claimed to have been performed in connection with official duties where they have acted ultra vires or where there is a showing of bad faith. We ruled in one case:

A number of cases decided by the Court where the municipal mayor alone was held liable for back salaries of, or damages to dismissed municipal employees, to the exclusion of the municipality, are not applicable in this instance. In Salcedo v. Court of Appeals (81 SCRA 408 [1978]) for instance, the municipal mayor was held liable for the back salaries of the Chief of Police he had dismissed, not only because the dismissal was arbitrary but also because the mayor refused to reinstate him in defiance of an order of the Commissioner of Civil Service to reinstate.In Nemenzo v. Sabillano (25 SCRA 1 [1968]), the municipal mayor was held personally liable for dismissing a police corporal who possessed the necessary civil service eligibility, the dismissal being done without justifiable cause and without any administrative investigation.In Rama v. Court of Appeals (G.R. Nos. L-44484, L-44842, L-44591, L-44894, March 16 1987), the governor, vice-governor, members of the Sangguniang Panlalawigan, provincial auditor, provincial treasurer and provincial engineer were ordered to pay jointly and severally in their individual and personal capacity damages to some 200 employees of the province of Cebu who were eased out from their positions because of their party affiliations. (Laganapan v. Asedillo, 154 SCRA 377 [1987])

Moreover, the petitioner's argument that the immunity proviso under Section 4(a) of Executive Order No. 1 also extends to him is not well-taken. A mere invocation of the immunity clause does not ipso facto result in the charges being automatically dropped.In the case of Presidential Commission on Good Government v. Peña (159 SCRA 556 [1988]) then Chief Justice Claudio Teehankee, added a clarification of the immunity accorded PCGG officials under Section 4(a) of Executive Order No. 1 as follows:

With respect to the qualifications expressed by Mr. Justice Feliciano in his separate opinion, I just wish to point out two things: First, the main opinion does not claim absolute immunity for the members of the Commission. The cited section of Executive Order No. 1 provides the Commission's members immunity from suit thus: "No civil action shall lie against the Commission or any member thereof for anything done or omitted in the discharge of the task contemplated by this order." No absolute immunity like that sought by Mr. Marcos in his Constitution for himself and his subordinates is herein involved. It is understood that the immunity granted the members of the Commission by virtue of the unimaginable magnitude of its task to recover the plundered wealth and the State's exercise of police power was immunity from liability for

damages in the official discharge of the task granted the members of the Commission much in the same manner that judges are immune from suit in the official discharge of the functions of their office . . . " (at pp. 581-582)

Justice Florentino P. Feliciano stated in the same case:It may be further submitted, with equal respect, that Section 4 (a) of Executive Order No. 1 was intended merely to restate the general principle of the law of public officers that the PCGG or any member thereof may not be held civilly liable for acts done in the performance of official duty,provided that such member had acted in good faith and within the scene of his lawful authority. It may also be assumed that the Sandiganbayan would have jurisdiction to determine whether the PCGG or any particular official thereof may be held liable in damages to a private person injured by acts of such manner. It would seem constitutionally offensive to suppose that a member or staff member of the PCGG could not be required to testify before the Sandiganbayan or that such members were exempted from complying with orders of this Court. (at pp. 586- 587)

Immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a privileged status not claimed by any other official of the Republic. (id., at page 586)Where the petitioner exceeds his authority as Solicitor General acts in bad faith, or, as contended by the private respondent, "maliciously conspir(es) with the PCGG commissioners in persecuting respondent Enrile by filing against him an evidently baseless suit in derogation of the latter's constitutional rights and liberties" (Rollo, p. 417), there can be no question that a complaint for damages may be filed against him. High position in government does not confer a license to persecute or recklessly injure another. The actions governed by Articles 19, 20, 21, and 32 of the Civil Code on Human Relations may be taken against public officers or private citizens alike. The issue is not the right of respondent Enrile to file an action for damages. He has the right. The issue is whether or not that action must be filed as a compulsory counterclaim in the case filed against him.Under the circumstances of this case, we rule that the charges pressed by respondent Enrile for damages under Article 32 of the Civil Code arising from the filing of an alleged harassment suit with malice and evident bad faith do not constitute a compulsory counterclaim. To vindicate his rights, Senator Enrile has to file a separate and distinct civil action for damages against the Solicitor General.

G.R. No. 89132 February 26, 1990LEONCIA, MANUEL, DIOSDADA, ANTONIA, ISIDRO, GERONIMO, CRESENCIO, ALEJANDRO, BONIFACIA, AURELIO, EPIFANIO, POLICARPO, IRENEO, ALL SURNAMED BACLAYON; HRS. of AGRIPINA BACLAYON, rep. by LUCIA BACLAYON; HRS. of

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MODESTA BACLAYON, rep. by FILING BACLAYON; HRS. OF HIPOLITO BACLAYON, rep. BY MARIO BACLAYON; HRS. OF TOMAS BACLAYON, rep. by CRISTITO BACLAYON; SILVESTRE ABANES; HRS. of LEONICA ABELLARE, rep. by FELIX BACLAYON; CECILIA, HERMINIA, FELIX, CONCORDIA, all surnamed DELA VICTORIA; and THE HON. JUDGE GERMAN LEE, JR., Presiding Judge of Branch XV, RTC, Cebu, petitioners, vs.THE HON. COURT OF APPEALS, HEIRS OF SPOUSES MARCIANO BACALSO AND GREGORIA SABANDEJA, namely, ARCADIA, FRANCISCA, JOSEFA, DIONESIA, VALENTINA, ANGELA, VENANCIO, DOMINGA and FELIMON, all surnamed BACALSO, respondents.Leonardo Garcillano for petitioners.Jesus N. Borromeo for private respondents. MEDIALDEA, J.:This is a petition for review on certiorari of the decision of the Court of Appeals dated April 28, 1989 ordering the trial court, in a hearing supplementary to execution, to receive private respondents' evidence to prove that they are builders in good faith of the improvements and the value of said improvements, and its resolution dated June 20, 1989 denying the motion for reconsideration.The antecedent facts are as follows:On May 7, 1969, petitioners Leoncia, Martin, Policarpio, Hilarion, Ireneo, Juliana and Tomas, all surnamed Baclayon; Rosendo, Felicidad and Silvestra, all surnamed Abanes; and Tomasa, Leoncia, Anacleto, Monica, Guillerma and Gertrudes all surnamed Abellare filed with the then CFI-Cebu Branch 2, in Civil Case No. R-11185, a complaint for recovery of ownership and possession, and damages, against spouses Marciano Bacalso and Gregoria Sabandeja of Lot No. 5528 of the Cebu Cadastre. The latter filed their answer thereto on July 15, 1969.On December 20, 1982, the trial court rendered a decision in favor of the Bacalso spouses, declaring them owners of the subject lot, which decision was appealed by the petitioners to the respondent Court of Appeals. The case was docketed as AC-G.R. CV No. 04948.On July 29, 1986, the respondent court rendered a decision reversing the trial court, the dispositive portion of which reads as follows (p. 15, Rollo):

WHEREFORE, the decision a quo is hereby reversed and set aside and another one is rendered declaring plaintiffs-appellants as heirs of the late Matias Baclayon the owners of Lot No. 5528 of the Cebu Cadastre covered by Original Certificate of Title No. 2726 (O-NA) of the Registry of Deeds of Cebu (Exh. I) and ordering defendants to vacate the lot and surrender the same to plaintiffs. No costs.SO ORDERED.

The private respondents then elevated the case to this Court by filing a petition for review which was, however, denied in the Resolution dated May 27, 1987.The decision in favor of the petitioners having become final and executory, they filed a motion for execution of judgment and possession which was opposed by the private respondents. The opposition was based on the pronouncement of the respondent court in its decision dated July 29, 1986, to wit (p. 16, Rollo):

No fraud or bad faith could be imputed on the part of the Bacalso spouses. They believed the lot they bought from Segundo Baclayon was the land they occupied.

The private respondents argued that since they were found by the respondent court as builders and/or planters ingood faith and Article 546 of the Civil Code ordains that the necessary and useful expenses for the improvements must be paid to the builders/planters in good faith with right of retention, a reception of evidence to determine the correct value of the necessary and useful improvements must be done first before ordering the execution.The RTC-Branch 15, Cebu City, presided by Judge German G. Lee, Jr., in its order, dated March 8, 1988, granted the motion for execution of judgment and possession, to wit (p. 16, Rollo):

O R D E RThis is finally, acting on the Motion for Execution of Judgment and Possession filed by Atty. Garcillano in this case and the rejoinder of Atty.

Nacua and the plaintiffs' rejoinder dated February 11 and the manifestation of Atty. Garcillano of February 26, 1988.It appearing that the dispositive portion of the decision of the Court of Appeals which is now being enforced categorically declares plaintiffs/appellants as heirs of the late Matias Baclayon, the owner of Lot No. 5526 (sic) of the Cebu Cadastre, covered by Original Certificate of Title No. 2728 (sic) (0-NA) of the Registry of Deeds of Cebu (Exh. 1) and ordering the defendants to vacate the lot and surrender the same to the plaintiffs, this Court is not in a position to entertain any further claims by any parties in connection with said case.However, if the clients of Atty. Nacua believe that they can prove their claims, then they should file a separate civil case to recover the same as this Court cannot pass judgment anew on certain claims that should have been interposed as counter-claims in this case.Wherefore, the Opposition to the issuance of the Writ of execution is hereby DENIED, as the Clerk of Court is hereby ordered to issue a writ of Execution in this case.SO ORDERED.

The private respondents appealed the said order of March 8, 1988 by filing a notice of appeal dated March 30, 1988 which appeal was, however, dismissed by Judge Lee in the order dated April 15, 1988.On April 29, 1988, the petitioners filed a motion for writ of possession and demolition to which motion the private respondents filed their opposition reiterating the ground in the opposition to the motion for execution and possession.Judge Lee, thereafter, issued the order dated August 19, 1988, to wit (p. 17, Rollo):

O R D E RAn examination of the records of this case reveals that until now, there is yet no action by the Court of Appeals on the Clarificatory motion filed by the losing party.The Court has allowed this excuse to defer its issuance of an order of demolition after the prevailing party has prayed the Court to issue one.With the long passage of time, since the judgment in this case has become final, this Court cannot allow any further delay in the enforcement of its judgment.WHEREFORE, it is finally ordered that the losing party in this case be given fifteen (15) days from today within which to effect a voluntary removal of any improvements that they have introduced in the premises, considering that the prevailing party refused to reimburse the losing party therefor, and if they do not demolish it after the expiration of this 15 days, this Court will be constrained to order its demolition as prayed for.IT IS SO ORDERED.

On September 19, 1988, the private respondents filed a petition for certiorari, mandamus and prohibition with the respondent court concerning the orders dated March 8, 1988 and August 19, 1988.On April 28, 1989, the respondent court granted the petition, the dispositive portion of which reads as follows (p. 21, Rollo):

WHEREFORE, the orders of March 8,1988 and August 19, 1988 issued in Civil Case No. R-11185 by the RTC-Cebu City, Branch 15, are hereby SET ASIDE and ANNULLED. In a hearing supplementary to execution, the said court is hereby ordered to receive petitioners' evidence to prove that they are builders in good faith of the improvements and the value of the said improvements introduced by them in the subject Lot 5528.IT IS SO ORDERED.

The motion for reconsideration was denied. Hence, the present petition.The only issue is whether or not the private respondents should be allowed, in a hearing supplementary to execution, to present evidence to prove that they are builders in good faith of the improvements and the value of said improvements.

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Petitioners allege that the orders dated March 8, 1988 and August 19, 1988 are legitimate having been issued by a judge presiding a court of competent jurisdiction, pursuant to his duties which are ministerial in nature, to enforce a decision which is already final and executory.In ordering the trial court to receive private respondent's evidence to prove that they are builders in good faith of the improvements and the value of said improvements, reliance was placed by the respondent court in the cases of Naga Development Corporation v. Court of Appeals, et al., G.R. No. L-28173, September 30, 1971, 41 SCRA 105 and Vda. de Chi v. Tanada, etc., et al., G.R. No. L-27274, January 30, 1982, 111 SCRA 190.We shall narrate the facts in these two cases in a nutshell:

1) In the former case, Pacific Merchandising Corporation (Pacific) filed a complaint against Naga Development Corporation (Naga) for the balance of its indebtedness in the amount of P143,282.76. For failure to file an answer within the period, Naga was declared in default. In its affidavit of merit attached to the motion to set aside the order of default, Naga asserted that it had made certain payments to Pacific which should be deducted from the amount of the claim. The motion was denied. A judgment by default was rendered ordering Naga to pay said balance of indebtedness. The decision was affirmed by the Court of Appeals and also by this Court, with the qualification that Naga was allowed to prove, during the process of execution of the judgment, whatever payments it had made to Pacific, either before or after the filing of the complaint, which constitute a proper deduction from the principal sum ordered to be paid. Thus, We rationalized (41 SCRA 115-116):Bearing in mind the nature of the instant suit and considering that the Court of Appeals' concurrence in the trial court's assessment of the amount of P143,282.76 is in the nature of a factual finding, this Court cannot now pass upon its correctness. The two courts below had before them the sales agreement between the parties, and to what extent the parties complied with their respective prestations thereunder was purely a matter of evidence.However, although we cannot pass upon the correctness of the said assessment, it is quite obvious that in the execution of its judgment as affirmed by the Court of Appeals, the trial court cannot compel the Naga to pay more than what it actually owes the Pacific under the terms of their covenant. Deeply imbedded in our legal system are the principles that no man may unjustly enrich himself at the expense of another, and that every person must, in the exercise of his rights, act with justice, give everyone his due, and observe honesty and good faith. ... .2) In the latter case, an action for recovery of damages as a result of a vehicular accident was filed by Rosita Yap Vda. de Chi against Alfonso Corominas, Jr., the owner of the bus, and Simplicio Lawas, the driver. Since the vehicle was insured, a third-party complaint was filed against the surety company. The trial court rendered judgment against Corominas, Jr. and Lawas by ordering them jointly and severally to pay P40,302.31 to Vda. de Chi. In turn, the surety company was ordered to indemnify Corominas, Jr. by the same amount. A writ of execution was issued against the defendants and the surety company. The decision was only partially satisfied because P6,700.00 has remained unpaid. Later, upon motion of the Southern Islands Hospital, the trial court ordered the surety company to pay directly to the hospital the amount of P686.35 out of the residue of the unpaid judgment; upon motion of the Chong Hua Hospital, the trial court issued another order requiring Corominas, Jr. and the surety company to pay the hospital the amount of P4,238.56. These two orders were questioned before this Court by Vda. de Chi. We set aside said orders and ordered the trial court to conduct a hearing, after proper notice to the parties, to determine whether or not the hospital bills incurred by Vda. de Chi have been paid, and thereafter, to render a decision accordingly. Thus, We explained (111 SCRA 196-197):

Technically it was error for the respondent Court to order the defendants and the surety company to pay the respondents Southern Islands Hospital and Chong Hua Hospital the amounts of P686.35 and P4,238.56, respectively, from the balance of the judgment yet to be paid to the herein petitioner by the defendants and the surety company since the said respondents are not parties in the case. The judgment sought to be executed specifically ordered the defendants Alfonso Corominas, Jr. and Simplicio Lawas to pay, jointly and severally, the plaintiff Rosita Yap Vda. de Chi, the amount of P40,302.31, plus costs; and for the surety company to indemnify the defendant Alfonso Corominas, Jr. the amount of P40,302.31, which the said defendant is ordered to pay the plaintiff. Consequently, to order the payment of certain portions thereof to the herein respondent hospitals, Southern Islands Hospital and Chong Hua Hospital, would be to modify, alter, or vary the terms of the judgment. While the said respondents may have an interest over the said amounts claimed by them, their remedy was not to file a mere ex-parte motion before the court, but to file separate and independent actions before courts of competent jurisdiction, since the judgment rendered in the case had already become final and almost executed and the law allows no intervention after the trial has been terminated.On the other hand, it cannot also be denied that the sums of money in question have been awarded to the herein petitioner as expenses for her hospitalization in the respondent hospitals and are based upon petitioner's own evidence. To order the filing of a separate and independent action to recover a claim where the respondent hospitals concerned will have to prove exactly a claim which had already been tried, litigated and adjudged would unduly result in multiplicity of suits. Considering that the herein respondents claim that the herein petitioner has not yet paid the amounts she incurred for hospitalization, the interests of justice will be best served if a hearing be conducted to determine whether or not the hospital bills have been paid, instead of requiring the respondent hospitals to file separate actions to recover their respective claims.

The aforementioned reliance on these two cases was misplaced. The common denominator between these two cases is the existence of a defense/claim which has been raised/tried before the trial court. In the Naga case, the defense of payments made to Pacific which are properly deductible from the principal sum ordered to be paid by Naga to Pacific was part of the issues which Naga was not allowed to prove, being already in default. In the Vda. de Chi case, her claim of hospitalization expenses incurred in the respondent hospital has been litigated and adjudged. The respondent court failed to appreciate that this shared denominator does not obtain in the present case. The defense of builders in good faith of the improvements and evidence of the value of said improvements were not raised/ presented before the trial court.More importantly, in the recent case of First Integrated Bonding and Insurance Co., Inc., et al. v. Isnani, etc., et al.,G.R. 70246, July 31, 1989, which involved a similar issue, We ruled:

Significantly, the decision of September 30, 1971 in Naga Development Corporation vs. Court of Appeals, on which total reliance has been placed by the petitioners, does not appear to have been reaffirmed by this Court in subsequent cases. It is Justice Antonio Barredo's dissent (quoted below) that appears to have been firmed up in later decisions of this Court:

"... I believe that since Naga has been declared in default, and no grave abuse of discretion having been found by the Court in that respect, the judgment by default must stand and be executed, as is. Whether or not Naga has partially paid was part of the issue before the court before judgment was rendered, Naga through its own fault was not allowed to prove any such partial payment by the trial court; surely, that issue cannot be reopened during the execution because that would tend to vary the terms of the judgment. The matters of equity

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which can be raised in an execution proceeding, cannot to my mind, refer to those which the court could have passed upon before judgment. Otherwise, there will be no end to litigation, since conceivably the proof of partial payments could be so seriously controversial as to need another full blown trial, decision and appeal. It is my view that under the circumstances, Naga can do no more than address itself to the benignity or conscience of the private respondent. (Emphasis supplied; 41 SCRA 105, 119.)"

The rule is well established that once a decision has become final and executory the only jurisdiction left with the trial court is to order its execution. To require now the trial court in a hearing supplementary to execution, to receive private respondents' evidence to prove that they are builders in good faith of the improvements and the value of said Improvements, is to disturb a final executory decision; which may even cause its substantial amendment. It appears that the private respondent's opposition to the motion for the execution of the judgment, possession and demolition is their last straw to prevent the satisfaction of the judgment. Sad to say, We have to cut this straw.We disagree with the respondent court that any counterclaim for reimbursement of the value of the improvements thereon by reason of private respondents' being builders in good faith, which presupposes that they are not the owners of the land, would run counter to the defense of ownership and therefore could not have been set up before the trial court. It should be emphasized that Rule 8, Section 2 of the Rules of Court allows a party to set forth two or more statements of a claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action or defenses. This Court, in Castle Bros., Wolf and Sons v. Go-Juno, 7 Phil. 144, even held that inconsistent defenses may be pleaded alternatively or hypothetically provided that each defense is consistent with itself. Mention must also be made of the case of Camara, et al. v. Aguilar, et al., 94 Phil. 527, where We ruled:

The contention that a counterclaim for expenses incurred in clearing and cultivating the parcel of land and planting coconut and other fruit-bearing trees therein could not have been set up in the former case because that would have been inconsistent with or would have weakened the claim that they were entitled to the parcel of land, is without merit, because 'A party may set forth two or more statements of a claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action or defenses.' Hence, the plaintiffs herein and intervenors in the former case could have set up the claim that they were entitled to the parcel of land and alternatively that assuming (hypothetically) that they were not entitled to the parcel of land at least they were entitled as possessors in good faith to the coconut and other fruit-bearing trees planted by them in the parcel of land and their fruits or their value. (Emphasis supplied)

A corollary question that We might as well resolve now (although not raised as an issue in the present petition, but conformably with Gayos, et al. v. Gayos, et al., G.R. No. L-27812, September 26, 1975, 67 SCRA 146, that it is a cherished rule of procedure that a court should always strive to settle the entire controversy in a single proceeding leaving no root or branch to bear the seeds of future litigation) is whether or not the private respondents can still file a separate complaint against the petitioners on the ground that they are builders in good faith and consequently, recover the value of the impr vements introduced by them on the subject lot. The� case of Heirs of Laureano Marquez v. Valencia, 99 Phil. 740, provides the answer:

If, aside from relying solely on the deed of sale with a right to repurchase and failure on the part of the vendors to purchase it within the period stipulated therein, the defendant had set up an alternative though inconsistent defense that he had inherited the parcel of land from his late maternal grandfather and presented evidence in support of both defenses, the overruling of the first would not bar the determination by the court of the second. The defendant having failed to set up such alternative defenses and chosen or elected to rely on one only, the overruling thereof was a complete determination of the controversy between the parties which bats a

subsequent action based upon an unpleaded defense, or any other cause of action, except that of failure of the complaint to state a cause of action and of lack of jurisdiction of the Court. The determination of the issue joined by the parties constitutes res judicata. (Emphasis supplied)

Although the alternative defense of being builders in good faith is only permissive, the counterclaim for reimbursement of the value of the improvements is in the nature of a compulsory counterclaim. Thus, the failure by the private respondents to set it up bars their right to raise it in a subsequent litigation (Rule 9, Section 4 of the Rules of Court). We realize the plight of the private respondents, the rule on comlpulsory counterclaim is designed to enable the disposition of the whole controversy at one time and in one action. The philosophy of the rule is to discourage multiplicity of suits.ACCORDINGLY, the petition is hereby GRANTED. The decision of the Court of Appeals dated April 28, 1989 and its resolution dated June 20, 1989 are SET ASIDE and the orders dated March 8, 1988 and August 19, 1988 of the Regional Trial Court of Cebu City, Branch 15 are REINSTATED.SO ORDERED.

G.R. No. 133119 August 17, 2000FINANCIAL BUILDING CORPORATION, petitioner, vs.FORBES PARK ASSOCIATION, INC., respondent.

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D E C I S I O NDE LEON, JR., J.:Before us is petition for review on certiorari of the Decision1 dated March 20, 1998 of the Court of Appeals 2 in CA-GR CV No. 48194 entitled "Forbes Park Association, Inc. vs. Financial Building Corporation", finding Financial Building Corporation (hereafter, Financial Building) liable for damages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for violating the latter’s deed of restrictions on the construction of buildings within the Forbes Park Village, Makati.The pertinent facts are as follows:The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square meter residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On December 2, 1985, the USSR engaged the services of Financial Building for the construction of a multi-level office and staff apartment building at the said lot, which would be used by the Trade Representative of the USSR.3 Due to the USSR’s representation that it would be building a residence for its Trade Representative, Forbes Park authorized its construction and work began shortly thereafter.On June 30, 1986, Forbes Park reminded the USSR of existing regulations4 authorizing only the construction of a single-family residential building in each lot within the village. It also elicited a reassurance from the USSR that such restriction has been complied with.5 Promptly, the USSR gave its assurance that it has been complying with all regulations of Forbes Park.6 Despite this, Financial Building submitted to the Makati City Government a secondbuilding plan for the construction of a multi-level apartment building, which was different from the first plan for the construction of a residential building submitted to Forbes Park.Forbes Park discovered the second plan and subsequent ocular inspection of the USSR’s subject lot confirmed the violation of the deed of restrictions. Thus, it enjoined further construction work. On March 27, 1987, Forbes Park suspended all permits of entry for the personnel and materials of Financial Building in the said construction site. The parties attempted to meet to settle their differences but it did not push through.Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro Manila, a Complaint7for Injunction and Damages with a prayer for Preliminary Injunction against Forbes Park docketed as Civil Case No. 16540. The latter, in turn, filed a Motion to Dismiss on the ground that Financial Building had no cause of action because it was not the real party-in-interest.On April 28, 1987, the trial court issued a writ of preliminary injunction against Forbes Park but the Court of Appeals nullified it and dismissed the complaint in Civil Case No. 16540 altogether. We affirmed the said dismissal in our Resolution,8 promulgated on April 6, 1988, in G.R. No. 79319 entitled "Financial Building Corporation, et al. vs. Forbes Park Association, et al."After Financial Building’s case, G.R. No. 79319, was terminated with finality, Forbes Park sought to vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of Makati a Complaint9 for Damages, against Financial Building, docketed as Civil Case No. 89-5522, arising from the violation of its rules and regulations. The damages claimed are in the following amounts: (a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages; (c)

P1,000,000.00 as exemplary damages; and (d) P1,000,000.00 as attorney’s fees.10 On September 26, 1994, the trial court rendered its Decision11 in Civil Case No. 89-5522 in favor of Forbes Park and against Financial Building, the dispositive portion of which reads, to wit:"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against the defendant:

(1) Ordering the defendant to remove/demolish the illegal structures within three (3) months from the time this judgment becomes final and executory, and in case of failure of the defendant to do so, the plaintiff is authorized to demolish/remove the structures at the expense of the defendant;(2) Ordering the defendant to pay damages, to wit:

(a) P3,000,000.00 as actual damages by way of demolition expenses;(b) P1,000,000.00 as exemplary damages;(c) P500,000.00 as attorney’s fees;(d) the costs of suit.

SO ORDERED."Financial Building appealed the said Decision of the trial court in Civil Case No. 89-5522 by way of a petition for review on certiorari12 entitled "Financial Building Corporation vs. Forbes Park Association, Inc." to the Court of Appeals and docketed therein as CA-GR CV No. 48194. However, the Court of Appeals affirmed it in its Decision13dated March 20, 1998, the dispositive portion of which reads:"WHEREFORE, the Decision dated September 26, 1994 of the Regional Trial Court of Makati is AFFIRMED with the modification that the award of exemplary damages, as well as attorney’s fees, is reduced to fifty thousand pesos (P50,000.00) each."Hence, this petition, wherein Financial Building assigns the following errors:

I. "THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED BY RESPONDENT FPA DESPITE THE FACT THAT ITS ALLEGED CLAIMS AND CAUSES OF ACTION THEREIN ARE BARRED BY PRIOR JUDGMENT AND/OR ARE DEEMED WAIVED FOR ITS FAILURE TO INTERPOSE THE SAME AS COMPULSORY COUNTERCLAIMS IN CIVIL CASE NO. 16540;II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE RESPONDENT FPA HAS NO CAUSE OF ACTION AGAINST PETITIONER FBC;III. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN FAVOR OF RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF THE EVIDENCE ON RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO AND PETITIONER FBC IS NOT LIABLE THEREFOR;IV. THE COURT OF APPEALS ERRED IN ORDERING THE DEMOLITION OF THE ILLEGAL STRUCTURES LOCATED AT NO. 10 NARRA PLACE, FORBES PARK, MAKATI CITY, CONSIDERING THAT THE SAME ARE LOCATED ON DIPLOMATIC PREMISES"14

We grant the petition.

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First. The instant case is barred due to Forbes Park’s failure to set it up as a compulsory counterclaim in Civil Case No. 16540, the prior injunction suit initiated by Financial Building against Forbes Park.A compulsory counterclaim is one which arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party’s claim.15 If it is within the jurisdiction of the court and it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred if it is not set up in the action filed by the opposing party.16

Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead be asserted in the same suit involving the same transaction or occurrence, which gave rise to it.17 To determine whether a counterclaim is compulsory or not, we have devised the following tests: (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same? (2) Would res judicata bar a subsequent suit on defendant’s claim absent the compulsory counterclaim rule? (3) Will substantially the same evidence support or refute plaintiff’s claim as well as the defendant’s counterclaim? and (4) Is there any logical relation between the claim and the counterclaim? Affirmative answers to the above queries indicate the existence of a compulsory counterclaim.18

Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same occurrence – the construction work done by Financial Building on the USSR’s lot in Forbes Park Village. The issues of fact and law in both cases are identical. The factual issue is whether the structures erected by Financial Building violate Forbes Park’s rules and regulations, whereas the legal issue is whether Financial Building, as an independent contractor working for the USSR, could be enjoined from continuing with the construction and be held liable for damages if it is found to have violated Forbes Park’s rules.As a result of the controversy, Financial Building seized the initiative by filing the prior injunction case, which was anchored on the contention that Forbes Park’s prohibition on the construction work in the subject premises was improper. The instant case on the other hand was initiated by Forbes Park to compel Financial Building to remove the same structures it has erected in the same premises involved in the prior case and to claim damages for undertaking the said construction. Thus, the logical relation between the two cases is patent and it is obvious that substantially the same evidence is involved in the said cases.Moreover, the two cases involve the same parties. The aggregate amount of the claims in the instant case is within the jurisdiction of the regional trial court, had it been set up as a counterclaim in Civil Case No. 16540. Therefore, Forbes Park’s claims in the instant case should have been filed as a counterclaim in Civil Case No. 16540.Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory counterclaim at that time is now barred.A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its jurisdictional support therefrom.19 A counterclaim presupposes the existence of a claim against the party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the counterclaim is improper and it must dismissed, more so where the complaint is dismissed at the instance of the counterclaimant.20 In other words, if the dismissal of the main action results in the dismissal of the counterclaim already filed, it stands to reason that the filing of a

motion to dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in the dismissal of the counterclaim.Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are incompatible remedies.1âwphi1In the event that a defending party has a ground for dismissal and a compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file a motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his compulsory counterclaim, he may still plead his ground for dismissal as an affirmative defense in his answer.21 The latter option is obviously more favorable to the defendant although such fact was lost on Forbes Park.The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of action. There was no need to plead such ground in a motion to dismiss or in the answer since the same was not deemed waived if it was not pleaded.22 Nonetheless, Forbes Park still filed a motion to dismiss and thus exercised bad judgment in its choice of remedies. Thus, it has no one to blame but itself for the consequent loss of its counterclaim as a result of such choice.Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes Park to interpose the same under the rule on compulsory counterclaims, there is no need to discuss the other issues raised by the herein petitioner.WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20, 1998 of the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE.Costs against respondent Forbes Park Association, Inc. .SO ORDERED.

G.R. No. 159746 July 18, 2012SPOUSES RAMON MENDIOLA and ARACELI N. MENDIOLA, Petitioners, vs.THE HON. COURT OF APPEALS, PILIPINAS SHELL PETROLEUM CORPORATION, and TABANGAO REALTY, INC., Respondents.D E C I S I O NBERSAMIN, J.:

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Through their petition for certiorari, mandamus and prohibition, petitioners assail the resolutions promulgated on November 22, 20021 and July 31, 2002,2 whereby the Court of Appeals (CA) respectively denied petitioners' motion to dismiss the appeal and motion for reconsideration. They allege that the CA thereby committed grave abuse of discretion amounting to lack or excess of jurisdiction.AntecedentsOn July 31, 1985, Pilipinas Shell Petroleum Corporation (Shell) entered into an agreement for the distribution of Shell petroleum products (such as fuels, lubricants and allied items) by Pacific Management & Development (Pacific), a single proprietorship belonging to petitioner Ramon G. Mendiola (Ramon). To secure Pacific’s performance of its obligations under the agreement, petitioners executed on August 1, 1985 a real estate mortgage in favor of Shell3 covering their real estate and its improvements, located in the then Municipality of Parañaque, Rizal, and registered under Transfer Certificate of Title No. S-59807 of the Registry of Deeds of Rizal (in the name of "Ramon Mendiola, married to Araceli Mendoza").4

Pacific ultimately defaulted on its obligations, impelling Shell to commence extrajudicial foreclosure proceedings in April 1987. Having received a notice of the extrajudicial foreclosure scheduled to be held at the main entrance of the Parañaque Municipal Hall on May 14, 1987,5 petitioners proceeded to the announced venue on the scheduled date and time but did not witness any auction being conducted and did not meet the sheriff supposed to conduct the auction despite their being at the lobby from 9:00 am until 11:30 am of May 14, 1987.6 They later learned that the auction had been held as scheduled by Deputy Sheriff Bernardo San Juan of the Regional Trial Court (RTC) in Makati, and that their mortgaged realty had been sold to Tabangao Realty, Inc. (Tabangao), as the corresponding certificate of sale bears out.7 They further learned that Tabangao’s winning bidder bid of P670,000.00 had topped Shell’s bid of P660,000.00.8

After application of the proceeds of the sale to the obligation of Pacific, a deficiency of P170,228.00 (representing the foreclosure expenses equivalent of 25% of the amount claimed plus interest) remained. The deficiency was not paid by Ramon. Thus, on September 2, 1987, Shell sued in the RTC in Manila to recover the deficiency, docketed as Civil Case No. 87-41852 entitled Pilipinas Shell Petroleum Corporation v. Ramon G. Mendiola, doing business under the name and style Pacific Management & Development (Manila case).9

In his answer with counterclaim filed on October 28, 1987, Ramon asserted that the extra-judicial foreclosure of the mortgage had been devoid of basis in fact and in law; and that the foreclosure and the filing of the action were made in bad faith, with malice, fraudulently and in gross and wanton violation of his rights.On March 22, 1988, petitioners commenced in the RTC in Makati an action to annul the extrajudicial foreclosure docketed as Civil Case No. 88-398 entitled Ramon G. Mendiola and Araceli N. Mendiola v. Pilipinas Shell Petroleum Corporation, Tabangao Realty, Inc., and Maximo C. Contreras, as Clerk of Court and Ex Oficio Sheriff of Rizal,10 which was assigned to Branch 134 (Makati case).As defendants in the Makati case, Shell and Tabangao separately moved for dismissal, 11 stating similar grounds, namely: (a) that the Makati RTC had no jurisdiction due to the pendency of the Manila case; (b) that the complaint stated no cause of action, the Makati case having been filed more than a year after the registration of the certificate of sale; (c) that another action (Manila case) involving the same subject matter was pending; (d) that the venue was improperly laid; and (e) that the Makati case was already barred by petitioners’ failure to raise its cause of action as a compulsory counterclaim in the Manila case.After the Makati RTC denied both motions on September 23, 1988,12 Shell filed its answer ad cautelam,13whereby it denied petitioners’ allegation that no auction had been held; insisted that there had been proper accounting of the deliveries made to Pacific and its clients; and averred that petitioners’ failure to file their compulsory counterclaim in the Manila case already barred the action.Pending the trial of the Makati case, the Manila RTC rendered its judgment in favor of Shell on May 31, 1990, viz:WHEREFORE, IN VIEW OF THE FOREGOING, defendants (sic) is ordered to pay plaintiffs as follows:

1. On the First Cause of Action –

a) P167,585.50 representing the deficiency as of the date of the foreclosure sale;b) P2,643.26 representing the interest due on the unpaid principal as of 30 June 1987; andc) The sum corresponding to the interest due on the unpaid principal from 30 June 1987 to date.

2. On the Second Cause of Action – attorney’s fees and expenses of litigation to (sic) the amount of P15,000.00; and finally,3. Costs of suit.

SO ORDERED.14

As sole defendant in the Manila case, Ramon appealed (C.A.-G.R. No. CV-28056), but his appeal was decided adversely to him on July 22, 1994,15 with the CA affirming the Manila RTC’s decision and finding that he was guilty of forum shopping for instituting the Makati case.Undaunted, he next appealed to the Court (G.R. No. 122795), which denied his petition for review on February 26, 1996,16 and upheld the foreclosure of the mortgage. The decision of the Court became final and executory, as borne out by the entry of judgment issued on June 10, 1996.17

Nonetheless, on February 3, 1998, the Makati RTC resolved the Makati case,18 finding that there had been no auction actually conducted on the scheduled date; that had such auction taken place, petitioners could have actively participated and enabled to raise their objections against the amount of their supposed obligation; and that they had been consequently deprived of notice and hearing as to their liability. The Makati RTC disposed as follows:WHEREFORE, premises considered, plaintiffs having duly established their case that the SHERIFF’s Certificate of Sale of May 14, 1987, is void for lack of actual auction sale and lack of valid consideration as the amount utilized by the SHERIFF was based on an invalid amount as a basis of an Extra-Judicial Foreclosure of Mortgage where the amount of the mortgage is based on a future obligation unilaterally adjudicated by SHELL alone in violation of MENDIOLA’s right of due process, and judgment is hereby rendered as follows:

1. Declaring as NULL and VOID the Extra-Judicial Foreclosure of Mortgage of plaintiff’s house and lot under TCT No. T-59807 issued by the Register of Deeds of Rizal;2. Declaring as NULL and VOID the Certificate of Sale issued by Maximo C. Contreras on May 14, 1987 in favor of TABANGAO REALTY, INC.;3. Ordering defendant PILIPINAS SHELL PETROLEUM CORPORATION to make a full accounting of the extent of the future obligation of plaintiff MENDIOLA in the Mortgage Contract before any foreclosure proceedings are initiated;4. Ordering defendants PILIPINAS SHELL PETROLEUM CORPORATION and TABANGAO REALTY INC. to pay the amount of P20,000.00 as and by way of attorney’s fees; and5. To pay the costs.

SO ORDERED.Shell sought the reconsideration of the decision,19 maintaining that the issues raised on the validity of the foreclosure sale and on the amount of the outstanding obligation of Pacific had been settled in the Manila case; and that the Makati RTC became bereft of jurisdiction to render judgment on the same issues pursuant to the principle of res judicata.Tabangao adopted Shell’s motion for reconsideration.On October 5, 1999, however, the Makati RTC denied Shell’s motion for reconsideration,20 to wit:WHEREFORE, premises considered, there is NO RES JUDICATA to speak of in this case. Consequently, the "Motion for Reconsideration" filed by defendant Pilipinas Shell Petroleum Corporation, which was later adopted by defendant Tabangao Realty, Inc., is hereby DENIED. Plaintiff’s "Motion for Execution" is likewise DENIED for reasons as stated above.SO ORDERED.21

Aggrieved by the decision of the Makati RTC, Shell and Tabangao filed a joint notice of appeal.22 The appeal was docketed in the CA as C.A.-G.R. No. 65764.In their appellants’ brief filed in C.A.-G.R. No. 65764,23 Shell and Tabangao assigned the following errors, namely:

I

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THE COURT A QUO COMMITTED GRAVE ERROR IN NOT DISMISSING THE CASE ON THE GROUND OF LITIS PENDENTIA AND, SUBSEQUENTLY, ON THE GROUND OF RES JUDICATA.IITHE COURT A QUO COMMITTED MANIFEST ERROR IN DISREGARDING THAT THE LEGAL REQUIREMENTS FOR A VALID EXTRAJUDICIAL FORECLOSURE WERE SATISFIED.IIITHE COURT A QUO COMMITTED SERIOUS ERROR IN RENDERING THE ASSAILED DECISION AND ASSAILED RESOLUTION IN CONTRAVENTION OF THE RULINGS OF A CO-EQUAL COURT AND SUPERIOR COURTS.

Instead of filing their appellees’ brief, petitioners submitted a motion to dismiss appeal,24 mainly positing that Section 1, Rule 41 of the Rules of Court prohibited an appeal of the order denying a motion for reconsideration.On November 22, 2002, the CA denied petitioners’ motion to dismiss appeal through the first assailed resolution, stating:25

For consideration is the Motion to Dismiss Appeal dated August 6, 2002 filed by counsel for plaintiffs-appellees praying for the dismissal of the appeal on the grounds that the Notice of Appeal filed by defendants-appellants was specifically interposed solely against the Resolution of the trial court dated October 20, 1999 which merely denied defendant-appellants’ Motion for Reconsideration of the trial court’s decision, dated February 3, 1998.Upon perusal of the records of the case, it seems apparent that herein defendants-appellants intended to appeal not only the Resolution dated October 2, 1999 but also the Decision dated February 3, 1998. Assuming arguendo that defendants-appellants indeed committed a technical error, it is best that the parties be given every chance to fight their case fairly and in the open without resort to technicality to afford petitioners their day in court (Zenith Insurance vs. Purisima, 114 SCRA 62).The Motion to Dismiss Appeal must not be granted if only to stress that the rules of procedure may not be misused as instruments for the denial of substantial justice. We must not forget the plain injunction of Section 2 of (now Sec. 6 of Rule 1, 1997 Revised Rules of Civil Procedure) Rule 1 that the "rules shall be liberally construed in order to promote their object and to assist the parties in obtaining not only speedy, but more imperatively just and inexpensive determination of justice in every action and proceeding" (Lim Tanhu vs. Ramolete 66 SCRA 425).WHEREFORE, in view of the foregoing, the Motion to Dismiss Appeal is hereby DENIED.SO ORDERED.On July 31, 2002, the CA denied petitioners’ motion for reconsideration through the second assailed resolution.26

Hence, petitioners brought these special civil actions for certiorari, mandamus and prohibition, insisting that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction in denying their motion to dismiss appeal and their motion for reconsideration.IssuePetitioners contend that the CA committed grave abuse of discretion in entertaining the appeal of Shell and Tabangao in contravention of Section 1, Rule 41 of the Rules of Court, which proscribes an appeal of the denial of a motion for reconsideration.Shell and Tabangao counter that their appeal was not proscribed because the action could be said to be completely disposed of only upon the rendition on October 5, 1999 of the assailed resolution denying their motion for reconsideration; that, as such, the decision of February 3, 1998 and the denial of their motion for reconsideration formed one integrated disposition of the merits of the action; and that the CA justifiably applied the rules of procedure liberally.Two issues have to be determined. The first is whether or not an appeal may be taken from the denial of a motion for reconsideration of the decision of February 3, 1998. The determination of this issue necessarily decides whether the petitions for certiorari, prohibition and mandamus were warranted. The second is whether the Makati case could prosper independently of the Manila case. The Court has to pass upon and resolve the second issue without waiting for the CA to decide the appeal on its merits in view of the urging by Shell and Tabangao that the Makati case was barred due to litis pendentia or res judicata.Ruling

The petition for certiorari, mandamus and prohibition lacks merit.1.Appeal by Shell and Tabangao of the denial of their motion for reconsideration was not proscribedPetitioners’ contention that the appeal by Shell and Tabangao should be rejected on the ground that an appeal of the denial of their motion for reconsideration was prohibited cannot be sustained.It is true that the original text of Section 1, Rule 41 of the 1997 Rules of Civil Procedure expressly limited an appeal to a judgment or final order, and proscribed the taking of an appeal from an order denying a motion for new trial or reconsideration, among others, viz: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. (n)The inclusion of the order denying a motion for new trial or a motion for reconsideration in the list of issuances of a trial court not subject to appeal was by reason of such order not being the final order terminating the proceedings in the trial court. This nature of the order is reflected in Section 9 of Rule 37 of the 1997 Rules of Civil Procedure, which declares that such order denying a motion for new trial or reconsideration is not appealable, "the remedy being an appeal from the judgment or final order."In Heirs of Spouses Teofilo M. Reterta and Elisa Reterta v. Spouses Lorenzo Mores and Virginia Lopez,27 the Court further expounded:The restriction against an appeal of a denial of a motion for reconsideration independently of a judgment or final order is logical and reasonable. A motion for reconsideration is not putting forward a new issue, or presenting new evidence, or changing the theory of the case, but is only seeking a reconsideration of the judgment or final order based on the same issues, contentions, and evidence either because: (a) the damages awarded are excessive; or (b) the evidence is insufficient to justify the decision or final order; or (c) the decision or final order is contrary to law.By denying a motion for reconsideration, or by granting it only partially, therefore, a trial court finds no reason either to reverse or to modify its judgment or final order, and leaves the judgment or final order to stand. The remedy from the denial is to assail the denial in the course of an appeal of the judgment or final order itself.In Quelnan v. VHF Philippines, Inc.,28 however, the Court has interpreted the proscription against appealing the order denying a motion for reconsideration to refer only to a motion for reconsideration filed against an interlocutory order, not to a motion for reconsideration filed against a judgment or final order, to wit:This Court finds that the proscription against appealing from an order denying a motion for reconsideration refers to an interlocutory order, and not to a final order or judgment. That that was the intention of the above-quoted rules is gathered from Pagtakhan v. CIR, 39 SCRA 455 (1971), cited in above-quoted portion of the decision in Republic, in which this Court held that an order denying a motion to dismiss an action is interlocutory, hence, not appealable.The rationale behind the rule proscribing the remedy of appeal from an interlocutory order is to prevent undue delay, useless appeals and undue inconvenience to the appealing party by

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having to assail orders as they are promulgated by the court, when they can be contested in a single appeal. The appropriate remedy is thus for the party to wait for the final judgment or order and assign such interlocutory order as an error of the court on appeal.The denial of the motion for reconsideration of an order of dismissal of a complaint is not an interlocutory order, however, but a final order as it puts an end to the particular matter resolved, or settles definitely the matter therein disposed of, and nothing is left for the trial court to do other than to execute the order.Not being an interlocutory order, an order denying a motion for reconsideration of an order of dismissal of a complaint is effectively an appeal of the order of dismissal itself.The reference by petitioner, in his notice of appeal, to the March 12, 1999 Order denying his Omnibus Motion—Motion for Reconsideration should thus be deemed to refer to the January 17, 1999 Order which declared him non-suited and accordingly dismissed his complaint.If the proscription against appealing an order denying a motion for reconsideration is applied to any order, then there would have been no need to specifically mention in both above-quoted sections of the Rules "final orders or judgments" as subject of appeal. In other words, from the entire provisions of Rule 39 and 41, there can be no mistaking that what is proscribed is to appeal from a denial of a motion for reconsideration of an interlocutory order.29

In Apuyan v. Haldeman,30 too, the Court categorized an order denying the motion for reconsideration as the final resolution of the issues a trial court earlier passed upon and decided, and accordingly held that the notice of appeal filed against the order of denial was deemed to refer to the decision subject of the motion for reconsideration.31

Subsequently, in Neypes v. Court of Appeals,32 where the decisive issue was whether or not the appeal was taken within the reglementary period, with petitioners contending that they had timely filed their notice of appeal based on their submission that the period of appeal should be reckoned from July 22, 1998, the day they had received the final order of the trial court denying their motion for reconsideration (of the order dismissing their complaint), instead of on March 3, 1998, the day they had received the February 12, 1998 order dismissing their complaint, the Court, citing Quelnan v. VHF Philippines, Inc. and Apuyan v. Haldeman, ruled that the receipt by petitioners of the denial of their motion for reconsideration filed against the dismissal of their complaint, which was a final order, started the reckoning point for the filing of their appeal, to wit:Rule 41, Section 3 of the 1997 Rules of Civil Procedure states:SEC. 3. Period of ordinary appeal. ― The appeal shall be taken wi thin fifteen (15) days from the notice of the judgment or final order appealed from. Where a record on appeal is required, the appellant shall file a notice of appeal and a record on appeal within thirty (30) days from the notice of judgment or final order.The period to appeal shall be interrupted by a timely motion for new trial or reconsideration. No motion for extension of time to file a motion for new trial or reconsideration shall be allowed. (emphasis supplied)Based on the foregoing, an appeal should be taken within 15 days from the notice of judgment or final order appealed from. A final judgment or order is one that finally disposes of a case, leaving nothing more for the court to do with respect to it. It is an adjudication on the merits which, considering the evidence presented at the trial, declares categorically what the rights and obligations of the parties are; or it may be an order or judgment that dismisses an action.As already mentioned, petitioners argue that the order of July 1, 1998 denying their motion for reconsideration should be construed as the "final order," not the February 12, 1998 order which dismissed their complaint. Since they received their copy of the denial of their motion for reconsideration only on July 22, 1998, the 15-day reglementary period to appeal had not yet lapsed when they filed their notice of appeal on July 27, 1998.What therefore should be deemed as the "final order," receipt of which triggers the start of the 15-day reglementary period to appeal – the February 12, 1998 order dismissing the complaint or the July 1, 1998 order dismissing the MR?In the recent case of Quelnan v. VHF Philippines, Inc., the trial court declared petitioner Quelnan non-suited and accordingly dismissed his complaint. Upon receipt of the order of dismissal, he filed an omnibus motion to set it aside. When the omnibus motion was filed, 12 days of the 15-day period to appeal the order had lapsed. He later on received another order, this time dismissing his omnibus motion. He then filed his notice of appeal. But this was likewise dismissed ― for having been filed out of time.

The court a quo ruled that petitioner should have appealed within 15 days after the dismissal of his complaint since this was the final order that was appealable under the Rules. We reversed the trial court and declared that it was the denial of the motion for reconsideration of an order of dismissal of a complaint which constituted the final order as it was what ended the issues raised there.This pronouncement was reiterated in the more recent case of Apuyan v. Haldeman et al. where we again considered the order denying petitioner Apuyan’s motion for reconsideration as the final order which finally disposed of the issues involved in the case.Based on the aforementioned cases, we sustain petitioners’ view that the order dated July 1, 1998 denying their motion for reconsideration was the final order contemplated in the Rules.33

As the aftermath of these rulings, the Court issued its resolution in A.M. No. 07-7-12-SC to approve certain amendments to Rules 41, 45, 58 and 65 of the Rules of Court effective on December 27, 2007. Among the amendments was the delisting of an order denying a motion for new trial or motion for reconsideration from the enumeration found in Section 1, Rule 41 of the 1997 Rules of Civil Procedure of what are not appealable. The amended rule now 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 petition for relief or any similar motion seeking relief from judgment;(b) An interlocutory order;(c) An order disallowing or dismissing an appeal;(d) 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;(e) An order of execution;(f) 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(g) An order dismissing an action without prejudice.

In any of the foregoing circumstances, the aggrieved party may file an appropriate special civil action as provided in Rule 65.Based on the foregoing developments, Shell and Tabangao’s appeal, albeit seemingly directed only at the October 5, 1999 denial of their motion for reconsideration, was proper. Thus, we sustain the CA’s denial for being in accord with the rules and pertinent precedents. We further point out that for petitioners to insist that the appeal was limited only to the assailed resolution of October 5, 1999 was objectively erroneous, because Shell and Tabangao expressly indicated in their appellant’s brief that their appeal was directed at both the February 3, 1998 decision and the October 5, 1999 resolution.34

The petition cannot prosper if the CA acted in accordance with law and jurisprudence. Certiorari, prohibition and mandamus are extraordinary remedies intended to correct errors of jurisdiction and to check grave abuse of discretion. The term grave abuse of discretion connotes capricious and whimsical exercise of judgment as is equivalent to excess, or a lack of jurisdiction. 35 The abuse must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.36 Yet, here, petitioners utterly failed to establish that the CA abused its discretion, least of all gravely.2. Makati case is barred and should be dismissed on ground of res judicata and waiverThe dismissal of the petition should ordinarily permit the CA to resume its proceedings in order to enable it to resolve the appeal of Shell and Tabangao. But the Court deems itself bound to first determine whether the Makati case could still proceed by virtue of their insistence that the cause of action for annulment of the foreclosure sale in the Makati case, which was intimately intertwined with the cause of action for collection of the deficiency amount in the Manila case, could not proceed independently of the Manila case.Shell and Tabangao’s insistence has merit. The Makati case should have been earlier disallowed to proceed on the ground of litis pendentia, or, once the decision in the Manila case became final, should have been dismissed on the ground of being barred by res judicata.

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In the Manila case, Ramon averred a compulsory counterclaim asserting that the extrajudicial foreclosure of the mortgage had been devoid of basis in fact and in law; and that the foreclosure and the filing of the action had been made in bad faith, with malice, fraudulently and in gross and wanton violation of his rights. His pleading thereby showed that the cause of action he later pleaded in the Makati case - that of annulment of the foreclosure sale - was identical to the compulsory counterclaim he had set up in the Manila case.Rule 6 of the 1997 Rules of Civil Procedure defines a compulsory counterclaim as follows:Section 7. Compulsory counterclaim. — A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to the amount and the nature thereof, except that in an original action before the Regional Trial Court, the counterclaim may be considered compulsory regardless of the amount. (n)Accordingly, a counterclaim is compulsory if: (a) it arises out of or is necessarily connected with the transaction or occurrence which is the subject matter of the opposing party’s claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to entertain the claim both as to its amount and nature, except that in an original action before the RTC, the counterclaim may be considered compulsory regardless of the amount.A compulsory counterclaim that a defending party has at the time he files his answer shall be contained therein.37Pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure, a compulsory counterclaim not set up shall be barred.The four tests to determine whether a counterclaim is compulsory or not are the following, to wit: (a) Are the issues of fact or law raised by the claim and the counterclaim largely the same? (b) Would res judicata bar a subsequent suit on defendant’s claims, absent the compulsory counterclaim rule? (c) Will substantially the same evidence support or refute plaintiff’s claim as well as the defendant’s counterclaim? and (d) Is there any logical relation between the claim and the counterclaim, such that the conduct of separate trials of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court? 38 Of the four, the one compelling test of compulsoriness is the logical relation between the claim alleged in the complaint and that in the counterclaim. Such relationship exists when conducting separate trials of the respective claims of the parties would entail substantial duplication of time and effort by the parties and the court; when the multiple claims involve the same factual and legal issues; or when the claims are offshoots of the same basic controversy between the parties. 39 If these tests result in affirmative answers, the counterclaim is compulsory.The four tests are affirmatively met as far as the Makati case was concerned. The Makati case had the logical relation to the Manila case because both arose out of the extrajudicial foreclosure of the real estate mortgageconstituted to secure the payment of petitioners’ credit purchases under the distributorship agreement with Shell. Specifically, the right of Shell to demand the deficiency was predicated on the validity of the extrajudicial foreclosure, such that there would not have been a deficiency to be claimed in the Manila case had Shell not validly foreclosed the mortgage. As earlier shown, Ramon’s cause of action for annulment of the extrajudicial foreclosure was a true compulsory counterclaim in the Manila case. Thus, the Makati RTC could not have missed the logical relation between the two actions.We hold, therefore, that the Makati case was already barred by res judicata. Hence, its immediate dismissal is warranted.Bar by res judicata avails if the following elements are present, to wit: (a) the former judgment or order must be final; (b) the judgment or order must be on the merits; (c) it must have been rendered by a court having jurisdiction over the subject matter and the parties; (d) there must be, between the first and the second action, identity of parties, of subject matter and cause of action.40

The Manila RTC had jurisdiction to hear and decide on the merits Shell’s complaint to recover the deficiency, and its decision rendered on May 31, 1990 on the merits already became final and executory. Hence, the first, second and third elements were present.Anent the fourth element, the Makati RTC concluded that the Manila case and the Makati case had no identity as to their causes of action, explaining that the former was a personal action involving the collection of a sum of money, but the latter was a real action affecting the validity of

the foreclosure sale, stating in its order of October 5, 1999 denying Shell’s motion for reconsideration as follows:Finally, as to whether there is identity of causes of action between the two (2) cases, this Court finds in negative.xxxxTrue, the test of identity of causes of action lies not in the form of an action but on whether the same evidence would support and establish the former and the present causes of action. The difference of actions in the aforesaid cases is of no moment. It has been held that a party cannot by varying the form of action or adopting a different method of presenting his case, escape the operation of the principle that one and the same cause of action shall not be twice litigated between the same parties and their privies. (Sangalang vs. Caparas, 151 SCRA 53; Gutierrez vs. Court of Appeals, 193 SCRA 437. This ruling however does not fall squarely on the present controversy.Civil Case No. 42852 is for collection of sum of money, a personal action where what is at issue is whether spouses Mendiola have indebtedness to Pilipinas Shell. There is no concrete findings on questions regarding the validity of sale affecting the mortgaged property, otherwise, there would be a determination of transferring of title over the property which is already a real action. In the latter action, Manila courts has no jurisdiction considering that the property is located in Paranaque, then sitting under Makati RTC. At any rate, this Court is not unmindful of series of cases which state that from an otherwise rigid rule outlining jurisdiction of courts being limited in character, deviations have been sanctioned where the (1) parties agreed or have acquiesced in submitting the issues for determination by the court; (2) the parties were accorded full opportunity in presenting their respective arguments of the issues litigated and of the evidence in support thereof; and (3) the court has already considered the evidence on record and is convinced that the same is sufficient and adequate for rendering a decision upon the issues controverted. xxx. While there is a semblance of substantial compliance with the aforesaid criteria, primarily because the issue of validity of foreclosure proceedings was submitted for determination of RTC Manila when this was stated as an affirmative defense by spouses Mendiola in their Answer to the complaint in Civil Case No. 42852, however it appears from the Decision rendered in said case that the issue on validity of foreclosure sale was not fully ventilated before the RTC Manila because spouses Mendiola’s right to present evidence in its behalf was declared waived. Naturally, where this issue was not fully litigated upon, no resolution or declaration could be made therein.On the other hand, Civil Case No. 88-398 is an action for declaration of nullity or annulment of foreclosure sale, a real action where the location of property controls the venue where it should properly be filed. This Court undoubtedly has jurisdiction to adjudicate this case. Plaintiff spouses Mendiola merely claimed that no actual foreclosure sale was conducted, and if there was, the same was premature for lack of notice and hearing. Take note that plaintiffs do not deny their indebtedness to Pilipinas Shell although the amount being claimed is disputed. They are simply asserting their rights as owners of the mortgaged property, contending that they were not afforded due process in the course of foreclosure proceedings. And based mainly on the testimonial and documentary evidence presented, as well as the postulations, expositions and arguments raised by all parties in this case, it is the Court’s considered view that spouses Mendiola have established the material allegations in their complaint and have convincingly shown to the satisfaction of the Court that they are entitled to the reliefs prayed for. With these findings and adjudications, the Court does not find inconsistency with those held in Civil Case No. 42852. As to whether spouses Mendiola is still indebted to Pilipinas Shell is not in issue here, and not even a single discussion touched that matter as this would tantamount to encroaching upon the subject matter litigated in Civil Case No. 42852.41

The foregoing conclusion of the Makati RTC on lack of identity between the causes of action was patently unsound. The identity of causes of action does not mean absolute identity; otherwise, a party may easily escape the operation of res judicata by changing the form of the action or the relief sought. The test to determine whether the causes of action are identical is to ascertain whether the same evidence will sustain the actions, or whether there is an identity in the facts essential to the maintenance of the actions. If the same facts or evidence will sustain the actions, then they are considered identical, and a judgment in the first case is a bar to the subsequent action.42 Petitioners’ Makati case and Shell’s Manila case undeniably required the production of the same evidence. In fact, Shell’s counsel faced a dilemma upon being required

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by the Makati RTC to present the original copies of certain documents because the documents had been made part of the records of the Manila case elevated to the CA in connection with the appeal of the Manila RTC’s judgment.43 Also, both cases arose from the same transaction (i.e., the foreclosure of the mortgage), such that the success of Ramon in invalidating the extrajudicial foreclosure would have necessarily negated Shell’s right to recover the deficiency.Apparently, the Makati RTC had the erroneous impression that the Manila RTC did not have jurisdiction over the complaint of petitioners because the property involved was situated within the jurisdiction of the Makati RTC. Thereby, the Makati RTC confused venue of a real action with jurisdiction. Its confusion was puzzling, considering that it was well aware of the distinction between venue and jurisdiction, and certainly knew that venue in civil actions was not jurisdictional and might even be waived by the parties.44 To be clear, venue related only to the place of trial or the geographical location in which an action or proceeding should be brought and does not equate to the jurisdiction of the court. It is intended to accord convenience to the parties, as it relates to the place of trial, and does not restrict their access to the courts.45 In contrast, jurisdiction refers to the power to hear and determine a cause,46 and is conferred by law and not by the parties.47

By virtue of the concurrence of the elements of res judicata, the immediate dismissal of the Makati case would have been authorized under Section 1, Rule 9 of the 1997 Rules of Civil Procedure, which provides:Section 1. Defenses and objections not pleaded. — Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by a prior judgment or by statute of limitations, the court shall dismiss the claim. (2a)The rule expressly mandated the Makati RTC to dismiss the case motu proprio once the pleadings or the evidence on record indicated the pendency of the Manila case, or, later on, disclosed that the judgment in the Manila case had meanwhile become final and executory.Yet, we are appalled by the Makati RTC's flagrant disregard of the mandate.1âwphi1 Its reason for the disregard was not well-founded. We stress that its disregard cannot be easily ignored because it needlessly contributed to the clogging of the dockets of the Judiciary. Thus, we deem it to be imperative to again remind all judges to consciously heed any clear mandate under the Rules of Court designed to expedite the disposition of cases as well as to declog the court dockets.WHEREFORE, we DISMISS the petition for certiorari, prohibition and mandamus for lack of merit; CONSIDER Civil Case No. 88-398 dismissed with prejudice on the. ground of res judicata; and ORDER petitioners to pay the costs of suit to respondents.The Office of the Court Administrator is DIRECTED to disseminate this decision to all trial courts for their guidance.SO ORDERED.

G.R. No. 160354 August 25, 2005BANCO DE ORO UNIVERSAL BANK, Petitioners, vs.THE HON. COURT OF APPEALS and SPS. GABRIEL G. LOCSIN and MA. GERALDINE R. LOCSIN,Respondents.D E C I S I O NCARPIO MORALES, J.:Subject of the present Petition for Review is the Court of Appeals June 5, 2003 Decision1 annulling and setting aside the Orders2 of the Regional Trial Court (RTC) of

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Mandaluyong denying respondents spouses Gabriel and Ma. Geraldine Locsin’s Motion to Dismiss the complaint of petitioner, Banco de Oro Universal Bank.The following antecedent facts are not disputed:On September 28, 1995, respondents Locsins entered into a Term Loan Agreement (TLA) with petitioner under which they obtained a loan of P700,000.00 which was secured by a Real Estate Mortgage of their property covered by TCT No. N-138739 (1st TLA).On February 29, 1996, the Locsins obtained a 2nd TLA from petitioner in the amount of P800,000.00, to secure which they executed a Real Estate Mortgage over their property covered by TCT No. 67286. This 2nd TLA was eventually settled on July 2, 1996, on account of which the mortgage was cancelled and the title was released on July 8, 1996.On November 6, 1996, the parties entered into a Credit Line Agreement (CLA) under which the Locsins obtained a credit line of P2.5 Million, to secure which their business partners, the spouses Juanito and Anita Evidente, executed a Real Estate Mortgage of their (the Evidentes’) properties covered by TCT Nos. N-166336 and N-166637. Monthly amortization of the obligation appears to have been religiously paid until October of 1997.The Locsins having failed to comply with their obligation under the CLA, petitioner filed before the Quezon City Regional Trial Court (RTC) Executive Judge an application dated May 4, 1998 for the extra-judicial foreclosure of the mortgage which encumbered the Evidente properties under the CLA, as well as the mortgage of the Locsin property covering TCT N-67286 which secured the 2 nd TLA . The application was granted and public auction of these properties was scheduled, and was actually carried out on July 23, 1998.The public auction was later nullified, however, on petitioner’s move, the Locsin property covered by TCT No. 67286 which secured the 2nd TLA having been erroneously included. An amended application for extrajudicial foreclosure was thus filed by petitioner, this time covering the same Evidente properties and TCT No. 138739, the property of the Locsins which secured the 1st TLA. Public auction of these properties was scheduled on August 26, 1998.Two days before the scheduled public auction or on August 24, 1998, the Locsins filed before the Quezon City Regional Trial Court (RTC) a complaint against petitioner, the RTC Clerk of Court and Ex-Oficio Sheriff of Quezon City, and Sheriff VI Marino V. Cahero, for Specific Performance, Tort and Damages with Prayer for the Issuance of a Temporary Restraining Order (TRO) and a Writ of Preliminary Injunction, docketed as Civil Case No. Q-98-35337.3 The pertinent allegations of the Locsins’ complaint are as follows:x x x15. Defendant bank, through its Assistant Vice-President-Combank II, Agnes C. Tuason, told plaintiffs that the loan valuation of the two aforementioned properties [of the spouses Evidente securing the CLA] is PHP2.5 Million, and this was in fact the amount received by plaintiff from defendant bank . . .16. The spouses Evidente, through plaintiffs, paid for the monthly installments due on the [CLA] until October, 1997, as evidenced by OR No. 167588 dated October 31, 1997 issued by defendant bank. . . .17. The spouses Evidente were unable to make subsequent payments and the real estate mortgage over the Evidente properties was recommended for foreclosure.x x x19. . . . [P]laintiffs advised defendant bank that they will be settling their 1st TLA in full and shall be taking the property covered by TCT No. N-138739 out of the mortgage.20. However, to the shock of plaintiffs, defendant bank through its Account Officer, Nelia Umbal, refused to release the said property because the Evidente properties, the mortgage of which secures . . . the CLA dated November 6, 1996, will be insufficient to cover the balance of the said CLA.21. Plaintiffs were surprised to learn that defendant bank capriciously, recklessly and oppressively gave a loan valuation of only PHP900,000.00 for each of [the] two Evidente properties, or a total of PHP1.8 Million. This valuation is unfair and unreasonable considering that the fair market value of these properties is around PHP5 Million. Furthermore, no reason was given by defendant bank for the sudden and unjust change in the valuation, which was originally pegged by defendant at PHP2.5 Million.22. In effect, the mortgaged property covered by TCT No. N-138739, which secures the 1st TLA dated September 28, 1995, and which has a loan valuation of PHP700,000.00, was also made a

collateral for the CLA. Worse, the whole amount of the loan under the 1st TLA was declared due and demandable, although plaintiffs faithfully and regularly paid for the monthly amortization there[of].23. Thus, to complete, rather suspiciously, the security for the CLA which is for PHP2.5 Million, defendant bank further informed plaintiffs that it would cost them PHP1.4 Million to take the property covered by TCT No. N-138739 [which secured the first TLA] out of the mortgage, because the deficiency in the CLA secured by the Evidente properties must also be paid. This amount is preposterous considering that at the time, the remaining balance of the 1st TLA was only around PHP450,000,00. Moreover, plaintiffs were suffering from financial difficulties because of the sharp decline of the peso’s purchasing power.x x x26. Defendant bank filed with the Executive Judge of Quezon City, through public defendants herein, an Application for Extra-Judicial foreclosure of Real Estate Mortgage under Act No, 3135, as amended, dated May 4, 1998. The application sought the sale in a public auction of the Evidente properties and plaintiffs’ property covered by TCT No. 67286 [which secured the second TLA and which TLA had been settled]. . . .x x x31. Yet, defendant bank and public defendants allowed the public auction to proceed as scheduled [on July 23, 1998].x x x35. In the meantime, without making any effort to cancel the effects of the public auction held on July 23, 1998,defendant bank filed with public defendants an Amended Application for Extra-Judicial Foreclosure of Real Estate Mortgage under Act No. 3135, as amended. The amended application sought the sale in a public auction of the same Evidente properties and plaintiffs’ property covered by TCT No. N-138739 [which secured the first TLA].36. Acting upon the said application, public defendants issued another notice of Sheriff Sale dated July 28, 1998 which scheduled the public auction of the aforementioned real properties on August 26, 1998 . . .37. Plaintiffs’ property covered by TCT No. N-138739 is erroneously included in the amended application and in the Notice of the Sheriff’s Sale. The said mortgaged property secures the 1st TLA dated September 28, 1995, for which plaintiffs have faithfully and regularly paid for the monthly amortization due. On the other hand, defendant bank is foreclosing the said property and the two Evidente properties for alleged failure to pay the monthly installments due on the CLA dated November 8, 1996.x x x38. Furthermore, defendant bank acted in bad faith and in willful breach of its contractual obligations to plaintiffs inunderstating the loan valuation of the two Evidente properties, and in effect declaring the property covered by TCT No. N-133739 [which secured the first TLA] as additional collateral for the said CLA. (Emphasis and underscoring supplied).The plaintiffs Locsins thus prayed that:A. Upon filing of this complaint, a temporary restraining order (TRO) be immediately issued ex-parte, enjoining defendants, their agents and/or representatives from enforcing the Notice of Sheriff’s Sale dated July 28, 1998, and from proceeding with the scheduled public auction of the properties included therein, particularly plaintiffs’ real property covered by TCT No. N-138739, on August 26, 1998, or on any date thereafter, until further orders from the Honorable Court.B. After appropriate proceedings, a writ of preliminary injunction be issued, under the same tenor as above, and upon payment of such bond as may be fixed by the Honorable Court.C. After trial on the merits, judgment be rendered:1. On the First Cause of Action, ordering defendant bank to faithfully comply with its obligations under the 1st TLA and the CLA, revert the loan valuation of the two Evidente properties covered by TCT’s Nos. N-166336 and 166337 to PHP2.5 Million, and allow plaintiffs to take its property covered by TCT No. N-138739 out of the mortgage by paying the balance thereon, minus interests and penalties accruing from February 1998;2. On the First and Second Causes of Action, ordering defendant bank to pay plaintiffs PHP500,000.00 in actual damages;3. On the Third Cause of Action, ordering defendant bank to pay plaintiffs PHP1 Million in actual damages;

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4. On the Fourth Cause of Action, ordering defendant bank to pay plaintiffs PHP500,000.00 in moral damages;5. On the Fifth Cause of Action, ordering defendant bank to pay plaintiffs PHP300,000.00 in exemplary damages;6. On the Sixth Cause of Action, ordering defendant bank to [pay] plaintiffs PHP200,[000].00 for attorney’s fees and litigation expenses;7. Making the injunction issued against defendants permanent; and8. Ordering defendants to pay costs of suit.Other reliefs which are just and equitable are likewise prayed for.4 (Emphasis and underscoring in the original; italics supplied).Branch 233 of the Quezon City RTC denied the Locsins’ prayer for the issuance of a TRO, by Order of August 25, 1998.In its September 8, 1998 ANSWER5 with Compulsory Counterclaim filed on September 11, 1998, petitioner denied that its Asst. Vice President Agnes Tuason had told the Locsins that the loan valuation of the Evidente properties was P2.5 million for it in fact told them that the P2.5 million loan was approved "inspite of the deficiency of the Evidente properties because of their [Locsins’] good paying record with [it]." And it denied (specifically) too the Locsins’ complaints-allegations in paragraphs 19-25, alleging as follows:8.2 All the promissory notes signed by [the Locsins] uniformly provide:Upon the occurrence as to Maker or any Co-Maker of this Promissory Note of any of the following events of default, the outstanding principal, accrued interest and any other sum payable hereunder or under any related agreement shall become immediately due and payable without presentment, demand, protest or notice of any kind (other than notice of the event and fact of default) all of which are hereby expressly waived by the Maker and all of the Co-Makers, if any:x x x3) Failure by the Maker or any Co-Maker to perform or the violation of any provision of this Promissory Note or any related agreement;x x x6) The Maker or any Co-Maker fails to pay any money due under any other agreement, standby letter of credit or document evidencing, securing, guaranteeing or otherwise relating to indebtedness of the Maker or any Co-Maker to any other creditor, or there occurs, any event of default or any event which, but for the passage of time or the giving of notice, or both, would constitute under any such agreement, stand by letter of credit or document (and which has not been remedied within any applicable grace period):x x x8.3 The letter of approval of the P2.5 million loan of [the Locsins] has a cross-default provision, which reads:3.6 A default on any availment under this credit line facility shall automatically mean a default on [the Locsins] existing term loan under Promissory Note No. 29-01-9080-95 [covering the first TLA] and vice versa (Emphasis and underscoring supplied),6

on which letter the Locsins affixed their conformity; that in light of the Locsins’ default in the settlement of their monthly obligations under the CLA, it sent them a January 7, 1998 demand letter advising them of the Past Due Status of their promissory note covering the P2.5 million account to thereby "automatically mean that [said promissory note] and the other loan account under [the promissory note covering the 1st TLA] with an outstanding balance of P460,652.95 are considered Due and Demandable already;" that after a follow up letter and a final letter of demand, the Locsins requested, by letter of February 26, 1998, that the promissory note under the 1st TLA and that under the CLA be treated separately and that one of their titles be released upon payment of P1.8 million; that by letter of March 5, 1998, it advised the Locsins that their request in their February 26, 1998 letter "regarding the release of one of the [two Evidente titles]" was approved, "subject to the partial payment on Principal plus all interests and charges amounting to P 1,934,465.79 as of March 20, 1998 "; that to its March 5, 1998 letter, the Locsins, by letter of March ___, (sic) 1998, replied as follows:We would like to request for a thirty day extension on the deadline given us today for the payment of P 1,900,000.00, or (sic) the release of one title under PN No. 11-01-0586-96 [covering the CLA] as the person very much interested in purchasing it has asked us for the same. At the same time we are also going to take out the property under PN No. 29-01-9080-95 [covering the

first TLA], so that only one property under the fire (sic) account mentioned shall be left mortgaged to your bank.Thank you for your kind consideration.7 (Underscoring supplied);that despite the grant of the Locsins’ request for extension of 30 days or up to April 20, 1998 to pay P 1.9 million as a condition "for the release of the title," the Locsins failed to come up therewith; and that the inclusion of the Locsins’ mortgaged title covering the 1st TLA in the amended application for extra-judicial foreclosure was "not erroneous because of the cross-default provisions and acceleration clauses in the loan documents which [the Locsins] signed."As Compulsory Counterclaim petitioner alleged that on account of the filing of the baseless and malicious suit, it was constrained to engage the services of its counsel at an agreed fee of P200,000.00. It thus prayed for the dismissal of the Locsins’ complaint and the grant of its counterclaim.En passant, it does not appear that the Locsins filed a Reply8 to petitioners’ Answer with Compulsory Counterclaim.On March 26, 1999, the Locsins filed an Omnibus Motion9 (To Amend the Designation of the Plaintiffs; and to Admit Supplemental Complaint), which appears to have been granted by the Quezon City RTC. In their Supplemental Complaint,10 they repleaded in toto the allegations in their August 24, 1998 Complaint andadditionally alleged that petitioner proceeded with the public auction of the properties covered by the mortgage in the 1st TLA and the mortgage in the CLA on September 23, 1998, "contrary to law."The Locsins thus prayed in their Supplemental Complaint as follows:1. Ordering the cancellation of the public auction of TCT Nos. N-138739, N-166336 and N-166337 on September 23, 1998;2. Declaring said auction of no legal force and effect; and3. Granting the following reliefs prayed for by plaintiffs in their [original] Complaint, to wit:x x x11 (Emphasis and underscoring supplied).By Answer12 (To Supplemental Complaint) dated June 1, 1999, petitioner admitted that the public auction (which was originally scheduled on August 26, 1998) did take place on September 23, 1998. It denied, however, that it was contrary to law.More than eight months after the Locsins filed their Supplemental Complaint reflecting their prayer for the nullification of the September 23, 1998 public auction sale or on November 29, 1999, petitioner filed a complaint against the Locsins before the RTC of Mandaluyong where it was docketed as Civil Case No. MC-99-935,13 for Collection of Sum of Money, alleging as follows:x x x5. Defendants failed to satisfy their obligations under the . . . Promissory Notes [covering the first TLA & the CLA] and Plaintiff deemed them in default;x x x11. The [amended] extrajudicial sale was conducted on 23 September 1998 and Plaintiff was again declared the highest bidder . . .12. The total outstanding obligation of Defendants at the time of the foreclosure was PESOS: FIVE MILLION TWENTY THREE THOUSAND FOUR HUNDRED NINETY SIX & 64/100 (P5,023.496.64). However, the appraised value of the properties was only P3,879,406.80 and plaintiff thus submitted a bid of PESOS: THREE MILLION EIGHT HUNDRED SEVENTY NINE THOUSAND FOUR HUNDRED SIX & 80/100 (P3,879.406.80);13. After all expenses for the foreclosure and registration of the Certificate of Sale have been deducted from the aforementioned bid, there still remains an outstanding balance in the amount of PESOS: ONE MILLION ONE HUNDRED FORTY FOUR THOUSAND EIGHTY NINE & 84/100 (1,144,089.84), EXCLUSIVE OF INTEREST AT THE RATE OF TWENTY FIVE AND A HALF PERCENT (25.5%) per annum, which Plaintiff is entitled to recover from Defendants;14. On 09 February 1999, counsel for plaintiff sent a letter to defendants dated 05 February 1999, demanding from the latter the payment of said deficiency but Defendants refused and failed and continue to refuse and fail to pay said obligation . . .15. Due to Defendants’ unreasonable refusal and failure to comply with Plaintiffs just demands, Plaintiff was compelled to institute the present action and to engage the services of counsel to whom it bound itself to pay the sum of P130,000.00, plus appearance fee of P2,000.00 and other legal costs and expenses.14 (Emphasis in the original; underscoring supplied).

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Petitioner accordingly prayed in its complaint that the Locsins be ordered to pay it jointly and severally1. the outstanding obligation in the sum of PESOS: ONE MILLION ONE HUNDRED FORTY FOUR THOUSAND EIGHTY NINE & 84/100 (1,144,089.84), plus interest thereon at the rate of twenty five and a half percent (25.5%) per annum from 23 September 1998, the date of the foreclosure sale, until the obligation has been fully paid;2. attorney’s fees in the sum of P130,000.00, plus appearance fee of P2,000.00; and3. costs of suit and expenses of litigation.Other just and equitable reliefs under the premises are likewise prayed for.15 (Emphasis in the original).To petitioner’s complaint (for sum of money), the Locsins filed a Motion to Dismiss16 on the ground that it should have been raised as compulsory counterclaim in their (the Locsins’) complaint (for specific performance, damages and nullification of the public auction), and by failing to raise it as such, it is now "barred by the rules." To the Motion, petitioner filed its Opposition which merited the Locsins’ filing of a Reply to Opposition.17

Branch 213 of the Mandaluyong RTC denied the Locsins’ Motion to Dismiss petitioner’s Complaint, by Order of September 18, 2000,18 in this wise:The motion to dismiss is premised on the ground that plaintiff’s claim in the instant case should have been raised in the previous case, [C]ivil [C]ase No. Q98-35337, wherein plaintiff herein was the defendant, said claim being a compulsory counterclaim and for failure to raise the same, it is now barred by the rules.It is noted, however, that the instant case is one for collection of alleged deficiency amount as the proceeds of the foreclosure sale of defendant’s properties are not sufficient to cover the entire indebtedness. In effect, such claim did not arise as a consequence of [C]ivil Case No. 098-353337 but was already existing (sic) even before the institution of that earlier case.Without necessarily delving into the veracity of plaintiff’s claim but merely considering its origin and nature as alleged in the complaint, said claim is merely permissive and not compulsory. Thus, such a claim can stand as an independent action.19 (Underscoring supplied).The Locsins’ Motion for Reconsideration having been denied by the Mandaluyong RTC by Order of March 21, 2001,20 they appealed to the Court of Appeals which, by the present assailed decision of June 5, 2003,21reversed the Orders of the Mandaluyong RTC, it finding that petitioner’s complaint was a compulsory counterclaim which should have been raised in its Answer to the Locsins’ complaint, and having failed to do so, it is now barred; that litis pendentia and res judicata apply to the case; and that petitioner violated the rule on forum shopping, hence, the dismissal of its complaint is warranted. Explained the appellate court:[The Locsins’] complaint in Civil Case No. Q-98-35337, pending before Branch 223 of the Regional; Trial Court of Quezon City asks specific performance by private respondent Banco de Oro of its obligations under the very same loan agreements covered by Real Estate Mortgages mentioned in private respondent’s Complaint in Civil Case No. MC-99-935 before the Mandaluyong City Trial Court. In both cases, the real properties involved are those covered by TCT Nos. N-138739, [N-166336] and N-166337. The basis of the parties’ respective complaints arose from the very same transactions, the Term Loan Agreement, dated September 28, 1995 and the Credit Line Agreement, dated November 6, 1996. Clearly, there is a logical connection between both claims which arose from the same transaction and are necessarily connected and it does not require the presence of third parties for its adjudication. A counterclaim is logically related to the opposing party’s claim where separate trials of each of their respective claims would involve substantial duplication of effort and time by the parties and the courts.Moreover, Sec. 2, Rule 9 of the Rules of Court provides:"Sec. 2. Compulsory counterclaim, or cross-claim, not set up barred. - A compulsory counterclaim. or a cross claim, not set up shall be barred."Private respondent should have raised its complaint as compulsory counterclaim in the Regional Trial Court of Quezon City. Failing to do so, it is now barred. The reason for the rule relating to counterclaims is to avoid multiplicity of suits and to enable the Courts to dispose of the whole matter in controversy in one action, and adjustment of defendant’s demand by counterclaim rather than by independent suit. (Reyes vs. Court of Appeals, 38 SCRA 138).[The Locsins’] second argument is that private respondent’s complaint in Civil Case No. MC-99-935 constitutes litis pendentia, and therefore should have been dismissed by the trial court. For litis pendentia to be a ground for dismissal of an action, three elements must concur: (a)

identity of parties, or at least such parties who represent the same interest in both actions; (b) identity of rights asserted and relief prayed for being founded on the same facts; and (c) the identity, with respect to the two preceding particulars in the two cases, is such that any judgment that may be rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other.Applying this test, the principle of litis pendentia and res judicata will certainly apply to the instant case, all three requisites are present. The parties are the same and what is involved in both Civil Case No. Q-98-35337 pending before the Quezon City Trial Court and Civil Case No. MC-99-935 before the Mandaluyong City Trial Court are the same subject matter and set of circumstances, which would entail presentation of the same evidence. Judgment in favor of one of the parties in Civil Case No. Q-9835337 would bar the institution of the case filed before the Mandaluyong City Trial Court.Finally, [the Locsins] assert that Civil Case MC-99-935 should be dismissed since private respondent is guilty of willful and deliberate forum shopping. Jurisprudence has defined forum-shopping as the filing of multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. Forum shopping exists where the elements of litis pendentia are present, and where the a final judgment in one case will amount to res judicata in the other. (Heirs of Victorina Motus Penaverde v. Heirs of Mariano Penaverde, 344 SCRA 69). Thus, there is forum shopping when there exist: a) identity of parties, or at least such parties as represent the same interest in both actions, b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and c) the identity of the two preceding particulars is such that any judgment rendered in the other action, will amount to res judicata in the action under consideration. (Prubankers Association vs. Prudential Bank and Trust Company, 302 SCRA 83). As discussed earlier, the elements of litis pendentia being present and that res judicata will eventually result, a decision by the Quezon City Trial Court would bar the institution of the Civil Case in the Mandaluyong City Trial Court for the collection of deficiency claim in the foreclosure sale of the petitioner’s properties. Private respondent violated the rule on forum shopping and therefore, the summary dismissal of their action is warranted.22 (Italics in the original; underscoring supplied).Hence, the present Petition for Review on Certiorari,23 petitioner raising the following assignment of errors:I. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANK’S COMPLAINT FOR COLLECTION OF SUM OF MONEY BASED ON DEFICIENCY CLAIM UNDER CIVIL CASE No. MC-99-935 IS A COMPULSORY COUNTERCLAIM AND SHOULD HAVE BEEN SET UP BY PETITIONER BANK IN PRIVATE RESPONDENTS’ COMPLAINT FOR SPECIFIC PERFORMANCE, TORT AND DAMAGES, AND ANNULMENT OF FORECLOSURE IN CIVIL CASE NO. Q-98-35337.II. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE IS LITIS PENDENTIA AND THUS, CIVIL CASE No. MC-99-935 SHOULD BE DISMISSED.III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER BANK IS GUILTY OF FORUM SHOPPING.24

Petitioner argues that the Locsins’ complaint is one based on tort, whereas its complaint before the Mandaluyong RTC is based on contract and law, hence, the two causes of action are separate and distinct; that under the test for the determination of whether the counterclaim is compulsory or permissive, its suit before the RTC of Mandaluyong for collection of deficiency judgment is not a compulsory, but permissive counterclaim and may, therefore, proceed independently of the Locsins’ complaint.Petitioner adds that its claim arises from the loan agreement, whereas the Locsins’ claim arises from the annulment of the foreclosure sale; that litis pendentia and res judicata do not apply as grounds for dismissal of its complaint as a perusal of both complaints reveals different causes of action, and the rights asserted and the reliefs prayed for are different, and the rule on lis pendens "is applicable only when the judgment to be rendered in the action first instituted will be such that regardless of which party is successful, it will amount to res judicata as to the second action," it citing Hongkong & Shanghai Bank v. Aldecon & Co.25

Citing Enriquez, et al. v. Ramos, et al.,26 petitioner further argues that an action for collection of a mortgage loan does not bar another for rescission of the mortgage if such is based on the non-compliance by the mortgagor of the mortgage contract.

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Petitioner further cites Roa v. PH Credit Corporation,27 wherein this Court ruled that the pendency of a replevin suit does not bar a proceeding for deficiency claim as there is no identity of subject matter, cause of action and reliefs prayed for.Finally, petitioner cites Bangko Silangan Development Bank v. Court of Appeals,28 wherein this Court held that:The test to determine identity of the causes of action is to ascertain whether the same evidence necessary to sustain the second cause of action is sufficient to authorize a recovery in the first , even if the form or nature of the two (2) actions are different from each other. If the same facts or evidence would sustain both, the two (2) actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action; otherwise, it is not. This method has been considered the most accurate test as to whether a former judgment is a bar in subsequent proceedings between the same parties. It has even been designated as infallible.While it is true that the two (2) cases are founded in practically the same set of facts, as correctly observed by the Court of Appeals, it cannot be said that exactly the same evidence are needed to prove the causes of action in both cases. Thus, in Civil Case No, 91-56185 of the RTC of Manila, the evidence needed to prove that petitioner sustained damage to its reputation and goodwill is not the same evidence needed in Civil Case No. 221 of the RTC of Batangas to prove the allegation that a substantial amount of respondent Bausas’ bank deposit in petitioner’s bank was illegally withdrawn without her consent or authority, The RTC of Batangas and the Court of Appeals, therefore, did not abuse their discretion in denying petitioner’s motion to dismiss which was based on the ground of litis pendentia.29 (Emphasis and underscoring supplied).By their Comment,30 the Locsins maintain that petitioner’s claim in Civil Case No. MC-99-935 is "logically related" to their claim in Civil Case No. Q-98-35337, as they involve the same parties, rely on the same facts, subject matter and series oftransactions and, therefore, would entail presentation of the same evidence; that petitioner having failed to set up its claim as a compulsory counterclaim31 in Civil Case No. Q-98-35337, it is now barred from setting it up in Civil Case No. MC-99-935; and that litis pendentia and res judicata proscribe the filing of a separate complaint by petitioner which is guilty of "willful and deliberate forum shopping."The petition is impressed with merit.It bears noting that when petitioner filed its Answer with Counterclaim to the Locsins’ complaint on September 11, 1998, the Real Estate Mortgages covering the 1st TLA and the CLA had not been extrajudicially foreclosed, the extra-judicial foreclosure having taken place subsequent thereto or on September 23, 1998.It bears noting too that until after the Locsins allegedly refused and failed to settle the alleged deficiency amount of their outstanding obligation, despite petitioner’s February 5, 1999 letter of demand sent to the Locsins on February 9, 1999, petitioner’s cause of action had not arisen.Petitioner could not, therefore, have set its claim – subject of its complaint in Civil Case No. MC-99-935 as, assuming arguendo that it is, a compulsory counterclaim when it filed on September 11, 1998 its Answer with Compulsory Counterclaim to the Locsins’ complaint.32

The counterclaim must be existing at the time of filing the answer, though not at the commencement of the action for under Section 3 of the former Rule 10, the counterclaim or cross-claim which a party may aver in his answer must be one which he may have "at the time" against the opposing party. That phrase can only have reference to the time of the answer. Certainly a premature counterclaim cannot be set up in the answer. This construction is not only explicit from the language of the aforecited provisions but also serves to harmonize the aforecited sections of Rule 10, with section 4 of the same rule which provides that "a counterclaim . . . which either matured or was acquired by a party after serving his pleading may, with the permission of the court, be presented as a counterclaim . . . by supplemental pleading before judgment."Thus a party who fails to interpose a counterclaim although arising out of or is necessarily connected with the transaction or occurrence of the plaintiff’s suit but which did not exist or mature at the time said party files his answer is not thereby barred from interposing such claim in a future litigation. . .33 (Emphasis and underscoring supplied).While petitioner could have, after the Locsins filed on March 26, 1999 a Supplemental Complaint in Civil Case No. Q-98-35337, set up, in its Supplemental Answer, its claim subject of Civil Case No. MC-99-935, again assumingarguendo that it is a Compulsory

Counterclaim, the setting up of such "after-acquired counterclaim," is merely permissive, not compulsory.34

At all events, even if the claim of petitioner - subject of its complaint in Civil Case No. MC-99-935 is a compulsory counterclaim which should have been set up in its Answer to the Locsins’ Supplemental Complaint, technicality should give way to justice and equity to enable petitioner to pursue its "after-acquired" claim against the Locsins.As for the issue of whether petitioner’s complaint is dismissible on the grounds of litis pendentia or auter action pendant, and forum shopping, the above-quoted and recited allegations of the pleadings of the parties do not reflect identity of rights asserted and reliefs sought, as well as basis thereof, to a degree sufficient to give rise to the abatement of petitioner’s complaint on any of these grounds.WHEREFORE, the petition is hereby GRANTED.The assailed decision of the Court of Appeals is SET ASIDE.Let the case be REMANDED to the court of origin, Branch 213 of the Regional Trial Court of Mandaluyong, which is hereby DIRECTED to continue with dispatch the proceedings in Civil Case No. MC-99-935.No costs.SO ORDERED.

G.R. No. L-25889 January 17, 1973HON. GUILLERMO E. TORRES, as Presiding Judge of the Court of First Instance of Rizal, Branch VIII, THE PROVINCIAL SHERIFF OF THE PROVINCE OF RIZAL, JAIME E. LAICO and LUZ LOS BANOS-LAICO,petitioners-appellants, vs.HON. COURT OF APPEALS, JOSE CHIVI and ANGELINA CHIVI as representative of the deceased MARTA B. CHIVI, respondents-appellees. Ernesto J. Seva for petitioners-appellants.Ordonez, Cervo and Sanchez for respondents-appellees.

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MAKALINTAL, J.:Appeal by certiorari to review the decision of the Court of Appeals in CA-G.R. No. 35677-R, dated 31 August 1965.The facts as found, by the Court of Appeals are as follows:On 1 January 1955 the spouses Isidro Sierra and Antonia Magtaas sold a parcel of land to Marta B. Chivi, representing to her that the land was not registered either under the Land Registration Act or under the Spanish Mortgage Law and assuring her that although the land was covered by a pre-war free patent application, the application had not been approved and no patent had been issued. The Sierras made that assurance because Chivi was not willing to buy the land if it was covered by a patent, since it would then be subject to repurchase. They agreed that the purchase price of P10,800.00 was not to be fully paid until the vendors could have the land registered under Act 496.At the instance of the Sierras, Chivi filed an application for registration of the land in the Court of First Instance of Rizal. While the application was pending Chivi, on 24 May 1958, sold her rights and interests in the land to the herein petitioners-spouses Jaime Laico and Luz Los Banos for P25,647.00, with the stipulation that should Chivi fail to secure and transfer title to the Laicos she would return to them twice the amount of the aforesaid purchase price. To induce the Laicos to buy Chivis rights and interests, the Sierras showed them a petition withdrawing their free patent application. The Laicos thereupon continued with the registration proceeding in substitution of Chivi, who signed a deed of transfer of her rights.In December, 1959 the Laicos discovered, and in January, 1960 Chivi learned, that a free patent title had been previously issued to Isidro Sierra as early as 26 February 1932. The Laicos went to see the Sierras, who agree to execute, as they did execute on January 17, 1960, another deed of sale in favor of the Laicos. The Laicos then withdrew their application for registration and filed instead a petition for the reconstitution of the title issued to Isidro Sierra.On 14 June 1960, however, the Sierras filed a complaint against Marta B. Chivi, assisted by her husband, and the Laicos in the Court of First Instance of Rizal, docketed as Civil Case No. 6184, praying that they (plaintiffs) be allowed to repurchase the land under the provisions of the Public Land Act. The Chivis and the Laicos filed their answers to the complaint and counter-claimed for damages by reason of the alleged bad faith, misrepresentation and fraudulent acts of the Sierras, as herein before recounted. The Laicos filed a cross-claim against the Chivis for collection of twice the amount of the price paid under their sales contract for the latter's failure to deliver title to the Laicos, alleging that "the defendants Chivi are/or will be liable on these warranties and condition should the plaintiffs finally obtain favorable judgment in their favor" (sic).On 12 March 1964 the Sierras and the Laicos entered into a compromise to amicably settle Civil Case No. 6184 as between themselves, stipulating therein, among other things, that the Laicos were now the absolute owners of the land and that the Sierras would withdraw their objection to the reconstitution of the patent title and that said title would be transferred in the name of the Laicos, who would pay P10,000.00 to the Sierras; that the Sierras would ask for the dismissal of Civil Case No. 6184 insofar as the Laicos were concerned and would convert their action in the case from one for repurchase to one for collection of the balance of the sales price and of damages against the Chivis; that the Laicos would pursue their cross-claim against the Chivis and in the event they obtained a favorable judgment thereon they would pay to the Sierras one-half (1/2) of any amount awarded to them in excess of the purchase price of P25,647.00.

The compromise, which was executed without the knowledge of or notice to the Chivis, was approved by the trial court on 12 March 1964. On the same date the court, joint motion of the Sierras and the Laicos, dismissed witness prejudice the complaint in Civil Case No. 6184 insofar as the Laicos were concerned as well as the counter-claim of the Laicos against the Sierras. Chivi was not notified of the dismissal.The court set the case for pre-trial on 14 July 1964. Despite notice to the Sierras and the Chivis, only cross-claimant Jaime Laico and his counsel appeared, whereupon the court declared the Chivis in default and allowed Laico to present evidence on the cross-claim before the deputy clerk of court. Counsel for the Chivis filed an urgent motion for reconsideration, explaining why he failed to appear at the pre-trial, but the motion was denied. On 5 February 1965 the court rendered judgment for the Laicos, sentencing the cross-defendants to pay them a total amount of P15,000.00, plus costs, and on 1 April 1965 issued a writ of execution. Pursuant to the writ the sheriff levied upon the properties of the Chivis and issued a notice that the properties would be sold at public auction on 14 April 1965.In due time the Chivis filed with the Court of Appeal a petition for certiorari and prohibition with preliminary injunction to annul: (1) the order of the trial court authorizing the Laicos to adduce evidence ex parte on their cross-claim against Marta B. Chivi; (2) the decision rendered on said cross-claim; and (3) the order directing the issuance of a writ of execution, the levy on execution and the notice of execution sale of the properties of Chivi prayed further that the therein respondents be prohibited from conducting any further proceedings in said Civil Case No. 6184 on the ground that the trial court was without jurisdiction in the premises.Upon giving due course to the petition the Court of Appeals issued a writ of preliminary injunction, restraining the therein respondents from proceedings with the execution and with the sale at public auction set for 14 April 1965, until further order.On 31 August 1965 the Court of Appeals rendered decision declaring null and void all the proceedings on the cross-claim of the spouses Laico against Chivi, as well as the orders, decisions, writs and processes issued in connection therewith, and restraining the therein respondent Judge and sheriff of the Court of First Instance of Rizal from further proceeding in Civil Case No. 6184. The Laicos moved for reconsideration. Pending resolution of the motion for reconsideration, Marta B. Chivi died was substituted by Angelina Chivi. In an order dated 16 March 1966, the motion for reconsideration was denied. Hence, the instant appeal by certiorari brought by the Laicos.The principal issue in this case is: Could the cross-claim in this particular action stand after the complaint in the same action was dismissed with prejudice?In the resolution of this issue the following considerations are pertinent:(1) A cross-claim, as defined in Section 7 of Rule 6 is "any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein."(2) The cross-claim of the Laicos against the Chivis was for the recovery of the sum of P51,294.00, upon the allegations that according to the contract of sale between them, "should the defendants Chivi fail to transfer the title to the land in question to the VENDEE (defendant Laico) then the former shall return to the latter (the aforesaid sum) which is double the amount of the purchase price received by the defendants Chivi;" and that "the defendants Chivi are/or will be liable on these warranties and conditions should the plaintiffs (Sierras) finally obtain favorable judgment in their favor" (sic).

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(3) When Marta B. Chivi sold her "rights and interests" to the land in question to the Laicos on 24 May 1958 the latter knew that Chivi had yet no registered title, and in fact substituted her in the registration proceeding which she had initiated.(4) In their counterclaim for damages against the Sierras in Civil Case No. 6184, the Laicos alleged that the "plaintiffs, in fraudulently misrepresenting to the defendants Chivi, as well as to the defendants Laico, that the land in question is unregistered and is not covered by a patent, thereby inducing the latter to purchase the land in question, which they would not have done had they known that the land is covered by a patent, should be adjudged to pay ..."(5) The warranty undertaken by Marta B. Chivi, judging by its terms and by the surrounding circumstances was in respect of the transfer of ownership — not of the registered title — to the Laicos. The action filed by the Sierras was not for recovery of such ownership but for the exercise of their alleged right of repurchase under the Public Land Act on the ground that the land they had sold was covered by a patent title. In other words, the filing of the action did not militate against the warranty to transfer title, for the very fact that the plaintiffs wished to enforce their alleged right of repurchase was predicated on the assumption that the title, that is, ownership, had been effectively transferred first to Chivi an subsequently by the latter to the Laicos.(6) In any event, even viewing the situation in the light most favorable to the Laicos, their cross-claim on Chivi's warranty to deliver title to them was so inextricably linked with and so utterly dependent upon the success of the complaint of the Sierras for the repurchase of the land that when the complaint was dismissed the cross-claim could not possibly survive. For as the cross-claimants themselves alleged, the cross-defendants would be liable on the warranty "should the plaintiffs finally obtain favorable judgment in their favor" (sic). The warranty became functus oficio after the Sierras, who turned out after all to have a free patent title to the land issued way back in 1932, agreed to transfer and did transfer said title to the Laicos — first by the deed of sale executed directly in their favor by the Sierras on January 17, 1960, and again in the amicable settlement of the case between them. The fact that the Laicos paid P10,000.00 to the Sierras in that amicable settlement created no liability on the part of the Chivis: first, because the latter neither knew nor consented to such settlement; second, because the Laicos had already acquired the land directly, from the Sierras by virtue of the aforesaid sale of January 17, 1960; and third because the said sum of P10,000.00 was not the subject of the cross-claim against them.Apropos is the following statement of the legal principle:

A cross-bill strictly speaking is one brought by a defendant in an equity suit against ... other defendants in the same suit, touching the matters in question in the original bill. It is considered as an auxiliary suit dependent upon the original bill, and can be sustained only on matters growing out of the original bill. There is a well-defined distinction between a cross-bill merely defensive in character, and one seeking affirmative relief. The dismissal of the original bill carries with it a purely defensive cross-bill but not one seeking affirmative relief. 1

The cross-claim in this case was purely defensive in nature. It arose entirely out of the complaint and could prosper only if the plaintiffs succeeded. Hence, under the principle above enunciated, it could not be the subject of independent adjudication once it lost the nexus upon which its life depended.Under the circumstances above set forth the dismissal of the cross-claim should have followed the dismissal of the complaint as a matter of course, without further proceeding; and in setting the said cross-claim for pre-trial and receiving evidence thereon and then rendering judgment against the cross-defendants the court

committed such a grave abuse of discretion amounting to lack of jurisdiction correctible by certiorari.Concerning the argument that the respondents here were guilty of laches because they filed their petition forcertiorari after the lapse of over 9 months from the time judgment of the Court of First Instance was rendered, respondent Court of Appeals ruled — in our opinion correctly — as follows:

xxx xxx xxxTo the contention that the petitioners' action is barred laches, we are bound to disagree. The judgment by default was rendered on February 5, 1965. It is not known when the petitioners received copy of this judgment, but the fact is that on April 13, or after the lapse of only 2 months and 7 days from rendition of the judgment, the petition for certiorari was filed with this Court. Principally, the petition assails the decision and the writ of execution thereof which was issued on April 1. Assuming that the decision complained of was actually received by the petitioners on the date it was rendered, the intervening period to the filing of the petition is only 2 months and 7 days, which is shorter than the shortest period of 2 months and 26 days cited in the respondents' ex-parte motion for reconsideration in support of their theory of laches. And a mere 12 days intervened between the issuance of the writ of execution and the filing of the petition for certiorari.xxx xxx xxx

Parenthetically, this Court would like to state that Judge Guillermo Torres should not have been made to appear as active party-petitioner in this case, his participation having become functus oficio after the rendered judgment, and therefore his role being purely nominal in this petition.In view of the foregoing considerations, the judgment of the Court of Appeals is affirmed, without pronouncement as to costs.

G.R. Nos. 182136-37 August 29, 2008BON-MAR REALTY AND SPORT CORPORATION, petitioner, vs.SPOUSES NICANOR AND ESTHER DE GUZMAN, EVELYN UY AND THE ESTATE OF JAYME UY, HON. LORNA CATRIS F. CHUA-CHENG, Presiding Judge, Branch 168 of RTC-Marikina City, (formerly Pasig City), HON. AMELIA A. FABROS, Branch 160 of RTC-San Juan, (formerly Pasig City), and THE REGISTRAR OF DEEDS OF SAN JUAN, respondents.D E C I S I O NYNARES-SANTIAGO, J.:

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This petition for review on certiorari assails the November 14, 2007 Decision1 and March 17, 2008 Resolution2 of the Court of Appeals in the consolidated cases involving CA-G.R. SP Nos. 949453 and 97812.4

In CA-G.R. SP No. 94945, the Court of Appeals denied Bon-Mar Realty and Sport Corporation’s (BON-MAR) petition to intervene in Civil Case No. 56393, a case filed by Spouses Nicanor, Jr. and Esther de Guzman (the DE GUZMANS) for annulment of titles and reconveyance of the properties against Mario and Erlina Siochi (SIOCHIS) and Jayme and Evelyn Uy (UYS), and affirmed the orders of the trial court granting the motion for issuance of a writ of possession of the DE GUZMANS.In CA-G.R. SP No. 97812, the Court of Appeals granted the DE GUZMANS’ leave to intervene in SCA No. 2988-SJ, a proceeding for indirect contempt instituted by BON-MAR against the Registrar of Deeds of San Juan for the latter’s refusal to cancel the DE GUZMANS’ titles and issue new ones in BON-MAR’s name.The antecedent facts:The DE GUZMANS were the owners of two lots located in Greenhills, San Juan, Metro Manila (the subject lots or properties), which were covered by Transfer Certificates of Title (TCT) Nos. 9052 and 9053. Owing to the need for campaign funds for Nicanor’s candidacy as member of the House of Representatives, the DE GUZMANS borrowed money from the SIOCHIS. As collateral, the DE GUZMANS executed a deed of sale dated April 10, 1987 in favor of the Siochis over the subject lots.The SIOCHIS, however, caused the cancellation of TCT Nos. 9052 and 9053 by virtue of the April 10, 1987 deed of sale. New titles, TCT Nos. 275-R and 276-R, were issued in their name.Thereafter, the SIOCHIS sold the subject lots to the UYS who were issued TCT Nos. 277-R and 278-R. Subsequently, the UYS entered into a lease agreement with Roberto Salapantan.Upon learning of the said transfers, the DE GUZMANS filed Civil Case No. 563935 seeking to annul the sales to the SIOCHIS and the UYS, as well as the lease to Salapantan. On December 28, 1990, the Regional Trial Court of Pasig City, Branch 168 rendered a Decision 6 finding the agreement between the DE GUZMANS and the SIOCHIS as a mere equitable mortgage, which precluded the latter from selling or foreclosing upon the subject lots without the knowledge and consent of the DE GUZMANS. Thus the trial court ordered the nullification of the deeds of sale to the SIOCHIS and the UYS, as well as the lease to Salapantan; the reconveyance of the subject lots to the DE GUZMANS; and the cancellation of the certificates of title issued in the name of the UYS.The SIOCHIS and the UYS appealed to the Court of Appeals which affirmed the ruling of the trial court.From the appellate court’s adverse decision, the SIOCHIS appealed to this Court, docketed as G.R. No. 109217; the UYS likewise appealed docketed as G.R. No. 109197.On June 21, 1993, the Court, in G.R. No. 109217, issued a Resolution denying SIOCHIS’ petition. Judgment in said case became final upon entry of judgment on December 11, 1994.Meanwhile, on March 10, 1999 or while the UYS’ petition in G.R. No. 109197 was pending, BON-MAR filed Civil Case No. 673157 for nullification of title against the UYS and the Register of Deeds of San Juan. BON-MAR claimed that after G.R. No. 109217 became final and executory (on December 11, 1994), the UYS’ titles were cancelled and in lieu thereof new titles were issued in the name of the DE GUZMANS (TCT Nos. 6982-R and 6983-R); that thereafter, the DE GUZMANS sold the subject lots to spouses Abundia and Jose Garcia (the GARCIAS); that on January 23, 1996, BON-MAR bought the lots from the GARCIAS and, as a result, TCT Nos. 7480-R and 7481-R were issued in its name; that on April 1, 1996, BON-MAR caused the subdivision of the properties into four (4) lots, under TCT Nos. 7650-R to 7653-R; that TCT Nos. 7650-R to 7653-R were transferred to the UYS on January 10, 1997, to whom TCT Nos. 8238-R to 8241-R were issued; however, the said January 10, 1997 transfer in favor of the UYS was a forgery, as the latter allegedly forged the signature of BON-MAR’s President (Bonifacio Choa or CHOA) on the deed of sale and other related documents.On March 11, 1999, BON-MAR caused the annotation of a notice of lis pendens in Civil Case No. 67315, under Entry No. 34865, on the titles covering the subject properties.On June 21, 2001, this Court rendered a Decision8 in G.R. No. 109197 finding that the UYS were not buyers in good faith of the subject lots; that as equitable mortgagees, the SIOCHIS could not validly appropriate the subject lots since they were not the owners thereof; that the

UYS, as mere transferees of the SIOCHIS, acquired no better right to the subject lots than what the latter had. The said decision became final and executory on November 20, 2001.Meanwhile, on September 25, 2001, the trial court in Civil Case No. 67315 rendered a Decision,9 which nullified and cancelled UYS’ titles (TCT Nos. 8238-R to 8241-R) and ordered the Register of Deeds of San Juan to reinstate BON-MAR’s titles (TCT Nos. 7650-R to 7653-R).Aggrieved, the UYS appealed to the Court of Appeals,10 but it was dismissed on August 16, 2004. The dismissal became final and executory, and entry of judgment thereon was made on September 5, 2004. The Court of Appeals11 declared that the UYS, in accordance with the ruling in G.R. No. 109197, have no right over the subject lots; hence, they may not assail BON-MAR’s title over the same.Meanwhile, on May 28, 2002, the DE GUZMANS, in Civil Case No. 56393, moved for the issuance of a writ of execution, which was granted by the trial court.12 The writ of execution was issued on August 1, 2002 but it was not implemented because BON-MAR filed an Omnibus Motion13 asking leave to intervene and to quash the writ.In its Omnibus Motion, BON-MAR alleged that by virtue of the judgment in G.R. No. 109217, the DE GUZMANS were able to re-acquire title over the subject lots (TCT Nos. 6982-R and 6983-R), and sold the same to the GARCIAS who in turn sold the subject lots to BON-MAR in 1996; that the DE GUZMANS no longer have any right to move for execution, for the second time, on the decision in said civil case because it has been satisfied already; that by allowing the DE GUZMANS to execute on the judgment anew would constitute unjust enrichment and double recovery upon a judgment; that since it (BON-MAR) is the successor-in-interest of the DE GUZMANS, it must be considered as the present lawful registered owner of the subject lots, such that it possesses actual legal interest to intervene in Civil Case No. 56393 in order to defend its title. BON-MAR thus prayed for intervention in the proceedings; for a stay in the execution of the judgment; for the quashal of the writ of execution; and for the issuance of an order decreeing that judgment in Civil Case No. 56393 has been fully satisfied.On December 18, 2003, however, the trial court denied14 BON-MAR’s motion to intervene and to quash the writ of execution on the ground that its right to the subject lots was merely inchoate, since BON-MAR’s claim was still the subject of a pending appeal in the Court of Appeals. The writ of execution in Civil Case No. 56393 was thus carried out, and TCT Nos. 8238-R to 8241-R in the name of the UYS were cancelled and TCT Nos. T-11566-R to T-11569-R were issued in the name of the DE GUZMANS. These titles were consolidated into two titles, TCT Nos. 11607-R and 11608-R.15 Entry No. 34865, or the notice of lis pendens covering Civil Case No. 67315, was carried over to these titles.BON-MAR appealed the denial of its Omnibus Motion to the Court of Appeals which was denied. The appellate court ruled that BON-MAR is a stranger to the litigation in Civil Case No. 56393, which is a case between the DE GUZMANS and the UYS, and that the writ of execution that was issued in said case was directed against the UYS, who were the registered owners of the property in question at the time, and not BON-MAR. The appellate court likewise found BON-MAR’s attempt at intervention to be belated and improper since the case was in its execution stage.BON-MAR filed a motion for reconsideration which was denied. BON-MAR did not appeal the aforequoted decision to this Court, thereby rendering the same final and executory on February 10, 2006.16

Meanwhile, after finality of the judgment in Civil Case No. 67315 declaring it as owner of the subject properties, BON-MAR moved for execution which was granted by the trial court. A writ of execution was issued on March 29, 2005, but the Register of Deeds of San Juan refused to transfer the titles in BON-MAR’s name.On the other hand, the DE GUZMANS in Civil Case No. 56393, moved for the issuance of a Writ of Possession,17 which BON-MAR opposed.18 The trial court granted19 the DE GUZMANS’ prayer for the issuance of a writ of possession, to which BON-MAR filed a motion for reconsideration. On February 16, 2006, BON-MAR also filed an Affidavit of Third-Party Claim20 executed by CHOA, whereby it set forth its claim of ownership.On May 24, 2006, the trial court denied21 BON-MAR’s motion for reconsideration of the Order granting a writ of possession in favor of the DE GUZMANS. As for BON-MAR’s third-party claim, the trial court did not conduct a hearing thereon, nor did it consider the same in the resolution of BON-MAR’s motion for reconsideration.

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On June 26, 2006, BON-MAR appealed the trial court’s denial of its motion for reconsideration to the Order granting a writ of possession in favor of the DE GUZMANS to the Court of Appeals, docketed as CA-G.R. SP No. 94945,22 which issued a writ of preliminary injunction, thus preventing the enforcement of the writ of possession.Meanwhile, after BON-MAR’s request to cancel the titles in UYS’ names and issue new ones in its favor as decreed by the trial court in its final and executory decision in Civil Case No. 67315, was denied by the Registrar of Deeds of San Juan, BON-MAR filed SCA No. 2988-SJ, 23 a special civil action for contempt against the Registrar of Deeds of San Juan. The DE GUZMANS sought to intervene,24 but it was denied25 by the trial court. The DE GUZMANS’ motion for reconsideration was denied,26 hence they appealed to the Court of Appeals through a petition for certiorari in CA-G.R. SP No. 97812.27

After the Court of Appeals ordered the consolidation of CA-G.R. SP No. 97812 and CA-G.R. SP No. 94945, it rendered the herein assailed November 14, 2007 Decision, the dispositive portion of which, reads:WHEREFORE, above premises considered, judgment is hereby rendered, as follows:

The petition in CA G.R. SP No. 94945 is DENIED for lack of merit. The November 30, 2005 and the June 15, 2006 Order(s) of the Regional Trial Court of Marikina City, Br. 168, granting the motion for issuance of a writ of possession in Civil Case No. 56393 are declared VALID. Accordingly, the writ of preliminary injunction issued by this Court is hereby LIFTED and the bond posted therefor is ORDERED RELEASED. With costs.The petition in CA-G.R. SP No. 97812 is hereby GRANTED. The November 8, 2006 and the January 18, 2007 Order(s) of the Regional Trial Court of Pasig City, Br. 160, are declared NULL and VOID. The Spouses Nicanor, Jr. and Esther de Guzman are given leave to intervene in SCA No. 2988-SJ and the said court is DIRECTED to proceed with the case accordingly. No costs.SO ORDERED.28

Hence, the instant petition.The issues for resolution are:

I. May BON-MAR intervene in the proceedings in Civil Case No. 56393? – Yes.II. Are the DE GUZMANS entitled to a writ of possession? – No.III. May the DE GUZMANS intervene in SCA No. 2988-SJ? – No.

I. BON-MAR MAY INTERVENE IN CIVIL CASE NO. 56393.The decision in Civil Case No. 67315 declared BON-MAR as successor-in-interest of the DE GUZMANS. Thus, BON-MAR is not a mere stranger to the litigation in Civil Case No. 56393; it is a necessary party who must be joined in the suit if complete relief is to be accorded as to those already parties, or for a complete determination or settlement of the claim subject of the action.29 BON-MAR’s intervention is necessary in order to put an end to Civil Case No. 56393, because if it were established that BON-MAR obtained its title from the GARCIAS who in turn obtained the same from the DE GUZMANS, then there is nothing left for the DE GUZMANS to execute, because their claim in Civil Case No. 56393 has been fully satisfied as early as 1995.30 There would thus be no further reason for the proceedings in Civil Case No. 56393 to continue.The trial court did not err when it initially denied on December 18, 2003 BON-MAR’s Omnibus Motion (to intervene and to quash the writ of execution) because at that time, the decision in Civil Case No. 67315 (which cancelled UYS’ titles and recognized BON-MAR’s ownership over the subject lots) had not yet become final and executory. Said decision attained finality only on September 5, 2004.BON-MAR could not yet intervene in Civil Case No. 56393 until its title to the subject lots is established, or recognized, by way of a final and executory decision in Civil Case No. 67315. Since title to the subject lots were then still registered in the name of the UYS, BON-MAR had nothing to show to the trial court in Civil Case No. 56393 that it had any legal interest to protect in the subject lots.However, with the finality of the decision in Civil Case No. 67315 (declaring BON-MAR as owner of the subject lots) it acquired legal interest to defend its title against any threat or challenge. The pronouncement by the Court of Appeals in CA-G.R. SP No. 82807 that BON-MAR is a stranger to the litigation in Civil Case No. 56393 thus no longer applies, because the facts which gave rise to the decision in said case no longer holds true. Having been declared the owner of the subject lots, BON-MAR is now possessed of the legal interest to intervene in Civil Case No.

56393, and to oppose DE GUZMANS’ attempt to re-acquire the subject lots through execution proceedings.To warrant intervention, two requisites must concur: (a) the movant has a legal interest in the matter in litigation, and (b) intervention must not unduly delay or prejudice the adjudication of the rights of the parties nor should the claim of the intervenor be capable of being properly decided in a separate proceeding.31 The interest, which entitles a person to intervene in a suit, must involve the matter in litigation and of such direct and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment.32

The judgment in Civil Case No. 67315 declaring BON-MAR as owner of the subject lots should have convinced the trial court to conduct an inquiry. Although BON-MAR may have conceded that it is a stranger to the litigation, the same does not bind the Court. Besides, the facts and the law belie this claim. While this Court gives considerable weight to the parties’ formulation of the issues, the resolution of the controversy may warrant an approach that goes beyond the narrow confines of the issues raised.33Justice does not depend on the depth of the parties’ arguments; it is based on the established facts and the applicable law.Thus, when BON-MAR moved to reconsider the trial court’s Order denying its motion to intervene and granting the writ of possession to the DE GUZMANS, the trial court should have granted the same in view of the final and executory judgment in Civil Case No. 67315 declaring BON-MAR as owner of the subject lots.Moreover, the trial court erred in ignoring BON-MAR’s third-party claim, which the latter filed after its attempt at intervention was rebuffed. Rule 39 of the Rules of Court, provides:

Sec. 16. Proceedings where property claimed by third person.If the property levied on is claimed by any person other than the judgment obligor 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 the same upon the officer making the levy and a copy thereof upon the judgment obligee, the officer shall not be bound to keep the property, unless such judgment obligee, on demand of the officer, files a bond approved by the court to indemnify the third-party claimant in a sum not less than the value of the property levied on. In case of disagreement as to such value, the same shall be determined by the court issuing the writ of execution. No claim for damages for the taking or keeping of the property may be enforced against the bond unless the action therefor is filed within one hundred twenty (120) days from the date of the filing of the bond.The officer shall not be liable for damages for the taking or keeping of the property, to any third-party claimant if such bond is filed. Nothing herein contained shall prevent such claimant or any third person from vindicating his claim to the property in a separate action, or prevent the judgment obligee from claiming damages in the same or a separate action against a third-party claimant who filed a frivolous or plainly spurious claim.When the writ of execution is issued in favor of the Republic of the Philippines, or any officer duly representing it, the filing of such bond shall not be required, and in case the sheriff or levying officer is sued for damages as a result of the levy, he shall be represented by the Solicitor General and if held liable therefor, the actual damages adjudged by the court shall be paid by the National Treasurer out of such funds as may be appropriated for the purpose.

The above provision bestows upon third parties claiming rights to property under execution the right to protect their interests by interposing a third-party claim in the same case, or by instituting a separate reivindicatory action against the executing creditor.34 The third-party claim that is heard in the same case may be tried at length or summarily. Proceedings to resolve the possession of third-party claimants may proceed independently of the action which said claimants may bring to enforce or protect their claim of ownership over the property.35

The records show that BON-MAR’s third-party claim was not even considered by the trial court, despite its declaration of ownership over the subject lots pursuant to the judgment in Civil Case No. 67315. BON-MAR is not an ordinary stranger charged with knowledge of the DE GUZMANS’ pending suit with respect to the disputed lots; it is one which claims ownership precisely as a result of that suit.Thus, BON-MAR should be given the opportunity to ventilate, in Civil Case No. 56393, and not in another suit, its claim that the DE GUZMANS are unlawfully attempting to execute anew a

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judgment that has been previously satisfied. The judgment in Civil Case No. 67315 is superior to that in Civil Case No. 56393, because the evidence established in the former renders the decision in the latter case moot. It is therefore unnecessary for BON-MAR to file a separate action against the DE GUZMANS.II. THE DE GUZMANS ARE NOT ENTITLED TO A WRIT OF POSSESSION.A writ of possession may not be issued in favor of the DE GUZMANS pending resolution of BON-MAR’s intervention cum third-party claim. If possession were surrendered to the DE GUZMANS before BON-MAR’s claim is resolved, and it is later adjudged that BON-MAR is the true owner such that the disputed lots should then be returned to it, then the court would have simply engaged in futile endeavor.

(I)t is impractical to award possession to a party who, after all, purchased the property with knowledge of the existence of a third-party claim, before said claim has been decided, even at least preliminarily, after a hearing, only to return said possession to the third-party claimant should he win. Such a procedure is liable to give rise to more complications than if the procedure laid down above were followed.36

A proceeding for the issuance of a writ of possession is a mere incident in the transfer of title;37 the courts may not grant the writ where title is in doubt, as in this case, where the trial court still has to hear BON-MAR on its claim. The prudent course of action, therefore, is to hold in abeyance proceedings for the issuance of the writ. Actual possession under claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property, not summarily through a motion for the issuance of a writ of possession.38

Civil Case Nos. 56393 and 67315 – despite involving title to real property, are essentially actions quasi in rem. Judgment in both cases affects only the parties thereto and their successors-in-interest; it does not bind the whole world.

A judgment directing a party to deliver possession of a property to another is in personam; it is binding only against the parties and their successors in interest by title subsequent to the commencement of the action. "Suits to quiet title are not technically suits in rem, nor are they, strictly speaking, in personam, but being against the person in respect of the res, these proceedings are characterized as quasi in rem. The judgment in such proceedings is conclusive only between the parties." In this case, the action below is basically one for declaration of nullity of title and recovery of ownership of real property, or re-conveyance. "An action to recover a parcel of land is a real action but it is an action in personam, for it binds a particular individual only although it concerns the right to a tangible thing." "Any judgment therein is binding only upon the parties properly impleaded."39

Thus, the DE GUZMANS cannot be bound by what has been decreed in Civil Case No. 67315 unless they are given the opportunity to refute it. Conversely, BON-MAR may not be prevented from attacking the judgment in Civil Case No. 56393, in order to preserve its title. Under these circumstances, there is no other practical venue for both parties to present their conflicting claims than in Civil Case No. 56393, through BON-MAR’s intervention cum third-party claim.III. THE DE GUZMANS CANNOT INTERVENE IN SCA NO. 2988-SJ.Anent the propriety of DE GUZMANS’ intervention in SCA No. 2988-SJ, this Court finds that contempt is not the proper remedy available to BON-MAR for the Registrar of Deeds’ denial of its request for issuance of titles pursuant to the judgment in Civil Case No. 67315. Under Presidential Decree No. 1529, or the Property Registration Decree, BON-MAR should appeal the Registrar of Deeds’ denial byconsulta to the Commissioner of the Land Registration Authority. Thus:

SECTION 117. Procedure. — When the Register of Deeds is in doubt with regard to the proper step to be taken or memorandum to be made in pursuance of any deed, mortgage or other instrument presented to him for registration, or where any party in interest does not agree with the action taken by the Register of Deeds with reference to any such instrument, the question shall be submitted to the Commissioner of Land Registration by the Register of Deeds, or by the party in interest thru the Register of Deeds.Where the instrument is denied registration, the Register of Deeds shall notify the interested party in writing, setting forth the defects of the instrument or legal grounds relied upon, and advising him that if he is not agreeable to such ruling, he may,

without withdrawing the documents from the Registry, elevate the matter by consulta within five days from receipt of notice of the denial of registration to the Commissioner of Land Registration.The Register of Deeds shall make a memorandum of the pending consulta on the certificate of title which shall be cancelled motu proprio by the Register of Deeds after final resolution or decision thereof, or before resolution, if withdrawn by petitioner.The Commissioner of Land Registration, considering the consulta and the records certified to him after notice to the parties and hearing, shall enter an order prescribing the step to be taken or memorandum to be made. His resolution or ruling in consultas shall be conclusive and binding upon all Registers of Deeds, provided, that the party in interest who disagrees with the final resolution, ruling or order of the Commissioner relative to consultas may appeal to the Court of Appeals within the period and in manner provided in Republic Act No. 5434.

Under the 1997 Rules of Procedure, the resolution by the Commissioner of the Land Registration Authority on the consulta may be appealed to the Court of Appeals, which has exclusive jurisdiction to decide the same, within the period and in the manner provided in Rule 43 thereof. SCA No. 2988-SJ should thus be dismissed for being the wrong mode of remedy.WHEREFORE, the Court hereby resolves as follows:1) The petition in CA-G.R. SP No. 94945 is GRANTED. The assailed Decision of the Court of Appeals dated November 14, 2007 denying BON-MAR Realty and Sport Corporation’s petition for intervention in Civil Case No. 56393 and granting Spouses Nicanor, Jr. and Esther de Guzman’s motion for issuance of a writ of possession, and the Resolution dated March 17, 2008 denying reconsideration thereof, areREVERSED and SET ASIDE. The Regional Trial Court of Pasig City, Branch 168, in Civil Case No. 56393 is DIRECTED to receive evidence on Bon-Mar Realty and Sport Corporation’s third-party claim with a view to determining the nature and extent of its claim to the subject lots and to hold in abeyance the enforcement of the writ of possession.2) The petition in CA-G.R. SP No. 97812 is DISMISSED. The November 14, 2007 Decision of the Court of Appeals granting the leave to intervene of the Spouses Nicanor, Jr. and Esther de Guzman in SCA No. 2988-SJ, as well as the March 17, 2008 Resolution denying the motion for reconsideration areREVERSED and SET ASIDE. SCA No. 2988-SJ is ordered DISMISSED for being the wrong mode of remedy.SO ORDERED.

G.R. No. L-53969 February 21, 1989PURIFICACION SAMALA and LEONARDO ESGUERRA, petitioners, vs.HON. LUIS L. VICTOR, CFI of Cavite, Br. II, EMERITA C. JUMANAN and RICARDO JUMANAN, respondents.Franco L. Loyola for petitioners.Jose T Cajulis for respondents. FERNAN, C.J.:

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This is a petition for review on certiorari seeking the reversal of the decision of the Court of First Instance of Cavite, Branch II, Cavite City, in Civil Case No. N-2411 entitled: "Emerita C. Jumanan, et al., plaintiffs, v. Felisa R. Garcia, et al, defendants; Felisa R. Garcia, et al., third-party plaintiffs, v. Purificacion Samala, et al., third-party defendants; Purificacion Samala, fourth-party plaintiff, v. The Imperial Insurance, Inc., fourth-party defendant", absolving the defendants from any liability and ordering the third party defendants and fourth party plaintiffs, Purificacion Samala and Leonardo Esguerra (petitioners herein) and the fourth party defendant Imperial Insurance, Inc., jointly and severally to pay to plaintiffs (respondent herein) the damages mentioned in the decision. 1

The factual background of this case as found by the trial court is as follows:At approximately 6:30 o'clock in the morning of February 7, 1976, plaintiff Emerita C. Jumanan was riding a passenger jeepney on her way from her residence at Binakayan, Kawit, Cavite to her place of work at the Department (now Ministry) of Public Information in Intramuros, Manila, where she was employed. The said passenger jeepney, which is owned by defendants Felisa and Tomas Garcia, was then being driven by defendant Virgilio Profeta and was bound for Manila carrying about twelve passengers.While the aforesaid passenger jeepney where Emerita C. Jumanan was riding was about to make a left turn on the road just below the bridge at Barrio Mabolo, Bacoor, Cavite, a delivery panel of the Luau restaurant bearing plate No. UH- 41373, driven by Domingo Medina was approaching from the opposite direction from Manila, followed by the Saint Raphael Transit passenger bus, owned by third party defendant Purificacion Samala and being driven by third party defendant Leonardo Esguerra. The Saint Raphael Transit passenger bus was running fast and after overtaking a vehicle the Saint Raphael Transit bumped the back portion of the delivery panel so violently and strongly causing the delivery panel to swerve abruptly to the path of the oncoming passenger jeepney in which plaintiff Emerita C. Jumanan was on board. So forceful was the impact of the collision between the delivery panel and the passenger jeepney that several passengers of the jeepney were injured, including plaintiff Emerita C. Jumanan.Taken to the National Orthopedic Hospital, after an emergency treatment at the Katigbak clinic at Binakayan, Kawit, Cavite, Emerita C. Jumanan was examined and found to be suffering from tenderness and swelling of the right thigh, tenderness over the left hip, tenderness over the nape and back of the neck of the right shoulder; limitation of left extremity, light limitation of motion of right extremity; contusion left hip right thigh and fracture of left inferior ramus of ischium Exhibits D and D-1). Admitted and treated at the National Orthopedic Hospital on February 7, 1976, Emerita C. Jumanan was discharged on a wheel chair on February 20, 1976 and advised to have complete bed rest for thirty days. 2

Emerita C. Jumanan, assisted by her husband Ricardo Jumanan, filed before the CFI of Cavite a complaint for damages arising from physical injuries suffered by her as a passenger of the jeepney bearing plate No. PUJ-VY-542 '75 allegedly owned and operated by the four-named defendants, spouses Felisa and Tomas Garcia, Emetiquio M. Jarin and Juanita Madlangbayan, and driven by the last named defendant, Virgilio Profeta.

In their separate answers, both Jarin and Madlangbayan denied liability, claiming they no longer owned the passenger jeepney at the time of the incident in question, said ownership having been transferred to the spouses Garcia. While admitting to be the owners of the passenger jeepney, the spouses Garcia nonetheless denied liability, alleging that the vehicular collision complained of was attributable to the fault and negligence of the owner and driver of the Saint Raphael Transit passenger bus with plate No. XGY-297 PUB- Phil. '75. Consequently, a third-party complaint was filed by defendants spouses Garcia and Virgilio Profeta against Purificacion Samala and Leonardo Esguerra, owner and driver, respectively, of the Saint Raphael Transit Bus. The latter defendants, in turn, filed a fourth-party complaint against the insurer of the Saint Raphael Transit Bus, Imperial Insurance, Inc., which was declared in default for failure to appear at the pre-trial conference.After trial, respondent Judge rendered a decision in favor of the defendants, the dispositive portion of which reads:

PREMISES CONSIDERED, judgment is hereby rendered -1. Absolving defendants Felisa and Tomas Garcia, Virgilio Profeta, Juanita Madlangbayan and Emetiquio Jarin from any liability;2. Ordering the third party defendants and fourth party plaintiffs, Purificacion Samala and Leonardo Esguerra, and the fourth party defendant Imperial Insurance, Inc., jointly and severally, to pay to plaintiffs Emerita C. Jumanan and Ricardo Jumanan the following-.(a) Actual or compensatory damages in the amount of P 7,958.83;(b) Moral damages in the amount of P 5,000.00;(c) Exemplary damages in the amount of P 3,000.00; and(d) Attorney's fees and expenses of litigation in the amount of P 2,000.00.Plus costs of this suit.SO ORDERED. 3

Third party defendants Purificacion Samala and Leonardo Esguerra moved to reconsider said decision, but to no avail. Hence, this appeal by certiorari, therein third party defendants (petitioners herein) contending that:

1. The lower court erred in holding that the third-party defendants and fourth party plaintiff and the fourth party defendant are jointly and severally liable to pay the claim of plaintiffs.2. The third-party defendant and fourth-party plaintiff should be absolved from any liability since the principal defendants have been absolved from the claim of plaintiffs, a matter not appreciated by the lower court;3. The lower court erred in not holding that since plaintiffs' cause of action is based on culpa contractual against the defendants only, they cannot recover from the third- party defendants fourth-party plaintiffs on a cause of action based on tort or quasi-delict. 4

At issue in this case is the nature and office of a third-party complaint.Appellants argue that since plaintiffs filed a complaint for damages against the defendants on a breach of contract of carriage, they cannot recover from the third-party defendants on a cause of action based on quasi-delict. The third party defendants, they allege, are never parties liable with respect to plaintiff s claim although they are with respect to the defendants for indemnification, subrogation, contribution or other reliefs. Consequently, they are not directly liable to the plaintiffs. Their liability commences only when the defendants are adjudged liable and not when they are absolved from liability as in the case at bar. 5

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Quite apparent from these arguments is the misconception entertained by appellants with respect to the nature and office of a third party complaint.Section 16, Rule 6 of the Revised Rules of Court defines a third party complaint as a "claim that a defending party may, with leave of court, file against a person not a party to the action, called the third-party defendant, for contribution, indemnification, subrogation, or any other relief, in respect of his opponent's claim." In the case ofViluan vs. Court of appeals, et al., 16 SCRA 742 [1966], this Court had occasion to elucidate on the subjects covered by this Rule, thus:

... As explained in the Atlantic Cost Line R. Co. vs. U.S. Fidelity & Guaranty Co., 52 F. Supp. 177 (1943:)

'From the sources of Rule 146 and the decisions herein cited, it is clear that this rule, like the admiralty rule, 'covers two distinct subjects, the addition of parties defendant to the main cause of action, and the bringing in of a third party for a defendant's remedy over'. ...'If the third party complaint alleges facts showing a third party's direct liability to plaintiff on the claim set out in plaintiffs petition, then third party 'shall' make his defenses as provided in Rule 12 and his counterclaims against plaintiff as provided in Rule 13. In the case of alleged direct liability, no amendment (to the complaint) is necessary or required. The subject-matter of the claim is contained in plaintiff's complaint, the ground of third party's liability on that claim is alleged in third party complaint, and third party's defense to set up in his answer to plaintiff's complaint. At that point and without amendment, the plaintiff and third party are at issue as to their rights respecting the claim.The provision in the rule that, 'The third-party defendant may assert any defense which the third-party plaintiff may assert to the plaintiffs claim,' applies to the other subject, namely, the alleged liability of third party defendant. The next sentence in the rule, 'The third-party defendant is bound by the adjudication of the third party plaintiffs liability to the plaintiff, as well as of his own to the plaintiff or to the third- party plaintiff applies to both subjects. If third party is brought in as liable only to defendant and judgment is rendered adjudicating plaintiff's right to recover against defendant and defendant's rights to recover against third party, he is bound by both adjudications. That part of the sentence refers to the second subject. If third party is brought in as liable to plaintiff, then third party is bound by the adjudication as between him and plaintiff. That refers to the first subject. If third party is brought in as liable to plaintiff and also over to defendant,

then third party is bound by both adjudications. ....

Under this Rule, a person not a party to an action may be impleaded by the defendant either (a) on an allegation of liability to the latter; (b) on the ground of direct liability to the plaintiff-, or, (c) both (a) and (b). The situation in (a) is covered by the phrase "for contribution, indemnity or subrogation;" while (b) and (c) are subsumed under the catch all "or any other relief, in respect of his opponent's claim."The case at bar is one in which the third party defendants are brought into the action as directly liable to the plaintiffs upon the allegation that "the primary and immediate cause as shown by the police investigation of said vehicular collision between (sic) the Above-mentioned three vehicles was the recklessness and negligence and lack of imprudence (sic) of the third-party defendant Virgilio (should be Leonardo) Esguerra y Ledesma then driver of the passenger bus." 7 The effects are that "plaintiff and third party are at issue as to their rights respecting the claim" and "the third party is bound by the adjudication as between him and plaintiff." It is not indispensable in the premises that the defendant be first adjudged liable to plaintiff before the third-party defendant may be held liable to the plaintiff, as precisely, the theory of defendant is that it is the third party defendant, and not he, who is directly liable to plaintiff. The situation contemplated by appellants would properly pertain to situation (a) above wherein the third party defendant is being sued for contribution, indemnity or subrogation, or simply stated, for a defendant's "remedy over".Anent appellant's claim that plaintiff who sued on contractual breach cannot recover on the basis of quasi-delict, suffice it to say that as the primary purpose of this rule is to avoid circuity of action and to dispose of in one litigation, the entire subject matter arising from a particular set of fact 8 it is immaterial that the third-party plaintiff asserts a cause of action against the third party defendant on a theory different from that asserted by the plaintiff against the defendant. 9 It has likewise been held that "a defendant in a contract action may join as third-party defendants those liable to him in tort for the plaintiff s claim against him or directly to the plaintiff. 10

The incident complained of having been found to have been caused by the negligence of appellant Leonardo Esguerra, driver and employee of co-appellant Purificacion Samala, no reversible error was committed by the trial court in adjudging the latter liable to plaintiffs-appellees.WHEREFORE, the instant appeal by certiorari is hereby DISMISSED with costs against appellants. This decision is immediately executory.SO ORDERED.

G.R. No. 163981. August 12, 2005CONSTRUCTION & DEVELOPMENT CORPORATION OF THE PHILIPPINES (now PHILIPPINE NATIONAL CONSTRUCTION CORPORATION), Petitioners, vs.RODOLFO M. CUENCA and MALAYAN INSURANCE CO., INC., Respondent.D E C I S I O NCALLEJO, SR., J.:Before this Court is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 44660 and its Resolution denying a motion for reconsideration thereof.The BackdropUltra International Trading Corporation (UITC) applied for a surety bond from Malayan Insurance Co., Inc. (MICI), to guarantee its credits, indebtedness, obligations and liabilities of any kind to

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Goodyear Tire and Rubber Company of the Philippines (Goodyear). MICI approved the application and issued MICO Bond No. 657342 for an amount not exceeding P600,000.00. The surety bond was valid for 12 months, and was renewed several times, the last time being on May 15, 1983.3

To protect MICI’s interests, UITC, Edilberto Cuenca, and Rodolfo Cuenca, herein respondent, executed an Indemnity Agreement4 in favor of MICI. Edilberto was then the President, while Rodolfo was a member of the Board of Directors of UITC. Edilberto signed the indemnity agreement in his official and personal capacity, while Rodolfo signed in his personal capacity only. In the said agreement, UITC, Edilberto and Rodolfo bound themselves jointly and severally to indemnify MICI of any payment it would make under the surety bond.On February 18, 1983, Goodyear sent a letter5 to MICI informing it of UITC’s default on its obligation. In the said letter, Goodyear requested MICI to pay P600,000.00 under the surety bond. MICI sent several demand letters to UITC, Edilberto and Rodolfo, requiring them to immediately settle Goodyear’s claim.6 UITC, Edilberto and Rodolfo failed to settle the account with Goodyear. Thus, on April 25, 1983, MICI paid Goodyear P600,000.00.7

On May 3, 1983, MICI sent a demand letter to UITC, Edilberto and Rodolfo for reimbursement of the payment it made to Goodyear, plus legal interest.8 UITC replied that Construction & Development Corporation of the Philippines (CDCP), now Philippine National Construction Corporation (PNCC), had initiated a complete review of UITC’s financial plans to enable it to pay its creditors, like MICI.9 UITC was a subsidiary of petitioner PNCC,10 with the latter owning around 78% of the former’s shares of stock.11 UITC requested MICI to delay the filing of any suit against it, to give it time to work out an acceptable repayment plan.12 MICI agreed and gave UITC until May 20, 1983 to come up with an offer.13

However, UITC, Edilberto and Rodolfo still failed to pay MICI. On July 1, 1983, MICI filed a Complaint14 for sum of money against UITC, Edilberto and Rodolfo, praying for indemnity of the amount it paid to Goodyear, plus interest per annum compounded quarterly from April 25, 1983 until fully paid, and 20% of the amount involved as attorney’s fees and costs of the suit.On July 23, 1983, UITC wrote MICI proposing the following:a. Immediate payment of P150,000.00.b. Balance payable P50,000.00 per month until the obligation is fully liquidated.c. Interest and penalty charges are to be waived.15

In the meantime, Rodolfo filed motion for leave to file a third-party complaint which the trial court granted.16 The third-party complaint17 against CDCP alleged that it had assumed Rodolfo’s liability under the indemnity agreement as indicated in a board resolution. In support of this allegation, he presented in evidence a certification of Antonio Roque, Assistant Corporate Secretary of CDCP, attesting to the correctness of an excerpt from the minutes of the Board of Directors’ meeting of January 10, 1978, which reads:GUARANTEE MADE BY CDCP REPRESENTATIVES IN OTHER CORPORATIONS_______________________________________________________________In fairness to the CDCP Board Members and/or Officers who represent the Corporation in other affiliated corporations and who are made to sign jointly and severally guarantees for and in support of said affiliated corporations, the Board under Res. No. BD-59-77/78 made of record CDCP’s assumption of all said guarantees and the liabilities and responsibilities arising therefrom. In the same vein, any guaranty fee that may be payable to said representatives shall accrue to CDCP.18

On August 26, 1983, UITC remitted to MICI P150,000.00 as partial payment of its obligation.19 Nonetheless, the parties failed to reach an amicable settlement of their respective claims.On January 6, 1994, the Regional Trial Court (RTC) of Manila, Branch 51, rendered a decision holding UITC and PNCC, jointly and solidarily liable to MICI under the indemnity agreement. The trial court ruled that UITC was bound by the indemnity agreement entered into by its two officers, even though there was no board resolution specifically authorizing them to do so because it had, in effect, ratified the acts of the said officers. Moreover, UITC has acknowledged its obligation to MICI in the letters it sent to the latter, and when it had remitted P150,000.00 as partial payment. It also held PNCC solidarily liable with UITC on the basis of the board resolution attesting to the fact that PNCC had assumed all liabilities arising from the guarantees made by its officers in other affiliated corporations.20 The trial court dismissed the complaint as against the Cuencas. The dispositive portion of the RTC decision reads:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of plaintiff Malayan Insurance Co., Inc. and against defendant ULTRA and Third-Party defendant PNCC, ordering the latter to pay jointly and solidarily the former the following:a) The sum of P600,000.00 but considering that defendant ULTRA had already advanced the amount ofP150,000.00 to plaintiff, their liability has then reduced to the sum of P450,000.00 with legal interest from the date of the filing of the complaint until fully paid;b) The sum equivalent to 20% of all the amounts due and demandable as and for attorney’s fees; andc) The costs of suit.The complaint against defendants Edilberto Cuenca and Rodolfo Cuenca and their counter-claims are hereby dismissed for lack of merit.SO ORDERED.21

UITC and PNCC appealed the decision to the CA, but MICI did not. On October 28, 2003, the CA affirmed in totothe appealed decision.22 The appellate court held that UITC had impliedly authorized Edilberto and Rodolfo to procure the surety bond and the indemnity agreement; hence, UITC was liable. Moreover, UITC was estopped from questioning Edilberto and Rodolfo’s authority to enter into the indemnity agreement in its behalf, considering that it had already partially paid P150,000.00 to MICI. The appellate court added that Edilberto and Rodolfo, having signed the indemnity agreement also in their personal capacity, would ordinarily be personally liable under the said agreement; but because MICI failed to appeal the decision, it had effectively waived its right to hold them liable on its claim.23

The CA further affirmed the trial court’s finding that PNCC was liable under the indemnity agreement. The appellate court noted that UITC was a subsidiary company of PNCC because the latter holds almost 78% of UITC’s stocks. As such, UITC would purchase materials from suppliers such as Goodyear, in behalf of PNCC. Finally, the CA held that the award of attorney’s fees was justified, considering that payment of attorney’s fees is specifically stated in the indemnity agreement.On June 3, 2004, the CA denied PNCC’s motion for reconsideration for lack of merit. 24 Hence, this petition for review, where the petitioner assigns the following errors:I.THE COURT OF APPEALS GRAVELY ERRED IN FINDING PETITIONER PNCC, JOINTLY AND SEVERALLY, LIABLE WITH ULTRA FOR THE INDEMNIFICATION AMOUNT REIMBURSABLE TO RESPONDENT MALAYAN AND IN EXEMPTING RESPONDENT RODOLFO CUENCA FROM ANY LIABILITY THEREFOR.II.THE COURT OF APPEALS GRAVELY ERRED IN FINDING PETITIONER PNCC, JOINTLY AND SEVERALLY, LIABLE WITH ULTRA FOR THE PAYMENT OF ATTORNEY’S FEES AND COSTS OF SUIT.25

The sole issue in this petition is whether or not the petitioner is jointly and solidarily liable with UITC, a subsidiary corporation, to respondent MICI under the indemnity agreement for reimbursement, attorney’s fees and costs.The petitioner maintains that it cannot be held liable under the indemnity agreement primarily because it was not a party to it. Likewise, it cannot answer for UITC’s liability under the indemnity agreement merely because it is the majority stockholder of UITC. It maintains that it has a personality separate and distinct from that of UITC; hence, it cannot be held liable for the latter’s obligations. The mere fact that the materials purchased from Goodyear were delivered to it does not warrant the piercing of the corporate veil so as to treat the two corporations as one entity, absent sufficient and clear showing that it was purposely used as a shield to defraud creditors.26

Further, the petitioner asserts that respondent Cuenca’s claim that it has assumed his personal liability under the indemnity agreement is unfounded. It assails the reliability of Exhibit 5, the certification attesting to the existence of the board resolution, wherein the petitioner allegedly assumed the personal guarantee of respondent Cuenca. The petitioner avers that the certification is a mere excerpt of the alleged board resolution. It points out that even the CA did not rely on this certification when it held that the Cuencas should be liable, but were absolved of their liabilities because MICI had waived the cause of action against them.27 Assuming that it has assumed the liability of respondent Cuenca, such liability is now extinguished after MICI waived its claim against the said respondent.28

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Finally, the petitioner asserts that there is no basis for the payment of attorney’s fees and costs of suit. It was not a party to the indemnity agreement and the case does not fall under the instances enumerated under Article 2208 of the Civil Code when attorney’s fees are proper.29

For his part, respondent Cuenca reiterates that he is not liable because the petitioner has already assumed his personal liability under the indemnity agreement, as evidenced by a certification issued by the Assistant Corporate Secretary attesting that CDCP Board Resolution No. BD-59-77/78 exists. He points out that the petitioner has already admitted the due execution and authenticity of the certification; hence, it cannot now impugn the existence of the board resolution referred to therein.Respondent Cuenca further argues that PNCC should be liable because it was the one which benefited from the transaction, having received the materials purchased from Goodyear; he did not derive any benefit from it. He emphasizes that the petitioner’s liability arose out of its voluntary assumption of the liabilities of the guarantors under the indemnity agreement, and not from the fact that it is the majority stockholder of UITC. Finally, he asserts that the CA’s decision holding UITC and the petitioner solidarily liable for the payment of attorney’s fees had factual and legal basis.30

On the other hand, respondent MICI avers that the petition is fatally defective for failure to implead as co-respondent, UITC, an indispensable party to the case. It, likewise, asserts that the petition raises no new issues of law, and that the CA and the trial court have amply ruled upon the issues raised in the petition. Further, MICI contends that, since the petitioner has assumed the liability of the UITC officers, it cannot now invoke the doctrine of separate personality.31

The petition is impressed with merit.At the outset, we note that the petitioner became a party to this case only when respondent Cuenca, as defendant, filed a third-party complaint against it on the allegation that it had assumed his liability. Section 11, Rule 6 of the Rules of Court defines a third-party complaint as follows:SEC. 11. Third (fourth, etc.)-party complaint. – A third (fourth, etc.)-party complaint is a claim that a defending party may, with leave of court, file against a person not a party to the action, called the third (fourth, etc.)-party defendant, for contribution, indemnity, subrogation or any other relief, in respect of his opponent’s claim.In Firestone Tire and Rubber Company of the Philippines v. Tempongko,32 we emphasized the nature of a third-party complaint, particularly its independence from the main case:The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff’s claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff’s complaint. Were it not for this provision of the Rules of Court, it would have to be filed independently and separately from the original complaint by the defendant against the third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to litigate his separate cause of action in respect of plaintiff’s claim against a third party in the original and principal case with the object of avoiding circuitry of action and unnecessary proliferation of lawsuits and of disposing expeditiously in one litigation the entire subject matter arising from one particular set of facts. … When leave to file the third-party complaint is properly granted, the Court renders in effect two judgments in the same case, one on the plaintiff’s complaint and the other on the third-party complaint. When he finds favorably on both complaints, as in this case, he renders judgment on the principal complaint in favor of plaintiff against defendant and renders another judgment on the third-party complaint in favor of defendant as third-party plaintiff, ordering the third-party defendant to reimburse the defendant whatever amount said defendant is ordered to pay plaintiff in the case.Failure of any of said parties in such a case to appeal the judgment as against him makes such judgment final and executory….33

It follows then that the plaintiff in the main action may not be regarded as a party to the third-party complaint;34 nor may the third-party defendant be regarded as a party to the main action. As for the defendant, he is party to both the main action and the third-party complaint but in different capacities – in the main action, he is the defendant; in the third-party complaint, he is the plaintiff.

In the present case, the petitioner PNCC which was the third-party defendant appealed before this Court from the decision of the CA. Case law is that if only the third-party defendant files an appeal, the decision in the main case becomes final.35 Therefore, the CA’s decision in the main action, holding UITC liable to MICI and dismissing the case as against the Cuencas, became final and executory when none of the said parties filed an appeal with this Court.We do not agree with the CA ruling that the petitioner is liable under the indemnity agreement. On this point, the CA ratiocinated that the petitioner is liable, considering that it is the majority stockholder of UITC and the materials from Goodyear were purchased by UITC for and in its behalf.This is clearly erroneous. The petitioner cannot be made directly liable to MICI under the indemnity agreement on the ground that it is UITC’s majority stockholder. It bears stressing that the petitioner was not a party defendant in the main action. MICI did not assert any claim against the petitioner, nor was the petitioner impleaded in the third-party complaint on the ground of its direct liability to MICI. In the latter case, it would be as if the third-party defendant was itself directly impleaded by the plaintiff as a defendant.36 In the present case, petitioner PNCC was brought into the action by respondent Cuenca simply for a "remedy over."37 No cause of action was asserted by MICI against it. The petitioner’s liability could only be based on its alleged assumption of respondent Cuenca’s liability under the indemnity agreement.In any case, petitioner PNCC, as majority stockholder, may not be held liable for UITC’s obligation. A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those persons composing it as well as from any other legal entity to which it may be related.38 The veil of corporate fiction may only be disregarded in cases where the corporate vehicle is being used to defeat public convenience, justify a wrong, protect fraud, or defend a crime.39 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 sufficient ground for disregarding the separate corporate personality.40 To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established.41

Neither can the petitioner be made liable under the indemnity agreement on the ground that it had assumed the personal liability of respondent Cuenca. To reiterate, the decision of the CA dismissing the case against respondent Cuenca has already become final and executory. The Court has, likewise, pointed out that respondent Cuenca impleaded the petitioner as a remedy over, and not as one directly liable to MICI. Since the petitioner’s liability is grounded on that of respondent Cuenca’s, it is imperative that the latter be first adjudged liable to MICI before the petitioner may be held liable. Indeed, the Court ruled in Samala v. Victor,42 thus:… It is not indispensable in the premises that the defendant be first adjudged liable to the plaintiff before the third-party defendant may be held liable to the plaintiff, as precisely, the theory of defendant is that it is the third party defendant, and not he, who is directly liable to plaintiff. The situation contemplated by appellants would properly pertain to situation (a) above wherein the third party defendant is being sued for contribution, indemnity or subrogation, or simply stated, for a defendant’s "remedy over".43

WHEREFORE, premises considered, the petition is GRANTED. The decision of the Court of Appeals is MODIFIED in that petitioner PNCC is absolved from any liability under the indemnity agreement. The third-party complaint against the petitioner is DISMISSED for lack of merit.SO ORDERED.

G.R. No. 143264 April 23, 2012LISAM ENTERPRISES, INC. represented by LOLITA A. SORIANO, and LOLITA A. SORIANO, Petitioners, vs.BANCO DE ORO UNIBANK, INC. (formerly PHILIPPINE COMMERCIAL INTERNATIONAL BANK),* LILIAN S. SORIANO, ESTATE OF LEANDRO A. SORIANO, JR., REGISTER OF DEEDS OF LEGASPI CITY, and JESUS L. SARTE, Respondents.D E C I S I O NPERALTA, J.:This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Resolution1 of the Regional Trial Court of Legaspi City (RTC), dated November 11, 1999, dismissing petitioners’ complaint, and its Order2 dated May 15, 2000, denying herein

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petitioners’ Motion for Reconsideration and Motion to Admit Amended Complaint, be reversed and set aside.The records reveal the following antecedent facts.On August 13, 1999, petitioners filed a Complaint against respondents for Annulment of Mortgage with Prayer forTemporary Restraining Order & Preliminary Injunction with Damages with the RTC of Legaspi City. Petitioner Lolita A. Soriano alleged that she is a stockholder of petitioner Lisam Enterprises, Inc. (LEI) and a member of its Board of Directors, designated as its Corporate Secretary. The Complaint also alleged the following:

4. Sometime in 1993, plaintiff LEI, in the course of its business operation, acquired by purchase a parcel of residential land with improvement situated at Legaspi City, covered by Transfer Certificate of Title No. 37866, copy attached as Annex "A," which property is more particularly described as follows:x x x x5. On or about 28 March 1996, defendant Lilian S. Soriano and the late Leandro A. Soriano, Jr., ashusband and wife (hereafter "Spouses Soriano"), in their personal capacity and for their own use and benefit, obtained a loan from defendant PCIB (Legaspi Branch) (now known as Banco de Oro Unibank, Inc.) in the total amount of P20 Million;6. That as security for the payment of the aforesaid credit accommodation, the late Leandro A. Soriano, Jr. and defendant Lilian S. Soriano, as president and treasurer, respectively of plaintiff LEI, but without authority and consent of the board of said plaintiff and with the use of a falsified board resolution, executed a real estate mortgage on 28 March 1996, over the above-described property of plaintiff LEI in favor of defendant PCIB, and had the same registered with the Office of the Registry of Deeds, Legaspi City, copy of the Real Estate Mortgage is hereto attached and marked as Annex "B," and made part hereof, to the prejudice of plaintiffs;7. That specifically, the Spouses Soriano, with intent to defraud and prejudice plaintiff LEI and its stockholders, falsified the signatures of plaintiff Lolita A. Soriano as corporate secretary and director of plaintiff LEI, in a document denominated as board resolution purportedly issued by the board of plaintiff LEI on 6 November 1995, making it appear that plaintiff LEI's Board met and passed a board resolution on said date authorizing the Spouses Soriano to mortgage or encumber all or substantially all of the properties of plaintiff LEI, when in fact and in truth, no resolution of that nature was ever issued by the board of plaintiff LEI, nor a meeting was called to that effect, copy of the resolution in question is hereto attached and marked as Annex "C," and made part hereof;8. That plaintiff Lolita A. Soriano as Corporate Secretary of plaintiff LEI, had never signed a board resolution nor issued a Secretary's Certificate to the effect that on 6 November 1995 a resolution was passed and approved by plaintiff LEI authorizing the Spouses Soriano as president and treasurer, respectively, to mortgage the above-described property of plaintiff LEI, neither did she appear personally before a notary public on 28 March 1996 to acknowledge or attest to the issuance of a supposed board resolution issued by plaintiff LEI on 6 November 1995;9. That defendant PCIB, knowing fully well that the property being mortgaged by the Spouses Soriano belongs to plaintiff LEI, a corporation, negligently and miserably failed to exercise due care and prudence required of a banking institution. Specifically, defendant PCIB failed to investigate and to delve into the propriety of the issuance of or due execution of subject board resolution, which is the very foundation of the validity of subject real estate mortgage. Further, it failed to verify the genuineness of the signatures appearing in said board resolution nor to confirm the fact of its issuance with plaintiff Lolita A. Soriano, as the corporate secretary of plaintiff LEI. Furthermore, the height of its negligence was displayed when it disregarded or failed to notice that the questioned board resolution with a Secretary's Certificate was notarized only on 28 March 1996 or after the lapse of more than four (4) months from its purported date of issue on 6 November 1995. That these circumstances should have put defendant PCIB on notice of the flaws and infirmities of the questioned board resolution. Unfortunately, it negligently failed to exercise due care and prudence expected of a banking institution;

10. That having been executed without authority of the board of plaintiff LEI said real estate mortgage dated 28 March 1996 executed by the Spouses Soriano, as officers of plaintiff LEI in favor of defendant PCIB, is the null and void and has no legal effect upon said plaintiff. Consequently, said mortgage deed cannot be used nor resorted to by defendant PCIB against subject property of plaintiff LEI as no right or rights whatsoever were created nor granted thereunder by reason of its nullity;11. Worst, sometime in August 1998, in order to remedy the defects in the mortgage transaction entered by the Spouses Soriano and defendant PCIB, the former, with the unlawful instigation of the latter, signed a document denominated as "Deed of Assumption of Loans and Mortgage Obligations and Amendment of Mortgage"; wherein in said document, plaintiff LEI was made to assume the P20 Million personal indebtedness of the Spouses Soriano with defendant PCIB, when in fact and in truth it never so assumed the same as no board resolution duly certified to by plaintiff Lolita A. Soriano as corporate secretary was ever issued to that effect, copy of said Deed is hereto attached and marked as Annex "D," and made part hereof;12. Moreover, to make it appear that plaintiff LEI had consented to the execution of said deed of assumption of mortgage, the Spouses Soriano again, through the unlawful instigation and connivance of defendant PCIB, falsified the signature of plaintiff Lolita A. Soriano as corporate secretary of plaintiff LEI in a document denominated as "Corporate Resolution to Borrow," to make it appear that plaintiff LEI so authorized the Spouses Soriano to perform said acts for the corporation, when in fact and in truth no such authority or resolution was ever issued nor granted by plaintiff LEI, nor a meeting called and held for said purpose in accordance with its By-laws; copy of which is hereto attached and marked as Annex "E" and made part hereof;13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff Lolita A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for herself and on behalf and for the benefit of plaintiff LEI, made demands upon defendants Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such mortgage lien, by paying in full their personal indebtedness to defendant PCIB in the principal sum of P20 Million. However, said defendants, for reason only known to them, continued and still continue to ignore said demands, to the damage and prejudice of plaintiffs;14. Hence, on 25 June 1999, plaintiffs commenced a derivative suit against defendants Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., before the Securities and Exchange Commission, docketed as SEC Case No. 06-99-6339 for "Fraudulent Scheme and Unlawful Machination with Damages" in order to protect and preserve the rights of plaintiffs, copy of said complaint is hereto attached as Annex"F";15. That plaintiffs, in order to seek complete relief from the unauthorized mortgage transaction between the Spouses Soriano and defendant PCIB, were further compelled to institute this instant case to seek the nullification of the real estate mortgage dated 28 March 1999. Consequently, plaintiffs were forced to retain the services of a lawyer with whom they contracted to pay P100,000.00 as and for attorney's fee;16. That unfortunately, the plaintiffs learned that on 30 July 1999, defendant Sarte, in his capacity as Notary Public of Daraga, Albay and upon application of defendant PCIB, issued a notice of Auction/Foreclosure Sale of the property subject of the mortgage in question and has set the auction sale on 7 September 1999 x x x;17. That by reason of the fraudulent and surreptitious schemes perpetrated by defendant Lilian S. Soriano and her husband, the late Leandro A. Soriano, Jr., in unlawful connivance and through the gross negligence of defendant PCIB, plaintiff Lolita A. Soriano, as stockholder, suffered sleepless nights, moral shock, wounded feeling, hurt pride and similar injuries, hence, should be awarded moral damages in the amount ofP200,000.00.

After service of summons on all defendants, the RTC issued a temporary restraining order on August 25, 1990 and, after hearing, went on to issue a writ of preliminary injunction enjoining respondent PCIB (now known as Banco de Oro Unibank, Inc.) from proceeding with the auction sale of the subject property.

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Respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. filed an Answer dated September 25, 1999, stating that the Spouses Lilian and Leandro Soriano, Jr. were duly authorized by LEI to mortgage the subject property; that proceeds of the loan from respondent PCIB were for the use and benefit of LEI; that all notarized documents submitted to PCIB by the Spouses Soriano bore the genuine signature of Lolita Soriano; and that although the Spouses Soriano indeed received demands from petitioner Lolita Soriano for them to pay the loan, they gave satisfactory explanations to the latter why her demands could not be honored. It was, likewise, alleged in said Answer that it was respondent Lilian Soriano who should be entitled to moral damages and attorney's fees.On September 28, 1999, respondent PCIB filed a Motion to Dismiss the Complaint on grounds of lack of legal capacity to sue, failure to state cause of action, and litis pendencia. Petitioners filed an Opposition thereto, while PCIB's co-defendants filed a Motion to Suspend Action.On November 11, 1999, the RTC issued the first assailed Resolution dismissing petitioners' Complaint. Petitioners then filed a Motion for Reconsideration of said Resolution. While awaiting resolution of the motion for reconsideration, petitioners also filed, on January 4, 2000, a Motion to Admit Amended Complaint, amending paragraph 13 of the original complaint to read as follows:13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff Lolita A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for herself and on behalf and for the benefit of plaintiff LEI, made demands upon defendant Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such mortgage lien, by paying in full their personal indebtedness to defendant PCIB in the principal sum of P20 Million. However, said defendants, for reason only known to them, continued and still continue to ignore said demands, to the damage and prejudice of plaintiffs; that plaintiff Lolita A. Soriano likewise made demands upon the Board of Directors of Lisam Enterprises, Inc., to make legal steps to protect the interest of the corporation from said fraudulent transaction, but unfortunately, until now, no such legal step was ever taken by the Board, hence, this action for the benefit and in behalf of the corporation;On May 15, 2000, the trial court issued the questioned Order denying both the Motion for Reconsideration and the Motion to Admit Amended Complaint. The trial court held that no new argument had been raised by petitioners in their motion for reconsideration to address the fact of plaintiffs' failure to allege in the complaint that petitioner Lolita A. Soriano made demands upon the Board of Directors of Lisam Enterprises, Inc. to take steps to protect the interest of the corporation against the fraudulent acts of the Spouses Soriano and PCIB. The trial court further ruled that the Amended Complaint can no longer be admitted, because the same absolutely changed petitioners' cause of action.Petitioners filed the present petition with this Court, alleging that what are involved are pure questions of law, to wit:FIRST, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION ON THE GROUND THAT PETITIONER LOLITA A. SORIANO HAS NO LEGAL CAPACITY TO SUE AS SHE IS NOT A REAL PARTY-IN-INTEREST;SECOND, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION ON THE GROUND THAT THERE IS ANOTHER ACTION PENDING BETWEEN THE SAME PARTIES FOR THE SAME CAUSE;THIRD, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION ON THE GROUND THAT THE COMPLAINT STATES NO CAUSE OF ACTION;FOURTH, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DENIED THE ADMISSION OF PETITIONERS' AMENDED COMPLAINT FILED AS A MATTER OF RIGHT, AFTER THE ORDER OF DISMISSAL WAS ISSUED BUT BEFORE ITS FINALITY.FIFTH, WHETHER OR NOT THE COURT ERRED IN DISMISSING THE ACTION, INSTEAD OF MERELY SUSPENDING THE SAME FOLLOWING THE DOCTRINE LAID DOWN IN UNION GLASS. 3

The petition is impressed with merit.The Court shall first delve into the matter of the propriety of the denial of the motion to admit amended complaint. Pertinent provisions of Rule 10 of the Rules of Court provide as follows:

Sec. 2. Amendments as a matter of right. − A party may amend his pleadings once as a matter of right at any time before a responsive pleading is served x x x.Sec. 3. Amendments by leave of court. − Except as provided in the next preceding section, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. x x xIt should be noted that respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. already filed their Answer, to petitioners' complaint, and the claims being asserted were made against said parties. A responsive pleading having been filed, amendments to the complaint may, therefore, be made only by leave of court and no longer as a matter of right. However, in Tiu v. Philippine Bank of Communications,4 the Court discussed this rule at length, to wit:x x x [A]fter petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically allows amendment by leave of court. The said Section states:SECTION 3. Amendments by leave of court. - Except as provided in the next preceding section, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela v. Court of Appeals, thus:Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that the phrase "or that the cause of action or defense is substantially altered" was stricken-off and not retained in the new rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of action or defense." This should only be true, however, when despite a substantial change or alteration in the cause of action or defense, the amendments sought to be made shall serve the higher interests of substantial justice, and prevent delay and equally promote the laudable objective of the rules which is to secure a "just, speedy and inexpensive disposition of every action and proceeding."The granting of leave to file amended pleading is a matter particularly addressed to the sound discretion of the trial court; and that discretion is broad, subject only to the limitations that the amendments should not substantially change the cause of action or alter the theory of the case, or that it was not made to delay the action. Nevertheless, as enunciated in Valenzuela, even if the amendment substantially alters the cause of action or defense, such amendment could still be allowed when it is sought to serve the higher interest of substantial justice, prevent delay, and secure a just, speedy and inexpensive disposition of actions and proceedings.The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of suits and in order that the real controversies between the parties are presented, their rights determined, and the case decided on the merits without unnecessary delay. This liberality is greatest in the early stages of a lawsuit, especially in this case where the amendment was made before the trial of the case, thereby giving the petitioners all the time allowed by law to answer and to prepare for trial.1âwphi1Furthermore, amendments to pleadings are generally favored and should be liberally allowed in furtherance of justice in order that every case, may so far as possible, be determined on its real facts and in order to speed up the trial of the case or prevent the circuitry of action and unnecessary expense. That is, unless there are circumstances such as inexcusable delay or the taking of the adverse party by surprise or the like, which might justify a refusal of permission to amend.5

Since, as explained above, amendments are generally favored, it would have been more fitting for the trial court to extend such liberality towards petitioners by admitting the amended complaint which was filed before the order dismissing the original complaint became final and executory. It is quite apparent that since trial proper had not yet even begun, allowing the amendment would not have caused any delay. Moreover, doingso would have served the higher interest of justice as this would provide the best opportunity for the issues among all parties to be thoroughly threshed out and the rights of all parties finally determined. Hence, the Court overrules the trial court's denial of the motion to admit the amended complaint, and orders the admission of the same.With the amendment stating "that plaintiff Lolita A. Soriano likewise made demands upon the Board of Directors of Lisam Enterprises, Inc., to make legal steps to protect the interest of the

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corporation from said fraudulent transaction, but unfortunately, until now, no such legal step was ever taken by the Board, hence, this action for the benefit and in behalf of the corporation," does the amended complaint now sufficiently state a cause of action? InHi-Yield Realty, Incorporated v. Court of Appeals,6 the Court enumerated the requisites for filing a derivative suit, as follows:

a) the party bringing the suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material;b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea; andc) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being caused to the corporation and not to the particular stockholder bringing the suit.7

A reading of the amended complaint will reveal that all the foregoing requisites had been alleged therein. Hence, the amended complaint remedied the defect in the original complaint and now sufficiently states a cause of action.Respondent PCIB should not complain that admitting the amended complaint after they pointed out a defect in the original complaint would be unfair to them. They should have been well aware that due to the changes made by the 1997 Rules of Civil Procedure, amendments may now substantially alter the cause of action or defense. It should not have been a surprise to them that petitioners would redress the defect in the original complaint by substantially amending the same, which course of action is now allowed under the new rules.The next question then is, upon admission of the amended complaint, would it still be proper for the trial court to dismiss the complaint? The Court answers in the negative.Saura v. Saura, Jr.8 is closely analogous to the present case. In Saura,9 the petitioners therein, stockholders of a corporation, sold a disputed real property owned by the corporation, despite the existence of a case in the Securities and Exchange Commission (SEC) between stockholders for annulment of subscription, recovery of corporate assets and funds, etc. The sale was done without the knowledge of the other stockholders, thus, said stockholders filed a separate case for annulment of sale, declaration of nullity of deed of exchange, recovery of possession, etc., against the stockholders who took part in the sale, and the buyer of the property, filing said case with the regular court (RTC). Petitioners therein also filed a motion to dismiss the complaint for annulment of sale filed with the RTC, on the ground of forum shopping, lack of jurisdiction, lack of cause of action, and litis pendentiaamong others. The Court held that the complaint for annulment of sale was properly filed with the regular court, because the buyer of the property had no intra-corporate relationship with the stockholders, hence, the buyer could not be joined as party-defendant in the SEC case. To include said buyer as a party-defendant in the case pending with the SEC would violate the then existing rule on jurisdiction over intra-corporate disputes. The Court also struck down the argument that there was forum shopping, ruling that the issue of recovery of corporate assets and funds pending with the SEC is a totally different issue from the issue of the validity of the sale, so a decision in the SEC case would not amount to res judicata in the case before the regular court. Thus, the Court merely ordered the suspension of the proceedings before the RTC until the final outcome of the SEC case.The foregoing pronouncements of the Court are exactly in point with the issues in the present case.1âwphi1 Here, the complaint is for annulment of mortgage with the mortgagee bank as one of the defendants, thus, as held inSaura,10 jurisdiction over said complaint is lodged with the regular courts because the mortgagee bank has no intra-corporate relationship with the stockholders. There can also be no forum shopping, because there is no identity of issues. The issue being threshed out in the SEC case is the due execution, authenticity or validity of board resolutions and other documents used to facilitate the execution of the mortgage, while the issue in the case filed by petitioners with the RTC is the validity of the mortgage itself executed between the bank and the corporation, purportedly represented by the spouses Leandro and Lilian Soriano, the President and Treasurer of petitioner LEI, respectively. Thus, there is no reason to dismiss the complaint in this case.IN VIEW OF THE FOREGOING, the Resolution of the Regional Trial Court of Legaspi City, Branch 4, dated November 11, 1999, dismissing petitioners’ complaint in Civil Case No. 9729, and its Order dated May 15, 2000, denying herein petitioners’ Motion for Reconsideration and Motion to Admit Amended Complaint, are herebyREVERSED and SET ASIDE. The Regional Trial Court of Legaspi City, Branch 4, is hereby DIRECTED to ADMITthe Amended Complaint.

Considering further, that this case has been pending for some time and, under R.A. No. 8799, it is now the regular courts which have jurisdiction over intra-corporate disputes, the Regional Trial Court of Legaspi City, Branch 4 is hereby DIRECTED to PROCEED with dispatch in trying Civil Case No. 9729.SO ORDERED.

G.R. No. 73039 October 9, 1987PERFECTA CAVILI, PRIMITIVO CAVILI and QUIRINO CAVILI, petitioners, vs.HON. TEODORO N. FLORENDO, Presiding Judge, Branch XXXVI, Regional Trial Court of Negros Oriental, 7th Judicial Region, CLARITA CAVILI, ULPIANO CAVILI, ESTRELLA CAVILI, PLACIDA CAVILI, ET AL.,respondents.No. L-68680 October 9, 1987PERFECTA CAVILI, PRIMITIVO CAVILI and QUIRINO CAVILI, petitioners, vs.HON. TEODORO N. FLORENDO, Presiding Judge, Branch XXXVI, Regional Trial Court, 7th Judicial Region, CLARITA CAVILI, ULPIANO CAVILI, ESTRELLA CAVILI, PLACIDA CAVILI, GREGORIA CAVILI,

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FORTUNATA CAVILI, AMILITA CAVILI, APAD CAVILI, AQUILINA CAVILI, CRESENCIO CAVILI, ALMA CAVILI, ET AL., respondents.No. L-57771 October 9, 1987QUIRINO CAVILI, PRIMITIVO, CAVILI, and PERFECTA CAVILI, petitioners, vs.HON. CIPRIANO VAMENTA, JR., as Presiding Judge, Branch III Court of First Instance of Negros Oriental; ULPIANO CAVILI, CLARITA CAVILI, ESTRELLA CAVILI, RAMONA TAKANG COSME TAKANG FABIAN TAKANG, LEODEGARIO TAKANG ET AL., respondents. GUTIERREZ, JR., J.:This is a petition to review and set aside two orders of the then Court of First Instance of Negros Oriental, namely: (1) the order dated October 11, 1985, disqualifying Perfects Cavili dela Cruz as a witness in Civil Case No. 6880 entitled "Clarita Cavili, et al. v. Perfecta Cavili, Quirino Cavili, and Primitivo Cavili" and (2) the order dated November 26, 1985, refusing to reconsider the previous orders of disqualification and resetting the reception of evidence for the defendants to December 19 and 20, 1985 with a warning that should defendants' witnesses fail to appear in court on said date, they will be deemed to have waived their right to be witnesses in this case.The private respondents filed Civil Case No. 6880 with the Court of First Instance of Negros Oriental against herein petitioners for Partition, Accounting, and Damages. After the case was raffled to Branch I presided over by Judge Augusto S. Villarin, summons was issued to the three petitioners, all at Bayawan Negros Oriental which was the address indicated in the complaint.After trying to effect service, the process server went back to the court with the following return of service to Quirino and Primitivo Cavili not contacted, according to Perfecta Cavili, subject persons is (sic) staying in Kabangkalan, Negros Occidental."Meanwhile, Atty. Jose P. Alamino filed a motion for extension to answer in behalf of the defendants, manifesting the representation of his client Perfecta Cavili that she will inform her brothers Primitivo and Quirino about the case.The defendants, however, failed to file their answer within the request period and upon motion of the plaintiffs, the defendants were declared in default, and on October 5, 1979, a judgment by default was promulgated by Judge Augusto S. Villarin.The records of the case, however, show that a Manifestation was filed by Atty. Jose P. Alamino informing the court that since he never met Primitivo and Quirino Cavili, who are residents of another province, he desisted from further appearing in the case in their behalf.On November 7, 1979, Atty. Jose P. Alamillo received a copy of the decision. On December 7, 1979, he filed a motion for new trial in behalf of the defendants on grounds of lack of jurisdiction and, with a meritorious defense that the properties sought to be partitioned have already been the subject of

a written partition agreement between the direct heirs of the late Bernardo Cavili who are the predecessors of the parties in this case. In/an order dated April 23, 1980, the court granted said motion.The plaintiffs filed a motion for reconsideration of the order granting new trial and at the same time prayed that a writ of execution be issued but only in so far as defendant Perfecta Cavili was concerned.In an order dated July 21, 1981, Judge Cipriano Vamenta of Branch III of the Court of First Instance of Negros Oriental to whom the case had been assigned after a re-raffle, set aside the order of April 23, 1980 and directed the execution of the October 5, 1979 decision without qualification ruling that the petitioners' remedy should have been appeal rather than new trial.Their motion for reconsideration having been denied on August 11, 1981, the defendants, now petitioners, brought the case to this Court through a petition for certiorari, G.R. No. 57771, entitled "Quirino Cavili, et al., Petitioners vs. Hon. Cipriano Vamenta, et al., Respondents "On May 31, 1982, this Court rendered a decision, the dispositive portion of which reads:

WHEREFORE, Our resolution dismissing the petition is hereby reconsidered; the petition is granted; and the order dated July 21, 1981, is set aside while that of April 23, 1980, is revived. (No special pronouncement as to costs. Rollo p. 21)

Thereafter, the pre-trial and trial of Civil Case No. 6880 was scheduled on October 9, 10, and 11, 1985 before Branch XXXVI of the Regional Trial Court, presided by respondent Judge Teodoro N. Florendo. The defendants, (now petitioners), presented Perfects Cavili dela Cruz as their first witness. The respondents, through counsel moved for her disqualification as a witness on the ground that having been declared in default, Perfects Cavili has lost her standing in court and she cannot be allowed to participate in all premise the even as a witness. The court, through the respondent judge, sustained the respondents' contention and disqualified her from testifying.The petitioners, through counsel, moved for a reconsideration of the ruling.On November 26, 1985, the lower court issued an order denying reconsideration of its Order dated October 11, 1985 disqualifying Perfecta Cavili dela Cruz as a witness in Civil Case No. 6880.Hence, this petition.Petitioner Perfecta Cavili's competence as a witness is put in issue by the private respondents.Section 18, Rule 130 of the Revised Rules of Court states who are qualified to be witnesses. It provides:Section 18. Witnesses; their qualifications. — Except as provided in the next succeeding section, all persons who, having organs of sense, can perceive, and perceiving, can make known their perception to others, may be witnesses. Neither parties nor other persons interested in the outcome of a case shall be excluded; nor those who have been convicted of crime; nor any person on account of his opinion on matters of religious belief.

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The generosity with which the Rule allows people to testify is apparent. Interest in the outcome of a case, conviction of a crime unless otherwise provided by law, and religious belief are not grounds for disqualification.Sections 19 and 20 of Rule 130 provide for specific disqualifications. Section 19 disqualifies those who are mentally incapacitated and children whose tender age or immaturity renders them incapable of being witnesses. Section 20 provides for disqualification based on conflicts of interest or on relationship. Section 21 provides for disqualifications based on privileged communications. Section 15 of Rule 132 may not be a rule on disqualification of witnesses but it states the grounds when a witness may be impeached by the party against whom he was called.There is no provision of the Rules disqualifying parties declared in default from taking the witness stand for non-disqualified parties. The law does not provide default as an exception. The specific enumeration of disqualified witnesses excludes the operation of causes of disability other than those mentioned in the Rules. It is a maxim of recognized utility and merit in the construction of statutes that an express exception, exemption, or saving clause excludes other exceptions. (In Re Estate of Enriquez, 29 Phil. 167) As a general rule, where there are express exceptions these comprise the only limitations on the operation of a statute and no other exception will be implied. (Sutherland on Statutory Construction, Fourth Edition, Vol. 2A, p. 90) The Rules should not be interpreted to include an exception not embodied therein.The respondents, however, cite Section 2, Rule 18 on Defaults, to wit:Section 2. Effect of order of default. — Except as provided in section 9 of Rule 13, a party declared in default shall not be entitled to notice of subsequent proceedings nor to take part in the trial.They advance the argument that to allow Perfecta Cavili to stand as witness would be to permit a party in default "to take part in the trial."An explanation of the Rule is in order.Loss of standing in court is the consequence of an order of default. Thus, a party declared in default is considered out of court and cannot appear therein, adduce evidence, and be heard and for that reason he is not entitled to notice. (Rule 18, Rules of Court; Lim Toco v. Go Fay, 80 Phil. 166) However, "loss of pending" must be understood to mean only the forfeiture of one's rights as a party litigant, contestant or legal adversary. A party in default loses his right to present his defense, control the proceedings, and examine or cross-examine witnesses. He has no right to expect that his pleadings would be acted upon by the court nor may he object to or refute evidence or motions filed against him. There is nothing in the rule, however, which contemplates a disqualification to be a witness or a opponent in a case. Default does not make him an incompetent.As opposed to a party litigant, a witness is merely a beholder, a spectator or onlooker, called upon to testify to what he has seen, heard, or observed. As such, he takes no active part in the contest of rights between the parties.

Cast in the cited role of witness, a party in default cannot be considered as " a part in the trial." He remains suffering the effects of an order of default.A party in default may thus be cited as a witness by his co-defendants who have the standing and the right to present evidence which the former may provide. The incidental benefit giving the party in default the opportunity to present evidence which may eventually redound to his advantage or bring about a desired result, through his co-defendants, is of minor consequence.Of greater concern or importance in allowing the presence of Perfecta Cavili as a witness in the case at bar, is the preservation of the right of petitioners Quirino and Primitivo Cavili to secure the attendance of witnesses and the production of evidence in their behalf. To reject Perfects Cavili's presentation of testimonial evidence would be to treat Primitivo and Quirino, as if they too were in default. There is no reason why the latter should also be made to bear the consequences of Perfecta's omission. Moreover, we cannot deprive Quirino and Primitivo of the only instrument of proof available to them, as Perfecta alone has been in possession and administration of the claim.WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The order of the respondent court disqualifying. Perfects Cavili dela Cruz as a witness in Civil Case No. 6880 is hereby SET ASIDE. The case is remanded to the court a quo for Wither proceedings. The temporary restraining order issued on January 6, 1986 is LIFTED.SO ORDERED.

G.R. No. 173559 January 7, 2013LETICIA DIONA, represented by her Attorney-in-Fact, MARCELINA DIONA, Petitioner, vs.ROMEO A. BALANGUE, SONNY A. BALANGUE, REYNALDO A. BALANGUE, and ESTEBAN A. BALANGUE, JR., Respondents.D E C I S I O NDEL CASTILLO, J.:The great of a relief neither sought by the party in whose favor it was given not supported by the evidence presented violates the opposing party’s right to due process and may be declared void ab initio in a proper proceeding.This Petition for Review on Certiorari1 assails the November 24, 2005 Resolution2 of the Court of Appeals (CA) issued in G.R. SP No. 85541 which granted the Petition for Annulment of Judgment3 filed by the respondents seeking to nullify that portion of the October 17, 2000 Decision4 of the Regional Trial Court (RTC), Branch 75, Valenzuela City awarding petitioner 5% monthly interest rate for the principal amount of the loan respondent obtained from her.This Petition likewise assails the CA’s June 26, 2006 Resolution5 denying petitioner’s Motion for Reconsideration.Factual AntecedentsThe facts of this case are simple and undisputed.

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On March 2, 1991, respondents obtained a loan of P45,000.00 from petitioner payable in six months and secured by a Real Estate Mortgage6 over their 202-square meter property located in Marulas, Valenzuela and covered byTransfer Certificate of Title (TCT) No. V-12296.7 When the debt became due, respondents failed to pay notwithstanding demand. Thus, on September 17, 1999, petitioner filed with the RTC a Complaint8 praying that respondents be ordered:

(a) To pay petitioner the principal obligation of P45,000.00, with interest thereon at the rate of 12% per annum, from 02 March 1991 until the full obligation is paid.(b) To pay petitioner actual damages as may be proven during the trial but shall in no case be less thanP10,000.00; P25,000.00 by way of attorney’s fee, plus P2,000.00 per hearing as appearance fee.(c) To issue a decree of foreclosure for the sale at public auction of the aforementioned parcel of land, and for the disposition of the proceeds thereof in accordance with law, upon failure of the respondents to fully pay petitioner within the period set by law the sums set forth in this complaint.(d) Costs of this suit.

Other reliefs and remedies just and equitable under the premises are likewise prayed for.9 (Emphasis supplied)Respondents were served with summons thru respondent Sonny A. Balangue (Sonny). On October 15, 1999, with the assistance of Atty. Arthur C. Coroza (Atty. Coroza) of the Public Attorney’s Office, they filed a Motion to Extend Period to Answer. Despite the requested extension, however, respondents failed to file any responsive pleadings. Thus, upon motion of the petitioner, the RTC declared them in default and allowed petitioner to present her evidence ex parte.10

Ruling of the RTC sought to be annulled.In a Decision11 dated October 17, 2000, the RTC granted petitioner’s Complaint. The dispositive portion of said Decision reads:WHEREFORE, judgment is hereby rendered in favor of the petitioner, ordering the respondents to pay the petitioner as follows:

a) the sum of FORTY FIVE THOUSAND (P45,000.00) PESOS, representing the unpaid principal loan obligation plus interest at 5% per month [sic] reckoned from March 2, 1991, until the same is fully paid;b) P20,000.00 as attorney’s fees plus cost of suit;c) in the event the [respondents] fail to satisfy the aforesaid obligation, an order of foreclosure shall be issued accordingly for the sale at public auction of the subject property covered by Transfer Certificate of Title No. V-12296 and the improvements thereon for the satisfaction of the petitioner’s claim.

SO ORDERED.12 (Emphasis supplied)Subsequently, petitioner filed a Motion for Execution,13 alleging that respondents did not interpose a timely appeal despite receipt by their former counsel of the RTC’s Decision on November 13, 2000. Before it could be resolved, however, respondents filed a Motion to Set Aside Judgment14 dated January 26, 2001, claiming that not all of them were duly served with summons. According to the other respondents, they had no knowledge of the case because their co-respondent Sonny did not inform them about it. They prayed that the RTC’s October 17, 2000 Decision be set aside and a new trial be conducted.But on March 16, 2001, the RTC ordered15 the issuance of a Writ of Execution to implement its October 17, 2000 Decision. However, since the writ could not be satisfied, petitioner moved for the public auction of the mortgaged property,16 which the RTC granted.17 In an auction sale conducted on November 7, 2001, petitioner was the only bidder in the amount of P420,000.00. Thus, a Certificate of Sale18 was issued in her favor and accordingly annotated at the back of TCT No. V-12296.Respondents then filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale19 dated December 17, 2001, claiming that the parties did not agree in writing on any rate of interest and that petitioner merely sought for a 12% per annum interest in her Complaint. Surprisingly, the RTC awarded 5% monthly interest (or 60% per annum) from March 2, 1991 until full payment. Resultantly, their indebtedness inclusive of the exorbitant interest from March 2, 1991 to May 22, 2001 ballooned from P124,400.00 to P652,000.00.In an Order20 dated May 7, 2002, the RTC granted respondents’ motion and accordingly modified the interest rate awarded from 5% monthly to 12% per annum. Then on August 2,

2002, respondents filed a Motion for Leave To Deposit/Consign Judgment Obligation21 in the total amount of P126,650.00.22

Displeased with the RTC’s May 7, 2002 Order, petitioner elevated the matter to the CA via a Petition for Certiorari23 under Rule 65 of the Rules of Court. On August 5, 2003, the CA rendered a Decision24 declaring that the RTC exceeded its jurisdiction in awarding the 5% monthly interest but at the same time pronouncing that the RTC gravely abused its discretion in subsequently reducing the rate of interest to 12% per annum. In so ruling, the CA ratiocinated:Indeed, We are convinced that the Trial Court exceeded its jurisdiction when it granted 5% monthly interest instead of the 12% per annum prayed for in the complaint. However, the proper remedy is not to amend the judgment but to declare that portion as a nullity. Void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any right nor the creator of any obligation (Leonor vs. CA, 256 SCRA 69). No legal rights can emanate from a resolution that is null and void (Fortich vs. Corona, 312 SCRA 751).From the foregoing, the remedy of the respondents is to have the Court declare the portion of the judgment providing for a higher interest than that prayed for as null and void for want of or in excess of jurisdiction. A void judgment never acquire[s] finality and any action to declare its nullity does not prescribe (Heirs of Mayor Nemencio Galvez vs. CA, 255 SCRA 672).WHEREFORE, foregoing premises considered, the Petition having merit, is hereby GIVEN DUE COURSE. Resultantly, the challenged May 7, 2002 and September 5, 2000 orders of Public Respondent Court are hereby ANNULLED and SET ASIDE for having been issued with grave abuse of discretion amounting to lack or in excess of jurisdiction. No costs.SO ORDERED.25 (Emphases in the original; italics supplied.)Proceedings before the Court of AppealsTaking their cue from the Decision of the CA in the special civil action for certiorari, respondents filed with the same court a Petition for Annulment of Judgment and Execution Sale with Damages.26 They contended that the portion of the RTC Decision granting petitioner 5% monthly interest rate is in gross violation of Section 3(d) of Rule 9 of the Rules of Court and of their right to due process. According to respondents, the loan did not carry any interest as it was the verbal agreement of the parties that in lieu thereof petitioner’s family can continue occupying respondents’ residential building located in Marulas, Valenzuela for free until said loan is fully paid.Ruling of the Court of AppealsInitially, the CA denied due course to the Petition.27 Upon respondents’ motion, however, it reinstated and granted the Petition. In setting aside portions of the RTC’s October 17, 2000 Decision, the CA ruled that aside from being unconscionably excessive, the monthly interest rate of 5% was not agreed upon by the parties and that petitioner’s Complaint clearly sought only the legal rate of 12% per annum. Following the mandate of Section 3(d) of Rule 9 of the Rules of Court, the CA concluded that the awarded rate of interest is void for being in excess of the relief sought in the Complaint. It ruled thus:WHEREFORE, respondents’ motion for reconsideration is GRANTED and our resolution dated October 13, 2004 is, accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered ordering the ANNULMENT OF:

(a) public respondent’s impugned October 17, 2000 judgment, insofar as it awarded 5% monthly interest in favor of petitioner; and(b) all proceedings relative to the sale at public auction of the property titled in respondents’ names under Transfer Certificate of Title No. V-12296 of the Valenzuela registry.

The judgment debt adjudicated in public respondent’s impugned October 17, 2000 judgment is, likewise, ordered RECOMPUTED at the rate of 12% per annum from March 2, 1991. No costs.SO ORDERED.28 (Emphases in the original.)Petitioner sought reconsideration, which was denied by the CA in its June 26, 2006 Resolution.29

IssuesHence, this Petition anchored on the following grounds:

I. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR OF LAW WHEN IT GRANTED RESPONDENTS’ PETITION FOR ANNULMENT OF JUDGMENT AS A SUBSTITUTE OR ALTERNATIVE REMEDY OF A LOST APPEAL.

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II. THE HONORABLE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS ERROR AND MISAPPREHENSION OF LAW AND THE FACTS WHEN IT GRANTED RESPONDENTS’ PETITION FOR ANNULMENT OF JUDGMENT OF THE DECISION OF THE REGIONAL TRIAL COURT OF VALENZUELA, BRANCH 75 DATED OCTOBER 17, 2000 IN CIVIL CASE NO. 241-V-99, DESPITE THE FACT THAT SAID DECISION HAS BECOME FINAL AND ALREADY EXECUTED CONTRARY TO THE DOCTRINE OF IMMUTABILITY OF JUDGMENT.30

Petitioner’s ArgumentsPetitioner claims that the CA erred in partially annulling the RTC’s October 17, 2000 Decision. She contends that a Petition for Annulment of Judgment may be availed of only when the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the claimant. In the present case, however, respondents had all the opportunity to question the October 17, 2000 Decision of the RTC, but because of their own inaction or negligence they failed to avail of the remedies sanctioned by the rules. Instead, they contented themselves with the filing of a Motion to Set Aside Judgment and then a Motion to Correct/Amend Judgment and to Set Aside Execution Sale.Petitioner likewise argues that for a Rule 47 petition to prosper, the same must either be based on extrinsic fraud or lack of jurisdiction. However, the allegations in respondents’ Rule 47 petition do not constitute extrinsic fraud because they simply pass the blame to the negligence of their former counsel. In addition, it is too late for respondents to pass the buck to their erstwhile counsel considering that when they filed their Motion to Correct/Amend Judgment and To Set Aside Execution Sale they were already assisted by their new lawyer, Atty. Reynaldo A. Ruiz, who did not also avail of the remedies of new trial, appeal, etc. As to the ground of lack of jurisdiction, petitioner posits that there is no reason to doubt that the RTC had jurisdiction over the subject matter of the case and over the persons of the respondents.While conceding that the RTC patently made a mistake in awarding 5% monthly interest, petitioner nonetheless invokes the doctrine of immutability of final judgment and contends that the RTC Decision can no longer be corrected or modified since it had long become final and executory. She likewise points out that respondents received a copy of said Decision on November 13, 2000 but did nothing to correct the same. They did not even question the award of 5% monthly interest when they filed their Motion to Set Aside Judgment which they anchored on the sole ground of the RTC’s lack of jurisdiction over the persons of some of the respondents.Respondents’ ArgumentsRespondents do not contest the existence of their obligation and the principal amount thereof. They only seek quittance from the 5% monthly interest or 60% per annum imposed by the RTC. Respondents contend that Section (3)d of Rule 9 of the Rules of Court is clear that when the defendant is declared in default, the court cannot grant a relief more than what is being prayed for in the Complaint. A judgment which transgresses said rule, according to the respondents, is void for having been issued without jurisdiction and for being violative of due process of law.Respondents maintain that it was through no fault of their own, but through the gross negligence of their former counsel, Atty. Coroza, that the remedies of new trial, appeal or petition for relief from judgment were lost. They allege that after filing a Motion to Extend Period to Answer, Atty. Coroza did not file any pleading resulting to their being declared in default. While the said lawyer filed on their behalf a Motion to Set Aside Judgment dated January 26, 2001, he however took no steps to appeal from the Decision of the RTC, thereby allowing said judgment to lapse into finality. Citing Legarda v. Court of Appeals,31 respondents aver that clients are not always bound by the actions of their counsel, as in the present case where the clients are to lose their property due to the gross negligence of their counsel.With regard to petitioner’s invocation of immutability of judgment, respondents argue that said doctrine applies only to valid and not to void judgments.Our RulingThe petition must fail.We agree with respondents that the award of 5% monthly interest violated their right to due process and, hence, the same may be set aside in a Petition for Annulment of Judgment filed under Rule 47 of the Rules of Court.Annulment of judgment under Rule 47; an exception to the final judgment rule; grounds therefor.A Petition for Annulment of Judgment under Rule 47 of the Rules of Court is a remedy granted only under exceptional circumstances where a party, without fault on his part, has failed to avail

of the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies. Said rule explicitly provides that it is not available as a substitute for a remedy which was lost due to the party’s own neglect in promptly availing of the same. "The underlying reason is traceable to the notion that annulling final judgments goes against the grain of finality of judgment. Litigation must end and terminate sometime and somewhere, and it is essential to an effective administration of justice that once a judgment has become final, the issue or cause involved therein should be laid to rest."32

While under Section 2, Rule 4733 of the Rules of Court a Petition for Annulment of Judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction, jurisprudence recognizes lack of due process as additional ground to annul a judgment.34 In Arcelona v. Court of Appeals,35 this Court declared that a final and executory judgment may still be set aside if, upon mere inspection thereof, its patent nullity can be shown for having been issued without jurisdiction or for lack of due process of law.Grant of 5% monthly interest is way beyond the 12% per annum interest sought in the Complaint and smacks of violation of due process.It is settled that courts cannot grant a relief not prayed for in the pleadings or in excess of what is being sought by the party. They cannot also grant a relief without first ascertaining the evidence presented in support thereof. Due process considerations require that judgments must conform to and be supported by the pleadings and evidence presented in court. In Development Bank of the Philippines v. Teston,36 this Court expounded that:Due process considerations justify this requirement. It is improper to enter an order which exceeds the scope of relief sought by the pleadings, absent notice which affords the opposing party an opportunity to be heard with respect to the proposed relief. The fundamental purpose of the requirement that allegations of a complaint must provide the measure of recovery is to prevent surprise to the defendant.Notably, the Rules is even more strict in safeguarding the right to due process of a defendant who was declared in default than of a defendant who participated in trial. For instance, amendment to conform to the evidence presented during trial is allowed the parties under the Rules.37 But the same is not feasible when the defendant is declared in default because Section 3(d), Rule 9 of the Rules of Court comes into play and limits the relief that may be granted by the courts to what has been prayed for in the Complaint. It provides:(d) Extent of relief to be awarded. – A judgment rendered against a party in default shall not exceed the amount or be different in kind from that prayed for nor award unliquidated damages.The raison d’être in limiting the extent of relief that may be granted is that it cannot be presumed that the defendant would not file an Answer and allow himself to be declared in default had he known that the plaintiff will be accorded a relief greater than or different in kind from that sought in the Complaint.38 No doubt, the reason behind Section 3(d), Rule 9 of the Rules of Court is to safeguard defendant’s right to due process against unforeseen and arbitrarily issued judgment. This, to the mind of this Court, is akin to the very essence of due process. It embodies "the sporting idea of fair play"39 and forbids the grant of relief on matters where the defendant was not given the opportunity to be heard thereon.In the case at bench, the award of 5% monthly interest rate is not supported both by the allegations in the pleadings and the evidence on record. The Real Estate Mortgage40 executed by the parties does not include any provision on interest. When petitioner filed her Complaint before the RTC, she alleged that respondents borrowed from her "the sum of FORTY-FIVE THOUSAND PESOS (P45,000.00), with interest thereon at the rate of 12% per annum"41 and sought payment thereof. She did not allege or pray for the disputed 5% monthly interest. Neither did she present evidence nor testified thereon. Clearly, the RTC’s award of 5% monthly interest or 60% per annum lacks basis and disregards due process. It violated the due process requirement because respondents were not informed of the possibility that the RTC may award 5% monthly interest. They were deprived of reasonable opportunity to refute and present controverting evidence as they were made to believe that the complainant petitioner was seeking for what she merely stated in her Complaint.Neither can the grant of the 5% monthly interest be considered subsumed by petitioner’s general prayer for "other reliefs and remedies just and equitable under the premises x x x."42 To repeat, the court’s grant of relief is limited only to what has been prayed for in the Complaint or related thereto, supported by evidence, and covered by the party’s cause of action.43 Besides, even assuming that the awarded 5% monthly or 60% per annum interest was properly alleged and

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proven during trial, the same remains unconscionably excessive and ought to be equitably reduced in accordance with applicable jurisprudence. In Bulos, Jr. v. Yasuma,44 this Court held:In the case of Ruiz v. Court of Appeals, citing the cases of Medel v. Court of Appeals, Garcia v. Court of Appeals, Spouses Bautista v. Pilar Development Corporation and the recent case of Spouses Solangon v. Salazar, this Court considered the 3% interest per month or 36% interest per annum as excessive and unconscionable. Thereby, the Court, in the said case, equitably reduced the rate of interest to 1% interest per month or 12% interest per annum. (Citations omitted)It is understandable for the respondents not to contest the default order for, as alleged in their Comment, "it is not their intention to impugn or run away from their just and valid obligation."45 Nonetheless, their waiver to present evidence should never be construed as waiver to contest patently erroneous award which already transgresses their right to due process, as well as applicable jurisprudence.Respondents’ former counsel was grossly negligent in handling the case of his clients; respondents did not lose ordinary remedies of new trial, petition for relief, etc. through their own fault.Ordinarily, the mistake, negligence or lack of competence of counsel binds the client.1âwphi1 This is based on the rule that any act performed by a counsel within the scope of his general or implied authority is regarded as an act of his client. A recognized exception to the rule is when the lawyers were grossly negligent in their duty to maintain their client’s cause and such amounted to a deprivation of their client’s property without due process of law.46 In which case, the courts must step in and accord relief to a client who suffered thereby.47

The manifest indifference of respondents’ former counsel in handling the cause of his client was already present even from the beginning. It should be recalled that after filing in behalf of his clients a Motion to Extend Period to Answer, said counsel allowed the requested extension to pass without filing an Answer, which resulted to respondents being declared in default. His negligence was aggravated by the fact that he did not question the awarded 5% monthly interest despite receipt of the RTC Decision on November 13, 2000.48 A simple reading of the dispositive portion of the RTC Decision readily reveals that it awarded exorbitant and unconscionable rate of interest. Its difference from what is being prayed for by the petitioner in her Complaint is so blatant and very patent. It also defies elementary jurisprudence on legal rate of interests. Had the counsel carefully read the judgment it would have caught his attention and compelled him to take the necessary steps to protect the interest of his client. But he did not. Instead, he filed in behalf of his clients a Motion to Set Aside Judgment49 dated January 26, 2001 based on the sole ground of lack of jurisdiction, oblivious to the fact that the erroneous award of 5% monthly interest would result to his clients’ deprivation of property without due process of law. Worse, he even allowed the RTC Decision to become final by not perfecting an appeal. Neither did he file a petition for relief therefrom. It was only a year later that the patently erroneous award of 5% monthly interest was brought to the attention of the RTC when respondents, thru their new counsel, filed a Motion to Correct/Amend Judgment and To Set Aside Execution Sale. Even the RTC candidly admitted that it "made a glaring mistake in directing the defendants to pay interest on the principal loan at 5% per month which is very different from what was prayed for by the plaintiff."50

"A lawyer owes entire devotion to the interest of his client, warmth and zeal in the maintenance and defense of his rights and the exertion of his utmost learning and ability, to the end that nothing can be taken or withheld from his client except in accordance with the law."51 Judging from how respondents’ former counsel handled the cause of his clients, there is no doubt that he was grossly negligent in protecting their rights, to the extent that they were deprived of their property without due process of law.In fine, respondents did not lose the remedies of new trial, appeal, petition for relief and other remedies through their own fault. It can only be attributed to the gross negligence of their erstwhile counsel which prevented them from pursuing such remedies. We cannot also blame respondents for relying too much on their former counsel. Clients have reasonable expectations that their lawyer would amply protect their interest during the trial of the case.52 Here,"respondents are plain and ordinary people x x x who are totally ignorant of the intricacies and technicalities of law and legal procedures. Being so, they completely relied upon and trusted their former counsel to appropriately act as their interest may lawfully warrant and require."53

As a final word, it is worth noting that respondents’ principal obligation was only P45,000.00. Due to their former counsel’s gross negligence in handling their cause, coupled with the RTC’s erroneous, baseless, and illegal award of 5% monthly interest, they now stand to lose their property and still owe petitioner a large amount of money. As aptly observed by the CA:x x x If the impugned judgment is not, therefore, rightfully nullified, petitioners will not only end up losing their property but will additionally owe private respondent the sum of P232,000.00 plus the legal interest said balance had, in the meantime, earned. As a court of justice and equity, we cannot, in good conscience, allow this unconscionable situation to prevail.54

Indeed, this Court is appalled by petitioner’s invocation of the doctrine of immutability of judgment. Petitioner does not contest as she even admits that the RTC made a glaring mistake in awarding 5% monthly interest.55Amazingly, she wants to benefit from such erroneous award. This Court cannot allow this injustice to happen.WHEREFORE, the instant Petition is hereby DENIED and the assailed November 24, 2005 and June 26, 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 85541 are AFFIRMED.SO ORDERED.

G.R. Nos. 121662-64 July 6, 1999VLASON ENTERPRISES CORPORATION, petitioner, vs.COURT OF APPEALS and DURAPROOF SERVICES, represented by its General Manager, Cesar Urbino Sr., respondents. PANGANIBAN, J.:Summons to a domestic or resident corporation should be served on officers, agents or employees, who are responsible enough to warrant the presumption that they will transmit to the corporation notice of the filing of the action against it. Rules on the service of motions should be liberally construed in order to promote the ends of substantial justice. A rigid application that will result in the manifest injustice should be avoided. A default judgment against several defendants cannot affect the rights of one who was never declared in default. In any event, such judgment cannot include award not prayed for in the complaint, even if proven ex parte.

The CaseThese principles were used by this Court in resolving this Petition for Review on Certiorari before us, assailing the July 19, 1993 Decision 1 and the August 15 Resolution 2 promulgated by the Court of Appeals. The assailed Decision disposed as follows: 3

ACCORDINGLY, in view of the foregoing disquisitions, all the three (3) consolidated petitions forcertiorari are hereby GRANTED.

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THE assailed Order of respondent Judge Arsenio Gonong of the Regional Trial Court of Manila, Branch 8, dated April 5, 1991, in the first petition for certiorari (CA-G.R. SP No. 24669); the assailed Order of Judge Bernardo Pardo, Executive Judge of the Regional Trial Court of Manila, Branch 8, dated July 6, 1992, in the second petition for certiorari (CA-G.R. SP No. 28387); and finally, the assailed order or Resolution en banc of the respondent Court of Tax Appeals Judges Ernesto Acosta, Ramon de Veyra and Manuel Gruba, under date of October 5, 1992, in the third petition forcertiorari (CA-G.R. SP No. 29317) are all hereby NULLIFIED and SET ASIDE thereby giving way to the entire decision dated February 18, 1991 of the respondent Regional Trial Court of Manila, Branch 8, in Civil Case No. 89-51451 which remains valid, final and executory, if not yet wholly executed.THE writ of preliminary injunction heretofore issued by this Court on March 6, 1992 and reiterated on July 22, 1992 and this date against the named respondents specified in the dispositive portion of the judgment of the respondent Regional Trial Court of Manila, Branch 8 in the first petition for certiorari, which remains valid, existing and enforceable, is hereby MADE PERMANENT without prejudice (1) to the [private respondent's] remaining unpaid obligations to the herein party-intervenor in accordance with the Compromise Agreement or in connection with the decision of the respondent lower court in CA-G.R. SP No. 24669 and (2) to the government, in relation to the forthcoming decision of the respondent Court of Tax Appeals on the amount of taxes, charges, assessments or obligations that are due, as totally secured and fully guaranteed payment by the [private respondent's] bond, subject to the relevant rulings of the Department of Finance and other prevailing laws and jurisprudence.

The assailed Resolution ruled:ACCORDINGLY, in the light of the foregoing disquisitions, as well as considering these clarifications, the three (3) motions aforementioned are hereby DENIED.

The FactsPoro Point Shipping Services, then acting as the local agent of Omega Sea Transport Company of Honduras & Panama, a Panamanian company, (hereafter referred to as Omega), requested permission for its vessel M/V Star Ace, which had engine trouble, to unload its cargo and to store it at the Philippine Ports Authority (PPA) compound in San Fernando, La Union while awaiting transshipment to Hongkong. The request was approved by the Bureau of Customs. 4 Despite the approval, the customs personnel boarded the vessel when it docked on January 7, 1989, on suspicion that it was the hijacked M/V Silver Med owned by Med Line Philippines Co., and that its cargo would be smuggled into the country. 5 The district customs collector seized said vessel and its cargo pursuant to Section 2301, Tariff and Customs Code. A notice of hearing of SFLU Seizure Identification No. 3-89 was served on its consignee, Singkong Trading Co. of Hongkong, and its shipper, Dusit International Co., Ltd. of Thailand.While seizure proceedings were ongoing, La Union was hit by three typhoons, and the vessel ran aground and was abandoned. On June 8, 1989, its authorized representative, Frank Cadacio, entered into a salvage agreement with private respondent to secure and repair the vessel at the agreed consideration of $1 million and "fifty percent (50%) [of] the cargo after all expenses, cost and taxes." 6

Finding that no fraud was committed, the District Collector of Customs, Aurelio M. Quiray, lifted the warrant of seizure on July 16, 1989. 7 However, in a Second Indorsement dated November 11, 1989, then Customs Commissioner Salvador M. Mison declined to issue a clearance for Quiray's Decision; instead, he forfeited the vessel and its cargo in accordance with Section 2530 of the Tariff and Customs Code. 8 Accordingly, acting District Collector of Customs John S. Sy issued a Decision decreeing the forfeiture and the sale of the cargo in favor of the government. 9

To enforce its preferred salvor's lien, herein Private Respondent Duraproof Services filed with the Regional Trial Court of Manila a Petition for Certiorari, Prohibition and Mandamus 10 assailing the actions of Commissioner Mison and District Collector Sy. Also impleaded as respondents were PPA Representative Silverio Mangaoang and Med Line Philippines, Inc.

On January 10, 1989, private respondent amended its Petition 11 to include former District Collector Quiray; PPA Port Manager Adolfo Ll. Amor Jr; Petitioner Vlason Enterprises as represented by its president, Vicente Angliongto; Singkong Trading Company as represented by Atty. Eddie Tamondong; Banco Du Brasil; Dusit International Co., Inc.; Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd. 12 In both Petitions, private respondent plainly failed to include any allegation pertaining to petitioner, or any prayer for relief against it.1âwphi1.nêtSummonses for the amended Petition were served on Atty. Joseph Capuyan for Med Line Philippines: Angliongto (through his secretary, Betty Bebero), Atty. Tamondong and Commissioner Mison. 13 Upon motion of the private respondent, the trial court allowed summons by publication to be served upon the alien defendants who were not residents and had no direct representatives in the country. 14

On January 29, 1990, private respondent moved to declare respondents in default, but the trial court denied the motion in its February 23, 1990 Order, 15 because Mangaoang and Amor had jointly filed a Motion to Dismiss, while Mison and Med Line had moved separately for an extension to file a similar motion. 16 Later it rendered an Order dated July 2, 1990, giving due course to the motions to dismiss filed by Mangaoang and Amor on the ground of litis pendentia, and by the commissioner and district collector of customs on the ground of lack of jurisdiction. 17 In another Order, the trial court dismissed the action against Med Line Philippines on the ground oflitis pendentia. 18

On two other occasions, private respondent again moved to declare the following in default: petitioner, Quiray, Sy and Mison on March 26, 1990; 19 and Banco Du Brazil, Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd. on August 24, 1990. 20 There is no record, however, that the trial court acted upon the motions. On September 18, 1990, petitioner filed another Motion for leave to amend the petition, 21 alleging that its counsel failed to include the following "necessary and/or indispensable parties": Omega represented by Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, relief captain. Aside from impleading these additional respondents, private respondent also alleged in the Second (actually, third) AmendedPetition 22 that the owners of the vessel intended to transfer and alienate their rights and interests over the vessel and its cargo, to the detriment of the private respondent.The trial court granted leave to private respondent to amend its Petition, but only to exclude the customs commissioner and the district collector. 23 Instead, private respondent filed the "Second Amended Petition with Supplemental Petition" against Singkong Trading Company; and Omega and M/V Star Ace, 24 to which Cadacio and Rada filed a Joint Answer. 25

Declared in default in an Order issued by the trial court on January 23, 1991, were the following: Singkong Trading Co., Commissioner Mison, M/V Star Ace and Omega. 26 Private respondent filed, and the trial court granted, an ex parte Motion to present evidence against the defaulting respondents. 27 Only private respondent, Atty. Tamondong, Commissioner Mison, Omega and M/V Star Ace appeared in the next pretrial hearing; thus, the trial court declared the other respondents in default and allowed private respondent to present evidence against them.28 Cesar Urbino, general manager of private respondent, testified and adduced evidence against the other respondents, including herein petitioner. As regards petitioner, he declared: "Vlason Enterprises represented by Atty. Sy and Vicente Angliongto thru constant intimidation and harassment of utilizing the PPA Management of San Fernando, La Union . . . further delayed, and [private respondent] incurred heavy overhead expenses due to direct and incidental expenses . . . causing irreparable damages of about P3,000,000 worth of ship tackles, rigs, and appurtenances including radar antennas and apparatuses, which were taken surreptitiously by persons working for Vlason Enterprises or its agents[.] 29

On December 29, 1990, private respondent and Rada, representing Omega, entered into a Memorandum of Agreement stipulating that Rada would write and notify Omega regarding the demand for salvage fees of private respondent; and that if Rada did not receive any instruction from his principal, he would assign the vessel in favor of the salvor. 30

On February 18, 1991, the trial court disposed as follows:WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations, prayer and evidence adduced, both testimonial and documentary, the Court is convinced, that, indeed, defendants/respondents are liable to [private respondent] in the amount as prayed for in the petition for which it renders judgment as follows:

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1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief [c]aptain of the vessel and Omega Sea Transport Company, Inc., represented by Frank Cadacio[,] is ordered to refrain from alienating or transferring the vessel M/V Star Ace to any third parties;2. Singkong Trading Company to pay the following:

a. Taxes due the government;b. Salvage fees on the vessel in the amount of $1,000,000.00 based on . . . Form of Salvage Agreement;c. Preservation, securing and guarding fees on the vessel in the amount of $225,000.00;d. Maintenance fees in the amount P2,685,000.00;e. Salaries of the crew from August 16, 1989 to December 1989 in the amount of $43,000.00 and unpaid salaries from January 1990 up to the present.f. Attorney's fees in the amount of P656,000.00;

3. [Vlason] Enterprises to pay [private respondent] in the amount of P3,000,000.00 for damages;4. Banco [Du] Brazil to pay [private respondent] in the amount of $300,000.00 in damages; and finally,5. Costs of [s]uit.

Subsequently, upon the motion of Omega, Singkong Trading Co. and private respondent, the trial court approved a Compromise Agreement 31 among the movants, reducing by 20 percent the amounts adjudged. For their part, respondents-movants agreed not to appeal the Decision. 32 On March 8, 1991, private respondent moved for the execution of judgment, claiming that the trial court Decision had already become final and executory. 33 The Motion was granted 34 and a Writ of Execution was issued. 35 To satisfy the Decision, Sheriffs Jorge Victorino, Amado Sevilla and Dionisio Camañgon were deputized on March 13, 1991 to levy and to sell on execution the defendant's vessel and personal property.On March 14, 1991, petitioner filed, by special appearance, a Motion for Reconsideration on the grounds that it was allegedly not impleaded as a defendant, served summons or declared in default; that private respondent was not authorized to present evidence against it in default; that the judgment in default was fatally defective, because private respondent had not paid filing fees for the award; and that private respondent had not prayed for such award. 36 Private respondent opposed the Motion, arguing that it was a mere scrap of paper due to its defective notice of hearing.On March 18, 1991, the Bureau of Customs also filed an ex parte Motion to recall the execution, and to quash the notice of levy and the sale on execution. 37 Despite this Motion, the auction sale was conducted on March 21, 1991 by Sheriff Camañgon, with private respondent submitting the winningbid. 38 The trial court ordered the deputy sheriffs to cease and desist from implementing the Writ of Execution and from levying on the personal property of the defendants. 39 Nevertheless, Sheriff Camañgon issued the corresponding Certificate of Sale on March 27, 1991. 40

On April 12, 1991, 41 private respondent filed with the Court of Appeals (CA) a Petition for Certiorari and Prohibition to nullify the cease and desist orders of the trial court. 42 Respondent Court issued on April 26, 1991 a Resolution which reads: 43

MEANWHILE, in order to preserve the status quo and so as not to render the present petition moot and academic, a TEMPORARY RESTRAINING ORDER is hereby ISSUED enjoining the respondent Judge, the Honorable Arsenio M. Gonong, from enforcing and/or implementing the Orders dated 22 March 1991 and 5 April 1991 which ordered respondent Sheriff to cease and desist from implementing the writ of execution and the return thereof, the quashing of the levy . . . on [the] execution [and sale] of the properties levied upon and sold at public auction by the Sheriff, for reason of grave abuse of discretion and in excess of jurisdiction, until further orders from this Court.

WITHIN ten (10) days from notice hereof, respondents [petitioner included] are also required to SHOW CAUSE why the prayer for a writ of preliminary injunction should not be granted.

On May 8, 1991, petitioner received from Camañgon a notice to pay private respondent P3 million to satisfy the trial court Decision. Not having any knowledge of the CA case to which it was not impleaded, petitioner filed with the trial court a Motion to Dismiss ex abutandi ad cautelam on the grounds that (1) the Petition of private respondent stated no cause of action against it, (2) the trial court had no jurisdiction over the case, and (3) litis pendentia barred the suit. 44

On May 10, 1991, Camañgon levied on petitioner's properties, which were scheduled for auction later on May 16, 1991. Specific descriptions of the properties are as follows: 45

a) Motor Tugboat — "DEN DEN" ex Emerson-l.Length: 35.67 ms. Breadth: 7.33 ms.Depth: 3.15 ms Gross Tons: 205.71Net tons: 67.48 ms Official Number: 213551Material: Steel Class license: CWLLicense No. 4424

b) Barge — "FC99" ex YD-153Length: 34.15 ms. Breadth: 15.85 m.s.Depth: 2.77 m.s. Gross Tons: 491.70Net Tons: 491.70 Official Number: 227236Material: Steel Class License: CWLLicense No. 83-0012

c) Barge — "LAWIN" ex "Sea Lion 2".Length: 66.92 ms. Breadth: 11.28 ms.Depth: 4.52 m.s. Gross Tons: 1,029.56Net Tons: 1,027/43 Official Number: 708069Material: Steel Class License: CoastwiseLicense No. 81-0059

Petitioner also filed a special appearance before the CA. It prayed for the lifting of the levy on its properties or, alternatively, for a temporary restraining order against their auction until its Motion for Reconsideration was resolved by the trial court. 46

Acting on petitioner's Motion for Reconsideration, the trial court reversed its Decision of February 18, 1991, holding in its May 22, 1991 Resolution as follows: 47

. . . [T]hat . . . Motion for Reconsideration [of petitioner] was filed on March 14, 1991 (see: page 584, records, Vol. 2) indubitably showing that it was seasonably filed within the 15-day time-frame. Therefore, . . . said default-judgment ha[d] not yet become final and executory when the Writ of Execution was issued on March 13, 1991 . . . The rules [provide] that [the e]xecution shall issue as a matter of right upon the expiration of the period of appeal from a judgment if no appeal has been duly perfected (Sec. 1, R-39, RRC). That being the case, VEC has all the right to file as itdid . . . the aforementioned reconsideration motion calling [the] attention of the Court and pointing therein its supposed error and its correction if, indeed, any [error was] committed. It is in this light that this Court made an in-depth reflection and assessment of the premises or reasons raised by [petitioner], and after a re-examination of the facts and evidence spread on the records, it has come to the considered conclusion that the questioned default-judgment has been improvidently issued. By the records, the claim of [private respondent] that his January 29, 1990 Ex-Parte Motion To Declare Defendants In Default (pp. 174-177, records, Vol. 1) including VEC had been granted is belied by the February 23, 1990 Order (pp. 214-215, records, ibid) par. 2, thereof, reading to wit:

By the foregoing, for reasons stated thereunder respectively, this Court, in the exercise of its judicious discretion, in the sense that the rules should be liberally construed in order to promote their object and to assist the parties, resolves to DENY petitioner's Motion to

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have the Commissioner of Customs AND OTHER ENUMERATED RESPONDENTS DECLARED IN DEFAULT. [Emphasis ours].

Not even [private respondent's] November 23, 1990 "Ex-Parte Motion To Present [Evidence] Against Defaulting Defendants" (page 489, records, Vol. 2) [can] be deemed as a remedy of the fact that there never was issued an order of default against respondents including [petitioner] VEC. Having thus established that there [had] been no order of default against VEC as contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13, Revised Rules of Court, there could not have been any valid default-judgment rendered against it. The issuance of an order of default is a condition sine qua nonin order [that] a judgment by default be clothed with validity. Further, records show that this Court never had authorized [private respondent] to adduce evidence ex-parte against [petitioner] VEC. In sum, the February 18, 1991 decision by default is null and void as against [petitioner] VEC. With this considered conclusion of nullity of said default judgment in question, this Court feels there is no more need for it to resolve Arguments I-A & I-B, as well as III-A & III-B, of the March 14, 1991 Motion for Reconsideration. The Court agrees, however, with said discussions on the non-compliance [with] Sec. 2, Rule 7 (Title of Complaint) and Sec. I, Rule 8 on the requirement of indicating in the complaint the ultimate facts on which the party pleading relies for his claim of defense [--] which is absent in the January 9, Amended Petition (pp. 122-141, records, Vol. I) [--] for it merely mentioned [petitioner] VEC in par. 5 thereof and no more. It abides, likewise, with [Argument] III-B that the Decision in suit award[ed] amounts never asked for in instant petition as regards VEC (Sec. 5, Rule 18, RRC). . . . .WHEREFORE, in view of the foregoing consideration, and as prayed for, the February 18, 1991 Judgment by Default is hereby reconsidered and SET ASIDE.

On June 26, 1992, then Executive Judge Bernardo P. Pardo 48 of the Regional Trial Court of Manila issued an Order 49 annulling the Sheriff's Report/Return dated April 1, 1991, and all proceedings taken by Camañgon.The CA granted private respondent's Motion to file a Supplemental Petition impleading petitioner in CA-GR 24669.50 In view of the rampant pilferage of the cargo deposited at the PPA compound, private respondent obtained from the appellate court a Writ of Preliminary Injunction dated March 6, 1992. The Writ: reads: 51

ACCORDINGLY, in view of the foregoing disquisitions, the urgent verified motion for preliminary injunction dated February 11, 1992 is hereby GRANTED. Therefore, let a writ of preliminary injunction forthwith issue against the respondents and all persons or agents acting in their behalf, enjoining them not to interfere in the transferring of the aforementioned vessel and its cargoes, or in removing said cargoes . . . from [the] PPA compound.

On September 15, 1992, Sheriff Amado Sevilla seized petitioner's motor tugboat Den Den by virtue of the Order 52dated April 3, 1992, issued by the RTC of Manila, Branch 26. 53

On August 6, 1992, the CA consolidated CA-GR SP No. 28387 54 with CA-GR SP No. 24669. 55 The Court of Tax Appeals issued on October 5, 1992, a Resolution in CTA Case Nos. 4492, 4494 and 4500, which disposed as follows:

Confirming the order in open court on October 5, 1992, the Court hereby RESOLVES to:1. Order Respondent Commissioner of Customs to assign or detail [a] sufficient number of customs police and guards aboard, and around the vicinity of, the vessel "M/V Star Ace" now in anchor at Mariveles, Bataan or elsewhere, in order to ensure its safety during the pendency of these cases;2. Direct him to assign personnel and/or representatives to conduct an inventory of part of the vessel's cargo now in the possession of Mr. Cesar S.

Urbino, Sr. at 197 Heroes del "96 Street, Caloocan City, which inventory may be participated in by all the parties interested in said cargo."

To enjoin the CTA from enforcing said Order, private respondent filed before the Court of Appeals another Petition for Certiorari, 56 which was later also consolidated with CA-GR SP No. 24669.On July 19, 1993, the CA rendered the assailed Decision. Petitioner filed (1) a Motion for Clarification, praying for a declaration that the trial court Decision against it was not valid; and (2) a partial Motion for Reconsideration, seeking to set aside the assailed Decision insofar as the latter affected it.On July 5, 1995, the Court of Appeals issued the following Resolution: 57

Pending resolution of the motions for reconsideration, filed by Vlason Enterprises Corporation and Banco [Du] Brazil, and considering [private respondent's] Motion for Entry of Judgment with respect to respondent PPA having already been granted by this Court as far back as June 17, 1994, pursuant to the resolution of the Supreme Court dated December 8, 1993 in G.R. No. 111270-72 (Philippine Ports Authority vs. Court of Appeals, et al.) informing the parties in the said case that the judgment sought to be reviewed has now become final and executory, the lower court may now take appropriate action on the urgent ex-parte motion for issuance a writ of execution, filed by [private respondent] on July 15, 1994.

On August 28, 1995, the Regional Trial Court of Manila, Branch 26, issued a Writ of Possession which resulted in private respondent taking possession of petitioner's barge Lawin (formerly Sea Lion 2) on September 1, 1995. 58

Hence, this Petition. 59

Ruling of the Respondent CourtAs already adverted to, Respondent Court granted the Petition for Certiorari of the private respondent, which was consolidated with the latter's two other Petitions. The court a quo issued the following rulings:

1. The trial court had jurisdiction over the salvor's claim or admiralty case pursuant to Batas Pambansa Bilang 129.2. Since the Decision of the trial court became final and executory, never having been disputed or appealed to a higher court, the trial judge committed grave abuse of discretion in recalling the Writ of Execution and in quashing the levy and the execution of the sale of M/V Star Ace and its cargo.2. Such acts constituted an alteration or a modification of a final and executory judgment and could never be justified under law and jurisprudence.3. Civil Case 59-51451 dealt only with the salvor's claim without passing upon the legality or the validity of the undared Decision of the Commissioner of Customs in the seizure proceeding.4. Petitioner and his co-respondents could not invoke the jurisdiction of a court to secure affirmative relief against their opponent and, after failing to obtain such relief, question the court's jurisdiction.5. Petitioner had no recourse through any of the following judicially accepted means to question the final judgment:

a. a petition for relief from judgment under Rule 38,b. a direct action to annul and enjoin the enforcement of the questioned judgment, and

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c. a collateral attack against the questioned judgment which appears void on its face.

6. A court which has already acquired jurisdiction over a case cannot be ousted by a coequal court; the res in this case — the vessel and its cargo— were placed under the control of the trial court ahead of the CTA.7. The admiralty Decision had attained finality while the issue of the validity of the seizure proceedings was still under determination.

In the assailed Resolution, Respondent Court clarified that there was no need to serve summons anew on petitioner, since it had been served summons when the Second Amended Petition (the third) was filed; and that petitioner's Motion for Reconsideration was defective and void, because it contained no notice of hearing addressed to the counsel of private respondent in violation of Rule 16, Section 4 of the Rules of Court.

To this second motion, [private respondent] contends that there was no need to serve summons anew to VEC when the second amended petition was filed impleading VEC, pursuant to the ruling of the Supreme Court in Asiatic Travel Corp. vs. CA (164 SCRA 623); and that finally, the decision of the court a quo o[n] February 18, 1991 became final and executory, notwithstanding the timely filing of the motion for reconsideration of VEC for the reason that the said motion for reconsideration was defective or void, there being no notice of hearing addressed to the counsel of petitioner. In fact, no motion such as this instant one can be acted upon by the Court without proof of service of the notice thereof, pursuant to Rule 16, Section 4 of the Rules of Court.xxx xxx xxxFinally, we should never lose sight of the fact that the instant petition for certiorari is proper only to correct errors of jurisdiction committed by the lower court, or grave abuse of discretion which is tantamount to lack of jurisdiction Where the error is not one of jurisdiction but an error of law or of fact which is a mistake of judgment, appeal is the remedy (Salas vs. Castro. 216 SCRA 198). Here, respondents failed to appeal. Hence, the decision dated February 18, 1991 of the lower court has long become final, executory and unappealable. We do not and cannot therefore review the instant case as if it were on appeal and direct actions on these motions. While the proper remedy is appeal, the action for certiorari will not be entertained. Indeed, certiorari is not a substitute for lapsed appeal.At any rate, the decision dated July 19, 1993 of this Court on the main petition for certiorari is not yet final (except with respect to respondent PPA), the Bureau of Customs having filed a petition for certiorari and prohibition, under Rule 65 of the Rules of Court, with the Supreme Court, necessitating prudence on Our part to await its final verdict. 60

Assignment of ErrorsBefore us, petitioner submits the following assignment of errors on the part of Respondent Court: 61

IThe Court of Appeals committed serious error in ruling that the entire decision of the trial court in Civil Case No. 89-51451 dated 18 February 1991 became final and executory because it "was never disputed or appealed".

A VEC filed a motion for reconsideration of the said decision two days before deadline, which motion was granted by the trial court.B The trial court correctly granted VEC's motion for reconsideration and set aside the 18 February 1991 decision . . . against VEC, for:

1. The trial court never acquired jurisdiction over the person of VEC as to enable it to render any judgment against it:

(i) VEC was not impleaded as a respondent in Civil Case No. 89- 51451;(ii) Summons was not served on VEC;

2. The trial court improperly rendered judgment by default against VEC;

(i) The trial court never issued an order of default against VEC;(ii) The trial court never authorized ex-parte presentation of evidence against VEC.

3. The Judgment by default was fatally defective because:

(i) No filing fee was paid by [private respondent) for the staggering amount of damages awarded by the trial court.(ii) The 18 February 1991 decision violates the Revised Rules of Court, which prescribe that a judgment by default cannot decree a relief not prayed for.

IISince the 18 February 1991 Decision in Civil Case No. 89-51451 is void as against VEC, the recall of the writ of execution was valid, as far as VEC is concerned.

The Court believes that the issues can be simplified and restated as follows:1. Has the February 18, 1991 RTC Decision become final and executory in regard to petitioner?

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2. Did the trial court acquire jurisdiction over the petitioner?3. Was the RTC default judgment binding on petitioner?4. Was the grant of damages against petitioner procedurally proper?5. Was private respondent entitled to a writ of execution?

This Court's RulingThe petition is meritorious.

First Issue: Finality of the RTC DecisionA judgment becomes "final and executory" by operation of law. Its finality becomes a fact when the reglementary period to appeal lapses, and no appeal is perfected within such period. 62 The admiralty case filed by private respondent with the trial court involved multiple defendants. This being the case, it necessarily follows that the period of appeal of the February 18, 1991 RTC Decision depended on the date a copy of the judgment was received by each of the defendants. Elsewise stated, each defendant had a different period within which to appeal, depending on the date of receipt of the Decision. 63

Omega, Singkong Trading Co. and M/V Star Ace chose to enter into a compromise agreement with private respondent. As to these defendants, the trial court Decision had become final, and a writ of execution could be issued against them. 64 Doctrinally, a compromise agreement is immediately final and executory. 65

Petitioner, however, is not in the same situation. Said Decision cannot be said to have attained finality as to the petitioner, which a party to the compromise. Moreover, petitioner filed a timely Motion for Reconsideration with the trial court, thirteen days after it received the Decision or two days before the lapse of the reglementary period to appeal. 66 Thus, as to petitioner, the trial court Decision had not attained finality.Exception to the Ruleon Notice of HearingRespondent Court and private respondent argue that, although timely filed, petitioner's Motion for Reconsideration was a mere scrap of paper, because (1) it did not contain a notice of hearing addressed to the current counsel of private respondent, and (2) the notice of hearing addressed to and served on private respondent's deceased counsel was not sufficient. Admittedly, this Motion contained a notice of hearing sent to Atty. Jesus C. Concepcion who, according to private respondent, had already died and had since been substituted by its new counsel, Atty. Domingo Desierto. Therefore, the appellate court ruled that the said Motion did not toll the reglementary period to appeal and that the trial court Decision became final.This Court disagrees. Rule 15 of the Rules of Court states:

Sec. 4. Notice. — Notice of a motion shall be served by the applicant to all parties concerned, at least three (3) days before the hearing thereof, together with a copy of the motion, and of any affidavits and other papers accompanying it. The court, however, for good cause may hear a motion on shorter notice, specially on matters which the court may dispose of on its own motion.Sec. 5. Contents of notice. — The notice shall be directed to the parties concerned, and shall state the time and place for the hearing of the motion. 67

Ideally, the foregoing Rule requires the petitioner to address and to serve on the counsel of private respondent the notice of hearing of the Motion for Reconsideration. The case at bar, however, is far from ideal. First, petitioner was not validly summoned and it did not participate in the trial of the case in the lower court; thus, it was understandable that petitioner would not be familiar with the parties and their counsels. Second, Atty. Desierto entered his appearance only as collaborating counsel, 68 who is normally not entitled to notices even from this Court. Third, private respondent made no manifestation on record that Atty. Concepcion was already dead. Besides, it was Atty. Concepcion who signed the Amended Petition, wherein petitioner was first impleaded as respondent and served a copy thereof. Naturally, petitioner's attention was focused on this pleading, and it was within its rights to assume that the signatory to such pleading was the counsel for private respondent.

The Court has consistently held that a motion which does not meet the requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is considered a worthless piece of paper, which the clerk of court has no right to receive and the trial court has no authority to act upon. Service of a copy of a motion containing a notice of the time and the place of hearing of that motion is a mandatory requirement, and the failure of movants to comply with these requirements renders their motions fatally defective. 69 However, there are exceptions to the strict application of this rule. These exceptions are asfollows: 70

. . . Liberal construction of this rule has been allowed by this Court in cases (1) where a rigid application will result in a manifest failure or miscarriage of justice; 71 especially if a party successfully shows that the alleged defect in the questioned final and executory judgment is not apparent on its face or from the recitals contained therein; (2) where the interest of substantial justice will be served; 72 (3) where the resolution of the motion is addressed solely to the sound and judicious discretion of the court; 73 and (4) where the injustice to the adverse party is not commensurate [to] the degree of his thoughtlessness in not complying with the procedure prescribed. 74

The present case falls under the first exception. Petitioner was not informed of any cause of action or claim against it. All of a sudden, the vessels which petitioner used in its salvaging business were levied upon and sold in execution to satisfy a supposed judgment against it. To allow this to happen simply because of a lapse in fulfilling the notice requirement — which, as already said, was satisfactorily explained — would be a manifest failure or miscarriage of justice.A notice of hearing is conceptualized as an integral component of procedural due process intended to afford the adverse parties a chance to be heard before a motion is resolved by the court. Through such notice, the adverse party is permitted time to study and answer the arguments in the motion.Circumstances in the case at bar show that private respondent was not denied procedural due process, and that the very purpose of a notice of hearing had been served. On the day of the hearing, Atty. Desierto did not object to the said Motion for lack of notice to him; in fact, he was furnished in open court with a copy of the motion and was granted by the trial court thirty days to file his opposition to it. These circumstances clearly justify a departure from the literal application of the notice of hearing rule. 75 In other cases, after the trial court learns that a motion lacks such notice, the prompt resetting of the hearing with due notice to all the parties is held to have cured the defect. 76

Verily, the notice requirement is not a ritual to be followed blindly. Procedural due process is not based solely on a mechanistic and literal application that renders any deviation inexorably fatal. Instead, procedural rules are liberally construed to promote their objective and to assist in obtaining a just, speedy and inexpensive determination of any action and proceeding. 77 For the foregoing reasons, we believe that Respondent Court committed reversible error in holding that the Motion for Reconsideration was a mere scrap of paper.

Second Issue: Jurisdiction Over PetitionerService of Summonson a Corporation

The sheriff's return shows that Angliongto who was president of petitioner corporation, through his secretary Betty Bebero, was served summons on January 18, 1990. 78 Petitioner claims that this service was defective for two reasons: (1) Bebero was an employee of Vlasons Shipping, Inc., which was an entity separate and distinct from Petitioner Vlason Enterprises Corporation (VEC); and (2) the return pertained to the service of summons for the amended Petition, not for the "Second Amended Petition with Supplemental Petition," the latter pleading having superseded the former.A corporation may be served summons through its agents or officers who under the Rules are designated to accept service of process. A summons addressed to a corporation and served on the secretary of its president binds that corporation. 79 This is based on the rationale that service must be made on a representative so integrated with the corporation sued, that it is safe to assume that said representative had sufficient responsibility and discretion to realize the importance of the legal papers served and to relay the same to the president or other responsible officer of the corporation being sued. 80 The secretary of the president satisfies this criterion. This rule requires, however, that the secretary should be an employee of the

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corporation sought to be summoned. Only in this manner can there be an assurance that the secretary will "bring home to the corporation [the] notice of the filing of the action" against it.In the present case, Bebero was the secretary of Angliongto, who was president of both VSI and petitioner, but she was an employee of VSI, not of petitioner. The piercing of the corporate veil cannot be resorted to when serving summons. 81 Doctrinally, a corporation is a legal entity distinct and separate from the members and stockholders who compose it. However, when the corporate fiction is used as a means of perpetrating a fraud, evading an existing obligation, circumventing a statute, achieving or perfecting a monopoly or, in generally perpetrating a crime, the veil will be lifted to expose the individuals composing it. None of the foregoing exceptions has been shown to exist in the present case. Quite the contrary, the piercing of the corporate veil in this case will result in manifest injustice. This we cannot allow. Hence, the corporate fiction remains.

Effect of Amendment ofPleading on Jurisdiction

Petitioner claims that the trial court did not acquire jurisdiction over it, because the former had not been served summons anew for the Second Amended Petition or for the Second Amended Petition with Supplemental Petition. In the records, it appears that only Atty. Tamondong, counsel for Singkong Trading, was furnished a copy of the Second Amended Petition. 82 The corresponding sheriff's return indicates that only Omega, M/V Star Ace and Capt. Rada were served summons and copies of said Petition. 83

We disagree. Although it is well-settled that an amended pleading supersedes the original one, which is thus deemed withdrawn and no longer considered part of the record, it does not follow ipso facto that the service of a new summons for amended petitions or complaints is required. Where the defendants have already appeared before the trial court by virtue of a summons on the original complaint, the amended complaint may be served upon them without need of another summons, even if new causes of action are alleged. 84 After it is acquired, a court's jurisdiction continues until the case is finally terminated. Conversely, when defendants have not yet appeared in court and no summons has been validly served, new summons for the amended complaint must be served on them. 85 It is not the change of cause of action that gives rise to the need to serve another summons for the amended complaint, but rather the acquisition of jurisdiction over the persons of the defendants. If the trial court has not yet acquired jurisdiction over them, a new service of summons for the amended complaint is required.1âwphi1.nêtIn this case, the trial court obviously labored under the erroneous impression that petitioner had already been placed under its jurisdiction since it had been served summons through the secretary of its president. Thus, it dispensed with the service on petitioner of new summons for the subsequent amendments of the Petition. We have already ruled, however, that the first service of summons on petitioner was invalid. Therefore, the trial court never acquired jurisdiction, and the said court should have required a new service of summons for the amended Petitions.

Impleading a Party in theTitle of the Complaint

Petitioner further claims that the trial court failed to acquire jurisdiction to render judgment against it because (1) the title of the three Petitions filed by private respondent never included petitioner as a party-defendant, in violation of Rule 7; and (2) the Petitions failed to state any allegation of ultimate facts constituting a cause of action against petitioner.We disagree with petitioner on the first ground. The judicial attitude has always been favorable and liberal in allowing amendments to pleadings. Pleadings shall be construed liberally so as to render substantial justice to the parties and to determine speedily and inexpensively the actual merits of the controversy with the least regard to technicalities. 86

The inclusion of the names of all the parties in the title of a complaint is a formal requirement under Section 3, Rule 7. However, the rules of pleadings require courts to pierce the form and go into the substance and not to be misled by a false or wrong name given to a pleading. The averments in the complaint, not the title, controlling. Although the general rule requires the inclusion of the names of all the parties in the title of a complaint, the non-inclusion of one or some of them is not fatal to the cause of action of a plaintiff, provided there is a statement in the body of the petition indicating that a defendant was made a party to such action.

Private respondent claims that petitioner has always been included in the caption of all the Petitions it filed, which included Antonio Sy, field manager of petitioner. We checked and noted that in the caption and the body of the Amended Petition and Second Amended Petition with Supplemental Petition, Antonio Sy alleged to be representing Med Line Philippines, not petitioner. Because it was private respondent who was responsible for the errors, the Court cannot excuse it from compliance, for such action will prejudice petitioner, who had no hand in the preparation of these pleadings. In any event, we reiterate that, as a general rule, mere failure to include the name of a party in the title of a complaint is not fatal by itself.

Stating a Cause of Actionin the Complaint

The general rule is allegata et probata — a judgment must conform to the pleadings and the theory of the action under which the case was tried. 87 But a court may also rule and render judgment on the basis of the evidence before it, even though the relevant pleading has not been previously amended, so long as no surprise or prejudice to the adverse party is thereby caused. 88

In the case at bar, the liability of petitioner was based not on any allegation in the four Petitions filed with the trial court, but on the evidence presented ex parte by the private respondent. Since the trial court had not validly acquired jurisdiction over the person of petitioner, there way for the latter to have validly and knowingly waived its objection to the private respondent's presentation of evidence against it.

Third Issue: Judgment by DefaultThe trial court Decision holding petitioner liable for damages is basically a default judgment. In Section 18, judgment by default is allowed under the following condition: 89

Sec. 1. Judgment by default.— If the defendant fails to answer within the time specified in these rules, the court shall, upon motion of the plaintiff and proof of such failure, declare the defendant in default. Thereupon the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the facts proven may warrant. . . . .

Thus, it becomes crucial to determine whether petitioner was declared in default, and whether the reception of evidence ex parte against it was procedurally valid.

Petitioner Was NeverDeclared In Default

Petitioner insists that the trial court never declared it in default.We agree. The trial court denied the January 29, 1990 Motion of private respondent to declare all the defendants in default, but it never acted on the latter's subsequent Motion to declare petitioner likewise. During the pretrial on January 23, 1993, the RTC declared in default only "Atty. Eddie Tamondong, as well as the other defendants Hon. Salvador Mison, M/V Star Ace, Omega Sea Transport Co., Inc. of Panama and Sinkong Trading Co., [but] despite . . . due notice to them, [they] failed to appear. 90 Even private respondent cannot pinpoint which trial court order held petitioner in default.More important, the trial court, in its Resolution dated May 22, 1991, admitted that it never declared petitioner in default, viz.:

. . . It is in this light that this [c]ourt made an in-depth reflection and assessment of the premises or reasons raised by [petitioner] VEC[;] and after a re-examination of the facts and evidence spread on the records, it has come to the considered conclusion that the questioned default-judgment has been improvidently issued. [Based on] the records, the claim of [private respondent] that [its] January 29, 1990 Ex-Parte Motion to Declare Defendants In Default (pp. 174-177, records, Vol. 1) including VEC had been granted is belied by the February 23, 1990 Order (pp. 214-215, records, ibid.) par. 2, thereof, . . .xxx xxx xxxNot even petitioner's November 23, 1990 "Ex-Parte Motion To Present Evidence Against Defaulting Defendants" (page 489, records, Vol. 2) [can] be deemed as a remedy [for] the fact that there never was issued an order of default against respondents including [petitioner] VEC. Having thus established that there ha[d] been no order of default against VEC as

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contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule 13, Revised Rules of Court, there could not have been any valid default-judgment rendered against it. The issuance of an order [o]f default is a condition sine qua nonin order [that] a judgment by default be clothed with validity. Further, records show that this [c]ourt never had authorized [private respondent] to adduce evidence ex-parte against [Petitioner] VEC. In sum, the February 18, 1991 decision by default is null and void as against [Petitioner] VEC. . . .

The aforementioned default judgment refers to the February 18, 1989 Decision, not to the Order finding petitioner in default as contended by private respondent. Furthermore, it is a legal impossibility to declare a party-defendant to be in default before it was validly served summons.

Trial Court Did Not AllowPresentation of EvidenceEx Parte Against Petitioner

The Order of December 10, 1990, which allowed the presentation of evidence ex parte against the defaulting defendants, could not have included petitioner, because the trial court granted private respondent's motion praying for the declaration of only the foreign defendants in default. So too, private respondent's ex parte Motion to present evidence referred to the foreign defendants only. 91

Furthermore, the reception of evidence ex parte against a non-defaulting party is procedurally indefensible. Without a declaration that petitioner is in default as required in Section 1, Rule 18, the trial court had no authority to order the presentation of evidence ex parte against petitioner to render judgment against it by default. The trial judge must have thought that since it failed to summons and was in default, it effectively waived any objection to the presentation of evidence against it. This rule, however, would have applied only if petitioner had submitted itself to the jurisdiction of the trial court. The latter correctly declared, in the Resolution just cited, that the default judgment against the former had been improvidently rendered.

Fourth Issue: Award Not Paid and Prayed ForAdditional Filing Fees asLien on the Judgment

Had the trial court validly acquired jurisdiction over petitioner, nonpayment of docket fees would not have prevented it from holding petitioner liable for damages. The Court, in Manchester Development Corporation v. Court of Appeals, 92 ruled that a court acquires jurisdiction over any case only upon the payment of the prescribed docket fee, not upon the amendment of the complaint or the payment of the docket fees based on the amount sought in the amended pleading. This ruling, however, was modified in Sun Insurance Office, Ltd. v. Asuncion, 93 which added:

3. Where the trial court acquires jurisdiction over a claim [through] the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee.

Filing fees for damages and awards that cannot be estimated constitute liens on the awards finally granted by the trial court. Their nonpayment alone is not a ground for the invalidation of the award.

Judgment by Default CannotGrant Relief Prayed For

A declaration or order of default is issued as a punishment for unnecessary delay in joining issues. In such event, defendants lose their standing in court, they cannot expect the trial court to act upon their pleadings, and they are not entitled to notice of the proceeding until the final termination of thecase. 94 Thus, the trial court proceeds with the reception of the plaintiff's evidence upon which a default judgment is rendered.Section 1 of Rule 18 provides that after the defendant has been declared in default, "the court shall proceed to receive the plaintiff's evidence and render judgment granting him such relief as the complaint and the facts proven may warrant." The reliefs that may be granted, however, are

restricted by Section 5, which provides that a judgment entered against a party in default shall not exceed the amount or be different in kind from that prayed for.In other words, under Section 1, a declaration of default is not an admission of the truth or the validity of the plaintiff's claims. 95 The claimant must still prove his claim and present evidence. In this sense the law gives defaulting parties some measure of protection because plaintiffs, despite the default of defendants, are still required to substantiate their allegations in the complaint. The judgment of default against defendants who have not appeared or filed their answers does not imply a waiver of all their rights, except their right to be heard and to present evidence in their favor. Their failure to answer does not imply their admission of the facts and the causes of action of the plaintiffs, because the latter are required to adduce evidence to support their allegations.Moreover, the trial court is not allowed by the Rules to receive evidence that tends to show a relief not sought or specified in the pleadings. 96 The plaintiff cannot be granted an award greater than or different in kind from that specified in the complaint. 97

This case should be distinguished, however, from that of defendants, who filed an answer but were absent during trial. In that case, they can be held liable for an amount greater than or different from that originally prayed for, provided that the award is warranted by the proven facts. This rule is premised on the theory that the adverse party failed to object to evidence relating to an issue not raised in the pleadings.The latter rule, however, is not applicable to the instant case. Admittedly, private respondent presented evidence that would have been sufficient to hold petitioner liable for damages. However, it did not include in its amended Petitions any prayer for damages against petitioner. Therefore, the trial court could not have validly held the latter liable for damages even if it were in default.

Fifth Issue: Execution of Final JudgmentSection 1 of Rule 39 provides that execution shall issue only upon a judgment that finally disposes of the action or proceeding. Such execution shall issue as a matter of right upon the expiration of the period to appeal it, if no appeal has been duly perfected. 98

In the present case, however, we have already shown that the trial court's Decision has not become final and executory against petitioner. In fact, the judgment does not even bind it. Obviously, Respondent Court committed serious reversible errors when it allowed the execution of the said judgment against petitioner.WHEREFORE, the appeal is hereby GRANTED, and the assailed Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE insofar as they affect petitioner. The levy and the sale on execution of petitioner's properties are declared NULL and VOID. Said properties are ordered RESTORED to petitioner. No pronouncement as to costs.

G.R. No. 130974 August 16, 2006MA. IMELDA M. MANOTOC, Petitioner,vs.HONORABLE COURT OF APPEALS and AGAPITA TRAJANO on behalf of the Estate of ARCHIMEDES TRAJANO, Respondents.D E C I S I O NVELASCO, JR., J.:The court’s jurisdiction over a defendant is founded on a valid service of summons. Without a valid service, the court cannot acquire jurisdiction over the defendant, unless the defendant voluntarily submits to it. The defendant must be properly apprised of a pending action against him and assured of the opportunity to present his defenses to the suit. Proper service of summons is used to protect one’s right to due process.The CaseThis Petition for Review on Certiorari 1 under Rule 45 presents the core issue whether there was a valid substituted service of summons on petitioner for the trial court to acquire jurisdiction.

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Petitioner Manotoc claims the court a quo should have annulled the proceedings in the trial court for want of jurisdiction due to irregular and ineffective service of summons.The FactsPetitioner is the defendant in Civil Case No. 63337 entitled Agapita Trajano, pro se, and on behalf of the Estate of Archimedes Trajano v. Imelda ‘Imee’ R. Marcos-Manotoc 2 for Filing, Recognition and/or Enforcement of Foreign Judgment. Respondent Trajano seeks the enforcement of a foreign court’s judgment rendered on May 1, 1991 by the United States District Court of Honolulu, Hawaii, United States of America, in a case entitled Agapita Trajano, et al. v. Imee Marcos-Manotoc a.k.a. Imee Marcos, Civil Case No. 86-0207 for wrongful death of deceased Archimedes Trajano committed by military intelligence officials of the Philippines allegedly under the command, direction, authority, supervision, tolerance, sufferance and/or influence of defendant Manotoc, pursuant to the provisions of Rule 39 of the then Revised Rules of Court.Based on paragraph two of the Complaint, the trial court issued a Summons 3 on July 6, 1993 addressed to petitioner at Alexandra Condominium Corporation or Alexandra Homes, E2 Room 104, at No. 29 Meralco Avenue, Pasig City.On July 15, 1993, the Summons and a copy of the Complaint were allegedly served upon (Mr.) Macky de la Cruz, an alleged caretaker of petitioner at the condominium unit mentioned earlier. 4 When petitioner failed to file her Answer, the trial court declared her in default through an Order 5 dated October 13, 1993.On October 19, 1993, petitioner, by special appearance of counsel, filed a Motion to Dismiss 6 on the ground of lack of jurisdiction of the trial court over her person due to an invalid substituted service of summons. The grounds to support the motion were: (1) the address of defendant indicated in the Complaint (Alexandra Homes) was not her dwelling, residence, or regular place of business as provided in Section 8, Rule 14 of the Rules of Court; (2) the party (de la Cruz), who was found in the unit, was neither a representative, employee, nor a resident of the place; (3) the procedure prescribed by the Rules on personal and substituted service of summons was ignored; (4) defendant was a resident of Singapore; and (5) whatever judgment rendered in this case would be ineffective and futile.During the hearing on the Motion to Dismiss, petitioner Manotoc presented Carlos Gonzales, who testified that he saw defendant Manotoc as a visitor in Alexandra Homes only two times. He also identified the Certification of Renato A. de Leon, which stated that Unit E-2104 was owned by Queens Park Realty, Inc.; and at the time the Certification was issued, the unit was not being leased by anyone. Petitioner also presented her Philippine passport and the Disembarkation/Embarkation Card 7 issued by the Immigration Service of Singapore to show that she was a resident of Singapore. She claimed that the person referred to in plaintiff’s Exhibits "A" to "EEEE" as "Mrs. Manotoc" may not even be her, but the mother of Tommy Manotoc, and granting that she was the one referred to in said exhibits, only 27 out of 109 entries referred to Mrs. Manotoc. Hence, the infrequent number of times she allegedly entered Alexandra Homes did not at all establish plaintiff’s position that she was a resident of said place.On the other hand, Agapita Trajano, for plaintiffs’ estate, presented Robert Swift, lead counsel for plaintiffs in the Estate of Ferdinand Marcos Human Rights Litigation, who testified that he participated in the deposition taking of Ferdinand R. Marcos, Jr.; and he confirmed that Mr. Marcos, Jr. testified that petitioner’s residence was at the Alexandra Apartment, Greenhills. 8 In addition, the entries 9 in the logbook of Alexandra Homes from August 4, 1992 to August 2, 1993, listing the name of petitioner Manotoc and the Sheriff’s Return, 10 were adduced in evidence.On October 11, 1994, the trial court rejected Manotoc’s Motion to Dismiss on the strength of its findings that her residence, for purposes of the Complaint, was Alexandra Homes, Unit E-2104, No. 29 Meralco Avenue, Pasig, Metro Manila, based on the documentary evidence of respondent Trajano. The trial court relied on the presumption that the sheriff’s substituted service was made in the regular performance of official duty, and such presumption stood in the absence of proof to the contrary. 11

On December 21, 1994, the trial court discarded Manotoc’s plea for reconsideration for lack of merit. 12

Undaunted, Manotoc filed a Petition for Certiorari and Prohibition 13 before the Court of Appeals (CA) on January 20, 1995, docketed as CA-G.R. SP No. 36214 seeking the annulment of the October 11, 1994 and December 21, 1994 Orders of Judge Aurelio C. Trampe.

Ruling of the Court of AppealsOn March 17, 1997, the CA rendered the assailed Decision, 14 dismissing the Petition for Certiorari and Prohibition. The court a quo adopted the findings of the trial court that petitioner’s residence was at Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue, Pasig, Metro Manila, which was also the residence of her husband, as shown by the testimony of Atty. Robert Swift and the Returns of the registered mails sent to petitioner. It ruled that the Disembarkation/Embarkation Card and the Certification dated September 17, 1993 issued by Renato A. De Leon, Assistant Property Administrator of Alexandra Homes, were hearsay, and that said Certification did not refer to July 1993—the month when the substituted service was effected.In the same Decision, the CA also rejected petitioner’s Philippine passport as proof of her residency in Singapore as it merely showed the dates of her departure from and arrival in the Philippines without presenting the boilerplate’s last two (2) inside pages where petitioner’s residence was indicated. The CA considered the withholding of those pages as suppression of evidence. Thus, according to the CA, the trial court had acquired jurisdiction over petitioner as there was a valid substituted service pursuant to Section 8, Rule 14 of the old Revised Rules of Court.On April 2, 1997, petitioner filed a Motion for Reconsideration 15 which was denied by the CA in its Resolution 16dated October 8, 1997.Hence, petitioner has come before the Court for review on certiorari.The IssuesPetitioner raises the following assignment of errors for the Court’s consideration:I. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN RENDERING THE DECISION AND RESOLUTION IN QUESTION (ANNEXES A AND B) IN DEFIANCE OF LAW AND JURISPRUDENCE IN RULING THAT THE TRIAL COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE PETITIONER THROUGH A SUBSTITUTED SERVICE OF SUMMONS IN ACCORDANCE WITH SECTION 8, RULE 14 OF THE REVISED RULES OF COURT.II. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR WHEN IT RULED THAT THERE WAS A VALID SERVICE OF SUMMONS ON AN ALLEGED CARETAKER OF PETITIONER’S RESIDENCE IN COMPLETE DEFIANCE OF THE RULING IN CASTILLO VS. CFI OF BULACAN, BR. IV, G.R. NO. L-55869, FEBRUARY 20, 1984, 127 SCRA 632 WHICH DEFINES THE PROPRIETY OF SUCH SERVICE UPON MERE OVERSEERS OF PREMISES WHERE A PARTY SUPPOSEDLY RESIDES.III. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN CONCLUDING THAT THE RESIDENCE OF THE HUSBAND IS ALSO THE RESIDENCE OF HIS WIFE CONTRARY TO THE RULING IN THE BANK OF THE PHILIPPINE ISLANDS VS. DE COSTER, G.R. NO. 23181, MARCH 16, 1925, 47 PHIL. 594.IV. RESPONDENT COURT OF APPEALS COMMITTED [A] SERIOUS ERROR IN FAILING TO APPLY THE RULE ON EXTRA-TERRITORIAL SERVICE OF SUMMONS UNDER SECTIONS 17 AND 18, RULE 14 OF THE REVISED RULES OF COURT. 17

The assigned errors bring to the fore the crux of the disagreement—the validity of the substituted service of summons for the trial court to acquire jurisdiction over petitioner.The Court’s RulingWe GRANT the petition.Acquisition of JurisdictionJurisdiction over the defendant is acquired either upon a valid service of summons or the defendant’s voluntary appearance in court. When the defendant does not voluntarily submit to the court’s jurisdiction or when there is no valid service of summons, "any judgment of the court which has no jurisdiction over the person of the defendant is null and void." 18 In an action strictly in personam, personal service on the defendant is the preferred mode of service, that is, by handing a copy of the summons to the defendant in person. If defendant, for excusable reasons, cannot be served with the summons within a reasonable period, then substituted service can be resorted to. While substituted service of summons is permitted, "it is extraordinary in character and in derogation of the usual method of service." 19 Hence, it must faithfully and strictly comply with the prescribed requirements and circumstances authorized by the rules. Indeed, "compliance with the rules regarding the service of summons is as much important as the issue of due process as of jurisdiction." 20

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Requirements for Substituted ServiceSection 8 of Rule 14 of the old Revised Rules of Court which applies to this case provides:SEC. 8. 21 Substituted service. – If the defendant cannot be served within a reasonable time as provided in the preceding section [personal service on defendant], service may be effected (a) by leaving copies of the summons at the defendant’s residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant’s office or regular place of business with some competent person in charge thereof.We can break down this section into the following requirements to effect a valid substituted service:(1) Impossibility of Prompt Personal ServiceThe party relying on substituted service or the sheriff must show that defendant cannot be served promptly or there is impossibility of prompt service. 22 Section 8, Rule 14 provides that the plaintiff or the sheriff is given a "reasonable time" to serve the summons to the defendant in person, but no specific time frame is mentioned. "Reasonable time" is defined as "so much time as is necessary under the circumstances for a reasonably prudent and diligent man to do, conveniently, what the contract or duty requires that should be done, having a regard for the rights and possibility of loss, if any[,] to the other party." 23 Under the Rules, the service of summons has no set period. However, when the court, clerk of court, or the plaintiff asks the sheriff to make the return of the summons and the latter submits the return of summons, then the validity of the summons lapses. The plaintiff may then ask for an alias summons if the service of summons has failed. 24 What then is a reasonable time for the sheriff to effect a personal service in order to demonstrate impossibility of prompt service? To the plaintiff, "reasonable time" means no more than seven (7) days since an expeditious processing of a complaint is what a plaintiff wants. To the sheriff, "reasonable time" means 15 to 30 days because at the end of the month, it is a practice for the branch clerk of court to require the sheriff to submit a return of the summons assigned to the sheriff for service. The Sheriff’s Return provides data to the Clerk of Court, which the clerk uses in the Monthly Report of Cases to be submitted to the Office of the Court Administrator within the first ten (10) days of the succeeding month. Thus, one month from the issuance of summons can be considered "reasonable time" with regard to personal service on the defendant.Sheriffs are asked to discharge their duties on the service of summons with due care, utmost diligence, and reasonable promptness and speed so as not to prejudice the expeditious dispensation of justice. Thus, they are enjoined to try their best efforts to accomplish personal service on defendant. On the other hand, since the defendant is expected to try to avoid and evade service of summons, the sheriff must be resourceful, persevering, canny, and diligent in serving the process on the defendant. For substituted service of summons to be available, there must be several attempts by the sheriff to personally serve the summons within a reasonable period [of one month] which eventually resulted in failure to prove impossibility of prompt service. "Several attempts" means at least three (3) tries, preferably on at least two different dates. In addition, the sheriff must cite why such efforts were unsuccessful. It is only then that impossibility of service can be confirmed or accepted.(2) Specific Details in the ReturnThe sheriff must describe in the Return of Summons the facts and circumstances surrounding the attempted personal service. 25 The efforts made to find the defendant and the reasons behind the failure must be clearly narrated in detail in the Return. The date and time of the attempts on personal service, the inquiries made to locate the defendant, the name/s of the occupants of the alleged residence or house of defendant and all other acts done, though futile, to serve the summons on defendant must be specified in the Return to justify substituted service. The form on Sheriff’s Return of Summons on Substituted Service prescribed in the Handbook for Sheriffs published by the Philippine Judicial Academy requires a narration of the efforts made to find the defendant personally and the fact of failure. 26 Supreme Court Administrative Circular No. 5 dated November 9, 1989 requires that "impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the failure of such efforts," which should be made in the proof of service.(3) A Person of Suitable Age and DiscretionIf the substituted service will be effected at defendant’s house or residence, it should be left with a person of "suitable age and discretion then residing therein." 27 A person of suitable age and discretion is one who has attained the age of full legal capacity (18 years old) and is considered

to have enough discernment to understand the importance of a summons. "Discretion" is defined as "the ability to make decisions which represent a responsible choice and for which an understanding of what is lawful, right or wise may be presupposed". 28 Thus, to be of sufficient discretion, such person must know how to read and understand English to comprehend the import of the summons, and fully realize the need to deliver the summons and complaint to the defendant at the earliest possible time for the person to take appropriate action. Thus, the person must have the "relation of confidence" to the defendant, ensuring that the latter would receive or at least be notified of the receipt of the summons. The sheriff must therefore determine if the person found in the alleged dwelling or residence of defendant is of legal age, what the recipient’s relationship with the defendant is, and whether said person comprehends the significance of the receipt of the summons and his duty to immediately deliver it to the defendant or at least notify the defendant of said receipt of summons. These matters must be clearly and specifically described in the Return of Summons.(4) A Competent Person in ChargeIf the substituted service will be done at defendant’s office or regular place of business, then it should be served on a competent person in charge of the place. Thus, the person on whom the substituted service will be made must be the one managing the office or business of defendant, such as the president or manager; and such individual must have sufficient knowledge to understand the obligation of the defendant in the summons, its importance, and the prejudicial effects arising from inaction on the summons. Again, these details must be contained in the Return.Invalid Substituted Service in the Case at BarLet us examine the full text of the Sheriff’s Return, which reads:THIS IS TO CERTIFY that on many occasions several attempts were made to serve the summons with complaint and annexes issued by this Honorable Court in the above entitled case, personally upon the defendant IMELDA ‘IMEE’ MARCOS-MANOTOC located at Alexandra Condominium Corpration [sic] or Alexandra Homes E-2 Room 104 No. 29 Merlaco [sic] Ave., Pasig, Metro-Manila at reasonable hours of the day but to no avail for the reason that said defendant is usually out of her place and/or residence or premises. That on the 15th day of July, 1993, substituted service of summons was resorted to in accordance with the Rules of Court in the Philippines leaving copy of said summons with complaint and annexes thru [sic] (Mr) Macky de la Cruz, caretaker of the said defendant, according to (Ms) Lyn Jacinto, Receptionist and Telephone Operator of the said building, a person of suitable age and discretion, living with the said defendant at the given address who acknowledged the receipt thereof of said processes but he refused to sign (emphases supplied).WHEREFORE, said summons is hereby returned to this Honorable Court of origin, duly served for its record and information.Pasig, Metro-Manila July 15, 1993. 29

A meticulous scrutiny of the aforementioned Return readily reveals the absence of material data on the serious efforts to serve the Summons on petitioner Manotoc in person. There is no clear valid reason cited in the Return why those efforts proved inadequate, to reach the conclusion that personal service has become impossible or unattainable outside the generally couched phrases of "on many occasions several attempts were made to serve the summons x x x personally," "at reasonable hours during the day," and "to no avail for the reason that the said defendant is usually out of her place and/or residence or premises." Wanting in detailed information, the Return deviates from the ruling—in Domagas v. Jensen 30 and other related cases 31—that the pertinent facts and circumstances on the efforts exerted to serve the summons personally must be narrated in the Return. It cannot be determined how many times, on what specific dates, and at what hours of the day the attempts were made. Given the fact that the substituted service of summons may be assailed, as in the present case, by a Motion to Dismiss, it is imperative that the pertinent facts and circumstances surrounding the service of summons be described with more particularity in the Return or Certificate of Service.Besides, apart from the allegation of petitioner’s address in the Complaint, it has not been shown that respondent Trajano or Sheriff Cañelas, who served such summons, exerted extraordinary efforts to locate petitioner. Certainly, the second paragraph of the Complaint only states that respondents were "informed, and so [they] allege" about the address and whereabouts of petitioner. Before resorting to substituted service, a plaintiff must demonstrate an effort in good faith to locate the defendant through more direct means. 32 More so, in the case

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in hand, when the alleged petitioner’s residence or house is doubtful or has not been clearly ascertained, it would have been better for personal service to have been pursued persistently.In the case Umandap v. Sabio, Jr., 33 it may be true that the Court held that a Sheriff’s Return, which states that "despite efforts exerted to serve said process personally upon the defendant on several occasions the same proved futile," conforms to the requirements of valid substituted service. However, in view of the numerous claims of irregularities in substituted service which have spawned the filing of a great number of unnecessary special civil actions of certiorari and appeals to higher courts, resulting in prolonged litigation and wasteful legal expenses, the Court rules in the case at bar that the narration of the efforts made to find the defendant and the fact of failure written in broad and imprecise words will not suffice. The facts and circumstances should be stated with more particularity and detail on the number of attempts made at personal service, dates and times of the attempts, inquiries to locate defendant, names of occupants of the alleged residence, and the reasons for failure should be included in the Return to satisfactorily show the efforts undertaken. That such efforts were made to personally serve summons on defendant, and those resulted in failure, would prove impossibility of prompt personal service.Moreover, to allow sheriffs to describe the facts and circumstances in inexact terms would encourage routine performance of their precise duties relating to substituted service—for it would be quite easy to shroud or conceal carelessness or laxity in such broad terms. Lastly, considering that monies and properties worth millions may be lost by a defendant because of an irregular or void substituted service, it is but only fair that the Sheriff’s Return should clearly and convincingly show the impracticability or hopelessness of personal service.Granting that such a general description be considered adequate, there is still a serious nonconformity from the requirement that the summons must be left with a "person of suitable age and discretion" residing in defendant’s house or residence. Thus, there are two (2) requirements under the Rules: (1) recipient must be a person of suitable age and discretion; and (2) recipient must reside in the house or residence of defendant. Both requirements were not met. In this case, the Sheriff’s Return lacks information as to residence, age, and discretion of Mr. Macky de la Cruz, aside from the sheriff’s general assertion that de la Cruz is the "resident caretaker" of petitioner as pointed out by a certain Ms. Lyn Jacinto, alleged receptionist and telephone operator of Alexandra Homes. It is doubtful if Mr. de la Cruz is residing with petitioner Manotoc in the condominium unit considering that a married woman of her stature in society would unlikely hire a male caretaker to reside in her dwelling. With the petitioner’s allegation that Macky de la Cruz is not her employee, servant, or representative, it is necessary to have additional information in the Return of Summons. Besides, Mr. Macky de la Cruz’s refusal to sign the Receipt for the summons is a strong indication that he did not have the necessary "relation of confidence" with petitioner. To protect petitioner’s right to due process by being accorded proper notice of a case against her, the substituted service of summons must be shown to clearly comply with the rules.It has been stated and restated that substituted service of summons must faithfully and strictly comply with the prescribed requirements and in the circumstances authorized by the rules. 34

Even American case law likewise stresses the principle of strict compliance with statute or rule on substituted service, thus:The procedure prescribed by a statute or rule for substituted or constructive service must be strictly pursued. 35There must be strict compliance with the requirements of statutes authorizing substituted or constructive service.36

Where, by the local law, substituted or constructive service is in certain situations authorized in the place of personal service when the latter is inconvenient or impossible, a strict and literal compliance with the provisions of the law must be shown in order to support the judgment based on such substituted or constructive service. 37Jurisdiction is not to be assumed and exercised on the general ground that the subject matter of the suit is within the power of the court. The inquiry must be as to whether the requisites of the statute have been complied with, and such compliance must appear on the record. 38 The fact that the defendant had actual knowledge of attempted service does not render the service effectual if in fact the process was not served in accordance with the requirements of the statute. 39

Based on the above principles, respondent Trajano failed to demonstrate that there was strict compliance with the requirements of the then Section 8, Rule 14 (now Section 7, Rule 14 of the 1997 Rules of Civil Procedure).

Due to non-compliance with the prerequisites for valid substituted service, the proceedings held before the trial court perforce must be annulled.The court a quo heavily relied on the presumption of regularity in the performance of official duty. It reasons out that "[t]he certificate of service by the proper officer is prima facie evidence of the facts set out herein, and to overcome the presumption arising from said certificate, the evidence must be clear and convincing." 40

The Court acknowledges that this ruling is still a valid doctrine. However, for the presumption to apply, the Sheriff’s Return must show that serious efforts or attempts were exerted to personally serve the summons and that said efforts failed. These facts must be specifically narrated in the Return. To reiterate, it must clearly show that the substituted service must be made on a person of suitable age and discretion living in the dwelling or residence of defendant. Otherwise, the Return is flawed and the presumption cannot be availed of. As previously explained, the Return of Sheriff Cañelas did not comply with the stringent requirements of Rule 14, Section 8 on substituted service.In the case of Venturanza v. Court of Appeals, 41 it was held that "x x x the presumption of regularity in the performance of official functions by the sheriff is not applicable in this case where it is patent that the sheriff’s return is defective (emphasis supplied)." While the Sheriff’s Return in the Venturanza case had no statement on the effort or attempt to personally serve the summons, the Return of Sheriff Cañelas in the case at bar merely described the efforts or attempts in general terms lacking in details as required by the ruling in the case of Domagas v. Jensen and other cases. It is as if Cañelas’ Return did not mention any effort to accomplish personal service. Thus, the substituted service is void.On the issue whether petitioner Manotoc is a resident of Alexandra Homes, Unit E-2104, at No. 29 Meralco Avenue, Pasig City, our findings that the substituted service is void has rendered the matter moot and academic. Even assuming that Alexandra Homes Room 104 is her actual residence, such fact would not make an irregular and void substituted service valid and effective.IN VIEW OF THE FOREGOING, this Petition for Review is hereby GRANTED and the assailed March 17, 1997 Decision and October 8, 1997 Resolution of the Court of Appeals and the October 11, 1994 and December 21, 1994 Orders of the Regional Trial Court, National Capital Judicial Region, Pasig City, Branch 163 are herebyREVERSED and SET ASIDE.No costs.SO ORDERED.

G.R. No. 89070 May 18, 1992BENGUET ELECTRlC COOPERATIVE, INC., petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, PETER COSALAN and BOARD OF DIRECTORS OF BENGUET ELECTRIC COOPERATIVE, INC., * respondents.Raymundo W. Celino for respondent Peter Cosalan.Reenan Orate for respondent Board of Directors of BENECO. FELICIANO, J.:Private respondent Peter Cosalan was the General Manager of Petitioner Benguet Electric Cooperative, Inc. ("Beneco"), having been elected as such by the Board of Directors of Beneco, with the approval of the National Electrification Administrator, Mr. Pedro Dumol, effective 16 October 1982.

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On 3 November 1982, respondent Cosalan received Audit Memorandum No. 1 issued by the Commission on Audit ("COA"). This Memorandum noted that cash advances received by officers and employees of petitioner Beneco in the amount of P129,618.48 had been virtually written off in the books of Beneco. In the Audit Memorandum, the COA directed petitioner Beneco to secure the approval of the National Electrification Administration ("NEA") before writing off or condoning those cash advances, and recommended the adoption of remedial measures.On 12 November 1982, COA issued another Memorandum — Audit Memorandum No. 2 –– addressed to respondent Peter Cosalan, inviting attention to the fact that the audit of per diems and allowances received by officials and members of the Board of Directors of Beneco showed substantial inconsistencies with the directives of the NEA. The Audit Memorandum once again directed the taking of immediate action in conformity with existing NEA regulations.On 19 May 1983, petitioner Beneco received the COA Audit Report on the financial status and operations of Beneco for the eight (8) month period ended 30 September 1982. This Audit Report noted and enumerated irregularities in the utilization of funds amounting to P37 Million released by NEA to Beneco, and recommended that appropriate remedial action be taken.Having been made aware of the serious financial condition of Beneco and what appeared to be mismanagement, respondent Cosalan initiated implementation of the remedial measures recommended by the COA. The respondent members of the Board of Beneco reacted by adopting a series of resolutions during the period from 23 June to 24 July 1984. These Board Resolutions abolished the housing allowance of respondent Cosalan; reduced his salary and his representation and commutable allowances; directed him to hold in abeyance all pending personnel disciplinary actions; and struck his name out as a principal signatory to transactions of petitioner Beneco.During the period from 28 July to 25 September 1984, the respondent Beneco Board members adopted another series of resolutions which resulted in the ouster of respondent Cosalan as General Manager of Beneco and his exclusion from performance of his regular duties as such, as well as the withholding of his salary and allowances. These resolutions were as follows:

1. Resolution No. 91-4 dated 28 July 1984:. . . that the services of Peter M. Cosalan as General Manager of BENECO is terminated upon approval of the National Electrification Administration;

2. Resolution No. 151-84 dated September 15, 1984;. . . that Peter M. Cosalan is hereby suspended from his position as General Manager of the Benguet Electric Cooperative, Inc. (BENECO) effective as of the start of the office hours on September 24, 1984, until a final decision has been reached by the NEA on his dismissal;. . . that GM Cosalan's suspension from office shall remain in full force and effect until such suspension is sooner lifted, revoked or

rescinded by the Board of Directors; that all monies due him are withheld until cleared;

3. Resolution No. 176-84 dated September 25, 1984;. . . that Resolution No. 151-84, dated September 15, 1984 stands as preventive suspension for GM Peter M. Cosalan. 1

Respondent Cosalan nevertheless continued to work as General Manager of Beneco, in the belief that he could be suspended or removed only by duly authorized officials of NEA, in accordance with provisions of P.D. No, 269, as amended by P.D. No. 1645 (the statute creating the NEA, providing for its capitalization, powers and functions and organization), the loan agreement between NEA and petitioner Beneco 2 and the NEA Memorandum of 2 July 1980. 3 Accordingly, on 5 October and 10 November 1984, respondent Cosalan requested petitioner Beneco to release the compensation due him. Beneco, acting through respondent Board members, denied the written request of respondent Cosalan.Respondent Cosalan then filed a complaint with the National Labor Relations Commission ("NLRC") on 5 December 1984 against respondent members of the Beneco Board, challenging the legality of the Board resolutions which ordered his suspension and termination from the service and demanding payment of his salaries and allowances. On 18 February 1985, Cosalan amended his complaint to implead petitioner Beneco and respondent Board members, the latter in their respective dual capacities as Directors and as private individuals.In the course of the proceedings before the Labor Arbiter, Cosalan filed a motion for reinstatement which, although opposed by petitioner Beneco, was granted on 23 October 1987 by Labor Arbiter Amado T. Adquilen. Petitioner Beneco complied with the Labor Arbiter's order on 28 October 1987 through Resolution No. 10-90.On 5 April 1988, the Labor Arbiter rendered a decision (a) confirming Cosalan's reinstatement; (b) ordering payment to Cosalan of his backwages and allowances by petitioner Beneco and respondent Board members, jointly and severally, for a period of three (3) years without deduction or qualification, amounting to P344,000.00; and (3) ordering the individual Board members to pay, jointly and severally, to Cosalan moral damages of P50,000.00 plus attorney's fees of ten percent (10%) of the wages and allowances awarded him.Respondent Board members appealed to the NLRC, and there filed a Memorandum on Appeal. Petitioner Beneco did not appeal, but moved to dismiss the appeal filed by respondent Board members and for execution of judgment. By this time, petitioner Beneco had a new set of directors.In a decision dated 21 November 1988, public respondent NLRC modified the award rendered by the Labor Arbiter by declaring that petitioner Beneco alone, and not respondent Board members, was liable for respondent Cosalan's backwages and allowances, and by ruling that there was no legal basis for the award of moral damages and attorney's fees made by the Labor Arbiter.Beneco, through its new set of directors, moved for reconsideration of the NLRC decision, but without success.

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In the present Petition for Certiorari, Beneco's principal contentions are two-fold: first, that the NLRC had acted with grave abuse of discretion in accepting and giving due course to respondent Board members' appeal although such appeal had been filed out of time; and second, that the NLRC had acted with grave abuse of discretion amounting to lack of jurisdiction in holding petitioner alone liable for payment of the backwages and allowances due to Cosalan and releasing respondent Board members from liability therefor.We consider that petitioner's first contention is meritorious. There is no dispute about the fact that the respondent Beneco Board members received the decision of the labor Arbiter on 21 April 1988. Accordingly, and because 1 May 1988 was a legal holiday, they had only up to 2 May 1988 within which to perfect their appeal by filing their memorandum on appeal. It is also not disputed that the respondent Board members' memorandum on appeal was posted by registered mail on 3 May 1988 and received by the NLRC the following day. 4 Clearly, the memorandum on appeal was filed out of time.Respondent Board members, however, insist that their Memorandum on Appeal was filed on time because it was delivered for mailing on 1 May 1988 to the Garcia Communications Company, a licensed private letter carrier. The Board members in effect contend that the date of delivery to Garcia Communications was the date of filing of their appeal memorandum.Respondent Board member's contention runs counter to the established rule that transmission through a private carrier or letter-forwarder –– instead of the Philippine Post Office –– is not a recognized mode of filing pleadings. 5The established rule is that the date of delivery of pleadings to a private letter-forwarding agency is not to be considered as the date of filing thereof in court, and that in such cases, the date of actual receipt by the court, and not the date of delivery to the private carrier, is deemed the date of filing of that pleading. 6

There, was, therefore, no reason grounded upon substantial justice and the prevention of serious miscarriage of justice that might have justified the NLRC in disregarding the ten-day reglementary period for perfection of an appeal by the respondent Board members. Accordingly, the applicable rule was that the ten-day reglementary period to perfect an appeal is mandatory and jurisdictional in nature, that failure to file an appeal within the reglementary period renders the assailed decision final and executory and no longer subject to review. 7 The respondent Board members had thus lost their right to appeal from the decision of the Labor Arbiter and the NLRC should have forthwith dismissed their appeal memorandum.There is another and more compelling reason why the respondent Board members' appeal should have been dismissed forthwith: that appeal was quite bereft of merit. Both the Labor Arbiter and the NLRC had found that the indefinite suspension and termination of services imposed by the respondent Board members upon petitioner Cosalan was illegal. That illegality flowed, firstly, from the fact that the suspension of Cosalan was continued long after expiration of the period of thirty (30) days, which is the maximum period of preventive suspension that could be lawfully imposed under Section 4, Rule XIV of the Omnibus Rules Implementing the Labor Code. Secondly, Cosalan had been deprived of procedural due process by the respondent Board members. He was never informed of the charges raised against him and was given no opportunity to meet those charges and present his side of whatever dispute existed; he was kept

totally in the dark as to the reason or reasons why he had been suspended and effectively dismissed from the service of Beneco Thirdly, respondent Board members failed to adduce any cause which could reasonably be regarded as lawful cause for the suspension and dismissal of respondent Cosalan from his position as General Manager of Beneco. Cosalan was, in other words, denied due process both procedural and substantive. Fourthly, respondent Board members failed to obtain the prior approval of the NEA of their suspension now dismissal of Cosalan, which prior approval was required, inter alia, under the subsisting loan agreement between the NEA and Beneco. The requisite NEA approval was subsequently sought by the respondent Board members; no NEA approval was granted.In reversing the decision of the Labor Arbiter declaring petitioner Beneco and respondent Board members solidarily liable for the salary, allowances, damages and attorney's fees awarded to respondent Cosalan, the NLRC said:

. . . A perusal of the records show that the members of the Board never acted in their individual capacities. They were acting as a Board passing resolutions affecting their general manager. If these resolutions and resultant acts transgressed the law, to then BENECO for which the Board was acting in behalf should bear responsibility. The records do not disclose that the individual Board members were motivated by malice or bad faith, rather, it reveals an intramural power play gone awry and misapprehension of its own rules and regulations. For this reason, the decision holding the individual board members jointly and severally liable with BENECO for Cosalan's backwages is untenable. The same goes for the award of damages which does not have the proverbial leg to stand on.The Labor Arbiter below should have heeded his own observation in his decision —

Respondent BENECO as an artificial person could not have, by itself, done anything to prevent it. But because the former have acted while in office and in the course of their official functions as directors of BENECO, . . .

Thus, the decision of the Labor Arbiter should be modified conformably with all the foregoing holding BENECO solely liable for backwages and releasing the appellant board members from any individual liabilities. 8(Emphasis supplied)

The applicable general rule is clear enough. The Board members and officers of a corporation who purport to act for and in behalf of the corporation, keep within the lawful scope of their authority in so acting, and act in good faith, do not become liable, whether civilly or otherwise, for the consequences of their acts, Those acts, when they are such a nature and are done under such circumstances, are properly attributed to the corporation alone and no personal liability is incurred by such officers and Board members. 9

The major difficulty with the conclusion reached by the NLRC is that the NLRC clearly overlooked or disregarded the circumstances under which respondent Board members had in fact acted in the instant case. As noted earlier, the respondent Board members responded to the efforts of Cosalan to take seriously

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and implement the Audit Memoranda issued by the COA explicitly addressed to the petitioner Beneco, first by stripping Cosalan of the privileges and perquisites attached to his position as General Manager, then by suspending indefinitely and finally dismissing Cosalan from such position. As also noted earlier, respondent Board members offered no suggestion at all of any just or lawful cause that could sustain the suspension and dismissal of Cosalan. They obviously wanted to get rid of Cosalan and so acted, in the words of the NLRC itself, "with indecent haste" in removing him from his position and denying him substantive and procedural due process. Thus, the record showed strong indications that respondent Board members had illegally suspended and dismissed Cosalan precisely because he was trying to remedy the financial irregularities and violations of NEA regulations which the COA had brought to the attention of Beneco. The conclusion reached by the NLRC that "the records do not disclose that the individual Board members were motivated by malice or bad faith" flew in the face of the evidence of record. At the very least, a strong presumption had arisen, which it was incumbent upon respondent Board members to disprove, that they had acted in reprisal against respondent Cosalan and in an effort to suppress knowledge about and remedial measures against the financial irregularities the COA Audits had unearthed. That burden respondent Board members did not discharge.The Solicitor General has urged that respondent Board members may be held liable for damages under the foregoing circumstance under Section 31 of the Corporation Code which reads as follows:

Sec. 31. Liability of directors, trustees or officers. — Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be jointly liable and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons . . . (Emphasis supplied)

We agree with the Solicitor General, firstly, that Section 31 of the Corporation Code is applicable in respect of Beneco and other electric cooperatives similarly situated. Section 4 of the Corporation Code renders the provisions of that Code applicable in a supplementary manner to all corporations, including those with special or individual charters so long as those provisions are not inconsistent with such charters. We find no provision in P.D. No. 269, as amended, that would exclude expressly or by necessary implication the applicability of Section 31 of the Corporation Code in respect of members of the boards of directors of electric cooperatives. Indeed, P.D. No. 269 expressly describes these cooperatives as "corporations:"

Sec. 15. Organization and Purpose. — Cooperative non-stock, non-profit membership corporations may be organized, and electric cooperative corporations heretofore formed or registered under the Philippine non-Agricultural Co-operative Act may as hereinafter provided be converted, under this Decree for the purpose of supplying, and of promoting and encouraging-the fullest use of, service on an area coverage

basis at the lowest cost consistent with sound economy and the prudent management of the business of such corporations. 10(Emphasis supplied)

We agree with the Solicitor General, secondly, that respondent Board members were guilty of "gross negligence or bad faith in directing the affairs of the corporation" in enacting the series of resolutions noted earlier indefinitely suspending and dismissing respondent Cosalan from the position of General Manager of Beneco. Respondent Board members, in doing so, acted belong the scope of their authority as such Board members. The dismissal of an officer or employee in bad faith, without lawful cause and without procedural due process, is an act that iscontra legem. It cannot be supposed that members of boards of directors derive any authority to violate the express mandates of law or the clear legal rights of their officers and employees by simply purporting to act for the corporation they control.We believe and so hold, further, that not only are Beneco and respondent Board members properly held solidarily liable for the awards made by the Labor Arbiter, but also that petitioner Beneco which was controlled by and which could act only through respondent Board members, has a right to be reimbursed for any amounts that Beneco may be compelled to pay to respondent Cosalan. Such right of reimbursement is essential if the innocent members of Beneco are not to be penalized for the acts of respondent Board members which were both done in bad faith and ultra vires. The liability-generating acts here are the personal and individual acts of respondent Board members, and are not properly attributed to Beneco itself.WHEREFORE, the Petition for Certiorari is GIVEN DUE COURSE, the comment filed by respondent Board members is TREATED as their answer, and the decision of the National Labor Relations Commission dated 21 November 1988 in NLRC Case No. RAB-1-0313-84 is hereby SET ASIDE and the decision dated 5 April 1988 of Labor Arbiter Amado T. Adquilen hereby REINSTATED in toto. In addition, respondent Board members are hereby ORDERED to reimburse petitioner Beneco any amounts that it may be compelled to pay to respondent Cosalan by virtue of the decision of Labor Arbiter Amado T. Adquilen. No pronouncement as to costs.SO ORDERED.G.R. No. 196877 November 21, 2012ELOISA R. NARCISO, Petitioner, vs.ESTELITA P. GARCIA, Respondent.D E C I S I O NABAD, J.:This case is about the propriety of declaring a defendant in default when the time for filing the answer has not yet elapsed.The Facts and the CasePlaintiff Estelita P. Garcia (respondent in this case) filed a complaint for damages against defendant Eloisa R. Narciso (petitioner) before the Regional Trial Court (RTC) of San Fernando, Pampanga. Narciso filed a motion to dismiss the complaint, alleging that the RTC had no jurisdiction over the subject matter of the complaint since it averred facts constitutive of forcible entry. Narciso also assailed the venue as improperly laid since the acts Garcia complained of were committed in Angeles City.Plaintiff Garcia opposed the motion to dismiss and at the same time sought to have defendant Narciso declared in default. Garcia cited the Supreme Court’s administrative circular that

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discouraged the filing of a motion to dismiss in lieu of answer. Since the time to file an answer had already elapsed, said Garcia, she was entitled to have Narciso declared in default.The RTC set the two motions for hearing on November 5, 2004 at which hearing it deemed the incidents submitted for resolution. On November 30, 2004, the RTC denied Narciso’s motion to dismiss and, as a consequence, declared her in default for failing to file an answer.On December 22, 2004 defendant Narciso filed a motion for reconsideration of the orders denying her motion to dismiss and declaring her in default for failing to file an answer, which motion Garcia opposed. In her opposition, the latter also sought to present her evidence ex parte. Meantime, the presiding judge, Pedro M. Sunga, retired and Judge Divina Luz Aquino-Simbulan replaced him as acting judge of the concerned RTC branch.Judge Simbulan referred the case for mediation on June 23, 2005. When mediation failed, on August 1, 2005 thetrial court set the case for judicial dispute resolution (JDR) as component of pre-trial, presided over by Judge Maria Amifaith S. Fider-Reyes. Since the JDR also failed, the case was re-raffled for pre-trial proper and trial to Branch 44, presided over by Judge Esperanza Paglinawan-Rozario.On March 26, 2007, having noted that the court had not yet acted on Narciso’s motion for reconsideration of the orders denying her motion to dismiss and declaring her in default, the trial court set the case for hearing and required the parties to submit their respective written manifestations to the court.On August 24, 2007 the trial court denied Narciso’s motion for reconsideration. It ruled that since she had already been declared in default as early as November 30, 2004 and since she had not filed any motion to lift the order of default within the allowable time, Narciso could no longer assail such default order.On September 3, 2007 Narciso filed a motion to lift the order of default against her. She claimed that the protracted resolution of her motion for reconsideration and the referral of the case for mediation prevented her from filing an answer. She also pointed out that she filed a case for ejectment against Garcia and succeeded in obtaining a decision against the latter.On April 8, 2008 the trial court denied Narciso’s motion. She filed a motion for reconsideration of this order but the court also denied the same on October 13, 2008, prompting Narciso to file a petition for certiorari before the Court of Appeals (CA). On December 8, 20101 the CA denied her petition and affirmed the RTC’s order. The CA held that, while a motion to lift order of default may be filed at any time after notice and before judgment, Narciso needed to allege facts constituting fraud, accident, mistake, or excusable negligence that prevented her from answering the complaint. She also needed to show a meritorious defense or that something would be gained by having the order of default set aside.2 For the CA, petitioner failed to do these things. It denied Narciso’s motion for reconsideration of its decision on April 11, 2011.3

Claiming that the CA committed grave abuse of discretion amounting to lack or excess of jurisdiction, Narciso filed the present petition for certiorari with prayer for the issuance of a temporary restraining order (TRO) and injunction. In a Resolution dated June 8, 2011 the Court issued a TRO in the case, enjoining the RTC from proceeding with its hearing until further orders.4

The Issue PresentedThe sole issue presented in this case is whether or not the CA gravely abused its discretion in affirming the order of default that the RTC issued against petitioner Narciso.The Court’s RulingSection 3, Rule 9 of the Rules of Court provides that a defending party may be declared in default upon motion of the claiming party with notice to the defending party, and proof of failure to file an answer within the time allowed for it. Thus:SEC. 3. Default; declaration of. — If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the defending party, and proof of such failure, declare the defending party in default. x x xHere, however, defendant Narciso filed a motion to dismiss plaintiff Garcia’s complaint against her before filing an answer. Section 1, Rule 16 allows her this remedy. Thus:SEC. 1. Grounds. — Within the time for but before filing the answer to the complaint or pleading asserting a claim, a motion to dismiss may be made on any of the following grounds: x x x.As a consequence of the motion to dismiss that defendant Narciso filed, the running of the period during which the rules required her to file her answer was deemed suspended. When the trial court denied her motion to dismiss, therefore, she had the balance of her period for filing an

answer under Section 4, Rule 16 within which to file the same but in no case less than five days, computed from her receipt of the notice of denial of her motion to dismiss. Thus:SEC. 4. Time to plead. — If the motion is denied, the movant shall file his answer within the balance of the period prescribed by Rule 11 to which he was entitled at the time of serving his motion, but not less than five (5) days in any event, computed from his receipt of the notice of the denial. If the pleading is ordered to be amended, he shall file his answer within the period prescribed by Rule 11 counted from service of the amended pleading, unless the court provides a longer period.But apart from opposing defendant’s motion to dismiss, plaintiff Garcia asked the trial court to declare Narciso in default for not filing an answer, altogether disregarding the suspension of the running of the period for filing such an answer during the pendency of the motion to dismiss that she filed in the case. Consequently, when the trial court granted Garcia’s prayer and simultaneously denied Narciso’s motion to dismiss and declared her in default, it committed serious error.1âwphi1 Narciso was not yet in default when the trial court denied her motion to dismiss. She still had at least five days within which to file her answer to the complaint.What is more, Narciso had the right to file a motion for reconsideration of the trial court’s order denying her motion to dismiss. No rule prohibits the filing of such a motion for reconsideration. Only after the trial court shall have denied it does Narciso become bound to file her answer to Garcia’s complaint. And only if she did not do so was Garcia entitled to have her declared in default. Unfortunately, the CA failed to see this point.WHEREFORE, the Court ANNULS and SETS ASIDE the Decision of the Court of Appeals dated December 8, 2010 and Resolution dated April 11, 2011 in CA-G.R. SP 106425, LIFTS the order of default that the Regional Trial Court of San Fernando, Pampanga, Branch 44, · entered against petitioner Eloisa Narciso, and DIRECTS that court to allow her to file her answer to the complaint and proceed to hear the case with dispatch. The court DISSOLVES the temporary restraining order that it issued on June 8, 2011 to enable the trial court to resume proceedings in the case.SO ORDERED.

G.R. No. 169548 March 15, 2010TITAN CONSTRUCTION CORPORATION, Petitioner, vs.MANUEL A. DAVID, SR. and MARTHA S. DAVID, Respondents.D E C I S I O NDEL CASTILLO, J.:The review of factual matters is not the province of this Court.1 The Supreme Court is not a trier of facts, and is not the proper forum for the ventilation and substantiation of factual issues.2

This Petition for Review assails the July 20, 2004 Decision3 of the Court of Appeals (CA) in CA-G.R. CV No. 67090 which affirmed with modification the March 7, 2000 Decision4 of the Regional Trial Court (RTC) of Quezon City, Branch 80. Also assailed is the August 31, 2005 Resolution5 of the CA denying the motion for reconsideration.Factual Antecedents

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Manuel A. David, Sr. (Manuel) and Martha S. David (Martha) were married on March 25, 1957. In 1970, the spouses acquired a 602 square meter lot located at White Plains, Quezon City, which was registered in the name of "MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David" and covered by Transfer Certificate of Title (TCT) No. 156043 issued by the Register of Deeds of Quezon City.6 In 1976, the spouses separated de facto, and no longer communicated with each other.7

Sometime in March 1995, Manuel discovered that Martha had previously sold the property to Titan Construction Corporation (Titan) for P1,500,000.00 through a Deed of Sale8 dated April 24, 1995, and that TCT No. 156043 had been cancelled and replaced by TCT No. 130129 in the name of Titan.Thus, on March 13, 1996, Manuel filed a Complaint9 for Annulment of Contract and Recovenyance against Titan before the RTC of Quezon City. Manuel alleged that the sale executed by Martha in favor of Titan was without his knowledge and consent, and therefore void. He prayed that the Deed of Sale and TCT No. 130129 be invalidated, that the property be reconveyed to the spouses, and that a new title be issued in their names.In its Answer with Counterclaim,10 Titan claimed that it was a buyer ingood faith and for value because it relied on a Special Power of Attorney (SPA) 11 dated January 4, 1995 signed by Manuel which authorized Martha to dispose of the property on behalf of the spouses. Titan thus prayed for the dismissal of the complaint.In his unverified Reply,12 Manuel claimed that the SPA was spurious, and that the signature purporting to be his was a forgery; hence, Martha was wholly without authority to sell the property.Subsequently, Manuel filed a Motion for Leave to File Amended Complaint13 which was granted by the trial court. Thus, on October 15, 1996, Manuel filed an Amended Complaint14 impleading Martha as a co-defendant in the proceedings. However, despite personal service of summons15 upon Martha, she failed to file an Answer. Thus, she was declared in default.16 Trial then ensued.Ruling of the Regional Trial CourtOn March 7, 2000, the RTC issued a Decision which (i) invalidated both the Deed of Sale and TCT No. 130129; (ii) ordered Titan to reconvey the property to Martha and Manuel; (iii) directed the Register of Deeds of Quezon City to issue a new title in the names of Manuel and Martha; and (iv) ordered Titan to pay P200,000.00 plusP1,000.00 per appearance as attorney’s fees, and P50,000.00 as costs of suit.The RTC found that:

1) The property was conjugal in character since it was purchased by Manueland Martha with conjugal funds during their marriage. The fact that TCT No. 156043 was registered in the name of "MARTHA S. DAVID x x x married to Manuel A. David" did not negate the property’s conjugal nature.2) The SPA professing to authorize Martha to sell the property on behalf of the spouses was spurious, and did not bear Manuel’s genuine signature. This was the subject of expert testimony, which Titan failed to rebut. In addition, despite the fact that the SPA was notarized, the

genuineness and due execution of the SPA was placed in doubt since it did not contain Manuel’s residence certificate, and was not presented for registration with the Quezon City Register of Deeds, in violation of Section 64 of Presidential Decree No. 1529.17

3) The circumstances surrounding the transaction with Martha should have put Titan on notice of the SPA’s dubious veracity. The RTC noted that aside from Martha’s failure to register the SPA with the Register of Deeds, it was doubtful that an SPA would have even been necessary, since the SPA itself indicated that Martha and Manuel lived on the same street in Navotas.

The dispositive portion of the trial court’s Decision reads:Wherefore, judgment is hereby rendered:

1.) Declaring the Deed of Sale dated April 24, 1995 as void ab initio and without force and effect.2.) Declaring null and void TCT No. 130129 issued by the Register of Deeds of Quezon City in the name of defendant Titan Construction Corporation.3.) Ordering defendant Titan Construction Corporation to reconvey the subject property to plaintiff and his spouse.4.) Ordering the Register of Deeds of Quezon City to make and issue a new title in the name of plaintiff Manuel David and his Spouse, Martha David.5.) Ordering defendant to pay P200,000.00 plus P1,000.00 per appearance as attorney’s fees andP50,000.00 as costs of suit.

SO ORDERED.18

Ruling of the Court of AppealsIn its Decision dated July 20, 2004, the CA affirmed the Decision of the trial court but deleted the award of attorney’s fees and the amount of P50,000.00 as costs.The dispositive portion of the Decision reads:WHEREFORE, with the MODIFICATION by deleting the award of attorney’s fees in favor of plaintiff-appellee Manuel A. David, Sr. and the amount of P50,000.00 as costs, the Decision appealed from is AFFIRMED in all other respects, with costs against defendant-appellant Titan Construction Corporation.19

Titan moved for reconsideration but the motion was denied on August 31, 2005.Hence, this petition.IssuesTitan raises the following assignment of errors:A. THE COURT OF APPEALS PATENTLY ERRED IN DECLARING THE SUBJECT DEED OF SALE NULL AND VOID AND FAILED TO APPLY TO THIS CASE THE PERTINENT LAW AND JURISPRUDENCE ON THE TORRENS SYSTEM OF LAND REGISTRATION.B. THE COURT OF APPEALS PATENTLY ERRED IN RULING THAT TITAN WAS NOT A BUYER IN GOOD FAITH CONTRARY TO THE STANDARDS APPLIED BY THIS HONORABLE COURT IN CASES INVOLVING SIMILAR FACTS.C. THE COURT OF APPEALS PATENTLY ERRED BY DISCARDING THE NATURE OF A NOTARIZED SPECIAL POWER OF ATTORNEY CONTRARY TO JURISPRUDENCE AND BY GIVING UNDUE WEIGHT TO THE ALLEGED

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EXPERT TESTIMONY VIS-À-VIS THE CONTESTED SIGNATURES AS THEY APPEAR TO THE NAKED EYE CONTRARY TO JURISPRUDENCE.D. THE COURT OF APPEALS PATENTLY ERRED BY FAILING TO DETECT BADGES OF CONNIVANCE BETWEEN RESPONDENTS.E. THE COURT OF APPEALS PATENTLY ERRED BY NOT RULING THAT ASSUMING THE SPA WAS NULL AND VOID, THE SAME IS IMMATERIAL SINCE THE RESPONDENTS SHOULD BE CONSIDERED ESTOPPED FROM DENYING THAT THE SUBJECT PROPERTY WAS SOLELY THAT OF RESPONDENT MARTHA S. DAVID.F. THE COURT OF APPEALS PATENTLY ERRED BY NOT RULING THAT ASSUMING THE SALE WAS VOID, ON GROUNDS OF EQUITY MARTHA S. DAVID SHOULD REIMBURSE PETITIONER OF HIS PAYMENT WITH LEGAL INTEREST.20

Petitioner’s ArgumentsTitan is claiming that it was a buyer in good faith and for value, that the property was Martha’s paraphernal property, that it properly relied on the SPA presented by Martha, and that the RTC erred in giving weight to the alleged expert testimony to the effect that Manuel’s signature on the SPA was spurious. Titan also argues, for the first time, that the CA should have ordered Martha to reimburse the purchase price paid by Titan.Our RulingThe petition is without merit.The property is part of the spouses’ conjugal partnership.The Civil Code of the Philippines,21 the law in force at the time of the celebration of the marriage between Martha and Manuel in 1957, provides:Article 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.Article 153 of the Civil Code also provides:Article 153. The following are conjugal partnership property:(1) That which is acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;x x x xThese provisions were carried over to the Family Code. In particular, Article 117 thereof provides:Art. 117. The following are conjugal partnership properties:(1) Those acquired by onerous title during the marriage at the expense of the common fund, whether the acquisition be for the partnership, or for only one of the spouses;x x x xArticle 116 of the Family Code is even more unequivocal in that "[a]ll property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved."We are not persuaded by Titan’s arguments that the property was Martha’s exclusive property because Manuel failed to present before the RTC any proof of his income in 1970, hence he could not have had the financial capacity to contribute to the purchase of the property in 1970; and that Manuel admitted that

it was Martha who concluded the original purchase of the property. In consonance with our ruling in Spouses Castro v. Miat,22Manuel was not required to prove that the property was acquired with funds of the partnership. Rather, the presumption applies even when the manner in which the property was acquired does not appear.23 Here, we find that Titan failed to overturn the presumption that the property, purchased during the spouses’ marriage, was part of the conjugal partnership.In the absence of Manuel’s consent, the Deed of Sale is void.Since the property was undoubtedly part of the conjugal partnership, the sale to Titan required the consent of both spouses. Article 165 of the Civil Code expressly provides that "the husband is the administrator of the conjugal partnership". Likewise, Article 172 of the Civil Code ordains that "(t)he wife cannot bind the conjugal partnership without the husband’s consent, except in cases provided by law".Similarly, Article 124 of the Family Code requires that any disposition or encumbrance of conjugal property must have the written consent of the other spouse, otherwise, such disposition is void. Thus:Art. 124. The administration and enjoyment of the conjugal partnership shall belong to both spouses jointly. In case of disagreement, the husband's decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.The Special Power of Attorney purportedly signed by Manuel is spurious and void.The RTC found that the signature of Manuel appearing on the SPA was not his genuine signature.As to the issue of the validity or invalidity of the subject Special Power of Attorney x x x the Court rules that the same is invalid. As aptly demonstrated by plaintiff’s evidence particularly the testimony of expert witness Atty. Desiderio Pagui, which the defense failed to rebut and impeach, the subject Special Power of Attorney does not bear the genuine signature of plaintiff Manuel David thus rendering the same as without legal effect.Moreover, the genuineness and the due execution of the Special Power of Attorney was placed in more serious doubt as the same does not contain the Residence Certificate of the plaintiff and most importantly, was not presented for registration with the Quezon City Register of Deeds which is a clear violation of Sec. 64 of P.D. No. 1529.As regards defendant Titan Construction Corporation’s assertion that plaintiff’s failure to verify his Reply (wherein the validity of the Special Power of Attorney is

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put into question) is an implied admission of its genuineness and due execution, [this] appears at first blush a logical conclusion. However, the Court could not yield to such an argument considering that a rigid application of the pertinent provisions of the Rules of Court will not be given premium when it would obstruct rather than serve the broader interest of justice.24

Titan claims that the RTC gave undue weight to the testimony of Manuel’s witness, and that expert testimony on handwriting is not conclusive.The contention lacks merit. The RTC’s ruling was based not only on the testimony of Manuel’s expert witness finding that there were significant differences between the standard handwriting of Manuel and the signature found on the SPA, but also on Manuel’s categorical denial that he ever signed any document authorizing or ratifying the Deed of Sale to Titan.25

We also note that on October 12, 2004, Titan filed before the CA a Manifestation with Motion for Re-Examination of Another Document/ Handwriting Expert26 alleging that there is "an extreme necessity"27 for a conduct of another examination of the SPA by a handwriting expert "as it will materially affect and alter the final outcome"28 of the case. Interestingly, however, Titan filed on January 6, 2005 a Manifestation/Motion to Withdraw Earlier Motion for Re-Examination of PNP Laboratory Expert29 this time praying that its motion for re-examination be withdrawn. Titan claimed that "after a circumspect evaluation, deemed it wise not to pursue anymore said request (re-examination) as there is a great possibility that the x x x [PNP and the NBI] might come out with two conflicting opinions and conclusions x x x that might cause some confusion to the minds of the Honorable Justices in resolving the issues x x x as well as the waste of material time and resources said motion may result".30

In any event, we reiterate the well-entrenched rule that the factual findings of trial courts, when adopted and confirmed by the CA, are binding and conclusive and will generally not be reviewed on appeal.31 We are mandated to accord great weight to the findings of the RTC, particularly as regards its assessment of the credibility of witnesses32 since it is the trial court judge who is in a position to observe and examine the witnesses first hand.33 Even after a careful and independent scrutiny of the records, we find no cogent reason to depart from the rulings of the courts below.34

Furthermore, settled is the rule that only errors of law and not of fact are reviewable by this Court in a petition for review on certiorari under Rule 45 of the Rules of Court. This applies with even greater force here, since the factual findings by the CA are in full agreement with those of the trial court.35

Indeed, we cannot help but wonder why Martha was never subpoenaed by Titan as a witness to testify on the character of the property, or the circumstances surrounding the transaction with Titan. Petitioner’s claim that she could not be found is belied by the RTC records, which show that she personally received and signed for the summons at her address in Greenhills, San Juan. Titan neither filed a cross claim nor made any adverse allegation against Martha.On the Failure to Deny the Genuineness and Due Execution of the SPATitan claimed that because Manuel failed to specifically deny the genuineness and due execution of the SPA in his Reply, he is deemed to have admitted the veracity of said document, in accordance with Rule 8, Sections 7 and 8, 36 of the Rules of Court.On this point, we fully concur with the findings of the CA that:

It is true that the reply filed by Manuel alleging that the special power of attorney is a forgery was not made under oath. However, the complaint, which was verified by Manuel under oath, alleged that the sale of the subject property executed by his wife, Martha, in favor of Titan was without his knowledge, consent, and approval, express or implied; and that there is nothing on the face of the deed of sale that would show that he gave his consent thereto. In Toribio v. Bidin, it was held that where the verified complaint alleged that the plaintiff never sold, transferred or disposed their share in the inheritance left by their mother to others, the defendants were placed on adequate notice that they would be called upon during trial to prove the genuineness or due execution of the disputed deed of sale. While Section 8, Rule 8 is mandatory, it is a discovery procedure and must be reasonably construed to attain its purpose, and in a way as not to effect a denial of substantial justice. The interpretation should be one which assists the parties in obtaining a speedy, inexpensive, and most important, a just determination of the disputed issues.1avvphi1Moreover, during the pre-trial, Titan requested for stipulation that the special power of attorney was signed by Manuel authorizing his wife to sell the subject property, but Manuel refused to admit the genuineness of said special power of attorney and stated that he is presenting an expert witness to prove that his signature in the special power of attorney is a forgery. However, Titan did not register any objection x x x. Furthermore, Titan did not object to the presentation of Atty. Desiderio Pagui, who testified as an expert witness, on his Report finding that the signature on the special power of attorney was not affixed by Manuel based on his analysis of the questioned and standard signatures of the latter, and even cross-examined said witness. Neither did Titan object to the admission of said Report when it was offered in evidence by Manuel on the ground that he is barred from denying his signature on the special power of attorney. In fact, Titan admitted the existence of said Report and objected only to the purpose for which it was offered. In Central Surety & Insurance Company v. C.N. Hodges, it was held that where a party acted in complete disregard of or wholly overlooked Section 8, Rule 8 and did not object to the introduction and admission of evidence questioning the genuineness and due execution of a document, he must be deemed to have waived the benefits of said Rule. Consequently, Titan is deemed to have waived the mantle of protection given [it] by Section 8, Rule 8.37

It is true that a notarial document is considered evidence of the facts expressed therein.38 A notarized document enjoys a prima facie presumption of authenticity and due execution39 and only clear and convincing evidence will overcome such legal presumption.40 However, such clear and convincing evidence is present here.1avvph!1 While it is true that the SPA was notarized, it is no less true that there were defects in the notarization which mitigate against a finding that the SPA was either genuine or duly executed. Curiously, the details of Manuel’s Community Tax Certificate are conspicuously absent, yet Martha’s are complete. The absence of Manuel’s data supports his claim that he did not execute the same and that his signature thereon is a forgery. Moreover, we have Manuel’s positive testimony that he never signed the SPA, in addition to the expert testimony that the signature appearing on the SPA was not Manuel’s true signature.Moreover, there were circumstances which mitigate against a finding that Titan was a buyer in good faith.

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First, TCT No. 156043 was registered in the name of "MARTHA S. DAVID, of legal age, Filipino, married to Manuel A. David" but the Deed of Sale failed to include Martha’s civil status, and only described the vendor as "MARTHA S. DAVID, of legal age, Filipino citizen, with postal address at 247 Governor Pascual, Navotas, Rizal." And it is quite peculiar that an SPA would have even been necessary, considering that the SPA itself indicated that Martha and Manuel lived on the same street (379 and 247 Governor Pascual Street, respectively).Second, Titan’s witness Valeriano Hernandez, the real estate agent who brokered the sale between Martha and Titan, testified that Jerry Yao (Yao), Titan’s Vice President for Operations (and Titan’s signatory to the Deed of Sale), specifically inquired why the name of Manuel did not appear on the Deed of Sale.41 This indicates that Titan was aware that Manuel’s consent may be necessary. In addition, Titan purportedly sent their representative to the Register of Deeds of Quezon City to verify TCT No. 156043, so Titan would have been aware that the SPA was never registered before the Register of Deeds.Third, Valeriano Hernandez also testified that during the first meeting between Martha and Yao, Martha informed Yao that the property was mortgaged to a casino for P500,000.00. Without even seeing the property, the original title, or the SPA, and without securing an acknowledgment receipt from Martha, Titan (through Yao) gave MarthaP500,000.00 so she could redeem the property from the casino.42 These are certainly not actions typical of a prudent buyer.Titan cannot belatedly claim that the RTC should have ordered Martha to reimburse the purchase price.Titan argues that the CA erred in not ruling that, even assuming the sale was void, on grounds of equity, Martha should reimburse petitioner its payment with legal interest. We note that this equity argument was raised for the first time before the CA, which disposed of it in this manner:Anent defendant-appellant’s claim that the court a quo and this Court never considered the substantial amount of money paid by it to Martha David as consideration for the sale of the subject property, suffice it to say that said matter is being raised for the first time in the instant motion for reconsideration. If well-recognized jurisprudence precludes raising an issue only for the first time on appeal proper, with more reason should such issue be disallowed or disregarded when initially raised only in a motion for reconsideration of the decision of the appellate court.Nonetheless, record shows that only defendant-appellant was initially sued by plaintiff-appellee in his complaint for annulment of contract and reconveyance upon the allegation that the sale executed by his wife, Martha David, of their conjugal property in favor of defendant-appellant was without his knowledge and consent and, therefore, null and void. In its answer, defendant-appellant claimed that it bought the property in good faith and for value from Martha David and prayed for the dismissal of the complaint and the payment of his counterclaim for attorney’s fees, moral and exemplary damages. Subsequently, plaintiff-appellee filed a motion for leave to file amended complaint by impleading Martha David as a defendant, attaching the amended complaint thereto, copies of which were furnished defendant-appellant, through counsel. The amended complaint was admitted by the court a quo in an Order dated October 23, 1996. Martha David was declared in default for failure to file an answer. The record does not show

[that] a cross-claim was filed by defendant-appellant against Martha David for the return of the amount of PhP1,500,000.00 it paid to the latter as consideration for the sale of the subject property. x x x Thus, to hold Martha David liable to defendant-appellant for the return of the consideration for the sale of the subject property, without any claim therefore being filed against her by the latter, would violate her right to due process.The essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of his defense. It is elementary that before a person can be deprived of his property, he should be first informed of the claim against him and the theory on which such claim is premised.43 (Emphasis supplied)While it is true that litigation is not a game of technicalities,44 it is equally true that elementary considerations of due process require that a party be duly apprised of a claim against him before judgment may be rendered. Thus, we cannot, in these proceedings, order the return of the amounts paid by Titan to Martha. However, Titan is not precluded by this Decision from instituting the appropriate action against Martha before the proper court.WHEREFORE, the petition is DENIED. The July 20, 2004 Decision of the Court of Appeals in CA-G.R. CV No. 67090 which affirmed with modifications the March 7, 2000 Decision of the Regional Trial Court of Quezon City, Branch 80, and its August 31, 2005 Resolution denying the motion for reconsideration, are AFFIRMED, without prejudice to the recovery by petitioner Titan Construction Corporation of the amounts it paid to Martha S. David in the appropriate action before the proper court.SO ORDERED.

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