THIRD DIVISION

[G.R. No. 120730.  October 28, 1996]

RAMON J. BERNARDO, SR., and RAMON XAVIER C. BERNARDO, JR., petitioners, vs. COURT OF APPEALS and MASTER COMMODITIES FUTURES, INC., respondents.

D E C I S I O NDAVIDE, JR., J.:

The issue in this case is whether respondent Court of Appeals committed reversible error in its decision[1] of 29 December 1994 in CA-G.R. CV No. 34168, affirming the decision[2] of 22 February 1991 of Branch 58 of the Regional Trial Court of Makati which dismissed Civil Case No. 88-1644 for lack of jurisdiction over the subject matter, it being vested in the Securities and Exchange Commission (SEC).

The original complaint[3] in Civil Case No. 88-1644 was filed on 12 August 1988 by petitioner Ramon J. Bernardo, Sr., in his capacity “as the natural guardian of minor XAVIER C. BERNARDO, JR.” against private respondent Master Commodoties Futures, Inc.  On 28 December 1988, an amended complaint [4] was filed impleading Ramon Xavier C. Bernardo, Jr., as party plaintiff and V.R. Bautista and Gloria Cadiente de Pedro as additional party defendants.  The following material facts were alleged in the amended complaint:

2.  That, on May 16, 1988, Ramon Bernardo, Sr. and minor Ramon C. Bernardo, Jr. with the assistance of his natural father Ramon J. Bernardo, Sr. entered into a trading commodity agreement, captioned by defendant as Rules for Commodity Trading & Customer’s Agreement with the defendant, whereby plaintiff minor and his father made initial deposit[s] of P60,000.00 in cash andP40,000.00 in check, or the total margin deposit of P100,000.00 as security for all commodities bought or sold according to the market, brand, delivery month and quantity of commodity, collectively referred to as Trading Contracts, and for the purchase and/or sale of commodity futures, in accordance with the terms and conditions of said agreement, a photocopy of said agreement is attached herewith as Annex “A”, while the margin deposits are attached as Annexes “B” and “C” hereof;

3.  That the margin deposits in the amount of 100,000 which came into the possession of the defendant and allegedly used by it in the purchased [ sic ] of soybeans through purchase and sale orders without instructions from the plaintiff, Ramon Bernardo, Sr., knowing fully well that the latter gave oral instructions not to purchase and sell commodities without his approval, and execute one transaction only, in violation on par. 6 of the Rules for Commodity Trading and Customer’s Agreement which requires clear instruction[s] from the customer before a [ sic ] purchase or sell orders are made;

4.  That after the execution of the said agreement (Annex “A” hereof) and the payment of the margin deposits in the amount of 100,000 which came from Ramon Bernardo, Sr., defendants through insidious machinations required the minor, Ramon Xavier Bernardo, Jr. to sign blank instructions of sale and purchase, without the knowledge, intervention, or approval of the plaintiff, Ramon Bernardo, Sr., the natural guardian of [the]minor, Ramon Bernardo, Jr., knowing fully well that the minor Bernardo, Jr. has no legal capacity to enter into contract without the assistance of the father, Ramon Bernardo, Sr., and aggravated by the fact that plaintiff, Ramon Bernardo, Sr., gave very clear verbal instruction to the defendant not to execute sale or purchase orders without his approval; furthermore, the purchase or sell orders

signed by Ramon Xavier Bernanrdo are voidable considering that he is a minor, that the acts committed by the defendants in securing the blank signatures of Ramon Bernardo, Jr., without the assistance of his father, Bernardo, Sr. were made to insure the monetary benefit and advantage of the defendants to the prejudice of the plaintiffs.

5.  That a certain V.R. Bautista, an alleged authorized agent of the defendant, without any authority from the plaintiff, Ramon Bernardo, Sr., signed the Instruction of Purchase annex “E”, Instructions of Sale annexes “G”, “I”, thus fraudulently depriving the plaintiffs the amount of 100,000, thus paving way for the alleged transactions wherein according to the defendants, the plaintiffs allegedly lost their money;

6.  That the defendant knowing fully well that Ramon Bernardo, Jr. is a minor and had no capacity to contract, through insidious machinations induced and required him to sign Instructions of Purchase, annexes “D”, “F”, Instructions of Sale, annex “H”, inspite of the clear instruction of the father that purchase and sale orders will have to be approved by him, thereby taking advantage of the minority and inexperience of the plaintiff, Ramon Bernardo, Jr.; furthermore, the plaintiff, Ramon Bernardo, Sr. informed the defendant beforehand that the defendant is a minor, and this is the reason that he signed the commodity agreement, and yet defendant in bad faith still required the minor to sign the Instructions of Purchase and Instructions of Sale;

7.  That the defendant, Gloria Cadiente de Pedro was the one who received the Margin Deposit in the amount of 100,000, as shown by the margin receipts no. 0322, 032, which the plaintiffs up to now did not know the reason why it was lost, and it is the duty of defendant de Pedro to account on [ sic ] where the money went, and if she is unable to do so to return the same to the plaintiffs;

8.  That the plaintiff, Ramon Bernardo, Sr. as owner of the money in his personal capacity, and as a guardian of Ramon Bernardo, Jr. is entitled to the return of the amount of 100,000, the total margin deposits made by the minor Bernardo to the defendant after fraudulent inducements, and exploitation of his minority, plus damages;

9.  That defendants are guilty of fraudulent schemes, machinations, imaginary transactions or other similar deceits to the prejudice of Ramon Bernardo, Sr. and minor Ramon Bernardo, Jr., resulting to [sic] mental anguish and serious anxiety on the part of the plaintiffs, who are fully convinced that they were defrauded of their money given to defendant Master Investments, hence, defendants should be adjudge to pay plaintiffs…

The petitioners as plaintiffs therein then prayed for a judgment: (a) declaring null and void the Instruction of Sale and purchases signed by minor Ramon Xavier C. Bernardo, Jr., and V.R. Bautista and the commodity agreement signed by Ramon Xavier C. Bernardo, Jr., and, (b) ordering the defendant to pay the plaintiffs (1) P100,000.00 representing the total margin deposits made by the minor Bernardo, Jr., (2) P200,000.00, from each of the defendant, as exemplary damages, (3) P200,000.00, from each of the defendants, as moral damages, and (4) a sum equivalent to 25% of the total amount due as attorney’s fees, plus the costs of the suit.

In its answers,[5] defendant (private respondent) Master Commodities Futures, Inc. (hereinafter MASTER) denied the material allegations in the amended complaint, especially the claim that Ramon Xavier C. Bernardo, Jr., was a minor, since in the Rules of Commodity Trading and Customer’s Agreement which both father and son signed, they represented that they were both of legal age.  Further, it raised the following defenses:

7.  This Honorable Court has no jurisdiction over the subject matter;

8.  The complaint states no cause of action;

9.  Plaintiff has not complied with the legal requirements before it can sue as an alleged “natural guardian” of his son;

10.  Plaintiff and son are in estoppel and barred by laches, and their claims have been waived, abandoned or otherwise extinguished[6]

and set up counterclaims for damages and attorney’s fees.

In their separate answer,[7] defendants V.R. Bautista and Gloria Cadiente de Pedro practically reiterated the answer and defenses of MASTER.

Issues having been joined, the trial court conducted a pre-trial conference.  Thereafter, trial on the merits ensued with the petitioners testifying on their behalf and calling defendant V.R. Bautista as a hostile witness.  They offered documentary exhibits consisting of the Commodity Agreement (Exhibit “A”); Instruction to Purchase dated 17 May 1988 (Exhibit “B”); Instruction of Sale dated 23 May 1988 (Exhibit “C”); Instruction of Sale dated 25 May 1988 (Exhibit “D”); Instruction of Sale dated 23 May 1988 (Exhibit “E”); Instruction of Purchase dated 2 June 1988 (Exhibit “F”); Margin Receipt No. 0323 (Exhibit “G”); Margin Receipt No. 0322 (Exhibit “G-1”); Letter of Demand (Exhibit “H”); Notice of Additional Margin (Exhibit “I”); and the Birth Certificate of Ramon Xavier C. Bernardo, Jr. (Exhibit “J”) which was offered to prove that he was a minor at the time he signed the assailed transactions. [8] While the defendants presented Ms. Jocelyn A. Lim, Teresita Briones, Alfredo Albao, and George Chua as their witness,[9] with Briones identifying several documentary exhibits (Exhibits “3” to “21”, inclusive).[10]

After the conclusion of the trial, the parties submitted their respective memoranda as required.  In their Statement of the Case in their Memorandum, the petitioners expounded on their allegations of fraud and fraudulent inducements, misrepresentations, and deceptions allegedly committed by MASTER, as follows:

This is a case of a minor, fraudulently induced by the defendant Master’s Commodities to invest in commodities futures.  Deception was employed.  The minor was made to believe, that once he invest in commodities futures, he will surely make a big profit.  The explanation was made in very technical manner.  Statistics were shown.  A market chart was shown.  All these instruments were designed to convince the minor that there was no way that he could lose his money.

The minor was fraudulently convinced.  He convinced his father, Ramon Bernardo, Sr.  To give him the money.  His father was in serious doubt about the investment.  The minor insisted, that it became an enigma for the father whether to give in to the wishes of the son.  The father talked to the representatives of the defendant, Masters Commodities.  They also deceived him by the same explanation that they gave to the son.  They made it appear that the investment will surely make money.

Since the minor could not sign the contract, the defendants induced the father to sign it, to validate whatever infirmity the agreement had with respect to the acts of the minor.  To give in to the wishes of his son, the father agreed to sign the agreement, on the condition that there should only be one transaction, and that the purchase and sale orders be cleared with him.

After the agreement was signed, that father was no longer ask to sign the purchase and sale orders.  Inspite of defendant Master’s knowledge that Ramon Bernardo, Jr.  Was a minor, it fraudulently asked him to sign the subsequent purchase and sale orders.  It avoided the father.  It was easier for the defendant Masters to deceive the minor son then the father.  The subsequent orders were either signed by the minor, Ramon Bernardo, Jr. Or V.R. Bautista, an officer of the defendant Masters.  All these orders were illegal, because they were not authorized by Ramon Bernardo, Sr.

The plaintiffs after the foregoing misrepresentations, invested money.  It bought soybeans futures, because the indication was that the price was going up.  It was the minor’s consent that was obtained.  Just four days later, the price went down.  The market went against the defendants Masters judgement.  Plaintiffs immediately lost money, contrary to expectations.  They were advised to short sell allegedly to cut losses.  This was based on the assumption that the price will go down.  But again, the defendant committed another fraudulent inducement.  The market went up, against the advise of the defendant Masters.

It was deception after deception.  When the market was going up, the plaintiff minor was advise to sell.  The market went against the advise.  When minor was advised to short sell, the market went up.  Even the market average went against the advise.  When the advise to sell was made, there was no chance for the plaintiff to recover.  There were misrepresentations as to the true situation of the market.  There were fraudulent deceptions. These were not simple errors.  These were clear tortious and fraudulent acts.

The plaintiffs were literally trapped.  The moment they gave their money, they lost control of it.  It was the defendant Master’s that decided on what to do with money.  The money transfer was legalized by the agreement. But after money transfer, it was the defendant Master’s that decided the faith of the margin deposit.  The Father was not consulted anymore.  All of these fraudulent acts were justified under a highly technical and one sided contract, whose provisions are even contrary to law.  no ordinary layman could fully understand its provisions, especially if fraudulent misrepresentations were made.

The defendant Masters alleged that it bought soybeans.  But it does not know where the soybeans were?  Defendant Masters don’t no, even know from show it bought the soybeans?  It said that it was in the warehouse, but it does not even know where the warehouse was located.  The most logical conclusion is that there really a transaction?  The evidence did not show that the soybeans and the seller really existed.  Where did the money go?  Definitely in the hands of the defendants Masters, but as to how it was spent, that is where the fraud lies. [11]

In its decision[12] dated 22 February 1991, the trial court dismissed the case for want of jurisdiction:

It is apparent from plaintiffs complaint specifically paragraph 9 thereof, that plaintiffs accuse defendants, among others of employing fraudulent schemes, machinations and other acts similar thereto which accusation is within the coverage of Sec. 5 of Presidential Decree No. 902-A the pertinent portion of which reads as follows:

Sec. 5.  In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall original and exclusive jurisdiction to hear and decide cases involving:

a.  Devices or schemes employed by or any acts.  of the board of director, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the

public and/or of the stockholder, partners, members of associations or organizations registered with the Commission. [13]

On the appeal, the Court of Appeals (CA-G.R. CV No. 34168) affirmed [14] the trial court and held:

Plaintiff-appellant’s claim that the fraud committed by defendant-appellee in the instant case is the fraud under Arts. 1330, 1338, and/or 1339 of the Civil Code and not those alluded to in Sec. 5a of P.D. 902-A has no merit.  The “fraudulent schemes, machinations, imaginary transactions or other deceits” alleged in the instant case was committed by the defendant-appellee corporation and the alleged victim, although only Ramon Bernardo, Jr. in this case, could be anyone among the public who transact or transacted similar business or transaction with said corporation.  the plaintiff-appellant himself was the one who used the terms “fraudulent schemes, machinations, imaginary transaction or other deceits” in his complaint.  For that matter, plaintiff-appellant’s allegation that “minor Ramon C. Bernardo, Jr. x x x with the assistance if his natural father Ramon J. Bernardo entered into a trading commodity agreement, captioned by defendant as Rules for Commodity Trading & Customer’s Agreement with the defendant” (par. 2, Complaint) could only mean or imply that anyone, among the public, interested may just see or contact defendant-appellee or its representative and make an investment and he or she is a prospective if not yet sure and actual victim.  This, in fact, is the gist of the following claim/argument submitted by plaintiff-appellant:

x x x

It must be well emphasized that the defendant-appellee is a corporation engaged in the trading commodities.  The plaintiffs-appellants entered into contract “a trading agreement” with said defendant-appellee, wherein they parted with their money in the nature of investment.  They, plaintiffs-appellants expected to receive returns or profits from the money they invested.  Unfortunately, they were the victims of the fraud and misrepresentation by the defendant-appellee, as they contented.  It is precisely to check machinations like this that the Securities and Exchange Commission will come in to the picture.

The grant of jurisdiction to the SEC must be viewed in the light of the nature and function of the SEC under the law.  Section 3 of Presidential Decree No. 902-A confers upon the latter “absolute jurisdiction, supervision and control over all corporations, partnerships or associations, who are grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines.”

The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investments in these entities maybe encourage and protected, and their activities pursued for the promotion of economic development.  (Sales vs. Securities and Exchange Commission, G.R. 54330, 13 January 1988).

Their motion for reconsideration [15] having been denied by the Court of Appeals in its resolution of 16 June 1995, [16] the petitioners filed this instant petition and contend therein that the Court of Appeals erred in: (a) dismissing the complaint for lack of jurisdiction; and (b) failing to declare the contract void.  In the main, they argue that the trial court had jurisdiction over the subject matter of Civil Case No. 88-1644, it being an

action for a sum of money with damages, and that no intra-corporate dispute was involved to warrant an exercise of jurisdiction by the SEC.

After the filing of the Comment to the petition by MASTER and of the Reply thereto by the petitioners, we resolved to due course to the petition and required the parties to submit their respective memoranda, which they subsequently complied with.

Further evaluation of the factual antecedents and arguments of the parties leads to no other conclusion than to agree with the Court of Appeals in its judgment, but solely on the strength of its finding.  This petition then has to be denied.

It is course settled that jurisdiction over the subject matter of a case is determined from the allegations of the complaint[17] as the latter comprises a concise statement of the ultimate facts constituting the plaintiff’s causes of action. [18]

While it may initially appear that the allegations in the original complaint prima facie sustained the theory of the petitioners, the allegations in the amended complaint brought petitioners’ grievance comfortably within the SEC’s jurisdiction.  As shown earlier, the amended complaint went beyond the original complaint’s general allegations by particularizing the ultimate facts constituting “fraudulent schemes, machinations imaginary transactions or other similar deceits.” [19] The succeeding pleadings further clarified the understanding of the parties that, indeed, the subject matter of and causes of action in the case resolves on the contract concerning the purchase and sale of commodity futures and the incidents thereto.  Thus, in their answers defendants denied the imputations and set forth counterclaims.  In their Answer to the counterclaim [20] of MASTER, the petitioners alleged that MASTER “exploited the minority of Ramon Bernardo, Jr. through misrepresentation which induced Ramon Bernardo, Sr. to give the money to defendant Masters Commodities Futures, Inc.  who was also fraudulently induced into making the investment”; “adopted fraudulent schemes to induced [sic] the son to convinced [sic] his father to make the investment”; and committed “scheming activities leading to the loss of the alleged investment in commodities,” and “acts of bad faith.”

In their Answer[21] to the counterclaim of defendants V.R. Bautista and De Pedro, the petitioners contended that the defendants “induced,” through “insidious machinations, the minor, Ramon Bernardo, Jr., to enter into Trading Commodity Agreement without his father’s consent and to give to the defendants the amount of P100,000.00” which “was fraudulently lost”; adopted fraudulent schemes to induced [sic] the son to convince his father to make the fraudulent investment”; and committed "scheming activities leading to the fraudulent loss of the alleged investment in commodities.”

Then, at the trial on the merits, the petitioners presented evidence to substantiate their allegations and imputations of insidious machinations, inducements, misrepresentation, fraud in the transactions and of scheming activities leading to fraudulent loss of the alleged investments in commodities, which they thereafter recapitulated in the Statement of the Case in their Memorandum before the trial court.

The defendants, on their part, refuted the charges with both testimonial and several pieces of documentary evidence.

The totality of the foregoing pleadings and evidence demonstrates beyond cavil that what originally appeared in the original complaint to be a simple case of annulment of the commodity agreement and instructions of sale and of purchase with damages, was transformed into a case for recovery of an alleged investment in the commodity futures market and the accompanying damages which petitioners perceived to be directly caused by MASTER’s deceit, inducements, misrepresentation, fraud or fraudulent schemes, insidious machinations, and scheming activities.

The presentation of the contrariant evidence for and against imputations undoubtedly cured, clarified or expanded, as the case may be, whatever defects in the pleadings of vagueness in the issues there might have been in the amended

complaint.  Section 5, Rule 10 of the Rules of Court was thus rendered applicable, pro tanto.  It provides:

SEC. 5 Amendment to conform to or authorize presentation of evidence. -- When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings.  Such amendments of he pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues.  If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits.  The court may grant a continuance to enable the objecting party to meet such evidence.

It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings. [22] Likewise, when issues not raised by the pleading are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings..[23]

In light of the foregoing, we find no difficulty in ruling that the subject matter of petitioner’s amended complaint or their causes of action therein fell squarely within the exclusive jurisdiction of the Securities and Exchange Commission for, in the first place, it involved, at bottom, the supervisory powers of the SEC over the conduct of the business of commodity futures. Section 3 of P.D. No. 902-A expressly provides that the Commission “shall have absolute jurisdiction, supervision and control over all corporations, partnerships or associations, who (sic) are the grantees of primary franchise and/or a license or permit issued by the government to operate in the Philippines,” and paragraph (g) of Section 6 thereof vests upon the SEC the power to authorize the establishment and operation of inter alia, commodity exchanges.  Furthermore, under Section 7 of P.D. No. 178 (Revised Securities Act), the SEC is authorized to promulgate, subject to the approval of the Monetary Board, rules and regulations for the registration and regulation of commodity futures contracts and licensing of futures commission merchants, futures brokers, floor brokers and pool operators.  Pursuant thereto and to Section 3 of P.D. No. 902-A, as amended, the SEC promulgated on 15 December 1987 the Revised Rules and Regulations on Commodity Futures Trading.[24]

In the second place, the damages prayed for are alleged to have been proximately caused by  or to have arisen from the alleged fraud or fraudulent inducements, deceit or deception, insidious machinations and misrepresentation committed by MASTER in connection with or incident to the execution of the customer’s agreement on commodity futures, the margin and deposit requirements and the instructions of purchase and of sale on commodity futures.

There can be no question that the relationship between MASTER and the petitioner is one of those within the ambit of paragraph (a) of Section 5 of P.D. No. 902-A,  viz., a corporation or its officers and members of “the public.”  It has been repeatedly held by this Court that in order that the SEC take cognizance of a case, the controversy must pertain to any of the following relationships: (a) between corporation, partnership or association and the public; (b) between the corporation, partnership or association and

its stockholders, partners, members or officers; (c) between the corporation, partnership or association and the State insofar as its franchise, permit or license to operate is concerned; and (d) among stockholders, partners or associates themselves. [25]

Elsewise stated, by the relationship of the parties and subject of their controversy, the jurisdiction of the SEC in this case is beyond dispute.  We thus reiterate:  The better policy in determining which body has jurisdiction over a case would be to consider not only the status or relationship of the parties but also the nature of the question that is the subject of their controversy.[26]

WHEREFORE, the instant petition is DENIED for lack of merit and the challenged decision of the Court of Appeals of 29 December 1994 in CA-G.R. CV No. 34168 is hereby AFFIRMED.

Cost against the petitioners.

SO ORDERED.Narvasa, C.J. (Chairman), Melo, Francisco and Panganiban, JJ., concur.

FIRST DIVISION

[G.R. No. 131683. June 19, 2000]

JESUS LIM ARRANZA; LORENZO CINCO; QUINTIN TAN; JOSE ESCOBAR; ELBERT FRIEND; CLASSIC HOMES VILLAGE ASSOCIATION, INC.; BF NORTHWEST HOMEOWNERS’ ASSOCIATION, INC.; and UNITED BF HOMEOWNERS’ ASSOCIATIONS, INC., petitioners, vs. B.F. HOMES, INC. AND THE HONORABLE COURT OF APPEALS, respondent.

D E C I S I O N

DAVIDE, JR., C.J.:

For resolution in this petition is the issue of whether it is the Securities and Exchange Commission (SEC) or the Housing and Land Use Regulatory Board (HLURB) that has jurisdiction over a complaint filed by subdivision homeowners against a subdivision developer that is under receivership for specific performance regarding basic homeowners’ needs such as water, security and open spaces.

Respondent BF Homes, Inc. (BFHI), is a domestic corporation engaged in developing subdivisions and selling residential lots. One of the subdivisions that respondent developed was the BF Homes Parañaque Subdivision, which now sprawls across not only a portion of the City of Parañaque but also those of the adjoining cities of Las Piñas and Muntinlupa.

When the Central Bank ordered the closure of Banco Filipino, which had substantial investments in respondent BFHI, respondent filed with the SEC a petition for rehabilitation and a declaration that it was in a state of suspension of payments. On 18 March 1985, the SEC placed respondent under a management committee. Upon that committee’s dissolution on 2 February 1988, the SEC appointed Atty. Florencio B. Orendain as a Receiver, and approved a Revised Rehabilitation Plan.

As a Receiver, Orendain instituted a central security system and unified the sixty~five homeowners’ associations into an umbrella homeowners’ association called United BF Homeowners’ Associations, Inc. (UBFHAI), which was thereafter incorporated with the Home Insurance and Guaranty Corporation (HIGC).[1]

In 1989, respondent, through Orendain, turned over to UBFHAI control and administration of security in the subdivision, the Clubhouse and the open spaces along Concha Cruz Drive. Through the Philippine Waterworks and Construction Corporation (PWCC), respondent’s managing company for waterworks in the various BF Homes subdivisions, respondent entered into an agreement with UBFHAI for the annual collection of community assessment fund and for the purchase of eight new pumps to replace the over~capacitated pumps in the old wells.

On 7 November 1994, Orendain was relieved by the SEC of his duties as a Receiver, and a new Board of Receivers consisting of eleven members of respondent’s Board of Directors was appointed for the implementation of Phases II and III of respondent’s rehabilitation.[2] The new Board, through its Chairman, Albert C. Aguirre, revoked the authority given by Orendain to use the open spaces at Concha Cruz Drive and to collect community assessment funds; deferred the purchase of new pumps; recognized BF Parañaque Homeowners’ Association, Inc., (BFPHAI) as the representative of all homeowners in the subdivision; took over the management of the Clubhouse; and deployed its own security guards in the subdivision.

Consequently, on 5 July 1995, herein petitioners filed with the HLURB a class suit "for and in behalf of the more than 7,000 homeowners in the subdivision" against respondent BFHI, BF Citiland Corporation, PWCC and A.C. Aguirre Management Corporation "to enforce the rights of purchasers of lots" in BF Homes Parañaque.[3] They alleged that:

1......The forty (40) wells, mostly located at different elevations in Phases 3 and 4 of the subdivision and with only twenty~seven (27) productive, are the sources of the inter~connected water system in the 765~hectare subdivision;

2......There is only one drainage and sewer system;

3......There is one network of roads;

4......There are eight (8) entry and exit points to the subdivision and from three (3) municipalities (now cities), a situation obtaining in this subdivision only and nowhere else;

5......There was no security force for the entire subdivision until 1988;

6......There are not enough open spaces in the subdivision in relation to the total land area developed; and whatever open spaces are available have been left unkempt, undeveloped and neglected;

7......There are no zoning guidelines which resulted in unregulated constructions of structures and the proliferation of business establishments in residential areas; and

8......The BFPHAI became "moribund" sometime in 1980 on account of its failure to cope with the delivery of basic services except for garbage collection.

Petitioners raised "issues" on the following basic needs of the homeowners: rights~of~way; water; open spaces; road and perimeter wall repairs; security; and the interlocking corporations that allegedly made it convenient for respondent "to compartmentalize its obligations as general developer, even if

all of these are hooked into the water, roads, drainage and sewer systems of the subdivision."[4] Thus, petitioners prayed that:

A. A cease~and~desist order from selling any of the properties within the subdivision be issued against respondent BFHI, BF Citi, ACAMC, and/or any and all corporations acting as surrogates/alter~egos, sister companies of BFHI and/or its stockholders until the warranties, facilities and infrastructures shall have been complied with or put up (and) the advances of UBFHAI reimbursed, otherwise, to cease and desist from rescinding valid agreements or contracts for the benefit of complainants, or committing acts diminishing, diluting or otherwise depriving complainants of their rights under the law as homeowners;

B. .....After proper proceedings the bond or deposit put up by respondent BF Homes, Inc. be forfeited in favor of petitioners;

C. .....Respondent BFHI be ordered to immediately turnover the roads, open spaces, and other facilities built or put up for the benefit of lot buyers/homeowners in the subdivision to complainant UBFHAI as representative of all homeowners in BF Homes Parañaque, free from all liens, encumbrances, and taxes in arrears;

D. If the open spaces in the subdivision are not sufficient as required by law, to impose said penalties/sanctions against BFHI or the persons responsible therefor;

E. .....Order the reimbursement of advances made by UBFHAI;

F. .....Turn over all amounts which may have been collected from users’ fees of the strip of open space at Concha Cruz Drive;

G. .....Order PWCC to effect and restore 24~hour water supply to all residents by adding new wells replacing over~capacitated pumps and otherwise improving water distribution facilities;

H. Order PWCC to continue collecting the Community Development Fund and remit all amounts collected to UBFHAI;

I......Order BFHI to immediately withdraw the guards at the clubhouse and the 8 entry and exit points to the subdivision, this being an act of usurpation and blatant display of brute force;

J. .....The appropriate penalties/sanctions be imposed against BF Citi, ACAMC or any other interlocking corporation of BFHI or any of its principal stockholders in respect of the diminution/encroaching/violation on the rights of the residents of the subdivision to enjoy/avail of the facilities/services due them; and

K......Respondents be made to pay attorney’s fees and the costs of this suit.[5]

In its answer, respondent claimed that (a) it had complied with its contractual obligations relative to the subdivision’s development; (b) respondent could not be compelled to abide by agreements resulting from Orendain’s ultra vires acts; and (c) petitioners were precluded from instituting the instant action on account of Section 6(c) of P.D. No. 902~A providing for the suspension of all actions for claims against a corporation under receivership. Respondent interposed counterclaims and prayed for the dismissal of the complaint.[6]

Petitioners thereafter filed an urgent motion for a cease~and~desist/status quo order. Acting on this motion, HLURB Arbiter Charito M. Bunagan issued a 20~day temporary restraining order to avoid rendering nugatory and ineffectual any judgment that could be issued in the case;[7] and subsequently, an Order granting petitioners’ prayer for preliminary injunction was issued

enjoining and restraining respondent BF Homes, Incorporated, its agents and all persons acting for and in its behalf from taking over/administering the Concha Garden Row, from issuing stickers to residents and non-residents alike for free or with fees, from preventing necessary improvements and repairs of infrastructures within the authority and administration of complainant UBFHAI, and from directly and indirectly taking over security in the eight (8) exit points of the subdivision or in any manner interfering with the processing and vehicle control in subject gates and otherwise to remove its guards from the gates upon posting of a bond of One Hundred Thousand Pesos (P100,000.00) which bond shall answer for whatever damages respondents may sustain by reason of the issuance of the writ of preliminary injunction if it turns out that complainant is not entitled thereto.[8]

Respondent thus filed with the Court of Appeals a petition for certiorari and prohibition docketed as CA~G.R. SP No. 39685. It contended in the main that the HLURB acted "completely without jurisdiction" in issuing the Order granting the writ of preliminary injunction considering that inasmuch as respondent is under receivership, the "subject matter of the case is one exclusively within the jurisdiction of the SEC."[9]

On 28 November 1997, the Court of Appeals rendered a decision[10] annulling and setting aside the writ of preliminary injunction issued by the HLURB. It ruled that private respondents’ action may properly be regarded as a "claim" within the contemplation of PD No. 902~A which should be placed on equal footing with those of petitioners’ other creditor or creditors and which should be filed with the Committee of Receivers. In any event, pursuant to Section 6(c) of P.D. No. 902~A and SEC’s Order of 18 March 1985, petitioners’ action against respondent, which is under receivership, should be suspended.

Hence, petitioners filed the instant petition for review on certiorari. On 26 January 1998, the Court issued a temporary restraining order (TRO) enjoining

respondent, its officers, representatives and persons acting upon its orders from

(a) taking over/administering the Concha Garden Row; (b) issuing stickers to residents and non~residents alike for free or with fees; (c) preventing necessary improvements and repairs of infrastructures within the authority and administration of complainant United BF Homeowners’ Association, Inc. (UBFHAI); (d) directly and indirectly taking over security in the eight (8) exit points of all of BF Homes Parañaque Subdivision or in any manner interfering with the processing and vehicle control in the subject gates; and (e) otherwise to remove its guards from the gates….[11]

Respondent’s motion to lift the TRO was denied.

At the hearing on 1 July 1998, the primary issue in this case was defined as "which body has jurisdiction over petitioners’ claims, the Housing and Land Use Regulatory Board (HLURB) or the Securities and Exchange Commission (SEC)?" The collateral issue to be addressed is "assuming that the HLURB has jurisdiction, may the proceedings therein be suspended pending the outcome of the receivership before the SEC?"

For their part, petitioners argue that the complaint referring to rights of way, water, open spaces, road and perimeter wall repairs, security and respondent’s interlocking corporations that facilitated circumvention of its obligation involves unsound real estate practices. The action is for specific performance of a real estate developers’ obligations under P.D. No. 957, and the relief sought is revocation of the subdivision project’s registration certificate and license to sell. These issues are within the jurisdiction of the HLURB. Even if respondent is under receivership, its obligations as a real estate developer under P.D. No. 957 are not suspended. Section 6(c) of P.D. No. 902~A, as amended by P.D. No. 957, on "suspension of all actions for claims against corporations" refers solely to monetary claims which are but incidental to petitioner’s complaints against BFHI, and if filed elsewhere than the HLURB, it would result to splitting causes of action. Once determined in the HLURB, however, the monetary awards should be submitted to the SEC as established claims. Lastly, the acts enjoined by the HLURB are not related to the disposition of BFHI’s assets as a corporation undergoing its final phase of rehabilitation.

On the other hand, respondent asserts that the SEC, not the HLURB, has jurisdiction over petitioners’ complaint based on the contracts entered into by the former receiver. The SEC, being the appointing authority, should be the one to take cognizance of controversies arising from the performance of the receiver’s duties. Since respondent’s properties are under the SEC’s custodia legis, they are exempt from any court process.

Jurisdiction is the authority to hear and determine a cause – the right to act in a case.[12] It is conferred by law and not by mere administrative policy of any court or tribunal.[13] It is determined by the averments of the complaint and not

by the defense contained in the answer.[14] Hence, the jurisdictional issue involved here shall be determined upon an examination of the applicable laws and the allegations of petitioners’ complaint before the HLURB.

Presidential Decree No. 957 (The Subdivision and Condominium Buyers’ Protective Decree) was issued on 12 July 1976 in answer to the popular call for correction of pernicious practices of subdivision owners and/or developers that adversely affected the interests of subdivision lot buyers. Thus, one of the "whereas clauses" of P.D. No. 957 states:

WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage, water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home and lot buyers….

Section 3 of P.D. No. 957 empowered the National Housing Authority (NHA) with the "exclusive jurisdiction to regulate the real estate trade and business." On 2 April 1978, P.D. No. 1344 was issued to expand the jurisdiction of the NHA to include the following:

SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature:

A......Unsound real estate business practices;

B......Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and

C......Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Italics supplied.)

Thereafter, the regulatory and quasi~judicial functions of the NHA were transferred to the Human Settlements Regulatory Commission (HSRC) by virtue of Executive Order No. 648 dated 7 February 1981. Section 8 thereof specifies the functions of the NHA that were transferred to the HSRC including the authority to hear and decide "cases on unsound real estate business practices; claims involving refund filed against project owners, developers, dealers, brokers or salesmen and cases of specific performance." Executive Order No. 90 dated 17 December 1986 renamed the HSRC as the Housing and Land Use Regulatory Board (HLURB).[15]

The boom in the real estate business all over the country resulted in more litigation between subdivision owners/developers and lot buyers with the issue

of the jurisdiction of the NHA or the HLURB over such controversies as against that of regular courts. In the cases [16] that reached this Court, the ruling has consistently been that the NHA or the HLURB has jurisdiction over complaints arising from contracts between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer to comply with its contractual and statutory obligations to make the subdivision a better place to live in.

Notably, in Antipolo Realty Corporation v. National Housing Authority,[17] one of the issues raised by the homeowners was the failure of Antipolo Realty to develop the subdivision in accordance with its undertakings under the contract to sell. Such undertakings include providing the subdivision with concrete curbs and gutters, underground drainage system, asphalt paved roads, independent water system, electrical installation with concrete posts, landscaping and concrete sidewalks, developed park or amphitheater and 24~hour security guard service. The Court held that the complaint filed by the homeowners was within the jurisdiction of the NHA.

Similarly, in Alcasid v. Court of Appeals,[18] the Court ruled that the HLURB, not the RTC, has jurisdiction over the complaint of lot buyers for specific performance of alleged contractual and statutory obligations of the defendants, to wit, the execution of contracts of sale in favor of the plaintiffs and the introduction in the disputed property of the necessary facilities such as asphalting and street lights.

In the case at bar, petitioners’ complaint is for specific performance to enforce their rights as purchasers of subdivision lots as regards rights of way, water, open spaces, road and perimeter wall repairs, and security. Indisputably then, the HLURB has jurisdiction over the complaint.

The fact that respondent is under receivership does not divest the HLURB of that jurisdiction. A receiver is a person appointed by the court, or in this instance, by a quasi~judicial administrative agency, in behalf of all the parties for the purpose of preserving and conserving the property and preventing its possible destruction or dissipation, if it were left in the possession of any of the parties.[19] It is the duty of the receiver to administer the assets of the receivership estate; and in the management and disposition of the property committed to his possession, he acts in a fiduciary capacity and with impartiality towards all interested persons.[20] The appointment of a receiver does not dissolve a corporation, nor does it interfere with the exercise of its corporate rights.[21] In this case where there appears to be no restraints imposed upon respondent as it undergoes rehabilitation receivership,[22] respondent continues to exist as a corporation and hence, continues or should continue to perform its contractual and statutory responsibilities to petitioners as homeowners.

Receivership is aimed at the preservation of, and at making more secure, existing rights; it cannot be used as an instrument for the destruction of those rights.[23]

No violation of the SEC order suspending payments to creditors would result as far as petitioners’ complaint before the HLURB is concerned. To reiterate, what petitioners seek to enforce are respondent’s obligations as a subdivision developer. Such claims are basically not pecuniary in nature although it could incidentally involve monetary considerations. All that petitioners’ claims entail is the exercise of proper subdivision management on the part of the SEC~appointed Board of Receivers towards the end that homeowners shall enjoy the ideal community living that respondent portrayed they would have when they bought real estate from it.

Neither may petitioners be considered as having "claims" against respondent within the context of the following proviso of Section 6 (c) of P.D. No. 902~A, as amended by P.D. Nos. 1653, 1758 and 1799, to warrant suspension of the HLURB proceedings:

[U]pon appointment of a management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for claims against corporations, partnerships or associations under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly. (Italics supplied.)

In Finasia Investments and Finance Corporation v. Court of Appeals,[24] this Court defined and explained the term "claim" in Section 6 (c) of P.D. No. 902~A, as amended, as follows:

We agree with the public respondent that the word "claim" as used in Sec. 6 (c) of P.D. 902~A, as amended, refers to debts or demands of a pecuniary nature. It means "the assertion of a right to have money paid. It is used in special proceedings like those before administrative court, on insolvency." (Emphasis supplied.)

Hence, in Finasia Investments, the Court held that a civil case to nullify a special power of attorney because the principal’s signature was forged should not be suspended upon the appointment of a receiver of the mortgagee to whom a person mortgaged the property owned by such principal. The Court ruled that the cause of action in that civil case "does not consist of demand for payment of debt or enforcement of pecuniary liability." It added:

It has nothing to do with the purpose of Section 6 (c) of P.D. 902~A, as amended, which is to prevent a creditor from obtaining an advantage or preference over another with respect to action against corporation, partnership, association under management or receivership and to protect and preserve the rights of party litigants as well as the interest of the investing public or creditors. Moreover, a final verdict on the question of whether the special power of attorney in question is a forgery or not will not amount to any preference or advantage to Castro who was not shown to be a creditor of FINASIA.[25]

In this case, under the complaint for specific performance before the HLURB, petitioners do not aim to enforce a pecuniary demand. Their claim for reimbursement should be viewed in the light of respondent’s alleged failure to observe its statutory and contractual obligations to provide petitioners a "decent human settlement" and "ample opportunities for improving their quality of life."[26]The HLURB, not the SEC, is equipped with the expertise to deal with that matter.

On the other hand, the jurisdiction of the SEC is defined by P.D. No. 902~A, as amended, as follows:

SEC. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving:

a).....Devices or schemes employed by or any act of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholders, partners, members of associations or organizations registered with the Commission;

b).....Controversies arising out of intra~corporate or partnership relations, between and among stockholders, members of associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members, or associates, respectively; and between such corporation, partnership or association and the State insofar as it concerns their individual franchise or right to exist as such entity; [and]

c).....Controversies in the election or appointments of directors, trustees, officers, or managers of such corporation, partnerships or associations.

For the SEC to acquire jurisdiction over any controversy under these provisions, two elements must be considered: (1) the status or relationship of the parties; and (2) the nature of the question that is the subject of their controversy.[27] The first element requires that the controversy must arise "out of intra~corporate or partnership relations between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the State in so far as it concerns their individual franchises."[28] Petitioners are not stockholders, members or associates of respondent. They are lot buyers and now homeowners in the subdivision developed by the respondent.

The second element requires that the dispute among the parties be intrinsically connected with the regulation or the internal affairs of the corporation, partnership or association.[29] The controversy in this case is remotely related to the "regulation" of respondent corporation or to respondent’s "internal affairs."

It should be stressed that the main concern in this case is the issue of jurisdiction over petitioners’ complaint against respondent for specific performance. P.D. No. 902~A, as amended, defines the jurisdiction of the SEC; while P.D. No. 957, as amended, delineates that of the HLURB. These two quasi~judicial agencies exercise functions that are distinct from each other. The SEC has authority over the operation of all kinds of corporations, partnerships or associations with the end in view of protecting the interests of the investing public and creditors. On the other hand, the HLURB has jurisdiction over matters relating to observance of laws governing corporations engaged in the specific business of development of subdivisions and condominiums. The HLURB and the SEC being bestowed with distinct powers and functions, the exercise of those functions by one shall not abate the performance by the other of its own functions. As respondent puts it, "there is no contradiction between P.D. No. 902~A and P.D. No. 957."[30]

What complicated the jurisdictional issue in this case is the fact that petitioners are primarily praying for the retention of respondent’s obligations under the Memorandum of Agreement that Receiver Orendain had entered into with them but which the present Board of Receivers had revoked.

In Figueroa v. SEC,[31] this Court has declared that the power to overrule or revoke the previous acts of the management or Board of Directors of the entity under receivership is within a receiver’s authority, as provided for by Section 6 (d) (2) of P.D. No. 902~A. Indeed, when the acts of a previous receiver or management committee prove disadvantageous or inimical to the rehabilitation of a distressed corporation, the succeeding receiver or management committee may abrogate or cast aside such acts. However, that prerogative is not absolute. It should be exercised upon due consideration of all pertinent and relevant laws when public interest and welfare are involved. The business of developing subdivisions and corporations being imbued with public interest and welfare, any question arising from the exercise of that prerogative should be brought to the proper agency that has technical know~how on the matter.

P.D. No. 957 was promulgated to encompass all questions regarding subdivisions and condominiums. It is aimed at providing for an appropriate government agency, the HLURB, to which all parties aggrieved in the implementation of its provisions and the enforcement of contractual rights with respect to said category of real estate may take recourse. Nonetheless, the powers of the HLURB may not in any way be deemed as in derogation of the SEC’s authority. P.D. Nos. 902~A and 957, as far as both are concerned with corporations, are laws in pari materia. P.D. No. 902~A relates to all corporations, while P.D. No. 957 pertains to corporations engaged in the particular business of developing subdivisions and condominiums. Although the provisions of these decrees on the issue of jurisdiction appear to collide

when a corporation engaged in developing subdivisions and condominiums is under receivership, the same decrees should be construed as far as reasonably possible to be in harmony with each other to attain the purpose of an expressed national policy.[32]

Hence, the HLURB should take jurisdiction over petitioners’ complaint because it pertains to matters within the HLURB’s competence and expertise. The HLURB should view the issue of whether the Board of Receivers correctly revoked the agreements entered into between the previous receiver and the petitioners from the perspective of the homeowners’ interests, which P.D. No. 957 aims to protect. Whatever monetary awards the HLURB may impose upon respondent are incidental matters that should be addressed to the sound discretion of the Board of Receivers charged with maintaining the viability of respondent as a corporation. Any controversy that may arise in that regard should then be addressed to the SEC.

It is worth noting that the parties agreed at the 1 July 1998 hearing that should the HLURB establish and grant petitioners’ claims, the same should be referred to the SEC. Thus, the proceedings at the HLURB should not be suspended notwithstanding that respondent is still under receivership. The TRO that this Court has issued should accordingly continue until such time as the HLURB shall have resolved the controversy. The present members of the Board of Receivers should be reminded of their duties and responsibilities as an impartial Board that should serve the interests of both the homeowners and respondent’s creditors. Their interests, financial or otherwise, as members of respondent’s Board of Directors should be circumscribed by judicious and unbiasedperformance of their duties and responsibilities as members of the Board of Receivers. Otherwise, respondent’s full rehabilitation may face a bleak future. Both parties should never give full rein to acts that could prove detrimental to the interests of the homeowners and eventually jeopardize respondent’s rehabilitation.

WHEREFORE, the questioned Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. This case is REMANDED to the Housing and Land Use Regulatory Board for continuation of proceedings with dispatch as the Securities and Exchange Commission proceeds with the rehabilitation of respondent BF Homes, Inc., through the Board of Receivers. Thereafter, any and all monetary claims duly established before the HLURB shall be referred to the Board of Receivers for proper disposition and thereafter, to the SEC, if necessary. No costs.

SO ORDERED.

Puno, Kapunan, Pardo and Ynares-Santiago, JJ., concur.

 

SECOND DIVISION

[G.R. No. 132703. June 23, 2000]

BANCO FILIPINO SAVINGS and MORTGAGE BANK, petitioner, vs. COURT OF APPEALS, HON. EDGAR D. GUSTILO, Presiding Judge, Branch 28, Regional Trial Court, Iloilo City, TALA REALTY SERVICES CORPORATION, NANCY L. TY, PEDRO B. AGUIRRE, REMEDIOS A. DUPASQUIER, PILAR D. ONGKING, ELIZABETH H. PALMA, DOLLY W. LIM, RUBENCITO M. DEL MUNDO, ADD INTERNATIONAL SERVICES, INC., respondents.

D E C I S I O N

DE LEON, JR., J.:

Before us is a special civil action for certiorari to set aside and annul the Decision [1] of the Court of Appeals dated December 18, 1996, which sustained the dismissal [2] of the complaint of petitioner Banco Filipino Savings and Mortgage Bank (hereafter, Banco Filipino) for recovery of real properties filed against Tala Realty Services Corporation (hereafter, Tala Realty) on the grounds of litis pendentia and forum-shopping.

The antecedent facts are the following:

The General Banking Act [3] regulates the number of branches that a bank may operate. Under the said law, a bank is allowed to own the land and the improvements thereon used as branch sites but only up to a maximum of fifty percent (50%) of the bank’s net worth.

In 1979, Banco Filipino had reached the allowable limit in branch site holdings but contemplated further expansion of its operations. Consequently, it unloaded some of its holdings to Tala Realty. Banco Filipino thereafter leased the same branch sites from Tala Realty which was conceived and organized precisely as a transferee corporation by the major stockholders [4] of Banco Filipino. On March 26, 1979, the Securities and Exchange Commission (SEC) issued Tala Realty’s certificate of registration.[5]

Shortly thereafter, the board of directors of Banco Filipino authorized negotiations for the sale of some of its branch sites, through a Board Resolution [6]

dated April 17, 1979 (hereafter, Board Resolution).

On August 25, 1981, respondent Banco Filipino sold the above branch sites to Tala Realty under separate deeds of sale for each branch site. On the same date, Tala Realty leased the same branch sites to Banco Filipino under separate instruments for each branch site.[7]

The instant case originated from the sale by Banco Filipino to Tala Realty of four (4) lots in Iloilo City, covered and described in the aforementioned TCT Nos. 62273 and 62274, for two million one hundred ten thousand pesos (P2,110,000.00).[8] Tala Realty then leased them back to Banco Filipino for a monthly rental of twenty one thousand pesos (P21,000.00) /for a period of twenty (20) years and renewable for another twenty (20) years.[9] The lease contracts of the other branch sites sold to Tala Realty have substantially similar terms and conditions, except for the amount of the rent.

Banco Filipino alleges that a trust was created by virtue of the above transactions. Tala Realty was allegedly established to serve as a corporate medium to warehouse the legal title of the said properties for the beneficial interest of Banco Filipino and to purchase properties to be held in trust for the latter.[10]

However, sometime in August 1992, Tala Realty demanded payment of increased rentals, deposits and goodwill from Banco Filipino, with a threat of ejectment in case of failure to comply thereto. On April 20, 1994, some stockholders of Banco Filipino filed a derivative suit against Tala Realty before the SEC for the reconveyance of the properties sold by the former to the latter. However, on March 6, 1995, the SEC dismissed the case on the ground of lack of jurisdiction.[11]

Due to Banco Filipino’s failure to comply with Tala Realty’s terms, the latter carried out its threat by filing numerous ejectment suits against Banco Filipino.[12] This prompted Banco Filipino to file, on August 16, 1995, an action for recovery of real properties[13] before the Regional Trial Court of Iloilo, Branch 28, on the ground of breach of trust. Incidentally, during the period from August to September 1995, Banco Filipino also filed sixteen (16) other complaints for recovery of real properties which it had previously sold to Tala Realty.[14]

These complaints, including the one filed in the Regional Trial Court of Iloilo City, Branch 28, were uniformly worded in their material allegations.[15]

As regards Banco Filipino’s complaint in the Regional Trial Court of Iloilo City, Tala Realty filed on October 9, 1995 a motion to dismiss on the following grounds: (1) forum-shopping; (2) litis pendentia; (3) pari delicto; (4) failure to implead indispensable parties; and (5) failure to state a cause of action.[16] On the same date, private repondents Pilar D. Ongking, Elizabeth H. Palma, Dolly W. Lim and Rubencito del Mundo filed a separate motion to dismiss in the same case on the following grounds: (1) lack of jurisdiction over the subject matter; (2) litis pendentia; and (3) failure to state a cause of action.[17] Likewise, on November 10, 1995, private respondent Nancy L. Ty filed a separate motion to dismiss, alleging the same grounds as those invoked by private respondents Ongking, et. al.[18]

These motions to dismiss alleged, among others, that aside from the said suit before the Regional Trial Court of Iloilo City, Branch 28, other suits involving certain Quezon City, Lucena City, Malolos and Manila branches of Banco Filipino are also pending in other Regional Trial Courts.

Banco Filipino filed separate oppositions, dated October 14, 1995, October 31, 1995 and November 21, 1995 respectively, to the motions to dismiss.[19] After a protracted exchange of pleadings, the trial court dismissed the complaint on April 22, 1996 in this wise:[20]

A thorough and careful perusal was made by the undersigned Presiding Judge of the arguments of opposing counsels, ventilated in their respective memoranda. Opposing counsels cited the pertinent Supreme Court Circulars, provisions of the Rules of Court and related Decisions of the Supreme Court in support of their arguments.

After weighing the foregoing, this Court is of the opinion and so holds that the contention of the defendants in their motions to dismiss, etc., is meritorious.

Wherefore, in view of the foregoing, the defendants separate motions to dismiss are hereby granted.

Therefore, let this case be, as it is hereby Dismissed.

SO ORDERED.

On June 27, 1996, the trial court denied Banco Filipino’s motion for reconsideration.[21] Banco Filipino received a copy of said order of denial on July 5, 1996 but instead of filing an appeal, it filed, on July 24, 1996, a petition for certiorari under Rule 65 before the Court of Appeals.[22] Banco Filipino alleged in its petition that the trial court’s decision was issued with grave abuse of discretion because it did not comply with the constitutional mandate on the form of decisions.

However, the Court of Appeals dismissed Banco Filipino’s petition on the ground, among others, that the "[p]etitioner’s recourse to Rule 65 of the Revised Rules of Court is patently malapropos."[23] It reiterated the rule that a special civil action for certiorari may be resorted to only when there is no appeal, nor any plain, speedy and adequate remedy in the ordinary course of law. Banco Filipino’s failure to appeal by writ of error within the reglementary period and its belated recourse to a petition for certiorari under Rule 65 was interpreted by the Court of Appeals as a desperate attempt by Banco Filipino to resurrect what was otherwise already a lost appeal.[24] Furthermore, the Court of Appeals debunked Banco Filipino’s theory that the assailed order of the RTC did not comply with the substantive requirements of the Constitution, and was thus, rendered with grave abuse of discretion.

On December 28, 1996, Banco Filipino received a copy of the Court of Appeals’ decision dismissing its petition thereby prompting the latter to file a

motion for reconsideration on January 10, 1997. The Court of Appeals denied the said motion for reconsideration on December 19, 1997 in a resolution, a copy of which was received by Banco Filipino on January 7, 1998.[25] Banco Filipino then filed with this Court its subject petition for certiorari under Rule 65 of the Revised Rules of Court on March 9, 1998.[26]

Petitioner advances the following arguments:

I......RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN FAILING TO CORRECT BY CERTIORARI THE DISMISSAL ORDER BY THE RTC WHICH PATENTLY DISREGARDED THE CONSTITUTIONAL PRESCRIPTION AS TO FORM AND JUDGMENT, AND EFFECTIVELY DENIED PETITIONER DUE PROCESS OF LAW;[27]

II......BANCO FILIPINO WAS DENIED THE OPPORTUNITY TO PROVE ITS CAUSE OF ACTION OF AN IMPLIED TRUST; [28]

III......RESPONDENT COURT GRAVELY ERRED IN RULING THAT A WRIT OF ERROR SHOULD BE THE PROPER REMEDY INSTEAD OF A PETITION FOR CERTIORARI UNDER RULE 65;[29]

IV......RESPONDENT CA GRAVELY ABUSED ITS DISCRETION IN FINDING THAT BANCO FILIPINO IS GUILTY OF SPLITTING CAUSES OF ACTION MERELY ON THE BASIS OF THE PLEADINGS THUS FILED.[30]

Without need of delving into the merits of the case, this Court hereby dismisses the instant petition. For in filing a special civil action for certiorari instead of an ordinary appeal before this Court, Banco Filipino violated basic tenets of remedial law that merited the dismissal of its petition.

First. Banco Filipino’s proper remedy from the adverse resolutions of the Court of Appeals is an ordinary appeal to this Court via a petition for review under Rule 45 and not a petition forcertiorari under Rule 65.

A petition for certiorari under Rule 65 is proper if a tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of 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.[31]

We have said time and again that for the extraordinary remedy of certiorari to lie by reason of grave abuse of discretion, the abuse of discretion, must be so patent and gross as to amount to an evasion of a positive duty, or a virtual refusal to perform the duty enjoined or act in contemplation of law, or where the power is exercised in an arbitrary and despotic manner by reason of passion and personal hostility.[32]

Nothing in the record of this case supports Banco Filipino’s bare assertion that the Court of Appeals rendered its assailed resolutions with grave abuse of discretion. On the contrary, Banco Filipino even admitted that the Court of Appeals painstakingly "labored to defend in thirty-three (33) [single spaced] pages"[33] the rationale behind its decision, clearly setting forth therein the applicable provisions of law and jurisprudence. In other words, there being no grave abuse of discretion on its part, the Court of Appeals rendered the assailed resolutions in the proper exercise of its jurisdiction. Hence, even if erroneous, the Court of Appeals’ resolutions can only be assailed by means of a petition for review. The distinction is clear: a petition for certiorari seeks to correct errors of jurisdiction while a petition for review seeks to correct errors of judgment committed by the court. Errors of judgment include errors of procedure or mistakes in the court’s findings.[34] Where a court has jurisdiction over the person and the subject matter, the decision on all other questions arising in the case is an exercise of that jurisdiction. Consequently, all errors committed in the exercise of such jurisdiction are merely errors of judgment.[35]

Second. The availability to Banco Filipino of the remedy of a petition for review from the decision of the Court of Appeals effectively foreclosed its right to resort to a petition for certiorari. This Court has often enough reminded members of the bench and bar that a special civil action for certiorari under Rule 65 lies only when there is no appeal nor plain, speedy and adequate remedy in the ordinary course of law. Certiorari is not allowed when a party to a case fails to appeal a judgment despite the availability of that remedy. The remedies of appeal and certiorari are mutually exclusive and not alternative or successive.[36]

The antithetic character of the remedies of appeal and certiorari has been generally observed by this Court save only in those rare instances where appeal is satisfactorily shown to be an inadequate remedy. In the case at bar, Banco Filipino has failed to show any valid reason why the issues raised in its petition for certiorari could not have been raised on appeal. To justify its resort to a special civil action for certiorari under Rule 65, it erroneously claims that an appeal is not a speedy and adequate remedy because further delay in the disposition of this case would effectively deprive Banco Filipino of the full use and enjoyment of its properties.[37] However, the further delay that would inadvertently result from the dismissal of the instant petition is one purely of Banco Filipino’s own doing. We cannot countenance an intentional departure from established rules of procedure simply to accommodate a case that has long been pending in the courts of law because of the party’s own fault or negligence.

Third. Certiorari cannot be used as a substitute for the lapsed or lost remedy of appeal. Banco Filipino’s recourse to a special civil action for certiorari was borne not out of the conviction that grave abuse of discretion attended the resolution of its petition before the Court of Appeals but simply because of its failure to file a timely appeal to this Court. This observation is shared by the Court of Appeals which was quick to point out that when Banco Filipino filed its petition for certiorari assailing the RTC order, the reglementary period for filing a petition for review before the Court of Appeals had already lapsed.

It is true that this Court may treat a petition for certiorari as having been filed under Rule 45 to serve the higher interest of justice, but not when the petition is filed well beyond the reglementary period for filing a petition for review and without offering any reason therefor.

Concomitant to a liberal application of the rules of procedure should be an effort on the part of the party invoking liberality to at least explain its failure to comply with the rules. In the case at bar, Banco Filipino’s petition is bereft of any valid reason or explanation as to why it failed to properly observe the rules of procedure. The record shows that Banco Filipino failed, not once but twice, and for an unreasonable length of time, to file an appeal within the period required by law. From the order of the RTC, it filed its petition for certiorari some fourteen (14) days after the lapse of the reglementary period to appeal to the Court of Appeals. Likewise, when Banco Filipino filed its petition for certiorari before this Court, forty five (45) days have already passed since the end of the fifteen (15) day reglementary period for filing an appeal to the Supreme Court.

Allowing appeals, although filed late in some rare cases, may not be applied to Banco Filipino in the case at bar for this rule is qualified by the requirement that there must be exceptional circumstances to justify the relaxation of the rules.[38] We cannot find any such exceptional circumstances in this case and neither has Banco Filipino endeavored to prove the existence of any. This being so, another elementary rule of procedure applies and that is the doctrine that perfection of an appeal within the reglementary period is not only mandatory but also jurisdictional so that failure to do so renders the questioned decision final and executory, and deprives the appellate court of jurisdiction to alter the final judgment, much less to entertain the appeal.[39]

As a final word, we quote herein our relevant pronouncement in the case of Bank of America, NT and SA v. Gerochi, Jr. that:

The case at bench, given its own factual settings cannot come close to those extraordinary circumstances that have indeed justified a deviation from an otherwise stringent rule. Let it not be overlooked that the timeliness of an appeal is a jurisdictional caveat that not even this Court can trifle with.[40] (Underscoring provided.)

WHEREFORE, the instant petition for certiorari is hereby DISMISSED.

SO ORDERED.

Bellosillo, (Chairman) Mendoza, Quisumbing and Buena, JJ., concur.