[G.R. No. 124642. February 23, 2004.]

ALFREDO CHING and ENCARNACION CHING, petitioners, vs. THE HON. COURT OF APPEALS and ALLIED BANKING CORPORATION, respondents.

D E C I S I O N

CALLEJO, SR., J p:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the Decision 1 of the Court of Appeals (CA) dated November 27, 1995 in CA-G.R. SP No. 33585, as well as the Resolution 2 on April 2, 1996 denying the petitioners' motion for reconsideration. The impugned decision granted the private respondent's petition for certiorari and set aside the Orders of the trial court dated December 15, 1993 3 and February 17, 1994 4 nullifying the attachment of 100,000 shares of stocks of the Citycorp Investment Philippines under the name of petitioner Alfredo Ching.

The following facts are undisputed:

On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI) obtained a loan of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue of this loan, the

PBMCI, through its Executive Vice-President Alfredo Ching, executed a promissory note for the said amount promising to pay on December 22, 1978 at an interest rate of 14%per annum. 5 As added security for the said loan, on September 28, 1978, Alfredo Ching, together with Emilio Tañedo and Chung Kiat Hua, executed a continuing guaranty with the ABC binding themselves to jointly and severally guarantee the payment of all the PBMCI obligations owing the ABC to the extent of P38,000,000.00. 6 The loan was subsequently renewed on various dates, the last renewal having been made on December 4, 1980. 7

Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the amount of P13,000,000.00 payable in eighteen months at 16% interest per annum. As in the previous loan, the PBMCI, through Alfredo Ching, executed a promissory note to evidence the loan maturing on June 29, 1981. 8 This was renewed once for a period of one month. 9

The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981, the ABC filed a complaint for sum of money with prayer for a writ of preliminary attachment against the PBMCI to collect the P12,612,972.88 exclusive of interests, penalties and other bank charges. Impleaded as co-defendants in the complaint were Alfredo Ching, Emilio Tañedo and Chung Kiat Hua in their capacity as sureties of the PBMCI.

The case was docketed as Civil Case No. 142729 in the Regional Trial Court of Manila, Branch XVIII. 10 In its application for a writ of preliminary attachment, the ABC averred that the "defendants are guilty of fraud in incurring the obligations upon which the present action is brought 11 in that they falsely represented themselves to be in a financial position to pay their obligation upon maturity thereof." 12 Its supporting affidavit stated, inter alia, that the "[d]efendants have removed or disposed of their properties, or [are] ABOUT to do so, with intent to defraud their creditors." 13

On August 26, 1981, after an ex-parte hearing, the trial court issued an Order denying the ABC's application for a writ of preliminary attachment. The trial court decreed that the grounds alleged in the application and that of its supporting affidavit "are all conclusions of fact and of law" which do not warrant the issuance of the writ prayed for. 14

On motion for reconsideration, however, the trial court, in an Order dated September 14, 1981, reconsidered its previous order and granted the ABC's application for a writ of preliminary attachment on a bond of P12,700,000. The order, in relevant part, stated:

With respect to the second ground relied upon for the grant of the writ of preliminary attachment ex-parte, which is the alleged disposal of properties by the defendants with intent to defraud creditors as provided in Sec. 1(e) of

Rule 57 of the Rules of Court, the affidavits can only barely justify the issuance of said writ as against the defendant Alfredo Ching who has allegedly bound himself jointly and severally to pay plaintiff the defendant corporation's obligation to the plaintiff as a surety thereof.

WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching requiring the sheriff of this Court to attach all the properties of said Alfredo Ching not exceeding P12,612,972.82 in value, which are within the jurisdiction of this Court and not exempt from execution upon, the filing by plaintiff of a bond duly approved by this Court in the sum of Twelve Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the defendant Alfredo Ching to secure the payment by plaintiff to him of all the costs which may be adjudged in his favor and all damages he may sustain by reason of the attachment if the court shall finally adjudge that the plaintiff was not entitled thereto.

SO ORDERED. 15

Upon the ABC's posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently, summonses were served on the

defendants, 16 save Chung Kiat Hua who could not be found.

Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for suspension of payments with the Securities and Exchange Commission (SEC), docketed as SEC Case No. 2250, at the same time seeking the PBMCI's rehabilitation. 17

On July 9, 1982, the SEC issued an Order placing the PBMCI's business, including its assets and liabilities, under rehabilitation receivership, and ordered that "all actions for claims listed in Schedule "A" of the petition pending before any court or tribunal are hereby suspended in whatever stage the same may be until further orders from the Commission." 18 The ABC was among the PBMCI's creditors named in the said schedule.

Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a Motion to Dismiss and/or motion to suspend the proceedings in Civil Case No. 142729 invoking the PBMCI's pending application for suspension of payments (which Ching co-signed) and over which the SEC had already assumed jurisdiction. 19 On February 4, 1983, the ABC filed its Opposition thereto. 20

In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on attachment the 100,000 common shares of Citycorp stocks in the name of Alfredo Ching. 21

Thereafter, in an Order dated September 16, 1983, the trial court partially granted the aforementioned motion by suspending the proceedings only with respect to the PBMCI. It denied Ching's motion to dismiss the complaint/or suspend the proceedings and pointed out that P.D. No. 1758 only concerns the activities of corporations, partnerships and associations and was never intended to regulate and/or control activities of individuals. Thus, it directed the individual defendants to file their answers. 22

Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend Proceedings on the same ground of the pendency of SEC Case No. 2250. This motion met the opposition from the ABC. 23

On January 20, 1984, Tañedo filed his Answer with counterclaim and cross-claim. 24 Ching eventually filed his Answer on July 12, 1984. 25

On October 25, 1984, long after submitting their answers, Ching filed an Omnibus Motion, 26 again praying for the dismissal of the complaint or suspension of the proceedings on the ground of the July 9, 1982 Injunctive Order issued in SEC Case No. 2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from the defenses of his principal. The ABC opposed Ching's omnibus motion.

Emilio Y. Tañedo, thereafter, filed his own Omnibus Motion 27 praying for the dismissal of the

complaint, arguing that the ABC had "abandoned and waived" its right to proceed against the continuing guaranty by its act of resorting to preliminary attachment.

On December 17, 1986, the ABC filed a Motion to Reduce the amount of his preliminary attachment bond from P12,700,000 to P6,350,000. 28 Alfredo Ching opposed the motion, 29 but on April 2, 1987, the court issued an Order setting the incident for further hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the actual value of the properties of Alfredo Ching levied on by the sheriff. 30

On March 2, 1988, the trial court issued an Order granting the motion of the ABC and rendered the attachment bond of P6,350,000. 31

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo Ching, filed a Motion to Set Aside the levy on attachment. She alleged inter alia that the 100,000 shares of stocks levied on by the sheriff were acquired by her and her husband during their marriage out of conjugal funds after the Citycorp Investment Philippines was established in 1974. Furthermore, the indebtedness covered by the continuing guaranty/comprehensive suretyship contract executed by petitioner Alfredo Ching for the account of PBMCI did not redound to the benefit of the conjugal partnership. She, likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant entitled to file a motion for

the release of the properties. 32 She attached therewith a copy of her marriage contract with Alfredo Ching. 33

The ABC filed a comment on the motion to quash preliminary attachment and/or motion to expunge records, contending that:

2.1The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus, she has no personality to file any motion before this Honorable Court;

2.2Said supposed movant did not file any Motion for Intervention pursuant to Section 2, Rule 12 of the Rules of Court;

2.3Said Motion cannot even be construed to be in the nature of a Third-Party Claim conformably with Sec. 14, Rule 57 of the Rules of Court.

3.Furthermore, assuming in gratia argumenti that the supposed movant has the required personality, her Motion cannot be acted upon by this Honorable Court as the above-entitled case is still in the archives and the proceedings thereon still remains suspended. And there is no previous Motion to revive the same. 34

 

The ABC also alleged that the motion was barred by prescription or by laches because the shares of stocks were in custodia legis.

During the hearing of the motion, Encarnacion T. Ching adduced in evidence her marriage contract to Alfredo Ching to prove that they were married on January 8, 1960; 35 the articles of incorporation of Citycorp Investment Philippines dated May 14, 1979; 36 and, the General Information Sheet of the corporation showing that petitioner Alfredo Ching was a member of the Board of Directors of the said corporation and was one of its top twenty stockholders.

On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the motion to expunge records.

Acting on the aforementioned motion, the trial court issued on December 15, 1993 an Order 37

lifting the writ of preliminary attachment on the shares of stocks and ordering the sheriff to return the said stocks to the petitioners. The dispositive portion reads:

WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is hereby granted. Let the writ of preliminary attachment subject matter of said motion, be quashed and lifted with respect to the attached 100,000 common shares of stock of Citycorp Investment Philippines in the name of the defendant Alfredo

Ching, the said shares of stock to be returned to him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon on July 26, 1983, or by whoever may be presently in possession thereof.

SO ORDERED. 38

The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the order but denied the same on February 17, 1994. The petitioner bank forthwith filed a petition for certiorari with the CA, docketed as CA-G.R. SP No. 33585, for the nullification of the said order of the court, contending that:

1.The respondent Judge exceeded his authority thereby acted without jurisdiction in taking cognizance of, and granting a "Motion" filed by a complete stranger to the case.

2.The respondent Judge committed a grave abuse of discretion in lifting the writ of preliminary attachment without any basis in fact and in law, and contrary to established jurisprudence on the matter. 39

On November 27, 1995, the CA rendered judgment granting the petition and setting aside the assailed orders of the trial court, thus:

WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the questioned orders (dated December 15, 1993 and February 17, 1994) for being null and void.

SO ORDERED. 40

The CA sustained the contention of the private respondent and set aside the assailed orders. According to the CA, the RTC deprived the private respondent of its right to file a bond under Section 14, Rule 57 of the Rules of Court. The petitioner Encarnacion T. Ching was not a party in the trial court; hence, she had no right of action to have the levy annulled with a motion for that purpose. Her remedy in such case was to file a separate action against the private respondent to nullify the levy on the 100,000 Citycorp shares of stocks. The court stated that even assuming that Encarnacion T. Ching had the right to file the said motion, the same was barred by laches.

Citing Wong v. Intermediate Appellate Court, 41 the CA ruled that the presumption in Article 160 of the New Civil Code shall not apply where, as in this case, the petitioner-spouses failed to prove the source of the money used to acquire the shares of stock. It held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the fact that the said shares were registered in the corporate books of Citycorp solely under his name. Thus, according to the appellate court, the RTC committed a grave abuse of its discretion

amounting to excess or lack of jurisdiction in issuing the assailed orders. The petitioners' motion for reconsideration was denied by the CA in a Resolution dated April 2, 1996.

The petitioner-spouses filed the instant petition for review on certiorari, asserting that the RTC did not commit any grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the assailed orders in their favor; hence, the CA erred in reversing the same. They aver that the source of funds in the acquisition of the levied shares of stocks is not the controlling factor when invoking the presumption of the conjugal nature of stocks under Art. 160, 42 and that such presumption subsists even if the property is registered only in the name of one of the spouses, in this case, petitioner Alfredo Ching. 43 According to the petitioners, the suretyship obligation was not contracted in the pursuit of the petitioner-husband's profession or business. 44 And, contrary to the ruling of the CA, where conjugal assets are attached in a collection suit on an obligation contracted by the husband, the wife should exhaust her motion to quash in the main case and not file a separate suit. 45 Furthermore, the petitioners contend that under Art. 125 of the Family Code, the petitioner-husband's gratuitous suretyship, is null and void ab initio, 46 and that the share of one of the spouses in the conjugal partnership remains inchoate until the dissolution and liquidation of the partnership. 47

In its comment on the petition, the private respondent asserts that the CA correctly granted its petition for certiorari nullifying the assailed order. It contends that the CA correctly relied on the ruling of this Court in Wong v. Intermediate Appellate Court. Citing Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private respondent alleges that the continuing guaranty and suretyship executed by petitioner Alfredo Ching in pursuit of his profession or business. Furthermore, according to the private respondent, the right of the petitioner-wife to a share in the conjugal partnership property is merely inchoate before the dissolution of the partnership; as such, she had no right to file the said motion to quash the levy on attachment of the shares of stocks. HSTCcD

The issues for resolution are as follows: (a) whether the petitioner-wife has the right to file the motion to quash the levy on attachment on the 100,000 shares of stocks in the Citycorp Investment Philippines; (b) whether or not the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.

On the first issue, we agree with the petitioners that the petitioner-wife had the right to file the said motion, although she was not a party in Civil Case No. 142729. 48

In Ong v. Tating, 49 we held that the sheriff may attach only those properties of the defendant against whom a writ of attachment has been

issued by the court. When the sheriff erroneously levies on attachment and seizes the property of a third person in which the said defendant holds no right or interest, the superior authority of the court which has authorized the execution may be invoked by the aggrieved third person in the same case. Upon application of the third person, the court shall order a summary hearing for the purpose of determining whether the sheriff has acted rightly or wrongly in the performance of his duties in the execution of the writ of attachment, more specifically if he has indeed levied on attachment and taken hold of property not belonging to the plaintiff. If so, the court may then order the sheriff to release the property from the erroneous levy and to return the same to the third person. In resolving the motion of the third party, the court does not and cannot pass upon the question of the title to the property with any character of finality. It can treat the matter only insofar as may be necessary to decide if the sheriff has acted correctly or not. If the claimant's proof does not persuade the court of the validity of the title, or right of possession thereto, the claim will be denied by the court. The aggrieved third party may also avail himself of the remedy of "terceria" by executing an affidavit of his title or right of possession over the property levied on attachment and serving the same to the office making the levy and the adverse party. Such party may also file an action to nullify the levy with damages resulting from the unlawful levy

and seizure, which should be a totally separate and distinct action from the former case. The abovementioned remedies are cumulative and any one of them may be resorted to by one third-party claimant without availing of the other remedies. 50

In this case, the petitioner-wife filed her motion to set aside the levy on attachment of the 100,000 shares of stocks in the name of petitioner-husband claiming that the said shares of stocks were conjugal in nature; hence, not liable for the account of her husband under his continuing guaranty and suretyship agreement with the PBMCI. The petitioner-wife had the right to file the motion for said relief.

On the second issue, we find and so hold that the CA erred in setting aside and reversing the orders of the RTC. The private respondent, the petitioner in the CA, was burdened to prove that the RTC committed a grave abuse of its discretion amounting to excess or lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the legal purpose to determine the case; there is excess of jurisdiction where the tribunal, being clothed with the power to determine the case, oversteps its authority as determined by law, There is grave abuse of discretion where the tribunal acts in a capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent to lack of jurisdiction. 51

It was incumbent upon the private respondent to

adduce a sufficiently strong demonstration that the RTC acted whimsically in total disregard of evidence material to, and even decide of, the controversy before certiorari will lie. A special civil action for certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of judgment. When a court exercises its jurisdiction, an error committed while so engaged does not deprive it of its jurisdiction being exercised when the error is committed. 52

 

After a comprehensive review of the records of the RTC and of the CA, we find and so hold that the RTC did not commit any grave abuse of its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.

Article 160 of the New Civil Code provides that all the properties acquired during the marriage are presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband, or to the wife. In Tan v. Court of Appeals, 53 we held that it is not even necessary to prove that the properties were acquired with funds of the partnership. As long as the properties were acquired by the parties during the marriage, they are presumed to be conjugal in nature. In fact, even when the manner in which the properties were acquired does not appear, the presumption will still apply, and the properties will still be considered conjugal. The presumption of the conjugal nature of the properties acquired

during the marriage subsists in the absence of clear, satisfactory and convincing evidence to overcome the same. 54

In this case, the evidence adduced by the petitioners in the RTC is that the 100,000 shares of stocks in the Citycorp Investment Philippines were issued to and registered in its corporate books in the name of the petitioner-husband when the said corporation was incorporated on May 14, 1979. This was done during the subsistence of the marriage of the petitioner-spouses. The shares of stocks are, thus, presumed to be the conjugal partnership property of the petitioners. The private respondent failed to adduce evidence that the petitioner-husband acquired the stocks with his exclusive money. 55 The barefaced fact that the shares of stocks were registered in the corporate books of Citycorp Investment Philippines solely in the name of the petitioner-husband does not constitute proof that the petitioner-husband, not the conjugal partnership, owned the same. 56 The private respondent's reliance on the rulings of this Court in Maramba v. Lozano 57 and Associated Insurance & Surety Co., Inc. v. Banzon, 58 is misplaced. In the Maramba case, we held that where there is no showing as to when the property was acquired, the fact that the title is in the wife's name alone is determinative of the ownership of the property. The principle was reiterated in the Associated Insurance case where the uncontroverted evidence showed that the shares of stocks were

acquired during the marriage of the petitioners.

Instead of fortifying the contention of the respondents, the ruling of this Court in Wong v. Intermediate Appellate Court 59 buttresses the case for the petitioners. In that case, we ruled that he who claims that property acquired by the spouses during their marriage is not conjugal partnership property but belongs to one of them as his personal property is burdened to prove the source of the money utilized to purchase the same. In this case, the private respondent claimed that the petitioner-husband acquired the shares of stocks from the Citycorp Investment Philippines in his own name as the owner thereof. It was, thus, the burden of the private respondent to prove that the source of the money utilized in the acquisition of the shares of stocks was that of the petitioner-husband alone. As held by the trial court, the private respondent failed to adduce evidence to prove this assertion.

The CA, likewise, erred in holding that by executing a continuing guaranty and suretyship agreement with the private respondent for the payment of the PBMCI loans, the petitioner-husband was in the exercise of his profession, pursuing a legitimate business. The appellate court erred in concluding that the conjugal partnership is liable for the said account of PBMCI under Article 161(1) of the New Civil Code.

Article 161(1) of the New Civil Code (now Article 121[2 and 3] 60 of the Family Code of the

Philippines) provides:

Art. 161.The conjugal partnership shall be liable for:

(1)All debts and obligations contracted by the husband for the benefit of the conjugal partnership, and those contracted by the wife, also for the same purpose, in the cases where she may legally bind the partnership.

The petitioner-husband signed the continuing guaranty and suretyship agreement as security for the payment of the loan obtained by the PBMCI from the private respondent in the amount of P38,000,000. In Ayala Investment and Development Corp. v. Court of Appeals, 61 this Court ruled "that the signing as surety is certainly not an exercise of an industry or profession. It is not embarking in a business. No matter how often an executive acted on or was persuaded to act as surety for his own employer, this should not be taken to mean that he thereby embarked in the business of suretyship or guaranty."

For the conjugal partnership to be liable for a liability that should appertain to the husband alone, there must be a showing that some advantages accrued to the spouses. Certainly, to make a conjugal partnership responsible for a liability that should appertain alone to one of the

spouses is to frustrate the objective of the New Civil Code to show the utmost concern for the solidarity and well being of the family as a unit. The husband, therefore, is denied the power to assume unnecessary and unwarranted risks to the financial stability of the conjugal partnership. 62

In this case, the private respondent failed to prove that the conjugal partnership of the petitioners was benefited by the petitioner-husband's act of executing a continuing guaranty and suretyship agreement with the private respondent for and in behalf of PBMCI. The contract of loan was between the private respondent and the PBMCI, solely for the benefit of the latter. No presumption can be inferred from the fact that when the petitioner-husband entered into an accommodation agreement or a contract of surety, the conjugal partnership would thereby be benefited. The private respondent was burdened to establish that such benefit redounded to the conjugal partnership. 63

It could be argued that the petitioner-husband was a member of the Board of Directors of PBMCI and was one of its top twenty stockholders, and that the shares of stocks of the petitioner-husband and his family would appreciate if the PBMCI could be rehabilitated through the loans obtained; that the petitioner-husband's career would be enhanced should PBMCI survive because of the infusion of fresh capital. However, these are not the benefits contemplated by Article 161 of

the New Civil Code. The benefits must be those directly resulting from the loan. They cannot merely be a by-product or a spin-off of the loan itself. 64

This is different from the situation where the husband borrows money or receives services to be used for his own business or profession. In the Ayala case, we ruled that it is such a contract that is one within the term "obligation for the benefit of the conjugal partnership." Thus:

(A)If the husband himself is the principal obligor in the contract, i.e., he directly received the money and services to be used in or for his own business or his own profession, that contract falls within the term ". . . obligations for the benefit of the conjugal partnership." Here, no actual benefit may be proved. It is enough that the benefit to the family is apparent at the time of the signing of the contract. From the very nature of the contract of loan or services, the family stands to benefit from the loan facility or services to be rendered to the business or profession of the husband. It is immaterial, if in the end, his business or profession fails or does not succeed. Simply stated, where the husband contracts obligations on behalf of the family business, the law presumes, and rightly so, that such obligation will redound to the benefit of

the conjugal partnership. 65

The Court held in the same case that the rulings of the Court in Cobb-Perez and G-Tractors, Inc. are not controlling because the husband, in those cases, contracted the obligation for his own business. In this case, the petitioner-husband acted merely as a surety for the loan contracted by the PBMCI from the private respondent.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the Court of Appeals are SET ASIDE AND REVERSED. The assailed orders of the RTC are AFFIRMED.

SO ORDERED.

[G.R. No. 156067. August 11, 2004.]

MADRIGAL TRANSPORT, INC., petitioner, vs. LAPANDAY HOLDINGS CORPORATION; MACONDRAY AND COMPANY, INC., and LUIS P. LORENZO JR., respondents.

D E C I S I O N

PANGANIBAN, J p:

The special civil action for certiorari and appeal are two different remedies that are mutually exclusive; they are not alternative or successive. Where appeal is available, certiorari will not prosper, even if the ground therefor is grave abuse of discretion. Basic is the rule that certiorari is not a substitute for the lapsed remedy of appeal.

The Case

Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, assailing the February 28, 2002 Decision 2 and the November 5, 2002 Resolution 3 of the Court of Appeals (CA) in CA-GR SP No. 54861. The challenged Decision disposed as follows:

"WHEREFORE, in consideration of the foregoing premises, private

respondents Lapanday and Lorenzo, Jr.'s Motion for Reconsideration dated 10 February 2000 is GRANTED. Accordingly, the Resolution dated 10 January 2000 is RECONSIDERED and SET ASIDE, thereby dismissing the Petition for Certiorari dated 10 September 1999." 4

The assailed Resolution denied reconsideration.

The Facts

The pertinent facts are undisputed. On February 9, 1998, Petitioner Madrigal Transport, Inc. ("Madrigal") filed a Petition for Voluntary Insolvency before the Regional Trial Court (RTC) of Manila, Branch 49. 5 Subsequently, on February 21, 1998, petitioner filed a Complaint for damages against Respondents Lapanday Holdings Corporation ("Lapanday"), Macondray and Company, Inc. ("Macondray"), and Luis P. Lorenzo Jr. before the RTC of Manila, Branch 36. 6

In the latter action, Madrigal alleged (1) that it had entered into a joint venture agreement with Lapanday for the primary purpose of operating vessels to service the shipping requirements of Del Monte Philippines, Inc.; 7 (2) that it had done so on the strength of the representations of Lorenzo, in his capacity either as chairman of the board or as president of Del Monte, Lapanday and Macondray; (3) that Macondray had thereafter been appointed — allegedly upon the insistence of Lapanday — as broker, for the purpose of

securing charter hire contracts from Del Monte; (4) that pursuant to the joint venture agreement, Madrigal had purchased a vessel by obtaining a P10,000,000 bank loan; and (5) that contrary to their representations and guarantees and despite demands, Lapanday and Lorenzo had allegedly been unable to deliver those Del Monte charter hire contracts. 8

On February 23, 1998, the insolvency court (RTC Branch 49) declared petitioner insolvent. 9 On March 30, 1998 and April 6, 1998, Respondents Lapanday, Lorenzo and Macondray filed their respective Motions to Dismiss the case pending before the RTC Branch 36. 10

On December 16, 1998, Branch 36 granted the Motion, for failure of the Complaint to state a cause of action. Applying Sections 32 and 33 of the Insolvency Law, 11 the trial court opined that upon the filing by Madrigal of a Petition for Voluntary Insolvency, the latter lost the right to institute the Complaint for Damages. The RTC ruled that the exclusive right to prosecute the actions belonged to the court-appointed assignee. 12

On January 26, 1999, petitioner filed a Motion for Reconsideration, 13 which was later denied on July 26, 1999. 14 Subsequently, petitioner filed a Petition for Certiorari with the Court of Appeals, seeking to set aside the December 16, 1998 and the July 26, 1999 Orders of the trial court. 15 On September 29, 1999, the CA issued a Resolution

requiring petitioner to explain why its Petition should not be dismissed outright, on the ground that the questioned Orders should have been elevated by ordinary appeal. 16

On January 10, 2000, the appellate court ruled that since the main issue in the instant case was purely legal, the Petition could be treated as one for review as an exception to the general rule that certiorari was not proper when appeal was available. 17 Respondents Lapanday and Lorenzo challenged this ruling through a Motion for Reconsideration dated February 10, 2000. 18 The CA heard the Motion for Reconsideration in oral arguments on April 7, 2000. 19

Ruling of the Court of Appeals

On February 28, 2002, the appellate court issued the assailed Decision granting Respondents Lapanday and Lorenzo's Motion for Reconsideration and dismissing Madrigal's Petition for Certiorari. The CA opined that an order granting a motion to dismiss was final and thus the proper subject of an appeal, not certiorari. 20

Furthermore, even if the Petition could be treated as an appeal, it would still have to be dismissed for lack of jurisdiction, according to the CA. 21 The appellate court held that the issues raised by petitioner involved pure questions of law that should be brought to the Supreme Court, pursuant to Section 2 of Rule 50 and Section 2(c) of Rule 41 of the Rules of Court. 22

Hence, this Petition. 23

The Issues

In its Statement of Issues, petitioner contends:

"I

The Honorable Court of Appeals committed egregious error by ruling that the order of the lower court which granted private respondents' Motions to Dismiss are not proper subjects of a Petition for Certiorari under Rule 65. DaIACS

'A.Section 5, Rule 16 does not apply in the present case since the grounds for dismissal [were] petitioner's purported lack of capacity to sue and its failure to state a cause of action against private respondents, and not any of the three (3) grounds provided under said provision, namely, res judicata, extinction of the claim, and Statute of Frauds.

'B.Section 1 of Rule 41, which is the applicable provision in petitioner's case, expressly proscribes the taking of an appeal from an order denying a motion for reconsideration or one which dismisses an action without prejudice, instead, the proper

remedy is a special civil action under Rule 65.

'C.A petition for certiorari under Rule 65 was correctly resorted to by petitioner from the dismissal order of the lower court, which had clearly acted with grave abuse of discretion amounting to lack of jurisdiction.

"II

The Honorable Court of Appeals committed serious error in ruling that it had no jurisdiction to entertain the Petition for Certiorari filed by petitioner before it.

'A.Section 2, Rule 50 nor Section 2(c) and Section 2(c), Rule 41 find no application in the present case, since said rule contemplates of a case where an appeal is the proper remedy, and not where the appropriate remedy is a petition for certiorari where questions of facts and laws may be reviewed by the court a quo.

"B.The court a quo erroneously concluded that it has no jurisdiction over the subject matter of the petition based on the wrong premise that an appeal from the lower court's dismissal

order is the proper remedy by applying Section 2, Rule 50 and Section 2(c), Rule 41 of the Rules of Court." 24

The Court's Ruling

The Petition is unmeritorious.

First Issue:

Remedy Against Dismissal of Complaint

The resolution of this case hinges on the proper remedy: an appeal or a petition for certiorari. Petitioner claims that it correctly questioned the trial court's Order through its Petition for Certiorari. Respondents insist that an ordinary appeal was the proper remedy. We agree with respondents.

Appeal

Under Rule 41, Rules of Court, 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 the Rules of Court to be appealable. 25 The manner of appealing an RTC judgment or final order is also provided in Rule 41 as follows:

Section 2.Modes of appeal. —

(a)Ordinary appeal. — The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of appeal

with the court which rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No record on appeal shall be required except in special proceedings and other cases of multiple or separate appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and served in like manner.

(b)Petition for review. — The appeal to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition for review in accordance with Rule 42.

(c)Appeal by certiorari. — In all cases where only questions of law are raised or involved, the appeal shall be to the Supreme Court by petition for review on certiorari in accordance with Rule 45. 26

An order or a judgment is deemed final when it finally disposes of a pending action, so that nothing more can be done with it in the trial court. In other words, the order or judgment ends the litigation in the lower court. Au contraire, an interlocutory order does not dispose of the case completely, but leaves something to be done as regards the merits of the latter. 27

Petition for Certiorari

A petition for certiorari is governed by Rule 65,

which reads:

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 its or his 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. cCSHET

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. 28

 

A writ of certiorarimay be issued only for the correction of errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction. The writ cannot be used for any other

purpose, as its function is limited to keeping the inferior court within the bounds of its jurisdiction. 29

For certiorari to prosper, the following requisites must concur: (1) the writ is directed against a tribunal, a board or any officer exercising judicial or quasi-judicial functions; (2) such tribunal, board or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law. 30

"Without jurisdiction" means that the court acted with absolute lack of authority. 31 There is "excess of jurisdiction" when the court transcends its power or acts without any statutory authority. 32 "Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as to be equivalent to lack or excess of jurisdiction; in other words, power is exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive duty or to a virtual refusal either to perform the duty enjoined or to act at all in contemplation of law. 33

Appeal and Certiorari Distinguished

Between an appeal and a petition for certiorari, there are substantial distinctions which shall be explained below.

As to the Purpose. Certiorari is a remedy designed for the correction of errors of jurisdiction, not errors of judgment. 34 In Pure Foods Corporation v. NLRC, we explained the simple reason for the rule in this light:

"When a court exercises its jurisdiction, an error committed while so engaged does not deprive it of the jurisdiction being exercised when the error is committed. If it did, every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void judgment. This cannot be allowed. The administration of justice would not survive such a rule. Consequently, an error of judgment that the court may commit in the exercise of its jurisdiction is not correct[a]ble through the original civil action of certiorari." 35

The supervisory jurisdiction of a court over the issuance of a writ of certiorari cannot be exercised for the purpose of reviewing the intrinsic correctness of a judgment of the lower court — on the basis either of the law or the facts of the case, or of the wisdom or legal soundness of the decision. 36 Even if the findings of the court are incorrect, as long as it has jurisdiction over the case, such correction is normally beyond the province of certiorari. 37 Where the error is not one of jurisdiction, but of an error of law

or fact — a mistake of judgment — appeal is the remedy. 38

As to the Manner of Filing. Over an appeal, the CA exercises its appellate jurisdiction and power of review. Over a certiorari, the higher court uses its original jurisdiction in accordance with its power of control and supervision over the proceedings of lower courts. 39 An appeal is thus a continuation of the original suit, while a petition for certiorari is an original and independent action that was not part of the trial that had resulted in the rendition of the judgment or order complained of. 40 The parties to an appeal are the original parties to the action. In contrast, the parties to a petition for certiorari are the aggrieved party (who thereby becomes the petitioner) against the lower court or quasi-judicial agency, and the prevailing parties (the public and the private respondents, respectively). 41

As to the Subject Matter. Only judgments or final orders and those that the Rules of Court so declare are appealable. 42 Since the issue is jurisdiction, an original action for certiorari may be directed against an interlocutory order of the lower court prior to an appeal from the judgment; or where there is no appeal or any plain, speedy or adequate remedy. 43

As to the Period of Filing. Ordinary appeals should be filed within fifteen days from the notice of judgment or final order appealed from. 44 Where a record on appeal is required, the appellant must

file a notice of appeal and a record on appeal within thirty days from the said notice of judgment or final order. 45 A petition for review should be filed and served within fifteen days from the notice of denial of the decision, or of the petitioner's timely filed motion for new trial or motion for reconsideration. 46 In an appeal by certiorari, the petition should be filed also within fifteen days from the notice of judgment or final order, or of the denial of the petitioner's motion for new trial or motion for reconsideration. 47 DAaIEc

On the other hand, a petition for certiorari should be filed not later than sixty days from the notice of judgment, order, or resolution. 48 If a motion for new trial or motion for reconsideration was timely filed, the period shall be counted from the denial of the motion. 49

As to the Need for a Motion for Reconsideration. A motion for reconsideration is generally required prior to the filing of a petition for certiorari, in order to afford the tribunal an opportunity to correct the alleged errors. Note also that this motion is a plain and adequate remedy expressly available under the law. 50 Such motion is not required before appealing a judgment or final order. 51

Certiorari Not the Proper Remedyif Appeal Is Available

Where appeal is available to the aggrieved party, the action for certiorari will not be entertained.

Remedies of appeal (including petitions for review) and certiorari are mutually exclusive, not alternative or successive. 52 Hence, certiorari is not and cannot be a substitute for an appeal, especially if one's own negligence or error in one's choice of remedy occasioned such loss or lapse. 53 One of the requisites of certiorari is that there be no available appeal or any plain, speedy and adequate remedy. 54 Where an appeal is available, certiorari will not prosper, even if the ground therefor is grave abuse of discretion.

Second Issue:

CA Jurisdiction

Petitioner was ascribing errors of judgment, not jurisdiction, in its Petition for Certiorari filed with the Court of Appeals. The issue raised there was the trial court's alleged error in dismissing the Complaint for lack of cause of action. Petitioner argues that it could still institute the Complaint, even if it had filed a Petition for Insolvency earlier. 55 As petitioner was challenging the trial court's interpretation of the law — posing a question of law — the issue involved an error of judgment, not of jurisdiction. An error of judgment committed by a court in the exercise of its legitimate jurisdiction is not necessarily equivalent to "grave abuse of discretion." 56

The instant case falls squarely with Barangay Blue Ridge "A" of QC v. Court of Appeals. 57 In that case, the trial court granted the Motion to Dismiss on the ground of failure to state a cause of action.

After the Motion for Reconsideration was denied, petitioner filed a Petition for Certiorari with the CA. The appellate court denied the Petition on the ground that the proper remedy was appeal. Holding that an error of judgment should be reviewed through an ordinary appeal, this Court upheld the CA.

The Dismissal — a Final Order

An order of dismissal, whether correct or not, is a final order. 58 It is not interlocutory because the proceedings are terminated; it leaves nothing more to be done by the lower court. Therefore the remedy of the plaintiff is to appeal the order. 59

Petitioner avers that Section 5 of Rule 16 60 bars the filing of an appeal when the dismissal is based on lack of cause of action. It adds that Section 5 limits the remedy of appeal only to dismissals grounded on prior judgments or on the statute of limitations, or to claims that have been extinguished or are unenforceable. We find this interpretation absurd.

The provision is clear. Dismissals on the aforesaid grounds constitute res judicata. However, such dismissals are still subject to a timely appeal. For those based on other grounds, the complaint can be refiled. Section 5, therefore, confirms that an appeal is the remedy for the dismissal of an action.

Citing Sections 1(a) and 1(h), Rule 41, 61 petitioner further claims that it was prohibited

from filing an appeal. Section 1(a) of the said Rule prohibits the filing of an appeal from an order denying a motion for reconsideration, because the remedy is to appeal the main decision as petitioner could have done. In fact, under Section 9, Rule 37, the remedy against an order denying a motion for reconsideration is to appeal the judgment or final order. Section 1(h) does not apply, because the trial court's Order did not dismiss the action without prejudice. 62

Exception to the RuleNot Established by Petitioner

We are not unaware of instances when this Court has granted certiorari despite the availability of appeal. 63 Where the exigencies of the case are such that the ordinary methods of appeal may not prove adequate — either in point of promptness or completeness, so that a partial if not a total failure of justice could result — a writ of certiorari may still be issued. 64 Petitioner cites some of these exceptions to justify the remedy it has undertaken with the appellate court, 65 but these are not applicable to the present factual milieu.

Even assuming that the Order of the RTC was erroneous, its error did not constitute grave abuse of discretion. Petitioner asserts that the trial court should not have dismissed the Complaint or should have at least allowed the substitution of the assignee in petitioner's stead. 66 These alleged errors of judgment, however, do not constitute a despotic, capricious, or whimsical

exercise of power. On the contrary, petitioner availed of certiorari because the 15-day period within which to file an appeal had already lapsed. Basic is the rule that certiorari is not a substitute for the lapsed remedy of appeal. DASEac  

As previously stressed, appeal — not certiorari — was the correct remedy to elevate the RTC's Order granting the Motion to Dismiss. The appeal, which would have involved a pure question of law, should have been filed with the Supreme Court pursuant to Section 2(c) of Rule 41 and Section 2 of Rule 50, 67 Rules of Court.

WHEREFORE, this Petition is DENIED, and the challenged Decision and Resolution AFFIRMED.

Costs against petitioner.

SO ORDERED.