CASE 1 RULE 1 SECTION 4 IN WHAT CASES APPLICABLE

Republic of the Philippines

Supreme Court
Manila

EN BANC

GOVERNMENT SERVICE INSURANCE

SYSTEM (GSIS) and WINSTON F.
GARCIA, in his capacity as PRESIDENT
and GENERAL MANAGER
of the GSIS,
Petitioners,

G.R. No. 180291

Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,

- versus -

VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,

DINNAH VILLAVIZA, ELIZABETH

DUQUE,
ADRONICO A. ECHAVEZ,
RODEL RUBIO, ROWENA THERESE B.
GRACIA, PILAR LAYCO, and ANTONIO
JOSE LEGARDA,
Respondents.

PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ, and
MENDOZA, JJ.

Promulgated:
July 27, 2010

x -------------------------------------------------------------------------------------------------------x

DECISION

MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the August 31,
2007 Decision[1] of the Court of Appeals(CA), in CA-G.R. SP No. 98952, dismissing the petition for certiorari of Government Service
Insurance System (GSIS) assailing the Civil Service Commissions Resolution No. 062177.
THE FACTS:
Petitioner Winston Garcia (PGM Garcia), as President and General Manager of the GSIS, filed separate formal charges
against respondents Dinnah Villaviza, Elizabeth Duque, Adronico A. Echavez, Rodel Rubio, Rowena Therese B. Gracia, Pilar Layco,
and Antonio Jose Legarda for Grave Misconduct and/or Conduct Prejudicial to the Best Interest of the Service pursuant to the Rules of
Procedure in Administrative Investigation (RPAI) of GSIS Employees and Officials, III, D, (1, c, f) in relation to Section 52A (3), (20),
Rule IV, of the Uniform Rules on Administrative Cases in the Civil Service (URACCS), in accordance with Book V of the
Administrative Code of 1987, committed as follows:
That on 27 May 2005, respondent, wearing red shirt together with some employees, marched to or
appeared simultaneously at or just outside the office of the Investigation Unit in a mass demonstration/rally of
protest and support for Messrs. Mario Molina and Albert Velasco, the latter having surreptitiously entered the GSIS
premises;
xxxxxxxxx
That some of these employees badmouthed the security guards and the GSIS management and defiantly
raised clenched fists led by Atty. Velasco who was barred by Hearing Officer Marvin R. Gatpayat in an Order dated
24 May 2005 from appearing as counsel for Atty. Molina pursuant to Section 7 (b) (2) of R.A. 6713 otherwise
known as the Code of Conduct and Ethical Standards for Public Officials and Employees;
That respondent, together with other employees in utter contempt of CSC Resolution No. 021316, dated 11
October 2002, otherwise known as Omnibus Rules on Prohibited Concerted Mass Actions in the Public Sector
caused alarm and heightened some employees and disrupted the work at the Investigation Unit during office hours.
[2]

This episode was earlier reported to PGM Garcia, through an office memorandum dated May 31, 2005, by the Manager of the
GSIS Security Department (GSIS-SD), Dennis Nagtalon. On the same day, the Manager of the GSIS Investigation Unit (GSIS-IU),
Atty. Lutgardo Barbo, issued a memorandum to each of the seven (7) respondents requiring them to explain in writing and under oath
within three (3) days why they should not be administratively dealt with.[3]
Respondents Duque, Echavez, Rubio, Gracia, Layco, and Legarda, together with two others, submitted a letter-explanation to
Atty. Barbo dated June 6, 2005. Denying that there was a planned mass action, the respondents explained that their act of going to the
office of the GSIS-IU was a spontaneous reaction after learning that their former union president was there. Aside from some of them
wanting to show their support, they were interested in that hearing as it might also affect them. For her part, respondent Villaviza
submitted a separate letter explaining that she had a scheduled pre-hearing at the GSIS-IU that day and that she had informed her
immediate supervisor about it, attaching a copy of the order of pre-hearing. These letters were not under oath.[4]
PGM Garcia then filed the above-mentioned formal charges for Grave Misconduct and/or Conduct Prejudicial to the Best
Interest of the Service against each of the respondents, all dated June 4, 2005. Respondents were again directed to submit their written
answers under oath within three (3) days from receipt thereof.[5] None was filed.
On June 29, 2005, PGM Garcia issued separate but similarly worded decisions finding all seven (7) respondents guilty of the
charges and meting out the penalty of one (1) year suspension plus the accessory penalties appurtenant thereto.

On appeal, the Civil Service Commission (CSC) found the respondents guilty of the lesser offense of Violation of Reasonable
Office Rules and Regulations and reduced the penalty to reprimand. The CSC ruled that respondents were not denied their right to due
process but there was no substantial evidence to hold them guilty of Conduct Prejudicial to the Best Interest of the Service. Instead,
x x x. The actuation of the appellants in going to the IU, wearing red shirts, to witness a public hearing
cannot be considered as constitutive of such offense. Appellants (respondents herein) assembly at the said office to
express support to Velasco, their Union President, who pledged to defend them against any oppression by the GSIS
management, can be considered as an exercise of their freedom of expression, a constitutionally guaranteed right. [6] x
xx
PGM Garcia sought reconsideration but was denied. Thus, PGM Garcia went to the Court of Appeals via a Petition for
Review under Rule 43 of the Rules on Civil Procedure.[7] The CA upheld the CSC in this wise:
The Civil Service Commission is correct when it found that the act sought to be punished hardly falls within
the definition of a prohibited concerted activity or mass action. The petitioners failed to prove that the supposed
concerted activity of the respondents resulted in work stoppage and caused prejudice to the public service. Only
about twenty (20) out of more than a hundred employees at the main office, joined the activity sought to be
punished. These employees, now respondents in this case, were assigned at different offices of the petitioner
GSIS. Hence, despite the belated claim of the petitioners that the act complained of had created substantial
disturbance inside the petitioner GSIS premises during office hours, there is nothing in the record that could support
the claim that the operational capacity of petitioner GSIS was affected or reduced to substantial percentage when
respondents gathered at the Investigation Unit. Despite the hazy claim of the petitioners that the gathering was
intended to force the Investigation Unit and petitioner GSIS to be lenient in the handling of Atty. Molinas case and
allow Atty. Velasco to represent Atty. Molina in his administrative case before petitioner GSIS, there is likewise no
concrete and convincing evidence to prove that the gathering was made to demand or force concessions, economic or
otherwise from the GSIS management or from the government. In fact, in the separate formal charges filed against
the respondents, petitioners clearly alleged that respondents marched to or appeared simultaneously at or just outside
the office of the Investigation Unit in a mass demonstration/rally of protest and support for Mssrs. Mario Molina and
Albert Velasco, the latter surreptitiously entered the GSIS premises. Thus, petitioners are aware at the outset that the
only apparent intention of the respondents in going to the IU was to show support to Atty. Mario Molina and Albert
Velasco, their union officers. The belated assertion that the intention of the respondents in going to the IU was to
disrupt the operation and pressure the GSIS administration to be lenient with Atty. Mario Molina and Albert Velasco,
is only an afterthought.[8]
Not in conformity, PGM Garcia is now before us via this Petition for Review presenting the following:
STATEMENT OF THE ISSUES
I
WHETHER AN ADMINISTRATIVE TRIBUNAL MAY APPLY SUPPLETORILY THE PROVISIONS OF
THE RULES OF COURT ON THE EFFECT OF FAILURE TO DENY THE ALLEGATIONS IN THE
COMPLAINT AND FAILURE TO FILE ANSWER, WHERE THE RESPONDENTS IN THE
ADMINISTRATIVE PROCEEDINGS DID NOT FILE ANY RESPONSIVE PLEADING TO THE FORMAL
CHARGES AGAINST THEM.

II
WHETHER THE RULE THAT ADMINISTRATIVE DUE PROCESS CANNOT BE EQUATED WITH DUE
PROCESS IN JUDICIAL SENSE AUTHORIZES AN ADMINISTRATIVE TRIBUNAL TO CONSIDER IN
EVIDENCE AND GIVE FULL PROBATIVE VALUE TO UNNOTARIZED LETTERS THAT DID NOT
FORM PART OF THE CASE RECORD.
III
WHETHER A DECISION THAT MAKES CONCLUSIONS OF FACTS BASED ON EVIDENCE ON
RECORD BUT MAKES A CONCLUSION OF LAW BASED ON THE ALLEGATIONS OF A DOCUMENT
THAT NEVER FORMED PART OF THE CASE RECORDS IS VALID.

IV
WHETHER FURTHER PROOF OF SUSBTANTIAL REDUCTION OF THE OPERATIONAL CAPACITY
OF AN AGENCY, DUE TO UNRULY MASS GATHERING OF GOVERNMENT EMPLOYEES INSIDE
OFFICE PREMISES AND WITHIN OFFICE HOURS, IS REQUIRED TO HOLD THE SAID EMPLOYEES
LIABLE FOR CONDUCT PREJUDICIAL TO THE BEST INTEREST OF THE SERVICE PURSUANT TO
CSC RESOLUTION NO. 021316.
V
WHETHER AN UNRULY MASS GATHERING OF TWENTY EMPLOYEES, LASTING FOR MORE
THAN AN HOUR DURING OFFICE HOURS, INSIDE OFFICE PREMISES AND WITHIN A UNIT
TASKED TO HEAR AN ADMINISTRATIVE CASE, TO PROTEST THE PROHIBITION AGAINST THE
APPEARANCE OF THEIR LEADER AS COUNSEL IN THE SAID ADMINISTRATIVE CASE, FALLS
WITHIN THE PURVIEW OF THE CONSTITUTIONAL GUARANTEE TO FREEDOM OF EXPRESSION
AND PEACEFUL ASSEMBLY.
VI
WHETHER THE CONCERTED ABANDONMENT OF EMPLOYEES OF THEIR POSTS FOR MORE
THAN AN HOUR TO HOLD AN UNRULY PROTEST INSIDE OFFICE PREMISES ONLY CONSTITUTES
THE ADMINISTRATIVE OFFENSE OF VIOLATION OF REASONABLE OFFICE RULES AND
REGULATIONS.[9]
The Court finds no merit in the petition.
Petitioners primarily question the probative value accorded to respondents letters of explanation in response to the
memorandum of the GSIS-IU Manager. The respondents never filed their answers to the formal charges. The petitioners argue that
there being no answers, the allegations in the formal charges that they filed should have been deemed admitted pursuant to Section 11,
Rule 8 of the Rules of Court which provides:
SECTION 11. Allegations not specifically denied deemed admitted. Material averment in the complaint,
other than those as to the amount of liquidated damages, shall be deemed admitted when not specifically
denied. Allegations of usury in a complaint to recover usurious interest are deemed admitted if not denied specifically
and under oath.
According to the petitioners, this rule is applicable to the case at bench pursuant to Rule 1, Section 4 of the Rules of Court
which reads:
SECTION 4. In what cases not applicable. These Rules shall not apply to election cases, land registration,
cadastral, naturalization and insolvency proceedings, and other cases not herein provided for, except by analogy or in
a suppletory character and whenever practicable and convenient. (underscoring supplied)
The Court does not subscribe to the argument of the petitioners. Petitioners own rules, Rule XI, Section 4 of the GSIS
Amended Policy and Procedural Guidelines No. 178-04, specifically provides:
If the respondent fails to file his Answer within five (5) working days from receipt of the Formal Charge for
the supporting evidence, when requested, he shall be considered to have waived his right to file an answer and the
PGM or the Board of Trustees, in proper cases, shall render judgment, as may be warranted by the facts and evidence
submitted by the prosecution.
A perusal of said section readily discloses that the failure of a respondent to file an answer merely translates to a waiver of his
right to file an answer. There is nothing in the rule that says that the charges are deemed admitted. It has not done away with the
burden of the complainant to prove the charges with clear and convincing evidence.
It is true that Section 4 of the Rules of Court provides that the rules can be applied in a suppletory character. Suppletory is
defined as supplying deficiencies.[10] It means that the provisions in the Rules of Court will be made to apply only where there is an
insufficiency in the applicable rule. There is, however, no such deficiency as the rules of the GSIS are explicit in case of failure to file
the required answer. What is clearly stated there is that GSIS may render judgment as may be warranted by the facts and evidence
submitted by the prosecution.

Even granting that Rule 8, Section 11 of the Rules of Court finds application in this case, petitioners must remember that
there remain averments that are not deemed admitted by the failure to deny the same. Among them are immaterial allegations and
incorrect conclusions drawn from facts set out in the complaint. [11] Thus, even if respondents failed to file their answer, it does not
mean that all averments found in the complaint will be considered as true and correct in their entirety, and that the forthcoming
decision will be rendered in favor of the petitioners. We must not forget that even in administrative proceedings, it is still the
complainant, or in this case the petitioners, who have the burden of proving, with substantial evidence, the allegations in the complaint
or in the formal charges.[12]
A perusal of the decisions of the CA and of the CSC will reveal that the case was resolved against petitioners based, not on
the absence of respondents evidence, but on the weakness of that of the petitioners. Thus, the CA wrote:
Petitioners correctly submitted the administrative cases for resolution without the respondents respective
answer to the separate formal charges in accordance with Section 4, Rule XI of the RPAI. Being in full control of
the administrative proceeding and having effectively prevented respondents from further submitting their responsive
answer and evidence for the defense, petitioners were in the most advantageous position to prove the merit of their
allegations in the formal charges. When petitioner Winston Garcia issued those similarly worded decisions in the
administrative cases against the respondents, it is presumed that all evidence in their favor were duly submitted and
justly considered independent of the weakness of respondents evidence in view of the principle that the burden of
proof belongs to the one who alleges and not the one who denies.[13]
On the merits, what needs to be resolved in the case at bench is the question of whether or not there was a violation of
Section 5 of CSC Resolution No. 02-1316. Stated differently, whether or not respondents actions on May 27, 2005 amounted to a
prohibited concerted activity or mass action. Pertinently, the said provision states:
Section 5. As used in this Omnibus Rules, the phrase prohibited concerted activity or mass action shall be
understood to refer to any collective activity undertaken by government employees, by themselves or through their
employees organizations, with intent of effecting work stoppage or service disruption in order to realize their
demands of force concession, economic or otherwise, from their respective agencies or the government. It shall
include mass leaves, walkouts, pickets and acts of similar nature. (underscoring supplied)
In this case, CSC found that the acts of respondents in going to the GSIS-IU office wearing red shirts to witness a public
hearing do not amount to a concerted activity or mass action proscribed above. CSC even added that their actuations can be deemed an
exercise of their constitutional right to freedom of expression. The CA found no cogent reason to deviate therefrom.
As defined in Section 5 of CSC Resolution No. 02-1316 which serves to regulate the political rights of those in the
government service, the concerted activity or mass action proscribed must be coupled with the intent of effecting work stoppage or
service disruption in order to realize their demands of force concession. Wearing similarly colored shirts, attending a public hearing at
the GSIS-IU office, bringing with them recording gadgets, clenching their fists, some even badmouthing the guards and PGM Garcia,
are acts not constitutive of an (i) intent to effect work stoppage or service disruption and (ii) for the purpose of realizing their demands
of force concession.
Precisely, the limitations or qualifications found in Section 5 of CSC Resolution No. 02-1316 are there to temper and focus
the application of such prohibition. Not all collective activity or mass undertaking of government employees is prohibited. Otherwise,
we would be totally depriving our brothers and sisters in the government service of their constitutional right to freedom of expression.
Government workers, whatever their ranks, have as much right as any person in the land to voice out their protests against
what they believe to be a violation of their rights and interests. Civil Service does not deprive them of their freedom of expression. It
would be unfair to hold that by joining the government service, the members thereof have renounced or waived this basic liberty. This
freedom can be reasonably regulated only but can never be taken away.
A review of PGM Garcias formal charges against the respondents reveals that he himself was not even certain whether the
respondents and the rest of the twenty or so GSIS employees who were at the GSIS-IU office that fateful day marched there or just
simply appeared there simultaneously.[14] Thus, the petitioners were not even sure if the spontaneous act of each of the twenty or so
GSIS employees on May 27, 2005 was a concerted one. The report of Manager Nagtalon of the GSIS-SD which was the basis for
PGM Garcias formal charges reflected such uncertainty. Thus,
Of these red shirt protesters, only Mr. Molina has official business at the Investigation Unit during this time.
The rest abandoned their post and duties for the duration of this incident which lasted until 10:55 A.M. It was also
observed that the protesters, some of whom raised their clenched left fists, carefully planned this illegal action as
evident in their behavior of arrogance, defiance and provocation, the presence of various recording gadgets such as
VCRs, voice recorders and digital cameras, the bad mouthing of the security guards and the PGM, the uniformity in

their attire and the collusion regarding the anomalous entry of Mr. Albert Velasco to the premises as reported earlier.
[15]

The said report of Nagtalon contained only bare facts. It did not show respondents unified intent to effect disruption or
stoppage in their work. It also failed to show that their purpose was to demand a force concession.
In the recent case of GSIS v. Kapisanan ng mga Manggagawa sa GSIS,[16] the Court upheld the position of petitioner GSIS
because its employees, numbering between 300 and 800 each day, staged a walkout and participated in a mass protest or
demonstration outside the GSIS for four straight days. We cannot say the same for the 20 or so employees in this case. To equate their
wearing of red shirts and going to the GSIS-IU office for just over an hour with that four-day mass action in Kapisanan ng mga
Manggagawa sa GSIS case and to punish them in the same manner would most certainly be unfair and unjust.
Recent analogous decisions in the United States, while recognizing the governments right as an employer to lay down certain
standards of conduct, tend to lean towards a broad definition of public concern speech which is protected by their First Amendment.
One such case is that of Scott v. Meters.[17] In said case, the New York Transit Authority (NYTA), responsible for operation of New
York Citys mass transit service, issued a rule prohibiting employees from wearing badges or buttons on their uniforms. A number of
union members wore union buttons promoting their opposition to a collective bargaining agreement. Consequently, the NYTA tried to
enforce its rule and threatened to subject these union members to discipline. The court, though recognizing the governments right to
impose reasonable restrictions, held that the NYTAs rule was unconstitutionally overboard.
In another case, Communication Workers of America v. Ector County Hospital District,[18] it was held that,
A county hospital employees wearing of a Union Yes lapel pin during a union organization drive constituted
speech on a matter of public concern, and the countys proffered interest in enforcing the anti-adornment provision of
its dress code was outweighed by the employees interest in exercising his First Amendment speech and associational
rights by wearing a pro-union lapel button.[19]
Thus, respondents freedom of speech and of expression remains intact, and CSCs Resolution No. 02-1316 defining what a
prohibited concerted activity or mass action has only tempered or regulated these rights. Measured against that definition, respondents
actuations did not amount to a prohibited concerted activity or mass action. The CSC and the CA were both correct in arriving at said
conclusion.
WHEREFORE, the assailed August 31, 2007 Decision of the Court of Appeals as well as its October 16, 2007 Resolution in
CA G.R. SP No. 98952 are herebyAFFIRMED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
WE CONCUR:

RENATO C. CORONA
Chief Justice

ANTONIO T. CARPIO CONCHITA CARPIO MORALES

Associate Justice Associate Justice

PRESBITERO J. VELASCO, JR. ANTONIO EDUARDO B. NACHURA

Associate Justice Associate Justice
TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION
Associate Justice Associate Justice
DIOSDADO M. PERALTA LUCAS P. BERSAMIN
Associate Justice Associate Justice
MARIANO C. DEL CASTILLO ROBERTO A. ABAD
Associate Justice Associate Justice
MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ
Associate Justice Associate Justice

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached
in consultation before the case was assigned to the writer of the opinion of the Court.

RENATO C. CORONA
Chief Justice
CASE 2 RULE 1- SECTION 6 CONSTRUCTION.
FIRST DIVISION
MEDISERV, INC.,
Petitioner,

G.R. No. 161368

Present:
- versus -

PUNO, C.J., Chairperson,

CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

COURT
OF
APPEALS
(Special
Former Promulgated:
13th Division)
and
LANDHEIGHTS
DEVELOPMENT CORPORATION,
April 5, 2010
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:

Before the Court is a petition for certiorari to nullify the September 16, 2003 Resolution[1] of the Court of Appeals reinstating
the Petition for Review of private respondent Landheights Development Corporation and the November 7, 2003 Resolution [2] denying
the motion for reconsideration thereof.
The facts are as follows:
On September 20, 1994, petitioner Mediserv, Inc. executed a real estate mortgage in favor of China Banking Corporation as
security for a loan. The mortgage was constituted on a 500-square meter lot with improvements located at 926 A.H. Lacson Street,
Sampaloc, Manila and covered by Transfer Certificate of Title (TCT) No. 205824 of the Registry of Deeds for the City
of Manila. Mediserv defaulted on its obligation with Chinabank and the real estate mortgage was foreclosed. At the public auction
sale, private respondent Landheights Development Corporation emerged as the highest bidder with a bid price of P17,617,960.00 for
the subject property.
Sometime in April 1998, Landheights filed with the Regional Trial Court (RTC) of Manila an Application for Possession of
Real Estate Property Purchased at an Auction Sale under Act No. 3135.[3] On September 21, 1999, the title of the property was
consolidated in favor of Landheights and the Register of Deeds for the City of Manila issued TCT No. 242202 in its favor. On March
13, 2000, Landheights, seeking to recover possession of the subject property, filed a verified complaint for ejectment against Mediserv
before the Metropolitan Trial Court of Manila (MeTC). The case was docketed as Civil Case No. 166637.
On October 12, 2000, the MeTC of Manila, Branch 15, rendered a decision [4] in favor of Landheights, the decretal portion of
which states:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby entered in favor of plaintiff and against
the defendant ordering the latter and all persons claiming rights under said entity to VACATE the premises situated
at 926 A.H. Lacson Street, Sampaloc, Manila; and to PAY plaintiff the sum of P25,000.00 as attorneys fees.
Costs against defendant.
SO ORDERED.
Aggrieved, Mediserv appealed[5] the decision to the RTC of Manila docketed as Civil Case No. 00-99395. On June 14, 2002 the RTC
rendered a Decision,[6] the fallo of which reads:
WHEREFORE, the Judgment of the Honorable Metropolitan Trial Court, Branch 15, Manila, dated October 26,
2000, is hereby reversed and set aside; and the Complaint for Ejectment is hereby ordered to be dismissed.
Further, on the Counterclaims, the plaintiff-appellee is hereby directed to pay the defendant-appellant, the sum of
Php 50,000.00 for actual damages and another sum of Php 50,000.00 for and as attorneys fees.
With costs against plaintiff-appellee.
SO ORDERED.
On September 16, 2002, Landheights motion for reconsideration[7] was likewise denied. [8]
Accordingly, Landheights filed a Petition for Review[9] with the Court of Appeals, which however dismissed the petition in a
Resolution[10] dated December 12, 2002, to wit:
It appearing that the written authority of Dickson Tan to sign the verification and certification on non-forum
shopping, as well as the copies of the complaint and answer, are not attached to the petition, the petition is
DISMISSED.
SO ORDERED.
Landheights seasonably filed a motion for reconsideration[11] on December 26, 2002 and subsequently submitted a Secretarys
Certificate[12] dated January 13, 2003 executed by its Corporate Secretary, Ms. Polly S. Tiu, stating that the Board of Directors affirms
the authority of Mr. Dickson Tan to file the Petition for Review.

On March 19, 2003, the Court of Appeals issued a Resolution [13] granting Landheights a new period of ten (10) days within which to
correct and rectify the deficiencies in the petition. On April 1, 2003, Mediserv filed a motion for reconsideration [14] praying that the
March 19, 2003 Resolution be set aside and the December 12, 2002 Resolution, which dismissed the petition, be reinstated. On even
date, Landheights filed its Manifestation of Compliance. [15]
On September 16, 2003, the appellate court issued the first assailed resolution reinstating the petition for review, the pertinent portion
of which reads as follows:
With the subsequent compliance of the petitioner with the requirement of the rules and in the interest of substantial
justice, We now consider the petition reinstated.
Respondent is hereby directed to file its comment on the petition within ten (10) days from notice and petitioner may
file its reply within five (5) days from receipt of the comment.
SO ORDERED.
Mediserv filed a motion for reconsideration [16] on October 3, 2003, while Landheights filed its comment [17] thereto on October 14,
2003.
On November 7, 2003, the Court of Appeals issued the second assailed resolution, the significant portion of which states:
However, again, in the interest of justice, we shall consider the belatedly filed Secretarys Certificate as a subsequent
compliance of our March 19, 2003 Resolution.
WHEREFORE, this Courts Resolution dated September 16, 2003 is hereby REITERATED. The petition is
hereby REINSTATED and the respondent is directed to file its Comment on the petition within ten (10) days from
notice.
SO ORDERED.
Its motion for reconsideration having been denied by the appellate court, petitioner is now before us via the present recourse.
Petitioner faults the appellate court as follows:
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION AND ACTED WITHOUT AND/ OR IN
EXCESS OF JURISDICTION IN REINSTATING THE PETITION DESPITE THE CLEAR MANDATE OF THE
RULES AS WELL AS THE JURISPRUDENCE AS LAID DOWN BY THIS HONORABLE COURT CALLING
FOR THE DISMISSAL OF THE SAID PETITION.[18]
Petitioner argues that from the beginning, the Court of Appeals found the petition filed before it to be defective for failure to comply
with the rules. It points out that there is no showing that the respondent corporation, through its board of directors, had authorized Mr.
Dickson Tan to file the petition for review in its behalf and to sign the verification and certification against forum-shopping. However,
instead of upholding the dismissal of the petition, the Court of Appeals allowed private respondent to rectify its deficiency, which is
contrary to jurisprudence.
Petitioner also cites Section 5, Rule 7 of the 1997 Rules of Civil Procedure, as amended, which provides that failure to
comply with the requirements on certification against forum shopping shall not be curable by mere amendment of the complaint or
other initiatory pleading but shall be cause for dismissal of the case. Petitioner thus asserts that the appellate court acted with grave
abuse of discretion amounting to lack or in excess of jurisdiction in reinstating the petition for review filed by respondent corporation.
We are not persuaded.
Under Rule 46, Section 3, paragraph 3 of the 1997 Rules of Civil Procedure, as amended, petitions for certiorari must be
verified and accompanied by a sworn certification of non-forum shopping. [19] A pleading is verified by an affidavit that the affiant has
read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. [20] The
party need not sign the verification. A partys representative, lawyer or any person who personally knows the truth of the facts alleged
in the pleading may sign the verification.[21]
On the other hand, a certification of non-forum shopping is a certification under oath by the plaintiff or principal party in
the complaint or other initiatory pleading asserting a claim for relief or in a sworn certification annexed thereto and simultaneously
filed therewith, (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court,

tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or
similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his
aforesaid complaint or initiatory pleading has been filed.[22]
The requirement that a petitioner or principal party should sign the certificate of non-forum shopping applies even to
corporations, considering that the mandatory directives of the Rules of Court make no distinction between natural and juridical
persons.[23] A corporation, however, exercises its powers through its board of directors and/or its duly authorized officers and agents.
Physical acts, like the signing of documents, can be performed only by natural persons duly authorized for the purpose by corporate
by-laws or by a specific act of the board of directors.[24]
In the case of Digital Microwave Corp. v. Court of Appeals,[25] the certification of non-forum shopping was signed by the
petitioner corporations counsel; hence, the appellate court dismissed the petition for failure to comply with Revised Supreme Court
Circular No. 28-91, as amended.[26] Petitioner corporations motion for reconsideration was denied by the appellate court absent any
compelling reason for petitioners failure to comply, at the first instance, with [the circular] .... On appeal, this Court denied the petition
in this wise:
In this case, petitioner has not adequately explained its failure to have the certification against forum
shopping signed by one of its officers. Neither has it shown any compelling reasonfor us to disregard strict
compliance with the rules.[27] (Emphasis supplied.)
In Shipside Incorporated v. Court of Appeals,[28] petitioner Shipside Incorporated filed a petition for certiorari and prohibition
with the Court of Appeals, which was, however, dismissed for failure to attach proof that the one (1) who signed the verification and
certification of non-forum shopping, its Manager Lorenzo Balbin, Jr., was authorized to institute the petition in petitioners
behalf. Shipside Incorporated filed a motion for reconsideration to which it attached a certificate issued by its board secretary stating
that ten (10) days before the filing of the petition, its board of directors authorized Balbin, Jr. to file it. The Court of Appeals denied
the motion for reconsideration, so the petitioner sought relief from this Court. In granting the petition, this Court explained:
It is undisputed that on October 21, 1999, the time petitioners Resident Manager Balbin filed the petition, there
was no proof attached thereto that Balbin was authorized to sign the verification and non-forum shopping
certification therein, as a consequence of which the petition was dismissed by the Court of Appeals.
However, subsequent to such dismissal, petitioner filed a motion for reconsideration, attaching to said motion a
certificate issued by its board secretary stating that on October 11, 1999, or ten days prior to the filing of the petition,
Balbin had been authorized by petitioners board of directors to file said petition.
The Court has consistently held that the requirement regarding verification of a pleading is formal, not
jurisdictional (Uy v. LandBank, G.R. No. 136100, July 24, 2000, 336 SCRA 419). Such requirement is simply a
condition affecting the form of the pleading, non-compliance with which does not necessarily render the pleading
fatally defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good
faith. The court may order the correction of the pleading if verification is lacking or act on the pleading although it is
not verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in
order that the ends of justice may thereby be served.
On the other hand, the lack of certification against forum shopping is generally not curable by the submission
thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the
failure of the petitioner to submit the required documents that should accompany the petition, including the
certification against forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to
certifications against forum shopping signed by a person on behalf of a corporation which are unaccompanied by
proof that said signatory is authorized to file a petition on behalf of the corporation.
In certain exceptional circumstances, however, the Court has allowed the belated filing of the
certification. In Loyola v. Court of Appeals, et al. (245 SCRA 477 [1995]), the Court considered the filing of the
certification one day after the filing of an election protest as substantial compliance with the requirement.
In Roadway Express, Inc. v. Court of Appeals, et al. (264 SCRA 696 [1996]), the Court allowed the filing of the
certification 14 days before the dismissal of the petition. In Uy v. LandBank, supra, the Court had dismissed Uys
petition for lack of verification and certification against non-forum shopping. However, it subsequently reinstated
the petition after Uy submitted a motion to admit certification and non-forum shopping certification. In all these
cases, there were special circumstances or compelling reasons that justified the relaxation of the rule requiring
verification and certification on non-forum shopping.
In the instant case, the merits of petitioners case should be considered special circumstances or compelling
reasons that justify tempering the requirement in regard to the certificate of non-forum shopping.

Moreover, in Loyola, Roadway, and Uy, the Court excused non-compliance with the requirement as to the certificate
of non-forum shopping. With more reason should we allow the instant petition since petitioner herein did submit a
certification on non-forum shopping, failing only to show proof that the signatory was authorized to do so. That
petitioner subsequently submitted a secretarys certificate attesting that Balbin was authorized to file an action on
behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of non-forum shopping is mandatory,
nonetheless the requirements must not be interpreted too literally and thus defeat the objective of preventing the
undesirable practice of forum-shopping (Bernardo v. NLRC, 255 SCRA 108 [1996]). Lastly, technical rules of
procedure should be used to promote, not frustrate justice. While the swift unclogging of court dockets is a laudable
objective, the granting of substantial justice is an even more urgent ideal. [29] (Italics in the original; emphasis and
underscoring supplied.)
Unquestionably, there is sufficient jurisprudential basis to hold that Landheights has substantially complied with the
verification and certification requirements. We have held in a catena of cases[30] with similar factual circumstances that there is
substantial compliance with the Rules of Court when there is a belated submission or filing of the secretarys certificate through a
motion for reconsideration of the Court of Appeals decision dismissing the petition for certiorari.
In Ateneo de Naga University v. Manalo,[31] this Court acknowledged that it has relaxed, under justifiable circumstances, the
rule requiring the submission of these certifications and has applied the rule of substantial compliance under justifiable circumstances
with respect to the contents of the certification. It also conceded that if this Court has allowed the belated filing of the certification
against forum shopping for compelling reasons in previous rulings, with more reason should it sanction the timely submission of such
certification though the proof of the signatorys authority was submitted thereafter.
The Court is aware of the necessity for a certification of non-forum shopping in filing petitions for certiorari as this is
required under Section 1, Rule 65, in relation to Section 3, Rule 46 of the Rules of Civil Procedure, as amended. When the petitioner
is a corporation, the certification should obviously be executed by a natural person to whom the power to execute such certification
has been validly conferred by the corporate board of directors and/or duly authorized officers and agents. Generally, the petition is
subject to dismissal if a certification was submitted unaccompanied by proof of the signatorys authority.[32]
However, we must make a distinction between non-compliance with the requirements for certificate of non-forum shopping
and verification and substantial compliance with the requirements as provided in the Rules of Court. The Court has allowed the
belated filing of the certification on the justification that such act constitutes substantial compliance. In Roadway Express, Inc. v. CA,
[33]
the Court allowed the filing of the certification fourteen (14) days before the dismissal of the petition. In Uy v. Land Bank of the
Philippines,[34] the Court reinstated a petition on the ground of substantial compliance even though the verification and certification
were submitted only after the petition had already been originally dismissed. In Havtor Management Phils. Inc. v. NLRC,[35] we
acknowledged substantial compliance when the lacking secretarys certificate was submitted by the petitioners as an attachment to the
motion for reconsideration seeking reversal of the original decision dismissing the petition for its earlier failure to submit such
requirement.
In the present case, Landheights rectified its failure to submit proof of Mr. Dickson Tans authority to sign the
verification/certification on non-forum shopping on its behalf when the required document was subsequently submitted to the Court of
Appeals. The admission of these documents, and consequently, the reinstatement of the petition itself, is in line with the cases we
have cited. In such circumstances, we deem it more in accord with substantive justice that the case be decided on the merits.
It is settled that liberal construction of the rules may be invoked in situations where there may be some excusable formal
deficiency or error in a pleading, provided that the same does not subvert the essence of the proceeding and connotes at least a
reasonable attempt at compliance with the rules. After all, rules of procedure are not to be applied in a very rigid, technical sense; they
are used only to help secure substantial justice.[36]
Finally, we note that the instant petition was filed under Rule 65 of the 1997 Rules of Civil Procedure, as amended, which
requires the existence of grave abuse of discretion. Grave abuse of discretion exists where an act of a court or tribunal is performed
with a capricious or whimsical exercise of judgment equivalent to lack of jurisdiction. The abuse of discretion must be so patent and
gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in
contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion or personal hostility.
[37]
No such grave abuse of discretion exists in this case to warrant issuance of the extraordinary writ of certiorari.
WHEREFORE, the petition is DISMISSED. The September 16, 2003 and November 7, 2003 Resolutions of the Court of Appeals
are AFFIRMED.

Let the records of this case be REMANDED to the Court of Appeals which is hereby DIRECTED to take appropriate action thereon
in light of the foregoing discussion with DISPATCH.
With costs against the petitioner.
SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson

CONCHITA CARPIO MORALES

Associate Justice

TERESITAJ. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN
Associate Justice

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

CASE 3 SECTION 6 CONSTRUCTION

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 188360

January 21, 2010

SPS. HEBER & CHARLITA EDILLO, Petitioners,

vs.
SPS. NORBERTO & DESIDERIA DULPINA, Respondents.
DECISION
BRION, J.:
We resolve in this Decision the Petition for Review on Certiorari1 filed by defendants-petitioners Spouses Heber and Charlita Edillo
(defendants-petitioners) who seek to reverse and set aside the Resolutions dated January 28, 2009 2 and June 11, 20093 of the Special
Former Special Division of Five of the Court of Appeals (CA) in CA-G.R. SP No. 02436-MIN. The first assailed CA Resolution
dismissed outright the defendants-petitioners Petition for Review for failure to state the factual background of the case; the second
assailed CA Resolution denied the defendants-petitioners Motion for Reconsideration.
FACTUAL BACKGROUND
The facts of the case, gathered from the parties pleadings and annexes, are briefly summarized below.
On February 21, 2006, plaintiffs-respondents Spouses Norberto and Desideria Dulpina (plaintiffs-respondents) filed a Complaint for
Forcible Entry against the defendants-petitioners with the Municipal Circuit Trial Court of Del Carmen-San Isidro-San Benito,
Surigao del Norte (MCTC).4
The plaintiffs-respondents alleged that they purchased from Wencelito Camingue a 235-square meter residential lot and house located
in Poblacion, San Isidro, Surigao del Norte, through a Deed of Sale5 dated May 14, 1990. On August 8, 2005, defendant-petitioner
Heber Edillo, without their consent and against their express prohibition, suddenly fenced off and occupied a 50-square meter portion
of the western part of the disputed property while uttering threats against plaintiffs-respondents. On January 26, 2006, they sent the
defendants-petitioners a notice to vacate the disputed property, but the defendants-petitioners refused to comply.6
In their Answer dated March 1, 2006, the defendants-petitioners countered that the Complaint states no cause of action because the
plaintiffs-respondents failed to allege that they were in prior physical possession of the disputed property.7 They also alleged that they
acquired the disputed property through three (3) separate Deeds of Absolute Sale8 from Apolinar Saragoza,9 Felomino Forcadilla,10 and
Wenceslao Caunzad.11
THE MCTC RULING
On May 23, 2007, the MCTC rendered judgment dismissing the Complaint. It ordered the plaintiffs-respondents to pay the
defendants-petitioners P10,000.00 as actual damages and another P10,000.00 as attorneys fees.12 The plaintiffs-respondents counsel
received a copy of the MCTC Judgment on May 31, 2007.13
On June 5, 2007, the plaintiffs-respondents filed a Motion for Reconsideration14 which the MCTC denied in its Resolution of June 8,
2007.15
On July 30, 2007, the plaintiffs-respondents filed a Notice of Appeal with the MCTC, which the latter granted.
On August 15, 2007, the plaintiffs-respondents filed their Appeal Memorandum with the Regional Trial Court, Branch 31, Dapa,
Surigao del Norte (RTC).16
THE RTC RULING
The RTC decided the appeal on November 7, 2007. It set aside the MCTC judgment and ordered the defendants-petitioners to vacate
the subject property and to restore the plaintiffs-respondents to their possession. It likewise ordered the payment of P10,000.00 as
attorneys fees and the cost of suit.17
After the RTC denied18 their Motion for Reconsideration,19 the defendants-petitioners elevated the case to the CA through a Petition
for Review under Rule 42 of the Rules of Court.20 They argued that the plaintiffs-respondents appeal with the RTC was filed out of
time since the Revised Rules of Summary Procedure (RRSP) prohibits the filing of a motion for reconsideration.

THE CA RULING
The CA dismissed the Petition in its Resolution of January 28, 200921 on the ground that it does not contain a statement of the factual
background of the case, in violation of Sections 2 and 3 of Rule 42 of the Rules of Court. A special division of five (5) justices, with
Associate Justice Ruben C. Ayson dissenting,22 rendered the resolution.
The defendants-petitioners moved to reconsider the dismissal, to amend the petition, and to admit their First Amended Petition. 23 The
CA denied the motions in its Resolution of June 11, 2009, noting that the amended petition did not correct the infirmity of the original
petition.24
Faced with this development, the defendants-petitioners filed the present Petition for Review on Certiorari under Rule 45 of the Rules
of Court.
THE PETITION
The defendants-petitioners argue that the CAs outright dismissal of the petition was unwarranted since the Petition for Review and the
Amended Petition (filed with the Motion for Reconsideration of the Dismissal of the Original Petition) sufficiently recited the factual
background of the case. They submit that the annexes to the original and amended petitions, consisting of the Complaint, the Answer,
the other pleadings, and the MCTC and RTC Decisions, also contain this factual background. They point out that a relaxation of
technical rules is justified by the merits of the case the RTC had no jurisdiction to entertain the plaintiffs-respondents appeal
because the MCTC Decision had become final and executory; the Motion for Reconsideration the plaintiffs-respondents filed is a
prohibited pleading in summary proceedings and did not stop the running of the period for the decisions finality.
For their part, the plaintiffs-respondents submit that the requirements set forth in Section 2 of Rule 42 of the Revised Rules of Court
are mandatory and the defendants-petitioners have no discretion but to comply, citing Galang v. Court of Appeals 25 and Tan v. Court of
Appeals.26
OUR RULING
We find for the defendants-petitioners.
Procedure on Appeal; Liberal Construction of Rules
An appeal to the CA from an RTC Decision rendered in the exercise of its appellate jurisdiction is via a Petition for Review under
Rule 42 of the Revised Rules of Court. Section 2 of Rule 42 prescribes the following requirements:
SEC. 2. Form and contents. The petition shall be filed in seven (7) legible copies, with the original copy intended for the court
being indicated as such by the petitioner, and shall (a) state the full names of the parties to the case, without impleading the lower
courts or judges thereof either as petitioners or respondents; (b) indicate the specific material dates showing that it was filed on time;
(c) set forth concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law, or both, allegedly
committed by the Regional Trial Court, and the reasons or arguments relied upon for the allowance of the appeal; (d) be accompanied
by clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk
of court of the Regional Trial Court, the requisite number of plain copies thereof and of the pleadings and other material portions of
the record as would support the allegations of the petition.
The petitioner shall also submit together with the petition a certification under oath that he has not theretofore commenced any other
action involving the same issues in the Supreme Court, the Court of Appeals or different divisions thereof, or any other tribunal or
agency; if there is such other action or proceeding, he must state the status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any
other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within five (5)
days therefrom. (Emphasis supplied.)
Non-compliance with these requirements is sufficient ground for the dismissal of the Petition, pursuant to Section 3 of the same Rule,
which reads:
SEC. 3. Effect of failure to comply with requirements. The failure of the petitioner to comply with any of the foregoing
requirements regarding the payment of the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the
contents of and the documents which should accompany the petition shall be sufficient ground for the dismissal thereof.

In not a few cases, we have ruled that the right to appeal is neither a natural right nor a part of due process; it is a mere statutory
privilege that may be exercised only in the manner and strictly in accordance with the provisions of law allowing the appeal. 27 The
party who seeks to appeal must comply with the requirements of the law and the rules; failure to comply leads to the dismissal and the
loss of the right to appeal.28
But while we have so ruled, we recognize nonetheless that the right to appeal is an essential part of our system of judicial processes,
and courts should proceed with caution in order not to deprive a party of the right to appeal. We invariably made this recognition due
to our overriding concern that every party-litigant be given the amplest opportunity to ventilate and secure the resolution of his cause,
free from the constraints of technicalities.29 This line of rulings is based, no less, on the Rules of Court which itself calls for a liberal
construction of its provisions, with the objective of securing for the parties a just, speedy and inexpensive disposition of every action
and proceeding.30 In this line of rulings, we have repeatedly stressed that litigation is not merely a game of technicalities. The law and
jurisprudence grant to courts in the exercise of their discretion along the lines laid down by this Court the prerogative to relax
compliance with procedural rules of even the most mandatory character, mindful of the duty to reconcile both the need to put an end to
litigation speedily and the parties right to an opportunity to be heard. 311avvphi1
We are aware of the plaintiffs-respondents cited cases of Galang v. Court of Appeals32 and Tan v. Court of Appeals,33 but these rulings
are not fully applicable to the present case as they are not squarely in point.
Galang involved the dismissal of a petition with the CA for nonpayment of costs within three (3) days from notice of the order. It
involved a direct failure to comply with a CA directive a matter vastly different from, and greater than, the question of sufficiency
posed in this case. Tan, on the other hand, involved a motion for reconsideration that was considered a mere scrap of paper for lack of
a notice of hearing. This is a matter that, at its core, is a due process concern the failure to afford the opposing party the opportunity
to respond to the motion in a duly scheduled hearing.
A commonality and the weightier reason (although not so given this characterization) behind our rulings in these cited cases is the lack
of merit of the respective petitioners underlying cases. In both cases, we took into account the relative merits of the parties cases and
found that a liberal interpretation, applied to the interlocutory issues before us, would be for naught because the petitioners underlying
cases clearly lacked merit. As we ruled then, so do we rule now. We assess, albeit preliminarily, if the appeal is meritorious on its face
and relax the applicable rule of procedure only after a prima facie finding of merit.34
That there was substantial compliance with the Rules because the background facts can be found within the four corners of the petition
and its incorporated annexes, is not a novel ruling for this Court. In the case of Deloso v. Marapao 35 (involving the same deficiency for
lack of a specific and separate statement of facts outlining the factual background relied upon), we said:
An examination of the petition filed with the Court of Appeals reveals that while it does not contain a separate section on statement of
facts, the facts of the case are, in fact, integrated in the petition particularly in the discussion/argument portion. Moreover, the decision
of the DARAB which contains the facts of the case was attached to the petition and was even quoted by the appellate court. The
petition also sufficiently discusses the errors committed by the DARAB in its assailed decision.
There was, therefore, substantial compliance with Sec. 6, Rule 43 of the Rules of Court. It is settled that liberal construction of the
Rules may be invoked in situations where there may be some excusable formal deficiency or error in a pleading, provided that the
same does not subvert the essence of the proceeding and connotes at least a reasonable attempt at compliance with the Rules. After all,
rules of procedure are not to be applied in a very rigid, technical sense; they are used only to help secure substantial justice. 36
Given this precedent, it only remains for us to determine if we can apply a liberal construction of the Rules because a meaningful
litigation of the case can ensue given the Petitions prima facie merit.
The defendants-petitioners
meritorious case; a motion for
reconsideration is a prohibited
pleading in summary procedure.
Our examination of the defendants-petitioners petition preliminarily tells us that it is not without merit, which merit would remain
unventilated unless we relax our application of the technical requirements applicable to their appeal. The question, too, that the
defendants-petitioners pose is not a minor one as it involves a very basic question of law whether the RTC has jurisdiction to
entertain an appeal from a final and executory MCTC decision. According to the defendants-petitioners, the plaintiffs-respondents
filing of a motion for reconsideration of the MCTC judgment did not stop the running of the period for appeal since a motion for
reconsideration is a prohibited pleading under the RRSP.
We agree with the defendants-petitioners.

Jurisdiction over forcible entry and unlawful detainer cases belongs to the Metropolitan Trial Courts, the Municipal Trial Courts in
Cities, the Municipal Trial Courts, and the Municipal Circuit Trial Courts.37 The RRSP applies to prevent undue delays in the
disposition of cases; to achieve this end, the filing of certain pleadings a motion for reconsideration, among others is prohibited. 38
Specifically, Section 19(c) of the Rules of Summary Procedure and Section 13(c) of Rule 70 of the Rules of Court consider a motion
for reconsideration of a judgment a prohibited pleading.39 Thus, when the plaintiffs-respondents filed on June 5, 2007 a Motion for
Reconsideration of the MCTC Judgment, the motion did not stop the running of the period for appeal. With the continuous running of
this period, the May 23, 2007 MCTC judgment (which the plaintiffs-respondents received through counsel on May 31, 2007) had long
lapsed to finality when the plaintiffs-respondents filed their Notice of Appeal on July 30, 2007.
The Doctrine of Immutability
A judgment that has become final and executory is immutable and unalterable;40 the judgment may no longer be modified in any
respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of
whether the modification is attempted to be made by the court rendering it or by the highest Court of the land. 41 While there are
recognized exceptions e.g., the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any
party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and
inequitable42 none of these exceptions apply to the present case.
Litigation must at some time end, even at the risk of occasional errors. Public policy dictates that once a judgment becomes final,
executory and unappealable, the prevailing party should not be denied the fruits of his victory by some subterfuge devised by the
losing party. Unjustified delay in the enforcement of a judgment sets at naught the role and purpose of the courts to resolve justiciable
controversies with finality.43
In the present case, the lapse of the period for appeal rendered the RTC without any jurisdiction to entertain, much less grant, the
plaintiffs-respondents appeal from the final and immutable MCTC judgment. This very basic legal reality would forever be lost if we
allow the CA to dismiss the defendants-petitioners appeal outright on the basis of a technicality that, after all, has been substantially
complied with.
WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the Resolutions dated January 28, 2009 and June
11, 2009 of the Special Former Special Division of Five of the Court of Appeals in CA-G.R. SP No. 02436-MIN. The Decision dated
November 7, 2007 and Order dated July 1, 2008 of the Regional Trial Court, Branch 31, Dapa, Surigao del Norte are ANNULLED.
The Judgment dated May 23, 2007 of the Municipal Circuit Trial Court, Del Carmen-San Isidro-San Benito, Surigao del Norte
is REINSTATED. Costs against the plaintiffs-respondents.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
MARIANO C. DEL CASTILLO
Associate Justice

ROBERTO A. ABAD
Associate Justice
JOSE P. PEREZ
Associate Justice
AT T E S TAT I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

ANTONIO T. CARPIO
Associate Justice
Chairperson
C E R T I F I C A T I ON
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the
Courts Division.
REYNATO S. PUNO
Chief Justice
CASE 4 RULE 2 SECTION 1 ORDINARY CIVIL ACTIONS BASIS OF
Republic of the Philippines
Supreme Court
Manila
THIRD DIVISION
PHILIP TURNER and ELNORA TURNER,
Petitioners,

G.R. No. 157479

Present:

-versus -

LORENZO SHIPPING
CORPORATION,
Respondent.

CARPIO MORALES, Chairperson,

BRION,
BERSAMIN,
VILLARAMA, JR., and
ARANAL-SERENO, JJ.
Promulgated:
November 24, 2010

x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
This case concerns the right of dissenting stockholders to demand payment of the value of their shareholdings.
In the stockholders suit to recover the value of their shareholdings from the corporation, the Regional Trial Court (RTC)
upheld the dissenting stockholders, herein petitioners, and ordered the corporation, herein respondent, to pay. Execution was partially
carried out against the respondent. On the respondents petition for certiorari, however, the Court of Appeals (CA) corrected the RTC
and dismissed the petitioners suit on the ground that their cause of action for collection had not yet accrued due to the lack of
unrestricted retained earnings in the books of the respondent.
Thus, the petitioners are now before the Court to challenge the CAs decision promulgated on March 4, 2003 in C.A.-G.R. SP
No. 74156 entitled Lorenzo Shipping Corporation v. Hon. Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46 of the
Regional Trial Court of Manila, et al.[1]
Antecedents
The petitioners held 1,010,000 shares of stock of the respondent, a domestic corporation engaged primarily in cargo shipping
activities. In June 1999, the respondent decided to amend its articles of incorporation to remove the stockholders pre-emptive rights to
newly issued shares of stock. Feeling that the corporate move would be prejudicial to their interest as stockholders, the petitioners

voted against the amendment and demanded payment of their shares at the rate of P2.276/share based on the book value of the shares,
or a total of P2,298,760.00.
The respondent found the fair value of the shares demanded by the petitioners unacceptable. It insisted that the market value on the
date before the action to remove the pre-emptive right was taken should be the value, or P0.41/share (or a total of P414,100.00),
considering that its shares were listed in the Philippine Stock Exchange, and that the payment could be made only if the respondent
had unrestricted retained earnings in its books to cover the value of the shares, which was not the case.
The disagreement on the valuation of the shares led the parties to constitute an appraisal committee pursuant to Section 82 of
the Corporation Code, each of them nominating a representative, who together then nominated the third member who would be
chairman of the appraisal committee. Thus, the appraisal committee came to be made up of Reynaldo Yatco, the petitioners nominee;
Atty. Antonio Acyatan, the respondents nominee; and Leo Anoche of the Asian Appraisal Company, Inc., the third member/chairman.
On October 27, 2000, the appraisal committee reported its valuation of P2.54/share, for an aggregate value of P2,565,400.00
for the petitioners.[2]
Subsequently, the petitioners demanded payment based on the valuation of the appraisal committee, plus 2%/month penalty
from the date of their original demand for payment, as well as the reimbursement of the amounts advanced as professional fees to the
appraisers.[3]
In its letter to the petitioners dated January 2, 2001, [4] the respondent refused the petitioners demand, explaining that pursuant to
the Corporation Code, the dissenting stockholders exercising their appraisal rights could be paid only when the corporation had
unrestricted retained earnings to cover the fair value of the shares, but that it had no retained earnings at the time of the petitioners
demand, as borne out by its Financial Statements for Fiscal Year 1999 showing a deficit of P72,973,114.00 as of December 31, 1999.
Upon the respondents refusal to pay, the petitioners sued the respondent for collection and damages in the RTC
in Makati City on January 22, 2001. The case, docketed as Civil Case No. 01-086, was initially assigned to Branch 132.[5]
On June 26, 2002, the petitioners filed their motion for partial summary judgment, claiming that:
7) xxx the defendant has an accumulated unrestricted retained earnings of ELEVEN MILLION NINE
HUNDRED SEVENTY FIVE THOUSAND FOUR HUNDRED NINETY (P11,975,490.00) PESOS,
Philippine Currency, evidenced by its Financial Statement as of the Quarter Ending March 31, 2002;
xxx
8) xxx the fair value of the shares of the petitioners as fixed by the Appraisal Committee is final, that
the same cannot be disputed xxx
9) xxx there is no genuine issue to material fact and therefore, the plaintiffs are entitled, as a matter of
right, to a summary judgment. xxx [6]
The respondent opposed the motion for partial summary judgment, stating that the determination of the unrestricted retained earnings
should be made at the end of the fiscal year of the respondent, and that the petitioners did not have a cause of action against
the respondent.
During the pendency of the motion for partial summary judgment, however, the Presiding Judge of Branch 133 transmitted the records
to the Clerk of Court for re-raffling to any of the RTCs special commercial courts in Makati City due to the case being an
intra-corporate dispute. Hence, Civil Case No. 01-086 was re-raffled to Branch 142.
Nevertheless, because the principal office of the respondent was in Manila, Civil Case No. 01-086 was ultimately transferred
to Branch 46 of the RTC in Manila, presided by Judge Artemio Tipon, [7] pursuant to the Interim Rules of Procedure on IntraCorporate Controversies (Interim Rules) requiring intra-corporate cases to be brought in the RTC exercising jurisdiction over the
place where the principal office of the corporation was found.
After the conference in Civil Case No. 01-086 set on October 23, 2002, which the petitioners counsel did not attend, Judge Tipon
issued an order,[8] granting the petitionersmotion for partial summary judgment, stating:
As to the motion for partial summary judgment, there is no question that the 3-man committee mandated to
appraise the shareholdings of plaintiff submitted its recommendation onOctober 27, 2000 fixing the fair value of the
shares of stocks of the plaintiff at P2.54 per share. Under Section 82 of the Corporation Code:
The findings of the majority of the appraisers shall be final, and the award shall be paid by the
corporation within thirty (30) days after the award is made.
The only restriction imposed by the Corporation Code is

That no payment shall be made to any dissenting stockholder unless the corporation has unrestricted
retained earning in its books to cover such payment.
The evidence submitted by plaintiffs shows that in its quarterly financial statement it submitted to the
Securities and Exchange Commission, the defendant has retained earnings of P11,975,490 as of March 21, 2002.
This is not disputed by the defendant. Its only argument against paying is that there must be unrestricted retained
earning at the time the demand for payment is made.
This certainly is a very narrow concept of the appraisal right of a stockholder. The law does not say that the
unrestricted retained earnings must exist at the time of the demand. Even if there are no retained earnings at the time
the demand is made if there are retained earnings later, the fair value of such stocks must be paid. The only
restriction is that there must be sufficient funds to cover the creditors after the dissenting stockholder is paid. No
such allegations have been made by the defendant.[9]
On November 12, 2002, the respondent filed a motion for reconsideration.
On the scheduled hearing of the motion for reconsideration on November 22, 2002, the petitioners filed a motion for
immediate execution and a motion to strike out motion for reconsideration. In the latter motion, they pointed out that the motion for
reconsideration was prohibited by Section 8 of the Interim Rules. Thus, also on November 22, 2002, Judge Tipon denied the motion
for reconsideration and granted the petitioners motion for immediate execution.[10]
Subsequently, on November 28, 2002, the RTC issued a writ of execution.[11]
Aggrieved, the respondent commenced a special civil action for certiorari in the CA to challenge the two aforecited orders of Judge
Tipon, claiming that:
A.
JUDGE TIPON GRAVELY ABUSED HIS DISCRETION IN GRANTING SUMMARY JUDGMENT TO THE
SPOUSES TURNER, BECAUSE AT THE TIME THE COMPLAINT WAS FILED, LSC HAD NO RETAINED
EARNINGS, AND THUS WAS COMPLYING WITH THE LAW, AND NOT VIOLATING ANY RIGHTS OF THE
SPOUSES TURNER, WHEN IT REFUSED TO PAY THEM THE VALUE OF THEIR LSC SHARES. ANY
RETAINED EARNINGS MADE A YEAR AFTER THE COMPLAINT WAS FILED ARE IRRELEVANT TO THE
SPOUSES TURNERS RIGHT TO RECOVER UNDER THE COMPLAINT, BECAUSE THE WELL-SETTLED
RULE, REPEATEDLY BROUGHT TO JUDGE TIPONS ATTENTION, IS IF NO RIGHT EXISTED AT THE
TIME (T)HE ACTION WAS COMMENCED THE SUIT CANNOT BE MAINTAINED, ALTHOUGH SUCH
RIGHT OF ACTION MAY HAVE ACCRUED THEREAFTER.
B.
JUDGE TIPON IGNORED CONTROLLING CASE LAW, AND THUS GRAVELY ABUSED HIS DISCRETION,
WHEN HE GRANTED AND ISSUED THE QUESTIONED WRIT OF EXECUTION DIRECTING THE
EXECUTION OF HIS PARTIAL SUMMARY JUDGMENT IN FAVOR OF THE SPOUSES TURNER, BECAUSE
THAT JUDGMENT IS NOT A FINAL JUDGMENT UNDER SECTION 1 OF RULE 39 OF THE RULES OF
COURT AND THEREFORE CANNOT BE SUBJECT OF EXECUTION UNDER THE SUPREME COURTS
CATEGORICAL HOLDING IN PROVINCE OF PANGASINAN VS. COURT OF APPEALS.
Upon the respondents application, the CA issued a temporary restraining order (TRO), enjoining the petitioners, and their
agents and representatives from enforcing thewrit of execution. By then, however, the writ of execution had been partially enforced.
The TRO lapsed without the CA issuing a writ of preliminary injunction to prevent the execution. Thereupon, the sheriff
resumed the enforcement of the writ of execution.
The CA promulgated its assailed decision on March 4, 2003,[12] pertinently holding:
However, it is clear from the foregoing that the Turners appraisal right is subject to the legal condition that no
payment shall be made to any dissenting stockholder unless the corporation has unrestricted retained earnings in its
books to cover such payment. Thus, the Supreme Court held that:
The requirement of unrestricted retained earnings to cover the shares is based on the trust fund
doctrine which means that the capital stock, property and other assets of a corporation are regarded as
equity in trust for the payment of corporate creditors. The reason is that creditors of a corporation are
preferred over the stockholders in the distribution of corporate assets. There can be no distribution of
assets among the stockholders without first paying corporate creditors. Hence, any disposition of

corporate funds to the prejudice of creditors is null and void. Creditors of a corporation have the right
to assume that so long as there are outstanding debts and liabilities, the board of directors will not use
the assets of the corporation to purchase its own stock.
In the instant case, it was established that there were no unrestricted retained earnings when the Turners filed
their Complaint. In a letter dated 20 August 2000, petitioner informed the Turners that payment of their shares could
only be made if it had unrestricted earnings in its books to cover the same. Petitioner reiterated this in a letter dated 2
January 2001 which further informed the Turners that its Financial Statement for fiscal year 1999 shows that its
retained earnings ending December 31, 1999 was at a deficit in the amount of P72,973,114.00, a matter which has
not been disputed by private respondents. Hence, in accordance with the second paragraph of sec. 82, BP 68 supra,
the Turners right to payment had not yet accrued when they filed their Complaint on January 22, 2001, albeit their
appraisal right already existed.
In Philippine American General Insurance Co. Inc. vs. Sweet Lines, Inc., the Supreme Court declared that:
Now, before an action can properly be commenced all the essential elements of the cause of action
must be in existence, that is, the cause of action must be complete. All valid conditions precedent to the
institution of the particular action, whether prescribed by statute, fixed by agreement of the parties or
implied by law must be performed or complied with before commencing the action, unless the conduct of
the adverse party has been such as to prevent or waive performance or excuse non-performance of the
condition.
It bears restating that a right of action is the right to presently enforce a cause of action, while a
cause of action consists of the operative facts which give rise to such right of action.The right of action
does not arise until the performance of all conditions precedent to the action and may be taken away by
the running of the statute of limitations, through estoppel, or by other circumstances which do not affect
the cause of action. Performance or fulfillment of all conditions precedent upon which a right of action
depends must be sufficiently alleged, considering that the burden of proof to show that a party has a right
of action is upon the person initiating the suit.
The Turners right of action arose only when petitioner had already retained earnings in the amount
of P11,975,490.00 on March 21, 2002; such right of action was inexistent on January 22, 2001 when they filed the
Complaint.
In the doctrinal case of Surigao Mine Exploration Co. Inc., vs. Harris, the Supreme Court ruled:
Subject to certain qualifications, and except as otherwise provided by law, an action commenced
before the cause of action has accrued is prematurely brought and should be dismissed. The fact that the
cause of action accrues after the action is commenced and while it is pending is of no moment. It is a rule
of law to which there is, perhaps, no exception, either at law or in equity, that to recover at all there must
be some cause of action at the commencement of the suit. There are reasons of public policy why there
should be no needless haste in bringing up litigation, and why people who are in no default and against
whom there is as yet no cause of action should not be summoned before the public tribunals to answer
complaints which are groundless. An action prematurely brought is a groundless suit. Unless the plaintiff
has a valid and subsisting cause of action at the time his action iscommenced, the defect cannot be cured
or remedied by the acquisition or accrual of one while the action is pending, and a supplemental
complaint or an amendment setting up such after-accrued cause of action is not permissible.

The afore-quoted ruling was reiterated in Young vs Court of Appeals and Lao vs. Court of Appeals.
The Turners apprehension that their claim for payment may prescribe if they wait for the petitioner to have
unrestricted retained earnings is misplaced. It is the legal possibility of bringing the action that determines the
starting point for the computation of the period of prescription. Stated otherwise, the prescriptive period is to be
reckoned from the accrual of their right of action.
Accordingly, We hold that public respondent exceeded its jurisdiction when it entertained the herein
Complaint and issued the assailed Orders. Excess of jurisdiction is the state of being beyond or outside the limits of
jurisdiction, and as distinguished from the entire absence of jurisdiction, means that the act although within the
general power of the judge, is not authorized and therefore void, with respect to the particular case, because the
conditions which authorize the exercise of his general power in that particular case are wanting, and hence, the
judicial power is not in fact lawfully invoked.

We find no necessity to discuss the second ground raised in this petition.

WHEREFORE, upon the premises, the petition is GRANTED. The assailed Orders and the corresponding
Writs of Garnishment are NULLIFIED. Civil Case No. 02-104692 is hereby ordered DISMISSED without prejudice
to refiling by the private respondents of the action for enforcement of their right to payment as withdrawing
stockholders.
SO ORDERED.
The petitioners now come to the Court for a review on certiorari of the CAs decision, submitting that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT GRANTED THE PETITION
FOR CERTIORARI WHEN THE REGIONAL TRIAL COURT OF MANILA DID NOT ACT BEYOND ITS
JURISDICTION AMOUNTING TO LACK OF JURISDICTION IN GRANTING THE MOTION FOR PARTIAL
SUMMARY JUDGMENT AND IN GRANTING THE MOTION FOR IMMEDIATE EXECUTION OF
JUDGMENT;
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERRORS OF LAW WHEN IT ORDERED THE
DISMISSAL OF THE CASE, WHEN THE PETITION FOR CERTIORARI MERELY SOUGHT THE
ANNULMENT OF THE ORDER GRANTING THE MOTION FOR PARTIAL SUMMARY JUDGMENT AND
OF THE ORDER GRANTING THE MOTION FOR IMMEDIATE EXECUTION OF THE JUDGMENT;
III.
THE HONORABLE COURT OF APPEALS HAS DECIDED QUESTIONS OF SUBSTANCE NOT THEREFORE
DETERMINED BY THIS HONORABLE COURT AND/OR DECIDED IT IN A WAY NOT IN ACCORD WITH
LAW OR WITH JURISPRUDENCE.
Ruling
The petition fails.
The CA correctly concluded that the RTC had exceeded its jurisdiction in entertaining the petitioners complaint in Civil Case
No. 01-086, and in rendering the summary judgment and issuing writ of execution.
A.
Stockholders Right of Appraisal, In General
A stockholder who dissents from certain corporate actions has the right to demand payment of the fair value of his or her
shares. This right, known as the right of appraisal, is expressly recognized in Section 81 of the Corporation Code, to wit:
Section 81. Instances of appraisal right. - Any stockholder of a corporation shall have the right to dissent and
demand payment of the fair value of his shares in the following instances:
1. In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of
any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding
shares of any class, or of extending or shortening the term of corporate existence;
2. In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of
the corporate property and assets as provided in the Code; and
3. In case of merger or consolidation. (n)
Clearly, the right of appraisal may be exercised when there is a fundamental change in the charter or articles of incorporation
substantially prejudicing the rights of the stockholders. It does not vest unless objectionable corporate action is taken. [13] It serves the
purpose of enabling the dissenting stockholder to have his interests purchased and to retire from the corporation. [14]

Under the common law, there were originally conflicting views on whether a corporation had the power to acquire or purchase its own
stocks. In England, it was held invalid for a corporation to purchase its issued stocks because such purchase was an indirect method of
reducing capital (which was statutorily restricted), aside from being inconsistent with the privilege of limited liability to creditors.
[15]
Only a few American jurisdictions adopted by decision or statute the strict English rule forbidding a corporation from purchasing
its own shares. In some American states where the English rule used to be adopted, statutes granting authority to purchase out of
surplus funds were enacted, while in others, shares might be purchased even out of capital provided the rights of creditors were not
prejudiced.[16] The reason underlying the limitation of share purchases sprang from the necessity of imposing safeguards against the
depletion by a corporation of its assets and against the impairment of its capital needed for the protection of creditors. [17]
Now, however, a corporation can purchase its own shares, provided payment is made out of surplus profits and the acquisition is for a
legitimate corporate purpose.[18] In thePhilippines, this new rule is embodied in Section 41 of the Corporation Code, to wit:
Section 41. Power to acquire own shares. - A stock corporation shall have the power to purchase or acquire
its own shares for a legitimate corporate purpose or purposes, including but not limited to the following cases:
Provided, That the corporation has unrestricted retained earnings in its books to cover the shares to be purchased or
acquired:
1.

To eliminate fractional shares arising out of stock dividends;

2. To collect or compromise an indebtedness to the corporation, arising out of unpaid subscription, in a

delinquency sale, and to purchase delinquent shares sold during said sale; and
3. To pay dissenting or withdrawing stockholders entitled to payment for their shares under the provisions of
this Code. (n)
The Corporation Code defines how the right of appraisal is exercised, as well as the implications of the right of appraisal, as
follows:
1.

The appraisal right is exercised by any stockholder who has voted against the proposed corporate action by
making a written demand on the corporation within 30 days after the date on which the vote was taken for the
payment of the fair value of his shares. The failure to make the demand within the period is deemed a waiver of
the appraisal right.[19]

2.

If the withdrawing stockholder and the corporation cannot agree on the fair value of the shares within a period
of 60 days from the date the stockholders approved the corporate action, the fair value shall be determined and
appraised by three disinterested persons, one of whom shall be named by the stockholder, another by the
corporation, and the third by the two thus chosen. The findings and award of the majority of the appraisers shall
be final, and the corporation shall pay their award within 30 days after the award is made. Upon payment by the
corporation of the agreed or awarded price, the stockholder shall forthwith transfer his or her shares to the
corporation.[20]

3.

All rights accruing to the withdrawing stockholders shares, including voting and dividend rights, shall be
suspended from the time of demand for the payment of the fair value of the shares until either the abandonment
of the corporate action involved or the purchase of the shares by the corporation, except the right of such
stockholder to receive payment of the fair value of the shares.[21]

4.

Within 10 days after demanding payment for his or her shares, a dissenting stockholder shall submit to the
corporation the certificates of stock representing his shares for notation thereon that such shares are dissenting
shares. A failure to do so shall, at the option of the corporation, terminate his rights under this Title X of
the Corporation Code. If shares represented by the certificates bearing such notation are transferred, and the
certificates are consequently canceled, the rights of the transferor as a dissenting stockholder under this Title
shall cease and the transferee shall have all the rights of a regular stockholder; and all dividend distributions that
would have accrued on such shares shall be paid to the transferee.[22]

5.

If the proposed corporate action is implemented or effected, the corporation shall pay to such stockholder, upon
the surrender of the certificates of stock representing his shares, the fair value thereof as of the day prior to the
date on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate
action.[23]

Notwithstanding the foregoing, no payment shall be made to any dissenting stockholder unless the corporation has
unrestricted retained earnings in its books to cover the payment. In case the corporation has no available unrestricted retained earnings

in its books, Section 83 of the Corporation Code provides that if the dissenting stockholder is not paid the value of his shares within
30 days after the award, his voting and dividend rights shall immediately be restored.
The trust fund doctrine backstops the requirement of unrestricted retained earnings to fund the payment of the shares of stocks of the
withdrawing stockholders. Under the doctrine, the capital stock, property, and other assets of a corporation are regarded as equity in
trust for the payment of corporate creditors, who are preferred in the distribution of corporate assets. [24] The creditors of a corporation
have the right to assume that the board of directors will not use the assets of the corporation to purchase its own stock for as long as
the corporation has outstanding debts and liabilities. [25] There can be no distribution of assets among the stockholders without first
paying corporate debts. Thus, any disposition of corporate funds and assets to the prejudice of creditors is null and void. [26]
B.
Petitioners cause of action was premature
That the respondent had indisputably no unrestricted retained earnings in its books at the time the petitioners commenced Civil Case
No. 01-086 on January 22, 2001 proved that the respondents legal obligation to pay the value of the petitioners shares did not yet
arise. Thus, the CA did not err in holding that the petitioners had no cause of action, and in ruling that the RTC did not validly render
the partial summary judgment.
A cause of action is the act or omission by which a party violates a right of another.[27] The essential elements of a cause of action are:
(a) the existence of a legal right in favor of the plaintiff; (b) a correlative legal duty of the defendant to respect such right; and (c) an
act or omission by such defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff for which
the latter may maintain an action for the recovery of relief from the defendant. [28] Although the first two elements may exist, a cause of
action arises only upon the occurrence of the last element, giving the plaintiff the right to maintain an action in court for recovery of
damages or other appropriate relief.[29]
Section 1, Rule 2, of the Rules of Court requires that every ordinary civil action must be based on a cause of action. Accordingly, Civil
Case No. 01-086 was dismissible from the beginning for being without any cause of action.
The RTC concluded that the respondents obligation to pay had accrued by its having the unrestricted retained earnings after the
making of the demand by the petitioners. It based its conclusion on the fact that the Corporation Code did not provide that the
unrestricted retained earnings must already exist at the time of the demand.
The RTCs construal of the Corporation Code was unsustainable, because it did not take into account the petitioners lack of a
cause of action against the respondent. In order to give rise to any obligation to pay on the part of the respondent, the petitioners
should first make a valid demand that the respondent refused to pay despite having unrestricted retained earnings. Otherwise, the
respondent could not be said to be guilty of any actionable omission that could sustain their action to collect.
Neither did the subsequent existence of unrestricted retained earnings after the filing of the complaint cure the lack of cause of action
in Civil Case No. 01-086. The petitioners right of action could only spring from an existing cause of action. Thus, a complaint whose
cause of action has not yet accrued cannot be cured by an amended or supplemental pleading alleging the existence or accrual of a
cause of action during the pendency of the action. [30] For, only when there is an invasion of primary rights, not before, does the
adjective or remedial law become operative. [31] Verily, a premature invocation of the courts intervention renders the complaint without
a cause of action and dismissible on such ground.[32] In short, Civil Case No. 01-086, being a groundless suit, should be dismissed.
Even the fact that the respondent already had unrestricted retained earnings more than sufficient to cover the petitioners claims on
June 26, 2002 (when they filed their motion for partial summary judgment) did not rectify the absence of the cause of action
at the time of the commencement of Civil Case No. 01-086. The motion for partial summary judgment, being a mere
application for relief other than by a pleading, [33] was not the same as the complaint in Civil Case No. 01-086. Thereby, the
petitioners did not meet the requirement of the Rules of Court that a cause of action must exist at the commencement of an
action, which is commenced by the filing of the original complaint in court.[34]
The petitioners claim that the respondents petition for certiorari sought only the annulment of the assailed orders of the RTC (i.e.,
granting the motion for partial summary judgment and the motion for immediate execution); hence, the CA had no right to direct the
dismissal of Civil Case No. 01-086.
The claim of the petitioners cannot stand.
Although the respondents petition for certiorari targeted only the RTCs orders granting the motion for partial summary judgment and
the motion for immediate execution, the CAs directive for the dismissal of Civil Case No. 01-086 was not an abuse of discretion, least
of all grave, because such dismissal was the only proper thing to be done under the circumstances. According to Surigao Mine
Exploration Co., Inc. v. Harris:[35]
Subject to certain qualification, and except as otherwise provided by law, an action commenced before the cause
of action has accrued is prematurely brought and should be dismissed. The fact that the cause of action accrues
after the action is commenced and while the case is pending is of no moment. It is a rule of law to which there is,
perhaps no exception, either in law or in equity, that to recover at all there must be some cause of action at the
commencement of the suit. There are reasons of public policy why there should be no needless haste in bringing up

litigation, and why people who are in no default and against whom there is as yet no cause of action should not be
summoned before the public tribunals to answer complaints which are groundless. An action prematurely brought is
a groundless suit. Unless the plaintiff has a valid and subsisting cause of action at the time his action is
commenced, the defect cannot be cured or remedied by the acquisition or accrual of one while the action is
pending, and a supplemental complaint or an amendment setting up such after-accrued cause of action is not
permissible.
Lastly, the petitioners argue that the respondents recourse of a special action for certiorari was the wrong remedy, in view of the fact
that the granting of the motion for partial summary judgment constituted only an error of law correctible by appeal, not of jurisdiction.
The argument of the petitioners is baseless. The RTC was guilty of an error of jurisdiction, for it exceeded its jurisdiction by taking
cognizance of the complaint that was not based on an existing cause of action.
WHEREFORE, the petition for review on certiorari is denied for lack of merit.
We affirm the decision promulgated on March 4, 2003 in C.A.-G.R. SP No. 74156 entitled Lorenzo Shipping Corporation v.
Hon. Artemio S. Tipon, in his capacity as Presiding Judge of Branch 46 of the Regional Trial Court of Manila, et al.
Costs of suit to be paid by the petitioners.
SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

ARTURO D. BRION MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

MARIA LOURDES P. ARANAL-SERENO

Associate Justice

AT T E S TAT I O N
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.

CONCHITA CARPIO MORALES

Associate Justice
Chairperson

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice
CASE 5 RULE 2 SECTION 2 CAUSE OF ACTION DEFINED
FIRST DIVISION
DEVELOPMENT BANK OF THEPHILIPPINES,

G.R. No. 163827

Petitioner,
Present:
CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
- versus -

VILLARAMA, JR., and

SERENO,* JJ.

HON. SILVERIO Q. CASTILLO and

CRISTINA TRINIDAD ZARATE ROMERO,
Respondents.

Promulgated:

August 17, 2011

x--------------------------------------------------x
RESOLUTION
VILLARAMA, JR., J.:

Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeking to set
aside the July 21, 2003 Decision [1] of the Court of Appeals (CA) in CA-G.R. SP No. 53825 dismissing petitioners petition for
certiorari.
The antecedents follow:

Corazon Zarate Romero and his brother Gonzalo Zarate co-owned a property covered by Transfer Certificate of Title (TCT)
No. 10070[2] of the Register of Deeds of Dagupan City. The subject property, located in Dagupan City, Province of Pangasinan, is a
1,705-square-meter lot with a four-storey hotel erected thereon.
It appears that sometime in 1975, Corazon and Gonzalo obtained a loan from petitioner Development Bank of the Philippines
(DBP). As collateral, they executed a real estate mortgage [3] over the subject property in favor of DBP. On the alleged failure of the
two borrowers to pay their amortizations, DBP foreclosed the real estate mortgage onSeptember 15, 1983. Purportedly, no redemption
was made within one year, and thus, DBP consolidated ownership over the subject property.
In March 1993, when Corazon passed away, her sole heir, her daughter respondent Cristina Trinidad Zarate Romero, asserted
ownership over the subject property to the extent of one-half thereof. However, respondent discovered that the property was already
registered as early as June 13, 1989 in the name of DBP under TCT No. 54142, [4] with TCT No 10070 in the names of her mother and
uncle already cancelled.
Respondent filed before the Regional Trial Court (RTC) of Dagupan City a complaint[5] for reconveyance, quieting of title
and damages with prayer for a temporary restraining order (TRO) and writ of preliminary injunction to prevent DBP from conducting
any auction sale on the subject property during the pendency of the case. Respondent claimed that her uncle and DBP conspired in
committing fraudulent acts relative to their true transaction and concealed the same from her mother, thereby depriving her of her right
of redemption.
The RTC, after hearing, issued on November 24, 1998, a TRO[6] restraining DBP from proceeding with its scheduled auction
of the disputed property on November 25, 1998. The dispositive portion of the trial courts order reads:
It appearing that plaintiff Cristina Trinidad Romero y Zarate is the sole heir of the late Maria Corazon
Zarate Romero[,] co-owner of the pro[-]indiviso of the property covered by TCT No. 10070 which at present is
carried in TCT No. 54142 in the name of DBP[,] and to avoid irreparable damage that may arise [from] the auction
sale (public bidding) scheduled on November 25, 1998[,] this Court hereby issues a Temporary Restraining Order
(TRO) AGAINST DEFENDANT Development Bank of the Philippines, Makati, Metro Manila from proceeding
[with] the scheduled auction sale (public bidding) on November 25, 1998 at defendants head office at SAM BCG for
a period of twenty (20) days from receipt of this order.
SO ORDERED.[7]
DBP moved to lift the TRO arguing that it violates Section 2 [8] of Presidential Decree (P.D.) No. 385[9] which prohibits the
issuance of a restraining order, temporary or permanent, against government financing institutions like DBP to enjoin any action taken
pursuant to the mandatory foreclosure clause of the decree.[10]

[11]

On December 14, 1998, the RTC denied DBPs motion to lift the TRO and granted respondents plea for an injunctive writ.
The pertinent portions of the trial courts order reads:
To the honest evaluation of this Court what is unrestrainable is the right of government financial institutions
to foreclose mandatorily all loans with arrearages including interest and charges amounting to at least twenty (20%)
percent of the total outstanding obligation.
xxxx
To allay the fears of the plaintiff and to avoid any irreparable damage that may arise while the issues
involved in the above case are still being resolved and determined by the Court in the light of the evidence so f[a]r
presented, [considering that] there is a tendency on the part of the Development Bank of the Philippines of
continuing the acts complained of (auction sale/Public bidding) and considering further [that] there [should] be no
advantage given to one [party] to the prejudice of the other while this case is still pending in Court, it is hereby
ordered that a WRIT of Preliminary Injunction be issued against defendant Development Bank of the Philippines
from conducting any auction sale of the property involved in the above case (formerly covered by TCT No. 10070
and at [present] covered by TCT No. 54142), upon posting of a BOND by the plaintiff in the amount of P3 Million
within five (5) days from receipt of this Order.[12]

On even date, DBP moved to reconsider[13] the December 14, 1998 Order and at the same time sought the dismissal of
respondents complaint on the sole ground that the same states no cause of action.[14]

On December 23, 1998, the writ of preliminary injunction[15] was issued in favor of respondent.
On March 8, 1999, the RTC denied DBPs motion for reconsideration of the denial of its motion for the lifting of the
TRO. The RTC likewise denied in the same order DBPs motion to dismiss the complaint,[16] and ordered DBP to file an answer.
On March 23, 1999, DBP moved to reconsider the March 8, 1999 denial of its motion to dismiss.[17] But even before the RTC
could resolve said motion, DBP filed its Answer [18] on April 5, 1999. A manifestation[19] was later filed by DBP indicating that the
answer it filed was a mere cautionary measure or what is known as an answer ad cautelam and thus without prejudice to any right of
action it may take and without any waiver of any of the grounds for the dismissal of the complaint and any favorable resolution or
order that a superior court may issue hereinafter.
On April 20, 1999, the RTC issued an order [20] denying DBPs motion for reconsideration of its March 8, 1999 Order. The
RTC in the same order emphasized that DBP already filed an answer thereby rendering the motion to dismiss moot and academic.
On June 23, 1999, DBP filed a petition for certiorari[21] before the CA assailing the following issuances of the RTC:
(1)

TRO dated November 24, 1998 (received by DBP on November 24, 1998) issued against DBP enjoining it from
proceeding with the scheduled auction sale of the disputed property;

(2)

Order dated December 14, 1998 (received by DBP on December 16, 1998) denying its motion to lift the TRO and
granting the respondents prayer for a writ of preliminary injunction;

(3)

Order dated March 8, 1999 (received by DBP on March 18, 1999) denying DBPs motion to dismiss and motion
for reconsideration of the December 14, 1998 Order; and

(4)

Order dated April 20, 1999 (received by DBP on April 23, 1999) denying DBPs motion for reconsideration of
the March 8, 1999 order.

In its assailed decision, the CA dismissed the petition on procedural grounds. It held that the petition questioning the first
three orders was filed late as the petition should have been filed within 60 days from receipt of the assailed orders. The CA noted that
as regards the third order, DBP was notified of the denial of its motion for reconsideration of the December 14, 1998 Order on March
18, 1999 and thus only had until May 17, 1999 to question the same. The CA further stated that DBPs subsequent filing of its Answer
to the complaint rendered its motion to dismiss moot and academic.
Hence, the present appeal.
DBP raises the following issues for this Courts consideration:
I. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ORDER OF THE
COURT A QUO DENYING DBPS MOTION TO DISMISS.
II. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ORDER OF THE
COURT A QUO ISSUING THE TEMPORARY RESTRAINING ORDER AND THE PRELIMINARY
INJUNCTION AGAINST PETITIONER DBP.
III. WHETHER THE RULES OF PROCEDURE [SHOULD NOT] BE APPLIED IN A VERY RIGID AND
TECHNICAL SENSE SO AS NOT TO FRUSTRATE THE PROMOTION OF SUBSTANTIAL JUSTICE.
[22]

DBP insists that it is evident from the face of the complaint that respondent failed to state a cause of action. DBP contends
that respondents allegation of conspiracy between DBP and Gonzalo is bare and has no factual basis to stand on. Further, DBP claims
that respondent has no legal right over the subject property as she did not inherit the same in the first place. At the time of death of
respondents mother, the property was not anymore owned by the latter and therefore not part of her estate. Thus, respondent has no
legal right over the property and has no cause of action against DBP. And because she had no right to the property, the issuance of the
TRO and injunctive writ were likewise improper. DBP also points to the following provisions of P.D. No. 385 that were allegedly
violated with the issuance of the TRO and injunctive writ:

SECTION 1. It shall be mandatory for government financial institutions, after the lapse of sixty (60) days
from the issuance of this Decree, to foreclose the collaterals and/or securities for any loan, credit, accommodation,
and/or guarantees granted by them whenever the arrearages on such account, including accrued interest and other
charges, amount to at least twenty percent (20%) of the total outstanding obligations, including interest and other
charges, as appearing in the books of account and/or related records of the financial institution concerned. This shall
be without prejudice to the exercise by the government financial institutions of such rights and/or remedies available
to them under their respective contracts with their debtors, including the right to foreclose on loans, credits,
accommodations and/or guarantees on which the arrearages are less than twenty percent (20%).
SEC. 2. No restraining order, temporary or permanent injunction shall be issued by the court against any
government financial institution in any action taken by such institution in compliance with the mandatory
foreclosure provided in Section 1 hereof, whether such restraining order, temporary or permanent injunction is
sought by the borrower(s) or any third party or parties, except after due hearing in which it is established by the
borrower and admitted by the government financial institution concerned that twenty percent (20%) of the
outstanding arrearages has been paid after the filing of foreclosure proceedings.
xxxx
Respondent, for her part, counters that the CA was correct in dismissing the petition for certiorari for having been filed
beyond the sixty (60)-day reglementary period.Also, respondent contends that the provisions of P.D. No. 385 relating to the
proscription against the issuance of injunctive writs enjoining foreclosure sales are not applicable in the instant case. She points out
that what the RTC enjoined is not an auction sale arising from the foreclosure of mortgage as the subject property had long been
foreclosed and title thereto consolidated in the name of DBP. Rather, what the RTC enjoined was DBPs sale of the subject property
through ordinary public bidding which is not within the ambit of P.D. No. 385.
The petition should be denied.
As correctly ruled by the CA, the petition for certiorari assailing the orders pertaining to the grant of the TRO and the writ of
injunction were filed out of time. Notice of the issuance of the TRO was received by DBP on the same day it was granted, November
24, 1998; thus, the petition for certiorari should have been filed not later than January 23, 1999. The denial of the motion for
reconsideration of the order granting the writ of injunction, on the other hand, was received by DBP on March 18, 1999 and thus, it
had only until May 17, 1999 to file the petition for certiorari. DBP, however, filed its petition only on June 23, 1999.
As to DBPs motion to dismiss the complaint, we agree with the RTC and CA that the same should be denied, but not for the
reason cited by said courts that it has been rendered moot and academic by DBPs filing of its answer but because the same lacks
merit. Contrary to DBPs submission, a perusal of the allegations of the complaint clearly reveals respondents cause of action against
DBP. The complaint states,
xxxx
1.1 Plaintiff is the sole heir and successor-in-interest of the late Ma. Corazon ZarateRomero, who died intestate on 6 March 1993.
xxxx
3. During her lifetime, plaintiffs predecessor-in-interest was the erstwhile owner pro-indiviso of that parcel
of land, together with improvements, located in Dagupan City, which property used to be covered by Transfer
Certificate of Title (TCT) No. 10070 of the Registry of Deeds of Dagupan City.
4. In or about the year 1975, defendant Zarate, who was co-owner of the subject property, secured various
personal loan obligations from the defendant DBP in the aggregate amount of P2,000,000.00.
4.1 To secure such putative loan obligations of the defendant Zarate, the latter, who
wielded moral ascendancy over his younger sister and herein plaintiffs predecessor-in-interest -Ma. Corazon Zarate-Romero, cajoled and prevailed upon the latter to mortgage the entirety of the
subject property in favor of defendant DBP, including her one-half (1/2) pro-indiviso share in the
same.

4.2 Accordingly, defendant Zarate assured the plaintiffs predecessor-in-interest that the
mortgage would be for a brief period only and that he (defendant Zarate) would forthwith pay and
settle in full all his personal loan obligations with the defendant DBP to ensure that said mortgage
is cancelled in the soonest time possible.
5. At some point in time during the effectivity of the mortgage, however, defendant Zarate apparently saw
an opportunity to claim the entirety of the subject property for himself, to the exclusion of plaintiffs predecessor-ininterest.
5.1 Emboldened by, and taking advantage of, the complete trust and confidence reposed
upon him by the plaintiffs predecessor-in-interest anent the subject property, defendant Zarate
conspired with the defendant DBP for the ostensible foreclosure of the subject property, with the
end in view, however, of subsequently reacquiring the same for himself as sole owner.
6. Pursuant to such sinister plot hatched by defendants, defendant DBP foreclosed the subject property in
September of 1983 and, thereafter, bought the same for itself in the sum of P2,253,101.00 during the auction sale
conducted by the Deputy Sheriff of Pangasinan.
7. Significantly enough, and even before the lapse of the mortgagors right of redemption over the subject
property, the herein defendants entered into a Deed of Conditional Sale over the same, with the defendant DBP as
seller, and the defendant Zarate as buyer.
7.1 Needless to state, all the aforedescribed dealings, transactions and proceedings
concerning the subject property -- from its fraudulent foreclosure up to the highly anomalous
execution of the Deed of Conditional Sale over the same -- were concealed from plaintiffs
predecessor-in-interest and even from the plaintiff herself after the death of her mother.
x x x x[23]
A cause of action is the act or omission by which a party violates a right of another. [24] A complaint states a cause of action
when it contains three essential elements: (1) a right in favor of the plaintiff by whatever means and whatever law it arises; (2) the
correlative obligation of the defendant to respect such right; and (3) the act or omission of the defendant violates the right of the
plaintiff. If any of these elements is absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a
cause of action.[25]
Evidently, all the above elements of a cause of action are alleged in the complaint: (1) the legal right of the respondent over
the subject property foreclosed premised on the fact that she is the sole heir of one of the owners who is entitled to the right of
redemption; (2) the correlative obligation of defendant DBP, as the foreclosing entity, to respect such right of redemption; and (3) the
act or omission of the defendant in violation of the legal right, i.e., the act of DBP and its co-defendant Zarate to cause the ostensible
foreclosure of the subject property and the subsequent execution of a deed of conditional sale between the defendants even prior to the
lapse of redemption period to deprive respondents mother of her right over the property.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated July 21, 2003 of the Court of Appeals in CAG.R. SP No. 53825 is AFFIRMED.
No costs.
SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO

LUCAS P. BERSAMIN

Associate Justice

Associate Justice

MARIA LOURDES P. A. SERENO

Associate Justice

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the conclusions in the above Resolution had been reached
in consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice

CASE 6 CAUSE OF ACTION RULE 2 SECTION 4 SPLITTING A SINGLE CAUSE OF ACTION, EFFECT OF.
Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

CATALINA B. CHU,
THEANLYN B. CHU,
THEAN CHING LEE B.
CHU, THEAN LEEWN
B. CHU, and MARTIN LAWRENCE B. CHU,
Petitioners,
- versus -

G.R. No. 156185

Present:
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
PEREZ,* JJ.

SPOUSES FERNANDO C. CUNANAN and

TRINIDAD
N. CUNANAN, BENELDA ESTATE
Promulgated:
DEVELOPMENT CORPORATION, and
SPOUSES AMADO E.
CARLOS and GLORIA
September 12, 2011
A. CARLOS,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in
any one is available as a ground for the dismissal of the others. [1]
We review the decision promulgated on November 19, 2002, [2] whereby the Court of Appeals (CA) dismissed the petitioners
amended complaint in Civil Case No. 12251 of the Regional Trial Court, Branch 41, in San Fernando City, Pampanga (RTC) for being
barred by res judicata.
Antecedents
On September 30, 1986, Spouses Manuel and Catalina Chu (Chus) executed a deed of sale with assumption of
mortgage[3] involving their five parcels of land situated in Saguin, San Fernando City, Pampanga, registered under Transfer Certificate
of Title (TCT) No. 198470-R, TCT No. 198471-R, TCT No. 198472-R, TCT No. 198473-R, and TCT No. 199556-R, all of the Office
of the Registry of Deeds of the Province of Pampanga, in favor of Trinidad N. Cunanan (Cunanan) for the consideration
ofP5,161,090.00. They also executed a so-called side agreement, whereby they clarified that Cunanan had paid only P1,000,000.00 to
the Chus despite the Chus, as vendors, having acknowledged receiving P5,161,090.00; that the amount of P1,600,000.00 was to be
paid directly to Benito Co and to Security Bank and Trust Company (SBTC) in whose favor the five lots had been mortgaged; and that
Cunanan would pay the balance of P2,561.90.00 within three months, with a grace period of one month subject to 3%/month interest
on any remaining unpaid amount. The parties further stipulated that the ownership of the lots would remain with the Chus as the
vendors and would be transferred to Cunanan only upon complete payment of the total consideration and compliance with the terms of
the deed of sale with assumption of mortgage.[4]
Thereafter, the Chus executed a special power of attorney authorizing Cunanan to borrow P5,161,090.00 from any banking
institution and to mortgage the five lots as security, and then to deliver the proceeds to the Chus net of the balance of the mortgage
obligation and the downpayment.[5]
Cunanan was able to transfer the title of the five lots to her name without the knowledge of the Chus, and to borrow money
with the lots as security without paying the balance of the purchase price to the Chus. She later transferred two of the lots to Spouses
Amado and Gloria Carlos (Carloses) on July 29, 1987. As a result, on March 18, 1988, the Chus caused the annotation of an unpaid
vendors lien on three of the lots. Nonetheless, Cunanan still assigned the remaining three lots to Cool Town Realty on May 25, 1989
despite the annotation.[6]
In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC to recover the unpaid balance from Spouses
Fernando and Trinidad Cunanan (Cunanans). Five years later, on April 19, 1993, the Chus amended the complaint to seek the
annulment of the deed of sale with assumption of mortgage and of the TCTs issued pursuant to the deed, and to recover damages. They

impleaded Cool Town Realty and Development Corporation (Cool Town Realty), and the Office of the Registry of Deeds of
Pampanga as defendants in addition to the Cunanans.[7]
Considering that the Carloses had meanwhile sold the two lots to Benelda Estate Development Corporation (Benelda Estate)
in 1995, the Chus further amended the complaint in Civil Case No. G-1936 to implead Benelda Estate as additional defendant. In due
course, Benelda Estate filed its answer with a motion to dismiss, claiming, among others, that the amended complaint stated no cause
of action because it had acted in good faith in buying the affected lots, exerting all efforts to verify the authenticity of the titles, and
had found no defect in them. After the RTC denied its motion to dismiss, Benelda Estate assailed the denial on certiorari in the CA,
which annulled the RTCs denial for being tainted with grave abuse of discretion and dismissed Civil Case No. G-1936 as against
Benelda Estate. On March 1, 2001, the Court upheld the dismissal of Civil Case No. G-1936 in G.R. No. 142313 entitled Chu, Sr. v.
Benelda Estate Development Corporation.[8]
On December 2, 1999, the Chus, the Cunanans, and Cool Town Realty entered into a compromise agreement,[9] whereby the
Cunanans transferred to the Chus their 50% share in all the parcels of land situated in Saguin, San Fernando, Pampanga registered in
the name of Cool Town Realty for and in consideration of the full settlement of their case. The RTC approved the compromise
agreement in a partial decision dated January 25, 2000.[10]
Thereafter, on April 30, 2001, the petitioners herein (i.e., Catalina Chu and her children) brought another suit, Civil Case No.
12251, against the Carloses and Benelda Estate, [11] seeking the cancellation of the TCTs of the two lots in the name of Benelda Estate,
and the issuance of new TCTs in their favor, plus damages.
The petitioners amended their complaint in Civil Case No. 12251 on February 4, 2002 to implead the Cunanans as additional
defendants.[12]
The Cunanans moved to dismiss the amended complaint based on two grounds, namely: (a) bar by prior judgment, and (b)
the claim or demand had been paid, waived, and abandoned. Benelda Estate likewise moved to dismiss the amended complaint, citing
as grounds: (a) forum shopping; (b) bar by prior judgment, and (c) failure to state a cause of action. On their part, the Carloses raised
affirmative defenses in their answer, namely: (a) the failure to state a cause of action; (b) res judicata or bar by prior judgment; and (c)
bar by statute of limitations.
On April 25, 2002, the RTC denied both motions to dismiss, [13] holding that the amended complaint stated a cause of action against all
the defendants; that the action was not barred by res judicata because there was no identity of parties and subject matter between Civil
Case No.12251 and Civil Case No. G-1936; and that the Cunanans did not establish that the petitioners had waived and abandoned
their claim or that their claim had been paid by virtue of the compromise agreement, pointing out that the compromise
agreement involved only the three parcels of land registered in the name of Cool Town Realty.[14]
The Cunanans sought reconsideration, but their motion was denied on May 31, 2002.[15]
On September 2, 2002, the Cunanans filed a petition for certiorari in the CA (SP-72558), assailing the RTCs denial of their
motion to dismiss and motion for reconsideration.[16]
On November 19, 2002, the CA promulgated its decision, [17] granting the petition for certiorari and nullifying the challenged
orders of the RTC. The CA ruled that thecompromise agreement had ended the legal controversy between the parties with respect to
the cause of action arising from the deed of sale with assumption of mortgagecovering all the five parcels of land; that Civil Case No.
G-1936 and Civil Case No.12251 involved the violation by the Cunanans of the same legal right under the deed of sale with
assumption of mortgage; and that the filing of Civil Case No.12251 contravened the rule against splitting of a cause of action, and
rendered Civil Case No.12251 subject of a motion to dismiss based on bar by res judicata. The CA disposed thusly:
WHEREFORE, premises considered, the present petition for certiorari is hereby GIVEN DUE COURSE and
the writ prayed for, accordingly GRANTED. Consequently, the challenged Orders of the respondent court denying
the motions to dismiss are hereby ANNULLED and SET ASIDE and a new one is hereby rendered DISMISSING
the Amended Complaint in Civil Case No. 12251.
No costs.
SO ORDERED.[18]
Hence, this appeal.
Issue
Was Civil Case No. 12251 barred by res judicata although the compromise agreement did not expressly include Benelda
Estate as a party and although the compromise agreement made no reference to the lots now registered in Benelda Estates name?

Ruling
We deny the petition for review.
I
The petitioners contend that the compromise agreement did not apply or extend to the Carloses and Benelda Estate; hence, their Civil
Case No. 12251 was not barred by res judicata.
We disagree.
A compromise agreement is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one
already commenced.[19] It encompasses the objects specifically stated therein, although it may include other objects by necessary
implication,[20] and is binding on the contracting parties, being expressly acknowledged as a juridical agreement between them. [21] It
has the effect and authority of res judicata upon the parties.[22]
In the construction or interpretation of a compromise agreement, the intention of the parties is to be ascertained from the agreement
itself, and effect should be given to that intention.[23] Thus, the compromise agreement must be read as a whole.
The following pertinent portions of the compromise agreement indicate that the parties intended to thereby settle all their
claims against each other, to wit:
1.
That the defendants SPOUSES TRINIDAD N.CUNANAN and FERNANDO C.CUNANAN for and in
consideration of the full settlement of their case in the above-entitled case, hereby TRANSFER, DELIVER, and
CONVEY unto the plaintiffs all their rights, interest, benefits, participation, possession and ownership which
consists of FIFTY (50%) percent share on all the parcels of land situated in Saguin, San Fernando Pampanga now
registered in the name of defendant, COOL TOWN REALTY & DEVELOPMENT CORPORATION, as particularly
evidenced by the corresponding Transfer Certificates of Titles xxx
xxxx
6. That the plaintiffs and the defendant herein are waiving, abandoning, surrendering, quitclaiming, releasing,
relinquishing any and all their respective claims against each other as alleged in the pleadings they respectively
filed in connection with this case.[24] (bold emphasis supplied)
The intent of the parties to settle all their claims against each other is expressed in the phrase any and all their respective
claims against each other as alleged in the pleadings they respectively filed in connection with this case , which was broad enough to
cover whatever claims the petitioners might assert based on the deed of sale with assumption of mortgage.
There is no question that the deed of sale with assumption of mortgage covered all the five lots, to wit:
WHEREAS, the VENDORS are willing to sell the above-described properties and the VENDEE is willing to
buy the same at FIFTY FIVE (P55.00) PESOS, Philippine Currency, per square meter, or a total consideration of
FIVE MILLION ONE HUNDRED SIXTY ONE THOUSAND and NINETY (P5,161,090.00) PESOS, Philippine
Currency.[25]
To limit the compromise agreement only to the three lots mentioned therein would contravene the avowed objective of Civil Case No.
G-1936 to enforce or to rescind the entiredeed of sale with assumption of mortgage. Such interpretation is akin to saying that the
Cunanans separately sold the five lots, which is not the truth. For one, Civil Case No. G-1936 did not demand separate amounts for
each of the purchased lots. Also, the compromise agreement did not state that the value being thereby transferred to the petitioners by
the Cunanans corresponded only to that of the three lots.
Apparently, the petitioners were guilty of splitting their single cause of action to enforce or rescind the deed of sale with
assumption of mortgage. Splitting a single cause of action is the act of dividing a single or indivisible cause of action into several parts
or claims and instituting two or more actions upon them. [26] A single cause of action or entire claim or demand cannot be split up or
divided in order to be made the subject of two or more different actions. [27] Thus, Section 4, Rule 2 of the Rules of Court expressly
prohibits splitting of a single cause of action, viz:
Section 4. Splitting a single cause of action; effect of. If two or more suits are instituted on the basis of the
same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the
dismissal of the others. (4a)

The petitioners were not at liberty to split their demand to enforce or rescind the deed of sale with assumption of mortgage and to
prosecute piecemeal or present only a portion of the grounds upon which a special relief was sought under the deed of sale with
assumption of mortgage, and then to leave the rest to be presented in another suit; otherwise, there would be no end to litigation.
[28]
Their splitting violated the policy against multiplicity of suits, whose primary objective was to avoid unduly burdening the dockets
of the courts. Their contravention of the policy merited the dismissal of Civil Case No. 12251 on the ground of bar by res judicata.
Res judicata means a matter adjudged, a thing judicially acted upon or decided; a thing or matter settled by judgment. [29] The
doctrine of res judicata is an old axiom of law, dictated by wisdom and sanctified by age, and founded on the broad principle that it is
to the interest of the public that there should be an end to litigation by the same parties over a subject once fully and fairly adjudicated.
It has been appropriately said that the doctrine is a rule pervading every well-regulated system of jurisprudence, and is put upon two
grounds embodied in various maxims of the common law: the one, public policy and necessity, which makes it to the interest of the
State that there should be an end to litigation interest reipublicae ut sit finis litium; the other, the hardship on the individual that he
should be vexed twice for one and the same cause nemo debet bis vexari pro una et eadem causa. A contrary doctrine would subject
the public peace and quiet to the will and neglect of individuals and prefer the gratification of the litigious disposition on the part of
suitors to the preservation of the public tranquillity and happiness.[30]
Under the doctrine of res judicata, a final judgment or decree on the merits rendered by a court of competent jurisdiction is conclusive
of the rights of the parties or their privies in all later suits and on all points and matters determined in the previous suit. [31] The
foundation principle upon which the doctrine rests is that the parties ought not to be permitted to litigate the same issue more than
once; that when a right or fact has been judicially tried and determined by a court of competent jurisdiction, so long as it remains
unreversed, should be conclusive upon the parties and those in privity with them in law or estate.[32]
Yet, in order that res judicata may bar the institution of a subsequent action, the following requisites must concur: (a) the
former judgment must be final; (b) it must have been rendered by a court having jurisdiction of the subject matter and the parties; (c) it
must be a judgment on the merits; and (d) there must be between the first and second actions (i) identity of parties, (ii) identity of the
subject matter, and (iii) identity of cause of action.[33]
The first requisite was attendant. Civil Case No. G-1936 was already terminated under the compromise agreement, for the
judgment, being upon a compromise, was immediately final and unappealable. As to the second requisite, the RTC had jurisdiction
over the cause of action in Civil Case No. G-1936 for the enforcement or rescission of the deed of sale with assumption of mortgage,
which was an action whose subject matter was not capable of pecuniary estimation. That the compromise agreement explicitly settled
the entirety of Civil Case No. G-1936 by resolving all the claims of the parties against each other indicated that the third requisite was
also satisfied.[34]
But was there an identity of parties, of subject matter, and of causes of action between Civil Case No.G-1936 and Civil Case
No. 12251?
There is identity of parties when the parties in both actions are the same, or there is privity between them, or they are
successors-in-interest by title subsequent to the commencement of the action litigating for the same thing and under the same title and
in the same capacity.[35] The requirement of the identity of parties was fully met, because the Chus, on the one hand, and the Cunanans,
on the other hand, were the parties in both cases along with their respective privies. The fact that the Carloses and Benelda Estate,
defendants in Civil Case No. 12251, were not parties in the compromise agreement was inconsequential, for they were also the privies
of the Cunanans as transferees and successors-in-interest. It is settled that the absolute identity of parties was not a condition sine qua
non for res judicata to apply, because a shared identity of interest sufficed. [36]Mere substantial identity of parties, or even community
of interests between parties in the prior and subsequent cases, even if the latter were not impleaded in the first case, was sufficient. [37]
As to identity of the subject matter, both actions dealt with the properties involved in the deed of sale with assumption of
mortgage. Identity of the causes of action was also met, because Case No. G-1936 and Civil Case No. 12251 were rooted in one and
the same cause of action the failure of Cunanan to pay in full the purchase price of the five lots subject of the deed of sale with
assumption of mortgage. In other words, Civil Case No. 12251 reprised Civil Case No. G-1936, the only difference between them
being that the petitioners alleged in the former that Benelda Estate was not also a purchaser for value and in good faith. [38]
In fine, the rights and obligations of the parties vis--vis the five lots were all defined and governed by the deed of sale with
assumption of mortgage, the only contract between them. That contract was single and indivisible, as far as they were concerned.
Consequently, the Chus could not properly proceed against the respondents in Civil Case No. 12251, despite the silence of
the compromise agreement as to the Carloses and Benelda Estate, because there can only be one action where the contract is entire,
and the breach total, and the petitioners must therein recover all their claims and damages. [39] The Chus could not be permitted to split
up a single cause of action and make that single cause of action the basis of several suits. [40]
WHEREFORE, we deny the petition for review on certiorari, and affirm the decision promulgated in CA-G.R. SP No. 72558.
The petitioners shall pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
Chairperson

TERESITA J. LEONARDO-DE CASTRO MARIANO C. DEL CASTILLO

Associate Justice Associate Justice

JOSE PORTUGAL PEREZ

Associate Justice

C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.

RENATO C. CORONA
Chief Justice
CASE 7 - RULE 3 PARTIES TO CIVIL ACTIONS SECTION 2 PARTIES IN INTEREST
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 173297

March 6, 2013

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,

vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC, and MANUEL D.
MARANON, JR., Respondents.

DECISION
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the personalities of its stockholders. Hence, its stockholders are not
themselves the real parties in interest to claim and recover compensation for the damages arising from the wrongful attachment of its
assets. Only the corporation is the real party in interest for that purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance company, assails the decision promulgated on
January 31, 2006,1 whereby the Court of Appeals (CA) in CA-G.R. CV No. 79145 affirmed the judgment rendered on April 28, 2003
by the Regional Trial Court in Parafiaque City (RTC) holding Stronghold Insurance and respondent Manuel D. Marafion, Jr. jointly
and solidarily liable for damages to respondents Tomas Cuenca, Marcelina Cuenca, Milagros Cuenca (collectively referred to as
Cuencas), and Bramie Tayactac, upon the latters claims against the surety bond issued by Stronghold Insurance for the benefit of
Maraon.2
Antecedents
On January 19, 1998, Maraon filed a complaint in the RTC against the Cuencas for the collection of a sum of money and damages.
His complaint, docketed as Civil Case No. 98-023, included an application for the issuance of a writ of preliminary attachment. 3 On
January 26, 1998, the RTC granted the application for the issuance of the writ of preliminary attachment conditioned upon the posting
of a bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Maraon amended the complaint to implead
Tayactac as a defendant.4
On February 11, 1998, Maraon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of P1,000,000.00 issued by
Stronghold Insurance. Two days later, the RTC issued the writ of preliminary attachment. 5 The sheriff served the writ, the summons
and a copy of the complaint on the Cuencas on the same day. The service of the writ, summons and copy of the complaint were made
on Tayactac on February 16, 1998.6
Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied upon the equipment, supplies,
materials and various other personal property belonging to Arc Cuisine, Inc. that were found in the leased corporate office-cumcommissary or kitchen of the corporation.7 On February 19, 1998, the sheriff submitted a report on his proceedings,8 and filed an ex
parte motion seeking the transfer of the levied properties to a safe place. The RTC granted the ex parte motion on February 23, 1998. 9
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to Quash Writ of Preliminary
Attachment on the grounds that: (1) the action involved intra-corporate matters that were within the original and exclusive jurisdiction
of the Securities and Exchange Commission (SEC); and (2) there was another action pending in the SEC as well as a criminal
complaint in the Office of the City Prosecutor of Paraaque City.10
On March 5, 1998, Maraon opposed the motion.11
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary Attachment, stating that the action,
being one for the recovery of a sum of money and damages, was within its jurisdiction.12
Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the denial of their Motion to Dismiss
and to Quash Writ of Preliminary Attachment, but the RTC denied their motion for reconsideration on September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to challenge the August 10, 1998
and September 16, 1998 orders of the RTC on the basis of being issued with grave abuse of discretion amounting to lack or excess of
jurisdiction (C.A.-G.R. SP No. 49288).13
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No. 49288,14 granting the petition. It annulled and set
aside the challenged orders, and dismissed the amended complaint in Civil Case No. 98-023 for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and the judgment is hereby rendered
DISMISSING the Amended Complaint in Civil Case No. 98-023 of the respondent court, for lack of jurisdiction.
SO ORDERED.

On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas and Tayactacs claim for the damages
sustained from the enforcement of the writ of preliminary attachment.15
On February 17, 2000,16 the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and to comply with the Resolution of the Court of Appeals dated
December 24, 1999 ordering the delivery of the attached properties to the defendants, the proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty. Ayo, defendant Marcelina Cuenca, and two
Court Personnel, Robertson Catorce and Danilo Abanto, went to the warehouse where Mr. Maraon recommended for
safekeeping the properties in which he personally assured its safety, at No. 14, Marian II Street, East Service Road,
Paraaque Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee and the properties were all gone and missing.
3. That there are informations (sic) that the properties are seen at Contis Pastry & Bake Shop owned by Mr. Maraon,
located at BF Homes in Paraaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached Properties and to Set Case for
Hearing,17 praying that: (1) the Branch Sheriff be ordered to immediately deliver the attached properties to them; (2) Stronghold
Insurance be directed to pay them the damages being sought in accordance with its undertaking under the surety bond
for P1,000,0000.00; (3) Maraon be held personally liable to them considering the insufficiency of the amount of the surety bond; (4)
they be paid the total of P1,721,557.20 as actual damages representing the value of the lost attached properties because they, being
accountable for the properties, would be turning that amount over to Arc Cuisine, Inc.; and (5) Maraon be made to pay P200,000.00
as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as attorneys fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and Tayactac filed their reply on May 5,
2000.
On May 25, 2000, Maraon filed his own comment/opposition to the Motion to Require Sheriff to Deliver Attached Properties and to
Set Case for Hearing of the Cuencas and Tayactac, arguing that because the attached properties belonged to Arc Cuisine, Inc. 50% of
the stockholding of which he and his relatives owned, it should follow that 50% of the value of the missing attached properties
constituted liquidating dividends that should remain with and belong to him. Accordingly, he prayed that he should be required to
return only P100,000.00 to the Cuencas and Tayactac.18
On June 5, 2000, the RTC commanded Maraon to surrender all the attached properties to the RTC through the sheriff within 10 days
from notice; and directed the Cuencas and Tayactac to submit the affidavits of their witnesses in support of their claim for damages. 19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Maraon and Stronghold Insurance jointly and solidarily liable
for damages to the Cuencas and Tayactac,21 viz:
WHEREFORE, premises considered, as the defendants were able to preponderantly prove their entitlement for damages by reason of
the unlawful and wrongful issuance of the writ of attachment, MANUEL D. MARAON, JR., plaintiff and defendant, Stronghold
Insurance Company Inc., are found to be jointly and solidarily liable to pay the defendants the following amount to wit:
(1) PhP1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorneys fees; and
(5) To pay the cost of suit.

SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning the following errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT OF P1,000,000.00
REPRESENTING THE AMOUNT OF THE BOND AND OTHER DAMAGES TO THE DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE INDEMNITY AGREEMENT (EXH. "2-SURETY")
EXECUTED BY MANUEL D. MARAON, JR. IN FAVOR OF STRONGHOLD WHEREIN HE BOUND HIMSELF TO
INDEMNIFY STRONGHOLD OF WHATEVER AMOUNT IT MAY BE HELD LIABLE ON ACCOUNT OF THE ISSUANCE OF
THE ATTACHMENT BOND.22
On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the judgment of the RTC. 23
Stronghold Insurance moved for reconsideration, but the CA denied its motion for reconsideration on June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance, which submits that:
I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED QUESTIONS OF SUBSTANCE IN A
WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE HONORABLE COURT CONSIDERING
THAT THE COURT OF APPEALS AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT HOLDING
RESPONDENT MARA[]ON AND PETITIONER STRONGHOLD JOINTLY AND SOLIDARILY LIABLE TO PAY THE
RESPONDENTS CUENCA, et al., FOR PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND
WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES ATTACHED AND THUS, ARE
NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED DAMAGES ARISING THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF
THE WRIT OF ATTACHMENT WERE CAUSED BY THE NEGLIGENCE OF THE BRANCH SHERIFF OF THE TRIAL
COURT AND HIS FAILURE TO COMPLY WITH THE PROVISIONS OF THE RULES OF COURT PERTAINING TO
THE ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER STRONGHOLD TO BE SOLIDARILY
LIABLE WITH RESPONDENT MARA[]ON TO RESPONDENTS CUENCA et al., FOR MORAL DAMAGES,
EXEMPLARY DAMAGES, ATTORNEYS FEES AND COST OF SUIT DESPITE THE FACT THAT THE GUARANTY
OF PETITIONER STRONGHOLD PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO THE AMOUNT
OF P1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD RESPONDENT MARA[]ON TO BE
LIABLE TO INDEMNIFY PETITIONER STRONGHOLD FOR ALL PAYMENTS, DAMAGES, COSTS, LOSSES, PENALTIES,
CHARGES AND EXPENSES IT SUSTAINED IN CONNECTION WITH THE INSTANT CASE, PURSUANT TO THE
INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER STRONGHOLD AND RESPONDENT MARA[]ON. 24
On their part, the Cuencas and Tayactac counter:

A. Having actively participated in the trial and appellate proceedings of this case before the Regional Trial Court and the
Court of Appeals, respectively, petitioner Stronghold is legally and effectively BARRED by ESTOPPEL from raising for the
first time on appeal before this Honorable Court a defense and/or issue not raised below.25
B. Even assuming arguendo without admitting that the principle of estoppel is not applicable in this instant case, the assailed
Decision and Resolution find firm basis in law considering that the writ of attachment issued and enforced against herein
respondents has been declared ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of the trial
court.
C. There having been a factual and legal finding of the illegality of the issuance and consequently, the enforcement of the writ
of attachment, Maranon and his surety Stronghold, consistent with the facts and the law, including the contract of suretyship
they entered into, are JOINTLY AND SEVERALLY liable for the damages sustained by herein respondents by reason
thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond without which the writ of
attachment shall not issue and be enforced against herein respondent if prescribed by law. In like manner, the obligations and
liability on the attachment bond are also prescribed by law and not left to the discretion or will of the contracting parties to
the prejudice of the persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages sustained by herein respondents is both a statutory
and contractual obligation and for which, it cannot escape accountability and liability in favor of the person against whom the
illegal writ of attachment was issued and enforced. To allow Stronghold to delay, excuse or exempt itself from liability is
unconstitutional, unlawful, and contrary to the basic tenets of equity and fair play.
F. While the liability of Stronghold as surety indeed covers the principal amount of P1,000,000.00, nothing in the law and the
contract between the parties limit or exempt Stronghold from liability for other damages. Including costs of suit and
interest.26
In his own comment,27
Maraon insisted that he could not be personally held liable under the attachment bond because the judgment of the RTC was rendered
without jurisdiction over the subject matter of the action that involved an intra-corporate controversy among the stockholders of Arc
Cuisine, Inc.; and that the jurisdiction properly pertained to the SEC, where another action was already pending between the parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves recover damages arising from the wrongful attachment
of the assets of Arc Cuisine, Inc. by claiming against the bond issued by Stronghold Insurance was not raised in the CA, we do not
brush it aside because the actual legal interest of the parties in the subject of the litigation is a matter of substance that has
jurisdictional impact, even on appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it involves a person without any interest at stake, for it would
be futile and meaningless to still proceed and render a judgment where there is no actual controversy to be thereby determined. Courts
of law in our judicial system are not allowed to delve on academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law itself, which forthrightly ordains that the judicial
power is wielded only to settle actual controversies involving rights that are legally demandable and enforceable. 28
To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court requires that unless otherwise
authorized by law or the Rules of Court every action must be prosecuted or defended in the name of the real party in interest. 29 Under
the same rule, a real party in interest is one who stands to be benefited or injured by the judgment in the suit, or one who is entitled to
the avails of the suit. Accordingly, a person , to be a real party in interest in whose name an action must be prosecuted, should appear
to be the present real owner of the right sought to be enforced, that is, his interest must be a present substantial interest, not a mere
expectancy, or a future, contingent, subordinate, or consequential interest. 30
Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause of action. 31The reason for this
is that the courts ought not to pass upon questions not derived from any actual controversy. Truly, a person having no material interest

to protect cannot invoke the jurisdiction of the court as the plaintiff in an action.32 Nor does a court acquire jurisdiction over a case
where the real party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or defending an action at law are: (a) to prevent the
prosecution of actions by persons without any right, title or interest in the case; (b) to require that the actual party entitled to legal
relief be the one to prosecute the action; (c) to avoid a multiplicity of suits; and (d) to discourage litigation and keep it within certain
bounds, pursuant to sound public policy.33 Indeed, considering that all civil actions must be based on a cause of action,34 defined as the
act or omission by which a party violates the right of another,35 the former as the defendant must be allowed to insist upon being
opposed by the real party in interest so that he is protected from further suits regarding the same claim. 36 Under this rationale, the
requirement benefits the defendant because "the defendant can insist upon a plaintiff who will afford him a setup providing good res
judicata protection if the struggle is carried through on the merits to the end."37
The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the action, and this interest ends
when a judgment involving the nominal plaintiff will protect the defendant from a subsequent identical action. Such a rule is intended
to bring before the court the party rightfully interested in the litigation so that only real controversies will be presented and the
judgment, when entered, will be binding and conclusive and the defendant will be saved from further harassment and vexation at the
hands of other claimants to the same demand.38
But the real party in interest need not be the person who ultimately will benefit from the successful prosecution of the action. Hence,
to aid itself in the proper identification of the real party in interest, the court should first ascertain the nature of the substantive right
being asserted, and then must determine whether the party asserting that right is recognized as the real party in interest under the rules
of procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling. 39
It is fundamental that the courts are established in order to afford reliefs to persons whose rights or property interests have been
invaded or violated, or are threatened with invasion by others conduct or acts, and to give relief only at the instance of such persons.
The jurisdiction of a court of law or equity may not be invoked by or for an individual whose rights have not been breached. 40
The remedial right or the remedial obligation is the persons interest in the controversy. The right of the plaintiff or other claimant is
alleged to be violated by the defendant, who has the correlative obligation to respect the right of the former. Otherwise put, without the
right, a person may not become a party plaintiff; without the obligation, a person may not be sued as a party defendant; without the
violation, there may not be a suit. In such a situation, it is legally impossible for any person or entity to be both plaintiff and defendant
in the same action, thereby ensuring that the controversy is actual and exists between adversary parties. Where there are no adversary
parties before it, the court would be without jurisdiction to render a judgment.41
There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine, Inc. alone, not to the Cuencas and
Tayactac in their own right. They were only stockholders of Arc Cuisine, Inc., which had a personality distinct and separate from that
of any or all of them.42 The damages occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine,
Inc., not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to claim and recover such damages. This right
could not also be asserted by the Cuencas and Tayactac unless they did so in the name of the corporation itself. But that did not happen
herein, because Arc Cuisine, Inc. was not even joined in the action either as an original party or as an intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties coming under the levy on
attachment by virtue alone of their being stockholders in Arc Cuisine, Inc. Their stockholdings represented only their proportionate or
aliquot interest in the properties of the corporation, but did not vest in them any legal right or title to any specific properties of the
corporation. Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.43
Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac lacked the legal personality to claim
the damages sustained from the levy of the formers properties. According to Asset Privatization Trust v. Court of Appeals, 44 even
when the foreclosure on the assets of the corporation was wrongful and done in bad faith the stockholders had no standing to recover
for themselves moral damages; otherwise, they would be appropriating and distributing part of the corporations assets prior to the
dissolution of the corporation and the liquidation of its debts and liabilities. Moreover, in Evangelista v. Santos, 45 the Court, resolving
whether or not the minority stockholders had the right to bring an action for damages against the principal officers of the corporation
for their own benefit, said:
As to the second question, the complaint shows that the action is for damages resulting from mismanagement of the affairs and assets
of the corporation by its principal officer, it being alleged that defendants maladministration has brought about the ruin of the
corporation and the consequent loss of value of its stocks. The injury complained of is thus primarily to the corporation, so that the
suit for the damages claimed should be by the corporation rather than by the stockholders (3 Fletcher, Cyclopedia of Corporation pp.
977-980). The stockholders may not directly claim those damages for themselves for that would result in the appropriation by, and the

distribution among them of part of the corporate assets before the dissolution of the corporation and the liquidation of its debts and
liabilities, something which cannot be legally done in view of section 16 of the Corporation Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any dividend whatsoever except from the surplus profits
arising from its business, or divide or distribute its capital stock or property other than actual profits among its members or
stockholders until after the payment of its debts and the termination of its existence by limitation or lawful dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not for the benefit of the corporation but for their own benefit,
since they ask that the defendant make good the losses occasioned by his mismanagement and pay to them the value of their respective
participation in the corporate assets on the basis of their respective holdings. Clearly, this cannot be done until all corporate debts, if
there be any, are paid and the existence of the corporation terminated by the limitation of its charter or by lawful dissolution in view of
the provisions of section 16 of the Corporation Law. (Emphasis ours)
It results that plaintiffs complaint shows no cause of action in their favor so that the lower court did not err in dismissing the complaint
on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of the Corporation Law be first
complied with, we note that the action stated in their complaint is susceptible of being converted into a derivative suit for the benefit
of the corporation by a mere change in the prayer. Such amendment, however, is not possible now, since the complaint has been filed
in the wrong court, so that the same has to be dismissed.46
That Maraon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still excluded Arc Cuisine, Inc. from his
complaint was of no consequence now. The Cuencas and Tayactac still had no right of action even if the affected properties were then
under their custody at the time of the attachment, considering that their custody was only incidental to the operation of the corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action to recover damages resulting
from the attachment. Such action would be one directly brought in the name of the corporation. Yet, that was not true here, for,
instead, the Cuencas and Tayactac presented the claim in their own names.
In view of the outcome just reached, the Court deems it unnecessary to give any extensive consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS ASIDE the decision of the Court of Appeals
in CA-G.R. CV No. 79145 promulgated on January 31,2006.
No pronouncements on costs of suit.
SO ORDERED.
LUCAS P. BERSAMIN
Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

MARTIN S. VILLARAMA, JR.

Associate Justice

BIENVENIDO L. REYES
Associate Justice
C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the Court's Division.

MARIA LOURDES P. A. SERENO

Chief Justice
CASE 8 RULE 3 SECTION 3 REPRESENTATIVE AS PARTIES
Facts:
On September 2, 1992, spouses Alan and EmAng (respondents) obtained a loan in the amount of Three Hundred Thousand
U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang (petitioners). On even date, the respondents executed a promissory
notein favor of the petitioners wherein they promised to pay the latter the said amount, with interest at the rate of ten percent (10%)
per annum, upon demand. However, despite repeated demands, the respondents failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay their outstanding debt
which, at that time, already amounted to Seven Hundred Nineteen Thousand, Six Hundred Seventy-One U.S. Dollars and TwentyThree Cents (US$719,671.23), inclusive of the ten percent (10%) annual interest that had accumulated over the years.
Notwithstanding the receipt of the said demand letter, the respondents still failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States of America (USA),
executed their respective Special Powers of Attorney6 in favor of Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the purpose of
filing an action in court against the respondents. On September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a
Complaint7for collection of sum of money with the RTC of Quezon City against the respondents.
Issues:
WON Atty. Aceron, being merely a representative of the petitioners, is not the real party in interest in the case.
Held:
Atty. Aceron, despite being the attorney-in-fact of the petitioners, is not a real party in interest in the case below. Section 2,
Rule 3 of the Rules of Court reads:
Sec. 2.Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted
or defended in the name of the real party in interest.
Interest within the meaning of the Rules of Court means material interest or an interest in issue to be affected by the decree or
judgment of the case, as distinguished from mere curiosity about the question involved. A real party in interest is the party who, by the
substantive law, has the right sought to be enforced.
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case below as he does not stand to
be benefited or injured by any judgment therein. He was merely appointed by the petitioners as their attorney-in-fact for the limited
purpose of filing and prosecuting the complaint against the respondents. Such appointment, however, does not mean that he is
subrogated into the rights of petitioners and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not have the right to file the
complaint below against the respondents. He may only do so, as what he did, in behalf of the petitioners the real parties in interest.
To stress, the right sought to be enforced in the case below belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-infact is not a real party in interest.
CASE 9 RULE 3 SECTION 7 COMPULSORYJOINDER OF INDISPENSIBLE PARTIES

Simny G. Guy, Geraldine G. Guy, Gladys G. Yao, and Heirs of the late Grace G. Cheu ( petitioners) vs. Gilbert G.
Guy (respondent) and

Simny G. Guy, Geraldine G. Guy, Gladys G. Yao, and Heirs of the late Grace G. Cheu (petitioners) vs. Hon. Ofelia C.
Calo (Presiding Judge, RTC Mandaluyong), and Gilbert G. Guy (respondents)

SC Second Division, promulgated September 5, 2012

Topics Covered: Corporation Law (1) intra-corporate controversy; (2) money claim; (3) endorsement of stock certificate

Facts:
Gilbert G. Guy son of spouses Simny and Francisco Guy, claims to own 80% of their multi-million family corporation
GoodGold Realty Development Inc, stating that he owns 519, 997 shares (fully paid upon incorporation) out of the 650,000 subscribed
capital stock. His mother Simny however contends that it was she and her husband who established the corporation and only placed
the bulk of the shares in Gilberts name because being their son, they had entrusted to him the future of their corporations. She further
claims that during the incorporation of GoodGold, they were advised by their lawyers to issue the stock certificates with
corresponding blank endorsements signed by Francisco as President and Atty. Paras as Corporate Secretary.; including Stock
Certificate Nos. 004-014 under Gilberts name.
In 1999, Francisco gave instructions to redistribute the shares of the corporation evenly among his children while maintaining
a proportionate share for himself and Simny. Hence, GoodGolds certificates were cancelled and new ones were issued showing that
the 4 siblings had 65,000 shares each while the spouses had 195,000 shares each.
Five years after the redistribution, Gilbert brought an action against his mother Simny and his sisters for the annulment of the
said transfers of shares along with some corporate documents, alleging fraud and that his signatures at the back of the stock
certificates which purportedly endorsed the same were forged and must be nullified. NBI reports on the examination of
signatures however showed them to be authentic. Gilbert withdrew his complaint. Three years thereafter, a new action was filed by
Gilbert with the caption Intra-corporate Controversy: For the Declaration of Nullity of Fraudulent Transfers of Shares of Stock
Certificates, Fabricated Shares of Stocks, Falsified General Information Sheets, Minutes of Meetings, etc against his mother and
sisters.

Gilbert claims that he is unaware of any document signed by him that would justify and support the transfer of his
shares to herein petitioners.
Simny and daughters filed their manifestation that the action filed by Gilbert was a mere nuisance and harassment suit under
Sec 1(b), Rule 1 of the Interim Rules of Procedure on Intra-Corporate Controversies.
RTC dismissed the case as a nuisance and harassment suit, CA reversed RTC.

Held:
Allegations of deceit, machination, false pretenses, misrepresentation, and threats are largely conclusions of law that, without
supporting statements of the facts to which the allegations of fraud refer, do not sufficiently state an effective cause of action.
Tested against established standards, we find that the charges of fraud which Gilbert accuses his siblings are not
supported by the required factual allegations.
Not every allegation of fraud done in a corporate setting or perpetrated by corporate officers will bring the case within the
special commercial courts jurisdiction. To fall within this jurisdiction, there must be sufficient nexus showing that the
corporations nature, structure, or powers, were used to facilitate the fraudulent device or scheme.

Failure to specifically allege the fraudulent acts in intra-corporate controversies is indicative of a harassment or nuisance suit and
may be dismissed motu proprio.

In ordinary cases, the failure to specifically allege the fraudulent acts does not constitute a ground for dismissal since such a
defect can be cured by a bill of particulars.
A bill of particulars may be ordered as to a defense of fraud or mistake if the circumstances constituting fraud or mistake are
not stated with the particularity required by the rule.
The above-stated rule, however, does not apply to intra-corporate controversies In cases governed by the Interim Rules of
Procedure on Intra-corporate Controversies, a bill of particulars is a prohibited pleading This is because fraud in intra-corporate
controversies must be based on devises and schemes, employed by, or any act of, the board of directors, business associates, officers
or partners, amounting to fraud or misrepresentation which may be detrimental to the interest of the public and/or of the stockholders,
partners, or members of any corporation, partnership, or association, as stated under Rule 1, Section 1 (a)(1) of the Interim Rules.

The act of fraud or misrepresentation complained of becomes a criterion in determining whether the complaint on its face has merits,
or within the jurisdiction of special commercial court, or merely a nuisance suit.

When a stock certificate is endorsed in blank by the owner thereof, it constitutes what is termed as a street certificate, so that upon
its face the holder is entitled to demand its transfer to his name from the issuing corporation.

With Gilberts failure to allege specific acts of fraud in his complaint and his failure to rebut the NBI report, this court
pronounces, as a consequence thereof, that the signatures appearing on the stock certificates, including his blank endorsement thereon
were authentic. With the stock certificates having been endorsed in blank by Gilbert which he himself delivered to his parents, the
same can be cancelled and transferred in the names of herein petitioners.
CASE 10 RULE 4 VENUE OF ACTIONS SECTION 1 VENUE OF REAL ACTIONS
G.R. No. 179018, April 17, 2013
Paglaum Management and Dev't Corp. and Health Marketing Technologies, Inc., petitioners
vs Union Bank of the Philippines, etc., respondents
Ponente: Sereno
Facts:
Union Bank filed this motion for reconsideration saying that restructuring agreement is null and void because the borrower has not
complied with the condition precedent of the bank. It is also unenforceable because it was only between Health and Union bank.
Paglaum was a party only to the real estate mortgages and not in the restructuring agreement. The venue is exclusively in Cebu City,
and the assumption of the RTC's jurisdiction was without basis.
Held:
We deny the Motion for Reconsideration.
Issues raised for the first time in a motion for reconsideration before this Court are deemed waived, because these should have been
brought up at the first opportunity.7 Nevertheless, there is no cogent reason to warrant a reconsideration or modification of our 18
June 2012 Decision.
Union Bank raises three new issues that require a factual determination that is not within the province of this Court.8 These questions
can be brought to and resolved by the RTC as it is the proper avenue in which to raise factual issues and to present evidence in support
of these claims.
Anent Union Bank's last contention, there is no need for the Court to discuss and revisit the issue, being a mere rehash of what we
have already resolved in our Decision.
WHEREFORE, in view of the foregoing, we DENY the Motion for Reconsideration with FINALITY.
CASE 11 RULE 4 VENUE OF ACTIONS SECTION 2 VENUE OF PERSONAL ACTIONS
THIRD DIVISION

AUCTION IN MALINTA, INC., G.R. No. 173979

Petitioner,
Present:
- versus - Ynares-Santiago, J. (Chairperson),

Austria-Martinez,
Callejo, Sr.,
Chico-Nazario, and
Nachura, JJ.
WARREN EMBES LUYABEN,
Respondent. Promulgated:
February 12, 2007
x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court is the May 31, 2005 Decision [1] of the Court of
Appeals in CA-G.R. CV No. 78456, which held that venue was properly laid before the Regional Trial Court of Bulanao, Tabuk,
Kalinga (Kalinga RTC), and reversed the trial courts September 3, 2002 Resolution [2]dismissing the complaint of respondent Warren
Embes Lubayen in Civil Case No. 511, on the ground of improper venue.

The facts show that on October 24, 2001, respondent, a resident of Magsaysay, Tabuk, Kalinga, filed with the Kalinga RTC a
complaint[3] for damages against petitioner Auction in Malinta, Inc., a corporation with business address at Malinta, Valenzuela City,
and engaged in public auction of heavy equipments, trucks, and assorted machineries.Respondent alleged that in an auction conducted
by petitioner on May 29, 2001, he was declared the highest bidder for a wheel loader T.C.M. 75B, series no. 3309. On June 7, 2001,
respondent tendered the payment for the said item but petitioner could no longer produce the loader. It offered a replacement but failed
to deliver the same up to the filing of the complaint. Hence, respondent instituted this case to recover actual, moral, and exemplary
damages plus attorneys fees.

Petitioner filed a motion to dismiss on the ground of improper venue. It argued that the correct venue is the RTC of Valenzuela City
pursuant to the stipulation in the Bidders Application and Registration Bidding Agreement which states that:

ALL COURT LITIGATION PROCEDURES SHALL BE CONDUCTED IN THE APPROPRIATE COURTS

OF VALENZUELA CITY, METRO MANILA.[4]

In a Resolution dated September 3, 2002, the Kalinga RTC held that the clear intention of the parties was to limit the venue to
the proper court of Valenzuela City and thus dismissed respondents complaint on the ground of improper venue. [5]

Aggrieved, respondent appealed to the Court of Appeals which reversed the Resolution of the Kalinga RTC and reinstated the
complaint. The dispositive portion thereof, reads:

WHEREFORE, the Resolution appealed from is hereby REVERSED and SET ASIDE. The case is
remanded to the RTC which is ordered to reinstate plaintiffs complaint for damages.

SO ORDERED.[6]

Petitioners motion for reconsideration was denied; hence, the instant petition.

The sole issue is whether the stipulation in the parties Bidders Application and Registration Bidding Agreement effectively
limited the venue of the instant case exclusively to the proper court of Valenzuela City.

The Court rules in the negative.

The general rule on the venue of personal actions, as in the instant case for damages [7] filed by respondent, is embodied
in Section 2, Rule 4 of the Rules of Court. It provides:

Sec. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or any
of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of
a nonresident defendant, where he may be found, at the election of the plaintiff.

The aforequoted rule, however, finds no application where the parties, before the filing of the action, have validly agreed in
writing on an exclusive venue.[8] But the mere stipulation on the venue of an action is not enough to preclude parties from bringing a
case in other venues. It must be shown that such stipulation is exclusive. In the absence of qualifying or restrictive words, such
as exclusively and waiving for this purpose any other venue,[9] shall only preceding the designation of venue, [10] to the exclusion of the
other courts,[11] or words of similar import, the stipulation should be deemed as merely an agreement on an additional forum, not as
limiting venue to the specified place.[12]

This has been the rule since the 1969 case of Polytrade Corporation v. Blanco.[13] It was held therein that the clause [t]he
parties agree to sue and be sued in the Courts of Manila, does not preclude the filing of suits in the court which has jurisdiction over
the place of residence of the plaintiff or the defendant. The plain meaning of the said provision is that the parties merely consented to
be sued in Manila considering that there are no qualifying or restrictive words which would indicate that Manila, and Manila alone, is
the agreed venue. It simply is permissive and the parties did not waive their right to pursue remedy in the courts specifically
mentioned in Section 2 of Rule 4 of the Rules of Court.[14]

The Polytrade doctrine was further applied in the case of Unimasters Conglomeration, Inc. v. Court of Appeals,[15] which
analyzed the various jurisprudence rendered after the Polytrade case. In Unimasters, we held that a stipulation stating that [a]ll suits
arising out of this Agreement shall be filed with/in the proper Courts of Quezon City, [16]is only permissive and does not limit the venue
to the Quezon City courts. As explained in the said case:

In other words, unless the parties make very clear, by employing categorical and suitably limiting language, that
they wish the venue of actions between them to be laid only and exclusively at a definite place, and to disregard the
prescriptions of Rule 4, agreements on venue are not to be regarded as mandatory or restrictive, but merely
permissive, or complementary of said rule. The fact that in their agreement the parties specify only one of the venues
mentioned in Rule 4, or fix a place for their actions different from those specified by said rule, does not, without

more, suffice to characterize the agreement as a restrictive one. There must, to repeat, be accompanying language
clearly and categorically expressing their purpose and design that actions between them be litigated only at the place
named by them, regardless of the general precepts of Rule 4; and any doubt or uncertainty as to the parties intentions
must be resolved against giving their agreement a restrictive or mandatory aspect. Any other rule would permit of
individual, subjective judicial interpretations without stable standards, which could well result in precedents in
hopeless inconsistency.[17]

The rule enunciated in Unimasters and Polytrade was reiterated in subsequent cases where the following agreements on
venue were likewise declared to be merely permissive and do not limit the venue to the place specified therein, to wit:

1. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25% of the principal
amount will be charged. The agreed venue for such action is Makati, Metro Manila, Philippines.[18]

2. In case of litigation hereunder, venue shall be in the City Court or Court of First Instance of Manila as the case
may be for determination of any and all questions arising thereunder.[19]

Then too, the doctrine that absent qualifying or restrictive words, the venue shall either be that stated in the law or rule
governing the action or the one agreed in the contract, was applied to an extra-judicial foreclosure sale under Act No. 3135.
[20]
In Langkaan Realty Development, Inc. v. United Coconut Planters Bank,[21] where the provision on the venue employed the word
shall to refer to the place where the foreclosure will be held, the Court ruled that said provision lack(s) qualifying or restrictive words
to indicate the exclusivity of the agreed forum, and therefore the stipulated place is considered only as an additional, not a limiting
venue.[22] The said stipulation reads:

It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, as amended, and
Presidential Decree No. 385, the auction sale shall be held at the capital of the province, if the property is within the
territorial jurisdiction of the province concerned, or shall be held in the city, if the property is within the territorial
jurisdiction of the city concerned.[23]

In the instant case, the stipulation in the parties agreement, i.e., all Court litigation procedures shall be conducted in the
appropriate Courts of Valenzuela City, Metro Manila, evidently lacks the restrictive and qualifying words that will limit venue
exclusively to the RTC of Valenzuela City. Hence, the Valenzuela courts should only be considered as an additional choice of venue to
those mentioned under Section 2, Rule 4 of the Rules of Court. Accordingly, the present case for damages may be filed with the (a)
RTC of Valenzuela City as stipulated in the bidding agreement; (b) RTC of Bulanao, Tabuk, Kalinga which has jurisdiction over the
residence of respondent (plaintiff); or with the (c) RTC of Valenzuela City which has jurisdiction over the business address of
petitioner (defendant). The filing of the complaint in the RTC of Bulanao, Tabuk, Kalinga, is therefore proper, respondent being a
resident of Tabuk, Kalinga.

The case of Hoechst Philippines, Inc. v. Torres,[24] promulgated in 1978, and invoked by petitioner in its motion to dismiss,
had already been superseded by current decisions on venue. In the said case, the Court construed the proviso: [i]n case of any litigation
arising out of this agreement, the venue of action shall be in the competent courts of the Province of Rizal,[25] as sufficient to limit the
venue to the proper court of Rizal. However, in Supena v. De la Rosa,[26] we ruled that Hoechst had been rendered obsolete by recent
jurisprudence applying the doctrine enunciated in Polytrade.

In sum, we find that the Court of Appeals correctly declared that venue in the instant case was properly laid with the RTC of
Bulanao, Tabuk, Kalinga.

WHEREFORE, the petition is DENIED. The May 31, 2005 Decision of the Court of Appeals in CA-G.R. CV No. 78456
which reversed the September 3, 2002 Resolution of the Regional Trial Court of Bulanao, Tabuk, Kalinga; reinstated the complaint in
Civil Case No. 511; and remanded the case to the said court, is AFFIRMED.

Costs against petitioner.

SO ORDERED.

CASE 11 RULE 5 UNIFORM PROCEDURE IN TRIAL COURTS SECTION 1 UNIFORM PROCEDURE

PURCON vs. MRM PHILIPPINES, INC. - HAJ
G.R. No. 182718, September 26, 2008
Facts:
Petitioner was hired by respondent MRM Philippines, Inc as a seaman on January 28, 2002. On June 2002, petitioner felt an
excruciating pain in his left testicle. After being examined, he was diagnosed with hernia. Subsequently, petitioner was repatriated due
to his ailment. Upon his return to the Philippines, petitioner was again examined by the company physician and the latter declared that
he was fit to resume work. When petitioner reported to MRM Philippines, Inc. hoping to be re-hired for another contract, he was told
that there was no vacancy for him. Petitioner a complaint filed by petitioner for reimbursement of medical expenses, sickness
allowance and permanent disability benefits with prayer for compensatory, moral and exemplary damages and attorney's fees before
the Labor Arbiter.However, the Labor Arbiter dismissed the complaint for utter lack of merit. On appeal, the NLRC affirmed the
decision of the labor arbiter.
Thereafter, petitioner filed a petition for certiorari under Rule 65 of the Revised Rules of Court with the Court of Appeals
(CA). However, the CA dismissed the case due to formal infirmities. Petitioner's motion for reconsideration was also
denied. Subsequently, the CA resolution became final and executory .Petitioner filed with this Court a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure assailing the resolutions of the CA, which dismissed his petition for certiorari. In
Our Resolution dated July 16, 2007, We denied the petition. Thus, petitioner filed the instant petition for relief from judgment.
Issue: Can petitioner avail of a petition for relief from judgment under Rule 38 of the 1997 Rules of Civil Procedure from Our
resolution denying his petition for review?
Ruling:
We answer in the negative. A petition for relief from judgment is not an available remedy in the Supreme Court.
First, although Section 1 of Rule 38 states that when a judgment or final order is entered through fraud, accident, mistake, or excusable
negligence, a party in any court may file a petition for relief from judgment, this rule must be interpreted in harmony with Rule 56,
which enumerates the original cases cognizable by the Supreme Court. A petition for relief from judgment is not included in the list of
Rule 56 cases originally cognizable by this Court.
Second, while Rule 38 uses the phrase "any court," it refers only to Municipal/Metropolitan and Regional Trial Courts.
Third, the procedure in the CA and the Supreme Court are governed by separate provisions of the Rules of Court. Neither the Rules of
Court nor the Revised Internal Rules of the CA allows the remedy of petition for relief in the CA.There is no provision in the Rules of
Court making the petition for relief applicable in the CA or this Court. The procedure in the CA from Rules 44 to 55, with the
exception of Rule 45 which pertains to the Supreme Court, identifies the remedies available before said Court such as annulment of
judgments or final orders or resolutions (Rule 47), motion for reconsideration (Rule 52), and new trial (Rule 53). Nowhere is a
petition for relief under Rule 38 mentioned.If a petition for relief from judgment is not among the remedies available in the CA, with
more reason that this remedy cannot be availed of in the Supreme Court. A petition for relief raises questions of facts on fraud,
accident, mistake, or excusable negligence, which are beyond the concerns of this Court.