CIVIL PROCEDURE: JUDGMENT ON THE PLEADINGS

G.R. No. L-18453 September 29, 1962

CAMPOS RUEDA CORPORATION, petitioner, vs. HON. JOSE S. BAUTISTA, as Presiding Judge,
HON. BALTAZAR M. VILLANUEVA, HON. ARSENIO I. MARTINEZ, HON. AMANDO C. BUGAYONG,
as Associate Judges, COURT OF INDUSTRIAL RELATIONS, and MANUEL MUYOT, respondents.

Respondent Muyot was employed by petitioner at its gasoline station located at 1012 Azcarraga
St. (now Recto Avenue), Manila, at a monthly salary of P200.00 from May 21, 1949 to May 31,
1953, and at P230.00 from June 1 to December 31, 1953. On November 26, 1958 he filed a
complaint against petitioner with the Court of Industrial Relations (Case No. 1140-V) to recover
compensation for alleged overtime, Sunday and holiday services rendered during said period.

On December 8, 1958 petitioner moved to dismiss the complaint on the following grounds: that
the claims set forth therein were barred by (a) the statute of limitations; (b) the decision
rendered by Regional Office No. 1, Department of Labor in Case No. C-4364 entitled "Manuel
Muyot Complainant, vs. Super Service and Auto Supply, Jose A. Campos, Manager, Respondent";
and by the decisions of the Court of First Instance of Manila in Civil Case No. 30138 entitled
"Manuel Muyot, Plaintiff, vs. Campos Rueda Corporation, Defendant", and in Civil Corporation,
Civil Case No. 36060 entitled "Campos Rueda petitioner, vs. Juliano E. Estrella, etc., et al.,
Respondents".

Respondent Muyot opposed said motion to dismiss alleging that, as the decisions relied upon
therein were rendered by courts that had no jurisdiction over the subject-matter, the same did
not constitute res judicata; that his causes of action were not barred by the statute of limitations
because the legal period provided for in Section 7-A of Commonwealth Act No. 444, as amended
by Republic Act No. 1993, was interrupted when he filed a case with the Department of Labor on
October 27, 1955 and another with the Court of First Instance on July 7, 1956.

On March 17, 1959, petitioner filed a supplementary motion to dismiss alleging that the Court
had no jurisdiction over the subject-matter because the complaint did not seek the
reinstatement of Muyot who, according to the complaint, ceased to be an employee of
petitioner since December 31, 1953. In other words, the claim merely involved collection of pay
for overtime, Sunday and holiday work.

On August 3, 1959, the Court of Industrial Relations, through Judge Arsenio I. Martinez, denied
petitioner's motion to dismiss and required him to answer the complaint. In its order of August
15, 1959, the respondent court, in banc, also denied petitioner's motion for reconsideration.

On November 11, 1959, petitioner filed its answer denying respondent's claim for overtime and
Sunday and holiday services pay. Among other affirmative defenses it reasserted its contention
that respondent court had no jurisdiction over the subject matter of the case.

During the trial, upon motion of respondent Muyot, respondent court issued a subpoena duces
tecum requiring the petitioner "to bring the Daily Time Records of employees working at the
Super Service Station for the years 1952-1953".
Petitioner filed a motion to quash the subpoena on the ground that (a) it did not reasonably
designate the particular employee or employees' daily time record concerned, but gave a blanket
description which the rules do not allow; (b) that the records sought to be produced did not
appear to be prima facie relevant to the issue involved in the case and (c) that the respondent in
whose behalf the subpoena duces tecum was issued had not offered or tendered to advance the
reasonable cost of producing the records sought to be produced.

On June 24, 1960, the respondent court, through Judge Jose S. Bautista, denied the motion to
quash, and on July 11, 1960, the court, in banc, also denied petitioner's motion for
reconsideration.1awphl.nt

Hence the present original action for Certiorari, and Prohibition filed by Campos Rueda
Corporation, to annul the respondent court's orders of August 3 and 15, 1959, June 24 and July
11, 1960 mentioned heretofore.

The allegations made in Muyot's complaint against petitioner show conclusively that his
employment with the latter was terminated on December 31, 1953 almost five years before
said complaint was filed; that, without asking for his reinstatement, neither directly nor indirectly,
he only sought to collect what, in his opinion, was due and payable to him for overtime Sunday
and holiday services he had rendered to his former employer during the period of his
employment.

In Roman Catholic Archbishop, etc. vs. Jimenez Yanson, et al., G.R. Nos. L-12341 and L-12345
decided on April 30, 1958, we held:

In the present case, it is apparent that the petition below is simply for the collection of
unpaid salaries and wages alleged to be due for services rendered years ago. No labor
dispute appears to be presently involved since the petition itself indicates that the
employment has long terminated and petitioners are not asking that they be reinstated.
Clearly, the petition does not fall under any of the cases enumerated in the law as coming
within the jurisdiction of the Industrial Court, so that it was error for that court not to have
ordered its dismissal.

In the Mindanao Bus Employees, etc. vs. The Court of Industrial Relations, et al., we also held:

The petitioner union claims, that its members employed by the respondent company are
entitled to overtime wages which have not been paid notwithstanding repeated demands,
and prays 'that after due hearing, respondent employer be ordered to pay for the herein
claims and for such other relief as justice and equity may merit.' It is clear that the case is
for collection of overtime wages claimed to be due and unpaid and does not involve hours
of employment under Commonwealth Act No. 444. Hence the Court does not have
jurisdiction over the case and correctly dismissed the petition.

Again, in Price Stabilization Corporation vs. Court of Industrial Relations, et al., G.R. No. L-13806,
decided on May 23, 1960, we clearly and unequivocably restated the same view as follows:

. . . where the employer-employee relationship is still existing or is sought to be

 reestablished because of its wrongful severance (as where the employee seeks
reinstatement), the Court of Industrial Relations has jurisdiction over all claims arising out of,
or in connection with employment, such as those related to the Minimum Wage Law and
the Eight-Hour Labor Law. After the termination of the relationship and no reinstatement is
sought, such claims become mere money claims, and come within the jurisdiction of the
regular courts.

We are aware that in 2 cases, Mindanao Bus Employees Labor Union (PLUM) v. Mindanao
Bus Co., et al., G.R. No. L-9795, prom. December 28, 1957; Gomez v. North Camarines
Lumber Co., Inc., G.R. No. L-11945, prom. August 18, 1958, some statements implying a
different view have been made but we now hold and declare the principle set forth in the
next preceding paragraph as the one governing all cases of this nature.

Three days after the promulgation of the decision in the Price Stabilization case (supra), we again
held in Sta. Cecilia Saw Mills Co. vs. Court of Industrial Relations, et al., G.R. Nos. L-14254-55:

It appears from the "compliance" of the respondents . . . that they are no longer in the
service of the petitioner, . . . and that they are not seeking reinstatement to their respective
positions. Hence no labor dispute is involved in the case and for that reason the Court of
Industrial Relations has no jurisdiction to hear and determine the respondents' petition.

The decisions abovequoted apply squarely to the present case, making it clear and beyond
question that the Court of Industrial Relations does not have jurisdiction over respondent
Muyot's claims subject matter of case No. 1140-V filed with said court.

Respondent Muyot must have finally realized that the Court of Industrial Relations had no
jurisdiction over his claims for, according to his answer filed in the present case, he had filed on
July 14, 1961 more than two years after the filing of his action a motion for leave to amend
his complaint and to admit the amended complaint attached to his motion, the amendment
consisting precisely in the addition of a third cause of action where inter alia, he alleged that on
May 31, 1953, he was illegally dismissed by herein petitioner and that, as a consequence he was
entitled to reinstatement, with back wages from the date of his illegal dismissal up to his actual
reinstatement.

Obviously the purpose of the amendment was to make his case fall within the jurisdiction of the
respondent court. This attempt is in our opinion, of no avail.

It is settled in this jurisdiction that the jurisdiction of a court is determined by the allegations
made in the complaint or petition. On the other hand, we have also held heretofore that this
principle applies to proceedings in the Court of Industrial Relations (Administrator, etc. vs.
Alberto, et al., G.R. No. L-12133, October 31, 1958).

The insufficiency of the allegations of Muyot's complaint to place his action within the
jurisdiction of the respondent court could not be cured by amendment, for in Rosario vs.
Carandang, we clearly held that "a complaint can not be amended so as to confer jurisdiction on
the court in which it is filed, if the cause of action originally set forth was not within the court's
jurisdiction." (51 O.G. 2387, April 28, 1955).
Moreover, the record does not show at all that the Court of Industrial Relations had admitted the
amended complaint.

In the light of our view on the question of jurisdiction, we deem it unnecessary, for the purpose
of this decision, to decide the questions of res judicata and prescription of the causes of action
raised in the petition under consideration.

WHEREFORE the writs prayed for are granted and, as a consequence, the orders complained of
are annulled. With costs.
G.R. No. 132753 February 15, 1999

MARIO SIASOCO, ANGELITA E. SIASOCO, MA. BELLA SIASOCO, ESTER SIASOCO-LAMUG, MA.
LOURDES SIASOCO LAMUG-BARRIOS, MA. RAMONA SIASOCO-LAMUG, MA. VICTORIA
SIASOCO LAMUG-DOMINGUEZ, BELEN SIASOCO-JOSE, RAFAEL SIASOCO JOSE, CYNTHIA
SIASOCO JOSE, CRISTINA SIASOCO JOSE, ROBERTO SIASOCO JOSE, CARIDAD SIASOCO JOSE,
RAMON SIASOCO JOSE, OSCAR SIASOCO, RUBEN SIASOCO, SALOME SIASOCO-PAZ, MEDARDO
PAZ SIASOCO, ROLANDO PAZ SIASOCO, JESUS PAZ SIASOCO, NELLY STO. DOMINGO NARIO,
MARY GRACE STO. DOMINGO NARIO and MARY ANNE STO. DOMINGO NARIO, petitioners,
vs.
COURT OF APPEALS; HON. MARCELINO BAUTISTA JR., Presiding Judge, Branch 215, Regional
Trial Court, Quezon City; and the IGLESIA NI CRISTO, respondents.

Notwithstanding the filing of a responsible pleading by one defendant, the complaint may still
be amended once, as a matter of right, by the plaintiff in respect to claims against the
non-answering defendant(s). The Court also reiterates that certiorari is not the proper remedy to
contest a lower court's final adjudication, since appeal is available as a recourse.

Statement of the Case

Petitioners assail the February 25, 1998 Decision1 of the Court of Appeals 2
in CA-GR SP No.
45451, the dispositive portion of which reads:

WHEREFORE, [the] foregoing considered, the present petition for certiorari is hereby
DENIED for lack of merit. The Temporary Restraining Order issued by this Court on
December 17, 1997 is hereby lifted. Petitioners are given six (6) days from receipt of
this decision within which to file their answer. The motion for oral argument filed by
respondent is rendered moot. Respondent court is ordered to proceed and resolve the
case with deliberate speed. 3

The foregoing disposition affirmed two Orders of the Regional Trial Court (RTC) of Quezon City,
Branch 215, dated August 11, 1997 and September 11, 1997 in Civil Case No. Q-97-29960. 4 The
first Order (1) admitted the Amended Complaint; (2) dropped Defendant Carissa Homes
Development and Properties, Inc. (hereafter referred to as "Carissa") from the Complaint; and (3)
denied the Motion to Declare Defendants Siasoco et al. (herein petitioners) in Default. The
second Order denied the Motion for Suspension filed by defendants and directed them to file
their answer to plaintiff's Amended Complaint.

Undaunted, petitioners seek recourse in this Court. 5

The Facts

Petitioners were the registered owners of nine parcels of land located in Montalban, Rizal. In
December 1994, they began to offer the subject properties for sale. Subsequently, Iglesia ni
Cristo (INC) negotiated with the petitioners, but the parties failed to agree on the terms of the
purchase. More than a year later, both parties revived their discussion. In a letter dated
December 16, 1996, petitioners made a final offer to the INC. The latter's counsel sent a reply
received by Petitioner Mario Siasoco on December 24, 1996, stating that the offer was accepted,
but that the INC was "not amenable to your proposal to an undervaluation of the total
consideration." In their letter dated January 8, 1997, petitioners claimed that the INC had not
really accepted the offer, adding that, prior to their receipt of the aforementioned reply on
December 24, 1996, they had already "contracted" with Carissa for the sale of the said
properties "due to the absence of any response to their offer from INC."

Maintaining that a sale had been consummated, INC demanded that the corresponding deed be
executed in its favor. Petitioners refused. Then ensuing events narrated by the Court of Appeals,
as follows:

On January 14, 1997, private respondent filed a civil suit for [s]pecific [p]erformance
and [d]amages against petitioners and Carissa Homes and Development & Properties,
Inc. docketed as Civil Case No. Q-97-29960.

Petitioners filed therein a Motion to Dismiss on the ground of improper venue and lack
of capacity to sue.

Carissa Homes filed its answer to the complaint on February 24, 1997.

Pending resolution of petitioners' Motion to Dismiss, private respondent negotiated

with Carissa Homes which culminated in the purchase of the subject properties of
Carissa Homes by private respondent.

On April 24, 1997, private respondent filed an [A]mended [C]omplaint, dropping

Carissa Homes as one of the defendants and changing the nature of the case to a mere
case for damages.

Petitioners filed a Motion to Strike Out Amended Complaint, contending that the
complaint cannot be amended without leave of court, since a responsive pleading has
been filed.

On August 11, 1997, the first assailed order denying petitioners' Motion to Strike Out
Amended Complaint was rendered.

On August 31, 1997, petitioners filed a Motion for Suspension of Proceeding pending
the resolution [by] the respondent court of the Motion to Dismiss earlier filed.

On September 11, 1997, the second assailed order denying petitioners' Motion to
Suspend Proceeding was rendered[;] the Order reads:

Filed also last September 1, 1997 [was] a Motion for Suspension by the
defendant Siasoco thru their counsel Atty. Clara Dumandang-Singh. Although
the court could not consider the motion filed because it violates the new
rules on personal service, in the interest of justice, the court will resolve the
motion. In the resolution of this court dated August 11, 1997, it state[d] that
defendants [were being] given a period of five (5) days within which to file [an]
 answer to the Amended Complaint. The defendants here obviously refer to
the defendants Mario Siasoco, et. al. In the Motion for Suspension filed by the
defendants Siasoco, et al., the latter insist on the court resolving the motion
to dismiss. As stated in the resolution, the motion to dismiss is now moot and
academic because of the Amended Complaint from Specific Performance with
Damages to just Damages. For this court to resolve the Motion to Dismiss . . .
the first complaint, would be an exercise in futility. The main complaint now is
damages and no longer Specific Performance with damages which [was]
actually what the Resolution dated August 11, 1997 [was] all about. Be that as
it may, the court gives defendants Siasoco, et al. fifteen (15) days from receipt
of this Order to file their respective Answers to the Amended Complaint, not
from the receipt of the resolution of the Motion to Dismiss which will not be
forthcoming.

Ruling of the Court of Appeals

The Court of Appeals (CA) ruled that although private respondent could no longer amend its
original Complaint as a matter of right, it was not precluded from doing so with leave of court.
Thus, the CA concluded that the RTC had not acted with grave abuse of discretion in admitting
private respondent's Amended Complaint.

Petitioners argued that the trial court where the original Complaint for specific performance had
been filed was not the proper venue. Debunking petitioners' argument, the CA explained that
the RTC nevertheless had jurisdiction over the said Complaint. The CA also held that the
amended Complaint did not substantially alter private respondent's cause of action, since
petitioners were not being asked to legal obligation different from that stated in the original
Complaint.

Assignment of Errors

In their Memorandum, petitioners submit, for the consideration of this Court, the following,
issues: 6

A.

Whether or not the respondent Court of Appeals gravely erred in holding that the
respondent Judge's admission of INC's Amended Complaint was proper.

B.

Whether or not the respondent Court of Appeals gravely erred in affirming respondent
Judge's denial of petitioners' "Motion for Suspension."

C.
 Whether or not the respondent Court of Appeals gravely erred in refusing to hear
petitioners' application for a temporary restraining order and writ of preliminary
injunction.

Simply stated, the question is: did the CA err in affirming the two Orders of the RTC which had
allowed the Amended Complaint?

The Court's Ruling

The petition is devoid of merit. We sustain the Court of Appeals, but for reasons different from
those given in the assailed Decision.

Preliminary Issue:

Propriety of Certiorari

In their Petition and Memorandum, Mario Siasoco et. al. emphasize that "the instant suit was
commenced pursuant to Rule 65 of the 1997 Rules of Procedure" and allege "that Respondent
Court of Appeals committed grave abuse of discretion in issuing the challenged Decision
February 25, 1988 . . . ." This is a procedural error. For the writ certiorari under Rule 65 to issue,
the petitioner must show not only that the lower court acted with grave abuse of discretion, but
also that "there is no appeal, or any other plain, speedy, and adequate remedy in the ordinary
course of law." 7 Since the questioned CA Decision was a disposition on the merits, and since said
Court has no remaining issue to resolve, the proper remedy available to petitioners was a
petition for review under Rule 45, not Rule 65. Furthermore, as a general rule, certiorari under
Rule 65 cannot issue unless the lower court, through a motion for reconsideration, has been
given an opportunity to correct the imputed error.8 Although there are recognized exceptions to
this rule, petitioners do not claim that this case is one of them. For this procedural lapse, the
instant petition should be dismissed outright.

Nonetheless, inasmuch as the Petition was filed within the 15-day period provided under Rule 45,
and considering the importance of the issue raised and the fact that private respondent did not
question the propriety of the instant Petition, the Court treated the action as a petition for
review (not certiorari) under Rule 45 in order to accord substantial justice to the parties. We will
thus proceed to discuss the substantive issue.

Main Issue:

Admission of Amended Complaint

Petitioners argue that the lower courts erred in admitting the Amended Complaint. Under the
Rules, a "party may amend his pleading once as a matter of right at any time before a responsive
pleading is served . . . ." 9 When private respondent filed its Amended Complaint, Carissa, the
other party-defendant in the original Complaint, had already filed its Answer. Because a
responsive pleading had been submitted, petitioners contend that private respondent should
have first obtained leave of court before filing its Amended Complaint. This it failed to do. In any
event, such leave could nor have been granted, allegedly because the amendment had
substantially altered the cause of action.

This argument is not persuasive. It is clear that plaintiff (herein private respondent) can amend
its complaint once, as a matter of right, before a responsive-pleading is filed.10 Contrary to the
petitioners' contention, the fact that Carissa had already filed its Answer did not bar private
respondent from amending its original Complaint once, as a matter of right, against herein
petitioners. Indeed, where some but not all the defendants have answered, plaintiffs may amend
their Complaint once, as a matter of right, in respect to claims asserted solely against the
non-answering defendants, but not as to claims asserted against the other defendants. 11

The rationale for the aforementioned rule is in Section 3, Rule 10 of the Rules of Court, which
provides that after a responsive pleading has been filed, an amendment may be rejected when
the defense is substantially altered. 12Such amendment does not only prejudice the rights of the
defendant; it also delays the action. In the first place, where a party has not yet filed a
responsive pleading, there are no defenses that can be altered. Furthermore, the Court has held
that "[a]mendments to pleading are generally favored and should be liberally, allowed in
furtherance of justice in order that every case may so far as possible be determined on its real
facts and in order to speed the trial of cases or prevent the circuity of action and unnecessary
expense, unless there are circumstances such as inexcusable delay or the taking of the adverse
party by surprise or the like, which might justify a refusal of permission to amend." 13

In the present case, petitioners failed to prove that they were prejudiced by private
respondent's Amended Complaint. True, Carissa had already filed its own Answer.
Petitioners, however, have not yet filed any. Moreover, they do not allege that their defense
is similar to that of Carissa. On the contrary, private respondent's claims against the latter
and against petitioners are different. Against petitioners, whose offer to sell the subject
parcels of land had allegedly been accepted by private respondent, the latter is suing for
specific performance and damages for breach of contract. Although private respondent
could no longer amend, as a matter of right, its Complaint against Carissa, it could do so
against petitioners who, at the time, had not yet filed an answer.

The amendment did not prejudice the petitioners or delay the action. Au contraire, it simplified
the case and tended to expedite its disposition. The Amended Complaint became simply an
action for damages, since the claims for specific performance and declaration of nullity of the
sale have been deleted.

RTC Had Jurisdiction

Petitioners also insist that the RTC of Quezon City did not have jurisdiction over the original
Complaint; hence, it did not have any authority to allow the amendment. They maintain that the
original action or specific performance involving parcels of land in Montalban, Rizal should have
been filed in the RTC of that area. Thus, they chide the CA or allegedly misunderstanding the
distinction between territorial jurisdiction and venue, thereby erroneously holding that the RTC
had jurisdiction over the original Complaint, although the venue was improperly laid.
We disagree. True, an amendment cannot be allowed when the court has no jurisdiction over
the original Complaint and the purpose of the amendment is to confer jurisdiction on the court.
14
In the present case, however, the RTC had jurisdiction because the original Complaint involved
specific performance with damages. In La Tondea Distillers v. Ponferrada, 15 this Court ruled
that a complaint for "specific performance with damages" is a personal action and may be filed
in the proper court where any of the parties reside, viz.:

Finally, [w]e are not also persuaded by petitioner's argument that venue should be
lodged in Bago City where the lot is situated. The complaint is one for "specific
performance with damages." Private respondents do not claim ownership of the lot but
in fact [recognize the] title of defendants by annotating a notice of lis pendens. In one
case, a similar complaint for "specific performance with damages" involving real
property, was held to be a personal action, which may be filed in the proper court
where the party resides. Not being an action involving title to or ownership of real
property, venue, in this case, was not improperly laid before the RTC of Bacolod City. 16

WHEREFORE, the Petition is hereby DENIED. Costs against petitioners.

SO ORDERED.
G.R. No. 151932 August 19, 2009

HENRY CHING TIU, CHRISTOPHER HALIN GO, and GEORGE CO, Petitioners, vs. PHILIPPINE
BANK OF COMMUNICATIONS, Respondent.

PERALTA, J.:

This is a petition for review on certiorari, under Rule 45 of the Rules of Court, seeking to annul
and set aside the Decision1 dated September 28, 2001, rendered by the Court of Appeals (CA) in
CA-G.R. SP No. 57732, dismissing the petition and affirming the assailed Orders of the Regional
Trial Court (RTC) of Cagayan de Oro City, Branch 21 in Civil Case No. 99-352, dated December 14,
1999 and January 11, 2000.

The factual and procedural antecedents are as follows:

In June 1993, Asian Water Resources, Inc. (AWRI), represented by herein petitioners, applied for
a real estate loan with the Philippine Bank of Communications (PBCOM) to fund its purified
water distribution business. In support of the loan application, petitioners submitted a Board
Resolution2 dated June 7, 1993. The loan was guaranteed by collateral over the property covered
by Transfer Certificate of Title No. T-13020.3 The loan was eventually approved.4

In August 1996, AWRI applied for a bigger loan from PBCOM for additional capitalization using
the same Board Resolution, but without any additional real estate collateral. Considering that
the proposed additional loan was unsecured, PBCOM required all the members of the Board of
Directors of AWRI to become sureties. Thus, on August 16, 1996, a Surety Agreement5 was
executed by its Directors and acknowledged by a notary public on the same date. All copies of
the Surety Agreement, except two, were kept by PBCOM. Of the two copies kept by the notary
public, one copy was retained for his notarial file and the other was sent to the Records
Management and Archives Office, through the Office of the RTC Clerk of Court.6

Thereafter, on December 16, 1998, AWRI informed the bank of its desire to surrender and/or
assign in its favor, all the present properties of the former to apply as dacion en pago for AWRIs
existing loan obligation to the bank.7 On January 11, 1999, PBCOM sent a reply denying the
request. On May 12, 1999, PBCOM sent a letter to petitioners demanding full payment of its
obligation to the bank.8

Its demands having remained unheeded, PBCOM instructed its counsel to file a complaint for
collection against petitioners. The case was docketed as Civil Case No. 99-352.

On July 3, 1999, petitioners filed their Answer. It alleged, among other things, that they were not
personally liable on the promissory notes, because they signed the Surety Agreement in their
capacities as officers of AWRI. They claimed that the Surety Agreement attached to the
complaint as Annexes "A" to "A-2"9 were falsified, considering that when they signed the same,
the words "In his personal capacity" did not yet appear in the document and were merely
intercalated thereon without their knowledge and consent.10

In support of their allegations, petitioners attached to their Answer a certified photocopy of the
Surety Agreement issued on March 25, 1999 by the Records Management and Archives Office in
Davao City,11 showing that the words "In his personal capacity" were not found at the foot of
page two of the document where their signatures appeared.12

Because of this development, PBCOMs counsel searched for and retrieved the file copy of the
Surety Agreement. The notarial copy showed that the words "In his personal capacity" did not
appear on page two of the Surety Agreement.13

Petitioners counsel then asked PBCOM to explain the alteration appearing on the agreement.
PBCOM subsequently discovered that the insertion was ordered by the bank auditor. It alleged
that when the Surety Agreement was inspected by the bank auditor, he called the attention of
the loans clerk, Kenneth Cabahug, as to why the words "In his personal capacity" were not
indicated under the signature of each surety, in accordance with bank standard operating
procedures. The auditor then ordered Mr. Cabahug to type the words "In his personal capacity"
below the second signatures of petitioners. However, the notary public was never informed of
the insertion.14 Mr. Cabahug subsequently executed an affidavit15 attesting to the circumstances
why the insertion was made.

PBCOM then filed a Reply and Answer to Counterclaim with Motion for Leave of Court to
Substitute Annex "A" of the Complaint,16 wherein it attached the duplicate original copy
retrieved from the file of the notary public. PBCOM also admitted its mistake in making the
insertion and explained that it was made without the knowledge and consent of the notary
public. PBCOM maintained that the insertion was not a falsification, but was made only to speak
the truth of the parties intentions. PBCOM also contended that petitioners were already
primarily liable on the Surety Agreement whether or not the insertion was made, having
admitted in their pleadings that they voluntarily executed and signed the Surety Agreement in
the original form. PBCOM, invoking a liberal application of the Rules, emphasized that the
motion incorporated in the pleading can be treated as a motion for leave of court to amend and
admit the amended complaint pursuant to Section 3, Rule 10 of the Rules of Court.

On December 14, 1999, the RTC issued an Order17 allowing the substitution of the altered
document with the original Surety Agreement, the pertinent portion of which reads:

August 16, 1996 attached as Annexes "A" to "A-2" of the reply and answer Resolving the Motion
to Substitute Annexes "A" to "A-2" of the complaint and the opposition thereto by the defendant,
this Court, in the interest of justice, hereby allows the substitution of said Annexes "A" to "A-2"
of the complaint with the duplicate original of notarial copy of the Agreement dated to
counter-claim.

SO ORDERED.

Petitioners filed a motion for reconsideration,18 but it was denied in the Order19 dated January
11, 2000, to wit:

Resolving the motion for reconsideration and the opposition thereto, the Court finds the motion
substantially a reiteration of the opposition to plaintiffs motion.
Additionally, the instant motion for reconsideration treats on evidentiary matter which can be
properly ventilated in the trial proper, hence, there is no cogent reason to disturb the Courts
order of December 14, 1999.

SO ORDERED.

Aggrieved, petitioners sought recourse before the CA via a petition for certiorari under Rule 65
of the Rules of Court, docketed as CA-G.R. SP No. 57732.

Petitioners claimed that the RTC acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction in denying their motion for reconsideration
and in allowing PBCOM to substitute the altered copy of the Surety Agreement with the
duplicate original notarial copy thereof considering that the latters cause of action was solely
and principally founded on the falsified document marked as Annexes "A" to "A-2."20

On September 28, 2001, the CA rendered a Decision dismissing the petition for lack of merit, the
decretal portion of which reads:

WHEREFORE, foregoing considered, the instant petition is hereby DENIED DUE COURSE and,
accordingly, DISMISSED for lack of merit. The assailed Orders dated December 14, 1999 and
January 11, 2000 of the Regional Trial Court of Cagayan de Oro City, Branch 21, are hereby
AFFIRMED in toto.

SO ORDERED.21

Hence, the petition assigning the following errors:

The COURT committed a reversible error in affirming in toto the order of the lower court
allowing the substitution of the falsified document by relying on the provision of section 3, rule
10 of the rules of Court.

II

Acting as the court on the petition for certiorari, the court committed a reversible error having
no jurisdiction to rule on the obligation of the petitioners based on the falsified document

III

The court erred in giving credence to the allegation of respondent bank that from August 15 to
December 9, 1997 asian water resources inc. obtained several availments of new bigger and
additional loans totalLing p2,030,000.00 evidenced by 4 promissory notes marked as annexes
"B," "B-1," "B-2" and "B-3."

IV
The court failed to consider the misapplication of the principle of equity committed by the lower
court in ordering the substitution of the falsified document.22

Petitioners argue that the CA committed a reversible error in affirming the Order of the RTC
allowing the substitution of the document by relying on Section 3, Rule 10 of the Rules of Court.
Petitioners assert that the Rules do not allow the withdrawal and substitution of a "falsified
document" once discovered by the opposing party.

Petitioners maintain that PBCOMs cause of action was solely and principally founded on the
alleged "falsified document" originally marked as

Annexes "A" to "A-2." Thus, the "withdrawal" of the document results in the automatic
withdrawal of the whole complaint on the ground that there is no more cause of action to be
maintained or enforced by plaintiff against petitioners. Also, petitioners argue that if the
substitution will be allowed, their defenses that were anchored on Annexes "A" to "A-2" would
be gravely affected. Moreover, considering that the said document was already removed,
withdrawn, and disregarded by the RTC, the withdrawal and substitution of the document would
prevent petitioners from introducing the falsified documents during the trial as part of their
evidence.23

Petitioners submit that the RTC misapplied the principle of equity when it allowed PBCOM to
substitute the document with the original agreement. Petitioners also claim that the remedy of
appeal after the termination of the case in the RTC would become ineffective and inadequate if
the Order of the RTC allowing the "withdrawal" and "substitution" of the document would not
be nullified, because the falsified document would no longer be found in the records of the case
during the appeal.24

Petitioners contend that the CA went beyond the issue raised before it when it interpreted the
provisions of the Surety Agreement, particularly paragraph 4 thereof, and then ruled on the
obligations of the parties based on

the document. Petitioners posit that the CA prematurely ruled on petitioners obligations,
considering that their obligations should be determined during trial on the merits, after the
parties have been given the opportunity to present their evidence in support of their respective
claims. Petitioners stress that the CA went into the merit of the case when it gave credence to
the statement of fact of PBCOM that "From August 15 to December 9, 1997, Asian Water
Resources, Inc. obtained several availments on its additional loans totalling 2,030,000.00 as
evidenced by 4 promissory notes marked as Annexes B, B-1, B-2, and B-3. Thus, the conclusion of
the CA in declaring the petitioners liable as sureties violated their right to due process.25

For its part, PBCOM argues that since the complaint is based on an actionable document, i.e.,
the surety agreement, the original or a copy thereof should be attached to the pleading as an
exhibit, which shall be deemed part of the pleading. Considering that the surety agreement is
annexed to the complaint, it is an integral part thereof and its substitution with another copy is
in the nature of a substantial amendment, which is allowed by the Rules, but with prior leave of
court.
Moreover, PBCOM alleges that since the Rules provides that substantial amendments may be
made upon leave of court, the authority of the RTC to allow the amendment is discretionary.
Thus, the CA correctly held that the act of granting the said substitution was within the clear and
proper discretion of the RTC.

The petition is without merit.

As to the substitution of the earlier surety agreement that was annexed to the complaint with
the original thereof, this Court finds that the RTC did not err in allowing the substitution.

The pertinent rule on actionable documents is found in Section 7, Rule 8 of the Rules of Court,
which provides that when the cause of action is anchored on a document, its substance must be
set forth, and the original or a copy thereof "shall" be attached to the pleading as an exhibit and
deemed a part thereof, to wit:

Section 7. Action or defense based on document. Whenever an action or defense is based

upon a written instrument or document, the substance of such instrument or document shall be
set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as
an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect
be set forth in the pleading.

With respect to PBCOMs right to amend its complaint, including the documents annexed
thereto, after petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court
specifically allows amendment by leave of court. The said Section states:

SECTION 3. Amendments by leave of court. Except as provided in the next preceding section,
substantial amendments may be made only upon leave of court. But such leave may be refused
if it appears to the court that the motion was made with intent to delay. Orders of the court
upon the matters provided in this section shall be made upon motion filed in court, and after
notice to the adverse party, and an opportunity to be heard.

This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure
in Valenzuela v. Court of Appeals,26 thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in
such manner that the phrase "or that the cause of action or defense is substantially altered" was
stricken-off and not retained in the new rules. The clear import of such amendment in Section 3,
Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of
action or defense." This should only be true, however, when despite a substantial change or
alteration in the cause of action or defense, the amendments sought to be made shall serve the
higher interests of substantial justice, and prevent delay and equally promote the laudable
objective of the rules which is to secure a "just, speedy and inexpensive disposition of every
action and proceeding."27

The granting of leave to file amended pleading is a matter particularly addressed to the sound
discretion of the trial court; and that discretion is broad, subject only to the limitations that the
amendments should not substantially change the cause of action or alter the theory of the case,
or that it was not made to delay the action.28Nevertheless, as enunciated in Valenzuela, even if
the amendment substantially alters the cause of action or defense, such amendment could still
be allowed when it is sought to serve the higher interest of substantial justice; prevent delay;
and secure a just, speedy and inexpensive disposition of actions and proceedings.

The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of suits
and in order that the real controversies between the parties are presented, their rights
determined, and the case decided on the merits without unnecessary delay. This liberality is
greatest in the early stages of a lawsuit, especially in this case where the amendment was made
before the trial of the case, thereby giving the petitioners all the time allowed by law to answer
and to prepare for trial.29

Furthermore, amendments to pleadings are generally favored and should be liberally allowed in
furtherance of justice in order that every case, may so far as possible, be determined on its real
facts and in order to speed up the trial of the case or prevent the circuity of action and
unnecessary expense. That is, unless there are circumstances such as inexcusable delay or the
taking of the adverse party by surprise or the like, which might justify a refusal of permission to
amend.30

In the present case, there was no fraudulent intent on the part of PBCOM in submitting the
altered surety agreement. In fact, the bank admitted that it was a mistake on their part to have
submitted it in the first place instead of the original agreement. It also admitted that, through
inadvertence, the copy that was attached to the complaint was the copy wherein the words "IN
HIS PERSONAL CAPACITY" were inserted to conform to the banks standard practice. This
alteration was made without the knowledge of the notary public. PBCOMs counsel had no idea
that what it submitted was the altered document, thereby necessitating the substitution of the
surety agreement with the original thereof, in order that the case would be judiciously resolved.

Verily, it is a cardinal rule of evidence, not just one of technicality but of substance, that the
written document is the best evidence of its own contents. It is also a matter of both principle
and policy that when the written contract is established as the repository of the parties
stipulations, any other evidence is excluded, and the same cannot be used to substitute for such
contract, or even to alter or contradict the latter.31 The original surety agreement is the best
evidence that could establish the parties respective rights and obligations. In effect, the RTC
merely allowed the amendment of the complaint, which consequently included the substitution
of the altered surety agreement with a copy of the original.

It is well to remember at this point that rules of procedure are but mere tools designed to
facilitate the attainment of justice. Their strict and rigid application that would result in
technicalities that tend to frustrate rather than promote substantial justice must always be
avoided.32 Applied to the instant case, this not only assures that it would be resolved based on
real facts, but would also aid in the speedy disposition of the case by utilizing the best evidence
possible to determine the rights and obligations of the party- litigants.

Moreover, contrary to petitioners contention, they could not be prejudiced by the substitution
since they can still present the substituted documents, Annexes "A" to A-2," as part of the
evidence of their affirmative defenses. The substitution did not prejudice petitioners or delay the
action. On the contrary, it tended to expedite the determination of the controversy. Besides, the
petitioners are not precluded from filing the appropriate criminal action against PBCOM for
attaching the altered copy of the surety agreement to the complaint. The substitution of the
documents would not, in any way, erase the existence of falsification, if any. The case before the
RTC is civil in nature, while the alleged falsification is criminal, which is separate and distinct from
another. Thus, the RTC committed no reversible error when it allowed the substitution of the
altered surety agreement with that of the original.

A Petition for Certiorari under Rule 65 of the Rules of Court is intended for the correction of
errors of jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction.
Its principal office is only to keep the inferior court within the parameters of its jurisdiction or to
prevent it from committing such a grave abuse of discretion amounting to lack or excess of
jurisdiction.33

For a petition for certiorari to prosper, the essential requisites that have to concur are: (1) the
writ is directed against a tribunal, a board or any officer exercising judicial or quasi-judicial
functions; (2) such tribunal, board or officer has acted without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no
appeal or any plain, speedy and adequate remedy in the ordinary course of law.341avvphi1

The phrase without jurisdiction means that the court acted with absolute lack of authority or
want of legal power, right or authority to hear and determine a cause or causes, considered
either in general or with reference to a particular matter. It means lack of power to exercise
authority. Excess of jurisdiction occurs when the court transcends its power or acts without any
statutory authority; or results when an act, though within the general power of a tribunal, board
or officer (to do) is not authorized, and is invalid with respect to the particular proceeding,
because the conditions which alone authorize the exercise of the general power in respect of it
are wanting. Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as to be equivalent to lack or excess of jurisdiction; simply put, power is exercised in
an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility; and such
exercise is so patent or so gross as to amount to an evasion of a positive duty or to a virtual
refusal either to perform the duty enjoined or to act at all in contemplation of law.35

The present case failed to comply with the above-stated requisites. In the instant case, the
soundness of the RTCs Order allowing the substitution of the document involves a matter of
judgment and discretion, which cannot be the proper subject of a petition for certiorari under
Rule 65. This rule is only intended to correct defects of jurisdiction and not to correct errors of
procedure or matters in the trial courts findings or conclusions.

However, this Court agrees with the petitioners contention that the CA should not have made
determinations as regards the parties respective rights based on the surety agreement. The CA
went beyond the issues brought before it and effectively preempted the RTC in making its own
determinations. It is to be noted that the present case is still pending determination by the RTC.
The CA should have been more cautious and not have gone beyond the issues submitted before
it in the petition for certiorari; instead, it should have squarely addressed whether or not there
was grave abuse of discretion on the part of the RTC in issuing the Orders dated December 14,
1999 and January 11, 2000.
WHEREFORE, premises considered, the petition is DENIED. Subject to the above disquisitions,
the Decision of the Court of Appeals in CA-G.R. SP No. 57732, dated September 28, 2001, and
the Orders of the Regional Trial Court of Cagayan de Oro City, Branch 21, in Civil Case No. 99-352,
dated December 14, 1999 and January 11, 2000, are AFFIRMED.

SO ORDERED.

G.R. No. 143264 April 23, 2012

LISAM ENTERPRISES, INC. represented by LOLITA A. SORIANO, and LOLITA A. SORIANO,

Petitioners,
vs.
BANCO DE ORO UNIBANK, INC. (formerly PHILIPPINE COMMERCIAL INTERNATIONAL BANK),*
LILIAN S. SORIANO, ESTATE OF LEANDRO A. SORIANO, JR., REGISTER OF DEEDS OF LEGASPI CITY,
and JESUS L. SARTE, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying
that the Resolution1of the Regional Trial Court of Legaspi City (RTC), dated November 11, 1999,
dismissing petitioners complaint, and its Order2 dated May 15, 2000, denying herein petitioners
Motion for Reconsideration and Motion to Admit Amended Complaint, be reversed and set
aside.

The records reveal the following antecedent facts.

On August 13, 1999, petitioners filed a Complaint against respondents for Annulment of
Mortgage with Prayer for Temporary Restraining Order & Preliminary Injunction with Damages
with the RTC of Legaspi City. Petitioner Lolita A. Soriano alleged that she is a stockholder of
petitioner Lisam Enterprises, Inc. (LEI) and a member of its Board of Directors, designated as its
Corporate Secretary. The Complaint also alleged the following:

4. Sometime in 1993, plaintiff LEI, in the course of its business operation, acquired by
purchase a parcel of residential land with improvement situated at Legaspi City, covered by
Transfer Certificate of Title No. 37866, copy attached as Annex "A," which property is more
particularly described as follows:

xxxx

5. On or about 28 March 1996, defendant Lilian S. Soriano and the late Leandro A. Soriano,
Jr., as husband and wife (hereafter "Spouses Soriano"), in their personal capacity and for
their own use and benefit, obtained a loan from defendant PCIB (Legaspi Branch) (now
known as Banco de Oro Unibank, Inc.) in the total amount of 20 Million;

6. That as security for the payment of the aforesaid credit accommodation, the late Leandro
A. Soriano, Jr. and defendant Lilian S. Soriano, as president and treasurer, respectively of
plaintiff LEI, but without authority and consent of the board of said plaintiff and with the
use of a falsified board resolution, executed a real estate mortgage on 28 March 1996, over
the above-described property of plaintiff LEI in favor of defendant PCIB, and had the same
registered with the Office of the Registry of Deeds, Legaspi City, copy of the Real Estate
Mortgage is hereto attached and marked as Annex "B," and made part hereof, to the
prejudice of plaintiffs;

7. That specifically, the Spouses Soriano, with intent to defraud and prejudice plaintiff LEI
and its stockholders, falsified the signatures of plaintiff Lolita A. Soriano as corporate
secretary and director of plaintiff LEI, in a document denominated as board resolution
purportedly issued by the board of plaintiff LEI on 6 November 1995, making it appear that
plaintiff LEI's Board met and passed a board resolution on said date authorizing the Spouses
Soriano to mortgage or encumber all or substantially all of the properties of plaintiff LEI,
when in fact and in truth, no resolution of that nature was ever issued by the board of
plaintiff LEI, nor a meeting was called to that effect, copy of the resolution in question is
hereto attached and marked as Annex "C," and made part hereof;

8. That plaintiff Lolita A. Soriano as Corporate Secretary of plaintiff LEI, had never signed a
board resolution nor issued a Secretary's Certificate to the effect that on 6 November 1995
a resolution was passed and approved by plaintiff LEI authorizing the Spouses Soriano as
president and treasurer, respectively, to mortgage the above-described property of plaintiff
LEI, neither did she appear personally before a notary public on 28 March 1996 to
acknowledge or attest to the issuance of a supposed board resolution issued by plaintiff LEI
on 6 November 1995;

9. That defendant PCIB, knowing fully well that the property being mortgaged by the
Spouses Soriano belongs to plaintiff LEI, a corporation, negligently and miserably failed to
exercise due care and prudence required of a banking institution. Specifically, defendant
PCIB failed to investigate and to delve into the propriety of the issuance of or due execution
of subject board resolution, which is the very foundation of the validity of subject real
estate mortgage. Further, it failed to verify the genuineness of the signatures appearing in
said board resolution nor to confirm the fact of its issuance with plaintiff Lolita A. Soriano,
as the corporate secretary of plaintiff LEI. Furthermore, the height of its negligence was
displayed when it disregarded or failed to notice that the questioned board resolution with
a Secretary's Certificate was notarized only on 28 March 1996 or after the lapse of more
than four (4) months from its purported date of issue on 6 November 1995. That these
circumstances should have put defendant PCIB on notice of the flaws and infirmities of the
questioned board resolution. Unfortunately, it negligently failed to exercise due care and
prudence expected of a banking institution;

10. That having been executed without authority of the board of plaintiff LEI said real estate
mortgage dated 28 March 1996 executed by the Spouses Soriano, as officers of plaintiff LEI
in favor of defendant PCIB, is the null and void and has no legal effect upon said plaintiff.
Consequently, said mortgage deed cannot be used nor resorted to by defendant PCIB
against subject property of plaintiff LEI as no right or rights whatsoever were created nor
granted thereunder by reason of its nullity;
11. Worst, sometime in August 1998, in order to remedy the defects in the mortgage
transaction entered by the Spouses Soriano and defendant PCIB, the former, with the
unlawful instigation of the latter, signed a document denominated as "Deed of Assumption
of Loans and Mortgage Obligations and Amendment of Mortgage"; wherein in said
document, plaintiff LEI was made to assume the 20 Million personal indebtedness of the
Spouses Soriano with defendant PCIB, when in fact and in truth it never so assumed the
same as no board resolution duly certified to by plaintiff Lolita A. Soriano as corporate
secretary was ever issued to that effect, copy of said Deed is hereto attached and marked as
Annex "D," and made part hereof;

12. Moreover, to make it appear that plaintiff LEI had consented to the execution of said
deed of assumption of mortgage, the Spouses Soriano again, through the unlawful
instigation and connivance of defendant PCIB, falsified the signature of plaintiff Lolita A.
Soriano as corporate secretary of plaintiff LEI in a document denominated as "Corporate
Resolution to Borrow," to make it appear that plaintiff LEI so authorized the Spouses Soriano
to perform said acts for the corporation, when in fact and in truth no such authority or
resolution was ever issued nor granted by plaintiff LEI, nor a meeting called and held for
said purpose in accordance with its By-laws; copy of which is hereto attached and marked as
Annex "E" and made part hereof;

13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro
A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff
Lolita A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for
herself and on behalf and for the benefit of plaintiff LEI, made demands upon defendants
Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff
LEI from such mortgage lien, by paying in full their personal indebtedness to defendant PCIB
in the principal sum of 20 Million. However, said defendants, for reason only known to
them, continued and still continue to ignore said demands, to the damage and prejudice of
plaintiffs;

14. Hence, on 25 June 1999, plaintiffs commenced a derivative suit against defendants Lilian
S. Soriano and the Estate of Leandro A. Soriano, Jr., before the Securities and Exchange
Commission, docketed as SEC Case No. 06-99-6339 for "Fraudulent Scheme and Unlawful
Machination with Damages" in order to protect and preserve the rights of plaintiffs, copy of
said complaint is hereto attached as Annex"F";

15. That plaintiffs, in order to seek complete relief from the unauthorized mortgage
transaction between the Spouses Soriano and defendant PCIB, were further compelled to
institute this instant case to seek the nullification of the real estate mortgage dated 28
March 1999. Consequently, plaintiffs were forced to retain the services of a lawyer with
whom they contracted to pay 100,000.00 as and for attorney's fee;

16. That unfortunately, the plaintiffs learned that on 30 July 1999, defendant Sarte, in his
capacity as Notary Public of Daraga, Albay and upon application of defendant PCIB, issued a
notice of Auction/Foreclosure Sale of the property subject of the mortgage in question and
has set the auction sale on 7 September 1999 x x x;
 17. That by reason of the fraudulent and surreptitious schemes perpetrated by defendant
Lilian S. Soriano and her husband, the late Leandro A. Soriano, Jr., in unlawful connivance
and through the gross negligence of defendant PCIB, plaintiff Lolita A. Soriano, as
stockholder, suffered sleepless nights, moral shock, wounded feeling, hurt pride and similar
injuries, hence, should be awarded moral damages in the amount of 200,000.00.

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

Respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. filed an Answer dated
September 25, 1999, stating that the Spouses Lilian and Leandro Soriano, Jr. were duly
authorized by LEI to mortgage the subject property; that proceeds of the loan from respondent
PCIB were for the use and benefit of LEI; that all notarized documents submitted to PCIB by the
Spouses Soriano bore the genuine signature of Lolita Soriano; and that although the Spouses
Soriano indeed received demands from petitioner Lolita Soriano for them to pay the loan, they
gave satisfactory explanations to the latter why her demands could not be honored. It was,
likewise, alleged in said Answer that it was respondent Lilian Soriano who should be entitled to
moral damages and attorney's fees.

On September 28, 1999, respondent PCIB filed a Motion to Dismiss the Complaint on grounds of
lack of legal capacity to sue, failure to state cause of action, and litis pendencia. Petitioners filed
an Opposition thereto, while PCIB's co-defendants filed a Motion to Suspend Action.

On November 11, 1999, the RTC issued the first assailed Resolution dismissing petitioners'
Complaint. Petitioners then filed a Motion for Reconsideration of said Resolution. While awaiting
resolution of the motion for reconsideration, petitioners also filed, on January 4, 2000, a Motion
to Admit Amended Complaint, amending paragraph 13 of the original complaint to read as
follows:

13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro A.
Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff Lolita A.
Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for herself and
on behalf and for the benefit of plaintiff LEI, made demands upon defendant Lilian S. Soriano
and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such
mortgage lien, by paying in full their personal indebtedness to defendant PCIB in the principal
sum of 20 Million. However, said defendants, for reason only known to them, continued and
still continue to ignore said demands, to the damage and prejudice of plaintiffs; that plaintiff
Lolita A. Soriano likewise made demands upon the Board of Directors of Lisam Enterprises, Inc.,
to make legal steps to protect the interest of the corporation from said fraudulent transaction,
but unfortunately, until now, no such legal step was ever taken by the Board, hence, this action
for the benefit and in behalf of the corporation;

On May 15, 2000, the trial court issued the questioned Order denying both the Motion for
Reconsideration and the Motion to Admit Amended Complaint. The trial court held that no new
argument had been raised by petitioners in their motion for reconsideration to address the fact
of plaintiffs' failure to allege in the complaint that petitioner Lolita A. Soriano made demands
upon the Board of Directors of Lisam Enterprises, Inc. to take steps to protect the interest of the
corporation against the fraudulent acts of the Spouses Soriano and PCIB. The trial court further
ruled that the Amended Complaint can no longer be admitted, because the same absolutely
changed petitioners' cause of action.

Petitioners filed the present petition with this Court, alleging that what are involved are pure
questions of law, to wit:

FIRST, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED
THE ACTION ON THE GROUND THAT PETITIONER LOLITA A. SORIANO HAS NO LEGAL CAPACITY
TO SUE AS SHE IS NOT A REAL PARTY-IN-INTEREST;

SECOND, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED
THE ACTION ON THE GROUND THAT THERE IS ANOTHER ACTION PENDING BETWEEN THE SAME
PARTIES FOR THE SAME CAUSE;

THIRD, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED
THE ACTION ON THE GROUND THAT THE COMPLAINT STATES NO CAUSE OF ACTION;

FOURTH, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DENIED
THE ADMISSION OF PETITIONERS' AMENDED COMPLAINT FILED AS A MATTER OF RIGHT, AFTER
THE ORDER OF DISMISSAL WAS ISSUED BUT BEFORE ITS FINALITY.

FIFTH, WHETHER OR NOT THE COURT ERRED IN DISMISSING THE ACTION, INSTEAD OF MERELY
SUSPENDING THE SAME FOLLOWING THE DOCTRINE LAID DOWN IN UNION GLASS. 3

The petition is impressed with merit.

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

Sec. 2. Amendments as a matter of right. A party may amend his pleadings once as a matter of
right at any time before a responsive pleading is served x x x.

Sec. 3. Amendments by leave of court. Except as provided in the next preceding section,
substantial amendments may be made only upon leave of court. But such leave may be refused
if it appears to the court that the motion was made with intent to delay. x x x

It should be noted that respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr.
already filed their Answer, to petitioners' complaint, and the claims being asserted were made
against said parties. A responsive pleading having been filed, amendments to the complaint may,
therefore, be made only by leave of court and no longer as a matter of right. However, in Tiu v.
Philippine Bank of Communications,4 the Court discussed this rule at length, to wit:

x x x [A]fter petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court
specifically allows amendment by leave of court. The said Section states:
SECTION 3. Amendments by leave of court. - Except as provided in the next preceding section,
substantial amendments may be made only upon leave of court. But such leave may be refused
if it appears to the court that the motion was made with intent to delay. Orders of the court
upon the matters provided in this section shall be made upon motion filed in court, and after
notice to the adverse party, and an opportunity to be heard.

This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure
in Valenzuela v. Court of Appeals, thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in
such manner that the phrase "or that the cause of action or defense is substantially altered" was
stricken-off and not retained in the new rules. The clear import of such amendment in Section 3,
Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of
action or defense." This should only be true, however, when despite a substantial change or
alteration in the cause of action or defense, the amendments sought to be made shall serve the
higher interests of substantial justice, and prevent delay and equally promote the laudable
objective of the rules which is to secure a "just, speedy and inexpensive disposition of every
action and proceeding."

The granting of leave to file amended pleading is a matter particularly addressed to the sound
discretion of the trial court; and that discretion is broad, subject only to the limitations that the
amendments should not substantially change the cause of action or alter the theory of the case,
or that it was not made to delay the action. Nevertheless, as enunciated in Valenzuela, even if
the amendment substantially alters the cause of action or defense, such amendment could still
be allowed when it is sought to serve the higher interest of substantial justice, prevent delay, and
secure a just, speedy and inexpensive disposition of actions and proceedings.

The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of

suits and in order that the real controversies between the parties are presented, their rights
determined, and the case decided on the merits without unnecessary delay. This liberality is
greatest in the early stages of a lawsuit, especially in this case where the amendment was
made before the trial of the case, thereby giving the petitioners all the time allowed by law to
answer and to prepare for trial.1wphi1

Furthermore, amendments to pleadings are generally favored and should be liberally allowed in
furtherance of justice in order that every case, may so far as possible, be determined on its real
facts and in order to speed up the trial of the case or prevent the circuitry of action and
unnecessary expense. That is, unless there are circumstances such as inexcusable delay or the
taking of the adverse party by surprise or the like, which might justify a refusal of permission to
amend.5

Since, as explained above, amendments are generally favored, it would have been more fitting
for the trial court to extend such liberality towards petitioners by admitting the amended
complaint which was filed before the order dismissing the original complaint became final and
executory. It is quite apparent that since trial proper had not yet even begun, allowing the
amendment would not have caused any delay. Moreover, doing
so would have served the higher interest of justice as this would provide the best opportunity for
the issues among all parties to be thoroughly threshed out and the rights of all parties finally
determined. Hence, the Court overrules the trial court's denial of the motion to admit the
amended complaint, and orders the admission of the same.

With the amendment stating "that plaintiff Lolita A. Soriano likewise made demands upon the
Board of Directors of Lisam Enterprises, Inc., to make legal steps to protect the interest of the
corporation from said fraudulent transaction, but unfortunately, until now, no such legal step
was ever taken by the Board, hence, this action for the benefit and in behalf of the corporation,"
does the amended complaint now sufficiently state a cause of action? In Hi-Yield Realty,
Incorporated v. Court of Appeals,6 the Court enumerated the requisites for filing a derivative suit,
as follows:

a) the party bringing the suit should be a shareholder as of the time of the act or
transaction complained of, the number of his shares not being material;

b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board
of directors for the appropriate relief but the latter has failed or refused to heed his plea;
and

c) the cause of action actually devolves on the corporation, the wrongdoing or harm having
been, or being caused to the corporation and not to the particular stockholder bringing the
suit.7

A reading of the amended complaint will reveal that all the foregoing requisites had been alleged
therein. Hence, the amended complaint remedied the defect in the original complaint and now
sufficiently states a cause of action.

Respondent PCIB should not complain that admitting the amended complaint after they pointed
out a defect in the original complaint would be unfair to them. They should have been well
aware that due to the changes made by the 1997 Rules of Civil Procedure, amendments may
now substantially alter the cause of action or defense. It should not have been a surprise to
them that petitioners would redress the defect in the original complaint by substantially
amending the same, which course of action is now allowed under the new rules.

The next question then is, upon admission of the amended complaint, would it still be proper for
the trial court to dismiss the complaint? The Court answers in the negative.

Saura v. Saura, Jr.8 is closely analogous to the present case. In Saura,9 the petitioners therein,
stockholders of a corporation, sold a disputed real property owned by the corporation, despite
the existence of a case in the Securities and Exchange Commission (SEC) between stockholders
for annulment of subscription, recovery of corporate assets and funds, etc. The sale was done
without the knowledge of the other stockholders, thus, said stockholders filed a separate case
for annulment of sale, declaration of nullity of deed of exchange, recovery of possession, etc.,
against the stockholders who took part in the sale, and the buyer of the property, filing said case
with the regular court (RTC). Petitioners therein also filed a motion to dismiss the complaint for
annulment of sale filed with the RTC, on the ground of forum shopping, lack of jurisdiction, lack
of cause of action, and litis pendentia among others. The Court held that the complaint for
annulment of sale was properly filed with the regular court, because the buyer of the property
had no intra-corporate relationship with the stockholders, hence, the buyer could not be joined
as party-defendant in the SEC case. To include said buyer as a party-defendant in the case
pending with the SEC would violate the then existing rule on jurisdiction over intra-corporate
disputes. The Court also struck down the argument that there was forum shopping, ruling that
the issue of recovery of corporate assets and funds pending with the SEC is a totally different
issue from the issue of the validity of the sale, so a decision in the SEC case would not amount to
res judicata in the case before the regular court. Thus, the Court merely ordered the suspension
of the proceedings before the RTC until the final outcome of the SEC case.

The foregoing pronouncements of the Court are exactly in point with the issues in the present
case.1wphi1 Here, the complaint is for annulment of mortgage with the mortgagee bank as one
of the defendants, thus, as held in Saura,10jurisdiction over said complaint is lodged with the
regular courts because the mortgagee bank has no intra-corporate relationship with the
stockholders. There can also be no forum shopping, because there is no identity of issues. The
issue being threshed out in the SEC case is the due execution, authenticity or validity of board
resolutions and other documents used to facilitate the execution of the mortgage, while the
issue in the case filed by petitioners with the RTC is the validity of the mortgage itself executed
between the bank and the corporation, purportedly represented by the spouses Leandro and
Lilian Soriano, the President and Treasurer of petitioner LEI, respectively. Thus, there is no reason
to dismiss the complaint in this case.

IN VIEW OF THE FOREGOING, the Resolution of the Regional Trial Court of Legaspi City, Branch 4,
dated November 11, 1999, dismissing petitioners complaint in Civil Case No. 9729, and its Order
dated May 15, 2000, denying herein petitioners Motion for Reconsideration and Motion to
Admit Amended Complaint, are hereby REVERSED and SET ASIDE. The Regional Trial Court of
Legaspi City, Branch 4, is hereby DIRECTED to ADMITthe Amended Complaint.

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

SO ORDERED.
PRE-TRIAL

A.M. No. RTJ-07-2060 July 27, 2011

(Formerly OCA IPI No. 06-2498-RTJ)

NATIONAL POWER CORPORATION, represented by its President CYRIL DEL CALLAR,

Complainant,
vs.
JUDGE SANTOS B. ADIONG, RTC, BRANCH 8, MARAWI CITY, Respondent.

DECISION

VILLARAMA, JR., J.:

Before us is an administrative complaint1 filed by the National Power Corporation (NPC) through
its president Cyril C. Del Callar, charging respondent Judge Santos B. Adiong, Presiding Judge of
the Regional Trial Court (RTC), Branch 8, Marawi City, with gross ignorance of the law, manifest
partiality and conduct unbecoming a member of the Judiciary.

The complaint arose in connection with the following cases:

a. Civil Case No. 1918-03 entitled "Ibrahim Abdo, et al. v. National Power Corporation" for
Damages;

b. Civil Case No. 1322-95 entitled "Pacalna Sanggacala v. National Power Corporation" for
Damages;

c. Civil Case No 1332-95 entitled "Ali Macaraya Mato v. National Power Corporation" for
Damages;

d. Civil Case No. 1367-95 entitled "Camar Dipatuan v. National Power Corporation" for
Damages;

e. Civil Case No. 1361-95 entitled "Casimra Sultan v. National Power Corporation" for
Damages; and

f. Civil Case No. 1355-95 entitled "Mualam Dimatingcal v. National Power Corporation" for
Damages.

In Civil Case No. 1918-03, plaintiffs Ibrahim Abdo, et al. who styled themselves as a "group of
farmers, fishermen, laborers, workers, vendors, household members, and businessmen",
collectively sought to hold NPC liable for damages for operating seven Hydroelectric Power
plants allegedly without due regard to the health and safety of the plaintiffs and other residents
of Marawi City and the province of Lanao del Sur. The plaintiffs alleged that they and several
others suffered ecological and economic disasters brought about by the operation of regulatory
dams which affected the natural flow of Lake Lanao and destroyed their farms, properties,
businesses and sources of livelihood. In addition to damages, the plaintiffs also sought the
refund of millions of pesos from the Purchase Power Adjustment (PPA) collected by NPC from its
electric consumers through the Lanao Del Sur Electric Cooperative.2

On October 21, 2003, said plaintiffs filed an ex-parte Motion for the Release of 640,000,000
worth of PPA and other generation charges. Judge Adiong granted the motion on November 9,
2004, but later set aside his order on November 24, 20053 after NPC filed a motion for
reconsideration on the ground of lack of notice and due process. Judge Adiong then required the
parties to present their respective evidence on December 8, 2005.

Subsequently, Judge Adiong issued a Resolution on February 28, 2006, ordering NPC to refund
the amount of 114,000,000, representing the Fuel Compensating Cost, Foreign Exchange, and
Incremental Cost Charges collected from April 1991 to December 1995; to refund the amount of
176,000,000, representing the Fuel and Power Cost Adjustment and PPA collected from January
1996 to April 2003; and to pay the amount of 97,537,000 as attorneys fees.4

NPC sought reconsideration of the order alleging that no pre-trial was conducted and yet
respondent judge already passed upon the merits of the case. NPCs motion, however, was
denied by Judge Adiong. Judge Adiong reasoned that before issuing the questioned resolution,
full-blown hearings were conducted and NPC was afforded all the opportunities to present its
evidence and to participate actively in the hearings. Having done so, NPC has submitted itself to
the courts jurisdiction and could no longer claim that no pre-trial was conducted. Later, Judge
Adiong also directed Sheriff Otto Gomampong to implement the February 28, 2006 Resolution
ratiocinating that the same has already become final.5

Thus, NPC filed the present administrative complaint, asserting that the issuance of the February
28, 2006 Resolution is contrary to and violative of the Rules of Court because said resolution was
issued by respondent judge without first conducting the requisite pre-trial conference and
despite the fact that no formal offer of exhibits was made by plaintiffs in support of their
allegations. Also, NPC complains of respondent judges failure to lay down the basis for granting
the plaintiffs ex-parte motion to release the PPA refunds, and in awarding the exorbitant
amount of 97,537,000.00 as attorneys fees.6

NPC further states that while it admits that judges are not to be administratively charged for acts
committed in the exercise of their judicial functions, respondent judge had acted in violation of
elementary rules that was equivalent to intolerable and inexcusable gross ignorance of the law.

As regards Civil Case Nos. 1322-95, 1332-95, 1367-95, 1361-95, and 1355-95, said cases involve
identical causes of action arising from the same facts and raising common issues. The plaintiffs in
said cases sought to hold NPC liable for damages for its refusal to open the Agus regulation dams
causing perennial flooding on their rice farmlands in 1979, 1984, 1986, 1989, 1993, 1994, 1995
and 1996. In all of these cases, respondent judge rendered judgments in favor of the plaintiffs.
Later, respondent judge also issued Joint Special Order7 dated January 25, 2006 granting the
Joint Motion for the Issuance of the Writ of Execution Pending Appeal8 filed by the plaintiffs in
Civil Case Nos. 1367-95, 1361-95, and 1355-95 on January 2, 2006.9

A similar Order10 granting execution pending appeal was likewise issued in the two other cases,
Civil Case Nos. 1322-95 and 1332-95, on January 17, 2006. Nine days later, on January 26, 2006,
a Joint Writ of Execution11 for the two cases was issued.

NPC alleges that Judge Adiongs act of granting execution pending appeal failed to conform
strictly to the rigid criteria outlined by jurisprudence for executions pending appeal. There was
no special reason for the issuance of the writ, and the grant of the writ was whimsical and clearly
manifested the partiality of respondent judge. Further, Judge Adiongs evident bias and
unexplained interest to execute the decisions manifested when he immediately set for hearing a
motion to cite in contempt a Land Bank personnel who allegedly refused to comply with the
notice of garnishment despite the fact that the motion lacked the required notice of hearing and
the failure of the plaintiffs to comply with Rule 71 of the Rules of Court.12

In his Comment13 dated June 1, 2006, respondent judge raised the following in his defense. With
regard to the lack of pre-trial conference, respondent judge asserts that he has set the case for
hearing on December 8 and 15, 2005, and January 12, 13, and 27, 2006. In all these hearings, the
parties were allowed to present whatever evidence they had to support their claims. He also
claims that the lack of pre-trial was never raised by NPC since the time it filed its answer on May
15, 2003 up to the time plaintiffs started presenting their evidence on December 8, 2005. It was
only on February 14, 2006 that NPC belatedly filed a manifestation calling the courts attention
to the lack of pre-trial, without formally asking or praying for the setting of one. In addition, the
records show that the plaintiffs filed their pre-trial brief while defendant NPC did not. Thus, he
argues that NPC is deemed to have waived the holding of a pre-trial conference. Perforce, Judge
Adiong argues that he should not be held administratively liable for not conducting pre-trial.14

On the charge that he was biased and has unexplained interest to execute the Decisions in Civil
Case Nos. 1322-95, 1332-95, 1367-95, 1361-95 and 1355-95, respondent judge denied the
allegations and explained that he complied with the requirements for allowing an execution
pending appeal. He asserts there was good reason for its issuance and there was evidence
substantiating the need to issue the writ of execution which were clearly spelled out and stated
in the Special Orders dated January 17, 2006 and January 25, 2006. Further, there is no reason to
complain about the bank personnel being held for contempt, as said bank personnel was not
even adjudged guilty of contempt.15

Respondent judge adds that he should be absolved from the charges against him. He argues that
mere suspicion that a judge is partial to one of the parties to the case is not enough; there
should be evidence to support the charge.16 Also, he asserts that a judge cannot be held
administratively liable for errors in the appreciation of evidence unless the errors are gross or
made in bad faith.17 When such errors of judgment are committed, complainants may avail
themselves of the remedy of appeal or certiorari and not the filing of administrative charges
against the judge who rendered the challenged decision.

On October 2, 2007, this Court referred the present complaint to the Court of Appeals, Cagayan
De Oro City, for investigation, report and recommendation. Pursuant to the Rules of Court, now
retired Associate Justice Ruben C. Ayson, to whom this case was assigned, sent notices to the
parties informing them of the schedule of investigation and hearings. The case was heard for five
days, from May 25 to 29, 2009, and the parties were required to present oral, as well as
documentary evidence in support of their respective allegations and counter-allegations.
On July 10, 2009, Justice Ayson submitted his report finding respondent judge administratively
liable. Justice Ayson did not delve into the correctness of the Resolution dated February 28, 2006,
granting the refund of millions of pesos representing the PPA charges, as the resolution is now
the subject of an appeal with this Court, docketed as G.R. No. 177288 entitled, Ibrahim Abdo, et
al. v. Court of Appeals and National Power Corporation. Neither did he delve into the merits of all
the other cases from which the administrative cases filed by NPC against Judge Adiong arose, for
the reason that the proper venue for their review would be through the usual judicial process of
review by appellate courts.18

The Investigating Justice also noted the well-entrenched rule that a judge may not be held
administratively liable for every erroneous decision he renders, for no person called upon to
determine the facts or interpret the law in the administration of justice can be infallible.
However, he also noted that there is a prominent exception to the rule, that is, when the law is
so elementary that not to know it constitutes gross ignorance of the law.19 In said cases, a judge
committing such error may face administrative sanctions.

Specifically, Justice Ayson noted that in Civil Case No. 1918-03, Judge Adiong failed to conduct a
pre-trial conference and erred in conducting the series of hearings in the case without
determining the existence of necessary pre-conditions before the court could take cognizance of
the case. Records revealed that Judge Adiong failed to resolve (1) the issue on the insufficiency
of the complaint as a class suit; (2) the issue of nonpayment of docket fees necessary to vest the
court with jurisdiction over the case; (3) the issue on forum-shopping allegedly committed by
therein plaintiffs; and (4) the question regarding the alleged failure of therein plaintiffs to state
with particularity their respective residences. Justice Ayson noted that without a proper
resolution of these threshold jurisdictional questions, any decision in the case is premature and
without factual and legal basis. In other words, the court would only be engaged in a useless
exercise and would merely be wasting the time and resources of the parties.20

Further, the Investigating Justice stressed that the conduct of a pre-trial is mandatory. He
explained that pre-trial is a procedural device whereby the court is called upon to compel the
parties and their lawyers to appear before it and negotiate an amicable settlement or otherwise
make a formal statement and embody in a single document the issues of fact and law involved in
the action. Respondent judge asserts that NPC only called the attention of the court in passing in
one of its hearings held sometime in December 8, 2005 and January 27, 2006. Judge Adiong
alleges that he then advised NPC to file the appropriate pleading, but it was only after the case
was terminated that NPC made a manifestation on the lack of pre-trial. Judge Adiong adds that
the conduct of a pre-trial conference would have been a mere superfluity, and claims that the
absence of pre-trial did not cause substantial prejudice or injury to the parties as the purpose of
expediting the proceedings has been attained. However, Justice Ayson opined that under the
circumstances, Judge Adiong should have scheduled the case for pre-trial as he was already
aware of the procedural defect. His act of not minding the setting of pre-trial, when he had every
opportunity and reasonable time to do so, can be characterized as negligent and imprudent,
according to Justice Ayson. Justice Ayson added that respondent judge apparently failed to
comply with the rules and failed to exercise the required initiative to set the case for pre-trial.
Considering Judge Adiongs long years of service, a total of thirty-nine (39) years in the Judiciary,
more than anyone else, he should be presumed to be conversant with the law and the rules. The
law involved in this case being elementary, failure to consider it or to act as if he does not know
it, constitutes gross ignorance of the law. Justice Ayson said,
x x x Indeed, when the inefficiency springs from a failure to consider so basic and elemental a
rule, a law or a principle in the discharge of his duties, a judge is either too incompetent and
undeserving of the position and the title he holds or is too vicious that the oversight or omission
was deliberately done in bad faith and in grave abuse of judicial authority.21

As to the granting of the motions for execution pending appeal, Justice Ayson pointed out that
respondent judge gave flimsy and unsupported reasons to support his order to issue the writ of
execution pending appeal.

In Civil Case No. 1367-95, respondent judge granted the execution pending appeal on the ground
that the plaintiff therein suffered a stroke and allegedly needed to undergo an operation costing
millions of pesos. However, said allegations were based only on the self-serving testimony of the
plaintiffs sister whose testimony was uncorroborated by any other evidence.

In Civil Case Nos. 1361-95 and 1355-95, Judge Adiong granted the motion for execution pending
appeal based on the testimony of the plaintiff who testified on his medical condition as stated in
his medical certificate. Said medical certificate, however, was never verified by the doctor who
allegedly issued it. Hence, it was unreliable and was merely hearsay evidence.

Meanwhile, in Civil Case No. 1322-95, the motion for execution pending appeal was granted
based on the plaintiffs claim that he is getting old and needed money to support his family of
four wives and twenty-nine (29) children. But the plaintiffs allegation was not corroborated by
any competent evidence.

In all these cases, respondent judge found justification that the financial conditions of the
plaintiffs warranted the issuance of the writ of execution pending appeal. Justice Ayson, however,
opined that while the power to grant or deny immediate or advance execution is addressed to
the sound discretion of the court, it is required that good reason exists for granting execution
pending appeal as provided under Section 2,22 Rule 39 of the Rules of Court. Absent any such
good reason, the special order of execution must be struck down for having been issued with
grave abuse of discretion.

Standing alone, the alleged dire financial distress of the plaintiffs in Civil Case Nos. 1918-03,
1322-95, 1332-95, 1367-95, 1361-95, 1355-95 cannot be taken as "good reason" for the
immediate execution of respondent judges decisions, according to Justice Ayson. Justice Ayson
opined that indeed, when respondent judge acted hastily in granting the execution of his
Decision pending appeal, his actuation did not indicate zeal to his duty but a clear disservice to
the cause of justice. Indubitably, respondent judge showed poor judgment and gross ignorance
of basic legal principles, added Justice Ayson.1avvphi1

After careful review of the records of this case, we find the above observations and findings of
the Investigating Justice well taken.

Judge Adiong failed to conduct a pre-trial conference in Civil Case No. 1918-03 contrary to
elementary rules of procedure which he should have known all too well considering his long
years of service in the bench. The mandatory character of pre-trial is embodied in Administrative
Circular No. 3-9923 dated January 15, 1999, and found its way in Section 2,24 Rule 18 of the Rules
of Court, which imposes a duty upon the plaintiff to promptly move ex parte that the case be set
for pre-trial. To further implement the pre-trial guidelines, this directive was reiterated in
Administrative Matter No. 03-1-09-SC25 entitled "Guidelines to be Observed by Trial Court Judges
and Clerks of Court in the Conduct of Pre-Trial and Use of Deposition-Discovery Measures" which
recognized the importance of pre-trial and the deposition-discovery measures as vital
components of case management in trial courts.26

To further show that the Court is serious in implementing the rules on pre-trial, in Alviola v.
Avelino27 the Court imposed the penalty of suspension on a judge who merely failed to issue a
pre-trial order within ten (10) days after the termination of the pre-trial conference as mandated
by Paragraph 8,28 Title I (A) of A.M. No. 03-1-09-SC.

Here, respondent judge failed to conduct the pre-trial conference itself. It is elementary and
plain that the holding of such a pre-trial conference is mandatory and failure to do so is
inexcusable. When the law or procedure is so elementary, such as the provisions of the Rules of
Court, not to know it or to act as if one does not know it constitutes gross ignorance of the law.29
Such ignorance of a basic rule in court procedure, as failing to conduct pre-trial, sadly amounts
to gross ignorance and warrants a corresponding penalty.

As to the allegations of poor judgment and gross ignorance of basic legal principles in granting
the motions for execution pending appeal for flimsy and unsupported reasons, we find that the
particular reasons relied upon by respondent judge for issuing the writ of execution pending
appeal are so unreliably weak and feeble that it highlights the lack of knowledge of respondent
judge with regard to the proper appreciation of arguments.

In Florendo v. Paramount Insurance Corp.,30 the Supreme Court held:

x x x "Good reasons," it has been held, consist of compelling circumstances that justify
immediate execution lest the judgment becomes illusory. The circumstances must be superior,
outweighing the injury or damages that might result should the losing party secure a reversal of
the judgment. Lesser reasons would make of execution pending appeal, instead of an instrument
of solicitude and justice, a tool of oppression and inequity.

"Good reason" as required by Section 2, Rule 39 of the Rules of Court does not necessarily mean
unassailable and flawless basis but at the very least, it must be on solid footing. Dire financial
conditions of the plaintiffs supported by mere self-serving statements as "good reason" for the
issuance of a writ of execution pending appeal does not stand on solid footing. It does not even
stand on its own.

Section 8, Rule 140 of the Rules of Court, as amended, classifies gross ignorance of the law as a
serious charge and Section 11 thereof penalizes it with any of the following sanctions:

1. Dismissal from the service, forfeiture of all or part of the benefits as the Court may
determine, and disqualification from reinstatement or appointment to any public office,
including government-owned or controlled corporations. Provided, however, That the
forfeiture of benefits shall in no case include accrued leave credits;
 2. Suspension from office without salary and other benefits for more than three (3) but not
exceeding six (6) months; or

3. A fine of more than 20,000[.00] but not exceeding 40,000.00.31

Considering, however, that in A.M. No. RTJ-04-1826, this Court has already dismissed Judge
Adiong, the penalties of suspension from office without salary and dismissal from the service are
no longer possible. Hence, the penalty of fine is more appropriate.

WHEREFORE, the now dismissed respondent Judge Santos B. Adiong of the Regional Trial Court
of Marawi City, Branch 8 is, for gross ignorance of the law, FINED in the amount of 40,000.00 to
be deducted from his retained/withheld accrued leave credits.

SO ORDERED.