G.R. No. 129227. May 30, 2000 ‘7. Except as provided in this Circular and Circular No.
‘7. Except as provided in this Circular and Circular No. 493, loans or renewals thereof shall continue
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioners, vs. THE HON. COURT OF APPEALS,
and CALVIN & ELSA ARCILLA, respondents.
DECISION
GONZAGA_REYES, J.:
Before us is a Petition for Review on Certiorari of the Decision of the Court of Appeals1 in CA-G.R.
CV No. 45891 entitled CALVIN S. ARCILLA and ELSA B. ARCILLA vs. BANCO FILIPINO SAVINGS and
MORTGAGE BANK, ET. AL. which affirmed the decision of the Regional Trial Court (RTC), Branch 33,
Manila ordering BANCO FILIPINO to pay CALVIN and ELSA ARCILLA the amount of P126,139.00 with
interest thereon at 12% per annum from the filing of the complaint.
The undisputed facts as found by the Court of Appeals are as follows:
"Elsa Arcilla and her husband, Calvin Arcilla, the Appellees in the present recourse, secured, on three
(3) occasions, loans from the Banco Filipino Savings and Mortgage Bank, the Appellant in the present
recourse, in the total amount of P107,946.00 as evidenced by "Promissory Note" executed by the
Appellees in favor of the Appellant. To secure the payment of said loans, the Appellees executed
"Real Estate Mortgages" in favor of the Appellants over their parcels of land located in BF-
Parañaque, covered by Transfer Certificate of Title Nos. 444645, 450406, 450407 and 455410 of the
Registry of Deeds of Parañaque (Annexes "B" to "B-2", Amended Complaint). Under said deeds, the
Appellant may increase the rate of interest, on said loans, within the limits allowed by law, as
Appellant’s Board of Directors may prescribe for its borrowers. At that time, under the Usury Law,
Act 2655, as amended, the maximum rate of interest for loans secured by real estate mortgages
was 12% per annum. On January 10, 1975, the Appellees and the Appellant executed a "Deed of
Consolidation and Amendment of Real Estate Mortgage" whereby the aforementioned loans of the
Appellees and the "Real Estate Mortgage" executed by them as security for the payment of said
loans were consolidated (pages 33-35, Record). Likewise, under said deed, the loan of the Appellees
from the Appellant was increased to P188,000.00. The Appellees executed a "Promissory Note",
dated January 15, 1975, whereby they bound and obliged themselves, jointly and severally, to pay
the Appellant the aforesaid amount of P188,000.00 with interest at the rate of 12% per annum, in
nineteen (19) years from date thereof, in stated installments of P2,096.93 a month (page 32,
Records).
On January 2, 1976, the Central Bank of the Philippines issued Central Bank Circular No. 494, quoted
infra, as follows:
‘x x x
‘3. The maximum rate of interest, including commissions, premiums, fees and other charges on
loans with maturity of more than seven hundred thirty (730) days, by banking institutions, including
thrift banks, or by financial intermediaries authorized to engage in quasi-banking functions shall be
nineteen percent (19%) per annum.
‘x x x
to be governed by the Usury Law, as amended.’ (idem, supra)
In the meantime, the Skyline Builders, Inc., through its President, Appellee Calvin Arcilla, secured
loans from the Bank of the Philippine Islands in the total amount of P450,000.00. To insure payment
of the aforesaid loan, the FGU Insurance Corporation, issued PG Bond No. 1003 for the amount of
P225,000.00 (pages 434-436, Records) in favor of the Bank of the Philippine Islands. Skyline
Buildings, Inc., and the Appellees executed an "Agreement of Counter-Guaranty with Mortgage" in
favor of the FGU Insurance Corporation covering the aforesaid parcels of land to assure payment of
any amount that the insurance company may pay on account of said loans (pages 429-436, Records).
The mortgage was annotated as Entry No. 58009 at the dorsal portion of Appellees’ titles.
After October 30, 1978, the Appellant prepared and issued a "Statement of Account" to the
Appellees on their loan account to the effect that, as of October 30, 1978, the balance of their loan
account, inclusive of interests, computed at 17% per annum, amounted to 284,490.75 (page 555,
Records). It turned out that the Appellant unilaterally increased the rate of interest on the loan
account of the Appellees from 12% per annum, as covenanted in the "Real Estate Mortgage" and
"Deed of Consolidated and Amended Real Estate Mortgage" to 17% per annum on the authority of
the aforequoted Central Bank Circular.
The Appellees failed to pay their monthly amortizations to Appellant. The latter forthwith filed, on
April 3, 1979, a petition, with the Provincial Sheriff, for the extrajudicial foreclosure of Appellees’
"Real Esate Mortgage" in favor of the Appellant for the amount of P342,798.00 inclusive of the 17%
per annum which purportedly was the totality of Appellees’ account with the Appellant on their
loans. The Appellant was the purchaser of the property at public auction for the aforesaid amount
of P324,798.00. On May 25, 1979, the Sheriff executed a "Certificate of Sale" over the aforesaid
properties in favor of the Appellant for the aforesaid amount (pages 37-38, Records).
The Appellant filed a "Petition for a Writ of Possession" with the Regional Trial Court entitled "Banco
Filipino Savings and Mortgage Bank vs. Elsa Arcilla, et al., LRC Case No. P-7757-P". On February 28,
1980, the Court rendered a Decision granting the Petition of the Appellant. The Appellees appealed
to the Court of Appeals but the latter Court, on June 29, 1985, promulgated a Decision affirming the
Decision of the Regional Trial Court (pages 190-198, Records).
In the meantime, the FGU Insurance Corporation, Inc., redeemed the aforesaid properties from the
Appellant by paying to the latter the amount of P389,289.41 inclusive of interest computed at 17%
per annum. The Appellant and FGU Insurance Corp., Inc., executed, on May 27, 1980, a "Deed of
Redemption" (pages 126-129, Records).
On September 2, 1985, the Appellees filed a complaint in the Court a quo for the "Annulment of the
Loan Contracts, Foreclose Sale with Prohibition and Injunction, Etc." entitled "Calvin Arcilla, et al.
vs. Banco Filipino Savings and Mortgage Bank, et al." (pages 1-38, Records).
The Appellees averred, in their complaint, inter alia, that the loan contracts and mortgages between
the Appellees and the Appellant were null and void because: (a) the interests, charges, etc., were
deducted in advance from the face value of the "Promissory Notes" executed by the Appellees; and
(b) the rate of interests charged by the Appellant were usurious. The Appellees prayed that
judgment be rendered in their favor as follows:
"x x x
WHEREFORE, it is respectfully prayed –
a) Pending hearing on the prayer for the issuance of the Writ of Preliminary Injunction, a restraining
order be immediately issued against the defendants or anyone acting in their behalf from enforcing
the writ of possession issued against the plaintiffs;
b) After notice and hearing, a writ of preliminary injunction be issued against the defendants,
particularly defendants FGU Insurance Corporation and the City Sheriff of Pasay City, MM, or any of
his deputies or anyone acting in their behalf from enforcing the writ of possession;
c) After trial –
1) To make the injunction permanent;
2) Declare the loan contracts null and void;
3) Declare the extrajudicial foreclosure null and void;
4) Ordering the defendants to pay the plaintiffs the sums of P100,000.00 as moral damages;
P50,000.00 as attorney fees; and, costs of suit.
PLAINTIFFS further pray for such other reliefs and remedies just and equitable in the premises."
(pages 88-89, Records)
In its Answer to the Complaint, the Appellant averred that the interests charged by it on Appellees’
loan accounts and that the said loan contracts and mortgages were lawful. The Appellant further
averred that the Appellees’ action had already prescribed.
In the interim, the Supreme Court promulgated its Decision in the precedent - setting case of "Banco
Filipino Savings and Mortgage Bank vs. Hon. Miguel Navarro, et al., 152 SCRA 346" where it declared
that Central Bank Circular No. 494 was not the "law" envisaged in the mortgage deeds of borrowers
of the Bank; that the escalation clause incorporated in said deeds giving authority to the Appellant
to increase the rate of interests without the corresponding deescalation clause should not be given
effect because of its one-sidedness in favor of the Appellant; that the aforesaid Central Bank Circular
did not apply to loans secured by real estate mortgages, and that, therefore, the Appellant cannot
rely said Circular as authority for it to unilaterally increase the rate of interests on loans secured by
Real Estate Mortgages.
In the meantime, the FGU Insurance Corp., Inc., filed a "Motion for Substitution" with the Regional
Trial Court, in LRC Case No. Pq-7757-P praying that it be substituted as the Petitioner in said case
(pages 354-356, Records). The Appellees were served with a copy of said motion and filed their
Opposition thereto. However, on November 10, 1987, the Regional Trial Court rendered a Decision
granting the motion of FGU Insurance Company (page 369, Records)
On December 3, 1987, the Appellees filed a Motion, with the Court a quo, for leave to file an
"Amended Complaint" to implead FGU Insurance Corporation as party defendant (pages 83-129,
Records). The Court granted said motion and admitted Appellees’ Amended Complaint.
After the requisite pre-trial, the Court a quo issued a Pre-Trial Order which defined, inter alia,
Appellees’ action against the Appellant, and the latter’s defenses, to wit:
"x x x
On the part of the defendants Banco Filipino Savings to simplify the case, it seeks to declare as null
and void plaintiff’s loan contract with Banco Filipino obtained in May 1974, on the ground that the
interest agreed in the contract was usurious. Plaintiffs also seek to declare as null and void the
foreclosure of their mortgage by Banco Filipino on the ground that the loan with the said mortgagee
foreclosure maybe validly done.
DEFENSES
1. Prescription
2. Laches
3. Estoppel" (page 496, Records)
In the meantime, the Appellees and FGU Insurance Corporation entered into and forged a
"Compromise Agreement." The Court a quo promulgated a Decision, dated April 3, 1991, based on
said "Compromise Agreement." Under the "Compromise Agreement", the Appellees bound and
obliged themselves, jointly and severally, to pay to FGU Insurance Corporation the amount of
P1,964,117.00 in three (3) equal installments and that:
"x x x
6. Upon faithful compliance by plaintiffs Calvin S. Arcilla and Elsa B. Arcilla with their Agreement,
defendant FGU Insurance Corporation shall renounce in their favor all its rights, interests and claims
to the four (4) parcels of land mentioned in paragraph No. 4 of this Compromise Agreement,
together with all the improvements thereon, and plaintiffs Calvin S. Arcilla and Elsa B. Arcilla shall
be subrogated to all such rights, interests and claims. In addition, defendant FGU Insurance
Corporation shall execute in favor of plaintiffs Calvin S. Arcilla and Elsa B. Arcilla a deed of
cancellation of the real estate mortgage constituted in its favor on the above-mentioned four (4)
parcels of land, together with all the improvements thereon. All documentary stamps and expenses
for registration of the said deed of cancellation of mortgage shall be for the account of plaintiffs
Calvin S. Arcilla and Elsa B. Arcilla.
7. Subject to the provisions of paragraph No. 4 of this Compromise Agreement, the execution of this
Compromise Agreement shall be without prejudice to the prosecution of the claims of plaintiffs
Calvin S. Arcilla and Elsa B. Arcilla. (pages 543-544, Records)
Thereafter, the Appellees and the Appellant agreed, upon the prodding of the Court a quo, that the
only issue to be resolved by the Court a quo was, whether or not the Appellees were entitled to the
refund, under the Decision of the Supreme Court in "Banco Filipino Savings and Mortgage Bank vs.
Hon. Miguel Navarro, et al.," supra. On November 8, 1991, the Appellees filed a "Motion for
Summary Judgment" appending thereto, inter alia, the Affidavit of Appellee Calvin S. Arcilla and the
appendages thereof (pages 550-555, Records). Appellant filed its Opposition but did not append
any affidavit to said Opposition. On March 26, 1993, the Court a quo promulgated a Decision, the
decretal portion of which reads as follows:
‘WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and
against defendant Banco Filipino ordering defendant Banco Filipino to pay spouses Calvin S. Arcilla
and Elsa B. Arcilla the sum of P126,139.00 with interest thereon at 12% per annum reckoned from
the filing of the complaint.
SO ORDERED.’ (pages 584-585, Records)"2
Petitioner appealed to the Court of Appeals, which affirmed the decision of the RTC the dispositive
portion of which reads:
"IN THE LIGHT OF ALL THE FOREGOING, the assailed Decision is AFFIRMED. Appellant’s appeal is
DISMISSED. With costs against the Appellant.
SO ORDERED."3
Their Motion for Reconsideration4 was denied hence this petition where the petitioner assigns the
following errors:
"I. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE CAUSE OF ACTION OF THE
PRIVATE RESPONDENTS ACCRUED ON OCTOBER 30, 1978, AND THEREFORE THE FILING OF THEIR
COMPLAINT FOR ANNULMENT OF THEIR LOAN CONTRACTS WITH THE PETITIONER IN 1985 WAS
NOT YET BARRED BY PRESCRIPTION.
II. THE HONORABLE COURT OF APPEALS ERRED WHEN IT HELD THAT THE MATERIAL ALLEGATIONS
OF THE PRIVATE RESPONDENTS COMPLAINT WERE SUFFICIENT TO WARRANT THE RELIEFS
GRANTED TO THEM BY THE LOWER COURT, PATICULARLY THE REFUND OF P126,139.00
REPRESENTING ALLEGED EXCESS INTEREST PAID ON THEIR LOAN.
III. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE RESPONDENTS
WERE ENTITLED TO THE SAID REFUND OF P126,139.00 CLAIMED BY THEM."5
The petitioner maintains that the complaint filed by herein private respondents was an action for
Annulment of Loan Contracts, foreclosure sale with prohibition and injunction. It is contended that
these causes of action accrued on the date of the execution of the promissory note and deed of
mortgage on January 15, 1975 and not October 30, 1978 as found by the Court of Appeals. Thus,
private respondents cause of action has already prescribed inasmuch as the case was filed on
September 2, 1985 or more than ten years thereafter. Petitioner further contends that private
respondents cannot rely on the ruling in the case of Banco Filipino Savings & Mortgage Bank vs.
Navarro6 considering that they were not parties to said case. Petitioner also maintains that the order
of the lower court, which was affirmed by the Court of Appeals ordering the petitioner to refund
the excess interest paid by private respondents in the amount of P126,318.00 was without any legal
basis since private respondents never raised the issue of interest nor prayed for any relief with
respect thereto. Moreover, the private respondents never paid said amount to the petitioner. While
the amount was included in the bid price of the bank when it bought the mortgaged properties
during the public auction, said bid price did not prejudice the private respondents because when
the private respondents repurchased the properties, the amount they paid was different and
independent of the redemption price of the bank. Besides, the agreement between the private
respondents and FGU Insurance Corporation was one of sale and not redemption. Thus, any amount
paid by the private respondents to FGU was voluntarily entered into by them and was not a
consequence of the foreclosure of the mortgage properties.
Conversely, private respondents allege that their action has not prescribed considering that
prescription begins to run from the day the action may be brought; the date their right of action
accrued. It is their contention that the period of prescription of their action should commence to
run from October 30, 1978 when the petitioner unilaterally increased the rate of interest on private
respondents’ loan to 17% per annum. Thus, when private respondents filed their action against the
petitioner on September 2, 1985 or almost eight years thereafter, their action had not yet
prescribed. Moreover, private respondents aver that they are entitled to the refund inasmuch as
the escalation clause incorporated in the loan contracts do not have a corresponding de-escalation
clause and is therefore illegal.
The appeal is unmeritorious.
There are only two issues, which must be resolved in the present appeal. First, has the action of the
private respondents prescribed; and second, are the respondents entitled to the refund of the
alleged interest overpayments.
Petitioner’s claim that the action of the private respondents has prescribed is bereft of merit. Under
Article 1150 of the Civil Code, the time for prescription of all kinds of actions, when there is no
special provision which ordains otherwise, shall be counted from the day they may be brought.
Thus, the period of prescription of any cause of action is reckoned only from the date the cause of
action accrued.7 And a cause of action arises when that which should have been done is not done,
or that which should not have been done is done.8 The period should not be made to retroact to the
date of the execution of the contract on January 15, 1975 as claimed by the petitioner for at that
time, there would be no way for the respondents to know of the violation of their rights. 9 The Court
of Appeals therefore correctly found that respondents’ cause of action accrued on October 30,
1978, the date they received the statement of account showing the increased rate of interest, for it
was only from that moment that they discovered the petitioner’s unilateral increase thereof. We
quote with approval the pertinent portions of the Court of Appeals decision as follows:
"It is the legal possibility of bringing the action that determines the starting point for the
computation of the period of prescription (Constancia C. Telentino vs. Court of Appeals, et al., 162
SCRA 66). In fine, the ten-year prescriptive period is to be reckoned from the accrual of Appellees’
right of action, not necessarily on the very date of the execution of the contracts subject of the
action (Naga Telepone Co. Inc. vs. Court of Appeals, et al., 230 SCRA 351). A party’s right of action
accrues only when the confluence of the following elements is established:
"xxx: a) a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; b) an obligation on the part of defendant to respect such right; and c) an act or omission
on the part of such defendant violative of the right of the plaintiff (Cole vs. Vda. de Gregorio, 116
SCRA 670 [1982]; Mathay vs. Consolidated Bank & Trust Co., 58 SCRA 559 [1974]; Vda. de Enriquez
vs. Dela Cruz, 54 SCRA 1 [1973]. It is only when the last element occurs or takes place that it can be
said in law that a cause of action has arisen (Cole vs. Vda. De Gregorio, supra)" (Maria U. Español
vs. Chairman, etc., et al.,, 137 SCRA 314, page 318)
More, the aggrieved must have either actual or presumptive knowledge of the violation, by the
guilty party of his rights either by an act or omission. The question that now comes to the fore is
when the Appellees became precisely aware of the unilateral increase, by the Appellant, of the rate
of interest on their loan account to 17% per annum. As can be ascertained from the records, the
Appellees discovered or should have discovered, for the first time, the unilateral increase by the
Appellant of the rate of interest to 17% per annum when they received the "Statement of Account"
of the Appellant as of October 30, 1978. Hence, it was only then that the prescriptive period for the
Appellees to institute their action in the Court a quo commenced. Since the Appellees filed their
complaint in the Court a quo on September 2, 1985, the same was seasonably filed within the ten-
year prescriptive period."10
Anent the second issue as to whether the respondents are entitled to recover the alleged
overpayments of interest, we find that they are despite the absence of any prayer therefor. This
Court has ruled that it is the material allegations of fact in the complaint, not the legal conclusion
made therein or the prayer that determines the relief to which the plaintiff is entitled. 11 It is the
allegations of the pleading which determine the nature of the action and the Court shall grant relief
warranted by the allegations and the proof even if no such relief is prayed for.12 Thus, even if the
complaint seeks the declaration of nullity of the contract, the Court of Appeals correctly ruled that
the factual allegations contained therein ultimately seek the return of the excess interests paid.
The loan contracts with real estate mortgage entered into by and between the petitioner and
respondent stated that the petitioner may increase the interest on said loans, within the limits
allowed by law, as petitioner’s Board of Directors may prescribe for its borrowers. At the time the
contracts were entered into, said escalation clause was valid. 16 It was only pursuant to P.D. No. 1684
which became effective March 17, 1980 wherein to be valid, escalation clauses should provide: 1.)
that there can be an increase in interest if increased by law or by the Monetary Board; and 2.) in
order for such stipulation to be valid, it must include a provision for the reduction of the stipulated
interest in the event that the maximum rate of interest is reduced by law or by the Monetary
Board.17
Given the validity of the escalation clause, could the petitioner increase the stipulated interest
pursuant to the Central Bank Circular 494 from 12% to 17%.
We rule that it may not.
The escalation clause in the loan contracts reads as follows:
"xxx g) The rate of interest charged on the obligation secured by this mortgage, as well as the
interest on the amount which may have been advanced by the Mortgagee in accordance with
paragraph (b) and (d) hereof, shall be subject, during the terms of this contract, to such an increase,
within the limits allowed by law, as the Board of Directors of the Mortgagee may prescribe for its
debtors; xxx" (emphasis supplied)18

The amended complaint13 of herein private respondents specifically allege that the contracts of loan
In Banco Filipino Savings & Mortgage Bank vs. Navarro,19 which involved a similar escalation clause20
entered into by them and the petitioner were contrary to and signed in violation of the Usury Law 14
, we ruled that Central Bank Circular 494, although it has the force and effect of law, is not a law
and consequentially pray that said contracts be declared null and void. The amended complaint
and is not the law contemplated by the parties which authorizes the petitioner to unilaterally raise
reads:
the interest rate of the loan.21 Consequently, the reliance by the petitioner on Central Bank Circular
494 to unilaterally raise the interest rates on the loan in question was without any legal basis.
"6. The aforementioned loans granted by defendant Banco Filipino to the plaintiffs as stated on the
face of the promissory note and real estate mortgage (Annexes "B" to "D", inclusive) were not
Petitioner’s argument that the Banco Filipino case cannot be applied to the present case since the
actually received by the plaintiffs because interests, charges, etc. were deducted in advance from
respondents were not intervenors therein is flawed. Only the judgment in said case cannot bind the
the face value of the loans not in accordance with the contracts;
respondents as they were not parties thereto, however, the doctrine enunciated therein is a judicial
decision and forms part of the legal system of the land. 22 It forms a precedent, which must be
7. Even the loan contracts (Annexes "B" to "D", inclusive) required by defendant Banco Filipino to adhered to under the doctrine of stare decisis.23 Thus, even if the respondents were not parties to
be signed by the plaintiffs were contrary to and in violation of the then Usury Law, as amended; the above-mentioned case, the doctrine enunciated therein may be applied to the present case.

8. Assuming arguendo that the loan contracts between plaintiffs and defendant Banco Filipino are WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 45891 is AFFIRMED and the
valid, the extra-judicial foreclosure of the properties of the plaintiffs on May 24, 1979 was null and instant petition is hereby DENIED.
void for having been conducted in clear violation of the law (Act 3135), namely: a) lack of roper
notice to the plaintiffs; b) lack of proper publication and posting as required by law; c) the alleged
No pronouncement as to costs.
sale was conducted at the place other than that prescribed by law, among others;

SO ORDERED.
9. On May 27, 1990, defendant Banco Filipino purportedly executed in favor of defendant FGU
Insurance Corporation a Deed of Redemption over the foreclosed properties of the plaintiffs, again,
without notice to the latter, as evidenced by the said Deed of Redemption, copy of which is hereto
attached and marked as Annex "F".

10. The Deed of Redemption (Annex "F") is clearly null and void for having been executed in violation
of Rule 39, Rules of Court, and other related provisions of the Rules of Court."15
G.R. Nos. 102193-97 May 10, 1994
MS. EMILY YU FAJARDO, SPOUSES SALVADOR and ENGRACIA GIANAN, RENE and BEVERLY
RODELAS, SPOUSES JULIAN and TERESITA CUIZON, MS. TERESITA RIVERA and RICARDO
VILLANUEVA, petitioners,
vs.
HON. ODILON I. BAUTISTA, in his capacity as the Presiding Judge of the Regional Trial Court,
Branch 37, Calamba, Laguna, SPOUSES ISABELO and PURITA JAREÑO, RUBEN HABACON, and
CESAR S. REYES, in his capacity as the Register of Deeds, Calamba, Laguna, respondents.
DAVIDE, JR., J.:
This is a special civil action for certiorari which seeks to annul the 4 September 1991 Order of the
respondent Judge dismissing the complaints of the petitioners for lack of jurisdiction, and the 20
September 1991 Order denying the petitioners' motion for reconsideration. The respondent Judge
had ruled that jurisdiction over the cases pertained to the Housing and Land Use Regulatory Board
(HLRB) and not the Regional Trial Court. The petitioners asseverate that the RTC has jurisdiction
over the cases.
The pleadings of the parties disclose the following facts:
Private respondents Isabelo Jareño and Purita Jareño (hereinafter JAREÑOS) are the owners and
developers of a subdivision known as the Calamba Central Compound. On various dates, they as
SELLERS, and the petitioners as BUYERS signed separate contracts, each designated as a CONTRACT
TO SELL, under which, for the considerations therein stated, they bound themselves to sell to the
petitioners the lots subject thereof, and after the latter shall have paid the purchase price and
interest, to execute in favor of the petitioners the corresponding deeds of transfer of title, free from
any lien or encumbrance except those expressly provided for in the Contract to Sell. The Contracts
to Sell are herein described:
Petitioners-Buyers Lot subject Date of execution of
of contract to sell contract to sell
1) Spouses Julian a) Lot No. 9, Block
and Teresita No. 3, covered by
Cuizon TCT No. T-66231 25 January 19791
b) Lot No. 11, Block
No. 1.2 24 April 19793
2) Teresita Rivera Lot No. 12, BLock 5 December 19854
and Ricardo No. 3, covered by
Villanueva TCT No. 7-62229
3) Spouses Rene and Lot No. 14, Block 17 December 1985 5
Beverly Rodelas No. 3, covered by
TCT No. T-66231
4) Spouses Salvador Lot No. 9, Block 17 March 19886
and Engracia No. 2, covered by
Gianan TCT No. T-66273
On the other hand, private respondent Fernando Realty and Development Corporation (hereinafter
FERNANDO) as SELLER, and petitioner Emily Yu Fajardo as BUYER signed on 22 February 1985 a
CONTRACT TO SELL 7 under which for the considerations therein stated, FERNANDO agreed to sell
to Fajardo Lot No. 10, Block No. 3, also located at the Calamba Central Compound Subdivision, 8 and
upon full payment of the agreed price and interest thereon, to execute a deed of absolute sale in
favor of Fajardo.
It appears, however, that on 18 October 1986, the JAREÑOS sold the aforesaid lots subject of the
different contracts to sell to private respondent Ruben Habacon (hereinafter HABACON) under
separate documents denominated as "Kasulatan ng Bilihan." 9 On 18 February 1991, HABACON
caused the cancellation of the certificates of title covering the said lots and the issuance of new
ones in his name. 10
When the petitioners learned of these, they filed on 21 June 1991 separate complaints with the
court a quo for annulment of the sales in favor of HABACON and of the new certificates of title
issued to him, for reinstatement of the certificates of title cancelled by those issued to HABACON,
and for accounting and damages. They prayed in their complaints for a judgment
(a) declaring the "Kasulatan na Bilihan" executed in favor of HABACON as an equitable mortgage;
(b) annulling the new certificates of title issued to HABACON and reinstating those previously
cancelled by the new certificates of title; (c) ordering HABACON and the JAREÑOS to determine the
unpaid balance of the purchase price under the Contracts to Sell, to accept payments thereof, and
to execute the deeds of absolute sale in favor of the petitioners; and (e) ordering the defendants to
pay actual and exemplary damages and attorney's fees specified therein, as well as the costs.
The complaints were docketed as Civil Cases Nos. 1683-91-C, 11 1684-91-C, 12 1685-91-C, 13 1686-
91-C, 14 and 1688-91-C, 15 and were assigned to Branch 37 of the Regional Trial Court of Calamba.
On 9 August 1991, HABACON filed a motion to dismiss the complaints on the ground that the
plaintiffs (petitioners herein) have no legal capacity to sue because they were not parties to the
"BILIHAN." 16
In its Order of 12 August 1991, 17 the trial court, through the respondent Judge, directed the
plaintiffs to show cause why their complaints should not be dismissed for lack of jurisdiction
pursuant to P.D. No. 957 (Subdivision and Condominium Buyers' Protective Decree), as amended by
P.D. No. 1344, and the doctrine laid down by this Court in Solid Homes, Inc. vs. Payawal. 18
In their compliance 19 with the show cause order, the petitioners maintained that it is the trial court,
and not the HLRB, which has jurisdiction over the complaint. They contend that Solid Homes, Inc.
vs. Payawal is inapplicable because in their cases: (1) the title of the developers, the JAREÑOS, had
already passed to a third person, HABACON; (2) their action is for the annulment of the title of a
third person; (3) HABACON is not a developer; and (4) Section 19(1) of B.P. Blg. 129 vests upon the
Regional Trial Court the jurisdiction to hear and decide all civil actions which involve title to or
possession of any real property or any interest therein, except actions for unlawful detainer and
forcible entry.
In its Order of 4 September 1991, 20 the trial court dismissed the aforesaid civil cases for lack of
jurisdiction. It held:
The Court does not agree with the plaintiffs. PD No. 957 as amended by P.D. No. 1344 gives the
National Housing Authority now the Human Settlement Regulatory Commission (HSRC) 21
inclusive [sic] jurisdiction to hear and, decide cases of "unsound real estate business practices"
(Sec. 1(a), P.D. 1344). This authority is broad enough to include all kinds of real estate transactions
involving subdivision lot or condominium, wherein either the subdivision lot or condominium
buyer, project owner, developer, dealer, broker or salesman is involved.
The petitioners filed a motion for the reconsideration of the order, but the trial court denied this in
its Order of 20 September 1991. 22 It ruled that while HABACON may not be the developer, the
JAREÑOS are, and by selling the same lots to HABACON after they were previously sold to different
parties, the JAREÑOS may have committed an "unsound business practice." Moreover, it ruled that
Section 19(2) of B.P. Blg. 129, being a general law, should yield to P.D. No. 957, as amended by P.D.
No. 1344, which is a special law.
On 24 December 1991, the petitioners filed the instant special civil action for certiorari to annul the
4 September 1991 and 20 September 1991 Orders of the trial court on the ground that the judge
acted with grave abuse of discretion amounting to lack of jurisdiction in dismissing their complaints
and that they have no other plain, speedy, and adequate remedy in the ordinary course of law. The
petitioners maintain that the trial court has jurisdiction over their complaints.
In the Resolution of 18 November 1991, 23 we required the respondents to comment on the petition.
Private respondent HABACON filed his comment and opposition on 27 August 1992 24 while public
respondent Cesar S. Reyes filed his comment on 24 August 1993. 25 Both respondents rely on our
pronouncement in Solid Homes, Inc. vs. Payawal and echo the ruling of the trial court in the
questioned orders. The copy of the resolution sent to the JAREÑOS was returned unserved and in
the Resolution of 21 July 1993, we considered it as served on them. 26 As required, the petitioners
filed a reply to the comment. 27 On 8 November 1993, we resolved to give due course to the petition
and required the parties to submit their memoranda, which the petitioners complied with on 29
December 1993 28 and the private respondents, on 28 March 1994. 29
The core issue in this case is whether the trial court gravely abused its discretion in dismissing, for
lack of jurisdiction, the complaints filed by the petitioners. Before resolving this issue, a procedural
matter must first be considered. Generally, an order of dismissal, whether right or wrong, is a
final order, and hence a proper subject of appeal, not certiorari. 30 The remedies of appeal and
certiorari are mutually exclusive and not alternative or successive. 31 Accordingly, although the
special civil action of certiorari is not proper when an ordinary appeal is available, it may be granted
where it is shown that the appeal would be inadequate, slow, insufficient, and will not promptly
relieve a party from the injurious effects of the order complained of, or where appeal is inadequate
and ineffectual. 32 Nevertheless, certiorari cannot be a substitute for the lost or lapsed remedy of
appeal, 33 where such loss is occasioned by the petitioner's own neglect or error in the choice of
remedies. 34
The petitioners admit that they received a copy of the trial court's order dismissing their complaints
on 4 October 1991. 35 The instant petition was filed on 24 October 1991 or beyond the 15-day period
to appeal from the order. The petitioners have not even attempted to explain why they were unable
to appeal from the challenged order within the reglementary period. This civil action then was
resorted to as a substitute for the lost or lapsed remedy of appeal, and since none of the exceptions
to the rigid rule barring substitution of remedies was alleged to exist in this petition, or even
indicated by the pleadings, this petition must be dismissed.
Even if we were to accept this petition in the broader interest of justice, it must still fail for the trial
court correctly ruled that it has no jurisdiction over the subject matter in Civil Cases Nos. 1683-91-
C, 1684-91-C, 1685-91-C, 1686- 91-C, and 1688-91-C. Jurisdiction thereon was originally vested in
the National Housing Authority (NHA) under P.D. No. 957, as amended by P.D. No. 1344. Under E.O.
No. 648 of 7 February 1981, this jurisdiction was transferred to the Human Settlements Regulatory
Commission (HSRC) which, pursuant to E.O. No. 90 of 17 December 1986, was renamed as the
Housing and Land Use Regulatory Board.
We agree with the trial court that the complaints do involve unsound real estate business practices
on the part of the owners and developers of the subdivision who entered into Contracts to Sell with
the petitioners. By virtue of Section 1 of P.D. No. 1344 and our decision in Solid Homes, Inc. vs.
Payawal, the NHA, now HLRB, has the exclusive jurisdiction to hear and decide the matter. In
addition to involving unsound real estate business practices, the complaints also involve specific
performance of the contractual and statutory obligations of the owners or developers of the
subdivision. The claims for annulment of the "Kasulatan ng Bilihan" in favor of HABACON and the
certificates of title issued to him and for damages are merely incidental.
Section 1 of P.D. No. 1344, promulgated on 2 April 1978, provides as follows:
Sec. 1. In the exercise of its functions to regulate the real estate trade and business and in addition
to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall
have exclusive jurisdiction to hear and decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium unit
buyer against the project owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractual and statutory obligations filed by buyers
of subdivision lots or condominium units against the owner, developer, dealer, broker or
salesman. (Italics supplied)
Conformably with this section, we had earlier upheld the jurisdiction of the NHA to determine the
rights of the parties under a contract to sell a subdivision lot in Antipolo Reality Corp. vs. National
Housing Authority 36 and struck down the exercise of jurisdiction by the Regional Trial Court over a
case instituted by a lot buyer for delivery of title against the subdivision owner in Solid Homes, Inc.
vs. Payawal. We also sustained the jurisdiction of the HLRB over complaints for (a) the refund of
reservation fees for the purchase of a subdivision lot, 37 (b) specific performance filed by a lot buyer
against the seller of a subdivision lot, 38 (c) annulment of the mortgage constituted by the project
owner without the buyer's consent, the mortgage foreclosure sale, and the condominium certificate
of title issued to the highest bidder at the said foreclosure sale, 39 and (d) collection of the balance
of the unpaid purchase price of a subdivision lot filed by the developer of a subdivision against the
lot buyer. 40
In CT Torres Enterprises, Inc. vs. Hibionada, 41 we further declared that incidental claims for damages
may be resolved by the HLRB. Thus:
 It is clear from Section 1(c) of the above quoted PD No. 1344 that the complaint for specific
performance with damages filed by Diongon with the Regional Trial Court of Negros Occidental
comes under the jurisdiction of the Housing and Land Use Regulatory Board. Diongon is a buyer
of a subdivision lot seeking specific performance of the seller's obligation to deliver to him the
corresponding certificate of title.

The argument that only courts of justice can adjudicate claims resoluble under the provisions of
the Civil Code is out of step with the fast-changing times. There are hundreds of administrative
bodies now performing this function by virtue of a valid authorization from the legislature. This
quasi-judicial function, as it is called, is exercised by them as an incident of the principal power
entrusted to them of regulating certain activities falling under their particular expertise.

In the Solid Homes case for example the Court affirmed the competence of the Housing and Land
use Regulatory Board to award damages although this is an essentially judicial power exercisable
ordinarily only by the courts of justice. This departure from the traditional allocation of
governmental powers is justified by expediency, or the need of the government to respond
swiftly and competently to the pressing problems of the modern world.

Accordingly, the trial court committed no grave abuse of discretion in dismissing the complaints of
the petitioners.

WHEREFORE, the due course Resolution of 8 November 1993 is RECALLED and, for lack of merit, the
instant petition is DISMISSED with costs against the petitioners.

SO ORDERED.
G.R. No. 88983 December 14, 1993
SPS LUIS ILASCO, JR. and ROSARIO DE LA CRUZ, and SPS. EUSEBIO MOYA * and ESTELITA RODILLO,
petitioners,
vs.
THE HON. COURT OF APPEALS and MARIA CLARA RODILLO, respondents.
QUIASON, J.:
This is a petition for review on certiorari under Rule 46 of the Revised Rules of Court, to annul the
decision of the Court of Appeals (CA-G.R. CV. No. 09842), which set aside the order of dismissal on
the ground of res judicata of Civil Case No. 6779-M of the Regional Trial Court, Branch XVI, Malolos,
Bulacan.
Sometime in 1980, respondent Rodillo commenced with the Court of First Instance of Valenzuela,
Bulacan, Civil Case No. 1120-V-80 (entitled "Maria Clara Rodillo versus Spouses Luis Ilasco, Jr. and
Rosario dela Cruz") to declare null and void the donation given to petitioners Luis Ilasco and Rosario
dela Cruz by Cipriano Rodillo and Victoria dela Cruz and the reconveyance of the one-half portion
of the same to respondent Rodillo.
In her complaint, respondent Rodillo alleged: (a) Her widowed grandmother, Asuncion Laurel, who
died on June 23, 1943, had two sons, Nicolas and Cipriano Rodillo. Nicolas predeceased Asuncion,
having died on December 25, 1942. Nicolas' sole heir was respondent Rodillo, his daughter;
(b) Upon the death of Asuncion, her heirs, Cipriano and respondent Rodillo succeeded to the entire
estate as co-heirs, the latter inheriting by right of representation; (c) Inasmuch as respondent
Rodillo was a minor at the time of the death of Asuncion, Cipriano acted as her trustee who
administered her interests in the estate; (d) Cipriano executed a document entitled "Paglilipat sa
Sarili ng Pag-aari ng Namatay," falsely stating therein that he was the only heir of Asuncion and
adjudicating to himself the entire estate left by the deceased; and (e) On June 16, 1978, Cipriano
and his wife, Victoria dela Cruz, donated the other half portion of the land to petitioner spouses,
Luis Ilasco and Rosario dela Cruz.
Respondent Rodillo prayed that the document entitled "Paglilipat sa Sarili ng Pag-aari ng Namatay"
and the donation made in favor of petitioner Luis Ilasco and Rosario dela Cruz be declared null and
void; and that the donated property be reconveyed to her.
Finding difficulty in serving the summonses on petitioners Ilasco and dela Cruz, who were residents
of the United States, respondent Rodillo filed a Motion for Leave to Archive Case dated August 6,
1980. The Court of First Instance of Valenzuela, Bulacan, issued an order dated August 8, 1980
approving the motion.
On October 2, 1981, respondent Rodillo filed an Ex-Parte Motion to Revive Case which was granted
by the trial court on October 13, 1981. As no further action was taken by respondent Maria Clara
Rodillo, petitioners Ilasco and dela Cruz filed a Motion to Dismiss and for Cancellation of Notice of
Lis Pendens. The motion was granted in an order dated March 27, 1982, which reads:
Acting on the "Motion to Dismiss and for, Cancellation of Notices of Lis Pendens" filed by Atty.
Juan B. Bañez, Jr., counsel for the defendant, and it appearing that despite the order of revival
granted by the Court in its Order of October 13, 1981, plaintiff has not done anything in this case
and as a matter of fact, the lawyer who filed the motion for revival, Atty. Eli Natividad, withdrew
as counsel for the plaintiff with the conformity of the plaintiff, for lack of interest, this case is
hereby DISMISSED and the notices of lis pendens on defendants' Transfer Certificate of Title Nos.
T-30-384(M) and T-30-386(M) arising from this case are hereby ordered CANCELLED (Rollo, p. 48).
Respondent Rodillo filed a Motion for Reconsideration, which was denied on April 29, 1982.
No appeal was taken from the Orders dated March 27, 1982 and
April 29, 1982. Instead, on March 9, 1983, respondent Rodillo commenced in the Regional Trial
Court, Bulacan, Civil Case No. 6779-M (entitled: "Maria Clara Rodillo versus Spouses Luis Ilasco, Jr.
and Rosario dela Cruz and Spouses Eusebio Mutya and Estelita Rodillo).
Petitioners Ilasco and dela Cruz moved for the dismissal of the case against them on the ground of
res judicata. In granting the motion, the trial court reasoned out:
. . . It was shown that Civil Case No. 1120-V-80 was filed at the then Court of First Instance of
Bulacan (Valenzuela) by plaintiff Maria Clara Rodillo against movants in this instant case. Eusebio
Mutya and Estelita Rodillo were however added as defendants in this instant case. Although the
civil case filed at Valenzuela was for "Action to Declare the Donation Null and Void" and this
instant case is for "Annulment of Document and Reconveyance," the prayers in both cases are
identical: to declare as nullity (sic) the donation executed by Sps. Cipriano Rodillo and Victoria
dela Cruz in favor of the movants and the reconveyance of one-half portion of the same to the
plaintiff. The Civil Case filed with the Valenzuela Court was ordered terminated in the order of
Judge Eduardo Caguioa dated March 27, 1982 and the order of dismissal is now final (Rollo, p.
27).
The Court of Appeals reversed the decision of the trial court and reinstated the complaint, holding
that while all the elements of res judicata were present such principle was inapplicable to the case
considering the "environmental circumstances" thereof. By "environmental circumstances," the
Court of Appeals meant the utter dependence of respondent Rodillo on her counsel and the failure
to prosecute the case due to the failure to summon the defendants, who were residing abroad.
In pertinent part, the decision of the Court of Appeals states:
xxx xxx xxx
Res judicata is to be disregarded if its application would involve the sacrifice of justice to
technicality (Republic, et al. v. Judge de Los Angeles, G.R. No. 30240, 23 March 88). While
procedurally speaking since the dismissal was unqualified, it had the effect of an adjudication on
the merits, given the equities of the case it would be more in keeping with substantial justice if
the controversy between the parties were resolved on the merits rather than on a procedural
technicality in light of the express mandate of the rules that they be liberally construed in order
to promote their object and to assist the parties in obtaining just, speedy and inexpensive
determination of every action and proceeding. (Olivares v. Gonzales, et al., G.R. No. 34500, 18
March 88).
The dismissal of the actions is based on sound judicial discretion and such discretion must be
exercised wisely and prudently with a view to substantial justice (supra). While the first case was
pending for almost two years, the inability to prosecute was not really due to an unwillingness of
 the plaintiff to proceed with the case but the difficulty in serving defendants with summons for
being non-residents. While this could not have been a legal obstacle to its prosecution given the
nature of the case, as aptly stated in Tandoc v. Tensuan, 93 SCRA 880, "it is not fair to visit this
error of counsel on the poor petitioner-litigant (who depended only on her counsel's advice and
judgment) and inflict upon her just suit the capital penalty of dismissal." Rule 17, Section 3
permits such dismissal which has "the effect of an adjudication on the merits" only if plaintiff
"fails to prosecute (her) action for an unreasonable length of time" and under the environmental
circumstances of this case, as duly explained by counsel, petitioner could not be adjudged guilty
of failure to prosecute for an unreasonable length of time (p. 883, supra)(Rollo, p. 29)
Petitioners assail the decision of the Court of Appeals, assigning the following errors:
1) The respondent court erred in not applying the doctrine of res judicata despite its own finding
that all the elements of said doctrine are present in the instant case;
2) The respondent court erred in denying the Motion for Reconsideration without stating the
legal basis therefore in violation of Sec. 14, Art. VIII of the 1986 Constitution.
We agree with petitioners.
Compresent in the case at bench are the elements of res judicata, which are the following:
1. There must be a final judgment or order;
2. The court rendering the judgment must have jurisdiction over the subject matter;
3. The former judgment is a judgment on the merits;
4. There is between the first and second actions identity of the parties, subject matter and of
causes of action (Ipekdjian Merchandising Co. Inc. v. Court of Tax Appeals, 9 SCRA 72 [1963]; Abes
v. Rodil, 17 SCRA 822 [1966] ).
The judgment in Civil Case No. 1120-V-80 is a final judgment, since plaintiff failed to appeal
therefrom within the reglementary period.
The trial court which rendered the judgment had jurisdiction over the subject matter.
The dismissal of Civil Case No. 1120-V-80 on the ground of lack of interest or failure to prosecute on
the part of the plaintiff has the effect of judgment on the merits (Revised Rules of Court, Rule 17,
Sec. 3). It has the force of res judicata against the revival of substantially the same action originally
filed in another court (Insular Veneer, Inc. v. Plan, 73 SCRA 1 [1976]; De La Cruz v. Paras, 69 SCRA
556 [1976] ).
The trial court and the Court of Appeals agreed that the prayers in both cases are identical. There
was no showing that the additional defendants could not have been impleaded in the first case or
that their interests in the subject of the case were derived from parties other than the original
defendants, there was, therefore, only a change in the form and name of the action and nothing
less.
A party, by varying the form of the action or by bringing forward in a second action additional parties
or arguments, cannot escape the effects of the principle of res judicata when the facts remain the
same or at least where such new parties or matter could have been impleaded or pleaded in the
prior action (Sangalang v. Caparas, 151 SCRA 53 [1987]; Filinvest Credit Corporation v. Intermediate
Appellate Court, 207 SCRA 59 [1992] ).
The Court of Appeals fell into error because of its wrong appreciation of the issue before it. The
issue was whether the Order dated March 27, 1982 of the Court of First Instance of Valenzuela,
Bulacan in Civil Case No. 1120-V-80 operated as res judicata to Civil Case No. 6779-M. What the
Court of Appeals resolved was the question of whether the trial court erred in dismissing Civil Case
No. 1120-V-80 without stating that the dismissal was "without prejudice." Invoking the rule that
justice should not be sacrificed to technicality, the Court of Appeals set aside the Order of the
dismissal dated March 27, 1982 and the Order dated April 27, 1982, denying the motion for
reconsideration in Civil Case No. 1120-V-80.
The Court of Appeals would have been correct if the plaintiff (private respondent herein) in Civil
Case No. 1120-V-80 had timely appealed the Order of dismissal dated March 27, 1982 and raised
the issue that the trial court had gravely abused its discretion in dismissing the case with prejudice
in view of the "environmental circumstances" of the case.
Private respondent has only herself to blame for her present predicament. Instead of appealing
from the order of dismissal in Civil Case No. 1120-V-80, she filed another case (Civil Case No. 6779-
M) almost one year later.
Before procedural rules can be relaxed to give way to substantive justice, it is implicit that such
liberality be applied in a proper case.
Private respondent is bound by the negligence and mistakes in procedural matters of her counsel
(B.R. Sebastian Enterprises, Inc. v. Court of Appeals, 206 SCRA 28 [1992]; Mobil Oil Philippines, Inc.
v. Court of First Instance, 208 SCRA 523 [1992].
It is a principle of public policy that at the risk of occasional errors, judgments of court should
become final at some definite time fixed by law. The very object of which the courts were
constituted was to put an end to controversies (Vda. de Kilayko v. Tengco, 207 SCRA 600 [1992] ).
WHEREFORE, the decision of the Court of Appeals appealed from is SET ASIDE. A new judgment is
rendered REINSTATING and AFFIRMING the Orders dated March 27, 1982 and April 29, 1982 of the
Regional Trial Court, Branch XVI, Malolos, Bulacan in civil Case No. 6779-M.
SO ORDERED.
G.R. No. L-25771 March 29, 1982
URBANO JACA and BONIFACIO JACA, petitioners,
vs.
DAVAO LUMBER COMPANY and HONORABLE MANASES REYES, as Judge of the Court of First
Instance of Davao, respondents.
FERNANDEZ, J.:
This is a petition for certiorari with a prayer for a writ of preliminary injunction filed by Urbano Jaca
and Bonifacio Jaca against the Davao Lumber Company and Honorable Manases Reyes as Judge of
the Court of First Instance of Davao seeking the following relief:
WHEREFORE, petitioners pray —
1. That a writ of Preliminary Injunction be immediately issued restraining the respondent Judge
from carrying out or enforcing the Orders (Annexes "Z" and "FF") complained of pending the
hearing of the merits of the instant petition;
2. After due hearing, that this Honorable Court annuls and sets aside the complained Orders
(Annexes "Z" and "FF");
Petitioners further pray for all other reliefs which are just and equitable in the premises.
Davao City, Philippines, February 5, 1966. 1
In November, 1963, Urbano Jaca and Bonifacio Jaca filed with the Court of First Instance of Davao a
complaint for Accounting, Return of Price Differentials and Damages against the Davao Lumber
Company. The case was docketed as Civil Case No. 4189.
The complaint alleges that the plaintiff Urbano Jaca has been, and still is, a licensee of a logging
concession located in the City of Davao, and together with his co-plaintiff, Bonifacio Jaca, engaged
in the logging business of producing timber and logs for export and/or domestic purposes; that the
defendant is a business corporation with which plaintiffs had business dealings covering the sale
and/or exportation of their logs; that sometime in 1954, the herein parties-litigants entered into an
agreement whereby plaintiffs may secure, by way of advances, either cash or materials, foodstuffs,
and/or equipment's from the defendant corporation; that the payment of such account was to be
made either in cash and/or by plaintiff's turning over all the logs that they produce in the aforesaid
concession to the defendant, and in the latter case, the current prices, either export or domestic,
of the logs at the time of their delivery was to be considered; that while the aforesaid business
relationship between the parties was subsisting, defendant made plaintiff Urbano Jaca execute in
its favor a chattel mortgage, a copy of which instrument. however, plaintiffs were never furnished
but that as far as they can recollect the primary conditions of such chattel mortgage were that
plaintiffs would turn over to defendant corporation all the logs they may produce from the aforesaid
concession the same to be priced either as export or domestic and their value to be applied by
defendant to, and be credited for, the account of plaintiff's indebtedness, and further that in case
of need, plaintiffs may secure, by way of advances, either cash, foodstuffs, materials or equipment's,
under an "open credit account"; that under the aforementioned "open credit account" relationship
between the plaintiffs and defendant, orders were secured by plaintiffs, by way of advances, from
the defendant, this to be paid by them with plaintiffs' production from their concession, liquidating
those old accounts and keeping all accounts current; that in pursuance to the agreement, as
aforestated, plaintiff Urbano Jaca executed assignments of letters of credit in favor of the
defendant, in order that the latter may be able to use, as defendant corporation did in fact use, the
said letters of credit for bank negotiations of the former in the exportation of logs; that the plaintiffs
and the defendant had this business relationship, as aforementioned, from 1954 up to sometime in
August, 1963; that during this whole period of time, the plaintiffs had been faithfully delivering all
their log production to the defendant for export or domestic purposes; that before the filing of this
complaint, the plaintiff made repeated demands on the defendant for a formal accounting of their
business relationship from 1954 up to August, 1963, but that the defendant failed and refused, and
still fails and refuses, to effect such formal accounting, asserting that it had no time as yet to
examine into all the details of the accounting; that sometime on October 30, 1963, much to their
surprise, plaintiffs received letters of demand from the defendant in which they were requested to
pay their accounts in favor of defendant, which according to the latter had long been overdue;
(Copies of such letters are hereto attached marked as Annexes "A" and "B", and made integral parts
of this complaint) that plaintiffs are no longer indebted to the defendant, and as a matter of act it
is their belief that, if a formal accounting be made, there would still appear a claim in their favor in
the amount of P250,000.00 more or less, representing the price differentials of logs which they
delivered to the defendant from 1954 up to August, 1963; and that further, there was a deliberate
fraud practiced by the defendant on them, especially in defendant's under grading and/or
reclassification of logs delivered to it by plaintiffs; that further, there were many errors committed
in the monthly statements submitted to the plaintiffs, arising from the fact that there were charges
of cash, equipment's, materials and foodstuffs in said statements never ordered and/or received by
the plaintiffs; and still further that the proceeds of the letter of credit were not fully applied and/or
credited to the account of plaintiffs; that defendant has up to the present denied the plaintiffs the
benefits of a formal accounting and inasmuch as the invoices, receipts, vouchers, requisition slips
and other pertinent papers and document of their business transactions are in the possession of
defendant, it is difficult for plaintiffs to ascertain with accuracy the ledger balance between the
parties, unless a detailed examination of the matter is had; that plaintiffs have thereby been
constrained to file this case in Court in order to compel defendant to have a formal accounting
between them, and that it is the desire of plaintiffs that pending the formal hearing of this case,
three commissioners, constituting accountants be judicially appointed for the purpose of examining
all the books, pertinent papers and documents and all other data in relation with their business
transaction; that in order to protect their interest and to litigate this case, the plaintiffs were
compelled to secure and retain the services of attorneys, and that they have thereby suffered
damages in the sum of Twenty Thousand Pesos (P20,000.00) by way of attorney's fees. 2
In December, 1963, the Davao Lumber Company filed its Answer with Affirmative Defenses and
Counterclaim. 3
In its counterclaim, the Davao Lumber Company alleged that Plaintiffs Urbano Jaca and Bonifacio
Jaca are the ones indebted to the defendant in the sum of P756,236.52 and P91,651.97,
respectively; that on January 24, 1961, the plaintiff Urbano Jaca executed a chattel mortgage in
favor of the defendant to secure the payment of any and all obligations contracted by him in favor
of the defendant covering several chattels valued at P532,000.00; that said obligation of Urbano
Jaca totalling P756,236.52 is overdue and unpaid despite repeated formal demands for settlement
thereof made by defendant; that the action brought by the plaintiffs is purely baseless and malicious
for which the plaintiffs should be required to pay defendant damages and attorney's fees amounting
to at least P20.000.00. 4
In June, 1965, the respondent Judge rendered a decision the dispositive portion of which reads:
CONSIDERING THE FOREGOING, judgment is hereby rendered in favor of defendant and against
the plaintiff, ordering that:
1. The complaint for accounting, return of price differentials and damages filed by plaintiffs
Urbano Jaca and Bonifacio Jaca versus defendant Davao Lumber Company is dismissed, as it is
hereby dismissed;
2. Ordering Urbano Jaca to pay defendant the amount of P756,236.52 with legal interest from
the date of the filing of the counterclaim;
3. Ordering plaintiff Bonifacio Jaca to pay defendant the amount of P91,651.00 with legal interest;
4. Ordering that the chattel mortgage executed by Urbano Jaca in favor of defendant Exhibit "3",
be foreclosed as it is hereby foreclosed;
5. Ordering plaintiffs to pay jointly and severally P20,000.00 as attorney's fees in favor of
defendant.
6. With cost against plaintiffs.
SO ORDERED.
Given at Davao City, on this 11th day of June, 1965. 5
In September, 1965, the Davao Lumber Company filed a motion for execution pending appeal on
the following grounds:
3. There are good reasons to authorize an order of execution pending appeal pursuant to Rule
39, Section 2 of the Rules of Court, which provides:
SEC. 2. Execution pending appeal. — On motion of the prevailing party with notice to the adverse
party the court may, in its discretion, order execution to issue before the expiration of the. time
to appeal, upon good reasons to be stated in a special order. If a record on appeal is filed
thereafter the motion and the special order shall be included therein.
(a) In this same civil case,, the court issued an Order dated November 17, 1964 directing the
plaintiffs 'to deliver to the receiver all the properties, chattels and equipment covered by the
Chattel Mortgage, the delivery to be made within thirty (30) days', but plaintiffs did not, comply
with said Order of November 17, 1964.
(b) Defendant's counsel filed a 'Motion to Implement Order ordering Urbano Jaca to deliver
Chattels to Receiver' dated July 28, 1965, but up this date, plaintiffs have not complied with said
Order.
(c) That there are various reports from the receiver, one of them dated April 19, 1965, stating
that the Receiver has not taken custody of the mortgaged chattels due to the refusal or inability
to mortgagor Urbano Jaca to deliver the same to him.
(d) Despite the long lapse of time from the Order of November 17, 1964, the court in its Order of
September 1, 1965, directed said mortgagor Urbano Jaca to comply forthwith with the Order
dated November 17, 1964 'fifteen (15) days upon receipt of this Order', but up to this date there
has been consistent refusal or failure to comply with said order of delivery.
(2) Another good reason for execution pending appeal (Rule 39, Section 2) is the fact that plaintiff
Urbano Jaca the mortgagor in the deed of chattel mortgage dated January 24, 1961, has violated
Article 319 of the Revised Penal Code, for he has sold some of the mortgaged properties to third
persons, particularly, a wrecker, to Teodoro M. Alagon of Davao City on February 12, 1962 for
P10,000.00. A copy of the letter-complaint addressed by defendant's counsel to the City Fiscal of
Davao, dated February 5, 1964 is attached hereto and made an integral part of this Motion as
Annex "A".
(3) Moreover, plaintiffs have not only failed to comply with the Order of the Honorable Court for
the delivery of the properties under receivership to the Receiver (par. 3 of this Motion) and in
fact has violated the Chattel Mortgage contract (Par. 4 of this Motion); but plaintiffs have no
properties or assets with which to satisfy the judgment of this Honorable Court, which amounts
to principal items of P756,326.52, P91,651.00 and P20,000.00, or a total of P867,887.52.
(4) Obviously, the appeal interposed by the plaintiffs is to delay the enforcement and/or
execution of the decision rendered by this Honorable Court, so that when the Decision correctly
rendered by this Honorable Court should be affirmed on appeal the judgment will become
nugatory. 6
The respondent judge granted the motion for execution pending appeal in an order dated
November 29, 1965. 7
Urbano Jaca and Bonifacio Jaca filed a motion for reconsideration of the order granting execution
pending appeal in December, 1965, 8 but the same was denied in an order dated January 10, 1966.
9
Petitioners Urbano Jaca and Bonifacio Jaca contend that the respondent Judge acted in excess of
jurisdiction and/or with grave abuse of discretion in issuing the order granting execution pending
appeal and the order denying the motion for reconsideration of the order granting execution
pending appeal because said orders were issued in complete disregard of the applicable provisions
of the Rules of Court, the laws, and the settled decisions of the Honorable Supreme Court.
Petitioners assail the order granting execution pending appeal and the order denying the motion
for execution pending appeal on the following grounds:
1) granting that execution pending appeal win issue in a foreclosure proceedings —
the respondent Judge acted in excess of jurisdiction when he considered, over the objection of
petitioners, in the motion for reconsideration of the Order granting premature execution (Annex
"AA") the alleged sale by Florentina Perez, wife of petitioner, Urbano Jaca of the two (2) chevrolet
trucks which were not part of the mortgaged chattels to Atty. Raul Nengasca as a reason for
execution pending appeal in his Order (Annex "FF") denying the motion for reconsideration, since
this matter is not among the grounds stated in the motion for execution pending appeal (Annex
"X") neither has it been brought out during the hearing of said motion, nor is it one of the reasons
stated in the Order of execution pending appeal (Annex "Z") which is the Order sought to be
reconsidered and it is a cardinal rule in pleadings that a motion should state the grounds upon
which it is based (Section 3, Rule 15 of the Rules of Court) and the order sought to be obtained
and that no other grounds can be entertained, passed upon and considered by the court over the
objection of the adverse party;
2) the respondent judge acted with grave abuse of discretion equivalent to lack of jurisdiction in
finding that there exists special or good reasons for execution pending appeal because
discretionary execution under Section 2, Rule 39 of the Rules of Court will only issue if there are
superior circumstances demanding urgency which outweigh the injury or damage that the losing
party may suffer upon securing a reversal of the judgment on appeal considering the merits of
his appeal (Moran, Com. on the Rules of Court Vol. 2, Part II, 1963 ed., p. 239 and p. 242, citing
Aguilos vs. Barrios, et al. 72 Phil. 285: Ledesma vs. Teodoro, 52 O.G. 784; De Leon, et al. vs.
Soriano, et al., L-7684, Sept. 17, 1954; City of Bacolod vs. Enriquez, 55 O.G. p. 10545), and in the
instant case, the reasons ultimately relied upon by the respondent Judge in granting execution
pending appeal as stated in the Order (Annex "FF"), denying petitioners motion for
reconsideration of the Order granting execution, are not such superior circumstances demanding
urgency of execution because:
(a) the first reason that petitioner Urbano Jaca sold a wrecker to Teodoro M. Alagon is alleged to
have been made yet on February 12, 1962, or about over one and half years prior to the filing of
the instant case on November 22, 1963, and such sale would not show a fraudulent design on the
part of petitioner Urbano Jaca to defeat the judgment against him by disposing of the mortgaged
chattels and thus would demand urgency of execution of the judgment;
(b) the second reason regarding the sale of the two chevrolet trucks (not alleged to be a part of
the mortgaged chattels to the respondent Davao Lumber Company) to Atty. Raul Nengasca does
not refer to the property of either of the petitioners, neither does it refer to a sale made by
anyone of them; rather, it refers to a sale made by Florentina Perez (wife of petitioner Urbano
Jaca), who is not a party to the action, regarding her own property;
(c) the third and last reason that the orders of the court directing petitioner Urbano Jaca to deliver
all the mortgaged chattels to the receiver are valid and must be complied with could not even be
considered any reason at all for immediate execution, as it does not supply at all any element of
a superior circumstance requiring urgency of execution for there is, in fact, no legal connection
whatsoever in the validity of such Orders and their compliance with the propriety of an
immediate execution of the judgment pending appeal;
furthermore, the appeal of petitioners are based on good grounds and could never be said to be
intended merely for delay, and that the amount involved in the judgment is huge;
3) That there are, in fact, good reasons for not allowing execution pending appeal considering —
(1) that the amount involved in the judgment is huge;
(2) that the petitioners have challenged the Counterclaim, under which the judgment sought to
be executed is rendered, for lack of cause of action;
(3) that the petitioners have challenged the chattel mortgage, under which the judgment of
foreclosure has been rendered, as null and void ab initio and that no cause of action can arise
therefrom;
(4) that the petitioners have challenged the Commissioner's Report to be null and void which is
the primary, if not in fact the sole, evidence of said respondent on its Counterclaim and upon
which the judgment sought to be executed is based;
4) no execution pending appeal, in fact, can issue on foreclosure proceedings because the ninety-
day period provided in Section 2, Rule 68 of the Rules of Court is a substantive right granted to
the mortgagor-debtor which may not be omitted and that upon taking an appeal, said period is
suspended and is not revived until the judgment is affirmed by the appellate court and the case
returned to the trial court, and in the instant case, the respondent judge acted in excess of
jurisdiction in allowing execution pending appeal when the Counterclaim under which the
judgment sought to be executed is rendered, is for a foreclosure of chattel mortgage and that
petitioners have taken an appeal to the judgment rendered against them ...;
5) granting arguendo, that the foreclosure proceedings is only against petitioner Urbano Jaca as
mortgagor, but the action against petitioner Bonifacio Jaca is for a collection of a sum of money,
the respondent Judge acted with grave abuse of discretion equivalent to lack of jurisdiction in
allowing execution pending appeal as against said petitioner Bonifacio Jaca because in so far as
said petitioner is concerned there is no showing of any special or good reasons, in fact, there is
no showing of any reason at all anywhere in the records of the case, including the Orders
complained of, as a basis for which discretionary execution may be issued against him. 10
The private respondent maintains that the respondent judge acted in full compliance with the Rules
of Court, the law and applicable decisions of this Honorable Court because:
1) The present case is an action for accounting and not a foreclosure proceeding. Therefore,
execution pending appeal can be issued pursuant to Sec. 2 of Rule 39, Rules of Court. This provision
of the Rules of Court applies in the present case for there are good and valid reasons for the issuance
of a writ of execution pending appeal as stated in respondents' Motion (Annex "X"). Moreover,
petitioners have no properties or assets with which to satisfy the judgment of P867,887.52 plus
other items stated in the Decision. The respondent Judge, therefore, was correct in ordering the
issuance of a writ of execution (Annex "1"). Furthermore, to stay execution, petitioners should have
filed a supersedeas bond in accordance with Sec. 3 of Rule 3.
a) Respondent denies the erroneous and gratuitous conclusion of alleged 'excess of jurisdiction'
as alleged in par. 44(a) of the Petition. It further denies the other misleading statements alleged
therein, the truth of the matter being the grounds enumerated in the Motion for Execution
Pending Appeal (Annex "X") and the reasons mentioned in the Order (Annex "Z") granting said
motion.
b) Respondent denies the erroneous conclusion that the respondent Judge acted with grave
abuse of discretion, equivalent to lack of jurisdiction' as alleged in par. 44(b) of the Petition, and
states that the respondent Judge correctly acted in accordance with Sec. 2, Rule 39 of the Rules
of Court. It further denies the misleading statement therein that the reasons ultimately relied
upon by the respondent Judge are those stated in the Order (Annex "FF"), which is false, because
the good and valid reasons relied upon by the respondent Judge are those stated in his Order
(Annex "Z") granting the Motion for Execution Pending Appeal (Annex "X").
(1) Respondent admits the allegation that petitioner Urbano Jaca sold a wrecker to Teodoro M.
Alagon on February 12, 1962 for P10,000.00; and denies the statement that such sale would not
show a fraudulent design on his part to defeat the judgment against him. It further alleges that it
is one of the good and valid reasons for execution pending appeal (Rule 39, Sec. 2), because said
petitioner, the mortgagor in the deed of chattel mortgage dated January 24, 1961, has violated
Article 319 of the Revised Penal Code in selling the said mortgaged property;
 (2) The misleading allegations contained in subparagraphs 2 and 3 of par. 44(b) of the Petition
are false, for they are matters that arose in the petitioners' Motion for Reconsideration of the
Order granting execution pending appeal. Respondent further states that they are not the original
and valid reasons given by the respondent Judge in his Order (Annex "Z");
c) There are goods reasons for allowing execution pending appeal considering that —
(1) the amount involved in the judgment in favor of respondent Davao Lumber Company is
P867,887.52 plus attorney's fees of P20,000.00, and the petitioners admitted at the hearing of
the Motion for Execution Pending Appeal that they are insolvent (See Order, Annex "Z" );
(2) the petitioners have never challenged the Counterclaim of respondent Davao Lumber
Company during the hearing on the merits;
(3) the petitioners failed to present any evidence challenging the chattel mortgage under which
the counterclaim for foreclosure has been rendered;
(4) the petitioners have not disproved the Commissioner's Report (Annex "K"). In fact, they failed
to present their own evidence before the Commissioner which might tend to controvert the
undisputed documentary evidence of respondent Davao Lumber Company;
(5.) execution pending appeal was properly issued in the present case, which is an ordinary civil
action for accounting and not primarily a foreclosure of chattel mortgage the respondent Judge,
therefore, acted in full compliance with the law and jurisprudence in allowing execution pending
appeal;
(6) the judgment sought to be executed pending appeal sentences petitioner Urbano Jaca to pay
respondent Davao Lumber Company the amount of P756,236.52 with legal interest; sentences
petitioner Bonifacio Jaca to pay said respondent the amount of P91,651.00 with legal interest;
orders the Chattel Mortgage executed by Urbano Jaca in favor of said respondent foreclosed;
orders petitioners to pay, jointly and severally, the amount of P20,000.00 as attorney's fees and
costs; the said judgment was rendered after hearing on the merits of its action for accounting,
which is not a proceeding for foreclosure of chattel mortgage; the provisions of the Rules of Court
on foreclosure proceeding invoked by petitioners do not find any application in the case at bar;
the respondent Judge, therefore, in allowing execution pending appeal, precisely acted in full
compliance with Sec. 2 of Rule 39;
(7) as above pointed out, the judgment rendered in this case is joint and several, and
consequently, the respondent Judge was correct in ordering the execution thereof as against
both petitioners who have no properties or assets to satisfy the judgment in favor of respondent
company. 11
The basic issue in this case is whether or not there are good reasons justifying the issuance of an
order granting premature execution.
Section 2, Rule 39 of the Rules of Court provides that on motion of the prevailing party with notice
to the adverse party the court may, in its discretion, order execution to issue even before the
expiration of the time to appeal, upon good reasons to be stated in a special order. If a record on
appeal is filed thereafter, the motion and the special order shall be included therein. The
discretionary power of the Court of First Instance to grant or deny a motion for execution before
the expiration of the time to appeal will not be interfered with by the appellate court, unless it be
shown that there has been an abuse thereof or a subsequent change of conditions. 12
As provided in Sec. 2, Rule 39 of the New Rules of Court, the existence of good reasons is what
confers discretionary power on a court of first instance to issue a writ of execution pending appeal.
13 The reasons allowing execution must constitute superior circumstances demanding urgency
which will outweigh the injury or damage should the losing party secure a reversal of the judgment
on appeal. 14
The decision in Civil Case No. 4189 requires petitioners to pay the enormous amount of
P867,887.52. Clearly, premature execution of said decision wig result in irreparable damage to
petitioners as the collection of said amount may be enforced through the seizure of money and/or
sale of properties used in the logging business of petitioners. In other words, execution of the
decision in Civil Case No. 4189 may result in the termination of petitioner's business. Thus, any
damage to the petitioners brought about by the premature execution of the decision will be justified
only upon a finding that the appeal is being taken only for the purpose of delay and of rendering
the judgment nugatory.
The facts of record show that the petitioner's appeal is not frivolous and not intended for delay. The
findings of the respondent judge that the petitioners are indebted to the respondent Davao Lumber
Company are based solely on the report submitted by Estanislao R. Lagman, the commissioner
appointed by the court. This report was assailed by the petitioners as null and void in a motion to
strike out the report from the records of the case. According to petitioners, the report is null and
void because:
... the so-called 'findings of the Commissioner in his report filed before this Honorable Court is
the result of the exercise of certain highly irregular function not contemplated by the Rules of
Court and therefore deprived Plaintiffs' their constitutional right to their day in court.
ARGUMENTS:
1. That among other things, Section 3, Rule 33 of Rules of Court, provides:
Section 3: ... Subject to the specifications and limitations stated in the order the commissioner
has and shall exercise the power to regulate the proceedings in every hearing before him and to
do all act and take measures necessary or proper for the efficient performance of his duties under
the order, ... The trial or hearing before him shall proceed in all respect as though the same had
been had before the Court.
2. That on August 22, 1964, without the proper notice to their respective counsels, the Plaintiffs
received the following letter from the Commissioner, pertinent portions of which reads as
follows: and, copy of which letter is attached hereto, forming an integral part in this Opposition,
marked Annex "A" — In compliance to the above order, I am now to proceed, as ordered by the
Court, to examine your books of accounts and other records for the year 1962 and 1963.
I will be dropping at your office on August 25, 1964. Kindly have our records ready.
 3. That on August 25, 1964, the Commissioner went to Plaintiff's' office and asked to see the
Books, and if possible to bring the same with him to his office; that, the plaintiffs' counsel refused
to have said records examined in such manner;
4. That the Counsel for the Plaintiffs reminded the Commissioner on many occasions that, the
examination of books and records of Accounts should be done in a manner provided for under
the Rules of Court and, that in pursuance of said mandate, a hearing and/or proceedings be
conducted in the presence of all parties, their witnesses and, their counsels and, the hearing be
conducted as if it were taken before the court of justice, as said accounts being one controversial
and contested in issues;
5. That said commissioner refused to conduct said hearing in accordance to law;
6. That report is void in law. 15
In an order dated November 17, 1964, the respondent judge approved the commissioners' report
in toto As to the allegation of the plaintiff that they were denied their day in court, the respondent
judge stated that "plaintiffs deliberately ignored to comply with the lawful order of the court
directing them to present the pertinent books of accounts on the 12th day of October, 1964, at 2:00
P.M. Sala of Branch 11, and therefore, their position that they are denied their day in court is clearly
untenable." 16
Petitioners filed their motion for reconsideration of the order approving the commissioner's report
in November, 1964, explaining that their failure to appear was due to the fact that they received
the order requiring them to appear on October 12, 1964 already after said date when it was too late
for them to comply with the order of appearance. 17 Notwithstanding the reasonable explanation
of their absence in the hearing of October 12, 1964, the respondent judge denied the motion for
reconsideration in an order dated December 4, 1964. 18
It is obvious that the refusal of the respondent judge to order a hearing before the commissioner
was in clear violation of Section 3, Rule 33, Revised Rules of Court, which specifically provides "...
that the trial or hearing before a commissioner shall proceed in all respects as though the same had
been had before the court." For this purpose Section 5 of the same Rule provides that "upon receipt
of the order of reference, unless otherwise provided therein, the commissioner shall forthwith set
a time and place for the first meeting of the parties or their attorneys to be held within ten (10) days
after the date of reference ..." Pertinent also is Section 10 of Rule 33 which provides that "...
Objections to the report based upon grounds which were available to the parties during the
proceedings before the commissioner, other than objections to the findings and conclusions therein
set forth, shall not be considered by the court unless they were made before the commissioner."
The respondent judge's refusal to order the commissioner to conduct a hearing in accordance with
Section 5, Rule 33 was fatal to the cause of the petitioners. Under Section 10 of Rule 33, objections
to the report based upon grounds which were available to the parties during the proceedings before
the commissioner other than objections to the findings and conclusions therein set forth shall not
be considered by the court, unless they were made before the commissioner. Objections to the
report which were available to the parties during the proceedings refer to objections to the
admissibility or non-admissibility of evidence to be considered by the commissioner. Since no
meeting was held before the commissioner, petitioners never had the opportunity to object to the
admissibility of evidence of cash, equipment, materials and foodstuff, which they alleged in their
complaint, were never received by them. Also, they failed to question the failure of the
commissioner to include in his examination the price quotations of the logs which, as claimed in the
complaint, were under classified and undergraded.
The records show that respondent Davao Lumber Company was able to prove its claim against
petitioners because respondent judge refused to order the commissioner to hold a hearing as
required by the rules. Thus, objections which petitioners may have against the claims of respondent
were never considered. In the same manner, the claim of petitioner that respondent Davao Lumber
Company is indebted to them was not also considered. The Commissioner limited his examination
to the following:
MR. URBANO LACAS ACCOUNTS:
(a) From Feb. 17, 1961 to Oct. 31, 1962, Urbano Jaca purchased on account from the
Merchandise Dept. of Davao Lumber Co. per statement attached, marked schedule
1...................................................................................... P190:010.41
(b) From July 2, 1960 to Oct. 31, 1962, Urbano Jaca purchased on account from the Sawmill
Dept. of Davao Lumber Co. per statement hereto attached, marked schedule
2....................................................................................... P75,075.73
(c) Old vales or cash advances prior to July 25, 1963 which Urbano Jaca replaced with four (4)
BPI Checks Nos. D-236619 to D-236622 P50,000.00 each as alleged by DLC
........................................................................................... P200,000.00
(d) From Nov. 3, 1962 to Aug. 30, 1963, Urbano Jaca purchased on accounts from the Sawmill
Dept. various goods, per attached statement, marked Schedule 3
................................................................................................... P57,459.27
(e) From Nov. 3, 1962 to Aug. 30, 1963, Urbano Jaca purchased from the Mds. Dept. of DLC
various goods, per attached statement, marked Scheduled 4
................................................................................................ P68,857.07
(f) From July 25, 1963 to Sept. 16, 1963 Urbano Jaca obtained cash advances or vales per
attached statement, marked schedule 5............ P164,844.45
(g) Purchase of gasoline made by Urbano Jaca from Shell Co., under Davao Lumber Co.'s
guaranty ...................................................................... P2,523.60
Total amount due Davao Lumber Co. from Urbano Jaca .......... P758,770.53
The amount of P2,523.60 due Shell Co. may be deducted from the total amount if Urbano Jaca
can show proof that the account has been paid.
MR. BONIFACIO JACAS ACCOUNTS:
(a) From Nov. 3, 1962 to Aug. 8, 1963 Bonifacio Jaca purchased on account various goods from
the Sawmill Dept. of DLC per attached statement,. marked schedule
6.................................................................................................. P39,999.69
(b) From Feb. 4, 1963 to Aug. 8, 1963 Bonifacio Jaca purchased on account from the Mdse.
Dept. various goods, per attached statement marked schedule
7................................................................................................................... P48,319.08
(c) Purchases of gasoline from Shell Co. guaranteed by Davao Lumber Co.
................................................................................................................ P5,252.12.
(d) From Aug. 6, 1963 to Aug. 23, 1963, Bonifacio Jaca obtained cash advances or vales, per
attached statement marked schedule 8........... P3,333.20
Total amount due Davao Lumber Co. from Mr. Bonifacio Jaca P96,904.09. 19
Clearly, the examination was only made on advances made to petitioners. There was not even an
attempt to examine receipts of payments made by petitioners. It is hard to believe that the
petitioners had not paid any amount for the advances made to them. In fact, the respondents stated
in paragraph 4 of its answer to the complaint that the plaintiffs stopped delivering logs in August,
1963, 20 indicating that from 1962 to 1963, the years included in the report of the commissioner,
the petitioners had delivered logs to the Davao Lumber Company.
There is doubt that petitioners are really indebted to respondent Davao Lumber Company in such a
big amount as found by the trial court. The appeal of the petitioner appears to be meritorious. The
fear of respondent that the judgment of the trial court might not be satisfied if not executed at once
is not well founded. If the judgment is executed now, and on appeal the same is reversed, although
there are provisions for restitution, damages incurred by petitioners can not be fully compensated.
21
The reasons stated in the order of execution pending appeal are not well founded.
The first reason stated in the order was the consistent refusal of petitioner to deliver the mortgaged
chattels to the receiver. 22 The records disclose that respondent Davao Lumber Company is not even
entitled to the appointment of a receiver. It is an established rule that the applicant for receivership
must have an actual and existing interest in the property for which a receiver is sought to be
appointed. 23 The Davao Lumber Company's proof of interest in the property is the deed of chattel
mortgage executed by Urbano Jaca in favor of the Davao Lumber Company on January 24, 1961.
This deed of chattel mortgage is void because it provides that the security stated therein is for the
payment of any and all obligations herein before contracted and which may hereafter be contracted
by the Mortgagor in favor of the Mortgagee. 24 In the case of Belgian Catholic Missionaries vs.
Magallanes Press this Court held:
A mortgage that contains a stipulation in regard to future advances in the credit will take effect
only from the date the same are made and not from the date of the mortgage (11 CJ, 448; 5 RCL
420-421). ... Where the statute provides that the parties to a chattel mortgage must make oath
that the debt is a just debt, honestly due and owing from the mortgagor to the mortgagee, it is
obvious that a valid mortgage cannot be made to secure a debt to be thereafter contracted. (11
CJ. 448) 25
The second reason stated was the fact that petitioner Urbano Jaca violated Article 319 of the
Revised Penal Code by selling to a certain Teodoro Alagon some of the mortgaged properties. 26 As
already discussed, the deed of chattel mortgage executed by Urbano Jaca in favor of the Davao
Lumber Company is void. Hence, petitioner Urbano Jaca could not have violated Article 319 of the
Revised Penal Code. Moreover, the respondent Davao Lumber Company has not successfully
refuted the allegation of the petitioners that the sale of the wrecker to Teodoro Alagon was
exclusively negotiated by the lumber company's managing partner, Tian Se, and that the latter
caused Urbano Jaca to sign the deed of sale because he was the owner of the wrecker.
were in fact sold by her. And even if said trucks were owned by Urbano Jaca their sale to Atty. Raul
Nengasca does not totally indicate insolvency. As has been repeatedly observed, petitioner Urbano
Jaca is engaged in business. Sale of property used in business does not establish insolvency. The sale
may have been prompted by the need for more modern equipment on account of obsolescence, or
the need of to be directed to more profitable endeavor. The same reason applies to their failure to
file a counterbound. The cash needed for the counterbound may be utilized for the continuance of
the business or to increase business profits. In short, the acts of petitioner can not be always be
interpreted as signs of insolvency but may also indicate sound business judgment prompted by the
need to have liquid reserve of cash.
In its answer to the petition, 30 respondent lumber company contends that petitioners, having
availed of the remedy of appeal are barred form filling a petition for certiorari. Although Section 1,
Rule 65 of the Rules of Court provides that the special civil action of certiorari may only be invoked
when "there is no appeal, nor any plain speedy and adequate remedy in the course of law," this rule
is not without exception. The availability of the ordinary course of appeal does not constitute
sufficient ground to prevent a party from making use of the extraordinary remedy of certiorari
where the appeal is not an adequate remedy or equally beneficial, speedy and sufficient. 31 It is the
inadequacy — not the mere absence — of all other legal remedies and the danger of failure of
justice without the writ, that must usually determine the propriety of certiorari.
In the case at bar, the remedy of appeal is inadequate. It will not immediately relieve petitioners
from the injurious effect of the order granting execution. The slow and inexpensive remedy of
appeal will not prevent respondent judge from executing his decision requiring petitioners to pay
the huge amount of P867,887.52. Moreover, to dismiss the petition on the ground that petitioner
has already availed of the remedy of appeal will only aggravate the patent injustice already inflicted
on petitioners.
The reasons stated in the order granting execution pending appeal are not sufficient.
WHEREFORE, the petition for writ of certiorari is granted and the orders granting execution pending
appeal dated November 29, 1965 and the order denying the motion for reconsideration of the order
granting execution pending appeal dated January 10, 1966 are nullified and set aside, without
pronouncement as to costs.
SO ORDERED.

The third reason stated is the fact that petitioners have no properties and assets to satisfy the
judgment. 27 The basis of respondent judge's conclusion that petitioners do not have sufficient
assets is an unsubstantiated allegation in the motion for execution pending appeal of respondent
lumber company. 28 To rectify this omission, respondent lumber company, in its opposition to the
motion for reconsideration of the order of execution pending appeal, tried to point out that the sale
of two chevrolet trucks by Urbano Jaca and their failure to file a counterbond indicate that they are
without sufficient assets. 29 This later attempt to substantiate a baseless allegation in the motion
for execution pending appeal is futile. The trucks alleged to be sold are not properties of petitioner
Urbano Jaca They are paraphernalia properties of his wife, Florentina Perez, and the same trucks
G.R. No. 108634 July 17, 1997
ANTONIO P. TAN, petitioner,
vs.
THE COURT OF APPEALS and DPG DEVELOPMENT and MANAGEMENT CORP., respondents.
FRANCISCO, J.:
Petitioner Antonio P. Tan was the lessee of a piece of property located at 3658 Ramon Magsaysay
Boulevard, Sampaloc, Manila when on April 21, 1986, respondent DPG Development and
Management Corporation (DPG for brevity) acquired ownership thereof by purchase from one
Manuel J. Gonzales. Subsequently, DPG filed with the Metropolitan Trial Court of Manila on April
13, 1989 an ejectment suit for nonpayment of rentals against Vermont Packaging, Inc. which was
managed by petitioner.
During the pendency of said suit, petitioner, on January 24, 1990, filed Civil Case No. 90-51767
against the Register of Deeds of Manila and DPG for cancellation/annulment of TCT No. 169146
issued in the name of DPG. In a nutshell, this complaint challenges the validity of TCT No. 169146
which, according to petitioner, emanated from TCT No. 165501 that covered parcels of land outside
of Manila.
DPG received summons and the copy of the complaint on February 6, 1990. More than a month
later or on March 22, 1990, DPG's then counsel, Atty. Abundio Bello, filed a motion for extension of
time to file its answer to the complaint. The motion was granted. However, instead of filing the
answer within the extended period, Atty. Bello filed a second motion for more time to file answer.
The court granted the motion but only for fifteen (15) days from April 25, 1990.
As DPG still failed to file its answer, petitioner filed a motion to declare the former in default. On
May 22, 1990, the trial court granted the motion and accordingly declared DPG in default. Petitioner
thereafter presented evidence.
On October 5, 1990, the trial court rendered a decision in Civil Case No. 90-51767 favoring
petitioner, the dispositive portion of which reads:
WHEREFORE, it is hereby ordered that TCT No. 169146 registered in the name of defendant DPG
Development & Management Corporation be cancelled with the consequential effect that the
land reverts to the government disposable to qualified applicants. It is further ordered that the
Bureau of Lands consider the application of the plaintiff for the purchase of the area occupied by
him pursuant to the recommendation of the land investigator on the matter.
Attorney's fees in the amount of P5,000.00.
Cost of suit. 1
DPG received a copy of the trial court's decision on October 25, 1990. Nine (9) days later or on
November 3, 1990, Atty. Benjamin S. Formoso filed a notice of appearance as new counsel for DPG.
On the same day, said counsel filed a motion for new trial and to admit answer with counterclaim.
Petitioner filed a comment thereon with an omnibus motion to strike out DPG's motion for new
trial, coupled with a prayer for the issuance of a writ of execution.
On November 23, 1990, the trial court issued an Order denying, in effect, the motion for new trial,
the entirety of which reads:
ORDER
Today is the consideration of the Motion for New Trial and Motion to Admit Answer of DPG Dev.
& Mgt. Corp. filed by Atty. Benjamin Formoso. The plaintiff opposed the Motion for New Trial on
the following grounds:
1) Defendant is represented by counsel of record in the person of Atty. Abundio Bello and that
there is no substitution of counsel by the mere filing of Notice of Appearance by Atty. Benjamin
Formoso;
2) Defendant did not even file the requisite motion to lift order of default to regain its standing
or personality before the Court and that the mere filing of motion by the alleged new counsel did
not automatically suspend the running of the period; and
3) That the decision in the above-entitled case had not become final and executory.
The records will show that Atty. Abundio Bello filed a Withdrawal of Apperance (sic) on November
5, 1990 after the defendant DPG Dev. & Mgt. Corp. had already been furnished with a copy of the
decision by this Court, and that the Notice of Appearance of Atty. Benjamin Formoso on
November 2, 1990 was actually ahead of the withdrawal of appearance by Atty. Abundio Bello on
November 5, 1990. Such being the case, the appearance of new counsel Atty. Benjamin Formoso,
granting that he is the authorized counsel for the defendant, did not actually stop the running of
the period within which to appeal the adverse decision of the court.
The Decision of the Court dated October 5, 1990 had already become final and executory, and
the Motion for New Trial need not be acted upon by the Court.
WHEREFORE, let there be issued a Writ og (sic) Execution in the above-entitled case, the same to
be implemented by Branch Sheriff Ramon G. Enriquez of this Court.
SO ORDERED.
DPG questioned this Order through a petition for certiorari before public respondent Court of
Appeals (CA) claiming that the trial court gravely abused its discretion and exceeded its jurisdiction
in failing to take action on and/or in denying its motion for new trial and to admit answer, and in
granting petitioner's omnibus motion to strike out said motion for new trial and prayer for the
issuance of a writ of execution.
In its Decision of October 23, 1992 disposing of DPG's petition for certiorari, 2 the CA ruled for DPG,
the dispositive portion of which reads:
 WHEREFORE, the petition is hereby GRANTED. As prayed for, the ORDER of the respondent
judge issued on November 23, 1990, is hereby ANNULLED and SET ASIDE.
As a consequence,
(1) The writ of execution and alias writ of execution that have been issued are likewise declared
null and void;
(2) Petitioner's motion for new trial and for admission of answer that the order of November
23, 1990 has, in effect, denied is considered GRANTED;
(3) Petitioner's Answer to the private respondent's complaint in Civil Case No. 90-51767 is,
accordingly, considered ADMITTED; and
(4) The DECISION of respondent judge in said case is hereby VACATED, and respondent judge
is hereby ordered to conduct a new trial in said civil case. Conformably to Section 5 of Rule 37
however, the recorded evidence taken upon the former trial so far as the same is material and
competent to establish the issues, shall be used at the new trial without retaking the same.
SO ORDERED.
Hence, this petition, with the following principal arguments raised by petitioner in support
thereof:
1) the CA should not have entertained DPG's petition for certiorari considering that no motion for
reconsideration of the trial court's October 5, 1990 Decision was first filed by DPG and that the
proper remedy is an appeal;
2) the filing of the motion for new trial did not interrupt the finality of the trial court's Decision
inasmuch as there was no valid substitution between DPG's previous counsel on record Atty. Bello
and new counsel Atty. Formoso who filed the said motion for new trial.
The petition must fail.
On the first argument, as a rule, the special civil action of certiorari will not lie unless a motion for
reconsideration is first filed before the respondent court to allow it an opportunity to correct its
errors. 3 However, this rule admits of certain recognized exceptions such as (a) where the order is a
patent nullity,4 as where the Court a quo had no jurisdiction; 5 (b) where the questions raised in the
certiorari proceeding have been duly raised and passed upon by the lower court, 6 or are the same
as those raised and passed upon in the lower court; 7 (c) where there is an urgent necessity for the
resolution of the question and any further delay would prejudice the interests of the Government 8
or of the petitioner 9 or the subject matter of the action is perishable; 10 (d) where, under the
circumstances, a motion for reconsideration would be useless; 11 (e) where petitioner was deprived
of due process and there is extreme urgency for relief; 12 (f) where, in a criminal case, relief from an
order of arrest is urgent and the granting of such relief by the trial Court is improbable; 13 (g) where
the proceedings in the lower court are a nullity for lack of due process; 14 (h) where the proceedings
was ex parte or in which the petitioner had no opportunity to object; 15 and (i) where the issue
raised is one purely of law or where public interest is involved. 16 It is exceptive circumstance (b)
that justified DPG's non-filing of a motion for reconsideration, inasmuch as DPG's petition for
certiorari before the CA involved a similar issue or question passed upon by the trial court in its
November 23, 1990 Order, i.e., the propriety of the motion for new trial filed by DPG's new counsel
(Atty. Formoso).
It must also be stressed that what is determinative of the propriety of certiorari is the danger of
failure of justice without the writ, not the mere absence of all other legal remedies. 17 Thus, even
when appeal is available and is the proper remedy, a writ of certiorari has been allowed when the
orders of the lower court were issued either in excess of or without jurisdiction. 18 Certiorari may
also be availed of where an appeal would be slow, inadequate and insufficient 19 and that to strictly
observe the general rule would result in a miscarriage of justice. 20 This is especially true when the
petition, such as DPG's certiorari petition before the CA, appears to be meritorious and the trial
judge indeed seems to have committed grave abuse of discretion.
This brings us to the second argument which touches on the heart of the matter. There is no
question that the remedy against a judgment by default is a motion for new trial under Rule 37 of
the Rules of Court which should be filed within the period for perfecting an appeal, and that the
timely filing thereof interrupts the 15-day reglementary period. The CA has thus correctly observed
that:
It is settled in Our jurisprudence that a motion for new trial is the appropriate remedy when the
defendant discovers that he has been declared in default and that a judgment has already been
rendered, which has not, however, become final and executory as yet. (Leyte vs. Cusi, Jr., 152
SCRA 496; Tiburcio vs. Castro, 161 SCRA 583; Dolos vs. Court of Appeals, 188 SCRA 413; Circle
Finance Corp vs. Court of Appeals, 196 SCRA 166). It is not required that the defendant file first a
motion to file the order of default "to regain his standing."
The filing of a motion for new trial suspends the reglementary period for the attainment by the
decision of finality. (Rule 41, Section 3; PCIBank vs. Ortiz, 150 SCRA 383) for
If a new trial be granted, . . . the judgment shall be vacated, and the action shall stand for trial
de novo, . . . (Rule 37, Section 5)21
There is also no dispute that a motion for new trial (and to admit answer with counterclaim) was
filed on behalf of DPG within the 15-day appeal period, i.e., on November 3, 1990 or just nine (9)
days from DPG's receipt (on October 25, 1990) of a copy of the trial court's October 5, 1990 Decision.
Petitioner insists on the correctness of the trial court's finding (contained in its November 23, 1990
Order earlier quoted in this Decision) that the motion for new trial filed by DPG's new counsel Atty.
Formoso did not interrupt the finality of the trial court's October 5, 1990 Decision since there was
no proper substitution of DPG's original counsel of record Atty. Bello by Atty. Formoso, it appearing
that Atty. Formoso's notice of appearance did not contain Atty. Bello's written consent to the
substitution and that said notice of appearance even preceded Atty. Bello's notice of withdrawal as
DPG's counsel. And so petitioner argues that the CA erred in reversing the trial court and in allowing
a new trial to be conducted.
Petitioner's and the trial court's position, indeed, cannot be sustained. Atty. Formoso's appearance
as second attorney, which bears the conformity of DPG, does not authorize the presumption that
the authority of the first attorney (Atty. Bello) has been withdrawn, because a party may have two
or more lawyers working in collaboration as his counsel in a given litigation. 22 Certainly, DPG cannot
be denied the prerogative to employ additional counsel to protect his rights. Even granting that
Atty. Formoso's appearance was really intended to be a substitution and that there was lack of strict
observance of the requisites thereof, to wit:
a) upon written application;
b) upon written consent of the client;
c) upon written consent of the attorney to be substituted; and
Being similarly situated, DPG should also benefit from the liberal application of the rules
specifically pertaining to substitution of counsels.
Of course, it would have been different if the appearance of a new counsel was, for instance,
occasioned by the death of the original counsel of record. In which case, all the requirements of a
proper substitution must be met, one of which is a verified proof of the death of such attorney. The
party seeking substitution, therefore, cannot escape the effects of new counsel's error in failing to
furnish the required proof of death, as such negligence does not result in deprivation of due process
to said party.

Finally, and as correctly ruled by the CA, DPG is entitled to a new trial it prays for inasmuch as
d) in case the consent of attorney to be substituted cannot be obtained, there must be at least
negligence or incompetency of counsel is a well-recognized ground for new trial. 26 This would
a proof of notice that the motion for substitution has been served upon him in the manner
rectify the serious error committed by DPG's former counsel Atty. Bello, give the DPG the
prescribed by the rules (Section 26, Rule 138, Rules of Court), 23
opportunity to present its evidence with the assistance of a hopefully more vigilant counsel (Atty.
Formoso), and thus level the playing field.
the attendant circumstances here are compelling enough to validate the substitution.
WHEREFORE, premises considered, the instant petition is hereby DENIED. The assailed Decision of
Note that DPG was declared in default (and was thus denied opportunity to present evidence and the Court of Appeals dated October 23, 1992 is AFFIRMED in toto. Let this case be REMANDED to
participate in the trial) by reason of Atty. Bello's negligence. Said counsel failed to file an answer the court of origin for further proceedings.
despite being given by the trial court two (2) extensions of time to file it. True, the general rule is
that the client is bound by the mistakes of counsel. But this is not a hard and fast rule. In "De Guzman
SO ORDERED.
v. Sandiganbayan" 24 for instance, this Court, even mindful of the supremacy of substantive rights
over technicalities and invoking its power to suspend the rules, relieved petitioner De Guzman from
the "costly importunings" of his previous lawyers who filed a demurrer to evidence despite leave
for that purpose having been denied by the trial court. We thus said:

. . . . Under the circumstances, higher interests of justice and equity demand that petitioner be
not penalized for the costly importunings of his previous lawyers based on the same principles
why this Court had, on many occasions where it granted new trial, excused parties from the
negligence or mistakes of counsel. To cling to the general rule in this case is only to condone rather
than rectify a serious injustice to petitioners whose only fault was to repose his faith and entrust
his innocence to his previous lawyers.

xxx xxx xxx

Let us not forget that the rules of procedure should be viewed as mere tools designed to facilitate
the attainment of justice. Their strict and rigid application, which would result in technicalities
that tend to frustrate rather than promote substantial justice, must always be avoided. Even the
Rules of Court envision this liberality.

xxx xxx xxx

The Rules of Court was conceived and promulgated to set forth guidelines in the dispensation of
justice but not to bind and chain the hand that dispenses it, for otherwise, courts will be mere
slaves to or robots of technical rules, shorn of judicial discretion. That is precisely why courts in
rendering real justice have always been, as they in fact ought to be, conscientiously guided by the
norm that when on the balance, technicalities take a backseat against substantive rights, and not
the other way around. Truly then, technicalities, in the appropriate language of Justice
Makalintal, "should give way to the realities of the situation. 25 (Emphasis ours)