1 of 30
any other action or proceedings involving the same issue in the Su-
[G.R. NO. 135803 : March 28, 2006]
O.B. JOVENIR CONSTRUCTION AND DEVELOPMENT
CORPORATION, OSCAR B. JOVENIR and GREGORIO LI-
ONGSON, Petitioners, v. MACAMIR REALTY AND DEVEL-
OPMENT CORPORATION, SPOUSES ROSAURO and GLO-
RIA MIRANDA and the HONORABLE COURT OF AP-
PEALS, Respondents.
TINGA, J.:
In denying the present petition, the Court affirms the right of a plaintiff
to cause the dismissal of the complaint at any time before service of
the answer without need of affirmative action on the part of the trial
court. It must be qualified though that the incidents for adjudication
occurred a few months before the effectivity of the 1997 Rules of Civil
Procedure1 which now requires that upon the filing of such notice, the
court issue an order confirming the dismissal.2 The precedental value
of this decision is thus qualified to instances occurring prior to the
1997 Rules of Civil Procedure.
FACTS:
On 3 February 1997,3 a complaint was filed before the Regional Trial
Court (RTC) of Makati City, with private respondents Macamir Realty
and Development Corp. (Macamir Realty) and spouses Rosauro and
Gloria Miranda as plaintiffs, and petitioners O.B. Jovenir Construction
and Development Corp. (Jovenir Construction), Oscar B. Jovenir, and
Gregorio Liongson being among the defendants. The complaint, dock-
eted as Civil Case No. 97-256, sought the annulment of certain agree-
ments between private respondents and petitioners, as well as dam-
ages.4
It was alleged that Jovenir Construction was contracted to complete
the construction of private respondents condominium project. Private
respondents subsequently sought the termination of their agreements
with petitioners after it was discovered that Jovenir Construction had
misrepresented itself as a legitimate contractor.5 Respondents likewise
prayed for the issuance of a writ of preliminary injunction. A hearing
on the prayer appears to have been conducted on 6 February 1997.6
It was also alleged in the complaint that Gloria Miranda was the prin-
cipal stockholder and President of Macamir Realty while her husband
Rosauro was the owner of the real properties on which the condomin-
ium project was being constructed.7
Almost immediately, two of the impleaded defendants filed their re-
spective motions to dismiss. Defendant Salud Madeja filed her motion
on 6 February 1997, while Cesar Mangrobang, Sr. and Cesar Mangro-
bang, Jr. followed suit with their motion dated 13 February 1997.
Madeja pertinently alleged that while the spouses Miranda had initi-
ated the complaint on behalf of Macamir Realty, the real party-in-in-
terest, they failed to attach any Board Resolution authorizing them to
file suit on behalf of the corporation.
On 13 February 1997, or 10 days after the filing of the complaint,
private respondents filed a Motion to Withdraw Complaint, alleg-
ing that during the initial hearing on the prayer for preliminary
injunction on 6 February 1997, counsel for plaintiffs "discovered
a supposed technical defect in the complaint x x x that x x x may
be a ground for the dismissal of this case."9 Thus, private respond-
ents prayed that the plaintiffs be allowed to withdraw the com-
plaint without prejudice.
Petitioners filed an opposition to the Motion to Withdraw Complaint
on 18 February 1997, wherein they adopted Madeja's arguments as to
the lack of authority on the part of the spouses Miranda to sue on be-
half of Macamir Realty. However, just one day earlier, or on 17 Feb-
ruary 1997, private respondents filed another complaint against the
same defendants save for Madeja, and seeking the same reliefs as the
first complaint. This time, a Board Resolution dated 10 February 1997
authorizing the spouses Miranda to file the Complaint on behalf of
Macamir Realty was attached to the complaint. This second complaint
was also filed with the Makati RTC and docketed as Civil Case No.
97-379.
The Verification and Certification [of] Non-Forum Shopping in the
second complaint was accomplished by Rosauro Miranda, who
averred as follows:
3. That other than Civil Case No. 97-256 filed on February 3, 1997
before the Regional Trial Court of Makati City which was withdrawn
on February 13, 1997, I further certify that we have not commenced
preme Court, or Court of Appeals or any other tribunal or agency; x x
x 10
RTC: Granted Motion to withdraw complaint.
On 24 February 1997, 11 days after the filing of the Motion to
Withdraw Complaint and seven days after the filing of the second
Complaint, the Makati RTC, Branch 149, acting in Civil Case No.
97-256, granted the Motion to Withdraw Complaint. The RTC
noted in its Order11 that "an action may be dismissed by the plain-
tiffs even without Order of the Court by filing a notice of dismissal
at anytime before the service of the answer under Rule 17, Section
1 of the Rules of Court," and accordingly considered the com-
plaint withdrawn without prejudice.12
They pointed out that at the time of the filing of the second complaint
on 17 February 1997, the first complaint was still pending. The Makati
RTC denied the Motion to Dismiss in an Order13 dated 23 May 1997,
observing that at the time the Motion to Withdraw Complaint was
filed, none of the defendants had filed any answer or any responsive
pleading. Thus, it was then within respondents' right to cause the dis-
missal of the complaint without having to await action of the court on
their motion.14
CA: This Order was affirmed by the Court of Appeals
Special Sixth Division in its Decision15 dated 23 June 1998 after peti-
tioners had assailed the RTC's order via a special civil action for cer-
tiorari filed with the appellate court.16 Hence, the present petition.
Petitioners Argue:_______________________
That under Section 1 of Rule 17 of the Rules of Civil Procedure in
effect at the time of these antecedents, the plaintiff may obtain the
dismissal of his own complaint before a responsive pleading has
been filed through the filing of a notice of dismissal. However, re-
spondents in this case did not file a notice of dismissal, but instead
lodged a Motion to Withdraw Complaint, a motion which requires
affirmative action from the court before the complaint may be deemed
dismissed. Since the Makati RTC had granted the motion only on 24
February 1997, the first complaint had not yet been withdrawn as of
17 February 1997, when the second complaint was filed. It is thus pos-
ited that the Certification of Non-Forum Shopping attached to the sec-
ond complaint was false, in that it averred that the first complaint "was
withdrawn on February 13, 1997" when in fact the motion to withdraw
complaint was granted only 11 days after. In sum, respondents had
violated the procedural rules against forum-shopping, which at
that time were incorporated in Administrative Circular No. 04-94
of the Supreme Court.
ISSUE:
W/N the petitioner’s argument is correct? – NO.
Ruling of the Court:
We find no error on the part of the lower courts since the denial of the
motion to dismiss is wholly in accord with the Rules of Civil Proce-
dure.
Section 1, Rule 17 of the 1964 Rules of Civil Procedure stated:
Dismissal by the plaintiff - An action may be dismissed by the plain-
tiff without order of court by filing a notice of dismissal at any
time before service of the answer or of a motion for summary
judgment. Unless otherwise stated in the notice, the dismissal is
without prejudice, except that a notice operates as an adjudication
upon the merits when filed by a plaintiff who has once dismissed in a
competent court an action based on or including the same claim. A
class suit shall not be dismissed or compromised without the approval
of the court.17
Indubitably, the provision ordained the dismissal of the complaint by
the plaintiff as a matter of right at any time before service of the an-
swer.18 The plaintiff was accorded the right to dismiss the complaint
without the necessity of alleging in the notice of dismissal any ground
nor of making any reservation.19
In Go v. Cruz,20 the Court, through Chief Justice Narvasa, has recog-
nized that "where the dismissal of an action rests exclusively on the
will of a plaintiff or claimant, to prevent which the defending party
and even the court itself is powerless, requiring in fact no action what-
ever on the part of the court except the acceptance and recording of
the causative document."21 The facts in that case are well worth con-
sidering. Therein, the notice of dismissal was filed by the plaintiff on
12 November 1981. Respondent filed his answer three days earlier, or
 2 of 30
on 9 November, but plaintiff was served a copy of the answer by reg- As noted at the onset, the 1997 Rules of Civil Procedure now requires
istered mail only on 16 November. Notwithstanding the fact that the that upon the filing of such notice, the court issue an order confirming
answer was filed with the trial court three days prior to the filing of the dismissal.30 The new requirement is intended to qualify the right
the notice of dismissal, the Court still affirmed the dismissal sought of a party to dismiss the action before the adverse party files an answer
by the plaintiff. The Court declared that the right of the plaintiff to or asks for summary judgment.31 Still, there is no cause to apply the
cause the dismissal of the complaint by mere notice is lost not by the 1997 Rules retroactively to this case. A plaintiff's right to cause the
filing of the answer with the trial court, but upon the actual service to dismissal of his complaint under the old rules was unqualified. Proce-
the plaintiff of the answer.22 dural rules may not be given retroactive effect if vested rights would
be disturbed,32 or if theirapplication would not be feasible or would
The Court further ruled that "[plaintiff's] notice ipso facto brought
work injustice.33 Since respondents possessed an unqualified right
about the dismissal of the action then pending in the Manila Court,
to cause the dismissal of their complaint without need of confir-
without need of any order or other action by the Presiding Judge. The
mation by the trial court, as enunciated in the 1964 Rules, they did
dismissal was effected without regard to whatever reasons or motives
not err in asserting that their first complaint was withdrawn on
[plaintiff] might have had for bringing it about, and was, as the same
the day of the filing of their motion to withdraw, and the lower
Section 1, Rule 17 points out, 'without prejudice,' the contrary not be-
courts were correct in agreeing with respondents on this point.
ing otherwise 'stated in the notice' and it being the first time the action
was being so dismissed."23 WHEREFORE, the Petition is DENIED. Costs against petitioners.SO
ORDERED.
It is quite clear that under Section 1, Rule 17 of the old Rules, the
dismissal contemplated therein could be accomplished by the
plaintiff through mere notice of dismissal, and not through motion
subject to approval by the Court. Dismissal is ipso facto upon no-
tice, and without prejudice unless otherwise stated in the notice.
It is due to these considerations that the petition should be denied.
Evidently, respondents had the right to dismiss their complaint by
mere notice on 13 February 1997, since as of even date, petitioners
had not yet served their answer on respondents. The Motion to
Withdraw Complaint makes clear respondents' "desire to withdraw the
complaint without prejudice." That respondents resorted to a motion
to effect what they could have instead by mere notice may be indica-
tive of a certain degree of ignorance of procedural rules on the part of
respondents' counsel. Yet such "error," if it could be called as such,
should hardly be of fatal consequence. Petitioners posit that the "rem-
edy" of filing a notice of dismissal is not exclusive, respondents hav-
ing the "option" of securing the court's approval to the dismissal.24 On
the contrary, the trial court has no discretion or option to deny the
motion, since dismissal by the plaintiff under Section 1, Rule 17 is
guaranteed as a matter of right to the plaintiffs. Even if the motion
cites the most ridiculous of grounds for dismissal, the trial court
has no choice but to consider the complaint as dismissed, since the
plaintiff may opt for such dismissal as a matter of right, regardless
of ground.
We are in accord with the Court of Appeals when it pronounced:
While [the Motion to Withdraw Complaint] is styled as a "motion"
and contains a "prayer", these are innocuous errors and superfluities
that do not detract from its being a notice of dismissal made under said
Section 1 of Rule 17 and which ipso facto dismissed the case. It is a
hornbook rule that it is not the caption of a pleading but the allegations
thereat that determines its nature.[25] The court order of dismissal is a
mere surplusage under the circumstances and emphasized by the
court a quo itself when it granted the motion "[x x x] considering that
an action may be dismissed by the plaintiffs even without Order of the
Court[x x x]"26
Thus, the complaint could be properly considered as having been dis-
missed or withdrawn as of 13 February 1997. Accordingly, when re-
spondents filed their new complaint relating to the same cause of ac-
tion on 17 February 1997, the old complaint was no longer pending.
The certification against forum-shopping attached to the new com-
plaint correctly asseverated that the old complaint "was withdrawn on
February 13, 1997."27
Petitioners are unable to propose any convincing legal argument or
any jurisprudence that would sway the Court to their point of view. At
the same time, our present ruling must be distinguished from Ortigas
& Company Limited Partnership v. Velasco,28 wherein it was ad-
vanced that "theoretically every final disposition of an action does not
attain finality until after fifteen (15) days therefrom, x x x the plaintiff
may move to withdraw and set aside his notice of dismissal and revive
his action, before that period lapses."29 That statement was made in
the context of ruling that a plaintiff may move for the revival of the
complaint dismissed on his instance under Section 1 of Rule 17 only
within 15 days upon notice; otherwise the remedy of the plaintiff
would be to file a new complaint. This observation in Ortigas does not
detract from the fact that under Section 1, Rule 17 of the previous
Rules, the complaint is deemed ipso facto dismissed on the day of the
filing of the notice. This again is because dismissal at the instance of
the plaintiff under Section 1, Rule 17 is a matter of right, and under
the 1964 Rules of Civil Procedure, effective without need of any af-
firmative action on the part of the trial court.
 3 of 30

-
4 of 30

TOPIC: Dismissal of action effect on counterclaim
G.R. No. 170354 June 30, 2006
EDGARDO PINGA, Petitioner,
vs.
THE HEIRS OF GERMAN, SANTIAGO represented by FER-
NANDO SANTIAGO, Respondents.
The constitutional faculty of the Court to promulgate rules of practice
and procedure1 necessarily carries the power to overturn judicial prec-
edents on points of remedial law through the amendment of the Rules
of Court. One of the notable changes introduced in the 1997 Rules of
Civil Procedure is the explicit proviso that if a complaint is dismissed
due to fault of the plaintiff, such dismissal is "without prejudice to the
right of the defendant to prosecute his counterclaim in the same or in
a separate action."2 The innovation was instituted in spite of previous
jurisprudence holding that the fact of the dismissal of the complaint
was sufficient to justify the dismissal as well of the compulsory coun-
terclaim.3
In granting this petition, the Court recognizes that the former jurispru-
dential rule can no longer stand in light of Section 3, Rule 17 of the
1997 Rules of Civil Procedure.
FACTS: Petitioner Eduardo Pinga was named as one of two defend-
ants in a complaint for injunction filed with (RTC) of San Miguel,
Zamboanga del Sur, by respondent Heirs of German Santiago, repre-
sented by Fernando Santiago. The Complaint alleged in essence that
petitioner and co-defendant Vicente Saavedra had been unlawfully en-
tering the coco lands of the respondent, cutting wood and bamboos
and harvesting the fruits of the coconut trees therein. Respondents
prayed that petitioner and Saavedra be enjoined from committing "acts
of depredation" on their properties, and ordered to pay damages.
Petitioner’s Amended Answer with Counterclaim: disputed respond-
ents’ ownership of the properties, asserting that petitioner’s father, Ed-
mundo Pinga, from whom defendants derived their interest in the
properties, had been in possession thereof since the 1930s.8 They al-
leged that as far back as 1968, respondents had already been ordered
ejected from the properties after a complaint for forcible entry was
filed by the heirs of Edmundo Pinga. It was further claimed that re-
spondents’ application for free patent over the properties was rejected
by the Office of the President in 1971. Owing to respondents’ forcible
re-entry in the properties and the irresponsible and reckless filing of
the case, they be awarded various types of damages instead in amounts
totaling P2,100,000 plus costs of suit.
By July of 2005, the trial of the case had not yet been completed.
Moreover, respondents, as plaintiffs, had failed to present their evi-
dence.
In 2004 the RTC ordered the dismissal of the complaint However, the
order of dismissal was subsequently reconsidered by the RTC in an
Order dated 9 June 2005, which took into account the assurance of
respondents’ counsel that he would give priority to that case.
At the hearing of July 2005, plaintiffs’ counsel on record failed to ap-
pear, sending in his stead a representative who sought the postpone-
ment of the hearing. Counsel for defendants (who include herein peti-
tioner) opposed the move for postponement and moved instead for the
dismissal of the case.
The RTC noted that it was obvious that respondents had failed to pros-
ecute the case for an unreasonable length of time, in fact not having
presented their evidence yet. On that ground, the complaint was dis-
missed. At the same time, the RTC allowed defendants "to present
their evidence ex-parte."
Respondents filed a Motion for Reconsideration13 of the order is-
sued in open court on 27 July 2005, opting however not to seek
that their complaint be reinstated, but praying instead that the
entire action be dismissed and petitioner be disallowed from pre-
senting evidence ex-parte. Respondents claimed that the order of
the RTC allowing petitioner to present evidence ex-parte was not
in accord with established jurisprudence. They cited cases, partic-
ularly City of Manila v. Ruymann14 and Domingo v. San-
tos,15 which noted those instances in which a counterclaim could
not remain pending for independent adjudication.
On 9 August 2005, RTC promulgated an order granting respondents’
Motion for Reconsideration and dismissing the counterclaim, citing as
5 of 30
the only ground therefor that "there is no opposition to the Motion for
Reconsideration of the [respondents]."
Petitioner filed a Motion for Reconsideration, but the same was denied
by the RTC in an Order dated 10 October 2005.
Respondents filed an Opposition to Defendants’ Urgent Motion for
Reconsideration, wherein they argued that the prevailing jurispruden-
tial rule is that "compulsory counterclaims cannot be adjudicated in-
dependently of plaintiff’s cause of action," and "a conversu, the dis-
missal of the complaint carries with it the dismissal of the compulsory
counterclaims."
ISSUE: WON the dismissal of the complaint necessarily carries the
dismissal of the compulsory counterclaim.
We hold that under Section 3, Rule 17 of the 1997 Rules of Civil Pro-
cedure, the dismissal of the complaint due to the fault of plaintiff does
not necessarily carry with it the dismissal of the counterclaim, com-
pulsory or otherwise. In fact, the dismissal of the complaint is without
prejudice to the right of defendants to prosecute the counterclaim.
On a prefatory note, the RTC, in dismissing the counterclaim, did not
expressly adopt respondents’ argument that the dismissal of their com-
plaint extended as well to the counterclaim. Instead, the RTC justified
the dismissal of the counterclaim on the ground that "there is no op-
position to [plaintiff’s] Motion for Reconsideration [seeking the dis-
missal of the counterclaim]."20 This explanation is hollow, consider-
ing that there is no mandatory rule requiring that an opposition be filed
to a motion for reconsideration without need for a court order to that
effect; and, as posited by petitioner, the "failure to file an opposition
to the Plaintiff’s Motion for Reconsideration is definitely not one
among the established grounds for dismissal [of the counter-
claim]."21 Still, the dismissal of the counterclaim by the RTC betrays
at very least a tacit recognition of respondents’ argument that the
counterclaim did not survive the dismissal of the complaint. At most,
the dismissal of the counterclaim over the objection of the defendant
(herein petitioner) on grounds other than the merits of the counter-
claim, despite the provisions under Rule 17 of the 1997 Rules of Civil
Procedure, constitutes a debatable question of law, presently meriting
justiciability through the instant action. Indeed, in reviewing the as-
sailed orders of the RTC, it is inevitable that the Court consider
whether the dismissal of the complaint, upon motion of the defendant,
on the ground of the failure to prosecute on plaintiff’s part precipitates
or carries with it the dismissal of the pending counterclaims.
Our core discussion begins with Section 3, Rule 17 of the 1997 Rules
of Civil Procedure, which states:
SEC. 3. Dismissal due to fault of plaintiff.—If, for no justifiable cause,
the plaintiff fails to appear on the date of the presentation of his evi-
dence in chief on the complaint, or to prosecute his action for an un-
reasonable length of time, or to comply with these Rules or any order
of the court, the complaint may be dismissed upon motion of defend-
ant or upon the court's own motion, without prejudice to the right of
the defendant to prosecute his counterclaim in the same or in a sepa-
rate action. This dismissal shall have the effect of an adjudication upon
the merits, unless otherwise declared by the court.
The express qualification in the provision that the dismissal of the
complaint due to the plaintiff’s fault, as in the case for failure to pros-
ecute, is without prejudice to the right of the defendant to prosecute
his counterclaim in the same or separate action. This stands in marked
contrast to the provisions under Rule 17 of the 1964 Rules of Court
which were superseded by the 1997 amendments. In the 1964 Rules,
dismissals due to failure to prosecute were governed by Section 3,
Rule 17, to wit:
SEC. 3. Failure to prosecute. — If plaintiff fails to appear at the time
of the trial, or to prosecute his action for an unreasonable length of
time, or to comply with these rules or any order of the court, the action
may be dismissed upon motion of the defendant or upon the court’s
own motion. This dismissal shall have the effect of an adjudication
upon the merits, unless otherwise provided by court.
Evidently, the old rule was silent on the effect of such dismissal due
to failure to prosecute on the pending counterclaims. As a result, there
arose what one authority on remedial law characterized as "the nag-
ging question of whether or not the dismissal of the complaint carries
with it the dismissal of the counterclaim." Jurisprudence construing
the previous Rules was hardly silent on the matter.
In their arguments before the RTC on the dismissal of the counter-
claim, respondents cited in support cases in support but none of the
complaints in the four cases were dismissed either due to the fault of

the plaintiff or upon the instance of the defendant. The distinction is
relevant.
Discussion on the difference of previous and new rules: On the gen-
eral effect of the dismissal of a complaint, regardless of cause, on the
pending counterclaims, previous jurisprudence laid emphasis on
whether the counterclaim was compulsory or permissive in character.
The necessity of such distinction was provided in the 1964 Rules it-
self, particularly Section 2, Rule 17, which stated that in instances
wherein the plaintiff seeks the dismissal of the complaint, "if a coun-
terclaim has been pleaded by a defendant prior to the service upon him
of the plaintiff’s motion to dismiss, the action shall not be dismissed
against the defendant’s objection unless the counterclaim can remain
pending for independent adjudication by the court. The
vaunted commentaries of Chief Justice Moran, remarking on Section
2, Rule 17, noted that "[t]here are instances in which a counterclaim
cannot remain pending for independent adjudication, as, where it
arises out of, or is necessarily connected with, the transaction or oc-
currence which is the subject matter of the opposing party’s claim."
Previous jurisprudence: The Court refused to reinstate the counter-
claim, opining without elaboration, If the civil case is dismissed, so
also is the counterclaim filed therein." The broad nature of that state-
ment gave rise to the notion that the mandatory dismissal of the coun-
terclaim upon dismissal of the complaint applied regardless of the
cause of the complaint’s dismissal.
Spouses Sta. Maria, Jr. v. Court of Appeals, decided in 1972, The de-
fendants therein successfully moved before the trial court for the dis-
missal of the complaint without prejudice and their declaration in de-
fault on the counterclaim after plaintiffs therein failed to attend the
pre-trial. After favorable judgment was rendered on the counterclaim,
plaintiffs interposed an appeal, citing among other grounds, that the
counterclaim could no longer have been heard after the dismissal of
the complaint. While the Court noted that the adjudication of the coun-
terclaim in question "does not depend upon the adjudication of the
claims made in the complaint since they were virtually abandoned by
the non-appearance of the plaintiffs themselves," it was also added that
"[t]he doctrine invoked is not available to plaintiffs like the petition-
ers, who prevent or delay the hearing of their own claims and allega-
tions." The Court, through Justice JBL Reyes, noted:
The doctrine that the complaint may not be dismissed if the coun-
terclaim cannot be independently adjudicated is not available to,
and was not intended for the benefit of, a plaintiff who prevents
or delays the prosecution of his own complaint. Otherwise, the trial
of counterclaims would be made to depend upon the maneuvers of the
plaintiff, and the rule would offer a premium to vexing or delaying
tactics to the prejudice of the counterclaimants. It is in the same spirit
that we have ruled that a complaint may not be withdrawn over the
opposition of the defendant where the counterclaim is one that arises
from, or is necessarily connected with, the plaintiff’s action and can-
not remain pending for independent adjudication.
Nonetheless, by the early 1990s, jurisprudence was settling on a rule
that compulsory counterclaims were necessarily terminated upon the
dismissal of the complaint not only if such dismissal was upon motion
of the plaintiff, but at the instance of the defendant as well.
Justice Regalado, joined by Chief Justice Narvasa, registered a strong
objection to the theory of the majority. They agreed that the trial court
could no longer hear the counterclaim, but only on the ground that
defendant’s motion to be allowed to present evidence on the counter-
claim was filed after the order dismissing the complaint had already
become final. They disagreed however that the compulsory counter-
claim was necessarily dismissed along with the main complaint, point-
ing out that a situation wherein the dismissal of the complaint was oc-
casioned by plaintiff’s failure to appear during pre-trial was governed
under Section 3, Rule 17, and not Section 2 of the same rule.
By reason thereof, to curb any dubious or frivolous strategy of plaintiff
for his benefit or to obviate possible prejudice to defendant, the former
may not dismiss his complaint over the defendant's objection if the
latter has a compulsory counterclaim since said counterclaim would
necessarily be divested of juridical basis and defendant would be de-
prived of possible recovery thereon in that same judicial proceeding.
Justice Regalado in BA Finance proved opportune, as he happened
then to be a member of the Rules of Court Revision Committee tasked
with the revision of the 1964 Rules of Court. Just a few months af-
ter BA Finance was decided, Justice Regalado proposed before the
Committee an amendment to Section 3, Rule 17 that would explicitly
6 of 30
provide that the dismissal of the complaint due to the fault of the plain-
tiff shall be "without prejudice to the right of the defendant to prose-
cute his counterclaim in the same or in a separate action." The amend-
ment, which was approved by the Committee, is reflected in the
minutes of the meeting of the Committee held on 12 October 1993:
[Justice Regalado] then proposed that after the words "upon the
court’s own motion" in the 6th line of the draft in Sec. 3 of Rule 17,
the following provision be inserted: "without prejudice to the right
of the defendant to prosecute his counterclaim in the same or in a
separate action." The Committee agreed with the proposed
amendment of Justice Regalado.
Justice Herrera observed that under Secs. 1 to 3 of Rule 17, it is not
the action that is dismissed but the complaint. He asked whether there
is any distinction between "complaint" and "action." Justice Regalado
opined that the action of the plaintiff is initiated by his complaint.
Justice Feria then suggested that the dismissal be limited to the
complaint[.] Thus, in the 1st line of Sec. 1, the words "An action"
will be changed to "a complaint"; in the 2nd line of Sec. 2, the
words "an action" will be changed to "a complaint" and in Sec. 3,
the word "action" on the 5th line of the draft will be changed to
"complaint." The Committee agreed with Justice Feria’s sug-
gested amendments.
CA Paño believed that there is a need to clarify the counterclaim
that the defendant will prosecute, whether it is permissive or com-
pulsory or all kinds of counterclaims.
Justice Regalado opined that there is no need of making a clarifi-
cation because it is already understood that it covers both coun-
terclaims.52
HELD (DISCUSSION) : It is apparent from these minutes that the
survival of the counterclaim despite the dismissal of the complaint un-
der Section 3 stood irrespective of whether the counterclaim was per-
missive or compulsory. Moreover, when the Court itself approved the
revisions now contained in the 1997 Rules of Civil Procedure, not only
did Justice Regalado’s amendment to Section 3, Rule 17 remain intact,
but the final version likewise eliminated the qualification formerly of-
fered under Section 2 on "counterclaims that can remain pending for
independent adjudication by the court."53 At present, even Section 2,
concerning dismissals on motion of the plaintiff, now recognizes the
right of the defendant to prosecute the counterclaim either in the same
or separate action notwithstanding the dismissal of the complaint, and
without regard as to the permissive or compulsory nature of the coun-
terclaim.
In his commentaries on the 1997 Rules of Civil Procedure, Justice Re-
galado expounds on the effects of the amendments to Section 2 and 3
of Rule 17:
Under this revised section [2], where the plaintiff moves for the dis-
missal of his complaint to which a counterclaim has been interposed,
the dismissal shall be limited to the complaint. Such dismissal shall be
without prejudice to the right of the defendant to either prosecute his
counterclaim in a separate action or to have the same resolved in the
same action. Should he opt for the first alternative, the court should
render the corresponding order granting and reserving his right to
prosecute his claim in a separate complaint. Should he choose to have
his counterclaim disposed of in the same action wherein the complaint
had been dismissed, he must manifest such preference to the trial court
within 15 days from notice to him of plaintiff’s motion to dis-
miss. These alternative remedies of the defendant are available to
him regardless of whether his counterclaim is compulsory or per-
missive. A similar alternative procedure, with the same underlying
reason therefor, is adopted in Sec. 6, Rule 16 and Sec. 3 of this Rule,
wherein the complaint is dismissed on the motion of the defendant or,
in the latter instance, also by the court motu proprio.
xxxx
2. The second substantial amendment to [Section 3] is with respect to
the disposition of the defendant’s counterclaim in the event the plain-
tiff’s complaint is dismissed. As already observed, he is here granted
the choice to prosecute that counterclaim in either the same or a sepa-
rate action. x x x x
3. With the aforestated amendments in Secs. 2 and 3 laying down spe-
cific rules on the disposition of counterclaims involved in the dismis-
sal actions, the controversial doctrine in BA Finance Corporation vs.
Co, et al., (G.R. No. 105751, June 30, 1993) has been abandoned, to-
gether with the apparent confusion on the proper application of said
Secs. 2 and 3.
 7 of 30
To be certain, when the Court promulgated the 1997 Rules of Civil While such dismissal or withdrawal precludes the pursuit of litiga-
Procedure, including the amended Rule 17, those previous jural tion by the plaintiff, either through his/her own initiative or fault, it
doctrines that were inconsistent with the new rules incorporated would be iniquitous to similarly encumber the defendant who main-
in the 1997 Rules of Civil Procedure were implicitly abandoned tained no such initiative or fault. If the defendant similarly moves for
insofar as incidents arising after the effectivity of the new procedural the dismissal of the counterclaim or neglects to timely pursue such
rules on 1 July 1997. BA Finance, or even the doctrine that a coun- action, let the dismissal of the counterclaim be premised on those
terclaim may be necessarily dismissed along with the complaint, grounds imputable to the defendant, and not on the actuations of the
clearly conflicts with the 1997 Rules of Civil Procedure. The aban- plaintiff.
donment of BA Finance as doctrine extends as far back as 1997,
The formalistic distinction between a complaint and a counterclaim
when the Court adopted the new Rules of Civil Procedure.
does not detract from the fact that both of them embody causes of ac-
We thus rule that the dismissal of a complaint due to fault of the plain- tion that have in their end the vindication of rights. While the distinc-
tiff is without prejudice to the right of the defendant to prosecute any tion is necessary as a means to facilitate order and clarity in the rules
pending counterclaims of whatever nature in the same or separate ac- of procedure, it should be remembered that the primordial purpose of
tion. procedural rules is to provide the means for the vindication of rights.
A party with a valid cause of action against another party cannot be
RULNG: RTC clearly erred when it ordered the dismissal of the coun-
denied the right to relief simply because the opposing side had the
terclaim, since Section 3, Rule 17 mandates that the dismissal of the
good fortune of filing the case first. Yet this in effect was what had
complaint is without prejudice to the right of the defendant to prose-
happened under the previous procedural rule and correspondent doc-
cute the counterclaim in the same or separate action. If the RTC were
trine, which under their final permutation, prescribed the automatic
to dismiss the counterclaim, it should be on the merits of such coun-
dismissal of the compulsory counterclaim upon the dismissal of the
terclaim. Reversal of the RTC is in order, and a remand is necessary
complaint, whether upon the initiative of the plaintiff or of the defend-
for trial on the merits of the counterclaim.
ant.
An explanation of the reason behind the new rule is called for, consid-
Thus, the present rule embodied in Sections 2 and 3 of Rule 17
ering that the rationale behind the previous rule was frequently elabo-
ordains a more equitable disposition of the counterclaims by en-
rated upon.
suring that any judgment thereon is based on the merit of the
When the answer sets up an independent action against the plain- counterclaim itself and not on the survival of the main complaint.
tiff, it then becomes an action by the defendant against the plain- Certainly, if the counterclaim is palpably without merit or suffers
tiff, and, of course, the plaintiff has no right to ask for a dismissal jurisdictional flaws which stand independent of the complaint, the
of the defendant’s action. trial court is not precluded from dismissing it under the amended
Nonetheless, a new rule was introduced when Act No. 190 was re- rules, provided that the judgment or order dismissing the coun-
placed by the 1940 Rules of Court. Section 2, Rule 30 of the 1940 terclaim is premised on those defects. At the same time, if the
Rules specified that if a counterclaim is pleaded by a defendant prior counterclaim is justified, the amended rules now unequivocally
to the service of the plaintiff’s motion to dismiss, the action shall not protect such counterclaim from peremptory dismissal by reason
be dismissed against the defendant’s objection unless the counterclaim of the dismissal of the complaint.
can remain pending for independent adjudication by the court. This WHEREFORE, the petition is GRANTED. The Orders dated 9 Au-
qualification remained intact when the 1964 Rules of Court was intro- gust 2005 and 10 October 2005 of Branch 29, Regional Trial Court of
duced. The rule referred only to compulsory counterclaims, or coun- San Miguel, Zamboanga del Sur in Civil Case No. 98-012 are SET
terclaims which arise out of or are necessarily connected with the ASIDE. Petitioner’s counterclaim as defendant in Civil Case. No. 98-
transaction or occurrence that is the subject matter of the plaintiff’s 012 is REINSTATED. The Regional Trial Court is ORDERED to hear
claim, since the rights of the parties arising out of the same transaction and decide the counterclaim with deliberate dispatch.
should be settled at the same time.
Whatever the nature of the counterclaim, it bears the same integral
characteristics as a complaint; namely a cause (or causes) of action
constituting an act or omission by which a party violates the right of
another. The main difference lies in that the cause of action in the
counterclaim is maintained by the defendant against the plaintiff,
while the converse holds true with the complaint. Yet, as with a com-
plaint, a counterclaim without a cause of action cannot survive.
It would then seemingly follow that if the dismissal of the complaint
somehow eliminates the cause(s) of the counterclaim, then the coun-
terclaim cannot survive. Yet that hardly is the case, especially as a
general rule. More often than not, the allegations that form the
counterclaim are rooted in an act or omission of the plaintiff other
than the plaintiff’s very act of filing the complaint. Moreover,
such acts or omissions imputed to the plaintiff are often claimed
to have occurred prior to the filing of the complaint itself. The only
apparent exception to this circumstance is if it is alleged in the
counterclaim that the very act of the plaintiff in filing the com-
plaint precisely causes the violation of the defendant’s rights. Yet
even in such an instance, it remains debatable whether the dismis-
sal or withdrawal of the complaint is sufficient to obviate the
pending cause of action maintained by the defendant against the
plaintiff.67
These considerations persist whether the counterclaim in question is
permissive or compulsory. A compulsory counterclaim arises out of
or is connected with the transaction or occurrence constituting the sub-
ject matter of the opposing party’s claim, does not require for its ad-
judication the presence of third parties, and stands within the jurisdic-
tion of the court both as to the amount involved and the nature of the
claim. The fact that the culpable acts on which the counterclaim is
based are founded within the same transaction or occurrence as the
complaint, is insufficient causation to negate the counterclaim to-
gether with the complaint. The dismissal or withdrawal of the com-
plaint does not traverse the boundaries of time to undo the act or omis-
sion of the plaintiff against the defendant, or vice versa.

G.R. No. 172242 August 14, 2007
PERKIN ELMER SINGAPORE PTE LTD., Petitioner,
vs.
DAKILA TRADING CORPORATION, Respondent.
FACTS:
Petitioner is a corporation duly organized and existing under the laws
of Singapore. It is not considered as a foreign corporation "doing busi-
ness" in the Philippines.
Herein respondent Dakila Trading Corporation is a corporation orga-
nized and existing under Philippine laws, and engaged in the business
of selling and leasing out laboratory instrumentation and process con-
trol instrumentation, and trading of laboratory chemicals and supplies.
Respondent entered into a Distribution Agreement on 1 June 1990
with Perkin-Elmer Instruments Asia Pte Ltd. (PEIA), a corpora-
tion duly organized and existing under the laws of Singapore and en-
gaged in the business of manufacturing, producing, selling or distrib-
uting various laboratory/analytical instruments. By virtue of the said
agreement, PEIA appointed the respondent as the sole distributor of
its products in the Philippines. The respondent was likewise granted
the right to purchase and sell the products of PEIA subject to the terms
and conditions set forth in the Distribution Agreement. PEIA, on the
other hand, shall give respondent a commission for the sale of its prod-
ucts in the Philippines.
Under the same Distribution Agreement, respondent shall order the
products of PEIA, which it shall sell in the Philippines, either from
PEIA itself or from Perkin-Elmer Instruments (Philippines) Corpora-
tion (PEIP), an affiliate of PEIA. PEIP is a corporation duly organized
and existing under Philippine laws, and involved in the business of
wholesale trading of all kinds of scientific, biotechnological, and ana-
lytical instruments and appliances. PEIA allegedly owned 99% of the
shares of PEIP.
On 2 August 1997, however, PEIA unilaterally terminated the Dis-
tribution Agreement, prompting respondent to file before the RTC
of Mandaluyong City, Branch 212, a Complaint for Collection of
Sum of Money and Damages with Prayer for Issuance of a Writ
of Attachment against PEIA and PEIP, docketed as Civil Case No.
MC99-605.
RTC [26 March 1999]: Issued an Order denying respondent’s prayer
for the issuance of a writ of attachment.
The respondent moved for the reconsideration of the said Order but it
was denied in another Order, dated 11 January 2000.
Respondent then filed Ex-Parte Motions for Issuance of Summons
and for Leave of Court to Deputize Respondent’s General Manager,
Richard A. Tee, to Serve Summons Outside of the Philippines, which
the RTC granted in its Order, dated 27 April 2000.
Thus, an Alias Summons, dated 4 September 2000, was issued by
the RTC to PEIA.
But the said Alias Summons was served on 28 September 2000 and
received by Perkinelmer Asia, a Singaporean based sole proprietor-
ship, owned by the petitioner and, allegedly, a separate and distinct
entity from PEIA.
PEIP moved to dismiss the Complaint filed by respondent on the
ground that it states no cause of action.
Perkinelmer Asia, on the other hand, through its counsel, sent let-
ters, dated 12 October 2000 and 15 November 2000, to the respond-
ent and to the RTC, respectively, to inform them of the wrongful
service of summons upon Perkinelmer Asia.
Accordingly, respondent filed an Ex-Parte Motion to Admit
Amended Complaint, together with the Amended Complaint claim-
ing that PEIA had become a sole proprietorship owned by the peti-
tioner, and subsequently changed its name to Perkinelmer Asia.
Being a sole proprietorship of the petitioner, a change in PEIA’s name
and juridical status did not detract from the fact that all its due and
outstanding obligations to third parties were assumed by the peti-
tioner.
Hence, in its Amended Complaint respondent sought to change the
name of PEIA to that of the petitioner.
RTC [24 July 2001]: Admitted the Amended Complaint filed by the
respondent.
8 of 30
Respondent then filed another Motion for the Issuance of Sum-
mons and for Leave of Court to Deputize Respondent’s General
Manager, Richard A. Tee, to Serve Summons Outside the Philippines.
In another Order, dated 4 March 2002, the RTC deputized respond-
ent’s General Manager to serve summons on petitioner in Singapore.
The RTC thus issued summons to the petitioner. Acting on the said
Order, respondent’s General Manager went to Singapore and served
summons on the petitioner.
RTC [10 October 2001]: Denied the Motion to Dismiss filed by
PEIP, compelling the latter to file its Answer to the Amended Com-
plaint.
Petitioner subsequently filed with the RTC a Special Appearance
and Motion to Dismiss respondent’s Amended Complaint on 30
May 2002 based on the following grounds:
(1) the RTC did not acquire jurisdiction over the person of the peti-
tioner;
(2) the respondent failed to state a cause of action against the peti-
tioner because it is not the real party-in-interest;
(3) even assuming arguendo that the respondent correctly filed the
case against the petitioner, the Distribution Agreement which was
the basis of its claim grants PEIA the right to terminate the con-
tract at any time; and
(4) the venue was improperly laid.
RTC [4 November 2002]: Denied petitioner’s Motion to Dismiss, ra-
tiocinating as follows:
Prescinding from the above arguments of both parties, the [RTC] is
inclined to DENY the Motion to Dismiss.
A careful scrutiny on (sic) the allegation in the (Amended) Complaint
would show that [herein respondent] alleges ownership by the [herein
petitioner] of shares of stocks in the [PEIP]. Such allegation of own-
ership of shares of stocks by the [petitioner] would reveal that there is
an allegation of personal property in the Philippines. Shares of stocks
represent personal property of the shareholder. Thus, it follows that
even though the Amended Complaint is primarily for damages, it does
relate to a property of the [petitioner], to which the latter has a claim
interest (sic), or an actual or contingent lien, which will make it fall
under one of the requisite (sic) for extraterritorial service under Sec-
tion 15, Rule 14, of the Rules of Court. Thus, it could be gainfully said
that the summons had been validly served for [RTC] to acquire juris-
diction over the [petitioner].
The [petitioner] hinges its dismissal on the failure of the [respondent]
to state a cause of action. The [RTC] would like to emphasize that in
a Motion to Dismiss, it hypothetically admits the truth of the facts al-
leged in a complaint.
When the ground for dismissal is that the complaint states no cause of
action, such fact can be determined only from the facts alleged in the
complaint x x x and from no other x x x and the Court cannot consider
other matters aliunde x x x. This implies that the issue must be passed
upon on the basis of the allegations and declare them to be false, oth-
erwise it would be a procedural error and a denial of due process to
the [respondent] x x x.
The three (3) essential elements of a cause of action are the follow-
ing:
a) The plaintiff’s legal rights;
b) A correlative obligation of the defendant;
c) The omission of the defendant in violation of the legal rights.
A cursory reading of the Amended Complaint would reveal that all of
the essential elements of a cause of action are attendant in the
Amended Complaint.
As for the contention that venue was improperly laid, x x x, the [RTC]
in its ultimate desire that the ends of justice could be served in its full-
est, cannot rule that venue was improperly laid.
xxxx
The stipulation as to the venue of a prospective action does not pre-
clude the filing of the suit in the residence of the [respondent] under
Section 2, Rule 4, Rules of Court, especially where the venue stipula-
tion was imposed by the [petitioner] for its own benefits.
xxxx
The [RTC] further believes that it is imperative that in order to ferret
out the truth, a full-blown trial is necessary for parties to be able to
prove or disprove their allegations.

Petitioner moved for the reconsideration of the aforesaid Order but, it
was denied by the RTC in its Order, dated 20 June 2003.
Consequently, petitioner filed a Petition for Certiorari under Rule
65 of the 1997 Revised Rules of Civil Procedure with application for
temporary restraining order and/or preliminary injunction before
the Court of Appeals alleging that the RTC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in refusing to
dismiss the Amended Complaint.
The Court of Appeals never issued any temporary restraining order or
writ of injunction.
CA [4 April 2006]: Rendered a Decision affirming the RTC Orders
of 4 November 2002 and 20 June 2003.
PETITIONER’S CONTENTIONS:
• Petitioner contends that Civil Case No. MC99-605 involves an ac-
tion for collection of sum of money and damages arising from the
alleged breach of the Distribution Agreement. The action is one in
personam, or an action against a person based on his personal liabil-
ity; and for the court a quo to acquire jurisdiction over the person of
the petitioner, personal service of summons, and not extraterritorial
service of summons, must be made within the state even if the peti-
tioner is a non-resident. Petitioner avers that extraterritorial service
of summons stated under Section 15, Rule 14 of the 1997 Revised
Rules of Civil Procedure, is only proper in in rem and quasi in rem
cases; thus, resort to an extraterritorial service of summons in the
case at bar was erroneous. Petitioner asseverates that the allegations
in the respondent’s Amended Complaint that the petitioner has per-
sonal properties within the Philippines does not make the present
case one that relates to, or the subject of which is, property within
the Philippines warranting the extraterritorial service of summons
under Section 15, Rule 14 of the 1997 Revised Rules of Civil Pro-
cedure. Petitioner states that for an action to be considered as one
that relates to, or the subject of which is, property within the Philip-
pines, the main subject matter of the action must be the property
within the Philippines itself, and such was not the situation in this
case. Likewise, the prayer in respondent’s Amended Complaint for
the issuance of a writ of attachment over the personal property of
PEIP, which is 99% owned by petitioner (as the supposed successor
of PEIA), did not convert the action from one in personam to one
that is quasi in rem. Also, the petitioner points out that since the
respondent’s prayer for the issuance of a writ of attachment was de-
nied by the RTC in its Order, dated 26 March 1999, then the nature
of Civil Case No. MC99-605 remains in personam, contrary to the
ruling of the Court of Appeals that by the attachment of the peti-
tioner’s interest in PEIP the action in personam was converted to an
action quasi in rem. Resultantly, the extraterritorial service of sum-
mons on the petitioner was not validly effected, and did not give the
RTC jurisdiction over the petitioner.
• Petitioner further argues that the appellate court should have granted
its Petition for Certiorari on the ground that the RTC committed
grave abuse of discretion amounting to lack or excess of jurisdiction
in refusing to dismiss respondent’s Amended Complaint for failure
to state a cause of action against petitioner which was not the real
party-in-interest in Civil Case No. MC99-605. Petitioner claims that
it had never used the name PEIA as its corporate name, and neither
did it change its name from that of PEIA. Petitioner stresses that
PEIA is an entirely different corporate entity that is not connected
in whatever manner to the petitioner. Even assuming arguendo that
petitioner is the real party-in-interest in Civil Case No. MC99-605
or that petitioner and PEIA are one and the same entity, petitioner
still avows that the respondent failed to state a cause of action
against it because the Distribution Agreement expressly grants PEIA
the right to terminate the said contract at any time.
• Lastly, it is the contention of the petitioner that the appellate court
should have granted its Petition for Certiorari because the RTC com-
mitted grave abuse of discretion amounting to lack or excess of ju-
risdiction in refusing to dismiss Civil Case No. MC99-605 for hav-
ing been filed in an improper venue. Petitioner asserts that in the
Distribution Agreement entered into between the respondent and
PEIA, both had mutually agreed to the exclusive jurisdiction of the
courts of Singapore or of the Philippines as elected by PEIA. Absent
any waiver by PEIA of its right to choose the venue of the dispute,
the Complaint filed by the respondent before the RTC in the Philip-
pines should have been dismissed on the ground of improper venue.
ISSUE: WON the dismissal of the complaint carry with it the dismis-
sal of the counterclaim? - NO. *See the last topic for this issue.
9 of 30
RULING:
RE: JURISDICTION & SERVICE OF SUMMONS
Jurisdiction is the power with which courts are invested for adminis-
tering justice; that is, for hearing and deciding cases. In order for the
court to have authority to dispose of the case on the merits, it must
acquire jurisdiction over the subject matter and the parties.
Jurisdiction of the court over the subject matter is conferred only by
the Constitution or by law. It is determinable on the basis of allega-
tions in the complaint.
Courts acquire jurisdiction over the plaintiffs upon the filing of the
complaint, while jurisdiction over the defendants in a civil case is ac-
quired either through the service of summons upon them in the manner
required by law or through their voluntary appearance in court and
their submission to its authority. If the defendants have not been sum-
moned, unless they voluntarily appear in court, the court acquires no
jurisdiction over their persons and a judgment rendered against them
is null and void. To be bound by a decision, a party should first be
subjected to the court’s jurisdiction.
Thus, one of the modes of acquiring jurisdiction over the person of the
defendant or respondent in a civil case is through service of summons.
It is intended to give notice to the defendant or respondent that a civil
action has been commenced against him. The defendant or respondent
is thus put on guard as to the demands of the plaintiff or the petitioner.
The proper service of summons differs depending on the nature of the
civil case instituted by the plaintiff or petitioner: whether it is in per-
sonam, in rem, or quasi in rem. Actions in personam, are those actions
brought against a person on the basis of his personal liability; actions
in rem are actions against the thing itself instead of against the person;
and actions are quasi in rem, where an individual is named as defend-
ant and the purpose of the proceeding is to subject his or her interest
in a property to the obligation or loan burdening the property.
Under Section 15, Rule 14 of the 1997 Revised Rules of Civil Proce-
dure, there are only four instances wherein a defendant who is a non-
resident and is not found in the country may be served with summons
by extraterritorial service, to wit: (1) when the action affects the per-
sonal status of the plaintiff; (2) when the action relates to, or the sub-
ject of which is property, within the Philippines, in which the defend-
ant claims a lien or an interest, actual or contingent; (3) when the relief
demanded in such action consists, wholly or in part, in excluding the
defendant from any interest in property located in the Philippines; and
(4) when the defendant non-resident’s property has been attached
within the Philippines. In these instances, service of summons may be
effected by (a) personal service out of the country, with leave of court;
(b) publication, also with leave of court; or (c) any other manner the
court may deem sufficient.
Undoubtedly, extraterritorial service of summons applies only where
the action is in rem or quasi in rem, but not if an action is in personam.
When the case instituted is an action in rem or quasi in rem, Philippine
courts already have jurisdiction to hear and decide the case because,
in actions in rem and quasi in rem, jurisdiction over the person of the
defendant is not a prerequisite to confer jurisdiction on the court, pro-
vided that the court acquires jurisdiction over the resThus, in such in-
stance, extraterritorial service of summons can be made upon the de-
fendant. The said extraterritorial service of summons is not for the
purpose of vesting the court with jurisdiction, but for complying with
the requirements of fair play or due process, so that the defendant will
be informed of the pendency of the action against him and the possi-
bility that property in the Philippines belonging to him or in which he
has an interest may be subjected to a judgment in favor of the plaintiff,
and he can thereby take steps to protect his interest if he is so
minded.On the other hand, when the defendant or respondent does not
reside and is not found in the Philippines,and the action involved is in
personam, Philippine courts cannot try any case against him because
of the impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court.
In the case at bar, this Court sustains the contention of the petitioner
that there can never be a valid extraterritorial service of summons
upon it, because the case before the court a quo involving collection
of a sum of money and damages is, indeed, an action in personam, as
it deals with the personal liability of the petitioner to the respondent
by reason of the alleged unilateral termination by the former of the
Distribution Agreement. Even the Court of Appeals, in its Decision
dated 4 April 2004, upheld the nature of the instant case as an action
in personam.

The action instituted by [respondent] affects the parties alone, not the
whole world. Hence, it is an action in personam, i.e., any judgment
therein is binding only upon the parties properly impleaded.
The objective sought in [respondent’s] [C]omplaint was to establish a
claim against petitioner for its alleged unilateral termination of
[D]istribution [A]greement. Hence, to repeat, Civil Case No. MC99-
605 is an action in personam because it is an action against persons,
namely, herein petitioner, on the basis of its personal liability.
As such, personal service of summons upon the [petitioner] is essential
in order for the court to acquire of (sic) jurisdiction over [its person].
Thus, being an action in personam, personal service of summons
within the Philippines is necessary in order for the RTC to validly ac-
quire jurisdiction over the person of the petitioner, and this is not pos-
sible in the present case because the petitioner is a non-resident and is
not found within the Philippines. Respondent’s allegation in its
Amended Complaint that petitioner had personal property within the
Philippines in the form of shares of stock in PEIP did not make Civil
Case No. MC99-605 fall under any of the four instances mentioned in
Section 15, Rule 14 of the Rules of Court, as to convert the action in
personam to an action in rem or quasi in rem and, subsequently, make
the extraterritorial service of summons upon the petitioner valid.
It is incorrect for the RTC to have ruled that the allegations made by
the respondent in its Amended Complaint, which is primarily for col-
lection of a sum of money and damages, that the petitioner owns
shares of stock within the Philippines to which the petitioner claims
interest, or an actual or contingent lien, would make the case fall under
one of the aforesaid instances wherein extraterritorial service of sum-
mons under Section 15, Rule 14 of the 1997 Revised Rules of Civil
Procedure, would be valid. The RTC in arriving at such conclusions
relied on the second instance, mentioned under Section 15, Rule 14 of
the 1997 Revised Rules of Civil Procedure (i.e., when the action re-
lates to, or the subject of which is property, within the Philippines, in
which the defendant claims a lien or interest, actual or contingent),
where extraterritorial service of summons can be properly made.
However, the aforesaid second instance has no application in the case
before this Court. Primarily, the Amended Complaint filed by the re-
spondent against the petitioner was for the collection of sum of money
and damages. The said case was neither related nor connected to any
property of the petitioner to which it claims a lien or interest. The ac-
tion for collection of a sum of money and damages was purely based
on the personal liability of the petitioner towards the respondent. The
petitioner is correct in saying that "mere allegations of personal prop-
erty within the Philippines does not necessarily make the action as one
that relates to or the subject of which is, property within the Philip-
pines as to warrant the extraterritorial service of summons. For the
action to be considered one that relates to, or the subject of which, is
the property within the Philippines, the main subject matter of the ac-
tion must be the property itself of the petitioner in the Philippines." By
analogy, an action involving title to or possession of real or personal
property -- such as the foreclosure of real estate or chattel mortgage
where the mortgagor does not reside or is not found in the Philippines
-- can be considered as an action which relates to, or the subject of
which is, property within the Philippines, in which the defendant
claims a lien or interest, actual or contingent; and in such instance,
judgment will be limited to the res.
Moreover, the allegations made by the respondent that the petitioner
has property within the Philippines were in support of its application
for the issuance of a writ of attachment, which was denied by the RTC.
Hence, it is clear from the foregoing that the Complaint filed by the
respondent against the petitioner does not really relate to, or the sub-
ject of which is, property within the Philippines of the petitioner.
Respondent’s allegation in its Amended Complaint that petitioner had
personal property within the Philippines in the form of shares of stock
in PEIP does not convert Civil Case No. MC99-605 from an action in
personam to one quasi in rem, so as to qualify said case under the
fourth instance mentioned in Section 15, Rule 14 of the 1997 Revised
Rules of Civil Procedure (i.e., when the non-resident defendant’s
property has been attached within the Philippines), wherein extrater-
ritorial service of summons upon the petitioner would have been valid.
It is worthy to note that what is required under the aforesaid provision
of the Revised Rules of Civil Procedure is not a mere allegation of the
existence of personal property belonging to the non-resident defendant
within the Philippines but, more precisely, that the non-resident de-
fendant’s personal property located within the Philippines must have
been actually attached. This Court in the case of Venturanza v. Court
of Appealsruled that when the attachment was void from the begin-
10 of 30
ning, the action in personam which required personal service of sum-
mons was never converted into an action in rem where service by pub-
lication would have been valid. Hence, the appellate court erred in de-
claring that the present case, which is an action in personam, was con-
verted to an action quasi in rem because of respondent’s allegations in
its Amended Complaint that petitioner had personal property within
the Philippines.
Glaringly, respondent’s prayer in its Amended Complaint for the issu-
ance of a writ of attachment over petitioner’s purported shares of stock
in PEIP located within the Philippines was denied by the court a quo
in its Order dated 26 March 1999. Respondent’s Motion for Reconsid-
eration of the said Order was likewise denied by the RTC in its subse-
quent Order, dated 11 January 2000. Evidently, petitioner’s alleged
personal property within the Philippines, in the form of shares of stock
in PEIP, had not been attached; hence, Civil Case No. MC99-605, for
collection of sum of money and damages, remains an action in perso-
nam. As a result, the extraterritorial service of summons was not val-
idly effected by the RTC against the petitioner, and the RTC thus
failed to acquire jurisdiction over the person of the petitioner. The
RTC is therefore bereft of any authority to act upon the Complaint
filed before it by the respondent insofar as the petitioner is concerned.
If there was no valid summons served upon petitioner, could RTC
have acquired jurisdiction over the person of the petitioner by the lat-
ter’s voluntary appearance? As a rule, even if the service of summons
upon the defendant or respondent in a civil case is defective, the court
can still acquire jurisdiction over his person when he voluntary ap-
pears in court or submits himself to its authority. Nonetheless, volun-
tary appearance, as a mode of acquiring jurisdiction over the person
of the defendant, is likewise inapplicable in this case.
It is settled that a party who makes a special appearance in court for
the purpose of challenging the jurisdiction of said court, based on the
invalidity of the service of summons, cannot be considered to have
voluntarily submitted himself to the jurisdiction of the court. In the
present case, petitioner has been consistent in all its pleadings in as-
sailing the service of summons upon it and the jurisdiction of the RTC
over its person. Thus, the petitioner cannot be declared in estoppel
when it filed an Answer ad cautelam with compulsory counterclaim
before the RTC while the instant Petition was still pending before this
Court. The petitioner was in a situation wherein it had no other choice
but to file an Answer; otherwise, the RTC would have already declared
that petitioner had waived its right to file responsive pleadings.Neither
can the compulsory counterclaim contained in petitioner’s Answer ad
cautelam be considered as voluntary appearance of petitioner before
the RTC. Petitioner seeks to recover damages and attorney’s fees as a
consequence of the unfounded suit filed by respondent against it.
Thus, petitioner’s compulsory counterclaim is only consistent with its
position that the respondent wrongfully filed a case against it and the
RTC erroneously exercised jurisdiction over its person.
Distinction must be made in Civil Case No. MC99-605 as to the juris-
diction of the RTC over respondent’s complaint and over petitioner’s
counterclaim -- while it may have no jurisdiction over the former, it
may exercise jurisdiction over the latter. The compulsory counter-
claim attached to petitioner’s Answer ad cautelam can be treated as a
separate action, wherein petitioner is the plaintiff while respondent is
the defendant.Petitioner could have instituted a separate action for the
very same claims but, for the sake of expediency and to avoid multi-
plicity of suits, it chose to demand the same in Civil Case No. MC99-
605.Jurisdiction of the RTC over the subject matter and the parties in
the counterclaim must thus be determined separately and inde-
pendently from the jurisdiction of the same court in the same case over
the subject matter and the parties in respondent’s complaint.
Moreover, even though the petitioner raised other grounds in its Mo-
tion to Dismiss aside from lack of jurisdiction over its person, the same
is not tantamount to its voluntary appearance or submission to the au-
thority of the court a quo. While in De Midgely v. Ferandos,it was held
that, in a Motion to Dismiss, the allegation of grounds other than lack
of jurisdiction over the person of the defendant, including a prayer "for
such other reliefs as" may be deemed "appropriate and proper"
amounted to voluntary appearance, such ruling must be deemed su-
perseded by the declaration of this Court in La Naval Drug Corpora-
tion v. Court of Appealsthat estoppel by jurisdiction must be unequiv-
ocal and intentional. It would be absurd to hold that petitioner une-
quivocally and intentionally submitted itself to the jurisdiction of the
court by seeking other reliefs to which it might be entitled when the
only relief that it could properly ask from the trial court is the dismissal
of the complaint against it. Thus, the allegation of grounds other than
lack of jurisdiction with a prayer "for such other reliefs" as may be

deemed "appropriate and proper" cannot be considered as unequivocal
and intentional estoppel. Most telling is Section 20, Rule 14 of the
Rules of Court, which expressly provides:
SEC. 20. Voluntary appearance. - The defendant’s voluntary appear-
ance in the action shall be equivalent to service of summons. The in-
clusion in a motion to dismiss of other grounds aside from lack of ju-
risdiction over the person of the defendant shall not be deemed a vol-
untary appearance.
In sum, this Court finds that the petitioner did not submit itself volun-
tarily to the authority of the court a quo; and in the absence of valid
service of summons, the RTC utterly failed to acquire jurisdiction over
the person of the petitioner.
RE: CAUSE OF ACTION
Anent the existence of a cause of action against petitioner and the
proper venue of the case, this Court upholds the findings of the RTC
on these issues.
Dismissal of a Complaint for failure to state a cause of action is pro-
vided for by the Rules of Court.When a Motion to Dismiss is grounded
on the failure to state a cause of action, a ruling thereon should be
based only on the facts alleged in the complaint. The court must pass
upon this issue based solely on such allegations, assuming them to be
true. For it to do otherwise would be a procedural error and a denial of
plaintiff’s right to due process.While, truly, there are well-recognized
exceptionsto the rule that the allegations are hypothetically admitted
as true and inquiry is confined to the face of the complaint,none of the
exceptions apply in this case. Hence, the general rule applies. The de-
fense of the petitioner that it is not the real party-in-interest is eviden-
tiary in nature which must be proven in trial. The appellate court, then,
cannot be faulted for not granting petitioner’s Motion to Dismiss on
the ground of failure to state a cause of action.
RE: VENUE
In the same way, the appellate court did not err in denying petitioner’s
Motion to Dismiss Civil Case No. MC99-605 on the ground of im-
proper venue.
The stipulation as to the venue of a prospective action does not pre-
clude the filing of the suit in the residence of the [respondent] under
Section 2, Rule 4, Rules of Court, especially where the venue stipula-
tion was imposed by the [petitioner] for its own benefits.
Despite the venue stipulation found in the Distribution Agreement
stipulating that the exclusive jurisdiction over disputes arising from
the same shall lie in the courts of Singapore or of the Territory (refer-
ring to the Philippines), whichever is elected by PEIA (or petitioner,
as PEIA’s alleged successor), the RTC of the Philippines cannot be
considered as an improper venue. Truly, the venue stipulation used the
word "exclusive," however, a closer look on the Distribution Agree-
ment would reveal that the venue stipulation was really in the alterna-
tive i.e., courts of Singapore or of the Territory, meaning, the Philip-
pines; thus, the court a quo is not an improper venue for the present
case.
Nonetheless, it bears to emphasize that despite our findings that based
on the allegations in respondent’s Complaint in Civil Case No. MC99-
605, respondent appears to have a cause of action against the petitioner
and that the RTC is the proper venue for the said case, Civil Case No.
MC99-605 is still dismissible, for the RTC never acquired jurisdiction
over the person of the petitioner. The extraterritorial service of sum-
mons upon the petitioner produces no effect because it can only be
done if the action is in rem or quasi in rem. The case for collection of
sum of money and damages filed by the respondent against the peti-
tioner being an action in personam, then personal service of summons
upon the petitioner within the Philippines is essential for the RTC to
validly acquire jurisdiction over the person of the petitioner. Having
failed to do so, the RTC can never subject petitioner to its jurisdiction.
The mere allegation made by the respondent that the petitioner had
shares of stock within the Philippines was not enough to convert the
action from one in personam to one that was quasi in rem, for peti-
tioner’s purported personal property was never attached; thus, the ex-
traterritorial service of summons upon the petitioner remains invalid.
In light of the foregoing findings, this Court concludes that the RTC
has no power to hear and decide the case against the petitioner, be-
cause the extraterritorial service of summons was not validly effected
upon the petitioner and the RTC never acquired jurisdiction over its
person.
RE: COUNTERCLAIM (OUR TOPIC)
11 of 30
Finally, as regards the petitioner’s counterclaim, which is purely for
damages and attorney’s fees by reason of the unfounded suit filed by
the respondent against it, it has long been settled that the same truly
falls under the classification of compulsory counterclaim and it must
be pleaded in the same action, otherwise, it is barred. In the case at
bar, this Court orders the dismissal of the Complaint filed by the re-
spondent against the petitioner because the court a quo failed to ac-
quire jurisdiction over the person of the latter. Since the Complaint of
the respondent was dismissed, what will happen then to the counter-
claim of the petitioner? Does the dismissal of the complaint carry with
it the dismissal of the counterclaim?
If the dismissal of the complaint somehow eliminates the cause of the
counterclaim, then the counterclaim cannot survive. Conversely, if the
counterclaim itself states sufficient cause of action then it should stand
independently of and survive the dismissal of the complaint. Now,
having been directly confronted with the problem of whether the com-
pulsory counterclaim by reason of the unfounded suit may prosper
even if the main complaint had been dismissed, we rule in the affirm-
ative.
It bears to emphasize that petitioner’s counterclaim against re-
spondent is for damages and attorney’s fees arising from the un-
founded suit. While respondent’s Complaint against petitioner is
already dismissed, petitioner may have very well already incurred
damages and litigation expenses such as attorney’s fees since it
was forced to engage legal representation in the Philippines to
protect its rights and to assert lack of jurisdiction of the courts
over its person by virtue of the improper service of summons upon
it. Hence, the cause of action of petitioner’s counterclaim is not
eliminated by the mere dismissal of respondent’s complaint.
It may also do well to remember that it is this Court which mandated
that claims for damages and attorney’s fees based on unfounded suit
constitute compulsory counterclaim which must be pleaded in the
same action or, otherwise, it shall be barred. It will then be iniquitous
and the height of injustice to require the petitioner to make the coun-
terclaim in the present action, under threat of losing his right to claim
the same ever again in any other court, yet make his right totally de-
pendent on the fate of the respondent’s complaint.
If indeed the Court dismisses petitioner’s counterclaim solely on the
basis of the dismissal of respondent’s Complaint, then what remedy is
left for the petitioner? It can be said that he can still file a separate
action to recover the damages and attorney’s fees based on the un-
founded suit for he cannot be barred from doing so since he did file
the compulsory counterclaim in the present action, only that it was
dismissed when respondent’s Complaint was dismissed. However,
this reasoning is highly flawed and irrational considering that peti-
tioner, already burdened by the damages and attorney’s fees it may
have incurred in the present case, must again incur more damages and
attorney’s fees in pursuing a separate action, when, in the first place,
it should not have been involved in any case at all.
Since petitioner’s counterclaim is compulsory in nature and its
cause of action survives that of the dismissal of respondent’s com-
plaint, then it should be resolved based on its own merits and evi-
dentiary support.
 12 of 30

ISSUE: WON petitioners erred in filing a Petition for Review on Cer-

tiorari under Rule 45 of the Rules of Court instead of filing an appeal
with the Court of Appeals.
13 of 30

G.R. No. 151098 March 21, 2006
ERLINDA GAJUDO, FERNANDO GAJUDO, JR., ESTELITA
GAJUDO, BALTAZAR GAJUDO and DANILO ARAHAN
CHUA, Petitioners,
vs.
TRADERS ROYAL BANK,Respondent.
DECISION
PANGANIBAN, CJ:
The mere fact that a defendant is declared in default does not automat-
ically result in the grant of the prayers of the plaintiff. To win, the
latter must still present the same quantum of evidence that would be
required if the defendant were still present. A party that defaults is not
deprived of its rights, except the right to be heard and to present evi-
dence to the trial court. If the evidence presented does not support a
judgment for the plaintiff, the complaint should be dismissed, even if
the defendant may not have been heard or allowed to present any coun-
tervailing evidence.
The Facts
The complaint alleged that in mid 1977[, Petitioner] Danilo Chua ob-
tained a loan from [respondent] bank in the amount of P75,000.00 se-
cured by a real estate mortgage over a parcel of land covered by TCT
No. 16711, and owned in common by the [petitioners];
The loan was not paid, [respondent] bank commenced extra-judicial
foreclosure proceedings on the property; that the auction sale of the
property was set on 10 June 1981, but was reset to 31 August 1981,
on [Petitioner Chua’s] request, which, however, was made without the
knowledge and conformity of the other [petitioners]; that on the re-
scheduled auction sale, [the] Sheriff of Quezon City sold the property
to the [respondent] bank, the highest bidder therein, for the sum of
P24,911.30; that the auction sale was tainted with irregularity because,
amongst others, the bid price was shockingly or unconscionably, low;
that the other [petitioners] failed to redeem the property due to their
lack of knowledge of their right of redemption, and want of sufficient
education; that, although the period of redemption had long expired,
[Petitioner] Chua offered to buy back, and [respondent] bank also
agreed to sell back, the foreclosed property, on the understanding that
Chua would pay [respondent] bank the amount of P40,135.53, repre-
senting the sum that the bank paid at the auction sale, plus interest;
that [Petitioner] Chua made an initial payment thereon in the amount
of P4,000.00, covered by Interbank Check No. 09173938, dated 16
February 1984, duly receipted by [respondent] bank; that, in a sudden
change of position, [respondent] bank wrote Chua, on 20 February
1984, asking that he could repurchase the property, but based on the
current market value thereof; and that sometime later, or on 22 March
1984, [respondent] bank wrote Chua anew, requiring him to tender a
new offer to counter the offer made thereon by another buyer.
Respondent bank filed its answer with counterclaim, thereunder as-
serting that the foreclosure sale of the mortgaged property was done
in accordance with law; and that the bid price was neither unconscion-
able, nor shockingly low; that [petitioners] slept on their rights when
they failed to redeem the property within the one year statutory period;
and that [respondent] bank, in offering to sell the property to [Peti-
tioner] Chua on the basis of its current market price, was acting con-
formably with law, and with legitimate banking practice and regula-
tions.
"Pre-trial having been concluded, the parties entered upon trial, which
dragged/lengthened to several months due to postponements however,
a big conflagration hit the City Hall of Quezon City, which destroyed,
amongst other things, the records of the case. After the records were
reconstituted, [petitioners] discovered that the foreclosed property was
sold by [respondent] bank to the Ceroferr Realty Corporation, and that
the notice of lis pendens annotated on the certificate of title of the
foreclosed property, had already been cancelled. Accordingly, [peti-
tioners], with leave of court, amended their complaint, but the Trial
Court dismissed the case ‘without prejudice’ due to [petitioners’] fail-
ure to pay additional filing fees.
Summons was served on [respondent] bank on 26 September 1990,
per Sheriff’s Return dated 08 October 1990. Supposing that all the de-
fendants had filed their answer, [petitioners] filed, on 23 October
1991, a motion to set case for pre-trial, which motion was, however,
denied by the Trial Court in its Order of 25 October 1991, on the
ground that [respondent] bank has not yet filed its answer. On 13 No-
vember 1991[, petitioners] filed a motion for reconsideration, there-
under alleging that they received by registered mail, on 19 October
1990, a copy of [respondent] bank’s answer with counterclaim, dated
14 of 30
04 October 1990, which copy was attached to the motion. In its Order
of 14 November 1991, the trial Court denied for lack of merit, the mo-
tion for reconsideration, therein holding that the answer with counter-
claim filed by [respondent] bank referred to another civil case pending
before Branch 90 of the same Court.
For this reason, [petitioners] filed on 02 December 1991 a motion to
declare [respondent] bank in default, thereunder alleging that no an-
swer has been filed despite the service of summons on it on 26 Sep-
tember 1990.
The Trial Court declared the motion submitted for resolution upon
submission by petitioners of proof of service of the motion on the
bank. Upon proof that petitioners had indeed served the bank with a
copy of said motion, the Trial Court issued an Order of default
against the bank. On petitioners’ motion, they were by the Court al-
lowed to present evidence ex parte. Thereafter, the Trial Court ren-
dered the new questioned partial decision.
Aggrieved, [respondent] bank filed a motion to set aside [the] partial
decision by default against Traders Royal Bank and admit [respond-
ent] Traders Royal Bank’s x x x Answer with counterclaim: thereun-
der it averred, amongst others, that the erroneous filing of said answer
was due to an honest mistake of the typist and inadvertence of its coun-
sel.
Ruling of the Court of Appeals
The CA ruled in favor of respondent bank. Deemed, however, to have
rested on shaky ground was the latter’s "Motion to Set Aside Partial
Decision by Default Against Traders Royal Bank and Admit Defend-
ant Traders Royal Bank’s Answer." The reasons offered by the bank
for failing to file an answer were considered by the appellate court to
be "at once specious, shallow and sophistical and can hardly be digni-
fied as a ‘mistake’ or ‘excusable negligence,’ which ordinary pru-
dence could not have guarded against."
On the issue of whether petitioners had convincingly established their
right to relief, the appellate court held that there was no ground to in-
validate the foreclosure sale of the mortgaged property. First, under
Section 3 of Act No. 3135, an extrajudicial foreclosure sale did not
require personal notice to the mortgagor. Second, there was no allega-
tion or proof of noncompliance with the publication requirement and
the public posting of the notice of sale, provided under Act No. 3135,
as amended. Third, there was no showing of inadequacy of price as no
competent evidence was presented to show the real market value of
the land sold or the readiness of another buyer to offer a price higher
than that at which the property had been sold.
Moreover, petitioners failed to prove that the bank had agreed to sell
the property back to them. After pointing out that the redemption pe-
riod had long expired, respondent’s written communications to Peti-
tioner Chua only showed, at most, that the former had made a proposal
for the latter to buy back the property at the current market price; and
that Petitioner Chua was requested to make an offer to repurchase the
property, because another buyer had already made an offer to buy it.
On the other hand, respondent noted that the Interbank check for
P4,000 was for "deposit only." Thus, there was no showing that the
check had been issued to cover part of the repurchase price.
The appellate court also held that the Compromise Agreement had not
resulted in the novation of the Partial Decision, because the two were
not incompatible. In fact, the bank was not even a party to the Agree-
ment. Petitioners’ recognition of Ceroferr’s title to the mortgaged
property was intended to preclude future litigation against it.
Issues
In their Memorandum, petitioners raise the following issues:
Whether or not the Respondent Court of Appeals erred in failing to
apply the provisions of Section 3, Rule 9 of the 1997 Rules of Civil
Procedure [and in applying instead] the rule on preponderance of evi-
dence under Section 1, Rule 133 of the Rules of Court.
The Court’s Ruling
The Petition has no merit. No.
Petitioners challenge the CA Decision for applying Section 3 of Rule
9 of the Rules of Court, rather than Section 1 of Rule 133 of the same
Rules. In essence, petitioners argue that the quantum of evidence for
judgments flowing from a default order under Section 3 of Rule 9 is
not the same as that provided for in Section 1 of Rule 133.
Between the two rules, there is no incompatibility that would preclude
the application of either one of them. To begin with, Section 3 of Rule
9 governs the procedure which the trial court is directed to take when
 15 of 30
a defendant fails to file an answer. According to this provision, the
court "shall proceed to render judgment granting the claimant such re-
lief as his pleading may warrant," subject to the court’s discretion on
whether to require the presentation of evidence ex parte. The same
provision also sets down guidelines on the nature and extent of the
relief that may be granted. In particular, the court’s judgment "shall
not exceed the amount or be different in kind from that prayed for nor
award unliquidated damages."
As in other civil cases, basic is the rule that the party making allega-
tions has the burden of proving them by a preponderance of evidence.
Moreover, parties must rely on the strength of their own evidence, not
upon the weakness of the defense offered by their opponent. This
principle holds true, especially when the latter has had no opportunity
to present evidence because of a default order. Needless to say, the
extent of the relief that may be granted can only be as much as has
been alleged and proved with preponderant evidence required under
Section 1 of Rule 133.
Regarding judgments by default, it was explained in Pascua v. Flor-
endo that complainants are not automatically entitled to the relief
prayed for, once the defendants are declared in default. Favorable re-
lief can be granted only after the court has ascertained that the relief is
warranted by the evidence offered and the facts proven by the present-
ing party.
"Being declared in default does not constitute a waiver of rights except
that of being heard and of presenting evidence in the trial court. x x x.
"In other words, a defaulted defendant is not actually thrown out of
court. While in a sense it may be said that by defaulting he leaves
himself at the mercy of the court, the rules see to it that any judgment
against him must be in accordance with law. The evidence to support
the plaintiff’s cause is, of course, presented in his absence, but the
court is not supposed to admit that which is basically incompetent.
Although the defendant would not be in a position to object, elemen-
tary justice requires that only legal evidence should be considered
against him. If the evidence presented should not be sufficient to jus-
tify a judgment for the plaintiff, the complaint must be dismissed. And
if an unfavorable judgment should be justifiable, it cannot exceed in
amount or be different in kind from what is prayed for in the com-
plaint."
In sum, while petitioners were allowed to present evidence ex parte
under Section 3 of Rule 9, they were not excused from establishing
their claims for damages by the required quantum of proof under Sec-
tion 1 of Rule 133. Stated differently, any advantage they may have
gained from the ex parte presentation of evidence does not lower the
degree of proof required. Clearly then, there is no incompatibility be-
tween the two rules.
Second and Third Issues:
Review of the Evidence
Unfortunately for petitioners, the grant of damages was not suffi-
ciently supported by the evidence for the following reasons.
First, petitioners were not deprived of their property without cause. As
correctly pointed out by the CA, Act No. 3135, as amended, does not
require personal notice to the mortgagor. In the present case, there has
been no allegation -- much less, proof -- of noncompliance with the
requirement of publication and public posting of the notice of sale, as
required by Áct No. 3135. Neither has there been competent evidence
to show that the price paid at the foreclosure sale was inadequate. To
be sure, there was no ground to invalidate the sale.
Second, as previously stated, petitioners have not convincingly estab-
lished their right to damages on the basis of the purported agreement
to repurchase. Without reiterating our prior discussion on this point,
we stress that entitlement to actual and compensatory damages must
be proved even under Section 3 of Rule 9 of the Rules of Court. The
same is true with regard to awards for moral damages and attorney’s
fees, which were also granted by the trial court.
In sum, petitioners have failed to convince this Court of the cogency
of their position, notwithstanding the advantage they enjoyed in pre-
senting their evidence ex parte. Not in every case of default by the
defendant is the complainant entitled to win automatically.
WHEREFORE, this Petition is hereby DENIED and the assailed De-
cision and Resolution AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. Nos. 121662-64 July 6, 1999
VLASON ENTERPRISES CORPORATION, petitioner,
vs. COURT OF APPEALS and DURAPROOF SERVICES, rep-
resented by its General Manager, Cesar Urbino Sr., respondents.
PANGANIBAN, J.:
Summons to a domestic or resident corporation should be served on
officers, agents or employees, who are responsible enough to warrant
the presumption that they will transmit to the corporation notice of the
filing of the action against it. Rules on the service of motions should
be liberally construed in order to promote the ends of substantial jus-
tice. A rigid application that will result in the manifest injustice should
be avoided. A default judgment against several defendants cannot
affect the rights of one who was never declared in default. In any
event, such judgment cannot include award not prayed for in the
complaint, even if proven ex parte.
The Case
These principles were used by this Court in resolving this Petition for
Review on Certiorari before us, assailing the July 19, 1993 Deci-
sion 1 and the August 15 Resolution 2 promulgated by the Court of
Appeals.
FACTS:
Poro Point Shipping Services, then acting as the local agent of Omega
Sea Transport Company of Honduras & Panama, a Panamanian com-
pany, (hereafter referred to as Omega), requested permission for its
vessel M/V Star Ace, which had engine trouble, to unload its cargo
and to store it at the Philippine Ports Authority (PPA) compound in
San Fernando, La Union while awaiting transshipment to Hongkong.
The request was approved by the Bureau of Customs. 4 Despite the
approval, the customs personnel boarded the vessel when it docked on
January 7, 1989, on suspicion that it was the hijacked M/V Silver Med
owned by Med Line Philippines Co., and that its cargo would be smug-
gled into the country. 5 The district customs collector seized said ves-
sel and its cargo pursuant to Section 2301, Tariff and Customs Code.
A notice of hearing of SFLU Seizure Identification No. 3-89 was
served on its consignee, Singkong Trading Co. of Hongkong, and its
shipper, Dusit International Co., Ltd. of Thailand.
While seizure proceedings were ongoing, La Union was hit by three
typhoons, and the vessel ran aground and was abandoned. It’s author-
ized representative, Frank Cadacio, entered into a salvage agreement
with private respondent to secure and repair the vessel.
Customs Commissioner Salvador M. Mison forfeited the vessel and
its cargo in accordance with Section 2530 of the Tariff and Customs
Code. 8 Accordingly, acting District Collector of Customs John S. Sy
issued a Decision decreeing the forfeiture and the sale of the cargo in
favor of the government.9
Private Respondent Duraproof Services filed with the Regional Trial
Court of Manila a Petition for Certiorari, Prohibition and Manda-
mus 10 assailing the actions of Commissioner Mison and District Col-
lector Sy. Also impleaded as respondents were PPA Representative
Silverio Mangaoang and Med Line Philippines, Inc.
On January 10, 1989, private respondent amended its Petition 11 to in-
clude former District Collector Quiray; PPA Port Manager Adolfo Ll.
Amor Jr; Petitioner Vlason Enterprises as represented by its president,
Vicente Angliongto; Singkong Trading Company as represented by
Atty. Eddie Tamondong; Banco Du Brasil; Dusit International Co.,
Inc.; Thai-Nan Enterprises Ltd. and Thai-United Trading Co.,
Ltd. 12 In both Petitions, private respondent plainly failed to include
any allegation pertaining to petitioner, or any prayer for relief against
it.
Summonses for the amended Petition were served on Atty. Joseph
Capuyan for Med Line Philippines: Angliongto (through his secretary,
Betty Bebero), Atty. Tamondong and Commissioner Mison. 13 Upon
motion of the private respondent, the trial court allowed summons by
publication to be served upon the alien defendants who were not resi-
dents and had no direct representatives in the country. 14
On January 29, 1990, private respondent moved to declare re-
spondents in default.
RTC: denied the motion in its February 23, 1990 Order. because Man-
gaoang and Amor had jointly filed a Motion to Dismiss, while Mison
and Med Line had moved separately for an extension to file a similar
motion. 16 Later it rendered an Order dated July 2, 1990, giving due
course to the motions to dismiss filed by Mangaoang and Amor on the
16 of 30
ground of litis pendentia, and by the commissioner and district collec-
tor of customs on the ground of lack of jurisdiction. 17 In another Or-
der, the trial court dismissed the action against Med Line Philippines
on the ground of litis pendentia. 18
On two other occasions, private respondent again moved to de-
clare the following in default: petitioner, Quiray, Sy and Mison on
March 26, 1990; 19 and Banco Du Brazil, Dusit International Co.,
Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co.,
Ltd. on August 24, 1990. 20 There is no record, however, that the
trial court acted upon the motions.
On September 18, 1990, petitioner filed another Motion for leave to
amend the petition, 21 alleging that its counsel failed to include the fol-
lowing "necessary and/or indispensable parties": Omega represented
by Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, re-
lief captain. Aside from impleading these additional respondents, pri-
vate respondent also alleged in the Second (actually, third) Amended
Petition 22 that the owners of the vessel intended to transfer and alien-
ate their rights and interests over the vessel and its cargo, to the detri-
ment of the private respondent.
The trial court granted leave to private respondent to amend its Peti-
tion, but only to exclude the customs commissioner and the district
collector. 23 Instead, private respondent filed the "Second Amended
Petition with Supplemental Petition" against Singkong Trading Com-
pany; and Omega and M/V Star Ace, 24 to which Cadacio and Rada
filed a Joint Answer. 25
Declared in default in an Order issued by the trial court on Janu-
ary 23, 1991, were the following: Singkong Trading Co., Commis-
sioner Mison, M/V Star Ace and Omega. 26 Private respondent
filed, and the trial court granted, an ex parte Motion to present
evidence against the defaulting respondents. 27 Only private re-
spondent, Atty. Tamondong, Commissioner Mison, Omega and
M/V Star Ace appeared in the next pretrial hearing; thus, the trial
court declared the other respondents in default and allowed pri-
vate respondent to present evidence against them. 28
The RTC On February 18, 1991, The Court is convinced, that, indeed,
defendants/respondents are liable to [private respondent] in the
amount as prayed for.
On March 8, 1991, private respondent moved for the execution of
judgment, claiming that the trial court Decision had already become
final and executory. 33 The Motion was granted 34 and a Writ of Exe-
cution was issued. 35 To satisfy the Decision, Sheriffs Jorge Victorino,
Amado Sevilla and Dionisio Camañgon were deputized on March 13,
1991 to levy and to sell on execution the defendant's vessel and per-
sonal property.
On March 14, 1991, petitioner filed, by special appearance, a Mo-
tion for Reconsideration on the grounds that it was allegedly not
impleaded as a defendant, served summons or declared in default;
that private respondent was not authorized to present evidence
against it in default; that the judgment in default was fatally de-
fective, because private respondent had not paid filing fees for the
award; and that private respondent had not prayed for such
award. 36 Private respondent opposed the Motion, arguing that it
was a mere scrap of paper due to its defective notice of hearing.
On March 18, 1991, the Bureau of Customs also filed an ex parte Mo-
tion to recall the execution, and to quash the notice of levy and the sale
on execution. 37 Despite this Motion, the auction sale was conducted
on March 21, 1991 by Sheriff Camañgon, with private respondent sub-
mitting the winningbid. 38
The trial court ordered the deputy sheriffs to cease and desist from
implementing the Writ of Execution and from levying on the personal
property of the defendants. 39 Nevertheless, Sheriff Camañgon issued
the corresponding Certificate of Sale on March 27, 1991. 40
On April 12, 1991, 41 private respondent filed with the Court of Ap-
peals (CA) a Petition for Certiorari and Prohibition to nullify the
cease and desist orders of the trial court. 42
CA: Granted.
a TEMPORARY RESTRAINING ORDER is
hereby ISSUED enjoining the respondent Judge,
the Honorable Arsenio M. Gonong, from enforc-
ing and/or implementing the Orders dated 22
March 1991 and 5 April 1991 which ordered re-
spondent Sheriff to cease and desist from imple-
menting the writ of execution and the return

thereof, the quashing of the levy . . . on [the] exe-
cution [and sale] of the properties levied upon and
sold at public auction by the Sheriff, for reason of
grave abuse of discretion and in excess of juris-
diction, until further orders from this Court.
WITHIN ten (10) days from notice hereof, re-
spondents [petitioner included] are also required
to SHOW CAUSE why the prayer for a writ of
preliminary injunction should not be granted.
On May 8, 1991, petitioner received from Camañgon a notice to pay
private respondent P3 million to satisfy the trial court Decision. Not
having any knowledge of the CA case to which it was not impleaded,
petitioner filed with the trial court a Motion to Dismiss ex abutandi ad
cautelam on the grounds that (1) the Petition of private respondent
stated no cause of action against it, (2) the trial court had no jurisdic-
tion over the case, and (3) litis pendentia barred the suit.44
On May 10, 1991, Camañgon levied on petitioner's properties, which
were scheduled for auction later on May 16, 1991.
Petitioner also filed a special appearance before the CA. It prayed for
the lifting of the levy on its properties or, alternatively, for a temporary
restraining order against their auction until its Motion for Reconsider-
ation was resolved by the trial court. 46
Acting on petitioner's Motion for Reconsideration, the trial court re-
versed its Decision of February 18, 1991, holding in its May 22, 1991
Resolution as follows: 47
. . . [T]hat . . . Motion for Reconsideration [of petitioner] was
filed on March 14, 1991 (see: page 584, records, Vol. 2) indu-
bitably showing that it was seasonably filed within the 15-day
time-frame. Therefore, . . . said default-judgment ha[d] not yet
become final and executory when the Writ of Execution was
issued on March 13, 1991 . . . The rules [provide] that [the
e]xecution shall issue as a matter of right upon the expiration
of the period of appeal from a judgment if no appeal has been
duly perfected (Sec. 1, R-39, RRC). That being the case, VEC
has all the right to file as it
did . . . the aforementioned reconsideration motion calling
[the] attention of the Court and pointing therein its supposed
error and its correction if, indeed, any [error was] committed.
It is in this light that this Court made an in-depth reflection
and assessment of the premises or reasons raised by [peti-
tioner], and after a re-examination of the facts and evidence
spread on the records, it has come to the considered conclu-
sion that the questioned default-judgment has been improvi-
dently issued. By the records, the claim of [private respond-
ent] that his January 29, 1990 Ex-Parte Motion To Declare
Defendants In Default (pp. 174-177, records, Vol. 1) includ-
ing VEC had been granted is belied by the February 23, 1990
Order (pp. 214-215, records, ibid) par. 2, thereof, reading to
wit:
By the foregoing, for reasons stated thereunder respectively,
this Court, in the exercise of its judicious discretion, in the
sense that the rules should be liberally construed in order to
promote their object and to assist the parties, resolves to
DENY petitioner's Motion to have the Commissioner of Cus-
toms AND OTHER ENUMERATED RESPONDENTS DE-
CLARED IN DEFAULT. [Emphasis ours].
Not even [private respondent's] November 23, 1990 "Ex-Parte
Motion To Present [Evidence] Against Defaulting Defend-
ants" (page 489, records, Vol. 2) [can] be deemed as a remedy
of the fact that there never was issued an order of default
against respondents including [petitioner] VEC. Having thus
established that there [had] been no order of default against
VEC as contemplated by Sec. 1, Rule 18, in relation to Sec. 9,
Rule 13, Revised Rules of Court, there could not have been
any valid default-judgment rendered against it. The issuance
of an order of default is a condition sine qua non in order
[that] a judgment by default be clothed with validity.
Further, records show that this Court never had authorized
[private respondent] to adduce evidence ex-parte against [pe-
titioner] VEC. In sum, the February 18, 1991 decision by de-
fault is null and void as against [petitioner] VEC.
WHEREFORE, in view of the foregoing consideration, and
as prayed for, the February 18, 1991 Judgment by Default is
hereby reconsidered and SET ASIDE.
17 of 30
On June 26, 1992, then Executive Judge Bernardo P. Pardo 48 of the
Regional Trial Court of Manila issued an Order 49 annulling the Sher-
iff's Report/Return dated April 1, 1991, and all proceedings taken by
Camañgon.
The Court believes that the issues can be simplified and restated as
follows:
1. Has the February 18, 1991 RTC Decision become final and exec-
utory in regard to petitioner?
2. Did the trial court acquire jurisdiction over the petitioner?
3. Was the RTC default judgment binding on petitioner?
4. Was the grant of damages against petitioner procedurally proper?
5. Was private respondent entitled to a writ of execution?
ISSUE: W/N Petitioner was declared in default? No.
This Court's Ruling
The petition is meritorious.
First Issue: Finality of the RTC Decision
A judgment becomes "final and executory" by operation of law. Its
finality becomes a fact when the reglementary period to appeal lapses,
and no appeal is perfected within such period. 62 The admiralty case
filed by private respondent with the trial court involved multiple de-
fendants. This being the case, it necessarily follows that the period of
appeal of the February 18, 1991 RTC Decision depended on the date
a copy of the judgment was received by each of the defendants. Else-
wise stated, each defendant had a different period within which to ap-
peal, depending on the date of receipt of the Decision. 63
Omega, Singkong Trading Co. and M/V Star Ace chose to enter into
a compromise agreement with private respondent. As to these defend-
ants, the trial court Decision had become final, and a writ of execution
could be issued against them. 64 Doctrinally, a compromise agreement
is immediately final and executory. 65
Petitioner, however, is not in the same situation. Said Decision cannot
be said to have attained finality as to the petitioner, which a party to
the compromise. Moreover, petitioner filed a timely Motion for Re-
consideration with the trial court, thirteen days after it received the
Decision or two days before the lapse of the reglementary period to
appeal. 66 Thus, as to petitioner, the trial court Decision had not at-
tained finality.
Exception to the Rule
on Notice of Hearing
Respondent Court and private respondent argue that, although timely
filed, petitioner's Motion for Reconsideration was a mere scrap of pa-
per, because (1) it did not contain a notice of hearing addressed to the
current counsel of private respondent, and (2) the notice of hearing
addressed to and served on private respondent's deceased counsel was
not sufficient. Admittedly, this Motion contained a notice of hearing
sent to Atty. Jesus C. Concepcion who, according to private respond-
ent, had already died and had since been substituted by its new coun-
sel, Atty. Domingo Desierto. Therefore, the appellate court ruled that
the said Motion did not toll the reglementary period to appeal and that
the trial court Decision became final.
This Court disagrees. Rule 15 of the Rules of Court states:
Sec. 4. Notice. — Notice of a motion shall be served by the applicant
to all parties concerned, at least three (3) days before the hearing
thereof, together with a copy of the motion, and of any affidavits and
other papers accompanying it. The court, however, for good cause
may hear a motion on shorter notice, specially on matters which the
court may dispose of on its own motion.
Sec. 5. Contents of notice. — The notice shall be directed to the parties
concerned, and shall state the time and place for the hearing of the
motion. 67
Ideally, the foregoing Rule requires the petitioner to address and to
serve on the counsel of private respondent the notice of hearing of the
Motion for Reconsideration. The case at bar, however, is far from
ideal. First, petitioner was not validly summoned and it did not partic-
ipate in the trial of the case in the lower court; thus, it was understand-
able that petitioner would not be familiar with the parties and their
counsels. Second, Atty. Desierto entered his appearance only as col-
laborating counsel, 68 who is normally not entitled to notices even
from this Court. Third, private respondent made no manifestation on
record that Atty. Concepcion was already dead. Besides, it was Atty.

Concepcion who signed the Amended Petition, wherein petitioner was
first impleaded as respondent and served a copy thereof. Naturally,
petitioner's attention was focused on this pleading, and it was within
its rights to assume that the signatory to such pleading was the counsel
for private respondent.
The Court has consistently held that a motion which does not meet the
requirements of Sections 4 and 5 of Rule 15 of the Rules of Court is
considered a worthless piece of paper, which the clerk of court has no
right to receive and the trial court has no authority to act upon. Service
of a copy of a motion containing a notice of the time and the place of
hearing of that motion is a mandatory requirement, and the failure of
movants to comply with these requirements renders their motions fa-
tally defective. 69 However, there are exceptions to the strict applica-
tion of this rule. These exceptions are as
follows: 70
. . . Liberal construction of this rule has been allowed by this
Court in cases (1) where a rigid application will result in a
manifest failure or miscarriage of justice; 71 especially if a
party successfully shows that the alleged defect in the ques-
tioned final and executory judgment is not apparent on its face
or from the recitals contained therein; (2) where the interest
of substantial justice will be served; 72 (3) where the resolu-
tion of the motion is addressed solely to the sound and judi-
cious discretion of the court; 73 and (4) where the injustice to
the adverse party is not commensurate [to] the degree of his
thoughtlessness in not complying with the procedure pre-
scribed. 74
The present case falls under the first exception. Petitioner was not in-
formed of any cause of action or claim against it. All of a sudden, the
vessels which petitioner used in its salvaging business were levied
upon and sold in execution to satisfy a supposed judgment against it.
To allow this to happen simply because of a lapse in fulfilling the no-
tice requirement — which, as already said, was satisfactorily ex-
plained — would be a manifest failure or miscarriage of justice.
A notice of hearing is conceptualized as an integral component of pro-
cedural due process intended to afford the adverse parties a chance to
be heard before a motion is resolved by the court. Through such no-
tice, the adverse party is permitted time to study and answer the argu-
ments in the motion.
Circumstances in the case at bar show that private respondent was not
denied procedural due process, and that the very purpose of a notice
of hearing had been served. On the day of the hearing, Atty. Desierto
did not object to the said Motion for lack of notice to him; in fact, he
was furnished in open court with a copy of the motion and was granted
by the trial court thirty days to file his opposition to it. These circum-
stances clearly justify a departure from the literal application of the
notice of hearing rule. 75 In other cases, after the trial court learns that
a motion lacks such notice, the prompt resetting of the hearing with
due notice to all the parties is held to have cured the defect. 76
Verily, the notice requirement is not a ritual to be followed blindly.
Procedural due process is not based solely on a mechanistic and literal
application that renders any deviation inexorably fatal. Instead, proce-
dural rules are liberally construed to promote their objective and to
assist in obtaining a just, speedy and inexpensive determination of any
action and proceeding. 77 For the foregoing reasons, we believe that
Respondent Court committed reversible error in holding that the Mo-
tion for Reconsideration was a mere scrap of paper.
Second Issue: Jurisdiction Over Petitioner
Service of Summons
on a Corporation
The sheriff's return shows that Angliongto who was president of peti-
tioner corporation, through his secretary Betty Bebero, was served
summons on January 18, 1990. 78 Petitioner claims that this service
was defective for two reasons: (1) Bebero was an employee of Vlasons
Shipping, Inc., which was an entity separate and distinct from Peti-
tioner Vlason Enterprises Corporation (VEC); and (2) the return per-
tained to the service of summons for the amended Petition, not for the
"Second Amended Petition with Supplemental Petition," the latter
pleading having superseded the former.
A corporation may be served summons through its agents or officers
who under the Rules are designated to accept service of process. A
summons addressed to a corporation and served on the secretary of its
president binds that corporation. 79 This is based on the rationale that
18 of 30
service must be made on a representative so integrated with the cor-
poration sued, that it is safe to assume that said representative had suf-
ficient responsibility and discretion to realize the importance of the
legal papers served and to relay the same to the president or other re-
sponsible officer of the corporation being sued. 80 The secretary of the
president satisfies this criterion. This rule requires, however, that the
secretary should be an employee of the corporation sought to be sum-
moned. Only in this manner can there be an assurance that the secre-
tary will "bring home to the corporation [the] notice of the filing of the
action" against it.
In the present case, Bebero was the secretary of Angliongto, who was
president of both VSI and petitioner, but she was an employee of VSI,
not of petitioner. The piercing of the corporate veil cannot be resorted
to when serving summons. 81 Doctrinally, a corporation is a legal en-
tity distinct and separate from the members and stockholders who
compose it. However, when the corporate fiction is used as a means
of perpetrating a fraud, evading an existing obligation, circumventing
a statute, achieving or perfecting a monopoly or, in generally perpe-
trating a crime, the veil will be lifted to expose the individuals com-
posing it. None of the foregoing exceptions has been shown to exist in
the present case. Quite the contrary, the piercing of the corporate veil
in this case will result in manifest injustice. This we cannot allow.
Hence, the corporate fiction remains.
Effect of Amendment of
Pleading on Jurisdiction
Petitioner claims that the trial court did not acquire jurisdiction over
it, because the former had not been served summons anew for the Sec-
ond Amended Petition or for the Second Amended Petition with Sup-
plemental Petition. In the records, it appears that only Atty. Tamon-
dong, counsel for Singkong Trading, was furnished a copy of the Sec-
ond Amended Petition. 82 The corresponding sheriff's return indicates
that only Omega, M/V Star Ace and Capt. Rada were served summons
and copies of said Petition. 83
We disagree. Although it is well-settled that an amended pleading su-
persedes the original one, which is thus deemed withdrawn and no
longer considered part of the record, it does not follow ipso facto that
the service of a new summons for amended petitions or complaints is
required. Where the defendants have already appeared before the trial
court by virtue of a summons on the original complaint, the amended
complaint may be served upon them without need of another sum-
mons, even if new causes of action are alleged. 84 After it is acquired,
a court's jurisdiction continues until the case is finally terminated.
Conversely, when defendants have not yet appeared in court and no
summons has been validly served, new summons for the amended
complaint must be served on them. 85 It is not the change of cause of
action that gives rise to the need to serve another summons for the
amended complaint, but rather the acquisition of jurisdiction over the
persons of the defendants. If the trial court has not yet acquired juris-
diction over them, a new service of summons for the amended com-
plaint is required.1âwphi1.nêt
In this case, the trial court obviously labored under the erroneous im-
pression that petitioner had already been placed under its jurisdiction
since it had been served summons through the secretary of its presi-
dent. Thus, it dispensed with the service on petitioner of new summons
for the subsequent amendments of the Petition. We have already ruled,
however, that the first service of summons on petitioner was invalid.
Therefore, the trial court never acquired jurisdiction, and the said court
should have required a new service of summons for the amended Pe-
titions.
Impleading a Party in the
Title of the Complaint
Petitioner further claims that the trial court failed to acquire jurisdic-
tion to render judgment against it because (1) the title of the three Pe-
titions filed by private respondent never included petitioner as a party-
defendant, in violation of Rule 7; and (2) the Petitions failed to state
any allegation of ultimate facts constituting a cause of action against
petitioner.
We disagree with petitioner on the first ground. The judicial attitude
has always been favorable and liberal in allowing amendments to
pleadings. Pleadings shall be construed liberally so as to render sub-
stantial justice to the parties and to determine speedily and inexpen-
sively the actual merits of the controversy with the least regard to tech-
nicalities. 86

The inclusion of the names of all the parties in the title of a complaint
is a formal requirement under Section 3, Rule 7. However, the rules of
pleadings require courts to pierce the form and go into the substance
and not to be misled by a false or wrong name given to a pleading. The
averments in the complaint, not the title, controlling. Although the
general rule requires the inclusion of the names of all the parties in the
title of a complaint, the non-inclusion of one or some of them is not
fatal to the cause of action of a plaintiff, provided there is a statement
in the body of the petition indicating that a defendant was made a party
to such action.
Private respondent claims that petitioner has always been included in
the caption of all the Petitions it filed, which included Antonio Sy,
field manager of petitioner. We checked and noted that in the caption
and the body of the Amended Petition and Second Amended Petition
with Supplemental Petition, Antonio Sy alleged to be representing
Med Line Philippines, not petitioner. Because it was private respond-
ent who was responsible for the errors, the Court cannot excuse it from
compliance, for such action will prejudice petitioner, who had no hand
in the preparation of these pleadings. In any event, we reiterate that,
as a general rule, mere failure to include the name of a party in the title
of a complaint is not fatal by itself.
Stating a Cause of Action
in the Complaint
The general rule is allegata et probata — a judgment must conform
to the pleadings and the theory of the action under which the case was
tried. 87 But a court may also rule and render judgment on the basis of
the evidence before it, even though the relevant pleading has not been
previously amended, so long as no surprise or prejudice to the adverse
party is thereby caused. 88
In the case at bar, the liability of petitioner was based not on any alle-
gation in the four Petitions filed with the trial court, but on the evi-
dence presented ex parte by the private respondent. Since the trial
court had not validly acquired jurisdiction over the person of peti-
tioner, there way for the latter to have validly and knowingly waived
its objection to the private respondent's presentation of evidence
against it.
Third Issue: Judgment by Default
The trial court Decision holding petitioner liable for damages is basi-
cally a default judgment. In Section 18, judgment by default is allowed
under the following condition: 89
Sec. 1. Judgment by default.— If the defendant fails to answer
within the time specified in these rules, the court shall, upon
motion of the plaintiff and proof of such failure, declare the
defendant in default. Thereupon the court shall proceed to re-
ceive the plaintiff's evidence and render judgment granting
him such relief as the complaint and the facts proven may war-
rant. . . . .
Thus, it becomes crucial to determine whether petitioner was declared
in default, and whether the reception of evidence ex parte against it
was procedurally valid.
Petitioner Was NeverDeclared In Default
Petitioner insists that the trial court never declared it in default.
We agree. The trial court denied the January 29, 1990 Motion of pri-
vate respondent to declare all the defendants in default, but it never
acted on the latter's subsequent Motion to declare petitioner likewise.
During the pretrial on January 23, 1993, the RTC declared in default
ONLY "Atty. Eddie Tamondong, as well as the other defendants Hon.
Salvador Mison, M/V Star Ace, Omega Sea Transport Co., Inc. of
Panama and Sinkong Trading Co., [but] despite . . . due notice to them,
[they] failed to appear. 90 EVEN PRIVATE RESPONDENT CAN-
NOT PINPOINT WHICH TRIAL COURT ORDER HELD PETI-
TIONER IN DEFAULT.
More important, the trial court, in its Resolution dated May 22, 1991,
admitted that it never declared petitioner in default, viz.:
. . . It is in this light that this [c]ourt made an in-depth reflec-
tion and assessment of the premises or reasons raised by [pe-
titioner] VEC[;] and after a re-examination of the facts and
evidence spread on the records, it has come to the considered
conclusion that the questioned default-judgment has been im-
providently issued. [Based on] the records, the claim of [pri-
vate respondent] that [its] January 29, 1990 Ex-Parte Motion
to Declare Defendants In Default (pp. 174-177, records, Vol.
1) including VEC had been granted is belied by the February
19 of 30
23, 1990 Order (pp. 214-215, records, ibid.) par. 2, thereof, . .
.
xxx xxx
Not even petitioner's November 23, 1990 "Ex-Parte Motion
To Present Evidence Against Defaulting Defendants" (page
489, records, Vol. 2) [can] be deemed as a remedy [for] the
fact that there never was issued an order of default against re-
spondents including [petitioner] VEC. Having thus estab-
lished that there ha[d] been no order of default against VEC
as contemplated by Sec. 1, Rule 18, in relation to Sec. 9, Rule
13, Revised Rules of Court, there could not have been any
valid default-judgment rendered against it. The issuance of an
order [o]f default is a condition sine qua non in order [that] a
judgment by default be clothed with validity. Further, records
show that this [c]ourt never had authorized [private respond-
ent] to adduce evidence ex-parte against [Petitioner] VEC. In
sum, the February 18, 1991 decision by default is null and
void as against [Petitioner] VEC. . . .
The aforementioned default judgment refers to the February 18, 1989
Decision, not to the Order finding petitioner in default as contended
by private respondent. FURTHERMORE, IT IS A LEGAL IMPOS-
SIBILITY TO DECLARE A PARTY-DEFENDANT TO BE IN DE-
FAULT BEFORE IT WAS VALIDLY SERVED SUMMONS.
Trial Court Did Not Allow
Presentation of Evidence
Ex Parte Against Petitioner
The Order of December 10, 1990, which allowed the presentation of
evidence ex parte against the defaulting defendants, could not have in-
cluded petitioner, because the trial court granted private respondent's
motion praying for the declaration of only the foreign defendants in
default. So too, private respondent's ex parte Motion to present evi-
dence referred to the foreign defendants only. 91
Furthermore, the reception of evidence ex parte against a non-default-
ing party is procedurally indefensible. Without a declaration that peti-
tioner is in default as required in Section 1, Rule 18, the trial court had
no authority to order the presentation of evidence ex parte against pe-
titioner to render judgment against it by default. The trial judge must
have thought that since it failed to summons and was in default, it ef-
fectively waived any objection to the presentation of evidence against
it. This rule, however, would have applied only if petitioner had sub-
mitted itself to the jurisdiction of the trial court. The latter correctly
declared, in the Resolution just cited, that the default judgment against
the former had been improvidently rendered.
Fourth Issue: Award Not Paid and Prayed For
Additional Filing Fees as
Lien on the Judgment
Had the trial court validly acquired jurisdiction over petitioner, non-
payment of docket fees would not have prevented it from holding pe-
titioner liable for damages. The Court, in Manchester Development
Corporation v. Court of Appeals, 92 ruled that a court acquires juris-
diction over any case only upon the payment of the prescribed docket
fee, not upon the amendment of the complaint or the payment of the
docket fees based on the amount sought in the amended pleading. This
ruling, however, was modified in Sun Insurance Office, Ltd. v. Asun-
cion, 93 which added:
3. Where the trial court acquires jurisdiction over a claim
[through] the filing of the appropriate pleading and payment
of the prescribed filing fee but, subsequently, the judgment
awards a claim not specified in the pleading, or if specified
the same has been left for determination by the court, the ad-
ditional filing fee therefor shall constitute a lien on the judg-
ment. It shall be the responsibility of the Clerk of Court or his
duly authorized deputy to enforce said lien and assess and col-
lect the additional fee.
Filing fees for damages and awards that cannot be estimated constitute
liens on the awards finally granted by the trial court. Their nonpay-
ment alone is not a ground for the invalidation of the award.
Judgment by Default Cannot
Grant Relief Prayed For
A declaration or order of default is issued as a punishment for unnec-
essary delay in joining issues. In such event, defendants lose their
standing in court, they cannot expect the trial court to act upon their
 20 of 30
pleadings, and they are not entitled to notice of the proceeding until
the final termination of the case. 94 Thus, the trial court proceeds with
the reception of the plaintiff's evidence upon which a default judgment
is rendered.
Section 1 of Rule 18 provides that after the defendant has been de-
clared in default, "the court shall proceed to receive the plaintiff's ev-
idence and render judgment granting him such relief as the complaint
and the facts proven may warrant." The reliefs that may be granted,
however, are restricted by Section 5, which provides that a judgment
entered against a party in default shall not exceed the amount or be
different in kind from that prayed for.
In other words, under Section 1, a declaration of default is not an ad-
mission of the truth or the validity of the plaintiff's claims. 95 The
claimant must still prove his claim and present evidence. In this sense
the law gives defaulting parties some measure of protection because
plaintiffs, despite the default of defendants, are still required to sub-
stantiate their allegations in the complaint. The judgment of default
against defendants who have not appeared or filed their answers does
not imply a waiver of all their rights, except their right to be heard and
to present evidence in their favor. Their failure to answer does not im-
ply their admission of the facts and the causes of action of the plain-
tiffs, because the latter are required to adduce evidence to support their
allegations.
Moreover, the trial court is not allowed by the Rules to receive evi-
dence that tends to show a relief not sought or specified in the plead-
ings. 96 The plaintiff cannot be granted an award greater than or dif-
ferent in kind from that specified in the complaint. 97
This case should be distinguished, however, from that of defendants,
who filed an answer but were absent during trial. In that case, they can
be held liable for an amount greater than or different from that origi-
nally prayed for, provided that the award is warranted by the proven
facts. This rule is premised on the theory that the adverse party failed
to object to evidence relating to an issue not raised in the pleadings.
The latter rule, however, is not applicable to the instant case. Admit-
tedly, private respondent presented evidence that would have been
sufficient to hold petitioner liable for damages. However, it did not
include in its amended Petitions any prayer for damages against peti-
tioner. Therefore, the trial court could not have validly held the latter
liable for damages even if it were in default.
Fifth Issue: Execution of Final Judgment
Section 1 of Rule 39 provides that execution shall issue only upon a
judgment that finally disposes of the action or proceeding. Such exe-
cution shall issue as a matter of right upon the expiration of the period
to appeal it, if no appeal has been duly perfected. 98
In the present case, however, we have already shown that the trial
court's Decision has not become final and executory against petitioner.
In fact, the judgment does not even bind it. Obviously, Respondent
Court committed serious reversible errors when it allowed the execu-
tion of the said judgment against petitioner.
WHEREFORE, the appeal is hereby GRANTED, and the assailed De-
cision and Resolution of the Court of Appeals are REVERSED and
SET ASIDE insofar as they affect petitioner. The levy and the sale on
execution of petitioner's properties are declared NULL and VOID.
Said properties are ordered RESTORED to petitioner. No pronounce-
ment as to costs.
 21 of 30

-
22 of 30

TOPIC: APPEAL RULE 40 and 41
G.R. No. 160895 October 30, 2006
JOSE R. MARTINEZ, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, respondents.
The central issue presented in this Petition for Review is
whether an order of general default issued by a trial court in a
land registration case bars the Republic of the Philippines,
through the Office of the Solicitor General, from interposing an
appeal from the trial court’s subsequent decision in favor of the
applicant.
FACTS: Jose R. Martinez (Martinez) filed a petition for the
registration in his name of three (3) parcels of land included in
the Cortes, Surigao del Sur Cadastre. The lots collectively
comprised around 3,700 square meters. Martinez alleged that
he had purchased lots in 1952 from his uncle, whose prede-
cessors-in-interest were traceable up to the 1870s. It was
claimed that Martinez had remained in continuous possession
of the lots; that the lots had remained unencumbered; and that
they became private property through prescription pursuant to
Section 48(b) of Commonwealth Act No. 141. Martinez further
claimed that he had been constrained to initiate the proceed-
ings because the Director of the Land Management Services
had failed to do so despite the completion of the cadastral sur-
vey of Cortes, Surigao del Sur.
The case was docketed as Land Registration Case No. N-30
and raffled to the Regional Trial Court (RTC) of Surigao del
Sur, Branch 27. The Office of the Solicitor General (OSG) was
furnished a copy of the petition. The trial court set the case for
hearing and directed the publication of the corresponding No-
tice of Hearing in the Official Gazette.
-On 30 September 1999, the OSG, opposed the petition on the
grounds that appellee’s possession was not in accordance
with Section 48(b) of Commonwealth Act No. 141; that his mu-
niments of title were insufficient to prove bona-fide acquisition
and possession of the subject parcels; and that the properties
formed part of the public domain and thus not susceptible to
private appropriation.
Despite the opposition filed by the OSG, the RTC issued an
order of general default, even against the Republic of the Phil-
ippines, no party appeared before the Court to oppose Mar-
tinez’s petition.
Afterwards, the trial court proceeded to receive Martinez’s oral
and documentary evidence in support of his petition. On 1 Au-
gust 2000, the RTC rendered a Decision4 concluding that Mar-
tinez and his predecessors-in-interest had been for over 100
years in possession characterized as continuous, open, public,
and in the concept of an owner. The RTC thus decreed the
registration of the three (3) lots in the name of Martinez.
-OSG filed a Notice of Appeal dated 28 August 2000,5 which
was approved by the RTC.
After the records had been transmitted to the Court of Appeals
RTC received a letter dated 21 February 20016 from the Land
Registration Authority (LRA) stating that only Lot Nos. 464-A
and 464-B were referred to in the Notice of Hearing published
in the Official Gazette; and that Lot No. 370, Cad No. 597 had
been deliberately omitted due to the lack of an approved sur-
vey plan for that property. Accordingly, the LRA manifested
that this lot should not have been adjudicated to Martinez for
23 of 30
lack of jurisdiction. This letter was referred by the RTC to the
Court of Appeals for appropriate action.
Court of Appeals promulgated the assailed Decision reversing
the RTC and instead ordering the dismissal of the petition for
registration. In light of the opposition filed by the OSG, the ap-
pellate court found the evidence presented by Martinez as in-
sufficient to support the registration of the subject lots. Oral ev-
idence presented by Martinez merely consisted of general
declarations of ownership, without alluding to specific acts of
ownership performed by him or his predecessors-in-interest.
Also debunked the documentary evidence presented by Mar-
tinez, adjudging the same as either inadmissible or ineffective
to establish proof of ownership.
No motion for reconsideration appears to have been filed with
the Court of Appeals by Martinez, who instead directly as-
sailed its Decision before this Court through the present peti-
tion.
OSG raises several substantial points, including the fact that it
had duly opposed Martinez’s application for registration before
the RTC; that jurisprudence and the Rules of Court
acknowledge that a party in default is not precluded from ap-
pealing the unfavorable judgment; that the RTC had no juris-
diction over Lot No. 370 since its technical description was not
published in the Official Gazette; and that as found by the
Court of Appeals the evidence presented by Martinez is insuffi-
cient for registering the lots in his name.12 Despite an order
from the Court requiring him to file a Reply to the Comment,
counsel for Martinez declined to do so, explaining, among oth-
ers, that "he felt he would only be taxing the collective pa-
tience of this [Court] if he merely repeats x x x what petitioner
had succinctly stated x x x on pages four (4) to seven (7) of his
said petition." Counsel for petitioner was accordingly fined by
the Court.
The Court’s patience is taxed less by redundant pleadings
than by insubstantial arguments. The inability of Martinez to of-
fer an effective rebuttal to the arguments of the OSG further
debilitates what is an already weak petition.
ISSUE: WON the OSG could have still appealed the RTC de-
cision after it had been declared in default.
RESPONDENTS CONTENTION: The OSG argues that a
party in default is not precluded from filing an appeal, cit-
ing Metropolitan Bank & Trust Co. v. Court of Appeals,14 and
asserts that "[t]he Rules of Court expressly provides that a
party who has been declared in default may appeal from the
judgment rendered against him."15
HELD: There is error in that latter, unequivocal averment,
though one which does not deter from the ultimate correctness
of the general postulate that a party declared in default is al-
lowed to pose an appeal. Elaboration is in order.
New provision:
SECTION 1. Subject of appeal.—An appeal may be
taken from a judgment or final order that completely
disposes of the case, or of a particular matter therein
when declared by these Rules to be appealable.
No appeal may be taken from:
(a) An order denying a motion for new trial or recon-
sideration;
(b) An order denying a petition for relief or any similar
motion seeking relief from judgment;
(c) An interlocutory order;

(d) An order disallowing or dismissing an appeal;
(e) An order denying a motion to set aside a judg-
ment by consent, confession or compromise on the
ground of fraud, mistake or duress, or any other
ground vitiating consent;
(f) An order of execution;
(g) A judgment or final order for or against or one or
more of several parties or in separate claims, coun-
terclaims, cross-claims and third-party complaints,
while the main case is pending, unless the court al-
lows an appeal therefrom; and
(h) An order dismissing an action without prejudice.
In all the above instances where the judgment or final
order is not appealable, the aggrieved party may file
an appropriate special civil action under Rule 65.
Evidently, the prior warrant that a defaulted defendant had the
right to appeal was removed from Section 2, Rule 41. On the
other hand, Section 3 of Rule 9 of the 1997 Rules incorporated
the particular effects on the parties of an order of default:
Sec. 3. Default; declaration of.—If the defending party
fails to answer within the time allowed therefor, the
court shall, upon motion of the claiming party with no-
tice to the defending party, and proof of such failure,
declare the defending party in default. Thereupon, the
court shall proceed to render judgment granting the
claimant such relief as his pleading may warrant, un-
less the court in its discretion requires the claimant to
submit evidence. Such reception of evidence may be
delegated to the clerk of court.
(a) Effect of order of default.—A party in default shall
be entitled to notice of subsequent proceedings but
shall not take part in the trial.
(b) Relief from order of default.—A party declared in
default may any time after notice thereof and before
judgment file a motion under oath to set aside the or-
der of default upon proper showing that his failure to
answer was due to fraud, accident, mistake or excus-
able negligence and that he has a meritorious de-
fense. In such case, the order of default may be set
aside on such terms and conditions as the judge may
impose in the interest of justice.
(c) Effect of partial default.—When a pleading assert-
ing a claim states a common cause of action against
several defending parties, some of whom answer and
the others fail to do so, the court shall try the case
against all upon the answers thus filed and render
judgment upon the evidence presented.
(d) Extent of relief to be awarded.—A judgment ren-
dered against a party in default shall not exceed the
amount or be different in kind from that prayed for nor
award unliquidated damages.
xxx
It cannot be escaped that the old provision expressly
guaranteeing the right of a defendant declared in default
to appeal the adverse decision was not replicated in the
1997 Rules of Civil Procedure. Should this be taken as a
sign that under the 1997 Rules a defaulted defendant no
longer has the right to appeal the trial court decision?
If post-1997 jurisprudence and the published commentaries to
the 1997 Rules were taken as an indication, the answer should
24 of 30
be in the negative. The right of a defaulted defendant to ap-
peal remains extant.
By 1997, the doctrinal rule concerning the remedies of a party
declared in default had evolved into a fairly comprehensive re-
statement as offered in Lina v. Court of Appeals:30
a) The defendant in default may, at any time after dis-
covery thereof and before judgment, file a motion, un-
der oath, to set aside the order of default on the
ground that his failure to answer was due to fraud,
accident, mistake or excusable neglect, and that he
has meritorious defenses; (Sec 3, Rule 18)
b) If the judgment has already been rendered when
the defendant discovered the default, but before the
same has become final and executory, he may file a
motion for new trial under Section 1(a) of Rule 37;
c) If the defendant discovered the default after the
judgment has become final and executory, he may
file a petition for relief under Section 2 of Rule 38;
and
d) He may also appeal from the judgment rendered
against him as contrary to the evidence or to the law,
even if no petition to set aside the order of default has
been presented by him. (Sec. 2, Rule 41)31
The fourth remedy, that of appeal, is anchored on Section 2,
Rule 41 of the 1964 Rules. Yet even after that provision’s dele-
tion under the 1997 Rules, the Court did not hesitate to ex-
pressly rely again on the Lina doctrine, including the pro-
nouncement that a defaulted defendant may appeal from the
judgment rendered against him. This can be seen in the cases
of Indiana Aerospace University v. Commission on Higher Ed-
ucation,32 Tan v. Dumarpa,33and Crisologo v. Globe Telecom,
Inc.34
Annotated textbooks on the 1997 Rules of Civil Procedure
similarly acknowledge that even under the new rules, a de-
faulted defendant retains the right to appeal as previously con-
firmed under the old Section 2, Rule 41. In his textbook on
Civil Procedure, Justice Francisco answers the question "What
are the remedies available to a defending party in default?"
with a reiteration of the Lina doctrine, including the remedy
that a defaulted defendant "may also appeal from the judg-
ment rendered against him as contrary to the evidence or to
the law, even if no petition to set aside the order of default has
been presented by him."35 Justice Regalado also restates
the Lina rule in his textbook on Civil Procedure, opining that
the remedies enumerated therein, even if under the former
Rules of Procedure, "would hold true under the present
amended Rules."36 Former Court of Appeals Justice Herrerra
likewise reiterates the Lina doctrine, though with the caveat
that an appeal from an order denying a petition for relief from
judgment was no longer appealable under Section 1, Rule 41
of the 1997 Rules.37 Herrera further adds:
Section 2, paragraph [2] of the former Rule 41, which
allows an appeal from a denial of a petition for relief,
was deleted from the present Rule, and confined ap-
peals to cases from a final judgment or final order
that completely disposes of the case, or of a particu-
lar matter therein, when declared by these rules to be
appealable. A judgment by default may be consid-
ered as one that completely disposes of the
case.38
We are hard-pressed to find a published view that the enact-
ment of the 1997 Rules of Civil Procedure accordingly with-
drew the right, previously granted under the 1964 Rules, of a
defaulted defendant to appeal the judgment by default against
him. Neither is there any provision under the 1997 Rules which
expressly denies the defaulted defendant such a right. If it is
perplexing why the 1997 Rules deleted the previous authoriza-
tion under the old Section 2, Rule 41 (on subject of appeal), it

is perhaps worth noting that its counterpart provision in the
1997 Rules, now Section 1, Rule 41, is different in orientation
even as it also covers "subject of appeal." Unlike in the old
provision, the bulk of the new provision is devoted to enumer-
ating the various rulings from which no appeal may be
taken, and nowhere therein is a judgment by default included.
A declaration therein that a defaulted defendant may still ap-
peal the judgment by default would have seemed out of place.
If it cannot be made any clearer, we hold that a defendant
party declared in default retains the right to appeal from the
judgment by default on the ground that the plaintiff failed to
prove the material allegations of the complaint, or that the de-
cision is contrary to law, even without need of the prior filing of
a motion to set aside the order of default. We reaffirm that
the Lim Toco doctrine, denying such right to appeal unless the
order of default has been set aside, was no longer controlling
in this jurisdiction upon the effectivity of the 1964 Rules of
Court, and up to this day.
Turning to the other issues, we affirm the conclusion of the
Court of Appeals that Martinez failed to adduce the evidence
needed to secure the registration of the subject lots in his
name.
25 of 30
the subject parcels from his uncle, Julian Mar-
tinez, was not translated from the vernacular in
which it was executed and, by said token, was in-
admissible in evidence. Having submitted a white
print copy of the survey plan for Lot Nos. 464-A
and 464-B, appellee also submitted the tracing
cloth plan for Lot No. 370 which does not, how-
ever, appear to be approved by the Director of
Lands. In much the same manner that the submis-
sion of the original tracing cloth plan is a mandatory
statutory requirement which cannot be waived, the
rule is settled that a survey plan not approved by the
Director of Lands is not admissible in evidence.41
These findings of the Court of Appeals, arrived at after a suffi-
ciently extensive evaluation of the evidence, stand in contrast
to that contained in the RTC decision, encapsulated in a one-
paragraph précis of the factual allegations of Martinez con-
cerning how he acquired possession of the subject properties.
The Court of Appeals, of course, is an appropriate trier of
facts, and a comparison between the findings of fact of the
Court of Appeals and that of the RTC clearly demonstrates
that it was the appellate court which reached a more thorough
and considered evaluation of the evidence.

It should be noted that the OSG, in appealing the case to
the Court of Appeals, did not introduce any new evidence,
but simply pointed to the insufficiency of the evidence
presented by Martinez before the trial court. The Court of
Appeals was careful to point out that the case against
Martinez was established not by the OSG’s evidence, but
by petitioner’s own insufficient evidence. We adopt with
approval the following findings arrived at by the Court of Ap-
peals, thus:
As correctly held by the Court of Appeals, the burden of proof
expected of the petitioner in a land registration case has not
been matched in this case.
WHEREFORE, the petition is DISMISSED. Costs against peti-
tioner.
SO ORDERED.

The burden of proof in land registration cases is in-

cumbent on the applicant who must show that he is
the real and absolute owner in fee simple of the land
applied for. Unless the applicant succeeds in showing
by clear and convincing evidence that the property in-
volved was acquired by him or his ancestors by any
of the means provided for the proper acquisition of
public lands, the rule is settled that the property must
be held to be a part of the public domain. The appli-
cant must, therefore, present competent and persua-
sive proof to substantiate his claim. He may not rely
on general statements, or mere conclusions of law
other than factual evidence of possession and title.

Considered in the light of the opposition filed by the

Office of the Solicitor General, we find the evidence
adduced by appellee, on the whole, insufficient to
support the registration of the subject parcels in his
name.

In the dreary tradition of most land registration

cases, appellee has apparently taken the absence
of representation for appellant at the hearing of
his petition as license to be perfunctory in the
presentation of his evidence. Actual possession
of land, however, consists in the manifestation of
acts of dominion over it of such a nature as a
party would naturally exercise over his own prop-
erty. It is not enough for an applicant to declare
himself or his predecessors-in-interest the pos-
sessors and owners of the land for which regis-
tration is sought. He must present specific acts of
ownership to substantiate the claim and cannot
just offer general statements which are mere con-
clusions of law requiring evidentiary support and
substantiation.

The record shows that appellee did not fare any bet-
ter with the documentary evidence he adduced be-
fore the trial court. The October 20, 1952 Deed of
Sale by which appellee claims to have purchased

G.R. No. 93233 December 19, 1995
JAO & COMPANY, INC. petitioner,
vs.
HON. COURT OF APPEALS, HON. ROSALIO DE LA ROSA,
as Presiding Judge of Br. 51, Regional Trial Court of Manila, THE
SHERIFF OF THE CITY OF MANILA, DEPUTY SHERIFF OF
MANILA RODOLFO P. TORRELLA, TOP SERVICE, INC.,
HENRY CASTILLO, QUINTIN S. GO, and CARLITO N. ABA-
DILLA, respondents.
FACTS:
Due to the non-appearance of defendant (the petitioner herein) Jao &
Company, Inc., during the hearing on the merits, the Regional Trial
Court of Manila, Branch 51 — upon motion of herein private respond-
ent Top Service, Inc. — issued an order.
RTC [April 14, 1989]: Declared said petitioner in default and allowed
evidence to be presented ex-parte.
The petitioner however filed an answer.
RTC [May 26, 1989]: Ordered petitioner Jao to pay private respond-
ent Top Service P150,920.00 representing agreed rentals with 12% in-
terest per annum from date of filing of the suit, attorney's fees of
P5,000.00, plus costs.
After receipt of the decision, petitioner filed on November 10, 1989 a
motion for reconsideration and/or to set aside decision.
Pending resolution of the motion, respondent judge restrained the
sheriff from holding an auction sale of two barges he earlier levied on.
RTC [January 10, 1990]: Denied the said motion and lifted the re-
straining order against the auction sale.
On January 12, 1990, the sheriff of Manila gave petitioner a Notice of
Resetting of Execution Sale of Personal Properties on January 15,
1990.
On January 15, 1990, petitioner filed a petition for certiorari with
the Court of Appeals, docketed as CA-G.R. No. SP-19680, contest-
ing the jurisdiction of the trial court.
CA [January 16, 1990]: Issued a temporary restraining order to stop
the sheriff from conducting the auction sale.
However, it appears that the auction took place one day before, on
January 15, 1990, although the petitioner contends that no such sale
actually took place. The barges in question were purchased during the
auction by respondent Henry Castillo, who later sold them to Quintin
Go, who in turn sold them to Carlito Abadilla.
CA [March 13, 1990]: Promulgated a Resolution denying petitioner's
motion for a writ of preliminary injunction, the dispositive portion of
which reads:
ACCORDINGLY, the prayer for the issuance of the writ of prelimi-
nary injunction is hereby DENIED for lack of merit. (Rollo, p. 86)
The respondent Court held that the motion has become moot and aca-
demic because the properties have already been sold to third parties
and because the decision of the trial court dated May 26, 1989 "has
long become final and executory on the basis that petitioner failed to
appeal . . . ."
CA [April 25, 1990]: Denied petitioner’s motion for reconsideration.
Upon denial of its motion for reconsideration, petitioner brought
to the Supreme Court the instant petition for certiorari and man-
damus under Rule 65, inter alia, to nullify the said Resolutions of
the respondent Court dated March 13, 1990 and April 25, 1990
and to command the said Court to declare as void the auction sale
of January 15, 1990, for grave abuse of discretion and/or lack/ex-
cess of jurisdiction.
PRIVATE RESPONDENTS’ ARGUMENTS:
• that the trial court's decision has become final and executory
• that the barges have been bought and resold to buyers in good faith
• that at any rate, the parties have another pending case for replevin
of said properties pending in Branch I of the Regional Trial Court
of Manila
PETITIONER’S REPLY:
• The decision could not become final because the trial court "improp-
erly declared defendant-petitioner in default and unjustifiably al-
lowed private respondent-plaintiff to present its evidence ex-parte"
because it (petitioner) was not given notice of the order of April 14,
1989 declaring it in default and of the decision of May 26, 1989.
26 of 30
• It also assailed the respondent Court's suggestion that petitioner's
remedy is a "separate action for the nullification of the sale or such
other remedies or process sanctioned by accepted rules and proce-
dure."
• It also contended that the case for preliminary injunction has not
become moot and academic by the auction sale of the subject barges,
citing the factual circumstances why, in its view, the said sale on
January 15, 1990 did not actually take place.
PRIVATE RESPONDENTS’ REJOINDER: Stated that petitioner's
counsel had withdrawn his appearance in the trial court and left no
forwarding address. Hence, no notice of the said order of default and
the decision could be given it. At any rate, petitioner's remedy, they
concluded, was timely appeal, which petitioner failed to perfect.
ISSUE/S:
*WON certiorari is the proper remedy of petitioner? - NO.
(1) Did the respondent Court of Appeals gravely abuse its discretion
in refusing to issue a writ of preliminary injunction? - NO.
(2) Has the decision of the trial court, promulgated on May 26, 1989,
become final? - final na ba non? haha diko alam lol
RULING:
1. On the first question, it must be stressed at the outset that the grant
or denial of the writ of preliminary injunction rests upon the sound
discretion of the court. And in evaluating whether to issue it or
not, the court is called upon to be careful and circumspect, "with
the caveat that extreme caution be observed in the exercise of such
discretion" to prevent a denial of procedural due process and avoid
causing "irreparable prejudice to a party.” Its main purpose is to
preserve the status quo and not to grant the very subject of the
petition on the merits.
The Supreme Court in Unciano Paramedical College, Inc. vs. Court
of Appeals, quoting with approval from the case of Capitol Medical
Center, Inc., et al. vs. Court of Appeals, et al. stated:
The sole object of a preliminary injunction, whether prohibitory or
mandatory, is to preserve the status quo until the merits of the case can
be heard. The status quo is the last actual peaceable uncontested status
which preceded the controversy. It may only be resorted to by a liti-
gant for the preservation or protection of his rights or interests and for
no other purpose during the pendency of the principal action. It should
only be granted if the party asking for it is clearly entitled thereto.
In the instant case, the respondent Court promptly issued a temporary
restraining order one day after an application therefor was filed by the
petitioner. From this, it can be inferred that said Court was alert and
sensitive to the need for immediate action. However, as the sale took
place the day before, i.e., on January 15, 1990, the TRO was useless
in preventing/stopping the act complained of.
This being the case, it is reasonable to expect that even if the said Court
was minded to issue the Writ, it would have been also functus oficio,
since a preventive writ can not be used to restore the parties' status
ante bellum, particularly because the subject properties were already
in the possession of persons who were not parties in the proceedings
before said Court.
As to petitioner's contention that the auction sale and the subsequent
sale to third parties were fraudulent, we cannot disagree with the find-
ing of the respondent Court that the allegation involves "factual is-
sues" which require "trial on the merits", and which cannot be decided
on the mere say-so of the parties in their pleadings.
2. On the second issue, it is well-settled that, under ordinary cir-
cumstances, the proper remedy of a party wrongly declared in de-
fault is either to appeal from the judgment by default or to file a
petition for relief from judgment, and not certiorari. A default
judgment is an adjudication on the merits and is, thus, appealable.
Since appeal is the proper remedy, the extraordinary writ of cer-
tiorari will not lie.
Petitioner contends that it could not be bound by the questioned Or-
der of April 14, 1989 declaring it in default and the subsequent Deci-
sion of May 20, 1989 because it did not receive copies thereof.
Respondents counter that such non-service was due to petitioner's
fault in not furnishing the trial court with its "forwarding address" after
its counsel withdrew his appearance. This Court is not in a position to
settle this issue of fact — as indeed the Supreme Court does not decide
such questions.
 27 of 30
But it is not disputed that after receipt of the decision, petitioner filed
a motion for reconsideration. Thus, whatever defects — if indeed there
was any — may have been committed by the trial court in failing to
give constructive notice of its erroneous default order was cured by
petitioner's voluntary filing of the said motion for reconsideration.
Upon denial thereof, petitioner should have appealed. But instead
of doing that, it opted for the wrong remedy of certiorari.
WHEREFORE, the petition is DISMISSED as petitioner failed to
show that respondent Court of Appeals acted with grave abuse of dis-
cretion and/or lack of jurisdiction. Costs against petitioner.
SO ORDERED.
 28 of 30

-
 29 of 30
-

-
30 of 30