1.

THE PHILIPPINE BRITISH CO., INC. and THE CIBELES

INSURANCE CORPORATION v. THE HON. WALFRIDO DE LOS
ANGELES
G.R. Nos. L-33720-21. May 21, 1975.

FACTS:

On the fatal day of June 12, 1970, a fire broke out in the premises of
private respondents (Tapia). Being holders of fire insurance policies from
different companies, among them the petitioners, and having failed to secure
extrajudicial settlement of their claims, they filed corresponding civil actions
in the Court of First Instance of Quezon City. Petitioner British was served
summons on March 29, 1971 while petitioner Cibeles was served on April 2,
1971, hence their answers were due on April 13 and 17, respectively.

The counsel for British filed on April 13, 1971 by mail a motion
asking for fifteen (15) days extension of its time to answer. He was granted
only five (5) days ending April 19. No answer came until April 28, 1971,
albeit it was mailed by registered service on April 22, 1971. Cibeles in turn
filed its own motion for extension on April 19, 1971, two days after due
date.

April 24, 1971, Tapia filed separate motions in the two cases praying
that petitioners be declared in default. On April 28, 1971 an order of default
was issued, directing at the same time that plaintiffs' evidence be received by
the clerk of court. May 26, 1971, petitioner filed a joint motion to lift the
order of default, unverified and unaccompanied by any affidavit of merit,
which he set for hearing on June 1, 1971.

June 10, 1971, a notice was received by Atty. Felix, Jr. advising him
that his motion had been set for hearing on June 30, 1971, but on June 22,
1971, respondent judge issued an order cancelling this notice for the reason
that "for failure of defendants in the above-entitled cases to comply with the
requirements imposed by Section 3 of Rule 18, Rules of Court and pursuant
to the decisions of the Supreme Court on the matter, this Court can no longer
set aside its order dated April 24, 1971." And on June 28, 1971 the court
rendered judgment against the petitioner.

On July 1, 1971, petitioners filed a joint "Petition for Relief from

Judgment." But before said petition could be acted upon by the court, the

1
instant petition was filed with this Court on July 2, 1971 and summons,
together with the writ of preliminary injunction was served on public
respondents on July 10, 1971. In the meantime, on the same day that the
petition for relief was set for hearing, July 7, 1971, respondent judge found it
to be "sufficient in form and substance" and ordered the respondents "to
answer the same within a period of fifteen (15) days from receipt hereof."
Nothing else developed in the trial court later because the injunction of this
Court which was served on respondent judge on July 10, 1971 enjoined him
from "taking further action" in the two subject cases.

ISSUE:

1. Whether or not respondent judge committed grave abuse of discretion

in declaring petitioners in default.
2. Whether or not the remedies sought were proper?

RULING

1. The contention of petitioners that they were erroneously declared in

default has no merit. From the incontrovertible facts in the record, the court
cannot see how it can be justly said that respondent judge committed a grave
abuse of discretion in making such declaration.

Counsel suggests that he was not given enough time, considering that
there was the Holy Week to take into account, but His Honor ruled that
precisely, counsel would have more time because of the holidays. The court
perceives no grave abuse of discretion in such a pragmatic ratiocination.
Besides, it is settled that parties and counsel should not assume that courts
are bound to grant the time they ask for compliance with the rules, and,
therefore, the fact that counsel received the order of extension by mail is no
reason for him to complain. Likewise, that he was not notified of the motion
to declare his clients in default is not against the rules, for he had no right to
such notice.

Upon examination of the motion to set aside the order of default, the
court finds it to be lacking in the following substantial requirements: it does
not contain an affidavit of merits, the motion to set aside the default order is
not under oath and contains only a promise or an assurance, not an affidavit
of merits, that defendant has a good defense. The court was, therefore, fully
justified in denying the motion to set aside the order of default.

In view of the omission of petitioners to accompany their motion with

any affidavit of merit, the trial court had no authority to consider the same.
It is to be noted that the requirements of Section 3 of Rule 18 are practically
identical to those of Section 3 of Rule 38 regarding the need to show the

2
existence of fraud, accident, mistake or excusable negligence that caused the
default and to accompany the motion to set aside with affidavits of merit.
Consequently, it is but proper to apply to such a motion the same ruling
applicable to petitions for relief under Rule 38.

The same section expressly provides that motions to lift orders of

default may be filed only before judgment, and petitioners' joint motion was
filed only on May 26, 1971, whereas the judgments in question were
rendered on April 28, 1971.

While the Court has generally been liberal in giving a party in default
a chance to participate in the trial, the court cannot sanction any proposition
that would so reduce the effect of an order of default that to have it set aside
all that has to be done is for the party concerned to file any perfunctory
motion therefor. A party who by inaction or negligence allows himself to be
declared in default offends the rule requiring him to answer the summons
without unnecessary delay to the end that the issues may be duly joined and
the litigation be expeditiously terminated. To purge himself of the effects of
such offense, it should not be enough for him to just tell the court he has,
after all, decided to wake up and take part in the proceedings.

The counsel of the petitioner alleged that the decisions in question

must have been prepared subsequent to June 3, 1971. Undoubtedly, the
indictment is serious. It directly implies misfeasance on the part of the
officials and employees of the trial court, not excluding respondent judge.
Upon the other hand, the rotund denial of the respondents is coupled with
their own counter-accusation that counsel is frantically but vainly trying
only to make up with his clients for his failure to act on their behalf on time.
In the face of these sharply opposite positions, the court could do no less
than scrutinize the record minutely and carefully, if only to be able to pin
proper responsibility on whosoever might be guilty of violating his sacred
oath as functionary of the court, either as judge, clerk of court or mere
employee thereof or as counsel.

In the petitioner’s unsworn memorandum submitted to the court,

petitioners averred that the evidence clearly shows Moises Tapia to be guilty
of arson and fraud. It was because of this respondent Moises Tapia availed
himself of every means, even those frowned upon by law, in order to secure
judgment in his favor without going to trial.

The court reiterate that these circumstances make it unnecessary for

them to adhere to the technical procedure of returning these cases to the trial
court for further proceedings and final determination of the issue of whether
or not petitioners' petition for relief from judgment should be granted. The
court finds all the proceedings leading to the rendition of the impugned

3
judgments and to the issuance of all the writs of execution thereunder to
have been regular and legal. And as to whether or not petitioners have been
able to make the requisite showing that they have good and valid defenses,
they likewise hold that they have failed to do so.

2. The identity of the two remedies expressed doubt if the same issue
raised in the original motion to set aside the order of default, may again be
raised in a petition for relief under Rule 38 of the Rules of Court. The
general rule is that once a matter in issue has been decided by the court, it
may no longer be brought again in the form of another objection, and in the
guise of a motion under another provision of the rules. True it is that as a
matter of form, under Section 3 of Rule 18 it is not essential that the
affidavit of merit be separate from the motion and may instead be
incorporated therein, but in the instant case of petitioners' motion, even if it
makes general allegations of merit, these allegations are not supported by
oath of anyone who has knowledge of the fact. As already stated, not even
the counsel of the petitioners swore to the truth thereof. Accordingly, the
court finds no error in the subsequent action of respondent judge of
cancelling the notice of hearing of the joint motion to lift the order of
default.

If petitioners herein were declared in default, it was because their

counsel failed to observe the reglementary period for answering and could
not or failed to obtain relief from the order of default in accordance with the
Rules of Court. Now an attempt is being made to shift the blame to
respondent Tapia by falsely attributing to him a desire to avoid going to trial
purportedly because the evidence will show he is guilty of arson and fraud'.
Such foul tactics are beneath the dignity of the Bench and Bar.

But there is another aspect of these cases which cannot be left

unresolved, since it affects matters related to the integrity of judicial
proceedings and the attitude and conduct displayed by counsel for
petitioners in connection therewith. The Court cannot begrudge any lawyer
of his right to be assiduous and zealous, even tenacious, in the prosecution
or defense of the cause of his client. But when, as in these cases, counsel
makes charges against the actuations of a judge and the personnel of his
court directly assailing their personal integrity as well as that of the
proceedings by alleging irregularities implying bad faith and outright
misfeasance, he should be prepared to substantiate the same. He is hereby
ordered to show cause within ten (10) days from notice hereof why no
administrative action should be taken against him as a member of the
Philippine Bar.

2.

4
PERFECTA CAVILI, PRIMITIVO CAVILI AND QUIRINO CAVILI
VS. HON. TEODORO N. FLORENDO, PRESIDING JUDGE,
BRANCH XXXVI, REGIONAL TRIAL COURT OF NEGROS
ORIENTAL, 7TH JUDICIAL REGION, CLARITA CAVILI,
ULPIANO CAVILI, ESTRELLA CAVILI, PLACIDA CAVILI, ET
AL., RESPONDENTS.
G.R. NO. 73039 OCTOBER 9, 1987

FACTS:

Private respondents filed Civil Case No. 6880 against herein

petitioners for Partition, Accounting, and Damages. Summons was issued to
the three petitioners which was the address indicated in the complaint.
Summons was not served to Primitivo and Quirino, but only to Perfecta.

Atty. Jose P. Alamino filed a motion for extension to answer in behalf

of the defendants, manifesting the representation of his client Perfecta Cavili
that she will inform her brothers Primitivo and Quirino about the case.

Defendants, however, failed to file their answer and were declared in

default. A judgment by default was promulgated by Judge Augusto S.
Villarin.

Atty. Jose P. Alamillo filed a motion for new trial in behalf of the
defendants on grounds of lack of jurisdiction and, with a meritorious defense
that the properties sought to be partitioned have already been the subject of a
written partition agreement between the direct heirs of the late Bernardo
Cavili who are the predecessors of the parties in this case. The court granted
said motion.

Plaintiffs filed a motion for reconsideration of the order granting new

trial and at the same time prayed that a writ of execution be issued but only
in so far as defendant Perfecta Cavili was concerned.

Judge Cipriano Vamenta rendered a decision without qualification

ruling that the petitioners' remedy should have been appeal rather than new
trial.

Motion for reconsideration have been denied. The defendants, now

petitioners, brought the case to this Court through a petition for certiorari.
The court rendered decision reviving the new trial of the plaintiffs.

5
 Pre-trial and trial was was scheduled. Presented Perfecta Cavili dela
Cruz as their first witness. The respondents, through counsel moved for her
disqualification as a witness on the ground that having been declared in
default, Perfects Cavili has lost her standing in court and she cannot be
allowed to participate in all premise the even as a witness. Judge, sustained
the respondents' contention and disqualified her from testifying.

The petitioners, moved for a reconsideration. Lower court issued an

order denying reconsideration.

ISSUE:

Whether or not Perfecta Cavili dela Cruz is disqualified as a witness?

HELD:

No. Perfecta Cavili is qualified to appear as witness.

Section 18, Rule 130 of the Revised Rules of Court states who are
qualified to be witnesses. It provides:

Section 18. Witnesses; their qualifications. — Except as provided in

the next succeeding section, all persons who, having organs of sense, can
perceive, and perceiving, can make known their perception to others, may be
witnesses. Neither parties nor other persons interested in the outcome of a
case shall be excluded; nor those who have been convicted of crime; nor any
person on account of his opinion on matters of religious belief.

There is no provision of the Rules disqualifying parties declared in

default from taking the witness stand for non-disqualified parties. The law
does not provide default as an exception. The specific enumeration of
disqualified witnesses excludes the operation of causes of disability other
than those mentioned in the Rules. It is a maxim of recognized utility and
merit in the construction of statutes that an express exception, exemption, or
saving clause excludes other exceptions. As a general rule, where there are
express exceptions these comprise the only limitations on the operation of a
statute and no other exception will be implied. The Rules should not be
interpreted to include an exception not embodied therein.

6
3.

GAJUDO V. TRADERS ROYAL BANK

G.R. No. 151098, March 21, 2006

FACTS:

In mid 1977 Danilo Chua obtained a loan from the Traders Royal
Bank in the amount of P75,000.00 secured by a real estate mortgage over a
parcel of land.

The loan was not paid and thus the bank commenced extrajudicial
foreclosure proceedings on the property. The auction sale of the property
was set on 10 June 1981, but was reset to 31 August 1981, on Chu’s request,
which, however, was made without the knowledge and conformity of the
other petitioners (Gajudos). On the rescheduled auction sale, the Sheriff of
Quezon City sold the property to the bank, the highest bidder therein, for the
sum of P24,911.30.

The other petitioners (Gajudo) assailed this because 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 the amount that the bank paid at the
auction sale, plus interest. Petitioner Chua made an initial payment thereon
duly receipted by the bank but in a sudden change of position, the 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, the bank wrote Chua anew, requiring him to
tender a new offer to counter the offer made thereon by another buyer.

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, petitioners, with leave of court,
amended their complaint, but the Trial Court dismissed the case without
prejudice due to petitioners’ failure to pay additional filing fees.

7
 Petitioners re-filed the complaint with the same Court. Summons was
served on respondent bank, per Sheriffs Return.

A motion to set case for pre-trial, which motion was, however, denied
by the Trial Court, on the ground that respondent bank has not yet filed its
answer.

Petitioners filed a motion to declare respondent bank in default,

thereunder alleging that no answer has been filed despite the service of
summons

The Trial Court declared the motion submitted for resolution upon
submission by petitioners of proof of service of the motion on respondent
bank.

Upon proof that petitioners had indeed served respondent bank with a
copy of said motion, the Trial Court issued an Order of default against
respondent bank. They were by the Court allowed to present evidence ex
parte, insofar as respondent bank was concerned.

The Trial Court rendered 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 respondent
Traders Royal Banks Answer with counterclaim: thereunder it averred,
amongst others, that the erroneous filing of said answer was due to an honest
mistake of the typist and inadvertence of its counsel.

The trial court thumbed down the motion.

Respondent bank appealed the Partial Decision to the CA. During the
pendency of that appeal, Ceroferr Realty Corporation and/or Cesar and/or
Lorna Roque filed a Manifestation with Motion asking the CA to discharge
them as parties, because the case against them had already been dismissed
on the basis of their Compromise Agreement with petitioners. The CA
issued a Resolution granting Ceroferr et al.s Manifestation with Motion to
discharge movants as parties to the appeal. The Court, though, deferred
resolution of the matters raised in the Comment of respondent bank. The
latter contended that the Partial Decision had been novated by the
Compromise Agreement, whose effect of res judicata had rendered that
Decision functus officio.

ISSUE:

8
 1. Whether erroneous docket number placed on the Answer and absence
of affidavit of merit on bank’s Motion to Set Aside the Partial
Decision and to Admit the Answer were excusable.

2. 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
evidence under Section 1, Rule 133 of the Rules of Court.

RULING:

1. The CA ruled that the erroneous docket number placed on the

Answer filed before the trial court was not an excusable negligence by the
banks counsel. The latter had a bounden duty to be scrupulously careful in
reviewing pleadings. there were several opportunities to discover and rectify
the mistake, but these were not taken. Moreover, the banks Motion to Set
Aside the Partial Decision and to Admit the Answer was not accompanied by
an affidavit of merit. These mistakes and the inexcusable negligence
committed by respondent’s lawyer were binding on the bank.

2. Section 3 of Rule 9 governs the procedure which the trial court is

directed to take when a defendant fails to file an answer. According to this
provision, the court shall proceed to render judgment granting the claimant
such relief as his pleading may warrant, subject to the courts 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.

Basic is the rule that the party making allegations 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.

Being declared in default does not constitute a waiver of rights except

that of being heard and of presenting evidence in the trial court. 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 Section 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 between the two rules.

The mere fact that a defendant is declared in default does not

automatically result in the grant of the prayers of the plaintiff. To win, the

9
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 evidence 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 countervailing evidence.

10
4.

GARCIA VS. COURT OF APPEALS,

G.R. NO. 83929, JUNE 11, 1992

FACTS:

Antonio Garcia filed an action for damages against private respondent

spouses, William and Ma. Jajorie Uy for padlocking the commercial stalls
rented by petitioner from private respondents. Spouses Uy failed to reply
within the reglementary period. Trial Court declared them in default. Garcia
filed for motion for execution pending appeal.

Private respondents appealed to respondent Court of Appeals,

challenging the validity of the writ of execution because it was granted
without proper notice to them and without hearing.

Court of Appeals rendered a decision granting private respondents'

petition for certiorari and setting aside the order of the trial court.

Respondent court's decision holding that after the judgment by default

was rendered, the defendants automatically regained their standing and were
entitled to notice of proceedings subsequent to the final judgment by default,
is here challenged by petitioner. Citing Section 2, Rule 18 of the Rules of
Court which provides that a party declared in default is not entitled to notice
of subsequent proceedings nor to take part in the trial, as well as Section 9,
Rule 13 which states that the party in default is entitled to notice only of
papers referring to substantially amended or supplemental pleadings and
final orders or judgments, or in cases where the defaulting party files a
motion to set aside the order of default, petitioner contends that nowhere in
the Rules does it appear that a party who defaults shall automatically regain
his lost standing and right to notice after rendition of a judgment by default.

ISSUE:

Whether or not a party declared in default is entitled to notice of

motion for execution pending appeal of a judgement of default.

HELD:

11
 Yes. The Court Cited case of SC Johnson & Son v. CA where in a
party declared in default is entitle to notice of the motion for execution
pending appeal. Without notice, the various recourses available to defaulted
party after judgment will be rendered illusory. Consistent with this right to
notice of final order or judgment is the right to notice of the motion for
execution pending appeal of the default judgment.

As being in default does not imply a waiver of rights, as aforesaid, the

defaulted party has the right to expect compliance with the requisites for
executing a judgment pending appeal under Section 2 of Rule 39:

Sec. 2. Execution pending appeal. – On motion of the prevailing party

with notice to the adverse party the court may, in its discretion, order
execution to issue even before the expiration of the time to appeal, upon
good reasons to be stated in a special order. If a record on appeal is filed
thereafter, the motion and the special order shall be included therein.

The court ruled that private respondents' (defendants') loss of standing

in court, by reason of having been declared in default, again we rule that a
party in default loses the right to present his defense and examine or cross-
examine witnesses. It does not mean that being declared in default, and
thereby losing one's standing, constitutes a waiver of all rights; what is
waived only is the right to be heard and to present evidence during the trial
while default prevails. A party in default is still entitled to notice of final
judgments land orders and proceedings taken subsequent thereto.

12
5.

UNIMASTERS CONGLOMERATION, INC. VS. COURT OF

APPEALS
G.R. NO. 119657, FEBRUARY 7 1997

FACTS:

Kubota and Unimasters entered into a Dealership Agreement for Sales

and Services of Kubota’s products in Samar and Leyte. Contract contained
that: “All suits arising out of this agreement shall be filed with/in the proper
courts of QUEZON CITY,” and that “Unimasters is bound to obtain a credit
line with Metrobank-Tacloban in the amount of 2M to answer for its
obligations to Kubota”

Five years later, UNIMASTERS filed an action in the Regional Trial

Court of Tacloban City against KUBOTA, a certain Reynaldo Go, and
Metropolitan Bank and Trust Company-Tacloban Branch for damages for
breach of contract, and injunction with prayer for temporary restraining
order. On the same day the Trial Court issued a restraining order.

KUBOTA filed two motions. One prayed for dismissal of the case on
the ground of improper venue. The other prayed for the transfer of the
injunction hearing to January 11, 1994 because its counsel was not available
on January 10 due to a prior commitment before another court.

The Trial Court went ahead with the hearing on the injunction
notwithstanding that its motion to transfer hearing had been granted.

Trial Court handed down an Order authorizing the issuance of the

preliminary injunction and denying KUBOTA's motion to dismiss on the
reason that UNIMASTERS is holding its principal place of business in the
City of Tacloban while KUBOTA is holding its principal place of business in
Quezon City. The proper venue therefore pursuant to Rules of Court would
either be Quezon City or Tacloban City at the election of the
plaintiff. Quezon City and Manila, as agreed upon by the parties in the
Dealership Agreement, are additional places other than the place stated in
the Rules of Court. The filing, therefore, of this complaint in the Regional
Trial Court in Tacloban City is proper.

13
 Both orders were challenged as having been issued with grave abuse of
discretion by KUBOTA in a special civil action of certiorari and prohibition
filed with the Court of Appeals.

It contended, that:

(1) the RTC had no jurisdiction to take cognizance of UNIMASTERS'

action considering that venue was improperly laid;

(2) UNIMASTERS had in truth "failed to prove that it is entitled to the

writ of preliminary injunction;and (3) the RTC gravely erred "in denying
the motion to dismiss."

The Court of Appeals decided in favor of Kubota and it held that: “the
stipulation respecting venue in its Dealership Agreement with
UNIMASTERS did in truth limit the venue of all suits arising there under
only and exclusively to the proper courts of Quezon City”.

Unimasters filed a motion for reconsideration but was turned down by

the appellate court.

ISSUE:

1. Whether or not the stipulation regarding the venue had the effect of
effectively eliminating the latter as an optional venue and limiting
litigation between UNIMASTERS and KUBOTA only and
exclusively to Quezon City.

2. Whether or not the RTC had “no jurisdiction to take cognizance of

UNIMASTERS’ action considering that venue was improperly laid.

HELD:

1. NO.

An analysis of these precedents reaffirms and emphasizes the soundness

of the Polytrade principle. Of the essence is the ascertainment of the parties'
intention in their agreement governing the venue of actions between
them. That ascertainment must be done keeping in mind that convenience is
the foundation of venue regulations, and that that construction should be
adopted which most conduces thereto. In other words, unless the parties
make very clear, by employing categorical and suitably limiting language,
that they wish the venue of actions between them to be laid only and

14
exclusively at a definite place, and to disregard the prescriptions of Rule 4,
agreements on venue are not to be regarded as mandatory or restrictive, but
merely permissive, or complementary of said rule.

Absence of qualifying or restrictive words, venue stipulations in a

contract should be considered merely as agreement on additional forum, not
as limiting venue to the specified place. Unless the parties make very clear,
by employing categorical and suitably limiting language, that they wish the
venue of actions between them to be laid only and exclusively at a definite
place, and to disregard the prescriptions of Rule 4, agreements on venue are
not to be regarded as mandatory or restrictive, but merely permissive, or
complementary of said rule. Absent additional words and expressions
definitely and unmistakably denoting the parties' desire and intention that
actions between them should be ventilated only at the place selected by
them, Quezon City -- or other contractual provisions clearly evincing the
same desire and intention -- the stipulation should be construed, not as
confining suits between the parties only to that one place, Quezon City, but
as allowing suits either in Quezon City or Tacloban City, at the option of the
plaintiff.

2.

This is not an accurate statement of legal principle. It equates venue with

jurisdiction; but venue has nothing to do with jurisdiction, except in criminal
actions. This is fundamental. The action at bar, for the recovery of damages
in an amount considerably in excess of P20,000.00, is assuredly within the
jurisdiction of a Regional Trial Court. Assuming that venue were improperly
laid in the Court where the action was instituted, the Tacloban City RTC,
that would be a procedural, not a jurisdictional impediment -- precluding
ventilation of the case before that Court of wrong venue notwithstanding
that the subject matter is within its jurisdiction. However, if the objection to
venue is waived by the failure to set it up in a motion to dismiss, the RTC
would proceed in perfectly regular fashion if it then tried and decided the
action.

This is true also of real actions. Cases "affecting title to, or for recovery
of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property" were commenced in a province or city other
than that "where the property or any part thereof lies," if no objection is
seasonably made in a motion to dismiss, the objection is deemed waived,
and the Regional Trial Court would be acting entirely within its competence
and authority in proceeding to try and decide the suit.

15
6.

UNITED OVERSEAS BANK PHILS. (FORMERLY WESTMONT

BANK),
PETITIONER, VS. ROSEMOOR MINING & DEVELOPMENT CORP.
AND
DRA. LOURDES PASCUAL, RESPONDENTS.
G.R. NOS 159669 & 163521.

FACTS:

Rosemoor Mining and Development Corporation (Respondent),

applied for and was granted by Westmont Bank (petitioner) a credit facility
in the total amount of P80 million consisting of P50,000,000.00 as long term
loan and P30,000,000.00 as revolving credit line. To secure the credit
facility, a lone real estate mortgage agreement was executed by Respondents
in favor of the Bank mortgagee in the City of Manila, covering 4 parcels of
land located in Bulacan, owned by Roosmoor, and 2 parcels of land located
in Nueva Ecija, owned by Pascual. Rosemoor subsequently opened with the
Bank four (4) irrevocable Letters of Credit (LCs) totaling
US$1,943,508.11. To cover payments by the Bank under the LCs, Rosemoor
proceeded to draw against its credit facility and thereafter executed
promissory notes amounting collectively to P49,862,682.50. Two (2) other
promissory notes were also executed by Rosemoor in the amounts
of P10,000,000.00 and P3,500,000.00, respectively, to be drawn from its
revolving credit line.

Respondent defaulted in the payment of its various drawings under the

LCs and promissory notes. In view of the default, the Bank caused the extra-
judicial foreclosure of the Nueva Ecija properties on 22 May 1998 and the
Bulacan properties on 10 August 1998. The Bank was the highest bidder on
both occasions. On 8 October 1999, the Bank caused the annotation of the
Notarial Certificate of Sale covering the Nueva Ecija properties on the
certificates of title concerned. Later, on 16 March 2001, the Notarial
Certificate of Sale covering the Bulacan properties was annotated on the
certificates of title of said properties. The foregoing facts led to Rosemoors
filing of separate complaints against the Bank, one before the Regional Trial
Court of Manila (Manila RTC) and the other before the Regional Trial Court
of Malolos, Bulacan (Malolos RTC).

16
The Manila Case (G.R. No. 163521)

On August 5, 1998, Rosemoor and Pascual filed a Complaint against

Bank and Notary Public Sineneng, which has been amended twice until it
reflected to be an action for Accounting, Specific Performance and
Damages. On the first complaint, the Bank moved for the dismissal on the
ground that the venue had been improperly laid, but was denied by the trial
court on January 24, 2000. One August 15, 2002, the Bank filed another
motion to dismiss the Second Amended Complaint on the ground of forum-
shopping because respondents had filed another petition earlier on March 11,
2002 before the Malolos RTC.

Still, the Manila RTC denied the motion to dismiss. It also denied the
Banks motion for reconsideration of the order of denial. The Bank
challenged the Manila RTCs denial of the Banks second motion to dismiss
before the Court of Appeals, through a petition for certiorari. The appellate
court dismissed the petition in a Decision dated 26 February 2004. The Bank
filed a motion for reconsideration which, however, was denied through a
Resolution dated 30 April 2004. In the Petition for Review on Certiorari in
G.R. No. 163521, the Bank argues that the Court of Appeals erred in holding
that no forum-shopping attended the actions brought by Rosemoor.

The Malolos Case (G.R. No. 159669)

After the complaint with the Manila RTC had been lodged, on March
11, 2002, respondents filed another action against the Bank including the
Register of Deeds for the Province of Bulacan, this time before the Malolos
RTC, a Petition for Injunction with Damages, with Urgent Prayer for
Temporary Restraining Order and/or Preliminary Injunction, alleging that
the redemption period for the Bulacan properties would expire on March 16,
2018. They claimed that the foreclosure of the real estate mortgage by the
Bank was fraudulent and without basis, as the Bank had made them sign two
blank forms of Real Estate Mortgage and several promissory notes also in
blank forms. It appeared later, according to Rosemoor and Dr. Pascual, that
the two Real Estate Mortgage blank forms were made as security for two
loans, one for P80 million and the other for P48 million, when the total
approved loan was only for P80 million. The Bank later released only the
amount of P10 million out of the P30 million revolving credit line, to the
prejudice of Rosemoor, they added. The Bank filed a motion to dismiss
on March 26, 2002 on the ground that Rosemoor had engaged in forum-
shopping, adverting to the pending Manila case. The Malolos RTC denied
the motion on May 13, 2002, and directed the Bank to file its answer to the
petition within five (5) days from notice. Despite receipt of the Order on
May 21, 2002, the Bank opted not to file its answer as it filed instead a
motion for reconsideration on June 5, 2002. Respondents then moved to
declare the Bank in default for failure to file its answer. On September 10,

17
2002, the Malolos RTC issued an order denying the Banks motion for
reconsideration for lack of merit and at the same time declaring the Bank in
default for failure to file its answer. The Bank filed a second petition for
certiorari before the Court of Appeals, where it assailed the Orders dated 13
May 2002 and 10 September 2002 of the Malolos RTC. During the
pendency of this petition for certiorari, the Malolos RTC decided the
Malolos case on the merits in favor of Rosemoor. The decision in the
Malolos case was also appealed to the Court of Appeals. Based on these
developments, the appellate court considered the prayer for preliminary
injunction as moot and academic and proceeded with the resolution of the
petition, by then docketed as CA-G.R. SP No.73358, on the merits. The
appellate court dismissed the petition in a Decision dated 20 June
2003. Undaunted, the Bank filed the petition in G.R. No. 159669.

ISSUE:

1. Does Rosemoor committed forum-shopping in filing the two

cases against the Bank?
2. With regards the Malolos RTC invalidating the foreclosure sale
including the Nueva Ecija Property, was the venue proper?
3. Is the Bank in default for failure to file an answer?
4. Is the denial by the Malolos RTC of the motion to dismiss
through a minute resolution filed by the Bank proper?

RULING:

1. No. The elements of forum-shopping are: (a) identity of parties,

or at least such parties as represent the same interests in both actions; (b)
identity of rights asserted and reliefs prayed for, the reliefs being founded on
the same facts; and (c) the identity with respect to the two preceding
particulars in the two cases is such that any judgment rendered in the
pending cases, regardless of which party is successful, amount to res
judicata in the other case. As to the existence of identity of parties, several
bank officers and employees impleaded in the Amended Complaint in
the Manila case were not included in the Malolos case. As regards the
identity of rights asserted and reliefs prayed for, the main contention of
Rosemoor in the Manila case is that the Bank had failed to deliver the full
amount of the loan, demanding the Bank on the remittance of the unreleased
portion of the loan and payment of damages consequent thereto, while in the
Malolos case, it was for the purpose of restraining the Bank from proceeding
with the consolidation of the titles over the foreclosed Bulacan properties
because the loan secured by the mortgage had not yet become due and
demandable. While the right asserted in the Manila case is to receive the
proceeds of the loan, the right sought in the Malolos case is to restrain the
foreclosure of the properties mortgaged to secure a loan that was not yet due.
Moreover, the Malolos case is an action to annul the foreclosure sale that is

18
necessarily an action affecting the title of the property
sold. It is therefore a real action which should be commenced and tried in the
province where the property or part thereof lies. The Manila case, on the
other hand, is a personal action involving as it does the enforcement of a
contract between Rosemoor, whose office is in Quezon City, and the Bank,
whose principal office is in Binondo, Manila. Personal actions may be
commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendants or any of the principal defendants resides, at
the election of the plaintiff. Clearly, with the foregoing premises, it cannot
be said that respondents committed forum-shopping.

2. Venue was properly. Under the Rules, actions affecting title to

or possession of real property, or interest therein, shall be commenced and
tried in the proper court which has jurisdiction over the area wherein the real
property involved, or a portion thereof, is situated. The venue of real actions
affecting properties found in different provinces is determined by the
singularity or plurality of the transactions involving said parcels of
land. Where said parcels are the object of one and the same transaction, the
venue is in the court of any of the provinces wherein a parcel of land is
situated. In the present case, there is only one proceeding sought to be
nullified and that is the extra-judicial mortgage foreclosure sale. And there is
only one initial transaction which served as the basis of the foreclosure sale
and that is the mortgage contract.

3. To recall, the Bank filed a motion to dismiss the Malolos case.

On May 13, 2002, the Malolos RTC denied the motion and ordered the Bank
to file its answer to the petition within five (5) days from receipt of the
Order. The Bank received a copy of the Order on May 21, 2002. Instead of
filing an answer, the Bank filed a motion for reconsideration but only on 5
June 2002. The motion for reconsideration could not have tolled the running
of the period to answer for two reasons. One, it was filed late, nine (9) days
after the due date of the answer. Two, it was a mere rehash of the motion to
dismiss; hence, pro forma in nature. Thus, the Malolos RTC did not err in
declaring the Bank in default.

4. No. Under the Rules, the resolution shall state clearly and
distinctly the reasons therefor. The subject order falls short of the content.
Despite the aberration, however, the Bank was not misled, though it could
have encountered difficulties or inconvenience because of it.
Comprehending, as it did, that the Malolos RTC did not share its position
that Rosemoor had engaged in forum-shopping, it went to great lengths to
impress upon the Court of Appeals that there was indeed forum-shopping on
Rosemoor’s part. But the appellate court did not likewise agree with the
Bank as it soundly debunked the forum-shopping charge. In fact, the same
forum-shopping argument has been fully ventilated before the Court but we
are utterly unimpressed as we made short shrift of the argument earlier

19
on. In the ultimate analysis, therefore, the trial courts blunder may be
overlooked as it proved to be harmless.

7.

ERIBERTO G. VALENCIA, SUBSTITUTED BY HIS HEIRS:

REBECCA S.\
VDA. DE VALENCIA, MA. CAROLINA S. VALENCIA, MA.
ANTONETTE
S. VALENCIA, PETER GELVIC S. VALENCIA, JOSE THERONE S.
VALENCIA AND MA. SOPHEA S. VALENCIA, PETITIONERS,
VS. COURT OF APPEALS, RICARDO BAGTAS AND MIGUEL
BUNYE, RESPONDENTS.
G.R. NO. 111401. OCTOBER 17, 1996

FACTS:

Bagtas and Bunye (respondents) were lessees of a 24-hectare fishpond

owned by Eriberto (petitioner as substituted by his heirs), located at
Paombong, Bulacan, covered by a lease contract, executed on March 1, 1982
and will expire on May 1987. However, before said date, petitioner filed a
complaint against private respondents for the rescission of the lease contract
in the RTC of Bulacan. The Regional Trial Court ordered the private
respondents to surrender to the petitioner the possession of the fishpond.
Private respondents then filed a Petition for Certiorari with the Intermediate
Appellate Court. On September 21, 1984, the IAC issued a restrainng order
enjoining petitioner and the RTC from enforcing the mandatory injuction.
During IAC hearings, the parties agreed to maintain a status quo and the
fishpond hut would be utilized by private respondents until the case is
resolved by the Regional Trial Court of Malolos, but, despite the order of the
IAC, petitioner filed an ex-parte motion for the designation of a member of
the Philippine Constabulary to maintain order in the place which the
Regional Trial Court of Malolos granted. With said order, petitioner, with the
aid of PC men was able to eject plaintiffs from the main hut. Petitioner did
acts which lead to the drying up of portions of the fishponds, non-growth of
fish food, and death of large fishes. Subsequently another person came to the
fishpond and introduced himself as the new lessee. The Regional Trial Court
of Malolos then issued another order declaring that all the fishes located in
the fishpond remain the properties of private respondent, subject to their
disposal, however the same was not honored by petitioner. Private
respondents then appealed again to the IAC which issued a resolution
enjoining petitioner to maintain and observe status quo, and subsequently

20
another resolution categorically declaring petitioner Valencia without right
of possession under status quo, and to vacate the main hut of the fishpond. It
was only then that private respondents gained complete and total control of
the subject fishpond including its huts.

Private respondents are now asking the Regional Trial Court

of Manila for exemplary damages worth P400,000.00, moral damages
of P400,000.00, attorneys fees of P100,000.00 and costs of suit. Petitioner
filed a motion to dismiss, but was denied by the court on March 4, 1986. A
Motion for Reconsideration was filed by petitioner which was denied by the
court. Trial on the merits was held on April 3, 1987. Evidence for the
prosecution was brought forth through the testimonies of Ricardo Bagtas and
Miguel Bunye. Instead of presenting evidence, petitioner filed on February
24, 1989 a Second Motion to Dismiss which was denied by the court
on April 13, 1989.

Petitioner contended that proceedings in this court RTC of Manila

should be suspended until after the case in the Regional Trial Court of
Malolos which was appealed to the Court of Appeals is resolved, and filed a
Motion to this effect, but the court denied the same.The trial court gave
counsel for petitioner time to file the necessary pleadings, as prayed for, but
he failed to do so. During the subsequent hearing, neither petitioner nor his
counsel appeared. The trial court thus deemed petitioner to have waived his
right to present further evidence, and the case was considered submitted for
decision. On March 23, 1990, the trial court ruled in favor of private
respondents, the fallo of its decision reading as follows.

WHEREFORE, premises considered, the court orders defendant (petitioner

herein) to pay the plaintiffs moral damages in the amount of P30,000.00,
exemplary damages in the amount of P20,000.00 and to pay
plaintiffs P10,000.00 as and for attorney’s fees.

Petitioner and private respondents, being equally dissatisfied with the

decision of the trial court, appealed to respondent Court. Petitioner
alleged litis pendentia and contested the award of damages by the trial court;
private respondents on the other hand were aggrieved that the trial court
failed to award actual damages, and in addition sought an increase in the
amount of moral and exemplary damages granted. On appeal, respondent
Court affirmed the decision of the Manila RTC, and held that there was
no litis pendentia. Petitioner’s motion for reconsideration dated March 9,
1993 was denied by respondent Court. Thus he comes to us seeking relief.

ISSUE:

21
 1. Is the action for recision bars the action for damages under litis
pendentia?
2. Is there a forum-shopping?
3. Should it be that the claim of private respondents for damages be
made through compulsory countercialm in the same action for
rescission?

RULING:

1. There is no litis pendentia. The requisites for the existence

of litis pendentia as a ground for dismissal of an action are: (1) identity of
parties, or at least such parties as represent the same interest in both actions;
(2) identity of rights asserted and relief prayed for, the relief being founded
on the same facts; and (3) the identity with respect to the two preceding
particulars in the two cases is such that any judgment that may be rendered
in the pending case, regardless of which party is successful, would amount
to res judicata in the other case. In the present case, there may have been
identity of parties in the two actions, but the other two requisites are not
similarly satisfied. Here, the Bulacan case was founded upon allaged
violations by the private respondents as lessees of certain stipulations in
their lease contract with petitioner, and therefore, it cannot be gainsaid that
the rights asserted (by petitioner as lessor) and relief sought therein (i.e.,
rescission of the lease contract) were entirely different from those asserted in
Manila, which is stemmed from the prejudice suffered by private
respondents due to petitioners violation of the IACs restraining orders for the
observance of status quo between the parties, the relief demanded therein
consisting of actual, moral and exemplary damages. The respondent Court
committed no reversible error in holding that the causes of action in the two
cases are not the same; they are founded on different acts; the rights violated
are different; and the reliefs sought are also different. And, applying the res
judicata test, the outcome of the Bulacan case has nothing to do with
whether petitioner should be held liable for the damage inflicted upon
private respondents as a result of his violating the IAC restraining orders, the
two cases having arisen from different acts and environmental
circumstances.

2. No. As provided in Buan vs. Lopez, forum shopping exists

where the elements of litis pendentia are present or where a final judgment
in one case will amount to res judicata in the other. In the present case, and
as provided in the previous issue, the existence of litis pendentia is absent
nor res judicata . Therefore, there is no forum-shopping in this case.

3. No. The criteria or tests by which the compulsory or permissive

nature of specific counterclaims can be determined as follows: (1) Are
the issues of fact and law raised by the claim and counterclaim largely the
same? (2) Would res judicata bar a subsequent suit on defendants claim

22
absent the compulsory counterclaim rule? (3) Will substantially the same
evidence support or refute plaintiffs claim as well as defendants
counterclaim? (4) Is there any logical relation between the claim and the
counterclaim? In this instance, the answers to all four queries are in the
negative.

8.

UNITED COCONUT PLANTERS BANK, petitioners, vs. SPOUSES

SAMUEL AND ODETTE BELUSO, respondents.
G.R. No. 159912, August 17, 2007

FACTS:

UCPB (petitioners) granted the spouses Beluso (private respondents) a

Promissory Notes Line under a Credit Agreement whereby the latter could
avail from the former credit of up to a maximum amount of P1.2 Million
pesos for a term ending on 30 April 1997. The spouses Beluso also
constituted a real estate mortgage over parcels of land in Roxas City, as
additional security for the obligation. The Credit Agreement was
subsequently amended to increase the amount of the Promissory Notes Line
to a maximum of P2.35 Million pesos and to extend the term thereof to 28
February 1998. Spouses Beluso alleged that the amounts covered by the last
two promissory notes were never released or credited to their account and,
thus, claimed that the principal indebtedness was only P2 Million. In any
case, UCPB applied interest rates on the different promissory notes ranging
from 18% to 34%. From 1996 to February 1998 the spouses Beluso were
able to pay the total sum of P763,692.03. The spouses Beluso, however,
failed to make any payment of the foregoing amounts. On 2 September
1998, UCPB demanded that the spouses Beluso pay their total obligation
of P2,932,543.00 plus 25% attorneys fees, but the spouses Beluso failed to
comply therewith. On 28 December 1998, UCPB foreclosed the properties
mortgaged by the spouses Beluso to secure their credit line, which, by that
time, already ballooned to P3,784,603.00.

On 9 February 1999, the spouses Beluso filed a Petition for

Annulment, Accounting and Damages against UCPB with the RTC of
Makati City. On 23 March 2000, the RTC ruled in favor of the spouses
Beluso. On 8 May 2000, the RTC denied UCPBs Motion for
Reconsideration, prompting UCPB to appeal the RTC Decision with the
Court of Appeals. The Court of Appeals affirmed the RTC Decision. On 9

23
September 2003, the Court of Appeals denied UCPBs Motion for
Reconsideration for lack of merit. UCPB thus filed the a petition to the
Supreme Court.

ISSUE:

1. Are the interest rates on the principal and the penalties valid?
2. What should be the proper interest?
3. Is the foreclosure sale valid?
4. Is there a violation of Truth in Lending Act committed by
UCPB?
5. Is there a forum-shopping present?

RULING:

1. The interest rates were not valid. Under the New Civil Code,
the contract must bind both contracting parties; its validity or compliance
cannot be left to the will of one of them. And, in Garcia vs. Rita Legarda,
Inc., a contract containing a condition which makes its fulfillment dependent
exclusively upon the uncontrolled will of one of the contracting parties, is
void. Here, the provision stating that the interest shall be at the rate
indicative of DBD retail rate or as determined by the Branch Head is indeed
dependent solely on the will of petitioner UCPB. Hence, the interest rates
are not valid.

2. Spouses Beluso should still be held liable for a compounded

legal interest of 12% per annum and a penalty charge of 12% per annum. As
provided for in the Credit Agreement and Promissory Notes, interest not
paid when due shall form part of the principal and shall be subject to the
same interest rate as herein stipulated, in which, under the law, must be
respected. The lower courts erred in deleting the compounding of interest.
And as to the rate, the Court finds that the interest rates amounting to 25%
and another monthly interest of 1% for unpaid debts, and the penalty of 30-
36% were iniquitous and thus, legal interest should apply.

3. The foreclosure proceedings were valid. The grounds for the

proper annulment of the foreclosure sale are the following: (1) that there was
fraud, collusion, accident, mutual mistake, breach of trust or misconduct by
the purchaser; (2) that the sale had not been fairly and regularly conducted;
or (3) that the price was inadequate and the inadequacy was so great as to
shock the conscience of the court. In the present case, none of the grounds
for the annulment of a foreclosure sale are present in this case. Petitioners
argued that there was no valid demand since the amount was excessive, and

24
they have the right to refuse payment. The Court ruled that, even if the
amount of the demand is excessive, the demand is still valid with respect
obly to the part of the amount which is not excessive. Hence, the foreclosure
sale was valid.

4. Yes. Under the Truth in Lending Act, any creditor who in

connection with any credit transaction fails to disclose to any person any
information in violation of this Act or any regulation issued thereunder shall
be liable to such person in the amount of P100 or in an amount equal to
twice the finance charge required by such creditor in connection with such
transaction, whichever is greater, except that such liability shall not
exceed P2,000 on any credit transaction. Action to recover such penalty may
be brought by such person within one year from the date of the occurrence
of the violation, in any court of competent jurisdiction. In the present case,
the infringement may be inferred or implied from allegations that when
spouses Beluso executed the promissory notes, the interest rate chargeable
thereon were left blank. Thus, UCPB failed to discharge its duty to disclose
in full to Spouses Beluso the charges applicable on their loans. Thus, there
was a violation for Truth in Lending Act.

5. There is no bar for forum shopping. The Rules of Court

nevertheless allows the filing of the second action. The RTC of Roxas City
dismissed the case before the filing of the case in RTC Makati City, since the
venue of litigation as provided for in the Credit Agreement is in Makati City.
Under the Rule 16, Section 5 that only in the following instances are the
grounds which bars the refiling of an action previously dismissed: (c) That
venue is improperly laid; (f) That the cause of action is barred by a prior
judgment or by the statute of limitations; (h) That the claim or demand set
forth in the plaintiffs pleading has been paid, waived, abandoned, or
otherwise extinguished; (i) That the claim on which the action is founded is
unenforceable under the provisions of the statute of frauds. When an action
is dismissed on the motion of the other party, it is only when the ground for
the dismissal of an action is found in paragraphs (f), (h) and (i) that the
action cannot be refiled. As regards all the other grounds, the complainant is
allowed to file same action, but should take care that, this time, it is filed
with the proper court or after the accomplishment of the erstwhile absent
condition precedent, as the case may be.

It is indeed the general rule that in cases where there are two pending
actions between the same parties on the same issue, it should be the later
case that should be dismissed. However, this rule is not absolute. In the case
of Allied Banking Corporation v. Court of Appeals In these cases, it is
evident that the first action was filed in anticipation of the filing of the later
action and the purpose is to preempt the later suit or provide a basis for
seeking the dismissal of the second action. Even if this is not the purpose for
the filing of the first action, it may nevertheless be dismissed if the later
action is the more appropriate vehicle for the ventilation of the issues

25
between the parties. Thus, in Ramos v. Peralta, it was held that the rule on
litis pendentia does not require that the later case should yield to the earlier
case. What is required merely is that there be another pending action, not a
prior pending action. Given, therefore, the pendency of two actions, the
following are the relevant considerations in determining which action should
be dismissed: (1) the date of filing, with preference generally given to the
first action filed to be retained; (2) whether the action sought to be dismissed
was filed merely to preempt the later action or to anticipate its filing and lay
the basis for its dismissal; and (3) whether the action is the appropriate
vehicle for litigating the issues between the parties. In the present case, the
first case was improperly filed in Roxas City, and the second case was filed
in Makati City, which is the proper venue of the action as mandated by the
Credit Agreement. The case filed in Makati City is a more appropriate
vehicle for litigating the issues between that parties than the case filed in
Roxas City.

26
9.

HEIRS OF PANFILO F. ABALOS, PETITIONERS,

VS. AURORA A. BUCAL, DEMETRIOBUCAL, ARTEMIO F.
ABALOS,
LIGAYA U. ABALOS, ROMULOF. ABALOS, JESUSA O. ABALOS,
MAURO F. ABALOS AND LUZVIMINDA R. ABALOS,
RESPONDENTS.
G.R. NO. 156224
FACTS:

Petitioners father, Panfilo Abalos, filed before the RTC of Lingayen,

Pangasinan, a complaint for Partition, Annulment of Certain Documents,
Accounting and Damages against Faustino Abalos, his brother, and Danilo
Abalos, his nephew and the only surviving heir of his brother Pedro Abalos.
In the amended complaint, Panfilo alleged that their father/grandfather,
Francisco Abalos, died intestate and was survived by his wife, Teodorica,
and their children, namely: Maria, Faustino, Pedro, Roman and Panfilo; that
at the time of his death, Francisco left several real properties. That said
properties were administered by Teodorica; that following their mothers
death, there was a verbal agreement among Faustino, Pedro and Panfilo that
Faustino would administer all the properties left by their parents except
those given by Teodorica to each of the siblings as their partial advance
inheritance; that taking undue advantage of his position and in clear breach
of the trust and confidence reposed on him, Faustino, by means of fraud and
machination, took possession of the properties given to Maria and Roman
upon their death and transferred some of the administered properties in his
name and/or in the name of his heirs or disposed of them in favor of third
parties; that since his administration of the properties, Faustino has not made
any accounting of the produce, appropriating them almost to himself; and
that Panfilo repeatedly demanded the partition of the properties but Faustino
refused to do so despite earnest efforts towards amicable settlement.

27
 RTC Branch 37 of Lingayen, Pangasinan, rendered its Decision in
favor of Panfilo. On December 11, 1985, the trial court issued a writ of
execution in favor of Panfilo.

When Panfilo, petitioners’ father, began to execute the Decision in

Civil Case No. 15465, respondents, who are children and in-laws of the now
deceased Faustino, in opposition filed on January 8, 1986 a case for Quieting
of Title, Possession, Annulment of Document and Damages with
Preliminary Injunction. Docketed as Civil Case No. 16289.

ISSUE:

(1) Whether or not the decision in Civil Case No. 15465 entitled
Panfilo Abalos versus Faustino Abalos is binding upon the
plaintiffs in the Civil Case No. 16289 who were not impleaded as
party litigants either as plaintiffs or defendants.

(2) Whether or not res judicata applies in the instant case.

HELD:

Res judicata means "a matter adjudged; a thing judicially acted upon
or decided; a thing or matter settled by judgment." It lays the rule that an
existing final judgment or decree rendered on the merits, without fraud or
collusion, by a court of competent jurisdiction, upon any matter within its
jurisdiction, is conclusive of the rights of the parties or their privies, in all
other actions or suits in the same or any other judicial tribunal of concurrent
jurisdiction on the points and matters in issue in the first suit.

For the preclusive effect of res judicata to be enforced, however, the

following requisites must be present: (1) the judgment or order sought to bar
the new action must be final; (2) the decision must have been rendered by a
court having jurisdiction over the subject matter and the parties; (3) the
disposition of the first case must be a judgment on the merits; and (4) there
must be between the first and second action, identity of parties, subject
matter and causes of action.

In the instant case, the fourth requisite, in particular the identity of

parties, is clearly wanting.

As found by the CA, this Court, through our earlier resolution in G.R.
No. 77965, already settled that res judicata does not apply in this case. In
G.R. No. 77965, which Panfilo instituted to challenge the propriety of the

28
writ of preliminary injunction issued by the trial court, this Court agreed
with the CAs disposition that respondents are considered as third persons
with respect to Civil Case No. 15465 since they were not impleaded as
defendants therein. This Court held as in accordance with law and
jurisprudence the CAs opinion that all those who did not in any way
participate or intervene in the partition case are considered third persons
within the contemplation of Article 499 of the Civil Code.

The foregoing rule still stands.

Indeed, Panfilo, the father of petitioners, should have impleaded

respondents when he filed Civil Case No. 15465 since at that time the latter
were already claiming ownership over the subject fishponds, which were
transferred in their names prior to the commencement of the case. Petitioners
cannot shift to respondents the burden of joining the case because they are
not duty bound to intervene therein and they have every right to institute an
independent action: First, intervention is not compulsory or mandatory but
merely optional and permissive; and Second, as the persons who are in
actual possession of the fishponds they claim to own, respondents may wait
until their possession are in fact disturbed before taking steps to vindicate
their rights. Understandably, at the time of the institution and pendency of
Civil Case No. 15465, respondents still had no definite idea as to how the
very nature of the partition case could actually affect their possession.

On the other hand, Panfilo had personal knowledge that respondents

acquired ownership of the properties prior to the filing of Civil Case No.
15465, that they are in actual possession thereof, and that they have declared
the lands in their names for taxation purposes. Panfilo could not be ignorant
of these because he resided in the same locality where the properties are
found. Quite startling, however, is that he did not bother to implead
respondents in the partition case despite all these and the fact that the
defendants therein raised the point that Faustino was not the owner of some
of the lands in question and that they belong to others not parties to the case.
As his successors-in-interest, petitioners must suffer from Panfilo’s evident
omission.

Even if res judicata requires not absolute but substantial identity of

parties, still there exists substantial identity only when the additional party
acts in the same capacity or is in privity with the parties in the former action.
In this case, while it is true that respondents are legitimate children and
relatives by affinity of Faustino it is more important to remember that, as
shown by their documents of acquisition, they became owners of the subject
fishponds not through Faustino alone but also from a third person (i.e.,
Maria Abalos). Respondents are asserting their own rights and interests
which are distinct and separate from those of Faustino’s claim as a
hereditary heir of Francisco Abalos. Hence, they cannot be considered as

29
privies to the judgment rendered in Civil Case No. 15465. Unfortunately for
petitioners, they relied solely on their untenable defense of res judicata
instead of contesting the genuineness and due execution of respondent’s
documentary evidence.

Moreover, Panfilo erred in repeatedly believing that there was no

necessity to implead respondents as defendants in Civil Case No. 15465
since, according to him, the necessary parties in a partition case are only the
co-owners or co-partners in the inheritance of Francisco Abalos. On the
contrary, the Rules of Court provides that in an action for partition, all other
persons interested in the property shall be joined as defendants. Not only the
co-heirs but also all persons claiming interests or rights in the property
subject of partition are indispensable parties. In the instant case, it is the
responsibility of Panfilo as plaintiff in Civil Case No. 15465 to implead all
indispensable parties, that is, not only Faustino and Danilo but also
respondents in their capacity as vendees and donees of the subject fishponds.
Without their presence in the suit the judgment of the court cannot attain real
finality against them. Being strangers to the first case, they are not bound by
the decision rendered therein; otherwise, they would be deprived of their
constitutional right to due process.

Finally, it must be stressed that in a complaint for partition, the

plaintiff seeks, first, a declaration that he is a co-owner of the subject
properties; and second, the conveyance of his lawful shares. An action for
partition is at once an action for declaration of co-ownership and for
segregation and conveyance of a determinate portion of the properties
involved.

30
10.

BOYET SEMPIO, PETITIONER,

VS. HON. COURT OF APPEALS AND AURELIA L. TUAZON,
RESPONDENTS.
G.R. NO. 124326
FACTS:

Petitioner is the son of spouses Bernardo Sempio and Genoveva Ligot

in whose name, the parcel of land subject of the instant case, is registered as
evidenced by Transfer Certificate of Title No. T-6263. The land is situated in
San Miguel, Bulacan and contains an area of approximately Three Thousand
One Hundred Ninety-two (3,192) square meters.

Spouses Bernardo Sempio and Genoveva Ligot mortgaged a parcel of

land registered under the name of their son Boyet Sempio to the
Development Bank of the Philippines (DBP) to secure a loan of One
Hundred Sixteen Thousand Seven Hundred Pesos (P116,700.00). This loan
was not fully paid; consequently, the DBP extrajudicially foreclosed the
mortgage. At the public auction sale, the DBP emerged as the highest bidder
and was correspondingly issued a Certificate of Sale dated March 1, 1982.

On October 17, 1989, the DBP filed a Petition for Issuance of Writ of
Possession Ex-Parte in the Regional Trial Court, Branch 5, Bulacan.
(Docketed as Civil Case No. P-1787-89, said petition was opposed by
Bernardo in an appropriate pleading filed on February 28, 1990.
Subsequently, respondent Tuazon filed a Complaint in Intervention claiming
that she was the new owner of the land, having already purchased the same,
albeit in the name of her daughter, Jeanette T. Baylon, from the DBP.

On March 8, 1990, the Sempio spouses filed a Complaint for

Annulment of Foreclosure, Reconveyance of Title and Damages in the
Regional Trial Court, Branch 19, Bulacan. They contended, among others,
that they were not notified of the foreclosure sale in violation of the notice,

31
posting and publication requirements under Act No. 3135.9 Said complaint
was docketed as Civil Case No. 181-M-90.

In the same year, 1990, respondent Tuazon filed in the Regional Trial
Court, Branch 6, Bulacan, a Complaint for Injunction and Damages,
docketed as Civil Case No. 681-M-90. She invoked her exclusive right to the
land as owner and accordingly asked the trial court to enjoin petitioner from
digging any portion of the land and to assess against the latter the damages
warranted under such circumstances. On September 24, 1990, the
extrajudicial foreclosure proceedings instituted by the DBP upon the land,
were nullified by the trial court in Civil Case No. 181-M-90.

On December 21, 1990, the trial court ordered the dismissal of Civil
Case No. 681-M-90 on the ground of lis pendens or auter action pendant,
specifically, the pendency of Civil Case No. P-1787-89 for issuance of writ
of possession filed by the DBP.

ISSUE:

Whether or not the dismissal on the ground of litis pendentia is proper

in the instant case.

HELD:

The requisites for lis pendens are: (1) identity of parties, or at least
such as representing the same interests in both actions; (2) identity of rights
asserted and reliefs prayed for, the reliefs being founded on the same facts;
and (3) identity in both cases is such that the judgment that may be rendered
in the pending case would, regardless of which party is successful, amount
to res judicata in the other.

All these concur in the instant case.

First. Well-settled is the rule that only substantial, and not absolute,
identity of parties is required for lis pendens, or in any case, res judicata, to
lie. There is substantial identity of parties when there is a community of
interest between a party in the first case and a party in the second case albeit
the latter was not impleaded in the first case.

It cannot be denied that the interests of respondent Tuazon are

inextricably intertwined with those of the DBP such that the former's
exercise of her rights as purchaser-transferee of the land foreclosed by the
DBP, is conditioned on the latter's successful defense of the validity of its
foreclosure procedures in Civil Case No. 181-M-90. Thus, a community of
interest, and corollarily, substantial identity of parties, exist between
respondent Tuazon and the DBP insofar as Civil Cases Nos. 181-M-90 and
681-M-90 are concerned.

32
 Likewise, substantial identity of parties obtains between Civil Cases
Nos. P-1787-89 and 681-M-90. That respondent Tuazon was a mere
intervenor in Civil Case No. P-1787-89 should not preclude us from
appreciating the existence of identity of parties as a requisite of lis pendens
because no less indubitable is the uniform interest of respondent Tuazon as
new owner of the land in both cases. In both cases, she asserted what she
believed to be vested in her: that single, indivisible right as exclusive owner
of the land.

Second. Respondent Tuazon adopts the posture of respondent Court of

Appeals that different causes of action underlie Civil Cases Nos. P-1787-89,
181-M-90 and 681-M-90, which involve issuance of a writ of possession,
annulment of foreclosure, and injunction with damages, respectively.

In Civil Case No. P-1787-89, she intervened, anchoring her

possessory claim on her right as new owner of the land. Invoking the same
right, respondent Tuazon herself filed Civil Case No. 681-M-90 to enjoin the
Sempios from digging portions of the land which she claims to be hers in
exclusive ownership and to collect from them the appropriate damages for
violation of her ownership rights. It is this same right that stood to be
defeated in Civil Case No. 181-M-90, should the foreclosure proceedings be
voided and DBP's title to the land, annulled, considering that respondent
Tuazon purchased the same from the DBP with notice that the DBP was
neither the registered owner nor the actual possessor thereof, rendering her a
purchaser in bad faith not entitled to any protection under the law.

Thus, whether we inquire into the unity of rights asserted in the

various actions filed on the basis of an identical set of facts involving
respondent Tuazon, or we apply the true test of identity of causes of action
that transcends the form of the action and rather evaluates whether or not the
same evidence would support and establish the several actions pending,
there is no denying that identity of causes of action lies in the instant case.

Finally, respondent Tuazon cannot innocently pretend insulation from

the legal effects of the non-issuance of a writ of possession in favor of the
DBP and the nullification of its foreclosure proceedings. The DBP having
been legally declared non-owner of the land and the Sempios, including
petitioner, having been restored by no less than this court to full ownership
thereof, respondent Tuazon is perforce bound thereby, and Civil Case No.
681-M-90 was therefore correctly-dismissed by the court a quo on the
ground of lis pendens, although too, the additional ground of res judicata
now obtains.

33
11.

SPOUSES MATIAS B. AZNAR III AND ELEONOR S. AZNAR,

PETITIONERS, VS. HON. JUANITO A. BERNAD, IN HIS
CAPACITY AS PRESIDING JUDGE OF BRANCH XXI, RTC, CEBU,
AND THE SPOUSES NICOLAS L. KINTANAR AND REDEMPTA C.
KINTANAR, RESPONDENTS.
G.R. NO. 81190

FACT:

Private respondents, the spouses Nicolas and Redempta Kintanar, as

plaintiffs, filed in the Regional Trail Court of Cebu, a civil action against the
defendants-spouses, the herein petitioners, praying for the annulment of a
Sheriffs Certificate of Sale, damages, and attorney's fees with preliminary
injunction.

The petitioners timely filed their answer specifically denying the

allegations in the complaint. Seven days later, or on October 20, 1986, the
petitioners submitted 'Motion For Leave to Amend Answer Or To File
Supplemental Pleading’.

The trial court, acting through the respondent Judge, issued on

November 4, 1986, an order denying the petitioner's motion. The respondent
Judge based his order on a strict or literal construction of section 2, Rule 9,
of the Revised Rules of Court which, in essence, provides that defenses or
objections, except the failure to state a cause of action, if not pleaded in a
motion to dismiss or in an answer, are deemed waived.

ISSUE:

34
 Whether or not the affirmative defense of prescription may be validly
set up for the first time in an amended answer.

HELD:

The Supreme Court ruled in the affirmative. The general rule is that
the affirmative defense of prescription when not seasonably raised in either a
motion to dismiss or in the answer, is deemed waived. This case, however,
does not fall under the cited rule. It cannot be said that the petitioners failed
to allege the defense of prescription in their answer. Precisely, the amended
answer is being submitted to take the place of the original one. Once the
amended answer is admitted, the original answer passes into oblivion and
ceases to exist with its former place entirely taken over by the amended
answer.

Moreover, at the time the petitioners moved to have their original

answer amended, they still had the right to do so. The records do not show
that a responsive pleading, like a reply, to the original answer, has already
been served to the petitioners by the private respondents. Neither is there any
showing that the case has already been calendared for hearing. On this score,
Section 2, Rule 10 of the Revised Rules of Court supports the petitioners'
contention.

SEC. 2. When amendments allowed as a matter of right. — A party

may amend his pleading once as a matter of course at any time before a
responsive pleading is served or, if the pleading is one to which no
responsive pleading is permitted and the action has not been placed upon the
trial calendar, he may so amend it at any time within ten (10) days after it is
served.

There is, therefore, no procedural impediment for the petitioners to

amend their original answer. This being so, the affirmative defense of
prescription has been validly pleaded for resolution in due course. For the
amended answer, which would replace the original answer, certainly would
cure the lapse or error committed by the petitioners in not alleging the
defense of prescription in the first place — in a motion to dismiss or in the
original answer.

We have repeatedly held that the rules of procedure should be viewed

as mere tools designed to facilitate the attainment of justice. Their strict and
rigid application, which would result in technicalities that tend to frustrate
rather than promote substantial justice, must always be avoided. Even the
rules of sion this liberality.

35
 Lastly, even assuming that the petitioners had indeed failed to raise
the affirmative defense of prescription in a motion to dismiss or in an
appropriate pleading (answer, or amended or supplemental answer) and an
amendment would no longer be feasible, still prescription, if apparent on the
face of the complaint, may be favorably considered. In the case at bar, the
private respondents admit in their complaint that the contract of real estate
mortgage which they alleged to be fraudulent and which had been
foreclosed, giving rise to this controversy with the petitioners, was executed
on July 17, 1978, or more than eight long years before the commencement of
the suit in the court a quo, on September 15, 1986. And an action to declare a
contract nul1 and void on the ground of fraud must be instituted within four
years. Extinctive prescription is thus apparent on the face of the complaint
itself as resolved by the Court.

12.

SPOUSES MARIANO CASTILLO AND PILAR CASTILLO IN

THEIR OWN BEHALF AND IN REPRESENTATION OF HEIRS OF
EDUARDO CASTILLO, PETITIONERS, VS. HEIRS OF VICENTE
MADRIGAL AND/OR SUSANA REALTY, INC. AND THE
REGISTER OF DEEDS OF THE CITY OF
MANILA, RESPONDENTS.
G.R. NO. 62650, JUNE 27, 1991

FACTS:

On December 17, 1979, petitioners spouses Mariano Castillo and Pilar

Castillo, in their own behalf and in representation of the heirs of Eduardo
Castillo, filed a verified complaint before the Court of First Instance (now
Regional Trial Court) of Manila for annulment of contract and transfer
certificate of title and/or reconveyance with damages against private
respondents heirs of Vicente Madrigal and/or Susana Realty, Inc. and public
respondent Register of Deeds of the City of Manila. The complaint
contained the following pertinent allegations:

xxx xxx xxx

4. That plaintiff spouses and their brother, Eduardo Castillo (herein

represented by his legal heirs Paula Castillo and Antonio Castillo), are
registered co-owners of a parcel of land situated in Ermita, Manila, XXX

36
 That the plaintiffs' ownership over the property is evidenced by
Transfer Certificate of Title No. 623597 issued in their name and that of their
brother Eduardo Castillo on August 11, 1941, . . .;

5. That the immediate origin of the above property is Transfer

Certificate of Title No. 28454 in the name of Petronila Vda. de Castillo,
plaintiffs' mother, and from whom they acquired the realty by way of
inheritance in equal share with Eduardo Castillo entered in the Registration
Book in 1927 yet, . . .

XXX

7. That after the transfer of the property in their own name and their
brother aforesaid, the property was mortgaged by plaintiffs in favor of the
Agricultural and Industrial Bank and due to the existing war conditions at
the time, the possession, management and supervision of the land was
entrusted to Eduardo Castillo reposing in him the (sic) full trust and
confidence;

XXX

9. That during and after the effectivity of the mortgage with the
aforesaid Bank, plaintiffs herein never gave their brother Eduardo Castillo
authority to sell their undivided property neither were there transactions
entered into by plaintiffs with any person or persons, natural or juridical with
respect to their undivided halfportion;

10. That after plaintiffs have returned from the provinces and upon
arrival from abroad later in 1977, they decided to get their share from their
brother Eduardo Castillo as he was entrusted but the latter being sickly then
could not give the explanation and after conference with his wife, Paula
Castillo, the latter told the plaintiffs that she and her husband Castillo
(Eduardo) did not know the mysterious transactions that transpired in the
transfer or registration of the above property to Vicente Madrigal (under
Transfer Certificate of Title No. 72066) and upon verification thereof, an
alleged deed of sale executed by plaintiffs and Eduardo Castillo appears on
the back of the title but in truth and in fact, plaintiffs had never signed any
document in favor of Vicente Madrigal contrary to what appears thereon; . . .
and subsequently transferred by Vicente Madrigal to Susana Realty Inc.,
under TCT No. 36280, . . .;

XXX

37
 12. That the transfer of the property under litigation in favor of the
late Vicente Madrigal was done thru fraud, simulation, illegality and serious
irregularity equivalent to nullity and inexistence of contract and follows that
the Transfer Certificate of Title No. 36280 under the name of defendant
Susana Realty Inc. is null and void and without any effect whatsoever either
under the Civil Code or under the Land Registration Act especially so that
the transactions entered on the title took place during war time and without
supporting papers or documents available up to the present time;

XXX

On March 25, 1980, the trial court dismissed the complaint (pp. 120-
126, Rollo). On appeal to the Court of Appeals, the decision was affirmed in
toto on August 5, 1982 (pp. 44-52, Rollo). Hence, the present petition.

ISSUE:

Whether or not petitioners' action for annulment of contract and

transfer certificate of title and/or reconveyance with damages is subject to
prescription; and

Whether or not the complaint states a cause of action against private

respondents.

HELD:

It is evident in paragraphs 9, 10 and 12 of the complaint, supra, that

petitioners sought the declaration of the inexistence of the deed of sale
because of the absence of their consent. Thus, following the provision of
Article 1410 of the Civil Code, this kind of action is imprescriptible. The
action for reconveyance is likewise imprescriptible because its basis is the
alleged void contract of sale.

However, there should be no debate that the action for damages

against private respondents has already prescribed.1avvphi1 In accordance
with Article 1144 of the Civil Code4 it should have been brought within ten
(10) years from the date of the sale to Vicente Madrigal and the issuance of
Transfer Certificate of Title No. 72066 in his name on July 12, 1943, if
against the heirs of Vicente Madrigal; or within ten (10) years from the date
of the issuance of Transfer Certificate of Title No. 36280 in the name of
Susana Realty, Inc. on May 12, 1954, if against the firm.

38
 The dismissal of their complaint by the trial court and the Court of
Appeals on the ground of failure to state a cause of action was correct. It was
also Our ruling in the Baranda case, supra, (and in other previous cases) that
only as long as the property is still in the name of the person who caused the
wrongful registration and has not passed to an innocent third person for
value will an action lie to compel that person to reconvey the property to the
real owner.

Where the complaint for recovery of ownership and possession of a

parcel of land alleges that some of the defendants bought said land from
their co-defendants who had a defective title thereto but does not allege that
the purchasers were purchasers in bad faith or with notice of the defect in the
title of their vendors, there is a failure to state a cause of action (Galvez, et
al. v. Tuazon y de la Paz, et al., 119 Phil. 612). By reason of this failure,
private respondent Susana Realty, Inc. is presumed to be an innocent
purchaser for value and in good faith, entitled to protection under the law.

13.

MARIA BENITA A. DULAY, IN HER OWN BEHALF AND IN

BEHALF OF THE MINOR CHILDREN KRIZTEEN ELIZABETH,
BEVERLY MARIE AND NAPOLEON II, ALL SURNAMED
DULAY, PETITIONERS,
VS. THE COURT OF APPEALS, FORMER EIGHTH DIVISION,
HON. TEODORO P. REGINO, IN HIS CAPACITY AS PRESIDING
JUDGE OF THE REGIONAL TRIAL COURT NATIONAL CAPITAL
REGION, QUEZON CITY, BR. 84, SAFEGUARD INVESTIGATION
AND SECURITY CO., INC., AND SUPERGUARD SECURITY
CORPORATION, RESPONDENTS.
G.R. NO. 108017 APRIL 3, 1995

FACTS:

On December 7, 1988, an altercation between Benigno Torzuela and

Atty. Napoleon Dulay occurred at the "Big Bang Sa Alabang," Alabang
Village, Muntinlupa as a result of which Benigno Torzuela, the security
guard on duty at the said carnival, shot and killed Atty. Napoleon Dulay.

Herein petitioner Maria Benita A. Dulay, widow of the deceased

Napoleon Dulay, in her own behalf and in behalf of her minor children, filed
on February 8, 1989 an action for damages against Benigno Torzuela and

39
herein private respondents Safeguard Investigation and Security Co., Inc.,
("SAFEGUARD") and/or Superguard Security Corp. ("SUPERGUARD"),
alleged employers of defendant Torzuela.

On March 2, 1989, private respondent SUPERGUARD filed a Motion

to Dismiss on the ground that the complaint does not state a valid cause of
action. SUPERGUARD claimed that Torzuela's act of shooting Dulay was
beyond the scope of his duties, and that since the alleged act of shooting was
committed with deliberate intent (dolo), the civil liability therefor is
governed by Article 100 of the Revised Penal Code.

Respondent SUPERGUARD further alleged that a complaint for

damages based on negligence under Article 2176 of the New Civil Code,
such as the one filed by petitioners, cannot lie, since the civil liability under
Article 2176 applies only to quasi-offenses under Article 365 of the Revised
Penal Code. In addition, the private respondent argued that petitioners' filing
of the complaint is premature considering that the conviction of Torzuela in
a criminal case is a condition sine qua non for the employer's subsidiary
liability.

Respondent SAFEGUARD also filed a motion praying that it be

excluded as defendant on the ground that defendant Torzuela is not one of its
employees.

Petitioners opposed both motions, stating that their cause of action

against the private respondents is based on their liability under Article 2180
of the New Civil Code.

Petitioners contended that a suit against alternative defendants is

allowed under Rule 3, Section 13 of the Rules of Court.

Meanwhile, an Information dated March 21, 1989 charging Benigno

Torzuela with homicide was filed before the Regional Trial Court of Makati
and was docketed as Criminal Case No. 89-1896.

On April 13, 1989, respondent Judge Regino issued an order granting

SUPERGUARD'S motion to dismiss and SAFEGUARD'S motion for
exclusion as defendant.

The above order was affirmed by the respondent court and petitioners'
motion for reconsideration thereof was denied.

ISSUE:

40
(1) Whether or not Torzuela’ s act of shooting Napoleon Dulay constitutes a
quasi-delict actionable under Article 2176 of the New Civil Code;
(2) Whether or not Article 33 of the New Civil Code applies only to
injuries intentionally committed;
(3) Whether or not the liability or respondents is subsidiary under the
Revised Penal Code; and
(4) whether or the complaint at hand states a sufficient cause of action.

HELD:

The nature of a cause of action is determined by the facts alleged in

the complaint as constituting the cause of action (Republic v. Estenzo, 158
SCRA 282 [1988]). The purpose of an action or suit and the law to govern it
is to be determined not by the claim of the party filing the action, made in
his argument or brief, but rather by the complaint itself, its allegations and
prayer for relief. (De Tavera v. Philippine Tuberculosis Society, 112 SCRA
243 [1982]). An examination of the complaint in the present case would
show that the plaintiffs, petitioners herein, are invoking their right to recover
damages against the private respondents for their vicarious responsibility for
the injury caused by Benigno Torzuela's act of shooting and killing
Napoleon Dulay, as stated in paragraphs 1 and 2 of the complaint.

Contrary to the theory of private respondents, there is no justification

for limiting the scope of Article 2176 of the Civil Code to acts or omissions
resulting from negligence. Well-entrenched is the doctrine that article 2176
covers not only acts committed with negligence, but also acts which are
voluntary and intentional.

The term "physical injuries" in Article 33 has already been construed

to include bodily injuries causing death (Capuno v. Pepsi-Cola Bottling Co.
of the Philippines, 121 Phil. 638 [1965); Carandang v. Santiago, 97 Phil. 94
[1955]). It is not the crime of physical injuries defined in the Revised Penal
Code. It includes not only physical injuries but also consummated,
frustrated, and attempted homicide (Madeja v. Caro, 126 SCRA 293 [1983]).
Although in the Marcia case (supra), it was held that no independent civil
action may be filed under Article 33 where the crime is the result of criminal
negligence, it must be noted however, that Torzuela, the accused in the case
at bar, is charged with homicide, not with reckless imprudence, whereas the
defendant in Marcia was charged with reckless imprudence. Therefore, in
this case, a civil action based on Article 33 lies.

Private respondents also contend that their liability is subsidiary under

the Revised Penal Code; and that they are not liable for Torzuela's act which

41
is beyond the scope of his duties as a security guard. It having been
established that the instant action is not ex-delicto, petitioners may proceed
directly against Torzuela and the private respondents. Under Article 2180 of
the New Civil Code as aforequoted, when an injury is caused by the
negligence of the employee, there instantly arises a presumption of law that
there was negligence on the part of the master or employer either in the
selection of the servant or employee, or in supervision over him after
selection or both (Layugan v. Intermediate Appellate Court, 167 SCRA 363
[1988]). The liability of the employer under Article 2180 is direct and
immediate; it is not conditioned upon prior recourse against the negligent
employee and a prior showing of the insolvency of such employee
(Kapalaran Bus Lines v. Coronado, 176 SCRA 792 [1989]). Therefore, it is
incumbent upon the private respondents to prove that they exercised the
diligence of a good father of a family in the selection and supervision of
their employee.

Since Article 2176 covers not only acts of negligence but also acts
which are intentional and voluntary, it was therefore erroneous on the part of
the trial court to dismiss petitioner's complaint simply because it failed to
make allegations of attendant negligence attributable to private respondents.

With respect to the issue of whether the complaint at hand states a

sufficient cause of action, the general rule is that the allegations in a
complaint are sufficient to constitute a cause of action against the defendants
if, admitting the facts alleged, the court can render a valid judgment upon the
same in accordance with the prayer therein. A cause of action exist if the
following elements are present, namely: (1) a right in favor of the plaintiff
by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative
of the right of the plaintiff or constituting a breach of the obligation of the
defendant to the plaintiff for which the latter may maintain an action for
recovery of damages (Del Bros Hotel Corporation v. CA, 210 SCRA 33
[1992]); Development Bank of the Philippines v. Pundogar, 218 SCRA 118
[1993])

This Court finds, under the foregoing premises, that the complaint
sufficiently alleged an actionable breach on the part of the defendant
Torzuela and respondents SUPERGUARD and/or SAFEGUARD. It is
enough that the complaint alleged that Benigno Torzuela shot Napoleon
Dulay resulting in the latter's death; that the shooting occurred while
Torzuela was on duty; and that either SUPERGUARD and/or SAFEGUARD
was Torzuela's employer and responsible for his acts. This does not operate
however, to establish that the defendants below are liable. Whether or not
the shooting was actually reckless and wanton or attended by negligence and
whether it was actually done within the scope of Torzuela's duties; whether

42
the private respondents SUPERGUARD and/or SAFEGUARD failed to
exercise the diligence of a good father of a family; and whether the
defendants are actually liable, are questions which can be better resolved
after trial on the merits where each party can present evidence to prove their
respective allegations and defenses. In determining whether the allegations
of a complaint are sufficient to support a cause of action, it must be borne in
mind that the complaint does not have to establish or allege the facts proving
the existence of a cause of action at the outset; this will have to be done at
the trial on the merits of the case (Del Bros Hotel Corporation v. CA, supra).
If the allegations in a complaint can furnish a sufficient basis by which the
complaint can be maintained, the same should not be dismissed regardless of
the defenses that may be assessed by the defendants (Rava Dev't. Corp. v.
CA, 211 SCRA 152 [1992] citing Consolidated Bank & Trust Corporation v.
Court of Appeals, 197 SCRA 663 [1991]). To sustain a motion to dismiss for
lack of cause of action, the complaint must show that the claim for relief
does not exist rather than that a claim has been defectively stated, is
ambiguous, indefinite or uncertain (Azur v. Provincial Board, 27 SCRA 50
[1969]). Since the petitioners clearly sustained an injury to their rights under
the law, it would be more just to allow them to present evidence of such
injury.

14.

ASIA BANKING CORPORATION vs.

WALTER E. OLSEN & CO. INC., ET AL
G.R. No. L-24488 , December 28, 1925

The complaint prays that judgment be rendered against defendants

and each and every one of them jointly and severally for the sum of
P200,000, with interest at the rate of 9 per cent per annum; that the plaintiff
be subrogated in the place of the defendants, except Walter E. Olsen & Co.,
Inc., as to the mortgage be cancelled; and should the amount of P200,000
not be paid to the plaintiff, that the land mortgaged be sold in order to pay
the amount of this loan.

FACTS:

February 6, 1920 the defendant Walter E. Olsen & Co., Inc. obtained a
loan of P200,00 from the plaintiff for the purpose of purchasing a piece of
land in Tondo. On account of this loan the other defendant and Mr. A. D.
Gibbs — all stockholders of the defendant corporation — executed jointly
and severally a promissory note for the amount of P200,000 in favor of the

43
plaintiff. After the land had been purchased, the defendant corporation,
Walter E. Olsen & Co., Inc. executed in favor of its codefendants and of Mr.
A. D. Gibbs a promissory note for the amount of P200,000 and a mortgage
upon the land to secure the payment of the P200,000 and a mortgage upon
the secure of payment of the P200,000 or any such part thereof as any of
them might be compelled to pay the plaintiff upon the promissory note
subscribe by them.

On April 25, 1921, the defendant corporation Walter E. Olsen & Co.,
Inc. through its president and treasurer, Mr. Walter E. Olsen, one of the
defendants, mortgaged the same land to the plaintiff to secure the payment
of the loan of P200,000. Due to the fact that this land, as already stated, was
mortgaged by the defendant corporation, Water E. Olsen & Co., Inc., to its
codefendants and to Mr. A. D. Gibbs, the mortgage in favor of the plaintiff
has not been paid until this date.

The lower court ruled in favor of the plaintiff

ISSUE:

Whether lower court erred in taking consideration the documents

attached to the complaint as a part thereof, without having been expressly
introduced in evidence.

RULING:

This was no error. In the answer of the defendants there was no denial
under oath of the authenticity of these documents. Under section 103 of the
Code of Civil Procedure, the authenticity be deemed admitted. The effect of
this to relieve the plaintiff from the duty of expressly presenting such
documents as evidence. The court, for the proper decision of the case, may
and should consider, without the introduction of evidence, the facts admitted
by the parties.

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15.

LUIS PINEDA, vs.COURT OF FIST INSTANCE OF DAVAO,

ERIBERTO UNSON, in his capacity as Provincial Sheriff Ex-Oficio of
Davao and POTENCIANA PLANDO,

G.R. No. L-12602 April 25, 1961

FACTS:

Potenciana Plando filed with the Court of First Instance of Davao a

complaint (Exhibits C-4 to C-6), which was docketed as Civil Case No. 959
of said court, against Luis Pineda and Bruno Ramirez. Potenciana Plando
alleged in said pleading that she was the surviving spouse and only heir of
the deceased Domingo Ramirez, who, in life, was the actual possessor of a
parcel of land situated in Lasang, formerly municipality of Tagum, now
Panabo, Province of Davao, and more particularly described in the
complaint; that said land was covered by Homestead Application No.
166166 (E-77371), in the name of said deceased, which had been approved
by the Director of Lands on December 18, 1930; that, by virtue of an order

45
of this officer, dated November 18, 1932, for the "issuance of patent", the
rights to and interests in said land became definitely vested in Domingo
Ramirez; that upon his death, such rights and interests were transmitted, by
operation of law, to Potenciana Plando; that said land had been jointly
occupied and cultivated by her and Domingo Ramirez, during his lifetime,
since early in 1930 until sometime in 1948, and had become improved and
productive through their common efforts; that, in 1948, Luis Pineda and
Bruno Ramirez took material possession of said land illegally and in bad
faith, thereby excluding her from the possession and enjoyment thereof,
despite her repeated demands that they vacate said property, which they
refused to do; and that she thereby suffered the damages specified in the
complaint. Accordingly, she prayed that judgment be rendered:

(a) Declaring the plaintiff the lawful owner and possessor of The land
and improvements described in the complaint;

(b) Ordering the defendants to vacate the premises in question and to

restore the possession thereof to the plaintiff;

XXX

Although the court had denied a motion to dismiss filed by Luis

Pineda and Bruno Ramirez, neither answered the plaintiff because of which
they were declared in default, at the instance of Potenciana Plando, who,
thereafter, presented her evidence. Based upon the same, decision was
rendered on June 16, 1953 in favor of Potenciana Plando.

Soon later, or on December 4, 1953, they filed with the Court of

Appeals a petition for a writ of certiorari with preliminary injunction against
the Judge of First Instance of Davao and Potenciana Plando, upon the
ground that the former had acted with grave abuse of discretion in denying
the motion to dismiss the complaint in said Civil Case No. 959, and the
motion for relief of judgment by default therein rendered. In a reasoned
resolution, dated May 19, 1954, the Third Division of the Court of Appeals
dismissed the petition.

On October 4, 1954, Luis Pineda and Bruno Ramir sought from the
Supreme Court, in case G.R. No. L-8357 thereof, a review by certiorari of
said resolution of the Court of Appeals, but their petition for review was,
minute resolution, dated November 18, 1954, dismiss for lack of merit.

On October 4, 1954, Luis Pineda and Bruno Ramir sought from the
Supreme Court, in case G.R. No. L-8357 thereof, a review by certiorari of
said resolution of t Court of Appeals, but their petition for review was,
minute resolution, dated November 18, 1954, dismiss for lack of merit.

ISSUE:

46
Whether or not the trial court acquired jurisdiction to settle the issues
between the parties?

HELD:

It is true that, subject to the authority of the Secretary of Agriculture

and Natural Resources, the Director of Lands has, by law, direct control over
the sale or any other form of concession or disposition and the management
of the public domain (Commonwealth Act No. 141, sections 4 and 5) and
that, accordingly, said officers are clothed with authority to decide, inter
alia, conflicts between applicants for homestead. It is, likewise, settled that,
until such controversy has been decided by the Director of Lands and/or the
Secretary of Agriculture and Natural Resources — or, to put it differently,
until all administrative remedies have been exhausted — a judicial recourse
for the settlement of said controversy has generally been held to be
"premature" (Municipality of Hinabañgan vs. Municipality of Wright and
Julian Abegonia L-12603, March 25, 1960). The rule to the effect that
administrative remedies must "first" be exhausted merely implies, however,
the absence of a "cause of action" (M. Vda. de Villanueva v. Ortiz, L-11412,
May 28, 1958; Lubugan v. Castrillo, L-10521, May 29, 1957), and
does not affect the "jurisdiction" of the court, either over the parties, if they
have been properly summoned, or over the subject matter of the case.

Luis Pineda does not claim that he had not been properly summoned
in Civil Case No. 959. Upon the other hand, courts of first instance are, and
have been, expressly vested with original jurisdiction "in all civil actions
which involve the title to or possession of real property, or any interest
therein ..." (Republic Act No. 296, Section 44). Accordingly, even if the
issue in Civil Case No. 959 had been who, as between the parties therein,
had a better title to a given public land, the court would have retained its
jurisdiction to hear and decide the case, although, had its attention had been
called to the proceedings then pending in the Bureau of Lands — which
were not disclosed by the record when the decision was rendered — it
should have dismissed the case, not for want of jurisdiction, but for lack of
"cause of action" on the part of Potenciana Plando.

At most, therefore, said court erred in refusing to grant the motion for
relief of judgment by default, and, had an appeal been taken from the order
denying said motion, it would have been proper for the appellate court to
reverse said order and set it aside. But, no such appeal was taken, and the
decision in Civil Case No. 959 was thus allowed to become final and
executory. Inasmuch as the court had jurisdiction to render it, said decision
is valid and binding upon the parties therein, no matter how erroneous it
might have been.

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