Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the April 18, 2001 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001 Resolution[2] denying the motion for reconsideration thereof.

On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy firm providing technical and management support in the infrastructure projects of foreign governments,[3] entered into an Independent Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently residing in the Philippines.[4] The agreement provides that respondent was to extend professional services to Nippon for a year starting on April 1, 1999.[5] Nippon then assigned respondent to work as the project manager of the Southern Tagalog Access Road (STAR) Project in the Philippines, following the company's consultancy contract with the Philippine Government.[6]

When the STAR Project was near completion, the Department of Public Works and Highways (DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this time for the detailed engineering and construction supervision of the Bongabon-Baler Road Improvement (BBRI) Project. [7] Respondent was named as the project manager in the contract's Appendix 3.1.[8]

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International Division, informed respondent that the company had no more intention of automatically renewing his ICA. His services would be engaged by the company only up to the substantial completion of the STAR Project on March 31, 2000, just in time for the ICA's expiry.[9]

Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation conference and demanded that he be assigned to the BBRI project. Nippon insisted that respondents contract was for a fixed term that had already expired, and refused to negotiate for the renewal of the ICA.[10]

As he was not able to generate a positive response from the petitioners, respondent consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and damages with the Regional Trial Court of Lipa City.[11]

1

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD.,Petitioners,

- versus -

MINORU KITAMURA,Respondent.

G.R. No. 149177

Present:

YNARES-SANTIAGO, J.,Chairperson,AUSTRIA-MARTINEZ,CHICO-NAZARIO,NACHURA, andREYES, JJ.

Promulgated:

November 23, 2007

For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for improper pre-termination of respondent's ICA could only be heard and ventilated in the proper courts of Japan following the principles of lex loci celebrationis and lex contractus.[12]

In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of Kitamura by a certain Y. Kotake as project manager of the BBRI Project.[13]

On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14] that matters connected with the performance of contracts are regulated by the law prevailing at the place of performance,[15] denied the motion to dismiss.[16] The trial court subsequently denied petitioners' motion for reconsideration,[17] prompting them to file with the appellate court, on August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205]. [18] On August 23, 2000, the CA resolved to dismiss the petition on procedural groundsfor lack of statement of material dates and for insufficient verification and certification against forum shopping. [19] An Entry of Judgment was later issued by the appellate court on September 20, 2000.[20]

Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the material dates and attaching thereto the proper verification and certification. This second petition, which substantially raised the same issues as those in the first, was docketed as CA-G.R. SP No. 60827.[21]

Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001 Decision[22] finding no grave abuse of discretion in the trial court's denial of the motion to dismiss. The CA ruled, among others, that the principle of lex loci celebrationis was not applicable to the case, because nowhere in the pleadings was the validity of the written agreement put in issue. The CA thus declared that the trial court was correct in applying instead the principle of lex loci solutionis.[23]

Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25, 2001 Resolution.[24]

Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant Petition for Review on Certiorari[25] imputing the following errors to the appellate court:

A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.

B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.[26]

2

The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of Philippine courts in civil cases for specific performance and damages involving contracts executed outside the country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, the state of the most significant relationship rule, orforum non conveniens.

However, before ruling on this issue, we must first dispose of the procedural matters raised by the respondent.

Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has already barred the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the same issues as those in the first one) and the instant petition for review thereof.

We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective certification of non-forum shopping, it was a dismissal without prejudice.[27] The same holds true in the CA's dismissal of the said case due to defects in the formal requirement of verification [28] and in the other requirement in Rule 46 of the Rules of Court on the statement of the material dates. [29] The dismissal being without prejudice, petitioners can re-file the petition, or file a second petition attaching thereto the appropriate verification and certificationas they, in fact didand stating therein the material dates, within the prescribed period[30] in Section 4, Rule 65 of the said Rules.[31]

The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action as though the dismissed action had not been commenced. In other words, the termination of a case not on the merits does not bar another action involving the same parties, on the same subject matter and theory.[32]

Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even if petitioners still indicated in the verification and certification of the second certioraripetition that the first had already been dismissed on procedural grounds,[33] petitioners are no longer required by the Rules to indicate in their certification of non-forum shopping in  the  instant  petition for  review of  the second certiorari petition, the status of the aforesaid first petition before the CA. In any case, an omission in the certificate of non-forum shopping about any event that will not constitute res judicata and litis pendentia, as in the present case, is not a fatal defect. It will not warrant the dismissal and nullification of the entire proceedings, considering that the evils sought to be prevented by the said certificate are no longer present.[34]

The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to verify and certify, on behalf of Nippon, the certiorari petition filed with the CA and not the instant petition. True, the Authorization[35] dated September 4, 2000, which is attached to the second certiorari petition and which is also attached to the instant petition for review, is limited in scopeits wordings indicate that Hasegawa is given the authority to sign for and act on behalf of the company only in the petition filed with the appellate court, and that authority cannot extend to the instant petition for review.[36] In a plethora of cases, however, this Court has liberally applied the Rules

3

or even suspended its application whenever a satisfactory explanation and a subsequent fulfillment of the requirements have been made.[37] Given that petitioners herein sufficiently explained their misgivings on this point and appended to their Reply [38] an updated Authorization[39] for Hasegawa to act on behalf of the company in the instant petition, the Court finds the same as sufficient compliance with the Rules.

However, the Court cannot extend the same liberal treatment to the defect in the verification and certification. As respondent pointed out, and to which we agree, Hasegawa is truly not authorized to act on behalf of Nippon in this case. The aforesaid September 4, 2000 Authorization and even the subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief executive officer, not by the company's board of directors. In not a few cases, we have ruled that corporate powers are exercised by the board of directors; thus, no person, not even its officers, can bind the corporation, in the absence of authority from the board.[40] Considering that Hasegawa verified and certified the petition only on his behalf and not on behalf of the other petitioner, the petition has to be denied pursuant to Loquias v. Office of the Ombudsman.[41] Substantial compliance will not suffice in a matter that demands strict observance of the Rules.[42] While technical rules of procedure are designed not to frustrate the ends of justice, nonetheless, they are intended to effect the proper and orderly disposition of cases and effectively prevent the clogging of court dockets.[43]

Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition  to question the trial court's denial of their motion to dismiss. It is a well-established rule that an order denying a motion to dismiss is interlocutory, and cannot be the subject of the extraordinary petition for certiorari or mandamus. The appropriate recourse is to file an answer and to interpose as defenses the objections raised in the motion, to proceed to trial, and, in case of an adverse decision, to elevate the entire case by appeal in due course.[44] While there are recognized exceptions to this rule,[45] petitioners' case does not fall among them.

This brings us to the discussion of the substantive issue of the case.

Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to hear and resolve the civil case for specific performance and damages filed by the respondent. The ICA subject of the litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the Japanese language. Thus, petitioners posit that local courts have no substantial relationship to the parties[46] following the [state of the] most significant relationship rule in Private International Law.[47]

The Court notes that petitioners adopted an additional but different theory when they elevated the case to the appellate court. In the Motion to Dismiss[48] filed with the trial court, petitioners never contended that the RTC is an inconvenient forum. They merely argued that the applicable law which will determine the validity or invalidity of respondent's claim is that of Japan, following the principles of lex loci  celebrationis and lex contractus.[49] While not abandoning this stance in their petition before the appellate court, petitioners on certiorarisignificantly invoked the defense of forum non conveniens.[50] On petition for review before this Court, petitioners dropped their other arguments, maintained the forum 

4

non conveniensdefense, and introduced their new argument that the applicable principle is the [state of the] most significant relationship rule.[51]

Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in theory, as explained in Philippine Ports Authority v.  City of  Iloilo.[52] We only pointed out petitioners' inconstancy in their arguments to emphasize their incorrect assertion of conflict of laws principles.

To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of judgments. Corresponding to these phases are the following questions: (1) Where can or should litigation be initiated? (2) Which law will the court apply? and (3) Where can the resulting judgment be enforced?[53]

Analytically, jurisdiction and choice of law are two distinct concepts. [54] Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the minimum contacts for one do not always provide the necessary significant contacts for the other. [55] The question of whether the law of a state can be applied to a transaction is different from the question of whether the courts of that state have jurisdiction to enter a judgment.[56]

In this case, only the first phase is at issue jurisdiction. Jurisdiction, however, has various aspects. For a court to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent, over the subject matter, over the issues of the case and, in cases involving property, over the res or the thing which is the subject of the litigation.[57] In assailing the trial court's jurisdiction herein, petitioners are actually referring to subject matter jurisdiction.

Jurisdiction over   the  subject  matter in a judicial proceeding is conferred by the sovereign authority which establishes and organizes the court. It is given only by law and in the manner prescribed by law.[58] It is further determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. [59] To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, [60] the movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims.[61]

In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific performance and damages is one not capable of pecuniary estimation and is properly cognizable by the RTC of Lipa City.[62] What they rather raise as grounds to question subject matter jurisdiction are the principles of lex   loci   celebrationis and lex   contractus, and the state of the most significant relationship rule.

5

The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the law of the place of the ceremony[63] or the law of the place where a contract is made.[64] The doctrine of lex  contractus or lex   loci   contractus means the law of the place where a contract is executed or to be performed.[65] It controls the nature, construction, and validity of the contract[66] and it may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly.[67] Under the state of the most significant relationship rule, to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties. In a case involving a contract, the court should consider where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of the parties.[68] This rule takes into account several contacts and evaluates them according to their relative importance with respect to the particular issue to be resolved.[69]

Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the second phase, the choice of law.[70] They determine which state's law is to be applied in resolving the substantive issues of a conflicts problem.[71] Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.

Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, first there should exist a conflict of laws situation requiring the application of the conflict of laws rules.[72] Also, when the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such law must be pleaded and proved.[73]

It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or apply the law of some other State or States. [74] The courts power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign sovereigns.[75]

Neither can the other ground raised, forum non conveniens,[76] be used to deprive the trial court of its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a ground. [77] Second, whether a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court.[78] In this case, the RTC decided to assume jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter of defense.[79]

 

6

Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly denied the petitioners motion to dismiss.

WHEREFORE, premises considered, the petition for review on certiorari is DENIED.

SO ORDERED.

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., vs MINORU KITAMURA G.R. No. 149177 November 23,

2007FACTS: Nippon Engineering Consultants (Nippon), a Japanese consultancy firm providingtechnical and management support in the infrastructure projects national permanently residing in the Philippines. The agreement provides that Kitamaru was to extend professional services to Nippon for a year. Nippon assigned Kitamaru to work as the project manager of the Southern Tagalog Access Road (STAR) project. When the STAR project was near completion, DPWH engaged theconsultancy services of Nippon, this time for the detailed engineering & construction supervision of the Bongabon-Baler Road Improvement (BBRI) Project. Kitamaru was named as the project manger in the contract. Hasegawa, Nippon‘s general manager for its International Division, informed Kitamaru that the company had no more intention of automatically renewing his ICA. His services would be engaged by the company only up to the substantial completion of the STAR Project.

Kitamaru demanded that he be assigned to the BBRI project. Nippon insisted that Kitamaru‘s contract was for a fixed term that had expired. Kitamaru then filed for specific performance &damages w/ the RTC of Lipa City. Nippon filed a MTD.

Nippon‘s contention: The ICA had been perfected in Japan & executed by & between Japanese nationals. Thus, the RTC of Lipa City has no jurisdiction. The claim for improper pre-termination of Kitamaru‘s ICA could only be heard & ventilated in the proper courts of Japan following the principles of lex loci celebrationis & lex contractus. The RTC denied the motion to dismiss. The CA ruled hat the principle of lex loci celebration is wasnot applicable to the case, because nowhere in the pleadings was the validity of the written agreement put in issue. It held that the RTC was correct in applying the principle of lex locisolutionis.

ISSUE: Whether or not the subject matter jurisdiction of Philippine courts in civil cases for specific performance & damages involving contracts executed outside the country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, ―the state of the most significant relationship rule,‖ or forum non conveniens.

HELD:

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NO. In the judicial resolution of conflicts problems, 3 consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of judgments. Jurisdiction & choice of law are 2 distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a substantive law w/c will determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the ―minimum contacts‖ for one do not always provide the necessary ―significant contacts‖ for the other. The question of whether the law of a state can be applied to a transaction is different from the question of whether the courts of that state have jurisdiction to enter a judgment. In this case, only the 1st phase is at issue - jurisdiction. Jurisdiction, however, has various aspects. For a court to validly exercise its power to adjudicate a controversy it must have jurisdiction over the plaintiff/petitioner, over the defendant/respondent, over the subject matter, over the issues of the case and, in cases involving property, over the res  or the thing w/c is the subject of the litigation. In assailing the trial court's jurisdiction herein, Nippon is actually referring to subject matter jurisdiction. Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority w/c establishes and organizes the court. It is given only by law and in the manner prescribed by law. It is further determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, the movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims.

In the instant case, Nippon, in its MTD, does not claim that the RTC is not properly vested by law w/ jurisdiction to hear the subject controversy for a civil case for specific performance & damages is one not capable of pecuniary estimation & is properly cognizable by the RTC of Lipa City. What they rather raise as grounds to question subject matter jurisdiction are the principles of lex loci celebrationis  andlex contractus , and the ―state of the most significant relationship rule.‖ The Court finds the invocation of these grounds unsound. Lex loci celebrationis relates to the ―law of the place of the ceremony‖ or the law of the place where a contract is made. The doctrine of lex contractus  or lex loci contractus  means the ―law of the place where a contract is executed or to be performed.‖ It controls the nature, construction, and validity of the on tract and it may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly. Under the ―state of the most significant relationship rule, ‖ to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties. In a case involving a contract, the court should consider where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of the parties. This rule takes into account several contacts and evaluates them according to their relative importance with respect to the particular issue to be resolved. Since these 3 principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the 2nd phase, the choice of law. They determine which state's law is to be applied in resolving the substantive issues of a conflicts problem. Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.

8

Further, Nippon‘s premature invocation of choice -of-law rules is exposed by the fact that they have not yet pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, 1st there should exist a conflict of laws situation requiring the application of the conflict of laws rules. Also, when the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such law must be pleaded and proved. It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or administrative agency, there are 3 alternatives open to the latter in disposing of it: (1)dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case;(2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or apply the law of some other State or States. The court‘s power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign sovereigns. Neither can the other ground raised,  forum non conveniens  , be used to deprive the RTC of its jurisdiction. 1st, it is not a proper basis for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include it as a ground. 2nd, whether a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the RTC. In this case, the RTC decided to assume jurisdiction. 3rd, the propriety of dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter of defense

9

SERENO, J.:

In this Petition for Review on Certiorari under Rule 45 with Prayer for Issuance of Writ of Temporary and/or Permanent Injunction, assailed is the 23 June 2010 Decision of the Court of Appeals (CA), Cagayan de Oro City, in CA-G.R. SP No. 01854-MIN. [1] Reversing the 30 November 2006 Resolution of the National Labor Relations Commission and reinstating, with modification, the 30 August 2006 Decision of the labor arbiter, the CA disposed as follows:

WHEREFORE, premises considered, the instant Petition is hereby GRANTED, and the Resolution dated November 30, 2006 is hereby REINSTATED subject to MODIFICATION, thus:

Private respondent Alex Ang Gaeid and/or AAG Trucking is hereby ORDERED to pay petitioner Melanio B. Yuag or his heirs or assigns the following:

(1) FULL BACKWAGES, inclusive of all allowances, other benefits or their monetary equivalent computed from the time petitioner's compensation was withheld from him starting December 6, 2004 until the time he was employed by his new employer (Bernie Ragandang), instead of the date of his supposed reinstatement which We no longer require as explained above.

(2) SEPARATION PAY (in lieu of the supposed reinstatement) equivalent to one-half () month pay for every year of service. A fraction of at least six (6) months shall be considered one (1) whole year.

(3) TEMPERATE DAMAGES in the amount of Five Thousand Pesos (Php5,000.00) for the financial loss suffered by the petitioner when he was abruptly dismissed as a truck driver on December 6, 2004 (during or around the Christmas season), although the exact amount of such damage is incapable of exact determination); and

(4) EXEMPLARY DAMAGES in the amount of Five Thousand Pesos (Php5,000.00) as a corrective measure in order to set out an example to serve as a negative incentive or deterrent against socially deleterious actions.

10

AGG TRUCKING AND/OR ALEXANG GAEID,Petitioners,

- versus -

MELANIO B. YUAG,Respondent.

G.R. No. 195033

Present:

CARPIO, J.,Chairperson,BRION,SERENO,REYES, andPERLAS-BERNABE,* JJ.

Promulgated:

October 12, 2011

Considering that a person's wage is his/her means of livelihood i.e., equivalent to life itself, this decision is deemed immediately executory pending appeal, should the private respondent decide to elevate this case to the Supreme Court.

SO ORDERED.[2]

The Motion for Reconsideration filed by petitioner was denied by the CA.[3] Hence, this Petition.

The facts of the case are simple. Petitioner Alex Ang Gaeid had employed respondent Melanio Yuag as a driver since 28 February 2002. He alleged that he had a trucking business, for which he had 41 delivery trucks driven by 41 drivers, one of whom was respondent. [4] His clients were Busco Sugar Milling Co., Inc., operating in Quezon, Bukidnon; and Coca-cola Bottlers Company in Davao City and Cagayan de Oro City.[5] Respondent received his salary on commission basis of 9% of his gross delivery per trip. He was assigned to a ten-wheeler truck and was tasked to deliver sacks of sugar from the Busco Sugar Mill to the port of Cagayan de Oro.[6] Petitioner noticed that respondent had started incurring substantial shortages since 30 September 2004, when he allegedly had a shortage of 32 bags, equivalent to ₱48,000; followed by 50 bags, equivalent to ₱75,000, on 11 November 2004.[7] It was also reported that he had illegally sold bags of sugar along the way at a lower price, and that he was banned from entering the premises of the Busco Sugar Mill.[8] Petitioner asked for an explanation from respondent who remained quiet.[9]

Alarmed at the delivery shortages, petitioner took it upon himself to monitor all his drivers, including respondent, by instructing them to report to him their location from time to time through their mobile phones.[10] He also required them to make their delivery trips in convoy, in order to avoid illegal sale of cargo along the way.[11]

Respondent, along with 20 other drivers, was tasked to deliver bags of sugar from Cagayan de Oro City to Coca-Cola Bottlers Plant in Davao City on 4 December 2004. [12] All drivers, with the exception of Yuag who could not be reached through his cellphone, reported their location as instructed. Their reported location gave evidence that they were indeed in convoy.[13] Afterwards, everyone, except Yuag, communicated that the delivery of their respective cargoes had been completed. [14] The Coca-Cola Plant in Davao later reported that the delivery had a suspiciously enormous shortage.[15]

Respondent reported to the office of the petitioner on 6 December 2004. Allegedly in a calm and polite manner, petitioner asked respondent to explain why the latter had not contacted petitioner for two days, and he had not gone in convoy with the other trucks, as he was told to do. [16] Respondent replied that the battery of his cellphone had broken down. [17]Petitioner then confronted him allegedly still in a polite and civilized manner, regarding the large shortages, but the latter did not answer. [18] Petitioner afterwards told him to just take arest or, in their vernacular, pahulay lang una.[19] This exchange started the dispute since respondent construed it as a dismissal. He demanded that it be done in writing, but petitioner merely reiterated that respondent should just take a rest in the meanwhile. [20] The former alleged that respondent had offered to resign and demanded separation pay. At that time, petitioner could not grant the demand, as it would entail computation which was the duty of the cashier.[21] Petitioner asked him to come back the next day.

11

Instead of waiting for another day to go back to his employer, Respondent went to the Department of Labor-Regional Arbitration Board X, that very day of the confrontation or on 6 December 2004. There he filed a Complaint for illegal dismissal, claiming his separation pay and 13 th month pay.[22] Subsequently, after the delivered goods to the Coca-Cola Plant were weighed on 9 December 2004, it was found out that there was a shortage of 111 bags of sugar, equivalent to ₱166,000.[23]

Respondent argued that he was whimsically dismissed, just because he had not been able to answer his employer's call during the time of the delivery. [24] His reason for not answering was that the battery pack of his cellphone had broken down.[25] Allegedly enraged by that incident, his employer, petitioner herein, supposedly shouted at him and told him, pahuway naka.[26]When he asked for a clarification, petitioner allegedly told him, wala nay daghan istorya, pahulay na! This statement was translated by the CA thus: No more talking! Take a rest![27] He then realized that he was being dismissed. When he asked for his separation pay, petitioner refused.[28] Respondent thus filed a Complaint for illegal dismissal.

Ruling of the Labor Arbiter

On 30 August 2006, labor arbiter Nicodemus G. Palangan rendered his Decision sustaining respondent's Complaint for illegal dismissal.[29] The labor arbiter made a discourse on the existence of an employer-employee relationship between the parties. In granting the relief sought by petitioner, the labor arbiter held as follows:

For failure on the part of the respondent to substantially prove the alleged infraction (shortages) committed by complainant and to afford him the due process mandated by law before he was eventually terminated, complainant's dismissal from his employment is hereby declared illegal and the respondent is liable to reinstate him with backwages for one (1) year but in view of the strained relationship that is now prevailing between the parties, this Arbitration Branch finds it more equitable to grant separation pay instead equivalent to one (1) month per year of service based on the average income for the last year of his employment CY 2004 which is P9,974.51, as hereby computed: [30]

Thus, the labor arbiter awarded respondent separation pay and proportionate 13th month pay for 2004 and 13th month pay differential for 2003.[31]

Petitioner appealed to the NLRC, alleging that the latter erred in finding that respondent had been illegally dismissed and that the utterance of pahulay lang una meant actual dismissal.[32]He also alleged that the pecuniary awards of separation pay, backwages, proportionate 13th month pay and differential were erroneous. He argued that pahulay lang una was not an act of dismissal; rather, he merely wanted to give respondent a break, since the companys clients had lost confidence in respondent. Thus, the latter allegedly had to wait for clients other than Busco Sugar Mill and Coca-Cola, which had banned respondent from entering their premises.

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Ruling of the NLRC

In a Resolution dated 30 November 2006,[33] the NLRC reversed the labor arbiter's ruling, holding as follows:

While the general rule in dismissal cases is that the employer has the burden to prove that the dismissal was for just or authorized causes and after due process, said burden is necessarily shifted to the employee if the alleged dismissal is denied by the employer, as in this case, because a dismissal is supposedly a positive and unequivocal act by the employer. Accordingly, it is the employee that bears the burden of proving that in fact he was dismissed. It was then incumbent upon complainant to prove that he was in fact dismissed from his job by individual respondent Alex V. Ang Gaeid effective December 6, 2004 when the latter told him: Pahuway naka! (You take a rest). Sadly, he failed to discharge that burden. Even assuming that Mr. Gaeid had the intention at that time of dismissing complainant from his job when he uttered the said words to him, there is no proof showing of any overt act subsequently done by Mr. Gaeid that would suggest he carried out such intention. There is no notice of termination served to complainant. Literally construing the remarks of Mr. Gaeid as having been dismissed from his job, complainant immediately filed the instant complaint for illegal dismissal on the same day without first ascertaining the veracity of the same. The how, why and the wherefore of his alleged dismissal should be clearly demonstrated by substantial evidence. Complainant failed to do so; hence, he cannot claim that he was illegally dismissed from employment.[34]

The NLRC further held thus:

At best, complainant should be considered on leave of absence without pay pending his new assignment. Not having been dismissed much less illegally, complainant is not entitled to the awarded benefits of backwages and separation pay for lack of legal and factual basis.[35]

The NLRC likewise held that the complainant was not entitled to 13 th month pay, since he was paid on purely commission basis, an exception under Presidential Decree No. 851 the law requiring employers to pay 13th month pay to their employees.[36]

Respondent moved for reconsideration,[37] in effect arguing that petitioner should not be allowed to change the latters theory. Supposedly, the argument in the position paper of petitioner was that there was no employer-employee relationship between them, and that he was compelled to dismiss respondent because of the heavy losses the latter was bringing to petitioner. In this Motion for Reconsideration, respondent admitted that his wife had received the Resolution on 12 January 2007, but that he learned of it much later, on 7 February 2007, justifying the untimely filing of the motion.[38]

The NLRC denied the Motion for Reconsideration for being filed out of time.[39] He and his counsel each received notice of the NLRC's Resolution dated 30 November 2006, reversing the labor arbiters Decision on 11 January 2007,[40] but they only filed the motion 25 days after the period to file had already lapsed.[41] Respondent, thus, sought recourse from the CA through a Petition for a Writ of Certiorari under Rule 65.

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The CA Ruling

On 23 June 2010, brushing aside the technicality issue, the CA proceeded to resolve the substantive issues which it deemed important, such as whether there was an employer-employee relationship between petitioner and respondent, and whether it was correct for the NLRC to declare that respondent was not illegally dismissed.[42] It completely reversed the NLRC and came up with the dispositive portion mentioned at the outset.

The Issues

Petitioner is now before us citing factual errors that the CA allegedly committed, such as not appreciating petitioner's lack of intention to dismiss respondent. These factual errors, however, are beyond this Court to determine, especially because the records of the proceedings at the level of the labor arbiter were not attached to the Petition. The Court is more interested in the legal issues raised by petitioner and rephrased by the Court as follows:

I

THE COURT OF APPEALS ERRED IN REVERSING THE NLRC WITHOUT ANY FINDING OF GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION;

II

THE COURT OF APPEALS ERRED IN ENTERTAINING RESPONDENT'S PETITION NOTWITHSTANDING THE FACT THAT HIS MOTION FOR RECONSIDERATION OF THE NLRC'S DECISION WAS FILED OUT OF TIME

III

THE COURT OF APPEALS ERRED IN GRANTING AWARDS BEYOND WHAT WAS PRAYED FOR IN THE COMPLAINT SUCH AS THE AWARD OF TEMPERATE AND EXEMPLARY DAMAGES

The Court's Ruling

We find the Petition impressed with merit.

A writ of certiorari is a remedy to correct errors of jurisdiction, for which reason it must clearly show that the public respondent has no jurisdiction to issue an order or to render a decision.Rule 65 of the Rules of Court has instituted the petition for certiorari to correct acts of any tribunal, board or officer exercising judicial or quasi-judicial functions with grave abuse of discretion amounting to lack or excess of jurisdiction. This remedy serves as a check on acts, either of excess or passivity, that constitute grave abuse of discretion of a judicial or quasi-judicial function. This Court, in San Fernando Rural Bank, Inc. v. Pampanga Omnibus Development Corporation and Dominic G. Aquino,[43] explained thus:

Certiorari is a remedy narrow in its scope and inflexible in character. It is not a general utility tool in the legal workshop. Certiorari will issue only to correct errors of jurisdiction and not to correct errors of judgment. An error of judgment is one which the court may commit in the exercise of its jurisdiction,

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and which error is reviewable only by an appeal. Error of jurisdiction is one where the act complained of was issued by the court without or in excess of jurisdiction and which error is correctible only by the extraordinary writ of certiorari. As long as the court acts within its jurisdiction, any alleged errors committed in the exercise of its discretion will amount to nothing more than mere errors of judgment, correctible by an appeal if the aggrieved party raised factual and legal issues; or a petition for review under Rule 45 of the Rules of Court if only questions of law are involved.

A cert[iorari] writ may be issued if the court or quasi-judicial body issues an order with grave abuse of discretion amounting to excess or lack of jurisdiction. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other words, where the power is exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and it must be so patent or gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. Mere abuse of discretion is not enough. Moreover, a party is entitled to a writ of certiorari only if there is no appeal nor any plain, speedy or adequate relief in the ordinary course of law.

The raison detre for the rule is that when a court exercises its jurisdiction, an error committed while so engaged does not deprive it of the jurisdiction being exercised when the error was committed. If it did, every error committed by a court would deprive it of its jurisdiction and every erroneous judgment would be a void judgment. In such a situation, the administration of justice would not survive. Hence, where the issue or question involved affects the wisdom or legal soundness of the decision not the jurisdiction of the court to render said decision the same is beyond the province of a special civil action for certiorari.[44](citations omitted)

Petitioner is correct in its argument that there must first be a finding on whether the NLRC committed grave abuse of discretion and on what these acts were. In this case, the CA seemed to have forgotten that its function in resolving a petition for certiorari was to determine whether there was grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public respondent NLRC. The CA proceeded to review the records and to rule on issues that were no longer disputed during the appeal to the NLRC, such as the existence of an employer-employee relationship. The pivotal issue before the NLRC was whether petitioners telling respondent to take a rest, or to have a break, was already a positive act of dismissing him. This issue was not discussed by the CA.

A reading of the assailed Decision will readily reveal the patent errors of the CA. On page 11 of its Decision, it held as follows: The NLRC likewise concluded that petitioner was not entitled to separation pay because he was not a regular employee of private respondent, he (the petitioner) being paid on purely commission or pakyaw basis. The CA took off from that point to give a discussion on regular employment and further held:

To Us, private respondent's advice to take a rest theory is nothing but a mere ploy to reinforce his hypothesis that the petitioner is not a regular employee. What makes this worse is that the NLRC bought private respondent's aforesaid theory hook, line and sinker and ruled that the petitioner was neither dismissed from work, he (the petitioner) being considered merely on leave of absence without pay, nor

15

is he (the petitioner) entitled to separation pay on the ground that he was paid on purely commission or pakyaw basis which is in legal parlance, in effect, implies that the petitioner is not a regular employee of the private respondent, but a mere seasonal worker or independent contractor.

It is most disturbing to see how the CA regarded labor terms paid on commission, pakyaw and seasonal worker as one and the same. In labor law, they are different and have distinct meanings, which we do not need to elaborate on in this Petition as they are not the issue here. It should also be remembered that a regular status of employment is not based on how the salary is paid to an employee. An employee may be paid purely on commission and still be considered a regular employee. [45] Moreover, a seasonal employee may also be considered a regular employee.[46]

Further, the appreciation by the CA of the NLRC Resolution was erroneous. The fact is that the refusal by the NLRC to grant separation pay was merely consistent with its ruling that there was no dismissal. Since respondent was not dismissed, much less illegally dismissed, separation pay was unnecessary. The CA looked at the issue differently and erroneously, as it held that the NLRC refused to grant the award of separation pay because respondent had not been found to be a regular employee. The NLRC had in fact made no such ruling. These are flagrant errors that are reversible by this

Court. They should be corrected for the sake not only of the litigants, but also of the CA, so that it would become more circumspect in its appreciation of the records before it.

We reviewed the NLRC Resolution that reversed the LA Decision and found nothing in it that was whimsical, unreasonable or patently violative of the law. It was the CA which erred in finding faults that were inexistent in the NLRC Resolution.

On the issue of the propriety of entertaining the Petition for Certiorari despite the prescribed Motion for Reconsideration with the NLRC, we find another error committed by the CA. The pertinent provisions of the 2005 Rules of Procedure of the NLRC are as follows:

Rule VII, Section 14. Motions for Reconsideration. Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision, with proof of service that a copy of the same has been furnished, within the reglementary period, the adverse party and provided further, that only one such motion from the same party shall be entertained.

Rule VIII, Section 2. Finality of decisions of the Commission. (a) Finality of the decisions, resolutions or orders of the Commission. Except as provided in Rule XI, Section 10, the decisions, resolutions orders of the Commission/Division shall become executory after (10) calendar days from receipt of the same.

When respondent failed to file a Motion for Reconsideration of the NLRCs 30 November 2006 Resolution within the reglementary period, the Resolution attained finality and could no longer be modified by the Court of Appeals. The Court has ruled as follows:

16

[I]t is a fundamental rule that when a final judgment becomes executory, it thereby becomes immutable and unalterable. The judgment may no longer be modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to be made by the court rendering it or by the highest Court of the land. The only recognized exceptions are the correction of clerical errors or the making of so-called nunc pro tunc entries which cause no prejudice to any party, and, of course, where the judgment is void. Any amendment or alteration which substantially affects a final and executory judgment is null and void for lack of jurisdiction, including the entire proceedings held for that purpose.[47]

It cannot be argued that prescriptive periods are mere procedural rules and technicalities, which may be brushed aside at every cry of injustice, and may be bent and broken by every appeal to pity. The Courts ruling in Videogram Regulatory Board v. Court of Appeals finds application to the present case:

There are certain procedural rules that must remain inviolable, like those setting the periods for perfecting an appeal or filing a petition for review, for it is doctrinally entrenched that the right to appeal is a statutory right and one who seeks to avail of that right must comply with the statute or rules. The rules, particularly the requirements for perfecting an appeal within the reglementary period specified in the law, must be strictly followed as they are considered indispensable interdictions against needless delays and for orderly discharge of judicial business. Furthermore, the perfection of an appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional and the failure to perfect the appeal renders the judgment of the court final and executory. Just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the correlative right to enjoy the finality of the resolution of his/her case.

These periods are carefully guarded and lawyers are well-advised to keep track of their applications. After all, a denial of a petition for being time-barred is a decision on the merits.

Similarly, a motion for reconsideration filed out of time cannot reopen a final and executory judgment of the NLRC. Untimeliness in filing motions or petitions is not a mere technical or procedural defect, as leniency regarding this requirement will impinge on the right of the winning litigant to peace of mind resulting from the laying to rest of the controversy.

As to the third issue, since the CA could no longer modify the NLRC Resolution, it logically follows that the modification of the award cannot be done either. Had the Resolution not yet attained finality, the CA could have granted some other relief, even if not specifically sought by petitioner, if such ruling is proper under the circumstances. Rule 65 of the Rules of Court provides:

Section. 8. Proceedings after comment is filed. After the comment or other pleadings required by the court are filed, or the time for the filing thereof has expired, the court may hear the case or require the parties to submit memoranda. If after such hearing or filing of memoranda or upon the expiration of the period for filing, the court finds that the allegations of the petition are true, it shall render judgment for such relief to which the petitioner is entitled.

17

However, the NLRC Resolution sought to be set aside had become final and executory 25 days before respondent filed his Motion for Reconsideration. Thus, subsequent proceedings and modifications are not allowed and are deemed null and void.

IN VIEW OF THE FOREGOING, the Petition is GRANTED. The assailed 23 June 2010 Decision of the Court of Appeals and its 20 December 2010 Resolution are hereby SET ASIDE. The 30 November 2006 and 30 March 2010 Resolutions of the NLRC are AFFIRMED and sustained.

SO ORDERED.

CASE No. 9 GRACEG.R. No. 195033               October 12, 2011AGG Trucking and/or Alex Ang Gaeid, Petitioners, vs. MELANIO B. YUAG, Respondent

FACTS:

Respondent Melanio Yuag worked for petitioner Alex Ang Gaeid as a driver in his trucking business, delivering sacks of sugar from the Busco Sugar Mill to the port of CDO City. He was hired on February 28, 2002 and earns on a commission basis of 9% of his gross delivery per trip. During the course of his employment, petitioner received reports that that the respondent was incurring substantial shortages in his deliveries since September 30, 2004 (see notes), was illegally selling bags of sugar at a lower price along the way, and was banned from entry into the premises of Busco Sugar Mill. When confronted, the respondent remained quiet. As a result of the reports, the petitioner monitored the activities of all its drivers, instructing them to report their location from time to time as well as deliver their assigned cargoes by convoy to avoid the illegal sale o f cargo.

On December 4, 2004, the respondent was assigned to deliver bags of sugar from CDO to the Coca-Cola Bottlers Plant, along with other drivers. The respondent could not be reached through his cellphone during the course of the trip. The Coca-Cola Plant later reported that the delivery he made had an enormous amount of shortage. When the goods were subsequently weighed on December 9, it was found out that there was a shortage of 111 bags of sugar equivalent to P166, 000.00. When the respondent reported for work on December 6, the petitioner confronted respondent who remained quiet. As a result, the petitioner told the respondent to “take a rest”, which the respondent construed as a dismissal.

The respondent filed a case of illegal dismissal on the very day of confrontation with the Labor Arbiter.

The petitioner argued that he merely told the respondent to “take a rest”, which was not a dismissal but a temporary break, since the company’s clients had lost their confidence in the respondents. He alleged that as a response, the respondent demanded offered to resign and demanded separation pay, which the former could not grant at the time as it would entail computation by the cashier. He told the respondent to come back the next day but he did not.

The respondent claimed on the other hand that his cellphone battery was drained, the reason for his failure to answer the petitioner’s calls. The petitioner was allegedly enraged and during their confrontation, shouted at him to take a rest. When he asked for a clarification, petitioner allegedly told him, “No more talking! Take a rest!” which he construed to be a dismissal. When he asked for his separation pay, the petitioner refused, hence the complaint.

The LA ruled in favor of the respondent, ruling that the respondent was illegally dismissed and ordered payment of his separation pay and proportionate 13th month pay. The LA stated that the petitioner failed to prove the alleged shortages committed by the respondent and to afford him due process before he was terminated.

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The NLRC reversed the ruling of the LA, dismissing the complaint for illegal dismissal. The NLRC stated that the respondent had the burden of proving that he was dismissed from his job by the petitioner, which he failed to do, as there was no proof showing any overt act subsequently done by the petitioner that would suggest he carried out the intention of dismissing the respondent when he said, “Pahulay naka!” (You take a rest). Instead, the respondent was merely considered on leave of absence without pay pending his new assignment. It also held that the respondent was not entitled to the payment of 13th month pay as he was paid on a commission basis, which was an exception under PD 851 (the law requiring employers to pay their employees 13th month pay.)

The respondent filed a Motion for Reconsideration 25 days after the period to file had already elapsed. The NLRC denied the MR for being filed out of time hence, the respondent filed a Petition for a Writ of Certiorari under Rule 65 before the CA.

The CA reversed the NLRC ruling, brushing aside the “technicality issues” and proceeding to resolve the substantive issues, such as the existence of an e-e relationship between the petitioner and respondent, and the legality of the dismissal of the latter. It ordered the payment of full backwages to the respondent, separation pay in lieu of reinstatement, temperate damages and exemplary damages.

Hence this petition.

ISSUES:1. Whether the Court of Appeals committed grave abuse of discretion amounting to lack or

excess of jurisdiction in its reversal of the NLRC decision2. Whether the respondent was illegally dismissed

RULING:1. YES.

First, in its decision, the CA proceeded to review the records of the case and to rule on issues that were no longer disputed during the appeal to the NLRC, such as the existence of an employer-employee relationship. The issue before the NLRC, which was whether the petitioner’s telling the respondent to “take a break” was an overt act of dismissal was not discussed by the CA.

Second, there were patent errors in the decision of the CA, such as its ruling that the NLRC refused to grant the award of separation pay because the respondent had not been found to be a regular employee, when the NLRC made no such ruling. The refusal by the NLRC to grant separation pay was merely consistent with its ruling that there was no dismissal.

Third, the CA entertained the Petition for Certiorari by the respondent despite the prescribed Motion for Reconsideration with the NLRC. Since the respondent failed to file the MR within the reglementary period provided by law, the Resolution of the NLRC has already become final and could no longer be modified by the CA (see notes). An MR filed out of time could not reopen a final and executory judgment by the NLRC. Since the CA could no longer modify the NLRC Resolution, the modification of the award cannot be done either (see notes). The NLRC Resolution had become final and executoy 25 days before the respondent filed his MR, thus, subsequent proceedings and modifications are not allowed and are deemed null and void.

2. No. As ruled by the NLRC which has already become final and executory, the respondent was not dismissed, much less illegally dismissed.

The burden of proving that a dismissal was for just or authorized causes and after due process shifts to the employee if the alleged dismissal was denied by the employer, such as in this case, since a dismissal is supposedly a positive act by the employer. As such, the respondent failed to prove that he was dismissed from his job when the petitioner told him to “Take a rest” as there was no substantial proof presented by the former of any overt act subsequently done by the petitioner that would suggest he carried out such intention. There was no termination

19

letter, or any substantial evidence demonstrating the how, why and wherefore of his alleged dismissal.

Following this, the complainant is not also entitled to the awards of backwages and separation pay for lack of factual and legal basis (he was not dismissed), as well as 13th month pay, as he was paid on purely a commission basis, which is an exception under PD 851.

ADJUDICATION:

IN VIEW OF THE FOREGOING, the Petition is GRANTED. The assailed 23 June 2010 Decision of the Court of Appeals and its 20 December 2010 Resolution are hereby SET ASIDE. The 30 November 2006 and 30 March 2010 Resolutions of the NLRC are AFFIRMED and sustained

NOTES:1. Allegedly, he had a shortage of 32 bags, equivalent to P48,000 on September 30, 2004;

And 50 bags, equivalent to P75,000 on November 11, 2004

2. The pertinent provisions of the 2005 Rules of Procedure of the NLRC are as follows:

Rule VII, Section 14. Motions for Reconsideration. — Motions for reconsideration of any order, resolution or decision of the Commission shall not be entertained except when based on palpable or patent errors, provided that the motion is under oath and filed within ten (10) calendar days from receipt of the order, resolution or decision, with proof of service that a copy of the same has been furnished, within the reglementary period, the adverse party and provided further, that only one such motion from the same party shall be entertained.

Rule VIII, Section 2. Finality of decisions of the Commission. — (a) Finality of the decisions, resolutions or orders of the Commission. Except as provided in Rule XI, Section 10, the decisions, resolutions orders of the Commission/Division shall become executory after (10) calendar days from receipt of the same.

3. Rule 65 of the Rules of Court:

Section. 8. Proceedings after comment is filed. After the comment or other pleadings required by the court are filed, or the time for the filing thereof has expired, the court may hear the case or require the parties to submit memoranda. If after such hearing or filing of memoranda or upon the expiration of the period for filing, the court finds that the allegations of the petition are true, it shall render judgment for such relief to which the petitioner is entitled.

G.R. Nos. 197592 & 20262               November 27, 2013

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THE PROVINCE OF AKLAN, Petitioner, vs.JODY KING CONSTRUCTION AND DEVELOPMENT CORP., Respondent.

D E C I S I O N

VILLARAMA, JR., J.:

These consolidated petitions for review on certiorari seek to reverse and set aside the following: (1) Decision1dated October 18, 2010 and Resolution2 dated July 5, 2011 of the Court of Appeals (CA) in CA-G.R. SP No. 111754; and (2) Decision3 dated August 31, 2011 and Resolution4 dated June 27, 2012 in CA-G.R. SP No. 114073.

The Facts

On January 12, 1998, the Province of Aklan (petitioner) and Jody King Construction and Development Corp. (respondent) entered into a contract for the design and -construction of the Caticlan Jetty Port and Terminal (Phase I) in Malay, Aklan. The total project cost is P38,900,000: P 18,700,000 for the design and construction of passenger terminal, and P20,200,000 for the design and construction of the jetty port facility.5 In the course of construction, petitioner issued variation/change orders for additional works. The scope of work under these change orders were agreed upon by petitioner and respondent.6

On January 5, 2001, petitioner entered into a negotiated contract with respondent for the construction of Passenger Terminal Building (Phase II) also at Caticlan Jetty Port in Malay, Aklan. The contract price for Phase II is P2,475,345.54.7

On October 22, 2001, respondent made a demand for the total amount of P22,419,112.96 covering the following items which petitioner allegedly failed to settle:

1. Unpaid accomplishments on additional worksundertaken - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 12,396,143.09

2. Refund of taxes levied despite it not beingcovered by original contract- - - - - - - - - - - - - - - - - - - - - - Php 884,098.59

3. Price escalation (Consistent with Section 7.5,Original Contract- - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 1,291,714.98

4. Additional Labor Cost resulting [from]numerous change orders issued sporadically - - - - - - - - Php 3,303,486.60

5. Additional Overhead Cost resulting [from]numerous Orders issued sporadically - - - - - - - - - - - - - Php 1,101,162.60

21

6. Interest resulting [from] payment delaysconsistent with Section 7.3.b of the OriginalContract - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Php 3,442,507.50.8

On July 13, 2006, respondent sued petitioner in the Regional Trial Court (RTC) of Marikina City (Civil Case No. 06-1122-MK) to collect the aforesaid amounts.9 On August 17, 2006, the trial court issued a writ of preliminary attachment.10

Petitioner denied any unpaid balance and interest due to respondent. It asserted that the sums being claimed by respondent were not indicated in Change Order No. 3 as approved by the Office of Provincial Governor. Also cited was respondent’s June 10, 2003 letter absolving petitioner from liability for any cost in connection with the Caticlan Passenger Terminal Project.11

After trial, the trial court rendered its Decision12 on August 14, 2009, the dispositive portion of which reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered in favor of plaintiff Jody King Construction And Development Corporation and against defendant Province of Aklan, as follows:

1. ordering the defendant to pay to the plaintiff the amount of Php7,396,143.09 representing the unpaid accomplishment on additional works undertaken by the plaintiff;

2. ordering the defendant to refund to the plaintiff the amount of Php884,098.59 representing additional 2% tax levied upon against the plaintiff;

3. ordering the defendant to pay to the plaintiff price escalation in the amount of Php1,291,714.98 pursuant to Section 7.5 of the original contract;

4. ordering the defendant to pay to the plaintiff the amount of Php3,303,486.60 representing additional labor cost resulting from change orders issued by the defendant;

5. ordering the defendant to pay to the plaintiff the sum of Php1,101,162.00 overhead cost resulting from change orders issued by the defendant;

6. ordering the defendant to pay the sum of Php3,442,507.50 representing interest resulting from payment delays up to October 15, 2001 pursuant to Section 7.3.b of the original contract;

7. ordering the defendant to pay interest of 3% per month from unpaid claims as of October 16, 2001 to date of actual payment pursuant to Section 7.3.b[;]

8. ordering the [defendant] to pay to the plaintiff the sum of Php500,000.00 as moral damages;

9. ordering the defendant to pay to the plaintiff the sum of Php300,000.00 as exemplary damages;

10. ordering the defendant to pay the plaintiff the sum of Php200,000.00, as and for attorney’s fees; and

11. ordering the defendant to pay the cost of suit.

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SO ORDERED.13

Petitioner filed its motion for reconsideration14 on October 9, 2009 stating that it received a copy of the decision on September 25, 2009. In its Order15 dated October 27, 2009, the trial court denied the motion for reconsideration upon verification from the records that as shown by the return card, copy of the decision was actually received by both Assistant Provincial Prosecutor Ronaldo B. Ingente and Atty. Lee T. Manares on September 23, 2009. Since petitioner only had until October 8, 2009 within which to file a motion for reconsideration, its motion filed on October 9, 2009 was filed one day after the finality of the decision. The trial court further noted that there was a deliberate attempt on both Atty. Manares and Prosecutor Ingente to mislead the court and make it appear that their motion for reconsideration was filed on time. Petitioner filed a Manifestation16 reiterating the explanation set forth in its Rejoinder to respondent’s comment/opposition and motion to dismiss that the wrong date of receipt of the decision stated in the motion for reconsideration was due to pure inadvertence attributable to the staff of petitioner’s counsel. It stressed that there was no intention to mislead the trial court nor cause undue prejudice to the case, as in fact its counsel immediately corrected the error upon discovery by explaining the attendant circumstances in the Rejoinder dated October 29, 2009.

On November 24, 2009, the trial court issued a writ of execution ordering Sheriff IV Antonio E. Gamboa, Jr. to demand from petitioner the immediate payment of P67,027,378.34 and tender the same to the respondent. Consequently, Sheriff Gamboa served notices of garnishment on Land Bank of the Philippines, Philippine National Bank and Development Bank of the Philippines at their branches in Kalibo, Aklan for the satisfaction of the judgment debt from the funds deposited under the account of petitioner. Said banks, however, refused to give due course to the court order, citing the relevant provisions of statutes, circulars and jurisprudence on the determination of government monetary liabilities, their enforcement and satisfaction.17

Petitioner filed in the CA a petition for certiorari with application for temporary restraining order (TRO) and preliminary injunction assailing the Writ of Execution dated November 24, 2009, docketed as CA-G.R. SP No. 111754.

On December 7, 2009, the trial court denied petitioner’s notice of appeal filed on December 1, 2009. Petitioner’s motion for reconsideration of the December 7, 2009 Order was likewise denied.18 On May 20, 2010, petitioner filed another petition for certiorari in the CA questioning the aforesaid orders denying due course to its notice of appeal, docketed as CA-G.R. SP No. 114073.

By Decision dated October 18, 2010, the CA’s First Division dismissed the petition in CA-G.R. SP No. 111754 as it found no grave abuse of discretion in the lower court’s issuance of the writ of execution. Petitioner filed a motion for reconsideration which was likewise denied by the CA. The CA stressed that even assuming as true the alleged errors committed by the trial court, these were insufficient for a ruling that grave abuse of discretion had been committed. On the matter of execution of the trial court’s decision, the appellate court said that it was rendered moot by respondent’s filing of a petition before the Commission on Audit (COA).

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On August 31, 2011, the CA’s Sixteenth Division rendered its Decision dismissing the petition in CA-G.R. SP No. 114073. The CA said that petitioner failed to provide valid justification for its failure to file a timely motion for reconsideration; counsel’s explanation that he believed in good faith that the August 14, 2009 Decision of the trial court was received on September 25, 2009 because it was handed to him by his personnel only on that day is not a justifiable excuse that would warrant the relaxation of the rule on reglementary period of appeal. The CA also held that petitioner is estopped from invoking the doctrine of primary jurisdiction as it only raised the issue of COA’s primary jurisdiction after its notice of appeal was denied and a writ of execution was issued against it.

The Cases

In G.R. No. 197592, petitioner submits the following issues:

I.

WHETHER OR NOT THE DECISION DATED 14 AUGUST 2009 RENDERED BY THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY AND THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 SHOULD BE RENDERED VOID FOR LACK OF JURISDICTION OVER THE SUBJECT MATTER OF THE CASE.

II.

WHETHER OR NOT THE REGIONAL TRIAL COURT, BRANCH 273, MARIKINA CITY GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION IN RENDERING THE DECISION DATED 14 AUGUST 2009 AND ISSUING THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 EVEN IT FAILED TO DISPOSE ALL THE ISSUES OF THE CASE BY NOT RESOLVING PETITIONER’S "URGENT MOTION TO DISCHARGE EX-PARTE WRIT OF PRELIMINARY ATTACHMENT" DATED 31 AUGUST 2006.

III.

WHETHER OR NOT THE WRIT OF EXECUTION DATED 24 NOVEMBER 2009 WHICH WAS HASTILY ISSUED IN VIOLATION OF SUPREME COURT ADMINISTRATIVE CIRCULAR NO. 10-2000 SHOULD BE RENDERED VOID.19

The petition in G.R. No. 202623 sets forth the following arguments:

Petitioner is not estopped in questioning the jurisdiction of the Regional Trial Court, Branch 273, Marikina City over the subject matter of the case.20

The petition for certiorari filed before the CA due to the RTC’s denial of petitioner’s Notice of Appeal was in accord with jurisprudence.21

The Issues

The controversy boils down to the following issues: (1) the applicability of the doctrine of primary jurisdiction to this case; and (2) the propriety of the issuance of the writ of execution.

24

Our Ruling

The petitions are meritorious.

COA has primary jurisdiction over private respondent’s money claims Petitioner is not estopped from raising the issue of jurisdiction

The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized training and knowledge of the proper administrative bodies, relief must first be obtained in an administrative proceeding before a remedy is supplied by the courts even if the matter may well be within their proper jurisdiction.22 It applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative agency. In such a case, the court in which the claim is sought to be enforced may suspend the judicial process pending referral of such issues to the administrative body for its view or, if the parties would not be unfairly disadvantaged, dismiss the case without prejudice.23

The objective of the doctrine of primary jurisdiction is to guide the court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court.24

As can be gleaned, respondent seeks to enforce a claim for sums of money allegedly owed by petitioner, a local government unit.

Under Commonwealth Act No. 327,25 as amended by Section 26 of Presidential Decree No. 1445,26 it is the COA which has primary jurisdiction over money claims against government agencies and instrumentalities.

Section 26. General jurisdiction. The authority and powers of the Commission shall extend to and comprehend all matters relating to auditing procedures, systems and controls, the keeping of the general accounts of the Government, the preservation of vouchers pertaining thereto for a period of ten years, the examination and inspection of the books, records, and papers relating to those accounts; and the audit and settlement of the accounts of all persons respecting funds or property received or held by them in an accountable capacity, as well as the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies and instrumentalities. The said jurisdiction extends to all government-owned or controlled corporations, including their subsidiaries, and other self-governing boards, commissions, or agencies of the Government, and as herein prescribed, including non-governmental entities subsidized by the government, those funded by donations through the government, those required to pay levies or government share, and those for which the government has put up a counterpart fund or those partly funded by the government. (Emphasis supplied.)

Pursuant to its rule-making authority conferred by the 1987 Constitution27 and existing laws, the COA promulgated the 2009 Revised Rules of Procedure of the Commission on Audit. Rule II, Section 1

25

specifically enumerated those matters falling under COA’s exclusive jurisdiction, which include "money claims due from or owing to any government agency." Rule VIII, Section 1 further provides:

Section 1. Original Jurisdiction - The Commission Proper shall have original jurisdiction over:

a) money claim against the Government; b) request for concurrence in the hiring of legal retainers by government agency; c) write off of unliquidated cash advances and dormant accounts receivable in amounts exceeding one million pesos (P1,000,000.00); d) request for relief from accountability for loses due to acts of man, i.e. theft, robbery, arson, etc, in amounts in excess of Five Million pesos (P5,000,000.00).

In Euro-Med Laboratories Phil., Inc. v. Province of Batangas,28 we ruled that it is the COA and not the RTC which has primary jurisdiction to pass upon petitioner’s money claim against respondent local government unit. Such jurisdiction may not be waived by the parties’ failure to argue the issue nor active participation in the proceedings. Thus:

This case is one over which the doctrine of primary jurisdiction clearly held sway for although petitioner’s collection suit for P487,662.80 was within the jurisdiction of the RTC, the circumstances surrounding petitioner’s claim brought it clearly within the ambit of the COA’s jurisdiction.

First, petitioner was seeking the enforcement of a claim for a certain amount of money against a local government unit. This brought the case within the COA’s domain to pass upon money claims against the government or any subdivision thereof under Section 26 of the Government Auditing Code of the Philippines:

The authority and powers of the Commission [on Audit] shall extend to and comprehend all matters relating to x x x the examination, audit, and settlement of all debts and claims of any sort due from or owing to the Government or any of its subdivisions, agencies, and instrumentalities. x x x.

The scope of the COA’s authority to take cognizance of claims is circumscribed, however, by an unbroken line of cases holding statutes of similar import to mean only liquidated claims, or those determined or readily determinable from vouchers, invoices, and such other papers within reach of accounting officers. Petitioner’s claim was for a fixed amount and although respondent took issue with the accuracy of petitioner’s summation of its accountabilities, the amount thereof was readily determinable from the receipts, invoices and other documents. Thus, the claim was well within the COA’s jurisdiction under the Government Auditing Code of the Philippines.

Second, petitioner’s money claim was founded on a series of purchases for the medical supplies of respondent’s public hospitals. Both parties agreed that these transactions were governed by the Local Government Code provisions on supply and property management and their implementing rules and regulations promulgated by the COA pursuant to Section 383 of said Code. Petitioner’s claim therefore involved compliance with applicable auditing laws and rules on procurement. Such matters are not within the usual area of knowledge, experience and expertise of most judges but within the special

26

competence of COA auditors and accountants. Thus, it was but proper, out of fidelity to the doctrine of primary jurisdiction, for the RTC to dismiss petitioner’s complaint.

Petitioner argues, however, that respondent could no longer question the RTC’s jurisdiction over the matter after it had filed its answer and participated in the subsequent proceedings. To this, we need only state that the court may raise the issue of primary jurisdiction sua sponte and its invocation cannot be waived by the failure of the parties to argue it as the doctrine exists for the proper distribution of power between judicial and administrative bodies and not for the convenience of the parties.29 (Emphasis supplied.)

Respondent’s collection suit being directed against a local government unit, such money claim should have been first brought to the COA.30 Hence, the RTC should have suspended the proceedings and refer the filing of the claim before the COA. Moreover, petitioner is not estopped from raising the issue of jurisdiction even after the denial of its notice of appeal and before the CA.

There are established exceptions to the doctrine of primary jurisdiction, such as: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of non-exhaustion of administrative remedies has been rendered moot; (j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto proceedings.31 However, none of the foregoing circumstances is applicable in the present case.

The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence.32 All the proceedings of the court in violation of the doctrine and all orders and decisions rendered thereby are null and void.33

Writ of Execution issued in violation of COA’s primary jurisdiction is void

Since a judgment rendered by a body or tribunal that has no jurisdiction over the subject matter of the case is no judgment at all, it cannot be the source of any right or the creator of any obligation. 34 All acts pursuant to it and all claims emanating from it have no legal effect and the void judgment can never be final and any writ of execution based on it is likewise void.35

Clearly, the CA erred in ruling that the RTC committed no grave abuse of discretion when it ordered the execution of its judgment against petitioner and garnishment of the latter’s funds.

In its Supplement to the Motion for Reconsideration, petitioner argued that it is the COA and not the RTC which has original jurisdiction over money claim against government agencies and

27

subdivisions.1âwphi1 The CA, in denying petitioner's motion for reconsideration, simply stated that the issue had become moot by respondent's filing of the proper petition with the COA. However, respondent's belated compliance with the formal requirements of presenting its money claim before the COA did not cure the serious errors committed by the RTC in implementing its void decision. The RTC's orders implementing its judgment rendered without jurisdiction must be set aside because a void judgment can never be validly executed.

Finally, the RTC should have exercised utmost caution, prudence and judiciousness in issuing the writ of execution and notices of garnishment against petitioner. The RTC had no authority to direct the immediate withdrawal of any portion of the garnished funds from petitioner's depositary banks.36 Such act violated the express directives of this Court under Administrative Circular No. 10-2000,37 which was issued "precisely in order to prevent the circumvention of Presidential Decree No. 1445, as well as of the rules and procedures of the COA."38 WHEREFORE, both petitions in G.R. Nos. 197592 and 202623 are GRANTED. The Decision dated October 18, 2010 and Resolution dated July 5 2011 of the Court of Appeals in CA-G.R. SP No. 111754, and Decision dated August 31, 2011 and Resolution dated June 27, 2012 in CA- G.R. SP No. 114073 are hereby REVERSED and SET ASIDE. The Decision dated August 14 2009, Writ of Execution and subsequent issuances implementing the said decision of the Regional Trial Court of Marikina City in Civil Case No. 06-1122-MK are all SET ASIDE. No pronouncement as to costs.

SO ORDERED.

MARTIN S. VILLARAMA, JR.Associate Justice

DIGEST :

THE PROVINCE OF AKLAN v. JODY KING CONSTRUCTION AND DEVELOPMENT CORP., G.R. Nos. 197592 & 202623, November 27, 2013

Remedial law; Doctrine of primary jurisdiction. The doctrine of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized training and knowledge of the proper administrative bodies, relief must first be obtained in an administrative proceeding before a remedy is supplied by the courts even if the matter may well be within their proper jurisdiction. It applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative agency. In such a case, the court in which the claim is sought to be enforced may suspend the judicial process pending referral of such issues to the administrative body for its view or, if the parties would not be unfairly disadvantaged, dismiss the case without prejudice. The objective of the doctrine of primary jurisdiction is to guide the court in determining whether it should refrain from exercising its jurisdiction until after an administrative agency has determined some question or some aspect of some question arising in the proceeding before the court.

Exceptions   to   the   rule   on  primary   jurisdiction. There are established exceptions to the doctrine of primary jurisdiction, such as: (a) where there is estoppel on the part of the party invoking the doctrine;

28

(b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the complainant; (d) where the amount involved is relatively small so as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice; (f) where judicial intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of non-exhaustion of administrative remedies has been rendered moot; (j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto proceedings. However, none of the foregoing circumstances is applicable in the present case. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence. All the proceedings of the court in violation of the doctrine and all orders and decisions rendered thereby are null and void.

Administrative law; The Commission on Audit (COA) has primary jursidiction over money claims against the government. It is the COA and not the RTC which has primary jurisdiction to pass upon petitioner’s money claim against respondent local government unit. Such jurisdiction may not be waived by the parties’ failure to argue the issue nor active participation in the proceedings. Respondent’s collection suit being directed against a local government unit, such money claim should have been first brought to the COA. Hence, the RTC should have suspended the proceedings and refer the filing of the claim before the COA. Moreover, petitioner is not estopped from raising the issue of jurisdiction even after the denial of its notice of appeal and before the CA.

29

D E C I S I O N MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Civil Procedure assailing the August 15, 2006 Decision[1] of the Court of Appeals (CA) in CA-G.R. No. 82711, modifying the decision of the Regional Trial Court of Iriga City, Branch 36 (RTC-Iriga), in Civil Case No. IR-3128, by ordering the consolidation of the said civil case with Special Proceeding Case No. M-5290 (liquidation case) before the Regional Trial Court of Makati City, Branch 59 (RTC-Makati).

It appears from the records that on March 17, 2000, petitioner Lucia Barrameda Vda. De Ballesteros (Lucia) filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of Mortgage and Damages with prayer for Preliminary Injunction against her children, Roy, Rito, Amy, Arabel, Rico, Abe, Ponce Rex and Adden, all surnamed Ballesteros, and the Rural Bank of Canaman, Inc., Baao Branch (RBCI) before the RTC-Iriga. The case was docketed as Civil Case No. IR-3128.

In her complaint, Lucia alleged that her deceased husband, Eugenio, left two (2) parcels of land located in San Nicolas, Baao, Camarines Sur, each with an area of 357 square meters; that on March 6, 1995, without her knowledge and consent, her children executed a deed of extrajudicial partition and waiver of the estate of her husband wherein all the heirs, including Lucia, agreed to allot the two parcels to Rico Ballesteros (Rico); that, still, without her knowledge and consent, Rico mortgaged Parcel B of the estate in favor of RBCI which mortgage was being foreclosed for failure to settle the loan secured by the lot; and that Lucia was occupying Parcel B and had no other place to live. She prayed that the deed of extrajudicial partition and waiver, and the subsequent mortgage in favor of RBCI be declared null and void having been executed without her knowledge and consent. She also prayed for damages.

In its Answer, RBCI claimed that in 1979, Lucia sold one of the two parcels to Rico which represented her share in the estate of her husband. The extrajudicial partition, waiver and mortgage were all executed with the knowledge and consent of Lucia although she was not able to sign the document. RBCI further

30

LUCIA BARRAMEDA VDA. DE BALLESTEROS,Petitioner,

- versus -

RURAL BANK OF CANAMAN INC., represented by its Liquidator, THE PHILIPPINE DEPOSIT INSURANCE CORPORATION,Respondent.

G.R. No. 176260

Present:

CARPIO, J., Chairperson,NACHURA,PERALTA,ABAD, andMENDOZA, JJ.

Promulgated:

November 24, 2010

claimed that Parcel B had already been foreclosed way back in 1999 which fact was known to Lucia through the auctioning notary public. Attorneys fees were pleaded as counterclaim.

The case was then set for pre-trial conference. During the pre-trial, RBCIs counsel filed a motion to withdraw after being informed that Philippine Deposit Insurance Corporation (PDIC)would handle the case as RBCI had already been closed and placed under the receivership of the PDIC. Consequently, on February 4, 2002, the lawyers of PDIC took over the case of RBCI.

On May 9, 2003, RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga has no jurisdiction over the subject matter of the action. RBCI stated that pursuant to Section 30, Republic Act No. 7653 (RA  No.   7653), otherwise known as the New Central Bank Act, the RTC-Makati, already constituted itself, per its Order dated August 10, 2001, as the liquidation court to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No. IR-3128 fell within the exclusive jurisdiction of such liquidation court.Lucia opposed the motion.

On July 29, 2003, the RTC-Iriga issued an order[2] granting the Motion to Dismiss, to wit:

This resolves the Motion to Dismiss filed by the defendant Rural Bank of Canaman, Inc., premised on the ground that this court has no jurisdiction over the subject matter of the action. This issue of jurisdiction was raised in view of the pronouncement of the Supreme Court in Ong v. C.A. 253 SCRA 105 and in the case of Hernandez v. Rural Bank of Lucena, Inc., G.R. No. L-29791 dated January 10, 1978, wherein it was held that the liquidation court shall have jurisdiction to adjudicate all claims against the bank whether they be against assets of the insolvent bank, for Specific Performance, Breach of Contract, Damages or whatever.

It is in view of this jurisprudential pronouncement made by no less than the Supreme Court, that this case is, as far as defendant Rural Bank of Canaman Inc., is concerned, hereby ordered DISMISSED without prejudice on the part of the plaintiff to ventilate their claim before the Liquidation Court now, RTC Branch 59, Makati City.

SO ORDERED.

Not in conformity, Lucia appealed the RTC ruling to the CA on the ground that the RTC-Iriga erred in dismissing the case because it had jurisdiction over Civil Case No. IR-3128 under the rule on adherence of jurisdiction.

On August 15, 2006, the CA rendered the questioned decision ordering the consolidation of Civil Case No. IR-3128 and the liquidation case pending before RTC-Makati. The appellate court ratiocinated thus:

The consolidation is desirable in order to prevent confusion, to avoid multiplicity of suits and to save unnecessary cost and expense. Needless to add, this procedure is well in accord with the principle that the rules of procedure shall be liberally construed in order to promote their object and to assist the parties in obtaining just, speedy and inexpensive determination of every action and proceeding (Vallacar Transit, Inc. v. Yap, 126 SCRA 500 [1983]; Suntay v. Aguiluz, 209 SCRA 500 [1992] citing Ramos v. Ebarle, 182 SCRA 245 [1990]). It would be more in keeping with the demands of equity if the cases are simply

31

ordered consolidated. Pursuant to Section 2, Rule 1, Revised Rules of Court, the rules on consolidation should be liberally construed to achieve the object of the parties in obtaining just, speedy and inexpensive determination of their cases (Allied Banking Corporation v. Court of Appeals, 259 SCRA 371 [1996]).

The dispositive portion of the decision reads:

IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED, in such a way that the dismissal of this case (Civil Case No. IR-3128) is set aside and in lieu thereof another one is entered ordering the consolidation of said case with the liquidation case docketed as Special Proceeding No. M-5290 before Branch 59 of the Regional TrialCourt of Makati City, entitled In Re: Assistance in the Judicial Liquidation of Rural Bank of Canaman, Camarines Sur, Inc., Philippine Deposit Corporation, Petitioner. No pronouncement as to cost.

SO ORDERED.[3]

Lucia filed a motion for reconsideration[4] but it was denied by the CA in its Resolution dated December 14, 2006.[5]

Hence, the present petition for review on certiorari anchored on the following

 GROUNDS 

(I)

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE REGIONAL TRIAL COURT OF IRIGA CITY, BRANCH 36 IS VESTED WITH JURISDICTION TO CONTINUE TRYING AND ULTIMATELY DECIDE CIVIL CASE NO. IR-3128.

(II)

THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN ORDERING THE CONSOLIDATION OF CIVIL CASE NO. IR-3128 WITH THE LIQUIDATION CASE DOCKETED AS SPECIAL PROCEEDINGS NO. M-5290 BEFORE BRANCH 59 OF THE REGIONAL TRIAL COURT OF MAKATI CITY.[6]

Given the foregoing arguments, the Court finds that the core issue to be resolved in this petition involves a determination of whether a liquidation court can take cognizance of a case wherein the main cause of action is not a simple money claim against a bank ordered closed, placed under receivership of the PDIC, and undergoing a liquidation proceeding.

Lucia contends that the RTC-Iriga is vested with jurisdiction over Civil Case No. 3128, the constitution of the liquidation court notwithstanding. According to her, the case was filed before the RTC-Iriga on March 17, 2000 at the time RBCI was still doing business or before the defendant bank was placed under receivership of PDIC in January 2001.

32

She further argues that the consolidation of the two cases is improper. Her case, which is for annulment of deed of partition and waiver, deed of mortgage and damages, cannot be legally brought before the RTC-Makati with the liquidation case considering that her cause of action against RBCI is not a simple claim arising out of a creditor-debtor relationship, but one which involves her rights and interest over a certain property irregularly acquired by RBCI. Neither is she a creditor of the bank, as only the creditors of the insolvent bank are allowed to file and ventilate claims before the liquidator, pursuant to the August 10, 2001 Order of the RTC-Makati which granted the petition for assistance in the liquidation of RBCI.

In its Comment,[7] PDIC, as liquidator of RBCI, counters that the consolidation of Civil Case No. 3128 with the liquidation proceeding is proper. It posits that the liquidation court of RBCI, having been established, shall have exclusive jurisdiction over all claims against the said bank.

After due consideration, the Court finds the petition devoid of merit.

Lucias argument, that the RTC-Iriga is vested with jurisdiction to continue trying Civil Case No. IR-3128 until its final disposition, evidently falls out from a strained interpretation of the law and jurisprudence. She contends that:

Since the RTC-Iriga has already obtained jurisdiction over the case it should continue exercising such jurisdiction until the final termination of the case. The jurisdiction of a court once attached cannot be ousted by subsequent happenings or events, although of a character which would have prevented jurisdiction from attaching in the first instance, and the Court retains jurisdiction until it finally disposes of the case (Aruego Jr. v. Court of Appeals, 254 SCRA 711).

When a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to final determination of the case is not affected by a new legislation transferring jurisdiction over such proceedings to another tribunal. (Alindao v. Joson, 264 SCRA 211). Once jurisdiction is vested, the same is retained up to the end of the litigation (Bernate v. Court of Appeals, 263 SCRA 323).[8]

The afore-quoted cases, cited by Lucia to bolster the plea for the continuance of her case, find no application in the case at bench.

Indeed, the Court recognizes the doctrine on adherence of jurisdiction. Lucia, however, must be reminded that such principle is not without exceptions. It is well to quote the ruling of the CA on this matter, thus:

This Court is not unmindful nor unaware of the doctrine on the adherence of jurisdiction. However, the rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is that when the change in jurisdiction is curative in character (Garcia v. Martinez, 90 SCRA 331 [1979]; Calderon, Sr. v.   Court   of   Appeals, 100 SCRA 459 [1980]; Atlas   Fertilizer   Corporation   v.   Navarro, 149 SCRA 432 [1987]; Abad v. RTC of Manila, Br. Lll, 154 SCRA 664 [1987]).

For sure, Section 30, R.A. 7653 is curative in character when it declared that the liquidation court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the

33

Bank. The interpretation of this Section (formerly Section 29, R.A. 265) becomes more obvious in the light of its intent. In Manalo v. Court of Appeals (366 SCRA 752, [2001]), the Supreme Court says:

xxx The requirement that all claims against the bank be pursued in the liquidation proceedings filed by the Central Bank is intended to prevent multiplicity of actions against the insolvent bank and designed to establish due process and orderliness in the liquidation of the bank, to obviate the proliferation of litigations and to avoid injustice and arbitrariness (citing Ong   v.   CA, 253 SCRA 105 [1996]). The lawmaking body contemplated that for convenience, only one court, if possible, should pass upon the claims against the insolvent bank and that the liquidation court should assist the Superintendents of Banks and regulate his operations (citing Central Bank of the Philippines, et al. v. CA, et al., 163 SCRA 482 [1988]).[9]

As regards Lucias contention that jurisdiction already attached when Civil Case No. IR-3128 was filed with, and jurisdiction obtained by, the RTC-Iriga prior to the filing of the liquidation case before the RTC-Makati, her stance fails to persuade this Court. In refuting this assertion, respondent PDIC cited the case of Lipana v. Development Bank of Rizal[10] where it was held that the time of the filing of the complaint is immaterial, viz:

It is the contention of petitioners, however, that the placing under receivership of Respondent Bank long after the filing of the complaint removed it from the doctrine in the said Morfe Case.

This contention is untenable. The time of the filing of the complaint is immaterial. It is the execution that will obviously prejudice the other depositors and creditors. Moreover, as stated in the said Morfe case, the effect of the judgment is only to fix the amount of the debt, and not to give priority over other depositors and creditors.

The cited Morfe case[11] held that after the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the Board becomes the trustee of its assets for the equal benefit of all the creditors, including depositors. The assets of the insolvent banking institution are held in trust for the equal benefit of all creditors, and after its insolvency, one cannot obtain an advantage or a preference over another by an attachment, execution or otherwise.

Thus, to allow Lucias case to proceed independently of the liquidation case, a possibility of favorable judgment and execution thereof against the assets of RBCI would not only prejudice the other creditors and depositors but would defeat the very purpose for which a liquidation court was constituted as well.

Anent the second issue, Lucia faults the CA in directing the consolidation of Civil Case No. IR-3128 with Special Proceedings No. M-5290. The CA committed no error. Lucias complaint involving annulment of deed of mortgage and damages falls within the purview of a disputed claim in contemplation of Section 30 of R.A. 7653 (The New Central Bank Act). The jurisdiction should be lodged with the liquidation court. Section 30 provides:

Sec. 30. Proceedings   in   Receivership   and   Liquidation. - Whenever, upon report of the head of the supervising or examining department, the Monetary Board finds that a bank or quasi-bank:

34

(a) is unable to pay its liabilities as they become due in the ordinary course of business: Provided, That this shall not include inability to pay caused by extraordinary demands induced by financial panic in the banking community;

(b) has insufficient realizable assets, as determined by the Bangko Sentral, to meet its liabilities; or

(c) cannot continue in business without involving probable losses to its depositors or creditors; or

(d) has wilfully violated a cease and desist order under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution; in which cases, the Monetary Board may summarily and without need for prior hearing forbid the institution from doing business in the Philippines and designate the Philippine Deposit Insurance Corporation as receiver of the banking institution.

For a quasi-bank, any person of recognized competence in banking or finance may be designated as receiver.

The receiver shall immediately gather and take charge of all the assets and liabilities of the institution, administer the same for the benefit of its creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the institution: Provided, That the receiver may deposit or place the funds of the institution in non-speculative investments. The receiver shall determine as soon as possible, but not later than ninety (90) days from take over, whether the institution may be rehabilitated or otherwise placed in such a condition that it may be permitted to resume business with safety to its depositors and creditors and the general public: Provided, That any determination for the resumption of business of the institution shall be subject to prior approval of the Monetary Board.

If the receiver determines that the institution cannot be rehabilitated or permitted to resume business in accordance with the next preceding paragraph, the Monetary Board shall notify in writing the board of directors of its findings and direct the receiver to proceed with the liquidation of the institution. The receiver shall:

(1) file ex parte with the proper regional trial court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the institution pursuant to a liquidation plan adopted by the Philippine Deposit Insurance Corporation for general application to all closed banks. In case of quasi-banks, the liquidation plan shall be adopted by the Monetary Board. Upon acquiring jurisdiction, the court shall, upon motion by the receiver after due notice, adjudicate disputed claims against the institution, assist the enforcement of individual liabilities of the stockholders, directors and officers, and decide on other issues as may be material to implement the liquidation plan adopted. The receiver shall pay the cost of the proceedings from the assets of the institution.

(2) convert the assets of the institution to money, dispose of the same to creditors and other parties, for the purpose of paying the debts of such institution in accordance with the rules on concurrence and

35

preference of credit under the Civil Code of the Philippines and he may, in the name of the institution, and with the assistance of counsel as he may retain, institute such actions as may be necessary to collect and recover accounts and assets of, or defend any action against, the institution. The assets of an institution under receivership or liquidation shall be deemed in custodia   legis in the hands of the receiver and shall, from the moment the institution was placed under such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, or execution. [Emphasis supplied]

Disputed claims refer to all claims, whether they be against the assets of the insolvent bank, for specific performance, breach of contract, damages, or whatever. [12] Lucias action being a claim against RBCI can properly be consolidated with the liquidation proceedings before the RTC-Makati. A liquidation proceeding has been explained in the case of In Re: Petition For Assistance in the Liquidation of the Rural Bank of BOKOD (Benguet), Inc. v. Bureau of Internal Revenue[13] as follows:

A liquidation proceeding is a single proceeding which consists of a number of cases properly classified as "claims." It is basically a two-phased proceeding. The first phase is concerned with the approval and disapproval of claims. Upon the approval of the petition seeking the assistance of the proper court in the liquidation of a closed entity, all money claims against the bank are required to be filed with the liquidation court. This phase may end with the declaration by the liquidation court that the claim is not proper or without basis. On the other hand, it may also end with the liquidation court allowing the claim. In the latter case, the claim shall be classified whether it is ordinary or preferred, and thereafter included Liquidator. In either case, the order allowing or disallowing a particular claim is final order, and may be appealed by the party aggrieved thereby.

The second phase involves the approval by the Court of the distribution plan prepared by the duly appointed liquidator. The distribution plan specifies in detail the total amount available for distribution to creditors whose claim were earlier allowed. The Order finally disposes of the issue of how much property is available for disposal. Moreover, it ushers in the final phase of the liquidation proceeding - payment of all allowed claims in accordance with the order of legal priority and the approved distribution plan.

A liquidation proceeding is commenced by the filing of a single petition by the Solicitor General with a court of competent jurisdiction entitled, "Petition for Assistance in the Liquidation of e.g., Pacific Banking Corporation. All claims against the insolvent are required to be filed with the liquidation court. Although the claims are litigated in the same proceeding, the treatment is individual. Each claim is heard separately. And the Order issued relative to a particular claim applies only to said claim, leaving the other claims unaffected, as each claim is considered separate and distinct from the others. x x x [Emphasis supplied.]

It is clear, therefore, that the liquidation court has jurisdiction over all claims, including that of Lucia against the insolvent bank. As declared in Miranda v. Philippine Deposit Insurance Corporation,[14] regular courts do not have jurisdiction over actions filed by claimants against an insolvent bank, unless there is a clear showing that the action taken by the BSP, through the Monetary Board, in the closure of financial

36

institutions was in excess of jurisdiction, or with grave abuse of discretion. The same is not obtaining in this present case.

The power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the State. Police power, however, is subject to judicial inquiry. It may not be exercised arbitrarily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust, or is tantamount to a denial of due process and equal protection clauses of the Constitution.[15]

In sum, this Court holds that the consolidation is proper considering that the liquidation court has jurisdiction over Lucias action. It would be more in keeping with law and equity if Lucias case is consolidated with the liquidation case in order to expeditiously determine whether she is entitled to recover the property subject of mortgage from RBCI and, if so, how much she is entitled to receive from the remaining assets of the bank.

WHEREFORE, the petition is DENIED.

SO ORDERED.

DIGEST :

BARRAMEDA vs RURAL BANK OF CANAMAN INC. G.R. No. 176260, November 24, 2010

FACTS: petitioner Lucia Barrameda Vda. De Ballesteros (Lucia) filed a complaint for Annulment of Deed of Extrajudicial Partition, Deed of Mortgage and Damages with prayer for Preliminary Injunction against her children, Roy, Rito, Amy, Arabel, Rico, Abe, Ponce Rex and Adden, all surnamed Ballesteros, and the Rural Bank of Canaman, Inc., Baao Branch (RBCI) before the RTC-Iriga praying that the deed of extrajudicial partition and waiver made by her children, and the subsequent mortgage in favor of RBCI be declared null and void having been executed without her knowledge and consent.

RBCI, through PDIC, filed a motion to dismiss on the ground that the RTC-Iriga has no jurisdiction over the subject matter of the action. RBCI stated that pursuant to Section 30, Republic Act No. 7653(RA No. 7653), otherwise known as the "New Central Bank Act," the RTC-Makati, already constituted itself, per its Order dated August 10, 2001, as the liquidation court to assist PDIC in undertaking the liquidation of RBCI. Thus, the subject matter of Civil Case No. IR-3128 fell within the exclusive jurisdiction of such liquidation court.

RTC granted the Motion to Dismiss. CA ordered the consolidation of the civil case and the liquidation case with the liquidation court, RTC-Makati.

ISSUE: Whether a liquidation court can take cognizance of a case wherein the main cause of action is not a simple money claim against a bank ordered closed, placed under receivership of the PDIC, and undergoing a liquidation proceeding.

37

RULING: Generally, when a court has already obtained and is exercising jurisdiction over a controversy, its jurisdiction to proceed to final determination of the case is not affected by a new legislation transferring jurisdiction over such proceedings to another tribunal. Once jurisdiction is vested, the same is retained up to the end of the litigation.

However, this rule does not find application in this case.

 The rule on adherence of jurisdiction is not absolute and has exceptions. One of the exceptions is that when the change in jurisdiction is curative in character.

Section 30, R.A. 7653 is curative in character when it declared that the liquidation court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the Bank. The interpretation of this Section (formerly Section 29, R.A. 265) becomes more obvious in the light of its intent. 

 To allow Lucia’s case to proceed independently of the liquidation case, a possibility of favorable judgment and execution thereof against the assets of RBCI would not only prejudice the other creditors and depositors but would defeat the very purpose for which a liquidation court was constituted as well.

[G.R. No. 140746. March 16, 2005]

PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, petitioners, vs. STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE,respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari assailing the Decision[1] dated July 23 1999 and Resolution[2] dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453, entitledStandard Insurance Company, Inc., and Martina Gicale vs. PANTRANCO North Express, Inc., and Alexander Buncan.

In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by his mother Martina Gicale, respondent herein. It was then raining. While driving north bound along the National Highway in Talavera, Nueva Ecija, a passenger bus, owned by Pantranco North Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, was trailing behind. When the two vehicles were negotiating a curve along the highway, the passenger bus overtook the jeepney. In so doing, the passenger bus hit the left rear side of the jeepney and sped away.

Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance Co., Inc. (Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but respondent Standard paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.

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Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners Pantranco and its driver Alexander Buncan, but they refused. This prompted respondents to file with the Regional Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.

In their answer, both petitioners specifically denied the allegations in the complaint and averred that it is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.

On June 5, 1992, the trial court rendered a Decision [3] in favor of respondents Standard and Martina, thus:

WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered in favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against defendants Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as follows:

(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon from November 27, 1984 until fully paid;

(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from October 22, 1984 until fully paid;

(3) to pay the sum of P10,000.00 for attorneys fees;

(4) to pay the expenses of litigation and the cost of suit.

SO ORDERED.

On appeal, the Court of Appeals, in a Decision[4] dated July 23, 1999, affirmed the trial courts ruling, holding that:

The appellants argue that appellee Gicales claim of P13,415.00 and appellee insurance companys claim of P8,000.00 individually fell under the exclusive original jurisdiction of the municipal trial court. This is not correct because under the Totality Rule provided for under Sec. 19, Batas Pambansa Bilang 129, it is the sum of the two claims that determines the jurisdictional amount.

In the case at bench, the total of the two claims is definitely more than P20,000.00 which at the time of the incident in question was the jurisdictional amount of the Regional Trial Court.

Appellants contend that there was a misjoinder of parties. Assuming that there was, under the Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto), the same does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint.

It does not need perspicacity in logic to see that appellees Gicales and insurance companys individual claims against appellees (sic) arose from the same vehicular accident on October 28, 1984 involving appellant Pantrancos bus and appellee Gicales jeepney. That being the case, there was a question of fact common to all the parties: Whose fault or negligence caused the damage to the jeepney?

39

Appellants submit that they were denied their day in court because the case was deemed submitted for decision without even declaring defendants in default or to have waived the presentation of evidence. This is incorrect. Of course, the court did not declare defendants in default because that is done only when the defendant fails to tender an answer within the reglementary period. When the lower court ordered that the case is deemed submitted for decision that meant that the defendants were deemed to have waived their right to present evidence. If they failed to adduce their evidence, they should blame nobody but themselves. They failed to be present during the scheduled hearing for the reception of their evidence despite notice and without any motion or explanation. They did not even file any motion for reconsideration of the order considering the case submitted for decision. Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly established their liability for quasi-delict under Article 2176 of the Civil Code.

Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated November 4, 1999.

Hence, this petition for review on certiorari raising the following assignments of error:

I

WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF THE ACTION CONSIDERING THAT RESPONDENTS RESPECTIVE CAUSE OF ACTION AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME TRANSACTION NOR ARE THERE QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS AND RESPONDENTS.

II

WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT BAR, RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.

III

WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE PROCESS.

For their part, respondents contend that their individual claims arose out of the same vehicular accident and involve a common question of fact and law. Hence, the RTC has jurisdiction over the case.

I

Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of each respondent did not arise from the same transaction and that there are no common questions of law and fact common to both parties. Section 6, Rule 3 of the Revised Rules of Court,[5] provides:

Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these Rules, join as plaintiffs or be

40

joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest.

Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction or series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants; and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and venue.[6]

In this case, there is a single transaction common to all, that is, Pantrancos bus hitting the rear side of the jeepney. There is also a common question of fact, that is, whether petitioners are negligent. There being a single transaction common to both respondents, consequently, they have the same cause of action against petitioners.

To determine identity of cause of action, it must be ascertained whether the same evidence which is necessary to sustain the second cause of action would have been sufficient to authorize a recovery in the first.[7] Here, had respondents filed separate suits against petitioners, the same evidence would have been presented to sustain the same cause of action. Thus, the filing by both respondents of the complaint with the court below is in order. Such joinder of parties avoids multiplicity of suit and ensures the convenient, speedy and orderly administration of justice.

Corollarily, Section 5(d), Rule 2 of the same Rules provides:

Sec. 5. Joinder of causes of action. A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions:

x x x

(d) Where the claims in all the causes of action are principally for recovery of money the aggregate amount claimed shall be the test of jurisdiction.

The above provision presupposes that the different causes of action which are joined accrue in favor of the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is involved.[8] The issue of whether respondents claims shall be lumped together is determined by paragraph (d) of the above provision. This paragraph embodies the totality rule as exemplified by Section 33 (1) of B.P. Blg. 129[9] which states, among others, that where there are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions.

As previously stated, respondents cause of action against petitioners arose out of the same transaction. Thus, the amount of the demand shall be the totality of the claims.

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Respondent Standards claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00, or a total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has exclusive original jurisdiction over all other cases, in which the demand, exclusive of interest and cost or the value of the property in controversy, amounts to more than twenty thousand pesos (P20,000.00). Clearly, it is the RTC that has jurisdiction over the instant case. It bears emphasis that when the complaint was filed, R.A. 7691 expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit Trial Courts had not yet taken effect. It became effective on April 15, 1994.

II

The finding of the trial court, affirmed by the Appellate Court, that petitioners are negligent and thus liable to respondents, is a factual finding which is binding upon us, a rule well-established in our jurisprudence. It has been repeatedly held that the trial court's factual findings, when affirmed by the Appellate Court, are conclusive and binding upon this Court, if they are not tainted with arbitrariness or oversight of some fact or circumstance of significance and influence. Petitioners have not presented sufficient ground to warrant a deviation from this rule.[10]

III

There is no merit in petitioners contention that they were denied due process. Records show that during the hearing, petitioner Pantrancos counsel filed two motions for resetting of trial which were granted by the trial court. Subsequently, said counsel filed a notice to withdraw. After respondents had presented their evidence, the trial court, upon petitioners motion, reset the hearing to another date. On this date, Pantranco failed to appear. Thus, the trial court warned Pantranco that should it fail to appear during the next hearing, the case will be submitted for resolution on the basis of the evidence presented. Subsequently, Pantrancos new counsel manifested that his client is willing to settle the case amicably and moved for another postponement. The trial court granted the motion. On the date of the hearing, the new counsel manifested that Pantrancos employees are on strike and moved for another postponement. On the next hearing, said counsel still failed to appear. Hence, the trial court considered the case submitted for decision.

We have consistently held that the essence of due process is simply an opportunity to be heard, or an opportunity to explain ones side or an opportunity to seek for a reconsideration of the action or ruling complained of.[11]

Petitioner Pantranco filed an answer and participated during the trial and presentation of respondents evidence. It was apprised of the notices of hearing issued by the trial court. Indeed, it was afforded fair and reasonable opportunity to explain its side of the controversy. Clearly, it was not denied of its right to due process. What is frowned upon is the absolute lack of notice and hearing which is not present here.

42

WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999 and Resolution dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453 are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

PANTRANCO North Express, Inc., and Alexander Buncan, versus Standard Insurance Company, Inc., and Martina Gicale, G.R. No. 140746, March 16, 2005.

DIGEST:

PANTRANCO North Express, Inc., and Alexander Buncan, versus

Standard Insurance Company, Inc., and Martina Gicale,

G.R. No. 140746, March 16, 2005.

NATURE OF THE CASE: The case was elevated to the SC by Pantranco and Buncan by reason of the ruling of the CA against them and the denial of the appellate court of their motion for reconsideration. The CA ruled that there was no misjoinder of parties in the complaint filed by Standard and Gicale against them, and that they are to be held accountable to the money claims of the respondents.

FACTS: Crispin Gicale was driving the passenger jeepney owned by his mother Martina Gicale. Alexander Buncan, on the other hand, was driving a bus owned by Pantranco North Express Inc. Both drivers were travelling along the National Highway of Talavera, Nueva Ecija in a rainy afternoon. Buncan was driving the bus northbound while Cripin was trailing behind. When the two vehicles were negotiating a curve along the highway, the passenger bus overtook the jeepney. In so doing, thhe passenger bus hit the left rear side of the jeepney and sped away.

Crispin reported the incident to the police and to the insurer of their jeepney, Standard Insurance Co. The total cost of the repair amounted to P21, 415. Standard only paid P8,000 while Martina Gicale shouldered the remaining P13,415. Thereafter, Standard and Martina demanded reimbursements from Pantranco and Buncan, but the bus company and the driver refused. Thus, Standard and Martina were prompted to file a complaint for sum of money with the RTC of Manila. Pantranco and Buncan denied the allegations of the complaint and asserted that it is the MeTC which has jurisdiction over the case.

RTC: The trial court ruled in favor of Standard and Martina, and ordered Pantranco and Buncan to pay the former reimbursements with interests due thereon plus attorney's fees, and litigation expenses.

Pantranco and Buncan: The RTC has no jurisdiction over the complaint.

1) Martina Gicale was claiming P13,415, while Standard was claiming P8,000. Their individual claims are below P20,000. Thus, the case falls under the exclusive jurisdiction of the MTC.

2) There was a misjoinder of parties.

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CA: The appellate court affirmed the decision of the RTC.

1) Under the Totality Rule provided for under Sec. 19 of BP 129, it is the sum of the two claims that determines the jurisdictional amount. At the time this case was heard, cases involving money claims that amounts to more than P20,000 falls under the exclusive jurisdiction of the RTC.

2) Even assuming that there was a misjoinder of parties, it does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint. The claims of Gicale and Standard arose from the same vehicular accident involving Pantranco's bus and Gicale's jeepney. Thus, there was a question of fact common to all parties.

Pantranco and Buncan's motion for reconsideration was denied by the CA.

Gicale and Standard: There was no misjoinder of parties. Their individual claims arose from the same vehicular accident and involve a common question of fact and law. Thus, the RTC has jurisdiction over the case.

ISSUE: WON there was a misjoinder of parties in the case.

HELD: No. Sec. 6, Rule 3 of the Revised Rules of Court provides the following requirements for a permissive joinder of parties: (a) the right to relief arises out of the same transaction or series of transactions; (b) there is a question of law or fact common to all the plaintiffs or defendants; and (c) such joinder is not otherwise proscribed by the provisions of the Rules on jurisdiction and venue.

In this case, there is a single transaction common to all, that is, Pantranco’s bus hitting the rear side of the jeepney. There is also a common question of fact, that is, whether petitioners are negligent. There being a single transaction common to both respondents, consequently, they have the same cause of action against petitioners.

To determine identity of cause of action, it must be ascertained whether the same evidence which is necessary to sustain the second cause of action would have been sufficient to authorize a recovery in the first. Here, had respondents filed separate suits against petitioners, the same evidence would have been presented to sustain the same cause of action. Thus, the filing by both respondents of the complaint with the court below is in order. Such joinder of parties avoids multiplicity of suit and ensures the convenient, speedy and orderly administration of justice.

There is NO MISJOINDER OF PARTIES if the money sought to be claimed is in favor of the same plaintiff/s and against the same defendant/s.

On the issue of lumping together the claims of Gicale and Standard, Section 5(d), Rule 2 of the same Rules provides:

“Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the alternative or otherwise, as many causes of action as he may have against an opposing party, subject to the following conditions:

44

x x x

(d) Where the claims in all the causes of action are principally for recovery of money the aggregate amount claimed shall be the test of jurisdiction.”

Further, the Court reiterates the Totality rule exemplified by Sec. 33 (1) of BP 129: “where there are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions.”

Hence, PETITION IS DENIED.

FAUSTINO REYES, - versus - PETER B. ENRIQUEZ, for himself and Attorney-in-Fact of his

D E C I S I O N

PUNO, C.J.:

This case is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court from the decision of the Court of Appeals (CA) dated September 29, 2003 in CA G.R. CV No. 68147, entitled Peter B. Enriquez, et al. v. Faustino Reyes, et al., reversing the decision of the Regional Trial Court (RTC) of Cebu City, Branch XI dated June 29, 2000, which dismissed the complaint filed by the respondents herein.[1]

The subject matter of the present case is a parcel of land known as Lot No. 1851 Flr-133 with an aggregate area of 2,017 square meters located in Talisay, Cebu.[2]

According to petitioners Faustino Reyes, Esperidion Reyes, Julieta C. Rivera, and Eutiquio Dico, Jr., they are the lawful heirs of Dionisia Reyes who co-owned the subject parcel of land with Anacleto Cabrera as evidenced by Transfer Certificate of Title (TCT) No. RT-3551 (T-8070). On April 17, 1996, petitioners executed an Extrajudicial Settlement with Sale of the Estate of Dionisia Reyes (the Extra Judicial Settlement) involving a portion of the subject parcel of land. On March 21, 1997, the petitioners and the

45

known heirs of Anacleto Cabrera executed a Segregation of Real Estate and Confirmation of Sale (the Segregation and Confirmation) over the same property. By virtue of the aforestated documents, TCT No. RT-35551 (T-8070) was cancelled and new TCTs were issued: (1) TCT No. T-98576 in the name of Anacleto Cabrera covering Lot 1851-A; (2) TCT No. T-98577 covering Lot 1851-B in the name of petitioner Eutiquio Dico, Jr.; (3) TCT No. T-98578 covering Lot 1851-C in the name of petitioner Faustino Reyes; (4) TCT No. T-98579 covering Lot 1851-D in the name of petitioner Esperidion Reyes; (5) TCT No. T-98580 covering Lot 1851-E in the name of petitioner Julieta G. Rivera; (6) TCT No. T-98581 covering Lot 1851-F in the name of Felipe Dico; and (7) TCT No. T-98582 covering Lot 1851-G in the name of Archimedes C. Villaluz.[3]

Respondents Peter B. Enriquez (Peter) for himself and on behalf of his minor daughter Deborah Ann C. Enriquez (Deborah Ann), also known as Dina Abdullah Enriquez Alsagoff, on the other hand, alleges that their predecessor-in-interest Anacleto Cabrera and his wife Patricia Seguera Cabrera (collectively the Spouses Cabrera) owned pro-indiviso share in the subject parcel of land or 1051 sq. m. They further allege that Spouses Cabrera were survived by two daughters Graciana, who died single and without issue, and Etta, the wife of respondent Peter and mother of respondent Deborah Ann who succeeded their parents rights and took possession of the 1051 sq. m. of the subject parcel of land. During her lifetime, Graciana sold her share over the land to Etta. Thus, making the latter the sole owner of the one-half share of the subject parcel of land. Subsequently, Etta died and the property passed on to petitioners Peter and Deborah Ann by virtue of an Extra-Judicial Settlement of Estate. On June 19, 1999, petitioners Peter and Deborah Ann sold 200 sq. m. out of the 1051 sq. m. forP200,000.00 to Spouses Dionisio and Catalina Fernandez (Spouses Fernandez), also their co-respondents in the case at bar. After the sale, Spouses Fernandez took possession of the said area in the subject parcel of land.[4]

When Spouses Fernandez, tried to register their share in the subject land, they discovered that certain documents prevent them from doing so: (1) Affidavit by Anacleto Cabrera dated March 16, 1957 stating that his share in Lot No. 1851, the subject property, is approximately 369 sq. m.; (2) Affidavit by Dionisia Reyes dated July 13, 1929 stating that Anacleto only owned of Lot No. 1851, while 302.55 sq. m. belongs to Dionisia and the rest of the property is co-owned by Nicolasa Bacalso, Juan Reyes, Florentino Reyes and Maximiano Dico; (3) Extra-Judicial Settlement with Sale of the Estate of Dionisia Reyes dated April 17, 1996; (4) certificates of title in the name of the herein petitioners; and (5) Deed of Segregation of Real Estate and Confirmation of Sale dated March 21, 1997 executed by the alleged heirs of Dionisia Reyes and Anacleto Cabrera. Alleging that the foregoing documents are fraudulent and fictitious, the respondents filed a complaint for annulment or nullification of the aforementioned documents and for damages. [5] They likewise prayed for the repartition and resubdivision of the subject property.[6]

The RTC, upon motion of the herein petitioners, dismissed the case on the ground that the respondents-plaintiffs were actually seeking first and foremost to be declared heirs of Anacleto Cabrera since they can not demand the partition of the real property without first being declared as legal heirs and such may not be done in an ordinary civil action, as in this case, but through a special proceeding specifically instituted for the purpose.[7]

46

On appeal, the Court of Appeals (CA) reversed the RTC and directed the trial court to proceed with the hearing of the case.[8] The Motion for Reconsideration filed by the herein petitioners was similarly denied.[9]

Hence this petition.

The primary issue in this case is whether or not the respondents have to institute a special proceeding to determine their status as heirs of Anacleto Cabrera before they can file an ordinary civil action to nullify the affidavits of Anacleto Cabrera and Dionisia Reyes, the Extra-Judicial Settlement with the Sale of Estate of Dionisia Reyes, and the Deed of Segregation of Real Estate and Confirmation of Sale executed by the heirs of Dionisia Reyes and the heirs of Anacleto Cabrera, as well as to cancel the new transfer certificates of title issued by virtue of the above-questioned documents.

We answer in the affirmative.

An ordinary civil action is one by which a party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong.[10] A special proceeding, on the other hand, is a remedy by which a party seeks to establish a status, a right or a particular fact.[11]

The Rules of Court provide that only a real party in interest is allowed to prosecute and defend an action in court.[12] A real party in interest is the one who stands to be benefited or injured by the judgment in the suit or the one entitled to the avails thereof. [13] Such interest, to be considered a real interest, must be one which is present and substantial, as distinguished from a mere expectancy, or a future, contingent, subordinate or consequential interest.[14] A plaintiff is a real party in interest when he is the one who has a legal right to enforce or protect, while a defendant is a real party in interest when he is the one who has a correlative legal obligation to redress a wrong done to the plaintiff by reason of the defendants act or omission which had violated the legal right of the former. [15] The purpose of the rule is to protect persons against undue and unnecessary litigation.[16] It likewise ensures that the court will have the benefit of having before it the real adverse parties in the consideration of a case. [17] Thus, a plaintiffs right to institute an ordinary civil action should be based on his own right to the relief sought.

In cases wherein alleged heirs of a decedent in whose name a property was registered sue to recover the said property through the institution of an ordinary civil action, such as a complaint for reconveyance and partition,[18] or nullification of transfer certificate of titles and other deeds or documents related thereto,[19] this Court has consistently ruled that a declaration of heirship is improper in an ordinary civil action since the matter is within the exclusive competence of the court in a special proceeding. [20] In the recent case of Portugal v. Portugal-Beltran,[21] the Court had the occasion to clarify its ruling on the issue at hand, to wit:

The common doctrine in Litam, Solivio and Guilas in which the adverse parties are putative heirs to the estate of a decedent or parties to the special proceedings for its settlement is that if the special proceedings are pending, or if   there   are   no   special   proceedings   filed   but   there   is,   under   the circumstances of the case, a need to file one, then the determination of, among other issues, heirship should   be   raised   and   settled   in   said   special   proceedings. Where special proceedings had been

47

instituted but had been finally closed and terminated, however, or if a putative heir has lost the right to have himself declared in the special proceedings as co-heir and he can no longer ask for its re-opening, then an ordinary civil action can be filed for his declaration as heir in order to bring about the annulment of the partition or distribution or adjudication of a property or properties belonging to the estate of the deceased.[22]

In the instant case, while the complaint was denominated as an action for the Declaration of Non-Existency[sic], Nullity of Deeds, and Cancellation of Certificates of Title, etc., a review of the allegations therein reveals that the right being asserted by the respondents are their right as heirs of Anacleto Cabrera who they claim co-owned one-half of the subject property and not merely one-fourth as stated in the documents the respondents sought to annul. As correctly pointed out by the trial court, the ruling in the case of Heirs of Guido Yaptinchay v. Hon. Roy del Rosario[23] is applicable in the case at bar. In the said case, the petitioners therein, claiming to be the legal heirs of the late Guido and Isabel Yaptinchay filed for annulment of the transfer certificates of title issued in the name of Golden Bay Realty Corporation on the ground that the subject properties rightfully belong to the petitioners predecessor and by virtue of succession have passed on to them. In affirming the trial court therein, this Court ruled:

...(T)he plaintiffs who claimed to be the legal heirs of the said Guido and Isabel Yaptinchay have not shown any proof or even a semblance of it except the allegations that they are the legal heirs of the aforementioned Yaptinchays that they have been declared the legal heirs of the deceased couple. Now, the determination of who are the legal heirs of the deceased couple must be made in the proper special proceedings in court, and not in an ordinary suit for reconveyance of property. This must take precedence over the action for reconveyance.[24]

In the same manner, the respondents herein, except for their allegations, have yet to substantiate their claim as the legal heirs of Anacleto Cabrera who are, thus, entitled to the subject property. Neither is there anything in the records of this case which would show that a special proceeding to have themselves declared as heirs of Anacleto Cabrera had been instituted. As such, the trial court correctly dismissed the case for there is a lack of cause of action when a case is instituted by parties who are not real parties in interest. While a declaration of heirship was not prayed for in the complaint, it is clear from the allegations therein that the right the respondents sought to protect or enforce is that of an heir of one of the registered co-owners of the property prior to the issuance of the new transfer certificates of title that they seek to cancel. Thus, there is a need to establish their status as such heirs in the proper forum.

Furthermore, in Portugal,[25] the Court held that it would be superfluous to still subject the estate to administration proceedings since a determination of the parties' status as heirs could be achieved in the ordinary civil case filed because it appeared from the records of the case that the only property left by the decedent was the subject matter of the case and that the parties have already presented evidence to establish their right as heirs of the decedent. In the present case, however, nothing in the records of this case shows that the only property left by the deceased Anacleto Cabrera is the subject lot, and neither had respondents Peter and Deborah Ann presented any evidence to establish their rights as heirs, considering especially that it appears that there are other heirs of Anacleto Cabrera who are not

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parties in this case that had signed one of the questioned documents. Hence, under the circumstances in this case, this Court finds that a determination of the rights of respondents Peter and Deborah Ann as heirs of Anacleto Cabrera in a special proceeding is necessary.

IN   VIEW   WHEREOF, the petition is GRANTED. The decision of the Court of Appeals is hereby REVERSED and the decision of the Regional Trial Court dated June 29, 2000DISMISSING the complaint is REINSTATED.

No costs.

SO ORDERED.

G.R. No. 183984 April 13, 2011ARTURO SARTE FLORES, Petitioner, vs.SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.D E C I S I O N

CARPIO, J.:

The Case

Before the Court is a petition for review1 assailing the 30 May 2008 Decision2 and the 4 August 2008 Resolution3of the Court of Appeals in CA-G.R. SP No. 94003.

The Antecedent Facts

The facts, as gleaned from the Court of Appeals’ Decision, are as follows:

On 31 October 1995, Edna Lindo (Edna) obtained a loan from Arturo Flores (petitioner) amounting to P400,000 payable on 1 December 1995 with 3% compounded monthly interest and 3% surcharge in case of late payment. To secure the loan, Edna executed a Deed of Real Estate Mortgage4 (the Deed)

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covering a property in the name of Edna and her husband Enrico (Enrico) Lindo, Jr. (collectively, respondents). Edna also signed a Promissory Note5 and the Deed for herself and for Enrico as his attorney-in-fact.

Edna issued three checks as partial payments for the loan. All checks were dishonored for insufficiency of funds, prompting petitioner to file a Complaint for Foreclosure of Mortgage with Damages against respondents. The case was raffled to the Regional Trial Court of Manila, Branch 33 (RTC, Branch 33) and docketed as Civil Case No. 00-97942.

In its 30 September 2003 Decision,6 the RTC, Branch 33 ruled that petitioner was not entitled to judicial foreclosure of the mortgage. The RTC, Branch 33 found that the Deed was executed by Edna without the consent and authority of Enrico. The RTC, Branch 33 noted that the Deed was executed on 31 October 1995 while the Special Power of Attorney (SPA) executed by Enrico was only dated 4 November 1995.

The RTC, Branch 33 further ruled that petitioner was not precluded from recovering the loan from Edna as he could file a personal action against her. However, the RTC, Branch 33 ruled that it had no jurisdiction over the personal action which should be filed in the place where the plaintiff or the defendant resides in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure.

Petitioner filed a motion for reconsideration. In its Order7 dated 8 January 2004, the RTC, Branch 33 denied the motion for lack of merit.

On 8 September 2004, petitioner filed a Complaint for Sum of Money with Damages against respondents. It was raffled to Branch 42 (RTC, Branch 42) of the Regional Trial Court of Manila, and docketed as Civil Case No. 04-110858.

Respondents filed their Answer with Affirmative Defenses and Counterclaims where they admitted the loan but stated that it only amounted to P340,000. Respondents further alleged that Enrico was not a party to the loan because it was contracted by Edna without Enrico’s signature. Respondents prayed for the dismissal of the case on the grounds of improper venue, res judicata and forum-shopping, invoking the Decision of the RTC, Branch 33. On 7 March 2005, respondents also filed a Motion to Dismiss on the grounds of res judicata and lack of cause of action.

The Decision of the Trial Court

On 22 July 2005, the RTC, Branch 42 issued an Order8 denying the motion to dismiss. The RTC, Branch 42 ruled that res judicata will not apply to rights, claims or demands which, although growing out of the same subject matter, constitute separate or distinct causes of action and were not put in issue in the former action. Respondents filed a motion for reconsideration. In its Order9 dated 8 February 2006, the RTC, Branch 42 denied respondents’ motion. The RTC, Branch 42 ruled that the RTC, Branch 33 expressly stated that its decision did not mean that petitioner could no longer recover the loan petitioner extended to Edna.

Respondents filed a Petition for Certiorari and Mandamus with Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining Order before the Court of Appeals.

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The Decision of the Court of Appeals

In its 30 May 2008 Decision, the Court of Appeals set aside the 22 July 2005 and 8 February 2006 Orders of the RTC, Branch 42 for having been issued with grave abuse of discretion.

The Court of Appeals ruled that while the general rule is that a motion to dismiss is interlocutory and not appealable, the rule admits of exceptions. The Court of Appeals ruled that the RTC, Branch 42 acted with grave abuse of discretion in denying respondents’ motion to dismiss.

The Court of Appeals ruled that under Section 3, Rule 2 of the 1997 Rules of Civil Procedure, a party may not institute more than one suit for a single cause of action. If two or more suits are instituted on the basis of the same cause of action, the filing of one on a judgment upon the merits in any one is available ground for the dismissal of the others. The Court of Appeals ruled that on a nonpayment of a note secured by a mortgage, the creditor has a single cause of action against the debtor, that is recovery of the credit with execution of the suit. Thus, the creditor may institute two alternative remedies: either a personal action for the collection of debt or a real action to foreclose the mortgage, but not both. The Court of Appeals ruled that petitioner had only one cause of action against Edna for her failure to pay her obligation and he could not split the single cause of action by filing separately a foreclosure proceeding and a collection case. By filing a petition for foreclosure of the real estate mortgage, the Court of Appeals held that petitioner had already waived his personal action to recover the amount covered by the promissory note.

Petitioner filed a motion for reconsideration. In its 4 August 2008 Resolution, the Court of Appeals denied the motion.

Hence, the petition before this Court.

The Issue

The sole issue in this case is whether the Court of Appeals committed a reversible error in dismissing the complaint for collection of sum of money on the ground of multiplicity of suits.

The Ruling of this Court

The petition has merit.

The rule is that a mortgage-creditor has a single cause of action against a mortgagor-debtor, that is, to recover the debt.10 The mortgage-creditor has the option of either filing a personal action for collection of sum of money or instituting a real action to foreclose on the mortgage security. 11 An election of the first bars recourse to the second, otherwise there would be multiplicity of suits in which the debtor would be tossed from one venue to another depending on the location of the mortgaged properties and the residence of the parties.12

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The two remedies are alternative and each remedy is complete by itself.13 If the mortgagee opts to foreclose the real estate mortgage, he waives the action for the collection of the debt, and vice versa.14 The Court explained:

x x x in the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. By such election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to bring a personal action will leave open to him all the properties of the debtor for attachment and execution, even including the mortgaged property itself. And, if he waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied judgment thereon would still give him the right to sue for deficiency judgment, in which case, all the properties of the defendant, other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his remedy is complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to bring a personal action against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in multiplicity of suits so offensive to justice (Soriano v. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil. 404), but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the plaintiff, and then again in the place where the property lies.15

The Court has ruled that if a creditor is allowed to file his separate complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, he will, in effect, be authorized plural redress for a single breach of contract at so much costs to the court and with so much vexation and oppressiveness to the debtor.16

In this case, however, there are circumstances that the Court takes into consideration.

Petitioner filed an action for foreclosure of mortgage. The RTC, Branch 33 ruled that petitioner was not entitled to judicial foreclosure because the Deed of Real Estate Mortgage was executed without Enrico’s consent. The RTC, Branch 33 stated:

All these circumstances certainly conspired against the plaintiff who has the burden of proving his cause of action. On the other hand, said circumstances tend to support the claim of defendant Edna Lindo that her husband did not consent to the mortgage of their conjugal property and that the loan application was her personal decision.

Accordingly, since the Deed of Real Estate Mortgage was executed by defendant Edna Lindo lacks the consent or authority of her husband Enrico Lindo, the Deed of Real Estate Mortgage is void pursuant to Article 96 of the Family Code.

This does not mean, however, that the plaintiff cannot recover the P400,000 loan plus interest which he extended to defendant Edna Lindo. He can institute a personal action against the defendant for the amount due which should be filed in the place where the plaintiff resides, or where the defendant or

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any of the principal defendants resides at the election of the plaintiff in accordance with Section 2, Rule 4 of the Revised Rules on Civil Procedure. This Court has no jurisdiction to try such personal action.17

Edna did not deny before the RTC, Branch 33 that she obtained the loan. She claimed, however, that her husband did not give his consent and that he was not aware of the transaction.18 Hence, the RTC, Branch 33 held that petitioner could still recover the amount due from Edna through a personal action over which it had no jurisdiction.

Edna also filed an action for declaratory relief before the RTC, Branch 93 of San Pedro Laguna (RTC, Branch 93), which ruled:

At issue in this case is the validity of the promissory note and the Real Estate Mortgage executed by Edna Lindo without the consent of her husband.

The real estate mortgage executed by petition Edna Lindo over their conjugal property is undoubtedly an act of strict dominion and must be consented to by her husband to be effective. In the instant case, the real estate mortgage, absent the authority or consent of the husband, is necessarily void. Indeed, the real estate mortgage is this case was executed on October 31, 1995 and the subsequent special power of attorney dated November 4, 1995 cannot be made to retroact to October 31, 1995 to validate the mortgage previously made by petitioner.

The liability of Edna Lindo on the principal contract of the loan however subsists notwithstanding the illegality of the mortgage. Indeed, where a mortgage is not valid, the principal obligation which it guarantees is not thereby rendered null and void. That obligation matures and becomes demandable in accordance with the stipulation pertaining to it. Under the foregoing circumstances, what is lost is merely the right to foreclose the mortgage as a special remedy for satisfying or settling the indebtedness which is the principal obligation. In case of nullity, the mortgage deed remains as evidence or proof of a personal obligation of the debtor and the amount due to the creditor may be enforced in an ordinary action.

In view of the foregoing, judgment is hereby rendered declaring the deed of real estate mortgage as void in the absence of the authority or consent of petitioner’s spouse therein. The liability of petitioner on the principal contract of loan however subsists notwithstanding the illegality of the real estate mortgage.19

The RTC, Branch 93 also ruled that Edna’s liability is not affected by the illegality of the real estate mortgage.

Both the RTC, Branch 33 and the RTC, Branch 93 misapplied the rules.

Article 124 of the Family Code provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of disagreement, the husband’s decision shall prevail, subject to recourse to the

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court by the wife for proper remedy, which must be availed of within five years from the date of contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal properties, the other spouse may assume sole powers of administration. These powers do not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the absence of such authority or consent the disposition or encumbrance shall be void. However, the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other   spouse   or   authorization   by   the   court   before   the   offer   is   withdrawn   by   either   or   both offerors. (Emphasis supplied)

Article 124 of the Family Code of which applies to conjugal partnership property, is a reproduction of Article 96 of the Family Code which applies to community property.

Both Article 96 and Article 127 of the Family Code provide that the powers do not include disposition or encumbrance without the written consent of the other spouse. Any disposition or encumbrance without the written consent shall be void. However, both provisions also state that "the transaction shall be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse x x x before the offer is withdrawn by either or both offerors."

In this case, the Promissory Note and the Deed of Real Estate Mortgage were executed on 31 October 1995. The Special Power of Attorney was executed on 4 November 1995. The execution of the SPA is the acceptance by the other spouse that perfected the continuing offer as a binding contract between the parties, making the Deed of Real Estate Mortgage a valid contract.

However, as the Court of Appeals noted, petitioner allowed the decisions of the RTC, Branch 33 and the RTC, Branch 93 to become final and executory without asking the courts for an alternative relief. The Court of Appeals stated that petitioner merely relied on the declarations of these courts that he could file a separate personal action and thus failed to observe the rules and settled jurisprudence on multiplicity of suits, closing petitioner’s avenue for recovery of the loan.

Nevertheless, petitioner still has a remedy under the law.

In Chieng v.  Santos,20 this Court ruled that a mortgage-creditor may institute against the mortgage-debtor either a personal action for debt or a real action to foreclose the mortgage. The Court ruled that the remedies are alternative and not cumulative and held that the filing of a criminal action for violation of Batas Pambansa Blg. 22 was in effect a collection suit or a suit for the recovery of the mortgage-debt.21 In that case, however, this Courtpro hac vice, ruled that respondents could still be held liable for the balance of the loan, applying the principle that no person may unjustly enrich himself at the expense of another.22

The principle of unjust enrichment is provided under Article 22 of the Civil Code which provides:

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Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

There is unjust enrichment "when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience."23 The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another.241avvphi1

The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.25 The principle is applicable in this case considering that Edna admitted obtaining a loan from petitioners, and the same has not been fully paid without just cause. The Deed was declared void erroneously at the instance of Edna, first when she raised it as a defense before the RTC, Branch 33 and second, when she filed an action for declaratory relief before the RTC, Branch 93. Petitioner could not be expected to ask the RTC, Branch 33 for an alternative remedy, as what the Court of Appeals ruled that he should have done, because the RTC, Branch 33 already stated that it had no jurisdiction over any personal action that petitioner might have against Edna.

Considering the circumstances of this case, the principle against unjust enrichment, being a substantive law, should prevail over the procedural rule on multiplicity of suits. The Court of Appeals, in the assailed decision, found that Edna admitted the loan, except that she claimed it only amounted to P340,000. Edna should not be allowed to unjustly enrich herself because of the erroneous decisions of the two trial courts when she questioned the validity of the Deed. Moreover, Edna still has an opportunity to submit her defenses before the RTC, Branch 42 on her claim as to the amount of her indebtedness.

WHEREFORE, the 30 May 2008 Decision and the 4 August 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 94003 are SET ASIDE. The Regional Trial Court of Manila, Branch 42 is directed to proceed with the trial of Civil Case No. 04-110858.

SO ORDERED.

HEIRS OF EDUARDOSIMON,Petitioners,

-versus -

G.R. No. 157547

Present:

BRION, Acting Chairperson,**

BERSAMIN,ABAD,***

VILLARAMA, JR., andSERENO, JJ.

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ELVIN* CHAN AND THE COURT OF APPEALS,Respondent.

Promulgated:

February 23, 2011x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

There is no independent civil action to recover the civil liability arising from the issuance of an unfunded check prohibited and punished under Batas Pambansa Bilang 22 (BP 22).

Antecedents

On July 11, 1997, the Office of the City Prosecutor of Manila filed in the Metropolitan Trial Court of Manila (MeTC) an information charging the late Eduardo Simon (Simon) with a violation of BP 22, docketed as Criminal Case No. 275381 entitled People v. Eduardo Simon. The accusatory portion reads:

That sometime in December 1996 in the City of Manila, Philippines, the said accused, did then and there willfully, unlawfully and feloniously make or draw and issue to Elvin Chan to apply on account or for value Landbank Check No. 0007280 dated December 26, 1996 payable to cash in the amount of P336,000.00 said accused well knowing that at the time of issue she/he/they did not have sufficient funds in or credit with the drawee bank for payment of such check in full upon its presentment, which check when presented for payment within ninety (90) days from the date thereof was subsequently dishonored by the drawee bank for Account Closed and despite receipt of notice of such dishonor, said accused failed to pay said Elvin Chan the amount of the check or to make arrangement for full payment of the same within five (5) banking days after receiving said notice.

CONTRARY TO LAW. [1]

More than three years later, or on August 3, 2000, respondent Elvin Chan commenced in the MeTC in Pasay City a civil action for the collection of the principal amount ofP336,000.00, coupled with an application for a writ of preliminary attachment (docketed as Civil Case No. 915-00). [2] He alleged in his complaint the following:

2. Sometime in December 1996 defendant employing fraud, deceit, and misrepresentation encashed a check dated December 26, 1996 in the amount of P336,000.00 to the plaintiff assuring the latter that the check is duly funded and that he had an existing account with the Land Bank of the Philippines, xerox copy of the said check is hereto attached as Annex A;

3. However, when said check was presented for payment the same was dishonored on the ground that the account of the defendant with the Land Bank of the Philippines has been closed contrary to his

56

representation that he has an existing account with the said bank and that the said check was duly funded and will be honored when presented for payment;

4. Demands had been made to the defendant for him to make good the payment of the value of the check, xerox copy of the letter of demand is hereto attached as Annex B, but despite such demand defendant refused and continues to refuse to comply with plaintiffs valid demand;

5. Due to the unlawful failure of the defendant to comply with the plaintiffs valid demands, plaintiff has been compelled to retain the services of counsel for which he agreed to pay as reasonable attorneys fees the amount of P50,000.00 plus additional amount of P2,000.00 per appearance.

ALLEGATION IN SUPPORT OF PRAYER FOR PRELIMINARY ATTACHMENT

6. The defendant as previously alleged has been guilty of fraud in contracting the obligation upon which this action is brought and that there is no sufficient security for the claims sought in this action which fraud consist in the misrepresentation by the defendant that he has an existing account and sufficient funds to cover the check when in fact his account was already closed at the time he issued a check;

7. That the plaintiff has a sufficient cause of action and this action is one which falls under Section 1, sub-paragraph (d), Rule 57 of the Revised Rules of Court of the Philippines and the amount due the plaintiff is as much as the sum for which the plaintiff seeks the writ of preliminary attachment;

8. That the plaintiff is willing and able to post a bond conditioned upon the payment of damages should it be finally found out that the plaintiff is not entitled to the issuance of a writ of preliminary attachment.[3]

On August 9, 2000, the MeTC in Pasay City issued a writ of preliminary attachment, which was implemented on August 17, 2000 through the sheriff attaching a Nissan vehicle of Simon.[4]

On August 17, 2000, Simon filed an urgent  motion   to   dismiss  with   application   to   charge   plaintiffs attachment bond for damages,[5] pertinently averring:

On the ground of litis pendentia, that is, as a consequence of the pendency of another action between the instant parties for the same cause before the Metropolitan Trial Court of Manila, Branch X (10) entitled People of the Philippines vs. Eduardo Simon, docketed thereat as Criminal Case No. 275381-CR, the instant action is dismissable under Section 1, (e), Rule 16, 1997 Rules of Civil Procedure, xxx

While the instant case is civil in nature and character as contradistinguished from the said Criminal Case No. 915-00 in the Metropolitan Trial Court of Manila, Branch X (10), the basis of the instant civil action is the herein plaintiffs criminal complaint against defendant arising from a charge of violation of Batas Pambansa Blg. 22 as a consequence of the alleged dishonor in plaintiffs hands upon presentment for payment with drawee bank a Land Bank Check No. 0007280 dated December 26, 1996 in the amount of P336,000- drawn allegedly issued to plaintiff by defendant who is the accused in said case, a photocopy of the Criminal information filed by the Assistant City Prosecutor of Manila on June 11, 1997 hereto attached and made integral part hereof as Annex 1.

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It is our understanding of the law and the rules, that, when a criminal action is instituted, the civil action for recovery of civil liability arising from the offense charged is impliedly instituted with the criminal action, unless the offended party expressly waives the civil action or reserves his right to institute it separately xxx.

On August 29, 2000, Chan opposed Simons urgent motion to dismiss with application to charge plaintiffs attachment bond for damages, stating:

1. The sole ground upon which defendant seeks to dismiss plaintiffs complaint is the alleged pendency of another action between the same parties for the same cause, contending among others that the pendency of Criminal Case No. 275381-CR entitled People of the Philippines vs. Eduardo Simon renders this case dismissable;

2. The defendant further contends that under Section 1, Rule 111 of the Revised Rules of Court, the filing of the criminal action, the civil action for recovery of civil liability arising from the offense charged is impliedly instituted with the criminal action which the plaintiff does not contest; however, it is the submission of the plaintiff that an implied reservation of the right to file a civil action has already been made, first, by the fact that the information for violation of B.P. 22 in Criminal Case No. 2753841 does not at all make any allegation of damages suffered by the plaintiff nor is there any claim for recovery of damages; on top of this the plaintiff as private complainant in the criminal case, during the presentation of the prosecution evidence was not represented at all by a private prosecutor such that no evidence has been adduced by the prosecution on the criminal case to prove damages; all of these we respectfully submit demonstrate an effective implied reservation of the right of the plaintiff to file a separate civil action for damages;

3. The defendant relies on Section 3 sub-paragraph (a) Rule 111 of the Revised Rules of Court which mandates that after a criminal action has been commenced the civil action cannot be instituted until final judgment has been rendered in the criminal action; however, the defendant overlooks and conveniently failed to consider that under Section 2, Rule 111 which provides as follows:

In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines, an independent civil action entirely separate and distinct from the criminal action, may be brought by the injured party during the pendency of criminal case provided the right is reserved as required in the preceding section. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence.

In as much as the case is one that falls under Art. 33 of the Civil Code of the Philippines as it is based on fraud, this action therefore may be prosecuted independently of the criminal action;

4. In fact we would even venture to state that even without any reservation at all of the right to file a separate civil action still the plaintiff is authorized to file this instant case because the plaintiff seeks to enforce an obligation which the defendant owes to the plaintiff by virtue of the negotiable instruments law. The plaintiff in this case sued the defendant to enforce his liability as drawer in favor of the plaintiff as payee of the check. Assuming the allegation of the defendant of the alleged circumstances relative to

58

the issuance of the check, still when he delivered the check payable to bearer to that certain Pedro Domingo, as it was payable to cash, the same may be negotiated by delivery by who ever was the bearer of the check and such negotiation was valid and effective against the drawer;

5. Indeed, assuming as true the allegations of the defendant regarding the circumstances relative to the issuance of the check it would be entirely impossible for the plaintiff to have been aware that such check was intended only for a definite person and was not negotiable considering that the said check was payable to bearer and was not even crossed;

6. We contend that what cannot be prosecuted separate and apart from the criminal case without a reservation is a civil action arising from the criminal offense charged. However, in this instant case since the liability of the defendant are imposed and the rights of the plaintiff are created by the negotiable instruments law, even without any reservation at all this instant action may still be prosecuted;

7. Having this shown, the merits of plaintiffs complaint the application for damages against the bond is totally without any legal support and perforce should be dismissed outright.[6]

On October 23, 2000, the MeTC in Pasay City granted Simons urgent motion to dismiss with application to charge plaintiffs attachment bond for damages,[7] dismissing the complaint of Chan because:

After study of the arguments of the parties, the court resolves to GRANT the Motion to Dismiss and the application to charge plaintiffs bond for damages.

For litis pendentia to be a ground for the dismissal of an action, the following requisites must concur: (a) identity of parties or at least such as to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the two (2) cases should be such that the judgment, which may be rendered in one would, regardless of which party is successful, amount to res judicata in the other. xxx

A close perusal of the herein complaint denominated as Sum of Money and the criminal case for violation of BP Blg. 22 would readily show that the parties are not only identical but also the cause of action being asserted, which is the recovery of the value of Landbank Check No. 0007280 in the amount of P336,000.00. In both civil and criminal cases, the rights asserted and relief prayed for, the reliefs being founded on the same facts, are identical.

Plaintiffs claim that there is an effective implied waiver of his right to pursue this civil case owing to the fact that there was no allegation of damages in BP Blg. 22 case and that there was no private prosecutor during the presentation of prosecution evidence is unmeritorious. It is basic that when a complaint or criminal Information is filed, even without any allegation of damages and the intention to prove and claim them, the offended party has the right to prove and claim for them, unless a waiver or reservation is made or unless in the meantime, the offended party has instituted a separate civil action. xxx The over-all import of the said provision conveys that the waiver which includes indemnity under the Revised Penal Code, and damages arising under Articles 32, 33, and 34 of the Civil Code must be both

59

clear and express. And this must be logically so as the primordial objective of the Rule is to prevent the offended party from recovering damages twice for the same act or omission of the accused.

Indeed, the evidence discloses that the plaintiff did not waive or made a reservation as to his right to pursue the civil branch of the criminal case for violation of BP Blg. 22 against the defendant herein. To the considered view of this court, the filing of the instant complaint for sum of money is indeed legally barred. The right to institute a separate civil action shall be made before the prosecution starts to present its evidence and under circumstances affording the offended party a reasonable opportunity to make such reservation. xxx

Even assuming the correctness of the plaintiffs submission that the herein case for sum of money is one based on fraud and hence falling under Article 33 of the Civil Code, still prior reservation is required by the Rules, to wit:

In the cases provided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code of the Philippines, an independent civil action entirely separate and distinct from the criminal action, may be brought by the injured party during the pendency of criminal case provided the right is reserved as required in the preceding section. Such civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence.

WHEREFORE, premises considered, the court resolves to:

1. Dismiss the instant complaint on the ground of litis pendentia; 2. Dissolve/Lift the Writ of Attachment issued by this court on August 14, 2000; 3. Charge the plaintiffs bond the amount of P336,000.00 in favor of the defendant for the damages sustained by the latter by virtue of the implementation of the writ of attachment; 4. Direct the Branch Sheriff of this Court to RESTORE with utmost dispatch to the defendants physical possession the vehicle seized from him on August 16, 2000; and 5. Direct the plaintiff to pay the defendant the sum of P5,000.00 by way of attorneys fees.

SO ORDERED.

Chans motion for reconsideration was denied on December 20, 2000,[8] viz:

Considering that the plaintiffs arguments appear to be a mere repetition of his previous submissions, and which submissions this court have already passed upon; and taking into account the inapplicability of the ratio decidendi in the Tactaquin vs. Palileo case which the plaintiff cited as clearly in that case, the plaintiff therein expressly made a reservation to file a separate civil action, the Motion for Reconsideration is DENIED for lack of merit.

SO ORDERED.

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On July 31, 2001, the Regional Trial Court (RTC) in Pasay City upheld the dismissal of Chans complaint, disposing:[9]

WHEREFORE, finding no error in the appealed decision, the same is hereby AFFIRMED in toto.

SO ORDERED.

On September 26, 2001, Chan appealed to the Court of Appeals (CA) by petition   for   review,[10] challenging the propriety of the dismissal of his complaint on the ground of litis pendentia.

In his comment, [11] Simon countered that Chan was guilty of bad faith and malice in prosecuting his alleged civil claim twice in a manner that caused him (Simon) utter embarrassment and emotional sufferings; and that the dismissal of the civil case because of the valid ground of litis pendentia based on Section 1 (e), Rule 16 of the 1997 Rules of Civil Procedure was warranted.

On June 25, 2002, the CA promulgated its assailed decision,[12] overturning the RTC, viz:

xxx

As a general rule, an offense causes two (2) classes of injuries. The first is the social injury produced by the criminal act which is sought to be repaired through the imposition of the corresponding penalty, and the second is the personal injury caused to the victim of the crime which injury is sought to be compensated through indemnity which is also civil in nature. Thus, every person criminally liable for a felony is also civilly liable.

The offended party may prove the civil liability of an accused arising from the commission of the offense in the criminal case since the civil action is either deemed instituted with the criminal action or is separately instituted.

Rule 111, Section 1 of the Revised Rules of Criminal Procedure, which became effective on December 1, 2000, provides that:

(a) When a criminal action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action unless the offended party waives the civil action, reserves the right to institute it separately or institute the civil action prior to the criminal action.

Rule 111, Section 2 further states:

After the criminal action has been commenced, the separate civil action arising therefrom cannot be instituted until final judgment has been entered in the criminal action.

However, with respect to civil actions for recovery of civil liability under Articles 32, 33, 34 and 2176 of the Civil Code arising from the same act or omission, the rule has been changed.

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In DMPI Employees Credit Association vs. Velez, the Supreme Court pronounced that only the civil liability arising from the offense charged is deemed instituted with the criminal action unless the offended party waives the civil action, reserves his right to institute it separately, or institutes the civil action prior to the criminal action. Speaking through Justice Pardo, the Supreme Court held:

There is no more need for a reservation of the right to file the independent civil action under Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines. The reservation and waiver referred to refers only to the civil action for the recovery of the civil liability arising from the offense charged. This does not include recovery of civil liability under Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines arising from the same act or omission which may be prosecuted separately without a reservation.

Rule 111, Section 3 reads:

Sec. 3. When civil action may proceed independently. In the cases provided in Articles 32, 33, 34, and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence. In no case, however, may the offended party recover damages twice for the same act or omission charged in the criminal action.

The changes in the Revised Rules on Criminal Procedure pertaining to independent civil actions which became effective on December 1, 2000 are applicable to this case.

Procedural laws may be given retroactive effect to actions pending and undetermined at the time of their passage. There are no vested rights in the rules of procedure. xxx

Thus, Civil Case No. CV-94-124, an independent civil action for damages on account of the fraud committed against respondent Villegas under Article 33 of the Civil Code, may proceed independently even if there was no reservation as to its filing.

It must be pointed that the abovecited case is similar with the instant suit. The complaint was also brought on allegation of fraud under Article 33 of the Civil Code and committed by the respondent in the issuance of the check which later bounced. It was filed before the trial court, despite the pendency of the criminal case for violation of BP 22 against the respondent. While it may be true that the changes in the Revised Rules on Criminal Procedure pertaining to independent civil action became effective on December 1, 2000, the same may be given retroactive application and may be made to apply to the case at bench, since procedural rules may be given retroactive application. There are no vested rights in the rules of procedure.

In view of the ruling on the first assigned error, it is therefore an error to adjudge damages in favor of the petitioner.

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WHEREFORE, the petition is hereby GRANTED. The Decision dated July 13, 2001 rendered by the Regional Trial Court of Pasay City, Branch 108 affirming the dismissal of the complaint filed by petitioner is hereby REVERSED and SET ASIDE. The case is hereby REMANDED to the trial court for further proceedings.

SO ORDERED.

On March 14, 2003, the CA denied Simons motion for reconsideration.[13]

Hence, this appeal, in which the petitioners submit that the CA erroneously premised its decision on the assessment that the civil case was an independent civil action under Articles 32, 33, 34, and 2176 of the Civil   Code; that the CAs reliance on the ruling in DMPI   Employees   Credit   Cooperative   Inc.   v. Velez[14] stretched the meaning and intent of the ruling, and was contrary to Sections 1 and 2 of Rule 111 of the Rules  of  Criminal  Procedure; that this case was a simple collection suit for a sum of money, precluding the application of Section 3 of Rule 111 of the Rules of Criminal Procedure.[15]

In his comment,[16] Chan counters that the petition for review should be denied because the petitioners used the wrong mode of appeal; that his cause of action, being based on fraud, was an independent civil action; and that the appearance of a private prosecutor in the criminal case did not preclude the filing of his separate civil action.

Issue

The lone issue is whether or not Chans civil action to recover the amount of the unfunded check (Civil Case No. 915-00) was an independent civil action.

Ruling

The petition is meritorious.

 Applicable Law and Jurisprudence on the Propriety of filing a separate civil action based on BP 22

The Supreme Court has settled the issue of whether or not a violation of BP 22 can give rise to civil liability in Banal v. Judge Tadeo, Jr.,[17] holding:

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Article 20 of the New Civil Code provides:

Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

Regardless, therefore, of whether or not a special law so provides, indemnification of the offended party may be had on account of the damage, loss or injury directly suffered as a consequence of the wrongful act of another. The indemnity which a person is sentenced to pay forms an integral part of the penalty imposed by law for the commission of a crime (Quemel v. Court of Appeals, 22 SCRA 44, citing Bagtas v. Director of Prisons, 84 Phil 692). Every crime gives rise to a penal or criminal action for the punishment

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of the guilty party, and also to civil action for the restitution of the thing, repair of the damage, and indemnification for the losses (United States v. Bernardo, 19 Phil 265).

xxx

Civil liability to the offended party cannot thus be denied. The payee of the check is entitled to receive the payment of money for which the worthless check was issued. Having been caused the damage, she is entitled to recompense.

Surely, it could not have been the intendment of the framers of Batas Pambansa Blg. 22 to leave the offended private party defrauded and empty-handed by excluding the civil liability of the offender, giving her only the remedy, which in many cases results in a Pyrrhic victory, of having to file a separate civil suit. To do so may leave the offended party unable to recover even the face value of the check due her, thereby unjustly enriching the errant drawer at the expense of the payee. The protection which the law seeks to provide would, therefore, be brought to naught.

xxx

However, there is no independent civil action to recover the value of a bouncing check issued in contravention of BP 22. This is clear from Rule 111 of the Rules of Court, effectiveDecember 1, 2000, which relevantly provides:

Section 1. Institution of criminal and civil  actions. - (a) When a criminal action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action unless the offended party waives the civil action, reserves the right to institute it separately or institutes the civil action prior to the criminal action.

The reservation of the right to institute separately the civil action shall be made before the prosecution starts presenting its evidence and under circumstances affording the offended party a reasonable opportunity to make such reservation.

When the offended party seeks to enforce civil liability against the accused by way of moral, nominal, temperate, or exemplary damages without specifying the amount thereof in the complaint or information, the filing fees therefor shall constitute a first lien on the judgment awarding such damages.

Where the amount of damages, other than actual, is specified in the complaint or information, the corresponding filing fees shall be paid by the offended party upon the filing thereof in court.

Except as otherwise provided in these Rules, no filing fees shall be required for actual damages.

No counterclaim, cross-claim or third-party complaint may be filed by the accused in the criminal case, but any cause of action which could have been the subject thereof may be litigated in a separate civil action. (1a)

(b) The criminal  action  for  violation of  Batas  Pambansa  Blg.  22  shall  be  deemed to   include  the corresponding civil action. No reservation to file such civil action separately shall be allowed.[18]

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Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing fees based on the amount of the check involved, which shall be considered as the actual damages claimed. Where the complaint or information also seeks to recover liquidated, moral, nominal, temperate or exemplary damages, the offended party shall pay the filing fees based on the amounts alleged therein. If the amounts are not so alleged but any of these damages are subsequently awarded by the court, the filing fees based on the amount awarded shall constitute a first lien on the judgment.

Where the civil action has been filed separately and trial thereof has not yet commenced, it may be consolidated with the criminal action upon application with the court trying the latter case. If the application is granted, the trial of both actions shall proceed in accordance with section 2 of the Rule governing consolidation of the civil and criminal actions.

Section 3. When civil action may proceed independently. In the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action may be brought by the offended party. It shall proceed independently of the criminal action and shall require only a preponderance of evidence. In no case, however, may the offended party recover damages twice for the same act or omission charged in the criminal action.

The aforequoted provisions of the Rules of Court, even if not yet in effect when Chan commenced Civil Case No. 915-00 on August 3, 2000, are nonetheless applicable. It is axiomatic that the retroactive application of procedural laws does not violate any right of a person who may feel adversely affected, nor is it constitutionally objectionable. The reason is simply that, as a general rule, no vested right may attach to, or arise from, procedural laws.[19] Any new rules may validly be made to apply to cases pending at the time of their promulgation, considering that no party to an action has a vested right in the rules of procedure,[20] except that in criminal cases, the changes do not retroactively apply if they permit or require a lesser quantum of evidence to convict than what is required at the time of the commission of the offenses, because such retroactivity would be unconstitutional for being ex post facto under the Constitution.[21]

Moreover, the application of the rule would not be precluded by the violation of any assumed vested right, because the new rule was adopted from Supreme Court Circular 57-97 that took effect on November 1, 1997.

Supreme Court Circular 57-97 states:

Any provision of law or Rules of Court to the contrary notwithstanding, the following rules and guidelines shall henceforth be observed in the filing and prosecution of all criminal cases under Batas Pambansa Blg. 22 which penalizes the making or drawing and issuance of a check without funds or credit:

1. The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to necessarily include the corresponding civil action, and no reservation to file such civil action separately shall be allowed or recognized.[22]

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2. Upon the filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing fees based upon the amount of the check involved which shall be considered as the actual damages claimed, in accordance with the schedule of fees in Section 7 (a) and Section 8 (a), Rule 141 of the Rules of Court as last amended by Administrative Circular No. 11-94 effective August 1, 1994. Where the offended party further seeks to enforce against the accused civil liability by way of liquidated, moral, nominal, temperate or exemplary damages, he shall pay the corresponding filing fees therefor based on the amounts thereof as alleged either in the complaint or information. If not so alleged but any of these damages are subsequently awarded by the court, the amount of such fees shall constitute a first lien on the judgment.

3. Where the civil action has heretofore been filed separately and trial thereof has not yet commenced, it may be consolidated with the criminal action upon application with the court trying the latter case. If the application is granted, the trial of both actions shall proceed in accordance with the pertinent procedure outlined in Section 2 (a) of Rule 111 governing the proceedings in the actions as thus consolidated.

4. This Circular shall be published in two (2) newspapers of general circulation and shall take effect on November 1, 1997.

The reasons for issuing Circular 57-97 were amply explained in Hyatt   Industrial   Manufacturing Corporation v. Asia Dynamic Electrix Corporation,[23] thus:

xxx

We agree with the ruling of the Court of Appeals that upon filing of the criminal cases for violation of B.P. 22, the civil action for the recovery of the amount of the checks was also impliedly instituted under Section 1(b) of Rule 111 of the 2000 Rules on Criminal Procedure. Under the present revised Rules, the criminal action for violation of B.P. 22 shall be deemed to include the corresponding civil action. The reservation to file a separate civil action is no longer needed. The Rules provide:

Section 1. Institution of criminal and civil actions.

(a) x x x

(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the corresponding civil action. No reservation to file such civil action separately shall be allowed.

Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay in full the filing fees based on the amount of the check involved, which shall be considered as the actual damages claimed. Where the complaint or information also seeks to recover liquidated, moral, nominal, temperate or exemplary damages, the offended party shall pay additional filing fees based on the amounts alleged therein. If the amounts are not so alleged but any of these damages are subsequently awarded by the court, the filing fees based on the amount awarded shall constitute a first lien on the judgment.

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Where the civil action has been filed separately and trial thereof has not yet commenced, it may be consolidated with the criminal action upon application with the court trying the latter case. If the application is granted, the trial of both actions shall proceed in accordance with section 2 of this Rule governing consolidation of the civil and criminal actions.

The foregoing rule was adopted from Circular No. 57-97 of this Court. It specifically states that the criminal action for violation of B.P. 22 shall be deemed to include the corresponding civil action. It also requires the complainant to pay in full the filing fees based on the amount of the check involved. Generally, no filing fees are required for criminal cases, but because of the inclusion of the civil action in complaints for violation of B.P. 22, the Rules require the payment of docket fees upon the filing of the complaint.  This rule was enacted to help declog court dockets which are filled with B.P. 22 cases as creditors actually use the courts as collectors.  Because ordinarily no filing fee is charged in criminal cases for actual damages, the payee uses the intimidating effect of a criminal charge to collect his credit   gratis  and   sometimes,  upon  being  paid,   the   trial   court   is  not  even   informed   thereof.  The inclusion of the civil action in the criminal case is expected to significantly lower the number of cases filed before the courts for collection based on dishonored checks.  It is also expected to expedite the disposition of these cases.  Instead of instituting two separate cases, one for criminal and another for civil, only a single suit shall be filed and tried.  It should be stressed that the policy laid down by the Rules is to discourage the separate filing of the civil action. The Rules even prohibit the reservation of a separate civil action, which means that one can no longer file a separate civil case after the criminal complaint is filed in court.  The only instance when separate proceedings are allowed is when the civil action is filed ahead of the criminal case.  Even then, the Rules encourage the consolidation of the civil and criminal  cases.   We have previously  observed that  a  separate  civil  action for  the  purpose of recovering the amount of the dishonored checks would only prove to be costly,  burdensome and time-consuming   for  both  parties  and  would   further  delay   the  final  disposition  of   the   case.   This multiplicity   of   suits  must  be   avoided.   Where  petitioners   rights  may  be   fully   adjudicated   in   the proceedings  before   the   trial   court,   resort   to   a   separate  action   to   recover   civil   liability   is   clearly unwarranted. In view of this special rule governing actions for violation of B.P. 22, Article 31 of the Civil Code cited by the trial court will not apply to the case at bar.[24]

The CAs reliance on DMPI Employees Credit Association v. Velez[25] to give due course to the civil action of Chan independently and separately of Criminal Case No. 275381 wasunwarranted. DMPI Employees, which involved a prosecution for estafa, is not on all fours with this case, which is a prosecution for a violation of BP 22. Although the Court has ruled that the issuance of a bouncing check may result in two separate and distinct crimes of estafa and violation of BP 22,[26] the procedures for the recovery of the civil liabilities arising from these two distinct crimes are different and non-interchangeable. In prosecutions of estafa, the offended party may opt to reserve his right to file a separate civil action, or may institute an independent action based on fraud pursuant to Article 33 of the Civil Code,[27] as DMPI Employees has allowed. In prosecutions of violations of BP 22, however, the Court has adopted a policy to prohibit the reservation or institution of a separate civil action to claim the civil liability arising from the issuance of the bouncing check upon the reasons delineated in Hyatt Industrial Manufacturing Corporation, supra.

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To repeat, Chans separate civil action to recover the amount of the check involved in the prosecution for the violation of BP 22 could not be independently maintained under both Supreme Court Circular 57-97 and the aforequoted provisions of Rule 111 of the Rules of Court, notwithstanding the allegations of fraud and deceit.

B

Aptness of the dismissal of the civil action on the ground of litis pendentia

Did the pendency of the civil action in the MeTC in Manila (as the civil aspect in Criminal Case No. 275381) bar the filing of Civil Case No. 915-00 in the MeTC in Pasay City on the ground of litis pendentia?

For litis pendentia to be successfully invoked as a bar to an action, the concurrence of the following requisites is necessary, namely: (a) there must be identity of parties or at least such as represent the same interest in both actions; (b) there must be identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and, (c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is successful, amount to res judicata in respect of the other. Absent the first two requisites, the possibility of the existence of the third becomes nil.[28]

A perusal of Civil Case No. 01-0033 and Criminal Case No. 275381 ineluctably shows that all the elements of litis pendentia are attendant. First of all, the parties in the civil action involved in Criminal Case No. 275381 and in Civil Case No. 915-00, that is, Chan and Simon, are the same. Secondly, the information in Criminal Case No. 275381 and the complaint in Civil Case No. 915-00 both alleged that Simon had issued Landbank Check No. 0007280 worth P336,000.00 payable to cash, thereby indicating that the rights asserted and the reliefs prayed for, as well as the facts upon which the reliefs sought were founded, were identical in all respects. And, thirdly, any judgment rendered in one case would necessarily bar the other by res judicata; otherwise, Chan would be recovering twice upon the same claim.

It is clear, therefore, that the MeTC in Pasay City properly dismissed Civil Case No. 915-00 on the ground of litis pendentia through its decision dated October 23, 2000; and that the RTC in Pasay City did not err in affirming the MeTC.

WHEREFORE, we grant the petition for review on certiorari, and, accordingly, we reverse and set aside the decision promulgated by the Court of Appeals on June 25, 2002. We reinstate the decision rendered on October 23, 2000 by the Metropolitan Trial Court, Branch 45, in Pasay City.

Costs of suit to be paid by the respondent.

SO ORDERED.

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