ROGER V. NAVARRO, Petitioner, vs. HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T. GO, doing business under the name KARGO ENTERPRISES, Respondents.

This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA) Decision2 dated October 16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings affirmed the July 26, 20004 and March 7, 20015 orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarro’s (Navarro) motion to dismiss.

BACKGROUND FACTS

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarro’s possession.

The first complaint stated:

1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and other processes of the Honorable Court; that defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff is hereby joined as party defendant as he may be the person in whose possession and custody the personal property subject matter of this suit may be found if the same is not in the possession of defendant ROGER NAVARRO;

2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor vehicles, including hauling trucks and other heavy equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more particularly described as follows –

Make/Type FUSO WITH MOUNTED CRANE

Serial No. FK416K-51680Motor No. 6D15-338735Plate No. GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS – CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or returned by the drawee bank for the common reason that the current deposit account against which the said checks were issued did not have sufficient funds to cover the amounts thereof; that the total amount of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE

AGREEMENT WITH RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in vain to the great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax assessment and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff;

xxx

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly executed and bond double the value of the personal property subject matter hereof to answer for damages and costs which defendants may suffer in the event that the order for replevin prayed for may be found out to having not been properly issued.

The second complaint contained essentially the same allegations as the first complaint, except that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as follows:

Make/Type FUSO WITH MOUNTED CRANESerial No. FK416K-510528Motor No. 6D14-423403

The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount ofP100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented for payment.8

On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases; as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of action, since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease agreements) – the actionable documents on which the complaints were based.

On Navarro’s motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of action.

In response to the motion for reconsideration Karen Go filed dated May 26, 2000,11 the RTC issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Go’s leasing business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint based on Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen Go to file a motion for the inclusion of Glenn Go as co-plaintiff.1avvphi1

When the RTC denied Navarro’s motion for reconsideration on March 7, 2001, Navarro filed a petition for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into one with a cause of action by mere amendment or supplemental pleading.

On October 16, 2001, the CA denied Navarro’s petition and affirmed the RTC’s order.13 The CA also denied Navarro’s motion for reconsideration in its resolution of May 29, 2002,14 leading to the filing of the present petition.

THE PETITION

Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to state a cause of action.

Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there was none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of Glenn Go as a co-plaintiff.

Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were premature because no prior demand was made on him to comply with the provisions of the lease agreements before the complaints for replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles were illegally seized from his possession and should be returned to him immediately.

Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarro’s insistence that Kargo Enterprises is Karen Go’s paraphernal property is without basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule that spouses should sue jointly, and was not meant to cure the complaints’ lack of cause of action.

THE COURT’S RULING

We find the petition devoid of merit.

Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.15

Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease contracts were in Kargo Enterprises’ name, this was merely a trade name without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was none.

We do not find Navarro’s arguments persuasive.

The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,

xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor a juridical person, as defined by Article 44 of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2) Other corporations, institutions and entities for public interest or purpose, created by law; their personality begins as soon as they have been constituted according to law;

(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.

Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil action. This legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo Enterprises?

We faced a similar question in Juasing Hardware v. Mendoza,17 where we said:

Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and permits, register the business name, and pay taxes to the national government. It does not vest juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in court.

Thus, the complaint in the court below should have been filed in the name of the owner of Juasing Hardware. The allegation in the body of the complaint would show that the suit is brought by such person as proprietor or owner of the business conducted under the name and style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may be added to the title of the case, as is customarily done.18 [Emphasis supplied.]

This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:

SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.

As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured by a judgment in this case. Thus, contrary to Navarro’s contention, Karen Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as this is a matter for the trial court to consider in a trial on the merits.

Glenn Go’s Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go,19 who described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married to each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are paraphernal or conjugal properties. To restate the parties’ positions, Navarro alleges that Kargo Enterprises is Karen Go’s paraphernal property, emphasizing the fact that the business is registered solely in Karen Go’s name. On the other hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property.

The registration of the trade name in the name of one person – a woman – does not necessarily lead to the conclusion that the trade name as a property is hers alone, particularly when the woman is married. By law, all property acquired during the marriage, whether the acquisition appears to have been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the records of the case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v. Miat:22

Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the husband or to the wife." This article does not require proof that the property was acquired with funds of the partnership.The presumption applies even when the manner in which the property was acquired does not appear.23[Emphasis supplied.]

Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property.

Article 124 of the Family Code, on the administration of the conjugal property, 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 court by the wife for proper remedy, which must be availed of within five years from the date of the contract implementing such decision.

xxx

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before performing an act of administration or any act that does not dispose of or encumber their conjugal property.

Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements. In other words, the property relations of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses’ marriage settlement and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we look at the Civil Code provision on partnership for guidance.

A rule on partnership applicable to the spouses’ circumstances is Article 1811 of the Civil Code, which states:

Art. 1811. A partner is a co-owner with the other partners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; xxx

Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or special provisions, co-ownership shall be governed by the provisions of this Title," we find further support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in ejectment with respect to the co-owned property.

While ejectment is normally associated with actions involving real property, we find that this rule can be applied to the circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman.24 In this case, one spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff in the action for the recovery of the credit, we said:

Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is not warranted, whether or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership in all that is not in conflict with what is expressly determined in this Chapter.

In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the other partners of specific partnership property." Taken with the presumption of the conjugal nature of the funds used to finance the four checks used to pay for petitioners’ stock subscriptions, and with the presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.

Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v. Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that any of the co-owners may bring an action for ejectment, covers all kinds of action for the recovery of possession.

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be accorded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners.25[Emphasis supplied.]

Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in question without the other spouse’s consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4, Rule 4 of the Rules, which states:

Section 4. Spouses as parties. – Husband and wife shall sue or be sued jointly, except as provided by law.

Non-joinder of indispensable parties not ground to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated in Macababbad v. Masirag:27

Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is a ground for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any claim against a misjoined party may be severed and proceeded with separately.

In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead the indispensable party at any stage of the action. The court, either motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to include the indispensable party is directed refuses to comply with the order of the court, the complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is fully in order.

Demand not required priorto filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens a replevin action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2, Rule 60 of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who personally knows the facts:

(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention thereof according to the best of his knowledge, information, and belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law, or seized under a writ of execution or preliminary attachment, or otherwise placed under custodia legis, or if so seized, that it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in the action.

We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action for a writ of replevin.

More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarro’s position that a demand is necessary and has not been made is therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against petitioner Roger V. Navarro.

SO ORDERED.

ANICIA VALDEZ-TALLORIN, Petitioner, vs. HEIRS OF JUANITO TARONA, Represented by CARLOS TARONA, ROGELIO TARONA and LOURDES TARONA, Respondents.

ABAD, J.:

This case is about a court’s annulment of a tax declaration in the names of three persons, two of whom had not been impleaded in the case, for the reason that the document was illegally issued to them.

The Facts and the Case

On February 9, 1998 respondents Carlos, Rogelio, and Lourdes Tarona (the Taronas) filed an action before the Regional Trial Court (RTC) of Balanga, Bataan,1 against petitioner Anicia Valdez-Tallorin (Tallorin) for the cancellation of her and two other women’s tax declaration over a parcel of land.

The Taronas alleged in their complaint that, unknown to them, in 1981, the Assessor’s Office of Morong in Bataan cancelled Tax Declaration 463 in the name of their father, Juanito Tarona (Juanito), covering 6,186 square meters of land in Morong, Bataan. The cancellation was said to be based on an unsigned though notarized affidavit that Juanito allegedly executed in favor of petitioner Tallorin and two others, namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez, who were not impleaded in the action. In place of the cancelled one, the Assessor’s Office issued Tax Declaration 6164 in the names of the latter three persons. The old man Tarona’s affidavit had been missing and no copy could be found among the records of the Assessor’s Office.2

The Taronas further alleged that, without their father’s affidavit on file, it followed that his tax declaration had been illegally cancelled and a new one illegally issued in favor of Tallorin and the others with her. The unexplained disappearance of the affidavit from official files, the Taronas concluded, covered-up the falsification or forgery that caused the substitution.3 The Taronas asked the RTC to annul Tax Declaration 6164, reinstate Tax Declaration 463, and issue a new one in the name of Juanito’s heirs.

On March 6, 1998 the Taronas filed a motion to declare petitioner Tallorin in default for failing to answer their complaint within the allowed time.4 But, before the RTC could act on the motion, Tallorin filed a belated answer, alleging among others that she held a copy of the supposedly missing affidavit of Juanito who was merely an agricultural tenant of the land covered by Tax Declaration 463. He surrendered and waived in that affidavit his occupation and tenancy rights to Tallorin and the others in consideration of P29,240.00. Tallorin also put up the affirmative defenses of non-compliance with the requirement of conciliation proceedings and prescription.

On March 12, 1998 the RTC set Tallorin’s affirmative defenses for hearing5 but the Taronas sought reconsideration, pointing out that the trial court should have instead declared Tallorin in default based on their earlier motion.6 On June 2, 1998 the RTC denied the Taronas’ motion for reconsideration7 for the reasons that it received Tallorin’s answer before it could issue a default order and that the Taronas failed to show proof that Tallorin was notified of the motion three days before the scheduled hearing. Although the presiding judge inhibited himself from the case on motion of the Taronas, the new judge to whom the case was re-raffled stood by his predecessor’s previous orders.

By a special civil action for certiorari before the Court of Appeals (CA),8 however, the Taronas succeeded in getting the latter court to annul the RTC’s March 12 and June 2, 1998 orders.9 The CA ruled that the RTC gravely abused its discretion in admitting Tallorin’s late answer in the absence of a motion to admit it. Even if petitioner Tallorin had already filed her late answer, said the CA, the RTC should have heard the Taronas’ motion to declare Tallorin in default.

Upon remand of the case, the RTC heard the Taronas’ motion to declare Tallorin in default,10 granted the same, and directed the Taronas to present evidence ex parte.11

On January 30, 2002 the RTC rendered judgment, a) annulling the tax declaration in the names of Tallorin, Margarita Pastelero Vda. de Valdez, and Dolores Valdez; b) reinstating the tax declaration in the name of Juanito; and c) ordering the issuance in its place of a new tax declaration in the names of Juanito’s heirs. The trial court also ruled that Juanito’s affidavit authorizing the transfer of the tax declaration had no binding force since he did not sign it.1avvphi1

Tallorin appealed the above decision to the CA,12 pointing out 1) that the land covered by the tax declaration in question was titled in her name and in those of her two co-owners; 2) that Juanito’s affidavit only dealt with the surrender of his tenancy rights and did not serve as basis for canceling Tax Declaration 463 in his name; 3) that, although Juanito did not sign the affidavit, he thumbmarked and acknowledged the same before a notary public; and 4) that the trial court erred in not dismissing the complaint for failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez who were indispensable parties in the action to annul Juanito’s affidavit and the tax declaration in their favor.13

On May 22, 2006 the CA rendered judgment, affirming the trial court’s decision.14 The CA rejected all of Tallorin’s arguments. Since she did not assign as error the order declaring her in default and since she took no part at the trial, the CA pointed out that her claims were in effect mere conjectures, not based on evidence of record.15Notably, the CA did not address the issue Tallorin raised regarding the Taronas’ failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as indispensable party-defendants, their interest in the cancelled tax declarations having been affected by the RTC judgment.

Questions Presented

The petition presents the following questions for resolution by this Court:

1. Whether or not the CA erred in failing to dismiss the Taronas’ complaint for not impleading Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax declaration had been issued;

2. Whether or not the CA erred in not ruling that the Taronas’ complaint was barred by prescription; and

3. Whether or not the CA erred in affirming the RTC’s finding that Juanito’s affidavit had no legal effect because it was unsigned; when at the hearing of the motion to declare Tallorin in default, it was shown that the affidavit bore Juanito’s thumbmark.

The Court’s Rulings

The first question, whether or not the CA erred in failing to dismiss the Taronas’ complaint for not impleading Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax declaration had been issued, is a telling question.

The rules mandate the joinder of indispensable parties. Thus:

Sec. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final determination can be had of an action shall be joined either as plaintiffs and defendants.16

Indispensable parties are those with such an interest in the controversy that a final decree would necessarily affect their rights, so that the courts cannot proceed without their presence.17 Joining indispensable parties into an action is mandatory, being a requirement of due process. Without their presence, the judgment of the court cannot attain real finality.

Judgments do not bind strangers to the suit. The absence of an indispensable party renders all subsequent actions of the court null and void. Indeed, it would have no authority to act, not only as to the absent party, but as to those present as well. And where does the responsibility for impleading all indispensable parties lie? It lies in the plaintiff.18

Here, the Taronas sought the annulment of the tax declaration in the names of defendant Tallorin and two others, namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez and, in its place, the reinstatement of the previous declaration in their father Juanito’s name. Further, the Taronas sought to strike down as void the affidavit in which Juanito renounced his tenancy right in favor of the same three persons. It is inevitable that any decision granting what the Taronas wanted would necessarily affect the rights of such persons to the property covered by the tax declaration.

The Court cannot discount the importance of tax declarations to the persons in whose names they are issued. Their cancellation adversely affects the rights and interests of such persons over the properties that the documents cover. The reason is simple: a tax declaration is a primary evidence, if not the source, of the right to claim title of ownership over real property, a right enforceable against another person. The Court held in Uriarte v. People19 that, although not conclusive, a tax declaration is a telling evidence of the declarant’s possession which could ripen into ownership.

In Director of Lands v. Court of Appeals,20 the Court said that no one in his right mind would pay taxes for a property that he did not have in his possession. This honest sense of obligation proves that the holder claims title over the property against the State and other persons, putting them on notice that he would eventually seek the issuance of a certificate of title in his name. Further, the tax declaration expresses his intent to contribute needed revenues to the Government, a circumstance that strengthens his bona fide claim to ownership.21

Here, the RTC and the CA annulled Tax Declaration 6164 that belonged not only to defendant Tallorin but also to Margarita Pastelero Vda. de Valdez and Dolores Valdez, which two persons had no opportunity to be heard as they were never impleaded. The RTC and the CA had no authority to annul that tax declaration without seeing to it that all three persons were impleaded in the case.

But the Taronas’ action cannot be dismissed outright. As the Court held in Plasabas v. Court of Appeals,22 the non-joinder of indispensable parties is not a ground for dismissal. Section 11, Rule 3 of the 1997 Rules of Civil Procedure prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of parties and allows the amendment of the complaint at any stage of the proceedings, through motion or on order of the court on its own initiative. Only if plaintiff refuses to implead an indispensable party, despite the order of the court, may it dismiss the action.

There is a need, therefore, to remand the case to the RTC with an order to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as defendants so they may, if they so desire, be heard.

In view of the Court’s resolution of the first question, it would serve no purpose to consider the other questions that the petition presents. The resolution of those questions seems to depend on the complete evidence in the case. This will not yet happen until all the indispensable party-defendants are impleaded and heard on their evidence.

WHEREFORE, the Court GRANTS the petition and SETS ASIDE the decision of the Regional Trial Court of Balanga, Bataan in Civil Case 6739 dated January 30, 2002 and the decision of the Court of Appeals in CA-G.R. CV 74762 dated May 22, 2006. The Court REMANDS the case to the Regional

Trial Court of Balanga, Bataan which is DIRECTED to have Margarita Pastelero Vda. de Valdez and Dolores Valdez impleaded by the plaintiffs as party-defendants and, afterwards, to hear the case in the manner prescribed by the rules.

SO ORDERED.

PHILIPPINE PORTS AUTHORITY, petitioner, vs. WILLIAM GOTHONG & ABOITIZ (WG&A), INC., respondent.

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari filed by the Philippine Ports Authority (petitioner) seeking the reversal of the Decision1 of the Court of Appeals (CA) promulgated on October 24, 2002 and its Resolution dated May 15, 2003.

The antecedent facts are accurately narrated by the CA as follows:

Petitioner William Gothong & Aboitiz, Inc. (WG&A for brevity), is a duly organized domestic corporation engaged in the shipping industry. Respondent Philippine Ports Authority (PPA for brevity), upon the other hand, is a government-owned and controlled company created and existing by virtue of the provisions of P.D. No. 87 and mandated under its charter to operate and administer the country's sea port and port facilities.

After the expiration of the lease contract of Veterans Shipping Corporation over the Marine Slip Way in the North Harbor on December 31, 2000, petitioner WG&A requested respondent PPA for it to be allowed to lease and operate the said facility. Thereafter, then President Estrada issued a memorandum dated December 18, 2000 addressed to the Secretary of the Department of Transportation and Communication (DOTC) and the General Manager of PPA, stating to the effect that in its meeting held on December 13, 2000, the Economic Coordinating Council (ECC) has approved the request of petitioner WG&A to lease the Marine Slip Way from January 1 to June 30, 2001 or until such time that respondent PPA turns over its operations to the winning bidder for the North Harbor Modernization Project.

Pursuant to the said Memorandum, a Contract of Lease was prepared by respondent PPA containing the following terms:

1. The lease of the area shall take effect on January 1 to June 30, 2001 or until such time that PPA turns over its operation to the winning bidder for the North Harbor modernization;

2. You shall pay a monthly rental rate of P12.15 per square meter or an aggregate monthly rental amount of P886,950.00;

3. All structures/improvements introduced in the leased premises shall be turned over to PPA;

4. Water, electricity, telephone and other utility expenses shall be for the account of William, Gothong & Aboitiz, Inc.;

5. Real Estate tax/insurance and other government dues and charges shall be borne by WG&A.

The said contract was eventually conformed to and signed by the petitioner company, through its President/Chief Executive Officer Endika Aboitiz, Jr. Thereafter, in accordance

with the stipulations made in the lease agreement, PPA surrendered possession of the Marine Slip Way in favor of the petitioner.

However, believing that the said lease already expired on June 30, 2001, respondent PPA subsequently sent a letter to petitioner WG&A dated November 12, 2001 directing the latter to vacate the contested premises not later than November 30, 2001 and to turnover the improvements made therein pursuant to the terms and conditions agreed upon in the contract.

In response, petitioner WG&A wrote PPA on November 27, 2001 urging the latter to reconsider its decision to eject the former. Said request was denied by the PPA via a letter dated November 29, 2001.

On November 28, 2001, petitioner WG&A commenced an Injunction suit before the Regional Trial Court of Manila. Petitioner claims that the PPA unjustly, illegally and prematurely terminated the lease contract. It likewise prayed for the issuance of a temporary restraining order to arrest the evacuation. In its complaint, petitioner also sought recovery of damages for breach of contract and attorney's fees.

On December 11, 2001, petitioner WG&A amended its complaint for the first time. The complaint was still denominated as one for Injunction with prayer for TRO. In the said amended pleading, the petitioner incorporated statements to the effect that PPA is already estopped from denying that the correct period of lease is "until such time that the North Harbor Modernization Project has been bidded out to and operations turned over to the winning bidder. It likewise included, as its third cause of action, the additional relief in its prayer, that should the petitioner be forced to vacate the said facility, it should be deemed as entitled to be refunded of the value of the improvements it introduced in the leased property.

Following the first amendment in the petitioner's complaint, respondent PPA submitted its answer on January 23, 2002. Meanwhile, the TRO sought by the former was denied by the trial court by way of an order dated January 16, 2002.

Petitioner later moved for the reconsideration of the said Order on February 11, 2002. Shortly thereafter, petitioner filed a Motion to Admit Attached Second Amended Complaint. This time, however, the complaint was already captioned as one for Injunction with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction and damages and/or for Reformation of Contract. Also, it included as its fourth cause of action and additional relief in its prayer, the reformation of the contract as it failed to express or embody the true intent of the contracting parties.

The admission of the second amended complaint met strong opposition from the respondent PPA. It postulated that the reformation sought for by the petitioner constituted substantial amendment, which if granted, will substantially alter the latter's cause of action and theory of the case.

On March 22, 2002, the respondent judge issued an Order denying the Admission of the Second Amended Complaint. Petitioner filed a motion for reconsideration of the aforesaid order but the same was again denied in an order dated April 26, 2002.2

Herein respondent WG&A then filed a petition for certiorari with the CA seeking the nullification of the aforementioned RTC orders.

In its Decision dated October 24, 2002, the CA granted respondent's petition, thereby setting aside the RTC orders and directing the RTC to admit respondent's second amended complaint pursuant to Section 3, Rule 10 of the 1997 Rules of Civil Procedure. Petitioner moved for reconsideration but the same was denied per Resolution dated May 15, 2003.

Hence, the present petition where the only issue raised is whether the CA erred in ruling that the RTC committed grave abuse of discretion when it denied the admission of the second amended complaint.

The Court finds the petition without merit.

The CA did not err in finding that the RTC committed grave abuse of discretion in issuing the Order dated March 22, 2002 denying the admission of respondent's second amended complaint.

The RTC applied the old Section 3, Rule 10 of the Rules of Court:

Section 3. Amendments by leave of court. – after the case is set for hearing, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay the action or that the cause of action or defense is substantially altered. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.

instead of the provisions of the 1997 Rules of Civil Procedure, amending Section 3, Rule 10, to wit:

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

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

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that the phrase "or that the cause of action or defense is substantially altered" was stricken-off and not retained in the new rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of action or defense." This should only be true, however, when despite a substantial change or alteration in the cause of action or defense, the amendments sought to be made shall serve the higher interests of substantial justice, and prevent delay and equally promote the laudable objective of the rules which is to secure a "just, speedy and inexpensive disposition of every action and proceeding."4

The application of the old Rules by the RTC almost five years after its amendment by the 1997 Rules of Civil Procedure patently constitutes grave abuse of discretion.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of Appeals promulgated on October 24, 2002 and its Resolution dated May 15, 2003 are hereby AFFIRMED in toto.

SO ORDERED.

E. B. VILLAROSA & PARTNER CO., LTD., petitioner, vs. HON. HERMINIO I. BENITO, in his capacity as Presiding Judge, RTC, Branch 132, Makati City and IMPERIAL DEVELOPMENT CORPORATION, respondent.

GONZAGA-REYES, J.:

Before this Court is a petition for certiorari and prohibition with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction seeking to annul and set aside the Orders dated

August 5, 1998 and November 20, 1998 of the public respondent Judge Herminio I. Benito of the Regional Trial Court of Makati City, Branch 132 and praying that the public respondent court be ordered to desist from further proceeding with Civil Case No. 98-824.

Petitioner E.B. Villarosa & Partner Co., Ltd. is a limited partnership with principal office address at 102 Juan Luna St., Davao City and with branch offices at 2492 Bay View Drive, Tambo, Parañaque, Metro Manila and Kolambog, Lapasan, Cagayan de Oro City. Petitioner and private respondent executed a Deed of Sale with Development Agreement wherein the former agreed to develop certain parcels of land located at Barrio Carmen, Cagayan de Oro belonging to the latter into a housing subdivision for the construction of low cost housing units. They further agreed that in case of litigation regarding any dispute arising therefrom, the venue shall be in the proper courts of Makati.

On April 3, 1998, private respondent, as plaintiff, filed a Complaint for Breach of Contract and Damages against petitioner, as defendant, before the Regional Trial Court of Makati allegedly for failure of the latter to comply with its contractual obligation in that, other than a few unfinished low cost houses, there were no substantial developments therein.1

Summons, together with the complaint, were served upon the defendant, through its Branch Manager Engr. Wendell Sabulbero at the stated address at Kolambog, Lapasan, Cagayan de Oro City2 but the Sheriff's Return of Service3 stated that the summons was duly served "upon defendant E.B. Villarosa & Partner Co., Ltd. thru its Branch Manager Engr. WENDELL SALBULBERO on May 5, 1998 at their new office Villa Gonzalo, Nazareth, Cagayan de Oro City, and evidenced by the signature on the face of the original copy of the summons.1âwphi1.nêt

On June 9, 1998, defendant filed a Special Appearance with Motion to Dismiss4 alleging that on May 6, 1998, "summons intended for defendant" was served upon Engr. Wendell Sabulbero, an employee of defendant at its branch office at Cagayan de Oro City. Defendant prayed for the dismissal of the complaint on the ground of improper service of summons and for lack of jurisdiction over the person of the defendant. Defendant contends that the trial court did not acquire jurisdiction over its person since the summons was improperly served upon its employee in its branch office at Cagayan de Oro City who is not one of those persons named in Section 11, Rule 14 of the 1997 Rules of Civil Procedure upon whom service of summons may be made.

Meanwhile, on June 10, 1998, plaintiff filed a Motion to Declare Defendant in Default5 alleging that defendant has failed to file an Answer despite its receipt allegedly on May 5, 1998 of the summons and the complaint, as shown in the Sheriffs Return.

On June 22, 1998, plaintiff filed an Opposition to Defendant's Motion to Dismiss6 alleging that the records show that defendant, through its branch manager, Engr. Wendell Sabulbero actually received the summons and the complaint on May 8, 1998 as evidenced by the signature appearing on the copy of the summons and not on May 5, 1998 as stated in the Sheriffs Return nor on May 6, 1998 as stated in the motion to dismiss; that defendant has transferred its office from Kolambog, Lapasan, Cagayan de Oro to its new office address at Villa Gonzalo, Nazareth, Cagayan de Oro; and that the purpose of the rule is to bring home to the corporation notice of the filing of the action.

On August 5, 1998, the trial court issued an Order7 denying defendant's Motion to Dismiss as well as plaintiffs Motion to Declare Defendant in Default. Defendant was given ten (10) days within which to file a responsive pleading. The trial court stated that since the summons and copy of the complaint were in fact received by the corporation through its branch manager Wendell Sabulbero, there was substantial compliance with the rule on service of summons and consequently, it validly acquired jurisdiction over the person of the defendant.

On August 19, 1998, defendant, by Special Appearance, filed a Motion for Reconsideration8 alleging that Section 11, Rule 14 of the new Rules did not liberalize but, on the contrary, restricted the service of summons on persons enumerated therein; and that the new provision is very specific and clear in that the word "manager" was changed to "general manager", "secretary" to "corporate secretary", and excluding therefrom agent and director.

On August 27, 1998, plaintiff filed an Opposition to defendant's Motion for Reconsideration9 alleging that defendant's branch manager "did bring home" to the defendant-corporation the notice of the filing of the action and by virtue of which a motion to dismiss was filed; and that it was one (1) month after receipt of the summons and the complaint that defendant chose to file a motion to dismiss.

On September 4, 1998, defendant, by Special Appearance, filed a Reply10 contending that the changes in the new rules are substantial and not just general semantics.

Defendant's Motion for Reconsideration was denied in the Order dated November 20, 1998.11

Hence, the present petition alleging that respondent court gravely abused its discretion tantamount to lack or in excess of jurisdiction in denying petitioner's motions to dismiss and for reconsideration, despite the fact that the trial court did not acquire jurisdiction over the person of petitioner because the summons intended for it was improperly served. Petitioner invokes Section 11 of Rule 14 of the 1997 Rules of Civil Procedure.

Private respondent filed its Comment to the petition citing the cases Kanlaon Construction Enterprises Co., Inc.vs. NLRC12 wherein it was held that service upon a construction project manager is valid and in Gesulgon vs.NLRC13 which held that a corporation is bound by the service of summons upon its assistant manager.

The only issue for resolution is whether or not the trial court acquired jurisdiction over the person of petitioner upon service of summons on its Branch Manager.

When the complaint was filed by Petitioner on April 3, 1998, the 1997 Rules of Civil Procedure was already in force.14

Sec. 11, Rule 14 of the 1997 Rules of Civil Procedure provides that:

When the defendant is a corporation, partnership or association organized under the laws of the Philippines with a juridical personality, service may be made on the president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel. (emphasis supplied).

This provision revised the former Section 13, Rule 14 of the Rules of Court which provided that:

Sec. 13. Service upon private domestic corporation or partnership. — If the defendant is a corporation organized under the laws of the Philippines or a partnership duly registered, service may be made on the president, manager, secretary, cashier, agent, or any of its directors. (emphasis supplied).

Petitioner contends that the enumeration of persons to whom summons may be served is "restricted, limited and exclusive" following the rule on statutory construction expressio unios est exclusio alterius and argues that if the Rules of Court Revision Committee intended to liberalize the rule on service of summons, it could have easily done so by clear and concise language.

We agree with petitioner.

Earlier cases have uphold service of summons upon a construction project manager15; a corporation's assistant manager16; ordinary clerk of a corporation17; private secretary of corporate executives18; retained counsel19; officials who had charge or control of the operations of the corporation, like the assistant general manager20; or the corporation's Chief Finance and Administrative Officer21. In these cases, these persons were considered as "agent" within the contemplation of the old rule.22 Notably, under the new Rules, service of summons upon an agent of the corporation is no longer authorized.

The cases cited by private respondent are therefore not in point.

In the Kanlaon case, this Court ruled that under the NLRC Rules of Procedure, summons on the respondent shall be served personally or by registered mail on the party himself; if the party is represented by counsel or any other authorized representative or agent, summons shall be served on such person. In said case, summons was served on one Engr. Estacio who managed and supervised the construction project in Iligan City (although the principal address of the corporation is in Quezon City) and supervised the work of the employees. It was held that as manager, he had sufficient responsibility and discretion to realize the importance of the legal papers served on him and to relay the same to the president or other responsible officer of petitioner such that summons for petitioner was validly served on him as agent and authorized representative of petitioner. Also in the Gesulgon case cited by private respondent, the summons was received by the clerk in the office of the Assistant Manager (at principal office address) and under Section 13 of Rule 14 (old rule), summons may be made upon the clerk who is regarded as agent within the contemplation of the rule.

The designation of persons or officers who are authorized to accept summons for a domestic corporation or partnership is now limited and more clearly specified in Section 11, Rule 14 of the 1997 Rules of Civil Procedure. The rule now states "general manager" instead of only "manager"; "corporate secretary" instead of "secretary"; and "treasurer" instead of "cashier." The phrase "agent, or any of its directors" is conspicuously deleted in the new rule.

The particular revision under Section 11 of Rule 14 was explained by retired Supreme Court Justice Florenz Regalado, thus:23

. . . the then Sec. 13 of this Rule allowed service upon a defendant corporation to "be made on the president, manager, secretary, cashier, agent or any of its directors." The aforesaid terms were obviously ambiguous and susceptible of broad and sometimes illogical interpretations, especially the word "agent" of the corporation. The Filoil case, involving the litigation lawyer of the corporation who precisely appeared to challenge the validity of service of summons but whose very appearance for that purpose was seized upon to validate the defective service, is an illustration of the need for this revised section with limited scope and specific terminology. Thus the absurd result in the Filoil case necessitated the amendment permitting service only on the in-house counsel of the corporation who is in effect an employee of the corporation, as distinguished from an independent practitioner. (emphasis supplied).

Retired Justice Oscar Herrera, who is also a consultant of the Rules of Court Revision Committee, stated that "(T)he rule must be strictly observed. Service must be made to one named in (the) statute . . . .24

It should be noted that even prior to the effectivity of the 1997 Rules of Civil Procedure, strict compliance with the rules has been enjoined. In the case of Delta Motor Sales Corporation vs. Mangosing,25 the Court held:

A strict compliance with the mode of service is necessary to confer jurisdiction of the court over a corporation. The officer upon whom service is made must be one who is named in the statute; otherwise the service is insufficient. . . .

The purpose is to render it reasonably certain that the corporation will receive prompt and proper notice in an action against it or to insure that the summons be served on a representative so integrated with the corporation that such person will know what to do with the legal papers served on him. In other words, "to bring home to the corporation notice of the filing of the action." . . . .

The liberal construction rule cannot be invoked and utilized as a substitute for the plain legal requirements as to the manner in which summons should be served on a domestic corporation. . . . . (emphasis supplied).

Service of summons upon persons other than those mentioned in Section 13 of Rule 14 (old rule) has been held as improper.26 Even under the old rule, service upon a general manager of a firm's branch office has been held as improper as summons should have been served at the firm's principal office. In First Integrated Bonding & Inc.Co., Inc. vs. Dizon,27 it was held that the service of summons on the general manager of the insurance firm's Cebu branch was improper; default order could have been obviated had the summons been served at the firm's principal office.

And in the case of Solar Team Entertainment, Inc. vs. Hon. Helen Bautista Ricafort, et al.28 the Court succinctly clarified that, for the guidance of the Bench and Bar, "strictest" compliance with Section 11 of Rule 13 of the 1997 Rules of Civil Procedure (on Priorities in modes of service and filing) is mandated and the Court cannot rule otherwise, lest we allow circumvention of the innovation by the 1997 Rules in order to obviate delay in the administration of justice.

Accordingly, we rule that the service of summons upon the branch manager of petitioner at its branch office at Cagayan de Oro, instead of upon the general manager at its principal office at Davao City is improper. Consequently, the trial court did not acquire jurisdiction over the person of the petitioner.

The fact that defendant filed a belated motion to dismiss did not operate to confer jurisdiction upon its person. There is no question that the defendant's voluntary appearance in the action is equivalent to service of summons.29 Before, the rule was that a party may challenge the jurisdiction of the court over his person by making a special appearance through a motion to dismiss and if in the same motion, the movant raised other grounds or invoked affirmative relief which necessarily involves the exercise of the jurisdiction of the court.30 This doctrine has been abandoned in the case of La Naval Drug Corporation vs. Court of Appeals, et al.,31 which became the basis of the adoption of a new provision in the former Section 23, which is now Section 20 of Rule 14 of the 1997 Rules. Section 20 now provides that "the inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person of the defendant shall not be deemed a voluntary appearance." The emplacement of this rule clearly underscores the purpose to enforce strict enforcement of the rules on summons. Accordingly, the filing of a motion to dismiss, whether or not belatedly filed by the defendant, his authorized agent or attorney, precisely objecting to the jurisdiction of the court over the person of the defendant can by no means be deemed a submission to the jurisdiction of the court. There being no proper service of summons, the trial court cannot take cognizance of a case for lack of jurisdiction over the person of the defendant. Any proceeding undertaken by the trial court will consequently be null and void.32

WHEREFORE, the petition is hereby GRANTED. The assailed Orders of the public respondent trial court are ANNULLED and SET ASIDE. The public respondent Regional Trial Court of Makati, Branch 132 is declared without jurisdiction to take cognizance of Civil Case No. 98-824, and all its orders and issuances in connection therewith are hereby ANNULLED and SET ASIDE.1âwphi1.nêt

SO ORDERED.

SPOUSES DANTE and MA. TERESA L. GALURA, Petitioners, vs. MATH-AGRO CORPORATION, Respondent.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition1 for review on certiorari under Rule 45 of the Rules of Court, with prayer for the issuance of a writ of preliminary injunction or temporary restraining order. The petition challenges the 25 January and 28 February 2005 Resolutions2  of the Court of Appeals in CA- G.R. SP No. 88088 dismissing the petition3  for annulment of judgment and final order and denying the motion4  for reconsideration, respectively, filed by Dante and Ma. Teresa L. Galura (Spouses Galura). The Spouses Galura sought to annul the 27 June 2001 Decision5  and 10

November 2004 Order6  of the Regional Trial Court (RTC), Judicial Region 3, Malolos, Bulacan, Branch 22, in Civil Case No. 473-M-2000.

The Facts

In March 1997, the Spouses Galura purchased broiler starters and finishers worth P426,000 from Math-Agro Corporation (MAC). The Spouses Galura paid MAC P72,500. Despite several demands, they failed to pay the P353,500 unpaid balance.

MAC engaged the services of a certain Atty. Ronolfo S. Pasamba (Atty. Pasamba) for the purpose of collecting the   P 353,500 unpaid balance from the Spouses Galura. In his letter 7  dated 13 November 1998 and addressed to the Spouses Galura, Atty. Pasamba stated:

Ang kinatawan ng aming kliyente na Math Agro Corporation na may tanggapan sa Balagtas , Bulacan, ay lumapit sa aming tanggapan at kinuha ang aming paglilingkod bilang manananggol kaugnay sa inyong natitirang pagkakautang sa kanila na halagang P353,500.00, na hanggang sa ngayon ay hindi pa ninyo nababayaran.

Dahilan dito , kayo ay binibigyan namin ng limang (5) araw mula sa pagkatanggap ng sulat na ito upang bayaran ang aming nabanggit na kliyente, pati na ang kaukulang tubo nito. Ikinalulungkot naming sabihin sa inyo na kung hindi ninyo bibigyang pansin ang mga bagay na ito, mapipilitan na kaming magsampa ng kaukulang dimanda sa hukuman laban sa inyo upang mapangalagaan namin ang karapatan at interes ng aming nabanggit na kliyente.

Inaasahan namin na bibigyang pansin ninyo ang mga bagay na ito .

In its complaint8  dated 21 June 2000 and filed with the RTC, MAC prayed that the RTC order the Spouses Galura to pay the   P 353,500 unpaid balance and   P 60,000 attorney’s fees and litigation expenses. In the complaint, MAC stated that "defendants are both of legal age, spouses, and residents of G.L. Calayan Agro System Inc., Bo. Kalayaan, Gerona, Tarlac, and/or 230 Apo St., Sta. Mesa Heights, Quezon City, where they may be served with summonses and other processes of this Honorable Court."

Clerk of Court Emmanuel L. Ortega issued the corresponding summons9 dated 15 August 2000 requiring the Spouses Galura to file their answer within 15 days, otherwise judgment by default would be taken against them.

On 17 September 2000, Court Process Server Faustino B. Sildo (Sildo) went to 230 Apo Street, Sta. Mesa Heights, Quezon City, to serve the summons. There, Dante Galura’s father, Dominador Galura, told Sildo that the Spouses Galura were presently residing at Tierra Pura Subdivision, Tandang Sora, Quezon City. On 22 September 2000, Sildo went to G.L. Calayan Agro System, Inc. in Barrio Kalayaan, Gerona, Tarlac to serve the summons. Sildo learned that the property had been foreclosed and that the Spouses Galura no longer resided there. On 26 September 2000, Sildo went to Tierra Pura Subdivision, Tandang Sora, Quezon City, to serve the summons. Sildo served the summons on Teresa L. Galura’s sister, Victoria Lapuz (Lapuz). In his return of service10 dated 4 October 2000, Sildo stated:

THIS IS TO CERTIFY that on September 22, 2000 the undersigned went to the given address of the defendant at G. Bo. Kalayaan, Gerona, Tarlac for the purpose of serving the summons, issued in the above-entitled case

That the defendants is [sic] no longer residing at the given address and their property was foreclose [sic] by the Bank,

That on September 17, the undersigned went to the given address of the defendants at 230 Apo St., Sta Mesa Heights, Quezon City;

That the defendants is [sic] not residing at the given address as per information given by Mr. Dominador Galura father of the defendants.

That Mr. Dominador Galura give [sic] the address of the defendant where they are presently residing at Tierra Fura [sic] Subd. at Tandang Sora, Quezon City.

That on September 26, 2000 the undersigned went to Tandang Sora where the defendants presently residing [sic] Tierra Fura [sic] Subd. for the purpose of serving the summons, complaint together with the annexes,

That Ms. Victoria Lapuz sister-in-Law of Dante Galura received the copy of said summons, as evidence [sic] by her signature appearing on the face of original summons.

The Spouses Galura failed to file their answer. In its Order dated 23 January 2001, the RTC declared the Spouses Galura in default and allowed MAC to present its evidence ex parte.

In its 27 June 2001 Decision, the RTC ruled in favor of MAC and ordered the Spouses Galura to pay theP353,500 unpaid balance, P30,000 attorney’s fees, and expenses of litigation. The RTC stated:

Based on the facts and findings established above, the Court is of the considered view that a judgment in favor of the plaintiff is in order. Likewise, this Court strongly believes that the failure of the defendants or their refusal to file any answer to the complaint is a clear admission on their part of their obligation to the plaintiff. It may even be safely presumed that by their inaction, defendants have no valid defense against the claim of the plaintiff such that under the circumstances, this Court has no other alternative but to pass judgment on the issued [sic] based on the evidence on record.

The award of attorney’s fees in the amount of P30,000.00 is justified under the premises in view of the court’s finding that the defendants acted in gross and evident bad faith in refusing to satisfy plaintiff’s plainly valid, just and demandable claim.

WHEREFORE, judgment is hereby rendered ordering the defendants to pay the plaintiff the following:

1. The sum of P353,500.00 representing the unpaid purchase price of the poultry products plus interest of 6% per annum accruing from the date of defendants’ receipt of the first demand letter on October 18, 1998 until full payment is made;

2. The sum of P30,000.00 as and for attorney’s fees; and

3. The costs of suit.

SO ORDERED.11

In its Order dated 10 November 2004, the RTC issued a writ of execution to implement the 27 June 2001 Decision. The RTC stated:

In support of the motion, it is alleged among others that on June 27, 2001, the Decision was rendered in the above-entitled case, has become final and executory on August 1, 2001 and was duly recorded in the Book of Entry of Judgment.

On the other hand, the fifteen (15) days period given to the defendants, from receipt of the order of the Court dated November 11, 2003 had already lapsed without complying therewith, hence his right to file comment on the Motion for Execution filed by the plaintiff was waived.

For reasons heretofore made apparent, the Court resolves to grant the motion for execution.121avvphi1

On 13 December 2004, the Spouses Galura received "from their parents-in-law" a copy of the 10 November 2004 Order. On 6 January 2005, the Spouses Galura filed with the Court of Appeals a petition13 for annulment of judgment and final order under Rule 47 of the Rules of Court, with prayer for the issuance of a writ of preliminary injunction or temporary restraining order. The Spouses Galura claimed that the RTC’s 27 June 2001 Decision and 10 November 2004 Order were void for two reasons: (1) the RTC failed to acquire jurisdiction over their persons because the substituted service of summons was invalid, and (2) there was extrinsic fraud because MAC made them believe that it would not file a case against them. The Spouses Galura stated:

The assailed decision dated June 27, 2001 and the order of execution dated November 10, 2004, issued by respondent Judge in Civil Case No. 473-M-2000, should be annulled pursuant to Rule 47 of the 1997 Rules of Court.

1. The assailed decision and order of execution are null and void having been rendered and issued despite failure of the court a quo to first acquire jurisdiction over the persons of the petitioners, on account of the improper service of summons upon them.

2. The assailed decision and order of execution were rendered with extrinsic fraud in attendance. The owner of Math-Agro and herein petitioners had an existing agreement for the settlement of their obligation, and herein petitioners were complying with the agreement. Math-Agro, despite the commitment of its owner not to file the complaint, did so. Such an act on the part of Math-Agro and its owner constitutes extrinsic fraud, as it prevented petitioners from defending themselves in the action lodged with the court a quo.14

The Court of Appeals’ Ruling

In its 25 January 2005 Resolution, the Court of Appeals dismissed the petition for lack of merit. The Court of Appeals held that there was a valid substituted service of summons, that the allegation of extrinsic fraud was unbelievable, and that the Spouses Galura should have first availed of the ordinary remedies of new trial, appeal, or petition for relief. The Court of Appeals stated:

1. Petitioners make no denial that insofar as known by the respondent Math-Agro Corporation, their address at the time of the filing of the complaint on July 25, 2000 was at G.L. Calayaan Agro System Inc., Bo. Kalayaan, Gerona, Tarlac and/or 230 Apo St., Sta. Mesa Heights, Quezon City. They likewise do not deny the proceedings taken by Court Process Server Paulino Sildo as narrated in his Return of Service dated October 4, 2000 x x x.

Under the circumstances, we believe, and so hold, that there was a valid substituted service of summons on the petitioners as defendants in the case. To begin with, the petitioners never took the bother of informing the creditor Math-Agro Corporation that they were leaving their address known to the latter and were moving on to another place of residence, so the process server took it upon himself to diligently trace the whereabouts of the petitioners until he was able to effect service of the summons on Victoria Lapuz, a sister-in-law of petitioner Dante Galura at Tierra Fura Subdivision in Tandang Sora, Quezon City, where the defendants were then residing. What they claim is that substituted service was immediately resorted to without the process server first exhausting all opportunities for personal service which is improper. x x x

Far from being improper, the actuations taken and the efforts exerted by the process server are highly commendable for he started looking for the petitioners in the addresses given by them to their creditor and alleged by the latter in the complaint. Finding them not to be there, he methodically traced their whereabouts until he came upon their latest address at Tierra Fura Subdivision, Tandang Sora, Quezon City, as given by Dominador Galura, father of petitioner-husband, Dante Galura. Quite conspicuously, the petitioner do not deny that they were residing at that place when service of the summons was made on petitioner-husband’s sister-in-law, Victoria Lapuz.

x x x x

2. Petitioners’ posturing that they are at the receiving end of extrinsic fraud because they had an existing payment arrangement with their creditor, Math-Agro Corporation, that the latter would not resort to judicial action for as long as payments are being made by them and that they had been paying their obligation until July, 2004 is hard to be believed in. This is but a bare and vagrant allegation without any visible means of support for nowhere in their petition, as well as in their joint affidavit of merit, did they attach copies of the corresponding receipts of their payments. x x x

3. Prescinding from the foregoing records also show that contrary to Section 1, Rule 47 of the 1997 Rules of Civil Procedure, petitioners have not availed themselves first of the ordinary remedies of a motion to lift order of default, new trial, appeal, petition for relief before resorting to this extra-ordinary action for annulment of judgment.15

The Spouses Galura filed a motion for reconsideration dated 14 February 2005. In its Resolution dated 28 February 2005, the Court of Appeals denied the motion for lack of merit.

Hence, the present petition.

The Issues

In their petition dated 8 April 2005, the Spouses Galura raised as issues that the Court of Appeals erred when it ruled that (1) there was a valid substituted service of summons; (2) the allegation of extrinsic fraud was unbelievable; and (3) they should have availed first of the ordinary remedies of new trial, appeal, or petition for relief.

In its Resolution16 dated 27 April 2005, the Court issued a temporary restraining order enjoining the Court of Appeals from implementing its 25 January and 28 February 2005 Resolutions.

The Court’s Ruling

The petition is meritorious.

The Spouses Galura claim that the RTC failed to acquire jurisdiction over their persons because the substituted service of summons was invalid. They stated:

The resort of the process server to what purports to be a substituted service, when he left the summons with Ms. Victoria Lapuz is clearly unjustified, as it was premature. He could still serve the summons personally upon herein petitioners had he exerted efforts to do so. Unfortunately, he did not, and he immediately resorted to a substituted service of the summons. Clearly, the acts of the trial court’s process server contravenes the rulings espoused by the Honorable Supreme Court that summons must be served personally on the defendant as much as possible.

x x x x

The process server, in his return of service above, did not state that his attempts to serve the summons by personal service upon the petitioners at the Tierra Pura Subdivision address failed, and that the same could not be made within a reasonable time. He likewise failed to state facts and circumstances showing why personal service of the summons upon the petitioners at the said address was impossible. Finally, he also failed to state that Ms. Victoria Lapuz, the person with whom he left the summons, was a person of sufficient age and discretion, and residing in the said Tierra Pura address.17

The Court agrees. Section 6, Rule 14 of the Rules of Court states that, "Whenever practicable, the summons shall be served by handing a copy thereof to the defendant in person, or, if he refuses to receive and sign for it, by tendering it to him." Section 7 states:

SEC. 7. Substituted service. — If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant’s residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant’s office or regular place of business with some competent person in charge thereof.

In Sandoval II v. HRET,18 the Court enumerated the requisites of a valid substituted service: (1) service of summons within a reasonable time is impossible; (2) the person serving the summons exerted efforts to locate the defendant; (3) the person to whom the summons is served is of sufficient age and discretion; (4) the person to whom the summons is served resides at the defendant’s place of residence; and (5) pertinent facts showing the enumerated circumstances are stated in the return of service. In Sandoval, the Court held that "statutory restrictions for substituted service must be strictly, faithfully and fully observed."

In the present case, there is no showing that personal service of summons within a reasonable time was impossible. On 17 September 2000, Sildo went to 230 Apo Street, Sta. Mesa Heights, Quezon City, to serve the summons. There, Dominador Galura told him that the Spouses Galura were presently residing at Tierra Pura Subdivision, Tandang Sora, Quezon City. Despite being told of the Spouses Galura’s correct address, Sildo still went to G.L. Calayan Agro System, Inc. in Barrio Kalayaan, Gerona, Tarlac to serve the summons, only to find out that the property had already been foreclosed and that the Spouses Galura no longer resided there. On 26 September 2000, Sildo went to Tierra Pura Subdivision, Tandang Sora, Quezon City, and, without any explanation, served the summons on Lapuz. In his 4 October 2000 return of service, Sildo stated:

That on September 26, 2000 the undersigned went to Tandang Sora where the defendants presently residing [sic] Tierra Fura [sic] Subd. for the purpose of serving the summons, complaint together with the annexes,

That Ms. Victoria Lapuz sister-in-Law of Dante Galura received the copy of said summons, as evidence [sic] by her signature appearing on the face of original summons.

Whenever practicable, the summons must be served on the defendant in person. Substituted service may be resorted to only when service of summons within a reasonable time is impossible. Impossibility of prompt service should appear in the return of service — the efforts exerted to find the defendant and the fact that such efforts failed must be stated in the return of service. In Keister v. Judge Navarro,19 the Court held:

Service of summons upon the defendant is the means by which the court may acquire jurisdiction over his person. In the absence of a valid waiver, trial and judgment without such service are null and void. This process is solely for the benefit of the defendant. Its purpose is not only to give the court jurisdiction of the person of the defendant, but also to afford the latter an opportunity to be heard on the claim made against him.

The summons must be served to the defendant in person. It is only when the defendant cannot be served personally within a reasonable time that a substituted service may be made. Impossibility of prompt service should be shown by stating the efforts made to find the defendant personally and the fact that such efforts failed. This statement should be made in the proof of service. This is necessary because substituted service is in derogation of the usual method of service. It has been held that this method of service is "in derogation of the common law; it is a method extraordinary in character, and hence may be used only as prescribed and in the circumstances authorized by statute." Thus, under the controlling decisions, the statutory requirements of substituted service must be followed strictly, faithfully and fully, and any substituted service other than that authorized by the statute is considered ineffective.

Indeed, the constitutional requirement of due process requires that the service be such as may be reasonably expected to give the desired notice to the party of the claim against him.

In the present case, there was no showing in the return of service (1) of the impossibility of personal service within a reasonable time; (2) that Lapuz, the person on whom summons was served, was of suitable age and discretion; and (3) that Lapuz resided in the residence of the Spouses Galura. Consequently, the RTC did not acquire jurisdiction over the persons of the Spouses Galura, and thus the Spouses Galura are not bound by the RTC’s 27 June 2001 Decision and 10 November 2004 Order.20

The Spouses Galura claim that the Court of Appeals erred when it ruled that they should have first availed of the ordinary remedies of new trial, appeal, or petition for relief. The Spouses Galura stated:

In the case at bar, the assailed decision was rendered in June 27, 2001. More than three years have passed since the said decision, clearly the remedies for a motion to lift order of default, new trial, appeal, petition for relief, have already prescribed. Herein petitioners, therefore, are left only with the remedy of a petition for the annulment of judgment.21

The Court agrees. When a petition for annulment of judgment or final order under Rule 47 is grounded on lack of jurisdiction over the person of the defendant, the petitioner does not need to allege that the ordinary remedies of new trial, appeal, or petition for relief are no longer available through no fault of his or her own. In Ancheta v. Ancheta,22 the Court held:

[T]he Court of Appeals erred in dismissing the original petition and denying admission of the amended petition. This is so because apparently, the Court of Appeals failed to take note from the material allegations of the petition, that the petition was based not only on extrinsic fraud but also on lack of jurisdiction over the person of the petitioner, on her claim that the summons and the copy of the complaint in Sp. Proc. No. NC-662 were not served on her. While the original petition and amended petition did not state a cause of action for the nullification of the assailed order on the ground of extrinsic fraud, we rule, however, that it states a sufficient cause of action for the nullification of the assailed order on the ground of lack of jursdiction of the RTC over the person of the petitioner, notwithstanding the absence of any allegation therein that the ordinary remedy of new trial or reconsideration, or appeal are no longer available through no fault of the petitioner.

In a case where a petition for annulment of a judgment or final order of the RTC filed under Rule 47 of the Rules of Court is grounded on lack of jurisdiction over the person of the defendant/respondent or over the nature or subject of the action, the petitioner need not allege in the petition that the ordinary remedy of new trial or reconsideration of the final order or judgment or appeal therefrom are no longer available through no fault of her own. This is so because a judgment rendered or final order issued by the RTC without jurisdiction is null and void and may be assailed any time either collaterally or in a direct action or by resisting such judgment or final order an any action or proceeding whenever it is invoked, unless barred by laches. (Emphasis supplied)

WHEREFORE, the Court (1) GRANTS the petition, (2) SETS ASIDE the 25 January and 28 February 2005 Resolutions of the Court of Appeals in CA-G.R. SP No. 88088, (3) MAKES PERMANENT the temporary restraining order issued on 27 April 2005, and (4) SETS ASIDE the 27 2001 Decision and 10 November 2004 Order of the Regional Trial Court, Judicial Region 3, Malolos, Bulacan, Branch 22, in Civil Case No. 473-M-2000.

SO ORDERED.

RAPID CITY REALTY AND DEVELOPMENT CORPORATION, Petitioner, vs. ORLANDO VILLA and LOURDES PAEZ-VILLA,1 Respondents.

CARPIO MORALES, J.:

Sometime in 2004, Rapid City Realty and Development Corporation (petitioner) filed a complaint for declaration of nullity of subdivision plans . . . mandamus and damages against several defendants including Spouses Orlando and Lourdes Villa (respondents). The complaint, which was docketed at the Regional Trial Court of Antipolo City as Civil Case No. 04-7350, was lodged at Branch 71 thereof.

After one failed attempt at personal service of summons, Gregorio Zapanta (Zapanta), court process server, resorted to substituted service by serving summons upon respondents’ househelp who did not acknowledge receipt thereof and refused to divulge their names. Thus Zapanta stated in the Return of Summons:

THIS IS TO CERTIFY that on September 24, 2004, the undersigned caused the service of summons together with a copy of the complaint with its annexes to defendant Spouses Lourdes Estudillo Paez-Cline and Orlando Villa at their given address at 905 Padre Faura Street, Ermita Manila, as per information given by two lady househelps who are also residing at the said address, the defendant spouses are not around at that time. On the 27th of September, 2004, I returned to the same place to serve the summons. I served the summons and the copy of the complaint with its annexes to the two ladies (The same lady househelp I met on Sept. 24, 2004) but they refused to sign to acknowledge receipt and they refused to tell their name as per instruction of the defendants. With me who can attest to the said incident is Mr. Jun Llanes, who was with me at that time.2 x x x (emphasis and underscoring supplied)

Despite substituted service, respondents failed to file their Answer, prompting petitioner to file a "Motion to Declare Defendants[-herein respondents] in Default" which the trial court granted by Order of May 3, 2005.

More than eight months thereafter or on January 30, 2006, respondents filed a Motion to Lift Order of Default,3claiming that on January 27, 2006 they "officially received all pertinent papers such as Complaint and Annexes. Motion to Dismiss of the Solicitor General and the ORDER dated May 3, 2005 granting the Motion to Declare [them] in Default." And they denied the existence of two women helpers who allegedly refused to sign and acknowledge receipt of the summons. In any event, they contended that assuming that the allegation were true, the helpers had no authority to receive the documents.4

By Order of July 17, 2006, the trial court set aside the Order of Default and gave herein respondents five days to file their Answer. Respondents just the same did not file an Answer, drawing petitioner to again file a Motion to declare them in default, which the trial court again granted by Order of February 21, 2007.

On April 18, 2007, respondents filed an Omnibus Motion for reconsideration of the second order declaring them in default and to vacate proceedings, this time claiming that the trial court did not acquire jurisdiction over their persons due to invalid service of summons.

The trial court denied respondents’ Omnibus Motion by Order of May 22, 2007 and proceeded to receive ex-parte evidence for petitioner.

Respondents, via certiorari, challenged the trial court’s February 21, 2007 and April 18, 2007 Orders before the Court of Appeals.

In the meantime, the trial court, by Decision of September 4, 2007, rendered judgment in favor of petitioner.

By Decision of April 29, 2008,5 the appellate court annulled the trial court’s Orders declaring respondents in default for the second time in this wise:

In assailing the orders of the trial court through their Motion to Lift… and later their Omnibus Motion… the petitioners [herein-respondents] never raised any other defense in avoidance of the respondents’

[herein petitioners] claim, and instead focused all their energies on questioning the said court’s jurisdiction. The latter motion clearly stated prefatorily their counsel’s reservation or "special appearance to question jurisdiction" over the persons of the petitioners. "A party who makes a special appearance in court challenging the jurisdiction of said court based on the ground of invalid service of summons is not deemed to have submitted himself to the jurisdiction of the court."6 (citation omitted; italics, emphasis and underscoring supplied)

Petitioner’s motion for reconsideration having been denied by the appellate court by Resolution of August 12, 2008, it comes to the Court via petition for review on certiorari, arguing in the main that respondents, in filing the first Motion to Lift the Order of Default, voluntarily submitted themselves to the jurisdiction of the court.

The petition is impressed with merit.

It is settled that if there is no valid service of summons, the court can still acquire jurisdiction over the person of the defendant by virtue of the latter’s voluntary appearance. Thus Section 20 of Rule 14 of the Rules of Court provides:

Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance in the action shall be equivalent to service of summons. The inclusion in a motion to dismiss of other grounds aside from lack of jurisdiction over the person shall not be deemed a voluntary appearance.

And Philippine Commercial International Bank v. Spouses Wilson Dy Hong Pi and Lolita Dy, et al. enlightens:

Preliminarily, jurisdiction over the defendant in a civil case is acquired either by the coercive power of legal processes exerted over his person, or his voluntary appearance in court. As a general proposition, one who seeks an affirmative relief is deemed to have submitted to the jurisdiction of the court. It is by reason of this rule that we have had occasion to declare that the filing of motions to admit answer, for additional time to file answer,for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, is considered voluntary submission to the court’s jurisdiction. This, however, is tempered by the concept of conditional appearance, such that a party who makes a special appearance to challenge, among others, the court’s jurisdiction over his person cannot be considered to have submitted to its authority.

Prescinding from the foregoing, it is thus clear that:

(1) Special appearance operates as an exception to the general rule on voluntary appearance;

(2) Accordingly, objections to the jurisdiction of the court   over the person of the defendant  must be explicitly made, i.e., set forth in an unequivocal manner ; and

(3) Failure to do so constitutes voluntary submission to the jurisdiction of the court, especially in instances where a pleading or motion seeking affirmative relief is filed and submitted to the court for resolution.7(italics and underscoring supplied)

In their first Motion to Lift the Order of Default8 dated January 30, 2006, respondents alleged:

x x x x

4. In the case of respondents, there is no reason why they should not receive the Orders of this Honorable Court since the subject of the case is their multi-million real estate property and naturally they would not want to be declared in default or lose the same outright without the benefit of a trial on the merits;

5. It would be the height of injustice if the respondents is [sic] denied the equal protection of the laws[;]

6. Respondents must be afforded "Due process of Law" as enshrined in the New Constitution, which is a basic right of every Filipino, since they were not furnished copies of pleadings by the plaintiff and the Order dated May 3, 2005;

x x x x9

and accordingly prayed as follows:

WHEREFORE, . . . it is most respectfully prayed . . . that the Order dated May 5, 2005 declaring [them] in default be LIFTED.10

Respondents did not, in said motion, allege that their filing thereof was a special appearance for the purpose only to question the jurisdiction over their persons. Clearly, they had acquiesced to the jurisdiction of the court.

WHEREFORE, the petition is GRANTED. The assailed Court of Appeals Decision of April 29, 2008 isREVERSED and SET ASIDE.

Let the original records of Civil Case No. 04-7350 be remanded to the court of origin, Regional Trial Court of Antipolo City, Branch 71.

SO ORDERED.

LEAH PALMA, Petitioner, vs. HON. DANILO P. GALVEZ, in his capacity as PRESIDING JUDGE of the REGIONAL TRIAL COURT OF ILOILO CITY, BRANCH 24; and PSYCHE ELENA AGUDO, Respondents.

PERALTA, J.:

Assailed in this petition for certiorari under Rule 65 of the Rules of Court are the Orders dated May 7, 20041 and July 21, 20042 of the Regional Trial Court (RTC) of Iloilo City, Branch 24, granting the motion to dismiss filed by private respondent Psyche Elena Agudo and denying reconsideration thereof, respectively.

On July 28, 2003, petitioner Leah Palma filed with the RTC an action for damages against the Philippine Heart Center (PHC), Dr. Danilo Giron and Dr. Bernadette O. Cruz, alleging that the defendants committed professional fault, negligence and omission for having removed her right ovary against her will, and losing the same and the tissues extracted from her during the surgery; and that although the specimens were subsequently found, petitioner was doubtful and uncertain that the same was hers as the label therein pertained that of somebody else. Defendants filed their respective Answers. Petitioner subsequently filed a Motion for Leave to Admit Amended Complaint, praying for the inclusion of additional defendants who were all nurses at the PHC, namely, Karla Reyes, Myra Mangaser and herein private respondent Agudo. Thus, summons were subsequently issued to them.

On February 17, 2004, the RTC's process server submitted his return of summons stating that the alias summons, together with a copy of the amended complaint and its annexes, were served upon private respondent thru her husband Alfredo Agudo, who received and signed the same as private respondent was out of the country.3

On March 1, 2004, counsel of private respondent filed a Notice of Appearance and a Motion for Extension of Time to File Answer4 stating that he was just engaged by private respondent's husband as she was out of the country and the Answer was already due.

On March 15, 2004, private respondent's counsel filed a Motion for Another Extension of Time to File Answer,5and stating that while the draft answer was already finished, the same would be sent to private respondent for her clarification/verification before the Philippine Consulate in Ireland; thus, the counsel prayed for another 20 days to file the Answer.

On March 30, 2004, private respondent filed a Motion to Dismiss6 on the ground that the RTC had not acquired jurisdiction over her as she was not properly served with summons, since she was temporarily out of the country; that service of summons on her should conform to Section 16, Rule 14 of the Rules of Court. Petitioner filed her Opposition7 to the motion to dismiss, arguing that a substituted service of summons on private respondent's husband was valid and binding on her; that service of summons under Section 16, Rule 14 was not exclusive and may be effected by other modes of service, i.e., by personal or substituted service. Private respondent filed a Comment8 on petitioner's Opposition, and petitioner filed a Reply9 thereto.

On May 7, 2004, the RTC issued its assailed Order granting private respondent's motion to dismiss. It found that while the summons was served at private respondent's house and received by respondent's husband, such service did not qualify as a valid service of summons on her as she was out of the country at the time the summons was served, thus, she was not personally served a summons; and even granting that she knew that a complaint was filed against her, nevertheless, the court did not acquire jurisdiction over her person as she was not validly served with summons; that substituted service could not be resorted to since it was established that private respondent was out of the country, thus, Section 16, Rule 14 provides for the service of summons on her by publication.

Petitioner filed a motion for reconsideration, which the RTC denied in its Order dated July 21, 2004.

Petitioner is now before us alleging that the public respondent committed a grave abuse of discretion amounting to lack or excess of jurisdiction when he ruled that:

I. Substituted service of summons upon private respondent, a defendant residing in the Philippines but temporarily outside the country is invalid;

II. Section 16, Rule 14, of the 1997 Rules of Civil Procedure limits the mode of service of summons upon a defendant residing in the Philippines, but temporarily outside the country, exclusively to extraterritorial service of summons under section 15 of the same rule;

III. In not ruling that by filing two (2) motions for extension of time to file Answer, private respondent had voluntarily submitted herself to the jurisdiction of respondent court, pursuant to Section 20, Rule 14 of the 1997 Rules of Civil Procedure, hence, equivalent to having been served with summons;

IV. The cases cited in his challenged Order of May 7, 2004 constitute stare decisis despite his own admission that the factual landscape in those decided cases are entirely different from those in this case.10

Petitioner claims that the RTC committed a grave abuse of discretion in ruling that Section 16, Rule 14, limits the service of summons upon the defendant-resident who is temporarily out of the country exclusively by means of extraterritorial service, i.e., by personal service or by publication, pursuant to Section 15 of the same Rule. Petitioner further argues that in filing two motions for extension of time to file answer, private respondent voluntarily submitted to the jurisdiction of the court.

In her Comment, private respondent claims that petitioner's certiorari under Rule 65 is not the proper remedy but a petition for review under Rule 45, since the RTC ruling cannot be considered as having been issued with grave abuse of discretion; that the petition was not properly verified because while the verification was dated September 15, 2004, the petition was dated September 30, 2004. She insists that since she was out of the country at the time the service of summons was made, such service should be governed by Section 16, in relation to Section 15, Rule 14 of the Rules of Court; that there was no voluntary appearance on her part when her counsel filed two motions for extension of

time to file answer, since she filed her motion to dismiss on the ground of lack of jurisdiction within the period provided under Section 1, Rule 16 of the Rules of Court.

In her Reply, petitioner claims that the draft of the petition and the verification and certification against forum shopping were sent to her for her signature earlier than the date of the finalized petition, since the petition could not be filed without her signed verification. Petitioner avers that when private respondent filed her two motions for extension of time to file answer, no special appearance was made to challenge the validity of the service of summons on her.

The parties subsequently filed their respective memoranda as required.

We shall first resolve the procedural issues raised by private respondent.

Private respondent's claim that the petition for certiorari under Rule 65 is a wrong remedy thus the petition should be dismissed, is not persuasive. A petition for certiorari is proper when any tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, or any plain, speedy, and adequate remedy at law.11 There is "grave abuse of discretion" when public respondent acts in a capricious or whimsical manner in the exercise of its judgment as to be equivalent to lack of jurisdiction.

Section 1, Rule 41 of the 1997 Rules of Civil Procedure states that an appeal may be taken only from a final order that completely disposes of the case; that no appeal may be taken from (a) an order denying a motion for new trial or reconsideration; (b) an order denying a petition for relief or any similar motion seeking relief from judgment; (c) an interlocutory order; (d) an order disallowing or dismissing an appeal; (e) an order denying a motion to set aside a judgment by consent, confession or compromise on the ground of fraud, mistake or duress, or any other ground vitiating consent; (f) an order of execution; (g) a judgment or final order for or against one or more of several parties or in separate claims, counterclaims, cross-claims and third-party complaints, while the main case is pending, unless the court allows an appeal therefrom; or (h) an order dismissing an action without prejudice. In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action for certiorari under Rule 65.

In this case, the RTC Order granting the motion to dismiss filed by private respondent is a final order because it terminates the proceedings against her, but it falls within exception (g) of the Rule since the case involves several defendants, and the complaint for damages against these defendants is still pending.12 Since there is no appeal, or any plain, speedy, and adequate remedy in law, the remedy of a special civil action for certiorari is proper as there is a need to promptly relieve the aggrieved party from the injurious effects of the acts of an inferior court or tribunal.13

Anent private respondent's allegation that the petition was not properly verified, we find the same to be devoid of merit. The purpose of requiring a verification is to secure an assurance that the allegations of the petition have been made in good faith, or are true and correct, not merely speculative.14 In this instance, petitioner attached a verification to her petition although dated earlier than the filing of her petition. Petitioner explains that since a draft of the petition and the verification were earlier sent to her in New York for her signature, the verification was earlier dated than the petition for certiorari filed with us. We accept such explanation. While Section 1, Rule 65 requires that the petition for certiorari be verified, this is not an absolute necessity where the material facts alleged are a matter of record and the questions raised are mainly of law.15 In this case, the issue raised is purely of law.

Now on the merits, the issue for resolution is whether there was a valid service of summons on private respondent.

In civil cases, the trial court acquires jurisdiction over the person of the defendant either by the service of summons or by the latter’s voluntary appearance and submission to the authority of the former.16 Private respondent was a Filipino resident who was temporarily out of the Philippines at the

time of the service of summons; thus, service of summons on her is governed by Section 16, Rule 14 of the Rules of Court, which provides:

Sec. 16. Residents temporarily out of the Philippines. – When an action is commenced against a defendant who ordinarily resides within the Philippines, but who is temporarily out of it, service may, by leave of court, be alsoeffected out of the Philippines, as under the preceding section. (Emphasis supplied)

The preceding section referred to in the above provision is Section 15, which speaks of extraterritorial service, thus:

SEC. 15. Extraterritorial service. ─ When the defendant does not reside and is not found in the Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 6; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.

The RTC found that since private respondent was abroad at the time of the service of summons, she was a resident who was temporarily out of the country; thus, service of summons may be made only by publication.

We do not agree.

In Montefalcon v. Vasquez,17 we said that because Section 16 of Rule 14 uses the words "may" and "also," it is not mandatory. Other methods of service of summons allowed under the Rules may also be availed of by the serving officer on a defendant-resident who is temporarily out of the Philippines. Thus, if a resident defendant is temporarily out of the country, any of the following modes of service may be resorted to: (1) substituted service set forth in section 7 ( formerly Section 8), Rule 14; (2) personal service outside the country, with leave of court; (3) service by publication, also with leave of court; or (4) in any other manner the court may deem sufficient.18

In Montalban v. Maximo,19 we held that substituted service of summons under the present Section 7, Rule 14 of the Rules of Court in a suit in personam against residents of the Philippines temporarily absent therefrom is the normal method of service of summons that will confer jurisdiction on the court over such defendant. In the same case, we expounded on the rationale in providing for substituted service as the normal mode of service for residents temporarily out of the Philippines.

x x x A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local base, so to speak, to which any inquiry about him may be directed and where he is bound to return. Where one temporarily absents himself, he leaves his affairs in the hands of one who may be reasonably expected to act in his place and stead; to do all that is necessary to protect his interests; and to communicate with him from time to time any incident of importance that may affect him or his business or his affairs. It is usual for such a man to leave at his home or with his business associates information as to where he may be contacted in the event a question that affects him crops up. If he does not do what is expected of him, and a case comes up in court against him, he cannot just raise his voice and say that he is not subject to the processes of our courts. He cannot stop a suit from being filed against him upon a claim that he cannot be summoned at his dwelling house or residence or his office or regular place of business.

Not that he cannot be reached within a reasonable time to enable him to contest a suit against him. There are now advanced facilities of communication. Long distance telephone calls and cablegrams make it easy for one he left behind to communicate with him.20

Considering that private respondent was temporarily out of the country, the summons and complaint may be validly served on her through substituted service under Section 7, Rule 14 of the Rules of Court which reads:

SEC. 7. Substituted service. — If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the preceding section, service may be effected (a) by leaving copies of the summons at the defendant’s residence with some person of suitable age and discretion then residing therein, or (b) by leaving the copies at defendant’s office or regular place of business with some competent person in charge thereof.

We have held that a dwelling, house or residence refers to the place where the person named in the summons is living at the time when the service is made, even though he may be temporarily out of the country at the time.21 It is, thus, the service of the summons intended for the defendant that must be left with the person of suitable age and discretion residing in the house of the defendant. Compliance with the rules regarding the service of summons is as important as the issue of due process as that of jurisdiction.221avvphi1

Section 7 also designates the persons with whom copies of the process may be left. The rule presupposes that such a relation of confidence exists between the person with whom the copy is left and the defendant and, therefore, assumes that such person will deliver the process to defendant or in some way give him notice thereof.23

In this case, the Sheriff's Return stated that private respondent was out of the country; thus, the service of summons was made at her residence with her husband, Alfredo P. Agudo, acknowledging receipt thereof. Alfredo was presumably of suitable age and discretion, who was residing in that place and, therefore, was competent to receive the summons on private respondent's behalf.

Notably, private respondent makes no issue as to the fact that the place where the summons was served was her residence, though she was temporarily out of the country at that time, and that Alfredo is her husband. In fact, in the notice of appearance and motion for extension of time to file answer submitted by private respondent's counsel, he confirmed the Sheriff's Return by stating that private respondent was out of the country and that his service was engaged by respondent's husband. In his motion for another extension of time to file answer, private respondent's counsel stated that a draft of the answer had already been prepared, which would be submitted to private respondent, who was in Ireland for her clarification and/or verification before the Philippine Consulate there. These statements establish the fact that private respondent had knowledge of the case filed against her, and that her husband had told her about the case as Alfredo even engaged the services of her counsel.

In addition, we agree with petitioner that the RTC had indeed acquired jurisdiction over the person of private respondent when the latter's counsel entered his appearance on private respondent's behalf, without qualification and without questioning the propriety of the service of summons, and even filed two Motions for Extension of Time to File Answer. In effect, private respondent, through counsel, had already invoked the RTC’s jurisdiction over her person by praying that the motions for extension of time to file answer be granted. We have held that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission to the jurisdiction of the court.24 When private respondent earlier invoked the jurisdiction of the RTC to secure affirmative relief in her motions for additional time to file answer, she voluntarily submitted to the jurisdiction of the RTC and is thereby estopped from asserting otherwise.25

Considering the foregoing, we find that the RTC committed a grave abuse of discretion amounting to excess of jurisdiction in issuing its assailed Orders.

WHEREFORE, the petition is GRANTED. The Orders dated May 7, 2004 and July 21, 2004 of the Regional Trial Court of Iloilo City, Branch 24, are hereby SET ASIDE. Private respondent is DIRECTED to file her Answer within the reglementary period from receipt of this decision.

SO ORDERED.

VENANCIO FIGUEROA y CERVANTES,1 Petitioner, vs. PEOPLE OF THE PHILIPPINES, Respondent.

NACHURA, J.:

When is a litigant estopped by laches from assailing the jurisdiction of a tribunal? This is the paramount issue raised in this petition for review of the February 28, 2001 Decision2 of the Court of Appeals (CA) in CA-G.R. CR No. 22697.

Pertinent are the following antecedent facts and proceedings:

On July 8, 1994, an information3 for reckless imprudence resulting in homicide was filed against the petitioner before the Regional Trial Court (RTC) of Bulacan, Branch 18.4 The case was docketed as Criminal Case No. 2235-M-94.5 Trial on the merits ensued and on August 19, 1998, the trial court convicted the petitioner as charged.6 In his appeal before the CA, the petitioner questioned, among others, for the first time, the trial court’s jurisdiction.7

The appellate court, however, in the challenged decision, considered the petitioner to have actively participated in the trial and to have belatedly attacked the jurisdiction of the RTC; thus, he was already estopped by laches from asserting the trial court’s lack of jurisdiction. Finding no other ground to reverse the trial court’s decision, the CA affirmed the petitioner’s conviction but modified the penalty imposed and the damages awarded.8

Dissatisfied, the petitioner filed the instant petition for review on certiorari raising the following issues for our resolution:

a. Does the fact that the petitioner failed to raise the issue of jurisdiction during the trial of this case, which was initiated and filed by the public prosecutor before the wrong court, constitute laches in relation to the doctrine laid down in Tijam v. Sibonghanoy, notwithstanding the fact that said issue was immediately raised in petitioner’s appeal to the Honorable Court of Appeals? Conversely, does the active participation of the petitioner in the trial of his case, which is initiated and filed not by him but by the public prosecutor, amount to estoppel?

b. Does the admission of the petitioner that it is difficult to immediately stop a bus while it is running at 40 kilometers per hour for the purpose of avoiding a person who unexpectedly crossed the road, constitute enough incriminating evidence to warrant his conviction for the crime charged?

c. Is the Honorable Court of Appeals justified in considering the place of accident as falling within Item 4 of Section 35 (b) of the Land Transportation and Traffic Code, and subsequently ruling that the speed limit thereto is only 20 kilometers per hour, when no evidence whatsoever to that effect was ever presented by the prosecution during the trial of this case?

d. Is the Honorable Court of Appeals justified in convicting the petitioner for homicide through reckless imprudence (the legally correct designation is "reckless imprudence resulting to homicide") with violation of the Land Transportation and Traffic Code when the prosecution did not prove this during the trial and, more importantly, the information filed against the petitioner does not contain an allegation to that effect?

e. Does the uncontroverted testimony of the defense witness Leonardo Hernal that the victim unexpectedly crossed the road resulting in him getting hit by the bus driven by the petitioner not enough evidence to acquit him of the crime charged?9

Applied uniformly is the familiar rule that the jurisdiction of the court to hear and decide a case is conferred by the law in force at the time of the institution of the action, unless such statute provides for a retroactive application thereof.10 In this case, at the time the criminal information for reckless imprudence resulting in homicide with violation of the Automobile Law (now Land Transportation and Traffic Code) was filed, Section 32(2) of Batas Pambansa (B.P.) Blg. 12911 had already been amended by Republic Act No. 7691.12 The said provision thus reads:

Sec. 32. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in Criminal Cases.—Except in cases falling within the exclusive original jurisdiction of Regional Trial Courts and the Sandiganbayan, the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

x x x x

(2) Exclusive original jurisdiction over all offenses punishable with imprisonment not exceeding six (6) years irrespective of the amount of fine, and regardless of other imposable accessory or other penalties, including the civil liability arising from such offenses or predicated thereon, irrespective of kind, nature, value or amount thereof: Provided, however, That in offenses involving damage to property through criminal negligence, they shall have exclusive original jurisdiction thereof.

As the imposable penalty for the crime charged herein is prision correccional in its medium and maximum periods or imprisonment for 2 years, 4 months and 1 day to 6 years,13 jurisdiction to hear and try the same is conferred on the Municipal Trial Courts (MTCs). Clearly, therefore, the RTC of Bulacan does not have jurisdiction over Criminal Case No. 2235-M-94.

While both the appellate court and the Solicitor General acknowledge this fact, they nevertheless are of the position that the principle of estoppel by laches has already precluded the petitioner from questioning the jurisdiction of the RTC—the trial went on for 4 years with the petitioner actively participating therein and without him ever raising the jurisdictional infirmity. The petitioner, for his part, counters that the lack of jurisdiction of a court over the subject matter may be raised at any time even for the first time on appeal. As undue delay is further absent herein, the principle of laches will not be applicable.

To settle once and for all this problem of jurisdiction vis-à-vis estoppel by laches, which continuously confounds the bench and the bar, we shall analyze the various Court decisions on the matter.

As early as 1901, this Court has declared that unless jurisdiction has been conferred by some legislative act, no court or tribunal can act on a matter submitted to it.14 We went on to state in U.S. v. De La Santa15 that:

It has been frequently held that a lack of jurisdiction over the subject-matter is fatal, and subject to objection at any stage of the proceedings, either in the court below or on appeal (Ency. of Pl. & Pr., vol. 12, p. 189, and large array of cases there cited), and indeed, where the subject-matter is not within the jurisdiction, the court may dismiss the proceeding ex mero motu. (4 Ill., 133; 190 Ind., 79; Chipman vs. Waterbury, 59 Conn., 496.)

Jurisdiction over the subject-matter in a judicial proceeding is conferred by the sovereign authority which organizes the court; it is given only by law and in the manner prescribed by law and an objection based on the lack of such jurisdiction can not be waived by the parties. x x x16

Later, in People v. Casiano,17 the Court explained:

4. The operation of the principle of estoppel on the question of jurisdiction seemingly depends upon whether the lower court actually had jurisdiction or not. If it had no jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction, the parties are not barred, on appeal, from assailing such jurisdiction, for the same "must exist as a matter of law, and may not be conferred by consent of the parties or by estoppel" (5 C.J.S., 861-863). However, if the lower court had jurisdiction, and the case was heard and decided upon a given theory, such, for instance, as that the court had no jurisdiction, the party who induced it to adopt such theory will not be permitted, on appeal, to assume an inconsistent position—that the lower court had jurisdiction. Here, the principle of estoppel applies. The rule that jurisdiction is conferred by law, and does not depend upon the will of the parties, has no bearing thereon. Thus, Corpus Juris Secundum says:

Where accused has secured a decision that the indictment is void, or has been granted an instruction based on its defective character directing the jury to acquit, he is estopped, when subsequently indicted, to assert that the former indictment was valid. In such case, there may be a new prosecution whether the indictment in the former prosecution was good or bad. Similarly, where, after the jury was impaneled and sworn, the court on accused's motion quashed the information on the erroneous assumption that the court had no jurisdiction, accused cannot successfully plead former jeopardy to a new information. x x x (22 C.J.S., sec. 252, pp. 388-389; italics ours.)

Where accused procured a prior conviction to be set aside on the ground that the court was without jurisdiction, he is estopped subsequently to assert, in support of a defense of previous jeopardy, that such court had jurisdiction." (22 C.J.S. p. 378.)18

But in Pindañgan Agricultural Co., Inc. v. Dans,19 the Court, in not sustaining the plea of lack of jurisdiction by the plaintiff-appellee therein, made the following observations:

It is surprising why it is only now, after the decision has been rendered, that the plaintiff-appellee presents the question of this Court’s jurisdiction over the case. Republic Act No. 2613 was enacted on August 1, 1959. This case was argued on January 29, 1960. Notwithstanding this fact, the jurisdiction of this Court was never impugned until the adverse decision of this Court was handed down. The conduct of counsel leads us to believe that they must have always been of the belief that notwithstanding said enactment of Republic Act 2613 this Court has jurisdiction of the case, such conduct being born out of a conviction that the actual real value of the properties in question actually exceeds the jurisdictional amount of this Court (over P200,000). Our minute resolution in G.R. No. L-10096, Hyson Tan, et al. vs. Filipinas Compaña de Seguros, et al., of March 23, 1956, a parallel case, is applicable to the conduct of plaintiff-appellee in this case, thus:

x x x that an appellant who files his brief and submits his case to the Court of Appeals for decision, without questioning the latter’s jurisdiction until decision is rendered therein, should be considered as having voluntarily waived so much of his claim as would exceed the jurisdiction of said Appellate Court; for the reason that a contrary rule would encourage the undesirable practice of appellants submitting their cases for decision to the Court of Appeals in expectation of favorable judgment, but with intent of attacking its jurisdiction should the decision be unfavorable: x x x20

Then came our ruling in Tijam v. Sibonghanoy21 that a party may be barred by laches from invoking lack of jurisdiction at a late hour for the purpose of annulling everything done in the case with the active participation of said party invoking the plea. We expounded, thus:

A party may be estopped or barred from raising a question in different ways and for different reasons. Thus, we speak of estoppel in pais, of estoppel by deed or by record, and of estoppel by laches.

Laches, in a general sense, is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.

It has been held that a party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the rule, it was further said that the question whether the court had jurisdiction either of the subject matter of the action or of the parties was not important in such cases because the party is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice cannot be tolerated—obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the court (Pease vs. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S.Ct. 283; St. Louis etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.

Upon this same principle is what We said in the three cases mentioned in the resolution of the Court of Appeals of May 20, 1963 (supra)—to the effect that we frown upon the "undesirable practice" of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse—as well as in Pindañgan etc. vs. Dans et al., G.R. L-14591, September 26, 1962; Montelibano et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. L-15092; Young Men Labor Union etc. vs. The Court of Industrial Relations et al., G.R. L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 Phil. p. 277.

The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948, it could have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu to take cognizance of the present action by reason of the sum of money involved which, according to the law then in force, was within the original exclusive jurisdiction of inferior courts. It failed to do so. Instead, at several stages of the proceedings in the court a quo, as well as in the Court of Appeals, it invoked the jurisdiction of said courts to obtain affirmative relief and submitted its case for a final adjudication on the merits. It was only after an adverse decision was rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction. Were we to sanction such conduct on its part, We would in effect be declaring as useless all the proceedings had in the present case since it was commenced on July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The inequity and unfairness of this is not only patent but revolting.22

For quite a time since we made this pronouncement in Sibonghanoy, courts and tribunals, in resolving issues that involve the belated invocation of lack of jurisdiction, have applied the principle of estoppel by laches. Thus, in Calimlim v. Ramirez,23 we pointed out that Sibonghanoy was developing into a general rule rather than the exception:

A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject-matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstance involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

In Sibonghanoy, the defense of lack of jurisdiction of the court that rendered the questioned ruling was held to be barred by estoppel by laches. It was ruled that the lack of jurisdiction having been raised for the first time in a motion to dismiss filed almost fifteen (15) years after the questioned ruling had been rendered, such a plea may no longer be raised for being barred by laches. As defined in said case, laches is "failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert has abandoned it or declined to assert it.24

In Calimlim, despite the fact that the one who benefited from the plea of lack of jurisdiction was the one who invoked the court’s jurisdiction, and who later obtained an adverse judgment therein, we refused to apply the ruling in Sibonghanoy. The Court accorded supremacy to the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

Yet, in subsequent cases decided after Calimlim, which by sheer volume are too plentiful to mention, the Sibonghanoy doctrine, as foretold in Calimlim, became the rule rather than the exception. As such, in Soliven v. Fastforms Philippines, Inc.,25 the Court ruled:

While it is true that jurisdiction may be raised at any time, "this rule presupposes that estoppel has not supervened." In the instant case, respondent actively participated in all stages of the proceedings before the trial court and invoked its authority by asking for an affirmative relief. Clearly, respondent is estopped from challenging the trial court’s jurisdiction, especially when an adverse judgment has been rendered. In PNOCShipping and Transport Corporation vs. Court of Appeals, we held:

Moreover, we note that petitioner did not question at all the jurisdiction of the lower court x x x in its answers to both the amended complaint and the second amended complaint. It did so only in its motion for reconsideration of the decision of the lower court after it had received an adverse decision. As this Court held in Pantranco North Express, Inc. vs. Court of Appeals (G.R. No. 105180, July 5, 1993, 224 SCRA 477, 491), participation in all stages of the case before the trial court, that included invoking its authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the court’s jurisdiction. Notably, from the time it filed its answer to the second amended complaint on April 16, 1985, petitioner did not question the lower court’s jurisdiction. It was only on December 29, 1989 when it filed its motion for reconsideration of the lower court’s decision that petitioner raised the question of the lower court’s lack of jurisdiction. Petitioner thus foreclosed its right to raise the issue of jurisdiction by its own inaction. (italics ours)

Similarly, in the subsequent case of Sta. Lucia Realty and Development, Inc. vs. Cabrigas, we ruled:

In the case at bar, it was found by the trial court in its 30 September 1996 decision in LCR Case No. Q-60161(93) that private respondents (who filed the petition for reconstitution of titles) failed to comply with both sections 12 and 13 of RA 26 and therefore, it had no jurisdiction over the subject matter of the case. However, private respondents never questioned the trial court’s jurisdiction over its petition for reconstitution throughout the duration of LCR Case No. Q-60161(93). On the contrary, private respondents actively participated in the reconstitution proceedings by filing pleadings and presenting its evidence. They invoked the trial court’s jurisdiction in order to obtain affirmative relief – the reconstitution of their titles. Private respondents have thus foreclosed their right to raise the issue of jurisdiction by their own actions.

The Court has constantly upheld the doctrine that while jurisdiction may be assailed at any stage, a litigant’s participation in all stages of the case before the trial court, including the invocation of its authority in asking for affirmative relief, bars such party from challenging the court’s jurisdiction (PNOC Shipping and Transport Corporation vs. Court of Appeals, 297 SCRA 402 [1998]). A party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Asset Privatization Trust vs. Court of Appeals, 300 SCRA 579 [1998]; Province of Bulacan vs. Court of Appeals, 299 SCRA 442 [1998]). The Court frowns upon the undesirable practice of a party participating in the proceedings and submitting his case for decision and then accepting judgment, only if favorable, and attacking it for lack

of jurisdiction, when adverse (Producers Bank of the Philippines vs. NLRC, 298 SCRA 517 [1998], citing Ilocos Sur Electric Cooperative, Inc. vs. NLRC, 241 SCRA 36 [1995]). (italics ours)26

Noteworthy, however, is that, in the 2005 case of Metromedia Times Corporation v. Pastorin,27 where the issue of lack of jurisdiction was raised only in the National Labor Relations Commission (NLRC) on appeal, we stated, after examining the doctrines of jurisdiction vis-à-vis estoppel, that the ruling in Sibonghanoy stands as an exception, rather than the general rule. Metromedia, thus, was not estopped from assailing the jurisdiction of the labor arbiter before the NLRC on appeal.281avvphi1

Later, in Francel Realty Corporation v. Sycip,29 the Court clarified that:

Petitioner argues that the CA’s affirmation of the trial court’s dismissal of its case was erroneous, considering that a full-blown trial had already been conducted. In effect, it contends that lack of jurisdiction could no longer be used as a ground for dismissal after trial had ensued and ended.

The above argument is anchored on estoppel by laches, which has been used quite successfully in a number of cases to thwart dismissals based on lack of jurisdiction. Tijam v. Sibonghanoy, in which this doctrine was espoused, held that a party may be barred from questioning a court’s jurisdiction after being invoked to secure affirmative relief against its opponent. In fine, laches prevents the issue of lack of jurisdiction from being raised for the first time on appeal by a litigant whose purpose is to annul everything done in a trial in which it has actively participated.

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it."

The ruling in Sibonghanoy on the matter of jurisdiction is, however, the exception rather than the rule.1avvphi1 Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu is analogous to that in the cited case. In such controversies, laches should be clearly present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption that the party entitled to assert it had abandoned or declined to assert it. That Sibonghanoy applies only to exceptional circumstances is clarified in Calimlim v. Ramirez, which we quote:

A rule that had been settled by unquestioned acceptance and upheld in decisions so numerous to cite is that the jurisdiction of a court over the subject-matter of the action is a matter of law and may not be conferred by consent or agreement of the parties. The lack of jurisdiction of a court may be raised at any stage of the proceedings, even on appeal. This doctrine has been qualified by recent pronouncements which stemmed principally from the ruling in the cited case of Sibonghanoy. It is to be regretted, however, that the holding in said case had been applied to situations which were obviously not contemplated therein. The exceptional circumstance involved in Sibonghanoy which justified the departure from the accepted concept of non-waivability of objection to jurisdiction has been ignored and, instead a blanket doctrine had been repeatedly upheld that rendered the supposed ruling in Sibonghanoy not as the exception, but rather the general rule, virtually overthrowing altogether the time-honored principle that the issue of jurisdiction is not lost by waiver or by estoppel.

Indeed, the general rule remains: a court’s lack of jurisdiction may be raised at any stage of the proceedings, even on appeal. The reason is that jurisdiction is conferred by law, and lack of it affects the very authority of the court to take cognizance of and to render judgment on the action. Moreover, jurisdiction is determined by the averments of the complaint, not by the defenses contained in the answer.30

Also, in Mangaliag v. Catubig-Pastoral,31 even if the pleader of lack of jurisdiction actively took part in the trial proceedings by presenting a witness to seek exoneration, the Court, reiterating the doctrine in Calimlim, said:

Private respondent argues that the defense of lack of jurisdiction may be waived by estoppel through active participation in the trial. Such, however, is not the general rule but an exception, best characterized by the peculiar circumstances in Tijam vs. Sibonghanoy. In Sibonghanoy, the party invoking lack of jurisdiction did so only after fifteen years and at a stage when the proceedings had already been elevated to the CA. Sibonghanoyis an exceptional case because of the presence of laches, which was defined therein as failure or neglect for an unreasonable and unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier; it is the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert has abandoned it or declined to assert it.32

And in the more recent Regalado v. Go,33 the Court again emphasized that laches should be clearly present for the Sibonghanoy doctrine to be applicable, thus:

Laches is defined as the "failure or neglect for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier, it is negligence or omission to assert a right within a reasonable length of time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it."

The ruling in People v. Regalario that was based on the landmark doctrine enunciated in Tijam v. Sibonghanoy on the matter of jurisdiction by estoppel is the exception rather than the rule. Estoppel by laches may be invoked to bar the issue of lack of jurisdiction only in cases in which the factual milieu is analogous to that in the cited case. In such controversies, laches should have been clearly present; that is, lack of jurisdiction must have been raised so belatedly as to warrant the presumption that the party entitled to assert it had abandoned or declined to assert it.

In Sibonghanoy, the defense of lack of jurisdiction was raised for the first time in a motion to dismiss filed by the Surety almost 15 years after the questioned ruling had been rendered. At several stages of the proceedings, in the court a quo as well as in the Court of Appeals, the Surety invoked the jurisdiction of the said courts to obtain affirmative relief and submitted its case for final adjudication on the merits. It was only when the adverse decision was rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction.

Clearly, the factual settings attendant in Sibonghanoy are not present in the case at bar. Petitioner Atty. Regalado, after the receipt of the Court of Appeals resolution finding her guilty of contempt, promptly filed a Motion for Reconsideration assailing the said court’s jurisdiction based on procedural infirmity in initiating the action. Her compliance with the appellate court’s directive to show cause why she should not be cited for contempt and filing a single piece of pleading to that effect could not be considered as an active participation in the judicial proceedings so as to take the case within the milieu of Sibonghanoy. Rather, it is the natural fear to disobey the mandate of the court that could lead to dire consequences that impelled her to comply.34

The Court, thus, wavered on when to apply the exceptional circumstance in Sibonghanoy and on when to apply the general rule enunciated as early as in De La Santa and expounded at length in Calimlim. The general rule should, however, be, as it has always been, that the issue of jurisdiction may be raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel. Estoppel by laches, to bar a litigant from asserting the court’s absence or lack of jurisdiction, only supervenes in exceptional cases similar to the factual milieu of Tijam v. Sibonghanoy. Indeed, the fact that a person attempts to invoke unauthorized jurisdiction of a court does not estop him from thereafter challenging its jurisdiction over the subject matter, since such jurisdiction must arise by law and not by mere consent of the parties. This is especially true where the person seeking to invoke unauthorized jurisdiction of the court does not thereby secure any advantage or the adverse party does not suffer any harm.35

Applying the said doctrine to the instant case, the petitioner is in no way estopped by laches in assailing the jurisdiction of the RTC, considering that he raised the lack thereof in his appeal before the appellate court. At that time, no considerable period had yet elapsed for laches to attach. True, delay alone, though unreasonable, will not sustain the defense of "estoppel by laches" unless it further appears that the party, knowing his rights, has not sought to enforce them until the condition of the

party pleading laches has in good faith become so changed that he cannot be restored to his former state, if the rights be then enforced, due to loss of evidence, change of title, intervention of equities, and other causes.36 In applying the principle of estoppel by laches in the exceptional case of Sibonghanoy, the Court therein considered the patent and revolting inequity and unfairness of having the judgment creditors go up their Calvary once more after more or less 15 years.37 The same, however, does not obtain in the instant case.

We note at this point that estoppel, being in the nature of a forfeiture, is not favored by law. It is to be applied rarely—only from necessity, and only in extraordinary circumstances. The doctrine must be applied with great care and the equity must be strong in its favor.38 When misapplied, the doctrine of estoppel may be a most effective weapon for the accomplishment of injustice.39 Moreover, a judgment rendered without jurisdiction over the subject matter is void.40 Hence, the Revised Rules of Court provides for remedies in attacking judgments rendered by courts or tribunals that have no jurisdiction over the concerned cases. No laches will even attach when the judgment is null and void for want of jurisdiction.41 As we have stated in Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of Alberto Cruz,42

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial officer or government agency, over the nature and subject matter of a petition or complaint is determined by the material allegations therein and the character of the relief prayed for, irrespective of whether the petitioner or complainant is entitled to any or all such reliefs. Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law, and not by the consent or waiver of the parties where the court otherwise would have no jurisdiction over the nature or subject matter of the action. Nor can it be acquired through, or waived by, any act or omission of the parties. Moreover, estoppel does not apply to confer jurisdiction to a tribunal that has none over the cause of action. x x x

Indeed, the jurisdiction of the court or tribunal is not affected by the defenses or theories set up by the defendant or respondent in his answer or motion to dismiss. Jurisdiction should be determined by considering not only the status or the relationship of the parties but also the nature of the issues or questions that is the subject of the controversy. x x x x The proceedings before a court or tribunal without jurisdiction, including its decision, are null and void, hence, susceptible to direct and collateral attacks.43

With the above considerations, we find it unnecessary to resolve the other issues raised in the petition.

WHEREFORE, premises considered, the petition for review on certiorari is GRANTED. Criminal Case No. 2235-M-94 is hereby DISMISSED without prejudice.

SO ORDERED.

MARIE ANTOINETTE R. SOLIVEN, petitioner, vs. FASTFORMS PHILIPPINES, INC., respondent.

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari1 assailing the Decision2 dated February 8, 1999 and Resolution dated June 17, 1999, both issued by the Court of Appeals in CA-G.R. CV No. 51946.

Records show that on May 20, 1994, Marie Antoinette R. Soliven, petitioner, filed with the Regional Trial Court, Branch 60, Makati City a complaint for sum of money with damages against Fastforms Philippines, Inc., respondent, docketed as Civil Case No. 94-1788.

The complaint alleges that on June 2, 1993, respondent, through its president Dr. Eduardo Escobar, obtained a loan from petitioner in the amount of One Hundred Seventy Thousand Pesos (P170,000.00), payable within a period of twenty-one (21) days, with an interest of 3%, as evidenced by a promissory note3 executed by Dr. Escobar as president of respondent. The loan was to be used

to pay the salaries of respondent’s employees. On the same day, respondent issued a postdated check (dated June 25, 1993)4 in favor of petitioner in the amount ofP175,000.00 (representing the principal amount of P170,000.00, plus P5,000.00 as interest). It was signed by Dr. Escobar and Mr. Lorcan Harney, respondent's vice-president. About three weeks later, respondent, through Dr. Escobar, advised petitioner not to deposit the postdated check as the account from where it was drawn has insufficient funds. Instead, respondent proposed to petitioner that the P175,000.00 be "rolled-over," with a monthly interest of 5% (or P8,755.00). Petitioner agreed to the proposal. Subsequently, respondent, through Dr. Escobar, Mr. Harney and Mr. Steve Singson, the new president, issued several checks in the total sum ofP76,250.00 in favor of petitioner as payment for interests corresponding to the months of June, August, September, October and December, 1993. Later, despite petitioner’s repeated demands, respondent refused to pay its principal obligation and interests due.

In her complaint, petitioner prays:

"WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that judgment be rendered:

(a) holding/declaring defendant (now respondent) guilty of breach of contract x x x; and

(b) ordering defendant to pay plaintiff (now petitioner) the following sums:

P195,155.00 as actual damages;P200,000.00 as moral damages;P100,000.00 as exemplary damages; andP100,000.00 as attorney’s fees, plus the costs of suit.

Plaintiff prays for such other relief just and equitable in the premises."

Respondent, in its answer with counterclaim,5 denied that it obtained a loan from petitioner; and that it did not authorize its then president, Dr. Eduardo Escobar, to secure any loan from petitioner or issue various checks as payment for interests.

After trial on the merits, the court a quo rendered a Decision dated July 3, 19956 in favor of petitioner, the dispositive portion of which reads:

"22. WHEREFORE, the court hereby renders judgment as follows:

22.1. The defendant FASTFORMS PHILS., INC. is ordered to pay the plaintiff, MARIE ANTOINETTE R. SOLIVEN, the following amounts:

22.1.1. P175,000.00 – the amount of the loan and its interest covered by the check (Exh. 3);

22.1.2. Five (5%) percent of P175,000.00 – a month from June 25, 1993 until the P175,000.00 is fully paid – less the sum of P76,250.00 – as interest;

22.1.3. P50,000.00 – as attorney’s fees.

22.2. The COMPLAINT for MORAL and EXEMPLARY damages is DISMISSED.

22.3. The COUNTERCLAIM is DISMISSED; and

22.4. Costs is taxed against the defendant."

Respondent then filed a motion for reconsideration7 questioning for the first time the trial court’s jurisdiction. It alleged that since the amount of petitioner’s principal demand (P195,155.00) does not exceed P200,000.00, the complaint should have been filed with the Metropolitan Trial Court pursuant to Republic Act No. 7691.8

Petitioner opposed the motion for reconsideration, stressing that respondent is barred from assailing the jurisdiction of the trial court since it has invoked the latter’s jurisdiction by seeking affirmative relief in its answer to the complaint and actively participated in all stages of the trial.9

In its Order dated October 11, 1995,10 the trial court denied respondent’s motion for reconsideration, holding that it has jurisdiction over the case because the totality of the claim therein exceeds P200,000.00. The trial court also ruled that respondent, under the principle of estoppel, has lost its right to question its jurisdiction.

On appeal, the Court of Appeals reversed the trial court’s Decision on the ground of lack of jurisdiction. The Appellate Court held that the case is within the jurisdiction of the Metropolitan Trial Court, petitioner’s claim being only P195,155.00; and that respondent may assail the jurisdiction of the trial court anytime even for the first time on appeal.

Petitioner filed a motion for reconsideration but was denied by the Court of Appeals in its Resolution dated June 17, 1999.11

Hence, this petition.

The fundamental issue for our resolution is whether the trial court has jurisdiction over Civil Case No. 94-1788.

Section 1 of Republic Act No. 7691, which took effect on April 15, 199412 or prior to the institution of Civil Case No. 94-1788, provides inter alia that where the amount of the demand in civil cases instituted in Metro Manila exceeds P200,000.00, exclusive of interest, damages of whatever kind, attorney’s fees, litigation expenses, and costs, the exclusive original jurisdiction thereof is lodged with the Regional Trial Court.

Under Section 3 of the same law, where the amount of the demand in the complaint instituted in Metro Manila does not exceed P200,000.00, exclusive of interest, damages of whatever kind, attorney’s fees, litigation expenses, and costs, the exclusive original jurisdiction over the same is vested in the Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court.

In Administrative Circular No. 09-94 dated March 14, 1994, we specified the guidelines in the implementation of R.A. 7691. Paragraph 2 of the Circular provides:

"2. The exclusion of the term ‘damages of whatever kind’ in determining the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No. 7691, applies to cases where the damages are merely incidental to or a consequence of the main cause of action. However, in cases where the claim for damages is the main cause of action, or one of the causes of action, the amount of such claim shall be considered in determining the jurisdiction of the court." (underscoring ours)

Here, the main cause of action is for the recovery of sum of money amounting to only P195,155.00. The damages being claimed by petitioner are merely the consequences of this main cause of action. Hence, they are not included in determining the jurisdictional amount. It is plain from R.A. 7691 and our Administrative Circular No. 09-94 that it is the Metropolitan Trial Court which has jurisdiction over the instant case. As correctly stated by the Court of Appeals in its assailed Decision:

"Conformably, since the action is principally for the collection of a debt, and the prayer for damages is not one of the main causes of action but merely a consequence thereto, it should not be considered in determining the jurisdiction of the court."

While it is true that jurisdiction may be raised at any time, "this rule presupposes that estoppel has not supervened."13 In the instant case, respondent actively participated in all stages of the proceedings before the trial court and invoked its authority by asking for an affirmative relief. Clearly, respondent is estopped from challenging the trial court’s jurisdiction, especially when an adverse judgment has been rendered. In PNOC Shipping and Transport Corporation vs. Court of Appeals,14 we held:

"Moreover, we note that petitioner did not question at all the jurisdiction of the lower court x x x in its answers to both the amended complaint and the second amended complaint. It did so only in its motion for reconsideration of the decision of the lower court after it had received an adverse decision. As this Court held in Pantranco North Express, Inc. vs. Court of Appeals (G.R. No. 105180, July 5, 1993, 224 SCRA 477, 491), participation in all stages of the case before the trial court, that included invoking its authority in asking for affirmative relief, effectively barred petitioner by estoppel from challenging the court’s jurisdiction. Notably, from the time it filed its answer to the second amended complaint on April 16, 1985, petitioner did not question the lower court’s jurisdiction. It was only on December 29, 1989 when it filed its motion for reconsideration of the lower court’s decision that petitioner raised the question of the lower court’s lack of jurisdiction. Petitioner thus foreclosed its right to raise the issue of jurisdiction by its own inaction." (underscoring ours)

Similarly, in the subsequent case of Sta. Lucia Realty and Development, Inc. vs. Cabrigas,15 we ruled:

"In the case at bar, it was found by the trial court in its 30 September 1996 decision in LCR Case No. Q-60161(93) that private respondents (who filed the petition for reconstitution of titles) failed to comply with both sections 12 and 13 of RA 26 and therefore, it had no jurisdiction over the subject matter of the case. However, private respondents never questioned the trial court’s jurisdiction over its petition for reconstitution throughout the duration of LCR Case No. Q-60161(93). On the contrary, private respondents actively participated in the reconstitution proceedings by filing pleadings and presenting its evidence. They invoked the trial court’s jurisdiction in order to obtain affirmative relief – the reconstitution of their titles. Private respondents have thus foreclosed their right to raise the issue of jurisdiction by their own actions.

"The Court has constantly upheld the doctrine that while jurisdiction may be assailed at any stage, a litigant’s participation in all stages of the case before the trial court, including the invocation of its authority in asking for affirmative relief, bars such party from challenging the court’s jurisdiction (PNOC Shipping and Transport Corporation vs. Court of Appeals, 297 SCRA 402 [1998]). A party cannot invoke the jurisdiction of a court to secure affirmative relief against his opponent and after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Asset Privatization Trust vs. Court of Appeals, 300 SCRA 579 [1998]; Province of Bulacan vs. Court of Appeals, 299 SCRA 442 [1998]). The Court frowns upon the undesirable practice of a party participating in the proceedings and submitting his case for decision and then accepting judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse (Producers Bank of the Philippines vs. NLRC, 298 SCRA 517 [1998], citing Ilocos Sur Electric Cooperative, Inc. vs. NLRC, 241 SCRA 36 [1995])." (underscoring ours)

WHEREFORE, the instant petition is GRANTED. The assailed Decision dated February 8, 1999 and Resolution dated June 17, 1999 of the Court of Appeals in CA-G.R. CV No. 51946 are REVERSED. The Decision dated July 3, 1995 and Resolution dated October 11, 1995 of the Regional Trial Court, Branch 60, Makati City in Civil Case No. 94-1788 are hereby AFFIRMED.

SO ORDERED.

THE HONGKONG & SHANGHAI BANKING CORPORATION, plaintiff-appellee, vs. ALDECOA & CO., in liquidation, JOAQUIN IBAÑEZ DE ALDECOA Y PALET, ZOILO IBAÑEZ DE ALDECOA Y PALET, CECILIA IBAÑEZ DE ALDECOA Y PALET, and ISABEL PALET DE GABARRO, defendants-appellants. WILLIAM URQUHART, intervener-appellant.

TRENT, J.:

This action was brought on January 31, 1911, by the plaintiff bank against the above-named defendants for the purpose of recovering from the principal defendant, Aldecoa & Co., an amount due from the latter as the balance to its debit in an account current with the plaintiff, and to enforce the subsidiary liability of the other defendants for the payment of this indebtedness, as partners of Aldecoa & Co., and to foreclose certain mortgages executed by the defendants to secure the indebtedness sued upon.

Judgment was entered on the 10th of August, 1912, in favor of the plaintiff and against the defendants for the sum of P344,924.23, together with interest thereon at the rate of 7 per cent per annum from the date of the judgment until paid, and for costs, and for the foreclosure of the mortgages. The court decreed that in the event of there being a deficiency, after the foreclosure of the mortgages, the plaintiff must resort to and exhaust the property of the principal defendant before taking out execution against the individual defendants held to be liablein solidum with the principal defendant, but subsidiarily. Judgment was also entered denying the relief sought by the intervener. All of the defendants and the intervener have appealed.

The defendants, Joaquin Ibañez de Alcoa, Zoilo Ibañez de Alcoa, and Cecilia Ibañez de Alcoa, were born in the Philippine Islands on March 27, 1884, July 4, 1885, and . . . , 1887, respectively, the legitimate children of Zoilo Ibañez de Alcoa and the defendant, Isabel Palet. Both parents were native of Spain. The father's domicile was in Manila, and he died here on October 4, 1895. The widow, still retaining her Manila domicile, left the Philippine Islands and went to Spain in 1897 because of her health, and did not return until the latter part of 1902. the firm of Aldecoa & Co., of which Zoilo Ibañez de Aldecoa, deceased, had been a member and managing director, was reorganized in December, 1896, and the widow became one of the general or "capitalistic" partners of the firm. The three children, above mentioned, appear in the articles of agreement as industrial partners.

On July 31, 1903, Isabel Palet, the widowed mother of Joaquin Ibañez de Aldecoa and Zoilo Ibañez de Aldecoa, who were then over the age of 18 years, went before a notary public and executed two instruments (Exhibits T and U), wherein and whereby she emancipated her two sons, with their consent and acceptance. No guardian of the person or property of these two sons had ever been applied for or appointed under or by virtue of the provisions of the Code of Civil Procedure since the promulgation of the Code in 1901. After the execution of Exhibit T and U, both Joaquin Ibañez de Aldecoa and Zoilo Ibañez de Aldecoa participated in the management of Aldecoa and Co, as partners by being present and voting at meetings of the partners of the company upon matters connected with its affairs.

On the 23rd of February, 1906, the defendant firm of Aldeco and Co. obtained from the bank a credit in account current up to the sum of P450,000 upon the terms and conditions set forth in the instrument executed on that date (Exhibit A). Later it was agreed that the defendants, Isabel Palet and her two sons, Joaquin and Zoilo, should mortgage, in addition to certain securities of Aldecoa and Co., as set forth in Exhibit A, certain of their real properties as additional security for the obligations of Aldecoa and Co. So, on March 23, 1906, the mortgage, Exhibit B, was executed wherein certain corrections in the description of some of the real property mortgaged to the bank by Exhibit A were made and the amount for which each of the mortgaged properties should be liable was set forth. These two mortgages, Exhibits A and B, were duly recorded in the registry of property of the city of Manila on March 23, 1906.

On the 31st day of December, 1906, the firm of Aldecoa and Co. went into liquidation on account of the expiration of the term for which it had been organized, and the intervener, Urquhart, was duly elected by the parties as liquidator, and be resolution dated January 24, 1907, he was granted the authority expressed in that resolution (Exhibit G).

On June 30, 1907, Aldeco and Co. in liquidation, for the purposes of certain litigation about to be commenced in its behalf, required an injunction bond in the sum of P50,000, which was furnished by the bank upon the condition that any liability incurred on the part of the bank upon this injunction bond would be covered by the mortgage of February 23, 1906. An agreement to this effect was executed by Aldecoa and Co. in liquidation, by Isabel Palet, by Joaquin Ibañez de Aldecoa, who had then attained his full majority, and by Zoilo Ibañez de Aldecoa, who was not yet twenty-three years of age. In 1908, Joaquin Ibañez de Aldecoa, Zoilo Ibañez de Aldecoa, and Cecilia Ibañez de Aldecoa commenced an action against their mother, Isabel Palet, and Aldecoa and Co., in which the bank was not a party, and in September of that year procured a judgment of the Court of First Instance annulling the articles of copartnership of Aldecoa and Co., in so far as they were concerned, and decreeing that they were creditors and not partners of that firm.

The real property of the defendant Isabel Palet, mortgaged to the plaintiff, corporation by the instrument of March 23, 1906 (Exhibit B), was, at the instance of the defendant, registered under the provisions of the Land Registration Act, subject to the mortgage thereon in favor of the plaintiff, by decree, of the land court dated March 8, 1907.

On the 6th of November, 1906, the defendants, Isabel Palet and her three children, Joaquin Ibañez de Aldecoa, Zoilo Ibañez de Aldecoa, and Cecilia Ibañez de Aldecoa, applied to the land court for the registration of their title to the real property described in paragraph 4 of the instrument of March 23, 1906 (Exhibit B), in which application they stated that the undivided three-fourths of said properties belonging to the defendants, Isabel Palet, Joaquin Ibañez de Aldecoa, and Zoilo Ibañez de Aldecoa, were subject to the mortgage in favor of the plaintiff to secure the sum of P203,985.97 under the terms of the instrument dated March 22, 1906. Pursuant to this petition the Court of Land Registration, by decree dated September 8, 1907, registered the title to the undivided three-fourths interest therein pertaining to the defendants, Isabel Palet and her two sons, Joaquin and Zoilo, to the mortgage in favor of the plaintiff to secure the sun of P203,985.97.

On December 22, 1906, Aldecoa and Co., by a public instrument executed before a notary public, as additional security for the performance of the obligations in favor of the plaintiff under the terms of the contracts Exhibits A and B, mortgaged to the bank the right of mortgage pertaining to Aldecoa and Co. upon certain real property in the Province of Albay, mortgaged to said company by one Zubeldia to secure an indebtedness to that firm. Subsequent to the execution of this instrument, Zubeldia caused his title to the mortgaged property to be registered under the provisions of the Land Registration Act, subject to a mortgage of Aldecoa and Co. to secure the sum of P103,943.84 and to the mortgage of the mortgage right of Aldecoa and Co. to the plaintiff.

As the result of the litigation Aldecoa and Co. and A. S. Macleod, wherein the injunction bond for P50,000 was made by the bank in the manner and for the purpose above set forth, Aldecoa and Co. became the owner, through a compromise agreement executed in Manila on the 14th of August, 1907, of the shares of the Pasay Estate Company Limited (referred to in the contract of March 13, 1907, Exhibit V), and on the 30th day of August of that year Urquhart, as liquidator, under the authority vested in him as such, and in compliance with the terms of the contract of June 13, 1907, mortgaged to the plaintiff, by way of additional security for the performance of the obligations set forth in Exhibits A and B, the 312 shares of the Pasay Estate Company, Limited, acquired by Aldecoa and Co.

On the 31st day of March, 1907, Aldecoa and Co. mortgaged, as additional security for the performance of those obligations, to the plaintiff the right of mortgage, pertaining to the firm of Aldecoa and Co., upon certain real estate in that Province of Ambos Camarines, mortgaged to Aldecoa and Co. by one Andres Garchitorena to secure a balance of indebtedness to that firm of the sum of P20,280.19. The mortgage thus created in favor of the bank was duly recorded in the registry of deeds f that province. On the 31st day of March, 1907, Aldecoa and Co. mortgaged as further additional security for the performance of the obligations set forth in Exhibits A and B, the right of mortgage pertaining to the firm of Aldecoa and Co. upon other real property in the same province, mortgaged by the firm of Tremoya Hermanos and Liborio Tremoya, to secure the indebtedness of that firm to the firm of Aldecoa and Co. of P43,117.40 and the personal debt of the latter of P75,463.54. the mortgage thus created in favor of the bank was filed for record with the registrar of deeds of that province.

On the 30th day of January, 1907, Aldecoa and Co. duly authorized the bank to collect from certain persons and firms, named in the instrument granting this authority, any and all debts owing by them to Aldecoa and Co. and to apply all amounts so collected to the satisfaction, pro tanto, of any indebtedness of Aldecoa and Co. to the bank.

By a public instrument dated February 18, 1907, Aldecoa and Co. acknowledged as indebtedness to Joaquin Ibañez de Aldecoa in the sum of P154,589.20, a like indebtedness to Zoilo Ibañez de Aldecoa in the sum of P89,177.07. On September 30, 1908, Joaquin, Zoilo, and Cecilia recovered a judgment in the Court of First Instance of Manila for the payment to them f the sum of P155,127.31, as the balance due them upon the indebtedness acknowledged in the public instrument dated February 18, 1907.

On November 30, 1907, Joaquin, Zoilo, and Cecilia instituted an action in the Court of First Instance of the city of the Manila against the plaintiff bank for the purpose of obtaining a judicial declaration to the effect that the contract whereby Aldecoa and Co. mortgaged to the bank the shares of the Pasay Estate Company recovered from Alejandro S. Macleod, was null and void, and for a judgment of that these shares be sold and applied to the satisfaction of their judgment obtained on September 30, 1908. Judgment was rendered by the lower court in favor of the plaintiffs in that action in accordance with their prayer, but upon appeal this court reversed that judgment and declared that the mortgage of the shares of stock in the Pasay Estate Co. to the bank was valid.

In October, 1908, Joaquin and Zoilo Ibañez de Aldecoa instituted an action against the plaintiff bank for the purpose of obtaining a judgment annulling the mortgages created by them upon their interest in the properties described in Exhibits A and B, upon the ground that the emancipation buy their mother was void and of no effect, and that, therefore, they were minors incapable of creating a valid mortgage upon their real property. The Court of First Instance dismissed the complaint as to Joaquin upon the ground that he had ratified those mortgages after becoming of age, but entered a judgment annulling said mortgages with respect to Zoilo. Both parties appealed from this decision and the case was given registry No. 6889 in the Supreme Court.1

On the 31st day of December, 1906, on which date the defendant Aldecoa and Co. went into liquidation, the amount of indebtedness to the bank upon the overdraft created by the terms of the contract, Exhibit A, was P516,517.98. Neither the defendant Aldecoa and Co., nor any of the defendants herein, have paid or caused to be paid to the bank the yearly partial payments due under the terms of the contract, Exhibit A. But from time to time the bank has collected and received from provincial debtors of Aldecoa and Co. the various sums shown in Exhibit Q, all of which sums so received have been placed to the credit of Aldecoa and Co. and notice duty given. Also, the bank, from time to time, since the date upon which Aldecoa and Co. went into liquidation, has received various other sums from, or for the account of, Aldecoa and Co., all of which have been duly placed to the credit of that firm, including the sum of P22,552.63, the amount of the credit against one Achaval, assigned to the bank by Aldecoa and Co. The balance to the credit of the bank on the 31st day of December, 1911, as shown on the books of Aldecoa and Co., was for the sum of P416.853.46. It appeared that an error had been committed by the bank in liquidating the interest charged to Aldecoa and Co., and this error was corrected so that the actual amount of the indebtedness of Aldecoa and Co. to the plaintiff on the 15th of February, 1912, with interest to December 10, 1912, the date of the judgment, the amount was P344,924.23.

The trial court found that there was no competent evidence that the bank induced, or attempted to induce, any customer of Aldecoa and Co. to discontinue business relations with that company. The court further found that Urquhart had failed to show that he had any legal interest in the matter in litigation between plaintiff and defendants, or in the success of either of the parties, or an interest against both, as required by section 121 of the Code of Civil Procedure. No further findings, with respect to the facts alleged in the complaint of the intervener, were made.

Aldecoa and Co. insist that the court erred:

1. In overruling the defendant's demurrer based upon the alleged ambiguity and vagueness of the complaint.

2. In ruling that there was no competent evidence that the plaintiff had induced Aldecoa and Co.'s provincial debtors to cease making consignments to that firm.

3. In rendering a judgment in a special proceeding for the foreclosure of a mortgage, Aldecoa and Co. not having mortgaged any real estate of any kind within the jurisdiction of the trial court, and the obligation of the persons who had signed the contract of suretyship in favor of the bank having been extinguished by operation of law.

The argument on behalf of the defendant in support of its first assignment of error from the complaint that Aldecoa and Co. authorized the plaintiff bank, by the instrument Exhibit G, to make collections on behalf of this defendant, and that the complaint failed to specify the amount obtained by the bank in the exercise of the authority conferred upon it, the complaint was thereby rendered vague and indefinite. Upon this point it is sufficient to say that the complaint alleges that a certain specific amount was due from the defendant firm as a balance of its indebtedness to the plaintiff, and this necessarily implies that there were no credits in favor of the defendant firm of any kind whatsoever which had not already been deducted from the original obligation.

With respect to the contention set forth in the second assignment of error to the effect that the bank has prejudiced Aldecoa and Co. by having induced customers of the latter to cease their commercial relations with this defendant, the ruling of the court that there is no evidence to show that there was any such inducement is fully supported by the record. It may be possible that some of Aldecoa and Co.'s customers ceased doing business with that firm after it went into liquidation. This is the ordinary effect of a commercial firm going consideration, for the reason that it was a well known fact that Aldecoa and Co. was insolvent. It is hardly probable that the bank, with so large a claim against Aldecoa and Co. and with unsatisfactory security for the payment of its claim, would have taken any action whatever which might have had the effect of diminishing Aldecoa and Co.'s ability to discharge their claim. The contention that the customers of Aldecoa and Co. included in the list of debtors ceased to make consignments to the firm because they had been advised by the bank that Aldecoa and Co. had authorized the bank to collect these credits from the defendant's provincial customers and apply the amounts so collected to the partial discharge of the indebtedness of the defendant to the bank. Furthermore, the bank was expressly empowered to take any steps which might be necessary, judicially or extrajudicially, for the collection of these credits. The real reason which caused the defendant's provincial customers to cease making shipments was due to the fact that the defendant, being out of funds, could not give its customers any further credit. It is therefore clear that the bank, having exercised the authority conferred upon it by the company in a legal manner, is not responsible for any damages which might have resulted from the failure of the defendant's provincial customers to continue doing business with that firm.

In the third assignments of errors two propositions are insisted upon: (1) that in these foreclosure proceedings the court was without jurisdiction to render judgment against Aldecoa and Co. for the reason that firm had mortgaged no real property within the city of Manila to the plaintiff; and (2) that the mortgages given by this defendant have been extinguished by reason of the fact that the bank extended the time within which the defendant's provincial debtors might make their payments.

We understand that the bank is not seeking to exercise its mortgages rights upon the mortgages which the defendant firm holds upon certain real properties in the Provinces of Albay and Ambros Camarines and to sell these properties at public auction in these proceedings. Nor do we understand that the judgment of the trial courts directs that this be done. Before that property can be sold the original mortgagors will have to be made parties. The banks is not trying to foreclose, in this section, any mortgages on real property executed by Aldecoa and Co. It is true that the bank sought and obtained a money judgment against that firm, and at the same time and in the same action obtained a foreclosure judgment against the other defendants. If two or more persons arein solidum the debtors mortgage any of their real property situate in the jurisdiction of the court, the creditor, in case of the solidary debtors in the same suit and secure a joint and several judgment against them, as well as judgments of foreclosure upon the respective mortgages.

The contention that the extensions granted to Aldecoa and Co.'s debtors, with the consent and authority of that firm itself, has resulted in extinguishment of the mortgages created by Aldecoa and Co. or of the mortgages created by partners of that company to secure its liabilities to the bank, is not

tenable. The record shows that all the sureties were represented by Urquhart, the person elected by them as liquidator of the firm, when he agreed with the bank upon the extensions granted to those debtors. The authority to grant these extensions was conferred upon the bank by the liquidator, and he was given authority by all the sureties to authorized the bank to proceed in this manner.

With respect to the contention that the bank should be required to render an account of collections made under authority of Exhibit G, it is sufficient to say that the bank has properly accounted for all amounts collected from the defendant's debtors, and has applied all such amounts to the partial liquidation of the defendant's debt die to the bank. It is true that the sum for which judgment was rendered against Aldecoa and Co. is less than the amount originally demanded in the complaint, but this difference is due to the fact that certain amounts which had been collected from Aldecoa and Co.'s provincial debtors by the bank were credited to the latter between the date on which the complaint was filed and the date when the case came on for trial, and the further fact that it was necessary to correct an entry concerning one of the claims inasmuch as it appears that this claim had been assigned to the bank absolutely, and not merely for the purposes of collection, as the bookkeeper of the bank supposed, the result being that instead of crediting Aldecoa and Co. with the full face value of this claim, the bookkeeper had merely credited from time to time the amounts collected from this debtor. We, therefore, find no error prejudicial to the rights of this defendant.

Doña Isabel Palt makes the following assignment of errors:

1. That the court erred in failing to hold that her obligation as surety had been extinguished in accordance with the provisions of article 1851 of the Civil Code.

2. That the court erred in refusing to order for the benefit of this appellant that the property of Aldecoa and Co. should be exhausted before the plaintiff firm should be entitled to have recourse to the property of this defendant and appellant for the satisfaction of its judgment.

This appellant does not contend that she is not personally liable in solidum with Aldecoa and Co. for the liability of the latter firm to the plaintiff in the event that the appeal taken by Aldecoa and Co. should unsuccessful. We have just held that the judgment appealed from by Aldecoa and Co. should be affirmed. But Doña Isabel Palet does not contend that her liability as a partner for the obligations of Aldecoa and Co., although solidary, is subsidiary, and that she is entitled to insist that the property of Aldecoa and Co. be first applied in its entirety to the satisfaction of the firm's obligations before the bank shall proceed against her in the execution of its judgment.

The trial court directed that the mortgaged properties, including the properties mortgaged in the event that Aldecoa and Co. should fail to pay into court the amount of the judgment within the time designated for that purpose. the court recognized the subsidiary character of the personal liability of Doña Isabel Palet as a member of the firm of Aldecoa and Co. and decreed that as to any deficiency which might result after the sale of the mortgaged properties, execution should not issue against the properties of Doña Isabel Palet until all the property of Aldecoa and Co. shall have been exhausted. The properties mortgaged by Doña Isabel Palet were so mortgaged not merely as security for the performance of her own solidary subsidiary obligation as a partner bound for all the debts of Aldecoa and Co., but for the purpose of securing the direct obligation of the firm itself to the bank. We are, therefore, of the opinion that the trial court committed no error upon this point.

It is urged on behalf of Doña Isabel Palet that the mortgages executed by her upon her individual property have been canceled. The ground for this contention is that Aldecoa and Co. undertook by the contract of February 23, 1906, to discharge its liability to the plaintiff bank at the rate of not less than P50,000 per annum, and that therefore it was the duty of the bank to sue Aldecoa and Co. as soon as that firm failed to pay at maturity any one of the partial payments which it had promised to make, and to apply the proceeds, from the sale of the property of Aldecoa and Co. to the satisfaction of this indebtedness, and that the fact that the bank failed to do so is equivalent to an extension of the term of the principal debtor, and that the effect of this extension has been to extinguish the obligation of this defendant as a surety of Aldecoa and Co. It is also contended that the bank expressly extended the term within which Aldecoa and Co. was to satisfy its obligation by allowing Aldecoa and Co. to furnish

additional security. Doña Isabel Palet alleges that all these acts were done without her knowledge or consent.

The extension of the term which, in accordance with the provisions of article 1851 of the Civil Code produces the extinction of the liability of the surety must of necessity be based on some new agreement between the creditor and principal debtor, by virtue of which the creditor deprives himself of his right to immediately bring an action for the enforcement of his claim. The mere failure to bring an action upon a credit, as soon as the same or any part of its matures, does not constitute an extension of the term of the obligation.

Doña Isabel Palet is a personal debtor jointly and severally with Aldecoa and Co. for the whole indebtedness of the latter firm to the bank, and not a mere surety of the performance of the obligations of Aldecoa and Co. without any solidary liability. It is true that certain additional deeds of mortgage and pledge were executed by Aldecoa and Co. in favor of the bank as additional security after Aldecoa and Co. had failed to meet its obligation to pay the first installment due under the agreement of February 23, 1906, but there is no stipulation whatever in any of these documents or deeds which can in any way be interpreted in the sense of constituting an extension which would bind the bank to waiter for the expiration of any new term before suing upon its claim against Aldecoa and Co. We find nothing in the record showing either directly or indirectly that the bank at any time has granted any extension in favor of Aldecoa and Co. for the performance of its obligations. The liquidator of Aldecoa and Co. authorized the bank to grant certain extensions to some of the provincial debtors of Aldecoa and Co. whose debts were to be paid to the bank under the authority conferred upon the bank by Aldecoa and Co. There is a marked difference between the extension of time within which Aldecoa and Co.'s debtors might pay their respective debts, and the extension of time for the payment of Aldecoa and Co.'s own obligations to the bank. If the bank was had brought suit on its credit against Aldecoa and Co., for the amount then due, on the day following the extension of the time of Aldecoa and Co.'s debtors for the payments of their debts, it is evident that the fact of such extension having been granted could not served in any sense as a defense in favor of Aldecoa and Co. against the bank's action, although this extension would have been available to Aldecoa and Co.'s debtors if suit had been brought to enforce their liabilities to Aldecoa and Co. We must, therefore, conclude that the judgment appealed from, in so far as it relates to Doña Isabel Palet, must likewise be affirmed.

The intervener, William Urquhart, assigns these errors:

1. The court erred in holding that the proof fails to show a case for intervention within the meaning of section 121 of the Code of Civil Procedure.

2. The court erred in failing to give preference to the credit of the liquidator Urquhart for his salary.

The trial court found, as we have said, that Urquhart had failed to show that he had any legal interest in the matter in litigation between the plaintiffs and the defendants, or in the success of any of the parties, or any interest against both. The proof upon this branch of the case consists of the following agreed statement of facts:

Mr. Urquhart is a creditor of Aldecoa and Co. in the sum of P21,000 due him for money loaned by him to Aldecoa and Co. before they went into liquidation.

Aldecoa and Co., in liquidation, owe Mr. Urquhart the liquidator P14,000 as salary.

Section 121 of the Code of civil Procedure provides that:

A person may, at any period of a trial, upon motion, be permitted by the court to intervene in an action or proceeding, if he has legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both.

The intervener is seeking to have himself declared a preferred creditor over the bank. According to the above- quoted agreed statement of facts, he is a mere creditor of Aldecoa and Co. for the sum of P21,000, loaned that firm before it went into liquidation. This amount is not evidenced by a public document, or any document for that matter, nor secured by pledge or mortgage, while the amount due the bank appears in a public instrument and is also secured by pledges and mortgages on the property of Aldecoa and Co., out of which the intervener seeks to have his indebtedness satisfied. It is, therefore, clear that the intervener is not entitled to the relief sought, in so far as the P21,000 is concerned.

The bank insists that, as the intervener had been in the employ of Aldecoa and Co. for several years prior to the time that the latter went into liquidation, it cannot be determined what part of the P14,000 is for salary as such employee and what part is for salary as liquidator. We find no trouble in reaching the conclusion that all of the P14,000 represents Urquhart's salary as liquidator of the firm of Aldecoa and Co. The agreed statement of facts clearly supports this view. It is there stated that Aldecoa and Co. in liquidation owed the liquidator P14,000 as salary. The agreement does not say, nor can it be even inferred from the same, that Aldecoa and Co. owed Urquhart P14,000, or any other sum for salary as an employee of that firm before it went into liquidation. Under these facts, is the intervener a preferred creditor over the bank for this amount?

In support of his contention that he should be declared a preferred creditor over the bank for the P14,000, the appellant cites the decision of the supreme court of Spain of March 16, 1897, and quotes the following from the syllabus of that case:

That the expense of maintenance of property is bound to affect such persons as have an interest therein, whether they be the owners or creditors of the property; therefore payment for this object has preference over any other debt, since such other debts are recoverable to the extent that the property is preserved and maintained.

There can be no question about the correctness of this ruling of the supreme court of Spain to the effect that the fees of a receiver, appointed by the court to preserve property in litigation, must be paid in preference to the claims of creditors. But this is not at all the case under consideration, for the reason that Urquhart was elected liquidator by the members of the firm of Aldecoa and Co. Neither do we believe that the contention of the appellant can be sustained under article 1922 of the Civil Code, which provides that, with regard to specified personal property of the debtor, the following are preferred:

1. Credits for the construction, repair, preservation, or for the amount of the sale of personal property which may be in the possession of the debtor to the extent of the value of the same.

The only personal property of Aldecoa and Co. is 16 shares of the stock of the Banco-Español-Filipino; 450 shares of the stock of the Compañia Maritima; 330 shares of the stock of the Pasay Estate Co., Ltd; and certain claims against debtors of Aldecoa and Co., mentioned in Exhibit G.

The shares of stock in the Banco Español-Filipino and the Compañia Maritima were pledged to the bank before Aldecoa and Co. went into liquidation, so Urquhart had nothing to do with the preservation of these. The stock of the Pasay Estate co., Ltd., was pledged to the bank on August 30, 1907, on the same day that it came into the possession of Aldecoa and Co. and by the terms of the pledge the bank was authorized to collect all dividends on the stock and apply the proceeds to the satisfaction of its claim against Aldecoa and Co. The credits set forth in Exhibit G were assigned to the bank on January 30, 1907, so, it will be seen, that the Pasay Estate shares were in the possession of Aldecoa and Co., or its liquidator, only one day. Urquhart had been liquidator twenty-eight days when the credits, mentioned in Exhibit G, were assigned to the bank. If it could be held that these two items bring him within the above quoted provisions of article 1922, he could not be declared a preferred creditor over the bank for the P14,000 salary for the reason that, according to his own showing, he had been paid for his services as liquidator up to January, 1910. It is the salary since that date which is now in question. The only property of Aldecoa and Co. which the liquidator had anything to do with after 1910

was the real estate mortgages on real property cannot be regarded as personal property, and it is only of personal property that article 1922 speaks.

The judgment appealed from, in so far as it relates to Urquhart, being in accordance with the law and the merits of the case, is hereby affirmed.

The appellants, Joaquin and Zoilo Ibañez de Aldecoa, make the following assignments of error:

1. The court erred in not sustaining the plea of lis pendens with respect to the validity of mortgages claimed by the plaintiff, which plea was set up as a special defense by the defendants Joaquin and Zoilo Ibañez de Aldecoa, and in taking jurisdiction of the case and in deciding therein a matter already submitted for adjudication and not yet finally disposed of.

2. The court erred in hot sustaining the plea of res adjudicata set up as a special defense by these defendants with respect to the contention of plaintiff that these defendants are industrial and general partners of the firm of Aldecoa and Co.

3. The court erred in holding that the defendants Joaquin and Zoilo Ibañez de Aldecoa were general partners (socios colectivos) of the firm of Aldecoa and Co., and is rendering judgment against them subsidiarily for the payment of the amount claimed in the complaint.

The basis of the first alleged error is the pendency of an action instituted by the appellants, Joaquin and Zoilo, in 1908, to have the mortgages which the bank seeks to foreclose in the present action annulled in so far as their liability thereon is concerned. That action was pending in this Supreme Court on appeal when the present action was instituted (1911), tried, and decided in the court below.

The principle upon which plea of another action pending is sustained is that the latter action is deemed unnecessary and vexatious. (Williams vs. Gaston, 148 Ala., 214; 42 Sou., 552; 1 Cyc. 21; 1 R. C. L., sec. 1.) A statement of the rule to which the litigant to its benefits, and which has often met with approval, is found inWatson vs. Jones (13 Wall., 679, 715; 20 L. ed., 666):

But when the pendency of such a suit is set up to defeat another, the case must be the same. There must be the same parties, or at least such as represent the same interest, there must be the same rights asserted, and the same relief prayed for. This relief must be founded on the same facts, and the title or essential basis of the relief sought must be the same. The identity in these particulars should be such that if the pending case has already been disposed of, it could be pleaded in bar as a former adjudication of the same matter between the same parties.

It will be noted that the cases must be identical in a number of ways. It will be conceded that in so far as the plea is concerned, the parties are the same in the case at bar as they were in the action to have the mortgages annulled. Their position is simple reversed, the defendants there being the plaintiffs here, and vice versa. This fact does not affect the application of the rule. The inquiry must therefore proceed to the other requisites demanded by the rule. Are the same rights asserted? Is the same relief prayed for?

The test of identity in these respects is thus stated in 1 Cyc., 28:

A plea of the pendency of a prior action is not available unless the prior action is of such a character that, had a judgment been rendered therein on the merits, such a judgment would be conclusive between the parties and could be pleaded in bar of the second action.

This test has been approved, citing the quotation, in Williams vs. Gaston (148 Ala., 214; 42 Sou., 552); Van Vleck vs. Anderson (136 Iowa, 366; 113 N. W., 853); Wetzstein vs. Mining Co. (28 Mont.,

451; 72 P., 865). It seems to us that unless the pending action, which the appellants refer to, can be shown to approach the action at bar to this extent, the plea ought to fail.

The former suit is one to annul the mortgages. The present suit is one for the foreclosure of the mortgages. It may be conceded that if the final judgment in the former action is that the mortgages be annulled, such an adjudication will deny the right of the bank to foreclose the mortgages. But will a decree holding them valid prevent the bank from foreclosing them. Most certainly not. In such an event, the judgment would not be a bar to the prosecution of the present action. The rule is not predicated upon such a contingency. It is applicable, between the same parties, only when the judgment to be rendered in the action first instituted will be such that, regardless of which party is successful, it will amount to res adjudicata against the second action. It has often been held that a pending action upon an insurance policy to recover its value is not a bar to the commencement of an action to have the policy reformed. The effect is quite different after final judgment has been rendered in an action upon the policy. Such a judgment may be pleaded in bar to an action seeking to reform the policy. The case are collected in the note to National Fire Insurance Co. vs. Hughes (12 L. R. A., [N. S.], 907). So, it was held in the famous case of Sharon vs. Hill (26 Fed., 337), that the action brought by Miss hill for the purpose of establishing the genuineness of a writing purporting to be a declaration of marriage and thereby establishing the relation of husband and wife between the parties could not be pleaded in abatement of Senator Sharon's action seeking to have the writing declared false and forged. The court said:

This suit and the action of Sharon vs. Sharon are not brought on the same claim or demand. The subject matter and the relief sought are not identical. This suit is brought to cancel and annul an alleged false and forged writing, and enjoin the use of it by the defendant to the prejudice and injury of the plaintiff, while the other is brought to establish the validity of said writing as a declaration of marriage, as well as the marriage itself, and also to procure a dissolution thereof, and for a division of the common property, and for alimony.

Incidentally, it was held in this case that a judgment of the trial court declaring the writing genuine was not res adjudicata after an appeal had been taken from the judgment of the Supreme Court. So, in the case ta bar, the fact that the trial court in the former action holds the mortgages invalid as to one of the herein appellants is not final by reason of the appeal entered by the bank from that judgment.

Cases are also numerous in which an action for separation has been held not to be a bar to an action for divorce or vice versa. (Cook vs. Cook, [N. C.], 40 L. R. S., [N. S.], 83, and cases collected in the note.) In Cook vs. Cookit was held that a pending action for absolute divorce was not a bar to the commencement of an action for separation. The above authorities are so analogous in principle to the case at bar that we deem the conclusion irresistible, that the pending action to annul the liability of the two appellant children on the mortgages cannot operates as a plea in abatement in the case in hand which seeks to foreclose these mortgages. The subject matter and the relief asked for are entirely different. The facts do not conform to the rule and it is therefore not applicable.

With reference to the second alleged error, it appears that a certified copy of the judgment entered in the former case, wherein it was declared that these two appellants, together with their sister Cecilia, were creditors and partners of Aldecoa and Co., was offered in evidence and marked Exhibit 5. This evidence was objected to by the plaintiff on the ground that it was res inter alios acta and not competent evidence against the plaintiff or binding upon it in any way because it was not a party to that action. This objection was sustained and the proffered evidence excluded. If the evidence had been admitted, what would be its legal effect? That was an action inpersonam and the bank was not a party. The judgment is, therefore, binding only upon the parties to the suit and their successors in interest (sec. 306, Code of Civil Procedure, No. 2).

The question raised by the third assignment of errors will be dealt with in a separate opinion wherein the appeal of Cecilia Ibañez de Aldecoa will be disposed of.

The appellants whose appeals are herein determined will pay their respective portions of the cost. So ordered.

TRENT, J.:

In Hongkong and Shanghai Banking Corporation vs. Aldecoa and Co. et al., R. G. No. 8437, just decided, we said that the correctness of the judgment declaring that the defendants, Joaquin, Zoilo, and Cecilia Ibañez de Aldecoa, are subsidiarily liable to the bank as industrial partners of Aldecoa and Co. for the debts of the latter, would be determined in a separate opinion.

The facts are these: Joaquin, Zoilo, and Cecilia Ibañez de Aldecoa were born in the Philippine Islands, being the legitimate children of Zoilo Ibañez de Aldecoa and Isabel Palet. Both parent were native of Spain, but domiciled in Manila, where the father died in 1895. At the time of his death the father was a member and managing director of an ordinary general mercantile partnership known as Adecoa and Co. In December, 1896, Isabel Palet, for herself and as the parent of her above-named three children, exercising the patria potestad, entered into a new contract with various persons whereby the property and good will, together with the liabilities of the firm of which her husband was a partner, were taken over. The new firm was also an ordinary general mercantile partnership and likewise denominated Aldecoa and Co. Although having the same name, the new firm was entirely distinct from the old one and was, in fact, a new enterprise. The widow entered into the new partnership as a capitalistic partner and caused her three children to appear in the articles of partnership as industrial partners. At the time of the execution of this new contract Joaquin was twelve years of age, Zoilo eleven, and Cecilia nine.

Clauses 9 and 12 of the new contract of partnership read:

9. The industrial partners shall bear in proportion to the shares the losses which may result to the partnership from bad business, but only from the reserve fund which shall be established, as set forth in the 12th clause, and if the loss suffered shall exhaust said fund the balance shall fall exclusively upon the partners furnishing the capital.

12. The industrial partner shall likewise contribute 50 per cent of his net profits to the formation of said reserve fund, but may freely dispose of the other 50 per cent.

The question is presented, Could the mother of the three children legally bind them as industrial partners of the firm of Aldecoa and Co. under the above facts? If so, are they liable jointly and severally with all their property, both real and personal, for the debts of the firm? That all industrial partners of an ordinary general mercantile partnership are liable with all their property, both personal and real, for all the debts of the firm owing to third parties precisely as a capitalistic partner has long since been definitely settled in this jurisdiction, notwithstanding provisions to the contrary in the articles of agreement. (Compañia Maritima vs. Muñoz, 9 Phil. Re., 326.)

There are various provisions of law, in force in 1896, which must be considered in determining whether or not the mother had the power to make her children industrial partners of the new firm Aldecoa and Co.

Article 5 of the Code of Commerce reads:

Persons under twenty-one years of age and incapacitated persons may continue, through their guardians, the commerce which their parents or persons from whom the right is derived may have been engaged in. If the guardians do not have legal capacity to trade, or have some incompatibility, they shall be under the obligation to appoint one or more factors who possess the legal qualifications, and we shall take their places in the trade.

As the firm of which it is claimed the children are industrial partners was not a continuation of the firm of which their deceased father was a member, but was a new partnership operating under its own articles of agreement, it is clear that article 5, supra, does not sustain the mother's power to bind her children as industrial partners of the new firm.

Article 4 of the Code of Commerce reads:

The persons having the following conditions shall have legal capacity to customarily engage in commerce:

1. Those who have reached the age of twenty-one years.

2. Those who are not subject to the authority of a father or mother or to a marital authority.

3. Those who have the free disposition of their property.

The appellant children had not a single one of these qualifications in 1896 when the mother attempted to enter them as industrial partners of the firm of Aldecoa and Co.

It is claimed that the power of the mother to bind her children as industrial partners is within her parental authority as defined by the Civil Code. Articles 159 to 166 which compose chapter 3 of the Civil Code, entitled "Effect of parental authority with regard to the property of the children," defined the extent of the parental authority over the property of minor children. Article 159 provides that the father, or, in his absence, the mother, is the legal administrator of the property of this children who are under their authority. Article 160 gives to such parent the administration and usufruct of property acquired by the child by its work or industry or for any good consideration. We take it that all the property possessed by the children at the time the contract of partnership was entered into in 1896 had been acquired by them either by their work or industry or for a good consideration. The children were at that time under the authority of their mother.

Article 164 reads:

The father, or the mother in a proper case, cannot alienate the real property of the child, the usufruct or administration of which belongs to them, nor encumber the same, except for sufficient reasons of utility or necessity, and after authorization from the judge of the domicile, upon hearing by the department of public prosecution, excepting the provisions which, with regard to the effects of transfers, the mortgage law establishes.

The mother did not secure judicial approval to enter into the contract of partnership on behalf of her children. Does member ship in an ordinary general mercantile partnership alienate or encumber the real property of an industrial partner? Clearly a partner alienates what he contributes to the firm as capital by transferring its ownership to the firm. But this, in the case of an industrial partner, is nothing. An industrial partner does not alienate any portion of his property by becoming a member of such a firm. Therefore, the mother did not violate this prohibition of article 164 in attempting to make her children industrial partners. But the article in question also prohibited her from encumbering their real property. This undoubtedly prohibits formal encumbrances such as mortgages, voluntary easements, usufructuary rights, and others which create specific liens upon specific real property. it has been held to prohibit the creation of real rights, and especially registrable leases in favor of third persons. (Res., Aug. 30, 1893.) The same word is used in article 317 of the Civil Code in placing restrictions upon the capacity of a child emancipated by the concession of the parent to deal with his own property. In commenting on this latter article, Manresa asks the question, "To what encumbrances does the code in speaking of emancipated children?" and answers it as follows:

The prohibition against encumbering real property is so explicit . . . that we consider it unnecessary to enumerate what are the incumbrances to which the law refers. All that signifies a limitation upon property, such as the creation, modification, or extinction of the right of usufruct, use, habituation, emphyteusis, mortgages, annuities, easements, pensions affecting real property, bonds, etc., is, in an express consent of the persons who are mentioned in the said article 317. (Vol. 2, p. 689.)

In commenting upon the same article, Sanchez Roan says practically the same thing. (Vol. 5, p. 1179.) Neither of these commentators refers to the right of an emancipated child to enter into a contract of partnership without the parent's consent. The question, in so far as we have been able to ascertain, does not appear to have ever been discussed, either by the courts or the commentators. It is

significant, however, that a contract of surety is placed by both the above mentioned commentators among the prohibited contracts. The encumbrance placed upon the real property of a surety is precisely the same as the encumbrance placed upon the real property of an industrial partner. That is, prior to judgment on the principal obligation or judgment against the partnership, the property is not specifically liable, and the creditor has n preferred lien thereon or right thereto by reason of the bond or partnership contract, as the case may be. After judgment, the property of the surety or of the industrial partner, both real and personal, is subsidiarily subject to execution. The evident purpose of both article 164, prohibiting the parent from encumbering the real property of his child without judicial approval, and of article 317, placing the same prohibition upon the emancipated child in the absence of the parent's approval, is the same. It is desired that the child's real property shall be frittered away by hasty and ill-advised contracts entered into by the one having the administration thereof. Both articles would fail of their purpose if the parent or the child, as the case might be, could do indirectly what could not be done directly. In other words, there would be little purpose in prohibiting a formal encumbrance by means of a mortgage, for instance, when a subsidiary liability by means of a bond or membership in a partnership could as effectually deprive the child of its real property. This proposition rests upon the theory that the mother could have freely disposed of the child's personal property in 1896 and that the only recourse open to them would have been an action against their mother for the value of such property. If this theory be true, the result would not be changed for the reason that children were either industrial partners or they were not. If they were, they are liable to the extent of both their real and personal property for the debts of the firm. If they were not, they are in no way liable. There can be only two kinds or classes of partners in a firm of this kind, capitalistic and industrial. Both are personally liable to third persons for the debts of such a firm. To say that the children are industrial partners, but liable only to the extent of their personal property, would be to place them in a different class of partners. As the mother did not secure judicial approval, the contract wherein she attempted to make her children industrial partners, with all the consequences flowing therefrom, was, therefore, defective and that act of itself in no way made the children liable for the debts of the new firm.

The question remains, Did any of the children validly ratify the contract after acquiring capacity to do so? Cecilia was never emancipated and there is no evidence indicating that she has ever ratified the contract by word or deed. She is, therefore, completely exonerated from liability for the debts of Aldecoa and Co.

The other two children, Joaquin and Zoilo, were emancipated by their mother after they had reached the age of eighteen and prior to seeking annullment of the contract of partnership had participated by vote and otherwise in the management of the firm, as is evidenced by Exhibits W, Y, and Z. These various acts sufficiently show a ratification of the partnership contract and would have the effect of making the two children industrial partners if they had been of age at that time. Ratification is in the nature of the contract. It is the adoption of, and assent to be bound by, the act of another. (Words and Phrases, vol. 7, p. 5930.) From the effect of emancipation it cannot be doubted that the two children had capacity, with their mother's consent, to enter into a contract of partnership, and, by so doing, make themselves industrial partners, thereby encumbering their property. Conceding that the children under these circumstances could enter into such a contract with their mother, her express consent to the ratification of the contract by the two children does not appear of record. The result flowing from the ratification being the encumbrance of their property, their mother's express consent was necessary.

For the foregoing reasons the judgment appealed from, in so far as it holds the three children liable as industrial partners, is reversed, without costs in so far as this branch of the case is concerned. So ordered.

SERAFIN TIJAM, ET AL., plaintiffs-appellees, vs. MAGDALENO SIBONGHANOY alias GAVINO SIBONGHANOY and LUCIA BAGUIO, defendants, MANILA SURETY AND FIDELITY CO., INC. (CEBU BRANCH) bonding company and defendant-appellant.

DIZON, J.:

On July 19, 1948 — barely one month after the effectivity of Republic Act No. 296 known as the Judiciary Act of 1948 — the spouses Serafin Tijam and Felicitas Tagalog commenced Civil Case No. R-660 in the Court of First Instance of Cebu against the spouses Magdaleno Sibonghanoy and Lucia Baguio to recover from them the sum of P1,908.00, with legal interest thereon from the date of the filing of the complaint until the whole obligation is paid, plus costs. As prayed for in the complaint, a writ of attachment was issued by the court against defendants' properties, but the same was soon dissolved upon the filing of a counter-bond by defendants and the Manila Surety and Fidelity Co., Inc. hereinafter referred to as the Surety, on the 31st of the same month.

After being duly served with summons the defendants filed their answer in which, after making some admissions and denials of the material averments of the complaint, they interposed a counterclaim. This counterclaim was answered by the plaintiffs.

After trial upon the issues thus joined, the Court rendered judgment in favor of the plaintiffs and, after the same had become final and executory, upon motion of the latter, the Court issued a writ of execution against the defendants. The writ having been returned unsatisfied, the plaintiffs moved for the issuance of a writ of execution against the Surety's bond (Rec. on Appeal, pp. 46-49), against which the Surety filed a written opposition (Id. pp. 49) upon two grounds, namely, (1) Failure to prosecute and (2) Absence of a demand upon the Surety for the payment of the amount due under the judgment. Upon these grounds the Surety prayed the Court not only to deny the motion for execution against its counter-bond but also the following affirmative relief : "to relieve the herein bonding company of its liability, if any, under the bond in question" (Id. p. 54) The Court denied this motion on the ground solely that no previous demand had been made on the Surety for the satisfaction of the judgment. Thereafter the necessary demand was made, and upon failure of the Surety to satisfy the judgment, the plaintiffs filed a second motion for execution against the counterbond. On the date set for the hearing thereon, the Court, upon motion of the Surety's counsel, granted the latter a period of five days within which to answer the motion. Upon its failure to file such answer, the Court granted the motion for execution and the corresponding writ was issued.

Subsequently, the Surety moved to quash the writ on the ground that the same was issued without the required summary hearing provided for in Section 17 of Rule 59 of the Rules of Court. As the Court denied the motion, the Surety appealed to the Court of Appeals from such order of denial and from the one denying its motion for reconsideration (Id. p. 97). Its record on appeal was then printed as required by the Rules, and in due time it filed its brief raising therein no other question but the ones covered by the following assignment of errors:

I. That the Honorable Court a quo erred in issuing its order dated November 2, 1957, by holding the incident as submitted for resolution, without a summary hearing and compliance with the other mandatory requirements provided for in Section 17, Rule 59 of the Rules of Court.

II. That the Honorable Court a quo erred in ordering the issuance of execution against the herein bonding company-appellant.

III. That the Honorable Court a quo erred in denying the motion to quash the writ of execution filed by the herein bonding company-appellant as well as its subsequent motion for reconsideration, and/or in not quashing or setting aside the writ of execution.

Not one of the assignment of errors — it is obvious — raises the question of lack of jurisdiction, neither directly nor indirectly.

Although the appellees failed to file their brief, the Court of Appeals, on December 11, 1962, decided the case affirming the orders appealed from.

On January 8, 1963 — five days after the Surety received notice of the decision, it filed a motion asking for extension of time within which to file a motion for reconsideration. The Court of Appeals granted the motion in its resolution of January 10 of the same year. Two days later the Surety filed a

pleading entitled MOTION TO DISMISS, alleging substantially that appellees action was filed in the Court of First Instance of Cebu on July 19, 1948 for the recovery of the sum of P1,908.00 only; that a month before that date Republic Act No. 296, otherwise known as the Judiciary Act of 1948, had already become effective, Section 88 of which placed within the original exclusive jurisdiction of inferior courts all civil actions where the value of the subject-matter or the amount of the demand does not exceed P2,000.00, exclusive of interest and costs; that the Court of First Instance therefore had no jurisdiction to try and decide the case. Upon these premises the Surety's motion prayed the Court of Appeals to set aside its decision and to dismiss the case. By resolution of January 16, 1963 the Court of Appeals required the appellees to answer the motion to dismiss, but they failed to do so. Whereupon, on May 20 of the same year, the Court resolved to set aside its decision and to certify the case to Us. The pertinent portions of its resolution read as follows:

It would indeed appear from the record that the action at bar, which is a suit for collection of money in the sum of exactly P1,908.00 exclusive of interest, was originally instituted in the Court of First Instance of Cebu on July 19, 1948. But about a month prior to the filing of the complaint, more specifically on June 17, 1948, the Judiciary Act of 1948 took effect, depriving the Court of First Instance of original jurisdiction over cases in which the demand, exclusive of interest, is not more than P2,000.00. (Secs. 44[c] and 86[b], R.A. No. 296.)

We believe, therefore, that the point raised in appellant's motion is an important one which merits serious consideration. As stated, the complaint was filed on July 19, 1948. This case therefore has been pending now for almost 15 years, and throughout the entire proceeding appellant never raised the question of jurisdiction until after receipt of this Court's adverse decision.

There are three cases decided by the Honorable Supreme Court which may be worthy of consideration in connection with this case, namely: Tyson Tan, et al. vs. Filipinas Compañia de Seguros, et al., G.R. No. L-10096, March 23, 1956; Pindangan Agricultural Co., Inc. vs. Jose P. Dans, etc., et al., G.R. No. L-14591, September 26, 1962; and Alfredo Montelibano, et al. vs. Bacolod-Murcia Milling Co., Inc., G.R. No. L-15092, September 29, 1962, wherein the Honorable Supreme Court frowned upon the 'undesirable practice' of appellants submitting their case for decision and then accepting the judgment, if favorable, but attacking it for lack of jurisdiction when adverse.

Considering, however, that the Supreme Court has the "exclusive" appellate jurisdiction over "all cases in which the jurisdiction of any inferior court is in issue" (See. 1, Par. 3[3], Judiciary Act of 1948, as amended), we have no choice but to certify, as we hereby do certify, this case to the Supreme Court.1äwphï1.ñët

ACCORDINGLY, pursuant to Section 31 of the Judiciary Act of 1948 as amended, let the record of this case be forwarded to the Supreme Court.

It is an undisputed fact that the action commenced by appellees in the Court of First Instance of Cebu against the Sibonghanoy spouses was for the recovery of the sum of P1,908.00 only — an amount within the original exclusive jurisdiction of inferior courts in accordance with the provisions of the Judiciary Act of 1948 which had taken effect about a month prior to the date when the action was commenced. True also is the rule that jurisdiction over the subject matter is conferred upon the courts exclusively by law, and as the lack of it affects the very authority of the court to take cognizance of the case, the objection may be raised at any stage of the proceedings. However, considering the facts and circumstances of the present case — which shall forthwith be set forth — We are of the opinion that the Surety is now barred by laches from invoking this plea at this late hour for the purpose of annuling everything done heretofore in the case with its active participation.

As already stated, the action was commenced in the Court of First Instance of Cebu on July 19, 1948, that is, almost fifteen years before the Surety filed its motion to dismiss on January 12, 1963 raising the question of lack of jurisdiction for the first time.

It must be remembered that although the action, originally, was exclusively against the Sibonghanoy spouses the Surety became a quasi-party therein since July 31, 1948 when it filed a counter-bond for the dissolution of the writ of attachment issued by the court of origin (Record on Appeal, pp. 15-19). Since then, it acquired certain rights and assumed specific obligations in connection with the pending case, in accordance with sections 12 and 17, Rule 57, Rules of Court (Bautista vs. Joaquin, 46 Phil. 885; Kimpang & Co. vs. Javier, 65 Phil. 170).

Upon the filing of the first motion for execution against the counter-bond the Surety not only filed a written opposition thereto praying for its denial but also asked for an additional affirmative relief — that it be relieved of its liability under the counter-bond upon the grounds relied upon in support of its opposition — lack of jurisdiction of the court a quo not being one of them.

Then, at the hearing on the second motion for execution against the counter-bond, the Surety appeared, through counsel, to ask for time within which to file an answer or opposition thereto. This motion was granted, but instead of such answer or opposition, the Surety filed the motion to dismiss mentioned heretofore.

A party may be estopped or barred from raising a question in different ways and for different reasons. Thus we speak of estoppel in pais, or estoppel by deed or by record, and of estoppel by laches.

Laches, in a general sense is failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it or declined to assert it.

The doctrine of laches or of "stale demands" is based upon grounds of public policy which requires, for the peace of society, the discouragement of stale claims and, unlike the statute of limitations, is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.

It has been held that a party can not invoke the jurisdiction of a court to sure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction (Dean vs. Dean, 136 Or. 694, 86 A.L.R. 79). In the case just cited, by way of explaining the rule, it was further said that the question whether the court had jurisdiction either of the subject-matter of the action or of the parties was not important in such cases because the party is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated — obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to question the jurisdiction or power of the court (Pease vs. Rathbun-Jones etc., 243 U.S. 273, 61 L. Ed. 715, 37 S. Ct. 283; St. Louis etc. vs. McBride, 141 U.S. 127, 35 L. Ed. 659). And in Littleton vs. Burgess, 16 Wyo. 58, the Court said that it is not right for a party who has affirmed and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny that same jurisdiction to escape a penalty.

Upon this same principle is what We said in the three cases mentioned in the resolution of the Court of Appeals of May 20, 1963 (supra) — to the effect that we frown upon the "undesirable practice" of a party submitting his case for decision and then accepting the judgment, only if favorable, and attacking it for lack of jurisdiction, when adverse — as well as in Pindañgan etc. vs. Dans, et al., G.R. L-14591, September 26, 1962; Montelibano, et al., vs. Bacolod-Murcia Milling Co., Inc., G.R. L-15092; Young Men Labor Union etc. vs. The Court of Industrial Relation et al., G.R. L-20307, Feb. 26, 1965, and Mejia vs. Lucas, 100 Phil. p. 277.

The facts of this case show that from the time the Surety became a quasi-party on July 31, 1948, it could have raised the question of the lack of jurisdiction of the Court of First Instance of Cebu to take cognizance of the present action by reason of the sum of money involved which, according to the law then in force, was within the original exclusive jurisdiction of inferior courts. It failed to do so. Instead,

at several stages of the proceedings in the court a quo as well as in the Court of Appeals, it invoked the jurisdiction of said courts to obtain affirmative relief and submitted its case for a final adjudication on the merits. It was only after an adverse decision was rendered by the Court of Appeals that it finally woke up to raise the question of jurisdiction. Were we to sanction such conduct on its part, We would in effect be declaring as useless all the proceedings had in the present case since it was commenced on July 19, 1948 and compel the judgment creditors to go up their Calvary once more. The inequity and unfairness of this is not only patent but revolting.

Coming now to the merits of the appeal: after going over the entire record, We have become persuaded that We can do nothing better than to quote in toto, with approval, the decision rendered by the Court of Appeals on December 11, 1962 as follows:

In Civil Case No. R-660 of the Court of First Instance of Cebu, which was a suit for collection of a sum of money, a writ of attachment was issued against defendants' properties. The attachment, however, was subsequently discharged under Section 12 of Rule 59 upon the filing by defendants of a bond subscribed by Manila Surety & Fidelity Co., Inc.

After trial, judgment was rendered in favor of plaintiffs.

The writ of execution against defendants having been returned totally unsatisfied, plaintiffs moved, under Section 17 of Rule 59, for issuance of writ of execution against Manila Surety & Fidelity Co., Inc. to enforce the obligation of the bond. But the motion was, upon the surety's opposition, denied on the ground that there was "no showing that a demand had been made, by the plaintiffs to the bonding company for payment of the amount due under the judgment" (Record on Appeal, p. 60).

Hence, plaintiffs made the necessary demand upon the surety for satisfaction of the judgment, and upon the latter's failure to pay the amount due, plaintiffs again filed a motion dated October 31, 1957, for issuance of writ of execution against the surety, with notice of hearing on November 2, 1957. On October 31, 1957, the surety received copy of said motion and notice of hearing.

It appears that when the motion was called on November 2, 1957, the surety's counsel asked that he be given time within which to answer the motion, and so an order was issued in open court, as follows:1äwphï1.ñët

As prayed for, Atty. Jose P. Soberano, Jr., counsel for the Manila Surety & Fidelity Co., Inc., Cebu Branch, is given until Wednesday, November 6, 1957, to file his answer to the motion for the issuance of a writ of execution dated October 30, 1957 of the plaintiffs, after which this incident shall be deemed submitted for resolution.

SO ORDERED.

Given in open court, this 2nd day of November, 1957, at Cebu City, Philippines.

(Sgd.) JOSE M. MENDOZA Judge

(Record on Appeal, pp. 64-65, emphasis ours)

Since the surety's counsel failed to file any answer or objection within the period given him, the court, on December 7, 1957, issued an order granting plaintiffs' motion for execution against the surety; and on December 12, 1957, the corresponding writ of execution was issued.

On December 24, 1957, the surety filed a motion to quash the writ of execution on the ground that the same was "issued without the requirements of Section 17, Rule 59 of the Rules of Court having been complied with," more specifically, that the same was issued without the required "summary hearing". This motion was denied by order of February 10, 1958.

On February 25, 1958, the surety filed a motion for reconsideration of the above-stated order of denial; which motion was likewise denied by order of March 26, 1958.

From the above-stated orders of February 10, 1958 and March 26, 1958 — denying the surety's motion to quash the writ of execution and motion for reconsideration, respectively — the surety has interposed the appeal on hand.

The surety insists that the lower court should have granted its motion to quash the writ of execution because the same was issued without the summary hearing required by Section 17 of Rule 59, which reads;

"Sec. 17. When execution returned unsatisfied, recovery had upon bond. — If the execution be returned unsatisfied in whole or in part, the surety or sureties on any bond given pursuant to the provisions of this role to secure the payment of the judgment shall become finally charged on such bond, and bound to pay to the plaintiff upon demand the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action." (Emphasis ours)

Summary hearing is "not intended to be carried on in the formal manner in which ordinary actions are prosecuted" (83 C.J.S. 792). It is, rather, a procedure by which a question is resolved "with dispatch, with the least possible delay, and in preference to ordinary legal and regular judicial proceedings" (Ibid, p. 790). What is essential is that "the defendant is notified or summoned to appear and is given an opportunity to hear what is urged upon him, and to interpose a defense, after which follows an adjudication of the rights of the parties" (Ibid., pp. 793-794); and as to the extent and latitude of the hearing, the same will naturally lie upon the discretion of the court, depending upon the attending circumstances and the nature of the incident up for consideration.

In the case at bar, the surety had been notified of the plaintiffs' motion for execution and of the date when the same would be submitted for consideration. In fact, the surety's counsel was present in court when the motion was called, and it was upon his request that the court a quo gave him a period of four days within which to file an answer. Yet he allowed that period to lapse without filing an answer or objection. The surety cannot now, therefore, complain that it was deprived of its day in court.

It is argued that the surety's counsel did not file an answer to the motion "for the simple reason that all its defenses can be set up during the hearing of the motion even if the same are not reduced to writing" (Appellant's brief, p. 4). There is obviously no merit in this pretense because, as stated above, the record will show that when the motion was called, what the surety's counsel did was to ask that he be allowed and given time to file an answer. Moreover, it was stated in the order given in open court upon request of the surety's counsel that after the four-day period within which to file an answer, "the incident shall be deemed submitted for resolution"; and counsel apparently agreed, as the order was issued upon his instance and he interposed no objection thereto.

It is also urged that although according to Section 17 of Rule 59, supra, there is no need for a separate action, there must, however, be a separate judgment against the surety in order to hold it liable on the bond (Appellant's Brief, p. 15). Not so, in our opinion. A bond filed for discharge of attachment is, per Section 12 of Rule 59, "to secure the payment to the plaintiff of any judgment he may recover in the action," and stands "in place of the property so released". Hence, after the judgment for the plaintiff has become executory and the

execution is "returned unsatisfied" (Sec. 17, Rule 59), as in this case, the liability of the bond automatically attaches and, in failure of the surety to satisfy the judgment against the defendant despite demand therefor, writ of execution may issue against the surety to enforce the obligation of the bond.

UPON ALL THE FOREGOING, the orders appealed from are hereby affirmed, with costs against the appellant Manila Surety and Fidelity Company, Inc.

BERNARDO DE LEON, Petitioner, vs. PUBLIC ESTATES AUTHORITY substituted by the CITY OF PARAÑAQUE, RAMON ARELLANO, JR., RICARDO PENA and REYMUNDO ORPILLA, Respondents.

G.R. No. 182678

PUBLIC ESTATES AUTHORITY (now PHILIPPINE RECLAMATION AUTHORITY), substituted by the CITY OF PARAÑAQUE, Petitioner, vs. HON. SELMA PALACIO ALARAS, in her capacity as the Acting Presiding Judge of Branch 135, Regional Trial Court of Makati City, and BERNARDO DE LEON. Respondents.

PERALTA, J.:

Before the Court are two consolidated petitions.

G.R. No. 181970 is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Bernardo de Leon seeking the reversal and setting aside of the Decision1 of the Court of Appeals (CA), dated November 21, 2007, in CA-G.R. SP No. 90328 which dismissed his petition for certiorari. De Leon also assails the CA Resolution2 dated March 4, 2008 denying his Motion for Reconsideration.

On the other hand, G.R. No. 182678 is a petition for certiorari under Rule 65 of the Rules of Court filed by the Public Estates Authority (PEA)3 seeking the nullification of the Orders dated December 28, 2007 and March 4, 2008 of the Regional Trial Court (RTC) of Makati City, Branch 135 in Civil Case No. 93-143.

The pertinent factual and procedural antecedents of the case, as summarized by the CA, are as follows:

On [January 15, 1993], petitioner Bernardo De Leon ("De Leon") filed a Complaint for Damages with Prayer for Preliminary Injunction before the Regional Trial Court [RTC] of Makati City, raffled to Branch 135, against respondent Public Estates Authority ("PEA"), a government-owned corporation, as well as its officers, herein private respondents Ramon Arellano, Jr., Ricardo Pena and Reymundo Orpilla. The suit for damages hinged on the alleged unlawful destruction of De Leon’s fence and houses constructed on Lot 5155 containing an area of 11,997 square meters, situated in San Dionisio, Parañaque, which De Leon claimed has been in the possession of his family for more than 50 years. Essentially, De Leon prayed that – one, lawful possession of the land in question be awarded to him; two, PEA be ordered to pay damages for demolishing the improvements constructed on Lot 5155; and, three, an injunctive relief be issued to enjoin PEA from committing acts which would violate his lawful and peaceful possession of the subject premises.

The court a quo found merit in De Leon’s application for writ of preliminary injunction and thus issued the Order dated 8 February 1993, pertinent portions of which read:

After a careful consideration of the evidence presented and without going into the actual merits of the case, this Court finds that plaintiff (De Leon) has duly established by preponderance of evidence that he has a legal right over the subject matter of the instant case and is entitled to the injunctive relief demanded for and may suffer irreparable damage or injury if such right is not protected by Law [Rules (sic) 58, Section 3 of the Revised (Rules of Court)].

Premises considered upon plaintiff’s (De Leon’s) filing of a bond in the amount of P500,000.00, let a writ of preliminary injunction be issued against the defendants, their agents, representatives and other persons (PEA and its officers) acting for and in their behalf are hereby enjoined from disturbing the peaceful possession of plaintiff (De Leon) and his co-owners over Lot 5155 and further, from destroying and/or removing whatever other improvements thereon constructed, until further orders of this Court.

SO ORDERED. (Emphasis supplied)

PEA sought recourse before the Supreme Court through a Petition for Certiorari with Prayer for a Restraining Order, ascribing grave abuse of discretion against the court a quo for issuing injunctive relief. The Petition was later referred to this Court for proper determination and disposition, and was docketed as CA-G.R. SP No. 30630.

On 30 September 1993, the Ninth Division of this Court rendered a Decision discerning that the court a quo did not act in a capricious, arbitrary and whimsical exercise of power in issuing the writ of preliminary injunction against PEA. The Ninth Division ruled that the court a quo was precisely careful to state in its Order that it was "without going into the actual merits of the case" and that the words "plaintiff (De Leon) and his co-owners" were used by the court a quo rather "loosely and did not intend it to be an adjudication of ownership."

Unfazed, PEA appealed to the Supreme Court via a Petition for Certiorari insisting that Lot 5155 was a salvage zone until it was reclaimed through government efforts in 1982. The land was previously under water on the coastline which reached nine to twenty meters deep. In 1989, PEA started constructing R-1 Toll Expressway Road for the Manila-Cavite Coastal Road, which project directly traversed Lot 5155. PEA argued that the documentary evidence presented by De Leon to bolster his fallacious claim of possession and ownership were procured only in 1992, thus negating his very own allegation that he and his predecessors-in-interest have been in occupation since time immemorial.

Ruling squarely on the issue adduced before it, the Supreme Court declared that Lot 5155 was a public land so that De Leon’s occupation thereof, no matter how long ago, could not confer ownership or possessory rights. Prescinding therefrom, no writ of injunction may lie to protect De Leon’s nebulous right of possession. Accordingly, in its Decision dated 20 November 2000, the Supreme Court disposed of the controversy in this wise:

WHEREFORE, the Court REVERSES the decision of the Court of Appeals in CA-G.R. SP No. 30630, and DISMISSES the complaint in Civil Case No. 93-143 of the Regional Trial Court, Makati.

No costs.

SO ORDERED.

The aforesaid Decision became final and executory as no motion for reconsideration was filed. In due course, PEA moved for the issuance of a writ of execution praying that De Leon and persons claiming rights under him be ordered to vacate and peaceably surrender possession of Lot 5155.

Acting on PEA’s motion, the court a quo issued the first assailed Order dated 15 September 2004, viz:

Acting on the "Motion For Issuance Of Writ of Execution" filed by defendant Public Estate[s] Authority, and finding the same to be impressed with merit, the same is GRANTED.

Let a Writ of Execution issue directing plaintiff, his agents, principals, successors-in-interest and all persons claiming rights under him to vacate and peaceably turn over possession of Lot 5155 to defendant Public Estate[s] Authority.

SO ORDERED.

As could well be expected, De Leon moved for reconsideration thereof and quashal of the writ of execution. He adamantly insisted that the court a quo’s Order for the issuance of the writ of execution completely deviated from the dispositive portion of the Supreme Court’s Decision dated 20 November 2000 as it did not categorically direct him to surrender possession of Lot 5155 in favor of PEA.

However, both motions met the same fate as these were denied by the court a quo in the second disputed Order dated 29 April 2005.4

Dissatisfied, De Leon filed another Motion for Reconsideration dated July 1, 2005, but the same was denied by the RTC in an Order dated July 27, 2005.

De Leon then filed a special civil action for certiorari with the CA assailing the September 15, 2004 and April 29, 2005 Orders of the RTC of Makati City. This was docketed as CA-G.R. SP No. 90328. In the same proceeding, De Leon filed an Urgent-Emergency Motion for Temporary Restraining Order (TRO) and Issuance of Writ of Preliminary Injunction but the same was denied by the CA in a Resolution dated April 24, 2006.

Subsequently, De Leon filed a second special civil action for certiorari with the CA seeking to annul and set aside the same RTC Orders dated September 15, 2004 and April 29, 2005, as well as the RTC Order of July 27, 2005. The case was docketed as CA-G.R. SP No. 90984.

On July 26, 2006, PEA filed a Very Urgent Motion for Issuance of Writ of Demolition5 praying that the RTC issue a Special Order directing De Leon and persons claiming under him to remove all improvements erected inside the premises of the subject property and, in case of failure to remove the said structures, that a Special Order and Writ of Demolition be issued directing the sheriff to remove and demolish the said improvements.

On October 11, 2006, the RTC issued an Order6 holding in abeyance the Resolution of PEA’s Motion. PEA filed a Motion for Reconsideration,7 but it was denied by the RTC in an Order8 dated January 12, 2007.

On February 27, 2007, PEA filed an Omnibus Motion9 to dismiss or, in the alternative, resolve the petitions in CA-G.R. SP No. 90328 and CA-G.R. SP No. 90984.

In its Decision10 dated March 21, 2007, the CA dismissed De Leon’s petition in CA-G.R. SP No. 90984 on the ground of forum shopping.

Subsequently, on November 21, 2007, the CA also dismissed De Leon’s petition in CA-G.R. SP No. 90328 holding that an earlier decision promulgated by the Supreme Court, finding the subject property to be public and that De Leon has no title and no clear legal right over the disputed lot, has already attained finality.11 De Leon filed a Motion for Reconsideration, but the CA denied it via its Resolution12 dated March 4, 2008.

Thereafter, PEA filed an Urgent Motion to Resolve (Re: Very Urgent Motion for Issuance of Writ of Demolition).13

On December 28, 2007, the RTC issued an Order14 holding in abeyance the resolution of PEA’s Motion pending receipt by the trial court of the entry of judgment pertaining to CA-G.R. SP No. 90328. PEA filed a Motion for Reconsideration.15

In its Order dated March 4, 2008, the RTC issued an Order denying PEA’s Motion for Reconsideration.

On April 23, 2008, De Leon filed the present petition for review on certiorari, docketed as G.R. No. 181970, assailing the November 21, 2007 Decision of the CA.

Subsequently, on May 15, 2008, PEA, on the other hand, filed the instant special civil action for certiorari, docketed as G.R. No. 182678, questioning the Orders of the RTC of Makati City, dated December 28, 2007 and March 4, 2008.

In G.R. No. 181970, De Leon questions the Decision of the CA on the following grounds: (a) he can only be removed from the subject land through ejectment proceedings; (b) the Decision of this Court in G.R. No. 112172 merely ordered the dismissal of De Leon’s complaint for damages in Civil Case No. 93-143; and (c) even though petitioner is not the owner and has no title to the subject land, mere prior possession is only required for the establishment of his right.

In G.R. No. 182678, the sole issue raised is whether respondent judge committed grave abuse of discretion in issuing the assailed Orders which held in abeyance the resolution of PEA’s Motion for the Issuance of a Writ of Demolition.

On February 25, 2009, PEA and the City of Parañaque filed a Joint Motion for Substitution stating that PEA had transferred its ownership and ceded its interests over the subject property to the City of Parañaque as full payment for all of the former’s real property tax liabilities. As a consequence, the movants prayed that PEA be substituted by the City of Parañaque as petitioner in G.R. No. 182678 and respondent in G.R. No. 181970.16

In a Resolution17 dated on October 14, 2009, this Court granted the Motion for Substitution filed by PEA and the City of Parañaque.

The issues raised in the present petitions boil down to the question of whether PEA is really entitled to possess the subject property and, if answered in the affirmative, whether the RTC should proceed to hear PEA’s Motion for the Issuance of a Writ of Demolition.

The Court rules for PEA.

The question of ownership and rightful possession of the subject property had already been settled and laid to rest in this Court’s Decision dated November 20, 2000 in G.R. No. 112172 entitled, Public Estates Authority v. Court of Appeals (PEA v. CA).18 In the said case, the Court ruled thus:

The issue raised is whether respondent and his brothers and sisters were lawful owners and possessors of Lot 5155 by mere claim of ownership by possession for a period of at least fifty (50) years.

The Court of Appeals ruled that respondent Bernardo de Leon and his brothers and sisters were lawful owners and possessors of Lot 5155 entitled to protection by injunction against anyone disturbing their peaceful possession of said Lot.

The ruling is erroneous. An applicant seeking to establish ownership of land must conclusively show that he is the owner in fee simple, for the standing presumption is that all lands belong to the public domain of the State, unless acquired from the Government either by purchase or by grant, except lands possessed by an occupant and his predecessors since time immemorial, for such possession would justify the presumption that the land had never been part of the public domain, or that it had been private property even before the Spanish conquest.

In this case, the land in question is admittedly public. The respondent Bernardo de Leon has no title thereto at all. His claim of ownership is based on mere possession by himself and his predecessors-in-interests, who claim to have been in open, continuous, exclusive and notorious possession of the land in question, under a bona fide claim of ownership for a period of at least fifty (50) years. However, the survey plan for the land was approved only in 1992, and respondent paid the realty taxes thereon on

October 30, 1992, shortly before the filing of the suit below for damages with injunction. Hence, respondent must be deemed to begin asserting his adverse claim to Lot 5155 only in 1992. More, Lot 5155 was certified as alienable and disposable on March 27, 1972, per certificate of the Department of Environment and Natural Resources. It is obvious that respondent’s possession has not ripened into ownership.

x x x x

Consequently, respondent De Leon has no clear legal right to the lot in question, and a writ of injunction will not lie to protect such nebulous right of possession. x x x19

The Court does not subscribe to De Leon’s argument that the issues of ownership and possession of the subject lot should not have been taken up by the court on the ground that his complaint is only for damages. De Leon must be aware that his action for damages is anchored on his claim that he owns and possesses the subject property.20 On this basis, it would be inevitable for the court to discuss the issues of whether he, in fact, owns the disputed property and, as such, has the right to possess the same. Moreover, it is clear from this Court’s Decision in PEA v. CA that the main issue resolved therein was "whether respondent [De Leon] and his brothers and sisters were the lawful owners and possessors of Lot 5155 by mere claim of ownership by possession for a period of at least fifty (50) years."

De Leon insists that what this Court did in PEA v. CA was to simply dismiss his complaint for damages and nothing more, and that the RTC erred and committed grave abuse of discretion in issuing a writ of execution placing PEA in possession of the disputed property. He insists that he can only be removed from the disputed property through an ejectment proceeding.

The Court is not persuaded.

As a general rule, a writ of execution should conform to the dispositive portion of the decision to be executed; an execution is void if it is in excess of and beyond the original judgment or award.21 The settled general principle is that a writ of execution must conform strictly to every essential particular of the judgment promulgated, and may not vary the terms of the judgment it seeks to enforce, nor may it go beyond the terms of the judgment sought to be executed.22

However, it is equally settled that possession is an essential attribute of ownership.23 Where the ownership of a parcel of land was decreed in the judgment, the delivery of the possession of the land should be considered included in the decision, it appearing that the defeated party’s claim to the possession thereof is based on his claim of ownership.24 Furthermore, adjudication of ownership would include the delivery of possession if the defeated party has not shown any right to possess the land independently of his claim of ownership which was rejected.25 This is precisely what happened in the present case. This Court had already declared the disputed property as owned by the State and that De Leon does not have any right to possess the land independent of his claim of ownership.

In addition, a judgment for the delivery or restitution of property is essentially an order to place the prevailing party in possession of the property.26 If the defendant refuses to surrender possession of the property to the prevailing party, the sheriff or other proper officer should oust him.27 No express order to this effect needs to be stated in the decision; nor is a categorical statement needed in the decision that in such event the sheriff or other proper officer shall have the authority to remove the improvements on the property if the defendant fails to do so within a reasonable period of time.28 The removal of the improvements on the land under these circumstances is deemed read into the decision, subject only to the issuance of a special order by the court for the removal of the improvements.29

It bears stressing that a judgment is not confined to what appears upon the face of the decision, but also those necessarily included therein or necessary thereto.30 In the present case, it would be redundant for PEA to go back to court and file an ejectment case simply to establish its right to possess the subject property. Contrary to De Leon’s claims, the issuance of the writ of execution by the trial court did not constitute an unwarranted modification of this Court’s decision in PEA v. CA, but

rather, was a necessary complement thereto. Such writ was but an essential consequence of this Court’s ruling affirming the nature of the subject parcel of land as public and at the same time dismissing De Leon’s claims of ownership and possession. To further require PEA to file an ejectment suit to oust de Leon and his siblings from the disputed property would, in effect, amount to encouraging multiplicity of suits.

De Leon also contends that there "was never any government infrastructure project in the subject land, much less a Manila-Cavite Coastal Road traversing it, at any time ever since, until now" and that "allegations of a government project in the subject land and of such Road traversing the subject land have been downright falsities and lies and mere concoctions of respondent PEA."31 However, this Court has already ruled in PEA v. CA that "it is not disputed that there is a government infrastructure project in progress traversing Lot 5155, which has been enjoined by the writ of injunction issued by the trial court."

In any case, De Leon’s argument that there was no government infrastructure project in the subject property begs the issue of ownership and rightful possession. The subject lot was properly identified. There is no dispute as to its exact location. Hence, whether or not there is a government project existing within the premises or that which traverses it is not relevant to the issue of whether petitioner is the owner of the disputed lot and, therefore, has legal possession thereof.

As to whether or not the RTC committed grave abuse of discretion in holding in abeyance the resolution of PEA’s Motion for the Issuance of a Writ of Demolition, Section 7,32 Rule 65 of the Rules of Court provides the general rule that the mere pendency of a special civil action for certiorari commenced in relation to a case pending before a lower court or court of origin does not stay the proceedings therein in the absence of a writ of preliminary injunction or temporary restraining order. It is true that there are instances where, even if there is no writ of preliminary injunction or temporary restraining order issued by a higher court, it would be proper for a lower court or court of origin to suspend its proceedings on the precept of judicial courtesy.33 The principle of judicial courtesy, however, remains to be the exception rather than the rule. As held by this Court in Go v. Abrogar,34 the precept of judicial courtesy should not be applied indiscriminately and haphazardly if we are to maintain the relevance of Section 7, Rule 65 of the Rules of Court.

Indeed, in the amendments introduced by A.M. No. 07-7-12-SC, a new paragraph is now added to Section 7, Rule 65, which provides as follows:

The public respondent shall proceed with the principal case within ten (10) days from the filing of a petition for certiorari with a higher court or tribunal, absent a temporary restraining order or a preliminary injunction, or upon its expiration. Failure of the public respondent to proceed with the principal case may be a ground for an administrative charge.1avvphi1

While the above quoted amendment may not be applied in the instant case, as A.M. No. 07-7-12-SC was made effective only on December 27, 2007, the provisions of the amendatory rule clearly underscores the urgency of proceeding with the principal case in the absence of a temporary restraining order or a preliminary injunction.

This urgency is even more pronounced in the present case, considering that this Court’s judgment in PEA v. CA, finding that De Leon does not own the subject property and is not entitled to its possession, had long become final and executory. As a consequence, the writ of execution, as well as the writ of demolition, should be issued as a matter of course, in the absence of any order restraining their issuance. In fact, the writ of demolition is merely an ancillary process to carry out the Order previously made by the RTC for the execution of this Court’s decision in PEA v. CA. It is a logical consequence of the writ of execution earlier issued.

Neither can De Leon argue that he stands to sustain irreparable damage. The Court had already determined with finality that he is not the owner of the disputed property and that he has no right to possess the same independent of his claim of ownership.

Furthermore, the Order of the RTC holding in abeyance the resolution of PEA’s Motion for the Issuance of a Writ of Demolition also appears to be a circumvention of the provisions of Section 5, Rule 58 of the Rules of Court, which limit the period of effectivity of restraining orders issued by the courts. In fact, the assailed Orders of the RTC have even become more potent than a TRO issued by the CA because, under the Rules of Court, a TRO issued by the CA is effective only for sixty days. In the present case, even in the absence of a TRO issued by a higher court, the RTC, in effect, directed the maintenance of the status quo by issuing its assailed Orders. Worse, the effectivity of the said Orders was made to last for an indefinite period because the resolution of PEA’s Motion for the Issuance of a Writ of Demolition was made to depend upon the finality of the judgment in G.R. No. 181970. Based on the foregoing, the Court finds that the RTC committed grave abuse of discretion in issuing the assailed Orders dated December 28, 2007 and March 4, 2008.1avvphi1

Finally, the Court reminds the De Leon that it does not allow the piecemeal interpretation of its Decisions as a means to advance his case. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and read in this context, but the same must be considered in its entirety.35 Read in this manner, PEA’s right to possession of the subject property, as well as the removal of the improvements or structures existing thereon, fully follows after considering the entirety of the Court’s decision in PEA v. CA. This is consistent with the provisions of Section 10, paragraphs (c) and (d), Rule 39 of the Rules of Court, which provide for the procedure for execution of judgments for specific acts, to wit:

SECTION 10. Execution of judgments for specific act. -

x x x x

(c) Delivery or restitution of real property. - The officer shall demand of the person against whom the judgment for the delivery or restitution of real property is rendered and all persons claiming rights under him to peaceably vacate the property within the three (3) working days, and restore possession thereof to the judgment obligee; otherwise, the officer shall oust all such persons therefrom with the assistance, if necessary, of appropriate peace officers, and employing such means as may be reasonably necessary to retake possession, and place the judgment obligee in possession of such property. Any costs, damages, rents or profits awarded by the judgment shall be satisfied in the same manner as a judgment for money.

(d) Removal of improvements on property subject of execution. - When the property subject of execution contains improvements constructed or planted by the judgment obligor or his agent, the officer shall not destroy, demolish or remove said improvements, except upon special order of the court, issued upon motion of the judgment obligee after due hearing and after the former has failed to remove the same within a reasonable time fixed by the court.

As a final note, it bears to point out that this case has been dragging for more than 15 years and the execution of this Court’s judgment in PEA v. CA has been delayed for almost ten years now simply because De Leon filed a frivolous appeal against the RTC’s order of execution based on arguments that cannot hold water. As a consequence, PEA is prevented from enjoying the fruits of the final judgment in its favor. The Court agrees with the Office of the Solicitor General in its contention that every litigation must come to an end once a judgment becomes final, executory and unappealable. 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 case by the execution and satisfaction of the judgment, which is the "life of the law."36 To frustrate it by dilatory schemes on the part of the losing party is to frustrate all the efforts, time and expenditure of the courts.37 It is in the interest of justice that this Court should write finis to this litigation.

WHEREFORE, the Court disposes and orders the following:

The petition for review on certiorari in G.R. No. 181970 is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 90328 dated November 21, 2007 and March 4, 2008, respectively, are AFFIRMED.

The petition for certiorari in G.R. No. 182678 is GRANTED. The assailed Orders of the Regional Trial Court of Makati City, Branch 135, dated December 28, 2007 and March 4, 2008, are ANNULLED and SET ASIDE.

The Regional Trial Court of Makati is hereby DIRECTED to hear and resolve PEA’s Motion for the Issuance of a Writ of Demolition with utmost dispatch. This Decision is IMMEDIATELY EXECUTORY. The Clerk of Court is DIRECTED to remand the records of the case to the court of origin.

SO ORDERED.

SPOUSES RODOLFO A. NOCEDA and ERNA T. NOCEDA, Petitioners, vs. AURORA ARBIZO-DIRECTO, Respondent.

NACHURA, J.:

Assailed in the instant petition is the Decision1 of the Court of Appeals (CA), dismissing the appeal on the ground of res judicata.

On September 16, 1986, respondent Aurora Arbizo-Directo filed a complaint against her nephew, herein petitioner Rodolfo Noceda, for "Recovery of Possession and Ownership and Rescission/Annulment of Donation" with the Regional Trial Court (RTC) of Iba, Zambales, Branch 71, docketed as Civil Case No. RTC-354-I. Respondent alleged that she and her co-heirs have extra-judicially settled the property they inherited from their late father on August 19, 1981, consisting of a parcel of land, described as Lot No. 1121, situated in Bitoong, San Isidro, Cabangan, Zambales. She donated a portion of her hereditary share to her nephew, but the latter occupied a bigger area, claiming ownership thereof since September 1985.

Judgment was rendered in favor of respondent on November 6, 1991, where the RTC (a) declared the Extra-Judicial Settlement-Partition dated August 19, 1981 valid; (b) declared the Deed of Donation dated June 1, 1981 revoked; (c) ordered defendant to vacate and reconvey that donated portion of Lot 2, Lot 1121 subject of the Deed of Donation dated June 1, 1981 to the plaintiff or her heirs or assigns; (d) ordered the defendant to remove the house built inside the donated portion at the defendant’s expense or pay a monthly rental of P300.00 Philippine Currency; and (e) ordered the defendant to pay attorney’s fees in the amount of P5,000.00.2 The decision was appealed to the CA, docketed as CA-G.R. CV No. 38126.

On January 5, 1995, spouses Rodolfo Dahipon and Cecilia Obispo- Dahipon filed a complaint for recovery of ownership and possession, and annulment of sale and damages against spouses Antonio and Dominga Arbizo, spouses Rodolfo and Erna Noceda, and Aurora Arbizo-Directo with the RTC, Iba, Zambales, Branch 70. This was docketed as Civil Case No. RTC-1106-I. In the complaint, spouses Dahipon alleged that they were the registered owners of a parcel of land, consisting of 127,298 square meters, situated in Barangay San Isidro, Cabangan, Zambales, designated as Lot 1121-A. The Original Certificate of Title No. P-9036 over the land was issued in the name of Cecilia Obispo-Dahipon, pursuant to Free Patent No. 548781. Spouses Dahipon claimed that the defendants therein purchased portions of the land from them without paying the full amount. Except for Aurora, a compromise agreement was entered into by the parties, as a result of which, a deed of absolute sale was executed, and TCT No. T-50730 was issued in the name of spouses Noceda for their portion of the land. For her part, Aurora questioned Dahipon’s alleged ownership over the same parcel of land by filing an adverse claim.

In the meantime, a decision was rendered in CA-G.R. CV No. 38126 on March 31, 1995 with the following fallo:

WHEREFORE, judgment is hereby rendered, ORDERING defendant Rodolfo Noceda to VACATE the portion known as Lot "C" of Lot 1121 per Exhibit E, which was allotted to plaintiff Aurora Arbizo-Directo. Except for this modification, the Decision dated November 6, 1991 of the RTC, Iba, Zambales,

Branch 71, in Civil Case No. RTC-354-I, is hereby AFFIRMED in all other respects. Costs against defendant Rodolfo Noceda.3

Undaunted, petitioners filed a petition for review with this Court, which was docketed as G.R. No. 119730. The Court found no reversible error, much less grave abuse of discretion, with the factual findings of the two courts below, and thus denied the petition on September 2, 1999.4 The decision became final and executory, and a writ of execution was duly issued by the RTC on March 6, 2001 in Civil Case No. RTC-354-I.

On December 4, 2003, petitioners instituted an action for quieting of title against respondent, docketed as Civil Case No. 2108-I. In the complaint, petitioners admitted that Civil Case No. RTC-354-I was decided in favor of respondent and a writ of execution had been issued, ordering them to vacate the property. However, petitioners claimed that the land, which was the subject matter of Civil Case No. RTC-354-I, was the same parcel of land owned by spouses Dahipon from whom they purchased a portion; and that a title (TCT No. T-37468) was, in fact, issued in their name. Petitioners prayed for the issuance of a writ of preliminary injunction to enjoin the implementation of the Writ of Execution dated March 6, 2001 in Civil Case No. RTC-354-I, and that "a declaration be made that the property bought, occupied and now titled in the name of [petitioners] was formerly part and subdivision of Lot No. 1121 Pls-468-D, covered by OCT No. P-9036 in the name of Cecilia Obispo-Dahipon."5

Respondent filed a Motion to Dismiss on the ground of res judicata. Respondent averred that petitioners, aware of their defeat in Civil Case No. RTC-354-I, surreptitiously negotiated with Cecilia Obispo-Dahipon for the sale of the land and filed the present suit in order to subvert the execution thereof.

The trial court denied the motion, holding that there was no identity of causes of action.

Trial thereafter ensued. On January 25, 2006, after petitioners presented their evidence, respondent filed a Demurrer to Evidence, stating that the claim of ownership and possession of petitioners on the basis of the title emanating from that of Cecilia Obispo-Dahipon was already raised in the previous case (Civil Case No. RTC-354-I).

On February 22, 2006, the trial court issued a resolution granting the demurrer to evidence.

The CA affirmed. Hence, petitioners now come to this Court, raising the following issues:

WHETHER OR NOT THE PRINCIPLE OF RES JUDICATA OR DOCTRINE OF CONCLUSIVENESS OF JUDGMENT IS APPLICABLE UNDER THE FACTS OBTAINING IN THE PRESENT CASE[;]

WHETHER OR NOT THE RESPONDENT HAS A BETTER TITLE THAN THE PETITIONERS[; and]

WHETHER OR NOT THE RULING ON PURCHASERS IN BAD FAITH IS APPLICABLE IN THE PRESENT CASE[.]6

Petitioners assert that res judicata7 does not apply, considering that the essential requisites as to the identity of parties, subject matter, and causes of action are not present.

The petition is bereft of merit.

The doctrine of res judicata is set forth in Section 47 of Rule 39 of the Rules of Court, as follows:

Sec. 47. Effect of judgments or final orders. - The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

x x x x

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which actually and necessarily included therein or necessary thereto.

The principle of res judicata lays down two main rules, namely: (1) the judgment or decree of a court of competent jurisdiction on the merits concludes the litigation between the parties and their privies and constitutes a bar to a new action or suit involving the same cause of action either before the same or any other tribunal; and (2) any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which a judgment or decree is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claims or demands, purposes, or subject matters of the two suits are the same. These two main rules mark the distinction between the principles governing the two typical cases in which a judgment may operate as evidence.8] The first general rule above stated, and which corresponds to the afore-quoted paragraph (b) of Section 47, Rule 39 of the Rules of Court, is referred to as "bar by former judgment"; while the second general rule, which is embodied in paragraph (c) of the same section and rule, is known as "conclusiveness of judgment."9

The Court in Calalang v. Register of Deeds of Quezon City10 explained the second concept which we reiterate herein, to wit:

The second concept — conclusiveness of judgment — states that a fact or question which was in issue in a former suit and was there judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order that a judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit (Nabus v. Court of Appeals, 193 SCRA 732 [1991]). Identity of cause of action is not required but merely identity of issue.

Justice Feliciano, in Smith Bell & Company (Phils.), Inc. v. Court of Appeals (197 SCRA 201, 210 [1991]), reiterated Lopez v. Reyes (76 SCRA 179 [1977]) in regard to the distinction between bar by former judgment which bars the prosecution of a second action upon the same claim, demand, or cause of action, and conclusiveness of judgment which bars the relitigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action.

The general rule precluding the relitigation of material facts or questions which were in issue and adjudicated in former action are commonly applied to all matters essentially connected with the subject matter of the litigation. Thus, it extends to questions necessarily implied in the final judgment, although no specific finding may have been made in reference thereto and although such matters were directly referred to in the pleadings and were not actually or formally presented. Under this rule, if the record of the former trial shows that the judgment could not have been rendered without deciding the particular matter, it will be considered as having settled that matter as to all future actions between the parties and if a judgment necessarily presupposes certain premises, they are as conclusive as the judgment itself.11

The foregoing disquisition finds application in the case at bar. Undeniably, the present case is closely related to the previous case (Civil Case No. RTC-354-I), where petitioners raised the issue of ownership and possession of Lot No. 1121 and the annulment of the donation of said lot to them. The RTC found for respondent, declaring the deed of donation she executed in favor of petitioners revoked; and ordered petitioners to vacate and reconvey the donated portion to respondent. The decision of the RTC was affirmed by the CA, and became final with the denial of the petition for review by this Court in G.R. No. 119730. In that case, the Court noted the established fact "that petitioner Noceda occupied not only the portion donated to him by respondent Aurora Arbizo-Directo, but he also fenced the whole area of Lot C which belongs to private respondent Directo, thus, petitioner’s act of occupying the portion pertaining to private respondent Directo without the latter’s knowledge and consent is an act of usurpation which is an offense against the property of the donor and considered as an act of ingratitude of a donee against the donor."12 Clearly, therefore, petitioners have no right of ownership or possession over the land in question.1avvph!1

Under the principle of conclusiveness of judgment, such material fact becomes binding and conclusive on the parties. When a right or fact has been judicially tried and determined by a court of competent jurisdiction, or when an opportunity for such trial has been given, the judgment of the court, as long as it remains unreversed, should be conclusive upon the parties and those in privity with them.13 Thus, petitioners can no longer question respondent’s ownership over Lot No. 1121 in the instant suit for quieting of title. Simply put, conclusiveness of judgment bars the relitigation of particular facts or issues in another litigation between the same parties on a different claim or cause of action.14

Furthermore, we agree that petitioners instituted the instant action with unclean hands. Aware of their defeat in the previous case, they attempted to thwart execution and assert their alleged ownership over the land through their purported purchase of a lot from Cecilia Obispo-Dahipon. This later transaction appears to be suspect. A perusal of G.R. No. 119730 reveals that the Court was not unaware of Dahipon’s alleged claim over the same parcel of land. It noted that Dahipon did not even bother to appear in court to present her free patent upon respondent’s request, or to intervene in the case, if she really had any legitimate interest over the land in question.15 In any event, petitioners’ assertion of alleged good title over the land cannot stand considering that they purchased the piece of land from Dahipon knowing fully well that the same was in the adverse possession of another.

Thus, we find no reversible error in the appellate court’s ruling that petitioners are in fact buyers in bad faith. We quote:

With appellants’ actual knowledge of facts that would impel a reasonable man to inquire further on [a] possible defect in the title of Obispo, considering that she was found not to have been in actual occupation of the land in CA-G.R. CV No. 38126, they cannot simply invoke protection of the law as purchasers in good faith and for value. In a suit to quiet title, defendant may set up equitable as well as legal defenses, including acquisition of title by adverse possession and a prior adjudication on the question under the rule on res judicata. Appellants’ status as holders in bad faith of a certificate of title, taken together with the preclusive effect of the right of possession and ownership over the disputed portion, which was adjudged in favor of appellee in Civil Case No. RTC-354-I, thus provide ample justification for the court a quo to grant the demurrer to evidence and dismiss their suit for quieting of title filed against the said appellee.16

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 87026 is AFFIRMED in toto.

SO ORDERED.

ADELAIDA INFANTE, Petitioner, vs. ARAN BUILDERS, INC., Respondent.*

AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking the reversal of the Decision1 of the Court of Appeals (CA) promulgated on August 12, 2002, which upheld the Order dated September 4, 2001, issued by the Regional Trial Court of Muntinlupa City (RTC).

The undisputed facts and issues raised in the lower courts are accurately summarized by the CA as follows:

Before the Regional Trial Court of Muntinlupa City (or "Muntinlupa RTC"; Branch 276), presided over by Hon. Norma C. Perello (or "respondent judge"), was an action for revival of judgment filed on June 6, 2001 by Aran Builders, Inc. (or "private respondent") against Adelaida Infante (or "petitioner"), docketed as Civil Case No. 01-164.

The judgment sought to be revived was rendered by the Regional Trial Court of Makati City (or "Makati RTC"; Branch 60) in an action for specific performance and damages, docketed as Civil Case No. 15563.

The Makati RTC judgment, which became final and executory on November 16, 1994, decreed as follows:

26. WHEREFORE, the Court hereby renders judgment as follows:

26.1 The defendant ADELAIDA B. INFANTE is ordered to do the following within thirty (30) days from finality hereof:

26.1.1. To deliver to the plaintiff ARAN BUILDERS, INC. the following: (a) the complete plans (lot plan, location map and vicinity map); (b) Irrevocable Power of Attorney; (c ) Real Estate Tax clearance; (d) tax receipts; (e) proof of up to date payment of Subdivision Association dues referred to in the "CONTRACT TO SELL" dated November 10, 1986 (Exh. A or Exh. 1);

26.1.2. To execute the deed of sale of Lot No. 11, Block 9, Phase 3-A1, Ayala Alabang Subdivision covered by TCT No. 114015 for P500,000.00 in favor of the plaintiff;

26.1.3. To pay the capital gains tax, documentary stamp taxes and other taxes which the Bureau of Internal Revenue may assess in connection with the sale mentioned in the preceding paragraph and to submit to the plaintiff proof of such payment;

26.1.4. To secure the written conformity of AYALA CORPORATION to the said sale and to give such written conformity to the plaintiff;

26.1.5. To register the deed of sale with the Registry of Deeds and deliver to AYALA CORPORATION the certificate of title issued in the name of plaintiff pursuant to such registration;

26.2 Upon the compliance of the defendant with the preceding directives, the plaintiff must immediately pay to the defendant the sum of P321,918.25;

26.3 The defendant is ordered to pay plaintiff P10,000.00 as attorney’s fees;

26.4 The Complaint for moral and exemplary damages is DISMISSED;

26.5 The COUNTERCLAIM is DISMISSED; and

26.6 Cost is taxed against the defendant.

Petitioner filed a motion to dismiss the action (for revival of judgment) on the grounds that the Muntinlupa RTC has no jurisdiction over the persons of the parties and that venue was improperly laid. Private respondent opposed the motion.

On September 4, 2001, the Muntinlupa RTC issued an order which reads:

The MOTION TO DISMISS is denied.

Admittedly, the Decision was rendered by the Makati Regional Trial Court, but it must be emphasized that at that time there was still no Regional Trial Court in Muntinlupa City, then under the territorial jurisdiction of the Makati Courts, so that cases from this City were tried and heard at Makati City. With the creation of the Regional Trial Courts of Muntinlupa City, matters involving properties located in this City, and cases involving Muntinlupa City residents were all ordered to be litigated before these Courts.

The case at bar is a revival of a judgment which declared the plaintiff as the owner of a parcel of land located in Muntinlupa City. It is this judgment which is sought to be enforced thru this action which necessarily involves the interest, possession, title, and ownership of the parcel of land located in Muntinlupa city and adjudged to Plaintiff. It goes without saying that the complaint should be filed in the latter City where the property is located, as there are now Regional Trial Courts hereat.

Defendant may answer the complaint within the remaining period, but no less than five (5) days, otherwise a default judgment might be taken against her.

It is SO ORDERED.

Her motion for reconsideration having been denied per order dated September 28, 2001, petitioner came to this Court [CA] via the instant special civil action for certiorari. She ascribes grave abuse of discretion amounting to lack or excess of jurisdiction on the part of respondent judge for "erroneously holding that Civil Case No. 01-164 is a revival of judgment which declared private respondent as the owner of a parcel of land located in Muntinlupa City and (that) the judgment rendered by the (Makati RTC) in Civil Case No. 15563 sought to be enforced necessarily involves the interest, possession, title and ownership of the parcel of land located in Muntinlupa City."

Petitioner asserts that the complaint for specific performance and damages before the Makati RTC is a personal action and, therefore, the suit to revive the judgment therein is also personal in nature; and that, consequently, the venue of the action for revival of judgment is either Makati City or Parañaque City where private respondent and petitioner respectively reside, at the election of private respondent.

On the other hand, private respondent maintains that the subject action for revival judgment is "quasi in rem because it involves and affects vested or adjudged right on a real property"; and that, consequently, venue lies in Muntinlupa City where the property is situated.2

On August 12, 2002, the CA promulgated its Decision ruling in favor of herein private respondent. The CA held that since the judgment sought to be revived was rendered in an action involving title to or possession of real property, or interest therein, the action for revival of judgment is then an action in rem which should be filed with the Regional Trial Court of the place where the real property is located. Petitioner moved for reconsideration of the CA Decision but the motion was denied per Resolution dated January 7, 2003.

Hence, herein petition. Petitioner claims that the CA erred in finding that the complaint for revival of judgment is an action in rem which was correctly filed with the RTC of the place where the disputed real property is located.

The petition is unmeritorious.

Petitioner insists that the action for revival of judgment is an action in personam; therefore, the complaint should be filed with the RTC of the place where either petitioner or private respondent resides. Petitioner then concludes that the filing of the action for revival of judgment with the RTC of Muntinlupa City, the place where the disputed property is located, should be dismissed on the ground of improper venue.

Private respondent is of the opinion that the judgment it is seeking to revive involves interest over real property. As such, the present action for revival is a real action, and venue was properly laid with the court of the place where the realty is located.

Thus, the question that must be answered is: where is the proper venue of the present action for revival of judgment?

Section 6, Rule 39 of the 1997 Rules of Civil Procedure provides that after the lapse of five (5) years from entry of judgment and before it is barred by the statute of limitations, a final and executory judgment or order may be enforced by action. The Rule does not specify in which court the action for revival of judgment should be filed.

In Aldeguer v. Gemelo,3 the Court held that:

x x x an action upon a judgment must be brought either in the same court where said judgment was rendered or in the place where the plaintiff or defendant resides, or in any other place designated by the statutes which treat of the venue of actions in general. (Emphasis supplied)4

but emphasized that other provisions in the rules of procedure which fix the venue of actions in general must be considered.5

Under the present Rules of Court, Sections 1 and 2 of Rule 4 provide:

Section 1. Venue of real actions. - Actions affecting title to or possession of real property, or interest therein, shall be commenced and tried in the proper court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated.

x x x x

Section 2. Venue of personal actions. - All other actions may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a non-resident defendant where he may be found, at the election of the plaintiff.

Thus, the proper venue depends on the determination of whether the present action for revival of judgment is a real action or a personal action. Applying the afore-quoted rules on venue, if the action for revival of judgment affects title to or possession of real property, or interest therein, then it is a real action that must be filed with the court of the place where the real property is located. If such action does not fall under the category of real actions, it is then a personal action that may be filed with the court of the place where the plaintiff or defendant resides.

In support of her contention that the action for revival of judgment is a personal action and should be filed in the court of the place where either the plaintiff or defendant resides, petitioner cites the statements made by the Court in Aldeguer v. Gemelo6 and Donnelly v. Court of First Instance of Manila7 . Petitioner, however, seriously misunderstood the Court's rulings in said cases.

In Aldeguer, what the Court stated was that "[t]he action for the execution of a judgment for damages is a personal one, and under section 377 [of the Code of Civil Procedure], it should be brought in any province where the plaintiff or the defendant resides, at the election of the

plaintiff"8 (Emphasis and underscoring supplied). Petitioner apparently took such statement to mean that any action for revival of judgment should be considered as a personal one. This thinking is incorrect. The Court specified that the judgment sought to be revived in said case was a judgment for damages. The judgment subject of the action for revival did not involve or affect any title to or possession of real property or any interest therein. The complaint filed in the revival case did not fall under the category of real actions and, thus, the action necessarily fell under the category of personal actions.

In Donnelly, the portion of the Decision being relied upon by petitioner stated thus:

Petitioner raises before this Court two (2) issues, namely: (a) whether an action for revival of judgment is one quasi in rem and, therefore, service of summons may be effected thru publication; and (b) whether the second action for revival of judgment (Civil Case No. 76166) has already prescribed. To our mind, the first is not a proper and justiciable issue in the present proceedings x x x. Nevertheless, let it be said that an action to revive a judgment is a personal one. (Emphasis supplied)9

The Court clearly pointed out that in said case, the issue on whether an action for revival of judgment is quasi in rem was not yet proper and justiciable. Therefore, the foregoing statement cannot be used as a precedent,as it was merely an obiter dictum. Moreover, as in Aldeguer, the judgment sought to be revived in Donnellyinvolved judgment for a certain sum of money. Again, no title or interest in real property was involved. It is then understandable that the action for revival in said case was categorized as a personal one.

Clearly, the Court's classification in Aldeguer and Donnelly of the actions for revival of judgment as being personal in character does not apply to the present case.

The allegations in the complaint for revival of judgment determine whether it is a real action or a personal action.

The complaint for revival of judgment alleges that a final and executory judgment has ordered herein petitioner to execute a deed of sale over a parcel of land in Ayala Alabang Subdivision in favor of herein private respondent; pay all pertinent taxes in connection with said sale; register the deed of sale with the Registry of Deeds and deliver to Ayala Corporation the certificate of title issued in the name of private respondent. The same judgment ordered private respondent to pay petitioner the sum of P321,918.25 upon petitioner's compliance with the aforementioned order. It is further alleged that petitioner refused to comply with her judgment obligations despite private respondent's repeated requests and demands, and that the latter was compelled to file the action for revival of judgment. Private respondent then prayed that the judgment be revived and a writ of execution be issued to enforce said judgment.

The previous judgment has conclusively declared private respondent's right to have the title over the disputed property conveyed to it. It is, therefore, undeniable that private respondent has an established interest over the lot in question; and to protect such right or interest, private respondent brought suit to revive the previous judgment. The sole reason for the present action to revive is the enforcement of private respondent's adjudged rights over a piece of realty. Verily, the action falls under the category of a real action, for it affects private respondent's interest over real property.1avvphi1

The present case for revival of judgment being a real action, the complaint should indeed be filed with the Regional Trial Court of the place where the realty is located.

Section 18 of Batas Pambansa Bilang 129 provides:

Sec. 18. Authority to define territory appurtenant to each branch. - The Supreme Court shall define the territory over which a branch of the Regional Trial Court shall exercise its authority. The territory thus defined shall be deemed to be the territorial area of the branch concerned for purposes of determining the venue of all suits, proceedings or actions, whether civil or criminal, as well as determining the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial

Courts over which the said branch may exercise appellate jurisdiction. The power herein granted shall be exercised with a view to making the courts readily accessible to the people of the different parts of the region and making the attendance of litigants and witnesses as inexpensive as possible. (Emphasis supplied)1avvphi1

From the foregoing, it is quite clear that a branch of the Regional Trial Court shall exercise its authority only over a particular territory defined by the Supreme Court. Originally, Muntinlupa City was under the territorial jurisdiction of the Makati Courts. However, Section 4 of Republic Act No. 7154, entitled An Act to Amend Section Fourteen of Batas Pambansa Bilang 129, Otherwise Known As The Judiciary Reorganization Act of 1981, took effect on September 4, 1991. Said law provided for the creation of a branch of the Regional Trial Court in Muntinlupa. Thus, it is now the Regional Trial Court in Muntinlupa City which has territorial jurisdiction or authority to validly issue orders and processes concerning real property within Muntinlupa City.

Thus, there was no grave abuse of discretion committed by the Regional Trial Court of Muntinlupa City, Branch 276 when it denied petitioner's motion to dismiss; and the CA did not commit any error in affirming the same.

WHEREFORE, the petition is DENIED. The Decision dated August 12, 2002 and Resolution dated January 7, 2003 of the Court of Appeals are AFFIRMED.

SO ORDERED.

ARTURO SARTE FLORES, Petitioner, vs. SPOUSES ENRICO L. LINDO, JR. and EDNA C. LINDO, Respondents.

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) 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.

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

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 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 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:

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.

FGU INSURANCE CORPORATION (Now BPI/MS INSURANCE CORPORATION), Petitioner, vs.REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 66, and G.P. SARMIENTO TRUCKING CORPORATION, Respondents.

MENDOZA, J.:

This is a petition for mandamus praying that the July 1, 2003 and November 3, 2003 orders 1 of the Regional Trial Court Branch 66, Makati City (RTC), which granted the Motion To Set Case For Hearing filed by private respondent G.P. Sarmiento Trucking Corporation (GPS), be set aside and, in lieu thereof, "a decision be rendered ordering the lower court to issue the Writ of Execution in Civil Case No. 94-3009 in consonance with the decision of this venerable court dated August 6, 2002."2

Records show that on June 18, 1994, GPS agreed to transport thirty (30) units of Condura S.D. white refrigerators in one of its Isuzu trucks, driven by Lambert Eroles (Eroles), from the plant site of Concepcion Industries, Inc. (CII) in Alabang, to the Central Luzon Appliances in Dagupan City. On its way to its destination, however, the Isuzu truck collided with another truck resulting in the damage of said appliances.

FGU Insurance Corporation (FGU), the insurer of the damaged refrigerators, paid CII, the insured, the value of the covered shipment in the sum of P204,450.00. FGU, in turn, as subrogee of the insured’s rights and interests, sought reimbursement of the amount it paid from GPS.

The failure of the GPS to heed FGU’s claim for reimbursement, led the latter to file a complaint for damages and breach of contract of carriage against the former and its driver, Eroles, with the RTC. During the hearing of the case, FGU presented evidence establishing its claim against GPS. For its part, GPS filed a motion to dismiss by way of demurrer to evidence, which was granted by the RTC.

The RTC ruled, among others, that FGU failed to adduce evidence that GPS was a common carrier and that its driver was negligent, thus, GPS could not be made liable for the damages of the subject cargoes. On appeal, the Court of Appeals (CA) affirmed the ruling of the RTC. The case was then elevated to this Court. On August 6, 2002, the Court rendered a decision3 agreeing with the lower courts that GPS was not a common carrier but nevertheless held it liable under the doctrine of culpa contractual. Thus, the dispositive portion of the Court’s decision reads as follows:

WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking Corporation which, instead, is

hereby ordered to pay FGU Corporation the value of the damaged and lost cargoes in the amount of P204,450.00. No costs.

SO ORDERED.

On September 18, 2002, this Court denied GPS’ motion for reconsideration with finality.4 In due course, an entry of judgment5 was issued certifying that the August 6, 2002 decision of this Court became final and executory on October 3, 2002.

On October 14, 2002, FGU filed a motion for execution6 with the RTC praying that a writ of execution be issued to enforce the August 6, 2002 judgment award of this Court in the amount of P204,450.00.

On November 5, 2002, GPS filed its Opposition to Motion for Execution7 praying that FGU’s motion for execution be denied on the ground that the latter’s claim was unlawful, illegal, against public policy and good morals, and constituted unjust enrichment. GPS alleged that it discovered, upon verification from the insured, that after the insured’s claim was compensated in full, the insured transferred the ownership of the subject appliances to FGU. In turn, FGU sold the same to third parties thereby receiving and appropriating the consideration and proceeds of the sale. GPS believed that FGU should not be allowed to "doubly recover" the losses it suffered.

Thereafter, on January 13, 2003, GPS filed its Comment with Motion to Set Case for Hearing on the Merits.8

On July 1, 2003, the RTC issued an order granting GPS motion to set case for hearing. Its order, in its pertinent parts, reads:

X x x.

The defendant, however, contends that it has already turned over to the consignee the 30 refrigerator units subject[s] of the case. It also appears from the record that the Accounting/Administrative Manager of Concepcion Industries has executed a certification to the effect that the assured company has turned over the refrigerator units in question to plaintiff.

In view of the foregoing and considering that plaintiff may not be allowed to recover more than what it is entitled to, there is a need for the parties to clarify the following issues to allow a fair and judicious resolution of plaintiff’s motion for issuance of a writ of execution:

1) Was there an actual turn-over of 30 refrigerators to the plaintiff?

2) In the affirmative, what is the salvage value of the 30 refrigerators?

WHEREFORE, the Court hereby orders both parties to present evidence in support of their respective positions on these issues.

SO ORDERED.9 [Italicization in the original]

Upon denial of its motion for reconsideration, FGU filed this petition for mandamus directly with this Court on the following

GROUNDS

THE REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 66 UNLAWFULLY NEGLECTED THE PERFORMANCE OF ITS DUTY WHEN IT RE-OPENED A CASE, THE DECISION OF WHICH HAD ALREADY ATTAINED FINALITY.

THE REGIONAL TRIAL COURT OF MAKATI CITY, BRANCH 66 UNLAWFULLY NEGLECTED THE PERFORMANCE OF ITS MINISTERIAL DUTY WHEN IT DENIED THE ISSUANCE OF A WRIT OF EXECUTION.

In advocacy of its position, FGU argues that the decision is already final and executory and, accordingly, a writ of execution should issue. The lower court should not be allowed to hear the matter of turnover of the refrigerators to FGU because it was not an issue raised in the Answer of GPS. Neither was it argued by GPS in the CA and in this Court. It was only brought out after the decision became final and executory.

Indeed, a writ of mandamus lies to compel a judge to issue a writ of execution when the judgment had already become final and executory and the prevailing party is entitled to the same as a matter of right.10

Fundamental is the rule that where the judgment of a higher court has become final and executory and has been returned to the lower court, the only function of the latter is the ministerial act of carrying out the decision and issuing the writ of execution.11 In addition, a final and executory judgment can no longer be amended by adding thereto a relief not originally included. In short, once a judgment becomes final, the winning party is entitled to a writ of execution and the issuance thereof becomes a court's ministerial duty. The lower court cannot vary the mandate of the superior court or reexamine it for any other purpose other than execution; much less may it review the same upon any matter decided on appeal or error apparent; nor intermeddle with it further than to settle so much as has been demanded.12

Under the doctrine of finality of judgment or immutability of judgment, a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law, and whether it be made by the court that rendered it or by the Highest Court of the land. Any act which violates this principle must immediately be struck down.

But like any other rule, it has exceptions, namely: (1) the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.13 The exception to the doctrine of immutability of judgment has been applied in several cases in order to serve substantial justice. The early case ofCity of Butuan vs. Ortiz14 is one where the Court held as follows:

Obviously a prevailing party in a civil action is entitled to a writ of execution of the final judgment obtained by him within five years from its entry (Section 443, Code of Civil Procedure). But it has been repeatedly held, and it is now well-settled in this jurisdiction, that when after judgment has been rendered and the latter has become final, facts and circumstances transpire which render its execution impossible or unjust, the interested party may ask the court to modify or alter the judgment to harmonize the same with justice and the facts (Molina vs. De la Riva, 8 Phil. 569; Behn, Meyer & Co. vs. McMicking, 11 Phil. 276; Warner, Barnes & Co. vs. Jaucian, 13 Phil. 4; Espiritu vs. Crossfield and Guash, 14 Phil. 588; Flor Mata vs. Lichauco and Salinas, 36 Phil. 809). In the instant case the respondent Cleofas alleged that subsequent to the judgment obtained by Sto. Domingo, they entered into an agreement which showed that he was no longer indebted in the amount claimed of P995, but in a lesser amount. Sto. Domingo had no right to an execution for the amount claimed by him.’ (De la Costa vs. Cleofas, 67 Phil. 686-693).

Shortly after City of Butuan v. Ortiz, the case of Candelario v. Cañizares15 was promulgated, where it was written that:

After a judgment has become final, if there is evidence of an event or circumstance which would affect or change the rights of the parties thereto, the court should be allowed to admit evidence of such new facts and circumstances, and thereafter suspend execution thereof and grant relief as the new facts and circumstances warrant. We, therefore, find that the ruling of the court declaring that the order for the payment of P40,000.00 is final and may not be reversed, is erroneous as above explained.

These rulings were reiterated in the cases of Abellana vs. Dosdos,16 The City of Cebu vs. Mendoza17 and PCI Leasing and Finance, Inc. v Antonio Milan.18 In these cases, there were compelling circumstances which clearly warranted the exercise of the Court’s equity jurisdiction.1avvphil

In the case at bench, the Court agrees with the RTC that there is indeed a need to find out the whereabouts of the subject refrigerators. For this purpose, a hearing is necessary to determine the issue of whether or not there was an actual turnover of the subject refrigerators to FGU by the assured CII. If there was an actual turnover, it is very important to find out whether FGU sold the subject refrigerators to third parties and profited from such sale. These questions were brought about by the contention of GPS in its Opposition to Motion for Execution19 that after the assured, CII, was fully compensated for its claim on the damaged refrigerators, it delivered the possession of the subject refrigerators to FGU as shown in the certification of the Accounting/Administrative Manager of CII. Thereafter, the subject refrigerators were sold by FGU to third parties and FGU received and appropriated the consideration and proceeds of the sale. GPS claims that it verified the whereabouts of the subject refrigerators from the CII because it wanted to repair and sell them to compensate FGU.

If, indeed, there was an actual delivery of the refrigerators and FGU profited from the sale after the delivery, there would be an unjust enrichment if the realized profit would not be deducted from the judgment amount. "The Court is not precluded from rectifying errors of judgment if blind and stubborn adherence to the doctrine of immutability of final judgments would involve the sacrifice of justice for technicality."20

WHEREFORE, the petition is DISMISSED.

SO ORDERED.