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G.R. No. L-31303-04 May 31, 1978

REPUBLIC OF THE PHILIPPINES, petitioner,

vs.

THE HONORABLE COURT OF APPEALS, ALFREDO V. DE OCAMPO, and OSCAR ANGLO, respondents.

SANTOS, J.:

An appeal by certiorari filed on December 5, 1969 by petitioner, Republic of the Philippines (Republic, for short), from the resolution of the Court of Appeals dated August 21, 1969 1 dismissing petitioner's appeal in CA-G. R. Nos. 40683-84-R, as well as from the resolution of the said Court dated November 14, 1969 2 denying petitioner's motion for reconsideration thereof

The relevant and essential factual and procedural — antecedents follow. Both Republic and respondents Alfredo V. de Ocampo and Oscar Anglo claim ownership over the same lots, i.e,, Nos. 817 and 2509 of the Sagay-Escalante Cadastre, Negros Occidental, subject matter of this litigation. The basis of Republic's claim is that said lots were bequeathed to the Bureau of Education (now Bureau of Public Schools) on September 21, 1926 by the late Esteban Jalandoni through his will. 3 Republic further alleged that the said parcels of land were already registered under the Torrens System "before 1919 in a cadastral case in the name of Meerkamp and Company" in whose favor Original Certificate of Title (OCT, for short) No. 370 was issued, that said company sold

the lots to Esteban Jalandoni who was issued Transfer Certificate of Title (TCT, for short) No. 1251: that TCT No. 6014 was issued to the Bureau of Education when the subject property was bequeathed to it; and that as a matter of fact, a sugar quota (Plantation Audit No. 24-10) was issued for the lots under the name of the Bureau of Education. 4 The lots have a total area of 289.47 hectares. 5

Respondent de Ocampo, upon the other hand, predicates his claim on an application for registration of the same Lots Nos. 817 and 2509 in Land Registration Case No. N-4, LRC Rec. No. N-19196, wherein a decree of registration No. 105538 was issued over the lots, followed by the issuance in his name of OCT No. 576, on October 1, 1965. 6 He averred that the lots were unregistered lands belonging to and possessed by him, by virtue of a donation dated November 10, 1911 from one Luis Mosquera. 7

Respondent Anglo intervened in the case on February 21, 1966, having allegedly bought the same lots from respondent de Ocampo on January 6, 1966. TCT No. 42217 was issued to him (Anglo) on January 12, 1966. 8

Procedurally, the records show that the Bureau of Public Schools, then represented by the Provincial Fiscal of Negros Occidental initiated on December 24, 1958, a forcible entry and detainer case against de Ocampo over Lots Nos. 817 and 2509. On appeal, the Court of First Instance of Negros Occidental dismissed the complaint (Civil Case No. 5353). 9

Then on June 29, 1960, de Ocampo filed an application for registration of the same two parcels of land in Land Registration Case No. N-4 LRC Rec. No. N-19196, entitled "Alfredo V. de Ocampo, Applicant, v. Republic of the Philippines, Oppositor Republic filed its opposition; in due time. 10

On May 2, 1961, Republic, represented by the Solicitor General, filed a complaint against de Ocampo with the Court of First Instance of Negros Occidental (Branch VII) for the recovery of possession of the subject lots, with prayer for the issuance of a writ of preliminary mandatory injunction, docketed therein as Civil Case No, 264 (6154), entitled "Republic of the Philippines v. Alfredo v. de Ocampo, Defendant, " 11 De Ocampo averred in his answer that the properties alleged to have been donated by Esteban Jalandoni to the then Bureau of Education were different from the properties involved in this case, the former being titled lands (TCT No. 1251) containing two million nine hundred and twelve thousand four hundred and seventy four square meters (2,912,474), while Lots Nos. 817 and 2509 applied for by de Ocampo and which Republic sought to recover were unregistered lands, and that granting, without admitting, that they are the same lands, the court no longer had jurisdiction over the subject matter of the action since the issue of possession over said lots was already decided by the Court of First Instance of Negros Occidental. 12

On May 26, 1961, a preliminary hearing was held before Branch IV of the Court of First Instance of Negros Occidental where the land registration case was pending, but inasmuch

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as the issues involved in both Civil Case No. 264 (6154) for recovery of possession and the land registration case were Identical, the parties agreed to a joint trial, this time before Branch VI I, Judge Jose D. Divinagracia, presiding, where the civil case was pending. 13

After a joint trial of the above-mentioned two (2) cases, the Court of First Instance rendered judgment on August 3, 1965, dismissing the complaint in Civil Case No. 264 (6154) and adjudging the registration of the subject two lots in the name of the then applicant de Ocampo. On October 1, 1966, OCT No. 576 was issued in his name. 14

It is admitted by Republic that it received a copy of the decision on August 13, 1965 15 but no appeal was taken therefrom. However, Republic later filed with the trial court on December 28, 1965, a "Petition for Relief from Judgment with Preliminary Injunction Pending Proceeding 16 (petition, for short) praying, among other things, that de Ocampo be restrained from enforcing the decision dated 3 August 1965, and that after the hearing, an order be issued declaring the decision to be not yet final add executory, and granting Republic the right to file a motion for reconsideration and/or appeal within the period granted, to commence upon receipt of the order.

The petition alleged inter alia that the Republic's failure to appeal was due to accident, mistake and/or excusable negligence, specifically, stating that its docket clerk, Cesar Salud, merely committed excusable negligence when he inadvertently attached the copy of the decision to the file of

another case; that it was only on November 5, 1965, that Cesar Salud found the copy of the same; and that petitioner has a substantial cause of action in Civil Case No. 264 (6154) and a good and substantial defense in Land Registration Case No. N-4 Rec. No.N-19196.

An opposition to the petition was filed by respondent de Ocampo on February 5, 1966 17 on the ground that the same was filed beyond the reglementary period. The petition was, however, given due course on January 11, 1966. 18 On February 21, 1966, respondent Oscar Anglo filed a motion for intervention alleging that he bought the subject two (2) Lots Nos. 817 and 1509 from respondent de Ocampo on January 6, 1966 and that TCT No. 42217 of the Register of Deeds for Negros Occidental was issued to him (Anglo) on January 12, 1966. 19 He also filed an answer in opposition to Republic's petition for relief from judgment 20 on the grounds, among others, that the decree of registration and certificate of title had already been issued and that a writ of preliminary injunction will not lie to restrain enforcement of the decision of the trial court.

On June 6, 1966, after respondents filed their respective memoranda, the trial court dismissed the Republic's petition for lack of competent proof, pursuant to Section 6, Rule 38, of the Rules of Court which the court said required a hearing. 21

On July 25, 1966, petitioner Republic filed a motion for reconsideration of the aforesaid order dismissing its petition; 22 and on August 4, 1966, it filed a manifestation averring additional grounds in support of the

motion for reconsideration. 23 Respondent Anglo and de Ocampo opposed the same. 24

On September 28, 1966, Republic filed an "Amended Petition for Relief from Judgment and/or Review of Decree with Preliminary Injunction 25 (Amended Petition, for short). In specific regard to the petition for review of the decree, Republic contended, inter alia, that actual fraud had been perpetrated by respondent de Ocampo in securing the lower court's decision ordering the registration of the lots in his name, as well as the issuance of the decree of registration and the corresponding certificate of title, on the grounds which, briefly restated. advert to respondent de Ocampo's alleged misrepresentations that the two parcels of land applied for by him in the land registration case were "different from the two parcels of land of the same lot numbers, technical descriptions and areas belonging to the Government, knowing such allegations to be false, the truth of the matter being that said parcels of land are the same property owned by the Government"; 26 that there was previous registration of the same parcels of land, Lots Nos. 817 and 2509, under the Torrens System in favor of Meerkamp and Company which later sold the same to Jalandoni who, in turn, gave the lots to the Bureau of Education as a legacy and that the Court of First Instance no longer had jurisdiction to decree again the registration of Lots Nos. 817 and 2509, in favor of respondent de Ocampo, in view of the earlier registration of the same lands infavor of Meerkamp and Company.

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Additionally, Republic claimed that its counsel was not given notice of de Ocampo's motion and the corresponding order dated September 16, 1965, for the issuance of the decree of registration and the issuance of the decree itself by the Land Registration Commission, in violation of its constitutional rights to due process", 27 that it has also been "in continuous peaceful, adverse, open and public owner and possessor, in good faith and with just title" of the lots "deriving the fruits and products of said properties and appropriating them to the purpose and purposes they were intended for"; 28 that they were in fact declared for tax purposes; 29 that on April 11, 1927, the lands were leased for ten (10) years but the lease was amended several times to extend the same; 30 that on September 17, 1964, Republic's counsel filed a "Petition for an Order to Produce the Original Documentary Exhibits and Submit Same to the NBI for Examination, 31 Which petition was communicated to de Ocampo's lawyers, Atty. Gemarino and Garingalao, earlier on September 7, 1964; that they did not object or state that the originals were burned or lost; that it was only on September 28, 1964 that de Ocampo's lawyers revealed for the first time in their "Manifestation and Reply" that the purported originals were burned in the house of Atty. Gemarino on May 16, 1963; 32 and that the "supposed originals were fake and their alleged burning was false and these pretenses were intentionally resorted to only to evade the examination of the spurious documents by the NBI and as camouflage to hide their fraudulent character. 33

On October 4, 1966, the trial court set, aside its order of June 6, 1966, dismissing the petition for relief, 34 having found Republic's motion for reconsideration well-founded, and scheduled December 1 and 2, 1966, for Republic's witnesses to testify, and likewise gave respondents, a chance to oppose the amended petition. Respondents and Republic filed their opposition 35 and reply; 36 respectively. Republic alleged in the said reply that "(T)he lands in question and their incomes are used exclusively for a public purpose: public education. 37

In a subsequent hearing on June 6, 1967, the trial court ordered Republic to present its evidence in the absence of respondents, who objected thereto for lack of jurisdiction, the parcels of land having been already registered in the name of respondent de Ocampo and in fact transferred to an alleged buyer in good faith, the other private respondent, Anglo.

On August 30, 1967, the trial court rendered its decision on the Amended Petition 38 against Republic, upon resolution of what it considered the "decisive" issue, i.e., that the allegations in the said petition did not constitute actual and extrinsic fraud which is the only ground available to review or reopen a decree in cadastral cases pursuant to Section 38 of Act 496. 39

On the other issues, the trial court found that it was through mistake, accident and excusable negligence that the decision of August 3, 1965 was not brought to the attention of Solicitor EmeritoSalva "as it was inadvertently clipped to the record of another case". 40 However, while the petition for relief

itself another case was filed within the reglementary period prescribed in Section 3, Rule 38, of the Rules of Court 41 the remedy of relief from judgment was no longer available since the decree, and later the title, were already issued in the name of respondent de Ocampo. 42 It also held that the amended petition was still legally available as it was filed within one (1) year after the issuance of the decree, pursuant to Section 38 of Act No. 496, "in case of actual fraud" and that it had jurisdiction to entertain the amended petition and to receive evidence in support thereof, 43 but it had to deny the relief prayed for on grounds already adverted to. In regard to respondent Anglo's claim that the petition for review was no longer tenable as against him because he was a purchaser in good faith, the trial court ruled that competent evidence to that effect should be submitted considering, among other things, that the case was pending when he acquired his interest. 44 Finally, it held that the fact that the Republic was not notified of the motion and the corresponding issuance of the decree and title was immaterial since petitions for issuance of decrees in cadastral cases are analogous to petitions for execution in ordinary cases and parties are not entitled to notice thereof as a matter of right. 45 Thus —

In the light of the decision of this Court dated August 3. 1965, Section 39 of Act No. 496 and the authorities cited ... this court is persuaded to conclude as it hereby holds, that the evidence adduced by the petitioner in this incident does not establish actual and constructive fraud which is the only kind of fraud that is considered a legal ground to review, reopen or set aside the decree which

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has already been issued in the name of Alfredo V. de Ocampo.

PREMISES CONSIDERED, the petition for Relief from Judgment and/or Review of Decree is hereby dismissed without pronouncement as to costs. 46

From the said decision, Republic appealed to the Court of Appeals, docketed therein as CA-G.R. Nos. 4083-84-R. Private respondents de Ocampo and Anglo moved to dismiss the appeal which was opposed by petitioner, Republic. 47 A supplemental motion to the same effect was later filed by respondent de Ocampo for failure of the record on appeal to show on its face that it was filed on time, 48 followed by an ex parte motion to consider the Solicitor General to have waived his right to oppose the said supplemental motion to dismiss and that the case be submitted for resolution. 49 A new party, SalvacionMarañon, sought to intervene in the case and also filed a motion to dismiss the appeal before respondent appellate court.

In its minute resolution of August 21, 1969, 50 the Court of Appeals resolved —

(1) To DISMISS ... the appeal ... for failure of the record on appeal to show on its face that the record on appeal was filed within the period fixed by the Rules (Secs. 3 & 6, Rule 41, Sec. 1[a] & [b), Rule 50, Rules of Court), it appearing that appellant's motion for extension of 20 days from October 14, 1967 to file the record on appeal was never granted by the lower court (there being no showing to that effect in the record on appeal); and even

if there was such an order granting it, the extension asked for would have expired on November 3, 1967 and, therefore, the record on appeal filed on November 9,1967 was filed six days late ...; and

(2) to DENY the motion to intervene of intervenorSalvacion Maranon following the doctrine enunciated in Hant, et al. vs. O'Leary, et al., page 993. At any rate, the purpose of intervening; which is to join the appellees in their motion to dismiss the appeal of the appellant, has already been served by the dismissal of the instant appeal.

On September 11, 1969, Republic filed a motion for reconsideration 51 but on November 14, 1969, the Court of Appeals —

RESOLVED TO DENY the said motion for reconsideration. Killings in the pertinent cases are equally applicable to the Republic of the Philippines where the latter is the appellant that recourse to 'the original records is immaterial because it is what appears in the record on appeal that is essential. 52

Hence, this appeal by certiorari on the following assignment of errors, i.e., that the Court of Appeals erred in not holding that — (1) prescription, the statute of limitations and laches do not lie against the Republic, as a sovereign state, and that, it is not bound or prejudiced by the faults or mistakes of its officers and employees, (2) the dismissal of Republic's appeal is not in accordance with the liberal construction of the Rules of Court and the promotion of its object to assist the parties in obtaining just, speedy and inexpensive determination of actions and proceedings; (3) the trial court has no

jurisdiction to entertain the application for land registration of Alfredo V. de Ocampo on the ground that Lots Nos. 817 and 2509 were already registered under the Torrens System before 1919; (4) the dismissal of Republic's appeal placed technicality over, substance; and (5) the dismissal of Republic's appeal will abet and promote land grabbing. 53

Private respondents in turn stress in their respective briefs, inter alia, (1) that Republic shed its immunity and sovereignty and assumed the garb of an ordinary private litigant when it initiated an action for forcible entry and detainer case over Lots Nos. 817 and 2509 against respondent de Ocampo. filed I s opposition in the land registration case, and instituted Civil Case No. 264 (6154); 54 (2) that Republic should comply with the mandatory and jurisdictional requirements of the rules on perfection of appeals, citing cases; 55 that there cannot be one set of Rules for ordinary private litigants, and another set for the State otherwise the set-up will result in the denial of due process and equal protection of law to private litigants as well as chaos in the administration of justice; 56 and (4) that public policy and sound practice demand that, at the risk of occasional errors, judgments of courts should become final at some definite date fixed by the, law. 57

The threshold and, in the ultimate analysis, the decisive issue raised by this petition is whether the dismissal by respondent. Court of Appeals of Republic's appeal from the decision of the trial court denying its Amended Petition, is not proper and should be set aside as contended by Republic, or

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correct and should be maintained, as argued by respondents. The issue — framed in the context of the suit's true significance to the parties involved in this protracted proceeding and in the light of the value the protagonists attach to the outcome of the litigation — may be stated thus-Should the government, represented by petitioner Republic not be permitted by respondent Court of Appeals to show that it stands Lo lose thru fraudulent machinations close to three hundred (300) hectares of prime sugar land to the private respondents who have allegedly secured their titles to these holdings long after the same parcels of land were already titled in the name of the original owner, Meerkamp and Company and, therefore, the trial court's action in directing the issuance of the title in the name of respondent de Ocampo is null and void ab initio and of no legal effect, simply because petitioner Republic failed to show in its record on appeal that it was perfected on time and that it actually filed its record on appeal six (6) days late?

Respondent Court of Appeals, in a very simplistic approach, which disregards the substantive merits of the appeal dismissed, the same on the grounds that the record on appeal did not show on its face that it was perfected on time, and, additionally, that even if it were to be assumed that the motion for extension of 20 days to file the record on appeal was indeed granted, the appeal was still not perfected on time because the record on appeal was filed November 9, six (6) days after November 3, 1967, when petitioner's requested extension expired.

If respondents' line of reasoning were to be upheld, the dismissal of the appeal may be sustained. For, as stated, in its notice of appeal filed on October 12, 1967, petitioner Republic received a copy of the decision of the trial court on September 14, 1967. 58 Therefore, it had until October 14, 1967 within which to file its record on appeal. The record on appeal does not show that the extension prayed for was granted, but the lower court in its order of December 4, 1967 approved the same, as there was no opposition to its approval. There is also no mention in the order approving the record on appeal as to whether or not it was filed on time. The record on appeal is, however, dated November 9,1967. Assuming then that this was also the actual filing date, and on the further assumption that the 20day extension was impliedly granted with its approval, it was still filed six (6) days late, after the requested extension expired on November 3, 1967. 59 And, as to the legal ground for the dismissal on the foregoing bases, this Court has repeatedly construed Section 6, Rule 41, of the Rules of Court 60 as mandatory and jurisdictional in nature, non-compliance with which justifies the dismissal of the appeal. 61

However, a consideration in depth of the unique and peculiar facts attendant to this case and the procedural and substantive implications of the dismissal of the appeal now sought to be reviewed and reconsidered; and a due and proper regard to the merits of the case rather than a fascile reliance on procedural rules, compel this Court to reverse and set aside the dismissal of Republic's appeal by respondent Court of Appeals for the following reasons, viz: (1) Should

Republic prove that the subject Lots Nos. 817 and 2509 were registered in favor of Meerkamp and Company before 1919, the trial court's decision decreeing again the same lots in the name of respondent de Ocampo in 1965 is null and void ab initio for lack of jurisdiction and a fatal infirmity necessarily attaches to the said decision; (2) There are strong and substantial allegations of fraudulent misrepresentations and machinations employed by respondent de Ocampo in securing his title Relevant to this is The express finding of the trial court that The Petition for Relief was filed within the reglementary period prescribed in Section 3, Rule 38 of the Rules of Court, and the Amended Petition was filed within one year from issuance of the decree. If the appeal is dismissed without considering its merits, the above periods will resumed to run and will lapse, and the reliefs sought herein will be forever foreclosed to Republic; (3) Assuming that respondents can invoke, the material data rule, and/or the fact that Republic's appeal was filed out of time because the record On appeal was submitted to the Court six (6) days beyond the requested extension of 20 days, it always in the power of this Court to suspend its rules or to except certain cases therefrom whenever courtervailing considerations so warrant; and (4) This Court, is not powerless to prevent gross miscarriage of Justice, which would follow if Republic's appeal is dismissed — since it stands to lose close to 300 hectares of prime sugar land already titled in its name and devoted to educational purposes — if it is true that the land registration court was without jurisdiction to issue a Second decree of registration in favor of respondent de Ocampo and, if it is

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also true that fraudulent misrepresentations and machinations attended respondent de Ocampo's application for registration and likewise prevented Republic from exposing the fake exhibits, on the basis of which he secured his title. 62

1. Specifically both Republic and respondents claim ownership over the same Lots Nos. 811 and 2509, hence, this controversy. If Republic's contentions are true that the said lots had been registered twice, with OCT No. 370 issued in favor of Meerkamp and Company before 1919 and another, OCT No. 576, issued in the name of respondent de Ocampo in 1965 — or some forty-six (46) years later — then the decision of the trial court, sitting as land registration court, is null and void ab initio and suffers from a fatal infirmity, which is also a ground for the review of a decree of registration. provided no innocent purchaser for value will be prejudiced. 63

It is very significant in this connection that respondent de Ocampo admitted the donation of Jalandoni in favor of the Bureau of Education, but averred that the lots so donated were titled (TCT No. 1251), 64 while Lots Nos. 817 and 2509 applied for by him in the land registration case were "unregistered. 65 Yet, both parties claim to be the owners of the same Lots Nos. 817 and 2509. Respondent de Ocampo also gave the area of the lots covered by TCT No. 1251, in the name of Jalandoni, as two million nine hundred and twelve thousand four hundred and seventy four (2,912,474) square meters, or 291 hectares plus. 66 Coincidentally, Lots Nos. 817 and 2509 claimed by Republic have

a total area of 289.47 hectares, 67 or only about two (2) hectares less. These factors, brought to light by respondent de Ocampo himself, cannot simply be ignored in reaching the conclusion that the disputed resolutions of respondent Court of Appeals be reversed.

It is also important to advert to the documentary exhibits adduced by Republic in the hearing of the Amended Petition below, one of which was a certification dated November 8, 1952 signed by the Register of Deeds of Negros Occidental, stating that on May 13, 1919, there was registered a sale executed by Meerkamp and Company in favor of Esteban Jalandoni and as a result OCT No, 370 in the name of the Company was cancelled and TCT No. 1251 was issued to Jalandoni; that TCT No. 1251 was later cancelled by virtue of the will of Jalandoni leaving the parcel of land to the then Bureau of Education; that TCT No. 6014 was correspondingly issued to the Bureau of Education; and that lease contracts were annotated in TCT No. 6014 in favor of Francisco Copper, executed by the Division Superintendent of Schools. 68 However, the above certification does not mention the lot numbers, and no certificates of title were exhibited in court, the incumbent Register of Deeds having declared that the titles could not be found in his office. 69

The trial court also made the express finding that the alleged deed of donation by Luis Mosquera in favor of respondent de Ocampo, dated November 10, 1911, acknowledged before one Notary Public John Boardman does not appear in his notarial book which is on file in the Bureau of Record Management,

Manila, from October 16, 191 1 to May, 1913. 70

The Provincial Assessor of Negros Occidental likewise issued a certification, dated November 29, 1966, stating that Lots Nos. 817 and 2509 were never declared in the name of Mosquera. 71 His later certification states that the said lots were assessed in the name of the Bureau of Education, and that the technical descriptions in the Bureau of Lands records show that the same lots were in the name of Meerkamp and Company. 72

Authorities are in agreement that a land registration court is without jurisdiction to decree again the registration of land already registered in an earlier registration case, and that the second decree entered for the same land is null and void. 73 If there is no valid and final judgment by the land registration court to speak of, then the filing of an admittedly late appeal from the decision denying the Amended Petition would be immaterial and of no moment, in so far as these proceedings are concerned in view of the congenitally fatal infirmity that attaches to the main decision. decreeing for the second time the registration of the same Lots Nos. 817 and 2509 in favor of respondent de Ocampo, despite an earlier registration in the name of Meerkamp and Company. Jurisprudence holds that the appellant's failure to perfect an appeal on time, "although ordinarily decisive, carries no persuasive force" and may be completely disregarded if the trial court acted without jurisdiction. 74 As held in United States v. Jayme, 75 lack of jurisdiction. la jurisdiction over the subject matter is fatal and may be raised at any stage

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of the proceedings. Jurisdiction 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 on the lack of such jurisdiction cannot be waived by the parties. The infirmity cannot be cured by silence, acquiescence, or even by express consent, 76 or by win of the parties. 77

In the interest of justice, which is the paramount consideration in all litigations, and especially considering the cloud surrounding the decision of the land registration court, as aforesaid, the more judicious course to follow is for respondent Court of Appeals to entertain Republic's appeal, not to dismiss it, so that if it finds the same to be meritorious, and the decision appealed from is reversed, the correct Identity of the lots that were donated to the then Bureau of Education (admitted by respondent de Ocampo), as well as those parcels of land applied for by said respondent in the land registration case, may already be ascertained once and for all, in the trial court below, and in this same proceeding, without Republic having to resort to relitigation to prove its claim. Further proceedings will not prejudice respondents. On the contrary, the cloud over their titles, OCT No. 576 and TCT No. 42217. issued in favor of respondents de Ocampo and Anglo, respectively, will be removed if Republic's claim is not true.

2. There is a serious charge, which is also crucial to the issue between the parties, that respondent de Ocampo used fraudulent misrepresentations and machinations in securing his title, Firstly, there was the

averment in his Answer in Civil case No, 264 (6154) for recovery of possession of the subject lots by Republic, which case was jointly tried with the land registration case,, that the properties alleged to have been donated by Jalandoni to the then Bureau of Education were "different" from Lots Nos. 817 and 2509, applied for by him, the Jalandoni holdings being "titled" lands, while Lots Nos. 817 and 2509 were "unregistered" lands. The then applicant de Ocampo even cited TCT No. 1251 of the Register of Deeds of Negros Occidental as the title covering the lots in the name of Jalandoni, further stating that the lands donated by him to the Bureau of Education had an area of 2,912,474 square meters, 78 or 291 hectares plus. Lots Nos. 817 and 2509 have a total area of 289.47 hectares 79 or a difference of only 2 hectares, more or less. The coincidence in area is highly significant since both claim to be the owners of the same lots. Secondly, certain documents which were presented as exhibits by respondent de Ocampo, on the basis of which he secured OCT 576 in his name, were withdrawn from the files of the trial court, and, thereafter were allegedly lost by fire. As a result, Republic's pending motion to have the said exhibits produced for examination of their genuineness by the NBI could not be made. Unless successfully traversed, the inference is strong that respondents did not want a full disclosure of the true nature of the same by the NBI and that the truth had been suppressed. The inference is also buttressed by the Republic's claim that despite their counsel's knowledge of Republic's intention to file the said motion which was orally communicated to them earlier, the alleged

loss was not revealed to Republic's counsel. 80

If the charge is true, there is the element of wilfull intent to deprive Republic of just rights which constitutes the essential characteristics of actual — as distinguished from legal — fraud. 81 As Justice Fernando stressed, "Nicolas v. Director of Lands 82 should erase any doubt as to the extreme judicial displeasure at this species of fraud of an applicant seeking to include as a part of the property to which title is sought land actually in possession of another. 83 This is very relevant in view of the denial of the Amended Petition which was premised on the conclusion that allegations in the said petition did not constitute actual and extrinsic fraud and which, according to the trial court, is "the only ground" available to review or reopen the decree. Of related significance is the express finding of the trial court that the original Petition for Relief was filed within the reglementary period pursuant to Section 3, Rule 38 of the Rules of Court, and the Amended Petition was filed within one year from issuance of the decree. For, if the appeal is dismissed — notwithstanding allegations of fraud which appear to be supported by the evidence adduced during the hearing of the Amended Petition below — the appealed decision will become final and executory, and the aforesaid periods will lapse, foreclosing forever to Republic the reliefs prayed for in the Amended Petition. Although Republic may seek to recover the lots in a different action that may still be legally available to it after the appeal is dismissed, that recourse will involve not only a re- litigation and, therefore. multiplicity of suits, but will also entail the risk

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that subject lots may be disposed of to innocent purchasers for value to put them beyond recovery. As it is, the other respondent, Anglo, has already intervened. alleging that he bought the same lots from respondent de Ocampo on January 6, 1966, and that TCT No. 42217 was in fact issued to him. 84 A new party, SalvacionMarañon, also sought to intervene in the case and filed in respondent Court of Appeals a motion to dismiss Republic's appeal before the said Court. 85

Finally, We held in Reyes, et al. v. Borbon, et al. 86 "(W)hen the attention of the Court of Land Registration is called to the fact that the same land has been registered in the name of two different persons, it is the duty of said court to order an investigation of that fact and that should be done even without requiring the parties to show that a fraud has been committed in during the double registration. When it is established that the same has been registered in the name of two different person the titile should remain in the name of the person securing the first registration." This Court further held that " (T)he very purpose of the Torrens System would be destroyed if the same land may be subsequently brought under a second action for registration. 87

3. The foregoing overriding considerations then — the alleged lack of jurisdiction and the alleged fraudulent misrepresentations and machinations, which, buttressed by strong evidence, can nullity the second registration and/or set aside OCT No. 576 issued to respondent de Ocampo — taken in relation with the procedural and substantive implications which could and would arise if

the appeal were dismissed, namely, the risk that the holdings may be transacted to third parties and the fact that Republic's action to recover tile holdings would give rise to multiplicity of suits — compel Us to conclude that the only recourse — in the interest of just and expeditious proceedings. considering that these have been pending for close to twenty (20) years now — is to suspend Our rules and/or to except this case from their operation. For when the operation of the Rules of will lead to an injustice We have, in justifiable instances, resorted to this extraordinary remedy to prevent it. 88 The Rules have been drafted with the primary objective of enhancing fair trials and expediting justice. 89 As a corollary, if their application and operation tend to subvert and defeat instead of promote and enhance it, their suspension is justified. In the words of Justice Antonio P. Barredo in his concurring opinion in Estrada v. Sto. Domingo, "(T)his Court, through the revered and eminent Mr. Justice Abad Santos, found occasion in the case of C Viuda de Ordoveza v. Raymundo, to lay down for recognition in this jurisdiction the sound rule in the administration of justice holding that 'it is always in the power of the court (Supreme Court) to suspend its own rules or to except a particular case from its operation, whenever the purposes of justice required it ... 90

Exceptions to the operation of the mandatory and jurisdictional character of the rules on perfection of appeals are to be noted in Sarmiento v. Salud, et al., 91 penned by Justice J.B. Reyes, Dequito v. Lopez 92 and Carillo v. Allied Workers Association of the Philippines 93 both written for the Court by

Justice E. M. Fernando, decided years after the Revised Rules of Court took effect in January, 1964. In the Sarmiento case, the late appeal was allowed on the ground of laches on the part of the appellees, the filing of the motion to dismiss having taken place six (6) years after the brief for appellees was filed, and after the case was submitted for decision. This, according to the Court, "constitutes a unique instance of laches without comparable precedent in the records of the Court. 94 The Dequito and Carillo cases, upon the other hand, took into account the fact that labor cases were involved. Justice Fernando expressly noted in the Dequito case that "in the light of the constitutional as well as codal and statutory mandates, there being an explicit command of protection to labor as well as the promotion of social justice," 95 the motion to dismiss the late appeal which was "filed much too late" hardly deserved sympathy or consideration. 96 In the Carillo case, no question whatsoever as to the late appeal was raised, hence, "it would seem that whatever right to contest the jurisdiction could have been availed of is by now no longer in existence. 97 Continuing, Justice Fernando stated that "Social justice would be a meaningless term if in a situation like the present, an element of rigidity would be affixed to procedural precepts and made to recover the matter. Flexibility should not be ruled out. Precisely, what is sought to be accomplished by such a fundamental principle expressly so declared by the Constitution is the effectiveness of the community's effort to assist the economically underprivileged." The responsibility to protect labor is incumbent "not only on the legislative and executive branches but also on the

Page 9 of 38

judiciary, to translate this pledge into a living reality. 98

While the above exceptions are predicated on different grounds, they nevertheless support the view that the rigid adherence to the rules on perfection of appeals may and should be relaxed where compelling reasons so warrant. The grounds invoked in this case — not only lack of jurisdiction but gross injustice itself — more than justify the exception — considering further that the delay in the perfection of the appeal involved six (6) days only.

4. Finally, enshrined in our legal and judicial annals is the maximum Chat no person should enrich himself at the expense or prejudice of others. 99 Courts should not be used as instruments Lo disregard this elemental and basic norm — which is the essence of justice and fair play. The whole trust of our laws on civil relations enjoins all those who come before the courts of justice to observe true faith and candor in their dealings with one another — the government included. 100 The commendable and determined efforts on the part of the citizenry to fashion a New Society rid of graft, corruption and the persistent malaise of land grabbing, will be set back, if the subject lots — consisting of close to 300 hectares which are devoted to educational purposes — have indeed been wrongfully titled to respondent de Ocampo, Happily, We can at this stage still prevent this, if true, by setting aside the dismissal of Republic's appeal and according the parties the opportunity in this proceeding, and without further need to re-litigate, to terminate this litigation, which has been pending for close to

twenty (20) long years — in fairness to both parties.

PREMISES CONSIDERED, the resolution of the Court of Appeals, dated August 21, 1969, dismissing the appeal, as well as its resolution of November 14, 1969, denying petitioner Republic's motion for reconsideration in CA G.R. Nos. 40683-84 are hereby SET ASIDE. The case is remanded to the said Court to give due course to and consider on its merits Republic's appeal. No costs.

Castro, C.J., Fernando, Muñoz Palma, Concepcion, Jr., Fernandez and Guerrero, JJ., concur.

Barredo, Makasiarand Antonio, JJ., took no part.

Separate Opinions

TEEHANKEE, J., concurring:

This case illustrated graphically once more 'the correctness of the Court's turning away from and setting aside of the rigid material data rule in the perfection of appeals and its adoption, in the interest of substantial justice as against mere technicality, of the liberal rule since the leading case of Berkenkotter vs. Court of Appeals 1 that "the mere absence of a formal order granting the motion for extension of time to file the record on appeal should not be fatal to the petitioner if the record on appeal filed within the requested extension period was approved by the court a quo.

Here, even conceding that the record on appeal was filed six (6) days later beyond the requested extension period, special considerations have been shown in the case at bar for the application of the principle of substantial justice as set out in the main opinion of Mr. Justice Santos. Among others, it should be stressed that the State's record On appeal was approved as per the trial court's Order of December 4, 1967 with the express statement that there was no opposition from respondents-appellees to its approval; and that the State's claims, that its e e preponderantly shows that the trial court had no jurisdiction to entertain the land registration application of respondent de Ocampo filed belatedly after forty-six years and with alleged fraudulent misrepresentations and machinations since the lots in question (some 289 hectares of prime sugar land) were long ago before 1919 already duly registered in the name of the predecessor-vendor of Esteban Jalandoni who subsequently bequeathed the same to the Bureau of Education exclusively for educational purposes, which were rejected by the trial court on erroneous grounds, raise a jurisdictional issue that should properly be reviewed and determined by the appellate court.

It should be further stressed that to uphold the appellate court's peremptory dismissal of the State's appeal would bar the State from "seeking again to recover the lots in a different action that may still be legally available to it after the appeal is dismissed" notwithstanding the main opinion's declaration to the effect 2 since the petitioner State would be foreclosed by the principle of

Page 10 of 38

res adjudicata from filing still another suit for the recovery of the lots in question. And the State itself in its comment of February 13, 1970 on respondents' motion to dismiss (filed through then Solicitor General, now a member of this Court, Associate Justice Felix Q. Antonio) expressly so admitted "that if the petition is dismissed, thereby sustaining the resolution of the Court of Appeals dismissing the appeal by the Government, then the latter would have no further remedy. Certainly, to lose a remedy resulting in unjust deprivation of one's property cannot be categorized except as substantial. 3

The precedent if Paulino vs. Court of Appeals 4 what re the Court ordered the giving of due course to an appeal notwithstanding that the same was admittedly filed two days beyond the reglementary period and had been therefore rejected by the appellate court is fully applicable to the case at bar. We cited therein inter alia the demands of substantial justice and the presence of special circumstances in this case) for giving due course to the appeal and reiterated that "(T)he underlying principle in the administration of justice and application of the rules is substantial justice and fair play. As restated by the Court in Obut vs. Court of Appeals, 5 (W)e cannot look with favor on a course of action which would place the administration of justice in a straight-jacket for then the result would be a poor kind of justice if there would be justice at all. Verily, judicial orders, such as the one subject of this petition, are issued to be obeyed, nonetheless a non-compliance is to be dealt with as the circumstances attending the case may warrant. What should guide judicial action is

the principle that a party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on technicalities.

As in the case of Carco Motor Sales, Inc. vs. of Appeals, 6 wherein we also set aside the appellate courts dismissal of an appeal for failure to file appellant's brief due to the fault and negligence of counsel's office secretary, we are herein persuaded that the higher interests of justice and fairness justify the setting aside of respondent court's peremptory dismissal of petitioner's appeal and that the exercise of the Court's "inherent right" to reinstate an appeal that was dismissed as the result of fraud, mistake or unavoidable casualty is fully justified under the circumstances of the case at bar.

Referring briefly to the view expressed that the State's record on appeal be remanded so that its appeal would cover not only the denial of its petition for relief but the lower court's adverse judgment on the merits, 7 it should be noted that as stated hereinafter the trial court in effect granted the petition for relief and reopened the case, setting aside its first adverse decision of August 3, 1965, (from which no appeal was taken), although it again rendered an adverse judgment against the State as per its decision of August 30, 1967, which is the subject of the State's appeal. The judgment of the Court has therefore properly ordered the reinstatement of the State's appeal and remanded the same to respondent Court of Appeals for determination on its merits without need of amending the record on appeal, since the

State's notice of appeal (as well as its pleadings and brier duly appealed from the trial court's decision of August 30, 1967 "on the ground that said decision is not in accordance with law and the evidence adduced in these cases. 8

One final word. The record shows a sorry lack of care and dedication to duty on the part of the staff of the State's counsel that almost cost the State by default the forfeiture and loss of the valuable lots involved, were it not for the special circumstances and the interests of substantial justice which have led the Court to set aside respondent court's summary dismissal of the appeal. The State's suit against respondents for recovery of the land was first dismissed by the trial court in its judgment of August 3, 1965 and although the State was duly served with copy thereof on August 13, 1965, it took no appeal therefrom since the docket clerk misfiled the same in another case and the period for appeal lapsed. 9 Fortunately, the State's petition for relief from judgment was eventually granted by the trial court which reopened the case and received additional evidence from the State, although ultimately it rendered its questioned judgment of August 30, 1967 again dismissing the State's suit. Here again, the appeal taken by the State appears to have been perfected late by six (6) days, which normally would have meant forfeiture of the right of appeal. The attention of the Solicitor General should be called to these acts of carelessness and neglect so that the proper remedial and administrative measures may be taken to avoid the recurrence thereof.

AQUINO, J., concurring:

Page 11 of 38

I concur in the well-written opinion of Justice Santos. I will even go farther. I vote for the remand of the case to the trial court so that the State can amend its record on appeal and appeal from the lower court's decision of August 3, 1965, dismissing its complaint for recovery of the possession of the disputed land and ordering the registration thereof in the name of Alfredo V. de Ocampo. The appeal from a judgment denying relief under Rule 38 includes the review of the judgment on the merits (Sec. 2, Rule 41, Rules of Court).

The ultimate issue is whether the land already registered as patrimonial property of the State (for the use of the Bureau of Public Schools), as allegedly shown in TCT No. 6014, can still be registered in the name of another person. My answer is that it cannot be done because section 46 of Act 496 provides that no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. The action to recover possession of registered land does not prescribe.

Separate Opinions

TEEHANKEE, J., concurring:

This case illustrated graphically once more 'the correctness of the Court's turning away from and setting aside of the rigid material data rule in the perfection of appeals and its adoption, in the interest of substantial justice as against mere technicality, of the liberal rule since the leading case of Berkenkotter vs. Court of Appeals 1 that "the mere absence of a formal order granting the motion for extension of time to file the record on appeal

should not be fatal to the petitioner if the record on appeal filed within the requested extension period was approved by the court a quo.

Here, even conceding that the record on appeal was filed six (6) days later beyond the requested extension period, special considerations have been shown in the case at bar for the application of the principle of substantial justice as set out in the main opinion of Mr. Justice Santos. Among others, it should be stressed that the State's record On appeal was approved as per the trial court's Order of December 4, 1967 with the express statement that there was no opposition from respondents-appellees to its approval; and that the State's claims, that its e e preponderantly shows that the trial court had no jurisdiction to entertain the land registration application of respondent de Ocampo filed belatedly after forty-six years and with alleged fraudulent misrepresentations and machinations since the lots in question (some 289 hectares of prime sugar land) were long ago before 1919 already duly registered in the name of the predecessor-vendor of Esteban Jalandoni who subsequently bequeathed the same to the Bureau of Education exclusively for educational purposes, which were rejected by the trial court on erroneous grounds, raise a jurisdictional issue that should properly be reviewed and determined by the appellate court.

It should be further stressed that to uphold the appellate court's peremptory dismissal of the State's appeal would bar the State from "seeking again to recover the lots in a

different action that may still be legally available to it after the appeal is dismissed" notwithstanding the main opinion's declaration to the effect 2 since the petitioner State would be foreclosed by the principle of res adjudicata from filing still another suit for the recovery of the lots in question. And the State itself in its comment of February 13, 1970 on respondents' motion to dismiss (filed through then Solicitor General, now a member of this Court, Associate Justice Felix Q. Antonio) expressly so admitted "that if the petition is dismissed, thereby sustaining the resolution of the Court of Appeals dismissing the appeal by the Government, then the latter would have no further remedy. Certainly, to lose a remedy resulting in unjust deprivation of one's property cannot be categorized except as substantial. 3

The precedent if Paulino vs. Court of Appeals 4 what re the Court ordered the giving of due course to an appeal notwithstanding that the same was admittedly filed two days beyond the reglementary period and had been therefore rejected by the appellate court is fully applicable to the case at bar. We cited therein inter alia the demands of substantial justice and the presence of special circumstances in this case) for giving due course to the appeal and reiterated that "(T)he underlying principle in the administration of justice and application of the rules is substantial justice and fair play. As restated by the Court in Obut vs. Court of Appeals, 5 (W)e cannot look with favor on a course of action which would place the administration of justice in a straight-jacket for then the result would be a poor kind of justice if there would be justice at all. Verily, judicial

Page 12 of 38

orders, such as the one subject of this petition, are issued to be obeyed, nonetheless a non-compliance is to be dealt with as the circumstances attending the case may warrant. What should guide judicial action is the principle that a party-litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on technicalities.

As in the case of Carco Motor Sales, Inc. vs. of Appeals, 6 wherein we also set aside the appellate courts dismissal of an appeal for failure to file.

G.R. No. 75919 May 7, 1987

MANCHESTER DEVELOPMENT CORPORATION, ET AL., petitioners,

vs.

COURT OF APPEALS, CITY LAND DEVELOPMENT CORPORATION, STEPHEN ROXAS, ANDREW LUISON, GRACE LUISON and JOSE DE MAISIP, respondents.

GANCAYCO, J.:

Acting on the motion for reconsideration of the resolution of the Second Division of January 28,1987 and another motion to refer the case to and to be heard in oral argument by the Court En Banc filed by petitioners, the motion to refer the case to the Court en banc is granted but the motion to set the case for oral argument is denied.

Petitioners in support of their contention that the filing fee must be assessed on the basis of the amended complaint cite the case of Magaspi vs. Ramolete. 1 They contend that the Court of Appeals erred in that the filing fee should be levied by considering the amount of damages sought in the original complaint.

The environmental facts of said case differ from the present in that —

1. The Magaspi case was an action for recovery of ownership and possession of a parcel of land with damages. 2 While the present case is an action for torts and damages and specific performance with prayer for temporary restraining order, etc. 3

2. In the Magaspi case, the prayer in the complaint seeks not only the annulment of title of the defendant to the property, the declaration of ownership and delivery of possession thereof to plaintiffs but also asks for the payment of actual moral, exemplary damages and attorney's fees arising therefrom in the amounts specified therein. 4 However, in the present case, the prayer is for the issuance of a writ of preliminary prohibitory injunction during the pendency of the action against the defendants' announced forfeiture of the sum of P3 Million paid by the plaintiffs for the property in question, to attach such property of defendants that maybe sufficient to satisfy any judgment that maybe rendered, and after hearing, to order defendants to execute a contract of purchase and sale of the subject property and annul defendants' illegal forfeiture of the money of plaintiff, ordering defendants jointly and severally to pay plaintiff actual, compensatory and exemplary damages as well as 25% of

said amounts as maybe proved during the trial as attorney's fees and declaring the tender of payment of the purchase price of plaintiff valid and producing the effect of payment and to make the injunction permanent. The amount of damages sought is not specified in the prayer although the body of the complaint alleges the total amount of over P78 Million as damages suffered by plaintiff. 5

3. Upon the filing of the complaint there was an honest difference of opinion as to the nature of the action in the Magaspi case. The complaint was considered as primarily an action for recovery of ownership and possession of a parcel of land. The damages stated were treated as merely to the main cause of action. Thus, the docket fee of only P60.00 and P10.00 for the sheriff's fee were paid. 6

In the present case there can be no such honest difference of opinion. As maybe gleaned from the allegations of the complaint as well as the designation thereof, it is both an action for damages and specific performance. The docket fee paid upon filing of complaint in the amount only of P410.00 by considering the action to be merely one for specific performance where the amount involved is not capable of pecuniary estimation is obviously erroneous. Although the total amount of damages sought is not stated in the prayer of the complaint yet it is spelled out in the body of the complaint totalling in the amount of P78,750,000.00 which should be the basis of assessment of the filing fee.

Page 13 of 38

4. When this under-re assessment of the filing fee in this case was brought to the attention of this Court together with similar other cases an investigation was immediately ordered by the Court. Meanwhile plaintiff through another counsel with leave of court filed an amended complaint on September 12, 1985 for the inclusion of Philips Wire and Cable Corporation as co-plaintiff and by emanating any mention of the amount of damages in the body of the complaint. The prayer in the original complaint was maintained. After this Court issued an order on October 15, 1985 ordering the re- assessment of the docket fee in the present case and other cases that were investigated, on November 12, 1985 the trial court directed plaintiffs to rectify the amended complaint by stating the amounts which they are asking for. It was only then that plaintiffs specified the amount of damages in the body of the complaint in the reduced amount of P10,000,000.00. 7 Still no amount of damages were specified in the prayer. Said amended complaint was admitted.

On the other hand, in the Magaspi case, the trial court ordered the plaintiffs to pay the amount of P3,104.00 as filing fee covering the damages alleged in the original complaint as it did not consider the damages to be merely an or incidental to the action for recovery of ownership and possession of real property. 8 An amended complaint was filed by plaintiff with leave of court to include the government of the Republic as defendant and reducing the amount of damages, and attorney's fees prayed for to P100,000.00. Said amended complaint was also admitted. 9

In the Magaspi case, the action was considered not only one for recovery of ownership but also for damages, so that the filing fee for the damages should be the basis of assessment. Although the payment of the docketing fee of P60.00 was found to be insufficient, nevertheless, it was held that since the payment was the result of an "honest difference of opinion as to the correct amount to be paid as docket fee" the court "had acquired jurisdiction over the case and the proceedings thereafter had were proper and regular." 10 Hence, as the amended complaint superseded the original complaint, the allegations of damages in the amended complaint should be the basis of the computation of the filing fee. 11

In the present case no such honest difference of opinion was possible as the allegations of the complaint, the designation and the prayer show clearly that it is an action for damages and specific performance. The docketing fee should be assessed by considering the amount of damages as alleged in the original complaint.

As reiterated in the Magaspi case the rule is well-settled "that a case is deemed filed only upon payment of the docket fee regardless of the actual date of filing in court . 12 Thus, in the present case the trial court did not acquire jurisdiction over the case by the payment of only P410.00 as docket fee. Neither can the amendment of the complaint thereby vest jurisdiction upon the Court. 13 For an legal purposes there is no such original complaint that was duly filed which could be amended. Consequently, the order admitting the amended complaint and all

subsequent proceedings and actions taken by the trial court are null and void.

The Court of Appeals therefore, aptly ruled in the present case that the basis of assessment of the docket fee should be the amount of damages sought in the original complaint and not in the amended complaint.

The Court cannot close this case without making the observation that it frowns at the practice of counsel who filed the original complaint in this case of omitting any specification of the amount of damages in the prayer although the amount of over P78 million is alleged in the body of the complaint. This is clearly intended for no other purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk in the assessment of the filing fee. This fraudulent practice was compounded when, even as this Court had taken cognizance of the anomaly and ordered an investigation, petitioner through another counsel filed an amended complaint, deleting all mention of the amount of damages being asked for in the body of the complaint. It was only when in obedience to the order of this Court of October 18, 1985, the trial court directed that the amount of damages be specified in the amended complaint, that petitioners' counsel wrote the damages sought in the much reduced amount of P10,000,000.00 in the body of the complaint but not in the prayer thereof. The design to avoid payment of the required docket fee is obvious.

The Court serves warning that it will take drastic action upon a repetition of this unethical practice.

Page 14 of 38

To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar pleadings should specify the amount of damages being prayed for not only in the body of the pleading but also in the prayer, and said damages shall be considered in the assessment of the filing fees in any case. Any pleading that fails to comply with this requirement shall not bib accepted nor admitted, or shall otherwise be expunged from the record.

The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much less the payment of the docket fee based on the amounts sought in the amended pleading. The ruling in the Magaspi case 14 in so far as it is inconsistent with this pronouncement is overturned and reversed.

WHEREFORE, the motion for reconsideration is denied for lack of merit.

SO ORDERED.

G.R. No. 85879 September 29, 1989

NG SOON, petitioner,

vs.

HON. ALOYSIUS ALDAY, REGIONAL TRIAL COURT, QUEZON CITY, BILLIE GAN AND CHINA BANKING CORPORATION, respondents.

MELENCIO-HERRERA, J.:

Applying literally the ruling on docket fees enunciated in Manchester Development Corporation vs. Court of Appeals (L-75919, May 7, 1987, 149 SCRA 562), respondent Judge, on 11 August 1988, ordered (1) that petitioner's Complaint below (in Civil Case No. Q-52489), for reconstitution of a savings account, and payment of damages and attorney's fees, be expunged; and (2) that the case be dismissed. He also denied, on 21 October 1988, the reconsideration sought by petitioner of that Order.

The aforementioned savings account was allegedly maintained with the China Banking Corporation (CBC) by Gan Bun Yaw, both of whom are respondents herein. Petitioner, Ng Soon, claims to be the latter's widow.

The pertinent portions of the Complaint and Prayer read as follows:

2. During his lifetime, Mr.Gan Bun Yaw opened Savings Account No. 17591-2 with CBC wherein he deposited P900,000.00 more or less.

3. Before his death on January 3, 1987 he lapsed into a coma until he finally took his last breath. But his passbook still showed a deposit of P900,000.00 more or less.

xxxxxxxxx

5. For almost three (3) long years, she looked for the deposit passbook with the help of her children to no avail.

xxxxxxxxx

7. She discovered further that aforesaid savings account was closed by defendant CBC on December 8, 1988. x xx.

8. She discovered finally that defendant Billie T. Gan connived and colluded with the officers and officials of CBC to withdraw all of the aforesaid savings account of Mr.Gan Bun Yaw by forging his signature. This has to be done because Mr.Gan Bun Yaw slipped into a comatose condition in the hospital and could not sign any withdrawal slip.

xxxxxxxxx

11. Due to the wanton and unfounded refusal and failure of defendants to heed her just and valid demands, she suffered actual damages in the form of missing money in aforesaid savings account and expenses of litigation.

12. Due also to the unfounded and malicious refusal of defendants to heed her just and valid demands, she suffered moral damages, the amount whereof she leaves to the discretion of the Court.

13. Due likewise to the unfounded and wanton refusal and failure of defendants to heed her just and valid demands, she suffered exemplary damages, the amount whereof she leaves to the discretion of the Court.

14. Due finally to the unfounded and wanton refusal and failure of defendants to heed her just and valid demands, she was constrained to hire the services of counsel, binding herself to pay the amount equivalent

Page 15 of 38

to twenty percent payable to her, thereby suffering to the tune thereof.

PRAYER

WHEREFORE, plaintiff respectfully prays that this Honorable Court render judgment:

1. Ordering defendants China Banking Corporation to reconstitute Savings Account No. 47591-2 in the name of Mr.Gan Bun Yaw in the amount of P900,000.00 with interest from December 8,1977 or ordering them both to pay her the principal and interest from December 9, 1977, jointly and severally.

2. Ordering both defendants to pay moral and exemplary damages of not less than P50,000.00.

3. Ordering both defendants to pay her attorney's fees equivalent to twenty percent of all amounts reconstituted or payable to her, but not less than P50,000.00.

She prays for such other and further relief to which she may be entitled in law and equity under the premises. [Emphasis supplied] (pp. 11-13, Rollo)

For the filing of the above Complaint, petitioner paid the sum of P3,600.00 as docket fees.

Respondent Billie Gan and the Bank, respectively, moved for the dismissal of the Complaint. Subsequently, respondent Gan, joined by the Bank, moved to expunge the said Complaint from the record for alleged non-payment of the required docket fees.

On 11 August 1988, respondent Judge issued the questioned Order granting the "Motion to Expunge Complaint." He explained:

It can thus be seen that while it can be considered at best as impliedly specifying the amount (namely, P900,000.00, more or less) of what is referred to in its par. 11 as 'missing money 'which apparently is the main part of the alleged actual damages), the body of the complaint does not specify the following, to wit: the amount of the rest of the alleged actual damages; the amount of the alleged moral damages; the amount of the alleged exemplary damages; and, the amount of the alleged attorney's fees. As regards the alleged attorney's fees, in particular, the clause 'the amount equivalent to twenty percent payable to her' is vague and indefinite. It leaves to guesswork the determination of the exact amount relative to which the 'twenty percent' shall be reckoned. Is it the amount of P900,000.00, more or less? Or is it the total amount of all the actual damages? Or is it the grand total amount of all the damages-actual, moral, and exemplary-'payable to her'?

As regards the prayer of the complaint, while it may be regarded as specific enough as to the principal sum of P900,000.00 as actual damages, it cannot be so regarded with respect to the amount of moral and exemplary damages (No. 2 of the prayer) and attorney's fees (No. 3 of the prayer); for, evidently, the phrase 'not less than P50,000.00' in each of Nos. 2 and 3 of the prayer merely fixes the minimum amount, but it does not mean that plaintiff is not praying

for an unspecified sum much higher than said minimum. And, again, the clause 'equivalent to twenty percent of all amounts reconstituted or payable to her' in No. 3 of the prayer is as vague and indefinite as the similar clause found in the complaint's body referred to earlier. What exactly is the amount relative to which the 'twenty percent' shall be determined? Is it the amount of P900,000.00, more or less? Or is it the total amount of all the actual damages? Or is it the grand total amount of all the damages-actual, moral, and exemplary-'payable to her'? Certainly, the great difference between any of these amounts, on the one hand, and the amount of P50,000.00 in the phrase 'not less than P50,000.00' in No. 3 of the prayer, on the other hand, is quite too obvious to need underscoring.

Needless to state, implicit in the obligation to specify is the duty to be clear and definite. A purported specification which is vague and indefinite obviously is no specification at all; indeed, it will serve no purpose other than to evade the payment of the correct filing fees by misleading the docket clerk in the assessment of the filing fees.

xxxxxxxxx

WHEREFORE, the Court hereby grants defendants' aforesaid 'MOTION TO EXPUNGE COMPLAINT and hereby denies plaintiffs aforesaid 'URGENT OMNIBUS MOTION (ETC.)' and 'OPPOSITION (ETC.)' inclusive of all the prayers contained therein and, accordingly, plaintiff's complaint herein is hereby deemed EXPUNGED from the record. Further, being rendered moot and academic as a result hereof, defendant Billie T. Gan's

Page 16 of 38

'MOTION TO DISMISS' dated April 25,1988 and defendant China Banking Corporations' 'MOTION TO DISMISS' dated May 25,1988 are hereby dismissed. (pp. 16-18, Rollo)

Petitioner's Motion for the reconsideration of the said Order having been denied, she asks for its review, more properly for a Writ of Certiorari.

The Petition is anchored on two grounds, namely:

1. The doctrine laid down in the Manchester case was incorrectly applied by respondent Judge; and

2. Respondent Judge acted with grave abuse of discretion when he ordered the Complaint expunged from the record although petitioner had paid the necessary filing fees.

During the pendency of this case, respondent Gan filed a Manifestation alleging, among others, that petitioner is an impostor and not the real Ng Soon, wife of Gan Bun Yaw, since the real Mrs.Gan Bun Yaw (Ng Soon) died on 29 July 1933, as shown by a Certificate issued on 27 April 1989 by, and bearing the seal of, the An Hai Municipal Government.

This allegation was, however, denied by petitioner in her "Sur-rejoinder to Manifestation" filed on 12 August 1989, to which respondent Gan has countered with a Reply on 9 September 1989.

We resolved to give due course to the Petition and dispensed with the submittal of

Memoranda, the issues having been thoroughly threshed out by the parties.

Upon the facts, the pleadings, and the law, we grant the Petition.

It is true that Manchester laid down the rule that all Complaints should specify the amount of damages prayed for not only in the body of the complaint but also in the prayer; that said damages shall be considered in the assessment of the filing fees in any case; and that any pleading that fails to comply with such requirement shall not be accepted nor admitted, or shall, otherwise, be expunged from the record.

While it may be that the body of petitioner's Complaint below was silent as to the exact amount of moral and exemplary damages, and attorney's fees, the prayer did specify the amount of not less than P50,000.00 as moral and exemplary damages, and not less than P50,000.00 as attorney's fees. These amounts were definite enough and enabled the Clerk of Court of the lower Court to compute the docket fees payable.

Similarly, the principal amount sought to be recovered as "missing money" was fixed at P900,000.00. The failure to state the rate of interest demanded was not fatal not only because it is the Courts which ultimately fix the same, but also because Rule 141, Section 5(a) of the Rules of Court, itemizing the filing fees, speaks of "the sum claimed, exclusive of interest." This clearly implies that the specification of the interest rate is not that indispensable.

Factually, therefore, not everything was left to "guesswork" as respondent Judge has opined. The sums claimed were ascertainable, sufficient enough to allow a computation pursuant to Rule 141, section 5(a).

Furthermore, contrary to the position taken by respondent Judge, the amounts claimed need not be initially stated with mathematical precision. The same Rule 141, section 5(a) (3rd paragraph), allows an appraisal "more or less." Thus:

In case the value of the property or estate or the sum claimed is less or more in accordance with the appraisal of the court, the difference of fee shall be refunded or paid as the case may be.

In other words, a final determination is still to be made by the Court, and the fees ultimately found to be payable will either be additionally paid by the party concerned or refunded to him, as the case may be. The above provision clearly allows an initial payment of the filing fees corresponding to the estimated amount of the claim subject to adjustment as to what later may be proved.

.... there is merit in petitioner's claim that the third paragraph of Rule 141, Section 5(a) clearly contemplates a situation where an amount is alleged or claimed in the complaint but is less or more than what is later proved. If what is proved is less than what was claimed, then a refund will be made; if more, additional fees will be exacted. Otherwise stated, what is subject to adjustment is the difference in the fee and not the whole amount (Pilipinas Shell Petroleum Corp., et

Page 17 of 38

als., vs. Court of Appeals, et als., G.R. No. 76119, April 10, 1989).

Significantly, too, the pattern in Manchester to defraud the Government of the docket fee due, the intent not to pay the same having been obvious not only in the filing of the original complaint but also in the filing of the second amended complaint, is patently absent in this case. Petitioner demonstrated her willingness to abide by the Rules by paying the assessed docket fee of P 3,600.00. She had also asked the lower Court to inform her of the deficiency, if any, but said Court did not heed her plea.

Additionally, in the case of Sun Insurance Office Ltd., et al., vs. Hon. Maximiano Asuncion et al. (G.R. Nos. 79937-38, February 13, 1989), this Court had already relaxed the Manchester rule when it held, inter alia,:

1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period (Italics ours).

In respect of the questioned Identity of petitioner, this is properly a matter falling within the competence of the Court a quo, this Court not being a trier of facts.

WHEREFORE, the assailed Orders of respondent Judge, dated 11 August 1988 and 21 October 1988, are SET ASIDE, and he is hereby directed to reinstate Civil Case No. Q-52489 for determination and proper disposition of the respective claims and rights of the parties, including the controversy as to the real identity of petitioner. No costs.

SO ORDERED.

G.R. No. 45155

CARMEN C. VIUDA DE ORDOVEZA, petitioner,

vs.

HONORIA RAYMUNDO, respondent.

ABAD SANTOS, J.:

Petitioner is the appellee and respondent the appellant in a case now pending on appeal in the Court of Appeals, entitled Domingo Ordoveza vs. HonoriaRaymundo, and numbered 44763 in the records of the court. The period for the filing of the appellant's brief in that case expired on March 20, 1936. On March 31, 1936 the Court of Appeals dismissed the appeal for failure of the appellant to file her brief within the time prescribed by the rules of the court, and ordered that after fifteen days the record of the case be remanded to the court below. On April 6, 1936 the appellant filed a petition for reconsideration of the order dismissing the appeal, which petition was denied on April 8, 1936. A second petition for reconsideration was filed by the appellant, and in view thereof

the Court of Appeals on April 14, 1936, passed the following resolution:

Upon consideration of the second petition of the attorneys for the appellant in case G. R. 44763, Domingo Ordoveza vs. HonoriaRaymundo, etc. praying that the resolution of this court of March 31, 1936, dismissing the appeal for failure to file their brief be reconsidered; in view of the reasons given in said petition and the special circumstances of the case, said resolution is hereby set aside and the appeal reinstated; provided, however, that the attorneys for the appellant shall file their printed brief within five days from notice hereof.

On April 17,1936 the appellee filed a motion praying that the resolution above quoted be reconsidered and set aside, which motion was denied.

Upon the foregoing state of facts, the appellee filed this petition for a writ of certiorari with a view to having declared null and void the order of the Court of Appeals restating the appeal.

Petitioner now contends (1) that the Court of Appeals had no power to reinstate the appeal because it lost jurisdiction of the case on April 5, 1936, in that fifteen days had already elapsed from March 20, 1936, the date when the period fixed for the filing of the appellant's brief expired; and (2) that granting that the Court of Appeals retained jurisdiction of the case, it had no authority to grant the appellant an additional period of five days within which to file her brief.

Page 18 of 38

By section 145-P of the Revised Administrative Code as amended by Commonwealth Act No. 3, and in virtue of the resolution adopted by the Court of Appeals on February 8, 1936, the rules of the Supreme Court governing the filing of briefs and the dismissal of appeals are applicable to cases cognizable by the Court of Appeals.

Rules 23 and 24 of the Supreme Court are pertinent to the consideration of the present petition. The rules read as follows:

23. Motions for extension of time for the filing of briefs must be presented before the expiration of the time mentioned in Rules 21 and 22, or within a time fixed by special order of the court. No more than one extension of time for the filing of briefs shall be allowed, and then only for good and sufficient cause shown, to be demonstrated by affidavit.

24. If the appellant, in any civil case, fails to serve his brief within the time prescribed by these rules the court may, on motion of the appellee and notice to the appellant, or on its own motion, dismiss the bill of exceptions or the appeal.

1. The first contention of the petitioner rests on the theory developed in his argument that upon the failure of the appellant to file her brief within the time prescribed by the rules of the court, her appeal became, ipso facto, dismissed. Consequently, he argues that at the expiration of the period of fifteen days from March 20, 1936, the Court of Appeals lost jurisdiction of the case, and had, therefore, no power to reinstate the appeal. This view finds no support in the rules of this court. Rule 24 above transcribed clearly

indicates the contrary view when it says that upon failure of the appellant to file his brief within the period prescribed by the rules, the court "may", on motion of the appellee and notice to the appellant, or its own motion, dismiss the bill of exceptions or the appeal. The use of the word "may" implies that the matter of dismissing the appeal or not rests within the sound discretion of the court, and that failure of the appellant to file his brief within the time prescribed by the rules does not have the effect of dismissing the appeal automatically. Viewed in this light, the period of fifteen days must be counted in the case under consideration not from March 20, 1936, but from March 31, 1936. Having been entered on April 14, 1936, the order reinstating the appeal came within such fifteen-day period.

2. Granted that the Court of Appeals still had jurisdiction of the case when it reinstated the appeal, it seem reasonable to conclude that it also had authority to grant the appellant an additional period of five days within which to file her brief. Rule 23 provides in specific terms that the court may by special order fix a time within which motions for extension of time for the filing of briefs must be presented. It would seem to be within the spirit of this rule to hold that the court may grant either the appellant or appellee an additional time for the filing of his brief even without any previous application therefor. Moreover, as the Supreme Court of the United States has aptly observed, "it is always in the power of the court to suspend its own rules, or to except a particular case from its operation, whenever the purposes of justice require it."

(U. S. vs. Breitling, 20 How., 252; 15 Law. ed., 900, 902.)

We conclude that the Court of Appeals had authority to reinstate the appeal in the aforesaid case numbered 44763 in its records, and to grant the appellant an additional period of file days within which to file her brief.

The petition for a writ of certiorari must be denied. So ordered.

[G.R. No. 141117. March 25, 2004]

UNITED PULP AND PAPER CO., INC., petitioner, vs. UNITED PULP AND PAPER CHAPTER-FEDERATION OF FREE WORKERS, respondent.

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Resolutions dated October 12, 1999[1] and December 10, 1999[2] of the Court of Appeals in CA-G.R. SP No. 55245, entitled United Pulp and Paper Co., Inc. vs. United Pulp and Paper Chapter-Federation of Free Workers.

The antecedent facts giving rise to the controversy at bar are as follows:

Sometime in July 1991, United Pulp and Paper Co., Inc., petitioner, implemented a Promotions Policy[3] that recognizes the excellent and meritorious work performance of deserving employees during the last twelve

Page 19 of 38

(12) months. The Promotions Policy sets forth the following guidelines:

VI. ADMINISTRATIVE GUIDELINES

1. Except in abnormal situations (subject to approval by the General Manager), promotions shall be made only if a vacancy in the next higher position occurs and Management has decided to fill-up such vacancy through approval of the Personnel Requisition form.

x xx

9. In case of union employees, the promotional increase shall be 5% compounded for every pay class jump. However, the resulting effect of 5% promotional increase shall not cause the promoted employees salary to exceed that of the lowest paid incumbent within first, the section, second, department, and third, division. If this constraint will result to a promotional increase of lower than 3% over his previous salary, the employee will receive an increase of 3%.

x x x.[4]

On April 1, 1998, TeodoricoSimbulan was promoted from Welder I to Welder II with the corresponding pay class (PC) movement from PC V to PC VIII.

For and in behalf of Simbulan, United Pulp and Paper Chapter-Federation of Free Workers, respondent, questioned the regularity or correctness of the salary increase granted by petitioner. Invoking Section 1, Article XVII of the collective

bargaining agreement (CBA),[5] respondent maintains that Simbulan is entitled to a 5% salary increase (for every pay class movement) because such salary increase does not exceed the salary rates of other incumbents. Respondent also contends that petitioner is guilty of discrimination against Simbulan since other employees, like Enrique Cruz and Joselito de Castro who were previously promoted, enjoy the 5% salary increase for their pay class movements.

The controversy was submitted to the grievance machinery, but the parties failed to reach an acceptable settlement.

Thus, the matter was elevated to a panel of Voluntary Arbitrators of the National Conciliation and Mediation Board (NCMB), Regional Branch No. III at San Fernando, Pampanga, docketed as NCMB-AC-583-RB3-10-024-98.

On July 1, 1999, the Voluntary Arbitrators rendered a Decision[6] partly reproduced as follows:

In light of all the foregoing, this Panel holds that the promotional increase in the case of union employees is 5% compounded for every pay class jump unless the effect of such increase will be such as to cause the promoted employees salary to exceed that of the lowest paid incumbent in the same position as that to which the employee is being promoted, in which case the promotional increase shall be limited to not less than 3%.

Consequently, in the case of the subject employee, TeodoricoSimbulan, since there is

no showing that, for the second and third jumps in his promotion on 1 April 1998, his salary would have exceeded that of the lowest paid incumbent in the pertinent position if granted a 5% promotional increase, he is entitled to a salary increase of 5%+5%+5%, compounded for each pay class, effective as of the said date.

WHEREFORE, respondent United Pulp and Paper Co., Inc. is hereby ordered to pay TeodoricoSimbulan the difference between the promotional increase of 5%+5%+5%, compounded for each pay class, and the salary increase be actually received as a result of his promotion, effective as of 1 April 1998.

The respondent is also directed to continue implementing the promotions policy, in appropriate cases, in the manner stated in this Decision.

SO ORDERED.

Petitioner filed a motion for reconsideration but was denied by the Voluntary Arbitrators in a Resolution[7] dated September 3, 1999.

On October 6, 1999, petitioner filed with the Court of Appeals a petition for review under Rule 43 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision and Resolution of the Voluntary Arbitrators.

In a Resolution dated October 12, 1999, the Appellate Court dismissed the petition outright for being insufficient in form, thus:

"1. The verification and certification of non-forum shopping was signed only by counsel

Page 20 of 38

for the petitioner corporation, rather than by a duly-authorized officer thereof;

2. The affidavit of service is inadequate, as the registry receipts evidencing mailing of copies of the petition to the respondent were not attached;

3. Absence of the mandatory written explanation required under Sec. 11, Rule 13, 1997 Rules of Civil Procedure to explain why personal service upon the respondents of copies of the petition was not resorted to.

The foregoing defects warrant an outright dismissal of the instant petition.

IN VIEW THEREOF, the Petition is hereby DENIED DUE COURSE and DISMISSED.

SO ORDERED.

On October 29, 1999, petitioner filed a motion for reconsideration but was denied by the Appellate Court in a Resolution dated December 10, 1999.

Hence, this petition for review on certiorari alleging that the Court of Appeals seriously erred in dismissing its petition for review on mere technicalities.

We agree with the Court of Appeals. Section 5, Rule 7 of the same Rules[8] provides that it is the plaintiff or principal party who shall certify under oath in the complaint or other initiatory pleading that he has not commenced any action involving the same issues in any court, tribunal or quasi-judicial agency.

Here, only petitioners counsel signed the certification against forum-shopping. There is no showing that he was authorized by the petitioner company to represent the latter and to sign the certification.

In Sy Chin vs. Court of Appeals,[9] we held that the petition is flawed as the certificate of non-forum shopping was signed only by counsel and not by the party. The rule requires that it should be the plaintiff or principal party who should sign the certification, otherwise, this requirement would easily be circumvented by the signature of every counsel representing corporate parties.[10]

Moreover, petitioners failure to attach with the petition a written explanation why the service or filing was not done personally violates Section 11, Rule 13 of the same Rules.[11] We have ruled that where no explanation is offered to justify the service of pleadings by other modes, the discretionary power of the court to expunge the pleading becomes mandatory. [12] Thus, the Court of Appeals correctly considered the petition as not having been filed, in view of petitioners failure to present a written explanation why it failed to effect personal service of its petition for review.

In Kowloon House/Willy Ng vs. Hon. Court of Appeals,[13] we held that (r)ules of procedure exist for a purpose, and to disregard such rules in the guise of liberal construction would be to defeat such purpose. Procedural rules are not to be disdained as mere technicalities. They may not be ignored to suit the convenience of a party. Adjective law ensures the effective enforcement of substantive rights

through the orderly and speedy administration of justice. Rules are not intended to hamper litigants or complicate litigation. But they help provide for a vital system of justice where suitors may be heard in the correct form and manner, at the prescribed time in a peaceful though adversarial confrontation before a judge whose authority litigants acknowledge. Public order and our system of justice are well served by a conscientious observance of the rules of procedure, particularly by government officials and agencies.

WHEREFORE, the petition is DENIED. Costs against the petitioner.

SO ORDERED.

G.R. No. L-53564 February 27, 1987

JUAN BAYANG, petitioner,

vs.

HON. COURT OF APPEALS and BENIGNO BIONG, respondents.

CRUZ, J.:

Sometime in November 1969, Juan Bayang filed a complaint for quieting of title with damages against BenignoBiong in the Court of First Instance of Surigao del Norte, Branch 1, docketed as Civil Case No. 1892. 1 In 1970, while the case was pending, Biong succeeded in dispossessing the plaintiff of the land in question and remained there until January 25, 1978. 2 On February 21, 1972, the case was decided in favor of Biong, but the Court of Appeals on December 8, 1977,

Page 21 of 38

reversed the trial court, declaring in the dispositive portion of its decision:

WHEREFORE, the judgment appealed from is reversed and appellants are hereby declared owner of the property in litigation, and defendant-appellee are (sic) hereby ordered to pay appellant the sum of P56.40 as the latter's share in the proceeds from the sale of the copra derived from the third harvest of coconuts from the same land, and P1,000.00 as attorney's fees, and costs of Litigation. 3

This decision became final on February 2, 1978.

On February 6, 1978, Bayang filed a second case, docketed as Civil Case No. 2589, with the CFI of Surigao del Norte, Branch II, seeking to recover from Biong the incomes earned from the same land from 1970 up to the quarterly incomes from 1978 until the said land was delivered to the plaintiff. 4 At the pre-trial conference held on July 10, 1978, the counsel for Bayang admitted that as of January 25, 1978, Biong had already surrendered possession of the land in question to Bayang. 5 On August 16, 1978, Biong filed a motion for summary judgment, reiterating the affirmative defense of res judicata raised in his answer dated April 12, 1978, insofar as it related to the incidents concerning the case prior to January 25, 1978. 6 An opposition to this motion was duly filed by Bayang. 7

The trial court, after considering the arguments of the parties, granted the motion and rendered a summary judgment on October 30, 1978. 8 The said decision was

sustained by the Court of Appeals, and Bayang is now before us in this petition for review by certiorari under Rule 45 of the Rules of Court.

His assignment of errors raises two basic submissions, to wit:

1. Civil Case No. 2589 should not have been decided by summary judgment.

2. The judgment in CA-G.R. No. 54720-R (appeal from judgment in Civil Case No. 1892) did not constitute res judicata as to bar Civil Case No. 2589.

Both contentions are incorrect. We rule for the respondents.

In its decision, the Court of Appeals quoted the following excerpt from Singleton v. Philippine Trust Co. 9 on the nature and functions of the summary judgment:

Summary judgment is one of the methods sanctioned in the present Rules of Court for a prompt disposition of civil actions wherein there exists no serious controversy. The procedure may be availed of not only by claimants, but also by defending parties who may be the object of unfounded claims. A motion for summary judgment assumes that scrutinizing of the facts will disclose that the issues presented by the pleadings need not be tried because they are so patently unsubstantial as not to be genuine issues, or that there is no genuine issue as to any material facts or where the facts appear undisputed and certain from the pleadings, depositions, admissions and affidavits.

We hold that there was no genuine or triable issue of fact raised by the parties, in view particularly of the affirmative defense of res judicata invoked by the private respondent. That defense is sustained.

A long line of decisions has consistently held that for res judicata to apply: a) the former judgment must be final; b) it must have been rendered by a court having jurisdiction over the subject matter and the parties; c) it must be a judgment on the merits; and d) there must be between the first case and the second case identity of parties, identity of subject matter and Identity of cause of action. 10

The decision in Civil Case No. 1892 became final and executory on February 2, 1978. There is no dispute that the trial court which rendered that decision had jurisdiction over the subject-matter and the parties to the proceeding. The case was tried on the merits. The parties to Civil Case No. 1892 and the subsequent Civil Case No. 2589 are the same petitioner and private respondent now before us.

The petitioner would draw a distinction between the land in dispute in Civil Case No. 1892 and the income from that land being claimed in Civil Case No. 2589. But that is in our view splitting hairs to split a cause of action. The subject-matter is essentially the same in both cases as the income is only a consequence or accessory of the disputed property. We cannot agree that there are involved here two causes of action calling for two separate cases. The claim for the income from the land was incidental to, and should

Page 22 of 38

have been raised by Bayang in his earlier claim for, ownership of the land.

We note that while the first case was pending, the private respondent, by the petitioner's own account, "succeeded in dispossessing" him of the disputed land 11 and that at the pretrial conference on Civil Case No. 2589, Bayang's counsel admitted that Biong had vacated the said property as of January 25, 1978. 12 This means that from 1970 to the date the respondent surrendered the property in 1978, Biong was presumably collecting and enjoying the income therefrom to the exclusion of the petitioner.

Civil Case No. 1892 was commenced in November 1969 and was finally decided only on February 2, 1978. The private respondent entered the disputed property in 1970 and left it only in 1978. For about seven years, therefore, the petitioner made no move at all to amend his complaint to include a claim for the income supposedly received by the private respondent during that period.

Under Rule 10, Section 6, of the Rules of Court.

Sec. 6. Matters subject of supplemental pleadings. — Upon motion of a party the court may, upon reasonable notice and upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions, occurrence or events which have happened since the date of the pleading sought to be supplemented. If the court deems it advisable that the adverse party should plead thereto, it shall so order, specifying the time therefor.

In the case of Jalandoni v. Martin-Guanzon, 13 this Court declared through Justice J.B.L. Reyes:

As to the value of the plaintiff's share in the products of the land during the time that the former action was pending (which are the damages claimed under the second cause of action), their recovery is now barred by the previous judgment. These damages are but the result of the original cause of action, viz., the continuing refusal by defendants in 1941 to recognize the plaintiff's right to an interest in the property. In the same way that plaintiffs claimed for their share of the produce from 1941 to 1947, these later damages could have been claimed in the first action, either in the original camplaint (for their existence could be anticipated when the first complaint was filed) or else by supplemental pleading. To allow them to be recovered by subsequent suit would be a violation of the rule against multiplicity of suits, and specifically of sections 3 and 4 of Rules 2 of the Rules of Court, against the splitting of causes of action, since these damages spring from the same cause of action that was pleading (sic) in the former case No. 573 between the same parties (Blossom & Co., Inc. v. Manila Gas Corporation, 55 Phil. 226; Santos v. Moir, 36 Phil. 350; Pascua v. Sideco 24 Phil. 26; Bachrach Motor Co. v. Icarangal 68 Phil. 287).

And in another case, 14 the same jurist declared:

Urtula, as defendant in the expropriation case, could have raised the matter of interest before the trial court even if there had been no actual taking yet by the Republic and the

said court could have included the payment of interest in its judgment but conditioned upon the actual taking, because the rate of interest upon the amount of just compensation (6%) is a known factor, and it can reasonably be expected that at some future time, the expropriator would take possession of the property, though the date be not fixed. In this way, multiple suits would be avoided. Moreover, nothing prevented appellee from calling the attention of the appellate courts (even by motion to reconsider before judgment became final) to the subsequent taking of possession by the condemnor, and asking for allowance of interest on the indemnity since that followed the taking as a matter of course, and raised no issue requiring remand of the records to the Court of origin.

As the issue of interest could have been raised in the former case but was not raised, res judicata blocks the recovery of interest in the present case. (Tejedor vs. Palet, 61 Phil. 494; Phil. Engineering Corp., et al. vs. Ceniza, etc., et al., L-17834, 29 Sept. 1962). It is settled that a former judgment constitutes a bar, as between the parties, not only as to matters expressly adjudged, but all matters that could have been adjudged at the time (Rule 39, sec. 49; Corda vs. Maglinti L-17476, November 30, 1961; Rodriguez vs. Tan, 48 Off. Gaz. 3330).

Clearly, then, Civil Case No. 2589 is barred by the previous judgment in Civil Case No. 1892. This being so, it should follow that the trial judge committed no grave abuse of discretion in deciding the latter case by summary judgment.

Page 23 of 38

We are not unmindful of the argument that affirmance of the challenged decision of the respondent court will result in the unjust enrichment of Biong at the expense of Bayang. This assumes, of course, that the petitioner could have proved his right to the income he now claims belatedly. The point is that he did not make the proper claim at the proper time and in the proper proceedings, and he cannot do it now. Whatever right he might have had is now deemed waived because of his neglect.

Nemodebetbisvexare pro unaeteademcausa. This has to be so if litigants are to be spared the annoyance, anxiety and expense that could otherwise be inflicted upon them endlessly by capricious, malicious or vindictive suitors.

WHEREFORE, the petition is dismiss and the appealed decision is affirmed. Costs against the petitioner.

SO ORDERED.

G.R. No. L-32958 November 8, 1930

BLOSSOM AND COMPANY, INC., plaintiff-appellant,

vs.

MANILA GAS CORPORATION, defendant-appellee.

STATEMENT

In its complaint filed March 3, 1927, the plaintiff alleges that on September 10, 1918, it entered into a contract with the defendant in

which the plaintiff promised and undertook to purchase and receive from the defendant and the defendant agreed to sell and deliver to the plaintiff, for a period of four years, three tons of water gas tar per month from September to January 1, 1919 and twenty tons per month after January 1, 1919, for the remaining period of the contract; one-half ton of coal gas tar a month from September to January 1, 1919, and six tons per month after January 1, 1919, for the remainder of the contract, delivery to be made at the plant of the defendant in the City of Manila, without containers and at the price of P65 per ton for each kind of gas tar, it being agreed that this price should prevail only so long as the raw materials — coal and crude oil —used by the defendant in the manufacture of gas should cost the defendant the same price as that prevailing at the time of the contract, and that in the event of an increase or decrease in the cost of raw material there would be a corresponding increase or decrease in the price of the tar. That on January 31, 1919, this contract was amended so that it should continue to remain in force for a period of ten years from January 1, 1919, and it was agreed that the plaintiff should not be obliged to take the qualities of the tars required during the year 1919, but that it might purchase tars in such quantities as it could use to advantage at the stipulated price. That after the year 1919 the plaintiff would take at least the quantities specified in the contract of September 10, 1918, to be taken from and after January 1, 1919, and that at its option it would have the right to take any quantity of water gas tar in excess of the minimum quantity specified in that contract and up to the total amount of output of that tar of

defendant's plant and also to take any quantity of coal gas tar in excess of the minimum quantity specified in that contract and up to 50 per cent of defendant's entire output of coal gas tar, and that by giving the defendant ninety days' notice, it would have the right at its option to take the entire output of defendant's coal gas tar, except such as it might need for its own use in and about its plant. That in consideration of this modification of the contract of September 10, 1918, plaintiff agreed to purchase from the defendant of certain piece of land lying adjacent to its plant at the price of P5 per square meter, the proof of which is evidenced by Exhibit C. That pursuant to Exhibit C, defendant sold and conveyed the land to the plaintiff which in turn executed a mortgage thereon to the defendant for P17,140.20, to secure the payment of the balance of the purchase price.

It is then alleged:

VIII. That about the last part of July, 1920 the defendant herein, the Manila Gas Corporation willfully, and deliberately breached its said contract, Exhibit C, with the plaintiff by ceasing to deliver any coal and water gas tar to it thereunder solely because of the increased price of its tar products and its desire to secure better prices therefor than plaintiff was obliged to pay to it, notwithstanding the frequent and urgent demands made by the plaintiff upon it to comply with its aforesaid contract by continuing to deliver the coal and water gas tar to the plaintiff thereunder, but the said defendant flatly refused to make any deliveries under said contract, and finally on

Page 24 of 38

November 23, 1923, the plaintiff was forced to commence action against the defendant herein in the Court of First Instance of Manila, being case No. 25352, of that court entitled 'Blossom & Co., plaintiff, vs. Manila Gas Corporation, defendant,' to recover the damages which it had up to that time suffered by reason of such flagrant violation of said contract on the part of the defendant herein, and to obtain the specific performance of the said contract and after due trial of that action, judgment was entered therein in favor of the plaintiff herein and against the said defendant, the Manila Gas Corporation, for the sum of P26,119.08, as the damages suffered by this plaintiff by the defendant's breach of said contract from July, 1920, up to and including September, 1923, with legal interest thereon from November 23, 1923, and for the costs but the court refused to order the said defendant to resume the delivery of the coal and water gas tar to the plaintiff under said contract, but left the plaintiff with its remedy for damages against said defendant for the subsequent breaches of said contract, which said decision, as shown by the copy attached hereto as Exhibit G, and made a part hereof, was affirmed by our Supreme Court on March 3, 1926;

IX. That after the defendant had willfully and deliberately violated its said contract as herein-before alleged, and the plaintiff suffered great damage by reason thereof, the plaintiff claimed the right to off- set its damages against the balance due from it to said defendant on account of the purchase of said land from the defendant, and immediately thereupon and notwithstanding said defendant was justly indebted to the

plaintiff at that time as shown by the judgment of the Court Exhibit G, in more that four times the amount due to it from the plaintiff, the said defendant caused to be presented against the plaintiff a foreclosure action, known as the Manila Gas Corporation versus Blossom & Company, No. 24267, of the Court of First Instance of Manila, and obtained judgment therein ordering that Blossom & Company pay the last installment and interest due on said land or else the land and improvements placed thereon by the plaintiff would be sold as provided by law in such cases to satisfy the same, and the said defendant proceeded with the sale of said property under said judgment and did everything in its power to sell the same for the sole purpose of crushing and destroying the plaintiff's business and thus rendering it impossible for the plaintiff herein to continue with its said contract in the event that said defendant might in the future consider it more profitable to resume performance of the same, but fortunately the plaintiff was able to redeem its property as well as to comply with its contract and continued demanding that the defendant performed its said contract and deliver to it the coal and water gas tar required thereby.

That the defendant made no deliveries under its contract, Exhibit C, from July, 1920 to March 26, 1926, or until after the Supreme Court affirmed the judgment of the lower court for damages in the sum of P26, 119.08. 1

It is then alleged that:

. . . On March 26, 1926 the said defendant offered to resume delivery to the plaintiff from that date of the minimum monthly quantities of tars stated in its contract ,and the plaintiff

believing that the said defendant was at least going to try to act in good faith in the further performance of its said contract, commenced to accept deliveries of said tars from it, and at once ascertained that the said defendant was deliberately charging it prices much higher than the contract price, and while the plaintiff accepted deliveries of the minimum quantities of tars stated in said contract up to and including January, 1927, (although it had demanded deliveries of larger quantities thereunder, as hereinafter alleged) and paid the increased prices demanded by the defendant, in the belief that it was its duty to minimize the damages as much as possible which the defendant would be required to pay to it by reason of its violation of said contract, it has in all cases done so under protest and with the express reservation of the right to demand from the said defendant an adjustment of the prices charged in violation of its contract, and the right to the payment of the losses which it had and would suffer by reason of its refusal to make additional deliveries under said contract, and it also has continuously demanded that the said defendant furnish to it statements supported by its invoices showing the cost prices if its raw materials — coal and crude oil — upon which the contract price of the tars in question is fixed, which is the only way the plaintiff has to calculate the true price of said tars, but said defendant has and still refuses to furnish such information, and will continue to refuse to do so, unless ordered to furnish such information to the plaintiff by the court, and the plaintiff believes from the information which it now has and so alleges that the said defendant has overcharged it on the deliveries of said tars mentioned in the sum of at least P10,000,

Page 25 of 38

all in violation of the rights of the plaintiff under its said contract with the defendant.

That on January 31, 1926 and pursuant to Exhibit C. plaintiff notified the defendant in writing that commencing with the month of August, 1926 it desired to take delivery of 50 per cent of defendant's coal tar production for that month and that on November 1, 1926, it desired to take the entire output of defendant's coal gas tar, but that the defendant refused and still refuses to make such deliveries unless plaintiff would take all of its water gas tar production with the desired quantity of coal gas tar which refusal was a plain violation of the contract. That on January 29, 1927, and in accord with Exhibit C, plaintiff notified the defendant in writing that within ninety days after the initial delivery to it of its total coal gas tar production or in February, 1927, it would require 50 per cent of its total water gas tar production and that in April 1927, it would require the total output of the defendant of both coal and water gas tars, and that it refused to make either of such deliveries.

It is then alleged:

XIV. That as shown by the foregoing allegations of this complaint, it is apparent that notwithstanding the plaintiff in this case has at all times faithfully performed all the terms and conditions of said contract, Exhibit C, on its part of be performed, and has at all times and is now ready, able and willing to accept and pay for the deliveries of said coal and water gas tars required by said contract and the notices given pursuant thereto, the said defendant, the Manila Gas Corporation, does not intend to comply with its said

contract, Exhibit C, and deliver to the plaintiff at the times and under the terms and conditions stated therein the quantities of coal and water gas tars required by said contract, and the several notices given pursuant thereto, and that it is useless for the plaintiff to insist further upon its performance of the said contract, and for that reason he only feasible course for the plaintiff to pursue is to ask the court for the rescission of said contract and for the full damages which the plaintiff has suffered from September, 1923, and will suffer for the remainder of said contract by reason of the defendant's failure and refusal to perform the same, and the plaintiff has so notified the said defendant.

That since September, 1923, by reason of the bad faith of the defendant, the plaintiff has been damaged in the sum of P300,000, for which it prays a corresponding judgment, and that the contract, Exhibit C, be rescinded and declared void and without force and effect.

After the filing and overruling of its demurrer, the defendant filed an answer in the nature of a general and specific denial and on April 10, 1928, and upon stipulation of the parties, the court appointed W. W. Larkin referee, "to take the evidence and, upon completion of the trial, to report his findings of law and fact to the court."

July 18, 1928, the defendant filed an amended answer in which it alleged as an affirmative defense, first, that the complaint does not state facts sufficient to constitute cause of action the reason that a prior adjudication has been had of all the issues involved in this action, and, second, "that on or about the 16th day of June, 1925, in an

action brought in the Court of First Instance of the City on Manila, Philippine Islands, before the Honorable Geo. R. Harvey, Judge, by Blossom & Company, plaintiff, vs. Manila Gas Corporation, defendant, being civil case No. 25353, of said court, for the same cause of action as that set fourth in the complaint herein, said plaintiff recovered judgment upon the merits thereof, against said defendant decreeing a breach of the contract sued upon herein, and awarding damages therefor in the sum of P26,119.08 with legal interest from November 23, 1923, and costs of suit, which judgment was upon appeal affirmed by the Supreme Court of the Philippine Islands, in case G. R. No. 24777 of said court, on the 3d day of March, 1926 and reported in volume 48 Philippines Reports at page 848," and it prays that plaintiff's complaint be dismissed with costs.

After the evidence was taken the referee made an exhaustive report of sixty-pages in which he found that the plaintiff was entitled to P56,901.53 damages, with legal interest from the date of the filing on the complaint, to which both parties filed numerous exceptions

In its decision the court says:

Incidental references have been made to the referee's report. It was admirably prepared. Leaving aside the question of damages and the facts upon which the referee assessed them, the facts are not in dispute — at least not in serious dispute. They appear in the documentary evidence and this decision is based upon documents introduced into evidence by plaintiff. If I could have agreed with the referee in respect to the question of law, I should have approved his

Page 26 of 38

report in toto. If defendant is liable for the damages accruing from November 23, 1923, the date the first complaint was filed, to April 1st, 1926, the date of resumption of relations; and if defendant, after such resumption of relations, again violated the contract, the damages assessed by the referee, are, to my way of thinking, as fair as could be estimated. He went to tremendous pains in figuring out the details upon which he based his decision. Unfortunately, I cannot agree with his legal conclusions and the report is set aside except wherein specifically approved.

It is unnecessary to resolve specifically the many exceptions made by both partied to the referee's report. It would take much time to do so. Much time has already been spent in preparing this decision. Since both parties have informed me that in case of adverse judgment ,and appeal would be taken, I desire to conclude the case so that delay will be avoided.

Let judgment be entered awarding damages to plaintiff in the sum of P2,219.60, with costs.

From which plaintiff only appealed and assigns twenty-four different errors, of which the following are material to this opinion:

I. The trial court erred in holding that this suit in so far as the damages from November, 1923, to March 31, 1926, areconcerned , is res adjudicata.

II. The trial court erred in holding that the defendant repudiated the contract in question as a whole, and that the plaintiff when it brought its first suit to collect damages had

already elected and consented to the dissolution of the contract, and its choice once made, being final, it was estopped to claim that the contract was alive when that suit was brought.

x xxxxxxxx

VII. The trial court erred in refusing to sustain plaintiff's third exception to the legal interpretation placed on the contract in this case by the referee with reference to quantity of tars and his conclusion with respect to the terms thereof that:

"1. Plaintiff must take and defendant must deliver either the minimum or maximum quantity of water gas tar and not any quantity from the minimum to the maximum and/or

"2. Plaintiff must take either the minimum and any quantity up to fifty per cent of entire output of coal gas tar.

"3. With ninety days' notice by plaintiff to defendant the former must take and the latter must deliver total output of both tars, except such as might be needed by defendant for use in and about its plants and not any quantity from the minimum up to total output of both tars." (See page 47, Referee's report.)

And in holding that the option contained in said contract, taking into consideration the purposes of both parties in entering into the contract, was a claimed by defendant: all the water gas tar and 50 per cent of the coal gas tar upon immediate notice and all tars upon ninety day's notice.

VIII. The trial court erred in refusing to sustain plaintiff's fourth exception to the finding and conclusion of the referee that from the correspondence between the parties it was apparent that plaintiff did not make a right use of its option, and that the letter of June 25, 1926, and the subsequent demands, with exception of the letter of July 31, 1926, were not made in pursuance to the terms of the contract, and that defendant had no liability in refusing to comply therewith, and in allowing plaintiff damages only for the failure of the defendant to deliver quantities shown in Exhibits Ref. 21 and 22. (See pages 51, 52, Referee's report.)

IX. The trial court erred in finding and holding that the demands of plaintiff for additional tars under its contract with the defendant were extravagant and not made in good faith, and that when it wrote to defendant that it desired maximum quantities of coal gas tars and only minimum of water gas tars, but with the reservation of going back to minimum quantities of both at any time it chose, it announced its intention f breaching the contract, and defendant was under no obligation to deliver maximum quantities of either tars, and since this was the efficient cause of the failure of defendant to deliver or plaintiff to accept tars, the blame is attribute to plaintiff, and it cannot recover for a rescission.

x xxxxxxxx

XXIII. The trial court erred in refusing to sustain plaintiff's seventeenth exception to the finding and conclusion of the referee that the plaintiff is entitled to recover from the defendant only the following sums:

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Water gas tar (Exhibit Ref. 21) P38,134.60

Coal gas tar (Exhibit Ref. 22) 16,547.33

Overcharges on deliveries (Exhibit Ref. 23) 2,219.60

or a total of 56,901.53

with interest, and in not awarding to the plaintiff as damages in this case the sum of P319,253.40, with legal interest thereon from the date of filing the complaint in this case, in the manner and form computed but it, and in awarding damages to the plaintiff for the sum of only P2,219.60. with costs.

x xxxxxxxx

JOHNS, J.:

In this action plaintiff seeks to recover damages from the defendant which it claims to have sustained after September, 1923, arising from, and growing out of, its original contract of September 10, 1918, as modified on January 1, 1919, to continue for a period of ten years from that date.

In paragraph VIII of its complaint, plaintiff alleges that about the last part of July, 1920, the defendant "willfully and deliberately breached its said contract," and that it "flatly refused to make any deliveries under said contract, and finally on November 23, 1923," it was forced to commence action in the Court of First Instance against the defendant known as case No. 25352, to recover the damages which it had then sustained by reason of such flagrant violation of said contract on the part

of the defendant, in which judgment was rendered in favor of the plaintiff and against the defendant for P26,1119.08, as damages suffered by this plaintiff by the defendant's breach of said contract from July 1920, up to and including September, 1923, with legal interest thereon from November 23, 1923, and for the costs," in which the court refused to order the defendant to resume the delivery of the coal and water gas tar to the plaintiff, in accord with said contract, but left it with its remedy for damages against the defendant for any subsequent breaches of the contract. A copy of that judgment, which was later affirmed by this court, is attached to, marked Exhibit G, and made a part of, the complaint in this action.

In their respective briefs, opposing counsel have much to say about the purpose and intent of the judgment, and it is vigorously asserted that it was never intended that it should be or become a bar to another action by the plaintiff to recover any damages it may have sustained after September, 1923, during the remainder of the ten-year period of that contract. Be that as it may, it must be conceded that the question as to what would be the legal force and effect of that judgment in that case was never presented to, or decided by, the lower court or this court. In the very nature of things, neither court in that case would have the power to pass upon or decided the legal force and effect of its own judgment, for the simple reason that it would be premature and outside of the issues of any pleading, and could not be raised or presented until after the judgment became final and then only by an appropriate plea, as in this case.

Plaintiff specifically alleges that the defendant willfully and deliverately breached the contract and "flatly refused to make any deliveries under said contract," by reason of. which it was forced to and commenced its former action in which it was awarded P26,119.08 damages against the defendant by reason of its breach of the contract from July, 1920, to September, 1923.

In the final analysis, plaintiff in this action seeks to recover damages growing out of, and arising from, other and different breaches of that same contract after November, 1923, for the remainder of the ten-year period, and the question is thus squarely presented as to whether the rendition of the former judgment is a bar to the right of the plaintiff to recover damages from and after September, 1923, arising from, and growing out of, breaches of the original contract of September 10, 1918, as modified on January 1, 1919. That is to say, whether the plaintiff, in a former action, having recovered judgment for the damages which it sustained by reason of a breach of its contract by the defendant up to September, 1923, can now in this action recover damages it may have sustained after September, 1923, arising from, and growing out of, a breach of the same contract, upon and for which it recovered its judgment in the former action.

In the former action in which the judgment was rendered, it is alleged in the compliant:

"7. That about the last part of July or the first part of August, 1920, the Manila Gas Corporation, the defendant herein, without any cause ceased delivering coal and water gas tar to the plaintiff herein; and that from that time up to the present date, the plaintiff

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corporation, Blossom & Company, has frequently and urgently demanded of the defendant, the Manila Gas Corporation, that it comply with its aforesaid contract Exhibit A by continuing to deliver coal and water gas tar to this plaintiff — but that the said defendant has refused and still refuses, to deliver to the plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A, since the said month of July 1920.

"9. That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living up to its said contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of the same, be delivering to this plaintiff the coal and water gas tar mentioned in the said Exhibit A, has caused to this plaintiff great and irreparable damages amounting to the sum total of one hundred twenty- four thousand eight hundred forty eight pesos and seventy centavos (P124,848,70);and that the said defendant corporation has refused, and still refuses, to pay to this plaintiff the whole or any part of the aforesaid sum.

"10. That the said contract Exhibit A, was to be in force until January 1, 1929, that is to say ten (10) years counted from January 1, 1929; and that unless the defendant again commence to furnish and supply this plaintiff with coal and water gas tar, as provided for in the said contract Exhibit A, the damages already suffered by this plaintiff will continually increase and become larger and larger in the course of years preceding the termination of the said contract on January 1, 1929."

In that action plaintiff prays for judgment against the defendant:

"(a) That upon trial of this this cause judgment be rendered in favor of the plaintiff and against the defendant for the sum of P124,8484.70), with legal interest thereon from November 23, 1923;

"(b) That the court specifically order the defendant to resume the delivery of the coal and water gas tar to the plaintiff under the terms of the said contract Exhibit A of this complaint."

In the final analysis, plaintiff must stand or fall on its own pleadings, and tested by that rule it must be admitted that the plaintiff's original cause of action, in which it recovered judgment for damages, was founded on the ten-year contract, and that the damages which it then recovered were recovered for a breach of that contract.

Both actions are founded on one and the same contract. By the terms of the original contract of September 10, 1018, the defendant was to sell and the plaintiff was to purchase three tons of water gas tar per month form September to January 1, 1919, and twenty tons of water gas tar per month after January 1, 1919, one-half ton of coal gas tar per month from September to January 1, 1919, and six tons of coal gas tar per month after January 1, 1919. That from and after January 1, 1919, plaintiff would take at least the quantities specified in the contract of September 10, 1918, and that at its option, it would have the right to take the total output of water gas tar of defendant's plant and 50 per cent of the gross output of its coal gas tar,

and upon giving ninety days' notice, it would have the right to the entire output of coal gas tar, except such as the defendant might need for its own use. That is to say, the contract provided for the delivery to the plaintiff from month to month of the specified amounts of the different tars as ordered and requested by the plaintiff. In other words, under plaintiff's own theory, the defendant was to make deliveries from month to month of the tars during the period of ten years, and it is alleged in both complaints that the defendant broke its contract, and in bad faith refused to make any more deliveries.

In 34 Corpus Juris, p. 839, it is said:

As a general rule a contract to do several things at several times in its nature, so as to authorize successive actions; and a judgment recovered for a single breach of a continuing contract or covenant is no bar to a suit for a subsequent breach thereof. But where the covenant or contract is entire, and the breach total, there can be only one action, and plaintiff must therein recover all his damages.

In the case of Rhoelmvs, Horst, 178 U. U., 1; 44 Law. ed., 953, that court said:

An unqualified and positive refusal to perform a contract, though the performance thereof is not yet due, may, if the renunciation goes to the whole contract, be treated as a complete breach which will entitle the injured party to bring his action at once.

15 Ruling Case Law, 966, 967, sec. 441 says:

Page 29 of 38

Similarly if there is a breach by the vendor of a contract for the sale of goods to be delivered and paid for in installments, and the vendee maintains an action therefor and recovers damages, he cannot maintain a subsequent action to recover for the failure to deliver later installments.

In Pakas vs. Hollingshead, 184 N. Y., 211; 77 N. E., 40; 3 L. R. A. (N. S.), 1024, the syllabus says:

Upon refusal, by the seller, after partial performance, longer to comply with his contract to sell and deliver a quantity of articles in installments the buyer cannot keep the contract in force and maintain actions for breaches as they occur but must recover all his damages in one suit.

And on page 1044 of its opinion, the court say:

The learned counsel for the plaintiff contends that the former judgment did not constitute a bar to the present action but that the plaintiff had the right to elect to waive or disregard the breach, keep the contract in force, and maintain successive actions for time to time as the installments of goods were to be delivered, however numerous these actions might be. It is said that this contention is supported in reason and justice, and has the sanction of authority at least in other jurisdictions. We do not think that the contention can be maintained. There is not as it seems to us any judicial authority in this state that gives it any substantial support. On the contrary, we think that the cases, so far as we have been able to examine them, are all the other way, and are to the effect that,

inasmuch as there was a total breach of the contract by the defendant's refusal to deliver, the plaintiff cannot split up his demand and maintain successive actions, but must either recover all his damages in the first suit or wait until the contract matured or the time for the delivery of all the goods had arrived. In other words, there can be but one action for damages for a total breach of an entire contract to deliver goods, and the fact that they were to be delivered in installment from time to time does not change the general rule.

The case of L. Bucki& Son Lumber Co. vs. Atlantic Lumber Co. (109 Federal, 411), of the United States Circuit Court of Appeals for the Fifth Circuit, is very similar.

The syllabus says:

1. CONTRACTS — CONSTRUCTION —ENTIRE CONTRACT. —A contract was made for the sale of a large quantity of logs to be delivered in monthly installments during a period of eight years, payments to be made also in installments at times having relation tot he deliveries. It contained stipulations as to such payments, and guaranties as to the average size of the logs to be delivered in each installment. Held, that it was an entire contract, and not a number of separate and independent agreements for the sale of the quantity to be delivered and paid for each month, although there might be breaches of the minor stipulations and warranties with reference thereto which would warrant suits without a termination of the contract.

2. JUDGMENTS — MATTERS CONCLUDED —ACTION FOR BREACH OF INDIVISIBLE CONTRACT. — The seller

declared the contract terminated for alleged breaches by the purchaser, and brought suit for general and special damages the latter covering payments due for installments of logs delivered. By way of set-off and recoupment against this demand, the purchaser pleaded breaches of the warranty as to the size of the logs delivered during the months for which payment had not been made. Held, that the judgment in such action was conclusive as to all claims or demands or either party against the other growing out of the entire contract, and was a bar to a subsequent suit brought by the purchaser to recover for other breaches of the same warranty in relation to deliveries made in previous months.

On page 415 of the opinion, the court says:

When the contract was ended, the claims of each party for alleged breaches and damages therefor constituted an indivisible demand; and when the same, or any part of the same, was pleaded, litigation had, and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or might have been litigated (Baird vs. U. S., 96 U. S., 430; 24 L. ed., 703.)

In Watts vs. Weston (238 Federal, 149), Circuit Court of Appeals, Second Circuit, the syllabus says:

1. JUDGMENTS — 593 — JUDGMENT AS BAR — MATTERS CONCLUDED. — Where a continuing contract was terminated by the absolute refusal of the party whose action was necessary to further perform, a claim for damages on account of the breach

Page 30 of 38

constituted as indivisible demand, and when the same or any part of the same was pleaded, litigated, and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or might have been litigated therein.

And on page 150 of the opinion, the court says:

It is enough to show the lack of merit in the present contention to point out as an inexorable rule of law that, when Kneval's contract was discharged by his total repudiation thereof, Watt's claims for breaches and damages therefor constituted an indivisible demand, and when the same, or any part of the same, was pleaded, litigation had and final judgment rendered, such suit and judgment constitute a bar to subsequent demands which were or might have been litigated." (Bucki, etc., Co. vs. Atlantic, etc., Co., 109 Fed. at page 415; 48 C. C. A., 459; Cf. Landon vs. Bulkley, 95 Fed., 344; 337 C. C. A., 96.)

The rule is usually applied in cases of alleged or supposed successive breaches, and consequently severable demands for damages; but if the contract has been discharged by breach, if suit for damages is all that is left, the rule is applicable, and every demand arising form that contract and possessed by any given plaintiff must be presented (at least as against any given defendant) in one action; what the plaintiff does not advance he foregoes by conclusive presumption.

Inn Abbott vs. 76 Land and Water Co. (118 Pac., 425; 161 Cal., 42), at page 428, the court said:

In Fish vs. Folley, 6 Hill (N. Y.), 54, it was held, in accord with the rule we have discussed, that, where the defendant had covenanted that plaintiff should have a continual supply of water for his mill from a dam, and subsequently totally failed to perform for nine years, and plaintiff brought an action for the breach and recovered damages sustained by him to that time, the judgment was a bar to a second action arising from subsequent failure to perform, on the theory that, although he covenant was a continuing one in one sense, it was an entire contract, and a total breach put an end to it, and gave plaintiff the right to sue for an equivalent in damages.

In such a case it is no warrant for a second action that the party may not be able to actually prove in the first action all the items of the demand, or that all the damage may not then have been actually suffered. He is bound to prove in the first action not only such damages as has been actually suffered, but also such prospective damage by reason of the breach as he may be legally entitled to, for the judgment he recovers in such action will be a conclusive adjudication as to the total damage on account of the breach.

It will thus be seen that, where there is a complete and total breach of a continuous contract for a term of years, the recovery of a judgment for damages by reason of the breach is a bar to another action on the same contract for and on account of the continuous breach.

In the final analysis is, there is no real dispute about any material fact, and the important and decisive question is the legal construction of the pleadings in the former case and in this case, and of the contract between the plaintiff and the defendant of January 1, 1920.

The complaint on the former case specifically alleges that the defendant "has refused and still refuses, to deliver to the plaintiff any coal and water gas tar whatsoever under the said contract Exhibit A, since the said month of July, 1920." " That owing to the bad faith of the said Manila Gas Corporation, defendant herein, in not living up to its said contract Exhibit A, made with this plaintiff, and refusing now to carry out the terms of the same." That is a specific allegation not only a breach of the contract since the month of July, 1920, but of the faith of the defendant in its continuous refusal to make deliveries of any coal and water gas tar. That amended complaint was filed on July 11, 1924, or four years after the alleged bad faith in breaking the contract.

Having recovered damages against it, covering a period of four years, upon the theory that the defendant broke the contract, and in bad faith refused to make deliveries of either of the tars, how can the plaintiff now claim and assert that the contract is still in fierce and effect? In the instant case the plaintiff alleges and relies upon the ten year contract on January 11, 1920, which in bad faith was broken by the defendant. If the contract was then broken, how can it be enforced in this action?

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It is admitted that the defendant never made any deliveries of any tar from July, 1920, to April, 1936. Also that it made nine deliveries to plaintiff of the minimum quantities of coal and water gas tar from April 7, 1926, to January 5, 1927.

Plaintiff contends that such deliveries were made under and in continuation of the old contract.

March 26, 1926, after the decision of this court affirming the judgment in the original action, plaintiff wrote the defendant:

. . . It is our desire to take deliveries of at least the minimum quantities set forth therein and shall appreciate to have you advise us how soon you will be in a position to make deliveries; . . .

. . . In view of the fact that you have only effected settlement up to November 23, 1923, please inform us what adjustment you are willing to make for the period of time that has since elapsed without your complying with the contract.

In response to which on March 31, 1926, the defendant wrote this letter to the plaintiff:

In reply to your letter of March 26th, 1926, in regard to tar, we beg to advise you that we are prepared to furnish the minimum quantities of coal and water gas tars as per your letter, viz: twenty tons of water gas tar and six tons of coal gas tar. The price figured on present costs of raw materials is P39.01 ) Thirty-nine and 01/100 Pesos) per ton of water gas and P33.59 (Thirty-three and 59/100 Pesos) per ton of coal tar.

We shall expect you to take delivery and pay for the above amount of tars at our factory on or before April 7th prox.

Thereafter we shall be ready to furnish equal amounts on the first of each month. Kindly make your arrangements accordingly.

On January 29, 1927, the plaintiff wrote the defendant that:

On July 31st last, we made demand upon you, under the terms of our tar contract for 50 per cent of your total coal tar production for that month and also served notice on you that beginning 90 days from August 1st we would require you total output of coal tar monthly; this in addition to the 20 tons of water gas tar provided for in the contract to be taken monthly.

x xxxxxxxx

We are here again on your for your total output of coal tar immediately and the regular minimum monthly quantity of water gas tar. In this connection we desire to advise you that within 90 days of your initial delivery to us of your total coal tar output we will require 50 per cent of your total water gas tar output, and, further, that two months thereafter we will require your total output of both tars.

February 2, 1927, the defendant wrote the plaintiff:

Replying to your letter of Jan. 29, we would sat that we have already returned to you the check enclosed there with. As we have repeatedly informed you we disagree with you as to the construction of your contract and

insist that you take the whole output of both tars if you wish to secure the whole of the coal tar.

With regard to your threat of further suits we presume that you will act as advised. If you make it necessary we shall do the same.lawphil.net

From an analysis of these letters it clearly appears that the plaintiff then sought to reply upon and enforce the contract of January 1, 1920, and that defendant denied plaintiff's construction of the contract, and insisted "that you take the whole output of both tars if you wish to secure the whole of the coal tar."

February 28, 1927, the plaintiff wrote the defendant:

In view of your numerous violations of and repeated refusal and failure to comply with the terms and provisions of our contract dated January 30-31, 1919, for the delivery to us of water and coal gas tars, etc., we will commence action," which it did.

The record tends to show that tars which the defendant delivered after April 7, 1926, were not delivered under the old contract of January 1, 1920, and that at all times since July 1920, the defendant has consistently refused to make any deliveries of any tars under that contract.

The referee found as a fact that plaintiff was entitled to P2,219.60 for and on account of overcharges which the defendant made for the deliveries of fifty-four tons of coal gas tar, and one hundred eighty tons of water gas tar

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after April, 1926, and upon that point the lower says:

The fourth charge that plaintiff makes is meritorious. The price was to be fixed on the basis of raw materials. The charge for deliveries during 1926 were too high. In this I agree with entirely with the referee and adopt his findings of fact and calculations. (See Referee's report, p. 83) The referee awarded for overcharge during the period aforesaid, the sum of P2,219.60. The defendant was trying to discharge plaintiff from buying tars and made the price of raw material appear as high as possible.

That finding is sustained upon the theory that the defendant broke its contract which it made with the plaintiff for the sale and delivery of the tars on and after April, 1926.

After careful study of the many important questions presented on this appeal in the exhaustive brief of the appellant, we are clearly of the opinion that, as found by the lower court, the plea of res judicata must be sustained. The judgment of the lower court is affirmed.

It is so ordered, with costs against the appellant.

G.R. No. L-16797 February 27, 1963

RODRIGO ENRIQUEZ, ET AL., plaintiffs-appellees,

vs.

SOCORRO A. RAMOS, ET AL., defendants-appellants.

REYES, J.B.L., J.:

Direct appeal on points of law from a decision of the Court of First Instance of Rizal in its Civil Case No.Q-4232.

The record is to the effect that on 24 November 1958, Rodrigo Enriquez and the spouses UrbanoDizon and Aurea Soriano de Dizon sold to Socorro A. Ramos, by a notarial deed of even date, eleven (11) parcels of land situated in BagoBantay, Quezon City, and covered by their corresponding certificates of title, for the stipulated price of P101,000.00. The vendee paid P5,000.00 down, P2,500.00 in cash, and P2,500.00 by a check drawn against the Philippine National Bank, and agreed to satisfy the balance of P96,000.00 within ninety (90) days. To secure the said balance, the vendee Socorro A. Ramos, in the same deed of sale, mortgaged the eleven parcels in favor of the vendors. By way of additional security, Socorro A. Ramos, as attorney-in-fact of her children, Enrique, Antonio, Milagros, and Lourdes, and as judicial guardian of her minor child Angelita Ramos, executed another mortgage on Lot No. 409 of the Malinta Estate.

Because of the vendee-mortgagor's failure to comply with some conditions of the mortgage, this action for foreclosure of the mortgage was filed by the vendors-mortgagees in the court below, on 29 April 1959. Defendant Socorro Ramos moved to dismiss, alleging that the plaintiffs previously had filed action against her in the Court of First Instance of Manila on 24 February 1959 for the recovery of P2,500.00 paid by check as part of the down payment on the price of the mortgaged lands; that at the time this first

suit was filed, the mortgage debt was already accrued and demandable; that plaintiffs were, therefore, guilty of splitting a single cause of action, and under section 4 of Rule 2 of the Rules of Court, the filing of the first action for P2,500.00 was a defense that could be pleaded in abatement of the second suit. Upon opposition by the plaintiffs, the Court of First Instance of Quezon City denied the motion to dismiss; but defendant Ramos repleaded the averments as a special defense in her answer. After trial, on 16 December 1959, the Court of First Instance of Quezon City rendered judgment against defendant Ramos; ordered her to pay P96,000.00, with 12% interest from 24 February 1959 until payment, 10% of the amount due as attorney's fees, and the costs of the suit; and further decreed the foreclosure sale of the mortgaged properties in case of non-payment within ninety (90) days.

Socorro Ramos appealed directly to this Court, and here insists that the action should be dismissed on account of the alleged splitting of appellee's cause of action, and that the obligation not having fixed a period, although one was intended, the court below should have set first a date of maturity before ordering payment or foreclosure.

We find no merit in the appeal.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts.

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An examination of the first complaint filed against appellant in the Court of First Instance of Manila shows that it was based on appellants' having unlawfully stopped payment of the check for P2,500.00 she had issued in favor of appellees; while the complaint in the present action was for non-payment of the balance of P96,000.00 guaranteed by the mortgage. The claim for P2,500.00 was, therefore, a distinct debt not covered by the security; and since the mortgage was constituted on lands situated in Quezon City, the appellees could not ask for its foreclosure in the Manila courts. The two causes of action being different, section 4 of Rule 2 does not apply.

On the second assignment of error: the stipulation in the mortgage contract that the obligation for P96,000.00 was to be —

without interest, payable within ninety (90) days from this date, provided that in case of default it shall bear interest at the rate of 12% per annum,

clearly fixes a date of maturity, the stipulated twelve per cent in case of default being nothing more than a penalty, designed to induce the debtor to pay on or before the expiration of the ninety (90) days. Hence, there was no call upon the court to set another due date.

Finding no error in the judgment appealed from, the same is affirmed, with costs against appellants.

G.R. No. L-64013 November 28, 1983

UNION GLASS & CONTAINER CORPORATION and CARLOS PALANCA, JR., in his capacity as President of Union Glass & Container Corporation, petitioners,

vs.

THE SECURITIES AND EXCHANGE COMMISSION and CAROLINA HOFILEÑA, respondents.

ESCOLIN, J.:

This petition for certiorari and prohibition seeks to annul and set aside the Order of the Securities and Exchange Commission, dated September 25, 1981, upholding its jurisdiction in SEC Case No. 2035, entitled "Carolina Hofileña, Complainant, versus Development Bank of the Philippines, et al., Respondents."

Private respondent Carolina Hofileña, complainant in SEC Case No. 2035, is a stockholder of Pioneer Glass Manufacturing Corporation, Pioneer Glass for short, a domestic corporation engaged in the operation of silica mines and the manufacture of glass and glassware. Since 1967, Pioneer Glass had obtained various loan accommodations from the Development Bank of the Philippines [DBP], and also from other local and foreign sources which DBP guaranteed.

As security for said loan accommodations, Pioneer Glass mortgaged and/or assigned its assets, real and personal, to the DBP, in addition to the mortgages executed by some

of its corporate officers over their personal assets. The proceeds of said financial exposure of the DBP were used in the construction of a glass plant in Rosario, Cavite, and the operation of seven silica mining claims owned by the corporation.

It appears that through the conversion into equity of the accumulated unpaid interests on the various loans amounting to P5.4 million as of January 1975, and subsequently increased by another P2.2 million in 1976, the DBP was able to gain control of the outstanding shares of common stocks of Pioneer Glass, and to get two, later three, regular seats in the corporation's board of directors.

Sometime in March, 1978, when Pioneer Glass suffered serious liquidity problems such that it could no longer meet its financial obligations with DBP, it entered into a dacion en pago agreement with the latter, whereby all its assets mortgaged to DBP were ceded to the latter in full satisfaction of the corporation's obligations in the total amount of P59,000,000.00. Part of the assets transferred to the DBP was the glass plant in Rosario, Cavite, which DBP leased and subsequently sold to herein petitioner Union Glass and Container Corporation, hereinafter referred to as Union Glass.

On April 1, 1981, Carolina Hofileña filed a complaint before the respondent Securities and Exchange Commission against the DBP, Union Glass and Pioneer Glass, docketed as SEC Case No. 2035. Of the five causes of action pleaded therein, only the first cause of action concerned petitioner Union Glass as transferee and possessor of the glass plant. Said first cause of action was based on the

Page 34 of 38

alleged illegality of the aforesaid dacion en pago resulting from: [1] the supposed unilateral and unsupported undervaluation of the assets of Pioneer Glass covered by the agreement; [2] the self-dealing indulged in by DBP, having acted both as stockholder/director and secured creditor of Pioneer Glass; and [3] the wrongful inclusion by DBP in its statement of account of P26M as due from Pioneer Glass when the same had already been converted into equity.

Thus, with respect to said first cause of action, respondent Hofileña prayed that the SEC issue an order:

1. Holding that the so called dacion en pago conveying all the assets of Pioneer Glass and the Hofileña personal properties to Union Glass be declared null and void on the ground that the said conveyance was tainted with.

A. Self-dealing on the part of DBP which was acting both as a controlling stockholder/director and as secured creditor of the Pioneer Glass, all to its advantage and to that of Union Glass, and to the gross prejudice of the Pioneer Glass,

B. That the dacion en pago is void because there was gross undervaluation of the assets included in the so-called dacion en pago by more than 100% to the prejudice of Pioneer Glass and to the undue advantage of DBP and Union Glass;

C. That the DBP unduly favored Union Glass over another buyer, San Miguel Corporation, notwithstanding the clearly advantageous terms offered by the latter to

the prejudice of Pioneer Glass, its other creditors and so-called 'Minority stockholders.'

2. Holding that the assets of the Pioneer Glass taken over by DBP and part of which was delivered to Union Glass particularly the glass plant to be returned accordingly.

3. That the DBP be ordered to accept and recognize the appraisal conducted by the Asian Appraisal Inc. in 1975 and again in t978 of the asset of Pioneer Glass. 1

In her common prayer, Hofileña asked that DBP be sentenced to pay Pioneer Glass actual, consequential, moral and exemplary damages, for its alleged illegal acts and gross bad faith; and for DBP and Union Glass to pay her a reasonable amount as attorney's fees. 2

On April 21, 1981, Pioneer Glass filed its answer. On May 8, 1981, petitioners moved for dismissal of the case on the ground that the SEC had no jurisdiction over the subject matter or nature of the suit. Respondent Hofileña filed her opposition to said motion, to which herein petitioners filed a rejoinder.

On July 23, 1981, SEC Hearing Officer Eugenio E. Reyes, to whom the case was assigned, granted the motion to dismiss for lack of jurisdiction. However, on September 25, 1981, upon motion for reconsideration filed by respondent Hofileña, Hearing Officer Reyes reversed his original order by upholding the SEC's jurisdiction over the subject matter and over the persons of petitioners. Unable to secure a reconsideration of the Order as well as to have the same reviewed by the Commission

En Banc, petitioners filed the instant petition for certiorari and prohibition to set aside the order of September 25, 1981, and to prevent respondent SEC from taking cognizance of SEC Case No. 2035.

The issue raised in the petition may be propounded thus: Is it the regular court or the SEC that has jurisdiction over the case?

In upholding the SEC's jurisdiction over the case Hearing Officer Reyes rationalized his conclusion thus:

As correctly pointed out by the complainant, the present action is in the form of a derivative suit instituted by a stockholder for the benefit of the corporation, respondent Pioneer Glass and Manufacturing Corporation, principally against another stockholder, respondent Development Bank of the Philippines, for alleged illegal acts and gross bad faith which resulted in the dacion en pago arrangement now being questioned by complainant. These alleged illegal acts and gross bad faith came about precisely by virtue of respondent Development Bank of the Philippine's status as a stockholder of co-respondent Pioneer Glass Manufacturing Corporation although its status as such stockholder, was gained as a result of its being a creditor of the latter. The derivative nature of this instant action can also be gleaned from the common prayer of the complainant which seeks for an order directing respondent Development Bank of the Philippines to pay co-respondent Pioneer Glass Manufacturing Corporation damages for the alleged illegal acts and gross bad faith as above-mentioned.

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As far as respondent Union Glass and Container Corporation is concerned, its inclusion as a party-respondent by virtue of its being an indispensable party to the present action, it being in possession of the assets subject of the dacion en pago and, therefore, situated in such a way that it will be affected by any judgment thereon, 3

In the ordinary course of things, petitioner Union Glass, as transferee and possessor of the glass plant covered by the dacion en pago agreement, should be joined as party-defendant under the general rule which requires the joinder of every party who has an interest in or lien on the property subject matter of the dispute. 4 Such joinder of parties avoids multiplicity of suits as well as ensures the convenient, speedy and orderly administration of justice.

But since petitioner Union Glass has no intra-corporate relation with either the complainant or the DBP, its joinder as party-defendant in SEC Case No. 2035 brings the cause of action asserted against it outside the jurisdiction of the respondent SEC.

The jurisdiction of the SEC is delineated by Section 5 of PD No. 902-A as follows:

Sec. 5. In addition to the regulatory and adjudicative function of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and devices, it shall have original and exclusive jurisdiction to hear and decide cases involving:

a] Devices and schemes employed by or any acts, of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or the stockholders, partners, members of associations or organizations registered with the Commission

b] Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members or associates; between any or all of them and the corporation, partnership, or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity;

c] Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.

This grant of jurisdiction must be viewed in the light of the nature and function of the SEC under the law. Section 3 of PD No. 902-A confers upon the latter "absolute jurisdiction, supervision, and control over all corporations, partnerships or associations, who are grantees of primary franchise and/or license or permit issued by the government to operate in the Philippines ... " The principal function of the SEC is the supervision and control over corporations, partnerships and associations with the end in view that investment in these entities may be encouraged and protected, and their activities pursued for the promotion of economic development. 5

It is in aid of this office that the adjudicative power of the SEC must be exercised. Thus the law explicitly specified and delimited its jurisdiction to matters intrinsically connected with the regulation of corporations, partnerships and associations and those dealing with the internal affairs of such corporations, partnerships or associations.

Otherwise stated, in order that the SEC can take cognizance of a case, the controversy must pertain to any of the following relationships: [a] between the corporation, partnership or association and the public; [b] between the corporation, partnership or association and its stockholders, partners, members, or officers; [c] between the corporation, partnership or association and the state in so far as its franchise, permit or license to operate is concerned; and [d] among the stockholders, partners or associates themselves.

The fact that the controversy at bar involves the rights of petitioner Union Glass who has no intra-corporate relation either with complainant or the DBP, places the suit beyond the jurisdiction of the respondent SEC. The case should be tried and decided by the court of general jurisdiction, the Regional Trial Court. This view is in accord with the rudimentary principle that administrative agencies, like the SEC, are tribunals of limited jurisdiction 6 and, as such, could wield only such powers as are specifically granted to them by their enabling statutes. 7 As We held in Sunset View Condominium Corp. vs. Campos, Jr.: 8têñ.£îhqwâ£

Page 36 of 38

Inasmuch as the private respondents are not shareholders of the petitioner condominium corporation, the instant cases for collection cannot be a 'controversy arising out of intra-corporate or partnership relations between and among stockholders, members or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively,' which controversies are under the original and exclusive jurisdiction of the Securities & Exchange Commission, pursuant to Section 5 [b] of P.D. No. 902-A. ...

As heretofore pointed out, petitioner Union Glass is involved only in the first cause of action of Hofileñas complaint in SEC Case No, 2035. While the Rules of Court, which applies suppletorily to proceedings before the SEC, allows the joinder of causes of action in one complaint, such procedure however is subject to the rules regarding jurisdiction, venue and joinder of parties. 9 Since petitioner has no intra-corporate relationship with the complainant, it cannot be joined as party-defendant in said case as to do so would violate the rule or jurisdiction. Hofileñas complaint against petitioner for cancellation of the sale of the glass plant should therefore be brought separately before the regular court But such action, if instituted, shall be suspended to await the final outcome of SEC Case No. 2035, for the issue of the validity of the dacion en pago posed in the last mentioned case is a prejudicial question, the resolution of which is a logical antecedent of the issue involved in the action against petitioner Union Glass. Thus, Hofileñas complaint against the latter can only prosper if

final judgment is rendered in SEC Case No. 2035, annulling the dacion en pago executed in favor of the DBP.

WHEREFORE, the instant petition is hereby granted, and the questioned Orders of respondent SEC, dated September 25, 1981, March 25, 1982 and May 28, 1982, are hereby set aside. Respondent Commission is ordered to drop petitioner Union Glass from SEC Case No. 2035, without prejudice to the filing of a separate suit before the regular court of justice. No pronouncement as to costs.

SO ORDERED.

Separate Opinions

TEEHANKEE, J., concurring:

I concur in the Court's judgment penned by Mr. Justice Escolin setting aside the questioned orders of respondent SEC and ordering that petitioner Union Glass be dropped from SEC Case No. 2035 for lack of SEC jurisdiction over it as a third party purchaser of the glass plant acquired by the DBP by dacion en pago from Pioneer Glass, without prejudice to Hofileña filing a separate suit in the regular courts of justice against Union Glass for recovery and cancellation of the said sale of the glass plant in favor of Union Glass.

I concur also with the statement in the Court's opinion that the final outcome of SEC Case No. 2035 with regard to the validity of the dacion en pago is a prejudicial case. If Hofileña's complaint against said dacion en pago fails in the SEC, then it clearly has no

cause of action against Union Glass for cancellation of DBP's sale of the plant to Union Glass.

The purpose of this brief concurrence is with reference to the statement in the Court's opinion that "Thus, Hofileñas complaint against the latter can only prosper if final judgment is rendered in SEC Case No. 2035, annulling the dacion en pago executed in favor of the DBP," to erase any impression that a favorable judgment secured by Hofileña in SEC Case No. 2035 against the DBP and Pioneer Glass would necessarily mean that its action against Union Glass in the regular courts of justice for recovery and cancellation of the DBP sale of the glass plant to Union Glass would necessarily prosper. It must be borne in mind that as already indicated, the SEC has no jurisdiction over Union Glass as an outsider. The suit in the regular courts of justice that Hofileña might bring against Union Glass is of course subject to all defenses as to the validity of the sale of the glass plant in its favor as a buyer in good faith and should it successfully substantiate such defenses, then Hofileñas action against it for cancellation of the sale might fail as a consequence.

AQUINO, J., dissenting:

I dissent with due deference to Justice Escolin's opinion. What are belatedly assailed in this certiorari and prohibition case filed on May 17, 1983 are the order of September 25, 1981 of Eugenio E. Reyes, a SEC hearing officer, and the orders of March 25 and May 28, 1982 of Antonio R. Manabat, another SEC hearing officer.

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Although a jurisdictional issue is raised and jurisdiction over the subject matter may be raised at any stage of the case, nevertheless, the petitioners are guilty of laches and nonexhaustion of the remedy of appeal with the Securities and Exchange Commission en banc.

The petitioners resorted to the special civil actions of certiorari and prohibition because they assail the orders of mere SEC hearing officers. This is not a review of the order, decision or ruling of the SEC sitting en banc which, according to section 6 of Presidential Decree No. 902-A (1976), may be made by this Court "in accordance with the pertinent provisions of the Rules of Court."

Rule 43 of the Rules of Court used to allow review by this Court of the SEC order, ruling or decision. Republic Act 5434 (1968) substituted the Court of Appeals for this Court in line with the policy of lightening our heavy jurisdictional burden. But this Court seems to have been restored as the reviewing authority by Presidential Decree No. 902-A.

However, section 9 of the Judiciary Reorganization Law returned to the Intermediate Appellate Court the exclusive jurisdiction to review the ruling, order or decision of the SEC as a quasi-judicial agency. The same section 9 granted to the Appellate Court jurisdiction in certiorari and prohibition cases over the SEC although not exclusive.

In this case, the SEC seems to have adopted the orders of the two hearing officers as its own orders as shown by the stand taken by the Solicitor General in defending

the SEC. If that were so, that is, if the orders of the hearing officers should be treated as the orders of the SEC itself en banc, this Court would have no jurisdiction over this case. It should be the Appellate Court that should exercise the power of review.

Carolina Hofileña has been a stockholder since 1958 of the Pioneer Glass Manufacturing Corporation. Her personal assets valued at P6,804,810 were apparently or supposedly mortgaged to the DBP to secure the obligations of Pioneer Glass (p. 32, Rollo).

Pioneer Glass became indebted to the Development Bank of the Philippines in the total sum of P59,000,000. Part of the loan was used by Pioneer Glass to establish its glass plant in Rosario, Cavite. The unpaid interest on the loan amounting to around seven million pesos became the DBP's equity in Pioneer Glass. The DBP became a substantial stockholder of Pioneer Glass. Three members of the Pioneer Glass' board of directors were from the DBP.

The glass plant commenced operations in 1977. At that time, Pioneer Glass was heavily indebted to the DBP. Instead of foreclosing its mortgage, DBP maneuvered to have the mortgaged assets of Pioneer Glass, including the glass plant, transferred to the DBP by way of dacion en pago. This transaction was alleged to be an "auto contract" or a case of the DBP contracting with itself since the DBP had a dominant position in Pioneer Glass.

Hofileña alleged that although the debt to the DBP of Pioneer Glass amounted to P59,000,000, the glass plant in 1977 had a

"sound value" of P77,329,000 and a "reproduction cost" of P90,403,000. She further alleged that San Miguel Corporation was willing to buy the glass plant for P40,000,000 cash, whereas it was actually sold to Union Glass & Container Corporation for the same amount under a 25-year term of payment (pp. 32-34, Rollo).

On March 31, 1981; Carmen Hofileña filed with the SEC a complaint against the DBP, Union Glass, Pioneer Glass and Rafael Sison as chairman of the DBP and Pioneer Glass boards of directors. Union Glass filed a motion to dismiss on the ground that jurisdiction over the case is lodged in the Court of First Instance. Hofileña opposed the motion. Hearing Officer Reyes in his order of July 23, 1981 dismissed the complaint on the ground that the case is beyond the jurisdiction of the SEC.

Hofileña filed a motion for reconsideration which was opposed by Union Glass. Hearing Officer Reyes in his order of September 25, 1981 reconsidered his dismissal order and ruled that Union Glass is an indispensable party because it is the transferee of the controverted assets given by way of dacion en pago to the DBP. He ruled that the SEC has jurisdiction over the case.

Union Glass filed a motion for reconsideration. Hearing Officer Antonio R. Manabat denied the motion on the ground "that the present action is an intra-corporate dispute involving stockholders of the same corporation (p. 26, Rollo).

Union Glass filed a second motion for reconsideration with the prayer that the SEC

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should decide the motion en banc. The hearing officer ruled that the remedy of Union Glass was to file a timely appeal. Hence, its second motion for reconsideration was denied by the hearing officer. (This ruling is a technicality which hinders substantial justice.)

It is clear that Union Glass has no cause of action for certiorari and prohibition. Its recourse was to appeal to the SEC en banc the denial of its first motion for reconsideration.

There is no question that the SEC has jurisdiction over the intra-corporate dispute between Hofileña and the DBP, both stockholders of Pioneer Glass, over the dacion en pago.

Now, does the SEC lose jurisdiction because of the joinder of Union Glass which has privity with the DBP since it was the transferee of the assets involved in the dacion en pago?

Certainly, the joinder of Union Glass does not divest the SEC of jurisdiction over the case. The joinder of Union Glass is necessary because the DBP, its transfer or, is being sued regarding the dacion en pago. The defenses of Union Glass are tied up with the defenses of the DBP in the intra-corporate dispute. Hofileñas cause of action should not be split.

It would not be judicious and expedient to require Hofileña to sue the DBP and Union Glass in the Regional Trial Court. The SEC is more competent than the said court to decide the intra-corporate dispute.

The SEC, as the agency enforcing Presidential Decree No. 902-A, is in the best position to know the extent of its jurisdiction. Its determination that it has jurisdiction in this case has persuasive weight.