THIRD DIVISIONG.R. No. 143264 April 23, 2012LISAM ENTERPRISES, INC. represented by LOLITA A. SORIANO, and LOLITA A. SORIANO,Petitioners,vs.BANCO DE ORO UNIBANK, INC. (formerly PHILIPPINE COMMERCIAL INTERNATIONAL BANK),*LILIAN S. SORIANO, ESTATE OF LEANDRO A. SORIANO, JR., REGISTER OF DEEDS OF LEGASPI CITY, and JESUS L. SARTE,Respondents.D E C I S I O NPERALTA,J.:This resolves the Petition for Review onCertiorariunder Rule 45 of the Rules of Court, praying that the Resolution1of the Regional Trial Court of Legaspi City (RTC), dated November 11, 1999, dismissing petitioners complaint, and its Order2dated May 15, 2000, denying herein petitioners Motion for Reconsideration and Motion to Admit Amended Complaint, be reversed and set aside.The records reveal the following antecedent facts.On August 13, 1999, petitioners filed a Complaint against respondents for Annulment of Mortgage with Prayer for Temporary Restraining Order & Preliminary Injunction with Damages with the RTC of Legaspi City. Petitioner Lolita A. Soriano alleged that she is a stockholder of petitioner Lisam Enterprises, Inc. (LEI) and a member of its Board of Directors, designated as its Corporate Secretary. The Complaint also alleged the following:4. Sometime in 1993, plaintiff LEI, in the course of its business operation, acquired by purchase a parcel of residential land with improvement situated at Legaspi City, covered by Transfer Certificate of Title No. 37866, copy attached as Annex "A," which property is more particularly described as follows:x x x x5. On or about 28 March 1996, defendant Lilian S. Soriano and the late Leandro A. Soriano, Jr., as husband and wife (hereafter "Spouses Soriano"), in their personal capacity and for their own use and benefit, obtained a loan from defendant PCIB (Legaspi Branch) (now known as Banco de Oro Unibank, Inc.) in the total amount ofP20 Million;6. That as security for the payment of the aforesaid credit accommodation, the late Leandro A. Soriano, Jr. and defendant Lilian S. Soriano, as president and treasurer, respectively of plaintiff LEI, but without authority and consent of the board of said plaintiff and with the use of a falsified board resolution, executed a real estate mortgage on 28 March 1996, over the above-described property of plaintiff LEI in favor of defendant PCIB, and had the same registered with the Office of the Registry of Deeds, Legaspi City, copy of the Real Estate Mortgage is hereto attached and marked as Annex "B," and made part hereof, to the prejudice of plaintiffs;7. That specifically, the Spouses Soriano, with intent to defraud and prejudice plaintiff LEI and its stockholders, falsified the signatures of plaintiff Lolita A. Soriano as corporate secretary and director of plaintiff LEI, in a document denominated as board resolution purportedly issued by the board of plaintiff LEI on 6 November 1995, making it appear that plaintiff LEI's Board met and passed a board resolution on said date authorizing the Spouses Soriano to mortgage or encumber all or substantially all of the properties of plaintiff LEI, when in fact and in truth, no resolution of that nature was ever issued by the board of plaintiff LEI, nor a meeting was called to that effect, copy of the resolution in question is hereto attached and marked as Annex "C," and made part hereof;8. That plaintiff Lolita A. Soriano as Corporate Secretary of plaintiff LEI, had never signed a board resolution nor issued a Secretary's Certificate to the effect that on 6 November 1995 a resolution was passed and approved by plaintiff LEI authorizing the Spouses Soriano as president and treasurer, respectively, to mortgage the above-described property of plaintiff LEI, neither did she appear personally before a notary public on 28 March 1996 to acknowledge or attest to the issuance of a supposed board resolution issued by plaintiff LEI on 6 November 1995;9. That defendant PCIB, knowing fully well that the property being mortgaged by the Spouses Soriano belongs to plaintiff LEI, a corporation, negligently and miserably failed to exercise due care and prudence required of a banking institution. Specifically, defendant PCIB failed to investigate and to delve into the propriety of the issuance of or due execution of subject board resolution, which is the very foundation of the validity of subject real estate mortgage. Further, it failed to verify the genuineness of the signatures appearing in said board resolution nor to confirm the fact of its issuance with plaintiff Lolita A. Soriano, as the corporate secretary of plaintiff LEI. Furthermore, the height of its negligence was displayed when it disregarded or failed to notice that the questioned board resolution with a Secretary's Certificate was notarized only on 28 March 1996 or after the lapse of more than four (4) months from its purported date of issue on 6 November 1995. That these circumstances should have put defendant PCIB on notice of the flaws and infirmities of the questioned board resolution. Unfortunately, it negligently failed to exercise due care and prudence expected of a banking institution;10. That having been executed without authority of the board of plaintiff LEI said real estate mortgage dated 28 March 1996 executed by the Spouses Soriano, as officers of plaintiff LEI in favor of defendant PCIB, is the null and void and has no legal effect upon said plaintiff. Consequently, said mortgage deed cannot be used nor resorted to by defendant PCIB against subject property of plaintiff LEI as no right or rights whatsoever were created nor granted thereunder by reason of its nullity;11. Worst, sometime in August 1998, in order to remedy the defects in the mortgage transaction entered by the Spouses Soriano and defendant PCIB, the former, with the unlawful instigation of the latter, signed a document denominated as "Deed of Assumption of Loans and Mortgage Obligations and Amendment of Mortgage"; wherein in said document, plaintiff LEI was made to assume theP20 Million personal indebtedness of the Spouses Soriano with defendant PCIB, when in fact and in truth it never so assumed the same as no board resolution duly certified to by plaintiff Lolita A. Soriano as corporate secretary was ever issued to that effect, copy of said Deed is hereto attached and marked as Annex "D," and made part hereof;12. Moreover, to make it appear that plaintiff LEI had consented to the execution of said deed of assumption of mortgage, the Spouses Soriano again, through the unlawful instigation and connivance of defendant PCIB, falsified the signature of plaintiff Lolita A. Soriano as corporate secretary of plaintiff LEI in a document denominated as "Corporate Resolution to Borrow," to make it appear that plaintiff LEI so authorized the Spouses Soriano to perform said acts for the corporation, when in fact and in truth no such authority or resolution was ever issued nor granted by plaintiff LEI, nor a meeting called and held for said purpose in accordance with its By-laws; copy of which is hereto attached and marked as Annex "E" and made part hereof;13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff Lolita A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for herself and on behalf and for the benefit of plaintiff LEI, made demands upon defendants Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such mortgage lien, by paying in full their personal indebtedness to defendant PCIB in the principal sum ofP20 Million. However, said defendants, for reason only known to them, continued and still continue to ignore said demands, to the damage and prejudice of plaintiffs;14. Hence, on 25 June 1999, plaintiffs commenced a derivative suit against defendants Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., before the Securities and Exchange Commission, docketed as SEC Case No. 06-99-6339 for "Fraudulent Scheme and Unlawful Machination with Damages" in order to protect and preserve the rights of plaintiffs, copy of said complaint is hereto attached as Annex"F";15. That plaintiffs, in order to seek complete relief from the unauthorized mortgage transaction between the Spouses Soriano and defendant PCIB, were further compelled to institute this instant case to seek the nullification of the real estate mortgage dated 28 March 1999. Consequently, plaintiffs were forced to retain the services of a lawyer with whom they contracted to payP100,000.00 as and for attorney's fee;16. That unfortunately, the plaintiffs learned that on 30 July 1999, defendant Sarte, in his capacity as Notary Public of Daraga, Albay and upon application of defendant PCIB, issued a notice of Auction/Foreclosure Sale of the property subject of the mortgage in question and has set the auction sale on 7 September 1999 x x x;17. That by reason of the fraudulent and surreptitious schemes perpetrated by defendant Lilian S. Soriano and her husband, the late Leandro A. Soriano, Jr., in unlawful connivance and through the gross negligence of defendant PCIB, plaintiff Lolita A. Soriano, as stockholder, suffered sleepless nights, moral shock, wounded feeling, hurt pride and similar injuries, hence, should be awarded moral damages in the amount ofP200,000.00.After service of summons on all defendants, the RTC issued a temporary restraining order on August 25, 1990 and, after hearing, went on to issue a writ of preliminary injunction enjoining respondent PCIB (now known as Banco de Oro Unibank, Inc.) from proceeding with the auction sale of the subject property.Respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. filed an Answer dated September 25, 1999, stating that the Spouses Lilian and Leandro Soriano, Jr. were duly authorized by LEI to mortgage the subject property; that proceeds of the loan from respondent PCIB were for the use and benefit of LEI; that all notarized documents submitted to PCIB by the Spouses Soriano bore the genuine signature of Lolita Soriano; and that although the Spouses Soriano indeed received demands from petitioner Lolita Soriano for them to pay the loan, they gave satisfactory explanations to the latter why her demands could not be honored. It was, likewise, alleged in said Answer that it was respondent Lilian Soriano who should be entitled to moral damages and attorney's fees.On September 28, 1999, respondent PCIB filed a Motion to Dismiss the Complaint on grounds of lack of legal capacity to sue, failure to state cause of action, andlitis pendencia. Petitioners filed an Opposition thereto, while PCIB's co-defendants filed a Motion to Suspend Action.On November 11, 1999, the RTC issued the first assailed Resolution dismissing petitioners' Complaint. Petitioners then filed a Motion for Reconsideration of said Resolution. While awaiting resolution of the motion for reconsideration, petitioners also filed, on January 4, 2000, a Motion to Admit Amended Complaint, amending paragraph 13 of the original complaint to read as follows:13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff Lolita A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for herself and on behalf and for the benefit of plaintiff LEI, made demands upon defendant Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such mortgage lien, by paying in full their personal indebtedness to defendant PCIB in the principal sum ofP20 Million. However, said defendants, for reason only known to them, continued and still continue to ignore said demands, to the damage and prejudice of plaintiffs;that plaintiff Lolita A. Soriano likewise made demands upon the Board of Directors of Lisam Enterprises, Inc., to make legal steps to protect the interest of the corporation from said fraudulent transaction, but unfortunately, until now, no such legal step was ever taken by the Board, hence, this action for the benefit and in behalf of the corporation;On May 15, 2000, the trial court issued the questioned Order denying both the Motion for Reconsideration and the Motion to Admit Amended Complaint. The trial court held that no new argument had been raised by petitioners in their motion for reconsideration to address the fact of plaintiffs' failure to allege in the complaint that petitioner Lolita A. Soriano made demands upon the Board of Directors of Lisam Enterprises, Inc. to take steps to protect the interest of the corporation against the fraudulent acts of the Spouses Soriano and PCIB. The trial court further ruled that the Amended Complaint can no longer be admitted, because the same absolutely changed petitioners' cause of action.Petitioners filed the present petition with this Court, alleging that what are involved are pure questions of law, to wit:FIRST, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION ON THE GROUND THAT PETITIONER LOLITA A. SORIANO HAS NO LEGAL CAPACITY TO SUE AS SHE IS NOT A REAL PARTY-IN-INTEREST;SECOND, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION ON THE GROUND THAT THERE IS ANOTHER ACTION PENDING BETWEEN THE SAME PARTIES FOR THE SAME CAUSE;THIRD, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DISMISSED THE ACTION ON THE GROUND THAT THE COMPLAINT STATES NO CAUSE OF ACTION;FOURTH, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT DENIED THE ADMISSION OF PETITIONERS' AMENDED COMPLAINT FILED AS A MATTER OF RIGHT, AFTER THE ORDER OF DISMISSAL WAS ISSUED BUT BEFORE ITS FINALITY.FIFTH, WHETHER OR NOT THE COURT ERRED IN DISMISSING THE ACTION, INSTEAD OF MERELY SUSPENDING THE SAME FOLLOWING THE DOCTRINE LAID DOWN INUNION GLASS.3The petition is impressed with merit.The Court shall first delve into the matter of the propriety of the denial of the motion to admit amended complaint. Pertinent provisions of Rule 10 of the Rules of Court provide as follows:Sec. 2.Amendments as a matter of right. A party may amend his pleadings once as a matter of right at any time before a responsive pleading is served x x x.Sec. 3.Amendments by leave of court. Except as provided in the next preceding section, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. x x xIt should be noted that respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. already filed their Answer, to petitioners' complaint, and the claims being asserted were made against said parties. A responsive pleading having been filed, amendments to the complaint may, therefore, be made only by leave of court and no longer as a matter of right. However, inTiu v. Philippine Bank of Communications,4the Court discussed this rule at length, to wit:x x x [A]fter petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically allows amendment by leave of court. The said Section states:SECTION 3. Amendments by leave of court. - Except as provided in the next preceding section, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela v. Court of Appeals, thus:Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that the phrase "or that the cause of action or defense is substantially altered" was stricken-off and not retained in the new rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of action or defense." This should only be true, however, when despite a substantial change or alteration in the cause of action or defense, the amendments sought to be made shall serve the higher interests of substantial justice, and prevent delay and equally promote the laudable objective of the rules which is to secure a "just, speedy and inexpensive disposition of every action and proceeding."The granting of leave to file amended pleading is a matter particularly addressed to the sound discretion of the trial court; and that discretion is broad, subject only to the limitations that the amendments should not substantially change the cause of action or alter the theory of the case, or that it was not made to delay the action. Nevertheless, as enunciated in Valenzuela, even if the amendment substantially alters the cause of action or defense, such amendment could still be allowed when it is sought to serve the higher interest of substantial justice, prevent delay, and secure a just, speedy and inexpensive disposition of actions and proceedings.The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of suits and in order that the real controversies between the parties are presented, their rights determined, and the case decided on the merits without unnecessary delay. This liberality is greatest in the early stages of a lawsuit, especially in this case where the amendment was made before the trial of the case, thereby giving the petitioners all the time allowed by law to answer and to prepare for trial.1wphi1Furthermore, amendments to pleadings are generally favored and should be liberally allowed in furtherance of justice in order that every case, may so far as possible, be determined on its real facts and in order to speed up the trial of the case or prevent the circuitry of action and unnecessary expense. That is, unless there are circumstances such as inexcusable delay or the taking of the adverse party by surprise or the like, which might justify a refusal of permission to amend.5Since, as explained above, amendments are generally favored, it would have been more fitting for the trial court to extend such liberality towards petitioners by admitting the amended complaint which was filed before the order dismissing the original complaint became final and executory. It is quite apparent that since trial proper had not yet even begun, allowing the amendment would not have caused any delay. Moreover, doingso would have served the higher interest of justice as this would provide the best opportunity for the issues among all parties to be thoroughly threshed out and the rights of all parties finally determined. Hence, the Court overrules the trial court's denial of the motion to admit the amended complaint, and orders the admission of the same.With the amendment stating "that plaintiff Lolita A. Soriano likewise made demands upon the Board of Directors of Lisam Enterprises, Inc., to make legal steps to protect the interest of the corporation from said fraudulent transaction, but unfortunately, until now, no such legal step was ever taken by the Board, hence, this action for the benefit and in behalf of the corporation," does the amended complaint now sufficiently state a cause of action? InHi-Yield Realty, Incorporated v. Court of Appeals,6the Court enumerated the requisites for filing a derivative suit, as follows:a) the party bringing the suit should be a shareholder as of the time of the act or transaction complained of, the number of his shares not being material;b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of directors for the appropriate relief but the latter has failed or refused to heed his plea; andc) the cause of action actually devolves on the corporation, the wrongdoing or harm having been, or being caused to the corporation and not to the particular stockholder bringing the suit.7A reading of the amended complaint will reveal that all the foregoing requisites had been alleged therein. Hence, the amended complaint remedied the defect in the original complaint and now sufficiently states a cause of action.Respondent PCIB should not complain that admitting the amended complaint after they pointed out a defect in the original complaint would be unfair to them. They should have been well aware that due to the changes made by the 1997 Rules of Civil Procedure, amendments may now substantially alter the cause of action or defense. It should not have been a surprise to them that petitioners would redress the defect in the original complaint by substantially amending the same, which course of action is now allowed under the new rules.The next question then is, upon admission of the amended complaint, would it still be proper for the trial court to dismiss the complaint? The Court answers in the negative.Saura v. Saura, Jr.8is closely analogous to the present case. InSaura,9the petitioners therein, stockholders of a corporation, sold a disputed real property owned by the corporation, despite the existence of a case in the Securities and Exchange Commission (SEC) between stockholders for annulment of subscription, recovery of corporate assets and funds, etc. The sale was done without the knowledge of the other stockholders, thus, said stockholders filed a separate case for annulment of sale, declaration of nullity of deed of exchange, recovery of possession, etc., against the stockholders who took part in the sale, and the buyer of the property, filing said case with the regular court (RTC). Petitioners therein also filed a motion to dismiss the complaint for annulment of sale filed with the RTC, on the ground of forum shopping, lack of jurisdiction, lack of cause of action, andlitis pendentiaamong others. The Court held that the complaint for annulment of sale was properly filed with the regular court, because the buyer of the property had no intra-corporate relationship with the stockholders, hence, the buyer could not be joined as party-defendant in the SEC case. To include said buyer as a party-defendant in the case pending with the SEC would violate the then existing rule on jurisdiction over intra-corporate disputes. The Court also struck down the argument that there was forum shopping, ruling that the issue of recovery of corporate assets and funds pending with the SEC is a totally different issue from the issue of the validity of the sale, so a decision in the SEC case would not amount tores judicatain the case before the regular court. Thus, the Court merely ordered the suspension of the proceedings before the RTC until the final outcome of the SEC case.The foregoing pronouncements of the Court are exactly in point with the issues in the present case.1wphi1Here, the complaint is for annulment of mortgage with the mortgagee bank as one of the defendants, thus, as held inSaura,10jurisdiction over said complaint is lodged with the regular courts because the mortgagee bank has no intra-corporate relationship with the stockholders. There can also be no forum shopping, because there is no identity of issues. The issue being threshed out in the SEC case is the due execution, authenticity or validity of board resolutions and other documents used to facilitate the execution of the mortgage, while the issue in the case filed by petitioners with the RTC is the validity of the mortgage itself executed between the bank and the corporation, purportedly represented by the spouses Leandro and Lilian Soriano, the President and Treasurer of petitioner LEI, respectively. Thus, there is no reason to dismiss the complaint in this case.IN VIEW OF THE FOREGOING, the Resolution of the Regional Trial Court of Legaspi City, Branch 4, dated November 11, 1999, dismissing petitioners complaint in Civil Case No. 9729, and its Order dated May 15, 2000, denying herein petitioners Motion for Reconsideration and Motion to Admit Amended Complaint, are herebyREVERSEDandSET ASIDE. The Regional Trial Court of Legaspi City, Branch 4, is herebyDIRECTEDtoADMITthe Amended Complaint.Considering further, that this case has been pending for some time and, under R.A. No. 8799, it is now the regular courts which have jurisdiction over intra-corporate disputes, the Regional Trial Court of Legaspi City, Branch 4 is herebyDIRECTEDtoPROCEEDwith dispatch in trying Civil Case No. 9729.SO ORDERED.

THIRD DIVISIONG.R. No. 151932 August 19, 2009HENRY CHING TIU, CHRISTOPHER HALIN GO, and GEORGE CO,Petitioners,vs.PHILIPPINE BANK OF COMMUNICATIONS,Respondent.D E C I S I O NPERALTA,J.:This is a petition for review on certiorari, under Rule 45 of the Rules of Court, seeking to annul and set aside the Decision1dated September 28, 2001, rendered by the Court of Appeals (CA) in CA-G.R. SP No. 57732, dismissing the petition and affirming the assailed Orders of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 21 in Civil Case No. 99-352, dated December 14, 1999 and January 11, 2000.The factual and procedural antecedents are as follows:In June 1993, Asian Water Resources, Inc. (AWRI), represented by herein petitioners, applied for a real estate loan with the Philippine Bank of Communications (PBCOM) to fund its purified water distribution business. In support of the loan application, petitioners submitted a Board Resolution2dated June 7, 1993. The loan was guaranteed by collateral over the property covered by Transfer Certificate of Title No. T-13020.3The loan was eventually approved.4In August 1996, AWRI applied for a bigger loan from PBCOM for additional capitalization using the same Board Resolution, but without any additional real estate collateral. Considering that the proposed additional loan was unsecured, PBCOM required all the members of the Board of Directors of AWRI to become sureties. Thus, on August 16, 1996, a Surety Agreement5was executed by its Directors and acknowledged by a notary public on the same date. All copies of the Surety Agreement, except two, were kept by PBCOM. Of the two copies kept by the notary public, one copy was retained for his notarial file and the other was sent to the Records Management and Archives Office, through the Office of the RTC Clerk of Court.6Thereafter, on December 16, 1998, AWRI informed the bank of its desire to surrender and/or assign in its favor, all the present properties of the former to apply as dacion en pago for AWRIs existing loan obligation to the bank.7On January 11, 1999, PBCOM sent a reply denying the request. On May 12, 1999, PBCOM sent a letter to petitioners demanding full payment of its obligation to the bank.8Its demands having remained unheeded, PBCOM instructed its counsel to file a complaint for collection against petitioners. The case was docketed as Civil Case No. 99-352.On July 3, 1999, petitioners filed their Answer. It alleged, among other things, that they were not personally liable on the promissory notes, because they signed the Surety Agreement in their capacities as officers of AWRI. They claimed that the Surety Agreement attached to the complaint as Annexes "A" to "A-2"9were falsified, considering that when they signed the same, the words "In his personal capacity" did not yet appear in the document and were merely intercalated thereon without their knowledge and consent.10In support of their allegations, petitioners attached to their Answer a certified photocopy of the Surety Agreement issued on March 25, 1999 by the Records Management and Archives Office in Davao City,11showing that the words "In his personal capacity" were not found at the foot of page two of the document where their signatures appeared.12Because of this development, PBCOMs counsel searched for and retrieved the file copy of the Surety Agreement. The notarial copy showed that the words "In his personal capacity" did not appear on page two of the Surety Agreement.13Petitioners counsel then asked PBCOM to explain the alteration appearing on the agreement. PBCOM subsequently discovered that the insertion was ordered by the bank auditor. It alleged that when the Surety Agreement was inspected by the bank auditor, he called the attention of the loans clerk, Kenneth Cabahug, as to why the words "In his personal capacity" were not indicated under the signature of each surety, in accordance with bank standard operating procedures. The auditor then ordered Mr. Cabahug to type the words "In his personal capacity" below the second signatures of petitioners. However, the notary public was never informed of the insertion.14Mr. Cabahug subsequently executed an affidavit15attesting to the circumstances why the insertion was made.PBCOM then filed a Reply and Answer to Counterclaim with Motion for Leave of Court to Substitute Annex "A" of the Complaint,16wherein it attached the duplicate original copy retrieved from the file of the notary public. PBCOM also admitted its mistake in making the insertion and explained that it was made without the knowledge and consent of the notary public. PBCOM maintained that the insertion was not a falsification, but was made only to speak the truth of the parties intentions. PBCOM also contended that petitioners were already primarily liable on the Surety Agreement whether or not the insertion was made, having admitted in their pleadings that they voluntarily executed and signed the Surety Agreement in the original form. PBCOM, invoking a liberal application of the Rules, emphasized that the motion incorporated in the pleading can be treated as a motion for leave of court to amend and admit the amended complaint pursuant to Section 3, Rule 10 of the Rules of Court.On December 14, 1999, the RTC issued an Order17allowing the substitution of the altered document with the original Surety Agreement, the pertinent portion of which reads:August 16, 1996 attached as Annexes "A" to "A-2" of the reply and answer Resolving the Motion to Substitute Annexes "A" to "A-2" of the complaint and the opposition thereto by the defendant, this Court, in the interest of justice, hereby allows the substitution of said Annexes "A" to "A-2" of the complaint with the duplicate original of notarial copy of the Agreement dated to counter-claim.SO ORDERED.Petitioners filed a motion for reconsideration,18but it was denied in the Order19dated January 11, 2000, to wit:Resolving the motion for reconsideration and the opposition thereto, the Court finds the motion substantially a reiteration of the opposition to plaintiffs motion.Additionally, the instant motion for reconsideration treats on evidentiary matter which can be properly ventilated in the trial proper, hence, there is no cogent reason to disturb the Courts order of December 14, 1999.SO ORDERED.Aggrieved, petitioners sought recourse before the CA via a petition for certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 57732.Petitioners claimed that the RTC acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction in denying their motion for reconsideration and in allowing PBCOM to substitute the altered copy of the Surety Agreement with the duplicate original notarial copy thereof considering that the latters cause of action was solely and principally founded on the falsified document marked as Annexes "A" to "A-2."20On September 28, 2001, the CA rendered a Decision dismissing the petition for lack of merit, the decretal portion of which reads:WHEREFORE, foregoing considered, the instant petition is hereby DENIED DUE COURSE and, accordingly, DISMISSED for lack of merit. The assailed Orders dated December 14, 1999 and January 11, 2000 of the Regional Trial Court of Cagayan de Oro City, Branch 21, are hereby AFFIRMED in toto.SO ORDERED.21Hence, the petition assigning the following errors:IThe COURT committed a reversible error in affirming in toto the order of the lower court allowing the substitution of the falsified document by relying on the provision of section 3, rule 10 of the rules of Court.IIActing as the court on the petition for certiorari, the court committed a reversible error having no jurisdiction to rule on the obligation of the petitioners based on the falsified documentIIIThe court erred in giving credence to the allegation of respondent bank that from August 15 to December 9, 1997 asian water resources inc. obtained several availments of new bigger and additional loans totalLingp2,030,000.00 evidenced by 4 promissory notes marked as annexes "B," "B-1," "B-2" and "B-3."IVThe court failed to consider the misapplication of the principle of equity committed by the lower court in ordering the substitution of the falsified document.22Petitioners argue that the CA committed a reversible error in affirming the Order of the RTC allowing the substitution of the document by relying on Section 3, Rule 10 of the Rules of Court. Petitioners assert that the Rules do not allow the withdrawal and substitution of a "falsified document" once discovered by the opposing party.Petitioners maintain that PBCOMs cause of action was solely and principally founded on the alleged "falsified document" originally marked asAnnexes "A" to "A-2." Thus, the "withdrawal" of the document results in the automatic withdrawal of the whole complaint on the ground that there is no more cause of action to be maintained or enforced by plaintiff against petitioners. Also, petitioners argue that if the substitution will be allowed, their defenses that were anchored on Annexes "A" to "A-2" would be gravely affected. Moreover, considering that the said document was already removed, withdrawn, and disregarded by the RTC, the withdrawal and substitution of the document would prevent petitioners from introducing the falsified documents during the trial as part of their evidence.23Petitioners submit that the RTC misapplied the principle of equity when it allowed PBCOM to substitute the document with the original agreement. Petitioners also claim that the remedy of appeal after the termination of the case in the RTC would become ineffective and inadequate if the Order of the RTC allowing the "withdrawal" and "substitution" of the document would not be nullified, because the falsified document would no longer be found in the records of the case during the appeal.24Petitioners contend that the CA went beyond the issue raised before it when it interpreted the provisions of the Surety Agreement, particularly paragraph 4 thereof, and then ruled on the obligations of the parties based onthe document. Petitioners posit that the CA prematurely ruled on petitioners obligations, considering that their obligations should be determined during trial on the merits, after the parties have been given the opportunity to present their evidence in support of their respective claims. Petitioners stress that the CA went into the merit of the case when it gave credence to the statement of fact of PBCOM that "From August 15 to December 9, 1997, Asian Water Resources, Inc. obtained several availments on its additional loans totallingP2,030,000.00 as evidenced by 4 promissory notes marked as Annexes B, B-1, B-2, and B-3. Thus, the conclusion of the CA in declaring the petitioners liable as sureties violated their right to due process.25For its part, PBCOM argues that since the complaint is based on an actionable document, i.e., the surety agreement, the original or a copy thereof should be attached to the pleading as an exhibit, which shall be deemed part of the pleading. Considering that the surety agreement is annexed to the complaint, it is an integral part thereof and its substitution with another copy is in the nature of a substantial amendment, which is allowed by the Rules, but with prior leave of court.Moreover, PBCOM alleges that since the Rules provides that substantial amendments may be made upon leave of court, the authority of the RTC to allow the amendment is discretionary. Thus, the CA correctly held that the act of granting the said substitution was within the clear and proper discretion of the RTC.The petition is without merit.As to the substitution of the earlier surety agreement that was annexed to the complaint with the original thereof, this Court finds that the RTC did not err in allowing the substitution.The pertinent rule on actionable documents is found in Section 7, Rule 8 of the Rules of Court, which provides that when the cause of action is anchored on a document, its substance must be set forth, and the original or a copy thereof "shall" be attached to the pleading as an exhibit and deemed a part thereof, to wit:Section 7. Action or defense based on document. Whenever an action or defense is based upon a written instrument or document, the substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.With respect to PBCOMs right to amend its complaint, including the documents annexed thereto, after petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically allows amendment by leave of court. The said Section states:SECTION 3. Amendments by leave of court. Except as provided in the next preceding section, substantial amendments may be made only upon leave of court. But such leave may be refused if it appears to the court that the motion was made with intent to delay. Orders of the court upon the matters provided in this section shall be made upon motion filed in court, and after notice to the adverse party, and an opportunity to be heard.This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure inValenzuela v. Court of Appeals,26thus:Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former rule in such manner that the phrase "or that the cause of action or defense is substantially altered" was stricken-off and not retained in the new rules. The clear import of such amendment in Section 3, Rule 10 is that under the new rules, "the amendment may (now) substantially alter the cause of action or defense." This should only be true, however, when despite a substantial change or alteration in the cause of action or defense, the amendments sought to be made shall serve the higher interests of substantial justice, and prevent delay and equally promote the laudable objective of the rules which is to secure a "just, speedy and inexpensive disposition of every action and proceeding."27The granting of leave to file amended pleading is a matter particularly addressed to the sound discretion of the trial court; and that discretion is broad, subject only to the limitations that the amendments should not substantially change the cause of action or alter the theory of the case, or that it was not made to delay the action.28Nevertheless, as enunciated inValenzuela, even if the amendment substantially alters the cause of action or defense, such amendment could still be allowed when it is sought to serve the higher interest of substantial justice; prevent delay; and secure a just, speedy and inexpensive disposition of actions and proceedings.The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of suits and in order that the real controversies between the parties are presented, their rights determined, and the case decided on the merits without unnecessary delay. This liberality is greatest in the early stages of a lawsuit, especially in this case where the amendment was made before the trial of the case, thereby giving the petitioners all the time allowed by law to answer and to prepare for trial.29Furthermore, amendments to pleadings are generally favored and should be liberally allowed in furtherance of justice in order that every case, may so far as possible, be determined on its real facts and in order to speed up the trial of the case or prevent the circuity of action and unnecessary expense. That is, unless there are circumstances such as inexcusable delay or the taking of the adverse party by surprise or the like, which might justify a refusal of permission to amend.30In the present case, there was no fraudulent intent on the part of PBCOM in submitting the altered surety agreement. In fact, the bank admitted that it was a mistake on their part to have submitted it in the first place instead of the original agreement. It also admitted that, through inadvertence, the copy that was attached to the complaint was the copy wherein the words "IN HIS PERSONAL CAPACITY" were inserted to conform to the banks standard practice. This alteration was made without the knowledge of the notary public. PBCOMs counsel had no idea that what it submitted was the altered document, thereby necessitating the substitution of the surety agreement with the original thereof, in order that the case would be judiciously resolved.Verily, it is a cardinal rule of evidence, not just one of technicality but of substance, that the written document is the best evidence of its own contents. It is also a matter of both principle and policy that when the written contract is established as the repository of the parties stipulations, any other evidence is excluded, and the same cannot be used to substitute for such contract, or even to alter or contradict the latter.31The original surety agreement is the best evidence that could establish the parties respective rights and obligations. In effect, the RTC merely allowed the amendment of the complaint, which consequently included the substitution of the altered surety agreement with a copy of the original.It is well to remember at this point that rules of procedure are but mere tools designed to facilitate the attainment of justice. Their strict and rigid application that would result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided.32Applied to the instant case, this not only assures that it would be resolved based on real facts, but would also aid in the speedy disposition of the case by utilizing the best evidence possible to determine the rights and obligations of the party- litigants.Moreover, contrary to petitioners contention, they could not be prejudiced by the substitution since they can still present the substituted documents, Annexes "A" to A-2," as part of the evidence of their affirmative defenses. The substitution did not prejudice petitioners or delay the action. On the contrary, it tended to expedite the determination of the controversy. Besides, the petitioners are not precluded from filing the appropriate criminal action against PBCOM for attaching the altered copy of the surety agreement to the complaint. The substitution of the documents would not, in any way, erase the existence of falsification, if any. The case before the RTC is civil in nature, while the alleged falsification is criminal, which is separate and distinct from another. Thus, the RTC committed no reversible error when it allowed the substitution of the altered surety agreement with that of the original.A Petition for Certiorari under Rule 65 of the Rules of Court is intended for the correction of errors of jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction. Its principal office is only to keep the inferior court within the parameters of its jurisdiction or to prevent it from committing such a grave abuse of discretion amounting to lack or excess of jurisdiction.33For a petition forcertiorarito prosper, the essential requisites that have to concur are: (1) the writ is directed against a tribunal, a board or any officer exercising judicial or quasi-judicial functions; (2) such tribunal, board or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law.341avvphi1The phrasewithout jurisdictionmeans that the court acted with absolute lack of authority or want of legal power, right or authority to hear and determine a cause or causes, considered either in general or with reference to a particular matter. It means lack of power to exercise authority.Excess of jurisdictionoccurs when the court transcends its power or acts without any statutory authority; or results when an act, though within the general power of a tribunal, board or officer (to do) is not authorized, and is invalid with respect to the particular proceeding, because the conditions which alone authorize the exercise of the general power in respect of it are wanting.Grave abuse of discretionimplies such capricious and whimsical exercise of judgment as to be equivalent to lack or excess of jurisdiction; simply put, power is exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive duty or to a virtual refusal either to perform the duty enjoined or to act at all in contemplation of law.35The present case failed to comply with the above-stated requisites. In the instant case, the soundness of the RTCs Order allowing the substitution of the document involves a matter of judgment and discretion, which cannot be the proper subject of a petition for certiorari under Rule 65. This rule is only intended to correct defects of jurisdiction and not to correct errors of procedure or matters in the trial courts findings or conclusions.However, this Court agrees with the petitioners contention that the CA should not have made determinations as regards the parties respective rights based on the surety agreement. The CA went beyond the issues brought before it and effectively preempted the RTC in making its own determinations. It is to be noted that the present case is still pending determination by the RTC. The CA should have been more cautious and not have gone beyond the issues submitted before it in the petition for certiorari; instead, it should have squarely addressed whether or not there was grave abuse of discretion on the part of the RTC in issuing the Orders dated December 14, 1999 and January 11, 2000.WHEREFORE, premises considered, the petition is DENIED. Subject to the above disquisitions, the Decision of the Court of Appeals in CA-G.R. SP No. 57732, dated September 28, 2001, and the Orders of the Regional Trial Court of Cagayan de Oro City, Branch 21, in Civil Case No. 99-352, dated December 14, 1999 and January 11, 2000, are AFFIRMED.SO ORDERED.

FIRST DIVISIONG.R. No. 133657 May 29, 2002REMINGTON INDUSTRIAL SALES CORPORATION,petitioner,vs.THE COURT OF APPEALS and BRITISH STEEL (ASIA), LTD.,respondents.YNARES-SANTIAGO,J.:Before us is a petition for review under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals in CA-G.R. SP No. 44529 dated February 24, 19981, which granted the petition for certiorari filed by respondent British Steel Asia Ltd. (British Steel) and ordered the dismissal of petitioner Remington Industrial Sales Corporations (Remington) complaint for sum of money and damages. Also assailed in this petition is the resolution2of the Court of Appeals denying petitioners motion for reconsideration.The facts of the case, as culled from the records, are as follows:On August 21, 1996, petitioner filed a complaint3for sum of money and damages arising from breach of contract, docketed as Civil Case No. 96-79674, before the sala of Judge Marino M. De la Cruz of the Regional Trial Court of Manila, Branch 22. Impleaded as principal defendant therein was Industrial Steels, Ltd. (ISL), with Ferro Trading GMBH (Ferro) and respondent British Steel as alternative defendants.ISL and respondent British Steel separately moved for the dismissal of the complaint on the ground that it failed to state a cause of action against them. On April 7, 1997, the RTC denied the motions to dismiss,4as well as the ensuing motion for reconsideration.5ISL then filed its answer to the complaint.On the other hand, respondent British Steel filed a petition for certiorari and prohibition before the Court of Appeals,6docketed as CA-G.R. SP No. 44529. Respondent claimed therein that the complaint did not contain a single averment that respondent committed any act or is guilty of any omission in violation of petitioners legal rights. Apart from the allegation in the complaints "Jurisdictional Facts" that:1.05. Defendants British Steel (Asia) Ltd. and Ferro Trading Gmbh, while understood by the plaintiff as mere suppliers of goods for defendant ISL, are impleaded as party defendants pursuant to Section 13, Rule 3 of the Revised Rules of Court.7no other reference was made to respondent that would constitute a valid cause of action against it. Since petitioner failed to plead any cause of action against respondent as alternative defendant under Section 13, Rule 3,8the trial court should have ordered the dismissal of the complaint insofar as respondent was concerned.Meanwhile, petitioner sought to amend its complaint by incorporating therein additional factual allegations constitutive of its cause of action against respondent. Pursuant to Section 2, Rule 109of the Rules of Court, petitioner maintained that it can amend the complaint as a matter of right because respondent has not yet filed a responsive pleading thereto.10Subsequently, petitioner filed a Manifestation and Motion11in CA-G.R. SP No. 44529 stating that it had filed a Motion to Admit Amended Complaint together with said Amended Complaint before the trial court. Hence, petitioner prayed that the proceedings in the special civil action be suspended.On January 29, 1998, the trial court ruled on petitioners Motion to Admit Amended Complaint thus:WHEREFORE, the Amended Complaint is NOTED and further proceedings thereon and action on the other incidents as aforementioned are hereby held in abeyance until final resolution by the Honorable Court of Appeals (Special 6thDivision) of the petition for certiorari and prohibition of petitioner (defendant British) and/or Manifestations and Motions of therein private respondent, herein plaintiff.SO ORDERED.12Thereafter, on February 24, 1998, the Court of Appeals rendered the assailed decision in CA-G.R. SP No. 44529 as follows:WHEREFORE, this Court grants the writ of certiorari and orders the respondent judge to dismiss without prejudice the Complaint in Civil Case No. 96-79674 against petitioner British Steel (Asia) Ltd. Costs against private respondent.SO ORDERED.13In the same decision, the Court of Appeals addressed petitioners prayer for suspension of proceedings in this wise:The incident which transpired after the filing of the instant petition for certiorari and prohibition are immaterial in the resolution of this petition. What this Court is called upon to resolve is whether the lower court committed grave abuse of discretion when it denied petitioners motion to dismiss the complaint against it. The admission or rejection by the lower court of said amended complaint will not, insofar as this Court is concerned, impinge upon the issue of whether or not said court gravely abused its discretion in denying petitioners motion to dismiss.14Petitioner filed a motion for reconsideration of the appellate courts decision, which was denied in a resolution dated April 28, 1998. Hence, this petition, anchored on the following grounds:-I-THE HON. COURT OF APPEALS ERRED IN ORDERING THE DISMISSAL OF THE COMPLAINT AGAINST THE PRIVATE RESPONDENT FOR LACK OF CAUSE OF ACTION UNDER THE ORIGINAL COMPLAINT EVEN AS SAID COMPLAINT WAS ALREADY AMENDED AS A MATTER OF RIGHT AND SUFFICIENT CAUSES OF ACTION ARE AVERRED IN THE AMENDED COMPLAINT, IN GROSS VIOLATION OF SEC. 2, RULE 10 OF THE 1997 RULES OF CIVIL PROCEDURE.-II-THE HON. COURT OF APPEALS ERRED IN HOLDING THAT IF THE PETITIONER WANTS TO PURSUE ITS CASE AGAINST THE PRIVATE RESPONDENT, IT HAS TO REFILE THE COMPLAINT, THUS PRE-EMPTING THE RIGHT OF THE LOWER COURT TO RULE ON THE AMENDED COMPLAINT AND COMPELLING THE PETITIONER TO LITIGATE ITS CAUSES OF ACTION AGAINST THE PRIVATE RESPONDENT AS AN ALTERNATIVE DEFENDANT IN A SEPARATE ACTION, THEREBY ABETTING MULTIPLICITY OF SUITS.15The basic issue in this case is whether or not the Court of Appeals, by granting the extraordinary writ of certiorari, correctly ordered the dismissal of the complaint for failure to state a cause of action, despite the fact that petitioner exercised its right to amend the defective complaint under Section 2, Rule 10 of the Rules of Court. Stated differently, the query posed before us is: can a complaint still be amended as a matter of right before an answer has been filed, even if there was a pending proceeding for its dismissal before the higher court?Section 2, Rule 1016of the Revised Rules of Court explicitly states that a pleading may be amended as a matter of right before a responsive pleading is served. This only means that prior to the filing of an answer, the plaintiff has the absolute right to amend the complaint whether a new cause of action or change in theory is introduced.17The reason for this rule is implied in the subsequent Section 3 of Rule 1018. Under this provision, substantial amendment of the complaint is not allowed without leave of court after an answer has been served, because any material change in the allegations contained in the complaint could prejudice the rights of the defendant who has already set up his defense in the answer.Conversely, it cannot be said that the defendants rights have been violated by changes made in the complaint if he has yet to file an answer thereto. In such an event, the defendant has not presented any defense that can be altered19or affected by the amendment of the complaint in accordance with Section 2 of Rule 10. The defendant still retains the unqualified opportunity to address the allegations against him by properly setting up his defense in the answer. Considerable leeway is thus given to the plaintiff to amend his complaint once, as a matter of right, prior to the filing of an answer by the defendant.The right granted to the plaintiff under procedural law to amend the complaint before an answer has been served is not precluded by the filing of a motion to dismiss20or any other proceeding contesting its sufficiency. Were we to conclude otherwise, the right to amend a pleading under Section 2, Rule 10 will be rendered nugatory and ineffectual, since all that a defendant has to do to foreclose this remedial right is to challenge the adequacy of the complaint before he files an answer.Moreover, amendment of pleadings is favored and should be liberally allowed in the furtherance of justice in order to determine every case as far as possible on its merits without regard to technicalities. This principle is generally recognized to speed up trial and save party litigants from incurring unnecessary expense, so that a full hearing on the merits of every case may be had and multiplicity of suits avoided.21In this case, the remedy espoused by the appellate court in its assailed judgment will precisely result in multiple suits, involving the same set of facts and to which the defendants would likely raise the same or, at least, related defenses. Plainly stated, we find no practical advantage in ordering the dismissal of the complaint against respondent and for petitioner to re-file the same, when the latter can still clearly amend the complaint as a matter of right. The amendment of the complaint would not prejudice respondents or delay the action, as this would, in fact, simplify the case and expedite its disposition.The fact that the other defendants below has filed their answers to the complaint does not bar petitioners right to amend the complaint as against respondent. Indeed, where some but not all the defendants have answered, the plaintiff may still amend its complaint once, as a matter of right, in respect to claims asserted solely against the non-answering defendant, but not as to claims asserted against the other defendants.22Furthermore, we do not agree with respondents claim that it will be prejudiced by the admission of the Amended Complaint because it had spent time, money and effort to file its petition before the appellate court.23We cannot see how the result could be any different for respondent, if petitioner merely re-filed the complaint instead of being allowed to amend it. As adverted to earlier, amendment would even work to respondents advantage since it will undoubtedly speed up the proceedings before the trial court. Consequently, the amendment should be allowed in the case at bar as a matter of right in accordance with the rules.WHEREFORE, the petition isGRANTED. The assailed decision and resolution of the Court of Appeals in CA-G.R. SP No. 44529 dated February 24, 1998 and April 28, 1998, respectively, areREVERSEDandSET ASIDE. The Regional Trial Court of Manila, Branch 22 is further ordered toADMITpetitioners Amended Complaint in Civil Case No. 96-79674 and to conduct further proceedings in said case.SO ORDERED.

SECOND DIVISIONG.R. No. 108538 January 22, 1996LOURDES A. VALMONTE and ALFREDO D. VALMONTE,petitioners,vs.THE HONORABLE COURT OF APPEALS, THIRD DIVISION and ROSITA DIMALANTA,respondents.D E C I S I O NMENDOZA,J.:Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in an action for partition filed against her and her husband, who is also her attorney, summons intended for her may be served on her husband, who has a law office in the Philippines. The Regional Trial Court of Manila, Branch 48, said no and refused to declare Lourdes A. Valmonte in default, but the Court of Appeals said yes. Hence this petition for review oncertiorari.The facts of the case are as follows:Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife. They are both residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A. Petitioner Alfredo D. Valmonte, who is a member of the Philippine bar, however, practices his profession in the Philippines, commuting for this purpose between his residence in the state of Washington and Manila, where he holds office at S-304 Gedisco Centre, 1564 A. Mabini Ermita, Manila.On March 9, 1992, private respondent Rosita Dimalanta, who is the sister of petitioner Lourdes A. Valmonte, filed a complaint for partition of real property and accounting of rentals against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte before the Regional Trial Court of Manila, Branch 48. The subject of the action is a three-door apartment located in Paco, Manila.In her Complaint, private respondent alleged:The plaintiff is of legal age, a widow and is at present a resident of 14823 Conway Road, Chesterfield, Missouri, U.S.A., while the defendants are spouses, of legal age and at present residents of 90222 Carkeek Drive, South Seattle, Washington, U.S.A., but, for purposes of this complaint may be served with summons at Gedisco Center, Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant Alfredo D. Valmonte as defendant Lourdes Arreola Valmonte's spouse holds office and where he can be found.Apparently, the foregoing averments were made on the basis of a letter previously sent by petitioner Lourdes A. Valmonte to private respondent's counsel in which, in regard to the partition of the property in question, she referred private respondent's counsel to her husband as the party to whom all communications intended for her should be sent. The letter reads:July 4, 1991Dear Atty. Balgos:This is in response to your letter, dated 20 June 1991, which I received on 3 July 1991. Please address all communications to my lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and fax numbers appear below.c/o Prime MarineGedisco Center, Unit 3041564 A. Mabini, ErmitaMetro ManilaTelephone: 521-1736Fax: 521-2095Service of summons was then made upon petitioner Alfredo D. Valmonte, who at the time, was at his office in Manila. Petitioner Alfredo D. Valmonte accepted the summons, insofar as he was concerned, but refused to accept the summons for his wife, Lourdes A. Valmonte, on the ground that he was not authorized to accept the process on her behalf. Accordingly the process server left without leaving a copy of the summons and complaint for petitioner Lourdes A. Valmonte.Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim. Petitioner Lourdes A. Valmonte, however, did not file her Answer. For this reason private respondent moved to declare her in default. Petitioner Alfredo D. Valmonte entered a special appearance in behalf of his wife and opposed the private respondent's motion.In its Order dated July 3, 1992, the trial court, denied private respondent's motion to declare petitioner Lourdes A. Valmonte in default. A motion for reconsideration was similarly denied on September 23, 1992. Whereupon, private respondent filed a petition forcertiorari, prohibition andmandamuswith the Court of Appeals.On December 29, 1992, the Court of Appeals rendered a decision granting the petition and declaring Lourdes A. Valmonte in default. A copy of the appellate court's decision was received by petitioner Alfredo D. Valmonte on January 15, 1993 at his Manila office and on January 21, 1993 in Seattle, Washington. Hence, this petition.The issue at bar is whether in light of the facts set forth above, petitioner Lourdes A. Valmonte was validly served with summons. In holding that she had been, the Court of Appeals stated:1[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the aforementioned counsel of Dimalanta to addressall communications(evidently referring to her controversy with her sister Mrs. Dimalanta over the Paco property, now the subject of the instant case) to her lawyer who happens also to be her husband. Such directive was made without any qualification just as was her choice/designation of her husband Atty. Valmonte as her lawyer likewise made without any qualification or reservation. Any disclaimer therefore on the part of Atty. Valmonte as to his being his wife's attorney (at least with regard to the disputevis-a-vis(sic) the Paco property) would appear to be feeble or trifling, if not incredible.This view is bolstered by Atty. Valmonte's subsequent alleged special appearance made on behalf of his wife. Whereas Mrs. Valmonte had manifestly authorized her husband to serve as her lawyer relative to her dispute with her sister over the Paco property and to receive all communications regarding the same and subsequently to appear on her behalf by way of a so-called special appearance, she would nonetheless now insist that the same husband would nonetheless had absolutely no authority to receive summons on her behalf. In effect, she is asserting that representation by her lawyer (who is also her husband) as far as the Paco property controversy is concerned, should only be made by him when such representation would be favorable to her but not otherwise. It would obviously be inequitable for this Court to allow private respondent Lourdes A. Valmonte to hold that her husband has the authority to represent her when an advantage is to be obtained by her and to deny such authority when it would turn out to be her disadvantage. If this be allowed, Our Rules of Court, instead of being an instrument to promote justice would be made use of to thwart or frustrate the same.xxx xxx xxxTurning to another point, it would not do for Us to overlook the fact that the disputed summons was served not upon just an ordinary lawyer of private respondent Lourdes A. Valmonte, but upon her lawyer husband. But that is not all, the same lawyer/husband happens to be also her co-defendant in the instant case which involves real property which, according to her lawyer/husband/co-defendant, belongs to the conjugal partnership of the defendants (the spouses Valmonte). It is highly inconceivable and certainly it would be contrary to human nature for the lawyer/husband/co-defendant to keep to himself the fact that they (the spouses Valmonte) had been sued with regard to a property which, he claims to be conjugal. Parenthetically, there is nothing in the records of the case before Us regarding any manifestation by private respondent Lourdes A. Valmonte about her lack of knowledge about the case instituted against her and her lawyer/husband/co-defendant by her sister Rosita. . . .PREMISES CONSIDERED, the instant petition forcertiorari, prohibition andmandamusis given due course. This Court hereby Resolves to nullify the orders of the courta quodated July 3, 1992 and September 23, 1992 and further declares private respondent Lourdes Arreola Valmonte as having been properly served with summons.Petitioners assail the aforequoted decision, alleging that the Court of Appeals erred (1) in refusing to apply the provisions of Rule 14, 17 of the Revised Rules of Court and applying instead Rule 14, 8 when the fact is that petitioner Lourdes A. Valmonte is a nonresident defendant; and (2) because even if Rule 14, 8 is the applicable provision, there was no valid substituted service as there was no strict compliance with the requirement by leaving a copy of the summons and complaint with petitioner Alfredo D. Valmonte. Private respondent, upon the other hand, asserts that petitioners are invoking a technicality and that strict adherence to the rules would only result in a useless ceremony.We hold that there was no valid service of process on Lourdes A. Valmonte.To provide perspective, it will be helpful to determine first the nature of the action filed against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private respondent, whether it is an actionin personam,in remorquasi in rem. This is because the rules on service of summons embodied in Rule 14 apply according to whether an action is one or the other of these actions.In an actionin personam, personal service of summons or, if this is not possible and he cannot be personally served, substituted service, as provided in Rule 14, 7-82is essential for the acquisition by the court of jurisdiction over the person of a defendant who does not voluntarily submit himself to the authority of the court.3If defendant cannot be served with summons because he is temporarily abroad, but otherwise he is a Philippine resident, service of summons may, by leave of court, be made by publication.4Otherwise stated, a resident defendant in an action in personam, who cannot be personally served with summons, may be summoned either by means of substituted service in accordance with Rule 14, 8 or by publication as provided in 17 and 18 of the same Rule.5In all of these cases, it should be noted, defendant must be a resident of the Philippines, otherwise an action in personam cannot be brought because jurisdiction over his person is essential to make a binding decision.On the other hand, if the action isin remorquasi in rem, jurisdiction over the person of the defendant is not essential for giving the court jurisdiction so long as the court acquires jurisdiction over theres. If the defendant is a nonresident and he is not found in the country, summons may be served exterritorially in accordance with Rule 14, 17, which provides:17. Extraterritorial service. - When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under section 7; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer..In such cases, what gives the court jurisdiction in an actionin remorquasiin remis that it has jurisdiction over theres,i.e.the personal status of the plaintiff who is domiciled in the Philippines or the property litigated or attached.Service of summons in the manner provided in 17 is not for the purpose of vesting it with jurisdiction but for complying with the requirements of fair play or due process, so that he will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff and he can thereby take steps to protect his interest if he is so minded.6Applying the foregoing rules to the case at bar, private respondent's action, which is for partition and accounting under Rule 69, is in the nature of an actionquasi in rem. Such an action is essentially for the purpose of affecting the defendant's interest in a specific property and not to render a judgment against him. As explained in the leading case ofBanco Espaol Filipino v. Palanca:7[An actionquasi in remis] an action which while not strictly speaking an actionin rempartakes of that nature and is substantially such. . . . The actionquasi in remdiffers from the true actionin remin the circumstance that in the former an individual is named as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the property. All proceedings having for their sole object the sale or other disposition of the property of the defendant, whether by attachment, foreclosure, or other form of remedy, are in a general way thus designated. The judgment entered in these proceedings is conclusive only between the parties.As petitioner Lourdes A. Valmonte is a nonresident who is not found in the Philippines, service of summons on her must be in accordance with Rule 14, 17. Such service, to be effective outside the Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court should be sent by registered mail to the last known address of the defendant; or (3) in any other manner which the court may deem sufficient.Since in the case at bar, the service of summons upon petitioner Lourdes A. Valmonte was not done by means of any of the first two modes, the question is whether the service on her attorney, petitioner Alfredo D. Valmonte, can be justified under the third mode, namely, "in any . . . manner the court may deem sufficient."We hold it cannot. This mode of service, like the first two, must be made outside the Philippines, such as through the Philippine Embassy in the foreign country where the defendant resides.8Moreover, there are several reasons why the service of summons on Atty. Alfredo D. Valmonte cannot be considered a valid service of summons on petitioner Lourdes A. Valmonte. In the first place, service of summons on petitioner Alfredo D. Valmonte was not made upon the order of the court as required by Rule 14, 17 and certainly was not a mode deemed sufficient by the court which in fact refused to consider the service to be valid and on that basis declare petitioner Lourdes A. Valmonte in default for her failure to file an answer.In the second place, service in the attempted manner on petitioner was not made upon prior leave of the trial court as required also in Rule 14, 17. As provided in 19, such leave must be applied for by motion in writing, supported by affidavit of the plaintiff or some person on his behalf and setting forth the grounds for the application.Finally, and most importantly, because there was no order granting such leave, petitioner Lourdes A. Valmonte was not given ample time to file her Answer which, according to the rules, shall be not less than sixty (60) days after notice. It must be noted that the period to file an Answer in an action against a resident defendant differs from the period given in an action filed against a nonresident defendant who is not found in the Philippines. In the former, the period is fifteen (15) days from service of summons, while in the latter, it is at least sixty (60) days from notice.Strict compliance with these requirements alone can assure observance of due process. That is why in one case,9although the Court considered publication in the Philippines of the summons (against the contention that it should be made in the foreign state where defendant was residing) sufficient, nonetheless the service was considered insufficient because no copy of the summons was sent to the last known correct address in the Philippines..Private respondent cites the ruling inDe Leon v. Hontanosas, 67 SCRA 458,462-463 (1975), in which it was held that service of summons upon the defendant's husband was binding on her. But the ruling in that case is justified because summons were served upon defendant's husband in their conjugal home in Cebu City and the wife was only temporarily absent, having gone to Dumaguete City for a vacation. The action was for collection of a sum of money. In accordance with Rule 14, 8, substituted service could be made on any person of sufficient discretion in the dwelling place of the defendant, and certainly defendant's husband, who was there, was competent to receive the summons on her behalf. In any event, it appears that defendant in that case submitted to the jurisdiction of the court by instructing her husband to move for the dissolution of the writ of attachment issued in that case.On the other hand, in the case ofGemperle v.Schenker,10it was held that service on the wife of a nonresident defendant was found sufficient because the defendant had appointed his wife as his attorney-in-fact. It was held that although defendant Paul Schenker was a Swiss citizen and resident of Switzerland, service of summons upon his wife Helen Schenker who was in the Philippines was sufficient because she was her husband's representative and attorney-in-fact in a civil case, which he had earlier filed against William Gemperle. In fact Gemperle's action was for damages arising from allegedly derogatory statements contained in the complaint filed in the first case. As this Court said, "[i]n other words, Mrs. Schenker had authority to sue, and had actually sued, on behalf of her husband, so that she was, also, empowered to represent him in suits filed against him, particularly in a case, like the one at bar, which is a consequence of the action brought by her on his behalf"11Indeed, if instead of filing an independent action Gemperle filed a counterclaim in the action brought by Mr. Schenker against him, there would have been no doubt that the trial court could have acquired jurisdiction over Mr. Schenker through his agent and attorney-in-fact, Mrs. Schenker.In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint her husband as her attorney-in-fact. Although she wrote private res- pondent's attorney that "all communications" intended for her should be addressed to her husband who is also her lawyer at the latter's address in Manila, no power of attorney to receive summons for her can be inferred therefrom. In fact the letter was written seven months before the filing of this case below, and it appears that it was written in connection with the negotiations between her and her sister, respondent Rosita Dimalanta, concerning the partition of the property in question. As is usual in negotiations of this kind, the exchange of correspondence was carried on by counsel for the parties. But the authority given to petitioner's husband in these negotiations certainly cannot be construed as also including an authority to represent her in any litigation.For the foregoing reasons, we hold that there was no valid service on petitioner Lourdes A. Valmonte in this case.WHEREFORE, the decision appealed from is REVERSED and the orders dated July 3, 1992 and September 23, 1992 of the Regional Trial Court of Manila, Branch 48 are REINSTATED.SO ORDERED.

SECOND DIVISIONG.R. No. 131724 February 28, 2000MILLENIUM INDUSTRIAL COMMERCIAL CORPORATION,petitioner,vs.JACKSON TAN,respondent.MENDOZA,J.:In December 1994, Millenium Industrial Commercial Corporation, petitioner herein, executed a Deed of Real Estate Mortgage1over its real property covered by TCT No. 24069 in favor of respondent Jackson Tan. The mortgage was executed to secure payment of petitioner's indebtedness to respondent in the amount of P2 million, without monthly interest, but which, at maturity date on June 10, 1995, was payable in the amount of P4 million.1wphi1.ntOn November 9, 1995, respondent filed against petitioner a complaint for foreclosure of mortgage in the Regional Trial Court, Branch 6, Cebu City. On November 21, 1995, summons and a copy of the complaint were served upon petitioner through a certain Lynverd Cinches, described in the sheriff's return, dated November 23, 1995, as "a Draftsman, a person of sufficient age and (discretion) working therein, he is the highest ranking officer or Officer-in-Charge of defendant's Corporation, to receive processes of the Court."2Petitioner moved for the dismissal of the complaint on the ground that there was no valid service of summons upon it, as a result of which the trial court did not acquire jurisdiction over it. Petitioner invoked Rule 14, 13 of the 1964 Rules of Court and contended that service on Lynverd Cinches, as alleged in the sheriff's return, was invalid as he is not one of the authorized persons on whom summons may be served and that, in fact, he was not even its employee.3Petitioner also sought the dismissal of the complaint against it on the ground that it had satisfied its obligation to respondent when the latter opted to be paid in shares of stock under the following stipulation in the mortgage contract:That in the remote possibility of failure on the part of the mortgagor to pay the mortgage obligation and interest in cash, the MORTGAGEE at his option may demand that payment be made in the form of shares of stock of Millenium Industrial Commercial Corporation totaling at least 4,000,000 shares.4Petitioner further prayed for "other reliefs just and equitable under the premises."5On December 15, 1995, the trial court denied petitioner's Motion to Dismiss. Its order stated:This refers to the Motion to Dismiss, dated December 4, 1995, by defendant anchored on the following grounds:1. That the Court had not acquired jurisdiction over the person of the defendant corporation because summons was served upon a person who is not known to or an employee of the defendant corporation.2. That the obligation sought to be collected was already paid and extinguished.By interposing the second ground, the defendant has availed of an affirmative defense on the basis of which the Court has to hear and receive evidence.For the Court to validly decide the said plea of the defendant it necessarily had to acquire jurisdiction over the person of the defendant.Thus, defendant is considered to have then abandoned its first ground and is deemed to have voluntarily submitted itself to the jurisdiction of the Court. It is a legal truism that voluntary appearance cures the defect of the summons, if any. The defendant's filing of the motion to dismiss by pleading therein the second ground amount to voluntary appearance and it indeed cured the defeat.Wherefore, Motion to Dismiss is hereby denied for lack of merit.6Petitioner moved for reconsideration, but its motion was denied by the trial court in its order, dated January 16, 1996, for failure of petitioner to raise any new ground. Petitioner then filed a petition forcertiorariin the Court of Appeals, assailing the aforesaid orders of the trial court.On September 18, 1997, the Court of Appeals dismissed the petition.7The appellate court ruled that although petitioner denied Lynverd Cinches' authority to receive summons for it, its actual receipt of the summons could be inferred from its filing of a motion to dismiss, hence, the purpose for issuing summons had been substantially achieved. Moreover, it was held, by including the affirmative defense that it had already paid its obligation and praying for other reliefs in its Motion to Dismiss, petitioner voluntarily submitted to the jurisdiction of the court.8Hence, this petition for review. Petitioner raises the following issues:I. WHETHER OR NOT SERVICE OF SUMMONS UPON A MERE DRAFTSMAN WHO IS NOT ONE OF THOSE UPON WHOM SUMMONS MAY BE SERVED IN CASE OF A DEFENDANT CORPORATION AS MENTIONED IN THE RULES IS VALID.II. WHETHER OR NOT THE INCLUSION OF ANOTHER AFFIRMATIVE RELIEF IN A MOTION TO DISMISS ABANDONS AND WAIVES THE GROUND OF LACK OF JURISDICTION OVER THE PERSON OF THE DEFENDANT THEREIN ALSO PLEADED UNDER PREVAILING LAW AND JURISPRUDENCE.III. WHETHER OR NOT THERE IS A LEGAL GROUND TO GRANT PETITIONER'S MOTION TO DISMISS THE COMPLAINT BELOW.First. Petitioner objects to the application of the doctrine of substantial compliance in the service of summons for two reasons: (1) the enumeration of persons on whom service of summons on a corporation may be effected in Rule 14, 13, is exclusive and mandatory; and (2) even assuming that substantial compliance is allowed, its alleged actual receipt of the summons is based on an unfounded speculation because there is nothing in the records to show that Lynverd Cinches actually turned over the summons to any of the officers of the corporation.9Petitioner contends that it was able to file a motion to dismiss only because of its timely discovery of the foreclosure suit against it when it checked the records of the case in the trial court.The contention is meritorious.Summons is the means by which the defendant in a case is notified of the existence of an action against him and, thereby, the court is conferred jurisdiction over the person of the defendant.10If the defendant is a corporation, Rule 14, 13 requires that service of summons be made upon the corporation's president, manager, secretary, cashier, agent, or any of its directors.11The rationale of the rule is that service must be made on a representative so integrated with the corporation sued as to make ita prioripresumable that he will realize his responsibilities and know what he should do with any legal papers received by him.12Petitioner contends that the enumeration in Rule 14, 13 is exclusive and that service of summons upon one who is not enumerated therein is invalid. This is the general rule.13However, it is settled that substantial compliance by serving summons on persons other than those mentioned in the above rule may be justified. InG & G Trading Corporation v.Court of Appeals,14we ruled that although the service of summons was made on a person not enumerated in Rule 14, 13, if it appears that the summons and complaint were in fact received by the corporation, there is substantial compliance with the rule as its purpose has been attained.InPorac Trucking,Inc.v.Court of Appeals,15this Court enumerated the requisites for the application of the doctrine of substantial compliance, to wit: (a) there must be actual receipt of the summons by the person served,i.e., transferring possession of the copy of the summons from the Sheriff to the person served; (b) the person served must sign a receipt or the sheriff's return; and (c) there must be actual receipt of the summons by the corporation through the person on whom the summons was actually served.16The third requisite is the most important for it is through such receipt that the purpose of the rule on the service of summons is attained.In this case, there is no dispute that the first and second requisites were fulfilled. With respect to the third, the appellate court held that petitioner's filing of a motion to dismiss the foreclosure suit is proof that it received the copy of the summons and the complaint. There is, however, no direct proof of this or that Lynverd Cinches actually turned over the summons to any of the officers of the corporation. In contrast, in our cases applying the substantial compliance rule,17there was direct evidence, such as the admission of the corporation's officers, of receipt of summons by the corporation through the person upon whom it was actually served. The question is whether it is allowable to merely infer actual receipt of summons by the corporation through the person on whom summons was served. We hold that it cannot be allowed. For there to be substantial compliance, actual receipt of summons by the corporation through the person served must be shown. Where a corporation only learns of the service of summons and the filing of the complaint against it through some person or means other than the person actually served, the service of summons becomes meaningless. This is particularly true in the present case where there is serious doubt if Lynverd Cinches, the person on whom service of summons was effected, is in fact an employee of the corporation. Except for the sheriff's return, there is nothing to show that Lynverd Cinches was really a draftsman employed by the corporation.Respondent casts doubt on petitioner's claim that it came to know about the summons and the complaint against it only after it learned that there was a pending foreclosure of its mortgage. There is nothing improbable about this claim. Petitioner was in default in the payment of its loan. It had received demand letters from respondent. Thus, it had reason to believe that a foreclosure suit would be filed against it. The appellate court was, therefore, in error in giving weight to respondent's claims. Receipt by petitioner of the summons and complaint cannot be inferred from the fact that it filed a Motion to Dismiss the case.Second. We now turn to the issue of jurisdiction by estoppel. Both the trial court and the Court of Appeals held that by raising the affirmative defense of payment and by praying for other reliefs in its Motion to Dismiss, petitioner in effect waived its objection to the trial court's jurisdiction over it. We think this is error.Our decision inLa Naval Drug Corporation v.Court of Appeals18settled this question. The rule prior toLa Navalwas that if a defendant, in a motion to dismiss, alleges grounds for dismissing the action other than lack of jurisdiction, he would be deemed to have submitted himself to the jurisdiction of the court.19This rule no longer holds true. Noting that the doctrine of estoppel by jurisdiction must be unequivocal and intentional, we ruled inLa Naval:Jurisdiction over the person must be seasonably raised,i.e., that it is pleaded in a motion to dismiss or by way of an affirmative defense. Voluntary appearance shall be deemed a waiver of this defense. The assertion, however, of affirmative defenses shall not be construed as an estoppel or as a waiver of such defense.20Third. Finally, we turn to the effect of petitioner's prayer for "other reliefs" in its Motion to Dismiss. InDe Midgely v.Fernandos,21it was held that, in a motion to dismiss, the allegation of grounds other than lack of jurisdiction over the person of the defendant, including a prayer "for such other reliefs as" may be deemed "appropriate and proper" amounted to voluntary appearance. This, however, must be deemed superseded by the ruling inLa Navalthat estoppel by jurisdiction must be unequivocal and intentional. It would be absurd to hold that petitioner unequivocally and intentionally submitted itself to the jurisdiction of the court by seeking other reliefs to which it might be entitled when the only relief that it can properly ask from the trial court is the dismissal of the complaint against it.1wphi1.ntWHEREFORE, the decision of the Court of Appeals is REVERSED and the complaint against petitioner is DISMISSED.SO ORDERED.THIRD DIVISIONG.R. No. 136426 August 6, 1999E. B. VILLAROSA & PARTNER CO., LTD.,petitioner,vs.HON. HERMINIO I. BENITO, in his capacity as Presiding Judge, RTC, Branch 132, Makati Cityand IMPERIAL DEVELOPMENT CORPORATION, respondent.GONZAGA-REYES,J.:Before this Court is a petition forcertiorariand prohibition with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction seeking to annul and set aside the Orders dated August 5, 1998 and November 20, 1998 of the public respondent Judge Herminio I. Benito of the Regional Trial Court of Makati City, Branch 132 and praying that the public respondent court be ordered to desist from further proceeding with Civil Case No. 98-824.Petitioner E.B. Villarosa & Partner Co., Ltd. is a limited partnership with principal office address at 102 Juan Luna St., Davao City and with branch offices at 2492 Bay View Drive, Tambo, Paraaque, Metro Manila and Kolambog, Lapasan, Cagayan de Oro City. Petitioner and private respondent executed a Deed of Sale with Development Agreement wherein the former agreed to develop certain parcels of land located at Barrio Carmen, Cagayan de Oro belonging to the latter into a housing subdivision for the construction of low cost housing units. They further ag