Rule 2

Case Summary Ruling + Doctrine

00 | Uy v. Sy
(2009) | G.R. No.
123445
01 | Swagman v. Sometime in 1996 and 1997, petitioner RULING:
CA (2005) | G.R. Swagman Hotels and Travel, Inc., through
No. 161135 Atty. Leonor L. Infante and Rodney David The receipts, as well as private respondent’s summary of payments, lend
Hegerty, its president and vice-president, credence to petitioner’s claim that the payments were for the principal loans and
respectively, obtained from private that the interests on the three consolidated loans were waived by the private
respondent Neal B. Christian loans respondent during the undisputed renegotiation of the loans on account of the
evidenced by three promissory notes dated 7 business reverses suffered by the petitioner at the time.
August 1996, 14 March 1997, and 14 July
1997. Each of the promissory notes is in the Since the petitioner did not renege on its obligation to pay the monthly installments
amount of US$50,000 payable after three conformably with their new agreement and even continued paying during the
years from its date with an interest of 15% pendency of the case, the private respondent had no cause of action to file the
per annum payable every three months. In a complaint. It is only upon petitioner’s default in the payment of the monthly
letter dated 16 December 1998, Christian amortizations that a cause of action would arise and give the private respondent a
informed the petitioner corporation that he right to maintain an action against the petitioner.
was terminating the loans and demanded
from the latter payment in the total amount of DOCTRINES:
US$150,000 plus unpaid interests in the total
amount of US$13,500. On 2 February 1999, Elements of a cause of action:
private respondent Christian filed with the
Regional Trial Court a complaint for a sum of 1. A RIGHT in favor of the plaintiff by whatever means and under whatever law it
money and damages against the petitioner arises or is created;
corporation, Hegerty, and Atty. Infante. The
petitioner corporation, together with its 2. An OBLIGATION on the part of the defendant to respect or not to violate such
president and vice-president, filed an Answer right; and
raising as defenses lack of cause of action
and novation of the principal obligations. 3. ACT OR OMISSION on the part of such defendant in violation of the right of the
According to them, Christian had no cause of plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for
action because the three promissory notes which the latter may maintain an action for recovery of damages or other
were not yet due and demandable. appropriate relief.

ISSUE: Whether Christian had a COA at

the time of the filing of the complaint - NO Anticipatory Breach

If the contract is divisible in its performance and the future periodic deliveries are
not yet due, and if the obligor has already manifested his refusal to comply with his
future periodic obligations the contract is entire and the breach is total, hence
there can only be one action for damages. (Danfoss v. Continental Cement Corp)

02 | Ceroferr RULING:
Realty Ceroferr Realty Corporation filed with the The elements (see Doctrine) are present in the case at bar. The complaint alleged
Corporation v. RTC Quezon City a complaint against that petitioner Ceroferr owned Lot 68 covered by a TCT. The complaint further
CA (2002) | G.R. Ernesto D. Santiago damages and alleged that respondent Santiago claimed the portion of Lot 68 used as a jeepney
No. 139539 injunction, with preliminary injunction. In the terminal since he claimed that the jeepney terminal was within Lot 90 owned by
complaint, Ceroferr prayed that Santiago and him and covered by a TCT issued in his name. Despite clarification from petitioner
his agents be enjoined from - claiming Ceroferr that the jeepney terminal was within Lot 68 and not within Lot 90,
possession and ownership over Lot No. 68 of respondent Santiago persisted in his plans to have the area fenced.
the Tala Estate Subdivision, Quezon City,
covered by TCT No. RT-90200 (334555); A defendant who moves to dismiss the complaint on the ground of lack of cause of
and that Santiago and his agents be action, as in this case, hypothetically admits all the averments thereof. The test of
prevented from making use of the vacant lot sufficiency of the facts found in a complaint as constituting a cause of action is
as a jeepney terminal. In his answer, whether or not admitting the facts alleged the court can render a valid judgement
defendant Santiago alleged that the vacant upon the same in accordance with the prayer thereof. The hypothetical admission
lot referred to in the complaint was within Lot extends to the relevant and material facts well pleaded in the complaint and
No. 90 of the Tala Estate Subdivision, inferences fairly deducible therefrom. Hence, if the allegations in the complaint
covered by his TCT No. RT-78 110 (3538); furnish sufficient basis by which the complaint can be maintained, the same should
that he was not claiming any portion of Lot not be dismissed regardless of the defense that may be assessed by the
No. 68 claimed by Ceroferr; that he had the defendants.
legal right to fence Lot No. 90 since this
belonged to him, and he had a permit for the In this case, petitioner Ceroferr’s cause of action has been sufficiently averred in
purpose; and that the complaint did not state the complaint. If it were admitted that the right of ownership of petitioner Ceroferr
a cause of action. Santiago then filed a to the peaceful use and possession of Lot 68 was violated by respondent
motion to dismiss the complaint premised Santiago’s act of encroachment and fencing of the same, then petitioner Ceroferr
primarily on his contention that the trial court would be entitled to damages.
cannot adjudicate the issue of damages
without passing over the conflicting claims of DOCTRINE:
ownership of the parties over the disputed The rules of procedure require that the complaint must state a concise statement
portion. of the ultimate facts or the essential facts constituting the plaintiff’s cause of action.
A fact is essential if it cannot be stricken out without leaving the statement of the
Whether Ceroferr’s complaint states a cause of action inadequate. A complaint states a cause of action only when it has
sufficient cause of action. YES. its three indispensable elements, namely: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created; (2) an obligation
 on the part of the named defendant to respect or not to violate such right; and (3)
an act or omission on the part of such defendant violative of the right of plaintiff or
constituting a breach of the obligation of defendant to the plaintiff for which the
latter may maintain an action for recovery of damages. If these elements are not
extant, the complaint becomes vulnerable to a motion to dismiss on the ground of
failure to state a cause of action.

The test of sufficiency of the facts found in a complaint as constituting a cause of

action is whether or not admitting the facts alleged the court can render a valid
judgement upon the same in accordance with the prayer thereof.
03 | BPI Family Margarita Coscolluela and her husband Non-payment of a note secured by a mortgage gives rise to a single cause of
v. Vda. de Oscar Coscolluela obtained an agricultural action
Coscolluela sugar crop loan from the Far East Bank & Section 3, Rule 2 of the 1997 Rules of Civil Procedure provides that a party may
(2006) | G.R. No. Trust Co. (FEBTC). However, in the book of not institute more than one suit for a single cause of action and, if two or more
167724 FEBTC, the loan account of the spouses was suits are instituted on the basis of the same cause of action, the filing of one on a
treated as a single account,which amounted judgment upon the merits in any one is available as ground for the dismissal of the
to P13,592,492.00 as evidenced by 67 other or others.
Promissory Notes.
The true rule which determines whether a party has only a single and entire cause
The spouses Coscolluela executed a real of action for all that is due him, and which must be sued for in one action, or has a
estate mortgage in favor of FEBTC as severable demand for which he may maintain separate suits, is whether the entire
security of loans on credit accommodation amount arises from one and the same act or contract or the several parts arise
obtained by the spouses from FEBTC and from distinct and different acts or contracts.
those that may be obtained by the
mortgagees which was fixed at Where there are entirely distinct and separate contracts, they give rise to separate
P7,000,000.00, as well as those that may be causes of action for which separate actions may be instituted and presented.
extended by the mortgagor to the When money is payable by installments, a distinct cause of action assails upon the
mortgagees. following due by each installment and they may be recovered in successive action.
On the other hand, where several claims payable at different times arise out of the
For failure to settle the outstanding obligation same transactions, separate actions may be brought as each liability accounts.
on the maturity dates, FEBTC sent a final But where no action is brought until more than one is due, all that are due must be
demand letter, but Respondent failed to included in one action; and that if an action is brought to recover upon one or more
settle the obligation. FEBTC filed a petition that are due but not upon all that are due, a recovery in such action will be a bar to
for the extrajudicial foreclosure of the a several or other actions brought to recover one or more claims of the other
mortgaged property, significantly only for the claims that were due at the time the first action was brought.
total amount covered by promissory notes
from 1 to 33. Thus, the weight of authority is that in the absence of special controlling
circumstances, an open or continuous running account between the same parties
Petitioner FEBTC filed another complaint constitutes a single and indivisible demand, the aggregate of all the items of the
with the RTC for collection of the amounts account constituting the amount due. But the rule is otherwise where it
indicated in the rest of the promissory notes, affirmatively appears that the parties regarded the different items of the account as
specifically Promissory Note Nos. 34 to 67. separate transactions and not parts of an ordinary running account.

After petitioner rested its case, respondent In Bachrach v. Esteban: on the nonpayment of a note secured by a mortgage, the
filed a demurrer, contending, among others, creditor has a single cause of action against the debtor. The single cause of action
that, with the admission of petitioner’s consists in the recovery of the credit with execution of the suit. In a mortgage
witness, there is only one loan account credit transaction, the credit gives rise to a personal action for collection of the
secured by the real estate mortgage, that the money. The mortgage is the guarantee which gives rise to a mortgage foreclosure
promissory notes were executed as evidence suit to collect from the very property that secured the debt.
of the loans. Respondent insisted that by
filing a complaint for a sum of money, In this case, the action of the creditor is anchored on one and the same cause: the
petitioner thereby split its cause of action nonpayment by the debtor of the debt to the creditor-mortgagee. Though the debt
against her; hence, the complaint must may be covered by a promissory note or several promissory notes and is covered
perforce be dismissed on the ground of litis by a real estate mortgage, the latter is subsidiary to the former and both refer to
pendentia. one and the same obligation.

The demurrer was denied by the RTC,

holding that petitioner had the option to file a Alternative remedies of collection of debt and foreclosure of mortgage
petition for the extrajudicial foreclosure of the A mortgage creditor may institute two alternative remedies against the
real estate mortgage covering 31 of the mortgage debtor, either a personal action for the collection of debt, or a real
promissory notes, and, as to the rest, to file action to foreclose the mortgage, but not both. Each remedy is complete by
an ordinary action for collection. CA, on a itself.
petition for certiorari, granted in favor of the
respondent. Resp. now files the present By such election, his cause of action can by no means be impaired, for each of the
petition in the SC. two remedies is complete in itself. Thus, an election to bring a personal action will
leave open to him all the properties of the debtor for attachment and execution,
ISSUE: Can petitioner file separate cases for even including the mortgaged property itself. And, if he waives such personal
foreclosure of mortgage and collection of action and pursues his remedy against the mortgaged property, an unsatisfied
debt? NO. By filing for foreclosure, he judgment thereon would still give him the right to sue for a deficiency judgment, in
waived his personal action to recover, and by which case, all the properties of the defendant, other than the mortgaged property,
filing only for the amount covered equivalent are again open to him for the satisfaction of the deficiency.
to 31 notes, he waived collection on the rest
of the notes. In the present case, petitioner opted to file a petition for extrajudicial foreclosure of
the real estate mortgage but only for the principal amount of P4,687,006.08 or in
the total amount of P7,755,733.64 covering only 31 of the 67 promissory notes. By
resorting to the extrajudicial foreclosure of the real estate mortgage, petitioner
thereby waived its personal action to recover the amount covered not only by said
promissory notes but also of the rest of the promissory notes. Petitioner should
 have caused the extrajudicial foreclosure of the real estate mortgage for the
recovery of the entire obligation of respondent, on all the promissory notes. By
limiting the account for which the real estate mortgage was being foreclosed to the
principal amount of P4,687,006.68, exclusive of interest and penalties, petitioner
thereby waived recovery of the rest of respondent's agricultural loan account.
04 | Umale v. On Jan 4, ’00, Umale leased a parcel of land Litis Pendentia Requisites:
Canoga from Canoga for 2 years, and in their a. Identity of parties in the 2 actions
G.R. No. 167246 contract, Umale could only use it for a b. Substantial Identity of cause of action and in the reliefs sought
c. Identity between the 2 actions that any judgment in one case, regardless
parking space and a small canteen. Umale
of which party is successful, would amount to res judicata
violated this and this led to Canoga filing the Now, to determine if there’s litis pendentia, there has to be a determination on
first unlawful detainer case against him. In whether the causes of actions are substantially similar or not. Here, the Court
this first case, the MTC ruled in favor of declares that the 2 cases have different causes of action. Several tests exists to
Canoga, but the RTC reversed the MTC, so determine if 2 cases relate to a common cause of action:
Canoga went to the CA for appeal. On May a. Whether the same evidence would support and sustain both
3, ’02, while the first case was on appeal, causes of action (same evidence test - yes ito lang pinangalanan ng
Canoga again filed an unlawful detainer case case)
against Umale, now on the ground that the b. Whether the defenses in one case may be used to substantiate
lease contract has already expired. The MTC the other complaint
again ruled in favor of Canoga, and this led c. The one used in this case: Whether the cause of action in the
to Umale filing an appeal in the CA based on 2nd case existed at the time of the filiing of the first complaint.
the ground that the 2nd case should be SC: The third test clearly shows that the causes of action are not substantially
dismissed because it constituted litis similar. As stated, the basis of the first unlawful detainer case was filed on Oct 10,
pendencia. The RTC granted Umale’s 2000, when the lease contract was still in effect. On the other hand, the 2nd case
prayer, the CA reversed. was filed after the expiration of the lease contract and therefore, this ground was
not yet available when the first case was filed. Also, Umale tried to argue that
WN there was litis pendentia - (NO) Canoga just tried to reiterate the causes of action of the 1st case in the 2nd case,
WN there were different causes of action - but the Court said that that does not automatically results in substantial identity
(YES) between the 2 cases. Even if the 2nd case repeated the grounds on the 1st case,
the main basis in the 2nd case was again, the expiration of the lease.1. This is a
very strong argument because if the lease contract didn’t expire, then the 2nd
case could not have been filed because the prescription of a case for unlawful
detainer is 1 year after the cause of action.

05 | Salvador v.
Patricia, Inc. Petitioners filed an action for injunction and
(2016) | G.R. No.
The joinder of the action for injunction and the action to quiet
quieting of title against Patricia, Inc. to
195834 title is disallowed by the Rules of Court.
determine who owns the property occupied
by them. The main issue to be resolved is
whether the improvements of the plaintiffs The action for injunction and quieting of title, despite the first
stand on land that belongs to Patricia, Inc. or being an ordinary suit and the latter a special civil action under
the City of Manila. The parties admitted in
evidence by stipulation the authenticity of
Rule 63. Section 5, Rule 2 of the Rules of Court disallowed the
two TCTs, one in the name of Patricia, Inc. joinder, viz.:
and one of the City of Manila.
(b) The joinder shall not include special civil actions or actions governed
RTC: ruled in favor of Petitioners; land by special rules
belonged to the City of Manila.
Consequently, the RTC should have severed the causes of
CA: reversed RTC and dismissed the
complaint; petitioners were without the
action, either upon motion or motu proprio, and tried them
necessary interest to maintain a suit for separately, assuming it had jurisdiction over both. Such
quieting of title. severance was pursuant to Section 6, Rule 2 of the Rules of
Court, which expressly provides:
W/N joinder of the action for injunction
and the action to quiet title is allowed - Section 6. Misjoinder of causes of action. — Misjoinder of causes of
NO
action is not a ground for dismissal of an action. A misjoined cause of
action may, on motion of a party or on the initiative of the court, be
severed and proceeded with separately. (n)

The refusal of the petitioners to accept the severance would have

led to the dismissal of the case conformably with the mandate of
Section, Rule 17 of the Rules of Court, to wit: SDAaTC

Section 3. Dismissal due to fault of plaintiff. — If, for no justifiable cause,

the plaintiff fails to appear on the date of the presentation of his evidence
in chief on the complaint, or to prosecute his action for an unreasonable
length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of the defendant or upon the
court's own motion, without prejudice to the right of the defendant to
prosecute his counterclaim in the same or in a separate action. This
 dismissal shall have the effect of an adjudication upon the merits, unless
otherwise declared by the court. (3a)

SC: Affirms decision of CA

(06) Pantranco v.
Standard Crispin was driving the passenger jeepney Sec. 6, Rule 3 of the Revised Rules of Court provides the following requirements
Insurance (2005) owned by his mother Martina. Buncan, on for a permissive joinder of parties:
G.R. No. 140746 the other hand, was driving a bus owned by
Pantranco North Express Inc. Both drivers (a) the right to relief arises out of the same transaction or series of transactions;
were travelling along the National Highway of
Talavera, Nueva Ecija in a rainy afternoon.
Buncan was driving the bus northbound (b) there is a question of law or fact common to all the plaintiffs or defendants; and
while Cripin was trailing behind. When the
two vehicles were negotiating a curve along (c) such joinder is not otherwise proscribed by the provisions of the Rules on
the highway, the passenger bus overtook the jurisdiction and venue.
jeepney. In so doing, the passenger bus hit
the left rear side of the jeepney and sped In this case, there is a single transaction common to all, that is, Pantranco’s bus
away. Crispin reported the incident to the hitting the rear side of the jeepney. There is also a common question of fact, that
police and to the insurer of their jeepney, is, whether petitioners are negligent. There being a single transaction common to
Standard Insurance Co. The total cost of the both respondents, consequently, they have the same cause of action against
repair amounted to P21, 415. Standard only petitioners.
paid P8,000 while Martina shouldered the
remaining P13,415. Thereafter, Standard
To determine identity of cause of action, it must be ascertained whether the same
and Martina demanded reimbursements from
evidence which is necessary to sustain the second cause of action would have
Pantranco and Buncan, but the bus company
been sufficient to authorize a recovery in the first. Here, had respondents filed
and the driver refused. Thus, Standard and
separate suits against petitioners, the same evidence would have been presented
Martina were prompted to file a complaint for
to sustain the same cause of action. Thus, the filing by both respondents of the
sum of money with the RTC of Manila.
complaint with the court below is in order. Such joinder of parties avoids
Pantranco and Buncan denied the
multiplicity of suit and ensures the convenient, speedy and orderly administration
allegations of the complaint and asserted
of justice.
that it is the MeTC which has jurisdiction
over the case.
There is NO MISJOINDER OF PARTIES if the money sought to be claimed is in
favor of the same plaintiff/s and against the same defendant/s.
RTC: The trial court ruled in favor of
Standard and Martina and ordered
Pantranco and Buncan to pay the former On the issue of lumping together the claims of Gicale and Standard, Section 5(d),
reimbursements with interests due thereon Rule 2 of the same Rules provides:
plus attorney's fees, and litigation expenses.
“Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the
CA: The appellate court affirmed the decision alternative or otherwise, as many causes of action as he may have against an
of the RTC. opposing party, subject to the following conditions:

W/N there was a misjoinder of parties? No xxx

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

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

Rule 3
01| Law firm of Respondents argue that it is CDC, and not petitioner, which is the real party-in-
Laguesma v. Officers of Clark Development Corporation, a interest since the subject of the assailed decision and resolution was the
COA (2015) | GOCC approached the law firm of Laguesma corporation's request for clearance to pay petitioner its legal fees. Respondents
G.R. No. 185544 for its possible assistance in handling the argue that any interest petitioner may have in the case is merely incidental. This is
corporation’s labor cases. CDC sought from erroneous.
the Office of the Government Corporate
Counsel (OGCC) its approval for the
engagement of Laguesma as external Petitioner is a real party-in-interest, as defined in Rule 3, Section 2 of the 1997
counsel. Initially, the latter denied the Rules of Civil Procedure: SEC. 2. Parties in interest. — A real party in interest is
request but reconsidered the request and the party who stands to be benefited or injured by the judgment in the suit, or the
approved the engagement. It also furnished party entitled to the avails of the suit. Unless otherwise authorized by law or these
CDC a copy of a pro-forma retainership Rules, every action must be prosecuted or defended in the name of the real party
contract containing the suggested terms and
in interest. Petitioner does not have a "mere incidental interest," and its interest is
conditions of the retainership. CDC, through
not "merely consequential." Respondents mistakenly narrow down the issue to
 its Board of Directors, approved Laguesma’s whether they erred in denying CDC’s request for clearance of the retainership
engagement as private counsel. CDC contract. In doing so, they argue that the interested parties are limited only to
requested the COA for concurrence of the CDC’s and respondents. The issue at hand, however, relates to the assailed
retainership contract but was DENIED on the
decision and resolution of respondents, which disallowed the disbursement
ground that the pro-forma retainership
contract given to them was not based on the of public funds for the payment of legal fees to petitioner. Respondents admit
premise that the monthly retainer’s fee and that legal services were performed by petitioner for which
concomitant charges are reasonable and
could pass in audit by COA. COA DENIED payment of legal fees are due. The question that they resolved was which among
request for clearance, citing its failure to the parties, the government, or the officials of CDC were liable. The net effect of
secure a prior written concurrence of the
upholding or setting aside the assailed COA rulings would be to either disallow or
Commission on Audit and the approval with
finality of the OGCC. It also stated that its allow the payment of legal fees to petitioner. Petitioner, therefore, stands to either
request for concurrence was made three (3) be benefited or injured by the suit, or entitled to its avails. It is a real party-in-
years after engaging the legal services of the interest.
law firm. CDC and Laguesma separately
filed motions for reconsideration to the COA Clark Development Corporation's Board of Directors, on the other hand, should
which were denied. The resolution also
have been impleaded in this case as a necessary party. A necessary party is
disallowed the payment of legal fees to the
law firm on the basis of quantum meruit defined as "one who is not indispensable but who ought to be joined as a party if
since COA Circular No. 86-255 mandates complete relief is to be accorded as to those already parties, or for a complete
that the engagement of private counsel determination or settlement of the claim subject of the action." The actions of the
without prior approval "shall be a personal Board of Directors precipitated the issues in this case. If the petition is granted,
liability of the officials concerned." Thus then the officers are relieved of liability to petitioner. If the rulings of respondents
Laguesma filed this petition for certiorari with are upheld, then it is the Board of Directors that will be liable to petitioner. Any
the SC.
relief in this case would be incomplete without joining the members of the Board of
Directors.
Was Petitioner a real party-in-interest?
YES.

02 | Chua v. It is only in the name of a real party in interest that a civil suit may be prosecuted.
Torres (2005) | In October 2001, a complaint for damages A real party in interest is the party that stands to be benefitted or injured by the
GR No. 151900 was filed by Christine Chua with the RTC judgment of the suit. Interest means a material interest.
Caloocan against Torres and Beltran. Torres
was the owner of a Caltex Service Center The subject complaint does not allege any rights of Jonathan violated by
while Beltran was an employee. She respondents. Jonathan is claiming nothing.
impleaded her brother, Jonathan Chua, as a
necessary co-plaintiff. A necessary party is the one who is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as to those already parties, or for a
complete determination or settlement of the claim subject of the action.
The complaint alleged that in April 2000,
Jonathan issued in favor of Caltex his Misjoinder of parties is also not fatal to the complaint.
personal check in payment of his purchases.
The check was dishonored. Beltran sent It should not matter to the RTC that Jonathan failed to sign the certification since
Christine a demand letter informing her he was misjoined as a plaintiff.
about the dishonored check. Christine
ignored the letter since it was Jonathan’s
check.

Beltran instituted a criminal action for

violation of BP22 against Christine. MTC
then issued a warrant of arrest. Police
officers searched her in the Manila Central
University where she was a med student.
The petitioner allegedly suffered
embarrassment and social humiliation.

In Christine’s suit against respondents,

Jonathan was explicitly identified as a
necessary party-plaintiff. There was no
allegation of any injury or damage to
Jonathan. Jonathan did not also sign any
verification or certification against forum
shopping.

RTC dismissed the complaint on the ground

that Jonathan did not sign the certification.
RTC said that the ROC did not distinguish
whether the plaintiff required to sign is a
principal, necessary, or nominal.

WON a co-plaintiff impleaded as a

necessary party, who however has no
claim of relief, should also make a
 certification against forum shopping. NO

03| Sumaljag v. [First Case] Decedent Josefa Maglasang The rule on substitution in case of death of a party is governed by Section 16, Rule
Literato (2008) | (vendor) in her lifetime filed a case against 3 of the 1997 Rules of Civil Procedure.
G.R. No. 149787 her sister Menendez Literato [and her
husband Diosdidit] (vendees) for nullity of the First, the petitioner is not one of those allowed by the Rules to be a substitute.
Substitution of deed of sale of real property. Section 16, Rule 3 speaks for itself in this respect.
deceased
decedent The Respondent spouses responded to the Second, the reason for the Rule is to protect all concerned who may be affected
answer with the counterclaim that the deed by the intervening death, particularly the deceased and her estate. We note in this
of sale was falsified. They respect that the Notice that counsel filed in fact reflects a claim against the interest
1. Impleaded Petitioner Sumaljag as of the deceased through the transfer of her remaining interest in the litigation to
counterclaim defendant because another party. Interestingly, the transfer is in favor of the very same person who is
he occupied the subject lots suggested to the court as the substitute. To state the obvious, the suggested
without their consent substitution effectively brings to naught the protection that the Rules intend; plain
2. Alleged that Petitioner acted in bad common sense tells us that the transferee who has his own interest to protect,
faith in acquiring the 2 lots cannot at the same time represent and fully protect the interest of the deceased
because he prepared and transferor.
notarized the contract of lease
between all the Maglasang heirs Third, counsel has every authority to manifest to the court changes in interest that
(but excluding Josefa) and Vicente transpire in the course of litigation. Thus, counsel could have validly manifested to
Tolo [Petitioner knew that Josefa the court the transfer of Josefa's interests in the subject matter of litigation
no longer owned the property] pursuant to Section 19, Rule 3. But this can happen only while the client-transferor
was alive and while the manifesting counsel was still the effective and authorized
[Second Case] Subsequently, Respondent counsel for the client-transferor, not after the death of the client when the lawyer-
Menendez filed with the RTC for the client relationship has terminated. The fact that the alleged transfer may have
declaration of the inexistence of lease actually taken place is immaterial to this conclusion, if only for the reason that it is
contract, recovery of possession of land, and not for counsel, after the death of his client, to make such manifestation because
damages against the petitioner and Josefa he then has lost the authority to speak for and bind his client. Thus, at most, the
after the RTC dismissed their counterclaim. petitioner can be said to be a transferee pendente lite whose status is pending
The complaint alleged that with the lower court.
1. Josefa previously sold the subject
lot to Menendez Lastly, a close examination of the documents attached to the records disclose that
2. Despite such lease, leased it to the subject matter of the Quitclaim allegedly executed by Josefa in favor of
Petitioner Sumaljag Remismundo is Lot 1220-E, while the subject matter of the deed of sale executed
3. Prayed that the lease contract be by Remismundo in the petitioner's favor is Lot 1220-D. This circumstance alone
declared null and void. raises the possibility that there is more than meets the eye in the transactions
related to this case.

When Sumaljag died, the Atty. Puray, For the protection of the interests of the decedent, this Court has in previous
counsel who represented her, moved to have instances recognized the heirs as proper representatives of the decedent, even
the petitioner Sumaljag substitute decedent when there is already an administrator appointed by the court. When no
in the case alleging that before Josefa died administrator has been appointed, as in this case, there is all the more reason to
she had executed a Quitclaim Deed in favor recognize the heirs as the proper representatives of the deceased.
of Remismundo D. Maglasang who in turn
sold it to petitioner. GSA: In this case, the transfer was done AFTER death but the allegation was that
it was done prior. The problem in this case is that if you “substitute” a party after
RTC denied motion for substitution and death, it has to be to an heir or legal representative it cannot be a non heir. The
instead asked Michaeles, heir of Josefa to transfer here was to a non heir. It must be to an heir after death in order to protect
appear. the interest of the estate. If I allow transfer to a non-heir after death it could
potentially diminish the estate. The case is saying, if the substitution had
Whether or not petitioner was subrogated ACTUALLY be done before death it could have been allowed.
to the rights of Josefa over the property
under litigation at the time she died. NO
04 | Sps. Algura Petitioners (spouses Algura) filed A The old Section 16, Rule 141 requires applicants to file an ex-parte motion to
v. LGU (2006) | complaint for damages with RTC Naga litigate as a pauper litigants. There are two requirements: a) income requirement
G.R. No. 150135 from the alleged illegal demolition of their — the applicants should not have a gross monthly income of more than PhP
residence and boarding house and for 1,500.00, and b) property requirement –– they should not own property with an
payment of lost income derived from fees assessed value of not more than PhP 18,000.00. Undoubtedly, petitioners do not
paid by their boarders. own real property as shown by the Certification of the Naga City assessor and so
See Rule 3, the property requirement is met. However with respect to the income requirement,
Section 21 and Simultaneously, petitioners filed an Ex-Parte it is clear that the gross monthly income of PhP 10,474.00 of the husband and the
Rule 141, Section Motion to Litigate as Indigent Litigants, to PhP 3,000.00 income of wife when combined, were above the PhP 1,500.00
19. which the husband’s Pay Slip was monthly income threshold prescribed by then Rule 141, Section 16 and therefore,
appended, showing a gross monthly income the income requirement was not satisfied.
of 10k and a net pay of 3,616.99. A
certification issued by the Office of the City The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended
Assessor of Naga City also stated that as Rule 141, Section 18 on March 1, 2000 and subsequently amended by Rule
petitioners had no property declared in their 141, Section 19 on August 16, 2003, which is now the present rule) are still valid
name for taxation purposes. and enforceable rules on indigent litigants. Instead of declaring that Rule 3,
Section 21 has been superseded and impliedly amended by Section 18 and later
Respondents LGU et. al Motion to Disqualify Section 19 of Rule 141, the Court finds that the two rules can and should be
the Plaintiffs for Non-Payment of Filing Fees. harmonized.
They asserted that the petitioner wife has
other income from mini-store and a computer
 shop on the ground floor of their residence.
Hence, respondents concluded that STEPS FOR INDIGENT LITIGANTS
petitioners were not indigent litigants.

RTC: issued an Order disqualifying 1. When an application to litigate as an indigent litigant is fled, the court
petitioners as indigent litigants. Their income shall scrutinize the affidavits and supporting documents submitted by
exceeded the amount in Rule 141, Section the applicant to determine if the applicant complies with the income and
18 (now Section 19) for pauper litigants property standards prescribed in the present Section 19 of Rule 141 —
residing outside Metro Manila. Said rule then that is, the applicant's gross income and that of the applicant's
provides that the gross income of the litigant immediate family do not exceed an amount double the monthly
should not exceed PhP 3,000.00 a month minimum wage of an employee; and the applicant does not own real
and shall not own real estate with an property with a fair market value of more than Php300,000.
assessed value of PhP 50,000.
2. If the trial court finds that the applicant meets the income and property
Whether petitioners should be considered requirements, the authority to litigate as indigent litigant is automatically
as indigent litigants who qualify for granted and the grant is a matter of right.
exemption from paying filing fees. (SC
remanded the case for hearing) 3. However, if the trial court finds that one or both requirements have not
been met, then it would set a hearing to enable the applicant to prove
Whether a trial court has to apply both that the applicant has "no money or property sufficient and available for
Rule 141, Section 16 and Rule 3, Section food, shelter and basic necessities for himself and his family.”
21 on such applications or should the
court apply only Rule 141, Section 16 and
4. In that hearing, the adverse party may adduce countervailing evidence
discard Rule 3, Section 21 as having been
to disprove the evidence presented by the applicant; after which the trial
superseded by Rule 141, Section 16 on
court will rule on the application depending on the evidence adduced.
Legal Fees. Harmonize both provisions

5. In addition, Section 21 of Rule 3 also provides that the adverse party

may later still contest the grant of such authority at any time before
judgment is rendered by the trial court, possibly based on newly
discovered evidence not obtained at the time the application was heard

6. If the court determines after hearing that the party declared as an

indigent is in fact a person with sufficient income or property, the proper
docket and other lawful fees shall be assessed and collected by the
clerk of court. If payment is not made within the time fixed by the court,
execution shall issue or the payment of prescribed fees shall be made,
without prejudice to such other sanctions as the court may impose.

Instead of disqualifying the Alguras as indigent litigants, the trial court should have
called a hearing as required by Rule 3, Section 21 to enable the petitioners to
adduce evidence to show that they didn't have property and money sufficient and
available for food, shelter, and basic necessities for them and their family. In that
hearing, the respondents would have had the right to also present evidence to
refute the allegations and evidence in support of the application of the petitioners
to litigate as indigent litigants. Since this Court is not a trier of facts, it will have to
remand the case to the trial court to determine whether petitioners can be
considered as indigent litigants using the standards set in Rule 3, Section 21.

Recapitulating the rules on indigent litigants, therefore, if the applicant for

exemption meets the salary and property requirements under Section 19 of Rule
141, then the grant of the application is mandatory. On the other hand, when the
application does not satisfy one or both requirements, then the application should
not be denied outright; instead, the court should apply the "indigency test" under
Section 21 of Rule 3 and use its sound discretion in determining the merits of the
prayer for exemption.Access to justice by the impoverished is held sacrosanct
under Article III, Section 11 of the 1987 Constitution.

Rule 4
(1) BPI vs. Spouses Borbon, XM Facultad Corp, et al RULING
Hontanosas (respondents) filed an action with RTC Cebu Venue was properly laid with the RTC Cebu since it was a personal action, and
(2014) | G.R. No. seeking a declaration of nullity of the XM Facultad has its principal office there.
157163 promissory notes, chattel and RE Mortgage,
and continuing surety agreement they
executed in favor of BPI. They also sought The action, being one for the cancellation or annulment of a real estate
damages and a TRO or preliminary mortgage, is not included as a real action as provided by the rules. Exclusio unius
injunction to prevent BPI from foreclosing eest inclusion alterius. According to the allegations in the complaint, there was no
their properties. BPI objected to the allegation that the respondents had been divested of the possession over the
jurisdiction of the court on the ground of property. This was not an action to recover real property.
improper venue, asserting that since action
relates to the foreclosure of the property, it is DOCTRINE
a real one, and the properties are not in Well-settled is the rule that an action to annul a contract of loan and its
Cebu. accessory real estate mortgage is a personal action. In a personal action, the
plaintiff seeks the recovery of personal property, the enforcement of a contractor
 RTC: ruled for the respondents; the motion the recovery of damages.
to dismiss was denied. The application for
TRO by respondents was granted.
In contrast, in a real action, the plaintiff seeks the recovery of real property,
or, as indicated in Section 2 (a), Rule 4 of the then Rules of Court, a real action is
CA: affirmed RTC. Docket fee rule can be an action affecting title to real property or for the recovery of possession, or for
relaxed in the interest of justice, and venue partition or condemnation of, or foreclosure of mortgage on, real property. In the
was proper since it was a personal action. Pascual case, relied upon by petitioner, the contract of sale of the fishpond was
assailed as fictitious for lack of consideration. We held that there being no contract
to begin with, there is nothing to annul. Hence, we deemed the action for
W/N venue was properly laid? (YES) annulment of the said fictitious contract therein as one constituting a real action for
W/N it was a real or personal action? the recovery of the fishpond subject thereof.
(PERSONAL)
We cannot, however, apply the foregoing doctrine to the instant case. Note that in
Pascual, title to and possession of the subject fishpond had already passed to the
vendee. There was, therefore, a need to recover the said fishpond. But in the
instant case, ownership of the parcels of land subject of the questioned real
estate mortgage was never transferred to petitioner, but remained with [the
plaintiff]. Thus, no real action for the recovery of real property is involved.
This being the case, TOPROS’ action for annulment of the contracts of loan and
real estate mortgage remains a personal action.

02 | BPI v. The City of Manila filed a complaint against RULING:

Yujuico (2015) | the respondents for the expropriation of five The petitioner correctly brought the action for deficiency in the Makati RTC
G.R. No. 175796 parcels of land located in Tondo, Manila and because Makati was the place where the main office of the petitioner was located.
registered in the name of respondent. Of
these, 2 parcels of land were previously Also, it would be improper to dismiss this case on the ground of improper venue,
mortgaged. The Manila RTC declared the assuming that the venue had been improperly laid, considering that the
five parcels of land expropriated for public respondents had not raised such ground in their Motion to Dismiss. As earlier
use. Such judgment became final and indicated, they came to raise the objection of improper venue for the first time only
executory. in their reply to the petitioner's comment on their Motion for Reconsideration. They
did so belatedly.
The petitioner’s Motion to Intervene was
denied. Hence, the petitioner decided to DOCTRINES:
extrajudicially foreclose the mortgage The venue of an action depends on whether it is a real or a personal action. A real
constituted on the two parcels of land subject action is one that affects title to or possession of real property, or an interest
of the respondents' loan. therein. The real action is to be commenced and tried in the proper court having
jurisdiction over the area wherein the real property involved, or a portion thereof, is
Claiming a deficiency amounting to situated, which explains why the action is also referred to as a local action. In
Pl8,522,155.42, the petitioner sued the contrast, the Rules of Court declares all other actions as personal actions. The
respondents to recover such deficiency in venue of a personal action is the place where the plaintiff or any of the principal
the Makati RTC. The respondents moved to plaintiffs resides, or where the defendant or any of the principal defendants
dismiss the complaint on several grounds, resides, or in the case of a non-resident defendant where he may be found, at the
namely: that the suit was barred by res election of the plaintiff, for which reason the action is considered a transitory one.
judicata; that the complaint stated no cause
of action; and that the plaintiffs claim had Based on the distinctions between real and personal actions, an action to
been waived, abandoned, or extinguished. recover the deficiency after the extrajudicial foreclosure of the real property
This was denied by the RTC. mortgage is a personal action, for it does not affect title to or possession of real
property, or any interest therein.
The respondent moved for MFR. Petitioner
adopted its comment/opposition to the In Caltex, the Court ruled that "a suit for the recovery of the deficiency after the
motion to dismiss. The respondent filed their foreclosure of a mortgage is in the nature of a mortgage action because its
reply and it is only upon which they raised for purpose is precisely to enforce the mortgage contract." However, in this case, the
the first time their objection on the ground of Court was only interpreting the prescriptive period within which to bring the suit for
improper venue. They contended that the the recovery of the deficiency after the foreclosure of the mortgage, and was not at
action for the recovery of the deficiency, all ruling therein on the venue of such suit or on the nature of such suit being
being a supplementary action of the either a real or a personal action.
extrajudicial foreclosure proceedings, was a
real action that should have been brought in in civil proceedings, venue is procedural, not jurisdictional, and may be waived by
the Manila RTC because Manila was the the defendant if not seasonably raised either in a motion to dismiss or in the
place where the properties were located. answer. Section 1, Rule 9 of the Rules of Court thus expressly stipulates that
defenses and objections not pleaded either in a motion to dismiss or in the answer
Whether the proper venue is in RTC- are deemed waived. As it relates to the place of trial, indeed, venue is meant to
Manila and not RTC-Makati. provide convenience to the parties, rather than to restrict their access to the
courts. In other words, unless the defendant seasonably objects, any action may
be tried by a court despite its being the improper venue.
03 Gochan v. Respondents were stockholders of the Felix It is necessary to determine the true nature of the complaint in order to resolve the
Gochan (2001) | Gochan and Sons Realty Corp. and the issue of whether or not respondents paid the correct amount of docket fees
G.R. No. 146089 Mactan Realty Development Corp. therefor. In this jurisdiction, the dictum adhered to is that the nature of an action is
determined by the allegations in the body of the pleading or complaint itself, rather
In 1996, respondents offered to sell their than by its title or heading.
shares in the two corporations to the
individual petitioners for P200 million. The caption of the complaint below was denominated as one for specific
Petitioners accepted and paid. Respondents performance and damages. The relief sought, however, is the conveyance or
(through Crispo Gochan) required the transfer of real property, or ultimately, the execution of deeds of conveyances in
individual petitioners to execute a their favor of the real properties enumerated. Under these circumstances, the
 “promissory note,” undertaking not to divulge case below was actually a real action, affecting as it does title to or possession of
the actual consideration they paid for the real property.
shares of stock. Unbeknown to petitioners,
Crispo Gochan inserted in the “promissory It has been held that where a complaint is entitled as one for specific performance
note” a phrase that says “said amount is in but nonetheless prays for the issuance of a deed of sale for a parcel of land, its
partial consideration of the sale.” primary objective and nature is one to recover the parcel of land itself and, thus, is
deemed a real action. In such a case, the action must be filed in the proper court
Respondents filed a complaint against where the property is located.
petitioners for Specific Performance and
Damages with the RTC-Cebu City, alleging In the case at bar, therefore, the complaint filed with the trial court was in the
that they are entitled to the conveyance of nature of a real action, although ostensibly denominated as one for specific
properties (fishpond, lot in a compound, Villa performance. Consequently, the basis for determining the correct docket fees shall
Magallanes, New Gem Building), in addition be the assessed value of the property, or the estimated value thereof.
to the P200 million, which they
acknowledged to have received from The instant petition is granted. This case is REMANDED to the RTC-Cebu City,
petitioners. which is directed to forthwith conduct the preliminary hearing on the affirmative
defense.
Petitioners filed their answer, raising, among
others, lack of jurisdiction for non-payment of
docket fees as affirmative defense.

Petitioners filed with the trial court a Motion

for a Preliminary Hearing on the Affirmative
Defenses. The trial court denied the motion.
The CA dismissed the Petitioner for
Certiorari filed. MRs were denied as well.

Petitioners contend that the complaint is in

the nature of a real action which affects title
to real properties; hence, respondents
should have alleged therein the value of the
real properties, which shall be the basis for
the assessment of correct docket fees.

Whether RTC-Cebu City is the proper

venue? (Remanded to RTC-Cebu City to
rule on affirmative defenses, including
this issue)
04 |Irene Irene Marcos-Araneta alleges that FEMII and RULING:
Marcos-Araneta UEC were organized by the Benedicto group The fact that FEMII’s assets include real properties does not materially change the
v. CA (2008) | pursuant to a contract or an arrangement nature of the action, for the ownership interest of a stockholder over corporate
G.R. No. 154096 whereby Benedicto, as trustor, placed in his assets is only inchoate as the corporation, as a juridical person, solely owns such
name and in the name of his associates, as assets. It is only upon the liquidation of the corporation that the stockholders,
trustees, the shares of stocks of FEMII and depending on the type and nature of their stockownership, may have a real
UEC with the obligation to hold those shares inchoate right over the corporate assets, but then only to the extent of their
and their fruits in trust and for the benefit of stockownership.
Irene to the extent of 65% of such shares.
Irene, through her trustee-husband, now The amended complaint is an action in personam as it is a suit against Francisca
demands reconveyance of the said 65% and the late Benedicto, on the basis of their “personal liability” to Irene upon an
holdings but the Benedicto Group refused to alleged trust.
oblige.
Citing Rule 3, section 2 and 3, and Rule 4 section 2, the court held that the real
Irene instituted before the RTC 2 complaints party-in-interest is Irene. She stands to be benefited or entitled to the avails of the
for conveyance of shares of stock, suit. Rubio, et.al. were only included as co-plaintiffs in the amended complaint as
accounting and receivership against the Irene’s new trustees. As trustees, they are only representatives of Irene.
Benedicto Group with prayer for issuance of
a TRO. Benedicto and his daughter It is undisputed that Irene is the real-party-in-interest and the principal plaintiff in
Francisca moved for the dismissal of both this case. Rule 4 section 2 states that the residences of the principal plaintiff
cases, citing as one of the grounds that should be the basis of determining the proper venue. As Irene was a not a resident
venue was improperly laid. Both cases were of Batac, Ilocos Norte, the venue was improperly laid.
eventually consolidated.
DOCTRINES:
During the preliminary proceedings on the In a personal action, the plaintiff seeks the recovery of personal property, the
motion to dismiss, Benedicto and Francusca enforcement of a contract, or the recovery of damages. Real actions, on the other
presented the Joint Affidavit of the household hand, are those affecting title to or possession of real property, or interest therein.
staff at the Marcos’ Mansion in Ilocos Norte. In accordance with the wordings of Sec. 1 of Rule 4, the venue of real actions shall
the affidavit indicated that Irene does not be the proper court which has territorial jurisdiction over the area wherein the real
reside in the mansion as she had only visited property involved, or a portion thereof, is situated. The venue of personal actions
it twice in 1999; that she did not vote in the is the court where the plaintiff or any of the principal plaintiffs resides, or where the
Batac, Ilocos Norte 1998 national elections; defendant or any of the principal defendants resides, or in the case of a non-
and that she was staying at her husband’s resident defendant where he may be found, at the election of the plaintiff.
house in Makati.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in
Irene rebutted the affidavit by presenting her a personal action case, the residences of the principal parties should be the basis
community tax certificate, which was issued for determining proper venue.
in Curimao, Ilocos Norte to support her
claimed residency.
 RTC: dismissed both complaints, stating that
these partly constituted "real action," and
that Irene did not actually reside in Ilocos
Norte, and, therefore, venue was improperly
laid.

Irene filed a MR. Pending its resolution, she

filed a motion to amend complaint, attaching
a copy of the amended complaint in which
Daniel Rubio, Orlando G. Reslin, and Jose
G. Reslin appeared as additional plaintiffs.
As stated in the amended complaint, the
added plaintiffs, all from Ilocos Norte, were
Irene's new trustees.

RTC: admitted the amended complaint.

CA: reversed the RTC decision.

Whether venue was improperly laid

considering that Irene, the principal party,
was not a resident of Batac, Ilocos Norte,
even if her co-principals were residents
thereof? - YES
05 | Hi-Yield Roberto Torres, for an on behalf of Honorio RULING:
Realty Inc. v. CA Torres & Sons, Inc. (HTSI) filed a Petition for
(2009) |G.R. No. Annulment of REM and Foreclosure Sale Both the RTC and Court of Appeals ruled that the action is in the form of a
168863 with the RTC Makati over two parcels of land derivative suit although captioned as a petition for annulment of real estate
located in Marikina and Quezon City. The mortgage and foreclosure sale. The Supreme Court affirmed, finding that Roberto
suit was filed against the Torreses, Register had fulfilled the requisites of a derivative suit in his petition:
of Deeds and petitioner Hi-Yield Inc.
5. Individual petitioner, being a minority stockholder, is instituting the instant
Hi-Yield filed a Motion to Dismiss the petition proceeding by way of a derivative suit to redress wrongs done to petitioner
on the grounds of improper venue and corporation and vindicate corporate rights due to the mismanagement and abuses
payment of insufficient docket fees. committed against it by its officers and controlling stockholders, especially by
respondent Leonora H. Torres (Leonora, for brevity) who, without authority from
RTC: Denied the MTD. It ruled that the case the Board of Directors, arrogated upon herself the power to bind petitioner
was a real action in the form of a derivative corporation from incurring loan obligations and later allow company properties to
suit cognizable by a special commercial be foreclosed as hereinafter set forth;
court.
Here, Roberto alleged in his petition that earnest efforts were made to reach a
CA: Affirmed. It added that the prayer for compromise among family members/stockholders before he filed the case. He
annulment of REM and foreclosure also
proceedings was merely incidental to the maintained that Leonora Torres held 55% of the outstanding shares while Ma.
main action. Theresa, Glenn and Stephanie excluded him from the affairs of the corporation.
Even more glaring was the fact that from June 10, 1992, when the first mortgage
Whether or not venue was properly laid. deed was executed until July 23, 2002, when the properties mortgaged were
YES. It was the principal office of HTSI. foreclosed, the Board of Directors of HTSI did nothing to rectify the alleged
unauthorized transactions of Leonora. Clearly, Roberto could not expect relief from
the board

DOCTRINES:

A derivative action is a suit by a shareholder to enforce a corporate cause of

action. Under the Corporation Code, where a corporation is an injured party, its
power to sue is lodged with its board of directors or trustees. But an individual
stockholder may be permitted to institute a derivative suit on behalf of the
corporation in order to protect or vindicate corporate rights whenever the officials
of the corporation refuse to sue, or are the ones to be sued, or hold control of the
corporation. In such actions, the corporation is the real party-in-interest while the
suing stockholder, on behalf of the corporation, is only a nominal party.

The following are the requisites of a derivative suit:

a) the party bringing 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; and
c) 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

Even then, not every suit filed on behalf of the corporation is a derivative suit. For
a derivative suit to prosper, the minority stockholder suing for and on behalf of the
corporation must allege in his complaint that he is suing on a derivative cause of
action on behalf of the corporation and all other stockholders similarly situated who
may wish to join him in the suit.
 Further, while it is true that the complaining stockholder must satisfactorily show
that he has exhausted all means to redress his grievances within the corporation;
such remedy is no longer necessary where the corporation itself is under the
complete control of the person against whom the suit is being filed. The reason is
obvious: a demand upon the board to institute an action and prosecute the same
effectively would have been useless and an exercise in futility.

Derivative Suits are governed by the Securities Regulation Code. With regard to
the venue, its rules provide the following:

SEC. 5. Venue. — All actions covered by these Rules shall be commenced and
tried in the Regional Trial Court which has jurisdiction over the principal office of
the corporation, partnership, or association concerned. Where the principal oCce
of the corporation, partnership or association is registered in the Securities and
Exchange Commission as Metro Manila, the action must be filed in the city or
municipality where the head office is located.
06 | PBCOM v. RULING:
Lim (2005) |G.R. Philippine Bank of Communications Here, the stipulation on the exclusivity of the venue as stated in the PN is not at
No. 158138 (PBCOM) filed a complaint against Elena issue. What PBCOM claims is that there was no restriction on the venue, because
Lim, Ramon Calderon and Tri-Oro none was stipulated in the security agreement on which petitioner had allegedly
International Trading & Manufacturing based its suit. Accordingly, the action on the SA may be filed in Manila, petitioner’s
Corporation (Respondents) with the RTC of place of residence.
Manila for the collection of a deficiency.
[Petitioner] alleged therein that Respondents Suretyship arises upon the solidary binding of a person -- deemed the surety --
obtained a loan from it and executed a with the principal debtor, for the purpose of fulfilling an obligation. It is merely an
continuing surety agreement in favor of accessory or collateral to the obligation contracted by the principal. In enforcing a
PBCOM for all loans, credits, etc., that were surety contract, the "complementary-contracts-construed-together" doctrine finds
extended or may be extended in the future to application. According to this principle, an accessory contract must be read in its
Respondents. PBCOM granted a renewal of entirety and together with the principal agreement. This no-segregation principle is
said loan as evidenced by a promissory note. based on Article 1374 of the Civil Code. The aforementioned doctrine is applicable
It was expressly stipulated in the promissory to the present case. Incapable of standing by itself, the SA can be enforced only in
note that the venue for any legal action that conjunction with the PN. The latter documents the debt that is sought to be
may arise out of said promissory note shall collected in the action against the sureties. The SA was entered into to facilitate
be Makati City, ‘to the exclusion of all other existing and future loan agreements. Petitioner approved the loan covered by the
courts’ x x x. Respondents allegedly failed to PN, partly because of the SA that assured the payment of the principal obligation.
pay said obligation; thus, PBCOM foreclosed The circumstances that related to the issuance of the PN and the SA are so
the real estate mortgage valued at intertwined that neither one could be separated from the other. It makes no sense
₱1,081,600.00, leaving a deficiency balance to argue that the parties to the SA were not bound by the stipulations in the PN.
of ₱4,014,297.23. Respondents moved to Notably, the PN was a contract of adhesion that petitioner required the principal
dismiss the complaint on the ground of debtor to execute as a condition of the approval of the loan. It was made in the
improper venue, invoking the stipulation in form and language prepared by the bank. By inserting the provision that Makati
the promissory note. City would be "the venue for any legal action [that] may arise out of [the]
Promissory Note," petitioner also restricted the venue of actions against the
RTC: denied the motion. PBCOM had sureties. The legal action against the sureties arose not only from the SA, but also
separate causes of action arising from the from the PN.
promissory note and the continuing surety
agreement; thus, venue was properly laid in
Manila. PBCOM correctly argues that there are two causes of action contained in its
CA: reversed RTC. The parties’ Surety Complaint: one, founded on the breach of the PN; and the second, on a violation
Agreement (SA), though silent as to venue, of the SA. The cause of action, however, does not affect the venue of the action.
was an accessory contract that should have The vital issue in the present case is whether the action against the sureties is
been interpreted in consonance with the covered by the restriction on venue stipulated in the PN. As earlier stated, the
Promissory Note. answer is in the affirmative. Since the cases pertaining to both causes of action
are restricted to Makati City as the proper venue, petitioner cannot rely on Section
5 of Rule 2 of the Rules of Court.
Whether the case should be dismissed on
the ground of improper venue. YES.
DOCTRINE:
Section 2 of Rule 4 of the Rules of Court provides the venue for personal actions.
This rule on venue does not apply when the law specifically provides otherwise, or
when -- before the filing of the action -- the contracting parties agree in writing on
the exclusive venue thereof. Venue is not jurisdictional and may be waived by the
parties. A stipulation as to venue does not preclude the filing of the action in other
places, unless qualifying or restrictive words are used in the agreement.

07 | Sps. Ochoa [No facts were provided other than those The extrajudicial foreclosure sale of a real estate mortgage is governed by Act No.
v. Chinabank specified below] 3135, as amended by Act No. 4118, otherwise known as "An Act to Regulate the
(2011) | G.R. No. Sale of Property Under Special Powers Inserted In or Annexed to Real-Estate
192887 The present petition is a Motion for Mortgages."
Reconsideration of the SC’s previous
resolution denying the petition for review for Sec. 1: xxx the provisions of the following sections shall govern as to the
certiorari against the CA judgment. manner in which the sale and redemption shall be effected, whether or
not provision for the same is made in the power.
Petitioners [Sps. Ochoa] insist that it was Sec. 2: Said sale cannot be made legally outside of the province in
error for the CA to rule that the stipulated which the property sold is situated;
exclusive venue of Makati City is binding
only on petitioners' complaint for Annulment The case at bar involves petitioners' mortgaged real property located in Parañaque
of Foreclosure, Sale, and Damages filed City over which respondent bank was granted a special power to foreclose extra-
before the Regional Trial Court of Parañaque judicially. Thus, by express provision of Section 2, the sale can only be made in
City, but not on respondent bank's Petition Parañaque City.
for Extrajudicial Foreclosure of Mortgage,
which was filed with the same court. The exclusive venue of Makati City, as stipulated by the parties and
sanctioned by Section 4, Rule 4 of the Rules of Court, cannot be made to
Whether the venue stipulation may apply apply to the Petition for Extrajudicial Foreclosure filed by respondent bank
to an extrajudicial foreclosure of because the provisions of Rule 4 pertain to venue of actions, which an
mortgage petition. NO. extrajudicial foreclosure is not.

Under the Rules of Court Sec 1 Rule 2, an "Action means an ordinary suit in a
court of justice, by which one party prosecutes another for the enforcement or
protection of a right, or the prevention or redress of a wrong."

Hagans v. Wislizenus provides: "[A]n action is a formal demand of one's legal

rights in a court of justice in the manner prescribed by the court or by the
law. . . . ." It is clear that the determinative or operative fact which converts a claim
into an "action or suit" is the filing of the same with a "court of justice." Filed
elsewhere, as with some other body or office not a court of justice, the claim may
not be categorized under either term. Unlike an action, an extrajudicial foreclosure
of real estate mortgage is initiated by filing a petition not with any court of justice
but with the office of the sheriff of the province where the sale is to be made.

These pronouncements were confirmed in A.M. No. 99-10-05-0, entitled

"Procedure in Extra-Judicial Foreclosure of Mortgage, which provides:
In line with the responsibility of an Executive Judge under Administrative
Order No. 6, for the management of courts within his administrative
area, included in which is the task of supervising directly the work of the
Clerk of Court, who is also the Ex-Office Sheriff xxx

Verily then, with respect to the venue of extrajudicial foreclosure sales, Act
No. 3135, as amended, applies, it being a special law dealing particularly with
extrajudicial foreclosure sales of real estate mortgages, and not the general
provisions of the Rules of Court on Venue of Actions.

Consequently, the stipulated exclusive venue of Makati City is relevant only to

actions arising from or related to the mortgage, such as petitioners' complaint for
Annulment of Foreclosure, Sale, and Damages.